UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
Commission File No. 1-11121
TFC ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Delaware 54-1306895
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
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 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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of
the registrant as of March 18, 1997: Common Stock - $15,524,174.
The number of shares outstanding of the registrant's common stock as of
March 18, 1997: 11,290,308.
<PAGE>
In addition to historical information, this Form 10-K 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. Readers are cautioned not to
place undue reliance on these forward-looking statements, which reflect
management's current analysis. For example, during 1997 the Company's operations
could be materially adversely affected if interest rates were to rise, if credit
experience deteriorated, or the Company were to face increased competition.
Documents Incorporated by Reference
Portions of the registrant's Annual Report to Shareholders (the "Annual
Report") are incorporated by reference in Part II of this Form 10-K and portions
of the definitive Proxy Statement (the "1997 Proxy Statement") to be used in
connection with the 1997 Annual Meeting of Shareholders are incorporated by
reference in Part III of this Form 10-K.
PART I
Item 1. Business
General
TFC Enterprises, Inc. ("TFCE") conducts its consumer finance operations
through two wholly-owned subsidiaries, The Finance Company ("TFC") and First
Community Finance, Inc. ("FCF"), (TFCE, TFC, and FCF collectively, the
"Company"). Through TFC, the Company is engaged in purchasing and servicing
installment sales contracts originated by automobile and motorcycle dealers in
the sale of used automobiles, vans, light trucks, and new and used motorcycles
(collectively "vehicles"). Installment sales contracts are acquired on either an
individual basis after the Company has reviewed and approved the vehicle
purchaser's credit application (a "point-of-sale purchase"), or on a group basis
through purchase of a dealer's portfolio of existing installment sales contracts
(a "portfolio purchase"). The Company focuses its point-of-sale business on
installment sales contracts originated by dealers with consumers who are United
States military enlisted personnel, primarily in the E-1 through E-5 grades.
Portfolio purchases are primarily from dealers who finance their own contracts
with civilian customers and sell them after origination in bulk. To achieve an
acceptable rate of return and provide for credit risks, contracts are purchased
from dealers at a discount to the remaining principal balance. Most of the
discount is held in a nonrefundable reserve against which credit losses are
first applied. The amount of the discount reflects, among other things, a
contract's interest rate, remaining term and perceived credit risk.
The Company has been engaged in consumer finance activities since its
founding in 1977. The Company's point-of-sale purchases provide TFC with the
ability to direct the credit underwriting process at the initiation of the
installment sales contract. Participating dealers benefit by having a source of
financing for a group of customers who typically find financing difficult to
obtain, thereby increasing the number of vehicles sold and improving dealer
profitability. Consumers also benefit because the financing provided by the
Company enables them to purchase a vehicle they otherwise would not be able to
buy. As of December 31, 1996, $80.7 million, or 64% of the Company's net
contract receivables represented point-of-sale purchases, compared to $134.3
million, or 78%, at December 31, 1995.
TFC's portfolio purchase business emphasizes acquisitions of portfolios
of seasoned installment sales contracts. These contracts normally have a payment
history of at least three months. While the typical portfolio purchase involves
fewer than 100 individual contracts, TFC has, at times, purchased portfolios
totaling more than 1,000 contracts. Portfolio purchases provide TFC with
demographic diversification, as the majority of customers are not military
enlisted personnel. They also provide a payment history on which to evaluate and
price the credit risk of the contracts and a relatively efficient mechanism for
establishing dealer relationships in new areas. TFC's
<PAGE>
portfolio purchases benefit dealers by providing an immediate source of
liquidity. As of December 31, 1996, $36.7 million, or 29% of the Company's
portfolio of net contract receivables was attributable to portfolio purchases,
compared to $32.3 million, or 19%, at December 31, 1995.
TFC operates two service centers: the Point-of-Sale Service Center in
Norfolk, Virginia, and the Portfolio Purchase Service Center in Jacksonville,
Florida. During 1996, TFC closed a third service center in Dallas, Texas. In
addition, TFC operates point-of-sale Loan Production Offices (LPO's) in Dallas,
Texas; San Diego, California; Norfolk, Virginia; and a portfolio purchase Loan
Production Office in Norfolk, Virginia.
Historically, regional service centers were responsible for purchasing
and servicing contract receivables originated by dealers in their regions.
However, during 1996, TFC transferred the underwriting functions to three
point-of-sale LPO's and one portfolio purchase LPO. This was done to improve
TFC's control over the underwriting process. Additionally, during 1996 TFC
located all of its point-of-sale accounts in the service center located in
Norfolk, Virginia, and all of its portfolio purchase accounts in the service
center located in Jacksonville, Florida. This was done to improve TFC's
collection results.
Through FCF, the Company is involved in the direct origination and
servicing of small consumer loans. FCF began operations in the first quarter of
1995 with the opening of two branch offices in Richmond, Virginia. Four
additional offices were opened in Virginia in 1995. During 1996, FCF opened four
branches in North Carolina. Net contract receivables relating to FCF at December
31, 1996, were $8.8 million, or 7% of the Company's net contract receivables
compared to $4.4 million or 3% of the net contract receivables at December 31,
1995.
Strategy
During 1995 and 1996, there was a significant increase in the number of
competitors in the markets in which TFC operates and the access to funds that
most of those competitors enjoyed. The combination of increased competition and
in the industry's then improved access to funds in the capital markets resulted
in a general increase in prices offered to dealers for installment sales
contracts. In certain sectors of the market, prices increased to the point at
which anticipated credit losses relating to the contracts were not adequately
reflected in prices offered to dealers.
As a result, management's focus beginning in 1996 has been on
redirecting the Company toward those sectors of the market in which management
believes pricing more closely reflects the risk inherent in the business. Areas
of focus include the military point-of-sale business, portfolio purchases and
consumer finance loans. During 1996, TFC came to the conclusion that it could
not profitably compete in the civilian point-of-sale business. Accordingly, TFC
has eliminated almost all purchases of civilian point-of-sale contracts and has
no present intention of competing in this market.
The Company intends to accelerate the growth of FCF during 1997 and
future years. The pricing of these direct consumer loans coupled with the
significantly lower delinquencies and write offs offers the Company potentially
better yields than the non-prime civilian point-of-sale business. The Company
believes FCF has sufficient senior management in place to effectively manage its
growth plans.
As a result of the Company's increase in delinquencies and credit
losses and the resultant net loss in 1995, the Company was not in compliance
with certain aspects of credit agreements with its lenders during 1996. The
Company's lenders agreed to forbear in the exercise of their rights and remedies
relating to the out-of-compliance situations during 1996. As part of the
forbearance agreements, which are more fully discussed in Note 5 of the Notes to
Consolidated Financial Statements in the Company's 1996 Annual Report,
incorporated by reference herein, the Company's funding costs increased and its
funds availability decreased. The Company's net loss in 1996 caused the Company
to remain out of compliance with two of its lenders and to go out of compliance
under its credit agreement
<PAGE>
with its principal lender, which had been amended in December 1996. Amended
credit agreements signed in April 1997, to correct the out-of-compliance
conditions, continue to impose high funding costs on the Company. One of our
primary goals for 1997 is to improve and stabilize performance so that the
Company will have a record that justifies lower funding costs prospectively.
History
The Company's operations began in 1977 in Alexandria, Virginia, with
the founding of TFC by Robert S. Raley, Jr., the Company's current Chairman of
the Board, President and Chief Executive Officer, whose career has been
exclusively within the consumer finance industry. The Company was founded
specifically for the purpose of providing direct financing for the credit needs
of individuals having limited access to traditional sources of credit,
particularly young United States military enlisted personnel. Mr. Raley
recognized that the financing needs of that market segment were being ignored by
the traditional providers of consumer credit.
With the significant increase in interest rates in the late 1970s and
early 1980s, the Company incurred operating losses as a result of the increased
costs of its funding. To offset those losses, the Company opened a used car
dealership near Fort Belvoir in northern Virginia. Within several months of
opening the northern Virginia dealership, the Company opened a second used car
dealership in Norfolk, Virginia, the home of the world's largest naval base. The
operation of these dealerships generated sufficient operating income to enable
the Company to survive and provided the Company expertise in used automobile
financing, particularly to United States military enlisted personnel. With the
reduction in interest rates that occurred in the mid-1980's, the Company sold
its used car dealerships. The Company's experience in owning and managing used
car dealerships identified the need that used automobile dealers have for a
reliable source of financing.
In 1990, the Company consolidated its contract production branch system
into a regional service center system by merging all then existing contract
production branches into either the Mid-Atlantic Regional Service Center in
Norfolk, Virginia, or the Southern Regional Service Center in Jacksonville,
Florida. In 1993, TFC opened a Regional Service Center in Dallas, Texas,
although as discussed above, TFC has since closed this center. In 1995, TFC
opened a point-of-sale LPO in San Diego, California. In 1996, the Company opened
similar point-of-sale LPO's in Dallas, Texas, and Norfolk, Virginia; and a
portfolio purchase LPO in Norfolk, Virginia, all of which utilized existing
space.
Through FCF, the Company is involved in the direct origination and
servicing of small consumer loans. FCF began operations in the first quarter of
1995 with the opening of two branch offices in Richmond, Virginia. Four
additional offices were opened throughout Virginia in 1995. During 1996, FCF
opened four branches in North Carolina.
Industry Overview
The automobile finance industry is dominated in certain respects by
commercial banks and captive finance companies of major automobile
manufacturers. While consumer credit risk classifications are not standardized,
those institutions generally focus on consumers that could be characterized as
being "low-risk" or "medium-risk" from a credit perspective. TFC's target market
involves consumers that are characterized as being "high-risk" from a credit
perspective.
The direct consumer loan industry established in the early 1900's has
traditionally been serviced by major national companies, smaller regional
companies and small local independent companies. Over the last 10-15 years many
of the major national companies have retreated from or reduced their involvement
in this market.
Management's focus in 1996 and continuing in 1997 has been on
redirecting the Company toward those sectors of the market in which management
believes pricing more closely reflects the risk inherent in the business. Areas
of focus include the military point-of-sale business, portfolio purchases and
small direct consumer loans.
<PAGE>
Automobile Finance Operations
Dealer Selection and Program
Through its marketing efforts, TFC has established relationships with
dealers that originate installment sales contracts purchased by TFC, either
through point-of-sale purchases or portfolio purchases. TFC's relationships are
primarily with independent dealers that are not affiliated with an automobile
manufacturer, nor the Company.
To achieve an acceptable rate of return and provide for credit risks,
contracts are purchased from dealers at a discount to the remaining principal
balance. With respect to point-of-sale purchases, the discount is the difference
between TFC's purchase price from the dealer and the amount financed, net of the
cost of ancillary products. With respect to portfolio purchases, the discount is
the difference between TFC's purchase price and the amount of the remaining
principal balance on the contract. The amount of the discount at which contracts
are purchased reflects, among other things, a contract's interest rate, term and
credit risk. Contracts are purchased in accordance with applicable underwriting
criteria and pursuant to a Master Dealer Agreement in the case of point-of-sale
purchases, and an Asset Purchase Agreement in the case of portfolio purchases.
TFC believes that its dealer programs provide substantial benefits to
dealers by providing a source of financing for a group of customers who
typically find financing difficult to obtain, thereby increasing the number of
vehicles sold and improving dealer profitability. Additionally, TFC provides the
following services to dealers through its point of sale program: (1)
documentation designed to conform to applicable federal and state laws; (2)
timely response to credit applications; (3) timely payment for approved
installment contracts; and (4) access to a range of ancillary products.
Sales and Marketing
TFC markets primarily to independent used car dealers. Initial contacts
are pursued through telemarketing and followed up by personal visits to dealer
facilities by TFC's Loan Production Office marketing personnel. TFC also
establishes relationships with dealers through referrals from existing dealers.
Other marketing efforts involve the distribution of marketing brochures and
advertisements in trade journals and other industry publications directed to
dealers. The Finance Company is also an exhibitor and major sponsor at the
annual convention of the National Independent Automobile Dealers Association
(the "NIADA") and other conventions in targeted states.
Competition
There are numerous providers of financing for the purchase of used
vehicles either through the direct financing of such purchases or on an indirect
basis through dealers. These financing sources include commercial banks, savings
and loans associations, consumer finance companies, credit unions, financing
divisions of automobile manufacturers, small sales contract companies and other
consumer lenders. Many of these providers of vehicle financing have
significantly greater resources than TFC and have relationships with established
dealer networks. TFC has focused on a segment of the market comprised of
consumers who typically do not meet the more stringent credit requirements of
the traditional sources of consumer financing and whose needs, as a result, have
historically not been consistently addressed by such financing sources. If,
however, the other providers of consumer finance were to assert a significantly
greater effort to penetrate TFC's targeted market segment, given their financial
strength, TFC could be materially and adversely affected by this type of
competition.
In 1995 and 1996 there was a significant increase in the number of
competitors in the automobile non-prime finance industry markets in which TFC
operates and in the access to funds that most of those competitors enjoyed. The
combination of increased competition and the industry's improved access to funds
resulted in a general increase in prices offered to dealers for installment
sales contracts. In certain sectors of the market, prices increased to the
<PAGE>
point at which anticipated credit losses relating to the contracts were not
adequately reflected in prices offered to dealers. As a result, the Company
found it increasingly difficult in 1996 to purchase contracts at what it
considers to be reasonable prices.
Management's focus in 1996 and continuing in 1997 has been on
redirecting the Company toward those sectors of the market in which management
believes pricing more closely reflects the risk inherent in the business. Areas
of focus will include the military point-of-sale and portfolio business lines.
Point-of-Sale Purchase Program
In its point-of-sale program, TFC establishes relationships with
dealers that meet its financial, organizational and compliance criteria. TFC
currently makes point-of-sale purchases from dealers in approximately 30 states.
The Finance Company purchases contracts relating to its point-of-sale
program pursuant to a Master Dealer Agreement. Upon entering into a Master
Dealer Agreement, TFC provides the dealer with necessary documentation for the
origination of installment sales contracts and trains its personnel regarding
the use of TFC's documentation. The Master Dealer Agreement contains
representations and warranties by the dealer to TFC with respect to certain
matters, including the security interest in the vehicle, and sets forth the
general terms upon which installment contracts will be purchased by TFC. The
agreements are nonexclusive and do not obligate a dealer to sell, or TFC to
purchase, any particular contract or volume of contracts. The Master Dealer
Agreement may be terminated at any time by TFC or by the dealer.
Typically, a dealer will submit a customer's credit application to more
than one financing source for review. Under TFC's program, a dealer is required
to provide TFC with a completed credit application which lists the applicant's
assets, liabilities, income, credit and employment history, and other personal
information bearing on the decision to extend credit.
The application and related information are then analyzed by one of
TFC's credit analysts. A credit analyst evaluates the applicant's ability to
make regular payments and other factors, including the amount of money to be
financed in relation to the purchase price and value of the vehicle. TFC
generally determines the value of the vehicle based upon the NADA's Used Car
Guide Books on Retail and Wholesale Values and/or the Kelley Blue Book. Upon
completion of the credit application review, a credit analyst will decide
whether to approve the financing as submitted, decline the financing or
conditionally approve the financing.
Typically, installment contracts are purchased by and assigned to TFC
at a price that reflects a discount from the amount financed. Most of the
discount is held in a non-refundable reserve against which credit losses are
first applied. The assigning dealer makes certain warranties as to the validity
of the contract and compliance with certain laws and generally agrees to
indemnify TFC for any claim, defense and set-off against the dealer that may be
asserted against TFC by reason of the assignment. TFC requires physical damage
insurance on all automobiles covered by the installment sales contracts that it
purchases through its point-of-sale program. To the extent that material terms
of a contract prove to be inaccurate, TFC generally has the right to require the
dealer to repurchase such contract under the terms of the Master Dealer
Agreement.
<PAGE>
Portfolio Purchase Program
Many dealers finance automobile sales through the use of their own
funds. TFC currently purchases portfolios of seasoned installment contracts from
such dealers in approximately 20 states. TFC limits consideration of dealers to
those that generate sufficient business volume, employ satisfactory credit
approval procedures and adequately monitor and report loan performance data.
Portfolio purchases are made pursuant to an Asset Purchase Agreement which
requires the dealer to make representations and warranties to TFC with respect
to each contract to be purchased by TFC and with respect to security interests
in the related vehicles. Unlike a point-of-sale purchase, with respect to which
TFC has the opportunity to verify various information relating to the
installment contract prior to its purchase, portfolio purchases are made
subsequent to the origination of the installment contract. Thus, the typical
Asset Purchase Agreement provides TFC with more extensive remedies than the
Master Dealer Agreement. Generally, if a representation or warranty is breached,
TFC, under the Asset Purchase Agreement, can require the dealer to repurchase
the contract. In certain cases, a special reserve or holdback is established,
against which payment defaults on contracts can be charged.
Generally, TFC purchases that portion of the dealer's portfolio that
meets or exceeds TFC's underwriting standards. TFC's due diligence normally
begins with a review of information obtained from the dealer on TFC's standard
information-gathering forms. Additional information is then obtained to verify
the dealer's compliance with licensing, bonding and organizational requirements.
TFC then performs extensive due diligence procedures that it has developed
during its years of operation to determine whether to do business with that
particular dealer.
Within 90 days after completing a portfolio purchase, TFC confirms by
telephone various terms of most contracts with the purchaser of the vehicle. To
the extent that material terms of any contract prove to be inaccurate, TFC
generally has the right to require the dealer to repurchase such contract under
the terms of the Asset Purchase Agreement.
Contract Purchases
Contracts in TFC's point of sale portfolio have initial durations
normally ranging from 18 to 48 months, with an average original maturity of
approximately three years. Portfolio purchase contracts generally have an
average remaining maturity of 18 to 24 months at the time of purchase.
The following table sets forth, for the periods indicated, TFC's
contract purchase volume, as well as the number and average size of its
purchased contracts.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C>
(dollars in thousands)
Contracts purchased or originated:
Point-of-sale $ 58,623 $231,877 $145,193 $101,615 $ 80,065
Portfolio 61,391 61,261 76,990 53,583 38,487
------- -------- -------- -------- --------
Total $120,014 $293,138 $222,183 $155,198 $118,552
======== ======== ======== ======== ========
Number of contracts purchased or
originated:
Point-of-sale 6,154 24,095 15,610 12,228 10,481
Portfolio 11,853 14,084 21,324 15,598 12,653
------- ------ ------ ------ ------
Total 18,007 38,179 36,952 27,826 23,134
======= ====== ====== ====== ======
Average size of contract: (in
dollars)
Point-of-sale $ 9,526 $9,623 $9,301 $8,310 $7,369
Portfolio 5,179 4,349 3,607 3,435 3,042
Weighted average 6,665 7,678 6,013 5,577 5,125
</TABLE>
The Finance Company's contract purchase volume is discussed more fully
in Management's Discussion and Analysis of Financial Condition and Results of
Operations included in the TFC Enterprises, Inc. 1996 Annual Report, which is
incorporated herein by reference.
<PAGE>
Ancillary Products
In connection with its point of sale business, TFC offers, through its
dealers in certain states, warranty and motor club products, as well as credit
life insurance, credit accident and health insurance and physical damage
insurance. These products are provided and underwritten by third-party vendors.
Accordingly, liabilities under the ancillary products are not obligations of
TFC. TFC offers these products to dealers so that they, in turn, may provide
vehicle purchasers a more complete line of products and services. Additionally,
certain of these products protect TFC's collateral as well as the vehicle
purchasers' ability to repay the installment contract in the event of an
accident, sickness or disability. By offering these products, TFC is able to
generate supplementary revenue without incurring significant additional
expenses. During 1996 and 1995, TFC generated gross revenues of approximately
$1.2 million and $2.1 million, respectively, from the sale of ancillary products
through its dealers.
Collections
Payments on purchased installment sales contracts are received by TFC
through a number of different means. Payments are monitored by TFC to maintain
current information regarding each customer's current address and banking data.
Customers occasionally make payments in person at one of TFC's service centers
or Loan Production Offices. Collections Department personnel, at times, will
make a collection through a field visit to the customer.
Monitoring the payment history of accounts and implementing appropriate
remedial action is the responsibility of the Collections Department within each
service center. At year-end 1996, a total of 171 employees, or 56% of TFC's
total full-time equivalent employees, worked in the Collections Departments of
the two service centers.
One of the primary responsibilities of the Collections Department is to
monitor customer accounts that are delinquent in payment. Collections Department
personnel work with customers to resolve payment problems and bring accounts to
current status at the earliest possible stage of delinquency. Collections
Department employees are compensated, in part, through bonuses tied to their
monthly collection performance.
When calling a delinquent account, Collections Department personnel
utilize TFC's Collections Training Manual developed by TFC. The manual specifies
the procedure to follow in different circumstances in order to maximize the
effectiveness of the call. Specific action with respect to a delinquent account
will depend on the customer's particular circumstances as well as the past
payment history of the account. However, in all cases, the primary focus is
resolving the problem causing the delinquency, arranging a modified payment
plan, or working out a settlement agreement. At times, Collections Department
personnel meet with customers in the field or at a service center.
When TFC has difficulty locating a customer, Collections Department
personnel will attempt to find the individual through skip tracing, which
utilizes various sources of information about a customer to which TFC has
access. All communications with and efforts to locate the customer are reflected
in TFC's data files.
In certain situations, TFC will repossess a vehicle. To the extent that
a deficiency balance exists upon repossession and sale of a vehicle, TFC may
take action to obtain a judgment.
Decisions to charge off accounts are made at the end of each month.
Accounts on which there has been no significant payment activity for 90 days are
generally charged off when they are 180 days contractually past due.
Additionally, the carrying value of repossessed assets is reduced, through
charge-off, to the lower of the unpaid contract balance or anticipated
liquidation proceeds. Once an account is charged off, it is transferred to the
Recovery Unit. Customers are called regularly and attempts are made to set up
repayment plans or workout settlement agreements as appropriate to a customer's
circumstances. Each Recovery Unit employee is responsible for keeping records of
all collection activity and for following up on callback and broken promise
dates as appropriate.
<PAGE>
The Company's charge-off and delinquency experience is discussed more
fully in Management's Discussion and Analysis of Financial Condition and Results
of Operations included in the TFC Enterprises, Inc. 1996 Annual Report, which is
incorporated herein by reference.
Consumer Finance Operations
Consumer Loan Program
In its Consumer Loan Program, FCF originates direct loans through a
branch network. Loans are obtained through print media, customer referrals,
renewals and other sources. Applications are primarily received directly from
the consumer either by telephone or in person at one of the branches.
Once an application has been received, a background investigation is
performed on the applicant, including such things as employment and income
verification, residence verification, direct references from other creditors and
review of credit bureau files. This information is reviewed by a branch manager
or assistant manager to determine credit worthiness. If the applicant is
approved, the applicant would visit the appropriate branch to execute necessary
documents and receive funding.
Loan Originations
Most contracts have initial durations of 36 months or less.
The following table sets forth for the periods indicated FCF's loan
volume as well as the number and average size of its loans. (FCF commenced
operations in 1995.)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C>
Loans originated (in thousands) $13,174 $6,257
====== =====
Number of loans originated 6,623 3,254
====== =====
Average size of loan $ 1,989 $1,923
====== =====
</TABLE>
FCF's loan volume is discussed more fully in Management's Discussion
and Analysis of Financial Condition and Results of Operations included in the
TFC Enterprises, Inc. 1996 Annual Report, which is incorporated herein by
reference.
Ancillary Products
In connection with its consumer loan business, FCF offers its customers
credit life, credit accident and health insurance, and property insurance. These
products are provided and underwritten by third-party vendors. Accordingly,
liabilities under the ancillary products are not obligations of the Company.
These products protect the customer as well as providing supplementary revenue
to FCF. During 1996, FCF generated gross revenues of approximately $0.1 million
from the sale of ancillary products. Such revenues in 1995, FCF's first year of
operation, were not significant.
Collections
Payments on consumer loans are received by FCF primarily through the
mail or the customer pays at the appropriate branch. Each branch monitors
payments to maintain current information regarding each customer's current
address and banking data. Branch personnel, at times, will make a collection
through a field visit to the
<PAGE>
customer. Monitoring the payment history of the accounts and implementing
appropriate remedial action is the responsibility of the branch.
One of the primary responsibilities of the branch is to monitor
customer accounts that are delinquent in payment. Branch personnel work with
customers to resolve payment problems and bring accounts to current status at
the earliest possible stage of delinquency. Specific action with respect to a
delinquent account will depend on the customer's particular circumstances as
well as the past payment history of the account. However, in all cases the
primary focus is resolving the problem causing the delinquency, arranging a
modified payment plan or working out a settlement. At times branch personnel
meet with the customers in the field or at the branch. When FCF has difficulty
locating a customer, collections personnel will attempt to locate the individual
through skip tracing, which utilizes various sources of information about a
customer to which FCF has access. All communications with and efforts to locate
the customer are reflected in FCF's data files.
Decisions to charge off accounts are made at the end of each month.
Accounts that reach a 180 day contractually past due status are generally
charged off. Once an account is charged off, collection activity will continue.
The Company's charge off and delinquency experience is discussed more fully in
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in the TFC Enterprises. Inc. 1996 Annual Report, which is
incorporated herein by reference.
Funding
Debt outstanding at December 31 consisted of the following:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
---- ----
<S> <C>
Revolving line of credit (a) $ 72,562 $59,475
Term Notes:
9.50% Term Note, due 1996 ---- 25,000
7.92% Term Note, due 1997 6,964 12,500
7.56% Term Note, due 1997 12,500 12,500
6.14% Automobile Receivables-Backed Notes, due 2001 15,843 47,252
Subordinated Notes:
9.38% Senior Subordinated Notes, due 2002 10,000 10,000
13.50% Subordinated Non-Convertible Notes due 1994
to 1998 (b) 2,509 3,732
-------- --------
Total debt $120,378 $170,459
======== ========
</TABLE>
(a) The revolving line of credit is net of unamortized discount
totaling $0.4 million at December 31, 1996.
(b) The 13.50% Subordinated Non-Convertible Notes are net of
unamortized discount totaling $0.1 million at December 31, 1996
and 1995.
The Company reported a net loss of $(6.5) million in 1995. This loss
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. 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, and remained out of compliance throughout 1996, with
certain aspects of the credit agreements relating to its revolving line of
credit, term notes and subordinated notes. Under the terms of those credit
agreements, the Company must comply with various restrictive debt covenants that
require the Company to meet or maintain certain financial ratios and other
financial conditions. As a consequence,
<PAGE>
the Company was in technical default under its revolving line of credit, term
notes and subordinated notes during 1996. To resolve this situation, the Company
reached agreement with its lenders in 1996 to forbear in the exercise of their
rights and remedies relating to the technical defaults. These forbearance
agreements extended through December 31, 1996.
In December 1996, the Company signed a new revolving line of credit
agreement with its primary lender that extends through December 31, 1998. This
new agreement was amended in April 1997, to correct out-ofcompliance conditions
that arose as of December 31, 1996. This amended agreement also provided for the
consolidation of the Company's debt under its term notes into the revolving line
of credit. In April 1997, the Company signed an amended credit agreement
relating to its subordinated notes. These new agreements replaced the
forbearance agreements under which the Company had been operating with each of
its lenders during most of 1996. While the new credit agreements cured the
technical defaults that existed during 1996, they also increased the Company's
funding costs by approximately 100 basis points for 1997 compared to 1996. The
forbearance agreements executed with the Company's lenders in 1996 increased
funding costs by approximately 100 basis points for 1996 compared to 1995.
A complete discussion of the Company's outstanding debt is included in Note 5 of
the Notes to Consolidated Financial Statements of the Company's 1996 Annual
Report which is incorporated by reference herein. The Company's credit
agreements and related forbearance agreements are discussed more fully in the
"Liquidity and Capital Resources" section of Management's Discussion and
Analysis of Financial Condition and Results of Operations included in the TFC
Enterprises, Inc. 1996 Annual Report, which is incorporated herein by reference.
Information Systems
The Company processes all data relating to its contract receivables and
financial reporting through a distributed network of computers. TFC's computer
systems are networked together to provide information to management for analysis
as well as automatic posting to the general ledger for financial reporting
purposes. The systems provide for complete contract processing from the purchase
of the contract, payment to the dealer, posting of payments and all other
collection activity from the inception date of the installment contract. TFC's
systems operate on software which has been adapted to the specific manner in
which TFC operates its business.
The TFC systems are interfaced with a predictive dialing system
designed to enhance collection activity by increasing the number of customer
contacts per collector hour. This system dials multiple telephone numbers
simultaneously based on parameters defined by the Collections Department. Calls
are connected automatically to a collector at the same time the customer's
account is displayed on the collector's computer screen. The process permits
better control of calling patterns for more effective calling and improved
customer contact rates. By eliminating busy signals, no answers and answering
machines, the system enables the collector to speak to more customers. The
system also reports collection performance by collector for improved supervision
and results. The Company has invested in technology that enables TFC to
mechanically process and score credit applications, thereby increasing capacity,
reducing processing time and improving standardization of credit underwriting
without significant staff increases.
First Community Finance uses a third-party computer system designed for
the consumer loan industry. Each branch processes all data relating to that
branch on a computer within the branch. The system provides for complete
contract processing from the closing of the loan, posting of payments and all
collection activity. These systems are networked together to provide
consolidated management information and automatic posting to the Company's
general ledger for financial reporting.
The Company believes that it has sufficient management information
systems in place, or in the process of being implemented, to meet the Company's
current and near-term future requirements.
<PAGE>
Regulation
The Company's businesses are subject to regulation and licensing under
various federal, state and local statutes and regulations. Most of the states in
which the Company operates limit the interest rate, fees and other charges that
may be collected. In addition, many states prescribe certain terms in the
contract.
Numerous federal and state consumer protection laws and related
regulations impose substantive disclosure requirements upon lenders and
servicers involved in motor vehicle financing. Some of the federal laws and
regulations include the Truth-in-Lending Act, the Equal Credit Opportunity Act,
the Federal Trade Commission Act, the Fair Credit Reporting Act, the Fair Debt
Collection Practices Act, the Motor Vehicle Information and Cost Savings Act,
the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B and Z,
and the Soldiers' and Sailors' Civil Relief Act.
In addition, the Federal Trade Commission ("FTC") has adopted the
holder-in-due-course rule, which has the effect of subjecting persons that
finance consumer credit transactions (and certain related lenders and their
assignees) to all claims and defenses which the purchaser could assert against
the seller of the goods and services. With respect to used automobiles
specifically, the FTC's rule on Sale of Used Vehicles requires that all sellers
of used vehicles prepare, complete and display a Buyer's guide which explains
the warranty coverage for such vehicles. The Credit Practices Rules of the FTC
impose additional restrictions on sales contract provisions and credit
practices.
Certain states where the Company operates have adopted motor vehicle
retail installment sales acts or variations thereof and consumer finance acts.
Such laws regulate, among other things, the interest rates and terms and
conditions of motor vehicle retail installment sales contracts and also impose
restrictions on consumer transactions and require sales contract disclosures in
addition to the requirements under federal law. Those requirements impose
specific statutory liabilities upon creditors who fail to comply.
The Company believes that it is in compliance with all applicable laws
and regulations.
Employees
At December 31, 1996, the Company had 366 full-time equivalent
employees. No employees are currently covered by collective bargaining
agreements. The Company believes that its employee relations are excellent.
Risk Factors
In evaluating the Company, prospective investors should consider
carefully all of the information set forth in this Form 10-K and, in particular,
should evaluate the following risk factors.
Fluctuating Interest Rates and Dependence on Line of Credit
The Company's operations require substantial borrowings to provide
funding for the installment contracts purchased by TFC and originated by FCF.
Consequently, profitability is impacted by the difference between the rate of
interest paid on the funds it borrows and the rate of interest charged on the
installment contracts, which rate in some states is limited by law. Currently,
the principal source of borrowing by the Company is its revolving line of
credit, guaranteed by TFCEI (the "Line of Credit") with General Electric Capital
Corporation ("G.E. Capital"). The maximum amount of borrowings available under
the Line of Credit was $150 million at December 31, 1996 (reduced to $110
million in April 1997). At December 31, 1996, TFC had $72.6 million outstanding
under the Line of Credit. The floating interest rate for borrowings under the
Line of Credit is equal to the average 30-day London Interbank Offered Rate
("LIBOR") plus 4.00%. Thus, future increases in interest rates could adversely
affect the Company's profitability. In an effort to reduce its exposure to an
increase in interest rates, TFC has purchased an interest rate cap which ensures
that the interest rate on $50 million of the borrowings under the Line of Credit
will not exceed
<PAGE>
a LIBOR ceiling of 6.5%. This interest rate cap expires September 30, 1997. In
addition to the purchase of interest rate caps, the Company believes it has
certain flexibility to increase the discount at which installment contracts are
purchased, or to increase the rate of interest charged on future installment
contracts (to the extent not limited by state law), in order to offset the
adverse impact of any interest rate increase on profitability.
The Finance Company has maintained a Line of Credit with G.E. Capital
since 1992. The current Line of Credit was executed in December 1996, amended in
April 1997, and expires December 31, 1998. There is no assurance that a new Line
of Credit will be executed when the current Line of Credit expires. If the new
Line of Credit is not executed, TFC would be required to seek alternative
financing sources and repay its outstanding balance on or before the expiration
of the current Line of Credit on December 31, 1998. No assurance can be given
that alternative financing sources would be available in such event. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" included in the TFC Enterprises,
Inc. 1996 Annual Report, which is incorporated herein by reference.
Defaults on Installment Contracts
The Company is engaged primarily in purchasing installment contracts
entered into by dealers with consumers who have limited access to traditional
sources of consumer credit. The inability of an individual to finance a used
automobile purchase by means of traditional credit sources is generally due to
such individual's past credit history or insufficient cash to make the required
down payment on an automobile. As a result, installment contracts purchased by
the Company are generally with purchasers of automobiles who are considered to
have a higher risk of default on an installment contract than certain other
automobile purchasers. Accordingly, the consumer loan activities engaged in by
the Company typically have a higher risk of loss than those of other consumer
financings. While the Company believes that its expertise in used automobile
financing, particularly for enlisted personnel, enables it to evaluate and price
accurately the higher risk associated with the Company's business, a significant
economic downturn in the markets in which the Company operates could materially
increase the number of charged off and delinquent installment contracts
experienced by TFC as compared to its historical losses. If TFC were to
experience a material increase in charge-offs or delinquencies, its
profitability could be adversely affected. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Credit Losses and
Delinquency" included in the TFC Enterprises, Inc. 1996 Annual Report, which is
incorporated herein by reference.
Dependence Upon Key Executive
The Company's growth and development to date have been largely
dependent upon the services of Robert S. Raley, Jr., Chairman of the Board,
President and Chief Executive Officer. The loss of Mr. Raley's services could
have a material adverse effect on the Company.
Competition
There are numerous providers of financing for the purchase of used
automobiles either through the direct financing of such purchases or on an
indirect basis through a dealer. Those financing sources include commercial
banks, savings and loan associations, consumer finance companies, credit unions,
financing divisions of automobile manufacturers or automobile retailers, small
sales contract companies and other consumer lenders. Many of those providers of
automobile financing have significantly greater financial resources than TFC and
have relationships with established dealer networks. The Company has focused on
a segment of the market composed of consumers who typically do not meet the more
stringent credit requirements of the traditional consumer financing sources and
whose needs, as a result, have not been addressed consistently by such financing
sources. If, however, the other providers of consumer finance were to assert a
significantly greater effort to penetrate TFC's targeted market segment, TFC
could be materially and adversely affected.
<PAGE>
Regulation
The Company's business is subject to regulation and licensing under
various federal, state and local statutes and regulations. The Company's
business operations are conducted in approximately 30 states and, accordingly,
the laws and regulations of such states govern the Company's operations
conducted in those states. Most states where the Company operates limit the
interest rate, fees and other charges that may be imposed by, or prescribe
certain other terms of, the contracts that the Company purchases and define the
Company's rights to repossess and sell collateral. In addition, the Company is
required to be, and is, licensed to conduct its operations in certain states. As
the Company expands its operations into other states, it will be required to
comply with the laws of such states.
An adverse change in those laws or regulations could have a material
adverse effect on the Company's profitability by, among other things, limiting
the states in which the Company may operate or the interest rate that may be
charged on installment contracts or restricting the Company's ability to realize
the value of any collateral securing contracts. The Company is not aware of any
materially adverse legislation currently pending in any jurisdiction where it
currently transacts business. See "Business -- Regulation."
Restrictions on the Payment of Dividends
The Company currently intends to retain its earnings to finance the
growth and development of its business and, therefore, does not anticipate
paying any cash dividends in the foreseeable future. Any future dividend
payments will depend upon the financial condition, funding requirements and
earnings of TFC as well as other factors that the Company's Board of Directors
may deem relevant. As the Company is a legal entity separate and distinct from
TFC and as its revenues depend on the payment of dividends by TFC, limitations
on the ability of TFC to pay dividends to the Company will in turn limit the
ability of the Company to pay dividends to its stockholders. There are certain
restrictions on the payment of dividends in the form of various affirmative and
negative covenants included in TFC's Line of Credit and the Note Purchase
Agreement relating to the $6,435,000 in original principal amount of 13.50%
Subordinated Non-Convertible Notes due October 15, 1998 and the Note Purchase
agreement relating to the $10 million in original principal amount of 9.38%
Senior Subordinated Notes due June 30, 2002.
Effect of Certain Charter, Bylaw and Statutory Provisions
Certain provisions of the Company's Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation") and Amended and Restated
Bylaws (the "Bylaws") could delay or frustrate the removal of incumbent
directors and could make more difficult a merger, tender offer or proxy contest
involving the Company, even if such events could be beneficial, in the short
term, to the interests of the stockholders. For example, the Certificate of
Incorporation provides for a classified Board of Directors and for certain
limitations on the calling of a special meeting of stockholders and the Bylaws
require advance notice of stockholder proposals and nominations of directors.
The Company also is subject to provisions of Delaware corporation law that
prohibit a publicly-held Delaware corporation from engaging in a broad range of
business combinations with a person who, together with affiliates and
associates, owns 15% or more of the corporation's common stock (an "interested
stockholder") for three years after the person became an interested stockholder,
unless the business combination is approved in a prescribed manner. Those
provisions could discourage or make more difficult a merger, tender offer or
similar transaction, even if favorable to the Company's stockholders.
Authorized Preferred and Common Stock
Pursuant to the Certificate of Incorporation, shares of preferred stock
and Common Stock may be issued in the future without further stockholder
approval and upon such terms and conditions, and having such rights, privileges
and preferences, as the Board of Directors may determine. The rights of the
holders of Common Stock
<PAGE>
will be subject to, and may be adversely affected by, any preferred stock that
may be issued in the future. The issuance of preferred stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporation transactions, could have the effect of making it more difficult for
a third party to acquire, or effectively preventing a third party from
acquiring, a majority of the outstanding voting stock of the Company. The
Company has no present plans to issue any shares of preferred stock.
<PAGE>
Executive Officers of the Company
The executive officers of TFCE, TFC and FCF are as follows:
<TABLE>
<CAPTION>
Name Age* Position
<S> <C>
Robert S. Raley, Jr. 59 Chairman of the Board of Directors of TFCEI, TFC and FCF,
President and Chief Executive Officer of TFCEI and TFC, and
Executive Vice President of FCF
Ronald G. Tray 55 Vice President of TFCEI and Director, Executive Vice
President and Chief Operating Officer of TFC
David W. Karsten 49 Vice President, Treasurer and Chief Financial Officer of TFCEI
and FCF, Executive Vice President, Treasurer and Chief
Financial Officer of TFC
Rick S. Lieberman 40 Senior Vice President and Chief Lending Officer of TFC
G. Kent Brooks 60 Director, President and Chief Executive Officer of FCF
*As of December 31, 1996
Background of Executive Officers
</TABLE>
Robert S. Raley, Jr. founded TFC in 1977. From that time through April
1990, and from May 1990 through April 1992, he served as President and Chief
Executive Officer of TFC. In 1996, Mr. Raley was appointed President and Chief
Executive Officer of TFCE and was reappointed to that position for TFC. Prior
to founding TFC, Mr. Raley was employed by Major Financial Services, Silver
Spring, Maryland, for 17 years in various positions, including Vice President
and Director of Operations. Mr. Raley was a Director of TFCE from 1984 through
April 1990 and has been a Director of TFCE since May 1990. Mr. Raley currently
serves as Chairman of the Board.
Ronald G. Tray joined TFC as a Vice President in 1989 and became
Executive Vice President for Management Information Systems in 1992. Mr. Tray
was appointed Chief Operating Officer of TFC in 1996. Prior to joining TFC, Mr.
Tray was President of the Mid-Atlantic Division, Mtech Corporation, a data
processing service bureau for banks, located in Fairfax, Virginia. In 1996, Mr.
Tray resigned as a Director of TFCE, a position he had held since 1993.
David W. Karsten, CPA, joined TFC as Chief Financial Officer in 1996.
From 1984 until 1995, Mr. Karsten was employed by USLICO Corp., an insurance
holding company, and served as Senior Vice President and Controller at the time
of his departure.
Rick S. Lieberman, Senior Vice President and Chief Lending Officer of
TFC. Mr. Lieberman joined TFC in 1989 and has served the Company in several
capacities, including General Manager, Vice President of the Norfolk Regional
Service Center. Prior to joining TFC, he was with ITT Consumer Financial
Corporation for 8 years.
G. Kent Brooks joined FCF in 1994 as President. Prior to that, he was
with Peoples Finance Corporation, Richmond, Virginia, from 1956 to 1980, the
last eight years of which he served as President. From 1980 to 1992, Mr. Brooks
served as a Senior Vice President and Regional Manager for Provident Financial
Corporation, subsequent to its acquisition of Peoples Financial Corporation.
From 1992 to 1993, Mr. Brooks was with American General Finance, subsequent to
its acquisition of Provident Financial Corporation. Mr. Brooks has been a
Director of FCF since 1994.
<PAGE>
Item 2. Properties
The Company's principal executive offices and Point-of-Sale Service
Center, Point-of-Sale Loan Production Office and Portfolio Loan Production
Office are located in Norfolk, Virginia. The combined facilities consist of
approximately 27,000 square feet of space pursuant to a lease expiring in 2006.
The Company's Portfolio Service Center is located in Jacksonville,
Florida. The facility consists of approximately 17,000 square feet of space
pursuant to a lease expiring in 2001. The Company's Point-of-Sale Loan
Production Office in Dallas, Texas,consists of approximately 2,300 square feet
of space pursuant to a lease expiring in 1998. The Company's Point-of-Sale Loan
Production Office in San Diego, California, consists of approximately 1,100
square feet of space pursuant to a lease expiring in 1997. First Community
Finance, Inc.'s branch offices, on a combined basis, total approximately 5,000
square feet of space pursuant to leases expiring in 1997 to 1998.
The Company believes that its facilities are adequate for its current
and near-term future requirements.
Item 3. Legal Proceedings
The Company is a party to several legal actions which are ordinary,
routine litigation incidental to its business. The Company believes that none of
those actions, either individually or in the aggregate, will have a material
adverse effect on the results of operations or financial position of the
Company.
Item 4. Submission of Matters to a Vote of Security Holders
None.
<PAGE>
PART II
The information required by Part II, Items 5, 6, 7 and 8 has been
incorporated herein by reference to the TFC Enterprises, Inc. 1996 Annual Report
as set forth below, in accordance with General Instruction G(2) of Form 10-K.
Item 5. Market For Registrant's Common Equity and Related Stockholder Matters
Since December 22, 1993, TFC Enterprises, Inc. Common Stock has traded
on the NASDAQ National Market System under the symbol "TFCE." Share price
information with respect to the Common Stock is set forth in the "Selected
Quarterly Data" table included in the TFC Enterprises, Inc. 1996 Annual Report,
which is incorporated herein by reference.
As of March 18, 1997, there were approximately 3,000 holders of the
Common Stock, including approximately 120 holders of record. No cash dividends
have been paid with respect to the Common Stock since issuance. The Company has
no current plans to pay any cash dividends relating to the Common Stock in the
foreseeable future, although any dividends on the Common Stock will be at the
sole discretion of the Company's Board of Directors and will depend upon the
Company's profitability and financial condition, capital requirements, statutory
restrictions, requirements of the Company's lenders, future prospects and other
factors deemed relevant by the Company's Board of Directors. If any dividends
are paid to the holders of Common Stock, all holders will share equally on a per
share basis.
The Company has not issued any of its authorized preferred stock.
Item 6. Selected Financial Data
Information included in the section entitled "Five-Year Summary of
Selected Financial Data" in the TFC Enterprises, Inc. 1996 Annual Report is
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Information included in the section entitled "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in the TFC
Enterprises, Inc. 1996 Annual Report is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The Consolidated Financial Statements of TFC Enterprises, Inc.,
including notes thereto, are presented in the TFC Enterprises, Inc. 1996 Annual
Report and are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants
None.
<PAGE>
PART III
The information required by Part III, Items 10, 11, 12, and 13 has been
incorporated herein by reference to the Company's 1997 Proxy Statement as set
forth below, in accordance with General Instruction G(3) of Form 10-K.
Item 10. Directors and Executive Officers of the Registrant
Information relating to directors of the Company and compliance with
Section 16(a) of the Exchange Act is set forth in the sections entitled
"Election of Directors" and "Section 16(a) Beneficial Ownership Reporting
Compliance" in the Company's 1997 Proxy Statement and is incorporated herein by
reference. Pursuant to General Instruction G(3) of Form 10-K, certain
information concerning the executive officers of the Company is set forth under
the caption entitled "Executive Officers of the Company" in Part I, Item 1, of
this Form 10-K.
Item 11. Executive Compensation
Information regarding compensation of officers and directors of the
Company is set forth in the section entitled "Executive Compensation" in the
Company's 1997 Proxy Statement and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information regarding ownership of certain of the Company's securities
is set forth in the section entitled "Security Ownership of Management and
Certain Beneficial Owners" in the Company's 1997 Proxy Statement and is
incorporated herein by reference.
Item 13. Certain Relationship and Related Transactions
Information regarding certain relationships and related transactions
with the Company is set forth in the section entitled "Certain Relationships and
Related Transactions" in TFC's 1997 Proxy Statement and is incorporated herein
by reference.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Documents filed as part of this report:
(1) Financial Statements
The Consolidated Financial Statements of TFC
Enterprise, Inc. and the Auditor's Report thereon, are incorporated herein by
reference. Applicable pages in the TFC Enterprises, Inc. 1996 Annual Report are
as follows:
Page
Consolidated Financial Statements:
Report of Ernst & Young LLP, Independent Auditors 19
Consolidated Balance Sheets at December 31, 1996 and 1995 20
Consolidated Statements of Operations for the Years ended
December 31, 1996, 1995 and 1994 21
Consolidated Statements of Changes in Shareholders' Equity
for the Years ended December 31, 1996, 1995 and 1994 22
Consolidated Statements of Cash Flows for the Years ended
December 31, 1996, 1995 and 1994 23
Notes to Consolidated Financial Statements 24
(2) Financial Statement Schedule
Report of Ernst & Young LLP, Independent Auditors, on Schedule I
Schedule I - Financial Information of Registrant - TFC Enterprises, Inc.
All other schedules for which provision is made in the
applicable accounting regulations of the Securities and Exchange
Commission are not required under the related instructions or
are inapplicable and therefore have been omitted.
(3) Exhibits
The exhibits listed on the accompanying Exhibit Index are filed or
incorporated by reference as part of this Form 10-K and such Exhibit Index is
incorporated herein by reference.
(b) Reports on Form 8-K (filed during the fourth quarter of 1996):
On October 11, 1996, the Company filed a report on Form 8-K,
under Item 5, regarding the closing of the Company's Southwestern Regional
Service Center in Dallas, Texas and the relocation of the Company's accounting
office from Manassas, Virginia to Norfolk, Virginia.
On November 20, 1996, the Company filed a report on Form 8-K,
under Item 5, announcing that TFC had executed a commitment letter with its
primary lender for an extension of its credit facility and that FCF had received
a non-binding proposal for a credit facility from a bank.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By :/s/Robert S. Raley, Jr.
-----------------------
Robert S. Raley, Jr.
Chairman of the Board, President and
Chief Executive Officer
Dated: April 11, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date:
<S> <C>
/s/Robert S. Raley, Jr. Chairman of the Board April 11, 1997
- ------------------------ and Director, President and
Robert S. Raley, Jr. Chief Executive Officer
Director
- ------------------------
Walter S. Boone, Jr.
/s/Douglas B. Bywater Director April 11, 1997
- ------------------------
Douglas B. Bywater
Director
- -------------------------
Andrew M. Ockershausen
/s/Phillip R. Smiley Director April 11, 1997
- --------------------------
Phillip R. Smiley
/s/Linwood R. Watson Director April 11 1997
- -----------------------
Linwood R. Watson
/s/David W. Karsten Chief Financial Officer April 11, 1997
- ----------------------- (Principal Accounting and Financial Officer)
David W. Karsten
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description Sequential
No. Page No.
<S> <C>
3.1 Amended and Restated Certificate of Incorporation of TFC Enterprises, Inc. (Incorporated by reference to the *
Registrant's Registration Statement on Form S-1, Commission File No. 33-70638, previously filed with the
Commission on October 21, 1993.)
3.2 Amended and Restated Bylaws of TFC Enterprises, Inc. (Incorporated by reference to the Registrant's *
Registration Statement on Form S-1, Commission File No. 33-70638, previously filed with the Commission on
October 21, 1993.)
4 Form of Common Stock certificate of TFC Enterprises, Inc. (Incorporated by reference to the Registrant's *
Registration Statement on Form S-1, Commission File No. 33-70638, previously filed with the Commission on
October 21, 1993.)
10.1A Loan and Security Agreement between G.E. Capital and The Finance Company dated September 24, 1992. *
(Incorporated by reference to the Registrant's Registration Statement on Form S-1, Commission File No.
33-70638, previously filed with the Commission on October 21, 1993.)
10.1B Commitment Letter executed by The Finance Company and G.E. Capital dated October 11, 1993, with respect to a *
$120 million line of credit and a related Letter Agreement executed by The Finance Company and G.E. Capital
dated October 19, 1993. (Incorporated by reference to the Registrant's Registration Statement on Form S-1,
Commission File No. 33-70638, previously filed with the Commission on October 21, 1993.)
10.2 Form of Master Dealer Agreement. (Incorporated by reference to the Registrant's Registration Statement on *
Form S-1, Commission File No. 33-70638, previously filed with the Commission on October 21, 1993.)
10.3 Form of Asset Purchase Agreement. (Incorporated by reference to the Registrant's Registration Statement on *
Form S-1, Commission File No. 33-70638, previously filed with the Commission on October 21, 1993.)
10.4 Form of Motor Vehicle Installment Sale Contract, Truth-in-Lending Disclosure, Promissory Note and Security *
Agreement. (Incorporated by reference to the Registrant's Registration Statement on Form S-1, Commission
File No. 33-70638, previously filed with the Commission on October 21, 1993.)
10.5 Note Purchase Agreement among TFCEI Acquisition Corp. and Connecticut General Life Insurance Company *
("CIGNA") and certain affiliates of CIGNA dated October 25, 1988, relating to $6,500,000 in original
principal amount of 14% Senior Notes due October 15, 1998, and Amendment Nos. 1 and 2. (Incorporated by
reference to the Registrant's Registration Statement on Form S-1, Commission File No. 33-70638, previously
filed with the Commission on October 21, 1993.)
10.6 Note Purchase Agreement among The Finance Company and CIGNA and certain affiliates of CIGNA dated October 25, *
1988, relating to $6,435,000 in original principal amount of 13.5% Subordinated Non-Convertible Notes due
October 15, 1998, and $65,000 in original principal amount of 13.5% Subordinated Convertible Notes due
October 15, 1998, and Amendment Nos. 1, 2 and 3. (Incorporated by reference to the Registrant's Registration
Statement on Form S-1, Commission File No. 33-70638, previously filed with the Commission on October 21,
1993.)
10.6(a) Amendment No. 5 to Note Purchase Among The Finance Company and CIGNA and certain affiliates of CIGNA dated *
October 25, 1988, relating to $6,435,000 in original principal amount of 13.5% Subordinated Non-Convertible
Notes due October 15, 1998, and $65,000 in original principal amount of 13 1/2% Subordinated Convertible Notes
due October 15, 1998.
10.7 Stock Purchase Agreement among TFCEI Acquisition Corp. and the stockholders of TFCEI dated October 14, 1988. *
(Incorporated by reference to the Registrant's Registration Statement on Form S-1, Commission File No.
33-70638, previously filed with the Commission on October 21, 1993.)
10.8 Form of Contingent Right to Purchase Shares of Common Stock of The Finance Company. (Incorporated by *
reference to the Registrant's Registration Statement on Form S-1, Commission File No. 33-70638, previously
filed with the Commission on October 21, 1993.)
10.9 Employment Agreement between The Finance Company and Robert S. Raley, Jr dated October 22, 1992. *
(Incorporated by reference to the Registrant's Registration Statement on Form S-1, Commission File No.
33-70638, previously filed with the Commission on October 21, 1993.)
10.10 Employment Agreement between The Finance Company and George R. Kouri dated October 1, 1988, as amended April *
1, 1992. (Incorporated by reference to the Registrant's Registration Statement on Form S-1, Commission File
No. 33-70638, previously filed with the Commission on October 21, 1993.)
10.11 Employment Agreement between The Finance Company and Joseph R. Becka dated October 1, 1988, as amended March *
16, 1993. (Incorporated by reference to the Registrant's Registration Statement on Form S-1, Commission File
No. 33-70638, previously filed with the Commission on October 21, 1993.)
10.12 Employment Agreement between The Finance Company and Preston K. Gnagey dated December 1, 1990. (Incorporated *
by reference to the Registrant's Registration Statement on Form S-1, Commission File No. 33-70638, previously
filed with the Commission on October 21, 1993.)
10.13 Employment Agreement between The Finance Company and Harold E. McCarty, Jr. dated December 1, 1990. *
(Incorporated by reference to the Registrant's Registration Statement on Form S-1, Commission File No.
33-70638, previously filed with the Commission on October 21, 1993.)
10.14 Consulting Agreement between The Finance Company and RSR Associates, as assignee of CHI, dated October 27, *
1988 and Assignment and Assumption of Consulting Agreement dated May 1, 1990. (Incorporated by reference to
the Registrant's Registration Statement on Form S-1, Commission File No. 33-70638, previously filed with the
Commission on October 21, 1993.)
10.15 Note Purchase Agreement between TFCEI and CHI dated May 1, 1990, relating to $1,000,000 in original principal *
amount of 14% Senior Subordinated Note due October 15, 1998. (Incorporated by reference to the Registrant's
Registration Statement on Form S-1, Commission File No. 33-70638, previously filed with the Commission on
October 21, 1993.)
10.16 RSR Associates 6.75% Note for $50,000 due October 15, 1998. (Incorporated by reference to the Registrant's *
Registration Statement on Form S-1, Commission File No. 33-70638, previously filed with the Commission on
October 21, 1993.)
10.17 RSR Associates General Partnership Agreement dated April 19, 1990. (Incorporated by reference to the *
Registrant's Registration Statement on Form S-1, Commission File No. 33-70638, previously filed with the
Commission on October 21, 1993.)
10.18 Interest Rate Cap Agreement dated September 24, 1993, and related letter. (Incorporated by reference to the *
Registrant's Registration Statement on Form S-1, Commission File No. 33-70638, previously filed with the
Commission on October 21, 1993.)
10.19 The Finance Company 401(k) Savings Plan dated May 1, 1991, and Amendment No. 1 dated August 1, 1993. *
(Incorporated by reference to the Registrant's Registration Statement on Form S-1, Commission File No.
33-70638, previously filed with the Commission on October 21, 1993.)
10.20 TFCEI Employee Stock Purchase Plan dated December 20, 1993. (Incorporated by reference to the Registrant's *
Registration Statement on Form S-1, Commission File No. 33-70638, previously filed with the Commission on
October 21, 1993.)
10.21 Forms of Junior Subordinated Promissory Notes. (Incorporated by reference to the Registrant's Registration *
Statement on Form S-1, Commission File No. 33-70638, previously filed with the Commission on October 21,
1993.)
10.22 Employment Agreement between George R. Kouri and The Finance Company dated December 21, 1993. (Incorporated *
by reference to the Registrant's Form 10-K for the fiscal year ended December 31, 1993, Commission File
No. 1-11121, previously filed with the Commission.)
10.23 Employment Agreement between Joseph R. Becka and The Finance Company dated December 21, 1993. (Incorporated *
by reference to the Registrant's Form 10-K for the fiscal year ended December 31, 1993, Commission File No.
1-11121, previously filed with the Commission.)
10.24 Employment Agreement between Preston K. Gnagey and The Finance Company dated December 27, 1993. *
(Incorporated by reference to the Registrant's Form 10-K for the fiscal year ended December 31, 1993,
Commission File No. 1-11121, previously filed with the Commission.)
10.25 Employment Agreement between Ronald G. Tray and The Finance Company dated December 23, 1993. (Incorporated *
by reference to the Registrant's Form 10-K for the fiscal year ended December 31, 1993, Commission File No.
1-11121, previously filed with the Commission.)
10.26 Employment Agreement between George R. Kouri and The Finance Company, dated January 1, 1995. (Incorporated *
by reference to the Registrant's Form 10-K for the fiscal year ended December 31, 1994, Commission File No.
1-11121, previously filed with the Commission.)
10.27 Employment Agreement between Joseph R. Becka and The Finance Company, dated January 1, 1995. (Incorporated *
by reference to the Registrant's Form 10-K for the fiscal year ended December 31, 1994, Commission File No.
1-11121, previously filed with the Commission.)
10.28 Employment Agreement between Preston K. Gnagey and The Finance Company, dated January 1, 1995. (Incorporated *
by reference to the Registrant's Form 10-K for the fiscal year ended December 31, 1994, Commission File No.
1-11121, previously filed with the Commission.)
10.29 Employment Agreement between Ronald G. Tray and The Finance Company, dated January 1, 1995. (Incorporated by *
reference to the Registrant's Form 10-K for the fiscal year ended December 31, 1994, Commission File No.
1-11121, previously filed with the Commission.)
10.30 Employment Agreement between Charles M. Johnston and The Finance Company, dated January 1, 1995. *
(Incorporated by reference to the Registrant's Form 10-K for the fiscal year ended December 31, 1994,
Commission File No. 1-11121, previously filed with the Commission.)
10.31 TFC Enterprises, Inc. 1995 Long-Term Incentive Plan. (Incorporated by reference to the Registrant's Form *
10-K for the fiscal year ended December 31, 1994, Commission File No. 1-11121, previously filed with the
Commission.)
10.32 Stock Option Award Agreement between George R. Kouri and TFC Enterprises, Inc. dated October 27, 1994. *
(Incorporated by reference to the Registrant's Form 10-K for the fiscal year ended December 31, 1994,
Commission File No. 1-11121, previously filed with the Commission.)
10.33 Stock Option Award Agreement between Joseph R. Becka and TFC Enterprises, Inc. dated October 27, 1994. *
(Incorporated by reference to the Registrant's Form 10-K for the fiscal year ended December 31, 1994,
Commission File No. 1-11121, previously filed with the Commission.)
10.34 Stock Option Award Agreement between Preston K. Gnagey and TFC Enterprises, Inc. dated October 27, 1994. *
(Incorporated by reference to the Registrant's Form 10-K for the fiscal year ended December 31, 1994,
Commission File No. 1-11121, previously filed with the Commission.)
10.35 Stock Option Award Agreement between Ronald G. Tray and TFC Enterprises, Inc. dated October 27, 1994. *
(Incorporated by reference to the Registrant's Form 10-K for the fiscal year ended December 31, 1994,
Commission File No. 1-11121, previously filed with the Commission.)
10.36 Stock Option Award Agreement between Charles M. Johnston and TFC Enterprises, Inc. dated October 27, 1994. *
(Incorporated by reference to the Registrant's Form 10-K for the fiscal year ended December 31, 1994,
Commission File No. 1-11121, previously filed with the Commission.)
10.37 Loan and Security Agreement, dated December 27, 1994, between NationsBank of Virginia, N.A., TFC Enterprises, *
Inc., The Finance Company, The Insurance Agency, Inc. and First Community Finance, Inc. (Incorporated by
reference to the Registrant's Form 10-K for the fiscal year ended December 31, 1994, Commission File No.
1-11121, previously filed with the Commission.)
10.38 Amendment No. 4, dated March 3, 1995, to Loan and Security Agreement between General Electric Capital *
Corporation and The Finance Company. (Incorporated by reference to the Registrant's Form 10-K for the fiscal
year ended December 31, 1994, Commission File No. 1-11121, previously filed with the Commission.)
10.39 Office Lease, dated June 1, 1995, by and between AFW No. 39 Corporation and The Finance Company. *
(Incorporated by reference to the Registrant's Form 10-K for the fiscal year ended December 31, 1994,
Commission File No. 1-11121, previously filed with the Commission.)
10.40 Ceiling Rate Interest Agreement, dated August 2, 1994, by and between The Finance Company and Mellon Bank, *
N.A. (Incorporated by reference to the Registrant's Form 10-K for the fiscal year ended December 31, 1994,
Commission File No. 1-11121, previously filed with the Commission.)
10.41 Agreement, dated March 23, 1995, by and among G. E. Capital Corporation and The Finance Company. *
(Incorporated by reference to the Registrant's Form 10-K for the fiscal year ended December 31, 1994,
Commission File No. 1-11121, previously filed with the Commission.)
10.42 Amendment #4, dated April 1, 1995, to the Loan and Security Agreement between General Electric Capital *
Corporation and The Finance Company relating to the definition of the borrowing base dated April 1, 1995.
(Incorporated by reference to the Registrant's Form 10-Q for the quarter ended March 31, 1995, Commission
File No. 1-11121, previously filed with the Commission.)
10.43 Lease Agreement, dated April 28, 1995, between Three Oaks Plaza, Ltd. and The Finance Company, Inc. *
(Incorporated by reference to the Registrant's Form 10-Q for the quarter ended March 31, 1995, Commission
File No. 1-11121, previously filed with the Commission.)
10.44 Amendment No. 1 to the Loan and Security Agreement by and between NationsBank of Virginia, N.A., TFC *
Enterprises, Inc., The Finance Company, The Insurance Agency, Inc., and First Community Finance, Inc. dated
May 16, 1995 regarding a modification in the definition of reserve ratio. (Incorporated by reference to the
Registrant's Form 10-Q for the quarter ended June 30, 1995, Commission File No. 1-11121, previously filed
with the Commission.)
10.45 Amendment No. 2 to the Loan and Security Agreement by and between NationsBank of Virginia, N.A., TFC *
Enterprises, Inc., The Finance Company, The Insurance Agency, Inc., and First Community Finance, Inc. dated
May 30, 1995 regarding a modification in the debt ratio threshold. (Incorporated by reference to the
Registrant's Form 10-Q for the quarter ended June 30, 1995, Commission File No. 1-11121, previously filed
with the Commission.)
10.46 Amendment No. 5 to the Loan and Security Agreement by and between General Electric Capital Corporation and *
The Finance Company dated June 23, 1995, regarding an increase in the available line of credit to
$150,000,000 and an increase in the general interest rate charged on the line of credit. (Incorporated by
reference to the Registrant's Form 10-Q for the quarter ended June 30, 1995, Commission File No. 1-11121,
previously filed with the Commission.)
10.47 Note purchase agreement among The Finance Company and Connecticut General Life Insurance Company ("CIGNA") *
and certain affiliates of CIGNA dated June 30, 1995, relating to $10,000,000 in original principal amount of
9.38% Senior Subordinated Notes due June 30, 2002. (Incorporated by reference to the Registrant's Form 10-Q
for the quarter ended June 30, 1995, Commission File No. 1-11121, previously filed with the Commission.)
10.48 Ceiling Rate Interest Credit Agreement by and between The Finance Company and Mellon Bank, N.A., dated May *
10, 1995. (Incorporated by reference to the Registrant's Form 10-Q for the quarter ended June 30, 1995,
Commission File No. 1-11121, previously filed with the Commission.) (Incorporated by reference to the
Registrant's Form 10-Q for the quarter ended June 30, 1995, Commission File No. 1-11121, previously filed
with the Commission.)
10.49 Ceiling Rate Interest Credit Agreement by and between The Finance Company and Mellon Bank, N.A., dated May *
24, 1995. (Incorporated by reference to the Registrant's Form 10-Q for the quarter ended June 30, 1995,
Commission File No. 1-11121, previously filed with the Commission.)
10.50 Lease agreement as of June 6, 1995, between Professors' Fund III Limited Partnership and The Finance Company *
regarding the premises located at 6170 Cornerstone Court East, San Diego, California. (Incorporated by
reference to the Registrant's Form 10-Q for the quarter ended June 30, 1995, Commission File No. 1-11121,
previously filed with the Commission.)
10.51 Amendment to Employment Agreement between The Finance Company and George R. Kouri dated July 27, 1995 *
(effective as of January 1, 1995). (Incorporated by reference to the Registrant's Form 10-Q for the quarter
ended June 30, 1995, Commission File No. 1-11121, previously filed with the Commission.)
10.52 Amendment to Employment Agreement between The Finance Company and Charles M. Johnston dated July 27, 1995 *
(effective as of January 1, 1995). (Incorporated by reference to the Registrant's Form 10-Q for the quarter
ended June 30, 1995, Commission File No. 1-11121, previously filed with the Commission.)
10.53 Amendment to Employment Agreement between The Finance Company and Joseph R. Becka dated July 27, 1995 *
(effective as of January 1, 1995). (Incorporated by reference to the Registrant's Form 10-Q for the quarter
ended June 30, 1995, Commission File No. 1-11121, previously filed with the Commission.)
10.54 Amendment to Employment Agreement between The Finance Company and Ronald G. Tray dated July 27, 1995 *
(effective as of January 1, 1995). (Incorporated by reference to the Registrant's Form 10-Q for the quarter
ended June 30, 1995, Commission File No. 1-11121, previously filed with the Commission.)
10.55 Amendment to Employment Agreement between The Finance Company and Preston K. Gnagey dated July 27, 1995 *
(effective as of January 1, 1995). (Incorporated by reference to the Registrant's Form 10-Q for the quarter
ended June 30, 1995, Commission File No. 1-11121, previously filed with the Commission.)
10.56 Amendment No. 1 to note purchase agreement, dated as of June 30, 1995, by and between The Finance Company and *
Connecticut General Li& Insurance Company ("CIGNA") regarding CIGNA's consent to the Company's $25 million
credit facility with NationsBank. (Incorporated by reference to the Registrant's Form 10-Q for the quarter
ended September 30, 1995, Commission File No. 1-11121, previously filed with the Commission.)
10.57 Amendment No. 8 to Note Purchase Agreement, dated as of October 25, 1988, by and between The Finance Company *
and CIGNA regarding CIGNA's consent to the Company's $25 million credit facility with NationsBank.
(Incorporated by reference to the Registrant's Form 10-Q for the quarter ended September 30, 1995, Commission
File No. 1-11121, previously filed with the Commission.)
10.58 Amendment to Loan Agreement, dated August 16, 1995, by and between The Finance Company, NationsBank, TFC *
Enterprises, Inc., The Insurance Agency, Inc., and First Community Finance, Inc., regarding additions and
amendments to certain definitions in the Loan and Security Agreement dated as of December 23, 1994.
(Incorporated by reference to the Registrant's Form 10-Q for the quarter ended September 30, 1995, Commission
File No. 1-11121, previously filed with the Commission.)
10.59 Loan and Security Agreement, dated August 16, 1995, by and between The Finance Company, NationsBank, TFC *
Enterprises, Inc., The Insurance Agency, Inc., and First Community Finance, Inc., regarding a $25 million
loan payable to NationsBank. (Incorporated by reference to the Registrant's Form 10-Q for the quarter ended
September 30, 1995, Commission File No. 1-11121, previously filed with the Commission.)
10.60 Private Placement Memorandum, related to the 6.14% Automobile Receivables-Backed Notes, Series 1995-A, dated *
as of November 1, 1995, by and between TFC Receivables Corporation, The Finance Company, Harris Trust and
Savings Bank and Financial Security Assurance Inc. (Incorporated by reference to the Registrant's Form 10-K
for the fiscal year ended December 31, 1995, Commission File No. 1-11121, previously filed with the
Commission.)
10.61 Sale and Servicing Agreement, related to the 6.14% Automobile Receivables-Backed Notes, Series 1995-A, dated *
as of November 1, 1995, by and between TFC Receivables Corporation, The Finance Company and Harris Trust and
Savings Bank. (Incorporated by reference to the Registrant's Form 10-K for the fiscal year ended December
31, 1995, Commission File No. 1-11121, previously filed with the Commission.)
10.62 Indenture, related to the 6.14% Automobile Receivables-Backed Notes, Series 1995-A, dated as of November 1, *
1995, by and between TFC Receivables Corporation and Harris Trust and Savings Bank. (Incorporated by
reference to the Registrant's Form 10-K for the fiscal year ended December 31, 1995, Commission File No.
1-11121, previously filed with the Commission.)
10.63 Insurance and Indemnity Agreement, related to the 6.14% Automobile Receivables-Backed Notes, Series 1995-A, *
dated November 1, 1995, by and between TFC Receivables Corporation, The Finance Company and Financial
Security Assurance Inc. (Incorporated by reference to the Registrant's Form 10-K for the fiscal year ended
December 31, 1995, Commission File No. 1-11121, previously filed with the Commission.)
10.64 Indemnification Agreement, related to the 6.14% Automobile Receivables-Backed Notes, Series 1995-A, dated *
November 1, 1995, by and between TFC Receivables Corporation, Financial Security Assurance Inc. and Chemical
Securities Inc. (Incorporated by reference to the Registrant's Form 10-K for the fiscal year ended December
31, 1995, Commission File No. 1-11121, previously filed with the Commission.)
10.65 Spread Account Agreement, related to the 6.14% Automobile Receivables-Backed Notes, Series 1995-A, dated *
November 1, 1995, by and between TFC Receivables Corporation, Financial Security Assurance Inc. and Harris
Trust and Savings Bank. (Incorporated by reference to the Registrant's Form 10-K for the fiscal year ended
December 31, 1995, Commission File No. 1-11121, previously filed with the Commission.)
10.66 Stock Pledge Agreement, related to the 6.14% Automobile Receivables-Backed Notes, Series 1995-A, dated *
November 1, 1995, by and between The Finance Company, TFC Receivables Corporation, Financial Security
Assurance Inc. and Harris Trust and Savings Bank. (Incorporated by reference to the Registrant's Form 10-K
for the fiscal year ended December 31, 1995, Commission File No. 1-11121, previously filed with the
Commission.)
10.67 Second Amendment to Amended and Restated Bylaws of TFC Enterprises, Inc. regarding the number of directors *
comprising the Board of TFC Enterprises, Inc. (Incorporated by reference to the Registrant's Form 10-K for
the fiscal year ended December 31, 1995, Commission File No. 1-11121, previously filed with the Commission.)
10.68 Excess Compensation Repayment Agreement and associated Promissory Note between Robert S. Raley, Jr. and The *
Finance Company, dated January 1, 1996. (Incorporated by reference to the Registrant's Form 10-K for the
fiscal year ended December 31, 1995, Commission File No. 1-11121, previously filed with the Commission.)
10.69 Excess Compensation Repayment Agreement and associated Promissory Note between George R. Kouri and The *
Finance Company, dated January 1 1996. (Incorporated by reference to the Registrant's Form 10-K for the
fiscal year ended December 31, 1995, Commission File No. 1-11121, previously filed with the Commission.)
10.70 Excess Compensation Repayment Agreement and associated Promissory Note between Preston K. Gnagey and The *
Finance Company, dated January 1 1996. (Incorporated by reference to the Registrant's Form 10-K for the
fiscal year ended December 31, 1995, Commission File No. 1-11121, previously filed with the Commission.)
10.71 Excess Compensation Repayment Agreement and associated Promissory Note between Joseph R. Becka and The *
Finance Company, dated January 1 1996. (Incorporated by reference to the Registrant's Form 10-K for the
fiscal year ended December 31, 1995, Commission File No. 1-11121, previously filed with the Commission.)
10.72 Excess Compensation Repayment Agreement and associated Promissory Note between Charles M. Johnson and The *
Finance Company, dated January 1 1996. (Incorporated by reference to the Registrant's Form 10-K for the
fiscal year ended December 31, 1995, Commission File No. 1-11121, previously filed with the Commission.)
10.73 Second Amendment to Employment Agreement Between George R. Kouri and The Finance Company dated January 1, *
1996. (Incorporated by reference to the Registrant's Form 10-K for the fiscal year ended December 31, 1995,
Commission File No. 1-11121, previously filed with the Commission.)
10.74 Second Amendment to Employment Agreement Between Joseph R. Becka and The Finance Company dated January 1, *
1996. (Incorporated by reference to the Registrant's Form 10-K for the fiscal year ended December 31, 1995,
Commission File No. 1-11121, previously filed with the Commission.)
10.75 Second Amendment to Employment Agreement Between Preston K. Gnagey and The Finance Company dated January 1, *
1996. (Incorporated by reference to the Registrant's Form 10-K for the fiscal year ended December 31, 1995,
Commission File No. 1-11121, previously filed with the Commission.)
<PAGE>
10.76 Second Amendment to Employment Agreement Between Ronald G. Tray and The Finance Company dated January 1, *
1996. (Incorporated by reference to the Registrant's Form 10-K for the fiscal year ended December 31, 1995,
Commission File No. 1-11121, previously filed with the Commission.)
10.77 Forbearance Agreement by and between The Finance Company and General Electric Capital Corporation ("GECC") *
dated as of March 21, 1996. (Incorporated by reference to the Registrant's Form 10-K for the fiscal year
ended December 31, 1995, Commission File No. 1-11121, previously filed with the Commission.)
10.78 Amendment No.9 and Waiver and Forbearance Agreement by and among The Finance Company , CIGNA, and certain *
affiliates of CIGNA, dated as of January 31, 1996, relating to 13.5% Senior Subordinated Notes.
(Incorporated by reference to the Registrant's Form 10-K for the fiscal year ended December 31, 1995,
Commission File No. 1-11121, previously filed with the Commission.)
10.79 Amendment No. 2 and Waiver and Forbearance Agreement by and among The Finance Company, CIGNA, and certain *
affiliates of CIGNA, dated as of January 31, 1996, relating to 9.38% Senior Subordinated Notes, dated as of
January 31, 1996. (Incorporated by reference to the Registrant's Form 10-K for the fiscal year ended
December 31, 1995, Commission File No. 1-11121, previously filed with the Commission.)
10.80 Forbearance Agreement by and among The Finance Company, TFC Enterprises, Inc., The Insurance Agency, Inc., *
First Community Finance, Inc., and NationsBank, N.A., dated March 28, 1996. (Incorporated by reference to
the Registrant's Form 10-K for the fiscal year ended December 31, 1995, Commission File No. 1-11121,
previously filed with the Commission.)
10.81 Early Retirement Agreement, dated as of September 30, 1996, between The Finance Company and George R. Kouri. *
(Incorporated by reference to the Registrant's Form 10-Q for the quarter ended September 31, 1996, Commission
File No. 1-11121, previously filed with the Commission.)
10.82 Severance Agreement, dated as of September 30, 1996, between The Finance Company and Preston K. Gnagey. *
(Incorporated by reference to the Registrant's Form 10-Q for the quarter ended September 31, 1996, Commission
File No. 1-11121, previously filed with the Commission.)
10.83 Early Retirement Agreement and Independent Contractor Agreement, dated as of September 30, 1996 , between *
The Finance Company and Joseph R. Becka. (Incorporated by reference to the Registrant's Form 10-Q for the
quarter ended September 31, 1996, Commission File No. 1-11121, previously filed with the Commission.)
10.84 Severance Agreement, dated as of September 30, 1996, between Charles M. Johnston and The Finance Company. *
(Incorporated by reference to the Registrant's Form 10-Q for the quarter ended September 31, 1996, Commission
File No. 1-11121, previously filed with the Commission.)
**10.85 Amended and Restated Motor Vehicle Installment Contract Loan and Security Agreement dated December 20, 1996
between The Finance Company and General Electric Capital Corporation.
**10.86 Amendment No. 1 to Amended and Restated Motor Vehicle Installment Contract Loan and Security Agreement dated
April 4, 1997 by and between The Finance Company and General Electric Capital Corporation
**10.87 TFC Enterprises, Inc. Warrant to Purchase Common Stock dated December 20, 1996.
**10.88 Allonge to Warrant to Purchase Common Stock dated April 4, 1997.
**10.89 TFC Enterprises, Inc. Warrant to Purchase Common Stock dated April 4, 1997.
**10.90 Amended and Restated Registration Rights dated April 4, 1997 between TFC Enterprises, Inc. and General
Electric Capital Corporation
**10.91 TFC Enterprises, Inc. Guaranty dated April 4, 1997.
**10.92 First Community Finance, Inc. Guaranty dated April 4, 1997
**10.93 The Insurance Agency, Inc. Guaranty dated April 4, 1997
**10.94 Securities Pledge Agreement dated April 4, 1997 by TFC Enterprises, Inc. and General Electric Capital
Corporation
**10.95 Security Agreement dated April 4, 1997 between TFC Enterprises, Inc., The Finance Company, First Community
Finance, Inc., The Insurance Agency, Inc., and its subsidiaries and General Electric Capital Corporation
**10.96 Amendment No. 3 and Waiver of Note Agreement by and among The Finance Company, CIGNA, and certain affiliates
of CIGNA, dated as of April 4, 1997, relating to 13.5% Senior Subordinated Notes.
**10.97 Amendment No. 10 and Waiver of Note Agreement by and among The Finance Company, CIGNA, and certain affiliates
of CIGNA, dated as of April 4, 1997, relating to 9.375% Senior Subordinated Notes.
**11 Statement re: computation of per share earnings.
**13 Annual report to security holders.
**21 List of subsidiaries of TFC Enterprises, Inc.
**23 Consent of Ernst & Young LLP
**99.1 The Financial Statements and notes thereto which appear
on pages 19 through 39 of TFC Enterprises, Inc. 1996
Annual Report to Shareholders (filed as Exhibit 13 to
this Form 10-K) are incorporated herein by reference.
**99.2 Financial Statement Schedule I.
</TABLE>
- ---------------------------------------------
* (Not filed herewith. In accordance with Rule 12b-32 of the
General Rules and Regulations under the Securities Exchange Act
of 1934, the exhibit is incorporated by reference).
** Filed herewith.
<PAGE>
Schedule I- Financial Information of Registrant
TFC Enterprises, Inc.
Balance Sheets
<TABLE>
<CAPTION>
December 31
(in thousands) 1996 1995
---- ----
<S> <C>
Assets
Investment in subsidiaries $ - $ 3,144
Intangible assets, net 13,161 14,252
Due from subsidiaries 25,320 22,865
Other assets 165 215
----------- ----------
Total assets $ 38,646 $ 40,476
======== ========
Liabilities and shareholders' equity
Liabilities:
Deficit in subsidiaries 4,100 -
Accounts payable and accrued expenses 203 78
Income taxes payable 3,579 2,984
Deferred income taxes 902 1,010
----------- ---------
Total liabilities 8,784 4,072
Shareholders' equity:
Preferred stock, $.01 per value, 1,000,000 shares
authorized; none outstanding - -
Common stock, $.01 par value, 40,000,000 shares
authorized and 11,290,308 and 11,283,954 shares
outstanding in 1996 and 1995, respectively 49 49
Additional paid-in capital 55,333 54,279
Retained deficit (25,520) (17,924)
-------- --------
Total shareholders' equity 29,862 36,404
------ ------
Total liabilities and shareholders' equity $ 38,646 $ 40,476
======== ========
</TABLE>
Page 1 of 3
<PAGE>
Schedule I- Financial Information of Registrant
TFC Enterprises, Inc.
Statements of Operations
<TABLE>
<CAPTION>
Years ended
December 31
(in thousands) 1996 1995 1994
---- ---- ----
<S> <C>
Net interest revenue:
Interest revenue $2,132 $3,404 $3,154
Interest expense - 30 8
------- ------- ---------
Net interest revenue 2,132 3,374 3,146
Other revenue:
Equity in net income (loss)
of subsidiaries (7,667) (7,241) 6,636
------- ------- ------
Total other revenue (7,667) (7,241) 6,636
Operating expenses:
Amortization of intangible assets 1,091 1,091 1,091
Other 483 704 525
------ ----- ------
Total operating expense 1,574 1,795 1,616
----- ----- ------
Income (loss) before income taxes (7,109) (5,662) 8,166
Provision for income taxes 487 799 935
-------- -------- -------
Net income (loss) $(7,596) $(6,461) $7,231
======== ======== ======
</TABLE>
Page 2 of 3
<PAGE>
Schedule I- Financial Information of Registrant
TFC Enterprises, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
Years ended December 31
(in thousands) 1996 1995 1994
---- ---- ----
<S> <C>
Operating activities
Net income (loss) $(7,596) $(6,461) $ 7,231
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Equity in net (income) loss of subsidiaries 7,667 7,241 (6,636)
Amortization of intangible assets 1,091 1,091 1,091
Benefit from deferred income taxes (108) (108) (79)
Amortization of deferred charges - 47 22
Changes in operating assets and liabilities:
Decrease in recoverable income taxes - - 772
Decrease (increase) in other assets 50 (80) (9)
Increase in due from subsidiaries (2,455) (1,831) (12,537)
Increase (decrease) in accounts payable and accrued
liabilities 744 43 34
Increase (decrease) in income taxes payable 595 (105) 3,089
-------- -------- -----
Net cash used in operating activities (12) (163) (7,022)
Financing activities
Proceeds on issuance of common stock - - 7,101
Proceeds from stock options exercised 12 20 54
-- ------- ------------
Net cash provided by financing activities 12 20 7,155
Increase (decrease) in cash - (143) 133
Cash at beginning of year - 143 10
------ -------- ------
Cash balance at end of year $ - $ - $ 143
========== ========== ========
Noncash transactions:
Issuance of stock warrants $ 423 $ - $ -
Deferred compensation terminated and transfered to paid-in 619 - -
capital
Conversion of due from subsidiaries to - 20,000 -
equity in subsidiaries
</TABLE>
Page 3 of 3
AMENDED AND RESTATED MOTOR VEHICLE INSTALLMENT
CONTRACT LOAN AND SECURITY AGREEMENT
This Amended and Restated Motor Vehicle Installment Contract Loan
and Security Agreement ("Agreement") is entered into by and between THE FINANCE
COMPANY (hereinafter referred to as "Borrower"), a Virginia corporation, and
General Electric Capital Corporation, a New York corporation (hereinafter
referred to as "Lender"). In consideration of the mutual covenants and
agreements contained herein, Borrower and Lender agree as follows:
RECITALS
A. Borrower and Lender are parties to that certain Loan and Security Agreement
dated as of September 24, 1992 as amended (the "Original Agreement") pursuant to
which Lender made certain loans to Borrower which loans were secured by, among
other things, Borrower's motor vehicle installment contracts;
B. Borrower and Lender have agreed to enter into this Agreement in order to (i)
amend and restate the Original Agreement in its entirety; (ii) incorporate such
terms of the Forbearance Agreement executed between Borrower and Lender dated
March 21, 1996 as the parties agree should be contained in this Agreement; (iii)
add The Insurance Agency, Inc. ("TIA") and First Community Finance, Inc. ("FCF")
as additional Guarantors to this Agreement, and (iv) document such other changes
in the lending relationship between the parties as have occurred since the
Original Agreement.
C. It is the intent of Borrower and Lender that the execution and delivery of
this amendment and restatement of the Original Agreement shall not effectuate a
novation of the indebtedness outstanding under the Original Agreement, but
rather as it pertains to the indebtedness outstanding under the Original
Agreement, shall constitute a substitution of certain of the terms governing the
payment and performance of such indebtedness.
ARTICLE I. DEFINITIONS.
Section 1.0 DEFINITIONS. Capitalized terms used in this Agreement
shall have the meanings given to such terms in Section 16 of this Agreement.
When such defined terms are used in this Agreement in the plural, the terms
shall have the plural of such meanings. All other terms contained in this
Agreement shall, unless the context indicates otherwise, have the meanings
provided for by the UCC to the extent the same are defined therein.
ARTICLE II. LOAN: GENERAL TERMS
Section 2.0. REVOLVING CREDIT; LOAN AMOUNT. Subject to all of the
terms and conditions of this Agreement, Lender agrees to loan funds to Borrower
against Eligible Contracts from time to time in a series of Advances during the
term of this Agreement. Funds may be borrowed, repaid and re-borrowed on a
revolving basis subject to the terms and conditions set forth in this Agreement,
provided that the Loan shall not at any time exceed the Borrowing Base.
Borrower's obligation to pay the Loan is evidenced by this Agreement. Borrower
shall pay Lender when due all Obligations in accordance with the terms of this
Agreement whether or not Borrower has executed a promissory note. The actual
amount Borrower is obligated to pay Lender hereunder shall be determined by this
Agreement and the records of Lender, regardless of the terms of any promissory
note. Any promissory note executed in connection with the Indebtedness need not
be amended to reflect changes made to this Agreement.
Section 2.1. SINGLE LOAN. All Advances by Lender to Borrower shall
constitute one loan and all indebtedness and obligations of Borrower to Lender
under the Loan Documents shall constitute an obligation secured by Lender's
security interest in all of the Collateral.
Section 2.2. GENERAL INTEREST RATE. (A) Except as modified by
Sections 2.4 and 15.1, the Loan shall bear interest, calculated daily on the
basis of a 365-day year, at a per annum rate equal to 400 basis points (4.00%)
plus the LIBOR Rate as it may change upon the first day of each calendar month.
The interest rate will adjust for the succeeding fiscal quarter
based on the level of Interest Coverage achieved in the preceding fiscal
quarter, provided that the utilization level is at least fifty million dollars
($50,000,000.00) average daily balance for each quarter. If Borrower achieves an
Interest Coverage of 1.4:1 as of the end of a fiscal quarter, then provided that
Borrower is in compliance with all terms of this Agreement and maintains an
Interest Coverage of at least 1.4:1, then the interest rate for the succeeding
fiscal quarter shall be three hundred and seventy-five basis points (3.75%) plus
the LIBOR Rate. If Borrower achieves an Interest Coverage of 1.7:1, as of the
end of a fiscal quarter, then provided that Borrower is in compliance with all
terms of this Agreement and maintains an Interest Coverage of at least 1.7:1
then the interest rate for the succeeding fiscal quarter shall be three hundred
and fifty basis points (3.50%) plus the LIBOR Rate.
(B) Borrower shall pay to Lender the Line Fee on execution of this
Agreement for the period from the execution date through and until December 31,
1997. Borrower shall pay on January 1, 1998 the Line Fee for calendar year 1998.
Section 2.3. LOAN TERM; RIGHT TO TERMINATE. Unless sooner terminated
as hereinafter provided, this Agreement shall terminate on December 31, 1998. If
an Event of Default has occurred, and not been cured as provided in Section
15.7, Lender may without prior notice to Borrower, immediately terminate this
Agreement. A prepayment in full of the Loan shall be a termination of this
Agreement. Notwithstanding termination of this Agreement in any manner, the
Indebtedness shall be payable in accordance with this Agreement, and all rights
and remedies granted to Lender hereunder or pursuant to applicable law shall
continue until all obligations of Borrower to Lender have been fully paid and
performed.
Section 2.4. MAXIMUM LAWFUL RATE. (A) INTEREST RATE. Notwithstanding
any provision in this Agreement, or in any other document, if at any time before
the payment in full of the Indebtedness, any of the rates of interest specified
in this Agreement (the "Stated Rates") exceeds the highest rate of interest
permissible under any law which a court of competent jurisdiction shall, in a
final determination, deem applicable hereto (the "Maximum Lawful Rate"), then in
such event and so long as the Maximum Lawful Rate would be so exceeded, the rate
of interest payable shall be equal to the Maximum Lawful Rate; provided,
however, that if at any time thereafter the Stated Rates shall be less than the
Maximum Lawful Rate, then, subject to (B) below, Borrower shall continue to pay
interest at the Maximum Lawful Rate until such time as the total interest
received by Lender is equal to the total interest which Lender would have
received had the Stated Rates been (but for the operation of this Section
2.4(A)) the interest rates payable; thereafter, the interest rates payable shall
be the Stated Rates unless and until any of the Stated Rates shall again exceed
the Maximum Lawful Rate, in which event this Section 2.4(A) shall again apply.
In the event interest payable hereunder is calculated at the Maximum Lawful
Rate, such interest shall be calculated at a daily rate equal to the Maximum
Lawful Rate divided by the number of days in the year in which such calculation
is made.
(B) AMOUNT OF INTEREST. In no event shall the total
interest contracted for, charged, received or owed pursuant to the terms of this
Agreement exceed the amount which Lender may lawfully receive. In the event that
a court of competent jurisdiction, notwithstanding the provisions of this
Section 2.4, shall make a final determination that Lender has received, charged,
collected, or contracted for interest hereunder in excess of the amount which
Lender could lawfully have, Lender shall, to the extent permitted by law,
promptly apply such excess first to any interest due (calculated at the Maximum
Lawful Rate if applicable) and not yet paid, then to the prepayment of
principal, and any excess remaining thereafter and after application to any
other amounts Borrower owes Lender shall be refunded to Borrower. In determining
whether the interest exceeds the Maximum Lawful Rate or the maximum amount which
Lender could lawfully have received, the total amount of interest shall, to the
extent allowed by law, be spread over the term of the Loan. Any provisions of
this Agreement regarding the time during which interest accrues on Advances are
only elements of the formula for calculating interest on the total Loan and are
not intended to cause interest to be applied to specific Advances for usury
determination purposes.
Section 2.5. WARRANT TO PURCHASE COMMON STOCK. As additional
consideration for Lender to enter into this Agreement, and as a condition to the
effectiveness hereof, concurrently herewith (a) TFCEI issues to Lender, and
Lender accepts, a certain Warrant to Purchase Common Stock of even date herewith
(the "Warrant"), whereby Lender is granted certain rights to purchase shares of
the common stock TFCEI, and (b) TFCEI and Lender enter into a certain
Registration Rights Agreement of even date herewith (the "Registration Rights
Agreement"), which agreement, among other things, grants certain rights to
Lender for the registration of the shares of common stock of TFCEI purchasable
under the Warrant.
ARTICLE III - LOAN DISBURSEMENTS
Section 3.0. LOAN - BORROWING BASE. Provided that there does not
then exist an Event of Default or a Pre-Default Event and provided that Lender
has not taken over all or some of the administration of the Contracts under
Section 5.1 hereof, Lender shall, upon written request of Borrower and subject
to all of the terms and conditions of this Agreement, make Advances to Borrower
pursuant to Section 3.2.
Section 3.1. ELIGIBLE CONTRACTS. Borrower shall from time to time
deliver to Lender Eligible Contracts which Borrower desires to be included in
the Borrowing Base. Along with the Contracts Borrower shall also deliver a List
of Contracts. An Eligible Contract shall be included in the Borrowing Base only
when and for so long as, in Lender's reasonable determination, each of the
requirements in the definition of Eligible Contracts continues to be satisfied.
If a Contract is determined by Lender to be, or is treated by Lender as, an
Eligible Contract, Lender reserves the right to change its determination or
treatment and to remove the Contract from the Borrowing Base if it later
determines that the Contract is not or was not an Eligible Contract. A
determination by Lender that a Contract is an Eligible Contract is not a waiver
by Lender of, or an admission by Lender of the truth of, any of Borrower's
representations and warranties in this Agreement.
Section 3.2. PROCEDURE FOR BORROWING. (A) The first Advance shall
not exceed the Borrowing Base. Subsequent Advances may be requested on any
Business Day and each subsequent Advance shall not exceed the Loan Availability
determined, either as of the end of the most recent Accounting Period for which
Lender has received the monthly reports required by Section 5.1(C) or as of such
other later date designated by Lender. Lender is not obligated to make an
Advance if the amount available or requested is less than one hundred thousand
dollars ($100,000.00). Lender is not obligated to make an Advance unless
Borrower provides Lender with sufficient information to calculate the Loan
Availability. Lender's use of the information provided by Borrower to determine
the amount available for Advances is not an admission by Lender as to the
accuracy of the information, and Lender reserves the right to verify the
information and re-determine the amount available for Advances.
(B) Lender shall disburse each Advance requested
by Borrower within one (1) Business Day after receipt of Borrower's written
request for the Advance. Lender shall disburse each Advance requested by
Borrower by means of a draft, or, upon the request of and at the expense of
Borrower, Lender shall wire transfer the funds to Borrower.
Section 3.3 MAXIMUM ADVANCES FOR THIRD PARTY CONTRACTS. At no time
shall the aggregate Borrower's Net Investment of all Eligible Contracts serviced
by Third Party Servicers exceed ten million dollars ($10,000,000), without prior
written Lender approval. All Third Party Servicers shall enter into a Third
Party Servicing Agreement in substantially the form as that attached in Exhibit
11.
ARTICLE IV - LOANS: PAYMENTS
Section 4.0. PAYMENTS BY BORROWER. (A) All payments by Borrower to
Lender shall be deposited in the Depository Account or shall be sent to such
other location of which Lender has notified Borrower.
(B) Upon the effective date of termination of
this Agreement, Borrower shall pay to Lender the entire Indebtedness. If there
is an Event of Default, which has not been Cured as provided in Section 15.7,
Borrower shall pay the entire Indebtedness on demand if the Indebtedness is
accelerated pursuant to Section 15.2.
(C) Interest shall accrue on the Loan daily and
be paid from the Remittances as provided in Section 4.2. If at the end of an
Accounting Period there is more than one Business Day of accrued unpaid
interest, Borrower shall pay the more-than- one-day accrued interest to Lender
within five (5) calendar days after the end of the Accounting Period. Accrued
interest shall not be added to the Loan balance and bear interest, unless the
interest is past due and paid with an Advance requested by Borrower and approved
by Lender; provided that, such an approval by Lender shall not constitute a
waiver of the Event of Default consisting of the failure to pay the interest
except to the extent provided in Section 17.9.
(D) Whenever Lender shall notify Borrower, with
a Statement of Borrowing Base or otherwise, that the Loan exceeds the Borrowing
Base, Borrower shall within one (1) Business Day after receipt of such notice,
either pay down the Loan by the amount of such excess, or, if Lender consents,
deliver additional Eligible Contracts to Lender which are sufficient to increase
the Borrowing Base above the Loan.
(E) The payment of all elements of the
Indebtedness not covered above shall be payable by Borrower to Lender as and
when provided in the Loan Documents, and, if not specified, then on demand.
(F) Borrower has the right to prepay the Loan in
full or in part at any time without penalty.
Section 4.1. CONTRACT PAYMENTS. Borrower shall direct all Contract
Debtors other than those administered by Third Party Servicers for Pledged
Contracts, and all other Persons (including Contract Rights Payors) who make
payments to Borrower relating to Pledged Contracts, to make, when paying by
mail, all payments directly to the Post Office Box or Third Party Servicers. In
the event Borrower receives any Remittances, Borrower shall, as soon as possible
but no later than the third (3rd) Business Day following receipt, deposit the
Remittances in kind in the Depository Account. Borrower shall hold Remittances
in trust for Lender until delivery to Lender or deposit in the Depository
Account. Borrower shall pay all expenses associated with the Post Office Box.
Section 4.2. APPLICATION OF PAYMENTS. All Remittances, received by
Lender or the Depository Account shall be applied by Lender to the Indebtedness
within one (1) Business Day after the Remittance has been credited to the
Depository Account; provided, however, that no Remittance received by the
Depository Account other than cash shall constitute payment to Lender unless and
until such item has actually been collected by the Depository Account bank and
such collection has been finally credited to Lender's account for the Depository
Account; provided, further, that if a Remittance applied to the Indebtedness is
charged back to the Depository Account, Lender can retroactively remove the
application of the Remittance to the Indebtedness and accrue any interest not
accrued because of the application of the Remittance to the Indebtedness. Each
Remittance applied by Lender to the Indebtedness shall be applied by Lender
first to accrued interest and, if sufficient to pay accrued interest, any excess
shall be applied then to the Loan, and, if sufficient to pay the accrued
interest and the Loan, any excess shall then be applied to the remaining
elements of the Indebtedness, if any, or, if not, Lender shall remit the same to
Borrower or its designee within one Business Day; provided that, Lender reserves
the right to use a different order of application if there is an Event of
Default or Lender has given prior written notice to Borrower of a different
order. All Remittances received by the Depository Account or Lender shall be
applied to the Indebtedness even though no portion of the Indebtedness is
otherwise then due and even though Lender has not sent Borrower a demand, notice
or request for payment of the Indebtedness. Payments shall be deemed to be due
by Borrower when received by Lender unless they are due sooner by the terms of
the Loan Documents.
ARTICLE V - CONTRACT ADMINISTRATION
Section 5.0. LENDER ADMINISTRATION. Lender shall have no liability
to Borrower with respect to Remittances received by Lender, the Post Office Box,
or the Depository Account, other than to: (i) apply the Remittances pursuant to
Section 4.2 of this Agreement, (ii) in the event Remittances are directly
received by Lender, Lender shall provide or cause to be provided to Borrower, a
report of Remittances received by the Post Office Box, and (iii) upon
termination of this Agreement and Borrower's satisfaction of all of its
obligations under this Agreement, to assign the Post Office Box and its contents
to Borrower. Lender shall have no liability to Borrower with respect to any
interest or other earnings which are earned, or could have been earned, on the
Remittances while they are in the Post Office Box, the Depository Account, or
otherwise.
Section 5.1. BORROWER ADMINISTRATION. (A) Borrower or Third Party
Servicer as referenced in Section 3.3, shall perform all aspects of servicing,
administering, collecting, liquidating, accounting for and managing
(collectively, "administering", "administer", or "administration") the Pledged
Contracts it customarily performs in accordance with Borrower's current
practices for contract administration, which practices are in accordance with
applicable law and have been disclosed to Lender prior to the date hereof.
Borrower shall provide such administration in a reasonable and prudent way that
does not, in Lender's reasonable determination, adversely affect the value of
the Collateral to Lender. If in Lender's reasonable opinion, Borrower fails to
administer the Pledged Contracts in accordance with Borrower's practices
disclosed to Lender prior to the date hereof, Lender shall notify Borrower of
the deficiencies in Borrower's administration and Borrower shall have ten (10)
Business Days to cure any such deficiencies. If Borrower fails to cure such
deficiency within such ten (10) Business Day period, Lender may thereafter, in
its sole discretion, take over all or part of the administration of the Pledged
Contracts. The administration provided by Borrower shall include but not be
limited to all servicing currently provided by Borrower, and Financed Vehicle
titling and lien perfection, customer service, insurance claim tracking and
collection, insurance maintenance, Contract enforcement, Contract billing,
payment processing, portfolio and Contract accounting, portfolio management,
delinquency collection, repossession, foreclosure, resale, and maintaining
current Contract Debtor and Financed Vehicle location information (name, address
and phone number) as set forth in Exhibit 5.1(A). Borrower shall maintain
current, accurate, and complete records of activity and comments regarding
collection, insurance, payments, and other material events. The records
regarding collection history, payments, Contract accounting, customer service
notes, Contract Debtor names and addresses and Outstanding Principal Balance
shall be computerized. Borrower shall require Contract Debtors to maintain
Required Contract Debtor Insurance. Borrower shall administer and otherwise deal
with the Contracts in compliance with all applicable laws. Borrower shall
conduct foreclosure sales in a commercially reasonable manner and take the steps
necessary to preserve the deficiency liability of the Contract Debtors.
(B) Borrower shall administer the Pledged
Contracts at its existing service centers in Norfolk, Virginia, and
Jacksonville, Florida, as set forth more fully in Exhibit 5.1(B) or at such
other locations of which Borrower provides prior notice to Lender and Lender
approves for Contract administration, which approval shall not be unreasonably
withheld.
(C) Borrower shall furnish to Lender such
reports in such form that Lender reasonably determines are necessary for it to
track and monitor the Pledged Contracts, Remittances, Financed Vehicles, and
insurance. Such reports shall be in a format and on a medium readable by
Lender's computer software, or such other format or medium acceptable to Lender.
The reports shall include but not be limited to those reports set forth on
Exhibit 5. 1(C) attached hereto and made a part hereof, and shall be delivered
to Lender in accordance with such Exhibit.
(D) Notwithstanding anything herein to the
contrary, (i) Borrower shall remain liable under all Contracts, and any other
contracts and agreements with Contract Rights Payors or otherwise included in or
related to the Collateral, to the extent set forth therein to perform all of its
duties and obligations thereunder to the same extent as if this Agreement had
not been executed, and (ii) the exercise by Lender of any rights under any of
the Loan Documents shall not release Borrower from any of its duties or
obligations under the Contracts, or the other contracts and agreements, and
(iii) Lender shall not have any obligation or liability under the Contracts, or
the other contracts and agreements, nor shall Lender be obligated to perform any
of the obligations or duties of Borrower thereunder or to take any action to
collect or enforce any rights thereunder.
(E) Borrower shall administer the Contracts at
its own expense. In the event that Borrower fails to administer the Contracts in
accordance with Section 5.1(A) or there is an Event of Default, Lender may in
Lender's or Borrower's name take over all or part of the Contract administration
Borrower is required by this Agreement to perform. If Lender takes over all or
part of such administration, Borrower shall pay to Lender on demand all
reasonable out-of-pocket costs incurred by Lender in the performance of
Borrower's administration obligations, and Borrower shall pay Lender for the
administration performed by Lender a reasonable administration fee (exclusive of
documented out-of-pocket costs) established by Lender, and until so paid such
costs and fee shall be part of the Loan.
ARTICLE VI - COLLATERAL: GENERAL TERMS
Section 6.0. SECURITY INTEREST. To secure the performance and
payment of the Indebtedness and all of Borrowers existing and future obligations
to Lender whether arising under or related to this Agreement or otherwise,
Borrower hereby grants to Lender a continuing security interest in and to all of
the following property of Borrower, whether now owned or existing or hereafter
arising or acquired and regardless of where located:
Contracts; Contract Debtor Documents; Contract Rights; payments from
Contract Debtor bank accounts; chattel paper; leases; installment sale
contracts; installment loan contracts; payments from chattel paper obligors;
security deposits; Motor Vehicles (including but not limited to cars and
trucks); certificates of title; contract purchase discounts; accounts; general
intangibles; security interests; collateral securing chattel paper; dealer
agreements; dealer reserves and rate participation (to the extent that Borrower
has an assignable interest therein); rights of Borrower related to chattel
paper, installment contracts, motor vehicles, and collateral securing chattel
paper; documents; instruments; deposit accounts; electronic funds transfers;
equipment; inventory; parts and accessories for motor vehicles; payments from
account debtor bank accounts; reserve accounts; insurance policies, and benefits
and rights under insurance policies, which Borrower is solely or jointly the
owner of, insured under, the lienholder or loss payee under, or the beneficiary
of; and all payments and property of any kind, now or at any time or times
hereafter, in the possession or under the control of Lender, or a bailee of
Lender;
accessions to, substitutions for and all replacements, products and
proceeds of, any of the foregoing property; and
books and records (including, without limitation, financial
statements, accounting records, customer lists, credit files, computer programs,
electronic data, print-outs and other computer materials and records) of
Borrower pertaining to any of the foregoing property.
Section 6.1. DISCLOSURE OF SECURITY INTEREST. Borrower shall make
appropriate entries upon its financial statements and its books and records
disclosing Lender's security interest in the Collateral. Borrower shall stamp
all original, duplicates and reproductions of Pledged Contracts with an
assignment to Lender.
Section 6.2. ADDITIONAL ACTS. Borrower shall perform all other acts
reasonably requested by Lender for the purpose of perfecting, protecting,
maintaining and enforcing Lender's security interest in the Collateral and the
priority of such security interest. Borrower agrees that a carbon, photographic,
photostatic, or other reproduction of this Agreement or of a financing statement
is sufficient as a financing statement. Borrower, upon request of Lender, shall
either pay or reimburse Lender for all costs, filing fees, and taxes associated
with the perfection of Lender's security interest.
Section 6.3. INSPECTION AND ACCESS. Lender and its agents shall have
the right, at any time, to (i) during Borrower's usual business hours, inspect
the Collateral and the premises upon which any of the Collateral is located;
(ii) during Borrower's usual business hours, inspect, audit and make copies or
extracts from any of Borrower's records, computer systems, files, and books of
account; (iii) during Borrower's usual business hours, monitor Borrower's
performance of its obligations with respect to this Agreement; and (iv) verify,
in Lender's name or in the name of Borrower, the validity, amount, quality,
quantity, value and condition of, or any other matter relating to, the
Collateral including but not limited to verifying Contract information with
Contract Debtors. Borrower shall, upon Lender's request from time to time,
instruct its vendors, banking and other financial institutions and its
accountants to make available to Lender and discuss with Lender such information
and records as Lender may request. Borrower authorizes Lender, without request,
to provide to a credit reporting agency information about the Indebtedness,
Collateral and Borrower's performance of this Agreement. If Borrower maintains
or stores any data with respect to Collateral on a computer data system,
Borrower shall upon request of Lender provide Lender with (a) on-line access to
such computer data system or (b) deliver to Lender duplicate copies of the
requested data in machine readable form acceptable to Lender along with a
printout or other hard copy of such data. Borrower shall, on request of Lender,
provide to Lender (at the location designated by Lender) the Contract Debtor
Documents.
Section 6.4. RIGHT TO NOTIFY AND ENDORSE. Borrower hereby
irrevocably authorizes Lender to notify any or all Contract Debtors and Contract
Rights Payors that Lender has a security interest in Contracts, Contract Rights,
and other items of Collateral at any time (i) prior to the occurrence of an
Event of Default, in the name of Borrower, and (ii) after the occurrence of an
Event of Default, in Lender's or Borrower's name. Any such notice shall, at
Lender's election, be signed by Borrower and may be sent on Borrower's
stationery.
Section 6.5. LENDER APPOINTED ATTORNEY-IN-FACT. Borrower hereby
irrevocably appoints Lender (and all Persons designated by Lender for that
purpose) as Borrower's true and lawful attorney-in-fact, coupled with an
interest, to act in Borrower's place and in Borrower's or Lender's name (i) to
endorse Borrower's name on any Remittance; (ii) to sign Borrower's name on any
assignment or termination of a security interest in a Financed Vehicle, on any
application for a Certificate of Title for a Financed Vehicle, or on any UCC
financing statement related to the Collateral, and on any other public records
regarding the Collateral; (iii) to send requests for verification to Contract
Debtors and (iv) to execute an assignment to Lender of any Pledged Contract for
which Lender has made an Advance which was delivered to Lender without such
assignment. Borrower ratifies and approves all acts of Lender as Borrower's
attorney-in-fact. Lender shall not, when acting as attorney-in-fact, be liable
for any acts or omissions as or for any error of judgment or mistake of fact or
law, except for actions taken in bad faith or resulting from Lender's gross
negligence or willful misconduct. This power, being coupled with an interest, is
irrevocable until all payment and performance obligations of Borrower to Lender
have been fully satisfied. Borrower shall upon request of Lender execute powers
of attorney to separately evidence the foregoing powers granted to Lender. As
long as an Event of Default has occurred, all costs, fees and expenses
thereafter incurred by Lender, or for which Lender becomes obligated, in
connection with exercising any of the foregoing powers shall be payable to
Lender by Borrower on demand by Lender and until paid shall be part of the Loan.
Section 6.6. CHANGE OF COLLATERAL, LOCATION, OFFICE OR STRUCTURE.
Borrower shall keep the Collateral, other than Collateral delivered to Lender
and Financed Vehicles, at Borrower's address set forth in Section 17.1 or its
service center(s) listed in Exhibit 5.1(B). Borrower shall not change its name,
tradename, principal place of business and chief executive office or the
location of any service center, unless Borrower gives Lender at least sixty (60)
days prior written notice of such change and prior thereto has taken all action
Lender requires to maintain the priority and perfection of its security interest
in, and access to, the Collateral.
Section 6.7. LENDER'S PAYMENT OF CLAIMS ASSERTED AGAINST BORROWER.
Lender may, at any time, in its sole discretion and without obligation to do so
and without waiving or releasing any obligation, liability or duty of Borrower
under the Loan Documents or any Event of Default, pay, acquire or accept an
assignment of any security interest, lien, claim or encumbrance asserted by any
Person against the Collateral; provided that Lender shall first give Borrower
written notice of its intent to do the same, and Borrower does not, within five
(5) days of such notice, pay such claim and/or obtain to Lender's reasonable
satisfaction the release of the security interests, liens, claims or
encumbrances to which such notice relates. All sums paid by Lender in respect
thereof and all costs, fees and expenses, including reasonable attorneys' fees,
court costs, expenses and other charges relating thereto, which are incurred by
Lender on account thereof, shall be payable by Borrower to Lender on demand by
Lender and until paid shall be part of the Loan.
Section 6.8. TERMINATION OF SECURITY INTEREST. Lender's security
interest in the Collateral shall continue until performance and payment in full
of all of Borrower's obligations to Lender in accordance with the terms of
agreements creating such obligations; and if, at any time, all or part of a
payment or transfer made by Borrower or any other Person and applied by Lender
to Borrower's obligations to Lender is rescinded or otherwise must be returned
by Lender for any reason whatsoever (including, without limitation, the
insolvency, bankruptcy or reorganization of Borrower or such other Person), the
security interest granted hereunder or under any other present or future
agreement between Borrower and Lender, and all rights of Lender, shall be
reinstated as to the obligations which were satisfied by the payment or transfer
rescinded or returned, all as though such payment or transfer had not been made,
and Borrower shall take the action requested by Lender to re-perfect all
terminated security interests and to reinstate all satisfied obligations. Lender
shall release its security interest in Contracts which are sold or pledged to
other Persons in accordance with Section 14.8.
Section 6.9. RETURN OF CONTRACT DELIVERY DOCUMENTS. Lender shall
return to Borrower within three (3) Business Days of Borrower's request any
Contract Delivery Document originals for Contracts paid in full. In addition,
provided that there is no Event of Default and the removal of the Contract will
not result in the Loan exceeding the Borrowing Base, Lender shall return
Contract Delivery Document originals for other Contracts requested by Borrower
for the time and to the extent necessary for Borrower to make corrections or to
enforce the Contracts or the obligations of the Contract Rights Payors. Whenever
Borrower is in possession or control of Contract Delivery Documents for
Contracts not paid in full, Borrower shall hold them in trust for Lender.
Section 6.10 LIFE INSURANCE. In addition to the security interest
granted in Section 6.0, Borrower hereby assigns absolutely to Lender Borrower's
right to life insurance benefits in the amount of One Million Dollars
($1,000,000.00) ("Life Insurance") insuring the life of Robert S. Raley, Jr.
Borrower shall cause all Life Insurance premiums to be timely paid, and shall
take whatever other action is necessary, to keep the Life Insurance in full
force and effect. Upon complete payment of the Indebtedness and termination of
this Agreement, Lender agrees to release its interest in the Life Insurance.
Section 6.11 FIRST COMMUNITY FINANCE RECEIVABLES. Borrower agrees
that FCF shall pledge its interest in consumer loan receivables ("FCF
Collateral") to Lender, as collateral for FCF's Guaranty. Such assignment and
pledge shall be documented as set forth in Exhibit 17. The FCF Collateral will
not be included for purposes of calculating the Borrowing Base. In the event FCF
obtains financing secured by the FCF Collateral, Lender agrees to release its
interest in the FCF Collateral, provided that Lender's advance against Eligible
Contracts is reduced by 3% at the time of Lender's release of the FCF
Collateral. Upon Lender's release of the FCF Collateral, Lender agrees to
eliminate the covenants pertaining to FCF as it relates to Section 13.6 and
Exhibit 13.6 of this Agreement. Upon Lender's release of the FCF Collateral,
Lender agrees to eliminate the covenants pertaining to FCF as it relates to
Section 13.6 and Exhibit 13.6 of this Agreement.
ARTICLE VII - COLLATERAL: CONTRACTS
Section 7.0. NOTICE REGARDING CONTRACTS. (A) After an Eligible
Contract is included in the Borrowing Base, in the event that Borrower becomes
aware that one of the requirements in the definition of Eligible Contracts or
one of the conditions in Section 9.1 is no longer being satisfied with respect
to the Contract, Borrower shall state such ineligibility on the next monthly
applicable reports submitted after Borrower becomes aware thereof.
(B) Upon the reasonable request of Lender and at
Lender's expense, Borrower shall to the extent authorized by law obtain current
credit bureau reports on Contract Debtors.
Section 7.1 GENERAL ASSIGNMENT . In addition to the security
interest granted in Section 6.0 Borrower hereby collaterally assigns to Lender
Borrower's rights under any agreement or contract relating to the Collateral,
including but not limited to, any agreements relating to the purchase of Bulk
Purchase Contracts (substantially in the form of Exhibit 12.0), third party
servicing contracts (substantially in the form of Exhibit 11.0), or dealer
recourse agreements (substantially in the form of Exhibit 13.0), that would
enable Lender to enforce this Agreement.
ARTICLE VIII - COLLATERAL: REMITTANCES AND INSURANCE
Section 8.0. ASSIGNMENT OF LIEN IN FINANCED VEHICLES. In addition to
the security interest granted in Section 6.0, Borrower hereby contingently
assigns to Lender Borrower's rights of foreclosure as lienholder of the Financed
Vehicles for Contracts delivered to Lender. This assignment is solely for the
purpose of Lender foreclosing on the liens following an Event of Default. Until
an Event of Default, Borrower has the right to foreclose on a Financed Vehicle.
In the event Lender exercises the right to foreclose, Lender shall be the owner
of the foreclosure sale proceeds and shall apply them to the Indebtedness.
Section 8.1. ABSOLUTE ASSIGNMENT OF REMITTANCES. In addition to the
security interest granted in Section 6.0, Borrower hereby absolutely assigns to
Lender Borrower's interest in and right to all Remittances arising on or after
the date of this Agreement, and such Remittances shall be the property solely of
Lender.
Section 8.2. INSURANCE. In addition to the security interest granted
in Section 6.0, Borrower hereby assigns absolutely to Lender Borrower's right to
refunds and benefits under Required Contract Debtor Insurance and Optional
Contract Debtor Insurance for Pledged Contracts. This assignment is evidenced by
Exhibit 8.2. In the event Lender uses this assignment to collect insurance
benefits or refunds, Lender shall be the owner of the benefits and refunds and
shall apply them to the Indebtedness.
ARTICLE IX - CONDITIONS TO ADVANCES
Section 9.0. CONDITIONS TO INITIAL ADVANCE. Notwithstanding any
other provision of this Agreement and without affecting in any manner the rights
of Lender hereunder, Lender shall not be obligated to make the initial Advance
hereunder unless and until Borrower shall have delivered to Lender, in form and
substance satisfactory to Lender each of the Supplemental Documents listed on
Exhibit 9.0 attached hereto and made a part hereof, and such additional
information and materials as Lender may reasonably request.
Section 9.1. CONDITIONS TO EACH ADVANCE. Notwithstanding any other
provision of this Agreement and without affecting in any manner the rights of
Lender hereunder, Lender shall not be obligated to make any Advances (including
the initial Advance) unless at the time of the Advance, all of the following
conditions shall, in Lender's sole determination, be satisfied:
(A) For each Eligible Contract, Borrower shall
have included the Eligible Contract on a List of Contracts delivered to Lender
and shall have delivered to Lender the Contract Delivery Documents; except that,
if a Certificate of Title has not been issued and Borrower has provided Lender
with proof acceptable to Lender that a Certificate of Title has been applied
for, or in the case of Bulk Purchase Contract will be applied for, then the
Certificate of Title must be delivered to Lender within one hundred and twenty
(120) days of the title application date and if a Bulk Purchase Contract, one
hundred and eighty (180) days from the date of purchase by Borrower.
Certificates of Title relating to Eligible Contracts serviced by Third Party
Servicers need not reflect the security interest of Borrower. However, with
respect to Eligible Contracts serviced by Third Party Servicers, the Borrower
shall have been appointed as Third Party Servicer's attorney-in-fact and shall
be permitted, under the applicable agreement with the dealer, to take all
actions necessary to reflect Borrower's first priority security interest.
(B) All of the representations and warranties of
Borrower in all of the Loan Documents shall be true and correct on and as of the
date of such Advance as though they were made on and as of such date and
Borrower shall have performed all of its obligations contained in the Loan
Documents required to be performed as of such date;
(C) No event shall have occurred and be
continuing which would constitute an Event of Default or Pre-Default Event, nor
would the making of the Advance constitute an Event of Default or Pre-Default
Event;
(D) There shall have been no material adverse
change in the financial condition of Borrower or any of the Guarantors, after
the Closing Date;
(E) No claim has been asserted or proceeding
commenced challenging this Agreement or Lender's rights under this Agreement,
and no claim has been asserted which if true would be a breach of a
representation and warranty in the Loan Documents;
(F) No Event of Default shall have occurred, and
no Pre-Default Event shall have occurred and still be in existence;
(G) Lender has a first priority perfected
security interest in the Collateral except to the extent otherwise allowed by
this Agreement or Lender in writing;
(H) An event has not occurred which entitles
Lender pursuant to Section 5.1 (E) to take over administration of the Contracts;
(I) Lender's most recent inspection of the
Collateral or Borrower's records or operations has been satisfactory to Lender;
(J) Borrower shall have provided such additional
information and documents as Lender may reasonably request; and
(K) None of the actions taken or documents
executed to satisfy the conditions in Section 9.0 have been revoked, rescinded,
terminated, or canceled without Lender's prior consent.
ARTICLE X - REPRESENTATIONS AND WARRANTIES OF BORROWER
Section 10.0. REPRESENTATIONS OF BORROWER. Borrower hereby makes the
following representations and warranties. The representations and warranties are
made as of the execution and delivery of the Agreement, and each time Borrower
delivers Contracts to Lender or requests an Advance the representations and
warranties are deemed to be made again at that time. Lender's knowledge of any
breach of the representations and warranties contained herein shall not void any
of the representations or warranties or affect Lender's rights with respect to
the breach. The following representations and warranties of Borrower are true
and correct in all material respects.
(a) ORGANIZATION, GOOD STANDING, NAME, AND LOCATION.
Borrower and Guarantors are corporations duly organized, validly existing and in
good standing under the laws of the State of Virginia, with power and authority
to own their properties and to conduct their business, and, at all relevant
times, have the power, authority and legal right to acquire, own, and pledge the
Pledged Contracts. Borrower has, is in good standing under, and is in compliance
with, all governmental approvals, licenses, permits, certificates, inspections,
consents and franchises necessary to conduct its business, to enter into and
perform this Agreement, and to own and operate its business. Borrower's
principal place of business and chief executive office is the Borrower address
set forth in Section 17.1. During the preceding five (5) years, Borrower has not
been known by or used any other corporate, trade or fictitious name, except as
disclosed in Exhibit 10.0 (a). Borrower has no subsidiaries, except as disclosed
on Exhibit 10.0 (a).
(b) DUE QUALIFICATION. Borrower has, and is in good
standing under, all licenses, permits, and approvals in all jurisdictions which
are required for Borrower's initial acquisition of the Pledged Contracts and for
Borrower's performance of this Agreement.
(c) POWER AND AUTHORITY. Borrower has the power and
authority to execute this Agreement and carry out its terms, and the execution
and performance of this Agreement have been duly authorized by all necessary
corporate action. All consents and approvals required for the performance of
this Agreement have been obtained by Borrower.
(d) VALID AND BINDING OBLIGATIONS. The Agreement
constitutes a valid loan obligation of Borrower and a valid granting of a
security interest in the Collateral to Lender, enforceable not withstanding any
rights or claims of creditors of and purchasers from Borrower; and is a legal,
valid and binding obligation of Borrower enforceable in accordance with its
terms. The Guaranties are valid and binding obligations of the Guarantors
enforceable according to their terms. Borrower's use of the Advances is a legal
and proper corporate use. Borrower has not used Advances to give any preference
to any creditor or to make a fraudulent transfer.
(e) NO VIOLATION. Borrower's execution and performance
of this Agreement does not conflict with, result in any breach of, or constitute
(with or without notice or lapse of time) a default under, (i) the articles of
incorporation or bylaws of Borrower, or (ii) any indenture, instrument,
agreement, or court order by which it is bound, (iii) nor does it result in the
creation or imposition of any lien upon any of Borrower's properties other than
that granted to Lender.
(f) NO PROCEEDINGS. There are no proceedings or
investigations pending, or to the best of Borrower's knowledge, threatened,
before any court, regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over Borrower or its properties, which (i)
assert the invalidity of this Agreement, (ii) seek to prevent the consummation
of any of the transactions contemplated by this Agreement, (iii) seek any
determination or ruling that, if determined adversely to Borrower, would
materially and adversely affect the Collateral, Borrower's ability to perform
its obligations under this Agreement, the validity or enforceability of this
Agreement, Lender's rights under this Agreement, or Borrower's financial
condition or business, or (iv) allege that Borrower is in material violation of
any statute, regulation, rule or ordinance of any governmental entity,
including, without limitation, the United States of America, any state, city,
town, municipality, or county or of any other jurisdiction, or of any agency
thereof other than as disclosed to Lender.
(g) COLLATERAL. Borrower and FCF have good and
marketable ownership of the Collateral, and the Collateral is free and clear of
all liens, claims, charges, defenses, counterclaims, offsets, encumbrances and
security interests of any kind or nature, except the Permitted Liens. The
security interests granted to Lender pursuant hereto are perfected first
priority security interests, assuming delivery to Lender of any Collateral as to
which possession is the only method of perfecting a security interest and
assuming the filing of a UCC financing statement with the collateral description
in Exhibit 10.0(g) with the Virginia State Corporation Commission; and no claim
of ownership or other interest has been asserted which would be a breach of this
Section 10.0(g).
(h) TAXES. All required federal, state and local tax
returns of Borrower have been accurately prepared and duly and timely filed
(within the initial or extended time period allowed therefor) and all federal,
state and local taxes required to be paid with respect to the periods covered by
such returns have been paid. Borrower has not been delinquent in the payment of
any tax, assessment or other governmental charge which could have a material
adverse affect upon the Collateral or Borrower's ability to perform its
obligations under the Agreement.
(i) BROKERS. Except as otherwise disclosed on Exhibit
10.0(i) attached hereto, no person has, or as a result of the transactions
contemplated hereby will have by reason of any Borrower conduct or any agreement
to which Borrower is a party, any right, interest or claim against Borrower,
Lender or the Collateral for any commission, fee or other compensation as a
finder or broker or in any similar capacity.
(j) STATUS AND CONDITION. Borrower is solvent, in
stable financial condition and is able to and does pay its liabilities as they
mature. Except as otherwise disclosed on Exhibit 10.0(j) attached hereto,
Borrower is not a party to any labor dispute or any collective bargaining
contract.
(k) DISCLOSURE. There is no fact known to Borrower or
Guarantors which Borrower or Guarantors have not disclosed to Lender in writing
with respect to the Collateral or the assets, liabilities, financial condition
or activities of Borrower or Guarantors or their Affiliates which would or may
be likely to have a material adverse effect upon the Collateral or Borrower's
ability to perform its obligations under the Agreement. All information and
documents prepared by Borrower and provided to Lender at any time are true and
accurate at the time of delivery. Borrower does not have knowledge that any
information or documents, not prepared by Borrower but delivered by Borrower to
Lender, were not true and accurate at the time of delivery.
(l) ARTICLES OF INCORPORATION AND CERTIFICATES OF GOOD
STANDING. The Borrower's Articles of Incorporation received by Lender pursuant
to Section 9.0 have not been modified. Borrower has not taken or allowed any
action which would result in it not being in good standing. Borrower has not
received notice of any actual or threatened action to revoke its articles of
incorporation or good standing.
(m) FINANCIAL STATEMENTS. All financial statements of
Borrower, Affiliates, and Guarantors delivered to Lender fairly present their
respective assets, liabilities and financial condition and income as of the
dates thereof. There are no material omissions from the financial statements and
there has been no adverse change in such assets, liabilities or financial
condition since the date of the most recently delivered financial statements.
There exists no equity or long-term investments in, or outstanding advances to,
or guaranties of, any Person except such equity, investments, advances, or
guaranties disclosed in the financial statements. The financial statements
accurately disclose all transactions with Affiliates.
(n) CONDITIONS. Each time Borrower requests an
Advance, the Conditions in Section 9.1 have been met.
(o) CHARACTERISTICS OF CONTRACTS. Each Pledged
Contract delivered to Lender as an Eligible Contract meets all of the
requirements listed in the definition of Eligible Contract, except that Borrower
makes no representation or warranty as to whether (i) the Contract meets such
requirements to Lender's satisfaction, or (ii) the Contract presents a credit,
collateral, or documentation risk unacceptable to Lender. No selection
procedures adverse to Lender have been utilized in selecting the Eligible
Contracts delivered to Lender.
(p) NO DEFAULTS. No event has occurred and no
condition exists, other than those disclosed to Lender, which would, upon the
execution and delivery of this Agreement or Borrower's performance hereunder,
constitute an Event of Default. Borrower is not in default, and no event has
occurred and no condition exists which constitutes, or with the passage of time
or the giving of notice or both, would constitute, a default under any material
agreement between Borrower and any Person, including the payment of any debt or
other obligation permitted under this Agreement to any Person for borrowed
funds.
ARTICLE XI - REPRESENTATIONS AND WARRANTIES OF THE LENDER
Section 11.0. REPRESENTATIONS OF LENDER. The Lender hereby makes
the following representations and warranties:
(a) DUE ORGANIZATION. The Lender is a corporation,
duly organized, validly existing and in good standing under the laws of the
State of New York, and has the power to own its assets and to transact the
business in which it is presently engaged with regard to this Agreement;
(b) REQUISITE POWER. The Lender has the power to
execute, deliver and perform this Agreement, and has taken all necessary action
to authorize the execution, delivery and performance of this Agreement; and
(c) BINDING AGREEMENT. This Agreement has been duly
executed and delivered by the Lender and constitutes the legal, valid and
binding obligation of the Lender, enforceable in accordance with its terms.
ARTICLE XII - INDEMNITIES
Section 12.0. INDEMNITY. Borrower shall indemnify and hold Lender
harmless from any and all losses, claims, damages, costs, good faith
settlements, expenses, taxes, reasonable attorneys' fees or other liabilities,
including but not limited to costs of investigation, litigation fees and
expenses, and costs in successfully asserting the right to indemnification
hereunder (collectively, "Losses") incurred by Lender at any time and pertaining
to (i) facts which are, or allegations which if true would be, a breach of any
representation, warranty, obligation, agreement or covenant of Borrower
contained in the Loan Documents, or (ii) Lender entering into the Loan Documents
or making Advances or handling Remittances or administering Pledged Contracts,
or (iii) an Event of Default, or (iv) activities, operations or conduct of
Borrower, Guarantor, or Affiliates.
ARTICLE XIII - AFFIRMATIVE COVENANTS
The following covenants shall remain in effect until the full
payment and performance of all of Borrower's obligations to Lender:
Section 13.0. FINANCING STATEMENTS. At the request of Lender,
Borrower shall execute such financing statements as Lender determines may be
required by law to perfect, maintain and protect the interest of Lender in the
Collateral and in the proceeds thereof.
Section 13.1. BOOKS AND RECORDS. Borrower shall maintain accurate
and complete books and records with respect to the Collateral, Borrower's
business, and Borrower's administration of the Pledged Contracts. All accounting
books and records shall be maintained in accordance with GAAP consistently
applied.
Section 13.2. PAYMENT OF FEES AND EXPENSES. Borrower shall pay to
Lender, on demand, any and all fees, costs or expenses which Lender pays to a
bank or other similar institution arising out of or in connection with (i) the
forwarding to Borrower, or any other Person on behalf of Borrower, by Lender of
Advances pursuant to this Agreement and (ii) the return of payments deposited
for collection by Lender, including but not limited to payments by Borrower and
payments by Contract Debtors.
Section 13.3. CONTINUITY OF BUSINESS AND COMPLIANCE WITH AGREEMENT.
Borrower shall continue in business in a prudent, reasonable and lawful manner
with all necessary licenses, permits, and qualifications necessary to perform
this Agreement. Borrower shall regularly and properly train its employees to
comply with all applicable laws governing the administration and purchase of
Contracts. Borrower shall take the steps necessary for the representations and
warranties in Article X to be true at all times. In the event that Borrower
learns that a representation and warranty in Article X is no longer true, it
shall notify Lender within three (3) Business Days after learning thereof.
Section 13.4. FINANCIAL STATEMENTS AND ACCESS TO RECORDS. Borrower
shall provide Lender with monthly unaudited consolidated and consolidating
financial statements and certificates of covenant compliance, as soon as
possible but within 45 days of the end of each of Borrower's Accounting Periods,
and with audited annual financial statements within ninety (90) days of
Borrower's fiscal year-end audited by Ernst & Young LLP or an independent
certified public accounting firm acceptable to Lender. Borrower shall deliver to
Lender with each financial statement a certificate by Borrower's chief financial
officer in the form of Exhibit 13.4. Borrower shall provide Lender with audited
or unaudited annual financial statements of the Guarantors within (90) days
after the end of each calendar year, and for such other periods as Lender may
request.
Section 13.5. SUBSEQUENT ACTIONS. At the request of Lender, Borrower
shall execute and deliver to Lender after execution of this Agreement such
documents or take such action as Lender reasonably deems necessary to carry out
the Agreement.
Section 13.6. FINANCIAL CONDITION AND PORTFOLIO PERFORMANCE.
Borrower (on a consolidated basis), FCF, and TFC Enterprises Incorporated (on a
consolidated basis) ("TFCEI") shall maintain the financial and portfolio
covenants listed on Exhibit 13.6. The covenants shall be measured as of the end
of each Accounting Period and reported to Lender with the Financial Statement
Certificate attached as Exhibit 13.4. Borrower shall notify Lender in writing,
promptly upon its learning of any material adverse change in the financial
condition of Borrower or a Guarantor.
Section 13.7. LITIGATION MATTERS. Borrower shall notify Lender in
writing, promptly upon its learning thereof, of any litigation, arbitration or
administrative proceeding which may materially and adversely affect the
operations, financial condition or business of Borrower or Borrower's ability to
perform this Agreement or which in any way involves Lender's security interest
in the Collateral or other rights under the Loan Documents.
Section 13.8 PAYMENT OF OBLIGATIONS. Borrower shall pay and perform,
as and when due, all of its material obligations, including, without limitation,
all of its obligations to Lender.
Section 13.9. BORROWER INSURANCE. Borrower shall maintain customary
amounts of insurance covering, without limitation, fire, theft, burglary, public
liability, property damage, workers' compensation, and liability arising from
Borrower's collection of Contracts and sale of motor vehicles. Borrower shall
pay all insurance premiums payable for such coverage and shall upon request of
Lender deliver a copy of the policies of such insurance to Lender, together with
evidence of payment of all premiums therefor.
Section 13.10. CERTIFICATES OF TITLE. Borrower shall promptly apply
for and obtain Certificates of Title for all Financed Vehicles. Borrower shall
promptly deliver to Lender all Certificates of Title it receives for Financed
Vehicles for Pledged Contracts in accordance with Section 9.1(A).
Section 13.11. INTEREST RATE COLLAR. Until the Indebtedness is paid
in full, Borrower shall keep in place an interest rate collar issued by a firm
rated at least A by any major rating institution or by a firm acceptable to
Lender. The collar shall cover a principal amount of at least Fifty Million
Dollars ($50,000,000.00) through December 31, 1997 and at least Seventy-five
Million Dollars ($75,000,000.00) at all times after December 31, 1997. The
Interest Rate Collar shall become effective and begin to pay benefits to
Borrower in the event that LIBOR exceeds 7.5%.
ARTICLE XIV - NEGATIVE COVENANTS
Borrower covenants and agrees that hereafter, without Lender's prior
written consent, which Lender may or may not give, in its sole discretion, until
all of Borrower's obligations to Lender with respect to this Agreement are
performed and paid in full:
Section 14.0. MERGERS, ETC. Borrower shall not merge with,
consolidate with, acquire or otherwise combine with any Person, transfer any
division or segment of its operations to any Person or form any subsidiary.
Section 14.1. INVESTMENTS. Borrower shall not make any investment
in any Person other than existing subsidiaries through the direct or indirect
holding of securities or otherwise.
Section 14.2. DIVIDENDS. Borrower shall not declare or pay
dividends except in accordance with all applicable laws and not in excess of
fifty percent (50%) of each year's net income available for distribution.
Section 14.3. LOANS AND ADVANCES. Except for: (i) routine and
customary salary advances, or loans made for the express purpose of repayment of
previously paid bonuses, and (ii) inter-company loans by and among Borrower, FCF
and TFCEI, Borrower shall not make any unsecured loans or other advances of
money to officers, directors, employees, stockholders or Affiliates in excess of
ten thousand dollars ($10,000.00) in total. Borrower shall not incur any
additional long term or working capital debt (other than the Indebtedness)
secured by Contracts, and shall not create, incur, assume or suffer to exist any
short term indebtedness which is not Subordinated Debt, without Lender's prior
approval.
Section 14.4. CAPITAL STRUCTURE. Borrower shall not (i) redeem,
retire, purchase or otherwise acquire, directly or indirectly, any of Borrower's
stock, or (ii) make any change in Borrower's capital structure, or (iii) make
any change in any of its business objectives, purposes and operations which
might in any way adversely affect the payment or performance of, or Borrower's
ability to pay and perform, its obligations to Lender with respect to this
Agreement. Borrower shall not allow any transfer of ownership of Borrower
without the prior written consent of Lender.
Section 14.5. TRANSACTIONS WITH AFFILIATE. Borrower shall not enter
into, or be a party to, any transaction with any Affiliate, or stockholder of
Borrower, except, consistent with Borrower's practice before entering into this
Agreement, in the ordinary course of, and pursuant to the reasonable
requirements of, Borrower's business and upon fair and reasonable terms which
are fully disclosed to Lender and are no less favorable to Lender than would
obtain in a comparable arm's length transaction with a Person not an Affiliate
or stockholder of Borrower.
Section 14.6. ADVERSE TRANSACTIONS. Borrower shall not enter into
any transaction which adversely affects the Collateral or Borrower's ability to
perform this Agreement or Lender's rights under the Loan Documents; or permit or
agree to any extension, compromise or settlement or make any change or
modification of any kind or nature with respect to any Pledged Contract,
including any of the terms thereof or the amounts due thereunder except for
customary payment extensions of Pledged Contracts done, in accordance with
Borrower's policies and routines in existence on the Closing Date, as contained
in Exhibit 5.1(A).
Section 14.7. GUARANTIES. Except as disclosed to Lender, Borrower
shall not guaranty, or otherwise in any way become liable with respect to, the
obligations or liabilities of any other Person except (i) the Affiliates'
obligations to Lender, and (ii) by customary endorsement of instruments or items
of payment for deposit to the general account of Borrower or for delivery to
Lender.
Section 14.8. COLLATERAL. Except as otherwise expressly permitted in
the Loan Documents, Borrower shall not convey or allow any ownership, security,
or other, interest in the Collateral other than Borrower's ownership interest
and Lender's security interest. Borrower shall not interfere with or countermand
Lender's instructions to any Person to send Remittances to the Post Office Box,
the Depository Account or Lender. Borrower may sell or pledge Contracts which
are not Eligible Contracts provided that the sale or loan proceeds are delivered
to Lender for application to the Indebtedness. Borrower may sell or pledge
Contracts for financed vehicles other than Motor Vehicles to the extent that the
Outstanding Principal Balance of such Contracts exceeds 5% of the Borrowing Base
and Lender does not agree to make advances against such excess. Borrower may
grant purchase money security interests in its equipment to Persons other than
Lender. Borrower may lease, as lessee, equipment it uses.
ARTICLE XV - EVENTS OF DEFAULT
Section 15.0. EVENTS OF DEFAULT. An Event of Default means the
occurrence or existence of one or more of the following events or conditions
(whatever the reason for the Event of Default and whether voluntary, involuntary
or caused by operation of law) which is not waived in writing by Lender or cured
as provided in Section 15.7 to the extent 15.7 applies:
(A) A breach by Borrower of any representation,
warranty or obligation contained herein or in the other Loan Documents or in any
other agreement with Lender.
(B) A breach by a Guarantor or an Affiliate of any
representation, warranty, or obligation contained in a Guaranty or any other
agreement with Lender, including but not limited to the Warrant and the
Registration Rights Agreement.
(C) Any default by Borrower (including but not limited
to a default due to non-payment) under any material agreement, document or
instrument to which Borrower is a party or by which Borrower or any of its
property is bound, creating or relating to any debt or other obligation (other
than the Loan), if the payment or maturity of such debt or obligation is
accelerated as a consequence of such default or demand for payment thereof is
made.
(D) The Collateral or any other of Borrower's or
a Guarantor's or an Affiliate's assets are attached, seized, levied upon or
subjected to a writ or distress warrant, or come within the possession of any
receiver, trustee, custodian or assignee for the benefit of creditors and the
same is not dissolved within sixty (60) days thereafter; an application is made
by any Person other than Borrower for the appointment of a receiver, trustee, or
custodian for the Collateral or any other of Borrower's or a Guarantor's or an
Affiliate's assets and the same is not dismissed within sixty (60) days after
the application therefor; Borrower or a Guarantor or an Affiliate shall have
concealed, removed or permitted to be concealed or removed, any part of its
property, with intent to hinder, delay or defraud its creditors or made or
suffered a transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or other similar law.
(E) An application is made by Borrower or a
Guarantor or an Affiliate for the appointment of a receiver, trustee or
custodian for the Collateral or any other of Borrower's or a Guarantor's or an
Affiliate's assets; a petition under any section or chapter of the Bankruptcy
Code or any similar federal or state law or regulation shall be filed by
Borrower, or a Guarantor or an Affiliate; Borrower, or a Guarantor or an
Affiliate shall make an assignment for the benefit of its creditors or any case
or proceeding is filed by Borrower, or a Guarantor or an Affiliate for its
dissolution, liquidation, or termination; Borrower ceases to conduct its
Contract purchase and servicing business.
(F) Borrower is enjoined, restrained or in any
way prevented by court order from conducting all or any material part of its
business affairs, or a petition under any section or chapter of the Bankruptcy
Code or any similar federal or state law or regulation is filed against
Borrower, or a Guarantor or an Affiliate, or any case or proceeding is filed
against Borrower, or a Guarantor or an Affiliate for its dissolution or
liquidation, and such injunction, restraint, petition, case or proceeding is not
dismissed within sixty (60) days after the entry or filing thereof.
(G) A notice of lien, levy or assessment is
filed of record with respect to all or any of Borrower's or a Guarantor's or an
Affiliate's assets by the United States, or any department, agency or
instrumentality thereof, or by any state, county, municipal or other
governmental agency and it is not satisfied within sixty (60) days after the
filing; or if any taxes or debts become a lien or encumbrance upon the
Collateral or any other of Borrower's or a Guarantor's or an Affiliate's assets,
and the same is not satisfied within sixty (60) days after the same becomes a
lien or encumbrance.
(H) Borrower or a Guarantor or an Affiliate
becomes insolvent or admits in writing to its inability to pay its debts as they
mature.
(I) An event has occurred which entitles Lender
pursuant to Section 5.1(E) to take over administration of the Contracts.
(J) A financial statement of Borrower or a
Guarantor or an Affiliate reveals that its financial condition has materially
adversely deteriorated after the execution of this Agreement.
(K) Any other event occurs which will, in
Lender's reasonable opinion, have a material adverse effect on the Collateral,
Lender's rights under the Loan Documents, or on Borrower's financial or business
condition, operations or prospects, including, without limitation, any change in
the due diligence procedures used by Borrower to qualify Contract Debtors for
Contracts, and Lender has given Borrower at least ten (10) Business Days' notice
thereof.
Section 15.1. DEFAULT RATE OF INTEREST. Upon and after an Event of
Default and subject to Section 2.4, Borrower's obligations to Lender shall
continue to bear interest, calculated daily on the basis of a 365-day year at
the per annum rate set forth in Section 2.2, plus additional post-default
interest of one percent (1%) per annum until paid in full.
Section 15.2. LENDER'S REMEDIES. Whenever an Event of Default or a
Pre-Default Event exists or whenever Lender is entitled to take over Contract
administration, Lender may without prior notice immediately suspend making
Advances. Upon and after an Event of Default, Lender shall have the following
rights and remedies. The rights and remedies shall be cumulative, and non
exclusive, except to the extent required by law. Lender's exercise of any right,
remedy, or attorney-in-fact appointment shall not relieve Borrower of any of its
obligations to Lender.
(A) The right, at Lender's discretion and
without notice, (i) to immediately cease further Advances and/or terminate this
Agreement, and (ii) to declare Borrower's obligations to Lender immediately due
and payable, whereupon Borrower's obligations shall become and be due and
payable, without presentment, demand, protest or further notice or process of
any kind, all of which are expressly waived by Borrower. Borrower's obligations
to Lender shall be immediately due and payable without declaration by Lender if
the Event of Default consists of a petition filed under the Bankruptcy Code or
any similar federal or state law.
(B) All of the rights and remedies of a secured
party under the UCC and other applicable laws, including the right to appoint a
receiver.
(C) The right at any time to (i) enter through
self-help and without judicial process upon the premises of Borrower, without
any obligation to pay rent to Borrower, or to enter any other place or places
where the Collateral is located and kept, and remove the Collateral or remain on
and use the premises for the purpose of collecting or disposing of the
Collateral, and (ii) require Borrower to assemble the Collateral and make it
available to Lender at a place to be designated by Lender.
(D) The right to sell or otherwise dispose of
all or any of the Collateral at public or private sale, as Lender in its sole
discretion may deem advisable, with such notice as may be required by law; and
such sales may be adjourned from time to time with or without notice. Lender
shall have the right to conduct such sales on Borrower's premises without charge
for such time and Collateral as Lender may see fit. Lender is hereby granted a
license or other applicable right to use, without charge, Borrower's labels,
patents, copyrights, rights of use of any name, trade secrets, trade names,
trademarks and advertising matter, or any property of a similar nature, as it
pertains to the Collateral, in advertising for sale and selling any Collateral
and Borrower's rights under all licenses and all franchise agreements shall
inure to Lender's benefit for this purpose. Lender shall have the right to sell,
lease or otherwise dispose of the Collateral, or any part thereof, for cash,
credit or any combination thereof, and Lender may purchase all or any part of
the Collateral at public or, if permitted by law, private sale and, in lieu of
actual payment of such purchase price, may set off the amount of such price
against Borrower's obligations to Lender. Without excluding other methods of
disposition which may be commercially reasonable, it shall be a commercially
reasonable disposition of the Pledged Contracts and Contract Rights for Lender
to collect and enforce the Contracts and Contract Rights in the same manner that
it collects and enforces similar Contracts and Contract Rights for its own
account or for the account of other Persons. If any deficiency shall arise from
the disposition of Collateral, Borrower shall remain liable to Lender therefor.
(E) The right at any time and from time to time
thereafter, at Lender's sole discretion and without notice to Borrower, (i) to
enforce payment of the Contract Debtor's and Contract Rights Payor's
obligations, and to collect and foreclose, by legal proceedings or otherwise,
the Collateral in the name of Lender or Borrower and (ii) to take control, in
any manner, of any item of payment for or proceeds of the Collateral. Lender is
not obligated to pursue the Collateral or the Guarantors or any other Person in
order to enforce Borrower's obligations to Lender.
(F) The right to take over and act in a
commercially reasonable manner in Lender's or Borrower's name all or part of the
administration of the Contracts.
(G) The right to carry out the actions within
the scope of Borrower's appointment of Lender as attorney-in-fact.
(H) The right to offset or apply the funds in
the Depository Account.
Section 15.3. INJUNCTIVE RELIEF. Borrower recognizes that if there
is an Event of Default then, depending on the nature of the Event of Default, it
may be that no remedy at law will provide complete or adequate relief to Lender,
and Lender shall be entitled to temporary and permanent injunctive relief in any
such case without the necessity of proving actual damages. The injunctive relief
shall not be a waiver of Lender's rights to other relief and remedies.
Section 15.4. NOTICE. Any notice required to be given by Lender of a
sale, lease, or other disposition of the Collateral, which is given pursuant to
Section 17.1 at least ten (10) days prior to such proposed action, shall
constitute commercially reasonable and fair notice thereof to Borrower. Notice
of less duration shall not be presumed to be commercially unreasonable or
unfair.
Section 15.5. APPOINTMENT OF LENDER AS BORROWER'S LAWFUL ATTORNEY.
Borrower irrevocably appoints Lender (and all persons designated by Lender) as
Borrower's true and lawful attorney-in- fact to act in Borrower's place in
Borrower's or Lender's name to: (i) demand payment of the Pledged Contracts,
other Collateral consisting of payment obligations and Contract Rights; (ii)
enforce payment of the Pledged Contracts, other Collateral consisting of payment
obligations and Contract Rights, by legal proceedings or otherwise; (iii)
exercise all of Borrower's rights and remedies with respect to the collection
and enforcement of the Pledged Contracts, other Collateral consisting of payment
obligations, and Contract Rights; (iv) settle, adjust, compromise, discharge,
release, extend or renew the Pledged Contracts, other Collateral consisting of
payment obligations, and Contract Rights; (v) if permitted by applicable law,
sell or assign the Collateral upon such terms, for such amounts and at such time
or times as Lender deems advisable; (vi) take control, in any manner, of any
item of payment or proceeds with respect to the Collateral; (vii) prepare, file
and sign Borrower's name on any proof of claim in Bankruptcy or similar document
against any Contract Debtor or Contract Rights Payor; (viii) prepare, file and
sign Borrower's name on any notice of lien, assignment or satisfaction of lien
or similar document in connection with the Collateral; (ix) do all acts and
things necessary, in Lender's sole discretion, to exercise Lender's rights
granted in or referred to in Section 15.2 of this Agreement; (x) endorse the
name of Borrower upon any item of payment or proceeds consisting of or relating
to the Collateral and deposit the same to the account of Lender for application
to the Indebtedness; (xi) use the information recorded on or contained in any
data processing equipment and computer hardware and software relating to the
Collateral to which Borrower has access; (xii) open Borrower's mail to collect
Collateral and direct the Post Office to deliver Borrower's mail to an address
designated by Lender; and (xiii) do all things necessary to carry out and
enforce this Agreement which Borrower has failed to do. Borrower ratifies and
approves all acts of Lender as Borrower's attorney-in-fact. Lender shall not,
when acting as attorney-in-fact, be liable for any acts or omissions as or for
any error of judgment or mistake of fact or law, except for actions taken in bad
faith. This power, being coupled with an interest, is irrevocable until all
payment and performance obligations of Borrower to Lender have been fully
satisfied. Borrower shall upon request of Lender execute powers of attorney to
separately evidence the foregoing powers granted to Lender. All costs, fees and
expenses incurred by Lender, or for which Lender becomes obligated, in
connection with exercising any of the foregoing powers shall be payable to
Lender by Borrower on demand by Lender and until paid shall be part of the Loan.
Section 15.6. LENDER'S DEFAULT. In the event of any default of the
Loan Documents by Lender or any claim by Borrower related to the Loan Documents,
Borrower's sole and exclusive remedy against Lender shall be a cause of action
sounding in contract with damages limited to actual and direct damages incurred.
Lender shall in no event be liable for ordinary negligence, delay in performance
or any consequential, special, punitive, incidental or indirect damages,
including without limitation, loss of profit or goodwill. Lender shall in no
event be liable for any loss or damage directly or indirectly resulting from the
furnishing of services or reports under this Agreement. With respect to any
goods and services provided by Lender, LENDER MAKES NO warranties, whether
expressed or implied, including, without limitation, implied WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. Borrower shall have no
cause of action against Lender for a default of the Loan Documents unless
Borrower first notices Lender of the default and allows Lender a reasonable time
of at least thirty (30) Business Days to cure the default and Lender fails to
cure the default.
15.7 BORROWER'S RIGHT TO CURE.
In the event of an unintentional default by Borrower with respect to
payment obligations or the delivery of Contract Delivery Documents or
Remittances, Borrower shall have three (3) Business Days after written notice
from Lender to cure the default before Lender may exercise its right to sue
Borrower or its rights under Sections 15.2(C), (D), (E) or (F). In the event of
any other type of unintentional default by Borrower, Borrower shall have thirty
(30) calendar days after written notice from Lender to cure the default before
Lender may exercise such rights. Regardless of whether Borrower cures a default,
Lender shall be entitled to indemnification pursuant to Article XII with respect
to any Losses arising from claims asserted against Lender.
(B) All other provisions of this Agreement
(including the cure provisions of Section 15.7 (A) above) notwithstanding, if
(i) as a result of default, any obligation of Borrower for the payment of any
indebtedness or liability for borrowed money (other than hereunder) becomes or
is declared to be due and payable prior to the expressed maturity thereof, or
(ii) as a result of default under or in connection with any indebtedness or
liability for borrowed money, a secured party takes action to enforce its rights
or remedies with regard to any security interest or collateral granted or
provided by the Borrower, then Lender may declare on Event of Default hereunder
effective upon written notice thereof to the Borrower, and may thereupon
exercise all rights and remedies of Lender provided hereunder (including but not
limited to Section 15.2) or otherwise at law upon an Event of Default,
Pre-Default Event or default. Lender's right to declare an Event of Default and
to exercise its remedies pursuant to the preceding sentence is absolute and
unconditional.
15.8 MATERIAL ADVERSE CHANGE. Lender shall not exercise any of the
remedies provided in Section 15.2 (other than the right to cease making
Advances) based solely on an Event of Default under Section 15.0(K) unless
Borrower fails to pay the Indebtedness in full within sixty (60) days of the end
of the 10 Business Day period provided in Section 15.0(K).
ARTICLE XVI - DEFINITIONS
Section 16.0 DEFINED TERMS. Whenever used in this Agreement with
such upper case letters as are shown below, the following terms shall have the
respective meanings set forth below. When the terms are used in the plural, the
plural forms of the meanings shall apply.
ACCOUNTING DATE: the last day of an Accounting Period.
ACCOUNTING PERIOD: a calendar month, beginning with the month during
which this Agreement is executed and ending with the calendar month during which
the Indebtedness has been paid in full following termination of this Agreement.
ADVANCE: each of the Loan advances described in Article III of this
Agreement.
AFFILIATE: Guarantors and any Person, excluding an individual
stockholder of TFCEI (including any individuals who are also members of
Borrower's board of directors and officers of the Borrower), now or in the
future (i) directly or indirectly owned or controlled in whole or in part by
Borrower or a Guarantor or, (ii) who directly or indirectly owns or controls, in
whole or in part, the Borrower or any Guarantor, or (iii) under common ownership
or control with Borrower or any Guarantor. For the purpose of this definition,
"control" shall mean the power to direct, or cause the direction of, management
or policies, whether through the ownership of voting securities, by contract or
otherwise. [For the purpose of this definition, "owned" shall mean at least 10%
ownership.]
AVAILABLE LINE: One hundred and fifty million dollars
($150,000,000)
BORROWING BASE: the amount equal to the lesser of (i) the Available
Line or (ii) the sum of (a) fifty percent (50%) of the Outstanding Principal
Balance of all Contracts which are Credit Builder's Contracts and (b) eighty-two
percent (82%) of the Outstanding Principal Balance of all other Eligible
Contracts during the time they are included in the Borrowing Base pursuant to
Section 3.1; provided however, that the advance against all other Eligible
Contracts shall only be eighty-two percent (82%) through December 31, 1996. The
advance against all other Eligible Contracts shall decrease one half percent
(.5%) per month on the first day of January, February, March and April, 1997, so
that the advance against all other Eligible Contracts will not exceed eighty
percent (80%) by April 1, 1997.
In the event that the FCF Collateral is released, then the advance
against all other Eligible Contracts will be reduced by 3% at the time that the
FCF Collateral is released and at all times thereafter.
BORROWER'S NET INVESTMENT: Gross Outstanding Balances less unearned
finance charges less dealer holdback, less discount obtained from the Dealer
when purchasing the Contract(s).
BULK PURCHASE CONTRACT: a Contract acquired on a group basis
through purchase of a Dealer's portfolio of existing installment sales
contracts.
BUSINESS DAY: any day other than (i) a Saturday or Sunday, or (ii)
a day on which banking institutions in the State of Virginia are required by law
to be closed.
CERTIFICATE OF TITLE: with respect to each Financed Vehicle, the
certificate of title (or other evidence of ownership) issued by the department
of motor vehicles, or other appropriate governmental body, of the state in which
the Financed Vehicle is to be registered showing the Contract Debtor as owner,
with either notation of the Borrower's first lien or such other status indicated
thereon which is necessary to perfect Borrower's security interest in the
Financed Vehicle as a first priority interest, and showing no other actual or
possible lien interest in the Financed Vehicle.
CHARGED-OFF CONTRACT: a Pledged Contract; (i) which appears as a 180
day contractual delinquent and a 90 day recency delinquent, or in the case of
non-monthly accounts, their equivalent, (ii) which has been written off as
reasonably uncollectable in accordance with Borrower's policies, or (iii) which
has been settled for less than the Outstanding Principal Balance.
CHARGED-OFF LOSSES: as of the end of an Accounting Period, the Net
Credit Losses recorded during the Accounting Period, divided by the average
Outstanding Principal Balance, for the Accounting Period (calculated using the
simple interest method), of all Contracts owned by Borrower and pledged to
Lender, which are not Charged-Off Contracts, expressed as a percentage.
CLOSING DATE: the date on which the first Advance is made.
COLLATERAL: any and all real and personal, tangible and intangible,
property in which Lender is granted a security interest now or hereafter, in
this Agreement or otherwise, to secure Borrower's obligations to Lender.
CONTRACT: an installment or conditional sale contract, with any
amendments, owned or acquired by Borrower pursuant to which a Contract Debtor
has: (i) purchased a new or used Motor Vehicle, (ii) granted a security interest
in the Motor Vehicle to secure the Contract Debtor's payment obligations, and
(iii) agreed to pay the unpaid purchase price and a finance charge in periodic
installments no less frequently than weekly.
CONTRACT DEBTOR: the Person that has executed a Contract as a
purchaser, and any guarantor, co-signer or other Person obligated to make
payments under the Contract.
CONTRACT DEBTOR DOCUMENTS: those documents as are identified on the
attached Exhibit 6.3 attached hereto and made a part hereof.
CONTRACT DELIVERY DOCUMENTS: the original Certificate of Title, and
the original executed Contract with original Contract Debtor and Dealer
signatures and bearing on its front or back surface an assignment to Lender.
CONTRACT RIGHTS: with respect to Pledged Contracts, (i) Borrower's
interest in the Financed Vehicle; (ii) all rights of Borrower regarding the
Contract and Financed Vehicle, including but not limited to rights to electronic
funds transfers and rights under all dealer agreements and purchase agreements
pursuant to which the Contract was acquired by Borrower; (iii) all rights of
Borrower with respect to Optional Contract Debtor Insurance, Required Contract
Debtor Insurance, and any other policies of fire, theft or comprehensive
insurance, collision insurance, public liability insurance or property damage
insurance maintained with respect to the Financed Vehicle, the Contract, or the
Contract Debtor; (iv) all rights of Borrower, if any, to prepaid dealer rate
participation in connection with the Contract; (v) Remittances, and (vi) all
rights of Borrower to the originals of all books, records (including electronic
data), reports, files, and documents relating to the Contracts, including, but
not limited to, Contract Debtor Documents, financial statements of Contract
Debtors, and all payment reports or records relating to the Contracts.
CONTRACT RIGHTS PAYORS: Persons, other than Contract Debtors,
against whom Contract Rights may be asserted.
CREDIT BUILDER CONTRACT: a Contract which is underwritten by
Borrower in accordance with the credit approval guidelines attached hereto as
Exhibit 3.1(B), or as such Exhibit may be amended from time to time.
DEALER: the seller of the Financed Vehicle to the Contract Debtor.
DEALER ADVANCE: the outstanding amount of acquisition payments made
to Dealers for Credit Builder Contracts from Borrower's general ledger account.
DEBT RATIO: the debt-to-equity ratio, calculated in accordance with
GAAP, by comparing total liabilities, other than Subordinated Debt, to Net
Worth.
DELINQUENCY MEASUREMENT: as of the end of an Accounting Period, the
sum of the Gross Outstanding Balances of all Delinquency Measurement Contracts
for which more than 50% of those Scheduled Payments due during the prior 30 days
are due and unpaid, divided by the sum of the Gross Outstanding Balances of all
Delinquency Measurement Contracts, expressed as a percentage.
DELINQUENCY MEASUREMENT CONTRACTS: all Pledged Contracts which do
not constitute Charged-Off Contracts.
DEPOSITORY ACCOUNTS: bank accounts owned by Lender at banks
designated by Lender for the purpose of receiving Remittances made payable to it
or Borrower. Borrower shall pay all expenses associated with the Depository
Accounts.
ELIGIBLE CONTRACT: each Contract delivered by Borrower to Lender
which is listed on a List of Contracts delivered to Lender at the same time, and
which in Lender's sole determination satisfies each of the requirements set
forth on Exhibit 3.1 at the time of delivery and thereafter except to the extent
expressly stated in Exhibit 3.1 to apply only at delivery or only thereafter.
EVENT OF DEFAULT: this term has the meaning provided in Section
15.0 of this Agreement.
FINANCED VEHICLE: the new or used Motor Vehicle purchased by a
Contract Debtor pursuant to a Contract, or any substituted vehicle which is
properly documented.
GAAP: Generally Accepted Accounting Principles
GROSS CREDIT LOSSES: For any Accounting Period, the sum of all
Charged-Off Contracts reflected on Borrower's general ledger, calculated in
accordance with GAAP.
GROSS OUTSTANDING BALANCE: the total of all remaining payments due
under a Contract plus any other amount due thereunder.
GUARANTORS: TFCEI, TIA, FCF and any Person who guarantees
Borrower's obligations to Lender.
INDEBTEDNESS: the Loan and all other amounts, including but not
limited to interest, that Borrower owes Lender in connection with this
Agreement.
INTEREST COVERAGE: the sum of Borrower's year-to-date pre-tax income
plus Borrower's year-to-date interest expense, compared to Borrower's
year-to-date interest expense, expressed as a ratio each Accounting Period. For
purposes of calculating Interest Coverage, any interest expense associated with
the Warrants granted to Lender shall be added to pre-tax income and not included
in interest expense.
LIBOR RATE: the average of the "one month" London Interbank Offered
Rates ("LIBOR") published in the Money Rates column of the Wall Street Journal
during the calendar month immediately preceding the calendar month for which
interest is being calculated, or published in such other publication as Lender
may designate.
LINE FEE: the fee payable annually by Borrower to Lender equal to
one quarter of one percent (.25%) times the Available Line.
LIST OF CONTRACTS: the list delivered to Lender by Borrower with
each Contract or group of Contracts which: (i) identifies each Contract being
delivered by account number, the name of the Contract Debtor and the Outstanding
Principal Balance, of the Financed Vehicle, and (ii) shows the total number of
Contracts and the total of the Outstanding Principal Balances.
LOAN: the outstanding principal amount of the Advances, plus all
other amounts advanced, expended or applied by Lender under this Agreement to or
for the benefit of Borrower or to perform or enforce Borrower's covenants in
this Agreement.
LOAN AVAILABILITY: the amount by which the Borrowing Base exceeds
the Loan.
LOAN DOCUMENTS: this Agreement, the guaranties signed by the
Guarantors, and the Supplemental Documentation.
MOTOR VEHICLE: A passenger motor vehicle, van, motorcycle, or light
duty truck which is not manufactured for a particular commercial purpose and
which may be registered for use on public highways and is not a "grey market"
vehicle.
NET CREDIT LOSSES: For any Accounting Period, the difference
between Gross Credit Losses and Recoveries, calculated in accordance with GAAP.
NET WORTH: the total of shareholders' equity (including capital
stock, additional paid-in capital, and retained earnings) plus Subordinated
Debt, less (i) the total amount of loans and debts due from Affiliates,
shareholders, officers, or employees, and (ii) the total amount of any
intangible assets, including without limitation goodwill.
OPTIONAL CONTRACT DEBTOR INSURANCE: any insurance, other than
Required Contract Debtor Insurance which insures a Financed Vehicle or a
Contract Debtor's obligations under a Contract, including but not limited to
credit life, credit health, credit disability, unemployment insurance; and any
service contract, mechanical breakdown coverage, warranty, or extended warranty
for a Financed Vehicle.
OUTSTANDING PRINCIPAL BALANCE: the outstanding principal balance of
a Contract calculated by subtracting the unearned finance charge from the Gross
Outstanding Balance, where applicable.
PERMITTED LIEN: (i) any security interest or lien at any time
granted in favor of Lender; (ii) liens securing claims of materialmen,
mechanics, carriers, warehousemen, landlords and other similar Persons for
labor, materials, supplies or rentals incurred in the ordinary course of
Borrower's business; (iii) liens resulting from deposits made in the ordinary
course of business in connection with worker's compensation, unemployment
insurance, social security and other similar laws; and (iv) liens of Nations
Bank as acknowledged in the Intercreditor Agreements dated August 15, 1995 and
December 22, 1994.
PERSON: any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, entity, party, or government (including, any instrumentality or
division thereof).
PLEDGED CONTRACT: a Contract owned on the Closing Date or in the
future by Borrower which is subject to the security interest granted in Section
6.0.
POINT OF SALE CONTRACT: a Contract which is not a Bulk Purchase
Contract.
POST OFFICE BOX: the post office box whose rights are owned by
Lender into which Borrower shall receive all Remittances.
PRE-DEFAULT EVENT: An event which with the passage of time, the
giving of notice, or both, would constitute an Event of Default if Lender gave
any notice required by this Agreement for the event to be an Event of Default,
or if the event continued past the end of any period specifically allowed by
this Agreement for the event to continue before it becomes an Event of Default.
RECOVERIES: For any Accounting Period, the sum of all amounts
received on account of previously Charged-Off Contracts, calculated in
accordance with GAAP.
REMITTANCES: all payments made with respect to Pledged Contracts,
including, but not limited to, Scheduled Payments, full and partial prepayments,
liquidation proceeds, Recoveries, insurance proceeds and refunds, late charges,
fees (including but not limited to NSF fees and extension fees), and payments
from Contract Rights Payors.
REPOSSESSION INVENTORY: Motor Vehicles which have been repossessed
by Borrower or any of its agents. Repossession Contracts shall not exceed 3% of
all Contracts which do not constitute Charged-Off Contracts.
REQUIRED CONTRACT DEBTOR INSURANCE: insurance for physical damage
to, and theft or loss of, the Financed Vehicle, having a deductible no higher
than $500 and providing coverage at least equal to the actual cash value of the
Financed Vehicle or the Outstanding Principal Balance, whichever is less.
RESERVE: shall mean the aggregate balance of all unamortized
discounts plus reserves for credit losses.
RESERVE REQUIREMENT: calculated at the end of each quarter as the
Reserve available for credit losses divided by the Outstanding Principal
Balances of all Delinquency Measurement Contracts with two (2) or more Scheduled
Payments due for which more than fifty percent (50%) of those Scheduled Payments
were due during the prior thirty (30) days as stated on the financial
statements, expressed as a percentage.
ROLLING AVERAGE DELINQUENCY: the weighted average of the
Delinquency Measurements for any six consecutive Accounting Periods.
ROLLING AVERAGE CHARGED-OFF LOSSES: the weighted average of the
Charged-Off Losses for any six Accounting periods.
SCHEDULE OF PAYMENTS: the schedule of payments disclosed on a
Contract.
SCHEDULED PAYMENT: the periodic installment payment amount
disclosed in the Schedule of Payments for the Contract.
SKIP LOSS INVESTIGATION: an investigation initiated by Borrower of
the whereabouts of a Financed Vehicle or a Contract Debtor.
STATEMENT OF BORROWING BASE: a statement issued by Lender which
contains the amount of the Borrowing Base, the amount of the Loan or
Indebtedness, and either the amount available for Advances or the amount by
which the Loan or Indebtedness exceeds the Borrowing Base.
SUBORDINATED DEBT: a debt obligation of Borrower which is
subordinated to Lender pursuant to a subordination agreement which is in the
form of Exhibit 16 or pursuant to some other agreement approved in writing by
Lender.
SUPPLEMENTAL DOCUMENTS: all agreements, instruments, documents,
certificates of title, financing statements, notices of assignment, Lists of
Contracts, chattel mortgages, powers of attorney, subordination agreements, and
other written matter necessary or reasonably requested by Lender to perfect and
maintain perfected Lender's security interest in the Collateral or to consummate
the transactions contemplated by this Agreement.
THIRD PARTY SERVICER: any Person from whom Borrower has acquired a
Contract pursuant to an asset purchase agreement and who is servicing such
Contract on Borrower's behalf pursuant to the terms of a certain servicing
agreement and for whose performance Borrower is responsible as between Borrower
and such Person.
UCC: "UCC" means the Uniform Commercial Code as adopted in the
Commonwealth of Virginia, and all amendments thereto, provided that, if, by
reason of mandatory provisions of law, the validity or perfection of any
security interest granted herein is governed by the Uniform Commercial Code as
in effect in a jurisdiction other than Virginia then, as to the validity or
perfection of such security interest, "UCC" shall mean the Uniform Commercial
Code in effect in such other jurisdiction.
VSI INSURANCE: Insurance insuring Borrower against the theft, damage
or loss of a Financed Vehicle.
Section 16.1 OTHER TERMS: All other terms contained in this
Agreement shall, unless the context indicates otherwise, have the meanings
provided in the UCC to the extent the same are defined therein.
Section 16.2 ACCOUNTING TERMS. Any accounting terms used in this
Agreement which are not specifically defined shall have the meanings customarily
given them in accordance with GAAP.
ARTICLE XVII - GENERAL TERMS AND CONDITIONS
Section 17.0. APPLICABLE LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Virginia.
Section 17.1. NOTICES. Any notice, request, demand, instruction or
other communication to be given any party hereto in writing shall be effective
upon delivery during regular business hours at the offices of Borrower and
Lender hereinafter set forth or at such other offices that either party notifies
the other of in writing. The failure to deliver a copy as set forth below shall
not affect the validity of the notice to the Borrower or Lender. Such
communications shall be given by telecopy, commercial delivery service, or sent
by certified mail, postage prepaid and return receipt requested, as follows:
If to Borrower: The Finance Company
5425 Robinhood Road, Suite 101B
Norfolk, VA 23513
Electronic FAX: 757-858-4093
ATTN: CEO & CFO
If to Lender: General Electric Capital Corporation
1000 Hart Road
Barrington, IL 60010
Electronic FAX (847) 304-3456
Attention: Manager, Asset Based Financing
Section 17.2. HEADINGS. Paragraph headings have been inserted in
this Agreement as a matter of convenience for reference only. The paragraph
headings shall not be used in the interpretation of this Agreement.
Section 17.3. SEVERABILITY. If any one or more of the provisions of
this Agreement are held to be invalid, illegal or unenforceable in any respect
for any reason, the validity, legality and enforceability of any such provision
or provisions in every other respect and of the remaining provisions of this
Agreement shall not be in any way impaired.
Section 17.4. OFFSET. Lender has the right to offset, apply, or
recoup any obligation of Borrower to Lender, arising under the Loan Documents or
otherwise, against any obligations or payments Lender owes to Borrower, arising
under the Loan Documents or otherwise, or against any property of Borrower held
by Lender. Borrower waives any right to offset, apply, or recoup against any
obligation it owes to Lender. Lender is not obligated to collect any of the
Contracts or pursue any of the other Collateral or any of Lender's rights at any
time as a condition to payment and performance by Borrower.
Section 17.5. INDEPENDENT CONTRACTOR. Borrower is an independent
contractor in all matters relating to this Agreement and the Collateral and is
not an agent or representative of Lender. Borrower has no authority to act on
behalf of or bind Lender.
Section 17.6. EXPENSES. Each party shall bear the expenses of its
own performance of this Agreement.
Section 17.7. MODIFICATION OF LOAN DOCUMENTS; SALE OF INTEREST. This
Agreement or any Exhibit attached hereto may not be modified, altered or
amended, except by an agreement in writing signed by Borrower and Lender. The
rights of Lender granted in or referred to in this Agreement shall apply to any
modification of or supplement to the Loan Documents. Borrower may not without
Lender's prior written permission sell, assign or transfer any of the Loan
Documents, or any portion thereof, including, without limitation, Borrower's
rights, title, interests, remedies, powers and duties thereunder. Any sale,
assignment, or transfer by Borrower without Lender's permission shall be void ab
initio. Borrower hereby consents to Lender's participation, sale, assignment,
transfer or other disposition, at any time or times hereafter, of any of the
Loan Documents, or of any portion thereof, including, without limitation,
Lender's rights, title, interests, remedies, powers and duties thereunder. The
Loan Documents shall be binding upon and inure to the benefit of the permitted
successors and assigns of Borrower and Lender.
Section 17.8. ATTORNEYS' FEES AND LENDER'S EXPENSES. If, following
an Event of Default, Lender shall in good faith employ counsel for advice or
other representation or shall incur other costs and expenses in connection with
(A) any litigation, contest, dispute, suit, proceeding or action (whether
instituted by Lender, Borrower or any other Person) in any way relating to the
Collateral, any of the Loan Documents or any other agreements executed or
delivered in connection herewith, (B) any attempt to enforce, or enforcement of,
any rights of Lender against Borrower or any other Person, including, without
limitation, Contract Debtors, that may be obligated to Lender by virtue of any
of the Loan Documents, or (C) any actual or attempted inspection, audit,
monitoring, verification, protection, collection, sale, liquidation or other
disposition of the Collateral; then, in any such event, the reasonable
attorneys' fees arising from such services and all expenses, costs, charges and
other fees (including expert's fees) incurred by Lender in any way arising from
or relating to any of the events or actions described in this Section shall be
payable to Lender by Borrower on demand by Lender and until paid shall be part
of the Loan.
Section 17.9. WAIVER BY LENDER. Lender's failure, at any time or
times hereafter, to require strict performance by Borrower of any provision of
this Agreement or any of the other Loan Documents shall not waive, affect or
diminish any right of Lender thereafter to demand strict performance thereof.
Any suspension or waiver by Lender of an Event of Default by Borrower under the
Loan Documents shall not suspend, waive or affect any other Event of Default by
Borrower under the Loan Documents, whether the same is prior or subsequent
thereto and whether of the same or of a different type. None of the
undertakings, agreements, warranties, covenants and representations of Borrower
contained in the Loan Documents and no Event of Default by the Borrower under
the Loan Documents shall be deemed to have been suspended or waived by Lender
unless such suspension or waiver is by an instrument in writing signed by a
manager of Lender and identifies the matter waived or suspended. Any consent or
approval by Lender pursuant to this Agreement is not a waiver by Lender of, or
an admission by Lender of the truth of, any of Borrower's representations and
warranties in this Agreement.
Section 17.10. WAIVERS BY BORROWER. Except as otherwise provided for
in this Agreement, Borrower waives (i) notice and consummation of presentment,
demand, protest, dishonor, intent to accelerate and acceleration; (ii) all
rights to notice and a hearing prior to taking possession or control of, or
Lender's replevy, attachment or levy upon, the Collateral; (iii) any bond or
security in a judicial proceeding as a condition to Lender exercising any of
Lender's remedies; (iv) the benefit of all valuation, appraisement and exemption
laws, and (v) TRIAL BY JURY in any dispute with Lender arising out of or related
to any of the Loan Documents. The failure or delay of Borrower to strictly
enforce the terms of this Agreement shall not be a waiver of Borrower's right to
do so.
Section 17.11. COUNTERPARTS. This Agreement may be executed in two
or more counterparts, with the same effect as if all parties had signed the same
document. All such counterparts shall be deemed an original, shall be construed
together and shall constitute one and the same instrument.
Section 17.12. ENTIRE AGREEMENT. This Agreement contains the entire
agreement among the parties regarding the loan by Lender to Borrower based on
Contracts and supersedes all prior agreements, whether written or oral, with
respect thereto.
Section 17.13. STATEMENTS OF ACCOUNT. Each report, billing
statement, Statement of Borrowing Base, and payment transcript which is prepared
by Lender shall, except for manifest errors, be deemed final, binding and
conclusive upon Borrower in all respects as to all matters reflected therein,
and shall constitute an account stated between Borrower and Lender, unless
thereafter waived in writing by Lender or unless, within thirty (30) days after
Borrower's receipt of such document, Borrower delivers to Lender notice of a
written objection thereto specifying the claimed error. In the event of such an
error, only those items expressly objected to in such notice shall be deemed to
be disputed by Borrower and Lender's only liability to Borrower shall be to
issue a corrected document.
Section 17.14. PUBLICITY. Borrower shall not, without prior Lender
approval, (i) issue any press release or make any public announcement or
otherwise publicize the consummation of this Agreement with Lender, or (ii) make
a public disclosure of any kind regarding the subject matter hereof, or (iii)
make use of Lender's name, tradename, logo or trademark without the express
written consent of Lender, except that Borrower may publicly disclose
information relating to this Agreement if Borrower is releasing any disclosure
required by law or in connection with its registration of securities with the
U.S. Securities and Exchange Commission or any state securities commission, or
in connection with a filing pursuant to Borrower's listing with a national
securities exchange or governmental entity.
Section 17.15. CONTRACT DOCUMENTS. After Lender reviews a Contract
form or any other form used in connection with a Contract (collectively, the
"Form") Lender may inform Borrower that the Form may not comply with certain
laws or that the Form is not acceptable to Lender as an Eligible Contract form
unless certain changes are made. Borrower is responsible for its use of the
Forms and for any changes Borrower makes to the Forms in response to Lender's
comments. Lender shall have no liability to Borrower arising from Borrower's use
of, or changes to, any Form regardless of whether Lender approved the Form or
the changes or whether Lender conditioned the use of the Form as an Eligible
Contract form upon the changes being made. Regardless of Lender's approval of a
Form or Lender's comments regarding a Form, Borrower remains obligated to Lender
to conduct its business in a lawful manner, including the use of Forms which
comply with applicable laws.
Section 17.16. FAXED DOCUMENTS. In order to expedite the acceptance
and execution of this Agreement and any of the Supplemental Documents, each of
the parties hereto agrees that a faxed copy of any original executed document
shall have the same binding effect on the party so executing the faxed document
as an original handwritten executed copy thereof.
Section 17.17. INCORPORATION OF RECITALS. All recitals shall be
incorporated into and made a part of this Agreement.
Entered into as of: December ______, 1996
GENERAL
ELECTRIC CAPITAL
THE FINANCE COMPANY CORPORATION
By: __________________________ By:
- -----------------------------
Its: __________________________ Its:
- -----------------------------
LOAN AND SECURITY AGREEMENT BETWEEN THE FINANCE COMPANY AND GENERAL ELECTRIC
CAPITAL CORPORATION
EXHIBITS
EXHIBIT 3.1 ELIGIBILITY REQUIREMENTS
EXHIBIT 3.1(A) CONTRACT FORM
EXHIBIT 3.1(B) CREDIT PROGRAMS AND ADVANCE CRITERIA
EXHIBIT 5.1(A) ADMINISTRATION POLICIES
EXHIBIT 5.1(B) SERVICING LOCATIONS
EXHIBIT 5.1(C) REPORTS
EXHIBIT 5.1(C)(1) SERVICING REPORT CERTIFICATE
EXHIBIT 6.3 CONTRACT DEBTOR DOCUMENTS
EXHIBIT 8.2 ASSIGNMENT
EXHIBIT 9.0 SUPPLEMENTAL DOCUMENTS
EXHIBIT 9.0(A) GUARANTY
EXHIBIT 9.0(G) OPINION OF COUNSEL
EXHIBIT 9.0(K) ASSIGNMENT OF BORROWER'S RIGHTS TO PAYMENTS
EXHIBIT 9.0(L) OFFICER'S CERTIFICATE
EXHIBIT 9.0(P) CORPORATE RESOLUTION OF
BORROWER
EXHIBIT 9.0(Q) POWER OF ATTORNEY
EXHIBIT 9.0(U) CORPORATE RESOLUTIONS OF TFCEI AND TIA
EXHIBIT 9.0(V) CORPORATE RESOLUTION OF FCF
EXHIBIT 9.0(W) WARRANT AND THE REGISTRATION RIGHTS
AGREEMENT
EXHIBIT 10.0(a) BORROWERS' NAMES, LOCATIONS AND SUBSIDIARIES
EXHIBIT 10.0(g) UCC LANGUAGE
EXHIBIT 10.0(i) BROKER DISCLOSURE
EXHIBIT 10.0(j) LABOR DISCLOSURE
EXHIBIT 11.0 SERVICING AGREEMENT
EXHIBIT 12.0 PURCHASE AGREEMENT
EXHIBIT 13.0 MASTER DEALER AGREEMENT
EXHIBIT 13.4 FINANCIAL STATEMENT CERTIFICATE
EXHIBIT 13.6 PORTFOLIO AND FINANCIAL COVENANTS
EXHIBIT 16.0 DEBT SUBORDINATION AGREEMENT
EXHIBIT 17.0 PLEDGE AGREEMENT
<PAGE>
EXHIBIT 3.1
CONTRACT ELIGIBILITY REQUIREMENTS
Each Contract delivered to Lender shall satisfy each of the following
requirements in order to be deemed an "Eligible Contract":
(A) All of the representations and warranties
in Sections 10.0 are true with respect to, and all conditions precedent in
Section 9.1 have been and continue to be met with respect to, the Contract,
Financed Vehicle, Contract Debtor, Required Contract Debtor Insurance, and
Optional Contract Debtor Insurance.
(B) The contract form is consistent with
Exhibit 3.1(A), and the Borrower represents that the contract form will be
submitted to Borrower's counsel for approval.
(C) The first Scheduled Payment is due within
sixty (60) days after the date of the Contract.
(D) Not more than three (3) Scheduled
Payments are due and unpaid in whole or in part at the time it is delivered to
Lender or thereafter.
(E) The Contract has a fixed "APR" and the
"Finance Charge" was computed using a fixed rate.
(F) The initial term of the Contract does not
exceed sixty (60) months and the Schedule of Payments has equal monthly payments
except for the first or final payment which may be five percent (5%) more or
less than the other equal payments, and the payment obligation is in United
States dollars.
(G) The Contract is for the absolute sale of
the Financed Vehicle to the Contract Debtor, and the Financed Vehicle is not on
approval or subject to any agreement between the Contract Debtor and the Dealer
for the repurchase or return of the Financed Vehicle.
(H) The Dealer has been paid all amounts due
for the purchase of the Contract from the Dealer.
(I) If the Contract Debtor is an employee,
officer, agent, director, stockholder, supplier or creditor of Borrower or an
Affiliate, the Contract does not contain terms more favorable than those
available to an unrelated Person.
(J) The Contract contains the original
signature of the Contract Debtor, the Dealer or the Dealer's authorized agent.
(K) The Contract is the only unsatisfied
original executed Contract for the purchase of the Financed Vehicle and
accurately reflects all of the actual terms and conditions of the Contract
Debtor's purchase of the Financed Vehicle. Neither Borrower nor an Affiliate has
made any agreement with the Contract Debtor to reduce the amount owed on the
Contract. Neither Borrower nor an Affiliate are required to perform any
additional service for, or perform or incur any additional obligation to, the
Contract Debtor in order for Borrower to enforce the Contract.
(L) The Contract, at the time Borrower
purchased it, met Borrower's creditworthiness, documentation and other advance
criteria which (i) are contained in Exhibit 3.1(B), or (ii) Borrower disclosed
to Lender in writing after execution of this Agreement and Lender consented to
in writing as acceptable for Eligible Contracts; or the Contract does not meet
such criteria and Lender approved in writing the deviation for that Contract.
(M) The Contract Debtor's obligations under
the Contract are secured by a validly perfected first priority security interest
in the Financed Vehicle in favor of Borrower or Lender as secured party, subject
to Section 9.1(A). With respect to Contracts serviced by Third Party Servicers,
the Borrower shall have been appointed as Third Party Servicer's
attorney-in-fact and shall be permitted, under the applicable agreement with the
dealer, to take all actions necessary to perfect Borrower's first priority
security interest.
(N) The Contract has not been, nor is it
designated to be, terminated, satisfied, canceled, subordinated or rescinded in
whole or in part; nor has the Financed Vehicle been released unless substituted
with another Financed Vehicle of greater or equal value, or designated for
release, from the security interest granted by the Contract; and all of the
holder's obligations under the Contract have been performed except those which
first arise subsequent to the delivery to Lender.
(O) No provision of the Contract has been
waived, extended, altered or modified in any respect except in accordance with
Company Policies which are contained in Exhibit 5.1(A).
(P) No claims of rescission, setoff,
counterclaim, defense or other material disputes have been asserted with respect
to the Contract or Financed Vehicle.
(Q) Except for the Contract Debtor's
ownership of the Financed Vehicle and Borrower's ownership of the Contract and
Contract Rights, no Person has, or has asserted in a judicial proceeding or to a
governmental agency or against Lender, a claim of, an ownership or other
interest in the Financed Vehicle, Contract or Contract Rights.
(R) The Point of Sale Contract requires
Required Contract Debtor Insurance. Borrower is a loss payee or insured under
the Required Contract Debtor Insurance except where the advance to the Dealer is
three thousand dollars ($3,000.00) or less.
(S) Borrower has not repossessed the Vehicle
or commenced a replevin action or other lawsuit, against the Contract Debtor or
Financed Vehicle.
(T) The obligation of the original Contract
Debtor has not been released or assumed by another Person unless the release or
assumption was properly documented, approved by Borrower and in accordance with
Credit Programs and Advance Criteria as set forth in Exhibit 3.1(B). (U) The
Contract Debtor Documents exist.
(V) All Bulk Purchase Contracts will be
purchased pursuant to a Purchase Agreement substantially in the form of that
attached in Exhibit 12.0.
(W) Subsequent to the time that the Contract
is entered into, the Contract Debtor has not filed a petition under any section
or chapter of the Bankruptcy Code or any similar federal or state law or
regulation.
(X) If the Contract is included in a
portfolio purchase for Two Million Dollars ($2,000,000.00) or more, Lender has
before the Advance reviewed with satisfactory results the terms, conditions, and
due diligence for the purchase; provided that, Lender will be deemed to have
conducted the review with satisfactory results if Borrower provides the terms,
conditions, and due diligence materials to Lender by overnight delivery service
at the address in Section 17.1 and Lender does not notify Borrower of its
dissatisfaction within two Business Days after receipt of the last materials
received. A deemed or actual satisfactory review shall not constitute a
determination that any of the other requirements in the definition of Eligible
Contract have been.
EXHIBIT 3.1
<PAGE>
CONTRACT FORM
[To be inserted]
EXHIBIT 3.1(A)
<PAGE>
CREDIT PROGRAMS AND ADVANCE CRITERIA
[To be inserted]
EXHIBIT 3.1(B)
<PAGE>
ADMINISTRATION POLICIES
(A) Collection
(a) Collection
(b) Deferment
(c) Due Date Change
(d) Allowable Delinquency
(B) Repossession Guidelines
(C) Accounting Policies
(a) Income Recognition
(b) Credit Losses
(c) Charge Off: Mandatory
Deficiency Balances
EXHIBIT 5.1(A)
<PAGE>
REPORTS
Financial Due no later than 45 Days after Month End
Financial Statements (departmental) Frequency: Monthly and Trend
(except departmental)
Income Statement, Balance Sheet, Loss Reserve Account,
Forecast and Budget Variance analysis, as done
Frequency: Quarterly Rolling 12-month projections
Static Pool
Cash Flow - Sources and
Uses
Portfolio
New Business by Program Frequency: Monthly within
20 business days of
month end,
Gross Contract Receivable, Unearned Finance Charges,
Amount Financed, Non-Refundable Reserve (Dealer
Holdback) Net Investment, Term, APR
New Business by Program Frequency: Monthly within
45 business days of
month end,
Exceptions to Credit Guidelines
First Payment Default
Branch/Service Center Volumes
Portfolio Management by Program Frequency: Monthly within
45 business days of
month end,
Customer Concessions (deferments) Delinquency by Units
and Dollars (gross and net) Repossessions and
Repossession Inventory Charge-Offs by Units and Dollars
(gross and net) Recovery P & L Deficiency Balance
performance
Operating
Daily: Cash Report, Transaction Report (sent no later than
1 Business Day after the day covered by the report)
Weekly: New Contract Report, Title Tracking Report (sent no later
than 1 business day after the end of the week covered by
the report).
Monthly: Number of Contracts, Aged Trial Balance, paid Off
Contracts, Charged-Off Contracts, Recovery, Repossession and Bankruptcy Reports.
(due no later than 20 Business Days after Month End)
Borrower shall deliver with the monthly reports a certificate of the
Chief Financial Officer of Borrower, in the form of Exhibit 5.1(C)(1).
Borrower shall deliver to Lender, no later than the 20th Business Day
following each Accounting Period, an up-to-date master file back-up tape in a
form usable by Lender's computer of all Pledged Contract information for the
Accounting Period relating to the Contract files which Borrower has placed on
electronic media, including but not limited to, payment histories, contract
accounting, Outstanding Principal Balance, customer service notes, collection
histories and Contract Debtor names and addresses.
EXHIBIT 5.1(C)
<PAGE>
SERVICING REPORT CERTIFICATE
THE FINANCE COMPANY
The undersigned, _____________, the duly authorized chief financial
officer of [____________________________, a ___________ corporation]
("Company"), DOES HEREBY CERTIFY, for purposes of the Amended and Restated Motor
Vehicle Installment Contract Loan and Security Agreement dated as of ___________
______ (the "Agreement") between the Company and General Electric Capital
Corporation that the reports and computer tapes submitted to Lender pursuant to
Section 5.1 (C) of the Agreement are to the best of my knowledge complete and
accurate in all material respects.
IN WITNESS WHEREOF, the undersigned has hereunto set his
hand this _____ day of ____________, 1996.
-----------------------------------
Vice President and Chief
Financial Officer
EXHIBIT 5.1(C)(1)
<PAGE>
EXHIBIT 6.3
CONTRACT DEBTOR DOCUMENTS
Each of the following documents constitute the Contract Debtor Documents:
1. The Contract Delivery Documents;
2. The Dealer Invoice and invoices for any additional equipment included in the
Contract;
3. A copy of (a) the original signed completed credit application, (b) the
credit bureau reports, (c) the completed credit investigation form, (d) the
completed verification of employment and income forms, and (e) Contract Debtor
references;
4. Verification of Required Contract Debtor Insurance showing Borrower as loss
payee, additional insured, or lienholder;
5. Borrower's funds disbursement listing;
6. A certificate for each type of Optional Contract Debtor Insurance purchased
by Contract Debtor;
7. Borrower's "deal structure" sheet;
8. The military pay allotment form if the Contract Debtor is in military service
and if such allotment has been made; and
9. The payment history and accounting for the Contract.
EXHIBIT 6.3
<PAGE>
ASSIGNMENT OF INSURANCE INTERESTS
___________________ ("Assignor") hereby absolutely and irrevocably assigns to
General Electric Capital Corporation ("GE Capital") all of Assignor's right,
title and interest in, under, and with respect to all insurance and service
contracts which provide any of the following coverages with respect to
installment contracts which Assignor has pledged to GE Capital and GE Capital
continues to have a security interest in:
<TABLE>
<S> <C>
1. credit life, credit disability, or credit accident and health;
2. casualty, damage, theft, loss, or liability;
3. involuntary unemployment;
4 mechanical breakdown, warranty, maintenance, or servicing;
5. lender protection, vendor/lender single interest, skip, repossessed
vehicle casualty (including damage, theft, and loss), confiscation,
nonfiling, or failure of lien perfection; or
6. any other coverage assigned in writing by Assignor to GE Capital.
</TABLE>
Without limiting the rights included in this assignment, this assignment
entitles GE Capital to claim and collect all benefits, refunds, and other
amounts with respect to all coverages that Assignor would be entitled to claim
and collect, and to make such claims and collections in its name or Assignor's
name. Assignor hereby authorizes GE Capital to sign Assignor's name on all such
claims and collections GE Capital makes, and to endorse Assignor's name on all
such payments it receives. Assignor hereby instructs and authorizes all
providers of the foregoing coverages to rely on this Assignment and any
statement or instruction in writing by GE Capital with respect to the operation
and effect of this Assignment and the installment contracts covered by it.
Assignor hereby agrees that the providers of the coverages who so rely shall
have no liability to Assignor for complying with this Assignment and such
statements and instructions by GE Capital.
Dated: _____________, 1996
By:
----------------------
Its:
----------------------
EXHIBIT 8.2
<PAGE>
EXHIBIT 9.0
SUPPLEMENTAL DOCUMENTS
(A) Guaranties in the form of Exhibit 9.0(A) duly executed by the
Guarantors; and, for the Guarantors who are individuals, instruments in the form
of Exhibit 9.0(A)(1) executed by the co-owners of the Guarantors' property
subordinating or disclaiming to Lender the interest of the co-owners in property
owned by the Guarantors;
(B) Documents that evidence that all of Borrower's debt is
Subordinated Debt except as otherwise allowed by this Agreement;
(E) Evidence that the insurance policies required by Section
13.9 have been obtained and are in full force and effect;
(F) A certified copy of Borrower's by-laws;
(G) An opinion of Borrower's counsel dated as of the Closing
Date in the form of Exhibit 9.0(G);
(H) A copy of a letter delivered by Borrower to its accountants
instructing them to disclose to Lender any and all financial statements and
other information of any kind relating to Borrower's business, financial
condition and other affairs that Lender may request;
(I) Satisfaction of Borrower's obligation to prior-filed
creditors with the initial advance, if any;
(J) An Assignment of Insurance Interests in the form of
Exhibit 8.2 duly executed by Borrower;
(K) An assignment of Borrower's rights to the payments from Contract
Debtor bank accounts in the form of Exhibit 9.0(K) attached hereto;
(L) An executed certificate in the form of Exhibit 9.0(L) attached
hereto executed by the President or Chief Financial Officer of Borrower;
(M) All government and private consents required to permit
Borrower to perform this Agreement;
(N) Evidence that properly executed financing statements for the
Collateral in the form of Exhibit 10.0(g) have been filed with all appropriate
filing officers.
(O) UCC release or termination statements and other release
documents, if any, Lender may deem appropriate to release any interest not held
by Borrower or Lender in the Collateral;
(P) Certified resolutions of Borrower's Board of Directors
in the form of Exhibit 9.0(P) attached hereto;
(Q) An executed power of attorney executed by Borrower in
the form of Exhibit 9.0(Q) attached hereto;
(R) Borrower's articles of incorporation and good standing certified
on or within five (5) Business Days before the Closing Date by the
_________________ Secretary of State;
(S) Certificates showing that Borrower is qualified as a foreign
corporation and in good standing in all jurisdictions other than _______________
in which it transacts business;
(T) A copy of Borrower's business licenses relating to the five (5)
states in which Borrower originates the greatest number of Contracts and a
letter from the department issuing the license confirming that such license is
in good standing;
(U) Certified resolutions of TFCEI's and TIA's Board of
Directors in the form of Exhibit 9.0(U) attached hereto;
(V) Certified resolutions of FCF's Board of Directors in the
form of Exhibit 9.0(V) attached hereto;
(W) Warrant and the Registration Rights Agreement;
(X) Such additional information and materials as Lender may
reasonably request.
EXHIBIT 9.0
<PAGE>
EXHIBIT 9.0(A)
GUARANTY
As an inducement to General Electric Capital Corporation ("Lender") to provide
financing to __________________________________ ("Borrower"), but without in any
way binding Lender to do so, the undersigned ("Guarantor") hereby guaranties to
Lender the due, regular and punctual payment and prompt performance of all debts
and other obligations of any kind or character which Borrower now owes Lender or
which Borrower shall at any time or from time to time hereafter owe Lender,
regardless of any change in Borrower's name, entity, or ownership. Guarantor
also agrees to pay to Lender all costs incurred by Lender in the collection and
enforcement of the debts and obligations of Borrower to Lender.
The liability of Guarantor hereunder is direct, unconditional, absolute and may
be enforced without requiring Lender first to resort to any right or remedy
Lender has as to Borrower or any third parties with regard to Borrower's debts
and obligations to Lender or to foreclose or exhaust any security therefor.
Guarantor shall not have any right of reimbursement, indemnity, subrogation or
security enforceable against Borrower, nor otherwise be a creditor of Borrower,
with respect to payments to Lender to the extent such rights or creditor status
would make payments to Lender a preference recoverable from Lender. Nothing
shall discharge or satisfy the liability of Guarantor hereunder except the full
payment and performance of all of Borrower's debts and obligations to Lender.
Any and all present and future debts and obligations of Borrower to Guarantor
are hereby postponed in favor of and subordinated to the full payment and
performance of all present and future debts and obligations of Borrower to
Lender.
Guarantor has made an independent investigation of the financial condition and
affairs of Borrower prior to entering into this Guaranty and has not relied upon
any representation made by Lender as to the financial condition, operation or
creditworthiness of Borrower. Guarantor further agrees that Lender shall have no
duty or responsibility now or hereafter to make any investigation or appraisal
of Borrower, or the security for Borrower's debts and obligations to Lender, on
behalf of Guarantor or to provide Guarantor with any information which may come
to Lender's attention now or hereafter, whether or not such information could
materially increase the risk of Guarantor hereunder.
Notice of acceptance of this Guaranty, of any default by Borrower, and of any
adverse change in Borrower's financial condition or of any other fact which
might materially increase the risk of Guarantor hereunder is hereby waived.
Presentment, protest and demand, and notice of protest, demand and dishonor are
hereby waived. Guarantor authorizes Lender without notice or demand and without
affecting the obligations of Guarantor hereunder, with respect to any debt or
obligation of Borrower to Lender, to extend the time of payment (without limit
as to the number or term of extensions) or waive strict compliance with any
other term thereof, to renew or otherwise modify the terms thereof, to waive or
release any security therefor, to release a guarantor or other party liable
therefor, and to enter or grant any settlement, release, compromise,
composition, account stated or agreed balance with or to Borrower or any third
party, and Guarantor agrees that the foregoing actions shall not diminish
Guarantor's obligations hereunder. GUARANTOR WAIVES ANY AND ALL RIGHT TO A TRIAL
BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATED TO THIS GUARANTY.
To the extent allowed by law, Guarantor hereby confesses judgment, and
acknowledges to be indebted unto and in favor of Lender, for the full amount of
all obligations due to Lender by Borrower, and consents to Lender filing this
Guaranty as evidence of judgment.
This Guaranty remains fully enforceable irrespective of any defenses which
Borrower could assert on the underlying debt, including but not limited to
failure of consideration, breach of warranty, fraud, payment, accord and
satisfaction, strict foreclosure, statute of frauds, bankruptcy, infancy,
statute of limitations, lender liability, and usury. If Borrower or Guarantor
should at any time become insolvent or make a general assignment, or a petition
in bankruptcy or any insolvency or reorganization proceedings shall be filed or
commenced by or against Borrower or Guarantor, any and all obligations of
Guarantor pursuant to this Guaranty shall not be lessened by such petitions,
assignments or filings and shall, at Lender's option, forthwith become due and
payable without notice. In the event of default in the performance of this
Guaranty, Guarantor agrees to pay all reasonable court costs, attorney's fees
and other expenses paid or incurred by Lender in the enforcement hereof.
This Guaranty is a continuing guaranty which shall remain effective until
terminated as provided herein. Guarantor may terminate this Guaranty upon at
least sixty (60) days prior written notice received by Lender and sent by
registered or certified mail, return receipt requested. Notwithstanding such
termination, however, this Guaranty shall remain effective as to all financing
provided, or committed to be provided, by Lender to or for the benefit of
Borrower prior to the effective date of termination and this Guaranty shall be
continuing and unconditional until the same are fully paid, performed and
discharged.
This Guaranty supersedes all prior writings, and all prior and contemporaneous
oral understandings, regarding this Guaranty. Without Lender's prior written
consent, no assignment or delegation of any rights or duties by Guarantor shall
be effective to relieve Guarantor of its obligations hereunder. Lender can at
any time assign or delegate any rights or duties arising under this Guaranty.
This Guaranty shall inure to the benefit of Lender's successors and assigns.
Guarantor agrees to provide financial statements for Guarantor when requested by
Lender.
This Guaranty shall be governed by and construed in accordance with the laws of
the State of Virginia. The undersigned hereby irrevocably and unconditionally
consents to submit to the exclusive jurisdiction of the courts of the State of
Virginia and of the United States of America located in the State of Virginia
for any action, suit or proceeding arising out of or relating to this Guaranty
and the transactions contemplated hereby, and further agrees that service of any
process, summons, notice or document by U.S. registered mail to its address set
forth below shall be effective service of process for any action, suit or
proceeding brought in connection with this Agreement in any such court.
IMPORTANT NOTICE: THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION
WHICH CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND
ALLOW THE CREDITOR TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.
CONFESSION OF JUDGMENT: The Guarantor hereby appoints Robert D. Perrow and Paul
S. Bliley, Jr., as its attorneys-in-fact, either of whom shall have the power to
confess judgment against the Guarantor in favor of the Lender in the Clerk's
Office of the Circuit Court of the City of Norfolk, Virginia, or in any other
court of proper jurisdiction for the unpaid balance of the guaranteed amounts
plus cost, expenses and attorney's fees as specified herein, upon the occurrence
of a default.
Guarantor acknowledges that Guarantor has read this Guaranty, has consulted with
counsel to the extent Guarantor deemed advisable, understands this Guaranty and
desires to be bound by it.
Dated: _______________, 1996
Corporate Guaranty
By:_____________________________ Witness: ______________________
Secretary
Print Name _________________________
Its:________________________________
<PAGE>
EXHIBIT 9.0(G)
General Electric Capital Corporation
1000 Hart Road, Suite 300
Barrington, IL 60010
Attn: Manager, Asset Based Lending
Gentlemen:
We have acted as counsel for ________________________, a
____________ corporation ("Borrower") in connection with the proposed loan to
Borrower by General Electric Capital Corporation ("GECC") pursuant to that
certain Loan and Security Agreement dated _________________, 1996, by and
between Borrower and GECC (the "Agreement"). In connection therewith, we have
been asked to deliver certain opinions to you. All capitalized terms not
otherwise defined herein shall have the meaning specified in the Agreement.
We have examined such documents, records and matters of law as we
have deemed necessary for purposes of this opinion. We have assumed and relied
upon the authenticity of all document submitted to us as originals, the
genuineness of all signatures, the legal capacity of natural persons, and,
except as to the execution of the Agreement on behalf of Borrower, the due
authority of all persons executing the same and the due execution and delivery
of all documents where due execution and delivery are prerequisites to the
effectiveness thereof.
As to various questions of fact material to our opinion, we have
relied solely upon statements or certificates of officers and representatives of
Borrower and others, none of which we believe to be incorrect. Where an opinion
is qualified by reference to our knowledge or belief, we render an opinion
limited in scope to matters actually or believed by us and have not
independently investigated such matters other than as described in this letter.
Based on the foregoing, it is our opinion that:
1. Borrower is a corporation duly organized, validly existing and in good
standing under the laws of the State of ______________, and each has full
corporate power to enter into the Agreement and all other instruments and
documents to be delivered thereunder or pursuant thereto, and to carry out the
provisions of the Agreement and such other instruments and documents. Borrower
has all licenses, approvals and consents necessary to conduct its business as
currently being conducted and to perform the Agreement, and had all licenses
approvals and consents necessary for the acquisition and servicing of the
Contracts by Borrower prior to the date of the Agreement.
2. Borrower is duly qualified and in good standing to do business in all states
in which the failure to so qualify would have a material adverse affect on
Borrower's business or properties or its ability to perform under the Agreement.
3. The execution, delivery and performance by Borrower of the Agreement and all
other documents previously or contemporaneously delivered pursuant thereto, and
the transactions contemplated thereby, have been duly authorized by all
necessary corporate proceedings. The Agreement and all such other documents
required to be executed by Borrower have been duly and validly executed and
delivered by Borrower and are valid and legally binding agreements of Borrower,
enforceable in accordance with their terms.
4. No consent, approval, authorization, order, registration or qualification of
or with any court or regulatory authority or other governmental body having
jurisdiction over Borrower is required for (or, in the alternative, the absence
of any such consent, approval, authorization, order, registration or
qualification would not adversely affect) the legal and valid execution,
delivery or performance of, or the pledge and servicing of the Contracts under,
the Agreement.
5. To the best of our knowledge, neither the execution, delivery or performance
of the Agreement will conflict with or result in a breach of or default under
any contract or agreement to which Borrower is subject or by which it or its
property is bound. Borrower has all licenses, approvals and consents necessary
to conduct its business as currently being conducted and as proposed to be
conducted in accordance with the terms of the Agreement and as it was conducted
for the acquisition and servicing of the Contracts by Borrower.
6. The execution, delivery and performance of the Agreement will not
violate or result in the violation of the articles of incorporation or by-laws
of Borrower or any law applicable to Borrower.
7. Based upon representations and warranties made to us by Borrower, prior to
the execution and delivery of the Agreement, Borrower had good and marketable
title to the Pledged Contracts, subject to no lien, claim, security interest,
charge, encumbrance or right of any kind. Upon execution and delivery of the
Agreement by Borrower and GECC, GECC will have a security interest in the
Collateral to secure Borrower's obligations to GECC under the Agreement.
8. Upon due execution of the Uniform Commercial Code financing statements with
the language in Exhibit 10.0(g) of the Agreement and filing in the office of the
____________ Secretary of State, GECC's security interest in the Collateral will
be perfected except where perfection depends on possession and GECC does not
have possession and except where perfection requires notation as lienholder on a
certificate of title. The Collateral in which a security interest is perfected
by filing a Uniform Commercial Code financing statement is described in the
language of Exhibit 10.0(g) with sufficient specificity to perfect the security
interest.
9. To the best of our knowledge, there are no material actions, suits,
judgments, orders, arbitrations or other legal, administrative or governmental
investigations or proceedings pending or threatened against or affecting
Borrower or the assets of Borrower.
10. The Contract attached to the Agreement as Exhibit 3.1(A) is chattel paper as
defined in the Uniform Commercial Code and complies with state and federal law.
11. GE Capital's security interest in the Contracts will enable GE Capital
following an Event of Default to enforce the Contracts and Borrower's security
interest in the Financed Vehicles to the same extent that Borrower could.
------------------
Very truly yours,
EXHIBIT 9.0(G)
<PAGE>
EXHIBIT 9.0(K)
ASSIGNMENT OF RIGHTS TO DIRECT DEBIT
The Finance Company
_________________________("Assignor") hereby absolutely and irrevocably assigns
to General Electric Capital Corporation ("GE Capital") all of Assignor's right,
title and interest in, under, and with respect to any and all rights of Assignor
to directly debit or charge any bank account authorized by a Contract Debtor for
the payment of any and all obligations of such Contract Debtor to Assignor under
any Contract.
Without limiting the rights included in this assignment, this assignment
entitles GE Capital to directly debit or charge the bank accounts of Assignor's
Contract Debtors for obligations due and owing under any Contract which Assignor
would be entitled to debit or charge, and to make such debits or charges in its
name or Assignor's name. Assignor hereby authorizes GE Capital to sign
Assignor's name on all such debits or charges GE Capital makes, and, to the
extent required, endorse Assignor's name on all such acknowledgments of such
debits or charges it receives. Assignor hereby instructs and authorizes all
banking institutions at which Assignor has direct debit authorizations of record
to rely on this Assignment and any statement or instruction in writing by GE
Capital with respect to the operation and effect of this Assignment and the
installment contract obligations of its Contract Debtors covered by it. Assignor
hereby agrees that the financial institutions who so rely shall have no
liability to Assignor for complying with this Assignment and such statements and
instructions by GE Capital.
Any terms used herein without definition shall have the meaning given to such
terms in the Amended and Restated Motor Vehicle Installment Contract Loan and
Security Agreement between Assignor and GE Capital dated _________, 1996.
Dated:___________________, 199__ [Name]
By:___________________________
Its:____________________________
EXHIBIT 9.0(K)
<PAGE>
THE FINANCE COMPANY
OFFICER'S CERTIFICATE
The undersigned, ________________________________________, a duly
authorized officer of __________________, a ______________ corporation
("Company"), DOES HEREBY CERTIFY, for purposes of the Amended and Restated Motor
Vehicle Installment Contract Loan and Security Agreement dated as of
__________________, 1996 (the "Agreement") between Company and General Electric
Capital Corporation, to the best of my knowledge after reasonable investigation,
that as of ______________ (i) the representations and warranties of Company in
the Agreement are true and correct, (ii) Company has performed all of its
obligations and satisfied all of the conditions required to be performed and
satisfied under the Agreement before or at the time of the first Advance by
General Electric Capital Corporation, and (iii) there has been no material
adverse change in the financial condition of Company since _____________. Unless
otherwise defined herein, capitalized terms herein shall have the meanings
specified in the Agreement.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
______ day of ____________, 1996.
-----------------------------------
Print Name: ________________________
Title: _____________________________
EXHIBIT 9.0(L)
<PAGE>
CORPORATE RESOLUTIONS
THE FINANCE COMPANY
I, ____________________________________, do hereby certify that I am
the duly elected and qualified Secretary and the keeper of the records and seal
of ____________________, a ___________ corporation (the "Corporation"), and that
the following is a true and correct copy of resolutions duly adopted at a
meeting of the Board of Directors of the Corporation convened and held in
accordance with law and with the articles of incorporation and the by-laws of
the Corporation on the ____ day of ________, ______, and that such resolutions
are now in full force and effect, unamended, unaltered and unrepealed:
RESOLVED, the Board of Directors has determined it is in the best of
interest of the Corporation borrow money from General Electric Capital
Corporation secured by installment obligations and other collateral now or
hereafter owned by the Corporation;
FURTHER RESOLVED, the Board of Directors has reviewed the proposed
loan and rights to be granted to General Electric Capital Corporation presented
by the President and as evidenced by the Amended and Restated Motor Vehicle
Installment Contract Loan and Security Agreement;
FURTHER RESOLVED, the proposed loan and granting of security
interests are approved and all officers of the Corporation are authorized to
execute and deliver such documents and take such actions as are necessary in
order to become or remain indebted to General Electric Capital Corporation and
to pledge the installment obligations and other collateral to General Electric
Capital Corporation;
FURTHER RESOLVED, all actions previously or subsequently taken by
officers of the Corporation in connection with this transaction, are ratified
and confirmed, and approved as authorized actions on behalf of and binding on
the Corporation, and each officer of the Corporation listed below, acting alone,
is authorized to take such additional action in connection with the loan as he
or she deems necessary or appropriate to consummate the proposed loan and
granting of rights to General Electric Capital Corporation.
I FURTHER CERTIFY that the following persons have been appointed or
elected and are now acting as officers of the Corporation in the capacity set
before their respective signatures:
Signatures to follow on next page
<PAGE>
NAME TITLE SIGNATURE
- ------------------------- ------------ ----------------
- ------------------------- ------------ ----------------
- ------------------------- ------------ ----------------
- ------------------------- ------------ ----------------
IN WITNESS WHEREOF, I have subscribed my name as Secretary and have
caused the seal of the Corporation to be hereunto affixed this ______ day of
________, ______.
- --------------------------
SEAL Secretary
EXHIBIT 9.0(P)
<PAGE>
POWER OF ATTORNEY
KNOW ALL PEOPLE BY THESE PRESENTS:
______________________ ("Principal") hereby constitutes and appoints
General Electric Capital Corporation ("GECC") as its true and lawful agent and
attorney in fact to act in its name and stead or on its behalf with authority to
do the following acts to the extent the acts relate to installment contracts and
related rights pledged to GECC (the pledged retail contracts and related rights
are referred to herein as the "Property"):
1. GECC can receive, endorse, and collect all payments made payable
to or owed to Principal in connection with the Property, including but not
limited to military pay allotments.
2. GECC can enforce, release, modify, and transfer the rights and
interests granted to Principal regarding the Property, including but not limited
to rights with respect to insurance policies, motor vehicles, motorcycles, and
certificates of title.
This power of attorney is coupled with an interest and cannot be
terminated by Principal. Principal hereby instructs and authorizes anyone
presented with this Power of Attorney, or a copy hereof, to comply with the
Power of Attorney and rely on GECC's statements and instructions in connection
therewith. Anyone who relies on and complies with this Power of Attorney or
GECC's statements or instruction in connection therewith shall have no liability
to Principal for doing so.
This power of attorney is made on _____________, 1996.
Borrower
By: ______________________ By:____________________________
Title: _____________________ Title:_________________________
Subscribed and Sworn to before me by authorized representatives of
______________ this ____ day of _____________________, 1996.
- -------------------------------
Notary Public
SEAL
EXHIBIT 9.0(Q)
<PAGE>
CORPORATE RESOLUTION
I, ____________________________________, do hereby certify that I am
the duly elected and qualified Secretary and the keeper of the records and seal
of ____________________, a ___________ corporation (the "Corporation"), and that
the following is a true and correct copy of resolutions duly adopted at a
meeting of the Board of Directors of the Corporation convened and held in
accordance with law and with the articles of incorporation and the by-laws of
the Corporation on the ____ day of ________, ______, and that such resolutions
are now in full force and effect, unamended, unaltered and unrepealed:
RESOLVED, the Board of Directors has determined it is in the best of
interest of the Corporation to guaranty the obligations of The Finance Company
to General Electric Capital Corporation;
FURTHER RESOLVED, the Board of Directors has reviewed the proposed
guaranty (the "Guaranty") to be issued to General Electric Capital Corporation
presented by the President and as evidenced by the Amended and Restated Motor
Vehicle Installment Contract Loan and Security Agreement;
FURTHER RESOLVED, the proposed Guaranty is approved and all officers
of the Corporation are authorized to execute and deliver such documents and take
such actions as are necessary in order to effectuate the Guaranty to General
Electric Capital Corporation;
FURTHER RESOLVED, all actions previously or subsequently taken by
officers of the Corporation in connection with this transaction, exclusive of
future amendments, are ratified and confirmed, and approved as authorized
actions on behalf of and binding on the Corporation.
I FURTHER CERTIFY that the following persons have been appointed or
elected and are now acting as officers of the Corporation in the capacity set
before their respective signatures:
NAME TITLE SIGNATURE
- ------------------------- ------------ -------------
- ------------------------- ------------ -------------
- ------------------------- ------------ -------------
- ------------------------- ------------ -------------
IN WITNESS WHEREOF, I have subscribed my name as Secretary and have
caused the seal of the Corporation to be hereunto affixed this ______ day of
________, ______.
--------------------------
SEAL Secretary
EXHIBIT 9.0(U)
<PAGE>
CORPORATE RESOLUTIONS
FIRST COMMUNITY FINANCE, INC.
I, ____________________________________, do hereby certify that I am
the duly elected and qualified Secretary and the keeper of the records and seal
of ____________________, a ___________ corporation (the "Corporation"), and that
the following is a true and correct copy of resolutions duly adopted at a
meeting of the Board of Directors of the Corporation convened and held in
accordance with law and with the articles of incorporation and the by-laws of
the Corporation on the ____ day of ________, ______, and that such resolutions
are now in full force and effect, unamended, unaltered and unrepealed:
RESOLVED, the Board of Directors has determined it is in the best of
interest of the Corporation to guaranty the obligations of The Finance Company
to General Electric Capital Corporation secured by installment obligations and
other collateral now or hereafter owned by the Corporation;
FURTHER RESOLVED, the Board of Directors has reviewed the proposed
guaranty (the "Guaranty") to be issued to General Electric Capital Corporation
presented by the President and as evidenced by the Amended and Restated Motor
Vehicle Installment Contract Loan and Security Agreement;
FURTHER RESOLVED, the proposed Guaranty is approved and all officers
of the Corporation are authorized to execute and deliver such documents and take
such actions as are necessary to effectuate the Guaranty to General Electric
Capital Corporation and to pledge the installment obligations and other
collateral to General Electric Capital Corporation;
FURTHER RESOLVED, all actions previously or subsequently taken by
officers of the Corporation in connection with this transaction, exclusive of
future amendments, are ratified and confirmed, and approved as authorized
actions on behalf of and binding on the Corporation.
I FURTHER CERTIFY that the following persons have been appointed or
elected and are now acting as officers of the Corporation in the capacity set
before their respective signatures:
NAME TITLE SIGNATURE
- ------------------------- ------------ ------------
- ------------------------- ------------ ------------
- ------------------------- ------------ ------------
- ------------------------- ------------ ------------
IN WITNESS WHEREOF, I have subscribed my name as Secretary and have
caused the seal of the Corporation to be hereunto affixed this ______ day of
________, ______.
--------------------------
SEAL Secretary
EXHIBIT 9.0(V)
BORROWER'S NAMES, LOCATIONS AND SUBSIDIARIES
EXHIBIT 10.0(a)
<PAGE>
UCC LANGUAGE
All of the following now existing or hereafter arising and wherever located:
chattel paper; leases; installment sale contracts; installment loan contracts;
payments from chattel paper obligors; security deposits; motor vehicles
(including but not limited to cars, trucks and motorcycles); certificates of
title; contract purchase discounts; accounts; general intangibles; security
interests; collateral securing chattel paper; dealer agreements; dealer reserves
and rate participation; rights of Debtor related to chattel paper, installment
contracts, motor vehicles, and collateral securing chattel paper; documents;
instruments; deposit accounts; electronic funds transfers; equipment; inventory;
parts and accessories for motor vehicles ; payments from account debtor bank
accounts; reserve accounts; insurance policies, and benefits and rights under
insurance policies, which Debtor is solely or jointly the owner of, insured
under, the lienholder or loss payee under, or the beneficiary of; all payments
and property of any kind, now or at any time or times hereafter, in the
possession or under the control of Secured Party, or a bailee of Secured Party;
and all books and records (including, without limitation, customer lists, credit
files, computer programs, print-outs and other computer materials and records)
of Debtor pertaining to the foregoing collateral. All accessions to,
substitutions for and all replacements, products and proceeds of all of the
foregoing collateral, including, without limitation, proceeds of insurance
policies insuring the collateral.
EXHIBIT 10.0(g)
<PAGE>
BROKER DISCLOSURE
TO BE PROVIDED BY TFC
EXHIBIT 10.0(i)
<PAGE>
LABOR DISCLOSURE
NONE
EXHIBIT 10.0(j)
<PAGE>
FINANCIAL STATEMENT CERTIFICATE
THE FINANCE COMPANY
OFFICER'S CERTIFICATE
The undersigned, ______________________, the duly authorized chief
financial officer of _________________, a ______________ corporation
("Company"), DOES HEREBY CERTIFY, for purposes of the Amended and Restated Motor
Vehicle Installment Contract Loan and Security Agreement dated as of
___________, 1996 (the "Agreement") between the Company and General Electric
Capital Corporation that: (i) the attached financial statements are accurate in
all material respects and present the true financial condition of Company as of
the dates shown, (ii) the assets of Company shown on the financial statements
exist, are solely owned by Company, are not subject to any liens other than the
lien of General Electric Capital Corporation and those disclosed in the
financial statements or allowed by the Agreement, and are accurately valued on
the financial statements, (iii) the attached financial statements were prepared
in accordance with generally accepted accounting principles, and (iv) there has
been no material adverse change in the financial condition of the Company after
the dates that the financial statements cover, and (v) the calculations on the
attached compliance certificate confirm that Borrower is in compliance with the
requirements of Sections 13.6 and Exhibit 13.6 of the Agreement.
IN WITNESS WHEREOF, the undersigned has hereunto set his
hand this _____ day of ____________, 1996.
-----------------------------------
Vice President and Chief
Financial Officer
EXHIBIT 13.4
<PAGE>
PORTFOLIO COVENANTS
The covenants outlined below shall be measured as of the end of each
Accounting Period unless stated otherwise and reported to Lender with the
Financial Statement Certificate attached as Exhibit 13.4
All percentages shall not exceed the following:
Maximum
Delinquency Measurement Fiscal Fiscal Fiscal
1996 1997 1998
TFC Rolling Average Delinquency 14.00% 13.00% 13.00%
FCF Rolling Average Delinquency 8.00% 10.00% 12.00%
Maximum Charged Off Losses 1996 1997 1998
TFC Rolling Average Charged-Off Losses 2.75% 2.00% 2.00%
FCF Rolling Average Charged-Off Losses 1.00% 1.50% 2.00%
Maximum Repossession Inventory 1996 1997 1998
TFC Repossession Inventory 3% 3% 3%
QUARTERLY
Minimum Reserve Requirement 1996 1997 1998
TFC Reserve Requirement 100% 100% 100%
FCF Reserve Requirement 100% 100% 100%
<TABLE>
<CAPTION>
Maximum Outstanding
Principal Balance Pledged Contracts 1996 1997 1998
<S> <C>
TFC 175,000,000 191,000,000 219,000,000
</TABLE>
(1) Increasing $4,000,000 per fiscal quarter in 1997
(2) Increasing $7,000,000 per fiscal quarter in 1998
EXHIBIT 13.6
<PAGE>
FINANCIAL COVENANTS
The covenants outlined below shall be measured as of the end of each
Accounting Period and reported to Lender with the Financial Statement
Certificate attached as Exhibit 13.4.
Minimum Fiscal Fiscal Fiscal
Net Worth 1996 1997 1998
TFCEI $33,000,000 $34,000,000 $37,000,000
TFC $27,000.000 $28,000,000 $31,000.000
Maximum
Debt Ratio 1996 1997 1998
TFCEI 4.2:1 4.1:1 4.0:1
TFC 4.6:1 4.6:1 4.2:1
Minimum
Interest Coverage 1996 1997 1998
TFC .7 1.3 1.5
EXHIBIT 13.6
<PAGE>
EXHIBIT 16.0
DEBT SUBORDINATION AGREEMENT
THIS DEBT SUBORDINATION AGREEMENT ("Agreement") dated as
of _____________, 1996 is made between __________________________ ("Payee") and
General Electric Capital Corporation, a New York corporation with offices at
l000 Hart Road, Barrington, Illinois 60010 ("Lender"). To induce Lender to
provide financing to _____________ ("Company"), Payee agrees to the terms of
this Agreement.
1. Representations and Warranties. Payee represents and warrants
that: (a) Company is currently indebted to Payee in the amount of $ ____________
("Current Debt"), (b) the Current Debt is the only payment obligation of Company
to or for the benefit of Payee other than any compensation for services already
provided or any dividend already declared, (c) the Current Debt is unsecured,
(d) the Current Debt is the present unpaid principal balance of all loans made
by Payee to Company, (e) the Current Debt is not in default and the Current Debt
is not subject to any defense, offset, or counterclaim, (f) the term of the
Current Debt is _________ months and the interest rate on the Current Debt is
____________ percent (____%), and (g) Payee is the sole holder and owner of the
Current Debt.
2. Subordination. The Current Debt and any future payment obligation
of Company to Payee (referred to together as the "Subordinated Debt") and the
payment thereof are hereby postponed and subordinated to all payment and
security interest obligations of Company to Lender now existing or hereafter
arising ("Senior Debt"). Payee shall not accept or receive any payment on the
Subordinated Debt without the prior written consent of Lender. Payee shall cause
each document evidencing the Subordinated Debt to bear a legend that it is
subordinated to Company's obligations to Lender.
3. Security Interest in Subordinated Debt. To secure the Senior
Debt, Payee hereby grants to Lender a security interest in the Subordinated Debt
and in Payee's interest in any now existing or hereafter arising collateral for
the Subordinated Debt. Payee shall notify Lender of any increase in the amount
of the Subordinated Debt beyond the amount of the Current Debt, other than any
increase attributable to reasonable and customary compensation and dividends,
and shall notify Lender if Payee obtains a security interest in any real or
personal property to secure the Subordinated Debt. Payee hereby subordinates its
security interest, if any, in Company's existing and future assets to Lender's
security interest in Company's existing and future assets. Payee agrees not to
repossess or foreclose on the collateral for the Subordinated Debt until all of
Company's obligations to Lender have been fully performed and Company is no
longer indebted to Lender.
4. Turnover of Prohibited Transfers. If Payee receives any payment
in any form on the Subordinated Debt other than as permitted in paragraph 2
hereof, Payee shall deliver the payment forthwith to Lender for application to
the Senior Debt, in the form received except for the addition of any endorsement
or assignment necessary to effect a transfer of all rights therein to Lender.
Lender is irrevocably authorized to supply any required endorsement or
assignment which may have been omitted. Until so delivered, Payee shall hold
such payment in trust for Lender and shall not commingle it with other funds or
property.
5. Authority to Act for Creditor. For so long as any of the Senior
Debt remains outstanding, Lender shall have the right to act as Payee's
attorney-in-fact, at Lender's option, at any meeting of creditors of Company or
in connection with any case or proceeding for the dissolution, distribution,
division or application of the assets of Company to: (a) enforce the
Subordinated Debt; (b) collect any assets of Company distributed or applied by
way of dividend or payment, or any securities issued, on account of the
Subordinated Debt and to apply them to the Senior Debt, paying any surplus to
Payee to the extent permitted by law; (c) vote claims comprising the
Subordinated Debt in order to accept or reject any plan of liquidation,
reorganization, or composition; and (d) take generally any action in connection
with any such meeting, case or proceeding that Payee would be authorized to take
but for this Agreement. In no event shall Lender be liable to Payee for any
failure to prove the Subordinated Debt, to exercise any right with respect
thereto or to collect any sums payable thereon.
6. Validity of Subordinated Debt. The provisions of this
Agreement are solely for the purpose of defining the relative rights of Lender
and Payee and shall not impair, as between Payee and Company, the validity of
the obligations of Company.
7. Indulgences Not Waivers. Neither the failure nor any delay on the
part of Lender to exercise any right, remedy, power or privilege hereunder shall
operate as a waiver thereof or give rise to an estoppel, or be construed as an
agreement to modify the terms of this Agreement, nor shall any single or partial
exercise of any right, remedy, power or privilege with respect to any occurrence
be construed as a waiver of such right, remedy, power or privilege with respect
to any other occurrence. No waiver by a party hereunder shall be effective
unless it is in writing and signed by the party making such waiver, and then
only to the extent specifically stated in such writing.
8. Duration and Termination. This Agreement shall constitute a
continuing agreement of subordination, and shall remain in effect until the
Senior Debt shall have been fully and indefeasibly paid with interest and other
applicable charges. Neither the death nor the bankruptcy of Payee shall effect a
termination hereof. Lender may, without notice to Payee, extend or continue
credit and make other financial accommodations to or for the account of Company
in reliance upon this Agreement.
9. Notices. All notices, requests, demands and other communications
required or permitted under this Agreement or by law shall be in writing and
shall be deemed to have been duly given, made and received only when delivered
against receipt or when deposited in the United States mails, certified or
registered mail, return receipt requested, postage paid, addressed as set forth
below, and actually presented at the address of the noticed party.
(a) If to Lender: General Electric Capital Corporation
1000 Hart Road, Suite 300
Barrington, Illinois 60010
Attn: Manager - Asset Based Financing
(b) If to Payee:
------------------------
------------------------
------------------------
Any addressee may change its address to which communications are to
be sent by giving notice of such change of address in conformity with the
provisions of this paragraph for the giving of notice.
10. Lender's Duties Limited. The rights granted to Lender
in this Agreement are solely for its protection, and nothing contained herein
imposes on Lender any duties.
11. Entire Agreement. This Agreement constitutes and expresses the
entire understanding between the parties hereto with respect to the subject
matter hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, whether expressed or implied, oral or
written. Neither this Agreement nor any portion or provision hereof may be
changed, waived or amended orally or in any manner other than by an agreement in
writing signed by Lender and Payee.
12. Additional Documentation. Payee shall execute such
additional documents and shall take such further action as Lender may reasonably
request in order to carry out the provisions and intent of this Agreement.
13. Expenses and Jury Trial Waiver. Payee agrees to pay Lender on
demand all expenses of every kind, including reasonable attorney's fees, that
Lender may incur in enforcing any of its rights under this Agreement. PAYEE
WAIVES ALL RIGHTS TO A JURY TRIAL IN ANY ACTION REGARDING THIS AGREEMENT
COMMENCED BY OR AGAINST LENDER.
14. Successors and Assigns. This Agreement shall inure to the
benefit of Lender, its successors and assigns, and shall be binding upon Payee
and his heirs, personal representatives, successors and assigns. Lender may
assign this Agreement. Payee shall cause any transferee of a Subordinated Debt
to agree in a writing delivered to Lender that the transferred debt is subject
to this Agreement and that the transferee will perform Payee's obligations
hereunder with regard to the transferred debt. A transfer by Payee shall not
relieve him of his obligations hereunder.
15. Governing Law. The validity, construction and
enforcement of this Agreement shall be governed by the internal laws of the
State of Illinois. If any provision hereof shall for any reason be held invalid
or unenforceable, it shall not affect the validity or enforceability of any
other provision hereof.
Payee
-----------------------------
General Electric Capital Corporation
By: __________________________
Title: _________________________
continued on next page
<PAGE>
Company agrees to comply with the provisions of this Debt
Subordination Agreement and to make payment on the Subordinated Debt only in
accordance with the subordination.
Borrower
By:
------------------------
Title:
-----------------------
EXHIBIT 16.0
<PAGE>
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT ("Agreement") is made as of the 20th day of
December, 1996, by and among First Community Finance, Inc. ("Pledgor"), a
Virginia corporation, and GENERAL ELECTRIC CAPITAL CORPORATION ("Lender"), a New
York corporation with an office located at 1000 Hart Road, Barrington, Illinois
60010.
WHEREAS, Lender has entered into an Amended and Restated Motor Vehicle
Installment Contract Loan and Security Agreement ("LSA") with The Finance
Company, a Virginia corporation ("Borrower"), dated December 20, 1996, pursuant
to which Lender agreed to provide financing to Borrower; and
WHEREAS, to induce Lender to extend such financial accommodations to
Borrower, Pledgor has executed and delivered to Lender a Guaranty dated December
20, 1996, pursuant to which Pledgor has guarantied the liabilities of Borrower
to Lender, and Pledgor has agreed to secure the guarantied liabilities with
certain collateral described in Section I below;
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and adequate consideration, the receipt and sufficiency of which are
hereby acknowledged, Pledgor agrees with Lender as follows:
I. Pledge To secure (i) Pledgor's obligations under the Guaranty,
(ii) Pledgor's obligations under this Agreement, (iii)
Borrower's obligations under the LSA, and (iv) all other
obligations of Borrower, and all other obligations of Pledgor,
to Lender, (all of the foregoing obligations, including those
now existing and those hereafter arising, are hereinafter
referred to as the
"Secured Obligations"), Pledgor hereby pledges and grants to
Lender a continuing security interest in and to all of the
following property of Pledgor, whether now owned or existing or
hereafter arising or acquired and regardless of where located:
contracts; contract rights; chattel paper; leases; installment sale
contracts; installment loan contracts; payments from chattel
paper obligors; security deposits; cash; contract purchase
discounts; accounts receivables; general intangibles; security
interests; collateral securing chattel paper; rights of Pledgor
related to chattel paper, installment contracts, and collateral
securing chattel paper; documents; instruments; deposit
accounts; electronic funds transfers; equipment; inventory;
payments from account debtor bank accounts; reserve accounts;
insurance policies, and benefits and rights under insurance
policies, which Pledgor is solely or jointly the owner of,
insured under, the lienholder or loss payee under, or the
beneficiary of; and all payments and property of any kind, now
or at any time or times hereafter, in the possession or under
the control of Lender, or a bailee of Lender; accessions to,
substitutions for and all replacements, products and proceeds
of, any of the foregoing property; and books and records
(including, without limitation, financial statements, accounting
records, customer lists, credit files, computer programs,
electronic data, print-outs and other computer materials and
records) of Pledgor pertaining to any of the foregoing property
(all of the foregoing are hereinafter referred to as the
"Collateral").
Pledgor shall execute and deliver such other instruments or documents
as Lender may reasonably request in order to carry out the
purposes of this Agreement. Except as provided in Section III.F.
hereof, Pledgor shall deliver to Lender such other items of
Collateral as are received by Pledgor.
II. Representations and Warranties. Pledgor hereby makes the
following representations and warranties to Lender, each of which shall survive
the execution and delivery of this Agreement:
A. Pledgor has the right and power to enter into and perform this
Agreement and this Agreement is the legal, valid and binding obligation of
Pledgor enforceable against Pledgor in accordance with its terms, subject to the
restrictions, if any, contained in Section 6.1-300 of the Code of Virginia, as
amended.
B. The execution and performance by Pledgor of this Agreement
does not constitute a violation of any applicable law or court order or
constitute a breach of any provision contained in any document to which Pledgor
is a party or by which it is bound.
C. Pledgor is the sole legal and equitable owner of the
Collateral free and clear of all liens, charges, claims encumbrances and
security interests, except those in favor of Lender.
III. Covenants with Respect to Collateral. Pledgor covenants
and agrees with Lender with respect to the Collateral as follows:
A. Pledgor shall pay all taxes, assessments and charges levied,
assessed or imposed upon the Collateral before the same become delinquent or
become liens upon any of the Collateral. Pledgor shall keep the Collateral free
from all interests and liens other than Pledgor's and Lender's, and not allow
the Collateral to become attached or levied upon or seized in connection with
any legal proceedings.
B. Pledgor shall perform all acts and do all things which Lender may
request to evidence, preserve, perfect, or enforce Lender's security interest in
the Collateral. Pledgor shall defend Pledgor's title to the Collateral and
Lender's security interest therein against any claims.
C. Until Lender releases its security interest in the Collateral,
Pledgor shall not transfer to anyone other than Lender any interest in the
Collateral; provided that, at any time prior to a default in the Secured
Obligations, Pledgor may sell the Collateral at fair market value and Lender
will release its security interest in the Collateral if Lender receives all
proceeds of sale, net of any customary sales commissions. Upon receipt of the
proceeds, Lender shall apply the proceeds to the Secured Obligations.
D. In the event that Pledgor fails or refuses to perform the Secured
Obligations, Lender shall have the right, without obligation, to do all things
it deems necessary or advisable to enforce the Secured Obligations, and Pledgor
shall reimburse Lender for all amounts incurred by Lender in furtherance thereof
including without limitation, attorneys' fees. Until Lender is reimbursed, such
amounts shall constitute Secured Obligations and bear interest at the highest
lawful contract rate until paid.
E. Nothing contained herein shall obligate Lender or impose a
duty upon Lender to assume or perform any obligations of Pledgor with respect to
any of the Collateral.
F. For so long as the Secured Obligations are not in default, Pledgor
has the right to receive all consumer payments with respect to the Collateral.
If any of the Secured Obligations are in default, Pledgor's right to receive
payments shall cease, and Lender shall have the sole and exclusive right to
receive and retain the payments. In such event, Pledgor shall pay over to Lender
any payments received by Pledgor with respect to the Collateral, and Lender
shall apply the payments to the Secured Obligations.
G. Pledgor shall provide Lender with copies of all notices it
receives regarding the Collateral.
H. Pledgor shall perform all aspects of servicing, administering,
collecting, liquidating, accounting for and managing the Collateral it
customarily performs in accordance with Pledgor's current practices for contract
administration, which practices are in accordance with applicable law and have
been disclosed to Lender prior to the date hereof.
IV. Remedies. Upon and after the default of a Secured
Obligation, Lender shall have the following rights and remedies:
A. In addition to any rights and remedies contained in this Agreement,
all of the rights and remedies of a secured party under the Uniform Commercial
Code of the State where such rights and remedies are asserted, or under other
applicable law, all of which rights and remedies shall be cumulative, and none
of which shall be exclusive.
B. Pledgor agrees that in the event that notice of disposition of any
Collateral is necessary under applicable law, written notice mailed to Pledgor,
in the manner specified in Section VII G. hereof, at least ten (10) days prior
to the date of the disposition of the Collateral shall constitute commercially
reasonable notice.
V. Appointment of Lender as Pledgor's Lawful Attorney. Pledgor hereby
appoints Lender (and all persons designated by Lender) as Pledgor's true and
lawful attorney to, without notice to Pledgor, in Pledgor's or Lender's name:
(i) do all acts and things necessary, in Lender's discretion, to fulfill
Pledgor's obligations under this Agreement; and (ii) endorse the name of Pledgor
upon any forms of payment or transfer documents consisting of or related to the
Collateral. Such power of attorney shall be deemed coupled with an interest and
shall be irrevocable.
VI. Termination. Pledgor acknowledges and agrees that this
Agreement shall continue in full force and effect until all of the Secured
Obligations have been fully performed and the LSA has been terminated. Upon
termination of this Agreement, Lender, at Pledgor's expense, shall return to
Pledgor all Collateral then in Lender's possession.
VII. Miscellaneous.
A. Modification of Agreement; Sale of Interest. This Agreement may not
be modified or amended except by an agreement in writing signed by Pledgor and
Lender. Pledgor shall not sell, assign or transfer this Agreement or any portion
thereof, including, without limitation, Pledgor's rights, interests, remedies,
powers, and/or duties hereunder. Pledgor hereby consents to Lender's
participation, sale, assignment, or other transfer of this Agreement or of any
portion hereof, including, without limitation, Lender's rights, interests,
remedies, powers, and/or duties hereunder.
B. Expenses and Taxes. If any taxes shall be payable on
account of the execution or performance of this Agreement or the Collateral,
Pledgor shall pay all such taxes.
C. Waiver by Lender. Lender's failure, at any time or times hereafter,
to require strict performance by Pledgor of any provision of this Agreement
shall not waive, impair or diminish any right of Lender thereafter to demand
strict compliance and performance therewith. Any suspension or waiver by Lender
of a default by Pledgor under this Agreement shall not suspend, waive or affect
any other default by Pledgor under this Agreement, whether the same is prior or
subsequent thereto and whether of the same or of a different type. None of the
undertakings, agreements, warranties, covenants and representations of Pledgor
contained in this Agreement and no event of default by the Pledgor under this
Agreement shall be deemed to have been suspended or waived by Lender, unless
such suspension or waiver is in a writing specifying the suspension or waiver
and the writing is signed by a duly authorized representative of Lender and
directed to Pledgor.
D. Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
E. Parties. This Agreement shall be binding upon and inure
to the benefit of the heirs of Pledgor and the permitted successors and assigns
of Pledgor and Lender.
F. Waivers by Pledgor. Except as otherwise provided for in this
Agreement, Pledgor waives (i) presentment, demand and protest, and notice of
presentment, dishonor, protest, default, nonpayment, maturity, release,
compromise, settlement, extension or renewal of the Secured Obligations; (ii)
any bond or security which might be required by any court prior to allowing
Lender to exercise any Lender's remedies; and (iii) the benefit of all
valuation, appraisement and exemption laws.
G. Liability of Pledgor. The liability of Pledgor hereunder is direct
and unconditional and may be enforced without requiring Lender first to resort
to any right or remedy Lender has as to Borrower or any third parties with
regard to Borrower's obligations to Lender or to foreclose or exhaust any
security therefor. Pledgor shall not have any right of subrogation,
reimbursement or indemnity whatsoever, nor any right to security for the
obligations of Borrower to Lender unless and until the indefeasible and
nonavoidable payment in full of all said obligations. Pledgor has made an
independent investigation of the financial condition and affairs of Borrower
prior to entering into this Agreement and has not relied upon any representation
made by Lender as to the financial condition, operation or creditworthiness of
Borrower. Pledgor further agrees that Lender shall have no duty or
responsibility now or hereafter to make any investigation or appraisal of
Borrower, or the security for Borrower's obligations to Lender, on behalf of
Pledgor or to provide Pledgor with any information which may come to Lender's
attention now or hereafter, whether or not such information could materially
increase the risk of Pledgor hereunder. Notice of any default by Borrower, and
of any adverse change in Borrower's financial condition or of any other fact
which might materially increase the risk of Pledgor hereunder is hereby waived.
Pledgor authorizes Lender without notice or demand and without affecting the
obligations of Pledgor hereunder, with respect to any obligation of Borrower to
Lender, to extend the time of payment or waive strict compliance of any other
term thereof, to renew or otherwise modify the terms thereof, to waive or
release any security therefor, to release Pledgor or other party liable
therefor, and to enter or grant any settlement, release, compromise,
composition, account stated or agreed balance with or to Borrower or any third
party, and Pledgor agrees that the foregoing actions shall not diminish
Pledgor's obligations hereunder.
H. Notice. Except as otherwise provided herein, a notice
required hereunder shall be in writing, and shall be deemed to have been validly
given and received on the date of delivery if sent to:
a. If to Lender, at: General Electric Capital Corporation
1000 Hart Road, Suite 300
Barrington, Illinois 60010
Attention: Manager, Asset Based
Financing
with a copy to: General Electric Capital Corporation
600 Hart Road
Barrington, Illinois 60010
Attention: Counsel Auto Financial
Services
b. If to Pledgor, at: First Community Finance, Inc.
71 South Airport Drive
Highland Springs, Virginia 23075
or to such other address as each party may designate for itself by like notice.
Notices may be delivered by telegram, facsimile transmission, certified mail
return receipt requested, or a commercial delivery service.
J. Governing Law. THIS AGREEMENT HAS BEEN SUBMITTED TO
LENDER AT ITS OFFICE IN BARRINGTON, ILLINOIS. THIS AGREEMENT SHALL BE
INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN
ACCORDANCE WITH VIRGINIA LAW.
K. Indemnity. Pledgor shall indemnify Lender against all
expenses and losses incurred by Lender to third parties, and all claims made
against Lender by third parties, based on the execution of this Agreement, the
pledge of the Collateral, Pledgor's performance of this Agreement, or Lender's
lawful exercise of its rights under this Agreement.
L. Disputes and Defaults. In the event of either a dispute regarding
the terms of this Agreement or a default of this Agreement by either party which
is not resolved to the satisfaction of the parties, the sole and exclusive right
of each party shall be to commence an arbitration proceeding in Chicago pursuant
to the rules of the American Arbitration Association. The only damages each
party may recover against the other are the actual and direct damages for a
breach of contract. Neither party can recover from the other any consequential,
special, punitive, incidental or indirect damages, including without limitation
loss of profit or goodwill. Both parties WAIVE A TRIAL BY JURY in any action
between them related to this Agreement.
M. Inspection and Access.
a. Lender and its agents shall have the right, at any time, (i) during
usual business hours, to inspect the Collateral and the premises upon which any
of the Collateral is located; (ii) during usual business hours, to inspect,
audit and make copies or extracts from any Pledgor's records, computer systems,
files, and books of account; (iii) during usual business hours, to monitor
Pledgor's performance of its obligations with respect to this Agreement; and
(iv) to verify, in Lender's name or in the name of Pledgor, the validity,
amount, quality, quantity, value and condition of, or any other matter relating
to, the Collateral including but not limited to verifying contract information.
Pledgor shall, upon Lender's request from time to time, instruct its vendors,
banking and other financial institutions and its accountants to make available
to Lender and discuss with Lender such information and records as Lender may
request. Pledgor authorizes Lender, without request, to provide to a credit
reporting agency information about the Collateral and Pledgor's performance of
this Agreement. If Pledgor maintains or stores any data with respect to
Collateral on a computer data system, Pledgor shall upon request of Lender
provide Lender with (a) on-line access to such computer data system or (b)
deliver to Lender duplicate copies of the requested data in machine readable
form acceptable to Lender along with a printout or other hard copy of such data.
Pledgor shall, on request of Lender, provide to Lender (at the location
designated by Lender) the appropriate files.
b. Certain of the Collateral consists of instruments, contracts,
chattel paper, documents and similar evidences of loans, advances, or other
extensions of credit by Pledgor (collectively, the "Finance Collateral"). On or
prior to January 3, 1997, Pledgor shall collect and securely deposit (and shall
thereafter collect and securely deposit) (i) all Finance Collateral originated
in the State of North Carolina at one of Pledgor's offices located within such
State, and (ii) all Finance Collateral originated in the Commonwealth of
Virginia (or otherwise than in North Carolina) at one of Pledgor's offices
located within such Commonwealth, such two offices and the conditions of such
collection and deposit to be approved by the Lender in its reasonable
discretion. Pledgor shall transfer possession to Lender of such Finance
Collateral at such two locations, and such Finance Collateral shall be
maintained in accordance with separate custodial agreements (the "Custodial
Agreements") between the Lender, the Pledgor and certain employees of Pledgor
who shall, pursuant to the Custodial Agreements, act as Lender's agents in the
holding, monitoring, maintenance, and securing of such Finance Collateral. On or
prior to January 3, 1997, Pledgor and two of its employees (acceptable to Lender
in its reasonable discretion) at each of the Finance Collateral collection
sites, shall have executed and delivered the respective Custodial Agreements,
which shall contain usual and customary terms acceptable to the parties thereto
in the respective reasonable discretion of each.
c. On or after February 1, 1997, the Lender, in its sole discretion,
may remove the Finance Collateral from the sites described in Section VII M.b.
above and place such Finance Collateral under the care of a bank trust
department(s) or similar agent(s) of the Lender located in North Carolina and
Virginia, chosen by Lender and approved by Pledgor (such approval to not be
unreasonably withheld), and such agent(s), Lender and Pledgor shall enter into a
new Custodial Agreement or Agreements containing usual and customary terms
acceptable to the parties thereto in the respective reasonable discretion of
each. From and after such removal, Pledgor shall collect and deposit all Finance
Collateral with such new agent(s) of Lender.
N. Location of Collateral. Throughout the term of this Agreement, any
of the Collateral (the "Virginia Collateral") subject to restrictions on
hypothecation, removal from the Commonwealth of Virginia and examination by the
Virginia State Corporation Commission (the "SCC") under the Virginia Consumer
Finance Act, Virginia Code Section 6.1-244, et seq., as it may be amended, and
any successor or similar statute (the "Virginia Act"), shall not be removed
outside the Commonwealth of Virginia. Likewise, any of the Collateral subject to
any requirements of North Carolina law similar to the Virginia Act ("N.C. Law")
relating to Collateral (the "N.C. Collateral") originated or located in North
Carolina, shall not be removed from the State of North Carolina and shall be
treated hereunder in compliance with N.C. Law. In the event of an exercise of
any right or remedy under this Agreement, Lender or a third party shall not
enter into a sale or other disposition of any of the Virginia Collateral which
would result in the Virginia Collateral leaving the Commonwealth of Virginia,
and shall likewise not enter into a sale or other disposition of the N.C.
Collateral which would result in the N.C. Collateral leaving the State of North
Carolina.
Pledgor agrees to permit the SCC or its duly authorized
representatives, and the North Carolina Secretary of State, or other
governmental officials or representatives thereof authorized under N.C.
Law, access to the Collateral for purposes of examination.
IN WITNESS WHEREOF, this Agreement has been duly executed under seal
by Pledgor as of December 20, 1996.
Pledgor: First Community Finance, Inc.
By:
-----------------------------------
Title:
----------------------------------
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[SEAL]
[EXECUTION ORIGINAL]
AMENDMENT NO. 1
This AMENDMENT NO. 1 (this "Amendment"), dated as of April 4, 1997,
is made by and between THE Finance Company, a Virginia corporation ("Borrower"),
and General Electric Capital Corporation, a New York corporation ("Lender").
RECITALS:
A. Borrower and Lender are parties to an Amended and Restated Motor
Vehicle Installment Contract Loan and Security Agreement, dated as of December
20, 1996 (the "Agreement"), which Agreement restated and amended that certain
Loan and Security Agreement, dated September 24, 1992, as amended.
B. Borrower is currently in default under the Agreement, and with
respect to loans from other creditors of Borrower, including NationsBank, N.A.
("NationsBank"), and Lender has agreed to substantially pay off the loans from
Nationsbank to restructure the loans from Lender under the Agreement (the "Loan
Restructure").
C. Borrower and Lender desire to amend the Agreement in
order to, among other things, amend certain covenants contained therein, all on
the terms and conditions set forth in this Amendment.
D. It is the intent of Borrower and Lender that the execution and
delivery of this Amendment shall not effect a novation of the indebtedness
outstanding under the Agreement, but rather, shall constitute the substitution
of certain of the terms and conditions governing payment and performance under
the Agreement, and, except as expressly modified by this Amendment, the
Agreement shall continue, unchanged, in full force and effect.
AGREEMENT:
NOW THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the parties hereto,
Borrower and Lender agree as follows:
1. DEFINITIONS. Terms used but not defined herein, and
which are defined in the Agreement, shall have for the purposes hereof the
respective meanings set forth in the Agreement.
2. LOAN STATUS. Borrower represents, warrants and agrees
as of the date hereof, that:
(a) as stated in the Lender Interest, Line
Balance and Availability Report dated April 1, 1997, the amount of the
outstanding balance of loans under the Agreement as of such date was
$74,088,989.58;
(b) the Loan and the other Indebtedness are
secured by a security interest granted by Borrower to Lender pursuant to the
Agreement in the Collateral, which Collateral includes without limitation, all
of Borrower's chattel paper including the NationsBank Collateral (as hereinafter
defined) which secures the NationsBank Loan (as hereinafter defined);
(c) Borrower has good and marketable ownership
of the Collateral, and the Collateral is free and clear of all liens, claims,
charges, defenses, counterclaims, offsets, encumbrances and security interests
of any kind or nature, except the Permitted Liens;
(d) Borrower has breached, and is in default
under, the Agreement as described in Schedule 2(d) hereto (the "Acknowledged
Defaults"), and Lender has the right to pursue its remedies under the Agreement
upon an Event of Default and a Pre-Default Event, including the right to declare
all of the Indebtedness immediately due and payable; and
(e) there are, and Borrower has, no claims,
defenses or offsets to the payment and performance of the terms and conditions
of the Agreement.
3. PAYOFF OF NATIONSBANK LOAN.
(a) Borrower represents and warrants to Lender
that:
(i) Borrower has a loan or loans
from NationsBank pursuant to certain Loan and Security Agreements dated as of
December 23, 1994 and August 16, 1995, respectively (together, the "NationsBank
Loan");
(ii) the total balance of all amounts
due under or with respect to the NationsBank Loan on the date hereof is
$13,600,892.36 (the "NationsBank Payoff") as set forth in the payoff letter from
NationsBank, a copy of which is attached hereto as Exhibit 3(a)(ii);
(iii) other than as described in
Exhibit 3(a)(vi), the NationsBank Loan is the only obligation for borrowed money
or otherwise owed by Borrower to NationsBank, and there are no other obligations
of Borrower to NationsBank other than the NationsBank Loan;
(iv) the NationsBank Loan is secured
by certain chattel paper described in Schedule 3.3(a)(iv) attached hereto (the
"NationsBank Collateral");
(v) Borrower has good and marketable
ownership of the NationsBank Collateral, and the NationsBank Collateral is free
and clear of all liens, claims, charges, defenses, counterclaims, offsets,
encumbrances and security interests of any kind or nature, except for the
security interest of NationsBank and any Permitted Lien;
(vi) NationsBank has agreed with
Borrower to accept, as payment in full for the NationsBank Loan, a cash payment
equal to the NationsBank Payoff less $400,000 (the "NationsBank Cash Payoff")
and an unsecured promissory note, in the form attached hereto as Exhibit
3(a)(vi) in the amount of $400,000, payable by Borrower to NationsBank (the
"NationsBank Note"), on the terms and as described in the NationsBank Note;
(vii) NationsBank has agreed, pursuant
to a certain letter attached hereto as Exhibit 3(a)(ii), upon the payment of the
NationsBank Cash Payoff to NationsBank by the Lender, to terminate any lien or
security interest it may have in the NationsBank Collateral or any other
collateral (if any), to deliver the NationsBank Collateral to the possession of
Lender, and to cooperate with the Lender in the Lender acquiring a perfected
first priority security interest in the NationsBank Collateral; and
(viii) the NationsBank Note shall be
unsecured, and shall not be subject to or have the benefit of, any lien or
security interest of NationsBank with respect to the NationsBank Collateral or
the Collateral.
(b) Lender agrees, pursuant to the terms and
upon the effectiveness hereof, to pay to NationsBank the NationsBank Cash Payoff
as an Advance under the Agreement, which Advance shall be subject to the terms
and conditions of the Agreement.
(c) Borrower represents, warrants and agrees
that upon the termination by NationsBank of its security interest in the
NationsBank Collateral upon the payment by Lender of the NationsBank Cash
Payoff, Lender shall have a perfected first priority security interest in the
NationsBank Collateral, and the NationsBank Collateral is Collateral, subject to
all of the terms and conditions of the Agreement and the rights of Lender
thereunder.
(d) Borrower hereby represents, warrants and
agrees that:
(i) it has heretofore granted a lien
and security interest in the Collateral (including the NationsBank Collateral),
which lien and security interest is hereby ratified and confirmed in all
respects and for all purposes and shall continue to secure the performance and
payment of the Indebtedness and all of Borrower's existing and future
obligations to Lender whether arising under or related to the Agreement or
otherwise ("Lender's Existing Security Interest");
(ii) to secure the performance and
payment of the Indebtedness and all of Borrower's existing and future
obligations to Lender whether arising under or related to the Agreement or
otherwise, Borrower hereby grants to Lender a continuing security interest in
and to all of the following property of Borrower, whether now owned or existing
or hereafter arising or acquired and regardless of where located:
Contracts; Contract Debtor
Documents; Contract Rights; payment from Contract Debtor bank
accounts; chattel paper; leases; installment sale contracts;
installment loan contracts; payment from chattel paper obligors;
security deposits; Motor Vehicles (including but not limited to cars
and trucks); certificates of title; contract purchase discounts;
accounts; general intangibles; security interests; collateral
securing chattel paper; dealer agreements; dealer reserves and rate
participation (to the extent that Borrower has an assignable
interest therein); rights of Borrower related to chattel paper,
installment contracts, motor vehicles, and collateral securing
chattel paper; documents; instruments; deposit accounts; electronic
funds transfers; equipment; inventory; parts and accessories for
motor vehicles; payment from account debtor bank accounts; reserve
accounts; insurance policies, and benefits and rights under
insurance policies, which Borrower is solely or jointly the owner
of, insured under, the lienholder or loss payee under, or the
beneficiary of; and all payments and property of any kind, now or at
any time or times hereafter, in the possession or under the control
of Lender, or a bailee of Lender;
accessions to, substitutions for
and all replacements, products and proceeds of, any of the foregoing
property; and
books and records (including,
without limitation, financial statements, accounting records,
customer lists, credit files, computer programs, electronic data,
print-outs and other computer materials and records) of Borrower
pertaining to any of the foregoing property; and
(iii) the foregoing grant of a
security interest is in addition to, and not in substitution of, Lender's
Existing Security Interest described in subsection (i) above, and shall not
modify or affect Lender's Existing Security Interest or the validity or
enforceability thereof.
4. RESTRUCTURING FEE. As consideration for Lender entering
into this Amendment, Borrower shall pay to Lender upon the effectiveness hereof
a restructuring fee in the amount of $150,000.
5. EXPENSES. Borrower shall be responsible for all reasonable costs
and expenses, including without limitation, those of legal counsel of Lender,
relating to this Amendment, the Agreement, and/or the transactions described or
contemplated herein or therein. Borrower shall pay to Lender all such costs and
expenses immediately upon demand by Lender.
6. WAIVER. Lender hereby agrees that this Amendment shall effect
(upon the effectiveness hereof), a waiver of the Acknowledged Defaults. The
Lender's waiver is limited solely to such Acknowledged Defaults, and shall not
suspend, waive or affect any other Event of Default, Pre-Default Event, default
or breach of, any of the Loan Documents, whether the same is prior or subsequent
thereto or whether of the same or a different type.
7. WARRANTS AND REGISTRATION RIGHTS. As additional
consideration for Lender to enter into this Amendment, and as a condition to the
effectiveness hereof, concurrently herewith: (a) TFCEI issues to Lender, and
Lender accepts, a certain Warrant (No. 2) to Purchase Common Stock of even date
herewith in the form attached hereto as Exhibit 6(a) ("Warrant No. 2"), (b)
TFCEI and Lender enter into a certain Allonge to Warrant to Purchase Common
Stock of even date herewith in the form attached hereto as Exhibit 6(b) (the
"Warrant Allonge"), which Warrant Allonge, among other things, amends the
Warrant to Purchase Common Stock, dated December 20, 1996 (as amended by the
Warrant Allonge, the "Warrant"), by decreasing the exercise price and increasing
its term; and (c) TFCEI and Lender enter into a certain Amended and Restated
Registration Rights Agreement of even date herewith in the form attached hereto
as Exhibit 6(c) (the "Restated Registration Rights Agreement"), which, among
other things, grants certain rights to Lender for registration of the shares of
the common stock of TFCEI purchasable under the Warrant and Warrant No. 2.
8. TAX REFUND. As additional consideration for Lender to enter into
this Amendment, and as a condition to the effectiveness hereof, concurrently
herewith Borrower and each of the Guarantors enters into a certain Security
Agreement of even date herewith in the form attached hereto as Exhibit 8 (the
"Refund Security Agreement"), whereby Borrower and each of the Guarantors
pledges to Lender as security for the Indebtedness and their respective
obligations under the Guaranties, and other obligations of Borrower or the
Guarantors to Lender, federal income tax refunds due to such parties, and
provides for the payment to Lender of one such tax refund described therein (the
"Tax Refund"), at which time the security interest in such federal tax refunds
will automatically terminate.
9. PLEDGE OF FCF STOCK. As additional consideration for Lender to
enter into this Amendment, and as a condition to the effectiveness hereof,
concurrently herewith TFCEI enters into a certain Securities Pledge Agreement of
even date herewith in the form attached hereto as Exhibit 9 (the "Stock
Pledge"), whereby TFCEI pledges to the Lender, as security for the Indebtedness,
TFCEI's obligations under the Guaranties to which it is a party, and other
obligations of Borrower or TFCEI to Lender, all of the issued and outstanding
capital stock of FCF (the "FCF Stock").
10. RELEASE OF FCF COLLATERAL AND FCF STOCK.
(a) Borrower represents and warrants to Lender
that FCF intends to enter into and consummate a certain loan transaction with
Hibernia Bank (the "Hibernia Financing") pursuant to a certain commitment letter
attached hereto as Exhibit 10 (the "Hibernia Commitment").
(b) Upon the funding of the Hibernia Financing
(the "Hibernia Funding"), Lender will receive a payment on the Loan of SEVEN
MILLION DOLLARS ($7,000,000). It is anticipated by the parties that the Hibernia
Financing will close and that the Hibernia Funding will occur, not later than
April 30, 1997 (the "Deadline").
(c) Should (i) the Hibernia Funding occur on or
before the Deadline, or (ii) if the Hibernia Funding does not occur by the
Deadline, then upon the closing and funding by FCF of a credit facility
substantially identical to the Hibernia Financing (including, but not limited
to, loan structure, loan amount, collateral, guaranties, repayment terms and
advance rates) in which the Borrower would receive payment on the Loan in an
amount not materially less than $7,000,000, then Lender, pursuant to the Stock
Pledge, shall:
(i) release its security interest in
the FCF Stock subject to the Stock Pledge;
(ii) release FCF from its obligations
under the Guaranties to which it is a party; and
(iii) release the FCF Collateral
subject to the FCF Pledge Agreement.
(d) Upon Lender's release of the FCF Collateral,
Lender agrees to eliminate the covenants pertaining to FCF as it relates to
Section 13.6 and Exhibit 13.6 of the Agreement.
(e) In the Stock Pledge, TFCEI has agreed, upon
any failure of FCF to consummate the Hibernia Financing, to exercise its good
faith best efforts to obtain additional funding for itself and/or its
subsidiaries in amounts equal to those set forth in the financial projections
delivered to Lender in contemplation of this Amendment (and on which projections
Lender has relied) in order to improve and maintain the financial health of
Borrower and TFCEI.
11. LOCKBOX.
(a) On or before April 30, 1997, all Depository
Accounts, and any other accounts through which Borrower receives allotment
payments and other electronic payments, shall be placed in the name of Lender.
(b) Pursuant to the amendment to Section 4.1 of
the Agreement contained in this Amendment, Borrower shall, on or before May 30,
1997, establish a Lockbox for the receipt of Remittances on terms and with a
bank acceptable to Lender.
12. AMENDMENTS TO THE AGREEMENT. The Agreement is amended
as follows:
(a) Section 4.1 is amended by replacing it with
the following:
Section 4.1. CONTRACT PAYMENTS. Borrower
shall direct all Contract Debtors other than those administered by Third Party
Servicers for Pledged Contracts, and all other Persons (including Contract
Rights Payors) who make payments to Borrower relating to Pledged Contracts, to
make, when paying by mail, all payments directly to the Post Office Box or Third
Party Servicers (with respect to Contract Debtors administered by Third Party
Servicers for Pledged Contracts); provided, however, that beginning on May 30,
1997, Borrower shall direct all Contract Debtors other than those administered
by Third Party Servicers for Pledged Contracts, and all other Persons (including
Contract Rights Payors) who make payments to Borrower relating to Pledged
Contracts, to make, when paying by mail, all payments directly to the Lockbox or
Third Party Servicers (with respect to Contract Debtors administered by Third
Party Servicers for Pledged Contracts). In the event Borrower receives any
Remittances, Borrower shall, as soon as possible but no later than the third
(3rd) Business Day following receipt, deposit the Remittances in kind in the
Depository Account. Borrower shall hold Remittances in trust for Lender until
delivery to Lender or deposit in the Depository Account. Borrower shall pay all
expenses associated with the Post Office Box or the Lockbox.
(b) Section 5.0 is amended by replacing it with
the following:
Section 5.0. LENDER ADMINISTRATION. Lender
shall have no liability to Borrower with respect to Remittances received by
Lender, the Post Office Box, the Lockbox, or the Depository Account, other than
to:
(i) apply the
Remittances to the Indebtedness as required by this
Agreement,
(ii) in the event
Remittances are directly received by Lender, Lender
shall provide or cause to be provided to Borrower, a
report of Remittances received by the Post Office Box,
as applicable,
(iii) upon termination of
this Agreement and Borrower's satisfaction of all of its
obligations under this Agreement, during the
effectiveness of the Post Office Box, to assign the Post
Office Box and its contents to Borrower, and
(iv) ensure that there is
a provision in Lender's Agreement with the Lockbox bank
which requires the bank to provide Borrower with a
report of Remittances received by the Lockbox which
itemizes the Remittances by Contract to the extent the
Remittances contain sufficient identifying information.
Lender shall have no
liability to Borrower with respect to any interest or
other earnings which are earned, or could have been
earned, on the Remittances while they are in the Post
Office Box, the Lockbox, the Depository Account, or
otherwise.
(c) Section 6.5 is amended by replacing the last
sentence thereof with the following:
As long as there is a Pre-Default Event, and
after an Event of Default has occurred, all costs, fees and expenses
thereafter incurred by Lender, or for which Lender becomes obligated, in
connection with exercising any of the foregoing powers shall be payable to
Lender by Borrower on demand by Lender and until paid shall be part of the Loan.
(d) Section 6.11 is amended by replacing it with
the following:
SECTION 6.11 FIRST COMMUNITY
FINANCE RECEIVABLES: Borrower agrees that FCF shall pledge its interest in
consumer loan receivables (the "FCF Collateral") to Lender, as collateral for
FCF's Guaranty and the Indebtedness. Such assignment and pledge shall be
documented as set forth in Exhibit 17. The FCF Collateral will not be included
for purposes of calculating the Borrowing Base.
(e) Section 13.6 of the Agreement is amended by
deleting Exhibit 13.6 in its entirety and replacing it with Exhibit 13.6 to this
Amendment.
(f) Section 13.6 is amended by substituting the
following for the first sentence thereof:
Borrower (on a consolidated
basis), FCF and TFCEI (on a consolidated basis) shall maintain the financial and
portfolio covenants listed on Exhibit 13.6.
(g) Section 15.0(B) is amended by replacing it
with the following:
(B) A breach by a Guarantor or an Affiliate
of any representation, warranty or obligation contained in a Guaranty or any
other agreement with Lender (whether or not such agreement is a Loan Document),
including but not limited to the Warrant, Warrant No. 2, the Restated
Registration Rights Agreement, the FCF Pledge Agreement, the Stock Pledge, and
the Refund Security Agreement.
(h) Section 16.0 of the Agreement is amended by:
(i) Adding the following definition
after the definition of "Affiliate":
AMENDMENT NO. 1: That certain
Amendment No. 1 dated as of April 4, 1997 by and between Borrower and Lender,
which amended the Amended and Restated Motor Vehicle Installment Contract Loan
and Security Agreement by and between Borrower and Lender dated December 20,
1996.
(ii) Replacing the definition of
"Available Line" with the following:
AVAILABLE LINE: One Hundred Ten Million Dollars ($110,000,000).
(iii) Replacing the definition of
"Borrowing Base" with the following:
BORROWING BASE: the amount
equal to the lesser of (i) the Available Line or (ii) the sum of (a) fifty
percent (50%) of the Outstanding Principal Balance of all Contracts which are
Credit Builder's Contracts and (b) eighty-three percent (83%) of the Outstanding
Principal Balance of all other Eligible Contracts during the time they are
included in the Borrowing Base pursuant to Section 3.1; provided, however, that,
automatically and without further notice or writing: (1) the advance against all
other Eligible Contracts shall be reduced by three percent (3%) upon the earlier
to occur of (i) the Hibernia Funding or (ii) July 1, 1997, (2) the advance
against all other Eligible Contracts shall be reduced by four percent (4%) upon
the receipt by TFCEI (and/or the other Guarantors or Borrower) of the Tax
Refund, and (3) in the event the Tax Refund is not received by TFCEI (and/or the
other Guarantors or the Borrower) by July 1, 1997, then the advance against all
other Eligible Contracts shall be reduced beginning July 1, 1997 by equal
monthly percentages so that the advance against all other Eligible Contracts
shall not exceed seventy-six percent (76%) upon the last such percentage
reduction on December 1, 1997; and provided further, that if TFCEI (and/or the
other Guarantors or Borrowers) receive the Tax Refund at any time after July 1,
1997 and before December 1, 1997, then the maximum percentage reduction in the
advance rate attributable to the Tax Refund (including any monthly percentage
reductions that may occur beginning July 1, 1997) shall be four percent (4%).
Notwithstanding the foregoing, the advance against all other Eligible Contracts
set forth in (b) above shall in no event: (x) exceed eighty percent (80%) after
July 1, 1997, (y) exceed seventy-six percent (76%) after December 1, 1997, or
(z) be reduced solely by operation of (b) 1, 2 and/or 3 above below seventy-six
percent (76%).
(iv) Adding the following definition
after the definition of "Event of Default":
FCF: First Community Finance, Inc., a Virginia corporation.
(v) Adding the following definition
after the definition of "FCF":
FCF PLEDGE AGREEMENT: That
certain Pledge Agreement by and between FCF and Lender dated December 20, 1996,
as amended by that certain Amendment and Confirmation of Pledge Agreement
between such parties, dated April 4, 1992.
(vi) Adding the following definition
after the definition of "Gross Outstanding Balance":
GUARANTIES: Collectively, that
certain: (i) Guaranty of TFCEI dated December 20, 1996, (ii) Guaranty of TFCEI
of even date with Amendment No. 1, (iii) Guaranty of FCF dated December 20,
1996, (iv) Guaranty of FCF of even date with Amendment No. 1, (v) Guaranty of
TIA dated December 20, 1996, and (vi) Guaranty of TIA of even date with
Amendment No. 1, all made by such respective Guarantors in favor of Lender.
(vii) Adding the following definition
after the definition of "Guarantors":
HIBERNIA FINANCING: This term
has the meaning provided in
Section 10(a) of this Amendment
No. 1.
(viii) Adding the following definition
after the definition of "Hibernia Financing":
HIBERNIA FUNDING: This term has
the meaning provided in Section
10(b) of this Amendment No. 1.
(ix) Replacing the definition of
"Interest Coverage" with the following:
INTEREST COVERAGE: the sum of
Borrower's year-to-date pre-tax income plus Borrower's year-to-date interest
expense, compared to Borrower's year-to-date interest expense, expressed as a
ratio each Accounting Period. For the purposes of calculating Interest Coverage,
any interest expense associated with the Warrant and Warrant No. 2 granted to
Lender shall be added to pre-tax income and not included in interest expense.
(x) Replacing the definition of
"Line Fee" with the following:
LINE FEE: the fee payable
annually by Borrower to Lender. Lender acknowledges receipt of the Line Fee for
calendar year 1997. For the period of calendar year 1998, the Line Fee shall be
equal to forty one-hundredths of one percent (.40%) of the Available Line.
(xi) Replacing the definition of
"Loan Documents" with the following:
LOAN DOCUMENTS: this Agreement,
the Guaranties, the Supplemental Documents, and any and all promissory notes,
security agreements, assignments, subordination agreements, pledge or
hypothecation agreements, mortgages, deeds of trust, leases, contracts and other
instruments and documents now and/or hereafter existing between Lender and
Borrower or any of the Guarantors or Affiliates of the Borrower and/or the
Guarantors, executed and/or delivered pursuant to or in conjunction with this
Agreement, securing or in any other manner relating to any of the Indebtedness.
(xii) Adding the following definition
after the definition of "Loan Documents":
LOCKBOX: The arrangement
established by Lender at a bank designated by Lender for the receipt and
identification of Remittances.
(xiii) Replacing the definition of
"Permitted Lien" with the following:
PERMITTED LIEN: (i) any
security interest or lien at any time granted in favor of Lender; (ii) liens
securing claims of materialmen, mechanics, carriers, warehousemen, landlords and
other similar Persons for labor, materials, supplies or rentals incurred in the
ordinary course of Borrower's business; and (iii) liens resulting from deposits
made in the ordinary course of business in connection with worker's
compensation, unemployment insurance, social security and other similar laws.
(xiv) Adding the following definition
after the definition of "Recoveries":
REFUND SECURITY AGREEMENT: This
term has the meaning provided in Section 8 of Amendment No. 1.
(xv) Adding the following definition
after the definition of "Reserve Requirement":
RESTATED REGISTRATION RIGHTS
AGREEMENT: This term has the meaning provided in Section 6 of Amendment No. 1.
(xvi) Adding the following definition
after the definition of "Statement of Borrowing Base":
STOCK PLEDGE: This term has the
meaning provided in Section 9 of
Amendment No. 1.
(xvii) Adding the following definition
after the definition of "Supplemental Documents ":
TAX REFUND: This term has the
meaning provided in Section 8 of this Amendment No. 1.
(xviii) Adding the following definition
after the definition of "Tax Refund":
TFC: The Finance Company, a Virginia corporation, or Borrower.
(xix) Adding the following definition
after the definition of "TFC":
TFCEI: TFC Enterprises, Inc., a
Delaware corporation.
(xx) Adding the following definition
after the definition of "Third Party Servicer":
TIA: The Insurance Agency, Inc.,
a Virginia corporation.
(xxi) Adding the following definition
after the definition of "VSI Insurance":
WARRANT: This term has the
meaning provided in Section 7 of Amendment No. 1.
(xxii) Adding the following definition
after the definition of "Warrant":
WARRANT ALLONGE: This term has
the meaning provided in Section 7 of Amendment No. 1.
(xxiii) Adding the following definition
after the definition of "Warrant Allonge":
WARRANT NO. 2: This term has
the meaning provided in Section 7 of Amendment No. 1.
(i) Section 2.5 is amended by deleting it in its
entirety.
(j) Article III is amended by adding a new
Section 3.4 as follows:
SECTION 3.4 MINIMUM BALANCE: If the balance of the Loan
drops below $50,000,000 at any time without Lender's prior written consent
during the term of this Agreement, Lender's obligation to make and Borrower's
right to receive Advances hereunder shall (automatically and without notice or
writing) cease within thirty (30) days after the date of such event; and
thereafter, Lender shall have no further obligation to make Advances or any
other extension of credit under this Agreement. Upon such event of the Loan
dropping below $50,000,000, Lender and Borrower shall enter into good faith
negotiations to re-evaluate the credit arrangement under this Agreement.
13. CONDITIONS PRECEDENT TO EFFECTIVENESS OF AMENDMENT. The
effectiveness of this Amendment, and the obligations of the Lender hereunder,
are subject to the condition precedent that the Lender shall have received each
of the following, in form and substance satisfactory to the Lender and its
counsel:
(a) Warrant Allonge, executed by TFCEI.
(b) Warrant No. 2, executed by TFCEI.
(c) Refund Security Agreement, executed by
Borrower and all Guarantors.
(d) Stock Pledge, executed by TFCEI, and stock
certificate(s) for FCF Shares, accompanied by duly executed stock powers.
(e) Financing Statements. UCC Financing
Statements with respect to the Collateral (including the NationsBank Collateral)
and the Refund Collateral (as defined in the Refund Security Agreement) shall
have been filed in all appropriate jurisdictions and shall be effective to grant
the Lender a first priority security interest therein at such time as UCC
termination statements releasing NationsBank's security interest are properly
filed in all required jurisdictions.
(f) Evidence of Corporate Existence and
Authority. All documents which Lender may reasonably request relating to the
existence of Borrower, and the Guarantors, and the corporate power of each to
execute, deliver and perform the Amendment and other documents related to the
Loan Restructure (together, the "Transaction Documents") and the validity
thereof, including, but not limited to, a certificate from the appropriate
official of any state in which any is incorporated or is qualified to do
business.
(g) Officer's Certificates. Separate
certificates (dated as of the date of this Amendment) of an appropriate officer
of each of Borrower and the Guarantors certifying:
(i) as to the names and true
signatures of the officers of each authorized to sign the Transaction Documents;
(ii) that, as of the date of this
Amendment and since the closing of the Agreement on December 20, 1996 (the
"Closing"), its Bylaws have not been amended, or, in the alternative, that a
true and correct copy of the same is attached to the officer's certificate as an
exhibit;
(iii) that, as of the date of this
Amendment and since the Closing, its Articles or Certificate of Incorporation
(whichever applicable) have not been amended, or, in the alternative, that a
true and correct copy of the same is attached to the officer's certificate as an
exhibit;
(iv) copies of all corporate action
taken by it (which copies shall be attached to the officer's certificate as an
exhibit), including resolutions of the board of directors authorizing the
execution, delivery, and performance of the Transaction Documents; and
(v) such other matters as Lender may
reasonably request.
(h) Opinion of Counsel for the Borrower. A
favorable opinion of counsel for Borrower, in form and substance satisfactory to
Lender.
(i) UCC Termination Statements, executed by
NationsBank releasing its security interest in the NationsBank Collateral in all
applicable jurisdictions.
(j) Restated Registration Rights Agreement,
executed by TFCEI.
14. CONFIRMATION OF REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Lender that, except for the Acknowledged
Defaults, the representations and warranties contained in the Agreement are true
and correct on and as of the date hereof as though made on and as of such date.
15. INTEGRATION. On and after the date hereof, each reference in the
Agreement to "this Agreement," "herein," "hereunder," or words of similar
import, shall be deemed a reference to the Agreement as amended by this
Amendment. Borrower and Lender agree that, except as expressly modified by this
Amendment, all other terms and provisions of the Agreement shall continue in
full force and effect. No novation is intended. Should there be any conflict
between this Amendment and the Agreement, this Amendment shall control.
16. COUNTERPARTS. This Amendment may be signed in any
number of counterparts, each of which shall be an original, all of which taken
together shall constitute a single integrated agreement with the same effect as
if the signatures thereto and hereto were upon the same instrument. Complete
sets of counterparts shall be delivered to Borrower and Lender for attachment to
the Agreement.
17. SUCCESSOR AND ASSIGNS. The provisions of this Amendment
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, including any successor or assign arising by
operation of law.
18. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the Commonwealth of Virginia.
<PAGE>
IT WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date and year first above written.
THE FINANCE COMPANY
By: _________________________
Its: _________________________
GENERAL ELECTRIC CAPITAL CORPORATION
By: _________________________
Its: _________________________
List of Exhibits:
Exhibit 3(a)(ii) - NationsBank Payoff Letter
Exhibit 3(a)(vi) - Unsecured Promissory Note
Exhibit 6(a) - Warrant No. 2
Exhibit 6(b) - Warrant Allonge
Exhibit 6(c) - Restated Registration Rights Agreement
Exhibit 8 - Refund Security Agreement
Exhibit 9 - Stock Pledge
Exhibit 10 - Hibernia Commitment Letter
List of Schedules:
Schedule 2(d) - Acknowledged Defaults
Schedule 3.3(a)(iv) - NationsBank Collateral
<PAGE>
EXHIBIT 13.6
To Amendment No. 1 Between
The Finance Company and General Electric Capital Corporation
PORTFOLIO COVENANTS
The covenants outlined below shall be measured as of the end of each
Accounting Period unless stated otherwise and reported to Lender with the
Financial Statement Certificate attached as Exhibit 13.4.
All percentages shall not exceed the following:
Maximum Delinquency Measurement
<TABLE>
<CAPTION>
Fiscal Fiscal
1997 1998
1st Q. 2nd Q. 3rd Q. 4th Q. 1st Q. 2nd Q. 3rd Q. 4th Q.
------ ------ ------ ------ ------ ------ ------ ------
<S> <C>
TFC Rolling Average 15.0% 15.0% 14.5% 14.0% 13.5% 13.0% 12.5% 12.0%
Delinquency
FCF Rolling Average 10.00% 12.00%
Delinquency
Maximum Charged Off Losses
1997 1998
---- ----
TFC Rolling Average
Charged-Off Losses 2.00% 2.00%
FCF Rolling Average
Charged-Off Losses 1.50% 2.00%
Maximum Repossession
Inventory
1997 1998
---- ----
TFC Repossession
Inventory 3% 3%
QUARTERLY
Minimum Reserve
Requirement
1997 1998
---- ----
TFC Reserve
Requirement 100% 100%
FCF Reserve
Requirement 100% 100%
Maximum Outstanding
Principal Balance Pledged
Contracts
1997 1998
---- ----
TFC 145,000,000 N/A
</TABLE>
<PAGE>
(EXHIBIT 13.6 continued)
FINANCIAL COVENANTS
The covenants outlined below shall be measured as of the end of each
Accounting Period and reported to Lender with the Financial Statement
Certificate attached as Exhibit 13.4.
Minimum Net Worth Fiscal Fiscal
1997 1998
TFCEI $28,000,000 29,500,000
TFC $27,000,000* 28,000,000
Maximum Debt Ratio
1997 1998
---- ----
TFCEI 4.1:1 4.0:1
TFC 4.6:1 4.2:1
Minimum Interest Coverage
1997 1998
---- ----
TFC 1.1 1.2
*Provided, however, that the Minimum Net Worth requirement for TFC for fiscal
year 1997 shall be $24,000,000 until such time as the Hibernia Funding has
occurred, at which time it shall immediately and automatically increase to
$27,000,000 and remain at such level for the remainder of 1997.
[EXECUTION ORIGINAL]
THIS WARRANT MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT AS
SPECIFIED HEREIN. NEITHER THE RIGHTS REPRESENTED BY THIS WARRANT NOR THE SHARES
ISSUABLE UPON THE EXERCISE THEREOF HAVE BEEN REGISTERED FOR OFFER OR SALE UNDER
THE SECURITIES ACT OF 1933. SUCH RIGHTS AND SHARES MAY NOT BE SOLD OR OFFERED
FOR SALE IN WHOLE OR IN PART EXCEPT IN ACCORDANCE WITH THE APPLICABLE PROVISIONS
HEREOF.
TFC ENTERPRISES, INC.
WARRANT TO PURCHASE COMMON STOCK
DECEMBER _____, 1996
TFC ENTERPRISES, INC., a Delaware corporation, its successors or
assigns (the "Company"), hereby certifies that, for value received, GENERAL
ELECTRIC CAPITAL CORPORATION, a New York corporation, or its registered assigns
(the "WARRANT HOLDER" or collectively the "WARRANT HOLDERS"), is entitled,
subject to the terms set forth below, to purchase from the Company upon
surrender of this Warrant, at any time or times on or after December 20, 1996
but not after 5:00 p.m., prevailing Eastern Standard or Daylight Time, on the
Expiration Date (as such term is hereinafter defined), 567,640 fully paid and
nonassessable shares of Common Stock (as such term is hereinafter defined) of
the Company (as adjusted from time to time as provided in this Warrant, the
"WARRANT SHARES"), at a purchase price per share equal to the Warrant Exercise
Price (as such term is hereinafter defined), in lawful money of the United
States of America. The Company represents and warrants, as of the date hereof,
that (a) there are 11,290,308 shares of the Common Stock issued and outstanding
and (b) Exhibit D sets forth all options or other rights to acquire any shares
of the Common Stock.
DEFINITIONS
SECTION 1. (a) Definitions. The following words and terms as used in
this Warrant shall have the following meanings, unless the context in which any
such term is used herein clearly requires a different meaning:
"Affiliate" means, with respect to a Person, any other Person that,
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such first Person.
"Business Day", except as otherwise provided herein, means a day
other than a Saturday, a Sunday or a day on which banking institutions in the
Commonwealth of Virginia are authorized or obligated by law or required by
executive order to be closed.
"Common Stock" means all shares now or hereafter authorized of the
Company's Common Stock, $.01 par value per share, and stock of any other
class into which such shares may hereafter be changed.
"Convertible Securities" mean any securities issued by the Company
which are convertible into or exchangeable for, directly or indirectly, shares
of Common Stock.
"Expiration Date" means December 31, 2000.
"Market Price" means the average of the closing prices of Common
Stock sales on all domestic exchanges (including the NASDAQ National Market
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System) on which the Common Stock may at the time be listed, or, if there shall
have been no sales on any such exchange on any day, the average of the reported
bid prices on all such exchanges at the end of such day, or, if on any day the
Common Stock shall not be so listed, the average of the representative bid
prices quoted in the NASDAQ System as of 3:30 P.M., Eastern Standard Time, or if
on any day the Common Stock shall not be quoted in the NASDAQ System, the
average of the high and low bid prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in each such case averaged
over a period of 30 consecutive Business Days (or such other period as shall be
specified herein) prior to the date as of which "Market Price" is being
determined; provided, that if the Common Stock is listed on any domestic
exchange, the term "business days" as used in this sentence shall mean business
days on which such exchange is open for trading. If at any time the Common Stock
is not listed on any domestic exchange or quoted in the NASDAQ System or the
domestic over-the-counter market, the "Market Price" shall be deemed to be the
higher of (i) the book value per share thereof, as determined by any firm of
independent public accountants (which may include the independent auditors
engaged by the Company) of recognized standing selected by the Board of
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Directors of the Company and acceptable to the Warrant Holder in its reasonable
discretion (the Warrant Holder agreeing that the Company's current independent
auditors and any other "Big 6" accounting firms engaged by the Company will be
acceptable), as of the last day of which such determination shall have been
made, or (ii) the fair value per share thereof reasonably determined in good
faith by the Board of Directors of the Company as of the date which is within 15
days of the date as of which the determination is to be made (in determining the
fair value per share thereof, the Board of Directors shall consider stock market
valuations and price to earnings ratios of comparable companies in similar
industries).
"Person" means an individual or corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Securities Act" means the Securities Act of 1933, as amended.
"Warrant Exercise Price" shall initially be $2.00 per share and
shall be adjusted and readjusted from time to time as provided in this Warrant.
"Warrant Share Holder" means any holder of the Warrant Shares.
(b) Other Definitional Provisions. Except as otherwise
specified herein:
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(i) all references herein (A) to
any Person shall be deemed to include such Person's successors and assigns, and
(B) to any applicable law defined or referred to herein, shall be deemed
references to such applicable law as the same may have been or may be amended or
supplemented from time to time.
(ii) Whenever used in this Warrant,
the words "herein", "hereof" and "hereunder", and words of similar import,
shall refer to this Warrant as a whole and not to any provision of this Warrant,
and the words "Section" and "Exhibit" shall refer to Sections of, and Exhibits
to, this Warrant unless otherwise specified.
(iii) When the context so requires,
the neuter gender includes the masculine or feminine, and the singular
number includes the plural, and vice versa.
SECTION 2. Exercise of Warrant. The rights represented by this
Warrant may be exercised by the Warrant Holder then registered on the books of
the Company, in whole or from time to time in part (except that this Warrant
shall not be exercisable as to a fractional share) by (i) delivery of a written
notice, in the form of the Subscription Notice attached as Exhibit A hereto, of
such holder's election to exercise this Warrant, which notice shall specify a
number of Warrant Shares to be purchased not less than 1,000 (as adjusted from
time to time as provided herein), (ii) payment to the Company of an amount equal
to the Warrant Exercise Price multiplied by the number of Warrant Shares as to
which the Warrant is then being exercised (plus any applicable issue or transfer
taxes) in cash or by certified or official bank check, (iii) surrender of this
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Warrant, properly endorsed, at the principal office of the Company in Norfolk,
Virginia, as set forth in Section 19 hereof (or at such other agency or office
of the Company as the Company may designate by notice to the holder hereof), and
(iv) if the Warrant Shares issuable upon the exercise of the rights represented
by this Warrant have not been registered under the Securities Act, delivery to
the Company by such holder of a letter in the form of Exhibit B hereto;
provided, that if such Warrant Shares are to be issued in any name other than
that of the registered holder of this Warrant, such issuance shall be deemed a
transfer and the provisions of Section 15 hereof shall be applicable. In the
event of any exercise of the rights represented by this Warrant, a certificate
or certificates for the Warrant Shares so purchased, registered in the name
directed by the holder, shall be delivered as directed by the holder within a
reasonable time, not exceeding 15 Business Days, after such exercise. Unless the
rights represented by this Warrant shall have expired or have been fully
exercised, the Company shall issue a new Warrant identical in all respects to
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the Warrant exercised except it shall represent rights to purchase the number of
Warrant Shares purchasable immediately prior to such exercise under the Warrant
exercised, less the number of Warrant Shares with respect to which such Warrant
was exercised. The person in whose name any certificate for Warrant Shares is
issued upon the exercise of this Warrant shall for all purposes be deemed to
have become the holder of record of such Warrant Shares immediately prior to the
close of business on the date on which the Warrant was surrendered and payment
of the amount due in respect of such exercise and any applicable taxes was made,
irrespective of the date of delivery of such share certificate, except that, if
the date of such surrender and payment is a date when the stock transfer books
of the Company are properly closed, such person shall be deemed to have become
the holder of such Warrant Shares at the opening of business on the next
succeeding date on which the stock transfer books are open.
SECTION 3. Covenants as to Common Stock. The Company covenants
and agrees that:
(a) All Warrant Shares which may be issued
upon the exercise of the rights represented by this Warrant will, upon
issuance, be validly issued, fully paid and nonassessable;
(b) During the period within which the rights
represented by this Warrant may be exercised, the Company will at all times
have authorized and reserved a sufficient number of shares of Common Stock, free
of preemptive rights, to provide for the exercise of the rights then represented
by this Warrant, and that the par value of such shares will at all times be less
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than the applicable Warrant Exercise Price. Before taking any action that would
cause an adjustment reducing the Warrant Exercise Price below the then par
value, if any, of the shares of Common Stock issuable upon exercise of this
Warrant, the Company will take any corporate action that may be necessary in
order that the Company may validly and legally issue fully paid and
non-assessable shares of such Common Stock at such adjusted Warrant Exercise
Price; and
(c) If any shares of Common Stock reserved or
to be reserved to provide for the exercise of the rights then represented by
this Warrant require registration with or approval of any governmental authority
under any federal law (other than the Securities Act) or under any state law
before such shares may be validly issued, then the Company covenants that it
will in good faith and as expeditiously as possible endeavor to secure such
registration or approval, as the case may be.
SECTION 4. Adjustment of Warrant Exercise Price Upon Stock
Splits, Dividends, Distributions and Combinations; Adjustment of Number of
Warrant Shares.
(a) In case the Company shall subdivide at any
time its outstanding shares of Common Stock into a greater number of shares or
issue a stock dividend or make a distribution with respect to outstanding shares
of Common Stock or Convertible Securities, payable in Common Stock or in
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Convertible Securities which are convertible with no additional consideration,
the Warrant Exercise Price in effect immediately prior to such subdivision or
stock dividend or distribution shall be proportionately reduced (treating for
such purpose any such shares of Convertible Securities outstanding or payable as
being the number of shares of Common Stock issuable upon their conversion); and,
conversely, in the case that the outstanding shares of Common Stock of the
Company shall be combined into a smaller number of shares, the Warrant Exercise
Price in effect immediately prior to such combination shall be proportionately
increased.
(b) Upon each adjustment of the Warrant
Exercise Price as provided in this Section 4, the Warrant Holder shall
thereafter be entitled to purchase, at the Warrant Exercise Price resulting from
such adjustment, the number of shares of Common Stock obtained by multiplying
the Warrant Exercise Price in effect immediately prior to such adjustment by the
number of shares of Common Stock purchasable pursuant hereto immediately prior
to such adjustment, and dividing the product thereof by the Warrant Exercise
Price after such adjustment.
SECTION 5. Adjustment of Warrant Exercise Price Upon Certain
Issuances or Sales of Common Stock.
(a) Whenever the Company shall issue, sell or
otherwise distribute any shares of its Common Stock (except as provided for in
Section 6) and the amount of consideration per share is less than the Market
Price in effect immediately prior to the time of such issuance or sale, then,
forthwith upon such issue or sale, and thereafter successively upon each such
issue, the Warrant Exercise Price shall be reduced to the amount determined by
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multiplying the Warrant Exercise Price in effect immediately prior to the time
of such issue or sale by a fraction, whose numerator shall be (i) the sum of (x)
the number of shares of Common Stock outstanding immediately prior to such issue
or sale multiplied by the current Market Price immediately prior to such issue
or sale, and (y) the consideration received by the Company upon such issue or
sale, and whose denominator shall be (ii) the total number of shares of Common
Stock outstanding immediately after such issue or sale multiplied by the current
Market Price immediately prior to such issue or sale.
(b) For the purposes of this Section 5, the
following clauses (i) to (v), inclusive, shall also be applicable:
(i) in case at any time the
Company shall in any manner grant any rights to subscribe for any rights
or options to purchase any shares of Common Stock or any Convertible Securities,
whether or not such rights or options or the rights to convert or exchange any
such Convertible Securities are immediately exercisable, and the purchase price
per share for which Common Stock is issuable upon the exercise of such rights or
options or upon conversion or exchange of such rights or options or upon
conversion or exchange of such Convertible Securities (determined by dividing
(x) the total amount, if any, received or receivable by the Company as
consideration for the granting of all such rights or options, plus the minimum
aggregate amount of additional consideration payable to the Company upon the
exercise of all such rights or options, plus, in the case of such Convertible
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Securities, the average aggregate amount of additional consideration, if any,
payable upon the conversion or exchange thereof, by (y) the maximum aggregate
number of shares of Common Stock issuable upon the exercise of such rights or
options or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such rights or options) shall be less than the
Market Price in effect immediately prior to the time of the granting of such
rights or options, then the maximum aggregate number of shares of Common Stock
issuable upon the exercise of such rights or options or upon conversion or
exchange of the total maximum amount of such Convertible Securities issuable
upon the exercise of such rights or options shall be deemed (as of the date of
granting of such rights or options) to be outstanding and to have been issued
for such price per share. No further adjustments of the Warrant Exercise Price
shall be made upon the actual issue of such Common Stock or of such Convertible
Securities upon exercise of such rights or options or upon the actual issue of
such Common Stock upon conversion or exchange of such Convertible Securities,
except as otherwise provided in clause (iii) below;
(ii) in case at any time the Company
shall issue or sell in any manner any Convertible Securities, whether or not
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the rights to exchange or convert thereunder are immediately exercisable, and
the purchase price per share for which Common Stock is issuable upon such
conversion or exchange (determined by dividing (x) the total amount received or
receivable by the Company as consideration for the issue or sale of all such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
thereof, by (y) the maximum aggregate number of shares of Common Stock issuable
upon the conversion or exchange of all such Convertible Securities) shall be
less than the Market Price in effect immediately prior to the time of such issue
or sale, then the maximum aggregate number of shares of Common Stock issuable
upon conversion or exchange of all such Convertible Securities shall be deemed
(as of the date of the issue or sale of such Convertible Securities) to be
outstanding and to have been issued for such price per share, provided that,
except as otherwise specified in clause (iii) below, (a) no further adjustment
of the Warrant Exercise Price shall be made upon the actual issue of such Common
Stock upon conversion or exchange of such Convertible Securities, and (b) if any
such issue or sale of such Convertible Securities is made upon exercise of any
rights to subscribe for or to purchase or upon exercise of any option to
purchase any such Convertible Securities for which adjustments of the Warrant
Exercise Price have been or are to be made pursuant to other provisions of this
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Section 5, no further adjustment of the Warrant Exercise Price shall be made by
reason of such issue or sale;
(iii) if the purchase price or
number of shares purchasable provided for in any right or option referred to in
clause (i) above, or the rate at which any Convertible Securities referred to in
clause (i) or (ii) above are convertible into or exchangeable for Common Stock,
shall change at any time (other than under, or by reason of, similar provisions
contained in such securities designed to protect against dilution for which
provision for adjustments in the Warrant Exercise Price are provided for in this
Warrant), the Warrant Exercise Price then in effect hereunder shall forthwith be
readjusted to such Warrant Exercise Price as would have obtained had the
adjustments made upon the issuance of such rights, options or Convertible
Securities been made upon the basis of the changed terms; and on the expiration
of any such option or right referred to in clause (i) above or the termination
of any such right to convert or exchange such Convertible Securities referred to
in clause (i) or (ii) above, the Warrant Exercise Price then in effect hereunder
shall forthwith be readjusted to such Warrant Exercise Price as would have
obtained had the adjustments made upon the issuance of such rights or options or
Convertible Securities have been made upon the basis of the issuance of only the
number of shares of Common Stock, if any, theretofore actually delivered upon
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the exercise of such rights or options or upon the conversion or exchange of
such Convertible Securities;
(iv) the cash consideration
received for any shares of Common Stock or Convertible Securities or any rights
or options to purchase any such Common Stock or Convertible Securities issued or
sold shall be deemed to be the amount received therefor, before deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions paid or allowed in connection therewith; in case any shares of
Common Stock or Convertible Securities or any rights or options to purchase any
such Common Stock or Convertible Securities shall be issued or sold for a
consideration other than cash, the amount of the consideration other than cash
(including any non-cash consideration received in respect of any acquisition by
the Company of substantially all of the stock or assets of another entity)
received by the Company for such shares shall be deemed to be the value of such
consideration as determined reasonably and in good faith by the Board of
Directors of the Company; and
(v) the number of shares of Common
Stock outstanding at any given time shall not include such shares owned or
held by or for the account of the Company; but the transfer from the Company of
any such shares so owned or held shall be considered to be an issue or sale of
Common Stock for the purposes of this Section 5.
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(c) If the Company shall distribute to all
holders of its Common Stock evidence of its indebtedness or assets, then in
each such case the Warrant Exercise Price in effect immediately prior to such
distribution shall be adjusted so that the same shall equal the price determined
by multiplying the Warrant Exercise Price in effect immediately prior to the
date of such distribution by a fraction whose numerator shall be the Market
Price per share of Common Stock on the effective date of distribution less the
then fair market value per share (as reasonably determined by the Board of
Directors of the Company) of the assets or evidences of indebtedness so
distributed and whose denominator shall be such Market Price per share of the
Common Stock. Such adjustment shall be made whenever any such distribution is
made and shall be retroactively effective as of immediately after the record
date for the determination of stockholders entitled to receive such
distribution.
(d) If the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them (x) to receive a
dividend or other distribution of Common Stock, or (y) to receive rights or
options to subscribe for Common Stock or Convertible Securities, then, for
purposes of this Warrant, such record date shall be deemed to be the date of the
issue or sale of the shares of Common Stock deemed to have been issued or sold
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upon the declaration of such dividend or the making of such other distribution
or the date of the granting of such right or option of subscription or purchase.
(e) Upon each adjustment of the Warrant
Exercise Price as provided in this Section 5, the Warrant Holder shall
thereafter be entitled to purchase, at the Warrant Exercise Price resulting from
such adjustment, the number of shares of Common Stock obtained by multiplying
the Warrant Exercise Price in effect immediately prior to such adjustment by the
number of shares of Common Stock purchasable pursuant hereto immediately prior
to such adjustment, and dividing the product thereof by the Warrant Exercise
Price after such adjustment.
SECTION 6. Reorganization, Reclassification, Etc. In case of any
capital reorganization, or of any reclassification of the capital stock, of the
Company (other than a change in par value or from a par value to no par value or
from no par value to a par value or as a result of a split-up or combination) or
in case of the consolidation or merger of the Company with or into any other
corporation (other than a consolidation or merger in which the Company is the
continuing corporation and which does not result in the Common Stock being
changed into, or exchanged for, stock or other securities or property of any
other Person), or the sale of all or substantially all of the assets of the
Company to another corporation shall be effected, or a share exchange shall be
effected by the Company with another corporation or Person, or the liquidation
of the Company, or any other event similar to any of the foregoing events (any
of the foregoing, a "Reorganization Event"), then, this Warrant, upon exercise
after such Reorganization Event, shall entitle the Warrant Holder to purchase
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the kind and number of shares of stock or other securities or property of the
Company, or of the Person resulting from such Reorganization Event, to which the
Warrant Holder would have been entitled if he had exercised the Warrant in full
immediately prior to such Reorganization Event; and upon any Reorganization
Event, appropriate provision shall be made with respect to the rights and
interests of the Warrant Holder to the end that the provisions hereof
(including, without limitation, provisions for the term of the Warrant,
adjustment of the Warrant Exercise Price and of the number of shares purchasable
upon the exercise of this Warrant) shall be applicable thereafter, as nearly as
may be in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of the rights represented hereby. The Company
shall not effect any Reorganization Event unless prior to, or simultaneously
with, the consummation thereof the successor Person (if other than the Company)
resulting from such Reorganization Event shall assume by written instrument
executed and mailed or delivered to the Warrant Holder at the address of such
holder appearing on the books of the Company, the obligation to deliver to such
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holder such shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to purchase.
SECTION 7. Notice of Adjustment of Warrant Exercise Price and Number
of Warrant Shares. Upon any adjustment of the Warrant Exercise Price or the
number of Warrant Shares purchasable hereunder, the Company shall notify the
Warrant Holder of the Warrant Exercise Price and number of Warrant Shares in
effect after such adjustment, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
SECTION 8. Computation of Adjustments. Upon each computation of an
adjustment in the Warrant Exercise Price and the number of shares which may be
subscribed for and purchased upon exercise of this Warrant, the Warrant Exercise
Price shall be computed to the nearest cent (i.e., fractions of .5 of a cent, or
greater, shall be rounded to the next highest cent) and the number of shares
which may be subscribed for and purchased upon exercise of this Warrant shall be
calculated to the nearest whole share (i.e., fractions of one half of a share,
or greater, shall be treated as being a whole share). No such adjustment shall
be made, however, if the change in the Warrant Exercise Price would be less than
$.01 per share, but any such lesser adjustment shall be made at the time and
together with the next subsequent adjustment which, together with any
adjustments carried forward, shall amount to $.01 per share or more.
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SECTION 9. Notice of Certain Events. In case at any time:
(a) the Company shall declare any dividend
or distribution in respect of its Common Stock payable in Common Stock or
Convertible Securities;
(b) the Company shall offer for subscription
pro rata exclusively to the holders of its Common Stock any additional shares
of stock of any class or other rights;
(c) there shall be any capital reorganization,
or reclassification of the capital stock, of the Company, or consolidation or
merger of the Company with, or sale of all or substantially all of its assets
to, another Person; or
(d) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in any one or more of said cases, the Company shall give to the Warrant
Holder (i) at least twenty (20) days' prior written notice of the date on which
the books of the Company shall close or a record shall be taken for such
dividend, distribution, or subscription rights or for determining rights to vote
in respect of any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up, and (ii) in the case of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, at least twenty (20) days' prior written notice of
the date when the same shall take place. Such notice in accordance with the
foregoing clause (i) shall also specify, in the case of such
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dividend, distribution or subscription rights, the date on which holders of
capital stock shall be entitled thereto, and such notice in accordance with the
foregoing clause (ii) shall also specify the date on which the holders of
capital stock shall be entitled to exchange their capital stock for securities
or other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, as the case
may be.
SECTION 10. No Change in Warrant Terms on Adjustment. Irrespective
of any adjustment in the Warrant Exercise Price or the number of shares of
Common Stock issuable upon exercise hereof, this Warrant, whether theretofore or
thereafter issued or reissued, may continue to express the same price and number
of shares as are stated herein, and the Warrant Exercise Price and such number
of shares specified herein shall be deemed to have been so adjusted.
SECTION 11. Registration Rights. The initial holder of this Warrant,
and any assignee thereof, shall have the registration rights with respect to the
Warrant Shares set forth in that certain Registration Rights Agreement of even
date herewith by and between the Company and such initial holder, a copy of
which is attached hereto as Exhibit C.
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SECTION 12. Taxes. The Company shall not be required to pay any tax
or taxes attributable to the initial issuance of the Warrant Shares or any
transfer taxes involved in the issue or delivery of any certificates for Warrant
Shares in a name other than that of the initial Warrant Holder or upon any
transfer of this Warrant.
SECTION 13. Warrant Holder Not Deemed a Shareholder; Information;
Rights Offerings.
(a) No Warrant Holder, as such, shall be
entitled to vote or receive dividends or be deemed the holder of shares of the
Company for any purpose, nor shall anything contained in this Warrant be
construed to confer upon a Warrant Holder, as such, any of the rights of a
shareholder of the Company or any right to vote, give or withhold consent to any
corporate action, or receive dividends prior to the issuance of record to a
Warrant Holder of the Warrant Shares to which he is then entitled to receive
upon the due exercise of this Warrant.
(b) Notwithstanding anything to the contrary
contained herein (i) so long as this Warrant or any portion hereof is
outstanding, a Warrant Holder shall be entitled to receive from the Company
copies of all annual financial statements generated by the Company, including
but not limited to the annual audited financial statements of the Company, and
any and all other notices and information provided, or required by applicable
law or regulation to be provided, by the Company to its shareholders generally,
and (ii) if the Company should offer to all of the Company's shareholders the
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exclusive right to purchase any securities of the Company, then all shares of
Common Stock that are subject to this Warrant shall be deemed to be outstanding
and owned by the Warrant Holder solely for the purposes thereof, and the Warrant
Holder shall be entitled to participate in such rights offering.
(c) No provision hereof, in the absence of
affirmative action by the Warrant Holder to purchase shares of Common Stock,
and no mere enumeration herein of the rights or privileges of the Warrant
Holder, shall give rise to any liability of such Warrant Holder for the purchase
price of any Warrant Shares or as a shareholder of the Company, whether such
liability is asserted by the Company or otherwise.
SECTION 14. Preemptive Rights. The Company shall not grant any
preemptive rights with respect to any of its capital stock without the prior
written consent of the Warrant Holder.
SECTION 15. Transfer; Opinions of Counsel; Restrictive Legends.
(a) This Warrant and any Warrant Shares shall
be registered on the books of the Company, and a copy of it shall be kept by
the Company at its principal office set forth in Section 19 hereof.
(b) Subject to the provisions of this Section
15, this Warrant may be transferred, in whole or in part, to any Person or
business entity, by presentation of this Warrant to the Company at the office of
the Company set forth in Section 19 hereof, with written instructions for such
transfer. Upon such presentation for transfer, the Company shall promptly
execute and deliver a new Warrant or Warrants in the form hereof in the name of
the assignee or assignees and in the denominations specified in such
instructions.
(c) The Company shall pay all expenses
incurred by it (but not those incurred by the Warrant Holder or Warrant
Share Holder, as applicable) in connection with the preparation, issuance and
delivery of Warrants or the Warrant Shares under this Section 15.
(d) Prior to any sale, transfer or other
disposition of this Warrant or the Warrant Shares, as the case may be, the
Warrant Holder or Warrant Share Holder, as applicable, will give ten (10)
Business Days' notice to the Company of such Warrant Holder's or Warrant Share
Holder's intention to effect such transfer. Each such notice shall describe the
manner and circumstances of the proposed transfer and, absent registration under
the Securities Act of the securities relating to such proposed transfer, shall
be accompanied by an opinion, addressed to the Company and reasonably
satisfactory in form and substance to it, of counsel experienced in such matters
for such Warrant Holder or Warrant Share Holder, stating whether, in the opinion
of such counsel, such transfer will be a transaction exempt from registration
under the Securities Act.
(e) If such sale, transfer or other
disposition is subject to registration under the Securities Act, or may in
the reasonable opinion of such counsel be effected without registration under
the Securities Act, such Warrant Holder or Warrant Share Holder shall thereupon
be entitled to transfer this Warrant or the Warrant Shares, as the case my be,
in accordance with the terms of the notice delivered by such Warrant Holder or
Warrant Share Holder to the Company. In the absence of such registration under
the Securities Act, if in the opinion of such counsel such transfer may not be
effected without registration under the Securities Act, such Warrant Holder or
Warrant Share Holder shall not be entitled to so transfer this Warrant or the
Warrant Shares, as the case may be, until such time as the foregoing conditions
to transfer are fulfilled.
(f) Subject to the provisions of this Section
15, the Warrant Holder may at any time transfer this Warrant or the Warrant
Shares, as the case may be, to an Affiliate of the Warrant Holder.
(g) Each certificate for Warrant Shares
initially issued upon exercise of this Warrant, unless at the time of exercise
such Warrant Shares are registered under the Securities Act, shall bear the
following legend (and any additional legend or legends required by any
securities exchange upon which such Warrant Shares may, at the time of such
exercise, be listed) on the face thereof:
The shares of stock represented by this certificate
have not been registered under the Securities Act of 1933, as
amended, or under the securities laws of any state. The shares may
not be sold, transferred, pledged or hypothecated in the absence of
an effective registration statement under the Securities Act of
1933, as amended, and such registration or qualification as may be
necessary under the securities laws of any state, or an opinion of
counsel reasonably satisfactory to the Company that such
registration or qualification is not required.
The shares of stock represented by this certificate are
held subject to the conditions as set forth in a certain Warrant to
Purchase Common Stock dated December _____, 1996, pursuant to which
such shares were initially issued. A copy of such Warrant to
Purchase Common Stock is on file at the principal office of the
Company.
SECTION 16. Exchange of Warrant; No Redemption.
(a) This Warrant is divisible into warrants of
smaller denominations or fractional warrants, and may be exchanged upon the
surrender hereof, accompanied by written instructions with respect to such
exchange, by the Warrant Holder at the office of the Company set forth in
Section 19 hereof for new Warrants of like provisions representing in the
aggregate the right to subscribe for and purchase the number of shares which may
be subscribed for and purchased hereunder from time to time after giving effect
to all the provisions hereof.
(b) This Warrant may not be called or redeemed
by the Company without the express written consent of the Warrant Holder.
SECTION 17. Lost, Stolen, Mutilated or Destroyed Warrant. If this
Warrant shall be mutilated, lost, stolen or destroyed, the Company shall issue
and deliver, in exchange and substitution for and upon cancellation of the
mutilated Warrant, or in lieu of and substitution for the Warrant lost, stolen
or destroyed, a new Warrant of like tenor and representing an equivalent number
of Warrant Shares, but only upon receipt of evidence satisfactory to the Company
in its reasonable discretion (which, in the appropriate instance, may include a
reasonable certification) from the applicable Warrant Holder of such loss, theft
or destruction of such Warrant and, if requested, indemnity also satisfactory to
it in its reasonable discretion. Applicants for such substitute Warrant shall
also pay such reasonable charges as the Company may prescribe relating to
issuance of such new Warrant. Further, applicants for such substitute Warrant,
other than General Electric Capital Corporation, shall also comply with such
other reasonable assurances to protect the Company, including without
limitation, a request to provide an indemnity bond sufficient in the reasonable
judgment of the Company to protect it from and against any loss that it may
suffer arising out of or relating to the issuance of a replacement Warrant. Any
such new Warrant shall constitute an original contractual obligation of the
Company, whether or not the allegedly lost, stolen, mutilated or destroyed
Warrant shall be enforceable at any time by anyone.
SECTION 18. Representations of Warrant Holder. The Warrant
Holder, by the acceptance hereof, represents that:
(a) It is acquiring this Warrant for its own
account for the purpose of investment and not with a view to, or for sale in
connection with, any distribution thereof in violation of the Securities Act.
(b) It understands that this Warrant at the
time of issuance will not be registered under the Securities Act on the ground
that the sale provided for in this Warrant and the issuance of securities
hereunder is exempt from registration under the Securities Act and that the
Company's reliance on such exemption is predicated in part on Warrant Holder's
representations set forth herein.
(c) It has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of Warrant Holder's investment in the Warrant, Warrant Holder has the
ability to bear the economic risks of such investment, and Warrant Holder has no
need for liquidity with respect to this Warrant.
(d) It understands that this Warrant may not be
sold, transferred, or otherwise disposed of without registration under the
Securities Act or an exemption therefrom, and that in the absence of an
effective registration statement covering this Warrant or an available exemption
from registration under the Securities Act, this Warrant may need to be held
indefinitely.
(e) It represents that the Warrant Holder is
an "accredited investor" as that term is defined in Rule 501 promulgated by
the Commission pursuant to the Securities Act.
(f) It has obtained, in its judgment,
sufficient information from the Company to evaluate the merits and risks of
an investment in this Warrant.
SECTION 19. Notice. All notices and other communications under this
Warrant shall be (a) in writing (which shall include communications by telex or
other facsimile transmission, promptly construed in writing), (b) sent by
registered or certified mail, postage prepaid, return receipt requested, or
delivered by hand, and (c) be given at the following respective addresses and
telecopier and telephone numbers and to the attention of the following Persons:
<PAGE>
(i) if to the Company, to it at:
5425 Robin Hood Road
Suite 101A
Norfolk, VA 23513
Attention: President
Telecopier No.:
Telephone No.: (757) 858-1400
with copies to:
John M. Paris, Esquire
Kaufman & Canoles
P.O. Box 3037
Norfolk, VA 23514
Telecopier No.: (757) 624-3169
Telephone No.: (757) 624-3181
(ii) if to the Warrant Holder, to
him at:
Nicholas L. Calabrese, Esquire
Auto Financial Services
General Electric Capital Corporation
600 Hart Road
Battington, IL 60010
Telecopier No.: (847) 304-3444
Telephone No.: (847) 304-3374
with copies to:
William L. Pitman, Esquire
Williams, Mullen, Christian & Dobbins
P.O. Box 1320
Richmond, VA 23210-1320
Telecopier No.: (804) 783-6456
Telephone No.: (804) 783-6474
or at such other address, telecopier or telephone number or to the
attention of such other person as the party to which such information pertains
may hereafter specify for the purpose in a notice to the other party.
SECTION 20. Judicial Proceedings. Any judicial proceeding brought
against the Company with respect to this Warrant may be brought in any court of
competent jurisdiction in the Commonwealth of Virginia, and, by execution and
delivery of this Warrant, the Company and the Warrant Holder (a) accept,
generally and unconditionally, the nonexclusive jurisdiction of such courts and
any related appellate courts, and (b) irrevocably waive any objection it may now
or hereafter have as to the venue of any such suit, action or proceedings
brought in such court or that such court is an inconvenient forum. Nothing
herein shall affect the right to serve process in any manner permitted by law or
shall limit the right of the Warrant Holder to bring proceedings against the
Company in the courts of any other jurisdiction.
SECTION 21. Miscellaneous. This Warrant and any term hereof may be
changed, waived, discharged, or terminated only by an instrument in writing
signed by the party or holder hereof against which enforcement of such change,
waiver, discharge or termination is sought. The headings in this Warrant are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof. This Warrant shall be interpreted, construed and enforced in accordance
with the laws of the Commonwealth of Virginia, exclusive, however, of such
Commonwealth's rules respecting the choice of law.
SECTION 22. Date. The date of this Warrant is as of December _____,
1996. This Warrant, in all events, shall be wholly void and of no effect after
the close of business on the Expiration Date, except that notwithstanding any
other provisions hereof, the provisions of Section 15 shall continue in full
force and effect after such date as to any Warrant Shares issued on or prior to
the Expiration Date upon the exercise of this Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its duly authorized officers and its corporate seal to be hereunto
affixed as of the _____ day of December, 1996.
TFC ENTERPRISES, INC.
ATTEST: By:
----------------------- ----------------------
----------------------
Printed Name
-----------------------
Printed Name
-----------------------
Secretary Title
-----------------------
Title
ACCEPTED AND AGREED:
GENERAL ELECTRIC CAPITAL CORPORATION
By:
---------------------------
---------------------------
Printed Name
----------------------------
Title
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER IF HE DESIRES
TO EXERCISE THIS WARRANT.
TFC ENTERPRISES, INC.
The undersigned hereby exercises the right to purchase _____ Warrant
Shares covered by this Warrant according to the conditions thereof and herewith
makes payment of $______________, the aggregate Warrant Exercise Price of such
Warrant Shares, in full.
Date: _________________, ____ _______________________________________
<PAGE>
EXHIBIT B
address
Attention: President
RE: Exercise of Warrant, Dated as of December ___, 1996
Dear Sirs:
In connection with the undersigned's purchase of _____ shares of the
Common Stock of TFC Enterprises, Inc., upon exercise of the Warrant therefor
(the "Purchased Shares"), the undersigned confirms and agrees as follows:
1. As the purchaser of the Purchased Shares in a transaction not
registered under the Securities Act of 1933 (the "Act"), the undersigned is
purchasing such Purchased Shares for its own account for investment and (subject
to the disposition of its property being at all times within its control) not
with a view to any resale, distribution or other disposition thereof; and the
undersigned is proceeding on the assumption that it must bear the economic risk
of the investment for an indefinite period, since the Purchased Shares may not
be sold except as provided in paragraph 2 below.
2. The undersigned agrees that, if in the future the undersigned
should decide to dispose of such Purchased Shares (such disposition not being
presently foreseen or contemplated), the undersigned will not offer, sell,
transfer or exchange such Purchased Shares, except (a) pursuant to Section 15 of
the Warrant and (b) under the conditions that would not violate the Act.
3. The undersigned is purchasing such Purchased Shares
pursuant to an exemption from the registration requirements of the Act.
Date: _________________, 19__ ___________________________________________
<PAGE>
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
<PAGE>
EXHIBIT D
LIST OF OPTIONS AND RIGHTS TO ACQUIRE COMMON STOCK
ALLONGE TO WARRANT TO
PURCHASE COMMON STOCK
This Allonge to Warrant to Purchase Common Stock (this "Allonge"),
made as of April 4, 1997, and delivered by TFC Enterprises, Inc., a Delaware
corporation (the "Company"), for the benefit of General Electric Capital
Corporation ("GECC") recites and provides as follows:
RECITALS:
A. THE Finance Company ("TFC"), a Virginia corporation and
subsidiary of the Company, and GECC entered into a certain Amended and Restated
Motor Vehicle Installment Contract Loan and Security Agreement, dated as of
December 20, 1996 (the "Loan Agreement") amending and restating the terms
governing the payment and performance of certain loans made by GECC to TFC.
B. As a condition of the Loan Agreement, the Company granted to GECC
the right to purchase from the Company 567,640 shares of common stock of the
Company, pursuant to a Warrant to Purchase Common Stock, dated as of December
20, 1996 (the "First Warrant").
C. TFC is currently in default under the Loan Agreement and
GECC has agreed to restructure the loans thereunder; as a result, TFC and GECC
executed Amendment No. 1, dated as of the date hereof (the "Amendment"), in
order to set forth the amended terms to the Loan Agreement.
D. In connection with the Amendment, the Company is
required to grant a warrant to GECC for additional shares of the Company's
common stock pursuant to that certain Warrant (No. 2) to Purchase Common Stock,
dated as of the date hereof (the "Second Warrant").
E. GECC and the Company agreed that the terms of the First Warrant
should be the same as the terms of the Second Warrant, and thus, the Company now
desires to execute and deliver this Allonge to GECC to amend the First Warrant.
AGREEMENT:
NOW, THEREFORE, for and in consideration of the foregoing, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company certifies, covenants and agrees as follows:
1. The Company consents to the terms of this Allonge for the benefit
of GECC and ratifies, reaffirms and reconfirms its obligations under the First
Warrant, except to the extent that such obligations are amended by this Allonge.
The Company certifies that there has been no adjustment in the Warrant Exercise
Price or the number of Warrant Shares (as both such terms are defined in the
First Warrant). This Allonge does not constitute a novation.
2. It is the intent of the Company and GECC that the exercise price
and the expiration date be amended effective as of the date hereof. Therefore,
the First Warrant is hereby amended by deleting the definitions of "Expiration
Date" and "Warrant Exercise Price" as set forth in Section 1 and substituting in
lieu thereof the following definitions of "Expiration Date" and "Warrant
Exercise Price":
"Expiration Date" means March 31, 2002.
"Warrant Exercise Price" shall initially be $1.00 per
share and shall be adjusted and readjusted from time to
time as provided in this Warrant.
3. Section 11 of the First Warrant is hereby deleted in its
entirety and a new Section 11 is substituted in lieu thereof as follows:
SECTION 11. Registration Rights. The initial
holder of this Warrant, and any assignee thereof, shall
have the registration rights with respect to the Warrant
Shares set forth in that certain Amended and Restated
Registration Rights Agreement, dated April 4, 1997, by
and between the Company and such initial holder, a copy
of which is attached hereto as Exhibit C.
4. Exhibit C to the First Warrant, containing the Registration
Rights Agreement between the Company and GECC, dated December 20, 1996, is
hereby deleted in its entirety and a new Exhibit C, as attached hereto,
containing the Amended and Restated Registration Rights Agreement between the
parties, dated as of the date hereof, shall be substituted in lieu thereof.
5. In all other respects, the terms of the First Warrant, except as
expressly modified hereby, are ratified and reaffirmed and shall remain in full
force and effect.
6. This Allonge shall be binding upon and inure to the
benefit of the Company and its successors and assigns, and shall be governed by
the laws of the Commonwealth of Virginia.
7. This Allonge may be executed in any number of
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Allonge to be
executed by its duly authorized officers as of the date first written above.
TFC ENTERPRISES, INC.
By: _______________________
Its: _______________________
ATTEST:
- ----------------------------------
- ----------------------------------
ACCEPTED AND AGREED:
GENERAL ELECTRIC CAPITAL CORPORATION
By: __________________________________
Its: __________________________________
<PAGE>
Exhibit C
THIS WARRANT MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT AS
SPECIFIED HEREIN. NEITHER THE RIGHTS REPRESENTED BY THIS WARRANT NOR THE SHARES
ISSUABLE UPON THE EXERCISE HEREOF HAVE BEEN REGISTERED FOR OFFER OR SALE UNDER
THE SECURITIES ACT OF 1933. SUCH RIGHTS AND SHARES MAY NOT BE SOLD OR OFFERED
FOR SALE IN WHOLE OR IN PART EXCEPT IN ACCORDANCE WITH THE APPLICABLE PROVISIONS
HEREOF.
TFC ENTERPRISES, INC.
WARRANT (NO. 2) TO PURCHASE COMMON STOCK
APRIL 4, 1997
TFC ENTERPRISES, INC., a Delaware corporation, its successors or
assigns (the "Company"), hereby certifies that, for value received, GENERAL
ELECTRIC CAPITAL CORPORATION, a New York corporation, or its registered assigns
(the "WARRANT HOLDER" or collectively the "WARRANT HOLDERS"), is entitled,
subject to the terms set forth below, to purchase from the Company upon
surrender of this Warrant, at any time or times on or after April 4, 1997 but
not after 5:00 p.m., prevailing Eastern Standard or Daylight Time, on the
Expiration Date (as such term is hereinafter defined), 567,640 fully paid and
nonassessable shares of Common Stock (as such term is hereinafter defined) of
the Company (as adjusted from time to time as provided in this Warrant, the
"WARRANT SHARES"), at a purchase price per share equal to the Warrant Exercise
Price (as such term is hereinafter defined), in lawful money of the United
States of America. The Company represents and warrants, as of the date hereof,
that (a) there are 11,290,308 shares of the Common Stock issued and outstanding
and (b) Exhibit D sets forth all options or other rights to acquire any shares
of the Common Stock.
DEFINITIONS
SECTION 1. (a) DEFINITIONS. The following words and terms as used in
this Warrant shall have the following meanings, unless the context in which any
such term is used herein clearly requires a different meaning:
"Affiliate" means, with respect to a Person, any other Person that,
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such first Person.
"Business Day," except as otherwise provided herein, means a day
other than a Saturday, a Sunday or a day on which banking institutions in the
Commonwealth of Virginia are authorized or obligated by law or required by
executive order to be closed.
"Common Stock" means all shares now or hereafter authorized of the
Company's Common Stock, $.01 par value per share, and stock of any other class
into which such shares may hereafter be changed.
"Convertible Securities" mean any securities issued by the Company
which are convertible into or exchangeable for, directly or indirectly, shares
of Common Stock.
"Expiration Date" means March 31, 2002.
"Market Price" means the average of the closing prices of Common
Stock sales on all domestic exchanges (including the NASDAQ National Market
System) on which the Common Stock may at the time be listed, or, if there shall
have been no sales on any such exchange on any day, the average of the reported
bid prices on all such exchanges at the end of such day, or, if on any day the
Common Stock shall not be so listed, the average of the representative bid
prices quoted in the NASDAQ System as of 3:30 P.M., Eastern Standard Time, or if
on any day the Common Stock shall not be quoted in the NASDAQ System, the
average of the high and low bid prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in each such case averaged
over a period of 30 consecutive Business Days (or such other period as shall be
specified herein) prior to the date as of which "Market Price" is being
determined; provided, that if the Common Stock is listed on any domestic
exchange, the term "business days" as used in this sentence shall mean business
days on which such exchange is open for trading. If at any time the Common Stock
is not listed on any domestic exchange or quoted in the NASDAQ System or the
domestic over-the-counter market, the "Market Price" shall be deemed to be the
higher of (i) the book value per share thereof, as determined by any firm of
independent public accountants (which may include the independent auditors
engaged by the Company) of recognized standing selected by the Board of
Directors of the Company and acceptable to the Warrant Holder in its reasonable
discretion (the Warrant Holder agreeing that the Company's current independent
auditors and any other "Big 6" accounting firms engaged by the Company will be
acceptable), as of the last day of which such determination shall have been
made, or (ii) the fair value per share thereof reasonably determined in good
faith by the Board of Directors of the Company as of the date which is within 15
days of the date as of which the determination is to be made (in determining the
fair value per share thereof, the Board of Directors shall consider stock market
valuations and price to earnings ratios of comparable companies in similar
industries).
"Person" means an individual or corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Securities Act" means the Securities Act of 1933, as amended.
"Warrant Exercise Price" shall initially be $1.00 per share and
shall be adjusted and readjusted from time to time as provided in this Warrant.
"Warrant Share Holder" means any holder of the Warrant Shares.
(B) OTHER DEFINITIONAL PROVISIONS. Except as otherwise
specified herein:
(i) all references herein (A) to any
Person shall be deemed to include such Person's successors and assigns, and (B)
to any applicable law defined or referred to herein, shall be deemed references
to such applicable law as the same may have been or may be amended or
supplemented from time to time.
(ii) Whenever used in this Warrant,
the words "herein," "hereof" and "hereunder," and words of similar import, shall
refer to this Warrant as a whole and not to any provision of this Warrant, and
the words "Section" and "Exhibit" shall refer to Sections of, and Exhibits to,
this Warrant unless otherwise specified.
(iii) When the context so requires,
the neuter gender includes the masculine or feminine, and the singular number
includes the plural, and vice versa.
SECTION 2. EXERCISE OF WARRANT. The rights represented by this
Warrant may be exercised by the Warrant Holder then registered on the books of
the Company, in whole or from time to time in part (except that this Warrant
shall not be exercisable as to a fractional share) by
(i) delivery of a written notice, in
the form of the Subscription Notice attached as Exhibit A hereto, of such
holder's election to exercise this Warrant, which notice shall specify a number
of Warrant Shares to be purchased not less than 1,000 (as adjusted from time to
time as provided herein),
(ii) payment to the Company of an amount
equal to the Warrant Exercise Price multiplied by the number of Warrant Shares
as to which the Warrant is then being exercised (plus any applicable issue or
transfer taxes) in cash or by certified or official bank check,
(iii) surrender of this Warrant, properly
endorsed, at the principal office of the Company in Norfolk, Virginia, as set
forth in Section 19 hereof (or at such other agency or office of the Company as
the Company may designate by notice to the holder hereof), and
(iv) if the Warrant Shares issuable upon
the exercise of the rights represented by this Warrant have not been registered
under the Securities Act, delivery to the Company by such holder of a letter in
the form of Exhibit B hereto;
provided, that if such Warrant Shares are to be issued in any name other than
that of the registered holder of this Warrant, such issuance shall be deemed a
transfer and the provisions of Section 15 hereof shall be applicable. In the
event of any exercise of the rights represented by this Warrant, a certificate
or certificates for the Warrant Shares so purchased, registered in the name
directed by the holder, shall be delivered as directed by the holder within a
reasonable time, not exceeding 15 Business Days, after such exercise. Unless the
rights represented by this Warrant shall have expired or have been fully
exercised, the Company shall issue a new Warrant identical in all respects to
the Warrant exercised except it shall represent rights to purchase the number of
Warrant Shares purchasable immediately prior to such exercise under the Warrant
exercised, less the number of Warrant Shares with respect to which such Warrant
was exercised. The person in whose name any certificate for Warrant Shares is
issued upon the exercise of this Warrant shall for all purposes be deemed to
have become the holder of record of such Warrant Shares immediately prior to the
close of business on the date on which the Warrant was surrendered and payment
of the amount due in respect of such exercise and any applicable taxes was made,
irrespective of the date of delivery of such share certificate, except that, if
the date of such surrender and payment is a date when the stock transfer books
of the Company are properly closed, such person shall be deemed to have become
the holder of such Warrant Shares at the opening of business on the next
succeeding date on which the stock transfer books are open.
SECTION 3. COVENANTS AS TO COMMON STOCK. The Company covenants
and agrees that:
(a) All Warrant Shares which may be issued upon
the exercise of the rights represented by this Warrant will, upon issuance, be
validly issued, fully paid and nonassessable;
(b) During the period within which the rights
represented by this Warrant may be exercised, the Company will at all times have
authorized and reserved a sufficient number of shares of Common Stock, free of
preemptive rights, to provide for the exercise of the rights then represented by
this Warrant, and that the par value of such shares will at all times be less
than the applicable Warrant Exercise Price. Before taking any action that would
cause an adjustment reducing the Warrant Exercise Price below the then par
value, if any, of the shares of Common Stock issuable upon exercise of this
Warrant, the Company will take any corporate action that may be necessary in
order that the Company may validly and legally issue fully paid and
non-assessable shares of such Common Stock at such adjusted Warrant Exercise
Price; and
(c) If any shares of Common Stock reserved or
to be reserved to provide for the exercise of the rights then represented by
this Warrant require registration with or approval of any governmental authority
under any federal law (other than the Securities Act) or under any state law
before such shares may be validly issued, then the Company covenants that it
will in good faith and as expeditiously as possible endeavor to secure such
registration or approval, as the case may be.
SECTION 4. ADJUSTMENT OF WARRANT EXERCISE PRICE UPON STOCK SPLITS,
DIVIDENDS, DISTRIBUTIONS AND COMBINATIONS; ADJUSTMENT OF NUMBER OF WARRANT
SHARES.
(a) In case the Company shall subdivide at any
time its outstanding shares of Common Stock into a greater number of shares or
issue a stock dividend or make a distribution with respect to outstanding shares
of Common Stock or Convertible Securities, payable in Common Stock or in
Convertible Securities which are convertible with no additional consideration,
the Warrant Exercise Price in effect immediately prior to such subdivision or
stock dividend or distribution shall be proportionately reduced (treating for
such purpose any such shares of Convertible Securities outstanding or payable as
being the number of shares of Common Stock issuable upon their conversion); and,
conversely, in the case that the outstanding shares of Common Stock of the
Company shall be combined into a smaller number of shares, the Warrant Exercise
Price in effect immediately prior to such combination shall be proportionately
increased.
(b) Upon each adjustment of the
Warrant Exercise Price as provided in this Section 4, the Warrant Holder shall
thereafter be entitled to purchase, at the Warrant Exercise Price resulting from
such adjustment, the number of shares of Common Stock obtained by multiplying
the Warrant Exercise Price in effect immediately prior to such adjustment by the
number of shares of Common Stock purchasable pursuant hereto immediately prior
to such adjustment, and dividing the product thereof by the Warrant Exercise
Price after such adjustment.
SECTION 5. ADJUSTMENT OF WARRANT EXERCISE PRICE UPON CERTAIN
ISSUANCES OR SALES OF COMMON STOCK.
(a) Whenever the Company shall issue, sell or
otherwise distribute any shares of its Common Stock (except as provided for in
Section 6) and the amount of consideration per share is less than the Market
Price in effect immediately prior to the time of such issuance or sale, then,
forthwith upon such issue or sale, and thereafter successively upon each such
issue, the Warrant Exercise Price shall be reduced to the amount determined by
multiplying the Warrant Exercise Price in effect immediately prior to the time
of such issue or sale by a fraction, whose numerator shall be (i) the sum of (x)
the number of shares of Common Stock outstanding immediately prior to such issue
or sale multiplied by the current Market Price immediately prior to such issue
or sale, and (y) the consideration received by the Company upon such issue or
sale, and whose denominator shall be (ii) the total number of shares of Common
Stock outstanding immediately after such issue or sale multiplied by the current
Market Price immediately prior to such issue or sale.
(b) For the purposes of this Section 5, the
following clauses (i) to (v), inclusive, shall also be applicable:
(i) in case at any time the Company
shall in any manner grant any rights to subscribe for any rights or options to
purchase any shares of Common Stock or any Convertible Securities, whether or
not such rights or options or the rights to convert or exchange any such
Convertible Securities are immediately exercisable, and the purchase price per
share for which Common Stock is issuable upon the exercise of such rights or
options or upon conversion or exchange of such rights or options or upon
conversion or exchange of such Convertible Securities (determined by dividing
(x) the total amount, if any, received or receivable by the Company as
consideration for the granting of all such rights or options, plus the minimum
aggregate amount of additional consideration payable to the Company upon the
exercise of all such rights or options, plus, in the case of such Convertible
Securities, the average aggregate amount of additional consideration, if any,
payable upon the conversion or exchange thereof, by (y) the maximum aggregate
number of shares of Common Stock issuable upon the exercise of such rights or
options or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such rights or options) shall be less than the
Market Price in effect immediately prior to the time of the granting of such
rights or options, then the maximum aggregate number of shares of Common Stock
issuable upon the exercise of such rights or options or upon conversion or
exchange of the total maximum amount of such Convertible Securities issuable
upon the exercise of such rights or options shall be deemed (as of the date of
granting of such rights or options) to be outstanding and to have been issued
for such price per share. No further adjustments of the Warrant Exercise Price
shall be made upon the actual issue of such Common Stock or of such Convertible
Securities upon exercise of such rights or options or upon the actual issue of
such Common Stock upon conversion or exchange of such Convertible Securities,
except as otherwise provided in clause (iii) below;
(ii) in case at any time the Company
shall issue or sell in any manner any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, and the
purchase price per share for which Common Stock is issuable upon such conversion
or exchange (determined by dividing (x) the total amount received or receivable
by the Company as consideration for the issue or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion or exchange thereof, by (y) the
maximum aggregate number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities) shall be less than the Market
Price in effect immediately prior to the time of such issue or sale, then the
maximum aggregate number of shares of Common Stock issuable upon conversion or
exchange of all such Convertible Securities shall be deemed (as of the date of
the issue or sale of such Convertible Securities) to be outstanding and to have
been issued for such price per share, provided that, except as otherwise
specified in clause (iii) below, (a) no further adjustment of the Warrant
Exercise Price shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities, and (b) if any such issue
or sale of such Convertible Securities is made upon exercise of any rights to
subscribe for or to purchase or upon exercise of any option to purchase any such
Convertible Securities for which adjustments of the Warrant Exercise Price have
been or are to be made pursuant to other provisions of this Section 5, no
further adjustment of the Warrant Exercise Price shall be made by reason of such
issue or sale;
(iii) if the purchase price or
number of shares purchasable provided for in any right or option referred to in
clause (i) above, or the rate at which any Convertible Securities referred to in
clause (i) or (ii) above are convertible into or exchangeable for Common Stock,
shall change at any time (other than under, or by reason of, similar provisions
contained in such securities designed to protect against dilution for which
provision for adjustments in the Warrant Exercise Price are provided for in this
Warrant), the Warrant Exercise Price then in effect hereunder shall forthwith be
readjusted to such Warrant Exercise Price as would have obtained had the
adjustments made upon the issuance of such rights, options or Convertible
Securities been made upon the basis of the changed terms; and on the expiration
of any such option or right referred to in clause (i) above or the termination
of any such right to convert or exchange such Convertible Securities referred to
in clause (i) or (ii) above, the Warrant Exercise Price then in effect hereunder
shall forthwith be readjusted to such Warrant Exercise Price as would have
obtained had the adjustments made upon the issuance of such rights or options or
Convertible Securities have been made upon the basis of the issuance of only the
number of shares of Common Stock, if any, theretofore actually delivered upon
the exercise of such rights or options or upon the conversion or exchange of
such Convertible Securities;
(iv) the cash consideration received
for any shares of Common Stock or Convertible Securities or any rights or
options to purchase any such Common Stock or Convertible Securities issued or
sold shall be deemed to be the amount received therefor, before deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions paid or allowed in connection therewith; in case any shares of
Common Stock or Convertible Securities or any rights or options to purchase any
such Common Stock or Convertible Securities shall be issued or sold for a
consideration other than cash, the amount of the consideration other than cash
(including any non-cash consideration received in respect of any acquisition by
the Company of substantially all of the stock or assets of another entity)
received by the Company for such shares shall be deemed to be the value of such
consideration as determined reasonably and in good faith by the Board of
Directors of the Company; and
(v) the number of shares of Common
Stock outstanding at any given time shall not include such shares owned or held
by or for the account of the Company; but the transfer from the Company of any
such shares so owned or held shall be considered to be an issue or sale of
Common Stock for the purposes of this Section 5.
(c) If the Company shall distribute to all
holders of its Common Stock evidence of its indebtedness or assets, then in each
such case the Warrant Exercise Price in effect immediately prior to such
distribution shall be adjusted so that the same shall equal the price determined
by multiplying the Warrant Exercise Price in effect immediately prior to the
date of such distribution by a fraction whose numerator shall be the Market
Price per share of Common Stock on the effective date of distribution less the
then fair market value per share (as reasonably determined by the Board of
Directors of the Company) of the assets or evidences of indebtedness so
distributed and whose denominator shall be such Market Price per share of the
Common Stock. Such adjustment shall be made whenever any such distribution is
made and shall be retroactively effective as of immediately after the record
date for the determination of stockholders entitled to receive such
distribution.
(d) If the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them (x) to receive a
dividend or other distribution of Common Stock, or (y) to receive rights or
options to subscribe for Common Stock or Convertible Securities, then, for
purposes of this Warrant, such record date shall be deemed to be the date of the
issue or sale of the shares of Common Stock deemed to have been issued or sold
upon the declaration of such dividend or the making of such other distribution
or the date of the granting of such right or option of subscription or purchase.
(e) Upon each adjustment of the Warrant
Exercise Price as provided in this Section 5, the Warrant Holder shall
thereafter be entitled to purchase, at the Warrant Exercise Price resulting from
such adjustment, the number of shares of Common Stock obtained by multiplying
the Warrant Exercise Price in effect immediately prior to such adjustment by the
number of shares of Common Stock purchasable pursuant hereto immediately prior
to such adjustment, and dividing the product thereof by the Warrant Exercise
Price after such adjustment.
SECTION 6. REORGANIZATION, RECLASSIFICATION, ETC. In case of any
capital reorganization, or of any reclassification of the capital stock, of the
Company (other than a change in par value or from a par value to no par value or
from no par value to a par value or as a result of a split-up or combination) or
in case of the consolidation or merger of the Company with or into any other
corporation (other than a consolidation or merger in which the Company is the
continuing corporation and which does not result in the Common Stock being
changed into, or exchanged for, stock or other securities or property of any
other Person), or the sale of all or substantially all of the assets of the
Company to another corporation shall be effected, or a share exchange shall be
effected by the Company with another corporation or Person, or the liquidation
of the Company, or any other event similar to any of the foregoing events (any
of the foregoing, a "Reorganization Event"), then, this Warrant, upon exercise
after such Reorganization Event, shall entitle the Warrant Holder to purchase
the kind and number of shares of stock or other securities or property of the
Company, or of the Person resulting from such Reorganization Event, to which the
Warrant Holder would have been entitled if he had exercised the Warrant in full
immediately prior to such Reorganization Event; and upon any Reorganization
Event, appropriate provision shall be made with respect to the rights and
interests of the Warrant Holder to the end that the provisions hereof
(including, without limitation, provisions for the term of the Warrant,
adjustment of the Warrant Exercise Price and of the number of shares purchasable
upon the exercise of this Warrant) shall be applicable thereafter, as nearly as
may be in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of the rights represented hereby. The Company
shall not effect any Reorganization Event unless prior to, or simultaneously
with, the consummation thereof the successor Person (if other than the Company)
resulting from such Reorganization Event shall assume by written instrument
executed and mailed or delivered to the Warrant Holder at the address of such
holder appearing on the books of the Company, the obligation to deliver to such
holder such shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to purchase.
SECTION 7. NOTICE OF ADJUSTMENT OF WARRANT EXERCISE PRICE AND
NUMBER OF WARRANT SHARES. Upon any adjustment of the Warrant Exercise Price or
the number of Warrant Shares purchasable hereunder, the Company shall notify the
Warrant Holder of the Warrant Exercise Price and number of Warrant Shares in
effect after such adjustment, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
SECTION 8. COMPUTATION OF ADJUSTMENTS. Upon each computation of an
adjustment in the Warrant Exercise Price and the number of shares which may be
subscribed for and purchased upon exercise of this Warrant, the Warrant Exercise
Price shall be computed to the nearest cent (i.e., fractions of .5 of a cent, or
greater, shall be rounded to the next highest cent) and the number of shares
which may be subscribed for and purchased upon exercise of this Warrant shall be
calculated to the nearest whole share (i.e., fractions of one half of a share,
or greater, shall be treated as being a whole share). No such adjustment shall
be made, however, if the change in the Warrant Exercise Price would be less than
$.01 per share, but any such lesser adjustment shall be made at the time and
together with the next subsequent adjustment which, together with any
adjustments carried forward, shall amount to $.01 per share or more.
SECTION 9. NOTICE OF CERTAIN EVENTS. In case at any time:
(a) the Company shall declare any dividend or
distribution in respect of its Common Stock payable in Common Stock or
Convertible Securities;
(b) the Company shall offer for subscription pro
rata exclusively to the holders of its Common Stock any additional shares of
stock of any class or other rights;
(c) there shall be any capital reorganization,
or reclassification of the capital stock, of the Company, or consolidation or
merger of the Company with, or sale of all or substantially all of its assets
to, another Person; or
(d) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in any one or more of the above-referenced cases, the Company
shall give to the Warrant Holder (i) at least twenty (20) days' prior written
notice of the date on which the books of the Company shall close or a record
shall be taken for such dividend, distribution, or subscription rights or for
determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, and (ii) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at least
twenty (20) days' prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause (i) shall also
specify, in the case of such dividend, distribution or subscription rights, the
date on which holders of capital stock shall be entitled thereto, and such
notice in accordance with the foregoing clause (ii) shall also specify the date
on which the holders of capital stock shall be entitled to exchange their
capital stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be.
SECTION 10. NO CHANGE IN WARRANT TERMS ON ADJUSTMENT. Irrespective
of any adjustment in the Warrant Exercise Price or the number of shares of
Common Stock issuable upon exercise hereof, this Warrant, whether theretofore or
thereafter issued or reissued, may continue to express the same price and number
of shares as are stated herein, and the Warrant Exercise Price and such number
of shares specified herein shall be deemed to have been so adjusted.
SECTION 11. REGISTRATION RIGHTS. The initial holder of this
Warrant, and any assignee thereof, shall have the registration rights with
respect to the Warrant Shares set forth in that certain Amended and Restated
Registration Rights Agreement of even date herewith by and between the Company
and such initial holder, a copy of which is attached hereto as Exhibit C.
SECTION 12. TAXES. The Company shall not be required to pay any tax
or taxes attributable to the initial issuance of the Warrant Shares or any
transfer taxes involved in the issue or delivery of any certificates for Warrant
Shares in a name other than that of the initial Warrant Holder or upon any
transfer of this Warrant.
SECTION 13. WARRANT HOLDER NOT DEEMED A SHAREHOLDER; INFORMATION;
RIGHTS OFFERINGS.
(a) No Warrant Holder, as such, shall be
entitled to vote or receive dividends or be deemed the holder of shares of the
Company for any purpose, nor shall anything contained in this Warrant be
construed to confer upon a Warrant Holder, as such, any of the rights of a
shareholder of the Company or any right to vote, give or withhold consent to any
corporate action, or receive dividends prior to the issuance of record to a
Warrant Holder of the Warrant Shares to which he is then entitled to receive
upon the due exercise of this Warrant.
(b) Notwithstanding anything to the contrary
contained herein (i) so long as this Warrant or any portion hereof is
outstanding, a Warrant Holder shall be entitled to receive from the Company
copies of all annual financial statements generated by the Company, including
but not limited to the annual audited financial statements of the Company, and
any and all other notices and information provided, or required by applicable
law or regulation to be provided, by the Company to its shareholders generally,
and (ii) if the Company should offer to all of the Company's shareholders the
exclusive right to purchase any securities of the Company, then all shares of
Common Stock that are subject to this Warrant shall be deemed to be outstanding
and owned by the Warrant Holder solely for the purposes thereof, and the Warrant
Holder shall be entitled to participate in such rights offering.
(c) No provision hereof, in the absence of
affirmative action by the Warrant Holder to purchase shares of Common Stock, and
no mere enumeration herein of the rights or privileges of the Warrant Holder,
shall give rise to any liability of such Warrant Holder for the purchase price
of any Warrant Shares or as a shareholder of the Company, whether such liability
is asserted by the Company or otherwise.
SECTION 14. PREEMPTIVE RIGHTS. The Company shall not grant any
preemptive rights with respect to any of its capital stock without the prior
written consent of the Warrant Holder.
SECTION 15. TRANSFER; OPINIONS OF COUNSEL; RESTRICTIVE LEGENDS.
(a) This Warrant and any Warrant Shares shall be
registered on the books of the Company, and a copy of it shall be kept by the
Company at its principal office set forth in Section 19 hereof.
(b) Subject to the provisions of this Section
15, this Warrant may be transferred, in whole or in part, to any Person or
business entity, by presentation of this Warrant to the Company at the office of
the Company set forth in Section 19 hereof, with written instructions for such
transfer. Upon such presentation for transfer, the Company shall promptly
execute and deliver a new Warrant or Warrants in the form hereof in the name of
the assignee or assignees and in the denominations specified in such
instructions.
(c) The Company shall pay all expenses incurred
by it (but not those incurred by the Warrant Holder or Warrant Share Holder, as
applicable) in connection with the preparation, issuance and delivery of
Warrants or the Warrant Shares under this Section 15.
(d) Prior to any sale, transfer or other
disposition of this Warrant or the Warrant Shares, as the case may be, the
Warrant Holder or Warrant Share Holder, as applicable, will give ten (10)
Business Days' notice to the Company of such Warrant Holder's or Warrant Share
Holder's intention to effect such transfer. Each such notice shall describe the
manner and circumstances of the proposed transfer and, absent registration under
the Securities Act of the securities relating to such proposed transfer, shall
be accompanied by an opinion, addressed to the Company and reasonably
satisfactory in form and substance to it, of counsel experienced in such matters
for such Warrant Holder or Warrant Share Holder, stating whether, in the opinion
of such counsel, such transfer will be a transaction exempt from registration
under the Securities Act.
(e) If such sale, transfer or other disposition
is subject to registration under the Securities Act, or may in the reasonable
opinion of such counsel be effected without registration under the Securities
Act, such Warrant Holder or Warrant Share Holder shall thereupon be entitled to
transfer this Warrant or the Warrant Shares, as the case my be, in accordance
with the terms of the notice delivered by such Warrant Holder or Warrant Share
Holder to the Company. In the absence of such registration under the Securities
Act, if in the opinion of such counsel such transfer may not be effected without
registration under the Securities Act, such Warrant Holder or Warrant Share
Holder shall not be entitled to so transfer this Warrant or the Warrant Shares,
as the case may be, until such time as the foregoing conditions to transfer are
fulfilled.
(f) Subject to the provisions of this Section
15, the Warrant Holder may at any time transfer this Warrant or the Warrant
Shares, as the case may be, to an Affiliate of the Warrant Holder.
(g) Each certificate for Warrant Shares
initially issued upon exercise of this Warrant, unless at the time of exercise
such Warrant Shares are registered under the Securities Act, shall bear the
following legend (and any additional legend or legends required by any
securities exchange upon which such Warrant Shares may, at the time of such
exercise, be listed) on the face thereof:
The shares of stock represented by this certificate
have not been registered under the Securities Act of 1933, as
amended, or under the securities laws of any state. The shares may
not be sold, transferred, pledged or hypothecated in the absence of
an effective registration statement under the Securities Act of
1933, as amended, and such registration or qualification as may be
necessary under the securities laws of any state, or an opinion of
counsel reasonably satisfactory to the Company that such
registration or qualification is not required.
The shares of stock represented by this certificate are
held subject to the conditions as set forth in a certain Warrant to
Purchase Common Stock dated April ____, 1997, pursuant to which such
shares were initially issued. A copy of such Warrant to Purchase
Common Stock is on file at the principal office of the Company.
SECTION 16. EXCHANGE OF WARRANT; NO REDEMPTION.
(a) This Warrant is divisible into warrants of
smaller denominations or fractional warrants, and may be exchanged upon the
surrender hereof, accompanied by written instructions with respect to such
exchange, by the Warrant Holder at the office of the Company set forth in
Section 19 hereof for new Warrants of like provisions representing in the
aggregate the right to subscribe for and purchase the number of shares which may
be subscribed for and purchased hereunder from time to time after giving effect
to all the provisions hereof.
(b) This Warrant may not be called or redeemed
by the Company without the express written consent of the Warrant Holder.
SECTION 17. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this
Warrant shall be mutilated, lost, stolen or destroyed, the Company shall issue
and deliver, in exchange and substitution for and upon cancellation of the
mutilated Warrant, or in lieu of and substitution for the Warrant lost, stolen
or destroyed, a new Warrant of like tenor and representing an equivalent number
of Warrant Shares, but only upon receipt of evidence satisfactory to the Company
in its reasonable discretion (which, in the appropriate instance, may include a
reasonable certification) from the applicable Warrant Holder of such loss, theft
or destruction of such Warrant and, if requested, indemnity also satisfactory to
it in its reasonable discretion. Applicants for such substitute Warrant shall
also pay such reasonable charges as the Company may prescribe relating to
issuance of such new Warrant. Further, applicants for such substitute Warrant,
other than General Electric Capital Corporation, shall also comply with such
other reasonable assurances to protect the Company, including without
limitation, a request to provide an indemnity bond sufficient in the reasonable
judgment of the Company to protect it from and against any loss that it may
suffer arising out of or relating to the issuance of a replacement Warrant. Any
such new Warrant shall constitute an original contractual obligation of the
Company, whether or not the allegedly lost, stolen, mutilated or destroyed
Warrant shall be enforceable at any time by anyone.
SECTION 18. REPRESENTATIONS OF WARRANT HOLDER. The Warrant
Holder, by the acceptance hereof, represents that:
(a) It is acquiring this Warrant for its own
account for the purpose of investment and not with a view to, or for sale in
connection with, any distribution thereof in violation of the Securities Act.
(b) It understands that this Warrant at the time
of issuance will not be registered under the Securities Act on the ground that
the sale provided for in this Warrant and the issuance of securities hereunder
is exempt from registration under the Securities Act and that the Company's
reliance on such exemption is predicated in part on Warrant Holder's
representations set forth herein.
(c) It has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of Warrant Holder's investment in the Warrant, Warrant Holder has the
ability to bear the economic risks of such investment, and Warrant Holder has no
need for liquidity with respect to this Warrant.
(d) It understands that this Warrant may not be
sold, transferred, or otherwise disposed of without registration under the
Securities Act or an exemption therefrom, and that in the absence of an
effective registration statement covering this Warrant or an available exemption
from registration under the Securities Act, this Warrant may need to be held
indefinitely.
(e) It represents that the Warrant Holder is an
"accredited investor" as that term is defined in Rule 501 promulgated by the
Commission pursuant to the Securities Act.
(f) It has obtained, in its judgment, sufficient
information from the Company to evaluate the merits and risks of an investment
in this Warrant.
SECTION 19. NOTICE. All notices and other communications under this
Warrant shall be (a) in writing (which shall include communications by telex or
other facsimile transmission, promptly construed in writing), (b) sent by
registered or certified mail, postage prepaid, return receipt requested, or
delivered by hand, and (c) be given at the following respective addresses and
telecopier and telephone numbers and to the attention of the following Persons:
(i) if to the Company, to it at:
5425 Robin Hood Road
Suite 101A
Norfolk, Virginia 23513
Attention: President
Facsimile No.: (757) 858-4073
Telephone No.: (757) 858-1400
with copies to:
John M. Paris, Esquire
Kaufman & Canoles
Post Office Box 3037
Norfolk, Virginia 23514
Facsimile No.: (757) 624-3169
Telephone No.: (757) 624-3181
(ii) if to the Warrant Holder, to him at:
Nicholas L. Calabrese, Esquire
Auto Financial Services
General Electric Capital Corporation
600 Hart Road
Barrington, Illinois 60010
Facsimile No.: (847) 304-3444
Telephone No.: (847) 304-3374
with copies to:
William L. Pitman, Esquire
Williams, Mullen, Christian & Dobbins
Post Office Box 1320
Richmond, Virginia 23210-1320
Facsimile No.: (804) 783-6456
Telephone No.: (804) 783-6474
or at such other address, telecopier or telephone number or to the
attention of such other person as the party to which such information pertains
may hereafter specify for the purpose in a notice to the other party.
SECTION 20. JUDICIAL PROCEEDINGS. Any judicial proceeding brought
against the Company with respect to this Warrant may be brought in any court of
competent jurisdiction in the Commonwealth of Virginia, and, by execution and
delivery of this Warrant, the Company and the Warrant Holder (a) accept,
generally and unconditionally, the nonexclusive jurisdiction of such courts and
any related appellate courts, and (b) irrevocably waive any objection it may now
or hereafter have as to the venue of any such suit, action or proceedings
brought in such court or that such court is an inconvenient forum. Nothing
herein shall affect the right to serve process in any manner permitted by law or
shall limit the right of the Warrant Holder to bring proceedings against the
Company in the courts of any other jurisdiction.
SECTION 21. MISCELLANEOUS. This Warrant and any term hereof may be
changed, waived, discharged, or terminated only by an instrument in writing
signed by the party or holder hereof against which enforcement of such change,
waiver, discharge or termination is sought. The headings in this Warrant are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof. This Warrant shall be interpreted, construed and enforced in accordance
with the laws of the Commonwealth of Virginia, exclusive, however, of such
Commonwealth's rules respecting the choice of law.
SECTION 22. DATE. The date of this Warrant is as of April 4, 1997.
This Warrant, in all events, shall be wholly void and of no effect after the
close of business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 15 shall continue in full force and
effect after such date as to any Warrant Shares issued on or prior to the
Expiration Date upon the exercise of this Warrant.
[ Intentionally left blank ]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its duly authorized officers and its corporate seal to be hereunto
affixed as of the ____ day of April, 1996.
TFC ENTERPRISES, INC.
By:____________________
Name:__________________
Title:_________________
ATTEST:
By:______________________________
Name:___________________________
Title:____________________________
ACCEPTED AND AGREED:
GENERAL ELECTRIC CAPITAL CORPORATION
0By:_____________________________
Name:__________________________
Title:___________________________
<PAGE>
EXHIBIT A
WARRANT (NO. 2)
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER IF HE DESIRES
TO EXERCISE THIS WARRANT.
TFC ENTERPRISES, INC.
The undersigned hereby exercises the right to purchase _____ Warrant
Shares covered by this Warrant according to the conditions thereof and herewith
makes payment of $______________, the aggregate Warrant Exercise Price of such
Warrant Shares, in full.
--------------------------------
DATE:__________________________
<PAGE>
EXHIBIT B
Address:
- ------------------------------
- ------------------------------
Attention: President
RE: Exercise of Warrant (No. 2), Dated as of April ____, 1997
Dear Sirs:
In connection with the undersigned's purchase of _____ shares of the
Common Stock of TFC Enterprises, Inc., upon exercise of the Warrant therefor
(the "Purchased Shares"), the undersigned confirms and agrees as follows:
1. As the purchaser of the Purchased Shares in a transaction not
registered under the Securities Act of 1933 (the "Act"), the undersigned is
purchasing such Purchased Shares for its own account for investment and (subject
to the disposition of its property being at all times within its control) not
with a view to any resale, distribution or other disposition thereof; and the
undersigned is proceeding on the assumption that it must bear the economic risk
of the investment for an indefinite period, since the Purchased Shares may not
be sold except as provided in paragraph 2 below.
2. The undersigned agrees that, if in the future the undersigned
should decide to dispose of such Purchased Shares (such disposition not being
presently foreseen or contemplated), the undersigned will not offer, sell,
transfer or exchange such Purchased Shares, except (a) pursuant to Section 15 of
the Warrant and (b) under the conditions that would not violate the Act.
3. The undersigned is purchasing such Purchased Shares
pursuant to an exemption from the registration requirements of the Act.
------------------------------------------
DATE:____________________________________
<PAGE>
EXHIBIT C
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
<PAGE>
EXHIBIT D
LIST OF OPTIONS AND RIGHTS TO ACQUIRE COMMON STOCK
TFC ENTERPRISES, INC.
OPTION HOLDER NUMBER PRICE TERM
SHARES
- ------------------------------------------ ----------------- ---------------
Charles M. Johnson 17,390 $11.50 5/9/95-12/31/99
14,632 $11.50 5/9/95-12/31/99
Joseph R. Becka 17,390 $11.50 5/9/95-12/31/99
153,590 $11.50 5/9/95-12/31/99
George R. Kouri 17,390 $11.50 5/9/95-12/31/99
193,986 $11.50 5/9/95-12/31/99
Preston K. Gregory 7,436 $11.50 5/9/95-12/31/99
14,632 $11.50 5/9/95-12/31/99
Ronald G. Tray 39,679 $11.50 5/9/95-12/31/99
David W. Karsten 100,000 $1.125 1/1/97-12/31/2006
Ronald G. Tray 50,000 $1.25 1/1/97-12/31/2006
Robert S. Raley, Jr. 200,000 $1.44 1/1/97 - 12/31/2006
*General Electric Capital
Corporation 567,640 $1.00 12/20/96-3/31/2002
* The Warrant granted to General Electric Capital Corporation on December 20,
1996, for 567,640 Warrant Shares was amended by that certain Allonge, dated as
of the date of this Agreement, to reduce the Exercise Price from $2.00 to $1.00
per share and to change the Expiration Date of the Warrant from 12/31/2000 to
3/31/2002.
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (the
"Agreement"), dated as of April 4, 1997, is made between TFC ENTERPRISES, INC.,
a Delaware corporation (the "Company") and GENERAL ELECTRIC CAPITAL CORPORATION,
a New York corporation ("GECC") and amends and restates that certain
Registration Rights Agreement, dated as of December 20, 1996 between the Company
and GECC and does not constitute a novation.
RECITALS:
A. THE Finance Company ("TFC"), a Virginia corporation and
subsidiary of the Company, entered into a certain Amended and Restated Motor
Vehicle Installment Contract Loan and Security Agreement, dated as of December
20, 1996 (the "Loan Agreement"), whereby, among other things, GECC agreed to
make loans to TFC pursuant to the terms thereof, and which agreement is
guaranteed by the Company.
B. As consideration for GECC entering into the Loan Agreement, the
Company issued to GECC a certain Warrant to Purchase Common Stock, dated
December 20, 1996, (including any divisions thereof, the "First Warrant"),
whereby GECC was granted rights to purchase shares of the Common Stock (as
hereinafter defined) of the Company. The Company also entered into a
Registration Rights Agreement with GECC, dated December 20, 1996 (the "Original
Registration Rights Agreement") in order to provide certain registration rights
to GECC in order to facilitate the distribution of such shares of Common Stock
purchasable under the First Warrant.
C. TFC is currently in default under the Loan Agreement and GECC has
agreed to restructure the loans under the Loan Agreement and to pay off another
creditor of the Company, namely, Nationsbank, N.A. (the "Loan Restructure"). In
connection with the Loan Restructure, TFC and GECC executed Amendment No. 1,
dated as of the date hereof (the "Amendment," and together with the Loan
Agreement, the "Amended Loan Agreement"), in order to set forth the terms and
conditions of the Loan Restructure.
D. As consideration for GECC entering into the Amendment,
the Company is required to issue to GECC a warrant for additional shares of
Common Stock of the Company, pursuant to that certain Warrant (No. 2) to
Purchase Common Stock, dated as of the date hereof (including any divisions
thereof, the "Second Warrant").
E. As further consideration for GECC entering into the Amendment,
the Company is required to grant GECC registration rights with respect to the
Common Stock purchasable under the Second Warrant. It is the desire of the
Company and GECC to amend and restate the Original Registration Rights Agreement
to provide for registration rights with respect to the Common Stock purchasable
under both the First Warrant and the Second Warrant. For the purposes of this
Agreement, the First Warrant and the Second Warrant, together, shall be referred
to as the "Warrant."
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, in the Loan Agreement and in the Warrant, the
Company and GECC hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. For purposes of this Agreement, the
following terms have the following meanings:
(a) "AFFILIATE" and "ASSOCIATE" shall have the
respective meanings ascribed to such terms in Rule 12b-2 under the Exchange Act
as in effect on the date of this Agreement.
(b) "BLUE SKY FILING" shall mean a filing made
in connection with the registration or qualification of the GECC Shares under a
particular state's or similar jurisdiction's securities or blue sky laws.
(c) "BUSINESS DAY" shall mean a day on which
the principal offices of the SEC in Washington, D.C. are open to accept filings,
or in the case of determining a date on which any payment is due, a day other
than a Saturday, Sunday or a day on which banking institutions in the
Commonwealth of Virginia are authorized or obligated by law or required by
executive order to be closed.
(d) "COMMON STOCK" shall mean all shares now or
hereafter authorized of the Company's Common Stock, $.01 par value per share,
and stock of any other class into which such shares may hereafter be changed.
(e) "COUNSEL TO THE HOLDERS" shall mean the
single law firm from time to time representing the Holders, as appointed by the
Holders of a majority in number of the GECC Shares.
(f) "EFFECTIVE DATE" shall mean the date on
which the Registration Statement provided in Section 2.2 is initially declared
effective by the SEC.
(g) "EFFECTIVE PERIOD" shall have the meaning
set forth in Section 2.2(b) hereof.
(h) "EXCHANGE ACT" shall mean the Securities
Exchange Act of 1934, as amended.
(i) "GECC SHARES" shall mean collectively (i)
the Warrant Shares and (ii) the Warrant, if applicable pursuant to Section
2.1(b). Securities shall cease to be GECC Shares (and therefore cease to be
entitled to the benefits of this Agreement) in accordance with Section 2.1(a).
(j) "HOLDER" shall mean, collectively, (i) GECC and (ii)
any successor holder of GECC Shares pursuant to Section 5.3.
(k) "INSPECTORS" shall have the meaning set
forth in Section 2.4(k) hereof.
(l) "NASD" shall mean the National Association
of Securities Dealers, Inc.
(m) "NASDAQ" shall mean the NASDAQ Stock Market.
(n) "PERSON" shall have the meaning set forth in
Section 3(a)(9) of the Exchange Act as in effect on the date of this Agreement.
(o) "PROSPECTUS" shall mean the prospectus
included in any Registration Statement (including a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the GECC Shares covered by such Registration
Statement and all other amendments and supplements to such prospectus, including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in any such prospectus.
(p) "RECORDS" shall have the meaning set forth
in Section 2.4(k) hereof.
(q) "REGISTRATION EXPENSES" shall mean any and
all out-of-pocket expenses incident to the Company's performance of or
compliance with this Agreement, including, without limitation, (i) all
registration and filing fees with the SEC, NASD and NASDAQ, or any other
exchange or automated interdealer quotation system as then applicable, (ii) all
fees and expenses of complying with state securities or blue sky laws, (iii) all
printing, messenger and delivery expenses, (iv) all fees and expenses incurred
in connection with the listing of the GECC Shares on NASDAQ, or any other
exchange or automated interdealer quotation system as then applicable, (v) the
fees and disbursements of the Company's counsel and of its independent public
accountants, (vi) the reasonable fees and expenses of any special experts
retained by the Company in connection with the requested registration, (vii)
one-half of the reasonable fees and expenses of Counsel to the Holders, and
(viii) out-of-pocket expenses of underwriters, if any, paid by the issuer to the
extent provided for in any underwriting agreement. Registration Expenses shall
not include (x) any fees or disbursements of counsel to the Holders (other than
Counsel to the Holders) and (y) underwriting discounts and commissions, and
transfer taxes, if any, relating to the sale or disposition of the GECC Shares.
(r) "REGISTRATION STATEMENT" shall mean one or
more registration statements of the Company under the Securities Act that cover
any portion of the GECC Shares pursuant to the terms of this Agreement,
including the related Prospectus, all amendments and supplements to such
registration statement, including pre- and post-effective amendments, all
exhibits thereto and all material incorporated by reference or deemed to be
incorporated by reference in any such registration statement.
(s) "SEC" shall mean the Securities and Exchange
Commission.
(t) "SECURITIES ACT" shall mean the Securities
Act of 1933, as amended.
(u) "WARRANT SHARES" shall mean the 1,135,280
shares of Common Stock purchasable by the Holders under the Warrant, as adjusted
from time to time as provided therein, and including but not limited to, any
securities paid, issued or distributed in respect of any shares of Common Stock
by way of stock dividend or distribution or stock split or in connection with a
combination of shares, recapitalization, reorganization, merger, consolidation
or otherwise.
1.2 Other Definitional Provisions. Except as otherwise
specified herein:
(a) All references herein (i) to any Person
shall be deemed to include such Person's successors and assigns, and (ii) to any
applicable law defined or referred to herein, shall be deemed references to such
applicable laws as same may have been or may be amended or supplemented from
time to time.
(b) Whenever used in this Agreement, the words
"herein," "hereof" and "hereunder," and words of similar import, shall refer to
this Agreement as a whole and not to any provision of this Agreement, and the
words "Section" and "Exhibit" shall refer to Sections of, and Exhibits to, this
Agreement unless otherwise specified.
(c) When the context so requires, the neuter
gender includes the masculine or feminine, and the singular number includes the
plural, and vice versa.
ARTICLE II REGISTRATION OF SECURITIES
2.1 Securities Subject to this Agreement.
(a) The securities entitled to the benefits of
this Agreement are the Warrant Shares and the Warrant (subject to Section
2.1(b)). For the purposes of this Agreement, any such securities will no longer
be subject to this Agreement and no longer deemed "GECC Shares" when and to the
extent that (i) a Registration Statement covering such securities has been
declared effective under the Securities Act and such securities have been
disposed of pursuant to such effective Registration Statement, (ii) such
securities are sold or otherwise transferred pursuant to Rule 144 under the
Securities Act, (iii) such securities shall have been otherwise transferred or
disposed of, new certificates therefor not bearing a legend restricting further
transfer shall have been delivered by the Company and, at such time, subsequent
transfer or disposition of such securities shall not require registration or
qualification of such securities under the Securities Act or any similar state
law then in force, or (iv) such securities have ceased to be outstanding
following the issuance thereof.
(b) Section 2.1(a) notwithstanding, the Warrant
shall be entitled to the benefits of this Agreement and deemed to be a "GECC
Share" only to the extent necessary to provide the benefits hereunder (including
registration) with respect to the Warrant Shares.
2.2 Registration Requirements.
(a) The Company shall: (i) on or prior to
September 5, 1997, file a Registration Statement with respect to the GECC Shares
with the SEC; and (ii) use its best efforts to cause such Registration Statement
to be declared effective by the SEC.
(b) The Company shall use its best efforts to
maintain the effectiveness of any registration relating to the GECC Shares
pursuant to Section 2.2(a), and the listing of any such Warrant Shares on NASDAQ
or any exchange or automated interdealer quotation system on which the Common
Stock is then listed or quoted, for the period from the Effective Date to and
including March 31, 2002, subject to extension as provided in Sections 2.2(c),
2.4(e) and 2.4(l) (the "Effective Period").
(c) For each Holdback Period required by the
Company under Article III of this Agreement, the Effective Period specified in
Section 2.2(b) above shall be extended for the number of Business Days of the
relevant Holdback Period.
(d) The obligations of the Company under this
Section 2.2 are in addition to, and independent of, the Company's obligation to
provide piggy-back registration rights under Section 2.3. In no event shall a
registration of GECC Shares, or the offer by the Company of such registration,
pursuant to this Section 2.2 be deemed to preclude, be in substitution for, or
otherwise relieve the Company of its obligations under, Section 2.3, or vice
versa.
2.3 Piggy-Back Registration Rights.
(a) Whenever prior to the Effective Date, the
Company shall propose to file a registration statement under the Securities Act
relating to the public offering by or through one or more underwriters of Common
Stock for the Company's own account (other than pursuant to a registration
statement on Form S-4 or Form S-8 or any successor forms, or filed in connection
with an exchange offer or an offering of securities solely to existing
stockholders or employees of the Company) and on a form and in a manner that
would permit registration of GECC Shares for sale to the public under the
Securities Act, the Company shall (i) give written notice at least 20 Business
Days prior to the filing thereof to each Holder, specifying the approximate date
on which the Company proposes to file such registration statement and advising
such Holder of its right to have any or all of the GECC Shares then held by it
included among the securities to be covered thereby and (ii) at the written
request of any such Holder given to the Company within 15 days after such
Holder's receipt of written notice from the Company, include among the
securities covered by such registration statement the number of GECC Shares
which such Holder (a "Requesting Holder") shall have requested be so included
(subject, however, to reduction in accordance with Section 2.3(b) below).
(b) If the lead managing underwriter selected by
the Company for an underwritten offering pursuant to Section 2.3(a) determines
that marketing factors require a limitation on the number of shares of GECC
Shares to be offered and sold by Requesting Holders in such offering, there
shall be included in the offering only that number of GECC Shares, if any, that
such lead managing underwriter reasonably and in good faith believes will not
jeopardize the success and pricing of the offering of all the shares of Common
Stock that the Company desires to sell for its own account. In such event and
provided the lead managing underwriter has so notified the Company in writing,
the shares of Common Stock to be included in such offering shall consist of (i)
first, the securities the Company proposes to sell, and (ii) second, the number,
if any, of GECC Shares requested to be included in such registration that, in
the opinion of such lead managing underwriter, can be sold without jeopardizing
the success of the offering of all the securities that the Company desires to
sell for its own account. If the Requesting Holders of GECC Shares shall number
greater than one, then such amount set forth in (ii) above shall be allocated on
a pro rata basis among such Requesting Holders based on the number of GECC
Shares that each such Requesting Holder has requested to be so included.
(c) Nothing in this Section 2.3 shall create any
liability on the part of the Company to the Holders if the Company for any
reason should decide not to file a registration statement proposed to be filed
under Section 2.3(a) or to withdraw such registration statement subsequent to
its filing, regardless of any action whatsoever that a Holder may have taken,
whether as a result of the issuance by the Company of any notice hereunder or
otherwise.
(d) Each Holder of GECC Shares to be included in
any underwritten offering pursuant to Section 2.3(a) above shall be a party to
the underwriting agreement between the Company and such underwriters and the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such Holders and the conditions precedent to the obligations
of such Holders under such underwriting agreement shall be satisfactory to the
Holders of a majority in number of the GECC Shares being so sold.
(e) Any such Holder shall not be required to
make any representations or warranties to the Company or its underwriters other
than representations or warranties regarding such Holder, title to its
securities and such Holder's intended method of distribution, but shall agree to
the indemnities and rights to contribution to the effect and to the extent
provided in Article IV hereof.
(f) The Company may also require that the GECC
Shares requested for inclusion pursuant to this Section 2.3 be included in the
offering on the same financial terms (to the extent feasible and applicable) as
the securities otherwise being sold through the underwriters.
(g) Subject to Sections 2.3(d), (e), and (f), no
Holder may participate in any underwritten offering pursuant to this Section 2.3
unless such Holder completes and executes all questionnaires, powers of
attorney, custody agreements, indemnities, underwriting agreements and other
documents reasonably required under the terms of such underwriting arrangement.
2.4 Registration Procedures. If and whenever the Company is
required to use its best efforts to effect or cause the registration of any GECC
Shares under the Securities Act as provided in this Agreement, the Company will:
(a) prepare and file with the SEC one or more
Registration Statements covering the GECC Shares on any form or forms for which
the Company then qualifies or that counsel for the Company shall deem
appropriate, and which form shall be available for the sale of the GECC Shares
in accordance with the intended methods of distribution thereof, and use its
best efforts to cause such Registration Statement to become effective;
(b) prepare and promptly file with the SEC pre-
and post-effective amendments to any such Registration Statement and such
amendments and supplements to the Prospectus used in connection therewith as may
be necessary to maintain the effectiveness of such registration or as may be
required by the rules, regulations or instructions applicable to the
registration form utilized by the Company or by the Securities Act or rules and
regulations thereunder necessary to keep such Registration Statement effective
(i) in the case of the registration required by Section 2.2, during the
Effective Period and (ii) in the case of a piggy-back registration under Section
2.3, for up to 90 days, and cause the Prospectus as so supplemented to be filed
pursuant to Rule 424 under the Securities Act, and to otherwise comply with the
provisions of the Securities Act with respect to the disposition of the GECC
Shares covered by such Registration Statement;
(c) furnish to each Holder such number of copies
of any Registration Statement and each pre- and post-effective amendment
thereto, any Prospectus or Prospectus supplement and such other documents as
such Holder may reasonably request in order to facilitate the disposition of the
GECC Shares by such Holder (the Company hereby consenting to the use (subject to
the limitation set forth in the last paragraph of this Section 2.4) of the
Prospectus or any amendment or supplement thereto in connection with such
disposition);
(d) use its best efforts to register or qualify
the GECC Shares under such other securities or blue sky laws of such
jurisdictions as any Holders may reasonably request, and do any and all other
acts and things that may be reasonably necessary or advisable to enable such
Holders to consummate the disposition in such jurisdictions of the GECC Shares,
except that the Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction where, but
for the requirements of this Section 2.4(d), it would not be obligated to be so
qualified, to subject itself to taxation in any such jurisdiction, or to consent
to general service of process in any such jurisdiction;
(e) notify each Holder at any time when a
Prospectus is required to be delivered under the Securities Act while the GECC
Shares are subject to this Agreement, of the Company's becoming aware that a
Prospectus included in a Registration Statement, as then in effect, includes an
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading (the period
during which Holders are required to refrain from effecting public sales or
distributions in such case being referred to as a "Section 2.4(e) Period"), and
prepare and furnish to each Holder a reasonable number of copies of an amendment
to such Registration Statement or related Prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such GECC Shares, such
Prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and the time during which such Registration Statement
shall remain effective pursuant to Section 2.2 shall be extended by the number
of Business Days of the Section 2.4(e) Period; provided, however, that the time
required to make effective any post-effective amendments required to be filed by
the Company to (i) comply with Section 10(a)(3) of the Securities Act or (ii)
reflect any facts or events arising after the Effective Date, which,
individually or in the aggregate, represent a material fundamental change in the
information set forth in the Registration Statement shall not be included within
the Section 2.4(e) Period.
(f) notify each Holder,
(i) when the Prospectus or any
Prospectus supplement or pre- or post-effective amendment has been filed, and,
with respect to the Registration Statement or any post-effective amendment, when
the same has become effective;
(ii) of any request by the SEC for
amendments or supplements to any Registration Statement or Prospectus or for
additional information;
(iii) of the issuance by the SEC of
any stop order of which the Company or its counsel is aware or should be aware
suspending the effectiveness of any Registration Statement or any order
preventing the use of a related Prospectus, or the initiation or any threats of
any proceedings for such purposes; and
(iv) of the receipt by the Company of
any written notification of the suspension of the registration or qualification
of any of the GECC Shares for sale in any jurisdiction or the initiation or any
threats of any proceeding for that purpose;
(g) otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC, and make available to its
shareholders, as soon as reasonably practicable, an earnings statement that
shall satisfy the provisions of Section 11(a) of the Securities Act, provided
that the Company shall be deemed to have complied with this paragraph if it has
complied with Rule 158 under the Securities Act;
(h) use its best efforts to cause all such GECC
Shares to be listed on any securities exchange or automated quotation system on
which the Common Stock has been listed, if such GECC Shares are not already so
listed and if listing is then permitted under the rules of such exchange or
automated quotation system, and to provide a transfer agent and registrar for
the GECC Shares covered by any Registration Statement no later than the
effective date of such Registration Statement;
(i) cooperate with the Holders to facilitate the
timely preparation and delivery of certificates (not bearing any restrictive
legends) representing the securities to be sold under any Registration
Statement, and enable such securities to be in such denominations and registered
in such names as such Holders may request;
(j) if a Holder reasonably requests in
connection with any underwritten offering pursuant to Section 2.3, incorporate
in a Prospectus supplement or post-effective amendment such information as the
managing underwriters and the Holders of a majority in number of the GECC Shares
being sold agree should be included therein relating to the plan of distribution
with respect to such GECC Shares, including, without limitation, information
with respect to the principal amount of GECC Shares being sold to underwriters,
the purchase price being paid therefor by such underwriters and with respect to
any other terms of the underwritten offering of the GECC Shares to be sold in
such offering and make all required filings of such Prospectus supplement or
post-effective amendment as promptly as practicable upon being notified of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment;
(k) provide any Holder and any attorney,
accountant or other agent retained by any such Holder (collectively, the
"Inspectors") with reasonable access during normal business hours to appropriate
officers of the Company and its subsidiaries to ask questions and to obtain
information that any such Inspector reasonably requests and make available for
inspection all financial and other records and other information, pertinent
corporate documents and properties of any of the Company and its subsidiaries
and affiliates (collectively, the "Records"), as shall be reasonably necessary
to enable them to exercise their due diligence responsibility; provided,
however, that the Records that the Company determines, in good faith, to be
confidential and that it notifies the Inspectors in writing are confidential
shall not be disclosed to any Inspector unless such Inspector signs or is
otherwise bound by a confidentiality agreement reasonably satisfactory to the
Company. The Company will furnish to each Holder at least five Business Days
prior to the filing thereof, a copy of any Registration Statement or any
amendment or supplement thereto that reflects new revised information concerning
one or more of the Holders, and shall not file any such Registration Statement,
amendment or supplement to which any Holder shall have reasonably objected on
the grounds that such Registration Statement, amendment or supplement does not
comply in all material respects with the requirements of the Securities Act or
the rules and regulations thereunder;
(l) in the event of the issuance of any stop
order of which the Company or its counsel is aware or should be aware suspending
the effectiveness of the Registration Statement or of any order suspending or
preventing the use of any related Prospectus or suspending the registration or
qualification of any GECC Shares for sale in any jurisdiction, the Company will
use its best efforts promptly to obtain its withdrawal, and the Effective Period
for which the Registration Statement under Section 2.2 shall be kept effective
shall be extended by the number of Business Days equal to the number of Business
Days between the issuance and withdrawal of any stop orders (a "Section 2.4(l)
Period"); and
(m) in any Registration Statement under Section
2.2, provide with respect to the plan of distribution that a Holder may offer
and sell his GECC Shares by one or more of the following methods: (i) ordinary
brokerage transactions by one or more brokers acting as agent for the Holder, at
a price or prices related to the then current market price of the Common Stock,
with such commissions to be paid by the Holder to the broker as shall be agreed
upon by them, (ii) purchases by a broker or dealer as principal and resale by
such broker or dealer for its own account at a price or prices related to the
then current market price of the Common Stock, less such discount, if any, as
shall be agreed upon by the Holder and such broker or dealer, (iii) by a
combination of the methods described in (i) and (ii) above, (iv) privately
negotiated transactions at such prices as may be agreed upon, and (v) sales made
pursuant to Rule 144 under the Securities Act, where applicable.
Each Holder shall furnish to the Company in writing such information
regarding it and pertinent to the disclosure requirements relating to the
registration and the distribution of the GECC Shares as the Company may
reasonably request from time to time. Each Holder agrees to notify the Company
as promptly as practicable of any inaccuracy or change in information previously
furnished by it to the Company or of the happening of any event in either case
as a result of which a Registration Statement, a Prospectus, or any amendment or
supplement thereto contains an untrue statement of a material fact regarding it
or omits to state any material fact regarding it required to be stated therein
or necessary to make the statements therein not misleading and to furnish
promptly to the Company any additional information required to correct and
update any previously furnished information or required so that such
Registration Statement, Prospectus, or amendment or supplement, shall not
contain, with respect to such Holder, an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading.
Each Holder agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Sections 2.4(e) or 2.4(l)
above, it will forthwith discontinue disposition of any GECC Shares pursuant to
the Prospectus or Registration Statement covering such GECC Shares until such
Holder's receipt of the copies of the amended or supplemented Prospectus
contemplated by Section 2.4(e) or the withdrawal of any stop order contemplated
by Section 2.3(l), and, if so directed by the Company, such Holder will deliver
to the Company all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such GECC Shares at the time of
receipt of such notice.
2.5 Registration Expenses. The Company will pay all Registration
Expenses in connection with all registrations of GECC Shares hereunder, and each
Holder shall pay (x) any fees and disbursements of counsel to such Holder (other
than Counsel to the Holders), (y) one-half of the reasonable fees and expenses
of Counsel to the Holders and (z) all underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of its respective
GECC Shares.
2.6 Reports Under the Exchange Act. The Company agrees to:
(a) file with the SEC in a timely manner all
reports and other documents required of the Company under the Exchange Act; and
(b) furnish to any Holder, during the Effective
Period, forthwith upon request (i) a written statement of the Company that it
has complied with the current public information reporting requirements of Rule
144 under the Securities Act and the Exchange Act and (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company with the SEC under the Exchange Act.
ARTICLE III
HOLDBACK PERIOD
If one or more underwritten public offerings of shares of Common
Stock (other than the Warrant Shares) occur during the Effective Period, then,
in connection with each such public offering, the Company may require the
Holders and their respective Associates and Affiliates to refrain from, and each
Holder and its Associates and Affiliates will refrain from, selling any of the
Warrant Shares for a period determined by the Company but not to exceed
one-hundred twenty (120) days (each such period referred to as a "Holdback
Period") so long as the Company delivers written notice to such Holder of the
Company's requirement of a Holdback Period, and the length of such Holdback
Period, no less than five (5) Business Days prior to the inception of the
Holdback Period; provided, that the Company may so require each Holder to
refrain from selling any of the Warrant Shares during no more than two such
Holdback Periods during the Effective Period.
ARTICLE IV
INDEMNIFICATION; CONTRIBUTION
4.1 Indemnification by the Company. The Company will, and hereby
does indemnify and hold harmless, to the fullest extent permitted by law, and,
subject to Section 4.3 below, defend each Holder, its officers, directors,
agents, trustees, stockholders and each other Person, if any, who controls
Holder (within the meaning of the Securities Act), against any and all losses,
claims, damages, liabilities and expenses, joint or several, to which they or
any of them may become subject under the Securities Act or any other statute or
common law, including any amount paid in settlement of any litigation, commenced
or threatened, and to reimburse them for any reasonable legal or other expenses
incurred by them in connection with investigating any claims and defending any
actions, insofar as any such losses, claims, damages, liabilities, expenses or
actions arise out of or are based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
any pre- or post-effective amendment thereto or in any Blue Sky Filing, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading or
(ii) any untrue statement or alleged untrue statement of a material fact
contained in the Prospectus, or the omission or alleged omission to state
therein a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading
(unless such statement is corrected and the Company has furnished copies of such
corrected Prospectus to such Holder under Section 2.4(e) above); provided,
however, that the indemnification agreement contained herein shall not (i) apply
to such losses, claims, damages, liabilities, expenses or actions arising out
of, or based upon, any such untrue statement or alleged untrue statement, or any
such omission or alleged omission, if such statement or omission was made in
reliance upon and in conformity with written information furnished to the
Company by such indemnified party from time to time specifically for use in
connection with preparation of the Registration Statement, the Prospectus, any
such amendment or supplement thereto or any Blue Sky Filing or (ii) inure to the
benefit of any Person, to the extent that any such loss, claim, damage or
expense arises out of such Person's failure to send or give a copy of the
Prospectus, as the same may be then supplemented or amended, to the Person
asserting an untrue statement or alleged untrue statement, or omission or
alleged omission, at or prior to the written confirmation of the sale of the
GECC Shares to such Person if such statement or omission was corrected in the
Prospectus. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of a Holder or controlling Person and
shall survive the transfer of such securities by a Holder.
4.2 Indemnification by the Holders. Each Holder will, and hereby
does, indemnify and hold harmless and, subject to Section 4.3 below, defend (in
the same manner and to the same extent as set forth in Section 4.1 above) the
Company, its officers, directors, agents, trustees, stockholders and each other
Person, if any, who controls the Company (within the meaning of the Securities
Act), with respect to any such untrue statement or alleged untrue statement in,
or any such omission or alleged omission from, any Registration Statement, any
Prospectus, or any amendment or supplement thereto, if such statement or
omission was made in reliance upon and in conformity with written information
furnished to the Company by such Holder from time to time specifically for use
in connection with preparation of the Registration Statement, the Prospectus,
and any such amendment or supplement thereto. Such indemnity shall remain in
full force and effect, regardless of any investigation made by or on behalf of
the Company or such other indemnified Person and shall survive the transfer of
such securities by a Holder.
4.3 Notices of Claims. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in Sections 4.1 and 4.2 above, such indemnified party will
give, if a claim in respect thereof is to be made against an indemnifying party,
written notice to the latter of the commencement of such action, provided that
the failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under this Article IV, except
to the extent that the indemnifying party is actually prejudiced in any material
respect by such failure to give notice. In case any such action is brought
against an indemnified party, the indemnifying party shall be entitled to
participate in and, unless in such indemnified party's reasonable judgment a
material conflict of interest between such indemnified and indemnifying parties
exists in respect of such claim, to assume the defense thereof, jointly with any
other indemnifying party similarly notified to the extent that it may wish, with
counsel chosen by the indemnifying party who is reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of reasonable investigation. If the
indemnifying party advises an indemnified party that it will contest a claim for
indemnification hereunder, or fails, within thirty (30) days of receipt of any
written indemnification notice to notify, in writing, such Person of its
election to defend, settle or compromise, at its sole cost and expense, any
action, proceeding or claim (or discontinues its defense at any time after it
commences such defense), then the indemnified party may, at its option, defend,
settle or otherwise compromise or pay such action or claim. In any event, unless
and until the indemnifying party elects in writing to assume and does so assume
the defense of any such claim, proceeding or action, the indemnified party's
reasonable costs and expenses arising out of the defense, settlement or
compromise of any such action, claim or proceeding shall be losses subject to
indemnification hereunder. The indemnified party shall cooperate fully with the
indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party that relates
to such action or claim. The indemnifying party shall keep the indemnified party
fully informed at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense, except that the indemnifying party shall be liable for such reasonable
costs and expenses if, in such indemnified party's reasonable judgment, a
material conflict of interest between such indemnified and indemnifying parties
may exist as described above. If the indemnifying party does not assume such
defense, the indemnified party shall keep the indemnifying party informed at all
times as to the status of the defense; provided, however, that the failure to
keep the indemnifying party so informed shall not affect the obligations of the
indemnifying party hereunder. No indemnifying party shall be liable for any
settlement of any action, claim or proceeding effected without its written
consent; provided, however, that the indemnifying party shall not unreasonably
withhold, delay or condition its consent. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of any judgment or enter
into any settlement that does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability with respect to such claim or litigation.
4.4 Indemnification Payments. The indemnification required by this
Article IV shall be made by periodic payments of the amount thereof during the
course of the investigation or defense as and when bills are received or
expense, loss, damage or liability is incurred, subject to the receipt of such
documentary support therefor as the indemnifying party may reasonably request.
4.5 Contribution. If the indemnification provided for in this
Article IV is unavailable to or insufficient to hold harmless an indemnified
party otherwise entitled to be indemnified thereunder in respect to any losses,
claims, damages and expenses (or actions or proceedings, whether commenced or
threatened, in respect thereof) referred to therein, then the indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities, expenses or actions in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and the
indemnified party in connection with the statements or omissions that resulted
in such losses, claims, damages, liabilities, expenses or actions; provided,
however, that the liability of each Holder hereunder shall be limited to the
proportion of any such loss, claim, damage, liability or expense that is equal
to the proportion that the net proceeds from the sale of securities sold by each
Holder under such Registration Statement bears to the total net proceeds from
the sale of all securities sold thereunder, but not in any event to exceed the
net proceeds received by such Holder from the sale of GECC Shares covered by
such Registration Statement. The relative fault of the indemnifying party and
the indemnified party shall be determined by reference to whether the untrue
statement or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
indemnifying party or the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and each Holder agree that it would not be
just and equitable if contributions pursuant to this Section 4.5 were determined
by pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to above in this Section 4.5.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who is not guilty of such fraudulent misrepresentation.
4.6 Other Rights and Liabilities. The indemnity and contribution
agreements contained herein shall be in addition to (i) any cause of action or
similar right of the indemnified party against the indemnifying party or others
and (ii) any liabilities the indemnifying party may be subject to pursuant to
the law.
ARTICLE V
MISCELLANEOUS
5.1 Notices, Etc. All notices, requests, demands or other
communications required by or otherwise with respect to this Agreement shall be
in writing and shall be deemed to have been duly given to any party when
delivered personally (by courier service or otherwise), when delivered by
facsimile and confirmed by return facsimile, or seven (7) days after being
mailed by first-class mail, postage prepaid in each case to the applicable
addresses set forth below:
a) if to the Company, to it at:
5425 Robin Hood Road
Suite 101A
Norfolk, Virginia 23513
Attention: President
Facsimile No.: (757) 858-4093
Telephone No.: (757) 858-1400
with copies to:
John M. Paris, Esquire
Kaufman & Canoles
Post Office Box 3037
Norfolk, Virginia 23514
Facsimile No.: (757) 624-3169
Telephone No.: (757) 624-3181
b) if to GECC, to it at:
Nicholas L. Calabrese, Esquire
Auto Financial Services
General Electric Capital Corporation
600 Hart Road
Barrington, Illinois 60010
Facsimile No.: (847) 304-3444
Telephone No.: (847) 304-3374
with copies to:
William L. Pitman, Esquire
Williams, Mullen, Christian & Dobbins
Post Office Box 1320
Richmond, Virginia 23210-1320
Facsimile No.: (804) 783-6456
Telephone No.: (804) 783-6474
or to such other address as such party shall have designated by notice so given
to each other party.
5.2 Amendments, Waivers, Etc. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated except by an
instrument in writing signed by the Company and Holders of at least a majority
in number of the GECC Shares then outstanding.
5.3 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the parties hereto, any Holder other than GECC,
and any successors thereof; provided, however, that any prospective Holder which
is not a party to this Agreement shall have agreed in writing to become a Holder
under this Agreement and to be bound by the terms and conditions hereof. In the
absence of compliance with the foregoing sentence of this Section 5.3, any such
purported assignment shall be null and void.
5.4 Entire Agreement. This Agreement embodies the entire agreement
and understanding among the parties relating to the subject matter hereof and
supersedes all prior agreements and understandings relating to such subject
matter. There are no representations, warranties or covenants by the parties
hereto relating to such subject matter other than those expressly set forth in
this Agreement, the Loan Agreement and the Warrant.
5.5 Specific Performance. The parties acknowledge that money damages
are not an adequate remedy for violations of this Agreement and that any party
may, in its sole discretion, apply to a court of competent jurisdiction for
specific performance or injunctive or such other relief as such court may deem
just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable law, each party waives any
objection to the imposition of such relief.
5.6 Remedies Cumulative. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise or beginning of
the exercise of any thereof by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such party.
5.7 No Waiver. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
5.8 Severability. If any terms of this Agreement or the application
thereof to any party or circumstance shall be held invalid or unenforceable to
any extent, the remainder of this Agreement and the application of such term to
the other parties or circumstances shall not be affected thereby and shall be in
force to the greatest extent permitted by applicable law, provided that in such
event the parties shall negotiate in good faith in an attempt to agree to
another provision (in lieu of the term or application held to be invalid or
unenforceable) that will be valid and enforceable and will carry out the
parties' intentions hereunder.
5.9 Jurisdiction. Each party to this Agreement (i) hereby
irrevocably submits to the exclusive jurisdiction of the Federal courts located
in the Commonwealth of Virginia, and in the event that such Federal courts shall
not have subject matter jurisdiction over the relevant proceeding, then of the
state courts located in the Commonwealth of Virginia, for the purpose of any
action arising out of or based upon this Agreement or relating to the subject
matter hereof or the transactions contemplated hereby, (ii) hereby waives, to
the extent not prohibited by applicable law, and agrees not to assert, by way of
motion, as a defense or otherwise, in any such action, any claim that it is not
subject personally to the jurisdiction of the above-named courts, that its
property is exempt or immune from attachment or execution, that any such
proceeding brought in one of the above-named courts is improper, or that this
Agreement, or the subject matter hereof, may not be enforced in or by such court
and (iii) hereby agrees not to commence any action arising out of or based upon
this Agreement or relating to the subject matter hereof other than before one of
the above-named courts nor to make any motion or take any other action seeking
or intending to cause the transfer or removal of any such action to any court
other than one of the above-named court whether on the grounds of inconvenient
forum or otherwise. Each party hereby consents to service of process in any such
proceeding in any manner permitted by Virginia law, and agrees that service of
process by registered or certified mail, return receipt requested, at its
address specified pursuant to Section 5.1 hereof is reasonably calculated to
give actual notice.
5.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Virginia.
5.11 Name, Captions. The name assigned to this Agreement and
the section captions used herein are for convenience of reference only and shall
not affect the interpretation or construction hereof.
5.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies each signed by less than all, but together signed by all, the
parties hereto.
[ Intentionally left blank ]
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.
TFC ENTERPRISES, INC.
By: _______________________
Its: _______________________
GENERAL ELECTRIC CAPITAL CORPORATION
By: _______________________
Its: _______________________
GUARANTY
IMPORTANT NOTICE: THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION
WHICH CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND
ALLOW THE CREDITOR TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.
As an inducement to General Electric Capital Corporation (the
"Lender") to provide financing to THE Finance Company, a Virginia corporation,
(the "Borrower"), but without in any way binding the Lender to do so, the
undersigned (the "Guarantor") hereby guaranties to the Lender the due, regular
and punctual payment and prompt performance of all debts and other obligations
of any kind or character which the Borrower now owes the Lender or which the
Borrower shall at any time or from time to time hereafter owe the Lender,
without regard to any change in the Borrower's name, entity, or ownership. The
Guarantor also agrees to pay to the Lender all costs incurred by the Lender in
the collection and enforcement of the debts and obligations of the Borrower to
the Lender.
The liability of the Guarantor hereunder is direct, unconditional,
absolute and may be enforced without requiring the Lender first to resort to any
right or remedy the Lender has as to the Borrower or any third parties with
regard to the Borrower's debts and obligations to the Lender or to foreclose or
exhaust any security therefor. The Guarantor shall not have any right of
reimbursement, indemnity, subrogation or security enforceable against the
Borrower, nor otherwise be a creditor of the Borrower, with respect to payments
to the Lender to the extent such rights or creditor status would make payments
to the Lender a preference recoverable from the Lender. Nothing shall discharge
or satisfy the liability of the Guarantor hereunder except the full payment and
performance of all of the Borrower's debts and obligations to the Lender. Any
and all present and future debts and obligations of the Borrower to the
Guarantor are hereby postponed in favor of and subordinated to the full payment
and performance of all present and future debts and obligations of the Borrower
to the Lender.
The Guarantor has made an independent investigation of the financial
condition and affairs of the Borrower prior to entering into this Guaranty and
has not relied upon any representation made by the Lender as to the financial
condition, operation or creditworthiness of the Borrower. Guarantor further
agrees that the Lender shall have no duty or responsibility now or hereafter to
make any investigation or appraisal of the Borrower, or the security for the
Borrower's debts and obligations to the Lender, on behalf of the Guarantor or to
provide the Guarantor with any information which may come to the Lender's
attention now or hereafter, whether or not such information could materially
increase the risk of the Guarantor hereunder.
Notice of acceptance of this Guaranty, of any default by the
Borrower, and of any adverse change in the Borrower's financial condition or of
any other fact which might materially increase the risk of the Guarantor
hereunder is hereby waived. Presentment, protest and demand, and notice of
protest, demand and dishonor are hereby waived. The Guarantor authorizes the
Lender without notice or demand and without affecting the obligations of the
Guarantor hereunder, with respect to any debt or obligation of the Borrower to
the Lender, to extend the time of payment (without limit as to the number or
term of extensions) or waive strict compliance with any other term thereof, to
renew or otherwise modify the terms thereof, to waive or release any security
therefor, to release a guarantor or other party liable therefor, and to enter or
grant any settlement, release, compromise, composition, account stated or agreed
balance with or to the Borrower or any third party, and the Guarantor agrees
that the foregoing actions shall not diminish the Guarantor's obligations
hereunder. THE GUARANTOR WAIVES ANY AND ALL RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATED TO THIS GUARANTY. To the extent
allowed by law, the Guarantor hereby confesses judgment, and acknowledges to be
indebted unto and in favor of the Lender, for the full amount of all obligations
due to the Lender by the Borrower, and consents to the Lender filing this
Guaranty as evidence of judgment.
This Guaranty remains fully enforceable irrespective of any defenses
which the Borrower could assert on the underlying debt, including but not
limited to failure of consideration, breach of warranty, fraud, payment, accord
and satisfaction, strict foreclosure, statute of frauds, bankruptcy, infancy,
statute of limitations, lender liability, and usury. If the Borrower or the
Guarantor should at any time become insolvent or make a general assignment, or a
petition in bankruptcy or any insolvency or reorganization proceedings shall be
filed or commenced by or against the Borrower or the Guarantor, any and all
obligations of the Guarantor pursuant to this Guaranty shall not be lessened by
such petitions, assignments or filings and shall, at the Lender's option,
forthwith become due and payable without notice. In the event of default in the
performance of this Guaranty, the Guarantor agrees to pay all reasonable court
costs, attorney's fees and other expenses paid or incurred by the Lender in the
enforcement hereof.
This Guaranty is a continuing guaranty which shall remain effective
until terminated as provided herein. The Guarantor may terminate this Guaranty
upon at least sixty (60) days prior written notice received by the Lender and
sent by registered or certified mail, return receipt requested. Notwithstanding
such termination, however, this Guaranty shall remain effective as to all
financing provided, or committed to be provided, by the Lender to or for the
benefit of the Borrower prior to the effective date of termination and this
Guaranty shall be continuing and unconditional until the same are fully paid,
performed and discharged.
This Guaranty supersedes all prior writings, and all prior and
contemporaneous oral understandings, regarding this Guaranty. Without the
Lender's prior written consent, no assignment or delegation of any rights or
duties by the Guarantor shall be effective to relieve the Guarantor of its
obligations hereunder. The Lender can at any time assign or delegate any rights
or duties arising under this Guaranty. This Guaranty shall inure to the benefit
of the Lender's successors and assigns. The Guarantor agrees to provide
financial statements for the Guarantor when requested by the Lender.
This Guaranty shall be governed by and construed in accordance with
the laws of the Commonwealth of Virginia. The undersigned hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the Commonwealth of Virginia and of the United States of America located in
the Commonwealth of Virginia for any action, suit or proceeding arising out of
or relating to this Guaranty and the transactions contemplated hereby, and
further agrees that service of any process, summons, notice or document by U.S.
registered mail to its address set forth below shall be effective service of
process for any action, suit or proceeding brought in connection with this
Guaranty in any such court.
CONFESSION OF JUDGMENT: The Guarantor hereby appoints Robert D.
Perrow and Paul S. Bliley, Jr., as its attorneys-in-fact, either of whom shall
have the power to confess judgment against the Guarantor in favor of the Lender
in the Clerk's Office of the Circuit Court of the City of Norfolk, Virginia, or
in any other court of proper jurisdiction for the unpaid balance of the
guaranteed amounts plus cost, expenses and attorney's fees as specified herein,
upon the occurrence of a default.
[ Intentionally left blank ]
<PAGE>
The Guarantor acknowledges that it has read this Guaranty, has
consulted with counsel to the extent it deemed advisable, understands this
Guaranty and desires to be bound by it.
Dated: April ___, 1996
TFC ENTERPRISES, INC.
By: ___________________________
Its: ___________________________
ATTEST:
- --------------------------------
Secretary
GUARANTY
IMPORTANT NOTICE: THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION
WHICH CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND
ALLOW THE CREDITOR TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.
As an inducement to General Electric Capital Corporation (the
"Lender") to provide financing to THE Finance Company, a Virginia corporation,
(the "Borrower"), but without in any way binding the Lender to do so, the
undersigned (the "Guarantor") hereby guaranties to the Lender the due, regular
and punctual payment and prompt performance of all debts and other obligations
of any kind or character which the Borrower now owes the Lender or which the
Borrower shall at any time or from time to time hereafter owe the Lender,
without regard to any change in the Borrower's name, entity, or ownership. The
Guarantor also agrees to pay to the Lender all costs incurred by the Lender in
the collection and enforcement of the debts and obligations of the Borrower to
the Lender.
The liability of the Guarantor hereunder is direct, unconditional,
absolute and may be enforced without requiring the Lender first to resort to any
right or remedy the Lender has as to the Borrower or any third parties with
regard to the Borrower's debts and obligations to the Lender or to foreclose or
exhaust any security therefor. The Guarantor shall not have any right of
reimbursement, indemnity, subrogation or security enforceable against the
Borrower, nor otherwise be a creditor of the Borrower, with respect to payments
to the Lender to the extent such rights or creditor status would make payments
to the Lender a preference recoverable from the Lender. Nothing shall discharge
or satisfy the liability of the Guarantor hereunder except the full payment and
performance of all of the Borrower's debts and obligations to the Lender. Any
and all present and future debts and obligations of the Borrower to the
Guarantor are hereby postponed in favor of and subordinated to the full payment
and performance of all present and future debts and obligations of the Borrower
to the Lender.
The Guarantor has made an independent investigation of the financial
condition and affairs of the Borrower prior to entering into this Guaranty and
has not relied upon any representation made by the Lender as to the financial
condition, operation or creditworthiness of the Borrower. Guarantor further
agrees that the Lender shall have no duty or responsibility now or hereafter to
make any investigation or appraisal of the Borrower, or the security for the
Borrower's debts and obligations to the Lender, on behalf of the Guarantor or to
provide the Guarantor with any information which may come to the Lender's
attention now or hereafter, whether or not such information could materially
increase the risk of the Guarantor hereunder.
Notice of acceptance of this Guaranty, of any default by the
Borrower, and of any adverse change in the Borrower's financial condition or of
any other fact which might materially increase the risk of the Guarantor
hereunder is hereby waived. Presentment, protest and demand, and notice of
protest, demand and dishonor are hereby waived. The Guarantor authorizes the
Lender without notice or demand and without affecting the obligations of the
Guarantor hereunder, with respect to any debt or obligation of the Borrower to
the Lender, to extend the time of payment (without limit as to the number or
term of extensions) or waive strict compliance with any other term thereof, to
renew or otherwise modify the terms thereof, to waive or release any security
therefor, to release a guarantor or other party liable therefor, and to enter or
grant any settlement, release, compromise, composition, account stated or agreed
balance with or to the Borrower or any third party, and the Guarantor agrees
that the foregoing actions shall not diminish the Guarantor's obligations
hereunder. THE GUARANTOR WAIVES ANY AND ALL RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATED TO THIS GUARANTY. To the extent
allowed by law, the Guarantor hereby confesses judgment, and acknowledges to be
indebted unto and in favor of the Lender, for the full amount of all obligations
due to the Lender by the Borrower, and consents to the Lender filing this
Guaranty as evidence of judgment.
This Guaranty remains fully enforceable irrespective of any defenses
which the Borrower could assert on the underlying debt, including but not
limited to failure of consideration, breach of warranty, fraud, payment, accord
and satisfaction, strict foreclosure, statute of frauds, bankruptcy, infancy,
statute of limitations, lender liability, and usury. If the Borrower or the
Guarantor should at any time become insolvent or make a general assignment, or a
petition in bankruptcy or any insolvency or reorganization proceedings shall be
filed or commenced by or against the Borrower or the Guarantor, any and all
obligations of the Guarantor pursuant to this Guaranty shall not be lessened by
such petitions, assignments or filings and shall, at the Lender's option,
forthwith become due and payable without notice. In the event of default in the
performance of this Guaranty, the Guarantor agrees to pay all reasonable court
costs, attorney's fees and other expenses paid or incurred by the Lender in the
enforcement hereof.
This Guaranty is a continuing guaranty which shall remain effective
until terminated as provided herein. The Guarantor may terminate this Guaranty
upon at least sixty (60) days prior written notice received by the Lender and
sent by registered or certified mail, return receipt requested. Notwithstanding
such termination, however, this Guaranty shall remain effective as to all
financing provided, or committed to be provided, by the Lender to or for the
benefit of the Borrower prior to the effective date of termination and this
Guaranty shall be continuing and unconditional until the same are fully paid,
performed and discharged.
This Guaranty supersedes all prior writings, and all prior and
contemporaneous oral understandings, regarding this Guaranty. Without the
Lender's prior written consent, no assignment or delegation of any rights or
duties by the Guarantor shall be effective to relieve the Guarantor of its
obligations hereunder. The Lender can at any time assign or delegate any rights
or duties arising under this Guaranty. This Guaranty shall inure to the benefit
of the Lender's successors and assigns. The Guarantor agrees to provide
financial statements for the Guarantor when requested by the Lender.
This Guaranty shall be governed by and construed in accordance with
the laws of the Commonwealth of Virginia. The undersigned hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the Commonwealth of Virginia and of the United States of America located in
the Commonwealth of Virginia for any action, suit or proceeding arising out of
or relating to this Guaranty and the transactions contemplated hereby, and
further agrees that service of any process, summons, notice or document by U.S.
registered mail to its address set forth below shall be effective service of
process for any action, suit or proceeding brought in connection with this
Guaranty in any such court.
CONFESSION OF JUDGMENT: The Guarantor hereby appoints Robert D.
Perrow and Paul S. Bliley, Jr., as its attorneys-in-fact, either of whom shall
have the power to confess judgment against the Guarantor in favor of the Lender
in the Clerk's Office of the Circuit Court of the City of Norfolk, Virginia, or
in any other court of proper jurisdiction for the unpaid balance of the
guaranteed amounts plus cost, expenses and attorney's fees as specified herein,
upon the occurrence of a default.
[ Intentionally left blank ]
<PAGE>
The Guarantor acknowledges that it has read this Guaranty, has
consulted with counsel to the extent it deemed advisable, understands this
Guaranty and desires to be bound by it.
Dated: April ___, 1996
FIRST COMMUNITY FINANCE, INC.
By: _________________________
Its: _________________________
ATTEST:
- --------------------------------
Secretary
GUARANTY
IMPORTANT NOTICE: THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION
WHICH CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND
ALLOW THE CREDITOR TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.
As an inducement to General Electric Capital Corporation (the
"Lender") to provide financing to THE Finance Company, a Virginia corporation,
(the "Borrower"), but without in any way binding the Lender to do so, the
undersigned (the "Guarantor") hereby guaranties to the Lender the due, regular
and punctual payment and prompt performance of all debts and other obligations
of any kind or character which the Borrower now owes the Lender or which the
Borrower shall at any time or from time to time hereafter owe the Lender,
without regard to any change in the Borrower's name, entity, or ownership. The
Guarantor also agrees to pay to the Lender all costs incurred by the Lender in
the collection and enforcement of the debts and obligations of the Borrower to
the Lender.
The liability of the Guarantor hereunder is direct, unconditional,
absolute and may be enforced without requiring the Lender first to resort to any
right or remedy the Lender has as to the Borrower or any third parties with
regard to the Borrower's debts and obligations to the Lender or to foreclose or
exhaust any security therefor. The Guarantor shall not have any right of
reimbursement, indemnity, subrogation or security enforceable against the
Borrower, nor otherwise be a creditor of the Borrower, with respect to payments
to the Lender to the extent such rights or creditor status would make payments
to the Lender a preference recoverable from the Lender. Nothing shall discharge
or satisfy the liability of the Guarantor hereunder except the full payment and
performance of all of the Borrower's debts and obligations to the Lender. Any
and all present and future debts and obligations of the Borrower to the
Guarantor are hereby postponed in favor of and subordinated to the full payment
and performance of all present and future debts and obligations of the Borrower
to the Lender.
The Guarantor has made an independent investigation of the financial
condition and affairs of the Borrower prior to entering into this Guaranty and
has not relied upon any representation made by the Lender as to the financial
condition, operation or creditworthiness of the Borrower. Guarantor further
agrees that the Lender shall have no duty or responsibility now or hereafter to
make any investigation or appraisal of the Borrower, or the security for the
Borrower's debts and obligations to the Lender, on behalf of the Guarantor or to
provide the Guarantor with any information which may come to the Lender's
attention now or hereafter, whether or not such information could materially
increase the risk of the Guarantor hereunder.
Notice of acceptance of this Guaranty, of any default by the
Borrower, and of any adverse change in the Borrower's financial condition or of
any other fact which might materially increase the risk of the Guarantor
hereunder is hereby waived. Presentment, protest and demand, and notice of
protest, demand and dishonor are hereby waived. The Guarantor authorizes the
Lender without notice or demand and without affecting the obligations of the
Guarantor hereunder, with respect to any debt or obligation of the Borrower to
the Lender, to extend the time of payment (without limit as to the number or
term of extensions) or waive strict compliance with any other term thereof, to
renew or otherwise modify the terms thereof, to waive or release any security
therefor, to release a guarantor or other party liable therefor, and to enter or
grant any settlement, release, compromise, composition, account stated or agreed
balance with or to the Borrower or any third party, and the Guarantor agrees
that the foregoing actions shall not diminish the Guarantor's obligations
hereunder. THE GUARANTOR WAIVES ANY AND ALL RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATED TO THIS GUARANTY. To the extent
allowed by law, the Guarantor hereby confesses judgment, and acknowledges to be
indebted unto and in favor of the Lender, for the full amount of all obligations
due to the Lender by the Borrower, and consents to the Lender filing this
Guaranty as evidence of judgment.
This Guaranty remains fully enforceable irrespective of any defenses
which the Borrower could assert on the underlying debt, including but not
limited to failure of consideration, breach of warranty, fraud, payment, accord
and satisfaction, strict foreclosure, statute of frauds, bankruptcy, infancy,
statute of limitations, lender liability, and usury. If the Borrower or the
Guarantor should at any time become insolvent or make a general assignment, or a
petition in bankruptcy or any insolvency or reorganization proceedings shall be
filed or commenced by or against the Borrower or the Guarantor, any and all
obligations of the Guarantor pursuant to this Guaranty shall not be lessened by
such petitions, assignments or filings and shall, at the Lender's option,
forthwith become due and payable without notice. In the event of default in the
performance of this Guaranty, the Guarantor agrees to pay all reasonable court
costs, attorney's fees and other expenses paid or incurred by the Lender in the
enforcement hereof.
This Guaranty is a continuing guaranty which shall remain effective
until terminated as provided herein. The Guarantor may terminate this Guaranty
upon at least sixty (60) days prior written notice received by the Lender and
sent by registered or certified mail, return receipt requested. Notwithstanding
such termination, however, this Guaranty shall remain effective as to all
financing provided, or committed to be provided, by the Lender to or for the
benefit of the Borrower prior to the effective date of termination and this
Guaranty shall be continuing and unconditional until the same are fully paid,
performed and discharged.
This Guaranty supersedes all prior writings, and all prior and
contemporaneous oral understandings, regarding this Guaranty. Without the
Lender's prior written consent, no assignment or delegation of any rights or
duties by the Guarantor shall be effective to relieve the Guarantor of its
obligations hereunder. The Lender can at any time assign or delegate any rights
or duties arising under this Guaranty. This Guaranty shall inure to the benefit
of the Lender's successors and assigns. The Guarantor agrees to provide
financial statements for the Guarantor when requested by the Lender.
This Guaranty shall be governed by and construed in accordance with
the laws of the Commonwealth of Virginia. The undersigned hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the Commonwealth of Virginia and of the United States of America located in
the Commonwealth of Virginia for any action, suit or proceeding arising out of
or relating to this Guaranty and the transactions contemplated hereby, and
further agrees that service of any process, summons, notice or document by U.S.
registered mail to its address set forth below shall be effective service of
process for any action, suit or proceeding brought in connection with this
Guaranty in any such court.
CONFESSION OF JUDGMENT: The Guarantor hereby appoints Robert D.
Perrow and Paul S. Bliley, Jr., as its attorneys-in-fact, either of whom shall
have the power to confess judgment against the Guarantor in favor of the Lender
in the Clerk's Office of the Circuit Court of the City of Norfolk, Virginia, or
in any other court of proper jurisdiction for the unpaid balance of the
guaranteed amounts plus cost, expenses and attorney's fees as specified herein,
upon the occurrence of a default.
[ Intentionally left blank ]
<PAGE>
The Guarantor acknowledges that it has read this Guaranty, has
consulted with counsel to the extent it deemed advisable, understands this
Guaranty and desires to be bound by it.
Dated: April ___, 1996
THE INSURANCE AGENCY, INC.
By: ______________________
Its: ______________________
ATTEST:
- --------------------------------
Secretary
[EXECUTION ORIGINAL]
SECURITIES PLEDGE AGREEMENT
THIS AGREEMENT (as amended, supplemented or modified from time to
time, this "Pledge Agreement") is dated as of April 4, 1997 and is made by TFC
ENTERPRISES, INC., a Delaware corporation (the "Pledgor"), in favor of GENERAL
ELECTRIC CAPITAL CORPORATION, a New York corporation (the "Lender").
RECITALS:
A. The Lender and THE Finance Company, a Virginia corporation (the
"Debtor") entered into that certain Amended and Restated Motor Vehicle
Installment Contract Loan and Security Agreement, dated as of December 20, 1996
(the "Loan Agreement") which amended and restated that certain Loan and Security
Agreement, dated September 24, 1992, as amended.
B. The Borrower is currently in default under the Loan
Agreement and with respect to loans from other creditors, including loans from
Nationsbank, N.A. (the "Nationsbank Loan").
C. The Lender has agreed to substantially pay off the
Nationsbank Loan and amend the Loan Agreement pursuant to Amendment No. 1, dated
as of the date hereof (the "Amendment," and together with the Loan Agreement,
the "Amended Loan Agreement").
D. The Pledgor, which is the corporate parent of the Debtor,
guarantied the obligations of the Debtor under the Loan Agreement in a guaranty
made by the Pledgor in favor of the Lender, dated as of December 20, 1996, and
concurrently herewith, in a guaranty made by the Pledgor in favor of the Lender,
dated as of the date hereof (together, the "Pledgor Guaranties").
E. First Community Finance, Inc. ("FCF"), a wholly-owned subsidiary
of the Pledgor, also guaranteed the obligations of the Debtor under the Loan
Agreement in a guaranty made by FCF in favor of the Lender, dated as of December
20, 1996, and concurrently herewith, in a guaranty made by FCF in favor of the
Lender, dated as of the date hereof (together, the "FCF Guaranties"). In
addition, FCF granted a security interest to the Lender in certain assets of FCF
to secure the Debtor's obligations under the Loan Agreement and its guarantee
thereof, in that certain Pledge Agreement, dated as of December 20, 1996, as
amended by the Amendment and Confirmation of Pledge Agreement, dated as of the
date hereof (the "FCF Pledge Agreement").
F. As a condition to the Amendment, the Lender has required that the
Pledgor execute and deliver this Agreement to secure payment and performance of
the obligations of the Debtor under the Amended Loan Agreement and the
obligations of the Pledgor under the Pledgor Guaranties and any and all existing
or future obligations of the Pledgor or the Debtor to Lender.
AGREEMENT:
NOW THEREFORE, for and in consideration of Ten Dollars ($10.00) and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. Terms defined in the Amended Loan
Agreement and not otherwise defined herein shall have, as used herein, the
respective meanings provided for therein.
SECTION 1.2. UCC Terms. Unless otherwise defined herein, or unless
the context otherwise requires, all terms used herein which are defined in the
UCC in effect as of the date hereof shall have the meanings therein stated.
ARTICLE II
THE SECURITY INTERESTS
SECTION 2.1. The Security Interest. The Pledgor hereby pledges to
the Lender, and grants to the Lender a continuing security interest in, all of
the shares of capital stock (including common stock) of FCF now owned or
hereafter acquired by the Pledgor, and all dividends, distributions, instruments
and other property and proceeds from time to time received, receivable or
otherwise made upon or distributed in respect of or in exchange for any or all
of such capital stock (collectively, the "Pledged Collateral").
SECTION 2.2. Security for Debtor's and Pledgor's Obligations. The
security interest and liens hereby granted are to secure payment and performance
when due, without offset, whether by acceleration or otherwise, of each and all
of the duties, obligations, debts and liabilities of every kind and description
of each of the Debtor and the Pledgor to the Lender now existing or hereafter
incurred, whether matured or unmatured, direct or indirect, secured or
unsecured, original, extended or renewed, absolute or contingent, whether
originally contracted with or acquired by the Lender, whether contracted alone
or jointly and/or severally with others, whether or not evidenced by negotiable
instruments or other writings and any renewals, extensions, or substitutions
thereto, and including open lines of credit and obligations with respect to
letters of credit or any draft presented in connection therewith; all future
advances to the Debtor or Pledgor made by the Lender; interest and charges
thereon at the rates therein provided; all costs, expenses, and attorney's fees
incurred by the Lender in connection with the collection of any of the foregoing
or in the protection or enforcement of the Lender's rights or remedies hereunder
or under any instrument or document given in connection with any of the
foregoing; and all sums now or hereinafter advanced by the Lender to or for the
benefit of the Debtor or the Pledgor pursuant to the provisions of this
Agreement (collectively, the "Indebtedness," and each, an "Indebtedness").
Specifically included within the term "Indebtedness" are the payment and
performance obligations of the Debtor under the Amended Loan Agreement, together
with interest thereon as therein provided, and the obligations of the Pledgor
under the Pledgor Guaranties.
SECTION 2.3. Delivery of Pledged Collateral. All certificates or
instruments representing or evidencing the Pledged Collateral shall be delivered
to and held by or on behalf of the Lender pursuant hereto and shall be in
suitable form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to the Lender. The Lender shall have the right, at any time, in its
discretion and without notice to the Pledgor, to cause any or all of the Pledged
Collateral to be transferred of record into the name of the Lender or its
nominee.
SECTION 2.4. FCF Financing with Hibernia Bank.
(a) The Pledgor represents and warrants to the Lender that FCF
intends to enter into and consummate a certain loan transaction with Hibernia
National Bank (the "Hibernia Financing") pursuant to the Hibernia Commitment (as
such term is defined in the Amendment) whereby Lender, upon the funding of the
Hibernia Financing (the "Hibernia Funding") would receive payment on the Loan
(as defined in the Amended Loan Agreement) of Seven Million Dollars
($7,000,000). It is anticipated by the parties that the Hibernia Financing will
close no later than April 30, 1997 (the "Deadline").
(b) Should (i) the Hibernia Funding occur on or before the Deadline,
or (ii) if the Hibernia Funding does not occur by the Deadline, then upon the
closing and funding by FCF of a credit facility substantially identical to the
Hibernia Financing (including, but not limited to, loan structure, loan amount,
collateral, guaranties, repayment terms and advance rates) in which the Debtor
would receive payment on the Loan in an amount not materially less than
$7,000,000, then the Lender agrees:
(i) to release its security interest in the
Pledged Collateral in accordance with the terms of Section 2.5 below;
(ii) to release FCF from its obligations under
the FCF Guaranties; and
(iii) to release FCF from its obligations under
the FCF Pledge Agreement.
(c) Should the Hibernia Funding fail to occur by the Deadline, the
Pledgor agrees to exercise its good faith best efforts to obtain alternative
funding for itself and/or its subsidiaries in amounts equal to those set forth
in the financial projections delivered to Lender in contemplation of the
Amendment (and on which projections Lender has relied) in order to improve and
maintain the financial health of the Debtor and the Pledgor. Pledgor agrees that
such good faith best efforts may include (but are not limited to) the engagement
by the Pledgor of an investment banker or financial adviser of recognized
standing to advise it concerning alternatives. Pledgor agrees that such
alternatives may include (but are not limited to) seeking another Lender to
provide financing to FCF, an offering of debt and/or equity securities, or the
sale of FCF.
SECTION 2.5. Termination of Security Interests; Release of Pledged
Collateral.
(a) Upon the full, final and irrevocable payment and
performance of all the Indebtedness and the termination of all
obligations under the Amended Loan Agreement and the Pledgor
Guaranties, the security interests in the Pledged Collateral shall
terminate and all rights to the Pledged Collateral shall revert to
the Pledgor.
(b) Upon any such termination of the security interests
or any release of the Pledged Collateral, the Lender will, at the
Pledgor's expense, execute and deliver to the Pledgor such documents
as the Pledgor shall reasonably request to evidence the termination
of the security interests or the release of the Pledged Collateral.
Any such documents shall be without recourse to or warranty by the
Lender.
SECTION 2.6. Security Interests Absolute. All rights of the Lender
and security interests hereunder, and all duties, and obligations of the Pledgor
hereunder, shall be absolute and unconditional and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(i) any extension, renewal, settlement,
compromise, waiver or release in respect of any Indebtedness, or any
other document evidencing or securing such Indebtedness, by
operation of law or otherwise;
(ii) any modification or amendment or supplement
to the Amended Loan Agreement, the Pledgor Guaranties or any other
document evidencing or securing any Indebtedness;
(iii) any release, non-perfection or invalidity of
any direct or indirect security for any Indebtedness;
(iv) any insolvency, bankruptcy, reorganization
or other similar proceeding affecting the Debtor or its assets or
any resulting disallowance, release or discharge of all or any
portion of the Indebtedness;
(v) the existence of any claim, set-off or other right
which the Pledgor may have at any time against the Debtor, the
Lender or any other entity or person, whether in connection herewith
or any unrelated transactions; provided, that nothing herein shall
prevent the assertion of any such claim by separate suit or
compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or
against the Debtor or Pledgor for any reason of any Indebtedness, or
any provision of applicable law or regulation purporting to prohibit
the payment by the Debtor or Pledgor of the Indebtedness;
(vii) any failure by the Lender (a) to file or enforce a
claim against the Debtor or its estate (in a bankruptcy or other
proceeding), (b) to give notice of the existence, creation or
incurring by the Debtor of any new or additional indebtedness or
obligation under or with respect to the Indebtedness, (c) to
commence any action against the Debtor or Pledgor, (d) to disclose
to the Pledgor any facts which the Lender may now or hereafter know
with regard to the Debtor or (e) to proceed with due diligence in
the collection, protection or realization upon any collateral
securing the Indebtedness; or (f) any other act or omission to act
or delay of any kind by the Debtor, the Pledgor, the Lender or any
other corporation or person or any other circumstance whatsoever
which might, but for the provisions of this clause, constitute a
legal or equitable discharge of the Pledgor's obligations hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Pledgor represents, warrants and agrees as follows:
SECTION 3.1. Contravention. The execution, delivery and performance
by the Pledgor of this Agreement require no action by or in respect of, or
filing with, any governmental authority and do not contravene, or constitute
(with or without the giving of notice or lapse of time or both) a default under,
any provision of applicable law or of any agreement, judgment, injunction,
order, decree or other instrument binding upon or affecting the Pledgor.
SECTION 3.2. Binding Effect. This Pledge Agreement constitutes a
valid and binding agreement of the Pledgor, enforceable against the Pledgor in
accordance with its terms, except as the enforceability hereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors rights generally and
by equitable principles of general applicability (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
SECTION 3.3. Title to Pledged Collateral. The Pledgor owns all of
the Pledged Collateral free and clear of any liens or encumbrances other than
the liens and security interests granted hereby.
SECTION 3.4. Pledged Collateral. The Pledgor owns all of the issued
and outstanding shares of common stock of FCF and certifies that FCF has not
issued warrants, options or other purchase rights with respect to its common
stock which could result in the issue of additional shares of FCF common stock.
The Pledgor further represents that FCF shall not issue additional shares of its
common stock or other securities convertible into common stock of FCF without
the consent of the Lender. All shares of common stock of FCF constituting the
Pledged Collateral have been duly authorized and validly issued, and are fully
paid and non-assessable, and are subject to no options to purchase or similar
rights of any person or entity. The Pledgor is not and will not become a party
to or otherwise bound by any agreement, other than this Agreement, which
restricts in any manner the rights of any present or future holder of any of the
Pledged Collateral with respect thereto.
SECTION 3.5. Validity, Perfection and Priority of Security
Interests. Upon delivery of all certificates or instruments representing or
evidencing the Pledged Collateral to the Lender, the Lender will have a valid
and perfected security interest in the Pledged Collateral subject to no prior
lien or encumbrance. No registration, recordation or filing with any
governmental agency is required in connection with the execution or delivery of
this Agreement, or necessary for the validity or enforceability hereof or for
the perfection of the security interests of the Lender granted hereby. The
Pledgor has not performed any acts which might prevent the Lender from enforcing
any of the terms and conditions of this Agreement or which would limit the
Lender in any such enforcement.
ARTICLE IV
COVENANTS
The Pledgor agrees that so long as any Indebtedness
remains unpaid:
SECTION 4.1. Filing; Further Assurances. The Pledgor will, at
Pledgor's expense and in such manner and form as the Lender may require,
execute, deliver, file and record any financing statement, specific assignment
or other paper and take any other action that may be necessary or desirable, or
that the Lender may request, in order to create, preserve, perfect or validate
the security interests granted hereby or to enable the Lender to exercise and
enforce its rights hereunder with respect to any of the Pledged Collateral. To
the extent permitted by applicable law, the Pledgor hereby authorizes the Lender
to execute and file, in the name of the Pledgor or otherwise, UCC financing
statements which the Lender in its sole discretion may deem necessary or
appropriate to further perfect the security interests granted hereby.
SECTION 4.2. Liens on Pledged Collateral. The Pledgor will not sell
or otherwise dispose of, or grant any option with respect to, any of the Pledged
Collateral or create or suffer to exist any lien or encumbrance (other than
security interests in favor of the Lender) on any Pledged Collateral. The
Pledgor agrees that it will cause the issuer of the Pledged Collateral not to
issue any stock or other securities in substitution for or in addition to the
Pledged Collateral issued by such issuer, except to the Pledgor. The Pledgor
will pledge hereunder, immediately upon Pledgor's acquisition (directly or
indirectly) thereof, any and all additional shares of stock or other securities
received in substitution for or in addition to any Pledged Collateral.
SECTION 4.3. Change in Law. The Pledgor will promptly notify the
Lender in writing of any change in law known to Pledgor (and will use Pledgor's
best efforts to become aware of any such change in law) which (i) adversely
affects or will adversely affect the validity, perfection or priority of the
Lender's security interests or (ii) requires or will require a change in the
procedures to be followed in order to maintain and protect the validity,
perfection and priority of the Lender's security interests.
ARTICLE V
DISTRIBUTIONS ON COLLATERAL; VOTING
SECTION 5.1. Right to Receive Distributions on Pledged Collateral;
Voting. (a) So long as no Event of Default shall have occurred:
(i) The Pledgor shall be entitled to exercise any and
all voting and other consensual rights pertaining to the Pledged
Collateral or any part thereof for any purpose not inconsistent with
the terms of this Pledge Agreement.
(ii) The Pledgor shall be entitled to receive and retain
any and all dividends, interest and other payments and distributions
made upon or with respect to the Pledged Collateral (except any
stock or liquidating dividend, which shall be paid directly to the
Lender).
(iii) The Lender shall execute and deliver, or cause to
be executed and delivered, to the Pledgor all such proxies, powers
of attorney, consents, ratifications and waivers and other
instruments as the Pledgor may reasonably request for the purpose of
enabling the Pledgor to exercise the voting and other rights which
the Pledgor is entitled to exercise pursuant to paragraph (i) above
and to receive the dividends or interest payments which the Pledgor
is authorized to receive and retain pursuant to paragraph (ii)
above.
(b) Upon the occurrence of an Event of Default:
(i) All rights of the Pledgor to exercise the voting and
other consensual rights which the Pledgor would otherwise be
entitled to exercise pursuant hereto and to receive the dividends
and interest payments which the Pledgor would otherwise be
authorized to receive and retain pursuant hereto shall cease, and
all such rights shall thereupon become vested in the Lender who
shall thereupon have the sole right to exercise such voting and
other consensual rights and to receive and hold as Pledged
Collateral such dividends and interest payments.
(ii) All dividends and interest payments which are
received by the Pledgor contrary to the provisions of paragraph (ii)
of this Section shall be received in trust for the benefit of the
Lender, shall be segregated from other funds of the Pledgor and
shall be paid over to the Lender as Pledged Collateral in the same
form as so received, with any necessary endorsement.
ARTICLE VI
EVENTS OF DEFAULT
Any one of the following events will constitute an "Event of
Default" under this Agreement:
SECTION 6.1. The occurrence of an Event of Default under the Amended
Loan Agreement.
SECTION 6.2. If any payment due under the Indebtedness is not paid
when due after the expiration of any applicable notice or cure period.
SECTION 6.3. The failure by the Pledgor to observe or perform any of
the applicable agreements contained herein.
SECTION 6.4. Discovery that any representation or warranty made by
the Pledgor herein or any statement or representation made in any certificate,
report or opinion delivered pursuant hereto was incorrect, incomplete or
misleading in any material respect on or as of the date made or deemed made.
SECTION 6.5. If any guaranty (including the Pledgor Guaranties and
the FCF Guaranties) obtained in connection with any Indebtedness is terminated.
SECTION 6.6. If the Pledgor or Debtor shall generally not pay, or
shall be unable to pay, or shall admit in writing its inability to pay, its
debts as such debts become due (as defined by 11 U.S.C. ss.303(h)(1)).
SECTION 6.7. If the Pledgor or Debtor makes an assignment for the
benefit of creditors, files a petition in bankruptcy, petitions or applies to
any tribunal for any receiver, custodian or any trustee of any substantial part
of its property, or commences any proceeding relating to it under any
reorganization, arrangement, readjustments of debt, dissolution or liquidation
law or statute of any jurisdiction, whether now or hereafter in effect.
SECTION 6.8. If, within sixty (60) days after the filing of a
bankruptcy petition or the commencement of any proceeding against the Pledgor or
Debtor seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation, the proceeding shall not have been dismissed, or, if within
thirty (30) days after the appointment, without the consent or acquiescence of
it, of any trustee, receiver, custodian or liquidator of it or of all or any
substantial part of the properties of it, the appointment shall not have been
vacated.
SECTION 6.9. If this Agreement shall at any time and for any reason
cease to create a valid and perfected first priority security interest in and to
the Pledged Collateral or such security interest shall cease to be in full force
and effect or shall be declared null and void, or the validity or enforceability
thereof shall be contested by the Pledgor or Debtor or the Pledgor shall deny
that it has any further liability or obligation with respect thereto.
SECTION 6.10. A default by the Pledgor or Debtor under any other
agreement or contract with the Lender, including but not limited to the Amended
Loan Agreement, the other Loan Documents (as defined in the Amended Loan
Agreement), and any other documents relating thereto.
SECTION 6.11. If any Pledged Collateral is lost, abandoned,
destroyed, severally damaged and not replaced within 30 days of notice to
Pledgor, or involved in a legal proceeding, sold or transferred except as
permitted by prior agreement with the Lender.
ARTICLE VII
GENERAL AUTHORITY; REMEDIES
SECTION 7.1. General Authority. The Pledgor hereby irrevocably
appoints the Lender and any officer or agent thereof, with full power of
substitution, as the Pledgor's true and lawful attorney-in-fact, in the name of
the Pledgor, for the sole use and benefit of the Lender, but at the Pledgor's
expense, at any time and from time to time, to take any and all appropriate
action and to execute any and all documents and instruments which may be
necessary or desirable to carry out the terms of this Pledge Agreement. Without
limiting the foregoing, the Pledgor hereby gives the Lender the power and right
on the Pledgor's behalf, without notice to or further assent by the Pledgor to
do the following:
(a) following an occurrence of an Event of Default, to
receive, take, endorse, assign and deliver any and all checks,
notes, drafts, acceptances, documents and other negotiable and
non-negotiable instruments taken or received by the Pledgor as, or
in connection with, the Pledged Collateral;
(b) to demand, sue for, collect, receive and
give acquaintance for any and all monies due or to become due upon
or in connection with the Pledged Collateral;
(c) to commence, settle, compromise, compound,
prosecute, defend or adjust any claim, suit, action or proceeding
with respect to, or in connection with, the Pledged Collateral;
(d) following an occurrence of an Event of Default, to
sell, transfer, assign or otherwise deal in or with the Pledged
Collateral or any part thereof, as fully and effectually as if the
Lender were the absolute owner thereof; and
(e) to do, at its option, but at the expense of the
Pledgor, at any time or from time to time, all acts and things which
the Lender deems necessary to protect or preserve the Pledged
Collateral and to realize upon the Pledged Collateral.
SECTION 7.2. UCC Rights. If an Event of Default shall have occurred,
the Lender may in addition to all other rights and remedies granted to it in
this Agreement and in any other agreement securing, evidencing or relating to
the Indebtedness, exercise (i) all rights and remedies of a secured party under
the UCC (whether or not in effect in the jurisdiction where such rights are
exercised) and (ii) all other rights available to the Lender at law or equity.
SECTION 7.3. Application of Proceeds; Sale of Pledged Collateral.
(a) The Pledgor expressly agrees that if an Event of Default shall occur and be
continuing, the Lender, without demand of any kind (except the notice specified
below of the time and place of any public or private sale) to or upon the
Pledgor or any other person or entity (all of which demands and/or notices are
hereby waived by the Pledgor), may forthwith (i) apply the cash, if any, then
held by it as specified in Section 7.8 and (ii) if there shall be no such cash
or if such cash shall be insufficient to pay the Indebtedness in full, to
collect, receive, appropriate and realize upon the Pledged Collateral and/or
sell, assign, give an option or options to purchase or otherwise dispose of and
deliver the Pledged Collateral (or contract to do so) or any part thereof in one
or more lots or parcels (which need not be in round lots) at public or private
sale, at any office of the Lender or elsewhere in such manner as is commercially
reasonable, and as the Lender may deem best, for cash or on credit or for future
delivery without assumption of any credit risk. The Lender shall have the right
upon any such public sale, and, if the Pledged Collateral is of a type
customarily sold in a recognized market or is of a type which is the subject of
widely distributed standard price quotations, upon any such private sale or
sales, to purchase the whole or any part of the Pledged Collateral so sold, and
thereafter to hold the same, absolutely and free from any right or claim of any
kind. To the extent permitted by applicable law, the Pledgor waives all claims,
damages and demands against the Lender arising out of the foreclosure,
repossession, retention or sale of the Pledged Collateral.
(b) Unless the Pledged Collateral threatens to decline speedily in
value or is of a type customarily sold on a recognized market, the Lender shall
give the Pledgor five days written notice of its intention to make any such
public or private sale or sale at a broker's board or on a securities exchange.
Such notice shall (i) in the case of a public sale, state the time and place
fixed for such sale, (ii) in the case of sale at a broker's board or on a
securities exchange, state the board or exchange at which such sale is to be
made and the day on which the Pledged Collateral, or the portion thereof being
sold, will first be offered for sale and (iii) in the case of a private sale,
state the day after which such sale may be consummated. The Lender shall not be
obligated to make any such sale pursuant to any such notice. The Lender may
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for the sale, and such sale
may be made at any time or place to which the same may be so adjourned. In the
case of any sale of all or any part of the Pledged Collateral on credit or for
future delivery, the Pledged Collateral so sold may be retained by the Lender
until the selling price is paid by the purchaser thereof, but the Lender shall
not incur any liability in case of the failure of such purchaser to take up and
pay for the Pledged Collateral so sold and, in the case of such failure, such
Pledged Collateral may again be sold upon like notice.
SECTION 7.4. Rights of Purchasers. Upon any sale of the Pledged
Collateral (whether public or private) the Lender shall have the right to
deliver, assign and transfer to the purchaser thereof the Pledged Collateral so
sold. Each purchaser (including the Lender) at any such sale shall hold the
Pledged Collateral so sold absolutely, free from any claim or right of any kind,
including any equity or right of redemption of the Pledgor who, to the extent
permitted by law, hereby specifically waives all rights of redemption,
including, without limitation, any right to redeem the Pledged Collateral under
Section 8.9-506 of the UCC, stay or approval which the Pledgor has or may have
under any law now existing or hereafter adopted.
SECTION 7.5. Securities Act, etc. The Pledgor understands that
compliance with the Federal Securities Laws might very strictly limit the course
of conduct of the Lender if the Lender were to attempt to dispose of all or any
part of the Pledged Collateral, and might also limit the extent to which or the
manner in which any subsequent transferee of any Pledged Collateral could
dispose of the same. Similarly, there may be other legal restrictions or
limitations affecting the Lender in any attempt to dispose of all or part of the
Pledged Collateral under applicable Blue Sky or other state securities laws or
similar laws analogous in purpose or effect. Under applicable law, in the
absence of an agreement to the contrary, the Lender might to be held to have
certain general duties and obligations to the Pledgor to make some effort toward
obtaining a fair price even though the obligations of the Pledgor may be
discharged or reduced by the proceeds of a sale at a lesser price. The Pledgor
clearly understands that the Lender is not to have any such general duty or
obligation to the Pledgor, and the Pledgor will not attempt to hold the Lender
responsible for selling all or any part of the Pledged Collateral at any
inadequate price even if the Lender shall accept the first offer received or
does not approach more than one possible purchaser. Without limiting the
generality of the foregoing, the provisions of this Section would apply if, for
example, the Lender were to place all or any part of the Pledged Collateral for
private placement by an investment banking firm, or if such investment banking
firm purchased all or any part of the Pledged Collateral for its own account, or
if the Lender placed all or any part of the Pledged Collateral privately with a
purchaser or purchasers.
Accordingly, the Pledgor expressly agrees that the Lender is
authorized, in connection with any sale of the Pledged Collateral, if it deems
it advisable so to do, (i) to restrict the prospective bidders on or purchasers
of any of the Pledged Collateral to a limited number of sophisticated investors
who will represent and agree that they are purchasing for their own account for
investment and not with a view to the distribution or sale of any of such
Pledged Collateral, (ii) to cause to be placed on certificates for any or all of
the Pledged Collateral or on any other securities pledged hereunder a legend to
the effect that such security has not been registered under the Federal
Securities Laws and may not be disposed of in violation of the provision of any
applicable law, rule or regulation and (iii) to impose such other limitations or
conditions in connection with any such sale as the Lender deems necessary or
advisable in order to comply with any law, rule or regulation.
The Pledgor covenants and agrees that the Pledgor will execute and
deliver such documents and take such other action as the Lender deems necessary
or advisable in order to comply with all applicable laws, rules or regulations.
The Pledgor acknowledges and agrees that such limitations may result in prices
and other terms less favorable to the seller than if such limitations were not
imposed, and, notwithstanding such limitations, agrees that any such sale shall
be deemed to have been made in a commercially reasonable manner, it being the
agreement of the Pledgor and the Lender that the provisions of this Section 7.5
will apply notwithstanding the existence of a public or private market upon
which the quotations or sales prices may exceed substantially the price at which
the Lender sells. The Lender shall be under no obligation to delay a sale of any
Pledged Collateral for a period of time necessary to permit the issuer of any
securities contained therein to register such securities under the Securities
Act of 1933 or under applicable state securities laws, even if the issuer would
agree to it.
SECTION 7.6. Other Rights of the Lender.
(a) The Lender (i) shall have the right and power to institute and
maintain such suits and proceedings as it may deem appropriate to protect and
enforce the rights vested in it by this Pledge Agreement and (ii) proceed by
suit or suits at law or in equity to enforce such rights and to foreclose upon
the Pledged Collateral and to sell all, or from time to time, any of the Pledged
Collateral under the judgment or decree of a court of competent jurisdiction.
(b) Upon the occurrence of an Event of Default, the Lender shall, to
the extent permitted by applicable law, without notice to the Pledgor or any
party claiming through the Pledgor, without regard to the solvency or insolvency
at such time of any person or entity then liable for the payment of any of the
Indebtedness, without regard to the then value of the Pledged Collateral and
without requiring any bond from any complainant in such proceedings, be entitled
as a matter of right to the appointment of a receiver or receivers (who may be
the Lender) of the Pledged Collateral or any part thereof, and of the profits,
revenues and other income thereof, pending such proceedings, with such powers as
the court making such appointment shall confer, and to the entry of an order
directing that the profits, revenues and other income of the property
constituting the whole or any part of the Pledged Collateral be segregated,
sequestered and impounded for the benefit of the Lender, and the Pledgor
irrevocably consents to the appointment of such receiver or receivers and to the
entry of such order.
(c) In no event shall the Lender have any duty to exercise any
rights or take any steps to preserve the rights of the Lender in the Pledged
Collateral, nor shall the Lender be liable to the Pledgor or any other person or
entity for any loss caused by the Lender's failure to meet any obligation
imposed by Section 9-207(e) of the UCC or any successor provision. Without
limiting the foregoing, the Lender shall be deemed to have exercised reasonable
care in the custody and preservation of the Pledged Collateral in its possession
if the Pledged Collateral is accorded treatment substantially equal to that
which the Lender accords its own property, it being understood that the Lender
shall not have any duty or responsibility for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Pledged Collateral, whether or not the Lender has or is
deemed to have knowledge of such matters or (ii) taking any necessary steps to
preserve rights against any parties with respect to any Pledged Collateral.
SECTION 7.7. Waiver and Estoppel.
(a) The Pledgor agrees, to the extent the Pledgor may lawfully do
so, that the Pledgor will not at any time in any manner whatsoever claim or take
the benefit or advantage of, any appraisal, valuation, stay, extension,
moratorium, turnover or redemption law, or any law permitting the Pledgor to
direct the order in which the Pledged Collateral shall be sold, now or at any
time hereafter in force which may delay, prevent or otherwise affect the
performance or enforcement of this Pledge Agreement, and hereby waives all
benefit or advantage of all such laws. The Pledgor covenants that the Pledgor
will not hinder, delay or impede the execution of any power granted to the
Lender in the Amended Loan Agreement and related documents or this Agreement.
(b) The Pledgor, to the extent the Pledgor may lawfully do so, on
behalf the Pledgor and all who claim through or under the Pledgor, including
without limitation any and all subsequent creditors, vendees, assignees and
lienors, waives and releases all rights to demand or to have any marshaling of
the Pledged Collateral upon any sale, whether made under any power of sale
granted herein or pursuant to judicial proceedings or under any foreclosure or
any enforcement of this Pledge Agreement, and consents and agrees that all of
the Pledged Collateral may at any such sale be offered and sold as an entirety.
(c) The Pledgor waives, to the extent permitted by law, presentment,
demand, protest and any notice of any kind (except the notices expressly
required hereunder) in connection with this Pledge Agreement and any action
taken by the Lender with respect to the Pledged Collateral. The Pledgor waives
and agrees not to assert any privileges which the Pledgor may acquire under
Section 9-112 of the UCC.
SECTION 7.8. Application of Monies. The proceeds of any sale of, or
other realization upon, all or any part of the Pledged Collateral shall be
applied by the Lender in the following order of priority, (the Pledgor remaining
liable for any deficiency remaining unpaid after such application):
(a) first, to payment of the expenses of such sale or
other realization, including reasonable compensation to the Lender
and its agents and counsel, and all expenses, liabilities and
advances incurred or made by the Lender, its agents and counsel in
connection therewith or in connection with the care, safekeeping or
otherwise of any or all of the Pledged Collateral, and any other
unreimbursed expenses for which the Lender is to be reimbursed
pursuant to Section 8.3;
(b) second, to payment of the Indebtedness in
such order as the Lender shall determine; and
(c) finally, any surplus then remaining shall be paid to
the Pledgor, or the Pledgor's successors or assigns, or to
whomsoever may be lawfully entitled to receive the same or as a
court of competent jurisdiction may direct.
ARTCLE VIII
MISCELLANEOUS
SECTION 8.1. Notices. All notices, requests and other communications
to any party hereunder shall be in writing and shall be given to such party at
the address set forth on the signature page hereof or to such other address as
such party may hereafter specify for the purpose by notice to the other. Each
such notice, request or other communication shall be effective (i) two days
after such communication is deposited in the mails with first class postage
prepaid, addressed as aforesaid or (ii) if given by any other means, when
delivered at the address specified under the signatures of the parties hereto.
Rejection or refusal to accept, or the inability to deliver because of a changed
address of which no notice was given shall not affect the validity of notice
given in accordance with this Section 8.1.
SECTION 8.2. Waivers, Non-Exclusive Remedies. No failure on the part
of the Lender to exercise, and no delay in exercising, any course of dealing
with respect to any right under this Agreement shall operate as a waiver
thereof; nor shall any single or partial exercise by the Lender of any right
under this Agreement preclude any other or further exercise thereof or the
exercise of any other right. The rights of the Lender under this Agreement are
cumulative and are not exclusive of any other remedies provided by law.
SECTION 8.3. Expenses; Documentary Taxes. The Pledgor shall
forthwith on demand pay all out-of-pocket expenses incurred by the Lender,
including the reasonable fees and disbursements of its counsel and agents, in
connection with the preparation and administration of this Agreement or the
administration, sale or other disposition of the Pledged Collateral on the
preservation, protection or defense of the rights of the Lender in and to the
Pledged Collateral. The Pledgor shall forthwith pay on demand the amount of any
taxes which the Lender may have been required to pay be reason of the security
interests (including any applicable transfer taxes) or to free any of the
Pledged Collateral from the Lien thereof.
SECTION 8.4. Successors and Assigns. This Agreement is for the
benefit of the Lender and its successors and assigns, and in the event of an
assignment of all or any of the Indebtedness, the rights hereunder, to the
extent applicable to the indebtedness so assigned, may be transferred with such
indebtedness. This Agreement shall be binding upon the Pledgor and the
Pledgor's, heirs, personal representatives, successors and assigns.
SECTION 8.5. Amendments and Waivers. Any provision of this
Agreement may be amended or waived, if, but only if, such amendment or waiver is
in writing and is signed by the Pledgor and the Lender.
SECTION 8.6. Delivery and Virginia Law. This Agreement has been
delivered in Virginia and shall be governed by and construed in accordance with
the laws of the Commonwealth of Virginia, except as otherwise required by
mandatory provisions of law and except to the extent that remedies provided by
the laws of any jurisdiction other than Virginia are governed by the laws of
such jurisdiction.
SECTION 8.7. Limitation by Law; Severability.
(a) All rights, remedies and powers provided in this
Agreement may be exercised only to the extent that the exercise
thereof does not violate any applicable provision of law, and all
the provisions of this Agreement are intended to be subject to all
applicable mandatory provisions of law which may be controlling and
be limited to the extent necessary so that they will not render this
Agreement invalid, unenforceable in whole or in part, or not
entitled to be recorded, registered or filed under the provisions of
any applicable law.
(b) If any provision hereof is invalid and unenforceable
in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in
favor of the Lender in order to carry out the intentions of the
parties hereto as nearly as may be possible; and (ii) the invalidity
or unenforceability of any provision hereof in any jurisdiction
shall not affect the validity or enforceability of such provision in
any other jurisdiction.
SECTION 8.8. Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when the Lender shall have
received counterparts hereof signed by itself and the Pledgor.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed as of the day and year first above written.
TFC ENTERPRISES, INC.,
A DELAWARE CORPORATION
By: _____________________________
Its: _____________________________
Address:
------------------------------------
------------------------------------
GENERAL ELECTRIC CAPITAL CORPORATION,
A NEW YORK CORPORATION
By: _____________________________
Its: _____________________________
Address:
------------------------------------
------------------------------------
<PAGE>
Schedule I
List of Pledged Collateral
<TABLE>
<CAPTION>
NUMBER
ISSUER DESCRIPTION CERTIFICATE NOS. VALUE OF SHARES
<S> <C>
First Community Finance, Inc. Common Stock
</TABLE>
<PAGE>
AMENDMENT AND
CONFIRMATION
OF PLEDGE AGREEMENT
This Amendment and Confirmation of Pledge Agreement (this "Agreement"),
is made this _ day of April, 1997, by and between First Community Finance, Inc.
(the "Company") and General Electric Capital Corporation ("GECC") and amends
that certain Pledge Agreement between the Company and GECC, dated as of December
20, 1996.
RECITALS:
A. THE Finance Company ("TFC"), a Virginia corporation and affiliate of
First Community Finance, Inc. (the "Company"), entered into that certain Amended
and Restated Motor Vehicle Installment Contract Loan and Security Agreement with
General Electric Capital Corporation ("GECC"), dated as of December 20, 1996
(the Loan Agreement") under which GECC agreed to amend and restate the agreement
governing the previous credit arrangement between GECC and TFC to modify the
term thereof.
B. As consideration for GECC extending credit under the Loan Agreement,
the Company guarantied TFC's performance and payment under the Loan Agreement in
a separate Guaranty, dated December 20, 1996 (the "First Guaranty"), and entered
into a Pledge Agreement with GECC, dated as of December 20, 1996 (the "Pledge
Agreement"), whereby the Company pledged collateral to secure TFC's obligations
under the Loan Agreement and to secure the Company's obligations under the First
Guaranty.
C. TFC is currently in default under the Loan Agreement (and under loan
agreements with one or more other creditors) and GECC agreed to restructure the
loans under the Loan Agreement and to pay off another creditor of the Company,
namely, Nationsbank,, N.A. (the `'Loan Restructure"). In connection with the
Loan Restructure, TFC and GECC executed Amendment No. 1, dated as of the date
hereof (the "Amendment"), in order to set forth the terms and conditions of the
Loan Restructure.
D. As consideration for GECC entering into the Amendment, the Company
was required to execute another guaranty, dated as of the date hereof (the
"Second Guaranty") and to amend the Pledge Agreement to confirm the security
interest granted thereunder and to secure the obligations of the Company under
the Second Guaranty as well as the First Guaranty.
E. The purpose of this Agreement is to amend and confirm the Pledge
Agreement pursuant to the terms and conditions as set forth herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises set forth above and
other good and valuable consideration, the sufficiency and receipt of which are
hereby acknowledged by the parties hereto, and in order to induce GECC to
participate in the Loan Restructure, the Company certifies, covenants and agrees
as follows:
1. The Pledge Agreement is hereby amended to secure the Company's
obligations under the Second Guaranty, in addition to those obligations that
were secured under the Pledge Agreement, namely: (i) the Company's obligations
under the First Guaranty; (ii) TFC's obligations under the Loan Agreement; and
(iii) all other obligations of TFC and of the Company to GECC. The term "Secured
Obligations" is hereby amended to mean the foregoing obligations, including
those now existing and those hereafter arising.
2. Except for the amendment set forth in Section 1 hereof, the Company
hereby restates and confirms each and every covenant or other agreement of the
Company contained in the Pledge Agreement and agrees that the Pledge Agreement,
as amended, shall continue in full force and effect as to the rights and
security interest granted thereby. No novation is intended.
WITNESS the following signatures as of this day of ___ April, 1997.
FIRST COMMUNITY FINANCE, INC.
By:
---------------------------------
Its:
---------------------------------
[EXECUTION ORIGINAL]
SECURITY AGREEMENT
THIS AGREEMENT (as amended, supplemented or modified from time to
time, this "Agreement") is dated as of April 4, 1997 and is entered into by and
between TFC ENTERPRISES, INC., a Delaware corporation ("TFCEI"), THE FINANCE
COMPANY, a Virginia corporation (the "Debtor"), FIRST COMMUNITY FINANCE, INC., a
Virginia corporation ("FCF") and THE INSURANCE AGENCY, INC., a Virginia
corporation ("TIA") (TFCEI, the Debtor, FCF and TIA are sometimes hereinafter
referred to as the "Affiliated Companies" and each as an "Affiliated Company"),
which Affiliated Companies constitute, or as of January 1, 1996 constituted, a
controlled group of corporations (the "Affiliated Group") as that term is
defined under Section 1563(a)(1) of the Internal Revenue Code of 1986, as
amended, in favor of GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation (the "Lender").
RECITALS:
A. The Lender and the Debtor entered into that certain Amended and
Restated Motor Vehicle Installment Contract Loan and Security Agreement, dated
as of December 20, 1996 (the "Loan Agreement"), which amended and restated that
certain Loan and Security Agreement, dated September 24, 1992, as amended.
B. The Debtor is currently in default under the Loan
Agreement and with respect to loans from one or more other creditors, including
loans from Nationsbank, N.A. (collectively, the "Nationsbank Loan").
C. The Lender has agreed to substantially pay off the
Nationsbank Loan and amend the Loan Agreement pursuant to Amendment No. 1, dated
as of the date hereof (the "Amendment," and together with the Loan Agreement,
the "Amended Loan Agreement").
D. TFCEI, which is the corporate parent of the Debtor, guarantied
the obligations of the Debtor under the Loan Agreement in a guaranty made by
TFCEI in favor of the Lender, dated as of December 20, 1996, and concurrently
herewith, in a guaranty made by TFCEI in favor of the Lender, dated as of the
date hereof.
E. FCF, a wholly-owned subsidiary of TFCEI, and TIA, a wholly-owned
subsidiary of the Debtor, also guaranteed the obligations of the Debtor under
the Loan Agreement in separate Guaranties made by them in favor of the Lender,
dated as of December 20, 1996, and concurrently herewith, in separate Guaranties
made by them in favor of the Lender, dated as of the date hereof. In addition,
FCF granted a security interest to the Lender in certain assets of FCF to secure
the Debtor's obligations under the Loan Agreement, in that certain Pledge
Agreement, dated as of December 20, 1996, as amended by the Amendment and
Confirmation of Pledge Agreement, dated as of the date hereof (the "FCF Pledge
Agreement").
F. The Affiliated Companies intend to file on a consolidated return
basis federal and state income tax returns reporting their respective business
operations for taxable year 1996 and thereafter.
G. With respect to such consolidated filings, TFCEI anticipates
receiving during 1997 a refund of federal income taxes in an amount estimated to
be $4,500,000 relating to a recapture of federal income taxes paid by the
Affiliated Companies for the tax years 1993 and 1994 (the "Tax Refund") on
behalf of itself or the other Affiliated Companies. As another condition of the
Amendment, the Lender has required that TFCEI and the other Affiliated Companies
pay the Tax Refund to Lender as, when, and in whatever amount received, in
reduction of the Indebtedness (as defined in the Amended Loan Agreement), and
has required the Affiliated Companies to execute and deliver this Agreement to
secure (i) the payment and performance of the Indebtedness, (ii) the payment and
performance of the respective covenants, agreements and undertakings of each of
the Affiliated Companies hereunder and under the other Loan Documents (as
defined in the Amended Loan Agreement), and (iii) any other present or future
obligations of any or all of the Affiliated Companies to Lender, whether matured
or unmatured, direct or indirect, secured or unsecured, original, extended or
renewed, absolute or contingent, whether originally contracted with or acquired
by the Lender, whether contracted alone or jointly and/or severally with others,
whether or not evidenced by negotiable instruments or other writings and any
renewals, extensions, or substitutions thereto, and including open lines of
credit and obligations with respect to letters of credit or any draft presented
in connection therewith (the obligations described in subsections (i), (ii) and
(iii) hereof, together, shall be referred to as the "Obligations.")
H. Without limiting the term "Loan Documents" as defined in the
Amended Loan Agreement, the term "Loan Documents" shall include the Amended Loan
Agreement, the Guaranties (as such term is defined in the Amended Loan
Agreement), the FCF Pledge Agreement and the Stock Pledge (as defined in the
Amended Loan Agreement).
AGREEMENT:
In order to secure to the Lender the payment when due under the
Obligations, each of the Affiliated Companies covenants and agrees as follows:
1. DEFINITIONS. Terms defined in the Amended Loan
Agreement and not otherwise defined herein shall have, as used herein, the
respective meanings provided for therein.
2. TERM. This Agreement and the obligations of the parties hereto
shall commence as of the date first above written and shall continue until the
payment by the Debtor and/or the other Affiliated Companies of all Indebtedness
and any other present or future Obligations of any of the Affiliated Companies
in existence or arising at or prior to such payment, including the performance
of all obligations under this Agreement.
3. REFUND COLLATERAL. The term "Refund Collateral" means
all property from time to time subject to the security interest granted hereby.
4. SECURITY INTEREST. To secure the Obligations, each and all of the
Affiliated Companies hereby assign, convey, transfer, grant and pledge to the
Lender, upon the terms set forth herein, a continuing lien and security interest
in all of the Affiliated Companies' (and/or each Affiliated Company's) right,
title and interest in, to and under all of the following, whether now owned or
hereafter acquired:
(a) any and all refunds of any nature or kind,
from the United States Department of Treasury or Internal Revenue Service,
however evidenced and whether characterized as an account, property or a general
intangible, relating to federal income taxes of any or all of the Affiliated
Companies;
(b) the federal income Tax Refund in an amount
estimated to be $4,500,000, payable during 1997 and relating to a recapture of
federal income taxes paid by the Affiliated Companies for the tax years 1993 and
1994; and
(c) all proceeds and products of any and all of
the foregoing, including, without limitation, cash and proceeds of the type
described above.
5. Security Interest Absolute. All rights of the Lender
and security interests hereunder, and all duties, and obligations of the
Affiliated Companies hereunder, shall be absolute and unconditional and, without
limiting the generality of the foregoing, shall not be released, discharged or
otherwise affected by:
(a) any extension, renewal, settlement,
compromise, waiver or release in respect of any of the Obligations,
or any other document evidencing or securing such Obligations, by
operation of law or otherwise;
(b) any modification or amendment or supplement
to the Amended Loan Agreement, the other Loan Documents or any other
document evidencing or securing any of the Obligations;
(c) any release, non-perfection or invalidity of
any direct or indirect security for any of the Obligations;
(d) any insolvency, bankruptcy, reorganization
or other similar proceeding affecting any of the Affiliated
Companies or its assets or any resulting disallowance, release or
discharge of all or any portion of the Obligations;
(e) the existence of any claim, set-off or other right
which any of the Affiliated Companies may have at any time against
the Lender or any other entity or person, whether in connection
herewith or any unrelated transactions; provided, that nothing
herein shall prevent the assertion of any such claim by separate
suit or compulsory counterclaim;
(f) any invalidity or unenforceability relating to or
against any of the Affiliated Companies for any reason of any of the
Obligations, or any provision of applicable law or regulation
purporting to prohibit the payment by the Affiliated Companies of
the Obligations;
(g) any failure by the Lender (i) to file or enforce a
claim against the Affiliated Companies or its estate (in a
bankruptcy or other proceeding), (ii) to give notice of the
existence, creation or incurring by any of the Affiliated Companies
of any new or additional indebtedness under or with respect to the
Obligations, (iii) to commence any action against any of the
Affiliated Companies, (iv) to disclose to any of the Affiliated
Companies any facts which the Lender may now or hereafter know with
regard to such Affiliated Company or (v) to proceed with due
diligence in the collection, protection or realization upon any
Refund Collateral securing the Obligations; or (vi) any other act or
omission to act or delay of any kind by any of the Affiliated
Companies, the Lender or any other corporation or person or any
other circumstance whatsoever which might, but for the provisions of
this clause, constitute a legal or equitable discharge of the
Obligations.
6. SPECIAL PROVISIONS. The Affiliated Companies irrevocably agree
that tax returns of whatever nature to the extent permitted by law shall be
filed on a consolidated return basis until cash proceeds of the Tax Refund have
been paid to or realized by the Lender. None of the Affiliated Companies will
take any action or omit to take any action which would impair the filing of the
Affiliated Companies on a consolidated basis. TFCEI shall promptly file for and
expeditiously facilitate the issuance of the Tax Refund on a consolidated return
basis, and promptly provide Lender with a copy of any and all tax returns,
amendments and correspondence with respect thereto. Without limiting the
generality of the foregoing, TFCEI, with the other Affiliated Companies' full
concurrence, shall in any such consolidated filing designate itself as the
recipient of the Tax Refund and provide the following address as the address for
the issuance of the Tax Refund from the taxing authorities:
Mr. W. Jerome McDermott
Account Executive
Asset Based Lending
General Electric Capital Corporation
1000 Hart Road
Barrington, Illinois 60010
In the alternative, upon the prior written instructions of the
Lender, the Tax Refund may be send by bank wire to a bank account of an
Affiliated Company designated by the Lender.
The Affiliated Companies agree that the Tax Refund shall be treated
as follows:
(a) Promptly upon the request of the Lender and
immediately upon receipt of the Tax Refund, TFCEI (and/or any of the Affiliated
Companies, if applicable) shall endorse the check(s) with respect to such Tax
Refund payable pursuant to Lender's instructions.
(b) Upon endorsement pursuant to subsection (a)
above, TFCEI (and/or any of the Affiliated Companies, if applicable) shall,
pursuant to the Lender's instructions (i) deliver the endorsed check to the
Lender, (ii) deposit same to a bank account in TFCEI's or Lender's name,
designated by the Lender, or (iii) in the case of the Tax Refund is paid by bank
wire to TFCEI (and/or any of the Affiliated Companies as applicable) or is
deposited into an account of same, immediately deliver the amount of the Tax
Refund to the Lender by bank wire (or otherwise pursuant to the Lender's
instructions) to a bank account designated by the Lender, and thereby effect a
payment to Lender in diminution of the outstanding loan balance under the
Amended Loan Agreement.
(c) In the event that TFCEI (and/or any of the
Affiliated Companies, if applicable) fails to endorse the Tax Refund or pay the
proceeds of the Tax Refund to the Lender as described in this Section, or
otherwise breaches the terms of this Agreement requiring payment or endorsement,
the Affiliated Companies expressly agree that money damages alone will not
constitute an adequate remedy and that the only adequate remedy shall be an
injunction requiring performance by TFCEI (and/or any of the Affiliated
Companies, if applicable) of its obligations under this Agreement. The
Affiliated Companies, accordingly, agree that in the event of a breach, Lender
may apply to any court of competent jurisdiction for both temporary and
permanent injunctions, together with any money damages suffered including
reasonable costs and attorneys' fees.
(d) Without limitation of any Lender's rights
pursuant to Subsection (c) above, in the event that TFCEI (and/or any of the
Affiliated Companies, if applicable) fails to endorse the Tax Refund or pay the
proceeds of such Tax Refund to the Lender as described in this Section, Lender
may directly deposit such Tax Refund in a Blocked Account (as hereinafter
defined) or other bank account of TFCEI (and/or any of the Affiliated Companies,
as applicable) controlled by Lender or in which Lender has a security interest,
and then take possession of the proceeds of such Tax Refund in such account and
utilize such proceeds to effect a payment to Lender in diminution of the
outstanding balance of the loans under the Amended Loan Agreement.
(e) Upon request of the Lender, TFCEI (and/or
any of the Affiliated Companies, if applicable) shall establish a special bank
account in TFCEI's or Lender's name solely for the purpose of depositing the Tax
Refund (the "Blocked Account") at a financial institution acceptable to Lender
in its sole discretion for deposit of the Tax Refund. The Blocked Account and
all proceeds thereof, shall be pledged by the Affiliated Companies to the Lender
in accordance with the requirements of the depository and the UCC so that Lender
has a perfected first priority security interest in the Blocked Account.
7. NO FURTHER TRANSFER. The Affiliated Companies shall not
sell, assign, pledge, encumber, grant a security interest in, or otherwise
transfer the Refund Collateral or any interest therein without the prior written
consent of the Lender.
8. MAINTENANCE OF RECORDS. TFCEI will maintain accurate
business records and books of account showing, among other things, all Refund
Collateral owned by the Affiliated Companies. The Lender shall have the right
to inspect such books and records and make abstracts therefrom.
9. PUBLIC FILING. The Affiliated Companies shall join with the
Lender in executing documents for public filing with respect to evidencing,
perfecting or protecting the Lender's security interest in the Refund Collateral
and its rights with respect to the Tax Refund, in a form satisfactory to the
Lender, and bear any and all costs of such filings.
10. FURTHER ASSURANCES. Each of the Affiliated Companies shall
execute and deliver on demand such further assurances and take such steps as may
be necessary to confirm, perfect and maintain the Lender's security interest in
the Refund Collateral and to preserve the priority of the Lender's security
interest and lien on the Refund Collateral. The Affiliated Companies will
reimburse the Lender for all expenses incurred in the filing and obtaining of
all such documents, including but not limited to the costs of performing lien,
security interest and judgment lien searches in applicable jurisdictions.
11. DEFENSE OF REFUND COLLATERAL. The Affiliated Companies:
(a) will not create, incur, assume or suffer to
exist, any lien, security interest or other encumbrance upon or with respect to
the Refund Collateral (except the security interest granted to the Lender
hereunder); and
(b) at their cost, will join the Lender in
defending the Refund Collateral against any claims or demands adverse to
Lender's security interest therein and in promptly paying, when due, all taxes
or assessments levied against the Refund Collateral except where contested in
good faith by proper proceedings if appropriate reserves are maintained with
Lender with respect thereto.
12. INFORMATION REGARDING REFUND COLLATERAL. TFCEI (and the other
Affiliated Companies, as applicable) shall provide the Lender such information
as the Lender may from time to time reasonably request with respect to the
Refund Collateral and the Tax Refund, including, without limitation, statements
describing, designating, identifying and evaluating the Refund Collateral and
the Tax Refund.
13. POWER OF ATTORNEY. Each of the Affiliated Companies hereby
appoints the Lender and any officer or employee of the Lender as the Lender may
from time to time designate, as attorneys-in-fact for the Affiliated Companies
to perform all actions necessary or desirable in the discretion of the Lender to
effect the provisions of this Agreement and to carry out the intent hereof, to
do any act which any of the Affiliated Companies are required to do pursuant to
the terms of this Agreement, and to exercise such rights and powers as any of
the Affiliated Companies might exercise with respect to the Refund Collateral,
all at the cost and expense of the Affiliated Companies. Neither the Lender nor
any other such attorney-in-fact will be liable for any acts of omission or
commission, unless such acts were willful and malicious or grossly negligent,
nor for any error of judgment or mistake of law or fact. This power is coupled
with an interest and is irrevocable until the cash proceeds of the Tax Refund
are paid to or realized by the Lender.
14. INDEMNIFICATION.
(a) The Affiliated Companies (jointly and
severally) will save, indemnify, and hold harmless the Lender from and against,
and pay or reimburse the Lender for, any and all claims, liabilities,
obligations, losses, fines, costs, proceedings, suits, actions, deficiencies or
damages (whether absolute, accrued, conditional, or otherwise and whether or not
resulting from third party claims), including reasonable attorneys' fees
incurred by the Lender, resulting from or arising out of:
(i) the Tax Refund, the Refund
Collateral or the Lender's security interest granted hereunder;
(ii) any recoupment, voiding,
recovery or set-off by any taxing authority with respect to the Tax Refund or
any payment or proceeds thereof;
(iii) any inaccuracy of any
representation or warranty made by any of the Affiliated Companies herein; or
(iv) any failure of any of the
Affiliated Companies to perform any covenant or agreement hereunder.
(b) The provisions of this Section 14 shall
survive the termination of this Agreement.
15. EVENTS OF DEFAULT. The occurrence of any of the
following events shall constitute a "Default" hereunder:
(a) The occurrence of an Event of Default under
the Amended Loan Agreement.
(b) If any payment due under the Obligations is
not paid when due after the expiration of any applicable notice or
cure period.
(c) The failure by any Affiliated Company to
observe or perform any of the applicable agreements contained herein.
(d) Discovery that any representation or
warranty made by the Affiliated Companies herein or any statement or
representation made in any certificate, report or opinion delivered pursuant
hereto was incorrect, incomplete or misleading in any material respect on or as
of the date made or deemed made.
(e) If any guaranty (including the Guaranties)
obtained in connection with an Obligation is terminated.
(f) If any of the Affiliated Companies shall
generally not pay, or shall be unable to pay, or shall admit in writing its
inability to pay, its debts as such debts become due (as defined by 11 U.S.C.
ss.303(h)(1)).
(g) If any of the Affiliated Companies makes an
assignment for the benefit of creditors, files a petition in bankruptcy,
petitions or applies to any tribunal for any receiver, custodian or any trustee
of any substantial part of its property, or commences any proceeding relating to
it under any reorganization, arrangement, readjustments of debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect.
(h) If, within sixty (60) days after the filing
of a bankruptcy petition or the commencement of any proceeding against any of
the Affiliated Companies seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, the proceeding shall not have been dismissed,
or, if within thirty (30) days after the appointment, without the consent or
acquiescence of it, of any trustee, receiver, custodian or liquidator of it or
of all or any substantial part of the properties of it, the appointment shall
not have been vacated.
(i) If this Agreement shall at any time and for
any reason cease to create a valid and perfected first priority security
interest in and to the Refund Collateral (except as provided in Section 11
hereof), or such security interest shall cease to be in full force and effect or
shall be declared null and void, or the validity or enforceability thereof shall
be contested by any Affiliated Company or any Affiliated Company shall deny that
it has any further liability or obligation with respect thereto.
(j) A default by any of the Affiliated Companies
under any other agreement or contract between any of the Affiliated Companies
and the Lender, including but not limited to the Loan Documents (whether or not
relating to the Amended Loan Agreement).
16. REMEDIES. Upon the occurrence of a Default, the Lender at its
option may exercise any and all rights and remedies on default of a Lender under
the UCC as then in effect, or under other applicable law, as well as all rights
and remedies provided herein, or in the Loan Documents, including, without
limitation, the right to sell any and all of the Refund Collateral in accordance
with the applicable provisions of said UCC.
The rights of the Lender granted and arising under the terms of this
Agreement shall be separate, distinct and cumulative of all other rights which
the Lender may have under the Amended Loan Agreement, any of the Loan Documents
or any other Obligation in law or in equity, and none of them shall be in
exclusion of the others; and all of them are cumulative to the remedies for
collection of indebtedness and enforcement of rights under security agreements
and preservation of security available to the Lender as lender as provided at
law. No act of the Lender shall be construed as an election to proceed under any
one provision hereof to the exclusion of any other provision, or an election of
remedies to the bar of any other remedy allowed under the Amended Loan
Agreement, any other Loan Document, or any other Obligation or at law or in
equity, anything herein or otherwise to the contrary notwithstanding. The Lender
shall have the right, at its sole option, to exhaust the Refund Collateral or
any other security given or received by the Lender to secure the amounts due
under the Amended Loan Agreement, or any other Obligation, either concurrently
or independently, and in such order as the Lender in its sole discretion may
determine. No delay by the Lender in exercising any right or remedy hereunder or
otherwise afforded by law shall operate as a waiver thereof or preclude the
exercise of any such right or remedy during continuance of any Default under
this Agreement.
17. AFFILIATED COMPANIES' REPRESENTATIONS AND WARRANTIES.
Each of the Affiliated Companies represents and warrants to the Lender as
follows:
(a) First Priority Security Interest. The
Affiliated Companies have good and marketable title to the Refund Collateral
subject to no prior liens, security interests or other encumbrances (except as
provided in Section 11 hereof).
(b) Incorporation, Good Standing, and Due
Qualification. TFCE is a corporation duly incorporated and validly existing
under the laws of Delaware, and each of the other Affiliated Companies is a
corporation duly incorporated under the laws of the Commonwealth of Virginia;
each has the corporate power and authority and all material governmental
licenses, authorization, consents and approvals required to own its assets and
to transact the business in which it is now engaged or proposes to be engaged;
and each is duly qualified as a foreign corporation and in good standing under
the laws of each other jurisdiction in which a failure to so qualify and be in
good standing would constitute a material violation of applicable law.
(c) Corporate Power and Authority. The
execution, delivery, and performance by each of the Affiliated Companies of this
Agreement have been duly authorized by all necessary corporate action and do not
and will not (1) require any consent or approval of the stockholders of such
corporation; (2) contravene such corporation's charter or bylaws; (3) violate
any provision of any law, rule, regulation (including, without limitation,
Regulations U and X of the Board of Governors of the Federal Reserve System),
order, writ, judgment, injunction, decree, determination, or award presently in
effect having applicability to such corporation; (4) require any action by or in
respect of, or filing with, any governmental body, agency or official (other
than the Internal Revenue Service); (5) result in a breach of or constitute a
default under any indenture or loan or credit agreement or any other agreement,
lease, or instrument to which such corporation is a party or by which it or any
of its properties may be bound or affected; (6) result in, or require, the
creation or imposition of any lien, security interest or other encumbrance
(other than the security interest of this Agreement), upon or with respect to
any of the properties now owned or hereafter acquired by such corporation; or
(7) cause such corporation to be in default under any such law, rule,
regulation, order, writ, judgment, injunction, decree, determination, or award
or any such indenture, agreement, lease, or instrument applicable to such
corporation.
(d) Legally Enforceable Agreement. This
Agreement, when delivered, will be legal, valid, and binding obligations of the
Affiliated Companies enforceable against each of the Affiliated Companies in
accordance with its terms and in whatever capacity an Affiliated Company may be
referred to under such terms (including without limitation, whether such
reference is made individually or collectively, as the case may be), except to
the extent that such enforcement may be limited by applicable bankruptcy,
insolvency, and other similar laws affecting creditors' rights generally.
(e) Other Agreements. None of the Affiliated
Companies is a party to any indenture, loan, or credit agreement, or to any
lease or other agreement or instrument, or subject to any charter or corporate
restriction which could have a material adverse effect on its ability to carry
out its obligations hereunder, and none is in default in any material respect in
the performance, observance, or fulfillment of any of the obligations,
covenants, or conditions contained in any agreement or instrument material to
its business to which it is a party.
(f) No Defaults on Outstanding Judgments or
Orders. Each of the Affiliated Companies has satisfied all judgments and is not
in default with respect to any judgment, writ, injunction, decree, rule or
regulation of any court, arbitrator or federal, state, municipal or other
governmental authority, commission, board, bureau, agency or instrumentality,
domestic or foreign, a default of which would materially adversely affect the
financial condition, operations, properties or business of such Affiliated
Company or its ability to perform its obligations hereunder.
(g) Compliance with Laws. Each of the
Affiliated Companies has complied in all material respects with all applicable
laws, rules, regulations, ordinances and orders.
(h) Taxes. The Affiliated Companies have filed
all tax returns (federal, state and local) required to be filed and have paid
all taxes, assessments and governmental charges and levies due pursuant to such
returns or pursuant to any assessment received by any of them, including
interest and penalties, if applicable.
(i) Corporate Structure. The Affiliated
Companies are the only corporations or other entities comprising the Affiliated
Group.
18. TERMINATION. Upon the payment to, or realization by,
the Lender of the cash proceeds of the Tax Refund, this Agreement shall
terminate.
19. GOVERNING LAW. The interpretation and performance of this
Agreement shall be governed by the laws of the Commonwealth of Virginia (or,
with respect to the security interests granted herein, by such other
jurisdiction if the validity or perfection of any security interest granted
herein is governed by reason of the mandatory provisions of law by the Uniform
Commercial Code as in effect in such jurisdiction other than Virginia).
20. SUCCESSORS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
21. INTERPRETATIONS. The headings to sections of this Agreement are
for the convenience of reference only and do not form a part of this Agreement
and shall not affect the interpretation hereof. Unless the context indicates
otherwise, words in a singular number shall be deemed to include words in the
plural and vice versa, and words in one gender shall be deemed to include words
in other genders.
[Next page is signatures]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
LENDER:
GENERAL ELECTRIC CAPITAL CORPORATION,
a New York corporation
By: ___________________________
Its: ___________________________
TFCEI:
TFC ENTERPRISES, INC.,
a Delaware corporation
By: ___________________________
Its: ___________________________
DEBTOR:
THE FINANCE COMPANY,
a Virginia corporation
By: ____________________________
Its: ____________________________
FCF:
FIRST COMMUNITY FINANCE, INC.,
a Virginia corporation
By: ____________________________
Its: ____________________________
TIA:
THE INSURANCE AGENCY, INC.,
a Virginia corporation
By: _____________________________
Its: _____________________________
AMENDMENT NUMBER 3 AND WAIVER OF
NOTE AGREEMENT
This AMENDMENT NUMBER 3 AND WAIVER OF NOTE AGREEMENT (this
"Amendment and Waiver") dated as of April 4, 1997, is made by and between THE
FINANCE COMPANY (the "Company"), a Virginia corporation and CIG & CO. (the
"Holder") as nominee for CONNECTICUT GENERAL LIFE INSURANCE COMPANY (the
"Purchaser").
BACKGROUND
1. The Company and the Purchaser are parties to a Note Purchase
Agreement (as amended prior to the date hereof, the "Existing Note Agreement"),
dated as of June 30, 1995, that provided, among other things, for the sale by
the Company and the purchase by the Purchaser of Ten Million Dollars
($10,000,000) in aggregate principal amount of the Company's 9.38% Senior
Subordinated Notes, due June 30, 2002 (the "Notes") which Notes are registered
in the name of the Holder on behalf of the Purchaser. The Company and the Holder
previously entered into a Waiver and Forbearance Agreement (as amended or
extended, the "Forbearance Agreement") dated as of January 31, 1996.
2. The Company has entered into an Amended and Restated Motor
Vehicle Installment Contract Loan and Security Agreement with General Electric
Capital Corporation ("GECC") dated as of December 20, 1996, and as amended by
Amendment No. 1 dated as of April 4, 1997 (as so amended, together with all
exhibits thereto and all other agreements contemplated thereby, the "New GECC
Agreement") which will require certain amendments to the Existing Note
Agreement.
3. The Company has requested of the Holder that the
Existing Note Agreement be amended and waived to the effect and as set forth
in this Amendment and Waiver.
NOW THEREFORE, in order to induce the Holder to amend the Existing
Note Agreement and to waive certain defaults with respect thereto and in
consideration for other good and valuable consideration (the receipt of and
sufficiency of which are hereby acknowledged), the Company agrees with the
Holder as follows:
SECTION 1. DEFINED TERMS.
All capitalized terries used, but clot specifically defined, in
this Amendment and Waiver have the respective meanings assigned to them in or
pursuant to the provisions of the Existing Note Agreement as amended by this
Amendment and Waiver (as so amended herein referred to as the "Amended Note
Agreement").
SECTION 2. REPRESENTATIONS AND WARRANTIES.
The Company warrants and represents to the Holder that as of the
date of this Amendment and Waiver and as of the Effective Date (as defined in
Section 3):
(a) ORGANIZATION AND AUTHORITY. The Company:
(i) is a corporation duly organized, validly existing and in good standing
under the laws of the State of Virginia; (ii) has all requisite power and
authority and all necessary licenses and permits to own and operate its
Properties and to carry on its business as now conducted and as presently
proposed to be conducted; and (iii) has duly qualified or has been duly
licensed, and is authorized to do business and is in good standing, as a foreign
corporation in each jurisdiction where the character of its Properties or the
nature of its activities makes such qualification necessary or desirable.
(b) NO MATERIAL ADVERSE CHANGE. Except as
described in the first, second and third quarter 10-Qs (for fiscal year 1996),
and subsequent press releases dated November 20, 1996, December 26, 1996 and
February 4, 1997, of TFC Enterprises, Inc., and except as described to the
Holder with respect to the existence of certain Material changes as of December
31, 1996, since December 31, 1995, there has been no change in the financial
condition, operations, business, properties or prospects of the Company or any
Subsidiary except changes that individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect and there has been no
Material change in the Liabilities of the Company and its Subsidiaries.
(c) FULL DISCLOSURE. Each written statement
and all written materials furnished by, or on behalf of, the Company to the
Holder in connection with this Amendment and Waiver do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements contained therein or herein not misleading in light of the
circumstances under which they were made. There is no fact known to the Company
which the Company has not disclosed to the Holder in writing that could
reasonably be expected to have a Material Adverse Effect that has not been set
forth herein or in the written materials delivered to you by the Company
specifically for use in connection with this Amendment.
(d) TRANSACTION IS LEGAL AND AUTHORIZED. The
execution and delivery of this Amendment and Waiver by the Company, the
consummation of each of the transactions contemplated by this Amendment and
Waiver and the compliance by the Company with all the provisions of this
Amendment and Waiver and the Amended Note Agreement: (i) are within the
corporate powers of the Company; and (ii) are legal and do not conflict with,
result in any breach in any of the provisions of, or constitute a default (or
require any consent other than the consents heretofore obtained) under, or
result in the creation of any Lien upon any Property of the Company under the
provisions of, any agreement or instrument to which it is a party or by which it
or any of its Property may be bound.
(e) AMENDMENT AND WAIVER IS ENFORCEABLE. The
obligations of the Company set forth in this Amendment and Waiver and the
Amended Note Agreement are valid, binding and enforceable in accordance with
their respective terms, except as the enforceability hereof and of the Amended
Note Agreement may be: (i) limited by bankruptcy, insolvency or other similar
laws affecting the enforceability of creditors' rights generally; and (ii)
subject to the availability of equitable remedies.
(f) NO DEFAULTS. After giving effect to the
amendments in Section 4 and the waivers in Section 6 of this Amendment and
Waiver and after giving effect to the New GECC Agreement, no event has occurred
and no condition exists which, upon execution and delivery of this Amendment and
Waiver, would constitute a Default or Event of Default.
SECTION 3. CONDITIONS PRECEDENT.
This Amendment and Waiver shall have no effect until all of the
following conditions precedent shall have been fulfilled (such time of
effectiveness is referred to as the "Effective Date"):
(a) WARRANTIES AND REPRESENTATIONS TRUE. The
warranties and representations set forth in Section 2 shall be true in all
material respects.
(b) NO DEFAULT OR EVENT OF DEFAULT. No
Default or Event of Default exists or will exist immediately after, and
after giving effect to, the consummation of the transactions contemplated by
this Amendment and Waiver.
(c) PROCEEDINGS SATISFACTORY. All proceedings
taken in connection with the execution and delivery of this Amendment and
Waiver and the transactions contemplated hereby shall be satisfactory to the
Holder and its in-house counsel; and the Holder and its in-house counsel shall
have received copies of such documents and papers as they may reasonably request
in connection therewith.
(d) BANK LOAN AGREEMENT. The Company shall
have paid or caused to be paid in cash all amounts owing to NationsBank ALA.
(the "Bank") under the Loan and Security Agreement, dated as of December 27,
1994, other than $400,000 of the amount owed to the Bank with respect to which
the Bank has agreed to accept an unsecured promissory note payable by the
Company to the Bank, in the form attached to Amendment No. 1 to the New GECC
Agreement and shall provide evidence that payment has been made satisfactory in
form and substance to the Holder and its in-house counsel.
(e) APPROVAL OF GECC LOAN AGREEMENT. The
Company and GECC shall have executed and delivered the New GECC Agreement
(including Amendment No. 1 thereto) in form and substance satisfactory to the
Holder and its in-house counsel.
(f) PAYMENT OF FEES. In connection with the
execution of this Amendment and Waiver the Company shall have paid the Holder a
fee of $50,000.
(g) ALLONGE. The Company shall have
executed and delivered to the Holder an Allonge in the form of Annex 1 for
each outstanding Note held by the Holder.
SECTION 4. AMENDMENTS TO THE EXISTING NOTE AGREEMENT.
(a) SECTION 10.5. Section 10.5 of the Existing
Note Agreement is hereby amended to read in full as follows:
"10.5 TOTAL LIABILITIES RATIO.
The ratio of (x) Total Liabilities minus Subordinated
Indebtedness to (y) Consolidated Tangible Net Worth plus Senior
Subordinated Indebtedness minus receivables from shareholders.
officers and employees of the Company and its Subsidiaries, will not
at any tine be greater than the ratios set forth below during the
following periods:
Effective Date through 12/31/97 4.6:1
From 1/1/98 through 12/31/98 4.2:1
From and after 1/1/99 4.0:1"
(b) SECTION 10.7. Section 10.7 of the Existing
Note Agreement is hereby amended to read in full as follows:
"10.7 PRE-TAX EARNINGS AVAILABLE FOR FIXED CHARGES.
The ratio of Consolidated Pre-Tax Earnings Available
for Fixed Charges to Consolidated Fixed Charges will at all times
exceed the ratios set forth below during the following periods:
From 1/1/97 through 12/31/97 1.10:1
From 1/1/98 through 12/31/98 1.20:1
From and alter 1/l/98 1.25:1"
(c) SECTION 10.8. Section 10.8 of the Existing
Note Agreement is hereby amended to read in full as follows:
"10.8 RESERVE RATIO; DEALER RESERVES.
(i) During the period from the Effective Date through
December 31 1998 the Company shall not allow the sun, of (x) Dealer
Reserves plus (y) allowances for credit losses to fall below 100% of
all Contracts and other installment receivables owned by it which
are Two Due or more delinquent. The term "TWO DUE means the
following payment delinquency status determined as of the end of a
calendar month:
SCHEDULED PAYMENTS DUE
SCHEDULE OF PAYMENTS AND UNPAID IN WHOLE
Monthly 2
Semi-Monthly 3
Bi-weekly 3
Weekly 6
(ii) From and after January 1, 1999, the Company shall
not allow the sum of (x) Dealer Reserves plus (y) allowances for
credit losses to fall below 120% of all Contracts and other
installment receivables owned by it which are Three Due or more
delinquent.
(iii) The Company will maintain the sum of (x) Dealer
Reserves plus (y) allowances for credit losses in an amount at least
equal to 5.75% of the Aggregate Principal Amount of Receivables of
the Company. The term AGGREGATE PRINCIPAL AMOUNT OF RECEIVABLES"
means gross receivables less any unearned amounts with respect
thereto."
(d) SECTION 10.9. Section 10.9 of the Existing
Note Agreement is hereby amended to read in full as follows:
"10.9 CONSOLIDATED TANGIBLE NET WORTH.
(i) During the period commencing January 1, 1997 and
continuing until December 31, 1998, the Company will not at any time
permit Consolidated Tangible Net Worth to be less than the following
amounts for the following periods:
From 1/1/97 through 12/31/97 $17,000,000
From 1/1/98 through 12/31/98 $20,000,000
provided, however, until First Community Finance, Inc. ("FCF")
enters into and consummates a loan transaction with Hibernia
National Bank (the "Hibernia Financing"), pursuant to a commitment
letter attached to Amendment No. 1 to the New GECC Agreement (or, if
FCF fails to consummate the Hibernia Financing, any other substitute
financing which results in the release by GECC of its lien arid
security interest in the FCF Stock (as defined in the New GECC
Agreement) and the release of FCF from the guaranties in favor of
GECC), the Company will not at any time permit Consolidated Net
Worth to be less than the following amounts for the following
periods:
From 1/1/97 through 12/31/97 $11,000,000
From 1/1/98 through 12/11/98 $14,000,000
(ii) Front and after January 1, 1999, the Company will
not permit Consolidated Tangible Net Worth, at any time, to be less
than the sum of (a) $21,000,000, plus (b) an aggregate amount equal
to 50% of its aggregate Consolidated Net Earnings (but only if a
positive number) for each completed fiscal year beginning with the
fiscal year ended December 31, 1999."
(e) SCHEDULE B. The definition of "Senior Financing Agreements"
contained in Schedule B to the Existing Note Agreement shall be amended and
restated as follows:
`"SENIOR FINANCING AGREEMENTS" means the Amended and
Restated Motor Vehicle Installment Contract Loan and Security
Agreement, as amended from time to time, by and between the Company
and General Electric Capital Corporation, a New York Corporation,
dated as of December 20, 1996, pursuant to which the Company may
borrow up to $110,000,000.'
SECTION 5. PAYMENT OF FEES OR OTHER COMPENSATION.
The Company agrees that in the event the Company pays, offers to
pay or is required to pay any remuneration (other than (x) the Line Fee [as such
term is defined in the New GECC Agreement], (y) warrants granted by TFCEI in
connection with the New GECC Agreement and (z) reimbursement of expenses
incurred by GECC in connection with the negotiation and delivery of the New GECC
Agreement, including legal fees), whether by way of supplemental or additional
interest, fee or otherwise, to GECC, as consideration for or as an inducement to
the entering into by GECC of any amendment, modification or waiver with respect
to the New GECC Agreement, it shall pay to the Holder the same remuneration,
with the Holder receiving an amount equal to its pro rata share of all amounts
so paid to GECC based on the outstanding principal amount of the Notes, and the
amounts then owing to GECC.
SECTION 6. WAIVER OF DEFAULT.
Subject to compliance with the conditions for the effectiveness of
this Amendment and Waiver set forth in Section 3 and further subject to the
conditions set forth in Section 7, the Holder hereby (1) waives (a) the Event of
Default under Section 10.7 of the Existing Note Agreement resulting from the
failure of the Company to comply with the provisions of said Section 10.7 for
the fiscal year ending December 31, 1995, and for the period from January 1,
1996 through and including the Effective Date, (b) the Event of Default under
Section 10.5 of the Existing Note Agreement resulting from the failure of the
Company to comply with the provisions of Section 10.5 for the fiscal year ending
December 31, 1995, and for the period from January 1, 1996 through and including
the Effective Date, and (c) for the period from January 1, 1996 through and
including the Effective Date, compliance with the provisions of Section 10.9 of
the Existing Note Agreement.
SECTION 7. FURTHER CONDITIONS.
The Company hereby agrees that the waivers and the forbearance
contained in Section 5 are subject to compliance with each of the following
conditions:
(a) The Company shall provide the Holder with
monthly business reviews, including financial statements and revised
forecasts, within forty-five (45) days after the end of each calendar month (and
in any event when such documents are delivered to GECC pursuant to the blew GECC
Agreement), covering (i) financial performance and (ii) cash flow projections of
the Company's future business as revised from time to time.
(b) In addition to the information required to
be provided pursuant to paragraph (b) above, the Company shall provide the
Holder, not later than forty-five (45) days following the end of each calendar
month (and in any event when such documents are delivered to GECC pursuant to
the New GECC Agreement), with the portfolio and operating information required
by Section 5.1(C) and Exhibit 5.1(C) of the New GECC Agreement as such Section
and such Exhibit may be amended from time to time. All such reports shall be in
a format and on a medium readable by the Holder's computer software, or such
other format or medium acceptable to the Holder.
(c) On or prior to November 30, 1998, the
Company shall have a firm commitment from GECC to extend the New GECC
Agreement on terms acceptable to the Holder until at least December 31, 2000 or
shall have a firm commitment with a lender acceptable to the Holder to replace
the financing provided by the New GECC Agreement. The failure of the Company to
have in effect the financing provided by GECC or substantially similar financing
for not less than $110,000,000, shall constitute an Event of Default under the
Amended Note Agreement. If GECC terminates the New GECC Agreement for any
reason, the Company shall notify the Holder immediately of such occurrence.
(d) If the Company shall amend or agree to
amend the terms and conditions of the New GECC Agreement, or enter into a new
agreement with GECC which has the effect of amending the New GECC Agreement, the
Company shall promptly notify the Holder and, at the request of such Holder,
enter into an amendment of this Agreement or a new agreement which has the
effect of amending this Agreement, reflecting the changes to the New GECC
Agreement.
This Amendment and Waiver shall constitute the amendment contemplated by the
final paragraph of Section 6 of the Forbearance Agreement as amended and upon
compliance with the conditions set forth in Section 3 of this Amendment and
Waiver, the Forbearance Agreement shall be of no further force and effect.
SECTION 8. EFFECT OF AMENDMENT.
Except as expressly provided in this Amendment and Waiver, the
Existing Note Agreement and the Notes shall remain in full force and effect,
without modification or amendment. This Amendment and Waiver shall be binding
upon, and shall inure to the benefit of, the successors and assigns of the
parties hereto and the holders from time to time of the Notes.
SECTION 9. EXPENSES.
The Company shall promptly (and in any event within thirty (30)
days of receiving any statement or invoice therefor) pay all expenses relating
to this Amendment and Waiver, including but not limited to the reasonable
allocated costs and disbursements of in-house counsel to the Holder. The
obligations of the Company under this Section 8 shall survive the termination of
this Amendment and Waiver.
SECTION 10. SURVIVAL.
All warranties, representations, certifications and covenants made
by the Company in this Amendment and Waiver or in any certificate or other
instrument delivered by it or on its behalf under this Amendment and Waiver
shall be considered to have been relied upon by the Holder and shall survive the
execution of this Amendment and Waiver, regardless of any investigation made by
or on behalf of the Holder. All statements in any such certificate or other
instrument shall constitute warranties and representations of the Company under
this Amendment and Waiver.
SECTION 11. DUPLICATE ORIGINALS, EXECUTION IN COUNTERPART.
Two or more duplicate originals of this Amendment and Waiver may be
signed by the parties, each of which shall be an original but all of which
together shall constitute one and the same instrument. This Amendment and Waiver
may be executed in one or more counterparts and shall be effective when at least
one counterpart shall have been executed by each party to this Amendment and
Waiver (including the signatories to each of the Consent and the Acknowledgment
that are annexed to this Amendment and Waiver), and each set of counterparts
which, collectively, show execution by each such party to this Amendment and
Waiver shall constitute one duplicate original.
SECTION 12. GOVERNING LAW.
This Amendment and Waiver shall be governed by, and construed in
accordance with, internal Connecticut law.
IN WITNESS WHEREOF, the Company and the Holder have executed this
Amendment Number 3 and Waiver of Note Agreement as of the date first above
written.
CIG & Co. THE FINANCE COMPANY
By: /s/ JAMES F. COGGINS, JR. By: /s/ R.S. RALEY, JR.
------------------------------ ------------------------
Name: JAMES F. COGGINS, JR. Name: R.S. RALEY, JR.
Title: PARTNER Title: PRESIDENT & CEO
<PAGE>
ANNEX 1
ALLONGE DATED AS OF ___________,1997
TO
9.38% SENIOR SUBORDINATED NOTE DATED JUNE __, 1995
REGISTERED IN THE NAME OF CIG & CO.
IN THE PRINCIPAL AMOUNT OF $__________
NUMBER R-[__]
In accordance with that certain Amendment Number 3 and Waiver of
Note Agreement dated as of April 4, 1997 (the "Amendment and Waiver"), amending
the Note Purchase Agreement dated as of June 30, 1995 (as amended, modified or
extended prior to the date hereof and from time to time hereafter, the "Note
Agreement"), by and between THE Finance Company (the "Company"), a Virginia
corporation, and Connecticut General Life Insurance Company (on behalf of which
the Notes issued thereunder are registered in the name of its nominee, CIG &
Co.), this Allonge has become a permanent and irrevocable attachment to that
certain 9.38% Senior Subordinated Note due June 30, 2002, registered in the name
of CIG & Co., in the principal amount of $__________ (the "Note"), dated June
__, 1995, numbered R-[__], so as to become an integral physical and legal part
of such Note effective as of the date hereof as if the terms hereof were
originally included therein at the date of issuance thereof. All terms used in
this Allonge and not defined herein shall have the meanings ascribed to them in
the Note and the Note Agreement as amended by the Amendment and Waiver.
For good and valuable consideration, the receipt and sufficient of
which are hereby acknowledged, and in accordance with the Amendment and Waiver,
the parties hereto agree that this Allonge effects the followings irrevocable
modifications and changes to the Note:
1. Notwithstanding anything contained in the Note or
the Note Agreement to the contrary, for the period commencing
February 1, 1996 through and including March 31, 1997, interest
payable on the Note shall accrue and be payable at the rate of
10.38% per annum and for the period commencing April 1, 1997,
interest payable on the Note shall accrue and be payable at the rate
of 10.48% per annual.
All other terms and conditions of the Note, as modified by this
Allonge, shall continue in full force and effect. This Allonge is governed by,
and shall be construed and enforced in accordance with, Connecticut law.
The face of the Note shall evidence the attachment of this Allonge
by the following legend to be placed thereon: "This Note has been permanently
and irrevocably modified by an Allonge dated as of ____________, 1997 that has
been physically attached hereto."
IN WITNESS WHEREOF, the Company and the holder of the Note have
each caused this Allonge to be duly executed by its duly authorized officer.
CIG & Co. THE Finance Company
By: /s/ JAMES F. COGGINS, JR. By:
--------------------------------- -------------------------------
Name: JAMES F. COGGINS, JR. Name:
Title: PARTNER Title:
<PAGE>
ALLONGE DATED AS OF APRIL 4, 1997
TO
9.38% SENIOR SUBORDINATED NOTE DATED JUNE 30, 1995
REGISTERED IN THE NAME OF CIG & CO.
IN THE PRINCIPAL AMOUNT OF $3,000,000
NUMBER R-1
In accordance with that certain Amendment Number 3 and Waiver of
Note Agreement dated as of April 4, 1997 (the "Amendment and Waiver"), amending
the Note Purchase Agreement dated as of June 30, 1995 (as amended, modified or
extended prior to the date hereof and from time to time hereafter, the "Note
Agreement"), by and between THE Finance Company (the "Company"), a Virginia
corporation, and Connecticut General Life Insurance Company (on behalf of which
the Notes issued thereunder are registered in the name of its nominee, CIG &
Co.), this Allonge has become a permanent and irrevocable attachment to that
certain 9.38% Senior Subordinated Note due June 30, 2002, registered in the name
of CIG & Co., in the principal amount of $3,000,000 (the "Note"), dated June 30,
1995, numbered R-1, so as to become an integral physical and legal part of such
Note effective as of the date hereof as if the terms hereof were originally
included therein at the date of issuance thereof. All terms used in this Allonge
and not defined herein shall have the meanings ascribed to then, in the Note and
the Note Agreement as amended by the Amendment and Waiver.
For good and valuable consideration, the receipt and sufficient of
which are hereby acknowledged, and in accordance with the Amendment and Waiver,
the parties hereto agree that this Allonge effects the following irrevocable
modifications and changes to the Note:
1. Notwithstanding anything contained in the Note or
the Note Agreement to the contrary, for the period commencing
February 1, 1996 through and including March 31, 1997, interest
payable on the Note shall accrue and be payable at the rate of
10.38% per annum and for the period commencing April 1, 1997,
interest payable on the Note shall accrue and be payable at the rate
of 10.48% per annual.
All other terms and conditions of the Note, as modified by this
Allonge, shall continue in full force and effect. This Allonge is governed by,
and shall be construed and enforced in accordance with, Connecticut law.
The face of the Note shall evidence the attachment of this Allonge
by the following legend to be placed thereon: "This Note has been permanently
and irrevocably modified by an Allonge dated as of April 4, 1997 that has been
physically attached hereto."
IN WITNESS WHEREOF, the Company and the holder of the Note have
each caused this Allonge to be duly executed by its duly authorized officer.
CIG & Co. THE Finance Company
By: /s/ JAMES F. COGGINS, JR. By: /s/ R.S. RALEY, JR.
--------------------------- ------------------------
Name: JAMES F. COGGINS, JR. Name: R.S. RALEY, JR.
Title: PARTNER Title: PRESIDENT & CEO
<PAGE>
ALLONGE DATED AS OF APRIL 4, 1997
TO
9.38% SENIOR SUBORDINATED NOTE DATED JUNE 30, 1995
REGISTERED IN THE NAME OF CIG & CO.
IN THE PRINCIPAL AMOUNT OF $3,500,000
NUMBER R-2
In accordance with that certain Amendment Number 3 and Waiver of
Note Agreement dated as of April 4, 1997 (the "Amendment and Waivers), amending
the Note Purchase Agreement dated as of June 30, 1995 (as amended, modified or
extended prior to the date hereof and from time to time hereafter, the "Note
Agreement"), by and between THE Finance Company (the "Company"), a Virginia
corporation, and Connecticut General Life Insurance Company (on behalf of which
the Notes issued thereunder are registered in the name of its nominee, CIG &
Co.), this Allonge has become a permanent and irrevocable attachment to that
certain 9.38% Senior Subordinated Note due June 30, 2002, registered in the name
of CIG & Co., in the principal amount of $3,500,000 (the "Note"), dated June 30,
1995, numbered R-2, so as to become an integral physical and legal part of such
Note effective as of the date hereof as if the terms hereof were originally
included therein at the date of issuance thereof. All terms used in this Allonge
and not defined herein shall have the meanings ascribed to them in the Note and
the Note Agreement as amended by the Amendment and Waiver.
For good and valuable consideration, the receipt and sufficient of
which are hereby acknowledged, and in accordance with the Amendment and Waiver,
the parties hereto agree that this Allonge effects the following irrevocable
modifications and changes to the Note:
1. Notwithstanding anything contained in the Note or
the Note Agreement to the contrary, for the period commencing
February 1, 1996 through and including March 31, 1997, interest,
payable on the Note shall accrue and be payable at the rate of
10.38% per annul and for the period commencing April 1, 1997,
interest payable on the Note shall accrue and be payable at the rate
of 10.48% per annum.
All other terms and conditions of the Note, as modified by this
Allonge, shall continue in full force and effect. This Allonge is governed by,
and shall be construed and enforced in accordance with, Connecticut law.
The face of the Note shall evidence the attachment of this Allonge
by the following legend to be placed thereon: "This Note has been permanently
and irrevocably modified by an Allonge dated as of April 4, 1997 that has been
physically attached hereto."
IN WITNESS WHEREOF, the Company and the holder of the Note have
each caused this Allonge to be duly executed by its duly authorized officer.
CIG & Co. THE Finance Company
By: /s/ JAMES F. COGGINS, JR. By: /s/ R. S. RALEY, JR.
----------------------------- -------------------------
Name: JAMES F. COGGINS, JR. Name: R. S. RALEY, JR.
Title: PARTNER Title: PRESIDENT & CEO
<PAGE>
ALLONGE DATED AS OF APRIL 4, 1997
TO
9.38% SENIOR SUBORDINATED NOTE DATED JUNE 30, 1995
REGISTERED IN THE NAME OF CIG & CO.
IN THE PRINCIPAL AMOUNT OF $3,500,000
NUMBER R-3
In accordance with that certain Amendment Number 3 and Waiver of
Note Agreement dated as of April 4, 1997 (the "Amendment and Waivers), amending
the Note Purchase Agreement dated as of June 30, 1995 (as amended, modified or
extended prior to the date hereof and from time to time hereafter, the "Note
Agreement"), by and between THE Finance Company (the "Company"), a Virginia
corporation, and Connecticut General Life Insurance Company (on behalf of which
the Notes issued thereunder are registered in the name of its nominee, CIG &
Co.), this Allonge has become a permanent and irrevocable attachment to that
certain 9.38% Senior Subordinated Note due June 30, 2002, registered in the name
of CIG & Co., in the principal amount of $3,500,000 (the "Note"), dated June 30,
1995, numbered R-3, so as to become an integral physical and legal part of such
Note effective as of the date hereof as if the terms hereof were originally
included therein at the date of issuance thereof. All terms used in this Allonge
and not defined herein shall have the meanings ascribed to them in the Note and
the Note Agreement as amended by the Amendment and Waiver.
For good and valuable consideration, the receipt and sufficient of
which are hereby acknowledged, and in accordance with the Amendment and Waiver,
the parties hereto agree that this Allonge effects the following irrevocable
modifications and changes to the Note:
1. Notwithstanding anything contained in the Note or
the Note Agreement to the contrary, for the period commencing
February 1, 1996 through and including March 31, 1997, interest,
payable on the Note shall accrue and be payable at the rate of
10.38% per annul and for the period commencing April 1, 1997,
interest payable on the Note shall accrue and be payable at the rate
of 10.48% per annum.
All other terms and conditions of the Note, as modified by this
Allonge, shall continue in full force and effect. This Allonge is governed by,
and shall be construed and enforced in accordance with, Connecticut law.
The face of the Note shall evidence the attachment of this Allonge
by the following legend to be placed thereon: "This Note has been permanently
and irrevocably modified by an Allonge dated as of April 4, 1997 that has been
physically attached hereto."
IN WITNESS WHEREOF, the Company and the holder of the Note have
each caused this Allonge to be duly executed by its duly authorized officer.
CIG & Co. THE Finance Company
By: /s/ JAMES R. COGGINS, JR. By: /s/ R.S. RALEY, JR.
-------------------------- ------------------------
Name: JAMES R. COGGINS, JR. Name: R.S. RALEY, JR.
Title: PARTNER Title: PRESIDENT & CEO
AMENDMENT NUMBER 10 AND WAIVER OF
NOTE AGREEMENT
This AMENDMENT NUMBER 10 AND WAIVER OF NOTE AGREEMENT (this
"Amendment and Waiver") dated as of April 4, 1997, is made by and among THE
FINANCE COMPANY (the "Company"), a Virginia corporation and CIG & CO. (the
"Holder") as nominee for CONNECTICUT GENERAL LIFE INSURANCE COMPANY AND LIFE
INSURANCE COMPANY OF NORTH AMERICA (the "Purchasers").
BACKGROUND
1. The Company and each of the Purchasers are parties to separate
Note Purchase Agreements (collectively, as amended prior to the date hereof, the
"Existing Note Agreement"), dated as of October 25, 1988, that provided, among
other things, for the sale by the Company and the purchase by the Purchasers of
Six Million Four Hundred Thirty-Five Thousand Dollars ($6,435,000) in aggregate
principal amount of the Company's 13 1/2% Subordinated Notes, due October 15,
1998 (the "Notes") which Notes are registered in the name of the Holder on
behalf of the Purchasers. The Company and the Holder previously entered into a
Waiver and Forbearance Agreement (as amended or extended, the "Forbearance
Agreement") dated as of January 31, 1996.
2. The Company has entered into an Amended and Restated Motor
Vehicle Installment Contract Loan and Security Agreement with General Electric
Capital Corporation ("GECC") dated as of December 20, 1996, and as amended by
Amendment No. 1 dated as of April 4, 1997 (as so amended, together with all
exhibits thereto and all other agreements contemplated thereby, the "New GECC
Agreement") which will require certain amendments to the Existing Note
Agreement.
3. The Company has requested of the Holder that the
Existing Note Agreement be amended and waived to the effect and as set forth
in this Amendment and Waiver.
NOW THEREFORE, in order to induce the Holder to amend the Existing
Note Agreement and to waive certain defaults with respect thereto and in
consideration for other good and valuable consideration (the receipt of and
sufficiency of which are hereby acknowledged), the Company agrees with the
Holder as follows:
SECTION 1. DEFINED TERMS.
All capitalized terms used, but not specifically defined, in this
Amendment and Waiver have the respective meanings assigned to them in or
pursuant to the provisions of the Existing Note Agreement as amended by this
Amendment and Waiver (as so amended herein referred to as the "Amended Note
Agreement").
SECTION 2. REPRESENTATIONS AND WARRANTIES.
The Company warrants and represents to the Holder that as of the date of
this Amendment and Waiver and as of the Effective Date (as defined in Section
3):
(a) ORGANIZATION AND AUTHORITY. The Company:
(i) is a corporation duly organized, validly existing and in good standing
under the laws of the State of Virginia; (ii) has all requisite power and
authority and all necessary licenses and permits to own and operate its
Properties and to carry on its business as now conducted and as presently
proposed to be conducted; and (iii) has duly qualified or has been duly
licensed, and is authorized to do business and is in good standing, as a foreign
corporation in each jurisdiction where the character of its Properties or the
nature of its activities makes such qualification necessary or desirable.
(b) NO MATERIAL ADVERSE CHANGE. Except as
described in the first, second and third quarter 10-Qs (for fiscal year 1996),
and subsequent press releases dated November 20, 1996, December 26, 1996 and
February 4, 1997, of TFC Enterprises, Inc., and except as described to the
Holder with respect to the existence of certain Material changes as of December
31, 1996, since December 31, 1995, there has been no change in the financial
condition, operations, business, properties or prospects of the Company or any
Subsidiary except changes that individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect and there has been no
Material change in the Liabilities of the Company and its Subsidiaries.
(c) FULL DISCLOSURE. Each written statement
and all written materials furnished by, or on behalf of, the Company to the
Holder in connection with this Amendment and Waiver do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements contained therein or herein not misleading in light of the
circumstances under which they were made. There is no fact known to the Company
which the Company has not disclosed to the Holder in writing that could
reasonably be expected to have a Material Adverse Effect that has not been set
forth herein or in the written materials delivered to you by the Company
specifically for use in connection with this Amendment.
(d) TRANSACTION IS LEGAL AND AUTHORIZED. The
execution and delivery of this Amendment and Waiver by the Company, the
consummation of each of the transactions contemplated by this Amendment and
Waiver and the compliance by the Company with all the provisions of this
Amendment and Waiver and the Amended Note Agreement: (i) are within the
corporate powers of the Company; and (ii) are legal and do not conflict with,
result in any breach in any of the provisions of, or constitute a default (or
require any consent other than the consents heretofore obtained) under, or
result in the creation of any Lien upon any Property of the Company under the
provisions of, any agreement or instrument to which it is a party or by which it
or any of its Property may be bound.
(e) AMENDMENT AND WAIVER IS ENFORCEABLE. The
obligations of the Company set forth in this Amendment and Waiver and the
Amended Note Agreement are valid, binding and enforceable in accordance with
their respective terms, except as the enforceability hereof and of the Amended
Note Agreement may be: (i) limited by bankruptcy, insolvency or other similar
laws affecting the enforceability of creditors' rights generally; and (ii)
subject to the availability of equitable remedies.
(f) NO DEFAULTS. After giving effect to the
amendments in Section 4 and the waivers in Section 6 of this Amendment and
Waiver and after giving effect to the New GECC Agreement, no event has occurred
and no condition exists which, upon execution and delivery of this Amendment and
Waiver, would constitute a Default or Event of Default.
SECTION 3. CONDITIONS PRECEDENT.
This Amendment and Waiver shall have no effect until all of the
following conditions precedent shall have been fulfilled (such time of
effectiveness is referred to as the "Effective Date"):
(a) WARRANTIES AND REPRESENTATIONS TRUE. The
warranties and representations set forth in Section 2 shall be true in all
material respects.
(b) NO DEFAULT OR EVENT OF DEFAULT. No
Default or Event of Default exists or will exist immediately after, and
after giving effect to, the consummation of the transactions contemplated by
this Amendment and Waiver.
(c) PROCEEDINGS SATISFACTORY. All proceedings
taken in connection with the execution and delivery of this Amendment and
Waiver and the transactions contemplated hereby shall be satisfactory to the
Holder and its in-house counsel; and the Holder and its in-house counsel shall
have received copies of such documents and papers as they may reasonably request
in connection therewith.
(d) BANK LOAN AGREEMENT. The Company shall
have paid or caused to be paid all amounts owing to NationsBank, N.A. (the
"Bank") under the Loan and Security Agreement, dated as of December 27, 1994,
other than $400,000 of the amount owed to the Bank with respect to which the
Bank has agreed to accept an unsecured promissory note payable by the Company to
the Bank, in the form attached to Amendment No. 1 to the New GECC Agreement, and
shall provide evidence that payment has been made satisfactory in form and
substance to the Holder and its in-house counsel.
(e) APPROVAL OF GECC LOAN AGREEMENT. The
Company and GECC shall have executed and delivered the New GECC Agreement
(including Amendment No. 1 thereto) in form and substance satisfactory to the
Holder and its in-house counsel.
(f) PAYMENT OF FEES. In connection with the
execution of this Amendment and Waiver the Company shall have paid the Holder a
fee of $12,870.
(g) ALLONGE. The Company shall have
executed and delivered to the Holder an Allonge in the form of Annex 1 for
each outstanding Note held by the Holder.
SECTION 4. AMENDMENT THE EXISTING NOTE AGREEMENT.
(a) SECTION 8.5. Section 8.5 of the Existing
Note Agreement is hereby amended to read in full as follows:
"8.5 TOTAL LIABILITIES RATIO.
The ratio of (x) Total Liabilities minus
Subordinated Indebtedness to (y) Consolidated Tangible
Net Worth plus Senior Subordinated Indebtedness minus
receivables from shareholders, officers and employees of
the Company and its Subsidiaries, will not at any time
be greater than the ratios set forth below during the
following periods:
Effective Date through 12/31/97 4.6:1
From 1/1/98 through 12/31/98 4.2:1"
(b) SECTION 8.7. Section 8.7 of the Existing
Note Agreement is hereby amended to read in full as follows:
"8.7 PRE-TAX EARNINGS AVAILABLE FOR FIXED
CHARGES.
The ratio of Consolidated Pre-Tax Earnings
Available for Fixed Charges to Consolidated Fixed
Charges will at all times exceed the ratios set forth
below during the following periods:
From 1/1/97 through 12/31/97 1.10:1
From 1/1/98 through 12/31/98 1.20:1"
(c) SECTION 8.8. Section 8.8 of the Existing
Note Agreement is hereby amended to read in full as follows:
"8.8 RESERVE RATIO; DEALER RESERVES.
(i) During the period
from the Effective Date through December 31, 1998,
the Company shale not allow the sun, of (x) Dealer
Reserves plus (y) allowances for credit losses to fall
below 100% of all Contracts and other installment
receivables owned by it which are Two Due or more
delinquent. The term "TWO DUE" means the following
payment delinquency status determined as of the end of a
calendar month:
SCHEDULED PAYMENTS DUE SCHEDULE OF PAYMENTS
AND UNPAID IN WHOLE
Monthly 2
Semi-Monthly 3
Bi-weekly 3
Weekly 6
(ii) The Company will maintain the
sum of (x) Dealer Reserves plus (y) allowances for
credit losses in an amount at least equal to 5.75% of
the Aggregate Principal Amount of Receivables of the
Company. The term "AGGREGATE PRINCIPAL AMOUNT OF
RECEIVABLES" means gross receivables less any unearned
amounts with respect thereto."
(b) SECTION 8.9. Section 8.9 of the Existing
Note Agreement is hereby amended to read in full as follows:
"8.9 CONSOLIDATED TANGIBLE NET WORTH.
During the period commencing January 1,
1997 and continuing until December 31, 1998, the Company
will not at any time permit Consolidated Tangible Net
Worth to be less than the following amounts for the
following periods:
From 1/1/97 through 12/31/97 $17,000,000
Pro 1/1/98 through 12/31/98 $20,000,000
provided, however, until First Community Finance, Inc.
("FCF") enters into and consummates a loan transaction
with Hibernia National Bank (the "Hibernia Financing"),
pursuant to a commitment letter attached to Amendment
No. 1 to the New GECC Agreement (or, if FCF fails to
consummate the Hibernia Financing, any other substitute
financing which results in the release by GECC of its
lien and security interest in the FCF Stock (as defined
in the New GECC Agreement) and the release of FCF from
the guaranties in favor of GECC), the Company will not
at any time permit Consolidated Net Worth to be less
than the following amounts for the following periods:
From 1 /1/97 through 12/31/97 $11,000,000
From 1/1/98 through 12/31/98 $14,000,000"
(e) SECTION 10.2 The definition of "Senior
Financing Agreements" contained in Section 10.2 of the Existing Note Agreement
shall be amended and restated as follows:
'"SENIOR FINANCING AGREEMENTS" means the
Amended and Restated Motor Vehicle Installment Contract
Loan and Security Agreement, as amended from time to
time, by and between the Company and General Electric
Capital Corporation, a New York Corporation, dated as of
December 20, 1996, pursuant to which the Company may
borrow up to $110,000,000.'
SECTION 5. PAYMENT OF FEES OR OTHER COMPENSATION.
The Company agrees that in the event the Company pays, offers to pay
or is required to pay any remuneration (other than (x) the Line Fee [as such
term is defined in the New GECC Agreement, (y) warrants granted by TFC
Enterprises, Inc. in connection with the New GECC Agreement and (z)
reimbursement of expenses incurred by GECC in connection with the negotiation
and delivery of the New GECC Agreement, including legal fees), whether by way of
supplemental or additional interest, fee or otherwise, to GECC, as consideration
for or as an inducement to the entering into by GECC of any amendment,
modification or waiver with respect to the New GECC Agreement, it shall pay to
the Holder the same remuneration, with the Holder receiving an amount equal to
its pro rata share of all amounts so paid to GECC based on the outstanding
principal amount of the Notes, and the amounts then owing to GECC.
SECTION 6. WAIVER OF DEFAULTS.
Subject to compliance with the conditions for the effectiveness of
this Amendment and Waiver set forth in Section 3 and further subject to the
conditions set forth in Section 7, the Holder hereby (1) waives (a) the Event of
Default under Section 8.7 of the Existing Note Agreement resulting from the
failure of the Company to comply with the provisions of said Section 8.7 for the
fiscal year ending December 31, 1995, and for the period from January 1, 1996
through and including the Effective Date, (b) the Event of Default under Section
8.5 of the Existing Note Agreement resulting frown the failure of the Company to
comply with the provisions of Section 8.5 for the fiscal year ending December
31, 1995, and for the period from January 1, 1996 through and including the
Effective Date, and (c) for the period from January 1, 1996 through and
including the Effective Date, compliance with the provisions of Section 8.9 of
the Existing Note Agreement.
SECTION 7. FURTHER CONDITIONS.
The Company hereby agrees that the waivers and the forbearance
contained in Section 5 are subject to compliance with each of the following
conditions:
(a) The Company shall provide the Holder with
monthly business reviews, including financial statements and revised
forecasts, within forty-five (45) days after the end of each calendar month (and
in any event when such documents are delivered to GECC pursuant to the New GECC
Agreement), covering (i) financial performance and (ii) cash flow projections of
the Company's future business as revised from time to time.
(b) In addition to the information required to
be provided pursuant to paragraph (b) above, the Company shall provide the
Holder, not later than forty-five (45) days following the end of each calendar
month (and in any event when such documents are delivered to GECC pursuant to
the New GECC Agreement), with the portfolio and operating information required
by Section 5.1(C) and Exhibit 5.1(C) of the New GECC Agreement as such Section
and such Exhibit may be amended front tinge to time. All such reports shall be
in a format and on a medium readable by the Holder's computer software, or such
other format or medium acceptable to the Holder.
(c) On or prior to November 30, 1998, the
Company shall have a firm commitment from GECC to extend the New GECC Agreement
on terms acceptable to the Holder until at least December 31, 2000 or shall have
a firm commitment with a lender acceptable to the Holder to replace the
financing provided by the New GECC Agreement. The failure of the Company to have
in effect the financing provided by GECC or substantially similar financing for
not less than $110,000,000, shall constitute an Event of Default under the
Amended Note Agreement. If GECC terminates the New GECC Agreement for any
reason, the Company shall notify the Holder immediately of such occurrence.
(d) If the Company shall amend or agree to
amend the terms and conditions of the New GECC Agreement, or enter into a new
agreement with GECC which has the effect of amending the New GECC Agreement, the
Company shall promptly notify the Holder and, at the request of' such Holder,
enter into an amendment of this Agreement or a new agreement which has the
effect of amending this Agreement, reflecting the changes to the New GECC
Agreement.
This Amendment and Waiver shall constitute the amendment contemplated by the
final paragraph of Section 6 of the Forbearance Agreement as amended and upon
compliance with the conditions set forth in Section 3 of this Amendment and
Waiver, the Forbearance Agreement shall be of no further force and effect.
SECTION 8. EFFECT OF AMENDMENT.
Except as expressly provided in this Amendment and Waiver, the
Existing Note Agreement and the Notes shall remain in full force and effect,
without modification or amendment. This Amendment and Waiver shall be binding
upon, and shall inure to the benefit of, the successors and assigns of the
parties hereto and the holders from time to time of the Notes.
SECTION 9. EXPENSES.
The Company shall promptly (and in any event within thirty (30) days of
receiving any statement or invoice therefor) pay all expenses relating to this
Amendment and Waiver, including but not limited to the reasonable allocated
costs and disbursements of in-house counsel to the Holder. The obligations of
the Company under this Section 8 shall survive the termination of this Amendment
and Waiver.
SECTION 10. SURVIVAL.
All warranties, representations, certifications and covenants made by the
Company in this Amendment and Waiver or in any certificate or other instrument
delivered by it or on its behalf under this Amendment and Waiver shall be
considered to have been relied upon by the Holder and shall survive the
execution of this Amendment and Waiver, regardless of any investigation made by
or on behalf of the Holder. All statements in any such certificate or other
instrument shall constitute warranties and representations of the Company under
this Amendment and Waiver.
SECTION 11. DUPLICATE ORIGINALS, EXECUTION IN COUNTERPART.
Two or more duplicate originals of this Amendment and Waiver may be
signed by the parties, each of which shall be an original but all of which
together shall constitute one and the same instrument. This Amendment and Waiver
may be executed in one or more counterparts and shall be effective when at least
one counterpart shall have been executed by each party to this Amendment and
Waiver (including the signatories to each of the Consent and the Acknowledgment
that are annexed to this Amendment and Waiver), and each set of counterparts
which, collectively, show execution by each such party to this Amendment and
Waiver shall constitute one duplicate original.
SECTION 12. GOVERNING LAW.
This Amendment and Waiver shall be governed by, and construed in
accordance with, internal Connecticut law.
IN WITNESS WHEREOF, the Company and the Holder have executed this
Amendment Number 10 and Waiver of Note Agreement as of the date first above
written.
CIG & Co. THE FINANCE COMPANY
By: /s/ JAMES F. COGGINS, JR. By: /s/ R. S. RALEY, JR.
----------------------- --------------------------
Name: JAMES F. COGGINS, JR. Name: R. S. RAELY, JR.
Title: PARTNER Title: PRESIDENT & CEO
<PAGE>
ANNEX 1
ALLONGE DATED AS OF ____________, 1997
TO
13 1/2% SUBORDINATED NON-CONVERTIBLE DATED ____________,19__
REGISTERED IN THE NAME OF CIG & CO.
IN THE PRINCIPAL AMOUNT OF $__________
NUMBER R-[__]
In accordance with that certain Amendment Number 10 and Waiver of Note
Agreement dated as of April 4, 1997 (the "Amendment and Waiver"), amending the
separate Note Purchase Agreements dated as of October 25, 1988 (as amended,
modified or extended prior to the date hereof and front time to time hereafter,
the "Note Agreement"), by and between THE Finance Company (the "Company"), a
Virginia corporation, and each of Connecticut General Life Insurance Company,
CIGNA Property and Casualty Insurance Company (which assigned its interest in
the Notes to Connecticut General Life Insurance Company) and Life insurance
Company of North America (on behalf of each of which the Notes issued thereunder
are registered in the name of its nominee, CIG & Co.), this Allonge has become a
permanent and irrevocable attachment to that certain 13 1/2% Subordinated
Non-Convertible Note due October 15, 1998, registered in the name of CIG & Co.,
in the principal amount of $__________ (the "Note"), dated ____________, 19__,
numbered R-[__], so as to become an integral physical and legal part of such
Note effective as of the date hereof as if the terns hereof were originally
included therein at the date of issuance thereof. All terms used in this Allonge
and not defined herein shall have the meanings ascribed to them in the Note and
the Note Agreement as amended by the Amendment and Waiver.
For good and valuable consideration, the receipt and sufficient of
which are hereby acknowledged, and in accordance with the Amendment and Waiver,
the parties hereto agree that this Allonge effects the following irrevocable
modifications and changes to the Note:
1. Notwithstanding anything contained in the Note or
the Note Agreement to the contrary, for the period commencing
February 1, 1996 through and including March 31, 1997, interest
payable on the Note shall accrue and be payable at the rate of
14.50% per annum and for the period commencing April 1, 1997,
interest payable on the Note shall accrue and be payable at the rate
of 14.60% per annum.
All other terms and conditions of the Note, as modified by this
Allonge, shall continue in full force and effect. This Allonge is governed by,
and shall be construed and enforced in accordance with, Connecticut law.
The face of the Note shall evidence the attachment of this Allonge by
the following legend to be placed thereon: "This Note has been permanently and
irrevocably modified by an Allonge dated as of _________________, 1997 that has
been physically attached hereto."
IN WITNESS WHEREOF, the Company and the holder of the Note have each
caused this Allonge to be duly executed by its duly authorized officer.
CIG & Co. THE Finance Company
By: /s/ JAMES F. COGGINS, JR. By:
----------------------- --------------------------
Name: JAMES F. COGGINS, JR. Name:
Title: PARTNER Title:
Exhibit 11
TFC ENTERPRISES, INC.
SCHEDULE OF COMPUTATION OF NET INCOME PER COMMON SHARE
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Years ended December 31
1996 1995 1994
---- ---- ----
<S> <C>
PRIMARY:
Net income (loss) $ (7,596) $ (6,461) $ 7,231
============= ============= =============
Weighted average shares outstanding 11,289,558 11,282,897 11,225,100
Add incremental shares related to stock options - 6,210
----------------- --------------- ---------------
11,289,558 11,282,897 11,231,310
----------------- --------------- ---------------
Net income (loss) per common share $ ( .67) $ ( .57) $ .64
=============== =============== ===============
FULLY DILUTED:
Net income $ 7,231
----------
Average shares outstanding 11,225,100
Add incremental shares related to stock options 6,674
----------
11,231,774
----------
Fully diluted net income per common share $ .64
===============
</TABLE>
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
1. The Finance Company, a Virginia corporation (100%).
a. The Insurance Agency, Inc., a Virginia corporation
owned 100% by The Finance Company.
b. TFC Receivables Corporation, a Virginia corporation
owned 100% by The Finance Company.
2. First Community Finance, Inc., a Virginia corporation (100%).
3. Recoveries, Inc., a Virginia corporation (100%).
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report
(Form 10-K) of TFC Enterprises, Inc. of our report dated March 11, 1997, except
for Note 5 as to which the date is April 4, 1997, included in the 1996 Annual
Report of TFC Enterprises, Inc.
We also consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-78376) pertaining to the TFC Enterprises, Inc. 1993
Employee Stock Purchase Plan of our reports dated March 11, 1997, except for
Note 5, as to which the date is April 4, 1997, with respect to the consolidated
financial statements and consolidated financial statement schedule of TFC
Enterprises, Inc., incorporated by reference or included in the Annual Report
(Form 10-K) for the year ended December 31, 1996.
ERNST & YOUNG LLP
Washington, DC
April 15, 1997
Exhibit 99.2
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS, ON SCHEDULE I
We have audited the consolidated financial statements of TFC
Enterprises, Inc., as of December 31, 1996 and 1995, and for each of the three
years in the period ended December 31, 1996, and have issued our report dated
March 11, 1997, except for Note 5 as to which the date is April 4, 1997. Our
audits also included the financial statement schedule listed in Item 14(a) of
this Form 10-K. This schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Washington, DC
March 11, 1997, except
for Note 5 as to which
the date is April 4, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
TFC ENTERPRISES, INC. YEAR-END REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,688
<SECURITIES> 0
<RECEIVABLES> 154,827
<ALLOWANCES> 28,575
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 6,133
<DEPRECIATION> 3,310
<TOTAL-ASSETS> 158,583
<CURRENT-LIABILITIES> 128,721
<BONDS> 120,378
49
0
<COMMON> 0
<OTHER-SE> 29,813
<TOTAL-LIABILITY-AND-EQUITY> 158,583
<SALES> 40,484
<TOTAL-REVENUES> 41,920
<CGS> 0
<TOTAL-COSTS> 26,540
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 8,733
<INTEREST-EXPENSE> 13,451
<INCOME-PRETAX> (6,804)
<INCOME-TAX> 792
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,596)
<EPS-PRIMARY> (.67)
<EPS-DILUTED> (.67)
</TABLE>
