United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-25714
THE AEGIS CONSUMER FUNDING GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-3008867
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
525 Washington Blvd., 29th Floor, Jersey City, NJ 07310
(Address of principal executive offices) (Zip Code)
(201) 418-7300 FAX (201) 418-7393
(Registrant's telephone number,
including area code)
Check whether the issuer (1) filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act
during the past 12 months (or for such shorter period
that the registrant was required to file such reports),
and (2) has been subject to such filing requirements
for the past 90 days. Yes X . No .
As of February 6, 1997, 16,036,294 shares of the
issuer's common stock were outstanding.
<PAGE>
THE AEGIS CONSUMER FUNDING GROUP, INC.
FORM 10-Q
INDEX
Page
PART I. FINANCIAL INFORMATION
No.
Item 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited):
Consolidated Condensed Statements of Financial Condition -
December 31, 1996 and June 30, 1996 . . . . 3
Consolidated Condensed Statements of Operations- three
months and six months ended December 31, 1996 and 1995. . 4
Consolidated Condensed Statement of Cash Flows -
six months ended December 31, 1996 and 1995 5
Notes to Consolidated Condensed Financial Statements. 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL]
CONDITION AND RESULTS OF OPERATION . . . . . 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . 27
Item 2. Changes in Securities . . . . . . . . . . . 27
Item 3. Defaults upon Senior Securities . . . . . . 27
Item 4. Submission of Matters to a Vote of
Security Holders. . . . . . . . . . . . 27
Item 5. Other information . . . . . . . . . . . . . 27
Item 6. Exhibits and Reports on Form 8-K. . . . . . 27
SIGNATURES 28
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . 27
- 2 -
<PAGE>
PART I. FINANCIAL INFORMATION:
Item 1. Consolidated Condensed Statements
THE AEGIS CONSUMER FUNDING GROUP, INC.
Consolidated Condensed Statements of Financial Condition
(unaudited)
ASSETS
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
<S> <C> <C>
Cash and cash equivalents $ 7,183,190 $ 3,090,624
Automobile finance receivables, net 212,471,193 41,058,222
Retained interests in securitized receivables 52,716,642 70,242,773
Other assets 11,591,556 7,060,135
---------- ----------
$283,962,581 $121,451,754
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Warehouse credit facilities $218,218,377 $37,202,342
Notes payable 32,829,385 29,848,859
Accounts payable and accrued expenses 17,761,031 11,220,644
Income taxes payable - 9,188,444
---------- ---------
Total liabilities 268,808,793 87,460,289
----------- ----------
Subordinated Debt 5,000,000 -
----------- -----------
Stockholders' equity:
Common stock, $.01 par value;
30,000,000 shares authorized;
15,455,958 shares issued and outstanding
at June 30 and 16,155,208 issued and
16,075,208 outstanding at December 31 161,552 154,560
Preferred stock, Series C $0.10 par value;
1,100 shares authorized; 920 shares issued;
525 shares outstanding at June 30 and 280
shares outstanding at December 31 28 53
Paid in capital 22,592,085 22,199,545
(Deficit) retained earnings, since date of
recapitalization (March 1, 1992) (12,259,877) 11,637,307
Total capital and (deficit) retained earnings 10,493,788 33,991,465
Treasury stock (340,000) -
Total stockholders' equity 10,153,788 33,991,465
$283,962,581 $121,451,754
See accompanying notes
- 3 -
<PAGE>
THE AEGIS CONSUMER FUNDING GROUP, INC.
Consolidated Condensed Statements of Operations
(unaudited)
</TABLE>
<TABLE>
Three months ended Six months ended
December 31, December 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Fees and commissions earned $23,987 $69,492 $70,542 $141,547
(Losses) gains from securitization
transactions (29,577,793) 5,923,819 (21,228,674) 11,946,677
Interest income 6,961,086 3,406,472 12,175,510 6,400,441
Other income 60,306 5,634 138,985 74,906
---------- --------- ---------- ----------
(22,532,414) 9,405,417 (8,843,637) 18,563,571
----------- --------- ----------- ----------
Operating expenses:
Salaries and other employee
cost 1,908,489 2,070,233 4,439,833 3,331,605
Provision for credit losses 6,043,350 369,275 6,579,525 1,123,050
Interest expense 4,214,327 2,459,041 7,227,800 4,583,387
Other expenses 2,806,842 1,279,511 5,099,895 2,650,689
----------- ---------- ---------- ----------
14,973,008 6,178,060 23,347,053 11,688,731
----------- ---------- ----------- ----------
Net (loss) income before
income tax (benefit) expense (37,505,422) 3,227,357 (32,190,690) 6,874,840
Income tax (benefit) expense (10,606,120) 1,383,500 (8,427,030) 3,024,900
------------ --------- ------------ ---------
Net (loss) income $(26,899,302) $1,843,857 $(23,763,660) $3,849,940
============= ========= =========== ==========
Net (loss) income available
to common stockholders $(26,957,780) $1,843,857 $(23,897,183) $3,849,940
============ ========= =========== =========
Primary Earnings Per Share:
Net (loss) income available
to common stockholders $(26,957,780) $1,843,857 $(23,897,183) $3,849,940
=========== ========= =========== ==========
Net (loss) income per
common and dilutive common
equivalent share $(1.68) $0.13 $(1.50) $0.28
====== ===== ====== =====
Weighted average common and
dilutive common
equivalent shares 16,066,631 13,754,939 15,923,853 13,746,434
========== ========== ========== ==========
Fully Diluted Earnings Per Share:
Net (loss) income available to
common stockholders $(26,957,780) $1,843,857 $(23,897,183)$3,849,940
=========== ========== =========== =========
Net (loss) income per common
and dilutive common
equivalent share $(1.68) $0.12 $(1.50) $0.26
======= ====== ====== =====
Weighted average common and
dilutive common equivalent
shares 16,066,631 14,833,247 15,923,853 14,824,742
========== ========== ========== ==========
</TABLE>
See accompanying notes.
-4-
<PAGE>
THE AEGIS CONSUMER FUNDING GROUP, INC.
Consolidated Condensed Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Six months ended December 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $(23,763,660) $3,849,940
Adjustments to reconcile
net (loss) income to net
cash used in operating activities:
Amortization and depreciation expense 534,143 240,556
Provision for credit losses 6,579,525 1,123,050
Unrealized gains on securitization transactions (12,109,339) (23,714,981)
Write-down of retained interest in securitized
receivables 31,000,000 1,500,000
Increase in automobile finance receivables
portfolio (177,992,496) (17,827,779)
Decrease in note receivable - 7,651,985
(Increase) decrease in other assets (2,028,142) 2,434,246
Increase in accounts payable and
accrued expenses 6,540,387 4,791,851
(Decrease) increase in income taxes payable (9,188,444) 2,957,603
------------ -----------
Net cash used in operating activities (180,428,026) (16,993,529)
------------ ------------
Cash flows from investing activities:
Distributions from retained interests in
securitized receivables 1,735,129 1,158,821
Additional payments to securitized receivable
trusts (3,099,659) -
Purchases of fixed assets (2,771,438) (160,753)
---------- ----------
Net cash (used in) provided by investing
activities (4,135,968) 998,068
----------- -----------
Cash flows from financing activities:
Proceeds from borrowing under warehouse credit
facilities 403,297,298 163,603,655
Repayment of borrowing under warehouse credit
facilities (222,281,263) (161,079,532)
Proceeds from borrowing under notes payable 20,167,467 12,972,635
Repayment of borrowing under notes payable (17,186,942) (2,673,528)
Proceeds from subordinated debt 5,000,000 -
Purchase of treasury stock (340,000) -
--------- ----------
Net cash provided
by financing activities 188,656,560 12,823,230
----------- ----------
Net increase (decrease) in cash and cash
equivalents 4,092,566 (3,172,231)
Cash and cash equivalents, beginning of period 3,090,624 5,970,571
--------- ----------
Cash and cash equivalents, end of period $7,183,190 $2,798,340
========= ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $4,586,897 $4,633,479
========== ==========
Income taxes $ 98,300 $ 121,000
========== ==========
See accompanying notes.
-5-
<PAGE>
THE AEGIS CONSUMER FUNDING GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The interim financial data is unaudited; however, in
the opinion of management, the interim data includes
all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the
results for the interim periods. Results for interim
periods are not necessarily indicative of the results
for a full year. The consolidated condensed financial
statements included herein have been prepared by the
Company pursuant to the rules and regulations of the
Securities and Exchange Commission (the "SEC").
Pursuant to interim accounting disclosure rules and
regulations, certain information and footnote
disclosures normally included in financial statements
prepared in accordance with generally accepted
accounting principles have been condensed or omitted.
The organization and business of the Company,
accounting policies followed by the Company and other
information are contained in the notes to the Company's
consolidated financial statements filed as part of the
Company's 10-K filing for the fiscal year ended June
30, 1996. This quarterly report should be read in
conjunction with such annual 10-K filing.
2. WAREHOUSE AND OTHER CREDIT FACILITIES
In January 1997, the two separate two-year Loan and
Security Agreements (the "Auto Agreements") with III
Finance Ltd ("III Finance") were amended to increase
the borrowing limits to $300.0 million. This limit is
inclusive of the Auto Agreements and Loan and Security
Agreements with III Finance (the "Financing
Agreements"). Under the terms of the amended Auto
Agreements, the rate of interest on loan borrowings in
excess of $50.0 million is LIBOR plus 2.75% compared
to LIBOR plus 4.0%. (See Note 8).
The Company has a one-year commitment from Greenwich
Capital to purchase and securitize up to $533.0 million
of the Company's finance contract acquisitions until
the commitment is filled, subject to customary
conditions. Three securitizations aggregating $307.0
million were completed as of December 31, 1996 pursuant
to this commitment. (See Note 8).
In December 1996, the Company entered into a purchase
agreement with Enterprise National Bank (the
"Enterprise Agreement") whereby approximately $15.0
million of automobile finance contracts were sold at
par. Under the terms of the Enterprise Agreement, the
unamortized balance of the contracts must be
repurchased no later than July 1997 and pays interest
at LIBOR plus 2.78%. At December 31, 1996, the
principal balance of the underlying finance contracts
were included in automobile finance receivables with a
corresponding liability recognized in warehouse credit
facilities. At December 31, 1996, the balance of the
underlying finance contracts and the amount due under
the Enterprise Agreement was $14,169,551.
3. NOTES PAYABLE
During the six months ended December 31, 1996, the
Company entered into an additional Loan and Security
Agreement with III Finance, whereby, the Company may
borrow up to $3,147,123. During the six months ended
December 31, 1996, the Company borrowed $2,197,411
under this agreement. As of December 31, 1996, the
Company had notes payable aggregating $31,354,981 and
related interest payable of $334,453 under the
Financing Agreements with III Finance. The notes bear
interest at a rate of 12% per annum and are secured by
certain of the Company's retained interests in
securitized receivables with carrying values
aggregating approximately $51.3 million at December 31,
1996, which approximates their fair value.
-6-
<PAGE>
In October 1996, the Company did not make a principal
payment to III Finance of $4.2 million due under the
note payable and secured by its retained interest in
securitized receivables created under the Aegis Auto
Owner Trust 1995-A securitization as a result of the
change in the recalculated borrowing base. As of
December 31, 1996, the Company had borrowings of $9.7
million under this note which is secured by retained
interests in securitized receivables with an estimated
fair value of $9.8 million. The Company negotiated an
extension on the $4.2 million principal payment owed.
The Company intends on repaying the entire outstanding
balance of $31.4 million (which includes the $9.7 million)
of the notes payable with the proceeds received from the
issuance of the Debenture.(See Note 8).
During the six months ended December 31, 1996, certain
executive officers of the Company deferred payment of a
portion of their bonuses earned for the year ended
June 30, 1996. In connection therewith, the Company
entered into notes payable (the "Executive Notes") with
such officers in an aggregate amount of $686,000.
The Executive Notes bear interest at an annual rate of
15%. Effective December 31, 1996, the Executive Notes
were cancelled and all executive officers entitled to
bonuses under their contracts agreed to forfeit their
deferred bonuses earned for the year ended June 30, 1996.
(See Note 8).
On July 29, 1996, Systems and Services Technologies,
Inc. ("SST"), a wholly owned subsidiary of the Company,
purchased a building and property (the "Property"),
located at 4215 Pickett Road, St. Joseph, Missouri,
formerly known as the Northwest Missouri Community
College Facility. The Property will be utilized by SST
as its loan servicing center. Commerce Bank, N.A.
("Commerce") has executed a Loan Agreement with SST,
dated as of July 29, 1996, whereby Commerce advanced
SST $1.4 million with interest of 8.2% per annum,
expiring in August, 2001, for the purchase and
refurbishment of the Property.
4. SUBORDINATED DEBT
During the six months ended December 31, 1996, the
Company borrowed $5.0 million available under a
revolving credit agreement provided by Greenwich
Capital Markets, Inc. ("Greenwich Capital"). (See Note
8).
5. COMMITMENTS AND CONTINGENCIES
In December 1995, the Company entered into a commitment
to sell $175.0 million of sub-prime automobile finance
contracts to be resold as asset-backed securities
through an Owners Trust Agreement (the "Agreement").
In October 1996, it was determined that the finance
contracts underlying the securities were not performing
in accordance with the levels required under the
Agreement. This event terminated the Company's
remaining commitment of $26.6 million (as of that date,
the Company had sold $148.4 million of finance
contracts of the $175.0 million total commitment).
In connection with securitization transactions, the
Company enters into pooling and servicing agreements.
Certain of these agreements require the Company to
increase its cash contribution to the underlying trusts
when the delinquencies and default rates increase to
certain levels defined in the agreements. As
delinquencies and/or default rates increase or
decrease, the Company's obligation varies. For the year
ended June 30,1996, the Company paid additional
contributions to the trusts of approximately $2.3
million and, in August 1996, paid $2.4 million, which
is the final contribution under this obligation.
On April 28, 1996, a complaint was filed against the
Company in the United States District Court for the
Southern District of New York alleging that the
complainant was entitled to certain fees under a
finder's agreement entered into with the Company on
January 2, 1996. The amounts alleged to be due were in
connection with the Company's private placement of $92
million of asset-backed securities in March 1996. On
July 3, 1996, the complaint was amended to include fees
allegedly due under the finder's agreement in
connection with a series of financing arrangements
entered into by the Company and in connection with a
potential sale of common stock of the Company. The
complainant seeks damages of approximately $21.0
million plus interest and punitive damages of at least
$545,000, together with costs, attorneys' fees and such
other relief as the court deems appropriate. On
January 8, 1997, the United States District Court for
the Southern District of New York denied Plaintiffs
Attachment Motion and its cross motion for partial
summary judgment. The Company's Motion to Dismiss has
been granted with respect to certain claims for relief
made by the Plaintiff. The Company believes it has
meritorious defenses to the remaining allegations in
the Complaint and the Amended Complaint and intends to
defend the matter vigorously.
-7-
<PAGE>
The Company is subject to various other legal
proceedings and claims that arise in the ordinary
course of business. In the opinion of management of the
Company, based in part on the advice of counsel, the
amount of any ultimate liability with respect to these
actions will not materially affect the results of
operations, cash flows or financial position of the
Company.
6. CAPITAL STOCK
No warrants or options that were issued and outstanding
at June 30, 1996 have been exercised as of February 6,
1997.
During the six months ended December 31, 1996 the
Company converted 245 shares of Series C Preferred
Stock into 699,250 shares of common stock.
In July 1996, the Company purchased 80,000 shares of
common stock from a former executive officer of the
Company, who is currently the CEO of SST, for $340,000.
7. INCOME TAXES
During the six months ended December 31, 1996, the
Company established a valuation allowance of $5.1
million against its deferred tax assets, which
represents the income tax benefit relating to losses
incurred in excess of previously earned income. As the
Company generates earnings in the future, the income
tax provision and the valuation allowance will be
adjusted.
8. SUBSEQUENT EVENTS
SST began operations during January 1997 as a loan
servicing company designed to service loans acquired by
the Company as well as various other types of marginal
loans originated by third parties. SST services the
new finance contracts approved for acquisition out of
the Georgia and New Jersey facilities and is expected
to start servicing all of the Company's finance
contract acquisition in February 1997.
The Company has reached an agreement in principle (the
"Agreement") with a group of funds and financial institutions,
including its current warehouse lender, for a multi-structured
finance facility (the "Facility"). The Facility includes a
commitment for the purchase of $300.0 million of subordinated
Class B trust certificates which will support the issuance by the
Company of $700.0 million of senior Class A trust certificates for a
total of $1.0 billion. The Facility also includes a commitment for
the purchase of a $40.0 million seven year convertible
subordinated debenture (the "Debenture"). The
Agreement is subject to final documentation acceptable
to the parties.
The Agreement contemplates the private sale of up to $700.0
million of senior Class A Grantor Trust Certificates and up
to $300.0 million of subordinate Class B Grantor Trust Certificates.
The Facility will be supported by a $50 million warehouse line.
The Agreement provides for a firm commitment as to the warehouse
portion of the facility and the purchase of the Class B Certificates
subject to placement of the Class A certificates and certain other
conditions. The Company has already received an indication of
interest from a major money center bank to purchase $290 million
of the Class A Certificates. The Agreement provides for initial
financing through the warehouse line as the finance contracts are acquired
and subsequently sold into the Facility on a bi-weekly
basis. This Facility will replace one of its existing
warehouse facilities and the finance contracts currently in the
existing warehouse facility will be sold into the new
Facility.
<PAGE>
The Debenture will be purchased for $37.5 million and
will be convertible into eight percent non-voting
preferred stock (the "Preferred Shares") of the Company
on a common share equivalent basis equal to the lesser
of (i) four dollars per share or (ii) 150% times the average
closing share price of the Company's common stock during the 15
days immediately preceding the three month anniversary
of the Debenture closing. The Debenture will have a term of
seven years and carry a coupon rate of twelve percent (12%) per
annum. Approximately $33.0 million of the proceeds of the Debenture
will be utilized to repay existing debt. The Debenture and
the Preferred Shares, into which the Debenture is convertible,
are redeemable anytime by the Company for cash or by
the hoder for cash; however, if
the redemption is requested by the holder, the Company at
its election may pay the redemption price in the form
of Common Stock. In the event the Debentures
are redeemed for any reason, in addition to the
redemption price, warrants shall be issued to the
holder which are exercisable for that number of
Preferred Shares into which the redeemed Debentures
were convertible. If Preferred Shares are redeemed at
the option of the Company, the Company must issue to
the holder warrants to acquire an equivalent number of
shares of common stock at a aggregate purchase price
equal to the redemption price paid by the Company. All
warrants will expire at the original stated maturity
date of the Debenture.
Discussions are currently taking place between the
Company and Greenwich Capital regarding the restructure
of its $5.0 million revolving credit facility and the
terms under which Greenwich Capital is willing to
reaffirm its commitments under its existing
securitization facility and $100.0 million warehouse
credit facility.
The Executive Officers employment contracts are
currently being reviewed by the Compensation Committee
of the Board of Directors. Discussions are taking
place between the Compensation Committee and the
respective officers regarding a restructuring of
certain contractual provisions including but not
limited to the bonus structure, term and base
compensation.
<PAGE>
Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations.
The following discussion and analysis of
financial condition and results of operations of the
Company relates to the six and three months ended
December 31, 1996 and 1995 and should be read in
conjunction with the Company's Consolidated Condensed
Financial Statements and Notes thereto included
elsewhere in this quarterly report. The unaudited
results for the three and six months ended December 31,
1996 are not necessarily indicative of results to be
expected for the entire fiscal year.
Overview
The Company is a specialty consumer finance
company engaged in acquiring, securitizing and
servicing finance contracts originated by Dealers in
connection with the sale of late-model used and, to a
lesser extent, new cars to consumers with sub-prime
credit. Since commencing the acquisition of finance
contracts in May 1992, through December 31, 1996, the
Company has acquired approximately $1.0 billion of
finance contracts, of which $0.8 billion have been
securitized in fifteen offerings of asset-backed
securities.
The following table illustrates the Company's
finance contract acquisition volume, total revenue,
securitization activity and servicing portfolio during
the past nine fiscal quarters.
</TABLE>
<TABLE>
For the Quarters Ended
<CAPTION
Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31. Mar. 31, June 30, Sept.30, Dec 31,
1994 1995 1995 1995 1995 1996 1996 1996 1996
(dollars inthousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Number of finance contracts
acquired during period . 1,583 2,688 4,901 5,943 8,190 10,569 12,037 15,401 14,584
Average finance contract
balance $12.1 $12.2 $12.2 $12.2 $12.3 $12.2 $12.4 $12.4 $12.3
Aggregate value of finance
contracts acquired during
period 19,188 32,785 59,609 72,562 100,582 128,781 149,612 190,843 179,933
Gains from securitization
transactions(1)(2) 741 1,984 5,197 6,023 7,424 12,759 10,824 10,349 (578)
Gains from whole loan sales 124 604 40 48 64 111 290 - -
Net interest income. 334 213 765 866 1,021 546 993 2,129 2,747
Revenue(3) . . . 1,949 2,498 6,111 7,034 6,946 10,341 11,916 10,675 (26,747)
Finance contracts securitized
during period. . 21,000 21,000 54,000 67,630 85,368 130,138 149,274 173,270 4,870
Finance contracts sold during
period . . . . . 1,750 8,561 1,000 1,000 1,801 2,752 2,250 - -
Servicing portfolio(at period
end)(4) . . . . 69,248 94,576 146,557 197,911 287,481 401,704 500,694 645,551 759,304
<FN>
<F1>
(1) Excludes gains from whole loan sales of finance
contracts.
<F2>
(2) The quarters ended December 31, 1995, March 31,
1996, June 30, 1996, September 30, 1996 and December
31, 1996 are before write downs of $2.1 million, $1.5
million, $3.5 million, $2.0 million and $29.0 million,
respectively, taken on prior retained interests in
securitized receivables.
<F3>
(3) Revenue is net of interest expense and write
downs on retained interests in securitized receivables.
<F4>
(4) Excludes finance contracts which are in
bankruptcy and authorized for repossession or in
repossession and still eligible for reinstatement.
</FN>
</TABLE>
Revenues
The Company's primary sources of revenues consist of
two components: gains or losses from securitization
transactions and interest income.
Gains or Losses from Securitization Transactions. The
Company warehouses the finance contracts it acquires
and periodically sells them to trusts, which in turn
sells asset-backed securities to investors. By
securitizing its finance contracts, the Company is able
to lock in the difference ( gross spread ) between the
annual rate of interest paid by the consumer ( APR ) on
the finance contracts acquired and the interest rate on
the asset-backed securities sold ( Certificate Rate ).
When the Company securitizes its finance contracts, it
<PAGE>
records gains or losses from securitization
transactions and establishes an asset referred to as
retained interest in securitized receivables. Gains or
losses from securitization transactions are equal to
the retained interest on the securitized receivables
plus the difference between the net proceeds from the
securitization and the cost (including the cost of VSI
Policy and credit default premiums) to the Company of
the finance contracts sold. The retained interest on
securitized receivables represents the estimated
present value of the projected future cash flows to be
received by the Company, discounted at a market-based
rate, taking into consideration (i) contractual
obligations of the obligors, (ii) amounts due to the
investors in asset-backed securities, (iii) various
costs of the securitizations, including the effects of
hedging transactions, if any, and (iv) adjustments to
the cash flows to reflect estimated prepayments of
finance contracts, defaults and losses incurred in
connection with defaults (collectively "Assumptions").
Subsequent to securitization, the Company continues to
service the securitized finance contracts, for which it
recognizes servicing fees, net of third party
sub-servicer fees, over the life of the securitization.
The Company reviews, on a quarterly basis, the fair
value of its retained interest in securitized
receivables. If actual experience differs from the
Company s Assumptions, or to the extent that market and
economic changes occur that adversely impact the
Assumptions utilized in determining the retained
interest in securitized receivables, the Company
records a charge against gains from securitization
transactions. The discount rate utilized in
determining the retained interest in securitized
receivables and gain from securitization transactions
is based on the Company's estimate of the yield
required by a third party purchaser of such instrument.
The Company also bases these assumptions on the static
pool performance characteristics of the Company's
finance contract portfolio to date. The Company's
default assumptions are based on historical static pool
experience as to repossession rates, proceeds from the
liquidation of repossessed vehicles, proceeds from VSI
Policy coverage and recoveries from the Company s
credit default insurance.
Interest Income. Interest income consists of: (i)
interest income earned on finance contracts (ii)
interest income earned on leases (the Company ceased
funding leases in the quarter ended September 30,
1995), (iii) servicing fees net of expenses, (iv) the
accretion of finance contract acquisition discounts net
of related capitalized costs and (v) the amortization
of capitalized costs net of origination discounts.
Other factors influencing interest income during a
given fiscal period include (a) the annual percentage
rate of the finance contracts acquired, (b) the
aggregate principal balance of finance contracts
acquired and funded through the Company's warehouse
credit facilities prior to securitization, and (c) the
length of time such finance contracts are funded by the
warehouse credit facilities prior to securitization.
Finance contract acquisition volume has a significant
impact on the amount of interest income earned by the
Company.
The following table provides information for each of
the Company s rated securitizations:
<TABLE>
<CAPTION>
Weighted
Remaining Average Weighted
balance at Finance Average
Original December 31, Contract Certificae Initial Gross Net
Securitizations Balance 1996 Rate Rate Ratings Spread (1) Spread(2)
<S> <C> <C> <C> <C> <C> <C> <C>
Aegis Auto Receivables Trust,
Series:
1994-A . . $18,539 $4,324 20.28% 7.74% A(3) 12.54% 8.70%
1994-2 . . 23,251 7,133 19.82 8.04 A+(3) 11.78 8.12
1994-3 . . 21,000(4) 7,656 19.66 9.46 A+(3) 10.20 6.46
1995-1 . . 21,000(4) 8,872 20.41 8.60 A+(3) 11.81 8.46
1995-2 . . 54,000(4) 26,255 19.94 7.16 A+(3) 12.78 8.98
1995-3 . . 60,000(4) 33,914 20.04 7.09 A+(3) 12.95 10.12
1995-4 . . 70,000(4) 44,093 19.88 6.65 A+(3) 13.23 10.41
1996-1 . . 92,000(4) 67,267 20.13 8.44(5) A+,BBB,BB/ 11.69 8.89
A+,BBB+,BB(6)
1996-2 . . 105,000(4) 90,165 20.10 8.93(7) A+,BBB,BB/ 11.17 8.40
A+,BBB+,BB(8)
1996-3 . . 110,000(4) 105,482 20.2 8.82(9 ) A+,BBB,BB/ 11.40 8.75
A,BBB,BB(10)
Aegis Auto
Owners Trust . . . . 148,347 119,906 20.14 6.53 AAA/Aaa,Baa2(11) 13.61 10.87
<PAGE>
<FN>
<F1>
(1) Difference between the
Weighted Average APR on finance contracts and the
Weighted Average APR on the trust certificates (the
"Weighted Average Certificate Rate").
<F2>
(2) Difference between Weighted
Average APR on finance contracts and the Weighted
Average Certificate Rate, net of servicing and trustee
monthly fees and annualized issuance costs that include
underwriting fees and hedging gains or losses, if any.
<F3>
(3) Indicates ratings by Duff & Phelps.
<F4>
(4) Includes prefunded amounts which were transferred
to the related trust by the end of the quarter for
1995-1, 1995-2, 1995-3, 1995-4,
1996-1, 1996-2, 1996-3 and by the first week of the
next quarter for 1994-3.
<F5>
(5) The Weighted Average Certificate Rate is
composed of the following: The
Class A certificate rate is 8.39%, the Class B
certificate rate is 7.86% and the Class C certificate
rate is 12.14%.
<F6>
(6) The 1996-1 Securitization
has Class A Notes rated A+ by Duff & Phelps and A+ by
Fitch; Class B Notes rated BBB by Duff & Phelps and
BBB+ by Fitch and Class C Notes rated BB by Duff &
Phelps and BB by Fitch.
<F7>
(7) The Weighted Average Certificate Rate is
composed of the following: The
Class A certificate rate is 8.9%, the Class B
certificate rate is 8.4% and the Class C certificate
rate is 11.65%
<F8>
(8) The 1996-2 Securitization
has Class A notes rated A+ by both Duff & Phelps and
Fitch; Class B Notes rated BBB by Duff and Phelps and
BBB+ by Fitch and Class C Notes rated BB by both Duff &
Phelps and Fitch.
<F9>
(9) The weighted average
Certificate Rate is composed of the following: the
Class A certificate is 8.8%, the Class B certificate is
8.3% and the Class C certificate is 11.1%.
<F10>
(10) The 1996-3 Securitization
has Class A notes rated A+ by Duff & Phelps and A by
Fitch; Class B notes rated BBB and Class C notes rated
BB by both Duff & Phelps and Fitch.
<F11>
(11) The Owner Trust Facility has
Class A Notes rated AAA by Standard & Poor s and Aaa by
Moody s and Class B Certificates rated Baa2 by Moody s.
Since their initial rating, Moody's has placed the Class B
certificates on their internal review for possible downgrade
and confirmed their Aaa rating of the Class A notes.
</FN>
</TABLE>
Results of Operations
Six Months Ended December 31, 1996 Compared To Six
Months Ended December 31, 1995
Revenues
Revenues decreased to $(8.8) million for the six
months ended December 31, 1996 from $18.6 million for
the six months ended December 31, 1995, a decrease of
$27.4 million or 147.6%.
Gains or Losses from Securitization Transactions.
Gains or losses from securitization transactions
decreased to $(21.2) million for the six months ended
December 31, 1996 from $11.8 million for the six months
ended December 31, 1995, a decrease of $33.0 million or
279.3%. The decrease in gains or losses from
securitization transactions includes write downs of
$31.0 million (described below) taken on the retained
interests in securitized receivables from earlier
securitizations and the lack of a material
securitization transaction in the three months ended
December 31, 1996. Quarterly, the Company revalues its
retained interests in securitized receivables using
actual experience on the respective underlying
securitization trust's finance contract performance.
When the actual experience differs from the original
assumptions utilized in the initial valuation in a
detrimental direction, the Company can incur permanent
impairment losses in the carrying value of these
assets. During the six months ended December 31, 1996
and 1995, the Company incurred $31.0 million and $1.5
million, respectively, of what management believes to
be permanent impairment losses on its retained
interests in securitized receivables portfolio. The
most significant causes of the permanent impairment was
higher than expected default rates on the underlying
finance contracts. As a result of this increase and
other observations on portfolio performance, current
assumptions utilized in current valuations have been
adjusted to reflect the higher rates actually experienced.
Additionally, the Company's securitization costs
increased as a result of the inherent costs associated
with issuing warrants to Greenwich Capital in
connection with additional securitizations pursuant to
the terms of the Securitization Facility.
Interest Income. Interest income increased to $12.0
million for the six months ended December 31, 1996 from
$6.5 million for the six months ended December 31,1995,
an increase of $5.5 million or 85.4% primarily as a
result of the Company s increased finance contract
volume. The Company s weighted monthly average
outstanding balance of finance contracts owned
increased to $106.0 million for the six months ended
December 31, 1996 from $60.3 million for the six
months ended December 31, 1995, an increase of $45.7
million or 75.8%.
<PAGE>
This significant increase in the
weighted average outstanding balance is attributed to
the Company not securitizing or otherwise disposing of
its finance contracts acquired in the second quarter
ended December 31, 1996. Since the Company s weighted
average APR on finance contracts has remained between
approximately 20.0% and 20.5%, the increase in interest
income is also attributable to the increase in the
weighted average outstanding balance. (Interest income
is net of servicing fees paid and earned.)
Operating Expenses
Operating expenses increased to $23.3 million for
the six months ended December 31, 1996 from $11.7
million for the six months ended December 31, 1995, an
increase of $11.7 million or 99.7%.
Interest Expense. Interest expense increased to
$7.2 million for the six months ended December 31, 1996
from $4.6 million for the six months ended December 31,
1995, an increase of $2.6 million or 57.7%, as a result
of the increased financing requirements for the
increased finance contract acquisition activity. The
increase in interest expense represents 22.7% of the
total increase in operating expenses and is partially
attributable to the Company s warehouse credit
facilities, which are at fluctuating interest rates
that ranged from as low as 8.125% to as high as 9.5625%
for the six months ended December 31, 1996 compared to
a low of 9.75% and a high of 10.125% for the six months
ended December 31, 1995. In addition, the Company s
monthly average outstanding balance on its warehouse
credit facility increased to $108.2 million for the six
months ended December 31, 1996 from $63.7 million for
the six months ended December 31, 1995. This
significant increase in the average outstanding balance
is attributed to the Company not securitizing or
otherwise disposing of its finance contracts acquired
in the second quarter ended December 31, 1996. The
Company also incurred interest on notes payable at a
12% interest rate on a monthly average outstanding
balance of $31.5 million for the six months ended
December 31, 1996 compared to a monthly outstanding
average balance of $16.1 million for the six months
ended December 31, 1995.
Salaries and Other Employee Costs. Salaries and
other employee costs increased to $4.1 million for the
six months ended December 31, 1996 from $3.3 million
for the six months ended December 31, 1995, an increase
of $0.8 million or 23.4%, due to an increase in the
number of employees to approximately 490 (including 48
SST employees) at December 31, 1996 from approximately
250 employees at December 31, 1995. In addition
temporary help charges incurred increased to
approximately $1.3 million for the six months ended
December 31, 1996 from approximately $89,000 for the
six months ended December 31, 1995, an increase of $1.2
million. Temporary employment agencies, specializing
in providing collectors, were increasingly utilized in
the Company's California collections unit located in
Irvine, CA as a screening process for hiring new
collectors. The Collections unit expanded its
operations in an effort to maintain the number of
finance contracts per collector at levels acceptable to
the Company. The Company expects continued increases
in the number of permanent employees, as well as total
salary costs, as it expands its servicing operations of
SST. In addition, salaries and other employee costs
for the six months ended December 31, 1996 includes an
adjustment of $611,000 relating to the forfeitures of the
deferred portion of contractual bonuses of certain executive
officers earned for the year ended June 30, 1996.
Provision for Credit Losses. The provision for
credit losses increased to $6.6 million for the six
months ended December 31, 1996 from $1.1 million for
the six months ended December 31, 1995, an increase of
$5.5 million or 485.9%. The Company's provision for
credit losses is affected by: (i) the Company's
increased acquisition volume of finance contracts; (ii)
the Company's decision to discontinue purchasing credit
default insurance on its lease originations effective
January 1995; (iii) the Company's decision, effective
August 1995, to insure on a discretionary basis its
finance contract acquisitions (to the extent finance
contracts remain uninsured for default, the Company's
loss ratio is higher); (iv) the increase in delinquent
automobile finance receivables (as discussed below);
(v) the change in the Company's historical loss ratios;
(vi) the higher amount of finance contracts and leases
owned by the Company at December 31, 1996 ($226.7
million) as compared to December 31, 1995 ($59.2
million); and (vii) the ratio of current finance
contracts to total finance contracts at December 31,
1996 (78.1%) compared to December 31, 1995 (78.0%).
These changes resulted in a decrease in the Company's
reserve rate as a percentage of total automobile
finance receivables held on the Company's balance sheet
<PAGE>
(i.e., original balance net of receivables repaid, sold
or charged off) to 3.0% at December 31, 1996 from 3.2%
at December 31, 1995. The provision for credit losses
for the six months ended December 31, 1996 includes an
adjustment for $500,000 for estimated recoveries of
sales taxes paid on automobile finance contracts which
became delinquent and/or defaulted. Exclusive of this
adjustment, the provision for credit losses increased
to $7.1 million, an increase of $6.0 million or 600.0%
from the six months ended December 31, 1995. The
Company maintains residual value insurance relating to
its entire lease portfolio.
All Other Operating Expenses. All other operating
expenses increased to $5.4 million for the six months
ended December 31, 1996 from $2.7 million for the six
months ended December 31, 1995, an increase of $2.8
million or 104.2%. The significant components of the
increase in all other operating expenses are increases
in office, communications and data services,
professional fees and all other general and
administrative expenses. Office, communications and
data service expenses increased to $1.2 million for the
six months ended December 31, 1996 from $540,000 for
the six months ended December 31, 1995, an increase of
$686,000 (5.6% of the total increase) or 120.7%. These
expenses increased due to the Company's increased
acquisitions of finance contracts and the upgrade and
maintenance of communications equipment at all of its
offices. Professional fees increased to $872,000 for
the six months ended December 31, 1996 from $335,000
for the six months ended December 31, 1995, an increase
of $537,000 (4.6% of the total increase) or 160.6%
primarily due to increased legal fees incurred for
defending the Company's ongoing litigation and
consulting fees incurred under the Whitehall Financial
Group, Inc. consulting agreement of $150,000 with no
such expense in the comparable 1995 period. All other
general and administrative expenses increased to $3.3
million for the six months ended December 31, 1996 from
$2.1 million from the comparable 1995 period, an
increase of $1.2 million or 58.5%. In general, the
Company's general and administrative expenses increased
to support the Company's increased finance contract
acquisition levels and its collections efforts.
Income Tax (Benefit) Expense. A net tax benefit of
$8.4 million was recorded by the Company for the six
months ended December 31, 1996 which is net of a
valuation adjustment of $5.1 million which represents
an adjustment to the income tax benefit relating to
losses incurred in excess of previously earned income.
Exclusive of the valuation adjustment the Company's tax
benefit would have been $13.5 million (an effective tax
rate of 42%). A tax expense of $3.0 million was
recorded by the Company for the six months ended
December 31, 1995 (an effective tax rate of 44%). The
change in effective tax rates is attributed to
decreased state and local taxes.
Net (Loss) Income. The Company recognized a net
loss of $23.8 million for the six months ended December
31, 1996. The net loss resulted from several factors
including; (1) a write down of $18.0 million, net of
taxes, in retained interests in securitized
receivables; (2) since the Company retained most of
the finance contracts it acquired during the last three
months of the period ended December 31, 1996, it
incurred larger reserves, (3) while in the process of
negotiating the Company's proposed $1.0 billion
Purchase Facility, the Company did not sell its loans
through its securitization exit strategy and retained
the loans on its balance sheet, resulting in no gain on
securitization transactions in the last three months of
the six months ended December 31, 1996 and, (4) a
valuation adjustment of $5.1 million taken on losses
incurred in excess of previously earned income.
Three Months Ended December 31, 1996 Compared To Three
Months Ended December 31, 1995
Revenues
Revenues decreased to $(22.5) million for the three
months ended December 31, 1996 from $9.4 million for
the three months ended December 31, 1995, a decrease of
$31.9 million or 340.0%.
Gains or Losses from Securitization Transactions.
Gains or losses from securitization transactions
decreased to $(29.6) million for the three months ended
December 31, 1996 from $5.8 million for the three
months ended December 31, 1995, a decrease of $35.4
million or 608.4%. The decrease in gains from
securitization transactions includes write downs of
$29.0 million (described below) taken on the retained
interests in securitized receivables from earlier
securitizations and the lack of a material
securitization in the current quarter.
<PAGE>
Quarterly, the Company revalues its retained interests in securitized
receivables using actual experience on the respective
underlying securitization trust's finance contract
performance. When the actual experience differs from
the original assumptions utilized in the initial
valuation in a detrimental direction, the Company can
incur permanent impairment losses in the carrying value
of these assets. During the three months ended
December 31, 1996 and 1995, the Company incurred $29.0
million and $1.5 million, respectively, of what
management believes to be, permanent impairment losses
on its retained interests in securitized receivables
portfolio. The most significant causes of the
permanent impairment was higher than expected default
rates on the underlying finance contracts and the
impact of reduced market liquidity for this type of
asset in the wake of recent industry performance and
developments. As a result of this increase and other
observations on portfolio performance, current
assumptions utilized in current valuations have been
adjusted to reflect the higher rates actually
experienced.
Additionally, the Company's securitization costs
increased as a result of the inherent costs associated
with issuing warrants to Greenwich Capital in
connection with additional securitizations pursuant to
the terms of the Securitization Facility.
Interest Income. Interest income increased to $6.9
million for the three months ended December 31, 1996
from $3.5 million for the three months ended December
31,1995, an increase of $3.4 million or 96.9%,
primarily as a result of the Company s increased
finance contract volume. The Company s weighted
monthly average outstanding balance of finance
contracts owned increased to $141.9 million for the
three months ended December 31, 1996 from $69.6
million for the three months ended December 31, 1995,
an increase of $72.4 million or 104.0%. This
significant increase in the weighted average
outstanding balance is attributed to the Company not
securitizing or otherwise disposing of its finance
contracts acquired in the quarter ended December 31,
1996. Since the Company s weighted average APR on
finance contracts has remained between approximately
20.0 % and 20.5%, the increase in interest income is
also attributable to the increase in the weighted
average outstanding balance. (Interest income is net
of servicing fees paid and earned.)
Operating Expenses
Operating expenses increased to $15.0 million for
the three months ended December 31, 1996 from $6.2
million for the three months ended December 31, 1995,
an increase of $8.8 million or 142.4 %.
Interest Expense. Interest expense increased to
$4.2 million for the three months ended December 31,
1996 from $2.5 million for the three months ended
December 31, 1995, an increase of $1.8 million or
71.4%, as a result of the increased financing
requirements for the increased finance contract
acquisition activity. The increase in interest expense
represents 11.7% of the total increase in operating
expenses and is partially attributable to the Company s
warehouse credit facilities, which are at fluctuating
interest rates that ranged from as low as 8.125% to as
high as 9.5625% for the three months ended December 31,
1996 compared to a low of 9.75% and a high of 10.125%
for the three months ended December 31, 1995. In
addition, the Company s monthly average outstanding
balance on its warehouse credit facility increased to
$108.2 million for the three months ended December 31,
1996 from $63.7 million for the three months ended
December 31, 1995. This significant increase in the
average outstanding balance is attributed to the
Company not securitizing or otherwise disposing of its
finance contracts acquired in the quarter ended
December 31, 1996. The Company also incurred interest
on notes payable at a 12% interest rate on a monthly
average outstanding balance of $32.3 million for the
three months ended December 31, 1996 compared to a
monthly outstanding average balance of $18.2 million
for the three months ended December 31, 1995.
Salaries and Other Employee Costs. Salaries and
other employee costs decreased to $1.9 million for the
three months ended December 31, 1996 from $ 2.1 million
for the three months ended December 31, 1995, a
decrease of $0.2 million or 8.0%. Salaries and other
employee costs for the three months ended December 31,
1996 includes an adjustment for $611,000 relating to the
forfeitures of the deferred portion of contractual bonuses
of certain executive officers earned for the year ended June 30,
1996. Had this adjustment not been recorded, salaries
and other employee costs would have been $2.5 million for
the three months ended December 31, 1996, an increase of
$0.4 million or 21.7%. The number of employees increased
to approximately 490 (including 48 SST employees) at December 31,
1996 from approximately 250 employees at December 31, 1995.
Temporary help charges incurred increased to $750,000 for the three
months ended December 31, 1996 from $68,000 for the
three months ended December 31, 1995, an increase of
$682,000. Temporary employment agencies, specializing
in providing collectors, were increasingly utilized in
the Company's California collections unit located in
Irvine, CA as a screening process for hiring new
collectors.
<PAGE>
The Collections unit expanded its
operations in an effort to maintain the number of
finance contracts per collector at levels acceptable to
the Company. The Company expects continued increases
in the number of permanent employees, as well as total
salary costs, as it expands its servicing operations of
SST.
Provision for Credit Losses. The provision for
credit losses increased to $6.0 million for the three
months ended December 31, 1996 from $0.4 million for
the three months ended December 31, 1995, an increase
of $5.7 million. The Company's provision for credit
losses is affected by: (i) the Company's increased
acquisition volume of finance contracts; (ii) the
Company's decision to discontinue purchasing credit
default insurance on its lease originations effective
January 1995; (iii) the Company's decision, effective
August 1995, to insure on a discretionary basis its
finance contract acquisitions (to the extent finance
contracts remain uninsured for default, the Company's
loss ratio is higher); (iv) the increase in delinquent
automobile finance receivables (as discussed below);
(v) a change in the Company's historical loss ratios;
(vi) the higher amount of finance contracts and leases
owned by the Company at December 31, 1996 ($226.7
million) as compared to December 31, 1995 ($59.2
million); and (vii) the ratio of current finance
contracts to non- current finance contracts at December
31, 1996 (78.1%) compared to December 31, 1995 (
78.0%). These changes resulted in a decrease in the
Company's reserve rate as a percentage of total
automobile finance receivables held on the Company's
balance sheet (i.e., original balance net of
receivables repaid, sold or charged off) to 3.0% at
December 31, 1996 from 3.2% at December 31, 1995. The
Company maintains residual value insurance relating to
its entire lease portfolio.
All Other Operating Expenses. All other operating
expenses increased to $2.8 million for the three months
ended December 31, 1996 from $1.3 million for the three
months ended December 31, 1995, an increase of $1.5
million or 119.4%. The significant components of the
increase in all other operating expenses are increases
in office, communications and data services,
professional fees and all other general and
administrative expenses. Office, communications and
data service expenses increased to $725,000 for the
three months ended December 31, 1995 from $216,000 for
the three months ended December 31, 1995, an increase
of $509,000 (5.8% of the increase) or 236.1%. These
expenses increased due to the Company's increased
acquisitions of finance contracts and the upgrade and
maintenance of communications equipment at all of its
offices. Professional fees increased to $368,000 for
the three months ended December 31, 1996 from $141,000
for the three months ended December 31, 1995, an
increase of $227,000 (2.2% of the total increase) or
161.2% primarily due to increased legal fees incurred
for defending the Company's on going litigation and
consulting fees incurred under the Whitehall Financial
Group, Inc. consulting agreement of $75,000 with no
such expense in the comparable 1995 period. All other
general and administrative expenses increased to $1.7
million for the three months ended December 31, 1996
from $0.9 million for the three months ended December
31, 1995, an increase of $0.8 million or 85.7%. In
general, the Company's general and administrative
expenses increased to support the Company's increased
finance contract acquisition levels.
Income Tax (Benefit) Expense. A net tax benefit of
$10.6 million was recorded by the Company for the three
months ended December 31, 1996 which is net of a
valuation adjustment of $5.1 million which represents
the an adjustment to the income tax benefit relating to
losses incurred in excess of previously earned income.
Exclusive of the valuation adjustment the Company's tax
benefit would have been $15.7 million (an effective tax
rate of 42%). A tax expense of $1.4 million was
recorded by the Company for the three months ended
December 31, 1995 (an effective tax rate of 42.9%).
The change in effective tax rates is attributed to
decreased state and local taxes.
Net (Loss) Income. The Company recognized a net
loss of $26.9 million for the three months ended
December 31, 1996. The net loss resulted from several
factors including; (1) a write down of $16.8 million,
net of taxes (before valuation allowance), in retained
interests in securitized receivables;
<PAGE>
(2) since the
Company retained most of the finance contracts it
acquired during the last three months of the period
ended December 31, 1996, it incurred larger reserves
and; (3) while in the process of negotiating the
Company's proposed $1.0 billion Purchase Facility, the
Company did not sell its loans through its
securitization exit strategy and retained the loans on
its balance sheet, resulting in no gain on
securitization transactions in the three months ended
December 31, 1996.
Financial Condition
Automobile Finance Receivables, Net. Automobile
finance receivables consists of finance contracts held
for sale, finance contracts held for investment
(including vehicles held for repossession) and the
Company's lease portfolio. The Company suspended
originating leases in the first quarter of its 1996
fiscal year.
Automobile finance receivables, net of allowance for
credit losses, increased to $212.5 million at December
31, 1996 from $41.1 million at June 30, 1996, an
increase of $171.4 million or 417.50 %. While in the
process of negotiating the Company's $1.0 billion
credit facility during the quarter ended December 31,
1996, the Company did not hold any of its finance
contracts for sale. Thus, at December 31, 1996,
finance contracts held for sale was none compared to
$12.9 million at June 30, 1996. Finance contracts held
for investment increased to $212.5 million at December
31, 1996 from $11.4 million at June 30, 1996, an
increase of $201.2 million. (However, had the
Company's finance contracts been held for sale, $180.2
million would have qualified, with the remaining $32.3
million being held for investment). The increase in
the finance contracts held for investment was due
primarily to the increased volume of finance contract
acquisitions and the lack of a securitization during
the quarter ended December 31, 1996. Additionally, the
increase was offset by an increase in the allowance for
credit losses to $7.2 million at December 31, 1996 from
$3.1 million at June 30, 1996 and a decrease in
automobile leases held for investment to $15.0 million
at December 31, 1996 from $19.8 million at June 30,
1996, a decrease of $4.8 million or 24.2%, primarily
due to amortization and write offs. As of December 31,
1996, approximately $5.0 million of finance contracts
held for investment were in the repossession process.
The number and principal balance of finance
contracts held are largely dependent upon the timing
and size of the Company's securitizations. The terms
under the Company's proposed Purchase Facility, if
implemented, will provide the Company with a monthly
securitization strategy. The Company expects its next
securitization of finance contracts to occur in the
quarter ending March 31, 1997, subject to the
completion of the proposed Purchase Facility (see
Recent Developments).
Retained Interests in Securitized Receivables. The
following table provides historical data regarding the
retained interests in securitized receivables for the
periods shown:
<TABLE>
<CAPTION>
Three Months Ended Year Ended
December 31, September 30, June 30,
1996 1996 1996
(dollars in thousands)
<S> <C> <C> <C>
Beginning balance. . $82,139 $70,243 $23,985
Additions. . . . . . - 14,539 56,749
Amortization . . . . (422) (643) (2,991)
Write downs. . . . . (29,000) (2,000) (7,500)
Ending balance . . . $52,717 $82,139 $70,243
</TABLE>
On a quarterly basis, the Company revalues its
retained interests in securitized receivables using
actual experience on the respective underlying
securitization trust's finance contract performance.
When the actual experience differs from the original
assumptions utilized in the initial valuation in a
detrimental direction, the Company can incur permanent
impairment losses in the carrying value of these
assets. During the quarter ended September 30, 1996,
the Company experienced minimal changes in its default
rates than the rates utilized in the valuation at June
30, 1996 resulting in a $2.0 million write down in the
carrying value of its retained interests in securitized
receivables.
<PAGE>
The estimated annualized default rate
changed from 13.5% at June 30, 1996 to 13.0 % at
September 30, 1996. In the subsequent quarter ended
December 31, 1996, the Company's estimated annualized
default rate increased from 13.0% at September 30, 1996
to 19.1% at December 31, 1996. In accordance with the
Company's policy, since the actual experience differed
adversely from the original assumptions utilized or from
its prior quarterly valuation direction, the Company incurred
an additional $29.0 million write down in the carrying value of its
retained interests in securitized receivables for the
three month period ended December 31, 1996. The total
write down for the six months ended December 31, 1996
was $31.0 million.
Delinquency Experience
The following table reflects the delinquency
experience of all finance contracts acquired, including
those sold in whole finance contract sales or
securitizations, by the Company at the dates shown:
<TABLE>
<CAPTION>
Finance Contract Portfolio at:
December 31, September 30, June 30,
1996 1996 1996
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Principal balance
outstanding(1) . $759,304 $645,551 $500,694
Number of finance
contracts outstanding (1) 67,950 57,404 44,600
Delinquent loans
31-59 days. . . $63,744 8.4% $46,145 7.2% $33,625 6.7%
60-89 days . . 16,461 2.2% 13,157 2.0% 9,172 1.8%
90 days and over. 3,959 0.5% 3,340 0.5% 2,054 0.4%
Total. . . . . 84,164 11.1% 62,642 9.7% 44,851 8.9%
Finance contracts in
repossession or
bankruptcy(2) . 56,445 7.4% 40,048 6.2% 21,022 4.2%
Grand Total $140,609 18.5% $102,690 15.9% $65,874 13.1%
<FN>
<F1>
(1) Excludes contracts for which notice of
intent to liquidate has expired and those having an
outstanding balance less than or equal to $500.
<F2>
(2) Excludes finance contracts which are in
bankruptcy and authorized for repossession or in
repossession and still eligible for reinstatement.
</FN>
</TABLE>
Credit Loss Experience
An allowance for credit losses is maintained for all
finance contracts held for sale and for all finance
contracts held for investment. Management evaluates
the reasonableness of the assumptions employed by
reviewing credit loss experience, delinquencies,
repossession trends, the size of the finance contract
portfolio and general economic conditions and trends.
If necessary, assumptions are changed to reflect
historical experience to the extent it deviates
materially from that which was assumed.
If a delinquency exists and a default is deemed
inevitable or the collateral is in jeopardy, and in no
event later than the 35th day of delinquency, the
Company's collections department initiates the
repossession of the financed vehicle. Bonded, insured
outside repossession agencies are used to secure
involuntary repossessions. In most jurisdictions,
notice to the borrower of the Company's intention to
sell the repossessed automobile is required, whereupon
the borrower may exercise certain rights to cure his or
her default or redeem the automobile. Following the
expiration of the legally required notice period, the
repossessed vehicle is sold at a wholesale auto
auction, usually within 150 days of the repossession.
The Company monitors vehicles set for auction, and
procures an appraisal under the VSI Policy prior to
sale. Liquidation proceeds are applied to the
borrower's outstanding obligation under the finance
contract and loss deficiency claims under the VSI
Policy and credit default insurance policy are then
filed. The Company reports the remaining deficiency as
a net charge-off against the allowance for credit
losses for automobile finance receivables owned by the
Company. For finance contracts held in securitization
trusts, charge-offs are accounted for in accordance
with the underlying pooling and servicing agreements.
<PAGE>
Because of the Company's limited operating history,
its finance contract portfolio is unseasoned.
Accordingly, delinquency and charge-off rates in the
portfolio may not fully reflect the rates that may
apply when the average holding period for finance
contracts in the portfolio is longer. Increases in the
delinquency and/or charge-off rates in the portfolio
would adversely affect the Company's ability to obtain
credit or securitize its finance contracts and would
have an adverse effect on the Company's results of
operations and financial condition.
The following table shows the Company's repossession
and loss experience for its managed finance contract
portfolio for the periods indicated:
<TABLE>
<CAPTION>
Six
Months Ended Three Months Year Ended
December 31 September 30, June 30,
1996 1996 1996
(dollars in thousands)
<S> <C> <C> <C>
Average principal balance outstanding(1) . $660,084 $617,400 $333,183
Balance of finance contracts at the time of
repossession . . . . 55,893 20,080 40,258
Number of repossessions(2) . . . . 4,875 1,759 3,494
Repossession ratio (3) . . . . . . 16.9% 13.0% 13.0%
Default balance of fully liquidated vehicles . $43,078 $19,942 $15,920
Proceeds from liquidation, net of repossession
costs . 18,679 9,167 7,964
Gross charge offs(4) . . . . . . . 24,399 10,775 7,956
Credit default insurance proceeds (5). . . 7,469 4,076 4,092
Net charge offs (6). . . . . . . . 16,930 6,699 3,864
Net charge offs as a percentage of
liquidations(7)(8). . . . . 39.3% 33.6% 24.3%
Net charge offs as a percentage of average
principal balance outstanding . . 2.6% 1.1% 1.2%
<FN>
<F1>
(1) Arithmetic mean of beginning and ending outstanding
principal balance of all finance contracts acquired
including those previously sold in securitization
transactions.
<F2>
(2) Number of vehicles which have been repossessed and
its notice of intent to liquidate ("NOI") has expired.
<F3>
(3) Balance of finance contracts at the time of
repossession divided by average principal balance
outstanding during the period, annualized for the
periods presented.
<F4>
(4) Gross charge offs equals the aggregate balance of
finance contracts liquidated, including those
previously sold in securitization transactions, less
all recoveries from the sale of the financed vehicles.
Repossession and liquidation expenses are included in
gross charge offs.
<F5>
(5) Since August 1995, the Company no longer deposits
money to a segregated account from which losses
incurred under a policy would be paid.
<F6>
(6) Net charge offs are gross charge offs reduced by
credit default insurance proceeds received relating to
the defaulted finance contracts.
<F7>
(7) Net charge off amount divided by the aggregate
balance of finance contracts relating to vehicles
liquidated.
<F8>
(8) A portion of the Company's managed finance contract
portfolio is not insured under its credit default
insurance policies (approximately $151.6 million at
December 31, 1996). Under the structured sale
(primarily, Aegis Auto Owner's Trust 1995) the Company
was not required to purchase risk default insurance.
Net losses for these receivables are therefore
significantly higher than those insured by a credit
risk insurance policy.
</FN>
</TABLE>
The Company has prepared analyses, based on its own
credit experience and available industry data, to
identify the relationship between finance contract
delinquency and default rates at the various stages of
a finance contract repayment term. The results of these
analyses, which have been incorporated into the
Company's methodology of determining gains from
securitization transactions, suggest that the
probability of a finance contract becoming delinquent
or going into default is highest during the "seasoning
period" that occurs between the sixth to the eighteenth
month payment period from the acquisition date.
If the rate of the Company's finance contract
acquisition volume continues to escalate, an
increasingly greater portion of the Company's finance
contract portfolio is expected to fall into the
"seasoning period" described above, which may cause a
rise in the overall finance contract portfolio
delinquency and default rates, without regard to
underwriting performance. Assuming no changes in any
other factors that may affect delinquency and default
rates, the Company believes this trend should stabilize
or reverse when the volume of mature finance contracts
(with lower delinquency and default rates) is
sufficient to offset the total finance contract
portfolio delinquency and default rates.
<PAGE>
Because of the Company's limited operating history
and the rapid growth of its finance contract
acquisitions, a significant portion of its finance
contract portfolio is unseasoned. Accordingly,
delinquency and loss rates in the portfolio may not be
indicative of rates the Company may experience over
time. There can be no assurance that the performance of
the Company's portfolio will be maintained, or that the
rate of future defaults and/or losses will be
consistent with prior experience or at levels that will
not adversely affect the Company's profitability.
The Company believes delinquencies and losses can be
mitigated through an in-house collection program.
Accordingly, the Company responded to the increased
rates of delinquencies and losses in the fiscal year
ended June 30, 1995 by entering into a sub-servicing
agreement with its third-party servicer in April 1995,
providing for the transfer of specific collection
functions to the Company. Through this arrangement the
Company assumed responsibility for all customer contact
with respect to all existing leases and with respect to
finance contracts that were included in the Company's
December 1994 securitization transaction and all
finance contracts acquired thereafter. In addition, the
Company assumed responsibility for liquidation
activities on its entire finance contract portfolio
(including securitized finance contracts) at such time.
Additionally, in January 1997, the Company's wholly
owned subsidiary, SST, began its operations as the
Company's loan servicing center. Initially, SST will
be fully responsible for all servicing aspects of the
Company's new finance contracts acquired. Ultimately,
SST will be servicing substantially all of the
Company's managed portfolio. The Company continues to
devote its resources to servicing its own finance
contracts acquired in an effort to decrease and
ultimately stabilize its rates of delinquencies,
repossessions and defaults and believes that having
full control over the entire servicing process coupled
with changes in its underwriting guidelines made in
January 1997, should assist it in meeting its overall
objectives.
Repossession Experience - Static Pool Analysis
The Company's finance contract portfolio is
continuing to grow rapidly. The Company does not
record its provision for credit losses based on a
percentage of the Company's finance contract portfolio
outstanding because percentages can be favorably
affected by large balances of recently acquired finance
contracts. The Company utilizes actual dollar levels
of delinquencies and charge-offs and analyzes the data
on a "static pool" basis. The Company s goal is to
complete the liquidation process as quickly as
possible. All repossessed vehicles are sold at
wholesale auction. The Company's net charge-off per
repossession equals the unpaid balance less the auction
proceeds (net of associated costs) and less proceeds
from insurance claims.
The following table provides static pool information
regarding the Company's rated securitization
transactions as of December 31, 1996:
<TABLE>
<CAPTION> Cumulative Gross Loss Gross Loss Net Loss
Percentage Repossession per Default Pool, Pool
Issuance Original Current of Original Frequency Contract Cumulative Cumulative,
Date Amount Amount Amount (1) (1)(2) (1)(3) (1)(3)(4) (1)(5)
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aegis Auto Receivable Trust
Series 1994-A. Jun-94 $18,539 $4,324 23.32% 18.68% 49.67% 8.87% 3.45%
Aegis Auto Receivable Trust
Series 1994-2. Sep-94 23,251 7,133 30.68 20.68 51.27 9.73 3.61
Aegis Auto Receivable Trust
Series 1994-3. Dec-94 21,000 7,656 36.46 20.62 51.76 9.55 4.66
Aegis Auto Receivable Trust
Series 1995-1. Mar-95 21,000 8,872 42.25 21.84 52.79 10.31 5.57
Aegis Auto Receivable Trust
Series 1995-2. Jun-95 54,000 26,255 48.62 21.91 52.81 9.77 5.65
Aegis Auto Receivable Trust
Series 1995-3. Sep-95 60,000 33,914 56.52 20.38 55.41 9.24 8.32
Aegis Auto Receivable Trust
Series 1995-4. Dec-95 70,000 44,093 62.99 19.89 54.34 5.68 0.83
Aegis Auto Receivable Trust
Series 1996-1. Mar-96 92,000 67,267 73.12 13.66 54.00 1.81 0.31
Aegis Auto Receivable Trust
Series 1996-2. Jun-96 105,000 90,165 85.87 8.30 58.14 0.81 0.81
Aegis Auto Receivable Trust
Series 1996-3. Sep-96 110,000 105,482 95.89 1.89 31.23 0.01 0.01
Aegis Auto Owners Trust
1995-A . . . . Dec-95-Oct-96 148,347 119,906 80.83 5.53 57.91 1.77 1.77
Total Managed Portfolio. . . $1,000,993 $791,169 79.04% 10.61% 53.52% 3.62% 2.16%
<FN>
<F1>
(1) Data computed from trustee reports of January
1997 reflecting servicer data of December 31, 1996 and
from Company s records as of December 31, 1996.
<F2>
(2) Cumulative Repossession Frequency reflects the
total dollar volume of finance contracts that have been
liquidated, or are in the liquidation process (but in
any event can no longer be reinstated), as a percentage
of the original pool balance.
<F3>
(3) Receivable gross losses are calculated as losses
after the proceeds from repossessed vehicle sales,
service contract rebates, consumer insurance and VSI
insurance, net of repossession and liquidation costs,
as a percentage of the defaulted receivable balance.
<F4>
(4) Calculated as the receivable gross losses for
the pool as a percentage of the original pool balance.
<F5>
(5) Net loss is calculated as the receivable gross
losses for the pool less proceeds received from credit
default insurance, as a percentage of the original pool
balance.
</FN>
</TABLE>
Liquidity and Capital Resources
The Company's business requires substantial cash to
support its operating activities. The principal cash
requirements include (i) amounts necessary to acquire
automobile finance contracts, (ii) cash held from time
to time in restricted spread accounts to support
securitizations and (iii) other securitization
expenses. The Company also uses material amounts of
cash for operating expenses and debt service. The
Company has operated on a negative operating cash flow
basis and expects to continue to do so for so long as
the Company's volume of finance contract acquisitions
continues to grow. The Company has funded these
negative operating cash flows principally through
borrowings from financial institutions and sales of
equity securities, among other resources. However,
there can be no assurance that the Company will have
access to capital markets in the future or that
financing will be available to satisfy the Company's
operating and debt service requirements or to fund
future growth. If these resources are not available on
terms acceptable to the Company, the Company may have
to curtail its finance contract acquisition volume
levels.
The Company's external capital resources primarily
consist of the warehouse credit facilities and the
Company's securitization program. When the Company
securitizes finance contracts it repays a portion of
its outstanding warehouse indebtedness with the
proceeds from such securitizations, making such portion
available for future borrowing. In the past, the
Company securitized its assets at least quarterly,
until this past quarter, there can be no assurance
that the Company will be able to do so in the future.
While in the process of negotiating the Company's
proposed $1.0 billion Purchase Facility, the Company
did not sell loans through its securitization exit
strategy. The terms under the proposed Purchase
Facility provides the Company with a monthly
securitization strategy. The Company expects its next
securitization to occur in the quarter ending March 31,
1997, pending the closing of the proposed Purchase
Facility. The Company also continues to seek
additional arrangements with financial institutions
with respect to the disposition of its portfolio
assets. In addition, the Company has been able to
borrow against its retained interests in securitized
receivables to increase liquidity. The Company ceased
the funding of leases in the first quarter of fiscal
1996.
The following table sets forth the major components of
the increase (decrease) in cash and cash equivalents
for the periods shown:
<TABLE>
<CAPTION>
Six Months Ended December 31,
1996 1995
(dollars in thousands)
<S> <C> <C>
Net cash used in operating activities(1) $(180,428) $(16,993)
Net cash (used in) provided by investing
activities . . . . . . . (4,136) 998
Net cash provided by
financing activities(2). 188,657 12,823
Net increase (decrease) in cash and cash
equivalents. . . . . . . $4,093 $(3,172)
<PAGE>
<FN>
<F1>
(1) Includes net cash used in acquisition of
automobile finance contracts of $17,828 in the six
months ended December 31, 1995, and $177,993 in the
six months ended December 31, 1996.
<F2>
(2) Includes net cash provided by (used in) warehouse
credit facilities of $2,524 in the six months ended
December 31, 1995, and $181,016 in the six months
ended December 31, 1996.
</FN>
</TABLE>
Net cash used in operating activities primarily
represents cash flows utilized to support the Company's
acquisition of finance contracts, including amounts
representing capitalized acquisition costs, net of cash
proceeds of sales, including through securitizations,
and repayments from automobile finance receivables. The
cash used to acquire finance contracts is generated
primarily by financing activities under the Company's
warehouse credit facilities.
A further significant source of cash used in
operating activities is net income offset by non-cash
revenue items, most notably unrealized gains on
securitization transactions, which are expected to
generate cash in future periods. The unrealized gains
principally represent the discounted present value of
the amount of anticipated collections from securitized
receivables over the amounts due investors in the
securitizations. These amounts were $12.1 million and
$23.7 million for the six months ended December 31,
1996 and 1995, respectively. During the six months
ended December 31, 1996 and 1995, the Company received
cash proceeds of $1.7 million and $1.2 million
respectively, from its retained interests in
securitized receivables which were utilized in meeting
its debt repayment requirements under the related
financing agreements.
Other non-cash adjustments include depreciation
and amortization, which amounted to $534,000 and
$241,000 for the six months ended December 31, 1996 and
1995, respectively; and provision for credit losses,
which amounted to $6.6 million for the six months ended
December 31, 1996 and $1.1 million for the six months
ended December 31, 1995. The Company also incurred
non-cash charges of $31.0 million and $1.5 million
respectively, for the six months ended December 31,
1996 and 1995, for write downs on retained interests in
securitized receivables.
To the extent that the foregoing activities were
net users of cash, such cash was provided primarily by
borrowings under notes payable of $20.2 million for the
six months ended December 31, 1996 and $13.0 million
for the six months ended December 31, 1995, secured by
retained interests in securitized receivables created
in the Company's finance contract securitizations.
Principal repayments under the notes payable are made
from the Company's proceeds received from pay downs on
retained interests in securitized receivables, which
amounted to $1.7 million for the six months ended
December 31, 1996 and $1.2 million for the comparable
1995 period. The borrowing base on each retained
interest in securitized receivables is determined
through a monthly calculation that incorporates
prevailing prepayment default and loss experience. As
each securitization transaction becomes seasoned, it
experiences a period of higher incidence of default and
loss, resulting in repayments on the notes payable
which are secured by the allocable retained interests
in securitized receivables. The Company made principal
payments of $15.5 million and $1.5 million in excess of
cash distributions received from the underlying
collateral during the six months ended December 31,
1996 and 1995, respectively.
In October 1996, the Company did not make a
principal payment of $4.2 million due under the note
payable to III Finance secured by its retained interest
in securitized receivables created under the Aegis Auto
Owner Trust 1995-A securitization as a result of the
change in the recalculated borrowing base. As of
December 31, 1996, the Company had borrowings of $9.7
million under this note which is secured by retained
interests in securitized receivables with an estimated
fair value of $9.8 million. The Company negotiated an
extension on the $4.2 million principal payment owed.
If the Company is not successful in its efforts to
raise capital in the form of cash, there can be no
assurance that the Company will be successful in
renegotiating its payment terms with its lender.
<PAGE>
The Company's cash flows and results of operations
may be affected adversely in the near term by rising
interest rates, since not all costs of funds, which
under the Company's warehouse credit facilities are at
floating rates of interest, can be immediately passed
on to consumers, whose finance contracts are at fixed
rates of interest. In addition, rising interest rates
would result in a decrease in the Company s net spreads
on securitization transactions thereby decreasing
projected cash flows from future retained interests in
securitized receivables. Furthermore, the Company s
discount rate utilized in determining its borrowing
base may also rise, decreasing the amount available to
borrow. Moreover, interest rates charged by the
Company may be more significantly affected by factors
other than prevailing interest rates, most notably
geographic distribution and varying state interest rate
limitations. The Company has a hedging policy which
seeks to limit the risks associated with changes in
interest rates; which it has not had the need to use to date.
In connection with its securitization
transactions, the Company enters into pooling and
servicing agreements (the "Agreements") in which its
finance contracts are sold to a trust which, in turn,
sells securities to investors. Generally, the Company
is required to make an initial cash deposit to the
trust as a form of credit enhancement for the
securitization. The terms of the Agreements generally
require that the excess servicing cash flows of the
finance contracts be retained in a bank account under
the control of the trustee (the "Reserve Fund") until
the Reserve Fund meets predetermined deposit
requirements. Any cash flows in excess of Reserve Fund
requirements are released to the Company on a monthly
basis. For the six months ended December 31, 1996 and
1995, the Company received $1.7 million and $1.2
million respectively, in excess servicing cash flows
from Reserve Funds. In the event that the finance
contracts owned by the trusts fail to meet
predetermined delinquency and loss performance
measures, the Agreements require that the trustee
retain excess servicing cash flows until the Reserve
Fund attains pre-set incrementally higher levels of
credit enhancement. The predetermined performance
measures are not always maintained on a consistent
monthly basis, thus deferring the release of the cash
flows to the Company from the Reserve Fund of the
applicable trust. In addition, certain of the
Agreements require the Company to deposit additional
cash into the trust's Reserve Fund if its initial
minimum required levels were not met within a
predetermined time frame. For the six months ended
December 31, 1996, the Company paid additional cash
contributions to certain Reserve Funds of $2.3 million.
The Company's warehouse credit facility with III
Finance Ltd. ("III Finance")for automobile finance contracts was
amended during the six months ended December 31, 1996
to provide that the Company may borrow the lesser of
$250 million (less amounts outstanding under the
Company's lease warehouse credit facility with III
Finance described below ($10.4 million as of
February 6, 1997) and its retained interests in
securitized receivables financing ($31.4 million as of
February 6, 1997)) or the sum of (A) 100% of the
outstanding principal amount of performing, insured,
finance contracts and (B) the lesser of 90% of the
outstanding principal amount of delinquent finance
contracts (which percentages are reduced to 80% and
70%, respectively, if the Company's automobile insurer
fails to maintain an A.M. Best Company rating of "A" or
better (defined by A.M. Best Company as an "excellent"
rating regarding the insurer's financial strength and
ability to meet its obligations to policyholders)) and
$1.0 million plus 92% (declining 1% per month for each
month the receivable is outstanding past 180 days) of
the outstanding principal amount of uninsured
automobile finance contracts for the purpose of
acquiring automobile finance contracts in accordance
with the Company's underwriting guidelines. The
Company has a warehouse credit facility for originating
its lease transactions, which provides the Company with
a $50.0 million credit line on substantially the same
terms as the automobile finance contract facility.
These facilities are secured primarily by the Company's
finance contract receivables and bear interest for the
first $50.0 million of funding of finance contract at
the rate of the one-month LIBOR plus 4.0%, adjusted
monthly (9.4375% for February 1997) and for any
outstanding balance in excess of $50 million, at the
rate of the one-month LIBOR plus 2.75%, adjusted
monthly. Under these warehouse credit facilities,
principal payments are made monthly to the extent of
principal payments received on the underlying
collateral, and interest payments are made quarterly in
arrears and on the date of any prepayment of principal
on the underlying collateral. The Company's ability to
continue to borrow under these warehouse credit
facilities is dependent upon its compliance with the
terms thereof, including the maintenance by the Company
of certain minimum capital levels. Under each warehouse
credit facility, the Company is required to prepay 5%
of the outstanding principal balance of finance
contracts held by the Company for more than 180 days.
In addition, each warehouse credit facility requires a
prepayment fee of 0.25% of the outstanding principal
balance of the finance contracts voluntarily prepaid,
including in connection with the sale of finance
contracts.
<PAGE>
In the event the prepayment occurs within
the same month of the borrowings, the prepayment fee is
0.125% of the outstanding principal balance. As of
December 31, 1996, the Company had approximately $12.0
million of borrowings available through the warehouse
credit facility arrangements with III Finance.
Additionally, in January 1997, III Finance increased
the line by $25.0 million (See Recent Developments).
In addition, the Company has a $50.0 million warehouse
credit facility with III Finance dedicated to the
purchase of HUD Title I Loans, which the Company does
not anticipate utilizing at this time. All three
warehouse credit facilities with III Finance expire in
November 1997. The proposed Facility, as described more
fully in Recent Developments, will replace the auto loan
warehouse facility. Upon Final documentation acceptable
to the parties, the loans then outstanding will be sold
into the new Facility and the existing warehouse line
will be cancelled. The lease warehouse credit facility
will be reduced to the amount then outstanding (approximately
$10.4 million as of February 6, 1997) and will expire as it
amortizes down. The Company believes these transactions will
close within the next 30 days. If the Company is not successful
in closaing these transactions within this time frame, it will
have to materially curtail its operations.
In May 1996, the Company secured an additional
warehouse credit facility with Greenwich Capital for
$100.0 million, which provided the Company with
additional flexibility to purchase greater volumes of
finance contracts or warehouse finance contracts for
longer periods. The facility is secured primarily by
the Company's finance contracts and bears interest at
the rate of the one-month LIBOR plus 3.0% (8.4375% at
February 6, 1997), adjusted monthly. Principal
payments are made to the extent that principal is paid
on the underlying collateral, and are required to be
made if the underlying collateral does not meet certain
specified conditions. Prepayment of principal is not
permitted, except in connection with securitization
transactions and whole loan sales. The Company's
ability to continue to borrow under this facility is
dependent on its compliance with the terms thereof,
including the maintenance by the Company of certain
minimum capital levels. As of December 31, 1996, the
Company did not utilize this facility. In addition to
the warehouse financing, the Company also secured a
one-year $5.0 million revolving credit facility (with a
six-month renewal option) from Greenwich Capital (which
the Company borrowed during the six month period ended
December 31, 1996) and a one-year commitment from
Greenwich Capital to purchase and securitize up to
$533.0 million of the Company's finance contract
acquisitions until the commitment is filled, subject to
customary conditions. Three securitizations
aggregating $307.0 million were completed as of
December 31, 1996 pursuant to this commitment. In
connection with these facilities, the Company granted
warrants to Greenwich Capital to purchase 1,116,335
shares of common stock at an exercise price of $6.50
per share (subject to adjustment as defined in the
agreement). The warehouse credit facility is for a one
year term with a one year renewal option. In addition,
the agreement provides the Company, at its option, to
increase the facility up to $150 million with a 90 day
notice. This option expired unused in December 1996.
In October 1996, as a result of credit deterioration in
the Company's finance contract portfolio, the Company
experienced a Portfolio Event as such term is defined
in and contemplated by both the warehouse credit
facility and the revolving credit facility. As a
result, Greenwich Capital, at its discretion, may
terminate its commitment to the Company under either
facility, and may accelerate the repayment of any
outstanding balance under each facility ($5.0 million,
as of the date hereof) which would then become
immediately due and payable. As of the date hereof,
Greenwich Capital has not terminated its commitment or
accelerated the due date of either facility, although
they have reserved their right to do so at any time
The revolving Credit Facility is currently under
renegotiation. (See Recent Developments).
In the quarters ended June 1994, September 1994,
December 1994, March 1995, June 1995, September 1995,
December 1995, March 1996, June 1996, September 1996,
and December 1996.the Company securitized approximately
$18.5 million, $23.3 million, $21.0 million, $21.0
million, $54.0 million, $60.0 million, $85.4 million,
$130.1 million, $149.3 million, $173.3 million, and
$4.9 million, respectively, of finance contracts and
used the net proceeds to pay down borrowings under its
warehouse credit facilities. In some securitizations,
the Company has utilized a "pre-funding account" that
enabled the Company to fund certain finance contract
acquisitions without committing its warehouse credit
facility for an extended period of time. Additionally,
the Company directly sold, in the form of whole finance
contract sales, approximately $20.1 million of
automobile finance contracts as of December 31, 1996
and used part of the proceeds to pay down borrowings
under its warehouse credit facilities.
In December 1995, the Company entered into a
commitment to sell $175.0 million of sub-prime
automobile finance contracts to be resold as
asset-backed securities through Rothschild, Inc.
<PAGE>
Through December 31, 1996, the Company sold
approximately $148.4 million of automobile receivables
into this facility. This facility requires the Company
to directly sell between $8.0 million and $15.0 million
of finance contracts per month for a fifteen-month
funding period subsequent to the initial funding date.
If the Company fails to meet the minimum target, the
terms of the facility provide that the Company may not
be able to sell future finance contracts to the
facility. As of December 31, 1996, the Company had a
remaining commitment of $26.6 million; however, in
October 1996, the Company experienced the occurrence of
certain performance- related events within this
facility. As a result, under the terms of the facility
(i) the Company was required to cease future funding to
this facility, and (ii) the amount of the required
reserve has been increased and the facility will
capture all payments otherwise due to the Company with
respect to its retained interest in excess spread cash
flows until the required reserve is filled. As a
result, the Company will not receive any excess spread
cash flows from this facility for some time.
Additionally, MBIA Insurance Corporation ("MBIA"), a
guarantor of principal and interest to the Class A
noteholders under this facility, retains the right at
any time to require early amortization of the Class A
notes from cash flows generated by the collateral sold
into the facility. If MBIA chooses to require early
amortization, the event could have an additional
material adverse affect on cash flows available to the
Company and on the valuation of the retained interest
in securitized receivables carried on the books of the
Company relating to this facility.
In February 1996, the Company issued $9,200,000 of
Series C Convertible Preferred Stock (the "Preferred
Stock") under Regulation S of the Securities Act. The
Preferred Stock is convertible into Common Stock at the
lower of $6.425 per share of Common Stock or 85% of the
fair market value of the Common Stock at the time of
conversion. The Company can redeem the Preferred Stock
upon conversion at the fair market value of the Common
Stock into which such Preferred Stock is convertible.
The Preferred Stock has an 8.0% annual dividend payable
in Common Stock at the time of conversion. Any
outstanding shares of Preferred Stock will
automatically convert into Common Stock on the third
anniversary of its issuance. As of December 31, 1996,
the Company redeemed 88 shares of Preferred Stock for
$1.1 million and converted 552 shares of Preferred
Stock into 1,378,364 shares of Common Stock and had 280
shares of Preferred Shares outstanding.
Recent Developments
The Company has reached an agreement in principle
(the "Agreement") with a group of funds and financial institutions,
including its current warehouse lender, for a multi-structured
finance facility (the "Facility"). The Facility includes a commitment
for the purchase of $300.0 million of subordinated Class B Trust
Certificates which will support the issuance by the Company of $700.0
million of senior Class A Trust Certificates by the Company for a total
of $1.0 billion. The Facility also includes a commitment for the
purchase of a $40.0 million seven year convertible subordinated
debenture (the "Debenture"). The Agreement is subject to final
documentation acceptable to the parties.
The Agreement contemplates the private sale of up to
$700.0 million of senior Class A Grantor Trust Certificates
and up to $300.0 million of subordinate Class B Grantor Trust
Certificates. The Certificates will be backed
by the Company's finance contracts and will be
unrated. The Facility will be supported by a
$50 million warehouse line. The Agreement provides for
a firm commitment as to the warehouse portion of the
facility and the purchase of the Class B Certificates
subject to placement of the Class A certificates and
certain other conditions. The Company has already received an
indication of interest from a major money center bank
to purchase $290 million of the Class A certificates. The
Agreement provides for initial financing through the
warehouse line as the finance contractds are acquired and
subsequently sold into the Facility on a
bi-weekly basis. This Facility will replace one of its
existing warehouse facilities and the finance contracts currently
in the existing warehouse facility will be sold into
the new Facility.
The Debenture will be purchased for $37.5 million
and will be convertible into eight percent non-voting
preferred stock (the "Preferred Shares") of the Company
on a common share equivalent basis equal to the lesser
of (i) four dollars per share or (ii) 150% times the average
closing share price of the Company's common stock during the 15
days immediately preceding the three month anniversary
of the Debenture closing. The Debenture will have a term of
seven years and carry a coupon rate of twelve percent (12%)
per annum. Approximately $33.0 million of the proceeds of the
Debenture will be utlized to repay existing debt. The
debenture and the Preferred Shares, into which the Debenture
is convertible, are redeemable at anytime by the Company for
cash or by the holder for cash; however, if the redemption is
requested by the holder, the Company at its election may pay
the redemption price in the form of common stock.
In the event the Debentures
are redeemed for any reason, in addition to the
redemption price warrants shall be issued to the
holder which are exercisable for that number of
Preferred Shares into which the redeemed Debentures
were convertible.
<PAGE>
If Preferred Shares are redeemed at
the option of the Company, the Company must issue to
the holder warrants to acquire an equivalent number of
shares of common stock at a aggregate purchase price
equal to the redemption price paid by the Company. All
warrants will expire at the original stated maturity
date of the Debenture.
Discussions are currently taking place between the
Company and Greenwich Capital regarding the restructure of
its $5.0 million revolving credit facility and the
terms under which Greenwich Capital is willing to
reaffirm its commitments under its existing
securitization facility and $100.0 million warehouse
credit facility.
The Executive Officers employment contracts are
currently being reviewed by the Compensation Committee
of the Board of Directors. Discussions are taking
place between the Compensation Committee and the
respective officers regarding a restructuring of
certain contractual provisions including but not
limited to the bonus structure, term and base
compensation.
Management believes that cash flows from
operations (including SST), the proposed Facility and
its warehouse credit facilities along with proceeds it
expects to receive from the Debentures should be
adequate to support its current and near-term funding
and operations needs at current levels. The Company is
currently in the process of solidifying the
transactions described above in Recent Developments.
The Company believes these transactions will close
within the next 30 days. If the Company is not
successful in closing these transactions within this
time frame, it will have to materially curtail its
operations.
Inflation
While inflation has not had a material impact upon
the Company s results of operations, there can be no
assurance that the Company's business will not be
affected by inflation in the future. Increases in the
inflation rate generally result in increased interest
rates and can be expected to result in increases in the
Company's operating expenses. As the Company borrows
funds at variable rates and generally acquires finance
contracts at an average interest rate of approximately
20.2%, increased interest rates will increase the
borrowing costs of the Company, and such increased
borrowing costs may not be offset by increases in the
interest rates with respect to finance contracts
acquired.
Seasonality
The Company's operations are affected to some
extent by seasonal fluctuations. Finance contract
acquisitions tend to increase in March through June and
September and October, while finance contract
acquisitions are lowest in December and January.
Delinquencies also tend to be higher during certain
holiday periods, particularly at calendar year end.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In connection with a complaint filed on April 28, 1996
by Star Holdings, Inc. d/b/a/ The Sloane Organization
against the Company in the United States District Court
for the Southern District of New York, captioned Star
Holdings, Inc. d/b/a The Sloane Organization vs. Aegis
Consumer Funding Group Inc., alleging that it was
entitled to certain fees under a finder's agreement
entered into with the Company on January 2, 1996; on
January 8, 1997, the United States District Court for
the Southern District of New York denied Plaintiffs
Attachment Motion and its cross motion for partial
summary judgment. The Company's Motion to Dismiss has
been granted with respect to certain claims for relief
made by the Plaintiff. The Company believes it has
meritorious defenses to the remaining allegations in
the Complaint and the Amended Complaint and intends to
defend the matter vigorously.
Item 2. Changes in Securities - Not Applicable
Item 3. Defaults Upon Senior Securities - Not
Applicable
Item 4. Submission of Matters to a Vote of Security
Holders - None
Item 5. Other Information;
Joseph F. Battiato was appointed to the Company's Board of Directors
and its Board was increased from five members to seven members.
Mr. Battiato was appointed to fill one of the vacancies. Mr
Battiato has served as the Company's President since May 1995.
Item 6. (a) Exhibits -
Page
Exhibit No. Description No.
10.99.1 PURCHASE AGREEMENT dated as of September
1, 1996 by and between AEGIS AUTO FINANCE, INC.
as Seller and AEGIS AUTO FUNDING CORP. as Purchaser.
10.99.2 CERTIFICATE PURCHASE AGREEMENT dated as of September 27,
1996 by and between AEGIS AUTO FUNDING CORP. and
GREENWICH CAPITAL MARKETS, INC.
10.103 PURCHASE AGREEMENT dated as of December 9, 1996
by and between AEGIS AUTO FINANCE, INC. as Seller and
ENTERPRISE NATIONAL BANK OF PALM BEACH as Purchaser.
10.103.1 ADDENDUM TO MASTER SERVICING AGREEMENT dated as of
December 9, 1996 by and among AMERICAN LENDERS
FACILITIES,INC. as Servicer, AEGIS CONSUMER FINANCE,
INC., AEGIS AUTO FINANCE INC. as Seller and ENTERPRISE
NATIONAL BANK OF PALM BEACH
27 Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8-K were filed by the
Company during the quarter ended December 31, 1996.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange
Act, the registrant caused this report to be signed on
its behalf by the undersigned, thereunto duly
authorized.
THE AEGIS CONSUMER FUNDING GROUP, INC.
Date: February 14, 1997 By: S/Dina L. Penepent
Dina L. Penepent
Chief Financial Officer,
Executive Vice-President and
Secretary
Signing on behalf of the registrant
and as principal financial and
accounting officer.
PURCHASE AGREEMENT
This PURCHASE AGREEMENT is made as of September 1,
1996, by and between Aegis Auto Finance, Inc., a Delaware
corporation, having its principal place of business at 525
Washington Boulevard, Jersey City, New Jersey 07310, as
seller (the "Seller"), and Aegis Auto Funding Corp., a
Delaware corporation, having its principal executive office
at 525 Washington Boulevard, Jersey City, New Jersey 07310,
as purchaser (the "Purchaser").
WHEREAS, the Seller has originated or acquired in the
ordinary course of business, certain Receivables (as defined
herein); and
WHEREAS, the Seller and the Purchaser wish to set forth
the terms pursuant to which Receivables owned by the Seller
as of the Closing Date (as defined herein) are to be sold by
the Seller to the Purchaser, which Receivables will be sold
by the Purchaser pursuant to the Pooling and Servicing
Agreement (as hereinafter defined), to the Aegis Auto
Receivables Trust 1996-A (the "Trust") to be created
thereunder, which Trust will issue pass-through certificates
representing undivided interests in such Receivables and the
other property of the Trust (the "Certificates").
NOW, THEREFORE, in consideration of the foregoing,
other good and valuable consideration, and the mutual terms
and covenants contained herein, the parties hereto agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
Terms not defined in this Agreement shall have the
meaning set forth in Article I of the Pooling and Servicing
Agreement dated as of September 1, 1996 (the "Pooling and
Servicing Agreement") among Aegis Auto Funding Corp. (as
seller thereunder), Norwest Bank Minnesota, National
Association, as trustee, and Norwest Bank Minnesota,
National Association, as backup servicer. As used in this
Agreement, the following terms shall, unless the context
otherwise requires, have the following meanings (such
meanings to be equally applicable to the singular and plural
forms of the terms defined):
"Agreement" means this Purchase Agreement and all
amendments hereof and supplements hereto.
"Assignment" means the document of assignment
substantially in the form attached to this Agreement as
Exhibit A.
"Backup Servicer" means Norwest Bank Minnesota,
National Association, in its capacity as Backup Servicer
under the Pooling and Servicing Agreement, and its
successors in such capacity, who shall be Eligible
Servicers.
"Closing Date" means September 30, 1996.
"Cutoff Date" means September 24, 1996.
"Lock-Box Account" means the account(s) designated as
such, established and maintained pursuant to Section 5.01 of
the Pooling and Servicing Agreement.
"Purchaser" means Aegis Auto Funding Corp, a Delaware
corporation, its successors and assigns.
"Receivable" means any retail installment sales
contract and security agreement identified on the Schedule
of Receivables.
"Schedule of Receivables" means the list of Receivables
annexed hereto as Exhibit B.
"Seller" means Aegis Auto Finance, Inc., a Delaware
corporation, its successors and assigns.
"Trust" means the Aegis Auto Receivables Trust 1996-A.
"Trustee" means Norwest Bank Minnesota, National
Association, its successors and assigns.
"UCC" means the Uniform Commercial Code, as in effect
from time to time in the relevant jurisdictions.
ARTICLE II
PURCHASE AND SALE OF RECEIVABLES
Section 2.01. Purchase and Sale of Receivables. On
the Closing Date, subject to the terms and conditions of
this Agreement, the Seller agrees to sell to the Purchaser,
and the Purchaser agrees to purchase from the Seller, the
Receivables and the other Trust Property relating thereto
(as defined in Section 2.01(a) below).
(a) Transfer of Receivables and Trust Property.
On the Closing Date simultaneously with the transactions
pursuant to the Pooling and Servicing Agreement, the Seller
shall sell, transfer, assign and otherwise convey to the
Purchaser, without recourse, a 100% interest in (i) all
right, title and interest of the Seller in and to the
Receivables, all moneys received thereon on and after the
Cutoff Date allocable to principal, and all moneys received
thereon allocable to interest accrued thereon from and
including the Cutoff Date, (ii) the security interests in
the Financed Vehicles granted by the Obligors pursuant to
the Receivables; (iii) the interest of the Seller in any
Risk Default Insurance Proceeds and any proceeds from claims
on any Insurance Policies (including the VSI Insurance
Policy) covering the Receivables, the Financed Vehicles or
the Obligors; (iv) the interest of the Seller in any Dealer
Recourse; and (v) the proceeds of any and all of the
foregoing. (All of the property identified in this
subsection (a) shall constitute "Trust Property.")
(b) Receivables Purchase Price. In consideration
for the Receivables and the other Trust Property relating
thereto, the Purchaser shall, on the Closing Date, pay to
the Seller an amount equal to 100% of the aggregate
Principal Balance of the Receivables in cash (the
"Receivables Purchase Price").
(c) Security Interest. It is the intention of
the Seller and the Purchaser that the transfer and
assignment of the Seller's right, title and interest in and
to the Receivables and the other Trust Property shall
constitute an absolute sale by the Seller to the Purchaser.
In the event a court of competent jurisdiction were to
recharacterize the transfer of the Trust Property as a
secured borrowing rather than a sale, contrary to the intent
of the Seller and the Purchaser, the Seller does hereby
grant, assign and convey to the Purchaser, a security
interest in and lien upon all of its right, title and
interest in and to the Trust Property, and all proceeds of
any thereof, said security interest to be effective from the
date of execution of this Agreement.
Section 2.02. The Closing. The sale and purchase of
the Receivables shall take place at a closing (the
"Closing") at the offices of Kutak Rock, 767 Third Avenue,
19th Floor, New York, New York 10017 on the Closing Date,
simultaneously with: (a) the closings under the Pooling and
Servicing Agreement pursuant to which (i) the Purchaser will
assign and transfer all of its right, title and interest in
and to the Receivables and other Trust Property relating
thereto to the Trustee for the benefit of the
Certificateholders; and (ii) the Trustee will deposit the
foregoing into the Trust; and (b) the purchase of the
Certificates by the purchasers thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of the
Seller.
(a) The Seller hereby represents and warrants to
the Purchaser and its respective successors and assigns and
for the benefit of the Trustee and the Trust as of the date
hereof:
(i) Organization, Etc. The Seller is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
(ii) Due Qualification. The Seller is in
good standing and duly qualified to do business and has
obtained all necessary licenses and approvals in the States
of Delaware and New Jersey and all jurisdictions in which
the ownership or lease of its property or the conduct of its
business shall require such qualifications unless the
failure of the Seller to obtain such licenses and approvals
would have no material adverse effect on the Seller's
ability to fulfill its obligations hereunder.
(iii) Power and Authority. The Seller has the
power and authority to execute and deliver this Agreement
and to carry out its terms; the Seller has full power and
authority to sell and assign the property to be sold and
assigned to the Purchaser and such sale and assignment is
valid and binding against the Seller, and the Seller has
duly authorized such sale and assignment to the Purchaser by
all necessary action; the execution, delivery and
performance of this Agreement have been duly authorized by
the Seller by all necessary action, and this Agreement is
the legal, valid and binding obligation of the Seller
enforceable in accordance with its terms. The Seller has
duly executed and delivered this Agreement and any other
agreements and documents necessary to effectuate the
transactions contemplated hereby.
(iv) No Violation. The consummation of the
transactions contemplated hereby and the fulfillment of the
terms hereof, neither conflict with, result in any breach of
any of the terms and provisions of, nor constitute (with or
without notice or lapse of time) a default under, the
certificate of incorporation or bylaws of the Seller, or any
indenture, agreement or other instrument to which the Seller
is a party or by which it is bound; nor result in the
creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture,
agreement or other instrument (other than this Agreement);
nor violate any law or, to the best of Seller's knowledge,
any order, rule or regulation applicable to the Seller of
any court or of any federal or state regulatory body,
administrative agency, or other governmental instrumentality
having jurisdiction over the Seller or its properties.
(v) No Proceedings. There are no
proceedings or investigations pending or, to the best
knowledge of Seller, threatened before any court, regulatory
body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or its
properties: (A) asserting the invalidity of this Agreement;
(B) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement; or (C) seeking
any determination or ruling that might materially and
adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of,
this Agreement.
(vi) No Approvals. No approval,
authorization or other action by, or filing with, any
governmental authority of the United States of America or
any of the States is required or necessary to consummate the
transactions contemplated hereby, except such as have been
duly obtained or made by the Closing Date. Seller complies
in all material respects with all applicable laws, rules and
orders with respect to itself, its business and properties
and the Receivables; and Seller maintains all applicable
permits, licenses and certifications.
(vii) Taxes. The Seller has filed all
federal, state, county, local and foreign income, franchise
and other tax returns required to be filed by it through the
date hereof, and has paid all taxes reflected as due
thereon. There is no pending dispute with any taxing
authority that, if determined adversely to the Seller, would
result in the assertion by any taxing authority of any
material tax deficiency, and the Seller has no knowledge of
a proposed liability for any tax to be imposed upon the
Seller's properties or assets for which there is not an
adequate reserve reflected in the Seller's current financial
statements.
(viii) Investment Company. The Seller is not,
and is not controlled by, an "investment company" registered
or required to be registered under the Investment Company
Act of 1940, as amended.
(ix) Pension/Profit Sharing Plans. No
contribution failure has occurred with respect to any
pension or profit sharing plan and all such plans have been
fully funded as of the date of this Agreement.
(x) Trade Names. "Aegis Auto Finance, Inc."
is the only trade name under which the Seller is currently
operating its business; for the six (6) years (or such
shorter period of time during which the Seller was in
existence) preceding the Closing Date, the only other trade
name under which Seller operated its business is "The
Clearing House Corp."
(xi
) Ability to Perform. There is no material
impairment in the ability of the Seller to perform its
obligations under this Agreement.
(xii) Valid Business Reasons; No Fraudulent
Transfers. The Seller has valid business reasons for
transferring the Receivables rather than obtaining a secured
loan with the Receivables as collateral. At the time of
each transfer: (i) the Seller transferred the Receivables to
the Purchaser without any intent to hinder, delay, or
defraud any current or future creditor of the Seller; (ii)
the Seller was not insolvent and did not become insolvent as
a result of the transfer; (iii) the Seller was not engaged
and was not about to engage in any business or transaction
for which any property remaining with the Seller was an
unreasonably small capital or for which the remaining assets
of the Seller were unreasonably small in relation to the
business of the Seller or the transaction; (iv) the Seller
did not intend to incur, and did not believe or reasonably
should not have believed that it would incur, debts beyond
its ability to pay as they become due; and (v) the
consideration paid by the Purchaser to the Seller for the
Receivables was equivalent to the fair market value of such
Receivables.
(xiii) Chief Executive Office. The Seller
maintains its chief executive office in the State of New
Jersey, and there have been no other locations of the
Seller's chief executive office since January 1995.
(xiv) Adverse Orders. There is no injunction,
writ, restraining order or other order of any nature binding
upon Seller that adversely affects Seller's performance of
this Agreement and the transactions contemplated hereby and
by the Pooling and Servicing Agreement.
(b) The Seller makes the following
representations and warranties as to the Receivables for the
benefit of the Purchaser, the Certificateholders, the
Trustee and the Trust and on which the Purchaser relies in
accepting the Receivables on the Closing Date. Such
representations and warranties speak as of the Closing Date,
but shall survive the sale, transfer and assignment of the
Receivables to the Purchaser and the subsequent assignment
to the Trustee pursuant to the Pooling and Servicing
Agreement. The Seller acknowledges and expressly agrees
that any or all of the Purchaser, the Trustee or the
Certificateholders may enforce the Seller's repurchase
obligations or substitution obligations pursuant to Section
7.02 hereof for any breach of any of the following
representations and warranties.
(i) Characteristics of Receivables. Each
Receivable (A) has been originated in the United States of
America by Seller or a Dealer for the retail sale of a
Financed Vehicle in the ordinary course of Seller's or such
Dealer's business, has been fully and properly executed by
the parties thereto and, if originated by a Dealer, has been
purchased by Seller from such Dealer or has been financed
for such Dealer under an existing agreement with Seller, (B)
has created a valid, subsisting and enforceable first
priority security interest in favor of the Seller or the
Dealer in the Financed Vehicle, which security interest, if
in favor of the Dealer, has been assigned by the Dealer to
Seller, and which in either case has been duly assigned by
Seller to the Purchaser, (C) is covered by the VSI Insurance
Policy and by the Risk Default Insurance Policy, (D)
contains customary and enforceable provisions such that the
rights and remedies of the holder thereof are adequate for
realization against the collateral of the benefits of the
security and (E) provides for level monthly payments
(provided that the payment in the first or last month in the
life of the Receivable may be different from the level
payment) that fully amortize the Amount Financed over an
original term of no greater than 60 months and yield
interest at the Annual Percentage Rate.
(ii) Schedule of Receivables. The
information set forth on the Schedule of Receivables is
true, complete and correct in all material respects as of
the opening of business on the Cutoff Date and no selection
procedures adverse to the Certificateholders have been
utilized in selecting the Receivables.
(iii) Compliance With Law. Each Receivable
and the sale of each Financed Vehicle (A) complied at the
time it was originated or made and at the Closing Date
complies in all material respects with all requirements of
applicable federal, State and local laws and regulations
thereunder, including, without limitation, usury 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 Seller is a party and no party to such
contract is in violation of any applicable law, rule or
regulation which is material to the Receivable or the sale
of the Financed Vehicle.
(iv) Binding Obligation. Each Receivable
represents the genuine, legal, valid and binding payment
obligation in writing of the Obligor, enforceable by the
holder thereof in accordance with its terms.
(v) No Government Obligor. None of the
Receivables is due from the United States of America or any
State or local government or from any agency, department or
instrumentality of the United States of America or any State
or local government.
(vi) Security Interest in Financed Vehicle.
Immediately prior to the sale, assignment and transfer
thereof, each Receivable is secured by a validly perfected
first priority security interest in the Financed Vehicle in
favor of the Seller as secured party or all necessary and
appropriate actions have been commenced that would result in
the valid perfection of a first priority security interest
in the Financed Vehicle in favor of the Seller as the
secured party. The Seller 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 the Financed Vehicle, to
be delivered to the Custodian pursuant to Section
3.03(a)(ii) of the Pooling and Servicing Agreement, together
with powers of attorney, duly executed by Seller in favor of
the Trustee, which powers of attorney are sufficient to
change the lien holder on the certificate of title with
respect to a Financed Vehicle.
(vii) Receivables in Force. No Receivable has
been satisfied, subordinated or rescinded, nor has any
Financed Vehicle been released from the lien granted by the
related Receivable in whole or in part.
(viii) No Waiver. No provision of a Receivable
has been waived, impaired, altered or modified in any
respect except in accordance with the Servicing Agreement,
the substance of which is reflected in the Schedule of
Receivables as it relates to the information included
thereon.
(ix) No Amendments. No Receivable has been
amended such that either the original Scheduled Payment has
been decreased or the number of originally scheduled due
dates has been increased except as permitted under the terms
of the Risk Default Policy.
(x) No Defenses. No right of rescission,
setoff, recoupment, counterclaim or defense has been
asserted or threatened with respect to any Receivable.
(xi) No Liens. No Liens or claims have been
filed for work, labor or materials relating to a Financed
Vehicle that are Liens prior to, or equal or coordinate
with, the security interest in the Financed Vehicle granted
by the Obligor pursuant to the Receivable.
(xii) No Default. Except for payment
delinquencies continuing for a period of not more than
thirty (30) days as of the Cutoff Date, no default, breach,
violation or event permitting acceleration under the terms
of any Receivable has occurred; and no continuing condition
that with notice or the lapse of time would constitute a
default, breach, violation or event permitting acceleration
under the terms of any Receivable has arisen; and the Seller
has not waived any of the foregoing. As of the Closing
Date, the Seller has no knowledge of any facts regarding any
particular Receivable transferred on such date indicating
that such Receivable would not be paid in full.
(xiii) Insurance. Each Receivable is covered,
as of the Closing Date and throughout the shorter of the
term of the Trust or the term of the Receivable, under the
VSI Insurance Policy and the Risk Default Insurance Policy,
and each such insurance policy is valid and remains in full
force and effect. The Seller, in accordance with its
customary procedures, has required that each Obligor obtain,
and has determined that each Obligor has obtained, physical
damage insurance covering the Financed Vehicle as of the
date of execution of the Receivable insuring repair or
replacement of such Financed Vehicle subject to a
deductibility not in excess of $500.
(xiv) Title. It is the intention of the
Seller that the transfer and assignment of the Receivables
from the Seller to the Purchaser herein contemplated be
treated as an absolute sale for financial accounting
purposes, and that the beneficial interest in and title to
the Receivables not be part of the property of the Seller
for any purpose under state or federal law. No Receivable
has been sold, transferred, assigned or pledged by the
Seller to any Person other than the Purchaser, except the
pledge to and liens for the benefit of certain of Seller's
creditors which will be released prior to conveyance to the
Purchaser hereunder. Immediately prior to the transfer and
assignment herein contemplated, the Seller had good and
marketable title to each Receivable free and clear of all
Liens and rights of others; and, immediately upon the
transfer thereof, the Purchaser will have good and
marketable title to each Receivable, free and clear of all
Liens and rights of others; and the transfer has been
validly perfected under the UCC.
(xv) Lawful Assignment. No Receivable has
been originated in, or is subject to the laws of, any
jurisdiction under which the sale, transfer and assignment
of such Receivable under this Agreement or pursuant to
transfers of the Certificates is or shall be unlawful, void
or voidable.
(xvi) All Filings Made. All filings
(including, without limitation, UCC filings) necessary in
any jurisdiction to give the Purchaser a first perfected
security interest in the Receivables have been made.
(xvii) One Original. There is only one
original executed copy of each Receivable.
(xviii) Maturity of Receivables. Each
Receivable had an original maturity of not more than 60
months; the weighted average original term to maturity of
the Receivables was 54.48 months as of the Cutoff Date while
the weighted average remaining term to maturity as of the
Cutoff Date for such Receivables was 54.40 months; the
remaining maturity of each Receivable was 60 months or less
as of the Cutoff Date.
(xix) Scheduled Payments. Each Receivable has
a next scheduled payment due date on or prior to November
24, 1996; no Receivables had a payment that was more than 30
days overdue as of the Cutoff Date; and each Receivable has
a final scheduled payment due no later than the Final
Scheduled Distribution Date.
(xx) Monthly Payments. Each Receivable
provides for level monthly payments (provided that the
payment in the first or last month in the life of the
Receivable may be minimally different from such level
payment) which fully amortize the amount financed over the
original term; provided, however, that the Risk Default
Policy provides that loan extensions will be allowed,
subject to no more than one extension during each 12 months
in the Receivable's term.
(xxi) Outstanding Principal Balance; Annual
Percentage Rate. Each Receivable had an outstanding
Principal Balance as of the Cutoff Date of at least
$3,911.50; and no Receivable has an outstanding Principal
Balance in excess of $36,505.52. As of the Cutoff Date, the
weighted average APR of the Receivables was 20.06% per
annum.
(xxii) Financing. Each Receivable represents a
Simple Interest Receivable.
(xxiii) Bankruptcy Proceeding. No Receivable as
of the respective Cutoff Date is noted in the Seller's
records as a dischargeable debt under a bankruptcy
proceeding.
(xxiv) Chattel Paper, Valid and Binding. Each
Receivable constitutes "chattel paper" under the UCC, and is
the legal, valid and binding obligation of the Obligor
thereunder in accordance with the terms thereof.
(xxv) States of Origination. At the time of
origination, each Receivable was originated in one of the
following states, which are the only states in which the
Receivables were originated: Alabama, Arizona, Colorado,
Connecticut, Delaware, Florida, Georgia, Illinois, Indiana,
Kansas, Kentucky, Louisiana, Maryland, Michigan,
Mississippi, Missouri, Nevada, New Jersey, New Mexico, New
York, North Carolina, Ohio, Pennsylvania, South Carolina,
Tennessee, Texas, Virginia and West Virginia.
(xxvi) Age of Financed Vehicles. Approximately
5.57% of the Receivables relate to new Financed Vehicles and
approximately 94.43% relate to used Financed Vehicles.
(xxvii) No Future Advances. The full principal
amount of each Receivable 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 the Receivable does
not have any options under such Receivable to borrow from
any person additional funds secured by the Financed Vehicle.
Each Receivable as of the Closing Date is fully secured by
the related Financed Vehicle.
(xxviii) Underwriting Guidelines. Each
Receivable has been originated in accordance with the
Underwriting Guidelines and in accordance with the
underwriting guidelines acceptable to the Risk Default
Insurer. Such guidelines include but are not limited to the
following:
(A) the purchase of the Financed
Vehicle by the Obligor, at the time of funding of the
Receivable, was affordable to the Obligor based upon
Seller's existing Underwriting Guidelines with respect to
discretionary income; and
(B) at the time of funding of the
Receivable, the Financed Vehicle was purchased from, and the
Receivable originated by, a Dealer located in one of the
states specified in paragraph (xxv) above.
(xxix) Financed Vehicle in Good Repair. To the
best of the Seller's knowledge, each Financed Vehicle is in
good repair and working order.
(xxx) Principal Balance. No Receivable has a
Principal Balance which includes capitalized interest,
physical damage insurance or late charges.
(xxxi) Servicing. At the Cutoff Date, each
Receivable was being serviced by the Servicer.
(xxxii) Eligible Loan. Each Receivable
constitutes an "Instrument" and each Financed Vehicle
constitutes "Eligible Collateral" as defined in and for
purposes of the Risk Default Insurance Policy. Neither the
insured under the Risk Default Insurance Policy nor any
Person acting on behalf of such insured has concealed or
misrepresented any material facts or circumstances regarding
any matter that would serve as a basis for the Risk Default
Insurer to void the Risk Default Insurance Policy.
(xxxiii) Original Principal Amount. The
original principal amount of each Receivable (A) originated
under the original "Zero Down" and the "Reduced Income"
programs, was not more than (1) in the case of new Financed
Vehicles, the lower of (x) 105% of the manufacturer's
suggested retail price plus rebatable premiums on cancelable
items and (y) 120% of the manufacturer's suggested retail
price or (2) in the case of used Financed Vehicles, the
lower of (x) 105% of the retail value of the Financed
Vehicle at the time of origination of the Receivable as set
forth in the Kelley "Blue Book" for the appropriate region
plus rebatable premiums on cancelable items and (y) 120% of
such Kelley "Blue Book" retail value; (B) originated under
the "First Time Buyer" program, was not more than (1) in the
case of new Financed Vehicles, 95% of the manufacturer's
suggested retail price plus rebatable premiums on cancelable
items of up to 15% of the manufacturer's suggested retail
price or (2) in the case of used Financed Vehicles, 95% of
the retail value of the Financed Vehicle at the time of
origination of the Receivable as set forth in the Kelley
"Blue Book" for the appropriate region plus rebatable
premiums on cancelable items of up to 15% of the
manufacturer's suggested retail price and (C) originated
under the "Military Program" was not more than 105% of the
manufacturer's suggested retail price or, in the case of
used Financed Vehicles, 105% of the Kelley "Blue Book"
retail value. Calculations made with respect to the
percentages referenced above are rounded to the nearest
whole percentage point.
(xxxiv) No Proceedings. There are no
proceedings or investigations pending or, to the best
knowledge of the Seller, threatened before any court,
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or its
respective properties: (A) asserting the invalidity of any
of the Receivables; (B) seeking to prevent the enforcement
of any of the Receivables; or (C) seeking any determination
or ruling that might materially and adversely affect the
payment on or enforceability of any Receivable.
(xxxv) Licensing. With respect to each
Receivable originated in the State of Pennsylvania, the
Seller and each prior holder of any such Receivable were
each properly licensed under applicable Pennsylvania laws
and regulations during the respective times the Seller and
each prior holder of any such Receivable held such
Receivable, except where the failure to be so licensed would
not have a material adverse effect on the ability of the
Trust to collect principal or interest payments on such
Receivable or to realize upon the Financed Vehicle
underlying any such Receivable in accordance with the terms
thereof.
(xxxvi) State Concentrations. The forms of
retail installment sales contract used by the Seller in each
of Florida, Georgia, North Carolina and Texas have not been
changed since September 12, 1996. The percentage of the
aggregate Principal Balance of the Receivables originated in
each of the foregoing states is as follows:
Florida 20.14%
Georgia 14.22%
North Carolina 11.86%
Texas 12.98%
As of the Closing Date, no other state represented
more than five percent (5%) of the aggregate Principal
Balance of the Receivables. After giving effect to the
substitution of Substitute Receivables and the release of
all funds from the escrow account established on the Closing
Date pursuant to a separate agreement, no more than eight
percent (8%) of the original aggregate Principal Balance of
the Receivables will have been originated in any one state.
(c) The Seller makes the following additional
representations, warranties and covenants for the benefit of
the Purchaser, the Certificateholders and the Trust on which
the Purchaser relies in accepting the Receivables on the
Closing Date, which representations, warranties and
covenants shall survive the Closing Date.
(i) Location of Servicer Files. The
Servicer Files are kept by the Servicer at the location
listed in Exhibit C hereto, with the exception of (A) the
original titles or other documents evidencing the security
interest of the Seller in the Financed Vehicle and (B) the
original Receivables, which documents shall be kept at an
office of the Custodian.
(ii) Evidence of Security Interest. On the
Closing Date, the Seller shall deliver or cause to be
delivered to the Trustee, as Custodian, (A) an original
certificate of title or (B) if the applicable state title
registration agency does not deliver certificates of title
to lienholders, such other document delivered to the Seller
by the state title registration agency evidencing the
security interest of the Seller in the Financed Vehicle, or
(C) 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 Financed Vehicle has yet been
issued, for each Financed Vehicle relating to each
Receivable sold, transferred, assigned and conveyed
hereunder; provided, however, that any original certificate
of title or other document evidencing the security interest
of the Seller in the Financed Vehicle not so delivered on
the Closing Date, due to the fact that such title or other
document has not yet been issued by a state title
registration agency and delivered to the Seller as of such
date, shall be delivered by the Seller to the Trustee within
one hundred fifty (150) days after the Closing Date or such
later date permitted by the Majority Certificateholders (or,
if the Certificates have been rated, by each Rating Agency)
in accordance with Section 3.03(a) of the Pooling and
Servicing Agreement; provided, further, that failure to so
deliver any original certificate of title or other document
evidencing the security interest of the Seller in the
Financed Vehicle to the Trustee shall be deemed to be a
breach by the Seller of its representations and warranties
contained in this Section 3.01, and such occurrence shall
constitute a breach pursuant to Section 7.02 herein.
(iii) Insurance Claims. The Seller shall
provide to the Purchaser, within five (5) Business Days of
receipt or distribution thereof, (A) copies of all documents
received from the Risk Default Insurer contesting the
eligibility of any claim made under a Risk Default Policy
and (B) copies of all documents regarding the resolution of
alleged ineligible claims.
(iv) Business Purpose. The Seller will sell,
transfer, assign and otherwise convey (for state law, tax
and financial accounting purposes) the Receivables for a
bona fide business purpose.
(v) Financial Accounting Purposes. The
Seller and the Purchaser, as owner of the Receivables, each
intend to treat the transactions contemplated by this
Agreement as an absolute sale of the Receivables by the
Seller for financial accounting purposes. The Seller and
the Trustee intend to cause to be filed all returns or
reports in a manner consistent with such treatment.
(vi) Valid Transfer. This Agreement
constitutes a valid transfer by the Seller to the Purchaser
of all of the Seller's right, title and interest in the
Receivables and the other Trust Property.
(vii) Seller's Obligations. The Seller
has submitted all necessary documentation for payment of the
Receivables to the Obligors and has fulfilled all of its
applicable obligations hereunder required to be fulfilled as
of the Closing Date.
(viii) Insurance Policies. The Seller will
not cancel, nor permit the cancellation of, the Risk Default
Insurance Policy or VSI Insurance Policy, in each case as it
relates to the Receivables.
ARTICLE IV
CONDITIONS
Section 4.01. Conditions to Obligation of the
Purchaser. The obligation of the Purchaser to purchase the
Receivables is subject to the satisfaction of the following
conditions:
(a) Representations and Warranties True. The
representations and warranties of the Seller hereunder shall
be true and correct on the Closing Date and the Seller shall
have performed all obligations to be performed by each of
them hereunder on or prior to the Closing Date.
(b) Files Marked; Files and Records owned by
Trust. The Seller shall, at its own expense, on or prior to
the Closing Date indicate in its files that the Receivables
have been sold to the Purchaser pursuant to this Agreement
and the Seller shall deliver to the Purchaser a Schedule of
Receivables certified by the Chairman, the President, the
Vice President or the Treasurer of the Seller to be true,
correct and complete. Further, the Seller hereby agrees
that the computer files and other physical records of the
Receivables maintained by the Seller will bear an indication
reflecting that the Receivables have been sold to the
Purchaser and thereafter sold, transferred and assigned to
the Trustee for deposit in the Trust.
(c) Documents to be Delivered by the Seller at the
Closing Date.
(i) The Assignment. At the Closing
Date, the Seller will execute and deliver an Assignment
substantially in the form of Exhibit A hereto with respect
to the Receivables.
(ii) Custodian files. At the Closing Date,
the Seller shall deliver to the Trustee, as custodian, for
the benefit of the Purchaser and its assigns the Custodian
Files, which delivery shall be accompanied by a Certificate
of Delivery substantially in the form of Exhibit D.
(iii) Evidence of UCC Filings. The Seller
shall record and file, at its own expense, (A) on or prior
to the Closing Date, UCC-3 termination statements in each
jurisdiction required by applicable law, to release any
prior security interests in the Receivables granted by the
Seller, and (B) on or prior to the Closing Date, UCC
financing statements in each jurisdiction in which required
by applicable law, executed by the Seller as seller or
debtor, and naming the Purchaser as purchaser or secured
party, naming the Trustee as assignee of such purchaser or
secured party, identifying the Receivables and the other
Trust Property as collateral, meeting the requirements of
the laws of each such jurisdiction and in such manner as is
necessary to perfect the sale, transfer, assignment and
conveyance of such Receivables to the Purchaser and the
sale, transfer, assignment and conveyance thereof to the
Trustee. The Seller shall deliver file-stamped copies, or
other evidence satisfactory to the Purchaser and the Trustee
of such filing, to the Purchaser and the Trustee on or prior
to the Closing Date.
(iv) Evidence of Insurance and Payment. On
the Closing Date the Seller shall deliver to the Trustee on
the Purchaser's behalf evidence of payment in full of all
premiums due under the Risk Default Insurance Policy and the
VSI Insurance Policy with respect to the Receivables being
sold on such date.
(v) Other Documents. Such other documents,
including without limitation a power of attorney with
respect to the Receivables substantially in the form of
Exhibit E hereto, as the Purchaser may reasonably request.
Section 4.02. Conditions to Obligation of the Seller.
The obligation of the Seller to sell the Receivables to the
Purchaser on the Closing Date is subject to the condition
that at the Closing Date the Purchaser will deliver to the
Seller the Receivables Purchase Price for the Receivables,
as provided in Section 2.01(b).
ARTICLE V
COVENANTS OF THE SELLER
The Seller agrees with the Purchaser as follows;
provided, however, that to the extent that any provision of
this Article V conflicts with any provision of the Pooling
and Servicing Agreement, the Pooling and Servicing Agreement
shall govern:
Section 5.01. Protection of Right, Title and Interest.
(a) Filings. The Seller shall cause all financing
statements and continuation statements and any other
necessary documents covering the right, title and interest
of the Purchaser in and to the Receivables and the other
Trust Property to be promptly filed, and at all times to be
kept recorded, registered and filed, all in such manner and
in such places as may be required by law fully to preserve
and protect the right, title and interest of the Purchaser
hereunder to the Receivables and the other Trust Property.
The Seller shall deliver to the Purchaser file-stamped
copies of, or filing receipts for, any document recorded,
registered or filed as provided above, as soon as available
following such recordation, registration or filing. The
Purchaser shall cooperate fully with the Seller in
connection with the obligations set forth above and will
execute any and all documents reasonably required to fulfill
the intent of this Section 5.01(a).
(b) Name Change. At least fifteen days before the
Seller makes any change in its name, identity or corporate
structure which would make any financing statement or
continuation statement filed in accordance with paragraph
(a) above seriously misleading within the applicable
provisions of the UCC or any title statute, the Seller shall
give the Purchaser and the Trustee notice of any such change
and no later than five (5) days after the effective date
thereof, shall file such financing statements or amendments
as may be necessary to continue the perfection of the
Purchaser's security interest in the Trust Property.
Section 5.02. Other Liens or Interests. Except for
the conveyances hereunder and pursuant to the Pooling and
Servicing Agreement, the Seller will not sell, pledge,
assign or transfer the Receivables to any other person, or
grant, create, incur, assume or suffer to exist any Lien on
any interest therein, and the Seller shall defend the right,
title, and interest of the Purchaser in, to and under such
Receivables against all claims of third parties claiming
through or under the Seller; provided, however, that the
Seller's obligations under this Section 5.02 shall terminate
upon the termination of the Trust pursuant to the Pooling
and Servicing Agreement.
Section 5.03. Chief Executive Office. The Seller
shall give written notice to the Purchaser and the Trustee
at least 30 days prior to relocating its chief executive
office and shall make such filings under the UCC as shall be
necessary to maintain the perfection of the security
interest (as defined in the UCC) in the Receivables granted
in favor of the Purchaser hereunder.
Section 5.04. Trustee as Named Insured; Pledge of
Proceeds. The Seller shall cause the Trustee to be
identified as the named insured under the Risk Default
Insurance Policy and as an additional insured, as its
interests may appear, under the VSI Insurance Policy as of
the Closing Date. The Seller hereby assigns to the Trustee
for the benefit of the Certificateholders, any interest it
may have in any and all proceeds with respect to a
Receivable under the terms of any of the foregoing insurance
policies.
Section 5.05. Costs and Expenses. The Seller agrees
to pay all reasonable costs and disbursements in connection
with the perfection, as against all third parties, of the
sale to the Purchaser of the Seller's right, title and
interest in and to the Receivables.
Section 5.06. No Waiver. The Seller shall not waive
any default, breach, violation or event permitting
acceleration under the terms of any Receivable.
Section 5.07. Location of Servicer Files. The
Servicer Files, exclusive of the original titles to the
Financed Vehicles and exclusive of the originals of the
Receivables, have been delivered to the location listed in
Exhibit C hereto. The Custodian Files, including the
original titles (or other evidence of the security interest
in the Financed Vehicles) and the originals of the
Receivables shall be delivered to the principal executive
office of the Custodian as specified in the Pooling and
Servicing Agreement.
Section 5.08. Sale of Receivables. The Seller will
take no action inconsistent with the Purchaser's ownership
of the Receivables. If a third party, including a potential
purchaser of the Receivables, should inquire, the Seller
will promptly indicate that ownership of the Receivables has
been transferred to the Purchaser, and by the Purchaser to
the Trust.
Section 5.09. The Seller's Records. This Agreement
and all related documents describe the transfer of the
Receivables from the Seller as an absolute sale by the
Seller to the Purchaser and evidence the clear intention by
the Seller to effectuate an absolute sale and assignment of
such Receivables. The financial statements and tax returns
of the Seller will disclose that, under generally accepted
accounting principles, or for tax purposes, respectively,
the Seller transferred ownership of the Receivables.
Section 5.10. Financial Statements. The Seller will
furnish to the Purchaser and each Certificateholder, (A)
within 90 days after the end of its fiscal year, an
unaudited balance sheet as at the end of such fiscal year
and the related statements of income and cash flow for such
fiscal year, setting forth in comparative form the figures
as at the end of and for the previous fiscal year and (B)
within 45 days after the end of each of the first three
quarterly accounting periods in each fiscal year, an
unaudited balance sheet of the Seller as at the end of such
quarterly period setting forth in each case in comparative
form the figures for the corresponding periods of the
previous fiscal year.
Section 5.11. Compliance with Laws, Etc. The Seller
will comply in all material respects with all applicable
laws, rules, regulations, judgments, decrees and orders
(including those relating to the Receivables and any other
agreements related thereto), where the failure so to comply,
individually or in the aggregate for all such failures,
would have a reasonable likelihood of having a material
adverse effect on the business or properties of the Seller.
Section 5.12. Preservation of Existence. The Seller
will preserve and maintain its existence, rights, franchises
and privileges in the jurisdiction of its organization, and
qualify and remain qualified in good standing in each
jurisdiction where the failure to preserve and maintain such
existence, rights, franchises, privileges and qualifications
would have a reasonable likelihood of having a material
adverse effect on the business or properties of the Seller.
Section 5.13. Keeping of Records and Books of Account.
The Seller shall maintain and implement administrative and
operating procedures (including, an ability to recreate
records evidencing its Receivables in the event of the
destruction of the originals thereof), and shall keep and
maintain, or cause to be kept or maintained, all documents,
books, records and other information which, in the
reasonable determination of Purchaser and the Trustee, are
necessary or advisable in accordance with prudent industry
practice and custom for transactions of this type for the
collection of all Receivables. Seller shall maintain or
cause to be maintained at all times accurate and complete
books, records and accounts relating to the Receivables,
which books and records shall be marked to indicate the
sales of all Receivables hereunder.
Section 5.14. Separate Existence of Purchaser. The
Seller hereby acknowledges that the Trustee, on behalf of
the Trust, is entering into the transactions contemplated by
the Pooling and Servicing Agreement in reliance upon
Purchaser's identity as a legal entity separate from the
Seller and Seller's other affiliates. Seller will, and will
cause each other affiliate to, take all reasonable steps to
continue their respective identities as separate legal
entities and to make it apparent to third Persons that each
is an entity with assets and liabilities distinct from those
of Purchaser and that Purchaser is not a division of the
Seller or any other Person.
ARTICLE VI
INDEMNIFICATION
Section 6.01. Indemnification. The Seller shall
indemnify the Purchaser, the Trustee and each
Certificateholder for any liability as a result of the
failure of a Receivable to be originated in compliance with
all requirements of law and for any breach of any of its
representations and warranties contained herein. In
addition, the Seller shall indemnify the Trustee, the Trust,
the Backup Servicer, the Custodian and each
Certificateholder to the extent of the Purchaser's indemnity
obligations under Section 8.02 of the Pooling and Servicing
Agreement and under the fourth sentence of Section 11.07 of
the Pooling and Servicing Agreement, which provisions are
incorporated herein by this reference as if such provisions
were fully set forth herein and as if the "Seller"
thereunder were the Seller hereunder. The Seller hereby
acknowledges that any of the Trustee, the Custodian, the
Backup Servicer or the Certificateholders may enforce the
obligation of the Seller under this Section 6.01. These
indemnity obligations shall be in addition to any obligation
that the Seller may otherwise have.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.01. Obligations of the Seller. The
obligations of the Seller under this Agreement shall not be
affected by reason of any invalidity, illegality or
irregularity of any Receivable.
Section 7.02. Repurchase or Substitution Upon Breach
or Certain Payment Defaults. (a) The Seller hereby
covenants and agrees to deliver to the Purchaser, the
Trustee and each Certificateholder prompt written notice of
(i) the occurrence of a breach of any of the representations
and warranties of the Seller contained or deemed to be
contained in Section 3.01(b) hereof with respect to any
Receivable or (ii) the failure of the Seller to deliver
original certificates of title or other documents evidencing
the security interest of the Seller in the Financed Vehicle
pursuant to Section 4.01(c)(ii). If (x) such breach shall
not have been cured by the thirtieth day following discovery
thereof or (y) the non-delivery shall not have been cured by
the seventh Business Day following receipt by a responsible
officer of the Seller of notice by certified mail thereof,
the Seller shall be obligated to repurchase such Receivable
hereunder from the Purchaser at the Purchase Amount on a
date which shall be no later than the fifth Business Day
following the applicable cure period. The Seller shall be
obligated to repurchase the Receivable to which such breach
or non-delivery relates even if the Purchaser shall not have
breached its respective representations and warranties with
respect to such Receivable under the Pooling and Servicing
Agreement and even if the Purchaser fails to comply with any
repurchase obligation it may have under the Pooling and
Servicing Agreement. The Seller shall remit the Purchase
Amount to the Trustee on behalf of the Purchaser. For
purposes of this Section, the Purchase Amount of a
Receivable which is not consistent with the warranty
pursuant to Section 3.01(b)(i)(E) shall include such
additional amount as shall be necessary to provide the full
amount of principal and interest as contemplated therein.
(b) The foregoing notwithstanding, the Seller shall
also have the option of substituting, within the five
Business Day period following the applicable cure period, a
Receivable conforming to the requirements hereof (a
"Substitute Receivable") for any breach or failing
Receivable instead of repurchasing such Receivable, provided
any such substitution occurs within ninety (90) days of the
Closing Date. It shall be a condition of any such
substitution that (i) the outstanding Principal Balance of
the Substitute Receivable as of the date of substitution
shall be less than or equal to the outstanding Principal
Balance of the replaced Receivable as of the date of
substitution; provided that an amount equal to the
difference, if any, between the outstanding Principal
Balance of the replaced Receivable and the outstanding
Principal Balance of the Substitute Receivable shall be paid
in cash to Purchaser for deposit into the Collection Account
pursuant to the Pooling and Servicing Agreement; (ii) the
remaining term to maturity of the Substitute Receivable
shall not be greater than that of the replaced Receivable;
(iii) the Cutoff Date with respect to the Substitute
Receivable shall be deemed to be the first day of the month
of the substitution; (iv) the Substitute Receivable
otherwise satisfies the conditions of Section 3.01(b) hereof
(the Seller shall be deemed to make all representations and
warranties contained in Section 3.01(b) and (c) hereof with
respect to the Substitute Receivable as of the date of
substitution); and (v) the Seller shall have delivered to
the Purchaser and the Trustee all of the documents specified
in Section 4.01(c) hereof with respect to the Substitute
Receivable on or before the date of substitution.
(c) The Seller agrees to repurchase at the Purchase
Amount on each Distribution Date, commencing with the
Distribution Date occurring in December 1996, any Receivable
for which, through the end of the related Collection Period,
either of the first two Scheduled Payments was not paid
within forty-five (45) days of the due date for such
Scheduled Payment. The Seller shall remit the Purchase
Amount to the Trustee on behalf of the Purchaser.
(d) Except as provided in subsection (b) above, the
repurchase obligation of the Seller shall constitute the
sole remedy of the Certificateholders, the Trustee or the
Purchaser against the Seller for its breach hereunder;
provided, that the Seller hereby acknowledges that any of
the Purchaser, the Certificateholders or the Trustee may
enforce the Seller's obligation to repurchase or substitute
for nonconforming Receivables pursuant to this Section 7.02.
Section 7.03. Purchaser's Assignment of Nonconforming
Receivables. With respect to all Receivables repurchased or
substituted for by the Seller pursuant to this Agreement,
the Purchaser shall assign, without recourse, representation
or warranty, to the Seller all the Purchaser's right, title
and interest in and to such Receivables, and all security
and documents relating thereto.
Section 7.04. Trust. The Seller acknowledges that the
Purchaser will assign the Receivables to the Trust for the
benefit of the Certificateholders, pursuant to the Pooling
and Servicing Agreement, and that the representations and
warranties contained in this Agreement and the rights of the
Purchaser under Section 7.02 hereof are intended to benefit
such Trust and each Certificateholder. The Seller hereby
consents to such transfers and assignments.
Section 7.05. Amendment. This Agreement may be
amended from time to time by a written amendment duly
executed and delivered by the Seller and the Purchaser;
provided however, that for so long as any Certificates are
outstanding no amendment which in any manner (x) relates to
the Seller's obligations under Section 7.02 or (y) would
have a materially adverse effect on the interests of the
Certificateholders, shall be effective without the prior
written consent of each Certificateholder.
Section 7.06. Waivers. No failure or delay on the
part of the Purchaser in exercising any power, right or
remedy under this Agreement or the Assignments shall operate
as a waiver thereof, nor shall any single or partial
exercise of any such power, right or remedy preclude any
other or further exercise thereof or the exercise of any
other power, right or remedy.
Section 7.07. Notices. All communications and notices
pursuant hereto to any party shall be in writing or by
telegraph or telex and addressed or delivered to it at its
address (or in case of telex, at its telex number at such
address) shown in the preamble of this Agreement or at such
other address as may be designated by it by notice to the
other party and, if mailed or sent by telegraph or telex,
shall be deemed given when mailed, communicated to the
telegraph office or transmitted by telex.
Section 7.08. Costs and Expenses. The Seller will pay
all expenses, including reasonable fees and expenses of
counsel, incident to the performance of its obligations
under this Agreement and the Seller agrees to pay all
reasonable out-of-pocket costs and expenses in connection
with the enforcement of any obligation of the Seller
hereunder.
Section 7.09 Acknowledgement Concerning Insurance
Proceeds. The Seller hereby acknowledges and agrees for the
benefit of the Purchaser, the Trustee and the
Certificateholders that any checks representing Risk Default
Insurance Proceeds or proceeds from claims on any Insurance
Policies in respect of the Receivables that at any time may
be made payable to the Seller will be so made payable for
reasons of administrative and claims processing convenience
only and that, notwithstanding that such checks may be made
so payable, the Seller shall have no right, title or
interest in such proceeds.
Section 7.10. Limited Recourse to Purchaser. The
Seller agrees that the obligations of the Purchaser
hereunder are payable solely from the Purchaser's interests
in the Trust Property and that the Seller may not look to
any other property or assets of the Purchaser in respect of
such obligations.
Section 7.11. Headings and Cross-References. The
various headings in this Agreement are included for
convenience only and shall not affect the meaning or
interpretation of any provision of this Agreement.
References in this Agreement to Section names or numbers are
to such Sections of this Agreement.
Section 7.12. Governing Law. This Agreement and the
Assignment shall be governed by and construed in accordance
with the laws of the State of New York without regard or
reference to principles of conflicts of laws of such state.
Section 7.13. Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall be
an original, but all of which together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties hereby have caused this
Purchase Agreement to be executed by their respective
officers thereunto duly authorized as of the date and year
first above written.
AEGIS AUTO FINANCE, INC., as
Seller
By
Cyril Means
President
AEGIS AUTO FUNDING CORP., a
Delaware corporation, as Purchaser
By
Brendan Meyer
President
EXHIBIT A
ASSIGNMENT
For value received in accordance with the Purchase
Agreement dated as of September 1, 1996, (the "Purchase
Agreement"), by and between the undersigned ("the Seller"),
and Aegis Auto Funding Corp., a Delaware corporation (the
"Purchaser"), the undersigned does hereby sell, assign,
transfer and otherwise convey unto the Purchaser, without
recourse, (i) all right, title and interest of the
undersigned in and to the Receivables identified on the
Schedule attached hereto, all moneys received thereon on and
after the Cutoff Date allocable to principal, and all moneys
received thereon allocable to interest accrued thereon from
and including the Cutoff Date therefor; (ii) the security
interests of the Seller in the Financed Vehicles granted by
the Obligors pursuant to the Receivables; (iii) the interest
of the Seller in any Risk Default Insurance Proceeds and any
proceeds from claims on any Insurance Policies (including
the VSI Insurance Policy) covering the Receivables, the
Financed Vehicles or Obligors from the Cutoff Date; (iv) the
interest of the Seller in any Dealer Recourse; and (v) the
proceeds of any and all of the foregoing. The foregoing
sale does not constitute and is not intended to result in
any assumption by the Purchaser of any obligation of the
undersigned to the Obligors, insurers or any other person in
connection with the Receivables, Custodian Files, Servicer
Files, any insurance policies or any agreement or instrument
relating to any of them.
This Assignment is made pursuant to and upon the
representations, warranties and agreements on the part of
the undersigned contained in the Purchase Agreement and is
to be governed by the Purchase Agreement.
Capitalized terms used herein and not otherwise defined
shall have the meaning assigned to them in the Purchase
Agreement.
IN WITNESS WHEREOF, the undersigned has caused this
Assignment to be duly executed as of September 30, 1996.
AEGIS AUTO FINANCE INC.
By
Name:
Title:
EXHIBIT B
SCHEDULE OF RECEIVABLES
EXHIBIT C
LOCATION OF SERVICER FILES
American Lenders Facilities, Inc.
2600 Michaelson Drive
Suite 470
Irvine, CA 92715
EXHIBIT D
CERTIFICATE OF DELIVERY
In connection with the transfer of certain auto loan
receivables to the Aegis Auto Receivables Trust 1996-A (the
"Trust") to be formed pursuant to a Pooling and Servicing
Agreement (the "Agreement") to be entered into among Aegis
Auto Funding Corp., a Delaware corporation, as seller (the
"Seller"), Norwest Bank Minnesota, National Association, as
Backup Servicer (the "Backup Servicer"), and Norwest Bank
Minnesota, National Association, as Trustee (the "Trustee"),
the undersigned hereby certifies that the documents listed
below are included in the Custodian Files delivered to the
Custodian or its agent for each of the Receivables listed on
the Schedule hereto. Unless otherwise defined herein,
capitalized terms have the meanings set forth in the
Agreement or the Purchase Agreement (as defined in the
Agreement).
(i) The original of the Receivable and
any amendments thereto.
(ii) The original certificate of title
or other document evidencing the security interest in the
Financed Vehicles, or a guarantee of title or a copy of an
application for title if no certificate of title or other
document evidencing the security interest in the Financed
Vehicle has yet been issued.
(iii) A copy of the Risk Default
Insurance Policy and the VSI Insurance Policy and
endorsements to the Risk Default Insurance Policy and the
VSI Insurance Policy confirming insurance (as reflected on a
master list of insured Receivables) regarding each
Receivable.
AEGIS AUTO FINANCE, INC.
Dated: , 1996 By
Name:
Title:
EXHIBIT E
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that Aegis Auto
Finance, Inc., a Delaware corporation ("Aegis Finance"),
having its principal place of business at 525 Washington
Boulevard, Jersey City, New Jersey 07310, in connection
with the transfer of its interests in certain automobile
receivables and certain security interests and liens created
in the Collateral (as defined below) has and hereby affirms
that it has made, constituted and appointed, and by these
presents does make, constitute and appoint Norwest Bank
Minnesota, National Association, a national banking
association, as trustee of the Aegis Auto Receivables Trust
1996-A ("Trustee"), having its principal place of business
at Sixth Street and Marquette Avenue, Minneapolis, Minnesota
55479-0070, and its successors or assigns in such capacity,
Aegis Finance's true and lawful attorney-in-fact for and in
Aegis Finance's name, place and stead to act:
FIRST: To execute and/or endorse any loan agreement,
promissory note, security agreement, financing statement,
certificate of title or other document, instrument, or
agreement, or any amendment, modification or supplement of
any of the foregoing and perform any act and covenant in any
way which Aegis Finance itself could do (to the fullest
extent that the Aegis Finance is permitted by law to act
through an agent), which is necessary or appropriate to
modify, amend, renew, extend, release, terminate and/or
extinguish (i) any and all liens and security interests
granted to or created in favor of Aegis Finance in and to or
affecting any of the motor vehicles described in Schedule
"A" (the "Collateral") annexed hereto and by this reference
made a part hereof, or (ii) any indebtedness secured by any
such lien or security interest or any right or obligation of
the obligor of such indebtedness or Aegis Finance, in each
case upon such terms and conditions deemed, in the sole
discretion of said attorney-in-fact, necessary or
appropriate in connection with such modification, amendment,
renewal, extension, release, termination and/or
extinguishment.
SECOND: To agree and to contract with any person, in
any manner and upon terms and conditions deemed, in the sole
discretion of said attorney-in-fact, necessary or
appropriate for the accomplishment of any such modification,
amendment, renewal, extension, release, termination and/or
extinguishment of any such lien, security interest,
indebtedness, right or obligation referred to above with
respect to the Collateral; to perform, rescind, reform,
release or modify any such agreement or contract or any
similar agreement or contract made by or on behalf of the
principal; to execute, acknowledge, seal and deliver any
contract, agreement, certificate of title or other document,
agreement or instrument creating, evidencing, securing or
secured by any such lien, security interest, indebtedness,
right or obligation; and to take all such other actions and
steps, pay or receive such moneys and to execute,
acknowledge, seal and deliver all such other certificates,
documents and agreements as said attorney-in-fact may deem
necessary or appropriate to consummate any such
modification, amendment, renewal, extension, release,
termination and/or extinguishment of any such security
interest, lien, indebtedness, right or obligation, or in
furtherance of any of the transactions contemplated by the
foregoing.
THIRD: With full and unqualified authority to delegate
any or all of the foregoing powers to any person or persons
whom said attorney-in-fact shall select.
FOURTH: This power of attorney shall not be affected
by the subsequent disability or incompetence of the
principal.
FIFTH: This power of attorney shall be irrevocable and
coupled with an interest.
SIXTH: To induce any third party to act hereunder,
Aegis Finance hereby agrees that any third party receiving a
duly executed copy or facsimile of this instrument may act
hereunder, and that any notice of revocation or termination
hereof or other revocation or termination hereof by
operation of law shall be ineffective as to such third
party.
IN WITNESS WHEREOF, Aegis Finance has executed this
Power of Attorney as of September 30, 1996.
AEGIS AUTO FINANCE, INC.
By
Name:
Title:
The foregoing instrument was acknowledged before me
this [Funding Date], by
, the of Aegis Auto Finance,
Inc.
WITNESS my hand and official seal.
________________________________
Notary Public
[NOTARIAL SEAL]
My commission expires:
SCHEDULE A
DESCRIPTION OF COLLATERAL
EXECUTION
AEGIS AUTO FUNDING CORP.
AUTOMOBILE RECEIVABLE PASS-THROUGH CERTIFICATES,
SERIES 1996-A
CERTIFICATE PURCHASE AGREEMENT
September 27, 1996
Greenwich Capital Markets, Inc.
600 Steamboat Road
Greenwich, Connecticut 06830
Dear Sirs:
Aegis Auto Funding Corp., a Delaware corporation (the
"Company"), proposes to sell to you its Automobile
Receivable Pass-Through Certificates, Series 1996-A
(collectively, the "Certificates") in the classes, in the
respective original principal amounts and with the
designations set forth in Schedule I hereto (the "Designated
Certificates"). Only the Designated Certificates are being
purchased by you hereunder. The Designated Certificates
will be issued by the Company pursuant to a Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement"),
dated as of September 1, 1996, among the Company, as seller,
Norwest Bank Minnesota, National Association, as back-up
servicer (the "Back-up Servicer"), and Norwest Bank
Minnesota, National Association, as trustee (the "Trustee").
Each Certificate will evidence the holder's fractional
undivided interest in a trust (the "Trust"), created
pursuant to the Pooling and Servicing Agreement, and
consisting primarily of a pool (the "Pool") of retail
installment sale contracts for new or used automobiles and
light-duty trucks between dealers and retail purchasers (the
"Contracts") and certain monies due thereunder on and after
the Cut-off Date.
1. Representations and Warranties. The Company
represents and warrants to, and agrees with, you and each
person who purchases a Designated Certificate directly from
you that:
(a) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Delaware, has full power and authority
(corporate and other) necessary to own or hold its
properties and to conduct its business as now conducted by
it and to enter into and perform its obligations under this
Agreement, the Pooling and Servicing Agreement and the
Purchase Agreement dated as of September 1, 1996 (the
"Purchase Agreement"), between the Company and Aegis Auto
Finance, Inc. ("Aegis Finance").
(b) This Agreement has been duly authorized,
executed and delivered by the Company.
(c) The Pooling and Servicing Agreement, when
executed and delivered as contemplated hereby and thereby,
will have been duly authorized, executed and delivered by
the Company, and when so executed and delivered, will
constitute a legal, valid, binding and enforceable agreement
of the Company, subject, as to enforceability, to
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally and to
general principles of equity regardless of whether
enforcement is sought in a proceeding in equity or at law.
(d) The Purchase Agreement, when executed and
delivered as contemplated hereby and thereby, will have been
duly authorized, executed and delivered by the Company, and
when so executed and delivered, will constitute a legal,
valid, binding and enforceable agreement of the Company,
except insofar as any indemnification provisions therein may
be limited by applicable law, and subject, as to
enforceability, to bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights
generally and to general principles of equity regardless of
whether enforcement is sought in a proceeding in equity or
at law.
(e) As of the Closing Date, the Designated
Certificates will be duly and validly authorized and, when
duly and validly executed, authenticated and delivered in
accordance with the Pooling and Servicing Agreement and
delivered to you against payment therefor as provided
herein, will be duly and validly issued and outstanding and
entitled to the benefits of the Pooling and Servicing
Agreement.
(f) On the Closing Date, the representations and
warranties of the Company with respect to the Contracts
contained in the Pooling and Servicing Agreement will be
true and correct.
(g) The Company is not in violation of its
certificate of incorporation or by-laws or in default under
any agreement, indenture or instrument the effect of which
violation or default would be material to the Company.
Neither the issuance and sale of the Designated
Certificates, nor the execution and delivery by the Company
of this Agreement, the Pooling and Servicing Agreement or
the Purchase Agreement, nor the consummation by the Company
of any of the transactions herein or therein contemplated,
nor compliance by the Company with the provisions hereof or
thereof, does or will conflict with or result in a breach of
any term or provision of the certificate of incorporation or
by-laws of the Company or conflict with, result in a breach,
violation or acceleration of, or constitute a default under,
the terms of any indenture or other agreement or instrument
to which the Company is a party or by which it is bound, or
any statute (including, without limitation, any local
registration or licensing requirements), order or regulation
applicable to the Company of any court, regulatory body,
administrative agency or governmental body having
jurisdiction over the Company. The Company is not a party
to, bound by or in breach or violation of any indenture or
other agreement or instrument, or subject to or in violation
of any statute, order or regulation of any court, regulatory
body, administrative agency or governmental body having
jurisdiction over it that materially and adversely affects,
or may in the future materially and adversely affect, (i)
the ability of the Company to perform its obligations under
this Agreement, the Pooling and Servicing Agreement or the
Purchase Agreement or (ii) the business, operations,
financial conditions, properties or assets of the Company.
(h) There are no actions or proceedings against,
or investigations of, the Company pending, or, to the
knowledge of the Company, threatened, before any court,
arbitrator, administrative agency or other tribunal (i)
asserting the invalidity of this Agreement, the Pooling and
Servicing Agreement, the Purchase Agreement or the
Certificates, (ii) seeking to prevent the issuance of the
Certificates or the consummation of any of the transactions
contemplated by this Agreement, the Pooling and Servicing
Agreement or the Purchase Agreement, (iii) that are
reasonably likely to be adversely determined and that might
materially and adversely affect the performance by the
Company of its obligations under, or the validity or
enforceability of, this Agreement, the Pooling and Servicing
Agreement, the Purchase Agreement or the Certificates or
(iv) seeking to affect adversely the federal income tax
attributes of the Certificates.
(i) Any taxes, fees and other governmental charges
in connection with the execution and delivery of this
Agreement, the Pooling and Servicing Agreement and the
Purchase Agreement or the execution, delivery and sale of
the Certificates have been or will be paid on or prior to
the Closing Date.
(j) Immediately prior to the assignment of the
Contracts to the Trustee as contemplated by the Pooling and
Servicing Agreement, the Company (i) had good title to, and
was the sole owner of, each Contract free and clear of any
pledge, mortgage, lien, security interest or other
encumbrance (collectively, "Liens"), (ii) had not assigned
to any person any of its right, title or interest in such
Contracts or in the Pooling and Servicing Agreement and
(iii) will have the power and authority to sell such
Contracts to the Trustee, and upon the execution and
delivery of the Pooling and Servicing Agreement by the
Trustee, the Trustee will have acquired all of the Company's
right, title and interest in and to the Contracts.
(k) There are no contracts, agreements or
understand- ings between the Company and any person
granting such person the right to require the Company to
file a registration statement under the Securities Act of
1933, as amended (the "1933 Act"), with respect to any
Designated Certificates owned or to be owned by such person.
(l) Assuming the accuracy of the representations
and warranties made by you in this agreement, the sale of
the Designated Certificates pursuant to this Agreement is
exempt from the registration and prospectus delivery
requirements of the 1933 Act. In the case of each offer or
sale of the Designated Certificates, no form of general
solicitation or general advertising was used by the Company
or any other representative of the Company, including, but
not limited to, advertisements, articles, notices or other
communications published in any newspaper, magazine or
similar medium or broadcast over tele- vision or radio, or
any seminar or meeting whose attendees have been invited by
any general solicitation or general advertising. Neither
the Company nor any other person acting on behalf of the
Company has offered or sold, nor will the Company or any
other person acting on behalf of the Company offer or sell
directly or indirectly, any Designated Certificate or any
other security in any manner that, assuming the accuracy of
the representations and warranties and the performance of
the covenants given by you, would render the issuance and
sale of any of the Designated Certificates as contemplated
hereby a violation of Section 5 of the 1933 Act or the
registration or qualification requirements of any state
securities laws, nor has the Company authorized, nor will it
authorize, any person to act in such manner.
(m) Neither the Company nor the Trust is, and
neither the issuance and sale of the Certificates nor the
activities of the Trust pursuant to the Pooling and
Servicing Agreement will cause the Company or the Trust to
be, an "investment company" or under the control of an
"investment company" as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment
Company Act").
2. Representations, Warranties and Covenants of the
Pur- chaser. You represent and warrant to, and agree with,
the Company that:
(a) You are purchasing the Designated
Certificates, in the Original Certificate Principal Balances
set forth on Schedule I, solely for your own account as
principal and not as nominee or agent for any other person,
and not with a view to, or for offer or sale in connection
with, any distribution (within the meaning of the 1933 Act)
or fractionalization thereof, subject, never- theless, to
the understanding that the disposition of your property
shall at all times be and remain within your control. It is
understood that you intend to reoffer or resell the
Designated Certificates from time to time in one or more
privately negotiated transactions.
(b) You are an "accredited investor" as defined in
Rule 501(a)(1), (2) or (3) of Regulation D under the 1933
Act and a "qualified institutional buyer" as defined in Rule
144A under the 1933 Act.
(c) You will not offer the Designated Certificates
or any part thereof or any similar security for issue or
sale to, or solicit any offer to acquire any of the same
from, anyone so as to bring the offer and sale of the
Designated Certificates to you and by you within the
provisions of Section 5 of the 1933 Act.
3. Purchase and Sale. Subject to the terms and
conditions and in reliance upon the representations and
warranties set forth herein, the Company agrees to sell the
Designated Certificates to you, and you agree to purchase
the Designated Certificates from the Company, for the
purchase price of $17,385,757.89.
The Company and you have discussed the possibility of a
future restructuring of your investment in the Designated
Certificates that would involve inclusion of the underlying
Contracts in the pool of contracts underlying the Company's
next sale of automobile receivable pass-through
certificates; such sale is expected to occur on or prior to
December 31, 1996. You and the Company acknowledge that
there may be potential benefits to you through repurchase by
the Company of the Designated Certificates and inclusion of
the underlying Contracts in a larger pool backing rated,
multi-class certificates, and you and the Company agree that
you or one of your affiliates and the Company may discuss
terms of such a restructuring of your investment in a manner
that may also benefit the Company economically (e.g., by
necessitating a level of credit support that is lower than
the credit support for the Designated Certificates, or by
some other means). You and the Company agree that no such
agreement regarding the purchase or sale of the Designated
Certificates has been reached, and the Company shall have no
obligation to purchase from you, and you shall have no
obligation to sell to the Company, the Designated
Certificates. Any sale of the Designated Certificates by
you to the Company will be on terms that are mutually
beneficial and which will be deemed to provide fair value to
each party.
4. Delivery and Payment. Delivery of and payment for
the Designated Certificates shall be made at the office of
Kutak Rock, 767 Third Avenue, New York, New York 10017, on
the date specified in Schedule I hereto, which date and time
may be changed by agreement between you and the Company
(such date and time of delivery and payment for the
Designated Certificates being herein called the "Closing
Date"). Delivery of the Designated Certificates shall be
made to you against payment by you of the purchase price
therefor in immediately available funds wired to such bank
as may be designated by the Company, or such other manner of
payment as may be agreed upon by the Company and you. The
Designated Certificates to be so delivered shall be in
book-entry or definitive fully registered form, as requested
by you, in such denominations and registered in such names
as you may have requested in writing not less than two full
business days in advance of the Closing Date.
The Company agrees to have the Designated Certificates
available for inspection, checking and packaging by you in
New York, New York on the business day prior to the Closing
Date.
5. Covenants of the Company. The Company covenants and
agrees with you that:
(a) During the period referred to in Section 5(b),
the Company will, at your request, furnish through you to
any prospective purchaser of Designated Certificates from
you such information as is reasonably requested and is
reasonably available concerning matters reasonably relevant
to such prospective purchaser's decision to purchase the
Designated Certificates and the Company represents and
warrants that such information will be accurate in all
material respects and not misleading.
(b) The Company authorizes you to deliver to
investors any information provided under Section 5(a) hereof
in connection with any reoffer or resale of the Designated
Certificates by you in accordance herewith.
(c) The Company agrees to use its reasonable best
efforts to furnish (or cause to be furnished) such
information and to execute such documents or instruments as
you may rea- sonably request to satisfy any condition to
the availability of an exemption under the state securities
or blue sky laws of any state for any sale of Designated
Certificates by you (provided that in no event shall the
Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or take any
action that would subject it to service of process in suits,
other than those arising out of the offering or sale of the
Certificates, in any jurisdiction where it is not now so
subject).
(d) The Company will pay all costs and expenses in
connection with the transactions herein contemplated,
including, but not limited to, the fees and disbursements of
its counsel; the costs and expenses of printing (or
otherwise reproducing) and delivering the Pooling and
Servicing Agreement and the Certifi- cates; the fees, costs
and expenses of the Trustee (to the extent permitted under
the Pooling and Servicing Agreement, and except to the
extent that another party is obligated to pay such amounts
thereunder) and the fees and disbursements of accountants
for the Company.
(e) The Company will enter into the Pooling and
Servicing Agreement and Purchase Agreement on or prior to
the Closing Date.
(f) The Company agrees to take such action as you
shall reasonably request following the Closing Date in
connection with any subsequent transfer of the Designated
Certificates by you.
6. Conditions to the Purchase of the Designated
Certifi- cates. Your obligation hereunder to purchase the
Designated Certificates shall be subject to the accuracy of
the repre- sentations and warranties on the part of the
Company contained herein as of the date hereof and as of the
Closing Date, to the accuracy of the statements of the
Company made in any certifi- cates delivered pursuant to
the provisions hereof, to the performance by the Company of
its obligations hereunder and to the following additional
conditions:
(a) The Company shall have delivered to you a
certifi- cate of the Company, signed by the President or a
vice president of the Company and dated the Closing Date, to
the effect that the signer of such certificate has carefully
examined this Agreement and that to the best of such
signer's knowledge: (i) the repre- sentations and
warranties of the Company in this Agreement are true and
correct in all material respects at and as of the Closing
Date with the same effect as if made on the Closing Date and
(ii) the Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or
satisfied at or prior to the Closing Date.
(b) You shall have received from Brown & Wood,
special counsel for the Purchaser, such opinions as you may
reasonably require, and the Company shall have furnished to
such counsel such documents as you may reasonably request
for the purposes of enabling them to render such opinions.
(c) You shall have received from Kutak Rock,
special counsel for the Company, a favorable opinion, dated
the Closing Date, to the effect that:
(i) This Agreement has been duly authorized,
executed and delivered by the Company and The Aegis Consumer
Funding Group, Inc.;
(ii) The Pooling and Servicing Agreement has
been duly authorized, executed and delivered by the Company,
and when so executed and delivered, constitutes a legal,
valid, binding and enforceable agreement of the Company,
enforceable according to its terms, subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and to general
principles of equity regardless of whether enforcement is
sought in a proceeding in equity or at law;
(iii) The Purchase Agreement has been duly
authorized, executed and delivered by the Company and Aegis
Finance and constitutes a legal, valid, binding and
enforceable agreement of each such party, except insofar as
the indemnification provisions therein may be limited by
applicable law, and subject, as to enforceability, to
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally and to
general principles of equity regardless of whether
enforcement is sought in a proceeding in equity or at law;
(iv) The issuance of the Certificates has been
duly and validly authorized by all required corporate action
by the Company and when executed and countersigned in the
manner contemplated in the Pooling and Servicing Agreement
will be validly issued and outstanding and entitled to the
benefits of the Pooling and Servicing Agreement;
(v) The offer and sale of the Designated
Certificates to you in the manner contemplated in this
Agreement and the Pooling and Servicing Agreement is not,
assuming the accuracy of your representations and warranties
and the performance of your covenants contained herein, a
transaction requiring the registration of the Designated
Certificates under the 1933 Act;
(vi) The Pooling and Servicing Agreement is
not required to be qualified under the Trust Indenture Act
of 1939, as amended, and neither the Company nor the Trust
is required to be registered under the Investment Company
Act; and
(vii) The Trust will be treated as a grantor
trust for federal income tax purposes, assuming: (i)
compliance with the Pooling and Servicing Agreement and (ii)
compliance with changes in the law, including any amendments
to the Code or applicable Treasury regulations thereunder.
(d) You shall have received from Kutak Rock,
special counsel for the Company, a favorable opinion, dated
the Closing Date, to the effect that:
(i) The Company and Aegis Finance have each
been duly organized and each is validly existing as a
corporation in good standing under the laws of the State of
Delaware and has all corporate power and authority necessary
to own or hold its properties and to conduct its business,
as now conducted by it, and to enter into and perform its
obligations under this Agreement, the Pooling and Servicing
Agreement and the Purchase Agreement;
(ii) There are no actions, proceedings or
investigations pending or threatened against or affecting
the Company or Aegis Finance before or by any court,
arbitrator, administrative agency or other governmental
authority reasonably likely to be adversely determined that
would materially and adversely affect the ability of any
such party to carry out the transactions contemplated in
this Agreement, the Pooling and Servicing Agreement or the
Purchase Agreement;
(iii) No consent, approval, authorization or
order of, or filing or registration with, any state or
federal court or governmental agency or body is required for
the consummation by the Company of the transactions
contemplated herein, except such as may be required under
the blue sky laws of any jurisdiction in connection with the
purchase and distribution of the Designated Certificates and
except any recordation of the assignments of the Contracts
to the Trustee pursuant to the Pooling and Servicing
Agreement that have not yet been completed; and
(iv) Neither the Company nor Aegis Finance is
in violation of its certificate of incorporation or by-laws
or in default under any agreement, indenture or instrument
the effect of which violation or default would be material
to the Company, and neither the issuance and sale of the
Designated Certificates, nor the execution or delivery of or
performance under this Agreement, the Pooling and Servicing
Agreement or the Purchase Agreement, nor the consummation of
any other of the transactions contemplated herein or therein
will conflict with or result in a breach or violation of any
term or provision of, or constitute a default (or an event
which with the passing of time or notification, or both,
would constitute a default) under, the certificate of
incorporation or by-laws of the Company or Aegis Finance or,
to the knowledge of such counsel, any indenture or other
agreement or instrument to which the Company or Aegis
Finance or any of their affiliates is a party or by which
any of them is bound, or any New York or federal statute or
regulation applicable to the Company or Aegis Finance or any
of their affiliates or, to the knowledge of such counsel,
any order of any New York or federal court, regulatory body,
administrative agency or governmental body having
jurisdiction over the Company or Aegis Finance or any of
their respective affiliates.
With respect to the opinions in paragraphs (c) and
(d) above, such counsel may: (1) express its reliance as to
factual matters on the representations and warranties made
by, and on certificates or other documents furnished by
officers of, the parties to this Agreement, the Pooling and
Servicing Agreement and the Purchase Agreement; (2) assume
the due authorization, execution and delivery of the
instruments and documents referred to therein by the parties
thereto other than the Company; and (3) qualify such opinion
only as to the federal laws of the United States of America,
the laws of the State of New York and the general
corporation law of the State of Delaware. Such counsel
shall also confirm that you may rely, on and as of the
Closing Date, on any opinion or opinions of such counsel
submitted to the rating agency or agencies rating the
Designated Certificates as if addressed to you and dated the
Closing Date.
(e) You shall have received from counsel for the
Trustee a favorable opinion, dated the Closing Date, in form
and substance satisfactory to you and your counsel, to the
effect that the Pooling and Servicing Agreement has been
duly authorized, executed and delivered by the Trustee and
constitutes the legal, valid, binding and enforceable
agreement of the Trustee, subject, as to enforceability, to
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights in general and by
general principles of equity regardless of whether
enforcement is considered in a proceeding in equity or at
law, and as to such other matters as may be agreed upon by
you and the Trustee.
(f) You shall have received from counsel for the
Back- up Servicer a favorable opinion, dated the Closing
Date, in form and substance satisfactory to you and your
counsel.
(g) You shall have received such further
information, certificates, documents and opinions as you may
reasonably have requested not later than the Closing Date.
(h) All proceedings in connection with the trans-
actions contemplated by this Agreement and all documents
incident hereto shall be satisfactory in form and substance
to you and your counsel, and you and your counsel shall have
received such information, certificates and documents as you
or they may have reasonably requested.
If any of the conditions specified in this Section
6 shall not have been fulfilled in all material respects
when and as provided in this Agreement, if the Company is in
breach of any covenants or agreements contained herein or if
any of the opinions and certificates referred to above or
elsewhere in this Agreement shall not be in all material
respects reasonably satisfactory in form and substance to
you and your counsel, this Agreement and all your
obligations hereunder may be cancelled by you at, or at any
time prior to, the Closing. Notice of such cancellation
shall be given to the Company in writing, or by telephone or
facsimile transmission confirmed in writing.
7. Conditions of the Company's Obligations. The
obligation of the Company to sell the Designated
Certificates to you shall be subject to: (i) the accuracy of
your representations and warranties herein contained at and
as of the Closing Date and (ii) your performance of all of
your obligations hereunder to be performed at or prior to
the Closing Date.
8. [Reserved]
9. Indemnification and Contribution. The Company and
The Aegis Consumer Funding Group, Inc. ("Aegis Consumer
Funding") agree with you that:
(a) The Company and Aegis Consumer Funding,
jointly and severally, will indemnify and hold harmless you
and each person who controls you within the meaning of
either the 1933 Act or the Securities Exchange Act of 1934,
as amended (the "1934 Act") against any and all losses,
claims, damages or liabilities, joint or several, to which
you or any of them may become subject under the 1933 Act,
the 1934 Act, or other federal or state law or regulation,
at common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise
out of or are based upon any material inaccuracy contained
in any statistical information provided by the Company to
you in writing or by electronic transmission prior to the
date hereof, and agrees to reimburse each such indemnified
party for any legal or other expenses reasonably incurred by
it in connection with investigating or defending any such
loss, claim, damage, liability or action. This indemnity
will be in addition to any liability that the Company may
otherwise have.
(b) [Reserved]
(c) Promptly after receipt by an indemnified party
under this Section 9 of notice of the commencement of any
action, such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under
this Section 9, notify the indemnifying party in writing of
the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability
that it may have to any indemnified party otherwise than
under this Section 9. In case any such action is brought
against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein,
and to the extent that it may elect by written notice
delivered to the indemnified party promptly after receiving
the aforesaid notice from such indemnified party, to assume
the defense thereof, with counsel satisfactory to such
indemnified party; provided, however, that if the defendants
in any such action include both the indemnified party and
the indemnifying party and the indemnified party or parties
shall have reasonably concluded that there may be legal
defenses available to it or them and/or other indemnified
parties that are different from or additional to those
available to the indemnifying party, the indemnified party
or parties shall have the right to elect separate counsel to
assert such legal defenses and to otherwise participate in
the defense of such action on behalf of such indemnified
party or parties. Upon receipt of notice from the
indemnifying party to such indemnified party of its election
to so assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will
not be liable for any legal or other expenses subsequently
incurred by such indemnified party in connection with the
defense thereof, unless (i) the indemnified party shall have
employed separate counsel in connection with the assertion
of legal defenses in accordance with the proviso to the next
preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of
more than one separate counsel, approved by you in the case
of paragraph (a) of this Section 9, representing the
indemnified parties under such paragraph (a) who are parties
to such action), (ii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time
after notice of commencement of the action or (iii) the
indemnifying party has authorized the employment of counsel
for the indemnified party at the expense of the indemnifying
party; and except that, if clause (i) or (iii) is
applicable, such liability shall only be in respect of the
counsel referred to in such clause (i) or (iii).
(d) If the indemnification provided for in this
Section 9 shall for any reason be unavailable to an
indemnified party under this Section 9, then you and the
Company shall contribute to the amount paid or payable by
such indemnified party as a result of the aggregate losses,
claims, damages and liabilities referred to in paragraph (a)
above, in such proportion so that (i) you are responsible
for the lesser of (1) 0.5% thereof and (2) 0.5% of the
Aggregate Initial Pool Balance (as set forth on Schedule I
hereto) and (ii) the Company is responsible for the balance;
provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepre-
sentation. For purposes of this Section 9, each person, if
any, who controls you within the meaning of either the 1933
Act or the 1934 Act shall have the same rights to
contribution as do you and each person, if any, who controls
the Company or Consumer Funding Group within the meaning of
either the 1933 Act or the 1934 Act shall have the same
rights to contribution as does the Company and Aegis
Consumer Funding. Any party entitled to contribution will,
promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of
which a claim for contribution may be made against another
party or parties under this paragraph (d), notify such party
or parties from whom contribution may be sought, but the
omission to so notify such party or parties shall not
relieve the party or parties from whom contribution may be
sought from any other obligation it or they may have
hereunder or otherwise than under this paragraph (d).
10. Termination. (a) This Agreement shall be subject
to termination in your absolute discretion by notice given
to the Company prior to delivery of and payment for the
Designated Certificates, if prior to such time, (i) trading
of securities generally on the New York Stock Exchange or
the American Stock Exchange shall have been suspended or
materially limited; (ii) a general moratorium on commercial
banking activities in New York shall have been declared by
either federal or New York State authorities; or (iii) there
shall have occurred any material outbreak or declaration of
hostilities or other calamity or crisis the effect of which
on the financial markets of the United States is such as to
make it, in your reasonable judgment, impracticable to
market the Designated Certificates on the terms specified
herein.
(b) If the sale of the Designated Certificates
shall not be consummated because any condition to your
obligations set forth in Section 6 hereof is not satisfied
or because of any refusal, inability or failure on the part
of the Company to perform any agreement herein or comply
with any provision hereof other than by reason of your
default, the Company shall reimburse you for the reasonable
fees and expenses of your counsel and for such other
out-of-pocket expenses as shall have been incurred by you in
connection with this Agreement and the proposed purchase of
the Designated Certificates, and upon demand the Company
shall pay the full amount thereof to you.
(c) This Agreement will survive delivery of and
payment for the Designated Certificates. The provisions of
Section 9 and this Section 10(c) shall survive the
termination or cancellation of this Agreement.
11. Notices. All communications hereunder will be in
writing and effective only on receipt, and, if sent to you,
will be mailed, delivered or transmitted by facsimile and
confirmed to you at 600 Steamboat Road, Greenwich,
Connecticut 06830, Attention: President; or, if sent to the
Company, will be mailed, delivered or transmitted by
facsimile and confirmed to it at 525 Washington Boulevard,
Jersey City, New Jersey 07310, Attention: President.
12. Successors. This Agreement will inure to the
benefit of and be binding upon the parties hereto and their
respective successors and the officers and directors and
controlling persons referred to in Section 9 and their
successors and assigns, and no other person will have any
right or obligation hereunder.
13. Applicable Law; Counterparts. This Agreement w ill
be governed by and construed in accordance with the laws of
the State of New York. This Agreement may be executed in
any number of counterparts, each of which shall for all
purposes be deemed to be an original and all of which shall
together constitute but one and the same instrument.If the
foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart
hereof, whereupon this letter and your acceptance shall
represent a binding agreement between the Company and you.
Very truly yours,
AEGIS AUTO FUNDING CORP.
By:________________________________
Name:
Title:
Acknowledged and agreed to for
purposes of Section 9 hereof:
THE AEGIS CONSUMER FUNDING
GROUP,
INC.
By:________________________________
Name:
Title:
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.
GREENWICH CAPITAL MARKETS, INC.
By:____________________________
Name:
Title: SCHEDULE I
Certificate Purchase Agreement dated September 27, 1996.
Closing Date: September 30, 1996
Title, Purchase Price and Description of Designated
Certificates:
AUTOMOBILE RECEIVABLE PASS-THROUGH CERTIFICATES, SERIES
1996-A
Aggregate Initial Certificate Balance: $17,561,371.61
Cut-off Date: September 24, 1996
Original
Designated Certificate
Certificates Balance
Series 1996-A $17,561,371.61
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT is made as of this 9th day
of December, 1996, by and between AEGIS AUTO FINANCE, INC.
(the "Seller"), a Delaware corporation having its chief
executive office and principal place of business at 525
Washington Boulevard, Jersey City, New Jersey 07310, and
ENTERPRISE NATIONAL BANK OF PALM BEACH ( the "Purchaser"), a
national banking association having offices at 11811 U.S.
Highway One, North Palm Beach, Florida 33408.
W I T N E S S E T H:
WHEREAS, Seller has underwritten and purchased on
an indirect basis, in the ordinary course of its business,
certain retail installment sales contracts secured by new
and used automobiles, light duty trucks, vans and mini-vans;
and
WHEREAS, Purchaser wishes to purchase certain of
such contracts and related rights from the Seller; and
WHEREAS, Seller and the Purchaser wish to set
forth the terms pursuant to which such contracts and related
rights are to be sold by the Seller to the Purchaser.
NOW, THEREFORE, in consideration of the foregoing,
other good and valuable consideration, and the mutual terms
and covenants contained herein, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
1.01 Certain Definitions. As used in this
Agreement, the following terms shall, unless the context
otherwise requires, have the following meanings (such
meanings to be equally applicable to the singular and plural
forms of the terms defined):
Additional Purchase Price shall have the meaning
given such term in Section 2.01(c) of this Agreement.
Administrative Agent shall mean the Seller or
any of its affiliates acceptable to the Purchaser or, if
such agent fails or is unable to perform its duties, the
Seller.
Administrative Report shall have the meaning
given such term in Section 2.04(E) hereof.
Advance Rate shall mean (i) 100% for Insured
Receivables (other than Unboarded Receivables), (ii) 95% for
Uninsured Receivables (other than Unboarded Receivables),
and (iii) 80% for Unboarded Receivables.
"Agreement" shall mean this Purchase Agreement and
all amendments hereof and supplements hereto.
"Assignment" shall mean the document of
assignment, in the form attached to this Agreement as
Exhibit A, to be executed by Seller in favor of Purchaser on
each Purchase Date with respect to the Receivables and other
Purchased Property being purchased on such day, and all
amendments thereof and supplements thereto.
Available Distribution Amount shall mean, for
any Payment Period, all Interest Collections for such period
plus all Principal Collections for such period less the
Servicing Fee for such period.
Business Day shall mean any day other than a
Saturday, Sunday or a day on which banking institutions are
authorized or required by law to close in the state in which
the Servicer s principal office is located.
Cash Purchase Price shall have the meaning given
such term in Section 2.01(B) of this Agreement.
"Cut-Off Date" shall mean, for each Receivable,
its Purchase Date (or such other date as may be established
by the Purchaser and the Seller).
"Dealer" shall mean an authorized new or used car
dealer who has executed a Dealer Agreement with Seller.
Dealer Agreements shall mean an agreement
between a Dealer and the Seller in substantially the form
supplied by the Seller to the Purchaser prior to the initial
Purchase Date.
Depository Account shall mean the bank account
of the Purchaser into which daily collections on the
Receivables from the Lock-Box Account (as defined in the
Servicing Agreement) shall be deposited by the Servicer
pursuant to the Servi cing Agreement and this Agreement.
Determination Date shall mean the last day of
each calendar month.
Distribution Amount shall mean, for any Payment
Period, the sum of (i) Principal Collections for such
period, (ii) Net Loss Paydowns for such period, and (iii)
interest accrued on the Outstanding Balance at the Purchaser
Interest Rate during such period.
Financed Vehicle shall mean, with respect to any
Receivable, the Vehicle that was purchased pursuant to such
Receivable and which serves as collateral for such
Receivable.
Insured Receivable shall mean any Receivable
which is covered by the RDI Policy.
Interest Collections shall mean all collections
of interest on the Receivables received by the Servicer
during the related Payment Period.
LIBOR shall mean an interest rate per annum
equal to the rate of interest per annum at which deposits in
U.S. dollars are offered for a period of one (1) month and
which appears as of 11:00 a.m., London time, on the date of
determination thereof (i) on the Bloomberg Quote Service, or
(ii) if such page on such service ceases to display such
information, such other page as may replace it on that
service for the purpose of displaying of such information,
or (iii) if such rate does not appear on the Bloomberg Quote
Service, then the rate quoted on the Telerate page 3751 or
Reuters Screen Page LIBO (as selected by Seller) as such
rate, or (iv) if such page on such service ceases to display
such information, such other page as may replace it on that
service for the purpose of displaying such information, or
(v) if that service ceases to display such information, the
determination shall be made on the basis of the rates which
are available from a recognized source mutually acceptable
to Seller and Purchaser. For purposes of this Agreement,
LIBOR for each Payment Period shall be determined on the
first Business Day of such period and shall be reset on the
first Business Day of each subsequent calendar month in such
Payment Period.
Liquidated Receivable shall mean (i) for Insured
Receivables, any Receivable liquidated by the Servicer
through the sale of the related Vehicle, or otherwise, and
for which a claim has been filed under the RDI Policy and
all other reasonably anticipated recoveries, including those
from insurance policies other than the RDI policy, have been
received by the Servicer and (ii) for Uninsured Receivables,
any Receivable liquidated by the Servicer through the sale
of the related Vehicle and for which all reasonably
anticipated recoveries, including those from insurance
policies, have been received by the Servicer.
Lock-box Account shall have the meaning
specified in the Servicing Agreement.
Net Loss shall mean, for any Liquidated
Receivable, the product of (i) the unpaid principal balance
of the Receivable at the time the Net Loss is computed and
(ii) the Advance Rate for such Receivable.
Net Loss Paydowns shall mean an amount equal to
the sum of the Net Losses realized during the associated
Payment Period.
Obligor shall mean, with respect to any
Receivable, any and all purchasers, co- purchasers,
co-signers or other Persons obligated to make payments on
such Receivable (other than a Dealer or the Seller).
Outstanding Balance shall mean, for any date for
which such amount is determined, the aggregate Cash Purchase
Price of all Receivables less all payments of Principal
Collections, all voluntary repurchases pursuant to Section
7.01 hereof, all mandatory repurchases pursuant to Section
7.02 hereof, and Net Loss Paydowns transferred to the
Purchaser before such date.
Payment Date shall mean the twentieth (20th) day
of the calendar quarter immediately following a Payment
Period (if such day is not a Business Day, then such Payment
Date shall be the Business Day next succeeding such
agreed-upon day).
Payment Period shall mean the first day through
and including the last day of the calendar quarter
immediately preceding a Payment Date. The first Payment
Period shall commence on the initial Purchase Date and end
on February 28, 1997.
Person shall mean any natural person or any
other legal entity, including without limitation any trust,
corporation, limited liability company, partnership, firm,
government, or government agency.
Principal Collections shall mean all collections
of principal and all other recoveries of principal on the
Receivables received by the Servicer during the related
Payment Period, except for purposes of computing the
Distribution Amount, in which case, Principal Collections
shall mean for each Receivable the product of its Advance
Rate times all collections of principal and all other
recoveries of principal received by the Servicer with
respect to such Receivables during the related Payment
Period.
Purchase Date shall mean any Business Day on
which any Receivables are purchased by the Purchaser
hereunder.
Purchase Documents shall mean this Agreement,
the Assignments, the Servicing Agreement, the Servicing
Agreement Addendum and all other agreements, assignments,
certificates, powers of attorneys, consents, notices,
financing statements, instruments and other documents which
may be now or hereafter executed by or on behalf of the
Seller in connection with the transactions contemplated by
this Agreement.
Purchased Property shall mean, collectively, any
and all Receivables and other property which are transferred
hereunder by Seller to Purchaser on any and all Purchase
Dates pursuant to Section 2.01(A) hereof.
"Purchaser" shall mean Enterprise National Bank of
Palm Beach, a national banking association, and its
successors and assigns.
Purchaser Interest Rate shall mean the rate per
annum (calculated on the basis of a 360-day year and the
actual day elapsed) equal to one-month LIBOR plus two and
seven- eighths percentage points (2-7/8ths%).
"Receivable File" means, with respect to any
particular Receivable, (a) the note, retail installment
sales contract or other evidence of the Obligor's
indebtedness to repay such Receivable, (b) any and all
documents evidencing the existence of any physical damage,
credit life, credit loss, credit disability, single interest
or risk default insurance policies relating to such
Receivable or the related Financed Vehicle or Obligor, (c)
the credit application relating to such Receivable, (d) the
certificate of title covering the Financed Vehicle relating
to such Receivable and any application therefor (or any
other comparable document evidencing title to such Financed
Vehicle issued in any jurisdiction which does not issue
certificates of title), (e) the Dealer Agreement executed by
the Dealer which originated and assigned such Receivable to
Seller and any assignment executed by such Dealer conveying
such Receivable to the Seller, and (g) any and all other
documents, books or records that the Seller or the Servicer,
as the case may be, shall maintain, in accordance with its
customary procedures, relating to such Receivable or the
related Obligor or Financed Vehicle.
Receivables shall mean any and all of the notes,
retail installment sale contracts or other evidences of
indebtedness listed on the Schedules of Receivables and the
indebtednesses of the Obligors evidenced thereby.
''Repurchase Amount" shall mean (i) for a
repurchase of all outstanding Receivables, the Outstanding
Balance plus any accrued and unpaid interest thereon at the
Purchaser Interest Rate and (ii) for a repurchase of less
than all outstanding Receivables, the sum for each
Receivable to be repurchased of (x) the product of such
Receivable s Outstanding Balance at the time of such
repurchase and its Advance Rate plus (y) any accrued and
unpaid interest on such sum at the Purchaser Interest Rate.
RDI Policy shall mean the risk default policy
maintained with respect to the Insured Receivables in
substantially the form supplied by the Seller to the
Purchaser prior to the initial Purchase Date.
"Schedules of Receivables" shall mean,
collectively, any and all lists of Receivables attached as
Schedule 1 to the Assignments, as such schedules may be
amended, supplemented or restated from time to time pursuant
to this Agreement.
"Seller" shall mean Aegis Auto Finance, Inc., a
Delaware corporation, and its successors and assigns.
Seller Bankruptcy shall mean the commencement by
or against the Seller of any proceeding under any
bankruptcy, receivership, insolvency or other similar laws
for the relief of debts.
"Servicer" shall mean American Lenders Facilities,
Inc., a California corporation, and its successors and
assigns.
Servicer Confirmation shall have the meaning
given such term in Section 2.04(A) hereof.
"Servicing Agreement" shall mean the Master
Servicing Agreement, dated as of April 6, 1996, by and among
the Servicer, as servicer; and the Seller s affiliate Aegis
Consumer Finance, Inc., as the same may be amended,
supplemented or replaced from time to time .
Servicing Agreement Addendum shall have the
meaning specified in Section 2.04(A) hereof.
Servicing Fee shall mean the fee payable to the
Servicer for services rendered during the related Payment
Period, determined in accordance with the Servicing
Agreement.
Servicing Report shall have the meaning
specified in Section 2.04 hereof.
Shortfall Amount shall mean, for any Payment
Period, an amount equal to the greater of (i) zero and (ii)
the lesser of (a) the difference between (1) the
Distribution Amount for such period and (2) the Available
Distribution Amount for such period and (b) the sum of (1)
the Net Loss Paydowns for such period and (2) the Servicing
Fee for such period.
"UCC" shall mean the Uniform Commercial Code as in
effect from time to time in the relevant jurisdiction.
Unboarded Receivable shall mean any Receivable
purchased hereunder by the Purchaser for which the Purchaser
has not yet received a Servicer Confirmation.
Uninsured Receivable shall mean any Receivable
which is not covered by the RDI Policy.
Underwriting Criteria shall mean the
underwriting criteria in place for the purchase and
origination of Receivables customarily adhered to by the
Seller as described on Exhibit F attached to this Agreement.
Vehicle shall mean the new or used automobile,
light truck, van or mini-van that is purchased by the
Obligor to which a particular Receivable relates.
VSI Policy shall mean the venders single
interest physical damage insurance policy maintained with
respect to the Receivables in substantially the form
submitted by the Seller to the Purchaser prior to the
initial Purchase Date.
1.02 Additional Definitions. All other terms
contained in this Agreement (and which are not otherwise
specifically defined herein) shall have the respective
meanings provided by the UCC as in effect from time to time
in the State of New Jersey to the extent the same are used
or defined therein. All accounting terms not specifically
defined herein shall be construed in accordance with
generally accepted accounting principles consistently
applied. Any references herein to exhibits, sections,
articles or schedules, unless otherwise specified, are
references to exhibits, sections, articles or schedules of
this Agreement. The words hereof herein and hereunder
and words of single inport when used in this Agreement shall
refer to this Agreement as a whole and not to any particular
provision of this Agreement. Wherever appropriate in the
context, terms used herein in the singular also include the
plural and vice versa, and each masculine, feminine or
neutral pronoun used herein shall also include the other
gender or genders.
ARTICLE II
PURCHASE, SALE AND SERVICING OF RECEIVABLES
2.01 (A) Purchase and Sale of Receivables. No
later than 11:00 p.m. (Eastern Time) on any proposed
Purchase Date, Seller shall provide Purchaser with a listing
of the Receivables which the Seller proposes to sell to
Purchaser hereunder on such day together with such other
information regarding such Receivables as the Purchaser may
reasonably request to enable the Purchaser to complete its
own independent evaluation of the credit quality of such
Receivables. In the event that Purchaser purchases any or
all of such Receivables on such Purchase Date, Purchaser
shall notify Seller of such election by written notice given
to Seller by no later than 4:00 p.m. (Eastern Time) on such
Purchase Date, and on such Purchase Date, subject to the
terms and conditions of this Agreement, the Seller shall
sell to the Purchaser, and the Purchaser shall purchase from
the Seller, all of the Seller s rights, titles and interests
in, to and under all of the following Purchased Property
relating to such Receivables:
(i) such Receivables, and all monies due on
such Receivables on and after the Cut-Off Date for such
Receivables, excepting for monies due the Seller relating to
interest accrued prior to the Cut-Off Date;
(ii) the security interests of the Seller in
the related Financed Vehicles granted by the Obligors
pursuant to such Receivables;
(iii) the interests of the Seller in any
proceeds from claims on any physical damage, credit life,
credit loss, credit disability, single interest or risk
default insurance policies relating to such Financed
Vehicles, such Obligors or such Receivables;
(iv) the Receivable Files relating to such
Receivables;
(v) the interests of the Seller with respect
to such Receivables under the Servicing Agreement; and
(vi) all proceeds of any and all of the
foregoing.
(B) Cash Purchase Price. In consideration for
the transfer on each Purchase Date of Receivables and the
other Purchased Property transferred hereunder on such date,
the Purchaser shall, no later than 4:00 p.m. (Eastern Time)
on such Purchase Date, pay to the Seller in immediately
available funds the aggregate Cash Purchase Price for such
Receivables. If the listing of Receivables described in
Section 2.01(A) is received after 11:00 a.m. (Eastern Time),
the Purchaser will endeavor to notify the Seller of the
Receivables to be purchased and to pay the Seller in
immediately available funds for such Receivables on such
day, but may provide such notification and payment on the
next Business Day. The Cash Purchase Price for any
Receivable transferred hereunder on any Purchase Date shall
be equal to the sum (i) the product of such Receivable s
outstanding principal balance as of its Cut-Off Date and its
Advance Rate and (ii) accrued interest thereon at the
Purchaser Interest Rate from and including the Cut-Off Date
to such Purchase Date. For any Receivable that was an
Unboarded Receivable on the date on which its Cash Purchase
Price was first paid, upon receipt by the Purchaser of a
Servicer Confirmation covering such Receivable in accordance
with Section 2.04(A) hereof (and provided that Purchaser has
not already requested that Seller repurchase such Receivable
pursuant to Sections 2.04(A) and 7.02 hereof), the Cash
Purchase Price for such Receivable shall be increased by the
difference between (i) the product of the outstanding
principal balance of such Receivable as of its Cut-Off Date
and such Receivable s Advance Rate, which Advance Rate shall
be determined after giving effect to the receipt of such
Servicer Confirmation, and (ii) the principal portion of the
Cash Purchase Price paid for the Receivable on its original
Purchase Date. The amount of such increase shall be paid by
the Purchaser to the Seller in immediately available funds
no later than 4:00 p.m. (Eastern Time) on the date such
Servicer Confirmation is received (or the following Business
Day (x) if such day is not a Business Day or (y) such
Servicer Confirmation is received after 4:00 p.m., Eastern
Time, on a Business Day). If on or before ninety (90) days
after the Purchase Date for any Uninsured Receivable Seller
provides written evidence satisfactory to the Purchaser that
(x) such Receivable has become an Insured Receivable and (y)
Purchaser has been named as the loss payee under the RDI
Policy with respect to such Receivable and the related
Financed Vehicles, Purchaser shall pay to Seller on receipt
of such evidence, and in immediately available funds, an
amount equal to five percent (5%) of such Receivable s
aggregate outstanding principal balance as of the
immediately preceding Determination Date, which additional
amount shall be added to (and shall form a part of) the Cash
Purchase Price for such Receivable.
(C) Additional Purchase Price. As additional
consideration for the transfer of the Receivables and the
other Purchased Property hereunder, the Seller shall
receive, on each Payment Date and solely from collections on
the Receivables, a payment (all such payments being herein
called the Additional Purchase Price ) equal to the amount
(if any) by which (i) the Available Distribution Amount for
the related Payment Period exceeds (ii) the Distribution
Amount for such period. The Purchaser shall have no
liability for the payment of the Additional Purchase Price
beyond its interest in such Available Distribution Amount.
2.02 Purchaser Election to Purchase. Purchaser
may elect to purchase any or all of the Receivables offered
by Seller on any Purchase Date, and Purchaser shall be under
no obligation to purchase any Receivable unless it is
acceptable in all respects to Purchaser, but Purchaser shall
not unreasonably withhold its acceptance of any Receivable
as to which all of Seller s representations and warranties
in Section 3.02(B) hereof are true and correct as of the
Purchase Date thereof; provided, however, that under no
circumstance shall Purchaser be under any obligation
hereunder to purchase Receivables having an aggregate
cumulative Cash Purchase Price in excess of $15,000,000.
2.03 No Assumption of Obligations.
Notwithstanding anything herein or in any of the other
Purchased Documents to the contrary, the transfer of the
Purchased Property hereunder from the Seller to the
Purchaser shall not constitute and is not intended to result
in any assumption by the Purchaser of any obligation of the
Seller to the Obligors, the Dealers, any insurers or any
other Person in connection with the Receivables, the
Receivable Files, the Servicer Files (as defined in the
Servicing Agreement), the Servicing Agreement, any insurance
policies or any agreement or instrument relating to any of
the foregoing.
2.04 Servicing of the Receivables.
(A) The Purchaser and the Seller agree that the
Receivables will continue to be serviced by the Servicer, in
accordance with those portions of the Servicing Agreement (a
true, correct and complete copy of which is attached hereto
and marked as Exhibit B) applicable to the Receivables. The
Purchaser and the Seller acknowledge and agree that the
Servicer will act as custodian and bailee for the Purchaser
of the Receivables and the Receivable Files in accordance
with the provisions of the Servicing Agreement relating
thereto. All fees, expenses or other sums owing to the
Servicer under the Servicing Agreement for servicing the
Receivables and acting as custodian and bailee for Purchaser
of the Receivables and the Receivable Files shall be paid
from Interest Collections and Principal Collections in
accordance with the Servicing Agreement, and the Seller
shall be entitled to receive all interest earned on any
collections while on deposit in any Lock-Box Account, the
Depository Account or other related bank account under the
Servicing Agreement. On or prior to the initial Purchase
Date, the Purchaser, the Seller, the Servicer and Aegis
Consumer Finance, Inc. shall enter into a written addendum
to the Servicing Agreement in the form of Exhibit C-1
attached hereto (the "Servicing Agreement Addendum")
pursuant to which the Servicer shall agree to act as
custodian and bailee for the Purchaser of the Receivables
and the Receivables Files relating thereto in accordance
with the provisions of the Servicing Agreement. Within
fifteen (15) days after each Purchase Date, the Seller shall
cause the Servicer to deliver to Purchaser (with a copy to
Seller) a Servicer Confirmation letter (a Servicer
Confirmation ), in the form of Exhibit C-2 attached hereto,
with respect to all of the Receivables transferred hereunder
on such Purchase Date. In the event the Purchaser does not
receive a Servicer Confirmation by the aforesaid deadline
with respect to any or all of the Receivables transferred
hereunder on a particular Purchase Date, the Seller shall
repurchase such Receivables from the Purchaser pursuant to
Section 7.02 hereof if and to the extent requested by the
Purchaser.
(B) The Purchaser shall establish and maintain
the Depository Account for the Receivables with the
Purchaser for the benefit of the Purchaser, the Seller and
the Servicer. All monies constituting Principal Collections
and Interest Collections shall be deposited by the Servicer
into the Depository Account. All monies transferred by the
Seller constituting the Shortfall Amount as provided in
Section 2.04(E) hereto shall also be deposited into the
Depository Account. No other funds shall be allowed to be
deposited into the Depository Account. The collected funds
on deposit in the Depository Account on any day shall earn
interest at the current rate then being paid by the
Purchaser on deposit accounts of that type. The Purchaser
waives all rights of set-off with respect to the Depository
Account (except its right to charge such account for amounts
due to it under this Agreement and the Servicing Agreement
Addendum). On each Payment Date, the Purchaser shall
withdraw from the Depository Account monies, to the extent
available therein, equal to, first, the Servicing Fee for
the related Payment Period and shall transfer such amount to
the Servicer and, second, the Distribution Amount for the
related Payment Period and shall transfer such amount to the
Purchaser. The remaining balance, if any, which constitutes
the Additional Purchase Price for the related Payment
Period, shall be transferred by the Purchaser to the Seller.
In making the aforesaid withdrawals and transfers, the
Purchaser shall rely on the computations of the aforesaid
amounts made by the Administrative Agent and disclosed in
the Administrative Reports.
(C) If after the Purchase Date for any Receivable
the Seller receives any payment on any of such Receivable,
the Seller shall hold such payment in trust for the
Purchaser, the Seller shall not commingle such payment with
its other funds or assets, and the Seller shall cause such
payment to be deposited to the Lock-box Account within one
(1) Business Day after the Seller's receipt thereof.
(D) The Seller retains the right to receive
ongoing electronic transmissions from the Servicer relating
to all servicing activities regarding the Receivables. The
Seller shall cause the Servicer to provide each of the
Purchaser and the Seller with a copy of a monthly Servicing
Report for the Receivables (the Servicing Report ), which
report will be substantially consistent with the sample
Servicing Report appearing as Exhibit D of this document.
The Seller shall also cause the Administrative Agent to
provide each of the Purchaser, the Seller and the Servicer
with a copy of a monthly Administrative Report for the
Receivables (the Administrative Report ), which report will
be substantially consistent with the sample Administrative
Report appearing as Exhibit G to this Agreement.
(E) If a Shortfall Amount greater than zero for
any Payment Period is shown on the Administrative Report
prepared in accordance with Section 2.04(D) hereto, the
Seller shall transfer funds equal to the amount of such
Shortfall Amount to the Servicer, or at the Servicer s
direction, to the Depository Account, no later than one
Business Day before the Payment Date relating to which such
Administrative Report was prepared.
(F) The computations contemplated by Section
2.01(C), 2.04(B), or 7.01 hereof shall be completed by the
Administrative Agent and disclosed in the Administrative
Reports.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01 Warranties of
the Purchaser. The Purchaser hereby represents and warrants
to the Seller as of the date hereof and as of each Purchase
Date the following (but such representations and warranties
shall survive Purchaser s purchase of the Receivables
hereunder):
(A) Organization. The Purchaser is duly
organized and validly existing as a national banking
association in good standing under the laws of the United
States, and has all necessary and proper governmental and
private authorizations to own and operate its property and
conduct the business in which it is now engaged. The
Purchaser is duly qualified to do business and has obtained
all necessary licenses and approvals in each jurisdiction in
which failure to so qualify or obtain such licenses and
approvals would have a material and adverse effect on the
ability of the Purchaser to perform its obligations
hereunder.
(B) Due Authorization. The execution, delivery
and performance by the Purchaser of this Agreement and the
other Purchase Documents executed by it have been duly
authorized by all necessary corporate action on its part,
and each of the Purchase Documents executed by it is the
legal valid, and binding obligations of Purchaser,
enforceable against Purchaser in accordance to its terms.
(C) Consents. Purchaser has obtained all
necessary governmental and private authorizations, and made
all governmental filings required under applicable law, for
the execution, delivery and performance by Purchaser of this
Agreement and the other Purchase Documents executed by it.
Purchaser has obtained or has caused to be waived all
consents which are required to be obtained in connection
with the Purchaser s execution, delivery or performance of
this Agreement and the other Purchase Documents executed by
it under any instruments to which Purchaser is a party or by
which it or any of its property is bound.
(D) No Violation. The consummation of the
transactions contemplated by this Agreement and the other
Purchase Documents and the fulfillment of the terms thereof
do not:
(i) conflict with, or result in the breach
of any of the terms or provisions of, nor constitute (with
or without notice or lapse of time) a default under, the
articles of association or by-laws of the Purchaser, or any
indenture, agreement or other instrument (other than this
Agreement) applicable to the Purchaser or its property; or
(ii) violate any law or, to the best of the
Purchaser s knowledge, any order, rule or regulation
applicable to the Purchaser or its properties, of any court
or of any federal or state regulatory body, administrative
agency, or other governmental instrumentality having
jurisdiction over the Purchaser or its properties.
(E) No Litigation. No litigation or
administrative proceeding of or before any arbitrator,
court, tribunal or governmental body is presently pending,
or to the knowledge of the Purchaser threatened, against the
Purchaser or its properties or with respect to this
Agreement or any of the other Purchase Documents, which, if
adversely determined, could reasonably be expected to have a
material adverse effect on the transactions contemplated by
this Agreement, or which asserts the invalidity of this
Agreement or any of the other Purchase Documents or seeks to
prevent the consummation of any of the transactions
contemplated by this Agreement or seeks any determination or
ruling that might materially and adversely affect the
performance by the Seller of its obligations under, or the
validity or enforceability of, this Agreement or any of the
other Purchase Documents.
3.02 Representations and Warranties of the Seller.
(A) General Representations and Warranties. The
Seller hereby represents and warrants to the Purchaser as of
the date hereof and as of each Purchase Date the following
(but such representations and warranties shall survive the
Purchaser s purchase of the Receivables hereunder):
(i) Organization. The Seller is duly
organized and validly existing as a corporation in good
standing under the laws of the State of Delaware, and has
all necessary and proper governmental and private
authorizations to own and operate its property and conduct
the business in which it is now engaged. The Seller is duly
qualified to do business and has obtained all necessary
licenses and approvals in each jurisdiction in which failure
to so qualify or obtain such licenses and approvals could
have a material adverse effect on the ability of the Seller
to perform its obligations hereunder.
(ii) Due Authorization. The execution,
delivery and performance by the Seller of this Agreement and
the other Purchase Documents executed by it have been duly
authorized by all necessary corporate action on its part,
and each of the Purchase Documents executed by it is the
legal, valid and binding obligation of the Seller,
enforceable against the Seller in accordance with its terms.
(iii) Consents. Seller has obtained all
necessary governmental and private authorizations, and made
all governmental filings required under applicable law, for
the execution, delivery and performance by Seller of this
Agreement and each of the other Purchase Documents executed
by it. Seller has obtained or caused to be waived all
consents which are required to be obtained in connection
with Seller s execution, delivery or performance of this
Agreement and the other Purchase Documents executed by it
under any instruments to which the Seller is a party or by
which it or any of its property is bound.
(iv) No Violation. The consummation of the
transactions contemplated by this Agreement and the other
Purchase Documents and the fulfillment of the terms thereof
do not:
(a) conflict with, result in the breach
of any of the terms or provisions of, nor constitute (with
or without notice or lapse of time) a default under, the
certificate of incorporation or bylaws of the Seller, or any
indenture, agreement or other instrument (other than this
Agreement) applicable to Seller or its properties; or
(b) violate any law or, to the best of
the Seller s knowledge, any order, rule or regulation
applicable to the Seller or its properties, of any court or
of any federal or state regulatory body, administrative
agency, or other governmental instrumentality having
jurisdiction over the Seller or its properties.
(v) No Proceedings. To the Seller's best
knowledge, there are no proceedings or investigations
pending or threatened before any court, regulatory body,
administrative agency or other governmental instrumentality
having jurisdiction over the Seller or its properties,
asserting the invalidity of this Agreement or any of the
other Purchase Documents or seeking to prevent the
consummation of any of the transactions contemplated by this
Agreement or seeking any determination or ruling that might
materially and adversely affect the performance by the
Seller of its obligations under, or the validity or
enforceability of, this Agreement or any of the other
Purchase Documents.
(vi) No Litigation. Except as disclosed in
the most recent 10K and 10Q reports for Aegis Consumer
Holdings, Inc. filed with the Securities and Exchange
Commission prior to the date of this Agreement, no
litigation or administrative proceeding of or before any
arbitrator, court, tribunal or governmental body is
presently pending, or to the knowledge of the Seller
threatened, against the Seller or its properties or with
respect to this Agreement or the other Purchase Documents,
which, if adversely determined, could reasonably be expected
to have a material adverse effect on the transactions
contemplated by this Agreement.
(vii) Use of Proceeds. None of the
proceeds of the Cash Purchase Price for any Receivables or
any Additional Purchase Price will be paid by or on behalf
of the Seller to III Finance, Ltd., a Cayman Islands
company.
(B) Receivable Representations and Warranties.
Seller makes the following representations and warranties
with respect to the Receivables transferred hereunder on
each Purchase Date on which the Purchaser will rely in
purchasing such Receivables (such representations and
warranties speak as of the execution and delivery of this
Agreement and as of such Purchase Date, but shall survive
the sale, transfer and assignment of such Receivables to the
Purchaser hereunder):
(i) Characteristics of Receivables. Each
Receivable purchased by the Purchaser hereunder on such
Purchase Date:
(a) has been originated in the United
States of America by a Dealer for the retail sale of a
Financed Vehicle in the ordinary course of such Dealer's
business which has been delivered to and accepted by the
Obligor on such Receivable, has been fully and properly
signed by the parties thereto, has been purchased by the
Seller from such Dealer under an existing Dealer Agreement
with the Seller and properly assigned to the Seller;
(b) has created or creates a valid,
subsisting, and enforceable first priority security interest
in favor of the Seller in the Financed Vehicle (except as
limited by any applicable bankruptcy, insolvency or other
similar laws affecting creditors rights generally), which
security interest shall be assigned by the Seller to the
Purchaser as of such Purchase Date and which vehicle is
titled or registered in one of the states of the United
States or the District of Columbia;
(c) contains customary and enforceable
provisions (except as limited by any applicable bankruptcy,
insolvency or other similar laws affecting creditors rights
generally) such that the rights and remedies of the holder
thereof shall be adequate for realization against the
collateral therefor of the benefits of the security; and
(d) is a simple interest installment
contract payable in U.S. Dollars that (i) has a term not to
exceed 61 months at origination, (ii) provides for level
monthly payments (provided that the payment in the first or
last month in the life of the Receivable may be minimally
different from the level payment) that fully amortize the
amount financed by maturity, (iii) yields interest at an
annual percentage rate of not less than 12%, and (iv) is not
30 days or more past due as of the Cut-Off Date.
(ii) Schedule of Receivables. The
information set forth in the Schedule of Receivables
attached to be Assignment executed and delivered by the
Seller on such Purchase Date is true, correct and complete
in all material respects as of the opening of business on
the Cut-Off Date.
(iii) Underwriting. Such Receivables
were originated in accordance with the Underwriting
Criteria, and no selection procedures believed to be adverse
to the Purchaser have been utilized in selecting such
Receivables. All information regarding such Receivables
made available to the Purchaser by or on behalf of the
Seller and its affiliates is true, correct and complete in
all material aspects.
(iv) Form of Receivables. Each of such
Receivables is substantially in the form described on
Exhibit E attached hereto.
(v) Compliance with Law. Each such
Receivable and the sale of the Financed Vehicle financed
thereunder complied at the time it was originated or made,
and at the execution of this Agreement and as of such
Purchase Date does comply, in all material respects with all
requirements of applicable federal, state and local laws,
rules and regulations, including, without limitation, usury
laws, the Fair Credit Reporting Act, the Federal
Truth-in-Lending Act, the Equal Credit Opportunity 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, and any other consumer
credit, equal credit opportunity, or disclosure laws, rules
and regulations.
(vi) Binding Obligation. Each such
Receivable represents the genuine, legal, valid and binding
payment obligation in writing of the Obligor, enforceable by
the holder thereof in accordance with its terms, except as
limited by bankruptcy, insolvency or other similar laws
affecting creditors rights generally.
(vii) No Government or Foreign Obligor.
No such Receivable is due from the United States of America
or any State or from any agency, department or
instrumentality of the United States of America or any
State. To the best of Seller s knowledge, no such
Receivable is due from an Obligor whose primary residence as
of such Purchase Date is located outside of the United
States of America.
(viii) Security Interest in Financed
Vehicle. Immediately prior to the sale, assignment and
transfer thereof hereunder, each such Receivable was secured
by a validly perfected first security interest in the
Financed Vehicle in favor of the Seller as secured party.
(ix) Receivables in Force. No such
Receivable has been satisfied, subordinated or rescinded,
nor has any Financed Vehicle relating to any such Receivable
been released from the security interest in favor of the
Seller granted by the related Receivable in whole or in
part.
(x) No Waiver. No material provision of any
such Receivable has been waived by the Dealer or the
Seller.
(xi) No Amendments. No such Receivable has
been amended such that the number of the Obligor's scheduled
Payments have been increased or the due date of any such
payments have been extended except to the extent permitted
under the Servicing Agreement.
(xii) No Defenses. No right of
rescission, set-off, counterclaim or defense has been
asserted or threatened by any Obligor or Dealer with respect
to any such Receivable and, to the Seller's knowledge, no
such rights will exist as of such Purchase Date.
(xiii) No Liens. To the best of Seller's
knowledge, no liens or claims have been filed for work,
labor or materials relating to a Financed Vehicle under any
such Receivable that would be liens prior to, or equal or
co-equal with, the security interest in the Financed Vehicle
granted by the Obligor in favor of the Seller pursuant to
the related Receivable.
(xiv) No Default. For such Receivable,
except for payment defaults continuing for a period of not
more than thirty (30) days as of such Receivable s Cut-Off
Date, no default, breach, violation or event permitting
acceleration under the terms of any such Receivable has
occurred to the best of Seller s knowledge; and no
continuing condition that with notice or lapse of time (or
both) would constitute a default, breach, violation or event
permitting acceleration under the terms of any Receivable
has arisen to the best of Seller s knowledge.
(xv) Insurance. The Seller, in accordance
with its customary procedures, has required that each
Obligor obtain, and has determined that each Obligor has
obtained, physical damage insurance covering the Financed
Vehicle (and in an amount not less than the outstanding
principal balance of the related Receivable) prior to the
Seller's purchase of such Receivable.
(xvi) Title. No such Receivable has
been sold, transferred, assigned or pledged by the Seller to
any Person other than the Purchaser; immediately prior to
the transfer and assignment herein contemplated, the Seller
has good and marketable title to each such Receivable free
and clear of all liens, encumbrances, security interest and
rights of others and, immediately upon the transfer thereof,
the Purchaser will have good and marketable title to each
such Receivable, free and clear of all liens, encumbrances,
security interests and rights of others (other Seller s
repurchase right hereunder); and the security interest in
the related Financed Vehicle and related underlying
collateral has been validly perfected and assigned to
Purchaser under the UCC and other applicable law.
(xvii) Lawful Assignment. No such
Receivable has been originated in, or is subject to the laws
of, any jurisdiction under which the sale, transfer and
assignment of such Receivable by the Seller to the Purchaser
hereunder would be unlawful, void or voidable.
(xviii) All Filings Made. All filings
(including, without limitation, UCC filings) necessary in
any jurisdiction to give the Purchaser a first perfected
ownership interest in such Receivables and to assign to
Purchaser a first priority security interest in the related
Financed Vehicles have been made.
(xix) One Original. There is only one
executed original counterpart of each such Receivable which
is and will remain in the possession of the Servicer as
custodian and bailee for the Purchaser.
(xx) Insured Receivables. Each such
Receivable which is represented by the Seller to be an
Insured Receivable is covered by the RDI Policy.
(xxi) Servicing Agreement. Each such
Receivable is covered by, and is being serviced by the
Servicer pursuant to, the Servicing Agreement as
supplemented by the Servicing Agreement Addendum dated as of
such Purchase Date.
(xxii) Bankruptcy Proceeding. No such
Receivable as of its Cut-Off Date was or should have been
noted in the Seller's records as a dischargeable debt under
a bankruptcy proceeding.
(xxiii) Chattel Paper. Each such
Receivable constitutes "chattel paper" as defined in the
UCC.
(xxiv) Down Payments. To the best of
Seller s knowledge, the down payment described in the
Receivables File for each such Receivable was paid to the
related Dealer in the manner stated therein and was not
financed as part of such Receivable.
(xxv) No Adverse Information. The Seller
has no knowledge of any fact which should have led it to
expect at the time of its acquisition of each such
Receivable that such Receivable will not be paid in full
when due because of fraud or misrepresentation on the part
of the Obligor or the Dealer related thereto and the Seller
has no knowledge of any fact which should have led Seller to
expect on such Purchase Date that such Receivable would not
be paid in full when due because of such fraud or
misrepresentation.
ARTICLE IV
CONDITIONS TO PURCHASES
4.01 Conditions to Obligations of the Purchaser.
The obligation of the Purchaser to purchase Receivables
hereunder on any Purchase Date is subject to the
satisfaction of the following conditions as of such Purchase
Date:
(A) Representations and Warranties True.
The representations and warranties of the Seller hereunder
shall be true and correct on such Purchase Date with the
same effect as if then made, and the Seller shall have
performed all obligations to be performed by it hereunder on
or prior to such Purchase Date.
(B) Files Marked and Assignment Delivered.
The Seller shall, at its own expense, on or prior to such
Purchase Date, indicate in its files that Receivables
transferred on such Purchase Date have been sold to the
Purchaser pursuant to this Agreement and the Seller shall
deliver to the Purchaser the Assignment covering such
Receivables duly executed on behalf of Seller and to which
shall be attached the Schedule of Receivables for such
Receivables certified by the President, the Vice President,
Secretary or the Treasurer of the Seller to be true, correct
and complete (such Assignment and Schedule of Receivables
may be sent by telecopy to the Purchaser so long as executed
original counterparts thereof are promptly sent by the
Seller to the Purchaser).
(C) Other Transactions. On or prior to the
initial Purchase Date, the Purchaser, the Seller, the Seller
s affiliate Aegis Consumer Finance, Inc. and the Servicer
shall have entered into the Servicing Agreement Addendum.
(D) Documents to be Delivered by Seller on the
Initial Purchase Date. On or before the initial Purchase
Date, the Seller shall provide the Purchaser with the
following:
(i) Evidence of UCC Filing. Prior to
the initial Purchase Date, the Seller shall record and file,
at its own expense, a UCC-1 financing statement in each
jurisdiction in which required by applicable law, executed
by the Seller, as seller or debtor, and naming the
Purchaser, as purchaser or secured party, identifying the
Receivables and the other Purchased Property as collateral,
meeting the requirements of the laws of each such
jurisdiction and in such manner as is necessary to perfect
the sale, transfer, assignment and conveyance of such
property to the Purchaser hereunder. The Seller shall
deliver a file-stamped copy, or other evidence satisfactory
to the Purchaser of such filing, to the Purchaser on or
prior to the initial Purchase Date.
(ii) Evidence of RDI and VSI Policies.
On or prior to the initial Purchase Date, the Seller shall
deliver to the Purchaser written evidence that (x) the
Insured Receivables and the related Financed Vehicles will
be covered by the RDI Policy and that all Receivables and
all Financed Vehicles will be covered by the VSI Policy and
(y) such polices are in full force and effect as of such
date(and promptly after each Purchase Date, Seller shall
cause endorsements to be issued with respect to such
policies naming the Purchaser as the loss payee under such
policies with respect to the Receivables purchased hereunder
on such date and the related Financed Vehicles).
(iii) Record Examination Reports.
Prior to the initial Purchase Date, the Purchaser shall have
received satisfactory reports of examinations of the Uniform
Commercial Code financing statement records and other public
records of such jurisdictions as are deemed appropriate by
the Purchaser and conducted under the Seller's current and
past names (including any fictitious names), which reports
must demonstrate that there are no financing statements or
other liens of record against the Seller which cover any or
all of the Receivables or the other Purchased Property.
(iv) Closing Documents. The Seller
shall have executed and delivered such closing certificates
and shall have provided such opinions of counsel as the
Purchaser may reasonably request.
(v)Other Documents. The Seller shall have provided
such other documents as the Purchaser may reasonably
request.
4.02 Conditions to Obligation of the Seller. The
obligation of the Seller to sell any Receivables to the
Purchaser hereunder on any Purchase Date is subject to the
satisfaction of the following conditions:
(A) Representations and Warranties True.
The representations and warranties of the Purchaser
hereunder shall be true and correct on such Purchase Date
with the same effect as if then made, and the Purchaser
shall have performed all obligations to be performed by it
hereunder on or prior to such Purchase Date.
(B) Payment of Cash Purchase Price. At such
Purchase Date, the Purchaser will pay to the Seller the Cash
Purchase Price for the Receivables transferred hereunder on
such date, as provided in Section 2.01(B).
ARTICLE V
COVENANTS OF THE SELLER
The Seller agrees with the Purchaser as follows:
5.01 Protection of Purchaser s Right, Title and
Interest.
(A) Filings. The Seller shall cause all
financing statements and continuation statements and any
other necessary documents covering the right, title and
interest of the Purchaser in and to the Receivables, and the
other Purchased Property to be promptly filed, and at all
times to be kept recorded, registered and filed, all in such
manner and in such places as may be required by law fully to
preserve and protect the right, title and interest of the
Purchaser hereunder to the Receivables and the other
Purchased Property. The Seller shall deliver to the
Purchaser file-stamped copies of, or filing receipts for,
any document recorded, registered or filed as provided
above, as soon as available following such recordation,
registration or filing. The Purchaser shall cooperate fully
with the Seller in connection with the obligations set forth
above and will execute any and all documents reasonably
required to fulfill the intent of this Section 5.01(A).
(B) Servicing Agreement. Without the
Purchaser s express prior written consent, the Seller shall
not permit the Servicing Agreement to be amended, modified,
restated, canceled or terminated, the Seller shall not waive
(or permit to be waived) any of its rights under any
provision of the Servicing Agreement, the Seller shall not
consent to any deviation from the terms thereof or otherwise
grant any consents provided for therein, and the Seller
shall not default in any of its obligations thereunder.
5.02 Other Liens or Interests. Except for the
conveyances hereunder and pursuant to the Servicing
Agreement and except for liens for taxes not yet due and
payable, the Seller will not sell, pledge, assign or
transfer to any other person, or grant, create, incur,
assume or suffer to exist any lien on any interest therein,
and the Seller shall defend the right, title, and interest
of the Purchaser in, to and under the Receivables and the
other Purchased Property against all claims of third parties
claiming through or under the Seller; provided, however,
that the Seller's obligations under this Section 5.02 shall
be terminated upon satisfaction of all Receivables sold to
the Purchaser hereunder or upon Seller s repurchase of all
of the Receivables pursuant to Article VII.
5.03 Costs and Expenses. The Seller agrees to pay
all reasonable costs and disbursements in connection with
the perfection, as against all third parties, of the
Purchaser's right, title and interest in and to the
Receivables and the other Purchased Property.
5.05 Control of Receivable Files. The Receivable
Files are to be kept in the control of the Servicer in
accordance with Servicing Agreement and shall not be removed
from the Servicer s control without Purchaser's prior
written consent.
ARTICLE VI
SELLER INDEMNIFICATION
6.01 Seller Indemnification. The Seller shall
indemnify the Purchaser for any loss, expense or liability
incurred or suffered by the Purchaser as a result of the
failure of a Receivable to be originated in compliance with
all requirements of any applicable law, rule or regulation
or for any breach of any of the Seller s representations,
warranties or covenants contained herein. These indemnity
obligations shall be in addition to any obligation that the
Seller may otherwise have to Purchaser hereunder or
otherwise and shall survive the sale, transfer and
assignment of the Receivables to Purchaser hereunder and
also shall survive any termination of this Agreement.
ARTICLE VII
SELLER S REPURCHASE RIGHTS AND OBLIGATIONS
7.01 Voluntary Repurchase. The Seller may, at its
option and on not less than five (5) day s prior written
notice to the Purchaser, repurchase all (or less if mutually
agreeable to both parties) of the Receivables and the
Purchased Property from the Purchaser at a price equal to
the Repurchase Amount as of such date, which shall be
payable in full by wire transfer of such amount to Purchaser
in immediately available funds on the date of such
repurchase.
7.02 Mandatory Repurchase. (A) The Seller hereby
covenants and agrees with the Purchaser for the benefit of
the Purchaser that, upon the occurrence of a breach of any
of the Seller s representations and warranties contained in
Section 3.02(B) hereof with respect to any Receivable, or
upon the failure of the Purchaser to receive a Servicer
Confirmation covering a Receivable by the deadline
prescribed in Section 2.04(A) hereof, the Purchaser shall
have the right, at its option and on not less than five (5)
days prior written notice to the Seller, to require that
the Seller repurchase such Receivable at a repurchase price
equal to the Repurchase Amount as of such date, which shall
be payable in full by wire transfer of such amount to
Purchaser in immediately available funds on the date of such
repurchase. Such repurchase obligation of the Seller shall
constitute the sole remedy of the Purchaser against the
Seller with respect to any such breach of representation,
warranty or covenant.
(B) In addition, the Seller hereby further
covenants and agrees with the Purchaser for the benefit of
the Purchaser that on the two hundred and tenth (210th) day
after the initial Purchase Date the Seller shall repurchase
all of the Receivables from the Purchaser at a repurchase
price equal to the Repurchase Amount as of such date, which
shall be payable in full by wire transfer of such amount to
Purchaser in immediately available funds on the date of such
repurchase.
7.03 Purchaser s Assignment of Repurchased
Receivables. With respect to all Receivables repurchased by
the Seller pursuant to this Article VII, the Purchaser shall
at the time of such repurchase assign, without recourse,
representation or warranty, to the Seller all of the
Purchaser s rights, titles and interest in, to and under
such Receivables and all of the Purchased Property relating
thereto and Purchaser shall execute and deliver to Seller
any and all termination statements and other evidences of
the reassignment of the Receivables as Seller may reasonably
request.
7.04 Seller s Obligations Absolute. The Seller s
repurchase obligations under Section 7.02 above shall be
absolute, unconditional and irrevocable and shall not be
released, discharged, modified or in any other way affected
or impaired, nor shall the Seller have any rights, defenses,
counterclaims or recourse against the Purchaser, by reason
of (i) any invalidity, illegality, unenforcability,
uncollectability, or other irregularlity regarding any
Receivable or any of the other Purchased Property or (ii)
any action or inaction on the part of the Purchaser, the
Seller or the Servicer in connection with the origination,
administration or enforcement of any of the Receivables or
the other Purchased Property.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.01. Amendment. This Agreement may only be
amended by mutual agreement from time to time by a written
amendment duly executed and delivered by the Seller and the
Purchaser.
8.02. Waivers. No failure or delay on the
part of the Purchaser in exercising any power, right or
remedy under this Agreement or the Assignment shall operate
as a waiver thereof, nor shall any single or partial
exercise of any such power, right or remedy preclude any
other or further exercise thereof or the exercise of any
other power, right or remedy.
8.03. Notices. All notices and other
communications provided for hereunder shall be in writing
(including telecopy transmission) and mailed by registered
mail, return receipt requested, telecopied or hand delivered
to each party at its address or telecopy number indicated
beneath its signature below or to such other address or
telecopy number as shall be designated by such party by
written notice to the other party. All such notices and
communications shall be effective and deemed delivered only
when received by the party to which it is sent; provided,
however, that a telecopy transmission shall be deemed to
have been received when transmitted so long as the
transmitting machine has provided an electronic confirmation
of such transmission.
8.04 Costs and Expenses. Except as expressly
provided in the immediately succeeding sentence of this
section, each party hereto agrees to pay its own costs and
expenses (including attorney s fees and expenses) in
connection with the negotiation, structuring, documenting,
closing and performance of this Agreement and the other
Purchase Documents. The Seller agrees to pay (a) the costs
and expenses of the Purchaser covered by Section 5.03
hereof, (b) any indemnity claims for costs or expenses made
by Purchaser pursuant to Section 6.01 hereof, and (c) all
costs and expenses of the Purchaser (including reasonable
attorney s fees and expenses) incurred in connection with
the Purchaser s enforcement of this Agreement and the other
Purchased Documents against the Seller.
8.04. Survival. The respective agreements,
representations, warranties and other statements by the
Seller and the Purchaser set forth in or made pursuant to
this Agreement and the Assignment shall remain in full force
and effect and will survive each Purchase Date under Section
2.02 hereof.
8.05. Confidential Information. The Purchaser
agrees that it will neither use nor disclose to any person
the names and addresses of the Obligors, except in
connection with the enforcement of the Purchaser s rights
hereunder, under the Receivable, under the Servicing
Agreement or as required by law.
8.06. Headings and Cross-References. The
various headings in this Agreement are included for
convenience only and shall not affect the meaning or
interpretation of any provision of this Agreement.
8.07. Governing Law. This Agreement and the
Assignment shall be governed by and construed in accordance
with the internal laws of the State of New Jersey.
8.08. Counterparts. This Agreement may be
executed in two or more counterparts and by different
parties on separate counterparts, each of which shall be
original, but all of which together shall constitute one and
the same instrument.
8.09. Intended Characterizations; Cautionary
Security Interest.
(A) It is the intention of the Seller and
the Purchaser that the transfer of the Receivables and the
other Purchased Property to be made pursuant to the terms
hereof shall constitute a purchase and sale by the Purchaser
and the Seller, respectively, and not a loan transaction.
In the event, however, that a court of competent
jurisdiction were to hold that such transfer constitutes a
loan and not a purchase and sale transaction, it is the
additional intention of the Seller and the Purchaser that
the Seller shall be deemed to have granted to the Purchaser
as of the Closing Date a first priority perfected security
interest in the Receivables and the other Purchased Property
and all proceeds thereof. Further, in the event of the
characterization of any such transfer as a loan, the amount
of interest paid or payable with respect to such loan under
the terms of this Agreement shall be limited to maximum
permitted under applicable law.
(B) Notwithstanding any provision of this
Agreement to the contrary, it is the additional intention of
the parties hereto that they are not co-venturers, partners
or members of a joint venture, partnership or any other
similar entity or organization with respect to the
transactions contemplated by this Agreement.
8.10. Binding Effect. This Agreement shall be
binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns.
8.11. Severability. In the event any
particular provision of this Agreement shall be held by a
court of competent jurisdiction to be prohibited or
unenforceable under applicable law, such prohibition or
unenforceability shall not affect any other provision of
this Agreement.
8.12. Entire Agreement. This Agreement, the
Assignment, the Servicing Agreement and the Servicing
Agreement Addendum constitutes the sole and entire agreement
between the Purchaser and the Seller with respect to the
subject matter hereof and supersede and replace all prior
discussions, negotiations, commitments, understandings or
agreements between them with respect to such subject matter.
IN WITNESS WHEREOF, the parties hereby have caused
this Agreement to be executed by their respective officers
thereunto duly authorized, all as of the date and year first
above written.
SELLER:
AEGIS AUTO FINANCE, INC.
By:
Name:
Title:
Address: 525 Washington Boulevard
Jersey City, New Jersey 07310
Attn: Joseph Battiato
Telecopy No. (201) 418-7370
PURCHASER:
ENTERPRISE NATIONAL BANK OF
PALM BEACH
By:
Name:
Title:
Address: 11811 U.S. Highway One
North Palm Beach, Florida 33408
Attn: Sylvia Ball
Telecopy No. (407) 624-4400
EXHIBIT A
ASSIGNMENT
FOR VALUE RECEIVED, in accordance with the
Purchase Agreement dated as of December 9, 1996 (the
Purchase Agreement ), by and between the Seller and
Enterprise National Bank of Palm Beach (the Purchaser ),
the undersigned does hereby sell, assign, transfer and
otherwise convey to the Purchaser, without recourse (except
to the extent expressly provided in the Purchase Agreement),
all right, title and interest of the undersigned in, to and
under (i) the Receivables identified on the Schedule of
Receivables attached to this Assignment as Schedule 1 and
all moneys due thereon on and after the Cut-Off Date for
such Receivables, except for any monies due the Seller
relating to interest accrued between each such Receivable s
last paid to date and the Cut-Off-Date for such Receivable;
(ii) the security interests of the Seller in the Financed
Vehicles granted by the Obligors pursuant to such
Receivables; (iii) the interests of the Seller in any
proceeds from claims on any physical damage, credit life,
credit loss, credit disability, single interest or risk
default insurance policies relating to such Financed
Vehicles, such Obligors or such Receivables; (iv) the
Receivable Files relating to such Receivables, (v) the
interests of the Seller with respect to such Receivables
under the Servicing Agreement, and (vi) all proceeds of any
and all of the foregoing. The foregoing sale does not
constitute and is not intended to result in any assumption
by the Purchaser of any obligation of the undersigned to the
Obligors, Dealers, insurers, or any other Person in
connection with such Receivables, such Receivable Files, the
Servicer Files relating to such Receivables (as defined in
the Servicing Agreement), any insurance policies or any
other agreement or instrument relating to any of them. In
order to effectuate the transactions contemplated by this
Assignment, the Seller hereby appoints the Purchaser (which
appointment is coupled with an interest and shall be
irrevocable) to be the Seller s attorney-in-fact with full
power and authority to execute or deliver any and all
documents (including, without limitation, certificate of
title applications) in the Seller s or the Purchaser s name
as may be necessary in order to perfect, protect or enforce
any of the Purchaser s right, titles or interests in, to and
under any of such Receivables, such Financed Vehicles, any
of the other Purchase Document relating to such Receivables,
or any proceeds of any of the foregoing.
This Assignment is made pursuant to and upon the
representations, warranties and agreements on the part of
the undersigned contained in the Purchase Agreement and is
to be governed by the Purchase Agreement.
Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to them in the
Purchase Agreement.
IN WITNESS WHEREOF, the undersigned has caused
this Assignment to be duly executed as of ________________,
19__.
SELLER:
AEGIS AUTO FINANCE, INC.
By:
Name:
Title:
SCHEDULE 1
SCHEDULE OF RECEIVABLES EXHIBIT B
COPY OF SERVICING AGREEMENT
See attached copy of Master Servicing Agreement,
dated as of April 6, 1996, among the Servicer and Aegis
Consumer Finance, Inc.
EXHIBIT C-1
FORM OF SERVICING AGREEMENT ADDENDUMEXHIBIT C-2
FORM OF SERVICER CONFIRMATIONEXHIBIT D
FORM OF SERVICING REPORTS
See attachedEXHIBIT E
FORM OF RECEIVABLES
Each of the Receivables will be in substantially
the form disclosed by Seller to Purchaser in Seller s
November 20, 1996 response to Purchaser s due diligence
requests.EXHIBIT F
UNDERWRITING CRITERIA
See attached
EXHIBIT G
FORM OF ADMINISTRATIVE REPORT
See attached.
ADDENDUM TO MASTER SERVICING AGREEMENT
THIS ADDENDUM is entered into as of this 9th day
of December, 1996, by and among AMERICAN LENDERS FACILITIES,
INC., a California corporation ( Servicer ), AEGIS CONSUMER
FINANCE, INC., a Delaware corporation (the Company ), AEGIS
AUTO FINANCE, INC., a Delaware corporation ( Seller ), and
ENTERPRISE NATIONAL BANK OF PALM BEACH, a national banking
association ( Purchaser ).
Statement of Facts
Pursuant to that certain Master Servicing
Agreement, dated as of April 6, 1996, between the Servicer
and the Company (the Servicing Agreement ), the Servicer
provides certain receivables portfolio management services
to the Company and its affiliates (all capitalized terms
used herein and not otherwise expressly defined shall have
the respective meanings given such terms in the Servicing
Agreement).
Pursuant to that certain Purchase Agreement, dated
as of December 9, 1996, entered or to be entered into
between the Seller and the Purchaser (the Purchase
Agreement ), and the related Assignments, executed by the
Seller in favor of the Purchaser (collectively, the
Assignments ), the Seller intends to sell to the Purchaser,
and the Purchaser intends to purchase from the Seller, the
Receivables to be described on Schedule 1 attached to the
Assignments (collectively, the Purchased Receivables ).
The Seller and the Purchaser desire that the
Purchased Receivables be serviced by the Servicer pursuant
to the terms and conditions of the Servicing Agreement as
supplemented by this Addendum and the parties are entering
into this Addendum for such purpose.
NOW, THEREFORE, for and in consideration of the
premises and the mutual covenants herein set forth, as well
as other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties do
hereby agree as follows:
Statement of Terms
1. The Servicer and the Company hereby
acknowledge and agree that the Servicing Agreement is in
full force and effect on and as of the date hereof and the
Servicing Agreement has not been amended as of this date.
The Servicer and the Company further acknowledge and agree
that the Seller is an affiliate of the Company and is
entitled to all rights and benefits of the Company under the
Servicing Agreement with respect to the Receivables of the
Seller and the Purchased Receivables, when acquired by the
Seller, will be serviced by the Servicer under the Servicing
Agreement.
2. The Purchaser hereby appoints the Servicer to
be the Purchaser s custodian and bailee to hold the
Purchased Receivables and the related Receivable Documents
(as defined below) as custodian and bailee for and on behalf
of the Purchaser pursuant to the terms hereof and the
general terms and conditions of the Servicing Agreement, and
the Servicer hereby accepts such appointment and agrees to
act as such custodian and bailee.
3. The Servicer hereby agrees with the Purchaser
that, from the date that the Servicer acquires control of
all of the documents relating to the Purchased Receivables
which are listed in items 1 through 4 of Part III.A. of
Schedule A of the Servicing Agreement (collectively, the
Receivable Documents ) and thereafter so long as this
Addendum is in effect, the Servicer will not release any of
the Receivable Documents to the Company or the Seller
without the express prior written consent of the Purchaser.
4. The Servicer agrees to make available for
inspection and examination by the Purchaser (and the
Purchaser s designees and bank examiners) all of the
Servicer s books and records with respect to the Purchased
Receivables and the Servicer shall provide the Purchaser and
its designees and examiners with access to the Servicer s
facilities for such purpose (but only upon reasonable
request and during normal business hours).
5. On or prior to the fifteenth (15th) day of
each month (or the next succeeding business day if such day
is not a business day), the Servicer will provide the
Purchaser with a Servicing Report (which shall be
substantially in the form of Exhibit D to the Purchase
Agreement) for the Purchased Receivables.
6. The Servicer and the Company shall give the
Purchaser prompt written notice of any termination of the
Servicing Agreement.
7. The Purchaser shall establish in its name a
Depository Account for the Receivables, which account shall
be maintained with the Purchaser for the benefit of itself,
the Seller and the Servicer as described in this Section.
All monies constituting Principal Collections and Interest
Collections (as defined in the Purchase Agreement shall be
deposited by the Servicer into the Depository Account. All
monies transferred by the Seller constituting the Shortfall
Amount as provided in Section 2.04(E) of the Purchase
Agreement shall also be deposited into the Depository
Account. No other funds shall be allowed to be deposited
into the Depository Account. The Purchaser waives all
rights of set-off with respect to the Depository Account
(except its right to charge such account for amounts due to
it under this Addendum and the Purchase Agreement). On each
Payment Date (as defined in the Purchase Agreement), the
Purchaser shall withdraw from the Depository Account monies,
to the extent available therein, equal to, first, the
Servicing Fee (as defined in the Purchase Agreement) for the
related Payment Period (as defined in the Purchase
Agreement) and shall transfer such amount to Servicer
(according to such payment instructions as the Servicer
shall give the Purchaser in writing from time to time) and,
second, the Distribution Amount for the related Payment
Period and shall transfer such amount to the Purchaser. The
remaining balance, if any, which constituted the Additional
Purchase Price for the related Payment Period, shall be
transferred by the Purchaser to the Seller. In making such
withdrawals and transfers, the Purchaser shall rely on the
computations of the aforesaid amounts made by the
Administrative Agent.
8. So long as this Addendum is in effect, any
and all payments due to the Purchaser with respect to the
Purchased Receivables under the Servicing Agreement shall be
paid to the Purchaser by way of (i) in the case of any
transfer of funds from the Depository Account, an intrabank
transfer to such other bank account with Purchaser as
Purchaser designates from time to time by written notice to
the Servicer, and (ii) in all other cases, a wire transfer
of such payments in accordance with the following transfer
instructions (or pursuant to such other payment instructions
as the Purchaser may hereafter give to the Servicer and the
Seller in writing):
Bank Name: Enterprise National Bank of Palm
Beach
ABA Routing No.: 067013852
Credit Account No.: 0198882
` Reference: Aegis
Attn: Sylvia Ball
Telephone No.: (561) 776-6523
9. So long as this Addendum is in effect, any
and all payments due to the Seller with respect to the
Purchased Receivables under the Servicing Agreement shall be
paid to the Seller by way of a wire transfer of such
payments in accordance with the following transfer
instructions (or pursuant to such other payment instructions
as the Seller may hereafter give to the Servicer and
Purchaser in writing):
Bank Name: Chase Manhattan Bank
ABA Routing No.: 021000021
Credit Account No.: 668-500080465
` Reference: Enterprise
Attn: Controller s Office
Telephone No.: (201) 418-7366
10. This Addendum shall remain in full force and
effect and shall be irrevocable until the Servicer receives
written confirmation from the Purchaser that the Seller has
repurchased the Purchased Receivables from the Purchaser
pursuant to the Purchase Agreement.
11. All demands, notices and communications to
the Purchaser under this Addendum or the Servicing Agreement
shall be addressed to it at the following address:
Enterprise National Bank of Palm Beach
11811 U.S. Highway One
North Palm Beach, Florida 33408
Attn: Sylvia Ball
IN WITNESS WHEREOF, each of the Servicer, the
Company, the Seller, and the Purchaser have caused its
respective duly authorized officer or representative to
execute and deliver this Addendum on its behalf, all as of
the day and year first above set forth.
AMERICAN LENDERS FACILITIES, INC.
By:___________________________________________
Name:_________________________________________
Title:__________________________________________
AEGIS CONSUMER FINANCE , INC.
By:___________________________________________
Name:_________________________________________
Title:__________________________________________
AEGIS AUTO
FINANCE, INC.
By:___________________________________________
Name:_________________________________________
Title:__________________________________________
ENTERPRISE NATIONAL BANK OF PALM
BEACH
By:___________________________________________
Name:_________________________________________
Title:__________________________________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF THE AEGIS CONSUMER FUNDING GORUP,
INC. AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS WHICH STARTS ON PAGE 3 OF THIS REPORT.
</LEGEND>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 6-MOS 6-MOS
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1996 JUN-30-1997 JUN-30-1996
<PERIOD-END> DEC-31-1996 JUN-30-1996 DEC-31-1996 DEC-31-1995
<CASH> $7,183,190 $3,090,624 0 0
<SECURITIES> 0 0 0 0
<RECEIVABLES> $212,471,193 $41,058,222 0 0
<ALLOWANCES> 0 0 0 0
<INVENTORY> 0 0 0 0
<CURRENT-ASSETS> 0 0 0 0
<PP&E> 0 0 0 0
<DEPRECIATION> 0 0 0 0
<TOTAL-ASSETS> $283,962,581 $121,451,754 0 0
<CURRENT-LIABILITIES> 268,808,793 87,460,289 0 0
<BONDS> 0 0 0 0
0 0 0 0
28 53 0 0
<COMMON> 161,552 154,560 0 0
<OTHER-SE> (340,000) 0 0 0
<TOTAL-LIABILITY-AND-EQUITY> $283,962,581 $121,451,754 0 0
<SALES> 0 0 0 0
<TOTAL-REVENUES> 0 0 $(8,843,637) $18,563,571
<CGS> 0 0 0 0
<TOTAL-COSTS> 0 0 0 0
<OTHER-EXPENSES> 0 0 9,539,728 5,982,294
<LOSS-PROVISION> 0 0 6,579,525 1,123,050
<INTEREST-EXPENSE> 0 0 7,227,800 4,583,387
<INCOME-PRETAX> 0 0 (32,190,690) 6,874,840
<INCOME-TAX> 0 0 (8,427,030) 3,024,900
<INCOME-CONTINUING> 0 0 $(23,763,660) $3,849,940
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 0 0 $(23,763,660) $3,849,940
<EPS-PRIMARY> 0 0 $(1.50)<F1>
$0.28<F1>
<EPS-DILUTED> 0 0 $(1.50) $0.26
<FN>
<F1>
<F1>The net loss available to common stockholders' for the six months ended
December 31, 1996 of $(23,763,660) includes an adjustment of $133,523 for
dividends for the Series C preferred stock.
</FN>
</TABLE>
