<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For fiscal year ended December 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For transition period from _____________ to ______________
Commission File Number: 0-24286
--------
EAGLE FINANCE CORP.
-----------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 36-2464365
- ------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
1425 TRI-STATE PARKWAY, GURNEE, ILLINOIS 60031-4060
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (847) 855-7150
--------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each Exchange
Title of each class on which registered
------------------- ----------------------
NONE NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $0.01 PAR VALUE PER SHARE
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
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 10-K or any
amendment to this form 10-K. /X/
<PAGE>
The aggregate market value of voting common stock of Registrant held by
non-affiliates as of February 28, 1997 was $8,223,530.(1) At February 28,
1997, the total number of shares of common stock outstanding was 4,189,100.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Annual Meeting of Shareholders to be
held May 20, 1997 are incorporated by reference in Part III hereof, to the
extent indicated herein.
________________________
(1) Based on the closing price of Registrant's common stock on February 28,
1997 on the Nasdaq National Market, and reports of beneficial ownership
filed by directors and executive officers of Registrant and by beneficial
owners of more than 5% of the outstanding shares of common stock of
Registrant; however, such determination of shares owned by affiliates does
not constitute an admission of affiliate status or beneficial interest in
shares of common stock of Registrant.
<PAGE>
EAGLE FINANCE CORP.
1996 FORM 10-K ANNUAL REPORT
---------------------
TABLE OF CONTENTS
---------------------
PAGE
NUMBER
PART I
Item 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 3. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . 8
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. . . . . 9
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS. . . . . . . . . . . . . . . . . . . . . 9
Item 6. SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . . . . 10
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . . . . . 11
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. . . . . . . . . 23
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE. . . . . . . . . . . . . 41
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . 41
Item 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . 41
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT. . . . . . . . . . . . . . . . . . . . 41
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . 41
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K. . . . . . . . . . . . . . . . . . . . . . . . . 41
<PAGE>
[ANNUAL REPORT COVER]
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
(Dollars in thousands, except per share amounts) 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Net Income (Loss)....................................... $ (5,349) $ 325
Net Income (Loss) Per Share............................. (1.28) 0.08
Net Managed Finance Receivables (Owned or Serviced)..... 151,630 184,882
Stockholders' Equity.................................... 10,308 15,656
Return on Average Equity................................ (34.85%) 1.86%
Return on Average Assets................................ (5.03%) 0.29%
Net Charge-Offs as a Percentage of Average Net Managed
Finance Receivables (Owned or Serviced).............. 19.60% 15.57%
- --------------------------------------------------------------------------------
</TABLE>
THE CHART SET FORTH ABOVE SHALL NOT BE DEEMED FILED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND
IT SHALL NOT BE DEEMED INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT
INCORPORATING BY REFERENCE THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1996 INTO ANY FILING UNDER SUCH ACTS.
THIS REPORT, INCLUDING THE LETTER TO STOCKHOLDERS, MAY CONTAIN CERTAIN
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED. THE COMPANY INTENDS SUCH FORWARD-LOOKING STATEMENTS TO BE COVERED BY
THE SAFE HARBOR PROVISIONS FOR FORWARD-LOOKING STATEMENTS CONTAINED IN THE
PRIVATE SECURITIES REFORM ACT OF 1995, AND IS INCLUDING THIS STATEMENT FOR
PURPOSES OF INDICATING SUCH INTENT. FORWARD-LOOKING STATEMENTS THAT ARE BASED
ON CERTAIN ASSUMPTIONS, AND DESCRIBE FUTURE PLANS, STRATEGIES AND EXPECTATIONS
OF THE COMPANY, ARE GENERALLY IDENTIFIABLE BY USE OF THE WORDS "BELIEVE,"
"EXPECT," "INTEND," "ANTICIPATE," "ESTIMATE," "PROJECT" OR SIMILAR EXPRESSIONS.
THE COMPANY'S ABILITY TO PREDICT RESULTS OR THE ACTUAL EFFECT OF FUTURE PLANS OR
STRATEGIES IS INHERENTLY UNCERTAIN. FACTORS WHICH COULD HAVE A MATERIAL ADVERSE
EFFECT ON THE OPERATIONS AND FUTURE PROSPECTS OF THE COMPANY INCLUDE, BUT ARE
NOT LIMITED TO, CHANGES IN INTEREST RATES, GENERAL ECONOMIC CONDITIONS,
LEGISLATIVE/REGULATORY CHANGES, MONETARY AND FISCAL POLICIES OF THE U.S.
GOVERNMENT, INCLUDING POLICIES OF THE U.S. TREASURY AND THE FEDERAL RESERVE
BOARD, THE QUALITY OR COMPOSITION OF THE COMPANY'S PORTFOLIO OF FINANCE
RECEIVABLES, THE ABILITY OF THE COMPANY TO OBTAIN DEBT OR OTHER FINANCING,
COMPETITION, DEMAND FOR FINANCIAL SERVICES IN THE COMPANY'S MARKET
AREA AND ACCOUNTING PRINCIPLES, POLICIES AND GUIDELINES. THESE RISKS AND
UNCERTAINTIES SHOULD BE CONSIDERED IN EVALUATING FORWARD-LOOKING STATEMENTS
AND UNDUE RELIANCE SHOULD NOT BE PLACED ON SUCH STATEMENTS. FURTHER INFORMATION
CONCERNING THE COMPANY AND ITS BUSINESS, INCLUDING ADDITIONAL FACTORS THAT
COULD MATERIALLY AFFECT THE COMPANY'S FINANCIAL RESULTS, IS INCLUDED IN THE
COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
[EAGLE LOGO HERE]
DEAR FELLOW STOCKHOLDER:
A $5.3 million loss was recorded in 1996 largely as a result of credit loss
provisions and higher operating expenses primarily related to loan collection
efforts. As managers and major stockholders we are disappointed with our
results. We believe strongly that the non-prime niche we serve is both viable
and growing. Much of this letter will address steps taken to bring about a
significant improvement in our financial results and a more predictable future.
In late 1995, we reduced loan originations and focused on infrastructure issues.
It has become clear to us that many industry players, including Eagle, lacked
the proper tools with which to accurately measure asset quality. In 1996, Eagle
exited several markets and reduced its managed assets by $33 million to $152
million. Today's loan originations are focused in the midwest and southeast.
In foregoing 1996 growth, we focused on underwriting execution. To speed this
process we contracted with a national provider of credit scoring products.
Their product did not meet our expectations. In June, 1996, we began developing
a proprietary credit scoring model which formally went on line in January, 1997.
Through the credit score development process, we were able to draw upon our
actual customer demographic variables and contract terms. Eagle was able to
validate relationships between its credit score design and observed charge-off
rates. The use of credit scoring has resulted in major changes made in the area
of underwriting. The impact of these changes eliminates the 30% of our
historical loan approvals which, we believe, produced the highest portion of
our charge-offs.
Our management team took the following actions in 1996 that were intended to
bring closure to past problems.
* Experienced management has been added in the collections and marketing
groups. Sam Keith was hired as Chief Operating Officer to oversee all
regional center operations.
* Management responsibilities have been clarified, performance goals
established for all functional areas and management performance is
formally measured against these goals.
* Operating controls have been tightened, particularly in the
underwriting and collections areas.
* Collection performance has been improved through the hiring of more
experienced personnel and upgraded training programs.
* A risk management process has been developed to establish and refine
credit policy, monitor portfolio performance, validate and enhance the
credit scoring model and develop profitability models.
* Cost containment measures have been taken including the consolidation
of certain of the functions performed at the Orlando and Tampa
regional centers.
<PAGE>
INDUSTRY OBSERVATIONS
* The stock market has punished the stock prices of all non-prime auto
lenders. Erratic earnings, defaults, asset quality issues and lack of
consistency in financial reporting have strained investor patience and
created concern regarding industry viability.
* Eagle, and several of its competitors, initiated public offerings in a
relatively short time span. This brought about a surge in new capital
and a competitive environment which favored automobile dealers rather
than shareholders of the non-prime entrants.
* Little new money is flowing into non-prime industry and signs of
consolidation are evident. Competitive observations suggest an
economic balance between assessing and pricing risk is coming into
focus. Growth may take a secondary position to profitability.
1996 REVIEW
* Credit losses remained high in 1996 with losses on our managed
portfolio up 4% from 1995 levels to 19.6%. The managed receivables
portfolio reflects the combination of our owned portfolio and
accounts serviced for third parties.
* We shifted our funding mix relying more heavily on receivable sales
and securitization transactions. This change in funding emphasis is
the primary reason for the reduction in balance sheet outstandings.
Owned receivables, shown on our balance sheet, shrank $91.0 million.
Serviced receivables grew $57.7 million. At December 31, 1996 managed
receivables were $151.6 million, down $33.3 million from the prior
year.
* In October, as part of our funding strategy, loans were packaged and
sold to third party investors through a securitization. Profitability
on securitized transactions is heavily influenced by portfolio
performance. The performance of the portfolio is reflected in the
amount of bonus/excess servicing fees earned by Eagle. In 1996 we
earned a total of $5.1 million in net servicing fees, consisting of
$1.7 million in base servicing income and $3.4 million in bonus/excess
serving income. Total servicing fee income increased 141% over 1995.
* In September we sold $9.6 million of Texas receivables to a
competitor. We no longer maintain a significant presence in Texas.
* New auto purchases declined $80.3 million to $105.9 million in 1996.
This represents a 43% drop in loan acquisition activity from our 1995
levels.
* Reserves, in 1996, were built from current-year earnings. Prior to
December 31, 1995 the Company in part built loss reserves by
allocating a portion of contract interest (that would have been
recorded as unearned finance charges) to reserves. In changing
its funding mix and relying more heavily on securitizations the
Company has reduced the impact of reserves on current earnings.
<PAGE>
* Reserves available to absorb credit losses, as a percentage of owned
finance receivables, were 14.2% at year end. As a result of reduced
growth, our portfolio is now more seasoned and predictable. Our
reserve position when combined with portfolio seasoning is stronger
today than in past periods.
* We have restructured our marketing efforts by hiring Sales Managers in
both of our geographic regions. They are seasoned in the auto
business and are charged with re-establishing receivable growth.
* Operating expenses increased 43% to $16.2 million in 1996. Operating
expenses as a percentage of average managed receivables were 9.4%. We
presently have several programs underway which will reduce operating
expenses.
* At December 31, 1996 the Company had 258 full time equivalent
employees representing an increase of 39 employees or a 17.8%
increase. We have, at present, capacity for measured growth.
CHARLES F. WONDERLIC
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
April __, 1997
THE FOREGOING LETTER TO STOCKHOLDERS SHALL NOT BE DEEMED FILED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED, AND IT SHALL NOT BE DEEMED INCORPORATED BY REFERENCE BY ANY
GENERAL STATEMENT INCORPORATING BY REFERENCE THE COMPANY'S ANNUAL REPORT ON FORM
10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996, INTO ANY FILING UNDER SUCH
ACTS.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For fiscal year ended December 31, 1996
Commission File Number: 0-24286
--------
EAGLE FINANCE CORP.
-----------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 36-2464365
- ------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
1425 TRI-STATE PARKWAY, GURNEE, ILLINOIS 60031-4060
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (847) 855-7150
--------------
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (847) 855-7150
--------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
----
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, $0.01
-------------------
PAR VALUE PER SHARE
-------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
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 10-K or any
amendment to this form 10-K. /X/
The aggregate market value of voting common stock of Registrant held by
non-affiliates as of February 28, 1997 was $8,223,530.(1) At February 28,
1997, the total number of shares of common stock outstanding was 4,189,100.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Annual Meeting of Shareholders to be
held May 20, 1997 are incorporated by reference in Part III hereof, to the
extent indicated herein.
________________________
(1) Based on the closing price of Registrant's common stock on February 28,
1997 on the Nasdaq National Market, and reports of beneficial ownership
filed by directors and executive officers of Registrant and by beneficial
owners of more than 5% of the outstanding shares of common stock of
Registrant; however, such determination of shares owned by affiliates does
not constitute an admission of affiliate status or beneficial interest in
shares of common stock of Registrant.
<PAGE>
EAGLE FINANCE CORP.
1996 FORM 10-K ANNUAL REPORT
---------------------
TABLE OF CONTENTS
---------------------
PAGE
NUMBER
PART I
Item 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 3. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . 8
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. . . . . 9
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS. . . . . . . . . . . . . . . . . . . . . 9
Item 6. SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . . . . 10
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . . . . . 11
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. . . . . . . . . 23
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE. . . . . . . . . . . . . 41
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . 41
Item 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . 41
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT. . . . . . . . . . . . . . . . . . . . 41
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . 41
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K. . . . . . . . . . . . . . . . . . . . . . . . . 41
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Eagle Finance Corp., a Delaware corporation (the "Company"), is a
specialized financial services company engaged primarily in acquiring and
servicing automobile retail installment sale contracts ("Installment
Contracts") for purchases of late model used automobiles (cars and light
trucks) by "non-prime" consumers, who typically have limited access to
traditional credit sources. To a lesser extent, the Company also makes
direct consumer loans and finance leases and purchases other retail
installment sale contracts (collectively, "Other Loans"), and offers, as
agent, insurance and other consumer finance-related products (collectively,
"Insurance Products") to consumers with whom it has financing relationships.
The Company maintains its corporate headquarters and a regional office
near Chicago in Gurnee, Illinois and operates two other regional offices in
Tampa and Orlando, Florida. As of December 31, 1996, the Company had active
relationships (I.E., the Company purchased Installment Contracts from such
dealers during the preceding 90 days) with approximately 390 dealers located
primarily in Illinois, Georgia, Florida and South Carolina, and, to a lesser
extent, in Arizona, Colorado, Indiana, Kentucky, New Mexico, Ohio, Tennessee,
Texas, Utah, Wisconsin, and Wyoming.
BUSINESS STRATEGY
The Company's business strategy is to increase its profitability through
greater penetration in most of its current markets, controlled geographic
expansion into new markets, reduced credit losses and lower operating
expenses. Unlike many of its competitors, the Company's strategy emphasizes
the use of its industry-experienced, employee and agent marketing
representatives to service the Company's market areas without opening
additional regional offices while maintaining quality control and realizing
economies of scale through its regionally-centralized credit underwriting and
servicing operations. The Company relies on its marketing representatives to
communicate frequently with dealers in order to maintain a high level of
responsiveness to dealer concerns, but they have no input into the credit
underwriting or buying decisions of the Company.
The Company focuses its efforts on purchasing Installment Contracts from
manufacturer-franchised dealers as opposed to independent used car dealers.
The Company believes that Installment Contracts purchased from
manufacturer-franchised dealers generally represent a reduced amount of
credit risk because such Installment Contracts generally involve consumers
with better credit histories.
CONSUMER FINANCE PRODUCTS
GENERAL. Installment Contracts represented over 99.1% (approximately
$54.2 million, not including approximately $97.0 million of net Installment
Contracts serviced by the Company for third parties) of the Company's net
finance receivables at December 31, 1996. The remaining receivables
(approximately $486,000) consisted of Other Loans. Approximately 58%, 26%
and 16% of the Company's outstanding net finance receivables at December 31,
1996 were originated by the Illinois, Tampa and Orlando regional offices,
respectively. In addition to the interest income and related fee income from
Installment Contracts and Other Loans, the Company obtains revenue for
servicing Installment Contracts that it has sold to third parties and from
the sale of Insurance Products that it offers, as agent, to consumers.
INSTALLMENT CONTRACTS. The Company had an aggregate Installment
Contracts receivable, net of unearned finance charges, of approximately $54.2
million at December 31, 1996. Substantially all of the Company's
<PAGE>
Installment Contracts are originated by dealers in connection with purchases
of used automobiles by non-prime consumers. The Company occasionally
purchases Installment Contracts relating to purchases of new automobiles.
Installment Contracts are originated by the dealer at the time the dealer
sells an automobile to a consumer. The consumer enters into an Installment
Contract with the dealer on a form supplied by, or acceptable to, the
Company, which is then sold by the dealer to the Company, together with the
dealer's security interest in the automobile. The Company is not obligated
to accept Installment Contracts originated by the dealer. In order for the
dealer to enhance its prospects of selling an Installment Contract to the
Company, the sale of the automobile or other property is usually coordinated
with, and occurs contemporaneously with, the Company's review, processing and
underwriting of the customer's credit application.
The amount financed on Installment Contracts purchased by the Company
typically ranges from approximately $5,000 to $15,000, annual percentage
rates of interest ("APRs") typically range from 21% to 33% and the
repayment terms typically extend from 12 to 60 months depending upon the
amount financed. The average original principal amount financed for
Installment Contracts outstanding at December 31, 1996 was approximately
$8,300, the average APR on such Installment Contracts was 27% and the average
original term was approximately 40 months. The Company's experience has
shown, however, that the average life of the Company's Installment Contracts
is substantially less than 40 months due to the amount of payoffs and
repossessions that occur prior to contract maturity.
OTHER LOANS. The Company had an aggregate Other Loans receivable, net of
unearned finance charges, of $485,514 at December 31, 1996. The Company's
direct loan business complements the Installment Contract business because of
their similar underwriting and servicing processes, and because Installment
Contract consumers are a readily identifiable source of potential loan
business. Other Loans typically range in principal amount from approximately
$4,000 to $11,000 with APRs typically ranging from 16% to 27%. Other Loans
are repayable in substantially equal monthly installments of principal and
interest for terms typically ranging from 12 to 60 months. The Company
believes that security for Other Loans is relatively unimportant as the
principal amounts of Other Loans are generally small.
SERVICING. The Company earned approximately $5.1 million in servicing
fees during the year ended December 31, 1996. As of December 31, 1996, the
Company serviced approximately $97.0 million in net Installment Contracts
that it had previously sold to third parties. Average net finance
receivables serviced for third parties were approximately $56.0 million in
1996. The Company has sold Installment Contracts in the past and anticipates
selling Installment Contracts in the future as an alternative source of
financing, although there can be no assurance in this regard.
INSURANCE PRODUCTS. In connection with its consumer financing
transactions, the Company offers, as agent, Insurance Products to consumers.
The Company receives commissions on its sales of all such insurance. The
Company earned approximately $66,000 from the sale of Insurance Products
during the year ended December 31, 1996.
MARKETING
The Company's Installment Contract marketing efforts are directed at
automobile dealers. The Company attempts to meet dealers' needs by offering
highly-responsive, cost-competitive and service-oriented financing programs,
and by promptly paying to dealers the purchase price for Installment
Contracts. The financing programs are flexible enough to meet dealer needs
and may, on occasion, be tailored to meet the budget of a specific consumer.
In order to maximize the efficiency of its regional office personnel, the
Company relies on its marketing representatives to locate potential dealers,
establish initial contacts and enhance relationships through recurring
communication. As of December 31, 1996, the Company utilized eight marketing
representatives throughout the states in which the Company purchases
Installment Contracts. As of December 31, 1995, the Company utilized 18
2
<PAGE>
marketing representatives. The reduction in the number of marketing
representatives reflects the Company's emphasis on addressing credit losses
(rather than portfolio growth) during 1996 as well as the decision of the
Company to discontinue purchasing Installment Contracts in Texas. The
Company creates incentives for its marketing representatives through
compensation arrangements that are based on the number of transactions the
Company closes with each marketing representative's dealers.
To complement the efforts of marketing representatives, the Company
employs an open dialogue policy with dealers at each regional office that is
reinforced by timely and consistent credit decisions that result in a high
level of service being provided. The open dialogue policy provides the
Company with many opportunities to gauge dealer satisfaction and to further
educate a dealer regarding the Company's flexible credit underwriting
standards.
RELATIONSHIPS WITH DEALERS
The Company has active relationships with approximately 390 new and used
automobile dealers. The Company has entered into written agreements with
almost all of the dealers from whom it purchases Installment Contracts.
These agreements set forth general terms upon which Installment Contracts
will be purchased by the Company, but do not obligate the dealer to sell, or
the Company to purchase, any particular Installment Contract or volume of
Installment Contracts.
In connection with establishing a relationship with a dealer, the
Company, through its marketing representatives, offers the dealer a training
and orientation program to promote a mutually profitable and efficient
relationship. The goals of the training and orientation program are to
introduce dealers to the Company's procedures, to engender loyalty to the
Company and to enable dealers to pre-screen Installment Contracts. This
pre-screening, in turn, permits the Company to respond more quickly to credit
applications from dealers, which ultimately expedites the payment of the
purchase price from the Company to dealers upon purchase of an Installment
Contract. The Company monitors overall dealer volume and tracks the
performance of Installment Contracts purchased from each dealer as a means of
identifying and ensuring against possible adverse trends in its dealer
relationships at the earliest possible time. None of the dealers with whom
the Company does business accounted for greater than 8% of the Company's
total dollar volume of Installment Contracts purchased during 1996.
Installment Contracts are generally purchased at a discount by the
Company and without recourse to the dealer. In all cases where the Company
and the dealer have entered into a written agreement, the dealer makes
certain warranties as to the validity of the Installment Contract and
compliance with certain laws, and indemnifies the Company for any claims,
defenses and set-off rights that may be asserted against the Company.
PURCHASING AND LENDING PROCEDURES AND GUIDELINES
Prior to its approval of the purchase of an Installment Contract, the
Company is provided with a standardized credit application completed by the
consumer which contains information concerning the consumer's background,
employment and credit history. The Company also obtains a credit report from
an independent reporting service and verifies the consumer's employment and
residence. Consumers are in virtually all cases interviewed by telephone by
a Company application processor. As part of the credit underwriting process,
the automobile is qualified and its value is established. In cases where
higher financing values are sought or exceptions to Company purchasing
guidelines are requested, a Company representative may personally inspect the
automobile and, in any event, approval from senior management of certain
exceptions is required.
During 1996, the Company developed a proprietary credit scoring model to
be used in the credit review and approval process. The model was integrated
into the Company's management information system in January, 1997. The Company
believes that the model's integration with the Company's existing information
management system will provide a useful tool in the credit decision-making
process, and will improve turnaround
3
<PAGE>
time, reduce operating costs and increase management control. For those
credit applications that exceed the Company's minimum credit score, credit
approval is generally left to the discretion of the regional office manager
or underwriter. Regional office managers and underwriters are encouraged to
apply their knowledge of local conditions and collateral values in making
credit decisions. The Company typically completes its credit analysis and
communicates to dealers its decisions, or conditions of approval to purchase
Installment Contracts, in approximately four hours. Consumers who are denied
credit by the Company typically have credit histories, incomes or overall
credit profiles that are incompatible with the Company's underwriting
standards. The Company does not purchase all of the Installment Contracts
approved for purchase because dealers typically offer to sell Installment
Contracts to more than one finance company or consumers often decide not to
purchase an automobile from a dealer to whom they have submitted a credit
application.
The financing documents are generated by the dealer on standardized
forms. If an automobile is taken as collateral, as is the case in all
Installment Contract transactions, the Company obtains the certificate of
title to the automobile with a lien recorded. The Company typically does not
perfect its lien on other types of collateral. In certain states, the
Company obtains a voluntary wage assignment from the consumer as additional
security in connection with the closing of the Installment Contract purchase.
The regulations in other states make obtaining wage assignments
impracticable. The Company also requests that the dealer obtain from the
consumer a statement in which the consumer acknowledges, among other things,
that the dealer may sell the Installment Contract to any third party at any
price, including at a discount. In the case of Installment Contracts, the
documents are signed by the dealer and the consumer, and the dealer sells the
Installment Contract to the Company. In the case of Other Loans, the
consumer signs a note and security agreement and the net loan proceeds are
remitted to the consumer. In either case, the consumer either receives a
payment coupon book or a monthly statement and instructions on remitting
monthly payments to the Company.
Copies of Installment Contracts and related documents are periodically
selected for review by senior management. This internal control is
supplemented by the Company's computer system, which is equipped with warning
"flags" that are triggered upon the occurrence of certain unusual, and
potentially problematic, events, including changes in payment due dates and
other modifications to any contract terms. In addition, a member of senior
management generally visits each regional office at least once each month to
review its operations, Installment Contract documentation and repossessed
automobiles.
The Company makes all credit decisions on a case-by-case basis. The
Company generally does not refinance delinquent accounts unless it determines
that refinancing is not likely to increase its credit risk or it is able to
improve its position with additional collateral or a cosigner.
SERVICING AND COLLECTION
Consumers obligated under the Company's Installment Contracts are
expected to remit their monthly payments using a coupon book or a monthly
statement provided to them by the Company. In the event a consumer is
delinquent on one or more of his or her first three scheduled payments, the
Company attempts to contact the consumer by telephone within one day of the
payment due date. Addressing delinquencies early in its relationship with a
consumer provides the collection staff an opportunity to assess the
consumer's financial situation and the likelihood that the consumer will
continue to be delinquent. If a payment other than one of the first three
scheduled payments is not received on its due date, the Company mails a
computer-generated written notice to the consumer within five days of the due
date and typically contacts the consumer by telephone as a follow-up to the
written notice. In the event of a delinquency, the Company's trained
collection specialists attempt to stay in regular contact with the consumer
until the delinquency is cured. If the consumer does not cure the
delinquency and misses a subsequent payment, the Company typically
repossesses the automobile promptly. In situations where the delinquency is
caused by the failure of the automobile to be in driveable condition, the
Company may make an accommodation to the
4
<PAGE>
consumer that will allow the consumer to pay for repairs to the automobile.
Accommodations may also be made in certain circumstances where a consumer has
previously demonstrated a strong payment history.
Typically, 25% to 35% of the Installment Contracts serviced by the
Company require some collection efforts each month. The Company's target is
to have each collection employee service approximately 150 collection
accounts. As of December 31, 1996, the Company was meeting this target. All
collection activities are handled in the company's three regional offices.
Deficiency accounts and accounts that have been charged off are serviced by a
separate group of collectors who have repossession and recovery experience.
Repossessed automobiles are typically offered to dealers for bidding or
they are auctioned after the lapse of the applicable redemption period, if
any. Installment Contracts are charged off prior to becoming 90 days
contractually delinquent or, if earlier, upon repossession of the automobile.
Once an automobile is repossessed, the automobile is carried on the
Company's books as a repossession on hand at a value equal to the lower of
cost or market. In certain situations, automobiles may be reconditioned
and/or repaired prior to sale.
REGULATION
The Company's operations are subject to extensive supervision and
regulation under state and federal laws and regulations, which, among other
things, require that the Company obtain and maintain certain licenses and
qualifications, limit the interest rates, fees and other charges the Company
is allowed to charge, limit or prescribe certain other terms of the Company's
financings, require specified disclosures to consumers, govern the sale and
terms of insurance products offered by the Company and the insurers for which
it acts as agent, and limit the Company's rights to repossess and sell
collateral.
The Company is regulated in the states where it purchases Installment
Contracts and makes Other Loans. In addition, the repossession of
automobiles and other collateral is generally governed by the law of the
state in which the repossession takes place. In general, the Company's
business is conducted under licenses issued by individual states, and the
Company is subject to periodic examination by the individual states. State
licenses are generally revocable for cause.
The Company is also subject to state regulations governing insurance
agents in connection with its sales of credit and other insurance, which
require that insurance agents (such as the Company's personnel) be licensed,
govern the commissions that may be paid to agents in connection with the sale
of credit insurance and limit the premium amount charged for insurance.
THE INDUSTRY AND COMPETITION
The year 1996 through the first quarter of 1997 was a period of dramatic
upheaval in the indirect used auto lending segment of the non-prime
automobile finance industry. The indirect used auto lending segment is
relatively young, and has attracted many new publicly traded participants.
Within the segment, competition for new lending opportunities fostered growth
to the detriment of credit quality and altered pricing discipline. The
combination of deteriorating credit quality among consumers and declining
yields on new loans has contributed to reduced operating returns and results.
Many industry participants, including the Company, have adjusted their
operating strategies to improve credit quality and financial returns.
The non-prime credit segment of the automobile finance industry is highly
fragmented and competitive. The prospect of high returns in this segment has
caused many finance companies to focus their operations more heavily on the
non-prime automobile finance business. During the last few years, a number
of finance companies have undertaken an initial public offering, thereby
improving their ability to compete. While other finance companies represent
substantial competition for the Company, the Company does not believe that
any finance company owns
5
<PAGE>
direct loans or installment contracts representing more than 2% of the total
volume of non-prime automobile financing in the United States.
Existing and potential competitors also include a variety of financial
entities, including captive finance arms of major automobile manufacturers,
banks, savings and loans, independent finance companies, small loan
companies, industrial thrifts and leasing companies. Many of these financial
organizations do not consistently solicit business in, or have withdrawn
from, this credit market. The Company believes that captive finance
companies generally focus their marketing efforts on this market when
inventory control and/or production scheduling requirements of their parent
organizations dictate a need to enhance sales volumes and then exit the
market once these sales volumes are satisfied. The Company also believes that
increased regulatory oversight and capital requirements imposed by market
conditions and governmental agencies have limited the activities of many
banks and savings and loans in this credit market.
The Company believes that its established relationships with dealers,
prompt and consistent review of credit applications, prompt payment of
purchase prices for Installment Contracts, and high level of service enable
it to compete effectively for the purchase of Installment Contracts.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company and their ages and positions are as
follows:
<TABLE>
<CAPTION>
AGE AT
NAME APRIL 1, 1997 POSITION WITH THE COMPANY
---- ------------- ----------------------------------------------
<S> <C> <C>
Charles F. Wonderlic 58 Chairman, Chief Executive Officer and Director
Ronald B. Clonts 64 Vice Chairman and Director
Robert J. Braasch 50 President and Chief Financial Officer
Samuel M. Keith 49 Chief Operating Officer
Richard E. Wonderlic 31 Executive Vice President and Director
</TABLE>
CHARLES F. WONDERLIC has been the Chief Executive Officer of the Company
since 1980 and Chairman since 1984. He has served the Company in various
capacities since 1962, including President, Chief Financial Officer, Vice
President and Treasurer. He was named a Director in 1962. Prior to joining
the Company, he was employed by General Finance Loan Company. Mr. Wonderlic
currently is a member of the Executive Committee of the American Financial
Services Association and has continuously served as a Director of that
organization since 1974. Mr. Wonderlic received his M.B.A. degree from
Northwestern University, Evanston, Illinois.
RONALD B. CLONTS has been Vice Chairman of the Company since July, 1996.
Previously, since 1992, he was the Company's President. He was named a
Director of the Company in 1994. Prior to 1992 he served as Executive Vice
President or Vice President since joining the Company in 1962. He was
previously employed by General Finance Loan Company. Mr. Clonts received his
M.B.A. degree from Northwestern University, Evanston, Illinois. Mr. Clonts
is the brother-in-law of Charles F. Wonderlic.
ROBERT J. BRAASCH was named President of the Company in July, 1996. He
joined the Company in January, 1994 as Chief Financial Officer and Treasurer
and was also named Senior Vice President in April, 1994. Prior to joining
the Company, Mr. Braasch spent seven years with USA Financial Services, Inc.
as Chief Financial Officer and subsequently Chief Executive Officer. Mr.
Braasch spent his previous 12 years in various positions with Household
Finance Corporation including six years as Treasurer. Mr. Braasch graduated
from DePaul University, Chicago, Illinois.
6
<PAGE>
SAMUEL M. KEITH joined the company in August, 1996 as Chief Operating
Officer. Prior to joining the Company, Mr. Keith spent 24 years with General
Electric Capital Corporation. Mr. Keith held management positions in the sales
and marketing, credit administration, customer service, operations and
collections functions. Mr. Keith graduated from the University of Mississippi,
Oxford, Mississippi.
RICHARD E. WONDERLIC formally joined the Company in May, 1988 following
graduation from the University of Iowa and was named a Director of the Company
in 1994. The son of Charles F. Wonderlic, he became Executive Vice President of
the Company in April, 1994. Mr. Wonderlic supervises the Company's operations
serviced from its Gurnee, Illinois location. Mr. Wonderlic has served in
various Company locations as Assistant Supervisor, Manager and Vice President
and was instrumental in the development of the Company's automobile finance
program.
Officers are appointed by the Board of Directors and, except for those
officers with whom the Company has entered into employment agreements (Messrs.
Charles Wonderlic, Clonts and Braasch), serve at the pleasure of the Board.
Each employment agreement has a one-year term, with one-year extensions
thereafter unless the agreement is terminated, or the Company or executive
officer has provided a notice of non-renewal at least 180 days prior to the
anniversary thereof.
EMPLOYEES
The Company employs personnel experienced in areas of credit origination,
documentation, collection, recovery and administration. Most traditional
financing companies utilize personnel with multiple responsibilities. In order
to maximize efficiency, the Company employs specialists in each area with a
minimal crossover of duties. With custom-designed software and sufficient
staffing levels, the Company believes it achieves prompt and effective
communication with automobile dealers.
As of December 31, 1996, the Company had 258 full-time equivalent
employees, 47 of whom were involved in management, administration, information
systems or accounting, 8 in marketing and 203 in credit processing,
documentation, collection and recovery. The Company's five most senior officers
have an average of 26 years experience in the consumer finance industry. None
of the Company's employees is represented by a union and the Company considers
employee relations to be excellent.
ITEM 2. PROPERTIES
PROPERTIES
As of December 31, 1996, the Company maintained its corporate headquarters
and a regional office in Gurnee, Illinois, and also operated two regional
offices located in Florida. The Company has begun to consolidate portions of
the Orlando operation into the Tampa regional office. The Company intends to
reduce the amount of the operations conducted at the Orlando regional office, or
close such office, during 1997. Although the Company believes it is beneficial
for its regional offices to be accessible to customers and automobile dealers,
the Company does not believe that the particular locations of its offices are
material to its business and believes that other satisfactory office locations
are available for lease at comparable rates and for comparable terms in each
market where the Company maintains regional offices. The following table sets
forth certain information with respect to the Company's offices:
7
<PAGE>
YEAR OFFICE APPROXIMATE BASE
LOCATION OPENED SQUARE FEET MONTHLY RENT
- --------------- ----------- ----------- ------------
Gurnee, IL (1) 1995 21,944 $18,688
Orlando, FL (2) 1975 5,600 4,378
Tampa, FL (2) 1968 9,000 6,765
- -----------------------------
(1) The information presented reflects the combined data for the Company's
headquarters (5,064 square feet) and the Illinois regional office (16,053
square feet), which are located in the same building, and a Kenosha,
Wisconsin payment processing office (827 square feet). The Gurnee facility
is leased from an unrelated party under three leases. One lease has a
thirty-four month term, which expires on May 31, 1998; one has a three-year
term, which expires on April 30, 1998; and one has a twenty-six month term,
which expires on November 30, 1997. Each lease provides for two three-year
extensions at the option of the Company. Initial occupancy occurred on
March 1, 1995.
(2) The Orlando and Tampa offices are leased from unrelated parties. The lease
for the Orlando office has a three-year term that expires on December 31,
1997 and provides for one three-year extension at the option of the
Company. The lease for the Tampa office has a five-year term that expires
on December 31, 2000.
Total property rental expense for the Company approximated $412,000,
$341,000 and $190,000 in 1996, 1995 and 1994, respectively.
ITEM 3. LEGAL PROCEEDINGS
In addition to the lawsuits described below, the Company is involved in
litigation in the normal course of business. The Company believes that the
resolution of such normal-course-of-business matters will not have a material
adverse effect on its financial position or results of operations. The Company
regularly initiates legal proceedings as a plaintiff in connection with its
routine collection activities.
The Company has been named as a defendant in the following described
lawsuits:
1. REHM V. EAGLE FINANCE CORP. is pending in the United States District
Court for the Northern District of Illinois and is designated by case number
96C 2455. The plaintiff has filed a class action complaint alleging that the
Company and three of its directors and officers have violated Section 10(b) of
the Securities and Exchange Act and Rule 10b-5 promulgated thereunder. The
litigation is still in its initial stages although it has been pending for
almost one year. The parties are awaiting a ruling on that motion. No
discovery has been taken by either party. Due to the early stage of the
litigation, it is not possible to determine the likelihood of an unfavorable
outcome, however, the Company intends to defend vigorously the claims made in
the complaint.
2. CLEVELAND V. WALLACE AUTO SALES, INC. ET AL. was filed on September
19, 1996 in the United States District Court for the Northern District of
Illinois and is designated by Case Number 96 C 6045. The complaint alleges that
the Company has violated the Illinois Consumer Fraud Act, the Illinois Sales
Finance Agency Act and the Federal Racketeer Influenced and Corrupt
Organizations Act arising out of the Company's purchase of retail installment
sales contracts through which the plaintiffs purchased a used automobile. The
complaint is alleged as a class action, and includes unnamed, and still unknown,
directors and officers of the Company. The Company has filed a Motion to
Dismiss, and the parties are awaiting a ruling from the court. No discovery has
been taken. Due to the early stage of the litigation, it is not possible to
determine the likelihood of an unfavorable outcome, however, the Company intends
to defend vigorously the claims made in the complaint.
8
<PAGE>
3. SOLARMAR SYSTEMS CORP. V. EAGLE FINANCE CORP., RONALD B. CLONTS ET AL.
was filed on September 14, 1995 in Circuit Court of the Eleventh Judicial
Circuit, Dade County, Florida, and is designated as Case No. 95-18056-CA-01.
This suit arose out of a settlement agreement entered in 1988 between the
plaintiff and the predecessor to the Company (the "Settlement Agreement"),
following the plaintiff's bankruptcy. The Company (E.F. Wonderlic & Associates,
Inc.) purchased promissory notes from the plaintiff that the plaintiff had
received in connection with the sale of hot water heating systems to Florida
homeowners. The complaint filed against the Company alleges that the Company
breached the Settlement Agreement and fraudulently induced the plaintiff to
enter into it. The plaintiff's complaint was dismissed in June, 1996, with
leave to amend, primarily on the grounds that the claims were time-barred by the
applicable Florida statute of limitations. The plaintiff filed an amended
complaint in June, 1996, which asserted essentially the same claims of fraud,
violations of the Federal Racketeer Influenced and Corrupt Organizations Act and
fraud in the inducement. The Company intends to defend vigorously the claims
made in the complaint.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is listed for quotation on the National Market
tier of the Nasdaq Stock MarketSM under the symbol ""EFCW.'' The high and
low bid quotations for the common stock during 1995 and 1996, as reported by
the National Association of Securities Dealers, Inc., are set forth in the
following table. Such over-the-counter bid quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission, and may not
necessarily represent actual transactions.
QUARTER ENDED 1996 1995
- ------------- ---------------------- -----------------------
HIGH LOW HIGH LOW
------ ----- ------ -----
March 31 $14 1/4 $8 1/2 $16 $13 1/4
June 30 $ 9 1/4 $6 1/2 $19 1/4 $13 1/4
September 30 $ 6 7/8 $5 1/4 $24 1/2 $18
December 31 $ 8 1/4 $5 $23 $12 1/2
Harris Trust and Savings Bank serves as the transfer agent for the
Company's common stock. As of March 25, 1997, the Company had 80 stockholders
of record, exclusive of holders who own their shares in "street" or nominee
names and approximately 1,450 beneficial stockholders.
The Company has not paid and does not presently intend to pay cash
dividends on its common stock. The Company anticipates that its earnings for
the foreseeable future will be retained for use in the operation and expansion
of its business. Payment of cash dividends, if any, in the future will be at
the sole discretion of the Company's Board of Directors and will depend upon the
Company's financial condition, earnings, current and anticipated capital
requirements, terms of indebtedness and other factors deemed relevant by the
Company's Board of Directors. The Company is restricted as to the payment of
dividends by its amended and restated revolving credit agreement with a group of
nine commercial banks (the "Revolving Credit Agreement").
9
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data as of and for each of the years in
the five-year period ended December 31, 1996 are derived from the financial
statements of the Company. The selected financial data should be read in
conjunction with the Financial Statements, including the Notes thereto, and
other financial data included elsewhere herein and the following "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
SELECTED FINANCIAL AND OPERATING INFORMATION
<TABLE>
<CAPTION>
AS OF OR FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------
1996 1995 1994 (1) 1993 1992
------ ------ ---------- ------ ------
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Automobile portfolio interest and fee income $ 26,326 $ 26,779 $ 12,328 $ 5,278 $ 5,312
--------- --------- --------- -------- --------
Total interest and fee income $ 26,653 $ 27,100 $ 12,723 $ 5,517 $ 5,692
Total interest expense 9,060 8,093 2,712 1,232 1,705
Net interest income before provision for
credit losses 17,593 19,007 10,011 4,285 3,987
Provision for credit losses 13,184 9,538 254 455 373
--------- --------- --------- -------- --------
Net interest income after provision for credit losses 4,409 9,469 9,757 3,830 3,614
Servicing income 5,107 2,119 841 586 --
Gain on securitization 612 -- -- -- --
Insurance commissions 66 255 147 65 64
Operating expenses 16,202 11,321 5,627 2,795 2,608
Income tax expense (benefit)(2) (659) 197 1,167 -- --
--------- --------- --------- -------- --------
Net income (loss) $(5,349) $ 325 $ 3,951 $ 1,686 $ 1,070
--------- --------- --------- -------- --------
--------- --------- --------- -------- --------
Earnings per common share $(1.28) $0.08 $0.93 $0.37 $0.23
Weighted average number of
common shares outstanding(3) 4,189,100 4,183,490 3,377,973 2,800,000 2,800,000
OPERATING AND OTHER DATA:
Net finance receivables (owned or serviced) $151,630 $184,882 $100,620 $28,847 $26,565
Average interest rate on net finance receivables(5) 22.82% 22.43% 26.72% 23.94% 21.64%
Average interest rate on interest bearing liabilities 9.23 9.17 8.56 7.82 8.59
--------- --------- --------- -------- --------
Net interest spread 13.59% 13.26% 18.16% 16.12% 13.05%
Net interest margin 15.06% 15.73% 21.02% 18.60% 15.16%
Total allowance for credit losses, dealer reserves
and nonrefundable acquisition
discount as a percentage of average
net finance receivables 14.22 14.09 12.67 15.44 13.94
Net charge-offs as a percentage of average net
finance receivables (owned or serviced) (6) 19.60 15.57 10.89 10.24 12.87
Operating expenses as a percentage of average net
finance receivables (owned or serviced) 9.37 7.35 10.48 10.14 9.92
Ratio of earnings to fixed charges(7) 0.51x 1.06x 2.81x 2.22x 1.59x
Return (loss) on average assets (5.03)% 0.29% 9.32% 8.18% 4.44%
Return (loss) on average equity (34.85)% 1.86% 46.76% 42.57% 30.20%
Net income as a percentage of revenues(8) (16.49) 1.52 35.92 34.16 26.41
BALANCE SHEET DATA:
Finance receivables, net(9) $ 54,664 $145,719 $ 78,864 $24,297 $26,565
Nonrefundable acquisition discount (1,443) (9,428) (8,671) (2,749) (2,446)
Allowance for credit losses (6,046) (10,808) (1,249) (1,000) (650)
Total assets 63,768 139,058 71,245 20,998 24,120
Total debt 50,806 118,697 52,528 15,922 19,590
Dealer reserves 287 293 74 2 607
Stockholders' equity 10,308 15,656 15,209 $ 4,088 3,674
</TABLE>
10
<PAGE>
- --------------------------
(1) The December 31, 1994 data reflect the effect of the Company's July, 1994
initial public offering in which the Company sold 1,380,000 shares of its
common stock.
(2) In connection with the Company's July, 1994 initial public offering, the
Company elected to terminate its election to be treated as a subchapter S
corporation for tax purposes. As a result of this change in tax status,
1994 became the first year in which the Company recorded any income tax
expense.
(3) Earnings per common share reflect a 38.8% income tax adjustment
to subchapter S corporation earnings for the periods prior to July 21,
1994, the date the Company terminated its subchapter S corporation
election.
(4) Weighted average number of common shares outstanding for periods prior to
April 14, 1994 reflect the effect of the Company's 11,666.667-for-1 stock
split effected on that date.
(5) For the 1992 through 1995 periods, average interest rates earned were less
than average APRs charged to consumers due to the Company's policy of
allocating, at the time Installment Contracts were purchased, a portion of
contract interest (that would otherwise have been recorded as unearned
finance charges) to nonrefundable acquisition discount when the credit risk
and potential for losses warranted such an allocation. For the years ended
December 31, 1994, 1993, and 1992, average interest rate earned includes
the impact of the accretion to income from nonrefundable acquisition
discount of $1.3 million, $580,000, and $375,000, respectively. SEE
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Credit Loss Experience."
(6) The Company's general policy is to charge off delinquent accounts when they
are deemed uncollectible, and in any event prior to their becoming 90 days
(120 days for securitized receivables) contractually delinquent. SEE
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Credit Loss Experience -- Allowance and Provision for Credit
Losses/Charge-Offs."
(7) For purposes of calculating the historical ratio of earnings to fixed
charges, earnings consist of income before income taxes and fixed charges.
Fixed charges consist of interest charges and one-third of rentals.
(8) Revenues consist of net interest income, servicing income and insurance
commissions.
(9) Net of unearned finance charges.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following management's discussion and analysis provides information
regarding the Company's financial condition as of December 31, 1996 and 1995
and its results of operations for the years ended December 31, 1996, 1995 and
1994. The management's discussion and analysis should be read in conjunction
with the preceding "Selected Financial Data" and the Company's Financial
Statements and the Notes thereto and the other financial data included
elsewhere in this Annual Report on Form 10-K. The financial information
provided below has been rounded in order to simplify its presentation.
However, the ratios and percentages provided below are calculated using the
detailed financial information contained in the Company's Financial
Statements, the Notes thereto and the financial data included elsewhere
herein.
GENERAL
The Company's outstanding balance of owned or serviced (i.e., managed)
Installment Contracts declined $33.3 million during 1996 to $151.1 million
(net). This decline reflects the Company's emphasis on addressing credit
losses (rather than portfolio growth) during 1996.
Interest and servicing income on the Company's portfolio of managed
Installment Contracts accounts for most of the Company's revenue. The net
amount of Installment Contracts purchased declined to $105.9 million during
the year ended December 31, 1996 from $186.2 million during the year ended
December 31, 1995. During the fourth quarter of 1995, the Company began
reducing its purchases of Installment Contracts, and continued this trend
throughout 1996. This decision was prompted by unacceptable credit
performance trends on previously purchased Installment Contracts.
11
<PAGE>
As reflected in the following table, the finance receivables originated
by the Company during the periods presented below consist primarily of
Installment Contracts.
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1996 1995 1994
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
Net Installment Contracts purchased(1).. $105,906 $186,162 $104,263
Net Other Loans originated(1)........... 528 417 877
---------- ---------- ----------
Total................................... $106,434 $186,579 $105,140
---------- ---------- ----------
---------- ---------- ----------
- ------------------------------
(1) Net of unearned finance charges.
As part of its funding strategy, the Company sold $64.8 million and $44.3
million of net Installment Contracts to General Electric Capital Corporation
("GECC") during the years ended December 31, 1996 and 1995, respectively.
(Additionally during 1996, the Company sold $9.6 million of net Installment
Contracts originated from dealers located in Texas to Search Capital. This
sale reflects the Company's decision to substantially reduce its business in
Texas. The Company did not retain servicing rights on the Installment
Contracts sold to Search Capital.) No gains or losses were recorded at the
time the Installment Contracts were sold. The Company retained servicing
rights on the Installment Contracts sold to GECC. The Company does recognize
servicing income over the life of the related receivables as a percentage of
receivables outstanding. The Company is also eligible to receive bonus
servicing fees based on portfolio performance. Bonus servicing fees are
recognized as income when earned. SEE "--Liquidity and Capital Resources"
and Notes 4 and 5 to the Company's Financial Statements.
During the fourth quarter of 1996, the Company completed the
securitization of approximately $35.2 million (net) of Installment Contracts
through a transaction agented by Greenwich Capital Markets, Inc. The
transaction was structured to create three classes of certificates, which
were rated by Duff & Phelps Credit Rating Co. and Fitch Investors Service
L.P. The Company recognized a gain on the transaction of approximately
$612,000. The Company capitalized the retained servicing rights on the
Installment Contracts securitized. The net amount of Installment Contracts
serviced by the Company for third parties was $97.0 million and $39.2 million
at December 31, 1996 and 1995, respectively. SEE "-- Liquidity and Capital
Resources" and Notes 4 and 5 to the Company's Financial Statements.
PROFITABILITY AND RECENT TRENDS
The Company experienced a net loss of $5.3 million during 1996 compared
to net income of $325,000 during 1995. The decline of $5.7 million in
earnings was primarily a result of a $3.6 million increase in the provisions
for credit losses and a $4.9 million increase in operating expenses, which
were partially offset by, among other things, a $3.0 million increase in
servicing income.
The following table sets forth certain data relating to the Company's net
income before provision for credit losses for the years ended December 31,
1996, 1995 and 1994:
12
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1996 1995 1994
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Average net finance receivables(1) $116,797 $120,830 $ 47,615
Average interest bearing liabilities 98,202 88,276 31,699
Total interest and fee income 26,653 27,100 12,723
Total interest expense 9,059 8,093 2,712
-------- -------- --------
Net interest income before provision for credit losses $ 17,594 $ 19,007 $ 10,011
-------- -------- --------
-------- -------- --------
Average interest rate on net finance receivables(2) 22.82% 22.43% 26.72%
Average interest rate on interest bearing liabilities 9.23% 9.17% 8.56%
-------- -------- --------
Net interest spread 13.59% 13.26% 18.16%
-------- -------- --------
-------- -------- --------
Net interest margin(3) 15.06% 15.73% 21.02%
-------- -------- --------
-------- -------- --------
</TABLE>
- ---------------------------
(1) Excludes average net finance receivables serviced for third parties of
$56.0 million, $33.1 million and $6.1 million for the years ended December
31, 1996, 1995 and 1994, respectively.
(2) For the 1995 and 1994 periods, average interest rates earned were less than
average APRs charged to consumers due to the Company's allocation to
nonrefundable acquisition discount, at the time Installment Contracts were
purchased, of a portion of contract interest (that would otherwise have
been recorded as unearned finance charges). SEE "-- Accounting Matters."
(3) Net interest margin represents net interest income divided by average net
finance receivables.
A principal component of the Company's net income is its net interest
spread. Net interest spread represents the difference between interest
earned on finance receivables and interest paid for borrowed funds. The laws
of certain states establish the maximum interest rates, and prescribe the
types and maximum amounts of fees, insurance premiums and other amounts that
consumers may be charged. As is common in its market segment, the Company's
Installment Contracts generally bear interest rates, fees, premiums and other
charges at or near the maximum amounts permitted under state law. As a
result, the Company has limited ability to offset increases in its cost of
funds.
An increasingly larger component of the Company's profitability is the
servicing income earned on Installment Contracts sold or securitized, with
servicing retained, by the Company. Servicing income is derived from base
servicing fees for loan administration and collection services and bonus or
excess servicing fees paid based on the performance of the Installment
Contracts sold or securitized. The increase in servicing income was due to
higher levels of loans serviced by the Company. Of the $5.1 million of
servicing income earned in 1996, $3.7 million represented bonus or excess
servicing fees. Of the $2.1 million of servicing income earned in 1995, $1.1
million represented bonus or excess servicing fees.
The Company maintains credit loss reserves to absorb potential losses in
its finance receivables portfolio. Credit loss reserves for the Company's
Installment Contracts portfolio are comprised of nonrefundable acquisition
discount and allowance for credit losses. SEE "-- Credit Loss Experience."
The Company's liabilities are generally more interest-rate sensitive than
its finance receivables. As a result, significant increases in the Company's
cost of funds borrowed under its Revolving Credit Agreement could have a
material adverse effect on its profitability. The Company has attempted to
mitigate the adverse effect of increases in interest rates by entering into
interest rate protection agreements. The Company has purchased an interest
rate cap and interest rate collars that provide limited interest rate
protection and intends to continue to explore additional opportunities to fix
or cap the interest rate on a portion of its adjustable rate borrowings.
SEE "-- Liquidity and Capital Resources." Additionally, the Company may
utilize alternative financing structures, such as fixed rate senior
13
<PAGE>
or subordinated debt, securitizations or whole loan sales to attempt to
mitigate the adverse effect of interest rate increases.
Pursuant to a September, 1996 amendment to the Revolving Credit
Agreement, the Company has the option of borrowing funds at an interest rate
equal to either the prime rate of the agent bank or the LIBOR rate plus 2.5%
(which was increased from LIBOR plus 2.0%). On December 31, 1996, the
three-month LIBOR borrowing rate under the Revolving Credit Agreement was
8.06% compared to 7.63% on December 31, 1995. The prime rate was 8.25% on
December 31, 1996 and the three-month LIBOR rate was 5.56% on such date.
Another component of the Company's profitability is the level of its
operating expenses. The increase in operating expenses was attributable to
higher salaries and benefits costs, and related operating expenses due to the
increase in the number of employees and infrastructure improvements. The
increase in the number of employees was caused primarily by an increase in
the number of collections personnel in order to handle credit losses.
FINANCIAL CONDITION
Total assets decreased $75.3 million (54.1%) to $63.8 million at December
31, 1996 from $139.1 million at December 31, 1995 primarily due to decreases
in finance receivables (net of dealer reserves, nonrefundable acquisition
discount and allowance for credit losses) to $47.2 million at December 31,
1996 from $125.5 million at December 31, 1995. The decline in assets and
finance receivables is, in part, attributable to the sale of approximately
$64.8 million and $9.6 million (net) of Installment Contracts to GECC and
Search Capital, respectively, during 1996 and the securitization of
approximately $35.2 million of Installment Contracts during 1996. The sale
of Installment Contracts was part of the Company's financing plan.
SEE "-- Liquidity and Capital Resources." The net amount of owned or serviced
Installment Contracts decreased to $151.1 million at December 31, 1996 from
$184.4 million at December 31, 1995.
Total liabilities decreased $69.9 million (56.7%) to $53.5 million at
December 31, 1996 from $123.4 million at December 31, 1995 primarily due to a
decrease in total debt to $50.8 million at December 31, 1996 from $118.7
million at December 31, 1995. The decrease in total debt was primarily the
result of decreased borrowings under the Revolving Credit Agreement to $31.8
million at December 31, 1996 from $99.6 million at December 31, 1996.
14
<PAGE>
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
The following table sets forth certain data relating to the Company's
results of operations for the years ended December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------
1996 1995 1994
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Automobile portfolio interest and fee income............ $26,326 $26,779 $12,328
-------- -------- --------
Total interest and fee income........................... $26,653 $27,100 $12,723
Total interest expense.................................. 9,060 8,093 2,712
------- ------- -------
Net interest income before provision for credit losses.. 17,594 19,007 10,011
Provision for credit losses............................. 13,184 9,538 254
------- ------- -------
Net interest income after provision for credit losses... 4,410 9,469 9,757
------- ------- -------
Other income:
Servicing income (from Installment Contracts)....... 5,107 2,119 841
Gain on sale of finance receivables (net)........... 612 -- --
Insurance Products commissions...................... 66 255 147
------- ------- -------
Total other income...................................... 5,785 2,374 988
------- ------- -------
Salaries and related costs.............................. 8,011 5,745 2,998
Other operating expenses................................ 8,191 5,576 2,629
------- ------- -------
Total operating expenses................................ 16,202 11,321 5,627
------- ------- -------
Income tax expense...................................... (659) 197 1,167
------- ------- -------
Net income.............................................. $(5,349) $ 325 $ 3,951
------- ------- -------
------- ------- -------
</TABLE>
COMPARISON OF 1996 TO 1995. The Company experienced a net loss of $5.3
million for the year ended December 31, 1996 compared to net income of
$325,000 for the year ended December 31, 1995.
Net interest income before the provision for credit losses decreased by
5.8% to $17.9 million for the year ended December 31, 1996 from $19.0 million
for the year ended December 31, 1995, primarily as the result of increased
sales and securitizations of Installment Contracts, thereby reducing the
number of interest income-producing assets. The negative effect on interest
and fee income resulting from the sale and securitization, with servicing
retained, of $100 million of finance receivables (net) during 1996, compared
to $44.3 million in 1995, was partially offset by a significant increase in
servicing income.
Total interest expense increased to $9.1 million for the year ended
December 31, 1996 from $8.1 million for the year ended December 31, 1995.
The increase resulted from an increase in the average amount of borrowed
funds outstanding throughout the year as well as increases in interest rates
charged for borrowed funds. The average debt outstanding during 1996
increased to $98.2 million from $88.3 million during 1995, and the average
interest rate paid for borrowed funds increased to 9.23% in 1996 from 9.17%
in 1995.
The most significant factor in the Company's $5.7 million decline in
earnings between 1995 and 1996 was a $3.7 million increase in the provision
for credit losses. This increase was a function of deteriorating credit
quality. Credit quality suffered due to higher charge-off rates for
Installments Contracts purchased during the last half of 1995 and the first
half of 1996. The Company believes that credit quality has also suffered, in
part, due to historically high levels of consumer indebtedness nationally.
SEE "-- Credit Loss Experience -- Allowance and Provision for Credit
Losses/Charge-offs." As more fully discussed in " -- Accounting Matters," the
increase in the provision for credit losses for 1996 is also due to the fact
that, unlike in 1995 (and prior years), no contract interest was allocated to
nonrefundable acquisition discount during 1996.
15
<PAGE>
Other income, including servicing income and commissions from the sale of
Insurance Products, increased 141.7% to $5.8 million for the year ended
December 31, 1996 from $2.4 million for the year ended December 31, 1995,
primarily due to an increase in servicing income to $5.2 million for the year
ended December 31, 1996 from $2.1 million for the year ended December 31,
1995. This increase reflects the increased amount of servicing-retained
sales and securitizations of finance receivables by the Company in 1996. The
Company derives its servicing income from base servicing fees and bonus or
excess servicing fees based on the performance of the finance receivables
serviced by the Company. Of the $5.1 million of servicing income earned in
1996, $3.7 million represented bonus or a excess servicing fees. Of the $2.1
million of servicing income earned in 1995, $1.1 million represented bonus or
excess servicing fees. During 1996, the Company recognized a $612,000 gain
from the sale of $35.2 million (net) of Installment Contracts to the Eagle
Auto Trust 1996-A in October, 1996 and the corresponding issuance to
investors of automobile receivable-backed certificates.
Operating expenses increased 43.4% to $16.2 million for the year ended
December 31, 1996 compared to $11.3 million for the year ended December 31,
1995. Salaries and related costs increased 40.4% from the prior year to $8.0
million for the year ended December 31, 1996, due primarily to an increase in
the number of employees, normal pay increases and increased benefits costs.
The Company's other operating expenses increased 46.4% to $8.2 million for
the year ended December 31, 1996 compared to the year ended December 31,
1995, due to higher collection expenses and higher professional fees.
Operating expenses as a percentage of average net finance receivables owned
or serviced increased to 9.37% for the year ended December 31, 1996 as
compared to 7.35% for the year ended December 31, 1995. The Company believes
that it will not require an increase in the number of employees needed to
operate the Company for the foreseeable future, although there can be no
assurance in this regard.
The Company recorded an income tax benefit of ($659,000) for the year
ended December 31, 1996 as compared to an income tax expense of $197,000 for
the year ended December 31, 1995. This resulted from the pretax loss of $6.0
million in 1996 versus pretax income of $523,000 in 1995. The effective tax
rates on income before income taxes were (11.0%) and 37.7% in 1996 and 1995,
respectively.
COMPARISON OF 1995 TO 1994. Net income decreased by 91.8% to $325,000
for the year ended December 31, 1995 from $4.0 million for the year ended
December 31, 1994.
Net interest income before the provision for credit losses increased by
90.0% to $19.0 million for the year ended December 31, 1995 from $10.0
million for the year ended December 31, 1994, primarily as the result of
increased income from the Installment Contracts portfolio. Total interest
and fee income was adversely affected by changes relating to the
nonrefundable acquisition discount account. The Company's credit loss
experience during 1995 resulted in no accretion to income from nonrefundable
acquisition discount during 1995, as compared to a $1.3 million accretion to
income during 1994. Based on a review of portfolio performance and of the
adequacy of the amount of the nonrefundable acquisition discount, during
1995, the Company allocated $9.8 million of contract interest (that would
otherwise have been recorded as unearned finance charges) to nonrefundable
acquisition discount, as compared to a $5.0 million allocation during 1994.
The allocations for each year represented approximately 10.4% of the original
aggregate contract interest on the Installment Contracts purchased during
each year. Such allocations and increased credit losses on the Company's
portfolio of finance receivables reduced the average interest rate earned on
net finance receivables in 1995 to 22.43% from 26.72% in 1994. SEE "--
Credit Loss Experience -- Nonrefundable Acquisition Discount and Dealer
Reserves." The sale of $39.9 million of finance receivables during 1995 had
a negative effect on interest and fee income; however, these sales resulted
in a significant increase in servicing income.
Total interest expense increased to $8.1 million for the year ended
December 31, 1995 from $2.7 million for the year ended December 31, 1994.
The increase resulted from an increase in the amount of borrowed funds, the
issuance of $17 million of subordinated notes, as well as increases in
interest rates charged for borrowed
16
<PAGE>
funds. The total debt outstanding at December 31, 1995 increased to $118.7
million from $52.5 million at December 31, 1994 and the average interest rate
paid for borrowed funds, principally due to the higher cost of subordinated
debt versus senior debt, increased to 9.17% in 1995 from 8.56% in 1994.
The provision for credit losses increased to $9.5 million for the year
ended December 31, 1995 from $254,000 for the year ended December 31, 1994.
This significant increase was made in connection with the adjustment,
effective the fourth quarter of 1995, whereby the Company reduced the 1995
allocation to nonrefundable acquisition discount of contract interest (that
would otherwise have been recorded as unearned finance charges). The
allowance for credit losses along with nonrefundable acquisition discount and
dealer reserves is available to absorb credit losses in the Company's finance
receivables portfolio. SEE "-- Credit Loss Experience --Allowance and
Provision for Credit Losses/Charge-offs."
Other income, including servicing income and commissions from the sale of
Insurance Products, increased 140% to $2.4 million for the year ended
December 31, 1995 from $988,000 for the year ended December 31, 1994,
primarily due to an increase in servicing income to $2.1 million for the year
ended December 31, 1995 from $841,000 for the year ended December 31, 1994.
This increase reflects the increased amount of servicing-retained sales of
finance receivables by the Company in 1995 and 1994. Insurance Product
income was $255,000 in 1995 as compared to $147,000 in 1994.
Operating expenses increased 101% to $11.3 million for the year ended
December 31, 1995 compared to the year ended December 31, 1994. Salaries and
related costs increased 92% from the prior year to $5.7 million for the year
ended December 31, 1995, due primarily to a substantial increase in the
number of employees, normal pay increases and increased benefits costs. The
Company's other operating expenses increased 112% to $5.6 million for the
year ended December 31, 1995 compared to the year ended December 31, 1994,
due to a larger base of owned or serviced finance receivables. Operating
expenses as a percentage of average net finance receivables owned or serviced
declined to 7.35% for the year ended December 31, 1995 as compared to 10.48%
for the year ended December 31, 1994.
Income tax expense decreased 83% to $197,000 for the year ended December
31, 1995 from $1.2 million for the year ended December 31, 1994. The
decrease resulted from a lower level of pretax income in 1995 versus 1994.
The effective tax rates on income before income taxes were 37.7% and 22.8% in
1995 and 1994, respectively.
CREDIT LOSS EXPERIENCE
The Company's credit loss reserves are comprised of three components:
nonrefundable acquisition discount; an allowance for credit losses; and, for
non-Installment Contracts finance receivables, refundable dealer reserves.
The total of allowance for credit losses, nonrefundable acquisition discount
and dealer reserves equaled 14.22% and 14.09% of net owned finance
receivables at December 31, 1996 and 1995, respectively. The following
discussion reflects the Company's increased emphasis on the allowance for
credit losses and its reduced emphasis on nonrefundable acquisition discount
in establishing credit loss reserves for the Company's Installment Contracts
portfolio.
NONREFUNDABLE ACQUISITION DISCOUNT AND DEALER RESERVES. In order to
achieve an acceptable rate of return and appropriately reflect credit risks
generally associated with the Company's automobile finance business, the
Company purchases Installment Contracts from dealers at a discount from their
principal amount. The Company negotiates the amount of the discounts with
dealers based upon various criteria, including the credit risk associated
17
<PAGE>
with the contracts being purchased and market pricing factors. The discount
is nonrefundable, is equal to the difference between (a) the total principal
amount to be repaid under the Installment Contract and (b) net funds paid to
the dealer, and is allocated to the nonrefundable acquisition discount
account. As part of the Company's financing of retail installment sales
contracts (other than Installment Contracts), refundable dealer reserves may
be established to protect the Company from losses associated with such
contracts, and are shown as a liability of the Company.
The following table presents a reconciliation of the changes in
nonrefundable acquisition discount and dealer reserves for the years ended
December 31, 1996, 1995 and 1994:
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------
1996 1995 1994
------------- ---------- -------------
(DOLLARS IN THOUSANDS)
Balance at January 1, $ 9,721 $ 8,745 $ 2,752
Additions applicable to new volume 11,547 30,319 15,576
Payments to dealers (833) (2,077) --
Accreted to income -- -- (1,329)
Reductions applicable to accounts sold (8,439) (5,524) (2,719)
Losses charged, net of recoveries (10,266) (21,742) (5,535)
-------- -------- --------
Balance at end of period $ 1,730 $ 9,721 $ 8,745
-------- -------- --------
-------- -------- --------
The substantial decrease in "additions applicable to new volume" from
1995 to 1996 reflects the fact that purchases of Installment Contracts
declined and that, unlike in 1994 and 1995, nonrefundable acquisition
discount was not increased during 1996 by allocations of contract interest
that otherwise would have been recorded as unearned finance charges. SEE
"-- Accounting Matters."
ALLOWANCE AND PROVISION FOR CREDIT LOSSES/CHARGE-OFFS. The Company
maintains an allowance for credit losses at a level that management believes
adequate to absorb potential losses in its finance receivables portfolio.
Management evaluates the adequacy of the allowance for credit losses by
reviewing credit loss experience and delinquency trends using static pool
analysis, the value of the underlying collateral and general economic
conditions and trends. If the amount of nonrefundable acquisition discount
associated with a specific pool of Installment Contracts is determined to be
insufficient, in the opinion of management, to absorb projected losses for that
pool, a provision for credit losses would be charged against earnings. The
Company's general policy is to charge off delinquent accounts when they are
deemed uncollectible, and in any event prior to their becoming 90 days
contractually delinquent. The Company has experienced higher charge-off
rates during 1996 than during 1995. SEE "-- Results of Operations for the
Years Ended December 31, 1996, 1995 and 1994 -- Comparison of 1996 to 1995"
The following table reflects the Company's allowance for credit losses
and provision for credit losses for each of the years ended December 31,
1996, 1995 and 1994:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------
1996 1995 1994
------------- ---------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of period $ 10,808 $ 1,249 $ 1,000
Provision charged to expense 13,184 9,538 254
Finance receivables charged off, net of recoveries (17,946) (21) (5)
--------- -------- --------
Balance at end of period $ 6,046 $ 10,808 $ 1,249
--------- -------- --------
--------- -------- --------
Allowance as a percentage of
net owned finance receivables at year-end 11.06% 7.42% 1.58%
</TABLE>
The substantial increase in the allowance for credit losses in 1996 was
the result of a $13.2 million provision for credit losses. The substantial
increase in the provision for credit losses was due to higher credit
18
<PAGE>
losses and the Company not allocating during 1996 any contract interest to
non-refundable acquisition discount. SEE "-- Results of Operations for the
Years Ended December 31, 1996, 1995 and 1994 -- Comparison of 1996 to 1995"
and "--Accounting Matters."
DELINQUENCIES. The Company monitors delinquencies in the managed finance
receivables portfolio to gauge overall credit trends. Managed finance
receivables that were 30 days and greater contractually delinquent (net of
unearned finance charges) were $16.6 million, $15.2 million and $9.8 million,
representing 11.0%, 8.2% and 9.7% of net managed finance receivables, as of
December 31, 1996, 1995 and 1994, respectively. The Company attributes the
increase in delinquencies in 1996 to a deterioration in overall consumer
credit quality trends and the purchase of lower quality Installment Contracts
in late 1995 and early 1996. SEE "Business -- Servicing and Collection."
The following table reflects delinquencies experienced by the Company in
its managed finance receivables portfolio as of December 31, 1996, 1995 and
1994:
AS OF DECEMBER 31,
----------------------------
1996 1995 1994
-------- -------- --------
(Dollars in thousands)
Net amount outstanding(1) ................... $151,630 $184,882 $100,620
-------- -------- --------
Delinquencies
30-59 days ............................... $ 13,256 $ 11,701 $ 7,430
60-89 days ............................... 2,965 3,507 2,434
90+ days(2) .............................. 396 1 --
-------- -------- --------
Total ................................ $ 16,617 $ 15,209 $ 9,774
-------- -------- --------
-------- -------- --------
Total delinquencies as a percentage of
net managed finance receivables .......... 11.0% 8.2% 9.7%
- -----------------------
(1) Includes Installment Contracts sold or securitized, with servicing
retained, by the Company and Other Loans, in each case net of unearned
finance charges.
(2) The Company charges off all Installment Contracts and Other Loans greater
than 89 days delinquent. The Company charges off all securitized
Installment Contracts greater than 120 days delinquent.
REPOSSESSIONS ON HAND AND CHARGE-OFF EXPERIENCE. Repossessed collateral
consists primarily of automobiles and is valued at the lower of cost or
market. Repossessions on hand (including titled assets) were valued at $4.2
million (2.8% of net managed Installment Contracts), $4.4 million (2.4% of
net managed Installment Contracts), and $666,000 (0.7% of net managed
Installment Contracts) at December 31, 1996, 1995 and 1994, respectively.
Titled assets included repossessed assets pending recovery (I.E., in respect
of a charged-off account, but not yet in the Company's possession) which,
effective December 31, 1995, are carried at their estimated fair value, less
the estimated costs of disposition. Additionally, accounts charged off as a
result of bankruptcy filings are carried as a titled asset at a value based
on the terms of the resolution of the bankruptcy. At both December 31, 1996
and 1995, the value of titled assets was approximately $1.6 million.
The following table reflects charge-offs in the managed finance
receivables portfolio as of and for the years ended December 31, 1996, 1995
and 1994:
19
<PAGE>
As of or for the years ended
December 31,
---------------------------
1996 1995 1994
-------- -------- -------
(Dollars in thousands)
Net average principal amount outstanding(1) ..... $172,838 $153,955 $53,719
Number of accounts charged-off during period .... 6,768 4,990 1,383
Net charge-offs during period ................... $ 33,878 $ 23,978 $ 5,847
Net charge-offs as a percentage of average
net managed principal amount outstanding ....... 19.60% 15.57% 10.89%
- -------------------------
(1) Includes Installment Contracts sold or securitized, with servicing
retained, by the Company and Other Loans, in each case net of unearned
finance charges.
LIQUIDITY AND CAPITAL RESOURCES
The Company finances its operations through cash flow from operations,
borrowings under the Revolving Credit Agreement, proceeds from subordinated
indebtedness and from the periodic sale or securitization of Installment
Contracts and other finance receivables.
Net cash provided by (used in) operating activities totaled $(23.7)
million, $3.3 million and $11.6 million during the years ended December 31,
1996, 1995 and 1994, respectively. During these periods, the primary source
or use of net cash provided by (used in) operating activities has been net
income, the net change in the allowance for credit losses, the net change in
the nonrefundable acquisition discount account and the amount of net finance
receivables charged off.
Net cash provided by (used in) investing activities totaled $91.0
million, ($67.4 million) and ($54.6 million) during the years ended December
31, 1996, 1995 and 1994, respectively. The Company reduced its need for
borrowed funds through the sale of Installment Contracts (net) of $109.4
million, $39.9 million and $19.7 million during the years ended December 31,
1996, 1995 and 1994, respectively. The Company reduced its need for borrowed
funds during 1996 by purchasing less finance receivables than in 1995.
Net cash provided by (used in) financing activities, primarily as a
result of borrowings and repayments under the Revolving Credit Agreement,
totaled $(68.3) million, $65.3 million and $43.8 million during the years
ended December 31, 1996, 1995 and 1994, respectively. SEE the Statements of
Cash Flows in the Company's Financial Statements.
The self-liquidating nature of Installment Contracts and Other Loans
enables the Company to assume a higher debt-to-equity ratio than in most
other businesses. The amount of debt the Company incurs from time to time
depends on the Company's need for cash and its ability to borrow under the
terms of the Revolving Credit Agreement. The Company intends to meet its
short- and long-term liquidity needs with cash flow from operations,
borrowings under the Revolving Credit Agreement, the sale or securitization
of finance receivables and the proceeds from the issuance of securities in
the capital markets.
During September, 1996, the Company entered into an amendment to the
Revolving Credit Agreement that, among other things, reduced the maximum
availability under the facility to $90 million at September 30, 1996 and $60
million at December 31, 1996 (this amount declines to $50 million by March,
1997), extended the maturity date to June 30, 1997 and modified certain other
terms of the revolving credit facility, including the cost of LIBOR
borrowings (which was increased to LIBOR plus 2.5% from LIBOR plus 2.0%).
These changes were motivated by, among other things, the Company's breach of
financial covenants under the Revolving Credit Agreement and general economic
conditions in the sub-prime automobile finance industry. In October, 1996,
the Company completed its first securitization, and anticipates relying more
heavily upon alternative funding sources, such as securitization financing.
20
<PAGE>
The Company must comply with customary financial and other covenants
under the Revolving Credit Agreement. At December 31, 1996, the Company was
in breach of the tangible net worth, interest coverage ratio and subordinated
debt limitation covenant under the Revolving Credit Agreement and the
interest coverage ratio covenant under its agreements with GECC. The Company
has received waivers with respect to these breaches (which, pursuant to the
Revolving Credit Agreement, are measured on the last day of each quarter) for
all periods through March 31, 1997. The Company expects to remain in
violation of these covenants for the near term. The waiver received in
respect of the breaches of the Revolving Credit Agreement had the effect of,
among other things; (i) reducing the amount of the facility to $50 million;
(ii) reducing the borrowing base, generally, to 82.5% (from 85%) of eligible
receivables under the Revolving Credit Agreement; and (iii) under certain
circumstances, reducing the borrowing base, generally, to 80% and 75% of
eligible receivables.
No assurance can be given that the Company's lenders and GECC will not
take adverse action. The Company is continuing negotiations with its current
lenders and alternative lenders to provide financing beyond June 30, 1997.
In any event, the Company anticipates relying more heavily during 1997 and
thereafter upon alternative funding sources, such as securitization
financing. No assurance can be given that the Revolving Credit Agreement, or
an equivalent facility, will be in place beyond June 30, 1997, or that
alternative funding transactions will be successfully completed, although
management does believe that existing and/or alternative funding sources will
continue to provide the Company with sufficient liquidity to maintain
existing operations.
At December 31, 1996, the Company had total debt of $50.8 million as
compared to $118.7 million at December 31, 1995 and $52.5 million at December
31, 1994. At December 31, 1996, $28.2 million was available under the
Revolving Credit Agreement. SEE Note 6 to the Company's Financial
Statements. The following table presents the Company's debt instruments and
the weighted average interest rates on such instruments at the dates
indicated:
<TABLE>
<CAPTION>
At December 31,
--------------------------------------------------------------
1996 1995 1994
----------------- ------------------ -----------------
Balance Rate Balance Rate Balance Rate
------- ------ -------- ------ ------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
SENIOR
Revolving Credit Agreement ........ $31,763 8.05% $ 99,650 7.89% $50,790 8.50%
Loan from affiliated company ...... 1,065 6.75% 1,002 6.75% 445 6.75%
SUBORDINATED
Notes payable ..................... 17,978 12.15% 18,045 12.14% 1,293 9.50%
------- -------- -------
Total debt ........................ $50,806 9.47% $118,697 8.52% $52,528 8.56%
------- -------- -------
------- -------- -------
</TABLE>
In May, 1995, through a public offering underwritten by Kemper
Securities, Inc. (now EVEREN Securities, Inc.), The Chicago Corporation and
Piper Jaffray Inc., the Company issued $17 million of subordinated notes,
with a maturity date of May 2005. Interest on the notes accrues at the rate
of 10% from the date of their original issuance, and is payable monthly. The
rate at which interest accrues under the notes will increase, generally by 25
basis points, each year beginning June 1, 1996. The notes are redeemable by
the Company, in whole or in part, beginning on their second anniversary date,
with a 1% premium imposed if the notes are redeemed prior to their third
anniversary. The Company is required to redeem $750,000 (subject to certain
adjustments) of aggregate principal amount of notes (or make corresponding
contributions to a sinking fund) on each of the fourth through ninth
anniversaries of the notes. The notes were issued under an Indenture that
contains financial and operating covenants that restrict, among other things,
the Company's ability to pay dividends, to incur additional indebtedness and
to engage in certain extraordinary transactions.
21
<PAGE>
The following table sets forth information with respect to maturities of
senior and subordinated debt at December 31, 1996:
Loan from
Senior Bank Affiliated Subordinated
Year Lines of Credit Company Notes Payable Total
---- --------------- ---------- ------------- -------
(Dollars in thousands)
1997 ................ $31,763 $1,065 $ 115 $32,943
1998 ................ -- -- 40 40
1999 ................ -- -- 858 858
2000 ................ -- -- 804 804
2001 ................ -- -- 864 864
Thereafter .......... -- -- 15,296 15,296
------- ------ ------- -------
Total .......... $31,763 $1,065 $17,977 $50,805
------- ------ ------- -------
------- ------ ------- -------
The Company has purchased interest rate caps and interest rate collars in
an aggregate notional amount of $55 million. The interest rate cap purchased
by the Company in an aggregate notional amount of $15 million protects the
Company against increases in the interest rate of a portion of its revolving
debt if the three-month LIBOR rate exceeds 10.5%. The interest rate cap
expires in July, 1998.
The interest rate collars, in an aggregate notional amount of $40
million, protect the Company against increases in the interest rate of its
revolving debt when the three-month LIBOR rate exceeds 8%. The Company must
make payments to the counterparties to the interest rate collars if
three-month LIBOR falls below 5%. The interest rate collars expire in
September 2000.
On October 25, 1996, the Company completed a sale of $35.2 million (net)
of Installment Contracts to the Eagle Auto Trust 1996-A, which issued
automobile loan-backed certificates. The proceeds that the Company received
were used to repay borrowings under the Revolving Credit Agreement. The
certificates were sold in three classes: Class A certificates total $30.6
million bearing a 7.45% coupon; the Class B and C certificates each total
$2.3 million and bear coupons of 8.50% and 12.75%, respectively.
In order to meet funding needs, in 1996 the Company sold approximately
$64.8 million of net Installment Contracts to GECC under the Asset Purchase
Agreement dated as of June 25, 1996, as amended, between the Company and
GECC. The agreement provides for the purchase by GECC of Installment
Contracts from the Company on a revolving basis of up to a maximum principal
amount of $80 million outstanding at any time through June 25, 1997 with an
automatic one-year extension through June 25, 1998. The Company also sold
approximately $9.6 million of net Installment Contracts to Search Capital in
connection with de-emphasizing its Texas operations.
Total stockholders' equity at December 31, 1996 was $10.3 million as
compared to $15.7 million at December 31, 1995. At December 31, 1996,
stockholders' equity stated as a percentage of total assets was 16.2% as
compared to 11.3% at December 31, 1995.
ACCOUNTING MATTERS
Historically, the Company recorded, at the time it purchased Installment
Contracts, a portion of contract interest (which would otherwise have been
recorded as unearned finance charges) as nonrefundable acquisition discount
when the credit risk and potential for future losses warranted such an
allocation. For 1996, however, the Company did not allocate any portion of
contract interest from Installment Contracts purchased during the period to
nonrefundable acquisition discount. Instead, the Company established
additional reserves for credit losses on
22
<PAGE>
its portfolio of Installment Contracts through the recognition of a provision
for credit losses that supplemented the balance of nonrefundable acquisition
discount. SEE "Credit Loss Experience."
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
("SFAS 121"), issued in March, 1995, requires entities to perform separate
calculations for long-lived assets to determine whether recognition of an
impairment loss is required and, if so, to measure that impairment. SFAS 121
is effective for fiscal years beginning after December 15, 1995. The Company
has adopted SFAS 121, which has not had any material impact on the Company's
financial position or results of operations.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), issued in October, 1995, allows
companies to retain the current approach for recognizing stock-based expense
in the financial statements; however, companies are encouraged to adopt a new
accounting method based on the estimated fair value of employee stock
options. Companies that do not elect the new fair value based method will be
required to provide expanded disclosures in the footnotes. SFAS 123 is
effective for fiscal years beginning after December 15, 1995. The Company
has elected to provide the disclosure alternative provided by SFAS 123.
As of January 1, 1997, the Company adopted Financial Accounting Standards
Board Statement No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities" ("Statement No. 125"). Statement
No. 125 is effective for transfers and servicing of financial assets and
retirements of liabilities occurring after December 31, 1996, and is to be
applied prospectively. Statement No. 125 provides accounting and reporting
standards for transfers and servicing of financial assets and retirements of
liabilities based on consistent application of a financial components
approach that focuses on control. It distinguishes transfers of financial
assets that are sales from transfers that are secured borrowings. Adoption
of Statement No. 125 is not expected to have a material impact on the
Company's financial position, results of operations or liquidity.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
DESCRIPTION: PAGE
- ----------- ----
<S> <C>
Independent Auditors' Report................................................... 24
Balance Sheets as of December 31, 1996 and 1995................................ 25
Statements of Income for the Years Ended December 31, 1996, 1995 and 1994...... 26
Statements of Changes in Stockholders' Equity for the Years Ended
December 31, 1996, 1995 and 1994............................................... 27
Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994.. 28
Notes to Financial Statements.................................................. 29
</TABLE>
23
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Eagle Finance Corp.:
We have audited the accompanying balance sheets of Eagle Finance Corp. (the
Company) as of December 31, 1996 and 1995, and the related statements of
income, changes in stockholders' equity and cash flows for each of the years
in the three-year period ended December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Eagle Finance Corp. as of
December 31, 1996 and 1995, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1996
in conformity with generally accepted accounting principles.
As discussed in note 7, effective July 21, 1994, the Company changed its tax
status by terminating the subchapter S corporation election. Concurrent with
this change, the Company adopted the provisions of the Financial Accounting
Standards Board's SFAS No. 109, "Accounting for Income Taxes."
Chicago, Illinois
March 27, 1997
24
<PAGE>
EAGLE FINANCE CORP.
BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
ASSETS
DECEMBER 31,
-----------------------------
1996 1995
--------------- -------------
Finance receivables, net (note 2)................ $54,663,926 $145,718,866
Nonrefundable acquisition discount (note 3)...... (1,443,164) (9,428,152)
Allowance for credit losses (note 3)............. (6,045,514) (10,807,835)
----------- ------------
47,175,248 125,482,879
Cash............................................. 1,271,594 2,069,217
Money market investments......................... 552,651 545,000
Prepaid expenses and debt issuance costs......... 1,554,082 1,142,925
Repossessed or titled assets..................... 4,249,443 4,429,140
Income tax receivable............................ 4,732,346 --
Deferred income tax benefit (note 7)............. 1,004,912 4,136,270
Excess servicing receivable (note 6)............. 1,050,590 --
Other assets..................................... 2,176,696 1,253,046
----------- ------------
$63,767,562 $139,058,477
----------- ------------
----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Senior debt (note 8)............................. $32,827,893 $100,651,557
Subordinated debt (note 8)....................... 17,977,720 18,045,298
Accrued interest payable......................... 468,533 502,834
Accrued income tax payable....................... -- 683,144
Accounts payable and accrued liabilities......... 1,893,737 3,180,328
Unearned insurance commissions................... 5,158 46,115
Dealer reserves (note 3)......................... 286,783 292,864
----------- ------------
Total liabilities................................ 53,459,824 123,402,140
Stockholders' equity:
Preferred Stock, authorized 3,000,000 shares,
none issued..................................... -- --
Common Stock: $.01 par value, authorized
10,000,000 shares, issued and outstanding
4,189,100 shares in 1996 and 1995............... 41,891 41,891
Additional paid-in capital....................... 13,514,422 13,514,422
Retained earnings (deficit)...................... (3,248,575) 2,100,024
----------- ------------
Total stockholders' equity....................... 10,307,738 15,656,337
----------- ------------
$63,767,562 $139,058,477
----------- ------------
----------- ------------
See accompanying notes to financial statements.
25
<PAGE>
EAGLE FINANCE CORP.
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Interest income:
Interest and fee income.......................... $26,653,260 $27,100,358 $12,722,601
Interest expense................................. 9,059,458 8,092,984 2,711,951
----------- ------------ -----------
Net interest income............................... 17,593,802 19,007,374 10,010,650
Provision for credit losses (note 3).............. 13,184,278 9,537,949 253,638
----------- ------------ -----------
Net interest income after provision for
credit losses.................................... 4,409,524 9,469,425 9,757,012
----------- ------------ -----------
Other income:
Service fee income (note 5)...................... 5,107,585 2,119,374 841,242
Gain on sale of finance receivables, net (note 4).. 611,796 -- --
Commissions and other............................ 65,811 254,853 146,837
----------- ------------ -----------
Total other income................................ 5,785,192 2,374,227 988,079
----------- ------------ -----------
Income before operating expenses.................. 10,194,716 11,843,652 10,745,091
Operating expenses:
Salaries and related costs....................... 8,011,223 5,744,920 2,997,959
Collection expenses.............................. 1,774,186 -- --
Other operating expenses......................... 6,416,781 5,576,100 2,629,188
----------- ------------ -----------
Total operating expenses.......................... 16,202,190 11,321,020 5,627,147
----------- ------------ -----------
Income (loss) before income taxes................. (6,007,474) 522,632 5,117,944
Applicable income taxes (note 7).................. (658,875) 197,187 1,166,804
----------- ------------ -----------
Net income (loss)................................. $(5,348,599) $ 325,445 $ 3,951,140
----------- ------------ -----------
----------- ------------ -----------
Per share data:
Net income (loss) per common share............... $(1.28) $0.08 $1.17
Weighted average number of common shares
outstanding..................................... 4,189,100 4,183,490 3,377,973
</TABLE>
See accompanying notes to financial statements.
26
<PAGE>
EAGLE FINANCE CORP.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
ADDITIONAL RETAINED
COMMON STOCK PAID-IN CAPITAL EARNINGS (DEFICIT) TOTAL
------------ --------------- ------------------ -----------
<S> <C> <C> <C> <C>
Balance at January 1, 1994 . . . . . . . $24,000 $ 566,206 $ 3,497,838 $ 4,088,044
Net income . . . . . . . . . . . . . . . -- -- 3,951,140 3,951,140
Dividends paid . . . . . . . . . . . . . -- -- (3,956,693) (3,956,693)
Transfer to paid in capital. . . . . . . -- 2,004,892 (2,004,892) --
Sale of 1,380,000 shares of
common stock net of
offering expenses . . . . . . . . . . 17,800 10,821,339 -- 10,839,139
Net deferred taxes on
termination of subchapter S
corporation status. . . . . . . . . . -- -- 287,186 287,186
------- ----------- ----------- -----------
Balance at December 31, 1994 . . . . . . 41,800 13,392,437 1,774,579 15,208,816
Stock options exercised. . . . . . . . . 91 81,809 -- 81,900
Tax benefit from stock option
exercised . . . . . . . . . . . . . . -- 40,176 -- 40,176
Net income . . . . . . . . . . . . . . . -- -- 325,445 325,445
-------- ------------ ----------- -----------
Balance at December 31, 1995 . . . . . . 41,891 13,514,422 2,100,024 15,656,337
Net loss . . . . . . . . . . . . . . . . -- -- (5,348,599) (5,348,599)
-------- ------------ ----------- -----------
Balance at December 31, 1996 . . . . . . $ 41,891 $ 13,514,422 $(3,248,575) $10,307,738
-------- ------------ ----------- -----------
-------- ------------ ----------- -----------
</TABLE>
See accompanying notes to financial statements.
27
<PAGE>
<TABLE>
<CAPTION>
EAGLE FINANCE CORP.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
YEAR ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994
------------- ---------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (5,348,599) $ 325,445 $ 3,951,140
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for credit losses 13,184,278 9,537,949 253,638
Net finance receivables (charge-offs) recoveries against allowance (17,946,599) 21,086 (4,838)
Decrease (increase) in:
Prepaid expenses (200,451) (77,175) 24,635
Repossessed or titled assets 179,697 (3,762,715) (519,400)
Excess servicing receivable (1,050,590) -- --
Other assets (923,650) (953,062) (188,755)
Income tax receivable (4,732,346) -- --
Deferred tax 3,131,358 (3,777,229) (359,041)
Increase (decrease) in:
Accrued interest (34,301) 383,405 95,418
Accrued income tax (683,144) 442,839 204,305
Accounts payable and accrued liabilities (1,286,591) 209,724 2,113,226
Unearned insurance commissions (40,957) (57,782) 35,353
Dealer reserves (6,081) 218,936 72,012
Nonrefundable acquisition discount (7,984,988) 757,032 5,921,787
------------- ---------- -----------
Net cash provided by operating activities (23,742,964) 3,268,453 11,599,480
------------- ---------- -----------
Cash flows from investing activities:
Purchase of Investments (7,651) (545,000) --
Proceeds from bulk sale/securitization of vehicle retail
installment notes 109,329,697 39,869,544 19,670,548
Principal collected on finance receivables 44,570,359 37,299,405 17,235,081
Finance receivables originated or acquired (net of write-offs) (62,845,116) (144,023,772) (91,472,593)
------------- ---------- -----------
Net cash provided by (used in) investing activities 91,047,289 (67,399,823) (54,566,964)
------------- ---------- -----------
Cash flows from financing activities:
Proceeds from draws on bank lines 48,471,793 602,004,545 64,380,468
Repayments of borrowings (116,359,075) (553,144,545) (27,820,468)
Debt to affiliate 63,618 555,745 (304,482)
Proceeds from issuance of other debt 103,731 17,140,482 444,931
Repayment of other debt (171,309) (387,790) (94,570)
Debt issuance costs (210,706) (945,311) 25,624
Dividends paid -- -- (3,956,693)
Deferred tax credit to additional paid in capital -- -- 287,186
Sale of common stock, net of offering expenses -- -- 10,839,139
Stock options exercised -- 81,900 --
Tax benefit from stock options exercised -- 40,176 --
------------- ---------- -----------
Net cash provided by (used in) financing activities (68,101,948) 65,345,202 43,801,135
------------- ---------- -----------
Cash, net change (797,623) 1,213,832 833,651
Cash at beginning of period 2,069,217 855,385 21,734
------------- ---------- -----------
Cash at end of period $ 1,271,594 $ 2,069,217 $ 855,385
------------- ---------- -----------
------------- ---------- -----------
Supplemental disclosures of cash flow information - cash paid during
the period for:
Interest $ 9,093,759 $ 7,712,731 $2,527,799
Income taxes and Illinois replacement tax $ 1,625,282 $ 3,260,500 $1,026,000
</TABLE>
See accompanying notes to financial statements.
28
<PAGE>
EAGLE FINANCE CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995, AND 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS
Eagle Finance Corp. (the Company) provides consumer finance services under
the name "Eagle Finance." Since 1988 the Company has focused its activities on
the business of purchasing installment contracts originated by franchised and
independent car dealers, generally referred to as indirect consumer lending.
Indirect auto financing currently represents over 99% of the Company's
receivables base.
INCOME ON FINANCE RECEIVABLES
The Company recognizes finance charges on the interest (actuarial) method.
Under this method, interest is earned over the lives of the loans to produce
constant rates of interest (yields). The accrual of interest income on direct
loans is suspended when no payments have been received for 90 days or more.
Interest accrual on finance leases and retail installment notes is suspended
when they become 90 days or more contractually delinquent.
SERVICING INCOME
The Company recognizes servicing income as received over the life of the
related receivables based upon a percentage of receivables outstanding. The
Company is also eligible to receive bonus servicing fees based on portfolio
performance. In accordance with the Company's accounting policy, bonus
servicing income is recognized as earned.
GAIN ON SALE OF FINANCE RECEIVABLES
Gains or losses are determined based upon the difference between the sales
proceeds for the portion of Installment Contracts sold and the Company's
recorded investment in the Installment Contracts sold. The Company allocates
the recorded investment in the Installment Contracts between the portion of the
Installment Contracts sold and the portion retained based on the relative fair
values of those portions on the date of sale.
NONREFUNDABLE ACQUISITION DISCOUNT
As part of the Company's financing of vehicle secured retail installment
notes, the difference between (i) the total principal amount to be repaid under
the notes and (ii) the net funds advanced to the dealer is recorded as a
nonrefundable acquisition discount and is available to the Company to absorb
charges related to repossession and reconditioning expenses and other losses of
principal that may arise in connection with defaulted retail installment notes.
Prior to 1996, the Company, based on its credit loss analysis, allocated to
nonrefundable acquisition discount, at the time it purchased vehicle secured
retail installment notes, amounts that would otherwise have been recorded as
unearned finance charges.
EXCESS SERVICING RECEIVABLE
Excess servicing receivable (ESR) represents the Company's subordinated
interest in the Eagle Auto Trust 1996-A (the "Trust"). The excess servicing
receivable is equal to the present value of estimated future collections and
recoveries on the finance receivables sold to the Trust less the present
value of required principal and interest payments to the investors, base
servicing fees payable to the Company and certain other fees. The
calculation of excess servicing receivable includes estimates of future
credit losses and prepayment rates for the remaining term of the finance
receivables sold, since these factors impact the amount and timing of future
collections and recoveries on the pool of finance receivables.
29
<PAGE>
To the extent that actual performance of the finance receivables results in
less excess cash flows than the Company estimated, ESR will be adjusted
through a charge to operations. Favorable credit loss and prepayment
experience compared to the Company's estimates would result in additional
servicing fee income. The excess servicing receivable is amortized using the
interest method against realized excess servicing fee income.
DEALER RESERVES
As part of the Company's financing of secured retail installment notes,
refundable dealer reserves are established to protect the Company from potential
losses associated with such notes. A portion of the proceeds from these retail
installment notes are retained by the Company and are available to the Company
to charge losses on related receivables against. The amount of reserves is
based upon various criteria, one of which is the credit risk associated with the
secured retail installment notes.
ALLOWANCE FOR CREDIT LOSSES
The allowance for credit losses is maintained by direct charges to
operations in amounts that are intended to provide adequate reserves on the
Company's finance receivables portfolio to absorb possible credit losses in
the foreseeable future in excess of the nonrefundable acquisition discount
and refundable dealer reserves with respect to the Company's finance
receivables.
In connection with its periodic review of credit loss experience and
delinquency trends using static pool analysis, management evaluates the adequacy
of the allowance for credit losses. If nonrefundable acquisition discount and
refundable dealer reserves associated with an individual pool of installment
contracts are deemed insufficient in comparison to the amount management
believes necessary to absorb projected losses on that pool's vehicle secured
installment notes that are expected to become impaired in the foreseeable
future, a provision for credit losses would be charged against earnings.
The Company's general policy is to charge off delinquent loans, retail or
direct, and finance leases (net of unearned finance charges) when they are
deemed uncollectible and, in any event, to charge off monthly accounts prior to
their becoming 90 days contractually delinquent.
REPOSSESSED OR TITLED ASSETS
Repossessed collateral and titled assets are valued at the lower of cost or
estimated net realizable value.
INSURANCE COMMISSIONS
Commissions on credit life and credit accident and health insurance are
taken into income over the average terms of the related policies on the sum of
the digits method. Property insurance, auto club, vehicle warranties, and other
insurance commissions are taken into income when written.
TAXES
Effective July 21, 1994, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." Under
the asset and liability method of SFAS 109, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. Prior to that date, the Company had maintained subchapter S
corporation status under the Internal Revenue Code. As such, the Company's
taxable income was included in the individual income tax returns of its
shareholders for federal and state purposes.
30
<PAGE>
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. The areas which are subject to estimation
techniques most significantly include the allocation of unearned finance
charges to nonrefundable acquisition discount (which allocations did not
occur at all during 1996) and the determination of the level of the allowance
for credit losses. Actual results could differ from these estimates.
(2) FINANCE RECEIVABLES
Finance receivables as of December 31, 1996 and 1995 consisted of the
following:
1996 1995
------------ ------------
Retail installment notes:
Vehicle ....................... $ 73,038,666 $198,589,885
Other ......................... 43,620 86,885
Direct installment loans:
Interest-bearing .............. 317,218 305,962
Discount-basis ................ 131,793 39,906
Finance leases .................. 25,582 79,182
------------ ------------
Total ........................... 73,556,879 199,101,820
------------ ------------
Unearned finance charges ........ (18,892,954) (53,382,954)
------------ ------------
Finance receivables, net ........ $ 54,663,926 $145,718,866
------------ ------------
------------ ------------
Direct installment loans are originated by the Company. Retail vehicle
secured installment notes are purchased without recourse. Certain retail
secured installment notes are purchased on a recourse basis to the extent of
available dealer reserve balances. As a result of the Company's policy to
charge-off accounts prior to their becoming 90 days past-due, no accounts
were on nonaccrual status at December 31, 1996 or 1995.
Direct installment loans are generally collateralized by household goods,
vehicles, or real estate, with maximum terms of 60 months for
interest-bearing loans and 84 months for discount-basis loans. Finance
leases, all discount basis, are generally collateralized by office and
industrial equipment with maximum terms of 60 months. Retail installment
notes, discount basis and interest bearing, arise principally from the sale
of new and used vehicles, and generally have a maximum term of 60 months.
Net outstanding vehicle retail installment notes serviced, but not owned,
by the Company totaled $96,965,804, $39,163,574 and $21,755,509 at December
31, 1996, 1995 and 1994, respectively.
The following table reflects delinquencies experienced by the Company in
its finance receivables portfolio as of December 31, 1996, 1995 and 1994:
As of December 31,
---------------------------------------
1996 1995 1994
----------- ------------ -----------
Net amount outstanding ............. $54,663,926 $145,718,866 $78,864,043
----------- ------------ -----------
Delinquencies
30-59 days ....................... $ 5,900,287 $ 10,073,834 $ 6,322,833
60-89 days ....................... 885,178 3,000,299 2,305,890
----------- ------------ -----------
Total .......................... $ 6,785,465 $ 13,074,133 $ 8,628,723
----------- ------------ -----------
----------- ------------ -----------
Total delinquencies as a percentage
of net finance receivables ......... 12.4% 9.0% 10.9%
Contractual maturities of retail and direct installment loan
receivables by year are not readily available. The Company's experience has
shown that the average life of the Company's finance receivables is
substantially less than
31
<PAGE>
the average original contract term of such receivables due to the amount of
payoffs and repossessions that occur prior to contract maturity.
A summary of principal cash collections is provided below:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Retail installment notes:
Interest bearing loans:
Principal cash collections ............................. $ 2,160,046 $ 619,232
Principal cash collections as a percentage
of average net outstanding balances .................. 46% 26%
Discount basis loans:
Principal cash collections other ....................... $42,022,211 $36,227,153
Principal cash collections other as a percentage
of average net outstanding balances .................. 38% 30%
Direct installment loans:
Principal cash collections ............................... $ 339,931 $ 384,537
Principal cash collections as a percentage of average
net outstanding balances ............................... 98% 98%
Finance leases:
Principal cash collections ............................... $ 48,171 $ 68,483
Principal cash collections as a percentage of average
net outstanding balances ............................... 111% 85%
</TABLE>
No dealer accounted for more than 8% of vehicle retail installment notes
purchases during 1996.
(3) ALLOWANCE FOR CREDIT LOSSES, NONREFUNDABLE ACQUISITION DISCOUNT, AND
DEALER RESERVES
Changes in the allowance for credit losses for the years ended December
31, 1996, 1995, and 1994 were as follows:
Balance at January 1, 1994. . . . . . . . . . . $ 1,000,000
Provision for credit losses. . . . . . . . . 253,638
Losses charged off . . . . . . . . . . . . . (118,198)
Recoveries . . . . . . . . . . . . . . . 113,360
-----------
Balance at December 31, 1994. . . . . . . . . . $ 1,248,800
Provision for credit losses. . . . . . . . . 9,537,949
Losses charged off . . . . . . . . . . . . . (174,841)
Recoveries . . . . . . . . . . . . . . . 195,927
-----------
Balance at December 31, 1995. . . . . . . . . . $10,807,835
Provision for credit losses. . . . . . . . . 13,184,278
Losses charged off . . . . . . . . . . . . . (18,028,677)
Recoveries . . . . . . . . . . . . . . . 82,078
-----------
Balance at December 31, 1996. . . . . . . . . . $ 6,045,514
-----------
-----------
32
<PAGE>
Changes in nonrefundable acquisition discount and dealer reserves for the
years ended December 31, 1996, 1995 and 1994 were as follows:
NONREFUNDABLE REFUNDABLE
ACQUISITION DEALER
DISCOUNT RESERVES
------------ ------------
Balance at January 1, 1994. . . . . . . . . . . $ 2,749,333 $ 1,916
Additions applicable to new volume. . . . . . 15,485,109 477,630
Accreted to income. . . . . . . . . . . . . . (1,328,515) --
Payments to dealers . . . . . . . . . . . . . -- (385,240)
Accounts sold . . . . . . . . . . . . . . . . (2,719,457) --
Losses charged, net of recoveries . . . . . . (5,515,350) (20,378)
------------ ------------
Balance at December 31, 1994. . . . . . . . . . $ 8,671,120 $ 73,928
Additions applicable to new volume. . . . . . 28,023,470 2,295,776
Payments to dealers . . . . . . . . . . . . . -- (2,076,840)
Accounts sold . . . . . . . . . . . . . . . . (5,524,932) --
Losses charged, net of recoveries . . . . . . (21,741,506) --
------------ ------------
Balance at December 31, 1995. . . . . . . . . . $ 9,428,152 $ 292,864
Additions applicable to new volume. . . . . . 10,720,447 826,220
Payments to dealers . . . . . . . . . . . . . -- (832,301)
Accounts sold . . . . . . . . . . . . . . . . (8,439,100) --
Losses charged, net of recoveries . . . . . . (10,266,335) --
------------ ------------
Balance at December 31, 1996. . . . . . . . . . $ 1,443,164 $ 286,783
------------ ------------
------------ ------------
The additions applicable to new volume include allocations, at the time
of Installment Contract purchases, of contract interest that would otherwise
have been recorded as unearned finance charges of $0, $9,815,829 and
$5,048,720 for 1996, 1995 and 1994, respectively.
Total charge-offs as a percentage of average net finance receivables were
24.16%, 17.98% and 11.64% for 1996, 1995 and 1994, respectively.
(4) SALE OF RECEIVABLES
On February 26, 1996, June 25, 1996, October 18, 1996 and December 20,
1996, the Company sold to GECC portfolios of net vehicle retail installment
notes aggregating $12.8 million, $21.5 million, $17.0 million and $13.6
million, respectively. On March 31, 1995 and September 18, 1995, the Company
sold to GECC portfolios of net vehicle retail installment notes aggregating
$19.0 million and $25.3 million, respectively. The purchaser will earn a
fixed spread over the two-year U.S. Treasury bill rate at the time of sale.
The purchaser retained 10% of the purchase price at the time of sale as a
reserve for losses. The holdback has been reflected as a reduction of
nonrefundable acquisition discount. The Company maintained servicing of the
portfolios and receives an annualized base servicing fee equal to 3% of net
outstandings from the seller. The Company is eligible to receive additional
bonus servicing fees based on portfolio performance, as reflected in Notes 5
and 6 below.
On October 25, 1996, the Company completed the securitization of
approximately $35.2 million (net) of Installment Contracts through a
transaction agented by Greenwich Capital Markets, Inc. The transaction was
structured to create three classes of certificates, which were rated by Duff
& Phelps Credit Rating Co. and Fitch Investors Service L.P. The Class A
certificates total $30.6 million bearing a 7.45% coupon; the Class B and C
certificates each total $2.3 million and bear coupons of 8.50% and 12.75%,
respectively. The Class B and Class C certificates are subordinated to the
Class A certificates. A 4% cash reserve was established at the time of the
sale as a reserve for losses. The reserve builds to 9% as excess cash is
available. At December 31, 1996, the amount of restricted cash and deferred
assets was $1,681,317. The Company recognized a gain on the transaction of
$611,796, net of related transactions costs of $749,487. The Company
capitalized the excess servicing rights on the Installment Contracts
securitized. Servicing fees are reported as income when earned, net of
related amortization of retained servicing rights. The Company maintained
servicing of the portfolios and receives an annualized base
33
<PAGE>
servicing fee equal to 3% of net outstandings from the seller. The Company
is eligible to receive additional excess servicing fees based on portfolio
performance, as reflected in Notes 5 and 6 below.
On September 27, 1996, the Company sold approximately $9.6 million (net)
of Texas-originated Installment Contracts to Search Capital Group, Inc.
("Search Capital"). This Installment Contract sale reflects the Company's
deemphasis of its Texas operations. The Company did not retain servicing of
the Installment Contracts sold to Search Capital. No gain was recorded as
the sales price approximated book value.
(5) SERVICING
Servicing fees are reported as income when earned, net of related
amortization of excess servicing. Servicing costs are charged to expense as
incurred. Servicing fees for the periods shown included the following
components:
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- --------
Base servicing fees . . . . . . . . . . . $1,712,437 $1,009,560 $165,267
Bonus/excess servicing fees. . . . . . . . 3,705,841 1,109,814 675,975
Amortization of excess servicing . . . . . (310,693) -- --
---------- ---------- --------
Net servicing fees . . . . . . . . . . . . $5,107,585 $2,119,374 $841,242
---------- ---------- --------
---------- ---------- --------
At December 31, 1996, the Company was in violation of certain covenants
relating to a purchase and servicing agreement with a third-party purchaser.
The Company obtained waivers for the covenant breaches through April 1, 1997.
Should the Company remain in violation of these covenants beyond April 1,
1997, the purchaser, at its option, could terminate the agreement, which
would result in a loss of future servicing and bonus servicing income.
(6) EXCESS SERVICING RECEIVABLE (ESR)
The following table summarizes ESR activity for the periods shown:
Year ended December 31,
----------------------------------
1996 1995 1994
---------- ---------- --------
Balance at beginning of period . . . . . . $ -- $ -- $ --
Additions to ESR . . . . . . . . . . . . 1,361,283 -- --
Amortization of ESR . . . . . . . . . . . (310,693) -- --
---------- ---------- --------
Balance, end of period . . . . . . . . . . $1,050,590 $ -- $ --
---------- ---------- --------
---------- ---------- --------
(7) INCOME TAXES
Total income tax expense (benefit) reported in the statements of income
for the years ended December 31, 1996, 1995 and 1994 included the following
components:
1996 1995 1994
----------- ----------- ----------
Current:
Federal . . . . . . . . . . . . . . $(3,368,177) $ 3,466,929 $1,057,472
State. . . . . . . . . . . . . . . . (422,056) 507,487 181,188
----------- ----------- ----------
Total. . . . . . . . . . . . . . . . (3,790,233) 3,974,416 1,238,660
----------- ----------- ----------
Deferred:
Federal. . . . . . . . . . . . . . . 2,624,758 (3,303,132) (62,837)
State. . . . . . . . . . . . . . . . 506,600 (474,097) (9,019)
----------- ----------- ----------
Total. . . . . . . . . . . . . . . . 3,131,358 (3,777,229) (71,856)
----------- ----------- ----------
Total income tax expense (benefit) . . $ (658,875) $ 197,187 $1,166,804
----------- ----------- ----------
----------- ----------- ----------
Temporary differences, which represent the difference between the amounts
reported in the financial statements and the tax bases of assets and
liabilities, result in deferred taxes. Deferred tax assets and liabilities
at December 31, 1996 and 1995, were as follows:
34
<PAGE>
1996 1995
---------- ----------
Gross deferred tax assets:
Allowances for credit losses. . . . . . $2,350,496 $4,202,086
Deferred income . . . . . . . . . . . . 2,005 17,930
State net operating loss. . . . . . . . 129,870 --
Other . . . . . . . . . . . . . . . . . 148,023 39,565
---------- ----------
Gross deferred tax assets. . . . . . . . . . 2,630,394 4,259,581
Valuation allowance. . . . . . . . . . . . . (1,563,826) --
---------- ----------
Subtotal . . . . . . . . . . . . . . . . . . 1,066,568 4,259,581
---------- ----------
Gross deferred tax liabilities:
Accrued finance charges . . . . . . . . 61,184 122,367
Other . . . . . . . . . . . . . . . . . 472 944
---------- ----------
Gross deferred tax liabilities . . . . . . . 61,656 123,311
---------- ----------
Net deferred tax assets. . . . . . . . . . . $1,004,912 $4,136,270
---------- ----------
---------- ----------
A valuation allowance of $1,563,826 has been established at December 31,
1996 against the deferred tax assets because of the uncertainty surrounding
the realization of these tax assets.
The differences between the statutory federal income tax rate of 34% and
the effective tax rate for the year ended December 31, 1996, 1995 and 1994
are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Statutory federal income tax rate........................ (34.0%) 34.0% 34.0%
Decrease in tax resulting from S corporation net income.. -- -- (14.4%)
Change in valuation allowance for deferred
tax assets .......................................... 26.0% -- --
State income taxes, less benefit of federal
income tax deduction ................................ (2.4%) 4.2% 2.2%
Other, net .............................................. (0.6%) (0.5%) 1.0%
-------- -------- -------
Effective tax rate ...................................... (11.0%) 37.7% 22.8%
-------- -------- -------
-------- -------- -------
</TABLE>
Prior to July 21, 1994, the Company, for tax reporting purposes, had
elected subchapter S corporation status under the Internal Revenue Code. As
such, the Company's shareholders, not the Company, paid taxes on the
Company's taxable income. Effective July 21, 1994, the Company changed its
tax status by terminating its subchapter S corporation election. As a result
of this change, the Company now pays taxes on its taxable income. Under
Statement of Financial Accounting Standards No. 109, the Company recognized
the effect of the change in its tax status by establishing a net deferred tax
asset of $287,186. The effect of the change in tax status has been
recognized in the statement of changes in stockholders' equity for the year
ended December 31, 1994.
35
<PAGE>
(8) DEBT
<TABLE>
Debt on December 31, 1996 and 1995 consisted of the following:
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Senior debt:
Revolving credit facility, expiring June 30, 1997......................... $ 31,762,718 $ 99,650,000
Debt to affiliate ........................................................ 1,065,175 1,001,557
------------ ------------
Total senior debt ...................................................... 32,827,893 100,651,557
------------ ------------
Subordinated debt:
10.25%, RISRS due June 1, 2005 (0.25% increase per year through
maturity)............................................................... 16,990,000 17,000,000
7.00% to 10.75% Private Placement Notes with various maturities
through August 1, 2004 ................................................. 781,159 741,972
7.00% to 11.00% Long Term Notes with various maturities through
August 1, 2006 ......................................................... 206,561 303,326
------------ ------------
Total subordinated debt .............................................. 17,977,720 18,045,298
------------ ------------
Total debt ........................................................... $ 50,805,613 $ 118,696,855
------------ ------------
------------ ------------
</TABLE>
The senior and subordinated debt agreements contain provisions relating
to the maintenance of consolidated net worth, as defined in such agreements,
limitations on borrowings, the payment of cash dividends, and acquisitions of
the Company's capital stock. At December 31, 1996, consolidated net worth,
as defined in the Company's revolving credit agreement, was $10,307,738,
which was below the minimum requirement of $14,714,023. Additionally, the
Company was in violation of other covenants, including interest coverage and
subordinated debt limitations. The Company's lenders have either provided
waivers through the term of their agreement or reduced the minimum
requirements for the limitations. The Company expects to remain in violation
of the interest coverage ratio, consolidated net worth and subordinated debt
limitation covenants for the near term. Based on its discussions with its
existing lenders, management expects no adverse actions by its lenders
regarding the Company's breach, although there can be no assurance in this
regard.
The Company is negotiating with its existing lenders to obtain financing
beyond the June 30, 1997 maturity of the revolving credit agreement. No
assurance can be given that these pursuits will be successful or that the
Company will be able to replace the revolving credit agreement on terms
acceptable to the Company, although management believes that alternative
funding sources or greater reliance upon securitizations and loan sales will
provide the Company with sufficient liquidity to maintain its existing
operations.
The Company has pledged its $552,651 money market investments as cash
collateral at December 31, 1996 in accordance with the requirements of the
revolving credit agreement. The cash collateral may be utilized by the agent
bank under the revolving credit agreement for the purpose of making interest
payments on the RISRS (as defined below) in the event of a default under the
Indenture for the RISRS.
The revolving credit agreement is an agented facility with nine banks.
The total available under the revolving credit agreement was $60,000,000
(which amount declines to $50,000,000 by March 1997) of which $31,762,718
was outstanding at December 31, 1996. The credit facility provides for
interest at floating rates, at the Company's option, either equal to the
reference bank's prime rate or 2.5% above LIBOR rate. The weighted average
interest rate paid on outstanding borrowings were 8.05% and 7.89% at December
31, 1996 and 1995, respectively. The revolving credit agreement matures on
June 30, 1997. On December 31, 1996, the Company had unused bank commitments
in the amount of $28,237,282. The Company pays a commitment fee equal to
3/8% of the unused portion of the agreement. Substantially all of the
Company's finance receivables have been pledged to secure debt outstanding
under the revolving credit agreement.
The unsecured debt to affiliate is due on demand and bore a 6.75%
interest rate on December 31, 1996.
On May 5, 1995, the Company completed a public offering of $17,000,000 of
its Subordinated Notes due 2005 (the "Notes"). The Notes were priced at
par and the net proceeds to the Company were approximately $16.3 million.
The Notes, known as Rising Interest Subordinated Redeemable Securities
("RISRS"), bear an interest rate, payable monthly, of 10% per annum, which
rate increased 0.25% on June 1, 1996 and will increase 0.25% each June 1st
thereafter through June 1, 2003. During the last year of their term,
following a 0.50% increase in the interest
36
<PAGE>
rate on June 1, 2004, the Notes will bear an interest rate of 12.50% per
annum. The Company may at its option redeem the RISRS, in whole or in part,
on or after June 1, 1997. From June 1, 1997 through May 31, 1998 the
redemption price would be 101% of the principal amount, and on or after June
1, 1998, the redemption price would be 100% of the principal amount. Annual
interest on the notes is expensed using the level yield method. In 1996, the
effective rate on the notes was 12.15%. Other than the early redemption
option, no conditions existed at December 31, 1996 that would cause
acceleration of amounts owing under the RISRS.
The Company has periodically offered subordinated debt pursuant to a
private placement which was intended to qualify as a non-public offering
under Regulation D promulgated by the SEC under the Securities Act of 1933.
The total subordinated notes issued pursuant to the private placement and
outstanding on December 31, 1996 was $781,159; these notes have interest
rates from 7.00% to 10.75% with various maturities through August 1, 2004.
The Company has other subordinated long term notes outstanding at December
31, 1996 totaling $206,561; these notes have interest rates from 7.00% to
11.00% with various maturities through August 1, 2006.
The subordinated notes are subordinate to the Company's senior debt and
rank equally with "RISRS" issued during 1995.
The aggregate minimum annual maturities of total debt (excluding bank
lines of credit and debt to affiliate) at December 31, 1996 are:
YEAR AMOUNT
---- ----------
1997 ..................................... $ 115,425
1998 ..................................... 40,445
1999 ..................................... 857,805
2000 ..................................... 804,253
2001 ..................................... 863,829
2002 and beyond .......................... 15,295,963
-----------
Total .................................. $17,977,720
-----------
-----------
(9) DERIVATIVE FINANCIAL INSTRUMENTS
In connection with its asset/liability management program and in the
normal cause of business, the Company enters into transactions involving
derivative financial instruments. These instruments are used to manage the
Company's exposure to fluctuations in interest rates. The Company has only
limited involvement with derivative financial instruments (consisting of
interest rate caps, collars and floors ranging in maturity from three to five
years, and totaling $55 million in notional principal amount) and does not
use them for trading purposes.
Interest rate cap and collar agreements are used to reduce the potential
impact of increases in interest rates on floating-rate, short-term debt. At
December 31, 1996 and 1995, the Company was a party to a $15 million interest
rate cap agreement which entitles the Company to receive payments from a
counterparty whenever, and based upon the amount by which, the three-month
LIBOR rate exceeds 10.5%. At December 31, 1996, the Company was a party to
four interest rate collar agreements totaling $40 million. These agreements
entitle the Company to receive payments from counterparties whenever, and
based upon the amount by which, the three-month LIBOR rate exceeds 8%. The
interest rate collar agreements require the Company to make payments to the
counterparties whenever, and based upon the amount by which, the three-month
LIBOR rate is less than 5%.
The Company is exposed to credit-related losses in the event of
nonperformance by counterparties to financial instruments, but it does not
expect any counterparties to fail to meet their obligations given their high
credit ratings. Premiums paid for interest rate caps and collars are
amortized into interest expense over the term of the instrument. Interest
expense will be reduced (increased) on a current basis if payments are
received (paid) under these instruments.
37
<PAGE>
(10) DIVIDEND RESTRICTIONS
Payment of dividends by the Company are subject to certain limitations in
the various debt agreements and the revolving credit facility. Under the most
restrictive provisions of these agreements, no amount of retained earnings of
the Company were available for distribution at December 31, 1996.
(11) STOCK OPTIONS
Prior to January 1, 1996, the Company accounted for its stock option plan
in accordance with the provisions of Accounting Principles Board ("APB")
Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related
interpretations. As such, compensation expense would be recorded on the date
of grant only if the current market price of the underlying stock exceeded
the exercise price. On January 1, 1996, the Company adopted SFAS No. 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION, in the manner that allows the
Company to continue to apply the provisions of APB Opinion No. 25 and provide
pro forma net income and pro forma earnings per share disclosures for
employee stock option grants as if the fair-value-based method defined in
SFAS No. 123 had been applied.
Under the terms of the Company's 1994 Stock Incentive Plan, as amended,
600,000 shares of Common Stock were reserved for future granting of options
to key individuals providing services to the Company as well as non-employee
directors. The plan generally provides for options to be granted, become
exercisable, and terminate upon terms established by a committee of the Board
of Directors. Options granted to non-employee directors have ten year terms
and vest and became fully exercisable at the end of two years of service.
Options granted to personnel with beneficial ownership of more than 5% of the
Company's common stock have five year terms and vest and become fully
exercisable at the end of three to four years of service. Options granted to
remaining personnel have ten year terms and vest and become fully exercisable
at the end of three to five years of service. Options are issued at fair
value on the date of grant and, accordingly, no compensation cost is
recognized for stock options in the accompanying financial statements.
At December 31, 1996, there were 122,100 additional shares available for
grant under the Plan. The per share weighted-average fair value of stock
options granted during 1996 and 1995 was $2.92 and $6.46, respectively, on
the date of the grant using the Black Scholes option-pricing model with the
following weighted-average assumptions: 1996 - expected dividend yield 0%,
risk-free interest rate of 6.29%, a volatility factor of the expected market
price of the Company's common stock of .463 and an expected life of 4.6
years; 1995 - expected dividend yield 0%, risk-free interest rate of 6.52%, a
volatility factor of the expected market price of the Company's common stock
of .463 and an expected life of 4.5 years.
Had the Company determined compensation cost based on the fair value at the
grant date for its stock options under SFAS No. 123, the Company's net income
would have been reduced to the pro forma amounts indicated below:
1996 1995
------------- -----------
Net income As reported $ (5,348,599) $ 325,445
Pro forma $ (5,367,766) $ 175,819
Earnings per share As reported $(1.28) $0.08
Pro forma $(1.28) $0.04
Pro forma net income reflects only options granted in 1996 and 1995.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the pro forma net income amounts
presented above because compensation cost is reflected over the options'
vesting periods detailed above and compensation cost for options granted
prior to January 1, 1995 is not considered.
Stock option activity during the periods indicated is as follows:
38
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES WEIGHTED-AVERAGE EXERCISE PRICE
---------------- -------------------------------
<S> <C> <C>
Balance at July 1, 1994............ -- --
Granted........................ 233,000 $ 9.49
Balance at December 31, 1994....... 233,000 9.49
Granted ....................... 215,000 14.94
Exercised ..................... (9,100) 9.00
Forfeited / Surrendered ....... (2,000) 14.25
Expired ....................... -- --
-------- ------
Balance at December 31, 1995 ...... 436,900 12.16
Granted ....................... 248,000 6.63
Exercised ..................... -- --
Forfeited / Surrendered ....... (207,000) 14.64
Expired ....................... -- --
-------- ------
Balance at December 31, 1996 ...... 479,900 $ 8.25
-------- ------
-------- ------
</TABLE>
At December 31, 1996, the range of exercise prices and the
weighted-average remaining contractual life of outstanding options was $5.75
to $14.50 and 6.6 years, respectively.
At December 31, 1996 and 1995, the number of options exercisable was
157,162 and 74,828, respectively, and the weighted-average exercise price of
those options was $10.12 and $9.97, respectively.
(12) COMMITMENTS AND CONTINGENCIES
Future minimum rental payments required under operating leases that
have initial or remaining noncancelable lease terms in excess of one year as
of December 31, 1996, are as follows:
<TABLE>
<CAPTION>
EQUIPMENT AND
LEASEHOLD
IMPROVEMENTS OFFICE LEASES TOTAL
------------- ------------- -----
<S> <C> <C> <C>
1997 $1,104,245 $368,289 $1,472,534
1998 597,141 162,760 759,901
1999 51,232 93,122 144,354
2000 -- 95,474 95,474
2001 -- -- --
2002 and beyond -- -- --
---------- -------- ----------
$1,752,618 $719,645 $2,472,263
---------- -------- ----------
---------- -------- ----------
</TABLE>
It is expected that, in the normal course of business, leases that expire
will be renewed or replaced by leases on other properties; therefore, it is
believed that future minimum annual rental commitments will not be less than
the amount of rental expense incurred. Office space and equipment rental
expenses for the years ended December 31, 1996, 1995, and 1994 were
$1,495,471, $1,199,046 and $346,258, respectively.
The Company is involved in litigation in the normal course of business.
The Company believes that the resolution of such matters will not have a
material adverse effect on its financial position or results of operations.
The Company regularly initiates legal proceedings as a plaintiff in
connection with its routine collection activities.
(13) EMPLOYEE BENEFITS
The Company offers no post-retirement or post-employment benefits to its
employees other than those available under its Section 401(k) Profit Sharing
Plan. The Company's defined contribution retirement plan provides for base
contributions by the Company of 3% of compensation and a 100% matching
contribution by the Company of an additional 2% of the contributing
employee's compensation. Employee contributions are limited to 15% of
compensation. The total expense for the plans for the years ended December
31, 1996, 1995 and 1994 was $95,395, $94,476 and $65,882, respectively.
39
<PAGE>
(14) RELATED-PARTY TRANSACTIONS
Effective January 1, 1994, the Company and certain affiliates entered
into an Intercompany Services Agreement, as amended. The agreement provides
for the Company to render specified accounting and administrative services to
the affiliates for a monthly fee which approximates the Company's cost of
rendering such services. For the year ended December 31, 1996, 1995 and
1994, fees totaling $137,588, $157,252 and $200,400, respectively, are
included in interest and fee income in the statement of income.
The Company terminated the lease agreement without penalty on October 6,
1995, for space in an office building owned by Upland Farms, a general
partnership (an affiliate). The total rent paid by the Company to Upland
Farms during each of the years 1996, 1995 and 1994 was $0, $55,758 and
$96,756, respectively, for 9,733 total square feet of space (average $10 per
square foot).
The Company had outstanding senior debt in the amount of $1,065,175 and
$1,001,557 at December 31, 1996 and 1995, respectively, held by Prominent
Mortgage (an affiliate) as discussed in footnote (6), Debt.
The Company leases furniture and computer equipment from Wonderlic
Personnel Test, Inc. (an affiliate), pursuant to a Master Lease Agreement.
Payments under that agreement (and any related predecessor agreements) were
$1,075,340, $850,293 and $95,210 for the years ending December 31, 1996, 1995
and 1994, respectively.
The Company paid a total of $77,015 during 1996 to Wonderlic Personnel
Test, Inc. (an affiliate) to develop a proprietary credit scoring model.
The Company paid a total of $60,000 plus expenses during 1994, pursuant
to the terms of a consulting agreement with two companies which provided
general management consulting services to the Company. A director of the
company is the president and sole shareholder of one of the companies.
The Company's Chief Executive Officer and Vice Chairman, members of their
families and certain of the Company's affiliates have outstanding principal
amounts of subordinated notes at December 31, 1996, approximating, for the
Chief Executive Officer and President or members of their families, $682,560
(including $600,000 of publicly offered subordinated notes known as RISRS),
respectively. Such subordinated notes currently bear interest at various
rates between 10% and 11% and mature at various times through June 2005,
although they are callable.
40
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company hereby incorporates by reference the information called for
by Item 10 of this Form 10-K regarding directors of the Company from the
section entitled ""Election of Directors'' of the Company's 1997 Proxy
Statement. The required information with respect to the Company's executive
officers is provided in Item 1 hereof under the heading ""Executive Officers
of the Company.''
ITEM 11. EXECUTIVE COMPENSATION
The Company hereby incorporates by reference the information called for
by Item 11 of this Form 10-K from the section entitled ""Executive
Compensation'' of the Company's 1997 Proxy Statement; provided, however, the
section entitled ""Board Compensation Committee Report on Executive
Compensation'' is specifically not incorporated into this Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company hereby incorporates by reference the information called for
by Item 12 of this Form 10-K from the section entitled ""Security Ownership
Of Certain Beneficial Owners'' of the Company's 1997 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company hereby incorporates by reference the information called for
by Item 13 of this Form 10-K from the section entitled ""Transactions with
Directors, Officers and Associates'' of the Company's 1997 Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) 1. Financial Statements: PAGE
----
Report of Independent Public Accountants . . . . . . . . . . .24
Balance Sheets-. . . . . . . . . . . . . . . . . . . . . . . .25
As of December 31, 1996 and 1995
Statements of Income-. . . . . . . . . . . . . . . . . . . . .26
For the Years Ended December 31, 1996, 1995 and 1994
Statements of Changes in Stockholders' Equity- . . . . . . . .27
For the Years Ended December 31, 1996, 1995 and 1994
Statements of Cash Flows-. . . . . . . . . . . . . . . . . . .28
For the Years Ended December 31, 1996, 1995 and 1994 . . . . . .
Notes to the Financial Statements . . . . . . . . . . . . . . 29
41
<PAGE>
2. The following financial schedules for the years 1996, 1995 and 1994
are submitted herewith:
None.
3. Exhibits
The following list sets forth the exhibits to this Form 10-K as
required by Item 601 of Regulation S-K. Certain exhibits are filed
herewith, while the remaining exhibits are hereby incorporated by
reference to documents previously filed with the Securities and Exchange
Commission. Exhibits hereto incorporated by reference to such other filed
documents are indicated by an asterisk (*).
EXHIBIT
NO. DESCRIPTION
--------- -----------------------------------------------------------
3.1* Restated Certificate of Incorporation of the Company
3.2* Restated Bylaws of the Company
4.1* Form of certificate evidencing Common Stock of the Company
4.2* Indenture dated as of April 15, 1995 between the Company and
LaSalle National Bank, as Trustee
4.3* First Supplemental Indenture dated as of April 28, 1995
between the Company and LaSalle National Bank, as Trustee,
including form of note
10.1* Lease Agreements dated June 1, 1993 between Upland Farms and
Wonderlic & Associates, Inc.
10.2* Intercompany Services Agreement dated as of January 1, 1994
10.3* Tax Indemnification Agreement
10.4* Servicing Agreement dated February 26, 1993 between
Wonderlic & Associates, Inc. and General Electric Capital
Corporation
10.5* Amendment No. 1 to Servicing Agreement dated March 22,
1993 between Wonderlic & Associates, Inc. and General
Electric Capital Corporation
10.6* Amended and Restated Revolving Credit Agreement dated as
of June 30, 1995 among Eagle Finance Corp., CoreStates
Bank, N.A., Harris Trust and Savings Bank, BankOne,
Chicago, N.A., Cole Taylor Bank, NatWest Bank, N.A., NBD
Bank, LaSalle National Bank, The Daiwa Bank, Limited and
CoreStates Bank, N.A., as agent
10.7* Interest Rate Protection Agreement dated July 1, 1992
between the Company and Harris Trust and Savings Bank
10.8* Eagle Finance Corp. 1994 Stock Incentive Plan
10.9* Form of Stock Option Agreement
10.10* Form of Employment Agreement of Charles F. Wonderlic
10.11* Form of Employment Agreement of Ronald B. Clonts
10.11(a) Amendment to Employment Agreement of Ronald B. Clonts, dated
January 1, 1997.
10.12* Form of Employment Agreement of Robert J. Braasch
10.13* Form of Indemnification Agreement
42
<PAGE>
EXHIBIT
NO. DESCRIPTION
--------- -----------------------------------------------------------
10.14* Computer System Lease dated July 31, 1993 between Wonderlic
Personnel Test, Inc. and Wonderlic & Associates, Inc.
10.15* Master Note Agreement dated as of January 1, 1994 between
Wonderlic & Associates, Inc. and Prominent Mortgage Corp.
10.16* First Amendment to Master Note Agreement dated as of
August 1, 1994 between Eagle Finance Corp. and Prominent
Mortgage Corp.
10.17* Form of Debenture Agreement
10.18* Form of Subordinated Debentures
10.19* Form of Subordinated Notes
10.20* Form of Dealer Agreement
10.21* Form of Company Credit Application
10.22* Asset Purchase Agreement dated as of September 27, 1994
between General Electric Capital Corporation and Eagle
Finance Corp.
10.23* Amendment No. 1 to Asset Purchase Agreement, dated as of
March 31, 1995, between General Electric Capital
Corporation and Eagle Finance Corp.
10.24* Form of Master Lease Agreement
10.25* Assignment and Assumption Agreement dated as of August 1,
1994 between Wonderlic Personnel Test, Inc. and Eagle
Finance Corp.
10.26* First Amendment to Amended and Restated Revolving Credit
Agreement dated September 1, 1995
10.27* Second Amendment to Amended and Restated Revolving Credit
Agreement dated June 30, 1996
10.28* Asset Purchase Agreement dated as of June 25, 1996 between
General Electric Capital Corporation and Eagle Finance Corp.
10.29* Amended and Restated Servicing Agreement dated as of
June 25, 1996 between General Electric Capital
Corporation and Eagle Finance Corp.
10.30* Third Amendment to Amended and Restated Revolving Credit
Agreement dated June 30, 1996
10.31 Form of Acknowledgment and Waiver with respect to
Amended and Restated Revolving Credit Agreement dated
March 27, 1997
10.32 Pooling and Servicing Agreement dated as of September 1,
1996 among Eagle Auto Funding Corp., Eagle Finance Corp.
and Harris Trust and Savings Bank
10.33 Loan Sale and Contribution Agreement dated as of September
1, 1996 between Eagle Finance Corp. and Eagle Auto
Funding Corp.
10.34 Waiver Letter from General Electric Capital Corporation
dated March 26, 1997
11. Statement Regarding Computation of Net Earnings Per Share
12. Statement Regarding Computation of Ratio of Earnings to
Fixed Charges
23 Consent of KPMG Peat Marwick LLP
43
<PAGE>
EXHIBIT
NO. DESCRIPTION
--------- -----------------------------------------------------------
27 Financial Data Schedule
(b) The Company did not file any Current Report on Form 8-K during
the fourth quarter of 1996.
(c) Exhibits - those exhibits listed above without an asterisk are
filed herewith.
(d) There are no financial statement schedules required by Regulation
S-X that are excluded from the Financial Statements included under
Item 8 of this report.
44
<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, on March 28, 1997.
EAGLE FINANCE CORP.
By: CHARLES F. WONDERLIC
-------------------------------------
Charles F. Wonderlic
Chairman and Chief Executive Officer
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 date indicated.
SIGNATURE TITLE DATE
--------- ----- -----
CHARLES F. WONDERLIC Chairman, Chief Executive )
- ----------------------- Officer and Director )
Charles F. Wonderlic (Principal Executive Officer) )
)
)
RONALD B. CLONTS Vice Chairman and Director )
- ----------------------- )
Ronald B. Clonts )
)
)
ROBERT J. BRAASCH President and Chief Financial )
- ----------------------- Officer (Principal Financial )
Robert J. Braasch and Accounting Officer) )
)
)
RICHARD E. WONDERLIC Executive Vice President )
- ----------------------- and Director )
Richard E. Wonderlic ) March 28, 1997
)
)
ROBERT H. ARNOLD Director )
- ----------------------- )
Robert H. Arnold )
)
Director )
- ----------------------- )
Anne Hamblin Schiave )
)
)
WALTER J. O'BRIEN Director )
- ---------------------- )
Walter J. O'Brien )
)
)
E. BRUCE FREDRIKSON Director )
- ---------------------- )
E. Bruce Fredrikson )
45
<PAGE>
BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
Charles F. Wonderlic Robert H. Arnold
Chairman and Chief Executive Officer President of R.H. Arnold & Co.
Ronald B. Clonts E. Bruce Fredrikson
Vice Chairman Professor of Finance
Syracuse University
Richard E. Wonderlic
Executive Vice President Walter J. O'Brien
President of National Advertising Review
Council, Inc.
Anne Hamblin Schiave
Partner, McBride, Baker & Coles
EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
Charles F. Wonderlic Robert J. Braasch
Chairman and Chief Executive Officer President and Chief Financial Officer
Ronald B. Clonts Richard E. Wonderlic
Vice Chairman Executive Vice President
Samuel M. Keith
Chief Operating Officer
STOCKHOLDER INFORMATION
- --------------------------------------------------------------------------------
CORPORATE HEADQUARTERS FORM 10-K
Eagle Finance Corp. Copies of Eagle Finance Corp.'s annual
1425 Tri-State Parkway, Suite 140 report and 10-K, as filed with the
Gurnee, Illinois 60031-4060 Securities and Exchange Commission, may
(847) 855-7150 be obtained from the Shareholder
Relations Department.
SHAREHOLDER RELATIONS OFFICER STOCK TRADING
Howard J. Adamski, Vice President Eagle Finance Corp. common stock is
and Treasurer traded on the Nasdaq National Market
(847) 855-7118 under the symbol EFCW
TRANSFER AGENT AND REGISTRAR INDEPENDENT AUDITORS
Harris Trust and Savings Bank KPMG Peat Marwick LLP
P.O. Box 7455 303 East Wacker Drive
Chicago, Illinois 60690 Chicago, Illinois 60601
Attention: Shareholder Services
ANNUAL MEETING LEGAL COUNSEL
The annual stockholders' meeting Barack Ferrazzano Kirschbaum Perlman &
will be held Tuesday, May 20, 1997 Nagelberg
at 10:00 a.m. at the Holiday Inn, 333 West Wacker Drive
6161 West Grand Avenue, Suite 2700
Gurnee, Illinois 60031 Chicago, Illinois 60606
46
<PAGE>
[BACK COVER OF ANNUAL REPORT]
<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, on March 28,
1997.
EAGLE FINANCE CORP.
By: CHARLES F. WONDERLIC
-------------------------------------
Charles F. Wonderlic
Chairman and Chief Executive Officer
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 date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
CHARLES F. WONDERLIC Chairman, Chief Executive )
- -------------------- Officer and Director )
Charles F. Wonderlic (Principal Executive Officer) )
)
RONALD B. CLONTS Vice Chairman and Director )
- -------------------- )
Ronald B. Clonts )
)
)
ROBERT J. BRAASCH President and Chief Financial )
- -------------------- )
Robert J. Braasch Officer (Principal Financial )
and Accounting Officer) )
)
RICHARD E. WONDERLIC Executive Vice President )
- -------------------- )
Richard E. Wonderlic and Director ) March 28, 1997
)
)
ROBERT H. ARNOLD Director )
- -------------------- )
Robert H. Arnold )
)
)
Director )
- -------------------- )
Anne Hamblin Schiave )
)
)
WALTER J. O'BRIEN Director )
- -------------------- )
Walter J. O'Brien )
)
)
E. BRUCE FREDRIKSON Director )
- -------------------- )
E. Bruce Fredrikson )
S-1
<PAGE>
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- --------- -----------
3.1 Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit No. 3.1 to Registration
Statement on Form S-1, File No. 33-77828)
3.2 Restated Bylaws of the Company (incorporated by reference to
Exhibit No. 3.2 to Registration Statement on Form S-1, File No.
33-77828)
4.1 Form of certificate evidencing Common Stock of the Company
(incorporated by reference to Exhibit No. 4.1 to Registration
Statement on Form S-1, File No. 33-77828)
4.2 Indenture dated as of April 15, 1995 between the Company and
LaSalle National Bank, as Trustee (incorporated by reference to
Exhibit No. 2 to Current Report on Form 8-K, dated May 5, 1995)
4.3 First Supplemental Indenture dated as of April 28, 1995 between
the Company and LaSalle National Bank, as Trustee, including form
of note (incorporated by reference to Exhibit No. 3 to Current
Report on Form 8-K, dated May 5, 1995)
10.1 Lease Agreements dated June 1, 1993 between Upland Farms and
Wonderlic & Associates, Inc. (incorporated by reference to
Exhibit No. 10.1 to Registration Statement on Form S-1, File No.
33-77828)
10.2 Intercompany Services Agreement dated as of January 1, 1994
(incorporated by reference to Exhibit No. 10.2 to Registration
Statement on Form S-1, File No. 33-77828)
10.3 Tax Indemnification Agreement (incorporated by reference to
Exhibit No. 10.3 to Registration Statement on Form S-1, File No.
33-77828)
10.4 Servicing Agreement dated February 26, 1993 between Wonderlic &
Associates, Inc. and General Electric Capital Corporation
(incorporated by reference to Exhibit No. 10.4 to Registration
Statement on Form S-1, File No. 33-77828)
10.5 Amendment No. 1 to Servicing Agreement dated March 22, 1993
between Wonderlic & Associates, Inc. and General Electric Capital
Corporation (incorporated by reference to Exhibit No. 10.5 to
Registration Statement on Form S-1, File No. 33-77828)
10.6 Amended and Restated Credit Agreement dated as of June 30, 1995
among Eagle Finance Corp., CoreStates Bank, N.A., Harris Trust
and Savings Bank, BankOne, Chicago, N.A., Cole Taylor Bank,
NatWest Bank, N.A., NBD Bank, LaSalle National Bank, The Daiwa
Bank, Limited and CoreStates Bank, N.A., as agent (incorporated
by reference to Exhibit No. 10 to Quarterly Report on Form 10-Q
for the Quarterly Period ended June 30, 1995)
10.7 Interest Rate Protection Agreement dated July 1, 1992 between the
Company and Harris Trust and Savings Bank (incorporated by
reference to Exhibit No. 10.11 to Registration Statement on Form
S-1, File No. 33-77828)
10.8 Eagle Finance Corp. 1994 Stock Incentive Plan (incorporated by
reference to Exhibit No. 10.12 to Registration Statement on Form
S-1, File No. 33-77828)
<PAGE>
EXHIBIT
NO. DESCRIPTION
- --------- -----------
10.9 Form of Stock Option Agreement (incorporated by reference to
Exhibit No. 4.4 to Registration Statement on Form S-8, File No.
33-89132)
10.10 Form of Employment Agreement of Charles F. Wonderlic
(incorporated by reference to Exhibit No. 10.13 to Registration
Statement on Form S-1, File No. 33-77828)
10.11 Form of Employment Agreement of Ronald B. Clonts (incorporated by
reference to Exhibit No. 10.14 to Registration Statement on Form
S-1, File No. 33-77828)
10.11(a) Amendment to Employment Agreement of Ronald B. Clonts, dated
January 1, 1997
10.12 Form of Employment Agreement of Robert J. Braasch (incorporated
by reference to Exhibit No. 10.15 to Registration Statement on
Form S-1, File No. 33-77828)
10.13 Form of Indemnification Agreement (incorporated by reference to
Exhibit No. 10.16 to Registration Statement on Form S-1, File No.
33-77828)
10.14 Computer System Lease dated July 31, 1993 between Wonderlic
Personnel Test, Inc. and Wonderlic & Associates, Inc.
(incorporated by reference to Exhibit No. 10.17 to Registration
Statement on Form S-1, File No. 33-77828)
10.15 Master Note Agreement dated as of January 1, 1994 between
Wonderlic & Associates, Inc. and Prominent Mortgage Corp.
(incorporated by reference to Exhibit No. 10.18 to Registration
Statement on Form S-1, File No. 33-77828)
10.16 First Amendment to Master Note Agreement dated as of August 1,
1994 between Eagle Finance Corp. and Prominent Mortgage Corp.
(incorporated by reference to Exhibit No. 10.18(a) to the
Quarterly Report on Form 10-Q for the Quarterly Period Ended
September 30, 1994)
10.17 Form of Debenture Agreement (incorporated by reference to Exhibit
No. 10.19 to Registration Statement on Form S-1, File No. 33-77828)
10.18 Form of Subordinated Debentures (incorporated by reference to
Exhibit No. 10.20 to Registration Statement on Form S-1, File No.
33-77828)
10.19 Form of Subordinated Notes (incorporated by reference to Exhibit
No. 10.21 to Registration Statement on Form S-1, File No. 33-77828)
10.20 Form of Dealer Agreement (incorporated by reference to Exhibit
No. 10.22 to Registration Statement on Form S-1, File No. 33-77828)
10.21 Form of Company Credit Application (incorporated by reference to
Exhibit No. 10.23 to Registration Statement on Form S-1, File No.
33-77828)
10.22 Asset Purchase Agreement dated as of September 27, 1994 between
General Electric Capital Corporation and Eagle Finance Corp.
(incorporated by reference to Exhibit No. 10.26 to the Quarterly
Report on Form 10-Q for the Quarterly Period ending September 30,
1994)
10.23 Amendment No. 1 to the Asset Purchase Agreement, dated as of
March 31, 1995, between General Electric Capital Corporation and
Eagle Finance Corp.
<PAGE>
EXHIBIT
NO. DESCRIPTION
- --------- -----------
(incorporated by reference to Exhibit No. 10.25(a) to Registration
Statement on Form S-1, File No. 33-90754)
10.24 Form of Master Lease Agreement (incorporated by reference to
Exhibit No. 10.26 to the Annual Report on Form 10-K for the Year
ended December 31, 1994)
10.25 Assignment and Assumption Agreement dated as of August 1, 1994
between Wonderlic Personnel Test, Inc. and Eagle Finance Corp.
(incorporated by reference to Exhibit No. 10.27 to the Annual
Report on Form 10-K for the Year Ended December 31, 1994)
10.26 First Amendment to Amended and Restated Revolving Credit
Agreement dated September 1, 1995 (incorporated by reference to
Exhibit No. 10.1 to the Quarterly Report on Form 10-Q for the
Quarterly Period Ended June 30, 1996)
10.27 Second Amendment to Amended and Restated Revolving Credit
Agreement dated June 30, 1996 (incorporated by reference to
Exhibit No. 10.2 to the Quarterly Report on Form 10-Q for the
Quarterly Period Ended June 30, 1996)
10.28 Asset Purchase Agreement dated as of June 25, 1996 between
General Electric Capital Corporation and Eagle Finance Corp.
(incorporated by reference to Exhibit No. 10.3 to the Quarterly
Report on Form 10-Q for the Quarterly Period Ended June 30, 1996)
10.29 Amended and Restated Servicing Agreement dated as of June 25,
1996 between General Electric Capital Corporation and Eagle
Finance Corp. (incorporated by reference to Exhibit No. 10.4 to
the Quarterly Report on Form 10-Q for the Quarterly Period Ended
June 30, 1996)
10.30 Third Amendment to Amended and Restated Revolving Credit
Agreement dated June 30, 1996 (incorporated by reference to
Exhibit No. 10.1 to the Quarterly Report on Form 10-Q for the
Quarterly Period Ended September 30, 1996)
10.31 Form of Acknowledgment and Waiver with respect to Amended and
Restated Revolving Credit Agreement dated March 27, 1997
10.32 Pooling and Servicing Agreement dated as of September 1, 1996
among Eagle Auto Funding Corp., Eagle Finance Corp. and Harris
Trust and Savings Bank
10.33 Loan Sale and Contribution Agreement dated as of September 1,
1996 between Eagle Finance Corp. and Eagle Auto Funding Corp.
10.34 Waiver Letter from General Electric Capital Corporation dated
March 26, 1997
11 Statement Regarding Computation of Net Earnings Per Share
12 Statement Regarding Computation of Ratio of Earnings to Fixed
Charges
23 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule
<PAGE>
EXHIBIT 10.11(a)
AMENDMENT TO
RONALD B. CLONTS
EMPLOYMENT AGREEMENT
EAGLE FINANCE CORP., a Delaware corporation (the "Employer"), and RONALD B.
CLONTS (the "Executive"), entered into an employment agreement dated July 22,
1994 (the "Agreement"), under which they have reserved the right to amend the
Agreement upon written agreement.
WHEREAS, the Employer and the Executive wish to amend the Agreement to
change the base compensation amount.
NOW, THEREFORE, in consideration of the Employer continuing to retain the
services of the Executive on a less than full-time basis and the Executive
continuing to serve in the employ of the Employer and for other good and
valuable consideration, the parties hereto agree to amend the Agreement
effective January 1, 1997, as follows:
Section 2(a) is hereby amended to read as follows:
"(a) BASE COMPENSATION. The Executive shall receive an
aggregate annual base salary at the rate of seventy-five thousand
dollars ($75,000) payable in installments in accordance with the
regular payroll schedule of the Employer. Such base compensation
shall be subject to review annually commencing in 1998 and shall be
adjusted during the term hereof as the Board shall direct."
In all other respects, Employer and Executive hereby confirm the Agreement,
as herein amended, reserving to themselves the joint right to further amend or
revoke, in whole or in part, the Agreement and any amendment thereto.
IN WITNESS WHEREOF, the Employer and the Executive have signed this
amendment this 1st day of January, 1997.
EAGLE FINANCE CORP.
By: /s/ ROBERT J. BRAASCH
--------------------------------
Title: President
RONALD B. CLONTS
/s/ RONALD B. CLONTS
-----------------------------------
<PAGE>
EXHIBIT 10.31
March 27, 1997
Mr. Robert J. Braasch
Chief Financial Officer
Eagle Finance Corp.
1425 Tri-State Parkway
Suite 140
Gurnee, Illinois 60031
Re: Acknowledgment and Waiver
-------------------------
Dear Bob:
Reference is hereby made to that certain Amended and Restated Revolving
Credit Agreement, as amended from time to time ("Credit Agreement") dated as of
June 30, 1995, by and among Eagle Finance Corp., a Delaware corporation (the
"Borrower"), the "Agent" (identified on the signature pages of this letter) and
the "Lenders" (identified below as signatories hereto). All capitalized terms
not otherwise defined herein shall have the meanings respectively ascribed to
them in the Credit Agreement.
The Agent and the Lenders acknowledge and agree as follows:
1. The Borrower has informed the Agent and Lenders that its financial
statements for its fiscal year ending December 31, 1996 will disclose that the
Borrower's: (i) Tangible Net Worth, as of December 31, 1996, was less than the
Tangible Net Worth of $14,714,023 required pursuant to Section 8.01 of the
Credit Agreement, (ii) ratio of the sum of Net Earnings PLUS Interest Expense to
Interest Expense was less than the 1.0 to 1.0 required pursuant to Section 8.05
of the Credit Agreement, and (iii) ratio of Subordinated Debt to Tangible Net
Worth was more than the 1.50 to 1.0 permitted pursuant to Section 8.04 of the
Credit Agreement. The Borrower has also disclosed to the Agent and the Lenders
that the Borrower does not expect to be in compliance with each of the
above-referenced financial covenants as of March 31, 1997.
2. Subject to the terms of this letter and to the approval of the Borrower
and the Majority Banks to this letter, the Lenders hereby waive breaches of the
specific financial covenants described in paragraph 1 above as of December 31,
1996 and March 31, 1997. As an express condition to the waivers set forth in
this paragraph 2, the following shall occur contemporaneously herewith:
(a) the Borrower shall pay to Agent, for the ratable benefit of the
Lenders who execute this Acknowledgment and Waiver, a fully earned and
non-refundable waiver fee of $30,000.00;
(b) the Credit Agreement is amended by deleting the number "$60,000,000"
presently contained in the 29th line of Section 2.01 of the Credit Agreement and
replacing it with the number "$50,000,000." In connection with the
aforementioned reduction in the aggregate Commitments of all of the Lenders,
each Lender's Commitment is reduced pro rata to the amount opposite the
applicable Lender's name on the signature pages hereto: and
(c) the Credit Agreement is amended by deleting the definition of
"Borrowing Base" contained in Section 1.01 of the Credit Agreement in its
entirety and replacing such definition with the following:
"Borrowing Base" means eighty-two and one-half percent (82 1/2%) of Eligible
Receivables, PROVIDED, HOWEVER, that the rate of advance shall be seventy
percent (70%) for Eligible Receivables for which there has been a
<PAGE>
Mr. Robert J. Braasch
March 27, 1997
Page 2
Modification (other than a Pre-Approved Modification) during the six (6) month
period immediately preceding September 15, 1996 and, PROVIDED, FURTHER, HOWEVER,
that the rate of advance shall be fifty percent (50%) for Eligible Receivables
rated as D Paper. Aggregate outstanding advances on Eligible Receivables rated
as D Paper shall not exceed $3,000,000 at any one time.
3. (a) As an additional condition to the effectiveness of the waivers
granted herein, Borrower further agrees that if Borrower does not have a
commitment from a lending institution or institutions to refinance Borrower's
obligations to Lenders by April 30, 1997 (which commitment must be evidenced by
a commitment letter signed by the issuing lender and by Borrower and be in form
and substance acceptable to Agent), the advance percentage in the first line of
the definition of the Borrowing Base shall automatically be reduced as of such
date from 82-1/2% to 80% and if such a commitment is not obtained by May 31,
1997, such percentage shall automatically be further reduced from 80 to 75%.
(b) If a fully signed refinancing commitment (in form and substance
acceptable to Agent) is received by Agent at such time as the applicable
borrowing percentage referred to in paragraph 3(a) above is 80% and provided
no Event of Default has occurred (which has not been waived), such rate shall
then be increased to 82-1/2%. If a fully signed refinancing commitment (in form
and substance acceptable to Agent) is received by Agent at such time as the
applicable borrowing percentage referred to in clause 3(a) above is 75% and
provided no Event of Default has occurred (which has not been waived), such
rate shall then be increased to 80%.
The Borrower acknowledges and agrees that the waivers herein described are
expressly conditioned upon Agent's receipt of Borrower's unqualified audited
financial statements for Borrower's fiscal year ending December 31, 1996 and
such financial statements being in all manner substantially consistent (in the
opinion of Agent) with the preliminary results disclosed to the Lenders on March
13, 1997.
This letter may be executed in counterparts, all of which taken together
shall constitute one and the same agreement, and any of the parties hereto may
execute this letter agreement by signing any such counterpart.
Each of the undersigned, by its signature hereto, hereby evidences its
consent to the terms and conditions of this letter, to be effective upon the
Agent's receipt of an executed counterpart by Borrower and by the Majority Banks
and delivery thereof to the Borrower.
CORESTATES BANK N.A., as Agent and as a
Lender
Commitments:
- ----------- By:
--------------------------------
$8,125,000 --------------------------------
(print name and title)
HARRIS TRUST AND SAVINGS BANK
By:
--------------------------------
$5,000,000 --------------------------------
(print name and title)
<PAGE>
Mr. Robert J. Braasch
March 27, 1997
Page 3
BANK ONE, CHICAGO, N.A.
HARRIS TRUST AND SAVINGS BANK
By:
--------------------------------
$6,250,000 --------------------------------
(print name and title)
COLE TAYLOR BANK
By:
--------------------------------
$3,541,666.66 --------------------------------
(print name and title)
FLEET BANK, N.A.
By:
--------------------------------
$6,250,000 --------------------------------
(print name and title)
NBD BANK
By:
--------------------------------
$6,250,000 --------------------------------
(print name and title)
LASALLE NATIONAL BANK
By:
--------------------------------
$6,250,000 --------------------------------
(print name and title)
THE SUMITOMO BANK, LIMITED, Chicago
Branch
By:
--------------------------------
--------------------------------
(print name and title)
By:
--------------------------------
$4,166,666.67 --------------------------------
(print name and title)
<PAGE>
Mr. Robert J. Braasch
March 27, 1997
Page 4
THE NORTHERN TRUST COMPANY
By:
--------------------------------
$4,166,666.67 --------------------------------
(print name and title)
Agreed to this ____ day of
March, 1997:
Eagle Finance Corporation
By:
--------------------------------
Name:
Title:
Attest:
----------------------------
Name:
Title:
<PAGE>
EXHIBIT 10.32
- --------------------------------------------------------------------------------
POOLING AND SERVICING AGREEMENT
among
EAGLE AUTO FUNDING CORP.,
as Seller
EAGLE FINANCE CORP.,
individually and as Servicer
and
HARRIS TRUST AND SAVINGS BANK,
as Trustee, initial Custodian and Back-Up Servicer
EAGLE AUTO TRUST - 1996-A
Dated as of September 1, 1996
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I
Page
----
DEFINITIONS............................ 2
SECTION 1.01. Certain Defined Terms.................................... 2
SECTION 1.02. Provisions of General Application........................ 19
ARTICLE II
TRANSFER OF TRUST ASSETS..................... 20
SECTION 2.01. Establishment of Trust; Conveyance of Transferred
Assets................................................... 20
SECTION 2.02. Acceptance by Trustee and Appointment of the Servicer
as Custodian............................................. 20
SECTION 2.03. Grant of Security Interest; Tax Treatment................ 22
SECTION 2.04. Further Action Evidencing Assignments.................... 23
ARTICLE III
REPRESENTATIONS AND WARRANTIES; COVENANTS............. 23
SECTION 3.01. Representations and Warranties of the Seller............. 23
SECTION 3.02. Representations and Warranties as to each Auto Loan
and the other Transferred Assets......................... 27
SECTION 3.03. Repurchases and Purchases................................ 32
SECTION 3.04. Covenants of the Seller.................................. 34
ARTICLE IV
SERVICING OF TRUST ASSETS..................... 36
SECTION 4.01. Appointment of Servicer.................................. 36
SECTION 4.02. Subservicing Agreements Between Servicer and
Subservicer.............................................. 38
SECTION 4.03. Representations and Warranties of the Servicer........... 39
SECTION 4.04. Duties and Responsibilities of the Servicer.............. 40
SECTION 4.05. Fidelity Bond, Errors and Omissions Insurance............ 43
SECTION 4.06. Inspection............................................... 44
SECTION 4.07. Trustee to Cooperate..................................... 44
SECTION 4.08. Servicing Compensation; Back-Up Servicing Fee;
Servicing Expenses....................................... 45
SECTION 4.09. Servicer Not to Resign................................... 45
SECTION 4.10. Change in Business of the Servicer....................... 46
SECTION 4.11. Events of Servicing Termination.......................... 46
SECTION 4.12. Appointment of the Successor Servicer.................... 48
SECTION 4.13. Annual Reports; Statements as to Compliance.............. 49
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SECTION 4.14. Annual Independent Public Accountants' Servicing
Report................................................... 50
SECTION 4.15. Servicer Reports......................................... 50
SECTION 4.16. Monthly Investor's Report................................ 52
SECTION 4.17. Representations of the Back-Up Servicer.................. 53
SECTION 4.18 Merger or Consolidation of or Assumption of the
Obligations of the Back-Up Servicer...................... 54
SECTION 4.19 Back-Up Servicer Resignation............................. 54
SECTION 4.20 Oversight of Servicing................................... 55
SECTION 4.21 Duties and Responsibilities; Indemnification............. 56
SECTION 4.22 Back-Up Servicer to Act as Servicer; Appointment of
Successor................................................ 56
ARTICLE V
THE TRUSTEE............................ 57
SECTION 5.01. Certain Duties........................................... 57
SECTION 5.02. Notice of Defaults; Other Notices........................ 59
SECTION 5.03. Certain Matters Affecting the Trustee.................... 59
SECTION 5.04. Trustee Not Liable for Certificates or Auto Loans........ 61
SECTION 5.05. Trustee May Own Certificates............................. 62
SECTION 5.06. The Servicer to Pay Trustee's Fees and Expenses.......... 62
SECTION 5.07. Eligibility Requirements for Trustee..................... 62
SECTION 5.08. Resignation or Removal of Trustee........................ 63
SECTION 5.09. Successor Trustee........................................ 63
SECTION 5.10. Merger or Consolidation of Trustee....................... 64
SECTION 5.11. Tax Matters.............................................. 64
ARTICLE VI
THE CERTIFICATES......................... 65
SECTION 6.01. The Certificates......................................... 65
SECTION 6.02. Authentication of Certificates........................... 65
SECTION 6.03. Registration of Transfer and Exchange of Certificates.... 66
SECTION 6.04. Appointment of Paying Agent.............................. 67
SECTION 6.05. Mutilated, Destroyed, Lost or Stolen Certificates........ 68
SECTION 6.06. Persons Deemed Owners.................................... 68
SECTION 6.07. Access to List of Certificateholders' Names and
Addresses................................................ 68
SECTION 6.08. Acts of Certificateholders............................... 69
SECTION 6.09. Restrictions on Transfer................................. 70
SECTION 6.10. Book-Entry Certificates.................................. 73
SECTION 6.11. Notices to Depository.................................... 74
SECTION 6.12. Definitive Certificates.................................. 75
SECTION 6.13. Temporary Certificates................................... 75
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ARTICLE VII
DEPOSITS AND DISTRIBUTIONS..................... 76
SECTION 7.01. Rights of Certificateholders. ........................... 76
SECTION 7.02. Establishment and Administration of the Collection
Account.................................................. 76
SECTION 7.03. Establishment and Administration of the Cash Reserve
Account.................................................. 77
SECTION 7.04. Distributions............................................ 79
SECTION 7.05 Reports to Certificateholders............................ 81
ARTICLE VIII
REMEDIES............................. 81
SECTION 8.01 Collection of Indebtedness and Suits for Enforcement by
Trustee.................................................. 81
SECTION 8.02 Trustee May File Proofs of Claim......................... 81
SECTION 8.03 Trustee May Enforce Claims Without Possession of
Certificates............................................. 82
SECTION 8.04 Application of Money Collected........................... 82
SECTION 8.05 Limitation on Suits...................................... 82
SECTION 8.06 Restoration of Rights and Remedies....................... 83
SECTION 8.07 Rights and Remedies Cumulative........................... 83
SECTION 8.08 Delay or Omission Not Waiver............................. 84
SECTION 8.09 Control by Certificateholders............................ 84
SECTION 8.10 Undertaking for Costs.................................... 84
SECTION 8.11 Waiver of Stay or Extension Laws......................... 84
ARTICLE IX
LIMITATION ON LIABILITY; INDEMNITIES............... 85
SECTION 9.01 Liabilities of Obligors.................................. 85
SECTION 9.02 Limitation on Liability of the Seller and the
Servicer................................................. 85
SECTION 9.03 Indemnities of the Servicer.............................. 85
ARTICLE X
MISCELLANEOUS........................... 86
SECTION 10.01 Termination of Agreement; Optional Repurchase............ 86
SECTION 10.02 Beneficiaries............................................ 87
SECTION 10.03 Amendment................................................ 87
SECTION 10.04 Notices.................................................. 88
SECTION 10.05 Notices and Reports to be Delivered to the Rating
Agencies................................................. 90
SECTION 10.06 Merger and Integration................................... 90
SECTION 10.07 Headings................................................. 90
SECTION 10.08 Certificates Nonassessable and Fully Paid................ 91
SECTION 10.09 Severability of Provisions............................... 91
SECTION 10.10 No Proceedings........................................... 91
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SECTION 10.11 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL.................................................... 91
SECTION 10.12 Counterparts............................................. 92
Exhibits
Exhibit A - Form of Repurchase Assignment
Exhibit B - Form of Release and Assignment
Exhibit C - Form of Independent Accountant's Report
Exhibit D - Form of Servicer Report
Exhibit E - Form of Monthly Investor's Report
Exhibit F - Form of Class A Certificate
Exhibit G - Form of Class B Certificate
Exhibit H Form of Class C Certificate
Exhibit I - Form of Rule 144A Certificate
Exhibit J - Form of Accredited Institutional Investor Certificate
Exhibit K - Form of Transferor's Certificate
Schedule 1 - List of Auto Loans
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POOLING AND SERVICING AGREEMENT (the "Agreement"), dated as of
September 1, 1996, among EAGLE AUTO FUNDING CORP., a Delaware corporation, its
successors and permitted assigns, as Seller (the "Seller"), EAGLE FINANCE CORP.,
a Delaware corporation, its successors and permitted assigns as Servicer (the
"Servicer") and individually ("Eagle Finance"), and HARRIS TRUST AND SAVINGS
BANK, an Illinois banking corporation, its successors and permitted assigns, not
in its individual capacity but solely as trustee (the "Trustee").
W I T N E S S E T H:
WHEREAS, the Seller is a bankruptcy-remote corporation formed for the
sole purpose of acting as the depositor of consumer automobile loans to trusts
and issuing certificates representing undivided beneficial interests in such
trusts;
WHEREAS, the Seller will acquire from time to time consumer automobile
loans financing the purchase of new and used automobiles and light trucks, which
loans create a lien or security interest in the automobile financed thereunder
in favor of the loan holder (the "Auto Loans");
WHEREAS, the Seller intends that Eagle Auto Trust 1996-A (the "Trust")
will purchase the Auto Loans from the Seller simultaneously with the acquisition
of such Auto Loans by the Seller;
WHEREAS, the Servicer has been requested and is willing to direct the
Trustee to make certain distributions of funds in connection with amounts due or
received as proceeds from the Auto Loans, investment income and payment of
principal of and interest on, the Certificates and to otherwise perform certain
administrative functions in connection with the transactions contemplated
hereby;
WHEREAS, in order to effectuate the purposes of this Agreement, the
Seller desires that the Servicer be appointed to perform certain servicing and
collection functions in respect of the Auto Loans to be acquired by the Trust
for the benefit of the Certificateholders as their interests appear herein; and
WHEREAS, Eagle Finance has been requested and is willing to act as the
Servicer hereunder to perform certain servicing and collection functions
provided for herein; and
WHEREAS, the Trustee has been requested and is willing to act as
Back-Up Servicer and as initial Custodian hereunder.
NOW, THEREFORE, the parties agree as follows:
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ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS. As used herein, the following
terms shall have the following meanings:
"ACTUARIAL METHOD" means the method of allocating fixed level monthly
payments on an Auto Loan between interest and principal whereby the amount
allocable to interest is equal to 1/12 of the APR under the related Auto Loan
multiplied by the unpaid principal balance of the Auto Loan and the amount
allocable to principal is equal to the remainder of the monthly payment.
"ADVERSE CLAIM" means any claim of ownership or any lien, security
interest, title retention, trust or other charge or encumbrance, or other type
of preferential arrangement having the effect or purpose of creating a lien or
security interest, other than the security interest created under this
Agreement.
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"AGGREGATE PRINCIPAL BALANCE OF THE AUTO LOANS" means, on any date of
determination, the aggregate Principal Balances of all Auto Loans as of such
date.
"AGREEMENT" means this Pooling and Servicing Agreement, as amended or
supplemented from time to time including all exhibits and schedules hereto and
thereto.
"APPLICANTS" has the meaning specified in Section 6.07.
"APR" means the annual percentage rate of finance charges of an Auto
Loan as determined according to the related contractual documents with the
Obligor thereof.
"AUTHORIZED OFFICER" means, with respect to any corporation or
partnership, the Chairman of the Board, the President, any Vice President, the
Secretary, the Treasurer, any Assistant Secretary, any Assistant Treasurer and
each other officer of such corporation or the general partner of such
partnership specifically authorized in resolutions of the Board of Directors of
such corporation to sign agreements, instruments or other documents in
connection with this Agreement on behalf of such corporation or partnership, as
the case may be.
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"AUTO LOAN" means a consumer loan arising from the sale of an
Automobile and conveyed to the Trust by the Seller as part of the Trust Assets,
and includes, without limitation, (a) all security interests or liens and
property subject thereto from time to time purporting to secure payment by the
Obligor thereunder, (b) all guarantees, indemnities and warranties (including
rights under any Dealer Agreement), insurance policies, certificates of title or
other title documentation and other agreements or arrangements of whatever
character, including the original loan contract, from time to time supporting or
securing payment of such Auto Loan, (c) all collections received on and after
the Cut-Off Date and records with respect to the foregoing and (d) all proceeds
of any of the foregoing.
"AUTOMOBILES" means new and used automobiles and light trucks, the
purchase of which the Obligors financed by the Auto Loans.
"AVAILABLE CASH RESERVE AMOUNT" means, on any date of determination,
the amount on deposit in the Cash Reserve Account.
"AVAILABLE FUNDS" means for any Distribution Date without duplication,
all amounts representing Payments collected during the immediately preceding Due
Period.
"BACK-UP SERVICER" means Harris Trust and Savings Bank, its successors
and permitted assigns.
"BACK-UP SERVICING FEE" means the fee payable in arrears, equal to the
greater of (a) the product of (i) 1/12, (ii) .055% and (iii) the Aggregate
Principal Balance of the Auto Loans as of the end of the second Due Period prior
to the Distribution Date and (b) $650; PROVIDED, HOWEVER, that with respect to
the fee payable on the first such Distribution Date, such fee will equal
$2,741.65.
"BOOK-ENTRY CERTIFICATES" has the meaning specified in Section 6.10.
"BUSINESS DAY" means any day other than a Saturday or a Sunday or
another day on which banks in the States of Florida or Illinois generally, or
the cities of Tampa and Orlando, Florida or of Gurnee or Chicago, Illinois (or
such other cities and states in which the Corporate Trust Office, the principal
administrative offices of the Servicer, Certificate Registrar and Transfer
Agent, and Paying Agent or the principal offices of the Servicer is subsequently
located, as specified in writing by the Servicer to the other parties hereto)
are required, or authorized by law, to close.
"CASH RESERVE ACCOUNT" means the account described in Section 7.03(a).
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"CERTIFICATE" means any of the Class A Certificates, the Class B
Certificates or the Class C Certificates issued pursuant hereto.
"CERTIFICATE PRINCIPAL BALANCE" means, for any Distribution Date, the
sum of (a) the Class A Certificate Principal Balance, PLUS (b) the Class B
Certificate Principal Balance, PLUS (c) the Class C Certificate Principal
Balance.
"CERTIFICATE REGISTER" has the meaning specified in Section 6.03.
"CERTIFICATE REGISTRAR AND TRANSFER AGENT" has the meaning specified
in Section 6.03(a).
"CERTIFICATEHOLDER" means the holder of record of a Certificate.
"CERTIFICATES" means the Class A Certificates, the Class B
Certificates and the Class C Certificates issued pursuant hereto.
"CLASS A CERTIFICATE" means one of the Class A Automobile Loan-Backed
Pass Through Certificates issued hereunder in the form of Exhibit F.
"CLASS A CERTIFICATE PRINCIPAL BALANCE" means, for any Distribution
Date, the Initial Class A Principal Amount reduced by all prior payments to the
Class A Certificateholders allocable to principal prior to such Distribution
Date.
"CLASS A INTEREST CARRYOVER SHORTFALL" means, as of the close of
business on any Distribution Date, the excess of the Class A Monthly Interest
for such Distribution Date, plus any outstanding Class A Interest Carryover
Shortfall from the preceding Distribution Date, plus interest on such
outstanding Class A Interest Carryover Shortfall, to the extent permitted by
law, at the Class A Pass-Through Rate from such preceding Distribution Date
through the current Distribution Date, over the amount of interest distributed
to the holders of Class A Certificates pursuant to Section 7.04(a) on such
current Distribution Date.
"CLASS A MONTHLY INTEREST" means with respect to any Distribution
Date, the product of (a) one-twelfth, (b) the Class A Pass-Through Rate and
(c) the Class A Certificate Principal Balance as of such Distribution Date;
PROVIDED, HOWEVER, that Class A Monthly Interest with respect to the first
Distribution Date following the Closing Date, shall be an amount equal to
$323,091.19.
"CLASS A PASS-THROUGH RATE" means a per annum rate equal to 7.45%.
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"CLASS A PERCENTAGE" means 87%.
"CLASS A PRINCIPAL CARRYOVER SHORTFALL" means, as of the close of
business on any Distribution Date, the excess of the Class A Principal
Distributable Amount plus any Class A Principal Carryover Shortfall from the
preceding Distribution Date over the amount of principal distributed to the
holders of the Class A Certificates pursuant to Section 7.04(a) on such current
Distribution Date.
"CLASS A PRINCIPAL DISTRIBUTABLE AMOUNT" means for any Distribution
Date the Class A Percentage of the Monthly Principal Distributable Amount.
"CLASS B CERTIFICATE" means one of the Class B Automobile Loan-Backed
Pass Through Certificates issued hereunder in the form of Exhibit G.
"CLASS B CERTIFICATE PRINCIPAL BALANCE" means, for any Distribution
Date, the Initial Class B Principal Amount reduced by all payments to the
Class B Certificateholders allocable to principal prior to such Distribution
Date.
"CLASS B INTEREST CARRYOVER SHORTFALL" means, as of the close of
business on any Distribution Date, the excess of the Class B Monthly Interest
for such Distribution Date, plus any outstanding Class B Interest Carryover
Shortfall from the preceding Distribution Date, plus interest on such
outstanding Class B Interest Carryover Shortfall, to the extent permitted by
law, at the Class B Pass-Through Rate from such preceding Distribution Date
through the current Distribution Date, over the amount of interest distributed
to the holders of the Class B Certificates pursuant to Section 7.04(a) on such
current Distribution Date.
"CLASS B MONTHLY INTEREST" means with respect to any Distribution
Date, the product of (a) one-twelfth, (b) the Class B Pass-Through Rate and
(c) the Class B Certificate Principal Balance as of such Distribution Date;
PROVIDED, HOWEVER, that Class B Monthly Interest with respect to the first
Distribution Date following the Closing Date shall be an amount equal to
$27,541.13.
"CLASS B PASS-THROUGH RATE" means a per annum rate equal to 8.50%.
"CLASS B PERCENTAGE" means 6.5%.
"CLASS B PRINCIPAL CARRYOVER SHORTFALL" means, as of the close of
business on any Distribution Date, the excess of the Class B Principal
Distributable Amount plus any Class B Principal Carryover Shortfall from the
preceding Distribution Date over the amount of principal distributed to the
holders of the Class B
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Certificates pursuant to Section 7.04(a) on such current Distribution Date.
"CLASS B PRINCIPAL DISTRIBUTABLE AMOUNT" means for any Distribution
Date the Class B Percentage of the Monthly Principal Distributable Amount.
"CLASS C CERTIFICATE" means one of the Class C Automobile Loan-Backed
Pass Through Certificates issued hereunder in the form of Exhibit H.
"CLASS C CERTIFICATE PRINCIPAL BALANCE" means, for any Distribution
Date, the Initial Class C Principal Amount reduced by all payments to the Class
C Certificateholders allocable to principal prior to such Distribution Date.
"CLASS C INTEREST CARRYOVER SHORTFALL" means, as of the close of
business on any Distribution Date, the excess of the Class C Monthly Interest
for such Distribution Date, plus any outstanding Class C Interest Carryover
Shortfall from the preceding Distribution Date, plus interest on such
outstanding Class C Interest Carryover Shortfall, to the extent permitted by
law, at the Class C Pass-Through Rate from such preceding Distribution Date
through the current Distribution Date, over the amount of interest distributed
to the holders of the Class C Certificates pursuant to Section 7.04(a) on such
current Distribution Date.
"CLASS C MONTHLY INTEREST" means with respect to any Distribution
Date, the product of (a) one-twelfth, (b) the Class C Pass-Through Rate and
(c) the Class C Certificate Principal Balance as of such Distribution Date;
PROVIDED, HOWEVER, that Class C Monthly Interest with respect to the first
Distribution Date following the Closing Date shall be an amount equal to
$41,311.70.
"CLASS C PASS-THROUGH RATE" means a per annum rate equal to 12.75%.
"CLASS C PERCENTAGE" means 6.5%.
"CLASS C PRINCIPAL CARRYOVER SHORTFALL" means, as of the close of
business on any Distribution Date, the excess of the Class C Principal
Distributable Amount plus any Class C Principal Carryover Shortfall from the
preceding Distribution Date over the amount of principal distributed to the
holders of the Class C Certificates pursuant to Section 7.04(a) on such current
Distribution Date.
"CLASS C PRINCIPAL DISTRIBUTABLE AMOUNT" means for any Distribution
Date, the Class C Percentage of the Monthly Principal Distributable Amount.
"CLOSING DATE" means October 24, 1996.
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"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL FILE" means a file containing (a) the original loan and
security agreement relating to each Auto Loan and (b) (i) the related Title
Document or (ii) a guarantee of title or a copy of an application for title if
no certificate of title or other evidence of the security interest in the
Automobile has yet been issued, for each Automobile relating to each Auto Loan
sold, transferred, assigned and conveyed hereunder.
"COLLECTION ACCOUNT" means the account described in Section 7.02(a)
and the local collection accounts relating to Designated Post Office Boxes.
"COMPUTER TAPE" means an electronic computer diskette containing the
electronic master record of the Auto Loans maintained by the Servicer.
"CORPORATE TRUST OFFICE" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date of the execution of this Agreement is
located at the address set forth in Section 10.04.
"CURE PERIOD TESTING MONTH" means each of the 9th, 12th, 15th, 18th,
21st and 24th Due Periods, corresponding to June 1997, September 1997, December
1997, March 1998, June 1998 and September 1998.
"CUSTODIAN" means Harris Trust and Savings Bank, its successors and
permitted assigns, appointed pursuant to Section 2.02(a).
"CUT-OFF DATE" means September 10, 1996.
"DCR" means Duff & Phelps Credit Rating Co., a nationally recognized
statistical rating organization, and any successor thereto.
"DEALER" means each automobile dealer from whom Eagle Finance has
acquired Auto Loans.
"DEALER AGREEMENT" has the meaning set forth in Section 3.02(a)(xvi).
"DEBT" means for any Person, (a) indebtedness of such Person for
borrowed money, (b) obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (c) obligations of such Person to pay the
deferred purchase price of property or services, (d) obligations of such Person
as lessee under leases which have been or should be, in accordance with GAAP,
recorded as capital leases, (e) obligations secured by any lien or
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other charge upon property or assets owned by such Person, even though such
Person has not assumed or become liable for the payment of such obligations,
(f) obligations of such Person under direct or indirect guaranties in respect
of, and obligations (contingent or otherwise) to purchase or otherwise acquire,
or otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clauses (a) through (e) above,
and (g) liabilities in respect of unfunded vested benefits under plans covered
by ERISA. For the purposes hereof, the term "guarantee" shall include any
agreement, whether such agreement is on a contingency or otherwise, to purchase,
repurchase or otherwise acquire Debt of any other Person, or to purchase, sell
or lease, as lessee or lessor, property or services, in any such case primarily
for the purpose of enabling another Person to make payment of Debt, or to make
any payment (whether as an advance, capital contribution, purchase of an equity
interest or otherwise) to assure a minimum equity, asset base, working capital
or other balance sheet or financial condition, in connection with the Debt of
another Person, or to supply funds to or in any manner invest in another Person
in connection with Debt of such Person.
"DEFAULTED AUTO LOAN" means, for any Due Period, (a) an Auto Loan
which is 120 or more days contractually past due, (b) an Auto Loan as to which
the proceeds of the sale of the related Automobile have been received by the
Servicer or (c) an Auto Loan as to which the Servicer has determined that no
further proceeds are expected to be received and such determination was made at
or prior to the last day of such Due Period.
"DEFINITIVE CERTIFICATES" has the meaning specified in Section 6.10.
"DELINQUENCY TRIGGER EVENT" means, for any Distribution Date, that, as
of the end of the immediately preceding Due Period, the 60+ Day Delinquency Rate
is greater than 5.5%.
"DEPOSIT DATE" means the Business Day immediately preceding each
related Distribution Date.
"DEPOSITORY" has the meaning specified in Section 6.10.
"DEPOSITORY PARTICIPANT" means a Person for whom, from time to time,
the Depository effects book-entry transfers and pledges of securities deposited
with the Depository.
"DESIGNATED POST OFFICE BOXES" means the post office boxes designated
by the Servicer for receipt of payments by the Obligors.
"DETERMINATION DATE" means the 14th day of each month (or the
preceding Business Day, if such day is not a Business Day) on which the Servicer
will determine, among other things, the Available Funds.
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"DISTRIBUTION DATE" means November 20, 1996 and, thereafter, the 20th
day of each month (or, if such day is not a Business Day, the next succeeding
Business Day).
"DOLLAR" and "$" means lawful currency of the United States of
America.
"DUE PERIOD" means the calendar month immediately preceding each
Distribution Date, except that the first Due Period shall be the period from and
as of the Cut-Off Date through October 31, 1996.
"EAGLE FINANCE" means Eagle Finance Corp., a Delaware corporation, in
its individual capacity and any successor thereto.
"EAGLE FUNDING" means Eagle Auto Funding Corp., a Delaware
corporation, and any successor thereto.
"ELIGIBLE ACCOUNT" means a segregated account, which may be an account
maintained with the Trustee, which is either (a) maintained with a depository
institution or trust company whose long term unsecured debt obligations are
rated at least A by DCR and Fitch (or, if such obligations are not rated by DCR
and Fitch, such rating by either of such agencies that rates such obligations,
or if neither of such agencies rates such obligations, at least A by Standard &
Poor's and A2 by Moody's; PROVIDED, that if only one such rating agency rates
such institution, such single rating shall suffice), or (b) a segregated trust
account or similar account maintained with a federally or state chartered
depository institution subject to regulations regarding fiduciary funds on
deposit substantially similar to 12 C.F.R. Section 9.10(b).
"ELIGIBLE INVESTMENTS" means any of the following, in each case held
in the name of the Trustee:
(a) obligations of, or guaranteed as to the full and timely payment
of principal and interest by, the United States or obligations of any agency or
instrumentality thereof, when such obligations are backed by the full faith and
credit of the United States;
(b) repurchase agreements on obligations specified in clause (a);
PROVIDED, that the short-term debt obligations of the party agreeing to
repurchase are rated no less than Duff-1 by DCR and F-1 from Fitch or, if not
rated by DCR and Fitch, such rating by either of such agencies that rates such
obligations, or if neither of such agencies rates such obligations, no less than
A-1 by Standard & Poor's and P-1 by Moody's (PROVIDED, that if only one such
rating agency rates such party, such single rating shall suffice);
(c) federal funds, certificates of deposit, time deposits and
bankers' acceptances (which shall each have an
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original maturity of not more than 90 days and, in the case of bankers'
acceptances, shall in no event have an original maturity of more than 365 days)
of any United States depository institution or trust company incorporated under
the laws of the United States or any state; PROVIDED, that the short-term
obligations of such depository institution or trust company are rated no less
than Duff-1 by DCR and F-1 from Fitch or, if not rated by DCR and Fitch, such
rating by either of such agencies that rates such obligations, or if neither of
such agencies rates such obligations, no less than A-1 by Standard & Poor's and
P-1 by Moody's (PROVIDED, that if only one such rating agency rates such party,
such single rating shall suffice);
(d) commercial paper (having original maturities of not more than 30
days) of any corporation incorporated under the laws of the United States or any
state thereof which on the date of acquisition are rated no less than Duff-1 by
DCR and F-1 from Fitch or, if not rated by DCR and Fitch, such rating by either
of such agencies that rates such obligations, or if neither of such agencies
rates such obligations, no less than A-1 by Standard & Poor's and P-1 by Moody's
(PROVIDED, that if only one such rating agency rates such party, such single
rating shall suffice);
(e) securities of money market funds rated AAm or better by Standard
& Poor's and Aa2 or better by Moody's (PROVIDED, that if only one such rating
agency rates such fund, such single rating shall suffice); and
(f) such other investment grade investments as shall be acceptable to
the Rating Agencies which constitute "financial assets" as defined in
Section 8-102(9) of the Illinois UCC.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EVENT OF SERVICING TERMINATION" has the meaning specified in Section
4.11.
"EXPECTED FINAL DISTRIBUTION DATE" means the March 20, 2002
Distribution Date.
"FITCH" means Fitch Investors Service, L.P., a nationally recognized
statistical rating organization, and any successor thereto.
"GAAP" means generally accepted accounting principles as in effect in
the United States, consistently applied, as of the date of such application.
"GOVERNMENTAL AUTHORITY" means the United States of America, any
state, local or other political subdivision thereof and any entity exercising
executive, legislative, judicial,
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regulatory or administrative functions thereof or pertaining thereto.
"INDEPENDENT PUBLIC ACCOUNTANT" means any of (a) Arthur Andersen &
Co., (b) Deloitte & Touche, (c) Coopers & Lybrand, (d) Ernst & Young (e) KPMG
Peat Marwick and (f) Price Waterhouse (and any successors thereof); PROVIDED,
that such firm is independent with respect to the Servicer or any Subservicer,
as the case may be, within the meaning of the Securities Act of 1933, as
amended.
"INITIAL AGGREGATE PRINCIPAL BALANCE OF THE AUTO LOANS" means the
aggregate Principal Balance of the Auto Loans as of the Cut-Off Date,
$35,186,973.33.
"INITIAL CASH RESERVE ACCOUNT DEPOSIT" means $1,407,479 to be
deposited in the Cash Reserve Account on or prior to the Closing Date, which is
equal to approximately 4% of the Initial Aggregate Principal Balance of the Auto
Loans.
"INITIAL CLASS A PRINCIPAL AMOUNT" means $30,612,667.00.
"INITIAL CLASS B PRINCIPAL AMOUNT" means $2,287,153.00.
"INITIAL CLASS C PRINCIPAL AMOUNT" means $2,287,153.00.
"INITIAL PRINCIPAL AMOUNT" means the initial principal amount of the
Certificates authenticated and delivered on the Closing Date which shall be
$35,186,973.00.
"INTENDED TAX CHARACTERIZATION" has the meaning set forth in Section
2.03(b).
"LIQUIDATION PROCEEDS" means, with respect to any Defaulted Auto Loan,
the moneys collected in respect thereof, from whatever source, net of any
amounts required by law to be remitted to the Obligor on such Defaulted Auto
Loan.
"LIST OF AUTO LOANS" means a list containing the Required Information
with respect to each Auto Loan delivered to the Trustee and certified by a duly
authorized officer of the Seller which is attached hereto as Schedule 1.
"MONTHLY INTEREST" means with respect to any Distribution Date, the
sum of (a) the Class A Monthly Interest, (b) the Class B Monthly Interest and
(c) the Class C Monthly Interest; PROVIDED, HOWEVER, that Monthly Interest with
respect to the first Distribution Date following the Closing Date shall be an
amount equal to $391,944.02.
"MONTHLY INVESTOR'S REPORT" has the meaning specified in Section 4.16.
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"MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Distribution Date, an amount equal to the sum of the following amounts, without
duplication, with respect to the immediately preceding Due Period, (a) with
respect to Precomputed Auto Loans, the principal component of all scheduled
payments received with respect to such Auto Loans; (b) with respect to Simple
Interest Auto Loans, that portion of all scheduled payments on such Auto Loans
allocable to principal received during such Due Period; (c) the principal
portion of all prepayments in full and partial prepayments received with respect
to any Auto Loans; (d) the Principal Balance of all Auto Loans that became
Defaulted Auto Loans during such Due Period immediately prior to such Auto Loans
becoming Defaulted Auto Loans and (e) to the extent attributable to principal,
the Repurchase Price of each Auto Loan that was purchased by the Seller or by
Eagle Finance during the related Due Period.
"MONTHLY SERVICING FEE" means, with respect to any Distribution Date,
a fee equal to (a) during such time as Eagle Finance is the Servicer, the sum of
(i) the product of (A) 1/12, (B) 3.0% and (C) the Aggregate Principal Balance of
the Auto Loans as of the end of the second Due Period immediately preceding such
Distribution Date (PROVIDED, HOWEVER, that with respect to the fee payable on
the first such Distribution Date, such fee will equal $149,544.64) and
(ii) Reimbursable Servicer Expenses to the extent not previously netted out of
Recoveries by the Servicer and (b) following the appointment of a Successor
Servicer, the amount determined pursuant to Section 4.12(b).
"MOODY'S" means Moody's Investors Service, Inc., a nationally
recognized statistical rating organization, and any successor thereto.
"NET LOSSES" means, with respect to any Due Period, the sum of the
Principal Balance of Auto Loans that became Defaulted Auto Loans during such Due
Period, minus Recoveries received in such Due Period for any Auto Loan that
became a Defaulted Auto Loan during such Due Period or any prior Due Period.
"NET LOSS TRIGGER EVENT" means, for any Distribution Date, as of the
end of the immediately preceding Due Period, cumulative Net Losses expressed as
a percentage of the Initial Aggregate Principal Balance of the Auto Loans exceed
the corresponding percentage of the Initial Aggregate Principal Balance of the
Auto Loans set forth in the table below:
Cumulative Net Losses
(expressed as % of
Initial Aggregate Principal
Due Period Balance of the Auto Loans)
---------- -------------------------
6 6.0%
9 9.0%
12 12.0%
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15 15.0%
18 17.0%
21 18.0%
24 20.0%
"OBLIGOR" means, with respect to any Auto Loan, the Person primarily
obligated to make payments in respect thereto.
"OFFICER'S CERTIFICATE" means, with respect to any Person, a
certificate signed by the Chairman of the Board, Vice Chairman of the Board, the
President, a Vice President, the Treasurer or the Secretary of such Person.
"OPERATIONS MANUAL" means the written policies and procedures of the
Servicer, consistent with the requirements of this Agreement in effect from time
to time formulated by the Servicer as to credit and collection policies, certain
underwriting criteria and certain other servicing matters.
"OPINION OF COUNSEL" means a written opinion of counsel (who may be
counsel to the Seller or the Servicer), which opinion is acceptable to the
Trustee.
"PAYING AGENT" has the meaning set forth in Section 6.04.
"PAYMENTS" means, without duplication, with respect to any Due Period,
(a) all amounts received during such Due Period with respect to the Auto Loans
not required by law to be remitted to the Obligor, including, without
limitation, payments and prepayments collected by the Servicer from Obligors
(other than insufficient funds fees and amounts in excess of outstanding
principal and interest (calculated on the Actuarial Method) on a prepaid
Precomputed Auto Loan, which may be retained by the Servicer) or under any
insurance policy, (b) Recoveries received during such Due Period and (c) the
Repurchase Price of Purchased Auto Loans repurchased during such Due Period.
"PERCENTAGE" means the fractional undivided interest owned by a
particular Certificateholder, expressed as the percentage obtained by dividing
the original principal amount of the related Certificate by the Initial
Principal Amount.
"PERSON" means an individual, partnership, corporation (including a
business trust), joint stock company, limited liability company, trust,
association, joint venture, Governmental Authority or any other entity of
whatever nature.
"PLACEMENT AGREEMENT" means the Placement Agent and Purchase Agreement
dated as of October 24, 1996 executed by Eagle Finance and the Seller and
accepted by Greenwich Capital Markets, Inc.
"POOL FACTOR" means an eight-digit decimal computed as of any
Distribution Date by dividing the aggregate Principal Balance
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of the Auto Loans as of the end of the prior Due Period (after giving effect to
any payments to Certificateholders allocable to principal on such Distribution
Date) by the Initial Aggregate Principal Balance of the Auto Loans.
"PRECOMPUTED AUTO LOAN" means any Auto Loan under which earned
interest (which may be referred to in the Auto Loan as the add-on finance
charge) and principal is determined according to the sum of periodic balances or
the sum of monthly balances or any equivalent method commonly referred to as the
"Rule of 78s."
"PRINCIPAL BALANCE" of an Auto Loan means, as of the end of any Due
Period, the Amount Financed (as such term is used in the related automobile loan
and security agreement pursuant to the Federal Truth-in-Lending Act) minus
without duplication (a) with respect to a Precomputed Auto Loan, the principal
component of all scheduled payments received with respect to such Auto Loan on
or prior to such day as allocated using the Actuarial Method; (b) with respect
to a Simple Interest Auto Loan, that portion of all scheduled payments on such
Auto Loan allocable to principal received on or prior to such day; (c) the
principal portion of all prepayments in full or partial prepayments received
with respect to such Auto Loan on or prior to such day; (d) with respect to an
Auto Loan that became a Defaulted Auto Loan during such Due Period, the
principal component of the outstanding balance of such Auto Loan, and (e) to the
extent attributable to principal, the Repurchase Price of such Purchased Auto
Loan that was repurchased.
"PRIVATE PLACEMENT MEMORANDUM" means the Private Placement Memorandum
dated October 24, 1996 with respect to the placement of the Certificates.
"PURCHASED AUTO LOAN" means an Auto Loan repurchased by the Seller,
Eagle Finance or the Servicer pursuant to Section 3.03.
"QIB" has the meaning specified in Section 6.09(e).
"RATING AGENCY" means any nationally recognized statistical
organization rating the Certificates at the request of the Seller; as of the
date hereof, DCR and Fitch. Any references to the "Rating Agency" shall be
deemed to refer to each Rating Agency if after the date hereof, there is more
than one Rating Agency.
"RECORDS" means all documents, books, records and other information
(including, without limitation, computer programs, tapes, disks, punch cards,
data processing software and related property and rights) prepared and
maintained by the Servicer or by or on behalf of the Seller with respect to Auto
Loans and the related Obligors.
"RECORD DATE" means the last Business Day of the calendar month
preceding the month in which a Distribution Date occurs.
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"RECOVERIES" means, for any Due Period, all amounts received by the
Servicer (other than amounts required by law to be remitted to the related
Obligor) with respect to (a) Liquidation Proceeds (net of Reimbursable Servicer
Expenses) and proceeds of deficiency judgments, (b) proceeds of insurance,
(c) repossession proceeds (net of Reimbursable Servicer Expenses) and (d) the
Repurchase Price of Purchased Auto Loans.
"REIMBURSABLE SERVICER EXPENSES" means, with respect to any
Distribution Date, all reasonable and customary fees and expenses of third
parties incurred by the Servicer in connection with (a) their respective
repossession and remarketing activities hereunder including, without limitation,
fees of attorneys, appraisers, third party collateral managers and others (who
shall have been retained by the Servicer, in accordance with the servicing
standard set forth in Section 4.01) but in no event more than the amount of
Recoveries (prior to netting out Reimbursable Servicer Expenses) on the related
Auto Loan and (b) financing statements and titles.
"RELATED DOCUMENTS" means the Sale Agreement, the Placement Agreement
and all documents and instruments required to be delivered thereunder.
"REPURCHASE PRICE" means for any Due Period, with respect to any Auto
Loan which the Seller, Eagle Finance or the Servicer is obligated to repurchase
in accordance with the provisions of Section 3.03, the sum of (a) the Principal
Balance of such Auto Loan PLUS (b) an amount equal to the amount of interest
accrued on such Principal Balance at the related APR from the last day to which
interest has been paid with respect to such Auto Loan through the last day of
the Due Period preceding the Deposit Date on which such Auto Loan is
repurchased.
"REQUIRED CASH RESERVE AMOUNT" means, on any day, an amount equal to
the lesser of (a) the greater of (i) the product of the Required Reserve
Percentage multiplied by the Aggregate Principal Balance of the Auto Loans
(without giving effect to clause (d) in the definition of Principal Balance)
determined as of the end of the immediately preceding Due Period and
(ii) $703,739 (which is approximately 2% of the Initial Aggregate Principal
Balance of the Auto Loans) and (b) the Aggregate Principal Balance of the Auto
Loans (without giving effect to clause (d) in the definition of Principal
Balance) as of the end of the immediately preceding Due Period.
"REQUIRED INFORMATION" means, with respect to an Auto Loan (a) the
name of the Obligor, (b) the Principal Balance, (c) the maturity date, (d) the
APR and (e) the state of residence of the Obligor.
"REQUIRED RESERVE PERCENTAGE" means:
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(a) for any Distribution Date on which there is not an uncured
Reserve Requirement Event, 9%;
(b) for any Distribution Date as to which a Delinquency Trigger Event
has occurred, the Required Reserve Percentage on such and each succeeding
Distribution Date shall be 11%; PROVIDED, HOWEVER, that, upon the
occurrence of a 60+ Day Delinquency Cure, the Required Reserve Percentage
will return to 9%; PROVIDED, FURTHER, HOWEVER, that if the 60+ Day
Delinquency Rate exceeds 5.5% on any subsequent Distribution Date after
such 60+ Day Delinquency Cure, the Required Reserve Percentage shall remain
at 11% until the Distribution Date on which the Certificates are retired;
and
(c) for any Distribution Date as to which a Net Loss Trigger Event
has occurred, the Required Reserve Percentage on such and each succeeding
Distribution Date shall be 11%. A Net Loss Trigger Event will be deemed to
be continuing until the first Distribution Date following a Cure Period
Testing Month for which the cumulative Net Losses, expressed as a
percentage of the Initial Aggregate Principal Balance of the Auto Loans,
are less than or equal to the corresponding percentage set forth in the
definition of Net Loss Trigger Event, at which time the Required Reserve
Percentage then will return to 9%; PROVIDED, HOWEVER, that if such Net Loss
Trigger Event is not the first Net Loss Trigger Event to occur (I.E., a
previous Net Loss Trigger Event has occurred and has been cured), then the
Required Reserve Percentage shall remain at 11% until the Distribution Date
on which the Certificates are retired.
"RESERVE REQUIREMENT EVENT" means the occurrence of a Delinquency
Trigger Event or a Net Loss Trigger Event.
"RESPONSIBLE OFFICER" shall mean any Vice President, any Assistant
Vice President, any Assistant Secretary, any Assistant Treasurer or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the above-designated officers and also, with respect to a
particular matter, any other officer to whom such matter is referred because of
such officer's knowledge of and familiarity with the particular subject.
"SALE AGREEMENT" means the Loan Sale and Contribution Agreement dated
as of September 1, 1996 by and between Eagle Finance and the Seller, providing
for the sale or contribution of the Auto Loans to the Seller.
"SECURITIES ACT" has the meaning specified in Section 6.09(a)(i).
"SERVICER DUTIES" has the meaning specified in Section 4.04(a).
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"SERVICER REPORT" has the meaning specified in Section 4.15.
"SERVICING OFFICER" means any officer or employee of the Servicer
involved in, or responsible for, the administration and servicing of Auto Loans
whose name appears on a list of servicing officers attached to Officer's
Certificates furnished to the Trustee by the Servicer, as such lists may be
amended from time to time.
"SIMPLE INTEREST AUTO LOAN" means any Auto Loan under which the
portion of a payment allocable to interest and the portion allocable to
principal is determined in accordance with the Simple Interest Method.
"SIMPLE INTEREST METHOD" means the method of allocating fixed level
monthly payments on an Auto Loan between interest and principal whereby the
amount allocable to interest is equal to daily interest on the Principal Balance
thereof at the stated APR for the actual number of days elapsed since the
preceding payment was made, which is computed on the basis of either 360 days or
365 days as required by applicable state law, and by application of amounts
received first to any charges or fees due under the Auto Loan and then to
interest accrued on a daily basis and then to principal.
"60+ DAY DELINQUENCY CURE" means the third consecutive Distribution
Date following the occurrence of a Delinquency Trigger Event that the 60+ Day
Delinquency Rate equals or drops below 5.5%.
"60+ DAY DELINQUENCY RATE" means, for any Distribution Date, the ratio
(expressed as a percentage) of the Aggregate Principal Balance of Auto Loans
that are 60 or more days delinquent (excluding Auto Loans relating to
repossessed Automobiles) as of the end of the immediately preceding Due Period
to the Aggregate Principal Balance of Auto Loans as of the end of such Due
Period (excluding Auto Loans relating to repossessed Automobiles).
"STANDARD & POOR'S" means Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies Inc., a nationally recognized statistical
rating organization, and any successor thereto.
"SUBSERVICER" means any Person with whom the Servicer enters into a
Subservicing Agreement.
"SUBSERVICING AGREEMENT" means any written contract between the
Servicer and any Subservicer, relating to servicing and collection of Auto
Loans.
"SUBSIDIARY" means, as to any Person, any corporation or other entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the Board of
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Directors or other Persons performing similar functions are at the time directly
or indirectly owned by such Person.
"SUCCESSOR SERVICER" has the meaning specified in Section 4.12(a).
"TAX" or "TAXES" shall mean all taxes, charges, fees, levies or other
assessments, including, without limitation, income, gross receipts, profits,
withholding, excise, property, sales, use, occupation and franchise taxes
(including, in each such case, any interest, penalties or additions attributable
to or imposed on or with respect to any such taxes, charges, fees or other
assessments) imposed by the United States, any state or political subdivision
thereof, any foreign government or any other jurisdiction or taxing authority.
"TITLE DOCUMENT" means, with respect to any Auto Loan and the related
Automobile, either (a) the certificate of title for, or other evidence of a
security interest in (including, without limitation, proof of application for
notice of lien), such Automobile or (b) with respect to any jurisdiction in
which the certificate of title or other evidence of ownership is not issued to
the holder of a lien, evidence of the security interest in the Automobile, in
each case issued by the department of motor vehicles or other appropriate
Governmental Authority in the jurisdiction in which such Automobile or the
Obligor is located.
"TRANSFERRED ASSETS" means the Auto Loans (including any Auto Loans in
replacement of a prior Auto Loan written pursuant to Section 4.04(c)), all
rights of the Seller under the Sale Agreement, all monies due or to become due
and all amounts received with respect thereto and all proceeds thereof.
"TRIGGER EVENT" means, with respect to any Distribution Date, one or
more of the following occurs: (a) a Delinquency Trigger Event or (b) a Net Loss
Trigger Event.
"TRUST" has the meaning ascribed thereto in the recitals to this
Agreement.
"TRUST ASSETS" has the meaning specified in Section 2.01.
"TRUST OPERATING EXPENSES" means, with respect to each Distribution
Date, the amounts payable under Section 7.04(a)(i) on such date in respect of
the immediately preceding Due Period.
"TRUST TERMINATION DATE" has the meaning specified in Section 10.01.
"TRUSTEE" means Harris Trust and Savings Bank, its successors and
permitted assigns.
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"TRUSTEE FEE" means the fee paid from the Collection Account as of any
Distribution Date equal to the greater of (a) the product of (i) 1/12 and
(ii) .0425% of the Aggregate Principal Balance of the Auto Loans as of the end
of the second Due Period immediately preceding such Distribution Date and
(b) $300; PROVIDED, HOWEVER, that with respect to the fee payable on the first
such Distribution Date, such fee will equal $2,118.55.
"UCC" means the Uniform Commercial Code as in effect in the relevant
state.
"U.S. PERSON" means a citizen or resident of the United States, a
corporation or partnership organized in or under the laws of the United States
or any state thereof, or an estate or trust, the income of which is subject to
United States Federal income taxation regardless of its source.
SECTION 1.02. PROVISIONS OF GENERAL APPLICATION. For all purposes of
this Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
(a) All accounting terms not specifically defined herein shall be
construed in accordance with GAAP.
(b) All terms used in Article 9 of the UCC, and not specifically
defined herein, are used herein as defined in such Article 9.
(c) The terms defined in this Article include the plural as well as
the singular.
(d) The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole. All references to Articles
and Sections shall be deemed to refer to Articles and Sections of this
Agreement.
(e) References to statutes are to be construed as including all
statutory provisions consolidating, amending or replacing the statute to which
reference is made and all regulations promulgated pursuant to such statutes.
(f) For purposes of any calculations referred to in this Agreement
(unless otherwise specified), (i) all percentages resulting from such
calculations will be rounded up, if necessary, to the nearest one ten-thousandth
of a percentage point (E.G., 9.87654% (or .0987654) being rounded up to 9.8766%
(or .098766)) and (ii) all Dollar amounts used in or resulting from such
calculations will be rounded up to the nearest cent (E.G., $1,234.373 being
rounded up to $1,234.38).
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ARTICLE II
TRANSFER OF TRUST ASSETS
SECTION 2.01. ESTABLISHMENT OF TRUST; CONVEYANCE OF TRANSFERRED
ASSETS. On the Closing Date, the Seller, with the execution and delivery
hereof, does hereby sell, grant, transfer, assign, set over and otherwise convey
to the Trustee, on behalf of the Trust, for the benefit of the
Certificateholders, without recourse, all right, title and interest of the
Seller in, to and under the Transferred Assets specified herein or therein, as
the case may be. The Eagle Auto Trust 1996-A is thereby and hereby established.
Such property together with all funds on deposit in the Collection Account and
the Trustee's security interest in all funds on deposit in the Cash Reserve
Account shall constitute the assets of the Trust (the "Trust Assets").
SECTION 2.02 ACCEPTANCE BY TRUSTEE AND APPOINTMENT OF THE SERVICER
AS CUSTODIAN. (a) The Trustee hereby acknowledges the conveyance of the
Transferred Assets and the receipt of the Collateral Files and the other
Transferred Assets conveyed by the Seller hereunder and declares that the
Trustee, through the Custodian, will hold such Auto Loans, all other Transferred
Assets conveyed by the Seller and all other Trust Assets in trust, for the use
and benefit of all Certificateholders subject to the terms and provisions
hereof. The Trustee, through such Custodian, may, upon the reasonable written
request of the Servicer, release any such original documents to the Servicer for
the limited purpose, if necessary, of temporarily assisting the Servicer to
conduct collection and other servicing activities or in connection with the
discharge of an Obligor's indebtedness. The Trustee shall not appoint a
Custodian (i) other than itself in respect of any Collateral File or Transferred
Asset unless each such Person shall have entered into an agreement with the
Trustee, for the benefit of the Trust, containing provisions substantially
similar to Sections 2.02(b)-(e) inclusive and 3.03 or (ii) which is Eagle
Finance or any successor thereto.
(b) The Custodian shall hold and acknowledges that it is holding the
Collateral Files that it may from time to time receive hereunder as custodian
for the Trustee. The Custodian shall perform its duties under this Section 2.02
in accordance with the standard set forth in Section 4.01 as such standard
applies to custodial agents.
(c) The Custodian shall promptly report to the Seller and the Trustee
any failure by it to hold the complete Collateral Files as herein provided and
shall promptly take appropriate action to remedy any such failure but only to
the extent (i) any such failure is caused by the acts or omissions of such
Custodian and (ii) such remedial action is otherwise within its capabilities or
control. The Custodian shall have and perform the following powers and duties:
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(A) hold certain Collateral Files on behalf of the Trustee
from time to time for the benefit of the Trust, maintain accurate records
pertaining to each Auto Loan to enable it to comply with the terms and
conditions of this Agreement and maintain a current inventory thereof;
(B) implement policies and procedures in accordance with the
Custodian's normal business practices with respect to the handling and
custody of the Collateral Files so that the integrity and physical
possession of the Collateral Files will be maintained; and
(C) attend to all details in connection with maintaining
custody of the Collateral Files on behalf of the Trustee and the Trust.
(d) In acting as custodian of the Collateral Files, the Custodian
agrees further that it does not and will not have or assert any beneficial
ownership interest in the Auto Loans or the Collateral Files (PROVIDED, HOWEVER,
that the foregoing shall not be deemed to affect the Trustee's right to assert
any interest in the Trust Assets in its capacity as Trustee on behalf of the
Certificateholders). The Servicer shall mark conspicuously its master data
processing records evidencing each Auto Loan with a legend, acceptable to the
Trustee, evidencing that the Trust has purchased the Auto Loans and all right
and title thereto and interest therein as provided herein.
(e) The Custodian agrees to maintain the related Collateral Files at
its office located in 111 West Monroe Street, Chicago, Illinois 60609 or at such
other offices of the Custodian as shall from time to time be identified by prior
written notice to the Trustee. Subject to the foregoing, the Custodian may
temporarily move individual Collateral Files or any portion thereof without
notice as necessary to allow the Servicer to conduct collection and other
servicing activities.
(f) On or before the Closing Date (and promptly in the case of the
Servicer writing a new Auto Loan pursuant to Section 4.04(c)), the Seller shall
deliver or cause to be delivered to the Custodian, and the Custodian shall
certify its receipt of (subject to any listed exceptions specified in the
proviso of this sentence), the Collateral Files; PROVIDED, HOWEVER, that any
original certificate of title or other document under applicable law evidencing
the security interest of Eagle Finance in the Automobile not so delivered on or
before the Closing Date shall be delivered by the Seller to the Custodian within
ninety (90) days after the Closing Date. The failure by the Seller to so
deliver (i) any original certificate of title or other document evidencing the
security interest of Eagle Finance in the Automobile (after giving effect to
such 90 day period) to the Custodian or (ii) any original Auto Loan contract not
so delivered on or before the Closing Date shall be delivered by the Seller to
the Custodian
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within thirty (30) days after the Closing Date shall be deemed to be a breach by
the Seller of its representations and warranties contained in Section 3.02, and
such breach shall give rise to a repurchase obligation pursuant to Section 3.03;
PROVIDED, HOWEVER, that in respect of any Auto Loan for which the Seller has
failed to deliver the original Auto Loan Contract as provided herein, the Seller
may substitute a new Auto Loan which (i) satisfies the representations and
warranties set forth in Section 3.02 and (ii) has an APR and Principal Balance
not less than the APR and Principal Balance of the Auto Loan being replaced by
such new Auto Loan and otherwise has substantially similar characteristics to
such Auto Loan(s).
SECTION 2.03. GRANT OF SECURITY INTEREST; TAX TREATMENT. (a) It is
the intention of the parties hereto that the conveyance by the Seller of the
Transferred Assets to the Trustee on behalf of the Trust on the Closing Date
shall constitute a purchase and sale of such Transferred Assets and not a loan.
In the event, however, that a court of competent jurisdiction were to hold that
the transaction evidenced hereby constitutes a loan and not a purchase and sale,
it is the intention of the parties hereto that this Agreement shall constitute a
security agreement under applicable law, and that the Seller shall be deemed to
have granted to the Trustee, on behalf of the Trust, a first priority perfected
security interest in all of the Seller's right, title and interest in, to and
under the Transferred Assets and the other Trust Assets. The conveyance by the
Seller of the Transferred Assets to the Trustee on behalf of the Trust on the
Closing Date shall not constitute and is not intended to result in an assumption
by the Trustee, the Servicer or any Certificateholder of any obligation of the
Seller to the Obligors or any other Person in connection with the Transferred
Assets.
(b) It is the intention of the Seller that, with respect to all
Taxes, the Trust will be classified as a grantor trust and not as an association
taxable as a corporation or as a partnership (the "Intended Tax
Characterization"). The Seller and the Trustee, by entering into this
Agreement, and each Certificateholder, by the purchase of a Certificate, agree
to report such transactions for purposes of all Taxes in a manner consistent
with the Intended Tax Characterization.
(c) The Seller shall take no action inconsistent with the Trust's
ownership of the Transferred Assets and shall indicate or shall cause to be
indicated in its records and records held on its behalf that ownership of each
Auto Loan and the other Transferred Assets is held by the Trustee on behalf of
the Trust. In addition, the Seller shall respond to any inquiries from third
parties with respect to ownership of an Auto Loan or any other Transferred Asset
by stating that it is not the owner of such Auto Loan and that ownership of such
Auto Loan or other Transferred Asset is held by the Trustee on behalf of the
Trust.
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SECTION 2.04. FURTHER ACTION EVIDENCING ASSIGNMENTS. (a) The Seller
agrees that, from time to time, at its expense, it will promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary (notice of such actions which shall be given by the Seller in
writing to the Trustee at least 30 days prior to the occurrence of any of the
foregoing, unless it shall be in the best interest of the Certificateholders for
such action to be taken sooner than such 30 day period, in which case the Seller
will provide such notice as promptly as possible), appropriate or required, or
that the Servicer or the Trustee may reasonably request, in order to perfect,
protect or more fully evidence the transfer of ownership of the Transferred
Assets or to enable the Trustee to exercise or enforce any of its rights
hereunder. Without limiting the generality of the foregoing, the Seller will,
upon the request of the Servicer on its behalf or on behalf of the Trustee,
execute and file (or cause to be executed and filed) such financing or
continuation statements, or amendments thereto or assignments thereof, and such
other instruments or notices, as may be necessary or appropriate, including,
without limitation, recording and filing UCC-1 financing statements, amendments
or continuation statements with the office of the Secretary of State of the
state of the location of the chief executive office of the Seller (and other
locations): (i) on or prior to the Closing Date; and (ii) not more than ten
Business Days after the effective date of any change of the name, identity or
structure or relocation of its chief executive office or any change that would
make any UCC-1 or continuation statement previously filed pursuant to this
Agreement seriously misleading within the meaning of applicable provisions of
the UCC.
(b) The Seller hereby grants to the Servicer and the Trustee a power
of attorney to execute all documents on behalf of the Seller as may be necessary
or desirable to effectuate the foregoing.
(c) The Servicer agrees to take all necessary reasonable actions to
maintain the first priority security interest (as such term is defined in the
UCC) of the Trustee on behalf of the Trust in the Transferred Assets.
ARTICLE III
REPRESENTATIONS AND WARRANTIES; COVENANTS
SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The
Seller represents and warrants on the Closing Date, to the Servicer, the Trust
and the Trustee, as follows:
(a) The Seller is a corporation duly organized, validly existing and
in good standing under the laws of the state of Delaware and is duly qualified
to do business, and is in good
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standing in each jurisdiction in which the nature of its business requires it
to be so qualified and which permits such qualification;
(b) The Seller has the power and authority to own and convey all of
its properties and to execute and deliver this Agreement and the Related
Documents and to perform the transactions contemplated hereby and thereby;
(c) The Seller is operated in such a manner that it would not be
substantively consolidated in the bankruptcy trust estate of any Affiliate, such
that the separate existence of the Seller and any Affiliate would be
disregarded; and to such end:
(i) the Seller maintains separate records, books of account
and financial statements from those of Eagle Finance and each other
affiliate of Eagle Finance;
(ii) the Seller does not commingle any of its assets or
funds with those of Eagle Finance or any of the other Affiliates of Eagle
Finance;
(iii) the Seller maintains a separate board of directors with
at least one independent director and observes all separate corporate
formalities, and all decisions with respect to the Seller's business and
daily operations have been and shall be independently made by the officers
of the Seller pursuant to resolutions of its board of directors;
(iv) other than contributions of capital, payment of
dividends and return of capital, no transactions have been entered into
between the Seller and Eagle Finance or between the Seller and any of the
other Affiliates of Eagle Finance except a lease and expense allocation
agreement and a tax sharing agreement between the Seller and Eagle Finance
and such other transactions as are contemplated by this Agreement and the
Related Documents;
(v) except for such administration and collection functions
as Eagle Finance may perform on behalf of the Seller and the Trust pursuant
to this Agreement and the Related Documents, the Seller acts solely in its
own name and through its own authorized officers and agents and the Seller
does not act as agent of Eagle Finance or any other Person in any capacity;
(vi) except for any funds received from Eagle Finance as a
capital contribution, the Seller shall not accept for its own account funds
from Eagle Finance or any of the other Affiliates of Eagle Finance; and the
Seller shall not allow Eagle Finance or any of the other Affiliates of
Eagle Finance otherwise to supply funds to, or guarantee any obligation of,
the Seller;
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(vii) the Seller shall not guarantee, or otherwise become
liable with respect to, any obligation of Eagle Finance or any of the other
Affiliates of Eagle Finance; and
(viii) the Seller shall at all times hold itself out to the
public under the Seller's own name as a legal entity separate and distinct
from Eagle Finance and the other Affiliates of Eagle Finance.
(d) The Seller has not engaged, and does not presently engage and
shall not engage, in any activity other than the activities undertaken pursuant
to this Agreement and the Related Documents and contemplated hereby and thereby
and activities ancillary or incident thereto;
(e) The Seller has not entered into any agreement or arrangement
(i) pursuant to which it grants rights in any of the Trust Assets to any Person
and (ii) which does not include a provision in form and substance similar to
Section 10.10;
(f) The execution, delivery and performance by the Seller of this
Agreement, the Related Documents and the transactions contemplated hereby and
thereby, (i) have been duly authorized by all necessary corporate or other
action on the part of the Seller, (ii) do not contravene or cause the Seller to
be in default under (A) the Seller's certificate of incorporation or by-laws,
(B) any contractual restriction contained in any indenture, loan or credit
agreement, lease, mortgage, security agreement, bond, note or other agreement or
instrument binding on or affecting the Seller or its property, (C) any law,
rule, regulation, order, writ, judgment, award, injunction or decree applicable
to, binding on or affecting the Seller or its property and (iii) do not result
in or require the creation of any Adverse Claim upon or with respect to any of
the property of the Seller;
(g) This Agreement and the Related Documents have each been duly
executed and delivered on behalf of the Seller;
(h) No consent of, or other action by, and no notice to or filing
with, any Governmental Authority or any other party, is required for the due
execution, delivery and performance by the Seller of this Agreement or any of
the Related Documents or for the perfection of or the exercise by the Trustee of
any of its rights or remedies thereunder which have not been obtained;
(i) Each of this Agreement, and each other Related Document is the
legal, valid and binding obligation of the Seller enforceable against the Seller
in accordance with its respective terms, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, receivership, moratorium or
other laws relating to or affecting the rights of creditors generally, and by
general principles of equity (regardless of whether such enforcement is
consideration in a proceeding in law or in equity);
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(j) There is no pending or threatened action, suit or proceeding, nor
any injunction, writ, restraining order or other order of any nature against or
affecting the Seller, its officers or directors, or the property of the Seller,
in any court or tribunal, or before any arbitrator of any kind or before or by
any Governmental Authority (i) asserting the invalidity of this Agreement or any
of the Related Documents, (ii) seeking to prevent the sale and assignment of any
Auto Loan or the consummation of any of the transactions contemplated thereby,
(iii) seeking any determination or ruling that might materially and adversely
affect (A) the performance by the Seller of this Agreement or any of the Related
Documents, (B) the validity or enforceability of this Agreement or any of the
Related Documents, (C) any Auto Loan, (D) the federal income tax attributes of
the Certificates, or (iv) asserting a claim for payment of money adverse to the
Seller or the conduct of its business or which is inconsistent with the due
consummation of the transactions contemplated by this Agreement or any of the
Related Documents;
(k) The principal place of business and chief executive office of the
Seller are located at the address indicated in Section 10.04 and there are not
now, and there have not been any, other locations where the Seller is located
(as that term is used in the UCC) or keeps Records except after the date of this
Agreement, as disclosed in writing to the Trustee and the Servicer;
(l) The legal name of the Seller is as set forth in the beginning of
this Agreement and the Seller has not changed its name since its formation, and
during such period, the Seller did not use, nor does the Seller now use any
tradenames, fictitious names, assumed names or "doing business as" names;
(m) The Seller does not have any Subsidiaries;
(n) The Seller shall treat the purchase and contribution of the Trust
Assets under the Sale Agreement as a sale and/or capital contribution for tax,
reporting and accounting purposes.
(o) The Seller is solvent and will not become insolvent after giving
effect to the transactions contemplated by this Agreement and each of the
Related Documents; the Seller has no Debt; the Seller's transfers of Transferred
Assets to the Trust have been and will be made for reasonably equivalent value
and fair consideration; and the Seller, after giving effect to the transactions
contemplated by this Agreement and each of the Related Documents, will have an
adequate amount of capital to conduct its business in the foreseeable future;
and
(p) The Seller has complied in all material respects with all
applicable laws, rules, regulations and orders with respect to it, its business
and properties and all of the Transferred Assets.
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SECTION 3.02. REPRESENTATIONS AND WARRANTIES AS TO EACH AUTO LOAN AND
THE OTHER TRANSFERRED ASSETS. (a) The Seller represents and warrants, as to
each (unless otherwise noted) Auto Loan, that, as of the Closing Date (unless
otherwise noted):
(i) With respect to the Obligors, at the time the Auto Loan
was entered into (A) his or her monthly income was no less than $1,200 for
individual Obligors, $1,800 for joint Obligors of an Auto Loan originated
in Eagle Finance's Florida regional centers, and $2,000 for joint Obligors
of other Auto Loans; (B) the Obligor was employed in his or her current
job, and had resided in his or her current residence, for at least one year
and (C) the percentage of an Obligor's gross income that the monthly
payment on the Auto Loan represents is less than 25%; PROVIDED, HOWEVER,
that such representations and warranties in each case shall not be deemed
to be breached unless more than the following percentages of Auto Loans (by
number of Auto Loans in the Trust as of the Closing Date) do not meet the
foregoing criteria: in respect of clause (A), with respect to the $1,200
for individual Obligors, 4.16%; clause (B), 2.11%; and clause (C), 6.60%;
(ii) the Required Information in respect of such Auto Loan
on the List of Auto Loans attached hereto as Schedule 1 is true and correct
in all material respects as of the date of delivery thereof, and no
selection procedures adverse to the Certificateholders have been utilized
in selecting the Auto Loan;
(iii) such Auto Loan (A) provides for level monthly payments
(provided that the payment in the first or last months in the life of the
Auto Loan may be different from the level payment if such Auto Loan is a
Simple Interest Auto Loan) that fully amortize the Amount Financed over an
original term of no greater than 60 months (prior to any extensions being
granted), and (B) is subject to an insurance requirement against the risks
of fire, theft and collision with a loss payable endorsement in favor of
Eagle Finance and had such insurance at origination, which security
interest and insurance are assignable and have been so assigned to the
Trust, and an agreement to provide accidental physical damage insurance
which identifies the vehicle insured, insurance agent, insurance company
and contains a Dealer confirmation executed by the Dealer and contains an
acknowledgement that such Obligor's installment contract requires that the
Automobile be continuously covered with insurance;
(iv) such Auto Loan has not been satisfied, subordinated or
rescinded; and no provision of the Auto Loan has been waived, altered or
modified in any respect, except by instruments or documents identified in
the Collateral File;
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(v) such Auto Loan is not and will not be subject to any
right of rescission, set-off, recoupment, counterclaim or defense, whether
arising out of transactions concerning the Auto Loan or otherwise and no
such right has been asserted with respect thereto;
(vi) it is the intention of the Seller that the transfer and
assignment of the Auto Loans from the Seller to the Trust herein
contemplated be treated as an absolute sale for financial accounting
purposes, and that the beneficial interest in and title to the Auto Loans
not be part of the property of the Seller for any purpose under state or
federal law. No Auto Loan has been sold, transferred, assigned or pledged
by the Seller to any Person other than the Trustee. Immediately prior to
the transfer and assignment herein contemplated, the Seller had good and
marketable title to each Auto Loan free and clear of all Adverse Claims and
rights of others and, immediately upon the transfer thereof, the Trustee
for the benefit of the Certificateholders will have good and marketable
title to each Auto Loan, free and clear of all Adverse Claims and rights of
others, including liens or claims filed for work, labor or materials
relating to an Automobile that are prior to or equal with the security
interest in such Automobile granted by the related Obligors; and the
transfer from Eagle Finance to the Seller and from the Seller to the Trust
has been validly perfected under the UCC;
(vii) except for payment delinquencies continuing for a
period of not more than 30 days as of the Cut-Off Date, as of the Cut-Off
Date there is no default, breach, violation or event permitting
acceleration under the Auto Loan, and no event has occurred which, with
notice and the expiration of any grace or cure period or both, would
constitute a default, breach, violation or event permitting acceleration
under such Auto Loan and neither Eagle Finance nor the Seller has waived
any of the foregoing;
(viii) such Auto Loan constitutes the legal, valid and binding
obligation of the Obligor thereunder enforceable against the Obligor in
accordance with its terms (except as may be limited by laws affecting
creditors' rights in similar transactions generally) and the documents
evidencing each Auto Loan contain enforceable provisions such as to render
the rights and remedies of the holder thereof adequate for the realization
against the collateral for the benefit of the security afforded thereby;
(ix) Eagle Finance has conducted each of the procedures and
received the documents set forth in the Operations Manual to evaluate the
Obligor's application in accordance with the Operations Manual and
applicable law and, to the extent consistent with such terms, in the same
manner and with the same care, skill, prudence and diligence with
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which it conducts such investigations with respect to similar auto loans
and obligors for other portfolios or its own account, giving due
consideration to customary and usual standards of prudent auto loan
originators;
(x) the contractual documents provided to the Custodian
constitute the only originals of the entire agreement with respect to such
Auto Loan between the Obligor and the related Dealer;
(xi) to the best of Seller's knowledge the down payment
described in Eagle Finance's credit files was paid to the related Dealer in
the manner stated in such files;
(xii) to the best of Seller's knowledge the Automobile
purchased by the Obligor pursuant to each Auto Loan has been delivered to
and accepted by the Obligor;
(xiii) each Auto Loan is denominated in and payable in
Dollars;
(xiv) all parties to each Auto Loan had the capacity to
execute such Auto Loan and legally bind the named Obligors and all
signatures thereon are authentic;
(xv) each Auto Loan was originated by the related Dealer in
the ordinary course of its business pursuant to standard terms of loan
documentation provided by Eagle Finance or otherwise has been reviewed by
and acceptable to Eagle Finance;
(xvi) other than with respect to 2.8% of the Auto Loans,
there is a Dealer Agreement in place between Eagle Finance and the Dealer
selling the Automobile purchased pursuant to the Auto Loan whereby the
Dealer warrants title to the Automobile and indemnifies Eagle Finance
against the unenforceability of the Auto Loan, and Eagle Finance's rights
thereunder, with regard to the Auto Loan sold hereunder, have been validly
assigned to and are enforceable against the Dealer by the Seller and then
to the Trust, along with any other rights of recourse which Eagle Finance
has against the Dealer, without prejudice to any rights the Seller and the
Trustee on behalf of the Trust may have against Eagle Finance;
(xvii) the Automobile was purchased from a duly licensed
Dealer as to which Eagle Finance has performed an investigation in
accordance with the Operations Manual and with the same care, skill,
prudence and diligence with which it conducts such investigations with
respect to dealers originating similar auto loans with similar obligors for
its own account;
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(xviii) the Auto Loan was sold to Eagle Finance and by Eagle
Finance to the Seller without any conduct constituting fraud or
misrepresentation on the part of Eagle Finance, and Eagle Finance has no
knowledge of any fact which should have led it to expect at the time of
sale of such Auto Loan that the Auto Loan would not be paid in full when
due;
(xix) the Auto Loan was not originated in and is not subject
to the laws of any jurisdiction, the laws of which would make the transfer
of the Auto Loan to the Seller or the Trustee unlawful or voidable;
(xx) the Sale Agreement and this Agreement each constitute a
valid transfer, assignment, set-over and conveyance to the Seller and the
Trustee on behalf of the Trust, respectively, of all right, title and
interest of Eagle Finance and the Seller, respectively, in and to the Auto
Loan sold thereunder;
(xxi) such Auto Loan and the sale of each Automobile
(A) complied at the time it was originated or made, and complies at the
Closing Date, as the case may be, in all material respects with all
requirements of applicable federal, state and local laws and regulations
thereunder, including, without limitation, usury laws, licensing laws, the
Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair
Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal
Trade Commission Act, the Magnuson-Moss Warranty Act, the Federal Reserve
Board's Regulations B and Z, State adaptations of the National Consumer Act
and of the Uniform Consumer Credit Code, and other consumer credit laws and
equal credit opportunity and disclosure laws and (B) does not contravene
any applicable contracts to which Eagle Finance is a party and no party to
such contract is in violation of any applicable law, rule or regulation
which is material to such Auto Loan or sale of the Automobile and (C) does
not impose any liability or obligation of the Dealer or Eagle Finance or
the Seller on the Trust with respect to such Auto Loan;
(xxii) as of the Cut-Off Date, the Seller has no knowledge of
any specific facts regarding any particular Auto Loan indicating that such
Auto Loan would not be paid in full. To the best of Seller's knowledge, as
of the Cut-Off Date based upon the procedures performed in the Operations
Manual and reasonable inquiry, there are no proceedings or investigations
pending or threatened before any Governmental Authority (1) asserting the
invalidity of any Auto Loan, (2) asserting the bankruptcy or insolvency of
the related Obligor, (3) seeking the payment of such Auto Loan or
(4) except as specifically disclosed in the Private Placement Memorandum,
seeking any determination or ruling that might
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materially and adversely affect the validity or enforceability of such Auto
Loan;
(xxiii) none of the Obligors on the Auto Loans is the United
States of America or any State or local government or any agency,
department or instrumentality of the United States of America or any State
or local governments;
(xxiv) each Auto Loan (A) is secured by a valid perfected
first priority perfected security interest in the related Automobile;
(B) immediately prior to the assignment and transfer thereof, Eagle Finance
held such security interest in the Automobile; (C) Eagle Finance has caused
each certificate of title (or copy of an application for title), or such
other document delivered by the state title registration agency evidencing
the security interest in each Automobile, to be delivered to the Custodian
pursuant to Section 2.02; and (D) upon the transfer of the Auto Loans to
each of them, the Seller and thereafter the Trust is the holder of such
first priority perfected security interest.
(xxv) Eagle Finance has duly fulfilled all obligations on its
part to be fulfilled under or in connection with each Auto Loan and has
done nothing to impair the rights of the Seller in such Auto Loan or the
proceeds with respect thereto, including, without limitation, paid in full
all taxes and other charges payable in connection with such Auto Loan and
the transfer of such Auto Loan to the Seller, which could impair or become
a lien prior to, Seller's interest in such Auto Loan;
(xxvi) there is only one original executed copy of each Auto
Loan;
(xxvii) each Auto Loan constitutes "chattel paper" under the
UCC;
(xxviii) as of the Cut-Off Date, Obligors on the Auto Loans
reside in one of the following 38 states: Alabama, Arizona, Arkansas,
California, Colorado, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana,
Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan,
Minnesota, Mississippi, Missouri, Nevada, New Jersey, New Mexico, New York,
North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, South Dakota,
Tennessee, Utah, Vermont, Virginia, West Virginia, Wisconsin and Wyoming,
of which Illinois accounted for approximately 31.0%, Georgia accounted for
approximately 22.4%, Florida accounted for approximately 20.0% and South
Carolina accounted for approximately 12.6% by Aggregate Principal Balances
of the Auto Loans;
(xxix) the full principal amount of each Auto Loan has been
advanced to each Obligor or advanced in accordance with
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the directions of each such Obligor, and there is no requirement for future
advances thereunder. The Obligor with respect to each Auto Loan does not
have any options under such Auto Loan to borrow from any person additional
funds secured by the Automobile;
(xxx) to the best of the Seller's knowledge, each Automobile
is in good repair and working order;
(xxxi) no Auto Loan has a Principal Balance which includes
capitalized interest, physical damage insurance (forced placed or
otherwise) or late charges;
(xxxii) each Auto Loan is being serviced by the Servicer;
(xxxiii) for each Auto Loan certain underwriting criteria were
observed, subject to specified exceptions, with respect to the Auto Loans,
and each Auto Loan is either eligible under the Operations Manual or an
exception to the guidelines of the Operations Manual has been granted by
Eagle Finance; PROVIDED, HOWEVER, that in the event an Obligor defaults in
making its first payment such representation will conclusively be deemed to
have been breached;
(xxxiv) each Dealer has complied with the terms of the Auto
Loans and the representations and warranties set forth therein are
accurate; and
(xxxv) Auto Loans contracts originated in the states Florida,
Georgia, Illinois and South Carolina are substantially in the form of the
Auto Loan contracts for such state attached to the Officer's Certificate of
the Seller dated the Closing Date.
(b) With respect to each Auto Loan sold to the Seller pursuant to the
Sale Agreement, a true and complete copy of which has been delivered to the
Trustee, Eagle Finance made the foregoing representations and warranties. The
Seller hereby assigns to the Trustee on behalf of the Trust its rights under the
Sale Agreement to cause Eagle Finance to repurchase an Auto Loan as to which
there has occurred an uncured breach of a representation or warranty in respect
of the representations and warranties set forth in the Sale Agreement. The
Trustee hereby acknowledges such assignment.
(c) The Seller hereby certifies that the representations and
warranties described in this Section 3.02 shall survive the sale of the Auto
Loans to the Trust.
SECTION 3.03. REPURCHASES AND PURCHASES. (a) Upon discovery by any
of the Seller, Eagle Finance or the Servicer, or actual knowledge of a
Responsible Officer of the Trustee, of (i) a breach of any of the
representations and warranties set forth in
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Sections 3.01 and 3.02(a), without regard to any limitation set forth in such
representation or warranty concerning the knowledge of the Seller or Eagle
Finance as to the facts stated therein, which materially and adversely affects
the interests of the Trust in any Auto Loan, (ii) a failure to make any filing
referred to in Section 2.04, which materially and adversely affects the interest
of the Certificateholders in any Auto Loan or which results in a loss, or
(iii) the failure of the Servicer to take any action required by
Section 2.04(c), which materially and adversely affects the interest of the
Certificateholders in any Auto Loan or which results in a loss or (iv) a
modification to an Auto Loan not permitted by Section 4.04(c) by the Servicer,
the party discovering such breach shall give prompt written notice to the
others. If, on the Deposit Date in the month following the expiration of a 60
day period since the date of such notice referred to in the immediately
preceding sentence, such breach or failure shall remain uncured, the Auto Loan
as to which the breach or failure relates shall be repurchased or purchased for
the Repurchase Price as follows:
(i) in respect of matters set forth in Sections 2.04, 3.01,
and 3.02(a), by the Seller;
(ii) in respect of the matters set forth in Section 3.02(b),
the Trustee shall enforce, to the extent necessary to effectuate the
provisions of this Section 3.03, the Trust's right to effect a repurchase
of such Auto Loan against Eagle Finance;
(iii) in respect of any Auto Loan modified other than in
conformity with Section 4.04(c), by the Servicer; and
(iv) in respect of the failure by the Servicer to take any
action required by Section 2.04(c), which materially and adversely affects
the interests of the Certificateholders in any Auto Loan or which results
in a loss.
(b) Upon receipt by the Trustee of written certification of the
Servicer to the effect that the Repurchase Price has been deposited in the
Collection Account, the Trustee on behalf of the Trust shall order the Custodian
to release such Auto Loan and the related Collateral File to the Seller, Eagle
Finance or the Servicer, as the case may be, and the Trustee on behalf of the
Trust shall assign to the Seller, Eagle Finance or the Servicer, as the case may
be, in their individual capacities, all of the Trust's and the
Certificateholders' right, title and interest in such purchased or repurchased
Auto Loan, and all property and rights conveyed to the Trustee relating thereto,
without recourse, representation or warranty, except as to the absence of liens,
charges or encumbrances created by or arising as a result of actions or
omissions of the Trustee (other than liens, charges or encumbrances created or
arising out of this Agreement). The Trustee and the Seller shall execute and
deliver to the Seller, Eagle Finance or the Servicer, as the case may be, an
assignment
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substantially in the form of Exhibit A to vest ownership of the repurchased Auto
Loan in such party. The repurchase and purchase obligations pursuant to this
Section 3.03 constitute the sole remedy available to the Trustee, the Servicer
and the Certificateholders for a breach of a representation or warranty or
agreement of the Seller, set forth in Sections 2.04, 3.01 and 3.02; PROVIDED,
that the foregoing limitation shall not be construed to limit in any manner the
right of the Trustee to exercise its rights under Section 6 of the Sale
Agreement in respect of representations and warranties relating to consumer
protection laws. For the purposes of this Agreement, an Auto Loan has not been
"repurchased" or "purchased" by the Seller, Eagle Finance or the Servicer, as
the case may be, pursuant to this Section 3.03 unless the Repurchase Price
therefor has been deposited into the Collection Account.
SECTION 3.04. COVENANTS OF THE SELLER. The Seller hereby
acknowledges and agrees that the following covenants and agreements of the
Seller shall be enforceable by the Trustee at all times until the Trust is
terminated.
(a) The Seller shall not engage in any business or activity other
than in connection with or relating to the purchase of auto loan receivables and
the issuance of rated debt secured by, or certificates of participation in, a
pool of auto loan receivables.
(b) The Seller shall not consolidate or merge with or into any other
entity or convey or transfer its properties and assets substantially as an
entirety to any entity (other than the conveyance of the Auto Loans and other
Trust Assets to the Trust hereunder) unless (A) the entity (if other than the
Seller) formed or surviving such consolidation or merger, or that acquires by
conveyance or transfer the properties and assets of the Seller substantially as
an entirety, shall be organized and existing under the laws of the United States
of America or any State thereof or the District of Columbia, and shall expressly
assume in form satisfactory to each Rating Agency and the Certificateholders,
the performance of every covenant on the part of the Seller to be performed or
observed pursuant to this Agreement and the Sale Agreement, (B) immediately
after giving effect to such transaction, no default or Event of Servicing
Termination under this Agreement shall have occurred and be continuing and
(C) the Seller shall have delivered to each Rating Agency, each
Certificateholder and the Trustee an Officers' Certificate and an opinion of
independent counsel, each stating that such consolidation, merger, conveyance or
transfer comply with this Agreement.
(c) The Seller shall not dissolve or liquidate, in whole or in part,
except (A) as permitted in paragraph (b) above or (B) with the prior written
consent of the Trustee acting upon the prior written confirmation from each
Rating Agency (a copy of which shall be provided to the Trustee and each
Certificateholder by the
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Seller) that such dissolution or liquidation will have no adverse effect on the
rating assigned to the rated Certificates.
(d) The funds and other assets of the Seller shall not be commingled
with those of any other corporation, entity or Person, including, but not
limited to, the parent or Affiliates of the Seller.
(e) The Seller shall not hold itself out as being liable for the
debts of any other party, including, but not limited to, the debts of the parent
or Affiliates of the Seller.
(f) The Seller shall not form, or cause to be formed, or otherwise
have, any subsidiaries.
(g) The Seller shall act solely in its corporate name and through the
duly authorized officers or agents in the conduct of its business, and shall
conduct its business so as not to mislead others as to the identity of the
entity with which they are concerned.
(h) At all times, except in the case of a temporary vacancy, which
shall promptly be filled, the Seller shall have on its board of directors at
least one director who qualifies as an "Independent Director" as such term is
defined in the Seller's Certificate of Incorporation as originally filed with
the Delaware Secretary of State's office.
(i) The Seller shall maintain records and books of account of the
Seller and shall not commingle such records and books of account with the
records and books of account of any Person.
(j) The board of directors of the Seller shall hold appropriate
meetings to authorize all of its corporate actions. Regular meetings of the
board of directors of the Seller shall be held not less frequently than one time
per annum.
(k) Meetings of the shareholders of the Seller shall be held not less
frequently than one time per annum.
(l) The Seller shall not amend, alter, change or repeal any provision
contained in this Section 3.04 without (i) the affirmative vote in favor thereof
of eighty percent (80%) of the then outstanding shares of the Seller entitled to
vote thereon; (ii) the prior written consent of the Trustee and the
Certificateholders; and (iii) the prior written confirmation from each Rating
Agency that the rating on the Certificates will not be impaired.
(m) The Seller shall not, without the affirmative unanimous vote of
the whole board of directors of the Seller (including each director referred to
in subsection (h) above),
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institute any proceedings to adjudicate the Seller a bankrupt or insolvent,
consent to the institution of bankruptcy or insolvency proceedings against the
Seller, file a petition seeking or consenting to reorganization or relief under
any applicable federal or state law relating to bankruptcy, consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Seller or a substantial part of its property or admit
its inability to pay its debts generally as they become due or authorize any of
the foregoing to be done or taken on behalf of the Seller.
(n) The Seller is not and shall not be involved in the day-to-day or
other management of its parent or any of its Affiliates.
(o) Other than the purchase and sale or pledge of assets as provided
in this Agreement and related agreements with respect to this transaction and
other transactions relating to the purchase of auto loan receivables and the
issuance of rated debt or rated certificates of participation, the Seller shall
engage in no other transactions with any of its Affiliates.
(p) Seller shall maintain a separate business office and telephone
number from any of its Affiliates.
(q) Seller's financial statements shall reflect its separate legal
existence from any of its Affiliates.
(r) The Seller will not amend its Certificate of Incorporation in any
respect material to the Certificateholders without the consent of each Rating
Agency.
(s) The Seller shall use separate invoices, stationery and checks.
(t) The Seller shall not suffer or permit the credit or assets of
Eagle Finance to be held out as available for the obligations of the Seller.
(u) The Seller shall enter into transactions with Eagle Finance or
its Affiliates only on commercially reasonable terms.
ARTICLE IV
SERVICING OF TRUST ASSETS
SECTION 4.01. APPOINTMENT OF SERVICER. (a) Eagle Finance agrees to
act as the Servicer and to perform all servicing duties for the benefit of the
Trust and the Certificateholders under this Agreement subject to the terms
hereof.
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(b) The Servicer shall perform its obligations pursuant to this
Agreement on behalf of and for the benefit of the Trust in accordance with the
terms of this Agreement, the respective Auto Loans and applicable law and, to
the extent consistent with such terms, in the same manner in which, and with the
same care, skill, prudence and diligence with which, it services and administers
automobile loans of similar credit quality for other portfolios and its own
portfolio (including the provisions of the Operations Manual during such time as
Eagle Finance is the Servicer), if any, giving due consideration to customary
and usual standards of practice of prudent institutional automobile and loan
servicers and, in each case, taking into account its other obligations
hereunder, but without regard to:
(i) any relationship that the Servicer, any Subservicer or
any Affiliate of the Servicer or any Subservicer may have with the related
Obligor;
(ii) the ownership of any Certificate by the Servicer or any
Affiliate of the Servicer;
(iii) the Servicer's or any Subservicer's right to receive
compensation for its services hereunder or with respect to any particular
transaction; or
(iv) the ownership, or servicing for others, by the Servicer
or any Subservicer, of any other automobile loans or property.
In the event that the Servicer believes that it is unable to comply with the
requirements of this Section 4.01(b) with respect to any particular Auto Loan as
a result of one or more of the factors described in the foregoing clauses (i)
through (iv), it may enter into a Subservicing Agreement pursuant to Section
4.02 pursuant to which a Subservicer shall perform its duties with respect to
such Auto Loan. In such event, so long as such Subservicer performs such duties
on behalf of the Servicer in accordance with the requirements of this Section
4.01, then the Servicer shall be deemed to be in compliance therewith. In
furtherance of the servicing standard set forth above in this Section 4.01(b),
to the extent consistent with the Operations Manual and subject to any express
limitations set forth in this Agreement, the Servicer shall also seek to
maximize the timely and complete recovery of principal and interest on Auto
Loans; PROVIDED, HOWEVER, that nothing herein contained shall be construed as an
express or implied guarantee by the Servicer of the collectibility of the Auto
Loans.
(c) The Servicer is authorized and empowered by the Trustee to
execute and deliver, on behalf of itself, the Trust, the Certificateholders, or
the Trustee or any of them, any and all instruments of satisfaction or
cancellation, or partial or full release or discharge, and all other comparable
instruments, with respect to the Auto Loans or the related Automobiles. Without
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limiting the generality of the foregoing, the Trustee shall, upon the receipt of
a written request of a Servicing Officer, execute and deliver to the Servicer
any limited powers of attorney and other documents prepared by the Servicer and
necessary or appropriate (as certified in such written request) to enable the
Servicer to carry out its servicing duties hereunder (including, without
limitation, certificates of title with respect to the Automobiles), and the
Trustee shall not be held responsible for any negligence by the Servicer in its
use of such limited powers of attorney.
SECTION 4.02. SUBSERVICING AGREEMENTS BETWEEN SERVICER AND
SUBSERVICER. (a) The Servicer may, with the prior written consent of
Certificateholders evidencing a Percentage of not less than 66_% of the
outstanding Certificates, enter into Subservicing Agreements with a Subservicer
for the performance of all or a part of the Servicer Duties. References in this
Agreement to actions taken or to be taken by the Servicer in performance of the
Servicer Duties include actions taken or to be taken by a Subservicer on behalf
of the Servicer. Each Subservicing Agreement will be upon such terms and
conditions as are not inconsistent with this Agreement. The Servicer shall
provide written notice to the Trustee, the Back-up Servicer and each Rating
Agency promptly upon the appointment of any Subservicer. For purposes of this
Agreement, the receipt by the Subservicer of any amount with respect to an Auto
Loan (other than amounts representing servicing compensation or reimbursement or
an advance) shall be treated as the receipt by the Servicer of such amount.
(b) Except as provided in Section 4.02(e), the Servicer shall be
entitled to terminate any Subservicing Agreement that may exist in accordance
with the terms and conditions of such Subservicing Agreement and without any
limitation by virtue of this Agreement.
(c) Notwithstanding any Subservicing Agreement, any of the provisions
of this Agreement relating to agreements or arrangements between the Servicer or
a Subservicer or reference to actions taken through a Subservicer or otherwise,
the Servicer shall remain obligated and liable to the Trustee and the Trust for
the servicing and administering of the Auto Loans in accordance with the
provisions of this Agreement without diminution of such obligation or liability
(including its indemnity of obligations under Section 9.03) by virtue of such
Subservicing Agreements or arrangements or by virtue of indemnification from the
Subservicer or the Servicer and to the same extent and under the same terms and
conditions as if the Servicer alone were servicing and administering the Auto
Loans. The Servicer shall be entitled to enter into any agreement with a
Subservicer for indemnification of the Servicer and nothing contained in this
Agreement shall be deemed to limit or modify such indemnification.
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(d) Any Subservicing Agreement that may be entered into and any other
transaction or services relating to the Auto Loans involving a Subservicer in
its capacity as such and not as an originator shall be deemed to be between the
Subservicer and the Servicer alone and the Trustee and the Certificateholders
shall not be deemed parties thereto and shall have no obligations, duties or
liabilities with respect to the Subservicer.
(e) If the Servicer shall for any reason no longer be the Servicer
hereunder (including by reason of any Event of Servicing Termination), the
Servicer, upon prior written notice to the Seller and the Trustee, shall
thereupon terminate each Subservicing Agreement that may have been entered into
and that is still effective at such time, and the Trustee and the Successor
Servicer shall not be deemed to have assumed any of the Servicer's interest
therein or to have replaced the Servicer as a party to any such Subservicing
Agreement.
SECTION 4.03. REPRESENTATIONS AND WARRANTIES OF THE SERVICER. The
Servicer represents and warrants, as of the date hereof, to the Seller, the
Trust and the Trustee, as follows:
(a) It is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and is duly qualified to do
business, and is in good standing in every jurisdiction in which the nature of
its business requires it to be so qualified the failure of which to so qualify
would have a material adverse effect on the Servicer's ability to service the
Auto Loans and perform its other obligations hereunder, and it is or will be in
compliance with the laws of each state to the extent necessary to ensure the
enforceability of each Auto Loan and the servicing of the Auto Loans under this
Agreement and it or a Subservicer has obtained all necessary licenses with
respect to it required by law to enable it to perform its duties herein;
(b) It has the power and authority to execute, deliver and perform
this Agreement and the transactions contemplated hereby;
(c) The execution, delivery and performance by it (or a Subservicer
on behalf of the Servicer) of this Agreement, and all other agreements,
instruments and documents which may be delivered by it pursuant hereto, and the
transactions contemplated thereby, (i) have been duly authorized by all
necessary corporate or other action, on the part of it, (ii) do not contravene
or cause it to be in default under (A) its charter or by-laws, (B) any
contractual restriction with respect to any of its Debt or contained in any
indenture, loan or credit agreement, lease, mortgage, security agreement, bond,
note or other agreement or instrument binding on or affecting it or its property
or (C) any law, rule, regulation, order, writ, judgment, award, injunction or
decree applicable to or binding on or affecting it or its property and (iii) do
not result
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in or require the creation of any Adverse Claim upon or with respect to any of
its properties;
(d) This Agreement has been duly executed and delivered on its
behalf;
(e) No consent of, or other action by, and no notice to or filing
with, any Governmental Authority or any other party is required for the due
execution, delivery and performance by it (either directly or through a
Subservicer) of this Agreement or any other agreement, document or instrument to
be delivered hereunder;
(f) This Agreement is its legal, valid and binding obligation
enforceable against it in accordance with its terms, except as such enforcement
may be limited by bankruptcy, insolvency, reorganization, receivership,
moratorium or other laws relating to or affecting the rights of creditors
generally, and by general principles of equity (regardless of whether such
enforcement is consideration in a proceeding in law or in equity);
(g) There is no pending or, to the Seller's knowledge, threatened
action, suit or proceeding, nor any injunction, writ, restraining order or other
order of a material nature against or affecting it, its officers or directors,
or its property, in any court or tribunal, or before any arbitrator of any kind
or before or by any Governmental Authority (i) asserting the invalidity of this
Agreement or any document to be delivered by it hereunder or (ii) seeking any
determination or ruling that could reasonably be expected to materially and
adversely affect (A) the performance by it of its obligations under this
Agreement, or (B) the validity or enforceability of this Agreement or any
document to be delivered by it hereunder or (iii) which is inconsistent with the
due consummation by it of the transactions contemplated by this Agreement; and
(h) Its servicing facilities, plant, personnel, records and products
are adequate for the performance of its duties hereunder.
SECTION 4.04. DUTIES AND RESPONSIBILITIES OF THE SERVICER. (a) The
Servicer shall service and make collections on the Auto Loans and otherwise
enforce the rights of the Trust in the Auto Loans and the other Trust Assets, in
conformity with Section 4.01 and as more specifically described in the
Operations Manual (the "Servicer Duties"). The Servicer Duties shall include at
all times:
(i) monitoring and tracking (A) insurance for Auto Loans
having a gross unpaid balance (I.E., principal and unearned interest) of
$10,000 or more and (B) Automobile titles;
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(ii) billing, collection and recording of Payments and
instructing Obligors to send payments to one of the Designated Post Office
Boxes; PROVIDED, that the Servicer shall not make any change in its
instructions to any Obligor regarding payments to be made in respect of the
Auto Loans other than pursuant to Sections 4.04(c) and 4.04(d);
(iii) communicating with and providing billing records to
Obligors;
(iv) depositing of all Payments and other monies received in
respect of the Auto Loans (without offset or deduction) into the Collection
Account in accordance with Section 7.02(b);
(v) subject to Section 4.01(b) and 4.04(b), administering and
enforcing all rights and responsibilities of the holder of the Auto Loans;
(vi) issuance of the reports to the Trustee, the
Certificateholders, Greenwich Capital Markets, Inc. and the Rating Agencies
required by this Agreement;
(vii) subject to Section 4.04(g), enforcement of the Trust's
rights in the Auto Loans, repossession and disposition of Automobiles
following Obligor defaults;
(viii) maintaining such books of account and other records as
will enable the Trustee to determine the status of each Auto Loan; and
(ix) providing the Obligors with any reports required by
applicable law.
(b) The Servicer covenants and agrees to enforce the Sale Agreement
in accordance with its respective terms for the benefit of the Trust and the
Certificateholders on behalf of the Seller as agent for the Trust and may sue to
enforce or collect upon such Sale Agreement as agent for the Trust. If the
Servicer elects to commence a legal proceeding to enforce an Auto Loan in its
own name, the act of commencement shall be deemed to be an automatic assignment
of the Auto Loan by the Trustee to the Servicer for purposes of collection only.
If in any enforcement suit or legal proceeding it is held that the Servicer may
not enforce an Auto Loan on the grounds that it is not a real party in interest
or a holder entitled to enforce the Auto Loan, the Trustee, on behalf of the
Trust, and with the consent of the Servicer, shall take such steps as the
Servicer deems necessary to assign to the Servicer the Auto Loan solely for the
purpose of permitting the Servicer to enforce the Auto Loan. The Trustee, at
the request of an Authorized Officer of the Servicer, shall furnish the Servicer
with any limited powers of attorney or other documents
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prepared by the Servicer necessary or appropriate to enable the Servicer to
carry out such duties.
(c) In accordance with the standard of care in Section 4.01, the
Servicer may grant to the Obligor on any Auto Loan any rebate, refund or
adjustment that the Servicer in good faith believes is required under the Auto
Loan or applicable law in connection with a prepayment in full of the Auto Loan,
and may deduct the amount of any such rebate, refund or adjustment from the
amount otherwise payable by the Servicer into the Collection Account. The
Servicer may not permit any rescission or cancellation of any Auto Loan nor may
it take any action with respect to any Auto Loan which would materially impair
the rights of the Trust or the Certificateholders therein or in the proceeds
thereof; PROVIDED, HOWEVER, that the Servicer may modify any Auto Loan for
credit related reasons related to imminent or actual default, consistent with
the servicing standard in Section 4.01 so long as such modification does not
extend the term of the Auto Loan beyond the Due Period immediately prior to the
Expected Final Distribution Date, and together with other such modifications
considered in the aggregate, does not (i) exceed 4% of the Auto Loans (measured
by the Initial Aggregate Principal Balance of the Auto Loans in the Trust),
(ii) cause the weighted average APR of the Auto Loans to vary more than 0.1% or
(iii) cause the weighted average term to maturity to vary more than one month.
The foregoing 4% limitation does not apply to any one-month extensions the
Servicer may grant one or more times in the exercise of its normal servicing
judgment. Such modifications may take the form of amendments to existing Auto
Loan contracts or the writing of a new Auto Loan contract. The Servicer shall
not make any modification that will adversely affect the treatment of the Trust
as a grantor trust for federal income tax purposes.
(d) The Automobile securing an Auto Loan shall not be released by or
on behalf of the Seller or the Servicer from the security interest granted by
such Auto Loan in whole or in part, except:
(i) when such Auto Loan has been paid in full;
(ii) immediately upon any exchange or substitution of such
Automobile by the Dealer or manufacturer thereof in settlement of claims as
to defects, breach of warranties and similar matters, with an Automobile of
equal or greater collateral value as of the date of such exchange in the
reasonable judgment of the Servicer (subject to all the terms hereof
including the recordation of the Trustee's lien thereon, if applicable); or
(iii) as otherwise contemplated in Section 3.03.
(e) Except as expressly provided herein, the Servicer shall not sell,
assign (by operation of law or otherwise) or
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otherwise dispose of, or create any Adverse Claim upon or with respect to, any
Auto Loan (or any right to income in respect thereof), or any account in which
any Payments are deposited, or assign any right to receive income in respect of
any Auto Loan.
(f) In addition to the other duties specified in this Agreement, the
Servicer Duties shall consist of: (i) delivering to the Trustee for inclusion as
Schedule 1 hereto the List of Auto Loans on the Closing Date; (ii) furnishing
reports on the foregoing matters in a timely manner as reasonably requested by
the Seller or the Trustee; and (iii) determining the occurrence of a Reserve
Requirement Event.
(g) Prior to incurring any Reimbursable Servicer Expense, the
Servicer shall have determined that such costs will maximize the net amount of
Recoveries made thereafter to the Trust. The Servicer may net Reimbursable
Servicer Expenses out of Recoveries required to be deposited in the Collection
Account. In the event Reimbursable Servicer Expenses are incurred by the
Servicer after the date of deposit of related Recoveries or have not been netted
against such Recoveries, such amounts will be included in the Monthly Servicing
Fee in respect of the following Due Period. The Servicer may in its discretion
not force place insurance; however, in the event it decides that doing so is in
the best interest of the Trust, all payments shall be applied first to reduce
the accrued interest or outstanding principal on the Auto Loan (without giving
effect to the addition of the cost of such insurance thereto) to zero and
second, to reimburse the Servicer for the cost of such insurance.
SECTION 4.05. FIDELITY BOND, ERRORS AND OMISSIONS INSURANCE. The
Servicer shall maintain, at its own expense, a blanket fidelity bond and an
errors and omissions insurance policy, with broad coverage with responsible
companies on all officers, employees or other Persons acting on behalf of the
Servicer in any capacity with regard to the Trust Assets to handle funds, money,
documents and papers relating to the Trust Assets in coverage amounts no less
than $1,000,000 (fidelity bond) and $5,000,000 (errors and omissions policy).
Any such fidelity bond and errors and omissions insurance shall protect and
insure the Servicer against losses, including forgery, theft, embezzlement,
fraud, errors and omissions and negligent acts of such Persons and shall be
maintained in a form and amount that would meet the requirements of prudent
institutional auto loan servicers. No provision of this Section 4.05 requiring
such fidelity bond and errors and omissions insurance shall diminish or relieve
the Servicer from its duties and obligations as set forth in this Agreement.
The Servicer shall be deemed to have complied with this provision if one of its
respective Affiliates has such fidelity bond and errors and omissions policy
coverage and, by the terms of such fidelity bond and errors and omissions
policy, the coverage afforded thereunder extends to the Servicer. The Servicer
shall cause each and every Subservicer for it to maintain a policy of insurance
covering
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errors and omissions and a fidelity bond which would meet such requirements.
Upon request of the Trustee, the Servicer shall cause to be delivered to the
Trustee a certification evidencing coverage under such fidelity bond and
insurance policy. Any such fidelity bond or insurance policy shall not be
cancelled or modified in a materially adverse manner without ten days prior
written notice to the Trustee, the Back-up Servicer and each Rating Agency.
SECTION 4.06. INSPECTION. (a) At all times during the term hereof,
the Servicer shall afford the Trustee and its authorized agents, upon reasonable
notice, reasonable access (subject to the security rules and regulations of the
Servicer) during normal business hours to its records relating to the Auto Loans
and the other Trust Assets conveyed pursuant to Section 2.01 and Section 2.04
and will cause its personnel to assist in any examination of such records by the
Trustee; PROVIDED, that the foregoing shall not require the Trustee to conduct
any inspection. The examination referred to in this Section 4.06 will be
conducted in a manner which does not unreasonably interfere with the Servicer's
normal operations or customer or employee relations or require the Servicer to
disclose or expose confidential information related to its services to their
other clients. Without otherwise limiting the scope of the examination, the
Trustee may, using generally accepted auditing standards, verify the status of
each Auto Loan and review the Computer Tape and records relating thereto for
conformity to reports prepared pursuant to Section 4.15 and compliance with the
standards represented to exist as to each Auto Loan in this Agreement.
(b) All information obtained by the Servicer regarding the Obligors
and the Auto Loans, whether upon exercise of its rights under this Section 4.06
or otherwise, shall be maintained by the Servicer in confidence and shall not be
disclosed to any other Person, except as otherwise required by applicable law or
regulation.
SECTION 4.07. TRUSTEE TO COOPERATE. Upon payment in full on any Auto
Loan, the Servicer shall notify the Trustee in writing on the next succeeding
Deposit Date (which notification shall include a statement to the effect that
all amounts received in connection with such payment in full which are required
to be deposited in the Collection Account pursuant to Section 7.02(b) have been
so deposited), and (to the extent not held by the Servicer or Custodian) shall
request delivery of any documents relating to the Auto Loan or in the Collateral
Files to the Servicer. Upon receipt of such request, the Trustee shall promptly
release or cause to be released such Auto Loan and the related Collateral File
if appropriate to the Servicer by executing a release and assignment in the form
of Exhibit B hereto, which assignment shall be without recourse to the Trustee
(except as to the absence of liens, charges or encumbrances created by or
arising as a result of actions taken or omitted by the Trustee other than
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those created by or arising from this Agreement). Upon receipt of such Auto
Loan and Collateral File, the Servicer shall be authorized to execute an
instrument in satisfaction of such Auto Loan and to take such other actions and
execute such other documents as it deems necessary to discharge the Obligor
thereunder and eliminate the security interest in the Automobile related
thereto. The Servicer shall determine when an Auto Loan has been paid in full.
Upon request of a Servicing Officer, the Trustee shall perform such other acts
as reasonably requested by the Servicer and otherwise cooperate with the
Servicer in enforcement of the Certificateholders' rights and remedies with
respect to the Auto Loans and the Assignments.
SECTION 4.08. SERVICING COMPENSATION; BACK-UP SERVICING FEE;
SERVICING EXPENSES. (a) The Servicer shall be paid the Monthly Servicing Fee in
accordance with the provisions of Section 7.04(a). No later than ten Business
Days prior to the next Distribution Date, the Servicer shall provide the Trustee
with a list of items eligible for reimbursement under the Monthly Servicing Fee,
in such reasonable detail as the Trustee may request, together with its
certification by a Servicing Officer that all such items are eligible for
inclusion within the Monthly Servicing Fee. The Trustee may conclusively rely
on such certification without independent investigation of the matters set forth
therein. The Servicer may also retain insufficient funds fees collected from
Obligors and amounts in excess of outstanding principal and interest (calculated
on the Actuarial Method) on a prepaid Precomputed Auto Loan. Except to the
extent of Reimbursable Servicer Expenses netted out of Recoveries or allowable
under the Monthly Servicing Fee, the Servicer shall be required to pay for any
and all expenses incurred by it in connection with its activities hereunder
(including any payments to accountants, counsel, Subservicers or any other
Person) and shall not be entitled to any payment or reimbursement therefor.
(b) The Back-Up Servicer shall be paid the Back-Up Servicing Fee in
accordance with the provisions of Section 7.04(a). Except to the extent of the
Back-Up Servicing Fee, the Back-Up Servicer shall be required to pay for all
expenses incurred by it in connection with its activities hereunder (including
any payments to accountants, counsel, Subservicers or any other Person) and
shall not be entitled to any payment or reimbursement therefor.
(c) The total servicing fees payable on each Distribution Date to the
Back-Up Servicer and the Servicer shall equal the Back-Up Servicing Fee and the
Monthly Servicing Fee, respectively. Compensation paid to any successor
Servicer (including the Back-Up Servicer after it assumes such duties) shall be
determined in accordance with Section 4.12(b) hereof.
SECTION 4.09. SERVICER NOT TO RESIGN. The Servicer shall not resign
from the obligations and duties hereby imposed on it except upon its
determination that (a) the performance of its
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duties hereunder has become impermissible under applicable law and (b) there is
no reasonable action which the Servicer could take to make the performance of
its duties hereunder permissible under applicable law. Any such determination
permitting the resignation of the Servicer shall be evidenced as to clause (a)
above by an Opinion of Counsel to such effect delivered to the Trustee on behalf
of the Certificateholders and as to clause (b) by an Officer's Certificate to
such effect delivered to the Trustee. Promptly upon any resignation pursuant to
this Section 4.09, the Servicer shall notify each Rating Agency thereof.
SECTION 4.10. CHANGE IN BUSINESS OF THE SERVICER. The Seller and the
Trustee on behalf of the Certificateholders have entered into this Agreement
with the Servicer in reliance upon its ability to perform the servicing duties,
if necessary, without any delegation thereof; the adequacy of its personnel,
records and procedures; its integrity, reputation and financial standing and the
continuance of each of the foregoing. The Servicer shall not, without prior
written consent of the Rating Agencies and the Certificateholders evidencing a
Percentage of 66 2/3 or greater, (a) make any material change in the character
of its business; or (b) merge with or into or consolidate with or into, or
convey, transfer, lease or otherwise dispose of all or substantially all of its
assets (whether now owned or hereafter acquired), or acquire all or
substantially all of the assets or capital stock or other ownership interest of,
any other corporation, unless immediately following any such change, each Rating
Agency confirms in writing to the Seller and the Trustee that the applicable
event described in (a) or (b) of this Section 4.10 will not result in a review
with negative implications, suspension, downgrade, withdrawal or other adverse
effect on the rating of the Certificates. The Servicer shall give each Rating
Agency prompt notice of any event referenced in this Section 4.10 that is or
would be reportable on Form 8-K under the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
SECTION 4.11. EVENTS OF SERVICING TERMINATION. If any of the
following events (each, an "Event of Servicing Termination") shall occur and be
continuing:
(a) Any failure by the Servicer or the Seller to make any payment or
deposit required to be made by it hereunder and the continuance of such failure
for a period of two (2) Business Days after the date upon which written notice
of such failure shall have been given to the Servicer or the Seller by the
Trustee; or
(b) Failure on the part of the Servicer or the Seller to observe or
perform any term, covenant or agreement in this Agreement, which materially
adversely affects the rights of the Certificateholders and which continues
unremedied for 30 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Servicer or the
Seller by the Trustee; or
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(c) Any proceeding shall be instituted against the Servicer or the
Seller (or, if the Servicer or the Seller is actively contesting the merits
thereof, such proceeding is not dismissed within 60 days after the filing
thereof) seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief or composition of it or any of its Debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for it or for any substantial part of its
property, or any of the actions sought in such proceeding (including, without
limitation, the entry of an order for relief against, or the appointment of a
receiver, trustee, custodian or other similar official for, it or for any
substantial part of its property) shall occur; or
(d) The commencement by the Servicer or the Seller of a voluntary
case or proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or the consent by it to the entry of a
decree or order for relief in respect of the Servicer or the Seller in an
involuntary case or proceeding under any applicable Federal or state bankruptcy,
insolvency, reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under any
applicable Federal or state law, or the consent by it to the filing of such
petition or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or similar official of the Servicer
or of any substantial part of its property, or the making by it of an assignment
for the benefit of creditors, or the admission by it in writing of its inability
to pay its Debts generally as they become due, or the taking of corporate action
by the Servicer or the Seller in furtherance of any such action; or
(e) The Servicer or the Seller shall fail to deliver a report
expressly required by this Agreement, and the continuance of such failure for a
period of five Business Days after the date upon which written notice of such
failure shall have been given to the Servicer or the Seller by the Trustee; or
(f) There is at any time a breach of any of the representations and
warranties of the Servicer set forth in Section 4.03 or the Seller set forth in
Section 3.01 which breach would have a material adverse effect on the interests
of the Certificateholders;
then, and in any such event, the Trustee may, by delivery to the Servicer of a
written notice specifying the occurrence of any of the foregoing events,
terminate the servicing and custodial
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responsibilities of the Servicer hereunder, without demand, protest or further
notice of any kind, all of which are hereby waived by the Servicer; PROVIDED,
that, in the event any of the events described in subsection (c) or (d) shall
have occurred, termination of the duties and responsibilities of the Servicer
shall automatically occur, without, demand, protest or further notice of any
kind, all of which are expressly waived by the Servicer. The Trustee shall
simultaneously with any declaration of any Event of Servicing Termination, give
notice thereof to the Servicer.
SECTION 4.12. APPOINTMENT OF THE SUCCESSOR SERVICER. (a) Upon
termination of the Servicer's responsibilities under this Agreement pursuant to
Section 4.09 or Section 4.11, the Back-Up Servicer shall assume all of the
responsibilities of the Servicer pursuant to this Section 4.12 and shall
thereafter be the Successor Servicer (the "Successor Servicer"). The Trustee
may also appoint a different Successor Servicer (after confirmation from each
Rating Agency that such appointment will not result in the withdrawal or
downgrade of the then current ratings of the Certificates). Such Successor
Servicer shall succeed to all rights and assume all of the responsibilities,
duties and liabilities of the Servicer under this Agreement; PROVIDED, that such
Successor Servicer and the Trustee shall have no responsibility for any actions
of the Servicer prior to the date of the appointment of such Successor Servicer
as Servicer. Prior to the appointment of such Successor Servicer, the Trustee
shall be authorized and empowered to execute and deliver, on behalf of the
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do any and all acts or things necessary or appropriate to
effect the purposes of such notice of termination and to perform the duties of
the Servicer hereunder (excluding its duty to indemnify pursuant to Article IX).
The standard of care, representations and warranties, covenants, liabilities,
rights of indemnification and all other rights and obligations of the Trustee
under this Agreement shall also be applicable to the Trustee in its capacity as
Successor Servicer hereunder. In the event no Successor Servicer has been
appointed within 60 days of the removal of a Servicer and the Trustee has
received written notice from each Rating Agency to the effect that failure to
appoint a successor Servicer will or has resulted in suspension, downgrade or
withdrawal of the rating assigned to the Certificates, the Trustee may petition
a court of competent jurisdiction to appoint a Successor Servicer.
(b) Any Successor Servicer appointed hereunder (including the Trustee
during such time as it functions as the Successor Servicer) shall be entitled to
reasonable compensation (including the estimated costs of such servicing and a
reasonable profit) which shall be determined by the Trustee. Any proposed
increase in the Back-Up Servicing Fee or the Monthly Servicing Fee due to the
assumption of duties under the Pooling and Servicing Agreement by a successor
Back-Up Servicer or successor Servicer shall be approved by the Seller, each
Rating Agency and the Certificateholders evidencing a Percentage not less than
50%.
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(c) The outgoing Servicer, the Trustee and the Successor Servicer
shall take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession, including, without limitation, the express
assumption by such Successor Servicer of the duties and obligations of the
outgoing Servicer hereunder. Without limiting the generality of the foregoing,
the Successor Servicer, with the assistance of the outgoing Servicer, shall
promptly notify Obligors by means of new coupon books or as the Successor
Servicer shall otherwise specify to make payments to the Successor Servicer.
(d) Upon appointment, any Successor Servicer shall be successor in
all respects to the outgoing Servicer under this Agreement and the transactions
set forth or provided for herein and shall be subject to all responsibilities,
duties and liabilities relating thereto placed upon the Servicer by the terms
and provisions hereof (subject to the same limitations as are contained in this
Section 4.12 with respect to a succession to the outgoing Servicer by the
Trustee).
SECTION 4.13. ANNUAL REPORTS; STATEMENTS AS TO COMPLIANCE. (a) The
Servicer shall deliver to the Trustee and the Rating Agencies as soon as
available, but in any event within 120 days after the end of each of its fiscal
years, a consolidated balance sheet of it and its Subsidiaries, if any, as at
such last day of the fiscal year, a consolidated statement of income and
retained earnings and statements of cash flow, for each such fiscal year, each
prepared in accordance with GAAP, in reasonable detail, and as to the
consolidated statements, certified without qualification by an Independent
Public Accountant, who may also render other services to the Servicer, or any of
its Affiliates and certified by the chief financial officer of the Servicer as
fairly presenting the financial position and the results of operations of the
Servicer as at and for the year ending on its date and as having been prepared
in accordance with GAAP.
(b) The Servicer shall, and shall cause any Subservicer (to the
extent such Person is in any manner receiving Payments hereunder) to, deliver to
the Trustee and the Rating Agencies on or before March 31st of each year,
beginning with March 31, 1997, an Officer's Certificate stating, as to each
signer thereof, that (a) a review of the activities of the Servicer or the
Subservicer, as the case may be, during the preceding calendar year and of
performance under this Agreement has been made under such officer's supervision
and (b) to the best of such officer's knowledge, based on such review, the
Servicer or Subservicer, as the case may be, has fulfilled all its respective
obligations under this Agreement throughout such year, or, if there has been a
default in the fulfillment of any such obligation, specifying each such default
known to such officer and the nature and status thereof and remedies therefor
being pursued.
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(c) The Servicer shall promptly (but in any event within two Business
Days) notify the Trustee upon receiving actual knowledge of any event which
constitutes an Event of Servicing Termination or would constitute an Event of
Servicing Termination but for the requirement that notice be given or time
elapse or both.
SECTION 4.14. ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING
REPORT. On or before March 31, 1997 and thereafter on or before March 31 of
each year, each of the Servicer and any Subservicer (to the extent in any manner
receiving Payments hereunder) at its expense shall cause an Independent Public
Accountant to furnish a report as set forth in Exhibit C hereof to the Trustee,
Greenwich Capital Markets, Inc. and the Rating Agencies. In connection with the
preparation of such report, such Independent Public Accountant will include in
its review the procedures and systems used by the Servicer in connection with
the performance of the Servicing Duties hereunder and the specified procedures
will take into account the Auto Loans or similar auto loans serviced by the
Servicer for others or its own account.
SECTION 4.15. SERVICER REPORTS. The Servicer shall furnish by the
14th day of each month (or, if such day is not a Business Day, the next
succeeding Business Day), to the Trustee, Greenwich Capital Markets, Inc., the
Back-Up Servicer and the Rating Agencies, an Officer's Certificate,
substantially in the form attached hereto as Exhibit D (the "Servicer Report")
which shall include the following information with respect to the Due Period
prior to the related Distribution Date:
(a) the Aggregate Principal Balance of the Auto Loans and
the number of Auto Loans as of the end of the prior Due Period (and, by
period of delinquency, current, 30-59 days, 60-89 days, 90-119, 120 or more
days delinquent);
(b) the Aggregate Principal Balance of the Auto Loans as of
the end of such Due Period (and, by period of delinquency, current, 30-59
days, 60-89 days, 90-119, 120 or more days delinquent);
(c) the number of Auto Loans and their aggregate Principal
Balances which (A) became Defaulted Auto Loans during such Due Period and
(B) have their payment schedules modified in accordance with the provisions
of Section 4.04(c);
(d) the number and the aggregate Repurchase Price of all
Purchased Auto Loans, separately stated, during such Due Period (including
such amounts to be deposited on the Deposit Date immediately preceding the
Distribution Date with respect to such Due Period);
(e) Recoveries received by the Servicer during such Due
Period;
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(f) the number of Automobiles repossessed during such Due
Period, the aggregate Principal Balances of the related Auto Loans, the
number of Automobiles disposed of following repossession during such Due
Period and the aggregate number of Automobiles in the Servicer's
repossession inventory (i) on the last day of the preceding Due Period and
(ii) on the last day of such Due Period;
(g) the total amount of Net Losses incurred during such Due
Period identifying the components used to calculate such loss (E.G., the
disposition price, aggregate outstanding Principal Balance of the Defaulted
Auto Loans, deductibles on insurance claims and uninsured claims,
repossession and liquidation expenses and rebates payable to the Obligor);
(h) the amount of Payments collected by the Servicer and
deposited into the Collection Account during such Due Period (identifying
the components of such amount (E.G., interest payments, scheduled principal
payments, prepayments, etc.));
(i) the amount and computation of the Monthly Servicing Fee
and Back-Up Servicing Fee paid and to be paid to the Servicer or Back-Up
Servicer, and the amount of Trustee Fee paid and to be paid to the Trustee
in respect of such Due Period;
(j) a statement containing the information set forth in
Section 7.04(c);
(k) the aggregate amount of Reimbursable Servicer Expenses
netted from Recoveries and/or included in the Monthly Servicing Fee,
together with a certification that such amounts, when added to prior
Reimbursable Servicer Expenses in respect of each such Auto Loan, do not
exceed Recoveries received after the date of incurring such expenses;
(l) in respect of each of the elements in Sections
4.04(d)(i), (ii) and (iii), the respective percentages as of the end of the
prior Due Period;
(m) the weighted average APR and the weighted average
remaining maturity of the Auto Loans as of the end of the prior Due Period;
and
(n) any additional information required by the Trustee for
purposes of making distributions for the related Distribution Date.
Each Servicer Report shall include a certification that the information
contained in such certificate is accurate and that no Event of Servicing
Termination, or event that with notice or lapse of time or both would become an
Event of Servicing Termination, has
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occurred, or if an Event of Servicing Termination or such event has occurred and
is continuing, specifying the Event of Servicing Termination or such event and
its status.
SECTION 4.16. MONTHLY INVESTOR'S REPORT. On each Determination Date
the Servicer shall furnish the Trustee, Greenwich Capital Markets, Inc., each
Certificateholder and the Rating Agencies a report, substantially in the form
attached hereto as Exhibit E (the "Monthly Investor's Report"), which shall
include the following information with respect to the related Distribution Date:
(i) the Certificate Principal Balance on such Distribution
Date, before and after giving effect to payments allocated to principal on
such Distribution Date;
(ii) the Pool Factor with respect to the beginning of the
Due Period;
(iii) the Pool Factor with respect to the end of the Due
Period;
(iv) the amount of Monthly Servicing Fee and Back-Up
Servicing Fee paid to the Servicer and Back-Up Servicer;
(v) the amount of Trustee Fee paid to the Trustee;
(vi) the amount of Available Funds with respect to the
related Due Period;
(vii) the amount of the aggregate distribution to be made on
such Distribution Date which constitutes interest on the Certificates,
together with a listing of the interest to be paid for each class of
Certificates;
(viii) the Class A Interest Carryover Shortfall, the Class B
Interest Carryover Shortfall and the Class C Interest Carryover Shortfall
for such Distribution Date and such amount paid to the respective classes;
(ix) the Class A Principal Distributable Amount, the Class B
Principal Distributable Amount and the Class C Principal Distributable
Amount for such Distribution Date, and such amount paid to the respective
classes;
(x) the Class A Principal Carryover Shortfall, the Class B
Principal Carryover Shortfall and the Class C Principal Carryover Shortfall
for such Distribution Date, and such amount paid to the respective classes;
(xi) the Class A Certificate Principal Balance, the Class B
Certificate Principal Balance and the Class C Certificate Principal Balance
on such Distribution Date,
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before and after giving effect to payments allocated to principal on such
Distribution Date;
(xii) the total amount on deposit in the Cash Reserve
Account;
(xiii) the amount to be withdrawn from or to be deposited to
the Cash Reserve Account with respect to such Distribution Date; and
(xiv) a statement setting forth a calculation of each of the
60+ Day Delinquency Rate and cumulative Net Losses as a percentage of the
Initial Aggregate Principal Balance of the Auto Loans, whether a
Delinquency Trigger Event or a Net Loss Trigger Event has occurred, the
Required Reserve Percentage and whether a 60+ Day Delinquency Cure or a
cure for a Net Loss Trigger Event has occurred.
Each such certificate will include a certification that the information
contained in such certificate is accurate and that no Event of Servicing
Termination, or event that with notice or lapse of time or both would become an
Event of Servicing Termination, has occurred, or if an Event of Servicing
Termination or such event has occurred and is continuing, specifying the Event
of Servicing Termination or such event and its status.
SECTION 4.17. REPRESENTATIONS OF THE BACK-UP SERVICER. The Back-Up
Servicer hereby represents, warrants and covenants to the Servicer, the Seller
and the Trustee (on behalf of the Trust and the Certificateholders) as of the
date of this Agreement:
(a) The Back-Up Servicer is a banking corporation, duly organized,
validly existing and in good standing under the laws of the State of Illinois
and it is or will be in compliance with the laws of each state to the extent
necessary to ensure the enforceability of each Auto Loan and the servicing of
the Auto Loans under this Agreement;
(b) It has the power and authority to execute, deliver and perform
this Agreement and the transactions contemplated hereby;
(c) The execution, delivery and performance by it of this Agreement,
and all other agreements, instruments and documents which may be delivered by it
pursuant hereto, and the transactions contemplated thereby, (i) have been duly
authorized by all necessary corporate or other action, on the part of it and
(ii) do not contravene or cause it to be in default under its charter or
by-laws;
(d) This Agreement has been duly executed and delivered on its
behalf;
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(e) No consent, approval, authorization, order, registration, filing,
qualification, license or permit (collectively, "Consents") of or with any such
court or any such regulatory authority or other such governmental agency or body
is required to be obtained by or with respect to the Back-Up Servicer in
connection with the execution, delivery and performance by the Back-Up Servicer
of this Agreement and the consummation of the transactions contemplated hereby
(except, with respect to performance only, such Consents as the Back-Up Servicer
may need to obtain prior to the commencement of its performance of its duties
hereunder in the certain jurisdictions outside of Illinois, provided that in
lieu of obtaining for itself the requisite Consents, the Back-Up Servicer may
and shall be permitted to delegate the performance of its duties to parties
having the requisite Consents in such jurisdictions).
(f) This Agreement is its legal, valid and binding obligation
enforceable against it in accordance with its terms, except as such enforcement
may be limited by bankruptcy, insolvency, reorganization, receivership,
moratorium or other laws relating to or affecting the rights of creditors
generally, and by general principles of equity (regardless of whether such
enforcement is consideration in a proceeding in law or in equity); and
(g) The Back-Up Servicer will not substantially reduce or terminate
its business (if such reduction or termination would materially adversely affect
its ability to perform its obligations as Back-Up Servicer).
SECTION 4.18. MERGER OR CONSOLIDATION OF OR ASSUMPTION OF THE
OBLIGATIONS OF THE BACK-UP SERVICER. Any Person (i) into which the Back-Up
Servicer may be merged or consolidated, (ii) which may result from any merger or
consolidation to which the Back-Up Servicer shall be a party, or (iii) which may
succeed to the properties and assets of the Back-Up Servicer substantially as a
whole, which Person in any of the foregoing cases executes an agreement of
assumption to perform every obligation of the Back-Up Servicer hereunder, shall
be the successor to the Back-Up Servicer under this Agreement without further
act on the part of any of the parties to this Agreement.
SECTION 4.19. BACK-UP SERVICER RESIGNATION. The Back-Up Servicer
shall not resign from its obligations and duties under this Agreement except
upon (a) a determination that the performance of its duties shall no longer be
permissible under applicable law (any such determination permitting the
resignation of the Back-Up Servicer shall be evidenced by an Opinion of Counsel
to such effect delivered to the Trustee, the Seller, the Servicer and each
Rating Agency) or (b) if the Back-Up Servicer and the Trustee are the same
entity, the resignation or termination of the Trustee. No resignation or
termination of the Back-Up Servicer shall become effective until an entity
acceptable to the Trustee (which, in the event the existing Trustee and the
Back-Up Servicer are the same
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entity and both resign, shall mean the successor Trustee) and the Rating
Agencies shall have assumed the responsibilities and obligations of the Back-Up
Servicer; PROVIDED, HOWEVER, that in the event a successor Back-Up Servicer is
not appointed within 60 days after such resignation or termination, the Back-Up
Servicer may petition a court of competent jurisdiction for its removal.
SECTION 4.20. OVERSIGHT OF SERVICING. (a) Commencing on the date of
execution of this Agreement and continuing until the earlier of (i) the
termination of the Trust created by this Agreement and (ii) the appointment of
the Back-Up Servicer as Servicer under this Agreement, the Servicer shall
immediately deliver to the Back-Up Servicer the Computer Tape and such other
information as is necessary to enable the Back-Up Servicer to service the Auto
Loans in accordance with the provisions of this Agreement. The Back-Up Servicer
shall accept and store, but shall not be required to examine such information
beyond determining that such information is sufficient in order for it to
perform its obligations set forth in paragraph (b) of this Section 4.20. Upon
notice that the Servicer has resigned or upon the removal of the Servicer under
this Agreement, the Back-Up Servicer shall assume all responsibilities of the
Servicer under this Agreement within three Business Days of such notice or
removal. Thereafter, until such time as the Back-Up Servicer is removed or
terminated in accordance with this Agreement, the Back-Up Servicer shall service
the Auto Loans as Servicer in accordance with provisions of this Agreement. The
Back-Up Servicer will not be responsible for delays attributable to the
Servicer's failure to deliver information, defects in the information supplied
by the Servicer or other circumstances beyond the control of the Back-Up
Servicer.
(b) On the date that each Servicer Report is delivered by the
Servicer to the Trustee, the Servicer shall also deliver a Computer Tape
containing detailed information with respect to the Auto Loans for the related
Due Period to the Back-Up Servicer. The Back-Up Servicer shall determine that
(i) the Servicer Report appears on its face to be complete and (ii) the Computer
Tape is readable by the Back-Up Servicer's computer systems. Using such
Computer Tape, the Back-Up Servicer shall verify to the extent possible the
accuracy of the calculations made by the Servicer in the Servicer Report. The
Back-Up Servicer will certify that it has performed the above-described
procedures, and that all of such calculations are correct, or, if discrepancies
or exceptions exist, note such discrepancies or exceptions.
(c) In the event of any discrepancies or exceptions noted by the
Back-Up Servicer in the Servicer Report, the Back-Up Servicer shall, within two
Business Days following its receipt of the Servicer Report, notify the Servicer
of such discrepancies or exceptions. The Servicer shall consult with the
Back-Up Servicer and use its best efforts to ensure that such Servicer Report is
corrected, and that subsequent Servicer Reports are accurate. The
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Servicer shall reflect any reconciliation of distributable amounts on the
Servicer Report for the next succeeding Distribution Date.
SECTION 4.21. DUTIES AND RESPONSIBILITIES; INDEMNIFICATION. (a) The
Back-Up Servicer shall perform such duties and only such duties as are
specifically set forth in this Agreement, and no implied covenants or
obligations shall be read into this Agreement against the Back-Up Servicer.
(b) In the absence of bad faith or negligence on its part, the
Back-Up Servicer may conclusively rely as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates, reports, the
Computer Tape or opinions furnished to the Back-Up Servicer and conforming to
the requirements of this Agreement.
(c) The Back-Up Servicer shall not be required to expend or risk its
own funds or otherwise incur financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers, if the
repayment of such funds or written indemnity satisfactory to it against such
risk or liability is not assured to it in writing prior to the expenditure or
risk of such funds or incurrence of financial liability.
(d) The Servicer shall indemnify, defend and hold harmless the
Back-Up Servicer and its directors, officers, agents and employees, from and
against any claim, action, loss, damage, penalty, fine, cost, expense or other
liability, including court costs and reasonable attorney's fees incurred in
enforcing this indemnity or defending any claim or action, directly or
indirectly resulting from or arising out of (i) the use, ownership, operation or
repair of an Automobile by the Servicer or any Affiliate or agent thereof, or
(ii) the Servicer's willful misfeasance, negligence or bad faith in the
performance of its duties under this Agreement, including, without limitation,
any misrepresentation or breached warranty made by it under this Agreement. The
right of indemnification provided hereby shall survive the termination of this
Agreement or the earlier resignation or removal of the Back-Up Servicer. The
Servicer shall not be liable to the Back-Up Servicer, under this Section 4.21(d)
or otherwise, for the negligence, bad faith or willful misconduct of the Back-Up
Servicer.
SECTION 4.22. BACK-UP SERVICER TO ACT AS SERVICER; APPOINTMENT OF
SUCCESSOR. If the Trustee appoints the Back-Up Servicer as successor Servicer
in accordance with Section 4.12 (after confirmation from each Rating Agency that
such appointment will not result in the withdrawal or downgrade of the then
current ratings of the Certificates), the Back-Up Servicer shall be the
successor in all respects to the Servicer in its capacity as Servicer under this
Agreement and the transactions set forth or provided for herein and shall be
subject to all the responsibilities, duties and liabilities relating thereto
placed on
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the Servicer by the terms and provisions hereof; PROVIDED, HOWEVER, that the
Back-Up Servicer shall not be liable for any acts or omissions of the Servicer
occurring prior to such succession or for any breach by the Servicer of any of
its representations and warranties contained herein or in any related document
or agreement. The Back-Up Servicer will make arrangements with the Servicer for
the prompt and safe transfer of, and the Servicer shall provide to the Back-Up
Servicer, all necessary servicing files and records, including (as deemed
necessary by the Back-Up Servicer at such time): (a) microfiche loan
documentation, (b) servicing system tapes, (c) loan payment history,
(d) collection history, (e) copies of the Designated Post Office Boxes and
related local account reconciliations, as of the close of the last Business Day
immediately preceding the date preceding conversion to the Back-Up Servicer and
(f) the trial balances, as of the close of business on the day immediately
preceding the date preceding conversion to the Back-Up Servicer, reflecting all
applicable loan information prepared or supplied by a Person other than the
Back-Up Servicer or the failure of any such Person to prepare or provide such
information. The Back-Up Servicer shall have no responsibility, shall not be in
default and shall incur no liability (x) for any act or failure to act by any
third party, including the Servicer, the Seller or the Trustee or for any
inaccuracy or omission in a notice or communication received by the Back-Up
Servicer from any third party or (y) which is due to or results from the
invalidity, unenforceability of any Auto Loan or non-compliance of the
underlying loan and security agreement with applicable law or the breach or the
inaccuracy of any representation or warranty made hereof with respect to any
Auto Loan. The Back-Up Servicer shall be reimbursed for any reasonable
transition expenses incurred pursuant to a transfer of servicing in accordance
with Section 4.08. Notwithstanding the above, if the Back-Up Servicer is
legally unable or unwilling to act as Servicer, the Trustee will appoint a
successor Servicer to act as Servicer. As compensation for acting as successor
Servicer, the Back-Up Servicer shall be entitled to receive reasonable
compensation equal to the prevailing market rate for such services, which may
result in an increase in the compensation and reimbursement due the Servicer
thereafter under this Agreement and in any event shall not be less than the
compensation and reimbursement of the Servicer under this Agreement. The
parties to this Agreement shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession.
ARTICLE V
THE TRUSTEE
SECTION 5.01. CERTAIN DUTIES. (a) The Trustee undertakes to perform
such duties and only such duties as are specifically set forth in this
Agreement, and no implied covenants or obligations shall be read into this
Agreement against the Trustee
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(including, without limitation, the duties referred to in Section 4.12 during
the continuance of an Event of Servicing Termination resulting in the
appointment of the Trustee as Successor Servicer).
(b) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates, reports or opinions furnished to
the Trustee and conforming to the requirements of this Agreement; but in the
case of any such certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee shall be under
a duty to examine the same to determine whether or not they conform to the
requirements of this Agreement.
(c) In case an Event of Servicing Termination (resulting in the
appointment of the Trustee as Successor Servicer) has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Agreement, and use the same degree of care and skill in their
exercise, as a prudent Person would exercise or use under the circumstances in
the conduct of such Person's own affairs; PROVIDED, HOWEVER, that no provision
in this Agreement shall be construed to limit the obligations of the Trustee to
provide notices under Section 5.02.
(d) No provision of this Agreement shall be construed to relieve the
Trustee of any obligation to exercise any of its duties under the Agreement in
any case in which the Trustee has not been offered security or indemnity
satisfactory to it against the costs, expenses and liabilities which might be
incurred by it in the exercise of such duty.
(e) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, EXCEPT that:
(i) this Section shall not be construed to limit the effect
of Section 5.01(a) and (b);
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer;
(iii) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with
the written direction of the Certificateholders of a majority (or such
lesser percentage as may be specified by certain provisions hereunder) in
principal amount of the outstanding Certificates relating to the time,
method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred upon the Trustee,
under this Agreement; and
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(iv) no provision of this Agreement shall require the
Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or indemnity
satisfactory to it against such risk or liability is not assured to it.
(f) Whether or not therein expressly so provided, every provision of
this Agreement relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Article V.
(g) The Trustee shall have no duty to monitor the performance of the
Seller or the Servicer hereunder, nor shall it have any liability in connection
with the malfeasance or nonfeasance by the Seller or the Servicer. The Trustee
shall have no liability in connection with compliance of the Certificate
Registrar and Transfer Agent, the Servicer or the Seller with statutory or
regulatory requirements related to the Trust Assets. The Trustee makes no
representations or warranties with respect to the Trust Assets or the validity
or sufficiency of any assignment of the Auto Loans to the Seller or to the
Trustee.
SECTION 5.02. NOTICE OF DEFAULTS; OTHER NOTICES. (a) The Trustee
shall promptly (but in any event within five Business Days) notify each Rating
Agency upon a Responsible Officer obtaining actual knowledge of any event which
constitutes an Event of Servicing Termination or would constitute an Event of
Servicing Termination but for the requirement that notice be given or time
elapse or both. In addition, the Trustee shall, within 10 Business Days
following a Responsible Officer receiving actual knowledge of the Event of
Servicing Termination specified in the immediately preceding sentence, transmit
to all Certificateholders, as their names and addresses appear in the
Certificate Register, notice of such event actually known to the Trustee, unless
such default shall have been cured or waived; PROVIDED, FURTHER, that this
Section 5.02 shall not limit the obligations of the Trustee to provide notices
expressly required by this Agreement.
(b) The Trustee shall promptly forward to each Rating Agency copies
of all reports and notices received by it from the Servicer or the Seller
pursuant to this Agreement.
SECTION 5.03. CERTAIN MATTERS AFFECTING THE TRUSTEE.
Subject to the provisions of Section 5.01:
(a) The Trustee may conclusively rely and shall be fully protected in
acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document
believed by it
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to be genuine and to have been signed or presented by the proper party or
parties;
(b) Any request or direction of any Certificateholders, the Seller or
the Servicer mentioned herein shall be in writing;
(c) Whenever in the performance of its duties hereunder the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may request and, in the absence of bad faith
on its part, conclusively rely upon an Officer's Certificate or Opinion of
Counsel;
(d) The Trustee may consult with counsel and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon;
(e) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement at the request or direction of
any of the Certificateholders pursuant to this Agreement, unless such
Certificateholders shall have offered to the Trustee security or indemnity
satisfactory to it against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f) Prior to the occurrence of an Event of Servicing Termination, or
after the curing of all Events of Default and Events of Servicing Termination
which may have occurred, the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond or other paper document, unless requested in writing so to do by
Certificateholders with an aggregate Percentage of 50% or more; PROVIDED,
HOWEVER, that if the payment within a reasonable time to the Trustee of the
costs, expenses or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not assured to the Trustee by
the security afforded to it by the terms of this Agreement, the Trustee may
require indemnity satisfactory to it against such cost, expense or liability as
a condition to so proceeding. The reasonable expense of every such examination
shall be paid by the Servicer or, if paid by the Trustee, shall be reimbursed by
the Servicer promptly upon demand;
(g) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or a custodian or a nominee (which may be Affiliates of the Trustee)
and the Trustee shall not be liable for any acts or omissions of, or for the
supervision of, such
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agents, attorneys, custodians or nominees appointed with due care by it
hereunder;
(h) The Trustee shall not be charged with knowledge of an Event of
Servicing Termination unless a Responsible Officer of the Trustee obtains actual
knowledge of such event or the Trustee receives written notice of such event
from the Seller, the Servicer or Certificateholders owning a Percentage not less
than 50% of the outstanding Certificate Principal Balance;
(i) The Trustee shall have no liability for any loss, cost or damage
incurred or sustained as a result of any investment or reinvestment of amounts
held in the bank accounts from time to time, the selection of Eligible
Investments, the liquidation of any such investments prior to maturity or the
failure of the Servicer to provide written investment direction to the Trustee
in a timely manner; and
(j) In the event that the Trustee is also acting as Paying Agent or
Certificate Registrar and Transfer Agent hereunder, the rights and protections
afforded to the Trustee pursuant to this Article V shall also be afforded to
such Paying Agent or Certificate Registrar and Transfer Agent.
SECTION 5.04. TRUSTEE NOT LIABLE FOR CERTIFICATES OR AUTO LOANS.
(a) The Trustee makes no representations as to the validity or sufficiency of
this Agreement or any Related Document, the Certificates (other than the
execution on behalf of the Trust and authentication thereof) or of any Auto
Loan. The Trustee shall not be accountable for the use or application by the
Seller of funds paid to the Seller in consideration of conveyance of the Auto
Loans to the Trust.
(b) Except with respect to the Trustee in its capacity as Successor
Servicer pursuant to Article IV, the Trustee shall have no responsibility or
liability for or with respect to: the validity of any security interest in any
Automobile; the perfection of any such security interest (whether as of the date
hereof or at any future time) or the maintenance of or the taking of any action
to maintain such perfection; the existence or validity of any Auto Loan, the
validity of the assignment of any Auto Loan to the Trust or of any intervening
assignment; the review of any Auto Loan, any Collateral File or the Computer
Tape (except in its capacity as Back-Up Servicer hereunder), the completeness of
any Collateral File, the receipt by it or its custodian of any Auto Loan or
Collateral File (it being understood that the Trustee has not reviewed and does
not intend to review such matters); the performance or enforcement of any Auto
Loan; the compliance by the Seller or the Servicer with any covenant or the
breach by the Seller or the Servicer of any warranty or representation made
hereunder or in any related document or the accuracy of any such warranty or
representation; any investment of monies in the Collection Account and the Cash
Reserve Account (except as
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specified in this Agreement) or any loss resulting therefrom (other than any
loss resulting from failure to follow the Servicer's written instructions with
respect thereto); the acts or omissions of the Servicer or any Obligor or
Dealer; any action of the Servicer taken in the name of the Trustee; any action
by the Trustee taken at the instruction of the Servicer. Except as provided in
Article IX hereof, no recourse shall be had for any claim based on any provision
of this Agreement, the Certificates or any Auto Loan or assignment thereof
against the Trustee in its individual capacity, and the Trustee shall not have
any personal obligation, liability or duty whatsoever to any Certificateholder
or any other Person with respect to any such claim, and any such claim shall be
asserted solely against the Trust or any indemnitor who shall furnish indemnity
as provided herein.
SECTION 5.05. TRUSTEE MAY OWN CERTIFICATES. The Trustee in its
individual or any other capacity may become the owner or pledgee of Certificates
with the same rights as it would have if it were not Trustee.
SECTION 5.06. THE SERVICER TO PAY TRUSTEE'S FEES AND EXPENSES. The
Servicer agrees to reimburse the Trustee upon its request for reasonable
third-party expenses, disbursements and advances incurred or made by the Trustee
in its capacity as such in accordance with any provision of this Agreement
(including the reasonable compensation and the expenses and disbursement of its
agents and counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith. The obligations of the Servicer
under this Section 5.06 shall survive the termination of this Agreement and the
resignation or removal of the Trustee. In the event the Trustee incurs expenses
or renders services in connection with any bankruptcy or insolvency proceeding,
such expenses (including the fees and expenses of its counsel) and the
compensation for such services are intended to constitute expenses of
administration under any bankruptcy law or law relating to creditors' rights
generally.
SECTION 5.07. ELIGIBILITY REQUIREMENTS FOR TRUSTEE. The Trustee
hereunder shall at all times (a) be a corporation, depository institution, or
trust company organized and doing business under the laws of the United States
of America or any state thereof authorized under such laws to exercise corporate
trust powers, having a combined capital and surplus of at least $100,000,000,
(b) be subject to supervision or examination by federal or state authority,
(c) be capable of maintaining an Eligible Account and (d) have a long-term
unsecured debt rating of not less than BBB or its equivalent from each
nationally recognized statistical rating organization that rates such debt or
such other rating as may be acceptable to the Rating Agencies. If such
institution publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then
for the purpose of this Section 5.07, the combined capital and surplus of such
institution shall be
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deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section 5.07, the
Trustee shall resign immediately in the manner and with the effect specified in
Section 5.08.
SECTION 5.08. RESIGNATION OR REMOVAL OF TRUSTEE. (a) The Trustee may
at any time resign and be discharged from the Trust hereby created by giving 60
days' written notice thereof to the Servicer, the Seller and the Rating
Agencies. Upon receiving such notice of resignation, the Servicer shall
promptly appoint a successor Trustee by written instrument, in triplicate, one
counterpart of which instrument shall be delivered to each of the Seller, the
successor Trustee and the predecessor Trustee. A copy of such instrument shall
be delivered to the Rating Agencies. If no successor Trustee shall have been so
appointed and have accepted appointment within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 5.07 and shall fail to resign after
written request therefor by the Servicer, or if at any time the Trustee shall be
legally unable to act, or shall be adjudged a bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Servicer may remove the Trustee. If it removes the Trustee under the authority
of the immediately preceding sentence, the Servicer shall promptly appoint a
successor Trustee by written instrument, in triplicate, one counterpart of which
instrument shall be delivered to each of the Seller, the successor Trustee and
the predecessor Trustee. Copies of such instrument shall also be delivered by
the Servicer to the Rating Agencies. If no successor Trustee shall have been so
appointed and have accepted appointment within 30 days after such removal, the
removed Trustee may petition any count of competent jurisdiction for the
appointment of a successor Trustee.
(c) Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 5.08 shall
not become effective until acceptance of appointment by the successor Trustee as
provided in Section 5.09.
SECTION 5.09. SUCCESSOR TRUSTEE. (a) Any successor Trustee appointed
as provided in Section 5.08 shall execute, acknowledge and deliver to each of
the Seller, the Servicer and to its predecessor Trustee an instrument accepting
such appointment hereunder, and thereupon the resignation or removal of the
predecessor Trustee shall become effective and such successor
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Trustee, without any further act, deed or conveyance, shall become fully vested
with all the rights, powers, duties and obligations of its predecessor hereunder
with like effect as if originally named a Trustee. The predecessor Trustee
shall deliver or cause to be delivered to the successor Trustee or its custodian
and any related documents and statements held by it or its custodian hereunder;
and the Seller, the Servicer and the predecessor Trustee shall execute and
deliver such instruments and do such other things as may reasonably be required
for the full and certain vesting and confirmation in the successor Trustee of
all such rights, powers, duties and obligations.
(b) No successor Trustee shall accept appointment as provided in this
Section 5.09 unless at the time of such acceptance such successor Trustee shall
be eligible under the provisions of Section 5.07.
(c) Upon acceptance of appointment by a successor Trustee as provided
in this Section 5.09, the Servicer shall mail notice of the succession of such
Trustee hereunder to each Certificateholder at its address as shown in the
Certificate Register and to the Rating Agencies. If the Servicer fails to mail
such notice within 10 days after acceptance of appointment by the successor
Trustee, the successor Trustee shall cause such notice to be mailed at the
expense of the Seller.
(d) No Trustee hereunder shall be liable for the acts or omissions of
any successor Trustee.
SECTION 5.10. MERGER OR CONSOLIDATION OF TRUSTEE. Any corporation
into which the Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to the corporate trust business of the Trustee, shall be the
successor of the Trustee hereunder; PROVIDED such corporation shall be eligible
under the provisions of Section 5.07, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.
SECTION 5.11. TAX MATTERS. (a) The Trustee shall prepare, execute
and file all tax returns and any other information, returns or reports, if any,
that need to be filed for the Trust. The Servicer shall provide the Trustee
with such information, reports and other cooperation as the Trustee shall
reasonably require to perform such duties.
(b) The Trustee shall take all action reasonably necessary to assure
compliance with the provisions of the Code relating to (i) certain withholding
requirements applicable to non-U.S. Person taxpayers; (ii) backup withholding
requirements and (iii) certain taxpayer certification requirements relating to
clauses (i) and (ii) above.
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ARTICLE VI
THE CERTIFICATES
SECTION 6.01. THE CERTIFICATES. (a) The Certificates shall be
substantially in the form of Exhibits F, G and H. The Certificates shall be
issuable in minimum denominations of $1,000,000 or integral multiples of $1,000
in excess thereof (except that one Certificate may be issued in a denomination
of less than $1,000).
(b) The Certificates may be initially issued in either definitive
form, or in the case of the Class A and Class B Certificates, in book-entry form
pursuant to Section 6.10 or 6.12, respectively.
(c) For purposes of any provision of this Agreement requiring or
permitting actions with the consent of, or at the direction of,
Certificateholders evidencing a specified percentage of the aggregate unpaid
principal amount of Certificates, such direction or consent may be given by
Certificateholders owning Certificates evidencing the requisite percentage of
principal amount of Certificates.
SECTION 6.02. AUTHENTICATION OF CERTIFICATES. (a) Subject to the
terms of Section 6.01(b) and Section 6.02(b), on the Closing Date, the Trustee
shall authenticate and deliver the Certificates, to or upon the written order of
the Seller for the sale of Certificates in an aggregate principal amount equal
to the Initial Principal Amount to or upon the order of the Seller against
payment to the Seller of the purchase price therefor. Upon the receipt of such
payment, the Certificates shall be fully paid and nonassessable.
(b) Upon satisfaction of the conditions set forth in clauses (i) and
(ii) below on or before the Closing Date, the Trustee will execute on behalf of
the Trust, authenticate and deliver the Certificates. The following conditions
must be satisfied on or prior to the Closing Date:
(i) the Rating Agencies shall have indicated in writing
that they have each assigned the Certificates a rating of not less than
(A) "A" with respect to the Class A Certificates, (B) "BBB" with respect to
the Class B Certificates and (C) "BB" with respect to the Class C
Certificates; and
(ii) the Trustee shall have received an Opinion of Counsel
with respect to the Intended Tax Characterization.
(c) Subject to the provisions of Section 6.02(b), each Certificate
shall be authenticated by the Trustee by the manual
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signature of a duly authorized signatory. Certificates bearing the signatures
of individuals who were at the time the proper officers or authorized
signatories of the Trustee shall bind the Trust, notwithstanding that such
individuals or any of them have ceased to hold such offices or positions prior
to the delivery of such Certificates or did not hold such offices or positions
at the date of such Certificates. All Certificates shall be dated the date of
their authentication. The authentication by the Trustee upon any Certificate
shall be conclusive evidence, and the only evidence, that the Certificate so
authenticated has been duly authenticated and delivered hereunder and is
entitled to the benefit of this Agreement. The authentication certification of
the Trustee may be executed by any Person authorized by the Trustee, but it
shall not be necessary that the same authorized Person sign the authentication
certificates on all of the Certificates.
SECTION 6.03. REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES.
(a) The Trustee shall maintain, or cause to be maintained by a certificate
registrar and transfer agent (the "Certificate Registrar and Transfer Agent"),
in accordance with Section 6.03(b), a certificate register in which the Trustee
shall provide or cause to be provided for the registration of Certificates and
transfers and exchanges of Certificates as herein provided (the "Certificate
Register"). The Trustee is hereby initially appointed the Certificate Registrar
and Transfer Agent for the purpose of registering Certificates and transfers and
exchanges of Certificates as provided herein. All Certificates shall be so
registered. The Trustee may revoke such appointment and remove the Certificate
Registrar and Transfer Agent if the Trustee determines in its sole discretion
that either of such parties has failed to perform its obligations under this
Agreement in any material respect and provided that such party acting as
Certificate Registrar, or Transfer Agent, as the case may be, is other than the
Trustee. The Trustee shall be permitted to resign as Certificate Registrar and
Transfer Agent upon 30 days' written notice to the Seller and each of the
Certificateholders; PROVIDED, HOWEVER, that such resignation shall not be
effective and the Trustee shall continue to perform its duties as Certificate
Registrar and Transfer Agent until the Trustee has appointed a successor
Certificate Registrar and Transfer Agent reasonably acceptable to the Seller and
the Certificateholders evidencing a Percentage of 50% or greater.
Notwithstanding anything herein to the contrary, the resignation by the Trustee
as Transfer Agent or Certificate Registrar shall become effective upon the
effectiveness of the resignation or removal of the Trustee hereunder.
(b) The Certificate Registrar and Transfer Agent will maintain at its
expense in the Borough of Manhattan, the City of New York an office or offices
or an agency or agencies where Certificates may be surrendered for registration
of transfer or exchange. The Certificate Registrar and Transfer Agent hereby
appoints its office at 77 Water Street, 5th Floor, New York, NY 10005 for such
purpose. Subject to the provisions of Section
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6.02(b), at the option of a Certificateholder, Certificates may be exchanged for
other Certificates of authorized denominations, upon surrender of the
Certificates to be exchanged at such office. Upon surrender for registration or
transfer of any Certificate at such office, the Trustee shall, on behalf of the
Trust, authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates of a like aggregate Percentage and
dated the date of authentication by the Trustee. Whenever any Certificates are
so surrendered for exchange, the Trustee shall execute, on behalf of the Trust,
authenticate and deliver the Certificates which the Certificateholder making the
exchange is entitled to receive. Every certificate presented or surrendered for
transfer or exchange shall be duly endorsed by, or be accompanied by a written
instrument of transfer in form satisfactory to, the Trustee and the Certificate
Registrar and Transfer Agent duly executed by the holder thereof or his or her
attorney duly authorized in writing. No transfer shall be effected by the
Trustee pursuant to this Section 6.03(b) unless the conditions set forth in
Section 6.09 have been satisfied in full.
(c) No service charge shall be made for any transfer or exchange of
Certificates, but the Trustee or Certificate Registrar and Transfer Agent may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any transfer or exchange of
Certificates. All Certificates surrendered for transfer and exchange shall be
disposed of in a manner approved by the Trustee.
(d) Notwithstanding the provisions of this Agreement, the transfer of
the Certificates is subject to the restrictions set forth in Section 6.09, and,
as applicable, Sections 6.10 and 6.12.
SECTION 6.04. APPOINTMENT OF PAYING AGENT. The Paying Agent (the
"Paying Agent") shall make distributions to Certificateholders from the
Collection Account pursuant to Section 7.04 and shall report the amounts of such
distributions to the Trustee. Any Paying Agent shall have the revocable power
to withdraw funds from the Collection Account for the purpose of making the
distributions referred to above. The Trustee, if the Paying Agent is other than
the Trustee, may revoke such power and remove the Paying Agent if the Trustee
determines in its sole discretion that the Paying Agent shall have failed to
perform its obligations under this Agreement in any material respect. The
Paying Agent shall initially be the Trustee. The Trustee shall be permitted to
resign as Paying Agent upon 30 days' written notice to the Trustee. In the
event that the Trustee shall no longer be the Paying Agent, the Trustee shall
appoint a successor to act as Paying Agent (which shall be a bank or trust
company). The Trustee shall cause such successor Paying Agent or any additional
Paying Agent appointed by the Trustee to execute and deliver to the Trustee an
instrument in which such successor Paying Agent or additional Paying Agent shall
agree with the Trustee that as Paying Agent, such successor Paying Agent or
additional Paying Agent will
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hold all sums, if any, held by it for payment to the Certificateholders in trust
for the benefit of the Certificateholders entitled thereto until such sums shall
be paid to such Certificateholders. The Paying Agent shall return all unclaimed
funds to the Trustee and upon removal of a Paying Agent such Paying Agent shall
also return all funds in its possession to the Trustee.
SECTION 6.05. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If
(a) any mutilated Definitive Certificate is surrendered to the Certificate
Registrar and Transfer Agent, or the Certificate Registrar and Transfer Agent
receives evidence to its satisfaction of the destruction, loss or theft of any
Definitive Certificate and (b) there is delivered to the Certificate Registrar
and Transfer Agent and the Trustee such security or indemnity as may be required
by each to save it harmless, then in the absence of notice to the Certificate
Registrar and Transfer Agent or the Trustee that such Certificate has been
acquired by a bona fide purchaser, the Trustee shall execute on behalf of the
Trust, authenticate and deliver, in exchange for and in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
tenor and percentage. Upon the issuance of any new Certificate under this
Section 6.05, the Trustee may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other expense connected therewith. Any duplicate Certificate issued
pursuant to this Section 6.05 shall constitute complete and indefeasible
evidence of ownership of the fractional undivided interest represented by the
original Certificate, as if originally issued, whether or not the destroyed,
lost or stolen Certificate shall be found at any time.
SECTION 6.06. PERSONS DEEMED OWNERS. Prior to due presentation of a
Certificate for registration of transfer, the Seller, the Servicer, the Paying
Agent, the Trustee and the Certificate Registrar and Transfer Agent may treat
the Person in whose name any Certificate is registered as the owner of such
Certificate for the purpose of receiving remittances pursuant to Section 7.04
and for all other purposes whatsoever, and none of the Seller, the Servicer, the
Paying Agent, the Trustee, the Certificate Registrar and Transfer Agent nor any
agent of the Seller, the Servicer, the Paying Agent, the Trustee or the
Certificate Registrar and Transfer Agent shall be affected by notice to the
contrary. Any action taken by the Trustee pursuant to this Agreement upon the
request or authority or consent of any Person who at the time of making such
request or giving such authority or consent is a Certificateholder shall be
conclusive and binding upon all future holders of the same Certificate and upon
Certificates issued in exchange therefor or in place thereof.
SECTION 6.07. ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND
ADDRESSES. The Certificate Registrar and Transfer Agent will furnish to the
Trustee, the Paying Agent, the Seller, the
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Servicer and any requesting Certificateholder no later than three Business Days
following such request therefor from any of them in writing, a list of the names
and addresses of the Certificateholders as of the most recent Record Date. Upon
written application by Certificateholders with an aggregate Percentage of 10% or
more (hereinafter referred to as "Applicants") to the Trustee stating that the
Applicants desire to communicate with other Certificateholders with respect to
their rights under this Agreement or under the Certificates accompanied by a
copy of the communication which such Applicants propose to transmit, the Trustee
shall, within five Business Days after the receipt of such application, afford
such Applicants access during normal business hours to the most recent list of
Certificateholders held by the Trustee. If such list is as of a date more than
90 days prior to the date of receipt of such Applicants' request, the Trustee
shall promptly request from the Certificate Registrar and Transfer Agent a
current list as provided above, and shall afford such Applicants access to such
list promptly upon receipt. Every Certificateholder, by receiving and holding a
Certificate, agrees with the Certificate Registrar and Transfer Agent and the
Trustee that none of the Seller, the Servicer, the Paying Agent, the Certificate
Registrar and Transfer Agent, the other Certificateholders nor the Trustee shall
be held accountable by reason of the disclosure of any such information as to
the names and addresses of the Certificateholders hereunder, regardless of the
source from which such information was obtained.
VI.17.
SECTION 6.08. ACTS OF CERTIFICATEHOLDERS. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Agreement to be given or taken by Certificateholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Certificateholders in Person or by an agent duly appointed in writing; and
except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee and
where required, to the Seller and the Servicer. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Agreement and (subject to Section 10.01) conclusive in favor of
the Trustee, the Seller and the Servicer, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any Certificateholders of
any such instrument or writing may be provided in any reasonable manner which
the Trustee deems sufficient.
(c) The ownership of Certificates shall be proved by the Certificate
Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Certificateholder shall bind every holder of every
Certificate issued upon the registration
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of transfer thereof or in exchange therefor or in lieu thereof, in respect of
anything done, or omitted to be done by the Trustee, the Seller or the Servicer
in reliance thereon, whether or not notation of such action is made upon such
Certificate.
(e) The Trustee may require such additional proof of any matter
referred to in this Section as it shall deem necessary.
SECTION 6.09. RESTRICTIONS ON TRANSFER. (a) The following
restrictions shall apply with respect to the transfer and registration of
transfer of a Definitive Certificate to a transferee that takes delivery in the
form of a Definitive Certificate:
(i) The Certificate Registrar and Transfer Agent shall
register the transfer of a Definitive Certificate if the requested transfer
is to the Seller, an affiliate (as defined in Rule 144(a)(1) under the
Securities Act of 1933, as amended (the "Securities Act") of the Seller or
the Placement Agent as evidenced by a written certification to such effect
on which the Certificate Registrar and Transfer Agent may conclusively
rely;
(ii) The Certificate Registrar and Transfer Agent shall
register the transfer of a Definitive Certificate if (A) the transferor has
delivered to the Certificate Registrar a form of Transferor's Certificate
substantially in the form of Exhibit K herein; and (B) the transferee has
delivered to the Certificate Registrar and Transfer Agent either (i) a Rule
144A Certificate substantially in the form of Exhibit I hereto or (ii) an
Accredited Institutional Investor Certificate substantially in the form of
Exhibit J hereto. In addition, the Certificate Registrar and Transfer
Agent may as a condition of the registration of any such transfer require
the transferor to furnish such other certifications, opinions of counsel or
other information (at the transferor's expense) as it may reasonably
require to confirm that the proposed transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and other applicable laws; and
(iii) Such Transferee may not be Eagle Finance, or any
successor thereto.
(b) Transfers of beneficial interests in the Book-Entry Certificates,
or transfers by Holders of Definitive Certificates to transferees that take
delivery in the form of beneficial interests in the Book-Entry Certificates, may
be made only in accordance with this Section 6.09(b) and in accordance with the
rules of the Clearing Agency.
(i) In the case of a beneficial interest in a Book-Entry
Certificate being transferred to an Institutional
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Accredited Investor, such transferee shall be required to take delivery in
the form of a Definitive Certificate or Certificates and the Certificate
Registrar and Transfer Agent shall register such transfer only upon
compliance with the provisions of Section 6.09(c);
(ii) In the case of a beneficial interest in a Book-Entry
Certificate being transferred to a transferee that takes delivery in the
form of a Definitive Certificate or Certificates, except as set forth in
clause (i) above, the Certificate Registrar and Transfer Agent shall
register such transfer only upon compliance with the provisions of Section
6.09(c);
(iii) In the case of a Definitive Certificate being
transferred to a transferee that takes delivery in the form of a beneficial
interest in a Book-Entry Certificate, the Certificate Registrar and
Transfer Agent shall register such transfer if the transferor has provided
the Certificate Registrar and Transfer Agent with a Rule 144A Certificate
in the form of Exhibit I hereto;
(iv) Neither the Trustee nor the Certificate Registrar and
Transfer Agent shall have any responsibility with respect to the transfer
or registration of transfer of a beneficial interest in a Book-Entry
Certificate to a transferee that takes delivery in the form of a beneficial
interest in such Book-Entry Certificate; and
(v) Such Transferee may not be Eagle Finance, or any
successor thereto.
(c) An exchange of a beneficial interest in a Book-Entry Certificate
for a Definitive Certificate or Certificates, an exchange of a Definitive
Certificate or Certificates for a beneficial interest in a Book-Entry
Certificate and an exchange of a Definitive Certificate or Certificates for
another Definitive Certificate or Certificates (in each case, whether or not
such exchange is made in anticipation of subsequent transfer, and in the case of
a Book-Entry Certificate, so long as the Book-Entry Certificate remains
outstanding and is held by or on behalf of the Clearing Agency) may be made only
in accordance with this Section 6.09 and in accordance with the rules of the
Clearing Agency:
(i) A Holder of a beneficial interest in a Book-Entry
Certificate may at any time exchange such beneficial interest for a
Definitive Certificate or Certificates of the same Class;
(ii) A Holder of a Definitive Certificate may exchange such
Certificate for a beneficial interest in the Book-Entry Certificate of the
same Class if such Holder furnishes to the Seller and to the Certificate
Registrar and
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Transfer Agent a certificate substantially in the form of Exhibit J hereto
properly executed; and
(iii) A Holder of a Definitive Certificate may exchange such
Certificate for an equal aggregate principal amount of Definitive
Certificates in different authorized denominations without any
certification.
(d) (i) Upon acceptance for exchange or transfer of a
Definitive Certificate for a beneficial interest in the Book-Entry
Certificate of the same Class as provided herein, the Certificate Registrar
and Transfer Agent shall cancel such Definitive Certificate and shall
request the Clearing Agency to endorse on the schedule affixed to such
Book-Entry Certificate (or on a continuation of such schedule affixed to
such Book-Entry Certificate and made a part thereof) an appropriate
notation evidencing the date of such exchange or transfer and an increase
in the principal amount of such Book-Entry Certificate equal to the
principal amount of such Definitive Certificate exchanged or transferred
therefor.
(ii) Upon acceptance for exchange or transfer of a
beneficial interest in a Book-Entry Certificate for a Definitive
Certificate of the same Class as provided herein, the Certificate Registrar
and Transfer Agent shall request the Clearing Agency to endorse on the
schedule affixed to such Book-Entry Certificate (or on a continuation of
such schedule affixed to such Book-Entry Certificate and made a part
thereof) an appropriate notation evidencing the date of such exchange or
transfer and a decrease in the principal amount of such Book-Entry
Certificate equal to the principal amount of such Definitive Certificate
issued in exchange therefor or upon transfer thereof.
(e) Each Certificate shall bear a legend substantially to the
following effect:
"THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY
STATE SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS
CERTIFICATE, AGREES THAT THIS CERTIFICATE MAY BE REOFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE
SECURITIES ACT AND OTHER APPLICABLE LAWS ONLY (1) PURSUANT TO RULE
144A UNDER THE SECURITIES ACT TO A PERSON WHO THE HOLDER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER ("QIB") WITHIN THE MEANING
OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QIB, WHOM THE HOLDER HAS INFORMED THAT SUCH REOFFER, RESALE, PLEDGE OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A; OR (2) IN
CERTIFICATED FORM ONLY (A) TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
WITHIN THE MEANING OF RULE 501(A), (2) (3) OR (7) OF REGULATION D OF
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THE SECURITIES ACT OR (B) IN OTHER TRANSACTIONS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO (A) IN ANY
SUCH CASE, RECEIPT BY THE SELLER AND THE CERTIFICATE REGISTRAR AND
TRANSFER AGENT OF A LETTER SUBSTANTIALLY IN THE FORM OF EXHIBIT J TO
THE POOLING AND SERVICING AGREEMENT REFERRED TO BELOW, AND (B) IN THE
CASE OF CLAUSE (2) RECEIPT BY THE SELLER AND THE TRUSTEE OF SUCH
CERTIFICATES, LEGAL OPINIONS AND OTHER EVIDENCE ACCEPTABLE TO THE
SELLER AND THE TRUSTEE THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER
IS IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS."
NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE
TRANSFERRED UNLESS THE TRANSFEREE REPRESENTS THAT EITHER (A) IT IS NOT
AN EMPLOYEE BENEFIT PLAN, TRUST OR ACCOUNT, WHETHER OR NOT SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED ("ERISA"), OR DESCRIBED IN SECTION 4975(e)(1) OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED, INCLUDING AN INDIVIDUAL RETIREMENT
ACCOUNT, OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY
REASON OF AN INVESTMENT IN SUCH ENTITY BY A PLAN, TRUST OR ACCOUNT
DESCRIBED ABOVE (AN "ERISA PLAN"), OR (B) IT IS AN INSURANCE COMPANY
GENERAL ACCOUNT AND PURSUANT TO SECTION I OF PROHIBITED TRANSACTION
CLASS EXEMPTION 95-60 ("PTCE-95-60"), THE ACQUISITION AND HOLDING OF
THE CERTIFICATE AND, PURSUANT TO SECTION III OF PTCE 95-60, THE
SERVICING, MANAGEMENT AND OPERATION OF THE TRUST ARE WITH RESPECT TO
SUCH TRANSFEREE EXEMPT FROM THE "PROHIBITED TRANSACTION" PROVISIONS OF
ERISA AND THE CODE, OR (C) ONLY IN THE CASE OF A TRANSFER OF CLASS A
CERTIFICATES, SPECIFIED CONDITIONS OF AN "UNDERWRITER EXEMPTION"
DESCRIBED IN SECTION V(h) OF PTCE 95-60 ARE SATISFIED WITH RESPECT TO
SUCH TRANSFEREE.
(f) The Certificate Registrar and Transfer Agent shall not effect
the registration of transfer of any Certificate, if after giving effect to such
transfer, the Certificates would be held by more than ninety-eight Holders for
purposes of Section 7704 of the Code and the regulations thereunder.
(g) The Servicer agrees to cause, and the Seller agrees, to provide
such information as required under Rule 144A under the Act so as to allow
resales to QIBs in accordance herewith.
SECTION 6.10. BOOK-ENTRY CERTIFICATES. The Class A and Class B
Certificates may be issued in the form of one or more typewritten book-entry
Global Certificates (the "Book-Entry Certificates"), to be delivered by, or on
behalf of, the Seller to the initial Depository (the "Depository"), which,
unless otherwise specified in this Agreement, shall be The Depository Trust
Company. In such case, the Certificates delivered to the Depository Trust
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Company shall initially be registered on the Certificate Register in the name of
Cede & Co., the nominee of the initial Depository, and no Certificateholder will
receive a definitive certificate representing such Certificateholder's interest
in the Certificates, except as provided in Section 6.12. Unless and until
definitive, fully registered Certificates (the "Definitive Certificates") have
been issued to such Certificateholders pursuant to Section 6.12:
(i) the provisions of this Section 6.10 shall be in full
force and effect;
(ii) the Seller, the Servicer, the Certificate Registrar and
Transfer Agent and the Trustee may deal with the Depository for all
purposes (including the making of distributions on such Certificates) as
the sole holder of such Certificates and shall have no obligation to the
related Certificateholder;
(iii) to the extent that the provisions of Section 6.09 or
this Section 6.10 conflict with any other provisions of this Agreement, the
provisions of this Section shall control;
(iv) the rights of such Certificateholders shall be
exercised only through the Depository and shall be limited to those
established by law and agreements between such Certificateholders and the
Depository. Pursuant to the Depository Agreement, unless and until
Definitive Certificates are issued pursuant to Section 6.12, the initial
Depository will make book-entry transfers among the Depository Participants
and receive and transmit distributions of principal and interest on such
Certificates to such Depository Participants; and
(v) whenever the Agreement requires or permits actions to
be taken based upon instructions or directions of holders of Certificates
evidencing a specified Percentage of the Certificate Principal Balance, the
Depository shall be deemed to represent such Percentage only to the extent
that it has received instructions to such effect from Certificateholders
and/or Depository participants owning or representing, respectively, such
required Percentage of the beneficial interest in such Certificates and has
delivered such instructions to the Trustee.
SECTION 6.11. NOTICES TO DEPOSITORY. Whenever notice or other
communication to the Certificateholders is required under this Agreement, unless
and until Definitive Certificates shall have been issued to Certificateholders
pursuant to Section 6.12, the Trustee and the Servicer shall give all such
notices and communications specified herein to be given to Certificateholders to
the Depository.
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SECTION 6.12. DEFINITIVE CERTIFICATES. If (a) the Depository is no
longer willing or able to properly discharge its responsibilities under the
Depository Agreement and the Servicer is unable to locate a qualified successor,
(b) the Seller at its option advises the Trustee in writing that it elects to
terminate the book-entry system through the Depository or (c) after the
occurrence of an Event of Servicing Termination, Certificateholders representing
beneficial interests aggregating not less than a majority of the aggregate
outstanding principal amount of the Global Certificate advise the Trustee and
the Depository in writing that the continuation of a book-entry system through
the Depository is no longer in the best interests of the Certificateholders,
then the Depository shall notify all Certificateholders and the Trustee of the
occurrence of such event and of the availability of Definitive Certificates to
Certificateholders requesting the same. Upon surrender to the Certificate
Registrar and Transfer Agent of the typewritten Certificates representing the
Global Certificate by the Depository, accompanied by registration instructions,
the Trustee shall execute on behalf of the Trust and authenticate the Definitive
Certificates in accordance with the instructions of the Depository. Neither of
the Trustee or the Certificate Registrar and Transfer Agent shall be liable for
any delay in delivery of such instructions and may conclusively rely on, and
shall be fully protected in relying on, such instructions. Upon the issuance of
Definitive Certificates, the Trustee shall recognize the Certificateholders
holding the Definitive Certificates as Certificateholders hereunder. The
Definitive Certificates shall be printed, lithographed or engraved or may be
produced in any other manner as is reasonably acceptable to the Trustee, as
evidenced by its execution thereof.
SECTION 6.13. TEMPORARY CERTIFICATES. In the event that this
Agreement provides that the Certificates are not to be issued in book-entry form
pursuant to Section 6.10, the Trustee, on behalf of the Trust, may execute,
pending the preparation of Definitive Certificates, authenticate and deliver,
temporary Certificates that are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the Definitive Certificates in lieu of which they are issued. If
temporary Certificates are issued, the Servicer will cause Definitive
Certificates to be prepared without unreasonable delay. After the preparation
of Definitive Certificates, the temporary Certificates shall be exchangeable for
Definitive Certificates upon surrender of the temporary Certificates at the
Corporate Trust Office, without charge to the holder thereof. Upon surrender
for cancellation of any one or more temporary Certificates, the Trustee shall
execute on behalf of the Trust, authenticate and deliver in exchange therefor a
like principal amount of Definitive Certificates in authorized denominations.
Until so exchanged, the temporary Certificates shall in all respects be entitled
to the same benefits under this Agreement as Definitive Certificates.
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ARTICLE VII
DEPOSITS AND DISTRIBUTIONS
SECTION 7.01. RIGHTS OF CERTIFICATEHOLDERS. (a) The Certificates
shall represent fractional undivided interests in, to and under the Trust
Assets, consisting of the right to receive Payments, to the extent necessary
to make the required payments with respect to the Certificates at the times
and in the amounts specified in this Agreement. The rights of the Class B
Certificateholders to receive distributions in respect of the Class B
Certificates on any Distribution Date shall be subordinated to the rights of
the Class A Certificateholders to receive distributions in respect of the
Class A Certificates to the extent described in Section 7.04. The rights of
the Class C Certificateholders to receive distributions in respect of the
Class C Certificates on any Distribution Date shall be subordinated to the
rights of the Class A Certificateholders and Class B Certificateholders to
receive their respective distributions in respect of the Class A Certificates
and Class B Certificates to the extent described in Section 7.04.
(b) Amounts held by or, pursuant to this Agreement, under the control
of, the Trustee for future distribution to the Certificateholders, including,
without limitation, in the Collection Account and the Cash Reserve Account,
shall not be distributed except in accordance with the terms of this Agreement.
The Seller is deemed to have granted a security interest in rights to receive
monies from the Collection Account and the Cash Reserve Account to
Certificateholders to secure the rights of the Certificateholders to receive
distributions in the priorities provided for herein. Whenever requested by the
Trustee, and without prejudice to the intent of the parties that the Collection
Account be held exclusively in the name of the Trustee for the benefit of the
Trust, the Seller will make, execute and deliver or cause to be made, executed
and delivered any and all further and other notices, instruments and assurances,
and will furnish such information and will make such filings with Governmental
Authorities, including, but not limited to, financing statements on Form UCC-1,
as may be necessary or appropriate to carry out the intention or to facilitate
the performance of the terms of this Agreement, including, without limitation,
the foregoing subordination provisions, to ensure the perfection of the security
interest of the Certificateholders in the Cash Reserve Account, or otherwise to
protect and preserve the rights and remedies hereunder of the
Certificateholders. Amounts properly distributed to the Seller or Servicer
pursuant to Section 7.04(a)(ix) shall be deemed released from the security
interest established by this Section 7.01, and the Seller or Servicer will not
in any event be required to refund any such distributed amounts.
SECTION 7.02. ESTABLISHMENT AND ADMINISTRATION OF THE COLLECTION
ACCOUNT. (a) The Trustee shall cause to be established
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and maintained at all times the Collection Account on behalf of and in the name
of the Trustee for the benefit of the Trust. The Collection Account shall be an
Eligible Account initially established at the office of the Trustee, bearing a
designation clearly indicating that the funds deposited therein are held for the
benefit of the Trust. The Trustee shall possess all right, title and interest
in all funds on deposit from time to time in the Collection Account and in all
proceeds thereof. The Collection Account shall be under the sole dominion and
control of the Trustee for the benefit of the Certificateholders as their
interests appear in the Trust. If, at any time, the Collection Account ceases
to be an Eligible Account, the Servicer, on behalf of the Trustee, shall within
20 Business Days establish a new Collection Account which shall be an Eligible
Account, transfer any cash and/or any investments to such new Collection Account
and from the date such new Collection Account is established, it shall be the
"Collection Account."
(b) The Servicer shall deposit into the Collection Account, as soon
as practicable, but in no event later than the close of business on the Business
Day after the date of receipt thereof, all amounts representing Payments (net of
overpayment credits and items constituting servicing compensation pursuant to
Section 4.08 other than the Monthly Servicing Fee) collected by the Servicer.
(c) The Servicer shall direct the Trustee in writing to invest, and
the Trustee shall so invest, the amounts in the Collection Account in specified
Eligible Investments that mature not later than the next succeeding Deposit Date
and the Trustee shall take all reasonable steps to perfect its security interest
(as such term is defined in the UCC) therein; PROVIDED, that, any Eligible
Investment as to which the entity serving as Trustee is the obligor in its
individual capacity or any Eligible Investment described in clause (e) of the
definition thereof may mature not later than such Distribution Date; and
PROVIDED, FURTHER, that all Eligible Investments shall be held to maturity.
(d) The Servicer shall instruct the Trustee in writing to make
withdrawals and payments from the Collection Account for the purposes of
carrying out the Servicer's or the Trustee's duties hereunder.
SECTION 7.03. ESTABLISHMENT AND ADMINISTRATION OF THE CASH RESERVE
ACCOUNT. (a) On or prior to the Closing Date, the Trustee shall cause to be
established and maintained at all times the Cash Reserve Account in the name of
the Trustee. The Seller hereby grants to the Trustee for the benefit of the
Trust and the Certificateholders, a security interest in the Cash Reserve
Account and all funds and investment property contained therein (which
investment property the parties hereto agree shall constitute "financial assets"
for purposes of Section 8-102 of the UCC of the State of Illinois). The Cash
Reserve Account shall be an Eligible
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Account initially established at the offices of the Trustee, bearing a
designation clearly indicating that the funds deposited therein are held for the
benefit of the Trust. The Cash Reserve Account shall not be deemed an asset of
the Trust, however it shall be subject to the dominion and control of the
Trustee for the benefit of the Trust. If, at any time, the Cash Reserve Account
ceases to be an Eligible Account, the Trustee on behalf of the Trust shall
within 20 Business Days establish a new Cash Reserve Account which shall be an
Eligible Account, transfer any cash and/or any investments to such new Cash
Reserve Account and from the date such new Cash Reserve Account is established,
it shall be the "Cash Reserve Account". On the Closing Date, the Seller shall
deliver an amount equal to the Initial Cash Reserve Account Deposit to the
Trustee for deposit into the Cash Reserve Account by the close of business on
the Closing Date, which amounts shall be allocated in the manner provided
herein.
(b) The Servicer shall direct the Trustee in writing to invest, and
the Trustee shall so invest, the amounts in the Cash Reserve Account in
specified Eligible Investments that mature not later than the Deposit Date
preceding the next Distribution Date and the Trustee shall take all reasonable
steps to perfect its security interest (as such term is defined in the UCC)
therein; PROVIDED that any Eligible Investment as to which the entity serving as
Trustee is the obligor in its individual capacity or any Eligible Investment
described in clause (e) of the definition thereof may mature not later than such
Distribution Date; and PROVIDED, FURTHER, that all Eligible Investments shall be
held to maturity.
(c) If on any Deposit Date the amount of Available Funds is
insufficient to make the distributions required by Section 7.04(a)(i)-(vii)
inclusive, the Trustee shall withdraw or cause to be withdrawn from the Cash
Reserve Account and deposit in the Collection Account the lesser of (i) the
Available Cash Reserve Amount and (ii) the amount necessary to make up such
deficiency.
(d) On each Distribution Date, all distributions made pursuant to
Section 7.04(a)(viii) shall be deposited into the Cash Reserve Account.
(e) If the amount on deposit in the Cash Reserve Account, after
giving effect to the distributions to the Certificateholders, the Trustee, the
Servicer, the Back-Up Servicer and the Successor Servicer, if applicable, on any
Distribution Date, is greater than the Required Cash Reserve Amount on such
Distribution Date, the amount of such excess shall be distributed to the Seller.
Amounts properly distributed to the Seller pursuant to this Section 7.03(e),
either directly without deposit in the Cash Reserve Account or from amounts in
excess of the Required Cash Reserve Amount, shall be deemed released from the
security interest established by Section 7.01, and the Seller will not in any
event be required to refund any such distributed amounts.
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(f) On the first Distribution Date following the Distribution Date on
which the Certificateholders have been paid in full, the Trustee shall disburse
all amounts held in the Cash Reserve Account, if any, to the Seller.
(g) The Servicer shall instruct the Trustee in writing to make
withdrawals and payments from the Cash Reserve Account in accordance with the
provisions hereof.
SECTION 7.04. DISTRIBUTIONS. (a) On each Distribution Date the
Trustee will disburse the Available Funds in the Collection Account (to the
extent available after taking into account any amounts deposited into the
Collection Account from the Cash Reserve Account) in the following priority:
(i) the following amounts to the following parties, PARI PASSU:
(A) to the Servicer, the Monthly Servicing Fee, together with
any overdue Monthly Servicing Fee;
(B) to the Trustee, the Trustee Fee, together with any overdue
Trustee Fee; and
(C) to the Back-Up Servicer, the Back-Up Servicing Fee, together
with any overdue Back-Up Servicing Fee;
(ii) to the Class A Certificateholders, the Class A Monthly
Interest, together with any Class A Interest Carryover Shortfall;
(iii) to the Class B Certificateholders, the Class B Monthly
Interest, together with any Class B Interest Carryover Shortfall;
(iv) to the Class C Certificateholders, the Class C Monthly
Interest, together with any Class C Interest Carryover Shortfall;
(v) to the Class A Certificateholders, the Class A Principal
Distributable Amount, together with any Class A Principal Carryover
Shortfall, until the Class A Certificate Principal Balance has been reduced
to zero;
(vi) to the Class B Certificateholders, the Class B Principal
Distributable Amount, together with any Class B Principal Carryover
Shortfall, until the Class B Certificate Principal Balance has been reduced
to zero;
(vii) to the Class C Certificateholders, the Class C Principal
Distributable Amount, together with any Class C Principal Carryover
Shortfall, until the Class C Certificate Principal Balance has been reduced
to zero;
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(viii) to the Cash Reserve Account, such amount, if any, necessary
to bring the Available Cash Reserve Amount up to the Required Cash Reserve
Amount; and
(ix) the balance, (A) to the Servicer, or (B) during such time as
there is a Successor Servicer, to the Seller;
PROVIDED, HOWEVER, that for purposes of determining the Aggregate Principal
Balance of the Auto Loans for calculating the distributions described in item
(i) above, the Principal Balance of a Defaulted Auto Loan or a Purchased Auto
Loan will be deemed to be zero on and after the close of business on the last
day of the Due Period in which such Auto Loan became a Defaulted Auto Loan or a
Purchased Auto Loan. If the Servicer exercises the purchase option on any
Distribution Date pursuant to Section 10.01, such amount will be distributed to
Certificateholders on such Distribution Date.
(b) All monthly distributions shall be made by the Trustee by wire
transfer of immediately available funds to the account of the Person entitled
thereto at a bank or other entity having appropriate facilities therefor if such
Person shall have so notified the Trustee in writing by the Record Date
immediately prior to such Distribution Date and is the registered
Certificateholder in the initial aggregate principal amount equal to or in
excess of $500,000; and in all other cases by check mailed to each such
Certificateholder at such Certificateholder's address appearing in the
Certificate Register, in either case without presentation or surrender of any
Certificate held by such Certificateholder or the making of any notation
thereon. Within 30 days after the final payment with respect to each
Certificate, the Certificateholder thereof will surrender its Certificate to the
Trustee. The Trustee shall have no liability or obligation in respect of the
failure for any Certificateholder to surrender its Certificate.
(c) On each Distribution Date, if the Servicer has reported to the
Trustee in the Servicer's Certificate for any Due Period that an Obligor or an
Obligor's representative or successor successfully shall have asserted a claim
or defense under bankruptcy law or similar laws for the protection of creditors
generally (including the avoidance of a preferential transfer under bankruptcy
law) that results in a liability of the Trust to such Obligor for monies
previously collected and remitted to the Trustee and not otherwise netted
against collections pursuant to Section 7.02(b), the Trustee shall make all
payments in respect of such claims or defenses out of the amounts on deposit in
the Collection Account with respect to such Due Period before making the
distributions required by paragraph (a) of this Section 7.04.
(d) On the first Distribution Date following the Distribution Date on
which the Certificateholders have been paid in full, all amounts held in the
Collection Account and the Cash
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Reserve Account, if any, shall be disbursed to the Seller and all interests of
the Trust in all Auto Loans which have an outstanding balance shall be
reconveyed by the Trustee to, or at the written direction of, the Seller.
SECTION 7.05. REPORTS TO CERTIFICATEHOLDERS. On each Distribution
Date, concurrently with the distribution to the Certificateholders, the Trustee
shall furnish, or cause to be furnished by the Paying Agent to the
Certificateholders, a Monthly Investor's Report.
ARTICLE VIII
REMEDIES
SECTION 8.01. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE. The Trustee may in its discretion proceed to protect and enforce its
rights and the rights of the Certificateholders by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect and enforce any
such rights, whether for the specific enforcement of any covenant or agreement
in this Agreement or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy. The Trustee shall notify the Seller, the
Servicer and each Rating Agency of any such action.
SECTION 8.02. TRUSTEE MAY FILE PROOFS OF CLAIM. (a) In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relating to the Seller, or any other obligor upon the Certificates,
or the property of the Seller, or such other obligor or their creditors, the
Trustee (irrespective of whether the principal of the Certificates shall then be
due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand on the Seller for
the payment of overdue principal or interest) shall be entitled and empowered,
by intervention in such proceeding or otherwise:
(i) to file and prove a claim for the whole amount of principal
and interest owing and unpaid in respect of the Certificates or any amount
owing on the Auto Loans or the other Trust Assets and to file such other
papers or documents as may be necessary or advisable in order to have the
claims of the Trustee and any predecessor Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee and any predecessor Trustee, their agents and counsel) and of the
Certificateholders allowed in such judicial proceeding; and
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(ii) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute the same;
and any custodian, receiver, liquidator, assignee, trustee, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Certificateholder to make such payments to the Trustee and, in the event
that the Trustee shall consent to the making of such payments directly to the
Certificateholders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee and any
predecessor Trustee, their agents and counsel, and any other amounts due the
Trustee and any predecessor Trustee under Section 5.06.
(b) Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Certificateholder
any plan or reorganization, agreement, adjustment or composition affecting the
Certificates or the rights of any Certificateholder thereof or affecting the
Auto Loans or the other Trust Assets or to authorize the Trustee to vote in
respect of the claim of any Certificateholder in any such proceeding.
SECTION 8.03. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
CERTIFICATES. All rights of action and claims under this Agreement, the
Certificates, the Auto Loans or the other Trust Assets may be prosecuted and
enforced by the Trustee without the possession of any of the Certificates or the
production thereof in any proceeding relating thereto, and any such proceeding
instituted by the Trustee shall be brought in its own name as trustee of an
express trust, and any recovery of judgment shall, after provisions for the
payment of the reasonable compensation, expenses, disbursements and advances of
the Trustee and any predecessor Trustee, their agents and counsel, be for the
ratable benefit of the Certificateholders in respect of which such judgment has
been recovered.
SECTION 8.04. APPLICATION OF MONEY COLLECTED. Any money collected by
the Trustee pursuant to this Article VIII shall be deposited in the Collection
Account for disbursement in accordance with the provisions of Article VII.
SECTION 8.05. LIMITATION ON SUITS. No Certificateholder shall have
any right to institute any proceeding, judicial or otherwise, with respect to
this Agreement, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless:
(a) such Certificateholder has previously given written notice to the
Trustee of such action or proceeding;
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(b) the Certificateholders of an aggregate Percentage of not less
than 50% shall have made written request to the Trustee to institute proceedings
in its own name as Trustee hereunder;
(c) such Certificateholder or Certificateholders have offered to the
Trustee indemnity satisfactory to the Trustee against the costs, expenses and
liabilities to be incurred in compliance with such request;
(d) the Trustee, for 60 days after its receipt of such notice,
request and offer of indemnity, has failed to institute any such proceeding; and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Certificateholders of a
majority in aggregate principal amount of the outstanding Certificates;
it being understood and intended that no one or more Certificateholders shall
have any right in any manner whatsoever by virtue of, or by availing of, any
provision of this Agreement to affect, disturb or prejudice the rights of any
other Certificateholders, or to obtain or to seek to obtain priority or
preference over any other Certificateholders or to enforce any right under this
Agreement, except in the manner herein provided and for the ratable benefit of
all the Certificateholders.
SECTION 8.06. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or
any Certificateholder has instituted any proceeding to enforce any right or
remedy under this Agreement and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee or to
such Certificateholder, then and in every such case, subject to any
determination in such proceeding, the Seller, the Trustee and the
Certificateholders shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee and
the Certificateholders shall continue as though no such proceeding had been
instituted.
SECTION 8.07. RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise
provided with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Certificates in Section 6.05, no right or remedy herein conferred
upon or reserved to the Trustee or to the Certificateholders is intended to be
exclusive of any other right or remedy and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
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SECTION 8.08. DELAY OR OMISSION NOT WAIVER. No delay or omission of
the Trustee or of any Certificateholder to exercise any right or remedy
hereunder shall impair any such right or remedy or constitute a waiver of any
right of the Trustee or such Certificateholder hereunder or an acquiescence
therein. Every right and remedy given by this Article or by law to the Trustee
or to the Certificateholders may be exercised from time to time, and as often as
may be deemed expedient, as permitted under the terms hereof, by the Trustee or
by the Certificateholders, as the case may be.
SECTION 8.09. CONTROL BY CERTIFICATEHOLDERS. Certificateholders of
an aggregate Percentage of not less than 50% shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred on the Trustee; PROVIDED,
that (a) such direction shall not be in conflict with any rule of law or with
this Agreement, and (b) the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction.
SECTION 8.10. UNDERTAKING FOR COSTS. All parties to this Agreement
agree, and each Certificateholder by his acceptance of a Certificate shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Agreement, or in any suit
against the Trustee for any action taken, suffered or omitted by it as Trustee,
the filing by any party litigant in such suit of an undertaking to pay the costs
of such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees and disbursements, against any party
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; but the provisions of this
Section 8.10 shall not apply to any suit instituted by the Seller, to any suit
instituted by the Trustee, to any suit instituted by any Certificateholder or
group of Certificateholders holding in the aggregate more than 10% in principal
amount of the outstanding Certificates, or to any suit instituted by any
Certificateholder for the enforcement of the payment of any principal of or
interest on any Certificate.
SECTION 8.11. WAIVER OF STAY OR EXTENSION LAWS. The Seller covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Agreement; and the Seller (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
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ARTICLE IX
LIMITATION ON LIABILITY; INDEMNITIES
SECTION 9.01. LIABILITIES OF OBLIGORS. No obligation or liability of
any Obligor under any of the Auto Loans is intended to be assumed by the Seller,
the Servicer, the Back-Up Servicer, the Trust, the Trustee or the
Certificateholders under or as a result of this Agreement and the transactions
contemplated hereby and, to the maximum extent permitted and valid under
mandatory provisions of law, the Seller, the Back-Up Servicer, the Servicer, the
Trust, the Trustee and the Certificateholders expressly disclaim such
assumption.
SECTION 9.02. LIMITATION ON LIABILITY OF THE SELLER AND THE SERVICER.
(a) The Seller and the Servicer shall each be liable in accordance herewith
only to the extent of the obligations specifically imposed by this Agreement, it
being understood that no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or shall otherwise
exist against the Seller or the Servicer.
(b) None of the Seller, the Servicer, nor any of the directors,
officers, employees or agents of the Seller or the Servicer shall be under any
liability to the Trust or the Certificateholders for any action taken, or for
refraining from the taking of any action, in good faith pursuant to this
Agreement, or for errors in judgment; PROVIDED, HOWEVER, that this provision
shall not protect the Seller or the Servicer or any such Person against any
breach of warranties or representations made herein, or against any specific
liability imposed on each such party pursuant to this Agreement or against any
liability which would otherwise be imposed by reason of willful misfeasance, bad
faith or negligence in the performance of duties or by reason of reckless
disregard of obligations or duties hereunder. The Seller, the Servicer and any
director, officer, employee or agent of the Seller or the Servicer may rely in
good faith on any document of any kind which, PRIMA FACIE, is properly executed
and submitted by any appropriate Person respecting any matters arising
hereunder.
SECTION 9.03. INDEMNITIES OF THE SERVICER. (a) The Servicer agrees
to indemnify the Trustee the Back-Up Servicer and any of their respective
directors, officers, employees or agents ("Servicer Indemnified Parties") and
the Trust from, and hold them harmless against, any and all costs (including,
without limitation, the costs and expenses of agents and counsel), expenses,
losses, claims, taxes, damages and liabilities (i) in the case of the Servicer
Indemnified Parties, incurred in connection with the performance of their
respective duties hereunder and the administration of the Trust and (ii) in the
case of the Servicer Indemnified Parties and the Trust, to the extent that such
cost, expense, loss, claim, tax, damage or liability arose out of, or was
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imposed upon such Servicer Indemnified Parties or the Trust through the
Servicer's acts or omissions in violation of this Agreement (subject to the
servicing standard set forth in Section 4.01(b)) except to the extent such
Servicer Indemnified Party's own bad faith, willful misconduct or negligence
contributes to the cost, expense, loss, claim, damage or liability.
(a) This Section 9.03 shall survive the termination of this Agreement
or the resignation or removal of the Trustee, or the Back-Up Servicer, as the
case may be, in respect of rights accrued prior to such resignation or removal.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. TERMINATION OF AGREEMENT; OPTIONAL REPURCHASE.
(a) This Agreement and the respective obligations and responsibilities of the
Seller, the Servicer and the Trustee created hereby shall terminate on the date
(the "Trust Termination Date") which is the earlier to occur of:
(i) the day after the day on which the Certificateholders
are paid all amounts required to be paid to them pursuant to this Agreement
and the Certificates and the disposition of all Trust Assets; and
(ii) March 20, 2002.
(b) Upon at least 15 days' written notice to the Trustee (and to each
Certificateholder) prior to a Distribution Date; PROVIDED the Certificate
Principal Balance on such Distribution Date is 10% or less of the Initial
Principal Amount, the Servicer may, but is not required to, purchase as of the
last day of the preceding Due Period all, but not less than all, outstanding
Auto Loans at a price equal to the Aggregate Principal Balances of the Auto
Loans on the last day of the preceding Due Period plus accrued and unpaid
interest thereon at the APR for each Auto Loan through the last day of such
preceding Due Period. Such price shall be deposited to the Collection Account
in immediately available funds by 10:00 a.m., New York City time, on the
relevant Determination Date and the Trustee shall release the Auto Loans and
cause the Custodian to release the Collateral Files to the Servicer, whereupon
the Certificates shall no longer evidence any right or interest in the Auto
Loans or the Collateral Files or any proceeds of the foregoing. Upon the
request of the Servicer, the Trustee shall perform such other acts as reasonably
requested by the Servicer and otherwise cooperate with the Servicer in
connection with the transfer of the Transferred Assets pursuant to this Section
10.01(b), including, but not limited to, the execution of any Title Document to
the extent necessary to effectuate the
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termination of such Auto Loan and the disposition of the related Automobile.
(c) If on the date set forth in Section 10.01(a)(ii), the Certificate
Principal Balance (after giving effect to any distributions to be made on such
date) is greater than zero, the Trustee on behalf of the Trust, or the Servicer
on behalf of the Trustee, will use its best efforts to sell, dispose of or
otherwise liquidate the Transferred Assets in a commercially reasonable manner
and on commercially reasonable terms, which shall include the solicitation of
competitive bids. The proceeds of any such sale, disposition or liquidation of
the Transferred Assets will be treated as Payments and will be immediately
deposited in the Collection Account and such proceeds, in addition to the
Available Funds on deposit in the Collection Account, shall be disbursed in
accordance with the provisions of Section 7.04.
(d) The Servicer shall give the Trustee at least 30 days' prior
written notice of the date on which the Trust is expected to terminate in
accordance with subsection 10.01(a). Such notice shall be accompanied by an
Officer's Certificate setting forth the information specified in Section 4.15
covering the period during the then-current calendar year through the date of
such notice. Not later than the fifth Business Day in the Due Period in which
the final distribution in respect to the Certificates is payable to the
Certificateholders, the Trustee shall mail to the Certificateholders a notice
specifying the procedures with respect to such final distribution. The Trustee
shall give a copy of such notice to the Rating Agencies at the time such notice
is given to Certificateholders.
SECTION 10.02. BENEFICIARIES. This Agreement will inure to the
benefit of and be binding upon the parties hereto, the Certificateholders and
their respective successors and permitted assigns. No other Person will have
any right or obligation hereunder.
SECTION 10.03. AMENDMENT. (a) This Agreement may be amended from
time to time by the Seller, the Servicer and the Trustee, without the consent of
any of the Certificateholders, to cure any ambiguity or defect of, to correct or
supplement any provisions herein which may be inconsistent with any other
provisions herein or to add any other provisions with respect to matters or
questions arising under this Agreement which shall not be inconsistent with the
provisions of this Agreement; PROVIDED, HOWEVER, that such action shall not, as
evidenced by an Opinion of Counsel delivered to the Trustee, adversely affect in
any material respect the interests of any Certificateholder. Such Opinion of
Counsel shall be at the expense of the party requesting such amendment or, if
such amendment is required by any Rating Agency to maintain the rating issued by
it on the Certificates or requested by the Trustee in order to clarify any
ambiguity or resolve any
87
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inconsistency, then the related Opinion of Counsel shall be at the expense of
the Servicer.
(b) This Agreement may also be amended from time to time by the
Seller, the Servicer and the Trustee, with the consent of the Certificateholders
of not less than an aggregate Percentage of 66 2/3% of outstanding Certificates,
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Certificateholders; PROVIDED, HOWEVER, that no such
amendment shall (a) reduce in any manner the amount of, or delay the timing of,
collections of payments on the Auto Loans or distributions which are required to
be made on any Certificate then outstanding, (b) reduce the aforesaid percentage
required to consent to any such amendment or (c) modify this Section 10.03(b)
without the consent of the holders of all Certificates then outstanding. The
Trustee may set a record date for purposes of determining the holders entitled
to give a written consent or waive compliance as authorized or permitted by this
Section 10.03(b). Such record date shall not be more than 30 days prior to the
first solicitation to such consent or waiver.
(c) Promptly after the execution of any amendment or consent pursuant
to this Section 10.03, the Trustee shall furnish such amendment to each
Certificateholder or a written summary of such amendment prepared by the
Servicer and, not later than the tenth Business Day preceding the effectiveness
of any such amendment, the Rating Agencies.
(d) It shall not be necessary for the consent of Certificateholders
under this Section 10.03 to approve the particular form of any proposed
amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable requirements as the Trustee may prescribe.
(e) The Servicer and the Trustee may, but shall not be obligated to,
enter into any such amendment which affects the Servicer's or the Trustee's, as
the case may be, own rights, duties immunities or indemnities under this
Agreement or otherwise.
(f) In connection with any amendment pursuant to this Section 10.03,
the Trustee shall be entitled to receive an Opinion of Counsel to the effect
that such amendment is authorized or permitted by the Agreement and that all
conditions precedent to the execution and delivery of such amendment have been
satisfied.
SECTION 10.04. NOTICES. (a) All communications, instructions,
directions and notices to the parties thereto shall be (i) in writing (which may
be by telecopy, followed by delivery of original documentation within one
Business Day), (ii) effective
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when received and (iii) delivered or mailed first class mail, postage prepaid to
it at the following address:
If the Trustee at its Corporate Trust Office:
Harris Trust and Savings Bank
311 West Monroe Street, 12th Floor
Chicago, Illinois 60606
Attention: Indenture Trust Division
Facsimile: (312) 461-3525
Telephone: (312) 461-2647
If to the Seller:
Eagle Auto Funding Corp.
1425 Tri-State Parkway
Suite 140A
Gurnee, IL 60031
Attention: Treasurer
Facsimile Number: (847) 855-7250
Telephone Number: (847) 855-7128
If to the Servicer:
Eagle Finance Corp.
1425 Tri-State Parkway
Suite 140
Gurnee, IL 60031
Attention: Servicer - Eagle Auto Trust 1996-A
Facsimile Number: (847) 855-7250
Telephone Number: (847) 855-7150
If to the Rating Agencies:
Duff & Phelps Credit Rating Co.
55 East Monroe Street
Chicago, Illinois 60603
Attention: Monitoring and Research Group/
Structured Finance
Facsimile Number: (312) 263-2852
Telephone Number: (312) 263-2610
Fitch Investors Service, L.P.
One State Street Plaza
New York, New York 10004
Attention: ABS Monitoring Department
89
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Facsimile Number: (212) 376-6898
Telephone Number: (212) 908-0500
If to Greenwich Capital Markets, Inc.:
Greenwich Capital Markets, Inc.
600 Steamboat Road
Greenwich, CT 06830
Attention: Structured Finance Dept.
Facsimile Number: (203) 629-4640
Telephone Number: (203) 625-2700
or at such other address as the party may designate by notice to the other
parties hereto, which shall be effective when received.
(a) All communications and notices pursuant hereto to a
Certificateholder shall be in writing and delivered or mailed first class mail,
postage prepaid at the address shown in the Certificate Register.
SECTION 10.05. NOTICES AND REPORTS TO BE DELIVERED TO THE RATING
AGENCIES. On or before the later to occur of each Distribution Date and, the
Business Day following its receipt thereof, the Servicer shall promptly deliver
to the Rating Agencies the notices, reports and certificates referred to in
Sections 4.13, 4.14, 4.15, 4.16, 7.05 and 10.03. Each report or certificate
specified in Sections 4.13(b), 4.14 and 4.15 shall be accompanied by a
certificate of the Servicer certifying that (a) the Servicer has reviewed such
report and that nothing came to its attention based on such review which would
lead it to believe that such report or certificate was not accurate or in
compliance with the terms of this Agreement governing the content and
preparation of such report or certificate except as specified therein or as to
which it shall believe to be immaterial and (b) that the Servicer has no actual
knowledge of any event that has occurred and is continuing which constitutes an
Event of Servicing Termination or would constitute such an event but for the
requirement that notice be given or time elapse or both.
SECTION 10.06. MERGER AND INTEGRATION. Except as specifically stated
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived, or supplemented except as provided herein.
SECTION 10.07. HEADINGS. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
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SECTION 10.08. CERTIFICATES NONASSESSABLE AND FULLY PAID. The
interests represented by the Certificates shall be nonassessable for any losses
or expenses of the Trust or for any reason whatsoever, and, upon authentication
thereof by the Trustee pursuant to Section 6.01 and 6.02, each Certificate shall
be deemed fully paid.
SECTION 10.09. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, provisions or terms of this Agreement shall be for any reason
whatsoever held invalid, then such covenants, provisions or terms shall be
deemed severable from the remaining covenants, provisions or terms of this
Agreement, and shall in no way affect the validity or enforceability of the
other provisions of this Agreement, of the Certificates or the rights of the
Certificateholders.
SECTION 10.10. NO PROCEEDINGS. The Servicer and the Trustee each
hereby agrees that it will not, directly or indirectly institute, or cause to be
instituted, against the Seller or the Trust any bankruptcy, insolvency,
reorganization, marshalling of assets, liquidation, receivership or other
similar proceeding so long as there shall not have elapsed one year plus one day
since the Trust Termination Date. Notwithstanding the foregoing nothing herein
shall be construed to prohibit the Trustee from filing proofs of claim or
otherwise participating in any such proceeding instituted by any other Person.
SECTION 10.11. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS) OF THE STATE
OF NEW YORK, PROVIDED, HOWEVER, THAT THE LAWS OF THE STATE OF ILLINOIS SHALL
GOVERN THE CREATION AND PERFECTION OF THE SECURITY INTEREST IN THE CASH RESERVE
ACCOUNT AND THE ELIGIBLE INVESTMENTS THEREIN GRANTED PURSUANT TO SECTION 7.03.
(b) THE SELLER, THE SERVICER, THE PAYING AGENT, AND THE TRUSTEE
HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF
NEW YORK AND THE UNITED STATES DISTRICT COURT LOCATED IN THE BOROUGH OF
MANHATTAN IN NEW YORK CITY, AND EACH CONSENTS TO PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON IT IN ANY MANNER PERMITTED BY APPLICABLE LAW. THE SELLER, THE
SERVICER, THE PAYING AGENT, AND THE TRUSTEE EACH HEREBY WAIVE ANY OBJECTION
BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION
INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION SHALL
AFFECT THE RIGHT OF THE SELLER, THE SERVICER, THE PAYING AGENT, AND THE TRUSTEE
TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT EITHER'S
RIGHT TO BRING ANY ACTION OR PROCEEDING IN THE COURTS OF ANY OTHER JURISDICTION.
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(c) THE SELLER, THE SERVICER, THE PAYING AGENT, AND THE TRUSTEE EACH
HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH,
RELATED TO, OR IN CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED
IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
SECTION 10.12. COUNTERPARTS. This Agreement may be executed in
counterparts each of which shall be an original, but all of which together shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Pooling and
Servicing Agreement to be executed by their respective officers thereunto duly
authorized this 24th day of October, 1996.
EAGLE AUTO FUNDING CORP.,
as Seller
By
---------------------------------
Name: Howard J. Adamski
Title: Vice President
EAGLE FINANCE CORP.,
individually and as Servicer
By
---------------------------------
Name: Howard J. Adamski
Title: Vice President & Treasurer
HARRIS TRUST AND SAVINGS BANK,
not in its individual capacity but solely as Trustee
By
---------------------------------
Name: Keith R. Richardson
Title: Assistant Vice President
<PAGE>
EXHIBIT A
TO
POOLING AND SERVICING AGREEMENT
DATED AS OF September 1, 1996
EAGLE AUTO TRUST 1996-A
[FORM OF REPURCHASE ASSIGNMENT]
ASSIGNMENT, dated as of __________, 199_ between Harris Trust and Savings
Bank, as Trustee (the "Trustee") and [EAGLE AUTO FUNDING CORP.] [EAGLE FINANCE
CORP.].
1. We refer to the Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement"), dated as of September 1, 1996, by and among Eagle Auto
Funding Corp., as Seller; Eagle Finance Corp., as Servicer; and the Trustee.
All provisions of such Pooling and Servicing Agreement are incorporated by
reference. All capitalized terms shall have the meanings set forth in the
Pooling and Servicing Agreement.
2. Pursuant to Section 3.03 of the Pooling and Servicing Agreement, the
Trust does hereby, transfer, assign, set over and convey to [Eagle Auto Funding
Corp.] [Eagle Finance Corp.], without recourse or warranty, express or implied,
all right, title and interest of the Trust in, to and under the Auto Loans
listed on Schedule 1 hereto (each, a "Purchased Auto Loan") and [Eagle Auto
Funding Corp.] [Eagle Finance Corp.] does hereby purchase such Auto Loans.
3. The Trustee, on behalf of the Trust, hereby represents and warrants
that each Auto Loan transferred hereunder is transferred without any lien,
charge or encumbrance, created by or arising as a result of actions or omissions
of the Trustee except as to liens, charges or encumbrances created or arising
out of the Pooling and Servicing Agreement.
4. The aggregate Repurchase Price for such [purchased] Auto Loan(s) is
$___________.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Assignment to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
Harris Trust and Savings Bank,
as Trustee
By:
--------------------------------
Name:
Title:
[EAGLE AUTO FUNDING CORP.] [EAGLE FINANCE CORP.]
By:
--------------------------------
Name:
Title:
ACKNOWLEDGED:
EAGLE FINANCE CORP.
as Servicer
By:
--------------------------------
Name:
Title:
A-2
<PAGE>
EXHIBIT B
TO
POOLING AND SERVICING AGREEMENT
DATED AS OF September 1, 1996
EAGLE AUTO TRUST 1996-A
[FORM OF RELEASE AND ASSIGNMENT]
RELEASE AND ASSIGNMENT, dated as of __________, 199_ between Harris Trust
and Savings Bank, as Trustee (the "Trustee") and Eagle Finance Corp., as
Servicer (the "Servicer").
1. We refer to the Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement"), dated as of September 1, 1996, and among Eagle Auto
Funding Corp., as Seller; Eagle Finance Corp., as Servicer; and the Trustee.
All provisions of such Pooling and Servicing Agreement are incorporated by
reference. All capitalized terms shall have the meanings set forth in the
Pooling and Servicing Agreement.
2. Pursuant to Section 4.07 of the Pooling and Servicing Agreement, the
Trustee does hereby transfer, assign, set over and convey to the Servicer
without recourse or warranty, express or implied, all right, title and interest,
in, to and under the Auto Loans (and the related Collateral Files) listed on
Schedule 1 hereto.
3. The Trustee, on behalf of the Trust, hereby represents and warrants
that each Auto Loan transferred hereunder is transferred without any lien,
charge or encumbrance, created by or arising as a result of actions or omissions
of the Trustee except as to liens, charges or encumbrances created or arising
out of the Pooling and Servicing Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Release and
Assignment to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
Harris Trust and Savings Bank
as Trustee
By:
--------------------------------
Name:
Title:
ACKNOWLEDGED:
EAGLE FINANCE CORP.
as Servicer
By:
--------------------------------
Name:
Title:
B-2
<PAGE>
EXHIBIT C
TO
POOLING AND SERVICING AGREEMENT
DATED AS OF September 1, 1996
EAGLE AUTO TRUST 1996-A
[FORM OF INDEPENDENT ACCOUNTANTS' REPORT]
Independent Accountant's Report
We have examined management's assertion about Eagle Finance Corp. (the
"Servicer") compliance with the servicing standards set forth in the Pooling and
Servicing Agreement. Management is responsible for the Servicer's compliance
with those minimum servicing standards. Our responsibility is to express an
opinion on management's assertion about the Servicer's compliance based on our
examination.
Our examination was made in accordance with standards established by the
American Institute of Certified Public Accountants and, accordingly, included
examining, on a test basis, evidence about the Servicer's compliance with the
minimum servicing standards and performing such other procedures as we
considered necessary in the circumstances. We believe that our examination
provides a reasonable basis for our opinion. Our examination does not provide a
legal determination on the Servicer's compliance with the minimum servicing
standards.
In our opinion, management's assertion that the Servicer complied with the
aforementioned minimum servicing standards as of and for the period ending
December 31, ____ is fairly stated, in all material respects.
<PAGE>
EXHIBIT D
TO
POOLING AND SERVICING AGREEMENT
DATED AS OF September 1, 1996
EAGLE AUTO TRUST 1996 - A
[FORM OF SERVICER REPORT]
----------------------------------------------------------
FOR THE PERIOD BEGINNING [ ] AND ENDING [ ] (the
"Reporting Period").
The undersigned, a duly authorized officer of Eagle Finance Corp. as
Servicer (the "Servicer"), pursuant to section 4.15 of the Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement"), dated as of September 1, 1996
by and among Eagle Auto Funding Corp., as Seller, the Servicer, and Harris Trust
and Savings Bank, as Trustee, does hereby certify as follows:
1. Capitalized terms used in this Servicer Report (and not otherwise defined
otherwise defined herein) shall have the respective meanings set forth in
the Pooling and Servicing Agreement.
2. Eagle Finance Corp. is, as the date hereof, the Servicer under the Pooling
and Servicing Agreement.
3. The undersigned is a Servicing Officer.
4. This report is dated [ ].
4.1 Principal Reconciliation:
Number of Auto Aggregate
Loans Prin. Balance
-------------- -------------
Beginning balance [ ]
Repurchase
Payments Allocable to Principal
Prepayment of Principal
Defaulted Auto Loans
-------------- -------------
Ending Balance [ ]
<PAGE>
5. AGGREGATE PRINCIPAL BALANCE OF THE AUTO LOANS
a. As of [the end of the prior Due Period]
Number of Days Aggregate Principal
Delinquent Number of Auto Loans Balance of Auto Loans
-------------- -------------------- ---------------------
current (0 - 29)
30 - 59
60 - 89
90 - 119
120 or greater
-------------------- ---------------------
Totals:
b. As of [the end of the current Due Period]
Number of Days Aggregate Principal
Delinquent Number of Auto Loans Balance of Auto Loans
-------------- -------------------- ---------------------
current (0 - 29)
30 - 59
60 - 89
90 - 119
120 or greater
-------------------- ---------------------
Totals:
6. DEFAULTED AUTO LOANS
Auto Loans that became Defaulted Auto Loans during the Reporting Period.
Number of Aggregate Principal
Auto Loans Balance of Auto Loans
-------------------- ---------------------
120 days
contractually
past due
Auto Loan as to
which proceeds of
the sale of the
related
Automobile has
been received
No further
proceeds expected
-------------------- ---------------------
Total
D-2
<PAGE>
7. AUTO LOANS WITH MODIFIED PAYMENT SCHEDULES
Auto Loans that have had their payment schedules modified in accordance
with the provisions of Section 4.04(c) of the Pooling and Servicing
Agreement during the Reporting Period.
Description of Modifications
----------------------------------------
Auto Loan Aggregate Principal Original New Original New
Number Balance of Auto Loan Term Term APR APR
--------- -------------------- ------------ ------ ---------- ------
8. PURCHASED AUTO LOANS
Information with respect to Purchased Auto Loans during the Reporting
Period.
Aggregate
Principal Aggregate
Number of Balance of Auto Repurchase
Party Auto Loans Loans Price
--------------- ---------- --------------- ----------
Seller
Eagle Finance
Servicer
--------------- ---------- --------------- ----------
Totals: 0 $0.00 $0.00
9. RECOVERIES
Information with respect to Recoveries during the Reporting Period.
Number of Auto Loans on Aggregate
which there were Amount of
Recoveries Recoveries
----------------------- --------------
----------------------- --------------
D-3
<PAGE>
10. REPOSSESSION INFORMATION
Aggregate Aggregate
Number of Principal Balance Amount
Action Auto Loans of Auto Loans Realized
---------------- ---------- ----------------- ---------
Repossessed
Automobiles in
Inventory at the
beginning of the
Due Period
Repossessed
Automobiles Sold
during the Due
Period
Automobiles
Repossessed
during the Due
Period
Repossessions
Redeemed during
the Due Period
Repossessed
Automobiles in
Inventory at end
of the Due Period
---------- ----------------- ---------
11. NET LOSSES
a. The aggregate outstanding Principal Balance of
Defaulted Auto Loans during the Reporting
Period was ............................................. $___________
b. Recoveries ............................................ $___________
c. The total amount of the losses on the Auto Loans
during the Reporting Period was ........................ $___________
12. TOTAL AMOUNT OF PAYMENTS COLLECTED DURING THE PRECEDING DUE PERIOD AND
DEPOSITED INTO THE COLLECTION ACCOUNT (WITHOUT DUPLICATION)
a. The aggregate portion of Payments collected on the
Auto Loans allocable to scheduled payments in respect
of interest on the Auto Loans........................... $___________
b. The aggregate portion of Payments collected on the
Auto Loans allocable to Scheduled Payments in respect
of Principal on the Auto Loans ......................... $___________
D-4
<PAGE>
c. The aggregate portion of Payments collected on the
Auto Loans allocable to prepayment of principal . . . .
(int....$ prin...$ ) $___________
d. The aggregate amount of Insurance Proceeds collected
on the Auto Loans....................................... $___________
e. The aggregate amount of Recoveries collected on
the Auto Loans. . . . . . . . . . . . . . . . . . . . . $___________
Int....$ Prin....$ ) $___________
f. Total Late Charges Received............................. $___________
g. The total amount of Payments collected on the Auto
Loans and the total deposited into the Collection
Account (sum of a+b+c+d+e+f) was........................ $___________
h. Total funds received on repurchase of Auto Loans
pursuant to Section 3.03................................ $___________
i. Total Cash Received .................................... $___________
13. AMOUNT AND COMPUTATION OF MONTHLY SERVICING FEE.
a. The Reimbursable Servicer Expenses with respect to
the Due Period immediately preceding the date of
this Servicer Report to be included in the Monthly
Servicer Fee (not previously netted against
Recoveries)............................................. $___________
b. The fee portion of the amount owing to the Servicer
with respect to the Due Period immediately preceding
the date of this Servicer Report is (1/12 x 0.03 x the
Aggregate Principal Balance of the Auto Loans at the
beginning of the immediately preceding Due Period)...... $___________
c. The Monthly Servicing Fee, if any, owing with respect
to the Due Period prior to the immediately preceding
Due Period (a+b) is..................................... $___________
d. The total amount owing to the Servicer on the next
following Distribution Date is.......................... $___________
14. EVENTS OF SERVICING TERMINATION
No event has occurred and is continuing which constitutes an Event of
Servicing Termination or would constitute an Event of Servicing Termination
but for the requirement that notice be given or time elapse or both.
D-5
<PAGE>
In Witness Whereof, the undersigned has duly executed and delivered this
certificate this day, [ ].
EAGLE FINANCE CORP.,
as Servicer
By:
--------------------------------
Name:
Title:
[To be delivered pursuant to Section 4.15 of the Pooling and Servicing
Agreement not later than the 14th day of each month (or, if such day is not
a Business Day the next succeeding Business Day) to the Trustee.]
D-6
<PAGE>
SCHEDULE 1
TO THE
SERVICING REPORT
DATED __________, 199_
REPOS - POOL 1996-A _______ 95
- --------------------------------------------------------------------------------
EAGLE AUTO TRUST POOL #1996-A: REPOSSESSIONS
- --------------------------------------------------------------------------------
DATE OF NOTE
ACCOUNT NAME BALANCE REPOSSESSION OPEN DATE COMMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL
- --------------------------------------------------------------------------------
[Information contained in this Schedule 1 may be presented
in another format]
D-7
<PAGE>
EXHIBIT E
TO
POOLING AND SERVICING AGREEMENT
DATED AS OF SEPTEMBER 1, 1996
EAGLE AUTO TRUST 1996-A
[FORM OF MONTHLY INVESTOR'S REPORT]
(To be delivered pursuant to Section 4.16 of the
Pooling and Servicing Agreement on each
Determination Date to the Seller and
pursuant to Section 7.05 on each Distribution
Date to the Certificateholders)
----------------------------------------------------------
EAGLE AUTO TRUST 1996-A
For the _______, 199_ Distribution Date
For period beginning on __________, 199_
and ending on ___________, 199_ (the "Due Period")
----------------------------------------------------------
The undersigned, a duly authorized officer of Eagle Finance Corp., as
Servicer (the "Servicer"), pursuant to Sections 4.16 and 7.05 of the Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement") dated as of
September 1, 1996, by and among Eagle Auto Funding Corp., as Seller, Eagle
Finance Corp., as Servicer and Harris Trust and Savings Bank, as Trustee, does
hereby certify as follows:
1. Capitalized terms used in this Monthly Investor's Report and not
otherwise defined herein shall have the respective meanings set forth in
the Pooling and Servicing Agreement.
2. Eagle Finance Corp. is as of the date hereof, the Servicer under the
Pooling and Servicing Agreement.
3. The undersigned is an Officer of the Servicer.
4. The date of this Report is ___________________.
5. POOL FACTOR.
(a) The Pool Factor was ...................................__________
<PAGE>
6. CLASS A, CLASS B AND CLASS C CERTIFICATE PRINCIPAL BALANCES (BEGINNING OF
DUE PERIOD).
(a) The Class A Certificate Principal
Balance as of ____________________
(after giving effect to the disbursements
in reduction of principal, if any,
on the immediately preceding
Distribution Date) was ............................... $________
(b) The Class B Certificate Principal
Balance as of ____________________
(after giving effect to the disbursements
in reduction of principal, if any,
on the immediately preceding
Distribution Date) was ............................... $________
(c) The Class C Certificate Principal
Balance as of __________________
(after giving effect to the
disbursements in reduction
of principal, if any, on the
immediately preceding Distribution
Date) was............................................. $________
7. OCCURRENCE OF A RESERVE REQUIREMENT EVENT
(a) The Delinquency Trigger Event is....................... ________
(b) The 60+ Day Delinquency Rate is........................ ________
(c) The Required Reserve Percentage is..................... ________
(d) The Net Loss Trigger Event is.......................... ________
(e) Cumulative Net Losses as a Percentage of the Initial
Aggregate Principal Balance of Auto Loans is ___________________
(f) [No Reserve Requirement Event has
occurred and is continuing] [A
Reserve Requirement Event has occurred
because of specify reason] [A 60+ Day Delinquency Cure
Event has occurred
because of specify reason]
(g) The Required Reserve Percentage
is...................................................__________%
8. THE CASH RESERVE ACCOUNT
(a) The total amount on deposit in the Cash
Reserve Account as of the beginning
of the period (after giving effect
to any deposits/withdrawals on the
preceding Distribution Date) is..................... $__________
E-2
<PAGE>
(b) The Required Cash Reserve Amount
(i) The Required Cash Reserve Amount available for
deposit to the Collection Account on the
related Deposit Date (prior to any withdrawals
or deposits to be made with respect to the
current Distribution Date are made) is .......... $_______
(ii) The amount to be [deposited] [withdrawn] from
the Cash Reserve Account in Respect of the
Required Cash Reserve Amount is.................. $_______
(iii) The total Required Cash Reserve Amount after
giving effect to any withdrawals or deposits
to be made on such Distribution Date is ......... $_______
(iv) The Required Cash Reserve Amount is ............. $_______
9. AGGREGATE MONTHLY SERVICING AND TRUSTEE FEES
(a) The aggregate Monthly Servicing Fee paid to the
Servicer on the ___________ Distribution Date was...... $_______
(b) The aggregate Back-Up Servicing Fee paid to the
Back-Up Servicer on the ___________ Distribution
Date was............................................... $_______
(c) The aggregate Trustee Fee paid to the Trustee on
the ___________ Distribution Date was.................. $_______
10. AVAILABLE FUNDS.
(a) The amount of Available Funds with respect to the
related Due Period was................................. $_______
(b) Interest earned on and retained in the Collection
Account for the period ___________________
through ___________________ was........................ $_______
(c) Total distributable funds with respect to the
related Due Period [a+b] was........................... $_______
E-3
<PAGE>
(d) The amount of Available Funds and interest earned
on the Collection Account used to pay the Monthly
Servicing Fee, Back-up Servicing Fee and Trustee
Fee on the Distribution Date was....................... $_________
(e) The amount of Available Funds and interest earned
on the Collection Account remaining and the payment
of the Monthly Servicing Fee with respect to the
related Due Period [c-d] is............................ $_________
11. WITHDRAWALS FROM THE CASH RESERVE ACCOUNT.
(a) The amount to be withdrawn from the Cash Reserve
Account and deposited into the Collection Account
on the related Deposit Date is......................... $_________
(b) The amount to be withdrawn from the cash reserve
account in excess of the required cash reserve
amount is.............................................. $_________
12. DISBURSEMENTS TO BE MADE ON THE RELATED DISTRIBUTION DATE.
(*) The Class A Pass-Through Rate is [_______].
The Class B Pass-Through Rate is [_______].
The Class C Pass-Through Rate is [_______].
(a) The amount of the aggregate distribution to be made
on such Distribution Date which constitutes interest
on the Class A Certificates at the Class A Pass-Through
Rate (the Class A Monthly Interest) (*), is ........... $_________
(b) The amount of the aggregate distribution to be made
on such Distribution Date which constitutes payments
in reduction of principal with respect to the Class A
Certificates (the Class A Principal Distributable
Amount) is............................................. $_________
(c) The total amount of the distribution to be made on
such Distribution Date to the Class A
Certificateholders [a+b] is............................ $_________
(d) The amount of the aggregate distribution to be made
on such Distribution Date which constitutes interest
on the Class B Certificate at the Class B Pass-Through
Rate (the Class B Monthly Interest) (*) is............. $_________
E-4
<PAGE>
(e) The amount of the aggregate distribution to be made
on such Distribution Date which constitutes a
reduction of principal with respect to the Class B
Certificate (the Class B Principal Distributable
Amount) is............................................. $_________
(f) The total amount of the distribution to be made on
such Distribution Date to the Class B
Certificateholders [d+e] is............................ $_________
(g) The amount of the aggregate distribution to be
made on such Distribution Date which constitutes
interest on the Class C Certificates at the Class C
Pass-Through Rate (the Class C Monthly Interest)
(*), is................................................ $_________
(h) The amount of the aggregate distribution to be made
on such Distribution Date which constitutes payments
in reduction of principal with respect to the
Class C Certificates (the Class C Principal
Distributable Amount) is............................... $_________
(i) The total amount of the distribution to be made on
such Distribution Date to the Class C
Certificateholders [g+h] is............................ $_________
(j) The total amount of the distributions of principal
and interest to be made on such Distribution Date
to the all Certificateholders [c+f+i] is............... $_________
(k) The amount to be deposited in the Cash Reserve
Account is............................................. $_________
(l) The amount to be disbursed to the Servicer (or, the
Successor Servicer, if applicable) in payment of
the Monthly Servicing Fee is........................... $_________
(m) The amount to be disbursed to the Back-Up Servicer
pursuant to Sections 4.08 and 7.04(a) in payment of
the Back-Up Servicing Fee is........................... $_________
(n) The amount to be disbursed to the Trustee (if
applicable) pursuant to Sections 5.06 and 7.04(a)(i)
in payment of the Trustee's monthly compensation is.... $_________
(o) The amount to be disbursed to the Servicer or Seller
pursuant to Section 7.04(a)(x) is...................... $_________
E-5
<PAGE>
(p) The total amount of distributions to be made
pursuant to Section 7.04(a) [j+k+l+m+n+o] is..... $_______________
13. CLASS A, CLASS B AND CLASS C CERTIFICATE PRINCIPAL BALANCES (END OF DUE
PERIOD).
(a) The Class A Certificate Principal
Balance as of ____________________
(after giving effect to the disbursements
in reduction of principal, if any,
on the immediately preceding
Distribution Date) was ............................... $__________
(b) The Class B Certificate Principal
Balance as of ____________________
(after giving effect to the disbursements
in reduction of principal, if any,
on the immediately preceding
Distribution Date) was ............................... $__________
(c) The Class C Certificate Principal
Balance as of __________________
(after giving effect to the
disbursements in reduction
of principal, if any, on the
immediately preceding Distribution
Date) was............................................. $__________
E-6
<PAGE>
ANNEX A
TO
MONTHLY INVESTOR'S REPORT
DATED ______________
Calculation of Required Cash Reserve Amount as of the ______________,
199_ Distribution Date.
i) The Certificate Principal Balance equals $_________.
ii) Required Reserve Percentage equals _____%.
iii) The Required Cash Reserve Amount equals $________ (i - ii).
E-7
<PAGE>
EXHIBIT F
TO
POOLING AND SERVICING AGREEMENT
DATED AS OF SEPTEMBER 1, 1996
EAGLE AUTO TRUST 1996-A
[FORM OF CLASS A CERTIFICATE]
CLASS A CERTIFICATE
EAGLE AUTO TRUST 1996-A
[ ]% Certificates
No. __ CUSIP No.
Original Principal
Amount: $
THIS CLASS A CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS CLASS A CERTIFICATE,
AGREES THAT THIS CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS
ONLY (1) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT TO A PERSON WHO THE
HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER ("QIB") WITHIN THE
MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QIB, WHOM THE HOLDER HAS INFORMED THAT SUCH REOFFER, RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A; OR (2) IN CERTIFICATED FORM
ONLY (A) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE
501(A), (2) (3) OR (7) OF REGULATION D OF THE SECURITIES ACT OR (B) IN OTHER
TRANSACTIONS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO (A) IN ANY SUCH CASE, RECEIPT BY THE SELLER AND THE CERTIFICATE
REGISTRAR AND TRANSFER AGENT OF A LETTER SUBSTANTIALLY IN THE FORM OF EXHIBIT I
TO THE POOLING AND SERVICING AGREEMENT REFERRED TO BELOW, AND (B) IN THE CASE OF
CLAUSE (2) RECEIPT BY THE SELLER AND THE TRUSTEE OF SUCH CERTIFICATES, LEGAL
OPINIONS AND OTHER EVIDENCE ACCEPTABLE TO THE SELLER AND THE TRUSTEE THAT SUCH
REOFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT AND
OTHER APPLICABLE LAWS.
NEITHER THIS CLASS A CERTIFICATE NOR ANY INTEREST HEREIN MAY BE
TRANSFERRED UNLESS THE TRANSFEREE REPRESENTS THAT EITHER (A) IT IS NOT AN
EMPLOYEE BENEFIT PLAN, TRUST OR ACCOUNT, WHETHER OR NOT SUBJECT TO TITLE I OF
THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
DESCRIBED IN SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED, INCLUDING AN INDIVIDUAL RETIREMENT ACCOUNT, OR AN ENTITY WHOSE
UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF AN INVESTMENT IN
<PAGE>
SUCH ENTITY BY A PLAN, TRUST OR ACCOUNT DESCRIBED ABOVE (AN "ERISA PLAN"), OR
(B) IT IS AN INSURANCE COMPANY GENERAL ACCOUNT AND PURSUANT TO SECTION I OF
PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-60"), THE ACQUISITION
AND HOLDING OF THE CERTIFICATE AND, PURSUANT TO SECTION III OF PTCE 95-60 THE
SERVICING, MANAGEMENT AND OPERATION OF THE TRUST ARE WITH RESPECT TO SUCH
TRANSFEREE EXEMPT FROM THE "PROHIBITED TRANSACTION" PROVISIONS OF ERISA AND THE
CODE, OR (C) ONLY IN THE CASE OF A TRANSFER OF CLASS A CERTIFICATES, SPECIFIED
CONDITIONS OF AN "UNDERWRITER EXEMPTION" DESCRIBED IN SECTION V(h) OF PTCE 95-60
ARE SATISFIED WITH RESPECT TO SUCH TRANSFEREE.
This certifies that [ ] (the "Class A
Certificateholder") is the registered owner of a fractional undivided interest
in a trust (the "Trust") created pursuant to the Pooling and Servicing Agreement
(the "Agreement"), dated as of September 1, 1996, among Eagle Auto Funding,
Corp., as Seller (the "Seller"), Eagle Finance Corp., as Servicer (the
"Servicer"), and Harris Trust and Savings Bank, as Trustee (the "Trustee"). The
Trust includes among its assets the Auto Loans, all rights of the Seller under
the Sale Agreement, all monies due or received with respect thereto and all
proceeds thereof (the "Transferred Assets") together with all funds on deposit
in the Collection Account (collectively, the "Trust Assets"). The Trust also
has the benefit of a security interest in and distributions from the Cash
Reserve Account. This Class A Certificate is described in the Agreement and is
issued pursuant and subject to the Agreement and the Class A Certificateholder
acknowledges and agrees to be bound by the terms and conditions of the Agreement
to the same extent as if the Class A Certificateholder were a party thereto. By
acceptance of this Class A Certificate the Class A Certificateholder assents to
and becomes bound by the Agreement. To the extent not defined herein, all
capitalized terms have the meanings assigned in the Agreement.
Under the Agreement, on the 20th day of each month (or, if such day is
not a Business Day, the following Business Day) (each, a "Distribution Date"),
the Trustee, at the direction of the Servicer, shall disburse Available Funds in
the Collection Account amounts and in the priority set forth in Section 7.04(a)
of the Agreement.
On the first Distribution Date following the Distribution Date on
which all classes of Certificateholders have been paid in full, all amounts held
in the Collection Account and the Cash Reserve Account, if any, shall be
disbursed to the Seller and all interests of the Trust in all Auto Loans which
have an outstanding balance shall be reconveyed by the Trustee to, or at the
direction of, the Seller.
Distributions on this Class A Certificate will be made by same day
funds to the Class A Certificateholder at the address for such Class A
Certificateholder appearing on the Certificate
F-2
<PAGE>
Register on the relevant Distribution Date without the presentation or surrender
of this Class A Certificate or the making of any notation hereon. Except as
otherwise provided in the Agreement and notwithstanding the above, the final
distribution on this Class A Certificate will be made upon satisfaction of the
procedures indicated in the notice mailed to the Class A Certificateholders as
stated in the Agreement.
The Certificateholders will have the benefit of a Cash Reserve Account
to compensate them to the limited extent described in the Agreement for losses
and delinquencies on the Trust Assets to the extent of the lesser of (i) any
shortfall in Available Funds for payment of interest and principal on the
Certificates and the Monthly Servicing Fee, Back-Up Servicing Fee and the
Trustee Fee, as well as any prior period shortfalls in such amounts and (ii) the
amount on deposit in the Cash Reserve Account. On the Closing Date, the Seller
shall be required to deposit in the Cash Reserve Account an amount equal to
$1,407,479.00 (the "Initial Cash Reserve Account Deposit"). The Required Cash
Reserve Amount will be additionally funded by collections on the Auto Loans
remaining after payment of all Trust Operating Expenses (as such term is defined
in the Agreement), and payments of interest and principal in respect of the
Certificates in an amount equal to the excess of the Required Cash Reserve
Amount over the amount then on deposit in the Cash Reserve Account. On each
Distribution Date, the Required Cash Reserve Amount will be an amount equal to
the lesser of (a) the greater of (i) a specified percentage (the "Required
Reserve Percentage") of the Aggregate Principal Balance of the Auto Loans
determined as of the end of the immediately preceding Due Period and (ii)
$703,739 and (b) the Aggregate Principal Balance of the Auto Loans as of the end
of the immediately preceding Due Period. Generally the Required Reserve
Percentage will equal 9%; however, in the event that the rates of losses or
delinquencies on the Auto Loans exceed certain specified levels, the Required
Reserve Percentage will increase to 11% generally until such event is cured.
Available Cash Reserve Amounts in excess of the Required Cash Reserve Amount
will be remitted to the Seller on each Distribution Date. If, in any Due
Period, Available Funds are insufficient to pay (a) the Trust Operating
Expenses, (b) Monthly Interest, and (c) the Monthly Principal Distributable
Amount, the Servicer will instruct the Trustee to make a withdrawal from the
Cash Reserve Account in an amount equal to the lesser of (i) such deficiency and
(ii) the Available Cash Reserve Amount. The Trustee will deposit such
withdrawals into the Collection Account and make disbursements thereof.
In addition to withdrawals as a result of losses and delinquencies on
the Auto Loans the amount required to be on deposit in the Cash Reserve Account
may be reduced from time to time upon satisfaction of certain conditions set
forth in the Agreement. On the first Distribution Date following the payment in
full of the Certificates, the Trustee shall disburse all amounts held in the
Cash Reserve Account to the Seller.
F-3
<PAGE>
The Agreement may be amended from time to time by the Seller, the
Servicer and the Trustee, without the consent of any of the Certificateholders,
to cure any ambiguity or defect of, to correct or supplement any provisions
which may be inconsistent with any other provisions or to add any other
provisions with respect to matters or questions arising under the Agreement
which shall not be inconsistent with the provisions of the Agreement; PROVIDED,
HOWEVER, that such action shall not, as evidenced by an Opinion of Counsel
delivered to the Trustee, adversely affect in any material respect the interests
of any Certificateholder. Such Opinion of Counsel shall be at the expense of
the party requesting such amendment or, if such amendment is required by any
Rating Agency to maintain the rating issued by it on the Certificates or
requested by the Trustee in order to clarify any ambiguity or resolve any
inconsistency, then the related Opinion of Counsel shall be at the expense of
the Servicer.
The Agreement may also be amended from time to time by the Seller, the
Servicer and the Trustee, with the consent of the Certificateholders of not less
than an aggregate Percentage of 66 2/3% of outstanding Certificates, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of the Agreement or of modifying in any manner the rights of
the Certificateholders; PROVIDED, HOWEVER, that no such amendment shall
(a) reduce in any manner the amount of, or delay the timing of, collections of
payments on the Auto Loans or distributions which are required to be made on any
Certificate then outstanding, (b) reduce the aforesaid percentage required to
consent to any such amendment or (c) modify Section 10.03(b) of the Agreement
without the consent of the holders of all Certificates then outstanding. The
Trustee may set a record date for purposes of determining the holders entitled
to give a written consent or waive compliance as authorized or permitted by
Section 10.03(b) of the Agreement. Such record date shall not be more than 30
days prior to the first solicitation to such consent or waiver. Promptly after
the execution of any amendment or consent pursuant to Section 10.03 of the
Agreement, the Trustee shall furnish such amendment to each Certificateholder or
a written summary of such amendment prepared by the Servicer and, not later than
the tenth Business Day preceding the effectiveness of any such amendment, the
Rating Agencies. It shall not be necessary for the consent of
Certificateholders under Section 10.03 of the Agreement to approve the
particular form of any proposed amendment, but it shall be sufficient if such
consent shall approve the substance thereof. The manner of obtaining such
consents and of evidencing the authorization of the execution thereof by
Certificateholders shall be subject to such reasonable requirements as the
Trustee may prescribe. In connection with any amendment pursuant to Section
10.03 of the Agreement, the Trustee shall be entitled to receive an Opinion of
Counsel to the effect that such amendment is authorized or permitted by the
Agreement and that all conditions precedent to the execution and delivery of
such amendment have been satisfied.
F-4
<PAGE>
The Agreement and the respective obligations and responsibilities of
the Seller, the Servicer and the Trustee created hereby (other than the
obligation of the Trustee to make payments to Certificateholders as hereinafter
set forth) shall terminate on the earlier of:
(i) the day after the day on which the Certificateholders are
paid all amounts required to be paid to them pursuant to the Agreement and
this and all other outstanding Certificates; and
(ii) March 20, 2002.
Upon at least 15 days' written notice to the Trustee (and to each
Certificateholder) prior to a Distribution Date; PROVIDED the Certificate
Principal Balance on such Distribution Date is 10% or less of the Initial
Principal Amount, the Servicer may, but is not required to, purchase as of the
last day of the preceding Due Period all, but not less than all, outstanding
Auto Loans at a price equal to the Aggregate Principal Balances of all Auto
Loans on the last day of the preceding Due Period plus accrued and unpaid
interest thereon at the APR for each Auto Loan through the last day of such
preceding Due Period. Such price shall be deposited to the Collection Account
in immediately available funds by 10:00 a.m., New York City time, on the
relevant Determination Date and the Trustee shall release the Auto Loans and
cause the Custodian to release the Collateral Files to the Servicer, whereupon
this Class A Certificate shall no longer evidence any right or interest in the
Auto Loans or the Collateral Files or any proceeds of the foregoing. Upon the
request of the Servicer, the Trustee shall perform such other acts as reasonably
requested by the Servicer and otherwise cooperate with the Servicer in
connection with the transfer of the Transferred Assets pursuant to Section
10.01(b) of the Agreement including, but not limited to, the execution of any
Title Document to the extent necessary to effectuate the termination of such
Auto Loan and the disposition of the related Automobile.
This Class A Certificate does not represent an obligation of, or an
interest in Eagle Finance Corp. or Eagle Auto Funding Corp. or any Affiliate
thereof. This Certificate is limited in right of payment to certain collections
respecting the Trust Assets, all as more specifically set forth herein and in
the Agreement.
The holder hereof, by its acceptance of this Class A Certificate,
agrees to look solely to the funds in the Collection Account to the extent
available for distribution to the holder hereof as provided in the Agreement for
payment hereunder and that the Trustee in its individual capacity is not
personally liable to the holder hereof for any amounts payable under this Class
A Certificate or the Agreement.
F-5
<PAGE>
This Class A Certificate does not purport to summarize the Agreement
and is qualified in its entirety by the Agreement. Reference is made to the
Agreement for information with respect to the interests, rights, benefits,
obligations, proceeds and duties evidenced hereby and the rights, duties and
immunities of the Trustee. Copies of the Agreement and all amendments thereto
will be made available for review and inspection by any Certificateholder during
normal business hours at the office of the Trustee, Harris Trust and Savings
Bank, 311 West Monroe Street, Chicago, Illinois 60606, upon the prior written
request of such Certificateholder.
F-6
<PAGE>
IN WITNESS WHEREOF, Eagle Auto Trust 1996-A has caused this Class A
Certificate to be duly executed by the manual or facsimile signature of the duly
authorized officer of the Trustee.
EAGLE AUTO TRUST 1996-A
By Harris Trust and Savings Bank, not in its individual capacity, but
solely as Trustee
By
-------------------------------
Title:
CERTIFICATE OF AUTHENTICATION
This is one of the Class A Certificates referred to in the
within-mentioned Agreement.
Harris Trust and Savings Bank, as Trustee
By
-------------------------------
Authorized Officer
Dated:
F-7
<PAGE>
ASSIGNMENT
Social Security or other identifying number of assignee
_______________.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto _________________________________________________________________
________________________________________________________________________________
(name and address of assignee)
the written certificate and all rights thereunder, and hereby irrevocably
constitutes and appoints ____________________________, attorney, to transfer
said certificate on the books kept for registration thereof, with full power of
substitution in the premises.
Dated:____________________
(1) A Non U.S. Person as de- Note: The signature(s) to
fined in the Code must this Assignment
certify to the Trustee in must correspond
writing as to its Non U.S. with the name(s) as
Person status and such written on the face
further information as may of the within cer-
be required under the Code tificate in every
or reasonably requested by particular without
the Trustee alteration or en-
largement or any
change whatsoever
F-8
<PAGE>
EXHIBIT G
TO
POOLING AND SERVICING AGREEMENT
DATED AS OF September 1, 1996
EAGLE AUTO TRUST 1996-A
[FORM OF CLASS B CERTIFICATE]
CLASS B CERTIFICATE
EAGLE AUTO TRUST 1996-A
[ ]% Certificates
No. __ CUSIP No.
Original Principal
Amount: $
THIS CLASS B CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS CLASS B CERTIFICATE,
AGREES THAT THIS CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS
ONLY (1) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT TO A PERSON WHO THE
HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER ("QIB") WITHIN THE
MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QIB, WHOM THE HOLDER HAS INFORMED THAT SUCH REOFFER, RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A; OR (2) IN CERTIFICATED FORM
ONLY (A) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE
501(A), (2) (3) OR (7) OF REGULATION D OF THE SECURITIES ACT OR (B) IN OTHER
TRANSACTIONS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO (A) IN ANY SUCH CASE, RECEIPT BY THE SELLER AND THE CERTIFICATE
REGISTRAR AND TRANSFER AGENT OF A LETTER SUBSTANTIALLY IN THE FORM OF EXHIBIT
[___] TO THE POOLING AND SERVICING AGREEMENT REFERRED TO BELOW, AND (B) IN THE
CASE OF CLAUSE (2) RECEIPT BY THE SELLER AND THE TRUSTEE OF SUCH CERTIFICATES,
LEGAL OPINIONS AND OTHER EVIDENCE ACCEPTABLE TO THE SELLER AND THE TRUSTEE THAT
SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE SECURITIES
ACT AND OTHER APPLICABLE LAWS.
NEITHER THIS CLASS B CERTIFICATE NOR ANY INTEREST HEREIN MAY BE
TRANSFERRED UNLESS THE TRANSFEREE REPRESENTS THAT EITHER (A) IT IS NOT AN
EMPLOYEE BENEFIT PLAN, TRUST OR ACCOUNT, WHETHER OR NOT SUBJECT TO TITLE I OF
THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
DESCRIBED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED, INCLUDING AN INDIVIDUAL RETIREMENT ACCOUNT, OR AN ENTITY WHOSE
<PAGE>
UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF AN INVESTMENT IN SUCH ENTITY
BY A PLAN, TRUST OR ACCOUNT DESCRIBED ABOVE (AN "ERISA PLAN"), OR (B) IT IS AN
INSURANCE COMPANY GENERAL ACCOUNT PURSUANT TO SECTION I OF PROHIBITED
TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-60"), THE ACQUISITION AND HOLDING OF
THE CERTIFICATE AND, PURSUANT TO SECTION III OF PTCE 95-60 THE SERVICING,
MANAGEMENT AND OPERATION OF THE TRUST ARE WITH RESPECT TO SUCH TRANSFEREE EXEMPT
FROM THE "PROHIBITED TRANSACTION" PROVISIONS OF ERISA AND THE CODE.
This certifies that [ ] (the "Class B
Certificateholder") is the registered owner of a fractional undivided interest
in a trust (the "Trust") created pursuant to the Pooling and Servicing Agreement
(the "Agreement"), dated as of September 1, 1996, among Eagle Auto Funding,
Corp., as Seller (the "Seller"), Eagle Finance Corp., as Servicer (the
"Servicer"), and Harris Trust and Savings Bank, as Trustee (the "Trustee"). The
Trust includes among its assets the Auto Loans, all rights of the Seller under
the Sale Agreement, all monies due or to become due and all amounts received
with respect thereto and all proceeds thereof (the "Transferred Assets")
together with all funds on deposit in the Collection Account [and all funds on
deposit in the Cash Reserve Account - pending determination of tax issue]
(collectively, the "Trust Assets"). This Class B Certificate is described in
the Agreement and is issued pursuant and subject to the Agreement and the Class
B Certificateholder acknowledges and agrees to be bound by the terms and
conditions of the Agreement to the same extent as if the Class B
Certificateholder were a party thereto. By acceptance of this Class B
Certificate the Class B Certificateholder assents to and becomes bound by the
Agreement. To the extent not defined herein, all capitalized terms have the
meanings assigned in the Agreement.
Under the Agreement, on the 15th day of each month (or, if such day is
not a Business Day, the following Business Day) (each, a "Distribution Date"),
the Trustee, at the direction of the Servicer, shall disburse Available Funds in
the Collection Account amounts and in the priority set forth in Section 7.04(a)
of the Agreement.
On the first Distribution Date following the Distribution Date on
which all classes of Certificateholders have been paid in full, all amounts held
in the Collection Account and the Cash Reserve Account, if any, shall be
disbursed to the Seller and all interests of the Trust in all Auto Loans which
have an outstanding balance shall be reconveyed by the Trustee to, or at the
direction of, the Seller.
Distributions on this Class B Certificate will be made by same day
funds to the Class B Certificateholder at the address for such Class B
Certificateholder appearing on the Certificate Register on the relevant
Distribution Date without the presentation or surrender of this Class B
Certificate or the making of any notation hereon. Except as otherwise provided
in the Agreement and
G-2
<PAGE>
notwithstanding the above, the final distribution on this Class B Certificate
will be made upon satisfaction of the procedures indicated in the notice mailed
to the Class B Certificateholders as stated in the Agreement.
The Certificateholders will have the benefit of a Cash Reserve
Account to compensate them to the limited extent described in the Agreement
for losses and delinquencies on the Trust Assets to the extent of the lesser
of (i) any shortfall in Available Funds for payment of interest and
principal on the Certificates and the Monthly Servicing Fee, Back-Up
Servicing Fee and the Trustee Fee, as well as any prior period shortfalls in
such amounts and (ii) the amount on deposit in the Cash Reserve Account. On
the Closing Date, the Seller shall be required to deposit in the Cash Reserve
Account an amount equal to $1,407,479.00 (the "Initial Cash Reserve Account
Deposit"). The Required Cash Reserve Amount will be additionally funded by
collections on the Auto Loans remaining after payment of all Trust Operating
Expenses (as such term is defined in the Agreement), and payments of interest
and principal in respect of the Certificates in an amount equal to the excess
of the Required Cash Reserve Amount over the amount then on deposit in the
Cash Reserve Account. On each Distribution Date, the Required Cash Reserve
Amount will be an amount equal to the lesser of (a) the greater of (i) a
specified percentage (the "Required Reserve Percentage") of the Aggregate
Principal Balance of the Auto Loans determined as of the end of the
immediately preceding Due Period and (ii) $703,739 and (b) the Aggregate
Principal Balance of the Auto Loans as of the end of the immediately
preceding Due Period. Generally the Required Reserve Percentage will equal
9%; however, in the event that the rates of losses or delinquencies on the
Auto Loans exceed certain specified levels, the Required Reserve Percentage
will increase to 11% generally until such event is cured. Available Cash
Reserve Amounts in excess of the Required Cash Reserve Amount will be
remitted to the Seller on each Distribution Date. If, in any Due Period,
Available Funds are insufficient to pay (a) the Trust Operating Expenses, (b)
Monthly Interest, and (c) the Monthly Principal Distributable Amount, the
Servicer will instruct the Trustee to make a withdrawal from the Cash Reserve
Account in an amount equal to the lesser of (i) such deficiency and (ii) the
Available Cash Reserve Amount. The Trustee will deposit such withdrawals
into the Collection Account and make disbursements thereof.
In addition to withdrawals as a result of losses and delinquencies on
the Auto Loans the amount required to be on deposit in the Cash Reserve Account
may be reduced from time to time upon satisfaction of certain conditions set
forth in the Agreement. On the first Distribution Date following the payment in
full of the Certificates, the Trustee shall disburse all amounts held in the
Cash Reserve Account to the Seller.
The Agreement may be amended from time to time by the Seller, the
Servicer and the Trustee, without the consent of any of
G-3
<PAGE>
the Certificateholders, to cure any ambiguity or defect of, to correct or
supplement any provisions which may be inconsistent with any other provisions or
to add any other provisions with respect to matters or questions arising under
the Agreement which shall not be inconsistent with the provisions of the
Agreement; PROVIDED, HOWEVER, that such action shall not, as evidenced by an
Opinion of Counsel delivered to the Trustee, adversely affect in any material
respect the interests of any Certificateholder. Such Opinion of Counsel shall
be at the expense of the party requesting such amendment or, if such amendment
is required by any Rating Agency to maintain the rating issued by it on the
Certificates or requested by the Trustee in order to clarify any ambiguity or
resolve any inconsistency, then the related Opinion of Counsel shall be at the
expense of the Servicer.
The Agreement may also be amended from time to time by the Seller, the
Servicer and the Trustee, with the consent of the Certificateholders of not less
than an aggregate Percentage of 66 2/3% of outstanding Certificates, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of the Agreement or of modifying in any manner the rights of
the Certificateholders; PROVIDED, HOWEVER, that no such amendment shall
(a) reduce in any manner the amount of, or delay the timing of, collections of
payments on the Auto Loans or distributions which are required to be made on any
Certificate then outstanding, (b) reduce the aforesaid percentage required to
consent to any such amendment or (c) modify Section 10.03(b) of the Agreement
without the consent of the holders of all Certificates then outstanding. The
Trustee may set a record date for purposes of determining the holders entitled
to give a written consent or waive compliance as authorized or permitted by
Section 10.03(b) of the Agreement. Such record date shall not be more than 30
days prior to the first solicitation to such consent or waiver. Promptly after
the execution of any amendment or consent pursuant to Section 10.03 of the
Agreement, the Trustee shall furnish such amendment to each Certificateholder or
a written summary of such amendment prepared by the Servicer and, not later than
the tenth Business Day preceding the effectiveness of any such amendment, the
Rating Agencies. It shall not be necessary for the consent of
Certificateholders under Section 10.03 of the Agreement to approve the
particular form of any proposed amendment, but it shall be sufficient if such
consent shall approve the substance thereof. The manner of obtaining such
consents and of evidencing the authorization of the execution thereof by
Certificateholders shall be subject to such reasonable requirements as the
Trustee may prescribe. In connection with any amendment pursuant to Section
10.03 of the Agreement, the Trustee shall be entitled to receive an Opinion of
Counsel to the effect that such amendment is authorized or permitted by the
Agreement and that all conditions precedent to the execution and delivery of
such amendment have been satisfied.
The Agreement and the respective obligations and responsibilities of
the Seller, the Servicer and the Trustee
G-4
<PAGE>
created hereby (other than the obligation of the Trustee to make payments to
Certificateholders as hereinafter set forth) shall terminate on the earlier of:
(i) the day after the day on which the Certificateholders are
paid all amounts required to be paid to them pursuant to the Agreement and
this and all other outstanding Certificates; and
(ii) March 20, 2002.
Upon at least 15 days' written notice to the Trustee (and to each
Certificateholder) prior to a Distribution Date; PROVIDED the Certificate
Principal Balance on such Distribution Date is 10% or less of the Initial
Principal Amount, the Servicer may, but is not required to, purchase as of the
last day of the preceding Due Period all, but not less than all, outstanding
Auto Loans at a price equal to the Aggregate Principal Balances of all Auto
Loans on the last day of the preceding Due Period plus accrued and unpaid
interest thereon at the APR for each Auto Loan through the last day of such
preceding Due Period. Such price shall be deposited to the Collection Account
in immediately available funds by 10:00 a.m., New York City time, on the
relevant Determination Date and the Trustee shall release the Auto Loans and
cause the Custodian to release the Collateral Files to the Servicer, whereupon
this Class B Certificate shall no longer evidence any right or interest in the
Auto Loans or the Collateral Files or any proceeds of the foregoing. Upon the
request of the Servicer, the Trustee shall perform such other acts as reasonably
requested by the Servicer and otherwise cooperate with the Servicer in
connection with the transfer of the Transferred Assets pursuant to Section
10.01(b) of the Agreement including, but not limited to, the execution of any
Title Document to the extent necessary to effectuate the termination of such
Auto Loan and the disposition of the related Automobile.
This Class B Certificate does not represent an obligation of, or an
interest in Eagle Finance Corp. or Eagle Auto Funding Corp. or any Affiliate
thereof. This Certificate is limited in right of payment to certain collections
respecting the Trust Assets, all as more specifically set forth herein and in
the Agreement.
The holder hereof, by its acceptance of this Class B Certificate,
agrees to look solely to the funds in the Collection Account to the extent
available for distribution to the holder hereof as provided in the Agreement for
payment hereunder and that the Trustee in its individual capacity is not
personally liable to the holder hereof for any amounts payable under this Class
B Certificate or the Agreement.
This Class B Certificate does not purport to summarize the Agreement
and is qualified in its entirety by the Agreement.
G-5
<PAGE>
Reference is made to the Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds and duties evidenced hereby
and the rights, duties and immunities of the Trustee. Copies of the Agreement
and all amendments thereto will be made available for review and inspection by
any Certificateholder during normal business hours at the office of the Trustee,
Harris Trust and Savings Bank, 311 West Monroe Street, Chicago, Illinois 60606
upon the prior written request of such Certificateholder.
G-6
<PAGE>
IN WITNESS WHEREOF, Eagle Auto Trust 1996-A has caused this Class B
Certificate to be duly executed by the manual or facsimile signature of the duly
authorized officer of the Trustee.
EAGLE AUTO TRUST 1996-A
By Harris Trust and Savings Bank, not in its individual capacity, but
solely as Trustee
By
-------------------------------
Title:
CERTIFICATE OF AUTHENTICATION
This is one of the Class A Certificates referred to in the within
mentioned Agreement.
Harris Trust and Savings Bank, as Trustee
By
-------------------------------
Authorized Officer
Dated:
G-7
<PAGE>
ASSIGNMENT
Social Security or other identifying number of assignee
_______________.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto _________________________________________________________________
________________________________________________________________________________
(name and address of assignee)
the written certificate and all rights thereunder, and hereby irrevocably
constitutes and appoints ____________________________, attorney, to transfer
said certificate on the books kept for registration thereof, with full power of
substitution in the premises.
Dated:____________________
(1) A Non U.S. Person as de- Note: The signature(s) to
fined in the Code must this Assignment
certify to the Trustee in must correspond
writing as to its Non U.S. with the name(s) as
Person status and such written on the face
further information as may of the within cer-
be required under the Code tificate in every
or reasonably requested by particular without
the Trustee alteration or en-
largement or any
change whatsoever
G-8
<PAGE>
EXHIBIT H
TO
POOLING AND SERVICING AGREEMENT
DATED AS OF September 1, 1996
EAGLE AUTO TRUST 1996-A
[FORM OF CLASS C CERTIFICATE]
CLASS C CERTIFICATE
EAGLE AUTO TRUST 1996-A
[ ]% Certificates
No. __ CUSIP No.
Original Principal
Amount: $
THIS CLASS C CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE
SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS CLASS C CERTIFICATE,
AGREES THAT THIS CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS
ONLY (1) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT TO A PERSON WHO THE
HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER ("QIB") WITHIN THE
MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QIB, WHOM THE HOLDER HAS INFORMED THAT SUCH REOFFER, RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A; OR (2) IN CERTIFICATED FORM
ONLY (A) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE
501(A), (2) (3) OR (7) OF REGULATION D OF THE SECURITIES ACT OR (B) IN OTHER
TRANSACTIONS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO (A) IN ANY SUCH CASE, RECEIPT BY THE SELLER AND THE CERTIFICATE
REGISTRAR AND TRANSFER AGENT OF A LETTER SUBSTANTIALLY IN THE FORM OF EXHIBIT
[___] TO THE POOLING AND SERVICING AGREEMENT REFERRED TO BELOW, AND (B) IN THE
CASE OF CLAUSE (2) RECEIPT BY THE SELLER AND THE TRUSTEE OF SUCH CERTIFICATES,
LEGAL OPINIONS AND OTHER EVIDENCE ACCEPTABLE TO THE SELLER AND THE TRUSTEE THAT
SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE SECURITIES
ACT AND OTHER APPLICABLE LAWS.
NEITHER THIS CLASS C CERTIFICATE NOR ANY INTEREST HEREIN MAY BE
TRANSFERRED UNLESS THE TRANSFEREE REPRESENTS THAT EITHER (A) IT IS NOT AN
EMPLOYEE BENEFIT PLAN, TRUST OR ACCOUNT, WHETHER OR NOT SUBJECT TO TITLE I OF
THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
DESCRIBED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED, INCLUDING AN INDIVIDUAL RETIREMENT ACCOUNT, OR AN ENTITY WHOSE
UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF AN INVESTMENT IN
<PAGE>
SUCH ENTITY BY A PLAN, TRUST OR ACCOUNT DESCRIBED ABOVE (AN "ERISA PLAN"), OR
(B) IT IS AN INSURANCE COMPANY GENERAL ACCOUNT AND PURSUANT TO SECTION I OF
PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-60"), THE ACQUISITION AND
HOLDING OF THE CERTIFICATE AND, PURSUANT TO SECTION III OF PTCE 95-60 THE
SERVICING, MANAGEMENT AND OPERATION OF THE TRUST ARE WITH RESPECT TO SUCH
TRANSFEREE EXEMPT FROM THE "PROHIBITED TRANSACTION" PROVISIONS OF ERISA AND THE
CODE.
This certifies that [ ] (the "Class C
Certificateholder") is the registered owner of a fractional undivided interest
in a trust (the "Trust") created pursuant to the Pooling and Servicing Agreement
(the "Agreement"), dated as of September 1, 1996, among Eagle Auto Funding,
Corp., as Seller (the "Seller"), Eagle Finance Corp., as Servicer (the
"Servicer"), and Harris Trust and Savings Bank, as Trustee (the "Trustee"). The
Trust includes among its assets the Auto Loans, all rights of the Seller under
the Sale Agreement, all monies due or to become due and all amounts received
with respect thereto and all proceeds thereof (the "Transferred Assets")
together with all funds on deposit in the Collection Account [and all funds on
deposit in the Cash Reserve Account - pending determination of tax issue]
(collectively, the "Trust Assets"). This Class C Certificate is described in
the Agreement and is issued pursuant and subject to the Agreement and the Class
C Certificateholder acknowledges and agrees to be bound by the terms and
conditions of the Agreement to the same extent as if the Class C
Certificateholder were a party thereto. By acceptance of this Class C
Certificate the Class C Certificateholder assents to and becomes bound by the
Agreement. To the extent not defined herein, all capitalized terms have the
meanings assigned in the Agreement.
Under the Agreement, on the 15th day of each month (or, if such day is
not a Business Day, the following Business Day) (each, a "Distribution Date"),
the Trustee, at the direction of the Servicer, shall disburse Available Funds in
the Collection Account amounts and in the priority set forth in Section 7.04(a)
of the Agreement.
On the first Distribution Date following the Distribution Date on
which all classes of Certificateholders have been paid in full, all amounts held
in the Collection Account and the Cash Reserve Account, if any, shall be
disbursed to the Seller and all interests of the Trust in all Auto Loans which
have an outstanding balance shall be reconveyed by the Trustee to, or at the
direction of, the Seller.
Distributions on this Class C Certificate will be made by same day
funds to the Class C Certificateholder at the address for such Class C
Certificateholder appearing on the Certificate Register on the relevant
Distribution Date without the presentation or surrender of this Class C
Certificate or the making of any notation hereon. Except as otherwise provided
in the Agreement and
H-2
<PAGE>
notwithstanding the above, the final distribution on this Class C Certificate
will be made upon satisfaction of the procedures indicated in the notice mailed
to the Class C Certificateholders as stated in the Agreement.
The Certificateholders will have the benefit of a Cash Reserve Account
to compensate them to the limited extent described in the Agreement for losses
and delinquencies on the Trust Assets to the extent of the lesser of (i) any
shortfall in Available Funds for payment of interest and principal on the
Certificates and the Monthly Servicing Fee, Back-Up Servicing Fee and the
Trustee Fee, as well as any prior period shortfalls in such amounts and (ii) the
amount on deposit in the Cash Reserve Account. On the Closing Date, the Seller
shall be required to deposit in the Cash Reserve Account an amount equal to
$1,407,479.00 (the "Initial Cash Reserve Account Deposit"). The Required Cash
Reserve Amount will be additionally funded by collections on the Auto Loans
remaining after payment of all Trust Operating Expenses (as such term is defined
in the Agreement), and payments of interest and principal in respect of the
Certificates in an amount equal to the excess of the Required Cash Reserve
Amount over the amount then on deposit in the Cash Reserve Account. On each
Distribution Date, the Required Cash Reserve Amount will be an amount equal to
the lesser of (a) the greater of (i) a specified percentage (the "Required
Reserve Percentage") of the Aggregate Principal Balance of the Auto Loans
determined as of the end of the immediately preceding Due Period and (ii)
$703,739 and (b) the Aggregate Principal Balance of the Auto Loans as of the end
of the immediately preceding Due Period. Generally the Required Reserve
Percentage will equal 9%; however, in the event that the rates of losses or
delinquencies on the Auto Loans exceed certain specified levels, the Required
Reserve Percentage will increase to 11% generally until such event is cured.
Available Cash Reserve Amounts in excess of the Required Cash Reserve Amount
will be remitted to the Seller on each Distribution Date. If, in any Due
Period, Available Funds are insufficient to pay (a) the Trust Operating
Expenses, (b) Monthly Interest, and (c) the Monthly Principal Distributable
Amount, the Servicer will instruct the Trustee to make a withdrawal from the
Cash Reserve Account in an amount equal to the lesser of (i) such deficiency and
(ii) the Available Cash Reserve Amount. The Trustee will deposit such
withdrawals into the Collection Account and make disbursements thereof.
In addition to withdrawals as a result of losses and delinquencies on
the Auto Loans the amount required to be on deposit in the Cash Reserve Account
may be reduced from time to time upon satisfaction of certain conditions set
forth in the Agreement. On the first Distribution Date following the payment in
full of the Certificates, the Trustee shall disburse all amounts held in the
Cash Reserve Account to the Seller.
The Agreement may be amended from time to time by the Seller, the
Servicer and the Trustee, without the consent of any of
H-3
<PAGE>
the Certificateholders, to cure any ambiguity or defect of, to correct or
supplement any provisions which may be inconsistent with any other provisions or
to add any other provisions with respect to matters or questions arising under
the Agreement which shall not be inconsistent with the provisions of the
Agreement; PROVIDED, HOWEVER, that such action shall not, as evidenced by an
Opinion of Counsel delivered to the Trustee, adversely affect in any material
respect the interests of any Certificateholder. Such Opinion of Counsel shall
be at the expense of the party requesting such amendment or, if such amendment
is required by any Rating Agency to maintain the rating issued by it on the
Certificates or requested by the Trustee in order to clarify any ambiguity or
resolve any inconsistency, then the related Opinion of Counsel shall be at the
expense of the Servicer.
The Agreement may also be amended from time to time by the Seller, the
Servicer and the Trustee, with the consent of the Certificateholders of not less
than an aggregate Percentage of 66 2/3% of outstanding Certificates, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of the Agreement or of modifying in any manner the rights of
the Certificateholders; PROVIDED, HOWEVER, that no such amendment shall
(a) reduce in any manner the amount of, or delay the timing of, collections of
payments on the Auto Loans or distributions which are required to be made on any
Certificate then outstanding, (b) reduce the aforesaid percentage required to
consent to any such amendment or (c) modify Section 10.03(b) of the Agreement
without the consent of the holders of all Certificates then outstanding. The
Trustee may set a record date for purposes of determining the holders entitled
to give a written consent or waive compliance as authorized or permitted by
Section 10.03(b) of the Agreement. Such record date shall not be more than 30
days prior to the first solicitation to such consent or waiver. Promptly after
the execution of any amendment or consent pursuant to Section 10.03 of the
Agreement, the Trustee shall furnish such amendment to each Certificateholder or
a written summary of such amendment prepared by the Servicer and, not later than
the tenth Business Day preceding the effectiveness of any such amendment, the
Rating Agencies. It shall not be necessary for the consent of
Certificateholders under Section 10.03 of the Agreement to approve the
particular form of any proposed amendment, but it shall be sufficient if such
consent shall approve the substance thereof. The manner of obtaining such
consents and of evidencing the authorization of the execution thereof by
Certificateholders shall be subject to such reasonable requirements as the
Trustee may prescribe. In connection with any amendment pursuant to Section
10.03 of the Agreement, the Trustee shall be entitled to receive an Opinion of
Counsel to the effect that such amendment is authorized or permitted by the
Agreement and that all conditions precedent to the execution and delivery of
such amendment have been satisfied.
The Agreement and the respective obligations and responsibilities of
the Seller, the Servicer and the Trustee
H-4
<PAGE>
created hereby (other than the obligation of the Trustee to make payments to
Certificateholders as hereinafter set forth) shall terminate on the earlier of:
(i) the day after the day on which the Certificateholders are
paid all amounts required to be paid to them pursuant to the Agreement and
this and all other outstanding Certificates; and
(ii) March 20, 2002.
Upon at least 15 days' written notice to the Trustee (and to each
Certificateholder) prior to a Distribution Date; PROVIDED the Certificate
Principal Balance on such Distribution Date is 10% or less of the Initial
Principal Amount, the Servicer may, but is not required to, purchase as of the
last day of the preceding Due Period all, but not less than all, outstanding
Auto Loans at a price equal to the Aggregate Principal Balances of all Auto
Loans on the last day of the preceding Due Period plus accrued and unpaid
interest thereon at the APR for each Auto Loan through the last day of such
preceding Due Period. Such price shall be deposited to the Collection Account
in immediately available funds by 10:00 a.m., New York City time, on the
relevant Determination Date and the Trustee shall release the Auto Loans and
cause the Custodian to release the Collateral Files to the Servicer, whereupon
this Class C Certificate shall no longer evidence any right or interest in the
Auto Loans or the Collateral Files or any proceeds of the foregoing. Upon the
request of the Servicer, the Trustee shall perform such other acts as reasonably
requested by the Servicer and otherwise cooperate with the Servicer in
connection with the transfer of the Transferred Assets pursuant to Section
10.01(b) of the Agreement including, but not limited to, the execution of any
Title Document to the extent necessary to effectuate the termination of such
Auto Loan and the disposition of the related Automobile.
This Class C Certificate does not represent an obligation of, or an
interest in Eagle Finance Corp. or Eagle Auto Funding Corp. or any Affiliate
thereof. This Certificate is limited in right of payment to certain collections
respecting the Trust Assets, all as more specifically set forth herein and in
the Agreement.
The holder hereof, by its acceptance of this Class C Certificate,
agrees to look solely to the funds in the Collection Account to the extent
available for distribution to the holder hereof as provided in the Agreement for
payment hereunder and that the Trustee in its individual capacity is not
personally liable to the holder hereof for any amounts payable under this Class
C Certificate or the Agreement.
This Class C Certificate does not purport to summarize the Agreement
and is qualified in its entirety by the Agreement.
H-5
<PAGE>
Reference is made to the Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds and duties evidenced hereby
and the rights, duties and immunities of the Trustee. Copies of the Agreement
and all amendments thereto will be made available for review and inspection by
any Certificateholder during normal business hours at the office of the Trustee,
Harris Trust and Savings Bank, 311 West Monroe Street, Chicago, Illinois 60606
upon the prior written request of such Certificateholder.
H-6
<PAGE>
IN WITNESS WHEREOF, Eagle Auto Trust 1996-A has caused this Class C
Certificate to be duly executed by the manual or facsimile signature of the duly
authorized officer of the Trustee.
EAGLE AUTO TRUST 1996-A
By Harris Trust and Savings Bank, not in its individual capacity, but
solely as Trustee
By
-------------------------------
Title:
CERTIFICATE OF AUTHENTICATION
This is one of the Class A Certificates referred to in the within
mentioned Agreement.
Harris Trust and Savings Bank, as Trustee
By
-------------------------------
Authorized Officer
Dated:
H-7
<PAGE>
ASSIGNMENT
Social Security or other identifying number of assignee
_______________.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto _________________________________________________________________
________________________________________________________________________________
(name and address of assignee)
the written certificate and all rights thereunder, and hereby irrevocably
constitutes and appoints ____________________________, attorney, to transfer
said certificate on the books kept for registration thereof, with full power of
substitution in the premises.
Dated:____________________
(1) A Non U.S. Person as de- Note: The signature(s) to
fined in the Code must this Assignment
certify to the Trustee in must correspond
writing as to its Non U.S. with the name(s) as
Person status and such written on the face
further information as may of the within cer-
be required under the Code tificate in every
or reasonably requested by particular without
the Trustee alteration or en-
largement or any
change whatsoever
H-8
<PAGE>
EXHIBIT I
TO
POOLING AND SERVICING AGREEMENT
DATED AS OF September 1, 1996
EAGLE AUTO TRUST 1996-A
[FORM OF RULE 144A CERTIFICATE]
Harris Trust and Savings Bank, (DATE)
as Trustee
311 West Monroe Street, 12th Floor
Chicago, IL 60606
Attn: Indenture Trust Division
Re: Eagle Auto Trust 1996-A [ ]% Certificates
------------------------------------------
Reference is hereby made to the Pooling and Servicing Agreement dated
as of September 1, 1996 (the "Pooling and Servicing Agreement") among Eagle Auto
Funding Corp., as Seller, Eagle Finance Corp., as Servicer and Harris Trust and
Savings Bank, as Trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Pooling and Servicing Agreement.
[NOTE: INSERT [A] FOR TRANSFERS OF DEFINITIVE CERTIFICATES TO TRANSFEREES THAT
TAKE DELIVERY IN INTERESTS IN THE BOOK-ENTRY CERTIFICATES. INSERT [B] FOR
TRANSFERS OF DEFINITIVE CERTIFICATES TO TRANSFEREES THAT TAKE DELIVERY IN
DEFINITIVE CERTIFICATES. INSERT [C] FOR TRANSFERS OF INTERESTS IN THE
BOOK-ENTRY CERTIFICATES TO TRANSFEREES THAT TAKE DELIVERY IN DEFINITIVE
CERTIFICATES.)]
[A] This letter relates to $_____ Initial [Principal Amount] of
[Class A/Class B/Class C] Certificates which are held in the form of Definitive
Certificates in the name of [insert name of transferor] (the "Transferor"). The
Transferor has requested a transfer of such Definitive Certificates for a
beneficial interest in the Book-Entry Certificate to be held with the Clearing
Agency in the name of [insert name of transferee].
[B] This letter relates to $_____ Initial [Principal Amount] of
[Class A/Class B/Class C] Certificates which are held in the form of Definitive
Certificates registered in the name of [insert name of transferor] (the
"Transferor"). The Transferor has requested a transfer of such Definitive
Certificates for Definitive Certificates of such Class registered in the name of
[insert name of transferee].
<PAGE>
[C] This letter relates to $__________ Initial [Principal Amount] of
[Class A/Class B] Certificates which are held in the form of a beneficial
interest in the Book-Entry Certificate with the Clearing Agency in the name of
[insert name of transferor] (the "Transferor"). The Transferor has requested a
transfer of such beneficial interest in the Book-Entry Certificate for
Definitive Certificates of such Class registered in the name of [insert name of
transferee].
In connection with such request, and in respect of such Certificates,
the Transferee hereby certifies that such Certificates are being transferred in
accordance with (i) the transfer restrictions set forth in the Pooling and
Servicing Agreement and the Certificates and (ii) Rule 144A under the Securities
Act it is a "qualified institutional buyer" within the meaning of Rule 144A
purchasing for its own account or for the account of a "qualified institutional
buyer", and is aware that the sale to it is being made in reliance upon Rule
144A, in a transaction meeting the requirements of Rule 144A and in accordance
with any applicable securities laws of any state of the United States or any
other applicable jurisdiction. The Transferee further certifies that it either
(a) is not (i) an employee benefit plan (as defined in section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) subject
to the provisions of Title I of ERISA, (ii) a plan described in section
4975(e)(1) of the Internal Revenue Code of 1986, or (iii) an entity whose
underlying assets are deemed to be assets of a plan described in (i) or (ii)
above by reason of such plan's investment in the entity (any such entity
described in clauses (i) through (iii), a "Benefit Plan Entity") or (b) it is an
insurance company general account and, pursuant to Section I of Prohibited
Transaction Class Exemption 95-60 ("PTCE 95-60"), the acquisition and holding of
the Certificates and, pursuant to Section III of PTCE 95-60, the servicing,
management and operation of the Trust are with respect to such Purchaser exempt
from the "prohibited transaction" provisions of ERISA and the Code [* or (c) if
the Transferee is a Benefit Plan Entity, the following:
a. the Transferee is not a Benefit Plan Entity with respect to an
employee benefit plan sponsored by any member of the Restricted Group (as
defined in the Private Placement Memorandum);
- -------------------------
* Do not include bracketed language for acquisitions or transfers of
Certificates that (i) evidence rights and interests that are subordinated to the
rights and interests evidenced by other Certificates of the Trust, or (ii) occur
at any time during which the Certificates being acquired or transferred are not
rated in one of the top three rating categories of any rating agency that
satisfies the requirements of Prohibited Transaction Exemption 89-90 and that
(a) is rating the Certificates as of the date hereof and (b) has been requested
by the issuer of the Certificates to rate the Certificates.
I-2
<PAGE>
b. either (A) the person who has discretionary authority or renders
investment advice to the Transferee with respect to the investment of plan
assets in the Certificates is not an Obligor (or an affiliate) with respect to
the Receivables (as defined in the Private Placement Memorandum), or (B) the
person who has such discretionary authority or renders such investment advice is
an Obligor (or an affiliate) with respect to less than 5 percent of the
Receivables; and, immediately after the acquisition of the Certificates, no more
than 25 percent of the assets of the Transferee are invested in certificates
representing an interest in a trust containing assets sold or serviced by the
same entity; and
c. the Transferee is an "accredited investor" as defined in Rule
501(a) of Regulation D pursuant to the 1933 Act.]
You and Greenwich Capital Markets, Inc. and the Seller are entitled to
rely upon this letter and are irrevocably authorized to produce this letter or a
copy hereof to any interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby.
[Insert Name of Transferee]
By
------------------------------------------------------------------------------
Name:
Title:
Dated:__________, _____
I-3
<PAGE>
EXHIBIT J
TO
POOLING AND SERVICING AGREEMENT
DATED AS OF SEPTEMBER 1, 1996
EAGLE AUTO TRUST 1996-A
[FORM OF ACCREDITED INVESTOR CERTIFICATE]
(Date)
Harris Trust and Savings Bank
as Trustee
311 West Monroe Street
Chicago Illinois 60606
Dear Sirs:
In connection with our proposed purchase of $__________ principal
amount of Eagle Auto Trust 1996-A [ ]% Certificates (the "Certificates") of
Eagle Auto Funding Corp. (the "Seller"), we confirm that:
(1) We have received a copy of the Private Placement Memorandum dated [October
1], 1996 relating to the Certificates (the "Private Placement Memorandum"),
and we understand that the Certificates have not been, and will not be,
registered under the Securities Act of 1933, as amended (the "Securities
Act"), and may not be sold except as permitted in the following sentence.
We agree, on our own behalf and on behalf of any accounts for which we are
acting as hereinafter stated, that if we should sell any Certificates
within three years of the later of the date of original issuance of the
Certificates or the last day on which such Certificates are owned by the
Seller or any affiliate of the Seller (which includes the Placement Agent)
we will do so only (A) to the Seller, (B) to "qualified institutional
buyers" (within the meaning of Rule 144A under the Securities Act) in
accordance with Rule 144A under the Securities Act ("QIBs"), (C) pursuant
to an exemption from registration in accordance with Rule 904 of Regulation
S under the Securities Act, (D) pursuant to the exemption from registration
provided by Rule 144 under the Securities Act, or (E) to an institutional
"accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7)
of Regulation D under the Securities Act that is not a QIB (an
"Institutional Accredited Investor") which, prior to such transfer,
delivers to the Trustee under the Pooling and Servicing Agreement dated as
of September 1, 1996 among the Seller, Eagle Finance Corp., as Servicer and
Harris Trust and Savings Bank, as Trustee (the "Trustee"), a signed letter
in
<PAGE>
the form of this letter; and we further agree, in the capacities stated
above, to provide to any person purchasing any of the Certificates from us
a notice advising such purchaser that resales of the Certificates are
restricted as stated herein.
(2) We understand that, on any proposed resale of any Certificates to an
Institutional Accredited Investor, we will be required to furnish to the
Trustee and the Seller such certifications, legal opinions and other
information as either of them may reasonably require to confirm that the
proposed sale is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities
Act. We further understand that the Certificates purchased by us will bear
a legend to the foregoing effect.
(3) We are acquiring the Certificates for investment purposes and not with a
view to, or for offer or sale in connection with, any distribution in
violation of the Securities Act. We have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits
and risks of our investment in the Certificates, and we and any account for
which we are acting are each able to bear the economic risk of such
investment.
(4) We are acquiring the Certificates purchased by us for our own account or
for one or more accounts (each of which is an Institutional Accredited
Investor or a QIB) as to each of which we exercise sole investment
discretion.
(5) We have received such information as we deem necessary in order to make our
investment decision.
(6) We are either (a) not (i) an employee benefit plan (as defined in section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) subject to the provisions of Title I of ERISA, (ii) a plan
described in section 4975(e)(1) of the Internal Revenue Code of 1986, or
(iii) an entity whose underlying assets are deemed to be assets of a plan
described in (i) or (ii) above by reason of such plan's investment in the
entity (any such entity described in clauses (i) through (iii), a "Benefit
Plan Entity") or (b) it is an insurance company general account and,
pursuant to Section I of Prohibited Transaction Class Exemption 95-60
("PTCE 95-60"), the acquisition and holding of the Certificates and,
pursuant to Section III of PTCE 95-60, the servicing, management and
operation of the Trust are with respect to such Purchaser exempt from the
"prohibited transaction" provisions of ERISA
J-2
<PAGE>
and the Code [** or (c) if the Purchaser is a Benefit Plan Entity, the
following:
a. the Purchaser is not a Benefit Plan Entity with respect to an
employee benefit plan sponsored by any member of the Restricted Group (as
defined in the Private Placement Memorandum);
b. either (A) the person who has discretionary authority or renders
investment advice to the Purchaser with respect to the investment of plan assets
in the Certificates is not an Obligor (or an affiliate) with respect to the
Receivables (as defined in the Private Placement Memorandum), or (B) the person
who has such discretionary authority or renders such investment advice is an
Obligor (or an affiliate) with respect to less than 5 percent of the
Receivables; and, immediately after the acquisition of the Certificates, no more
than 25 percent of the assets of the Purchaser are invested in certificates
representing an interest in a trust containing assets sold or serviced by the
same entity; and
c. the Purchaser is an "accredited investor" as defined in Rule
501(a) of Regulation D pursuant to the Securities Act.]
- -------------------------
** Do not include bracketed language for acquisitions or transfers of
Certificates that (i) evidence rights and interests that are subordinated to the
rights and interests evidenced by other Certificates of the Trust, or (ii) occur
at any time during which the Certificates being acquired or transferred are not
rated in one of the top three rating categories of any rating agency that
satisfies the requirements of Prohibited Transaction Exemption 89-90 and that
(a) is rating the Certificates as of the date hereof and (b) has been requested
by the issuer of the Certificates to rate the Certificates.
J-3
<PAGE>
Terms used in this letter which are not otherwise defined herein have
the respective meanings assigned thereto in the Private Placement Memorandum.
You and the Seller are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
[PURCHASER]
By:
-----------------------------------------------------------------------------
Name:
Title:
Offered Certificates to be purchased:
$__________ original Certificate Balance
of Certificates.
J-4
<PAGE>
EXHIBIT K
FORM OF TRANSFEROR'S CERTIFICATE
Harris Trust and Savings Bank,
as Trustee
311 West Monroe Street
Chicago, IL 60606
Re: Eagle Auto Trust 1996-A Automobile Loan-Backed
Pass Through Certificates
---------------------------------------------------
Ladies and Gentlemen:
In connection with the disposition by the transferor listed below (the
"Transferor") of Certificates (the "Certificates") issued pursuant to the
Pooling and Servicing Agreement dated as of September 1, 1996 (the "Pooling and
Servicing Agreement") between Eagle Auto Funding Corp., as seller (the
"Seller"), Eagle Finance Corp., individually and as Servicer, and Harris Trust
and Savings Bank, as trustee (the "Trustee"), relating to the Eagle Auto Trust
1996-A Automobile Loan-Backed Pass Through Certificates (the "Certificates"),
the Transferor certifies that:
(a) the Transferor understands that the Certificates have not been
registered under the Securities Act of 1933, as amended (the "1933
Act"), and are being disposed of by the Transferor in a transaction
that is exempt from the registration requirements of the 1933 Act; and
(b) the Transferor has not offered or sold any Certificates to, or
solicited offers to buy any Certificates from, any person, or
otherwise approached or negotiated with any person with respect
thereto, in a manner that would be deemed, or taken any other action
which would result in, a violation of Section 5 of the 1933 Act.
<PAGE>
You and Greenwich Capital Markets, Inc. and the Seller are entitled to
rely upon this letter and are irrevocably authorized to produce this letter or a
copy hereof to any interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby.
Very truly yours,
----------------------------
Name of Transferor
By:
------------------------
Name:
-----------------------
K-2
<PAGE>
EXHIBIT 10.33
LOAN SALE AND CONTRIBUTION AGREEMENT
Dated as of September 1, 1996
by and between
EAGLE FINANCE CORP.
and
EAGLE AUTO FUNDING CORP.
<PAGE>
LOAN SALE AND CONTRIBUTION AGREEMENT (the "Sale Agreement"), dated as
of September 1, 1996 by and between EAGLE FINANCE CORP. (the "Originator"), a
Delaware corporation, its successors and permitted assigns and EAGLE AUTO
FUNDING CORP., a Delaware corporation (the "Funding Company").
W I T N E S S E T H:
WHEREAS, the Originator purchases consumer automobile loans originated
by car dealers to finance the purchase of new and used automobiles and light
trucks;
WHEREAS, the Funding Company has been formed for the purpose of
purchasing and simultaneously selling such types of auto loans to a
securitization trust, the Eagle Auto Trust Series 1996-A (the "Trust"); and
WHEREAS, the Originator intends to sell and the Funding Company
intends to purchase, certain of such automobile loans for simultaneous transfer
to the Trust, together with all of its rights hereunder, as described herein;
NOW, THEREFORE, the parties agree as follows:
Section 1. DEFINITIONS.
"AMOUNT FINANCED" has, with respect to any Auto Loan, the meaning
ascribed thereto in the applicable Truth-in-Lending disclosure documents given
to the Obligor of such Auto Loan pursuant to the Federal Truth-in-Lending Act.
"FUNDING COMPANY" means Eagle Auto Funding Corp., a Delaware
corporation, and any successor thereto.
"INDEMNIFIED AMOUNTS" means any and all amounts necessary to indemnify
such Indemnified Party from and against any and all claims, losses and
liabilities and related costs and expenses, including reasonable attorneys' fees
and disbursements.
"INDEMNIFIED PARTY" means the Funding Company or any employee, officer
or agent thereof.
"LOAN PORTFOLIO ACQUISITION PRICE" means with respect to any Auto
Loan, the amount received by Eagle Finance from the Funding Company for all of
Eagle Finance's rights, title and interest in such Auto Loan.
"ORIGINATOR" means Eagle Finance Corp., a Delaware corporation, and
any successor thereto.
<PAGE>
"POOLING AND SERVICING AGREEMENT" means the Pooling and Servicing
Agreement dated as of September 1, 1996 by and among the Originator,
individually and as Servicer, the Funding Company, as Seller and Harris Bank and
Trust Company, as Trustee, Custodian and Back-Up Servicer.
"SALE" means the sale of an Auto Loan from the Originator to the
Funding Company pursuant to this Sale Agreement.
"SALES FINANCE COMPANY LICENSE" means a current license issued to the
Originator authorizing it to make, purchase and sell consumer Auto Loans in each
state in which such license is required.
"SERVICER" means Eagle Finance Corp., a Delaware corporation, its
successors and permitted assigns.
All other capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to such terms in the Pooling and
Servicing Agreement.
Section 2. SALE OF AUTO LOANS. (a) The Originator hereby sells or
contributes to the Funding Company, subject to the terms and conditions of this
Sale Agreement, the Auto Loans listed on Schedule 1 hereof. Subject to the
terms and conditions of this Sale Agreement, Funding Company agrees to purchase
or accept the foregoing from Originator. To the extent that the Loan Portfolio
Acquisition Price paid to Originator for the Auto Loans is less than the fair
market value of such Auto Loans, the difference between such fair market value
and the Loan Portfolio Acquisition Price shall be deemed to be a capital
contribution made by Originator to Funding Company on the Closing Date.
(b) At the request of the Funding Company, the Originator hereby
undertakes to deliver to the Custodian on or before the Closing Date a complete
Collateral File in respect of each Auto Loan hereunder. Upon receipt of the
complete Collateral Files by the Custodian the Funding Company shall
simultaneously on the Closing Date pay the Loan Portfolio Acquisition Price with
respect to such Auto Loans.
(c) Following payment of the Loan Portfolio Acquisition Price, the
ownership of each Auto Loan listed on Schedule 1 hereof shall be vested in the
Funding Company, and, immediately upon its transfer thereto, the Originator
shall not take any action inconsistent with such ownership and shall not claim
any ownership interest in any such Auto Loan. All references herein to rights
of the Funding
2
<PAGE>
Company include its assignee, the Trustee on the behalf of the Trust.
(d) The Originator shall indicate in its records that ownership of
each Auto Loan is held by the Funding Company or its assignee. In addition, the
Originator shall respond to any inquiries with respect to ownership of an Auto
Loan by stating that it is no longer the owner of such Auto Loan and that
ownership of such Auto Loan is held by the Trustee on behalf of the Trust. The
Originator at any time and from time to time shall afford the Funding Company
and its authorized agents and representatives reasonable access during regular
business hours to the Originator's records relating to the Originator's
performance under this Sale Agreement and will cause its personnel to assist in
any examination of such records to enable such parties to determine the
Originator's compliance with the terms of this Sale Agreement. The examination
referred to in the immediately preceding sentence will be conducted in a manner
that does not unreasonably interfere with the Originator's normal operations or
customer or employee relations.
(e) The Originator agrees that, from time to time, at its expense, it
will promptly execute and deliver all further instruments, notices and
documents, and take all further action, that may be necessary or appropriate, or
that the Funding Company requests, in order to perfect, protect or more fully
evidence the transfer of ownership of the Auto Loans or to enable the Funding
Company to exercise or enforce any of its rights hereunder. Without limiting
the generality of the foregoing, the Originator will promptly, upon the request
of the Funding Company, (i) execute and file or cause to be filed such financing
or continuation statements, certificates of title or other title documentation
in support of the lien of the Funding Company's assignee in the related
Automobile, or amendments thereto or assignments thereof and (ii) upon the
request of the Funding Company to facilitate timely collection thereof, assist
in collecting from the Dealer on a timely basis upon notification from the
Funding Company refundable insurance and warranty premiums. The Originator
hereby authorizes the Funding Company to file one or more financing or
continuation statements, and amendments thereto and assignments thereof,
relating to all or any of the Auto Loans and proceeds thereof without the
signature of the Originator.
Section 3. INTENDED CHARACTERIZATION; GRANT OF
SECURITY INTEREST. It is the intention of the parties hereto that the transfer
of Auto Loans to be made hereunder shall constitute a purchase and sale, or a
capital contribution, and not a loan. In the event, however, that a court of
competent jurisdiction were to hold that the
3
<PAGE>
transaction evidenced hereby constitutes a loan and not a purchase and sale or
capital contribution, it is the intention of the parties hereto that this Sale
Agreement shall constitute a security agreement under applicable law and that
the Originator shall be deemed to have granted to the Funding Company as of the
date hereof a first priority security interest in all of the Originator's right,
title and interest in, to and under each Auto Loan, and all proceeds thereof.
In the event of the characterization of any such transfer as a loan, the amount
of interest payable or paid with respect to such loan under the terms of this
Agreement shall be limited to an amount which shall not exceed the maximum
nonusurious rate of interest allowed by the applicable state law or any
applicable law of the United States permitting a higher maximum nonusurious rate
that preempts such applicable state law, which could lawfully be contracted for,
charged or received (the "Highest Lawful Rate"). In the event any payment of
interest on any such loan exceeds the Highest Lawful Rate, the parties hereto
stipulate that (a) to the extent possible given the term of such loan, such
excess amount previously paid or to be paid with respect to such loan be applied
to reduce the principal balance of such loan, and the provisions thereof
immediately be deemed reformed and the amounts thereafter collectible thereunder
reduced, without the necessity of the execution of any new document, so as to
comply with the then applicable law, but so as to permit the recovery of the
fullest amount otherwise called for thereunder and (b) to the extent that the
reduction of the principal balance of, and the amounts collectible under, such
loan and the reformation of the provisions thereof described in the immediately
preceding clause (a) is not possible given the term of such loan, such excess
amount will be deemed to have been paid with respect to such loan as a result of
an error and upon discovery of such error or upon notice thereof by any party
hereto such amount shall be refunded by the recipient thereof.
Section 4. REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR. The
Originator represents and warrants to the Funding Company, as of the Closing
Date, as follows:
(a) With respect to the Originator:
(i) the Originator is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and is
duly qualified to do business, and is in good standing in each jurisdiction in
which the nature of its business requires it to be so qualified the failure of
which to so qualify would have a material adverse effect on the Originator's
ability to acquire the Auto Loans and perform its other obligations hereunder,
and it is or will be in compliance with the laws
4
<PAGE>
of each state to the extent necessary to ensure the enforceability of each Auto
Loan and it has obtained all necessary licenses with respect to it required by
law to enable it to perform its duties herein;
(ii) the Originator has the power and authority to own and convey
all of its properties and assets and to execute and deliver this Sale Agreement,
and all Related Documents and to perform the transactions contemplated hereby
and thereby;
(iii) the execution, delivery and performance by the Originator of
this Sale Agreement and the Related Documents and the transactions contemplated
hereby and thereby, (A) have been duly authorized by all necessary corporate or
other action on the part of the Originator, (B) do not contravene or cause the
Originator to be in default under (1) the Originator's certificate of
incorporation and by-laws, (2) any contractual restriction with respect to any
Debt of the Originator or contained in any indenture, loan or credit agreement,
lease, mortgage, security agreement, bond, note, or other agreement or
instrument binding on or affecting the Originator or its property or (3) any
law, rule, regulation, order, writ, judgment, award, injunction or decree
applicable to, binding on or affecting the Originator or its property and (C) do
not result in or require the creation of any Adverse Claim;
(iv) this Sale Agreement has been duly executed and delivered on
behalf of the Originator;
(v) no consent of, or other action by, and no notice to or
filing with, any Governmental Authority or any other party, is required for the
due execution, delivery and performance by the Originator of this Sale Agreement
or for the perfection of or the exercise by the Funding Company of any of its
rights or remedies hereunder;
(vi) this Sale Agreement delivered by the Originator is the
legal, valid and binding obligation of the Originator enforceable against the
Originator in accordance with its terms;
(vii) there is no pending or threatened action, suit or
proceeding, nor any injunction, writ, restraining order or other order of any
nature against or affecting the Originator, its Affiliates, its officers or
directors, or the property of the Originator, in any court or tribunal, or
before any arbitrator of any kind or before or by any Governmental Authority (A)
asserting the invalidity of this Sale Agreement, (B) seeking to prevent the sale
and assignment of any Auto Loan or the consummation of any of the transactions
contemplated thereby, (C) seeking any
5
<PAGE>
determination or ruling that might materially and adversely affect (1) the
performance by the Originator of this Sale Agreement, (2) the validity or
enforceability of this Sale Agreement, (3) any Auto Loan or (4) the federal
income tax attributes of the Sales, or (D) except as previously disclosed in the
Private Placement Memorandum, asserting a claim for payment of money in excess
of $100,000 (other than such judgments or orders in respect of which adequate
insurance is maintained by the Originator for the payment thereof);
(viii) no injunction, writ, restraining order or other order of any
material nature adverse to the Originator or the conduct of its business or
which is inconsistent with the due consummation of the transactions contemplated
by this Sale Agreement has been issued by a Governmental Authority;
(ix) no defaulted Debt exists under any instrument or agreement
evidencing, securing or providing for the issuance of Debt of the Originator;
(x) the principal place of business and chief executive office
of the Originator are located at the address of the Originator set forth in the
designated space beneath its signature line in this Sale Agreement, and there
are now no, and during the past four months there have not been, any other
locations where the Originator is located (as that term is used in the UCC in
the state of such location), and, except as set forth in the designated space
beneath its signature line in this Sale Agreement, there are no other locations
where records in regard to the Auto Loans are maintained, except, that, with
respect to such changes occurring after the date of this Sale Agreement, as
shall have been specifically disclosed to the Funding Company in writing;
(xi) the legal name of the Originator is as set forth at the
beginning of this Sale Agreement and except as set forth in the designated space
beneath its signature line in this Sale Agreement the Originator has not changed
its name in the last two years, and during such period, the Originator did not
use, nor does the Originator now use any tradenames, fictitious names, assumed
names or "doing business as" names except that, with respect to such changes
occurring after the date of this Sale Agreement, as shall have been specifically
disclosed to the Funding Company in writing;
(xii) the Originator is solvent and will not become insolvent
after giving effect to the transactions contemplated by this Sale Agreement; the
Originator is paying its debts as they mature; the Originator has not sold
6
<PAGE>
any Auto Loan to the Funding Company with intent to hinder, delay or defraud any
entity to which the Originator was, or became, after the date that such transfer
was made, indebted; the Originator's sales of the Auto Loan to the Funding
Company have been and will be made for reasonably equivalent value and fair
consideration; the Originator has not incurred debts beyond its ability to pay
as they mature; and the Originator, after giving effect to the transactions
contemplated by this Sale Agreement, will have an adequate amount of capital to
conduct its business in the foreseeable future;
(xiii) for federal income tax, reporting and accounting purposes,
the Originator will treat the sale of each Auto Loan sold pursuant to this Sale
Agreement as a sale, or absolute assignment, of its full right, title and
ownership interest in such Auto Loan to the Funding Company and the Originator
has not and will not in any other respect accounted for or treated the
transactions contemplated by this Sale Agreement;
(xiv) the Originator has and maintains all permits, licenses,
authorizations, registrations, approvals and consents of governmental
authorities (including, without limitation, any Sales Finance Company License)
necessary for (A) the activities and business of the Originator as currently
conducted and as proposed to be conducted, (B) the origination of the Auto Loans
(as of the date each was originated) and (C) the performance by the Originator
of this Sale Agreement;
(xv) the Originator has filed on a timely basis all tax returns
(federal, state and local) required to be filed and has paid or made adequate
provisions for the payment of all taxes, assessments and other governmental
charges due from the Originator;
(xvi) each pension plan or profit sharing plan to which the
Originator is a party has been fully funded in accordance with the obligations
of the Originator set forth in such plan;
(xvii) with respect to the Originator, there has occurred no event
which has or is reasonably likely to have a material adverse effect on its
ability to perform its obligations under this Sale Agreement;
(xviii) the consolidated balance sheets of the Originator and its
consolidated Subsidiaries as of the date of its most recently completed fiscal
year and the related statements of income and shareholders' equity of the
Originator and its consolidated Subsidiaries for the fiscal year then ended,
certified by its independent certified
7
<PAGE>
public accountants, together with all quarterly reports with respect to
completed fiscal quarters occurring after such fiscal year until the date of
this representation and warranty, copies of which have been furnished to the
Funding Company, fairly present the consolidated financial condition, business
and operations of the Originator and its consolidated subsidiaries as at such
date and the consolidated results of the operations of the Originator and its
consolidated subsidiaries for the period ended on such date, all in accordance
with generally accepted accounting principles consistently applied, and since
such date there has been no material adverse change in any such condition,
business or operations;
(xix) the Originator has valid business reasons for selling its
interests in the Auto Loans rather than obtaining a loan with the Auto Loans as
collateral;
(xx) all information heretofore or hereafter furnished with
respect to the Originator to the Funding Company in connection with any
transaction contemplated by this Sale Agreement is and will be true and complete
in all material respects and does not and will not omit to state a material fact
necessary to make the statements contained therein not misleading.
(b) With respect to each Auto Loan sold pursuant to this Sale
Agreement on the Closing Date (unless otherwise noted):
(i) With respect to the Obligors, at the time the Auto Loan was
entered into (A) his or her monthly income was no less than $1,200 for
individual Obligors, $1,800 for joint Obligors of an Auto Loan originated
in Eagle Finance's Florida regional centers, and $2,000 for joint Obligors
of other Auto Loans; (B) the Obligor was employed in his or her current
job, and had resided in his or her current residence, for at least one year
and (C) the percentage of an Obligor's gross income that the monthly
payment on the Auto Loan represents is less than 25%; PROVIDED, HOWEVER,
that such representations and warranties in each case shall not be deemed
to be breached unless more than the following percentages of Auto Loans (by
number of Auto Loans as of the Closing Date) do not meet the foregoing
criteria: in respect of clause (A), 4.16% (for individual Obligors with
respect to the $1,200); clause (B), 2.11%; and clause (C), 6.60%;
(ii) The (A) the name of the Obligor, (B) the Principal Balance,
(C) the maturity date, (D) the APR and (E) the state of residence of the
Obligor in respect of such Auto Loan on the List of Auto Loans
8
<PAGE>
attached hereto as Schedule 1 is true and correct in all material respects
as of the date of delivery thereof, and no selection procedures adverse to
the Funding Company have been utilized in selecting the Auto Loan;
(iii) such Auto Loan (A) provides for level monthly payments
(provided that the payment in the first or last months in the life of the
Auto Loan may be different from the level payment if such Auto Loan is a
Simple Interest Auto Loan) that fully amortize the Amount Financed over an
original term of no greater than 60 months (prior to any extensions being
granted), and (B) is subject to an insurance requirement against the risks
of fire, theft and collision with a loss payable endorsement in favor of
Eagle Finance and had such insurance at origination, which security
interest and insurance are assignable and have been so assigned to the
Trust, and an agreement to provide accidental physical damage insurance
which identifies the vehicle insured, insurance agent, insurance company
and contains a Dealer confirmation executed by the Dealer and contains an
acknowledgement that such Obligor's installment contract requires that the
Automobile be continuously covered with insurance;
(iv) such Auto Loan has not been satisfied, subordinated or
rescinded; and no provision of the Auto Loan has been waived, altered or
modified in any respect, except by instruments or documents identified in
the Collateral File;
(v) such Auto Loan is not and will not be subject to any right
of rescission, set-off, recoupment, counterclaim or defense, whether
arising out of transactions concerning the Auto Loan or otherwise and no
such right has been asserted with respect thereto;
(vi) No Auto Loan has been sold, transferred, assigned or pledged
by the Originator to any Person other than the Funding Company.
Immediately prior to the transfer and assignment herein contemplated, the
Originator had good and marketable title to each Auto Loan free and clear
of all Adverse Claims and rights of others and, immediately upon the
transfer thereof, the Funding Company will have good and marketable title
to each Auto Loan, free and clear of all Adverse Claims and rights of
others, including liens or claims filed for work, labor or materials
relating to an Automobile that are prior to or equal with the security
interest in such Automobile granted by the related Obligors; and
9
<PAGE>
the transfer from the Originator to the Funding Company has been validly
perfected under the UCC;
(vii) except for payment delinquencies continuing for a period of
not more than 30 days as of the Cut-Off Date, there is no default, breach,
violation or event permitting acceleration under the Auto Loan, and no
event has occurred which, with notice and the expiration of any grace or
cure period or both, would constitute a default, breach, violation or event
permitting acceleration under such Auto Loan and the Originator has not
waived any of the foregoing;
(viii) such Auto Loan constitutes the legal, valid and binding
obligation of the Obligor thereunder enforceable against the Obligor in
accordance with its terms (except as may be limited by laws affecting
creditors' rights in similar transactions generally) and the documents
evidencing each Auto Loan contain enforceable provisions such as to render
the rights and remedies of the holder thereof adequate for the realization
against the collateral for the benefit of the security afforded thereby;
(ix) the Originator has conducted each of the procedures and
received the documents set forth in the Operations Manual to evaluate the
Obligor's application in accordance with the Operations Manual and
applicable law and, to the extent consistent with such terms, in the same
manner and with the same care, skill, prudence and diligence with which it
conducts such investigations with respect to similar auto loans and
obligors for other portfolios or its own account, giving due consideration
to customary and usual standards of prudent auto loan originators;
(x) the contractual documents provided to the Custodian
constitute the only originals of the entire agreement with respect to such
Auto Loan between the Obligor and the related Dealer;
(xi) to the best of the Originator's knowledge, the down payment
described in the Originator's credit files was paid to the related Dealer
in the manner stated in such files;
(xii) to the best of the Originator's knowledge, the Automobile
purchased by the Obligor pursuant to each Auto Loan has been delivered to
and accepted by the Obligor;
(xiii) each Auto Loan is denominated in and payable in Dollars;
10
<PAGE>
(xiv) all parties to each Auto Loan had the capacity to execute
such Auto Loan and legally bind the named Obligors and all signatures
thereon are authentic;
(xv) each Auto Loan was originated by the related Dealer in the
ordinary course of its business pursuant to standard terms of loan
documentation provided by the Originator or otherwise acceptable to the
Originator;
(xvi) other than with respect to 2.8% of the Auto Loans, there is
a Dealer Agreement in place between the Originator and the Dealer selling
the Automobile purchased pursuant to the Auto Loan whereby the Dealer
warrants title to the Automobile and indemnifies the Originator against the
unenforceability of the Auto Loan, and the Originator's rights thereunder,
with regard to the Auto Loan sold hereunder, have been validly assigned to
and are enforceable against the Dealer by the Funding Company and then to
the Trust, along with any other rights of recourse which the Originator has
against the Dealer, without prejudice to any rights the Funding Company and
the Trustee on behalf of the Trust may have against the Originator;
(xvii) the Automobile was purchased from a duly licensed Dealer as
to which the Originator has performed an investigation in accordance with
the Operations Manual and with the same care, skill, prudence and diligence
with which it conducts such investigations with respect to Dealers
originating similar auto loans with similar obligors for its own account;
(xviii) the Auto Loan was sold to the Originator and by the
Originator to the Funding Company without any conduct constituting fraud or
misrepresentation on the part of the Originator, and the Originator has no
knowledge of any fact which should have led it to expect at the time of
sale of such Auto Loan that the Auto Loan would not be paid in full when
due;
(xix) the Auto Loan was not originated in and is not subject to
the laws of any jurisdiction, the laws of which would make the transfer of
the Auto Loan to the Funding Company or the Trustee unlawful or voidable;
(xx) this Sale Agreement constitutes a valid transfer,
assignment, set-over and conveyance to the Funding Company of all right,
title and interest of the Originator in and to the Auto Loan sold
thereunder;
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<PAGE>
(xxi) such Auto Loan and the sale of each Automobile (A) complied
at the time it was originated or made, and complies at the Closing Date, as
the case may be, in all material respects with all requirements of
applicable federal, State and local laws and regulations thereunder,
including, without limitation, usury laws, licensing laws, the Federal
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit
Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade
Commission Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's
Regulations B and Z, State adaptations of the National Consumer Act and of
the Uniform Consumer Credit Code, and other consumer credit laws and equal
credit opportunity and disclosure laws and (B) does not contravene any
applicable contracts to which the Originator is a party and no party to
such contract is in violation of any applicable law, rule or regulation
which is material to such Auto Loan or sale of the Automobile and (C) does
not impose any liability or obligation of the Dealer or the Originator on
the Funding Company or on the Trust with respect to such Auto Loan;
(xxii) as of the Cut-Off Date, the Originator has no knowledge of
any specific facts regarding any particular Auto Loan indicating that such
Auto Loan would not be paid in full. To the best of Originator's
knowledge, as of the Cut-Off Date, based upon the procedures performed in
the Operations Manual and reasonable inquiry, there are no proceedings or
investigations pending or threatened before any Governmental Authority
(1) asserting the invalidity of any Auto Loan, (2) asserting the bankruptcy
or insolvency of the related Obligor, (3) seeking the payment of such Auto
Loan or (4) except as specifically disclosed in the Private Placement
Memorandum, seeking any determination or ruling that might materially and
adversely affect the validity or enforceability of such Auto Loan;
(xxiii) none of the Obligors on the Auto Loans is the United States
of America or any State or local government or any agency, department or
instrumentality of the United States of America or any State or local
governments;
(xxiv) each Auto Loan (A) is secured by a valid perfected first
priority perfected security interest in the related Automobile; (B)
immediately prior to the assignment and transfer thereof, the Originator
held such security interest in the Automobile; (C) the
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<PAGE>
Originator has caused each certificate of title (or copy of an application
for title), or such other document delivered by the state title
registration agency evidencing the security interest in each Automobile, to
be delivered to the Custodian pursuant to Section 2.02 of the Pooling and
Servicing Agreement, and (D) upon the transfer of the Auto Loans to each of
them, the Funding Company and thereafter the Trust is the holder of such
first priority perfected security interest;
(xxv) the Originator has duly fulfilled all obligations on its
part to be fulfilled under or in connection with each Auto Loan and has
done nothing to impair the rights of the Funding Company in such Auto Loan
or the proceeds with respect thereto, including, without limitation, paid
in full all taxes and other charges payable in connection with such Auto
Loan and the transfer of such Auto Loan to the Funding Company, which could
impair or become a lien prior to, Funding Company's interest in such Auto
Loan;
(xxvi) there is only one original executed copy of each Auto Loan;
(xxvii) each Auto Loan constitutes "chattel paper" under the UCC;
(xxviii) as of the Cut-Off Date, Obligors on the Auto Loans reside in
one of the following 38 states: Alabama, Arizona, Arkansas, California,
Colorado, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas,
Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota,
Mississippi, Missouri, Nevada, New Jersey, New Mexico, New York, North
Carolina, Ohio, Oregon, Pennsylvania, South Carolina, South Dakota,
Tennessee, Utah, Vermont, Virginia, West Virginia, Wisconsin and Wyoming,
of which Illinois accounted for approximately 31.0%, Georgia accounted for
approximately 22.4%, Florida accounted for approximately 20.0% and South
Carolina accounted for approximately 12.6% by aggregate Principal Balances
of the Auto Loans;
(xxix) the full principal amount of each Auto Loan has been
advanced to each Obligor or advanced in accordance with the directions of
each such Obligor, and there is no requirement for future advances
thereunder. The Obligor with respect to each Auto Loan does not have any
options under such Auto Loan to borrow from any person additional funds
secured by the Automobile;
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(xxx) to the best of the Originator's knowledge, each Automobile
is in good repair and working order;
(xxxi) no Auto Loan has a Principal Balance which includes
capitalized interest, physical damage insurance (forced placed or
otherwise) or late charges;
(xxxii) for each Auto Loan certain underwriting criteria were
observed, subject to specified exceptions, with respect to the Auto Loans,
and each Auto Loan is either eligible under the Operations Manual or an
exception to the guidelines of the Operations Manual has been granted by
the Originator; PROVIDED, HOWEVER, that in the event an Obligor defaults in
making its first payment such representation will conclusively be deemed to
have been breached;
(xxxiii) each Dealer has complied with the terms of the Auto Loans
and the representations and warranties set forth therein are accurate; and
(xxxiv) Auto Loan contracts originated in the states of Florida,
Georgia, Illinois and South Carolina are substantially in the form of the
Auto Loan contracts for each state attached to the Officer's Certificate of
the Funding Company dated as of the Closing Date.
(c) It is understood and agreed that the representations and
warranties set forth in this Section 4 shall survive the sale of the Auto Loans
to the Funding Company and any assignment of the Auto Loan by the Funding
Company to any subsequent assignee and shall continue so long as any Auto Loan
shall remain outstanding. The Originator acknowledges that the Funding Company
may assign all of its right, title and interest in and to the Auto Loans and its
right to exercise the remedies created by this Section 4 hereof to a subsequent
assignee. The Originator agrees that, upon such assignment, any subsequent
assignee may enforce directly, without joinder of the Funding Company, the
repurchase obligations of the Originator set forth in Section 4(d) with respect
to breaches of the representations and warranties set forth in Section 4(a) and
Section 4(b) hereof.
(d) Upon discovery by the Originator, the Funding Company, the
Trustee or the Servicer or any subsequent assignee of a breach of any of the
representations and warranties in Section 4(a) or Section 4(b) hereof which
materially and adversely affects the value of an Auto Loan or the interests of
the Funding Company or a subsequent assignee therein, the party discovering such
breach shall
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<PAGE>
give prompt written notice to the other parties. Thereafter, if requested by
notice from the Funding Company or any subsequent assignee, the Originator shall
immediately repurchase such Auto Loan by remitting the Repurchase Price in the
manner specified in such notice. Any such repurchase shall be made without
recourse against, or warranty, express or implied, of such party.
(e) Upon such repurchase and the payment of the Repurchase Price, the
Funding Company or any subsequent assignee shall execute and deliver an
assignment substantially in the form of Exhibit B hereto and the Funding Company
or any subsequent assignee shall assign to the entity effecting such repurchase,
all of the Funding Company's or any subsequent assignee's right, title and
interest in such repurchased Auto Loan, without recourse, representation or
warranty, except as to the absence of liens, charges or encumbrances created by
or arising as a result of actions of the Funding Company or any subsequent
assignee other than liens, charges or encumbrances created or arising out of
this Sale Agreement. The Funding Company and any subsequent assignee agree that
it will promptly execute and deliver and take all further action, that may be
necessary or appropriate, or that the Originator may reasonably request, in
order to perfect, protect or more fully evidence the transfer of ownership of
such Auto Loan to the entity effecting such repurchase pursuant to Section 4
(d). It is understood and agreed that the obligation of the Originator to
repurchase any Auto Loan pursuant to Section 4 (d) shall constitute the sole
remedy for the breach of any representation or warranty under Section 4 (b);
provided, that the foregoing limitation shall not be construed to limit in any
manner the Funding Company's rights to indemnification to the extent available
under Section 6.
Section 5. ADDITIONAL COVENANTS OF THE ORIGINATOR. The Originator
shall, unless the Funding Company and the Trustee shall otherwise consent in
writing:
(a) Promptly after the occurrence thereof, notice of any pending or
threatened action, suit or proceeding of a type described in Section 4(a)(vii);
(b) Operate in such a manner that the Funding Company would not be
substantively consolidated in the bankruptcy estate of the Originator or any
Affiliate, such that the separate existence of the Funding Company and the
Originator or any Affiliate would be disregarded, and to such end, ensure that:
(i) the Originator and any Affiliate thereof maintain separate
records, books of account and
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<PAGE>
financial statements from those of the Funding Company;
(ii) Neither the Originator nor any Affiliate commingles any of
its assets or funds with those of the Funding Company;
(iii) Originator shall cause the Funding Company at all times to
maintain a separate board of directors with at least one independent
director and observe all separate corporate formalities, and that all
decisions with respect to the Funding Company's business and daily
operations have been and shall be independently made by the officers of the
Funding Company pursuant to resolutions of its board of directors;
(iv) other than contributions of capital, payment of dividends
and return of capital, no transactions have been entered into between the
Funding Company and Originator or between the Funding Company and any of
the other Affiliates of Originator except a lease and expense allocation
agreement and a tax sharing agreement and such transactions as are
contemplated by this Agreement, the Pooling and Servicing Agreement and the
other Related Documents;
(v) except for such administration and collection and functions
as Originator may perform on behalf of the Funding Company and the Trust
pursuant to the Pooling and Servicing Agreement and the Related Documents,
cause the Funding Company to act solely in its own name and through its own
authorized officers and agents and at no time permit Funding Company to act
as agent of Originator or any other Person in any capacity;
(vi) except for any funds contributed by Originator as a capital
contribution, the Originator shall not supply funds to, or guarantee any
obligation of, the Funding Company;
(vii) Originator shall not permit the Funding Company to
guarantee, or otherwise become liable with respect to, any obligation of
Originator or any of the other Affiliates of Originator; and
(viii) the Originator and each of its Affiliates shall at all times
hold itself out to the public under its own name as a legal entity separate
and distinct from the Funding Company.
Section 6. INDEMNIFICATION. Without limiting any other rights that
an Indemnified Party may have hereunder or
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under applicable law, the Originator hereby agrees to pay on demand to each
Indemnified Party Indemnified Amounts which may be imposed on, incurred by or
asserted against an Indemnified Party in any way arising out of or resulting
from this Sale Agreement including without limitation:
(a) use by the Originator of proceeds of any Sale or in respect
of any Auto Loan;
(b) reliance on (a) any representation or warranty made or
deemed made by the Originator (or any of its officers) under or in
connection with this Sale Agreement (other than in respect of a breach of
representation and warranty in respect of an Auto Loan, as to which the
Funding Company's remedies are set forth in Section 4(d); PROVIDED,
HOWEVER, that with respect to any representation and warranty arising under
Section 4(b)(xxvi)(A) and (C) in respect of losses to or damages imposed on
the Funding Company or its assignee in excess of the Repurchase Price of
the Auto Loan the limitation on remedies in Section 4(d) shall not apply)
and (b) any report or any other information delivered by the Originator
pursuant hereto, which shall have been incorrect in any material respect
when made or deemed made or delivered;
(c) the failure by the Originator to comply with any term,
provision or covenant contained in this Sale Agreement, or any agreement
executed in connection with this Sale Agreement; or
(d) the failure to vest and maintain vested in the Funding
Company, or to transfer to the Funding Company, legal and equitable title
to and ownership of the Auto Loans which are, or are purported to be, the
Auto Loans, together with all proceeds in respect thereof, free and clear
of any Adverse Claim (except as permitted hereunder) whether existing at
the time of the proposed sale of such Auto Loan or at any time thereafter
and without limitation to the remedies set forth in Section 4;
excluding, however, (a) recourse for any uncollectible Auto Loan (provided that
the foregoing shall not be deemed to limit the Funding Company's rights under
Sections 4(d) and 6(b) to the extent available otherwise than for such
uncollectibility) and (b) Indemnified Amounts to the extent resulting from the
negligence or willful misconduct on the part of such Indemnified Party. The
Originator acknowledges that the Funding Company may assign its rights of
indemnity granted hereunder to an assignee and upon such assignment, such
assignee shall have all rights of the Funding Company hereunder. The Originator
agrees that, upon such
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assignment, such assignee may enforce directly, without joinder of the Funding
Company, the indemnities set forth in this Section.
Section 7. NO PROCEEDINGS. The Originator hereby agrees that it will
not, directly or indirectly, institute, or cause to be instituted, against the
Funding Company any bankruptcy, insolvency, reorganization, liquidation or other
similar proceeding relating to state or federal debtors relief laws, so long as
there shall not have elapsed one year plus one day since the latest maturing
securities issued by the Trust have been paid in full in cash.
Section 8. NOTICES, ETC. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing and
mailed or telecommunicated, or delivered as to each party hereto, at its address
set forth under its name on the signature page hereof or at such other address
as shall be designated by such party in a written notice to the other parties
hereto. All such notices and communications shall not be effective until
received by the party to whom such notice or communication is addressed.
Section 9. NO WAIVER; REMEDIES. No failure on the part of the
Originator or the Funding Company to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any other remedies provided by law.
Section 10. BINDING EFFECT; ASSIGNABILITY. This Sale Agreement shall
be binding upon and inure to the benefit of the Originator and the Funding
Company, and their respective successors and permitted assigns. The Originator
may not assign any of its rights and obligations hereunder or any interest
herein without the prior written consent of the Funding Company. The Funding
Company may, and intends to, assign all of its rights hereunder to the Trust.
This Sale Agreement shall create and constitute the continuing obligations of
the parties hereto in accordance with its terms, and shall remain in full force
and effect until its termination; provided, that the rights and remedies with
respect to any breach of any representation and warranty made by the Originator
pursuant to Section 4 and the indemnification and payment provisions of Section
6 shall be continuing and shall survive any termination of this Sale Agreement.
Section 11. AMENDMENTS; CONSENTS AND WAIVERS; ENTIRE AGREEMENT. No
modification, amendment or waiver of,
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or with respect to, any provision of this Sale Agreement, and all other
agreements, instruments and documents delivered thereto, nor consent to any
departure by the Originator from any of the terms or conditions thereof shall be
effective unless it shall be in writing and signed by each of the parties
hereto. Any waiver or consent shall be effective only in the specific instance
and for the purpose for which given. No consent to or demand by the Originator
in any case shall, in itself, entitle it to any other consent or further notice
or demand in similar or other circumstances. This Sale Agreement and the
documents referred to herein embody the entire agreement of the Originator and
the Funding Company with respect to the Auto Loans and supersede all prior
agreements and understandings relating to the subject hereof.
Section 12. SEVERABILITY. In case any provision in or obligation
under this Sale Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation, shall not in any
way be affected or impaired thereby in any other jurisdiction. Without limiting
the generality of the foregoing, in the event that a Governmental Authority
determines that the Funding Company may not purchase or acquire Auto Loans, the
transactions evidenced hereby shall constitute a loan and not a purchase and
sale, notwithstanding the otherwise applicable intent of the parties hereto, and
this Sale Agreement shall constitute a security agreement under applicable law,
and the Originator shall be deemed to have granted to the Funding Company as of
the date hereof a first priority perfected security interest in all of the
Originator's right, title and interest in, to and under the Auto Loans, and all
proceeds thereof.
Section 13. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL. (a) THIS SALE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS)
OF THE STATE OF NEW YORK.
(b) THE ORIGINATOR AND THE FUNDING COMPANY HEREBY SUBMIT TO THE
NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED
STATES DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY, AND
EACH WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT
ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE ADDRESS
SET FORTH ON THE SIGNATURE PAGE HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED FIVE DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U.S. MAILS,
POSTAGE PREPAID. THE ORIGINATOR AND THE FUNDING COMPANY EACH HEREBY WAIVE ANY
OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION
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TO VENUE OF ANY ACTION INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH
LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. NOTHING IN
THIS SECTION SHALL AFFECT THE RIGHT OF THE ORIGINATOR OR THE FUNDING COMPANY TO
SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT EITHER'S
RIGHT TO BRING ANY ACTION OR PROCEEDING IN THE COURTS OF ANY OTHER JURISDICTION.
(c) THE ORIGINATOR AND THE FUNDING COMPANY EACH HEREBY WAIVES ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR IN
CONNECTION WITH THIS SALE AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT
WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
Section 14. EXECUTION IN COUNTERPARTS. This Sale Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and both of which when taken together
shall constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties have caused this Sale Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
EAGLE FINANCE CORP.
By /s/ Howard J. Adamski
---------------------------
Name: Howard J. Adamski
Title: Vice President & Treasurer
Address of Principal Place of Business and
Chief Executive Office:
1425 Tri-State Parkway
Suite 140
Gurnee, IL 60031
Attention: Servicer - Eagle Auto Trust
1996-A
Telephone number: (847) 855-7150
Telecopier number: (847) 855-7250
Additional locations where records are kept:
Tampa, Florida
Orlando, Florida
Additional names under which, and locations
at which, Eagle Finance Corp. does business:
None
EAGLE AUTO FUNDING CORP.
By /s/ Howard J. Adamski
---------------------------
Name: Howard J. Adamski
Title: Vice President
Address: 1425 Tri-State Parkway
Suite 140A
Gurnee, IL 60031
Attention: Treasurer
Telephone number: (847) 855-7128
Telecopier number: (847) 855-7225
<PAGE>
EXHIBIT A
TO
LOAN SALE AND CONTRIBUTION AGREEMENT
DATED AS OF SEPTEMBER 1, 1996
BY AND BETWEEN
EAGLE FINANCE CORP.
AND
EAGLE AUTO FUNDING CORP.
[FORM OF OFFICER'S CERTIFICATE
FOR ORIGINATOR]
I hereby certify that I am a duly elected Officer of EAGLE FINANCE
CORP. (the "Originator") with all requisite knowledge of the matters set forth
below and further certify as follows:
1. No proceedings looking toward merger, liquidation, dissolution or
bankruptcy of the Originator are pending or contemplated.
2. Except as previously disclosed in the Private Placement
Memorandum, there is no litigation pending, or to my knowledge, threatened,
which, if determined adversely to the Originator, would adversely affect the
execution, delivery or enforceability of the Loan Sale and Contribution
Agreement, dated as of September 1, 1996 (the "Sale Agreement"), by and between
the Originator and Eagle Auto Funding Corp. or the sale or servicing of the Auto
Loans as provided therein.
3. With respect to the Sale Agreement, the Originator has complied
with all the agreements by which it is bound and has satisfied all the
conditions on its part to be performed or satisfied prior to the Closing Date.
4. The Originator is not a party to, or governed by, any contract,
indenture, mortgage, loan agreement, note, lease, deed of trust or other
instrument which restricts the Originator's ability to sell or service Auto
Loans or consummate any of the transactions contemplated by the Sale Agreement.
Independent certified public accountants for the Originator will treat
the transfer to the Funding Company of the Originator's interests in the Auto
Loans as a sale, pursuant to generally accepted accounting principles.
For tax and reporting purposes, the Originator will treat the transfer
to the Funding Company of the Originator's interests in the Auto Loans as a
sale.
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The transfer to the Funding Company of the Originator's interests in
the Auto Loan will be made (a) in good faith and without intent to hinder,
delay, or defraud present or future creditors, and (b) in exchange for
reasonably equivalent value and fair consideration.
On the date hereof, the Originator (a) was solvent, and as a result of
the transfer to the Funding Company of the Originator's interests in the Auto
Loans will not become insolvent; (b) was paying its debts as they matured; (c)
neither intended to incur, nor believed that it would incur, debts beyond its
ability to pay as they mature; and (d) after giving effect to the transfer to
the Originator of the Originator's interests in the Auto Loans, will have an
adequate amount of capital to conduct its business and anticipates no difficulty
in continuing to do so for the foreseeable future.
The Originator has and maintains all material permits, licenses,
authorizations, registrations, approvals and consents of Governmental
Authorities necessary for (a) the activities and business of the Originator as
currently conducted, (b) the ownership, use, operation and maintenance of its
properties, facilities and assets, and (c) the performance by the Originator of
the Sale Agreement or other duties as specified in the Pooling and Servicing
Agreement.
All capitalized terms used herein that are not otherwise defined shall
have the respective meanings ascribed thereto in the Sale Agreement.
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IN WITNESS WHEREOF, I have hereunto signed my name and affixed the
seal of the Originator as of this __ day of _______, ____.
By
---------------------------------
Name:
Title:
24
<PAGE>
EXHIBIT B
TO
LOAN SALE AND CONTRIBUTION AGREEMENT
DATED AS OF SEPTEMBER 1, 1996
BY AND BETWEEN
EAGLE FINANCE CORP.
AND
EAGLE AUTO FUNDING CORP.
[FORM OF REPURCHASE ASSIGNMENT]
PURCHASE ASSIGNMENT, dated as of ____________, 199_ between EAGLE
FINANCE CORP. (the "Originator"), EAGLE AUTO FUNDING CORP. (the "Funding
Company"), and Subsequent Assignee (the "Trust").
We refer to the Loan Sale and Contribution Agreement (the "Sale
Agreement"), dated as of September 1, 1996, by and between the Originator and
the Funding Company. All provisions of such Sale Agreement are incorporated by
reference. All capitalized terms shall have the meanings set forth in the Sale
Agreement.
Pursuant to Section 4(d) of the Sale Agreement, the Funding Company
does hereby sell, transfer, assign, set over and convey to the Originator,
without recourse or warranty, express or implied, all right, title and interest
of the Funding Company in and to the Auto Loans listed on Schedule 1 hereto
(each, a "Repurchased Auto Loan") and the Originator does hereby purchase each
such Auto Loan.
The aggregate Repurchase Price for the Repurchased Auto Loans is
$___________________.
25
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Repurchase Assignment
to be executed by their respective officers thereunto duly authorized, as of the
date first above written.
EAGLE FINANCE CORP. EAGLE AUTO TRUST 1996-A
By Harris Bank and Trust Company
By By
--------------------------------- ---------------------------------
Name: Name:
Title: Title
EAGLE AUTO FUNDING CORP.
By
---------------------------------
Name:
Title:
26
<PAGE>
Exhibit 10.34
March 26, 1997
Robert J. Braasch
Chief Financial Officer
Eagle Finance Corp.
1425 Tri-State Parkway
Suite 140
Gurnee, IL 60031
Dear Robert:
Eagle Finance Corp. ("Eagle") and General Electric Capital Corporation ("GE
Capital") entered into a certain Asset Purchase Agreement dated June 25, 1996
(the Asset Purchase Agreement") and Amended and Restated Servicing Agreement
dated as of June 25, 1996 (the "Servicing Agreement") pursuant to which GE
Capital agreed to (i) purchase from time to time portfolios of motor vehicle
retail installment contracts from Eagle, and (ii) permit Eagle to service such
acquired portfolios of contracts, all pursuant to the terms and conditions set
forth in the Asset Purchase Agreement and the Servicing Agreement (collectively,
the "Agreements"). Any capitalized terms used herein without definition shall
have the meaning given to such terms in the Agreements.
Section 9.0(f) of the Servicing Agreement requires that Eagle's Interest
Coverage shall not be less than 1.10 for the quarter ending 12/31/96 and 1.15
thereafter. Eagle has advised GE Capital that Interest Coverage for the fiscal
year ended December 31, 1996 was below 1.10 and anticipates that the Interest
Coverage for the quarter ending 3/31/97 will be below 1.15. Eagle requests a
waiver of this actual and anticipated non-compliance. Effective as of December
31, 1996, GE Capital hereby waives compliance by Eagle with the provisions set
forth in Section 9.0(f) of the Servicing Agreement for the period from October
1, 1996 through and including March 31, 1997. From and after April 1, 1997,
Eagle must be in compliance with the Interest Coverage requirement as stated in
Section 9.0(f) of the Servicing Agreement.
Section 11.0 of the Servicing Agreement requires that Eagle's Rolling
Average Charge-Off on the managed (owned and serviced) contracts cannot exceed
two percent (2%). Eagle has been in default of this covenant since December 31,
1996. Effective as of December 31, 1996, GE Capital hereby waives compliance by
Eagle with the provisions set forth in Section 11.0 of the Servicing Agreement
for the period from December 1, 1996 through and including March 31, 1997. From
and after April 1, 1997, Eagle must be in compliance with the Rolling Average
Charge-Off requirement as stated in Section 11.0 of the Servicing Agreement.
Section 11.0 of the Servicing Agreement requires that Eagle's Rolling
Average Delinquency on the managed (owned and serviced) contracts cannot exceed
ten percent (10%). Eagle has been in
<PAGE>
default of this covenant since January 31, 1997. Effective as of January 31,
1997, GE Capital hereby waives compliance by Eagle with the provisions set forth
in Section 11.0 of the Servicing Agreement for the period from January 1, 1997
through and including March 31, 1997. From and after April 1, 1997, Eagle must
be in compliance with the Rolling Average Delinquency requirement as stated in
Section 11.0 of the Servicing Agreement.
In consideration for GE Capital, granting the above referenced waivers, the
parties agree to the following amendment to Section 6.1 of the Servicing
Agreement;
Section 6.1 RESERVE LEVELS. With respect to the reserve account for
Purchased Contracts purchased before March 31, 1995 (the "1993/1994 Reserve
Account"), the 1993/1994 Reserve Account shall be maintained at such ten
and twenty-five hundredths percent (10.25%) level for the remainder of the
term of this Agreement.
With respect to the reserve account for Purchased Contracts purchased on
or after March 31, 1995, but before the date of this Agreement (the
"1994 Reserve Account"), once the 1994 Reserve Account reaches twelve
and twenty-five hundredths percent (12.25%) of the Borrower's
Outstanding Principal Balance of the Purchased Contracts on any Closing
Date, the 1994 Reserve Account shall be maintained at such twelve and
twenty-five hundredths percent (12.25%) level for the remainder of the
term of this Agreement provided, however, that if (i) the Monthly
Delinquency of such Purchased Contracts for each of the first twelve
(12) full calendar months after the related Closing Date, computed as of
the end of each such month, is less than ten percent (10%); and (ii) the
Monthly Charge-Off of such Purchased Contracts for each of the first
twelve (12) full calendar months after the related Closing Date,
computed as of the end of each such month, is less than one and
seventy-five hundredths percent (1.75%), Company shall refund to
Servicer from the 1994 Reserve Account an amount sufficient to reduce
the 1994 Reserve Account to ten and twenty-five hundredths percent
(10.25%) of the Borrower's Outstanding Principal Balance of such
Purchased Contracts as of the end of the first twelve (12) calendar
months after the related Closing Date, and the 1994 Reserve Account
shall be maintained for the remainder of the term of the Agreement at an
amount equal to ten and twenty-five hundredths percent (10.25%) of the
Borrower's Outstanding Principal Balance of such Purchased Contracts as
of the end of each calendar month thereafter.
With respect to Contracts purchased by Company on or after the date of the
Agreement, the Reserve Account shall be maintained at the level required by
the Asset Purchase Agreement and shall be increased to twelve and twenty-
five hundredths percent (12.25%) of the Borrower's Outstanding Principal
Balance of the Purchased Contracts, for (12) months if either of the
following occurs: (i) the Three Month Rolling Average Delinquency is eight
percent (8.0%) or greater, or (ii) the Three Month Rolling Average
Charge-Off is one and seventy-five hundredths percent (1.75%) or greater.
If the Required Reserve Account level is increased from ten and twenty-five
hundredths percent (10.25%) to twelve and twenty-five hundredths percent
(12.25%), the Servicer and Company agree that the Reserve
2
<PAGE>
Account will only be increased up to a maximum of fifty percent (50%) of
the Bonus Servicing Fee for any Due Period. If in the event the Three
Month Rolling Average Delinquency and the Three Month Rolling Average
Charge Off are less than eight percent (8.0%) and one and seventy-five
hundredths (1.75%), respectively, for twelve (12) consecutive months, the
Reserve Account balance will be reduced to ten and twenty-five hundredths
percent (10.25%). The Reserve Account shall be increased to twelve and
twenty-five hundredths percent (12.25%) of the Borrower's Outstanding
Principal Balance of the Purchased Contracts for an additional twelve (12)
months if either of the following occurs: (i) the Three Month Rolling
Average Delinquency is eight percent (8.0%) or greater, or (ii) the Three
Month Rolling Average Charge-Off is one and seventy-five hundredths percent
(1.75%) or greater.
With respect to all Purchased Contracts, in no event shall the Reserve
Accounts be less than one hundred twenty-five thousand dollars
($125,000.00) or one hundred percent (100%) of the Borrower's Outstanding
Principal Balance of the Purchased Contracts, whichever is less.
Once Eagle is in compliance with all requirements and covenants of the
Agreements the original terms of Section 6.1 shall then be applicable.
Except as provided in this waiver, all terms and conditions of the Asset
Purchase Agreement and the Servicing Agreement shall continue in full force and
effect. This waiver shall be effective only in the specific instance, for the
specific provisions, and for the specific period for which it has been given.
This waiver may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which taken together
shall constitute one and the same instrument.
Very truly yours,
General Electric Capital Corporation
By: /s/ Jody Filut
---------------------------------
Title: Account Executive
Acknowledged, accepted and agreed:
Eagle Finance Corp.
By: /s/ Robert Braasch
--------------------------------
Title: President and Chief Financial Officer
3
<PAGE>
EXHIBIT 11
EAGLE FINANCE CORP.
COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------------------
1996 1995 1994
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
INCOME DATA:
1. Net income (loss) as reported $ (5,349) $ 325 $ 3,951
2. Pro forma income taxes -- -- 819
--------- --------- ---------
3. Pro forma net income (loss) $ (5,349) $ 325 $ 3,132
--------- --------- ---------
--------- --------- ---------
NUMBER OF OUTSTANDING SHARES:
4. Weighted average common shares
outstanding 4,189 4,183 3,378
5. Weighted average shares of treasury
stock outstanding -- -- --
6. Weighted average shares reserved for
stock options (utilizing the treasury
stock method) -- 124 80
7. Common shares outstanding
(Line 4-5+6) 4,189 4,310 3,458
NET INCOME PER SHARE:
8. Net income (loss) per common shares
(Line 3 DIVIDED BY 4) $ (1.28) $ .08 $ .93
9. Fully diluted net income (loss) per common share
(Line 3 DIVIDED BY 7)* $ (1.28) $ .08 $ .91
</TABLE>
- --------------------
* Not reported, as dilution does not meet the three percent materiality test.
<PAGE>
EXHIBIT 12
EAGLE FINANCE CORP.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net income (loss) $(5,349) $ 325 $ 3,951 $ 1,686 $ 1,070
Added fixed charges:
Cost of borrowing 9,059 8,093 2,712 1,232 1,705
One-third rental 499 400 115 146 112
------- ------- ------- ------- -------
Total fixed charges $ 9,558 $ 8,493 $ 2,827 $ 1,378 $ 1,817
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Provision for income taxes $ (659) $ 197 $ 1,167 -- --
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total "earnings" (net income (loss), fixed
charges, and income taxes) $ 4,868 $ 9,015 $ 7,945 $ 3,064 $ 2,887
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratio of "earnings" to fixed charges 0.51 1.06 2.81 2.22 1.59
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Eagle Finance Corp.
RE: Registration Statements on Form S-8
-----------------------------------
- Registration No. 33-89132; 1994 Stock Incentive Plan
- Registration No. 33-81840; Profit Sharing Plan
We consent to incorporation by reference in the subject Registration Statements
on Form S-8 of Eagle Finance Corp. of our report dated March 27, 1997, relating
to the balance sheets of Eagle Finance Corp. as of December 31, 1996 and 1995,
and the related statements of income, changes in stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1996,
which report appears in the December 31, 1996 annual report on Form 10-K of
Eagle Finance Corp.
Chicago, Illinois
March 28, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,271,594
<SECURITIES> 552,651
<RECEIVABLES> 60,401,184
<ALLOWANCES> 7,488,678
<INVENTORY> 0
<CURRENT-ASSETS> 48,999,493
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 63,767,562
<CURRENT-LIABILITIES> 35,482,104
<BONDS> 17,977,720
0
0
<COMMON> 41,891
<OTHER-SE> 10,265,847
<TOTAL-LIABILITY-AND-EQUITY> 63,767,562
<SALES> 0
<TOTAL-REVENUES> 32,438,452
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 16,202,190
<LOSS-PROVISION> 13,184,278
<INTEREST-EXPENSE> 9,059,458
<INCOME-PRETAX> (6,007,474)
<INCOME-TAX> (658,875)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,348,599)
<EPS-PRIMARY> (1.28)
<EPS-DILUTED> (1.28)
</TABLE>
