U.S. SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C., 20549
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1997
Commission file number 0-25714
THE AEGIS CONSUMER FUNDING GROUP, INC.
Delaware 22-3008867
(State of Incorporation) (I.R.S. Employer Identification No.)
525 Washington Blvd.
Jersey City, NJ 07310
(Address of principal executive offices)
Telephone number: (201)418-7300
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Title of class Name of exchange on which registered
Common Stock, The Nasdaq National Market
$.01 par value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes___ No_X_.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or
any amendment to this Form 10-K. [X]
The aggregate market value of the Registrant's Common Stock held by
non-affiliates on November 14, 1997 (based upon the average of the high and
low sales prices of such stock as of such date) was approximately $2,616,000.
As of November 14, 1997, 17,677,217 shares of the Registrant's Common Stock
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
<PAGE>
Information contained or incorporated by reference in this report contains
"forward-looking statements" which can be identified by the use of
forward-looking terminology such as "believes," "expects," "may," "will,"
"should" or "anticipates" or the negative thereof or other variations thereon
or comparable terminology, or by discussions of strategy. See, e.g.,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." No assurance can be given that the future results covered by
the forward-looking statements will be achieved.
PART I
Item 1: Business
General
The Aegis Consumer Funding Group, Inc. is a specialty consumer finance
company engaged in acquiring, securitizing and servicing automobile
retail installment contracts ("finance contracts") originated by factory
authorized new car dealers ("Dealers") in connection with the sale of late-
model used and to a lesser extent, new cars to consumers with sub-prime
credit. The Company acquires finance contracts primarily on used cars
that, on average, are 1.7 years old with an original finance contract amount
of $12,400 and a term of 55 months as of June 30, 1997. In January 1997, the
Company began focusing its efforts to target a higher quality segment of the
sub-prime market as a means of improving delinquency and default experience by
tightening its underwriting guidelines. The Company, through the implemenation
of its strategic business plan (discussed below) will be making additional
changes to its automobile finance contract acquisition program, including,
but not limited to, the introduction of new marketing programs and the
implementation of credit scoring. The Company has acquired $1.25 billion of
automobile finance contracts through June 30, 1997, $1.03 billion of which
have been securitized in twenty-one offerings of asset-backed securities.
The Company was organized in 1989 to participate in the growing market for
securitization of various consumer and other receivables. Following a
quasi-reorganization in March 1992, the Company focused its business on the
acquisition and securitization of high-yield consumer-based receivables.
Upon acquiring The Clearing House Corporation (renamed "Aegis Auto Finance,
Inc.") in June 1993, the Company began funding sub-prime automobile finance
contracts. Since its inception, the Company has completed over thirty private
placement securitizations of consumer and other receivables, including sub-
prime automobile finance contracts as well as medical equipment leases, loans
originated under the federal Department of Housing and Urban Development's
home improvement loans program ("HUD Title I Loans") and mutual fund fee
receivables. In July 1996, the Company began designing its loan servicing
platform through its wholly owned subsidiary, Systems & Services, Technologies,
Inc. ("SST") and began servicing its loan acquisitions in January 1997.
During the fiscal year ended june 30, 1997, the Company had a net loss of
approximately $44.5 million and its financial condition is currently critical.
The Company has adopted a new business plan described below which if successful,
might enable the Company to continue ts operations. The Company believes
that its business plan can be achieved with the credit facilities available
to it. However, there can be no assurance the Company will be successful
in implementing its business plan. If it is unable to do so, the Company will
require additional financing and there can be no assurance that sufficient
financing will be available to the Company on satisfactory terms, or at all.
If the Company is unable to obtain any needed financing, it will not be able to
continue in operation. See "Management's Discussion and Analysis of Financial
Condition and Results of Operation".
<PAGE> 2
Beginning in 1994, the Company focused its business exclusively on the
automobile finance business and achieved significant growth until its
third quarter of the fiscal year ended June 30, 1997. During the quarter
ended March 31, 1997, the Company's finance contracts acquisitions volume
decreased substantially to $110.6 million from a quarterly high of $190.8
million in September 1996, and this trend continued into the quarter ended
September 30, 1997. during this time, the Company experienced a significant
increase in delinquencies and losses from the disposition of the
collateral securing defaulted loans. The decrease in loan acquisitions
reflects the Company's change in underwriting guidelines to its primary
program to attempt to decrease delinquency and loss performance. The Company
anticipates its acquisition levels to be approximately $10.5 million to $15.0
million per month while it continues to focus on decreasing its loss ratios,
operating costs and modifying existing and developing new loan products to
attract better quality credits and improved portfolio performance. Following
the pursuit of new programs, management believes the volume of loan acquisition
should gradually increase to a monthly average of between $20 million to $30
million by the quarter ending June 30, 1998.
During its growth phase, the Company expanded to three regional processing
centers, a collections facility, a systems development group and a sales
force in excess of 50 people, not including its three independent broker
relationships, doing business in 32 states. During this time period, the
Company's dealer network exceeded 4,000 automobile dealerships, with
approximately 2,200 active Dealers and 1,100 funding dealers. As of
September 30, 1997, the Company had 4,000 approved Dealers, 2,000 active
Dealers and 825 funding Dealers. (Approved Dealers are dealers that the
Company will accept Finance contract applications from, Active Dealers are
approved Dealers that have sent applications to the Company within the past
90 days and Funding Dealers are approved Dealers from which the Company has
acquired finance contracts). As of September 30, 1997, the Company has
one processing center located in Marietta, Georgia, and as of October 20,
1997, 16 sales people and two independent broker relationships.
During the fiscal year ended June 30, 1997, the percentage of the Company's
delinquent receivables dramtically increased to 20.5% at June 30, 1997,
including finance contracts in repossesion or bankruptcy. This increase
coupled with decreased recovery rates or liquidated collateral resulted in the
Company recording a $49.0 million write down on its retained interests in
securitized receivables which caused its $44.5 million net loss for
the fiscal year ended June 30, 1997. As a result of the delays in the filing
of this annual 10-K with the Securities and Exchange Commission, the Company,
in evaluating its retained interests in securitized receivables for the quarter
ended September 30, 1997, discovered that the estimates used at June 30, 1997
in its evaluation process, were understated and resulted in an additional $3.0
million write down in the quarter ended June 30, 1997, from its initial write
down of $10.6 million, increasing the write down for the quarter to $13.6
million. At June 30, 1997, the Company had a deficit net worth of $10.6
million.
Strategic Business Plan
The Company's new executive management team (see Executive Management below)
has developed and is implementing its strategis business plan (the "Plan") to:
rebuild the Company's equity; reduce debt burden as well as the related expense;
enhance operating capital; restructure operations and administrative functions
to achieve efficiencies and reduce operating expenses; introduce new products
and services and restructure existing products to achieve proditability and
credit performance in a highly competitive market; and enhance credit
management processes. The Company's Plan is in its initial phases and if the
Company is not successful in implementing such Plan, the Company may no longer
be able to continue operations. (See "Management's Discussion and Analysis
of Financial Condition and Results of Operations").
<PAGE> 3
Executive Management. As of October 17, 1997, the Company has either
accepted the resignations or terminated certain executive officers. These
officers included Gary Peiffer, Joseph Battiato, Angelo Appierto and Jorge
Rios, the Company's general counsel, President, Chief Executive Officer and
National Sales Manager, respectively. Since the departure of these
executives, the Company has assembled a new management team comprised of
Matthew Burns as the Chief Executive Officer, William Henle and Dina
Penepent remain respectively as the Company's Chief Operating Officer
and Chief Financial Officer. The role of National Sales Manager has
been filled by one of the Company's district managers and the role of
general counsel has been filled by interanal corporate cousel with support
from various to a New York based law firms.
Net Worth. In accordance with the Plan, On October 16, 1997 III Finance Ltd.
("III Finance") and the High Risk Opportunities Fund Ltd. ("HUB") converted
$21.3 million of the Company's 12% Convertible Subordianted Debenture (the
"Debenture") into $21.1 million of 12.75% Cumulative Preferred Stock (the
"Preferred Stock"). The Preferred Stock is convertible into common stock at
$1.26 per share. Additionally, on November 10, 1997, the remaining debt
holder converted its $4.0 million of subordinated debt into $4.0 million of
preferred stock with substantially the same terms as the conversion of the
Debenture, except that $2.0 million of the preferred stock is convertible
into common stock at $2.00 per share. Had these conversions of debt to
equity occured prior to the Company's fiscal year ended June 30, 1997,
the Company's positive net worth would have been approximately $13.4 million.
The Company expects to report a loss for the quarter ended September 30, 1997,
of approximately $3.6 million. The conversion of debt to equity reduces the
Company's annual debt service requirements by approximately $3.0 million.
Payment of Preferred Stock dividends, if any, are subject to the approval of
the Board of Directors.
Operating Capital. On November 10, 1997, the Company agreed in principle,
subject to certain creditor and shareholder approval, to sell all of its
stock in its wholly owned subsidiary, SST for $7.0 million to a related entity
of III Finance. The Company received a down payment aggregating $2.0 million,
$800,000 on November 10, 1997 and $1.2 million on November 14, 1997, and will
receive the remaining $5.0 million upon the transaction closing. With this
sale, the Company has retained an option, to be exercised at the Company's
discretion, to repurchase the stock of SST for the sale price, plus accretion
at the annual rate of 5%, on or before December 31, 1998. Upon approval and
closing, the $5.0 million balance of proceeds of this sale will enhance the
Company's liquidity and operating capital position. To further enhance
operating funds, the Company intends on enter into discussions to
restructure the repayment terms of its existing debt to enhance its cash flow.
The Company is requesting its lender to allow the Company to service its
remaining debt (excluding warehouse lines) through the cash flows arising from
the underlying collateral thus relieving the Company of approximately $3.8
million in annual payments and allowing the funds to be utilized to support
operations and the restructuring. There can be no assurance, that
the Company will be successful in renegotiating its repayment terms or that
with the additional operating capital, that the Company will be successful in
its efforts to to implement its Plan.
Operations and Administration. A key element of the Company's Plan is the
restructuring of the Company. To this end the Company, in September 1997,
comleted the consolidation of all loan processing centers to its facility in
Marietta, Georgia. Further, the Company has annouced the relocation of its New
Jersey based Headquarters Group to the cost efficient production center in
Georgia. The relocation from New Jersey to Georgia is expected to be completed
by January 1998. Additionally, the Company has restructured and reduced its
sales force. The Company intends to continue to eliminate redundant functions,
streamline processes as well as reduce management in order to reduce variable
and fixed operating expenses. As a result of operations and administrative
restructuring activities, the Company believes it can
<PAGE> 4
reduce its other operating expenses by approximately $20.0 million from that
experienced in the prior period ended June 30, 1997. The Company expects to
incur a restructuring charge in the quarter ending December 31, 1997.
Product and Services. Under the Plan, the Company has initiated a full review
of its products as well as the development of new products and services designed
to achieve cash flow efficiency and improved credit performance in a highly
competive market.
Distincitve Financing Programs. The Company believes that financing
flexibility is a significant competive advantage. New programs, that
should be in the market place by January 1, 1998, will focus on increasing
the Company's net spread value and credit performance. The Company will
continue to approve credit applications by determining monthly payment
amounts that consumers can afford, rather than limiting its approval to
a specific automobile, providing Dealers the flexibility to offer their
customers a wide range of automobiles. The Compoany's financing programs
will enable the customer to purchase the vehicle with a variety of
financial choices. One program will allow a reduced payment stream
through a balloon note that can be refinanced at the end of the contract.
This allows the customer who has had credit problems to purchase a higher
quality auto with a reduced payment which will have a lower impact on the
customer's total fixed obligations. Other programs involve providing the
finance and insurance professionals, of the Company's Dealer base,
assistance and support capabilities in the front end process of the
Dealer supplying the initial application to the Company, thereby
protecting the Company from adverse selection.
Superior Dealer Service. By providing prompt serivce, consistent credit
decisions and a reliable source of finaancing for subub-prime consumers,
the Company believes this should increase the volume of quality finance
contracts acquired from each Dealer. The Company typically responds to
credit applications within three hours, and generally pays the Dealer
within 24 hours of receipt of completed finance contract documentation.
Nationwide Diversification and Centralized Operations. The Company
currently acquires finance contracts in 28 states and operates in one
regional processing center. In May 1997 and September 1997, the Company
closed its processing centers in Irvine, California and Jersey City, New
Jersey, respectively, in an effort to further centralize its operations
and reduce costs. The Company belives that its centralized operations
are a more efficient method of processing finance contracts than
operating numerous local facilities. The Company seeks to mitigate risk
of loss due to regional economic downturns and to reduce dependency on a
limited number of local markets by maintaining a geographically diverse
finance contract portfolio. While the Company establishes and maintains
relationships with Dealers through sales representatives located in the
geographic markets served by the Company, all of the Company's day-to-day
operatons are centralized at the Company's processing center in Marietta,
Georgia. This structure allows the Company to closely monitor its
underwriting operations and eliminates the expenses associated with
full-service branch or mulitple regional offices.
Credit Management. The Company's strategy is to actively manage credit risk
while maintaining the volume of finance contracts acquired, sold and serviced
at manageable levels. Key elements of the Company's strategy are:
Active Credit Risk Management. The Company will focus its credit risk
management on all aspects of the Company's underwriting, sales and
servicing, with emphasis on correct origination of finance contracts.
The Company has a credit committee chaired by its Chief Operating
Officer that
<PAGE> 5
evaluates the underwriting process, Dealer performance, servicer
efficiency and portfolio performance. The Company's
quality control department will review, on a live sample basis, finance
contracts, supporting documentation and compliance with underwriting
standards. The Company believes that effective credit risk management
will build institutional investor demand for the Company's finance
contracts.
Consistent Underwriting Standards. Through training, proprietary
technology and intensive management review, the Company will strive to
maintain consistent underwriting standards. These standards are designed
to meet the criteria required by the Company's risk default insurance
policies and to qualify the Company's finance contracts for securitization,
and/or whole loan sales. The Company's credit approval system monitors
multiple evaluation criteria, and performs in excess of 100 internal data
integrity checks before the Company approves a finance contract for
acquisition. The Company is in the process of developing and
implementing a customized credit scorecard. Full implementation of this
scorecard is not expected until the third quarter of the fiscal year
ending June 30, 1998; however, elements of the customized scorecard
program including tighter credit standards, have been incorporated in
recent modifications to the Company's underwriting criteria. Through
heightened training, credit assurance has been greatly enhanced at the
production level.
Limited Loss Exposure. To reduce its potential losses on defaulted
finance contracts, the Company insures each finance contract it acquires
against damage to the financed vehicle through a vender's comprehensive
single interest physical damage insurance policy (the "VSI Policy"). In
addition, the Company purchases credit default insurance with respect to
most of the finance contracts it acquires. After a claim approval process
and the depletion of the policy deductible, credit default insurance pays
the differnce between the loan balance due on default and all other
recoveries, subject to certain other adjustments thereby mitigating loss
exposure on such receivables. Moreover, the Company limits loan-to-value
ratios and applies a purchase price discount to the finance contracts it
acquires.
Servicing. In January 1997, Systems & Services Technologies, Inc. ("SST")
began its operations as a loan servicing company, servicing loans acquired
by the Company. The Company believes that performing all the servicing
functions within SST will improve the overall performance of automobile
receivables acquired by the Company. After the sale of SST, SST will
continue to perform all of the servicing functions for the Company's
finance contract acquisitions.
State-of-the-Art Technology. The combined knowledge and eperience of the
Company's management has enabled it to develop and implement enhancements
to proprietary computer systems and databases, AUTOMATE (finance contract
acquisition) and PRIM (Product Reporting and Information Management) to
effectively manage each stage in the financing cycle. The management team
then leveraged its experience to develop and implement the loan processing
and servicing systems and other operations. The inherent synergy between
producer and servicer provides the Company's management with critical
information
by utilizing comparable micro-based systems and optics, eliminating time
delays involved with paper retrieval systems.
Funding and Liquidity through Securitization. The Company uses warehouse
facilities to provide funds for the acquisition of automobile finance
contracts and securitization transactions, to reduce the impact of interest
rate fluctuations and to reduce its cost of capital relative to traditional
sources of corporate debt financing. Through June 30, 1997, the Company
had securitized $1.03 billion of automobile finance contracts in twenty-
one offerings of asset-backed securities. In March 1997, the Company
secured a $1.0 billion purchase facility (the "Purchase Facility") which
was one of the components of a multi-structured finance facility (the
"Facility). The Purchase Facility contains a commitment from III Finance
and III Limited Partnership for the purchase of $350.0 million of trust
certificates. The Purchase Facility is supported by a $75.0 million
warehouse line. As of June 30, 1997, the Company sold $252.9 million of
Class A trust certificates and $136.2 of Class B trust certificates for
an aggregate amount of $389.0 million under the Purchase Facility. The
securitizations under the Purchase Facility are not rated. Seven of the
Company's prior securitizations were rated by Duff & Phelps Credit Rating
Co. ("Duff & Phelps") and three were rated by both Duff & Phelps and Fitch
<PAGE> 6
Investors Service, L.P. ("Fitch"). The Company securitized $148.4 million
of its automobile finance contracts through Aegis Auto Receivables Owners
Trust (the "Owner Trust Facility") which were rated by Standard's & Poor's
Rating Services ("Standard & Poors") and Moody's Investor Services, Inc.
("Moody's"). The Company also has approximately $226.0 million remaining
on its $533.0 million commitment from Greenwich Capital Markets, Inc.
("Greenwich") to purchase and securitize automobile finance contracts (the
"Securitization Facility"). The fulfillment of the remaining commitment
is subject to customary conditions. Currently, the Company has not met
these customary conditions and has not securitized under the Securitization
Facility since September 1996. Under the Company's Plan, the Company
intends to utilize multiple exit strategies including, but not limited
to, whole loan sales and securitizations.
<PAGE> 6
Industry Background/Competition
The sub-prime credit market is comprised of consumers who are deemed to be
relatively high credit risks due to various factors, including, among other
things, previous credit problems, the absence or limited extent of their
prior credit history or limited financial resources. The sub-prime consumer
automobile finance market is highly fragmented, consisting of many national,
regional and local competitors. Historically, traditional financing sources
(commercial banks, savings and loan associations, credit unions, captive
finance companies and consumer lenders), many of which have significantly
greater resources than the Company and may be able to offer more attractive
finance contract acquisition prices to Dealers, have not consistently served
this market. The Company believes that increased regulatory
oversight and capital requirements imposed by market conditions and
governmental agencies have limited the activities of many banks and savings
and loan associations in the sub-prime credit market. As a result, the
sub-prime credit market is primarily serviced by smaller finance organizations
that solicit business when and as their capital resources permit. However,
such traditional financing sources have been increasing their presence in
this market. The Company believes no one of its competitors or group of
competitors has a dominant presence in the market. The Company's strategy is
still designed to capitalize on the market's lack of a major national financing
source.
The Company's cash flows and results of operations may be affected adversely by
rising interest rates. The Company's warehouse credit facilities are at
floating rates of interest and increases in rates cannot immediately be
passed on to consumers, whose finance contracts are at fixed rates of
interest. In addition, rising interest rates result in a decrease in the
Company's net spreads on securitization transactions, thereby decreasing future
projected cash flows from 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 significnatly affected by
factors other than prevailing interest rates, most notably geographic
distribution and varying state interest rate limitiations.
Since the quarter ended December 31, 1996, the sub-prime consumer finance
industry has experienced tremendous turmoil and many companies financing
consumers in the sub-prime credit market have experienced higher than expected
credit losses on their loan portfolios. Some of the Company's competitors
have filed for protection under federal bankruptcy laws while others have been
acquired by or merged with other finance companies.
The Company believes that a portion of the increased delinquency rates can be
attrituable to macroeconomic factor wich affected the sub-prime market
generally. The Company also believes that the decline in the quality of its
owned and managed portfolio of loans was, in part, attributable to increased
competition in the sub-prime market. The Company believes that its high
discount rate caused the Company's financing program to be adversely selected
<PAGE> 7
by Dealers.
Management currently believes that the Plan can be achieved with the credit
facilities available to it. However, there can be assurance the Company will
be successful in implementing its Plan. If it is unable to do so, the
Company will require additional financing and there can be no assuance that
sufficient financing will be available to the Company on satisfactory terms or
at all. If the Company is unable to obtain any needed financing, it will not
be able to continue inopeation. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
Finance Contract Profile
The following tables provide information regarding the automobile finance
contracts acquired and leases originated by the Company during the periods
indicated. The Company commenced lease originations in April 1994 and ceased
originations in the first quarter of its 1996 fiscal year.
<TABLE>
<CAPTION>
Finance Contract Acquisitions
- ------------------------------------------------------------------------------
Year Ended
-----------------------------------------------------
June 30, June 30, June 30, June 30, June 30,
1993 1994 1995 1996 1997
-------- -------- -------- -------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Original Balance.......... $12,181 $33,738 $132,294 $451,536 $591,841
Number acquired........... 1,148 2,964 10,895 36,739 47,722
Average Original balance.. $ 10.6 $ 11.4 $ 12.1 $ 12.3 $ 12.4
Average discount on contracts
acquired................. 8.1% 10.0% 9.9% 10.0% 10.0%
Current balance(1)........ $ 620 $ 6,320 $ 49,348 $283,263 $532,232
Average Balance
Outstanding(1)........... $ 2.6 $ 5.1 $ 7.8 $ 9.7 $ 11.5
Weighted Average Original
Term (in months)(1)...... 56.9 56.1 55.6 54.5 54.5
Weighted Average Remaining
Term (in months)(1)...... 14.6 21.5 31.3 39.7 49.4
Weighted Average Annual
Percentage Rate(1)...... 20.6% 20.1% 20.1% 20.0% 20.4%
Percentage New Cars(1).... 35.3% 18.0% 13.0% 7.1% 4.0%
Percentage Used Cars(1)... 64.7% 82.0% 87.0% 92.9% 96.0%
<FN>
<F1>
(1) As of June 30, 1997
</FN>
</TABLE>
<TABLE>
<CAPTION>
Lease Portfolio Originations
- -----------------------------------------------------------------------------
Year Ended
----------------------------------------------
June 30,1994 June 30,1995 June 30,1996
------------ ------------ -------------
(dollars in thousands)
<S> <C> <C> <C>
Original Balance............. $ 1,571 $ 29,905 $ 436
Number originated............ 92 1,914 25
Average Original balance..... $ 17.1 $ 15.6 $ 17.4
Average discount on contracts
originated.................. 6.7% 7.1% 7.2%
Current balance(1)........... $ 543 $ 14,540 $ 271
Average Balance Outstanding(1) $ 8.0 $ 8.7 $ 11.8
Weighted Average Original Term
(in months)(1).............. 57.6 55.6 56.2
Weighted Average Remaining Term
(in months)(1).............. 28.8 33.8 37.8
Weighted Average Annual
Percentage Rate(1).......... 15.9% 16.5% 17.0%
Percentage New Cars(1)....... 60.9% 16.8% 4.3%
Percentage Used Cars(1)...... 39.1% 83.2% 95.7%
<FN>
<F1>
(1)As of June 30, 1997
</FN>
</TABLE>
<PAGE> 8
Credit Evaluation and Procedures
Underwriting. The Company's automobile finance contract acquisition program
is designed to acquire automobile finance contracts originated through
factory-authorized new car Dealers, while offering them an opportunity to
increase vehicle sales to consumers who typically do not qualify for
traditional financing. As of June 30, 1997, the Company had entered into
agreements with approximately 4,200 Dealers, located in 31 States, from which
the Company accepts finance contract applications. (See Business - General).
The Company is striving to improve upon the effectiveness of its evaluation of
credit risk, consistency in its credit decisions, the timely communication of
credit decisions and its reliability as a funding source. The Company has
developed, and is refining, the "in house" processing systems and
controls specifically designed to support its evaluation process. The Company
utilizes these systems and controls to assess each applicant's ability to repay
the amounts due on the finance contract and the adequacy of the financed vehicle
as collateral. In addition, the Company utilizes these systems to achieve
consistent credit decisions and to reduce the elapsed time between receipt of a
credit application from a Dealer and the Company's response to the Dealer. The
Company requires each Dealer submitting a finance contract for acquisition to
provide certain information to the Company, including a completed signed finance
contract application that lists the applicant's assets, liabilities, income,
credit and employment history as well as other personal information. The
Company is currently developing a customized credit scorecard based on its
historical data base. The Company expects to test its scorecard in the second
quarter of its fiscal year ending June 30, 1998 with full implementation
scheduled to occur in the third quarter ending March 31, 1998. The Company
evaluates an applicant's ability to pay by verifying residence, employment and
income and by considering the relationship of monthly income to monthly auto
payment and monthly income to monthly debt burden, including expenses relating
to the finance contract under consideration and expenses relating to automobile
insurance. The Company also engages in a comprehensive evaluation of at least
one credit bureau report from an independent credit bureau. The credit report
typically contains information on matters such as historical payment experience,
credit history with merchants and lenders, installment debt payments, defaults
and bankruptcies, if any. The purpose of this credit review is to eliminate
individuals whose credit quality is deteriorating or suggests too great a
probability of default or whose credit experience is too limited for the
Company to assess the probability of performance.
Based upon its review of information extracted from the credit bureau reports
and the credit application, the Company may either (i) approve the credit
application; (ii) approve the credit application with conditions; or
(iii) decline the application. The credit analyst documents the decision and
the Dealer is notified by facsimile transmission, typically within three hours
of receipt by the Company of the credit application. In the fiscal years ended
June 30, 1995, 1996 and 1997, the Company approved 41.8%, 41.3% and 36.9%,
respectively, and funded 12.8%, 10.6% and 9.8%, respectively, of the credit
applications received by it from Dealers.
Upon submission by the Dealer of the finance contract and related documentation,
the Company undertakes a series of processes and procedures that are designed
to: (i) substantiate the accuracy of information critical to the Company's
original credit decision; (ii) verify that the finance contract submitted by
the Dealer complies with both the conditions under which the credit approval
was granted and the Company's transaction structure criteria, including any
requirements for obtaining credit default insurance and (iii) confirm that
the documentation complies with the Company's loss management requirements.
These processes and procedures include the verification of collateral, borrower
references and insurance prior to funding the finance contract. This
verification process in many instances requires submission of supporting
documentation and is performed solely by Company personnel.
<PAGE> 9
The Company has designed its finance programs to limit the loss exposure on each
transaction. The Company seeks to mitigate loss exposure by: (i) determining
whether the applicant meets the Company's underwriting criteria, particularly
whether the applicant has sufficient disposable income to meet such applicant's
existing obligations and the obligations resulting from the proposed trans-
action; (ii) limiting the credit it is willing to extend based upon its assess-
ment of the applicant's ability to meet payment obligations and the value of
the underlying collateral; (iii) requiring that physical damage insurance naming
the Company as loss payee be maintained at all times by the obligor to protect
the Company's financial interest (if such insurance lapses, the Company is
nonetheless covered under the Company's vehicle single interest insurance
policy); (iv) acquiring a security interest in the vehicle financed; and
(v) obtaining credit default insurance with respect to most of its finance
contracts. The degree of exposure in any transaction is a function of:
(a) the creditworthiness of the applicant; (b) the extent of credit granted
compared to the value of the underlying collateral; (c) the possibility of
physical damage to, or the loss of the collateral; and (d) the potential for
any legal impediment to the collection of the obligation or the repossession
of the collateral. The Company determines the value of collateral based upon
the MSRP, if new, or the Kelley Blue Book, if used. The Company has a general
policy of not extending credit exceeding 100% (exclusive of Company approved
service contracts, not to exceed an additional $1,500 and taxes, title,
licensing and up to an additional $200 for Dealer documentation fees) of
either the MSRP or the Kelley Blue Book retail value for a finance contract.
While the Company does not require a down payment for finance contracts it
acquires, a significant percentage of consumers elect to make a down payment.
In the fiscal year ended June 30, 1997, 4.0% of the finance contracts acquired
by the Company were new car finance contracts and 96.0% were used car finance
contracts. (See Business - General).
Upon acquiring a finance contract, the Company acquires a security interest in
the vehicle financed. The finance contracts acquired by the Company during the
fiscal year ended June 30, 1995 averaged approximately $12,143 and had a
weighted average annual interest rate of approximately 20.2%. Finance contracts
acquired during the fiscal year ended June 30, 1996 averaged approximately
$12,290 and had a weighted average annual interest rate of approximately 20.1%.
Finance contracts acquired during the fiscal year ended June 30, 1997 averaged
approximately $12,402 and had a weighted average annual interest rate of
approximately 20.4%. All finance contracts acquired by the Company are fully
amortizing (on the simple interest method) and provide for equal payments over
the term of the contract (averaging 54 months). The portions of such payments
allocable to principal and interest are, for payoff and deficiency purposes,
determined in accordance with the law of the state in which the finance contract
was acquired.
Dealers typically send credit applications to several financing sources.
After reviewing the credit application, each financing source will notify the
Dealer whether it is willing to acquire the finance contract and, if so, under
what conditions. If more than one finance source has offered to acquire the
finance contract, the Dealer typically will select the source based on an
analysis of the "buy rate," or the interest rate, discount fees, finance
contract amounts and other terms and conditions stipulated by the financing
source. The Company believes that it's new programs together with building
solid relationships with the Dealers should provide a more secure credit base
than has existed in the past. The ability to process finance contract
applications and respond to Dealers quickly and efficiently increase its
chances of being selected by Dealers to acquire auto finance contracts as long
as the Company's rates, discount and terms are competitive. The Company
currently acquires finance contracts at a discount of 10% from Dealers. Upon
acquiring a finance contract, the Company issues a check to the Dealer, and
instructs their servicer to issue a "welcome" letter to the obligor, which
advises the obligor of certain payment procedures.
When the Company was funding leases, the Company acquired title to the leased
vehicle. Leases originated during the fiscal year ended June 30, 1995 averaged
approximately $15,624, had a weighted average annual interest rate of
approximately 16.6% and an average term of 55 months. During the year ended
<PAGE> 10
June 30, 1996, the Company originated $436,000 of leases. Leases originated
during the year ended June 30, 1996 averaged approximately $17,436, had a
weighted average annual interest rate of approximately 17.1% and an average
term of 57 months. All leases originated by the Company are amortized to the
estimated wholesale residual value using the direct financing method and
provide for equal payment over the term of the contract. In the quarter ended
September 30, 1995, the Company ceased funding leases and has redirected all
its efforts to acquiring finance contracts.
Auditing. The Company has dramatically changed its audit and quality assurance
process to make them more timely and applicable to live loan processing.
As a result, loans are audited for quality at teh time the laons are
underwritten and prior to funding. Combined with the new credit underwriting
guidelines, this is intended to provide a profitable net interest rate spread
and acceptable credit performance on the loan portfolio. The Company's quality
assurance department seeks to minimize errors and varianes in underwriting
procedures by internally auditing or "re-underwriting" approximately 10% of
all funded finance contracts. The quality assurance staff performs all of
the underwriting and auditing functions on such finance contracts that were
performed prior to the finance contracts being approved and funded. The
results of such audits are then communicated to senior management,
underwriting and sales personnel and used as a training tool.
Dealer Network
The Company is developing a marketing group that will be paid on the basis
of loan quality as well as quantity. This new approach starts the quest for
quality at the front at the front of the loan acquisition process to better
ensure the ultimate performance of the loans acquired. Sales representatives
are assigned to designated territories and are paid based on the quality of a
loan's performance as well as on the basis of the volume of loans acquired.
The Company has also engaged four independent exclusive marketing brokers who
earn flat fees per finance contract acquired in their designated territories
which include Alabama, Florida, Louisiana, Massachusetts, Mississippi,
Pennsylvania and South Carolina. All of the Company's business generated in
such territories is the result of introductions by the independent marketing
brokers. In the fiscal year ended June 30, 1997, approximately $142.4 million
of finance contracts (approximately 24.1% of all finance contracts acquired
during such period), were acquired from Dealers in Florida, Alabama and South
Carolina (since January 1997), approximately $35.7 million of all finance
contracts acquired in such period (approximately 6.0%) were acquired from
Dealers in Louisiana and Mississippi and were introduced by such independent
marketing brokers. In the fiscal year ended June 30, 1996, approximately
$97.0 million of finance contracts and $300,000 of leases (approximately
21.5% and 68.8%, respectively, of all finance contracts acquired and leases
originated during such period) were acquired or originated from Dealers in
Florida and Alabama and approximately $37.6 million of all finance contracts
acquired in such period (approximately 8.3%) were acquired from Dealers in
Louisiana and Mississippi and were introduced by such independent marketing
brokers. In the fiscal year ended June 30, 1995, approximately $32.1 million
of finance contracts and leases (approximately 20.7%, of all finance contracts
acquired and leases originated during such period) were originated by Dealers
in Florida and approximately $25.4 million of all finance contracts acquired
in the fiscal year ended June 30, 1995 (approximately 16.4%) were originated
by Dealers in Louisiana and were introduced by such independent marketing
brokers. As of October 20, 1997, the Company terminated or issued a notice of
termination to its independent marketing brokers doing business in Louisiana,
Mississippi and Pennsylvania. As a result, the number of broker relationships
has been reduced from four to two. (See Business - General).
<PAGE> 11
The Company continues to explore new marketing strategies in an effort to
expand and enhance its Dealer base and finance contract acquisition volume.
The Company will offer three finance contract programs to Dealers: (i) a
new straight pay program; (ii) a military program; and (iii) a proprietary
dealer lender assistance program. Recently, the Company implemented an extended
warranty program with approved warranty service contract carriers. The warranty
program allows the cost of an extended warranty to be funded above the Company's
typical 100% of MSRP (within certain limits). In return for each extended
warranty purchased, the Company receives a fee. Should the extended warranty
be cancelled or the finance conract not go to term, the Company will receive
a rebate of the unused premium financed. The Company markets its programs
solely to factory authorized new car delaers, typically with used vehicle
sales operations.
The Company targets factory authorized new car dealers for a number of reasons.
The Company believes that factory authorized new car dealers generally have
higher quality inventory than independent dealers and tend to attract customers
with more desirable credit performance characteristics. Management of the
Company also believes that factory authorized dealers are generally backed by
greater capital levels as compared to independent dealers and are generally
subject to periodic audits by their respective manufacturers.
The Company's field sales representatives identify and target Dealers that
have established, or are considering establishing, customer solicitation
programs designed to attract sub-prime credit consumers. Each field sales
representative typically is responsible for pursuing and maintaining relation-
ships with 50 to 100 Dealers. The Company's field sales representatives train
the Dealer's personnel in the Company's finance programs. This training is
continuous since dealerships generally experience a relatively high degree of
personnel turnover. The training provided by the Company is designed to: (i) to
identify consumers who will qualify for financing by the Company; (ii) assist
the Dealer in obtianing the necessary documentation from consumers to meet
underwriting requirements; and (iii) structure transactions that meet the
Company's requirements. Approved Dealers enter into a non-exclusive written
Dealer agreement with the Company (a "Dealer Agreement"). The Dealer
Agreements generally provide that finance contracts are sold by the Dealer to
the Company "without recourse" to the Dealer, except in limited circumstances
including, among others, that: (i) the financed vehicle is not properly
registered or titled showing the Company as first lienholder; (ii) the full
down payment specified in the contract, if any, was not received by the
Dealer; (iii) certain representations and warranties by the Dealer regarding
the finance contract, the financed vehicle, the finance contract process and
manner of sale are breached or untrue; or (iv) the Dealer has failed to comply
with applicable federal and state consumer laws. The Company currently
acquires finance contracts at a discount of 10% from Dealers.
The following table indicates, for the states in which the Company acquired
finance contracts in the fiscal years ended June 30, 1993, 1994, 1995, 1996
and 1997, the total number of factory-authorized Dealers in such states, the
number of Dealers from which the Company has acquired finance contracts and
the finance contract acquisition volume of the Company in dollars for such
periods.
<PAGE> 12
<TABLE>
<CAPTION>
Fiscal Year Ended
June 30, 1993 June 30, 1994 June 30,1995 June 30, 1996 June 30, 1997
------------- ------------- ------------ ------------- -------------
(dollars in thousands)
Factory- Finance Finance Finance Finance Finance
Authorized Originating Contract Originating Contract Originating Contract Originating Contract Originating Contract
State Dealers(1) Dealers Volume Dealers Dealers Dealers Volume Dealers Volume Dealer Volume
- ----- --------- ------- ------ ---------- ------- --------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alabama.... 370 3 $ 92 5 $ 689 2 $286 21 $ 3,609 118 $44,838
Arizona..... 205 9 450 8 883 13 1,451 21 1,843 36 6,317
California. 1,705 149 6,948 69 1,772 23 539 7 385 4 182
Colorado.... 270 - - - - 2 47 28 1,381 15 626
Connecticut. 340 - - - - 10 869 5 4,453 1 1,106
Florida.... 935 - - 59 5,947 149 18,955 291 93,472 334 91,812
<PAGE> 12
Georgia.... 590 37 4,259 84 12,357 107 16,900 164 64,933 227 86,245
Illinois... 1,155 - - - - - - 58 2,839 49 4,513
Indiana.... 625 - - - - 28 1,994 44 5,694 48 7,552
Kansas..... 335 - - - - - - 27 2,444 36 11,987
Kentucky... 350 - - - - - - 40 3,426 55 5,725
Louisiana.. 335 - - 4 91 67 25,402 96 30,355 91 20,201
Maryland... 590 - - 1 12 4 516 22 2,355 49 4,357
Michigan... - - - - - - - - - 78 6,366
Missouri... 555 - - 3 85 3 31 54 6,108 100 14,546
Mississippi. 245 - - - - 3 226 33 7,233 62 15,462
Nevada...... 90 6 127 2 20 16 1,457 20 4,744 23 3,346
New Jersey.. 700 7 130 57 4,267 66 4,576 75 8,934 73 5,631
New Mexico.. 135 2 32 - - 3 149 16 1,756 21 2,617
New York... 1,350 - - - - 45 3,250 116 10,009 110 7,235
N. Carolina. 700 1 21 8 5,227 51 28,928 103 68,459 142 67,869
Ohio....... 1,070 - - - - 40 2,220 65 10,215 101 17,811
Penn....... 1,410 - - 16 1,049 51 5,260 101 13,252 121 13,360
S. Carolina 325 2 48 13 1,127 26 3,868 55 9,301 94 14,348
Tennessee... 420 1 16 - - 14 1,223 62 10,161 103 22,263
Texas...... 1,329 - - - - 47 6,181 227 57,902 263 69,317
Virginia.... 580 1 22 2 - 19 1,930 85 10,816 120 17,145
W. Virginia. 220 - - - 212 21 5,699 54 14,585 64 28,459
Other...... 560 1 36 - - 10 337 26 872 11 605
---- --- --- --- ---- ----- ------ ---- ------- -- -----
17,494 219 $12,181 331 $33,738 820 $132,294 1,916 $451,536 2,549 $591,841
====== === ======= === ======= === ========= ====== ======== ===== ========
<FN>
<F1>
(1) Source: National Automobile Dealers Association (data as of January 1,1996).
</FN>
</TABLE>
During the fiscal year ended June 30, 1997, no single dealer accounted for
more than 1.0% of the finance contracts acquired by the Company, and no group
of Dealers under common control accounted for more than 2.3% of the finance
contracts acquired by the Company. During the fiscal year ended June 30, 1996,
no single Dealer accounted for more than 1.5% of the finance contracts acquired
by the Company, and no group of Dealers under common control accounted
for more than 6.0%, although one accounted for 5.1% of the finance contracts
acquired by the Company. During the fiscal years ended June 30, 1994 and
1995, City Chevrolet Automotive Company, in Charlotte, North Carolina,
accounted 12.6% and 4.5%, respectively, of the finance contracts acquired
and leases originated by the Company during such periods, and Dealers in the
Hendrick Automotive Group, including City Chevrolet Automotive Company,
accounted for approximately 16.5% and 12.5%, respectively, of the finance
contracts and leases acquired or originated by the Company during those periods.
No other Dealer accounted for more than 5.0% and 3.0% of the finance contracts
acquired by the Company in the fiscal years ended June 30, 1994 and 1995,
respectively.
Warehouse Credit Facilities
The Company currently operates primarily under a $75.0 million warehouse
facility for financing new acquisitions of automobile finance contract
receivables which is provided by III Finance and III Global LTD. In addition
to the above facility, the Company's leases are financed under a warehouse
facility that no longer provides for new financing since the Company has not
originated leases since August 1995. At June 30, 1997, the Company had $65.1
million available under its finance contract warehouse facility and had $7.6
million outstanding under its lease facility. To the extent the Company would
be unable to secure alternative sources of funding, the loss of these
facilities would have an adverse impact on the Company's finance contract
acquisition activities. (See Managements Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources).
Securitization Program
The periodic securitization of finance contractshas been an integral part of the
<PAGE> 13
Company's automobile finance program. Securitizations enable the Company to
reliquify and redeploy its capital resources and warehouse credit facilities
for the purchase of additional finance contracts. Through June 30, 1997, the
Company completed twenty-one privately placed automobile finance contract
securitizations totalling approximately $1.03 billion of automobile finance
contracts. Nine of such securitizations were rated A+ by Duff & Phelps.
In March 1997, the Company secured a $1.0 billion Purchase Facility which was
one of the components of the Facility. The Purchase Facility contains a
commitment from III Finance and III Limited Partnership for the purchase of
$350.0 million of trust certificates. The Purchase Facility is supported by
a $75.0 million warehouse credit facility described above. As of June 30, 1997,
the Company sold $252.9 million of Class A trust certificates and $136.2 of
Class B trust certificates for an aggregate amount of $389.0 million under the
Purchase Facility. Future securitizations under the Purchase Facility ($611.0
million as of June 30, 1997) are subject to customary conditions and are
uncommitted. In December 1995, the Company entered into a commitment to
sell $175 million of sub-prime automobile finance contracts to be resold as
asset-backed securities (the "Owner Trust Agreement"), which was rated AAA by
Standard & Poor's and Aaa by Moody's. As of June 30, 1997, the Company sold
approximately $148.4 million of automobile finance contracts to this facility.
In October 1996, it was determined that the finance contracts underlying the
securities were not performing in accordance with levels required under the
Owner Trust Agreement. This event terminated the Company's remaining commitment
of $26.6 million. In May 1996, the Company obtained a firm commitment from
Greenwich 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 which were rated A+ by Duff & Phelps were completed pursuant to this
commitment . The Company has not met these customary customary conditions and
has not securitized receivables under the Securitization Facility since
September 1996.
In its securitization transactions, the Company sells pools of finance
contracts to a special purpose subsidiary, which then sells the receivables
to a trust in exchange for certificates ("Certificates") representing either
a 100% undivided interest in, or secured obligation of, the trust. The
Certificates are then sold to investors who receive principal and a stated
pass-through rate of interest on the Certificate amount outstanding. The
Company may also retain or sell an indirect interest in the transferred
receivables that is subordinate to the interest of the Certificate holders.
The retained interest entitles the holder to receive the residual cash flows
from the trust after payment to investors, absorption of losses, if any, that
arise in respect of the securitized finance contracts and payment of the
other expenses and obligations of the trust. The Company is continually
exploring other structures of securitization which can meet the changing
needs of the financial and capital markets.
Upon each securitization, the Company recognizes the sale of finance contracts
and records a gain or loss in an amount which takes into account the amounts
expected to be received as a result of its retained interest, net of acquisition
discounts and other deferred origination costs. The Company values each
retained interest by calculating the net present value of its expected
residual cash distributions from the trust. The calculation of the gain or
loss and of the retained interest arising from the securitizations embody
prepayment, delinquency, default, recovery and interest rate assumptions that
the Company believes are reasonable and consistent with assumptions that other
market participants would use for similar financial instruments, and are
discounted assuming an interest rate that the Company believes a third party
purchaser of such financial instrument would demand. If actual experience
differs from these assumptions, additional gains or losses to the Company would
result. During the fiscal year ended June 30, 1997, the Company's actual
experience significantly differed from its original assumptions utilized in
recognizing the initial gain on securitization transactions. These differences
resulted in additional losses of approximately $49.0 million. The Company also
recognized losses of approximately $7.5 million in the year ended June 30, 1996.
At June 30, 1997, the Company held retained interests from the securitization of
receivables which were carried at an aggregate value of $33.3 million which are
pledged to secure borrowings of $34.8 million.
<PAGE> 14
The Company relies significantly on its ability to securitize its finance
contract portfolio in order to finance acquisitions of additional finance
contracts. The securitization proceeds are utilized to repay borrowings under
the Company's warehouse credit facility, thereby making the facility available
to finance the acquisition of additional finance contracts. The ability to
complete a securitization transaction is affected by a number of factors, some
of which are beyond the Company's control, including conditions in the
securities market in general, demand for the Company's asset-backed securities,
conditions generally in the asset backed securitization market and approval by
all parties to the terms of the transaction.
If the Company were unable to securitize or otherwise sell its finance
contracts in a financial reporting period, the Company would incur a
significant decline in total revenues and net income or report a loss for
such period. If the Company were unable to securitize its receivables and
did not have sufficient credit available, either under its warehouse credit
facilities or from other sources, the Company would have to sell portions of
its portfolio directly to investors or curtail its finance contract acquisition
activities. As discussed in "Business-General", the Company is in the process
of implementing its business plan which does not rely soley on securitization.
There can be no assurance that the Company will be successful in implementing
its business plan.
Servicing
In January 1997, the Company's wholly owned subsidiary, SST, began servicing
the Company's finance contracts. While SST was in its start up phase, the
Company gradually assigned the servicing of its finance contracts acquired to
SST from January 1997 through March 1997. In May 1997, the Company transferred
the servicing rights of an additional $469.7 million of finance contracts to
SST. SST is now servicing approximately $710.6 million or 76.9% of the
Company's total remaining finance contracts acquired. The balance of the
Company's finance contracts and lease portfolio is serviced by its initial
servicer, American Lenders Facilities, Inc. ("ALFI") (a wholly owned subsidiary
of CIGNA Corporation). The Company paid a fee of $5.00 per contract
(approximately $220,000) to transfer the servicing to SST. The Company is
currently in dispute with ALFI. (See Item 3: Legal Proceedings).
SST has a low-cost, technologically efficient loan servicing platform located
in St. Joseph, Missouri. Housed in a 50,000 square foot facility and currently
employing more than 200 people, it represents, what management believes to be,
the future of mult-asset servicing utilizing optics and micro based systems.
This facility is also capable of creating custom origination platforms for
financial entities desiring marginal loan production, without the overhead
and inefficiency of a small volume origination center. SST has structured
its systems to provide "beginning to end" servicing. Initiating the process
from sales and marketing through origination and servicing for banks, investors
and other consumer finance companies.
On November 10, 1997, the Company agreed in principle to sell, subject to
shareholder and creditor approval, its interest in SST for $7.0 million.
The agreement porvides that the Company retains an option, exercisable at any
time through December 31, 1998, to repurchae SST for $7.0 million plus an
accretion at a 5% rate. The transaction is expected to close in the first
calendar quarter of 1998. (See Startegic Buisness Plan - Operating Capital).
The servicer accounts for and posts all payments received and provides certain
financial reporting with respect to the Company's automobile finance
receivables. The servicer's computer system provides its personnel with daily
access to all information contained in the customer's contract and application,
including the amount of the contract, maturity, interest rate, vehicle and
reference information and payment history. Furthermore, the Company is
provided with daily access to the servicer's data through downloading to the
<PAGE> 15
Company's PRIM computer system, described below.
In April 1996, the Company renewed its sub-servicing agreement with its
third-party servicer, providing for the transfer of specific collection
functions to the Company. Through this arrangement, the Company assumed
responsibility for all consumer contact with respect to all leases and finance
contracts acquired that were included in the Company's December 1994 securiti-
zation transaction and all finance contracts acquired thereafter. In addition,
the Company assumed responsibility for liquidation activities on its entire
finance contract purchase program at such time. The Company receives a fee
from the third-party servicer for performing these functions. Due to the
transfer of servicing to SST, the Company is currently the sub-servicer of
approximately $202.1 million or 22.5%, including its lease portfolio, of its
outstanding automobile finance receivables. The Company, as sub-servicer,
monitors the payment of the receivables, investigates delinquencies, communi-
cates with the consumer to obtain timely payments, when necessary (through sub-
contractors) repossesses and disposes of the financed vehicle and generally
polices the receivable and its related collateral. If payment is not received
after five days its due date, the Company takes action by either mailing a
written notice to the consumer or contacting the consumer by telephone. It is
the Company's policy generally to work with the consumer to permit the consumer
to keep the vehicle and continue payments. The Company believes that this
policy is in the best interest of the Company, the participating Dealer and
the consumer, as it builds goodwill and long term customer relationships and
increases the possibility of the ongoing collectibility of the amount due. If
a consumer misses a second monthly payment and is delinquent in his or her
payment by more than 35 days and the Company has satisfactory reason to believe
the consumer will not pay, the Company will initiate the necessary steps to
repossess the vehicle. If the value received as a result of repossession and
subsequent sale is materially less than the remaining balance on the receivable,
the Company will seek to hold the consumer liable for the deficiency. The
Company utilizes third party collection agencies to pursue such deficiency
balances.
Delinquency Control And Collection Strategy
The Company (including SST) and, with respect to a limited number of accounts,
ALFI, reviews any account that reaches 31 days of delinquency to assess the
collection efforts to date and to refine, if appropriate, the collection
strategy. The Company does not allow finance contracts to be re-written but
allows finance contracts to be extended in certain limited circumstances. The
servicer and the Company generally will design a collection strategy that
includes a specific deadline within which the obligation must be collected.
Accounts that have not been collected during such period are again reviewed,
and, unless there are specific circumstances which warrant further collection
efforts, the account is assigned to independent bonded agencies for
repossession. Repossessed vehicles are generally resold by the servicer or
the Company in its capacity as sub-servicer through wholesale auctions which
are attended principally by Dealers. Such auctions typically result in an
average recovery of 57.1% of the outstanding finance contract balance or
approximately 78.4% of the Kelley Blue Book wholesale value. This compares to
prior years average recovery of 57.4% of the outstanding finance contract
balance or approximately 85.7% of Kelley Blue Book wholesale value.
For financial reporting purposes, the Company recognizes losses based on the
aging profile of delinquent finance contracts. For purposes of reporting
charge-off ratios, the Company reports both gross and net losses when all
potential recoveries on a defaulted receivable have been realized. For the
fiscal years ended June 30, 1995, 1996 and 1997, the Company's net loss ratio,
based on the average outstanding finance contracts, including those finance
contracts sold in securitization transactions, was 0.8%, 1.2% and 4.7%,
respectively. Net losses reflect all recoveries including proceeds for the
sale of the repossessed vehicles, risk default and other insurance proceeds,
net of related repossession and disposition costs.
<PAGE> 16
As of June 30, 1997, the Company had 2,212 vehicles in repossession inventory
with an outstanding finance contract balance of $25.5 million (3.5% of the
average outstanding finance contract balance) and 4,879 finance contracts with
an outstanding finance contract balance of $33.3 million (4.5% of the average
outstanding finance contract balance) which were liquidated at auction and
awaiting other recoveries. In accordance with the Company's reporting policy,
the losses relating to these finance contracts will be reflected in the charge
off ratios reported in future reporting periods.
Because of the Company's limited operating history in the fiscal years ended
June 30, 1995 and 1996, its finance contract portfolio was unseasoned.
Accordingly, delinquency and charge-off rates in the portfolio may not have
fully reflected the rates that would apply when the average holding period
for finance contracts in the portfolio is longer. In the fiscal year ended
June 30, 1997, the Company's repossession ratio (i.e. default rate) increased
to 18.8% from 13.0% in the fiscal year ended June 30, 1996. Additionaly, the
Company's net charge-offs as a percentage of liquidations in the fiscal
year ended June 30, 1997 increase to 40.5% from 24.3% in the fiscal year
ended June 30, 1996. The primary cause for this increase is due to the
deterioration in the Company's recovery rates from the disposition of
repossessed vehicles. Increases in the delinquency and/or charge-off rates in
the portfolio would further adversely affect the Company's ability to obtain
credit or securitize its finance contracts and would continue to have an
adverse effect on the Company's results of operations and financial condition.
A majority of the Company's portfolio of finance contracts are insured for
credit default (see Insurance below) ("RDI"). The Company, since its inception,
has insured its portfolio under this type of insurance; however, the structure
of the policy has differed over this time frame. Its initial policy provided
for a cash reserve deposit thereby decreasing the Company's net loss experience.
Over time, in an effort to preserve cash, the Company structured its RDI policy
to incorporate a self insured retention ("SIR"). This structure remains in
force today. The SIR results in increased net losses due to the Company's
responsibility increasing from the first six percent of losses to the first
eight or ten percent of losses, depending upon the policy under which the
respective contract is insured. RDI claims have substantially increaed due to
rising default rates. This in turn created a backlog in the claims processing
resulting in a portion of those claims being put at risk for non payment.
The Company is also experiencing higher than expected rejection rates on
claims submitted which is currently under management reveiw. As a result, the
Company has reported an increase in its net loss experience. Upon receipt of
all anticipated recoveries, the Company charges off any remaining balance on a
receivable-by-receivable review.
Management Information Systems
The Company believes that high levels of automation are essential both for its
efficient operations and to maintain its competitive position. The Company has
spent in excess of $4.0 million developing and maintaining the AUTOMATE,
LeaseMate and PRIM (Product Reporting and Information Management) computer
systems and databases and more recently developing SST'S servicing platform,
REMOTE. AUTOMATE is the acquisition software for finance contracts and
LeaseMate is the origination software for leases. They are on-line, real-time
systems employing advanced database management techniques. In addition to
accumulating all relevant borrower and asset information, AUTOMATE and LeaseMate
automatically request and receive credit reports from credit bureaus, create and
merge all Dealer, borrower or lessee and internal documentation, automatically
fax the appropriate documents to their destinations and prompt underwriting
personnel through verification phone calls. An electronic copy of all docu-
mentation is kept on-line for an extended period of time and off-line inde-
finitely. Prior to funding, AUTOMATE and LeaseMate perform over 100 data
integrity, underwriting guideline and numerical accuracy checks. REMOTE
provides the Company's collectors with critical on-line information by
utilizing micro-based systems and optics, eliminating time delays involved
with paper retrieval systems.
<PAGE> 17
Insurance
Each finance contract requires the borrower to obtain comprehensive and
collision insurance with respect to the related financed vehicle with the
Company named as a loss payee. The Company relies on a written representation
from the selling Dealer and independently verifies that a borrower in fact has
such insurance in effect when it purchases contracts. Each finance contract
acquired by the Company is covered from the time of purchase by the VSI Policy.
The VSI Policy has been issued to the Company by Guaranty National Insurance
("Guaranty National").
Physical Damage and Loss Coverage. The Company initially relies on the
requirement, set in its underwriting criteria, that each consumer maintain
adequate levels of physical damage loss coverage on the financed vehicle.
The servicers engaged by the Company track the physical damage
insurance of consumers and contact consumers in the event of a lapse in
coverage or inadequate documentation. Moreover, the servicers are obligated,
subject to certain conditions and exclusions, to assist the processing of claims
under the VSI Policy. Guaranty National will insure each financed vehicle
securing a contract against: (i) all risk of physical loss or damage from any
external cause to financed vehicles which the Company holds as collateral;
(ii) any direct loss which the Company may sustain by unintentionally failing
to record or file the instrument evidencing each contract with the proper
public officer or public office, or by failing to cause the proper public
officer or public office to show the Company's encumbrance thereon, if such
instrument is a certificate of title; (iii) any direct loss sustained during
the term of the VSI Policy by reason of the inability of the Company to locate
the consumer or the related financed vehicle, or by reason of confiscation of
the financed vehicle by a public officer or public office; and (iv) all risk of
physical loss or damage from any external cause to a repossessed financed
vehicle for a period of 60 days while such financed vehicle is (subject to
certain exceptions) held by or being repossessed by the Company.
The physical damage provisions of the VSI Policy generally provide coverage
for losses sustained on the value of the financed vehicle securing a finance
contract, but in no event is the coverage to exceed: (i) the cost to repair
or replace the financed vehicle with material of like kind and quality;
(ii) the actual cash value of the financed vehicle at the date of
loss, less its salvage value; (iii) the unpaid balance of the contract;
(iv) $50,000 per financed vehicle; or (v) the lesser of the amounts due the
Company under clauses (i) through (iv) above, less any amounts due under all
other valid insurance on the damaged financed vehicle less its salvage value.
No assurance can be given that the insurance will cover the amount financed
with respect to a financed vehicle.
There is no aggregate limitation or other form of cap on the number of claims
under the VSI Policy. Coverage on a financed vehicle is for the term of the
related contract and is noncancellable. The VSI Policy requires that, prior
to filing a claim, a reasonable attempt be made to repossess the financed
vehicle and, in the case of claims on skip losses, every professional effort be
made to locate the financed vehicle and the related borrower.
Credit Default Insurance. In addition to physical damage and loss coverage,
the Company obtains credit default insurance policies for substantially all of
the receivables it acquires. Generally, these policies are obtained for each
securitized pool of receivables and as a result, benefit that pool's trustee
and certificate holders. The insurance provides indemnification for certain
losses incurred due to a deficiency balance following the repossession and
resale of financed vehicles securing defaulted finance contracts eligible for
coverage. Coverage under these credit default policies are conditioned upon
the Company's maintaining and adhering to the credit underwriting criteria set
forth in each policy. THe Company has experienced some claim denials under
these policies, which is contesting. If it is not successful in its efforts,
the Company may experience an adverse financial impact. Under these policies,
losses on eligible contracts are calculated in an amount equal to the Net
Payoff Balance (as defined below) less
<PAGE> 18
the sum of (i) the Actual Cash Value (as defined below) of the financed vehicle
plus (ii) the total amount recoverable from all other applicable insurance,
including refunds from cancelable add-on products. The maximum coverage under
these policies is $40,000 per contract.
From the time it commenced purchasing finance contracts until August 31, 1995,
the Company relied upon a series of credit default insurance policies purchased
through Agricultural Excess and Surplus Insurance Company ("AESIC") which were
guaranteed by AESIC's parent, Great American Insurance Company. Each of these
policies required that the Company make a deposit of certain moneys to
segregated accounts from which losses incurred under a policy would be paid.
Once the funds in an account have been depleted by losses incurred under a
policy, AESIC would directly reimburse the insured.
Since August 1995, the Company has relied upon a series of credit default
insurance policies purchased through The Connecticut Indemnity Company
("Connecticut Indemnity"), a subsidiary of Orion Capital Corporation or
Empire Fire and Marine a subsidiary of the Zurich Insurance Group ("Empire").
Unlike the insurance provided by AESIC, these policies do not require the
Company to deposit moneys to segregated accounts to pay losses. Instead, each
of the Connecticut Indemnity and Empire policies provide that the Company bear
losses until such loss exceeds 8% or 10% (depending on the policy) of the
aggregate amount insured under that policy. Connecticut Indemnity or Empire
is obligated to pay all losses in excess of this amount to the insured.
Credit default insurance was purchased for each of the finance contracts sold
to a securitization trust with the exception of Aegis Auto Receivables Trust
1995-3 for which credit default insurance was purchased for only $31.8 million
of the $60.0 million of finance contracts sold to that trust. Furthermore,
none of the $148.4 million finance contracts contributed to Aegis Auto Owners
Trust 1995 have the benefit of credit default insurance. The Aegis Auto Owners
Trust 1995 did not require this type of insurance since the principal balance
owed to the certificate holders is insured by MBIA.
"Actual Cash Value," for the purposes of credit default insurance, means
gross proceeds from the sale of the repossessed automobile securing the
finance contract. Under certain circumstances, this amount could be modified
to reflect the greater of (i) gross proceeds from sale and (ii) the wholesale
market value at the time of the loss as determined by an automobile guide
provided by the insurer applicable to the region in which the financed vehicle
is sold.
"Net Payoff Balance," for the purposes of credit default insurance, means the
outstanding principal balance as of the default date plus late fees and
corresponding interest no more than 90 days after the date of default. Net
Payoff Balance does not include non-approved fees, taxes, penalties or assess-
ments included in the original instrument, or repossession, disposition,
collection, remarketing expenses and fees or taxes incurred.
Regulation
The Company acts as a sales finance company in 37 states and is licensed
and/or registered in each state. The Company is subject to varying degrees
of regulation and periodic examination in such states. In addition, numerous
federal and state consumer protection laws impose requirements upon the
origination and collection of consumer receivables. The laws of some states
impose finance charge ceilings and other restrictions on consumer transactions
and may require certain contract disclosures in addition to those required
under federal law. These requirements impose specific statutory liabilities
upon creditors who fail to comply with their provisions. In addition, certain
of these laws make an assignee of such finance contract liable to the obligor
thereon for any violations by the assignor. The Company, as an assignee of
<PAGE> 19
finance contracts, may be unable to enforce some of its finance contracts or
may be subject to liability to the obligor under some of its finance contracts
if such finance contracts do not comply with such laws.
The Company is subject to numerous federal laws, including the Truth in Lending
Act, the Equal Credit Opportunity Act and the Fair Credit Reporting Act and the
rules and regulations promulgated thereunder, and certain rules of the Federal
Trade Commission. These laws require the Company to provide certain disclosures
to applicants, prohibit misleading advertising and protect against discrimina-
tory financing or unfair credit practices. The Truth in Lending Act and Re-
gulation Z promulgated thereunder require disclosure of, among other things,
the terms of repayment, the amount financed, the total finance charge and the
annual percentage rate charged on each automobile finance contract. The Equal
Credit Opportunity Act prohibits creditors from discriminating against finance
contract applicants (including finance contract obligor) on the basis of race,
color, religion, national origin, sex, age or marital status or on the basis
that income is derived from public assistance. Under the Equal Credit Oppor-
tunity Act and Regulation B promulgated thereunder, creditors are required to
make certain disclosures regarding consumer rights and advise consumers whose
credit applications are not approved of the reasons for the rejection. The Fair
Credit Reporting Act requires the Company to provide certain information to
consumers whose credit applications are not approved on the basis of a report
obtained from a consumer reporting agency. The rules of the Federal Trade
Commission limit the types of property a creditor may accept as collateral to
secure a consumer finance contract and its holder in due course rules provide
for the preservation of the consumer's claims and defenses when a consumer
obligation is assigned to a subject holder. With respect to used vehicles
specifically, the Federal Trade Commission's Rule on Sale of Used Vehicles
requires that all sellers of used vehicles prepare, complete and display a
Buyer's Guide which explains any applicable warranty coverage for such vehicles.
In addition to limiting the types of property which may be taken as collateral,
the Credit Practices Rule of the Federal Trade Commission imposes additional
restrictions on finance contract provisions and credit practices.
Certain of the states in which the Company operates prohibit Dealers from
charging a finance charge in excess of statutory maximum rates. Finance
charges include interest and any cash sale differential. The Company's
agreements and other communications with Dealers stress the importance of
Dealers' compliance with all applicable laws. The Company's contractual
agreements with Dealers obligate Dealers to comply with all applicable laws
and provide that each Dealer must indemnify the Company for any violation of
law relating to a finance contract acquired from the Dealer. Every obligor
(as part of the standard financing documentation) currently acknowledges by
signing the retail installment contract that the obligor is aware, and
approves, of the Dealer's intended sale of the finance contract at a discount
to the Company. To the best of the Company's knowledge, the obligor was not
quoted a lower price for a cash purchase. Further, it is the Company's policy
to terminate its relationship with any Dealer where the Company becomes aware
of such incidents perpetrated either with the knowledge or tacit assent of the
Dealer or by more than one salesperson at a particular Dealer. As of June 30,
1997, no Dealer had been so terminated. To the knowledge of the Company, no
action has been brought or is currently threatened or contemplated against the
Company alleging that Dealers regularly charge cash sale differentials.
Nevertheless, if it were determined that a material number of finance contracts
acquired by the Company involved violations by Dealers of applicable laws and
regulations, the Company's financial position could be materially adversely
affected and a widespread pattern of violation by Dealers could have a material
adverse effect on the Company's future prospects.
In the event of default by an obligor on a finance contract, the Company is
entitled to exercise the remedies of a secured party under the Uniform
Commercial Code ("UCC"). The UCC remedies of a secured party include the right
to repossession by self-help means, unless such means would constitute a breach
of the peace. Unless the obligor voluntarily surrenders a vehicle, self-help
repossession is accomplished through the engagement of an independent reposses-
sion specialist. Self-help repossession is accomplished through by retaking
<PAGE> 20
possession of the vehicle. If a breach of the peace is likely to occur, or if
applicable state law so requires, the Company must obtain a court order from
the appropriate state court and repossess the vehicle in accordance with that
order. None of the states in which the Company presently does business, except
for Louisiana, has any law that would require the Company, in the absence of a
probable breach of the peace, to obtain a court order before it attempts to
repossess a vehicle. However, in instances where the vehicle is located on an
Indian Reservation or a military base, self-help repossession is not available.
In these cases, the Company enlists the assistance of the highest ranking
official of the reservation or the base, as the case may be, to resolve the
matter in accordance with applicable laws.
In most jurisdictions, the UCC and other state laws require the secured party
to provide the obligor with reasonable notice of the date, time, and place of
any public sale or the date after which any private sale of the collateral may
be held. Unless the obligor waives his or her rights after default, the
obligor in most circumstances would have the right to redeem the collateral
prior to actual sale by paying the secured party all unpaid installments of
the receivable (less any required discount for prepayment) plus reasonable
expenses for repossessing, holding, and preparing the collateral for disposition
and arranging for its sale, plus in some jurisdictions, reasonable attorneys'
fees, or, in some states, by payment of past-due installments. Repossessed
vehicles are generally resold by the Company through wholesale auctions which
are attended principally by dealers.
The Company, through one of its operating subsidiaries, is licensed by the
Federal Housing Administration ("FHA") of the U.S. Department of Housing and
Urban Development as an issuer of securities collateralized by HUD Title I
Loans. As such, the Company is subject to certain regulations, including
requirements for the maintenance of certain minimum levels of capitalization,
and is subject to periodic examination by the FHA.
The Company believes it is in compliance in all material respects with
regulations applicable to it, except for its late filing of its annual
10-K filing with the SEC and the Nasdaq.
Employees
As of October 20, 1997, the Company and its subsidiaries employed approximately
525 persons, including three in senior management and 194 in finance contract
acquisition and administrative support and 265 persons in finance contract
servicing, including one in senior management. None of the Company's employees
is covered by a collective bargaining agreement.
Item 2: Properties.
Properties and Facilities
The Company's headquarters are located in approximately 30,000 square feet of
leased space at 525 Washington Boulevard, Jersey City, New Jersey. The lease
for such facility expires in August 2005. The Company's headquarters contain
the Company's executive offices as well as those related to automobile finance
contract acquisitions. On October 17, 1997, the Company announced the
closing of its New Jersey facility and will be relocating to its Marietta,
Georgia facility. The Company also leases office space in Irvine,
California (expiring April 1999); Marietta, Georgia (expiring June 2005); and
Merriam, Kansas (expiring December 1999) aggregating approximately 77,905
square feet. Such facilities are used for finance contract acquisitions,
systems technology, sub-servicing and sales support. The Company,
through its subsidiary SST, owns a 52,228 square foot building in St. Joseph,
<PAGE> 21
Missouri. Such facility is used for its servicing operations. The building
and land was purchased for $2.1 million and has outstanding mortgages of
approximately $2.0 million.
Item 3: Legal Proceedings.
Litigation
In connection with a complaint filed on April 28, 1996 by Star Holdings, Inc.
d/b/a The Sloane Organization (the "Plaintiff") 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 the Plaintiff was entitled to certain fees under a
finder's agreement entered into with the Company on January 2, 1996. On Jan-
uary 8, 1997, the United States District Court for the Southern District of
New York denied the Plaintiff's 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. In accordance
with the procedures set by the court, both parties submitted their direct cases
in writing and the remainder of the trial was set for late May 1997. The case
has been settled and dismissed. Judgment was entered against the Company in
the amount of $650,000 which the court believed was a valid assessment of
Plaintiff's services. This amount has been paid by the Company to Plaintiff.
Subsequent to this judgment, the Company filed a motion to recoup certain legal
fees in the amount of approximately $75,000, to challenge the court's
calculation of pre-judgment interest and to oppose Plaintiff's attempt to
obtain costs and expenses from the Company. As settlement of the foregoing,
Plaintiff agreed to pay $50,000 to the Company (which amount has been paid),
to concede the disputed amount of the interest charge and to drop the claim
for costs.
On May 2, 1996, a purported class action lawsuit on behalf of Josephine
Thornton and other individuals, captioned Josephine C. Thornton, et al., on
behalf of themselves and all others similarly situated vs. Bennett Finance,
Inc. et al., was filed in the New York Supreme Court for New York County against
Bennett Finance Inc. and various other persons and entities alleged to have
been affiliated with or employed by The Bennett Funding Group, Inc. ("Bennett
Funding") and Bennett Management and Development Corp. ("Bennett Management").
Other entities, including the Company, were named as defendants because they
were allegedly alter egos and agents for Patrick Bennett, Michael Bennett,
their parents and certain other named individual defendants. It is further
alleged that, as such alter egos and agents, the corporate defendants,
including the Company, engaged in common law and securities fraud, negligent
misrepresentations, deceptive acts or practices, sale of unregistered
securities and breaches of fiduciary duty in connection with the financing
activities of Bennett Funding and Bennett Management. Plaintiffs in this
action seek an accounting, unspecified compensatory and punitive damages,
injunctive relief, costs, attorneys' fees and such other relief as the court
deems appropriate. On or about May 30, 1997, the Company moved to dismiss
all claims asserted against it in the Bennett matter. The motion
to dismiss has been submitted to the court. Discovery is stayed
pending a decision on the motion to dismiss. The Company believes that its
motion to dismiss the complaint is meritorious.
<PAGE> 22
On or about May 15, 1997, Aegis Capital Market, Inc. filed a proof of claim for
approximately $668,000 in the United States Bankruptcy Court for the Northern
District of New York in a case entitled In re Bennett Management and
Development Corp. The proof of claim is based on a $600,000 note receivable
(the "Note") issued by Bennett Management in connection with a transaction in
August 1993, whereby the Company sold to Bennett Management an investment in
securitized HUD Title I Loans and certain retained interests in the Company's
securitizations of automobile finance contracts. The Note bears interest at
8.5% per annum and matures in August 2000. To date, such proof of claim has
not been adjudicated by the court.
By letter dated August 1, 1997, counsel for ALFI contacted the Company
concerning disputes under a Master Servicing Agreement dated April 6, 1996
and a letter agreement dated June 10, 1997, between the Company and ALFI
(respectively, the "Master Servicing Agreement" and the "Letter Agreement").
Pursuant to the Master Servicing Agreement, ALFI had been the sub-servicer of
certain securitized loan portfolios serviced by the Company. ALFI's counsel
contends that: (a) the Company owes ALFI about $457,000 in unpaid servicing
fees; (b) the Company owes ALFI an unstated amount in late charges; (c) the
Company owes ALFI about $31,000 in other expenses; (d) the Company owes ALFI
about $247,000 for reimbursement of funds paid by ALFI to certain "NSF
Accounts"; and (e) the Company sent to Norwest Bank Minnesota, N.A.
("Norwest"), the Trustee of the loan portfolios, and to others, a letter
that is purportedly "defamatory and actionable" in that it "places blame"
for late filings of ultimately rejected RDI claims upon ALFI. The Company
believes it does not owe ALFI any servicing fees and that the Company is
entitled to reimbursement of about $195,000 in servicing fees it caused to
be paid to ALFI but to which ALFI was not entitled. The Company also
disputes that it owes ALFI any of the late charges and that it is entitled
to reimbursement for late charge payments that it has made. The Company has
caused to be paid the expenses sought by ALFI and $232,000 to the NSF Account.
ALFI has not supplied supporting documentation for the remaining $15,000 for
which it sought reimbursement for payment to the NSF Account.
In addition, ALFI has withheld $191,000 which it owes the Company under a
Subcontracting Agreement between the Company and ALFI dated April 6, 1996,
apparently as a means of securing its purported claims under the Master
Servicing Agreement. In response, the Company has withheld $37,000 from ALFI
under the Letter Agreement.
By letters dated May 28, 1997, Norwest informed the Company that, to the
extent the rejection of untimely filed RDI claims ultimately exceed the
deductibles on the applicable insurance policies, there would be an event of
default under the Company's agreements with Norwest. An aggregate amount of
$1,579,000 in RDI claims have been denied due to untimely filings. The
Company believes approximately $450,000 of additional similar claims exist.
While the Company denies liability for the untimely filings and contends that
ALFI had the responsibility to timely file all such claims pursuant to the
Master Servicing Agreement, the Company, by letter dated June 19, 1997,
notified Reliance Insurance Company ("Reliance"), its errors and omission
insurance policy carrier, of the potential claim against it by Norwest. By
letter dated July 10, 1997, Reliance acknowledged the Company's $3,000,000
insurance policy (containing a $350,000 deductible) and reserved its right to
deny coverage on several grounds. Should the Company be found liable for some
or all of the losses caused by the untimely filing of the RDI claims, it does
not believe that Reliance's reservation of rights will not preclude coverage.
<PAGE> 23
On or about July 11, 1997, an action was brought in the Superior Court of the
State of California for the County of Orange, by James Osborn, an employee of
a temporary placement agency whose services were utilized by the Company,
alleging wrongful termination and sexual harassment against the Company and
one of its employees. His wife, Susan Osborn, has filed a complaint against
the Company for loss of consortium (collectively, the "Plaintiffs"). The
Plaintiffs assert claims against the Company and its employee for special
damages in an aggregate amount of $6,000,000, general damages in an aggregate
amount of $6,000,000, punitive damages in an aggregate of amount $6,000,000,
for a civil penalty in the amount of $75,000 under the California Civil Code,
for attorneys fees and costs and for prejudgment interest at the legal rate of
ten percent. The Company received an offer to settle this matter for a total
amount of $399,996. The Company has refused this settlement offer and on
September 30, 1997 filed responsive pleadings. The case is currently in
the discovery stage. The Company believes it has meritorious defenses to
these allegations and intends to defend this matter vigorously.
On or about September 3, 1996, an action was brought in the United States
District Court for the Middle District of the State of Louisiana on behalf of
a putative class defined as persons who hold installment contracts originated
by and/or negotiated to Chase Bank, N.A. ("Chase") and Aegis Auto Finance, Inc.
("Aegis") and their Louisiana affiliates with respect to vehicle purchases made
from a specific Louisiana dealer. Plaintiffs assert claims for compensatory and
punitive damages under the Federal Truth-in-Lending Act ("TILA") and Louisiana
state law based on the allegation that certain taxes and state fees were
improperly included in the "amount financed" section of the contract thus
causing the disclosed "annual percentage rate" under the relevant contracts to
be misstated by a small but actionable amount. Chase and Aegis have moved to
dismiss the complaint for failure to state a claim. The motion was briefed
and submitted to the court this summer. On or about August 19, 1997, the court
granted the Company's motion for summary judgment dismissing all claims against
the Company. To date, final judgement has not been entered. Plaintiffs have
thirty days from the date of the entry of final judgment to file a notice of
appeal. It is likely that a notice of appeal will be filed.
The Company is also subject to various legal proceedings and claims that arise
in the ordinary course of business. The Company believes that the amount of any
ultimate liability with respect to these actions, not including the actions
described above, in the aggregate or individually will not materially affect
the results of operations, cash flows or financial position of the Company.
Item 4: Submission of Matters to a Vote of Security Holders.
There were no submissions of matters to a vote of security holders during the
fourth quarter of the fiscal year ended June 30, 1997.
PART II
Item 5: Market for Common Equity and Related Stockholder Matters.
The Company's Common Stock is quoted on the Nasdaq National Market ("NNM")
under the symbol "ACARE". The following table sets forth, for the periods
indicated, the high and low per share sales prices for the Common Stock as
reported on the NNM. Quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not necessarily represent actual
transactions.
<PAGE> 24
<TABLE>
<CAPTION>
Price of Common Stock
---------------------
High Low
---- ---
<S> <C> <C>
Fiscal year ended June 30, 1996:
- -------------------------------
Quarter ended September 30, 1995 $8 3/8 $7
Quarter ended December 31, 1995 8 3/4 7
Quarter ended March 31, 1996 7 1/2 5 5/8
Quarter ended June 30, 1996 6 5/8 5
Fiscal year ended June 30, 1997:
- -------------------------------
Quarter ended September 30, 1996 $5 3/4 $3 7/8
Quarter ended December 31, 1996 5 1/2 2 3/8
Quarter ended March 31, 1997 3 1/2 31/32
Quarter ended June 30, 1997 1 11/32 5/8
</TABLE>
On August 25, 1997, the Nasdag Stock Market announced new listing requirements
to further strengthen both the quantitative and qualitative requirements for
issuers listing on Nasdaq. As of October 20, 1997, the Company does not meet
all of the new requirements for continued listing. The Company has until
February 23, 1998 to meet all the new requirements. Under new listing
requirements, the Company's minimum bid price must be at least $1; as of
October 23, 1997, the Company's bid price was $ 9/32. Furthermore, on
October 17, 1997, the Company received notification from Nasdaq of a potential
delisting due to certain events including the non timely filing of the
Company's annual report on Form 10-K for the fiscal year ended June 30, 1997.
The Company has received a stay from Nasdaq pending the outcome of a hearing
scheduled for December 4, 1997.
As of October 31, 1997, there were approximately 4,200 holders of record
of the Company's Common Stock.
The Company's capital stock consists of 30,000,000 authorized shares of
common stock, par value $.01 per share, of which, as of October 31, 1997,
17,677,217 shares were issued and outstanding; and 2,000,000 authorized
shares of preferred stock, par value $.10 per share, of which, as of
November 12, 1997, 1,100 shares were designated as Series C with 306 shares
outstanding and 21,350 shares were designated as Series D, 2,100 shares were
designated as Series E and 2,100 shares were designated as Series F.
On October 16, 1997, the Company's holders of its Debenture converted the
Debenture into Cumulative Convertible Preferred Stock, Series D ("Series
D Preferred Shares"). The Debenture, with a face value of $21.3 million
and an interest rate of 12% were converted into 21,107 Series D Preferred
Shares with a 12.75% dividend and a redemption value of approximately $21.1
million. The Series D Prefered Shares are convertible into common stock at
$1.26 per share.
On November 10, 1997, the Company's holders of the remaining subordinated debt
converted its debt into Cumulative Preferred Stock ("Series E and F Preferred
Shares"). The debt, with a face value of $4.0 million and an interest rate
of 12% was converted into 2,000 shares each of Series E and F Preferred Shares
with a 12.0% dividend and a redemption value of $4.0 million. The Series E
Preferred Shares are convertible into common stock at $1.26 per share and the
Series F Preferred Shares are convertible into common stock at $2.00 per share.
The Company has not paid any dividends on its common stock. The payment of
dividends, if any, in the future is within the discretion of the Board of
Directors and will depend on the Company's earnings, its capital requirements
and financial condition. It is the current intention of the Board of
Directors to retain all earnings, if any, for use in the Company's business
operations, and accordingly, the Board of Directors does not expect to
declare or pay any dividends in the foreseeable future.
The transfer agent and registrar for the Company's Common Stock is FCTC
Transfer Services, 505 Thornall Street, Suite 303, Edison, NJ 08837.
<PAGE> 25
Item 6: Selected Financial Data.
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------------------
1993 1994 1995 1996 1997(*)
----- ---- ---- ---- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Auto Finance Revenues
Gains (losses) from
securitization transactions $ - $ 2,876(1) $9,523 $32,323 ($27,416)
Interest Income - 1,321 6,710 13,795 21,869
Servicing fee income - - - - 4,038
Fees and commissions 438 2,294 259 274 1,281
Other income - - 230 113 218
--- ------- ------ ------ --------
Total auto business revenues 438 6,491 16,722 46,222 (9)
Other business revenues(2) 5,926 4,686 1,088 106 -
------ ------ ------ ------ ------
Total revenues 6,364 11,177 17,810 46,328 (9)
------ ------ ------ ------ ------
Operating Expenses
Salaries and other
employee costs 2,701 3,568 3,897 8,266 13,876
Interest expense - 968 4,794 10,091 588
Provision for credit losses - 287 941 3,505 9,427
Other operating expenses 3,016 3,599 4,511 6,898 13,022
----- ----- ----- ----- ------
Total operating expenses 5,717 8,422 14,143 28,760 52,913
----- ------ ------ ------ ------
Charge for release of
Escrowed Shares(3) - - 879 807 -
----- ------ ------ ----- ------
Operating income (loss) 647 2,755 3,042 16,761 (52,922)
----- ------ ------ ------ -------
Provision for (recovery of)
income taxes 334 1,352 1,768 7,472 (8,427)
---- ------ ------ ------ --------
Net income (loss) $313 $1,403 $1,274 $9,289 ($44,495)
==== ====== ====== ====== ========
Net income (loss) available for
common stockholders $313 $1,178 $1,079 $9,018 ($44,688)
==== ====== ====== ====== =========
Portfolio Data:
Number of finance contracts
acquired 1,148 2,964 10,895 36,739 47,722
Amount of finance contracts
acquired $12,181 $33,738 $132,294 $451,536 $591,841
Weighted average size of
finance contracts acquired $10.6 $11.4 $12.1 $12.3 $12.4
Weighted average interest
rate of finance contracts
acquired 20.6% 20.1% 20.2% 20.1% 20.4%
Finance contract portfolio
securitized $4,289 $26,043 $119,251 $432,410 $567,181
Repossession Inventory:
Number of vehicles 9 30 78 698 2,212
Defaulted principal balance $99 $322 $840 $7,861 $25,500
Finance Contracts liquidated awaiting other recoveries:
Number of vehicles 11 25 30 1,552 4,879
Defaulted principal balance $53 $124 $122 $9,212 $33,348
Gross charge-off ratio(4)(5) 0.4% 2.1% 3.4% 2.4% 6.7%
Net charge-off ratio(4)(6) N/M 0.2% 0.8% 1.2% 4.7%
Number of leases originated(7) - 92 1,914 25 -
Amount of leases originated(7) $ - $1,571 $29,025 $436 $ -
Weighted average interest rate
of leases originated(7) N/A 15.8% 16.6% 17.1% -
Operating Data:
Finance contract portfolio
outstanding(8) $11,156 $38,844 $146,557 $500,694 $813,055
Delinquency (>30 days) ratio(9) 3.8% 0.7% 6.5% 9.0% 12.0%
Loans in repossession or
bankruptcy(10) 1.9% 2.7% 2.3% 4.2% 8.5%
---- ----- ----- ----- ----
Total delinquencies 5.7% 3.4% 8.8% 13.2% 20.5%
===== ====== ===== ===== =====
Number of states N/M 14 25 32 31
Number of Dealers N/M 375 1,200 2,900 4,200
Number of sales representatives N/M 8 24 49 38
<PAGE> 27
</TABLE>
<TABLE>
<CAPTION>
At June 30, June 30, 1997
------------------------------------ -------------
1993 1994 1995 1996 1997 Pro-forma(11)
----- ---- ----- ----- ----- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents $495 $981 $5,971 $8,776 $4,493 $4,493
Automobile finance
receivables, net - 15,788 39,784 41,058 34,655 34,655
Retained interests in
securitized receivables 1,243 4,434 23,985 70,243 33,330 33,330
Total assets 4,442 23,527 84,737 127,137 83,483 83,156
Warehouse credit facilities - 15,260 48,162 37,202 17,407 17,407
Notes payable - - 12,956 29,849 36,813 36,156
Subordinated debentures - - - - 24,032 -
Stockholders' equity
(deficit) 2,677 4,083 15,697 33,991 (10,578) 13,391
<FN>
<F1>
(1) Includes approximately $678,000 in gains realized from related parties in
connection with securitization transactions.
<F2>
(2) Other business revenues represents revenues from the Company's non-
automobile finance related activities.
<F3>
(3) Represents a charge for release of 113,386 shares in 1995 and 150,118
shares in 1996 of Common Stock placed in escrow by the executive
officers of the Company in connection with the Company's initial public
offering of Common Stock.
<F4>
(4) The Company records both gross and net losses when all potential recoveries
on a defaulted finance contract have been realized.
<F5>
(5) The gross charge-off ratio is 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 average outstanding principal balance of the finance
contract portfolio outstanding as of each period end.
<F6>
(6) The net charge-off ratio equals the aggregate balance of finance contracts
liquidated (including those previously sold in securitized transactions)
plus repossession and liquidation expenses, less all recoveries from the
sale of the collateral, risk default and other insurance proceeds or
otherwise, as a percentage of average outstanding principal balance of the
finance contract portfolio as of each period end.
<F7>
(7) The Company ceased funding leases in the first quarter of its 1996 fiscal
year.
<F8>
(8) Principal balance of all finance contracts acquired, including those
previously sold in securitized transactions and excluding those which
are in repossession and no longer eligible for reinstatement as of each
period end.
<F9>
(9) Percentage based on outstanding principal balance.
<F10>
(10)Includes finance contracts in bankruptcy, authorized for repossession and in
repossession and still eligible for reinstatement.
<F11>
(11)Pro-forma adjustments reflect the conversion of the Company's $24.0 million
subordinated debt (with a face value of approximately $25.3 million) and
approximately $263,000 of accrued interest into approximately $25.1
million of equity.
<F12>
(*) The Company's audited consolidated financial statments contain a report
from its independent auditors which question the Company's ability to
continue to operate as a going concern. (See Item 8).
N/M not meaningful.
</FN>
</TABLE>
QUARTERLY FINANCIAL DATA:
Summarized financial data is as follows (dollars in thousands, except for
per share amounts):
<TABLE>
<CAPTION>
Quarter Ended
-------------------------------------------------------------------------------------------------
Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30,
1995 1995 1996 1996 1996 1996 1997 1997
-------- ------- ------- -------- --------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $9,158 $9,405 $13,064 $14,700 $13,689 ($22,532) $11,211 $(3,623)
------ ----- ------ ------ ------ ------- ------ ----
Interest expense 2,124 2,459 2,723 2,784 3,014 4,214 6,447 2,914
Other expenses 3,386 3,720 5,824 6,547 5,361 10,759 9,926 10,279
------ ------ ------ ------ ------- ------- ------ ------
Total expenses 5,511 6,179 8,547 9,331 8,374 14,973 16,373 13,193
Net income (loss) before income
taxes (benefit) 3,647 3,227 4,517 5,369 5,315 (37,505) (5,162) (15,570)
Provision (Benefit) for
income taxes 1,641 1,384 1,988 2,460 2,179 (10,606) - -
------ ----- ----- ----- ------ ------- -------
Net income (loss) $2,006 $1,844 $2,529 $2,909 $3,136 ($26,899) ($5,162) ($15,570)
====== ======= ====== ====== ====== ======== ======= =========
Net income (loss) available
to shareholders $2,006 $1,844 $2,529 $2,768 $3,136 ($26,958) ($5,206) ($15,592)
======= ======= ====== ====== ======= ======== ======= =========
Net income (loss) per
common share:
Primary $0.15 $0.13 $0.17 $0.19 $0.19 ($1.68) ($0.31) ($0.88)
===== ===== ===== ===== ====== ====== ====== ======
Fully Diluted $0.14 $0.12 $0.16 $0.18 $0.19 ($1.68) ($0.31) ($0.88)
===== ===== ===== ===== ====== ======= ====== ======
</TABLE>
<PAGE> 28
The quarters ended December 31, 1995, March 31, 1996, June 30, 1996,
September 30, 1996, December 31, 1996, March 31, 1997 and June 30, 1997
included write downs on retained interests in securitized receivables of $1.5
million, $2.5 million, $3.5 million, $2.0 million, $29.0 million, $4.4 million
and $13.6 million, respectively. The quarter ended March 31, 1997 has been
restated to reflect a $4.4 million write down on retained interests in
securitized receivables resulting from a correction of an error in the
Company's valuation model discovered during the valuation process for the
quarter ended June 30, 1997.
The quarter ended June 30, 1996, included a non-cash charge of $807,000 from
the release of escrowed shares which was offset by an increase in paid-in-
capital. There was no impact on total stockholders' equity as a result of
the escrow share release and the resultant non-cash charge.
Item 7: Managements Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion of the financial condition and results of operations
of the Company relates to fiscal years ended June 30, 1995, 1996 and 1997, and
should be read in conjunction with the preceding Selected Financial Data and
the Company's Consolidated Financial Statements and Notes thereto included
elsewhere in this annual report. All references to full years are to the
applicable fiscal year of the Company.
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 June 30, 1997, the Company has acquired
approximately $1.25 billion of finance contracts, of which $1.03 billion have
been securitized in twenty-one 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>
<CAPTION>
For the Quarters Ended
--------------------------------------------------------------------------------------
June 30, Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31. Mar. 31, June 30,
1995 1995 1995 1996 1996 1996 1996 1997 1997
------- ------- ------- ------- ------ ------- ------ ------- ------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Number of finance
contracts acquired
during period......... 4,901 5,943 8,190 10,569 12,037 15,401 14,584 8,992 8,745
Average finance contract
balance .............. $12.2 $12.2 $12.3 $12.2 $12.4 $12.4 $12.3 $12.3 $12.6
Aggregate value of
finance contracts acquired
during period......... 59,609 72,562 100,582 128,781 149,612 190,843 179,933 110,580 110,485
Gains from securitization
transactions(1)(2)..... 5,197 6,023 7,424 12,759 10,824 10,349 (578) 5,979 5,797
Gains from whole loan
sales................. 40 48 64 111 290 - - 37 -
Net interest (expense)
income................ 765 866 1,021 546 993 2,129 2,747 2,894 1,931
Revenue(3)(4).......... 6,111 7,034 6,946 10,341 11,916 10,675 (26,747) 4,765 (5,291)
Finance contracts securitized
during period.......... 54,000 67,630 85,368 130,138 149,274 173,258 4,870 238,393 148,814
Finance contracts sold
during period......... 1,000 1,000 1,801 2,752 2,250 - - 15,000 -
Servicing portfolio
(at period end)(5)..... 146,557 197,911 287,481 401,704 500,694 645,551 759,304 783,757 813,055
<FN>
<F1>
(1) Excludes gains from whole loan sales of finance contracts.
<F2>
(2) The quarters ended December 31, 1995, through June 30, 1997 are before
write downs of $3.1 million, $1.5 million, $3.5 million, $2.0
million, $29.0 million, $4.4 million and $13.6 million, respectively,
taken on prior retained interests in securitized receivables.
<F3>
(3) Revenue is net of interest expense and includes the write downs on
retained interests in securitized receivables.
<F4>
(4) The quarter ended March 31, 1997 has been restated to reflect a $4.4
million write down on retained interests in securitization
receivables resulting from a correction of an error discovered
in the Company's valuation model, relating to such quarter, during
the valuation process for the June 30, 1997 quarter.
<F5>
(5) Excludes finance contracts in bankruptcy, authorized for repossession
and in repossession and still eligible for reinstatement.
</FN>
</TABLE>
<PAGE> 29
Revenues
The Company's primary sources of revenues consist of two components:
gains from securitization transactions and interest income.
Gains (Losses) from Securitization Transactions. The Company warehouses the
finance contracts it acquires and periodically sells them to a trust, 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
records a gain from securitization transactions and establishes an asset
referred to as retained interest in securitized receivables. Gains 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 estimated future cash flows to be received by the Company, discounted at
a market-based rate, taking into consideration (i) contractual obligations of
the obligor, (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 and losses incurred in connection
with defaults. Subsequent to securitization, the Company continues to service
the securitized finance contracts, for which it recognizes servicing fees over
the life of the securitization. Retained interest in securitized receivables
represents the difference between the weighted average finance contract rate
earned and the rate paid on certificates issued to the investors in the
securitization, less servicing fees and other costs over the life of the
securitization. Retained interest in securitized receivables is computed
by taking into account certain assumptions regarding prepayments, defaults,
servicing and other costs. The Company reviews on a quarterly basis the
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 (See "Results of
Operations"). 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 performance
characteristics of the Company's finance contract portfolio to date. The
Company's default assumptions are based on estimated 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 for leases. 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 growth has
a significant impact on the amount of interest income earned by the Company.
<PAGE> 30
The following table provides information for each of the Company s rated
securitizations:
<TABLE>
<CAPTION>
Weighted
Remaining Average Weighted
balance at Finance Average
Original June 30, Contract Certificate Current Gross Net
Securitizations Balance 1997 Rate(1) Rate(1) Ratings Spread (1)(2) Spread(1)(3)
- -------------- ------- ------ ------- --------- ------- ------------- ------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Aegis Auto Receivables Trust,
Series:
1994-A . . $18,539 $2,595 20.28% 7.74% A(4) 12.54% 8.70%
1994-2 . . 23,251 4,722 19.82 8.04 A+(4) 11.78 8.12
1994-3 . . 21,000(5) 5,379 19.66 9.46 A+(4) 10.20 6.46
1995-1 . . 21,000(5) 6,437 20.41 8.60 A+(4) 11.81 8.46
1995-2 . . 54,000(5) 19,381 19.94 7.16 A+(4) 12.78 8.98
1995-3 . . 60,000(5) 24,809 20.04 7.09 A+(4) 12.95 10.12
1995-4 . . 70,000(5) 32,440 19.88 6.65 BBB+(4) 13.23 10.41
1996-1 . . 92,000(5) 49,626 20.13 8.44(6) (7) 11.69 8.89
1996-2 . . 105,000(5) 65,912 20.10 8.93(8) (9) 11.17 8.40
1996-3 . . 110,000(5) 79,329 20.20 8.82(10) (11) 11.40 8.75
Aegis Auto
Owners Trust . 148,347 90,766 20.14 6.53 (12) 13.61 10.87
<FN>
<F1>
(1) Values as of closing date.
<F2>
(2) Difference between the Weighted Average APR on finance contracts
and the Weighted Average APR on the trust certificates (the "Weighted
Average Certificate Rate").
<F3>
(3) 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.
<F4>
(4) Indicates ratings by Duff & Phelps.
<F5>
(5) 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.
<F6>
(6) 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%.
<F7>
(7) The 1996-1 Securitization has Class A Notes rated B+ by Duff & Phelps
and B by Fitch; Class B Notes rated B by Duff & Phelps and CCC by
Fitch and Class C Notes rated C by Duff & Phelps and CCC- by Fitch.
<F8>
(8) 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%.
<F9>
(9) The 1996-2 Securitization has Class A notes rated B+ by Duff & Phelps and
CCC+ by Fitch; Class B notes rated B by Duff and Phelps and CC+
by Fitch and Class C notes rated C by Duff & Phelps and CC by Fitch.
<F10>
(10) 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%.
<F11>
(11) The 1996-3 Securitization has Class A notes rated BBB- by Duff &
Phelps and B- by Fitch; Class B notes rated B by Duff & Phelps and
CC+ by Fitch and Class C notes rated C by Duff & Phelps and CC by Fitch.
<F12>
(12) The Owner Trust Facility has Class A notes rated AAA by Standard &
Poors and Aaa by Moody s and Class B certificates rated Ba1 by
Moody s.
</FN>
</TABLE>
The following table provides information for each of the Company's
securitizations under its $1.0 billion Purchase Facility:
<TABLE>
<CAPTION>
Weighted Weighted
Remaining Average Weighted
balance at Finance Average
Original June 30, Contract Certificate Gross Net
Securitizations Balance 1997 Rate(1) Rate(1) Spread(1)(2) Spread(1)(3)
- --------------- ------- ------- ------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
1997-1 $238,693 $205,137 20.43% 9.5%(4) 10.93% 8.46%
1997-2 . . 37,163 35,258 20.67 9.75(5) 10.92 8.48
1997-3. . 38,475 37,673 20.73 9.53(6) 11.20 8.81
1997-4 . . 74,721 74,111 20.40 9.38(7) 11.22 8.62
<FN>
<F1>
(1) Values as of closing date.
<F2>
(2) Difference between the Weighted Average APR on finance contracts and
the Weighted Average Certificate Rate.
<F3>
(3) Difference between Weighted Average APR on finance contracts and the
Weighted Average Certificate Rate, net of servicing and trustee fees.
<F4>
(4) The weighted average Certificate Rate is composed of the following:
the Class A certificate rate is 7.3% and the Class B Certificate rate
is 13.73%
<PAGE> 31
<F5>
(5) The weighted average Certificate Rate is composed of the following: the
Class A certificate rate is 7.5% and the Class B Certificate rate
is 13.9%.
<F6>
(6) The weighted average Certificate Rate is composed of the following: the
Class A certificate rate is 7.25% and the Class B Certificate rate
is 13.8%.
<F7>
(7) The weighted average Certificate Rate is composed of the following:
the Class A certificate rate is 7.1% and the Class B Certificate Rate
is 13.6%.
</FN>
</TABLE>
Results of Operations
Fiscal year ended June 30, 1997 Compared To Fiscal year ended June 30, 1996
Revenues
Revenues decreased to a negative $9,000 (net of a write down of $49.0 million
on retained interests in securitized receivables) for the fiscal year ended
June 30, 1997 from $46.3 million (net of a write down of $7.5 million on
retained interests in securitized receivables) for the fiscal year ended
June 30, 1996, a decrease of $49.0 million or 100.0%.
Gains or Losses from Securitization Transactions. Gains or losses from
securitization transactions decreased to a loss of $27.4 million for the
fiscal year ended June 30, 1997 from a gain of $32.4 million for the fiscal
year ended June 30, 1996, a decrease of $59.8 million. The decrease in gains
or losses from securitization transactions includes write downs of $49.0
million (described below) taken on the retained interests in securitized
receivables from earlier securitizations. During the fiscal year ended
June 30, 1997 and 1996, the Company incurred $49.0 million and $7.5 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 were higher than expected
default rates on the underlying finance contracts and a significant
deterioration in the Company's recovery rates from the disposition of repossed
vehicles. As a result of these differences and other observations on portfolio
performance, current assumptions utilized in current valuations have been
adjusted to reflect the higher default rates and lower recovery rates actually
experienced. The decrease in gains or losses from securitization transactions
is also a result of the Company's current assumptions utilized in evaluating
its retained interest in securitized receivables, which reflect higher than
expected defalut rates and higher losses on the balances outstanding at the
time of default, over the life of the securitization trust compared to the
levels used in the comparable period a year agao and a decrease in the net
spread available. The decrease is also partially attributable to the lack of
a material securitization transaction in the three months ended December 31,
1996 and the lower gain obtained on securitization transactions completed in
the fiscal year ended June 30, 1997 compared to the gains obtained in the
fiscal year ended June 30, 1996. The securitizations completed in the six
months ended June 30, 1997 under the Company's Purchase Facility are not rated.
The adjusted assumptions utilized in valuing its newly created retained
interests in securitized receivables resulted in significantly lower
unrealized gains on such transactions. 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 on the carrying value of these assets. During
the fiscal year ended June 30, 1996, the Company also recorded a valuation
allowance of $0.6 million on a note receivable from a related party with no
such charge in the comparable 1997 period.
Interest Income. Interest income increased to $21.9 million for the fiscal
year ended June 30, 1997 from $13.6 million for the fiscal year ended June 30,
1996, an increase of $8.3 million or 61.0% primarily as a result of the
Company's increased finance contract volume. The Company's monthly average
outstanding balance of finance contracts owned increased to $112.0 million at
June 30, 1997 from $50.3 million at June 30, 1996, an increase of $61.7
million or 122.7%. This significant increase in the average outstanding
balance is attributed to the Company not securitizing or otherwise disposing
<PAGE> 32
of its finance contracts acquired in the quarter ended December 31, 1996
until March 1997. The Company also recorded income of $875,000 representing
the accretion of its dealer discount, net of direct costs, of loans held for
investment for the fiscal year ended June 30, 1997. There was no accretion
from the corresponding period of the comparable period a year ago as balances
held for investment were not material. (Interest income is net of servicing
fees paid).
Servicing Fee Income. For the fiscal year ended June 30, 1997, the Company
recognized servicing fee income of $4.0 million which includes $1.8 million
relating to its new servicing operations there was no comparable income for
the fiscal year ended June 30, 1996. The Company also recognized income of
$2.2 million for the fiscal year ended June 30, 1997, from the sub-servicing
agreements with ALFI compared to approximately $237,000 in the comparable 1996
period.
Fees and Commissions Earned. For the fiscal year ended June 30, 1997, the
Company recognized $870,000 in warranty fees earned. There was no such income
recognized for the fiscal year ended June 30, 1996.
Operating Expenses
Operating expenses increased to $53.0 million for the fiscal year ended
June 30, 1997 from $29.6 million for the fiscal year ended June 30, 1996, an
increase of $23.4 million or 79.1%.
Interest Expense. Interest expense increased to $16.6 million for the fiscal
year ended June 30, 1997 from $10.1 million for the fiscal year ended June 30,
1996, an increase of $6.5 million or 64.4%, as a result of the increased
financing requirements for the increased finance contract balances. The
increase in interest expense represents 27.8% of the total increase in
operating expenses. The Company's monthly average outstanding balance on its
warehouse credit facility increased to $126.8 million for the fiscal year ended
June 30, 1997 from $74.4 million for the fiscal year ended June 30, 1996. The
Company's warehouse credit facilities accrue interest at fluctuating interest
rates that ranged from 8.125% to 9.6875% for the fiscal year ended June 30, 1997
compared to a low of 9.0625% and a high of 10.125% for the fiscal year ended
June 30, 1996. The significant increase in the average outstanding balance
is attributed to the Company not securitizing or otherwise disposing of the
finance contracts acquired in the second quarter ended December 31, 1996 until
March 1997. The Company also incurred interest on notes payable at a 12%
interest rate on a monthly average outstanding balance of $35.6 million for
the fiscal year ended June 30, 1997, compared to a monthly outstanding average
balance of $20.2 million for the fiscal year ended June 30, 1996.
Salaries and Other Employee Costs. Salaries and other employee costs increased
to $13.9 million for the fiscal year ended June 30, 1997 from $9.1 million for
the fiscal year ended June 30, 1996, an increase of $5.6 million or 52.9%, due
to an increase in the number of employees to approximately 520 (including 130
SST employees) at June 30, 1997 from approximately 340 employees at June 30,
1996. In addition temporary help charges incurred increased to approximately
$2.7 million for the fiscal year ended June 30, 1997 from approximately
$405,000 for the fiscal year ended June 30, 1996, an increase of $2.3 million.
Temporary employment agencies, specializing in providing collectors, are
utilized in the Company's Irvine, California collections unit 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 fiscal year ended June 30, 1997 were reduced by 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.
<PAGE> 33
Provision for Credit Losses. The provision for credit losses increased to
$9.4 million for the fiscal year ended June 30, 1997 from $3.5 million for
the fiscal year ended June 30, 1996, an increase of $5.9 million or 169.0%.
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; and (vi) the ratio of current finance contracts to
total finance contracts at June 30, 1997 (50.1%) compared to June 30, 1996
(72.4%). These changes resulted in an increase 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 16.6% at June 30, 1997 from 7.1% at June 30, 1996. The
provision for credit losses for the fiscal year ended June 30, 1997 includes
an adjustment for $500,000 of 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
$9.9 million, an increase of $6.4 million from the fiscal year ended June
30, 1996. The Company maintains residual value insurance relating to its
entire lease portfolio.
Rent and Electricity, Office Expenses and Communicatins. Rent and
electricity charges increased to $2.0 million for the fiscal year ended
June 30, 1997 from $1.2 million for the fiscal year ended June 30, 1996
an increase of $769,000 or 61.6% due to processing centers being expanded or
the servicing subsidiary, SST being opened. In addition, in the second
quarter of fiscal 1996, the Company expanded its Jersey City Headquarters and
in the third quarter of fiscal 1996 the Company relocated and expanded its
collections department located in Irvine, California and in fiscal 1997
opened its servicing subsidiary, SST, in St. Joseph, Missouri. Correspondingly,
office expenses increased to $2.1 million for the fiscal year ended June 30,
1997 from $400,000 for the fiscal year ended June 30, 1996, an increase of $1.2
million or 133.3% and communication expenses increased to $2.5 million for the
fiscal year ended June 30, 1997 from $975,000 for the fiscal year ended June 30,
1996, an increase of $1.5 million or 156.4%. Communication expenses include
expenses relating to receiving and sending electronic data including expenses
relating to obtaining credit reports and other data services, telephone charges,
faxes, the linking of the collections department to ALFI and SST and the linking
of all offices including SST to systems development located in the Merrian,
Kansas facility.
Professional fees. Professional fees, including those paid to related parties,
increased to $2.6 million for the fiscal year ended June 30, 1997 from $1.3
million for the fiscal year ended June 30, 1996, and increase of $1.3 million
or 100.0% due to the follwing: (i) an increase in legal fees of approximately
$916,000 primarily as a result of defending lawsuits entered into against the
Company, as previously discussed, and other general corporate matters (ii) an
increase in accounting and auditing fees of approximately $153,000 (iii) an
increase directors fees of 117,000.
Equipment Rental. Equipment rental increased to $1.2 million for the fiscal
year ended June 30, 1997 from, $687,00 for the fiscal year ended June 30, 1996,
an increase of $497,000 or 72.3% due to the increase in the number of employees
to 520 (including 130 SST employees) at June 30, 1997 from 340 employees at
June 30, 1996, the majority of whom require computers, the most significant
component of equipment rental costs.
All Other Operating Expenses. Other operating expenses increased to $3.0
million for the fiscal year ended June 30, 1997 from $2.4 million for the
fiscal year ended June 30, 1996, and increase of $1.3 million or 53.6%. This
increase is the result of the following: (i) an increase in travel and
entertainment expense of $183,000 due to the Company's expansion into new
territories and new business, (ii) an increase in
<PAGE> 34
amortization and depreciation of $529,000 due to increased purchases of fixed
assets, including leasehold improvements to expanded office space and (iii) an
increase of $555,000 in other expenses such as insurance, advertising and
promotional expenses, other taxes, such as state privelege taxes and other
miscellaneous taxes and miscellaneous expenses.
Income Tax (Benefit) Expense. A net tax benefit of $8.4 million was recorded
by the Company for the fiscal year ended June 30, 1997 which is net of a
valuation adjustment of $12.9 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 $21.3 million (an effective tax rate of 42%). A tax expense of $7.5
million was recorded by the Company for the fiscal year ended June 30, 1996
(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 $44.5 million for the
fiscal year ended June 30, 1997. The net loss resulted from several factors
including: (1) a write down of $28.4 million, net of taxes, in retained
interests in securitized receivables; (2) the decrease in gains or losses
from securitization transactions because the Company's current
assumptions utilized in evaluating its retained interest in securitized
receivables reflect higher than expected default rates and lower
recovery rates over the life of the securitization trust than those assumed
in the comparable period a year ago, and (3) a deferred tax asset
valuation adjustment of $13.8 million taken on losses incurred in excess of
previously earned income.
Fiscal Year Ended June 30, 1996 Compared To Fiscal Year Ended June 30, 1995
Revenues
Revenues increased to $46.3 million for the fiscal year ended June 30, 1996
from $17.8 million for the fiscal ended June 30, 1995, an increase of $28.5
million or 160.1%.
Gains from Securitization Transactions. Gains from securitization
transactions increased to $32.4 million for the fiscal year ended June 30,
1996 from $9.5 million for the fiscal year ended June 30, 1995, an increase
of $22.9 million or 240.5%. The increase in securitized gains was offset by
write downs of $7.5 million taken on the retained interests in securitized
receivables from earlier securitizations and a $600,000 valuation allowance
on a note receivable from a then-related party created in a prior sale of a
retained interest. Additionally, the Company's securitization costs increased
by approximately $326,000 as a result of the inherent costs associated with
issuing warrants to Greenwich in connection with the Securitization Facility.
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
losses in the carrying value of these assets. During the year ended June
30, 1996, the Company incurred $7.5 million of, what management believes to
be, permanent losses on its retained interests in securitized receivables
portfolio. The cause of the permanent impairment was higher than expected
default rates on the underlying finance contracts. As a result of these
increases, current assumptions utilized in current valuations have been
adjusted to reflect the higher default rates.
Interest Income. Interest income increased to $13.3 million for the fiscal
year ended June 30, 1996 from $6.9 million for the fiscal year ended June 30,
1995, an increase of $6.4 million or 92.8%, 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 $50.3
million in the fiscal year ended June 30, 1996 from $18.3 million for the fiscal
year ended June 30, 1995, an increase of $32.0 million or 174.9%. Since the
<PAGE> 35
Company s weighted average coupon has remained at approximately 20.5%, the
increase in interest income is partially attributable to the increase in the
weighted average outstanding balance of $32.0 million during the fiscal year
ended June 30, 1996 or approximately $6.6 million. (Interest income is net
of servicing fees paid).
Operating Expenses. Operating expenses increased to $29.6 million for the
fiscal year ended June 30, 1996 from $14.8 million for the fiscal year ended
June 30, 1995, an increase of $14.8 million or 100.2%.
Interest Expense. Interest expense increased to $10.1 million for the fiscal
year ended June 30, 1996 from $4.8 million for the fiscal year ended June 30,
1995, an increase of $5.3 million or 110.5%, as a result of the increased
financing requirements caused by the Company's increased finance contract
acquisition activity. The increase in interest expense represents 51.1% 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 9.0625% to as high as 10.125% for the fiscal year
ended June 30, 1996 compared to a low of 8.5% and a high of 10.1875% for the
fiscal year ended June 30, 1995. In addition, the Company's monthly average
outstanding balance on its warehouse credit facility increased to $74.4 million
for the fiscal year ended June 30, 1996 from $37.6 million for the fiscal year
ended June 30, 1995. The Company also incurred interest on notes payable at a
12% interest rate on a monthly average outstanding balance of $20.2 million for
the fiscal year ended June 30, 1996 compared to a monthly outstanding average
balance of $8.2 million for the fiscal year ended June 30, 1995.
Salaries and Other Employee Costs. Salaries and other employee costs increased
to $8.3 million for the fiscal year ended June 30, 1996 from $3.9 million for
the fiscal year ended June 30, 1995, an increase of $4.4 million or 112.2%, due
to an increase in the number of employees to approximately 340 at June 30, 1996
from approximately 140 employees at June 30, 1995 and approximately $2.0 million
of bonus expense based on the Company's pre-tax net income for the fiscal year
ended June 30, 1996. For the fiscal year ended June 30, 1995, certain members
of senior management elected to forgo bonuses that would have aggregated
approximately $200,000.
Provision for Credit Losses. The provision for credit losses increased to $3.5
million for the fiscal year ended June 30, 1996 from $941,000 for the fiscal
year ended June 30, 1995, an increase of $2.3 million due to: (i) the Company's
increased acquisition volume of finance contracts; (ii) the Company's decision
to discontinue purchasing credit default insurance on its lease origination
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); and (v) the higher amount of finance contracts and leases
owned by the Company at June 30, 1996 ($41.1 million) as compared to June 30,
1995 ($39.8 million). These changes also resulted in an increase 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 7.1% in 1996 from 2.9% in 1995. The Company
maintains residual value insurance relating to its entire lease portfolio.
Charge for Release of Escrowed Shares. Charge for release of escrowed shares
decreased to $809,000 for the fiscal year ended June 30, 1996 from $879,000
for the fiscal year ended June 30, 1995, a decrease of $72,000 or 8.2%. The
decrease is a result of the decrease in the Company's quoted market price of
$5 3/8 at June 30, 1996 from $7 3/4 at June 30, 1995; the market price is one
of the components for computing the charge. The other component is the number
of shares released. In fiscal 1996, 150,118 shares of the 1,078,308 remaining
escrowed shares were subject to the charge compared to 113,386 shares of the
814,455 released in fiscal 1995. All escrowed shares owned by the executive
officers were subject to this charge. As of June
<PAGE> 36
30, 1996, all escrowed shares are being released, thus the Company will not
incur this expense in future years.
Rent and Electricity, Office Expenses and Communications. Rent and electricity
charges increased to $1.3 million for the fiscal year ended June 30, 1996 from
$616,000 for the fiscal year ended June 30, 1995, an increase of $634,000 or
102.9% due to all processing centers being opened or expanded for the full
fiscal year of 1996, whereas in the fiscal year 1995 two of the Company's
processing centers were newly leased in the latter part of the third quarter.
In addition, in the second quarter of fiscal 1996, the Company expanded its
Jersey City Headquarters and in the third quarter of fiscal 1996 the Company
relocated and expanded its collections department located in Irvine, California.
Correspondingly, office expenses increased to $900,000 for the fiscal year ended
June 30, 1996 from $744,000 for the fiscal year ended June 30, 1995, an increase
of $156,000 or 20.9% and communication expenses increased to $975,000 for the
fiscal year ended June 30, 1996 from $607,000 for the fiscal year ended June 30,
1995, an increase of $368,000 or 60.8%. Communication expenses include expenses
relating to receiving and sending electronic data including expenses relating to
obtaining credit reports and other data services, telephone charges, faxes, the
linking of the collections department to the third party servicer and the
linking of all the offices to systems development location in the Merriam,
Kansas facility.
Professional fees. Professional fees, including those paid to related parties,
increased to $1.3 million for the fiscal year ended June 30, 1996 from $722,000
for the fiscal year ended June 30, 1995, an increase of $534,000 or 74.0% due
to the following: (i) an increase in accounting and auditing fees of approx-
imately $100,000 primarily as a result of the new reporting requirements of
the Company as a public company for the fiscal year ended June 30, 1996;
(ii) an increase in legal fees of approximately $200,000 primarily as a
result of the new reporting requirements of the Company as a public company
for the fiscal year ended June 30, 1996 and as a result of defending primarily
two lawsuits entered into against the Company as previously discussed;
(iii) an increase of approximately $110,000 in directors fees; and (iv) an
increase of approximately $124,000 in consulting fees (offset by a decrease
in related party consulting fees of $225,000). During the fiscal year ended
June 30, 1996, the Company engaged public relation firms to assist it in
developing its marketing strategies in both the sub-prime automobile finance
industry and in the investor community; whereas, these expenses were not
incurred for the fiscal year ended June 30, 1995.
Equipment Rental. Equipment rental increased to $687,000 for the fiscal year
ended June 30, 1996 from $448,000 for the fiscal year ended June 30, 1995, an
increase of $239,000 or 53.2% due to the increase in the number of employees
to 340 at June 30, 1996 from 140 employees at June 30, 1995, the majority of
the new employees require computers, the most significant component of
equipment rental costs.
All Other Operating Expenses. Other operating expenses increased to $1.8
million for the fiscal year ended June 30, 1996 from $1.2 million for the
fiscal year ended June 30, 1995, an increase of $709,000 or 63.2%. This
increase is the result of the following: (i) an increase in travel and
entertainment expense of $173,000 due to the Company's expansion into new
territories including seven new states; (ii) an increase in amortization and
depreciation of $158,000 due to increased purchases of fixed assets, including
leasehold improvements to expanded office space and (iii) an increase of
$378,000 in other expenses such as insurance, advertising and promotional
expenses, other taxes, such as state privilege taxes and other miscellaneous
taxes and miscellaneous expenses.
Income Taxes. Income taxes increased to $7.5 million (an effective tax rate
of 44.6%) for the fiscal year ended June 30, 1996 from $1.8 million (an
effective tax rate of 58.2%) for the fiscal year ended June 30, 1995, an
increase of $5.7 million. The decrease in the Company's effective tax rate of
13.5% is a result of the decrease in the impact of permanent differences
(primarily from the charge for the release of escrowed shares discussed
above that is not tax deductible) between book and taxable income. For the
fiscal year ended June
<PAGE> 37
30, 1996, the impact of the charge for the release of escrowed shares decreased
to 1.7% from 10.0% for the fiscal year ended June 30, 1995, a decrease of 8.3%,
the other significant component is the state and local tax benefit which
decreased to 7.1% for the fiscal year ended June 30, 1996 from 12.0% for the
fiscal year ended June 30, 1995, a decrease of 4.9%.
Net Income. Net income increased to $9.3 million for the fiscal year ended
June 30, 1996 from $1.3 million for the fiscal year ended June 30, 1995, an
increase of $8.0 million or 629.3%. This increase resulted primarily from
the increase in the size of automobile securitization transactions to $364.0
million for the fiscal year ended June 30, 1996 from $119.3 million for the
fiscal year ended June 31, 1995.
Financial Condition
Automobile Finance Receivables, Net. Automobile finance receivables consists
of finance contracts held for sale, finance contracts held for investment
(including vehicles held in the repossession process) 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, decreased
to $34.7 million at June 30, 1997 from $41.1 million at June 30, 1996, a
decrease of $6.4 million or 15.6%. Finance contracts held for sale decreased
to $11.0 million at June 30, 1997 from $12.9 million at June 30, 1996, a
decrease of $2.2 million or 20.0%. Finance contracts held for investment
increased to $12.8 million at June 30, 1997 from $11.4 million at June 30,
1996, an increase of $1.4 million or 12.3%. As of June 30, 1997, approximately
$11.0 million of finance contracts held for investment were in the repossession
process. The increase in the finance contracts held for investment was due
primarily to the lack of a securitization in the December 1996 quarter end
and an increase in default rates resulting in a higher number of vehicles in
the repossession process. The allowance for credit losses increased to $6.9
million in 1997 from $3.1 million in 1996. Automobile leases held for
investment decreased to $11.2 million at June 30, 1997 from $19.8 million at
June 30, 1996, a decrease of $8.6 million or 43.4% primarily due to write offs,
pay offs and normal amortization.
The number and principal balance of finance contracts held are largely dependent
upon the timing and size of the Company's securitizations. The Company plans
to securitize finance contracts on a regular monthly basis under its Purchase
Facility.
Retained Interests in Securitized Receivables. The following table provides
historical data regarding the retained interests in securitized receivables
for the periods shown:
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------
1995 1996 1997
---- ----- -----
(dollars in thousands)
<S> <C> <C> <C>
Beginning balance. . $ 4,434 $23,985 $70,243
Additions. . . . . . 21,347 56,749 13,709
Amortization . . . . (1,796) (2,991) (1,622)
Write downs. . . . . - (7,500) (49,000)
------- -------- ---------
Ending balance . . . $23,985 $70,243 $33,330
======= ======== ========
</TABLE>
Delinquency Experience
The following tables reflect the delinquency experience of all finance
contracts acquired or leases originated, including those sold in whole
finance contract sales or securitizations, by the Company at the dates
shown:
<PAGE> 38
<TABLE>
<CAPTION>
Finance Contract Portfolio
June 30,
--------------------------------------------
1995 1996 1997
------ ------ -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Principal balance
outstanding(1) $146,557 $500,694 $813,055
Number of finance
contracts outstanding (1) 13,345 44,600 75,847
Delinquent loans
31-59 days $ 7,974 5.4% $33,625 6.7% $71,008 8.7%
60-89 days 1,186 0.8% 9,172 1.8% 21,831 2.7%
90 days and over 410 0.3% 2,054 0.4% 4,781 0.6%
----- ---- ------- ---- ------ ----
Total 9,570 6.5% 44,851 8.9% 97,620 12.0%
Finance contracts in
repossession or
bankruptcy(2) 3,384 2.3% 21,022 4.2% 69,485 8.5%
------ --- ------ ---- ------ ----
Grand Total $12,954 8.8% $65,874 13.1% $167,105 20.5%
======= ==== ====== ===== ======== ======
<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 in bankruptcy, authorized for repossession
and in repossession and still eligible for reinstatement.
</FN>
</TABLE>
[CAPTION]
<TABLE>
Lease Contract Portfolio
June 30,
---------------------------------------------
1995 1996 1997
---- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Principal balance (dollars in thousands)
outstanding $27,756 $21,261 $10,049
Number of finance
contracts outstanding 1,976 1,890 996
Delinquent loans(2)
31-59 days $ 2,221 8.0% $1,976 9.3% 835 8.3%
60-89 days 688 2.5% 475 2.2% 252 2.5%
90 days and over 160 0.6% 384 1.8% 363 3.6%
------ ---- ------- ----- ---- ----
Total $3,069 11.1% $2,834 13.3% $1,450 14.4%
======= ===== ====== ===== ===== ======
<FN>
<F1>
(1) The Company began originating leases in April 1994 and ceased funding
leases in the first quarter of its 1996 fiscal year.
<F2>
(2) Percentages based on outstanding principal balance; includes vehicles in
repossession and/or in bankruptcy.
</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 will initiate 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
<PAGE> 39
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 contracts
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.
Because of the Company's limited operating history in the fiscal years ended
June 30, 1995 and 1996, its finance contract portfolio was unseasoned.
Accordingly, delinquency and charge-off rates in the portfolio may not have
fully reflected the rates that would apply when the average holding period
for finance contracts in the portfolio is longer. In the fiscal year ended
June 30, 1997, the Company's repossession ratio (i.e. default rate) increased
to 18.8% from 13.0% in the fiscal year ended June 30, 1996. Additionally, the
Company's net charge-offs as a percentage of liquidations in the fiscal year
ended June 30, 1997 increased to 40.5% from 24.3% in the fiscal year ended
June 30, 1996. The primary cause for this increase is due to the deterioration
in the Company's recovery rates from the disposition of repossessed vehicles.
Furthermore, a portion of the approved RDI claims are being applied to the
Company's self insured retention balance ("SIR"). Since the Company has not
yet reached its SIR limit, the insurance company is not required to pay the
approved claims. Had the Company categorized claims applied toward the SIR
as an offset to losses, net charge-off as a percentage of liquidations for
the fiscal year year ended June 30, 1997 would be significantly lower.
Without decreasing the delinquency and/or charge-off rates in
the portfolio, the Company's ability to obtain or securitized its finance
contracts would continue to 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>
Year ended June 30,
-----------------------------
1995 1996 1997
----- ----- -----
(dollarsin thousands)
<S> <C> <C> <C>
Average principal balance outstanding(1)..... $96,569 $333,183 $737,423
Balance of finance contracts at the time of
repossession................................. 7,837 40,258 138,643
Number of repossessions...................... 722 3,494 11,964
Repossession ratio (2)....................... 8.2% 13.0% 18.8%
Default balance of fully liquidated vehicles. $7,230 $15,920 $84,713
Proceeds from liquidation, net of repossession
costs....................................... 3,928 7,963 35,654
Gross charge offs(3)......................... 3,301 7,957 49,059
Credit default insurance proceeds (4)........ 2,790 5,117 13,441
Net charge offs (5).......................... 780 3,864 34,310
Net charge offs as a percentage of
liquidations(6)............................. 10.8% 24.3% 40.5%
Net charge offs as a percentage of average
principal balance outstanding................ 0.8% 1.2% 4.7%
<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) Balance of finance contracts at the time of repossession divided by average
principal balance outstanding during the period.
<F3>
(3) 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.
<F4>
(4) Since August 1995, the Company no longer deposits money to a segregated
account from which losses incurred under a policy would be paid.
<F5>
(5) Net charge offs are gross charge offs reduced by credit default insurance
proceeds received relating to the defaulted finance contracts.
<F6>
(6) Net charge off amount divided by the aggregate balance of finance contracts
relating to vehicles liquidated.
</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
<PAGE> 40
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.
A 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. In the fiscal year ended
June 30, 1997, the Company's rate of finance contract acquisition volume
decreased and therefore a portion of its increased delinquency and default
rates can be attributed to the finance contracts falling into the "seasoning
period".
The Company believes delinquencies and losses can be partially mitigated by
introducing stricter credit standards together with an in-house servicing and
collection program. Accordingly, the Company dedicated approximately $3.0
million of its limited working capital to the development and ultimate
implementation of its own servicing company through its wholly owned
subsidiary, SST. While SST was developing, the Company contracted for certain
collection functions through a sub-servicing agreement with its third party
servicer, ALFI. Through this arrangement the Company contracted for
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. In January 1997, SST began servicing a
portion of the Company's finance contracts from the time of acquisition.
As of March 1997, SST was awarded the servicing on all of the Company's finance
contracts simultaneously with their acquisition. By the end of May 1997, SST
was servicing approximately 76.9% of the Company's managed finance contract
portfolio. SST does not perform any servicing on the Company's lease
portfolio. The Company continues to perform collection functions under its
sub-servicing vagreement with ALFI on 22.5% of the remaining finance contracts
serviced by ALFI. 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.
Repossession Experience - Static Pool Analysis
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. The
Company has experienced delays in liquidating its repossessed vehicles caused
by events at its servicers, custodians and trustees in providing a perfected
title to the Company's liquidating agents. It is currently working with these
parties to improve the title tracking processes. Upon receipt of the perfected
title, the Company's remarketing group can schedule the vehicle to be
liquidated, typically within five business days. All repossessed vehicles
are sold at wholesale auction. The Company is responsible for the costs of
repossession, transportation and storage. 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 analysis of the Company's portfolio
as of June 30, 1997 for the periods shown. In this table, all finance
contracts have been segregated by month of acquisition. All repossessions
have been segregated by the month in which the repossessed finance contract
was originally
<PAGE> 41
acquired by the Company. Cumulative repossessions equals the ratio of
repossessions as a percentage of finance contracts acquired for each segregated
month. Annualized repossessions equals an annual equivalent of the cumulative
repossession ratio for each segregated month. This table provides information
regarding the Company's repossession experience over time. For example,
recently acquired finance contracts result in very few repossessions.
After approximately six to eighteen months of seasoning, frequency of
repossessions appear to reach a plateau. Based on industry statistics and
the performance experience of the securitizations, the Company believes that
finance contracts seasoned in excess of approximately 18 months will start to
demonstrate declining repossession frequency.
<TABLE>
<CAPTION>
Fiscal Year and Month Repossessions by Repossession Frequency Finance Contracts Net Charge-Off
----------------------
of Acquisition Month Acquired Cumulative(1) Annualized(2) Acquired Per Unit
- --------------------- ----------------- ------------ ---------- ----------------- --------------
Units Amount Units Amount Amount
----- ------ ----- ------ ------
(Dollars in (Dollars in (Actual Dollars)
Thousands) Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Fiscal 1995
July............ 149 $1,500 23.73% 7.91% 530 $6,320 $2,089
August.......... 175 1,822 24.87% 8.53% 606 7,327 2,445
September....... 152 1,644 23.28% 8.21% 587 7,064 2,747
October......... 144 1,534 27.04% 9.83% 476 5,674 2,892
November........ 149 1,623 24.38% 9.14% 542 6,658 3,745
December........ 156 1,638 23.90% 9.25% 565 6,856 3,526
January......... 208 2,340 28.08% 11.23% 676 8,334 3,872
February........ 249 2,739 28.13% 11.64% 798 9,736 3,386
March........... 362 4,073 27.68% 11.86% 1,214 14,715 3,789
April........... 426 4,766 28.30% 12.58% 1,391 16,831 3,699
May............. 458 5,166 27.32% 12.61% 1,550 18,906 3,540
June............ 563 6,292 26.37% 12.66% 1,960 23,860 3,965
Fiscal 1996
July............ 501 5,738 25.62% 12.81% 1,809 22,401 4,700
August.......... 607 6,956 27.80% 14.50% 2,057 25,024 5,935
September....... 533 6,057 24.10% 13.14% 2,077 25,137 5,327
October......... 689 7,906 27.79% 15.88% 2,347 28,449 2,253
November........ 747 8,573 24.93% 14.96% 2,803 34,391 1,348
December........ 815 9,637 25.53% 16.13% 3,040 37,743 1,569
January......... 804 9,353 23.43% 15.62% 3,265 39,922 4,002
February........ 779 8,915 22.36% 15.78% 3,301 39,875 2,703
March........... 847 9,988 20.39% 15.29% 4,003 48,984 4,820
April........... 783 9,214 19.62% 15.70% 3,803 46,952 4,882
May............. 769 9,160 18.31% 15.70% 4,033 50,025 5,004
June............ 758 9,338 17.74% 16.38% 4,201 52,635 6,337
Fiscal 1997
July............ 818 10,098 16.07% 16.07% 5,051 62,843 5,632
August.......... 742 8,981 14.14% 15.42% 5,149 63,518 6,657
September....... 632 7,692 11.93% 14.31% 5,201 64,482 6,670
October......... 445 5,429 8.48% 11.30% 5,231 64,048 6,757
November........ 318 3,858 6.85% 10.27% 4,538 56,322 6,350
December........ 239 2,997 5.03% 8.63% 4,815 59,563 6,298
January......... 88 1,078 2.23% 4.46% 3,907 48,363 5,536
February........ 30 362 1.20% 2.89% 2,474 30,054 -
March........... 7 98 0.30% 0.91% 2,611 32,164 -
April........... 3 28 0.07% 0.30% 3,004 37,617 -
May............. 0 0 0.00% 0.00% 2,917 36,941 -
June............ 0 0 0.00% 0.00% 2,824 35,927 -
<FN>
<F1>
(1) For each month, cumulative repossession frequency equals the dollar
amount of repossessions divided by the dollar amount of finance contracts
acquired.
<F2>
(2) Annualized repossession frequency converts cumulative repossession
frequency into an annual equivalent (e.g., for December 1994, $1,638
repossessions divided by $6,856, divided by 31 months outstanding times
12 equals an annualized repossession frequency of 9.25%).
</FN>
</TABLE>
The following table provides the aggregate static pool information regarding
the Company's rated securitization transactions as of June 30, 1997:
<PAGE> 42
<TABLE>
<CAPTION>
Gross Loss
Original Current Percentage Cumulative per Defaulted Gross Loss Net Loss
Issuance Pool Pool of Original Repos Receivable 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 $2,595 14.00% 20.06% 50.40% 9.51% 3.87%
Aegis Auto Receivable Trust
Series 1994-2 Sep-94 23,251 4,722 20.31 22.21 53.03 10.87 4.48
Aegis Auto Receivable Trust
Series 1994-3 Dec-94 21,000 5,379 25.61 22.36 53.22 10.44 5.41
Aegis Auto Receivable Trust
Series 1995-1 Mar-95 21,000 6,437 30.65 25.62 54.11 11.51 6.49
Aegis Auto Receivable Trust
Series 1995-2 Jun-95 54,000 19,381 35.89 25.83 54.86 11.91 7.34
Aegis Auto Receivable Trust
Series 1995-3 Sep-95 60,000 24,809 41.35 25.87 56.62 11.97 10.95
Aegis Auto Receivable Trust
Series 1995-4 Dec-95 70,000 32,440 46.34 27.54 57.22 9.63 1.64
Aegis Auto Receivable Trust
Series 1996-1 Mar-96 92,000 49,629 53.94 22.60 56.07 5.64 1.22
Aegis Auto Receivable Trust
Series 1996-2 Jun-96 105,000 65,912 62.77 18.93 57.16 3.53 2.48
Aegis Auto Receivable Trust
Series 1996-3 Sep-96 110,000 79,329 72.12 14.77 54.21 0.71 0.50
Aegis Auto Owners Trust
1995-A(6) Dec-95 - Oct-96 148,347 90,766 61.18 14.65 58.24 6.45 6.45
Total Managed Portfolio $1,220,416 $867,603 71.09% 15.47% 55.69 4.99% 3.20%
<FN>
<F1>
(1) Data computed from trustee reports of July 1997 reflecting servicer
data as of June 30, 1997 and from Company s records as of June 30, 1997.
<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.
<F6>
(6) Net loss will be substantially the same as the gross loss since the
finance contracts in the securitization are not insured for risk default.
</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 pending disposition, primarily through
securitization and (ii) cash held from time to time in restricted spread
accounts to support securitizations and other securitization expenses.
The Company also uses material amounts of cash for operating expenses and debt
service. The Company has operated on a negative cash flow basis and
experienced a substantial loss in the fiscal year ended June 30, 1997.
The Company has funded these negative operating cash flows principally
through borrowings from financial institutions and sales of equity securities.
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 implement its Plan and to reach
break even. If these resources are not available on terms acceptable to
the Company, the Company may have to further curtail operations which may
result in a new restructuring plan or discontinuing its operations.
The Company's external capital resources primarily consist of its $75.0
million warehouse credit facility line and the Company's $1.0 billion Purchase
Facility. When the Company securitizes finance contracts through its Purchase
Facility, it repays a portion of its outstanding warehouse indebtedness with
the proceeds from such securitization, making such portion available for future
borrowing. The terms under the Purchase Facility provide the Company with a
monthly securitization strategy. In the fiscal year ended June 30, 1997, the
<PAGE> 43
Company completed four securitizations under the terms of the Purchase Facility
since closing the agreement in March 1997 in the aggregate amount of $389.3
million, and expects to securitize at least monthly thereafter. There can be
no assurances that transactions under the Purchase Facility will be
successfully completed. The Company also continues to seek additional
arrangements with financial institutions with respect to the disposition of
its portfolio assets through securitizations, whole loan sale or other exit
strategies. In addition, the Company has been able to borrow against its
retained interests in securitized receivables to provide liquidity. To
further enhance the Company's liquidity, its wholly owned subsidiary, SST
began its servicing operations. As a servicer of the Company's finance
contracts sold in the securitization process, SST receives its fee for
services rendered to the respective trusts directly from those trusts prior
to any other distributions. As servicer for the finance contracts held for
sale and held for investment, the Company has reduced its overall cost to
service these finance contracts thus enhancing its liquidity. As of November
10, 1997, the company entered into a letter of intent to sell SST. (See
"Business-Strategic Business Plan - Operating Caital").
The following table sets forth the major components of the increase (decrease)
in cash and cash equivalents for the periods shown:
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------
1995 1996 1997
----- ------- ----
(dollars in thousands)
<S> <C> <C> <C>
Net cash used in operating activities(1) $(49,208) $(10,097) $(9,311)
Net cash provided by (used in) investing
activities(2) 745 (390) (7,039)
Net cash provided by financing activities 53,452 13,292 12,066
------- -------- --------
Net increase (decrease) in cash and cash
equivalents $4,989 $2,805 ($4,283)
======== ======= =======
<FN>
<F1>
(1) Includes net cash used in acquisition of automobile finance contracts
of $(32,497) in fiscal 1995, $(4,779) in fiscal 1996 and $(3,023) in
fiscal 1997.
<F2>
(2) Includes net cash (used in) provided by warehouse credit
facilities of $32.9 million in fiscal 1995, $(11.0) million in fiscal
1996 and $(19.8) million in fiscal 1997.
</FN>
</TABLE>
Net cash used in operating activities primarily represents cash flows utilized
to support the Company's acquisition of automobile 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 automobile finance contracts is
generated primarily by financing activities under the Company's warehouse
credit facilities, discussed below.
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 is 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 to investors in the securitizations. These amounts were
$21.4 million, $54.0 million and $11.3 million for the fiscal years ended
June 30, 1995, 1996 and 1997, respectively. During the years ended June 30,
1995, 1996 and 1997, the Company received cash proceeds of $1.8 million, $3.0
million and $1.6 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 $454,000 for the fiscal year ended June 30, 1995, $612,000 for
the fiscal year ended June 30, 1996 and $1.1 million for the fiscal year ended
June 30, 1997; provision for credit losses, which amounted to $942,000 for
the fiscal year ended June 30, 1995, $3.5 million for the fiscal year ended
June 30, 1996 and $9.4 million for fiscal year ended June 30, 1997; and
provision for deferred income taxes of $1.5 million for the fiscal year
ended June 30, 1995, $5.9
<PAGE> 44
million for the fiscal year ended June 30, 1996 and none for the fiscal year
ended June 30, 1997. In addition, as of June 30, 1995 and 1996, the Company
released 814,455 shares and 1,078,308 shares respectively, of the Escrowed
Shares (of which 113,386 shares were released to the executive officers of
the Company in 1995 and 150,118 shares were released to the executive officers
of the Company in 1996) and consequently incurred non-cash charges of $879,000
and $807,000, respectively. The charges did not affect the Company's total
stockholders' equity or working capital. The Company incurred non-cash charges
for write downs on retained interests in securitized receivables of none, $7.5
million and $49.0 million for the fiscal years ended June 30, 1995, 1996 and
1997, respectively. Additionally, in the fiscal year ended June 30, 1996, the
Company incurred a non-cash charge of $600,000 for a valuation allowance on
a note receivable with no such charges in the other periods presented.
To the extent that the foregoing activities were net users of cash, such cash
was provided primarily by borrowings under notes payable of $16.0 million for
the fiscal year ended June 30, 1995, $39.4 million for the fiscal year ended
June 30, 1996 and $84.0 million for the fiscal year ended June 30, 1997.
The notes payable (excluding $2.0 million secured by SST's building and
certain of its machinery and equipment with a fair value of $2.4 million)
are secured by retained interests in securitized receivables (created in the
Company's automobile finance contract securitizations), finance contracts
acquired prior to March 1, 1997 and all assets of the Company not otherwise
encumbered. A portion of the principal payments were made from the Company's
proceeds received from pay downs on such assets which amounted to $1.8 million,
$3.0 million and $4.6 million, respectively, in the years ended June 30, 1995,
1996 and 1997. The remaining principal payments of $1.2 million, $19.5 million
and $71.2 million in the years ended June 30, 1995, 1996 and 1997, respectively,
were made either from borrowings under other similar available lines or
from the Company's then available operating cash.
The Company's cash flows and results of operations may be affected adversely
by rising interest rates. The Company's warehouse credit facilities are at
floating rates of interest, and increases in rates cannot immediately be
passed on to consumers, whose finance contracts are at fixed rates of interest.
In addition, rising interest rates result in a decrease in the Company's net
spreads on securitization transactions thereby decreasing future projected
cash flows from 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.
In connection with its securitization transactions, the Company enters into
pooling and servicing agreements (the "Agreements") pursuant to 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 fiscal years ended
June 30, 1995, 1996 and 1997, the Company received $1.8 million, $3.0 million
and $1.6 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 required 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 fiscal years ended June 30, 1996 and 1997,
the Company paid additional cash contributions to
<PAGE> 45
certain Reserve Funds of $2.3 million and $2.4 million, respectively.
In March 1997, the Company reached an agreement with a group of funds and
financial institutions, including its existing warehouse lender, for the
multi-structured Purchase Facility. The Purchase Facility includes a
commitment from III Finance for the purchase of $350.0 million of trust
certificates. The Certificates are backed by the Company's finance contracts
and are unrated. The Purchase Facility is supported by the $75.0 million
warehouse line. As of September 15, 1997, the Company securitized an
aggregate amount of $476.4 million in six securitization transactions. The
Purchase Facility provides for initial financing through the warehouse line
as the finance contracts are acquired and subsequently sold, generally on a
monthly basis, into the Purchase Facility.
The Company's $75.0 million warehouse line supporting the Purchase Facility
replaced the Company's amended $300.0 million warehouse facility which
augmented the Company's quarterly securitizations in its fiscal years ended
June 30, 1995 and 1996 and the first nine months of its fiscal year ended
June 30, 1997. The $75.0 million warehouse line was increased in May 1997
from the initial $50.0 million limit in March 1997. This increase was required
to reduce the frequency of securitizations under the Purchase Facility. The
$75.0 million warehouse line provides the Company with a two year (expiring
the sooner of March 13, 1999 or an event of default as defined thereunder)
warehouse line bearing interest at LIBOR plus 3% from the date the loan is
made with borrowing limits of the lesser of $75.0 million or the sum of
(A) 100% of the outstanding principal amount of finance contracts and (B) the
lesser of 90% of the outstanding principal amount of non-conforming 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. Proceeds from borrowings
under this Warehouse line may be used for the purpose of acquiring automobile
finance contracts in accordance with the Company's underwriting guidelines.
Concurrent with the closing of the Facility in March 1997, the Company's
$50.0 million warehouse credit facility for originating lease transactions
was amended to reduce it to the then outstanding balance and no additional
borrowings allowed under the facility. The lease line expires in November
1997. As of November 12, 1997, the Company owed approximately $5.9 million
under the lease line and is negotiating extending the term for up to an
additional two years. All other terms under the lease line remain the same.
Under the Company's prior warehouse credit facilities, principal payments
were made monthly to the extent principal payments were received on the
underlying collateral, and interest payments were made quarterly in arrears
and on the date of any prepayment of principal on the underlying collateral.
The Company was able to continue to borrow under these warehouse credit
facilities so long as it complied with the terms thereof, including the
maintenance by the Company of certain minimum capital levels. Under each
warehouse credit facility, the Company was required to prepay 5% of the
outstanding principal balance of finance contracts held by the Company for
more than 180 days. In addition, the Company has a $50.0 million warehouse
credit facility, expiring in November 1997, with III Finance dedicated to the
purchase of HUD Title I Loans which the Company does not anticipate utilizing
at this time.
In the fiscal year ended June 30, 1997, the Company borrowed $5.0 million under
its subordinated debt agreement with Greenwich. The Company also has
approximately $226.0 million available under its $533.0 million Securitization
Facility. The fulfillment of the remaining commitment is subject to customary
conditions. Currently, the Company does not meet these customary conditions
and has not securitized under the Securitization Facility since September 1996.
In October 1996, as a result of credit deterioration in the Company's finance
contract portfolio, the Company experienced a "Portfolio Event" under the
subordinated debt agreement. The Company and Greenwich agreed to restructure
the $5.0 million the subordinated debt
<PAGE> 46
agreement under which, the Company used $1.0 million of the proceeds from the
sale of the Debenture, as described, to pay down the $5.0 million balance to
$4.0 million. The Company will repay $2.0 million of the remaining balance
under the revolving credit facility proportionately (pari passu) with principal
payments made on the balances of the Debentures and certain notes payable
aggregating $41.3 million. The pari passu payments will begin when the
Company's outstanding balance under its retained yield financing note amortizes
to $20.0 million. As of September 22, 1997, the Company has an outstanding
balance of approximately $32.3 million under this note. The term of the
loan was extended for four years from the date of closing of the Debenture
and the interest rate decreased to 12.0% per annum, payable monthly. Early
repayment for the other $2.0 million under the revolving credit facility is
permitted if Greenwich provides auto loan servicing to the Company as defined
thereunder. Additional terms of the agreement provide for lowering the strike
price on warrants issued from $6.50 to as low as $4.00, contingent on achieving
certain levels of auto loan servicing placed by Greenwich with the Company.
On November 10, 1997, the remaining debt holder converted its $4.0 million of
subordinated debt into $4.0 million of equity with substantially the same terms
as the conversion of the Debenture except that $2.0 million of preferred stock
is convertible into common stock at $2.00 per share. Had these conversions of
debt to equity occurred prior to the Company's fiscal year ended June 30, 1996,
the Company's net worth would have been approximately $13.4 million.
For the fiscal years ended June 30, 1995, 1996 and 1997, the Company
securitized approximately $119.3 million, $432.4 million and $565.3 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
$35.1 million of automobile finance contracts as of June 30, 1997 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. Through June 30, 1997, the Company sold
approximately $148.4 million of automobile receivables into this facility.
This facility required 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. 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 note holders 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 for $9.2 million 920 shares of Series C
Convertible Preferred Stock (the "Preferred Stock") under Regulation S of the
Securities Act. The Class C 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 Class C Preferred Stock upon conversion at the fair market value of the
Common Stock into which such Class C Preferred Stock is convertible. The Class
C Preferred Stock has an 8.0% annual dividend payable in Common Stock at the
time
<PAGE> 47
of conversion. Any outstanding shares of Class C Preferred Stock will
automatically convert into Common Stock on the third anniversary of its
issuance. As of June 30, 1997, the Company redeemed 88 shares of Class C
Preferred Stock for $1.1 million, 726 shares of Class C Preferred Stock were
converted into 1,602,009 shares of Common Stock and 106 shares of Class C
Preferred Shares were outstanding.
In May 1997, the Company sold $21.3 million of subordinated debentures (the
"Debenture"). The Debenture was purchased for $20.0 million and is
convertible into 8% non-voting preferred stock (the "Preferred Shares") of
the Company on a common share equivalent basis equal to $2.0 per common share.
The Debenture has a term of seven years and carries a coupon rate of twelve
percent (12%) per annum. Approximately $16.1 million of the proceeds of the
Debenture were utilized 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. The holder of the Debenture may require the
Company to redeem the debenture, however, the Company at its election may pay
the redemption price in the form of common stock. In the event the Debenture
is redeemed for any reason, in addition to the redemption price, warrants for
that number of Preferred Shares into which the redeemed Debenture are
convertible shall be issued to the holder. The warrants will have an
exercise price equal to the cash paid by the Company upon such redemption.
All warrants will expire at the original stated maturity date of the
Debenture.
On October 16, 1997, the holders of the Debenture converted the
Debenture into non-voting Cumulative Convertible Preferred Stock, Series D
("Series D Preferred Shares"). The Series D Preferred Shares has a 12.75%
dividend and a redemption value of approximately $21.1 million, and is
convertible into common stock at $1.26 per share (a total of 16,751,412 shares
of common stock. On November 10, 1997 the Company's holders of the remaining
subordinated debt converted the debt into Cumulative Preferred Stock
("Series E and F Preferred Shares").
The debt, with a face value of $4.0 million and an interest rate of 12%
was was converted into 2,000 shares each of Series E and F Preferred Shares
with a 12.0% dividend and a redemption value of approximately $4.0 million.
The Series E Preferred Shares are convertible into common stock at $1.26 per
share and the Series F Preferred Shares are convertible into common stock at
$2.00 per share.
With the implementation of the Company's strategic business plan which includes
rebuilding the Company's equity; reducing debt burden as well as the related
expense; enhance operating capital, restructure operations and administrative
functions to achieve efficiencies, reduce operating expenses, introduce new
products and services and restructure exisitng products to achieve profitability
and credit performance in a highly competitive market and enhance credit
management processes.
Managmement believes that cash flows from operations,
the sale of SST, the Purchase Facility and its warehouse credit facility along
with the conversion of the Company's Debenture and the $4.0 million subordinated
debt into equity, should assist the Company in meeting its near-term funding
and operational needs. The Company was successful in raising operating capital
of approximately $7.0 million with the ultimate sale of SST ($2.0 million
received as of November 14, 1997 with the balance of $5.0 million to
be received upon colsing of the sale) and believes it needs at lease another
$3.0 million in order to implement its strategic buisiness plan.
The Company is requesting its lender to allow the Company to service the debt
through the cash flows arising from the underlying collateral thus relieving
the Company of approximately $3.8 million in annual payments and allowing the
funds to be utilized to support operations and the restructuring. Management
believes that if the Company is successful in implementing the Company's Plan,
the Company will have the ability to repurchase the stock of SST. In the event
the Company does not elect to repurchase SST, the cash flows generated from
operations are most likely to be utilzied to support its operations, which may
include accelerated paydowns in its then outstanding debt. Additionally, the
Company operates in a capital intensive industry and on a negative cash flow
basis. Any inability to access its lines of credit as a result of changes in
its financial condition, or otherwise, could have a material adverse effect on
the
<PAGE> 48
Company's financial condition and results of operations. There can be
no assurances that the Company will be successful in raising the necessary
capital, alleviate its liquidity problems and restore its operations. If the
Company is unsuccessful in its efforts, it will be unable to meet its
obligations, and will not be able to continue as a going concern.
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.
Item 8: Financial Statements and Supplementary Data.
The information required under this item is indexed on page F-1 herein and
is contained on the pages following said page F-1.
Item 9: Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.
None.
PART III
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
As of Octoberr 17, 1997, the Company has either accepted the resignations or
terminated certain executive officers. These officers included Gary Peiffer,
Joseph Battiato, Angelo Appierto and Jorge Rios, the Company's general
counsel, President, Chief Executive Officer and National Sales Manager,
respectively. Since the departure of these executives, the Company has
assembled a new management team comprised of Matthew Burns as the
Chief Executive Officer, William Henle and Dina Penepent remain respectively,
the Company's Chief Operating Officer and Chief Financial Officer. The role
of National Sales Manager has been filled by one of the Company's district
sales managers and the role of general counsel has been filled with internal
corporate counsel with support from various New York based law firms. In
addition, Angelo Appierto's term as Director will expire at the 1998 Annual
Meeting of Stockholders. In addition, Angelo Appierto's term as Director will
expire at the 1998 Annual Meeting of Stockholders.
The Directors and executive officers of the Company and their respective
ages and positions with the Company as of November 10, 1997 are set forth
in the following table:
<PAGE> 49
Name Age Position
Matthew B. Burns ........... 55 Chief Executive Officer
William F. Henle............ 47 Executive Vice President and
Chief Operating Officer
Dina L. Penepent............ 36 Executive Vice President,
Chief Financial Officer
and Secretary
Felice R. Cutler............. 60 Director (Class 1)
Carl Frischling.............. 60 Director (Class 3)
Paul D. Fitzpatrick.......... 44 Director (Class 1)
Angelo R. Appierto .......... 45 Director (Class 3)
Mr. Burns has served as Chief Executive Office of the Company since
October 15, 1997. From July 1996 to September 1997, Mr. Burns served as Chief
Executive Officer of Systems & Services Technologies, Inc., a wholly owned
subsidiary of the Company. From November 1993 to June 1996, he served as an
Executive Vice President of the Company in systems development. Prior to
joining the Company, Mr. Burns was Chairman and Chief Executive Officer of
Franklin Pacific, a subsidiary of Franklin Savings Association from 1988 to
1991. From 1985 through 1987, Mr. Burns was the Chief Operating Officer and
Founder of Merrill Lynch Mortgage Capital Corporation. In 1984, he was the
principal manager for all trading and hedging activities related to mortgage
products for Shearson Lehman Mortgage Corporation and from 1981 through 1983
he was involved in trading and hedging for Shearson Lehman Brothers.
Mr. Henle has served as Chief Operating Officer and Executive Vice President
of the Company since July 1, 1997. Prior to joining the Company and from May
1996 through June 1997, Mr. Henle was an independent consultant. From July
1986 through April 1996, he served as a Senior Vice President at First
Interstate Bancorp with responsibilities such as indirect automobile lending,
consumer loan processing, servicing and collections. From November 1972
through July 1986, he was employed by Bank of America NT & S.A. where
he served various management positions including, Vice President, Credit Risk
Manager, BankAmerica Acceptance Group and Vice President, Statewide Head of
Consumer Credit.
Ms. Penepent has served as Chief Financial Officer and Executive Vice
President of the Company since March 1994, and as Secretary of the Company
since October 1993. From July 1992 through February 1994, she was
Controller and Vice President of the Company. Before joining the Company,
Ms. Penepent, a certified public accountant, was a Manager in the audit and
accounting practice at BDO Seidman, certified public accountants,
from January 1989 through July 1992.
Ms. Cutler has served as a Director of the Company since February 1996.
Ms. Cutler has served as the Managing Partner of the law firm of Cutler and
Cutler since 1966. From 1960 through 1966, Ms. Cutler was a Deputy Attorney
General of the State of California. Ms. Cutler serves as a Trustee of Astra
Institutional Trust and Astra Institutional Securities Trust. Ms. Cutler was
initially appointed as a Director in February 1996 in connection with a change
in control in the Company, and was elected to serve a three year term at the
1996 Annual Meeting of Stockholders in June 1996.
Mr. Frischling has served as a Director of the Company since February 1996.
Mr. Frischling has been a partner of the law firm of Kramer, Levin,
Naftalis & Frankel since September 1994. From September 1992 to
August 1994, Mr. Frischling was a senior partner of the law firm of
Reid & Priest. From 1979 to August 1992, Mr. Frischling was a senior
partner of the law firm of Spengler Carlson Gubar Brodsky & Frischling.
He also serves as a Director on eleven fund boards of the AIM Funds, ERD
Waste Corp. and on two fund boards of the Lazard Funds. Mr. Frischling
was initially appointed as a Director in February 1996 in connection with a
change in control in the Company, to serve a two year term and is up for
election at the 1998 Annual Meeting of Stockholders.
<PAGE> 50
Mr. Fitzpatrick has served as a Director of the Company since June 1996.
Mr. Fitzpatrick has served in various capacities at Deutsche Bank AG New York
Branch since 1979, including as Vice President/Credit Risk Review from July
1997 to present; as Vice President/Credit Risk Manager from October 1995 to
July 1997; as Vice President/Senior Credit Officer, Private Banking from July
1994 to September 1995; and as Vice President/Credit Administration from
January 1992 to June 1994. Mr. Fitzpatrick was nominated in connection
with a change in control in the Company, which occurred in February 1996,
and elected as a Director to serve a three year term at the 1996 Annual
Meeting of Stockholders in June 1996.
Mr. Appierto has served as a Director of the Company since March 1994.
He joined the Company in 1992 and served as Chairman of the Board and Chief
Executive Officer from March 1994 until October 1997. He served as President
of the Company from July 1993 until May 1995. He previously served as Chief
Financial Officer of the Company from May 1992 through February 1994. Prior
to joining the Company, Mr. Appierto was a trader and Senior Vice President
at CS First Boston, an investment bank, from December 1991 through May 1992,
and a partner and Chief Financial Officer at FB Tech Joint Venture, an
affiliate of CS First Boston and ofTech Partners, a proprietary securities
trading firm, from April 1990 through November 1991.
No family relationship exists between any directors, nominees or executive
officers of the Company; however, Mr. Philip Fitzpatrick, Mr. Paul
Fitzpatrick's brother, is a director of Systems & Services Technologies,
Inc., a material operating subsidiary of the Company.
Item 11: EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid by the Company,
as well as certain other compensation paid or accrued, for the fiscal years
ended June 30, 1995, 1996 and 1997 to Angelo R. Appierto,the Company's then
Chairman of the Board of Directors and Chief Executive Officer, and the other
four most highly compensated executive officers of the Company who were serving
as executive officers at the end of the last completed fiscal year (the "Named
Executive Officers"):
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Annual Compensation Compensation
------------------------------------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Securities
Underlying All Other
Fiscal Other Annual #Options Compen-
Name and Principal Position Year Salary Bonus Compensation(1) #SARs sation(2)
- --------------------------- ------ ----- ----------- ---------- --------- ----------
Angelo R. Appierto (3)
Chief Executive Officer and
Chairman of the Board 1995 $240,500 $---------- $---- $------(4) $-----
1996 295,333 706,732(5) ---- ------(6) 3,750
1997 398,672 $---------- ---- ------ 4,750
Gary D. Peiffer (7) 1995 240,500 $---------- ---- ------(7) -----
General Counsel, 1996 295,333 424,039(5) ---- ------(7) 3,750
Vice Chairman of the Board 1997 299,666 $---------- 80,000(1) ------ 1,625
Joseph F. Battiato(8) 1995 171,750 ---------- ---- ------(7) -----
President, Director 1996 212,000 300,346(5) ---- ------(7) 3,750
1997 237,000 ---------- ---- ------ 1,625
Jorge G. Rios (11) 1995 95,833 266,860 ---- ------(12) 248,490(13)
Executive Vice President, 1996 112,000 913,625(5) ---- ------(14) 3,750
National Sales Manager 1997 199,500 732,845 ---- ------- 4,750
Matthew B. Burns 1995 167,330 --------- ---- ------- -----
Chief Executive Officer and 1996 150,000 110,000 ---- ------- -----
Chairman of SST 1997 150,000 50,000 ---- ------- -----
John J. Chappell 1995 90,000 --------- ---- 50,000 , -----
President of SST 1996 125,000 75,000 ---- 5,000 -----
1997 125,000 50,000 ---- ------- -----
<FN>
<F1>
(1) The Company has concluded that the aggregate amount of perquisited and
other of the Named Executives did not exceed the lesser of ten percent
(10%) of such officer's annual salary and bonus for each fiscal year
indicated or $50,000, except for Mr. Peiffer whose debt of $80,000 due
and owing to the Company was forgiven upon his resignation.
<F2>
(2) For fiscal year 1996 and 1997 amounts reflect Company contributions to
the Company's 401K Plan.
<F3>
(3) Mr. Appierto was terminated as Chairman of the Board and Chief Executive
Officer, effective October 14, 1997. All option grants (130,000 in 1997)
were forfeited. (See "Employment Agreements".)
<F4>
(4) Pursuant to the terms of Mr. Appierto's Amended and Restated Executive
Employment Agreement, stock options to purchase 150,000 shares granted
under the 1994 Plan were cancelled and effective April 1, 1997, fully
vested options to purchase 111,423 shares were granted at an exercise
price of $2.50 for a term of ten years from the effective date of grant.
<F5>
(5) Excludes $300,000, $180,000, $81,000, and $50,000, respectively, of earned
bonuses in fiscal year 1996 which were deferred until December 31, 1996
at which time such amounts were forfeited by Messrs. Appierto, Peiffer,
Battiato and Rios, respectively. (See "Employment Agreements.")
(6) Pursuant to the terms of Mr. Appierto's Amended and Restated Executive
Employment Agreement, stock options to purchase 25,000 shares granted
under the 1996 Plan were cancelled and effective April 1, 1997,
options to purchase 18,577 shares (one third (6,193) of which are fully
vested as of June 30, 1997 with the remaining options vesting at an annual
rate of 6,192 each year over the nest two years, ending June 30, 1999,
in accordance with the terms of the 1996 Plan) were granted at an exercise
price of $2.50 for a term of 10 years from the effective date of grant.
(See "Employment Agreements".)
<F7>
(7) Mr. Peiffer resigned as Vice Chairman of the Board and General Counsel,
effective June 18, 1997. All option grants (75,000 in 1995 and 100,000
in 1996) were forfeited. (See "Certain Relationships and Related
Transactions").
<F8>
(8) Mr. Battiato resigned as President and Director, effective September 18,
1997. All option grants (290,000 in 1997) were forfeited. (See "Certain
Relationships and Related Transactions").
<F9>
(9) Pursuant to the terms of Mr. Battiato's Amended and Restated Executive
Employment Agreement, stock options to purchase 300,000 shares granted
under the 1994 Plan were cancelled and effective April 1, 1997,
fully vested options to purchase 259,695 shares were granted at an
exercise price of $2.50 for a term of ten years from the effective date
of grant. (See "Employment Agreements.")
<F10>
(10)Pursuant to the terms of Mr. Battiato's Amended and Restated Executive
Employment Agreement, stock options to purchase 35,000 shares granted
under the 1996 Plan were cancelled and effective April 1, 1997, options
to purchase 30,305 shares (one third (10,101) of which are fully vested
as of June 30, 1997 with the remaining shares vesting at an annual rate
of 10,102 each year over the next two years, ending June 30, 1999,
in accordance with the terms of the 1996 Plan) were granted at an
exercise price of $2.50 for a term of 10 years from the effective date of
grant. (See "Employment Agreements.")
<F11>
(11)Mr. Rios was terminated as Executive Vice President and National Sales
Manager, effective October 17, 1997. All options (185,00 in 1997) were
forfeited. (See "Employment Agreements.")
<F12>
(12)Pursuant to the terms of Mr. Rios' Amended and Restated Executive
Employment Agreement, stock options to purchase 130,000 shares
granted under the 1994 Plan were cancelled and effective April 1, 1997,
fully vested options to purchase 133,607 shares were granted at an exercise
price of $2.50 for a term of ten years from the effective date of
grant. (See "Employment Agreements.")
<F13>
(13)Reflects amounts paid to the National Financing and Leasing Corporation
("NFL"), an entity controlled by Mr. Rios in connection with the purchase
of certain sales territories where NFL held exclusive rights to act as
the Company's independent marketing broker.
<F14>
(14)Pursuant to the terms of Mr. Rios' Amended and Restated Executive
Employment Agreement, stock options to purchase 50,000 shares granted under
the 1996 Plan were cancelled and effective April 1, 1997, options to
purchase 51,393 shares (one third (17,131) of which are fully vested as
of June 30, 1997 with the remaining shares vesting at an annual rate of
17,131 each year over the next two years, ending June 30, 1999,in
accordance with the terms of the 1996 Plan) were granted at an exercise
price of $2.50 for a term of 10 years from the effective date of grant.
(See "Employment Agreements.")
</FN>
</TABLE>
<PAGE> 51
Option Grants in Fiscal Year 1997
The following options were granted to the Named Executive Officers during
fiscal year 1997 under the Plans.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO PRICE PER PRICE APPRECIATION FOR
OPTIONS EMPLOYEES IN SHARE EXPIRATION OPTION TERM
NAME GRANTED (3) FISCAL YEAR (%) ($/SH) DATE 5%($) 10%($)
- -------------------- ------------ --------------- -------- ---------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Angelo R. Appierto(1) 111,423(2) 12.13 2.50 3/31/07 175,183 443,949
18,577(3) 2.02 2.50 3/31/07 29,207 74,017
Gary D. Peiffer (4) 111,423(2) 12.13 2.50 3/31/07 175,183 443,949
18,577(3) 2.02 2.50 3/31/07 29,207 74,017
Joseph F. Battiato(5) 259,695(6) 28.27 2.50 3/31/07 408,302 1,034,717
30,305(7) 3.30 2.50 3/31/07 47,647 120,746
Jorge G. Rios(8) 133,607(9) 12.37 2.50 3/31/07 178,617 452,651
51,393(10) 5.59 2.50 3/31/07 80.802 204,768
<FN>
<F1>
(1) Effective October 14, 1997, Mr. Appierto was terminated as Chairman of
the Board and Chief Executive Officer. All option grants were forfeited.
<F2>
(2) Effective April 1, 1997, fully vested options to purchase 111,423 shares
were granted at an exercise price of $2.50 for a term of ten years from
the effective date of grant upon the cancellation of stock options to
purchase 300,000 shares previously granted under the 1994 Plan. (See
"Employment Agreements.")
<F3>
(3) Effective April 1, 1997, options to purchase 18,577 shares (one third
(6,193) of which are fully vested as of June 30, 1997 with the remaining
options vesting at an annual rate of 6,192 each year over the next two
years, ending June 30, 1999, in accordance with the terms of the 1996
Plan) were granted at an exercise price of $2.50 for a term of 10 years
from the effective date upon the cancellation of stock options to purchase
25,000 shares previously granted under the 1996 Plan. (See "Employment
Agreements.")
<F4>
(4) Effective June 18, 1997, Mr. Peiffer resigned his positions with the
Company as Vice Chairman of the Board and General Counsel. All option
grants were forfeited. (See "Employment Agreements.")
<F5>
(5) Effective September 18, 1997, Mr. Battiato resigned his positions as
President and Director of the Company. All options were forfeited.
<F6>
(6) Effective April 1, 1997, fully vested options to purchase 259,695 shares
were granted at an exercise price of $2.50 for a term of ten years from
the effective date of grant upon the cancellation of stock options to
purchase 300,000 shares previously granted under the 1994 Plan. (See
"Employment Agreements.")
<F7>
(7) Effective April 1, 1997, options to purchase 30,305 shares (one third
(10,101) of which are fully vested as of June 30, 1997, with the
remaining options vesting at an annual rate of 10,102 each year over the
next two years, ending June 30, 1999, in accordance with the terms of
the 1996 Plan) were granted at an exercise price of $2.50 for a term of
10 years from the effective date of grant upon the cancellation of stock
options to purchase 35,000 shares previously granted under the 1996 Plan.
(See "Employment Agreements.")
<F8>
(8) Effective October 17, 1997, Mr. Rios was terminated as Executive Vice
President and National Sales Manager. All options were forfeited.
<F9>
(9) Effective April 1, 1997, fully vested options to purchase 133,607 shares
were granted at an exercise price of $2.50 for a term of ten years from
the effective date of grant upon cancellation of stock options to
purchase 130,000 shares previously granted under the 1994 Plan. (See
"Employment Agreements.")
<F10>
(10) Effective April 1, 1997, options to purchase 51,393 shares (one third
(17,131) of which are fully vested as of June 30, 1997 with the
remaining options vesting at an annual rate of 17,131 each year over
the next two years, ending June 30, 1999, in accordance with the terms
of the 1996 Plan) were granted at an exercise price of $2.50 for a term
of 10 years from the effective date of grant upon the cancellation of
stock options to purchase 50,000 shares previously granted under the 1996
Plan. (See "Employment Agreements.")
</FN>
</TABLE>
Aggregated Option Exercises in Fiscal Year 1997 and 1997 Fiscal
Year-End Option Values
The table below sets forth information relating to the exercise of options
during fiscal year 1997 by each Named Executive Officer and the fiscal year-end
value of unexercised options.
<PAGE> 52
<TABLE>
<CAPTION>
Number of Securities Value of
Underlying Unexercised
Unexercised Options In the Money
Shares At Fiscal Year End Options at Fiscal
Acquired (#)
On Value Exercisable/ Exercisable/
Name Exercise (#) Realized (4) Uncxercisable (1) Unexercisable
<S> <C> <C> <C> <C>
Angelo R. Appierto(2) -- -- 111,423/18,577 $0/$0
Gary D. Peiffer (3) -- -- 150,000/25,000 0/0
Joseph F. Battiato (4) -- -- 259,695/30,305 0/0
Jorge G. Rios (5) 133,607/51,393 0/0
____________________
<FN>
<F1>
(1) See "Report on Repricing of Options" and "Option Grants in Fiscal Year
1997" above.
<F2>
(2) Effective October 14, 1997, Mr. Appierto was terminated as Chairman of
the Board and Chief Executive Officer. All option grants were forfeited.
(See "Employment Agreements.")
<F3>
(3) Effective June 18, 1997, Mr. Peiffer resigned his positions with the
Company as Vice Chairman of the Board and General Counsel. All option
grants were forfeited. (See "Employment Agreements.")
<F4>
(4) Effective September 18, 1997, Mr. Battiato resigned his positions as
President and Director. All option grants were forfeited. (See
"Employment Agreements.")
<F5>
(5) Effective October 17, 1997, Mr. Rios was terminated as Executive Vice
President and National Sales Manager. All option grants were forfeited.
(See "Employment Agreements.")
</FN>
</TABLE>
Employment Agreements
The Company renegotiated it's prior employment agreements with each of
the Named Executive Officers (other than Mr. Burns and Mr. Chappell) with such
changes being effective April 1, 1997. Mr. Appierto's, Mr.Peiffer's and
Mr. Battiato's prior agreements were each for a term of five years commencing
March 1, 1994 and Mr. Rios' prior agreement was for a term of three years
commencing July 16, 1994. Mr. Appierto's and Mr. Peiffer's prior agreements
provided for a base salary of $250,000 in the first year, $275,000 in the second
year, $300,000 in the third year and $350,000 in the fourth and fifth years.
Mr. Battiato's prior agreement provided for a base salary of $175,000
during the first year and $200,000 per year thereafter. Mr. Rios' prior
agreement provided for a base salary of $100,000 for each year of the term,
which was amended to $150,000 effective July 1, 1996. Mr. Rios was entitled
to a bonus, based on production volumes, of $25 per finance contract acquired
or lease originated less finance contracts or leases which have defaulted.
Each of the prior agreements (other than Mr. Rios' prior agreement) provided
for an annual bonus based on the net pretax income (as defined therein) of
the Company. Mr. Appierto was entitled to a bonus ranging from 1% of net
pretax income, if such net pretax income is less than $1 million, to 5% of
net pretax income if such net pretax income is in excess of $10 million.
Mr. Peiffer was entitled to a bonus ranging from 2% of net pretax income,
if such net pretax income is at least $5 million, but less than $10 million,
and 3% of net pretax income if such net pretax income is at least $10 million.
Mr. Battiato was entitled to a bonus ranging from 4% of the first $1 million of
net pretax income down to $280,000 plus 1% of net pretax income in excess of
$10 million. Notwithstanding the foregoing, for the fiscal year ended June 30,
1996, Mr. Appierto, Mr. Peiffer, Mr. Battiato and Mr. Rios each deferred and
subsequently agreed to relinquish a portion of the bonuses due them in the
amounts of $300,000, $180,000, $81,000 and $50,000, respectively ($611,000
in the aggregate), pursuant to, their respective prior employment agreements.
These employment agreements were terminated, and amended and restated
employment agreements (collectively, the "Restated Agreements") were
executed, effective April 1, 1997. The term of each Restated Agreement
commenced on April 1, 1997 and terminates on April 1, 1999 and each provides
for an annual
<PAGE> 53
base salary of $300,000. Mr. Battiato's Restated Agreement provided that
the $125,000 loan made by the Company to Mr. Battiato in 1996
shall be used to offset the bonus to which he may have become entitled
thereunder (See "Certain Relationships and Related Transactions").
Mr. Peiffer's Restated Agreement provided that in order to repay $80,000
advanced by the Company on his behalf, his annual salary would be reduced
from $300,000 to $260,000 until such advance has been repaid in full. (See
"Certain Relationships and Related Transactions"). Mr. Rios' Restated
Agreement provided that for the period ended March 31, 1997, he would be
compensated under the terms of his employment agreement dated July 16, 1994.
Mr. Rios received $50,000 of the $216,125 amount to which he was entitled
based on the bonus structure of his July 16, 1994 employment agreement
for the fiscal quarter ended March 31, 1997. Amounts in excess of $50,000,
shall be offset against the bonus amounts to which he may become entitled
pursuant to his Restated Agreement. (See "Certain Relationships and
Related Transactions.")
As of October 17, 1997, the Company has either accepted the resignations
of or terminated certain executive officers. These officers included Gary
Peiffer, Joseph Battiato, Angelo Appierto and Jorge Rios, the Company's
general counsel, President, Chief Executive Officer and National Sales Manager,
respectively. Since the departure of these executives, the Company has
assembled a new management team comprised of Matthew Burns as the Chief
Executive Officer, William Henle as Chief Operating Officer and Dina Penepent
remains the Company's Chief Financial Officer. The role of National Sales
Manager has been filled by one of the Company's district sales managers and
the role of general counsel has been filled by internal corporate counsel
with support from various New York based law firms.
Each of the Restated Agreements provided for the determination of a bonus
pool to be based on an amount equal to a percentage of Consolidated Net After
Tax Income ("CNATI") and the achievement of certain targets related to Return
on Assets ("ROA") for the period commencing on July 1, 1997 and ending on
June 30, 2000 (the "Bonus Period"). ROA is determined by dividing the CNATI
for the Bonus Period by Total Assets (hereinafter defined) for the Bonus
Period and dividing that amount by three. CNATI means, with respect to
any fiscal year, the net after tax income of the Company from operations
currently conducted by the Company (including the servicing and origination of
automobile loans or mortgages) before extraordinary items as reported on the
audited financial statements of the Company with respect to such period and
adjusted as follows: CNATI shall be increased to eliminate bonuses paid or
payable under the Restated Agreements; reduced to eliminate any gain accrued
on sales in such fiscal year with respect to securitization, whether or not
any such securitization was effected in such fiscal year; increased or reduced
without duplication, to give effect to net cash received or disbursed in
connection with securitizations; adjusted to eliminate any income attributable
to securitization of assets by the Company prior to the securitization
designated as "971"; and adjusted to provide for applicable taxes (current
or deferred) on such adjustments. Total Assets is determined by aggregating
the total weighted average of assets owned by the Company during the Bonus
Period, whether such assets are owned by the Company (including its
subsidiaries) or by a special purpose vehicle (an entity created for the
purpose of effecting securitizations in which the Company has a retained
interest or which have recourse to the Company and which are not otherwise
reflected as consolidated subsidiaries on the Company's financial
statements), excluding for this purpose assets owned by the Company prior
to the securitization designated as"97-1". The bonus pool is allocated by
the then most senior executive among Messrs. Appierto, Battiato, Peiffer
and Rios, in such person's discretion among (i) such persons and (ii) the
Chief Financial Officer, any Executive Vice President and such other
employees of the Company as the Chairman shall designate.
Each Restated Agreement provided that the executive would be entitled to
the salary, bonus and benefits at the levels in effect immediately prior to
termination for the remainder of the term of the Restated Agreement (the
"Severance Period") in the event his employment is terminated by the Company
other than for cause, death or disability, or because his Restated Agreement
has not been renewed or extended, or by such
<PAGE> 54
executive for good reason (as each term is defined under the Restated
Agreements). Any benefits receivable by the executive during the Severance
Period shall be reduced to the extent benefits of the same type are received
by or made available to the executive during the Severance Period. In the
event the executive's employment is terminated as a result of death or
disability or by the Company for cause, or by the executive without good
reason, or in the event his Restated Agreement is not renewed or extended,
then the Company shall have no further obligations or liabilities to the
executive such that all benefits and salary (excluding bonus and any death or
disability benefits that would otherwise continue past the date of termination)
shall terminate simultaneously with the termination of the executive's employ-
ment other than benefits and salary accrued through the date of termination.
If the employment of the executive is terminated by the Company without cause
or by the executive with good reason (as each term is defined under the Restated
Agreements), he shall be entitled to receive 100% of his bonus at such time
as the bonus otherwise becomes payable. If the employment of the
executive is terminated by the Company for cause or by the executive without
good reason (as each term is defined under the Restated Agreements) (a)
during the first year of the term of his Restated Agreement, the executive's
right to receive any portion of the bonus shall be forfeited or (b) during the
second year of the term of his Restated Agreement, he shall be entitled to
receive, at such time as the bonus otherwise becomes payable,
an amount equal to one half (1/2) of the bonus otherwise attributable to him.
In the event that, prior to February 1, 1999, the Company offers to the
executive an extension of his employment for at least one (1) year following
the end of the term of his Restated Agreement on terms substantially similar to
those provided therein and the executive does not accept such offer, the
executive shall be entitled to receive, at the time such bonus otherwise
becomes payable, a bonus equal to two thirds (2/3) of the bonus otherwise
attributable to him. In the event that, prior to February 1, 1999, the
Company does not offer to the executive an extension of his employment for at
least one (1) year following the end of the term of his Restated Agreement
on terms substantially similar to those provided therein, the executive shall
be entitled to receive, at the time such bonus otherwise becomes
payable, an amount equal to five sixths (5/6) of the bonus otherwise
attributable to him. Any portion of the bonus not paid to the executive by
operation of his Restated Agreement shall be allocated in such amounts and
to such employees as the Board of Directors may in its discretion determine.
All Restated Agreements contained provisions protecting the confidentiality
of information concerning the Company's business, and do not limit the
ability of such officers to compete with the Company after such officers no
longer receive a salary from the Company. In addition, each Restated
Agreement provides for certain insurance and other benefits for
the executive.
Effective June 18, 1997, Mr. Peiffer resigned his positions with the
Company as Vice Chairman of the Board and General Counsel. Mr. Peiffer's
Restated Agreement was terminated in all respects and he agreed to release
and waive any and all claims which he may have against the Company arising
under or pursuant to the Restated Agreement or any prior agreement relating
to his employment with the Company, including but not limited to
claims to receive severance or bonus payments or to exercise options to
purchase shares of the Company's stock. Upon Mr. Peiffer's resignation,
the Company cancelled and declared to be no longer due and owing by
him to the Company, $80,000 advanced by the Company on Mr. Peiffer's behalf.
(See "Certain Relationships and Related Transactions").
Effective September 18, 1997, Mr. Battiato resigned his positions with the
Company as President and Director. Mr. Battiato's Restated Agreement was
terminated in all respects including his rights to any bonus payments.
Mr. Battiato's seperation terms are currently pending, including the possible
repayment of a note in the amount of $125,000. Further, all stock options
granted to him, to the extent not previously exercised, were forfeited.
(See "Certain Relationships and Related Transactions").
Effective October 14, 1997, Mr. Appierto was terminated as Chairman of the
Board and Chief Executive Officer. His term as Director of the Company will
expire at the Company's, 1997 Annual Meeting of Stockholders. Mr. Appierto's
Restated Agreement was terminated in all respects including his right to any
<PAGE> 55
bonus payments. Further, all stock options granted to him, to the extent
not previously exercised, were forfeited.
Effective October 17, 1997, Mr. Rios was terminated as Executive Vice
President and National Sales Manager. His Restated Agreement was terminated
in all respects including his right to any bonus payments. Further, all
stock options granted to him, to the extent not previously exercised, were
forfeited. Mr. Rios owes the Company $18,387 under an original note in the
amount of $22,184. Due to the fact that Mr. Rios will not receive any
future bonuses from the Company, the amount outstanding under a $300,000 note
will not be repaid to the Company. (See "Certain Relationships and Related
Transactions").
Under the terms of each Restated Agreement, stock options previously granted
to such executives under the Plans were cancelled. In consideration of such
cancellation, a reduced number of options in the case of Mr. Appierto, Mr.
Peiffer and Mr. Battiato and an increased number of options in
the case of Mr. Rios were granted. Mr. Appierto's Restated Agreement
provided that options to purchase an aggregate of 150,000 and 25,000 shares
of Common Stock of the Company granted to him pursuant to the 1994 Plan and the
1996 Plan, have been reduced to 111,423 and 18,577 shares, respectively.
Mr. Rios's Restated Agreement provided that options to purchase 130,000 and
50,000 shares of Common Stock of the Company granted to him pursuant to
the 1994 Plan and the 1996 Plan have been increased to 133,607 and 51,393
shares, respectively. The terms of the grants remain as set forth in the
Plans, except that the option exercise price per share has been reduced to
$2.50, the term of the option is 10 years from the date of grant (April 1,
1997) and, in the event of a termination of employment by the Company other
than for cause (as defined under the Restated Agreements) or by the executive
for good reason (as defined under the Restated Agreements), the option shall
remain exercisable, to the extent exercisable as of the effective date of
termination, for a period of the lesser of one year following the effective
date of termination and the original term of such option.
Notwithstanding the foregoing, the agreements entered into on April 26,
1996 by Mr. Appierto, Mr. Peiffer and Mr. Battiato with the Company with
respect to a change of control that occurred in February 1996 remain in full
force and effect for the remainder of the term of the
agreements.
The Company entered into an employment agreement with Mr. Burns in October
1995 to serve as Executive Vice President -- Systems and Systems Development.
Pursuant to the agreement, Mr. Burns gave up the right to any bonuses he
might be entitled to under a previous employment agreement with the Company
for finance contracts acquired or leases originated by the Company after July
1, 1995 in exchange for payment by the Company of $110,000. Under this
agreement, Mr. Burns was entitled to a salary of $150,000 for each year of
the term. On September 18, 1996, Mr. Burns' employment with the Company
terminated and Mr. Burns entered into an employment agreement to serve as
Chairman and Chief Executive Officer of Systems & Services Technologies, Inc.
("SST"), a newly formed wholly owned subsidiary of the Company, for a term of
five years, subject to extension or reduction in accordance with the terms of
the agreement. Mr. Burns' agreement provides for an annual base salary of
$150,000, subject to adjustment after June 30, 1997 based upon certain
performance targets, and a bonus (i) for the first two years, of the greater
of $50,000 and 3.33% of SST's Net Pre-Tax Income (as defined therein) in each
year it equals or exceeds Performance Targets (as defined therein) and (ii)
thereafter, of 3.33% of Net Pre-Tax Income in each year Net PreTax Income
equals or exceeds performance targets. Mr. Burns' agreement contains
provisions protecting the confidentiality of information concerning SST's
business, but does not limit the ability of Mr. Burns to compete with SST
after the conclusion of its term.
The Company entered into an employment agreement with Mr. Chappell on
September 18, 1996 to serve as President of SST for a term of five years,
subject to extension or reduction in accordance with the terms of the
agreement. Mr. Chappell's agreement provides for an annual base salary of
$125,000, subject to
<PAGE> 56
adjustment after June 30, 1997 based upon certain performance targets, and a
bonus (i) for the first two years, of the greater of $50,000 and 3.33% of
SST's Net PreTax Income (as defined therein) and (ii) thereafter, of 3.33%
of SST's Net PreTax Income in each fiscal year in which the Net PreTax Income
equals or exceeds the performance targets for that fiscal year. Mr. Chappell's
agreement contains provisions protecting the confidentiality of information
concerning SST's business, but does not limit the ability of Mr. Chappell to
compete with SST after the conclusion of its term.
Compensation of Directors
Directors who are employees of the Company or its subsidiaries are not
compensated for their services rendered to the Company in their capacity as
Director. Independent Directors receive a $25,000 per year retainer, $3,000
plus expenses for attendance at Board meetings ($1,500 for telephonic meetings
of less than an hour, with discretion to reduce such fee for teleponic
meetings of less than one-half hour) and $1,500 plus expenses for attendance
at Committee meetings held on days other than those which Board meetings are
scheduled.
In addition, each independent director who is or becomes a member of the Board
of Directors on or after June 30, 1996, shall automatically be granted a
non-qualified stock option to purchase that number of shares of Common Stock
obtained by multiplying the number of months measured from the commencement of
such director's then term to the expiration of such term, by 833 shares. The
number of months remaining in a director's then term shall be measured from
the first day of the calendar month in which the director's term commenced to
the last day of the calendar month in which the director's term is scheduled to
expire. Options in the amount determined above were granted on July 1, 1996
to each independent director serving in such capacity on such date. All options
granted in such manner shall (a) have an exercise price per share equal to 100%
of the fair value of a share on the date of the grant; (b) have a term of ten
years; (c) vest at the rate of 833 shares for each calendar month, counted in
the same manner as the calculation of the amount of shares underlying the
option, during which a director has served in such capacity for the full
calendar month or any portion therof; (d) terminate (i) 12 months
after termination of an independent director's service as a director of the
Company due to the death of such independent director; or (ii) three months
after the independent director ceases to serve as a director of the Company
for any other reason; and (e) be otherwise on the same terms and condition as
all other options granted pursuant to the Company's 1996 Stock Option Plan,
as amended. Any options which do not vest in accordance with the above
provisions shall be forfeited.
The Company has a Compensation Committee and an Audit Committee.
The Compensation Commitee, which currently consists of Felice Cutler, Carl
Frischling and Paul Fitzpatrick, is responsible for reviewing all
compensation agreements and arrangements for officers of the Company, including
annual incentive awards, and is responsible for administering the Company's
stock options plans. The Audit Commitee, which currently consists of Felice
Cutler, Carl Frischling and Paul Fitzpatrick, is responsible for recommending
to the Board of Directors the engagement of the independent auditors of the
Company and reviewing with the independent auditors the scope and results
of the audit, the internal accounting controls of the Company, audit
practice and the professional services furnished by the independent auditors.
During the fiscal year ended June 30, 1997, the Board of Directors held
seventeen (17) meetings, eleven of which were telephonic. In addition, the
Compensation Committee held nine (9) meetings and the Audit Commitee held four
(4) meetings. Each of the then current Directors of the Company attended all
of the meetings of the Board of Directors and each Director serving on a
committee attended all the meetings of such committee upon which each
Director served.
<PAGE> 57
Item 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND OF MANAGEMENT
The following table sets forth certain information as of November 10, 1997,
based on information obtained from the persons named below or from Schedule
13D's filed with the Securities and Exchange Commission, with respect to the
beneficial ownership of shares of Common Stock by (i) each person known by
the Company to be the beneficial owner of more than 5% of the outstanding
shares of Common Stock, (ii) each Director, nominee for Director and Named
Executive Officer of the Company and (iii) all of the Company's executive
officers and Directors as a group.
NUMBER OF
SHARES PERCENTAGE OF
BENEFICIALLY OUTSTANDING
OWNED COMMON STOCK
High Risk Opportunity Hub Fund Ltd.(2) 12,712,198 43.1%
c/o Admiral Administration
P.O. Box 32021SMB
Grand Cayman Islands BWI
III Finance Ltd. (3) 12,825,300 42.0
250 Australian South
West Palm Beach, FL 33401
Gary Winnick (4) 3,015,341 17.1
c/o PCG Management, Inc.
150 El Camino Drive, Suite 204
Beverly Hills, CA 90212
Greenwich Capital Financial
Products, Inc. (5) 3,346,792 15.9
600 Steamboat Road
Greenwich, CT 06830
Robert I. Weingarten (6) 1,732,618 9.8
1999 Avenue of the Stars, Suite 2350
Los Angeles, CA 90067
Palomba Weingarten (6)(7) 1,678,577 9.5
c/o Atlas Holdings Group, Inc.
9595 Wilshire Boulevard
Beverly Hills, CA 90212
Angelo R. Appierto (8) 513,437 3.6
Joseph F. Battiato 345,000 3.4
Gary D. Peiffer (9) 279,314 1.6
Matthew B. Burns 20,000 *
John J. Chappell(10) 33,667
Jorge G. Rios -- --
Felice R. Cutler (11) 17,493 *
Carl Frischling (12) 40,493 *
Paul D. Fitzpatrick (13) 15,827 *
All executive officers and Directors as a group
(7 persons)(14) 737,250 4.1
*Less than 1%
<PAGE> 58
[FN]
<F1>
(1) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock beneficially owned by them. Each beneficial owner's percentage
ownership is determined by assuming that convertible securities, options or
warrants that are held by such person (but not those held by any other
person) and which are exercisable within 60 days of the Record Date have
been exercised.
<F2>
(2) Shares which may be owned by High Risk Opportunity Hub Fund Ltd. if
4,946,901 Series D Preferred is exchanged for common stock of the
Company on a common share equivalent basis equal to $1.26 per share.
(See "Change in Control"). Also includes 7,895,382 shares (estimated on
the basis of conversion at a 15% discount from the 5 days prior average
Nasdaq closing bid price) convertible from 106 shares of Convertible
Preferred Series C stock held by III Global Ltd.
<F3>
(3) Shares which may be owned by III Finance Ltd. if 16,159,878 Series D
Preferred Stock is exchanged for common stock of the Company on a common
share equivalent basis equal to $1.26 per share. (See "Change in Control").
<F4>
(4) Such shares are owned by PCG Management, Inc., an entity of which Gary
Winnick is the Chairman of the Board, Chief Executive Officer and sole
stockholder.
<F5>
(5) Includes 1,374,874 common stock equivalents.
<F6>
(6) Robert I. Weingarten and Palomba Weingarten are married to each other.
Shareholdings for Mr.Weingarten and Mrs. Weingarten each reflect
individual ownership and each disclaims beneficial ownership of
stock held by the other.
<F7>
(7) Such shares are owned by Atlas Holdings Group, Inc., an entity of which
Palomba Weingarten is the Chief Executive Officer, sole Director and
principal stockholder.
<F8>
(8) Includes (i) 50,000 shares held by the Appierto Irrevocable Family Trust
as to which shares Mr. Appierto disclaims beneficial ownership.
<F9>
(9) Includes 279,314 shares directly held by Suzanne C. Peiffer, Mr. Peiffer's
wife. Mr. Peiffer disclaims beneficial ownership of such shares.
<F10>
(10)Includes 33,667 shares subject to stock options which are immediately
exercisable. In addition, Mr. Chappell has nonvested options to purchase
21,333 shares which will vest over time.
<F11>
(11)Includes 17,493 shares subject to stock options. In addition, Ms. Cutler
has been granted options to purchase 833 shares per month for the remainder
of her term as Director. Such shares are immediately exercisable upon
vesting.
<F12>
(12)Includes 17,493 shares subject to stock options. In addition, Mr.
Frischling has been granted options to purchase 833 shares per month for
the remainder of his term as a Director. Such shares are immediately
exercisable upon vesting.
<F13>
(13)Includes 15,827 shares subject to stock options. In addition, Mr.
Fitzpatrick has been granted options to purchase 833 shares per month for
the remainder of his term as Director. Such shares are immediately
exercisable upon vesting.
<F14>
(14)See footnotes (8),(11), (12) and 13. In addition, includes 50,000 shares
and 75,000 subject to stock options held by William Henle and Dina Penepent,
respectively. Additionally, non vested options of 150,000 and 75,000 are
held by Mr. Henle and Ms. Penepent, respectively. Also includes 5,000
shares of common stock held by Ms. Penepent.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Officers and Directors of the Company
As of October 14, the date of Mr. Appierto's termination, Mr. Appierto owed the
Company $68,754 under an advance of $150,000 of a bonus amount that was
forfeited during the fiscal year 1997 from bonuses earned in the fiscal year
ended June 30, 1996. Repayment terms are currently under pending. See
"Employment Agreements".
Upon Mr. Peiffer's resignation, the Company cancelled and declared to be no
longer due and owing by him to the Company, certain expenses totaling $80,000
advanced by the Company on Mr. Peiffer's behalf. See "Employment Agreements".
Mr. Battiato owes the $125,000, which was advanced by the Company on Mr.
Battiato's behalf, in relation to the modification of his employment agreement
in connection with a change of control that occurred in February 1996. This
amount remains due and owing, repayment terms are currently under negotiation
with Mr. Battiato. See "Employment Agreements".
declare to be no longer due and owing by him to the Company, certain amounts
totaling $125,000 advanced by the Company on Mr. Battiato's behalf in relation
to the modification of his employment agreement in connection with the Whitehall
Transfer discussed under "Change in Control". The Company has also agreed, in
principle, to pay Mr. Battiato an additional $125,000 as severance.
As of November 7, 1997, definitive agreements have not been agreed upon.
See "Employee Agreements".
Upon Mr. Rios' termination, the remaining balance of $18,387 of an original
balance of $22,184 advanced by the Company on his behalf remains due and
payable by him. Further, an advance, which was due and payable upon the
receipt of future bonuses, in the amount of $300,000 was no longer due and
payable. See "Employment Agreements".
<PAGE> 59
Relationships and Related Transactions with Principal Stockholders of the
Company On March 31, 1996, the Company entered into an agreement with Whitehall
Financial Group, Inc. (the "Consulting Agreement"), whereby Whitehall was
engaged to provide consulting services to the Company relating to operations,
management, financing and marketing. Since neither party has elected to
terminate the Consulting Agreement, it was, in accordance with its terms,
automatically extended for a period of one year commencing February 6, 1997.
The Consulting Agreement provides for an annual fee to Whitehall of
$300,000 (subject to adjustment in certain circumstances) plus reasonable and
necessary expenses. Under the terms of the agreement, as of November 7, 1997,
the Company has paid $527,800, including out of pocket expenses of $27,800.
Whitehall recommended that Carl Frischling, Felice Cutler and Paul Fitzpatrick
be named to the Company's Board of Directors as of February 1996 as to Mr.
Frischling and Ms. Cuter and as of June 1996 as to Mr. Fitzpatrick. (See
"Directors and Executive Officers of the Company").
The Company has engaged Kramer, Levin, Naftalis & Frankel as its primary legal
counsel. Mr. Frischling, one of the Company's Directors, is a member of such
firm. No material payments have been made to legal cousel as of November 14,
1997.
PART IV
Item 14: Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Documents filed as part of this Report:
(1) The financial statements and schedules listed in
the accompanying Index to Financial Statements
and Schedules on page F-1 are filed as part of
the Annual Report on Form 10K.
(2) Exhibits. See Exhibit Index beginning on page 62.
(b) No Current Reports on Form 8-K were filed by the Company during
the fourth quarter ended June 30, 1997.
<PAGE> 60
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
THE AEGIS CONSUMER FUNDING GROUP, INC.
By: s/Matthew B. Burns
----------------------------
Matthew B. Burns
Date: November 18, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Title Date
s/Matthew B. Burns
- ---------------------- Chief Executive Officer November 19, 1997
Matthew B. Burns
s/Dina L. Penepent
- --------------------- Chief Financial Officer, November 19, 1997
Dina L. Penepent Executive Vice President,
Secretary, Principal
Financial and
Accounting Officer
s/Felice Cutler
- -------------------- Director November 19, 1997
Felice Cutler
s/Carl Frischling
- ------------------- Director November 19, 1997
Carl Frischling
s/Paul Fitzpatrick
- ------------------- Director November 19, 1997
Paul Fitzpatrick
s/Angelo R. Appierto
____________________ Director November 19, 1997
Angelo R. Appierto
<PAGE> 61
INDEX OF EXHIBITS
Listed below are all Exhibits filed as part of this report. Certain Exhibits
are incorporated herein by reference to (1) the Company's Registration
Statement on Form SB-2 originally filed on April 6, 1995 (File No. 33-85836);
(2) documents previously filed with the Company's Quarterly Report on Form
10-QSB for the period ended March 31, 1995; (3) documents previously filed with
the Company's Annual Report filed for the period ended June 30, 1995;
(4) documents previously filed with the Company's Quarterly Report on
Form 10-QSB for the period ended September 30, 1995; (5) documents previously
filed with the Company's Quarterly Report on Form 10-QSB for the period ended
December 31, 1995; (6) documents previously filed with the Company's Quarterly
Report on Form 10-QSB for the period ended March 31, 1996; (7) documents
previously filed with the Company's Annual Report on Form 10-K for the period
ended June 30, 1996; (8) documents previously filed with the Company's
Quarterly Report on Form 10-Q for the period ended September 30, 1996;
(9) documents previously filed with the Company's Quarterly Report on
Form 10-Q for the period ended December 31, 1996; (10) documents previously
filed with the Company's Quarterly Report on Form 10-Q for the period ended
March 31, 1997 or, (11) filed herewith.
Exhibit No. Description Page No.
3.1 Certificate of Incorporation(1)
3.2 By-laws(1)
3.3 Form of Amended and Restated Certificate of
Incorporation(1)
3.4 Form of Amended and Restated By-laws(1)
3.5 Certificate of Designation of Series C Preferred Stock(4)
4.1 Specimen Common Stock Certificate(1)
4.2 Warrant issued to Drew Schaefer(1)
4.3 Underwriters' Warrant Agreement(1)
4.4 Form of Escrow Agreement(1)
4.5 Voting Agreement dated February 15, 1996(1)
4.6 Irrevocable Proxy dated February 15, 1995(1)
4.7 Warrants to purchase 114,553 shares of Common Stock (4)
4.8 Warrant issued to Chaneil Associates(6)
4.9 Warrant issued to Beckett Reserve Fund, L.L.C(6)
4.10 Warrant issued to Bjorn Ahlstrom.(6)
5.1 Opinion of Shereff, Friedman, Hoffman & Goodman,
LLP(1)
10.1 Revolving Credit Facility Agreement, dated July 23, 1993,
between The Bennett Funding Group, Inc. and the Company(1)
10.2 Loan and Security Agreement, dated as of February 28,
1994, among Aegis Acceptance Corp., Aegis Consumer Finance,
Inc. and III Finance Ltd(1)
10.2.1 Form of Promissory Note relating to Exhibit 10.2(1)
10.2.2 Aging Receivables Report relating to Exhibit 10.2(1)
10.2.3 Form of Dealer Agreement relating to Exhibit 10.2(1)
10.2.4 GAP Auto Protection Insurance Policy relating to Exhibit
10.2.(1)
10.2.5 Form of Lease relating to Exhibit 10.2(1)
10.2.6 Liability Insurance Policy relating to Exhibit 10.2(1)
10.2.7 Risk Default Policy relating to Exhibit 10.2(1)
10.2.8 Residual Value Insurance Policy relating to Exhibit 10.2(1)
10.2.9 Underwriting Criteria relating to Exhibit 10.2(1)
10.2.10 Vendor Single Interest Physical Damage Insurance Policy
relating to Exhibit 10.2(1)
10.2.11 Form of Custodian Confirmation relating to Exhibit 10.2(1)
10.2.12 List of Closing Documents relating to Exhibit 10.2(1)
10.3 Loan and Security Agreement, dated as of November 8,
1993, between Aegis Capital Markets, Inc., Aegis Acceptance
Corp., Aegis Auto Finance, Inc. and III Finance Ltd.(1)
<PAGE> 62
10.3.1 Form of Promissory Note relating to Exhibit 10.3(1)
10.3.2 Aging Receivables Report relating to Exhibit 10.3(1)
10.3.3 Form of Dealer Agreement relating to Exhibit 10.3(1)
10.3.4 Form of RDI Policy relating to Exhibit 10.3(1)
10.3.5 Underwriting Criteria relating to Exhibit 10.3(1)
10.3.6 Form of VSI Policy relating to Exhibit 10.3(1)
10.3.7 Form of Servicer's Confirmation relating to Exhibit 10.3(1)
10.3.8 List of Closing Documents relating to Exhibit 10.3(1)
10.4 Loan and Security Agreement, dated as of July 1, 1993,
between Aegis Securitized Assets, Inc. and III Finance
Ltd.(1)
10.4.1 Underwriting Criteria relating to Exhibit 10.4(1)
10.5 1994 Stock Option Plan of the Company(1)
10.5.1 1994 Stock Option Plan of the Company, as amended(7)
10.5.2 1996 Stock Option Plan of the Company(7)
10.6 Employment Agreement with Angelo R. Appierto(1)
10.6.1 Amendment to Employment Agreement with Angelo R. Appierto(2).
10.6.2 Form of Amendment to Employment Agreement with
Angelo R. Appierto(6)
10.6.3 Form of Amendment to Employment Agreement with
Angelo R. Appierto.(7)
10.6.4 AMENDED AND RESTATED EMPLOYMENT AGREEMENT dated as of
April 1, 1997, by and between THE AEGIS CONSUMER FUNDING
GROUP, INC. and Mr. Angelo R. Appierto.(11)
10.7 Employment Agreement with Gary D. Peiffer(1)
10.7.1 Amendment to Employment Agreement with Gary D.
Peiffer.(2)
10.7.2 Form of Amendment to Employment Agreement with Gary
D. Peiffer.(6)
10.7.3 Form of Amendment to Employment Agreement with Gary
D. Peiffer.(7)
10.7.4 TERMINATION AGREEMENT dated as of June 18, 1997,
between THE AEGIS CONSUMER FUNDING GROUP, INC. and
Mr. Gary D. Peiffer.(11)
10.8 Employment Agreement with Joseph F. Battiato(1)
10.8.1 Amendment to Employment Agreement with Joseph F.
Battiato(2)
10.8.2 Form of Amendment to Employment Agreement with
Joseph F. Battiato(6)
10.8.3 Form of Amendment to Employment Agreement with
Joseph F. Battiato(7)
10.8.4 AMENDED AND RESTATED EMPLOYMENT AGREEMENT dated as of
April 1, 1997, by and between THE AEGIS CONSUMER FUNDING
GROUP,INC. and Mr. Joseph F. Battiato(11)
10.9 Employment Agreement with Matthew B. Burns(1)
10.9.1 Amendment to Employment Agreement with Matthew B.Burns(2)
10.9.2 Amendment to Employment Agreement of Matthew B. Burns,
dated as of October 11, 1995.(5)
10.9.3 Termination of Employment Agreement with Matthew B.
Burns.(8)
10.10 Employment Agreement with Jorge G. Rios.(1)
10.10.1 AMENDED AND RESTATED EMPLOYMENT AGREEMENT dated as of
April 1, 1997, by and between THE AEGIS CONSUMER FUNDING
GROUP, INC.
and Mr. Jorge Rios.(11)
10.11 Employment Agreement with Robert G. Nelson.(1)
10.12 Consulting Agreement with Drew E. Schaefer and Nustar
Financial Corp.(1)
10.13 Termination of Consulting Agreement with Drew E.
Schaefer Nustar Finnacial Corp (1)
10.14 Lease, dated June 29, 1992, by and between the Company
and First Pac Limited, with respect to 33 Whitehall St.,
New York, New York(1)
10.15 Additional Space Agreement, dated September 30, 1993, by
and between the Company and First Pac Limited(1)
10.16 Sublease, dated September 27, 1993, by and between the
Company as subtenant and Centre Reinsurance Company and
International Insurance Advisors, Inc., as sublessors(1)
<PAGE> 63
10.17 Sublease, dated as of October 1, 1993, by and between the
Company as sublessor and Americorp Financial Services, Inc.
as subtenant(1)
10.18 Master Servicing Agreement, dated as of February 28,
1994, between American Lenders Facilities, Inc. and Aegis
Consumer Finance, Inc.(1)
10.19 Program Management Agreement, dated as of November
16, 1992, by and between Aegis Financial Advisers, Inc.,
and The Bennett Funding Group, Inc(1)
10.20 Program Management Agreement Amendment No. 1,
dated as of July 1, 1993 by and between Aegis Financial
Advisers, Inc. and The Bennett Funding Group, Inc.(1),
10.21 Loan and Security Agreement, dated as of August 11,
1994, between Aegis Consumer Finance, Inc. and III Finance
Ltd.(1)
10.21.1 Form of Promissory Note relating to Exhibit 10.21(1)
10.21.2 Form of Cash Flow Valuation Report relating to Exhibit
10.21(1)
10.21.3 Aegis Auto Receivables 1994-A, L.P., Agreement of
Limited Partnership relating to Exhibit 10.21(1)
10.21.4 Pooling and Servicing Agreement relating to Exhibit
10.21.(1)
10.21.5 List of Closing Documents relating to Exhibit 10.21.(1)
10.21.6 See Exhibit 10.3.4.(1)
10.21.7 See Exhibit 10.3.6.(1)
10.22 Loan and Security Agreement, dated as of September 28,
1994, between Aegis Consumer Finance, Inc. and III
Finance Ltd.(1)
10.22.1 Form of Promissory Note relating to Exhibit 10.22(1)
10.22.2 See Exhibit 10.21.2(1)
10.22.3 See Exhibit 10.21.3(1)
10.22.4 See Exhibit 10.21.4(1)
10.22.5 See Exhibit 10.21.5(1)
10.22.6 See Exhibit 10.3.4(1)
10.22.7 See Exhibit 10.3.6.(1)
10.23 Form of Dealer Agreement(1)
10.24 Form of Customer Credit Application(1)
10.25 Partnership Agreement of Aegis Investment Partners(1)
10.26 Employment Termination Agreement, dated as of
February 22, 1995, between the Company and Robert Nelson(1)
10.27 Servicing Agreement with American Lenders Facility,
Inc.(2)
10.28 Loan and Security Agreement, dated as of December 22,
1994 between Aegis Consumer Finance, Inc. and III Finance
Ltd.(2).
10.28.1 Form of Promissory Note relating to Exhibit 10.28(2)
10.28.2 Exhibit 10.21.2 Form of Cash Flow Valuation Report
relating to Exhibit 10.21(1)
10.28.3 Exhibit 10.21.3 Aegis Auto Receivables 1994-A, L.P.,
Agreement of Limited Partnership relating to Exhibit 10.21(1)
10.28.4 Exhibit 10.21.4 Pooling and Servicing Agreement
relating to Exhibit 10.21(1)
10.28.5 Exhibit 10.21.5 List of Closing Documents relating to
Exhibit 10.21(1)
10.28.6 Exhibit 10.3.4 Form of RDI policy relating to Exhibit
10.3(1)
10.28.7 Exhibit 10.3.6 Form of VSI Policy relating to Exhibit
10.3(1)
10.29 Loan and Security Agreement dated as of March 22, 1995,
between Aegis Consumer Finance, Inc. and III Finance LTD.(2)
10.29.1 Form of Promissory Note relating to Exhibit 10.29(2)
10.29.2 Exhibit 10.21.2 Form of Cash Flow Valuation Report
relating to Exhibit 10.21(1)
10.29.3 Exhibit 10.21.3 Aegis Auto Receivables 1994-A, L.P.,
Agreement of Limited Partnership relating to Exhibit 10.21(1)
<PAGE> 64
10.29.4 Exhibit 10.21.4 Pooling and Servicing Agreement
relating to Exhibit 10.21(1)
10.29.5 Exhibit 10.21.5 List of Closing Documents relating to
Exhibit 10.21(1)
10.29.6 Exhibit 10.3.4 Form of RDI Policy relating to Exhibit 10.3(1)
10.29.7 Exhibit 10.3.6 Form of VSI Policy relating to Exhibit 10.3(1)
10.30 Loan and Security Agreement, dated as of June 20, 1995 between
Aegis Auto Finance, Inc. as Borrower and III Finance Ltd. as
Lender (3)
10.30.1 Promissory Note relating to Exhibit 10.30(3)
10.30.2 Exhibit 10.29.2 Form of Cash Flow Valuation Report relating
to Exhibit 10.21.3, relating to Exhibit 10.21(1)
10.30.3 Exhibit 10.29.4 Form of Cash Flow Valuation Report relating
to Exhibit 10.21.4, relating to Exhibit 10.21(1)
10.30.4 Exhibit 10.29.5 List of Closing Documents relating to Exhibit
10.21.5 relating to Exhibit 10.21(1)
10.30.5 Exhibit 10.29.6 Form of RDI Policy relating to Exhibit 10.3.4,
relating to Exhibit 10.3(1)
10.30.6 Exhibit 10.29.7 Form of VSI Policy relating to Exhibit 10.3.6,
relating to Exhibit 10.3(1)
10.31 Purchase Agreement dated as of 3/31/95 by and between
Aegis Auto Finance, Inc. as Seller and III Limited Partnership
as Purchaser (3)
10.31.1 Promissory Note dated as of 3/31/95 by and between III Limited
Partnership, Ltd. and Aegis Consumer Finance, Inc. (3)
10.31.2 Note Modification dated as 5/1/95 to the Promissory Note dated
3/31/95 by and between III Limited Partnership Ltd. and
Aegis Consumer Finance, Inc. (3)
10.32 Subcontracting Agreement dated as of 4/6/95 by and between
American Lenders Facilities, Inc. and Aegis Consumer Finance,
Inc. (3)
10.32.1 Amendment to Subcontracting Agreement between American
Lenders Facilities, Inc. and Aegis Consumer Finance, Inc.,
dated 6/19/95 (3)
10.33 Form of Servicing Agreement between American Lenders Facilities,
Inc., and Norwest Bank Minnesota, National Association. (3)
10.34 Marketing Agreement dated as of 6/15/95 by and between
Financial Access, Inc. and Aegis Consumer Finance, Inc.(3)
10.35 Purchase Agreement dated as of 6/1/95 between Aegis Auto
Finance, Inc. as Seller and Aegis Auto Funding Corp. as Buyer(3)
10.36 Form of Purchase Agreement dated as of 6/23/95 by and between
Aegis Auto Finance, Inc. as Seller and Liberty Bank and Trust
Company as Purchaser (3)
10.37 Marketing Agreement dated as of 8/24/95 by and between WG
Warranty and Insurance Services and Aegis Consumer Finance,
Inc. (3)
10.38 Purchase Agreement dated as of 9/22/95 by and between Aegis
Auto Finance, Inc. as Seller and Cameron State Bank as
Purchaser (3)
10.39 Employment Agreement with Dina L. Penepent (4)
10.40 Master Amendment to Loan and Security Agreements, dated as of
August 24, 1995 between Aegis Auto Finance, Inc. and III Finance
Ltd(4).
10.41 Amendment No. 4 to Loan and Security Agreement,
dated as of September 12, 1995 between Aegis Acceptance Corp.,
Aegis Consumer Finance, Inc. and III Finance
Ltd.(4)
10.42 Amendment No. 5 to Loan and Security Agreement,
dated as of October 18, 1995 between Aegis Acceptance Corp.,
Aegis Consumer Finance, Inc. and III Finance Ltd.(4)
10.43 Amendment No.5 to Loan and Security Agreement,
dated as of September 13, 1995, between Aegis Auto Finance,
Inc. and III Finance Ltd.(4)
<PAGE> 65
10.44 Amendment No. 6 to Loan and Security Agreement,
dated as of October 18, 1995, between Aegis Auto Finance, Inc.
and III Finance Ltd.(4)
10.45 Purchase Agreement dated as of 611/95 by and between
Aegis Auto Finance, Inc. as Seller and Aegis Auto Funding
Corp. as Purchaser(4).
10.46 Purchase Agreement dated as of 6/20/95 by and between
Aegis Auto Funding Corp. as Seller and Smith Barney Inc. as
Purchaser.(4)
10.47 Loan and Security Agreement, dated as of June 20, 1995
between Aegis Auto Finance, Inc. as Borrower and III Finance
Ltd. as Lender.(4)
10.47.1 Promissory Note relating to Exhibit 10.45.(4)
10.48. Exhibit 10.30.2 Form of Cash Flow Valuation Report
relating to Exhibit 10.29.2, relating to Exhibit 10.21.3,
relating to Exhibit 10.21(1).
10.48.1 Exhibit 10.30.3 Pooling and Servicing Agreement relating to
Exhibit 10.29.4, relating to Exhibit 10.21.4, relating to
Exhibit 10.21(1).
10.48.2 Exhibit 10.30.4 List of Closing Documents relating to
Exhibit 10.29.5, relating to Exhibit 10.21.5, relating
to Exhibit 10.21(1).
10.48.3 Exhibit 10.30.5 Form of RDI Policy relating to Exhibit
10.29.6, relating to Exhibit 10.3.4, relating to Exhibit
10.3(1).
10.48.4 Exhibit 10.30.6 Form of VSI Policy relating to Exhibit
10.29.7, relating to Exhibit 10.3.6, relating to Exhibit
10.3 (1).
10.49 Purchase Agreement dated as of 9/1/95 by and between
Aegis Auto Finance, Inc. as Seller and Aegis Auto Funding
Corp. as Purchaser.(4)
10.50 Purchase Agreement dated as of 9/20/95 by and between
Aegis Auto Funding Corp. as Seller and Smith Barney Inc.
as Purchaser.(4)
10.51 Loan and Security Agreement, dated as of September 25,
1995 between Aegis Auto Finance, Inc. as Borrower and III
Finance Ltd. as Lender.(4)
10.51.1 Promissory Note relating to Exhibit 10.49.(4)
10.52 Exhibit 10.46 Form of Cash Flow Valuation Report
relating to Exhibit 10.30.2, relating to Exhibit 10.29.2,
relating to Exhibit 10.21.3, relating to Exhibit
10.21(1).
10.52.1 Exhibit 10.46.1 Pooling and Servicing Agreement
relating to Exhibit 10.30.3, relating to Exhibit 10.29.4,
relating to Exhibit 10.21.4, relating to Exhibit 10.21(1).
10.52.2 Exhibit 10.46.2 List of Closing Documents relating to
Exhibit 10.30.4, relating to Exhibit 10.29.5, relating to
Exhibit 10.21.5, relating to Exhibit 10.21(1).
10.52.3 Exhibit 10.46.3 Form of RDI Policy relating to Exhibit
10.3.5, relating to Exhibit 10.29.6, relating to Exhibit
10.3.4, relating to Exhibit 10.3 (1).
10.52.4 Exhibit 10.46.4 Form of VSI Policy relating to Exhibit
10.3.6, relating to Exhibit 10.29.7, relating to Exhibit
10.3.6, relating to Exhibit 10.3 (1).
10.53 Purchase Agreement dated as of 11/7/95 by and between
Aegis Auto Finance, Inc. as Seller and Cameron State
Bank as Purchaser.(4)
10.54 Purchase Agreement dated as of 11/7/95 by and between
Aegis Auto Finance, Inc. as Seller and City Savings Bank and
Trust as Purchaser.(4)
10.55 Amendment No. 1 to 6/20/95 Loan and Security
Agreement, dated as of October 27, 1995 between Aegis Auto
Finance, Inc. and III Finance LTD.(4)
10.56 Amendment No. 1 to 9/25/95 Loan and Security
Agreement, dated as of October 27, 1995 between Aegis Auto
Finance, Inc. and III Finance LTD.(4)
10.57 Form of Regulation S Subscription Agreement (5)
10.57.1 Registration Rights Agreement relating to Exhibit 10.57(5)
10.58 Loan and Security Agreement, dated as of 11/7/95
between The Aegis Consumer Funding Group, Inc., as Borrower,
and both Aegis Consumer Finance, Inc., and
Aegis Auto Funding Corp.,as Guarantors, and Beckett
Reserve Fund, L.L.C., as Lender. (5)
<PAGE> 66
10.58.1 Promissory Note relating to Exhibit 10.58.(5)
10.59 Purchase Agreement dated as of 11/7/95 between Aegis
Auto Finance, Inc., as Seller, and City Savings Bank and
Trust as Purchaser.(5)
10.60 Purchase Agreement dated as of 11/7/95 between Aegis
Auto Finance, Inc., as Seller, and Cameron State Bank as
Purchaser.(5)
10.61 Agreement of Sublease dated as of 11/10/95 between
Aegis Consumer Funding Group, Inc., and Peterson & Ross.(5)
10.62 Purchase Agreement dated as of 12/12/95 between Aegis
Auto Finance, Inc. as Seller and Calcasieu Marine National
Bank as Purchaser.(5)
10.63 Funding Agreement dated as of 4/4/95 between U.S.
Investment Group, Inc., and The Aegis Consumer Funding Group,
Inc.(5)
10.63.1 Amendment dated as of 8/4/95 relating to Exhibit 10.63.(5)
10.64 Fee Agreement dated as of 12/20/95 with Chaneil
Associates.(5)
10.65 Loan Purchase Agreement dated as of 12/1/95 between
Aegis Auto Finance, Inc.and Aegis Auto Funding Corp.
II, as Purchaser.(5)
10.65.1 Trust Purchase Agreement dated as of 12/1/95 between
Aegis Auto Owner Trust 1995 as Issuer, and Aegis Auto
Funding Corp. II, as Seller.(5)
10.65.2 Trust Agreement dated as of 12/1/95 among Aegis Auto
Funding Corp. II, as Depositor, and Bankers Trust as
Owner Trustee.(5)
10.65.3 Indenture dated as of 12/1/95 between Aegis Auto Owner Trust
1995, as Issuer, and Norwest Bank Minnesota, National
Association, as Indenture Trustee.(5)
10.65.4 Insurance Agreement dated as of 12/1/95 by and between
MBIA Insurance Corporation, as Insurer, Aegis Auto Funding
Corp. II, as Seller, Aegis Auto finance, Inc., as Servicer,
Aegis Auto Owner Trust 1995, as Issuer, Norwest Bank
Minnesota, National association, as Indenture Trustee, and
Norwest Bank Minnesota, National Association, as Back-up
Servicer.(5)
10.65.5 Servicing Agreement dated as of 12/1/95 among Aegis Auto
Finance, Inc., as Servicer, Aegis Auto Funding Corp. II,
as Seller, Aegis Auto Owner Trust 1995, as Issuer, and
Norwest Bank Minnesota, National Association, as Back-
up Servicer.(5)
10.65.6 Addendum to Servicing Agreement, relating to Exhibit
10.65.5.(5)
10.65.7 Placement agency Agreement dated as of 12/13/95,
relating to Exhibit 10.65.2.(5)
10.65.8 Note Purchase Agreement dated as of 12/20/95, by and
between Aegis Auto Owner Trust 1995, Issuer, Aegis Auto
Finance, Inc, as Servicer, Aegis Auto Funding Corp., as
Seller, Market Street Capital Corporation, as Purchaser.(5)
10.65.9 Administration Agreement dated as of 12/20/95 between
Aegis Auto Finance, Inc., as Servicer, and Rothschild
Inc., as Administrator.(5)
10.70 Lease Agreement dated as of 11/14/94, between Newport
L.G.-I, Inc., as Landlord, and The Aegis Consumer Funding
Group, Inc., as Tenant.(5)
10.70.1 Amendment to Lease, dated as of 12/23/94 between Newport
L.G.-I, Inc., as Landlord, and The Aegis Consumer Funding
Group, Inc., as Tenant, relating to Exhibit 10.70.(5)
10.70.2 Second Amendment to Lease, dated as of 12/29/95 between
Newport L.G.-I, Inc., as Landlord, and The Aegis Consumer
Funding Group, Inc.,as Tenant, relating to Exhibit 10.70 (5)
10.71 Fee Agreement dated as of 12/20/95 with U.S. Investment Group,
Inc., relating to Exhibit 10.63.(5)
10.72 Purchase Agreement dated as of 12/1/95 by and between
Aegis Auto Finance, Inc. as Seller and Aegis Auto Funding
Corp., as Purchaser.(5)
10.73 Purchase Agreement dated as of 12/20/95 by and between Aegis
Auto Funding Corp. as Seller and Smith Barney Inc., as
Purchaser.(5)
<PAGE> 67
10.74 Loan and Security Agreement dated as of 12/20/95 between Aegis
Auto Finance, Inc. as Borrower and III Finance Ltd., as
Lender.(5)
10.74.1 Form of Promissory Note relating to Exhibit 10.60.(5)
10.75 Exhibit 10.48 Form of Cash Flow Valuation Report, relating to
Exhibit 10.30.2, relating to Exhibit 10.29.2, relating to
Exhibit 10.21.3, relating to Exhibit 10.21(1).
10.75.1 Exhibit 10.48.1 Pooling and Servicing Agreement, relating to
Exhibit 10.30.3, relating Exhibit 10.29.4, relating to Exhibit
10.21.4, relating to Exhibit 10.21(1).
10.75.2 Exhibit 1048.2 List of Closing Documents, relating to
Exhibit 10.30.4, relating to Exhibit 10.29.5, relating to
Exhibit 10.21.5, relating to Exhibit 10.21(1).
10.75.3 Exhibit 10.48.3 Form of RDI Policy, relating to Exhibit
10.30.5, relating to Exhibit 10.29.6 relating to Exhibit 10.3.4,
relating to Exhibit 10.3(1).
10.75.4 Exhibit 10.48.4 Form of VSI Policy, relating to Exhibit
10.30.6, relating to Exhibit 10.29.7, relating to Exhibit
10.3.6, relating to Exhibit 10.3(1).
10.76 Form of Servicing Agreement dated as of 12/1/95 by and between
Aegis Auto Finance, Inc. as Seller and Aegis Auto Funding
Corp. as Purchaser.(5)
10.77 Consultant/Advisor Agreement dated as of 1/2/96, between The
Sloane Organization, as Consultant, and The Aegis Consumer
Funding Group, Inc., as the Consultee.(5)
10.77.1 Sloane Letter Agreement dated as of 1/3/96, relating to
Exhibit 10.77.(5)
10.78 Purchase Agreement dated as of 1/19/96 between Aegis
Auto Finance, Inc. as Seller and United Bank and Trust
Company as Purchaser.(5)
10.79 Purchase Agreement dated as of 1/24/96 between Aegis
Auto Finance, Inc. as Seller and Gulf Coast Bank as
Purchaser.(5)
10.79.1 Reserve Account Agreement, relating to Exhibit 10.79.(5)
10.80 Notice of Annual Meeting of Stockholders and Proxy
Statement.(5)
10.80.1 Proxy Card, relating to 10.80.(5)
10.81 Purchase Agreement dated as of 2/29/96 between Aegis
Auto Finance, Inc. as Seller and First Bank of Eunice as
Purchaser.(6)
10.82 Purchase Agreement dated as of 3/21/96 between Aegis
Auto Finance, Inc. as Seller and United Bank and Trust
Company as Purchaser.(2)
10.83 Purchase Agreement dated as of 3/1/96 by and between
Aegis Auto Finance, Inc. as Seller and Aegis Auto Funding
Corp., as Purchaser.(6)
10.84 Purchase Agreement dated as of 3/22/96 by and between
Aegis Auto Funding Corp. as Seller and Greenwich Capitol
Markets, Inc., as Purchaser.(6)
10.85 Loan and Security Agreement dated as of 3/22/96
between Aegis Auto Finance, Inc. as Borrower and III
Finance Ltd., as Lender.(6)
10.85.1 Form of Promissory Note relating to Exhibit 10.85(5)
10.86 Exhibit 10.75 Form of Cash Flow Valuation Report,
relating to Exhibit 10.48 relating to Exhibit 10.30.2,
relating to Exhibit 10.29.2, relating to Exhibit 10.21.3,
relating to Exhibit 10.21(1).
10.86.1 Exhibit 10.75.1 Pooling and Servicing Agreement,
relating to Exhibit 10.48.1, relating to Exhibit 10.30.3,
relating to Exhibit 10.29.4, relating to Exhibit
10.21.4, relating to Exhibit 10.21(1).
10.86.2 Exhibit 10.75.2 List of Closing Documents, relating to
Exhibit 10.48.2, relating to Exhibit 10.30.4, relating to
Exhibit 10.29.5, relating to Exhibit 10.21.5, relating to
Exhibit 10.21(1).
10.86.3 Exhibit 10.75.3 Form of RDI Policy, relating to Exhibit
10.48.3, relating to Exhibit 10.30.5, relating to Exhibit
10.29.6, relating to Exhibit 10.3.4, relating to
Exhibit 10.3(1).
10.86.4 Exhibit 10.75.4 Form of VSI Policy, relating to Exhibit
10.48.4, relating to Exhibit 10.30.6, relating to Exhibit
10.29.7, relating to Exhibit 10.3.6, relating to
Exhibit 10.3(1).
<PAGE> 68
10.87 Servicing Agreement dated as of 3/1/96 by and between
Aegis Auto Finance, Inc. as Servicer and Norwest Bank
Minnesota, National Association in its capacity as Backup
Servicer and Norwest Bank Minnesota, National Association in its
capacity as Trustee.(6)
10.88 Master Servicing Agreement dated as of 4/6/96 by and
between American Lenders Facilities, Inc. as Servicer
and Aegis Consumer Finance, Inc. as Company.(6)
10.89 Subcontracting Agreement dated as of 4/6/96 by and
between American Lenders Facilities, Inc. as Servicer
and Aegis Consumer Finance, Inc. as Subcontractor.(6)
10.90 Form of Greenwich Capital Markets, Inc. Warrant
("Greenwich Warrant") to purchase Common Stock of The
Aegis Consumer Funding Group, Inc.(6)
10.90.1 Form of Escrow letter concerning Greenwich Warrant,
relating to Exhibit 10.90.(6)
10.90.2 Form of Acknowledgement letter concerning the
adequacy of the Greenwich
Warrant, relating to Exhibit 10.90.(6)
10.91 Exhibit 10.86 Form of Cash Flow Valuation Report, relating
to Exhibit 10.75, relating to Exhibit 10.48, relating to
Exhibit 10.30.2, relating to Exhibit 10.29.2, relating to
Exhibit 10.21.3, relating to Exhibit 10.21(1).
10.91.1 Exhibit 10.86.1 Pooling and Servicing Agreement, relating
to Exhibit 10.75.1, relating to Exhibit 10.48.1, relating
to Exhibit 10.30.3, relating to Exhibit 10.29.4, relating
to Exhibit 10.21.4, relating to Exhibit 10.21(1).
10.91.2 Exhibit 10.86.2 List of Closing Documents, relating to
Exhibit 10.75.2, relating to Exhibit 10.48.2, relating
to Exhibit 10.30.4, relating to Exhibit 10.29.5, relating
to Exhibit 10.21.5, relating to Exhibit 10.21(1).
10.91.3 Exhibit 10.86.3 Form of RDI Policy, relating to Exhibit
10.75.3, relating to Exhibit 10.48.3, relating to Exhibit
10.30.5, relating to Exhibit 10.29.6, relating to
Exhibit 10.3.4, relating to Exhibit 10.3(1).
10.91.4 Exhibit 10.86.4 Form of VSI Policy, relating to Exhibit
10.75.4, relating to Exhibit 10.48.4, relating to Exhibit
10.30.6, relating to Exhibit 10.29.7, relating to Exhibit
10.3.6, relating to Exhibit 10.3(1).
10.91.5 Form of Purchase Agreement dated as of 6/01/96 by and
between Aegis Auto Finance, Inc. as Seller and Aegis Auto
Funding Corp., as Purchaser.(7)
10.91.6 Form of Purchase Agreement dated as of 6/01/96 by and
between Aegis Auto Funding Corp. III, as seller and Aegis
Auto Finance, Inc., as Purchaser.(7)
10.91.7 Form of Servicing Agreement dated as of 6/1/96 by and
between Aegis Auto Finance, Inc. as Servicer and Norwest
Bank Minnesota, National Association in its capacity as
Backup Servicer and Norwest Bank Minnesota, National
Association in its capacity as Trustee.(7)
10.91.8 Form of Purchase Agreement as of May 17, 1996, by
and between Aegis Auto Finance,Inc. as Seller and Aegis
Auto Funding Corp. III as Purchaser.(7)
10.92 Form of Rothschild Placement Agency Agreement Letter(6)
10.93 Greenwich Capital Commitment Letter(7)
10.93.1 Amendment to Greenwich Capital Commitment Letter (7)
10.94 Warehouse Lending Agreement dated as of May 17, 1996 by
and between The Aegis Consumer Funding Group, Inc. as
Guarantor, Aegis Auto Funding Corp. III and Greenwich
Capital Financial Products, Inc., as Lender(7)
10.94.1 Form of Note relating to Exhibit 10.94(7)
10.94.2 Form of Security Agreement relating to Exhibit 10.94(7)
10.94.3 Form of Servicing Agreement relating to Exhibit 10.94(7)
10.95 Credit Agreement Dated as of May 17, 1996, Among The Aegis
Consumer Funding Group, Inc. as borrower, Aegis Consumer
Finance, Inc., as Guarantor, Aegis Auto Finance, Inc., as
Guarantor, and Greenwich Capital Financial Products, Inc.,
as Lender(7)
<PAGE> 69
10.95.1 Form of Note relating to Exhibit 10.95(7)
10.95.2 Form of Aegis Consumer Finance, Inc. Security and
Pledge Agreement relating to Exhibit 10.95(7)
10.95.3 Form of Aegis Auto Finance, Inc. Security and Pledge
Agreement relating to Exhibit 10.95(7)
10.95.4 AMENDED AND RESTATED CREDIT AGREEMENT dated as of June 23,
1997 to the Credit Agreement dated as of May 17, 1996 among
THE AEGIS CONSUMER FUNDING GROUP, INC., as Borrower and
AEGIS CONSUMER FINANCE, INC and AEGIS AUTO FINANCE, INC. as
Guarantors and GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.(11)
10.96 Loan and Security Agreement dated June 25, 1996, between
Aegis Consumer Finance, Inc. and III Finance, Inc. LTD.(7)
10.96.1 Form of Promissory Note relating to Exhibit 10.96(7)
10.97 PURCHASE AGREEMENT dated as of September 1, 1996 by and
between AEGIS AUTO FINANCE, INC. as Seller and AEGIS AUTO
FUNDING CORP. as Purchaser.(8)
10.97.1 SERVICING AGREEMENT dated as of September 1, 1996 among
AEGIS AUTO FINANCE, INC., as Servicer NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION in its capacity as Backup
Servicer and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
in its capacity as Trustee.(8)
10.97.2 POOLING AND SERVICING AGREEMENT Dated as of September 1,
1996 by and between AEGIS AUTO FUNDING CORP., as Seller
and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION as Trustee
and Backup Servicer.(8)
10.98 LOAN AND SECURITY AGREEMENT dated as of September 12, 1996
by and between AEGIS AUTO FINANCE, INC. as Borrower and III
FINANCE, INC. as Lender(8).
10.98.1 NOTE relating to 10.98.(8)
10.99 POOLING AND SERVICING AGREEMENT dated as of September 1, 1996
by and between AEGIS AUTO FUNDING CORP., as Seller and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee and
Backup Servicer.(8)
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.(9)
10.99.2 CERTIFICATE PURCHASE AGREEMENT dated as of September 27, 1996
by and between AEGIS AUTO FUNDING CORP. and GREENWICH CAPITAL
MARKETS, INC.(9)
10.99.3 FIRST AMENDMENT TO POOLING AND SERVICING AGREEMENT dated as
of June 27, 1997, by and between AEGIS AUTO FUNDING CORP., as
Seller and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as
Trustee and Backup Servicer relating to Aegis Auto Receivables
Trust 1996-A.(11)
10.100 SERVICING AGREEMENT dated as of September 1, 1996 among
AEGIS AUTO FINANCE, INC., as Servicer, NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION in its capacity as Backup Servicer and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION in its capacity
as Trustee.(8)
10.101 Employment Agreement by and between SYSTEMS AND SERVICES
TECHNOLOGIES,INC. and Matthew B. Burns.(8)
<PAGE> 70
10.102 Employment Agreement by and between SYSTEMS AND SERVICES
TECHNOLOGIES, INC. and John Chappell(8)
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.(9)
10.103.A FIRST MODIFICATION OF PURCHASE AGREEMENT dated as of
March 20, 1997, by and between AEGIS AUTO FINANCE, INC. as
Seller and ENTERPRISE NATIONAL BANK OF PALM BEACH as
Purchaser.(10)
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(9)
10.103.1A MODIFICATION OF ADDENDUM TO MASTER SERVICING AGREEMENT
dated as of March 20, 1997, 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 as Purchaser.(10)
10.103.2 REPURCHASE AGREEMENT dated as of August 29, 1997, by and
between AEGIS AUTO FINANCE, INC. and ENTERPRISE NATIONAL
BANK OF PALM BEACH(11)
10.104 MASTER TRUST AGREEMENT dated as of March 1, 1997, by and
among AEGIS AUTO FUNDING CORP. IV, NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION as Backup Servicer, and NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION as Trustee with respect
to the Aegis Auto Receivables Trusts.(10)
10.104.1 MASTER PURCHASE AGREEMENT dated as of March 1, 1997, by
and between AEGIS AUTO FINANCE, INC. as Borrower and AEGIS
AUTO FUNDING CORP. IV.(10)
10.104.2 MASTER SERVICING AGREEMENT dated as of March 1, 1997, by and
among AEGIS AUTO FUNDING CORP. IV, NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION as Backup Servicer and NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION as Trustee.(10)
10.104.3 POOLING AND SERVICING AGREEMENT dated as of March 1, 1997,
by and among AEGIS AUTO FUNDING CORP.IV., NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION as Trustee and Backup
Servicer.(10)
10.104.4 MASTER CERTIFICATE PURCHASE AGREEMENT dated as of March 14,
1997, by and among AEGIS AUTO FUNDING CORP. IV, THE AEGIS
CONSUMER FUNDING GROUP, INC., and III FINANCE LTD.,
III GLOBAL LTD. and III LIMITED PARTNERSHIP, collectively,
as Purchasers.(10)
10.104.5 POOLING AND SERVICING AGREEMENT dated as of April 1, 1997,
by and between AEGIS AUTO FUNDING CORP. IV, as Seller and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee and
Backup Servicer.(10)
10.104.6 SUPPLEMENTAL CONVEYANCE dated as of April 16, 1997, by
AEGIS AUTO FINANCE, INC. to AEGIS AUTO FUNDING CORP. IV,
as Purchaser.(10)
10.104.7 PROMISSORY NOTE dated as of Apr 16, 1997, executed by THE
AEGIS CONSUMER FUNDING GROUP, INC. in favor of AEGIS AUTO
FUNDING CORP. IV.(10)
10.104.8 POOLING AND SERVICING dated as of May 1, 1997, by and
between AEGIS AUTO FUNDING CORP. IV, as Seller and NORWEST
BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee and Backup
Servicer.(10)
<PAGE> 71
10.104.9 PROMISSORY NOTE dated as of May 12, 1997, executed by THE
AEGIS CONSUMER FUNDING GROUP, INC. in favor of AEGIS AUTO
FUNDING CORP. IV. (10)
10.104.10 SUPPLEMENTAL CONVEYANCE dated as of May 12, 1997, executed
by AEGIS AUTO FINANCE, INC. to AEGIS AUTO FUNDING CORP. IV,
as Purchaser.(10)
10.104.11 AMENDED AND RESTATED MASTER TRUST AGREEMENT dated as of May
1, 1997, by and between AEGIS AUTO FUNDING CORP. IV, as
Seller and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as
Trustee.(11)
10.104.12 AMENDED AND RESTATED MASTER SERVICING AGREEMENT dated as of
May 1, 1997, by and between AEGIS AUTO FINANCE, INC., as
Servicer and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee and Backup Servicer.(11)
10.104.13 AMENDED AND RESTATED MASTER PURCHASE AGREEMENT dated as of
May 1, 1997, by and between AEGIS AUTO FINANCE, INC., as
Seller and AEGIS AUTO FUNDING CORP. IV, as Purchaser.(11)
10.104.14 POOLING AND SERVICING AGREEMENT dated as of June 1, 1997,
by and between AEGIS AUTO FUNDING CORP. IV, as Seller
and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as
Trustee and Backup Servicer.(11)
10.104.15 SUPPLEMENTAL CONVEYANCE dated as of June 27, 1997
by AEGIS AUTO FINANCE, INC. to AEGIS AUTO FUNDING CORP.
IV, as Purchaser.(11)
10.104.16 POOLING AND SERVICING AGREEMENT dated as of August 1,
1997, by and between AEGIS AUTO FUNDING CORP. IV, as
Seller and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee and Backup Servicer.(11)
10.104.17 SUPPLEMENTAL CONVEYANCE dated as of August 1, 1997
by AEGIS AUTO FINANCE, INC. to AEGIS AUTO FUNDING CORP.
IV, as Purchaser.(11)
10.105 LOAN AND SECURITY AGREEMENT dated as of March 14, 1997,
by and among AEGIS AUTO FINANCE, INC.as Borrower,
III FINANCE LTD. and III GLOBAL LTD., collectively
as Lenders.(10)
10.105.1 PROMISSORY NOTE dated as of March 14, 1997, executed by
AEGIS AUTO FINANCE, INC. in favor of III FINANCE LTD.(10)
10.105.2 PROMISSORY NOTE dated as of March 14, 1997, executed by
AEGIS AUTO FINANCE, INC. in favor of III GLOBAL LTD.(10)
10.105.3 GUARANTY dated as of March 14, 1997, executed by
THE AEGIS CONSUMER FUNDING GROUP, INC. in favor of III
FINANCE LTD. and III GLOBAL LTD.(10)
10.105.4 PLEDGE AGREEMENT dated as of March 14,1997, executed by THE
AEGIS CONSUMER FUNDING GROUP, INC. in favor of III FINANCE
LTD. and III GLOBAL LTD.(10)
10.105.5 PLEDGE AGREEMENT dated as of March 14, 1997, executed
by AEGIS CONSUMER FINANCE, INC. in favor of III FINANCE
LTD. and III GLOBAL LTD.(10)
10.105.6 PLEDGE AGREEMENT dated as of March 14, 1997, executed by
AEGIS CAPITAL MARKET, INC. (d/b/a MARKETS) in favor of
III FINANCE LTD. AND III GLOBAL LTD.(10)
10.105.7 RETAINED YIELD PLEDGE AGREEMENT dated as of March 14,
1997, executed by AEGIS AUTO FINANCE, INC. in favor of
III FINANCE LTD.(10)
10.105.8 AMENDMENT NO. 6 dated as of March 12, 1997, by and
among AEGIS ACCEPTANCE CORP., AEGIS CONSUMER FINANCE,
INC. and III FINANCE LTD. to the LOAN AND SECURITY
AGREEMENT dated as of February 28, 1994.(10)
<PAGE> 72
10.105.9 SECURITY AGREEMENT dated as of March 14, 1997, by
and between AEGIS ACCEPTANCE CORP. and AEGIS CONSUMER
FINANCE, INC., as grantors and III FINANCE LTD.and
III GLOBAL LTD., as Secured Parties.(10)
10.105.10 MASTER AMENDMENT TO LOAN AND SECURITY AGREEMENT dated
as of March 19, 1997 by and between AEGIS CONSUMER
FINANCE, INC. and AEGIS AUTO FINANCE, INC., as
Borrowers and III FINANCE LTD., as Lender and an
ASSIGNMENT AGREEMENT dated as of March 19, 1997 by
and among AEGIS CAPITAL MARKETS, AEGIS ACCEPTANCE CORP.
AND AEGIS AUTO FINANCE, INC.(11)
10.105.11 AMENDMENT dated May 21, 1997, to LOAN and SECURITY
AGREEMENT dated March 14, 1997, by and between AEGIS
AUTO FINANCE, INC. and III FINANCE LTD.(11)
10.106 SERVICING AGREEMENT dated as of January 3, 1997,
by and between SYSTEMS & SERVICES TECHNOLOGIES, INC.
and AEGIS CONSUMER FINANCE, INC.(10)
10.107 INDENTURE dated as of April 30, 1997, among AEGIS
AUTO FINANCE, INC., as Borrower, THE AEGIS CONSUMER
FUNDING GROUP and NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Indenture Trustee as to the
Subordinated Debentures.(11)
10.107.1 12% EXCHANGEABLE SUBORDINATED NOTES due 2004 (i) the
first payable to THE HIGH RISK OPPORTUNITIES HUB FUND
LTD. in the principal amount of $5,000,000; and
(ii) the second payable to III FINANCE LTD. in the
principal amount of $16,333,333.(11)
10.107.2 NOTE PURCHASE AGREEMENT dated as of April 30, 1997,
among AEGIS AUTO FINANCE, INC., THE AEGIS CONSUMER
FUNDING GROUP, INC., III FINANCE LTD. AND THE HIGH
RISK OPPORTUNITIES HUB FUND LTD.(11)
10.107.3 REGISTRATION RIGHTS AGREEMENT dated as of April 30, 1997,
among THE AEGIS CONSUMER FUNDING GROUP, INC.,
THE HIGH RISK OPPORTUNITIES HUB FUND LTD., AND III
FINANCE LTD.(11)
10.107.4 GUARANTY AGREEMENT dated as of April 30, 1997,
executed by THE AEGIS CONSUMER FUNDING GROUP, INC.
in favor of NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Indenture Trustee.(11)
10.107.5 PLEDGE AGREEMENT dated as of April 30, 1997,
from THE AEGIS CONSUMER FUNDING GROUP, INC.
to NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Indenture Trustee.(11)
10.107.6 PLEDGE AGREEMENT dated as of April 30, 1997,
from AEGIS CONSUMER FINANCE, INC. to NORWEST
BANK MINNESOTA, NATIONAL ASSOCIATION.(11)
10.107.7 PLEDGE AGREEMENT dated as of April 30, 1997,
from AEGIS CAPITAL MARKETS, INC. to NORWEST
BANK MINNESOTA, NATIONAL ASSOCIATION.(11)
10.107.8 PLEDGE AGREEMENT dated as of April 30, 1997,
from AEGIS AUTO FINANCE, INC. to NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION.(11)
10.107.9 PLEDGE AGREEMENT dated as of April 30, 1997,
from AEGIS CONSUMER FINANCE, INC. to NORWEST
BANK MINNESOTA, NATIONAL ASSOCIATION.(11)
10.107.10 SECURITY AGREEMENT dated as of April 30, 1997,
from AEGIS AUTO FINANCE, INC. to NORWEST BANK
MINNESOTA,NATIONAL ASSOCIATION.(11)
10.107.11 SECURITY AGREEMENT dated as of April 30, 1997,
from AEGIS ACCEPTANCE CORP. and AEGIS CONSUMER
FINANCE, INC. to NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION.(11)
<PAGE> 73
10.107.12 LIEN SUBORDINATION AGREEMENT dated as of April 30,
1997, by NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
in favor of III FINANCE LTD.(11)
10.107.13 CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF CLASS D REDEEMABLE PREFERRED STOCK OF THE AEGIS
CONSUMER FUNDING GROUP, INC. dated as of May 15, 1997.(11)
10.108 AMENDED AND RESTATED MASTER LOAN AGREEMENT dated as of
April 30, 1997, among AEGIS AUTO FINANCE, INC.,AEGIS
CONSUMER FINANCE, INC. AND III FINANCE LTD.(11)
10.108.1 AMENDED AND RESTATED NOTE dated as of May 21, 1997.(11)
10.108.2 PLEDGE AGREEMENT dated as of April 30, 1997, from AEGIS
AUTO FINANCE, INC. to III FINANCE LTD.(11)
10.108.3 PLEDGE AGREEMENT dated as April 30, 1997, from AEGIS
CONSUMER FINANCE, INC. to III FINANCE LTD.(11)
10.108.4 MASTER SECURITY AGREEMENT dated as of April 30, 1997,
from each of THE AEGIS CONSUMER FUNDING GROUP, INC.,
AEGIS CONSUMER FINANCE, INC., AEGIS CAPITAL MARKETS,
INC.and AEGIS AUTO FINANCE, INC. to III FINANCE LTD.(11)
10.108.5 GUARANTY dated as of April 30, 1997, from THE AEGIS
CONSUMER FUNDING GROUP, INC. to III FINANCE LTD.(11)
10.109 EMPLOYMENT AGREEMENT dated as of July 1, 1997, by and
between THE AEGIS CONSUMER FUNDING GROUP, INC. and Mr.
William F. Henle.(11)
21 Subsidiaries of the Company(1)
23 Consent of Independent Accountants
27 Financial Data Schedule(11)
<PAGE> 74
THE AEGIS CONSUMER FUNDING GROUP, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Auditors .................................. F-2
Consolidated Statements of Financial Condition at June 30,
1996 and 1997.................................................. F-3
Consolidated Statements of Operations for the fiscal years ended June
30, 1995, 1996 and 1997......................................... F-4
Consolidated Statements of Changes in Stockholders' Equity for the
fiscal years ended June 30, 1995, 1996 and 1997................ F-5
Consolidated Statements of Cash Flows for the fiscal years ended
June 30, 1995, 1996 and 1997.................................. F-6
Notes to Consolidated Financial Statements....................... F-7
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
The Aegis Consumer Funding Group, Inc.
We have audited the accompanying consolidated statements of financial
condition of The Aegis Consumer Funding Group, Inc. and subsidiaries (the
"Company") as of June 30, 1997 and 1996 and the related consolidated
statements of Operations, changes in stockholders' equity, and cash flows for
the three years in the period ended June 30, 1997. These consolidated
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of the Company as of June 30, 1997 and 1996 and the consolidated results of
its operations and its cash flows for the three years in the period ended
June 30, 1997, in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed
in Note 2 to the consolidated financial statements, the Company experienced
in 1997 material increases in delinquencies and losses on owned and serviced
installment contracts, and a substantial net loss. As a reslut, the
Company is facing severe liquidity problems due to the lack of committed
operating capital and the delay of expected cash payments from retained
interests in securitized receivables. These matters raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 2.
The accompanying consolidated financial statements do not include any
adjustments that might be necessary should the Company be unable to
continue as a going concern.
s/ERNST & YOUNG LLP
October 20, 1997 except for Note 2
and Note 17 which are of November 14, 1997
New York, New York
F-2
<PAGE>
The Aegis Consumer Funding Group, Inc.
Consolidated Statements of Financial Condition
Assets
<TABLE>
<CAPTION>
Pro-Forma
June 30, June 30, 1997
-------- -------------
1996 1997 (Unaudited)
----- -----
<S> <C> <C> <C>
Cash and cash equivalents $8,775,975 $4,492,591 $4,492,591
Interest and other receivables 1,660,442 3,983,843 3,983,843
Automobile finance receivables, net 41,058,222 34,654,507 34,654,507
Retained interests in securitized
receivables 70,242,773 33,329,946 33,329,946
Property, plant and equipment,
net of accumulated
depreciation of $712,073 in 1996
and $1,313,368 in 1997 1,817,356 4,997,718 4,997,718
Other assets 3,582,337 2,024,135 1,697,720
--------- --------- ---------
$127,137,105 $83,482,740 $83,156,325
=========== =========== ==========
Liabilities and stockholders' equity
Warehouse credit facilities $37,202,342 $17,407,004 $17,407,004
Notes payable 29,848,859 36,812,869 36,812,869
Accounts payable and accrued expenses 16,905,995 15,043,881 14,780,770
Income taxes payable 9,188,444 764,900 764,900
--------- ---------- -----------
Total liabilities 93,145,640 70,028,654 69,765,543
----------- ---------- -----------
Subordinated debentures, net - 24,031,746 -
---------- ----------- -----------
Stockholders' equity:
Common stock, $.01 par value; 30,000,000
shares authorized; $15,455,958 shares
issued and outstanding in 1996
and 17,677,217 shares
issued and outstanding in 1997 154,560 176,772 176,772
Preferred stock, $0.10 par value;
2,000,000 shares authorized:
Series C, 1,100 shares designated;
920 shares issued; 525 shares
outstanding in 1996 and 106
shares outstanding in 1997 53 11 11
Series D, E and F 25,550 shares designated;
24,032 shares issued and outstanding
in pro-forma 1997 - - 2,403
Paid-in capital 22,199,545 22,303,034 46,269,073
Retained earnings (deficit) since
date of recapitalization
(March 1, 1992) 11,637,307 (33,057,477) (33,057,477)
----------- ------------ ------------
Total stockholders' equity 33,991,465 (10,577,660) 13,390,782
----------- ------------ ------------
$127,137,105 $83,482,740 $83,156,325
============ ============ ===========
</TABLE>
See notes to these consolidated financial statements.
F-3
<PAGE>
The Aegis Consumer Funding Group, Inc.
Consolidated Statements of Operations
<TABLE>
Years Ended June 30,
-------------------
1995 1996 1997
---- ---- -----
<S> <C> <C> <C>
Revenues:
Gains (losses) from securitization
transactions, net $9,522,648 $32,428,861 ($27,416,474)
Interest income 6,853,819 13,339,575 21,869,489
Servicing fee income - 237,373 4,037,772
Fees and commissions earned 769,953 283,319 1,281,772
Fees and commissions
earned - related parties 275,000 - -
Other income 388,881 38,759 218,202
-------- ---------- ----------
17,810,301 46,327,887 (9,239)
---------- ---------- ----------
Operating Expenses:
Interest 4,541,006 10,090,712 16,588,261
Interest paid to related parties 252,879 - -
Salaries and other employee costs 3,896,697 8,267,376 13,875,881
Provision for credit losses 941,354 3,504,622 9,426,802
Charge for release of escrowed shares 878,739 806,886 -
Office expenses 744,149 899,667 2,082,375
Professional fees 372,324 1,131,759 2,243,464
Professional fees to related parties 350,000 125,000 317,675
Rent and electricity 615,749 1,249,557 2,018,778
Communications 606,523 974,979 2,463,008
Amortization and depreciation 453,821 611,833 1,140,478
Travel and entertainment 126,640 300,042 483,105
Other 988,775 1,604,816 2,273,074
------- --------- ----------
14,768,656 29,567,249 52,912,901
---------- ---------- ----------
Net income (Loss) before income taxes 3,041,645 16,760,638 (52,922,140)
Income taxes (benefit) 1,768,024 7,472,022 (8,427,030)
---------- ----------- -----------
Net income (loss) $1,273,621 $9,288,616 ($44,495,110)
========== =========== ============
Net income (loss) available
for common stockholders $1,079,423 $9,017,976 ($44,687,587)
========== =========== ============
Net income (loss) per common
and common equivalent share:
Primary Earnings (Loss) Per Share:
Historical basis $0.09 $0.65 ($2.71)
===== ===== =======
Pro-forma basis $0.12 N/A N/A
===== ===== =======
Fully Diluted Earnings (Loss) Per Share:
Historical basis $0.08 $0.61 ($2.71)
===== ===== =======
Pro-forma basis $0.11 N/A N/A
===== ===== =======
</TABLE>
See notes to these consolidated financial statements.
F-4
<PAGE>
The Aegis Consumer Funding Group, Inc.
Consolidated Statements of Changes in Stockholders' Equity
Years Ended June 30, 1995 , 1996 and 1997
<TABLE>
<CAPTION>
Other
Transactions Retained
Common Preferred Paid-in With (Deficit)
Stock Stock Capital Shareholders Earnings Total
------- --------- -------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, July 1,1994 $122,563 $25 $2,755,484 ($335,000) $1,539,907 $4,082,979
Issuance of common
stock from initial
public offering, 21,921 - 11,824,936 - - 11,846,857
Issuance of common stock from
exercise of warrants 3,284 - 23,716 - - 27,000
Amortization of common
stock issued - - - 25,000 - 25,000
Redemption of Series B
preferred stock - (25) (2,452,653) - - (2,452,678)
Repayment of stockholder
receivable - - - 210,000 - 210,000
Net income - - - - 1,273,621 1,273,621
Release of escrowed shares - - 878,739 - - 878,739
Series B preferred stock
dividends - - - - (194,198) (194,198)
----- --- --------- -------- ----------- ----------
Balance, June 30, 1995 147,768 - 13,030,222 (100,000) 2,619,330 15,697,320
Issuance of Series C
preferred stock - 92 8,463,908 - - 8,464,000
Conversions of Series C
preferred stock to common
stock 6,792 (31) (6,761) - - -
Redemptions of Series C
preferred stock - (8) (1,104,413) - - (1,104,421)
Issuance of warrants from
debt agreements - - 739,064 - - 739,064
Amortization of common stock
issued - - - 100,000 - 100,000
Net income - - - - 9,288,616 9,288,616
Release of escrow shares - - 806,886 - - 806,886
Series C preferred stock
dividends - - 270,639 - (270,639) -
----- --- --------- -------- --------- -----------
Balance, June 30, 1996 154,560 53 22,199,545 - 11,637,307 33,991,465
Purchase of treasury stock - - - (340,000) - (340,000)
Conversion of Series C
preferred stock to
common stock 22,212 (42) (362,170) 340,000 - -
Issuance of warrants from
debt agreements - - 265,985 - - 265,985
Net loss - - - - (44,495,110) (44,495,110)
Series C preferred stock dividends - - 199,674 - (199,674) -
----- ----- -------- -------- ----------- ----------
Balance, June 30, 1997 176,772 11 22,303,034 - ($33,057,477) ($10,577,660)
Pro-forma adjustments,
unaudited:
Conversion of subordinated
debt to Series D preferred
stock - 2,003 19,754,867 - - 19,756,870
Conversion of subrodinated
debt to Series E and F
preferred stock - 400 3,948,061 - - 3,948,461
------- ----- --------- ------- ----------- ----------
Pro-forma balance,
June 30, 1997
(unaudited) $176,772 $2,414 $46,269,073 $ - ($33,057,477) $13,390,782
======== ====== =========== ======= ============= ===========
</TABLE>
See notes to these consolidated financial statements.
F-5
<PAGE>
The Aegis Consumer Funding Group, Inc.
Consolidated Statements of Cash Flows
Years Ended June 30,
-----------------------------------------
1995 1996 1997
----------- ----------- -------------
Cash flows from operating activities:
Net income (loss) $1,273,621 $9,288,616 ($44,495,110)
Adjustments to reconcile net
income (loss) to net cash used in
operating activities:
Amortization and depreciation 453,821 611,833 1,140,478
Provision for credit losses 941,354 3,504,622 9,426,802
Valuation allowance on note receivable - 600,000 -
Provision (benefit) for deferred
income taxes 1,546,540 5,918,034 (8,577,030)
Release of escrowed shares 878,739 806,886 -
Unrealized gains on securitization
transactions (21,439,207) (53,950,552) (11,288,092)
Write down of retained interests
in securitized receivables - 7,500,000 49,000,000
Automobile finance receivables portfolio:
Purchases of automobile finance
receivables (162,154,536) (451,972,152) (606,882,687)
Sales of automobile finance
receivables 123,899,778 432,582,175 580,335,969
Repayments of automobile
finance receivables 6,515,100 15,930,459 24,341,440
Increase in prepaid insurance and
direct costs of acquisition
net of deferred acquisition fees (757,582) (33,179) (46,755)
Decrease in note receivable - 7,651,985 -
(Increase) decrease in interest
and other receivables (4,182,398) 3,047,448 (2,323,401)
(Increase) decrease in other
assets (217,500) (2,551,691) 2,537,153
Increase (decrease) in accounts
payable and accrued expenses 5,017,747 9,503,652 (2,633,168)
(Decrease) increase in income
taxes payable (983,063) 1,464,933 153,486
------------ --------- -----------
Net cash used in operating
activities (49,207,586) (10,096,931) (9,310,915)
------------ ------------ -----------
Cash flows from investing activities:
Additional payments to securitized
receivable trusts - (2,335,562) (2,421,284)
Distributions from retained interests
in securitized receivables 1,796,173 2,991,063 1,622,203
Purchases of fixed assets (802,419) (1,045,553) (6,239,621)
Purchase of sales territory (248,490) - -
----------- ----------- -----------
Net cash provided by (used in)
investing activities 745,264 (390,052) (7,038,702)
---------- ----------- -----------
Cash flows from financing activities:
Proceeds from borrowings under
warehouse credit facilities 161,641,043 468,882,721 626,283,300
Repayment of borrowings under
warehouse credit facilities (128,738,913) (479,842,650) (646,078,639)
Proceeds from borrowings under
notes payable 16,044,277 39,416,908 83,966,513
Repayment of borrowings under
notes payable (3,088,154) (22,524,171) (75,764,941)
Proceeds from borrowings under
revolving credit facility 5,273,006 - -
Repayment of borrowings under
revolving credit facility (7,116,673) - -
Proceeds from borrowing under
subordinated debt agreements - - 25,000,000
Repayment of borrowing under
subordinated debt agreement - - (1,000,000)
Proceeds from initial public
offering, net 11,846,857 - -
Exercise of warrants to purchase
common stock 27,000 - -
Proceeds from preferred stock
issue, Series C - 8,464,000 -
Preferred stock, Series B
dividends paid (194,198) - -
Proceeds from repayment of
stockholder receivable 210,000 - -
Redemption of preferred stock,
Series B in 1995, Series C
in 1996 (2,452,678) (1,104,421) -
Purchase of treasury stock - - (340,000)
------------ ----------- ------------
Net cash provided by
financing activities 53,451,567 13,292,387 12,066,233
----------- ---------- -----------
Net increase (decrease) in
cash and cash equivalents 4,989,245 2,805,404 (4,283,384)
Cash and cash equivalents,
beginning of year 981,326 5,970,571 8,775,975
---------- --------- ---------
Cash and cash equivalents,
end of year $5,970,571 $8,775,975 $4,492,591
========== ========== ==========
See notes to these consolidated financial statements.
F-6
<PAGE>
The Aegis Consumer Funding Group, Inc.
Notes to Consolidated Financial Statements
Years Ended June 30, 1995, 1996 and 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of The Aegis
Consumer Funding Group, Inc. (ACFG), and its wholly owned subsidiaries
(collectively, the "Company"). Such subsidiaries are engaged primarily in
automobile finance (acquiring automobile retail installment contracts and
from April 1994 through August 1995 originated automobile leases), the
capital markets business (structuring the securitizations of the Company)
and loan servicing (as of January 1, 1997). All material intercompany
balances and transactions have been eliminated.
ACFG was formed for the purpose of providing management and operational
services to its subsidiaries. Its principal subsidiaries, Aegis Consumer
Finance, Inc. (ACF) and Systems and Services Technologies, Inc. (SST), were
formed for the purposes of providing operational services, warehouse facility
arrangements, marketing support for its subsidiaries and to service loans
acquired by the Company as well as other marginal originations of third
parties, respectively.
On March 1, 1992, the Company underwent a significant recapitalization;
at that time, the approximately $3,000,000 deficit from the operations of the
Company since the date of formation (October 4, 1989) was transferred to
paid in capital. The carrying amount of the Company's assets and liabilities
approximated their fair values at that time.
Certain prior year financial statement line items have been reclassified
to conform to current year presentation.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
cash and short-term investments with an original maturity of less than
ninety days.
Automobile Finance Receivables
Automobile finance receivables held for sale (through the securitization
process) are carried at the lower of cost or market value. Market value is
estimated based on the characteristics of the finance contracts held for sale
and the terms of recent securitizations of similar finance contracts completed
by the Company and others. Automobile finance receivables held as investments
are receivables the Company believes it can not currently securitize and are
carried at their amortized cost.
The Company's evaluation of its allowance for credit losses is based upon
the Company's historical and expected future default rates, the liquidation
value of the underlying collateral in the existing portfolio, estimates of
repossession expenses and any recoveries expected from insurance proceeds.
The Company's charge off policy is based on a receivable-by-receivable review.
Interest on automobile finance receivables is accrued and credited to interest
income based upon the daily principal amount outstanding using the simple
interest method. If an automobile receivable becomes more than 60 days
delinquent in its payment of interest and principal, the Company no longer
accrues interest revenue and reverses all interest previously accrued
and uncollected.
Finance contract acquisition fees received, insurance premiums
(including self insured retentions) accrued and direct costs incurred for the
underwriting and acquisition of automobile finance receivables held for sale
are deferred until the related automobile finance receivables are securitized
and sold. Origination fees received, insurance premiums paid at origination,
and direct costs incurred for the underwriting and origination of automobile
finance receivables held for investment are deferred and amortized to interest
income over their contractual lives using the interest method. Unamortized
amounts are recognized in income at the time that automobile finance
receivables are sold, charged-off or paid in full.
Retained Interests in Securitized Receivables
Retained interests in securitized receivables represent the discounted
amount of expected collections from securitized receivables in excess of the
amounts due to investors in the securitizations. Amortization of the carrying
value amount is based on the declines during the period in the present value
of the currently projected collections using the same discount rate as was
<PAGE> F-7
The Aegis Consumer Funding Group, Inc.
Notes to Consolidated Financial Statements
Years Ended June 30, 1995, 1996 and 1997
appropriate at the time of securitization. Gains (losses) from the revaluation
in retained interests in securitized receivables are included in gains (losses)
on securitized transactions.
Property, Plant and Equipment
Property, plant and equipment includes land and building and other fixed
assets. The Company depreciates the building on a straight line basis over its
estimated useful life of 30 years. The Company depreciates all other fixed
assets on a straight-line basis over their estimated useful lives which range
from three to seven years. Leasehold improvements are amortized over the
lesser of the estimated useful life of the asset or the remaining life of the
lease.
Servicing Fee Income
The Company recognizes servicing fee income in the period it is earned.
The Company records the accompanying receivable in accounts receivable. An
allowance account is not deemed necessary.
Fees and Commissions
Fees and commissions earned are recorded as income at the closing date
of the related transaction or as they are earned in accordance with the terms
of the underlying agreements.
Income Taxes
Deferred income taxes are determined by recognizing deferred tax assets
and liabilities for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. The realization of deferred tax
assets is assessed and a valuation allowance is provided when it is more
likely than not that some portion of the deferred tax asset will not be
realized. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
Use of Estimates and Judgements
The Company's consolidated financial statements include amounts determined
using estimates and assumptions. For example, estimates and assumptions are
used in determining asset valuations and allowances for retained interests in
securitized receivables, automobile finance receivables and interest
receivable. While these estimates are based on the best judgement of
management, actual results could differ from these estimates.
2. LIQUIDITY
As reflected in the accompanying 1997 consolidated financial statements,
the Company has suffered substantial losses and, accordingly substantial
reductions in stockholders' equity. These negative financial trends have
resulted from material increases in delinquencies and losses on owned and
managed finance contracts. As a result, the Company is facing sever
liquidity porblems due to the lack of commited operating capital and the
delay of expected cash payments from the Company's retained interests in
securitized receivables.
To address the liquidity problems, the Company requested its related party
consulting firm, Whitehall Financial Group, Inc. ("Whitehall") (See Note 13),
to advise the Company on alternatives and to raise additonal capital. With
the assistance of Whitehall, the Company successfully negotiated the conversion
of its 12% subordianted debentures with a face value of $21.3 million and
accrued interest of approximately $1.0 million to equity of approximately
$21.1 million in October 1997 and the conversion of the remaining $4.0
million of subordinated debt into preferred stock in November 1994
(See Note 17). The June 30, 1997, pro-forma consolidated statement of
financial condition gives effect to these conversions as if they occurred
on June 30, 1997. Also with the assistance of Whitehall, in November 1997,
the Company negotiated the sale of its servicing subsidiary, SST for $7.0
milliion (See Note 17). Additionally, the Company reduced the number of its
employees, scaled back the extent of its operations, including the
consolidation of three processing centers to one and moving its corporate
offices to Marietta, Georgia, these steps coupled with the cash proceeds from
the sale of SST should assist the Company in meeting its funding requirements.
The Company expects to report a loss of approximately $3.6 million for the
<PAGE> F-8
The Aegis Consumer Funding Group, Inc.
Notes to Consolidated Financial Statements
Years Ended June 30, 1995, 1996 and 1997
quarter ended September 30, 1997 and to incur a structuring charge in the
quarter ending December 31, 1997.
There can be no assurance that the Company's efforts to alleviate
its liquidity problems and restore its operations will be successful. If the
Company is unsuccessful in its efforts, it may be unable to meet its
obligations, which raises substantial doubt about the Company's ability to
continue as a going concern. If the Company is unable to continue as a
going concern and is forced to liquidate assets to meet its obligations, the
Company may not be able to recover the recorded amounts of such assets. The
Company's consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
3. AUTOMOBILE FINANCE RECEIVABLES, NET
ACF, through its subsidiaries, acquires retail installment contracts
("finance contracts") and from April 1994 through August 1995 originated
direct finance receivables ("leases") maturing within a range of three to
five years. At June 30, 1996, 27%, 22%, and 15%, respectively of automobile
finance receivables outstanding were acquired in Georgia, Louisiana and North
Carolina, respectively, with the remaining 36% being originated in 29 other
states. At June 30, 1997, 20%, 20% and 12% of automobile receivables
outstanding were acquired in Florida, Georgia and North Carolina, respectively,
with the remaining 48% being generated in 31 other states. Automobile finance
receivables are acquired through the Company's established dealership base to
individual consumers with sub-prime credit.
For the fiscal years ended June 30, 1995, 1996 and 1997, separate groups
of Dealers with common ownership accounted for 12.5%, 8.4% and 5.1%
respectively, of the finance contracts and leases acquired or originated by
the Company. In addition; for the fiscal year ended June 30, 1995,
approximately 20.3%, 19.1%, 16.3% and 15.1% of all automobile finance
receivables were purchased in North Carolina, Florida, Louisiana and Georgia,
respectively, for the fiscal year ended June 30, 1996, 20.7%, 15.2%, 14.4%
and 12.8% of all automobile finance receivables were purchased in Florida,
North Carolina, Georgia and Texas and for the fiscal year ended June 30, 1997,
approximately 15.5%, 14.6%, 11.7% and 11.5% of all automobile finance
receivables were acquired in Florida, Georgia, Texas and North Carolina,
respectively. Independent marketing brokers are engaged by the Company to
introduce Dealers in Florida, Louisiana and four other states.
ACF periodically packages and securitizes, as asset-backed securities,
portions of its automobile finance receivables to sell to institutional
investors. During the years ended June 30, 1995, 1996 and 1997,
the Company securitized $119.3 million, $432.4 million and $565.3 million,
respectively, of its automobile finance contracts. For the years ended
June 30, 1995, 1996 and 1997, the Company also sold $12.3, $7.8 million and
$15.0 million, respectively, of its finance contract receivables in whole loan
sales.
In January 1997, SST began the servicing of the Company's finance contracts
acquired. While SST was in its start up phase, the Company gradually assigned
the servicing of its finance contracts acquired to SST from January 1997
through March 1997. In May 1997, the Company transferred the servicing rights
of approximately $469.7 million of finance contracts to SST. As of
August 31, 1997, SST is servicing approximately $710.6 million or 76.9% of
the Company's total remaining finance contracts acquired. The balance of
the Company's finance contracts and lease portfolio is serviced by its
initial servicer, American Lenders Facilities, Inc. ("ALFI") (a wholly owned
subsidiary of CIGNA Corporation). The Company paid a fee of $5.00 per
contract (aggregating approximately $200,000) to ALFI to transfer the servicing
to SST. The Company is also sub-servicing, under its sub-servicing agreement
with ALFI on 22.5% of the remaining receivables serviced by ALFI. The Company,
under the sub-servicing agreement performs certain collection functions on
designated automobile receivables and receives a sub-servicing fee. The Company
is currently involved in a dispute with ALFI. (See Note 9).
Automobile finance receivables consist of the following:
<PAGE> F-9
The Aegis Consumer Funding Group, Inc.
Notes to Consolidated Financial Statements
Years Ended June 30, 1995, 1996 and 1997
<TABLE>
<CAPTION>
June 30,
------------------------
1996 1997
----------- ---------
<S> <C> <C>
Automobile finance contracts -
Held for sale $12,930,864 $10,890,278
Held for investment 11,426,903 18,821,069
Automobile leases - held for investment 25,991,174 13,353,921
---------- ----------
Unearned income on automobile leases (6,156,486) (2,152,046)
Unamortized prepaid insurance and direct
costs of acquisition, net of deferred
acquisition fees 9,451 658,766
---------- ----------
44,201,906 41,571,988
Less allowance for credit losses (3,143,684) (6,917,481)
----------- -----------
$41,058,222 $34,654,507
=========== ===========
Weighted average interest rates:
Finance contracts 20.1% 20.5%
===== =====
Leases 16.5% 16.5%
===== =====
</TABLE>
The Company's expected future minimum lease payments from performing
leases to be received as of June 30, 1997 are as follows:
Year Ending
June 30, Amount
---------- --------
1998 $3,841,000
1999 3,207,000
2000 1,048,000
------ ----------
$8,096,000
==========
An analysis of the allowance for credit losses follows:
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Balance, beginning of year $268,194 $1,183,988 $3,143,684
Provision charged to income 941,354 3,504,622 9,426,802
Charge-offs, net (25,560) (1,544,926) (5,653,005)
-------- ---------- -----------
Balance, end of year $1,183,988 $3,143,684 $6,917,481
========== ========== ==========
</TABLE>
As of June 30, 1996 and 1997, substantially all automobile finance
receivables are pledged as security under the Company's warehouse credit
facilities.
As of June 30, 1996 and 1997, respectively, approximately $3.7 million and
$11.0 million of finance contracts held for investment were in the
pepossession process.
The Company obtains credit defualt insurance policies for substantially
all of the finance contracts it acquires. The insurance provides
indemnifications for certain losses incurred due to a deficiency balance
following the repossession and resale of finance vehicles securing defaulted
finance contracts. Since August 1995, the Company has relied upon a
series of credit defualt insurance policies purchased through The Connecticut
Indemnity Company ("Connecticut Indemnity") a subsidiary of Orion Capital
Corporation or Empire Fire and Marine a subsidiary of the "Zurich Insurance
Group"("Empire"). The Connecticut Indemnity and Empire policies provide that
the Company bear losses until such loss exceeds 8% or 10% (depending on the
policy) of the aggregate amount insured under that policy. Connecticut
Indemnity or Empire is obligated to pay all losses in excess of this
amount to the insured. The Company has an accrual for estimated losses
of approximately $1,300,000 and $771,000 at June 30, 1996 and 1997,
respectively. No such accrual was required at June 30, 1995. These amounts
are included in accounts payable and accrued expenses. In addition, for the
years ended June 30, 1996 and 1997 the Company made cash disbursements of
<PAGE> F-10
The Aegis Consumer Funding Group, Inc.
Notes to Consolidated Financial Statements
Years Ended June 30, 1995, 1996 and 1997
approximately $34,000 and $238,000, respectively, under these policies and
recorded $706,000 in principal applications representing approved insurance
claims under the policies for the year ended June 30, 1997. No applications
were recorded for the year ended June 30, 1996.
At June 30, 1996 and 1997, the estimated fair value of the Company's
automobile finance receivables held for sale approximated $13.5 million
(which is $931,000 in excess of book value) and $11.0 million (which estimated
its book value), respectively. [The fair values of the Company's automobile
finance receivables held for investment at June 30, 1996 and 1997 approximated
their book values of $28.6 million and $26.3 million, respectively.]
4. RETAINED INTERESTS IN SECURITIZED RECEIVABLES
Retained interests in securitized receivables are computed by taking
into account certain assumptions regarding prepayments, defaults, servicing
and other costs. The Company reviews on a quarterly basis the retained
interests 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
interests 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 performance on the performance
characteristics of the Company's finance contract portfolio to date. The
Company's default assumptions are based on estimated repossession rates,
proceeds from the liquidation of repossessed vehicles, proceeds from VSI
Policy coverage and recoveries from the Company s credit default insurance.
An analysis of the retained interests in securitized receivables
follows (in thousands):
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------
1995 1996 1997
------- ------ -------
<S> <C> <C> <C>
Balance, beginning of year $4,434 $23,985 $70,243
Additions 21,347 56,749 13,709
Amortization (1,796) (2,991) (1,622)
Write-downs - (7,500) (49,000)
------- ------- -------
Balance, end of year $23,985 $70,243 $33,330
======= ======= =======
</TABLE>
As of June 30, 1996 and 1997, substantially all of the Company's
retained interests in securitized receivables are pledged as security under
the Company's Promissory Notes Payable.
The estimated fair values of the Company retained interests in
securitized receivables at June 30, 1996 and 1997 approximated their
book values of $70.2 million and $33.3 million, respectively.
5. PROPERTY, PLANT AND EQUIPMENT
The Company's property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
June 30,
------------------------
1996 1997
--------- ----------
<S> <C> <C>
Land $ - $70,000
Building and improvements - 2,013,469
Other fixed assets 2,529,429 4,227,617
--------- ---------
2,529,429 6,311,086
Accumulated depreciation (712,073) (1,313,368)
---------- ----------
$1,817,356 $4,997,718
========== ==========
</TABLE>
The Company capitalizes interest costs incurred in connection with
building improvements. Interest capitalized during the fiscal year ended
June 30, 1997 was immaterial. Other fixed assets include office furniture,
equipment and leasehold improvements. As of June 30, 1997, the Company's
F-11
The Aegis Consumer Funding Group, Inc.
Notes to Consolidated Financial Statements
Years Ended June 30, 1995, 1996 and 1997
land and building and certain of its other fixed assets are pledged as
security under certain of the Company's Notes Payable.
6. WAREHOUSE AND OTHER CREDIT FACILITIES
As of June 30, 1997, the Company has a $75.0 million warehouse credit
facility with III Finance LTD and III Global Ltd. (individually and
collectively, "III Finance"). This facility replaced the Company's warehouse
facility for acquiring finance contracts with III Finance then in existence.
The $75.0 million warehouse credit facility expires on March 13, 1999 or sooner
upon an event of default, as defined thereunder, and bears interest at LIBOR
plus 3% from the date the loan is made. As of June 30, 1997, the Company had
$9.8 million outstanding and owed interest of approximately $95,000.
As of March 1, 1997, the Company's $50.0 million warehouse credit
facility for originating its lease transactions was amended to the then
outstanding balance with no additional borrowing allowed under the
facility. The lease line expires in November 1997 and the Company is currently
negotiating extending the term to the earlier of an additional two years or
until paid in its entirety. As of June 30, 1997, the Company owed
approximately $7.6 million under the lease line and approximately $190,000 in
interest.
In March 1997, the Company reached an agreement with a group of funds and
financial institutions its existing warehouse lender, for a multi-structured
finance facility. The Purchase Facility includes a commitment from III
Finance and III Limited Partnership for the purchase of $350.0 million of
trust certificates. The Certificates are backed by the Company's finance
contracts and are unrated. The Purchase Facility is supported by the above
mentioned $75.0 million warehouse facility. As of June 30, 1997 the Company
securitized an aggregate amount of $389.0 million in the four securitization
transactions. Future securitizations under the Purchase Facility ($611.0
million as of June 30, 1997) are subject to customary conditions and are
uncommitted. The Purchase Facility provides for initial financing through
the warehouse line as the finance contracts are acquired and subsequently sold,
generally on a monthly basis, into the Purchase Facility. In connection with
such refinancing the Company has pledged all of the stock of its subsidiaries
and all of its assets to III Finance.
The Company's $75.0 million warehouse line supporting the Purchase Facility
replaced the Company's amended $300.0 million warehouse facility which
augmented the Company's quarterly securitizations in its fiscal years
ended June 30, 1995 and 1996 and the first nine months of its fiscal year
ended June 30, 1997. The $75.0 million warehouse line was increased in
May 1997 from the initial $50.0 million limit in March 1997. This
increase was required to reduce the frequency of securitizations under
the Purchase Facility. The $75.0 million warehouse line provides the
Company with a two year (expiring the sooner of March 13, 1999 or
the occurences of an event of default as defined thereunder) warehouse line
bearing interest at LIBOR plus 3% from the date the loan is made with
borrowing limits of the lesser of $75.0 million or the sum of (A) 100% of the
outstanding principal amount of finance contracts and (B) the lesser of 90% of
the outstanding principal amount of non-conforming 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.
Proceeds from borrwoings under this warehouse facility may be used for the
purpose of acquiring automobile finance contracts in accordance
with the Company's underwriting guidelines. Concurrent with the closing
of the facility in March 1997, the Company's $50.0 million warehouse credit
facility for originating lease transactions was amended to reduce it to the
then outstanding balance and no additional borrowing is allowed under the
facility. The lease line expires in November 1997. As of September 17, 1997,
the Company owed approximately $6.5 million under the lease line and is
negotiating extending the term for up to an additional two years. All other
terms under the lease line remain the same. The Company was able to continue
to borrow under these warehouse credit facilities so long as it complied with
the terms thereof, including the maintenance by the Company of certain
minimum capital levels. Under each warehouse credit facility, the Company was
required to prepay 5% of the outstanding principal balance of finance contracts
held by the Company for more than 180 days.
<PAGE> F-12
The Aegis Consumer Funding Group, Inc.
Notes to Consolidated Financial Statements
Years Ended June 30, 1995, 1996 and 1997
As of June 30, 1996, the Company had a combined limit of $100.0 million
for its automobile finance contracts and lease originations. This limit was
subsequently amended to a maximum of $300.0 million. These facilities were
secured primarily by the Company's finance contract receivables and had an
interest rate of the one-month LIBOR plus 4.0%, adjusted monthly (9.4805% at
June 30, 1996) and for any outstanding balance in excess of $50.0 million,
at the rate of the one-month LIBOR plus 2.75%, adjusted monthly. Under these
warehouse credit facilities, principal payments were made monthly to the
extent of principal payments received on the underlying collateral, and
interest payments were made quarterly in arrears and on the date of any
prepayment of principal on the underlying collateral. As of June 30, 1996,
the Company had $37.2 million outstanding (including $15.5 million under its
lease line) and owed interest aggregating approximately $439,000. In March
1997, the Company paid down the then outstanding balance of $268.7 million
under this warehouse credit facility with the proceeds from the initial
securitization under its Purchase Facility amounting to $238.7 million,
$23.4 million in the form of a promissory note and the remaining $6.7 million
from proceeds received from the underlying collateral. (See Note 7).
Principal payments on the warehouse facility are made monthly in an
amount equal to principal payments received from the underlying collateral.
Prepayments of principal occurs when the Company securitizes and sells the
underlying collateral. Interest payments are made quarterly in arrears
and on the date of any principal prepayments on the unpaid principal amount
of each finance contract or lease made in accordance with the respective
warehouse credit facility.
The Company also has a Loan and Security agreement (the "Title I
Agreement") whereby, as borrower, it may borrow the lesser of $50.0 million
or the sum of the outstanding principal amount of mortgage loans and 90% of
the then outstanding principal amount of deficient mortgage loans, as defined,
for the purpose of purchasing or financing home improvement and mortgage loans
from originators and servicers of HUD Title I Loans in connection with separate
purchase agreements that are approved by the lender. Interest is charged at an
annual rate of the one-month LIBOR plus 4.0%. As of June 30, 1996 and 1997, no
amounts were outstanding under the Title I Agreement. The Title I Agreement
expires in November 1997.
Under the warehouse credit facilities and the Title I Agreement, ACF and
the Company may also borrow funds to sell 90-day Eurodollar futures contracts
as a hedge against interest rate fluctuations. At June 30, 1996 and 1997,
the Company had no futures contracts outstanding.
In May 1996, the Company secured an additional warehouse credit facility
with Greenwich Financial Products, Inc. ("Greenwich Financial") for $100.0
million. The facility was secured primarily by the Company's finance contracts
and had an interest rate of the one-month LIBOR plus 3.0% (8.4805% at June 30,
1996), adjusted monthly. Principal payments were made to the extent that
principal was paid on the underlying collateral, and were required to be made
if the underlying collateral did not meet certain specified conditions.
Prepayment of principal was not permitted, except in connection with
securitization transactions and whole loan sales. The Company's ability to
continue to borrow under this facility was dependent on its compliance with
the terms thereof, including the maintenance by the Company of certain
minimum capital levels. This facility expired in May 1997.
7. NOTES PAYABLE
Notes payable at June 30, 1996 and 1997 consisted of the
following:
<TABLE>
<CAPTION>
June 30,
----------
1996 1997
------- ------
<S> <C> <C>
Promissory Notes Payable, due through
June 25, 1998 with an interest rate of 12% $29,848,859 $ -
Promissory Note Payable, due May 21, 2001
with an interest rate of 12% - 34,778,355
Note payable due July 1, 2002 with an
interest rate of 8.5% - 1,864,514
Note payable due March 2000,
with an interest rate of 5% - 170,000
------------ ------------
$29,848,859 $36,812,869
=========== ===========
</TABLE>
<PAGE> F-13
The Aegis Consumer Funding Group, Inc.
Notes to Consolidated Financial Statements
Years Ended June 30, 1995, 1996 and 1997
The Promissory Notes Payable at June 30, 1996, aggregating $29.8 million,
due through June 25, 1998 were under separate Loan and Security Agreements (the
"Financing Agreements") with III Finance, whereby, it had borrowing limits of
the lesser of an aggregate amount of $66.4 million or the maximum borrowing
base, as defined, under the Financing Agreements. The notes under the Financing
Agreements were secured by substantially all of the Company's retained interests
in securitized receivables with carrying values aggregating approximately
$70.0 million at June 30, 1996, which approximated their fair value. As of
June 30, 1996, the Company had $30.5 million available under the Financing
Agreements. In May 1997, the Company refinanced the then outstanding balance
of $35.1 million under the Financing Agreements and $14.8 million of the
remaining balance under the promissory note created in paying down the Company's
warehouse credit facility in March 1997 with the $15.1 million of the proceeds
received from the issuance of the Subordinated Debentures and a new promissory
note of $34.8 million. In connection with such refinancing, the Company has
pledged all of the stock of its subsidiaries and all of its assets to III
Finance. (See Note 8).
The Promissory Note Payable at June 30, 1997, in the amount of $34.8
million is payable to III Finance and is secured by the Company's retained
interest in securitized receivables aggregating approximately $36.3 million
and its finance contracts held for investment with an aggregate net carrying
value of approximately $12.8 million (the "RTY Financing "). Principal and
interest payments under the RTY Financing are made from proceeds received from
the underlying collateral.
The Note Payable at June 30, 1997 in the amount of approximately $1.9
million is secured by the building as well as security interests in specific
furniture and equipment of SST. No additional borrowing by SST is allowed
under the note. The note contains several covenants which, among other things,
restrict changes in ownership of SST. The Company plans on entering into
negotiations with this lender as it related to the proposed sale of SST.
(See Notes 2 and 17).
The Note Payable at June 30, 1997 in the amount of $170,000 is secured
by a second mortgage on the building. The note's interest is payable
quarterly. The note contains several covenants which, among other things,
restrict changes in ownership of SST and requires SST to create and maintain
certain employment targets.
8. SUBORDINATED DEBENTURES
On May 23, 1997, the Company sold $21.3 million subordinated debentures
(the "Debenture") to III Finance for $20.0 million. The Debenture is
convertible into 8% non-voting preferred stock (the "Preferred Shares") of
the Company on a common share equivalent basis equal to $2.00 per common
share. The Debenture is for a term of seven years and carries a coupon rate
of twelve percent (12%) (an effective rate of 12.8%) per annum. Approximately
$16.1 million of the proceeds of the Debenture was utilized to repay existing
debt. The Debenture and the Preferred Shares, into which the Debenture is
convertible, are redeemable at any time 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. 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 an 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. In connection with
such refinancing the Company has pledged all of the stock of its subsidiaries
and all of its assets to III Finance. In connection with the Credit Agreement,
the Company has pledged its retained interest in securitized receivables.
(See Note 17).
<PAGE> F-14
The Aegis Consumer Funding Group, Inc.
Notes to Consolidated Financial Statements
Years Ended June 30, 1995, 1996 and 1997
In May 1996, the Company entered into a one year $5.0 million revolving
credit agreement with Greenwich Capital (the "Credit Agreement") at an annual
interest rate of 15.0% or LIBOR plus 9.0% determined by the Company at the
time of borrowing. As of June 30, 1996, the Company had no borrowing under
the Credit Agreement. During the year ended June 30, 1997, the Company
borrowed $5.0 million at LIBOR plus 9.0% (14.7% as of June 27, 1997).
In June 1997, the Company paid down $1.0 million under the Credit Agreement
and entered into a new agreement with Greenwich Capital for the remaining
$4.0 million outstanding. The Company will repay $2.0 million of the adjusted
balance proportionately (pari passu) with principal payments made on the
balances of the Debentures and certain notes payable aggregating $41.3 million.
The term of the loan was extended for four years from the date of closing of
the Debenture and the interest rate decreased to 12.0% per annum, payable
monthly. Early repayment of the other $2.0 million is permitted if Greenwich
provides auto loan servicing to the Company as defined thereunder. Additional
terms of the agreement provide for lowering the strike price on warrants issued
to them by the Company from $6.50 to as low as $4.00, contingent on achieving
certain levels of auto loan servicing placed by Greenwich with the Company.
(See Note 17).
9. COMMITMENTS AND CONTINGENCIES
The Company leases its office space and certain of its office equipment
under noncancelable operating leases. The Company also has subleased certain
of its office space and offsets its rent expense by the amount collected under
the subleases.
The Company's minimum rental payments as of June 30, 1997 are:
Year Ending Gross Sub-lease Net
June 30, Amount Amount Amount
----------- -------- --------- ---------
1998 $3,028,000 ($172,000) $2,856,000
1999 2,512,000 (100,000) 2,412,000
2000 1,554,000 - 1,554,000
2001 1,198,000 - 1,198,000
2002 1,139,000 - 1,139,000
Thereafter 3,503,000 - 3,503,000
--------- ---------- ----------
$12,934,000 ($272,000) $12,662,000
=========== ========== ===========
The Company has employment agreements with several of its key employees
and officers which expire at various times through July 1, 2001. Under the
terms of these agreements, the Company is obligated to pay minimum annual
payments of $1.5 million, $1.2 million, $400,000 and $400,000, respectively,
during each of the years ending June 30, 1998 through June 30, 2001. In
addition to the minimum payments, the Company is further obligated to pay
incentive bonuses based on its earnings, as defined in the respective
agreements.
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 Owner Trust Agreement (the "Agreement"). During the
years ended June 30, 1996 and 1997, the Company sold approximately $97.8 million
and $50.6 million, respectively, of automobile receivables into this facility.
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).
<PAGE> F-15
The Aegis Consumer Funding Group, Inc.
Notes to Consolidated Financial Statements
Years Ended June 30, 1995, 1996 and 1997
In May 1996, the Company obtained a 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
(the "Securitization Facility"). As of June 30, 1997, the Company did not
meet these customary conditions and has not securitized receivables under the
Securitization Facility since September 1996. As of June 30, 1997, three
securitizations aggregating $307.0 million were completed pursuant to this
commitment.
In March 1997, the Company entered into a demand note payable of $1.2
million between consolidating entities. This note was assigned to the Aegis
Auto Receivables Trust 1997-3 as a credit enhancemant of the securitization.
The note becomes due under certain conditions of default as degined therein.
In connection with securitization transactions, the Company enters into
pooling and servicing agreements. The 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 certain agreements.
As delinquencies and/or default rates increase or decrease, the Company's
obligation varies. For the years ended June 30, 1996 and 1997, the Company
paid additional contributions to the trusts of approximately $2.3 million and
$2.4 million, respectively.
As of June 30, 1997, the Company has four seperate contingent notes payable
aggregating $15.6 million that become obligations of the Company upon the
occurence of a Bankruptcy event as defined in the underlying instruments.
These notes were entered into in connection with the Company's securitization
transactions completed under the Purchase Facility as a form of a credit
enhancement in lieu of a cash deposit to such trusts. The notes are between
consolidating entities of the Company and have been assigned to the respective
securitization trusts.
By letter dated August 1, 1997, counsel for ALFI contacted the Company
concerning disputes under a Master Servicing Agreement dated April 6, 1996
and a letter agreement dated June 10, 1997, between the Company and ALFI
(respectively, the "Master Servicng Agreement" and the "Letter Agreement").
Pursuant to the Master Servicing Agreement, ALFI had been the sub-servicer
of certain securitized loan portfolios serviced by the Company. ALFI's
counsel contends that: (a) the Company owes ALFI about $457,000 in unpaid
servicing fees; (b) the Company owes ALFI an unstated amount in late charges;
(c) the Company owes ALFI about $31,000 in other expenses; (d) the Company
owes ALFI about $247,000 for reimbursement of funds paid by ALFI to certain
"NSF Accounts"; and (e) the Company sent to Norwest Bank Minnesota, N.A.
("Norwest"), the Trustee of the loan portfolios, and to others, a letter that
is purportedly "defamatory and actionable" in that it "places blame" for late
filings of ultimately rejected risk default insurance ("RDI") claims upon ALFI.
The Company believes it does not owe ALFI any servicing fees an that the
Company is entitled to reimbursement of about $195,000 in servicing fees it
caused to be paid to ALFI but to which ALFI was not entitled. The Company
also disputes that it owes ALFI any of the late charges and that it is entitled
to reimbursement for late charge payments that it has made. The Company has
caused to be paid the expenses sought by ALFI and $232,000 to the NSF Account.
ALFI has not supplied supporting documentation for the remaining $15,000 for
which it sought reimbursement for repayment to the NSF Account.
In addition, ALFI, to date has withheld $191,000 which it owes the Company
under a Subcontracting Agreement between the Company and ALFI dated April 6,
1996, apparently as a means of securing its purported claims under the Master
Servicing Agreement. In response, the Company, to date, has withheld $37,000
from ALFI under the Letter Agreement.
By letters dated May 28, 1997, Norwest informed the Company that, to the extent
the rejection of untimely filed RDI claims ultimately exceed the deductibles on
the applicable insurance policies, there would be an event of default under
the Company's agreements with Norwest. An aggregate amount of $1,579,000 in
RDI claims have been denied due to umtimely filings. The Company believes
approximately $450,000 of additional similar claims exist. While the Company
denies liability for the untimely filings and contends that ALFI had the
responsibility to timely file all such claims pursuant to the Master Servicing
Agreement, the Company, by letter dated June 19, 1997, notified Reliance
Insurance Company ("Reliance"), its errors and ommission insurance policy
carrier, of the potential claim against it by Norwest. By letter dated
July 10, 1997, Reliance acknowledged the Company's $3,000,000 insurance policy
(containing a $350,000 deductible) and reserved its right to deny coverage on
several grounds. Should the Company be found liable for some or all of the
losses caused by the untimely filing of the RDI claims, it does not believe
that Reliance's reservation of rights will preclude coverage.
The Company is subject to various other legal proceedings and claims
that arise in the ordinary course of business. In the opinion of management
<PAGE> F-16
The Aegis Consumer Funding Group, Inc.
Notes to Consolidated Financial Statements
Years Ended June 30, 1995, 1996 and 1997
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.
10. CAPITAL STOCK
On October 18, 1994, the Board of Directors and the Company's stockholders
authorized a 47,654.4578 for 1 split of the common stock, the reclassification
of the common stock from no par value to $.01 par value per share and an
increase in the number of authorized shares of common stock to 30,000,000.
All share and per share amounts presented in these financial statements have
been adjusted to reflect the effect of such stock split and reclassification.
In July 1993, the Company issued 3,637,477 shares to an existing
stockholder in consideration for extending it credit under a $10,000,000
revolving credit facility. The Company recorded a commitment fee of $150,000
in consideration for this credit facility. This fee was capitalized and
amortized as additional issuance of common shares over the six year life of
the revolving credit facility. In March, 1996 the revolving credit facility
was cancelled, whereby the Company expended the then remaining balance.
The Series B preferred stock provided for the accrual of no dividends
until the first anniversary date of its issuance. Dividends accrued at an
annual rate of 10%, payable quarterly, which commenced October 1, 1994. The
Series B preferred stock was cumulative, nonvoting and non redeemable; however,
ACFG had the option, upon 30 days notice, to redeem all or part of the
outstanding Series B preferred stock at its liquidation value of $10,000 per
share. During the year ended June 30, 1995, the Company paid cash Series B
preferred stock dividends of $194,198 and retired its Series B preferred stock
at its redemption value of $2,452,678.
During the year ended June 30, 1995, the Company received $210,000 from
one of its stockholders as the repayment of an outstanding receivable from a
previous year's transaction.
On September 15, 1993, the Company granted a warrant in connection with
consulting services received by the Company. Such warrant is exercisable for
2.68% of the Company's common stock (328,389 shares) outstanding at the time
of grant at an aggregate exercise price equal to $27,000, which was estimated
to be the fair market value on the date of grant. In April 1995, the warrant
was exercised and the Company issued 328,389 shares of common stock at its
exercise price of $27,000.
On April 6, 1995, the Company completed the issuance of 1,875,955 shares
of common stock in an initial public offering (IPO). Net proceeds to the
Company were approximately $9,997,000 after deducting expenses of the offering.
Subsequently, on April 13, 1995, the Company completed the issuance of 316,250
shares of common stock pursuant to the exercise of the underwriters' IPO
over-allotment option, resulting in additional net proceeds to the Company of
approximately $1,850,000.
On April 6, 1995, the executive officers of the Company and Patrick and
Michael Bennett placed 1,892,763 shares of common stock in escrow pending the
Company's attainment of certain pre-determined earnings or market price targets.
In the event the Company attains any of the pre-determined earnings or market
price targets, the fair market value of the escrowed shares at the time they
are released will be deemed additional compensation expense to the extent such
shares are released from escrow to officers, directors or other employees of
the Company. For the years ended June 30, 1995 and 1996, the Company incurred
non-cash (non tax deductible) charges in the amount of $878,739 and $806,886,
respectively from the release of 113,386 and 150,118 escrowed shares released
to the executive officers of the Company (814,455 and 1,078,308 of the escrowed
shares were released, respectively). As of June 30, 1996, all escrowed shares
have been released. There was no impact on total stockholders equity on the
Company's financial statements as a result of the release of the escrowed
shares due to a corresponding increase in paid-in capital.
In February, 1996 the Company issued $9,200,000 of Series C convertible
preferred stock under Regulation S of the Securities Act of 1933. The Series
C preferred stock is convertible into common stock of the Company at the lower
of $6.425 per share of common stock or 85% of the fair market value of the
<PAGE> F-17
The Aegis Consumer Funding Group, Inc.
Notes to Consolidated Financial Statements
Years Ended June 30, 1996, 1996 and 1997
common stock at the time of conversion. The Company can redeem the Series C
preferred stock upon conversion at the fair market value of the common stock
into which such Series C preferred stock is convertible. The Series C preferred
stock has an 8% annual dividend payable in common stock at the time of
conversion. The Series C preferred stock is automatically converted into
common stock on the third anniversary of its issuance. For purposes of
computing earnings per share, the Series C preferred stock is deemed to be a
common stock equivalent, and as such is included in the weighted average
common and common equivalent shares outstanding. The Company also issued
warrants to the placement agent to purchase 114,553 shares of common stock of
the Company at a price of $6.425 per share, which expire five years from their
issuance date. None of these warrants were exercised as of June 30, 1997.
During the year ended June 30, 1996, the Company redeemed 88 Series C preferred
shares for $1.1 million and converted 307 Series C preferred shares into
679,114 shares of common stock. During the year ended June 30, 1997, the
Company converted 419 shares of Series C Preferred Stock into 2,221,259
shares of Common Stock.
In July 1996, the Company purchased 80,000 shares of common stock from
an executive officer of the Company, for $340,000. These shares were re-issued
in connection with the conversion of preferred stock to common stock.
In connection with the Greenwich Capital 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 to as low as $4.00
per share. The warrants vest at the occurrence of various events relating to
the facilities. As of June 30, 1997, 759,490 warrants are exercisable and
133,578 of the remaining non-vested warrants vest over the remaining
securitization commitment and 223,267 warrants will remain unvested.
In connection with the issuance of the Debenture, the Company has
reserved 21,350 shares of Preferred Stock and designated them as Series D.
As of June 30, 1997, no shares have been issued under the Series D.
(See Note 17).
NOTE 11. STOCK OPTION PLAN AND 401K RETIREMENT PLAN
In September, 1994, the Company adopted the 1994 stock option plan
(the "1994 Plan") and reserved 1,000,000 shares for such purposes and in
May 1996 the Company adopted the 1996 stock option plan (the "1996 Plan") and
reserved 750,000 shares for such purposes (collectively the "Option Plan").
The Option Plan is administered by the Board of Directors or a committee
appointed by the Board of Directors and provides for grants of incentive
stock options ("ISOs") and non-incentive stock options ("Non-ISOs") to
employees, directors and consultants of the Company or its subsidiaries
(as defined in the Option Plan).
Consultants and directors who are not also employees of the Company may
only be granted Non-ISOs. The exercise price of each ISO may not be less than
100% of the fair market value of the common stock at the time of grant, except
that in the case of a grant to an employee who owns 10% or more of the
outstanding common stock of the Company or a subsidiary of the Company (a "10%
Stockholder"), the exercise price shall not be less than 110% of the fair
market value on the date of grant. The exercise price of each Non-ISO granted
under the Option Plan may not be less than 85% of the fair market value of the
common stock at the time of grant or, in the case of a Non-ISO granted to a
10% Stockholder, 110% of the fair market value of the common stock at the time
of the Grant. ISOs may not be exercised after the tenth anniversary (fifth
anniversary in the case of any option granted to a 10% Stockholder) of their
grant. Options may not be transferred during the lifetime of an option holder.
No stock options may be granted under the Option Plan after ten years from the
adoption of the Option Plan. Each director who is not also an employee of the
Company will automatically receive each year Non-ISO's to purchase 30,000 shares
of Common Stock which vest in equal monthly increments of 833 shares pursuant
to such terms as are provided in the formula provisions of the Option Plan.
The stock options are immediately vested or are subject to vesting over a three
year period.
The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees," and related Interpretations
in accounting for its employee stock options. Therefore, no compensation cost
has been recognized. If the Company accounted for its stock options under the
fair value method of SFAS No, 123, the Company's net income and earnings per
share would not have been materially different than its actual results.
<PAGE> F-18
The Aegis Consumer Funding Group, Inc.
Notes to Consolidated Financial Statements
Years Ended June 30, 1995 and 1997
A summary of the status of the Company's Option Plan as of June 30, 1995,
1996 and 1997, respectively and changes during each of the years then ended is
presented below:
<TABLE>
Year Ended June 30,
--------------------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Outstanding at the beginning of year - 545,000 1,173,507
Granted 545,000 733,507 25,000
Exercised - - -
Forfeited/Expired - (105,000) (10,175)
Adjusted pursuant to employment contracts
and incentive programs - - (130,000)
------- --------- ---------
Outstanding at end of year 545,000 1,173,507 1,058,332
======== ========= =========
Options exercisable at end of year 525,000 783,333 797,901
======== ========= =========
</TABLE>
The following table summarizes information about the stock options
outstanding at June 30,7:
<TABLE>
<CAPTION>
Options Outstanding, Options Exercisable
------------------------------ ---------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Outstanding Contractual Exercise Exercisable Excercise
Life Price Price
------------ ---------- ------- ----------- ------
<S> <C> <C> <C> <C> <C>
Exercise Prices:
$0.69 25,000 10 years $0.69 - $ -
2.50 928,632 9 years $2.50 761,251 2.50
5.38 47,450 9 years $5.38 15,817 5.38
7.75 7,250 8 years $7.75 4,833 7.75
8.37 50,000 6 years $8.37 16,000 8.37
</TABLE>
Effective January 1, 1996, the Company adopted the Aegis Consumer Funding
Group, Inc. 401 K Plan ("the Plan"). The Plan is contributory up to 15% of
a Plan's participant's compensation, as defined, and covers substantially all
employees. Employees become eligible participants after completing six months
of service. The Plan provides the participants with a choice of seven
investment vehicles in a broad range of risk tolerance portfolios ranging from
a fixed income account to an international stock fund. The Company matches on a
discretionary basis which has been 50% of a participant's contribution up to 6%
(voluntary contributions in excess of 6% are not matched by the Company) since
its inception. The Company's discretionary match is approved by its Board
of Directors on an annual basis. Plan participants become vested in the
Company's matching contribution after completion of 3 years of service.
Forfeitures of non vested employer contributions at the end of each Plan
year are first used to reduce the administrative expenses of the Plan,
second to reduce the Company's matching contribution and any then remaining
forfeitures are allocated to eligible employees, regardless of participation
status as a profit sharing contribution made by the employer. For the years
ended June 30, 1996 and 1997, the Company contributed approximately $87,400
and $216,700, respectively as its matching contribution.
12. EARNINGS (LOSS) PER SHARE
Pro forma net income and pro forma earnings per share for the year ended
June 30, 1995 is calculated assuming the Company's April 1995 IPO occurred as
of the beginning of the year and gives effect to (i) the redemption of
approximately $2.5 million of the Company's preferred stock and dividends
paid of $194,198, (ii) the termination of a consulting agreement providing
consulting fees of $139,751, net of taxes, (iii) the repayment of approximately
$5.0 million of indebtedness under the Company's revolving credit facility and
related interest expense of $192,157, net of taxes.
<PAGE> F-19
The Aegis Consumer Funding Group, Inc.
Notes to Consolidated Financial Statements
Years Ended June 30, 1995, 1996 and 1997
The components of the Company's earnings (loss) per share of common and
common equivalent share are as follows:
<TABLE>
<CAPTION>
Year Ended June 30,
1995 1996 1997
------ ------ -----
<S> <C> <C> <C>
Primary earnings (loss) per share:
Historical basis:
Net income (loss) available,
as adjusted $1,079,423 $9,288,615 ($44,687,586)
========== ========== =============
Net income (loss) per common
and common equivalent share $0.09 $0.65 ($2.71)
===== ===== =======
Weighted average common shares 12,641,878 12,969,500 16,511,628
Weighted average common
equivalent shares 9,968 1,359,130 -
---------- ---------- ------------
Weighted average common and
common equivalent shares 12,651,846 14,328,630 16,511,628
=========== ========== ===========
Pro forma basis:
Net income available to
common stockholders $1,605,529 N/A N/A
=========== ==== ====
Net income per common and common
equivalent share $0.12 N/A N/A
========= === ===
Weighed average common shares 12,886,319 N/A N/A
Weighted average common
equivalent shares 32,917 N/A N/A
---------- --- ---
Weighted average common and common
equivalent shares 12,919,235 N/A N/A
========== === ===
Fully diluted earnings (loss) per share:
Historical basis:
Net income (loss) available,
as adjusted $1,079,423 $9,288,615 $(44,687,586)
========== ========== =============
Net income (loss) per common and
common equivalent share $0.08 $0.61 ($2.71)
====== ===== =======
Weighted average common shares 13,081,631 14,862,263 16,511,628
Weighted average common
equivalent shares 10,661 328,430 -
---------- ---------- -----------
Weighted average common and
common equivalent shares 13,092,292 15,190,693 16,511,628
========== ========== ==========
Pro forma basis:
Net income available to
common stockholders $1,605,529 N/A N/A
========== === ===
Net income per common and
common equivalent share $0.11 N/A N/A
===== === ===
Weighted average common shares 14,776,844 N/A N/A
Weighted average common
equivalent shares 35,887 N/A N/A
---------- --- ---
Weighted average common and common
equivalent shares 14,812,731 N/A N/A
=========== === ===
</TABLE>
<PAGE> F-20
The Aegis Consumer Funding Group, Inc.
Notes to Consolidated Financial Statements
Years Ended June 30, 1995, 1996 and 1997
In February 1997, the Financial accounting Standarda Board ("FASB") issued
SFAS No. 128, Earnings Per Share, which is effective for annual and interim
financial statements issued for periods ending after December 15, 1997.
SFAS No. 128 was issued to simplify the Standards for calculating earnings
per share ("EPS") previously found in APB No. 15, Earnings Per Share. SFAS
128 replaces the presentatin of primary EPS with a presentation of basic EPS.
The new rules also require dual presentation of basic and diluted EPS on the
face of the statement of operations for companies with a complex capital
structure. For the Company, basic EPS will exclude the dilutive effects of
stock options and certain non-vested ISO'S. Diluted EPS for the Company will
reflect all potential dilutive securities (similar to fully diluted EPS under
APB No.15). Under the provisions of the SFAS 128, basic EPS for the fiscal
year ended June 30, 1996 would have been $0.72. All other per share data
would have been the same as reported amounts.
13. RELATED PARTY TRANSACTIONS
For the year ended June 30 1995, the Company provided consulting,
financial and structuring services to an affiliated entity of one of its then
significant stockholders. In connection with these engagements, the Company
earned $275,000 for the year ended June 30, 1995. For the years ended June 30,
1996 and 1997, none of these services were provided.
During the year ended June 30, 1996, the Company recorded a valuation
allowance of $600,000 on a note receivable it received in connection with the
sale of certain retained interests in securitized receivables. The note
accrued interest at 8.5% per annum and matures in August 2000. In May 1997,
the Company filed a proof of claim for approximately $668,000 in the United
States Bankruptcy Court for the Northern District of New York in the debtor's
case.
The Company had a consulting agreement with another significant
stockholder whereby it provided advisory services to the Company for the
development, implementation and marketing of consumer product lines. In
connection with this agreement, the Company paid approximately $350,000 to
such stockholder during the year ended June 30, 1995. This agreement was
canceled effective April 6, 1995.
In March 1996, the Company entered into a consulting agreement (the
"Consulting Agreement") with Whitehall, a company affiliated with significant
shareholders, whereby Whitehall was engaged to provide consulting services to
the Company relating to operations, management, financing and marketing. The
Consulting Agreement was renewed on its anniversary date February 5, 1997,
for an additional one-year term and provides an annual fee to Whitehall of
$300,000 (subject to adjustment in certain circumstances) plus reasonable and
necessary expenses. For the years ended June 30, 1996 and 1997, the Company
incurred an expense of $125,000 and approximately $317,700, respectively,
under the Consulting Agreement.
14. INCOME TAXES
At June 30, 1997, the Company had a federal net operating loss carry-
forward of approximately $43.7 million which will expire no sooner than
September 30, 2005. Future utilization of approximately $36.7 million of the
total net operating losses are subject to an annual limitation under Section
382 of the Internal Revenue Code. The Company has recorded a deferred tax
asset relating to the future benefit of the carryforward. As discussed in
the summary of significant accounting policies, the Company underwent a quasi-
reorganization in 1992. Accordingly, any benefit relating to the use of $1.8
million Section 382 loss carry forward generated prior to the quasi-
reorganization will be reflected as an adjustment to stockholders' equity.
A full valuation allowance of $661,000 has been established against this $1.8
million Section 382 loss carryforward. In addition, a valuation allowance of
$12.2 million has been established against the Company's remaining NOL as a
result of the Company incurring losses in excess of previously earned
income.
The Company's income tax provisions consist of the following:
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------------------------
1995 1996 1997
------ ----- -----
<S> <C> <C> <C>
Current provision
Federal . . . . . . . . . $ - $ - $ -
State and local. . . . . . 221,484 1,553,988 150,000
------- --------- --------
Total current. . . . . . 221,484 1,553,988 150,000
------- --------- --------
<PAGE> F-21
The Aegis Consumer Funding Group, Inc.
Notes to Consolidated Financial Statements
Years Ended June 30, 1995, 1996 and 1997
Deferred (benefit) provision
Federal. . . . . . . . . . 1,475,000 5,639,763 (8,678,455)
State and local. . . . . . 71,540 278,271 101,425
--------- --------- -----------
Total deferred . . . . . 1,546,540 5,918,034 (8,577,030
--------- --------- -----------
Total provision for income taxes $1,768,024 $7,472,022 $8,427,030
========== ========== ===========
Deferred taxes have been provided for temporary differences in the
recognition of revenues and expenses for tax and financial statement purposes.
The significant components of the Company's deferred tax liability, which is
included in income taxes payable, are as follows:
</TABLE>
<TABLE>
<CAPTION>
June 30,
-------------------------
1996 1997
----------- ----------
<S> <C> <C>
Liabilities:
Securitization transactions $17,628,762 $2,060,889
Leases 2,534,990 2,785,129
----------- ----------
Total deferred tax liability 20,163,752 $4,846,018
----------- ----------
Assets:
Net operating loss carryforward 11,956,095 14,252,585
Allowance for credit losses 1,236,491 2,488,444
State taxes 193,375 91,637
Rent expense 130,217 135,452
----------- -----------
Total deferred tax asset 13,516,178 16,968,118
------------ -----------
Valuation allowance (661,000) (12,837,000)
------------ ------------
Net deferred tax asset 12,855,178 4,081,118
------------ ------------
Net deferred tax liability $7,308,574 $764,900
============ ============
</TABLE>
The reconciliation of the federal statutory rate to the effective tax rate
is as follows:
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------------
1995 1996 1997
---- ----- -----
<S> <C> <C> <C>
Statutory federal rate 34% 34% (35%)
State taxes, net of federal benefit 12% 7% -
Permanent difference resulting from
charge for release of Escrowed shares 10% 2% -
Warrants 1% -
Valuation allowance - - 16%
Other 2% - 2%
--- --- -----
58% 45% (17%)
=== === =====
</TABLE>
15. QUARTERLY FINANCIAL DATA (UNAUDITED):
Summarized financial data is as follows (dollars in thousands,
except for per share amounts):
<TABLE>
<CAPTION>
Quarter Ended
--------------------------------------------------------------------------
Sept. 30, Dec. 31,March 31, June 30 Sept. 30, Dec. 31,March 31, June 30,
1995 1995 1996 1996 1996 1996 1997 1997
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $9,158 $9,405 $13,064 $14,700 $13,689 ($22,532) $11,211 ($3,623)
------ ------ ------ ------- ------- ------- ------- ------
Interest expense 2,124 2,459 2,723 2,784 3,014 4,214 6,447 2,914
Other expenses 3,386 3,719 5,824 6,547 5,361 10,759 9,926 10,279
----- ----- ----- ------ ------ ------ ------ ------
Total expenses 5,511 6,178 8,547 9,331 8,374 14,973 16,373 13,193
----- ----- ----- ----- ----- ------ ------ ------
<PAGE> F-22
The Aegis Consumer Funding Group, Inc.
Notes to Consolidated Financial Statements
Years Ended June 30, 1995, 1996 and 1997
Net income (loss)
before income
taxes (benefit) 3,647 3,227 4,517 5,369 5,315 (37,505) (5,162) (15,570)
Provision (benefit)
for income taxes 1,641 1,383 1,988 2,460 2,179 (10,606) - -
----- ----- ----- ------ ----- -------- ------ -------
Net income (loss) $2,006 $1,844 $2,529 $2,909 $3,136 ($26,899) ($5,162)($15,570)
Net income (loss) ====== ====== ====== ====== ====== ========= ======= ======
available
to shareholders $2,006 $1,844 $2,529 $2,768 $3,136 ($26,985) ($5,206)($15,572)
====== ====== ====== ====== ====== ======= ======= ======
Net income (loss) per
common share:
Primary $0.15 $0.13 $0.17 $0.19 $0.19 ($1.68) ($0.31) ($0.88)
===== ===== ===== ===== ===== ======= ====== =====
Fully Diluted $0.14 $0.12 $0.16 $0.18 $0.19 ($1.68) ($0.31) ($0.88)
===== ===== ===== ===== ===== ======= ===== =======
</TABLE>
The quarters ended December 31, 1995, March 31, 1996, June 30, 1996,
September 30, 1996, December 31, 1996, March 31, 1997 and June 30, 1997
include write-downs on retained interests in securitized receivables of
$1.5 million, $2.5 million, $3.5 million, $2.0 million, $29.0 million, $4.4
million and $13.6 million, respectively.
The quarter ended June 30, 1996, included a non-cash charge of $807,000
from the release of escrowed shares which was offset by an increase in
paid-in-capital. There was no impact on total stockholders' equity as a
result of the escrow share release and the resultant non-cash charge.
The quarter ended March 31, 1997, has been restated to reflect a $4.4
million write down on retained interests in securitized receivables resulting
from a correction of an error in the Company's valuatin model discovered during
the valuation process for the quarter ended June 30, 1997.
16. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest and income taxes paid during the year were as follows:
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Interest . . . . . . . $4,098,195 $10,369,296 $16,738,188
=========== =========== ===========
Income taxes . . . . . $1,070,513 $141,623 $126,005
=========== =========== ===========
</TABLE>
17. SUBSEQUENT EVENTS
On October 16, 1997, III Finance Ltd. ("III Finance") and the High Risk Fund
Ltd. ("HUB") converted $21.3 million of the Company's 12% Convertible
Subordinated Debenture (the"Debenture") into $2.1 million of 12,75% Cumulative
Preferred Stock (the "Preferred Stock"). The Preferred Stock is convertible
into common stock at $1.26 per share. Additionally, on November 10, 1997,
the remaining debt holder converted its $4.0 million of subordinated debt into
$4.0 million of preferred stock with substantially the same terms as the
conversion of the Debenture, except tthat $2.0 million of the preferred stock
is convertible into common stock at $2.00 pershare. Had these conversions of
debt to equity occurred prior to the Company's fiscal year ended June 30, 1997,
the Company's positive net worth would have been approximately $13.4 million.
The Company of debt to equity reduces the Company's annual debt service
requirements by approximately $3.0 million. Payment of Preferred Stock
dividends, if any, are subject to the approval of the Board of Directors.
On November 10, 1997, the Company agreed in principle to sell, subject to
shareholder and creditor approval, its interest in SST for $7.0 million to
a related entity of III Finance. The Company received a down payment of $2.0
million in two installments of $800,000 and $1.2 million on November 10, 1997
and November 14, 1997, respectively, the remaining purchase price of $5.0
million will be received upon completion of the sale agreement. In
connection with the sel, the Company has a repurchase option, expiring
on December 31, 1998, to repurchase SST for $7.0 million, plus an annual
accretion of 5.0%.
<PAGE> F-23
AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT, by and between
THE AEGIS CONSUMER FUNDING GROUP, INC., a Delaware
corporation, with offices at 525 Washington Blvd., Jersey
City, New Jersey 07310 (the "Company"), and ANGELO R.
APPIERTO, residing at 23 Ashley Court, Jamesburg, New
Jersey 08831 (the "Executive"), is amended and restated
as of April 1, 1997.
W I T N E S S E T H:
WHEREAS, the Executive and the Company have entered
into an Employment Agreement dated as of March 1, 1994,
as amended (the "Prior Agreement"), pursuant to which the
Executive holds the office of Chief Executive Officer;
WHEREAS, the Company has determined that it is in its
best interest and that of its stockholders to recognize
the contribution that the Executive has made and is
expected to continue to make to the Company's business
and to retain his services in the future;
WHEREAS, in view of recent changes in the industry in
which the Company is involved, the Company has determined
that it is in its best interest and that of its stock
holders to revise and restate the terms of Executive's
continued employment with the Company; and
WHEREAS, the Executive and the Company desire to
terminate and supersede the Prior Agreement, except with
respect to the amendment dated April 26, 1996, concerning
a change in control of the Company, and to set forth in
this Agreement the terms and conditions of the Execu
tive's continued employment with the Company;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants contained herein, the parties hereto
agree as follows:
1. Employment. The Company agrees to and does hereby
continue to employ the Executive, and the Executive
agrees to and does hereby accept continued employment by
the Company, subject to the terms and conditions herein
set forth.
2. Term. The term of the Executive's employment hereun
der shall commence as of April 1, 1997 (the "Effective
Time") and shall terminate on April 1, 1999 (such period
hereinafter referred to as the "Term") unless terminated
prior to such date.
3. Duties.
(a) During the Term, the Executive shall be employed
as a senior executive officer of the Company and shall be
in charge of and responsible for the general and supervi
sory duties normally and customarily attendant to such
office in a consumer finance and loan servicing business
and shall render such other lawful services, and exercise
such powers, which are from time to time requested of
him, assigned to him or vested in him by the Board of
Directors of the Company (the "Board") and which are
commensurate with his position as Chairman and Chief
Executive Officer.
(b) The Executive agrees that, during the Term,
unless the Board shall otherwise consent, he will devote
substantially his full time, energies, labor and skills
to the business of the Company. The Company shall pro
vide the Executive with his own office space and appro
priate administrative or clerical assistance, all in a
location reasonably appropriate to enable the Executive
to fulfill his duties, and each commensurate with the
Executive's position, duties and responsibilities.
(c) It is hereby acknowledged that, subject to Para
graph 10 hereof, the Executive may either presently, or
in the future, be involved in business, charitable or
community activities so long as such other activities do
not interfere with the performance by the Executive of
his duties hereunder.
4. Compensation. In consideration for services per
formed hereunder, the Company shall pay to the Executive
an annual salary of $300,000, in installments payable in
accordance with the Company's customary payroll prac
tices. In addition, the Company shall reimburse the
Executive for all expenses reasonably incurred by him in
connection with the performance of his duties hereunder
and the business of the Company upon the submission to
the Company of appropriate receipts therefor.
5. Vacation. The Executive shall be entitled to four
weeks' paid vacation during each twelve (12) month period
of his employment hereunder, to be taken at times mutu
ally agreeable to the Executive and the Company.
6. Bonus.
(a) Determination of Bonus Pool. A Bonus Pool shall
be determined for the period commencing on July 1, 1997
and ending on June 30, 2000 (the "Bonus Period").
(i) "Consolidated Net After Tax Income" ("CNATI")
shall mean, with respect to any period, the net after tax
income of the Company from operations currently conducted
by the Company (including for such purpose the servicing
and origination of automobile loans or mortgages) before
extraordinary items as reported on the audited financial
statements of the Company with respect to such period,
which amount shall be: (A) increased to eliminate bo
nuses paid or payable hereunder; (B) reduced to eliminate
any gain accrued on sales in such fiscal year with re
spect to securitization, whether or not any such securi
tization was effected in such fiscal year; (C) increased
or reduced without duplication, to give effect to net
cash received or disbursed in connection with securi
tizations; (D) adjusted to eliminate any income attribut
able to securitization of assets by the Company prior to
the securitization designated as "971"; and (E) adjusted
to provide for applicable taxes (current and deferred) on
(A), (B), (C) and (D) above.
(ii) An amount ("Total Assets") shall be determined by
aggregating the total weighted average of assets owned by
the Company during the Bonus Period, whether such assets
are owned by the Company (including its subsidiaries) or
by a special purpose vehicle, excluding for this purpose
assets owned by the Company prior to the securitization
designated as "97-1". For purposes of this Agreement, a
"special purpose vehicle" shall be a corporation or other
entity created for the purpose of effecting securiti
zations in which the Company has a retained interest or
which have recourse to the Company and which are not
otherwise reflected as consolidated subsidiaries on the
Company's financial statements.
(iii) A percentage ("ROA") shall be determined by
dividing the CNATI for the Bonus Period by Total Assets
for the Bonus Period and dividing the quotient thereof by
the number three (3).
(iv) The amount of the Bonus Pool for the Bonus Period
shall be determined in accordance with the following
schedule:
(A) if ROA is less than .5%, the Bonus Pool shall be
0% of CNATI;
(B) if ROA is at least .5% but no greater than .749%,
the Bonus Pool shall be 16% of CNATI in excess of
the amount of CNATI that would equal an ROA of
.5% (such amount of CNATI equaling an ROA of .5%
being hereinafter referred to as "Base CNATI");
(C) if ROA is at least .75% but no great er than
.875%, the Bonus Pool shall equal (x) 5% of Base
CNATI plus (y) 16% of CNATI in excess of Base
CNATI;
(D) if ROA is at least .876% but no grea ter than
.99%, the Bonus Pool shall equal (x) 7.5% of Base
CNATI plus (y) 16% of CNATI in excess of Base
CNATI;
(E) if ROA is at least 1.0% but no greater
than 1.249%, the Bonus Pool shall equal (x) 10% of Base
CNATI plus (y) 16% of CNATI in excess of Base CNATI;
(F) if ROA is at least 1.25% but no grea ter than
1.499%, the Bonus Pool shall equal (x) 12.5% of
Base CNATI plus (y) 16% of CNATI in excess of
Base CNATI; and
(G) if ROA is 1.5% or more, the Bonus Pool shall
equal 16% of CNATI.
(b) Allocation of Bonus Pool. As soon as practicable
but no later than sixty (60) days following the certifi
cation of the Company's financial statements in respect
of the fiscal year of the Company ending June 30, 2000,
the Bonus Pool shall be allocated by the then most senior
executive among Messrs. Angelo Appierto, Joseph Battiato,
Gary Peiffer and Jorge Rios, in such individual's sole
discretion, between (i) the Senior Executive Group,
consisting of Messrs. Angelo Appierto, Joseph Battiato,
Gary Peiffer and Jorge Rios, and (ii) the Executive
Group, consisting of the Chief Financial Officer, any
Executive Vice President and such other employees of the
Company as the Chairman shall in his discretion desig
nate; provided, however, that no less than 5% of the
Bonus Pool shall be allocated to the Executive Group.
Except as hereinbelow provided, onefourth (1/4) of that
portion of the Bonus Pool allocated to the Senior Execu
tive Group in accordance with the immediately preceding
sentence shall be allocated to each of the members of the
Senior Executive Group (such individual's allocation, the
"Bonus"), and that portion of the Bonus Pool allocated to
the Executive Group in accordance with the immediately
preceding sentence shall be allocated among the members
of the Executive Group as determined by the Chairman in
his sole discretion. If the employment of the Executive
is terminated by the Company without Cause or by the
Executive with Good Reason, he shall be entitled to
receive 100% of his Bonus at such time as the Bonus
otherwise becomes payable. If the employment of the
Executive is terminated by the Company for Cause or by
the Executive without Good Reason (A) during the first
year of the Term, the Executive's right to receive any
portion of the Bonus shall be forfeited or (B) during the
second year of the Term, he shall be entitled to receive,
at such time as the Bonus otherwise becomes payable, an
amount equal to onehalf (1/2) of the Bonus otherwise
attributable to him. In the event that, prior to Febru
ary 1, 1999, the Company offers to the Executive an
extension of his employment for at least one (1) year
following the end of the Term on terms substantially
similar to those provided herein and the Executive does
not accept such offer, the Executive shall be entitled to
receive, at the time such Bonus otherwise becomes pay
able, an amount equal to twothirds (2/3) of the Bonus
otherwise attributable to him. In the event that, prior
to February 1, 1999, the Company does not offer to the
Executive an extension of his employment for at least one
(1) year following the end of the Term on terms substan
tially similar to those provided herein, the Executive
shall be entitled to receive, at the time such Bonus
otherwise becomes payable, an amount equal to fivesixths
(5/6) of the Bonus otherwise attributable to him. Any
portion of the Bonus not paid to the Executive by opera
tion of this Agreement shall be allocated in such amounts
and to such employees as the Board of Directors may in
its discretion determine.
(c) Payment of Bonuses. The bonus determined pursu
ant to this Section 6 shall be paid to the Executive not
less than ten (10) business days following the alloca
tions described in subparagraph (b) hereof; provided,
however, that to the extent that the determination of
CNATI set forth in subparagraph (a) hereof includes
income accrued as a result of securitizations effected
during the Bonus Period commencing with the securitiza
tion designated by the Company as "1997-1," that portion
of the Bonus Pool allocated to such income will be paid
only when and to the extent that cash is released to the
Company from the reserve fund or funds applicable to such
securitizations. The Company's obligation to pay the
Executive the Bonus accrued pursuant to this Section 6
shall survive the termination of this Agreement.
7. Benefits.
(a) Throughout the Term, the Executive shall be
eligible to participate in any pension, profitsharing,
stock option or similar plan or program of the Company
now existing or established hereafter for the benefit of
its employees generally, to the extent that he is eligi
ble under the general provisions thereof. The Executive
shall also be entitled to participate in any group insur
ance, hospitalization, medical, health and accident,
disability or similar or nonsimilar plan or program of
the Company now existing or established hereafter for the
benefit of its employees or executives generally, to the
extent that he is eligible under the general provisions
thereof. To the extent that it can be accomplished
without cost to the Company above that payable in respect
of other senior officers of the Company, the benefits
under such plans and programs shall be at least equiva
lent to the benefits available to the Executive under
plans and programs in which he was participating on
January 1, 1994. To the extent that the foregoing plans
and programs do not provide the Executive with disability
insurance providing a maximum benefit level of at least
$10,000 per month, the Company shall supplement such
plans and programs to provide such coverage.
(b) The Company shall reimburse the
Executive in a monthly amount not to exceed $1,000 in
respect of the cost of leasing or purchasing an automo
bile to be used by him in connection with the Company's
business. In addition, the Company shall be responsible
for all reasonable costs of operating, repairing, main
taining and insuring such automobile.
(c) The Company shall provide the Executive with a
policy of term life insurance in an amount equal to five
(5) times his annual salary (or, in the Executive's
discretion, any other form or amount of life insurance at
an annual premium cost to the Company not in excess of
the annual premium for such a policy providing five (5)
times his annual salary of term life insurance), payable
to such beneficiary or such beneficiaries as shall be
designated in writing by the Executive. Such policy
shall be owned by the Executive or any person or entity
designated by him. Any incremental increase in the
premium cost arising by virtue of the Executive being
uninsurable at standard rates shall be paid by the Execu
tive.
(d) In the event that the Executive shall die prior
to the end of the Term, then, as an additional death
benefit, the Company shall pay to the Executive's benefi
ciary or beneficiaries, as the Executive shall have
indicated in writing to the Company (or, if no such
beneficiary has been designated, to the Executive's
estate), an amount equal to onehalf (1/2) of the Execu
tive's annual salary in effect at the time of the Execu
tive's death, pursuant to the terms of this Agreement.
Such death benefit shall be paid (i) in addition to any
sum otherwise required to be paid to such beneficiary or
to the Executive's estate by the Company and (ii) in six
(6) equal consecutive monthly installments, commencing on
the first date following the Executive's death that the
Executive would have otherwise received a salary payment
hereunder if the Executive had survived.
(e) In the event the Company shall cause the Execu
tive to relocate to offices not within reasonable commut
ing distance of his then current residence, the Executive
shall be entitled to receive full reimbursement from the
Company for all customary expenses incurred in connection
with the Executive's moving his residence to a location
within reasonable commuting distance of such new office
location. Such expenses shall include but not be limited
to the costs of moving, packing and storing the Execu
tive's personal effects, real estate brokerage fees and
legal and other incidental costs. In addition, provided
that the Executive is making a reasonably diligent effort
to sell his then current residence at a price established
in good faith based upon then current market conditions
in the immediate vicinity, pending the Executive's sale
of his then current residence the Company shall make
available to the Executive appropriate living facilities
maintained by the Company in the vicinity of the new
office location and shall reimburse the cost of traveling
once a week between such residence and office locations.
The Company shall further reimburse the Executive upon
sale of such residence for the amount, if any, by which
the net proceeds from such sale (after brokerage, legal
and other incidental closing costs) are less than the
costs to the Executive of such residence, including any
improvements thereto. The Company shall further pay the
Executive an amount equal to the federal, state and local
income taxes due (at the highest marginal brackets then
in effect) from the Executive with respect to all amounts
payable by the Company pursuant to this subsection (e) to
the extent not deductible to the Executive under the
Internal Revenue Code of 1986, as amended, and the regu
lations thereunder.
8. Termination of Executive's Employment.
(a) Notwithstanding any provisions contained herein
to the contrary, the Executive's employment may be termi
nated by the Company upon the Executive's death or dis
ability (as defined below) or for Cause (as defined
below), and the Executive may terminate his employment
for Good Reason (as defined below);
(b) For purposes of this Agreement, "disability"
shall mean the Executive is mentally or physically dis
abled from properly and fully performing his duties and
responsibilities hereunder for a period of 120 consecu
tive days or for 180 days, even though not consecutive,
within any 360day period, all as evidenced by the written
certification of a qualified medical doctor agreed to by
the Company and the Executive or, in the absence of such
agreement, by a doctor selected by the agreement of a
qualified medical doctor selected by each of the Company
and the Executive;
(c) For purposes of this Agreement, "Cause" shall
mean: (i) the conviction of the Executive of a felony by
a federal or state court of competent jurisdiction; (ii)
the continued failure by the Executive to substantially
perform the Executive's duties with the Company (other
than any such failure resulting from the Executive's
incapacity due to physical or mental illness or any such
actual or anticipated failure after the issuance of a
notice of termination for Good Reason by the Executive)
after a written demand for substantial performance is
delivered to the Executive by the Board, which demand
specifically identifies the manner in which the Board
believes that the Executive has not substantially per
formed his duties, (iii) the engaging by the Executive in
conduct which is demonstrably and materially injurious to
the Company or its subsidiaries, monetarily or otherwise,
or (iv) the engaging by the Executive in an actual act of
dishonesty intended to result in gain to the Executive at
the expense of the Company. In no event shall Cause be
deemed to include any action or inaction on the part of
the Executive undertaken in good faith, consistent with
his fiduciary duties to the Company, which are within the
"business judgement rule" as such rule or embodiment
thereof has been interpreted in accordance with the laws
of the applicable jurisdiction.
A notice of termination for Cause shall in
clude a copy of a resolution duly adopted by the affirma
tive vote of a majority of the entire membership of the
Board (not including the Executive) at a meeting of the
Board which was called and held for the purpose of con
sidering such termination (after reasonable notice to the
Executive and an opportunity for the Executive, together
with the Executive's counsel, to be heard before the
Board) finding that, in the good faith opinion of the
Board, the Executive was guilty of conduct set forth in
the immediately preceding paragraph, and specifying the
particulars thereof in detail.
(d) For purposes of this Agreement, "Good Reason"
shall mean any of the following: (i) the assignment to
the Executive of duties inconsistent with the Executive's
position, duties, responsibilities, titles or offices as
described herein, (ii) any material reduction by the
Company of the Executive's duties or responsibilities
(including the appointment, without the Executive's
consent, of an executive officer senior to him), (iii)
any reduction by the Company of the Executive's compensa
tion as set forth in Paragraphs 4, 5, 6 or 7 hereof (it
being understood that a reduction of benefits applicable
to all executives of the Company (including the Execu
tive) shall not be deemed a reduction of the Executive's
compensation package for purposes of this definition) or
(iv) requiring the Executive to be based without his
consent at a location not within reasonable commuting
distance of his then current residence.
(e) In the event that the Executive's employment
hereunder is terminated as a result of death, disability
or by the Company for Cause, or by the Executive without
Good Reason, or in the event that this Agreement is not
renewed or extended at the end of the Term, then the
Company shall have no further obligations or liabilities
to the Executive hereunder, such that all benefits and
salary (but not the Company's obligation to pay the
Executive's Bonus) provided for within this Agreement
(except for any death or disability benefits that would
otherwise continue past the date of such termination)
shall terminate simultaneously with the termination of
the Executive's employment except for benefits and salary
earned and accrued through the date of such termination.
Nothing in this subsection (e) shall supersede any rights
of the Executive to receive any amounts or benefits
otherwise due to him upon the occurrence of any of the
events described in the immediately preceding sentence,
whether such rights are created by this Agreement or
otherwise.
(f) In the event that the Executive's employment
hereunder is terminated by the Company other than for
Cause, death, disability, or because the Agreement has
not been renewed or extended, or by the Executive for
Good Reason, the Company shall continue to provide the
Executive with the salary, bonus and benefits enumerated
in Paragraphs 4, 6 and 7 hereof, respectively, at the
levels in effect immediately prior to such termination
(or, if applicable, the occurrence of the event consti
tuting Good Reason), for the remainder of the Term (such
period, the "Severance Period"). In addition, following
the Severance Period, the Executive shall continue to be
entitled to receive payment of the Bonus earned in accor
dance with Section 6 hereof.
(g) If the Executive's employment hereunder is termi
nated under Section 8(f) hereof, the Executive shall be
required to mitigate damages; provided, however, that the
Executive shall not be required to accept employment that
requires him to perform duties inconsistent with those of
a senior executive officer or professional at a level for
which he is qualified by reason of experience and educa
tion. Any salary, bonus and benefits (to the extent
provided at no additional cost to the Executive) received
by the Executive during or with respect to the Severance
Period and attributable to services rendered by the
Executive to persons or entities other than the Company
shall be applied to reduce the Company's obligation to
make payments and provide benefits attributable to peri
ods after such termination.
9. Stock Options. (h) Effective as of the date hereof,
options to purchase an aggregate of 150,000 shares of
common stock of the Company previously awarded under the
Company's 1994 Stock Option Plan (as amended) (the "1994
Plan") shall be cancelled to the Company. In consider
ation for such cancellation, the Compensation Committee
of the Board shall, effective as of the date hereof,
grant to the Executive an option to purchase 111,423
Shares (as defined in the 1994 Plan) under the terms set
forth in the 1994 Plan, except as provided below:
Option exercise price per share: $2.50;
Term of Option: 10 years from the date of grant;
and
Termination of Employment: if the Executive's
employment hereunder is terminated by the Company
other than for Cause or by the Executive for Good
Reason (as such terms are defined herein), the
option shall remain exercisable, to the extent
exercisable as of the effective date of such
termination, for a period of the lesser of (1) 1
year following the effective date of such termi
nation and (2) the original term of such option.
(i) In addition, effective as of the date
hereof, options to purchase an aggregate of 25,000 shares
of common stock of the Company previously awarded under
the Company's 1996 Stock Option Plan (as amended) (the
"1996 Plan") shall be cancelled to the Company. In
consideration for such cancellation, the Compensation
Committee of the Board shall, effective as of the date
hereof, grant to the Executive an option to purchase
18,577 Shares (as defined in the 1996 Plan) under the
terms set forth in the 1996 Plan, except that provisions
in respect of the option exercise price, term and exerci
sability of such option set forth above in subsection (a)
of this Section 9 shall also apply to the option granted
hereunder.
9. Covenants of the Executive.
(a) The Executive acknowledges that his employment by
the Company will throughout his employment bring him into
close contact with many confidential affairs of the
Company, including information about costs, profits,
markets, sales, key personnel, pricing policies, opera
tional methods, and other business affairs, methods and
information, including plans for future developments, not
readily available to the public. The Executive further
acknowledges that the services to be performed under this
Agreement are of a special, unique, unusual, extraordi
nary and intellectual character, and that the Company
currently competes or intends to compete with other
organizations that are located in all of the states of
the United States. In recognition of the foregoing, the
Executive covenants and agrees that:
(i) he will not knowingly divulge any material
confidential matters of the Company which are not other
wise in the public domain and will not intentionally
disclose them to anyone outside of the Company during his
employment by the Company hereunder, other than in the
proper performance of the duties contemplated herein, or
following the expiration or termination for any reason of
his employment with the Company;
(ii) he will deliver promptly to the Company upon the
termination of his employment, or at any other time the
Company may so request, at the Company's expense, all
memoranda, notes, records, reports and other documents
(and all copies thereof) relating to the businesses of
the Company which he obtained while employed by, or
otherwise serving or acting on behalf of, the Company, or
any of its subsidiaries or affiliates, and which he may
then possess or have under his control; and
(iii) for so long as the Executive continues to
receive salary from the Company, whether under the terms
of this Agreement or otherwise (including, but not lim
ited to, the duration of the Severance Period), the
Executive will not, unless the Board shall otherwise
consent, alone or together with any other person, firm,
partnership, corporation or other entity whatsoever
(except any subsidiaries or affiliates of the Company),
directly or indirectly, whether as an officer, director,
stockholder, partner, proprietor, associate, employee,
representative, public relations or advertising represen
tative, management consultant or otherwise:
(A)(A) engage in or
(B) become or be interested in or associated with
any other person, corporation, firm, partnership or other
entity whatsoever engaged in any business which is com
petitive with any business conducted or contemplated by
the Company (a "Similar Business").
(b) Notwithstanding the provisions of subsection
(a)(iii) of this Paragraph 10, the Executive may own, as
an inactive investor, securities of a corporation engaged
in a competitive line of business whose equity securities
are registered under Section 12(b) or 12(g) of the Ex
change Act, so long as his beneficial ownership in any
one such corporation shall not in the aggregate consti
tute more than five percent (5%) of any class of equity
securities of such corporation.
(c) As a separate and independent covenant, the
Executive agrees that during the Term, including any
extensions or renewals therof, and for a period of six
months thereafter, the Executive will not, without the
consent of the Company (which consent shall not be unrea
sonably withheld) in any way, directly or indirectly, for
the purpose of conducting or engaging in any Similar
Business, call upon, solicit, advise or otherwise do, or
attempt to do, business with any clients, customers or
accounts of the Company (including for such purposes any
subsidiaries of the Company) with whom the Exeuctive had
any dealings during the course of the Executive's employ
ment with the Company or any of its affiliates or inter
fere or attempt to interfere with any officers, employ
ees, representatives or agents of the Company, or induce
or attempt to induce any of them to leave the employ of
or violate the terms of their contracts with the Company.
(d) The Executive agrees that the remedy at law for
any breach or threatened breach of any covenant contained
in this Paragraph 10 will be inadequate and that the
Company, in addition to such other remedies as may be
available to it, at law or in equity, shall be entitled
to injunctive relief without bond or other security.
10. Governing Law. This Agreement shall be
construed in accordance with and governed by the laws of
the State of New York applicable to contracts executed in
and to be performed solely within such state.
11. Notices. All notices required or permitted
to be given by either party hereunder, including notice
of change of address, shall be in writing and delivered
by hand, or mailed, postage prepaid, certified or regis
tered mail, return receipt requested, to the other party
as follows:
If to the Company:
The Aegis Consumer Funding Group, Inc.
525 Washington Blvd.
Jersey City, New Jersey 07310
Attention: Gary Peiffer
Vice Chairman and General Counsel
If to the Executive:
Angelo R. Appierto
23 Ashley Court
Jamesburg, New Jersey 08831
12. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes the
entire agreement among the parties with respect to the
subject matter hereof and supersedes any and all prior
oral or written agreements and understandings; however,
this Agreement shall not supersede, diminish or modify
any rights of the Executive under any employee benefit
plans of the Company. There are no oral promises, condi
tions, representations, understandings, interpretations
or terms of any kind as conditions or inducements to the
execution hereof or in effect among the parties. This
Agreement may not be amended, and no provision hereof
shall be waived, except by a writing signed by the Com
pany and the Executive, or in the case of a waiver, by
the party waiving compliance therewith, which states that
it is intended to amend or waive a provision of this
Agreement. Any waiver of any rights or failure to act in
a specific instance shall relate only to such instance
and shall not be construed as an agreement to waive any
rights or failure to act in any other instance, whether
or not similar.
(b) Further Acts. The parties hereto agree that,
after the execution of this Agreement, they will make,
do, execute or cause to be made, done or executed all
such further and other lawful acts, deeds, things, de
vices, conveyances and assurances in law whatsoever as
may be required to carry out the true intention and to
give full force and effect to this Agreement.
(c) Severability. Should any provision of this
Agreement be held by a court of competent jurisdiction to
be unenforceable or prohibited by an applicable law, this
Agreement shall be considered divisible as to such provi
sion, which shall be inoperative, and the remainder of
this Agreement shall be valid and binding as though such
provision were not included herein.
(d) Successors and Assigns. This Agreement shall
inure to the benefit of, and be binding upon, the Company
and any corporation with which the Company merges or
consolidates or to which the Company sells all or sub
stantially all of its assets, and upon the Executive and
his executors, administrators, heirs and legal represen
tatives.
(e) Headings. All headings in this Agreement are for
convenience only and are not intended to affect the
meaning of any provision hereof.
(f) Counterparts. This Agreement may be executed in
two or more counterparts with the same effect as if the
signatures to all such counterparts were upon the same
instrument, and all such counterparts shall constitute
but one instrument.
(g) Costs of the Agreement. The Company agrees to
reimburse the Executive for all of the costs of negotiat
ing and drafting this Agreement, including the reasonable
fees and expenses of the Executive's attorneys, such
reimbursement to be paid whether or not this Agreement
becomes effective.
<PAGE>
IN WITNESS WHEREOF, the Executive has executed this
Agreement and the Company has caused this Agreement to be
executed by its duly authorized officer as of the day and
year first above written.
THE AEGIS CONSUMER FUNDING GROUP, INC.
By:
Name:
Title:
Angelo R. Appierto
CONFIDENTIAL DRAFT
June 19, 1997
Gary Peiffer, Esq.
319 Ardmore Road
Hohokus, New Jersey 07423
Re: TERMINATION OF EXECUTIVE
EMPLOYMENT AGREEMENT
Dear Gary:
This letter confirms the ter
mination of the Amended and Restated
Executive Employment Agreement (the
"Agreement") dated as of April 1, 1997
between Aegis Consumer Funding Group,
Inc. (the "Company") and Gary Peiffer (the
"Executive") and certain related matters
effective as of the date of this letter. For
good and valuable consideration the receipt
of which is acknowledged the Company
and the Executive have agreed as follows:
1. Defined terms used but not other
wise defined herein shall have the
meaning ascribed to them in the
Agreement.
2. The Agreement is terminated in all
respects except for the continuing
obligations of the Executive under
Section 10 of the Agreement. The
Executive hereby confirms his vol
untary resignation as an officer and
director of the Company.
3. The amount of the Advance (as de
fined in Section 4(b) of the Agree
ment) which remains unpaid by the
Executive to the Company is hereby
cancelled and declared to be no lon
ger due and owing by the Executive
to the Company. The Executive
hereby releases and waives any and
all claims he may have against the
Company arising under or pursuant
to the Agreement or any prior
agreement relating to his employ
ment with the Company, including
but not limited to claims to receive
severance or bonus payments or to
exercise options to purchase shares
of the Company's Common Stock.
By executing and returning a copy of this
letter please confirm the foregoing terms to
be our agreement with respect to the mat
ters set forth herein as of the date of this
letter.
AEGIS CONSUMER FUNDING
GROUP,INC.
By:
Joseph F. Battiato
President
Accepted and agreed to this
day of June, 1997 but as of
the date first above written.
Gary Peiffer
D AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREE
MENT, by and between THE AEGIS CONSUMER
FUNDING GROUP, INC., a Delaware corpora-
tion, with offices at 525 Washington
Blvd., Jersey City, New Jersey 07310
(the "Company"), and JOSEPH F. BATTIATO,
residing at 125 Johanna Lane, Staten
Island, New York 10309 (the "Execu-
tive"), is amended and restated as of
April 1, 1997.
W I T N E S S E T H:
WHEREAS, the Executive and the
Company have entered into an Employment
Agreement dated as of March 1, 1994, as
amended (the "Prior Agreement"), pursu
ant to which the Executive holds the
office of President;
WHEREAS, the Company has deter
mined that it is in its best interest
and that of its stockholders to recog-
nize the contribution that the Executive
has made and is expected to continue to
make to the Company's business and to
retain his services in the future;
WHEREAS, in view of recent
changes in the industry in which the
Company is involved, the Company has
determined that it is in its best
interest and that of its stockholders to
revise and restate the terms of
Executive's continued employment with
the Company; and
WHEREAS, the Executive and the
Company desire to terminate and
supersede the Prior Agreement, except
with respect to the amendment dated
April 26, 1996, concerning a change in
control of the Company, and to set forth
in this Agreement the terms and condi
tions of the Executive's continued
employment with the Company;
NOW, THEREFORE, in consideration
of the premises and the mutual covenants
contained herein, the parties hereto
agree as follows:
1. Employment. The Company
agrees to and does hereby continue to
employ the Executive, and the Executive
agrees to and does hereby accept contin
ued employment by the Company, subject
to the terms and conditions herein set
forth.
2. Term. The term of the Exec
utive's employment hereunder shall com
mence as of April 1, 1997 (the "Effec-
tive Time") and shall terminate on April
1, 1999 (such period hereinafter
referred to as the "Term") unless
terminated prior to such date.
3. Duties.
(a) During the Term, the
Executive shall be employed as a senior
executive officer of the Company and
shall be in charge of and responsible
for the general and supervisory duties
normally and customarily attendant to
such office in a consumer finance and
loan servicing business and shall render
such other lawful services, and exercise
such powers, which are from time to time
requested of him, assigned to him or
vested in him by the Board of Directors
of the Company (the "Board") and which
are commensurate with his position as
President.
(b) The Executive agrees
that, during the Term, unless the Board
shall otherwise consent, he will devote
substantially his full time, energies,
labor and skills to the business of the
Company. The Company shall provide the
Executive with his own office space and
appropriate administrative or clerical
assistance, all in a location reasonably
appropriate to enable the Executive to
fulfill his duties, and each commen-
surate with the Executive's position,
duties and responsibilities.
(c) It is hereby
acknowledged that, subject to Paragraph
10 hereof, the Executive may either
presently, or in the future, be involved
in business, charitable or community
activities so long as such other
activities do not interfere with the
performance by the Executive of his
duties hereunder.
4. Compensation. In
consideration for services performed
hereunder, the Company shall pay to the
Executive an annual salary of $300,000,
in installments payable in accordance
with the Company's customary payroll
practices. In addition, the Company
shall reimburse the Executive for all
expenses reasonably incurred by him in
connection with the performance of his
duties hereunder and the business of the
Company upon the submission to the
Company of appropriate receipts there-
for.
The Executive acknowledges, with
respect to the loan (the "Advance") made
by the Company to the Executive in
accordance with the provisions of that
certain amendment, dated as of April 22,
1996, to the Prior Agreement, that
(i) as no bonus shall become due to the
Executive with respect to the Company's
fiscal year ending June 30, 1997, the
Advance shall be used as an offset
against the Bonus (as defined under
Section 6 hereof) to which the Executive
may become entitled, and (ii) the terms
of the repayment of the Advance shall
otherwise remain in full force and
effect. In the event that the Execu
tive's employment hereunder is termi
nated by the Company without Cause or by
the Executive for Good Reason (as each
such term is defined in Section 8
hereof), the Advance shall be a non-
recourse loan to the extent the Bonus is
insufficient to repay the Advance.
5. Vacation. The Executive
shall be entitled to four weeks' paid
vacation during each twelve (12) month
period of his employment hereunder, to
be taken at times mutually agreeable to
the Executive and the Company.
6. Bonus.
(a) Determination of
Bonus Pool. A Bonus Pool shall be
determined for the period commencing on
July 1, 1997 and ending on June 30, 2000
(the "Bonus Period").
(i) "Consolidated Net
After Tax Income" ("CNATI") shall
mean, with respect to any period,
the net after tax income of the
Company from operations currently
conducted by the Company (including
for such purposes the servicing and
origination of automobile loans or
mortgages) before extraordinary
items as reported on the audited
financial statements of the Company
with respect to such period, which
amount shall be: (A) increased to
eliminate bonuses paid or payable
hereunder; (B) reduced to eliminate
any gain accrued on sales in such
fiscal year with respect to securi-
tization, whether or not any such
securitization was effected in such
fiscal year; (C) increased or
reduced without duplication, to give
effect to net cash received or
disbursed in connection with
securitizations; (D) adjusted to
eliminate any income attributable to
securitization of assets by the Com
pany prior to the securitization
designated as "97-1"; and (E)
adjusted to provide for applicable
taxes (current and deferred) on (A),
(B), (C) and (D) above.
(ii) An amount ("Total
Assets") shall be determined by ag
gregating the total weighted average
of assets owned by the Company dur
ing the Bonus Period, whether such
assets are owned by the Company (in
cluding its subsidiaries) or by a
special purpose vehicle, excluding
for this purpose assets owned by the
Company prior to the securitization
designated as "97-1". For purposes
of this Agreement, a "special pur-
pose vehicle" shall be a corporation
or other entity created for the pur
pose of effecting securitizations in
which the Company has a retained
interest or which have recourse to
the Company and which are not other-
wise reflected as consolidated sub
sidiaries on the Company's financial
statements.
(iii) A percentage ("ROA")
shall be determined by dividing the
CNATI for the Bonus Period by Total
Assets for the Bonus Period and di
viding the quotient thereof by the
number three (3).
(iv) The amount of the
Bonus Pool for the Bonus Period
shall be determined in accordance
with the following schedule:
(A) if ROA is less than
.5%, the Bonus Pool
shall be 0% of
CNATI;
(B) if ROA is at least
.5% but no greater
than .749%, the
Bonus Pool shall be
16% of CNATI in
excess of the amount
of CNATI that would
equal an ROA of .5%
(such amount of
CNATI equaling an
ROA of .5% being
hereinafter referred
to as "Base CNATI");
(C) if ROA is at least
.75% but no greater
than .875%, the
Bonus Pool shall
equal (x) 5% of Base
CNATI plus (y) 16%
of CNATI in excess
of Base CNATI;
(D) if ROA is at least
.876% but no greater
than .99%, the Bonus
Pool shall equal (x)
7.5% of Base CNATI
plus (y) 16% of
CNATI in excess of
Base CNATI;
(E) if ROA is at least
1.0% but no greater
than 1.249%, the
Bonus Pool shall
equal (x) 10% of
Base CNATI plus (y)
16% of CNATI in
excess of Base
CNATI;
(F) if ROA is at least
1.25% but no greater
than 1.499%, the
Bonus Pool shall
equal (x) 12.5% of
Base CNATI plus (y)
16% of CNATI in
excess of Base
CNATI; and
(G) if ROA is 1.5% or
more, the Bonus Pool
shall equal 16% of
CNATI.
(b) Allocation of Bonus
Pool. As soon as practicable, but no
later than sixty (60) days following the
certification of the Company's financial
statements in respect of the fiscal year
of the Company ending June 30, 2000, the
Bonus Pool shall be allocated by the
then most senior executive among Messrs.
Angelo Appierto, Joseph Battiato, Gary
Peiffer and Jorge Rios, in such
individual's sole discretion, between
(i) the Senior Executive Group, consist-
ing of Messrs. Angelo Appierto, Joseph
Battiato, Gary Peiffer and Jorge Rios,
and (ii) the Executive Group, consisting
of the Chief Financial Officer, any
Executive Vice President and such other
employees of the Company as the Chairman
shall in his discretion designate;
provided, however, that no less than 5%
of the Bonus Pool shall be allocated to
the Executive Group. Except as herein-
below provided, one-fourth (1/4) of that
portion of the Bonus Pool allocated to
the Senior Executive Group in accordance
with the immediately preceding sentence
shall be allocated to each of the mem-
bers of the Senior Executive Group (such
individual's allocation, the "Bonus"),
and that portion of the Bonus Pool
allocated to the Executive Group in
accordance with the immediately
preceding sentence shall be allocated
among the members of the Executive Group
as determined by the Chairman in his
sole discretion. If the employment of
the Executive is terminated by the Com
pany without Cause or by the Executive
with Good Reason, he shall be entitled
to receive 100% of his Bonus at such
time as the Bonus otherwise becomes pay-
able. If the employment of the Execu
tive is terminated by the Company for
Cause or by the Executive without Good
Reason (A) during the first year of the
Term, the Executive's right to receive
any portion of the Bonus shall be for
feited or (B) during the second year of
the Term, he shall be entitled to re
ceive, at such time as the Bonus other
wise becomes payable, an amount equal to
one-half (1/2) of the Bonus otherwise
attributable to him. In the event that,
prior to February 1, 1999, the Company
offers to the Executive an extension of
his employment for at least one (1) year
following the end of the Term on terms
substantially similar to those provided
herein and the Executive does not accept
such offer, the Executive shall be enti-
tled to receive, at the time such Bonus
otherwise becomes payable, an amount
equal to two-thirds (2/3) of the Bonus
otherwise attributable to him. In the
event that, prior to February 1, 1999,
the Company does not offer to the Execu-
tive an extension of his employment for
at least one (1) year following the end
of the Term on terms substantially simi-
lar to those provided herein, the Execu-
tive shall be entitled to receive, at
the time such Bonus otherwise becomes
payable, an amount equal to five-sixths
(5/6) of the Bonus otherwise attribut
able to him. Any portion of the Bonus
not paid to the Executive by operation
of this Agreement shall be allocated in
such amounts and to such employees as
the Board of Directors may in its dis
cretion determine.
(c) Payment of Bonuses.
The bonus determined pursuant to this
Section 6 shall be paid to the Executive
not less than ten (10) business days
following the allocations described in
subparagraph (b) hereof; provided,
however, that to the extent that the
determination of CNATI set forth in
subparagraph (a) hereof includes income
accrued as a result of securitizations
effected during the Bonus Period com
mencing with the securitization desig
nated by the Company as "1997-1," that
portion of the Bonus Pool allocated to
such income will be paid only when and
to the extent that case is released to
the Company from the reserve fund or
funds applicable to such
securitizations. The Company's
obligation to pay the Executive the
Bonus accrued pursuant to this Section 6
shall survive the termination of this
Agreement.
7. Benefits.
(a) Throughout the Term,
the Executive shall be eligible to
participate in any pension, profit-shar-
ing, stock option or similar plan or
program of the Company now existing or
established hereafter for the benefit of
its employees generally, to the extent
that he is eligible under the general
provisions thereof. The Executive shall
also be entitled to participate in any
group insurance, hospitalization,
medical, health and accident, disability
or similar or nonsimilar plan or program
of the Company now existing or
established hereafter for the benefit of
its employees or executives generally,
to the extent that he is eligible under
the general provisions thereof. To the
extent that it can be accomplished
without cost to the Company above that
payable in respect of other senior
officers of the Company, the benefits
under such plans and programs shall be
at least equivalent to the benefits
available to the Executive under plans
and programs in which he was par-
ticipating on January 1, 1994. To the
extent that the foregoing plans and
programs do not provide the Executive
with disability insurance providing a
maximum benefit level of at least
$10,000 per month, the Company shall
supplement such plans and programs to
provide such coverage.
(b) The Company shall
reimburse the Executive in a monthly
amount not to exceed $1,000 in respect
of the cost of leasing or purchasing an
automobile to be used by him in connec-
tion with the Company's business. In
addition, the Company shall be responsi-
ble for all reasonable costs of
operating, repairing, maintaining and
insuring such automobile.
(c) The Company shall
provide the Executive with a policy of
term life insurance in an amount equal
to $1 million (or, in the Executive's
discretion, any other form or amount of
life insurance at an annual premium cost
to the Company not in excess of the
annual premium for such a policy provid-
ing $1 million of term life insurance),
payable to such beneficiary or such
beneficiaries as shall be designated in
writing by the Executive. Such policy
shall be owned by the Executive or any
person or entity designated by him. Any
incremental increase in the premium cost
arising by virtue of the Executive being
uninsurable at standard rates shall be
paid by the Executive.
(d) In the event that
the Executive shall die prior to the end
of the Term, then, as an additional
death benefit, the Company shall pay to
the Executive's beneficiary or
beneficiaries, as the Executive shall
have indicated in writing to the Company
(or, if no such beneficiary has been
designated, to the Executive's estate),
an amount equal to one-half (1/2) of the
Executive's annual salary in effect at
the time of the Executive's death, pur
suant to the terms of this Agreement.
Such death benefit shall be paid (i) in
addition to any sum otherwise required
to be paid to such beneficiary or to the
Executive's estate by the Company and
(ii) in six (6) equal consecutive
monthly installments, commencing on the
first date following the Executive's
death that the Executive would have
otherwise received a salary payment
hereunder if the Executive had survived.
(e) In the event the
Company shall cause the Executive to
relocate to offices not within reason-
able commuting distance of his then
current residence, the Executive shall
be entitled to receive full reim-
bursement from the Company for all
customary expenses incurred in
connection with the Executive's moving
his residence to a location within
reasonable commuting distance of such
new office location. Such expenses
shall include but not be limited to the
costs of moving, packing and storing the
Executive's personal effects, real
estate brokerage fees and legal and
other incidental costs. In addition,
provided that the Executive is making a
reasonably diligent effort to sell his
then current residence at a price
established in good faith based upon
then current market conditions in the
immediate vicinity, pending the
Executive's sale of his then current
residence the Company shall make avail-
able to the Executive appropriate living
facilities maintained by the Company in
the vicinity of the new office location
and shall reimburse the cost of travel
ing once a week between such residence
and office locations. The Company shall
further reimburse the Executive upon
sale of such residence for the amount,
if any, by which the net proceeds from
such sale (after brokerage, legal and
other incidental closing costs) are less
than the costs to the Executive of such
residence, including any improvements
thereto. The Company shall further pay
the Executive an amount equal to the
federal, state and local income taxes
due (at the highest marginal brackets
then in effect) from the Executive with
respect to all amounts payable by the
Company pursuant to this subsection (e)
to the extent not deductible to the
Executive under the Internal Revenue
Code of 1986, as amended, and the regu-
lations thereunder.
8. Termination of Executive's
Employment.
(a) Notwithstanding any
provisions contained herein to the con
trary, the Executive's employment may be
terminated by the Company upon the Exec
utive's death or disability (as defined
below) or for Cause (as defined below),
and the Executive may terminate his
employment for Good Reason (as defined
below);
(b) For purposes of this
Agreement, "disability" shall mean the
Executive is mentally or physically
disabled from properly and fully per
forming his duties and responsibilities
hereunder for a period of 120 consecu-
tive days or for 180 days, even though
not consecutive, within any 360-day
period, all as evidenced by the written
certification of a qualified medical
doctor agreed to by the Company and the
Executive or, in the absence of such
agreement, by a doctor selected by the
agreement of a qualified medical doctor
selected by each of the Company and the
Executive;
(c) For purposes of this
Agreement, "Cause" shall mean: (i) the
conviction of the Executive of a felony
by a federal or state court of competent
jurisdiction; (ii) the continued failure
by the Executive to substantially per
form the Executive's duties with the
Company (other than any such failure
resulting from the Executive's incapac
ity due to physical or mental illness or
any such actual or anticipated failure
after the issuance of a notice of termi
nation for Good Reason by the Executive)
after a written demand for substantial
performance is delivered to the Execu
tive by the Board, which demand specifi
cally identifies the manner in which the
Board believes that the Executive has
not substantially performed his duties,
(iii) the engaging by the Executive in
conduct which is demonstrably and mate
rially injurious to the Company or its
subsidiaries, monetarily or otherwise,
or (iv) the engaging by the Executive in
an actual act of dishonesty intended to
result in gain to the Executive at the
expense of the Company. In no event
shall Cause be deemed to include any
action or inaction on the part of the
Executive undertaken in good faith,
consistent with his fiduciary duties to
the Company, which are within the "busi
ness judgement rule" as such rule or
embodiment thereof has been interpreted
in accordance with the laws of the ap
plicable jurisdiction.
A notice of termination for
Cause shall include a copy of a resolu
tion duly adopted by the affirmative
vote of a majority of the entire member
ship of the Board (not including the
Executive) at a meeting of the Board
which was called and held for the pur
pose of considering such termination
(after reasonable notice to the Execu-
tive and an opportunity for the Execu
tive, together with the Executive's
counsel, to be heard before the Board)
finding that, in the good faith opinion
of the Board, the Executive was guilty
of conduct set forth in the immediately
preceding paragraph, and specifying the
particulars thereof in detail.
(d) For purposes of this
Agreement, "Good Reason" shall mean any
of the following: (i) the assignment to
the Executive of duties inconsistent
with the Executive's position, duties,
responsibilities, titles or offices as
described herein, (ii) any material
reduction by the Company of the Execu
tive's duties or responsibilities (in
cluding the appointment, without the
Executive's consent, of an executive
officer senior to him other than the
Chairman of the Board, the Vice Chairman
or the Chief Executive Officer), (iii)
any reduction by the Company of the
Executive's compensation as set forth in
Paragraphs 4, 5, 6 or 7 hereof (it being
understood that a reduction of benefits
applicable to all executives of the
Company (including the Executive) shall
not be deemed a reduction of the Execu
tive's compensation package for purposes
of this definition) or (iv) requiring
the Executive to be based without his
consent at a location not within rea-
sonable commuting distance of his then
current residence.
(e) In the event that
the Executive's employment hereunder is
terminated as a result of death, dis-
ability or by the Company for Cause, or
by the Executive without Good Reason, or
in the event that this Agreement is not
renewed or extended at the end of the
Term, then the Company shall have no
further obligations or liabilities to
the Executive hereunder, such that all
benefits and salary (but not the Com
pany's obligation to pay the Executive's
Bonus) provided for within this Agree-
ment (except for any death or disability
benefits that would otherwise continue
past the date of such termination) shall
terminate simultaneously with the termi
nation of the Executive's employment
except for benefits and salary earned
and accrued through the date of such
termination. Nothing in this subsection
(e) shall supersede any rights of the
Executive to receive any amounts or
benefits otherwise due to him upon the
occurrence of any of the events
described in the immediately preceding
sentence, whether such rights are
created by this Agreement or otherwise.
(f) In the event that
the Executive's employment hereunder is
terminated by the Company other than for
Cause, death, disability, or because the
Agreement has not been renewed or
extended, or by the Executive for Good
Reason, the Company shall continue to
provide the Executive with the salary,
bonus and benefits enumerated in Para-
graphs 4, 6 and 7 hereof, respectively,
at the levels in effect immediately
prior to such termination (or, if
applicable, the occurrence of the event
constituting Good Reason), for the
remainder of the Term (such period, the
"Severance Period"). In addition,
following the Severance Period, the
Executive shall continue to be entitled
to receive payment of the Bonus earned
in accordance with Section 6 hereof.
(g) If the Executive's
employment hereunder is terminated under
Section 8(f) hereof, the Executive shall
be required to mitigate damages; provid-
ed, however, that the Executive shall
not be required to accept employment
that requires him to perform duties
inconsistent with those of a senior
executive officer or professional at a
level for which he is qualified by rea
son of experience and education. Any
salary, bonus and benefits (to the ex
tent provided at no additional cost to
the Executive) received by the Executive
during or with respect to the Severance
Period and attributable to services
rendered by the Executive to persons or
entities other than the Company shall be
applied to reduce the Company's obliga
tion to make payments and provide bene
fits attributable to periods after such
termination.
9. Stock Options. (a)
Effective as of the date hereof,
options to purchase an aggregate of
300,000 shares of common stock of the
Company previously awarded under the
Company's 1994 Stock Option Plan (as
amended) (the "1994 Plan") shall be
cancelled to the Company. In consider-
ation for such cancellation, the
Compensation Committee of the Board
shall, effective as of the date hereof,
grant to the Executive an option to
purchase 259,695 Shares (as defined in
the 1994 Plan) under the terms set forth
in the 1994 Plan, except as provided
below:
Option exercise price per share:
$2.50;
Term of Option: 10 years from
the date of grant; and
Termination of Employment: if
the Executive's employment
hereunder is terminated by the
Company other than for Cause or
by the Executive for Good Reason
(as such terms are defined
herein), the option shall remain
exercisable, to the extent
exercisable as of the effective
date of such termination, for a
period of the lesser of (1) 1
year following the effective
date of such termination and
(2) the original term of such
option.
(b) In addition, effective
as of the date hereof, options to pur-
chase an aggregate of 35,000 shares of
common stock of the Company previously
awarded under the Company's 1996 Stock
Option Plan (as amended) (the "1996
Plan") shall be cancelled to the
Company. In consideration for such
cancellation, the Compensation Committee
of the Board shall, effective as of the
date hereof, grant to the Executive an
option to purchase 30,305 Shares (as
defined in the 1996 Plan) under the
terms set forth in the 1996 Plan, except
that provisions in respect of the option
exercise price, term and exercisability
of such option set forth above in
subsection (a) of this Section 9 shall
also apply to the option granted hereun-
der.
10. Covenants of the
Executive.
(a) The Executive
acknowledges that his employment by the
Company will throughout his employment
bring him into close contact with many
confidential affairs of the Company,
including information about costs,
profits, markets, sales, key personnel,
pricing policies, operational methods,
and other business affairs, methods and
information, including plans for future
developments, not readily available to
the public. The Executive further ac-
knowledges that the services to be per
formed under this Agreement are of a
special, unique, unusual, extraordinary
and intellectual character, and that the
Company currently competes or intends to
compete with other organizations that
are located in all of the states of the
United States. In recognition of the
foregoing, the Executive covenants and
agrees that:
(i) he will not knowingly
divulge any material confidential
matters of the Company which are not
otherwise in the public domain and
will not intentionally disclose them
to anyone outside of the Company
during his employment by the Company
hereunder, other than in the proper
performance of the duties contem-
plated herein, or following the ex
piration or termination for any rea
son of his employment with the
Company;
(ii) he will deliver
promptly to the Company upon the
termination of his employment, or at
any other time the Company may so
request, at the Company's expense,
all memoranda, notes, records,
reports and other documents (and all
copies thereof) relating to the
businesses of the Company which he
obtained while employed by, or
otherwise serving or acting on
behalf of, the Company, or any of
its subsidiaries or affiliates, and
which he may then possess or have
under his control; and
(iii) for so long as the
Executive continues to receive
salary from the Company, whether
under the terms of this Agreement or
otherwise (including, but not lim
ited to, the duration of the Sever
ance Period), the Executive will
not, unless the Board shall other-
wise consent, alone or together with
any other person, firm, partnership,
corporation or other entity what-
soever (except any subsidiaries or
affiliates of the Company), directly
or indirectly, whether as an offi-
cer, director, stockholder, partner,
proprietor, associate, employee,
representative, public relations or
advertising representative, man-
agement consultant or otherwise:
(A) engage in or
(B) become or be inter
ested in or associ-
ated with any other
person, corporation,
firm, partnership or
other entity whatso
ever engaged in
any business which is competitive
with any business conducted or con
templated by the Company (a "Similar
Business").
(b) Notwithstanding the
provisions of subsection (a)(iii) of
this Paragraph 10, the Executive may
own, as an inactive investor, securities
of a corporation engaged in a competi
tive line of business whose equity secu
rities are registered under Section
12(b) or 12(g) of the Exchange Act, so
long as his beneficial ownership in any
one such corporation shall not in the
aggregate constitute more than five
percent (5%) of any class of equity
securities of such corporation.
(c) As a separate and
independent covenant, the Executive
agrees that during the Term, including
any extensions or renewals therof, and
for a period of six months thereafter,
the Executive will not, without the
consent of the Company (which consent
shall not be unreasonably withheld) in
any way, directly or indirectly, for the
purpose of conducting or engaging in any
Similar Business, call upon, solicit,
advise or otherwise do, or attempt to
do, business with any clients, customers
or accounts of the Company (including
for such purposes any subsidiaries of
the Company) with whom the Exeuctive had
any dealings during the course of the
Executive's employment with the Company
or any of its affiliates or interfere or
attempt to interfere with any officers,
employees, representatives or agents of
the Company, or induce or attempt to
induce any of them to leave the employ
of or violate the terms of their con-
tracts with the Company.
(d) The Executive agrees
that the remedy at law for any breach or
threatened breach of any covenant con
tained in this Paragraph 10 will be
inadequate and that the Company, in
addition to such other remedies as may
be available to it, at law or in equity,
shall be entitled to injunctive relief
without bond or other security.
11. Governing Law. This Agree
ment shall be construed in accordance
with and governed by the laws of the
State of New York applicable to
contracts executed in and to be
performed solely within such state.
12. Notices. All notices
required or permitted to be given by
either party hereunder, including notice
of change of address, shall be in writ
ing and delivered by hand, or mailed,
postage prepaid, certified or registered
mail, return receipt requested, to the
other party as follows:
If to the Company: The Aegis Consumer Fund
ing Group, Inc.
525 Washington Blvd.
Jersey City, New Jersey 07310
Attention: Angelo Appierto
Chairman of the Board
If to the Executive: Joseph F. Battiato
125 Johanna Lane
Staten Island, New York 10309
13. Miscellaneous.
(a) Entire Agreement.
This Agreement constitutes the entire
agreement among the parties with respect
to the subject matter hereof and super
sedes any and all prior oral or written
agreements and understandings; however,
this Agreement shall not supersede, dimin-
ish or modify any rights of the Executive
under any employee benefit plans of the
Company. There are no oral promises,
conditions, representations, under-
standings, interpretations or terms of any
kind as conditions or inducements to the
execution hereof or in effect among the
parties. This Agreement may not be
amended, and no provision hereof shall be
waived, except by a writing signed by the
Company and the Executive, or in the case
of a waiver, by the party waiving
compliance therewith, which states that it
is intended to amend or waive a provision
of this Agreement. Any waiver of any
rights or failure to act in a specific
instance shall relate only to such
instance and shall not be construed as an
agreement to waive any rights or failure
to act in any other instance, whether or
not similar.
(b) Further Acts. The
parties hereto agree that, after the exe
cution of this Agreement, they will make,
do, execute or cause to be made, done or
executed all such further and other lawful
acts, deeds, things, devices, conveyances
and assurances in law whatsoever as may be
required to carry out the true intention
and to give full force and effect to this
Agreement.
(c) Severability. Should
any provision of this Agreement be held by
a court of competent jurisdiction to be
unenforceable or prohibited by an applica-
ble law, this Agreement shall be consid
ered divisible as to such provision, which
shall be inoperative, and the remainder of
this Agreement shall be valid and binding
as though such provision were not included
herein.
(d) Successors and As
signs. This Agreement shall inure to the
benefit of, and be binding upon, the Com
pany and any corporation with which the
Company merges or consolidates or to which
the Company sells all or substantially all
of its assets, and upon the Executive and
his executors, administrators, heirs and
legal representatives.
(e) Headings. All head
ings in this Agreement are for convenience
only and are not intended to affect the
meaning of any provision hereof.
(f) Counterparts. This
Agreement may be executed in two or more
counterparts with the same effect as if
the signatures to all such counterparts
were upon the same instrument, and all
such counterparts shall constitute but one
instrument.
(g) Costs of the Agree
ment. The Company agrees to reimburse the
Executive for all of the costs of
negotiating and drafting this Agreement,
including the reasonable fees and expenses
of the Executive's attorneys, such reim-
bursement to be paid whether or not this
Agreement becomes effective.
<PAGE>
IN WITNESS WHEREOF, the Executive
has executed this Agreement and the Com
pany has caused this Agreement to be exe
cuted by its duly authorized officer as of
the day and year first above written.
THE AEGIS CONSUMER
FUNDING
GROUP, INC.
By:
Name:
Title:
Joseph F. Battiato
EXECUTIVE EMPLOYMENT
AGREEMENT
THIS EXECUTIVE
EMPLOYMENT AGREEMENT, by and
between THE AEGIS CONSUMER
FUNDING GROUP, INC., a Delaware
corporation, with offices at 525
Washington Blvd., Jersey City, New
Jersey 07310 (the "Company"), and
JORGE RIOS, residing at 4 Terrier Court,
Tinton Falls, New Jersey 07753 (the
"Executive"), is amended and restated as
of April 1, 1997.
W I T N E S S E T H:
WHEREAS, the Executive and
the Company have entered into an
Employment Agreement dated as of March
1, 1994, as amended (the "Prior Agree-
ment"), pursuant to which the Executive
holds the office of Executive Vice
President/National Sales Manager;
WHEREAS, the Company has
determined that it is in its best interest and
that of its stockholders to recognize the
contribution that the Executive has made
and is expected to continue to make to the
Company's business and to retain his
services in the future;
WHEREAS, in view of recent
changes in the industry in which the
Company is involved, the Company has
determined that it is in its best interest and
that of its stockholders to revise and
restate the terms of Executive's continued
employment with the Company; and
WHEREAS, the Executive and
the Company desire to terminate and
supersede the Prior Agreement and to set
forth in this Agreement the terms and
conditions of the Executive's continued
employment with the Company;
NOW, THEREFORE, in
consideration of the premises and the
mutual covenants contained herein, the
parties hereto agree as follows:
1. Employment. The
Company agrees to and does hereby
continue to employ the Executive, and the
Executive agrees to and does hereby
accept continued employment by the
Company, subject to the terms and
conditions herein set forth.
2. Term. The term of the Execu
tive's employment hereunder shall com
mence as of April 1, 1997 (the "Effective
Time") and shall terminate on April 1,
1999 (such period hereinafter referred to
as the "Term") unless terminated prior to
such date.
3. Duties.
(a) During the Term, the
Executive shall be employed as a senior
executive officer of the Company and shall
be in charge of and responsible for the
general and supervisory duties normally
and customarily attendant to such office in
a consumer finance and loan servicing
business and shall render such other lawful
services, and exercise such powers, which
are from time to time requested of him,
assigned to him or vested in him by the
Board of Directors of the Company (the
"Board") and which are commensurate
with his position as Executive Vice
President/National Sales Manager.
(b) The Executive agrees
that, during the Term, unless the Board
shall otherwise consent, he will devote
substantially his full time, energies, labor
and skills to the business of the Company.
The Company shall provide the Executive
with his own office space and appropriate
administrative or clerical assistance, all in
a location reasonably appropriate to enable
the Executive to fulfill his duties, and each
commensurate with the Executive's posi-
tion, duties and responsibilities.
(c) It is hereby
acknowledged that, subject to Paragraph
10 hereof, the Executive may either
presently, or in the future, be involved in
business, charitable or community
activities so long as such other activities
do not interfere with the performance by
the Executive of his duties hereunder.
4. Compensation. In
consideration for services performed here-
under, the Company shall pay to the
Executive an annual salary of $300,000, in
installments payable in accordance with the
Company's customary payroll practices.
In addition, the Company shall reimburse
the Executive for all expenses reasonably
incurred by him in connection with the
performance of his duties hereunder and
the business of the Company upon the sub-
mission to the Company of appropriate
receipts therefor.
Notwithstanding the foregoing,
for the period commencing at the Effective
Time and ending on March 31, 1997, the
Executive shall be compensated under the
terms of the Prior Agreement; provided,
however, that if, as a result, the Executive
becomes entitled to receive in respect of
the fiscal quarter ending March 31, 1997,
gross amounts in excess of $50,000, the
amount of such excess shall be used as an
offset against the bonus amounts to which
the Executive may become entitled
pursuant to Section 6 hereof. For the
period of the Term commencing on April
1, 1997, the Executive's compensation
shall be determined solely under the terms
of this Agreement.
5. Vacation. The Executive
shall be entitled to four weeks' paid
vacation during each twelve (12) month
period of his employment hereunder, to be
taken at times mutually agreeable to the
Executive and the Company.
6. Bonus.
(a) Determination of
Bonus Pool. A Bonus Pool shall be
determined for the period commencing on
July 1, 1997 and ending on June 30, 2000
(the "Bonus Period").
(i) "Consolidated Net
After Tax Income" ("CNATI") shall
mean, with respect to any period, the
net after tax income of the Company
from operations currently conducted
by the Company (including for such
purpose the servicing and origination
of automobile loans or mortgages)
before extraordinary items as report-
ed on the audited financial statements
of the Company with respect to such
period, which amount shall be:
(A) increased to eliminate bonuses
paid or payable hereunder;
(B) reduced to eliminate any gain
accrued on sales in such fiscal year
with respect to securitization,
whether or not any such
securitization was effected in such
fiscal year; (C) increased or reduced
without duplication, to give effect to
net cash received or disbursed in
connection with securitizations; (D)
adjusted to eliminate any income
attributable to securitization of assets
by the Company prior to the
securitization designated as "97-1"
and (E) adjusted to provide for
applicable taxes (current and de-
ferred) on (A), (B), (C) and (D)
above.
(ii) An amount ("Total
Assets") shall be determined by
aggregating the total weighted
average of assets owned by the
Company during the Bonus Period,
whether such assets are owned by the
Company (including its subsidiaries)
or by a special purpose vehicle,
excluding for this purpose assets
owned by the Company prior to the
securitization designated as "97-1".
For purposes of this Agreement, a
"special purpose vehicle" shall be a
corporation or other entity created for
the purpose of effecting
securitizations in which the Company
has a retained interest or which have
recourse to the Company and which
are not otherwise reflected as
consolidated subsidiaries on the
Company's financial statements.
(iii) A percentage
("ROA") shall be determined by
dividing the CNATI for the Bonus
Period by Total Assets for the Bonus
Period and dividing the quotient
thereof by the number three (3).
(iv) The amount of the
Bonus Pool for the Bonus Period
shall be determined in accordance
with the following schedule:
(A) if ROA is less than
.5%, the Bonus Pool
shall be 0% of
CNATI;
(B) if ROA is at least
.5% but no greater
than .749%, the
Bonus Pool shall be
16% of CNATI in
excess of the amount
of CNATI that would
equal an ROA of
.5% (such amount of
CNATI equaling an
ROA of .5% being
hereinafter referred
to as "Base
CNATI");
(C) if ROA is at least
.75% but no greater
than .875%, the
Bonus Pool shall
equal (x) 5% of Base
CNATI plus (y) 16%
of CNATI in excess
of Base CNATI;
(D) if ROA is at least
.876% but no greater
than .99%, the
Bonus Pool shall
equal (x) 7.5% of
Base CNATI plus (y)
16% of CNATI in
excess of Base
CNATI;
(E) if ROA is at least
1.0% but no greater
than 1.249%, the
Bonus Pool shall
equal (x) 10% of
Base CNATI plus (y)
16% of CNATI in
excess of Base
CNATI;
(F) if ROA is at least
1.25% but no greater
than 1.499%, the
Bonus Pool shall
equal (x) 12.5% of
Base CNATI plus (y)
16% of CNATI in
excess of Base
CNATI; and
(G) if ROA is 1.5% or
more, the Bonus
Pool shall equal 16%
of CNATI.
(b) Allocation of Bonus
Pool. As soon as practicable, but no later
than sixty (60) days following the
certification of the Company's financial
statements in respect of the fiscal year of
the Company ending June 30, 2000, the
Bonus Pool shall be allocated by the then
most senior executive among Messrs.
Angelo Appierto, Joseph Battiato, Gary
Peiffer and Jorge Rios, in such
individual's sole discretion, between (i) the
Senior Executive Group, consisting of
Messrs. Angelo Appierto, Joseph Battiato,
Gary Peiffer and Jorge Rios, and (ii) the
Executive Group, consisting of the Chief
Financial Officer, any Executive Vice
President and such other employees of the
Company as the Chairman shall in his
discretion designate; provided, however,
that no less than 5% of the Bonus Pool
shall be allocated to the Executive Group.
Except as hereinbelow provided, one-
fourth (1/4) of that portion of the Bonus
Pool allocated to the Senior Executive
Group in accordance with the immediately
preceding sentence shall be allocated to
each of the members of the Senior Execu-
tive Group (such individual's allocation,
the "Bonus"), and that portion of the
Bonus Pool allocated to the Executive
Group in accordance with the immediately
preceding sentence shall be allocated
among the members of the Executive
Group as determined by the Chairman in
his sole discretion. If the employment of
the Executive is terminated by the
Company without Cause or by the Execu-
tive with Good Reason, he shall be entitled
to receive 100% of his Bonus at such time
as the Bonus otherwise becomes payable.
If the employment of the Executive is
terminated by the Company for Cause or
by the Executive without Good Reason (A)
during the first year of the Term, the
Executive's right to receive any portion of
the Bonus shall be forfeited or (B) during
the second year of the Term, he shall be
entitled to receive, at such time as the
Bonus otherwise becomes payable, an
amount equal to one-half (1/2) of the
Bonus otherwise attributable to him. In
the event that, prior to February 1, 1999,
the Company offers to the Executive an
extension of his employment for at least
one (1) year following the end of the Term
on terms substantially similar to those pro-
vided herein and the Executive does not
accept such offer, the Executive shall be
entitled to receive, at the time such Bonus
otherwise becomes payable, an amount
equal to two-thirds (2/3) of the Bonus
otherwise attributable to him. In the event
that, prior to February 1, 1999, the
Company does not offer to the Executive
an extension of his employment for at least
one (1) year following the end of the Term
on terms substantially similar to those pro-
vided herein, the Executive shall be
entitled to receive, at the time such Bonus
otherwise becomes payable, an amount
equal to five-sixths (5/6) of the Bonus
otherwise attributable to him. Any portion
of the Bonus not paid to the Executive by
operation of this Agreement shall be
allocated in such amounts and to such
employees as the Board of Directors may
in its discretion determine.
(c) Payment of Bonuses.
The bonus determined pursuant to this
Section 6 shall be paid to the Executive
not less than ten (10) business days
following the allocations described in
subparagraph (b) hereof; provided, howev-
er, that to the extent that the determination
of CNATI set forth in subparagraph (a)
hereof includes income accrued as a result
of securitizations effected during the Bonus
Period commencing with the securitization
designated by the Company as "1997-1,"
that portion of the Bonus Pool allocated to
such income will be paid only when and to
the extent that cash is released to the
Company from the reserve fund or funds
applicable to such securitizations. The
Company's obligation to pay the Executive
the Bonus accrued pursuant to this Section
6 shall survive the termination of this
Agreement.
7. Benefits.
(a) Throughout the
Term, the Executive shall be eligible to
participate in any pension, profit-sharing,
stock option or similar plan or program of
the Company now existing or established
hereafter for the benefit of its employees
generally, to the extent that he is eligible
under the general provisions thereof. The
Executive shall also be entitled to
participate in any group insurance,
hospitalization, medical, health and
accident, disability or similar or nonsimilar
plan or program of the Company now
existing or established hereafter for the
benefit of its employees or executives
generally, to the extent that he is eligible
under the general provisions thereof. To
the extent that it can be accomplished
without cost to the Company above that
payable in respect of other senior officers
of the Company, the benefits under such
plans and programs shall be at least
equivalent to the benefits available to the
Executive under plans and programs in
which he was participating on January 1,
1994. To the extent that the foregoing
plans and programs do not provide the
Executive with disability insurance
providing a maximum benefit level of at
least $10,000 per month, the Company
shall supplement such plans and programs
to provide such coverage.
(b) The Company shall
reimburse the Executive in a monthly
amount not to exceed $1,000 in respect of
the cost of leasing or purchasing an
automobile to be used by him in connec-
tion with the Company's business. In
addition, the Company shall be responsible
for all reasonable costs of operating,
repairing, maintaining and insuring such
automobile.
(c) The Company shall
provide the Executive with a policy of
term life insurance in an amount equal to
$1 million (or, in the Executive's discre-
tion, any other form or amount of life
insurance at an annual premium cost to the
Company not in excess of the annual
premium for such a policy providing $1
million of term life insurance), payable to
such beneficiary or such beneficiaries as
shall be designated in writing by the
Executive. Such policy shall be owned by
the Executive or any person or entity
designated by him. Any incremental
increase in the premium cost arising by
virtue of the Executive being uninsurable
at standard rates shall be paid by the
Executive.
(d) In the event that the
Executive shall die prior to the end of the
Term, then, as an additional death benefit,
the Company shall pay to the Executive's
beneficiary or beneficiaries, as the Execu-
tive shall have indicated in writing to the
Company (or, if no such beneficiary has
been designated, to the Executive's estate),
an amount equal to one-half (1/2) of the
Executive's annual salary in effect at the
time of the Executive's death, pursuant to
the terms of this Agreement. Such death
benefit shall be paid (i) in addition to any
sum otherwise required to be paid to such
beneficiary or to the Executive's estate by
the Company and (ii) in six (6) equal
consecutive monthly installments,
commencing on the first date following the
Executive's death that the Executive would
have otherwise received a salary payment
hereunder if the Executive had survived.
(e) In the event the
Company shall cause the Executive to
relocate to offices not within reasonable
commuting distance of his then current
residence, the Executive shall be entitled
to receive full reimbursement from the
Company for all customary expenses
incurred in connection with the
Executive's moving his residence to a
location within reasonable commuting
distance of such new office location. Such
expenses shall include but not be limited to
the costs of moving, packing and storing
the Executive's personal effects, real estate
brokerage fees and legal and other
incidental costs. In addition, provided that
the Executive is making a reasonably dili-
gent effort to sell his then current
residence at a price established in good
faith based upon then current market
conditions in the immediate vicinity,
pending the Executive's sale of his then
current residence the Company shall make
available to the Executive appropriate
living facilities maintained by the
Company in the vicinity of the new office
location and shall reimburse the cost of
traveling once a week between such
residence and office locations. The
Company shall further reimburse the
Executive upon sale of such residence for
the amount, if any, by which the net pro-
ceeds from such sale (after brokerage,
legal and other incidental closing costs) are
less than the costs to the Executive of such
residence, including any improvements
thereto. The Company shall further pay
the Executive an amount equal to the
federal, state and local income taxes due
(at the highest marginal brackets then in
effect) from the Executive with respect to
all amounts payable by the Company
pursuant to this subsection (e) to the extent
not deductible to the Executive under the
Internal Revenue Code of 1986, as
amended, and the regulations thereunder.
8. Termination of
Executive's Employment.
(a) Notwithstanding any
provisions contained herein to the
contrary, the Executive's employment may
be terminated by the Company upon the
Executive's death or disability (as defined
below) or for Cause (as defined below),
and the Executive may terminate his
employment for Good Reason (as defined
below);
(b) For purposes of this
Agreement, "disability" shall mean the
Executive is mentally or physically
disabled from properly and fully
performing his duties and responsibilities
hereunder for a period of 120 consecutive
days or for 180 days, even though not
consecutive, within any 360-day period, all
as evidenced by the written certification of
a qualified medical doctor agreed to by the
Company and the Executive or, in the
absence of such agreement, by a doctor
selected by the agreement of a qualified
medical doctor selected by each of the
Company and the Executive;
(c) For purposes of this
Agreement, "Cause" shall mean: (i) the
conviction of the Executive of a felony by
a federal or state court of competent
jurisdiction; (ii) the continued failure by
the Executive to substantially perform the
Executive's duties with the Company
(other than any such failure resulting from
the Executive's incapacity due to physical
or mental illness or any such actual or
anticipated failure after the issuance of a
notice of termination for Good Reason by
the Executive) after a written demand for
substantial performance is delivered to the
Executive by the Board, which demand
specifically identifies the manner in which
the Board believes that the Executive has
not substantially performed his duties,
(iii) the engaging by the Executive in
conduct which is demonstrably and
materially injurious to the Company or its
subsidiaries, monetarily or otherwise, or
(iv) the engaging by the Executive in an
actual act of dishonesty intended to result
in gain to the Executive at the expense of
the Company. In no event shall Cause be
deemed to include any action or inaction
on the part of the Executive undertaken in
good faith, consistent with his fiduciary
duties to the Company, which are within
the "business judgement rule" as such rule
or embodiment thereof has been
interpreted in accordance with the laws of
the applicable jurisdiction.
A notice of termination for
Cause shall include a copy of a resolution
duly adopted by the affirmative vote of a
majority of the entire membership of the
Board (not including the Executive) at a
meeting of the Board which was called and
held for the purpose of considering such
termination (after reasonable notice to the
Executive and an opportunity for the
Executive, together with the Executive's
counsel, to be heard before the Board)
finding that, in the good faith opinion of
the Board, the Executive was guilty of
conduct set forth in the immediately
preceding paragraph, and specifying the
particulars thereof in detail.
(d) For purposes of this
Agreement, "Good Reason" shall mean
any of the following: (i) the assignment to
the Executive of duties inconsistent with
the Executive's position, duties,
responsibilities, titles or offices as
described herein, (ii) any material
reduction by the Company of the
Executive's duties or responsibilities, (iii)
any reduction by the Company of the
Executive's compensation as set forth in
Paragraphs 4, 5, 6 or 7 hereof (it being
understood that a reduction of benefits
applicable to all executives of the Compa-
ny (including the Executive) shall not be
deemed a reduction of the Executive's
compensation package for purposes of this
definition) or (iv) requiring the Executive
to be based without his consent at a
location not within reasonable commuting
distance of his then current residence.
(e) In the event that the
Executive's employment hereunder is
terminated as a result of death, disability
or by the Company for Cause, or by the
Executive without Good Reason, or in the
event that this Agreement is not renewed
or extended at the end of the Term, then
the Company shall have no further obliga-
tions or liabilities to the Executive
hereunder, such that all benefits and salary
(but not the Company's obligation to pay
the Executive's Bonus) provided for within
this Agreement (except for any death or
disability benefits that would otherwise
continue past the date of such termination)
shall terminate simultaneously with the
termination of the Executive's employment
except for benefits and salary earned and
accrued through the date of such termina-
tion. Nothing in this subsection (e) shall
supersede any rights of the Executive to
receive any amounts or benefits otherwise
due to him upon the occurrence of any of
the events described in the immediately
preceding sentence, whether such rights
are created by this Agreement or
otherwise.
(f) In the event that the
Executive's employment hereunder is
terminated by the Company other than for
Cause, death, disability, or because the
Agreement has not been renewed or
extended, or by the Executive for Good
Reason, the Company shall continue to
provide the Executive with the salary,
bonus and benefits enumerated in Para-
graphs 4, 6 and 7 hereof, respectively, at
the levels in effect immediately prior to
such termination (or, if applicable, the
occurrence of the event constituting Good
Reason), for the remainder of the Term
(such period, the "Severance Period"). In
addition, following the Severance Period,
the Executive shall continue to be entitled
to receive payment of the Bonus earned in
accordance with Section 6 hereof.
(g) If the Executive's
employment hereunder is terminated under
Section 8(f) hereof, the Executive shall be
required to mitigate damages; provided,
however, that the Executive shall not be
required to accept employment that
requires him to perform duties inconsistent
with those of a senior executive officer or
professional at a level for which he is
qualified by reason of experience and
education. Any salary, bonus and benefits
(to the extent provided at no additional
cost to the Executive) received by the
Executive during or with respect to the
Severance Period and attributable to
services rendered by the Executive to
persons or entities other than the Company
shall be applied to reduce the Company's
obligation to make payments and provide
benefits attributable to periods after such
termination.
9. Stock Options. (a)
Effective as of the date hereof, options to
purchase an aggregate of 130,000 shares
of common stock of the Company previ-
ously awarded under the Company's 1994
Stock Option Plan (as amended) (the "1994
Plan") shall be cancelled to the Company.
In consideration for such cancellation, the
Compensation Committee of the Board
shall, effective as of the date hereof, grant
to the Executive an option to purchase
133,607 Shares (as defined in the 1994
Plan) under the terms set forth in the 1994
Plan, except as provided below:
Option exercise price per share:
$2.50;
Term of Option: 10 years from
the date of grant; and
Termination of Employment: if
the Executive's employment
hereunder is terminated by the
Company other than for Cause
or by the Executive for Good
Reason (as such terms are
defined herein), the option shall
remain exercisable, to the extent
exercisable as of the effective
date of such termination, for a
period of the lesser of (1) 1
year following the effective date
of such termination and (2) the
original term of such option.
(b) In addition, effective
as of the date hereof, options to purchase
an aggregate of 50,000 shares of common
stock of the Company previously awarded
under the Company's 1996 Stock Option
Plan (as amended) (the "1996 Plan") shall
be cancelled to the Company. In consider-
ation for such cancellation, the Compensa-
tion Committee of the Board shall,
effective as of the date hereof, grant to the
Executive an option to purchase 51,393
Shares (as defined in the 1996 Plan) under
the terms set forth in the 1996 Plan,
except that provisions in respect of the
option exercise price, term and
exercisability of such option set forth
above in subsection (a) of this Section 9
shall also apply to the option granted
hereunder.
10. Covenants of the
Executive.
(a) The Executive
acknowledges that his employment by the
Company will throughout his employment
bring him into close contact with many
confidential affairs of the Company,
including information about costs, profits,
markets, sales, key personnel, pricing
policies, operational methods, and other
business affairs, methods and information,
including plans for future developments,
not readily available to the public. The
Executive further acknowledges that the
services to be performed under this
Agreement are of a special, unique,
unusual, extraordinary and intellectual
character, and that the Company currently
competes or intends to compete with other
organizations that are located in all of the
states of the United States. In recognition
of the foregoing, the Executive covenants
and agrees that:
(i) he will not knowingly
divulge any material confidential
matters of the Company which are
not otherwise in the public domain
and will not intentionally disclose
them to anyone outside of the
Company during his employment by
the Company hereunder, other than
in the proper performance of the
duties contemplated herein, or
following the expiration or termina-
tion for any reason of his employ-
ment with the Company;
(ii) he will deliver
promptly to the Company upon the
termination of his employment, or at
any other time the Company may so
request, at the Company's expense,
all memoranda, notes, records,
reports and other documents (and all
copies thereof) relating to the
businesses of the Company which he
obtained while employed by, or
otherwise serving or acting on behalf
of, the Company, or any of its sub-
sidiaries or affiliates, and which he
may then possess or have under his
control; and
(iii) for so long as the
Executive continues to receive salary
from the Company, whether under
the terms of this Agreement or
otherwise (including, but not limited
to, the duration of the Severance
Period), the Executive will not,
unless the Board shall otherwise con-
sent, alone or together with any other
person, firm, partnership, corporation
or other entity whatsoever (except
any subsidiaries or affiliates of the
Company), directly or indirectly,
whether as an officer, director,
stockholder, partner, proprietor,
associate, employee, representative,
public relations or advertising repre-
sentative, management consultant or
otherwise:
(A)(A) engage in or
(B) become or be
interested in or
associated with any
other person, corpo-
ration, firm, partner-
ship or other entity
whatsoever engaged
in
any business which is competitive
with any business conducted or
contemplated by the Company (a
"Similar Business").
(b) Notwithstanding the
provisions of subsection (a)(iii) of this
Paragraph 10, the Executive may own, as
an inactive investor, securities of a corpo-
ration engaged in a competitive line of
business whose equity securities are
registered under Section 12(b) or 12(g) of
the Exchange Act, so long as his beneficial
ownership in any one such corporation
shall not in the aggregate constitute more
than five percent (5%) of any class of
equity securities of such corporation.
(c) As a separate and
independent covenant, the Executive
agrees that during the Term, including any
extensions or renewals therof, and for a
period of six months thereafter, the
Executive will not, without the consent of
the Company (which consent shall not be
unreasonably withheld) in any way,
directly or indirectly, for the purpose of
conducting or engaging in any Similar
Business, call upon, solicit, advise or
otherwise do, or attempt to do, business
with any clients, customers or accounts of
the Company (including for such purposes
any subsidiaries of the Company) with
whom the Exeuctive had any dealings
during the course of the Executive's
employment with the Company or any of
its affiliates or interfere or attempt to
interfere with any officers, employees,
representatives or agents of the Company,
or induce or attempt to induce any of them
to leave the employ of or violate the terms
of their contracts with the Company.
(d) The Executive agrees
that the remedy at law for any breach or
threatened breach of any covenant
contained in this Paragraph 10 will be
inadequate and that the Company, in
addition to such other remedies as may be
available to it, at law or in equity, shall be
entitled to injunctive relief without bond or
other security.
11. Governing Law. This
Agreement shall be construed in accor-
dance with and governed by the laws of
the State of New York applicable to
contracts executed in and to be performed
solely within such state.
12. Notices. All notices
required or permitted to be given by either
party hereunder, including notice of
change of address, shall be in writing and
delivered by hand, or mailed, postage
prepaid, certified or registered mail, return
receipt requested, to the other party as
follows:
If to the Company: The Aegis Consumer Funding
Group, Inc.
525 Washington Blvd.
Jersey City, New Jersey 07310
Attention: Angelo Appierto
Chairman of the Board
If to the Executive: Jorge Rios
4 Terrier Court
Tinton Falls, New Jersey 07753
13. Miscellaneous.
(a) Entire Agreement. This
Agreement constitutes the entire agreement among
the parties with respect to the subject matter hereof
and supersedes any and all prior oral or written
agreements and understandings; however, this
Agreement shall not supersede, diminish or modify
any rights of the Executive under any employee
benefit plans of the Company. There are no oral
promises, conditions, representations, under-
standings, interpretations or terms of any kind as
conditions or inducements to the execution hereof or
in effect among the parties. This Agreement may
not be amended, and no provision hereof shall be
waived, except by a writing signed by the Company
and the Executive, or in the case of a waiver, by the
party waiving compliance therewith, which states
that it is intended to amend or waive a provision of
this Agreement. Any waiver of any rights or failure
to act in a specific instance shall relate only to such
instance and shall not be construed as an agreement
to waive any rights or failure to act in any other
instance, whether or not similar.
(b) Further Acts. The parties
hereto agree that, after the execution of this
Agreement, they will make, do, execute or cause to
be made, done or executed all such further and other
lawful acts, deeds, things, devices, conveyances and
assurances in law whatsoever as may be required to
carry out the true intention and to give full force and
effect to this Agreement.
(c) Severability. Should any
provision of this Agreement be held by a court of
competent jurisdiction to be unenforceable or
prohibited by an applicable law, this Agreement shall
be considered divisible as to such provision, which
shall be inoperative, and the remainder of this
Agreement shall be valid and binding as though such
provision were not included herein.
(d) Successors and Assigns. This
Agreement shall inure to the benefit of, and be
binding upon, the Company and any corporation
with which the Company merges or consolidates or
to which the Company sells all or substantially all of
its assets, and upon the Executive and his executors,
administrators, heirs and legal representatives.
(e) Headings. All headings in this
Agreement are for convenience only and are not
intended to affect the meaning of any provision
hereof.
(f) Counterparts. This Agreement
may be executed in two or more counterparts with
the same effect as if the signatures to all such
counterparts were upon the same instrument, and all
such counterparts shall constitute but one instrument.
(g) Costs of the Agreement. The
Company agrees to reimburse the Executive for all
of the costs of negotiating and drafting this
Agreement, including the reasonable fees and
expenses of the Executive's attorneys, such reim-
bursement to be paid whether or not this Agreement
becomes effective.
<PAGE>
IN WITNESS WHEREOF, the Executive
has executed this Agreement and the Company has
caused this Agreement to be executed by its duly
authorized officer as of the day and year first above
written.
THE AEGIS CONSUMER FUNDING
GROUP,INC.
By:
Name:
Title:
Jorge Rios
EXECUTION COPY
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of June 23, 1997
to
CREDIT AGREEMENT
Dated as of May 17, 1996
AMONG
THE AEGIS CONSUMER FUNDING GROUP,
INC.,
as Borrower,
AEGIS CONSUMER FINANCE, INC.,
as Guarantor,
AEGIS AUTO FINANCE, INC.,
as Guarantor
AND
GREENWICH CAPITAL FINANCIAL
PRODUCTS, INC.,
as Lender
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS;
CONSTRUCTION. . . . . . . . . . . . . . . 1
Section 1.01. Definitions. . . . . . . . 1
Section 1.02. Accounting Terms and
Determinations . . . . . . . . . . . 7
Section 1.03. Other Definitional
Terms. . . . . . . . . . . . . . . 7
ARTICLE II. AMOUNT AND TERMS
OF THE LOAN . . . . . . . . . . . . . . . 7
Section 2.01. The Loan . . . . . . . . . 7
Section 2.02. The Note . . . . . . . . . 7
ARTICLE III. INTEREST, PAYMENTS,
ETC.. . . . . . . . . . . . . . . . . . . 8
Section 3.01. Interest on the Loan . . . 8
Section 3.02. Optional Prepaymen . . . 8
Section 3.03. Mandatory
Repayments and Prepayments
. . . . . . . . . . . . . . . . . . 8
Section 3.04. Funds; Manner of
Payment. . . . . . . . . . . . . . . 8
Section 3.05. Default Interest . . . . . 9
Section 3.06. Requirements of Law. . . . 9
Section 3.07. Application of
Payments, etc. . . . . . . . . . . . 10
ARTICLE IV. CONDITIONS TO
AMENDMENT AND
RESTATEMENT . . . . . . . . . . . . . . . 10
Section 4.01. Conditions Precedent
to Amendment and
Restatement. . . . . . . . . . . . . 10
ARTICLE V. REPRESENTATIONS AND
WARRANTIES. . . . . . . . . . . . . . . 12
Section 5.01. Existence; Conduct of
Business . . . . . . . . . . . . . . 12
Section 5.02. Corporate Power and
Authority. . . . . . . . . . . . . . 13
Section 5.03. No Violation . . . . . . . 13
Section 5.04. Approvals,
Authorizations, Consents,
etc. . . . . . . . . . . . . . . . . 13
Section 5.05. No Litigation. . . . . . . 13
Section 5.06. Tax Liability. . . . . . . 13
Section 5.07. Regulation G . . . . . . . 14
Section 5.08. Permits, Licenses,
Approvals, Consents,
Compliance with
Requirements of Law, etc.. . . . . . 14
Section 5.09. Financial Statements;
Material Adverse Change. . . . . . 14
Section 5.10. The Investment
Company Act, Etc.. . . . . . . . . . 14
Section 5.11. The Security
Agreements.. . . . . . . . . . . . . 14
Section 5.12. Ownership of
Properties; Insurance. . . . . . . . 14
Section 5.13. Ownership of the
Guarantors . . . . . . . . . . . . 14
Section 5.14. Full Disclosure. . . . . . 14
Section 5.15. Intellectual Property. . . 15
Section 5.16. ERISA. . . . . . . . . . 15
Section 5.17. Subsidiaries.. . . . . . . 15
Section 5.18. III Finance
Documents; the Subordinated
Note Documents.. . . . . . . . . . 15
Section 5.19. Original Credit
Agreement Obligations. . . . . . . . 15
ARTICLE VI. AFFIRMATIVE
COVENANTS . . . . . . . . . . . . . . . . 16
Section 6.01. Financial Statements
and Other Information. . . . . . . . 16
Section 6.02. Compliance with
Laws, etc. . . . . . . . . . . . . . 17
Section 6.03. Preservation of
Corporate Existence; Conduct
of Business. . . . . . . . . . . . 17
Section 6.04. Payment of Taxes and
Claims, etc. . . . . . . . . . . . . 17
Section 6.05. Keeping of Books,
Visitation, Inspection, etc. . . . . 17
Section 6.06. Pay Obligations. . . . . 18
Section 6.07. Notice of Default, etc.. . 18
Section 6.08. Notice of Material
Adverse Change . . . . . . . . . . 18
Section 6.09. Further Assurances . . . . 18
Section 6.10. Insurance. . . . . . . . . 18
Section 6.11. III Finance
Documents; Subordinated
Note Documents, Etc. . . . . . . . . 19
ARTICLE VII. NEGATIVE
COVENANTS . . . . . . . . . . . . . . . . 19
Section 7.01. Indebtedness; Liens;
Sales of Assets. . . . . . . . . . . 19
Section 7.02. Merger;
Consolidation, Etc.. . . . . . . . . 20
Section 7.03. Net Worth of the
Borrower . . . . . . . . . . . . . . 20
Section 7.04. Dividends, etc.. . . . . . 20
Section 7.05. Transactions with
Affiliates . . . . . . . . . . . . 20
ARTICLE VIII. EVENTS OF DEFAULT . . . . . . . 20
Section 8.01. Events of Default. . . . 20
ARTICLE IX. GUARANTEE . . . . . . . . . . 23
Section 9.01. Guarantee. . . . . . . . . 23
Section 9.02. No Subrogation . . . . . . 24
Section 9.03. Amendments, etc.
with respect to the
Obligations; Waiver of Rights
. . . . . . . . . . . . . . . . . 24
Section 9.04. Guarantee Absolute
and Unconditional. . . . . . . . . 25
Section 9.05. Reinstatement. . . . . . . 25
Section 9.06. Payments . . . . . . . . 26
ARTICLE X. MISCELLANEOUS. . . . . . . . . . . 26
Section 10.01. Notices . . . . . . . . 26
Section 10.02. Amendments,
Waivers, etc.. . . . . . . . . . . . 27
Section 10.03. No Waiver;
Remedies Cumulative. . . . . . . . . 27
Section 10.04. Payment of
Expenses, Indemnity, etc.. . . . . . 27
Section 10.05. Benefits of
Agreement. . . . . . . . . . . . . . 28
Section 10.06. Right of Setoff . . . . 29
Section 10.07. Survival of
Agreement. . . . . . . . . . . . . . 29
Section 10.08. GOVERNING
LAW. . . . . . . . . . . . . . . . . 29
Section 10.09. Counterparts. . . . . . 29
Section 10.10. Headings
Descriptive. . . . . . . . . . . . . 30
Section 10.11. Severability. . . . . . 30
Section 10.12. Entire Agreement. . . . 30
Section 10.13. Submission to
Jurisdiction; Venue. . . . . . . . . 30
Section 10.14. Confirmation of
Security Interests, Etc. . . . . . . 30
Section 10.15. WAIVER OF
JURY TRIAL . . . . . . . . . . . . . 31
EXHIBITS
EXHIBIT A FORM OF NOTE
EXHIBIT B FORM OF OPINION OF COUNSEL
TO THE BORROWER AND THE
GUARANTORS
EXHIBIT C FORM OF INTERCREDITOR
AGREEMENT
SCHEDULES
SCHEDULE I III FINANCE
DOCUMENTS
SCHEDULE II INSURANCE
SCHEDULE III PLANS
SCHEDULE IV SUBSIDIARIES
SCHEDULE V PERMITTED EXISTING
LIENS
ANNEXES
ANNEX A III Finance Amended and
Restated Master Loan Agreement<PAGE>
AMENDED AND RESTATED CREDIT
AGREEMENT, dated as of June 23, 1997, to
Credit Agreement dated as of May 17, 1996,
between THE AEGIS CONSUMER FUNDING
GROUP, INC., a Delaware corporation (the
"Borrower), AEGIS CONSUMER FINANCE,
INC., a Delaware corporation ("Aegis Consumer
Finance"), AEGIS AUTO FINANCE, INC., a
Delaware corporation ("Aegis Auto Finance") and
GREENWICH CAPITAL FINANCIAL
PRODUCTS, INC., a Delaware corporation (the
"Lender").
W I T N E S S E T H:
WHEREAS, the Borrower, the Guarantors
and the Lender are parties to that certain Credit
Agreement, dated as of May 17, 1996 (the
"Original Credit Agreement"); and
WHEREAS, the Borrower is indebted to the
Lender under the Original Credit Agreement in the
principal amount of $5,000,000, together with all
accrued and unpaid interest due and owing thereon
to but excluding the Restatement Date (as defined
below); and all accrued and unpaid fees and
expenses of the Lender due and owing under the
Original Credit Agreement to but excluding the
Restatement Date (collectively, the "Original Credit
Agreement Obligations"); and
WHEREAS, the Borrower has requested that
the Lender amend and restate the Original Credit
Agreement, and the Lender is willing to so amend
and restate the Original Credit Agreement upon the
terms and conditions set forth herein;
NOW THEREFORE, in consideration of the
premises and for other good and valuable
consideration, the receipt of which is hereby
acknowledged, the parties hereto agree the Original
Credit Agreement is hereby amended and restated
in its entirety as follows:
ARTICLE I. DEFINITIONS;
CONSTRUCTION
Section 1.01. Definitions. As used herein
and in the Schedules and the Exhibits hereto, the
following terms shall have the meanings herein
specified (to be equally applicable to both the
singular and plural forms of the terms defined):
"Aegis Auto Finance" shall have the
meaning set forth in the preamble hereof.
"Aegis Auto Finance Security Agreement"
shall mean the security and pledge agreement, dated
as of May 17, 1996, made by Aegis Auto Finance
in favor of the Lender substantially in the form of
Exhibit C-1 to the Original Credit Agreement, as
the same may be amended, supplemented or
otherwise modified from time to time.
"Aegis Consumer Finance" shall have the
meaning set forth in the preamble hereof.
"Aegis Consumer Finance Security
Agreement" shall mean the security and pledge
agreement, dated as of May 17, 1996, made by
Aegis Consumer Finance in favor of the Lender
substantially in the form of Exhibit C-2 to the
Original Credit Agreement, as the same may be
amended, supplemented or otherwise modified from
time to time.
"Affiliate" shall mean, with respect to any
Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is
under common control with, such Person. For
purposes of this definition, control of a Person shall
mean the power, direct or indirect, (i) to vote 5%
or more of the securities having ordinary voting
power for the election of directors of such Person
or (ii) to direct or cause the direction of the
management and policies of such Person whether by
contract or otherwise.
"Agreement" shall mean this Amended and
Restated Credit Agreement, as amended,
supplemented or otherwise modified from time to
time in accordance with the terms hereof.
"Board" shall mean the Board of Governors
of the Federal Reserve System.
"Borrower" shall have the meaning set forth
in the preamble hereof.
"Business Day" shall mean any day of the
year other than a Saturday, Sunday or other day on
which the New York Stock Exchange, Inc. is closed
or commercial banks in The City of New York are
authorized or required by law or executive order to
close.
"Capital Stock" shall mean any and all
shares, interests, participations or other equivalents
(however designated) of capital stock of a
corporation, any and all equivalent ownership
interests in a Person (other than a corporation) and
any and all warrants or options to purchase any of
the foregoing.
"Change in Control" shall have the meaning
set forth in the Indenture as in effect on the date
hereof.
"Code" shall mean the Internal Revenue
Code of 1986, as amended from time to time.
"Collateral" shall mean the collective
reference to the "collateral" as defined in each of
the Security Agreements.
"Commonly Controlled Entity" shall mean,
as to any Person, an entity whether or not
incorporated, which is under common control with
such Person within the meaning of Section 4001 of
ERISA or is part of a group which includes such
Person and which is treated as a single employer
under Section 414 of the Code.
"Default" shall mean any condition, act or
event which, with notice or lapse of time or both,
would constitute an Event of Default.
"Dollar" and the sign "$" shall mean lawful
money of the United States of America.
"ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as
amended.
"Event of Default" shall have the meaning
set forth in Section 8.01 hereof.
"Existing Loans" shall have the meaning set
forth in Section 2.01 hereof.
"GAAP" shall mean generally accepted
accounting principles as in effect in the United
States consistently applied.
"Governmental Authority" shall mean any
nation, government, or State, or any political
subdivision thereof, or any court, stock exchange,
entity or agency exercising executive, legislative,
judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantee" shall mean, as to any Person
(the "guaranteeing person"), any obligation of the
guaranteeing person guaranteeing or in effect
guaranteeing any Indebtedness, leases, dividends or
other obligations (the "primary obligations") of any
other third Person (the "primary obligor") in any
manner, whether directly or indirectly, including,
without limitation, any obligation of the
guaranteeing person, whether or not contingent, (i)
to purchase any such primary obligation or any
property constituting direct or indirect security
therefor, (ii) to advance or supply funds (1) for the
purchase or payment of any such primary obligation
or (2) to maintain working capital or equity capital
of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (iii)
to purchase property, securities or services
primarily for the purpose of assuring the owner of
any such primary obligation of the ability of the
primary obligor to make payment of such primary
obligation or (iv) otherwise to assure or hold
harmless the owner of any such primary obligation
against loss in respect thereof; provided, however,
that the term Guarantee shall not include the
endorsements of instruments for deposit or
collection in the ordinary course of business. The
amount of any Guarantee of any guaranteeing
person shall be deemed to be the lower of (a) an
amount equal to the stated or determinable amount
of the primary obligation in respect of which such
Guarantee is made and (b) the maximum amount for
which such guaranteeing person may be liable
pursuant to the terms of the instrument embodying
such Guarantee, unless such primary obligation and
the maximum amount for which such guaranteeing
person may be liable are not stated or determinable,
in which case the amount of such Guarantee shall
be such guaranteeing person's maximum reasonably
anticipated liability in respect thereof as determined
by the guaranteeing person in good faith.
"III Finance" shall mean III Finance Ltd., a
Cayman Islands corporation.
"III Finance Amended and Restated Master
Loan Agreement" shall mean the Amended and
Restated Master Loan Agreement among Aegis
Auto Finance, Aegis Consumer Finance and III
Finance, a copy of which is attached hereto as
Annex I.
"III Loan Agreements" shall have the
meaning set forth in the Intercreditor Agreement.
"III Finance Documents" shall have the
meaning set forth in the Intercreditor Agreement.
"III Finance Obligations" shall have the
meaning set forth in the Intercreditor Agreement.
"Guarantors" shall mean the collective
reference to Aegis Consumer Finance and Aegis
Auto Finance.
"Indebtedness" shall mean with respect to
any Person, without duplication, (a) all obligations
of such Person for borrowed money, (b) all
obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (c)
all obligations of such Person to pay the deferred
purchase price of property or services (excluding
trade payables payable within 30 days of delivery of
goods or services), (d) all obligations of such
Person as lessee under leases which shall have been
or should be, in accordance with GAAP, recorded
as capital lease, (e) all indebtedness of others
secured by (or for which the holder of such
Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property
owned or acquired by such Person, whether or not
the obligations secured thereby have been assumed
(only to the extent of the fair market value of such
asset if such Indebtedness has not been assumed by
such Person), (f) all Guarantees of such Person, and
(h) all obligations of such Person as an account
party in respect of letters of credit and other similar
instruments issued for the account of such Person.
"Indenture" shall mean the Indenture dated
as of April 30, 1997 between Aegis Auto Finance,
as Issuer, and Norwest Bank Minnesota, National
Association, as Trustee, relating to the issuance of
$21,333,333 12% Exchangeable Subordinated Notes
due April 30, 2004.
"Indenture Trustee" shall mean Norwest
Bank Minnesota, National Association.
"Intellectual Property" shall have the
meaning set forth in Section 5.15 hereof.
"Intercreditor Agreement" shall mean the
amended and restated intercreditor agreement, dated
as of the Restatement Date, among III Finance, the
Indenture Trustee and the Lender, in substantially
the form of Exhibit C hereto as the same may be
amended, supplemented or otherwise modified from
time to time.
"Lender" shall have the meaning set forth in
the preamble hereof.
"Lien" shall mean any interest in property
securing an obligation owed to, or a claim by, a
Person other than the owner of such property,
whether such interest is based on the common law,
statute or contract, and including, but not limited
to, the security interest, security title or lien arising
from a security agreement, mortgage, deed of trust,
deed to secure debt, encumbrance or pledge for
security purposes.
"Loan" shall have the meaning specified in
Section 2.01 hereof.
"Loan Parties" shall mean the collective
reference to the Borrower and the Guarantors
"Loan Documents" shall mean and include
this Agreement, the Note, the Security Agreements
and all other documents and instruments executed
and delivered in connection herewith or therewith.
"Margin Stock" shall have the meaning set
forth in Regulation G of the Board.
"Material Adverse Change" shall mean a
material adverse change in, or the disclosure or
discovery of any information not previously
disclosed to the Lender which the Lender
reasonably deems material and adverse relating to,
the business, operations, properties, condition
(financial or otherwise) or prospects of any Loan
Party, individually, or of such Loan Party and its
operating Subsidiaries, taken as a whole.
"Material Adverse Effect" shall mean a
material adverse effect on (a) the business,
operations, properties, condition (financial or
otherwise) or prospects of any Loan Party,
individually, or of such Loan Party and its
operating Subsidiaries, taken as a whole, or (b) the
validity or enforceability of this or any of the other
Loan Documents or the rights or remedies of the
Lender hereunder or thereunder, or (c) the ability of
any Loan Party to perform its obligations under any
Loan Document to which it is a party.
"Maturity Date" shall mean April 30, 2001,
or such earlier date if the Loan is sooner
accelerated in accordance with the terms hereof.
"Multiemployer Plan" shall mean a Plan
which is a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"Note" shall have the meaning specified in
Section 2.02 hereof.
"Notice of Borrowing" shall have the
meaning set forth in Section 2.03 hereof.
"Obligations" shall mean (i) the unpaid
principal of and premiums, if any, and interest
(including interest accruing at the then applicable
rate provided in this Agreement after the maturity
of the Loan and interest accruing at the then
applicable rate provided in this Agreement after the
filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or
like proceedings, relating to the Borrower whether
or not a claim for post-filing or post-petition interest
is allowed in such proceeding) on the Loan, when
and as due, whether at maturity, by acceleration,
upon one or more dates set for prepayment or
otherwise and (ii) all other obligations and liabilities
of every nature of the Borrower from time to time
owing to the Lender, in each case whether direct or
indirect, absolute or contingent, due or to become
due, or now existing or hereafter incurred
(including monetary obligations incurred during the
pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless
of whether allowed or allowable in such
proceeding), which may arise under, out of, or in
connection with, this Agreement or any other Loan
Document or under any other document made,
delivered or given in connection with any of the
foregoing, in each case whether on account of
principal, premium, if any, interest, fees,
indemnities, costs, expenses or otherwise (including
all fees and disbursements of counsel to the Lender)
that are required to be paid by the Borrower
pursuant to the terms of this Agreement or any
other Loan Document.
"Original Credit Agreement" shall have the
meaning set forth in the recitals hereof.
"Original Credit Agreement Obligations"
shall have the meaning set forth in the recitals
hereof.
"Permitted Existing Liens" shall mean the
Liens set forth on Schedule V hereto.
"Permitted Liens" shall the meaning set forth
in the Indenture as in effect on the date hereof.
"Person" shall mean any individual,
partnership, firm, corporation, association, joint
venture, trust, limited liability company or other
entity.
"PBGC" shall mean the Pension Benefit
Guaranty Corporation established pursuant to
Subtitle A of Title IV of ERISA.
"Plan" shall mean, at a particular time, any
employee benefit plan which is covered by ERISA
and in respect of which the Borrower or a
Commonly Controlled Entity is (or, if such plan
were terminated at such time, would under
Section 4069 of ERISA be deemed to be) an
"employer" as defined in Section 3(5) of ERISA.
"Regulation G" shall mean Regulation G
promulgated by the Board.
"Reportable Event" shall mean any of the
events set forth in Section 4043(b) of ERISA.
"Requirement of Law" shall mean, as to any
Person, any law, statute, rule, treaty, regulation, or
determination of an arbitrator, court or other
Governmental Authority, in each case applicable to
or binding upon such Person or any of its properties
or to which any such Person or any of its properties
may be bound or affected.
"Responsible Officer" shall mean any of the
President, the chief executive officer and chief
financial officer of any Loan Party.
"Restatement Date" shall mean the date that
all of the conditions precedent set forth in Section
4.01 hereof have been fulfilled.
"Security Agreements" shall mean the
collective reference to the Aegis Auto Finance
Security Agreement and the Aegis Consumer
Finance Security Agreement.
"Subordinated Notes" shall mean the
$21,333,333 12% Exchangeable Subordinated Notes
due April 30, 2004 issued by Aegis Auto Finance
under the Indenture.
"Subordinated Notes Documents" shall mean
the Indenture, the Subordinated Notes, the Parent
Guaranty (as defined in the Indenture) and each
other document, instrument or certificate issued in
connection with the Subordinated Notes.
"Subsidiary" shall mean, as to any Person,
a corporation, partnership of other entity of which
shares of stock or other ownership interests having
ordinary voting power (other than stock or such
other ownership interests having such power only
by reason of the happening of a contingency) to
elect a majority of the board of directors or other
managers of such corporation, partnership or other
entity are at the time owned, or the management of
which is otherwise controlled, directly or indirectly
through one or more intermediaries, or both, by
such Person.
Section 1.02. Accounting Terms and
Determinations. Unless otherwise defined or
specified herein, all accounting terms shall be
construed herein, all accounting determinations
hereunder shall be made, all financial statements
required to be delivered hereunder shall be prepared
and all financial records shall be maintained in
accordance with GAAP.
Section 1.03. Other Definitional Terms.
The words "hereof", "herein" and "hereunder" and
words of similar import when used in this
Agreement shall refer to this Agreement as a whole
and not to any particular provision of this
Agreement, and article, section, schedule, exhibit
and like references are to this Agreement unless
otherwise specified.
Defined terms used in Sections 7.01, 7.02
and 7.03 hereof which are not otherwise defined
herein shall have the meanings set forth in the III
Finance Amended and Restated Master Loan
Agreement.
Unless otherwise provided herein, any
defined term which relates to a document shall
include within its definition any amendments,
modifications, renewals, restatements, extensions,
supplements or substitutions which may have been
heretofore or may be hereafter executed in
accordance with the terms thereof.
ARTICLE II. AMOUNT AND TERMS OF
THE LOAN
Section 2.01. The Loan. The Lender has
made loans to the Borrower under the Original
Credit Agreement in a principal amount equal to
$5,000,000 (the "Existing Loans"). FOUR
MILLION DOLLARS ($4,000,000) of the Existing
Loans (the "Loan") will continue under this
Agreement. No portion of the Loan paid or prepaid
hereunder may be reborrowed.
Section 2.02. The Note. (a) The Loan
shall be evidenced by a promissory note
substantially in the form of Exhibit A hereto, duly
executed by the Borrower, dated the Restatement
Date, payable to the order of the Lender in the
principal amount equal to $4,000,000 (the "Note").
The Lender is hereby authorized to record the dates
and amounts of all payments and prepayments of
the principal of the Loan on the Schedule (and each
continuation thereof) attached to and constituting
part of the Note. Such recordation shall be
conclusive in the absence of manifest error;
provided that the failure of the Lender to make any
such recordation or any error in such recordation
shall not affect the obligations of the Borrower
hereunder and under the Note.
(b) The outstanding principal amount of
the Loan shall be payable as set forth in Article III
hereof. The Borrower shall pay interest on the
outstanding principal amount of the Loan from the
date hereof until the principal amount thereof is
paid in full at the rates and pursuant to the terms set
forth in Article III hereof.
ARTICLE III. INTEREST, PAYMENTS,
ETC.
Section 3.01. Interest on the Loan. (a)
Except as otherwise provided herein, the Loan shall
bear interest on the outstanding principal amount
thereof, for each day from the date hereof until the
principal amount thereof shall be paid in full, at a
rate per annum equal to twelve percent (12%),
(calculated on the basis of the actual number of
days elapsed in a year of 360 days).
(b) Except as otherwise provided herein,
all accrued and unpaid interest on the Loan shall be
payable monthly in arrears on the first day of each
calendar month during the term hereof commencing
on the first such day to occur after the Restatement
Date and on the Maturity Date.
(c) If, by the terms of this Agreement or the
Note, the Borrower at any time is required or
obligated to pay interest at a rate in excess of the
maximum rate permitted by applicable law, the rate
of interest shall be deemed to be immediately
reduced to such maximum rate and the portion of
all prior interest payments in excess of such
maximum rate shall be applied and shall be deemed
to have been payments made in reduction of the
outstanding principal amount of the Loan.
Section 3.02. Optional Prepayments. The
Borrower may prepay the Loan on any Business
Day, in whole or in part, without premium or
penalty, on two (2) Business Day's prior written
notice to the Lender. Any such prepayment shall
be accompanied by payment of all accrued and
unpaid interest due and owing to the date of such
prepayment on the principal amount of the Loan so
prepaid. No amount prepaid may be reborrowed.
Section 3.03. Mandatory Repayments and
Prepayments. (a) On the Maturity Date the
Borrower promises to pay to the Lender the
outstanding principal amount of the Loan in full,
together with all accrued and unpaid interest due
and owing hereunder.
(b) After the occurrence of the
"Triggering Event" (as defined in the Intercreditor
Agreement), the Borrower shall, no later than
fifteen (15) days after the dates the annual and
quarterly financial statements referred to in Section
6.01(a) hereof are delivered or are required to be
delivered to the Lender hereunder or if earlier, are
issued by the Borrower, prepay the Loan by the
amount of the Lender's "Pro Rata Share" (as
defined in the Intercreditor Agreement) of
"Accumulated Cash Flow" (as defined in the
Indenture as in effect on the date hereof).
Section 3.04. Funds; Manner of Payment.
Each payment and each prepayment of principal of
and interest on the Loan, and each payment on
account of all other Obligations shall be paid by the
Borrower without set-off or counterclaim to the
Lender at its office located at 600 Steamboat Road,
Greenwich, Connecticut 06830 or to such other
location or account as the Lender may specify to the
Borrower from time to time, in Federal or other
immediately available funds in lawful money of the
United States of America, not later than 1:00 p.m.
(New York City time) on the date on which any
such payment or prepayment is payable. If any
payment hereunder or under the Note becomes due
and payable on a day other than a Business Day,
the maturity thereof shall be extended to the next
succeeding Business Day. If the date for any
payments or prepayments of principal is extended
by operation of law or otherwise, interest thereon
shall be payable at the then applicable rate during
such extension.
Section 3.05. Default Interest. If the
Borrower shall default in the payment of the
principal of or interest on the Loan or any other
Obligation, the Borrower shall on demand pay
interest on such overdue principal amount and, to
the extent permitted by applicable law, on such
overdue interest and any other overdue amount, for
each day at a rate per annum equal to fourteen
percent (14%) (calculated on the basis of the actual
number of days elapsed in a year of 360 days),
accruing from the date such payment was due until
such amount is paid in full (after as well as before
judgment).
Section 3.06. Requirements of Law. (a)
If any Requirement of Law or any change in the
interpretation or application thereof or compliance
by the Lender with any request or directive
(whether or not having the force of law) from any
central bank or other Governmental Authority made
subsequent to the date hereof:
(i) shall subject the
Lender to any tax of any kind whatsoever
with respect to this Agreement, the Note or
the Loan made by it (excluding net income
taxes) or change the basis of taxation of
payments to the Lender in respect thereof;
(ii) shall impose, modify
or hold applicable any reserve, special
deposit, compulsory loan or similar
requirement against assets held by, deposits
or other liabilities in or for the account of,
advances, loans or other extensions of credit
by, or any other acquisition of funds by, any
office of the Lender;
(iii) shall impose on the
Lender any other condition;
and the result of any of the foregoing is to increase
the cost to the Lender, by an amount which the
Lender deems to be material, of making, continuing
or maintaining the Loan or to reduce any amount
receivable hereunder in respect thereof, then, in any
such case, the Borrower shall promptly pay the
Lender such additional amount or amounts as will
compensate the Lender for such increased cost or
reduced amount receivable.
(b) If the Lender shall have determined
that the adoption of or any change in any
Requirement of Law regarding capital adequacy or
in the interpretation or application thereof or
compliance by the Lender or any corporation
controlling the Lender with any request or directive
regarding capital adequacy (whether or not having
the force of law) from any Governmental Authority
made subsequent to the date hereof shall have the
effect of reducing the rate of return on the Lender's
or such corporation's capital as a consequence of its
obligations hereunder to a level below that which
the Lender or such corporation (taking into
consideration the Lender's or such corporation's
policies with respect to capital adequacy) by an
amount deemed by the Lender to be material, then
from time to time, the Borrower shall promptly pay
to the Lender such additional amount or amounts as
will compensate the Lender for such reduction.
(c) If the Lender becomes entitled to
claim any additional amounts pursuant to this
subsection, it shall promptly notify the Borrower of
the event by reason of which it has become so
entitled. A certificate as to any additional amounts
payable pursuant to this subsection submitted by the
Lender to the Borrower shall be conclusive in the
absence of manifest error.
Section 3.07. Application of Payments,
etc. All payments made hereunder shall be applied
to the Obligations as follows: first to accrued and
unpaid interest due and owing, second to the
outstanding principal amount of the Loan, and third
to all other Obligations; provided that upon the
occurrence and during the continuance of a Default
or an Event of Default all monies received or
collected by the Lender hereunder or under any
other Loan Document shall be applied first to all
Obligations due under Section 10.04 hereof, second
to all accrued and unpaid interest due and owing,
third to the outstanding principal amount of the
Loan, and fourth to all other Obligations.
ARTICLE IV. CONDITIONS TO
AMENDMENT AND RESTATEMENT
Section 4.01. Conditions Precedent to
Amendment and Restatement. The obligation of
the Lender to enter into this Agreement is subject to
fulfillment of the following conditions precedent, on
or before the Restatement Date:
(a) Receipt of Documents. Receipt by the
Lender of the following documents, each dated as
of the Restatement Date, as applicable, in form and
substance satisfactory to the Lender and its counsel:
(i This Agreement, executed
and delivered on behalf of the Borrower;
(ii The Note, executed and
delivered on behalf of the Borrower;
(iii A copy of the resolutions of
the Borrower authorizing (A) the execution,
delivery and performance of the Loan
Documents to which it is a party by the
Borrower, and (B) the borrowings
contemplated hereunder, certified by the
Secretary or an Assistant Secretary of the
Borrower as of the Restatement Date, which
certificate shall state that the resolutions
thereby certified have not been amended,
modified, revoked or rescinded as of the
date of such certificate;
(iv A certificate of the Secretary
or an Assistant Secretary of the Borrower
certifying the names and the signatures of
the officers of the Borrower authorized to
sign the Loan Documents to which it is a
party to be delivered hereunder;
(v Copies of (A) the Certificate
of Incorporation of the Borrower and each
amendment thereto and (B) the By-Laws of
the Borrower and each amendment thereto,
certified by the Secretary or an Assistant
Secretary of the Borrower as being true,
complete and correct as of the Restatement
Date;
(vi Original certificates or other
evidence from the Secretary of State or
other appropriate authority of the State of
Delaware and the State of New Jersey,
evidencing the good standing of the
Borrower in the State of Delaware and the
State of New Jersey;
(vii A copy of the resolutions of
each Guarantor authorizing the execution,
delivery and performance of the Loan
Documents to which it is a party and the
granting of the security interest
contemplated under the Security Agreement
to which it is a party, certified by the
Secretary or an Assistant Secretary of such
Guarantor as of the Restatement Date, which
certificate shall state that the resolutions
thereby certified have not been amended,
modified, revoked or rescinded as of the
date of such certificate;
(viii A certificate of the Secretary
or an Assistant Secretary of each Guarantor
certifying the names and the signatures of
the officers of such Guarantor authorized to
sign the Loan Documents to which it is a
party to be delivered hereunder;
(ix Copies of (A) the Certificate
of Incorporation of each Guarantor and each
amendment thereto and (B) the By-Laws of
each Guarantor and each amendment
thereto, certified by the Secretary or an
Assistant Secretary of such Guarantor as
being true, complete and correct as of the
Restatement Date;
(x Original certificates or other
evidence from the Secretary of State or
other appropriate authority of the State of
Delaware and of the State of New Jersey,
evidencing the good standing of such
Guarantor in the State of Delaware and the
State of New Jersey;
(xi The Lender shall have
received copies of each III Finance
Document existing on the Restatement Date
as listed on Schedule I hereto and all
amendments thereto and all Subordinated
Note Documents (all in form and substance
satisfactory to the Lender and its counsel)
certified by the Secretary or an Assistant
Secretary of the Borrower as being true,
complete and correct as of the Restatement
Date;
(xii A certificate of a
Responsible Officer of each Loan Party
certifying that after giving effect to the
amendment and restatement hereof there is
no default under any credit agreement to
which such Loan Party is a party;
(xiii III Finance and the
Indenture Trustee shall have executed and
delivered the Intercreditor Agreement;
(xiv the Subordinated Notes shall
have been issued and the proceeds thereof
shall have been used to reduce the III
Finance Obligations to a principal amount
not greater than $___________.
(xv Opinion of counsel to the
Borrower and the Guarantors substantially in
the form of Exhibit B hereto;
(xvi) The additional
Acknowledgements under the Security
Agreements duly executed and delivered by
the appropriate party thereto;
(xvii Such other documents and
instruments as the Lender or its counsel
shall reasonably request.
(b) Representation and Warranties.
After giving effect to the amendment and
restatement hereof, each of the representations and
warranties made by or on behalf of each Loan Party
herein or in any other Loan Document shall be true
and correct in all respects on and as of the
Restatement Date.
(c) No Default or Event of Default.
After giving effect to the amendment and
restatement hereof, no Default or Event of Default
shall have occurred and be continuing on and as of
the Restatement Date.
(d) Fees. On the Restatement Date, the
Borrower shall have paid all fees and expenses
incurred by the Lender in connection herewith
including, without limitation, fees and expenses of
counsel to the Lender.
(e) No Violation. The making of the Loans
on such Borrowing Date will not violate any
Requirement of Law applicable to the Lender.
(f) Original Credit Agreement
Obligations. The Lenders shall have received
$1,000,000 on account of principal of the Original
Credit Agreement Obligations, together with all
accrued and unpaid interest due and owing on the
Existing Loans to but excluding the Restatement
Date and all other accrued and unpaid Original
Credit Agreement Obligations owing to the Lender
to but excluding the Restatement Date.
ARTICLE V. REPRESENTATIONS AND
WARRANTIES
In order to induce the Lender to enter into
this Agreement, each Loan Party hereby represents
and warrants to the Lender as follows:
Section 5.01. Existence; Conduct of
Business. Each Loan Party, and each of its
respective Subsidiaries, is a duly organized and
valid existing corporation in good standing under
the laws of the State of its incorporation and is duly
qualified to do business and in good standing in
each jurisdiction where the conduct of its business
or the ownership, lease or operation of its property
requires such qualification, except where the failure
to be so qualified could not have a Material
Adverse Effect. Each Loan Party and each of its
respective Subsidiaries has all requisite power and
authority to own and operate its property, to lease
its property it operates as lessee and to conduct and
transact the business in which it is engaged.
Section 5.02. Corporate Power and
Authority. Each Loan Party has all requisite
corporate power and authority to execute and
deliver the Loan Documents to which it is a party
and to carry out the terms and provisions thereof on
its part to be performed and each Loan Party has
taken or caused to be taken all necessary corporate
action to authorize the execution, delivery and
performance by such Loan Party of the Loan
Documents to which it is a party and in the case of
the Borrower, the Loan contemplated hereunder,
and in the case of the Guarantors the granting of the
security interest contemplated by the Security
Agreement to which it is a party. Each Loan
Document to which it is a party constitutes a legal,
valid and binding obligation of each Loan Party,
and is enforceable against such Loan Party in
accordance with its respective terms, except as the
enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of
creditors' rights generally, and by general equitable
principles regardless of whether enforcement is
sought in a proceeding in equity or at law.
Section 5.03. No Violation. Neither the
execution and delivery of the Loan Documents to
which it is a party nor the consummation of the
transactions contemplated thereby, nor compliance
with the provisions thereof will violate any
provision of the Certificate of Incorporation or
By-Laws of any Loan Party or will violate any
Requirement of Law or conflict with, or result in
the breach of, or constitute a default under, any
indenture, mortgage, deed of trust, agreement or
other instrument or contractual obligation to which
any Loan Party is a party or by which it or any of
its property may be bound or affected or result in
the creation or imposition of any Lien upon any
property of any Loan Party thereunder, except, as
contemplated by the Security Agreements.
Section 5.04. Approvals, Authorizations,
Consents, etc. All approvals, authorizations,
consents, orders or other actions or registrations
with or notices to any Person or Governmental
Authority required to be obtained, made or given by
any Loan Party in connection with the execution,
delivery and performance of the Loan Documents to
which it is a party and the consummation of the
transactions contemplated thereby have been duly
and properly obtained, made or given by such Loan
Party and are in full force and effect.
Section 5.05. No Litigation. There are no
pending or, to such Loan Party's knowledge,
threatened actions, suits or other proceedings by or
against any Loan Party or any of its respective
Subsidiaries before any court, arbitrator or other
Governmental Authority which challenge or affect
the legality, validity or enforceability of any Loan
Document or the transactions contemplated thereby
or which individually or in the aggregate could have
a Material Adverse Effect.
Section 5.06. Tax Liability. Each Loan
Party and each of its respective Subsidiaries has
filed or caused to be filed all tax returns (Federal,
State and local) (or requests for extension which are
routinely granted) which are required to be filed
and, except as otherwise permitted by Section 6.04
hereof, has paid all taxes including those which
have become due pursuant to such returns or
pursuant to any assessments made against it or any
of its properties, as the case may be, and all other
material taxes or other charges imposed on it or any
of its properties by any Governmental Authority;
and no tax Liens have been filed.
Section 5.07. Regulation G. No proceeds
of any Loan will be used, directly or indirectly, by
the Borrower for the purpose of purchasing or
carrying any Margin Stock or for the purpose of
reducing or retiring any Indebtedness which was
originally incurred to purchase or carry Margin
Stock or for any other purpose which might cause
the Loan to be a "purpose credit" within the
meaning of Regulation G of the Board.
Section 5.08. Permits, Licenses,
Approvals, Consents, Compliance with
Requirements of Law, etc. Each Loan Party and
each of its respective Subsidiaries has obtained any
and all permits, licenses, approvals and consents of
any Governmental Authority as may be required to
conduct or transact its business or own, lease or
operate its properties and is in material compliance
with all applicable Requirements of Law.
Section 5.09. Financial Statements;
Material Adverse Change. (a) All financial
statements of each Loan Party delivered to the
Lender fully and accurately present the financial
position of such Loan Party, as of the respective
dates thereof in accordance with GAAP.
(b) Since December 31, 1996, there has
been no Material Adverse Change.
Section 5.10. The Investment Company
Act, Etc.. No Loan Party is, or is directly or
indirectly, controlled by any Person which is, an
"investment company" within the meaning of the
Investment Company Act of 1940, as amended. No
Loan Party is subject to regulation under any
Requirement of Law (other than Regulation X of
the Board) which limits its ability to incur
Indebtedness.
Section 5.11. The Security Agreements.
Each of the representations and warranties of each
Guarantor contained in each Security Agreement is
true and correct.
Section 5.12. Ownership of Properties;
Insurance. (a) Each Loan Party has good and
marketable title to any and all of its respective
properties and assets free and clear of Liens, except
as contemplated by the Security Agreements and
Permitted Liens.
(b) Set forth on Schedule II hereto is a
true and accurate list of all insurance maintained by
each Loan Party. Each such policy is in full force
and effect and all premiums due and owing thereon
are current.
Section 5.13. Ownership of the
Guarantors. The Borrower owns beneficially and
of record all of the issued and outstanding Capital
Stock of Aegis Consumer Finance and Aegis
Consumer Finance owns beneficially and of record
all of the issued and outstanding shares of the
Capital Stock of Aegis Auto Finance in each case
free and clear of all Liens other than Liens in favor
of III Finance and the Indenture Trustee.
Section 5.14. Full Disclosure. No
representation or warranty made by or on behalf of
any Loan Party contained in any Loan Document
and no information (written or oral), certificate,
financial statement or report furnished or to be
furnished by or on behalf of any Loan Party
thereunder or in connection with the transactions
contemplated thereby, contains or will contain an
untrue statement of a material fact, or, omits or will
omit to state any material fact (including without
limitation, whether any Loan Party or any of its
respective Subsidiaries or any of their respective
officers or directors (past or present) is (or during
the last five (5) years has been) under civil or
criminal investigation by any Governmental
Authority or is under indictment by any
Governmental Authority) necessary to make the
statements herein or therein contained, in light of
the circumstances in which made, not misleading.
Section 5.15. Intellectual Property. Each
Loan Party and each of its respective Subsidiaries
owns, or is licensed to use, all trademarks, trade
names, copyrights, technology, know-how and
processes necessary for the conduct of its business
as currently conducted (the "Intellectual Property")
except for those the failure to own or license which
could not have a Material Adverse Effect. No
claim has been asserted and is pending by any
Person challenging or questioning the use of any
such Intellectual Property or the validity or
effectiveness of any such Intellectual Property, nor
does any Loan Party know of any valid basis for
any such claim. The use of such Intellectual
Property by each Loan Party or its respective
Subsidiaries does not infringe on the rights of any
Person, except for such claims and infringements
that, in the aggregate, could not have a Material
Adverse Effect.
Section 5.16. ERISA. Except as set forth
on Schedule III hereto, no Loan Party nor any of its
respective Subsidiaries maintains any Plans, and
each Loan Party agrees to notify the Lender in
advance of forming any Plans. No Loan Party nor
any Commonly Controlled Entity has any
obligations or liabilities with respect to any
employee pension benefit plans or Multiemployer
Plans, nor have any such Persons had any
obligations or liabilities with respect to any such
Plans during the five-year period prior to the date
this representation is made or deemed made. Each
Loan Party will give notice if at any time it or any
Commonly Controlled Entity has any obligations or
liabilities with respect to any employee pension
benefit plan or Multiemployer Plan. All Plans
maintained by any Loan Party or any Commonly
Controlled Entity are in substantial compliance with
all applicable laws (including ERISA). No Loan
Party is an employer under any Multiemployer
Plan.
Section 5.17. Subsidiaries. The Persons
listed on Schedule IV constitute all the principal
operating Subsidiaries of each Loan Party at the
date hereof. Schedule IV sets forth the name, type
of entity and jurisdiction of organization of each
such Subsidiary, the amount of authorized, and
issued and outstanding Capital Stock of each such
Subsidiary, and the holder or holders of such issued
and outstanding Capital Stock of each such
Subsidiary, in each case as of the date hereof.
Section 5.18. III Finance Documents; the
Subordinated Note Documents. Copies of each of
the III Loan Documents, Partnership Agreements,
if applicable, and Pooling and Servicing
Agreements and Subordinated Note Documents
delivered to the Lender are true, accurate and
complete and no "Default" or "Event of Default"
(as defined in each III Finance Documents or the
Indenture) has occurred and is continuing.
Section 5.19. Original Credit Agreement
Obligations. The Borrower hereby confirms to the
Lender that it is indebted to the Lender in the full
amount of the Original Credit Agreement
Obligations and each Loan Party hereby confirms to
the Lender that it has no counterclaims, defenses or
set-offs of any kind or nature with respect to any of
the Original Credit Agreement Obligations.
ARTICLE VI. AFFIRMATIVE COVENANTS
Until all of the Obligations have been paid
in full, the Commitment has been terminated and
this Agreement has been terminated:
Section 6.01. Financial Statements and
Other Information. Each Loan Party shall furnish
to the Lender:
(a) as soon as available, but in any event
within ninety (90) days after the end of each fiscal
year, sixty (60) days after the end of each fiscal
quarter and forty-five (45) days after the end of
each fiscal month of such Loan Party, occurring
during the term of this Agreement, a copy of the
balance sheet of such Loan Party, as at the end of
such fiscal year, fiscal quarter or fiscal month, as
applicable, and the related statements of income,
cash flow and changes in stockholders equity (for
the year-end statements only) for such Loan Party,
for such fiscal period, in each case setting forth in
comparative form the corresponding figures for the
previous year, accompanied by all relevant notes
and, in the case of its fiscal year-end balance sheet,
an opinion, without a going concern or like
qualification or qualification arising out of the scope
of the audit, by independent certified public
accountants of nationally recognized standing as
fairly presenting the financial condition and results
of operation of such Loan Party;
(b) concurrently with the delivery of the
financial statements referred to in Section 6.01(a)
above a certificate of a Responsible Officer of such
Loan Party that such financial statements were
prepared in accordance with GAAP (except that
with respect to monthly and quarterly financial
statements, pursuant to interim accounting
disclosure rules and regulations, certain information
and footnote disclosures normally included in
financial statements prepared in accordance with
GAAP will be condensed or omitted) and that, to
the best of such officer's knowledge after due
inquiry, such Loan Party, during such period has
observed or performed all of its covenants and other
agreements, and satisfied every condition, contained
in the Loan Documents to be observed, performed
or satisfied by it, and that such officer has obtained
no knowledge of any Default or Event of Default,
except as specified in such certificate, which
certificate shall also demonstrate in reasonable
detail the calculations used in determining
compliance with Sections 7.01 and 7.03 hereof;
(c) promptly upon receipt thereof, copies of
all reports (including, without limitation
management letters), if any, submitted to any Loan
Party by its auditors, in connection with each audit
or review of its books by such auditors;
(d) promptly, and in any event no later than
three (3) Business Days, after the commencement
thereof or any adverse development with respect
thereto, written notice of any actions, suits or
proceedings (including arbitrations) threatened or
pending by or against any Loan Party or any of its
respective Subsidiaries before any court, arbitrator
or other Governmental Authority which,
individually or in the aggregate, could have a
Material Adverse Effect;
(e) promptly, upon the issuance thereof,
copies of all notices, reports and registration
statements, if any, which any Loan Party or any of
its respective Subsidiaries files with or receives
from, as applicable, the Securities and Exchange
Commission or other Governmental Authority;
(f) with reasonable promptness, such other
information respecting the business, operations,
properties or condition (financial or otherwise) or
prospects of each Loan Party and its respective
Subsidiaries or the Collateral as the Lender may
reasonably request from time to time.
Section 6.02. Compliance with Laws, etc.
Each Loan Party shall, and shall cause each of its
respective Subsidiaries to, comply (i) in all material
respects with all Requirements of Law and any
change therein or in the application, administration
or interpretation thereof (including, without
limitation any request, directive, guideline or
policy, whether or not having the force of law) by
any Governmental Authority charged with the
administration or interpretation thereof; and (ii)
with all indentures, mortgages, deeds of trust,
agreements, or other instruments or contractual
obligations to which it is a party or by which it or
any of its properties may be bound or affected,
individually or in the aggregate, the failure to
comply therewith could have a Material Adverse
Effect.
Section 6.03. Preservation of Corporate
Existence; Conduct of Business. Each Loan Party
shall, and shall cause each of its respective
Subsidiaries to, preserve and maintain its corporate
existence, rights, franchises and privileges in the
jurisdiction of its incorporation, and qualify and
remain qualified in good standing as a foreign
corporation in each jurisdiction where the failure to
preserve and maintain such qualification could have
a Material Adverse Effect and continue to engage in
the same type of business in which it is engaged on
the Restatement Date.
Section 6.04. Payment of Taxes and
Claims, etc. Each Loan Party shall, and shall
cause each of its respective Subsidiaries to, pay,
when due (after giving effect to any extensions), (i)
all taxes, assessments and governmental charges
imposed upon it or upon any of its properties and
(ii) all claims (including without limitation claims
for labor, materials, supplies or services) which
could, if unpaid, individually or in the aggregate,
have a Material Adverse Effect or become a Lien
upon its respective properties.
Section 6.05. Keeping of Books,
Visitation, Inspection, etc. (a) Each Loan Party
shall, and shall cause each of its respective
Subsidiaries to, keep proper books of record and
account, containing complete and accurate entries of
all financial and business transactions relating to the
business, operations, properties or condition
(financial or otherwise) of such Loan Party in
conformity with GAAP and all Requirements of
Law.
(b) Each Loan Party shall, and shall cause
each of its respective Subsidiaries to, permit any
representative of the Lender to visit and inspect any
of the properties of such Loan Party and each such
Subsidiary to examine the books and records of
such Loan Party and each of its Subsidiaries and to
make copies and take extracts therefrom, and to
discuss the business, operations, properties,
condition (financial or otherwise) or prospects of
such Loan Party and each such Subsidiary or any of
the Collateral with the officers and independent
public accountants thereof and as often as the
Lender may reasonably request, and so long as no
Default or Event of Default shall have occurred and
be continuing, all at such reasonable times during
normal business hours upon reasonable notice.
Section 6.06. Pay Obligations. Each Loan
Party shall, and shall cause each of its respective
Subsidiaries to, pay, discharge or otherwise satisfy
at or before maturity or before they become
delinquent, as the case may be, all obligations under
or pursuant to all its material obligations, except
when the amount or validity thereof is currently
being contested in good faith by appropriate
proceedings and such Loan Party or such Subsidiary
has established adequate reserves in accordance with
GAAP with respect thereto and no Liens in respect
thereof have been filed.
Section 6.07. Notice of Default, etc. Each
Loan Party shall promptly, and in any event within
two (2) Business Days, after such Loan Party has
knowledge thereof, notify the Lender in writing of
(i) the occurrence of any Default or Event of
Default, or (ii) any default, or event, condition or
occurrence which with notice or lapse of time, or
both, would constitute a default by any party thereto
under any indenture, mortgage, deed of trust,
agreement or other instrument or contractual
obligation to which it is a party or by which any of
its properties may be bound or affected, or any
other event or occurrence which in any such case
individually or in the aggregate could have a
Material Adverse Effect.
Section 6.08. Notice of Material Adverse
Change; Material Adverse Effect. Each Loan
Party shall promptly, and in any event within two
(2) Business Days, after such Loan Party becomes,
or reasonably should have become, aware thereof,
give the Lender notice in writing of the occurrence
of any Material Adverse Change, and of the
occurrence of any event or condition that may have
a Material Adverse Effect.
Section 6.09. Further Assurances. At its
sole cost and without expense to the Lender, on
demand, each Loan party shall do, execute,
acknowledge and deliver all and every such further
acts, deeds, conveyances, assignments, notices of
assignment, transfers and assurances as the Lender
shall from time to time reasonably require for better
assuring, conveying, assigning, transferring and
confirming unto the Lender the property and rights
pledged or assigned or intended now or hereafter so
to be, or which any Loan Party may be or may
hereafter become bound to convey, pledge or assign
to the Lender, or for carrying out the intention or
facilitating the performance of the terms of this
Agreement or any of the other Loan Documents, or
for filing, registering or recording of any Security
Agreement.
Section 6.10. Insurance. Each Loan Party
shall, and shall cause each of its respective
Subsidiaries to, maintain the insurance set forth in
Schedule II hereto and shall maintain, and shall
cause each of its Subsidiaries to maintain, such
other insurance as is customary for a Person
engaged in a similar business and each Loan Party
shall, and shall cause each of its respective
Subsidiaries to, pay all insurance premiums payable
for such insurance coverage on or before the due
date therefor. Each Loan Party shall upon request
of the Lender deliver a copy of the policies of such
insurance to the Lender, together with evidence of
payment of all premiums therefor.
Section 6.11. III Finance Documents;
Subordinated Note Documents, Etc. (a) Each
Loan Party shall promptly and in any event within
one (1) Business Day after receipt thereof deliver to
the Lender a copy of all notices, demands and other
communications received by such Loan Party or any
Affiliate thereof from any Person under or in
connection with any III Finance Document or
Subordinated Note Document.
(b) Each Loan Party shall provide to the
Lender a copy of each notice, certificate or other
writing delivered by such Loan Party or any
Affiliate thereof to any Person under or in
connection with any III Finance Document or
Subordinated Note Document simultaneously with
the delivery thereof to such Person.
(c) Each Loan Party agrees that it will not
amend, supplement or otherwise modify any III
Finance Document or Subordinated Note Document
without the prior written consent of the Lender.
(d) Each Loan Party shall provide the
Lender at least ten (10) Business Days' prior
written notice of its intention to enter into any
additional III Finance Document, which notice shall
include a copy of such additional III Finance
Document.
(e) Until all of the Obligations are paid in
full no Loan Party shall directly or indirectly make
any voluntary or optional prepayment or repayment
of any obligation under the Subordinated Note
Documents or redeem, repurchase, purchase or
defease any Subordinated Note or make any
provision therefor whether through a sinking fund,
deposit or any other or similar arrangement.
ARTICLE VII. NEGATIVE COVENANTS
Until all of the Obligations have been paid
in full, the Commitment has been terminated and
this Agreement has been terminated:
Section 7.01. Indebtedness; Liens; Sales of
Assets. No Loan Party shall create, incur, assume
or suffer to exist any Indebtedness, nor allow any of
its Subsidiaries to create, incur, assume or suffer to
exist any Indebtedness, except for (i) Indebtedness
incurred under this Agreement, (ii) Indebtedness
evidenced by the Subordinated Notes, (iii)
Indebtedness incurred under the III Finance
Documents described on Schedule I hereto and (iv)
Indebtedness incurred under the Master Certificate
Purchase Agreement, the Master Trust Agreement,
any Purchase Agreement or any Pooling and
Servicing Agreement. No Loan Party shall sell,
assign (by operation of law or otherwise) or
otherwise dispose of, or create or suffer to exist,
any Lien upon or with respect to, any of its
properties or assets, except for (x) Liens to secure
the Indebtedness described in clauses (ii) through
(iv) above, including without duplication, Permitted
Existing Liens, (y) Permitted Liens and (z) Liens
incurred to evidence the sales of Receivables
pursuant to any Purchase Agreement or Pooling and
Servicing Agreement.
Section 7.02. Merger; Consolidation, Etc.
No Loan Party shall, nor permit any of its
respective Subsidiaries ) to, liquidate, dissolve,
merge into or consolidate with another entity; or
sell, lease or otherwise dispose of all or a
substantial portion of its business or assets, except
for sales of Receivables to various Trusts as
contemplated under the Master Trust Agreement.
No Loan Party shall permit any SPC or Partnership
to engage in any business other than the holding of
the Residual Interest, nor to acquire any other assets
nor incur any Indebtedness not expressly permitted
under Section 4.6 of the III Finance Amended
Master Loan Agreement as in effect on the date
hereof.
Section 7.03. Net Worth of the Borrower.
The sum of the Borrower's consolidated total assets
minus the Borrower's consolidated total liabilities
(each determined in conformity with GAAP and
without duplication) shall not be less than the
greater of (i) $10,000,000 and (ii) ten percent
(10%) of the Borrower's consolidated assets
(without duplication) on any subsequent date;
provided, however that for purposes of this Section
7.03, any Collateral (as defined in the III Finance
Amended and Restated Master Loan Agreement as
in effect on the date hereof) shall constitute an asset
of its applicable owner, and any assets which have
been sold by any person in a non-recourse sale to
any unaffiliated third party in a securitization
transaction shall not constitute assets of any such
Person.
Section 7.04. Dividends, etc. The
Borrower shall not pay any dividends, whether in
cash or property (other than through the issuance of
the shares of its Capital Stock), on or redeem,
repurchase or otherwise acquire any shares of its
Capital Stock.
Section 7.05. Transactions with Affiliates.
No Loan Party will, or will permit any of its
respective Subsidiaries to, enter into, or be a party
to, any transaction with any Affiliate thereof,
except, in the ordinary course of business, and upon
fair and reasonable terms which are no less
favorable to such Loan Party or such Subsidiary
than would be obtained in a comparable arm's
length transaction with a Person not an Affiliate;
provided that for the purposes of this Section 7.05
no Loan Party shall be deemed an Affiliate of any
other Loan Party.
ARTICLE VIII. EVENTS OF DEFAULT
Section 8.01. Events of Default. If any
one or more of the following events (each an
"Event of Default") shall occur:
(a) the Borrower shall fail to pay
any principal of any Loan when due,
whether at maturity, by required prepayment
or otherwise; or the Borrower shall fail to
pay any interest on any Loan or any other
Obligation within two (2) Business Days
after the same shall become due and payable
(whether at maturity, by acceleration or
otherwise); or either Guarantor shall fail to
pay any Obligation in accordance with
Section 9.01 hereof when due; or
(b) Any Loan Party shall fail to
perform or observe any covenant, agreement
or provision contained in Sections 6.07(i) or
6.11 or in Article VII of this Agreement on
its part to be performed; or any Loan Party
shall fail to perform or observe any
covenants or agreement contained in any
other Loan Document to which it is a party;
or any Loan Party shall fail to perform any
covenant, agreement or provision contained
in Sections 6.07(ii), 6.08 through and
including 6.10 of this Agreement and such
default shall continue unremedied for a
period of ten (10) or more days; or
(c) Any Loan Party shall fail to
perform or observe any other covenant or
agreement contained herein (other than as
described in subsections (a) and (b) above)
and such default shall continue unremedied
for a period of fifteen (15) or more Business
Days; or
(d) Any Loan Party or any of its
respective Subsidiaries shall fail to pay any
principal or interest on any Indebtedness
(other than in the case of the Borrower the
Loan) which individually or in the aggregate
exceeds $100,000; or any other event shall
occur or condition shall exist under any
agreement or instrument under or pursuant
to which any such Indebtedness of any Loan
Party or any of its respective Subsidiaries
may have been issued, created, assumed,
guaranteed or secured by any Loan Party or
any of its respective Subsidiaries and any
such payment or other default shall continue
for more than the grace period, if any,
therein specified, if the effect of such event
or condition is to accelerate, or permit the
acceleration of, the maturity of such
Indebtedness; or any such Indebtedness shall
be declared due and payable prior to the
stated maturity thereof; or
(e) any representation or warranty
made or deemed made by or on behalf of
any Loan Party or any of its respective
subsidiaries in any Loan Document to which
it is a party shall prove to have been
incorrect in any material respect when made
or deemed made; or
(f) if any Loan Party or any of
its respective Subsidiaries shall (i) apply for
or consent to the appointment of, or the
taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of
all or a substantial part of its property,
(ii) admit in writing its inability, or be
generally unable, to pay its debts as they
become due, (iii) make a general assignment
for the benefit of creditors, (iv) commence
a voluntary case under the federal
bankruptcy laws (as now or hereafter in
effect), (v) be adjudicated a bankrupt or
insolvent, (vi) file a petition seeking to take
advantage of any other law providing for the
relief of debtors, or (vii) take any corporate
action for the purpose of effecting any the
foregoing; or
(g) a case or other proceeding
shall be commenced without the application
or consent of any Loan Party or any of its
respective Subsidiaries, in any court of
competent jurisdiction, seeking the
liquidation or readjustment of debts, the
appointment of a trustee, receiver, custodian
or liquidator of such Loan Party or any of
its respective Subsidiaries or of all or any
substantial part of its property, or any
similar action with respect to any Loan
Party or any of its Subsidiaries under the
federal bankruptcy laws (as now or hereafter
in effect) or any other laws relating to
bankruptcy, insolvency, reorganization,
winding up or composition or adjustment of
debt, and such case or proceeding shall
continue undismissed, or unstayed and in
effect, for a period of sixty (60) days, or an
order for relief against any Loan Party or
any of its Subsidiaries shall be entered in an
involuntary case under such bankruptcy law;
or
(h) (i) any Person shall engage in
any "prohibited transaction" (as defined in
Section 406 of ERISA or Section 4975 of
the Code) involving any Plan, (ii) any
"accumulated funding deficiency" (as
defined in Section 302 or ERISA), whether
or not waived, shall exist with respect to
any Plan or any Lien in favor of the PBGC
or a Plan shall arise on the assets of any
Loan Party or any Commonly Controlled
Entity, (iii) a Reportable Event shall occur
with respect to, or proceedings shall
commence to have a trustee appointed, or a
trustee shall be appointed, to administer or
to terminate, any Single Employer Plan,
which Reportable Event or commencement
of proceedings or appointment of a trustee
is, in the reasonable opinion of the Lender,
likely to result in the termination of such
Plan for purposes of Title IV of ERISA, (iv)
any Single Employer Plan shall terminate
for purposes of Title IV of ERISA, (v) any
Loan Party or any Commonly Controlled
Entity shall, or in the reasonable opinion of
the Lender is likely to, incur any liability in
connection with a withdrawal from, or the
insolvency or reorganization of, a
Multiemployer Plan or (vi) any other event
or condition shall occur or exist with respect
to a Plan; and in each case in clauses (i)
through (vi) above, such event or condition,
together with all other such events or
conditions, if any, could have a Material
Adverse Effect; or
(i) a final judgment(s) or order(s)
for the payment of money shall be rendered
against any Loan Party or any of its
respective Subsidiaries which individually or
in the aggregate exceeds $100,000 and such
judgment or order shall continue unsatisfied
and in effect for a period of thirty (30)
consecutive days unless such judgment or
order shall have been vacated, released,
fully bonded or stayed; or
(j) for any reason the Lender
shall fail to have a valid, perfected security
interest in any of the Collateral, subject to
no other Liens other than Liens in favor of
III Finance or the Indenture Trustee, or any
Loan Document shall for any reason cease
to be in full force and effect or any Loan
Party or any other Person shall so assert in
writing; or
(k) a Change in Control shall
occur; or
(l) Aegis Consumer Finance
ceases to be a direct wholly-owned
Subsidiary of the Borrower or Aegis Auto
Finance ceases to be a direct wholly-owned
Subsidiary of Aegis Consumer Finance in
each case free and clear of all Liens other
than Liens in favor of III Finance or the
Indenture Trustee; or
(m) any Loan Party or any Affiliate
thereof shall default under any agreement
with, or other contractual obligation to, the
Lender or any Affiliate of the Lender; or
(n) III Finance or the Indenture
Trustee shall default on any of its covenants
or agreements set forth in the Intercreditor
Agreement; or
(o) Aegis Auto Finance or any of its
Affiliates shall fail to purchase from the
Lender the certificates held by the Lender or
any of its Affiliates in the Aegis Auto
Receivables Trust 96-A simultaneously with
the closing of the Aegis Auto Receivables
Trust 97-4 securitization transaction at the
purchase price therefor agreed to by the
Lender; or
(p) a Material Adverse Change shall
occur;
then, and in any such event, (A) if such event is an
Event of Default specified in paragraphs (f) or (g)
above with respect to any Loan Party, the
Commitment hereunder shall immediately terminate
and the outstanding principal amount of the Loan,
together with accrued and unpaid interest thereon,
and all other Obligations shall immediately become
due and payable without notice of any kind, and (B)
if such event is any other Event of Default and if
such Event of Default shall be continuing, the
Lender may, by notice of default to the Borrower,
terminate the Commitment hereunder, and/or
declare the outstanding principal amount of the
Loan, together with accrued and unpaid interest
thereon, and all other Obligations to be due and
payable forthwith, whereupon the same shall
immediately become due and payable, and/or
pursue any of its other rights, remedies, power and
privileges under the Loan Documents or otherwise.
Except as expressly provided above in this Section
8.01, diligence, presentment, protest, demand for
payment and notice of default or nonpayment and
all other notices of any kind are hereby expressly
waived by the Borrower.
ARTICLE IX. GUARANTEE
Section 9.01. Guarantee. (a) Each
Guarantor hereby jointly and severally
unconditionally and irrevocably guarantees to the
Lender and its respective successors, indorsees,
transferees and assigns, the due, punctual and
complete payment and performance by the
Borrower when and as due, whether at the stated
maturity, by acceleration, upon one or more dates
set for repayment or prepayment or otherwise of the
Obligations.
(b) It is the intention of all parties
hereto that the guarantee set forth in this Article IX
not constitute a fraudulent transfer or conveyance
for the purposes of any applicable bankruptcy,
fraudulent transfer or conveyance law or any other
similar law. To effectuate the foregoing intention,
the Lender and the Guarantor agree that the
obligations of each Guarantor under the guarantee
set forth in this Article IX shall be limited to the
maximum amount as will, after giving effect to such
maximum amount and all other contingent and fixed
obligations of such Guarantor that are relevant
under such laws, and after giving effect to any
collections from rights to receive contribution from
or payments made by or on behalf of the other
Guarantor in respect of such other Guarantor, the
obligations of such Guarantor under the guarantee
set forth in this Article IX would not constitute a
fraudulent transfer or conveyance.
Section 9.02. No Subrogation.
Notwithstanding any payment or payments made by
a Guarantor hereunder or any setoff or application
of funds of any Guarantor by the Lender, no
Guarantor shall be entitled to be subrogated to any
of the rights of the Lender against the Borrower or
any collateral security or guarantee or right of
offset held by the Lender for the payment of the
Obligations, nor shall such Guarantor seek or be
entitled to seek any contribution or reimbursement
from the Borrower in respect of payments made by
such Guarantor hereunder, until all amounts owing
to the Lender by the Borrower and the Guarantors
on account of the Obligations are paid in full and
the Commitment is terminated. If any amount shall
be paid to a Guarantor on account of the
subrogation rights at any time when all of the
Obligations shall not have been paid in full and the
Commitment shall not have been terminated, the
amount shall be held by such Guarantor in trust for
the Lender, segregated from other funds of such
Guarantor, and shall forthwith upon receipt by such
Guarantor, be turned over to the Lender in the
exact form received by such Guarantor (duly
endorsed by such Guarantor to the Lender, if
required), to be applied against the Obligations,
whether matured or unmatured, at the time and in
the order as the Lender may determine.
Section 9.03. Amendments, etc. with
respect to the Obligations; Waiver of Rights.
Each Guarantor shall remain obligated hereunder
notwithstanding that, without any reservation of
rights against such Guarantor, and without notice to
or further assent by such Guarantor, any demand
for payment of any of the Obligations made by the
Lender may be rescinded by the Lender, and any of
the Obligations continued, and the Obligations, or
the liability of any other Person upon or for any
part thereof, or any collateral security or guarantee
therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed,
extended, amended, modified, accelerated,
compromised, waived, surrendered or released by
the Lender, and this Agreement, any other Loan
Document, and any other documents executed and
delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or
in part, as the Lender may deem advisable from
time to time, and any collateral security, guarantee
or right of offset at any time held by the Lender for
the payment of the Obligations may be sold,
exchanged, waived, surrendered or released. The
Lender shall have no obligation to protect, secure,
perfect or insure any Lien at any time held by it as
security for the Obligations or for the guarantee set
forth in this Article IX or any property subject
thereto. When making any demand hereunder
against a Guarantor, the Lender may, but shall be
under no obligation to, make a similar demand on
the Borrower or any other guarantor (including,
without limitation, any other Guarantor), and any
release of the Borrower or the other guarantor
(including, without limitation, any other Guarantor),
shall not relieve any of its obligations or liabilities
hereunder, and shall not impair or affect the rights,
remedies, powers and privileges, express or
implied, or as a matter of law, of the Lender
against such Guarantor.
Section 9.04. Guarantee Absolute and
Unconditional. Each Guarantor waives any and all
notice of the creation, renewal, extension or accrual
of any of the Obligations and notice of or proof of
reliance by the Lender upon the guarantee of such
Guarantor set forth in this Article IX or acceptance
of the guarantee of such Guarantor set forth in this
Article IX; the Obligations, and any of them, shall
conclusively be deemed to have been created,
contracted or incurred, or renewed, extended,
amended or waived, in reliance upon the guarantee
of each Guarantor set forth in this Article IX; and
all dealings between the Borrower or the
Guarantors, on the one hand, and the Lender, on
the other, shall likewise be conclusively presumed
to have been had or consummated in reliance upon
the guarantee of each Guarantor set forth in this
Article IX. Each Guarantor waives diligence,
presentment, protest, demand for payment and
notice of default or nonpayment and all other
notices of any kind to or upon the Borrower or such
Guarantor with respect to the Obligations. The
guarantee of each Guarantor set forth in this Article
IX shall be construed as a continuing, absolute and
unconditional guarantee of payment, and not of
collection, and without regard to (a) the validity,
regularity or enforceability of this Agreement, any
other Loan Document, any of the Obligations or
any collateral security therefor or guarantee or right
of offset with respect thereto at any time or from
time to time held by the Lender, (b) any defense,
set-off or counterclaim (other than a defense of
payment or performance) which may at any time be
available to or be asserted by the Borrower against
the Lender, or (c) any other circumstance
whatsoever (with or without notice to or knowledge
of the Lender, the Borrower or any Guarantor)
which may or might in any manner or to any extent
vary the risk of such Guarantor or otherwise
constitutes, or might be construed to constitute, an
equitable or legal discharge of the Borrower for the
Obligations, or of such Guarantor under the
guarantee set forth in this Article IX, in bankruptcy
or in any other instance. When pursuing its rights
and remedies hereunder against a Guarantor, the
Lender may, but shall be under no obligation to,
pursue the rights, remedies, powers and privileges
as it may have against the Borrower or any other
Person or against any collateral security or
guarantee for the Obligations or any right of offset
with respect thereto. Any failure by the Lender to
pursue the other rights, remedies, powers or
privileges or to collect any payments from the
Borrower or any other Person or to realize upon
any collateral security or guarantee or to exercise
any the right of offset, or any release of the
Borrower or any the other Person or of any
collateral security, guarantee or right of offset, shall
not relieve a Guarantor of any liability hereunder,
and shall not impair or affect the rights, remedies,
powers or privileges, whether express, implied or
available as a matter of law, of the Lender against
a Guarantor. The guarantee set forth in this Article
IX shall remain in full force and effect and be
binding in accordance with and to the extent of its
terms upon each Guarantor and its successors and
permitted assigns, and shall inure to the benefit of
the Lender, and its respective successors, indorsee,
transferees and assigns, until all the Obligations and
the obligations of the Guarantors under the
guarantee set forth in this Article IX shall have
been satisfied by payment in full and the
Commitment shall have been terminated,
notwithstanding that from time to time while the
Commitment is in effect during the term of this
Agreement the Borrower may be free from any
Obligations.
Section 9.05. Reinstatement. The
guarantee set forth in this Article IX shall continue
to be effective, or be reinstated, as the case may be,
if at any time payment, or any part thereof, of any
of the Obligations is rescinded or must otherwise be
restored or returned by the Lender for any reason
whatsoever, including, without limitation, upon the
insolvency, bankruptcy, dissolution, liquidation or
reorganization of a Guarantor or the Borrower or
upon or as a result of the appointment of a receiver,
intervenor or conservator of, or trustee or similar
officer for, any Loan Party or any substantial party
of its property, or otherwise, all as though the
payments had not been made.
Section 9.06. Payments. All payments by
a Guarantor under the guarantee set forth in this
Article IX shall be paid by such Guarantor without
set-off or counterclaim to the Lender at its office at
600 Steamboat Road, Greenwich, Connecticut
06830 or to such other location or account as the
Lender may specify to the Guarantors from time to
time, in Federal or other immediately available
funds in lawful money of the United States by 1:00
p.m. (New York City time) on the due date
therefor.
ARTICLE X. MISCELLANEOUS
Section 10.01. Notices. Except as
otherwise provided herein, all notices, requests and
other communications to any party hereunder or
under the other Loan Documents shall be in writing
(including telecopy or similar teletransmission or
writing) and shall be given, to the parties hereto at
the addresses set forth below:
if to the Borrower:
The Aegis Consumer Funding Group, Inc.
525 Washington Blvd.
Jersey City, New Jersey 07310
Attention: Joseph F. Battiato
Telephone: (201) 418-7337
Telecopy: (201) 418-7339
if to Aegis Consumer Finance:
Aegis Consumer Finance, Inc.
525 Washington Blvd.
Jersey City, New Jersey 07310
Attention: Joseph F. Battiato
Telephone: (201) 418-7337
Telecopy: (201) 418-7339
if to Aegis Auto Finance:
Aegis Auto Finance, Inc.
525 Washington Blvd.
Jersey City, New Jersey 07310
Attention: Joseph F. Battiato
Telephone: (201) 418-7337
Telecopy: (201) 418-7339
if to the Lender:
Greenwich Capital Financial Products, Inc.
600 Steamboat Road
Greenwich, Connecticut 06830
Attention: William C. Gallagher
Telephone: (203) 625-2749
Telecopy: (203) 629-5718
or to such other address or telecopier number as
such party may hereafter specify by written notice
to the other parties hereto. Except as otherwise
provided for herein, each such notice, request or
other communication shall be effective (i) if given
by telecopier when transmitted to the telecopy
number specified in this Section 10.01, (ii) if given
by mail, 72 hours after such communication is
deposited in the mails by certified mail,
return-receipt requested, postage prepaid, addressed
as aforesaid, or (iii) if given by any other means
(including without limitation by air courier), when
delivered at the address specified in this Section
10.01.
Section 10.02. Amendments, Waivers,
etc. None of the Loan Documents or any terms
thereof may be amended, modified or otherwise
supplemented except in writing signed by the parties
hereto. In the case of any waiver of a Default or
Event of Default, any Default or Event of Default
waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any
subsequent or other Default or Event of Default, or
impair any right consequent thereon.
Section 10.03. No Waiver; Remedies
Cumulative. No failure or delay on the part of the
Lender in exercising any right, remedy, power or
privilege under any Loan Document shall operate as
a waiver thereof, nor shall any single or partial
exercise of, or any abandonment or discontinuance
of steps to enforce any right, remedy, power or
privilege under any Loan Document preclude any
other or further exercise thereof or the exercise of
any other rights, remedies or privileges thereunder.
The rights, remedies, powers and privileges
provided in the Loan Documents are cumulative and
may be exercised singularly or concurrently and are
not exclusive of any other rights, remedies, powers
or privileges provided by law.
Section 10.04. Payment of Expenses,
Indemnity, etc. Each Loan Party jointly and
severally agrees to:
(i) pay or reimburse the Lender on
demand for all its out-of-pocket costs and
expenses incurred in connection with the
development, preparation and execution of,
and any amendment, modification or
supplement to, or any waiver under, any
Loan Document and any other document
prepared in connection therewith, and the
consummation and administration of the
transactions contemplated thereby, including
without limitation the reasonable fees and
disbursements of counsel to the Lender;
(ii) pay on demand all reasonable
costs and expenses of the Lender, including
without limitation the reasonable fees and
disbursements of counsel to the Lender, in
connection with the occurrence or
continuance of a Default or Event of Default
and the enforcement, collection, protection
or preservation (whether through
negotiations, legal proceedings or otherwise)
of this Agreement or any other Loan
Document, the Collateral, any Obligation or
any right, remedy, power or privilege of the
Lender hereunder or under any other Loan
Document;
(iii) pay and hold the Lender harmless
from and against any and all present and
future stamp, excise, recording or other
similar taxes or fees payable in connection
with the execution, delivery, recording and
filing of any Loan Document and hold the
Lender harmless from and against any and
all liabilities with respect to or resulting
from any delay or omission to pay such
taxes or fees; and
(iv) indemnify the Lender and its
Affiliates and each of their respective
directors, officers, employees and agents
and hold each of them harmless from and
against, any and all liabilities, losses,
damages, penalties, actions, judgments,
suits, claims, costs, expenses and
disbursements, including without limitation
the reasonable fees and disbursement of
counsel to the Lender and such other
parties, incurred by any of them in
connection with, arising out of or in any
way relating to any investigation, claim,
litigation or other proceeding, pending or
threatened (whether or not any of them is
designated a party thereto), in connection
with, arising out of or in any way related to
this Agreement or any other Loan Document
or any of the transactions contemplated
herein or therein or any use of the proceeds
of any Loan by the Borrower; provided that
the Lender shall not be entitled to any
indemnification for any of the foregoing
resulting from its gross negligence or willful
misconduct as determined by a final court of
competent jurisdiction.
If and to the extent that the indemnity obligations of
any Loan Party under this Section 10.04 may be
unenforceable for any reason, each Loan Party
hereby agree to make the maximum contribution to
the payment and satisfaction of each of such
indemnity obligations which is permissible under
applicable law.
Section 10.05. Benefits of Agreement.
(a) This Agreement and the other Loan Documents
to which it is a party shall be binding upon and
inure to the benefit of each of the Loan Parties and
the Lender and their respective successors and
assigns, except that no Loan Party may assign or
transfer any of its rights or obligations under this
Agreement or any other Loan Document to which
it is a party without the prior written consent of the
Lender.
(b) The Lender may assign or transfer all or
any of its rights or obligations under any Loan
Document to any Person at any time without the
prior written consent of any Loan Party.
(c) The Lender may sell or grant
participations in all or any of its rights and
obligations under any Loan Document from time to
time to any Person or Persons upon such terms as
the Lender may determine in its sole discretion
without the prior written consent of any Loan Party.
Each Loan Party agrees that to the extent permitted
by applicable law, each such participant shall be
deemed to have the right of setoff in respect of its
participating interest in the Loan and the Note to
the same extent as if the amount of its participating
interest in the Loan and the Note were owing
directly to it as "Lender" under this Agreement or
the Note. The Borrower also agrees that each
participant shall be entitled to all benefits of
Sections 3.06 and 10.04 hereof with respect to its
participating interest in the Loan and the Note. If
the Lender shall sell or grant any such participation,
each Loan Party shall continue to deal solely with
the Lender.
(d) Each Loan Party hereby authorizes the
Lender to disclose any and all information regarding
each Loan Party and each of its respective
Subsidiaries whether received pursuant to the Loan
Documents or otherwise to any assignee or
participant or any proposed assignee or participant.
Section 10.06. Right of Setoff. If an
Event of Default shall have occurred and be
continuing, the Lender is hereby authorized at any
time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all
deposits and any and all indebtedness or other
amounts at any time owing by the Lender to or for
the credit or the account of any Loan Party against
any of and all the obligations of any Loan Party
now or hereafter existing under this Agreement or
any other Loan Document held by the Lender,
irrespective of whether or not the Lender shall have
made any demand under this Agreement or such
other Loan Document and although such obligations
may be unmatured. The rights of the Lender under
this Section 10.06 are in addition to other rights and
remedies (including other rights of setoff) which the
Lender may have.
Section 10.07. Survival of Agreement.
All covenants, agreements, representations and
warranties made by each Loan Party herein, in the
other Loan Documents to which it is a party and in
the certificates or other instruments prepared or
delivered in connection with or pursuant to this
Agreement or any other Loan Document shall be
considered to have been relied upon by the Lender
and shall survive the making by the Lender of the
Loan, the execution and delivery to the Lender of
the Loan Documents regardless of any investigation
made by the Lender, and shall continue in full force
and effect as long as any Obligation is outstanding
and so long as the Commitment has not been
terminated. Without prejudice to the survival of
any other agreements contained herein and the other
Loan Documents, the obligations under Sections
3.06 and 10.04 hereof shall survive payment in full
of the Obligations and termination of this
Agreement.
Section 10.08. GOVERNING LAW.
THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS SHALL BE CONSTRUED IN
ACCORDANCE WITH, AND BE GOVERNED
BY, THE LAWS OF THE STATE OF NEW
YORK, EXCEPT TO THE EXTENT THAT
THE PERFECTION, AND THE EFFECT OF
PERFECTION OR NON-PERFECTION, OF
THE SECURITY INTEREST
CONTEMPLATED UNDER THE SECURITY
AGREEMENTS MAY BE GOVERNED BY THE
LAWS OF ANOTHER JURISDICTION.
Section 10.09. Counterparts. This
Agreement may be executed in any number of
counterparts and by the different parties hereto in
separate counterparts, each of which when so
executed and delivered shall be deemed an original,
and all of which shall together constitute one and
the same agreement.
Section 10.10. Headings Descriptive.
The headings of the several articles and sections of
this Agreement, and the Table of Contents, are
inserted for convenience only and shall not in any
way affect the meaning or construction of any
provisions of this Agreement.
Section 10.11. Severability. Any
provision of this Agreement or any other Loan
Document which is prohibited, unenforceable or not
authorized in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such
prohibition, unenforceability or non-authorization
without invalidating the remaining provisions hereof
or thereof or affecting the validity, enforceability or
legality of such provisions in any other jurisdiction.
Section 10.12. Entire Agreement. This
Agreement and the other Loan Documents constitute
the entire agreement among the parties relative to
the subject matter hereof. Any previous agreement
among the parties with respect to the subject matter
hereof is superseded by this Agreement and the
other Loan Documents. Nothing in this Agreement
or in the other Loan Documents, expressed or
implied, is intended to confer upon any party other
than the parties hereto and thereto any rights,
remedies, obligations or liabilities under or by
reason of this Agreement or the other Loan
Documents.
Section 10.13. Submission to
Jurisdiction; Venue. (a) Any legal action or
proceeding against any Loan Party with respect
to this Agreement or any other Loan Document
to which it is a party may be brought in the
courts of the State of New York located in New
York County or of the United States for the
Southern District of New York, and, by
execution and delivery of this Agreement, each
Loan Party hereby irrevocably accepts for itself
and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid
courts. Each of the parties hereto agrees that a
final judgment in any such action or proceeding
shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any
other manner provided by law. Nothing herein
shall affect the right of the Lender to commence
legal proceedings or otherwise proceed against
any Loan Party in any other jurisdiction.
(b) Each Loan Party irrevocably
consents to service of process in the manner
provided for notices in Section 10.01. Nothing in
this Agreement will affect the right of the Lender
to serve process in any other manner permitted
by law.
(c) Each Loan Party irrevocably
waives any objection which it may now or
hereafter have to the laying of venue of any of
the aforesaid actions or proceedings arising out
of or in connection with this Agreement or any
other Loan Document to which it is a party in
the courts referred to in clause (a) above and
hereby further irrevocably waives and agrees not
to plead or claim in any such court that any such
action or proceeding brought in any such court
has been brought in an inconvenient forum.
Section 10.14. Confirmation of Security
Interests, Etc. Each of Aegis Auto Finance and
Aegis Consumer Finance hereby confirms in all
respects the security interests granted to the Lender
by it pursuant to the Aegis Auto Finance Security
Agreement and the Aegis Consumer Finance
Security Agreement, as collateral security, for the
Obligations hereunder and under the other Loan
Documents and hereby confirms that all references
in such Security Agreements to the "Credit
Agreement" shall mean the Credit Agreement as
amended and restated hereby, all references therein
to the III Loan Agreement shall be to the "III
Finance Amended and Restated Master Loan
Agreement" and all references therein to the
"Intercreditor Agreement" shall mean the amended
and restated "Intercreditor Agreement" referred to
herein.
Section 10.15. WAIVER OF JURY
TRIAL. EACH OF THE PARTIES HERETO
HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY
LITIGATION ARISING DIRECTLY OR
INDIRECTLY UNDER OR IN CONNECTION
WITH THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT.
<PAGE>
IN WITNESS WHEREOF, each of the
parties hereto have caused this Agreement to be
duly executed by their respective officers thereunto
duly authorized, as of the date first above written.
THE AEGIS CONSUMER FUNDING GROUP,
INC.
By:
Title:
AEGIS CONSUMER FINANCE, INC.
By:
Title:
AEGIS AUTO FINANCE, INC.
By:
Title:
GREENWICH CAPITAL FINANCIAL
PRODUCTS, INC.
By:
Title:
FIRST AMENDMENT TO POOLING AND
SERVICING AGREEMENT
BY AND BETWEEN
AEGIS AUTO FUNDING CORP.,
a Delaware Corporation,
Seller
and
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
Trustee and Backup
Servicer
RELATING TO THE
ISSUANCE OF
$17,561,371.61
AEGIS AUTO RECEIVABLES
TRUST 1996-A
AUTOMOBILE RECEIVABLE
PASS-THROUGH CERTIFICATES
DATED AS OF JUNE 27,
1997
FIRST AMENDMENT TO POOLING
AND SERVICING AGREEMENT
Dated as of June 27,
1997
This FIRST AMENDMENT TO
POOLING AND SERVICING AGREEMENT
(this "Amendment"), dated as of
June 27, 1997 is made among AEGIS
AUTO FUNDING CORP., a Delaware
corporation, as Seller, NORWEST
BANK MINNESOTA, NATIONAL
ASSOCIATION, as Backup Servicer,
and NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
for the Trust.
WHEREAS, the Seller, the
Backup Servicer and the Trustee
executed that certain Pooling and
Servicing Agreement dated as of
September 1, 1996 (the "Pooling and
Servicing Agreement") pursuant to
which $17,561,371.61 AEGIS AUTO
RECEIVABLES TRUST 1996-A AUTOMOBILE
RECEIVABLE PASS-THROUGH
CERTIFICATES (the "Certificates")
were issued; and
WHEREAS, all of the
Certificates are currently owned by
Aegis Auto Finance, Inc.
("Certificateholder"); and
WHEREAS, Section 13.01 of the
Pooling and Servicing Agreement
allows for the amendment of the
Pooling and Servicing Agreement by
an instrument executed by the
Seller, the Backup Servicer and the
Trustee, with the consent of the
Holders of all outstanding
Certificates; and
WHEREAS, the Seller, the
Backup Servicer and the Trustee
wish to amend the Pooling and
Servicing Agreement to allow for
the termination of the Trust and
the conveyance of the Trust
Property to the Certificateholders;
and
WHEREAS, the
Certificateholder, as owner of all
outstanding Certificates, consents
to the amendment of the Pooling and
Servicing Agreement to permit the
liquidation of the Trust,
termination of the Trust and the
conveyance of the Trust Property to
the Certificateholders as evidenced
by its written consent delivered in
conjunction with the execution of
this Amendment.
NOW THEREFORE, in
consideration of the mutual
agreements herein contained, each
party agrees as follows for the
benefit of the other parties and
for the benefit of the
Certificateholder as follows:
Section 1. Amendment to
Section 12.01. Section 12.01
Termination of Trust of the Pooling
and Servicing Agreement is hereby
amended by adding the following
subparagraph (e):
(e) (i) In addition to
the provisions allowing for the
termination of the Trust in this
Section 12.01, and notwithstanding
anything to the contrary in Section
12.01 or stated elsewhere in this
Agreement, or in any other document
of agreement executed or delivered
in conjunction with the original
issuance of the Certificates, the
Trust and the respective
obligations of the Seller, the
Backup Servicer and the Trustee
created by this Agreement may be
terminated upon the receipt of the
Seller, the Backup Servicer and the
Trustee of the written direction
(the "Direction to Terminate") from
the Certificateholders owning all
outstanding Certificates to
terminate the Trust. Such
Direction To Terminate shall be in
the form attached hereto as Exhibit
O and shall otherwise provide as
follows (1) that the parties
providing such direction are the
current Holders of all outstanding
Certificates as registered with the
Trustee, (2) that such Holders
direct the Trustee to terminate the
Trust, (3) the date upon which such
termination shall be effective (the
"Termination Date"), (4) any
directions on the sale or other
disposition of the Trust Property,
(5) that the Direction to Terminate
is irrevocable by such
Certificateholders, (6) that the
Certificateholders shall pay all
reasonable fees and costs of the
Trustee in complying with such
direction, and (7) that the Trustee
shall be held harmless by the
Certificateholders from all claims
arising from the termination of the
Trust by the Trustee pursuant to
such directions absent gross
negligence or willful misconduct.
At the time of delivery of the
Direction to Terminate, the
Certificateholders shall also
deliver to the Trustee the original
Certificates with irrevocable
instructions to cancel the
Certificates upon the transfer to
the Certificateholders of the Trust
Property.
(ii) Upon receipt of
a Direction to Terminate as
described in (i) above, the Trustee
shall sell and assign the Trust
Property as instructed in the
Direction to Terminate to the
Certificateholders, transfer all
funds in the Collection Account to
the Certificate Account, and
disburse funds in the Certificate
Account (a) first to pay all unpaid
Backup Servicer Fees and
unreimbursed expenses of the Backup
Servicer, all unpaid Servicer Fees
and unreimbursed expenses of the
Servicer and all unpaid fees and
unreimbursed expenses of the
Trustee, and (b) then to the
Certificateholders the remaining
balance as directed in the
Direction of Termination.
(iii) The Trustee
shall be entitled to rely upon the
Direction to Terminate in
completing the transfer to the
Certificateholders of the Trust
Property and the termination of the
Trust. The Trustee shall also
execute all assignments, release of
liens, UCC termination statements
as may be necessary to complete the
transfer to the Certificateholders
of Trust Property and the
termination of the Trust as
contemplated hereby.
(iv) In providing
any Direction to Terminate the
Certificateholders shall be deemed
to have acknowledged that the
transfer of the Trust Property to
the Certificateholders shall
constitute full satisfaction of all
obligations under or through the
Certificates.
(v) Effective on
the Termination Date, and provided
the Trustee has complied with all
the terms and conditions of this
Section 12.01(e), the Trust shall
terminate, the Agreement and all
other agreements executed in
conjunction with the original
issuance of the Certificates shall
cease, terminate and be void, the
lien on the Trust Property created
by the Agreement shall be
extinguished and the Trustee shall
be discharged in full from all
responsibilities and duties created
by the Agreement. All funds
remaining in the Reserve Fund after
making the final disbursement to
the Certificateholders under clause
(ii) above, shall be disbursed to
or upon the direction of the
Seller.
Section 2. Waiver of Notices.
The Seller, the Trustee, the Backup
Servicer and the Certificateholders
hereby waive all notices required
under the Pooling and Servicing
Agreement relating to the amendment
or modification of the Pooling and
Servicing Agreement.
Section 3. Transfer and
Termination. The Seller and the
Backup Servicer shall assist and
cooperate with the Trustee in
effecting the liquidation of the
Trust Property and the termination
of Trust in accordance with the
terms and provisions hereof and of
the Pooling and Servicing Agreement
as amended hereby.
Section 4. Miscellaneous.
(a) Severability. Any
provision of this Amendment which
is prohibited or unenforceable in
any jurisdiction shall, as to such
jurisdiction, be ineffective to the
extent of such prohibition or
unenforceability without
invalidating the remaining
provisions hereof, and any such
prohibition or unenforceability in
any jurisdiction shall not
invalidate or render unenforceable
such provision in any other
jurisdiction.
(b) Separate Counterparts.
This Amendment may be executed by
the parties hereto in separate
counterparts, each of which when so
executed and delivered shall be an
original, but all such counterparts
shall together constitute but one
and the same instrument.
(c) Successors and Assigns.
All covenants and agreements
contained herein shall be binding
upon and inure to the benefit of
the parties hereto and their
respective successors and assigns.
Any request, notice, direction,
consent, waiver or other writing or
action by the parties hereto shall
bind their respective successors
and assigns.
(d) Headings. The headings
of the various Articles and
Sections herein are for convenience
of reference only and shall not
define or limit any of the terms or
provisions hereof.
(e) Governing Law. This
Amendment shall be governed by, and
construed in accordance with, the
substantive laws of the State of
New York (without regard to
conflict of law provisions)
applicable to contracts to be
performed entirely within such
state, including all matters of
construction, validity and
performance.
(f) Tax Consequences. The
Certificateholder, by consenting to
this Amendment, hereby represents
that it has consulted with its own
tax advisors to determine the
particular federal, state or local
income tax consequences of the
transactions described in this
Amendment and the termination of
the Trust and conveyance to the
Certificateholders of the Trust
Property.
(g) Confirmation of and
Direction by Holder of
Certificates. By the execution of
this Amendment the
Certificateholder hereby (a)
confirms as of the date hereof and
as of the Termination Date that (i)
the Certificateholder is the owner
of all outstanding Certificates,
(ii) the Certificateholder has not
sold, assigned, pledged or
otherwise transferred any of its
interest in the Certificates and
(iii) the Certificateholder
consents to the provisions of this
Amendment and (b) directs the
Trustee to execute this Amendment
and to perform the actions
described herein.
(h) Agreement. All
references in the Pooling and
Servicing Agreement to "Agreement"
shall be deemed references to the
Pooling and Servicing Agreement as
amended by this Amendment.
(i) Defined Terms. All
capitalized terms used in this
Amendment which are not otherwise
defined herein shall have the
meanings assigned to them in the
Pooling and Servicing Agreement.
IN WITNESS WHEREOF, the
Seller, the Backup Servicer and the
Trustee have caused this First
Amendment to Pooling and Servicing
Agreement to be duly executed by
their respective officers as of the
day and year first above written.
AEGIS AUTO FUNDING CORP.,
as Seller
By:
Name: Angelo R. Appierto
Title: President
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By
Name: Michael DeBois
Title: Corporate Trust Officer
NORWEST
BANK MINNESOTA, NATIONAL
ASSOCIATION, as Backup Servicer
By
Name:
Michael DeBois
Title: Corporate Trust Officer
IN WITNESS WHEREOF, the
undersigned, as the owner of all
outstanding Aegis Auto Receivables
Trust 1996-A Automobile Receivable
Pass-Through Certificates, does
hereby consent to the First
Amendment to Pooling and Servicing
Agreement dated as of June 27th,
1997 and does hereby agree to all
the terms thereof applicable to the
Holder of the Certificates.
AEGIS
AUTO FINANCE, INC.
By
Name: Joseph F. Battiato
Title: President
Date: June 27, 1997
EXHIBIT O
DIRECTION TO TERMINATE TRUST
FOR THE $17,561,371.61 (ORIGINAL
PRINCIPAL AMOUNT)
AEGIS AUTO RECEIVABLES TRUST 1996-A
AUTOMOBILE RECEIVABLE PASS-THROUGH
CERTIFICATES
To: NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
The undersigned, being the
Holder of all outstanding
$17,561,371.61 (Original Principal
Amount) Aegis Auto Receivables
Trust 1996-A Automobile Receivable
Pass-Through Certificates (the
"Certificates"), does hereby
provide this Direction to Terminate
pursuant to Section 12.01(e) of
that certain Pooling and Servicing
Agreement (the "Pooling and
Servicing Agreement") dated as of
September 1, 1996 as amended by
that certain First Amendment to
Pooling and Servicing Agreement
dated as of June 27, 1997 (the
"Amendment" and together with the
Pooling and Servicing Agreement,
the "Agreement"). All capitalized
terms used herein but not otherwise
defined shall have the meanings
assigned to them in the Agreement.
In accordance with said Section
12.01(e), the Trustee is directed
as follows:
1. The Trustee shall
terminate the Trust effective as of
June 27, 1997 (the "Termination
Date").
2. Upon receipt of the
original Certificates as described
below, you shall assign the Trust
Property to the Certificateholders
through one or more assignment
documents as may be necessary,
disburse the funds in the funds and
accounts established under the
Agreement in accordance with
Section 12.01(e) thereof, and
terminate all UCC financing
statements on file evidencing the
sale of the Trust Property or
security interest therein to the
Trustee.
3. This Direction to
Terminate shall be effective as of
the Effective Date (as stated
below), is irrevocable and is
conditioned only upon the
fulfillment of the procedures
stated herein and in the Pooling
and Servicing Agreement.
4. The undersigned shall pay
all reasonable fees and expenses of
the Trustee in completing these
instructions.
5. The Trustee shall be held
harmless against any action taken
in furtherance of these
instructions and shall be
indemnified against all claims
arising from any actions taken in
furtherance of these instructions
absent gross negligence or willful
misconduct.
6. Delivered herewith is the
original Certificate in the name of
Greenwich Capital Markets, Inc.,
together with an assignment
evidencing the transfer thereof to
the undersigned. You are further
directed to cancel said Certificate
upon transfer of the Trust Property
as instructed hereby.
EXECUTED ON this 27th day of
June 1997 (the "Effective Date").
AEGIS AUTO FINANCE, INC.
By
Name: Joseph F. Battiato
Title: President
REPURCHASE AGREEMENT
THIS AGREEMENT is made
and entered into as of this ___ of August, 1997,
by and between AEGIS AUTO FINANCE,
INC. ( Aegis ), a Delaware corporation, and
ENTERPRISE NATIONAL BANK OF
PALM BEACH ( Enterprise ), a national
banking association.
W I T N E S S E T H:
WHEREAS, pursuant to a
Purchase Agreement, dated as of December 9,
1996, as amended, between Aegis and
Enterprise (the Purchase Agreement ; all
capitalized terms used herein and not otherwise
expressly defined herein shall have the
respective meanings given such terms in the
Purchase Agreement), Enterprise purchased
certain Receivables and other Purchased
Property from Aegis; and
WHEREAS, certain disputes have
arisen between Enterprise and Aegis regarding
certain of the Receivables due to the unexpected
performance of such Receivables; and
WHEREAS, Enterprise and
Aegis desire to enter into this Agreement in
order to set forth the terms and conditions under
which such Receivables shall be repurchased by
Aegis.
NOW, THEREFORE, in
consideration of the foregoing, the mutual terms
and covenants contained herein, as well as other
good and value consideration, the receipt and
adequacy of which are hereby acknowledged,
the parties do hereby agree as follows:
. Reconveyances of Certain
Receivables and Purchased Property. Subject to
the terms and conditions of this Agreement,
Enterprise shall sell to Aegis on this date, and
Aegis shall purchase from Enterprise on this
date, all of Enterprise s rights, titles and
interests in, to and under all of the Receivables
specified on Exhibit A attached hereto (such
Receivables being herein collectively referred to
herein as the Reconveyed Receivables ) and
all other Purchased Property relating to such
Reconveyed Receivables (the Reconveyed
Receivables and all such related Purchased
Property being herein collectively referred to as
the Reconveyed Interests ). In consideration
for the transfer on this date of the Reconveyed
Interests hereunder, Aegis shall, by no later
than 4:00 p.m. (Eastern Standard Time) on this
date, (i) pay to Enterprise in immediately
available funds a cash payment (the Cash
Payment ) in an amount equal to the sum of
102.94% of the aggregate outstanding principal
balance of all of the Reconveyed Receivables
as of August 1, 1997 plus interest on such
principal at the rate of 8.375% per annum for
the period from (and including) August 1, 1997
through this date and (ii) execute and deliver to
Enterprise a promissory note in the form of
Exhibit B attached hereto (the Note ) under
which Aegis shall be obligated to pay the
principal sum of $500,000 to Enterprise in
accordance with the terms and conditions of
such Note.
. Servicing of and VSI and
RDI Policies on the Reconveyed Receivables.
Upon Enterprise s receipt of the Cash Payment
and the Note pursuant to Section 1 above,
Enterprise shall notify the Servicer and the
issuers of the VSI Policy and the RDI Policy in
writing that the Reconveyed Receivables have
been transferred by Enterprise to Aegis and that
such Reconveyed Receivables are no longer
subject to the Servicing Agreement Addendum
and that Enterprise is no longer the additional
insured or loss payee under the VSI Policy and
the RDI Policy with respect to the Reconveyed
Receivables.
. Handling of Retained
Receivables. (a) The remainder of the
outstanding Receivables acquired by Enterprise
from Aegis under the Purchase Agreement are
described on Exhibit C attached hereto (such
Receivables being herein collectively referred to
as the Retained Receivables ).
(b) In the event that the
aggregate liquidation and collection costs
incurred by Enterprise with respect to the
Retained Receivables (including, without
limitation, any such costs incurred by the
Servicer which Enterprise is obligated to
reimburse) exceed $162,000, Aegis shall pay
Enterprise the amount of such excess, or if such
aggregate costs are less than $162,000,
Enterprise shall pay Aegis the amount of such
deficiency, which payment shall be made within
five (5) days after Aegis receipt of the final
Retained Receivable loss report delivered
pursuant to paragraph (c) below.
(c) On the fifteenth (15th) day
after the end of each calendar quarter ending
after the date of this Agreement (or on the next
Business Day if such day is not a Business
Day), Enterprise shall provide Aegis with a
written report which identifies any and all
Retained Receivables which became Liquidated
Receivables during such quarter (or since
August 1, 1997 in the case of the initial
quarter). If the outstanding principal balance of
any such Retained Receivable at the time it
became a Liquidated Receivable is greater than
55% of the outstanding principal balance thereof
as of August 1, 1997 as shown on Exhibit C
attached hereto, Aegis shall pay the amount of
such excess to Enterprise within five (5) days
after Aegis receipt of such report, but if the
outstanding principal balance of any such
Retained Receivable at the time it became a
Liquidated Receivable is less than 55% of its
outstanding principal balance as of August 1,
1997, Enterprise shall pay the amount of the
difference to Aegis within five (5) days after
Enterprise gives such report. Aegis may
purchase from Enterprise each of the Retained
Accounts which becomes a Liquidated
Receivable for a price of $1.00, which purchase
shall be made without recourse against or
representations or warranties by Enterprise.
. Mutual Releases. ()
Effective upon its receipt of the Cash Payment
the Note as specified in Section 1 above, and in
consideration thereof, Enterprise shall be
deemed to have released and discharged Aegis
of and from any and all claims, defenses or
other liabilities, whether known or unknown and
whether in contract or in tort or arising under
any statute or otherwise, which Enterprise may
have against Aegis and which arise out of any
actions or inactions taken or omitted by Aegis
on or prior to the date of this Agreement in
connection with the negotiation, execution,
delivery, performance, administration, operation
or enforcement of the Purchase Agreement or
any of the Receivables or the other Purchased
Property; provided, however, that nothing in
this sentence is intended, or shall be construed,
as a release of Aegis from any of its covenants,
obligations or other liabilities under this
Agreement or the Note.
() Effective upon the
reconveyance of all of the Reconveyed Interests
pursuant to Section 1 above, and in
consideration thereof, Aegis shall be deemed to
have released and discharged Enterprise of and
from any and all claims, defenses or other
liabilities, whether known or unknown and
whether in contract or in tort or arising under
any statute or otherwise, which Aegis may have
against Enterprise and which arise out of any
actions or inactions taken or omitted by
Enterprise on or prior to the date of this
Agreement in connection with the negotiation,
execution, delivery, performance,
administration, operation or enforcement of the
Purchase Agreement or any of the Receivables
or the other Purchased Property; provided,
however, that nothing in this sentence is
intended, or should be construed, as a release of
Enterprise from any of its covenants,
obligations or other liabilities under this
Agreement.
. Representations and
Warranties. (a) Enterprise represents and
warrants to Aegis as of the date hereof (which
representations and warranties shall survive the
reconveyance hereunder of the Reconveyed
Interests) that (i) Enterprise is duly organized
and validly existing as a national banking
association in good standing under the laws of
the United States, (ii) the execution, delivery
and performance by Enterprise of this
Agreement have been duly authorized by all
necessary corporate action on its part and this
Agreement is a legal, valid and binding
obligation of Enterprise, enforceable against
Enterprise in accordance with its terms, (iii)
Enterprise has obtained all necessary
governmental and private authorizations, and
made all governmental filings under applicable
law, for the execution, delivery and
performance by Enterprise of this Agreement,
(iv) Enterprise has obtained or has caused to be
waived all consents which are required to be
obtained in connection with Enterprise s
execution, delivery or performance of this
Agreement under any instruments to which
Enterprise is a party or by which it or any of its
property is bound, and (v) the consummation of
the transactions contemplated by this Agreement
and the fulfillment of the terms hereof do not
conflict with, or result in a breach of any of the
terms or provisions of, nor constitute a default
under, the charter or by-laws of Enterprise, or
any indenture, agreement or other instrument
(other than this Agreement) applicable to
Enterprise or its property, or any law, rule,
regulation or order applicable to Enterprise or
its properties of any court or any federal or
state regulatory body, administrative agency or
other governmental instrumentality have
jurisdiction over Enterprise or its properties.
(b) Aegis represents and
warrants to Enterprise as of the date hereof
(which representations and warranties shall
survive the reconveyance hereunder of the
Reconveyed Interests) that (i) Aegis is duly
organized and validly existing as a corporation
in good standing under the laws of Delaware,
(ii) the execution, delivery and performance by
Aegis of this Agreement and the Note have been
duly authorized by all necessary corporate
action on its part and each of this Agreement
and the Note is a legal, valid and binding
obligation of Aegis, enforceable against Aegis
in accordance with its terms, (iii) Aegis has
obtained all necessary governmental and private
authorizations, and made all governmental
filings under applicable law, for the execution,
delivery and performance by Aegis of this
Agreement and the Note, (iv) Aegis has
obtained or has caused to be waived all consents
which are required to be obtained in connection
with Aegis execution, delivery or performance
of this Agreement and the Note under any
instruments to which Aegis is a party or by
which it or any of its property is bound, and (v)
the consummation of the transactions
contemplated by this Agreement and the Note
and the fulfillment of the terms hereof and
thereof do not conflict with, or result in a
breach of any of the terms or provisions of, nor
constitute a default under, the charter or by-
laws of Aegis, or any indenture, agreement or
other instrument (other than this Agreement)
applicable to Aegis or its property, or any law,
rule, regulation or order applicable to Aegis or
its properties of any court or any federal or
state regulatory body, administrative agency or
other governmental instrumentality have
jurisdiction over Aegis or its properties.
(c) Enterprise also represents
and warrants to Aegis (which representations
and warranties shall survive the reconveyance
hereunder of the Reconveyed Interests) that
Enterprise has not sold, transferred, assigned or
pledged any of the Reconveyed Interests or the
AVM Reserve to any person (other than to
Aegis hereunder) and that Aegis, upon the
conveyance of the Reconveyed Interests and the
AVM Reserve hereunder, will acquire
Enterprise s rights, titles and interests in the
Reconveyed Interests and the AVM Reserve
free and clear of any liens, security interests or
other encumbrances of any creditor of
Enterprise.
(d) Except as expressly set
forth in paragraphs (a) and (c) above, Enterprise
makes no representations and warranties to
Aegis with respect to any of the Reconveyed
Receivables, any of the other related Purchased
Property, or the AVM Reserve, all of which
shall be transferred by Enterprise to Aegis
hereunder on an AS IS and WHERE IS
basis and without any recourse against
Enterprise by Aegis.
. Further Assurances.
Enterprise shall execute any and all Uniform
Commercial Code financing statements or
partial release statements as may be reasonably
requested by Aegis in order to perfect the
reconveyance of the Reconveyed Receivables
hereunder and Enterprise shall execute any and
all other documents as may be reasonably
required by Aegis to fulfill the intent of this
Agreement, but any and all such documents
shall be prepared, recorded and filed at Aegis
expense.
. Miscellaneous. This
Agreement shall be governed by and construed
in accordance the internal laws of the State of
New Jersey. This Agreement may be executed
in two or more counterparts and by different
parties on separate counterparts, each of which
shall be an original but all of which together
shall constitute one and the same instrument.
This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and
their respective successors and assigns. This
Agreement is the sole and entire agreement
between Enterprise and Aegis with respect to
the subject matter hereof and it supersedes and
replaces all prior discussions, negotiations,
commitments, understandings or agreements
between them with respect to such subject
matter.
IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be
executed by their respective officers thereunto
duly authorized, all as of the day and year first
above written.
AEGIS AUTO FINANCE, INC.
By:
Name:
Title:
ENTERPRISE NATIONAL BANK
OF PALM BEACH
By:
Name:
Title:
<PAGE>
EXHIBIT A
RECONVEYED RECEIVABLES
<PAGE>
EXHIBIT B
PROMISSORY NOTE
$500,000
August ____, 1997
FOR VALUE RECEIVED, the
undersigned AEGIS AUTO FINANCE, INC.,
a Delaware corporation (the Maker ),
promises to pay to the order of ENTERPRISE
NATIONAL BANK OF PALM BEACH, a
national banking association ( Payee ), the
principal sum of FIVE HUNDRED
THOUSAND DOLLARS ($500,000) in six (6)
consecutive monthly installments of $83,333.33
each, which shall be due commencing on
_____________, 1997 and shall continue to be
due on the same day of each succeeding
calendar month thereafter up to and through a
final payment which shall be due on
_____________, 1998 in an amount equal to the
entire remaining unpaid principal balance of this
Note. In the event that any of the aforesaid
principal installments is not paid when due, the
entire then-outstanding principal balance of this
Note shall be bear interest at a rate per annum
equal to eighteen percent (18%) from (and
including) the date of such payment default
through the date on which such payment default
is cured.
This Note shall be governed by the
laws of the State of Florida and shall be binding
upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns.
Time is of the essence of this Note.
In case this Note is collected by or
through an attorney-at-law, all costs of collection,
including reasonable attorney s fees, incurred by
Payee shall be paid by Maker.
SIGNED, SEALED AND
DELIVERED by the undersigned Maker as of
the day and year first above set forth.
AEGIS AUTO FINANCE, INC.
By:
Name:
Title: <PAGE>
EXHIBIT C
RETAINED RECEIVABLES
AMENDED AND RESTATED
MASTER TRUST AGREEMENT
by and between
AEGIS AUTO FUNDING CORP. IV,
a Delaware Corporation, Seller
and
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION,
Trustee
Dated as of May 1, 1997
With respect to
Aegis Auto Funding Corp. IV
Aegis Auto Receivables Trusts
Automobile Receivable Pass-Through
Certificates <PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS 1
ARTICLE II. CREATION OF TRUSTS; SALE
AND TAX TREATMENT 1
ARTICLE III. ESTABLISHMENT OF
RESERVE FUND 2
ARTICLE IV. ADDITIONAL
REQUIREMENTS 5
ARTICLE V. TERMINATION 6
ARTICLE VI. AMENDMENTS 6
ARTICLE VII. MISCELLANEOUS 6
TESTIMONIUM
SIGNATURES
APPENDIX A Amended and Restated Standard
Terms and Conditions
APPENDIX B Form of Pooling and Servicing
Agreement
AMENDED AND RESTATED MASTER
TRUST AGREEMENT
This AMENDED AND RESTATED
MASTER TRUST AGREEMENT dated as of
May 1, 1997 (this "Amended and Restated Master
Trust Agreement") is by and between AEGIS
AUTO FUNDING CORP. IV, a Delaware
corporation, as Seller, and NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION, as
Trustee for the holders from time to time of the
Automobile Receivable Pass-Through Certificates
(the "Certificates") to be issued by the trusts created
pursuant to the terms hereof.
W I T N E S S E T H :
WHEREAS, the Seller desires to provide for
the creation of a series of grantor trusts (each a
"Trust"), the assets of each to consist of a pool of
motor vehicle retail installment sales contracts
secured by new and used automobiles and light-duty
trucks and certain related property;
WHEREAS, each such Trust will issue a
series of Certificates evidencing an undivided
interest in the assets of the Trust (excluding the
residual interest retained by the Seller);
WHEREAS, each series of Certificates will
be issued pursuant to the terms of this Amended
and Restated Master Trust Agreement and a related
Pooling and Servicing Agreement incorporating the
Amended and Restated Standard Terms and
Conditions attached hereto as Appendix A (the
"Amended and Restated Standard Terms");
WHEREAS, each series of Certificates will
be additionally secured by a common reserve fund
established hereby and to be held outside each of
the individual Trusts;
WHEREAS, the parties have heretofore
entered into a Master Trust Agreement dated as of
March 1, 1997 (the "Original Agreement"),
providing for the creation of trusts from time to
time and the issuance of Certificates thereby, and
pursuant to which the 1997-1 Trust, the 1997-2
Trust and 1997-3 Trust (collectively, the "Prior
Trusts") have heretofore been created;
WHEREAS, the parties desire to amend and
restate the Original Agreement in its entirety as set
forth herein; and
WHEREAS, the parties intend that the
amendments effected hereby shall apply
retroactively to the Prior Trusts, except as expressly
provided otherwise herein.
NOW, THEREFORE, in consideration of
the foregoing premises and the mutual covenants
expressed herein, the parties hereto agree to amend
and restate the Original Agreement as follows:
ARTICLE I
DEFINITIONS
Terms used in this Amended and Restated
Master Trust Agreement and not otherwise defined
shall have the meanings assigned in the Amended
and Restated Standard Terms.
ARTICLE II
CREATION OF TRUSTS; SALE AND TAX
TREATMENT
Section 2.1. Creation of Trusts. Each
Trust shall be created upon the execution and
delivery of a Pooling and Servicing Agreement
substantially in the form of Appendix B hereto
and the Seller's conveyance to the Trustee of the
trust property specified therein. Concurrent with
the creation of each Trust, the Trustee shall execute
and deliver to the Seller or upon the Seller's written
order Automobile Receivable Pass-Through
Certificates representing a fractional undivided
ownership interest in the trust property conveyed
(excluding the residual interest retained by the
Seller). Such Certificates shall bear a separate
series designation, pay pass-through interest and be
subject to such other terms as provided in the
related Pooling and Servicing Agreement. Each
Pooling and Servicing Agreement shall incorporate
the Amended and Restated Standard Terms, with
such appropriate variations as from time to time
may be agreed to by the Seller and the Trustee
subject to Article VI hereof.
Section 2.2. Sale and Tax Treatment. It is
the intention of the parties that each transfer of trust
property to a Trust be treated as an absolute sale
and conveyance of such property by the Seller to
the Trustee on behalf of such Trust, and that each
Trust be treated as a separate grantor trust for
federal income tax purposes.
ARTICLE III
ESTABLISHMENT OF RESERVE FUND
Section 3.1. Establishment and Funding.
(a) In order to assure that sufficient amounts to
make required payments to the holders of the
Certificates will be available, there shall be
established and maintained with the Trustee the
following Eligible Account: the "Reserve Fund--
Aegis Auto Funding Corp. IV, Aegis Auto
Receivables Trusts" (the "Reserve Fund"), which
will include the money and other property deposited
therein pursuant to applicable sections of each
Pooling and Servicing Agreement and held therein
pursuant to this Article III. The Reserve Fund shall
not be part of any trust created pursuant to the
terms hereof, but instead will be held outside each
trust for the benefit of the holders of the
Certificates and to secure trustee and servicing fee
distributions as described below. Subject to the
terms and conditions hereinafter set forth, the
Reserve Fund shall be under the sole dominion and
control of the Trustee, as pledgee, and the Trustee
shall have the sole right to make withdrawals
therefrom. Notwithstanding the right of the Seller
hereunder to give instructions relating to the
investment or reinvestment of amounts in the
Reserve Fund, withdrawals from the Reserve Fund
may not be made at the direction of the Seller but
may only be made by the Trustee in accordance
with the terms hereof. The Seller and the Trustee
acknowledge that any amounts on deposit in the
Reserve Fund (and any investment earnings thereon)
will be owned directly by and be the separate
property of the Seller, and such parties hereby
agree to treat the same as assets (and investment
earnings) of the Seller for federal income tax
purposes.
(b) The Reserve Fund shall be funded
through deposits made on the date of creation of
each Trust and transfers made on each Distribution
Date and each Funding Date (if any) as provided in
the Pooling and Servicing Agreements.
Section 3.2. Reserve Fund Investments. (a)
Subject to subsection (b) below, amounts held in the
Reserve Fund shall be invested in Eligible
Investments, in accordance with written instructions
from the Seller or its designee, and such
investments shall not be sold or disposed of prior to
their maturity but shall mature no later than two
Business Days before the Distribution Date next
succeeding the date of investment. All amounts
held in the Reserve Fund, including proceeds of
investments, shall be available for application to
required distributions on such Distribution Date
pursuant to Section 3.5 hereof and 5.07(a) of the
Amended and Restated Standard Terms. All such
investments shall be made in the name of the
Trustee or its nominee. Any loss on investment of
amounts held in the Reserve Fund and all income
and gain realized on the Reserve Fund shall be
credited to such fund. The Trustee shall not have
any liability for losses on moneys invested by the
Trustee hereunder except if caused by its negligence
or its failure to act in accordance with reasonable
and proper instructions given in writing and
received by the Trustee.
(b) The foregoing subsection (a)
notwithstanding, an amount equal to the Reserve
Fund Initial Deposit deposited into the Reserve
Fund on the Closing Date with respect to each Trust
may be invested in capital appreciation notes issued
by The Aegis Consumer Funding Group, Inc. in a
maturity amount of up to four percent (4%) of the
aggregate initial Class Certificate Balance of the
Certificates issued by such Trust. Such notes (the
"Term Notes") shall be in substantially the form
attached to the related Pooling and Servicing
Agreement, shall mature on the date which is sixty-
six (66) months from the date thereof, and shall be
purchased at a price calculated to yield the Discount
Rate, payable at maturity. All amounts paid on
such Term Notes shall be deposited into the Reserve
Fund. In addition, on the Closing Date with respect
to the 1997-1 Trust, an additional amount in the
Reserve Fund was invested in a demand promissory
note (the "Demand Note") issued by The Aegis
Consumer Funding Group, Inc. in the amount and
on the terms and conditions set forth in the related
Pooling and Servicing Agreement.
Section 3.3. Pledge of Reserve Fund. In
order to provide for the required payments to be
made to the holders of the Certificates, the Trustee,
the Custodian, the Servicer, the Backup Servicer
and the Contingent Servicer pursuant to the Pooling
and Servicing Agreements, and to assure availability
of the amounts maintained in the Reserve Fund, the
Seller hereby pledges to and grants in favor of the
Trustee, as collateral agent, and its successor and
assigns, a security interest in and lien upon all its
right, title and interest in and to the Reserve Fund,
including all amounts and investments held from
time to time in the Reserve Fund (whether in the
form of deposit accounts, instruments, book-entry
securities, uncertificated securities or otherwise) (all
of the foregoing, subject to the limitations set forth
below, the "Reserve Fund Property"); to have and
to hold all the aforesaid property, rights and
privileges unto the Trustee, its successors and
assigns, in trust for the uses and purposes set forth
in this Article. The Trustee hereby acknowledges
such transfer and accepts the trust hereunder and
shall hold and distribute the Reserve Fund Property
in accordance with the terms and provisions of this
Article.
Section 3.4. Further Assurances. The Seller
agrees to take or cause to be taken such further
actions and to execute, deliver and file or cause to
be executed, delivered and filed such further
documents and instruments (including, without
limitation, any UCC financing statements or this
Amended and Restated Master Trust Agreement) as
may be determined to be necessary to perfect the
interests created by this Article in favor of the
Trustee and otherwise fully to effectuate the
purposes, terms and conditions of this Article.
Specifically, the Seller (with respect to Reserve
Fund Property) shall:
(i) promptly execute, deliver and
file any financing statements, amendments,
continuation statements, assignments,
certificates and other documents with respect
to such interests and perform all such other
acts as may be necessary in order to perfect
or to maintain the perfection of the Trustee's
security interest in the Reserve Fund
Property; and
(ii) make the necessary filings of
financing statements or amendments thereto
within ten business days after the occurrence
of any of the following: (1) any change in
the Seller's corporate name or any trade
name; (2) any change in the location of its
chief executive office or principal place of
business; and (3) any merger or
consolidation or other change in its identity
or corporate structure and promptly notify
the Trustee of any such filings.
Section 3.5. Reserve Fund Draws. If on
any Distribution Date the Total Available
Distribution Amount with respect to any series of
Certificates is insufficient to make all required
distributions to the Trustee, Backup Servicer,
Contingent Servicer, Custodian, Servicer and the
holders of such Certificates, the Trustee shall
withdraw an amount equal to such insufficiency (or
any lesser amount on deposit in the Reserve Fund
if an equal amount is not available) from the
Reserve Fund (any such withdrawal, a "Reserve
Fund Draw"), first from cash on deposit in the
Reserve Fund and, second, from proceeds of the
Demand Note as described below, and apply such
amount in the order of priority for distributions
established by the terms of the applicable Pooling
and Servicing Agreement. If, on any such
Distribution Date, the amount of the insufficiency
described above is greater than the amounts on
deposit in the Reserve Fund in cash or Eligible
Investments and the Demand Note is outstanding,
the Trustee shall notify the Certificateholders of
such insufficiency and, if directed to do so by the
Majority Certificateholders the Trustee shall, before
making any required withdrawals from the Reserve
Fund (or as soon as practicable after receiving the
direction of the Majority Certificateholders),
demand payment of such Demand Note in an
amount equal to the lesser of (x) the amount of such
excess insufficiency and (y) the outstanding
principal balance of such Demand Note plus
accrued interest thereon. Any amount repaid in
excess of the amounts required for a Reserve Fund
Draw shall be retained in the Reserve Fund. If on
any Distribution Date a Reserve Fund Draw is
needed under more than one Pooling and Servicing
Agreement to make required distributions, and the
total amount on deposit in the Reserve Fund is
insufficient to make all such distributions, the
Trustee shall apply the available amount on deposit
in the Reserve Fund to make required distributions
in the order of the dated dates of each such Pooling
and Servicing Agreement, commencing with the
earliest.
Section 3.6. Release of Reserve Fund
Amounts. Commencing on the Distribution Date
which is at least 24 months after the initial Closing
Date, funds remaining on deposit in the Reserve
Fund on any Distribution Date after any needed
Reserve Fund Draws have been made (exclusive of
the Demand Note or any Term Notes), shall, on
such date, be released to the Servicer to pay
accrued and unpaid Servicing Fees and, to the
extent such fees are paid in full, shall also be
released to the Seller, provided that the aggregate
amount of such released funds shall not exceed the
least of:
(x) 75% of the average aggregate
amount of monthly collections received in
the Reserve Fund during the most recent and
two preceding months (or, if less, 75% of
such collections received during the most
recent month) and which are allocable to
any Trust which has been in existence for at
least 24 months, so long as the total
cumulative deposits from such Trust into the
Reserve Fund have exceeded the total
cumulative withdrawals made to such Trust
from the Reserve Fund; and
(y) 50% of the amount by which
(i) the aggregate amount of collections
received during the most recent month for
all Trusts exceeds (ii) the aggregate of the
required payments to the Trustee, Back-up
Servicer, Custodian, Servicer and all holders
of the Certificates on such Distribution
Date; and
(z) 50% of the amount by which
(i) the aggregate amount of collections
received during the most recent month and
the two preceding months for all Trusts
exceeds (ii) the aggregate of the required
payments to the Trustee, Back-up Servicer,
Custodian, Servicer and all holders of the
Certificates made on such Distribution Date
and the two preceding Distribution Dates;
provided that, in no event shall amounts be
distributed to the Seller from the Reserve Fund on
any Distribution Date to the extent that the amounts
on deposit therein (exclusive of Term Notes and the
Demand Note), after giving effect to Reserve Fund
Draws on such date, would be less than the Reserve
Requirement.
Upon termination of this Amended and
Restated Master Trust Agreement and all related
Pooling and Servicing Agreements, any amounts on
deposit in the Reserve Fund, after payment of all
amounts due the Backup Servicer, the Contingent
Servicer, the Trustee, the Custodian, the Servicer
and the holders of the Certificates, shall be paid to
the Seller or its assignee. Amounts properly
received by the Seller pursuant to this Amended and
Restated Master Trust Agreement and any Pooling
and Servicing Agreement shall not be available to
the Trustee for the purpose of making deposits to
the Reserve Fund or making payments to the
holders of the Certificates, nor shall the Seller be
required to refund any amount properly received by
it.
ARTICLE IV
ADDITIONAL REQUIREMENTS
Section 4.1. Financing Statements.
On or before the initial Closing Date, the
Seller shall deliver to the Trustee UCC-1 financing
statements to be filed in appropriate jurisdictions
which are necessary to perfect the interests of the
Trustee in the Receivables and other Trust Property
to be transferred to the Trustee from time to time
pursuant to the related Pooling and Servicing
Agreements and the pledge of the Reserve Fund by
the Seller to the Trustee pursuant to this
Agreement. In addition, on or before the initial
Closing Date, the Seller shall deliver to the Trustee
copies of UCC-1 financing statements filed by the
lenders pursuant to the Warehouse Facility, each of
which shall provide that the Receivables and other
Trust Property sold from time to time by Aegis
Finance to the Seller pursuant to the Purchase
Agreement and by the Seller to the Trustee pursuant
to the related Pooling and Servicing Agreement,
shall not be included in the collateral covered by
such financing statements.
Section 4.2. Risk Default Insurance
Policies.
On the initial Closing Date the Seller shall
deliver to the Trustee the original Risk Default
Insurance Policies, each of which shall name Aegis
Finance as the named insured. On each Closing
Date and Funding Date, if any, the Seller shall
deliver to the Trustee an endorsement to such policy
naming the Trustee as an additional insured or a
"pool certificate holder" with respect to the
Receivables being transferred to the Trustee on such
date and the related Trust.
ARTICLE V
TERMINATION
This Amended and Restated Master Trust
Agreement may be terminated by the Seller upon
written notice to the Trustee, but only if at the time
of such notice every Pooling and Servicing
Agreement previously executed and delivered
pursuant to the Original Agreement or this
Amended and Restated Master Trust Agreement has
been terminated in accordance with its respective
terms.
<PAGE>
ARTICLE VI
AMENDMENTS
This Amended and Restated Master Trust
Agreement may be amended from time to time by
a written amendment duly executed and delivered
by the Seller and the Trustee; provided, however,
that for so long as any Certificates are outstanding,
without the prior written consent of all holders of
the Certificates, (i) no amendment of Section 2.2 or
Article III shall be made and (ii) the Amended and
Restated Standard Terms shall not be amended nor
varied in any given Pooling and Servicing
Agreement so as to change the day of the month on
which regular distributions from each of the trusts
is made or to make any other change that would
create a preference or distinction among the holders
of different series of Certificates outstanding with
respect to the security represented by the Reserve
Fund.
ARTICLE VII
MISCELLANEOUS
Section 7.1. Headings and
Cross-References. The various headings in this
Amended and Restated Master Trust Agreement are
included for convenience only and shall not affect
the meaning or interpretation of any provision
contained herein. References herein to Section or
Article names or numbers are to such Sections or
Articles of this Amended and Restated Master Trust
Agreement.
Section 7.2. Governing Law. This
Amended and Restated Master Trust Agreement
shall be governed by and construed in accordance
with the laws of the State of New York, including
Section 5-1401 of the General Obligations Law but
otherwise without regard or reference to principles
of conflicts of laws of such state.
Section 7.3. Counterparts. This Amended
and Restated Master Trust Agreement may be
executed in one or more counterparts, each of
which shall be an original, but all of which together
shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the Seller and
the Trustee have caused this Amended and Restated
Master Trust Agreement to be duly executed by
their respective officers as of the day and year first
above written.
AEGIS AUTO FUNDING CORP. IV,
as seller
By
Angelo R. Appierto
President
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By
Jason VanVleet
Corporate Trust Officer
<PAGE>
APPENDIX A
TO THE AMENDED AND RESTATED
MASTER TRUST AGREEMENT
AMENDED AND RESTATED STANDARD
TERMS AND CONDITION
Aegis Auto Funding Corp. IV
Aegis Auto Receivables Trusts
Automobile Receivable Pass-Through Certificates
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS.....................................1
ARTICLE II
INTERPRETATION
Section 2.01 Usage of Terms ..................17
Section 2.02. Cutoff Date and Record Date......17
Section 2.03. Section References.............. 17
ARTICLE III
THE RECEIVABLES
Section 3.01. Representations and Warranties of
Seller..........................18
Section 3.02. Repurchase or Substitution Upon
Breach..........................25
Section 3.03. Custody of Documents............26
Section 3.04. Duties of Custodian.............28
Section 3.05. Instructions; Authority to Act..29
Section 3.06. Custodian Fees; Indemnification.29
Section 3.07. Effective Period and Termination29
Section 3.08. Funding Events..................30
ARTICLE IV
ADMINISTRATION AND SERVICING OF
RECEIVABLES
Section 4.01. Servicing Duties. . . . . . 32
Section 4.02. Resignation of
Backup Servicer . . . . . . . . 33
Section 4.03. Covenant of Backup
Servicer . . . . . . . . . . . . 33
Section 4.04. Servicing Fees . . . . 34
Section 4.05. Costs and Expenses . . 34
Section 4.06. Standard of Care . . . 34
Section 4.07. Contingent Servicer. . .
ARTICLE V
DISTRIBUTIONS; ACCOUNTS;
STATEMENTS TO CERTIFICATEHOLDERS
Section 5.01. Accounts . . . . . . . 35
Section 5.02. Collections. . . . . . 36
Section 5.03. Application of
Collections. . . . . . . . . . . 36
Section 5.04. Miscellaneous
Servicer Collections . . . . . . 36
Section 5.05. Additional Deposits. . 36
Section 5.06. Distributions. . . . . 37
Section 5.07. Reserve Fund . . . . . 39
Section 5.08. Funding Account. . . . 39
Section 5.09. Statements to
Certificateholders; Tax
Returns. . . . . . . . . . . . . 39
Section 5.10. Reliance on
Information from the Servicer
. . . . . . . . . . . . . . . . 43
ARTICLE VI
RIGHTS OF
CERTIFICATEHOLDERS . . . . . . . 43
ARTICLE VII
THE CERTIFICATES
Section 7.01. The Certificates . . . 43
Section 7.02. Execution,
Authentication of Certificates
. . . . . . . . . . . . . . . . 44
Section 7.03. Registration of
Transfer and Exchange of
Certificates . . . . . . . . . . 44
Section 7.04. Mutilated, Destroyed,
Lost or Stolen Certificates. . . 47
Section 7.05. Persons Deemed
Owners . . . . . . . . . . . . . 47
Section 7.06. Access to List of
Certificateholders' Names
and Addresses. . . . . . . . . . 47
Section 7.07. Maintenance of Office
or Agency. . . . . . . . . . . . 48
Section 7.08. Notices to
Certificateholders . . . . . . . 48
ARTICLE VIII
THE SELLER
Section 8.01. Representations of
Seller . . . . . . . . . . . . . 48
Section 8.02. Liability of Seller;
Indemnities. . . . . . . . . . . 51
Section 8.03. Merger or
Consolidation of, or
Assumption of the
Obligations of, Seller
. . . . . . . . . . . . . . . . 52
Section 8.04. Limitation on
Liability of Seller and Others
. . . . . . . . . . . . . . . . 53
Section 8.05. Seller May Own
Certificates . . . . . . . . . . 53
Section 8.06. Covenants of the
Seller . . . . . . . . . . . . . 53
Section 8.07. Enforcement by
Trustee. . . . . . . . . . . . . 54
Section 8.08. No Bankruptcy
Petition . . . . . . . . . . . . 57
ARTICLE IX
THE BACKUP SERVICER
Section 9.01. Representations of
Backup Servicer. . . . . . . . . 58
Section 9.02. Merger or
Consolidation of, or
Assumption of the
Obligations of, or
Resignation of Backup
Servicer . . . . . . . . . . . . 59
Section 9.03. Limitation on
Liability of Backup Servicer
and Others . . . . . . . . . . . 59
Section 9.04. Successor Backup
Servicer . . . . . . . . . . . . 60
Section 9.05. No Bankruptcy
Petition . . . . . . . . . . . . 60
ARTICLE X
BACKUP SERVICING DEFAULT
Section 10.01. Events of Backup
Servicing Default. . . . . . . . 60
Section 10.02. Appointment of
Successor. . . . . . . . . . . . 61
Section 10.03. Notification to
Certificateholders . . . . . . . 62
Section 10.04. Waiver of Past
Defaults . . . . . . . . . . . . 62
ARTICLE XI
THE TRUSTEE
Section 11.01. Duties of Trustee . . 62
Section 11.02. Trustee's Certificate
. . . . . . . . . . . . . . . . 66
Section 11.03. Trustee's
Assignment of Purchased
Receivables. . . . . . . . . . . 65
Section 11.04. Certain Matters
Affecting Trustee. . . . . . . . 65
Section 11.05. Trustee Not Liable
for Certificates or
Receivables. . . . . . . . . . . 66
Section 11.06. Trustee May Own
Certificates . . . . . . . . . . 67
Section 11.07. Trustee's Fees and
Expenses . . . . . . . . . . . . 67
Section 11.08. Eligibility
Requirements for Trustee . . . . 68
Section 11.09. Resignation or
Removal of Trustee . . . . . . . 68
Section 11.10. Successor Trustee . . 69
Section 11.11. Merger or
Consolidation of Trustee . . . . 69
Section 11.12. Appointment of
Co-Trustee or Separate
Trustee. . . . . . . . . . . . . 69
Section 11.13. Representations and
Warranties of Trustee . . . . . . . . . . 71
Section 11.14. No Bankruptcy
Petition . . . . . . . . . . . . 72
ARTICLE XII
TERMINATION
Section 12.01. Termination of the
Trust. . . . . . . . . . . . . . 72
Section 12.02. Optional Purchase of
All Receivables. . . . . . . . . 73
Section 12.03. Notice. . . . . . . . 73
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.01. Amendment . . . . . . 73
Section 13.02. Protection of Title to
Trust. . . . . . . . . . . . . . 74
Section 13.03. Limitation on Rights
of Certificateholders. . . . . . 75
Section 13.04. Governing Law . . . . 75
Section 13.05. Notices . . . . . . . 76
Section 13.06. Severability of
Provisions . . . . . . . . . . . 77
Section 13.07. Assignment. . . . . . 77
Section 13.08. Certificates
Nonassessable and Fully Paid
. . . . . . . . . . . . . . . . 77
Section 13.09. Counterparts. . . . . 77
Section 13.10. Limited Recourse to
Seller . . . . . . . . . . . . . 77
EXHIBIT A Forms of Certificates
. . . . . . . . . . . . . . . . . .A-1-1
EXHIBIT B [Reserved]. . . . . . . . .B-1
EXHIBIT C Form of Trustee's
Statement to Certificateholders . . .C-1
EXHIBIT D [Reserved]. . . . . . . . .D-1
EXHIBIT E Location of Servicer
Files . . . . . . . . . . . . . . . .E-1
EXHIBIT F 1 [Reserved]. . . . . . .F-1-1
EXHIBIT F 2 [Reserved]. . . . . . .F-2-1
EXHIBIT G Wiring Instructions
Form . . . . . . . . . . . . . . . .G-1
EXHIBIT H [Reserved]. . . . . . . . .H-1
EXHIBIT I Risk Default Insurance
Policies. . . . . . . . . . . . . . .I-1
EXHIBIT J VSI Insurance Policy. . . .J-1
EXHIBIT K Form of Transferee
Letter (Rule 144A Transfer) . . . . K-1
EXHIBIT L Form of Investor
Letter
(Non-Rule 144A Purchase of Class B
Certificates). . . . . . . . . . . . . . .L-1
EXHIBIT M Form of ERISA
Representation Letter . . . . . . . .M-1
EXHIBIT N Form of Notice of
Funding . . . . . . . . . . . . . . .N-1
EXHIBIT O Form of Officer's
Certificate . . . . . . . . . . . . .O-1
EXHIBIT P Assignment. . . . . . . . .P-1
EXHIBIT Q [Reserved]. . . . . . . . .Q-1
EXHIBIT R Form of Trustee's
Certificate . . . . . . . . . . . . .R-1
EXHIBIT S [Reserved]. . . . . . . . .S-1<PAGE>
AMENDED AND RESTATED
STANDARD TERMS AND CONDITIONS
DATED AS OF MAY 1, 1997
INTRODUCTION
The following Amended and Restated
Standard Terms and Conditions (the "Amended and
Restated Standard Terms") shall be applicable to
each Trust formed by the Seller pursuant to the
foregoing Amended and Restated Master Trust
Agreement, with respect to which a Pooling and
Servicing Agreement incorporating by reference
these Amended and Restated Standard Terms shall
have been executed, subject to such modifications
as may be specified in such particular Pooling and
Servicing Agreement and as may be permitted
under Article VI of the Amended and Restated
Master Trust Agreement. Except as otherwise
provided herein, the amendments made hereby to
the Standard Terms and Conditions applicable as of
March 1, 1997 shall apply to the the Prior Trusts
and each Trust formed on or after the date hereof.
ARTICLE I
DEFINITIONS
Whenever used in these Amended and
Restated Standard Terms, the following words and
phrases, unless the context otherwise requires, shall
have the following meanings:
"Accounts" shall mean the accounts and
funds identified in Section 5.01 hereof.
"Additional Receivables" means all
Receivables sold by the Seller to the Trust after the
Closing Date and during the Funding Period, if any,
which shall be listed on Schedule A to the related
assignment, delivered pursuant to the Agreement.
"Aegis Finance" means Aegis Auto Finance,
Inc., a Delaware corporation, its successors and
assigns.
"Aegis Finance Servicing Agreement" means
the Master Servicing Agreement, as amended and
restated, providing for the servicing of the
Receivables among Aegis Finance, the Backup
Servicer and the Trustee, and all amendments,
modifications and supplements thereto.
"Affiliate" of any Person means any other
Person which, directly or indirectly, controls, is
controlled by or is under common control with such
Person. A Person shall be deemed to be
"controlled by" any other Person if such other
Person possesses, directly or indirectly, power
(a) to vote 10% or more of the securities
(on a fully diluted basis) having ordinary voting
power for the election of directors or managing
general partners; or
(b) to direct or cause the direction of the
management and policies of such Person whether by
contract or otherwise.
"Agreement" means the Pooling and
Servicing Agreement executed by the Seller, the
Backup Servicer and the Trustee as of the date set
forth thereon, into which these Amended and
Restated Standard Terms shall be incorporated by
reference, and all amendments, modifications and
supplements thereto.
"Amended and Restated Master Trust
Agreement" means the Amended and Restated
Master Trust Agreement dated as of May 1, 1997,
which amends and restates the Master Trust
Agreement dated as of March 1, 1997 by and
between the Seller and the Trustee, as the same
may be further amended, supplemented or restated.
"Amended and Restated Standard Terms"
means these Amended and Restated Standard Terms
dated as of May 1, 1997, as the same may be
amended or modified from time to time.
"Amount Financed" means, with respect to
a Receivable, the amount advanced under the
Receivable toward the purchase price of the
Financed Vehicle and any related costs.
"Annual Percentage Rate" or "APR" means,
with respect to a Receivable, the annual rate of
finance charges stated in the Receivable.
"Available Interest Distribution Amount"
means, for any Distribution Date, the sum of the
following amounts with respect to the preceding
Collection Period: (i) that portion of all collections
of Scheduled Payments and prepayments in full or
in part on Receivables allocable to interest; (ii)
Liquidation Proceeds and other Recoveries to the
extent allocable to interest due on Liquidated
Receivables and Defaulted Receivables in
accordance with the Servicer's customary servicing
procedures; (iii) Risk Default Insurance Proceeds
to the extent allocable to interest as determined by
the Servicer; (iv) the earnings, if any, on amounts
in the Funding Account (if any) accrued during the
related Collection Period, and for the initial
Distribution Date, such earnings as have accrued to
such date; and (v) the Purchase Amount of each
Receivable that became a Purchased Receivable
during the related Collection Period to the extent
attributable to accrued interest thereon; provided,
however, that in calculating the Available Interest
Distribution Amount the following will be excluded:
all payments and proceeds (including Liquidation
Proceeds) of any Purchased Receivables the
Purchase Amount of which has been included in the
Principal Distributable Amount with respect to a
prior Distribution Date.
"Available Principal Distribution Amount"
means, for any Distribution Date, the sum of the
following amounts with respect to the preceding
Collection Period: (i) that portion of all collections
of Scheduled Payments and prepayments in full or
in part on Receivables allocable to principal; (ii)
Liquidation Proceeds and other Recoveries allocable
to the principal amount of Liquidated Receivables
and Defaulted Receivables in accordance with the
Servicer's customary servicing procedures; (iii)
Risk Default Insurance Proceeds to the extent not
allocable to interest as determined by the Servicer;
(iv) amounts deposited in the Collection Account
pursuant to Section 3.02(b) in respect of
Receivables that became Substitute Receivables
during the related Collection Period; and (v) to the
extent attributable to principal, the Purchase
Amount of each Receivable that became a
Purchased Receivable during the preceding
Collection Period; provided, however, that in
calculating the Available Principal Distribution
Amount the following will be excluded: all
payments and proceeds (including Liquidation
Proceeds) of any Purchased Receivables the
Purchase Amount of which has been included in the
Principal Distributable Amount with respect to a
prior Distribution Date.
"Backup Servicer" means Norwest Bank
Minnesota, National Association, until any
successor Backup Servicer is appointed or succeeds
to the duties and obligations of the Backup Servicer
hereunder, and thereafter means the Eligible
Servicer appointed successor Backup Servicer
pursuant to Section 9.02 or 10.02.
"Bankruptcy Code" means the federal
Bankruptcy Code of 1978, as amended, 11 USc
101 through 1330.
"Business Day" means any day other than a
Saturday, a Sunday, or a day on which banking
institutions (including the Federal Reserve Bank, if
applicable) in the cities in which the principal
offices of the Trustee or the Servicer are located, or
New York, New York, or Jersey City, New Jersey
shall be authorized or obligated by law, executive
order, or governmental decree to be closed. Any
action required to be taken on a day which falls on
a non-Business Day shall be conducted on the next
Business Day.
"Certificate" means a Class A Certificate or
a Class B Certificate.
"Certificate Account" means the trust
account designated as such, established and
maintained pursuant to Section 5.01.
"Certificate Register" and "Certificate
Registrar" mean the register maintained and the
registrar appointed pursuant to Section 7.03.
"Certificateholder" or "Holder" means the
Person in whose name the respective Certificate
shall be registered in the Certificate Register,
except that, solely for the purposes of giving any
approval, consent, waiver, request or demand
pursuant to this Agreement, the interest evidenced
by any Certificate registered in the name of the
Seller, the Servicer, the Backup Servicer, the
Trustee or any Affiliate of any of the foregoing
shall not be taken into account in determining
whether the requisite percentage necessary to effect
any such consent, waiver, request or demand shall
have been obtained.
"Certificateholder Statement" means the
Statement the form of which is attached hereto as
Exhibit C.
"Class" means all Certificates having the
same priority of payment and bearing the same
alphabetical designation (A or B).
"Class A Certificate" means any one of the
Certificates executed by the Trustee on behalf of the
Trust and authenticated by the Trustee in
substantially the form set forth in Exhibit A-1
hereto.
"Class A Certificate Balance" shall equal,
initially, the Class A Percentage of the aggregate
Principal Balance of the Initial Receivables as of the
initial Cutoff Date plus the Class A Percentage of
the Original Pre-Funded Amount, if any, and,
thereafter, the initial Class A Certificate Balance,
reduced by all amounts previously distributed to
Class A Certificateholders as principal.
"Class A Distributable Amount" means, on
any Distribution Date, the sum of the Class A
Interest Distributable Amount and the Class A
Principal Distributable Amount.
"Class A Interest Carryover Shortfall"
means, as of the close of any Distribution Date, the
excess of the Class A Interest Distributable Amount
for such Distribution Date plus any outstanding
Class A Interest Carryover Shortfall from the
previous Distribution Date plus interest on such
outstanding Class A Interest Carryover Shortfall, to
the extent permitted by law, at the Class A Rate
from such preceding Distribution Date through the
current Distribution Date, over the amount of
interest that the holders of the Class A Certificates
actually received on such Distribution Date.
"Class A Interest Distributable Amount"
means, (i) for any Distribution Date (other than the
Initial Distribution Date), one-twelfth of the product
of (x) the Class A Rate and (y) the Class A
Certificate Balance as of the close of business on
the preceding Distribution Date (after giving effect
to any distribution of principal on the Class A
Certificates made on such preceding Distribution
Date) and (ii) for the Initial Distribution Date, the
product of (x) the Class A Rate, (y) the initial Class
A Certificate Balance and (z) a fraction (A) the
numerator of which equals the sum of 30 plus, if
the Closing Date occurs prior to the 20th day in any
calendar month, the number of days from the
Closing Date to but not including such 20th day, or
minus, if the Closing Date occurs after the 20th day
in any calendar month, the number of days from
such 20th day to but not including the Closing Date,
and (B) the denominator of which equals 360.
"Class A Percentage" has the meaning set
forth in the Agreement.
"Class A Principal Carryover Shortfall"
means, as of the close of any Distribution Date, the
excess of the Class A Principal Distributable
Amount plus any outstanding Class A Principal
Carryover Shortfall from the preceding Distribution
Date over the amount of principal that the holders
of the Class A Certificates actually received on such
Distribution Date pursuant to Section 5.06.
"Class A Principal Distributable Amount"
means, with respect to any Distribution Date, the
Class A Percentage of the Principal Distributable
Amount.
"Class B Certificate" means any one of the
Certificates executed by the Trustee on behalf of the
Trust and authenticated by the Trustee in
substantially the form set forth in Exhibit A-2
hereto.
"Class B Certificate Balance" shall equal,
initially, the Class B Percentage of the aggregate
Principal Balance of the Initial Receivables as of the
initial Cutoff Date plus the Class B Percentage of
the Original Pre-Funded Amount, if any, and,
thereafter, the initial Class B Certificate Balance,
reduced by all amounts previously distributed to
Class B Certificateholders as principal.
"Class B Distributable Amount" means, on
any Distribution Date, the sum of the Class B
Interest Distributable Amount and the Class B
Principal Distributable Amount.
"Class B Interest Distributable Amount"
means, (i) for any Distribution Date (other than the
Initial Distribution Date), one-twelfth of the product
of (x) the Class B Rate and (y) the Class B
Certificate Balance as of the close of business on
the preceding Distribution Date (after giving effect
to any distribution of principal on the Class B
Certificates made on such preceding Distribution
Date) and (ii) for the Initial Distribution Date, the
sum of (1) the product of (x) the Class B Rate, (y)
the initial Class B Certificate Balance and (z) a
fraction (A) the numerator of which equals the sum
of 30 plus, if the Closing Date occurs prior to the
20th day in any calendar month, the number of days
from the Closing Date to but not including such
20th day, or minus, if the closing Date occurs after
the 20th day in any calendar month, the number of
days from such 20th day to but not including the
Closing Date, and (B) the denominator of which
equals 360, plus (2) an amount equal to that portion
of the purchase price of the Class B Certificates
under the Master Certificate Purchase Agreement
equal to the interest payable under the Warehouse
Facility.
"Class B Percentage" has the meaning set
forth in the Agreement.
"Class B Principal Carryover Shortfall"
means, as of the close of any Distribution Date, the
excess of the Class B Principal Distributable
Amount plus any outstanding Class B Principal
Carryover Shortfall from the preceding Distribution
Date over the amount of principal that the holders
of the Class B Certificates actually received on such
Distribution Date pursuant to Section 5.06.
"Class B Principal Distributable Amount"
means, as of any Distribution Date, the Class B
Percentage of the Principal Distributable Amount.
"Class Certificate Balance" means, with
respect to the applicable Class of Certificates, the
Class A Certificate Balance or the Class B
Certificate Balance.
"Class Factor" means, with respect to any
Distribution Date and any Class of Certificates, a
seven-digit decimal figure computed by the Trustee
equal to the Class Certificate Balance of such Class
as of such Distribution Date divided by the Original
Class Certificate Balance thereof.
"Class Percentage" means, with respect to
the applicable Class of Certificates, the Class A
Percentage or the Class B Percentage.
"Clearing Agency" means an organization
registered as a "clearing agency" pursuant to
Section 17A of the Exchange Act.
"Clearing Agency Participant" means a
broker, dealer, bank, other financial institution or
other Person for whom from time to time a
Clearing Agency effects book entry transfers and
pledges of securities deposited with the Clearing
Agency.
"Closing Date" shall be determined
separately for each Trust and shall be specified in
the corresponding Agreement.
"Code" means the Internal Revenue Code of
1986, as amended.
"Collection Account" means the trust account
designated as such, established and maintained
pursuant to Section 5.01.
"Collection Period" means, with respect to
a Distribution Date, the calendar month
immediately prior to such Distribution Date. Any
amount stated "as of the close of business of the last
day of a Collection Period" shall give effect to the
following calculations as determined as of the end
of the day on such last day: (1) all applications of
collections, and (2) all distributions.
"Contingent Servicer" means LSI Financial
Group, or any Eligible Servicer appointed successor
Contingent Servicer pursuant to Section 4.07
hereof.
"Contingent Servicer Fee" shall have the
meaning set forth in the Agreement.
"Corporate Trust Office" means the office of
the Trustee at which its corporate trust business
shall be administered, which office at the date of
this Agreement shall be 6th Street and Marquette
Avenue, Minneapolis, Minnesota 55479-0070,
Attention: Corporate Trust Services --Asset-Backed
Administration, or such other address as shall be
designated by the Trustee in written notice to the
Seller, the Backup Servicer, the Servicer and each
Certificateholder.
"Credit Enhancer" means Barclays Bank
PLC or any other financial institution which shall
provide a letter of credit, a standby purchase
agreement or other credit enhancement for the Class
A Certificates or any commercial paper issued to
fund an investment in the Class A Certificates.
"Credit Enhancement Fee" shall have the
meaning set forth in the Agreement.
"Custodian" means the Person acting as
Custodian of the Trust pursuant to Section 3.03, its
successor in interest and any successor custodian.
"Custodian Fees" shall have the meaning set
forth in the Agreement.
"Custodian Files" means the documents
specified in Section 3.03(a).
"Dealer" means any licensed or franchised
factory-authorized motor vehicle dealer, or affiliate
thereof, who sold a Financed Vehicle to an Obligor
and who originated the respective Receivable which
was acquired by Aegis Finance.
"Dealer Recourse" means, with respect to a
Receivable, all recourse rights against the Dealer
that originated the Receivable, and any successor
Dealer.
"Defaulted Receivable" means any
Receivable, other than a Liquidated Receivable, as
to which the Obligor became 90 days past due
(calculated on the basis of a 360-day year of 12 30-
day months) in making Scheduled Payments during
the prior Collection Period.
"Demand Note" has the meaning set forth in
Section 3.2(b) of the Amended and Restated Master
Trust Agreement.
"Delivery Date" has the meaning set forth in
Section 3.08(b)(i).
"Determination Date" means, with respect to
any Distribution Date, the eighth (8th) Business
Day of the calendar month of such Distribution
Date; provided, however, if such Business Day is
later than the eleventh (11th) day of such month,
then the Determination Date shall mean the next
earlier Business Day which is not later than the
eleventh (11th) day of such calendar month.
"Discount Rate" has the meaning set forth in
the Agreement.
"Dissolution" means, with respect to the
Seller, bankruptcy, insolvency or dissolution.
"Distribution Date" means, for each
Collection Period, the 20th day of the month
following the month in which the Collection Period
ends, or if the 20th day is not a Business Day, the
next following Business Day, beginning on the
Initial Distribution Date.
"Eligible Account" means a segregated
account (except as otherwise permitted with respect
to the Lock-Box Account) which may be an account
maintained with the Trustee, which is either (a)
maintained with an Eligible Institution, or (b) a
segregated trust account or similar account
maintained with a federally or state chartered
depository institution subject to regulations
regarding fiduciary funds on deposit substantially
similar to 12 C.F.R. 9.10(b).
"Eligible Institution" means a depository
institution or trust company whose long-term
unsecured debt obligations are rated at least "A" by
S&P or "A2" by Moody's (provided that, if only
one such rating agency rates such institution, such
single rating shall suffice).
"Eligible Investments" means negotiable
instruments or securities or other investments (a)
which, except in the case of demand or time
deposits, investments in money market funds and
repurchase obligations, are represented by
instruments in bearer or registered form or
ownership of which is represented by book entries
by a clearing agency or by a Federal Reserve Bank
in favor of depository institutions eligible to have an
account with such Federal Reserve Bank who hold
such investments on behalf of their customers and
(b) which evidence:
(i) direct obligations of, and
obligations fully guaranteed as to full and
timely payment by, the United States of
America;
(ii) demand deposits, time
deposits or certificates of deposit of
depository institutions or trust companies
incorporated under the laws of the United
States of America or any state thereof and
subject to supervision and examination by
federal or state banking or depository
institution authorities; provided, however,
that at the time of the Trust's investment or
contractual commitment to invest therein,
the short-term unsecured debt obligations of
such depository institution or trust company
shall have credit ratings from either S&P or
Moody's in the highest investment category
granted by S&P or Moody's, as applicable;
(iii) commercial paper having, at
the time of the Trust's investment or
contractual commitment to invest therein, a
rating from either S&P or Moody's in the
highest investment category by S&P or
Moody's;
(iv) bankers' acceptances issued
by any depository institution or trust
company referred to in (ii) above;
(v) investments in money market
funds having the highest investment category
from either S&P or Moody's (such
investments may include money market
funds sponsored by Norwest Bank
Minnesota, National Association that have a
credit rating from either S&P or Moody's);
(vi) time deposits (having
maturities of not more than 30 days) or
notes which are payable on demand by an
entity the commercial paper of which has
the highest investment category granted by
either S&P or Moody's; and
(vii) repurchase obligations with
respect to any security described in clause
(i) above entered into with a depository
institution or trust company (acting as
principal) meeting the rating standards
described in clause (ii) above.
Any Eligible Investments may be purchased by or
through the Trustee or any of its affiliates.
"Eligible Servicer" means any entity which,
at the time of its appointment as Backup Servicer,
Contingent Servicer, Servicer or subservicer, and
for so long as such entity is acting in such capacity,
(i) is servicing a portfolio of motor vehicle retail
installment sale contracts or motor vehicle loans,
(ii) is legally qualified (or is acting through an
Affiliate which is legally qualified) and has the
capacity to service the Receivables, (iii) has
demonstrated the ability to professionally and
competently service a portfolio of similar contracts
in accordance with industry standards of skill and
care, (iv) is qualified and entitled to use, and agrees
to maintain the confidentiality of, the software that
the Backup Servicer, Contingent Servicer, Servicer
or a subservicer uses in connection with performing
its duties and responsibilities under this Agreement,
a supervisory servicing agreement, the Servicing
Agreement or a subservicing agreement or obtains
rights to use or develops its own software which is
adequate to perform its duties and responsibilities
under this Agreement, a supervisory servicing
agreement, the Servicing Agreement or a
subservicing agreement and (v) is approved by the
Risk Default Insurer.
"ERISA" means the Employee Retirement
Income Security Act of 1974, as amended.
"Event of Backup Servicing Default" with
respect to the Backup Servicer means an event
specified in Section 10.01.
"Event of Servicing Default" means an event
specified in paragraph VI of the Servicing
Agreement.
"Excess Interest Collections" has the
meaning set forth in Section 5.05(b).
"Excess Receipts" means, with respect to any
Distribution Date, the remaining amount on deposit
in the Certificate Account after all distributions
pursuant to Section 5.06(d) have been made.
"Exchange Act" means the Securities
Exchange Act of 1934, as amended.
"Final Funding Date" means the date upon
which the balance in the Funding Account is
reduced to zero.
"Financed Vehicle" means an automobile or
light-duty truck, together with all accessions
thereto, securing an Obligor's indebtedness under
the respective Receivable.
"Funding Account" means the trust account,
if any, designated as such, established and
maintained pursuant to the Agreement and
Sections 5.01 and 5.08 hereof.
"Funding Date" means each date occurring
no more than once per calendar week during the
Funding Period, if any, on which Additional
Receivables are sold to the Trust.
"Funding Event" shall mean, with respect to
a Funding Date, if any, the occurrence of the events
required to occur in accordance with Section 3.08.
"Funding Period" has the meaning set forth
in the Agreement, which in no case shall be more
than fifteen days from the Closing Date of the
corresponding Trust.
"Initial Distribution Date" has the meaning
set forth in the Agreement.
"Initial Receivables" means all Receivables
sold to the Trust by the Seller on the Closing Date.
"Insurance Policy" means, with respect to a
Receivable, any comprehensive, collision, fire and
theft insurance policy required to be maintained by
the Obligor with respect to the Financed Vehicle,
the VSI Insurance Policy, and any credit life and
disability insurance maintained by the Obligor or
Seller and benefitting the holder of the Receivable.
"Investment Company Act" means the
Investment Company Act of 1940, as amended.
"Lien" means a security interest, lien,
charge, pledge, equity or encumbrance of any kind.
"Liquidated Receivable" means any
Receivable, other than a Receivable that first
became a Defaulted Receivable, liquidated by the
Servicer through sale of the Financed Vehicle or
otherwise.
"Liquidation Proceeds" means the moneys
collected during the respective Collection Period on
a Liquidated Receivable, whether through
foreclosure or otherwise, other than Risk Default
Insurance Proceeds, net of the sum of any amounts
expended by the Servicer for the account of the
Obligor and the expenses incurred in the
liquidation.
"Lock-Box Account" means the account(s)
designated as such, established and maintained
pursuant to Section 5.01 hereof, into which account
shall be deposited only those moneys collected with
respect to the Receivables as contemplated herein
and moneys collected with respect to other retail
installment sales contracts originated or purchased
by Aegis Finance or its Affiliates.
"Lock-Box Account Depository" means each
of Wells Fargo Bank, N.A., and Commerce Bank,
acting as Lock-Box Account Depository hereunder,
its successors in interest and any successors
appointed pursuant to paragraph IX of the Servicing
Agreement.
"Majority Certificateholders" means Holders
of Certificates evidencing not less than 51% of the
Voting Interests of each Class thereof.
"Master Certificate Purchase Agreement"
means the Master Certificate Purchase Agreement
dated March 14, 1997 among the Seller, The Aegis
Consumer Funding Group, Inc., III Finance Ltd.,
III Global Ltd. and III Limited Partnership, as
amended, supplemented or restated.
"Miscellaneous Servicer Collections" means,
with respect to a Collection Period, all late charges,
extension fees and recoveries of expenses relating to
liquidation, repossession and other costs previously
incurred by the Servicer.
"Monthly Servicing Certificate" means the
certificate substantially in the form of Schedule B to
the Servicing Agreement.
"Moody's" means Moody's Investors Service
or any successors thereto.
"Net Loss" means, with respect to a
Collection Period, the sum of the Principal Balances
of Receivables that became Liquidated Receivables
or Defaulted Receivables during such Collection
Period, minus Recoveries and Risk Default
Insurance Proceeds (to the extent allocable to
principal) received in such Collection Period.
"1997-1 Trust" means the Aegis Auto
Receivables Trust 1997-1 established pursuant to the
Pooling and Servicing Agreement dated as of March
1, 1997 among the Seller, the Trustee and the
Backup Servicer.
"1997-2 Trust" means the Aegis Auto
Receivables Trust 1997-2 established pursuant to the
Pooling and Servicing Agreement dated as of April
1, 1997 among the Seller, the Trustee and the
Backup Servicer.
"1997-3 Trust" means the Aegis Auto
Receivables Trust 1997-3 established pursuant to the
Pooling and Servicing Agreement dated as of May
1, 1997 among the Seller, the Trustee and the
Backup Servicer.
"Nonconforming Insured Receivables" means
Receivables which were not originated in
accordance with the Underwriting Guidelines but
which are covered by a Risk Default Insurance
Policy.
"Notice of Funding" has the meaning set
forth in Section 3.08(b)(ii)(C).
"Obligor" means, with respect to a
Receivable, the purchaser or co-purchasers of the
Financed Vehicle and/or any other Person who
owes payments under such Receivable.
"Officer's Certificate" means a certificate
signed by the chairman of the board, the president,
any vice chairman of the board, any vice president,
any assistant vice president, any trust officer, the
treasurer, the controller or any assistant treasurer or
any assistant controller of the Seller, the Trustee,
the Servicer, the Custodian or the Backup Servicer,
as appropriate.
"Opinion of Counsel" means a written
opinion of counsel who may but need not be
counsel to the Seller or Servicer, which counsel
shall be acceptable to the Trustee.
"Optional Purchase Percentage" means 10%
of the Original Pool Balance.
"Original Certificate Balance" means, as to
any Certificate, the initial certificate balance stated
on the face of such Certificate.
"Original Pool Balance" means the initial
Principal Balance of all Receivables (including
Additional Receivables) as of their respective Cutoff
Dates.
"Original Pre-Funded Amount" means the
amount deposited in the Funding Account, if any,
on the Closing Date, which amount shall not exceed
30% of the Original Pool Balance.
"Pass-through Rate" means, with respect to
the applicable Class of Certificates, the Class A
Rate or the Class B Rate.
"Percentage Interest" means, with respect to
any Certificate, the percentage ownership interest of
such Certificate in the aggregate of amounts
distributable hereunder to the related Class of
Certificates. With respect to any Certificate, the
Percentage Interest evidenced thereby shall equal
the Original Certificate Balance thereof divided by
the aggregate Original Class Certificate Balance of
the related Class.
"Person" means any individual, corporation,
estate, partnership, limited liability company, joint
venture, association, joint stock company, trust,
unincorporated organization, or government or any
agency or political subdivision thereof.
"Plan" means an employee benefit plan
subject to ERISA or a plan or other retirement
arrangement subject to Section 4975 of the Code.
"Pool Balance" means, as of the day of
calculation, the aggregate Principal Balance of the
Receivables less Net Losses.
"Pool Factor" means, as of any Distribution
Date, a seven-digit decimal figure equal to the Pool
Balance for such Distribution Date divided by the
Original Pool Balance.
"Principal Balance" means, with respect to
any Receivable at any time, the Amount Financed
minus the sum of (a) the portion of all payments
made by or on behalf of the related Obligor and
allocable to principal using the Simple Interest
Method and (b) the portion of any payment of the
Purchase Amount with respect to the Receivable
allocable to principal, calculated as of the close of
business on the last day of the prior Collection
Period (or, prior to the end of the first Collection
Period, calculated as of the close of business on the
day immediately prior to the Cutoff Date).
"Principal Distributable Amount" means,
with respect to any Distribution Date the sum of: (i)
the portion of all Scheduled Payments allocable to
principal (including delinquent payments) collected
during the preceding Collection Period on the
Receivables; (ii) the principal portion of all
prepayments in full or in part received during the
preceding Collection Period (without duplication of
amounts included in clause (i) above); (iii) the
Principal Balance of each Receivable that became a
Purchased Receivable during the preceding
Collection Period (without duplication of amounts
referred to in clauses (i) and (ii) above); (iv) the
Principal Balance of each Receivable that became a
Liquidated Receivable during the preceding
Collection Period (without duplication of amounts
included in clause (i), (ii) and (iii) above), and (v)
the Principal Balance of each Receivable that
became a Defaulted Receivable during the preceding
Collection Period (without duplication of amounts
included in clause (i), (ii), (iii) and (iv) above);
provided, however, that in calculating the Principal
Distributable Amount the following will be
excluded: all payments and proceeds of any
Purchased Receivables the Purchase Amount of
which has been included in the Principal
Distributable Amount in a prior Collection Period.
Further, (i) with respect to the Distribution Date
immediately following the end of the Funding
Period, if any, the principal required to be
distributed to Certificateholders shall include an
amount equal to the remaining balance in the
Funding Account on the last day of the Funding
Period, to the extent allocable to principal, and (ii)
with respect to the Distribution Date following the
substitution of a Receivable pursuant to Section
3.02, the principal required to be distributed to
Certificateholders shall include the difference, if
any, between the outstanding Principal Balance of
the replaced Receivable and the outstanding
Principal Balance of the substitute Receivable.
"Prior Trusts" means, collectively, the 1997-
1 Trust, the 1997-2 Trust and 1997-3 Trust.
"Purchase Agreement" means the Amended
and Restated Master Purchase Agreement dated as
of May 1, 1997 providing for Aegis Finance's sale
of the Receivables to the Seller.
"Purchase Amount" means the amount, as of
the close of business on the last day of a Collection
Period, required to prepay in full the respective
Receivable under the terms thereof, including the
principal amount thereof and interest to the end of
such Collection Period.
"Purchased Receivable" means a Receivable
purchased as of the close of business on the last day
of a Collection Period by the Seller or by Aegis
Finance on behalf of the Seller pursuant to the
Purchase Agreement.
"Rated Certificates" means each Class of
Certificates, if any, that has been rated by a Rating
Agency at the request of the Seller.
"Rated Entity" shall mean a Person whose
long-term unsecured debt obligations (at the time of
the transfer under Section 7.03) are rated within the
investment grade categories of either Moody's or
S&P.
"Rating Agency" means any statistical credit
rating agency, or its successor, providing a rating
for any of the Certificates at the request of the
Seller.
"Receivable" means any retail installment
sales contract and security agreement identified on
the Schedule of Receivables. Any Receivable
transferred to a Trust hereunder shall be the sole
and exclusive property of such Trust, subject to the
rights of the Seller therein.
"Receivables Cash Purchase Price" means
with respect to any Additional Receivable, an
amount equal to 100% of the Principal Balance of
such Additional Receivable (or 92% if such
Additional Receivable is Uninsured).
"Record Date" means the last day of the
Collection Period preceding a Distribution Date or
termination of the Trust.
"Recoveries" means all amounts received
(net of out-of-pocket costs of collection), other than
Risk Default Insurance Proceeds, with respect to
Defaulted Receivables and Liquidated Receivables.
"Refunding Event" means the transfer of
remaining funds in the Funding Account, if any, to
the Certificate Account and distribution to the
Certificateholders on a pro rata basis, on the
Distribution Date immediately following the end of
the Funding Period, of such remaining funds in the
Funding Account in accordance with Section 5.06
hereof.
"Required Deposit Rating" means a rating of
an institution which has either short-term deposits
of "P-1" by Moody's, or short-term deposits of
"A-1+" by S&P; and any requirement that deposits
have the "Required Deposit Rating" shall mean that
such deposits have the foregoing required ratings by
Moody's or S&P.
"Reserve Fund" means the separate fund
established and maintained pursuant to the Amended
and Restated Master Trust Agreement outside of the
Trust.
"Reserve Fund Draw" has the meaning
specified in the Amended and Restated Master Trust
Agreement.
"Reserve Fund Initial Deposit" shall be
determined separately for each Trust, shall be
specified in the corresponding Agreement, and shall
be equal to the present value of the "Term Note"
which is a permitted investment under Section
3.2(b) of the Amended and Restated Master Trust
Agreement, discounted at the Discount Rate.
"Reserve Fund Property" has the meaning
specified in the Amended and Restated Master Trust
Agreement.
"Reserve Requirement" means the greater of
(i) $1,000,000 and (ii) 5% of the aggregate
outstanding Principal Balance of the Receivables of
all Trusts which are outstanding as of the date of
determination.
"Residual Interest" means the right of the
Seller to all distributions from, and assets of, the
Trust, after payment in full of the fees and expenses
of the Backup Servicer, the Servicer, the Contingent
Servicer, the Trustee and the Custodian and
payment in full of the Certificates upon termination
of this Agreement.
"Retention Amount" means the insured's
deductible (initially equal to 10% of the aggregate
insured portion of the Amount Financed of the
Receivables) under the terms of the Risk Default
Policy as described therein.
"Risk Default Insurance Policy" or "Risk
Default Policy" means each insurance policy listed
on Exhibit I issued by the Risk Default Insurer,
which shall show Aegis Finance as named insured
and the Trustee as an additional insured or pool
certificate holder thereunder, including all
endorsements thereto, the original of which policy
and endorsements shall be delivered to the
Custodian on or prior to the Closing Date.
"Risk Default Insurance Proceeds" means the
proceeds received by the Trustee, the Backup
Servicer, the Servicer, the insured or any other
Person under the Risk Default Policy, which
proceeds shall include allocations to principal and
interest as determined by the Servicer.
"Risk Default Insurer" means The
Connecticut Indemnity Company, its successors and
assigns, or Empire Fire & Marine Insurance Co., a
division of Zurich Insurance Company, its
successors and assigns.
"Schedule of Receivables" means the list of
Receivables annexed to the Agreement as Appendix
A; provided that such Appendix A shall be deemed
to be amended on each Funding Date, if any, to add
Additional Receivables acquired by the Trust on
each such date pursuant to the Agreement.
Appendix A shall include an indication of any
Receivables that are Uninsured Receivables or
Nonconforming Insured Receivables.
"Scheduled Payment" means the fixed
payment required to be made by the Obligor during
the respective Collection Period sufficient to fully
amortize the Principal Balance under the Simple
Interest Method over the term of the Receivable and
to provide interest at the applicable APR, including
any delinquent payment; provided, however, that
"Scheduled Payment" does not include
Miscellaneous Servicer Collections.
"Securities Act" means the Securities Act of
1933, as amended.
"Seller" means Aegis Auto Funding Corp.
IV, a Delaware corporation, as the seller of the
Receivables to the Trust under this Agreement, and
its successors (in the same capacity) pursuant to
Section 8.03.
"Servicer" means Aegis Finance, as servicer
of the Receivables pursuant to the Servicing
Agreement or any other Eligible Servicer acting as
servicer pursuant to the Servicing Agreement in
accordance with Section 4.01, as the context may
require.
"Servicer Files" shall have the meaning set
forth in Section 3.03(b).
"Servicing Agreement" means the Aegis
Finance Servicing Agreement or another servicing
agreement entered into by the Backup Servicer and
the Trustee with an Eligible Servicer which shall be
substantially in the form of the Aegis Finance
Servicing Agreement or such other form as shall be
approved by the Majority Certificateholders.
"Servicing Fee" means the fee payable to the
Servicer for services rendered during the respective
Collection Period, determined pursuant to the
Servicing Agreement.
"Servicing Officer" means any officer of the
Servicer involved in, or responsible for, the
administration and servicing of Receivables whose
name appears on a list of servicing officers attached
to an Officer's Certificate furnished to the Trustee
by the Servicer, as such list may be amended from
time to time.
"Simple Interest Method" means the method
of allocating a fixed level payment to principal and
interest, pursuant to which the portion of such
payment that is allocated to interest is equal to the
product of the APR multiplied by the unpaid
principal balance multiplied by a fraction the
numerator of which is the number of days elapsed
since the preceding payment was made and the
denominator of which is 365.
"Simple Interest Receivable" means any
Receivable under which the portion of a payment
allocable to interest and the portion allocable to
principal is determined in accordance with the
Simple Interest Method.
"S&P" means Standard & Poor's Ratings
Services, a division of The McGraw-Hill
Companies, Inc., or any successors thereto.
"SST" means System and Services
Technology, Inc., a Missouri corporation, its
successors and assigns.
"State" means any state of the United States
of America, or the District of Columbia.
"Subordinate Holder" means the Holder of
any Certificate that is subordinated in payment to
the Class A Certificates.
"Substitute Receivable" means any
replacement Receivable substituted for another
Receivable in accordance with Section 3.02(b).
"Total Available Distribution Amount"
means, for each Distribution Date, the sum of the
Available Interest Distribution Amount, the
Available Principal Distribution Amount and the
Miscellaneous Servicer Collections.
"Transition Costs" means an amount
necessary to reimburse the successor to the
Servicer, the Trustee or the Backup Servicer, as the
case may be, for reasonable costs and expenses
incurred in connection with such transition(s).
"Trust" means the Trust created by the
Agreement, the estate of which shall consist of the
Trust Property.
"Trust Property" shall have the meaning set
forth in Article II of the Agreement.
"Trustee" means the Person acting as
Trustee of the Trust under the Agreement, its
successor in interest and any successor trustee
pursuant to Section 11.10.
"Trustee Fee" shall have the meaning set
forth in the Agreement.
"Trustee Officer" means any vice president
or assistant vice president, any assistant secretary,
any trust officer or any other officer of the
Corporate Trust Department of the Trustee
customarily performing functions similar to those
performed by any of the above designated officers
and also means with respect to a particular
corporate trust matter, any other officer to whom
such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Trustee's Certificate" means a certificate
completed and executed by the Trustee by a Trustee
Officer pursuant to Section 11.02, substantially in
the form of, in the case of an assignment to the
Seller, Exhibit R.
"UCC" means the Uniform Commercial
Code as in effect from time to time in the relevant
jurisdictions.
"Underwriting Guidelines" means the
underwriting guidelines of Aegis Finance with
respect to each of its programs, as in effect at the
time of origination of each Receivable.
"Uninsured Receivables" means Receivables
not covered by a Risk Default Insurance Policy.
"Vendor's Single Interest Physical Damage
Insurance Policy" or "VSI Insurance Policy" means
the insurance policy listed on Exhibit J issued by
the VSI Insurer, including all endorsements thereto.
"Voting Interests" means the portion of the
voting interests of all the Certificates that is
allocated to any Certificate for purposes of the
voting provisions of this Agreement. Voting
Interests shall be allocated to the Class A and Class
B Certificates, respectively, in proportion to their
Class Certificate Balances. Voting Interests
allocated to each Class of Certificates shall be
allocated among the Certificates within each such
class in proportion to their Certificate Balances.
Where the Voting Interests are relevant in
determining whether the vote of the requisite
percentage of the Certificateholders necessary to
effect any consent, waiver, request or demand shall
have been obtained, the Voting Interests shall be
deemed to be reduced by the amount equal to the
Voting Interests (without giving effect to this
provision) represented by the interests evidenced by
any Certificate registered in the name of the
Servicer, Aegis Finance, the Seller or any Person
known to a Trustee Officer to be an Affiliate of any
such foregoing entities, unless such entity owns all
affected Certificates.
"VSI Insurer" means Guaranty National
Insurance Company.
"Warehouse Facility" means the Loan and
Security Agreement dated as of March 14, 1997
among Aegis Finance, III Finance Ltd and III
Global Ltd.
ARTICLE II
INTERPRETATION
Section 2.01. Usage of Terms. With
respect to all terms in these Standard Terms, the
singular includes the plural and the plural the
singular; words importing any gender include the
other genders; references to "writing" include
printing, typing, lithography and other means of
reproducing words in a visible form; references to
agreements and other contractual instruments
include all subsequent amendments thereto or
changes therein entered into in accordance with
their respective terms and not prohibited by these
Standard Terms; references to Persons include their
permitted successors and assigns; and the term
"including" means "including without limitation."
Section 2.02. Cutoff Date and Record
Date. All references to the Record Date prior to
the first Record Date in the life of the Trust shall be
to the Closing Date.
Section 2.03. Section References. Unless
otherwise indicated, all section references shall be
to Sections in these Standard Terms.
ARTICLE III
THE RECEIVABLES
Section 3.01. Representations and
Warranties of Seller.
(a) The Seller makes the
following representations and warranties as
to the Receivables on which the Trustee
relies in accepting the Receivables in trust
on the Closing Date and each Funding Date
and executing and authenticating the
Certificates on the Closing Date. Such
representations and warranties speak as of
the Closing Date with respect to the Initial
Receivables and as of the related Funding
Date with respect to Additional Receivables
to be acquired on such date, but shall
survive the sale, transfer and assignment of
the Receivables to the Trustee.
(i) Characteristics of
Receivables. Each Receivable (A)
has been originated in the United
States of America by Aegis Finance
or a Dealer for the retail sale of a
Financed Vehicle in the ordinary
course of Aegis Finance'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 Aegis
Finance in the ordinary course of
business from such Dealer or has
been financed for such Dealer under
an existing agreement with Aegis
Finance, (B) has created a valid,
subsisting and enforceable first
priority security interest in favor of
Aegis Finance or the Dealer in the
Financed Vehicle, which security
interest, (1) if in favor of the Dealer,
has been assigned by the Dealer to
Aegis Finance, (2) in either case has
been duly assigned by Aegis Finance
to the Seller, and (3) has been
assigned by the Seller to the Trustee,
(C) is covered by the VSI Insurance
Policy and, except as identified on
the Schedule of Receivables, 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) 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
or the applicable Funding
Date, as the case may be,
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 Aegis Finance
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.
(iii) 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.
Each Receivable is denominated and
payable solely in U.S. dollars.
(iv) No Government
Obligor or Affiliate. 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 nor from any Affiliate of
Aegis Finance or the Seller.
(v) Security Interest in
Financed Vehicle. Immediately prior
to the assignment and transfer
thereof, each Receivable is secured
by a validly perfected first priority
security interest in the related
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 each Financed
Vehicle, to be delivered to the
Custodian pursuant to Section 3.03
hereof, together with a power of
attorney, duly executed by Aegis
Finance 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.
(vi) 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.
(vii) 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 contained in the
Purchase Agreement as it relates to
the information included thereon.
(viii) 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 covering such
Receivable.
(ix) No Defenses. No
right of rescission, setoff,
recoupment, counterclaim or defense
has been asserted or threatened with
respect to any Receivable.
(x) 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.
(xi) No Default. Except
for payment delinquencies continuing
for a period of not more than fifty-
nine days as of the applicable Cutoff
Date for any Receivable, 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 such Receivable has
arisen; and the Seller has not waived
any of the foregoing. As of the date
hereof and as of each Funding Date,
the Seller has no knowledge of any
facts regarding any particular
Receivable indicating that such
Receivable would not be paid in full.
(xii) Insurance. Each
Receivable is covered, as of the
Closing Date or Funding Date when
acquired, as the case may be, and
throughout the shorter of the term of
the Trust or the term of the
Receivable, under the VSI Insurance
Policy and, except as indicated on
the Schedule of Receivables, under
the Risk Default Insurance Policy,
and each such insurance policy is
valid and remains in full force and
effect. No more than one fifth of
one percent of the Receivables are
not covered by a Risk Default
Insurance Policy. Aegis Finance, 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
deductible not in excess of $500.
(xiii) Title. It is the
intention of the Seller that the
transfer and assignment of the
Receivables from the Seller to the
Trust herein contemplated be treated
as an absolute sale for financial
accounting purposes, and that the
beneficial interest in and title to the
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 Trustee. 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 Trustee
for the benefit of the
Certificateholders 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.
(xiv) Lawful Assignment.
No Receivable has been originated
in, or is subject to the laws of, any
jurisdiction under which the pledge,
transfer and assignment of such
Receivable under this Agreement or
pursuant to transfers of the
Certificates is or shall be unlawful,
void or voidable.
(xv) All Filings Made. All
filings (including, without limitation,
UCC filings) necessary in any
jurisdiction to give the Trustee a first
perfected ownership interest in the
Receivables have been made.
(xvi) One Original. There
is only one original executed copy of
each Receivable.
(xvii) Maturity of
Receivables. Each Receivable has
an original term to maturity of not
more than 60 months and, as of each
Cutoff Date, each Receivable has a
remaining maturity of 60 months or
less.
(xviii) 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 Policies provide that
loan extensions will be allowed,
subject to a total number of
extensions of no more than one
extension for each twelve (12) month
period or fraction thereof in the
Receivable's term.
(xix) [Reserved]
(xx) Financing. Each
Receivable represents a Simple
Interest Receivable.
(xxi) Bankruptcy
Proceeding. Except with respect to
the 1997-1 Trust, no Obligor as of
the respective Cutoff Date is noted in
Aegis Finance's or the Seller's
records as the subject of a
bankruptcy proceeding. With respect
to the 1997-1 Trust, no Receivable as
of the Cutoff Date is noted in Aegis
Finance's or the Seller's records as a
discharged debt under a bankruptcy
proceeding.
(xxii) 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.
(xxiii) [Reserved]
(xxiv) [Reserved]
(xxv) 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
and each related Funding Date is
secured by the related Financed
Vehicle.
(xxvi) Underwriting
Guidelines. Except for Uninsured
Receivables constituting no more
than one-fifth of 1% of the aggregate
initial Principal Balance, and
Nonconforming Insured Receivables
constituting no more than 1% of the
aggregate initial Principal Balance,
each Receivable has been originated
in accordance with the applicable
Underwriting Guidelines of Aegis
Finance in effect at the time of
origination and in accordance with
underwriting guidelines acceptable to
the Risk Default Insurer.
(xxvii) Financed Vehicle in
Good Repair. To the best of the
Seller's knowledge, each Financed
Vehicle is in good repair and
working order.
(xxviii) Principal Balance.
No Receivable has a Principal
Balance which includes capitalized
interest, physical damage insurance
or late charges. The maximum
principal balance of any Receivable
does not exceed $40,000, or such
lesser maximum principal balance as
is permitted under the Underwriting
Guidelines.
(xxix) Servicing. At the
applicable Cutoff Date, each
Receivable was being serviced by the
Servicer.
(xxx) Eligible Loan. Each
Receivable covered by a Risk Default
Insurance Policy constitutes an
"Instrument" or "Insured Security
Agreement" 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.
(xxxi) Original Principal
Amount. The original principal
amount of each Receivable with
respect to which a credit application
was received by Aegis Finance prior
to January 15, 1997 and which was
(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 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. The original
principal amount of each Receivable
with respect to which a credit
application was received by Aegis
Finance after January 15, 1997
which was (A) originated under the
original "Zero Down" program, was
not more than (1) in the case of new
Financed Vehicles (other than
Hyundai automobiles), 100% of the
manufacturer's suggested retail price
(not to exceed $20,000) plus taxes,
title and other fees and premiums for
approved service contracts or (2) in
the case of used Financed Vehicles
(other than Hyundai automobiles),
100% 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 (not to exceed
$20,000) plus taxes, title and other
fees and premiums for approved
service contracts; (B) originated
under the "Reduced Income"
program and with respect to all
Hyundai automobiles, was not more
than (1) in the case of new Financed
Vehicles, 85% of the manufacturer's
suggested retail price plus taxes,
title and other fees and premiums for
approved service contracts or (2) in
the case of used Financed Vehicles,
85% 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 taxes,
title and other fees and premiums for
approved service contracts; provided
that, in any such case, if any such
amount is higher than that approved
by the Risk Default Insurer, each
Receivable will be limited in amount
to that permitted by the Risk Default
Insurer for coverage under the Risk
Default Insurance Policy.
(xxxii) 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.
(xxxiii) Licensing. With
respect to each Receivable originated
in the State of Pennsylvania, the
Trust, the Seller, Aegis Finance and
each prior holder of any such
Receivable were each properly
licensed under applicable
Pennsylvania laws and regulations
during the respective times the Trust,
the Seller, Aegis Finance 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.
(xxxiv) Additional
Receivables. Each Additional
Receivable shall have been identified
and approved by Aegis Finance on or
prior to the Closing Date, as
evidenced by Aegis Finance's dated
notation of approval on the loan
application (or other writing).
(b) The Seller makes the following
additional representations, warranties and
covenants on which the Trustee relies in
accepting the Receivables in trust on the
Closing Date and each Funding Date and
executing and authenticating the Certificates
on the Closing Date, which representations,
warranties and covenants shall survive the
Closing Date and each Funding Date.
(i) Location of Servicer Files. The Servicer
Files are kept at the location or locations listed in
Exhibit E hereto, with the exception of (A) the
original certificates of title or other documents
under applicable state laws evidencing the security
interest of Aegis Finance in the Financed Vehicles,
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 (in the
case of the Initial Receivables) and
the applicable Funding Date (in the
case of each Additional Receivable),
the Seller shall deliver or cause to be
delivered to the 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 under applicable state laws
evidencing the security interest of
Aegis Finance 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 under applicable law
evidencing the security interest of
Aegis Finance in the Financed
Vehicle not so delivered on the
Closing Date or Funding Date, as the
case may be, due to the fact that
such certificate of 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 Custodian within one hundred
twenty (120) days after the Closing
Date or the applicable Funding Date,
as the case may be, or such later
date permitted in accordance with
Section 3.03(a); provided, further,
that failure to so deliver any original
certificate of title or other document
evidencing the security interest of
Aegis Finance 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 3.02.
Section 3.02. Repurchase or
Substitution Upon Breach.
(a) The Seller, the Backup
Servicer or the Trustee, as the case may be,
shall inform the other parties to this
Agreement and each Certificateholder
promptly, in writing, upon its discovery of
(i) any breach of the Seller's representations
and warranties made pursuant to Section
3.01(a), or of Aegis Finance's
representations and warranties made
pursuant to Section 3.01(b) of the Purchase
Agreement, or (ii) the failure of the Seller to
deliver original certificates of title or other
documents evidencing the security interest of
Aegis Finance in the Financed Vehicle
pursuant to Section 3.01(b) and 3.03.
Neither the Backup Servicer nor the Trustee
has any duty to investigate or determine the
existence of any breach or non-delivery
except as specified herein. Unless (i) the
breach shall have been cured by the thirtieth
day following the discovery thereof by the
Trustee or receipt by the Trustee of notice
from the Seller, the Servicer or the Backup
Servicer of such breach, or (ii) the non-
delivery shall have been cured by the
seventh Business Day following receipt by
an officer of the Seller of notice from the
Trustee by certified mail, the Seller shall
repurchase each Receivable (x) to which
such breach relates by the fifth Business
Day following such 30 day cure period or
(y) relating to the non-delivery by the fifth
Business Day following such seven day cure
period. Concurrently therewith, the Seller
shall cause Aegis Finance to repurchase such
Receivable pursuant to the Purchase
Agreement for the Purchase Amount. In
consideration of the purchase of the
Receivable, the Seller shall remit or cause
Aegis Finance to remit the Purchase Amount
to the Trustee for application in the manner
specified in Section 5.05. For purposes of
this Section 3.02, the Purchase Amount of a
Receivable which is not consistent with the
warranty pursuant to Section 3.01(a)(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, one or more
replacement Receivables 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
Receivables 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 deposited into the
Collection Account and shall be applied to
repay the outstanding Principal Balance of
the Certificates on the next Distribution
Date; (ii) the remaining term to maturity of
the Substitute Receivable shall not be greater
than that of the replaced Receivable; (iii) the
APR on the Substitute Receivable is not less
than the APR on the replaced Receivable;
(iv) the Cutoff Date with respect to the
Substitute Receivable shall be deemed to be
the first day of the month in which the
substitution occurs; (v) the Substitute
Receivable otherwise shall satisfy the
conditions of Section 3.01(a) and (b) hereof
(and the Seller shall be deemed to make all
representations and warranties contained in
Sections 3.01(a) and (b) hereof with respect
to the Substitute Receivable as of the date of
substitution); and (vi) the Seller shall have
delivered to the Purchaser and the Trustee
all of the documents specified in Section
3.03(a) or 3.08(b) hereof with respect to the
Substitute Receivable on or before the date
of substitution.
(c) The sole remedy of the
Trustee, the Trust or the Certificateholders
with respect to a breach of representations
and warranties of the Seller pursuant to
Section 3.01(a), or a breach of
representations and warranties of Aegis
Finance pursuant to Section 3.01(b) of the
Purchase Agreement, or non-delivery of
certificates of title pursuant to Section
3.01(b) and 3.03, shall be to require the
Seller to repurchase or substitute for the
Receivables pursuant to this Section 3.02
and to enforce Aegis Finance's obligation to
repurchase such Receivables pursuant to the
Purchase Agreement.
Section 3.03. Custody of Documents.
(a) To assure uniform quality in
servicing the Receivables, to reduce
administrative costs and to perfect the
security interest conveyed by the Seller to
the Trustee and the Trust pursuant to this
Agreement in the Trust Property, the
Trustee, upon the execution and delivery of
this Agreement, is hereby irrevocably
appointed as Custodian of the following
documents or instruments, which shall be
delivered to the Custodian with respect to
each Receivable within 10 days after the
Closing Date or applicable Funding Date:
(i) The original of the
Receivable and any amendments
thereto;
(ii) The original certificate
of title or, if the applicable state title
registration agency does not issue
certificates of title to lienholders,
such other document under
applicable state laws evidencing the
security interest of Aegis Finance in
the Financed Vehicle, or a guarantee
of title or a copy of an application
for title if a certificate of title or
other document evidencing the
security interest in the Financed
Vehicle has not yet been issued; and
(iii) Such other documents
as may be in existence evidencing the
security interest of Aegis Finance in
the Financed Vehicle; provided,
however, that the Trustee has no
obligation to determine the existence
or necessity for such other
documents.
Items (a)(i), (ii) and (iii) shall be
referred to collectively as the "Custodian
Files."
The Custodian shall review the
Custodian Files (A) within 30 days after the
Closing Date (or 30 days after the end of
the Funding Period, if applicable) to verify
that all guarantees of title and all
applications for title have been replaced by
either an original certificate of title or other
documents delivered by a state title
registration agency evidencing the security
interest of Aegis Finance in the Financed
Vehicle, and (B) within 30 days after the
Closing Date and each Funding Date,
whichever is applicable with respect to each
Receivable, to verify that an original
installment sale contract is present for each
Receivable and that each Receivable is
covered by an endorsement to the Risk
Default Policy confirming insurance
thereunder. The Custodian shall
immediately deliver written notice by
certified mail to the Seller and Aegis
Finance if any such document is missing or
has not been delivered to the Custodian.
With respect to Receivables for which the
original certificates of title or other
documents evidencing the security interest of
Aegis Finance in the Financed Vehicle have
not been delivered within 30 days after the
Closing Date (or within 30 days after the
end of the Funding Period if applicable), the
Custodian shall review the related Custodian
Files every thirty days thereafter to
determine whether or not such documents
have been delivered, and shall promptly
notify the Seller in writing, on a monthly
basis, of any such documents which have
not been delivered as of the date of such
notice. The Custodian shall deliver written
notice to the Certificateholders if any
original certificate of title or other document
evidencing the security interest of Aegis
Finance in the Finance Vehicle has not been
delivered to the Custodian within 120 days
after the Closing Date (or within 120 days
after the end of the Funding Period if
applicable). Such notice shall confirm
whether or not a guaranty of title or an
application for title has been delivered to the
Custodian with respect to the related
Receivable.
With respect to Receivables for
which the original retail installment sale
contract has not been delivered to the
Custodian in accordance with this Section
3.03(a), the Seller shall cause Aegis Finance
to deliver the missing documents within
seven (7) Business Days of receipt of such
notice or repurchase such Receivables
pursuant to Section 3.02 hereof. With
respect to Receivables for which original
certificates of title or other documents
evidencing the security interest of Aegis
Finance in the Financed of the Vehicle have
not been delivered to the Custodian within
120 days after the Closing Date (or within
120 after the Funding Period if applicable),
the Seller shall cause Aegis Finance to
deliver such within 120 days thereafter (i.e.,
within 240 days after the Closing Date or
the end of the Funding Period, as
applicable) or repurchase the Receivables
pursuant to Section 3.02 hereof. Other than
the reviews set forth in this paragraph, the
Custodian shall have no duty or obligation
to review any of the Custodian Files.
(b) The Seller shall deliver to the
Servicer for custody pursuant to the
Servicing Agreement the documents and
instruments described in Paragraph III.B.3.
of the Servicing Agreement (collectively, the
"Servicer Files").
(c) The Custodian agrees to
maintain the Custodian Files at the offices of
the Custodian as shall from time to time be
identified to the Trustee by written notice.
Subject to the foregoing, the Trustee may
temporarily move individual Custodian Files
or any portion thereof without notice as
necessary to conduct collection and other
servicing activities in accordance with its
customary practices and procedures.
The Custodian shall have and
perform the following powers and duties:
(i) hold the Custodian
Files for the benefit of all present
and future Certificateholders,
maintain accurate records pertaining
to each Receivable to enable it to
comply with the terms and conditions
of this Agreement and maintain a
current inventory thereof;
(ii) carry out such policies
and procedures in accordance with its
customary actions with respect to the
handling and custody of the
Custodian Files so that the integrity
and physical possession of the
Custodian Files will be maintained;
and
(iii) promptly release the
original certificate of title to the
Servicer upon receipt of a written
request for release of documents
certified by an officer of the
Servicer, substantially in the form of
Schedule C to the Servicing
Agreement, with respect to the
matters therein.
(d) Except with respect to the
1997-1 Trust, within 30 days of the Closing
Date (or the applicable Funding Date, if
any), the Custodian shall stamp the
Receivables to indicate their sale to the
Seller and their subsequent transfer and
assignment to the Trust. The Seller shall
provide to the Custodian the applicable
stamp at or prior to the time the Custodian
Files are delivered to the Custodian.
Section 3.04. Duties of Custodian.
(a) Safekeeping. The Trustee, as
Custodian, shall hold the original
Receivables and original certificates of title
at the Corporate Trust Office, for the use
and benefit of all present and future
Certificateholders. In performing its duties
the Custodian will comply with all
applicable state and federal laws and will
exercise that degree of skill and care
consistent with the same degree of skill and
care that the Custodian exercises with
respect to similar motor vehicle loans held
by the Custodian and that is consistent with
prudent industry standards, and will apply in
performing such duties and obligations,
those standards, policies and procedures
consistent with the same standards, policies
and procedures the Custodian applies with
respect to similar motor vehicle loans or
motor vehicle retail installment sale
contracts which the Custodian serves as
custodian or in a similar capacity.
(b) Maintenance of and Access to
Records. Subject to Section 3.03(c), the
Custodian shall maintain the Custodian Files
at the Corporate Trust Office or at such
other office as shall be specified to the
Trustee by written notice not later than 90
days after any change in location. The
Custodian shall make available to the
Servicer and the Certificateholders or their
duly authorized representatives, attorneys or
auditors a list of locations of the Custodian
Files, and the related accounts, records and
computer systems maintained by Custodian
at such times as the Servicer or the Majority
Certificateholders shall instruct.
(c) Release of Documents. In
addition to releasing certificates of title
pursuant to Section 3.03(c)(iii) upon receipt
of written instructions from the Servicer in
the form of Schedule C to the Servicing
Agreement, the Custodian shall release any
Custodian File to the Servicer, the
Servicer's agent or the Servicer's designee,
as the case may be, at such place or places
as the Servicer may designate, as soon as
practicable.
Section 3.05. Instructions; Authority to
Act. The Custodian shall be deemed to have
received proper instructions with respect to the
Custodian Files upon its receipt of written
instructions from the Servicer in the form of
Schedule C to the Servicing Agreement.
Section 3.06. Custodian Fees;
Indemnification.
(a) In consideration for services
rendered as Custodian, the Custodian shall
be paid the Custodian Fees.
(b) The Seller shall indemnify the
Custodian for any and all liabilities,
obligations, losses, compensatory damages,
payments, costs or expenses of any kind
whatsoever, including reasonable fees and
expenses of counsel, that may be imposed
on, incurred or asserted against the
Custodian as the result of any improper act
or omission by the Seller or alleged
improper act or omission by the Seller in
any way relating to the maintenance and
custody by the Custodian of the Custodian
Files; provided, however, that the Seller
shall not be liable for any portion of any
such amount resulting from the willful
misfeasance, bad faith or negligence of the
Custodian.
Section 3.07. Effective Period and
Termination. The Trustee's appointment as
Custodian shall become effective as of the Closing
Date and shall continue in full force and effect until
the Trustee resigns or is removed pursuant to
Section 11.09. As soon as practicable after any
termination of such appointment, the Custodian
shall deliver the original documents identified in
Section 3.03 to the successor Custodian at such
place or places as the successor Custodian may
reasonably designate.
Section 3.08. Funding Events.
(a) A funding event (each a
"Funding Event") shall occur upon a
Funding Date and in accordance with the
requirements of this Section 3.08.
(b) During the Funding Period,
the Seller shall, on Funding Dates, acquire
Additional Receivables at the Receivables
Cash Purchase Price from Aegis Finance
pursuant to the Purchase Agreement with
moneys deposited in the Funding Account
on the Closing Date.
The Seller shall transfer to the
Trustee the Additional Receivables and the
other property and rights related thereto
described in Section 2.01(b) only upon
satisfaction of each of the following
conditions on or prior to the related Funding
Date:
(i) On or before the
related Cutoff Date immediately
preceding any Funding Date for the
Additional Receivables, the Seller
will review, package and forward to
the Trustee for receipt by not less
than two Business Days prior to the
Funding Date (each, a "Delivery
Date"), the following documents
related to such Additional
Receivables:
(A) Original retail
installment
sales contracts
evidencing
such
Receivables
and any
amendments
thereto;
(B) Original
certificates of
title, or copies
of dealer
blanket
guarantees of
title, or
applications
for title to the
related
Financed
Vehicles;
(C) With respect
to Receivables
covered by a
Risk Default
Insurance
Policy, an
endorsement
to the Risk
Default
Insurance
Policy
confirming
insurance
regarding each
Receivable to
be purchased
on such
Funding Date
(as specified
on a master
list of
Receivables
annexed to
such
endorsement);
(D) A list of
Receivables
being
purchased on
such Funding
Date in
electronic
format
satisfactory to
the Trustee;
and
(E) A notice that
the Funding
Date will
occur on the
Friday
immediately
following the
Delivery Date
(or such other
day as
specified in
such notice).
(ii) By the Delivery Date,
the Seller shall deliver, or cause to
be delivered, to the Trustee (with a
copy to Seller's counsel), fully
executed documents as follows:
(A) Supplemental
Conveyance
(in the form of
Exhibit A to
the Purchase
Agreement)
with Schedule
A attached
listing all
Receivables to
be sold on
such Funding
Date;
(B) Assignment
(in the form of
Exhibit P
hereto) with
Schedule A
attached listing
all Receivables
to be sold on
such Funding
Date;
(C) Notice of
funding (in the
form of
Exhibit N
hereto)(the
"Notice of
Funding");
(D) Officer's
Certificate (in
the form of
Exhibit O
hereto); and
(E) Power of
Attorney by
the Seller in
favor of the
Trust
reflecting the
Additional
Receivables.
(iii) On the Delivery Date,
the Trustee will acknowledge receipt
of a written certification of the Seller
of the presence of the documents
listed in Sections 3.08(b)(i) and (ii)
above by sending notice, via
telecopy, to Seller and Seller's
counsel. The Trustee shall not be
responsible for the accuracy of such
documents. Only those Receivables
for which the documents listed in
Sections 3.08(b)(i) and (ii) are
delivered to the Trustee on the
Delivery Date will be included in the
Funding Event.
(iv) Upon satisfaction of
the above requirements with respect
to events to occur on or before the
Funding Date, the Trustee will on
the Funding Date withdraw funds
from the Funding Account to pay to
the Seller or its designee with respect
to Additional Receivables acquired
on such Funding Date, in cash by
federal wire transfer funds, an
amount equal to the Receivables
Cash Purchase Price, all pursuant to
the written directions provided to the
Trustee in the Notice of Funding.
(v) The Trustee shall
review the documents delivered to it
in connection with any Funding
Event within 20 Business Days after
the initial Funding Date and within 5
Business Days after each subsequent
Funding Date (or within such greater
number of Business Days required to
review such documents at a rate of
1500 files per Business Day) to
verify the presence of the documents
listed in Sections 3.08(b)(i) and
3.08(b)(ii) for each Additional
Receivable. The Trustee shall
immediately deliver written notice by
certified mail to the Seller, Aegis
Finance and each Certificateholder,
if any of such documents is missing.
The Seller shall cause Aegis Finance
to deliver to the Trustee the missing
items within 3 Business Days of
receipt of such notice.
(c) If the Seller does not provide
written notice to the Trustee of its intent to
acquire Additional Receivables pursuant to
this Section 3.08 prior to the end of the
Funding Period, then the remaining balance
on deposit in the Funding Account after the
end of the Funding Period (excluding
earnings on investments or reinvestments
thereof) shall be used for the purpose of
partially prepaying the Certificates in
accordance with Section 5.06(d) hereof on
the Distribution Date immediately following
the end of the Funding Period.
(d) The Seller shall take any
action required to maintain the first
perfected ownership interest of the Trust in
the Trust Property and the first perfected
security interest of the Trustee in the
Reserve Fund Property.
ARTICLE IV
ADMINISTRATION AND SERVICING OF
RECEIVABLES
Section 4.01. Servicing Duties.
(a) On or before the Closing
Date, the Backup Servicer and the Trustee
will enter into the Aegis Finance Servicing
Agreement with Aegis Finance pursuant to
which Aegis Finance shall act as Servicer
with respect to the Receivables. Any
Servicer shall be, and shall remain, for so
long as it is acting as Servicer, an Eligible
Servicer. The Backup Servicer shall review
each Monthly Servicing Certificate required
to be provided by the Servicer pursuant to
paragraph III.B.6 of the Servicing
Agreement and shall notify the Trustee and
each Certificateholder of any discrepancy in
such Monthly Servicing Certificate which
cannot be corrected in accordance with
paragraph III.B.6 of the Servicing
Agreement.
(b) In the event of termination of
the rights and obligations of the Servicer
under the Servicing Agreement, the Backup
Servicer shall, in accordance with paragraph
VI of the Servicing Agreement, act as
Servicer of the Receivables by assuming
such rights and obligations under the
Servicing Agreement unless a successor
Servicer, other than the Backup Servicer, is
appointed by the Trustee under the Servicing
Agreement; provided, however, that the
Backup Servicer shall not be liable for any
acts, omissions or obligations of the Servicer
prior to such succession or for any breach
by the Servicer of any of its representations
and warranties contained in the Servicing
Agreement or in any related document or
agreement.
(c) Any Servicing Agreement that
may be entered into and any other
transactions or servicing arrangements
relating to the Receivables and the other
Trust Property involving a Servicer in its
capacity as such shall be deemed to be for
the benefit of the Trust, the Trustee and the
Certificateholders.
(d) Other than the duties
specifically set forth in this Agreement and
the Servicing Agreement, the Backup
Servicer shall have no obligation hereunder,
including, without limitation, to supervise,
verify, monitor or administer the
performance of the Servicer. The Backup
Servicer shall have no liability for any
actions taken or omitted by the Servicer.
The duties and obligations of the Backup
Servicer shall be determined solely by the
express provisions of this Agreement and the
Servicing Agreement and no implied
covenants or obligations shall be read into
this Agreement against the Backup Servicer.
Section 4.02. Resignation of Backup
Servicer. The Backup Servicer may resign from the
obligations and duties imposed on it under this
Agreement and the Servicing Agreement as Backup
Servicer, and shall resign at any time when it ceases
to be an Eligible Servicer, by giving written notice
of such resignation to the Trustee and the
Certificateholders. No such resignation shall
become effective until a successor Backup Servicer
that is an Eligible Servicer acceptable to the
Majority Certificateholders shall have assumed the
responsibilities and obligations of the Backup
Servicer in accordance with Section 10.02; provided
however, if a successor Backup Servicer has not
assumed the responsibilities and obligations of the
Backup Servicer within 30 days after such
resignation, the Backup Servicer may petition a
court of competent jurisdiction for its removal.
In the event the Backup Servicer shall for
any reason no longer be acting as such (including
by reason of resignation as set forth in this Section
4.02 or an Event of Backup Servicing Default as
specified in Section 10.01), the successor Backup
Servicer shall thereupon assume all of the rights and
obligations of the outgoing Backup Servicer under
the Servicing Agreement. In such event, the
successor Backup Servicer shall be deemed to have
assumed all of the Backup Servicer's interest therein
and to have replaced the outgoing Backup Servicer
as a party to the Servicing Agreement to the same
extent as if the Servicing Agreement had been
assigned to the successor Backup Servicer, except
that the outgoing Backup Servicer shall not thereby
be relieved of any liability or obligations on the part
of the outgoing Backup Servicer to the Servicer
under such Servicing Agreement to the extent such
obligations or liabilities arose prior to the
assumption by the successor Backup Servicer of the
obligations of the Backup Servicer thereunder. The
outgoing Backup Servicer shall, upon request of the
Trustee, deliver to the successor Backup Servicer
all documents and records relating to the Servicing
Agreement and the Receivables and otherwise use
its reasonable efforts to effect the orderly and
efficient transfer of the Servicing Agreement to the
successor Backup Servicer.
Section 4.03. Covenant of Backup
Servicer. The Backup Servicer shall promptly
notify the Trustee of the occurrence of any Event of
Backup Servicing Default or Event of Servicing
Default of which it has obtained actual knowledge
and any breach by the Backup Servicer or the Seller
of any of its respective covenants or representations
and warranties contained in this Agreement.
Section 4.04. Servicing Fees. The total
servicing fees payable on each Distribution Date to
the Backup Servicer and the Servicer, subject to
accrual and deferral of a portion of the Servicing
Fee in accordance with the Servicing Agreement,
shall equal the Backup Servicer Fee and the
Servicing Fee, respectively. Any proposed increase
in the Backup Servicer Fee or the Servicing Fee due
to the assumption of duties hereunder or under the
Servicing Agreement by a successor Backup
Servicer or successor Servicer shall be approved by
the Seller and the Majority Certificateholders. The
Backup Servicer shall also be entitled to any
reimbursement pursuant to Section 9.03. Any
Servicing Fee payable to the Servicer hereunder or
pursuant to the Servicing Agreement shall be paid
to the Servicer and/or to one or more subservicers
as the servicer may from time to time direct in
writing to the Trustee.
Section 4.05. Costs and Expenses. All
reasonable out-of-pocket costs and expenses
incurred by the Backup Servicer in carrying out its
duties as Backup Servicer hereunder, including all
out-of-pocket fees and expenses not expressly stated
hereunder to be for the account of the Trust or the
Seller, shall be paid or caused to be paid by the
Backup Servicer, and the Backup Servicer shall be
entitled to reimbursement therefor hereunder
pursuant to Section 5.06(d)(i). Nothing in this
Section 4.05 shall be construed to limit the
compensation to be paid to or retained by the
Backup Servicer pursuant to Section 4.04.
Section 4.06. Standard of Care. In
managing, administering, servicing and making
collections on the Receivables, and in performing
its obligations under the Servicing Agreement after
succeeding as Servicer thereunder, the Backup
Servicer will exercise that degree of skill and care
consistent with the same degree of skill and care
that the Backup Servicer exercises with respect to
similar motor vehicle loans owned and/or serviced
by the Backup Servicer and that is consistent with
prudent industry standards, and will apply in the
management, administration, servicing and
collection of the Receivables and in the
administration and enforcement of the Insurance
Policies relating to the Receivables, those standards,
policies and procedures consistent with the best
standards, policies and procedures the Backup
Servicer applies with respect to similar motor
vehicle loans owned or serviced by it, and, to the
extent not inconsistent with the foregoing, to
exercise that degree of skill and care it uses in
servicing assets held for its own account; provided,
however, that notwithstanding the foregoing, the
Backup Servicer shall not, except pursuant to a
judicial order from a court of competent
jurisdiction, or as otherwise required by applicable
law or regulation, release or waive the right to
collect the unpaid balance on any Receivable and
provided, further, that the Backup Servicer shall not
amend or modify any Receivable, unless a default
with respect to such Receivable has occurred or is,
in the judgment of the Backup Servicer, imminent.
In performing its duties and obligations hereunder
or under the Servicing Agreement, in the event
there is no Servicer managing, administering,
servicing or making collections on the Receivables
and administering and enforcing the Insurance
Policies relating to the Receivables, the Backup
Servicer shall comply with all applicable federal and
state laws and regulations, shall maintain all state
and federal licenses and franchises necessary for it
to perform its servicing responsibilities hereunder
and thereunder, and in such event it shall exercise
the same degree of skill and care it uses in
managing, administering, servicing and making
collection on the Receivables and administering and
enforcing the Insurance Policies in its capacity as
Backup Servicer hereunder, and shall not impair the
rights of the Trust or the Certificateholders in the
Trust Property.
Section 4.07. Contingent Servicer. The
Trustee, at the direction of the Majority
Certificateholders, shall appoint one or more
Eligible Servicers as a Contingent Servicer. Such
appointment shall be subject to the following terms
and conditions.
(a) The rights, powers, duties and
obligations conferred or imposed upon any
such Contingent Servicer shall be as set
forth in the instrument appointing the
Contingent Servicer.
(b) The Trustee may at any time, by
an instrument in writing executed by it, and
solely with the consent of the Majority
Certificateholders, accept the resignation of
a Contingent Servicer and, with the consent
or at the direction of the Majority
Certificateholders, remove any Contingent
Servicer appointed under this Section.
(c) Neither the Trustee nor the
Backup Servicer shall be liable by reason of
any act or omission of any Contingent
Servicer, and no Contingent Servicer shall
be liable by reason of any act or omission of
any other Contingent Servicer.
(d) Any Contingent Servicer shall
be entitled to the Contingent Servicer Fees
as compensation for all services rendered by
it in the execution of its duties as Contingent
Servicer. The Contingent Servicer shall also
be paid or reimbursed pursuant to Section
5.06(d)(i) its reasonable out-of-pocket costs
and expenses incurred by it in carrying out
its duties as Contingent Servicer hereunder.
ARTICLE V
DISTRIBUTIONS; ACCOUNTS;
STATEMENTS TO CERTIFICATEHOLDERS
Section 5.01. Accounts.
(a) The Trustee shall establish
and maintain separately with respect to each
Trust the Collection Account, the Funding
Account, if any, and the Certificate Account
in the name of the Trustee for the benefit of
the Certificateholders. The Collection
Account, the Funding Account and the
Certificate Account shall be segregated trust
accounts established with the trust
department of the Trustee. The Servicer
shall establish the Lock-Box Account
pursuant to the Servicing Agreement. The
Lock-Box Account shall be a non-interest
bearing account established with a Lock-Box
Account Depository, which shall at all times
be an Eligible Institution, by the Servicer
for the sole benefit of the Trust and other
holders of retail installment sales contracts
originated by Aegis Finance or its Affiliates.
All of the foregoing Accounts shall be
Eligible Accounts.
(b) Amounts held in the
Collection Account, the Certificate Account
and the Funding Account shall be invested
by the Trustee, upon the written direction of
the Seller, in Eligible Investments. Any
such investment in the Certificate Account
or the Funding Account shall mature no
later than (i) one Business Day before the
Distribution Date (or Funding Date with
respect to the Funding Account), next
succeeding the date of investment or, (ii) in
the case of money market fund investments,
on such Distribution Date. Any such
investment in the Collection Account shall
mature not later than two Business Days
before such Distribution Date. Any written
investment direction by the Seller shall
certify that any such investment is
authorized by this Section 5.01. The
Trustee shall have no authority to sell or
otherwise dispose of Eligible Investments
attributable to funds held in the Certificate
Account, the Collection Account or the
Funding Account prior to their respective
maturity dates. Interest and earnings on
investments of funds in any Account shall be
credited to and all losses borne by the
Account with respect to which they were
derived. All accounts with the Trustee must
be trust accounts subject to regulations
substantially similar to 12 C.F.R. 9.10(b).
The Trustee shall not have any responsibility
or liability for any investment of moneys at
the direction of the Seller or any loss
resulting therefrom.
(c) The Servicer has appointed
each of Wells Fargo Bank, N.A., and
Commerce Bank, as an initial Lock-Box
Account Depository under the Servicing
Agreement. All funds of the Trust held by
a Lock-Box Account Depository are and
shall remain the property of the Trust.
Section 5.02. Collections. Pursuant to the
Servicing Agreement, the Servicer shall remit to the
Lock-Box Account as soon as practicable, but in no
event later than its close of business on the Business
Day after receipt thereof by the Servicer, all
payments by or on behalf of the Obligors with
respect to each Receivable (other than Purchased
Receivables), all Recoveries and all Risk Default
Insurance Proceeds, all as collected during the
Collection Period. As provided in the Servicing
Agreement, the Servicer shall cause the Lock-Box
Account Depository to transfer all available funds
applied to the Receivables in excess of $2,000 from
the Lock-Box Account to the Collection Account on
each Business Day. In the event an Obligor remits
funds to the Trustee rather than remitting such
funds directly to the Servicer, the Trustee shall
notify the Servicer and shall deposit such amounts
into the Collection Account within one (1) Business
Day after receipt. Deposits into the Lock-Box
Account allocable to collections on Receivables of
each Trust shall be identified and earmarked
separately from the collections with respect to each
other Trust (the "Earmarked Funds"). The
Earmarked Funds shall be transferred to the
Collection Account of the related Trust.
Section 5.03. Application of Collections.
All collections for the Collection Period shall be
applied by the Trustee in accordance with reports
provided to the Trustee by the Servicer pursuant to
the Servicing Agreement, as follows:
With respect to each Receivable (other than
a Purchased Receivable), payments by or on behalf
of the Obligor shall be applied first to the
Scheduled Payment. Any excess payments received
constituting Scheduled Payments for subsequent
Collection Periods shall be applied as part of the
Available Interest Distribution Amount or the
Available Principal Distribution Amount on the
Distribution Date following the Collection Period in
which such excess payments are received.
Section 5.04. Miscellaneous Servicer
Collections. All Miscellaneous Servicer Collections
shall be deposited by the Servicer to the Lock-Box
Account within one Business Day of receipt thereof.
Section 5.05. Additional Deposits. (a) The
Trustee shall deposit or cause to be deposited in the
Collection Account the aggregate Purchase Amount
received with respect to Purchased Receivables and
shall, upon receipt, deposit such other amounts to
such accounts as may be specified herein. All such
deposits shall be made in Automated Clearinghouse
Corporation next-day funds or immediately
available funds, on or before the Business Day
preceding the Distribution Date.
(b) On the Closing Date and each Funding
Date, the Seller shall deliver to the Trustee and the
Trustee shall deposit into the Collection Account
any amount transferred from the "Depository
Account" established under the Warehouse Facility
which constitutes collections received with respect
to the Receivables to be purchased by the Seller and
sold to the Trust on such date, net of amounts paid
under the Warehouse Facility with respect to
principal and interest on the related loans under the
Warehouse Facility ("Excess Interest Collections").
Section 5.06. Distributions.
(a) On each Distribution Date,
the Trustee shall cause to be made the
transfers and distributions set forth in this
Section 5.06 in the amounts set forth in the
Monthly Servicing Certificate for such
Distribution Date.
(b) The Trustee shall, on each
Determination Date, based upon a certificate
delivered to the Trustee from the Backup
Servicer, calculate the Total Available
Distribution Amount, the Class A
Distributable Amount and the Class B
Distributable Amount, and, based on the
Total Available Distribution Amount,
determine the amount distributable to the
Certificateholders and the other distributions
to be made on such Distribution Date.
(c) Two (2) Business Days prior
to each Distribution Date, the Trustee shall
transfer from the Collection Account to the
Certificate Account an amount equal to the
Total Available Distribution Amount and all
investment earnings and interest on the
funds in the Collection Account.
(d) The rights of the Class B
Certificateholders to receive distributions in
respect of the Class B Certificates shall be
and hereby are subordinated to the rights of
the Class A Certificateholders to receive
distributions in respect of the Class A
Certificates to the extent provided in this
Section. Except as otherwise provided
below, on each Distribution Date, the
Trustee (based on the information contained
in the Monthly Servicing Certificate
delivered on the related Determination Date
pursuant to the Servicing Agreement) shall
make the following distributions from the
funds then on deposit in the Certificate
Account (including funds transferred from
the Reserve Fund when necessary pursuant
to the Amended and Restated Master Trust
Agreement and Section 5.07 below) in the
following order of priority:
(i) to the Backup Servicer, the Backup Servicer
Fee and reasonable out-of-pocket costs and expenses
and all unpaid Backup Servicer Fees and
unreimbursed reasonable out-of-pocket costs and
expenses from prior Collection Periods; to the
Contingent Servicer, the Contingent Servicer Fee
and reasonable out-of-pocket costs and expenses and
all unpaid Contingent Servicer Fees and
unreimbursed reasonable out-of-pocket costs and
expenses from prior Collection Periods; to the
Servicer, the Servicing Fees, to the extent then
payable in cash and not accrued and deferred in
accordance with the Servicing Agreement, and
reasonable out-of-pocket servicing expenses
incurred in connection with the servicing, collection
or enforcement of a Receivable, the repossession or
liquidation of a Financed Vehicle, the preparation of
reports and the other duties of the Servicer under
the Servicing Agreement, and all such unpaid
Servicing Fees and unreimbursed reasonable out-of-
pocket expenses from prior Collection Periods; to
the Trustee and Custodian, the Trustee Fees and
reasonable out-of-pocket costs and expenses and
Custodian Fees and reasonable out-of-pocket costs
and expenses (including but not limited to the
expenses associated with maintaining a credit rating,
if any, assigned by a Rating Agency and obtaining
an audit, procedures review or other accountants'
report on the reports, accounts or statements
prepared by the Servicer or the Trustee) and all
unpaid Trustee Fees and unreimbursed reasonable
out-of-pocket costs and expenses and Custodian
Fees and unreimbursed reasonable out-of-pocket
costs and expenses from prior Collection Periods;
and to the successor to the Servicer, the Trustee or
the Backup Servicer, Transition Costs, if any;
(ii)
to the Class A Certificateholders of record,
an amount equal to the sum of the Class A Interest
Distributable Amount and any Class A Interest
Carryover Shortfall from the prior Distribution
Date;
(iii) to the Class A
Certificateholders of record, an
amount equal to the sum of the Class
A Principal Distributable Amount
and any Class A Principal Carryover
Shortfall from the prior Distribution
Date;
(iv) to the Credit
Enhancer, if any, the Credit
Enhancement Fee;
(v) to the Class B
Certificateholders of record, an
amount equal to the sum of the Class
B Interest Distributable Amount and
any Class B Interest Carryover
Shortfall from the prior Distribution
Date; and
(vi) to the Class B
Certificateholders of record, an
amount equal to the sum of the Class
B Principal Distributable Amount
and any Class B Principal Carryover
Shortfall from the prior Distribution
Date.
(e) On each Distribution Date,
the Trustee shall distribute any Excess
Receipts into the Reserve Fund, provided
that, if on such Distribution Date, amounts
may be released from the Reserve Fund
under the terms of Section 3.6 of the
Amended and Restated Master Trust
Agreement, then such Excess Receipts shall
be distributed directly to the Seller or its
assignee as holder of the Excess Receipts.
(f) All distributions with respect
to each Class of Certificates on each
Distribution Date shall be made pro rata
among the outstanding Certificates of such
Class, in proportion to the Percentage
Interests evidenced thereby. All payments
to Certificateholders shall be made on each
Distribution Date to each Certificateholder
of record on the related Record Date by
check, or, if requested by a
Certificateholder holding Certificates with
Original Certificate Balances in the
aggregate in excess of $1,000,000, by wire
transfer to the account designated in writing
by such Holder in the form of Exhibit G
hereto (or such other account as such
Certificateholder may designate in writing)
delivered to the Trustee prior to the
Determination Date, in immediately
available funds.
Section 5.07. Reserve Fund.
(a) If on any Distribution Date
amounts in the Certificate Account are
insufficient to make the distributions
specified in Section 5.06(d), the Trustee
shall draw upon the Reserve Fund to make
up such insufficiency in accordance with the
Amended and Restated Master Trust
Agreement.
(b) On the Closing Date, the Seller
shall deposit into the Reserve Fund an
amount equal to (i) the Reserve Fund Initial
Deposit and (ii) such other amounts as may
be specified in the Agreement.
Section 5.08. Funding Account.
(a) The Trustee shall establish the
Funding Account, if any, for the benefit of
the Certificateholders. On the Closing Date,
the Trustee shall deposit into the Funding
Account the Original Pre-Funded Amount.
(b) The Trustee shall use funds
on deposit in the Funding Account on a
Funding Date to acquire Additional
Receivables on behalf of the Trust.
(c) Two Business Days prior to
the Distribution Date immediately following
the end of the Funding Period, the Trustee
shall first transfer all amounts received as
earnings on income from any investments or
reinvestments of funds in the Funding
Account to the Collection Account and,
second, shall transfer all remaining funds in
the Funding Account to the Certificate
Account for the purpose of prepaying the
Certificates on such Distribution Date.
Section 5.09. Statements to
Certificateholders; Tax Returns. With each
distribution from the Certificate Account to the
Certificateholders made on a Distribution Date, the
Trustee shall provide to the Backup Servicer, the
Seller and each Certificateholder of record, based
on the Monthly Servicing Certificate provided to the
Backup Servicer and the Trustee by the Servicer in
the form of Schedule B to the Servicing Agreement,
a statement substantially in the form of Exhibit C to
this Agreement setting forth at least the following
information with respect to such Distribution Date
and the related Collection Period, to the extent
applicable:
(a) Servicer Collections:
(i) The Available Interest Distribution Amount;
(ii) The Available
Principal Distribution Amount;
(iii) The Miscellaneous
Servicer Collections; and
(iv) The Total Available
Distribution Amount.
(b) Distributions:
(i) the amount of such distribution allocable to
principal in respect of each Class of Certificates;
(ii) the amount of such
distribution allocable to interest in
respect of each Class of Certificates;
(iii) the amount of the
Backup Servicing Fee, Contingent
Servicing Fee, Credit Enhancement
Fee, Servicing Fee, Trustee and
Custodian Fees and expenses for the
related Collection Period and the
portion of such fees allocable to each
Class of Certificates;
(iv) the amount of Class
Interest Carryover Shortfalls, if any,
on such Distribution Date in respect
of each Class of Certificates and the
amount of the Class Principal
Carryover Shortfalls, if any, on such
Distribution Date in respect of each
Class of Certificates;
(v) the Pool Factor and
the Class Factor for each Class of
Certificates as of such Distribution
Date, after giving effect to payments
allocated to principal reported under
clause (i) above;
(vi) the amount on deposit
in the Reserve Fund on such
Distribution Date, after giving effect
to amounts deposited in the Reserve
Fund and Reserve Fund Draws on
such date;
(vii) the aggregate amount
of Reserve Fund Draws, and the
breakdown of the application of such
draws to cover payment shortfalls to
Class A or B Certificateholders,
made on such Distribution Date;
(viii) the amount of net
investment earnings with respect to
the Reserve Fund earned during the
related Collection Period; and
(ix) the amounts, if any,
released from the Reserve Fund to
the Seller.
(c) Pool Information:
The Original Pool
Balance, the Pool Balance, the
weighted average coupon, the
weighted average maturity (in
months) and the remaining number
of Receivables for both the first and
the last day of the preceding
Collection Period, after giving effect
to payments allocated to principal
reported in (b)(ii) above.
(d) Receivables Repurchased or
Substituted by Seller:
The number and
aggregate Purchase Amount of
Receivables repurchased by Seller
and for any substitution of
Receivables, the number and
principal balance of both the
Receivables being replaced and the
Receivables substituted.
(e) Delinquency Information:
The amount of
Receivables (other than Defaulted
Receivables and Liquidated
Receivables) as to which Obligors
are (i) 30 days to 59 days past due
and (ii) 60 days to 89 days past due
in making Scheduled Payments.
(f) Repossession Information:
The number and
principal balance of Receivables as to
which the Servicer has repossessed
the Financed Vehicle during the
current period and on a cumulative
basis.
(g) Liquidated and Defaulted
Receivables Information:
The number and
principal balance of Receivables
which became Liquidated
Receivables (other than Receivables
previously characterized as Defaulted
Receivables) and the number and
principal balance of Receivables
which became Defaulted Receivables
during the Collection Period and on
a cumulative basis.
(h) Recoveries:
The amount of
Liquidation Proceeds, the amount of
insurance claims paid under the VSI
Insurance Policy, the amount of
rebates received from the Servicer
as a result of cancelled warranty or
extended service contracts and the
amount of claims paid under
consumer insurance during the
related Collection Period and on a
cumulative basis.
(i) Retention Amount:
The beginning
balance, the amount added with
respect to Additional Receivables or
quarterly reserve loss deficiency, the
amount subtracted with respect to
approved claims and quarterly
reserve loss surplus, and the ending
balance.
(j) Risk Default Insurance Proceeds:
The amount of
insurance proceeds paid under the
Risk Default Insurance Policy.
(k) Net Losses:
The amount of Net
Losses, if any, on such Distribution
Date and the cumulative amount of
all Net Losses realized on the
Receivables since the Closing Date.
(l) Insurance Claims:
The number of
Receivables as to which a claim was
filed under the Risk Default Policy
or the VSI Insurance Policy, the
amount of such claims, the number
of claims rejected and the principal
balance of related Receivables
rejected under the Risk Default
Policy for the related Collection
Period and on a cumulative basis.
(m) Funding Account:
The beginning
balance, the amount withdrawn to
purchase Additional Receivables and
to make deposits to the Reserve
Fund, the amount of any
reinvestment income earned on the
moneys on deposit therein, and the
ending balance.
(n) Collection Account:
The amount of
reinvestment income on funds held in
the Collection Account.
(o) Other Information:
Any other information
regarding each distribution which any
Certificateholder reasonably requests
in writing 30 days prior to such
distribution and which the Trustee
can provide without undue expense
or effort.
Within thirty (30) days after the end of each
calendar year, the Trustee shall furnish to each
Person who at any time during such calendar year
was a Certificateholder of record and received any
payment thereon (a) a report as to the aggregate of
amounts reported pursuant to clauses (b)(i), (ii) and
(iii) of this Section 5.09 for such calendar year or
applicable portion thereof during which such Person
was a Certificateholder and (b) such information as
may be reasonably requested by the
Certificateholders or required by the Code, and the
regulations thereunder, to enable such Holders to
prepare their federal and state income tax returns.
The obligation of the Trustee set forth in this
paragraph shall be deemed to have been satisfied to
the extent that substantially comparable information
shall be provided by the Backup Servicer pursuant
to any requirements of the Code. The parties
hereto further agree to treat each series of
Certificates as separate from each other series
created under the Amended and Restated Master
Trust Agreement for federal income tax purposes.
The Seller shall prepare any tax returns or
other forms required to be filed by the Trust. The
Trustee, upon request, will furnish the Seller with
all such information known to the Trustee as may
be reasonably required in connection with the
preparation of all tax returns of the Trust.
Section 5.10. Reliance on Information
from the Servicer. Notwithstanding anything to the
contrary contained in this Agreement, all
distributions from any of the accounts described in
this Article V and any movement of cash between
such accounts shall be made by the Trustee in
reliance on information provided to the Trustee by
the Servicer in writing, whether by way of the
Servicer's Monthly Servicing Certificate or
otherwise unless the Trustee has actual knowledge
or notice of any inaccuracy therein.
ARTICLE VI
RIGHTS OF CERTIFICATEHOLDERS
The Certificates shall represent fractional
undivided interests in the assets of the Trust which
shall consist of the right to receive, at the time and
in the amount specified herein pursuant to Section
5.01, a Percentage Interest in distributions with
respect to the Trust Property secured by funds
available pursuant to the Reserve Fund. Any other
right to receive payments or distributions hereunder
shall not represent any interest in the Accounts or
the Reserve Fund, except as specifically provided in
this Agreement. The parties hereto and the
Certificateholders agree that the Certificates
represent undivided interests in the Receivables,
which Receivables shall constitute stripped bonds
within the meaning of Section 1286 of the Code.
The parties hereto further agree to treat the
Certificates as separate from all other series of
certificates created under the Amended and Restated
Master Trust Agreement for federal income tax
purposes.
ARTICLE VII
THE CERTIFICATES
Section 7.01. The Certificates. The
Certificates shall be substantially in the forms of
Exhibit A-1 and A-2 hereto. The Class A and
Class B Certificates shall be issuable in minimum
denominations in Certificate Balances of $1,000,000
and integral multiples of $1,000 in excess thereof,
except that one Class A Certificate or Class B
Certificate may be issued in a different
denomination to account for an odd initial aggregate
Certificate Balance. The Certificates shall be
executed on behalf of the Trust by manual or
facsimile signature of a Trustee Officer of the
Trustee under the Trustee's seal imprinted thereon
and shall bear legends restricting the transfer
thereof. Certificates bearing the manual or
facsimile signatures of individuals who were, at the
time when such signatures shall have been affixed,
authorized to sign on behalf of the Trust, shall be
valid and binding obligations of the Trust,
notwithstanding that such individuals or any of them
shall have ceased to be so authorized prior to the
authentication and delivery of such Certificates or
did not hold such offices at the date of such
Certificates.
Section 7.02. Execution, Authentication of
Certificates. The Trustee shall cause the
Certificates to be executed on behalf of the Trust,
and delivered to or upon the written order of the
Seller pursuant to this Agreement. No Certificate
shall entitle its Holder to any benefit under this
Agreement or shall be valid for any purpose, unless
there shall appear on such Certificate a certificate of
authentication substantially in the form set forth in
Exhibits A-1 and A-2 hereto executed by the
Trustee by manual signature; such authentication
shall constitute conclusive evidence that such
Certificate shall have been duly authenticated and
delivered hereunder. All Certificates shall be dated
the date of their authentication.
Section 7.03. Registration of Transfer and
Exchange of Certificates.
(a) The Certificate Registrar shall
maintain a Certificate Register in which,
subject to such reasonable regulations as it
may prescribe, the Certificate Register shall
provide for the registration of Certificates
and transfers and exchanges of Certificates
as provided in this Agreement. The Trustee
is hereby initially appointed Certificate
Registrar for the purpose of registering
Certificates and transfers and changes of
Certificates as provided in this Agreement.
In the event that, subsequent to the Closing
Date, the Trustee notifies the Seller that it is
unable to act as Certificate Registrar, the
Seller shall appoint another bank or trust
company, having an office or agency located
in the Borough of Manhattan, The City of
New York, agreeing to act in accordance
with the provisions of this Agreement
applicable to it, and otherwise acceptable to
the Trustee, to act as successor Certificate
Registrar under this Agreement.
No transfer of a Certificate shall be
made unless (I) (a) such transfer is made
pursuant to an effective registration
statement under the Securities Act and any
applicable state securities laws or (b) (i)
such transfer is exempt from the registration
requirements under the Securities Act and
such state securities laws or (ii) the
Certificate Registrar is notified by such
transferee that such Certificate will be
registered in the name of the Clearing
Agency or its nominee and shall be held by
such transferee in book-entry form through
the Clearing Agency, and (II) such transfer
is to a Person that satisfies the requirements
of paragraph (a) (2) (ii) of Rule 3a-7 as then
in effect or any successor rule ("Rule 3a-7")
under the Investment Company Act. Each
prospective purchaser of a non-registered
Certificate not held in book-entry form shall
deliver a completed and duly executed
Transferee's Certificate in the form of
Exhibit K to the Trustee and to the Seller
for inspection prior to effecting any
requested transfer. The Seller and the
Trustee may rely conclusively upon the
information contained in any such certificate
in the absence of knowledge to the contrary.
Each Certificate Owner shall be deemed to
have agreed to these restrictions on transfer.
The foregoing restriction shall not be
deemed to prohibit the purchase of any
Certificates by III Finance, Ltd, III Limited
Partnership or any affiliates of either of the
foregoing, provided that (i) such purchaser
satisfies the requirements of paragraph
(a)(2)(i) of Rule 3a-7 and delivers to the
Seller and the Trustee an investor letter
substantially in the form of Exhibit L and
(ii) any subsequent transfers by such
purchaser comply with the restrictions set
forth in the preceding paragraph.
(b) If an election is made to hold a
Certificate in book-entry form, the
Certificate shall be registered in the name of
a nominee designated by the Clearing
Agency (and may be aggregated as to
denominations with other Certificates held
by the Clearing Agency). With respect to
Certificates held in book-entry form:
(1) the Certificate
Registrar and the Trustee will be
entitled to deal with the Clearing
Agency for all purposes of this
Agreement (including the payment of
principal of and interest on the
Certificates and the giving of
instructions or directions hereunder)
as the sole Holder of the Certificates,
and shall have no obligation to the
Certificate Owners;
(2) the rights of
Certificate Owners will be exercised
only through the Clearing Agency
and will be limited to those
established by law and agreements
between such Certificate Owners and
the Clearing Agency and/or the
Clearing Agency Participants
pursuant to the Depository
Agreement;
(3) whenever this
Agreement requires or permits
actions to be taken based upon
instructions or directions of Holders
of Certificates evidencing a specified
percentage of the Outstanding
Amount of the Certificates, the
Clearing Agency will be deemed to
represent such percentage only to the
extent that it has received
instructions to such effect from
Certificate Owners and/or Clearing
Agency Participants owning or
representing, respectively, such
required percentage of the beneficial
interest in the Certificates and has
delivered such instructions to the
Trustee; and
(4) without the consent of
the Seller and the Trustee, no such
Certificate may be transferred by the
Clearing Agency except to a
successor Clearing Agency that
agrees to hold such Certificate for
the account of the Certificate Owners
or except upon the election of the
Certificate Owner thereof or a
subsequent transferee to hold such
Certificate in physical form.
Neither the Trustee nor the
Certificate Registrar shall have any
responsibility to monitor or restrict the
transfer of beneficial ownership in any
Certificate an interest in which is
transferable through the facilities of the
Clearing Agency.
The Seller shall cause each
Certificate to contain a legend stating that
transfer of the Certificates is subject to
certain restrictions and referring prospective
purchasers of the Certificates to this Section
7.03 with respect to such restrictions.
(c) No transfer of a Certificate
(other than a Certificate held in book-entry
form) shall be made to any Person unless
the Trustee and Seller have received (A) a
certificate (substantially in the form of
Exhibit M) from such transferee to the effect
that such transferee (i) is not a Plan or a
Person that is using the assets of a Plan to
acquire such Certificate or (ii) is an
insurance company investing assets of its
general account and the exemptions provided
by Section III(a) of Department of Labor
Prohibited Transactions Class Exemption 95-
60, 60 Fed. Reg. 35925 (July 12, 1995) (the
"Exemptions") apply to the transferee's
acquisition and holding of any such
Certificate or (B) an opinion of counsel
satisfactory to the Trustee and the Seller to
the effect that the purchase and holding of
such Certificate will not constitute or result
in the assets of the Trust being deemed to be
"plan assets" subject to the prohibited
transactions provisions of ERISA or Section
4975 of the Code and will not subject the
Trustee or the Seller to any obligation in
addition to those undertaken in the
Agreement; provided, however, that the
Trustee will not require such certificate or
opinion in the event that, as a result of a
change of law or otherwise, counsel
satisfactory to the Trustee has rendered an
opinion to the effect that the purchase and
holding of a Certificate by a Plan or a
Person that is purchasing or holding such a
Certificate with the assets of a Plan will not
constitute or result in a prohibited
transaction under ERISA or Section 4975 of
the Code. Any Certificate Owners of a
Certificate held in book-entry form shall be
deemed to have made the representation in
clause (A) of this preceding sentence by its
acceptance of such Certificate. The
preparation and delivery of the certificate
and opinions referred to above shall not be
an expense of the Trust, the Trustee nor any
other party to the Agreement but shall be
borne by the Holder.
(d) The Certificates, until such time,
if at all, as they become registered under the
Securities Act, shall bear legends stating that
they have not been registered under the
Securities Act and are subject to the
restrictions on transfer described in Section
7.03(a). The Certificates shall additionally
bear legends stating that they are subject to
the restrictions on transfer described in
Section 7.03(c). By purchasing a
Certificate, each purchaser shall be deemed
to have agreed to these restriction on
transfer.
(e) The Holder of a Certificate
desiring to effect any transfer or assignment
shall, and the transferee of such Certificate
by purchasing such Certificate agrees to,
indemnify the Trustee and the Seller against
any liability that may result if the transfer or
assignment is not made in accordance with
the provisions of this Section 7.03 and
applicable federal and state securities laws.
(f) Upon surrender for registration
of transfer of any Certificate at the
Corporate Trust Office, the Trustee shall
execute, authenticate and deliver, in the
name of the designated transferee or
transferees, one or more new Certificates of
the same Class in authorized denominations
of a like aggregate principal amount.
(g) At the option of a Class A or
Class B Certificateholder, such holder's
Certificates may be exchanged for other
Certificates of the same Class in authorized
denominations of a like aggregate principal
amount, upon surrender of the Certificates
to be exchanged at any such office or
agency. Whenever any Certificates are so
surrendered for exchange the Trustee on
behalf of the Trust shall execute,
authenticate and deliver the Certificates that
the Certificateholder making the exchange is
entitled to receive.
(h) Every Certificate presented or
surrendered for registration of transfer or
exchange shall be accompanied by a written
instrument of transfer in form satisfactory to
the Trustee and the Certificate Registrar
duly executed by the Holder or his attorney
duly authorized in writing. Each Certificate
surrendered for registration of transfer and
exchange shall be cancelled and
subsequently disposed of by the Trustee.
(i) No service charge shall be made
to the Certificateholders for any registration
of transfer or exchange of Certificates, but
the Trustee may require payment of a sum
sufficient to cover any tax or governmental
charge that may be imposed in connection
with any transfer or exchange of
Certificates.
Section 7.04. Mutilated, Destroyed, Lost or
Stolen Certificates. If (a) any mutilated Certificate
shall be surrendered to the Certificate Registrar, or
if the Certificate Registrar shall receive evidence to
its satisfaction of the destruction, loss or theft of
any Certificate (provided that a Certificateholder's
written statement with respect to such destruction,
loss or theft shall constitute satisfactory evidence
thereof) and (b) there shall be delivered to the
Certificate Registrar and the Trustee such security
or indemnity as may be required by them to save
each of them harmless, then in the absence of notice
that such Certificate shall have been acquired by a
bona fide purchaser, the Trustee on behalf of the
Trust shall execute and the Trustee shall
authenticate and deliver, in exchange for or in lieu
of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like tenor and
denomination. In connection with the issuance of
any new Certificate under this Section 7.04, the
Trustee and the Certificate Registrar may require
the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in
connection therewith. Any duplicate Certificate
issued pursuant to this Section 7.04 shall constitute
conclusive evidence of ownership in the Trust, as if
originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
Section 7.05. Persons Deemed Owners.
Prior to due presentation of a Certificate for
registration of transfer, the Trustee or the
Certificate Registrar may treat the Person in whose
name any Certificate shall be registered as the
owner of such Certificate for the purpose of
receiving distributions pursuant to Section 5.06 and
for all other purposes whatsoever, and neither the
Trustee nor the Certificate Registrar shall be bound
by any notice to the contrary.
Section 7.06. Access to List of
Certificateholders' Names and Addresses. The
Trustee shall furnish or cause to be furnished to the
Servicer, at the expense of the Trust, within 15
days after receipt by the Trustee of a request
therefor from the Servicer in writing, a list, in such
form as the Servicer may reasonably require, of the
names and addresses of the Certificateholders as of
the most recent Record Date. Each Holder, by
receiving and holding a Certificate, shall be deemed
to have agreed to hold neither the Servicer nor the
Trustee accountable by reason of the disclosure of
its name and address, regardless of the source from
which such information was derived.
Section 7.07. Maintenance of Office or
Agency. The Trustee shall maintain in
Minneapolis, Minnesota, or New York, New York,
an office or offices or agency or agencies where
Certificates may be surrendered for registration of
transfer or exchange and where notices and
demands to or upon the Trustee in respect of the
Certificates and this Agreement may be served.
The Trustee initially designates the Corporate Trust
Office as specified in this Agreement as its office
for such purposes. The Trustee shall give prompt
written notice to the Backup Servicer and to the
Certificateholders of any change in the location of
the Certificate Register or any such office or
agency.
Section 7.08. Notices to Certificateholders.
Whenever notice or other communication to the
Certificateholders is required under this Agreement,
the Trustee shall give all such notices and
communications specified herein to be given to
Holders of the Certificates at their respective
addresses as they appear in the Certificate Register.
ARTICLE VIII
THE SELLER
Section 8.01. Representations of Seller.
The Seller makes the following representations on
which the Trustee relies in accepting the
Receivables in trust and executing and
authenticating the Certificates on the Closing Date.
The representations speak as of the Closing Date,
but shall survive the pledge, transfer and
assignment of the Receivables to the Trustee in trust
for the benefit of the Certificateholders.
(a) Organization and Good
Standing. The Seller is a corporation duly
organized, validly existing and in good
standing under the laws of the State of
Delaware.
(b) 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 other
jurisdictions in which the ownership or lease
of 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.
(c) 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 so sold and assigned to and deposited
with the Trustee as part of the Trust and
such sale and assignment is valid and
binding against the Seller and has been duly
authorized by the Seller by all necessary
action; and 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.
(d) No Violation. The
consummation of the transactions
contemplated by this Agreement 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 shall be
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 the 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.
(e) No Proceedings. To the
Seller's 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:
(i) asserting the invalidity of this
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 the Purchase Agreement or
this Agreement; (iii) 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,
the Purchase Agreement or the Certificates;
or (iv) relating to the Seller and which might
adversely affect the federal or State income
tax attributes of the Certificates.
(f) 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 as 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 and certifications.
(g) 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.
(h) Adequate Provisions for
Taxes. The provisions for taxes on the
Seller's books are in accordance with
generally accepted accounting principles.
(i) Pension/Profit Sharing
Plans. No contribution failure has occurred
with respect to any pension or profit sharing
plan to which the Seller or any of its
Affiliates is a contributor, and all such plans
have been fully funded as of the date of this
Agreement.
(j) Trade Names. "Aegis Auto
Funding Corp. IV" is the only trade name
under which the Seller is currently operating
its business and under which the Seller
operated its business for the period of time
during which the Seller was in existence
preceding the Closing Date.
(k) Ability to Perform. There
has been no material impairment in the
ability of Seller to perform its obligations
under this Agreement.
(l) Chief Executive Office.
Since it commenced operations, the Seller
has maintained its chief executive office in
the State of Delaware and there have been
no other locations of the Seller's chief
executive office preceding the Closing Date.
The Seller shall give written notice to the
Trustee and the Certificateholders 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
perfected, first priority security interest in
the Receivables granted hereunder in favor
of the Trust.
(m) 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 thereby.
(n) Solvent. Seller is solvent
and will not become insolvent after giving
effect to the transactions contemplated
hereunder; Seller is paying its debts as they
become due; Seller, after giving effect to the
contemplated transactions, will have
adequate capital to conduct its business.
(o) Lock-Box Account. Each
Obligor of a Receivable has been, or will be
within 30 days of the Closing Date or
Funding Date when acquired, directed and is
required to remit payments to the Lock-Box
Account.
(p) Consolidation. Seller has
operated and will operate its business such
that its assets and liabilities will not be
substantively consolidated with the assets
and liabilities of Aegis Finance and its
separate existence will not be disregarded in
any state or federal court proceeding.
(q) Business Purpose. The
Seller will acquire and sell, transfer, assign
and otherwise convey (for state law, tax and
financial accounting purposes) the
Receivables for a bona fide business
purpose.
(r) Federal Income Tax
Purposes. The Seller intends to treat the
transactions contemplated under this
Agreement as a sale of the Receivables to
the Trust for federal income tax purposes,
subject to the retention by the Seller of a
stripped coupon therein as described in
Section 1286 of the Code. The Seller
intends to cause to be filed all returns or
reports in a manner consistent with such
treatment. In addition, the Seller intends to
treat each other trust created under the
Amended and Restated Master Trust
Agreement as an entity separate from the
Trust for federal income tax purposes.
Further, the Seller intends to treat the
Reserve Fund as property separate from any
interest in any trust the Seller may acquire,
including but not limited to any interest in
the Excess Receipts.
(s) Valid Transfer. The
Purchase Agreement constitutes a valid
transfer to the Seller of all of Aegis
Finance's right, title and interest in the
Receivables transferred to the Seller
pursuant to such Purchase Agreement.
(t) 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.
(u) 1940 Act. 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.
Section 8.02. Liability of Seller;
Indemnities. The Seller shall be liable in
accordance herewith only to the extent of the
obligations specifically undertaken by the Seller
under this Agreement, and only to the extent of the
Seller's interest in the Trust Property.
(a) The Seller shall indemnify,
defend and hold harmless the Trustee, the
Trust, the Backup Servicer, the Custodian
and each Certificateholder from and against
any taxes, other than income and franchise
taxes, that may at any time be asserted
against the Trustee, the Trust, the Backup
Servicer, the Custodian or the
Certificateholders with respect to, and as of
the date of, the transfer of the Receivables
to the Trust or the issuance and original sale
of the Certificates, including any sales,
gross receipts, general corporation, tangible
personal property, privilege or license taxes
and costs and expenses in defending against
the same.
(b) The Seller shall assume,
defend and hold harmless the Trustee, the
Trust, the Backup Servicer, the Custodian
and each Certificateholder from and against
any loss, liability, expense or action, suit,
claim or damage incurred by reason of (i)
the Seller's willful misfeasance, bad faith or
negligence in the performance of its duties
under this Agreement, or by reason of
reckless disregard of its obligations and
duties under this Agreement (and such
indemnity shall extend to the performance of
the Seller's duties and the satisfaction of its
obligations with respect to any Receivables
that become Purchased Receivables, as
provided in this Agreement), (ii) the Seller's
violation of federal or State securities laws
in connection with the exemption from
registration of the sale of the Certificates,
and (iii) any transaction arising out of or
contemplated by this Agreement except any
loss, liability, expense, action, suit, claim or
damage arising out of the failure to pay
principal, premium, if any, or interest with
respect to the Certificates to the extent such
failure does not result from the Seller's
omission to comply with the terms of this
Agreement or acts of the Seller in
contravention of this Agreement.
The assumption of liability or
indemnification under this Section 8.02 shall
include, without limitation, reasonable fees and
expenses of counsel and expenses of litigation and
shall survive termination of this Agreement. If the
Seller shall have made any payments to the Trustee
pursuant to this Section and the Trustee thereafter
shall collect any of such amounts from others, the
Trustee shall repay such amounts to such party
without interest. Notwithstanding anything to the
contrary herein, the liability of the Seller under this
Section 8.02 is intended to be the same primary
liability as would apply to the general partner of a
limited partnership organized under the laws of the
State of Delaware. Potential creditors of the Trust
are intended beneficiaries of the assumption of
liabilities by the Seller under this Section 8.02 and
may enforce such assumption in accordance with its
tenor.
Section 8.03. Merger or Consolidation of,
or Assumption of the Obligations of, Seller. Any
Person (a) into which the Seller may be merged or
consolidated, (b) which may result from any merger
or consolidation to which the Seller shall be a party,
or (c) which may succeed to the properties and
assets of the Seller substantially as a whole, which
Person in any of the foregoing cases executes an
agreement of assumption to perform every
obligation of the Seller under this Agreement, shall
be the successor to the Seller hereunder without the
execution or filing of any document or any further
act by any of the parties to this Agreement;
provided, however, that (i) immediately after giving
effect to such transaction, no representation or
warranty or covenant made pursuant to Section 3.01
or Section 8.01 shall have been breached, no Event
of Servicing Default, and no event that, after notice
or lapse of time, or both, would become an Event
of Servicing Default shall have happened and be
continuing and the conditions of Section 8.07(a)(ii)
shall have been satisfied, (ii) the Seller shall have
delivered to the Trustee and each Certificateholder
an Officer's Certificate and an Opinion of Counsel,
which shall be independent outside counsel, each
stating that such consolidation, merger or
succession and such agreement or assumption
comply with this Section 8.03 and that all
conditions precedent, if any, provided for in this
Agreement relating to such transaction have been
complied with, (iii) the Seller shall have delivered
to the Trustee an Opinion of Counsel, which shall
be independent outside counsel, either (A) stating
that, in the opinion of such counsel, all financing
statements and continuation statements and
amendments thereto have been executed and filed
that are necessary fully to preserve and protect the
interest of the Trustee in the Receivables, and
reciting the details of such filings, or (B) stating
that, in the opinion of such counsel, no such action
shall be necessary to preserve and protect such
interest and (iv) the Major Certificateholders shall
have consented to such merger, consolidation or
succession. The Seller shall provide notice of any
merger, consolidation or succession pursuant to this
Section 8.03 to each Certificateholder.
Notwithstanding anything herein to the contrary, the
execution of the foregoing agreement of assumption
and compliance with clauses (i), (ii), (iii) and (iv)
above shall be conditions to the consummation of
the transactions referred to in clauses (a), (b) or (c)
above.
Section 8.04. Limitation on Liability of
Seller and Others. The Seller and any director or
officer or employee or agent of the Seller may rely
in good faith on the written advice of counsel or on
any document of any kind, prima facie properly
executed and submitted by any Person respecting
any matters arising hereunder.
Section 8.05. Seller May Own Certificates.
The Seller and any Affiliate of the Seller may in its
individual or any other capacity become the owner
or pledgee of Certificates with the same rights as it
would have if it were not the Seller or an Affiliate
thereof, except as otherwise provided in the
definition of "Certificateholder" in Section 1.01.
Certificates so owned by or pledged to the Seller or
such Affiliate shall have an equal and proportionate
benefit under the provisions of this Agreement,
without preference, priority or distinction as among
all of the Certificates, other than with respect to
Voting Interests. Notwithstanding the foregoing,
the Seller will not, and will not permit any of their
Affiliates (or any Person acting on behalf of the
Seller or any such Affiliate) to directly or indirectly
acquire or make any offer to acquire any
Certificates unless the Seller or such Affiliate (or
such Person acting on behalf thereof) shall have
offered to acquire Certificates, pro rata, from all
Holders and upon the same terms.
Section 8.06. Covenants of the Seller. The
Seller shall:
(a) not impair the rights of the
Certificateholders or the Trustee in the
Receivables;
(b) except for the sale and
assignment effected under this Agreement
and prior to the termination of the Trust, not
sell, pledge, assign, or transfer to any other
Person, or grant, create, incur, assume, or
suffer to exist any Lien on any Receivable
sold to the Trustee or any interest therein;
(c) immediately notify the
Trustee of the existence of any Lien on any
Receivable;
(d) defend the right, title, and
interest of the Trustee in, to, and under the
Receivables transferred to the Trustee,
against all claims of third parties claiming
through or under the Seller, Aegis Finance
or the Servicer;
(e) make at its sole cost and
expense any filings, reports, notices,
applications, registrations with, and seek any
consents or authorizations from, the
Securities and Exchange Commission and
any state securities authority on behalf of the
Trust as may be necessary or advisable or
reasonably requested by the Trustee, and
shall comply with any federal or State
securities or reporting requirements laws;
(f) comply in all respects with
the terms and conditions of the Purchase
Agreement and not amend, modify, or
waive any provision of the Purchase
Agreement in any manner relating to the
obligation of Aegis Finance to repurchase
Receivables or in any manner that would
have a materially adverse effect on the
interests of the Certificateholders;
(g) promptly after receipt of
knowledge thereof, notify the Trustee and
the Certificateholders of the occurrence of
any Event of Backup Servicing Default or
Event of Servicing Default and any breach
by the Seller or the Backup Servicer of any
of its respective covenants or representations
and warranties contained in this Agreement
or, with respect to the Seller, in the
Purchase Agreement;
(h) make at its sole cost and
expense any filings, reports, notices, or
applications and seek any consents or
authorizations from any and all government
agencies, tribunals, or authorities in
accordance with the UCC and any State
vehicle license or registration authority on
behalf of the Trust as may be necessary or
advisable or reasonably requested by the
Trustee to create, maintain and protect a
first-priority perfected security interest of
the Trust in, to, and on the Financed
Vehicles and a first-priority perfected
ownership interest of the Trust in, to, and
on the Receivables transferred to it;
(i) upon request of any
Certificateholder, furnish the information
required by paragraph (d)(4) of Rule 144A
promulgated under the Securities Act.
Section 8.07. Enforcement by Trustee.
The Seller hereby acknowledges and agrees that the
following covenants and agreements of the Seller
shall be enforceable by the Trustee at all times until
the Trust is terminated.
(a) Covenants Regarding
Operations:
(i) The Seller shall not
engage in any business or activity
other than in connection with or
relating to the purchase of auto loan
receivables and the issuance of debt
secured by, or certificates of
participation in, a pool of auto loan
receivables.
(ii) The Seller shall not
consolidate or merge with or into any
other entity or convey or transfer its
properties and assets substantially as
an entirety to any entity unless (A)
the entity (if other than the Seller)
formed or surviving such
consolidation or merger, or that
acquires by conveyance or transfer
the properties and assets of the Seller
substantially as an entirety, shall be
organized and existing under the
laws of the United States of America
or any State thereof or the District of
Columbia, and shall expressly
assume in form satisfactory to the
Majority Certificateholders, the
performance of every covenant on
the part of the Seller to be performed
or observed pursuant to this
Agreement and the Purchase
Agreement, (B) immediately after
giving effect to such transaction, no
default or event of default under this
Agreement shall have occurred and
be continuing, (C) the Seller shall
have delivered to each
Certificateholder and the Trustee an
Officers' Certificate and an opinion
of independent counsel, each stating
that such consolidation, merger,
conveyance or transfer comply with
this Agreement and (D) the Majority
Certificateholders shall have
consented thereto.
(iii) The Seller shall not
dissolve or liquidate, in whole or in
part, except (A) as permitted in
paragraph (ii) above or (B) with the
prior written consent of the Trustee
and the Majority Certificateholders.
(iv) The funds and other
assets of the Seller shall not be
commingled with those of any other
corporation, entity or Person,
including, but not limited to, the
parent or Affiliates of the Seller.
(v) The Seller shall not
hold itself out as being liable for the
debts of any other party, including,
but not limited to, the debts of the
parent or Affiliates of the Seller.
(vi) The Seller shall not
form, or cause to be formed, or
otherwise have, any subsidiaries.
(vii) The Seller shall act
solely in its corporate name and
through the duly authorized officers
or agents in the conduct of its
business, and shall conduct its
business so as not to mislead others
as to the identity of the entity with
which they are concerned.
(viii) At all times, except
in the case of a temporary vacancy,
which shall promptly be filled, the
Seller shall have on its board of
directors at least two directors each
of whom qualifies as an
"Independent Director" as such term
is defined in the Seller's Certificate
of Incorporation as originally filed
with the Delaware Secretary of
State's office.
(ix) The Seller shall
maintain records and books of
account of the Seller and shall not
commingle such records and books
of account with the records and
books of account of any Person.
The books of the Seller may be kept
(subject to any provision contained in
the statutes) inside or outside the
State of New Jersey at such place or
places as may be designated from
time to time by the board of
directors of the Seller.
(x) The board of directors
of the Seller shall hold appropriate
meetings to authorize all of its
corporate actions. Regular meetings
of the board of directors of the Seller
shall be held not less frequently than
three times per annum.
(xi) Meetings of the
shareholders of the Seller shall be
held not less frequently than one time
per annum.
(xii) The Seller shall not
amend, alter, change or repeal any
provision contained in this
Section 8.07(a) without (A) the
affirmative vote in favor thereof of
eighty percent (80%) of the then
outstanding shares of the Seller
entitled to vote thereon and (B) the
prior written consent of the Trustee
and the Majority Certificateholders.
(xiii) The Seller shall not,
without the affirmative unanimous
vote of the whole board of directors
of the Seller (including at least one
director referred to in clause (viii)
above), institute any proceedings to
adjudicate the Seller a bankrupt or
insolvent, consent to the institution
of bankruptcy or insolvency
proceedings against the Seller, file a
petition seeking or consenting to
reorganization or relief under any
applicable federal or State law
relating to bankruptcy, consent to the
appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or
other similar official) of the Seller or
a substantial part of its property or
admit its inability to pay its debts
generally as they become due or
authorize any of the foregoing to be
done or taken on behalf of the Seller.
(xiv) The Seller is not and
shall not be involved in the day-to-
day or other management of its
parent or any of its Affiliates.
(xv) Other than the
purchase and sale or pledge of assets
as provided in this Agreement and
related agreements with respect to
this transaction and other transactions
relating to the purchase of auto loan
receivables and the issuance of debt
or certificates of participation as
contemplated by the Amended and
Restated Master Trust Agreement,
the Seller shall engage in no other
transactions with any of its Affiliates.
(xvi) Seller shall maintain a
separate business office and
telephone number from any of its
Affiliates.
(xvii) Seller's financial
statements shall reflect its separate
legal existence from any of its
Affiliates.
(xviii) The Seller will not
amend its Certificate of Incorporation
in any respect material to the
Certificateholders.
(xix) The Seller shall use
separate invoices, stationery and
checks.
(xx) The Seller shall not
suffer or permit the credit or assets
of Aegis Finance to be held out as
available for the obligations of the
Seller.
(xxi) The Seller shall enter
into transactions with Aegis Finance
or its affiliates only on commercially
reasonable terms.
(xxii) The Seller shall not
incur or issue any "Obligation" (as
such term is defined in its Certificate
of Incorporation) in contravention of
the limitations set forth therein.
(xxiii) The Seller shall not
issue any "Securities" or incur or
issue any "Obligations" (as such
terms are defined in its Certificate of
Incorporation) under any other
pooling and servicing agreement,
purchase agreement or otherwise,
unless such agreement contains an
express provision substantially
similar to Section 13.10 hereof
limiting recourse to the Seller to the
assets involved in the transaction to
which such agreement relates.
(xxiv) The Seller will
maintain its valid corporate existence
in good standing under the laws of
the State of Delaware; (ii) will
observe all corporate procedures
required by its Certificate of
Incorporation and Bylaws (the
"Bylaws") and the laws of the State
of Delaware; and (iii) and will
otherwise comply with the provisions
of its Certificate of Incorporation and
Bylaws and the Delaware General
Corporation Law.
(xxv) Financial and
operational services, including,
without limitation, maintenance of
the Seller's books and records, will
be performed on behalf of the Seller
by independent contractors. The
Seller will make payments to such
independent contractors for such
services rendered or expenses
incurred on its behalf in an amount
equal to the fair value of such
services and expenses. To the extent
the Seller leases premises from Aegis
Finance or its Affiliates, the Seller
will pay appropriate compensation or
rental. The Seller will be directly
responsible for the costs of outside
legal, auditing and other similar
services. The Seller will provide for
its operating expenses and liabilities
from its own funds.
(xxvi) The annual financial
statements of the Seller will disclose
the effects of these transactions in
accordance with generally accepted
accounting principles. Any
consolidated financial statements
which consolidate the assets and
earnings of Aegis Finance with those
of the Seller will contain a footnote
stating that the assets of Aegis
Finance will not be available to
creditors of Seller. Audited financial
statements of the Seller will disclose
that the assets of the Seller are not
available to pay creditors of Aegis
Finance.
Section 8.08. No Bankruptcy Petition. The
Seller covenants and agrees that prior to the date
which is one year and one day after the payment in
full of all securities issued by the Seller or by a
trust for which the Seller was the depositor, which
securities were rated by any nationally recognized
statistical rating organization, it will not institute
any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other
proceedings under any federal or State bankruptcy
or similar law.
ARTICLE IX
THE BACKUP SERVICER
Section 9.01. Representations of Backup
Servicer. The Backup Servicer makes the following
representations on which the Trustee relies in
accepting the Receivables in trust and executing and
authenticating the Certificates on the Closing Date.
The representations speak as of the Closing Date,
but shall survive the sale and assignment of the
Receivables to the Trustee in trust for the benefit of
the Certificateholders.
(a) Organization and Good
Standing. The Backup Servicer shall have
been duly organized and shall be validly
existing and in good standing under the
federal laws of the United States of
America, with power and authority to own
its properties and to conduct its business as
such properties shall be currently owned and
such business is presently conducted.
(b) Power and Authority. The
Backup Servicer shall have the power and
authority to execute and deliver this
Agreement and the Servicing Agreement and
to carry out their respective terms; and the
execution, delivery and performance of this
Agreement and the Servicing Agreement
shall have been duly authorized by the
Backup Servicer by all necessary corporate
action. Each of this Agreement and the
Servicing Agreement constitutes the valid
and binding obligation of the Backup
Servicer enforceable in accordance with its
terms.
(c) No Violation. The
consummation of the transactions by the
Backup Servicer contemplated by this
Agreement and the Servicing Agreement and
the fulfillment of the terms hereof and
thereof 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 charter or
bylaws of the Backup Servicer, or, to the
best of the Backup Servicer's knowledge,
any indenture, agreement or other
instrument to which the Backup Servicer 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 and
the Servicing Agreement); nor to the best of
the Backup Servicer's knowledge, any law,
order, rule or regulation applicable to the
Backup Servicer of any court or of any
federal or state regulatory body,
administrative agency, or other
governmental instrumentality having
jurisdiction over the Backup Servicer or its
properties.
(d) No Proceedings. To the
Backup Servicer'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 Backup Servicer or its
respective properties: (A) asserting the
invalidity of this Agreement or the Servicing
Agreement; (B) seeking to prevent the
consummation of any of the transactions
contemplated by this Agreement or the
Servicing Agreement; or (C) seeking any
determination or ruling that might materially
and adversely affect the performance by the
Backup Servicer of its obligations under, or
the validity or enforceability of, this
Agreement or the Servicing Agreement.
Section 9.02. Merger or Consolidation of,
or Assumption of the Obligations of, or
Resignation of Backup Servicer. Any Person (a)
into which the Backup Servicer may be merged or
consolidated, (b) which may result from any merger
or consolidation to which the Backup Servicer shall
be a party, (c) which may succeed to the properties
and assets of the Backup Servicer substantially as a
whole, or (d) which may succeed to the duties and
obligations of the Backup Servicer under this
Agreement and the Servicing Agreement following
the resignation of the Backup Servicer, whether or
not such Person executes an agreement of
assumption to perform every obligation of the
Backup Servicer hereunder and thereunder, shall be
the successor to the Backup Servicer under this
Agreement and the Servicing Agreement without
further act on the part of any of the parties to this
Agreement or the Servicing Agreement.
Section 9.03. Limitation on Liability of
Backup Servicer and Others. Neither the Backup
Servicer nor any of the directors or officers or
employees or agents of the Backup Servicer shall be
under any liability to the Trust or the
Certificateholders, except as provided under this
Agreement, for any action taken or for refraining
from the taking of any action pursuant to this
Agreement; provided, however, that this provision
shall not protect the Backup Servicer or any such
Person against any liability that would otherwise be
imposed by reason of willful misfeasance, bad faith
or negligence in the performance of duties or by
reason of reckless disregard of obligations and
duties under this Agreement. The Backup Servicer
and any director or officer or employee or agent of
the Backup Servicer may rely in good faith on any
document of any kind prima facie properly executed
and submitted by any Person respecting any matters
arising under this Agreement.
Except as provided in this Agreement, the
Backup Servicer shall not be under any obligation
to appear in, prosecute or defend any legal action
that shall not be incidental to its duties under this
Agreement and the Servicing Agreement, and that
in its opinion may involve it in any expense or
liability; provided, however, that the Backup
Servicer may undertake any reasonable action that
it may deem necessary or desirable in respect of
this Agreement and the Servicing Agreement and
the rights and duties of the parties to this
Agreement and the Servicing Agreement and the
interests of the Certificateholders under this
Agreement and the Servicing Agreement. In such
event, the reasonable out-of-pocket legal expenses
and costs of such action and any liability resulting
therefrom shall be expenses, costs and liabilities of
the Trust and the Backup Servicer shall be entitled
to be reimbursed therefor pursuant to Section
5.06(d)(i).
The Trustee shall distribute out of the
Collection Account pursuant to Section 5.06(d)(i) on
the Distribution Date succeeding the delivery of the
Opinion of Counsel referred to below, any such
expenses, costs or liabilities required from the Trust
pursuant to this Section 9.03, provided, however,
that the Trustee shall only distribute amounts
pursuant to this Section 9.03 upon the Trustee's
receipt of an Opinion of Counsel to the effect that
such distribution is permitted by this Agreement.
Section 9.04. Successor Backup Servicer.
The Backup Servicer under this Agreement shall at
all times be a corporation or a banking association
organized and existing in good standing under the
laws of the United States or a state thereof; having
a combined capital and surplus not less than
$50,000,000 and subject to supervision or
examination by federal or state authorities. If such
association or corporation shall publish reports of
condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or
examining authority, then for the purpose of this
Section 9.04, the combined capital and surplus of
such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent
report of condition so published. In case at any
time the Backup Servicer shall cease to be eligible
in accordance with the provisions of this Section
9.04, or shall cease to be an Eligible Servicer, the
Backup Servicer shall resign immediately in the
manner and with the effect specified in Section
4.02.
Section 9.05. No Bankruptcy Petition. The
Backup Servicer covenants and agrees that prior to
the date which is one year and one day after the
payment in full of all securities issued by the Seller
or by the Trust it will not institute against, or join
any other Person in instituting against, the Seller
any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other
proceedings under any federal or state bankruptcy
or similar law; provided, however, that nothing
contained herein shall prohibit the Backup Servicer
from participating in any existing bankruptcy
proceeding.
ARTICLE X
BACKUP SERVICING DEFAULT
Section 10.01. Events of Backup Servicing
Default. If any one of the following events
("Events of Backup Servicing Default") shall occur
and be continuing:
(a) Failure on the part of the
Backup Servicer duly to observe or to
perform in any material respect any
covenant or agreement of the Backup
Servicer set forth in this Agreement or the
Servicing Agreement, which failure shall (i)
materially and adversely affect the rights of
Certificateholders and (ii) continue
unremedied for a period of 30 days after the
date on which written notice of such failure,
requiring the same to be remedied, shall
have been sent (A) to the Backup Servicer
by the Trustee, or (B) to the Backup
Servicer and to the Trustee by the Holders
of Certificates evidencing not less than 20%
of the Voting Interests thereof; or
(b) The entry of a decree or order
by a court or agency or supervisory
authority having jurisdiction in the premises
for the appointment of a conservator,
receiver or liquidator for the Backup
Servicer in any insolvency, readjustment of
debt, marshalling of assets and liabilities or
similar proceedings, or for the winding up
or liquidation of its affairs, and the
continuance of any such decree or order
unstayed and in effect for a period of 30
consecutive days; or
(c) The consent by the Backup
Servicer to the appointment of a conservator
or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets
and liabilities or similar proceedings of or
relating to the Backup Servicer or of or
relating to substantially all of its property;
or the Backup Servicer shall admit in
writing its inability to pay its debts generally
as they become due, file a petition to take
advantage of any applicable insolvency or
reorganization statute, make an assignment
for the benefit of its creditors or voluntarily
suspend payment of its obligations;
then, and in each and every case, so long as an
Event of Backup Servicing Default shall not have
been remedied, either the Trustee, or the Holders of
the Certificates evidencing not less than 20% of the
Voting Interests thereof, by notice then given in
writing to the Backup Servicer (and to the Trustee
if given by the Certificateholders) may terminate all
of the rights and obligations of the Backup Servicer
under this Agreement. Thirty (30) days after the
receipt by the Backup Servicer of such written
notice, all authority and power of the terminated
Backup Servicer under this Agreement, whether
with respect to the Certificates or the Receivables
or otherwise, shall, without further action, pass to
and be vested in the Trustee if the Trustee is not the
same entity as the terminated Backup Servicer and
a successor Backup Servicer has not been appointed
under Section 10.02. The Trustee is hereby
authorized and empowered to execute and deliver,
on behalf of the predecessor Backup Servicer, as
attorney in fact or otherwise, any and all documents
and other instruments, and to do or accomplish all
other acts or things necessary or appropriate to
effect the purposes of such notice of termination.
The predecessor Backup Servicer shall cooperate
with the successor Backup Servicer and the Trustee
in effecting the termination of the responsibilities
and rights of the predecessor Backup Servicer under
this Agreement.
Section 10.02. Appointment of Successor.
(a) Upon a Backup Servicer's
receipt of notice of termination pursuant to
Section 10.01 or a Backup Servicer's
resignation in accordance with Section 4.02,
the predecessor Backup Servicer shall
continue to perform its functions as Backup
Servicer under this Agreement until receipt
of such notice and, in the case of
resignation, until a successor Backup
Servicer shall have assumed the duties of the
Backup Servicer in accordance with this
Section 10.02. In the event of a Backup
Servicer's termination hereunder, the
Trustee (with the consent of the Majority
Certificateholders) shall appoint a successor
Backup Servicer, and the successor Backup
Servicer shall accept its appointment by a
written assumption in form acceptable to the
Trustee. In the event that a successor
Backup Servicer has not been so appointed
(i) within 45 days of delivery of notice of
termination, or (ii) within 30 days of
resignation, the Trustee may petition a court
of competent jurisdiction to appoint any
established institution, having a combined
capital and surplus of not less than
$50,000,000 and which is an Eligible
Servicer, as the successor to the Backup
Servicer under this Agreement.
(b) Upon appointment, the
successor Backup Servicer shall be the
successor in all respects to the predecessor
Backup Servicer and shall be subject to all
the responsibilities, duties and liabilities
arising thereafter relating thereto placed on
the predecessor Backup Servicer, including,
but not limited to, the assumption by the
Backup Servicer of all duties and obligations
of the Servicer in the event of an Event of
Servicing Default with respect to the
Servicer under the Servicing Agreement
pursuant to the terms therein and shall be
entitled to all of the rights granted to the
predecessor Backup Servicer, by the terms
and provisions of this Agreement.
(c) The outgoing Backup Servicer
shall deliver to the successor Backup
Servicer all documents and records in its
possession which are necessary to enable the
successor Backup Servicer to perform its
duties relating to the Servicing Agreement
and the Receivables and otherwise use its
best efforts to effect the orderly and efficient
transfer of the Servicing Agreement to the
successor Backup Servicer.
Section 10.03. Notification to
Certificateholders. Upon any termination of, or
appointment of a successor to, a Backup Servicer
pursuant to this Article X, the Trustee shall give
prompt written notice thereof to Certificateholders
at their respective addresses appearing in the
Certificate Register.
Section 10.04. Waiver of Past Defaults.
The Majority Certificateholders (or, in the case of
a default referred to in Section 10.01(a), the
Holders of Certificates evidencing 100% of the
Voting Interests thereof) may, on behalf of all
Holders of Certificates, waive any default by the
Backup Servicer in the performance of its
obligations hereunder and its consequences. Upon
any such waiver of a past default, such default shall
cease to exist, and any Event of Backup Servicing
Default arising therefrom shall be deemed to have
been remedied for every purpose of this Agreement.
No such waiver shall extend to any subsequent or
other default or impair any right consequent
thereon.
ARTICLE XI
THE TRUSTEE
Section 11.01. Duties of Trustee. The
Trustee, both prior to the occurrence of an Event of
Backup Servicing Default and after an Event of
Backup Servicing Default shall have been cured or
waived, shall undertake to perform only such duties
as are specifically set forth in this Agreement. If
an Event of Backup Servicing Default shall have
occurred and shall not have been cured or waived,
the Trustee shall exercise such of the rights and
powers vested in it by this Agreement, and shall use
the same degree of care and skill in their exercise,
as a prudent person would exercise or use under the
circumstances in the conduct of his own affairs;
provided, however, that if the Trustee shall assume
the duties of a Backup Servicer pursuant to Section
10.02, the Trustee shall perform such duties in
accordance with Section 4.06. If the Trustee is
uncertain with respect to performing its duties or if
a conflict arises regarding the Trustee's rights,
duties and obligations, the Trustee may petition a
court of competent jurisdiction for written direction
or to interplead necessary parties. Notwithstanding
anything in this Agreement to the contrary, neither
the Trustee nor the Backup Servicer shall have any
authority to perform any act which would cause the
Trust to be characterized as an association taxable
as a corporation for federal income tax purposes.
The Trustee, upon receipt of all resolutions,
certificates, statements, opinions, reports,
documents, orders or other instruments furnished to
the Trustee that shall be specifically required to be
furnished pursuant to any provision of this
Agreement, shall examine them to determine
whether they conform as to form to the
requirements of this Agreement; provided,
however, in the absence of bad faith on its part, the
Trustee can assume the truth and accuracy of the
statements made therein and the genuineness of the
signatures thereon.
The Trustee shall take and maintain custody
of the Schedule of Receivables included as an
exhibit to this Agreement and shall retain all
Monthly Servicing Certificates identifying
Receivables that become Purchased Receivables and
Liquidated Receivables.
The Trustee shall give written notice to the
Certificateholders, the Seller and Aegis Finance of
the occurrence, to its actual knowledge, which
notice shall be given within three (3) Business
Days' of the Trustee's receipt of actual knowledge
thereof, of any waiver of or any action taken to
cure (i) any default, breach, violation or event
permitting acceleration under the terms of any
Receivable; (ii) any 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; (iii)
any default or delinquency under the terms of any
Receivable that remained uncured for more than
thirty (30) days after notice to the Seller; or (iv)
any event which constitutes or with notice or the
lapse of time would constitute an Event of Backup
Servicing Default or Event of Servicing Default.
The Trustee shall give written notice to each
Certificateholder promptly upon receipt of a notice
from the Backup Servicer pursuant to Section 4.02
hereof or from the Servicer pursuant to paragraph
IV.F.1 of the Servicing Agreement or the Seller
pursuant to Section 8.06(g) hereof of an event
which with the giving of notice or the lapse of time,
or both, would constitute an Event of Backup
Servicing Default or an Event of Servicing Default.
No provision of this Agreement shall be
construed to relieve the Trustee from liability for its
own negligent action, its own negligent failure to
act or its own bad faith; provided, however, that:
(a) Prior to the occurrence of an
Event of Backup Servicing Default, and
after the curing or waiving of all such
Events of Backup Servicing Default that
may have occurred, the duties and
obligations of the Trustee shall be
determined solely by the express provisions
of this Agreement, the Trustee shall not be
liable except for the performance of such
duties and obligations as shall be specifically
set forth in this Agreement, no implied
covenants or obligations shall be read into
this Agreement against the Trustee and, in
the absence of bad faith on the part of the
Trustee, the Trustee may conclusively rely
on the truth of the statements and the
correctness of the opinions expressed upon
any certificates or opinions furnished to the
Trustee and conforming as to form to the
requirements of this Agreement;
(b) The Trustee shall not be liable
for an error of judgment made in good faith
by a Trustee Officer, unless it shall be
proved that the Trustee shall have been
negligent in ascertaining the pertinent facts;
(c) The Trustee shall not be liable
with respect to any action taken, suffered or
omitted to be taken in good faith in
accordance with this Agreement or at the
direction of the Holders of Certificates
evidencing not less than 20% of the Voting
Interests thereof relating to the time, method
and place of conducting any proceeding for
any remedy available to the Trustee, or
exercising any trust or power conferred
upon the Trustee, under this Agreement;
(d) The Trustee shall not be
charged with knowledge of any failure by
the Backup Servicer (so long as the Trustee
is not the Backup Servicer) or the Servicer
to comply with the obligations, covenants or
representations or warranties of the Backup
Servicer or the Servicer under this
Agreement or the Servicing Agreement, as
the case may be, or of any failure by the
Seller to comply with the obligations,
covenants or representations or warranties of
the Seller under this Agreement, unless a
Trustee Officer assigned to the Trustee's
Corporate Trust Department obtains actual
knowledge of such failure (it being
understood that, so long as the Trustee is
not the Backup Servicer, knowledge of the
Backup Servicer is not attributable to the
Trustee) or the Trustee receives written
notice of such failure from the Backup
Servicer, Servicer or the Seller, as the case
may be, or any Holder of Certificates; and
(e) Without limiting the generality
of this Section or Section 11.04, the Trustee
(except if also serving as the Backup
Servicer and the duties of the Backup
Servicer require such) shall have no duty (i)
to see to any recording, filing or depositing
of this Agreement or any agreement referred
to therein or any financing statement or
continuation statement evidencing a security
interest in the Receivables or the Financed
Vehicles, or to see to the maintenance of
any such recording or filing or depositing or
to any rerecording, refiling or redepositing
of any thereof, (ii) to see to any insurance
of the Financed Vehicles or Obligors or to
effect or maintain any such insurance, (iii)
to see to the payment or discharge of any
tax, assessment or other governmental
charge or any Lien or encumbrance of any
kind owing with respect to, assessed or
levied against, any part of the Trust, (iv) to
confirm or verify the contents of any reports
or certificates of the Servicer delivered to
the Trustee pursuant to this Agreement or
the Servicing Agreement believed by the
Trustee to be genuine and to have been
signed or presented by the proper party or
parties or (v) to inspect the Financed
Vehicles at any time or ascertain or inquire
as to the performance or observance of any
of the Seller's or the Servicer's
representations, warranties or covenants or
the Servicer's duties and obligations as
Servicer under this Agreement and the
Servicing Agreement.
The Trustee shall not be required to expend
or risk its own funds or otherwise incur financial
liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or
powers, if it believes in its sole discretion that the
repayment of such funds or adequate indemnity
against such risk or liability shall not be reasonably
assured to it, and none of the provisions contained
in this Agreement or the Servicing Agreement shall
in any event require the Trustee to perform, or be
responsible for the manner of performance of, any
of the obligations of the Servicer, the Backup
Servicer or a Servicer under this Agreement or the
Servicing Agreement, as the case may be.
Section 11.02. Trustee's Certificate. On or
as soon as practicable after each Distribution Date
on which Receivables shall be assigned to the Seller
pursuant to Section 3.02, the Trustee shall execute
a Trustee's Certificate (in the form of Exhibit R),
based on the information contained in the Monthly
Servicing Certificate for the related Collection
Period, amounts deposited to the Certificate
Account and notices received pursuant to this
Agreement, identifying the Receivables repurchased
by the Seller pursuant to Section 3.02 during such
Collection Period, and shall deliver such Trustee's
Certificate, accompanied by a copy of the Monthly
Servicing Certificate for such Collection Period to
the Seller. The Trustee's Certificate submitted with
respect to such Distribution Date shall operate, as
of such Distribution Date, as an assignment,
without recourse, representation or warranty, to the
Seller, of all the Trustee's right, title and interest in
and to such repurchased Receivable, and all security
and documents relating thereto, such assignment
being an assignment outright and not for security.
Section 11.03. [Reserved]
Section 11.04. Certain Matters Affecting
Trustee. Except as otherwise provided in Section
11.01:
(a) The Trustee may rely and
shall be protected in acting or refraining
from acting upon any resolution, Officer's
Certificate, Monthly Servicing Certificate,
certificate of auditors or any other
certificate, statement, instrument, opinion,
report, notice, request, consent, order,
appraisal, bond or other paper or document
believed by it to be genuine and to have
been signed or presented by the proper party
or parties.
(b) The Trustee may consult with
counsel and any written Opinion of Counsel
shall be full and complete authorization and
protection in respect of any action taken or
suffered or omitted by it under this
Agreement in good faith and in accordance
with such written Opinion of Counsel.
(c) The Trustee shall be under no
obligation to exercise any of the rights or
powers vested in it by this Agreement, or to
institute, conduct or defend any litigation
under this Agreement or in relation to this
Agreement, at the request, order or direction
of any of the Certificateholders pursuant to
the provisions of this Agreement, unless
such Certificateholders shall have offered to
the Trustee security or indemnity,
reasonably satisfactory to the Trustee,
against the costs, expenses and liabilities
that may be incurred therein or thereby.
(d) The Trustee shall not be liable
for any action taken, suffered or omitted by
it in good faith and believed by it to be
authorized or within the discretion or rights
or powers conferred upon it by this
Agreement.
(e) Except as expressly provided
herein, the Trustee shall not be bound to
make any investigation into the facts of
matters stated in any resolution, certificate,
statement, instrument, opinion, report,
notice, request, consent, order, approval,
bond or other paper or document, unless
requested in writing so to do by Holders of
Certificates evidencing not less than 20% of
the Voting Interests thereof; provided,
however, that the Trustee may require
reasonable indemnity against any cost,
expense or liability as a condition to so
proceeding at the direction of the
Certificateholders.
(f) Subject to the limitations
herein, the Trustee may execute any of the
trusts or powers hereunder or perform any
duties under this Agreement either directly
or by or through agents or attorneys or a
custodian. The Trustee shall not be
responsible for any misconduct or
negligence of any such agent or custodian
appointed with due care by it hereunder or
of the Servicer in its capacity as Servicer.
The Trustee may act upon the opinion or
advice of accountants, engineers or such
other professionals as the Trustee deems
necessary and selected by it in the exercise
of reasonable care, and the Trustee may pay
reasonable compensation and shall be
entitled to reimbursement hereunder for such
compensation paid to such professionals,
which fee shall be considered an expense of
the Trustee to be paid pursuant to
Section 5.06(d)(i).
(g) Subsequent to the sale of the
Receivables by the Seller to the Trust, the
Trustee shall have no duty of independent
inquiry, and the Trustee may rely upon the
representations and warranties and covenants
of the Seller and the Servicer contained in
this Agreement and the Servicing Agreement
with respect to the Receivables.
Section 11.05. Trustee Not Liable for
Certificates or Receivables. The recitals contained
herein and in the Certificates (other than the
certificate of authentication on the Certificates) shall
be taken as the statements of the Seller, and the
Trustee assumes no responsibility for the
correctness thereof. The Trustee shall make no
representations as to the validity or sufficiency of
this Agreement, the Trust Property or of the
Certificates (other than the certificate of
authentication on the Certificates), or of any
Receivable or related document or the validity,
genuineness or originality of any document
delivered to the Trustee in its capacity as
Custodian. The Trustee shall at no time have any
responsibility or liability for or with respect to the
legality, validity and enforceability of any security
interest in any Financed Vehicle or any Receivable,
or the perfection and priority of such a security
interest or the maintenance of any such perfection
and priority, or for or with respect to the efficacy
of the Trust or its ability to generate the payments
to be distributed to Certificateholders under this
Agreement, including, without limitation: the
existence, condition, location and ownership of any
Financed Vehicle; the review of any Servicer File
or Custodian File therefor; the existence and
enforceability of any physical damage insurance
thereon; the existence and contents of any
Receivable or any Servicer File or Custodian File
or any computer or other record thereof; the
validity of the assignment of any Receivable to the
Trust or of any intervening assignment; the
completeness of any Receivable or any Servicer File
or Custodian File; the performance or enforcement
of any Receivable; the compliance by the Seller or
the Servicer, with any warranty or representation
made under this Agreement or the Servicing
Agreement or in any related document and the
accuracy of any such warranty or representation
prior to the Trustee's receipt of notice or other
discovery of any noncompliance therewith or any
breach thereof (provided, however, that the receipt
of notice or other discovery of such noncompliance
or breach shall only obligate the Trustee to comply
with the terms of Section 3.02 hereof); any
investment of moneys by the Trustee or any loss
resulting therefrom (it being understood that the
Trustee shall remain responsible for any Trust
property that it may hold); the acts or omissions of
the Seller, the Servicer or any Obligor; an action of
the Servicer taken in the name of the Trustee; or
any action by the Trustee taken at the instruction of
the Servicer; provided, however, that the foregoing
shall not relieve the Trustee of its obligation to
perform its duties under this Agreement. Except if
caused by its negligence or its failure to act in
accordance with reasonable and proper instructions
given in writing received by the Trustee, the
Trustee shall not be liable for losses on investments
on the funds or on the accounts established pursuant
to Section 5.01. The Trustee shall not be liable for
collections received by the Servicer prior to deposit
by the Servicer of such collections into the
Collection Account or for the application or
misapplication of funds, or for other acts or
defaults, by any person, firm or corporation except
its own directors, officers, agents and employees.
Except with respect to a claim based on the
Trustee's negligence or willful misconduct, no
recourse shall be had for any claim based on any
provision of this Agreement, the Certificates or any
Receivable or assignment thereof against the
Trustee in its individual capacity, the Trustee shall
not have any personal obligation, liability or duty
whatsoever to any Certificateholder or any other
Person with respect to any such claim, and any such
claim shall be asserted solely against the Trust or
any indemnitor who shall furnish indemnity as
provided in this Agreement. The Trustee shall not
be accountable for the use or application by the
Seller of any of the Certificates or of the proceeds
of such Certificates, or for the use or application of
any funds paid to a Servicer in respect of the
Receivables.
Section 11.06. Trustee May Own
Certificates. The Trustee in its individual or any
other capacity may become the owner or pledgee of
Certificates and may deal with the Seller and the
Servicer in banking transactions with the same
rights as it would have if it were not Trustee,
except as otherwise provided in the definition of
"Certificateholder" in Section 1.01.
Section 11.07. Trustee's Fees and
Expenses. The Trustee shall be entitled to the
Trustee Fees as compensation (which shall not be
limited by any provision of law in regard to the
compensation of a trustee of an express trust) for all
services rendered by it in the execution of the trusts
created by this Agreement and in the exercise and
performance of any of the Trustee's powers and
duties under this Agreement. The Trustee shall be
paid or reimbursed pursuant to Section 5.06(d)(i)
upon its request for all reasonable out-of-pocket
expenses and disbursements (including the
reasonable compensation and the expenses and
disbursements of its outside counsel and of all
Persons not regularly in its employ) incurred or
made by the Trustee in accordance with any
provisions of this Agreement, except any such
expense or disbursement as may be attributable to
its willful misfeasance, negligence or bad faith.
The Seller shall indemnify the Trustee for, and hold
it harmless against, any loss, liability or expense
incurred without willful misfeasance, negligence or
bad faith on its part, arising out of or in connection
with the acceptance or administration of the Trust,
including the costs and expenses of defending itself
against any claim or liability in connection with the
exercise or performance of any of its powers or
duties under this Agreement. Additionally, the
Seller, pursuant to Section 8.02, shall indemnify the
Trustee with respect to certain matters. The
Trustee shall not be required to furnish any surety
bond. The provisions of this Section 11.07 shall
survive the termination of this Agreement.
Section 11.08. Eligibility Requirements for
Trustee. The Trustee shall at all times be a
corporation having an office in the same state as the
location of the Corporate Trust Office as specified
in or pursuant to this Agreement; and organized and
doing business under the laws of such state or the
United States of America; authorized under such
laws to exercise corporate trust powers; having a
combined capital and surplus of at least
$100,000,000 and subject to supervision or
examination by federal or state authorities. If such
corporation shall publish reports of condition at
least annually, pursuant to law or to the
requirements of the aforesaid supervising or
examining authority, then for the purpose of this
Section 11.08, the combined capital and surplus of
such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent
report of condition so published. In case at any
time the Trustee shall cease to be eligible in
accordance with the provisions of this Section
11.08, the Trustee shall resign immediately in the
manner and with the effect specified in Section
11.09.
Section 11.09. Resignation or Removal of
Trustee. The Trustee may at any time resign and
be discharged from the trusts hereby created by
giving written notice thereof to the Seller and each
Certificateholder. Upon receiving such notice of
resignation, the Majority Certificateholders shall
promptly appoint a successor Trustee by written
instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning
Trustee and one copy to the successor Trustee. If
no successor Trustee shall have been so appointed
and have accepted appointment within 30 days after
the giving of such notice of resignation, the
resigning Trustee may petition any court of
competent jurisdiction for the appointment of a
successor Trustee.
If at any time the Trustee shall cease to be
eligible in accordance with the provisions of Section
11.08 and shall fail to resign after written request
therefor by the Seller, or if at any time the Trustee
shall be legally unable to act, or shall be adjudged
bankrupt or insolvent, or a receiver of the Trustee
or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then the
Majority Certificateholders may remove the
Trustee. If the Majority Certificateholders shall
remove the Trustee under the authority of the
immediately preceding sentence, the Majority
Certificateholders shall promptly appoint a
successor Trustee by written instrument, in
duplicate, one copy of which instrument shall be
delivered to the outgoing Trustee so removed and
one copy to the successor Trustee and payment of
all fees and expenses owed to the outgoing Trustee.
Any resignation or removal of the Trustee
and appointment of a successor Trustee pursuant to
any of the provisions of this Section 11.09 shall not
become effective until acceptance of appointment by
the successor Trustee pursuant to Section 11.10 and
payment of all fees and expenses owed to the
outgoing Trustee or upon order of a court of
competent jurisdiction.
Section 11.10. Successor Trustee. Any
successor Trustee appointed pursuant to Section
11.09 shall execute, acknowledge and deliver to the
Backup Servicer, the Servicer and to the
predecessor Trustee an instrument accepting such
appointment under this Agreement, and thereupon
the resignation or removal of the predecessor
Trustee shall become effective and such successor
Trustee, without any further act, deed or
conveyance, shall become fully vested with all the
rights, powers, duties and obligations of its
predecessor under this Agreement, with like effect
as if originally named as Trustee. The predecessor
Trustee shall upon payment of its fees and expenses
deliver to the successor Trustee all documents and
statements and moneys held by it under this
Agreement; and the Seller and the predecessor
Trustee shall execute and deliver such instruments
and do such other things as may reasonably be
required for fully and certainly vesting and
confirming in the successor Trustee all such rights,
powers, duties and obligations.
No successor Trustee shall accept
appointment as provided in this Section 11.10
unless at the time of such acceptance such successor
Trustee shall be eligible pursuant to Section 11.08.
Upon acceptance of appointment by a
successor Trustee pursuant to this Section 11.10,
the successor Trustee shall mail notice of the
successor of such Trustee under this Agreement to
all Holders of Certificates at their addresses as
shown in the Certificate Register.
Section 11.11. Merger or Consolidation of
Trustee. Any corporation into which the Trustee
may be merged or converted or with which it may
be consolidated, or any corporation resulting from
any merger, conversion or consolidation to which
the Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate
trust business of the Trustee, shall be the successor
of the Trustee hereunder, provided such corporation
shall be eligible pursuant to Section 11.08, without
the execution or filing of any instrument or any
further act on the part of any of the parties hereto;
provided, further, that the Trustee shall mail notice
of such merger or consolidation to each
Certificateholder.
Section 11.12. Appointment of Co-Trustee
or Separate Trustee. Notwithstanding any other
provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any
jurisdiction in which any part of the Trust or any
Financed Vehicle may at the time be located, the
Backup Servicer and the Trustee acting jointly shall
have the power and shall execute and deliver all
instruments to appoint one or more Persons
approved by the Trustee to act as co-trustee, jointly
with the Trustee, or separate trustee or separate
trustees, of all or any part of the Trust, and to vest
in such Person, in such capacity and for the benefit
of the Certificateholders, such title to the Trust, or
any part thereof, and, subject to the other
provisions of this Section 11.12, such powers,
duties, obligations, rights and trusts as the Backup
Servicer and the Trustee may consider necessary or
desirable. If the Backup Servicer shall not have
joined in such appointment within 15 days after the
receipt by it of a request so to do, or in the case an
Event of Backup Servicing Default shall have
occurred and be continuing, the Trustee alone shall
have the power to make such appointment. No
co-trustee or separate trustee under this Agreement
shall be required to meet the terms of eligibility as
a successor trustee pursuant to Section 11.08 and no
notice of a successor trustee pursuant to Section
11.10 and no notice to Certificateholders of the
appointment of any co-trustee or separate trustee
shall be required pursuant to Section 11.10.
Each separate trustee and co-trustee shall, to
the extent permitted by law, be appointed and act
subject to the following provisions and conditions:
(a) All rights, powers, duties and
obligations conferred or imposed upon the
Trustee shall be conferred upon and
exercised or performed by the Trustee and
such separate trustee or co-trustee jointly (it
being understood that such separate trustee
or co-trustee is not authorized to act
separately without the Trustee joining in
such act), except to the extent that under any
law of any jurisdiction in which any
particular act or acts are to be performed
(whether as Trustee under this Agreement or
as successor to the Backup Servicer under
this Agreement), the Trustee shall be
incompetent or unqualified to perform such
act or acts, in which event such rights,
powers, duties and obligations (including the
holding of title to the Trust or any portion
thereof in any such jurisdiction) shall be
exercised and performed singly by such
separate trustee or co-trustee, but solely at
the direction of the Trustee;
(b) No trustee under this
Agreement shall be personally liable by
reason of any act or omission of any other
trustee under this Agreement; and
(c) The Backup Servicer and the
Trustee acting jointly may at any time
accept the resignation of or remove any
separate trustee or co-trustee.
Any notice, request or other writing given to
the Trustee shall be deemed to have been given to
each of the then separate trustees and co-trustees, as
effectively as if given to each of them. Every
instrument appointing any separate trustee or
co-trustee shall refer to this Agreement and the
conditions of this Article XI. Each separate trustee
and co-trustee, upon its acceptance of the trusts
conferred, shall be vested with the estates or
property specified in its instrument of appointment,
either jointly with the Trustee or separately, as may
be provided therein, subject to all the provisions of
this Agreement, specifically including every
provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection
to, the Trustee. Each such instrument shall be filed
with the Trustee and copies thereof given to the
Backup Servicer.
Any separate trustee or co-trustee may at
any time appoint the Trustee, its agent or
attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act
under or in respect of this Agreement on its behalf
and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting,
resign or be removed, all of its estates, properties,
rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by
law, without the appointment of a new or successor
separate trustee or co-trustee.
Section 11.13. Representations and
Warranties of Trustee. The Trustee makes the
following representations and warranties on which
the Seller and Certificateholders rely:
(a) The Trustee is a banking
association duly organized, validly existing,
and in good standing under the laws of its
place of incorporation.
(b) The Trustee has full corporate
power, authority and legal right to execute,
deliver and perform its obligations under
this Agreement and the Servicing
Agreement, and shall have taken all
necessary action to authorize the execution,
delivery and performance by it of this
Agreement and the Servicing Agreement.
(c) This Agreement and the
Servicing Agreement shall have been duly
executed and delivered by the Trustee, and
each constitutes the valid and binding
obligation of the Trustee enforceable in
accordance with its terms.
(d) The execution, delivery and
performance by the Trustee of this
Agreement (a) does not violate any
provision of any law governing the banking
and trust powers of the Trustee or any
order, writ, judgment or decree of any
court, arbitrator, or governmental authority
applicable to the Trustee or any of its assets,
(b) does not violate any provision of the
corporate charter or by-laws of the Trustee,
and (c) does not violate any provision of, or
constitute, with or without notice or lapse of
time, a default under, or result in the
creation or imposition of any lien on any
properties included in the Trust pursuant to
the provisions of any mortgage, indenture,
contract, agreement or other undertaking to
which it is a party, which violation, default
or lien could reasonably be expected to
materially and adversely affect the Trustee's
performance or ability to perform its duties
under this Agreement or the transactions
contemplated in this Agreement.
(e) The execution, delivery and
performance by the Trustee of this
Agreement does not require the
authorization, consent, or approval of, the
giving of notice to, the filing or registration
with, or the taking of any other action in
respect of, any governmental authority or
agency regulating the banking and corporate
trust activities of the Trustee.
Section 11.14. No Bankruptcy Petition.
Except with the consent of the Majority
Certificateholders, the Trustee covenants and agrees
that prior to the date which is one year and one day
after the payment in full of all securities issued by
the Seller or by the Trust it will not institute
against, or join any other Person in instituting
against, the Seller any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings,
or other proceedings under any federal or state
bankruptcy or similar law; provided, however, that
nothing contained herein shall prohibit the Trustee
from participating in any existing bankruptcy
proceeding.
ARTICLE XII
TERMINATION
Section 12.01. Termination of the Trust.
(a) The Trust and the respective
obligations of the Seller, the Backup
Servicer and the Trustee created by this
Agreement (except such obligations as are
hereinafter set forth) shall terminate upon
the earliest of (i) payment to the
Certificateholders of all amounts required to
be paid to them pursuant to this Agreement
and the disposition of all property held as
part of the Trust Property, (ii) the purchase
as of any Distribution Date by the Seller, at
its option, of the corpus of the Trust as
described in Section 12.02 or (iii) the Final
Scheduled Distribution Date. The Seller
shall promptly notify the Trustee of any
prospective termination pursuant to this
Section 12.01.
(b) Notice of any prospective
termination, specifying the Distribution Date
for payment of the final distribution and
requesting the surrender of the Certificates
for cancellation, shall be given promptly by
the Trustee by letter to Certificateholders
mailed not earlier than the 15th day and not
later than the 25th day of the month next
preceding the specified Distribution Date
stating (A) the Distribution Date upon which
final payment of the Certificates shall be
made and (B) the amount of any such final
payment. Surrender of the Certificates shall
not be a condition of payment of the final
distribution; however, each
Certificateholder, by accepting the
Certificates, hereby agrees to indemnify and
hold harmless the Trustee, the Seller and the
Certificate Registrar from and against any
and all claims arising from such failure,
including but not limited to claims by third
parties claiming to be bona fide purchasers
subsequently presenting such Certificates for
payment.
(c) Upon receipt by the Trustee
from the Seller of notice of any prospective
termination of the Trust pursuant to Section
12.01(a), the Trustee shall, subject to the
direction of the Majority Certificateholders
(provided that, if the Majority
Certificateholders shall not have provided
such direction to the Trustee within 30 days
of the Trustee having sent a written request
for such direction to the Certificateholders,
the Trustee shall proceed without such
direction) sell the remaining assets of the
Trust, if any, at public or private sale, in a
commercially reasonable manner and on
commercially reasonable terms. The Seller
agrees to cooperate with the Trustee to
effect any such sale, including by executing
such instruments of conveyance or
assignment as shall be necessary or required
by the purchaser. Proceeds of sale, net of
expenses, shall be treated as collections on
the assets of the Trust and shall be deposited
into the Collection Account. On the
Distribution Date specified for final
payment, the Trustee shall cause to be
distributed to Certificateholders and the
Seller amounts distributable on such
Distribution Date pursuant to Section 5.06
and Section 5.07.
Section 12.02. Optional Purchase of All
Receivables. The Seller shall have the option (and
shall have a similar option with respect to each trust
created pursuant to the Amended and Restated
Master Trust Agreement) to purchase the corpus of
the Trust on the Distribution Date following the last
day of any Collection Period as of which the Pool
Balance as a percentage of the Original Pool
Balance shall be less than or equal to the Optional
Purchase Percentage. To exercise such option, the
Seller shall (i) give notice to the Trustee and the
Certificateholders not less than 30 days prior to the
Distribution Date on which such purchase is to be
effected and (ii) on or before such Distribution
Date, deposit in the Collection Account an amount
equal to the Purchase Amount for the Receivables
and the appraisal value of any other property held
by the Trust. After payment of such amounts, the
Seller shall succeed to all interests in and to the
Trust Property.
Section 12.03. Notice. The Trustee shall
give notice of termination of the Trust to the Seller.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.01. Amendment. (a) This
Agreement may be amended by written instrument
executed by the Seller, the Backup Servicer and the
Trustee, without the consent of any of the
Certificateholders, (i) to cure any ambiguity, to
correct or supplement any provisions in this
Agreement, (ii) to add, change or eliminate any
other provisions with respect to matters or questions
arising under this Agreement that shall not be
inconsistent with the provisions of this Agreement;
or (iii) to add or amend any provision therein in
connection with permitting transfers of the
Certificates or to add or provide for any credit
enhancement for the Certificates; provided,
however, that any such action described in this
paragraph (a) shall not adversely affect the interests
of the Certificateholders.
(b) This Agreement may also be amended
from time to time or the provisions hereof waived
from time to time by a written instrument executed
by the Seller, the Backup Servicer and the Trustee
with the consent of the Holders of the
Certificateholders affected thereby (which consent
of any Holder of a Certificate given pursuant to this
Section or pursuant to any other provision of the
Agreement shall be conclusive and binding on such
Holder and on all future Holders of such Certificate
and of any Certificate issued upon the transfer
thereof or in exchange thereof or in lieu thereof
whether or not notation of such consent is made
upon the Certificate) evidencing not less than 51%
of the Voting Interests of each Class of the affected
Certificates for the purpose of adding any
provisions to or changing in any manner or
eliminating any of the provisions of this Agreement,
or of modifying in any manner the rights of any
Class of Certificateholders; provided, however, that
no such amendment or waiver shall, without the
consent of the Holders of all Certificates affected
thereby then outstanding, (a) increase or reduce in
any manner the amount of, or accelerate or delay
the timing of, collections of payments on
Receivables or distributions that shall be required to
be made on any Certificate or (b) reduce the
aforesaid percentage of the Voting Interests of the
Certificates required to consent to any such
amendment.
(c) Any amendment which affects the
Trustee's own rights, duties or immunities under
the Agreement or otherwise shall not be effective to
such extent unless the Trustee shall have joined
thereto.
(d) Promptly after the execution of any such
amendment or consent, the Trustee shall furnish a
copy of such amendment or consent to each
Certificateholder. It shall not be necessary for the
consent of Certificateholders pursuant to this
Section 13.01 to approve the particular form of any
proposed amendment or consent, but it shall be
sufficient if such consent shall approve the
substance thereof. The manner of obtaining such
consents (and any other consents of
Certificateholders provided for in this Agreement)
and of evidencing the authorization of the execution
thereof by Certificateholders shall be subject to such
reasonable requirements as the Trustee may
prescribe.
(e) Prior to the execution of any amendment
to this Agreement, the Trustee shall be entitled to
receive and rely upon an Opinion of Counsel stating
that the execution of such amendment is authorized
or permitted by this Agreement and does not
conflict with the amendment provisions of the
Amended and Restated Master Trust Agreement.
Section 13.02. Protection of Title to Trust.
(a) The Seller shall execute and
file such financing statements and cause to
be executed and filed such continuation
statements, all in such manner and in such
places as may be required by law fully to
preserve, maintain and protect the interest of
the Certificateholders and the Trustee in the
Receivables and the other assets of the Trust
Property and in the proceeds thereof. The
Seller shall deliver (or cause to be delivered)
to the Trustee file-stamped copies of, or
filing receipts for, any document filed as
provided above, as soon as available
following such filing.
(b) The Seller shall not change its
name, identity or corporate structure in any
manner that would, could or might make
any financing statement or continuation
statement filed in accordance with paragraph
(a) above seriously misleading within the
meaning of 9-402(7) of the UCC, unless it
shall have given the Trustee at least thirty
(30) days' prior written notice thereof and
shall have promptly filed appropriate
amendments to all previously filed financing
statements or continuation statements.
(c) The Seller shall give the
Trustee at least 30 days' prior written notice
of any relocation of its chief executive
office. If, as a result of such relocation, the
applicable provisions of the UCC would
require the filing of any amendment of any
previously filed financing or continuation
statement or of any new financing statement,
it shall promptly file any such amendment
and shall give the amendment with the
recorder's file stamp thereon to the
Custodian promptly upon receipt thereof.
Section 13.03. Limitation on Rights of
Certificateholders. The death or incapacity of any
Certificateholder shall not operate to terminate this
Agreement or the Trust, nor entitle such
Certificateholder's legal representatives or heirs to
claim an accounting or to take any action or
commence any proceeding in any court for a
partition or winding up of the Trust, nor otherwise
affect the rights, obligations and liabilities of the
parties to this Agreement or any of them.
Nothing in this Agreement set forth, or
contained in the terms of the Certificates, shall be
construed so as to constitute the Certificateholders
from time to time as partners or members of an
association; nor shall any Certificateholder be under
any liability to any third Person by reason of any
action taken pursuant to any provision of this
Agreement.
No Certificateholder shall have any right by
virtue or by availing itself of any provisions of this
Agreement to institute any suit, action or
proceeding in equity or at law upon or under or
with respect to this Agreement, unless such Holder
previously shall have given to the Trustee a written
notice of default and of the continuance thereof, and
unless also the Holders of Certificates evidencing
not less than 20% of the Voting Interests thereof
shall have made written request upon the Trustee to
institute such action, suit or proceeding in its own
name as Trustee under this Agreement and shall
have offered to the Trustee such reasonable
indemnity as it may require against the costs,
expenses and liabilities to be incurred therein or
thereby, and the Trustee, for 30 days after its
receipt of such notice, request and offer of
indemnity, shall have neglected or refused to
institute any such action, suit or proceeding and
during such 30-day period no request or waiver
inconsistent with such written request has been
given to the Trustee pursuant to this Section or
Section 10.04; no one or more Holders shall have
any right in any manner whatever by virtue or by
availing itself or themselves of any provisions of
this Agreement to affect, disturb or prejudice the
rights of the Holders of any other of the
Certificates, or to obtain or seek to obtain priority
over or preference to any other such Holder, or to
enforce any right under this Agreement except in
the manner provided in this Agreement and for the
equal, ratable and common benefit of all
Certificateholders. For the protection and
enforcement of the provisions of this Section 13.03,
each Certificateholder and the Trustee shall be
entitled to such relief as can be given either at law
or in equity.
Section 13.04. Governing Law. THIS
AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES UNDER THIS AGREEMENT
SHALL BE DETERMINED IN ACCORDANCE
WITH SUCH LAWS INCLUDING SECTION 5-
1401 OF THE GENERAL OBLIGATIONS LAWS
BUT OTHERWISE WITHOUT REGARD OR
REFERENCE TO PRINCIPLES OF CONFLICTS
OF LAWS OF SUCH STATE.
Section 13.05. Notices. All demands,
notices and communications upon or to the Seller,
the Backup Servicer or the Trustee under this
Agreement shall be in writing, personally delivered
or mailed by certified mail, return receipt
requested, and shall be deemed to have been duly
given upon receipt:
(a) in the case of the Seller, to
Angelo R. Appierto
President
Aegis Auto Funding Corp. IV
525 Washington Boulevard
Jersey City, New Jersey
07310
or at such other address as shall be
designated by the Seller in a written notice
to the Trustee;
(b) in the case of the Backup
Servicer, to
Norwest Bank Minnesota,
National Association
Sixth Street and Marquette
Avenue
Minneapolis, Minnesota
55479-0070
Attention: Corporate Trust
Services--Asset-Backed
Administration
or at such other address as shall be
designated by the Backup Servicer in a
written notice to the Seller; and
(c) in the case of the Trustee or
Custodian, to
Norwest Bank Minnesota,
National Association
Sixth Street and Marquette
Avenue
Minneapolis, Minnesota
55479-0070
Attention: Corporate Trust
Services--Asset-Backed Administration
or at such other address as shall be
designated by the Trustee in a written notice
to the Seller.
Any notice or other communication required
or permitted to be mailed to a Certificateholder
shall be given by first class mail, postage prepaid,
at the address of such Holder as shown in the
Certificate Register (with copies thereof to such
other Person(s) as such Certificateholder shall have
requested in writing, the address of such other
Person(s) to receive such copies also to be reflected
in the Certificate Register), and shall be deemed to
have been given upon receipt.
Section 13.06. Severability of Provisions.
If any one or more of the covenants, agreements,
provisions or terms of this Agreement shall be for
any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be
deemed severable from the remaining covenants,
agreements, provisions or terms of this Agreement
and shall in no way affect the validity or
enforceability of the other provisions of this
Agreement or of the Certificates or the rights of the
Holders thereof.
Section 13.07. Assignment.
Notwithstanding anything to the contrary contained
herein, except as provided in Sections 8.03, this
Agreement may not be assigned by the Seller
without the prior written consent of the Trustee and
the Holders of Certificates evidencing not less than
66% of the Voting Interests thereof.
Section 13.08. Certificates Nonassessable
and Fully Paid. Certificateholders shall not be
personally liable for obligations of the Trust. The
interests represented by the Certificates shall be
nonassessable for any losses or expenses of the
Trust or for any reason whatsoever.
Section 13.09. Counterparts. This
Agreement may be executed simultaneously in any
number of counterparts, each of which counterparts
shall be deemed to be an original, and all of which
counterparts shall constitute but one and the same
instrument.
Section 13.10. Limited Recourse to Seller.
The parties hereto agree that the obligations of the
Seller hereunder, including, without limitation, the
obligation of the Seller in respect of indemnification
pursuant to Sections 3.06, 8.02 and 11.07 in respect
of repurchases or substitutions of Receivables upon
breach of representations and warranties pursuant to
Section 3.02, and in respect of fees, costs and
expenses pursuant to Sections 3.06, 4.04 and 4.05,
are payable solely from the Seller's interests in the
Trust Property and that no party may look to any
other property or assets of the Seller in respect of
such obligations.
<PAGE>
EXHIBIT A-1
FORM OF CLASS A CERTIFICATE
THIS CERTIFICATE HAS NOT BEEN AND
WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"),OR UNDER THE
SECURITIES OR BLUE SKY LAWS OF ANY
STATE IN THE UNITED STATES OR ANY
FOREIGN SECURITIES LAWS. BY ITS
ACCEPTANCE OF THIS CERTIFICATE THE
HOLDER OF THIS CERTIFICATE IS DEEMED
TO REPRESENT TO THE SELLER AND THE
TRUSTEE (i) THAT IT IS AN INSTITUTIONAL
INVESTOR THAT IS AN "ACCREDITED
INVESTOR" AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) OF REGULATION D
PROMULGATED UNDER THE SECURITIES
ACT (AN "INSTITUTIONAL ACCREDITED
INVESTOR") AND THAT IT IS ACQUIRING
THIS CERTIFICATE FOR ITS OWN ACCOUNT
(AND NOT FOR THE ACCOUNT OF OTHERS)
OR AS A FIDUCIARY OR AGENT FOR
OTHERS (WHICH OTHERS ALSO ARE
INSTITUTIONAL ACCREDITED INVESTORS
UNLESS THE HOLDER IS A BANK ACTING IN
ITS FIDUCIARY CAPACITY) FOR
INVESTMENT AND NOT WITH A VIEW TO,
OR FOR OFFER OR SALE IN CONNECTION
WITH, THE PUBLIC DISTRIBUTION HEREOF
OR (II) THAT IT IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT
AND IS ACQUIRING SUCH CERTIFICATE FOR
ITS OWN ACCOUNT (AND NOT FOR THE
ACCOUNT OF OTHERS) OR AS A FIDUCIARY
OR AGENT FOR OTHERS (WHICH OTHERS
ALSO ARE QUALIFIED INSTITUTIONAL
BUYERS).
NO SALE, PLEDGE OR OTHER TRANSFER OF
THIS CERTIFICATE MAY BE MADE BY ANY
PERSON UNLESS EITHER (i) SUCH SALE,
PLEDGE OR OTHER TRANSFER IS MADE TO
THE SELLER, (ii) SUCH SALE, PLEDGE OR
OTHER TRANSFER IS MADE TO AN
INSTITUTIONAL ACCREDITED INVESTOR
THAT EXECUTES A CERTIFICATE,
SUBSTANTIALLY IN THE FORM SPECIFIED
IN THE AGREEMENT, TO THE EFFECT THAT
IT IS AN INSTITUTIONAL ACCREDITED
INVESTOR ACTING FOR ITS OWN ACCOUNT
(AND NOT FOR THE ACCOUNT OF OTHERS)
OR AS A FIDUCIARY OR AGENT FOR
OTHERS (WHICH OTHERS ALSO ARE
INSTITUTIONAL ACCREDITED INVESTORS
UNLESS THE HOLDER IS A BANK ACTING IN
ITS FIDUCIARY CAPACITY), (iii) SO LONG AS
THIS CERTIFICATE IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT, SUCH SALE, PLEDGE OR
OTHER TRANSFER IS MADE TO A PERSON
WHOM THE ISSUER REASONABLY BELIEVES
AFTER DUE INQUIRY IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A), ACTING FOR ITS OWN
ACCOUNT (AND NOT FOR THE ACCOUNT OF
OTHERS) OR AS A FIDUCIARY OR AGENT
FOR OTHERS (WHICH OTHERS ALSO ARE
QUALIFIED INSTITUTIONAL BUYERS) TO
WHOM NOTICE IS GIVEN THAT THE SALE,
PLEDGE OR TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, OR (iv) SUCH
SALE, PLEDGE OR OTHER TRANSFER IS
OTHERWISE MADE IN A TRANSACTION
EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT,
IN WHICH CASE (A) THE TRUSTEE SHALL
REQUIRE THAT BOTH THE PROSPECTIVE
TRANSFEROR AND THE PROSPECTIVE
TRANSFEREE CERTIFY TO THE TRUSTEE
AND THE SELLER IN WRITING THE FACTS
SURROUNDING SUCH TRANSFER, WHICH
CERTIFICATION SHALL BE IN FORM AND
SUBSTANCE SATISFACTORY TO THE
TRUSTEE AND THE SELLER, AND (B) THE
TRUSTEE SHALL REQUIRE A WRITTEN
OPINION OF COUNSEL (WHICH SHALL NOT
BE AT THE EXPENSE OF THE SELLER OR
THE TRUSTEE) SATISFACTORY TO THE
SELLER AND THE TRUSTEE TO THE EFFECT
THAT SUCH TRANSFER WILL NOT VIOLATE
THE SECURITIES ACT. NO SALE, PLEDGE OR
OTHER TRANSFER MAY BE MADE TO ANY
ONE PERSON FOR CERTIFICATES WITH A
FACE AMOUNT OF LESS THAN $1,000,000
AND, IN THE CASE OF ANY PERSON ACTING
ON BEHALF OF ONE OR MORE THIRD
PARTIES (OTHER THAN A BANK (AS
DEFINED IN SECTION 3(a)(2) OF THE
SECURITIES ACT) ACTING IN ITS FIDUCIARY
CAPACITY), FOR CERTIFICATES WITH A
FACE AMOUNT OF LESS THAN $1,000,000
FOR EACH SUCH THIRD PARTY.
THIS CERTIFICATE MAY NOT BE
PURCHASED BY OR TRANSFERRED TO ANY
EMPLOYEE BENEFIT PLAN SUBJECT TO THE
EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED
("ERISA") OR A PLAN SUBJECT TO SECTION
4975 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED ("SECTION 4975") (A
"PLAN") OR A PERSON THAT IS USING THE
ASSETS OF A PLAN TO ACQUIRE THIS
CERTIFICATE. ACCORDINGLY, TRANSFER
OF THIS CERTIFICATE IS SUBJECT TO
CERTAIN RESTRICTIONS SET FORTH IN THE
AGREEMENT.
<PAGE>
AEGIS AUTO RECEIVABLES TRUST 199_-_
AUTOMOBILE RECEIVABLE PASS-
THROUGH CERTIFICATES
CLASS A CERTIFICATE
[PPN:]
[CUSIP:]
NUMBER R-
Original Certificate Balance:
Class A Rate:
$_______________________
Final Scheduled Distribution Date:
Initial Class A Certificate Balance of all Class A
Certificates: $
THIS CERTIFIES THAT
___________________ is the registered owner of
this _________ DOLLARS Class A Certificate.
This Certificate evidences a fractional undivided
interest in the Aegis Auto Receivables Trust 199_-_
(the "Trust") (excluding the Residual Interest in the
Trust), formed by Aegis Auto Funding Corp. IV, a
Delaware corporation (the "Seller"). The Trust was
created pursuant to a Pooling and Servicing
Agreement dated as of _________________ (the
"Agreement") among the Seller, Norwest Bank
Minnesota, National Association, as backup servicer
(the "Backup Servicer"), and Norwest Bank
Minnesota, National Association, as trustee (the
"Trustee"). The property of the Trust includes,
among other assets, a pool of motor vehicle retail
installment sale contracts secured by new and used
automobiles and light-duty trucks. (This Class A
Certificate does not represent an interest in or
obligation of the Seller or any of the respective
Affiliates thereof, except to the extent described
below.) A summary of certain of the pertinent
provisions of the Agreement is set forth below. To
the extent not otherwise defined herein, the
capitalized terms used herein have the meanings
assigned to them in the Agreement. The Certificate
Balance of this Class A Certificate will be decreased
by the payments on this Class A Certificate in
respect of principal as described in the Agreement.
Accordingly, following the initial issuance of the
Class A Certificates, the Certificate Balance of this
Class A Certificate will over time be less than the
original denomination shown above. Anyone
acquiring this Class A Certificate may ascertain its
current Certificate Balance by inquiry of the
Trustee.
This Certificate is one of the duly authorized
Certificates designated as "Automobile Receivable
Pass-Through Certificates," issued in two Classes
(Class A and Class B collectively, the
"Certificates"). To the extent described in the
Agreement the Class B Certificates are subordinate
in payment to the Class A Certificates. This Class
A Certificate is issued under and is subject to the
terms, provisions and conditions of the Agreement,
to which Agreement the Holder of this Class A
Certificate by virtue of the acceptance hereof
assents and by which such Holder is bound. The
property of the Trust includes, without limitation,
a pool of motor vehicle retail installment sale
contracts (the "Receivables") acquired on the
Closing Date and on Funding Dates (both as defined
in the Agreement) secured by new and used
automobiles and light-duty trucks (the "Financed
Vehicles"), all moneys due thereunder after the
applicable Cutoff Dates (as defined in the
Agreement), proceeds from claims on certain
insurance policies and certain other rights under the
Agreement, all right, title and interest of the Seller
in and to the Purchase Agreement and any and all
proceeds of the foregoing.
This Class A Certificate does not purport to
summarize the Agreement and reference is made to
the Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds and
duties evidenced hereby and the rights, duties and
immunities of the Trustee. Copies of the
Agreement and all amendments thereto will be
provided to any Certificateholder, at its expense,
upon a written request to the Trustee.
Under the Agreement, there will be
distributed on the 20th day of each month or, if
such 20th day is not a Business Day, the next
Business Day (the "Distribution Date"),
commencing on _________________, to the person
in whose name this Class A Certificate is registered
at the close of business on the last day of the
Collection Period preceding a Distribution Date or
termination of the Trust (the "Record Date") an
amount equal to the product of the Percentage
Interest evidenced by this Certificate and the
amount, if any required to be distributed to the
holders of all Class A Certificates.
All payments to Certificateholders shall be
made on each Distribution Date to each
Certificateholder of record on the related Record
Date by check, or, if requested by a
Certificateholder holding Certificates with Original
Certificate Balances in aggregate in excess of
$1,000,000, by wire transfer to the account
designated in writing by such Holder in the form of
Exhibit G to the Agreement (or such other account
as such Certificateholder may designate in writing)
delivered to the Trustee prior to the Determination
Date, in immediately available funds. Except as
otherwise provided in the Agreement and
notwithstanding the above, the final distribution on
this Class A Certificate will be made after due
notice by the Trustee of the pendency of such
distribution, which notice shall request that the
Certificateholder present and surrender this Class A
Certificate at the office or agency maintained for
that purpose by the Trustee in Minneapolis,
Minnesota. Surrender of this Class A Certificate
shall not be a condition of payment of the final
distribution; however, the Holder, by accepting this
Class A Certificate, hereby agrees to indemnify and
hold harmless the Trustee, the Seller and the
Certificate Registrar from and against any and all
claims arising from such failure to present and
surrender this Class A Certificate, including but not
limited to claims by third parties claiming to be
bona fide purchasers.
Unless the certificate of authentication
hereon shall have been executed by an authorized
officer of the Trustee, by manual signature, this
Class A Certificate shall not entitle the Holder
hereof to any benefit under the Agreement or be
valid for any purpose.
The Class A Certificates do not represent a
recourse obligation of, or an interest in, the Seller,
the Backup Servicer, the Trustee or any Affiliate of
any of them. The Class A Certificates are limited
in right of payment to certain collections and
recoveries respecting the Receivables, all as more
specifically set forth in the Agreement. A copy of
the Agreement may be examined during normal
business hours at the principal office of the Seller,
and at such other places, if any, designated by the
Seller, by any Certificateholder upon request.
The Agreement permits, with certain
exceptions therein provided, the amendment thereof
and the modification of the rights and obligations of
the Seller and the rights of the Certificateholders
under the Agreement at any time by the Seller and
the Trustee with the consent of the Holders of the
Certificates affected thereby voting as a class
evidencing not less than 51% of the Voting Interests
of all affected Certificates. Any such consent by
the Holder of this Class A Certificate shall be
conclusive and binding on such Holder and on all
future Holders of this Class A Certificate and of
any Class A Certificate issued upon the transfer
hereof or in exchange hereof or in lieu hereof
whether or not notation of such consent is made
upon this Class A Certificate. The Agreement also
permits the amendment thereof, in certain limited
circumstances, without the consent of the Holders
of any of the Class A Certificates.
As provided in the Agreement and subject to
certain limitations set forth therein, the transfer of
this Class A Certificate is registrable in the
Certificate Register upon surrender of this Class A
Certificate for registration of transfer at the offices
or agencies maintained by the Trustee in its capacity
as Certificate Registrar, or by any successor
Certificate Registrar, in Minneapolis, Minnesota, or
such other office of the Trustee maintained for such
purpose and designated by the Trustee in writing,
accompanied by a written instrument of transfer in
form satisfactory to the Trustee and the Class A
Certificate Registrar duly executed by the Holder
hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Class A
Certificates of authorized denominations evidencing
the same aggregate interest in the Trust will be
issued to the designated transferee.
The Class A Certificates are initially issuable
only as registered Class A Certificates without
coupons in denominations of $1,000,000 and
integral multiples of $1,000 in excess thereof,
except that one Class A Certificate may be issued in
a different denomination. As provided in the
Agreement and subject to certain limitations set
forth therein, Class A Certificates are exchangeable
for new Class A Certificates evidencing the same
aggregate denomination, as requested by the Holder
surrendering the same. No service charge will be
made to the Holder for any such registration of
transfer or exchange, but the Trustee may require
payment of a sum sufficient to cover any tax or
governmental charges payable in connection
therewith.
The Trustee, the Certificate Registrar, and
any agent of the Trustee or the Certificate Registrar
may treat the person in whose name this Class A
Certificate is registered as the owner hereof for all
purposes, and neither the Trustee, the Certificate
Registrar, nor any such agent shall be affected by
any notice to the contrary.
The Trust created by the Agreement shall
terminate upon the earliest of (i) payment to the
Certificateholders of all amounts required to be paid
to them pursuant to the Agreement and the
disposition of all property held as part of the Trust
Property, (ii) the purchase as of any Distribution
Date by the Seller of the corpus of the Trust, as
described below, or (iii) the Final Scheduled
Distribution Date. The Seller may, at its option,
purchase the corpus of the Trust, in whole, at a
price specified in the Agreement, and such purchase
will effect early retirement of the Certificates;
however, such right of purchase is exercisable only
on a Distribution Date following the last day of any
Collection Period as of which the Pool Balance is
less than or equal to 10% of the Original Pool
Balance.<PAGE>
IN WITNESS WHEREOF, the Trustee, not
in its individual capacity but on behalf of the Trust,
has caused this Class A Certificate to be duly
executed.
AEGIS
AUTO
RECEI
VABL
ES
TRUS
T
199_-_
By:
NOR
WEST
BANK
MINN
ESOT
A,
NATI
ONAL
ASSO
CIATI
ON, as
Trustee
By
Name:
Title:
This is one of the Class A Certificates referred to
in the within-mentioned Agreement.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By
Name:
Title:
Dated as of
_________________, 199_
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned
hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
(Please print or typewrite name and address,
including postal zip code, of assignee)
the within Class A Certificate, and all rights
thereunder, hereby irrevocably constituting and
appointing
Attorney
to transfer said Class A Certificate on the books of
the Certificate Registrar, with full power of
substitution in the premises.
Dated:
Name:
_______________
NOTICE: The signature to this assignment must
correspond with the name as it appears upon the
face of the within Class A Certificate in every
particular, without alteration, enlargement or any
change whatever.
<PAGE>
EXHIBIT A-2
FORM OF CLASS B CERTIFICATE
THIS CERTIFICATE IS SUBORDINATED
IN RIGHT OF PAYMENT AS DESCRIBED IN
THE AGREEMENT REFERRED TO HEREIN.
THIS CERTIFICATE HAS NOT BEEN AND
WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"),OR UNDER THE
SECURITIES OR BLUE SKY LAWS OF ANY
STATE IN THE UNITED STATES OR ANY
FOREIGN SECURITIES LAWS. BY ITS
ACCEPTANCE OF THIS CERTIFICATE THE
HOLDER OF THIS CERTIFICATE IS DEEMED
TO REPRESENT TO THE SELLER AND THE
TRUSTEE (i) THAT IT IS AN INSTITUTIONAL
INVESTOR THAT IS AN "ACCREDITED
INVESTOR" AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) OF REGULATION D
PROMULGATED UNDER THE SECURITIES
ACT (AN "INSTITUTIONAL ACCREDITED
INVESTOR") AND THAT IT IS ACQUIRING
THIS CERTIFICATE FOR ITS OWN ACCOUNT
(AND NOT FOR THE ACCOUNT OF OTHERS)
OR AS A FIDUCIARY OR AGENT FOR
OTHERS (WHICH OTHERS ALSO ARE
INSTITUTIONAL ACCREDITED INVESTORS
UNLESS THE HOLDER IS A BANK ACTING IN
ITS FIDUCIARY CAPACITY) FOR
INVESTMENT AND NOT WITH A VIEW TO,
OR FOR OFFER OR SALE IN CONNECTION
WITH, THE PUBLIC DISTRIBUTION HEREOF
OR (II) THAT IT IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT
AND IS ACQUIRING SUCH CERTIFICATE FOR
ITS OWN ACCOUNT (AND NOT FOR THE
ACCOUNT OF OTHERS) OR AS A FIDUCIARY
OR AGENT FOR OTHERS (WHICH OTHERS
ALSO ARE QUALIFIED INSTITUTIONAL
BUYERS).
NO SALE, PLEDGE OR OTHER TRANSFER OF
THIS CERTIFICATE MAY BE MADE BY ANY
PERSON UNLESS EITHER (i) SUCH SALE,
PLEDGE OR OTHER TRANSFER IS MADE TO
THE SELLER, (ii) SUCH SALE, PLEDGE OR
OTHER TRANSFER IS MADE TO AN
INSTITUTIONAL ACCREDITED INVESTOR
THAT EXECUTES A CERTIFICATE,
SUBSTANTIALLY IN THE FORM SPECIFIED
IN THE AGREEMENT, TO THE EFFECT THAT
IT IS AN INSTITUTIONAL ACCREDITED
INVESTOR ACTING FOR ITS OWN ACCOUNT
(AND NOT FOR THE ACCOUNT OF OTHERS)
OR AS A FIDUCIARY OR AGENT FOR
OTHERS (WHICH OTHERS ALSO ARE
INSTITUTIONAL ACCREDITED INVESTORS
UNLESS THE HOLDER IS A BANK ACTING IN
ITS FIDUCIARY CAPACITY), (iii) SO LONG AS
THIS CERTIFICATE IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT, SUCH SALE, PLEDGE OR
OTHER TRANSFER IS MADE TO A PERSON
WHOM THE ISSUER REASONABLY BELIEVES
AFTER DUE INQUIRY IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A), ACTING FOR ITS OWN
ACCOUNT (AND NOT FOR THE ACCOUNT OF
OTHERS) OR AS A FIDUCIARY OR AGENT
FOR OTHERS (WHICH OTHERS ALSO ARE
QUALIFIED INSTITUTIONAL BUYERS) TO
WHOM NOTICE IS GIVEN THAT THE SALE,
PLEDGE OR TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, OR (iv) SUCH
SALE, PLEDGE OR OTHER TRANSFER IS
OTHERWISE MADE IN A TRANSACTION
EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT,
IN WHICH CASE (A) THE TRUSTEE SHALL
REQUIRE THAT BOTH THE PROSPECTIVE
TRANSFEROR AND THE PROSPECTIVE
TRANSFEREE CERTIFY TO THE TRUSTEE
AND THE SELLER IN WRITING THE FACTS
SURROUNDING SUCH TRANSFER, WHICH
CERTIFICATION SHALL BE IN FORM AND
SUBSTANCE SATISFACTORY TO THE
TRUSTEE AND THE SELLER, AND (B) THE
TRUSTEE SHALL REQUIRE A WRITTEN
OPINION OF COUNSEL (WHICH SHALL NOT
BE AT THE EXPENSE OF THE SELLER OR
THE TRUSTEE) SATISFACTORY TO THE
SELLER AND THE TRUSTEE TO THE EFFECT
THAT SUCH TRANSFER WILL NOT VIOLATE
THE SECURITIES ACT. NO SALE, PLEDGE OR
OTHER TRANSFER MAY BE MADE TO ANY
ONE PERSON FOR CERTIFICATES WITH A
FACE AMOUNT OF LESS THAN $1,000,000
AND, IN THE CASE OF ANY PERSON ACTING
ON BEHALF OF ONE OR MORE THIRD
PARTIES (OTHER THAN A BANK (AS
DEFINED IN SECTION 3(a)(2) OF THE
SECURITIES ACT) ACTING IN ITS FIDUCIARY
CAPACITY), FOR CERTIFICATES WITH A
FACE AMOUNT OF LESS THAN $1,000,000
FOR EACH SUCH THIRD PARTY.
THIS CERTIFICATE MAY NOT BE
PURCHASED BY OR TRANSFERRED TO ANY
EMPLOYEE BENEFIT PLAN SUBJECT TO THE
EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED
("ERISA") OR A PLAN SUBJECT TO SECTION
4975 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED ("SECTION 4975") (A
"PLAN") OR A PERSON THAT IS USING THE
ASSETS OF A PLAN TO ACQUIRE THIS
CERTIFICATE. ACCORDINGLY, TRANSFER
OF THIS CERTIFICATE IS SUBJECT TO
CERTAIN RESTRICTIONS SET FORTH IN THE
AGREEMENT.
<PAGE>
AEGIS AUTO RECEIVABLES TRUST 199
AUTOMOBILE RECEIVABLE PASS THROUGH
CERTIFICATES
CLASS B CERTIFICATE
[PPN:]
[CUSIP:]
NUMBER R Original Certificate Balance:
Class B Rate:
$_______________________
Final Scheduled Distribution Date:
Initial Class B Certificate Balance of all Class B
Certificates: $
THIS CERTIFIES THAT
___________________ is the registered owner of
this _________ DOLLARS Class B Certificate.
This Certificate evidences a fractional undivided
interest in the Aegis Auto Receivables Trust 199_-_
(the "Trust") (excluding the Residual Interest in the
Trust), formed by Aegis Auto Funding Corp. IV, a
Delaware corporation (the "Seller"). The Trust was
created pursuant to a Pooling and Servicing
Agreement dated as of ________________ (the
"Agreement") among the Seller, Norwest Bank
Minnesota, National Association, as backup servicer
(the "Backup Servicer"), and Norwest Bank
Minnesota, National Association, as trustee (the
"Trustee"). The property of the Trust includes,
among other assets, a pool of motor vehicle retail
installment sale contracts secured by new and used
automobiles and light-duty trucks. (This Class B
Certificate does not represent an interest in or
obligation of the Seller or any of the respective
Affiliates thereof, except to the extent described
below.) A summary of certain of the pertinent
provisions of the Agreement is set forth below. To
the extent not otherwise defined herein, the
capitalized terms used herein have the meanings
assigned to them in the Agreement. The Certificate
Balance of this Class B Certificate will be decreased
by the payments on this Class B Certificate in
respect of principal as described in the Agreement.
Accordingly, following the initial issuance of the
Class B Certificates, the Certificate Balance of this
Class B Certificate will over time be less than the
original denomination shown above. Anyone
acquiring this Class B Certificate may ascertain its
current Certificate Balance by inquiry of the
Trustee.
This Certificate is one of the duly authorized
Certificates designated as "Automobile Receivable
Pass-Through Certificates", issued in two Classes
(Class A and Class B, collectively, the
"Certificates"). To the extent described in the
Agreement the Class B Certificates are subordinate
in payment to the Class A Certificates. This Class
B Certificate is issued under and is subject to the
terms, provisions and conditions of the Agreement,
to which Agreement the Holder of this Class B
Certificate by virtue of the acceptance hereof
assents and by which such Holder is bound. The
property of the Trust includes, without limitation,
a pool of motor vehicle retail installment sale
contracts (the "Receivables") acquired on the
Closing Date and on Funding Dates (both as defined
in the Agreement) secured by new and used
automobiles and light-duty trucks (the "Financed
Vehicles"), all moneys due thereunder after the
applicable Cutoff Dates (as defined in the
Agreement), proceeds from claims on certain
insurance policies and certain other rights under the
Agreement, all right, title and interest of the Seller
in and to the Purchase Agreement and any and all
proceeds of the foregoing.
This Class B Certificate does not purport to
summarize the Agreement and reference is made to
the Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds and
duties evidenced hereby and the rights, duties and
immunities of the Trustee. Copies of the
Agreement and all amendments thereto will be
provided to any Certificateholder, at its expense,
upon a written request to the Trustee.
Under the Agreement, there will be
distributed on the 20th day of each month or, if
such 20th day is not a Business Day, the next
Business Day (the "Distribution Date"),
commencing on ________________, to the person
in whose name this Class B Certificate is registered
at the close of business on the last day of the
Collection Period preceding a Distribution Date or
termination of the Trust (the "Record Date") an
amount equal to the product of the Percentage
Interest evidenced by this Certificate and the
amount, if any required to be distributed to the
holders of all Class B Certificates.
All payments to Certificateholders shall be
made on each Distribution Date to each
Certificateholder of record on the related Record
Date by check, or, if requested by a
Certificateholder holding Certificates with Original
Certificate Balances in aggregate in excess of
$1,000,000, by wire transfer to the account
designated in writing by such Holder in the form of
Exhibit G to the Agreement (or such other account
as such Certificateholder may designate in writing)
delivered to the Trustee prior to the Determination
Date, in immediately available funds. Except as
otherwise provided in the Agreement and
notwithstanding the above, the final distribution on
this Class B Certificate will be made after due
notice by the Trustee of the pendency of such
distribution, which notice shall request that the
Certificateholder present and surrender this Class B
Certificate at the office or agency maintained for
that purpose by the Trustee in Minneapolis,
Minnesota. Surrender of this Class B Certificate
shall not be a condition of payment of the final
distribution; however, the Holder, by accepting this
Class B Certificate, hereby agrees to indemnify and
hold harmless the Trustee, the Seller and the
Certificate Registrar from and against any and all
claims arising from such failure to present and
surrender this Class B Certificate, including but not
limited to claims by third parties claiming to be
bona fide purchasers.
Unless the certificate of authentication
hereon shall have been executed by an authorized
officer of the Trustee, by manual signature, this
Class B Certificate shall not entitle the Holder
hereof to any benefit under the Agreement or be
valid for any purpose.
The Class B Certificates do not represent a
recourse obligation of, or an interest in, the Seller,
the Backup Servicer, the Trustee or any Affiliate of
any of them. The Class B Certificates are limited
in right of payment to certain collections and
recoveries respecting the Receivables, all as more
specifically set forth in the Agreement. A copy of
the Agreement may be examined during normal
business hours at the principal office of the Seller,
and at such other places, if any, designated by the
Seller, by any Certificateholder upon request.
The Agreement permits, with certain
exceptions therein provided, the amendment thereof
and the modification of the rights and obligations of
the Seller and the rights of the Certificateholders
under the Agreement at any time by the Seller and
the Trustee with the consent of the Holders of the
Certificates affected thereby voting as a class
evidencing not less than 51% of the Voting Interests
of all affected Certificates. Any such consent by
the Holder of this Class B Certificate shall be
conclusive and binding on such Holder and on all
future Holders of this Class B Certificate and of any
Class B Certificate issued upon the transfer hereof
or in exchange hereof or in lieu hereof whether or
not notation of such consent is made upon this Class
B Certificate. The Agreement also permits the
amendment thereof, in certain limited
circumstances, without the consent of the Holders
of any of the Class B Certificates.
As provided in the Agreement and subject to
certain limitations set forth therein, the transfer of
this Class B Certificate is registrable in the
Certificate Register upon surrender of this Class B
Certificate for registration of transfer at the offices
or agencies maintained by the Trustee in its capacity
as Certificate Registrar, or by any successor
Certificate Registrar, in Minneapolis, Minnesota, or
such other office of the Trustee maintained for such
purpose and designated by the Trustee in writing,
accompanied by a written instrument of transfer in
form satisfactory to the Trustee and the Class B
Certificate Registrar duly executed by the Holder
hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Class B
Certificates of authorized denominations evidencing
the same aggregate interest in the Trust will be
issued to the designated transferee.
The Class B Certificates are initially issuable
only as registered Class B Certificates without
coupons in denominations of $1,000,000 and
integral multiples of $1,000 in excess thereof,
except that one Class B Certificate may be issued in
a different denomination. As provided in the
Agreement and subject to certain limitations set
forth therein, Class B Certificates are exchangeable
for new Class B Certificates evidencing the same
aggregate denomination, as requested by the Holder
surrendering the same. No service charge will be
made to the Holder for any such registration of
transfer or exchange, but the Trustee may require
payment of a sum sufficient to cover any tax or
governmental charges payable in connection
therewith.
The Trustee, the Certificate Registrar, and
any agent of the Trustee or the Certificate Registrar
may treat the person in whose name this Class B
Certificate is registered as the owner hereof for all
purposes, and neither the Trustee, the Certificate
Registrar, nor any such agent shall be affected by
any notice to the contrary.
The Trust created by the Agreement shall
terminate upon the earliest of (i) payment to the
Certificateholders of all amounts required to be paid
to them pursuant to the Agreement and the
disposition of all property held as part of the Trust
Property, (ii) the purchase as of any Distribution
Date by the Seller of the corpus of the Trust as
described below, or (iii) the Final Scheduled
Distribution Date. The Seller may, at its option,
purchase the corpus of the Trust, in whole, at a
price specified in the Agreement, and such purchase
will effect early retirement of the Certificates;
however, such right of purchase is exercisable only
on a Distribution Date following the last day of any
Collection Period as of which the Pool Balance is
less than or equal to 10% of the Original Pool
Balance.
IN WITNESS WHEREOF, the Trustee, not
in its individual capacity but on behalf of the Trust,
has caused this Class B Certificate to be duly
executed
AEGIS AUTO RECEIVABLES TRUST 199_-_
By: NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By
Name:
Title:
This is one of the Class B Certificates referred to
in the within-mentioned Agreement.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By
Name:
Title:
Dated as of
______, 199_
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned
hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
(Please print or typewrite name and address,
including postal zip code, of assignee)
the within Class B Certificate, and all rights
thereunder, hereby irrevocably constituting and
appointing
Attorney
to transfer said Class B Certificate on the books of
the Certificate Registrar, with full power of
substitution in the premises.
Dated:
Name:
_______________
NOTICE: The signature to this assignment must
correspond with the name as it appears upon the
face of the within Class B Certificate in every
particular, without alteration, enlargement or any
change whatever.
<PAGE>
EXHIBIT B
[RESERVED]
<PAGE>
EXHIBIT C
TRUSTEE'S STATEMENT TO
CERTIFICATEHOLDERS
Aegis Auto Funding Corp. IV
Aegis Auto Receivables Trust 199_-_
Automobile Receivable Pass-Through Certificates
Distribution Date:
Last Day of Collection Period:
I. COLLECTIONS INTEREST PRINCIPAL TOTALS
Scheduled Payments
Full & Partial Prepayments
Recoveries
Risk Default Insurance Proceeds
Receivable Repurchased by Seller
Miscellaneous Servicer Collections
Available Interest Distribution Amount
Available Principal Distribution Amount
Total Available Distribution Amount
Reinvestment Income on Collection Account
Withdrawals from
Reserve Fund
Total Amount Available
II. DISTRIBUTIONS
Backup Servicer Fee
Contingent Servicer Fee
Servicing Fee
Trustee and Custodian Fee
Credit Enhancement Fee
Allocation of Expenses by Class
Class A
Class B
Class A Interest Distribution
Class A Interest Carryover Shortfall
Class A Principal Distribution
Class A Principal Carryover Shortfall
Class B Interest Distribution
Class B Interest Carryover Shortfall
Class B Principal Distribution
Class B Principal Carryover Shortfall
Funding Account-Prepayment Distribution
Deposits to Reserve Fund
Releases to Seller from Reserve Fund
Total Funds Distributed
III. CLASS CERTIFICATE BALANCE
Original Class A Certificate Balance
Beginning Class A Certificate Balance
Ending Class A Certificate Balance
Class A Interest Carryover Shortfall
Class A Principal Carryover Shortfall
Class A Certificate Factor
Original Class B Certificate Balance
Beginning Class B Certificate Balance
Ending Class B Certificate Balance
Class B Interest Carryover Shortfall
Class B Principal Carryover Shortfall
Class B Certificate Factor
IV. POOL BALANCE INFORMATION
Original Pool Balance:
Beginning of Period End of Period
Pool Balance
Pool Factor
Weighted Average Coupon (WAC)
Weighted Average Remaining Maturity (WAM) (in months)
Remaining Number of Receivables
V. RESERVE FUND
Amount
Beginning Balance
Plus: Deposits
Plus: Reinvestment Income
Withdrawals to Certificateholders
Class A
Class B
<PAGE>
Withdrawals for expenses
[Withdrawals for other Series]
Released to Seller
Ending Balance
VI. RECEIVABLES REPURCHASED/SUBSTITUTED BY
SELLER
Number of Receivables Repurchased
Principal Amount
Number of Receivables Substituted
Principal Amount
VII. DELINQUENCY INFORMATI
# ofPrincipal % of
Contracts Balance Pool Balance
30-59 Days Delinquent
60-89 days Delinquent
Excluding Liquidated and Defaulted Receivables
VIII. REPOSSESSION INFORMATION Current
PeriodInventory
Number of Receivables as to which Vehicles have been
Repossessed (and not yet liquidated)
Principal Balances of Receivables relating to Vehicles
which have been Repossessed (and not yet liquidated)
IX. LIQUIDATED AND DEFAULTED RECEIVABLES
Current Period Cumulative
Number of Liquidated Receivables
Principal Balances of Liquidated Receivables
(Prior to Liquidation)
Number of Defaulted Receivables
Principal Balances of Defaulted Receivables
Total Principal Balance of Liquidated
and Defaulted Receivables
Excludes receivables previously characterized
as Defaulted Receivables
**Refers to Receivables that have become
90 days delinquent and are not Liquidated Receivables
X. RECOVERIES Current Period Cumulative
Liquidation Proceeds
Rebate of Servicer Cancelled Warranty Contracts
VSI Physical Damage/Loss Insurance Proceeds
Consumer Insurance
Other
Total Recoveries
XI. RETENTION AMOUNT
Beginning Balance
Plus: (Additional Receivables)
Plus: Quarterly Reserve Loss Deficiency
Less: Claims approved
Less: Quarterly Reserve Loss Surplus
Ending Balance
XII. RISK DEFAULT INSURANCE PROCEEDS
Current Period
Cumulative
Risk Default Insurance Proceeds
<PAGE>
XIII. NET LOSSES
Current Period
Cumulative
Principal Balance of Liquidated and
Defaulted Receivables
Less: Recoveries
Less: Risk Default Insurance Proceeds
Net Losses
XIV. INSURANCE CLAIMS
Current Period
Cumulative
Number of Risk Default Insurance Claims
Amount of Risk Default Insurance Claims
Number of VSI Physical Damage/Loss Insurance Claims
Amount of VSI Physical Damage/Loss Insurance Claims
Number of Risk Default Insurance Claims Rejected
Principal Balance of Receivables Rejected
XV. FUNDING ACCOUNT
Beginning Balance
Withdrawals (Additional Receivables)
Withdrawals (Reserve Fund)
Reinvestment Income Retained
Ending Balance
<PAGE>
EXHIBIT D
[RESERVED]
<PAGE>
EXHIBIT E
LOCATION OF SERVICER FILES
American Lenders Facilities, Inc.
2600 Michaelson Drive
Suite 470
Irvine, CA 92715
Systems and Services Technology, Inc.
4315 Pickett Road
St. Jospeh, MO 64503
<PAGE>
EXHIBIT F
[RESERVED]
<PAGE>
EXHIBIT G
WIRING INSTRUCTIONS FORM
______________, 19____
Norwest Bank Minnesota, National Association
6th Street and Marquette Avenue
Minneapolis, MN 55479-0070
Re:Aegis Auto Funding Corp. IV Automobile
Receivable Pass-Through Certificates
Class ___ Issued by Aegis Automobile Receivables
Trust 199_-_
Dear Sirs:
In connection with the sale of the above-captioned
Certificate by to
("Transferee") you, as Trustee with respect to the
related Certificates, are instructed to make all
remittances to Transferee as Certificateholder as of
, 19 and you are directed to send all
notices to the appropriate party at the address set
forth on Schedule 1 hereto. You are further
instructed to treat the Transferee as the record
holder for purposes of the , 199__
Distribution Date.
[Transferee]
By
Title:
Acknowledged
[Seller]
By
Title:
<PAGE>
EXHIBIT H
[RESERVED]
<PAGE>
EXHIBIT I
RISK DEFAULT INSURANCE POLICIES
Issuer:Empire Fire and Marine Insurance Company
Policy Name:Loan Default Insurance
Policy No.:SB 221447
Date: 2/6/97
Named Insured:Aegis Auto Finance, Inc.
Issuer:The Connecticut Indemnity Company
Policy Name:Secured Value Insurance
Policy No:ZSC 1500270
Date:3/19/97
Named Insured:Aegis Auto Finance, Inc.
Issuer:The Connecticut Indemnity Company
Policy Name:Secure Value Insurance
Policy No:ZSC 1500271
Date:3/19/97
Named Insured:Aegis Auto Finance, Inc.
<PAGE>
EXHIBIT J
VSI INSURANCE POLICY
1. Issuer:Guaranty National Insurance Company
Policy Name:Lenders Comprehensive Single
Interest Insurance Policy
Policy No.:ZYG 1500103
Date:February 1, 1994
Named Insured:Aegis Capital Markets
Endorsements:42621-0 (10/93), 42623-0 (10/93),
42624-0 (10/93),
42627-0 (10/93), 42629-0
(10/93), 42630-0 (10/93), 41510-0 (6/90), Nos. 7, 8,
Coverage Endorsements dated 3/23/94,
9/08/94 and 9/26/94, Nos.
16-24, 30-31
<PAGE>
EXHIBIT K
FORM OF INVESTMENT/TRANSFEREE
LETTER
(Rule 144A Transfer)
[Date]
Aegis Auto Funding Corp. IV
525 Washington Boulevard
Jersey City, New Jersey 07310
Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, MN 55479-0070
Attention: Corporate Trust Services Asset Backed
Administration
Aegis Auto Funding Corp. IV
Aegis Auto Receivables Trust 199_-_
Automobile Receivable Pass-Through
Certificates, Class ___
Ladies and Gentlemen:
The undersigned (the "Purchaser") proposes
to purchase one or more Automobile Receivable
Pass-Through Certificates, Class ___ (the
"Certificates") issued by Aegis Auto Receivables
Trust 199_-_ (the "Trust") pursuant to that certain
Pooling and Servicing Agreement dated as of
_________________ (the "Pooling and Servicing
Agreement") by and among Aegis Auto Funding
Corp. IV, a Delaware corporation, as seller
("Seller"), Norwest Bank Minnesota, National
Association, as Backup Servicer, and Norwest Bank
Minnesota, National Association, as Trustee.
Unless the context or use indicates another or
different meaning, each capitalized term used herein
and not otherwise defined herein shall have the
meaning ascribed to it in the Pooling and Servicing
Agreement.
1. The undersigned hereby certifies that,
as indicated below, the undersigned is the President,
Chief Executive/Financial Officer, Senior Vice
President or other executive officer or investment
officer of the Purchaser.
2. In connection with the purchase by
the Purchaser of the Certificates, the undersigned
hereby certifies to you that the Purchaser is a
"qualified institutional buyer" as defined in Rule
144A ("Rule 144A") promulgated under the
Securities Act of 1933, as amended, because:
[ ] (a) The Purchaser owned or invested on a
discretionary basis $100 million in securities
(except for the excluded securities referred
to below) as of the end of the Purchaser's
most recent fiscal year (such amount being
calculated in accordance with Rule 144A)
and the Purchaser satisfies the criteria in the
subcategory marked below (check one):
[ ] Insurance Company. The Purchaser
is an insurance company whose
primary and predominant business
activity is the writing of insurance or
the reinsuring of risks underwritten
by insurance companies and which is
subject to supervision by the
insurance commissioner or a similar
official or agency of a State or
territory or the District of Columbia.
[ ] Investment Company. The
Purchaser is (i) an investment
company registered under the
Investment Company Act of 1940, as
amended (the "Investment Company
Act") or (ii) a business development
company as defined in Section
2(a)(48) of that Act.
[ ] Small Business Investment Company.
The Purchaser is a Small Business
Investment Company licensed by the
U.S. Small Business Administration
under Section 301(c) or (d) of the
Small Business Investment Act of
1958.
[ ] Corporation, Etc. The Purchaser is
an organization described in Section
501(c)(3) of the Internal Revenue
Code of 1986, as amended, a
corporation (other than a bank,
savings and loan association or
similar institution), partnership or
Massachusetts or similar business
trust.
[ ] State or Local Plan. The Purchaser
is a plan established and maintained
by a State or its political
subdivisions, or any agency or
instrumentality of a State or its
political subdivisions, for the benefit
of its employees.
[ ] ERISA Plan. The Purchaser is an
employee benefit plan within the
meaning of Title I of the Employee
Retirement Income Security Act of
1974.
[ ] Trust Fund. The Purchaser is a trust
fund whose trustee is a bank or trust
company and whose participants are
exclusively plans established and
maintained by a State or its political
subdivision, or any agency or
instrumentality of a State or its
political subdivisions, for the benefit
of its employees.
[ ] Business Development Company.
The Purchaser is a business
development company as defined in
Section 202(a)(22) of the Investment
Adviser Act of 1940.
[ ] Investment Advisor. The Purchaser
is an investment advisor registered
under the Investment Advisers Act of
1940, as amended.
[ ] (b) The Purchaser is a dealer registered
pursuant too Section 15 of the Exchange
Act, acting for its own account or the
accounts of other qualified institutional
buyers, that in the aggregate owns and
invests on a discretionary basis at least $10
million of securities of issuers that are not
affiliated with the dealer, provided that
securities constituting the whole or a part of
an unsold allotment to or subscription by a
dealer as a participant in a public offering
shall not be deemed to be owned such
dealer.
[ ] (c) The Purchaser is a dealer registered
pursuant to Section 15 of the Exchange Act
acting in a riskless principal transaction on
behalf of a qualified institutional buyer.
[ ] (d) The Purchaser is an investment
company registered under the Investment
Company Act, acting for its own account or
for the accounts of other qualified
institutional buyers, that is part of a family
of investment companies which own in the
aggregate at least $100 million in securities
of issuers other than issuers that are
affiliated with the investment company or
are part of such family of investment
companies. "Family of investment
companies" means any two or more
investment companies registered under the
Investment Company Act, except for a unit
investment trust whose assets consist solely
of shares of one or more registered
investment companies, that have the same
investment adviser (or, in the case of unit
investment trusts, the same depositor),
provided that, for purposes of this section:
(A) each series of a series company
(as defined in Rule 18f-2 under the
Investment Company Act (17 CFR
270.18f-2)) shall be deemed to be a
separate investment company; and
(B) investment companies shall be
deemed to have the same adviser (or
depositor) if their advisers (or
depositors) are majority-owned
subsidiaries of the same parent, or if
on investment company's adviser (or
depositor) is a majority-owned
subsidiary of the other investment
company's adviser (or depositor).
[ ] (e) The Purchaser is an entity, all of the
equity owners of which are qualified
institutional buyers, acting for its own
account or the accounts of other qualified
institutional buyers.
[ ] (f) The Purchaser is a bank as defined in
Section 3(a)(2) of the Act, any savings and
loan association or other institution as
referenced in Section 3(a)(5)(A) of the Act,
or any foreign bank or savings and loan
association or equivalent institution, acting
for its own account or the accounts of other
qualified institutional buyers, that in the
aggregate owns and invests on a
discretionary basis at least $100 million in
securities of issuers that are not affiliated
with it and that has an audited net worth of
at least $25 million ad demonstrated in its
latest annual financial statements, as of a
date not more than 16 months preceding the
date of sale under the Rule in the case of a
U.S. bank or savings and loan association,
and not more than 18 months preceding such
date of sale for a foreign bank or savings
and loan association or equivalent
institution.
The term "securities" as used herein does
not include (i) securities of issuers that are affiliated
with the Purchaser, (ii) securities that are part of an
unsold allotment to or subscription by the Purchaser
(if the Purchaser is a dealer), (iii) bank deposit
notes and certificates of deposit, (iv) loan
participations, (v) repurchase agreements, (vi)
securities owned but subject to a repurchase
agreement and (vii) currency, interest rate and
commodity swaps.
For purposes of determining the aggregate
amount of securities owned or invested on a
discretionary basis by the Purchaser, the Purchaser
used the cost of such securities to the Purchaser and
did not include any of the securities referred to in
the preceding paragraph.
Further, in determining such aggregate
amount, the Purchaser may have included securities
owned by subsidiaries of the Purchaser, but only if
such subsidiaries are consolidated with the
Purchaser in its financial statements prepared in
accordance with generally accepted accounting
principles and if the investments of such
subsidiaries are managed under the Purchaser's
direction. However, such securities were not
included if the Purchaser is a majority-owned,
consolidated subsidiary of another enterprise and the
Purchaser is not itself a reporting company under
the Securities Exchange Act of 1934, as amended.
3. The Purchaser certifies and
acknowledges that it is familiar with Rule 144A and
understands that you and your customers (if you act
as a broker for one or more customers) are relying
on the statements made therein.
4. The Purchaser certifies that the
Purchaser is purchasing the Certificates in the
capacity marked below (check one):
[ ] The Purchaser certifies that the Purchaser is
purchasing the Certificates for its own
account only; or
[ ] The Purchaser certifies that the Purchaser is
purchasing the Certificates for the account
of [one] [specify number:] other qualified
institutional buyer(s), [each of] which is a
"qualified institutional buyer." (Draw a line
through inapplicable words and brackets.)
5. The Purchaser certifies that, to the
extent it has requested same, it has received from
the Seller the information that satisfies the
requirements of paragraph (d)(4) of Rule 144A (the
"Rule 144A Information").
6. The Purchaser certifies that it will
comply with all applicable federal and state
securities laws in connection with any subsequent
resale by the Purchaser of the Certificates. The
Purchaser acknowledges that no Certificates may be
exchanged for any new Certificates having an initial
principal balance of less than $1,000,000.
7. The Purchaser understands and
acknowledges that the Certificates have not been
and will not be registered under the Securities Act
of 1933, as amended, or any state securities laws
and may be resold only if (a) the Certificates are
registered pursuant to the provisions of the
Securities Act of 1933, as amended, and such state
securities laws, or (b) if an exemption from such
registration is available. The Purchaser understands
and acknowledges that the Seller is not required to
register the Certificates and that any transfer must
comply with Section 7.03 of the Agreement. The
Trustee is not obligated to provide Rule 144A
Information.
8. The Purchaser understands that there
is no market, nor is there any assurance that a
market will develop, for the Certificates and that
the Seller does not have any obligation to make or
facilitate any such market (or to otherwise
repurchase the Certificates from the Purchaser)
under any circumstances.
9. The Purchaser has consulted with its
own legal counsel, independent accountants and
financial advisors to the extent it deems necessary
regarding the tax consequences to it of ownership of
the Certificates, is aware that its taxable income
with respect to the Certificates in any accounting
period may not correspond to the cash flow (if any)
from the Certificates for such period, and is not
purchasing the Certificates in reliance on any
representations of the Seller or its counsel with
respect to tax matters.
10. [For III Finance and III Global only:
The purchaser acknowledges that it or its affiliate
has acted as a warehouse lender to the originator of
the Receivables backing the Certificates and, as
such, it has had substantial access to information
relating to the Trust and the assets backing the
Certificates] The Purchaser has had the
opportunity to review the documents providing for
the issuance of the Certificates and to ask questions
and receive answers concerning the terms and
conditions of the transactions contemplated thereby
and to obtain additional information necessary to
verify the accuracy and completeness of any
information furnished to the Purchaser or to which
the Purchaser had access. The Purchaser
acknowledges that no offering memorandum or
other offering literature has been prepared in
connection with the offering of the Certificates and
that it is not relying on any party for furnishing or
verifying information relating to the Seller, the
Trust or other parties to this transaction or their
respective financial condition, or with respect to
any assets of the Trust or which relates in any way
to the Certificates or any security relating to the
Certificates. The Purchaser has been represented
by its own legal counsel to the extent it deems
necessary in connection with the offering of the
Certificates and is not relying on counsel to the
Trust or counsel to any other party with respect to
the matters relating, directly or indirectly, to the
furnishing or verifying of information relating to the
Seller, the Trust or any parties to the transaction or
their respective financial condition or with respect
to any assets of the Trust or which relates in any
way to the Certificates or any security relating to
the Certificates.
11. The Purchaser hereby further agrees
to be bound by all the terms and conditions of the
Certificates as provided in the Pooling and
Servicing Agreement.
<PAGE>
12. If the Purchaser sells any of the
Certificates, the Purchaser will obtain from any
subsequent purchaser the same representations
contained in this Letter.
Very truly yours
[PURCHASER]
By
Name
Title <PAGE>
EXHIBIT L
FORM OF INVESTOR LETTER
(Non-Rule 144A Purchase of Class B Certificates)
[Date]
Aegis Auto Funding Corp. IV
525 Washington Boulevard
Jersey City, New Jersey 07310
Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, MN 55479-0070
Attention: Corporate Trust Services Asset Backed
Administration
Aegis Auto Funding Corp. IV
Aegis Auto Receivables Trust 199_-_
Automobile Receivable Pass-Through Certificates,
Class B
Ladies and Gentlemen:
The undersigned (the "Purchaser") proposes
to purchase certain Automobile Receivable
Certificates, Class B (the "Certificates") issued by
Aegis Auto Receivables Trust 199_-_ (the "Trust)
pursuant to a Pooling and Servicing Agreement
dated as of _________________ (the "Pooling and
Servicing Agreement"), among Aegis Auto Funding
Corp. IV, as Seller, Norwest Bank Minnesota,
National Association, as Backup Servicer, and
Norwest Bank Minnesota, National Association as
Trustee. Unless the context or use indicates another
or different meaning, each capitalized term used
herein and not otherwise defined herein shall have
the meaning ascribed to it in the Pooling and
Servicing Agreement.
The Purchaser represents and warrants that:
(a) Information. The Purchaser
acknowledges that it or its affiliate has acted as a
warehouse lender to the originator of the
Receivables and, as such, it has had substantial
access to information relating to the Trust and the
assets backing the Certificates. The Purchaser
acknowledges that no offering memorandum or
other offering literature has been prepared in
connection with the offering of the Certificates and
that it is not relying on any party for furnishing or
verifying information relating to the Seller, the
Trust or other parties to this transaction or their
respective financial condition, or with respect to
any assets of the Trust or which relates in any way
to the Certificates or any security relating to the
Certificates. The Purchaser acknowledges that it
has made such investigation as the Purchaser deems
necessary to evaluate the merits and risks involved
with an investment in the Certificates, and has had
an opportunity to review the documents providing
for the issuance of the Certificates and to meet with
officers and employees of the Seller and to ask
questions and receive answers regarding an
investment in the Certificates and has asked any
question he desired to ask and has received answers
with respect to such questions to the full satisfaction
of the Purchaser, and the Purchaser confirms that
all requested documents, records and books
pertaining to the investment in the Certificates have
been made available or delivered to the Purchaser,
and the Purchaser has relied exclusively on such
information. The Purchaser has been represented
by its own legal counsel to the extent it deems
necessary in connection with the offering of the
Certificate and is not relying on counsel to the Trust
or counsel to any other party with respect to any
matters relating, directly or indirectly, to the
furnishing or verifying of information relating to the
Seller, the Trust or other parties to the transaction
or their respective financial condition or with
respect to any assets of the Trust or which relates in
any way to the Certificates or any security relating
to the Certificates.
(b) No Reliance on Other Purchasers. In
making its investment decision with respect to
subscribing for the Certificates, the Purchaser has
not relied upon any statement, representation or
advice of any other Purchaser of the Certificates.
(c) Purchase for Investment. The
Purchaser is purchasing the Certificates without a
view to any distribution, assignment, resale or other
disposition of the Certificates in any manner which
would violate the Securities Act of 1933, as
amended (the "Securities Act"), or applicable state
securities or "Blue Sky" laws, subject, nevertheless,
to the understanding that the disposition of the
Purchaser's property shall at all times be and
remain within the Purchaser's control, and the
Certificates are being purchased solely for the
Purchaser's own account for investment purposes
only and not for the account of any other person.
(d) Institutional Accredited Investor.
The Purchaser is an institutional "accredited
investor" as defined in Rule 501 under the
Securities Act as follows (check one):
( ) A bank as defined in Section 3(a)(2)
of the Securities Act, whether acting in its
individual or fiduciary capacity;
( ) A savings and loan association or
other institution as defined in Section 3(a)(5)(A) of
the Securities Act, whether acting in its individual
or fiduciary capacity;
( ) A broker or dealer registered
pursuant to Section 15 of the Securities Exchange
Act of 1934;
( ) An insurance company as defined in
Section 2(13) of the Securities Act;
( ) An investment company registered
under the Investment Company Act of 1940 or a
business development company as defined in
Section 2(a)(48) of that Act;
( ) A Small Business Investment
Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958;
( ) An employee benefit plan within the
meaning of Title I of the Employee Retirement
Income Security Act of 1974 ("ERISA"), if the
investment decision is made by a plan fiduciary (as
defined in Section 3(21) of ERISA) which is a
bank, savings and loan association, insurance
company or registered investment advisor, or if the
plan has total assets in excess of $5,000,000 or, if
a self-directed plan, with investment decisions made
solely by accredited investors;
( ) A plan established or maintained by
a state, its political subdivisions, or any agency or
instrumentality of a state or its political
subdivisions, for the benefit of its employees, if
such plan has total assets in excess of $5,000,000;
( ) A private business development
company as defined in Section 202(a)(22) of the
Investment Advisers Act of 1940;
( ) An organization described in Section
501(c)(3) of the Internal Revenue Code,
corporation, Massachusetts or similar business trust
or partnership, not formed for the specific purpose
of acquiring the securities offered, with total assets
in excess of $5,000,000;
( ) A trust, with total assets in excess of
$5,000,000, not formed for the specific purpose of
acquiring the securities offered, whose purchase is
directed by a person having such knowledge and
experience in financial and business matters to be
capable of evaluating the merits and risks of an
investment in the Certificates; or
( ) An entity in which all of the equity
owners fall within one of the foregoing categories
of "accredited investors."
(e) Exempt Offering. The Purchaser
understands that the Certificates are not being
registered under the Securities Act or any state
securities or "Blue Sky" laws and are being sold in
reliance on exemptions from the registration
requirements of the Securities Act and any such
laws for non-public offerings. The Purchaser
understands that the exemptions from the
registration requirements under state securities laws
upon which the Certificates is relying require that
the Purchaser be one of the types of investors
specified in subsection (d) above under the
applicable state securities law and the Purchaser is
such an investor. The Purchaser further
understands that the Certificates must be held
indefinitely unless subsequently registered under the
Securities Act, any applicable state securities or
"Blue Sky" laws or unless exemptions from the
registration requirements of the Securities Act and
such laws are available. The Purchaser represents,
warrants and agrees that, if at some future time the
Purchaser wishes to dispose of or exchange any of
the Certificates, the Purchaser will not do so unless
before any such sale, transfer or other disposition
the Purchaser shall have furnished to the Trustee
either (a) a certificate of the transferee that the
transferee is a "qualified institutional buyer" within
the meaning of Rule 144A promulgated pursuant to
the Securities Act or (b) a certificate of the
transferee that the transferee is an institutional
"accredited investor" as defined in Rule 501(a) of
the Securities Act and, in the case of (b) only, an
opinion of counsel satisfactory in form and
substance to the Trustee and the transferor, to the
effect that the sale, transfer or other disposition of
such Certificate has been registered under the
Securities Act, or that such sale, transfer or other
disposition does not require registration under the
Securities Act.
(f) Legal Investment. The Purchaser
understands that there may be restrictions on the
ability of certain investors, including, without
limitation, depository institutions, either to purchase
the Certificates or to purchase investments having
characteristics similar to those of the Certificates
representing more than a specified percentage of the
investor's assets, and the Purchaser further
represents and warrants that it has consulted, and
relied on the advice of, its own legal advisor in
determining whether and to what extent the
Certificates constitute a legal investment for the
Purchaser.
(g) The Purchaser (i) has no need for liquidity
with respect to the Certificates, (ii) is able to bear
the economic risks of an investment in the
Certificates for an indefinite period and (iii) is able
to afford a complete loss of such investment. The
Purchaser has such knowledge and experience in
financial and business matters to use the information
made available in connection with the offering of
the Certificates, to evaluate the merits and risks of
the prospective investment in the Certificates and to
make an informed business decision with respect
thereto. The Purchaser understands that the Seller
will rely upon the information supplied by the
Purchaser pursuant to this Agreement in order to
verify this representation and warranty and
represents that such information is true and correct
in all respects. The Purchaser understands that a
false representation may constitute a violation of
law, that any person which suffers damage as a
result of a false representation may have a claim
against the undersigned for damages for which the
undersigned will indemnify the Seller and its
affiliates pursuant to the terms of this Agreement.
(h) The Purchaser recognizes that an
investment in the Certificates involves significant
risks.
(i) The Purchaser understands that no
offering memorandum has been prepared for filing
with or review by any state securities administrators
because of the representations made by the Seller as
to the private or limited nature of the offering.
(j) The Purchaser understands that there
is no established market for the Certificates and that
none may develop and, accordingly, that the
Purchaser must bear the economic risk of an
investment in the Certificates for an indefinite
period of time.
(k) The Purchaser agrees that it is bound
by and will abide by the provisions of the Pooling
and Servicing Agreement pursuant to which the
Certificates are issued.
(l) All information which the Purchaser
has provided to the Seller concerning the Purchaser
is correct and complete as of the date hereof, and if
there should be any adverse change in such
information before receiving notification that this
subscription has been accepted, the Purchaser will
immediately provide the Seller with such
information.
Very truly yours,
[PURCHASER]
By
Name
Title <PAGE>
EXHIBIT M
FORM OF ERISA REPRESENTATION
LETTER
________________
(Date)
Aegis Auto Funding Corp. IV
525 Washington Boulevard
Jersey City, NJ 07130
Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0070
Attention: Corporate Trust ServicesAsset Backed
Administration
Re:Aegis Auto Funding Corp. IV
Aegis Auto Receivables Trust 199_-_
Auto Receivable Pass-Through Certificates, Class
____
Ladies and Gentlemen:
[NAME OF OFFICER]
_______________________ HEREBY CERTIFIES
THAT:
1. [That he [she] is [Title of Officer]
________________________ of [Name of
Transferee]
___________________________________ (the
"Transferee"), a [savings institution] [corporation]
duly organized and existing under the laws of [the
State of _____________] [the United States], on
behalf of which he [she] makes this affidavit.
2. The Transferee (i) is not, and on
_________ [insert date of transfer of Certificate to
Transferee] will not be, and on such date will not
be investing the funds of, an employee benefit plan
subject to the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") or a plan
subject to Section 4975 of the Code or (ii) is an
insurance company investing assets of its general
account and the exemption provided by Section
III(a) of Department of Labor Prohibited
Transaction Class Exemption 95-60, 60 Fed. Reg.
35925 (July 12, 1995) (the "Exemption") applies to
the transferee's acquisition and holding of such
Certificate.
3. The Transferee hereby acknowledges
that under the terms of the Pooling and Servicing
Agreement (the "Agreement") among Aegis Auto
Funding Corp. IV, and Norwest Bank Minnesota,
National Association, as Backup Servicer and as
Trustee, dated as of _________________, no
transfer of any Class A or Class B Certificates shall
be permitted to be made to any person unless the
Trustee has received (i) a certificate from such
transferee to the effect that such transferee (A) is
not an employee benefit plan subject to ERISA or
a plan subject to Section 4975 of the Code (a
"Plan") and is not using assets of any such
employee benefit or other plan to acquire any such
Certificate or (B) is an insurance company investing
assets of its general account and the Exemption
applies to the transferee's acquisition and holding of
such Certificate or (ii) an opinion of counsel
satisfactory to the Trustee to the effect that the
purchase and holding of any such Certificate will
not constitute or result in the assets of the Trust
created by the Agreement begin deemed to be "plan
assets" and subject to the prohibited transaction
provisions of ERISA or Section 4975 of the Code
and will not subject the Trustee or the Seller to any
obligation in addition to those undertaken in the
Agreement (provided, however, that the Trustee
will not require such certificate or opinion in the
event that, as a result of changed of law or
otherwise, counsel satisfactory to the Trustee has
rendered an opinion to the effect that the purchase
and holding of any such Certificate by a Plan or a
Person that is purchasing or holding any such
Certificate with the assets of a Plan will not
constitute or result in a prohibited transaction under
ERISA or Section 4975 of the Code).
IN WITNESS WHEREOF, the Transferee
has caused this instrument to be executed on its
behalf, pursuant to authority of its Board of
Directors, by its [Title of Officer]
__________________, this day of _____, 199_.
______________________
[name of Transferee]
By:_______________________________________
Name:
Title:
<PAGE>
EXHIBIT N
NOTICE OF FUNDING
In accordance with the Pooling and
Servicing Agreement dated as of
_________________ by and among Norwest Bank
Minnesota, National Association, as backup servicer
and as trustee, and Aegis Auto Funding Corp. IV,
a Delaware corporation (the "Pooling and Servicing
Agreement"), the undersigned hereby gives notice
of a Funding Date to occur on ____________, 19
for each of the Receivables listed on Schedule I to
the Assignment executed by the undersigned and
accompanying this Notice of Funding. Unless
otherwise defined herein, capitalized terms have the
meanings set forth in the Pooling and Servicing
Agreement.
Such Receivables represent the following amounts:
Principal Balance of Receivables
as of the Cutoff Date: $______________
Amount to be transferred
to the Reserve Fund from
the Funding Account: $______________
Amount to be wired to the undersigned or its
designee (Aegis Finance) in payment for such
Receivables: $______________
The undersigned hereby certifies that, in
connection with the Funding Date specified above,
the undersigned has complied with all terms and
provisions specified in Section 3.08 of the Pooling
and Servicing Agreement, including, but not limited
to, delivery of the Officers' Certificate, as specified
therein.
Date: ________________, 199
AEGIS AUTO FUNDING CORP. IV,
a Delaware Corporation, as Seller
By
Angelo R. Appierto
President<PAGE>
EXHIBIT O
OFFICER'S CERTIFICATE
re: Funding Date
AEGIS AUTO FUNDING CORP. IV
To:Norwest Bank Minnesota, National Association
Corporate Trust Services Asset Backed
Administration
Sixth Street and Marquette Avenue
Minneapolis, MN 55479-0070
Fax 612-667-9825
This Officer's Certificate is being issued in
accordance with Section 3.08 of the Pooling and
Servicing Agreement dated as of
_________________ (the "Pooling and Servicing
Agreement") by and among Aegis Auto Funding
Corp. IV, a Delaware corporation, as seller
("Seller"), and Norwest Bank Minnesota, National
Association, as Backup Servicer and as Trustee.
Terms not otherwise defined herein shall have the
meanings ascribed thereto in the Pooling and
Servicing Agreement.
By his signature below, the undersigned certifies
that:
(a) The matters set forth in Section
3.01(b) of the Purchase Agreement by and between
Aegis Auto Finance, Inc., as the transferor named
therein, and Seller, as transferee, are true and
correct. All Receivables acquired on the Funding
Date to occur on ________, 199 constitute
Additional Receivables meeting the criteria specified
in the Purchase Agreement; and
(b) The representations and warranties
set forth in Sections 3.01(a) and (b) of the Pooling
and Servicing Agreement are true and correct as of
the date hereof; and
(c) The documents listed in Sections
3.08(b)(i) and (ii) of the Pooling and Servicing
Agreement are being delivered to the Trustee in its
capacity as Custodian on or before the Funding
Date specified herein.
Dated: __________, 199_
AEGIS AUTO FUNDING CORP. IV,
a Delaware corporation, as Seller
By
Angelo R. Appierto, President<PAGE>
EXHIBIT P
ASSIGNMENT
In accordance with the Pooling and Servicing
Agreement dated as of _________________ by and
among Aegis Auto Funding Corp. IV, a Delaware
corporation (the "Seller"), and Norwest Bank
Minnesota, National Association, as trustee (the
"Trustee") and as backup servicer (the "Backup
Servicer") (the "Pooling and Servicing
Agreement"), the Seller hereby assigns, transfers
and otherwise conveys unto the Trustee in trust for
the benefit of the Certificateholders, without
recourse (capitalized terms used herein and not
otherwise defined shall have the meaning assigned
to them in the Pooling and Servicing Agreement):
(i) all right, title and interest of the Seller in and to
the Receivables identified on Schedule I attached
hereto (the "Receivables"), and all moneys received
thereon, on and after the Cutoff Date; (ii) the
interest of the Seller in the security interests in the
Financed Vehicles granted by the Obligors pursuant
to the Receivables and all certificates of title to such
Financed Vehicles; (iii) the interest of the Seller in
any Risk Default Insurance Proceeds or any
proceeds from claims on Insurance Policies
(including the VSI Insurance Policy) covering the
Receivables, the Financed Vehicles or Obligors
from the Cutoff Date; (iv) the right of the Seller to
realize upon any property (including the right to
receive future liquidation Proceeds) that shall have
secured a Receivable and have been repossessed by
or on behalf of the Trustee; (v) the interest of the
Seller in any Dealer Recourse; (vi) all right, title
and interest in the Seller in and to the Purchase
Agreement; (vii) all right, title and interest of the
Seller in and to the Funding Account and any
monies and investments on deposit therein and (viii)
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 Trustee
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
contained in the Pooling and Servicing Agreement.
IN WITNESS WHEREOF, the undersigned
has caused this Assignment to be duly executed as
of , 199 .
AEGIS AUTO FUNDING CORP. IV,
a Delaware corporation
By
Angelo R. Appierto, President
<PAGE>
EXHIBIT Q
[RESERVED]
<PAGE>
EXHIBIT R
TRUSTEE'S CERTIFICATE
Norwest Bank Minnesota, National
Association, as trustee (the "Trustee") of the Aegis
Auto Receivables Trust Series 199_-_ created
pursuant to the Pooling and Servicing Agreement
(the "Pooling and Servicing Agreement") dated as
of _________________ among Aegis Auto Funding
Corp. IV (the "Seller"), Norwest Bank Minnesota,
National Association, as backup servicer (the
"Backup Servicer") and as trustee (the "Trustee"),
does hereby sell, transfer, assign and otherwise
convey to the Seller, without recourse,
representation or warranty, all of the Trustee's
right, title and interest in and to all of the
Receivables (as defined in the Pooling and Servicing
Agreement) identified in the attached Servicer's
Certificate of "Purchased Receivables," which are
to be repurchased by the Seller pursuant to Section
3.02 of the Pooling and Servicing Agreement, and
all security and documents relating thereto.
IN WITNESS WHEREOF, I have hereunto
set my hand this day of 199 .
Norwest Bank Minnesota, National
Association, as Trustee
[Name]
[Title]
<PAGE>
EXHIBIT S
[RESERVED]
<PAGE>
APPENDIX B
TO THE AMENDED AND RESTATED MASTER
TRUST AGREEMENT
FORM OF POOLING AND SERVICING
AGREEMENT
AEGIS AUTO FUNDING CORP. IV,
a Delaware Corporation, Seller
and
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION,
Trustee and Backup Servicer
POOLING AND SERVICING AGREEMENT
Dated as of _________________
$______________
AEGIS AUTO RECEIVABLES TRUST 199_-_
AUTOMOBILE RECEIVABLE PASS-
THROUGH CERTIFICATES
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I.CREATION OF TRUST 1
ARTICLE II.CONVEYANCE OF RECEIVABLES
1
ARTICLE III.ACCEPTANCE BY TRUSTEE 3
ARTICLE IV.INCORPORATION OF STANDARD
TERMS AND CONDITIONS 3
ARTICLE V.SPECIAL DEFINITIONS AND
TERMS 4
ARTICLE VI.ADDITIONAL SELLER
REPRESENTATIONS 5
ARTICLE VII. CERTIFICATE DELIVERY AND
REGISTRATION 5
ARTICLE VIII. APPLICATION OF
PROCEEDS 6
TESTIMONIUM
SIGNATURES
APPENDIX A Schedule of Receivables
APPENDIX B Amended and Restated Standard
Terms and Conditions
APPENDIX C Risk Default Insurance Policy
Endorsement
APPENDIX D VSI Insurance Policy Endorsement
APPENDIX E Direction as to Registration of
Certificates
APPENDIX F General Certificate of Aegis Auto
Funding Corp. IV
APPENDIX G Form of Term Note
<PAGE>
POOLING AND SERVICING AGREEMENT
This POOLING AND SERVICING
AGREEMENT is dated as of ____________ (this
"Agreement") among Aegis Auto Funding Corp.
IV, a Delaware corporation, as Seller (the "Seller")
and Norwest Bank Minnesota, National Association,
a national banking association, as trustee for the
Trust (the "Trustee") and as Backup Servicer (the
"Backup Servicer") and is made with respect to the
formation of the Aegis Auto Receivables Trust
199_-_ (the "Trust").
WHEREAS, the Seller and the Trustee
desire to form a trust pursuant to the Amended and
Restated Master Trust Agreement dated as of April
1, 1997 (the "Amended and Restated Master Trust
Agreement") by and between the Seller and the
Trustee, and provide for the issuance of a series of
Automobile Pass-Through Certificates by such trust;
NOW, THEREFORE, in consideration of
the premises and of the mutual agreements herein
contained, the parties hereto agree as follows:
ARTICLE I
CREATION OF TRUST
Upon the execution of this Agreement by the
parties hereto, there is hereby created the Aegis
Auto Receivables Trust 199_-_. The situs and
administration of the Trust shall be in Minneapolis,
Minnesota or in such other city in which the
Corporate Trust Office is located from time to time.
ARTICLE II
CONVEYANCE OF RECEIVABLES
[Note: Delete bracketed provisions if no Funding
Period is applicable. Remove brackets if there will
be a Funding Period.]
Section 2.01. Conveyance by Seller.
(a) In consideration of the
Trustee's delivery of the Certificates to or
upon the order of the Seller in an aggregate
principal amount equal to the aggregate
Principal Balance of the Initial Receivables
[plus the Original Pre-Funded Amount,] the
Seller does hereby irrevocably sell, assign,
and otherwise convey to the Trustee, in trust
for the benefit of the Certificateholders,
without recourse (subject to the obligations
herein):
(i) all right, title and interest of the Seller in
and to the Initial Receivables identified on
Appendix A hereto, all Excess Interest Collections
thereon and all other moneys received thereon on
and after the Cutoff Date;
(ii) the interest of the
Seller in the security interests in the
Financed Vehicles granted by the
Obligors pursuant to the Initial
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 Initial Receivables, the
Financed Vehicles or the Obligors
from the Cutoff Date;
(iv) the right of the Seller
to realize upon any property
(including the right to receive future
Liquidation Proceeds) that shall have
secured an Initial Receivable and
have been repossessed by or on
behalf of the Trust;
(v) the interest of the
Seller in any Dealer Recourse
relating to the Initial Receivables;
(vi) all right, title and
interest of the Seller in and to the
Purchase Agreement; and
(vii) the proceeds of any
and all of the foregoing.
[(b) Subject to the conditions set
forth in Section 3.08 of the Amended and
Restated Standard Terms incorporated
herein, in consideration of the Trustee's
delivery on the related Funding Dates to or
upon the order of the Seller of all or a
portion of the balance in the Funding
Account in an amount equal to the aggregate
Receivables Cash Purchase Price of the
Additional Receivables to be acquired on the
Funding Date, the Seller shall on such
Funding Date sell, transfer, assign, set over
and otherwise convey to the Trustee,
without recourse (subject to the obligations
herein):
(i) all right, title and interest of the Seller in
and to the Additional Receivables, all Excess
Interest Collections thereon and all other moneys
received thereon on and after the related Cutoff
Date;
(ii) the interest of the Seller in the security
interests in the Financed Vehicles granted by
Obligors pursuant to the Additional Receivables;
(iii) the interest of the Seller in any Risk Default
Insurance Proceeds or any proceeds from claims on
any Insurance Policies (including the VSI Insurance
Policy) covering the Additional Receivables, the
Financed Vehicles or the Obligors from the related
Cutoff Date;
(iv) the right of the Seller to realize upon any
property (including the right to receive future
Liquidation Proceeds) that shall have secured an
Additional Receivable and have been repossessed by
or on behalf of the Trust;
(v) the interest of the Seller in any Dealer
Recourse relating to the Additional Receivables;
(vi) all right, title and interest of the Seller in
and to the Purchase Agreement; and
(vii) the proceeds of any and all of the
foregoing.]
Section 2.02. Nature of Conveyance. It is
the intention of the Seller and the Trustee that the
transfer and assignment of the Seller's right, title
and interest in and to the assets identified in clauses
(i) through (vii) of Section 2.01(a) [and clauses (i)
through (vii) of Section 2.01(b)] (collectively, the
"Trust Property") shall constitute an absolute sale
by the Seller to the Trustee in trust for the benefit
of the Certificateholders. 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 Trustee, the Seller does hereby
grant, assign and convey to the Trustee and the
Trust, as security for all amounts payable to the
Certificateholders, a security interest in and lien
upon all of its right, title and interest in and to the
Trust Property, including all amounts deposited to
the Lock-Box Account, the Collection Account, the
Certificate Account [and the Funding Account,] said
security interest to be effective from the date of
execution of this Agreement.
The Trustee and the Certificateholders
acknowledge and agree that the Seller is the holder
of the Residual Interest.
ARTICLE III
ACCEPTANCE BY TRUSTEE
The Trustee, on behalf of the Trust, hereby
accepts all consideration conveyed by the Seller
pursuant to Article II, and declares that the Trustee
shall hold such consideration upon the trusts herein
set forth for the benefit of all present and future
Certificateholders, subject to the terms and
provisions of this Agreement and the Amended and
Restated Master Trust Agreement.
ARTICLE IV
INCORPORATION OF STANDARD TERMS
AND CONDITIONS
This Agreement hereby incorporates by
reference the Amended and Restated Standard
Terms provided for by the Amended and Restated
Master Trust Agreement in the form attached hereto
as Appendix C, except to the extent expressly
modified hereby.
ARTICLE V
SPECIAL DEFINITIONS AND TERMS
Capitalized terms not otherwise defined
herein shall have the meanings ascribed to them in
the Amended and Restated Standard Terms.
Whenever used in this Agreement, the following
words and phrases shall have the following
meanings:
"Backup Servicer Fee" means, with respect
to any Distribution Date, one-twelfth of the product
of (i) % per annum and (ii) the outstanding
Pool Balance as of the first day of the preceding
Collection Period or, in the case of the first
Distribution Date, as of the Closing Date.
"Class A Percentage" means _________%.
"Class A Rate" means _________% of
interest per annum.
"Class B Percentage" means _________%.
"Class B Rate" means _________% of
interest per annum [provided, however that if a
Credit Enhancement Event shall have occurred,
"Class B Rate" shall mean %. A "Credit
Enhancement Event" shall have occurred if, within
90 days of the Closing Date, the Seller notifies the
Trustee and the Certificateholders that a Credit
Enhancement Fee shall be payable to the Credit
Enhancer in connection with the credit enhancement
of the Class A Certificates or any commercial paper
issued to fund the purchase of the Class A
Certificates.]
"Closing Date" means _____________.
"Contingent Servicer Fee" means, with
respect to any Distribution Date, one-twelfth of the
product of (i) % per annum and (ii) the
outstanding Pool Balance as of the first day of the
preceding Collection Period or, in the case of the
first Distribution Date, as of the Closing Date.
"Credit Enhancement Event" shall have the
meaning set forth in the definition of "Class B
Rate".
"Credit Enhancement Fee" means, with
respect to any Distribution Date, one-twelfth of the
product of 0.50% per annum times the Class A
Percentage of the Pool Balance as of the end of the
preceding Distribution Date, payable to the Credit
Enhancer after a Credit Enhancement Event shall
have occurred.
"Custodian Fee" means $ per file
boarded.
"Cutoff Date" means ____________.
"Discount Rate" means % per annum.
"Final Scheduled Distribution Date" means
______________.
["Funding Account Interest Amount" means
________________________.]
["Funding Period" means the period
beginning on the Closing Date and ending on the
earlier to occur of (i) the Final Funding Date or (ii)
the expiration of the fifteen day period commencing
on the Closing Date.]
"Initial Distribution Date" means
_____________.
"Original Class Certificate Balance" means,
as to the Class A Certificates, $_____________,
and as to the Class B Certificates,
$______________.
["Original Pre-Funded Amount" means $
, the amount deposited in the Funding
Account on the Closing Date.]
"Reserve Fund Initial Deposit" means [Term
Notes with an aggregate purchase price of]
$______________.
"Trustee Fee" means, with respect to any
Distribution Date, one-twelfth of the product of (i)
% per annum and (ii) the aggregate Class
Certificate Balance as of the close of business on
the preceding Distribution Date (or, in the case of
the Initial Distribution Date, the original aggregate
Class Certificate Balance).
ARTICLE VI
ADDITIONAL SELLER REPRESENTATIONS
The Seller hereby makes the following
additional representations with respect to the
Receivables:
(i) Schedule of Receivables. The
information set forth in Appendix A hereto is true,
complete and correct in all material respects as of
the opening of business on the applicable Cutoff
Dates, as the case may be, and no selection
procedures adverse to the Certificateholders have
been utilized in selecting the Receivables.
(ii) Scheduled Payments. No Receivables
had a payment that was more than 59 days overdue
as of the applicable Cutoff Date; and each
Receivable has a final scheduled payment due no
later than the Final Scheduled Distribution Date.
[(iii) Annual Percentage Rate. The
addition of the Additional Receivables on each
Funding Date will not decrease the weighted
average APR of all Receivables sold hereunder by
more than 10 basis points.]
[(iv) States of Origination. After the
addition of all Additional Receivables to the Trust,
not more than 25% of the Receivables will have
been originated in any one state.]
(v) Insurance Policy Endorsements.
Attached hereto as Appendices E and F,
respectively, are true and correct copies of the
endorsements to the Risk Default Insurance Policy
and VSI Insurance Policy required by the Standard
Terms.
[(vi) As of the Funding Date when
acquired, each Additional Receivable shall be in
compliance with the Seller's representations and
warranties with respect to the Receivables set forth
in Section 3.01(a) and (b) of the Standard Terms.]
ARTICLE VII
CERTIFICATE DELIVERY AND
REGISTRATION
The Certificates shall be designated as the
"Aegis Auto Receivables Trust _________,
Automobile Receivable Pass-Through Certificates,
Series _____ (the "Certificates"), and issued with
an initial aggregate Certificate Balance of
$___________ in two Classes as follows: Class A
Certificates with an initial Certificate Balance of
$______________ and Class B Certificates with an
initial Certificate Balance of $_____________.
The Seller hereby directs the Trustee to
register the Certificates in the names and
denominations specified in the direction attached
hereto as Appendix E, and to execute, authenticate
and deliver the Certificates to the initial purchasers
specified in such direction upon receipt by the
Trustee of the following:
(i) $_____________ in
immediately available funds from the
purchasers for the account of the
Seller;
(ii) Investor letters executed by
each of the initial purchasers;
(iii) An executed copy of the
Supplemental Conveyance from Aegis
Finance in the form attached as Appendix A
to the Purchase Agreement with respect to
the Receivables conveyed to the Trust on the
Closing Date;
(iv) An executed copy of the
certificate of the Seller required by Section
7 of the Master Certificate Purchase
Agreement substantially in the form attached
hereto as Appendix F;
(v) Executed opinions of
counsel to the Seller required by Section 7
of the Master Certificate Purchase
Agreement; and
(vi) $_________ in immediately
available funds from the Seller for deposit to
the Collection Account of Excess Interest
Collections.
ARTICLE VIII
APPLICATION OF PROCEEDS
The proceeds of the Certificates, receipt of
which the Trustee hereby acknowledges, shall be
applied as follows:
(i) $__________ shall be
deposited into the Collection Account
as the Excess Interest Collections;
(ii) [Term Notes with an
aggregate purchase price of]
$___________ shall be deposited into
the Reserve Fund as the Reserve
Fund Initial Deposit;
[(iii) $____________ shall
be deposited into the Funding
Account as the Original Pre-Funded
Amount]; and
(iv) The remainder of
$____________ shall be paid to the
Seller or upon the Seller's order.
<PAGE>
IN WITNESS WHEREOF, the parties
hereto have caused this Pooling and Servicing
Agreement to be duly executed by their respective
officers as of the day and year first above written.
AEGIS AUTO FUNDING CORP. IV,
as Seller
By:
Name:
Title:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee and as Backup Servicer
By:
Name:
Title:
[Signature Page to Pooling and Servicing
Agreement]<PAGE>
APPENDIX A
SCHEDULE OF RECEIVABLES
Delivered to the Trustee on the Closing Date
[(This Schedule shall be deemed to be amended
on each Funding Date to add
Additional Receivables and shall be deemed to be
amended to account for any
substitution of Receivables permitted by the
Agreement upon the
occurrence of any such substitution.)]
(See Attached)<PAGE>
APPENDIX B
AMENDED AND RESTATED STANDARD
TERMS AND CONDITIONS<PAGE>
APPENDIX C
RISK DEFAULT INSURANCE POLICY
ENDORSEMENT<PAGE>
APPENDIX D
VSI INSURANCE POLICY ENDORSEMENT<PAGE>
APPENDIX E
$[AMOUNT]
Aegis Auto Receivables Trust ________
Automobile Receivable Pass-Through
Certificates,
Series _________
DIRECTION AS TO
REGISTRATION OF CERTIFICATES
The undersigned purchasers of the above-referenced
Certificates hereby direct the Trustee to register
such Certificates in the names and denominations
specified below:
CLASS A CERTIFICATES
Certificate
Number Name Amount Purchased
R 1
$[CLASS A AMOUNT]
CLASS B CERTIFICATES
Certificate
Number Name Amount Purchased
R 1 $[CLASS B AMOUNT]
Total$[AMOUNT]
<PAGE>
IN WITNESS WHEREOF, the undersigned have
duly executed this Direction as to Registration of
Certificates as of the date set forth below.
Dated: _____________________
III FINANCE LTD.
By
Name:
Title:
III GLOBAL LTD.
By
Name:
Title:
III LIMITED PARTNERSHIP
By
Name:
Title:
<PAGE>
Appendix F
$[AMOUNT]
Aegis Auto Receivables Trust _________
Automobile Receivable Pass Through Certificates,
Series _________
GENERAL CERTIFICATE
OF
AEGIS AUTO FUNDING CORP. IV
The undersigned, on behalf of Aegis Auto Funding Corp. IV,
a Delaware corporation ("Seller"), hereby certifies
this _________________, as follows in connection
with the issuance of the above-referenced
Certificates (the "Certificates") pursuant to the
terms of the Pooling and Servicing Agreement dated
as of ________________ (the "Agreement") among
the Seller, Norwest Bank Minnesota, National
Association, as backup servicer and Norwest Bank
Minnesota, National Association, as Trustee, and
the Amended and Restated Master Trust Agreement
dated as of April 1, 1997 (the "Amended and
Restated Master Trust Agreement") between the
Seller and the Trustee (capitalized terms used but
not otherwise defined herein shall have the
meanings ascribed to them in the Amended and
Restated Standard Terms and Conditions attached as
Appendix A to the Amended and Restated Master
Trust Agreement):
1. The undersigned has carefully examined the
Agreement, the Amended and Restated Master
Trust Agreement, the Purchase Agreement and the
Master Certificate Purchase Agreement.
2. The representations and warranties of the Seller
contained in the Agreement, the Amended and
Restated Master Trust Agreement, the Purchase
Agreement and the Master Certificate Purchase
Agreement are true and correct in all material
respects as if made on and as of the date hereof
(except for such representations and warranties
specifically made as of another specified date).
3 Neither the Seller nor any of its Affiliates is in
default in the performance of any of their respective
obligations under the documents mentioned in
paragraph 2 above or any other Pooling and
Servicing Agreement executed pursuant to the terms
of the Amended and Restated Master Trust
Agreement.
4.The Seller has complied with all agreements and
satisfied all conditions on its part to be performed
or satisfied under the documents specified in
paragraph 2 above at or prior to the date hereof.
5.The Seller did not, either independently or
through any other party, solicit any offer to buy or
offer to sell the Certificates or any similar security
by means of any form of general solicitation or
general advertising, including, but not limited to, (i)
any advertisement, article, notice or other
communication published in any newspaper,
magazine or similar medium or broadcast over
television or radio, and (ii) any seminar or meeting
whose attendees have been invited by any general
solicitation or general advertising.
6.The Certificates were sold by the Seller to III
Finance Ltd., III Global Ltd. and III Limited
Partnership in a private placement in transactions
exempt from the registration requirements of the
Act.
7.The undersigned is duly authorized by the Seller
to make the foregoing representations on behalf of
the Seller and has conducted such investigation and
made such inquiries as he has deemed necessary
and appropriate in order to make such
representations on behalf of the Seller.
<PAGE>
IN WITNESS WHEREOF the undersigned has
signed this General Certificate of Aegis Auto
Funding Corp. IV as of the date first written above.
AEGIS AUTO FUNDING CORP. IV
By: __________________________
Name:
Title:
APPENDIX G
PROMISSORY NOTE
Dated Date:
Maturity Date:
FOR VALUE RECEIVED, The Aegis Consumer
Funding Group, Inc., a Delaware Corporation (the
"Company"), does hereby promise to pay to the
order of Aegis Auto Funding Corp. IV, a Delaware
corporation (the "Payee") in lawful money of the
United States of America, the principal amount of
[PRINCIPAL AMOUNT] (the "Principal Amount")
on the Maturity Date stated above subject to the
conditions described herein.
Notwithstanding the foregoing, this Note shall,
without demand, notice or legal process of any
kind, be declared and shall become immediately due
and payable upon the occurrence of any of the
following events (each a "Bankruptcy Event"): (i)
the entry of a decree or order by a court or agency
or supervisory authority having jurisdiction in the
premises for the appointment of a conservator,
receiver, trustee, or liquidator for the Company in
any bankruptcy, insolvency, readjustment of debt,
marshalling of assets and liabilities, or similar
proceedings, or for the winding-up or liquidation of
its affairs, and the continuance of any such decree
or order unstayed and in effect for a period of thirty
(30) consecutive days; (ii) the consent by the
Company to the appointment of a trustee,
conservator, receiver, or liquidator in any
bankruptcy, insolvency, readjustment of debt,
marshalling of assets and liabilities, or similar
proceedings of or relating to the Company and
involving substantially all of its property; or (iii) the
Company shall admit in writing its inability to pay
its debts generally as they become due, file a
petition of any applicable bankruptcy, insolvency,
or reorganization statute, make an assignment for
the benefit of its creditors, or voluntarily suspend
payment of its obligations.
If a Bankruptcy Event occurs, the amount
immediately due and payable on this Note shall
equal the original purchase price hereof ($
) plus interest accrued on such amount from the
Dated Date hereof until such amount is paid in full
at the rate of 14% per annum, calculated on the
basis of a 360-day year for the actual number of
days elapsed and compounded semiannually. The
Company hereby promises to pay all costs and
expenses incurred in the collection and enforcement
of this Note and any appeal of a judgement
rendered hereon.
This Note represents a general unsecured obligation
of the Company.
<PAGE>
THIS PROMISSORY NOTE SHALL BE
GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
THE AEGIS CONSUMER FUNDING GROUP,
INC., a Delaware corporation
By:
Name:
Title:
PAY TO THE ORDER of Norwest Bank
Minnesota, National Association, as Trustee under
that certain Amended and Restated Master Trust
Agreement between the Trustee and Aegis Auto
Funding Corp. IV dated May 1, 1997, as amended
and restated from time to time, without recourse or
warranty.
AEGIS AUTO FUNDING CORP. IV
By:
Name:
Title:
[PROMISSORY NOTE]
_________________________________________
AMENDED AND RESTATED MASTER
SERVICING AGREEMENT
Dated as of May 1, 1997
Among
AEGIS AUTO FINANCE, INC.,
Servicer
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
in its capacity as Backup Servicer
and
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
in its capacity as Trustee
Relating to
Aegis Auto Receivables Trusts
_________________________________________
<PAGE>
TABLE OF CONTENTS
Page
I.
RECITAL..............................1
II.
DEFINITIONS......................... 2
III.
SERVICING RELATIONSHIP
A. NATURE AND SCOPE OF
RELATIONSHIP................. 2
B. GENERAL CONDITIONS............3
IV.
ADMINISTRATION AND SERVICING OF
RECEIVABLES
A. DUTIES OF SERVICER............ 7
B. MAINTENANCE OF RECORDS........ 8
C. MAINTENANCE OF SECURITY
INTEREST...................... 8
D. COLLECTION OF RECEIVABLE
PAYMENTS...................... 8
E. PHYSICAL DAMAGE INSURANCE......9
F. COVENANTS OF THE TRUSTEE AND
SERVICER; NOTICES............. 9
G. PURCHASE OF RECEIVABLES UPON
BREACH..................... 11
H. SERVICING FEE.............. 11
I. MONTHLY SERVICING
CERTIFICATES............... 11
J. ANNUAL STATEMENT AS TO
COMPLIANCE; ACCOUNTANTS'
SERVICING REPORT..............12
K. ACCESS TO CERTAIN
DOCUMENTATION AND INFORMATION
REGARDING RECEIVABLES.........12
L. RESPONSIBILITY FOR INSURANCE
POLICIES; PROCESSING OF CLAIMS
UNDER INSURANCE POLICIES; DAILY
RECORDS AND REPORTS...........13
M. ENFORCEMENT...................14
N. PAYMENT IN FULL ON
RECEIVABLE....................15
O. SUBSTITUTION OF COLLATERAL....15
P. FIDELITY BOND AND ERRORS AND
OMISSIONS INSURANCE...........16
V.
REPRESENTATIONS AND WARRANTIES
A. REPRESENTATIONS AND
WARRANTIES OF SERVICER........16
B. REPRESENTATIONS AND
WARRANTIES OF BACKUP
SERVICER......................17
C. SURVIVAL OF REPRESENTATIONS
AND WARRANTIES................18
VI.
EVENTS OF SERVICING DEFAULT...........18
VII.
REMEDIES............................. 20
VIII.
RESPONSIBILITY AND AUTHORITY OF
SERVICER..............................20
IX.
COLLECTIONS; LOCK-BOX ACCOUNT AND
RELATED BANK ACCOUNTS.................21
X.
DOCUMENTS AND RECORDS
A. SERVICING DOCUMENTS AND
RECORDS.......................22
B. REPORTS AND CREDIT AGENCIES...22
XI.
INDEMNIFICATION.......................22
XII.
TERM AND TERMINATION..................23
XIII.
ARBITRATION AND ATTORNEYS'FEES.......23
XIV.
WAIVERS...............................24
XV.
NOTICES...............................25
XVI.
ASSIGNABILITY........................ 25
XVII.
FURTHER ASSURANCES....................26
XVIII.
COUNTERPARTS......................... 26
XIX.
ENTIRE AGREEMENT;
AMENDMENTS............................26
XX.
INSPECTION............................26
XXI.
LIMIT ON TRUSTEE'S PAYMENT
OBLIGATIONS...........................26
XXII.
SERVICER NOT TO RESIGN.............. 27
XXIII.
MERGER OR CONSOLIDATION OF, OR
ASSUMPTION OF THE OBLIGATIONS OF, OR
RESIGNATION OF SERVICER...............27
XXIV.
GOVERNING LAW.........................28
SCHEDULE A SUMMARY OF SERVICES A1
I. SERVICES A1
A. CONTRACT SERVICES COLLECTIONS A1
B. CONTRACT SERVICES CUSTOMER
SERVICE A2
II. A. SPECIAL COLLECTION ACTIVITIES A4
1. Repossession and Sale A4
2. Credit Enhancement Claims Filing A4
3. Deficiency A5
4. Bankruptcies A6
5. Disability A6
6. Allotments A7
7. Skips A7
III. FEE SCHEDULE A7
A. GENERAL SERVICING A7
B. EXPENSE REIMBURSEMENT A8
C. DEFICIENCY SERVICING A8
SCHEDULE B SERVICER MONTHLY
ACTIVITY REPORT B1
SCHEDULE C REQUEST FOR RELEASE OF
DOCUMENTS C1
SCHEDULE D RELEASE AND
ASSIGNMENT D1
AMENDED AND RESTATED MASTER
SERVICING AGREEMENT
This AMENDED AND RESTATED
MASTER SERVICING AGREEMENT is entered
into as of May 1, 1997 (this "Servicing
Agreement") among AEGIS AUTO FINANCE,
INC., a Delaware corporation, as servicer
(hereinafter referred to as "Servicer" and, in its
separate capacity as the originator of the
Receivables described herein, the "Originator"),
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, a national banking association, in
its capacity as backup servicer (hereinafter referred
to as "Backup Servicer") and NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION, in its
capacity as trustee (hereinafter referred to as
"Trustee") under that certain Amended and Restated
Master Trust Agreement dated as of May 1, 1997
(the "Amended and Restated Master Trust
Agreement"), between Aegis Auto Funding Corp.
IV, a Delaware corporation, as Seller, and Norwest
Bank Minnesota, National Association as Trustee
for the holders from time to time of the Automobile
Receivable Pass-Through Certificates to be issued
by the Trusts created pursuant to the Amended and
Restated Master Trust Agreement.
I. RECITALS
WHEREAS, Servicer provides
portfolio management services, including collection
assistance, loan administration and financial
reporting to financial institutions in connection with
motor vehicle retail installment sales contracts, and
WHEREAS, Norwest Bank
Minnesota, National Association, in its capacity as
Trustee, is or will become the holder of those
motor vehicle retail installment sales contracts
referred to in Exhibit A to various Pooling and
Servicing Agreements executed and delivered by the
Seller and the Trustee from time to time pursuant to
the Amended and Restated Master Trust Agreement
(as such Exhibits are amended or deemed amended
pursuant to the related Pooling and Servicing
Agreements on any Funding Date, hereinafter
referred to as "Receivables") which Receivables
were originated by the Originator, subsequently sold
to the Seller pursuant to an Amended and Restated
Master Purchase Agreement dated as of May 1,
1997 (the "Purchase Agreement") between the
Originator and the Seller and subsequently deposited
by the Seller with the Trustee pursuant to the terms
of the related Pooling and Servicing Agreements,
and
WHEREAS, pursuant to the Pooling
and Servicing Agreements, the Back-up Servicer
and the Trustee, on behalf of each trust created
under the Pooling and Servicing Agreements,
desires to avail itself of the services provided by
Servicer, and
WHEREAS, the parties hereto have
heretofore entered into that certain Master Servicing
Agreement dated as of March 1, 1997 (the
"Original Agreement"), and
WHEREAS, the parties desire to
amend and restate the Original Agreement in its
entirety as follows:
Let this be the terms and conditions of this
Servicing Agreement:
II. DEFINITIONS
Capitalized terms not otherwise defined
herein shall have the meanings ascribed
thereto in the Amended and Restated Master
Trust Agreement or in the Amended and
Restated Standard Terms referred to therein.
Whenever used in this Servicing Agreement,
the following terms shall have the following
meanings.
Credit Agency. A recognized agency to
which Servicer reports delinquencies,
repossessions and redemptions.
Independent Public Accountants. Means any
of (a) Arthur Andersen & Co., (b) Deloitte
& Touche, LLP, (c) Coopers & Lybrand,
(d) Ernst & Young LLP, (e) KPMG Peat
Marwick and (f) Price Waterhouse, or such
other nationally recognized firm of
independent accountants as shall be
acceptable to the parties hereto and the
Rating Agencies; provided, that such firm is
independent with respect to the Servicer
within the meaning of the Securities Act of
1933, as amended.
Loan Documents. Has the meaning set forth
in paragraph III.B.9.
III. SERVICING RELATIONSHIP
A. NATURE AND SCOPE OF
RELATIONSHIP
The Servicer hereby agrees to service
and administer the Receivables for each Trust
established pursuant to the Amended and Restated
Master Trust Agreement and a related Pooling and
Servicing Agreement and render those services
described in this Servicing Agreement and in the
attached Schedule A. In performing its duties under
this Servicing Agreement, the Servicer shall have
full power and authority to do or cause to be done
any and all things in connection with such servicing
and administration which it may deem necessary or
desirable, within the terms of the related Pooling
and Servicing Agreements and this Servicing
Agreement. Servicer acknowledges receiving a
copy of the Pooling and Servicing Agreement dated
as of March 1, 1997 relating to the creation of the
Aegis Auto Receivables Trust 1997-1, the Pooling
and Servicing Agreement dated as of April 1, 1997,
relating to the creation of the Aegis Auto
Receivables Trust 1997-2 and the Pooling and
Servicing Agreement dated as of May 1, 1997,
relating to the creation of the Aegis Auto
Receivables Trust 1997-3, and agrees to promptly
acknowledge receipt of copies of each Pooling and
Servicing Agreement relating to a trust created after
the date hereof. Servicer shall report in writing
solely to such officers or other employees of the
Backup Servicer and the Trustee as the Trustee and
the Backup Servicer may designate from time to
time in writing.
Nothing in this Servicing Agreement
shall be construed as establishing an agency, an
employment or a partnership or joint venture
between the Backup Servicer, Trustee, any third
party contract purchaser and Servicer.
Furthermore, Backup Servicer shall
not use or permit the use of Servicer's name or the
names of any of Servicer's affiliates in any
advertising or promotional materials prepared by
Backup Servicer or on Backup Servicer's behalf
without the prior written consent of Servicer.
Compensation payable to the Servicer
under this Servicing Agreement shall be payable by
the Trustee solely from the Trust Property in
accordance with the terms of the related Pooling
and Servicing Agreements, and except as provided
in the Pooling and Servicing Agreements, none of
the Trusts, the Trustee or the Certificateholders will
have any liability to the Servicer with respect
thereto. In accordance with Section 4.04 of the
Standard Terms, such compensation shall be paid to
the Servicer and/or one or more subservicers as the
Servicer may from time to time direct in writing to
the Trustee.
In the event the Backup Servicer shall
for any reason no longer be acting as such
(including by reason of resignation or an Event of
Backup Servicing Default as specified in Section
4.02 or 10.01, respectively, of the Standard
Terms), the successor Backup Servicer shall
thereupon assume all of the rights and obligations of
the outgoing Backup Servicer under this Servicing
Agreement; provided, however that the successor
Backup Servicer shall not be liable for any acts,
omissions or obligations of the outgoing Backup
Servicer prior to such succession or for any breach
by the outgoing Backup Servicer of any of its
representations and warranties contained in this
Servicing Agreement or in any related document or
agreement and the outgoing Backup Servicer shall
not be relieved of any liability or obligation
hereunder to the extent such obligation or liability
arose prior to the assumption by the successor
Backup Servicer of the obligations of the Backup
Servicer hereunder.
B. GENERAL CONDITIONS
1. Servicer agrees to provide the
services hereunder during the term hereof.
Servicer, Backup Servicer and Trustee each
represent and warrant that it is duly authorized to
enter into the arrangements contemplated hereby
with respect to the Receivables.
2. Servicer may make such
communications with third parties and the ultimate
Obligor as are necessary and proper to perform the
services provided for hereunder.
3. The Servicer hereby agrees to
act for each Trust as custodian of all the documents
or instruments delivered to the Servicer with respect
to each Receivable of such Trust, and any and all
other documents that Servicer receives, creates,
generates, or otherwise possesses which relate to a
Receivable, an Obligor or a Financed Vehicle,
provided, however, that the Custodian Files,
including the original of the motor vehicle
installment sale contract and the original certificate
of title or such documents evidencing the security
interest of the related trust in the Financed Vehicle
or efforts made by the Trustee or its assignor to
perfect such security interest shall be held by the
Custodian, which shall be the Trustee. The
Servicer shall maintain in its files for each Trust,
separate and segregated from the files of each other
Trust, copies, computer records or originals of each
of the following documents with respect to each
related Receivable and the Financed Vehicle related
thereto:
(i) application of the Obligor
for credit;
(ii) a copy (but not the original)
of the retail installment sale contract
and any amendments thereto;
provided, however, that the Servicer
shall deliver any original amendments
to the retail installment sale contract
to the Trustee immediately following
execution thereof;
(iii) a copy (but not the original)
of a certificate of title with a lien
notation or an application therefor;
and
(iv) such other documents as the
Servicer may reasonably request in
order to accomplish its duties under
this Servicing Agreement.
Items (i), (ii), (iii) and (iv) shall be referred
to collectively as the "Servicer Files."
4. Upon receipt of the
documentation indicated in Paragraph III.B.3,
Servicer shall establish a physical file for each
Receivable, which shall contain the Servicer Files,
as well as copies of all reports developed by or
information received by Servicer with respect to the
Receivable, including insurance certificates and
reports of collection activities.
In its capacity as custodian of such
files, Servicer shall hold the Servicer Files and all
related files and documents on behalf of the related
trust, and maintain such accurate and complete
accounts, records, and computer systems pertaining
to the Receivables using reasonable care and that
degree of skill and attention with respect to the
Receivables and the files and documents as is
customary with other companies in the industry that
service motor vehicle installment sales contracts for
themselves as well as for others.
The Servicer shall keep satisfactory
books and records pertaining to each Receivable and
shall make periodic reports in accordance with this
Servicing Agreement. Such records may not be
destroyed or otherwise disposed of except as
provided herein and as allowed by applicable laws,
regulations or decrees; provided, that, such records
may be released to the Seller if the related
Receivable is paid in full, the related Financed
Vehicle is repossessed, the Receivable has been
either repurchased or replaced pursuant to the
Purchase Agreement with a Substitute Receivable
(as defined therein) or the Receivable otherwise is
no longer being serviced by the Servicer pursuant to
this Servicing Agreement. All documents, whether
developed or originated by the Servicer or not,
reasonably required to document or to properly
administer any Receivable shall remain at all times
the property of the related trust. The Servicer shall
not acquire any property rights with respect to such
records, and shall not have the right to possession
of them except as subject to the conditions stated in
this Servicing Agreement. The Servicer shall bear
the entire cost of restoration in the event any Loan
Documents (as defined below) shall become
damaged, lost or destroyed.
5. Servicer shall make available
to the Backup Servicer, the Trustee and the related
Certificateholders, or their duly authorized
representatives, attorneys, or auditors, the Servicer
Files and any related accounts, records, and
computer systems maintained by the Servicer, at
such times as the Backup Servicer, the Trustee or
any Certificateholder shall reasonably instruct, but
without disrupting Servicer's operations. Without
otherwise limiting the scope of the examination, the
Backup Servicer, the Trustee or any
Certificateholder may, upon at least two (2)
Business Days' prior notice and at its own expense,
using generally accepted audit procedures, verify
the status of each Receivable and review the Loan
Documents and records relating thereto for
conformity to monthly reports prepared pursuant to
paragraph IV.I. and compliance with the standards
represented to exist as to each Receivable in this
Servicing Agreement. Nothing herein shall require
the Trustee or any Certificateholder to conduct any
inspection pursuant to this Section.
6. Within five (5) Business Days
following the last day of each Collection Period, the
Servicer shall forward to the Backup Servicer, via
electronic transfer in a format mutually acceptable
to the Servicer and the Backup Servicer, its
computerized records reflecting, for each Trust, (i)
all collections received during such Collection
Period with respect to the Receivables and (ii)
information as of the last day of each Collection
Period regarding repossessed Financed Vehicles and
sales of repossessed Financed Vehicles. Within
three (3) Business Days of receipt of the foregoing
information, the Backup Servicer shall input such
information onto its computer system such that such
information is immediately available to the Backup
Servicer. The Backup Servicer shall then review
such information within five (5) Business Days of
its input onto the Backup Servicer's computer
system and compare it to the information reported
by the Servicer in its Monthly Servicing Certificates
delivered to the Backup Servicer and Trustee with
respect to each Trust in the form of Schedule B (the
"Monthly Servicing Certificates"). Any
discrepancies shall then be immediately reported to
the Servicer, who shall have ten (10) Business Days
from receipt of notice of discrepancies to correct all
such discrepancies. Any discrepancies which
cannot be corrected in such time period shall be
reported by the Servicer to the Trustee, and the
related Certificateholders.
7. On Monday of each week
beginning March 21, 1997, the Servicer shall
forward to the Backup Servicer, via electronic
transfer in form mutually acceptable to the Servicer
and the Backup Servicer, its computerized records
reflecting, for each Trust, (i) all collections
received during the preceding calendar week with
respect to the Receivables and (ii) a listing of all
Receivables with the date through which payments
have been made by the Obligor.
8. Other than the duties
specifically set forth in this Servicing Agreement,
the Backup Servicer shall have no obligation
hereunder. The Backup Servicer shall have no
liability for any action taken or omitted by the
Servicer. The duties and obligations of the Backup
Servicer shall be determined solely by the express
provisions of this Servicing Agreement and the
Pooling and Servicing Agreements and no implied
covenants or obligations shall be read into this
Servicing Agreement against the Backup Servicer.
9. Unless otherwise specified
herein, the Servicer shall maintain physical
possession, or computerized records, of good and
legible copies of the Servicer Files received by it;
such other instruments or documents that modify or
supplement the terms or conditions of any of the
foregoing; and, all other instruments, documents,
correspondence and memoranda generated by or
coming into the possession of the Servicer
(including, but not limited to, insurance premium
receipts, ledger sheets, payment records, insurance
claim files, correspondence and current and
historical computerized data files) that are required
to document or service any Receivable.
Collectively, all of the documents described in this
paragraph III.B.9 with respect to a Receivable are
referred to as "Loan Documents." The Servicer
shall hold all Loan Documents in trust for the
benefit of the related Certificateholders and the
related Trust; all Loan Documents shall remain the
property of such Trust. The Servicer shall respond
to all third party inquiries concerning ownership of
the Receivables by indicating that the Receivables
have been assigned to the applicable Trust.
10. The Servicer may employ or
otherwise utilize subservicers and enter into
subservicing agreements in carrying out its duties
and obligations under this Servicing Agreement,
provided that the subservicers and the terms of any
such subservicing agreement shall have been
approved by the Majority Certificateholders for
each Trust affected thereby, and provided that,
except as provided herein, the duties of such
subservicer shall be limited by the terms and
conditions of this Servicing Agreement. The
Servicer is expressly authorized to enter into
subservicing agreements with American Lenders
Facilities, Inc. ("ALFI") and Systems and Services
Technology, Inc. ("SST"), the forms of which
agreements are annexed hereto as Exhibits A and B,
respectively. Notwithstanding any provision hereof
to the contrary, but subject to the proviso to this
sentence, ALFI and SST shall service the
Receivables in accordance with the provisions of
their respective subservicing agreements and, in the
event of a conflict between any such subservicing
agreement and this Servicing Agreement, the
subservicing agreement shall control the duties and
obligations of SST and ALFI; provided, however,
that, for the purpose of preserving the separate
status of each Trust as a grantor trust for federal
income tax purposes, each subservicer shall comply
with the provisions of paragraphs IV.B, F, M.4,
M.5 and O, VI, IX, and A.3.c and A.3.e of
Schedule A, each of which provisions shall be
deemed to be incorporated into the related
subservicing agreement; provided, further, that
neither ALFI nor SST nor any other Servicer or
subservicer shall have any authority to perform any
act which, if consummated, would cause the Trust
to fail to be treated as a trust for federal income tax
purposes. Any subservicing agreement entered into
by the Servicer shall provide that the Majority
Certificateholders of each Trust affected thereby
shall have the right to direct the Servicer to
terminate such subservicing arrangement with
respect to such Trust if (a) the Majority
Certificateholders of such Trust reasonably
determine that the subservicer is failing to perform
its obligations thereunder and (b) such failure
materially reduces the amount recovered on
defaulted loans. The Servicer agrees to promptly
terminate a subcontracting arrangement with respect
to any Trust if directed to do so by the Majority
Certificateholders of such Trust.
IV. ADMINISTRATION AND SERVICING OF
RECEIVABLES
A. DUTIES OF SERVICER
The Servicer shall service and
administer the Receivables in compliance with all
applicable Federal and State laws and regulations
governing the Servicer and the Receivables, and
shall act prudently and in accordance with
customary and usual servicing procedures for other
institutional servicers and applicable law, and, to
the extent not inconsistent with the foregoing, shall
exercise that degree of skill and care it uses for
servicing assets held for its own account.
The Servicer's duties shall include
collection and posting of all payments, responding
to inquiries by Obligors or by Federal, State, or
local governmental authorities on the Receivables,
investigating delinquencies, sending payment books
or monthly statements to Obligors, responding to
inquiries by Obligors with respect to the
Receivables and furnishing Monthly Servicing
Certificates to the Trustee with respect to
distributions and any additional information
reasonably requested by the Trustee to enable the
Trustee to make distributions and produce reports
required under the related Pooling and Servicing
Agreements.
Without limiting the generality of the
foregoing, the Servicer shall be authorized and
empowered to execute and deliver any and all
instruments of satisfaction or cancellation, and all
other comparable instruments, with respect to the
Receivables or the Financed Vehicles.
If the Servicer shall commence a legal
proceeding to enforce a Receivable, the Trustee,
acting on behalf of the related Trust, shall
thereupon be deemed to have automatically assigned
such Receivable to the Servicer which assignment
shall be solely for the purpose of collection. The
Trustee, acting on behalf of the related Trust, shall
furnish the Servicer with any powers of attorney
and other documents necessary or appropriate to
enable the Servicer to carry out its servicing and
administrative duties hereunder.
B. MAINTENANCE OF RECORDS
The Servicer shall maintain accounts
and records as to each Receivable accurately and in
sufficient detail to permit: (i) the reader thereof to
know at any time the status of such Receivable,
including payments and recoveries made and
payments owing (and the nature of each) and which
Trust owns such Receivable; (ii) reconciliation
between payments or recoveries on (or with respect
to) each Receivable and the amounts from time to
time owing in respect of such Receivable.
To the extent that such records are
maintained on a computer system, the Servicer shall
also maintain such computer system so that the
Servicer's master computer records (including
archives) that shall refer to each Receivable indicate
that such Receivable is owned by the related Trust.
Such accounts and records shall be
kept only for as long as Servicer is servicing the
Receivables for the related Trust.
At all times during the term hereof,
for so long as Aegis Auto Finance, Inc. is acting as
Servicer, the Servicer shall keep available at its
office located at 525 Washington Boulevard, Jersey
City, New Jersey 07310 (or such other location as
to which it shall give written notice to the Trustee
and each applicable Certificateholder), for
inspection by Certificateholders a copy of the list of
Receivables for each Trust, and shall mail a copy of
the applicable list to a Certificateholder upon
written request.
C. MAINTENANCE OF SECURITY
INTEREST
The Servicer shall cooperate with the
Seller in taking such steps as are necessary to
maintain perfection of the security interest created
by each Receivable in the respective Financed
Vehicle. The Trustee, on behalf of each Trust,
hereby authorizes and the Servicer hereby agrees to
take such steps as are necessary to re-perfect such
security interest on behalf of such Trust in the event
such re-perfection is necessary or advisable for any
reason. The title to each Financed Vehicle relating
to a Receivable included in each Trust initially shall
bear a notation of a lien in the name of the
Originator.
D. COLLECTION OF RECEIVABLE
PAYMENTS
The Servicer shall use its best efforts
to collect all payments called for under the terms
and provisions of the Receivables as and when the
same shall become due.
In addition, the Servicer, on behalf of
the related Trust, shall use its best efforts to
repossess or otherwise recover the Financed Vehicle
securing any Receivable as to which the Servicer
shall have determined, after consultation with Seller
if Servicer so requests, that eventual payment in full
is unlikely and such repossession or recovery is
permitted under the terms of the Receivable and any
applicable law. The Servicer shall be entitled to
recover all reasonable out-of-pocket expenses
incurred by it in the course of repossessing and
liquidating the Financed Vehicle into cash proceeds.
Subject to the provisions of
paragraph IV.A. above, the Servicer shall follow
such customary and usual practices and procedures
as it shall deem necessary or advisable in its
servicing of automotive receivables, which may
include selling the Financed Vehicle at public or
private sale in accordance with applicable state law.
The foregoing shall be subject to the provision that,
in any case in which the Financed Vehicle shall
have suffered damage, the Servicer shall not expend
funds in connection with the repair or the
repossession of such Financed Vehicle unless the
Servicer shall determine in its discretion that such
repair and/or repossession will increase the
Liquidation Proceeds or Insurance Proceeds by an
amount greater than the amount of such expenses.
E. PHYSICAL DAMAGE INSURANCE
1. The Servicer, in accordance
with its customary servicing procedures, shall use
its best efforts to ensure that each Obligor maintains
physical damage insurance covering the Financed
Vehicle throughout the lesser of the term of the
related Trust or the Receivable.
2. In the event of any physical
loss or damage to a Financed Vehicle from any
cause, whether through accidental means or
otherwise, the Servicer shall have no obligation to
cause the affected Financed Vehicle to be restored
or repaired. However, the Servicer shall comply
with the provisions of any insurance policy or
policies directly or indirectly related to any physical
loss or damage to a Financed Vehicle.
3. The Servicer will administer
the filings of claims under the VSI Insurance Policy
and the Risk Default Insurance Policies as provided
under paragraph IV.L. hereof.
F. COVENANTS OF THE TRUSTEE
AND SERVICER; NOTICES
1. The Servicer shall (1) prior to
a default with respect to a Receivable, not release
any Financed Vehicle securing any Receivable from
the security interest granted by such Receivable in
whole or in part except in the event of payment in
full by the Obligor thereunder or upon transfer of
the Financed Vehicle to a successor purchaser
following repossession by the Servicer, (2) not
impair the rights of the Certificateholders or the
Trustee in the Receivables, (3) not increase the
number of Scheduled Payments due under a
Receivable except as permitted in paragraph I.A.3.e
of Schedule A, (4) prior to the termination of the
related Trust, not sell, pledge, assign, or transfer to
any other Person, or grant, create, incur, assume,
or suffer to exist any Lien on any Receivable
transferred to such Trust or any interest therein,
except for assignment to the Risk Default Insurer
upon its request after the Risk Default Insurer has
paid a claim in full, (5) immediately notify the
Trustee of the existence of any material Lien on any
Receivable, (6) defend the right, title, and interest
of the related Trust in, to and under the Receivables
transferred to such Trust, against all claims of third
parties claiming through or under the Servicer,
(7) deposit into the Lock-Box Account all payments
received by the Servicer with respect to the
Receivables in accordance with this Servicing
Agreement and the related Pooling and Servicing
Agreement, (8) comply in all respects with the
terms and conditions of this Servicing Agreement
relating to the obligation of Seller to repurchase
Receivables from a Trust pursuant to the related
Pooling and Servicing Agreement, or the obligation
of the Originator to repurchase Receivables from
the Seller pursuant to the Purchase Agreement, (9)
promptly notify the Trustee of the occurrence of
any Event of Servicing Default, and any breach by
the Backup Servicer of any of its covenants or
representations and warranties contained herein,
(10) with the cooperation of the Seller, make any
filings, reports, notices, or applications and seek
any consents or authorizations from any and all
government agencies, tribunals, or authorities in
accordance with the UCC and any state vehicle
license or registration authority on behalf of the
related Trust as may be necessary or advisable or
reasonably requested by the Majority
Certificateholders to create, maintain, and protect a
first-priority security interest of such Trustee in, to,
and on the Financed Vehicles and a first-priority
security interest of the related Trust in, to, and on
the Receivables transferred to it and (11) take all
reasonable action necessary to maximize the returns
pursuant to the Risk Default Insurance Policies and
the VSI Insurance Policy.
2. The Trustee shall promptly
notify the Servicer of any actual knowledge on its
part (i) of any abandonment of any Financed
Vehicle by an Obligor, (ii) of any material change
in the condition or value of any Financed Vehicle,
(iii) of any waste committed with respect to any
Financed Vehicle; (iv) of any failure on the part of
an Obligor to keep the Financed Vehicle insured or
in good condition and repair, (v) of any permanent
or substantial injury to a Financed Vehicle caused
by unreasonable use, abuse or neglect or (vi) of any
other matter which would adversely affect or result
in diminution of the value of any Financed Vehicle.
3. The Servicer will promptly
advise the Trustee of any inquiry received from an
Obligor which contemplates the consent of the
Trustee. Inquiries contemplating consent of the
Trustee shall include, but not be limited to,
inquiries about settlement of any unasserted claim
or defense, or compromise of any amount an
Obligor owes or any other matters the Servicer
should reasonably understand are not within the
Servicer's authority under this Servicing
Agreement.
4. Notwithstanding any other
provision of this Servicing Agreement, the Trustee
and the Backup Servicer (except if and when the
Backup Servicer is acting as the Servicer hereunder)
shall be under no duty or obligation to investigate
or inquire into the status of any Obligor or
Financed Vehicle and "actual knowledge" referred
to in subparagraphs 2 and 3 of this paragraph IV.F.
shall be limited to actual knowledge of a Trustee
Officer.
G. PURCHASE OF RECEIVABLES
UPON BREACH
The Servicer shall inform the Trustee,
the Backup Servicer and each affected
Certificateholder promptly, in writing, upon the
discovery of any breach pursuant to Section 3.01 of
the Standard Terms or Article VI of a Pooling and
Servicing Agreement. The Servicer has no duty to
investigate or determine the existence of any breach
except as specified herein. Unless the breach shall
have been cured within the time periods specified in
Section 3.02 of the Standard Terms, the Trustee
shall use all reasonable efforts to cause the Seller to
repurchase or replace the affected Receivables in
accordance with Section 3.02 of the Standard
Terms, and enforce the repurchase or substitution
obligations of the Originator under Section 7.02 of
the Purchase Agreement. In consideration of the
purchase of such Receivable, the Trustee shall use
all reasonable efforts to cause the Seller or the
Originator to remit the Purchase Amount or the
substitute Receivable to the Trustee for deposit to
the applicable Trust. The Trustee's rights with
respect to this paragraph IV.G. shall not subject the
Trustee to any duty or obligation upon a breach by
the Seller or the Originator of its representations,
warranties or covenants as set forth above, other
than to take action as described herein and as may
be directed by the applicable Certificateholders in
accordance with and subject to the condition and
limitation set forth in the related Pooling and
Servicing Agreement.
H. SERVICING FEE
The Servicer shall be paid a monthly
servicing fee ("Servicing Fee") with respect to each
Receivable serviced under this Servicing Agreement
during a Collection Period in accordance with
paragraph III of Schedule A hereto. The Servicing
Fee shall be due on the succeeding Distribution
Date, provided that a portion thereof may accrue
and payment of such portion may be deferred in
accordance with such paragraph III of Schedule A
hereto. In the event this Servicing Agreement is
terminated on a date other than the last day of a
Collection Period, then the Servicing Fee for such
period shall be determined on a pro rata basis. In
the event that the Backup Servicer assumes the
responsibilities and obligations of the Servicer under
this Servicing Agreement, the Backup Servicer shall
be entitled to receive its normal and customary fee
for such services with respect to comparable quality
Receivables, not to exceed those set forth in the Fee
Schedule set forth in paragraph III of Schedule A
attached hereto.
I. MONTHLY SERVICING
CERTIFICATES
The Servicer shall deliver to the
Trustee (which shall deliver a copy to each
applicable Certificateholder) and the Seller, on each
Determination Date, a Monthly Servicing Certificate
with respect to each Trust, substantially in the form
of Schedule B hereto containing all information
necessary for the Trustee to calculate and make the
distributions with respect to each Trust pursuant to
Section 5.06 of the Standard Terms and the related
Pooling and Servicing Agreements.
J. ANNUAL STATEMENT AS TO
COMPLIANCE; ACCOUNTANTS'
SERVICING REPORT
1. The Servicer shall deliver to
the Backup Servicer, the Trustee and each
Certificateholder, on or before September 30 of
each year, an Officer's Certificate, dated effective
as of the end of the Servicer's fiscal year, beginning
with the fiscal year ended June 30, 1997, stating
that (i) a review of the activities of the Servicer
during the preceding 12-month period and of its
performance under this Servicing Agreement has
been made under such officer's supervision and (ii)
based on such review, the Servicer has materially
fulfilled all its obligations under this Servicing
Agreement throughout such fiscal year, or, if there
has been a default in the fulfillment of any such
obligation, specifying each such default known to
such officer and the nature and status thereof. A
copy of such certificate may be obtained by any
Certificateholder by a request in writing to the
Servicer from any such Certificateholder.
2. Unless required more
frequently by the Majority Certificateholders of
every Trust, within 90 days after the end of each
fiscal year of the Servicer, commencing June 30,
1997, the Servicer shall cause a firm of Independent
Public Accountants to furnish a statement to the
Trustee and each Certificateholder to the effect that
such firm has examined certain documents and
records relating to the servicing of the Receivables
and the reporting requirements with respect thereto
as set forth in this Servicing Agreement, and that,
on the basis of such examination, such servicing
and reporting requirements have been conducted in
compliance with this Servicing Agreement, except
for (i) such exceptions as such firm shall believe to
be immaterial and (ii) such other exceptions as shall
be set forth in such statement.
3. The Servicer shall deliver to
the Trustee, the Backup Servicer and each
Certificateholder, promptly after having obtained
actual knowledge thereof, but in no event later than
five (5) Business Days thereafter, written notice in
an Officer's Certificate of the Servicer of any event
which with the giving of notice or lapse of time, or
both, would become an Event of Back-up Servicing
Default under Section 10.01 of the Standard Terms
or an Event of Servicing Default under paragraph
VI hereof.
K. ACCESS TO CERTAIN
DOCUMENTATION AND
INFORMATION REGARDING
RECEIVABLES
The Trustee and the Servicer shall,
upon written request, each provide to or cause the
related Certificateholders to have access to its
Custodian Files or Servicer Files, as the case may
be, relating to the Receivables. Access shall be
afforded without charge, but only upon reasonable
request and during the normal business hours at the
offices of the Trustee or the Servicer, as the case
may be. Nothing in this Section shall affect the
obligation of the Trustee or the Servicer to observe
any applicable law prohibiting disclosure of
information regarding the Obligors, and the failure
of the Trustee or the Servicer to provide access to
information as a result of such obligation shall not
constitute a breach of this paragraph IV.K.
L. RESPONSIBILITY FOR
INSURANCE POLICIES;
PROCESSING OF CLAIMS UNDER
INSURANCE POLICIES; DAILY
RECORDS AND REPORTS
1. The Servicer, on behalf of
each Trust, will administer and enforce all rights
and responsibilities of the holder of the Receivables
provided for in the Insurance Policies relating to the
Receivables. The Servicer, on behalf of each
Trust, shall verify that an endorsement listing each
Receivable has been issued with respect to each
Receivable under the applicable Risk Default
Insurance Policy, that each Receivable is listed by
the VSI Insurer as covered under the VSI Insurance
Policy, and that the Risk Default Insurance Policies
name the Trustee as the insured and the VSI
Insurance Policy names the Trustee as an additional
insured.
2. The Servicer will administer
the filings of claims under the VSI Insurance Policy
and Risk Default Insurance Policies by filing the
appropriate notices related to claims as well as
claims with the respective carriers or their
authorized agents, all in accordance with the terms
of the VSI Insurance Policy and Risk Default
Insurance Policies. The Servicer shall file all such
claims regardless of whether a Receivable may have
become a Purchased Receivable or a Liquidated
Receivable. The Servicer shall file such claims on
a timely basis after obtaining knowledge of the
events giving rise to such claims, subject to the
servicing standard set forth in paragraph IV.A.
hereof. The Servicer will utilize such notices,
claim forms and claim procedures as are required
by the respective insurance carriers. The Servicer
shall notify the Trustee and Seller of (i) any such
claims actually denied under the applicable Risk
Default Insurance Policy or VSI Insurance Policy
and (ii) those claims which would have been denied
under such Risk Default Insurance Policy or VSI
Insurance Policy had the Receivable(s) not been
repurchased from the related Trust, and in both
cases, the reasons for such denials. The Servicer
shall cause all Insurance Proceeds to be deposited to
the Lock-Box Account within two (2) Business
Days of receipt thereof.
The Servicer shall not be required to
pay any premiums or, other than administering the
filing of claims and performing reporting
requirements specified in the VSI Insurance Policy
and Risk Default Insurance Policies in connection
with filing such claims, perform any obligations of
any named insured under the foregoing VSI
Insurance Policies and Risk Default Insurance
Policies, and shall not be required to institute any
litigation or proceeding or otherwise enforce the
obligations of any insurer thereunder.
Notwithstanding any provision to the contrary in a
Pooling and Servicing Agreement, the Servicer shall
not be responsible to any Certificateholder or the
Seller (i) for any act or omission to act done in
order to comply with the requirements or satisfy
any provisions of the VSI Insurance Policy or any
Risk Default Insurance Policy or (ii) for any act or
omission to act, absent willful misconduct or gross
negligence, done or omitted in compliance with this
Servicing Agreement. In the case of any
inconsistency between this Servicing Agreement and
the terms of any VSI Insurance Policy or Risk
Default Insurance Policy, the Servicer shall comply
with the latter.
3. Notwithstanding any other
provision in this Servicing Agreement to the
contrary, the Trustee and the Backup Servicer,
unless it is acting as Servicer, shall not be under
any obligation to administer the Receivables as
required by the VSI Insurance Policy and/or the
Risk Default Insurance Policies.
M. ENFORCEMENT
1. The Servicer will, consistent with
the standard of care required by paragraph IV.A.
hereof, act with respect to the Receivables and the
Insurance Policies in such manner as will, in the
reasonable judgment of the Servicer, maximize the
amount to be received by the Trust with respect
thereto.
2. The Servicer may and shall, at the
direction of the Trustee, sue to enforce or collect
upon the Receivables and the Insurance Policies
(including unpaid claims), with the prior approval
of the Trustee, in the name of and as agent for the
related Trust. If the Servicer commences a legal
proceeding to enforce a Receivable or an Insurance
Policy, the act of commencement shall be deemed
to be an automatic assignment of the Receivable and
the related rights under the Insurance Policies by
the Trustee to the Servicer for purposes of
collection only. If, however, in any enforcement
suit or legal proceeding it is held that the Servicer
may not enforce a Receivable or an Insurance
Policy on the grounds that it is not a real party in
interest or a holder entitled to enforce the
Receivable or the Insurance Policy, the Trustee, on
behalf of the applicable Trust, shall, at the
Servicer's request, take such steps as the Servicer
deems reasonably necessary to enforce the
Receivable or the Insurance Policy, including
bringing suit in its name or the names of the related
Certificateholders. The Servicer shall be entitled to
reimbursement for reasonable out-of-pocket
expenses incurred in connection with enforcement
or collection activities with respect to the
Receivables pursuant to this paragraph IV.M.2.
3. The Servicer shall exercise any
rights of recourse against third persons that exist
with respect to any Receivable in accordance with
the Servicer's usual practice and the standard of
care required by paragraph IV.A hereof. In
exercising such recourse rights, the Servicer is
hereby authorized on the Trustee's behalf to
reassign the Receivable and to deliver the certificate
of title to the Financed Vehicle to the person against
whom recourse exists at the price set forth in the
document creating the recourse.
4. The Servicer may not permit
any rescission or cancellation of any Receivable nor
may it take any action with respect to any
Receivable or Insurance Policy which would
materially impair the rights or interest of the related
Trust or the Certificateholders therein or in the
proceeds thereof.
5. Except as otherwise provided in
paragraph I.A.3 of Schedule A hereto, the Servicer
may not increase or reduce the amount of any
Scheduled Payments, change any Receivable, APR,
extend the maturity date of or rework any
Receivable, modify or change any Obligor with
respect to any Receivable or modify any other
material term of a Receivable.
N. PAYMENT IN FULL ON
RECEIVABLE
Upon payment in full on any
Receivable, the Servicer shall notify the Custodian
pursuant to Section 3.03 of the Amended and
Restated Standard Terms of the related Pooling and
Servicing Agreement, prior to the next succeeding
Distribution Date, by a certificate of a Servicing
Officer substantially in the form of Schedule C
hereto and request for release of the related
Custodian File (which certificate shall include a
statement to the effect that all amounts received in
connection with such payment in full which are
required to be deposited in the Collection Account
or the Lock-Box Account pursuant to Section 5.02
of the Amended and Restated Standard Terms of the
related Pooling and Servicing Agreement have been
so deposited). Upon receipt of such request, the
Custodian shall promptly release or cause to be
released such Receivable and the related Custodian
File by executing a release and assignment in the
form of Schedule D hereto, which shall be without
recourse to the Trustee. The Custodian shall be
authorized, upon receipt of a request for release
from the Servicer in the form of Schedule C hereto,
to execute an instrument in satisfaction of such
Receivable and to take such other actions and
execute such other documents as the Servicer deems
necessary to discharge the Obligor thereunder and
eliminate the security interest in the Financed
Vehicle related thereto. Upon request of a
Servicing Officer, the Trustee shall perform such
other acts as reasonably requested by the Servicer
and otherwise cooperate with the Servicer in
enforcement of the Certificateholders' rights and
remedies with respect to the Receivables.
O. SUBSTITUTION OF COLLATERAL
In the event a Financed Vehicle
sustains significant physical damage such that the
insurance company carrying the physical damage
insurance covering such Financed Vehicle
determines that the Financed Vehicle is not
repairable, the Servicer or the Seller may permit the
Obligor to pledge a vehicle of equal or greater
market value than that of the Financed Vehicle
immediately prior to sustaining the physical
damage, provided, that any such substitution shall
not be made if to do so would void coverage of the
related Receivable under the VSI Insurance Policy
or the related Risk Default Insurance Policy, and
provided further that the value of Financed Vehicles
(prior to sustaining the physical damage) for which
substitutions may be made with respect to any Trust
shall not exceed in the aggregate ten percent (10%)
of the Original Pool Balance of such Trust. The
second vehicle shall be substituted as the collateral
("Substituted Financed Vehicle") for the Receivable
and the terms of the Receivable shall not be
amended or modified except to reflect the
substituted collateral. The Servicer shall, within 90
days of the purchase of the Substituted Financed
Vehicle, cause the certificate of title for the
Substituted Financed Vehicle to be delivered to the
Trustee as Custodian pursuant to Section 3.03 of the
Standard Terms; provided, however, that if the
certificate of title is not delivered to the Trustee
within such 90-day period, the Seller shall be
deemed to be in breach of its representations and
warranties in the Pooling and Servicing Agreement.
In accordance with Section 3.03 of the Amended
and Restated Standard Terms, the Servicer shall
make appropriate notation in its records of the
substitution of the collateral.
P. FIDELITY BOND AND ERRORS
AND OMISSIONS INSURANCE
The Servicer shall maintain, at its own
expense, (i) an errors and omissions insurance
policy and (ii) a blanket fidelity bond (but only to
the extent any subservicer appointed by the Servicer
to perform collection activities and related services
pursuant to paragraph III.B.10 hereof does not
maintain a blanket fidelity bond with respect to such
servicing functions to be performed hereunder;
provided if the Servicer does participate in
performing any such functions, it shall maintain a
blanket fidelity bond), in each case with broad
coverage with responsible companies on all officers,
employees or other persons acting on behalf of the
Servicer in any capacity with regard to the
Receivables to handle funds, money, documents and
papers relating to the Receivables. Any such
fidelity bond and errors and omissions insurance
shall protect and insure the Servicer against losses,
including forgery, theft, embezzlement, fraud,
errors and omissions and negligent acts of such
persons and shall be maintained in a form and
amount that would meet the requirements of prudent
institutional motor vehicle installment sales contract
servicers. No provision of this paragraph IV.P.
requiring such fidelity bond and errors and
omissions insurance shall diminish or relieve the
Servicer from its duties and obligations as set forth
in this Servicing Agreement. The Servicer shall be
deemed to have complied with this provision if one
of its respective Affiliates has such fidelity bond
and errors and omissions policy coverage and, by
the terms of such fidelity bond and errors and
omission policy, the coverage afforded thereunder
extends to the Servicer. The Servicer shall cause
each and every subservicer for it to maintain a
policy of insurance covering errors and omissions
and a fidelity bond which would meet such
requirements. Upon request of the Trustee, the
Servicer shall cause to be delivered to the Trustee
a certification evidencing coverage under such
fidelity bond and insurance policy. Any such
fidelity bond or insurance policy shall not be
cancelled or modified in a materially adverse
manner without ten days' prior written notice to the
Trustee and the Certificateholders.
V. REPRESENTATIONS AND
WARRANTIES
A. REPRESENTATIONS AND
WARRANTIES OF SERVICER
1. Servicer is a corporation duly
organized, validly existing and in good standing
under the laws of the jurisdiction of its
incorporation, and has full corporate power and
authority to enter into this Servicing Agreement and
to carry out the provisions of this Servicing
Agreement.
2. This Servicing Agreement and
all other instruments or documents to be delivered
hereunder or pursuant hereto, and the transactions
contemplated hereby, have been duly authorized by
all necessary corporate proceedings of Servicer; this
Servicing Agreement has been duly and validly
executed and delivered by Servicer; and, assuming
due authorization, execution and delivery by Backup
Servicer and the Trustee, this Servicing Agreement
is a valid and legally binding agreement of Servicer
enforceable in accordance with its terms.
3. The execution and delivery of
this Servicing Agreement by Servicer hereunder and
the compliance by Servicer with all provisions of
this Servicing Agreement do not conflict with or
violate any applicable law, regulation or order and
do not conflict with or result in a breach of or
default under any of the terms or provisions of any
contract or agreement to which Servicer is subject
or by which it or its property is bound, nor does
such execution, delivery or compliance violate the
certificate of incorporation or bylaws of Servicer.
4. During the term of this
Servicing Agreement, Servicer will maintain fire
and theft, general liability, business interruption and
employee fidelity insurance coverage in such
amounts and upon such terms as shall be customary
given the nature and extent of Servicer's business
activities.
5. The Servicer is not in
violation of, and the execution, delivery and
performance of this Servicing Agreement by the
Servicer will not constitute a violation with respect
to, any order or decree of any court or any order,
regulation or demand of any federal, state,
municipal or governmental agency, which violation
might have consequences that would materially and
adversely affect the condition (financial or other) or
operations of the Servicer or its properties or might
have consequences that would affect the
performance of its duties hereunder.
6. No proceeding of any kind,
including but not limited to litigation, arbitration,
judicial or administrative, is contemplated by or, to
the Servicer's knowledge, pending or threatened
against the Servicer which would under any
circumstance have a material adverse effect on the
execution, delivery, performance or enforceability
of this Servicing Agreement.
7. To the best of Servicer's
knowledge all electronic data provided by the
Servicer will be at the time of delivery thereof true
and correct.
8. No information, certificate of
an officer, statement furnished in writing or report
delivered to the Backup Servicer by the Servicer
will, to the knowledge of the Servicer, contain any
untrue statement of a material fact or omit a
material fact necessary to make the information,
certificate, statement or report not misleading.
9. The Servicer is an Eligible
Servicer as of the Closing Date and shall remain an
Eligible Servicer throughout the term of this
Servicing Agreement.
B. REPRESENTATIONS AND
WARRANTIES OF BACKUP SERVICER
1. Backup Servicer is a national
banking association in good standing under the laws
of the United States, and has full corporate power
and authority to enter into this Servicing Agreement
and to carry out the provisions of this Servicing
Agreement. Backup Servicer has all licenses,
approvals and consents to conduct its business as
contemplated by this Agreement, except to the
extent that the failure to possess such licenses,
approvals and consents does not have a material
adverse effect on the ability of the Backup Servicer
to perform its duties under this Servicing
Agreement.
2. This Servicing Agreement and
all other instruments or documents to be delivered
hereunder or pursuant hereto, and the transactions
contemplated hereby, have been duly authorized by
all necessary corporate proceedings of Backup
Servicer; this Servicing Agreement has been duly
and validly executed and delivered by Backup
Servicer; and, assuming due authorization,
execution and delivery by Servicer, this Servicing
Agreement is a valid and legally binding agreement
of Backup Servicer enforceable in accordance with
its terms.
3. The execution and delivery of
this Servicing Agreement by Backup Servicer
hereunder and the compliance by Backup Servicer
with all provisions of this Servicing Agreement do
not conflict with or violate any applicable law,
regulation or order and do not conflict with or
result in a breach of or default under any of the
terms or provisions of any contract or agreement to
which Backup Servicer is subject or by which it or
its property is bound, nor does such execution,
delivery or compliance violate the Certificate of
Incorporation or Bylaws of Backup Servicer.
C. SURVIVAL OF
REPRESENTATIONS AND
WARRANTIES
The representations and warranties set forth
in this paragraph V are made as of the date of this
Servicing Agreement and shall survive the date of
this Servicing Agreement. Upon discovery by the
Backup Servicer, the Trustee or the Servicer of a
breach of any of the foregoing representations and
warranties, the party discovering such breach shall
give prompt written notice to the other parties.
VI. EVENTS OF SERVICING DEFAULT
If any one of the following events ("Events
of Servicing Default") shall occur and be
continuing:
(i) Any failure by the Servicer to
deliver to the Trustee any
proceeds or payment required
to be so delivered under the
terms of this Servicing
Agreement that shall continue
unremedied for a period of
two (2) Business Days after
the earlier to occur of (a) the
date on which written notice
of such failure shall have
been received by the Servicer
or (b) a Servicing Officer
shall have actual knowledge
thereof or, with reasonable
diligence, should have had
knowledge thereof; or
(ii) Failure on the part of the
Servicer to observe or to
perform in any material
respect any other covenants
or agreements set forth in
this Servicing Agreement
which continue unremedied
for a period of thirty (30)
days after the earlier to occur
of (a) the date on which
written notice of such failure
shall have been received by
the Servicer or (b) a
Servicing Officer shall have
actual knowledge thereof or,
with reasonable diligence,
should have had knowledge
thereof; or
(iii) The entry of a decree or
order by a court or agency or
supervisory authority having
jurisdiction in the premises
for the appointment of a
conservator, receiver, trustee,
or liquidator for the Servicer
in any bankruptcy,
insolvency, readjustment of
debt, marshalling of assets
and liabilities, or similar
proceedings, or for the
winding-up or liquidation of
its affairs, and the
continuance of any such
decree or order unstayed and
in effect for a period of thirty
(30) consecutive days; or
(iv) The consent by the Servicer
to the appointment of a
trustee, conservator, receiver,
or liquidator in any
bankruptcy, insolvency,
readjustment of debt,
marshalling of assets and
liabilities, or similar
proceedings of or relating to
the Servicer and involving
substantially all of its
property; or
(v) The Servicer shall admit in
writing its inability to pay its
debts generally as they
become due, file a petition of
any applicable bankruptcy,
insolvency, or reorganization
statute, make an assignment
for the benefit of its
creditors, or voluntarily
suspend payment of its
obligations; or
(vi) The failure by the Servicer to
provide true and correct
electronic data, in violation
of representations and
warranties made by the
Servicer in paragraph V.A.
hereof, which violation shall
be material and shall continue
unremedied for a period of
30 days after the date on
which written notice of such
failure requiring the same to
be remedied, shall have been
sent (1) to the Servicer by the
Trustee, or (2) to the
Servicer and to the Trustee
by the Holders of Certificates
of any Trust evidencing not
less than 20% of the Voting
Interests thereof; or
(vii) The assignment by the
Servicer to a delegate of its
duties or rights hereunder,
except as specifically
permitted hereunder, or any
attempt to make such an
assignment; or
(viii) The failure to provide the
Trustee at least thirty (30)
days prior written notice of a
merger or consolidation
involving the Servicer or
assumption of obligations of
the Servicer; or
(ix) Any fraud, gross negligence
or willful misconduct on the
part of the Servicer with
respect to the Receivables or
its duties hereunder.
Then, and in each and every case and
so long as an Event of Servicing Default described
above shall not have been remedied in the period,
if any, provided for in the applicable subsection, the
Trustee may, and shall, at the direction of the
Majority Certificateholders for every Trust,
terminate all of the rights and obligations of the
Servicer under this Servicing Agreement.
On or after the receipt by the
Servicer of such written notice, all authority and
power of the Servicer under this Servicing
Agreement, with respect to the Receivables or
otherwise, shall pass to and be vested in the Backup
Servicer or in any successor Servicer to be
appointed by the Trustee at the direction of the
Majority Certificateholders for every Trust. The
Backup Servicer is hereby authorized and
empowered to execute and deliver on behalf of the
Servicer, as attorney-in-fact or otherwise, any and
all documents and other instruments, and to do or
accomplish all other acts with things necessary to
effect the purposes of such notice of termination,
whether to complete the transfer and endorsement
of the Receivable files, or otherwise. Anything to
the contrary herein notwithstanding, the Backup
Servicer may appoint agents to perform its duties as
successor Servicer hereunder.
The Servicer shall cooperate with the
Backup Servicer in effecting the termination of the
responsibilities and rights of the Servicer under this
Servicing Agreement, including the transfer to the
Backup Servicer or any successor Servicer for
administration by it of all cash amounts that shall at
the time be held by the Servicer or shall have been
deposited by the Servicer in any account or that
shall thereafter be received by the Servicer with
respect to a Receivable.
The Backup Servicer or the successor
Servicer appointed by the Trustee (including by
reason of an Event of Servicing Default under this
Section or resignation pursuant to Section XXII)
shall be successor in all respects to the Servicer in
its capacity as Servicer and custodian under this
Servicing Agreement; provided, however that the
successor Servicer shall not be liable for any acts,
omissions or obligations of the Servicer that arose
prior to such succession or for any breach by the
outgoing Servicer of any of its representations and
warranties contained in this Servicing Agreement or
in any related document or agreement, and the
outgoing Servicer shall not be relieved of any
liability or obligations hereunder to the extent such
obligation or liability arose prior to such succession.
The Servicer shall be entitled to receive all
Servicing Fees and recovery of all costs up to the
date of the transfer to the successor Servicer of all
functions referenced under this Servicing
Agreement.
VII. REMEDIES
In addition to the right to terminate
contained in Section VI, the Servicer agrees that
upon the happening of any Event of Servicing
Default (as defined herein), the Backup Servicer,
the Trustee or the successor Servicer may avail
itself of any other relief to which the Backup
Servicer, the Trustee or the successor Servicer may
be legally or equitably entitled, subject only to the
provision of Section XIII of this Servicing
Agreement.
VIII. RESPONSIBILITY AND
AUTHORITY OF SERVICER
Subject to the limitations set forth
herein or in the Pooling and Servicing Agreements,
the Servicer shall have the full power and authority,
acting alone and without the consent of the Trustee
or the Backup Servicer, to do any and all things in
connection with such servicing and administration
that it may deem reasonably necessary or desirable,
to collect the Receivables, to disburse the proceeds
and to protect the interests of the Trustee and the
Certificateholders in the Receivables.
IX. COLLECTIONS; LOCK BOX
ACCOUNT AND RELATED BANK
ACCOUNTS
Any amounts received by the
Servicer, including all payments by or on behalf of
the Obligors (other than Purchased Receivables), all
Liquidation Proceeds, Insurance Proceeds and other
Recoveries, all as collected during the Collection
Period in respect of a Receivable being serviced by
the Servicer, shall be remitted to the Lock-Box
Account as soon as practicable, but in no event
later than the close of business on the Business Day
after receipt thereof by the Servicer.
The Servicer shall maintain the Lock-
Box Account and shall collect and hold in trust (for
the benefit of each Trust, as applicable) in such
account all funds received on account of the
Obligors until such funds are transferred to the
Trustee or in accordance with its instructions. On
a daily basis the posted balance (in excess of
$2,000) related to the Receivables in the Lock-Box
Account shall be transferred by wire transfer to the
Trustee for deposit into the Collection Accounts
established for the related Trusts.
Such funds shall not be commingled
with the funds of any other person; provided that
there may be deposited in the Lock-Box Account
moneys collected on other motor vehicle installment
sales contracts originated by Aegis Finance and its
affiliates. In the event funds of more than one
Trust are deposited in the Lock-Box Account,
collections attributable to Receivables of each Trust
shall be separately identified. The Servicer shall be
responsible for all charges with respect to the Lock-
Box Account and, insofar as such charges relate to
the Receivables, shall be reimbursed in accordance
with the instructions set forth in the Monthly
Servicer Certificate. The Servicer shall provide
written notice to the Trustee of the location and
account number of the Lock-Box Accounts promptly
after establishing or changing the same.
Wells Fargo Bank, N.A. and
Commerce Bank will each serve as an initial Lock-
Box Account Depository with respect to the
Receivables. The Servicer shall provide thirty (30)
days' prior notice to the Trustee of its appointment
of a successor Lock-Box Account Depository,
which such successor Lock-Box Account Depository
shall be an Eligible Institution.
The Servicer shall deposit into the
Lock-Box Account all amounts (including late
payments) remitted by Obligors to the Servicer
under the terms of the Receivables within one (1)
Business Day after receipt thereof. The Servicer
shall provide the Lock-Box Account Depository
with a report providing instructions related to
distributions of funds from the Lock-Box Account
to the applicable Collection Accounts.
The Servicer shall deposit in the
applicable Collection Account the aggregate
Purchase Amount with respect to Purchased
Receivables. All such deposits shall be made in
Automated Clearinghouse Corporation next-day
funds or immediately available funds, on the
Business Day following receipt thereof.
X. DOCUMENTS AND RECORDS
A. SERVICING DOCUMENTS AND
RECORDS
1. All documents with respect to
an Obligor account and delivered to Servicer
hereunder will be held in trust and kept safely by
Servicer as delivered.
2. The Servicer shall hold in
trust and keep safely for the benefit of each Trust
the computer records relating to the related Obligor
accounts and the proceeds thereof.
3. The Servicer will furnish
copies of any audit reports prepared for the Servicer
(either internal or otherwise) with respect to the
Receivables to the Trustee promptly upon the
receipt thereof by Servicer.
4. All data, documents and
information held by the Servicer on behalf of the
Trusts shall be held in confidence and not used or
disclosed for any purpose other than as
contemplated by this Servicing Agreement or as
required by law or as may be necessary to enforce
their respective rights under this Servicing
Agreement.
B. REPORTS AND CREDIT
AGENCIES
1. In addition to its normal
reporting, the Servicer shall also furnish Backup
Servicer upon request with such reports as are
required by this Servicing Agreement and such
additional information underlying the data in the
aforesaid reports as may be reasonably pertinent to
Backup Servicer's needs and that can be generated
by the Servicer's existing data processing system
without undue effort or expense. The reports
required by this Servicing Agreement shall be
substantially in the form of Schedule B hereto.
2. Backup Servicer and Trustee
understand that all transactions with respect to an
Obligor account will be reported by Servicer to one
or more Credit Agencies in the name of the Seller
or its applicable affiliate as required by contract and
by law. Servicer will comply with all Credit
Agency agreements.
XI. INDEMNIFICATION
The Servicer agrees to indemnify the
Trusts, the Backup Servicer, the Trustee and the
Certificateholders and hold the Trusts, the Backup
Servicer, the Trustee and the Certificateholders,
their respective officers, employees and agents
harmless against any and all claims, losses,
penalties, fines, forfeitures, legal fees and related
costs, judgments, and any other costs, fees and
expenses that the Trusts, the Backup Servicer, the
Trustee or the Certificateholders, as the case may
be, may sustain in any way related to failure of the
Servicer to perform its duties and service the
Receivables in compliance with the terms of this
Servicing Agreement. The Servicer shall
immediately notify the Backup Servicer and the
Trustee if a claim is made by a third party with
respect to this Servicing Agreement or the
Receivables, assume (with the consent of the
Backup Servicer and the Trustee) the defense of any
such claim and pay all expenses in connection
therewith, including counsel fees, and promptly
pay, discharge and satisfy any judgment or decree
which may be entered against it or the Backup
Servicer or the Trustee in respect of such claim.
This right to indemnification shall survive the
termination of this Servicing Agreement.
XII. TERM AND TERMINATION
1. The Servicer agrees to service
all Receivables for their full term and until their
expiration or earlier termination.
2. In the event the Trustee, on
behalf of any Trust, transfers any Receivable(s), the
transferee shall have the option to terminate the
servicing of the respective Obligor account(s) by
providing thirty (30) days written notice to Servicer.
3. The holder of the Residual
Interest in the Trusts may at any time replace the
Servicer with a substitute Eligible Servicer upon the
delivery of written notice of such substitution
stating the name and address of such substitute
Servicer to the Back-up Trustee, the Trustee, and
the predecessor Servicer at least 90 days prior to
the change in Servicer, provided (1) the holder of
the Residual Interest delivers to the Trustee in
connection with such substitution evidence of the
consent of at least the Majority Certificateholders of
each Trust to the change and (2) provided further
that such substitute Servicer shall have executed an
agreement of assumption, acceptable to the Trustee,
under which it assumes every obligation and duty of
the Servicer under this Servicing Agreement. Upon
the occurrence of the foregoing, such substitute
Servicer shall be deemed the Servicer for all
purposes under this Servicing Agreement.
Should the transferee or holder of the
Residual Interest elect to terminate the servicing as
indicated above, the Servicer shall be entitled to a
five ($5.00) dollars per Receivable transfer fee,
such fee to be paid by the transferee or holder of
the Residual Interest on the date of transfer.
XIII. ARBITRATION AND ATTORNEYS' FEES
1. It is understood that this
Servicing Agreement is made in good faith and
should there arise, from any unforeseen cause, a
difference of opinion or of interpretation of this
Servicing Agreement which cannot be settled
amicably between the Trustee, the Backup Servicer
and the Servicer, such difference or interpretations
shall be submitted to a decision of a board of
arbitration.
2. The aforementioned board of
arbitration shall be composed of two (2) arbitrators
and an umpire meeting in the State of Minnesota,
unless otherwise agreed to by the Trustee, the
Backup Servicer and the Servicer.
3. The members of the board of
arbitration shall be active or retired disinterested
officials of insurance companies or financial
institutions. Each party shall appoint its arbitrator,
and the two arbitrators shall choose an umpire
before instituting the hearing. If the respondent fails
to appoint its arbitrator within thirty (30) days after
being requested to do so by the claimant, the latter
shall also appoint the second arbitrator.
If the two arbitrators fail to
agree upon the appointment of an umpire within
two (2) weeks after their nominations, each of them
shall name three (3), of whom the other shall
decline two (2) and the decision shall be made by
drawing lots. The claimant shall submit its initial
brief within twenty (20) days from appointment of
the umpire. The respondent shall submit its brief
within twenty (20) days thereafter, and the claimant
may submit a reply brief within ten (10) days after
filing of the respondent's brief.
4. The board shall make an
award with regard to the custom and usage of the
business contemplated by this Servicing Agreement.
The board shall issue its award in writing based
upon a hearing at which evidence may be
introduced without following strict rules of evidence
but in which cross-examination and rebuttal shall be
allowed.
The board shall make its
award within thirty (30) days following the
termination of the hearing unless the parties consent
to an extension. A decision by the majority of the
members of the board shall become the award of
the board and shall be final and binding upon all
parties to the proceeding. Either party may apply to
the United States District Court, sitting in the State
of Minnesota, for an order confirming the award. If
such an order is issued, the attorneys' fees of the
party so applying and the court cost will be paid by
the party against whom confirmation is sought.
5. Each party shall bear the
expense of its arbitrator and shall jointly and
equally bear with the other party the expense of the
umpire. The remaining costs of the arbitration
proceeding (including attorneys' fees of the parties)
shall be allocated by the board in its award.
Notwithstanding any other provision hereof, any
reasonable out-of-pocket expenses (including
reasonable attorney's fees) incurred by the Trustee
or the Backup Servicer shall be reimbursed from the
Trusts unless the arbitrators shall have determined
that any such expenses were incurred as a result of
the negligence or willful misconduct of the Trustee
or the Backup Servicer.
XIV. WAIVERS
No failure or delay on the part of the
Servicer, the Trustee or the Backup Servicer in
exercising any power, right or remedy under this
Servicing Agreement 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, except by a
written instrument signed by the party to be charged
or as otherwise expressly provided herein.
XV. NOTICES
Except as otherwise provided herein,
all notices, requests, consents, demands and other
communications given hereunder shall be in writing.
All notices of whatever kind shall be either
personally delivered or sent by telecopy or other
form of rapid transmission and confirmed by United
States mail, properly addressed and with full
postage prepaid, addressed as follows:
To Servicer: Aegis Auto Finance, Inc.
525 Washington Boulevard
Jersey City, NJ 07310
Attn: Joseph F. Battiato,
President
Telecopy No. (201) 418-7339
To Backup Servicer: Norwest
Bank Minnesota,
National
Association Corporate Trust Services Asset
Backed
Administration
Sixth Street and Marquette Ave.
Minneapolis, MN 55479-0070
Telecopy No. (612) 667-3539
To Trustee: Norwest Bank Minnesota,
National Association
Corporate Trust Services Asset Backed
Administration
Sixth Street and Marquette Ave.
Minneapolis, MN 55479-0070
Telecopy No. (612) 667-3539
or to such other address as such
party shall have specified in writing
in the manner set forth above. All
notices to the Certificateholders shall
be sent in the manner specified in the
related Pooling and Servicing
Agreement.
XVI. ASSIGNABILITY
No party may assign any of its rights
or obligations hereunder without the prior written
consent of the other parties. Nothing in this
Servicing Agreement is intended to confer,
expressly or by implication, upon any Person other
than the Trustee, the Backup Servicer and the
Servicer any rights or remedies under or by reason
of this Servicing Agreement.
XVII. FURTHER ASSURANCES
Each party agrees, if reasonably
requested by another party, to execute and deliver
such additional documents or instruments and take
such further actions as may be reasonably necessary
to effect the transactions contemplated by this
Agreement.
XVIII. COUNTERPARTS
This Servicing Agreement may be
executed in counterparts, each of which shall be
deemed an original but all of which taken together
shall constitute but one and the same document.
XIX. ENTIRE AGREEMENT;
AMENDMENTS
This Servicing Agreement, including
the Schedules attached hereto and the documents
referred to herein, contains the entire agreement
between the parties hereto with respect to the
transactions contemplated hereby and supersedes all
prior understandings, negotiations, commitments
and writings with respect thereto. This Servicing
Agreement may not be modified, changed or
supplemented except upon the express written
consent of each of the parties hereto. The Trustee
shall not agree to any amendment of this Servicing
Agreement without the prior written consent of the
Majority Certificateholders of each Trust affected
thereby. In the event of any conflict between this
Servicing Agreement and a Schedule hereto, the
Schedule shall govern.
XX. INSPECTION
Any party hereto or its designated
agents, and any Certificateholder, may, during
ordinary business hours and after reasonable notice,
inspect, audit, check and make abstracts from any
party's books, accounts, records and other papers
directly pertaining to the subject matter of this
Servicing Agreement or the Schedules hereto. All
costs and expenses of such activities shall be borne
by the inspecting party. Each party shall use
reasonable efforts to facilitate any such inspection.
XXI. LIMIT ON TRUSTEE'S PAYMENT
OBLIGATIONS
Neither the Trustee, nor Norwest
Bank Minnesota, National Association, nor any of
its affiliates, shall have any obligation to make any
payment to the Servicer in respect of any payment
obligation of the Trustee to the Servicer under this
Servicing Agreement, any Schedules, riders or
amendments hereto otherwise than from funds held
by the Trustee pursuant to a Pooling and Servicing
Agreement. The Servicer hereby specifically
consents to the same and agrees that under no
circumstances will it offset or otherwise withhold
amounts owing to it from remittances made by it to
the Trustee pursuant to this Servicing Agreement,
or any Schedules hereto or any riders or
amendments hereto.
XXII. SERVICER NOT TO RESIGN
1. The Servicer shall not resign
from the obligations and duties imposed on it as
Servicer under this Servicing Agreement except (i)
in the event that the performance of its duties under
this Servicing Agreement shall no longer be
permissible under applicable law or it shall no
longer be an Eligible Servicer or (ii) if the Backup
Servicer has taken over the duties of the Servicer in
accordance with the terms hereof or upon the
appointment of a successor or substitute Servicer
(other than the Backup Servicer) to take over the
duties and obligations of the Servicer hereunder.
Notice of any such determination permitting the
resignation of the Servicer shall be communicated
in writing to the Trustee, the Backup Servicer and
the Certificateholders at the earliest practicable time
and any such determination shall be evidenced by
an Opinion of Counsel to such effect delivered to
the Trustee concurrently with or promptly after
such notice. No such resignation shall become
effective until an Eligible Servicer shall have
assumed the responsibilities and obligations of the
Servicer; provided, however, in the event that the
Backup Servicer is unable to act as Servicer
hereunder and a successor Eligible Servicer has not
been appointed within thirty (30) days, the Trustee
may petition a court of competent jurisdiction for
the appointment of a successor Eligible Servicer
acceptable to the Majority Certificateholders of each
Trust.
2. Upon the Servicer's receipt of
notice of termination pursuant to paragraph VI. or
upon the Servicer's resignation pursuant to this
paragraph, the Backup Servicer shall perform as
Servicer until such time, if ever, as a successor
Servicer who is an Eligible Servicer reasonably
acceptable to the Majority Certificateholders of each
Trust shall have been appointed by the Trustee and
shall have assumed the duties and responsibilities of
the Servicer.
3. Upon appointment, the
successor Servicer shall be the successor in all
respects to the predecessor Servicer and shall be
subject to all the responsibilities, duties and
liabilities arising thereafter relating thereto placed
on the predecessor Servicer, and shall be entitled to
the applicable portion of the Servicing Fee and all
of the rights granted to the predecessor Servicer, by
the terms and provisions of the related Pooling and
Servicing Agreements.
XXIII. MERGER OR CONSOLIDATION
OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, OR
RESIGNATION OF SERVICER
Any Person (a) into which the
Servicer may be merged or consolidated, (b) which
may result from any merger or consolidation to
which the Servicer shall be a party, (c) which may
succeed to the properties and assets of the Servicer
substantially as a whole, or (d) which may succeed
to the duties and obligations of the Servicer under
this Servicing Agreement which Person executes an
agreement of assumption to perform every
obligation of the Servicer hereunder, shall be the
successor to the Servicer under this Servicing
Agreement without further act on the part of any of
the parties to this Servicing Agreement; provided,
however, that (i) immediately after giving effect to
such transaction, no Event of Servicing Default (as
defined in paragraph VI.), and no event which,
after notice or lapse of time, or both, would
become an Event of Servicing Default shall have
happened and be continuing, (ii) the Servicer shall
have delivered to the Trustee an Officer's
Certificate stating that such consolidation, merger
or succession and such agreement of assumption
comply with this paragraph XXIII. and that all
conditions precedent provided for in this Servicing
Agreement relating to such transaction have been
complied with, and (iii) the Servicer shall have
delivered to the Trustee an Opinion of Counsel
either (A) stating that, in the opinion of such
counsel, all financing statements, continuation
statements and amendments and notations on
certificates of title thereto have been executed and
filed that are necessary fully to preserve and protect
the interest of the Trustee in the Receivables and
the Financed Vehicles, and reciting the details of
such filings, or (B) stating that, in the opinion of
such counsel, no such action shall be necessary to
preserve and protect such interest. Without receipt
by the Trustee of written notice from the Servicer
of such merger, consolidation or succession at least
thirty days prior to such action by the Servicer and
approval by the Majority Certificateholders of each
Trust, which approval shall not be unreasonably
withheld, such merger, consolidation or succession
shall constitute an Event of Servicing Default with
respect to the Servicer.
XXIV. GOVERNING LAW
This Servicing Agreement shall be
governed by and construed in accordance with the
laws of the State of New York including Section 5-
1401 of the General Obligations Laws but otherwise
without regard or reference to principles of conflicts
of laws of such State.
<PAGE>
IN WITNESS WHEREOF, the
parties hereto have caused this Amended and
Restated Servicing Agreement to be executed as of
the date first written above.
SERVICER:
AEGIS AUTO FINANCE, INC.
By:
Name: Brendan Meyer
Title: Vice President
[Signatures continue on following page]<PAGE>
BACKUP SERVICER:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, in its capacity
as Backup Servicer under the Pooling and
Servicing Agreement
By:
Name:
Title: Corporate Trust Officer
TRUSTEE:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, in its
capacity as Trustee under the
Pooling and Servicing Agreement
By:
Name:
Title: Corporate Trust Officer
[Counterpart signature page to Servicing
Agreement]
<PAGE>
ACKNOWLEDGEMENT AND AGREEMENT OF
SELLER
The undersigned hereby acknowledges this
Amended and Restated Servicing Agreement and
agrees, in its capacity as Seller, to be bound by the
applicable provisions hereof.
AEGIS AUTO FUNDING CORP. IV,
In its capacity as Seller under the
Pooling and Servicing Agreement
By:
Name: Brendan Meyer
Title: Vice President <PAGE>
SCHEDULE A SUMMARY OF SERVICES
I. SERVICES
A. CONTRACT SERVICES COLLECTIONS
1. Prior to the execution of this Servicing
Agreement Servicer has established a Lock-
Box Account at Wells Fargo Bank, N.A.
2. Servicer shall be responsible for the mailing
of payment coupon books or monthly
statements. Payment books shall contain
coupons in sufficient quantity to allow
Obligor to enclose a coupon with each
scheduled payment per the terms of the
related contract. Each payment coupon book
may contain up to 36 coupons.
For those Obligor accounts whose contract
term exceeds 36 months a new coupon book
for the remaining term will be sent in the
35th month.
3. Servicer shall process Obligor accounts for
which the Obligor fails to make a payment
on the applicable payment due date (a
"Delinquency") on the following basis:
a. Commencing on the first business day on
which an Obligor is delinquent by more than
ten (10) days, Servicer shall, at the
Servicer's discretion, either (1) phone the
Obligor, (2) if no contact is made after
phoning, the Servicer may send a letter to
the Obligor asking the Obligor to
immediately contact the Servicer, or (3)
order a field call by an outside agency to the
Obligor.
b. Servicer may request the Seller's
authorization to repossess an Obligor's
vehicle at any time after an Obligor is
delinquent and Servicer has satisfactory
reason to believe that Obligor will not pay.
However, such authorization will be deemed
given if Servicer cannot obtain timely
authorization, provided Servicer has
determined that any delay would impede the
Servicer's ability to service the Obligor's
vehicle. Servicer shall create and maintain
a report of any Obligor's vehicle it
repossesses and all events leading to such
action.
c. If an Obligor requests a change to his
normal monthly due date (a "Due Date
Change") and if the Obligor has defaulted
on his obligations under a Receivable or if
the Servicer reasonably believes such default
is imminent, Servicer may grant such Due
Date Change to the extent the Servicer
deems in the best interest of the
Certificateholders; however, no Due Date
Change shall be granted beyond the
currently due month.
d. Except as otherwise provided in this
agreement, if an Obligor has been
delinquent for more than thirty-five (35)
days, Servicer shall request Seller's
authorization to repossess pursuant to
Section IA3.b. of this Schedule A.
e. If an Obligor requests an extension of the
currently required monthly payment to
extend the end of the loan term (a "Loan
Extension") and if the Obligor has defaulted
on his obligations under a Receivable or if
the Servicer reasonably believes such default
is imminent, Servicer may to the extent the
Servicer deems in the best interest of the
Certificateholders grant such Loan
Extension, subject to the following
paragraph.
Servicer shall grant a Loan Extension only
to those Obligors who have made at least six
(6) regularly scheduled payments; and in no
case shall the number of Loan Extensions
per loan exceed the number of years,
including fractions thereof, in the loan term.
In no event may any modification cause the
final payment date to extend beyond the
Final Scheduled Distribution Date for the
Receivables.
B. CONTRACT SERVICES - CUSTOMER
SERVICE
1. If Servicer receives written or oral notice
from an Obligor of such Obligor's refusal to
make payments on the Obligor's account,
Servicer shall enter such notice into its
computer records.
2. The Seller shall have the responsibility to
apply for title to the motor vehicle covered
by the contract. Servicer shall send, or
cause to be sent, to Trustee all titles to such
motor vehicles. With respect to titles
received, Servicer shall verify that Aegis
Finance is noted as lien holder.
3. Servicer shall notify Originator and/or
Custodian of any discrepancies with respect
to the lien holder indicated on received
titles. Servicer shall further notify Originator
and/or Custodian of missing titles.
Originator shall be responsible for correcting
title discrepancies and obtaining missing
titles.
4. Servicer shall not release any title to a
vehicle except upon the full payment of the
remaining obligor principal balance by the
Obligor or others, or the repossession and
sale of the related vehicle, or the release of
the title to Originator for the correcting of
title problems, or as required by law, or as
directed by Custodian. Custodian will
release title to Servicer on a timely basis,
pursuant to Section 3.04(c) of the Standard
Terms.
5. Servicer shall perform the following
insurance tracking functions with respect to
a contract until the earlier of the
repossession and sale of the vehicle or the
remaining obligor principal balance is paid
in full by the Obligor or others:
a. Seller shall provide initial physical damage
insurance information at the time of
portfolio boarding.
b. Servicer shall notify Seller and/or Custodian
if Servicer has not received a copy of a
physical damage insurance policy for an
Obligor's vehicle within twenty (20) days of
the receipt of a Notice of Cancellation/Non-
Renewal.
c. Servicer shall produce a monthly Insurance
Expiration report showing those Obligor
accounts for whom a Notice of
Cancellation/Non-Renewal has been received
or the expiration date for an Obligor's
insurance policy in Servicer's computer
records has elapsed.
d. Servicer shall not be liable for any loss or
liability resulting from the lack of insurance
coverage on any Obligor vehicles if it has
complied with the foregoing.
6. Servicer shall negotiate and settle any claims
relating to physical damage to a vehicle and
endorse any insurance company drafts for
such claim subject to the following
conditions:
a. Servicer shall endorse a draft for payment of
a claim to body shop or other auto repair
service.
b. If the Obligor's account is more than thirty
(30) days delinquent, Servicer shall attempt
to collect all currently due amounts. If
unable to make such collection, Servicer
shall request Seller's authorization to
repossess vehicle from the repair facility
pursuant to Section I-A-3.b. of this Schedule
A. To effect such repossession, Servicer
may negotiate for the release of the vehicle
from the repair facility in exchange for the
endorsed draft in the amount of the repairs
and an agreement to hold the repair facility
harmless for the release of the vehicle.
7. Servicer shall calculate early payoffs of
remaining obligor principal balance per the
terms of the related sales contract. Seller
authorization is required for any payoff
amount other than the full calculated
amount. Notwithstanding any condition in
this Servicing Agreement, Servicer,
however, shall have the right (in the event
of early payoff) to waive any remaining
obligor principal balance of twenty-five
dollars ($25.00) or less.
8. Upon receipt by Servicer of the full payment
of the remaining Obligor principal balance
by the Obligor, the Custodian shall release
to the Servicer which in turn shall release
and forward to the Obligor the original of
the installment sales contract.
II.
A. SPECIAL COLLECTION ACTIVITIES
1. Repossession and Sale
The following terms shall govern the repossession
and sale of the vehicle:
a. Servicer shall order repossession services
from licensed, bonded agents.
b. Within five (5) business days after
repossession or sooner if required by law,
Servicer shall prepare and mail a Notice of
Intent (the "NOI") to the Obligor and send
a copy of the NOI once per month together
with their monthly reports to the Seller.
c. Servicer shall cause the repossessed vehicle
to be delivered to a location as designated
by Seller for the amount of time required by
applicable State law for Obligor redemption
(the "Obligor Redemption Period").
d. After the expiration of the Obligor
Redemption Period, Seller may authorize
Servicer to arrange for the sale and
disposition of the vehicle.
2. Credit Enhancement Claims Filing
Within the provisions of the Fee Schedule
set forth in paragraph III of this Schedule,
Servicer shall perform the following
insurance functions with respect to a
Receivable and will comply with all
necessary operating and claims filing
procedures (which may be modified by the
insurance company from time to time and by
mutual consent of the Seller and the
Servicer) pursuant to each Credit
Enhancement:
a. With respect to each Risk Default Insurance
Policy, Servicer shall: (1) file notice of loss
within the earlier of (a) 60 days from the
date of expiration of the Obligor
Redemption Period or (b) 30 days from the
date the Financed Vehicle was sold at
auction, (2) maintain claim data
components, (3) calculate the claim amount
and (4) submit to the Insurer all supporting
documents for each claim required by the
Risk Default Insurance Policy.
b. With respect to the VSI Insurance Policy,
Servicer shall:
(1) if appropriate, prior to liquidation and within
ninety (90) days of date of loss, file an initial notice
of loss which shall mean the following for purposes
of this Section only:
(A) For physical damage, the date of
repossession;
(B) For instrument non-filing insurance, the date
of filing of a superior lien;
(C) For a skip, the date of the first delinquency
plus 150 days; and
(D) For a repossession, the date the damage
occurred.
(2) maintain physical and electronic information,
(3) calculate the claim amount, (4) prepare physical
and electronic information and complete claim form
and (5) in the case of a claim dispute, select an
independent appraiser and file an appraisal report
within thirty (30) days of initial claim filing
rejection.
3. Deficiency
a. After the repossession and sale of a vehicle,
in order to calculate a deficiency, if any,
Servicer shall request the cancellation of any
financed product related to the vehicle (e.g.,
credit life, disability insurance, etc.), file for
any refunds associated therewith and furnish
a cancellation report to Custodian.
b. After taking into account any cancellation
refunds, Servicer shall compute any
deficiency resulting from the repossession
and sale of a vehicle and notify Obligor of
any such deficiency.
c. At the discretion and instruction of the
Seller, Servicer shall commence collection
activities on any such established Obligor
deficiency accounts.
4. Bankruptcies
If Servicer receives written notice that an Obligor
has become subject to bankruptcy proceedings under
Federal or State law, Servicer or its designee
(attorney if required) shall provide the following
services as necessary:
a. Servicer shall immediately cease all
collection activity and otherwise comply
with the Bankruptcy Code and all related
laws and regulations.
b. Servicer shall file a claim with the
applicable court.
c. Servicer shall obtain legal services for the
prosecution of the claim when necessary.
d. Servicer shall monitor the receipts of funds
being paid through the applicable bankruptcy
plan.
e. Upon dismissal of an action under
bankruptcy, Servicer shall service the
Obligor's account pursuant to the standard
collection procedures of Section I of this
Schedule A.
f. Should the Obligor account be the subject of
a reaffirmation or court ordered modified
payment schedule, Servicer shall administer
and collect the account in the same fashion
as that prior to the bankruptcy proceedings.
5. Disability
If Servicer is notified in writing of an Obligor's
disability claim and evidence of the Obligor's
disability insurance policy is on file, Servicer shall
suspend all collection activity on such Obligor's
account until such time as Obligor resumes his
normal payment schedule, however:
a. Servicer shall continue to monitor such
Obligor's account until the earlier of the
date on which:
1) A claim approval or denial has been
received; or
2) The Obligor resumes payment, at which
time Servicer will resume collection activity
pursuant to Section III of this agreement.
b. If Obligor's disability claim is denied,
Servicer shall resume collection activity
pursuant to Section I of this Agreement and
the terms and conditions of the related sales
contract.
c. Servicer's collection procedures for a
disability account shall comply with the
terms stipulated on the related sales
contract.
6. Allotments
Servicer shall have been notified at the time of loan
boarding if an Obligor will be subject to military
allotment processing. If Servicer has not received
an allotment verification on a designated allotment
account within 60 days of any subsequent allotment
establishment and the designated Obligor's account
is greater than 45 days delinquent, Servicer shall
request Seller's authorization to repossess pursuant
to Section I.A.3.b of this Schedule A.
7. Skips
If Servicer determines that Obligor has become a
skip, Servicer shall conduct skip-tracing efforts for
a period of 30 days. If such skip-tracing efforts
prove unsuccessful, Servicer will file (if applicable)
the necessary claim forms with Seller's insurance
carriers as described in II A(2) of Schedule B of
this document.
III. FEE SCHEDULE
Subject to the following provisions, Servicer shall
be entitled to receive the following fees and costs
no later than the Distribution Date immediately
following each related Collection Period:
A. GENERAL SERVICING
1. For all Receivables with an outstanding
balance greater than zero dollars ($0.00) as
of the first day of the related Collection
Period, a monthly serving fee equal to one-
twelfth of 2.05% of the outstanding balance
or $10.00, whichever is greater; provided,
however, that with respect to Receivables
serviced or subserviced by Systems and
Services Technology, Inc., only one-twelfth
of 1.15% of such outstanding balance shall
be payable currently on each Distribution
Date and the balance of .90% will accrue on
each Distribution Date and be deferred and
paid from the Reserve Fund in accordance
with the terms of the Amended and Restated
Master Trust Agreement; provided further
that the amount payable currently shall be
adjusted from time to time to equal 100% of
the reasonable and necessary costs and
expenses of the Servicer, not to exceed
1.85% of the outstanding balance.
2. All extension fees that are received during
the related Collection Period.
3. All late charges that are received during the
related Collection Period.
4. A charge of $25.00 per filing of Credit
Enhancement claims forms with the
designated Insurers during the related
Collection Period.
B. EXPENSE REIMBURSEMENT
1. All out-of-pocket expenses incurred by
Servicer in the pursuit of its job functions as
described in this Schedule (including but not
limited to filing fees, investigation fees,
repossession fees, transportation and storage
fees, legal fees, DMV fees, etc.) shall be
reimbursed to the Servicer at Servicer's
actual cost. In addition Servicer shall be
entitled to an administrative fee equal to 8%
of all out-of-pocket expenses. Servicer shall
provide the Trustee with documentation for
all such out-of-pocket expenses as a
condition to payment.
2. All postage costs associated with the mailing
of insurance follow-up letters, payment
statements, including Notice of Intent and
Deficiency Statement, during the related
Remittance Period.
3. All expenses relating to establishing,
maintaining and transferring funds from the
Lock-Box account to the relevant Collection
Account maintained by the Trustee. Such
expenses shall be reimbursed at actual cost
provided the Servicer include copies of
related invoices.
C. DEFICIENCY SERVICING
For those Obligor accounts that have been the
subject of a short insurance payoff, within the
related Collection Period, Servicer shall cause the
account to be moved to a "non-performing" loan
pool and marked inactive.
All collection activity by Servicer will be suspended
until such time as the Seller directs Servicer to
resume collection efforts. Upon such reactivation,
a one time set-up fee of fifty ($50.00) dollars will
be charged and payable on the next Distribution
Date.
For each Collection Period that an Obligor account
remains in the above described deficiency condition,
a servicing fee will be charged and payable on the
related Distribution Date based on the following
schedule:
1. $1.00 per month for months 1-4 that a
subject Receivable remains in the nonperforming
loan pool.
2. $0.50 per month for months 5-8 that a
Receivable remains in the nonperforming loan pool.
3. $0.10 per month for each month thereafter
that a Receivable remains in the nonperforming loan
pool.<PAGE>
SCHEDULE B
SERVICER MONTHLY ACTIVITY REPORT
Aegis Auto Receivables Trust 199
Automobile Receivable Pass Through
Certificates Series 199
I. COLLECTION ACTIVITY INTEREST PRINCIPAL TOTALS
Beginning of Period Pool Principal Balance 0
Additional Receivables Purchased
Scheduled Payments 0 0 0
Full & Partial Prepayments 0 0 0
Risk Default Insurance Cash Proceeds 0 0 0
Receivables Repurchased by Seller
Recoveries (on Liquidated and Defaulted
Receivables)
Miscellaneous Servicer Collections
Available Distribution Amount
0 0 0
Net Losses 0
End of Period Pool Balance 0
II. SERVICING COMPENSATION Amount
(ATTACH BREAKOUT OF FEES)
Servicer Compensation
III. POOL BALANCE INFORMATION
Original Pool Balance:
Beginning of Period End of Period
Pool Balance
Pool Factor
Weighted Average Coupon (WAC)
Weighted Average Remaining Maturity (WAM)
Remaining Number of Contracts
IV. RECEIVABLES REPURCHASED/SUBSTITUTED BY SELLER
Number of Receivables Repurchased
Principal Amount
Number of Additional Receivables Substituted
Principal Amount
V. EXTENSIONS
Number of Extensions granted
Principal Amount
VI. DELINQUENCY INFORMATION*
% of
# of Principal Outstanding
Contracts Balance Pool Balance
30-59 Days Delinquent
60-90 Days Delinquent
90 Days or more Delinquent
Excluding Liquidated and Defaulted Receivables
VII. REPOSSESSION INFORMATION
Current Period Inventory
Number of Receivables as to which Vehicles have been
Repossessed (and NOI expired)
Principal Balances of Receivables relating to Vehicles
which have been Repossessed (and NOI expired)
VIII. LIQUIDATED AND DEFAULTED RECEIVABLES
Current Period Cumulative
Number of Liquidated Receivables
Principal Balance of Liquidated Receivables
(Prior to Liquidation)
Number of Defaulted Receivables
Principal Balance of Defaulted Receivables
Total Principal Balance of Liquidated Defaulted
Receivables
Includes Receivables transferred to Risk
Default Insurer for liquidation
Excludes Receivables previously characterized
as Defaulted Receivables 180 days delinquent
IX. RECOVERIES
Current Period
Cumulative
Liquidation Proceeds
VSI Physical Damage/Loss Insurance Proceeds
Rebates of Servicer Cancelled Warranty Contracts
Consumer Insurance
Other
Total Recoveries
X. RISK DEFAULT POLICY INSURED RETENTION AMOUNT
Beginning Balance
Add: Prefunded Receivables
Add: Quarterly Reserve Loss Deficiency
Less: Approved Claims
Less: Surplus in Quarterly Loss Reserve
Ending Balance
<PAGE>
XI. NET LOSSES
Current Period Cumulative
Principal Balance of Liquidated and Defaulted Receivables
Less: Recoveries
Less: Risk Default Insurance Proceeds
Net Losses
XII. INSURANCE CLAIMS
Current Period Cumulative
Number of Risk Default Insurance Claims
Amount of Risk Default Insurance Claims
Retention Amount
Number of VSI Insurance Claims
Amount of VSI Physical Damage/Loss Insurance Claims
Number of Risk Defaulted Insurance Claims Rejected
Principal Balance of Receivables relating to Risk Default
Insurance Claims Rejected
SERVICER COMPENSATION BREAKDOWN Amount
Servicing Fees
Amount Payable currently
Amount Accrued and Deferred (SST only)
Collection Expenses Incurred
Claim Filing Fees
Bank Charges
Late fees, extension fees collected
Postage
Total Servicer Compensation
Less Deferred Servicing Fees( )
Net Cash Servicer Compensation
SCHEDULE C
REQUEST FOR RELEASE OF DOCUMENTS To:
Norwest Bank Minneapolis,
National Association, as Custodian
Sixth Street and Marquette Avenue
Minneapolis, MN 55479-0070
Re:Aegis Auto Receivables Trust 199 ; Amended and
Restated Master Servicing Agreement dated as of May 1, 1997
by and among Aegis Auto Finance, Inc., Norwest Bank
Minneapolis, National Association, as Trustee, and Norwest
Bank Minneapolis, National Association, as Backup Servicer.
In connection with the administration of a pool of Receivables
held by you as Custodian for the Trustee, we request the
release and acknowledge receipt of the (Custodian's
Receivable Files/[specify documents]) for the Receivable
described below, for the reason indicated.
Borrower's Name, Address & Zip Code:
Receivable Number: [list here or on attached schedule]
Reason for Requesting Documents (check one or put code on
attached schedule)
1.Receivable Paid in Full (Servicer hereby certifies that all
amounts received in connection therewith have been credited
to the Collection Account as provided in the applicable
Pooling and Servicing Agreement.)
2.Receivable Repurchased Pursuant to Section 3.02 of the
Standard Terms of the applicable Pooling and Servicing
Agreement (Servicer hereby certifies that any applicable
repurchase price has been credited to the Collection Account
as provided in the Pooling and Servicing Agreement.)
3.Receivable [to be] Liquidated (Servicer hereby certifies that
all proceeds of foreclosure, insurance or other liquidation
[have been finally received and credited] [when received shall
be credited] to the Collection Account pursuant to the related
Pooling and Servicing Agreement.)
<PAGE>
4.Receivable to be transferred to Risk Default Insurer for
liquidation (servicer hereby certifies that all proceeds of
insurance when received shall be credited to the Collection
Account pursuant to the related Pooling and Servicing
Agreement).
5.Receivable in Foreclosure
6.Other (explain)
If box 1, 2, 3 or 4 above is checked, and if all or part of the
Custodian's Receivable File was previously released to us,
please deliver to us a copy of our previous request for release
on file with you, as well as any additional documents in your
possession relating to the above specified Receivable.
If box 5 or 6 above is checked, upon our return of all of the
above documents to you as Custodian, please acknowledge
your receipt by signing in the space indicated below, and
returning this form.
AEGIS AUTO FINANCE, INC.
Servicer
By:________________________________
Name:
Title:
Date:______________________________
Documents returned to Custodian:
NORWEST BANK MINNEAPOLIS, NATIONAL
ASSOCIATION,
as Custodian
By: _______________________________
Name:
Title:
Date:
______________________________<PAGE>
SCHEDULE D
RELEASE AND ASSIGNMENT
PURSUANT TO SECTION IV.N.
OF THE SERVICING AGREEMENT
Norwest Bank Minnesota, National Association, as custodian
(the "Custodian") for the Trustee of the Aegis Auto
Receivables Trust Series 199 created pursuant to the
Pooling and Servicing Agreement (the "Pooling and Servicing
Agreement") dated as of 1, 199 -among Aegis Auto
Funding Corp. IV (the "Seller"), Norwest Bank Minnesota,
National Association, as backup servicer (the "Backup
Servicer") and as trustee (the "Trustee"), does hereby transfer,
assign and release to the Seller, without recourse,
representation or warranty of the Trustee, all of the Trustee's
right, title and interest in and to the Receivable and related
Custodian File (as defined in the Standard Terms of the related
Pooling and Servicing Agreement) identified as paid in full in
the attached Servicer's Request For Release of Documents,
and all security and documents relating thereto.
IN WITNESS WHEREOF, I have hereunto set my
hand this day of 199 .
Norwest Bank Minnesota, National Association, as Custodian
By ____________________________________
[Name]
[Title]
AMENDED AND RESTATED MASTER
PURCHASE AGREEMENT
This AMENDED AND RESTATED
MASTER PURCHASE AGREEMENT (this
"Agreement") is made as of May 1, 1997, 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. IV, a Delaware
corporation, having its principal executive office at
525 Washington Boulevard, Jersey City, New
Jersey 07310, as purchaser (the "Purchaser").
WHEREAS, the Seller originates or acquires
in the ordinary course of its business motor vehicle
retail installment sales contracts secured by new and
used automobiles and light-duty trucks, along with
certain related property with respect thereto (the
"Receivables"); and
WHEREAS, the Seller desires to sell
Receivables to the Purchaser from time to time
during the term of this Agreement and the
Purchaser desires to purchase such Receivables
subject to the terms and conditions set forth herein;
and
WHEREAS, the Purchaser intends to
subsequently convey Receivables purchased by it
pursuant to the terms hereof to a series of separate
trusts (each a "Trust") to be created pursuant to the
terms of the Amended and Restated Master Trust
Agreement dated as of May 1, 1997 (the "Amended
and Restated Master Trust Agreement") between the
Purchaser and Norwest Bank Minnesota, National
Association, as trustee (the "Trustee") and each
related Pooling and Servicing Agreement executed
and delivered pursuant to the terms thereof; and
WHEREAS, each such Trust is expected to
issue pass-through certificates representing
undivided interests in each pool of Receivables and
other property conveyed to the Trust (the
"Certificates"); and
WHEREAS, the parties entered into the
Master Purchase Agreement dated as of March 1,
1997 (the "Original Agreement"); and
WHEREAS, the parties desire to amend and
restate the Original Agreement in its entirety.
NOW, THEREFORE, in consideration of
the foregoing, other good and valuable
consideration, and the mutual terms and covenants
contained herein, the parties hereto agree to amend
and restate the Original Agreement as follows:
<PAGE>
ARTICLE I
CERTAIN DEFINITIONS
Terms not defined in this Agreement shall
have the meaning set forth in the Amended and
Restated Standard Terms and Conditions attached to
the Amended and Restated Master Trust
Agreement. 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 Amended and
Restated Master Purchase Agreement and all
amendments hereof and supplements hereto.
"Cutoff Date" means the date designated as
such in any Supplemental Conveyance.
"Purchaser" means Aegis Auto Funding
Corp. IV, a Delaware corporation, its successors
and assigns.
"Receivable" means any retail installment
sales contract and security agreement sold pursuant
hereto, as identified on the related Schedule of
Receivables for each Sale Date.
"Receivables Cash Purchase Price" means
with respect to any Receivable sold on a Sale Date,
100% of the Principal Balance of such Receivable
(or 92% if such Receivable is Uninsured) payable
as provided in Section 2.01 hereof.
"Sale Date" means each date on which a
pool of Receivables is sold pursuant to the terms
hereof, each such date corresponding to either a
Closing Date or a Funding Date for the Purchaser's
sale of Receivables to a Trust.
"Schedule of Receivables" means, with
respect to any Sale Date, the list of Receivables
sold on such date attached as Schedule I to the
related Supplemental Conveyance.
"Seller" means Aegis Auto Finance, Inc., a
Delaware corporation, its successors and assigns.
"Supplemental Conveyance" means each
supplemental conveyance executed by the Seller
substantially in the form attached to this Agreement
as Exhibit A evidencing the sale of a pool of
Receivables to the Purchaser.
"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. (a) On each Sale Date, in exchange
for the Receivables Cash Purchase Price and subject
to the other terms and conditions of this Agreement,
the Seller agrees to sell, transfer, assign and
otherwise convey to the Purchaser, without recourse
(except as provided in Sections 6.01 and 7.02), a
100% interest in (i) all right, title and interest of the
Seller in and to the Receivables listed on the
applicable Schedule of Receivables, all monies
constituting Excess Interest Collections with respect
thereto, and all other moneys received thereon on
and after the related Cutoff Date; (ii) the interest of
the Seller in the security interests in the Financed
Vehicles granted by the Obligors pursuant to such
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 such
Receivables, the Financed Vehicles or the Obligors
from the Cutoff Date; (iv) the right of the Seller to
realize upon any property (including the right to
receive future Liquidation Proceeds) that shall have
secured a Receivable and have been repossessed by
or on behalf of the Purchaser; (v) the interest of the
Seller in any Dealer Recourse; and (vi) the proceeds
of any and all of the foregoing. (All of the
property identified in this subsection (a) shall
constitute "Trust Property.")
(b) In consideration for the Receivables
and the other Trust Property relating thereto sold on
any Sale Date, the Purchaser shall (i) on each such
date corresponding to a Closing Date for a Trust,
pay to the Seller an amount equal to the Receivables
Cash Purchase Price by wire transfer of
immediately available funds; and (ii) on each such
date corresponding to a Funding Date for a Trust,
cause the Trustee for such Trust to pay to the Seller
from the applicable Funding Account an amount
equal to the Receivables Cash Purchase Price by
wire transfer of immediately available funds.
Section 2.02. Security Interest. It is the
intention of the Seller and the Purchaser that each
sale hereunder of the Seller's right, title and interest
in and to Receivables and related Trust Property
shall constitute an absolute sale by the Seller to the
Purchaser. In the event a court of competent
jurisdiction were to recharacterize any transfer of
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
such Trust Property, and all proceeds of any
thereof, said security interest to be effective from
the date of execution of the related Supplemental
Conveyance.
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 as of the date hereof and each Sale Date:
(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 on or prior to each applicable
Sale 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 to which the Seller or
any of its Affiliates is a contributor 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 each Sale
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.
(b) As of each Sale Date, the Seller
makes the following representations and warranties
as to the Receivables for the benefit of the
Purchaser and the Trustee with respect to any trust
formed pursuant to the Amended and Restated
Master Trust Agreement, and intends that the
Purchaser rely thereon in accepting the Receivables
on each Sale Date. Such representations and
warranties shall survive each sale, transfer and
assignment of the Receivables to the Purchaser and
each subsequent assignment to the Trustee. The
Seller acknowledges and expressly agrees that either
the Purchaser or the Trustee 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 in the ordinary course of
business 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 (except as otherwise indicated
on the related Schedule of Receivables) 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
relating to such Sale Date and no selection
procedures adverse to the Purchaser or the Trustee
have been utilized in selecting the Receivables.
(iii) Compliance With Law. Each
Receivable and the sale of the related Financed
Vehicle (A) complied at the time it was originated
or made and at the Sale 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. Each Receivable is denominated and
payable solely in U.S. dollars.
(v) No Government Obligor or Affiliate.
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 or from any Affiliate of the
Seller.
(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, 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.
<PAGE>
(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 covering such Receivable.
(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 fifty-nine (59) days as of the applicable 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 each Sale 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 under the VSI Insurance Policy and (except
as indicated on the related Schedule of Receivables)
the Risk Default Insurance Policy, and each such
insurance policy is valid and remains in full force
and effect. No more than one fifth of one percent
of the Receivables are not covered by a Risk
Default Insurance Policy. 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
concurrently with or prior to conveyance to the
Purchaser hereunder. Immediately prior to or
concurrently with 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 related
pass-through 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 remaining maturity of each
Receivable was 60 months or less as of the Cutoff
Date.
(xix) 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 Policies provide that
loan extensions will be allowed, subject to a total
number of extensions of no more than one extension
for each 12 month period or fraction thereof in the
Receivable's term. No Receivables had a payment
that was more than 59 days overdue as of the
applicable Cutoff Date; and each Receivable has a
final scheduled payment due no later than the
applicable Final Scheduled Distribution Date.
(xx) Financing. Each Receivable
represents a Simple Interest Receivable.
(xxi) Bankruptcy Proceeding. Except with
respect to the 1997-1 Trust, no Obligor as of the
respective Cutoff Date is noted in the Seller's
records as the subject of a bankruptcy proceeding.
With respect to the 1997-1 Trust, no Receivable as
of the Cutoff Date is noted in the Seller's records as
a discharged debt under a bankruptcy proceeding.
(xxii) 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.
<PAGE>
(xxiii) 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 is secured by the related Financed
Vehicle.
(xxiv) Underwriting Guidelines. Except for
Uninsured Receivables constituting no more than
one-fifth of one percent of the aggregate Principal
Balance of all Receivables being conveyed to any
single Trust, and Nonconforming Insured
Receivables constituting no more than 1% of the
aggregate Principal Balance of all Receivables being
conveyed to any single Trust, each Receivable has
been originated in accordance with the Underwriting
Guidelines and in accordance with the underwriting
guidelines acceptable to the Risk Default Insurer.
(xxv) Financed Vehicle in Good Repair.
To the best of the Seller's knowledge, each
Financed Vehicle is in good repair and working
order.
(xxvi) Principal Balance. No Receivable
has a Principal Balance which includes capitalized
interest, physical damage insurance or late charges.
The maximum principal balance of any Receivable
does not exceed $40,000 or such lesser maximum
amount as is permitted under the Underwriting
Guidelines.
(xxvii) Servicing. At the Cutoff Date, each
Receivable was being serviced by the Servicer.
(xxviii) Eligible Loan. Each Receivable
constitutes an "Instrument" or "Insured Security
Agreement" 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.
(xxix) Original Principal Amount. The
original principal amount of each Receivable with
respect to which a credit application was received
by Aegis Finance prior to January 15, 1997 and
which was (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 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. The original
principal amount of each Receivable with respect to
which a credit application was received by Aegis
Finance after January 15, 1997 which was (A)
originated under the original "Zero Down"
program, was not more than (1) in the case of new
Financed Vehicles (other than Hyundai
automobiles), 100% of the manufacturer's suggested
retail price (not to exceed $20,000) plus taxes, title
and other fees and premiums for approved service
contracts or (2) in the case of used Financed
Vehicles (other than Hyundai automobiles), 100%
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
(not to exceed $20,000) plus taxes, title and other
fees and premiums for approved service contracts;
(B) originated under the "Reduced Income"
program and with respect to all Hyundai
automobiles, was not more than (1) in the case of
new Financed Vehicles, 85% of the manufacturer's
suggested retail price plus taxes, title and other fees
and premiums for approved service contracts or (2)
in the case of used Financed Vehicles 85%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
taxes, title and other fees and premiums for
approved service contracts; provided that, in any
such case, if any such amount is higher than that
approved by the Risk Default Insurer, each
Receivable will be limited in amount to that
permitted by the Risk Default Insurer for coverage
under the Risk Default Insurance Policy.
(xxx) 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.
(xxxi) 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.
(c) The Seller makes the following
additional representations, warranties and covenants
for the benefit of the Purchaser and the Trustee on
which the Purchaser relies in accepting the
Receivables on each Sale Date, which
representations, warranties and covenants shall
survive each Sale Date.
(i) Location of Servicer Files.
The Servicer Files are kept by the Servicer
at the locations listed in Exhibit B 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.
Within 10 days after each Sale 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 Sale 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 twenty (120) days after
the Sale Date or such later date (not
exceeding another 120 days thereafter)
permitted by the related 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 intends 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 Sale 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 Receivables on each Sale Date is subject
to the satisfaction of the following conditions:
(a) Notice of Sale. The Seller shall
provide the Purchaser notice of each sale hereunder
at least three Business Days in advance of each Sale
Date.
(b) Representations and Warranties True.
The representations and warranties of the Seller
hereunder shall be true and correct on each Sale
Date and the Seller shall have performed all
obligations to be performed by it hereunder on or
prior to each Sale Date.
(c) Files Marked; Files and Records
owned by Trustee. The Seller shall, at its own
expense, on or prior to each Sale Date indicate in
its files that the applicable Receivables have been
sold to the Purchaser pursuant to this Agreement.
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.
(d) Documents to be Delivered by the
Seller on or prior to each Sale Date.
<PAGE>
(i) Supplemental Conveyance. On or prior to
each Sale Date, the Seller will execute and deliver
a Supplemental Conveyance substantially in the
form of Exhibit A hereto with respect to the
Receivables and related Trust Property being
conveyed on such date.
(ii) Custodian Files. At each Sale
Date, the Seller shall deliver to the Trustee,
as custodian, for the benefit of the Purchaser
and its assigns the Custodian Files.
(iii) Evidence of UCC Filings. The
Seller shall record and file, at its own expense, (A)
on or prior to the initial Sale Date, UCC-3
termination statements in each jurisdiction required
by applicable law, to release effective as of each
Sale Date any prior security interests in the related
Receivables granted by the Seller, and (B) on or
prior to the initial Sale 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 being sold
hereunder as collateral, meeting the requirements of
the laws of each such jurisdiction and in such
manner as is necessary to perfect effective as of
each Sale Date 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
initial Sale Date.
(iv) Evidence of Insurance and
Payment. On each Sale 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 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 each Sale Date is
subject to the condition that on each Sale Date the
Purchaser will deliver to the Seller the Receivables
Cash Purchase Price for the Receivables.
ARTICLE V
COVENANTS OF THE SELLER
The Seller agrees with the Purchaser as
follows:
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 Amended and Restated Master Trust
Agreement and each related 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 with respect to
any pool of Receivables sold on a Sale Date shall
terminate upon the termination of the related trust
to which the pool is conveyed.
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 Sale Date
with respect to each pool of Receivables sold
hereunder. The Seller hereby agrees to assign to
the Trustee 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, shall be delivered to the location
listed in Exhibit B 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.
Section 5.08. Sale of Receivables.
Following each sale, 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 Trustee on behalf of
each related trust.
Section 5.09. The Seller's Records. All of
the Seller's records shall describe each sale and
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 also 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 the Trustee,
(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. The 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 is entering into the transactions
contemplated by the Amended and Restated Master
Trust Agreement and each related 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. Without limiting the foregoing, the
Seller will take no actions which would be
inconsistent with the covenants of the Purchaser set
forth in Section 8.07 of the Amended and Restated
Standard Terms.
ARTICLE VI
INDEMNIFICATION
Section 6.01. Indemnification. The Seller
shall indemnify the Purchaser and the Trustee 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 on
behalf of each trust, the Backup Servicer, the
Custodian and the Certificateholders to the extent of
the Purchaser's indemnity obligations under each
related 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 or the Backup
Servicer 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 and the Trustee 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 or in the Supplemental Conveyance
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 related Pooling
and Servicing Agreement and even if the Purchaser
fails to comply with any repurchase obligation it
may have under the related 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
related Sale 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 related 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 and the applicable
Supplemental Conveyance (the Seller shall be
deemed to make all representations and warranties
contained in Section 3.01(b) and (c) hereof and the
applicable Supplemental Conveyance 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) 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. 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
pursuant to the related Pooling and Servicing
Agreements, no amendment shall be effective
without the prior written consent of the holders of
at least 51% of each Class of each series of
Certificates outstanding.
Section 7.05. Waivers. No failure or delay
on the part of the Purchaser in exercising any
power, right or remedy under this Agreement or
any Supplemental Conveyance 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 7.06. 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.
<PAGE>
Section 7.07. 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 7.08. 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 7.09. 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 7.10. 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 7.11. Governing Law. This
Agreement and the Assignment shall be governed
by and construed in accordance with the laws of the
State of New York, including Section 5-1401 of the
General Obligations Law, but otherwise without
regard or reference to principles of conflicts of laws
of such state.
Section 7.12. Counterparts. This
Agreement may be executed in any number of
counterparts, each of which shall be an original, but
all of which together shall constitute one and the
same instrument.<PAGE>
IN WITNESS WHEREOF, the parties
hereby have caused this Amended and Restated
Master 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
President
AEGIS AUTO FUNDING CORP. IV, a Delaware
corporation, as Purchaser
By
President
<PAGE>
EXHIBIT A
SUPPLEMENTAL CONVEYANCE
For value received in accordance with the
Amended and Restated Master Purchase Agreement
dated as of May 1, 1997, (the "Purchase
Agreement"), by and between the undersigned (the
"Seller"), and Aegis Auto Funding Corp. IV, 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 of Receivables attached as Schedule I
hereto, all monies constituting Excess Interest
Collections thereon and all other moneys received
thereon on and after ____________________ (the
"Cutoff Date"); (ii) the interest of the Seller in 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 right of the Seller to realize upon any
property (including the right to receive future
Liquidation Proceeds) that shall have secured a
Receivable and have been repossessed by or on
behalf of the Purchaser; (v) the interest of the Seller
in any Dealer Recourse; and (vi) 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 Supplemental Conveyance is executed
and delivered pursuant to the Purchase Agreement.
The representations, warranties and agreements on
the part of the undersigned contained in the
Purchase Agreement are hereby confirmed.
The undersigned 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 _____ ("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,
Seller's true and lawful attorney-in-fact for and in
Seller'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 Seller itself could do (to the fullest
extent that the Seller 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 (the "Collateral") granted
to or created in favor of Seller in and to or
affecting any of the Receivables described on
Schedule I 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
Seller, 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 Receivables or
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, Seller 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.
Capitalized terms used herein and not
otherwise defined shall have the meaning assigned
to them in the Purchase Agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned
has caused this Supplemental Conveyance to be duly
executed as of
__________________________________.
AEGIS AUTO FINANCE INC.
By
Name:
Title:<PAGE>
SCHEDULE I
SCHEDULE OF RECEIVABLES
<PAGE>
EXHIBIT B
LOCATION OF SERVICER FILES
System and Services Technology, Inc.
4315 Pickett Road
St. Joseph, MO 64503
American Lenders Facilities, Inc.
2600 Michaelson Drive
Suite 470
Irvine, CA 92715
AEGIS AUTO FUNDING CORP. IV,
a Delaware Corporation, Seller
and
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION,
Trustee and Backup Servicer
POOLING AND SERVICING AGREEMENT
Dated as of June 1, 1997
$74,721,000
AEGIS AUTO RECEIVABLES TRUST 1997-4
AUTOMOBILE RECEIVABLE PASS-
THROUGH CERTIFICATES
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. CREATION OF TRUST 1
ARTICLE II. CONVEYANCE OF
RECEIVABLES 1
ARTICLE III. ACCEPTANCE BY
TRUSTEE 3
ARTICLE IV. INCORPORATION OF
STANDARD TERMS AND
CONDITIONS 3
ARTICLE V. SPECIAL DEFINITIONS AND
TERMS 4
ARTICLE VI. ADDITIONAL SELLER
REPRESENTATIONS 5
ARTICLE VII. CERTIFICATE DELIVERY AND
REGISTRATION 5
ARTICLE VIII. APPLICATION OF
PROCEEDS 6
TESTIMONIUM
SIGNATURES
APPENDIX A Schedule of Receivables
APPENDIX B Amended and Restated Standard
Terms and Conditions
APPENDIX C Risk Default Insurance Policy
Endorsement
APPENDIX D VSI Insurance Policy Endorsement
APPENDIX E Direction as to Registration of
Certificates
APPENDIX F General Certificate of Aegis Auto
Funding Corp. IV
APPENDIX G Form of Term Note
<PAGE>
POOLING AND SERVICING AGREEMENT
This POOLING AND SERVICING
AGREEMENT is dated as of June 1, 1997 (this
"Agreement") among Aegis Auto Funding Corp.
IV, a Delaware corporation, as Seller (the "Seller")
and Norwest Bank Minnesota, National Association,
a national banking association, as trustee for the
Trust (the "Trustee") and as Backup Servicer (the
"Backup Servicer") and is made with respect to the
formation of the Aegis Auto Receivables Trust
1997-4 (the "Trust").
WHEREAS, the Seller and the Trustee
desire to form a trust pursuant to the Amended and
Restated Master Trust Agreement dated as of May
1, 1997 (the "Amended and Restated Master Trust
Agreement") by and between the Seller and the
Trustee, and provide for the issuance of a series of
Automobile Pass-Through Certificates by such trust;
NOW, THEREFORE, in consideration of
the premises and of the mutual agreements herein
contained, the parties hereto agree as follows:
ARTICLE I
CREATION OF TRUST
Upon the execution of this Agreement by the
parties hereto, there is hereby created the Aegis
Auto Receivables Trust 1997-4. The situs and
administration of the Trust shall be in Minneapolis,
Minnesota or in such other city in which the
Corporate Trust Office is located from time to time.
ARTICLE II
CONVEYANCE OF RECEIVABLES
Section 2.01. Conveyance by Seller.
(a) In consideration of the
Trustee's delivery of the Certificates to or
upon the order of the Seller in an aggregate
principal amount equal to the aggregate
Principal Balance of the Initial Receivables,
the Seller does hereby irrevocably sell,
assign, and otherwise convey to the Trustee,
in trust for the benefit of the
Certificateholders, without recourse (subject
to the obligations herein):
(i) all right, title and interest of the Seller in
and to the Initial Receivables identified on
Appendices A-1 and A-2 hereto, all Excess Interest
Collections thereon and all other moneys received
thereon on and after the applicable Cutoff Dates;
(ii) the interest of the
Seller in the security interests in the
Financed Vehicles granted by the
Obligors pursuant to the Initial
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 Initial Receivables, the
Financed Vehicles or the Obligors
from the Cutoff Date;
(iv) the right of the Seller
to realize upon any property
(including the right to receive future
Liquidation Proceeds) that shall have
secured an Initial Receivable and
have been repossessed by or on
behalf of the Trust;
(v) the interest of the
Seller in any Dealer Recourse
relating to the Initial Receivables;
(vi) all right, title and
interest of the Seller in and to the
Purchase Agreement; and
(vii) the proceeds of any
and all of the foregoing.
(b) [Reserved]
Section 2.02. Nature of Conveyance. It is
the intention of the Seller and the Trustee that the
transfer and assignment of the Seller's right, title
and interest in and to the assets identified in clauses
(i) through (vii) of Section 2.01(a) (collectively, the
"Trust Property") shall constitute an absolute sale
by the Seller to the Trustee in trust for the benefit
of the Certificateholders. 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 Trustee, the Seller does hereby
grant, assign and convey to the Trustee and the
Trust, as security for all amounts payable to the
Certificateholders, a security interest in and lien
upon all of its right, title and interest in and to the
Trust Property, including all amounts deposited to
the Lock-Box Account, the Collection Account and
the Certificate Account, said security interest to be
effective from the date of execution of this
Agreement.
The Trustee and the Certificateholders
acknowledge and agree that the Seller is the holder
of the Residual Interest.
ARTICLE III
ACCEPTANCE BY TRUSTEE
The Trustee, on behalf of the Trust, hereby
accepts all consideration conveyed by the Seller
pursuant to Article II, and declares that the Trustee
shall hold such consideration upon the trusts herein
set forth for the benefit of all present and future
Certificateholders, subject to the terms and
provisions of this Agreement and the Amended and
Restated Master Trust Agreement.
ARTICLE IV
INCORPORATION OF STANDARD TERMS
AND CONDITIONS
This Agreement hereby incorporates by
reference the Amended and Restated Standard
Terms provided for by the Amended and Restated
Master Trust Agreement in the form attached hereto
as Appendix C, except to the extent expressly
modified hereby.
ARTICLE V
SPECIAL DEFINITIONS AND TERMS
Section 5.01. Special Definitions.
Capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Amended
and Restated Standard Terms. Whenever used in
this Agreement, the following words and phrases
shall have the following meanings:
"Backup Servicer Fee" means, with respect
to any Distribution Date, one-twelfth of the product
of (i) 0.02% per annum and (ii) the outstanding
Pool Balance as of the first day of the preceding
Collection Period or, in the case of the first
Distribution Date, as of the Closing Date.
"Class A Percentage" means 64.99913%.
"Class A Rate" means 7.10% of interest per
annum.
"Class B Percentage" means 35.00087%.
"Class B Rate" means 13.614% of interest
per annum provided, however that if a Credit
Enhancement Event shall have occurred, "Class B
Rate" shall mean 12.686%. A "Credit
Enhancement Event" shall have occurred if, within
90 days of the Closing Date, the Seller notifies the
Trustee and the Certificateholders that a Credit
Enhancement Fee shall be payable to the Credit
Enhancer in connection with the credit enhancement
of the Class A Certificates or any commercial paper
issued to fund the purchase of the Class A
Certificates.
"Closing Date" means June 27, 1997.
"Contingent Servicer Fee" means the amount
described as such in the instrument appointing the
Contingent Servicer in accordance with Section 4.07
of the Amended and Restated Standard Terms.
"Credit Enhancement Event" shall have the
meaning set forth in the definition of "Class B
Rate".
"Credit Enhancement Fee" means, with
respect to any Distribution Date, one-twelfth of the
product of 0.50% per annum times the Class A
Percentage of the Pool Balance as of the end of the
preceding Distribution Date, payable to the Credit
Enhancer after a Credit Enhancement Event shall
have occurred.
"Custodian Fee" means $1.75 per file
boarded.
"Cutoff Date" means (i) May 31, 1997, with
respect to the Receivables listed on Annex A-1
hereto, all of which were acquired by Aegis
Finance on or prior to such date, and (ii) the date
when purchased by Aegis Finance, but not later
than June 20, 1997, with respect to the Receivables
listed on Annex A-2 hereto, all of which were
acquired by Aegis Finance on or after June 2, 1997
and not later then June 20, 1997.
"Discount Rate" means 14% per annum.
"Final Scheduled Distribution Date" means
December 20, 2002.
"Initial Distribution Date" means July 20,
1997.
"Original Class Certificate Balance" means,
as to the Class A Certificates, $48,568,000, and as
to the Class B Certificates, $26,153,000.
"Reserve Fund Initial Deposit" means Term
Notes with an aggregate purchase price of
$1,423,717.14.
"Trustee Fee" means, with respect to any
Distribution Date, one-twelfth of the product of (i)
0.02% per annum and (ii) the aggregate Class
Certificate Balance as of the close of business on
the preceding Distribution Date (or, in the case of
the Initial Distribution Date, the original aggregate
Class Certificate Balance).
Section 5.02. Special Terms. (a) Term
Note. On the Closing Date, the Reserve Fund
Initial Deposit shall be invested in a Term Note of
The Aegis Consumer Funding Group, Inc.,
substantially in the form of Appendix G hereto.
<PAGE>
ARTICLE VI
ADDITIONAL SELLER REPRESENTATIONS
The Seller hereby makes the following
additional representations with respect to the
Receivables:
(i) Schedule of Receivables. The
information set forth in Appendices A1 and A2
hereto is true, complete and correct in all material
respects as of the opening of business on the
applicable Cutoff Dates, as the case may be, and no
selection procedures adverse to the
Certificateholders have been utilized in selecting the
Receivables.
(ii) Scheduled Payments. No Receivables
had a payment that was more than 59 days overdue
as of the applicable Cutoff Date; and each
Receivable has a final scheduled payment due no
later than the Final Scheduled Distribution Date.
(iii) Insurance Policy Endorsements.
Attached hereto as Appendices E and F,
respectively, are true and correct copies of the
endorsements to the Risk Default Insurance Policy
and VSI Insurance Policy required by the Amended
and Restated Standard Terms.
ARTICLE VII
CERTIFICATE DELIVERY AND
REGISTRATION
The Certificates shall be designated as the
"Aegis Auto Receivables Trust 19974, Automobile
Receivable Pass-Through Certificates, Series 1997-
4" (the "Certificates"), and issued with an initial
aggregate Certificate Balance of $74,721,000 in two
Classes as follows: Class A Certificates with an
initial Certificate Balance of $48,568,000 and Class
B Certificates with an initial Certificate Balance of
$26,153,000.
The Seller hereby directs the Trustee to
register the Certificates in the names and
denominations specified in the direction attached
hereto as Appendix E, and to execute, authenticate
and deliver the Certificates to the initial purchasers
specified in such direction upon receipt by the
Trustee of the following:
(i) $75,166,303.22 in immediately
available funds from the purchasers for the account
of the Seller;
(ii) Investor letters executed by each of
the initial purchasers;
(iii) An executed copy of the Supplemental
Conveyance from Aegis Finance in the form
attached as Appendix A to the Purchase Agreement
with respect to the Receivables conveyed to the
Trust on the Closing Date;
(iv) An executed copy of the certificate of
the Seller required by Section 7 of the Master
Certificate Purchase Agreement substantially in the
form attached hereto as Appendix F;
(v) Executed opinions of counsel to the
Seller required by Section 7 of the Master
Certificate Purchase Agreement; and
(vi) $0.00 in immediately available funds
from the Seller for deposit to the Collection
Account of Excess Interest Collections.
ARTICLE VIII
APPLICATION OF PROCEEDS
The proceeds of the Certificates and the
Term Notes, receipt of which the Trustee hereby
acknowledges, shall be applied as follows:
(i) $0.00 shall be deposited into the
Collection Account as the Excess Interest
Collections;
(ii) The remainder of $75,166,303.32 shall
be paid to the Seller or upon the Seller's order;
(iii) Term Notes with an aggregate purchase
price of $1,423,717.47 shall be deposited into the
Reserve Fund as the Reserve Fund Initial Deposit.
<PAGE>
IN WITNESS WHEREOF, the parties
hereto have caused this Pooling and Servicing
Agreement to be duly executed by their respective
officers as of the day and year first above written.
AEGIS AUTO FUNDING CORP. IV,
as Seller
By:
Name: Angelo R. Appierto
Title: President
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee and as Backup Servicer
By:
Name: Michael DeBois
Title: Corporate Trust Officer
[Signature Page to Pooling and Servicing
Agreement]<PAGE>
APPENDIX A - 1
SCHEDULE OF RECEIVABLES
(Cutoff Date of May 31, 1997)
<PAGE>
APPENDIX A - 2
SCHEDULE OF RECEIVABLES
(Cutoff Dates from June 2, 1997 to June 20, 1997)
<PAGE>
APPENDIX B
AMENDED AND RESTATED STANDARD
TERMS AND CONDITIONS<PAGE>
APPENDIX C
RISK DEFAULT INSURANCE POLICY
ENDORSEMENT<PAGE>
APPENDIX D
VSI INSURANCE POLICY ENDORSEMENT<PAGE>
APPENDIX E
$74,721,000
Aegis Auto Receivables Trust 1997-4
Automobile Receivable Pass-Through
Certificates,
Series 1997-4
DIRECTION AS TO
REGISTRATION OF CERTIFICATES
The undersigned purchasers of the above-
referenced Certificates hereby direct the Trustee to
register such Certificates in the names and
denominations specified below:
CLASS A CERTIFICATES
Certificate
Number Name
Amount Purchased
R-1 III Limited Partnerhsip
$48,568,000
CLASS B CERTIFICATES
Certificate
Number Name Amount
Purchased
R-1 III Limited Partnership
$26,153,000
Total $74,721,000
<PAGE>
IN WITNESS WHEREOF, the undersigned
have duly executed this Direction as to
Registration of Certificates as of the date set forth
below.
Dated: June 27, 1997
III LIMITED PARTNERSHIP
By III Associates
General Partner
By Cheyene, Inc.
General Partner
By
Name: Robert Fasulo
Title: Secretary/Treasurer
<PAGE>
Appendix F
$74,721,000
Aegis Auto Receivables Trust 1997-4
Automobile Receivable Pass-Through Certificates,
Series 1997-4
GENERAL CERTIFICATE
OF
AEGIS AUTO FUNDING CORP. IV
The undersigned, on behalf of Aegis Auto Funding
Corp. IV, a Delaware corporation ("Seller"),
hereby certifies this June 27, 1997, as follows in
connection with the issuance of the above-
referenced Certificates (the "Certificates") pursuant
to the terms of the Pooling and Servicing
Agreement dated as of June 27, 1997 (the
"Agreement") among the Seller, Norwest Bank
Minnesota, National Association, as backup servicer
and Norwest Bank Minnesota, National Association,
as Trustee, and the Amended and Restated Master
Trust Agreement dated as of May 1, 1997 (the
"Amended and Restated Master Trust Agreement")
between the Seller and the Trustee (capitalized
terms used but not otherwise defined herein shall
have the meanings ascribed to them in the Amended
and Restated Standard Terms and Conditions
attached as Appendix A to the Amended and
Restated Master Trust Agreement):
1. The undersigned has carefully
examined the Agreement, the Amended and
Restated Master Trust Agreement, the Purchase
Agreement and the Master Certificate Purchase
Agreement.
2. The representations and warranties of
the Seller contained in the Agreement, the Amended
and Restated Master Trust Agreement, the Purchase
Agreement and the Master Certificate Purchase
Agreement are true and correct in all material
respects as if made on and as of the date hereof
(except for such representations and warranties
specifically made as of another specified date).
3. Neither the Seller nor any of its
Affiliates is in default in the performance of any of
their respective obligations under the documents
mentioned in paragraph 2 above or any other
Pooling and Servicing Agreement executed pursuant
to the terms of the Amended and Restated Master
Trust Agreement.
4. The Seller has complied with all
agreements and satisfied all conditions on its part to
be performed or satisfied under the documents
specified in paragraph 2 above at or prior to the
date hereof.
5. The Seller did not, either
independently or through any other party, solicit
any offer to buy or offer to sell the Certificates or
any similar security by means of any form of
general solicitation or general advertising,
including, but not limited to, (i) any advertisement,
article, notice or other communication published in
any newspaper, magazine or similar medium or
broadcast over television or radio, and (ii) any
seminar or meeting whose attendees have been
invited by any general solicitation or general
advertising.
6. The Certificates were sold by the
Seller to III Limited Partnership in a private
placement in transactions exempt from the
registration requirements of the Act.
7. The undersigned is duly authorized
by the Seller to make the foregoing representations
on behalf of the Seller and has conducted such
investigation and made such inquiries as he has
deemed necessary and appropriate in order to make
such representations on behalf of the Seller.
<PAGE>
IN WITNESS WHEREOF the undersigned
has signed this General Certificate of Aegis Auto
Funding Corp. IV as of the date first written above.
AEGIS AUTO FUNDING CORP. IV
By: __________________________
Name: Angelo R. Appierto
Title: President
<PAGE>
APPENDIX G
PROMISSORY NOTE
$2,988,840.00 Dated Date: June 27, 1997
Maturity Date: December 20, 2002
FOR VALUE RECEIVED, The Aegis
Consumer Funding Group, Inc., a Delaware
Corporation (the "Company"), does hereby promise
to pay to the order of Aegis Auto Funding Corp.
IV, a Delaware corporation (the "Payee") in lawful
money of the United States of America, the
principal amount of Two Million Nine Hundred
Eighty-eight Thousand Eight Hundred Forty Dollars
($2,988,840) (the "Principal Amount") on the
Maturity Date stated above subject to the conditions
described herein.
Notwithstanding the foregoing, this Note shall,
without demand, notice or legal process of any
kind, be declared and shall become immediately due
and payable upon the occurrence of any of the
following events (each a "Bankruptcy Event"): (i)
the entry of a decree or order by a court or agency
or supervisory authority having jurisdiction in the
premises for the appointment of a conservator,
receiver, trustee, or liquidator for the Company in
any bankruptcy, insolvency, readjustment of debt,
marshalling of assets and liabilities, or similar
proceedings, or for the winding-up or liquidation of
its affairs, and the continuance of any such decree
or order unstayed and in effect for a period of thirty
(30) consecutive days; (ii) the consent by the
Company to the appointment of a trustee,
conservator, receiver, or liquidator in any
bankruptcy, insolvency, readjustment of debt,
marshalling of assets and liabilities, or similar
proceedings of or relating to the Company and
involving substantially all of its property; or (iii) the
Company shall admit in writing its inability to pay
its debts generally as they become due, file a
petition of any applicable bankruptcy, insolvency,
or reorganization statute, make an assignment for
the benefit of its creditors, or voluntarily suspend
payment of its obligations.
If a Bankruptcy Event occurs, the amount
immediately due and payable on this Note shall
equal the original purchase price hereof
($1,423,717.47) plus interest accrued on such
amount from the Dated Date hereof until such
amount is paid in full at the rate of 14% per
annum, calculated on the basis of a 360-day year
for the actual number of days elapsed and
compounded semiannually. The Company hereby
promises to pay all costs and expenses incurred in
the collection and enforcement of this Note and any
appeal of a judgement rendered hereon.
This Note represents a general unsecured obligation
of the Company.
<PAGE>
THIS PROMISSORY NOTE SHALL BE
GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
THE AEGIS CONSUMER FUNDING GROUP,
INC., a Delaware corporation
By:
Name: Joseph F. Battiato
Title: President
PAY TO THE ORDER of Norwest Bank
Minnesota, National Association, as Trustee under
that certain Amended and Restated Master Trust
Agreement between the Trustee and Aegis Auto
Funding Corp. IV dated as of May 1, 1997, as
amended and restated from time to time, without
recourse or warranty.
AEGIS AUTO FUNDING CORP. IV
By:
Name: Angelo R. Appierto
Title: President
[PROMISSORY NOTE]
SUPPLEMENTAL CONVEYANCE
For value received in accordance with the
Amended and Restated Master Purchase Agreement
dated as of May 1, 1997 (the "Purchase
Agreement"), by and between the undersigned (the
"Seller"), and Aegis Auto Funding Corp. IV, 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 Schedules of Receivables attached as Schedules
I and II hereto, all monies constituting Excess
Interest Collections thereon and all other moneys
received thereon on and after the applicable Cutoff
Dates; (ii) the interest of the Seller in 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 applicable
Cutoff Dates; (iv) the right of the Seller to realize
upon any property (including the right to receive
future Liquidation Proceeds) that shall have secured
a Receivable and have been repossessed by or on
behalf of the Purchaser; (v) the interest of the Seller
in any Dealer Recourse; and (vi) 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 Supplemental Conveyance is executed
and delivered pursuant to the Purchase Agreement.
The representations, warranties and agreements on
the part of the undersigned contained in the
Purchase Agreement are hereby confirmed.
The undersigned 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 1997-4 ("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,
Seller's true and lawful attorney-in-fact for and in
Seller'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 Seller itself could do (to the fullest
extent that the Seller 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 (the "Collateral") granted
to or created in favor of Seller in and to or
affecting any of the Receivables described on
Schedule I 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
Seller, 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 Receivables or
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, Seller 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.
Capitalized terms used herein and not
otherwise defined shall have the meaning assigned
to them in the Purchase Agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned
has caused this Supplemental Conveyance to be duly
executed as of June 27, 1997.
AEGIS AUTO FINANCE INC.
By
Name: Joseph F. Battiato
Title: President<PAGE>
SCHEDULE I
SCHEDULE OF RECEIVABLES
(May 31, 1997 Cutoff Date)
<PAGE>
SCHEDULE II
SCHEDULE OF RECEIVABLES
(Cutoff Dates from June 2, 1997 to June 20, 1997)
AEGIS AUTO FUNDING CORP. IV,
a Delaware Corporation, Seller
and
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION,
Trustee and Backup Servicer
POOLING AND SERVICING AGREEMENT
Dated as of August 1, 1997
$48,128,000
AEGIS AUTO RECEIVABLES TRUST 1997 5
AUTOMOBILE RECEIVABLE PASS
THROUGH CERTIFICATES
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
CREATION OF TRUST.....................1
ARTICLE II
CONVEYANCE OF RECEIVABLES
Section 2.01. Conveyance by Seller....1
Section 2.02. Nature of Conveyance... 2
ARTICLE III
ACCEPTANCE BY TRUSTEE..............2
ARTICLE IV
INCORPORATION OF STANDARD
TERMS AND CONDITIONS......3
ARTICLE V
SPECIAL DEFINITIONS AND TERMS
Section 5.01. Special Definitions..3
Section 5.02. Special Terms.......4
ARTICLE VI
ADDITIONAL SELLER
REPRESENTATIONS...........5
ARTICLE VII
CERTIFICATE DELIVERY AND
REGISTRATION............. 5
ARTICLE VIII
APPLICATION OF PROCEEDS........... 6
TESTIMONIUM
SIGNATURES
APPENDIX A Schedule of Receivables
APPENDIX B Amended and Restated Standard
Terms and Conditions
APPENDIX C Risk Default Insurance Policy
Endorsement
APPENDIX D VSI Insurance Policy Endorsement
APPENDIX E Direction as to Registration of
Certificates
APPENDIX F General Certificate of Aegis Auto
Funding Corp. IV
APPENDIX G Form of Term Note
<PAGE>
POOLING AND SERVICING AGREEMENT
This POOLING AND SERVICING
AGREEMENT is dated as of August 1, 1997 (this
"Agreement") among Aegis Auto Funding Corp.
IV, a Delaware corporation, as Seller (the "Seller")
and Norwest Bank Minnesota, National Association,
a national banking association, as trustee for the
Trust (the "Trustee") and as Backup Servicer (the
"Backup Servicer") and is made with respect to the
formation of the Aegis Auto Receivables Trust
1997-5 (the "Trust").
WHEREAS, the Seller and the Trustee
desire to form a trust pursuant to the Amended and
Restated Master Trust Agreement dated as of May
1, 1997 (the "Amended and Restated Master Trust
Agreement") by and between the Seller and the
Trustee, and provide for the issuance of a series of
Automobile Pass-Through Certificates by such trust;
NOW, THEREFORE, in consideration of
the premises and of the mutual agreements herein
contained, the parties hereto agree as follows:
ARTICLE I
CREATION OF TRUST
Upon the execution of this Agreement by the
parties hereto, there is hereby created the Aegis
Auto Receivables Trust 1997-5. The situs and
administration of the Trust shall be in Minneapolis,
Minnesota or in such other city in which the
Corporate Trust Office is located from time to time.
ARTICLE II
CONVEYANCE OF RECEIVABLES
Section 2.01. Conveyance by Seller.
(a) In consideration of the Trustee's
delivery of the Certificates to or upon the order of
the Seller in an aggregate principal amount equal to
the aggregate Principal Balance of the Receivables,
the Seller does hereby irrevocably sell, assign, and
otherwise convey to the Trustee, in trust for the
benefit of the Certificateholders, without recourse
(subject to the obligations herein):
(i) all right, title and interest of the Seller in
and to the Receivables identified on Appendix A
hereto, all Excess Interest Collections thereon and
all other moneys received thereon and after the
Cutoff Date;
(ii) the interest of the Seller in 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 from the Cutoff
Date;
(iv) the right of the Seller to realize upon
any property (including the right to receive future
Liquidation Proceeds) that shall have secured a
Receivable and have been repossessed by or on
behalf of the Trust;
(v)the interest of the Seller in any Dealer Recourse
relating to the Receivables;
all right, title and interest of the Seller in and to the
Purchase Agreement; and
the proceeds of any and all of the foregoing.
(b) [Reserved]
Section 2.02. Nature of Conveyance. It is the
intention of the Seller and the Trustee that the
transfer and assignment of the Seller's right, title
and interest in and to the assets identified in clauses
(i) through (vii) of Section 2.01(a) (collectively, the
"Trust Property") shall constitute an absolute sale
by the Seller to the Trustee in trust for the benefit
of the Certificateholders. 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 Trustee, the Seller does hereby
grant, assign and convey to the Trustee and the
Trust, as security for all amounts payable to the
Certificateholders, a security interest in and lien
upon all of its right, title and interest in and to the
Trust Property, including all amounts deposited to
the Lock-Box Account, the Collection Account and
the Certificate Account, said security interest to be
effective from the date of execution of this
Agreement.
The Trustee and the Certificateholders
acknowledge and agree that the Seller is the holder
of the Residual Interest.
ARTICLE III
ACCEPTANCE BY TRUSTEE
The Trustee, on behalf of the Trust, hereby
accepts all consideration conveyed by the Seller
pursuant to Article II, and declares that the Trustee
shall hold such consideration upon the trusts herein
set forth for the benefit of all present and future
Certificateholders, subject to the terms and
provisions of this Agreement and the Amended and
Restated Master Trust Agreement.
ARTICLE IV
INCORPORATION OF STANDARD TERMS
AND CONDITIONS
This Agreement hereby incorporates by
reference the Amended and Restated Standard
Terms provided for by the Amended and Restated
Master Trust Agreement in the form attached hereto
as Appendix C, except to the extent expressly
modified hereby.
ARTICLE V
SPECIAL DEFINITIONS AND TERMS
Section 5.01. Special Definitions.
Capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Amended
and Restated Standard Terms. Whenever used in
this Agreement, the following words and phrases
shall have the following meanings:
"Backup Servicer Fee" means, with respect
to any Distribution Date, one-twelfth of the product
of (i) 0.02% per annum and (ii) the outstanding
Pool Balance as of the first day of the preceding
Collection Period or, in the case of the first
Distribution Date, as of the Closing Date.
"Class A Percentage" means 65.00166%.
"Class A Rate" means 6.90% of interest per annum.
"Class B Percentage" means 34.99834%.
"Class B Rate" means 13.414% of interest per
annum provided, however that if a Credit
Enhancement Event shall have occurred, "Class B
Rate" shall mean 12.48536%. A "Credit
Enhancement Event" shall have occurred if, within
90 days of the Closing Date, the Seller notifies the
Trustee and the Certificateholders that a Credit
Enhancement Fee shall be payable to the Credit
Enhancer in connection with the credit enhancement
of the Class A Certificates or any commercial paper
issued to fund the purchase of the Class A
Certificates.
"Closing Date" means August 20, 1997.
"Contingent Servicer Fee" means the amount
described as such in the instrument appointing the
Contingent Servicer in accordance with Section 4.07
of the Amended and Restated Standard Terms.
"Credit Enhancement Event" shall have the meaning
set forth in the definition of "Class B Rate".
"Credit Enhancement Fee" means, with respect to
any Distribution Date, one-twelfth of the product of
0.50% per annum times the Class A Percentage of
the Pool Balance as of the end of the preceding
Distribution Date, payable to the Credit Enhancer
after a Credit Enhancement Event shall have
occurred.
"Custodian Fee" means $1.75 per file boarded.
"Cutoff Date" means July 31, 1997.
"Discount Rate" means 14% per annum.
"Final Scheduled Distribution Date" means
February 20, 2003.
"Initial Distribution Date" means September 20,
1997.
"Original Class Certificate Balance" means, as to
the Class A Certificates, $31,284,000, and as to the
Class B Certificates, $16,844,000.
"Reserve Fund Initial Deposit" means Term Notes
with an aggregate purchase price of $914,610.64.
"Trustee Fee" means, with respect to any
Distribution Date, one-twelfth of the product of (i)
0.02% per annum and (ii) the aggregate Class
Certificate Balance as of the close of business on
the preceding Distribution Date (or, in the case of
the Initial Distribution Date, the original aggregate
Class Certificate Balance).
Section 5.02. Special Terms. (a) Term Note. On
the Closing Date, the Reserve Fund Initial Deposit,
consisting of a Term Note of The Aegis Consumer
Funding Group, Inc., substantially in the form of
Appendix G hereto, shall be delivered to the
Trustee for deposit to the Reserve Fund.
<PAGE>
ARTICLE VI
ADDITIONAL SELLER REPRESENTATIONS
The Seller hereby makes the following
additional representations with respect to the
Receivables:
(i) Schedule of Receivables. The
information set forth in Appendix A hereto 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.
(ii) Scheduled Payments. No Receivables
had a payment that was more than 59 days overdue
as of the Cutoff Date; and each Receivable has a
final scheduled payment due no later than the Final
Scheduled Distribution Date.
(iii) Insurance Policy Endorsements.
Attached hereto as Appendices E and F,
respectively, are true and correct copies of the
endorsements to the Risk Default Insurance Policy
and VSI Insurance Policy required by the Amended
and Restated Standard Terms.
ARTICLE VII
CERTIFICATE DELIVERY AND
REGISTRATION
The Certificates shall be designated as the "Aegis
Auto Receivables Trust 1997-5, Automobile
Receivable Pass-Through Certificates, Series 1997-
5" (the "Certificates"), and issued with an initial
aggregate Certificate Balance of $48,128,000 in two
Classes as follows: Class A Certificates with an
initial Certificate Balance of $31,284,000 and Class
B Certificates with an initial Certificate Balance of
$16,844,000.
The Seller hereby directs the Trustee to
register the Certificates in the names and
denominations specified in the direction attached
hereto as Appendix E, and to execute, authenticate
and deliver the Certificates to the initial purchasers
specified in such direction upon receipt by the
Trustee of the following:
(i) $48,348,698.55 in immediately available
funds from the purchasers for the account of the
Seller;
(ii) Investor letters executed by each of the
initial purchasers;
(iii) An executed copy of the Supplemental
Conveyance from Aegis Finance in the form
attached as Appendix A to the Purchase Agreement
with respect to the Receivables conveyed to the
Trust on the Closing Date;
(iv) An executed copy of the certificate of the
Seller required by Section 7 of the Master
Certificate Purchase Agreement substantially in the
form attached hereto as Appendix F;
(v) Executed opinions of counsel to the Seller
required by Section 7 of the Master Certificate
Purchase Agreement; and
(vi) $27,505.90 in immediately available funds
from the Seller for deposit to the Collection
Account of Excess Interest Collections.
ARTICLE VIII
APPLICATION OF PROCEEDS
The proceeds of the Certificates, receipt of
which the Trustee hereby acknowledges, shall be
applied as follows:
(i) $27,505.90 shall be deposited into the
Collection Account as the Excess Interest
Collections; and
(ii) The remainder of $48,348,698.55 shall be paid
to the Seller or upon the Seller's order.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have
caused this Pooling and Servicing Agreement to be
duly executed by their respective officers as of the
day and year first above written.
AEGIS AUTO FUNDING CORP. IV,
as Seller
By:
Name: Angelo R. Appierto
Title: President
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee and as Backup Servicer
By:
Name: Michael DeBois
Title: Corporate Trust Officer
[Signature Page to Pooling and Servicing
Agreement]<PAGE>
APPENDIX A
SCHEDULE OF RECEIVABLES
(Cutoff Date of July 31, 1997)
<PAGE>
APPENDIX B
AMENDED AND RESTATED STANDARD
TERMS AND CONDITIONS<PAGE>
APPENDIX C
RISK DEFAULT INSURANCE POLICY
ENDORSEMENT<PAGE>
APPENDIX D
VSI INSURANCE POLICY ENDORSEMENT<PAGE>
APPENDIX E
$48,128,000
Aegis Auto Receivables Trust 1997 5
Automobile Receivable Pass Through
Certificates,
Series 19975
DIRECTION AS TO
REGISTRATION OF CERTIFICATES
The undersigned purchasers of the above-referenced
Certificates hereby direct the Trustee to register
such Certificates in the names and denominations
specified below:
CLASS A CERTIFICATES
Certificate
Number
Name
Amount Purchased
R1 III Finance Ltd.
$31,284,000.00
CLASS B CERTIFICATES
Certificate
Number Name Amount Purchased
R1 III Finance Ltd. $16,844,000.00
Total $48,128,000.00
<PAGE>
IN WITNESS WHEREOF, the undersigned
have duly executed this Direction as to
Registration of Certificates as of the date set forth
below.
Dated: August 20, 1997
III FINANCE LTD.
By
Name: David Bree
Title: Director
<PAGE>
Appendix F
$48,128,000
Aegis Auto Receivables Trust 1997 5
Automobile Receivable Pass Through Certificates,
Series 1997 5
GENERAL CERTIFICATE
OF
AEGIS AUTO FUNDING CORP. IV
The undersigned, on behalf of Aegis
Auto Funding Corp. IV, a Delaware corporation
("Seller"), hereby certifies this August 20, 1997, as
follows in connection with the issuance of the
above-referenced Certificates (the "Certificates")
pursuant to the terms of the Pooling and Servicing
Agreement dated as of August 1, 1997 (the
"Agreement") among the Seller, Norwest Bank
Minnesota, National Association, as backup servicer
and Norwest Bank Minnesota, National Association,
as Trustee, and the Amended and Restated Master
Trust Agreement dated as of May 1, 1997 (the
"Amended and Restated Master Trust Agreement")
between the Seller and the Trustee (capitalized
terms used but not otherwise defined herein shall
have the meanings ascribed to them in the Amended
and Restated Standard Terms and Conditions
attached as Appendix A to the Amended and
Restated Master Trust Agreement):
1. The undersigned has carefully examined the
Agreement, the Amended and Restated Master
Trust Agreement, the Purchase Agreement and the
Master Certificate Purchase Agreement.
2. The representations and warranties of the
Seller contained in the Agreement, the Amended
and Restated Master Trust Agreement, the Purchase
Agreement and the Master Certificate Purchase
Agreement are true and correct in all material
respects as if made on and as of the date hereof
(except for such representations and warranties
specifically made as of another specified date).
3. Neither the Seller nor any of its Affiliates is
in default in the performance of any of their
respective obligations under the documents
mentioned in paragraph 2 above or any other
Pooling and Servicing Agreement executed pursuant
to the terms of the Amended and Restated Master
Trust Agreement.
4. The Seller has complied with all agreements
and satisfied all conditions on its part to be
performed or satisfied under the documents
specified in paragraph 2 above at or prior to the
date hereof.
5. The Seller did not, either independently or
through any other party, solicit any offer to buy or
offer to sell the Certificates or any similar security
by means of any form of general solicitation or
general advertising, including, but not limited to, (i)
any advertisement, article, notice or other
communication published in any newspaper,
magazine or similar medium or broadcast over
television or radio, and (ii) any seminar or meeting
whose attendees have been invited by any general
solicitation or general advertising.
6. The Certificates were sold by the Seller to
III Finance Ltd. in a private placement in
transactions exempt from the registration
requirements of the Act.
7. The undersigned is duly authorized by the
Seller to make the foregoing representations on
behalf of the Seller and has conducted such
investigation and made such inquiries as he has
deemed necessary and appropriate in order to make
such representations on behalf of the Seller.
<PAGE>
IN WITNESS WHEREOF the undersigned has
signed this General Certificate of Aegis Auto
Funding Corp. IV as of the date first written above.
AEGIS AUTO FUNDING CORP. IV
By: __________________________
Name: Angelo R. Appierto
Title: President
<PAGE>
APPENDIX G
PROMISSORY NOTE
$1,925,120.00
Dated Date: August 20, 1997
Maturity Date: February 20, 2003
FOR VALUE RECEIVED, The Aegis Consumer
Funding Group, Inc., a Delaware Corporation (the
"Company"), does hereby promise to pay to the
order of Aegis Auto Funding Corp. IV, a Delaware
corporation (the "Payee") in lawful money of the
United States of America, the principal amount of
One Million Nine Hundred Twenty-five Thousand
One Hundred Twenty Dollars ($1,925,120.00) (the
"Principal Amount") on the Maturity Date stated
above subject to the conditions described herein.
Notwithstanding the foregoing, this Note
shall, without demand, notice or legal process of
any kind, be declared and shall become immediately
due and payable upon the occurrence of any of the
following events (each a "Bankruptcy Event"): (i)
the entry of a decree or order by a court or agency
or supervisory authority having jurisdiction in the
premises for the appointment of a conservator,
receiver, trustee, or liquidator for the Company in
any bankruptcy, insolvency, readjustment of debt,
marshalling of assets and liabilities, or similar
proceedings, or for the winding-up or liquidation of
its affairs, and the continuance of any such decree
or order unstayed and in effect for a period of thirty
(30) consecutive days; (ii) the consent by the
Company to the appointment of a trustee,
conservator, receiver, or liquidator in any
bankruptcy, insolvency, readjustment of debt,
marshalling of assets and liabilities, or similar
proceedings of or relating to the Company and
involving substantially all of its property; or (iii) the
Company shall admit in writing its inability to pay
its debts generally as they become due, file a
petition of any applicable bankruptcy, insolvency,
or reorganization statute, make an assignment for
the benefit of its creditors, or voluntarily suspend
payment of its obligations.
If a Bankruptcy Event occurs, the amount
immediately due and payable on this Note shall
equal the original purchase price hereof
($914,610.64) plus interest accrued on such amount
from the Dated Date hereof until such amount is
paid in full at the rate of 14% per annum,
calculated on the basis of a 360-day year for the
actual number of days elapsed and compounded
semiannually. The Company hereby promises to
pay all costs and expenses incurred in the collection
and enforcement of this Note and any appeal of a
judgement rendered hereon.
This Note represents a general unsecured
obligation of the Company.
<PAGE>
THIS PROMISSORY NOTE SHALL BE
GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
THE AEGIS CONSUMER FUNDING GROUP,
INC., a Delaware corporation
By:
Name: Joseph F. Battiato
Title: President
PAY TO THE ORDER of Norwest Bank
Minnesota, National Association, as Trustee under
that certain Amended and Restated Master Trust
Agreement between the Trustee and Aegis Auto
Funding Corp. IV dated as of May 1, 1997, as
amended and restated from time to time, without
recourse or warranty.
AEGIS AUTO FUNDING CORP. IV
By:
Name: Angelo R. Appierto
Title: President
[PROMISSORY NOTE]
SUPPLEMENTAL CONVEYANCE
For value received in accordance with the
Amended and Restated Master Purchase Agreement
dated as of May 1, 1997 (the "Purchase
Agreement"), by and between the undersigned (the
"Seller"), and Aegis Auto Funding Corp. IV, 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 of Receivables attached as Schedule I
hereto, all monies constituting Excess Interest
Collections thereon and all other moneys received
thereon on and after the Cutoff Date; (ii) the
interest of the Seller in 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
right of the Seller to realize upon any property
(including the right to receive future Liquidation
Proceeds) that shall have secured a Receivable and
have been repossessed by or on behalf of the
Purchaser; (v) the interest of the Seller in any
Dealer Recourse; and (vi) 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 Supplemental Conveyance is executed
and delivered pursuant to the Purchase Agreement.
The representations, warranties and agreements on
the part of the undersigned contained in the
Purchase Agreement are hereby confirmed.
The undersigned 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 1997-5 ("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,
Seller's true and lawful attorney-in-fact for and in
Seller'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 Seller itself could do (to the fullest
extent that the Seller 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 (the "Collateral") granted
to or created in favor of Seller in and to or
affecting any of the Receivables described on
Schedule I 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
Seller, 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 Receivables or
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, Seller 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.
Capitalized terms used herein and not
otherwise defined shall have the meaning assigned
to them in the Purchase Agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned
has caused this Supplemental Conveyance to be duly
executed as of August , 1997.
AEGIS AUTO FINANCE INC.
By
Name: Joseph F. Battiato
Title: President<PAGE>
SCHEDULE I
SCHEDULE OF RECEIVABLES
(July 31, 1997 Cutoff Date)
EXECUTION COPY
AMENDMENT
to
LOAN AND SECURITY AGREEMENT
Dated as of March 14, 1997
THIS AMENDMENT
("Amendment") dated as of May 21, 1997 is
entered into among AEGIS AUTO FINANCE,
INC., a Delaware corporation ("AAF") and III
FINANCE LTD., a Cayman Islands company
("Lender").
Reference is hereby made to that
certain Loan and Security Agreement (the
"Original Loan Agreement") among the parties
hereto dated as of March 14, 1997, as amended by
that certain Assignment and Amendment
Agreement, dated as of April 30, 1997 (the
"Assignment Amendment") pursuant to which III
Global Ltd. assigned its rights and obligations
under the Original Loan Agreement to the Lender.
The Original Loan Agreement and the Assignment
Amendment, as the same may be further amended,
restated, supplemented or otherwise modified from
time to time is hereinafter referred to as the "Loan
Agreement." Capitalized terms used herein and
not defined herein shall have the meanings
ascribed to such terms in the Loan Agreement.
AAF and the Lender have agreed to amend the
Loan Agreement as hereinafter set forth.
SECTION 1. Amendments to the
Loan Agreement. The Loan Agreement is,
effective the date hereof and subject to the
satisfaction of the conditions precedent set forth in
Section 3 hereof, hereby amended as follows:
1.1 The Definition of "Maximum
Loan Amount" set forth in Section 1.1 of
the Loan Agreement is hereby amended to
delete the dollar number of "$50,000,000"
which appears therein and to substitute
therefor the dollar number of
"$75,000,000".
SECTION 2. Conditions Precedent.
This Amendment shall become effective upon
receipt by the Lender of (i) counterpart signature
pages of this Amendment, executed by the Lender
and AAF, (ii) the executed reaffirmation of
guaranty attached hereto and (iii) an amended and
restated promissory note substantially in the form
of Exhibit A hereto.
SECTION 3. Covenants,
Representations and Warranties of the Borrowers.
3.1 Upon the effectiveness of this
Amendment, AAF hereby reaffirms all covenants,
representations and warranties made by it in the
Loan Agreement to the extent the same are not
amended hereby and agrees that all such
covenants, representations and warranties shall be
deemed to have been re-made as of the effective
date of this Amendment.
3.2 AAF hereby represents and
warrants that this Amendment constitutes its legal,
valid and binding obligation, enforceable against
AAF in accordance with its terms.
SECTION 4. Reference to and
Effect on the Loan Agreement.
4.1 Upon the effectiveness of this
Amendment, each reference in the Loan
Agreement to "this Agreement", "hereunder",
"hereof", "herein" or words of like import shall
mean and be a reference to the Loan Agreement,
as amended hereby, and each reference to the
Loan Agreement in any other document,
instrument or agreement executed and/or delivered
in connection with the Loan Agreement shall
mean and be a reference to the Loan Agreement
as amended hereby.
4.2 Except as specifically amended
above, the Loan Agreement and all other
Financing Agreements executed and/or delivered
in connection therewith shall remain in full force
and effect and are hereby ratified and confirmed.
4.3 The execution, delivery and
effectiveness of this Amendment shall not operate
as a waiver of any right, power or remedy of the
Lender under the Loan Agreement or any other
Financing Agreement executed in connection
therewith, nor constitute a waiver of any provision
contained therein, except as specifically set forth
herein.
SECTION 5. Execution in
Counterparts. This Amendment may be executed
in any number of counterparts and by different
parties hereto in separate counterparts, each of
which when so executed and delivered shall be
deemed to be an original and all of which taken
together shall constitute but one and the same
instrument.
SECTION 6. Governing Law.
This Amendment shall be governed by and
construed in accordance with the laws of the State
of New York.
SECTION 7. Headings. Section
headings in this Amendment are included herein
for convenience of reference only and shall not
constitute a part of this Amendment for any other
purpose.
IN WITNESS WHEREOF, the
parties hereto have caused this Amendment to be
executed by their respective officers thereunto
duly authorized as of the date first above written.
III
FINANCE LTD.
By
Name:
Title:
AEGIS AUTO FINANCE, INC.
By
Name:
Title:
ACKNOWLEDGMENT TO AMENDMENT to
LOAN AND SECURITY AGREEMENT
The Aegis Consumer Funding
Group hereby consents to the agreements of the
Lender and AAF contained in the foregoing
Amendment to Loan and Security Agreement, and
reaffirms all of its obligations under the Guaranty
executed by it in connection with the Loan
Agreement, which Guaranty shall remain in full
force and effect, before and after giving effect to
the amendments described hereinabove, and such
Guaranty is hereby ratified and confirmed
THE AEGIS CONSUMER FUNDING
GROUP, INC.
By
Name:
Title:
<PAGE>
AMENDED AND RESTATED NOTE
U.S. $75,000,000.00
May 21, 1997
FOR VALUE RECEIVED, AEGIS
AUTO FINANCE, INC., a Delaware corporation
(the "Borrower") does hereby promise to pay to III
FINANCE LTD, a Cayman Islands company (the
"Lender"), the principal amount of
U.S.$75,000,000 (SEVENTY FIVE MILLION
AND NO/100 DOLLARS) or, if less, the unpaid
principal amount of the Loans made by the Lender
to the Borrower under that certain Loan and
Security Agreement dated as of March 19, 1997
among the Borrower and the Lender (as amended,
restated, supplemented or otherwise modified from
time to time, the "Loan Agreement"), on the
Termination Date, and to pay interest on the
unpaid principal balance hereof at the rates and at
the times set forth in the Loan Agreement.
Capitalized terms used herein without definition
are used as defined in the Loan Agreement.
Interest shall be calculated on the
basis of a 360-day year for the actual number of
days elapsed. Upon the occurrence and during the
continuance of an Event of Default, the interest
rate shall be increased by two percent (2.00%) per
annum above the rate of interest otherwise
applicable. In no event shall the interest payable
hereunder exceed the Maximum Rate.
This Note is referred to in, is issued
pursuant to, and is entitled to the benefits of, the
Loan Agreement, to which reference is hereby
made for a more complete statement of the terms
and conditions under which the Loans evidenced
hereby are made and are to be repaid.
This Note is a registered obligation
(as more particularly described in Section 8.8 of
the Loan Agreement), and it is the intent of the
parties to the Loan Agreement that the Loans be
maintained in "registered form" within the
meaning of Section 163(f), 871(h)(2) and
81(c)(2) of the Internal Revenue Code.
Upon and after the occurrence of an
Event of Default, this Note may, as provided in
the Loan Agreement, without demand, notice or
legal process of any kind, be declared, and
immediately shall become, due and payable. The
Loan Agreement also contains
provisions for optional and mandatory
prepayments on account of the principal hereof
prior to maturity upon the terms and conditions
specified therein.
All Payments of principal of and
interest on this Note shall be made to the Lender
at such account as the Lender shall
in writing direct the Borrower, in immediately
available funds and in currency of the United
States of America which at the time
of payment shall be legal tender for the payment
of public and private debts.
The Borrower promises to pay all
costs and expenses, including reasonable attorney's
fees and disbursements incurred in the collection
and enforcement of this Note or any appeal of a
judgement rendered thereon, all in accordance
with the provisions of the Loan Agreement. The
Borrower hereby waives diligence, presentment,
protest, demand and notice of every kind except as
required pursuant to the Loan Agreement and to
the full extent permitted by law the right to plead
any statute of limitations as a defense to any
demands hereunder.
This Note is secured by all
Collateral securing the Obligations pursuant to the
Loan Agreement and the other Financing
Agreements.
THIS NOTE SHALL BE
GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
AEGIS AUTO FINANCE, INC.
By
Name:
Title:
I:\DINA\SECREPOR\10_10511.WPD September 17, 1997 (11:42am)
AEGIS AUTO FINANCE, INC.
TO
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
TRUSTEE
INDENTURE
DATED AS OF APRIL 30, 1997
$21,333,333
12% EXCHANGEABLE SUBORDINATED NOTES
DUE APRIL 30, 2004
<PAGE>
INDENTURE, dated as of April 30, 1997,
between Aegis Auto Finance, Inc., a corporation duly
organized and existing under the laws of the State of
Delaware (herein called the "Company"), having its
principal office at 525 Washington Boulevard, Jersey
City, New Jersey 07310, and Norwest Bank
Minnesota, National Association, a national banking
association organized and existing under the laws of
the United States of America, as Trustee (herein called
the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation
of an issue of its 12% Exchangeable Subordinated
Notes Due 2004 (herein called the "Securities") of
substantially the tenor and amount hereinafter set
forth, and to provide therefor, the Company has duly
authorized the execution and delivery of this
Indenture.
All things necessary to make the Securities,
when executed by the Company and authenticated and
delivered hereunder and duly issued by the Company,
the valid obligations of the Company, and to make this
Indenture a valid agreement of the Company, in
accordance with their and its terms, have been done.
Further, all things necessary to duly authorize the
issuance of the Preferred Stock issuable upon the
exchange of the Securities, and to duly reserve for
issuance the number of shares of Common Stock
issuable, at the Parent's option, upon redemption of
such Preferred Stock, have been done.
NOW, THEREFORE, THIS INDENTURE
WITNESSETH:
For and in consideration of the premises and
the acceptance of the Securities by the Holders
thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities,
as follows:
ARTICLE I
Definitions and Other Provisions of General
Application
SECTION 1.01. Definitions.
For all purposes of this Indenture, except as
otherwise expressly provided or unless the context
otherwise requires:
(1) the terms defined in this
Article One have the meanings assigned to
them in this Article and include the plural as
well as the singular;
(2) all other terms used herein
which are defined in the Trust Indenture Act,
either directly or by reference therein, have
the meanings assigned to them therein;
(3) all accounting terms not
otherwise defined herein have the meanings
assigned to them in accordance with generally
accepted accounting principles, and except as
otherwise herein expressly provided, the term
"generally accepted accounting principles"
with respect to any computation required or
permitted hereunder shall mean such
accounting principles as are generally accepted
at the date of such computation; and
(4) the words "herein", "hereof"
and "hereunder" and other words of similar
import refer to this Indenture as a whole and
not to any particular Article, Section or other
subdivision.
"Accumulated Cash Flow" has the meaning
specified in Section 14.01.
"Act," when used with respect to any Holder,
has the meaning specified in Section 1.04(a).
"Affiliate" of any specified Person means any
other Person directly or indirectly controlling or
controlled by or under direct or indirect common
control with such specified Person. For the purposes
of this definition, "control", when used with respect to
any specified Person, means the power to direct the
management and policies of such Person, directly or
indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings
correlative to the foregoing.
"Authenticating Agent" means any Person
authorized by the Trustee pursuant to Section 6.14 to
act on behalf of the Trustee to authenticate Securities.
"Board of Directors" means either the board of
directors of the Company or any duly authorized
committee of that board.
"Board Resolution" means a resolution duly
adopted by the Board of Directors, a copy of which,
certified by the Secretary or an Assistant Secretary of
the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the
date of such certification, shall have been delivered to
the Trustee.
"Business Day" means, with respect to any
Place of Payment, Place of Exchange or any other
place, as the case may be, each Monday, Tuesday,
Wednesday, Thursday and Friday, other than any such
day on which banking institutions in such particular
place are authorized or obligated by law or executive
order to close.
"Capital Expenditures" means, for any Person
for any period, the aggregate of (i) all expenditures by
such Person and its consolidated subsidiaries, except
interest capitalized during construction, during such
period for property, plant or equipment, including,
without limitation, renewals, improvements,
replacements and capitalized repairs, that would be
reflected as additions to the property, plant or
equipment on a consolidated balance sheet of such
Person and its subsidiaries prepared in conformity with
generally accepted accounting principles and (ii)
without duplication, the principal amount of all
Indebtedness incurred or assumed to finance any such
additions to property, plant and equipment. For the
purpose of this definition, the purchase price of
equipment which is acquired simultaneously with the
trade-in of existing equipment owned by such Person
or any of its subsidiaries or with insurance proceeds
shall be included in Capital Expenditures only to the
extent of the gross amount of such purchase price less
the credit granted by the seller of such equipment
being traded in at such time or the amount of such
proceeds, as the case may be.
"Cash Equivalents" means (i) securities with
maturities of one year or less from the date of
acquisition issued or fully guaranteed or insured by the
United States government or any agency or
instrumentality thereof, (ii) certificates of deposit,
eurodollar time deposits, overnight bank deposits and
bankers' acceptances of any lender having maturities
of one year or less from the date of acquisition, (iii)
commercial paper of an issuer rated at least "A-1" by
Standard & Poor's Corporation or "P-1" by Moody's
Investors Service, Inc., or carrying an equivalent
rating by a nationally recognized rating agency if both
of the two named rating agencies cease publishing
ratings of investments; and (iv) repurchase agreements
and reverse repurchase agreements relating to
marketable direct obligations issued or unconditionally
guaranteed by the United States government or issued
by any agency thereof and backed by the full faith and
credit of the United States, in each case maturing
within one year from the date of acquisition; provided,
however, that the terms of such agreements comply
with the guidelines set forth in the Federal Financial
Institutions Examination Council Supervisory Policy
entitled Repurchase Agreements of Depository
Institutions With Securities Dealers and Others, as
adopted by the Comptroller of the Currency.
"Certificate of Designation" means the
Certificate of Designations, Preferences, and Rights of
Class D Redeemable Preferred Stock of The Aegis
Consumer Funding Group, Inc.
"Change in Control" shall mean any of the
following: (i) the Parent ceases to be the owner,
directly or indirectly, of 100% of the equity interest
in, and capital stock of the Company; or (ii) any of
Joseph Battiato, Angelo Appierto or Gary Peiffer shall
cease to hold their current positions or cease to be
otherwise actively involved in the management of the
Company; provided, however, that should any one of
the foregoing individuals (and only one) cease to hold
his current office or cease to be actively involved in
the management of the Company and the Parent as a
result of death, disability or discharge for cause, then
no "Change in Control" shall be deemed to have
occurred under this definition unless and until another
of the foregoing individuals ceases to hold his current
office or ceases to be actively involved in management
as described above.
"Closing Price Per Share" means, with respect
to the Common Stock, for any day, the reported last
sales price regular way per share or, in case no such
reported sale takes place on such day, the average of
the reported closing bid and asked prices regular way,
in either case (i) on the New York Stock Exchange or,
if the Common Stock is not listed or admitted to
trading on the New York Stock Exchange, on the
principal national securities exchange on which the
Common Stock is listed or admitted to trading, or
(ii) if not listed on or admitted to trading on any
national securities exchange, then on the Nasdaq
National Market or (iii) if the Common Stock is not
listed or admitted to trading on any national securities
exchange or quoted on such National Market, the
average of the closing bid and asked prices in the
over-the-counter market as furnished by any New
York Stock Exchange member firm selected from time
to time by the Company for that purpose.
"Code" has the meaning specified in Section
2.01.
"Collateral" has the meaning specified in
Section 15.01.
"Collateral Documents" means (a) that certain
security agreement dated as of the date hereof, from
the Company granting the Trustee a second priority
security interest in the "Collateral" as defined in the
Loan Warehouse Facility, (b) that certain security
agreement dated as of the date hereof from Aegis
Acceptance Corp. and Aegis Consumer Finance, Inc.
granting the Trustee a third priority security interest in
the "Collateral" as defined in the Lease Warehouse
Facility, (c) that certain pledge agreement dated as of
the date hereof from the Company granting the Trustee
a second priority security interest in the issued and
outstanding stock of (i) Aegis Auto Funding Corp. IV,
(ii) Aegis Auto Funding Corp. II and (iii) Aegis Auto
Funding Corp., (d) that certain pledge agreement dated
as of the date hereof from Aegis Consumer Finance,
Inc. granting the Trustee a second priority security
interest in the issued and outstanding limited
partnership interests in (i) Aegis Auto Receivables
1994-A, L.P., (ii) Aegis Auto Receivables 1994-2,
L.P., (iii) Aegis Auto Receivables 1994-3, L.P. and
(iv) Aegis Auto Receivables 1995-1, L.P., (e) that
certain pledge agreement dated as of the date hereof
from Aegis Consumer Finance, Inc. granting the
Trustee a subordinate security interest in the issued
and outstanding stock of its direct subsidiaries, (f) that
certain pledge agreement dated as of the date hereof
from the Parent granting the Trustee a subordinate
security interest in the issued and outstanding stock of
its direct subsidiaries and (g) that certain pledge
agreement dated as of the date hereof from Aegis
Capital Markets, Inc. granting the Trustee a
subordinate security interest in the issued and
outstanding stock in its direct subsidiaries.
"Commission" means the Securities and
Exchange Commission, as from time to time
constituted, created under the Exchange Act, or, if at
any time after the execution of this instrument such
Commission is not existing and performing the duties
now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.
"Common Stock" means the common stock,
par value $.01 per share, of the Company authorized
at the date of this instrument as originally executed.
"common stock" includes any stock of any
class of capital stock which has no preference in
respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation,
dissolution or winding up of the issuer thereof and
which is not subject to redemption by the issuer
thereof.
"Company" means the Person named as the
"Company" in the first paragraph of this instrument
until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture,
and thereafter "Company" shall mean such successor
Person.
"Company Request" or "Company Order"
means a written request or order signed in the name of
the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or a Vice
President, and by its Chief Financial Officer, its
Treasurer, an Assistant Treasurer, its Secretary or an
Assistant Secretary, and delivered to the Trustee.
"Constituent Person" has the meaning specified
in Section 13.09.
"Corporate Trust Office" means the principal
office of the Trustee at which at any particular time its
corporate trust business shall be administered, which
office on the date hereof is located at
6th and Marquette, Minneapolis, Minnesota 55479-
0069
"Corporation" means a corporation,
association, company, joint-stock company or business
trust.
"Defaulted Interest" has the meaning specified
in Section 3.07.
"Event of Default" has the meaning specified
in Section 5.01.
"Exercise Price" means the exercise price of
the Warrant as set forth in Section 11.09.
"Exchange Act" means the United States
Securities Exchange Act of 1934 (or any successor
statute), as amended from time to time, and the rules
and regulations promulgated thereunder.
"Exchange Agent" means any Person
authorized by the Company to exchange Securities in
accordance with Article Thirteen hereof. The
Company has initially appointed the Trustee as its
Exchange Agent.
"Exchange Price" has the meaning specified in
Section 13.01.
"Guaranty" means the unconditional guaranty
by the Parent of the Company's obligations on the
Securities delivered pursuant to the provisions of
Section 15.03.
"Holder" means a Person in whose name a
Security is registered in the Security Register.
"Indebtedness" means, with respect to any
Person, without duplication, (a) any indebtedness,
contingent or otherwise, in respect of borrowed money
or evidenced by bonds, notes, debentures or similar
instruments, if and to the extent any of the foregoing
indebtedness would appear as a liability upon a
balance sheet of such Person prepared on a
consolidated basis in accordance with generally
accepted accounting principles and (b) to the extent not
otherwise included, any obligation by such Person to
be liable, or to pay, as obligor or otherwise, on the
Indebtedness of another Person.
"Indenture" means this instrument as originally
executed or as it may from time to time be
supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the
applicable provisions hereof, including, for all
purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act
that are deemed to be a part of and govern this
instrument and any such supplemental indenture,
respectively.
"Interest Payment Date" means the Stated
Maturity of an installment of interest on the Securities.
"Lease Warehouse Facility" means that certain
Loan and Security Agreement dated February 28,
1994, by and among Aegis Acceptance Corp., Aegis
Consumer Finance, Inc. and III Finance, Ltd.
"Lien" means any mortgage, lien, pledge,
charge or other security interest or similar
encumbrance.
"Loan Warehouse Facility" means that certain
Loan and Security Agreement dated March 14, 1997,
by and among the Company, III Finance, Ltd. and III
Global, Ltd.
"Maturity," when used with respect to any
Security (or portion thereof), means the date on which
the principal or any Redemption Price of such Security
(or portion thereof) becomes due and payable as
therein or herein provided, whether at the Stated
Maturity or by declaration of acceleration, call for
redemption or otherwise.
"Non-Electing Share" has the meaning
specified in Section 13.09.
"Non-Payment Default" means the occurrence
or existence of any default in any covenant, other than
a Payment Default, that, by the terms of any
outstanding Senior Indebtedness, permits one or more
holders of such Senior Indebtedness (or a trustee or
agent on behalf of the holders thereof) to declare such
Senior Indebtedness immediately due and payable prior
to the date on which it would otherwise become due
and payable.
"Notice of Default" means a written notice of
the kind specified in Section 5.01(3).
"Obligor" means the Company, the Parent and
each Affiliate of the Parent which has pledged or
granted a security interest in any of its property under
any Collateral Document.
"Officers' Certificate" means a certificate
signed by the Chairman of the Board, a Vice
Chairman of the Board, the President or a Vice
President, and by the Chief Financial Officer, the
Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary, of the Company, and delivered to
the Trustee. One of the officers signing an Officers'
Certificate given pursuant to Section 10.05 shall be the
principal executive, financial or accounting officer of
the Company.
"Opinion of Counsel" means a written opinion
of counsel, who may be counsel for the Company and
who shall be reasonably acceptable to the Trustee.
"Outstanding," when used with respect to
Securities, means, as of the date of determination, all
Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore canceled
by the Trustee or delivered to the Trustee for
cancellation;
(ii) Securities for payment or
redemption of which money in the necessary
amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the
Company) in trust or set aside and segregated
in trust by the Company (if the Company shall
act as its own Paying Agent) for the Holders
of such Securities; provided that, if such
Securities are to be redeemed, notice of such
redemption has been duly given pursuant to
this Indenture or provision therefor satisfactory
to the Trustee has been made;
(iii) Securities which have been
paid pursuant to Section 3.06 or in exchange
for or in lieu of which other Securities have
been authenticated and delivered pursuant to
this Indenture, other than any such Securities
in respect of which there shall have been
presented to the Trustee proof satisfactory to it
that such Securities are held by a bona fide
purchaser in whose hands such Securities are
valid obligations of the Company; and
(iv) Securities converted into
Preferred Stock pursuant to Article Thirteen;
provided, however, that in determining whether the
Holders of the requisite principal amount of
Outstanding Securities have given any request,
demand, authorization, direction, notice, consent or
waiver hereunder, Securities owned by the Company
or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor shall
be disregarded and deemed not to be Outstanding,
except that, in determining whether the Trustee shall
be protected in relying upon any such request,
demand, authorization, direction, notice, consent or
waiver, only Securities which a Responsible Officer of
the Trustee actually knows to be so owned shall be so
disregarded. Securities so owned which have been
pledged in good faith may be regarded as Outstanding
if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to
such Securities and that the pledgee is not the
Company or any other obligor upon the Securities or
any Affiliate of the Company or of such other obligor.
"Parent" shall mean The Aegis Consumer
Funding Group, Inc.
"Paying Agent" means any Person authorized
by the Company to pay the principal of or interest on
any Securities on behalf of the Company.
"Payment Blockage Period" has the meaning
specified in Section 12.03.
"Payment Default" means the continuation of
any default in the payment of principal of or interest
on any Senior Indebtedness beyond any applicable
grace period with respect thereto (whether at the stated
maturity of any such payment or by declaration of
acceleration, call for redemption or otherwise).
"Permitted Investment" has the meaning
specified in Section 4.02.
"Permitted Liens" means:
(a) Liens for taxes, assessments or
other governmental charges which shall not be
delinquent or which are not yet due and
payable without penalty, or the validity of
which is being contested in good faith by
appropriate proceedings upon stay of execution
of the enforcement thereof, and for which such
reserve or other appropriate provision, if any,
as is required by generally accepted accounting
principles has been made;
(b) Liens to secure statutory
obligations, bonds to secure performance of
bids, tenders, contracts (other than for the
repayment of indebtedness for borrowed
money) or leases, or deposits or pledges for
purposes of like general nature in the ordinary
course of business;
(c) Liens securing surety,
supersedeas or appeal bonds, bonds for
releases of attachment or stay of execution or
injunction or Liens otherwise resulting from
litigation or legal proceedings;
(d) mechanic's, workmen's,
materialmen's or other like Liens arising in the
ordinary course of business in respect of
obligations which are not due or which are
being contested in good faith and deposits or
pledges to secure the release of such Liens;
(e) operating leases made, or
existing on property acquired, in the ordinary
course of business;
(f) landlord's Liens under leases
to which the Company or any Subsidiary is a
party;
(g) Liens on property arising from
purchase money mortgages and capitalized
lease obligations which are created or assumed
subsequent to the date of this Indenture;
(h) Liens in existence on the date
of this Indenture on any part of the property of
the Company or any Subsidiary which are
described on Exhibit A hereto; or
(i) any Lien renewing, extending
or refunding any Lien permitted by clauses (g)
or (h).
"Person" means any individual, corporation,
limited liability company, partnership, joint venture,
joint stock company, trust, unincorporated
organization, or government or any agency or political
subdivision thereof.
"Place of Exchange" has the meaning specified
in Section 13.02.
"Place of Payment" means any city in which a
Paying Agent is located.
"Predecessor Security" of any particular
Security means every previous Security evidencing all
or a portion of the same debt as that evidenced by
such particular Security; for the purposes of this
definition, any Security authenticated and delivered
under Section 3.06 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be
deemed to evidence the same debt as the mutilated,
destroyed, lost or stolen Security.
"Preferred Stock" means the Class D
Redeemable Preferred Stock, par value $.10 per share,
stated value $1,000 per share, of the Parent which
shall be issued by the Parent upon exchange of the
Securities in accordance with the provisions of Article
Thirteen hereof.
"Record Date" means any Regular Record
Date or Special Record Date.
"Redemption Date," when used with respect to
any Security to be redeemed, means the date fixed for
such redemption by or pursuant to this Indenture.
"Redemption Price," when used with respect
to any Security to be redeemed, means the price at
which it is to be redeemed pursuant to this Indenture.
"Regular Record Date" for the interest payable
on any Interest Payment Date means the April 25 or
October 25 (whether or not a Business Day), as the
case may be, next preceding such Interest Payment
Date.
"Retained Yield Financing" means borrowings
of the Company and Aegis Consumer Finance, Inc.
secured directly or indirectly by the residual interests
in securitizations effected by the Company and Aegis
Consumer Finance, Inc., as set forth in Items II.B.
and IV.A. of Exhibit B to this Indenture, all as
amended and restated by that certain Amended and
Restated Master Loan Agreement dated as of April 30,
1997 by and among the Company, Aegis Consumer
Finance, Inc. and III Finance, Ltd.
"Responsible Officer," when used with respect
to the Trustee, means any officer within the Corporate
Trust Office, including any Vice President, Assistant
Vice President, Secretary, Assistant Secretary,
Managing Director or any other officer of the Trustee
customarily performing functions similar to those
performed by the above designated officers and also,
with respect to a particular matter, any other officer to
whom such matter is referred because of his
knowledge and familiarity with the particular subject.
"Securities" has the meaning ascribed to it in
the first paragraph under the caption "Recitals of the
Company".
"Security Register" and "Security Registrar"
have the respective meanings specified in Section 3.05.
"Senior Indebtedness" means the principal of
and interest (including all interest accruing subsequent
to the commencement of any bankruptcy or similar
proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding)
on, and all fees and other amounts payable in
connection with, the following, whether absolute or
contingent, secured or unsecured, due or to become
due, outstanding on the date of the Indenture or
thereafter created, incurred or assumed: (a) obligations
of the Company or the Parent under the Loan
Warehouse Facility, (b) obligations of the Company or
the Parent under the Lease Warehouse Facility, (c) all
obligations in respect of securitizations effected by the
Company or its Affiliates after the date hereof, (d)
obligations under the Retained Yield Financing, (e)
indebtedness of others of any of the kinds described in
the preceding clauses (a) through (d) assumed or
guaranteed by the Company or the Parent, (f)
Indebtedness owed to Greenwich Capital Financial
Products, Inc. to the extent set forth in a certain
intercreditor agreement to be executed by the Trustee
on behalf of the Holders, at the direction of the initial
purchasers of a majority in principal amount of the
Outstanding Securities, and (g) amendments, renewals,
extensions, modifications and refundings of any such
indebtedness or obligations described in clauses (a)
through (f) of this paragraph; provided, however, that
the following will not constitute Senior Indebtedness:
(i) any indebtedness or obligation which refers
explicitly to the Securities and states that the
indebtedness or obligation shall not be senior in right
of payment thereto, (ii) any indebtedness or obligation
in respect of the Securities or (iii) any indebtedness or
obligation of the Company or the Parent for
compensation to employees or for items purchased or
services rendered in the ordinary course of business.
"Special Record Date" for the payment of any
Defaulted Interest means a date fixed by the Trustee
pursuant to Section 3.07.
"Stated Maturity," when used with respect to
any Security or any installment of interest thereon,
means the date specified in such Security as the fixed
date on which the principal of such Security or such
installment of interest is due and payable.
"Subsidiary" means a corporation more than
50% of the outstanding voting stock of which is
owned, directly or indirectly, by the Company or by
one or more other Subsidiaries, or by the Company
and one or more other Subsidiaries. For the purposes
of this definition, "voting stock" means stock which
ordinarily has voting power for the election of
directors, whether at all times or only so long as no
senior class of stock has such voting power by reason
of any contingency.
"Transfer Notice" means the certification set
forth in Section 2.05.
"Trustee" means the Person named as the
"Trustee" in the first paragraph of this instrument until
a successor Trustee shall have become such pursuant
to the applicable provisions of this Indenture, and
thereafter "Trustee" shall mean such successor
Trustee.
"Trust Indenture Act" means the Trust
Indenture Act of 1939 as in force at the date as of
which this Indenture was executed; provided,
however, that in the event the Trust Indenture Act of
1939 is amended after such date, "Trust Indenture
Act" means, to the extent required by any such
amendment, the Trust Indenture Act of 1939 as so
amended.
"Vice President", when used with respect to
the Company or the Trustee, means any vice
president, whether or not designated by a number or a
word or words added before or after the title "vice
president".
"Warrant" has the meaning specified in Section
11.09.
"Warrant Expiration Date" shall be the date
specified in Section 2.07
"Warrant Holder" has the meaning specified in
Section 3.11.
"Warrant Register" has the meaning specified
in Section 3.11.
SECTION 1.02. Compliance Certificates and
Opinions.
Upon any application or request by the
Company to the Trustee to take any action under any
provision of this Indenture, the Company shall furnish
to the Trustee an Officers' Certificate stating that all
conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that,
in the opinion of such counsel, all such conditions
precedent, if any, have been complied with, except
that in the case of any such application or request as to
which the furnishing of such documents is specifically
required by any provision of this Indenture relating to
such particular application or request, no additional
certificate or opinion need be furnished.
Every certificate (including certificates
provided pursuant to Section 10.04) or opinion with
respect to compliance with a condition or covenant
provided for in this Indenture shall include, without
limitation:
(1) a statement that each individual
signing such certificate or opinion has read
such covenant or condition and the definitions
herein relating thereto;
(2) a brief statement as to the
nature and scope of the examination or
investigation upon which the statements or
opinions contained in such certificate or
opinion are based;
(3) a statement that, in the opinion
of each such individual, he has made such
examination or investigation as is necessary to
enable him to express an informed opinion as
to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in
the opinion of each such individual, such
condition or covenant has been complied with.
SECTION 1.03. Form of Documents Delivered
to Trustee.
In any case where several matters are required
to be certified by, or covered by an opinion of, any
specified Person, it is not necessary that all such
matters be certified by, or covered by the opinion of,
only one such Person, or that they be so certified or
covered by only one document, but one such Person
may certify or give an opinion with respect to some
matters and one or more other such Persons may
certify or give an opinion with respect to other
matters, and any such Person may certify or give an
opinion as to such matters in one or several
documents.
Any certificate or opinion of an officer of the
Company may be based, insofar as it relates to legal
matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows,
or in the exercise of reasonable care should know, that
the certificate or opinion of, or representations by,
counsel with respect to the matters upon which such
officer's certificate or opinion is based are erroneous.
Any such certificate or opinion of counsel may be
based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an
officer or officers of the Company stating that the
information with respect to such factual matters is in
the possession of the Company, unless such counsel
knows, or in the exercise of reasonable care should
know, that the certificate or opinion of, or
representations by, the officer or officers of the
Company with respect to such matters are erroneous.
Where any Person is required to make, give or
execute two or more applications, requests, consents,
certificates, statements, opinions or other instruments
under this Indenture, they may, but need not, be
consolidated and form one instrument.
SECTION 1.04. Acts of Holders; Record
Dates.
(a) Any request, demand, authorization,
direction, notice, consent, waiver or other action
provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or
more instruments of substantially similar tenor signed
by such Holders in person or by an agent duly
appointed in writing; and, except as herein otherwise
expressly provided, such action shall become effective
when such instrument or instruments are delivered to
the Trustee and, where it is hereby expressly required,
to the Company. Such instrument or instruments (and
the action embodied therein and evidenced thereby) are
herein sometimes referred to as the "Act" of the
Holders signing such instrument or instruments. Proof
of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Section 6.01)
conclusive in favor of the Trustee and the Company, if
made in the manner provided in this Section.
(b) The fact and date of the execution by
any Person of any such instrument or writing may be
proved by the affidavit of a witness of such execution
or by a certificate of a notary public or other officer
authorized by law to take acknowledgments of deeds
certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof.
Where such execution is by a signer acting in a
capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient
proof of his authority. The fact and date of the
execution of any such instrument or writing, or the
authority of the Person executing the same, may also
be proved in any other manner which the Trustee
deems sufficient.
(c) The ownership of Securities shall be
proved by the Security Register.
(d) The Company may, in circumstances
permitted by the Trust Indenture Act, fix a record date
for the purpose of determining the Holders entitled to
sign any instrument evidencing or embodying an Act
of the Holders. If a record date is fixed, those
persons who were Holders at such record date (or
their duly appointed agents), and only those persons
shall be entitled to sign any such instrument
evidencing or embodying an Act of the Holders,
whether or not such persons continue to be Holders
after such record date. Nothing in this Section 1.04(d)
shall be construed to render ineffective any action
taken by Holders of the requisite principal amount of
Securities on the date such action is taken. Promptly
after any record date is set pursuant to this section
1.04(d), the Company, at its own expense, shall cause
notice of such record date, the proposed action by the
Holders and the applicable date by which the Act must
be taken, to be given to the Trustee in writing and to
each Holder in the manner set forth in Section 1.06.
(e) Without limiting the provisions of
paragraphs (a), (b), (c) and (d) of this Section 1.04, a
Holder entitled hereunder to take any action hereunder
with regard to any particular Security may do so with
regard to all or any part of the principal amount of
such Security or by one or more duly appointed
agents, each of which may do so pursuant to such
appointment with regard to all or any part of such
principal amount.
(f) Any request, demand, authorization,
direction, notice, consent, waiver or other Act of the
Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security
issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the
Trustee or the Company in reliance thereon, whether
or not notation of such action is made upon such
Security.
SECTION 1.05. Notices, Etc., to Trustee and
Company.
Any request, demand, authorization, direction,
notice, consent, waiver or Act of Holders or other
document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or
by the Company shall be sufficient for every
purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its
Corporate Trust Office, Attention: Curtis D.
Schwegman; or
(2) the Company by the Trustee or
by any Holder shall be sufficient for every
purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed,
first-class postage prepaid, to the Company,
addressed to it at the address specified in the
first paragraph of this instrument or at any
other address previously furnished in writing
to the Trustee by the Company.
SECTION 1.06. Notice to Holders: Waiver.
Where this Indenture provides for notice to
Holders of any event, such notice shall be sufficiently
given (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to
each Holder affected by such event, at his address as it
appears in the Security Register, not later than the
latest date (if any), and not earlier than the earliest
date (if any), prescribed for the giving of such notice.
In any case where notice to Holders is given by mail,
neither the failure to mail such notice, nor any defect
in any notice so mailed, to any particular Holder shall
affect the sufficiency of such notice with respect to
other Holders. Where this Indenture provides for
notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall
be the equivalent of such notice. Waivers of notice by
Holders shall be filed with the Trustee, but such filing
shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
In case by reason of the suspension of regular
mail service or by reason of any other cause it shall be
impracticable to give such notice by mail, then such
notification as shall be made with the approval of the
Trustee shall constitute a sufficient notification for
every purpose hereunder.
SECTION 1.07. Conflict with Trust Indenture
Act.
If, at a time when the Trust Indenture Act is
applicable to this Indenture, any provision hereof
limits, qualifies or conflicts with a provision of the
Trust Indenture Act that is required under such Act to
be a part of and govern this Indenture, the applicable
provision in such Act shall control. If any provision
of this Indenture modifies or excludes any provision of
the Trust Indenture Act that may be so modified or
excluded, the latter provision shall be deemed to apply
to this Indenture as so modified or excluded, as the
case may be.
SECTION 1.08. Effect of Headings and Table
of Contents.
The Article and Section headings herein and
the Table of Contents are for convenience only and
shall not affect the construction hereof.
SECTION 1.09. Successors and Assigns.
All covenants and agreements in this Indenture
by the Company shall bind its successors and assigns,
whether so expressed or not.
SECTION 1.10. Separability Clause.
In case any provision in this Indenture or in
the Securities shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the
remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 1.11. Benefits of Indenture.
Nothing in this Indenture or in the Securities,
express or implied, shall give to any Person, other
than the parties hereto and their successors hereunder,
the holders of Senior Indebtedness and the Holders of
Securities, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
SECTION 1.12. Governing Law.
THIS INDENTURE, THE SECURITIES
AND THE WARRANTS SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK AS
APPLIED TO CONTRACTS MADE AND TO BE
PERFORMED WITHIN THE STATE OF NEW
YORK, INCLUDING SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW BUT OTHERWISE
WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS.
SECTION 1.13. Legal Holidays.
In any case where any Interest Payment Date,
Redemption Date or Stated Maturity of any Security or
the last date on which a Holder has the right to
exchange his Securities shall not be a Business Day,
then (notwithstanding any other provision of this
Indenture or of the Securities) payment of interest or
principal or delivery for exchange of such Security
need not be made on such date, but may be made on
the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date,
Redemption Date or at the Stated Maturity, or on such
last day for exchange; provided, that no interest shall
accrue for the period from and after such Interest
Payment Date, Redemption Date, Stated Maturity or
the last day for exchange, as the case may be, so long
as payment is made on such succeeding Business Day.
SECTION 1.14. Incorporators, Stockholders,
Officers and Directors of the
Company Exempt from
Individual Liability.
No recourse under or upon any obligation,
covenant or agreement in this Indenture or any
indenture supplemental hereto or of any Security, or
for any claim based thereon or otherwise in respect
thereof, shall be had against any incorporator,
stockholder, officer or director, as such, past, present
or future, of the Company or of any successor Person,
either directly or through the Company or any
successor Person, whether by virtue of any
constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or
otherwise; it being expressly understood that this
Indenture and the obligations issued hereunder are
solely corporate obligations, and that no such personal
liability whatever shall attach to, or is or shall be
incurred by, the incorporators, stockholders, officers
or directors, as such, of the Company or of any
successor Person, or any of them, because of the
creation of the indebtedness hereby authorized, or
under or by reason of the obligations, covenants or
agreements contained in this Indenture or in any of the
Securities or implied therefrom; and that any and all
such personal liability of every name and nature,
either at common law or in equity or by constitution
or statute, of, and any and all such rights and claims
against, every such incorporator, stockholder, officer
or director, as such, because of the creation of the
indebtedness hereby authorized, or under or by reason
of the obligations, covenants or agreements contained
in this Indenture or in any of the Securities or implied
therefrom, are hereby expressly waived and released
as a condition of, and as a consideration for, the
execution of this Indenture and the issue of such
Securities.
<PAGE>
ARTICLE II
Security Forms
SECTION 2.01. Forms Generally.
The Securities and the Trustee's certificates of
authentication shall be in substantially the forms set
forth in this Article, with such appropriate insertions,
omissions, substitutions and other variations as are
required or permitted by this Indenture, and may have
such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as
may be required to comply with the rules of any
securities exchange, the Internal Revenue Code of
1986, as amended, and the regulations thereunder (the
"Code"), or as may, consistently herewith, be
determined by the officers executing such Securities,
as evidenced by their execution thereof.
SECTION 2.02. Form of Face of Security.
[If applicable, insert:] THE SECURITY
REPRESENTED HEREBY HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"),
AND IS A RESTRICTED SECURITY AS THAT
TERM IS DEFINED IN RULE 144 UNDER THE
SECURITIES ACT. THIS SECURITY MAY NOT
BE OFFERED FOR SALE, SOLD, OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT
TO AN EXEMPTION FROM REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAW,
THE AVAILABILITY OF WHICH IS TO BE
ESTABLISHED TO THE SATISFACTION OF THIS
CORPORATION, INCLUDING, WITHOUT
LIMITATION, BY DELIVERY OF AN OPINION
OF COUNSEL IN FORM AND SCOPE
SATISFACTORY TO THE CORPORATION AS TO
THE AVAILABILITY OF SUCH EXEMPTION.
AEGIS AUTO FINANCE, INC.
12% EXCHANGEABLE SUBORDINATED NOTE
DUE 2004
No. ________ $__________
Aegis Auto Finance, Inc., a corporation duly
organized and existing under the laws of Delaware
(herein called the "Company", which term includes
any successor Person under the Indenture hereinafter
referred to), for value received, hereby promises to
pay to ______________, or registered assigns, the
principal sum of ________________ Dollars
($________) on April 30, 2004, and to pay interest
thereon from May __, 1997 or from the most recent
Interest Payment Date to which interest has been paid
or duly provided for, semi-annually in arrears on
November 1 and May 1 in each year (each, an
"Interest Payment Date"), commencing November 1,
1997 at the rate of 12% per annum, until the principal
hereof is due, and at the rate of 14% per annum
compounded semi-annually, on any overdue principal
and, to the extent permitted by law, on any overdue
interest. Interest on the Securities shall be computed
on the basis of a 360-day year of twelve 30-day
months. The interest so payable, and punctually paid
or duly provided for, on any Interest Payment Date
will, as provided in the Indenture, be paid to the
Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest,
which shall be the April 25 or October 25 (whether or
not a Business Day), as the case may be, next
preceding such Interest Payment Date. Except as
otherwise provided in the Indenture, any such interest
not so punctually paid or duly provided for will
forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the
Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee,
notice whereof shall be given to Holders of Securities
no more than 15 days and not less than 10 days prior
to such Special Record Date, or be paid at any time in
any other lawful manner not inconsistent with the
requirements of any automated quotation system or
securities exchange on which the Securities may be
quoted or listed, and upon such notice as may be
required by such quotation system or exchange, as the
case may be, all as more fully provided in the
Indenture. Payments of principal shall be made upon
the surrender of this Security at the option of the
Holder at the Corporate Trust Office of the Trustee, or
at such other office or agency of the Company as may
be designated by it for such purpose, in such coin or
currency of the United States of America as at the
time of payment shall be legal tender for the payment
of public and private debts; provided, however; that at
the option of the Company payment of interest may be
made by check, mailed to the address of the Person
entitled thereto as such address shall appear in the
Security Register.
Except as specifically provided in the
Indenture, the Company shall not be required to make
any payment with respect to any tax, assessment or
other governmental charge imposed by any
governmental or any political subdivision or taxing
authority thereof or therein.
Reference is hereby made to the further
provisions of this Security set forth on the reverse
hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon
has been executed by the Trustee referred to on the
reverse hereof by manual signature, this Security shall
not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has
caused this instrument to be duly executed under its
corporate seal.
Dated:
AEGIS AUTO FINANCE, INC.
[Corporate Seal]
By:
Title:
Name:
Attest:
Title:
SECTION 2.03. Form of Reverse of Security.
This Security is one of a duly authorized issue
of Securities of the Company designated as its 12%
Exchangeable Subordinated Notes Due 2004 (herein
called the "Securities"), limited in aggregate principal
amount to $21,333,333 issued under an Indenture,
dated as of April 30, 1997 (herein called the
"Indenture"), between the Company and Norwest
Bank, N.A. as Trustee (herein called the "Trustee",
which term includes any successor trustee under the
Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the
Trustee, the holders of Senior Indebtedness and the
Holders of the Securities and of the terms upon which
the Securities are authenticated and delivered. The
Securities are issuable in "registered form" only (as
such term is defined in Section 163(f), 871(h)(2) and
881(c)(2) of the Code) without coupons in the
minimum denomination of $1,000 and any integral
multiple of one dollar.
Subject to and upon compliance with the
provisions of the Indenture, the Holder of this
Security, is entitled, at his option, at any time after
April 30, 1997 and before the close of business on
April 30, 2004, to exchange this Security (or any
portion of the principal amount hereof that is a
minimum of $1,000 and an integral multiple of one
dollar provided that the unexchanged portion of such
principal amount is $1,000 or any amount in excess
thereof) at the principal amount hereof or of such
portion, into fully paid and nonassessable shares of
Preferred Stock at an Exchange Price equal to
$1,000.00 aggregate principal amount of Securities for
each share of Preferred Stock by surrender of this
Security, duly endorsed or assigned to the Company or
in blank, and accompanied by the exchange notice
hereon duly executed, to the Company at the
Corporate Trust Office of the Trustee, or at such other
office or agency as the Company may designate (an
"Exchange Agent") (subject to any laws or regulations
applicable thereto and subject to the right of the
Company to terminate the appointment of any
Exchange Agent) for such purpose; provided,
however, that if this Security (or a portion hereof) has
been called for redemption on a Redemption Date
occurring during the period from the close of business
on any Regular Record Date next preceding any
Interest Payment Date to the opening of business on
such Interest Payment Date and is surrendered for
exchange during such period, then no payment or
adjustment shall be required of the Holder of this
Security upon such surrender with respect to interest
payable hereon on such Interest Payment Date. In the
event of an exchange, the Holder of this Security shall
be entitled to receive on the next Interest Payment
Date, accrued interest from the Interest Payment Date
immediately preceding the exchange of this Security to
the date this Security is surrendered for exchange. No
payment or adjustment is to be made on exchange of
this Security (or any portion hereof) for dividends on
the Preferred Stock issued on exchange. The delivery
to the Holder of the fixed number of shares of
Preferred Stock (together with any cash adjustment, as
provided in the Indenture) for which the Security is
exchanged shall be deemed to satisfy the Company's
obligation to pay the principal amount of the Security.
Where necessary, upon exchange, the Parent will issue
fractional shares of Preferred Stock. In addition, the
Indenture provides that in the case of certain
consolidations or mergers to which The Aegis
Consumer Funding Group, Inc. (the "Parent") is a
party or the conveyance, transfer, sale or lease of all
or substantially all of the property and assets of the
Parent, the Indenture shall be amended, without the
consent of any Holders of Securities, so that this
Security, if then Outstanding, will be exchanged
thereafter, during the period this Security shall be
redeemable as specified above, only for the kind and
amount of securities, cash and other property
receivable upon such consolidation, merger,
conveyance, transfer, sale or lease by a holder of the
number of shares of Preferred Stock for which this
Security could have been exchanged (assuming the
redemption of the shares of Preferred Stock)
immediately prior to such consolidation, merger,
conveyance, transfer, sale or lease (assuming such
holder of Preferred Stock was not a Constituent
Person, failed to exercise any rights of election and
received per share the kind and amount of securities,
cash and other property received per share by a
plurality of Non-Electing Shares).
The Securities are subject to redemption upon
not less than 30 nor more than 60 days' notice by
mail, at any time, and from time to time, in whole or
in part, at the election of the Company, at a
Redemption Price equal to 100% of the principal
amount, together with accrued interest to the
Redemption Date; provided, however, that interest
installments whose Stated Maturity is on or prior to
such Redemption Date will be payable to the Holders
of such Securities (or any Predecessor Securities) of
record at the close of business on the relevant Record
Dates referred to on the face hereof all as provided in
the Indenture.
In the event that the Securities are redeemed,
in whole or in part, prior to April 30, 2004, Warrants
shall be issued by the Parent upon such redemption
granting the Person previously holding the redeemed
Security rights to purchase, for cash in an amount
equal to the principal amount of the Securities so
redeemed, a number of shares of Preferred Stock
equivalent to the number of shares of Preferred Stock
(or other securities or property) such Person could
have received pursuant to the exchange rights provided
by the redeemed Securities.
In the event of redemption or exchange of this
Security in part only, a new Security or Securities for
the unredeemed or unexchanged portion hereof will be
issued in the name of the Holder hereof upon the
cancellation hereof.
In any case where the due date for the
payment of the principal of or interest on any Security
or the last day on which a Holder of a Security has a
right to exchange his Security shall be, at any Place of
Payment or Place of Exchange, as the case may be, a
day on which banking institutions at such Place of
Payment or Place of Exchange are authorized or
obligated by law or executive order to close, then
payment of principal, or interest, or delivery for
exchange of such Security need not be made on or by
such date at such place but may be made on or by the
next succeeding day at such place which is not a day
on which banking institutions are authorized or
obligated by law or executive order to close, with the
same force and effect as if made on the date for such
payment or the date fixed for redemption, or by such
last day for exchange, and no interest shall accrue on
the amount so payable for the period after such date so
long as payment is made on the next succeeding day at
such place which is not a day on which banking
institutions are authorized or obligated by law or
executive order to close.
The indebtedness evidenced by this Security
is, to the extent provided in the Indenture, subordinate
and subject in right of payment to the prior payment in
full of all Senior Indebtedness, and this Security is
issued subject to the provisions of the Indenture with
respect thereto. Each Holder of this Security, by
accepting the same, (a) agrees to and shall be bound
by such provisions, (b) authorizes and directs the
Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination
so provided and (c) appoints the Trustee his
attorney-in-fact for any and all such purposes.
If an Event of Default shall occur and be
continuing, the principal of all the Securities may be
declared due and payable in the manner and with the
effect provided in the Indenture.
The Indenture permits, with certain exceptions
as therein provided, the amendment thereof and the
modification of the rights and obligations of the
Company and the rights of the Holders of the
Securities under the Indenture at any time by the
Company and the Trustee with the consent of the
Holders of not less than a majority in aggregate
principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions
permitting the Holders of specified percentages in
aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the
Securities, to waive compliance by the Company with
certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this
Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security
and of any Security issued upon the registration of
transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or
waiver is made upon this Security.
No reference herein to the Indenture and no
provision of this Security or of the Indenture shall
alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of
and interest on this Security on the respective Stated
Maturities expressed herein (or in the case of
redemption, on the Redemption Date) or to exchange
this Security or issue Warrants as provided in the
Indenture.
As provided in and subject to the provisions of
the Indenture, the Holder of this Security shall not
have the right to institute any proceeding with respect
to the Indenture or for the appointment of a receiver
or trustee or for any other remedy thereunder, unless
such Holder shall have previously given the Trustee
written notice of a continuing Event of Default, the
Holders of not less than 25% in principal amount of
the Outstanding Securities shall have made written
request to the Trustee to institute proceedings in
respect of such Event of Default as Trustee and
offered the Trustee indemnity satisfactory to it and the
Trustee shall not have received from the Holders of a
majority in principal amount of the Securities
Outstanding a direction inconsistent with such request
and shall have failed to institute any such proceeding
for 60 days after receipt of such notice, request and
offer of indemnity. The foregoing shall not apply to
any suit instituted by the Holder of this Security for
the enforcement of any payment of principal hereof or
interest hereon on or after the respective due dates
expressed herein or for the enforcement of the right to
exchange or redeem this Security as provided in the
Indenture.
As provided in the Indenture and subject to
certain limitations therein set forth, the transfer of this
Security is registrable in the Security Register upon
surrender of this Security for registration of transfer at
the office or agency of the Company maintained for
that purpose pursuant to Section 10.03 of the
Indenture, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to
the Company and the Security Registrar duly executed
by the Holder hereof or his attorney duly authorized in
writing, and thereupon, one or more new Securities,
of authorized denominations and for the same
aggregate principal amount will be issued to the
designated transferee or transferees. No service
charge shall be made for any such registration of
transfer or exchange, but the Company may require
payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
Prior to due presentment of this Security for
registration of transfer, the Company, the Trustee and
any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the
owner hereof for all purposes, whether or not this
Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice
to the contrary.
All terms used in this Security and not defined
herein but which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
ABBREVIATIONS
The following abbreviations, when used in the
inscription of the face of this Security, shall be
construed as though they were written out in full
according to applicable laws or regulations:
TENCOM - as tenants in common UNIF
GIFT MIN ACT-__________________
TENENT - as tenants by the entiretie (Cust)
JT TEN - as joint tenants with right as
Custodian for __________________
under of survivorship and not as
(Minor)
tenants in common
Uniform Gifts to Minors Act of
_______________
(State)
Additional abbreviations may also be used
though not in the above list.
SECTION 2.04. Form of Trustee's Certificate
of Authentication.
This is one of the Securities referred to in the
within-mentioned Indenture.
[TRUSTEE],
as
Trustee
By:
Authorized
Signatory
SECTION 2.05. Form of Transfer Notice.
Assignment of this Security requires
completion of the form below and obtaining a
Medallion Guarantee:
The undersigned Holder hereby sell(s),
assign(s) and transfer(s) unto __________________
and whose taxpayer identification number is
_____________________ and whose address is
____________________________________________
the within Security and all rights thereunder, hereby
irrevocably constituting and appointing
_____________________ attorney-in-fact to transfer
this Security on the books of the Company with full
power of substitution in the premises.
Dated: Name:
By:
Name:
Title:
MUST BE MEDALLION GUARANTEED
NOTICE: The signature of the Holder to this
assignment must correspond with the name as written
upon the face of the within instrument in every
particular, without enlargement or any change
whatsoever.
SECTION 2.06. Form of Exchange Notice.
The undersigned Holder of this Security
hereby irrevocably exercises the option to exchange
this Security, or any portion of the principal amount
hereof (which is a minimum amount of $1,000 and an
integral multiple of one dollar provided that the
unexchanged portion of such principal amount is
$1,000 or any amount in excess thereof) below
designated, for shares of Preferred Stock in
accordance with the terms of the Indenture referred to
in this Security, and directs that such shares, together
with any Securities representing any unexchanged
principal amount hereof, be delivered to and be
registered in the name of the undersigned unless a
different name has been indicated below. If shares of
Preferred Stock or Securities are to be registered in
the name of a Person other than the undersigned,
(a) the undersigned will pay all transfer taxes payable
with respect thereto and (b) signature(s) must be
Medallion Guaranteed. If unexchanged Securities are
to be registered in the name of a Person other than the
undersigned, a Transfer Notice duly executed and with
signatures Medallion Guaranteed accompanies this
Security. Any amount required to be paid by the
undersigned on account of interest accompanies this
Security.
Dated:
Portion of Security to be exchanged
($1,000.00 or a greater amount in an integral multiple
of one dollar):
$
Signature (for exchange only)
MUST BE MEDALLION GUARANTEED IF THE
PREFERRED STOCK IS TO BE ISSUED IN A
NAME OTHER THAN THE REGISTERED
HOLDER OF THE SECURITY
If shares of Preferred Stock are to be issued and
registered otherwise than to the registered Holder
named above, please print or typewrite name and
address, including zip code, and social security or
other taxpayer identification number.
SECTION 2.07. Form of Warrant.
[If applicable, insert:] THE SECURITY
REPRESENTED HEREBY HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"),
AND IS A RESTRICTED SECURITY AS THAT
TERM IS DEFINED IN RULE 144 UNDER THE
SECURITIES ACT. THIS SECURITY MAY NOT
BE OFFERED FOR SALE, SOLD, OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT
TO AN EXEMPTION FROM REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAW,
THE AVAILABILITY OF WHICH IS TO BE
ESTABLISHED TO THE SATISFACTION OF THIS
CORPORATION, INCLUDING, WITHOUT
LIMITATION, BY DELIVERY OF AN OPINION
OF COUNSEL IN FORM AND SCOPE
SATISFACTORY TO THE CORPORATION AS TO
THE AVAILABILITY OF SUCH EXEMPTION.
No. ________________ Warrants
VOID AFTER 5:00 P.M. NEW YORK CITY TIME
ON APRIL 30, 2004
THE AEGIS CONSUMER FUNDING, GROUP,
INC.
Warrant Certificate
THIS CERTIFIES THAT for value
received ______________ or registered assigns is the
owner of the number of Warrants set forth above, each
of which entitles the owner thereof to purchase at any
time from __________ __, ___, until 5:00 p.m., New
York City time on April 30, 2004, (the "Warrant
Expiration Date"), ___ fully paid and nonassessable
shares of the Class D Redeemable Preferred Stock, par
value $.10 per share (the "Preferred Stock"), of The
Aegis Consumer Funding Group, Inc., a Delaware
corporation (the "Company"), at the purchase price of
$1,000.00 per share (the "Exercise Price"), upon
presentation and surrender of this Warrant Certificate,
together with the Form of Election to Purchase duly
executed and payment in New York Clearing House or
other funds acceptable to the Company of the
aggregate Exercise Price for the Warrants so
exercised. The number of Warrants evidenced by this
Warrant Certificate (and the number of shares which
may be purchased upon exercise thereof) set forth
above, and the Exercise Price per share set forth
above, are the number and Exercise Price as of the
date of original issuance of the Warrants, based on the
shares of Common Stock of the Company as
constituted at such date.
This Warrant Certificate, with or
without other Warrant Certificates, upon surrender at
the principal office of the Company, may be
exchanged for another Warrant Certificate or Warrant
Certificates of like tenor and date evidencing Warrants
entitling the holder to purchase a like aggregate
number of shares of Preferred Stock as the Warrants
evidenced by the Warrant Certificate or Warrant
Certificates surrendered entitled such holder to
purchase. If this Warrant Certificate shall be
exercised in part, the holder hereof shall be entitled to
receive upon surrender hereof another Warrant
Certificate or Warrant Certificates for the number of
whole Warrants not exercised.
To the extent applicable, fractional
shares of Preferred Stock will be issued upon the
exercise of any Warrant or Warrants evidenced
hereby.
No holder of this Warrant Certificate
shall be entitled to receive dividends or be deemed to
be the holder of Preferred Stock or any other
securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor
shall anything contained herein be construed to confer
upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted
to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action (whether
upon any recapitalization, issue of stock,
reclassification of stock, change of par value or change
of stock to no par value, consolidation, merger,
conveyance, or otherwise) or to receive notice of
meetings, or to receive dividends or subscription rights
or otherwise, until the Warrant or Warrants evidenced
by this Warrant Certificate shall have been exercised
and the shares shall have become deliverable as
provided herein.
If this Warrant shall be surrendered for
exercise within any period during which the transfer
books for the Company's Preferred Stock or other
class of stock purchasable upon the exercise of this
Warrant are closed for any purpose, the Company
shall not be required to make delivery of certificates
for shares purchasable upon such exercise until the
date of the reopening of said transfer books.
IN WITNESS WHEREOF, THE
AEGIS CONSUMER FUNDING GROUP, INC. has
caused the signature (or facsimile signature) of its
President and its Secretary to be printed hereon and its
corporate seal (or facsimile) to be printed hereon.
Dated: __________, ____
THE AEGIS CONSUMER FUNDING GROUP, INC.
By:_________________________
Name:
Title:
[Corporate Seal]
Attest:
_____________________________
Name:
Title: Secretary
SECTION 2.08. Form of Warrant Exercise.
TO: THE AEGIS CONSUMER FUNDING
GROUP, INC.
The undersigned hereby irrevocably
elects to exercise Warrants represented by this Warrant
Certificate to purchase the shares of Preferred Stock
issuable upon the exercise of such Warrants and
payment of the Exercise Price as set forth in the
Warrant Certificate and requests that certificates for
such shares be issued in the name of:
Please insert social security or other
identifying number
______________________________________
______________________________________
_____________________________________________
____________________
(Please print name and address)
_____________________________________________
____________________
If such number of Warrants shall not be all the
Warrants evidenced by this Warrant Certificate, a new
Warrant Certificate for the balance remaining of such
Warrants shall be registered in the name of and
delivered to:
Please insert social security number or other
identifying number
______________________________________
______________________________________
_____________________________________________
____________________
(Please print name and address)
_____________________________________________
___________________
Dated: ______________, 199_
______________________________
Sign
MUST BE MEDALLION GUARANTEED IF THE
PREFERRED STOCK IS TO BE ISSUE DINA
NAME OTHER THAN THE REGIS
TERED HOLDER OF THE SECURITY
SECTION 2.09. Form of Warrant
Assignment.
FOR VALUE RECEIVED,
________________________ hereby sells, assigns and
transfers unto this Warrant
Certificate, together with all right, title and interest
herein, and does hereby irrevocably constitute and
appoint ________________, to transfer the within
Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: _______________, 199_
Signature __________________
MUST BE MEDALLION GUARANTEED
NOTICE
The signature on the foregoing
Assignment must correspond to the name as written
upon the face of this Warrant Certificate in every
particular, without alteration or enlargement or any
change whatsoever.
ARTICLE III
The Securities
SECTION 3.01. Title and Terms.
The aggregate principal amount of Securities
which may be authenticated and delivered under this
Indenture is limited to $21,333,333 except for
Securities authenticated and delivered upon registration
of transfer of, or in exchange for, or in lieu of, other
Securities pursuant to Section 3.04, 3.05, 3.06, 9.06,
11.08 or 13.02. The Securities shall be known and
designated as the "12% Exchangeable Subordinated
Notes Due 2004" of the Company. Their Stated
Maturity shall be April 30, 2004, and they shall bear
interest at the rate of 12% per annum, from the date
of issuance or from the most recent Interest Payment
Date to which interest has been paid or duly provided
for,as the case may be, payable semi-annually in
arrears on May 1 and November 1 in each year,
commencing November 1, 1998 until the principal
thereof is paid or made available for payment, and to
the fullest extent permitted by law, at the rate of 14%
per annum, compounded semiannually, on any
overdue principal and, to the extent permitted by law,
on any overdue interest.
The principal of and interest on the Securities
shall be payable at the office or agency of the
Company maintained for such purpose pursuant to
Section 10.03; provided, however, that at the option of
the Company payment of interest may be made by
check mailed to the address of the Person entitled
thereto at such address as shall appear in the Security
Register.
The Securities shall be redeemable as provided
in Article Eleven and Article Fourteen.
The Securities shall be subordinated in right of
payment to Senior Indebtedness as provided in Article
Twelve.
The Securities shall be exchangeable as
provided in Article Thirteen.
The Securities shall be entitled to the benefit of
the Collateral Documents and Guaranty as provided in
Article Fifteen.
SECTION 3.02. Denominations.
The Securities shall be issuable only in
registered form, without coupons, in the minimum
denomination of $1,000 and only in integral multiples
of one dollar.
SECTION 3.03. Execution, Authentication,
Delivery and Dating.
The Securities shall be executed on behalf of
the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or one of its Vice
Presidents, under its corporate seal reproduced thereon
attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on
the Securities may be manual or facsimile.
Securities bearing the manual or facsimile
signatures of individuals who were at any time the
proper officers of the Company shall bind the
Company, notwithstanding that such individuals or any
of them have ceased to hold such offices prior to the
authentication and delivery of such Securities or did
not hold such offices at the date of such Securities.
At any time and from time to time after the
execution and delivery of this Indenture, the Company
may deliver Securities executed by the Company to the
Trustee for authentication, together with a Company
Order for the authentication and delivery of such
Securities; and the Trustee, in accordance with such
Company Order, shall authenticate and deliver such
Securities as in this Indenture provided and not
otherwise.
Each Security shall be dated the date of its
authentication.
No Security shall be entitled to any benefit
under this Indenture or be valid or obligatory for any
purpose unless there appears on such Security a
certificate of authentication substantially in the form
provided for herein executed by the Trustee by manual
signature, and such certificate upon any Security shall
be conclusive evidence, and the only evidence, that
such Security has been duly authenticated and
delivered hereunder.
SECTION 3.04. Temporary Securities.
Pending the preparation of definitive
Securities, the Company may execute, and upon
Company Order the Trustee shall authenticate and
deliver, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise
produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in
lieu of which they are issued and with such
appropriate insertions, omissions, substitutions and
other variations as the officers executing such
Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities are issued, the
Company will cause definitive Securities to be
prepared without unreasonable delay. After, the
preparation of definitive Securities, the temporary
Securities shall be exchangeable for definitive
Securities upon surrender of the temporary Securities
at any office or agency of the Company designated
pursuant to Section 10.03, without charge to the
Holder. Upon surrender for cancellation of any one
or more temporary Securities, the Company shall
execute and the Trustee shall authenticate and deliver
in exchange therefor a like principal amount of
definitive Securities of authorized denominations. Until
so exchanged the temporary Securities shall in all
respects be entitled to the same benefits under this
Indenture as definitive Securities.
SECTION 3.05. Registration, Registration of
Transfer and Exchange,
Restrictions on Transfer.
(a) The Company shall cause to be kept at
the Corporate Trust Office of the Trustee a register
(the register maintained in such office and in any other
office or agency designated pursuant to Section 10.03
being herein sometimes collectively referred to as the
"Security Register") in which, subject to such
reasonable regulations as it may prescribe, the
Company shall provide for the registration of
Securities and of transfers of Securities. The Security
Register shall be maintained in such a fashion so that
the Securities will be maintained in "registered form"
within the meaning of Section 163(f), 871(h)(2) and
881(c)(2) of the Code. The Trustee is hereby
appointed "Security Registrar" for the purpose of
registering Securities and transfers of Securities as
herein provided.
(b) Upon surrender for registration of
transfer of any Security at an office or agency of the
Company designated pursuant to Section 10.04 for
such purpose, the Company shall execute, and the
Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more
new Securities of any authorized denominations and of
a like aggregate principal amount and bearing such
restrictive legends as may be required by this
Indenture; provided, however, that the Trustee shall
not register the transfer of such Security unless the
conditions in Section 3.05(c) shall have been satisfied.
The Holder of each Security, by such Holder's
acceptance thereof, agrees to be bound by the transfer
restrictions set forth herein and in the legend on such
Security,
(c) A Holder presenting a Security for
transfer hereby and thereby agrees that such Security
may not be offered for sale, sold or otherwise
transferred except pursuant to an effective registration
statement under the Securities Act of 1933 or pursuant
to an exemption from registration under the Securities
Act of 1933, the availability of which is to be
established to the satisfaction of this corporation, and
in each case in accordance with any applicable
securities law of any state of the United States or any
other applicable jurisdiction, and that the Company
may require that such Holder deliver an opinion of
counsel, certification or other information acceptable
to it in form and substance to establish the availability
of any such exemption and the compliance with
applicable federal or state securities laws.
(d) At the option of the Holder, Securities
may be exchanged for other Securities of any
authorized denominations and of a like aggregate
principal amount, upon surrender of the Securities to
be exchanged at an office or agency of the Company
designated pursuant to Section 10.03. Whenever any
Securities are so surrendered for exchange, the
Company shall execute, and the Trustee shall
authenticate and deliver, the Securities which the
Holder making the exchange is entitled to receive.
(e) All Securities issued upon any
registration of transfer or exchange of Securities shall
be the valid obligations of the Company, evidencing
the same debt, and entitled to the same benefits under
this Indenture, as the Securities surrendered upon such
registration of transfer or exchange.
(f) Every Security presented or
surrendered for registration of transfer or for exchange
shall (if so required by the Company or the Trustee)
be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the
Company, the Trustee and the Security Registrar, duly
executed by the Holder thereof or his attorney duly
authorized in writing.
(g) No service charge shall be made for
any registration of transfer or exchange of Securities;
but the Company may require payment of a sum
sufficient to cover any tax or other governmental
charge that may be imposed in connection with any
registration of transfer or exchange of Securities, other
than exchanges pursuant to Section 3.04, 9.06, 11.08
or 13.02 not involving any transfer.
(h) The Company shall not be required
(i) to issue, register the transfer of or exchange any
Security during a period beginning at the opening of
business 15 days before the day of the mailing of a
notice of redemption of Securities selected for
redemption under Section 11.04 and ending at the
close of business on the day of such mailing or (ii) to
register the transfer of or exchange any Security so
selected for redemption in whole or in part, except the
unredeemed portion of any Security being redeemed in
part.
(i) Each Security shall, to the extent
applicable and in addition to other legends that may be
required by state or federal securities laws, bear the
following legend:
"THE SECURITY REPRESENTED HEREBY
HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"),
AND IS A RESTRICTED SECURITY AS
THAT TERM IS DEFINED IN RULE 144
UNDER THE SECURITIES ACT. THIS
SECURITY MAY NOT BE OFFERED FOR
SALE, SOLD, OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN EXEMPTION
FROM REGISTRATION OR
QUALIFICATION UNDER THE
SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAWS, THE
AVAILABILITY OF WHICH IS TO BE
ESTABLISHED TO THE SATISFACTION
OF THIS CORPORATION, INCLUDING,
WITHOUT LIMITATION, BY DELIVERY
OF AN OPINION OF COUNSEL, IN FORM
AND SUBSTANCE SATISFACTORY TO
THE CORPORATION, AS TO THE
AVAILABILITY OF SUCH EXEMPTION."
SECTION 3.06. Mutilated, Destroyed, Lost
and Stolen Securities.
If any mutilated Security is surrendered to the
Trustee, the Company shall execute, and the Trustee
shall authenticate and deliver in exchange therefor, a
new Security of like tenor and principal amount and
bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and
the Trustee (i) evidence to their satisfaction of the
destruction, loss or theft of any Security and (ii) such
security or indemnity as may be satisfactory to them to
save each of them and any agent of either of them
harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been
acquired by a bona fide purchaser, the Company shall
execute and the Trustee shall authenticate and deliver,
in lieu of any such destroyed, lost or stolen Security, a
new Security of like tenor and principal amount and
bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or
stolen Security has become or is about to become due
and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under
this Section, the Company may require the payment of
a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and
expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this
Section in lieu of any destroyed, lost or stolen Security
shall constitute an original additional contractual
obligation of the Company, whether or not the
destroyed, lost or stolen Security shall be at any time
enforceable by anyone, and shall be entitled to all the
benefits of this Indenture equally and proportionately
with any and all other Securities duly issued
hereunder.
The provisions of this Section are exclusive
and shall preclude (to the extent lawful) all other rights
and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen
Securities.
SECTION 3.07. Payment of Interest: Interest
Rights Preserved.
Interest on any Security which is payable, and
is punctually paid or duly provided for, on any Interest
Payment Date shall be paid to the Person in whose
name that Security (or any Predecessor Securities) is
registered at the close of business on the Regular
Record Date for such interest.
Any interest on any Security which is payable,
but is not punctually paid or duly provided for, on any
Interest Payment Date (herein called "Defaulted
Interest") shall forthwith cease to be payable to the
Holder on the relevant Regular Record Date by virtue
of having been such Holder, and such Defaulted
Interest may be paid by the Company, at its election in
each case, as provided in Clause (1) or (2) below:
(1) The Company may elect to
make payment of any Defaulted Interest to the
Persons in whose names the Securities (or their
respective Predecessor Securities) are
registered at the close of business on a Special
Record Date for the payment of such
Defaulted Interest, which shall be fixed in the
following manner: the Company shall notify
the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each
Security and the date of the proposed payment,
and, at the same time, the Company shall
deposit with the Trustee an amount of money
equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or
shall make arrangements satisfactory to the
Trustee for such deposit prior to the date of
the proposed payment, such money when
deposited to be held in trust for the benefit of
the Persons entitled to such Defaulted Interest
as in this Clause provided. Thereupon the
Trustee shall fix a Special Record Date for the
payment of such Defaulted Interest, which
shall be not more than 15 days and not less
than 10 days prior to the date of the proposed
payment and not less than 10 days after the
receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly
notify the Company of such Special Record
Date and, in the name and at the expense of
the Company, shall cause notice of the
proposed payment of such Defaulted Interest
and the Special Record Date therefor to be
mailed, first-class, postage prepaid, to each
Holder at his address as it appears in the
Security Register, not less than 10 days prior
to such Special Record Date. Notice of the
proposed payment of such Defaulted Interest
and the Special Record Date therefor having
been so mailed, such Defaulted Interest shall
be paid to the Persons in whose names the
Securities (or their respective Predecessor
Securities) are registered at the close of
business on such Special Record Date and shall
no longer be payable pursuant to the following
Clause (2).
(2) The Company may make
payment of any Defaulted Interest in any other
lawful manner not inconsistent with the
requirements of any automated quotation
system or securities exchange on which the
Securities may be quoted or listed, and upon
such notice as may be required by such
quotation system or exchange, if, after notice
given by the Company to the Trustee of the
proposed payment pursuant to this Clause,
such manner of payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this
Section, each Security delivered under this Indenture
upon registration of transfer of or in exchange for or
in lieu of any other Security shall carry the rights to
interest accrued and unpaid, and to accrue interest,
which were carried by such other Security.
In the case of any Security which is exchanged
for Preferred Stock, interest which shall be payable on
the next such Interest Payment Date shall be paid to
the Person in whose name such Security (or one or
more Predecessor Securities) is registered at time such
Security is presented to the Trustee for exchange.
SECTION 3.08. Persons Deemed Owners.
Prior to due presentment of a Security for
registration of transfer, the Company, the Trustee and
any agent of the Company or the Trustee may treat the
Person in whose name such Security is registered as
the owner of such Security for the purpose of
receiving payment of principal of and (subject to
Section 3.07) interest on such Security and for all
other purposes whatsoever, whether or not such
Security be overdue, and neither the Company, the
Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.
SECTION 3.09. Cancellation.
All Securities surrendered for payment,
redemption, repurchase, registration of transfer, or
exchange shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall
be promptly canceled by it. The Company may at any
time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered
hereunder which the Company may have acquired in
any manner whatsoever, and all Securities so delivered
shall be promptly canceled by the Trustee. No
Securities shall be authenticated in lieu of or in
exchange for any Securities canceled as provided in
this Section, except as expressly permitted by this
indenture. All canceled Securities held by the Trustee
shall be disposed of in accordance with the Trustee's
normal procedures.
SECTION 3.10. Computation of Interest.
Interest on the Securities shall be computed on
the basis of a 360-day year of twelve 30-day months.
SECTION 3.11. Provisions Relating to
Warrants.
(a) Upon redemption of the
Securities under Article Eleven of this Indenture, the
Parent will issue Warrants to the former Holders of
the Securities. The form of the Warrant shall be
substantially as set forth in Section 2.07 of this
Indenture and the form of Warrant Exercise shall be
substantially in the form as set forth in Section 2.08 of
this Indenture. The Warrants shall be executed on
behalf of the Parent by the manual or facsimile
signature of the present or any future President or any
Vice President of the Parent, under its corporate seal,
affixed or in facsimile, and attested by the manual or
facsimile signature of the present or any future
Secretary or Assistant Secretary of the Parent.
(b) The Warrants shall be numbered and shall be registered in a
Warrant register to be maintained by the Parent (the "Warrant
Register"). The Parent shall be entitled to treat the registered
holder
of any Warrant on the Warrant Register (the "Warrant Holder") as
the owner in fact thereof for all purposes and shall not be bound
to
recognize any equitable or other claim to or interest in such
Warrant
on the part of any other person, and shall not be liable for any
registration of transfer of Warrants which are registered or are to
be
registered in the name of a fiduciary or the nominee of a fiduciary
unless made with the actual knowledge that a fiduciary or nominee
is
committing a breach of trust in requesting such registration of
transfer, or with such knowledge of such facts that its
participation
therein amounts to bad faith.
(c) A Warrant Holder desiring to transfer a
Warrant shall deliver the Warrant certificate to the Parent
together
with the proper form of assignment of Warrant as set forth in
Section
2.09 of this Indenture. The Warrants will not be sold,
transferred,
assigned or hypothecated, in part or in whole (other than by will
or
pursuant to the laws of descent and distribution), except in
accordance with the Securities Act of 1933, as amended. In case of
transfer by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority
shall be
produced, and may be required to be deposited with the Parent in
its
discretion. Upon any registration of transfer, the Parent shall
deliver
a new Warrant or Warrants to the persons entitled thereto. The
Warrants may be exchanged at the option of the Warrant Holder
thereof for another Warrant, or other Warrants, of different
denominations, of like tenor and representing in the aggregate the
right to purchase a like number of shares of Preferred Stock upon
surrender to the Parent or its duly authorized agent.
Notwithstanding
the foregoing, the Parent shall have no obligation to cause
Warrants
to be transferred on its books to any person, if such transfer
would
violate the Securities Act of 1933, as amended, and each Warrant
shall, to the extent applicable bear the legend relating to the
registration requirements of such Act set forth in Section 2.07
hereof.
(d)(i) Upon surrender to the Parent, or its duly
authorized agent, of such Warrants with the form of election to
purchase attached thereto duly completed and signed, with
signatures
Medallion Guaranteed and upon payment to the Parent of the
Exercise Price, for the number of shares in respect of which such
Warrants are then exercised by the Expiration Date (as defined in
the
Warrant), the Parent shall issue and sell to such Warrant Holder
the
number of fully paid and nonassessable shares of Preferred Stock
specified in the Warrant. Payment of such Exercise Price may be
made in cash or by cashier's check payable to the order of the
Parent. No adjustment shall be made for any dividends on any
shares of Preferred Stock issuable upon exercise of a Warrant.
(ii) Upon each surrender of Warrants in accordance
with clause (d)(i) of this Section 3.11, the Parent shall issue and
cause to be delivered with all reasonable dispatch to or upon the
written order of the Warrant Holder of such Warrants and in such
name or names as such Warrant Holder may designate, a certificate
or certificates for the number of full and fractional shares of
Preferred Stock so purchased upon the exercise of such Warrants,
issuable upon such surrender. Such certificate or certificates
shall be
deemed to have been issued and any person so designated to be
named therein shall be deemed to have become a holder of record of
such shares of Preferred Stock as of the date of the surrender of
the
Warrants as aforesaid and payment of the Exercise Price; provided,
however, that if, at the date of surrender of such Warrants, the
transfer books for the Preferred Stock or other class of securities
issuable upon the exercise of such Warrants shall be closed, the
certificates for the shares shall be issuable as of the date on
which
such books shall next be opened (whether before, on or after the
Warrant Expiration Date) and until such date the Parent shall be
under no duty to deliver any certificate for such shares of
Preferred
Stock; provided further, however, that the transfer books of
record,
unless otherwise required by law, shall not be closed at any one
time
for a period longer than twenty (20) days. The rights of purchase
represented by the Warrants shall be exercisable, at the election
of
the Warrant Holders thereof, either in full or from time to time in
part and, in the event that any Warrant is exercised in respect of
less
than all of the shares issuable upon such exercise at any time
prior to
the Warrant Expiration Date, the Parent shall promptly issue or
cause
to be issued a new Warrant or Warrants relating to the remaining
number of shares specified in the Warrant so surrendered.
(e) The Parent will pay all documentary stamp
taxes, if any, attributable to the issuance of the Preferred Stock
upon
the exercise of Warrants; provided, however, that the Parent shall
not
be required to pay any tax or taxes which may be payable in respect
of any transfer involved in the issue or delivery of any
certificates for
shares of Preferred Stock in a name other than that of the Warrant
Holder in respect of which such shares of Preferred Stock are
issued.
(f) In case any of the Warrants shall be
mutilated, lost, stolen or destroyed, the Parent may, in its
discretion,
issue and deliver in exchange and substitution for and upon
cancellation of the mutilated Warrant, or in lieu of and
substitution
for the Warrant lost, stolen or destroyed, a new Warrant of like
tenor
and representing an equivalent right or interest, but only upon
receipt
of evidence reasonably satisfactory to the Parent of such
mutilation,
loss, theft or destruction of such Warrant and indemnity, unless
mutilated, also reasonably satisfactory to the Parent, indemnifying
the
Parent for any claims arising under a Warrant that has been lost,
stolen or destroyed. An applicant for such substitute Warrants
shall
also comply with such other reasonable regulations and pay such
other reasonable charges as the Parent may prescribe.
ARTICLE IV
Satisfaction and Discharge
SECTION 4.01. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as
to
any surviving rights of exchange or registration of transfer or
exchange of Securities herein expressly provided for), and the
Trustee, on demand of and at the expense of the Company, shall
execute proper instruments acknowledging satisfaction and discharge
of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or
stolen
and which have been replaced or paid as provided in Section 3.06
and (ii) Securities for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the Company
and
thereafter repaid to the Company or discharged from such trust, as
provided in Section 10.05) have been delivered to the Trustee for
cancellation; or
(B) all such Securities not theretofore delivered to the Trustee
for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice
of
redemption by the Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of (i), (ii) or (iii) above, has
deposited
or caused to be deposited with the Trustee as trust funds in trust
for
the purpose, (x) cash in United States Dollars, (y) non-callable
obligations guaranteed by the United States of America for the
payment of which obligation or guarantee the full faith and credit
of
the United States is pledged, or (z) a combination thereof, an
amount
sufficient to pay and discharge the entire indebtedness on such
Securities not theretofore delivered to the Trustee for
cancellation,
for principal and interest to the date of such deposit (in the case
of
Securities which have become due and payable) or to the Stated
Maturity of the Securities or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all
other sums payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent herein provided for relating to
the satisfaction and discharge of this Indenture have been
complied with.
Notwithstanding the satisfaction and discharge of this Indenture,
the
obligations of the Company to the Trustee under Section 6.07, the
obligations of the Trustee to any Authenticating Agent under
Section
6.14 and, if money shall have been deposited with the Trustee
pursuant to subclause (B) of Clause (1) of this Section, the
obligations of the Trustee under Section 4.02 and the last
paragraph
of Section 10.05 shall survive. Funds held in trust pursuant to
this
Section are not subject to the provisions of Article Twelve.
SECTION 4.02. Application of Trust Money.
Subject to the provisions of the last paragraph of Section
10.05, all money deposited with the Trustee pursuant to Section
4.01
shall be held in trust and applied by it, in accordance with the
provisions of the Securities and this Indenture, to the payment,
either
directly or through any Paying Agent (including the Company acting
as its own Paying Agent) as the Trustee may determine, to the
Persons entitled thereto, of the Redemption Price, principal and
interest for whose payment such money has been deposited with the
Trustee. All moneys deposited with the Trustee pursuant to Section
4.01 or Section 14.01 (and held by it or any Paying Agent) for the
payment of Securities subsequently exchanged or redeemed (or
otherwise being held by the Trustee in Trust following, or in
excess
of amounts required for, satisfaction of this Indenture in
accordance
with Section 4.01) shall be returned to the Company upon Company
Request, except for any amounts for interest as shall be payable on
such Securities pursuant to Section 3.07. All funds held by the
Trustee awaiting distribution shall be invested or reinvested by
the
Trustee, to the extent permitted by law, at the request of and as
directed in writing by the Company (the "Permitted Investments") in
money market accounts having same day access to funds or other
types of accounts having the same liquidity of the Trustee or any
bank having a combined capital and surplus of not less than $2
billion. The Trustee need not make any Permitted Investments
unless
so requested by the Company. Such Permitted Investments shall be
registered in the name of the Trustee. The Trustee shall pay over
to
the Company as requested any and all income received on the
Permitted Investments.
ARTICLE V
Remedies
SECTION 5.01. Events of Default.
"Event of Default", wherever used herein, means any
one of the following events (whatever the reason for such Event of
Default and whether it shall be occasioned by the provisions of
Article Twelve or be voluntary or involuntary or be affected by
operation of law or pursuant to any judgment, decree or order of
any
court or any order, rule or regulation of any administrative or
governmental body):
(1) default in the payment of the principal or Redemption
Price of any Security (or portion thereof) at its Maturity, whether
or
not such payment is prohibited pursuant to Article Twelve; or
(2) default in the payment of any interest upon any
Security when it becomes due and payable, whether or not such
payment is prohibited pursuant to Article Twelve; or
(3) default in the performance, or breach, of any
covenant, agreement or warranty of the Company in this Indenture
(other than a covenant, agreement or warranty a default in whose
performance or whose breach is elsewhere in this Section
specifically
dealt with), and continuance of such default or breach for a period
of
30 days after there has been given, by registered or certified
mail, to
the Company by the Trustee or to the Company and the Trustee by
the Holders of at least 25% in aggregate principal amount of the
Outstanding Securities a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice
is
a "Notice of Default" hereunder; or
(4) the occurrence of a Change in Control; or
(5) a default under any mortgage, indenture or instrument
under which there may be issued or by which there may be
secured or evidenced any Indebtedness of the Company, the
Parent or any Subsidiary of the Company or the Parent in
excess of $2,000,000, whether such Indebtedness now exists
or shall hereafter be created, which default shall have
resulted
in such Indebtedness becoming or being declared due and
payable prior to the date it would otherwise have become due
and payable; provided, however, that if such default under
such mortgage, indenture or instrument shall be remedied or
cured or waived by the holders of such indebtedness, then the
Event of Default hereunder by reason thereof shall be deemed
likewise to have been thereupon remedied, cured or waived
without further action upon the part of either the Trustee or
any of the Holders of the Securities; and provided, further,
that the Trustee (subject to Sections 6.01 and 6.02) shall not
have any rights, duties, liabilities or responsibilities with
respect to such default unless and until the Trustee shall
have
received written notice thereof at the Corporate Trust Office
from the Company, the trustee under any such mortgage,
indenture or instrument, the holder or holders of any such
indebtedness or the agent of any such holder or holders or the
Holder or Holders of any Outstanding Securities; or
(6) the entry of one or more judgments or orders
that exceed $2,000,000 in the aggregate for the payment of
money by a court or courts of competent jurisdiction against
the Company, the Parent or any Subsidiary of the Company
or the Parent and such judgment or judgments have not been
satisfied, stayed, annulled or rescinded within 30 days of
entry; or
(7) the entry by a court having jurisdiction in the
premises of (A) a decree or order for relief in respect of the
Company, the Parent or any Subsidiary of the Company or
the Parent in an involuntary case or proceeding under any
applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order
adjudging the Company, the Parent or any Subsidiary of the
Company or the Parent a bankrupt or insolvent, or approving
as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of
the Company, the Parent or any Subsidiary of the Company
or the Parent under any applicable federal or state law, or
appointing a custodian, receiver, liquidator, assignee,
trustee,
sequestrator or other similar official of the Company, the
Parent or any Subsidiary of the Company or the Parent or of
any substantial part of its property, or ordering the winding
up or liquidation of its affairs, and the continuance of any
such decree or order for relief or any such other decree or
order unstayed and in effect for a period of 60 consecutive
days; or
(8) the commencement by the Company, the
Parent or any Subsidiary of the Company or the Parent of a
voluntary case or proceeding under any applicable federal or
state bankruptcy, insolvency, reorganization or other similar
law or of any other case or proceeding to be adjudicated a
bankrupt or insolvent, or the consent by it to the entry of a
decree or order for relief in respect of the Company, the
Parent or any Subsidiary of the Company or the Parent in an
involuntary case or proceeding under any applicable federal
or state bankruptcy, insolvency, reorganization or other
similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, or the filing by it
of
a petition or answer or consent seeking reorganization or
relief under any applicable federal or state law, or the
consent
by the Company, the Parent or any Subsidiary of the
Company or the Parent to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar
official of the Company, the Parent or any Subsidiary of the
Company or the Parent or of any substantial part of its
property, or the making by it of an assignment for the benefit
of creditors, or the admission by it in writing of its
inability
to pay its debts generally as they become due, or the taking
of corporate action by the Company, the Parent or any
Subsidiary of the Company or the Parent in furtherance of
any such action; or
(9) default in the performance under, or breach
of any of the Collateral Documents by the Company, the
Parent or any Subsidiary of the Company or the Parent and
continuance of such default or breach for a period of 30 days
after there has been given, by registered or certified mail,
to
the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in aggregate principal
amount of the Outstanding Securities a written notice
specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default"
hereunder; or
(10) default in the performance, or breach, of any
covenant, agreement or warranty of the Parent under the
Guaranty, and continuance of such default or breach for a
period of 30 days after there has been given, by registered or
certified mail, to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in
aggregate principal amount of the Outstanding Securities a
written notice specifying such default breach, revocation or
repudiation and requiring it to be remedied and stating that
such notice is a "Notice of Default" hereunder; or
(11) revocation or repudiation by the Parent of the
Guaranty; or
(12) the failure of any Lien granted under any of
the Collateral Documents to continue to be effective or
perfected and continuance of such failure for a period of 10
days.
SECTION 5.02. Acceleration of Maturity; Rescission and
Annulment.
If an Event of Default (other than an Event of Default
specified in paragraph (1), (2), (7) or (8) of Section 5.01) occurs
and
is continuing, then and in every such case the Trustee or the
Holders
of not less than 25% in principal amount of the Outstanding
Securities may declare the principal of all the Securities to be
due and
payable immediately, by a notice in writing to the Company (and to
the Trustee if given by Holders), and upon any such declaration
such
principal and all accrued interest thereon shall become immediately
due and payable. If an Event of Default specified in Section
5.01(1)
or (2) occurs and is continuing, the Holder of any Outstanding
Security may, by notice in writing to the Company (with a copy to
the Trustee), declare the principal of such Security to be due and
payable immediately, and upon any such declaration such principal
and any accrued interest thereon shall become immediately due and
payable. If an Event of Default specified in Section 5.01(7) or
5.01(8) occurs and is continuing, the principal of, and any accrued
interest on, all Outstanding Securities shall ipso facto become due
and
payable without any declaration or other Act on the part of the
Trustee or any Holder.
At any time after such a declaration of acceleration has been
made and before a judgment or decree for payment of the money due
has been obtained by the Trustee, as hereinafter in this Article
Five
provided, the Holders of a majority in principal amount of the
Outstanding Securities, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its
consequences
if:
(1) the Company has paid or deposited with the Trustee,
a sum sufficient to pay
(A) all overdue interest on all Securities,
(B) the principal of any Securities which have become
due otherwise than by such declaration of acceleration and
interest thereon at the rate borne by the Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at a rate of 14% per annum,
and
(D) all sums paid or advanced by the Trustee hereunder
and the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel; and
(2) all Events of Default, other than the
non-payment of the principal of Securities which has become
due solely by such declaration of acceleration, have been
cured or waived as provided in Section 5.13.
No such rescission or annulment referred to above shall affect any
subsequent default or Event of Default or impair any right
consequent
thereon.
SECTION 5.03. Collection of Indebtedness and Suits for
Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on any
Security when such interest becomes due and payable, or
(2) default is made in the payment of the principal or
Redemption Price of any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the
benefit of the Holders of such Securities, the whole amount then
due
and payable on such Securities for principal and interest, and to
the
extent that payment of such interest shall be legally enforceable,
interest on any overdue principal and on any overdue interest, at
a
rate of 14% per annum, and, in addition thereto, such further
amount
as shall be sufficient to cover the costs and expenses of
collection,
including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon
such demand, the Trustee, in its own name and as trustee of an
express trust, may enforce all rights granted under the Collateral
Documents, may institute a judicial proceeding for the collection
of
the sums so due and unpaid, may prosecute such proceeding to
judgment or final decree and may enforce the same against the
Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Company or any other obligor upon
the Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and
the
rights of the Holders by such appropriate judicial proceedings as
the
Trustee shall deem most effective to protect and enforce any such
rights, whether for the specific enforcement of any covenant or
agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy.
SECTION 5.04. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceeding relative to the Company or
any other obligor upon the Securities, the property of the Company
or of such other obligor, or the creditors of either, the Trustee
(irrespective of whether the principal of, and any interest on, the
Securities shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee
shall
have made any demand on the Company for the payment of overdue
principal or interest) shall be entitled and empowered, by
intervention
in such proceeding or otherwise,
(1) to file and prove a claim for the whole
amount of principal and interest owing and unpaid in respect
of the Securities and take such other actions, including
participating as a member, voting or otherwise, of any
official committee of creditors appointed in such matter, and
to file such other papers or documents, in each of the
foregoing cases, as may be necessary or advisable in order to
have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel) and of the
Holders of Securities allowed in such judicial proceeding, and
(2) to collect and receive any moneys or other
property payable or deliverable on any such claim and to
distribute the same; and any custodian, receiver, assignee,
trustee, liquidator, sequestrator or other similar official in
any
such judicial proceeding is hereby authorized by each Holder
to make such payments to the Trustee and, in the event that
the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due
to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel, and any other amounts due the Trustee under Section
6.07.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of
any
Holder of a Security any plan of reorganization, arrangement,
adjustment or composition affecting the Securities or the rights of
any
Holder thereof or to authorize the Trustee to vote in respect of
the
claim of any Holder of a Security in any such proceeding; provided,
however, that the Trustee may, on behalf of such Holders, vote for
the election of a trustee in bankruptcy or similar official.
SECTION 5.05. Trustee May Enforce Claims Without
Possession of Securities.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without
the
possession of any of the Securities or the production thereof in
any
proceeding relating thereto, and any such proceeding instituted by
the
Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment shall, after provision for the
payment of the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, be for the
ratable
benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 5.06. Application of Money Collected.
Subject to Article Twelve, any money collected by the
Trustee pursuant to this Article Five shall be applied in the
following
order, at the date or dates fixed by the Trustee and, in case of
the
distribution of such money on account of principal or interest,
upon
presentation of the Securities and the notation thereon of the
payment, if only partially paid, and upon surrender thereof, if
fully
paid:
FIRST: To the payment of all amounts due
the Trustee under Section 6.07;
SECOND: To the payment of the amounts then
due and unpaid for principal of and interest on the Securities
in respect of which or for the benefit of which such money
has been collected, ratably, without preference or priority of
any kind, according to the amounts due and payable on such
Securities for principal and interest, respectively; and
THIRD: Any remaining amounts shall be
repaid to the Company.
SECTION 5.07. Limitation on Suits.
No Holder of any Security shall have any right to institute
any proceeding, judicial or otherwise, with respect to this
Indenture,
or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless
(1) such Holder has previously given written
notice to the Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in principal
amount of the Outstanding Securities shall have made written
request to the Trustee to institute proceedings in respect of
such Event of Default in its own name as Trustee;
(3) the Trustee for 60 days after its receipt of
such notice, request and offer of indemnity has failed to
institute any such proceeding; and
(4) no direction inconsistent with such written
request has been given to the Trustee during such 60-day
period by the Holders of a majority in principal amount of
the Outstanding Securities;
it being understood and intended that no one or more Holders shall
have any right in any manner whatever by virtue of, or by availing
of, any provision of this Indenture to affect, disturb or prejudice
the
rights of any other Holders, or to obtain or to seek to obtain
priority
or preference over any other Holders or to enforce any right under
this Indenture, except in the manner herein provided and for the
equal and ratable benefit of all the Holders.
SECTION 5.08. Unconditional Right of Holders to Receive
Principal and Interest and to Exchange.
Notwithstanding any other provision in this Indenture, the
Holder of any Security shall have the right, which is absolute and
unconditional, to receive payment of the principal of and (subject
to
Section 3.07) interest on such Security on the respective Stated
Maturities expressed in such Security (or in the case of
redemption,
on the Redemption Date), to exchange such Security in accordance
with Article Thirteen, and to institute suit for the enforcement of
any
such payment and right to exchange; and such rights shall not be
impaired without the consent of such Holder.
SECTION 5.09. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such
proceeding
has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Holder, then and in
every such case, subject to any determination in such proceeding,
the
Company, the Trustee and the Holders shall be restored severally
and
respectively to their former positions hereunder, and thereafter
all
rights and remedies of the Trustee and the Holders shall continue
as
though no such proceeding had been instituted.
SECTION 5.10 Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities in
the
last paragraph of Section 3.06, no right or remedy herein conferred
upon or reserved to the Trustee or to the Holders is intended to be
exclusive of any other right or remedy, and every right and remedy
shall, to the extent permitted by law, be cumulative and in
addition to
every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
SECTION 5.11 Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Security to exercise any right or remedy accruing upon any Event of
Default shall impair any such right or remedy or constitute a
waiver
of any such Event of Default or an acquiescence therein. Every
right
and remedy given by this Article Five or by law to the Trustee or
to
the Holders may be exercised from time to time, and as often as may
be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 5.12 Control by Holders.
The Holders of a majority in principal amount of the
Outstanding Securities shall have the right to direct the time,
method
and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred on the
Trustee, provided that
(1) such direction shall not be in conflict with
any rule of law or with this Indenture, and
(2) the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with such
direction.
SECTION 5.13 Waiver of Past Defaults.
The Holders of not less than a majority in principal amount
of the Outstanding Securities may, on behalf of the Holders of all
the
Securities, waive any past default hereunder and its consequences,
except a default
(1) in the payment of the principal of or interest
on any Security, or
(2) in respect of a covenant or provision hereof
which under Article Nine cannot be modified or amended
without the consent of the Holder of each Outstanding
Security affected.
Upon any such waiver, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Indenture; but no such waiver
shall
extend to any subsequent or other default or impair any right
consequent thereon.
SECTION 5.14 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action
taken,
suffered or omitted by it as Trustee, a court may require any party
litigant in such suit to file an undertaking to pay the costs of
such
suit, and may assess costs against any such party litigant, in the
manner and to the extent provided in the Trust Indenture Act;
provided that the provisions of this Section 5.14 (to the extent
permitted by law) shall not apply to any suit instituted by the
Trustee,
to any suit instituted by any Holder, or group of Holders, holding
in
the aggregate more than ten (10) percent in principal amount of
Outstanding Securities, or to any suit instituted by any Holder of
any
Security for the enforcement of the payment of the principal of, or
interest on any Security, or to any suit for the enforcement of the
right to exchange any Security in accordance with the provisions of
Article Thirteen.
SECTION 5.15 Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, or plead, or in any
manner
whatsoever claim or take the benefit or advantage of, any stay,
usury
or extension law wherever enacted, now or at any time hereafter in
force, which may affect the covenants or the performance of this
Indenture; and the Company (to the extent that it may lawfully do
so)
hereby expressly waives all benefit or advantage of any such law
and
covenants that it will not hinder, delay or impede the execution of
any power herein granted to the Trustee but will suffer and permit
the execution of every such power as though no such law had been
enacted.
ARTICLE VI
The Trustee
SECTION 6.01. Certain Duties and Responsibilities.
(a) If an Event of Default has occurred and is continuing,
the Trustee shall exercise the rights and powers vested in it by
this
Indenture and use the same degree of care and skill in its exercise
as
a prudent person would exercise or use under the circumstances in
the conduct of such persons own affairs.
(b) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties
and only such duties as are specifically set forth in this
Indenture, and no implied covenants or obligations shall be
read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the
Trustee
and conforming to the requirements of the Indenture; but in
the case of any such certificates or opinions which by any
provision hereof are specifically required to be furnished to
the Trustee, the Trustee shall be under a duty to examine the
same to determine whether or not they conform to the
requirements of this Indenture.
(c) No provision of this Indenture shall be construed to
relieve the Trustee from liability for its own negligent action,
its own
negligent failure to act, or its own misconduct, except that
(1) this paragraph (c) shall not be construed to
limit the effect of paragraph (b) of this Section;
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless
it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of a majority in
principal amount of the Outstanding Securities relating to the
time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee, under this Indenture; and
(4) no provision of this Indenture shall require
the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing that
repayment of such funds or indemnity satisfactory to it
against such risk or liability is not assured to it.
(d) Whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting
the
liability of or affording protection to the Trustee shall be
subject to
the provisions of this Section.
SECTION 6.02. Notice of Defaults.
Within 30 days after the occurrence of any default hereunder
as to which the Trustee has received written notice, the Trustee
shall
give to all Holders of Securities, in the manner provided in
Section
1.06, notice of such default, unless such default shall have been
cured or waived; provided, however, that in the case of any default
of the character specified in Section 5.01(3), no such notice to
Holders of Securities shall be given until at least 30 days after
the
occurrence of such default so long as the Trustee shall have given
notice to the Company demanding that the Company cure such
default. For the purpose of this Section, the term "default" means
any event which is, or after notice or lapse of time or both, would
become, an Event of Default.
SECTION 6.03. Certain Rights of Trustee.
Subject to the provisions of Section 6.01:
(a) the Trustee may rely and shall be protected in
acting or refraining from acting upon any resolution,
Officers' Certificate, other certificate, statement,
instrument,
opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or
other paper or document believed by it to be genuine and to
have been signed or presented by the proper party or parties;
(b) any request or direction of the Company
mentioned herein shall be sufficiently evidenced by a
Company Request or Company Order and any resolution of
the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this
Indenture the Trustee shall deem it desirable that a matter be
proved or established prior to taking, suffering or omitting
any action hereunder, the Trustee (unless other evidence be
herein specifically prescribed) may, in the absence of bad
faith on their part, conclusively rely upon an Officers'
Certificate;
(d) the Trustee may consult with counsel and the
advice of such counsel or any Opinion of Counsel shall be
full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon;
(e) the Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this
Indenture at the request or direction of any of the Holders
pursuant to this Indenture, unless such Holders shall have
offered to the Trustee security or indemnity satisfactory to
it
against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any
resolution,
certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document,
but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may
see fit, and if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to
examine
the books, records and premises of the Company, personally
or by agent or attorney, during reasonable business hours and
after reasonable notice; and
(g) the Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys, and the Trustee
shall not be responsible for any misconduct or negligence on
the part of any agent or attorney appointed with due care by
it hereunder.
SECTION 6.04. Not Responsible for Recitals or Issuance of
Securities.
The recitals contained herein and in the Securities, except
the
Trustee's certificates of authentication, shall be taken as the
statements of the Company, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this Indenture
or of
the Securities. The Trustee shall not be accountable for the use
or
application by the Company of Securities or the proceeds thereof.
SECTION 6.05. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent,
any Security Registrar or any other agent of the Company, in its
individual or any other capacity, may become the owner or pledgee
of Securities and, subject to Sections 6.08 and 6.13, may otherwise
deal with the Company with the same rights it would have if it were
not Trustee, Authenticating Agent, Paying Agent, Security Registrar
or such other agent.
SECTION 6.06. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law.
The Trustee shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed with the
Company in writing.
SECTION 6.07. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time
reasonable compensation for all services rendered by it
hereunder (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of
an express trust);
(2) except as otherwise expressly provided
herein, to reimburse the Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or
made by the Trustee in accordance with any provision of this
Indenture (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except
any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(3) to indemnify the Trustee and its directors,
officers, employees and agents for, and to hold them
harmless against, any loss, liability or expense incurred
without negligence or bad faith on their part, arising out of
or
in connection with the acceptance or administration of this
trust, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder.
The Trustee shall have a claim prior to the Securities as to
all
property and funds properly held by it hereunder for any amount
owing it or any predecessor Trustee pursuant to this Section 6.07,
except with respect to funds held in trust for the benefit of the
Holders of particular Securities.
When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 5.01(7) or
Section 5.01(8), the expenses (including the reasonable charges and
expenses of its counsel) and the compensation for the services are
intended to constitute expenses of administration under any
applicable
federal or state bankruptcy, insolvency or other similar law.
The provisions of this Section shall survive the termination
of
this Indenture.
"Trustee" for purposes of this Section 6.07 shall include any
predecessor Trustee, but the negligence or bad faith of any Trustee
shall not affect the indemnification of any other Trustee.
SECTION 6.08. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest
within
the meaning of the Trust Indenture Act at a time when such Act is
applicable, the Trustee shall either eliminate such interest or
resign,
to the extent and in the manner provided by, and subject to the
provisions of, the Trust Indenture Act and this Indenture.
SECTION 6.09. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
a Person that is eligible pursuant to the Trust Indenture Act to
act as
such, having a combined capital and surplus of at least
$50,000,000,
subject to supervision or examination by federal or state
authority, in
good standing and having an established place of business in
Minneapolis, Minnesota. If such person publishes reports of
condition
at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such Person shall be
deemed to be its combined capital and surplus as set forth in its
most
recent report of condition so published. If at any time the
Trustee
shall cease to be eligible in accordance with the provisions of
this
Section 6.09, it shall resign immediately in the manner and with
the
effect hereinafter specified in this Article and a successor shall
be
appointed pursuant to Section 6.10.
SECTION 6.10. Resignation and Removal; Appointment of
Successor.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the
successor
Trustee under Section 6.11.
(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If an instrument of acceptance by
a
successor Trustee shall not have been delivered to the Trustee
within
30 days after the giving of such notice of resignation, the
resigning
Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of
the Holders of a majority in principal amount of the Outstanding
Securities, delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section
6.08 after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for at
least six months, or
(2) the Trustee shall cease to be eligible under
Section 6.09 and shall fail to resign after written request
therefor by the Company or by any such Holder, or
(3) the Trustee shall become incapable of acting
or shall be adjudged a bankrupt or insolvent or a receiver of
the Trustee or of its property shall be appointed or any
public
officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then in any such case, (i) the Company, by a Board Resolution, may
remove the Trustee or (ii) subject to Section 5.14, any Holder who
has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated,
petition
any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of
Trustee for any cause, the Company, by a Board Resolution, shall
promptly appoint a successor Trustee. If, within one year after
such
resignation, removal or incapability, or the occurrence of such
vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding
Securities delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall forthwith, upon its acceptance
of
such appointment, become the successor Trustee and supersede the
successor Trustee appointed by the Company. If no successor
Trustee shall have been so appointed by the Company or the Holders
and accepted appointment in the manner hereinafter provided, any
Holder who has been a bona fide Holder of a Security for at least
six
months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of
a
successor Trustee.
(f) The Company shall give notice of each resignation
and each removal of the Trustee and each appointment of a successor
Trustee to all Holders in the manner provided in Section 1.06.
Each
notice shall include the name of the successor Trustee and the
address
of its Corporate Trust Office.
(g) No retiring Trustee shall be liable for the acts or
omissions of any successor Trustee hereunder.
(h) All fees, charges and expenses of the retiring Trustee
shall become immediately due and payable upon the appointment of a
successor Trustee hereunder.
SECTION 6.11. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee
an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Trustee shall become
effective
and such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on request of the Company
or
the successor Trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring
Trustee and shall duly assign, transfer and deliver to such
successor
Trustee all property and money held by such retiring Trustee
hereunder. Upon request of any such successor Trustee, the
Company shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Trustee all
such
rights, powers and trusts.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be
qualified
and eligible under this Article.
SECTION 6.12. Merger, Conversion, Consolidation or
Succession to Business.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation succeeding to all or
substantially all the corporate trust business of the Trustee
(including
the trust created by this Indenture), shall be the successor of the
Trustee hereunder, provided such corporation shall be otherwise
qualified and eligible under this Article, without the execution or
filing of any paper or any further act on the part of any of the
parties
hereto. In case any Securities shall have been authenticated, but
not
delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may
adopt
such authentication and deliver the Securities so authenticated
with
the same effect as if such successor Trustee had itself
authenticated
such Securities.
SECTION 6.13. Preferential Collection of Claims Against
Company.
If and when the Trustee shall be or become a creditor of the
Company (or any other obligor upon the Securities), the Trustee
shall
be subject to the provisions of the Trust Indenture Act regarding
the
collection of claims against the Company (or any such other
obligor).
SECTION 6.14. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents
reasonably acceptable to the Company which shall be authorized to
act on behalf of the Trustee to authenticate Securities issued upon
original issue and upon exchange, registration of transfer, partial
exchange or partial redemption, or pursuant to Section 3.06, and
Securities so authenticated shall be entitled to the benefits of
this
Indenture and shall be valid and obligatory for all purposes as if
authenticated by the Trustee hereunder. Wherever reference is made
in this Indenture to the authentication and delivery of Securities
by
the Trustee or the Trustee's certificate of authentication, such
reference shall be deemed to include authentication and delivery on
behalf of the Trustee by an Authenticating Agent and a certificate
of
authentication executed on behalf of the Trustee by an
Authenticating
Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a corporation organized and doing
business under the laws of the United States of America, any State
thereof or the District of Columbia, authorized under such laws to
act
as Authenticating Agent, having a combined capital and surplus of
not less than $50,000,000 and subject to supervision or examination
by federal or state authority. If such Authenticating Agent
publishes
reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for
the
purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so
published. If at any time an Authenticating Agent shall cease to
be
eligible in accordance with the provisions of this Section, such
Authenticating Agent shall resign immediately in the manner and
with
the effect specified in this Section.
Any corporation into which an Authenticating Agent may be
merged or exchanged or with which it may be consolidated, or any
corporation resulting from any merger, exchange or consolidation to
which such Authenticating Agent shall be a party, or any
corporation
succeeding to the corporate agency or corporate trust business of
an
Authenticating Agent, shall continue to be an Authenticating Agent,
provided such corporation shall be otherwise eligible under this
Section, without the execution or filing of any paper or any
further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving
written notice thereof to the Trustee and to the Company. The
Trustee may at any time terminate the agency of an Authenticating
Agent by giving written notice thereof to such Authenticating Agent
and to the Company. Upon receiving such a notice of resignation or
upon such a termination, or in case at any time such Authenticating
Agent shall cease to be eligible in accordance with the provisions
of
this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail
written notice of such appointment by first-class mail, postage
prepaid, to all Holders as their names and addresses appear in the
Security Register. Any successor Authenticating Agent upon
acceptance of its appointment hereunder shall become vested with
all
the rights, powers and duties of its predecessor hereunder, with
like
effect as if originally named as an Authenticating Agent. No
successor Authenticating Agent shall be appointed unless eligible
under the provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from
time to time reasonable compensation for its services under this
Section, and the Trustee shall be entitled to be reimbursed for
such
payments, subject to the provisions of Section 6.07.
If an appointment is made pursuant to this Section, the
Securities may have endorsed thereon, in addition to the Trustee's
certificate of authentication, an alternative certificate of
authentication
in the following form:
This is one of the Securities described in the within-mentioned
Indenture.
[TRUSTEE]
As Trustee
By: [Authenticating Agent]
as Authenticating Agent
By:
Authorized Signatory
ARTICLE VII
Holders' Lists and Reports by Trustee and Company
SECTION 7.01. Company to Furnish Trustee Names and
Addresses of Holders.
The Company will furnish or cause to be furnished to the
Trustee
(a) semiannually, not more than 15 days after
each Regular Record Date, a list, in such form as the Trustee
may reasonably require, of the names and addresses of the
Holders as of such Regular Record Date, and
(b) at such other times as the Trustee may request
in writing, within 30 days after the receipt by the Company
of any such request, a list of similar form and content as of
a
date not more than 15 days prior to the time such list is
furnished; provided that such list need not be furnished by
the Company so long as the Trustee is acting as Security
Registrar.
SECTION 7.02. Preservation of Information;
Communications to Holders.
(a) The Trustee shall preserve, in as current a
form as is reasonably practicable, the names and addresses of
Holders contained in the most recent list furnished to the
Trustee as provided in Section 7.01 and the names and
addresses of Holders received by the Trustee in its capacity
as Security Registrar. The Trustee may destroy any list
furnished to it as provided in Section 7.01 upon receipt of a
new list so furnished.
(b) The rights of Holders to communicate with
other Holders with respect to their rights under this
Indenture
or under the Securities, and the corresponding rights and
duties of the Trustee, shall be as provided by the Trust
Indenture Act.
(c) Every Holder, by receiving and holding the
Securities, agrees with the Company and the Trustee that
neither the Company nor the Trustee nor any agent of either
of them shall be held accountable by reason of any disclosure
of information as to names and addresses of Holders made
pursuant to the Trust Indenture Act.
SECTION 7.03. Reports by Trustee.
(a) The Trustee shall transmit to Holders such
reports concerning the Trustee and its actions under this
Indenture as may be required pursuant to the Trust Indenture
Act at the times and in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time
of such transmission to Holders, be filed by the Trustee with
each stock exchange upon which the Securities are listed,
with the Commission and with the Company. The Company
will notify the Trustee if and when the Securities are listed
on
any stock exchange.
SECTION 7.04. Reports by Company.
The Company shall file with the Trustee and the
Commission, and transmit to Holders, such information, documents
and other reports, and such summaries thereof as may be required
pursuant to the Trust Indenture Act at the times and in the manner
provided pursuant to such Act; provided that any such information,
documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 shall be filed with the Trustee within 15 days after the same
is
so required to be filed with the Commission.
ARTICLE VIII
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 8.01. Company May Consolidate, Etc., Only on
Certain Terms.
The Company (a) shall not consolidate with or merge into
any other Person or, directly or indirectly, convey, transfer,
sell,
lease or otherwise dispose of its properties and assets
substantially as
an entirety to any Person and (b) shall not permit any Person to
consolidate or merge with or into the Company or convey, transfer,
sell, lease or otherwise dispose of such Person's properties and
assets
substantially as an entirety to the Company, in one transaction or
a
series of transactions, unless:
(1) in case the Company shall consolidate with or
merge into another Person or convey, transfer, sell, lease or
otherwise dispose of its properties and assets substantially
as
an entirety to any Person, the Person formed by such
consolidation or into or with which the Company is merged
or the Person which acquires by conveyance, transfer or sale,
or which leases or otherwise acquires, the properties and
assets of the Company substantially as an entirety shall be a
corporation, limited liability company, partnership or trust,
shall be organized and validly existing under the laws of the
United States of America, any State thereof or the District of
Columbia and shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee,
in form satisfactory to the Trustee, all the obligations of
the
Company under the Securities; and
(2) immediately after giving effect to such
transactions, no Event of Default and no event which, after
notice or lapse of time or both, would become an Event of
Default, shall have happened and be continuing; and
(3) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger, conveyance, transfer or
lease, and if a supplemental indenture is required in
connection with such transactions, such supplemental
indenture, comply with this Indenture and that all conditions
precedent herein provided for relating to such transactions
have been complied with.
SECTION 8.02. Successor Substituted.
Upon any consolidation or merger of the Company with or
into any other Person, or any conveyance, transfer, sale or lease
of
the properties and assets of the Company substantially as an
entirety
in accordance with Section 8.01, the successor Person formed by
such consolidation or merger or into or with which the Company is
merged or to which such conveyance, transfer, sale or lease is made
shall succeed to, and be substituted for, and may exercise every
right
and power of, the Company under this Indenture with the same effect
as if such successor Person had been named as the Company herein,
and thereafter, except in the case of a lease, the predecessor
Person
shall be relieved of all obligations and covenants under this
Indenture
and the Securities.
ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without Consent
of Holders.
Without the consent of any Holders, the Company, when
authorized by a Board Resolution, and the Trustee, at any time and
from time to time, may enter into one or more indentures
supplemental hereto, in form satisfactory to the Trustee, for any
of
the following purposes:
(1) to evidence the succession of another Person
to the Company and the assumption by any such successor of
the covenants and obligations of the Company herein and in
the Securities; or
(2) to add to the covenants of the Company for
the benefit of the Holders, or to surrender any right or power
herein conferred upon the Company; or
(3) to add any additional Events of Default with
respect to the Securities; or
(4) to secure the Securities; or
(5) to make provision with respect to the
exchange rights of Holders pursuant to the requirements of
Section 13.10; or
(6) to cure any ambiguity, defect or inconsistency
to correct or supplement any provision herein which may be
inconsistent with any other provision herein, or to make any
other provisions with respect to matters or questions arising
under this Indenture which shall not be inconsistent with the
provisions of this Indenture, provided that such action
pursuant to this Clause (6) shall not adversely effect the
interests of the Holders in any material respect.
SECTION 9.02. Supplemental Indentures With Consent of
Holders.
With the written consent of the Holders of not less than a
majority in principal amount of the Outstanding Securities, by the
Act
of said Holders delivered to the Company and the Trustee, the
Company, when authorized by a Board Resolution, and the Trustee
may enter into an indenture or indentures supplemental hereto for
the
purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or of modifying
in
any manner the rights of the Holders under this Indenture;
provided,
however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Security affected
thereby,
(1) change the Stated Maturity of the principal
of, or any installment of interest on, any Security, or reduce
the principal amount thereof or the rate of interest thereon
or
the amounts payable upon the redemption or repurchase
thereof or change any Place of Payment where, or the place
or currency in which, any Security or interest thereon or any
other amount in respect thereof is payable, or impair the
right
to institute suit for the enforcement of any payment in
respect
of any Security on or after the Stated Maturity thereof (or in
the case of redemption, on or after the Redemption Date), or,
except as provided by Section 13.11, adversely effect the
right to exchange any Security as provided in Article
Thirteen, or modify the provisions of this Indenture with
respect to the subordination of the Securities in a manner
adverse to the Holders, or
(2) reduce the percentage in principal amount of
the Outstanding Securities the consent of whose Holders is
required for any such supplemental indenture or the consent
of whose Holders is required for any waiver (of compliance
with certain provisions of this Indenture or certain defaults
hereunder and their consequences) provided for in this
Indenture, or
(3) modify the obligation of the Company to
maintain an office or agency in Jersey City, New Jersey
pursuant to Section 10.04, or
(4) modify any of the provisions of this Section,
or Section 5.13, except to increase any percentage contained
herein or therein or to provide that certain other provisions
of
this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected
thereby, or
(5) modify the provisions of Article Eleven,
Article Twelve, Article Thirteen or Article Fourteen in a
manner adverse to the Holders.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the
substance thereof.
SECTION 9.03. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by,
any supplemental indenture permitted by this Article Nine or the
modifications thereby of the trusts created by this Indenture, the
Trustee shall be entitled to receive, and (subject to Section 6.01)
shall
be fully protected in relying upon, an Opinion of Counsel stating
that
the execution of such supplemental indenture is authorized or
permitted by this Indenture and an Officers' Certificate stating
that all
conditions precedent to the execution of such supplemental
indenture
have been fulfilled. The Trustee may, but shall not be obligated
to,
enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or
otherwise.
SECTION 9.04. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article Nine, this Indenture shall be modified in accordance
therewith, and such supplemental indenture shall form a part of
this
Indenture for all purposes; and every Holder of Securities
theretofore
or thereafter authenticated and delivered hereunder shall be bound
thereby.
SECTION 9.05. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this
Article Nine shall conform to the requirements of the Trust
Indenture
Act, as then in effect.
SECTION 9.06. Reference in Securities to Supplemental
Indentures.
Securities authenticated and delivered after the execution of
any supplemental indenture pursuant to this Article Nine may, and
shall if required by the Trustee, bear a notation in form approved
by
the Trustee as to any matter provided for in such supplemental
indenture. If the Company shall so determine, new Securities so
modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities.
SECTION 9.07. Notice of Supplemental Indentures.
Promptly after the execution by the Company and the Trustee
of any supplemental indenture pursuant to the provisions of Section
9.02, the Company shall, or shall cause the Trustee to, give notice
to
all Holders of Securities of such fact, setting forth in general
terms
the substance of such supplemental indenture, in the manner
provided
in Section 1.06. Any failure of the Company or the Trustee to give
such notice, or any defect therein, shall not in any way impair or
effect the validity of any such supplemental indenture.
<PAGE>
ARTICLE X
Covenants
SECTION 10.01. Payment of Principal and Interest.
The Company will duly and punctually pay the principal and
Redemption Price of and interest on the Securities in accordance
with
the terms of the Securities and this Indenture.
SECTION 10.02. Limitation on Indebtedness.
The Parent and the Company shall not, after the date hereof,
without the written consent of the Holders of not less than a
majority
in principal amount of the Outstanding Securities create, incur,
assume, guarantee or otherwise become liable with respect to, or
extend the maturity of or become responsible for, contingently or
otherwise, any Indebtedness, except (A)(i) Indebtedness extending,
renewing or refunding any Indebtedness of the Company or the
Parent or any of their respective Subsidiaries in existence on the
date
of this Indenture as set forth in Exhibit B to this Indenture
provided;
that, the amount of any extended, renewed or refunded Indebtedness
does not exceed the amount of Indebtedness outstanding immediately
prior to such extension, renewal or refunding, which outstanding
Indebtedness shall be deemed to include any interest, fees or other
amounts owed on or with respect to such Indebtedness being
extended, renewed or refunded, (ii) obligations in respect of
purchase
money and capital lease obligations incurred in the ordinary course
of
business in an amount not to exceed $2.0 million per year or $7.5
million in the aggregate at any one time outstanding, (iii)
obligations
in respect of interest rate swap, cap, collar or similar contracts
intended to protect against fluctuations in interest rates and
entered
into in the ordinary course of business, (iv) Indebtedness which by
its
terms is fully subordinated to the Securities, and (v) loans to
fund the
purchase or holding of automobile finance contracts or other
working
capital needs of the Parent or the Company, as the case may be and
(B) if an Event of Default shall have occurred and be continuing at
the time of such incurrence of Indebtedness specified in clause (A)
above, or if an Event of Default shall occur as a consequence
thereof, only if the Company shall have deposited with the Trustee
sufficient moneys to pay all principal of and interest on, or the
Redemption Price of, the Outstanding Securities at the Stated
Maturities or the Redemption Date thereof, as the case may be.
SECTION 10.03. Limitation on Liens.
The Company shall not, directly or indirectly, create, incur,
issue, assume or suffer to exist any Lien upon any of its
properties or
assets, whether owned at the date of this Indenture or thereafter
acquired, securing any Indebtedness or other obligation, except
(a) the Liens created hereunder and under the Collateral Documents,
(b) Permitted Liens, and (c) Liens created through the incurrence
of
any additional Indebtedness permitted by clauses (i), (iii) and (v)
of
Section 10.02; provided, however, that (A) with respect to
Indebtedness permitted by clause (ii) of Section 10.02, the Company
shall be allowed to create, incur, issue or assume Liens only on
the
property or assets purchased or leased in connection with such
Indebtedness, (B) with respect to Indebtedness permitted by clause
(iii) of Section 10.02, the Company shall not be allowed to create,
incur, issue or assume Liens on the Collateral and (C) with respect
to
Indebtedness permitted by clause (v) of Section 10.02, the Company
shall be allowed to create, incur, issue or assume Liens only on
the
automobile finance contracts purchased or held in connection with
such Indebtedness.
SECTION 10.04. Maintenance of Office or Agency.
The Company will maintain in Jersey City, New Jersey an
office or agency where Securities may be presented or surrendered
for payment, where Securities may be surrendered for registration
of
transfer or exchange, where Securities may be surrendered for
exchange and where notices and demands to or upon the Company in
respect of the Securities and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency.
If
at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the
address
thereof, such presentations, surrenders, notices and demands may be
made or served at the Corporate Trust Office of the Trustee, and
the
Company hereby appoints the Trustee as its agent to receive all
such
presentations, surrenders, notices and demands.
The Company may also from time to time designate one or
more other offices or agencies (in or outside the Jersey City, New
Jersey) where the Securities may be presented or surrendered for
any
or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its
obligation
to maintain an office or agency in Jersey City, New Jersey for such
purposes. The Company will give prompt written notice to the
Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
SECTION 10.05. Money for Security Payments to Be Held in
Trust.
If the Company shall act as its own Paying Agent, it will, on
or before each due date of the principal of, or interest on any of
the
Securities (or any Redemption Date), segregate and hold in trust
for
the benefit of the Persons entitled thereto a sum sufficient to pay
the
principal, or interest (or, as provided in Section 11.06, the
Redemption Price and accrued interest) so becoming due until such
sums shall be paid to such Persons or be otherwise disposed of as
herein provided, and the Company will promptly notify the Trustee
of its action or failure so to act.
Whenever the Company shall have one or more Paying
Agents, it will, on or prior to 10:00 a.m. on each due date of the
principal of, or interest on any Securities (including any
Redemption
Date), deposit with such Paying Agent(s) a sum in immediately
available funds on the payment date sufficient to pay the
principal, or
interest (or Redemption Price) so becoming due, such sum to be held
in trust for the benefit of the Persons entitled to such principal,
or
interest, and (unless such Paying Agent is the Trustee) the Company
will promptly notify the Trustee of any failure so to act.
The Company will cause each Paying Agent other than the
Trustee to execute and deliver to the Trustee an instrument in
which
such Paying Agent shall agree with the Trustee, subject to the
provisions of this Section, that such Paying Agent will:
(1) comply with the provisions of the Trust
Indenture Act applicable to it as a Paying Agent;
(2) give the Trustee notice of any default by the
Company (or any other obligor upon the Securities) in the
making of any payment of principal or interest; and
(3) at any time during the continuance of any
such default, upon the written request of the Trustee,
forthwith pay to the Trustee all sums so held by such Paying
Agent.
The Company may at any time, for the purpose of obtaining
the satisfaction and discharge of this Indenture or for any other
purpose, pay, or by Company Order direct any Paying Agent to pay,
to the Trustee all sums held in trust by the Company or such Paying
Agent, such sums to be held by the Trustee upon the same trusts as
those upon which such sums were held by the Company or such
Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further
liability
with respect to such money.
Any money deposited with the Trustee or any Paying Agent,
or then held by the Company, in trust for the payment of the
principal of, or interest on any Security and remaining unclaimed
for
two years after such principal or interest has become due and
payable
shall be paid to the Company on Company Request, or (if then held
by the Company) shall be discharged from such trust; and the Holder
of such Security shall thereafter, as an unsecured general
creditor,
look only to the Company for payment thereof, and all liability of
the
Trustee or such Paying Agent with respect to such trust money, and
all liability of the Company as trustee thereof, shall thereupon
cease;
provided, however, that the Trustee or such Paying Agent, before
being required to make any such repayment, may at the expense of
the Company cause to be published once, in a newspaper in the
English language, customarily published on each Business Day and of
general circulation in New York, New York, notice that such money
remains unclaimed and that, after a date specified therein, which
shall
not be less than 30 days from the date of such publication, any
unclaimed balance of such money then remaining will be repaid to
the Company.
SECTION 10.06. Statement by Officers as to Default.
The Company shall deliver to the Trustee, within 120 days
after the end of each fiscal year of the Company, an Officers'
Certificate stating whether or not, to the best knowledge of the
signers thereof, the Company is in compliance on such date with all
terms, provisions, conditions and covenants hereunder (without
regard to any period of grace or requirement of notice provided
hereunder). If the signers know of any default or Event of
Default,
the Officer's Certificate shall describe each such default or Event
of
Default and its status and the specific section or sections of this
Indenture in connection with which such default or Event of Default
has occurred.
The Company will deliver to the Trustee, within five
Business Days of becoming aware of any default or Event of Default
under this Indenture, an Officers' Certificate specifying with
particularity such default or Event of Default and further stating
what
action the Company has taken, is taking or proposes to take with
respect thereto. For the purpose of this Section, the term
"default"
means any event which is or, after notice or lapse of time or both,
would become an Event of Default.
Any notice required to be given under this Section 10.06
shall be delivered to the Trustee at its Corporate Trust Office.
SECTION 10.07. Existence.
Subject to Article Eight hereof, the Company will do or
cause to be done all things necessary to preserve and keep in full
force and effect its existence, rights (charter and statutory) and
franchises; provided, however, that the Company shall not be
required to preserve any such right or franchise if its Board of
Directors shall determine that the preservation thereof is no
longer
desirable in the conduct of the business of the Company and that
the
loss thereof is not disadvantageous in any material respect to the
Holders.
SECTION 10.08. Maintenance of Properties.
The Company will cause all properties used or useful in the
conduct of its business or the business of any Subsidiary to be
maintained and kept in good condition, repair and working order and
supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Company may be
necessary so that the business carried on in connection therewith
may
be properly and advantageously conducted at all times; provided,
however, that nothing in this Section shall prevent the Company
from
discontinuing the operation or maintenance of any of such
properties
if such discontinuance is, in the judgment of the Board of
Directors
desirable in the conduct of its business or the business of any
Subsidiary and not disadvantageous in any material respect to the
Holders.
SECTION 10.09. Payment of Taxes and Other Claims.
The Company will pay or discharge, or cause to be paid or
discharged, before the same shall become delinquent, (i) all taxes,
assessments and governmental charges levied or imposed upon the
Company or any Subsidiary or upon the income, profits or property
of the Company or any Subsidiary and (ii) all lawful claims for
labor,
materials and supplies which, if unpaid, might by law become a lien
upon the property of the Company or any Subsidiary; provided,
however, that the Company shall not be required to pay or discharge
or cause to be paid or discharged any such tax, assessment, charge
or
claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings.
SECTION 10.10. Further Instruments and Acts.
Upon request of the Trustee, the Company will execute and
deliver such further instruments and perform such further acts as
may
be reasonably necessary or proper to carry out more effectively the
purposes of this Indenture.
SECTION 10.11 Limitation on Dividends.
The Parent shall not, so long as any of the Securities,
Warrants or shares of Preferred Stock are outstanding, (i) declare
or
pay any dividend on or make any distributions, other than
distributions in respect of the Preferred Stock, with respect to
any
shares of its capital stock, or (ii) purchase, redeem or otherwise
acquire or retire for value any capital stock of the Parent other
than
with respect to any shares of the Preferred Stock.
SECTION 10.12. Reports by the Company.
(a) The Company covenants and agrees to file with the
Trustee, promptly but no later than 10 days after the Parent files
them with the Commission or, if not required to file with the
Commission, within 120 days after the end of each fiscal year of
the
Parent, a consolidated balance sheet of the Parent and its
Subsidiaries
as at the end of such year and the related consolidated statements
of
income and cash flows for such year prepared in accordance with
generally accepted accounting principles and certified without a
"going concern" or like qualification or exception, by independent
certified public accountants and a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" of the
Parent and its Subsidiaries for such period as filed with the
Commission or comparable to that which the Parent would have been
required to include in an annual report if the Parent were then
subject
to the requirements of Section 13 or 15(d) of the Securities
Exchange
Act of 1934.
(b) The Company covenants and agrees to file with the
Trustee, promptly but no later than 10 days after the Parent files
them with the Commission or, if not required to file with the
Commission, within 75 days after the end of each of the first three
fiscal quarters of the Parent, a consolidated balance sheet of the
Parent and its Subsidiaries as at the end of such quarter and the
related consolidated statements of income and cash flows for such
quarter prepared in accordance with generally accepted accounting
principles (to the extent applicable to interim financial
statements
except for footnotes) and a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" of the Parent and
its Subsidiaries for such period, as filed with the Commission or
comparable to that which the Parent would have been required to
include in a quarterly report if the Parent were then subject to
the
requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934.
(c) The Company will mail, or cause to be mailed,
copies of the Parent's annual and quarterly financial statements
filed
with Trustee to each Holder of the Securities. Financial
statements
shall be mailed to each Holder's address as it appears in the
Security
Register.
SECTION 10.13 Limitation on Transactions with Affiliates.
The Company shall not, and shall not permit any Subsidiary
of the Company to, directly or indirectly, sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or
purchase
any property or assets from, or enter into any contract, agreement,
understanding, loan, advance or guarantee with an Affiliate of the
Company or of a Subsidiary of the Company, or any officer, director
or employee of the Company or such Subsidiary on terms less
favorable to the Company or such Subsidiary than would be available
in a transaction with or for the benefit of an unrelated Person (as
determined by the Board of Directors in good faith).
SECTION 10.14. Limitation on Investments by the
Company.
Except with consent of the Holders of a majority in aggregate
principal amount of the Securities at the time Outstanding, the
Company shall not invest any funds held by it other than (i) in
Cash
Equivalents, (ii) in any of its Subsidiaries existing on the date
hereof
or (iii) in any Subsidiary created after the date hereof which
Subsidiary is created primarily to facilitate the securitization of
automobile finance contracts.
SECTION 10.15. Limitation on Capital Expenditures by the
Company and the Parent.
The Company and the Parent will not, as long as any of the
Securities are outstanding, make Capital Expenditures in excess of
$2
million in the aggregate in any fiscal year.
<PAGE>
ARTICLE XI
Redemption of Securities
SECTION 11.01. Right of Redemption.
Subject to the requirements of Section 11.09, the Securities
may be redeemed at the election of the Company, as a whole or from
time to time in part, at any time, at 100% of the principal amount
of
the Securities to be redeemed, together with accrued interest, if
any,
to the Redemption Date.
SECTION 11.02. Applicability of Article.
Redemption of Securities at the election of the Company, as
permitted or required by any provision of this Indenture, shall be
made in accordance with such provision and this Article Eleven.
SECTION 11.03. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities
pursuant to Section 11.01 shall be evidenced by a Board Resolution.
In case of any redemption at the election of the Company, the
Company shall, at least 30 days prior to the Redemption Date fixed
by the Company (unless a shorter notice shall be satisfactory to
the
Trustee), notify the Trustee of such Redemption Date and of the
principal amount of Securities to be redeemed. In case of a
mandatory redemption pursuant to Article Fourteen hereof, the
Redemption Date shall be set by the Trustee, provided, however,
that
in no event shall the Redemption Date be more than 30 days after
the
Company deposits an amount constituting Accumulated Cash Flow
with the Trustee.
SECTION 11.04. Selection by Trustee of Securities to Be
Redeemed.
If less than all the Securities are to be redeemed, the
particular Securities to be redeemed shall be selected not more
than
30 days prior to the Redemption Date by the Trustee, from the
Outstanding Securities not previously called for redemption, on a
pro
rata basis, by lot or by such method as the Trustee shall deem fair
and appropriate.
If any Security selected for partial redemption is exchanged
in part before termination of the right to exchange with respect to
the
portion of the Security so selected, the exchanged portion of such
Security shall be deemed (so far as may be) to be the portion
selected
for redemption. Securities which have been exchanged during a
selection of Securities to be redeemed shall be treated by the
Trustee
as Outstanding for the purpose of such selection.
The Trustee shall promptly notify the Company and each
Security Registrar in writing of the Securities selected for
redemption
and, in the case of any Securities selected for partial redemption,
the
principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of
Securities relate, in the case of any Securities redeemed or to be
redeemed only in part, to the portion of the principal amount of
such
Securities which has been or is to be redeemed.
SECTION 11.05. Notice of Redemption.
Notice of redemption shall be given by first-class mail,
postage prepaid, mailed not less than 30 nor more than 60 days
prior
to the Redemption Date, to each Holder of Securities to be
redeemed,
at such Holder's address appearing in the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price (equal to the principal
amount to be redeemed and accrued interest, if any, to be due
thereon on the Redemption Date),
(3) if less than all the Outstanding Securities are
to be redeemed, the identification (and, in the case of
partial
redemption of any Securities, the principal amounts) of the
particular Securities to be redeemed,
(4) that on the Redemption Date the Redemption
Price will become due and payable upon each such Security
to be redeemed and that, upon payment thereof, interest on
the Securities so redeemed will cease to accrue on and after
said date,
(5) the Exchange Price, the date on which the
right to exchange the Securities to be redeemed will terminate
and the place or places where such Securities may be
surrendered for exchange,
(6) the place or places where such Securities are
to be surrendered for payment of the Redemption Price, and
(7) the CUSIP number, if applicable, of the
Securities to be redeemed.
Notice of redemption of Securities to be redeemed at the
election of the Company shall be given by the Company or, at the
Company's written request, by the Trustee in the name and at the
expense of the Company, and such notice, when given to the
Holders, shall be irrevocable.
SECTION 11.06. Deposit of Redemption Price.
Not less than one Business Day prior to any Redemption
Date, the Company shall deposit with the Trustee or with a Paying
Agent (or if the Company is acting as its own Paying Agent,
segregate and hold in trust, as provided in Section 10.05) an
amount
of money (which shall be in immediately available funds on such
Redemption Date) sufficient to pay the Redemption Price of, and
(except if the Redemption Date shall be an Interest Payment Date)
accrued interest on, all the Securities which are to be redeemed on
that date other than any Securities called for redemption on that
date
which have been exchanged for Preferred Stock prior to the date of
such deposit.
If any Security called for redemption is exchanged for
Preferred Stock prior to such redemption, any money deposited with
the Trustee or with any Paying Agent or so segregated and held in
trust for the redemption of such Security shall (subject to any
right of
the Holder of such Security or any Predecessor Security to receive
interest as provided in the last paragraph of Section 3.07) be paid
to
the Company upon Company Request or, if then held by the
Company, shall be discharged from such trust.
SECTION 11.07. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the
Securities so to be redeemed shall, on the Redemption Date, become
due and payable at the Redemption Price therein specified, and from
and after such date (unless the Company shall default in the
payment
of the Redemption Price, such Securities shall cease to bear
interest.
Upon surrender of any such Security for redemption in accordance
with said notice, such Security shall be paid by the Company at the
Redemption Price, together with accrued interest to the Redemption
Date; provided, however, that installments of interest whose Stated
Maturity is on or prior to the Redemption Date shall be payable to
the Holders of such Securities (or any Predecessor Securities)
registered as such at the close of business on the relevant Record
Dates according to their terms and the provisions of Section 3.07.
If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the Redemption Price shall,
until paid, bear interest from the Redemption Date until paid at a
rate
of 14% per annum.
SECTION 11.08. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be
surrendered at an office or agency of the Company designated for
that purpose pursuant to Section 10.03 (with, if the Company or the
Trustee so requires, due endorsement by, or a written instrument of
transfer in form satisfactory to the Company and the Trustee duly
executed by, the Holder thereof or his attorney duly authorized in
writing), and the Company shall execute, and the Trustee shall
authenticate and deliver to the Holder of such Security, without
service charge, a new Security or Securities, of any authorized
denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the
principal of the Security so surrendered.
SECTION 11.09. Warrant to be Issued Upon Redemption.
The Parent shall issue to each Holder of Securities, upon
redemption thereof, in whole or in part, a warrant certificate in
the
form set forth in Section 2.07 hereof (a "Warrant") which will
entitle
the holder of the Warrant to acquire shares of Preferred Stock at
the
Exchange Price. Each Warrant will grant the holder thereof the
right, for a purchase price equal to the aggregate principal amount
of
the Holder's Securities being redeemed (the "Exercise Price"), to
acquire up to that number of shares of Preferred Stock which could
have been acquired under Article Thirteen in exchange for the
aggregate principal amount of the Holder's Securities being
concurrently redeemed.
ARTICLE XII
Subordination of Securities
SECTION 12.01. Securities Subordinate to Senior
Indebtedness.
The Company, on behalf of each Obligor, covenants and
agrees, and each Holder of a Security, by his acceptance thereof,
likewise covenants and agrees, that to the extent and in the manner
hereinafter set forth in this Article Twelve (subject to the
provisions
of Article Four), the indebtedness represented by the Securities
and
the payment of the principal of and interest on each and all of the
Securities are hereby expressly made subordinate and subject in
right
of payment to the prior payment in full of all Senior Indebtedness.
Whenever in this Article Twelve there is a reference, in any
context,
to the principal of any Security as of any time, such reference
shall
be deemed to include reference to the Redemption Price in respect
of
such Security to the extent that such Redemption Price is, was or
would be so payable at such time, and express mention of the
Redemption Price in any provision of this Article Twelve shall not
be
construed as excluding the Redemption Price in those provisions of
this Article Twelve when such express mention is not made.
SECTION 12.02. Payment Over of Proceeds Upon
Dissolution, Etc.
In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or
other
similar case or proceeding in connection therewith, relative to the
any
Obligor or to its creditors, as such, or to its assets, or (b) any
liquidation, dissolution or other winding up of any Obligor whether
voluntary or involuntary and whether or not involving insolvency or
bankruptcy, or (c) any assignment for the benefit of creditors or
any
other marshaling of assets and liabilities of any Obligor, then and
in
any such event, the holders of Senior Indebtedness shall be
entitled to
receive payment in full of all amounts due or to become due on or
in
respect of all Senior Indebtedness in cash or other immediately
available funds, or provision shall be made for such payment in
cash
or other immediately available funds or otherwise in a manner
satisfactory to each holder of Senior Indebtedness with respect to
its
indebtedness, before the Holders of the Securities are entitled to
receive any payment on account of principal of or interest on the
Securities, and to that end the holders of Senior Indebtedness
shall be
entitled to receive, for application to the payment thereof, any
payment or distribution of any kind or character, whether in cash,
property or securities, which may be payable or deliverable in
respect
of the Securities in any such case, proceeding, dissolution,
liquidation
or other winding up or event.
In the event that, notwithstanding the foregoing provisions of
this Section, the Trustee or the Holder of any Security shall have
received any payment or distribution of assets of the any Obligor
of
any kind or character, whether in cash, securities or other
property,
before all Senior Indebtedness is paid in full or payment thereof
provided for, and if such fact shall, at or prior to the time of
such
payment or distribution, have been made known to the Trustee or, as
the case may be, such Holder, then and in such event such payment
or distribution shall be paid over or delivered forthwith to the
trustee
in bankruptcy, receiver, liquidating trustee, custodian, assignee,
agent
or other Person making payment or distribution of assets of such
Obligor for application to the payment of all Senior Indebtedness
remaining unpaid, to the extent necessary to pay all Senior
Indebtedness in full, after giving effect to any concurrent payment
or
distribution to or for the holders of Senior Indebtedness.
For purposes of this Article only, the words "cash, securities
or other property" shall not be deemed to include shares of stock
of
the an Obligor as reorganized or readjusted, or securities of an
Obligor or any other corporation provided for by a plan of
reorganization or readjustment which shares of stock are
subordinated
in right of payment to all then outstanding Senior Indebtedness to
substantially the same extent as, or to a greater extent than, the
Securities are so subordinated, as provided in this Article Twelve.
The consolidation of an Obligor with, or the merger of an Obligor
into, another Person or the liquidation or dissolution of an
Obligor
following the conveyance or transfer of its properties and assets
substantially as an entirety to another Person upon the terms and
conditions set forth in Article Eight shall not be deemed a
dissolution, winding up, liquidation, reorganization, assignment
for
the benefit of creditors or marshaling of assets, and liabilities
of an
Obligor for the purposes of this Section, if the Person formed by
such consolidation or into which such Obligor is merged or which
acquires by conveyance or transfer such properties and assets
substantially as an entirety, as the case may be, shall, as a part
of
such consolidation, merger, conveyance or transfer, comply with the
conditions set forth in Article Eight.
SECTION 12.03. No Payment When Senior Indebtedness in
Default.
In the event of the existence of any Payment Default, then no
payment shall be made by the Company or any other Obligor on
account of principal of or interest on the Securities or on account
of
the purchase, redemption or other acquisition of Securities unless
and
until such Payment Default shall have been cured or waived or shall
have ceased to exist or all amounts then due and payable in respect
of
Senior Indebtedness shall have been paid in full, or provision
shall
have been made for such payment in cash or cash equivalents or
otherwise in a manner satisfactory to the holders of Senior
Indebtedness.
In the event that any Non-Payment Default shall have
occurred with respect to any Senior Indebtedness and be continuing,
then, upon the receipt by the Trustee of written notice of such
Non-Payment Default from a holder of such Senior Indebtedness, or
a representative of such holder, no payment shall be made with
respect to the Securities during the period (the "Payment Blockage
Period") commencing on the date of such receipt of such written
notice and ending on the earlier of (i) the date on which such
Non-Payment Default shall have been cured or waived or shall have
ceased to exist or any acceleration of the Senior Indebtedness to
which such Non-Payment Default relates shall have been rescinded or
annulled or such Senior Indebtedness shall have been discharged and
(ii) the 120th day after the date of such receipt of such written
notice.
During any 360-day period the aggregate of all Payment Blockage
Periods shall not exceed 120 days and there shall be a period of at
least 240 consecutive days in each 360-day period when no Payment
Blockage Period is in effect. For all purposes of this paragraph,
no
Non-Payment Default that existed or was continuing on the date of
commencement of any Payment Blockage Period shall be, or be
made, the basis for the commencement of a subsequent Payment
Blockage Period by holders of Senior Indebtedness, or their
representatives, unless such Non-Payment Default shall have been
cured for a period of not less than 90 consecutive days.
In the event that, notwithstanding the foregoing, an Obligor
shall make any payment to the Trustee or the Holder of any Security
prohibited by the foregoing provisions of this Section, and if such
fact shall, at or prior to the time of such payment, have been made
known to the Trustee or, as the case may be, such Holder, then and
in such event such payment shall be paid over and delivered
forthwith to the applicable Obligor for repayment to the holders of
Senior Indebtedness.
The provisions of this Section shall not apply to any payment
with respect to which Section 12.02 would be applicable.
SECTION 12.04. Payment Permitted If No Default.
Nothing contained in this Article or elsewhere in this
Indenture or in any of the Securities shall prevent (a) the Company
or
any other Obligor, at any time except during the pendency of any
case, proceeding, dissolution, liquidation or other winding up,
assignment for the benefit of creditors or other marshaling of
assets
and liabilities of the Company or such Obligor referred to in
Section
12.02, or under the conditions described in Section 12.03, from
making payments at any time of principal of or interest on the
Securities or (b) the application by the Trustee of any money
deposited with it hereunder to the payment of or on account of the
principal of or interest on the Securities or the retention of such
payment by the Holders, if, at the time of such application by the
Trustee, it did not have knowledge that such payment would have
been prohibited by the provisions of this Article.
SECTION 12.05. Subrogation to Rights of Holders of Senior
Indebtedness.
Subject to the payment in full of all Senior Indebtedness, the
Holders of the Securities shall be subrogated to the extent of the
payments or distributions made to the holders of such Senior
Indebtedness pursuant to the provisions of this Article to the
rights of
the holders of such Senior Indebtedness to receive payments and
distributions of cash, property and securities applicable to the
Senior
Indebtedness until the principal of and interest on the Securities
shall
be paid in full. For purposes of such subrogation, no payments or
distributions to the holders of the Senior Indebtedness of any
cash,
property or securities to which the Holders of the Securities or
the
Trustee would be entitled except for the provisions of this
Article,
and no payments over to the holders of Senior Indebtedness by
Holders of the Securities or the Trustee pursuant to the provisions
of
this Article, shall, as among the Company or any Obligor, its
creditors other than holders of Senior Indebtedness and the Holders
of the Securities, be deemed to be a payment or distribution by the
Company to or on account of the Senior Indebtedness.
SECTION 12.06. Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely for
the purpose of defining the relative rights of the Holders of the
Securities on the one hand and the holders of Senior Indebtedness
on
the other hand. Nothing contained in this Article or elsewhere in
this
Indenture or in the Securities is intended to or shall (a) impair,
as
among any Obligor, its creditors other than holders of Senior
Indebtedness and the Holders of the Securities, (i) the obligation
of
the Company, which is absolute and unconditional, to pay to the
Holders of the Securities the principal of and interest on the
Securities as and when the same shall become due and payable in
accordance with their terms, or (ii) the obligation of any Obligor
to
make any payments on account of the Securities; or (b) affect the
relative rights against each Obligor of the Holders of the
Securities
and creditors of such Obligor other than the holders of Senior
Indebtedness; or (c) prevent the Trustee or the Holder of any
Security from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the
rights, if any, under this Article of the holders of Senior
Indebtedness
to receive cash, property and securities otherwise payable or
deliverable to the Trustee or such Holder.
SECTION 12.07. Trustee to Effectuate Subordination.
Each holder of a Security by his acceptance thereof
authorizes and directs the Trustee on his behalf to take such
action as
may be necessary or appropriate to effectuate the subordination
provided in this Article and appoints the Trustee his
attorney-in-fact
for any and all such purposes.
SECTION 12.08. No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at
any
time in any way be prejudiced or impaired by any act or failure to
act on the part of the Company or by any act or failure to act, in
good faith, by any such holder of any Senior Indebtedness, or by
any
non-compliance by the Company with the terms, provisions and
covenants of this Indenture, regardless of any knowledge thereof
any
such holder may have or be otherwise charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness may, at any time and
from time to time, without the consent of or notice to the Trustee
or
the Holders of the Securities, without incurring responsibility to
the
Holders of the Securities and without impairing or releasing the
subordination provided in this Article or the obligations hereunder
of
the Holders of the Securities to the holders of Senior
Indebtedness,
do any one or more of the following: (i) change the manner, place
or
terms of payment or extend the time of payment of, or renew,
increase or alter, Senior Indebtedness, or otherwise amend or
supplement in any manner Senior Indebtedness or any instrument
evidencing the same or any agreement under which Senior
Indebtedness is outstanding; (ii) sell, exchange, release or
otherwise
deal with any property pledged, mortgaged or otherwise securing
Senior Indebtedness; (iii) release any Person liable in any manner
for
the collection of Senior Indebtedness, and settle or compromise
Senior Indebtedness (which, to the extent so settled and
compromised, shall be deemed to have been paid in full for all
purposes hereof); (iv) apply any sums by whomsoever paid and
however realized to any liability or liabilities of the Company or
any
other Obligor owing to such holders of Senior Indebtedness (other
than in respect of the Securities or any liability or liabilities
which
rank pari passu or junior in right of payment to the Securities)
regardless of what liability or liabilities of the Company or such
Obligor to such holders remain unpaid; and (v) exercise or refrain
from exercising any rights against the Company and any other
Person.
SECTION 12.09. Notice to Trustee.
The Company shall give prompt written notice to the Trustee
of any fact known to the Company which would prohibit the making
of any payment to or by the Trustee in respect of the Securities.
Notwithstanding the provisions of this Article or any other
provision
of this Indenture, the Trustee shall not be charged with knowledge
of
the existence of any facts which would prohibit the making of any
payment to or by the Trustee in respect of the Securities, unless
and
until the Trustee shall have received written notice thereof from
the
Company or a holder of Senior Indebtedness or from any trustee
therefor; and, prior to the receipt of any such written notice, the
Trustee, subject to the provisions of Section 6.01, shall be
entitled in
all respects to assume that no such facts exist; provided, however,
that if the Trustee shall not have received the notice provided for
in
this Section at least two Business Days prior to the date upon
which
by the terms hereof any money may become payable for any purpose
(including, without limitation, the payment of the principal of or
interest on any Security), then anything herein contained to the
contrary notwithstanding, the Trustee shall have full power and
authority to receive such money and to apply the same to the
purpose
for which such money was received and shall not be affected by any
notice to the contrary which may be received by it within two
Business Days prior to such date.
Subject to the provisions of Article Six, the Trustee shall be
entitled to rely conclusively on the delivery to it of a written
notice
by a Person representing himself to be a holder of Senior
Indebtedness (or a representative thereof) to establish that such
notice
has been given by a holder of Senior Indebtedness (or a
representative thereof). In the event that the Trustee determines
in
good faith that further evidence is required with respect to the
right
of any Person as a holder of Senior Indebtedness to participate in
any
payment or distribution pursuant to this Article, the Trustee may
request such Person to furnish evidence to the reasonable
satisfaction
of the Trustee as to the amount of Senior Indebtedness held by such
Person, the extent to which such Person is entitled to participate
in
such payment or distribution and any other facts pertinent to the
rights of such Person under this Article, and if such evidence is
not
furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to
receive such payment.
SECTION 12.10. Reliance on Judicial Order or Certificate of
Liquidating Agent.
Upon any payment or distribution of assets of any Obligor
referred to in this Article, the Trustee, subject to the provisions
of
Section 6.01, and the Holders of the Securities shall be entitled
to
rely conclusively upon any order or decree entered by any court of
competent jurisdiction in which such insolvency, bankruptcy,
receivership, liquidation, reorganization, dissolution, winding up
or
similar case or proceeding is pending, or a certificate of the
trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for
the
benefit of creditors, agent or other Person making such payment or
distribution, delivered to the Trustee or to the Holders of
Securities,
for the purpose of ascertaining the Persons entitled to participate
in
such payment or distribution, the holders of the Senior
Indebtedness
and other indebtedness of such Obligor, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article.
SECTION 12.11. Trustee Not Fiduciary for Holders of
Senior Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to
the holders of Senior Indebtedness and shall not be liable to any
such
holders if it shall in good faith mistakenly pay over or distribute
to
Holders of Securities or to the Company or to any other Person
cash,
property or securities to which any holders of Senior Indebtedness
shall be entitled by virtue of this Article or otherwise.
SECTION 12.12. Rights of Trustee as Holder of Senior
Indebtedness; Preservation of Trustee's
Rights.
The Trustee, in its individual capacity, shall be entitled to
all
the rights set forth in this Article with respect to any Senior
Indebtedness which may at any time be held by it, to the same
extent
as any other holder of Senior Indebtedness, and nothing in this
Indenture shall deprive the Trustee of any of its rights as such
holder.
Nothing in this Article shall apply to claims of, or payments
to, the Trustee under or pursuant to Section 6.07.
SECTION 12.13. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee
shall have been appointed by the Company and be then acting
hereunder, the term "Trustee" as used in this Article shall in such
case (unless the context otherwise requires) be construed as
extending
to and including such Paying Agent within its meaning as fully, for
all intents and purposes, as if such Paying Agent were named in
this
Article in addition to or in place of the Trustee; provided,
however,
that Section 12.12 shall not apply to the Company or any Affiliate
of
the Company if it or such Affiliate acts as Paying Agent.
SECTION 12.14. Certain Exchanges Deemed Payment.
For the purposes of this Article only, (1) the issuance and
delivery of junior securities upon exchange of Securities in
accordance with Article Thirteen shall not be deemed to constitute
a
payment or distribution on account of the principal of or interest
on
Securities or on account of the purchase or other acquisition of
Securities, and (2) the payment, issuance or delivery of cash,
property or securities (other than junior securities) upon exchange
of
a Security shall be deemed to constitute payment on account of the
principal of such Security. For the purposes of this Section, the
term
"junior securities" means (a) shares of any stock of any class of
the
Company or the Parent and any cash, securities or other property
into which the Securities are exchangeable pursuant to Article
Thirteen and (b) securities of the Company or the Parent which are
subordinated in right of payment to all Senior Indebtedness which
may be outstanding at the time of issuance or delivery of such
securities to substantially the same extent as, or to a greater
extent
than, the Securities are so subordinated as provided in this
Article.
Nothing contained in this Article or elsewhere in this Indenture or
in
the Securities is intended to or shall impair, as among the any
Obligor, its creditors other than holders of Senior Indebtedness
and
the Holders of the Securities, the right, which is absolute and
unconditional, of the Holder of any Security to exchange such
Security in accordance with Article Thirteen.
SECTION 12.15. Trust Monies Not Subordinated.
Notwithstanding anything contained herein to the contrary
and subject to the prior satisfaction of all of the conditions set
forth
in Section 4.01, payments from money held in trust under Article
Four by the Trustee shall not be subordinated to the prior payment
of
any Senior Indebtedness of the Company or subject to the
restrictions
set forth in this Article Twelve, and none of the Holders shall be
obligated to pay over any such amount to the Company or any holder
of Senior Indebtedness of the Company or any other creditor of the
Company.
ARTICLE XIII
Exchange of Securities
SECTION 13.01. Exchange Privilege and Exchange Price.
Subject to and upon compliance with the provisions of this
Article Thirteen, at the option of the Holder thereof, any
Security, or
any portion of the principal amount thereof which is a minimum of
$1,000 and an integral multiple of one dollar may be exchanged at
any time, on the basis of such principal amount for fully paid and
non-assessable shares of Preferred Stock at the price of $1,000 per
share of Preferred Stock (the "Exchange Price). Such exchange
right
shall expire at the close of business on April 30, 2004. In case
a
Security (or portion thereof) is called for redemption at the
election
of the Company, such exchange right in respect of such Security
shall survive the redemption solely (in addition to payment of the
Redemption Price) through the issuance of Warrants in place of the
Securities redeemed granting the holder thereof the right to
purchase
for cash, at the price of $1,000 per share of Preferred Stock,
shares
of Preferred Stock in an amount equal to the number of shares of
Preferred Stock for which such Security would have been
exchangeable had it not been redeemed.
SECTION 13.02. Exercise of Exchange Privilege.
In order to exercise the exchange privilege, the Holder of any
Security to be exchanged shall surrender such Security, duly
assigned
to the Company or endorsed in blank, at any office or agency of the
Company maintained for that purpose pursuant to Section 10.04 (any
city in which any Exchange Agent is located being called herein a
"Place of Exchange") accompanied by a duly signed exchange notice
substantially in the form set forth in Section 2.06 stating that
the
Holder elects to exchange such Security or, if less than the entire
principal amount thereof is to be exchanged, the portion thereof to
be
exchanged. Each Holder of a Security surrendered for exchange (in
whole or in part) shall be entitled to receive on the Interest
Payment
Date following the exchange interest with respect to the Security
or
portion thereof exchanged accrued from the Interest Payment Date
immediately preceding the exchange to the date the Security is
surrendered for exchange. No cash payment or adjustment shall be
made upon any exchange on account of any dividends on the
Preferred Stock issued upon exchange. The Company's delivery to
the Holder of the number of shares of Preferred Stock (and cash in
lieu of fractions thereof as provided in this Indenture) into which
a
Security is exchangeable will be deemed to satisfy the Company's
obligation to pay the principal amount of the Security.
Securities shall be deemed to have been exchanged
immediately prior to the close of business on the day of surrender
of
such Securities for exchange in accordance with the foregoing
provisions, and at such time, the rights of the Holders of such
Securities as Holders shall cease, and the Person or Persons
entitled
to receive the Preferred Stock issuable upon exchange shall be
treated
for all purposes as the record holder or holders of such Preferred
Stock at such time (unless the stock register of the Parent shall
be
closed on such day, in which event, at the close of business on the
next succeeding day on which such stock register is open). The
Parent agrees that as promptly as practicable on or after the
exchange
date, it shall issue and deliver to the Trustee for delivery to the
Holder a certificate or certificates for the number of full and
fractional shares of Preferred Stock issuable upon exchange.
In the case of any Security which is exchanged in part only,
upon such exchange the Company shall execute and the Trustee shall
authenticate and deliver to the Holder thereof, at the expense of
the
Company, a new Security or Securities of authorized denominations
in an aggregate principal amount equal to the unexchanged portion
of
the principal amount of such Security. A Security may be exchanged
in part, but only if the principal amount of such Security to be
exchanged is a minimum of $1,000 and is an integral multiple of one
dollar and the principal amount of such security to remain
Outstanding after such exchange is a minimum of $1,000.
SECTION 13.03. Notice of Adjustments to Preferred Stock.
In the event that adjustments of the exchange rights of the
Preferred Stock are required to be made pursuant to the Certificate
of
Designation, the Company shall promptly deliver notice thereof,
setting forth the calculation in reasonable detail, to the Trustee
and to
each of the Holders of Securities.
SECTION 13.04. Notice of Certain Corporate Action.
In case:
(a) the Company shall declare a dividend (or any
other distribution) on its Common Stock payable (i) otherwise than
exclusively in cash or (ii) exclusively in cash in an amount that
would
require any adjustment pursuant to Section 3.1 or 3.2 of the
Certificate of Designation; or
(b) the Company shall authorize the granting to
the holders of its Common Stock generally of rights, options
or warrants to subscribe for or purchase any shares of capital
stock of any class, or of any other rights; or
(c) of any reclassification of the Common Stock,
or of any consolidation, merger or share exchange to which
the Company is a party and for which approval of any
stockholders of the Company is required, or of the
conveyance, sale, transfer or lease of all or substantially
all
of the assets of the Company; or
(d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(e) the Company or any Subsidiary shall
commence a tender offer for all or a portion of the
Company's outstanding shares of Common Stock (or shall
amend any such tender offer); or
(f) any other event requiring an adjustment
pursuant to Section 3.1 or 3.2 of the Certificate of Designation
shall have occurred;
then the Company shall cause to be filed, or the Company shall
cause
the Trustee to cause to be filed, at each office or agency
maintained
for the purpose of exchange of Securities pursuant to Section
10.04,
and the Company shall cause to be provided, or the Company shall
cause the Trustee to cause to be provided, to all Holders in
accordance with Section 1.06, at least 20 days (or 10 days in any
case specified in clause (a) or (b) above) prior to the applicable
record, expiration or effective date hereinafter specified, a
notice
stating (x) the date on which a record is to be taken for the
purpose
of any such dividend, distribution, rights, options or warrants,
or, if
a record is not to be taken, the date as of which the holders of
Common Stock of record to be entitled to such dividend,
distribution,
rights, options or warrants are to be determined, (y) the date on
which the right to make tenders under any such tender offer expires
or (z) the date on which any such reclassification, consolidation,
merger, conveyance, transfer, sale, lease, dissolution, liquidation
or
winding up is expected to become effective, and the date as of
which
it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities,
cash or other property deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, sale, lease,
dissolution,
liquidation or winding up. Neither the failure to give such notice
or
the notice referred to in the following paragraph nor any defect
therein shall affect the legality or validity of the proceedings
described in clauses (a) through (e) of this Section 13.04. If at
the
time the Trustee shall not be an Exchange Agent, a copy of such
notice shall also forthwith be filed by the Company with the
Trustee.
The preceding paragraph to the contrary notwithstanding, the
Company shall cause to be filed, or the Company shall cause the
Trustee to cause to be filed, at each office or agency maintained
for
the purpose of exchange of Securities pursuant to Section 10.04,
and
the Company shall cause to be provided, or the Company shall cause
the Trustee to cause to be provided, to all Holders in accordance
with
Section 1.06, notice of any tender offer by the Company or any
Subsidiary for all or any portion of the Common Stock on or after
the time that such notice of tender offer is provided to the public
generally.
SECTION 13.05. Parent to Reserve Preferred and Reserve
and Issue Common Stock.
The Parent shall at all times reserve and keep available out
of
its authorized but unissued shares of Preferred Stock, solely for
the
purpose of effecting the exchange of the Securities, such number of
its shares of Preferred Stock as shall from time to time be
sufficient
to effect an exchange of all outstanding Securities, and if at any
time
the number of authorized but unissued shares of Preferred Stock
shall
not be sufficient to effect the exchange of all then outstanding
Securities, the Parent shall promptly seek such corporate action as
may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Preferred Stock to such number of
shares as shall be sufficient for such purpose. In the event of
the
consolidation or merger of the Parent with another corporation
where
the Parent is not the surviving corporation, effective provisions
shall
be made in the certificate or articles of incorporation, merger or
consolidation, or otherwise, of the surviving corporation to
reserve
and keep available sufficient number of shares of Preferred Stock
or
other securities or property to provide for the exchange of the
Securities in accordance with the provisions of this Article
Thirteen.
The Parent shall also at all times reserve and keep available
out of its authorized but unissued shares of Common Stock, solely
for the purpose of effecting the redemption of the Preferred Stock,
such number of shares of its Common Stock as shall from time to
time be sufficient to effect a redemption of all shares of
Preferred
Stock that would be issued and outstanding upon exchange of the
Securities into shares of Preferred Stock, and if at any time the
number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the redemption of all shares of Preferred
Stock
that would be outstanding upon exchange of the Securities into
shares
of Preferred Stock, the Parent shall promptly seek such corporate
action as may, in the opinion of its counsel, be necessary to
increase
its authorized but unissued shares of Common Stock to such number
of shares as shall be sufficient for such purpose. In the event of
the
consolidation or merger of the Parent with another corporation
where
the Parent is not the surviving corporation, effective provisions
shall
be made in the certificate or articles of incorporation, merger or
consolidation, or otherwise, of the surviving corporation to
reserve
and keep available sufficient number of shares of common stock or
other securities or property to provide for the exchange of the
Preferred Stock in accordance with the provisions of this Article
Thirteen.
In the event the Preferred Stock is redeemed pursuant to
Section 3.3 of the Certificate of Designation, and warrants are
issued
under such Section 3.3 and subsequently exercised, the Parent
agrees
that it shall, upon receipt of payment from the holder of any such
warrant of the exercise price of such warrant, issue shares of
Common Stock in an amount equal to the number of shares of
Common Stock being purchased pursuant to such warrant.
SECTION 13.06. Taxes on Exchanges.
Except as provided in the next sentence, the Company will
pay any and all taxes and duties that may be payable in respect of
the
issue or delivery of shares of Preferred Stock on exchange of
Securities pursuant hereto. The Company shall not, however, be
required to pay any tax or duty which may be payable in respect of
(i) income of the Holder or (ii) any transfer involved in the issue
and
delivery of shares of Preferred Stock in a name other than that of
the
Holder of the Security or Securities to be exchanged and no such
issue or delivery shall be made unless and until the Person
requesting
such issue has paid to the Company the amount of any such tax or
duty, or has established to the satisfaction of the Company that
such
tax or duty has been paid.
SECTION 13.07. Covenant as to Preferred Stock.
The Parent agrees that all shares of Preferred Stock which
may be delivered upon exchange of Securities will be newly issued
shares and, upon such delivery, will have been duly authorized and
validly issued and will be fully paid and nonassessable and, except
as
provided in Section 13.06, the Company will pay all taxes, liens
and
charges with respect to the issue thereof.
SECTION 13.08. Cancellation of Exchanged Securities.
All Securities delivered for exchange pursuant to Article
Thirteen shall be delivered to the Trustee to be canceled by or at
the
direction of the Trustee, which shall dispose of the same as
provided
in Section 3.09.
SECTION 13.09. Provision in Case of Consolidation,
Merger, Sale of Assets or Compulsory
Share Exchange.
In case of any consolidation or merger of the Parent with or
into any other Person, any merger of another Person with or into
the
Parent (other than a merger which does not result in any
reclassification, conversion, exchange or cancellation of
outstanding
shares of Common Stock or Preferred Stock), any conveyance, sale,
transfer or lease of all or substantially all of the assets of the
Parent
or compulsory share exchange, the Person formed by such
consolidation or resulting from such merger, which acquires such
assets or which acquires the shares of the Parent pursuant to such
share exchange, as the case may be, shall execute and deliver to
the
Trustee a supplemental indenture providing that the Holder of each
Security then outstanding shall have the right thereafter, during
the
period such Security shall be exchangeable as specified in Section
13.01, to receive for such Security only the kind and amount of
securities, cash and other property receivable upon such
consolidation, merger, conveyance, sale, transfer or lease, or
compulsory share exchange by a holder of the number of shares of
Common Stock for which such Security might have been redeemed
(after exchange into shares of Preferred Stock) immediately prior
to
such consolidation, merger, conveyance, sale, transfer or lease, or
compulsory share exchange, assuming such holder of Common Stock
(i) is not a Person which the Company consolidated or merged with
or into or which merged into or with the Company or to which such
conveyance, sale, transfer or lease was made or with which such
compulsory share exchange was made, as the case may be
("Constituent Person"), or an Affiliate of a Constituent Person,
and
(ii) failed to exercise his rights of election, if any, as to the
kind or
amount of securities, cash and other property receivable upon such
consolidation, merger, conveyance, sale, transfer or lease, or
compulsory share exchange (provided that if the kind or amount of
securities, cash and other property receivable upon such
consolidation, merger, conveyance, sale, transfer or lease, or
compulsory share exchange is not the same for each share of
Common Stock held immediately prior to such consolidation, merger,
conveyance, sale, transfer or lease, or compulsory share exchange
by
other than a Constituent Person or an Affiliate thereof and in
respect
of which such rights of election shall not have been exercised
("Non-Electing Share"), then for the purpose of this Section 13.09
the kind and amount of securities, cash and other property
receivable
upon such consolidation, merger, conveyance, sale, transfer or
lease,
or compulsory share exchange by the holders of each Non-Electing
Share shall be deemed to be the kind and amount so receivable per
share by a plurality of the Non-Electing Shares). Such
supplemental
indenture shall provide for adjustments which, for events
subsequent
to the effective date of such supplemental indenture, shall be as
nearly equivalent as may be practicable to the adjustments provided
for in this Article. The above provisions of this Section 13.09
shall
similarly apply to successive consolidations, mergers, conveyances,
sales, transfers or leases, or compulsory share exchanges. Notice
of
the execution of such a supplemental indenture shall be given by
the
Company, or the Company shall cause the Trustee to give such
notice, to the Holder of each Security as provided in Section 1.06
promptly upon such execution.
Neither the Trustee, any Paying Agent nor any Exchange
Agent shall be under any responsibility to determine the
correctness
of any provisions contained in any such supplemental indenture
relating either to the kind or amount of shares of stock or other
securities or property or cash receivable by Holders of Securities
upon the exchange of their Securities after any such consolidation,
merger, conveyance, transfer, sale or lease, or compulsory share
exchange or to any such adjustment, but may accept as conclusive
evidence of the correctness of any such provisions, and shall be
protected in relying upon, an Opinion of Counsel with respect
thereto, which the Company shall cause to be furnished to the
Trustee upon request.
SECTION 13.10. Responsibility of Trustee for Exchange
Provisions.
The Trustee, subject to the provisions of Article Six, and any
Exchange Agent shall not at any time be under any duty or
responsibility to any Holder of Securities to make any
determination
whether any facts exist which may require any adjustment of the
Exchange Price of the Preferred Stock on the Redemption Value (as
defined in the Certificate of Designation) of the Preferred Stock
or
with respect to the nature or extent of any such adjustment when
made, or with respect to the method employed, or herein or in any
supplemental indenture or the Certificate of Designation provided
to
be employed, in making the same, or whether a supplemental
indenture need be entered into. Neither the Trustee, subject to
the
provisions of Article Six, nor any Exchange Agent shall be
accountable with respect to the validity or value (or the kind or
amount) of any Preferred Stock, or of any other securities or
property or cash, which may at any time be issued or delivered upon
the exchange of any Security, and neither makes any representation
with respect thereto. Neither the Trustee, subject to the
provisions of
Article Six, nor any Exchange Agent shall be responsible for any
failure of the Company to make or calculate any cash payment or to
issue, transfer or deliver any shares of Preferred Stock or share
certificates or other securities or property or cash upon the
surrender
of any Security for the purpose of exchange; and the Trustee,
subject
to the provisions of Article Six, and any Exchange Agent shall not
be
responsible for any failure of the Company to comply with any of
the
covenants of the Company contained in this Article.
ARTICLE XIV
Periodic Redemption
SECTION 14.01. Funds for Redemption.
(a) Within 15 days after unaudited financial statements
are issued by the Parent in each of the first three quarters of its
fiscal
year, and within 15 days after its audited year-end financial
statements are issued, until all Outstanding Securities have been
satisfied pursuant to Article Four, redeemed pursuant to Article
Eleven or exchanged into shares of Preferred Stock pursuant to
Article Thirteen, the Company shall deposit with the Trustee, to be
used to redeem or satisfy and discharge such Securities in
accordance
with Article Eleven of this Indenture, all Accumulated Cash Flow
(as
defined below). Notwithstanding the foregoing, the provisions of
this
Article Fourteen shall not take effect until such time as all
obligations
of the Company under the Retained Yield Financing have been
satisfied in full.
(b) Accumulated Cash Flow means an amount,
calculated, on a cumulative basis as of the end of each fiscal
quarter
for the period commencing on the date of this Indenture and ending
on the last day of such fiscal quarter, equal to (without
duplication)
the Parent's and its Subsidiaries' consolidated (i) net income for
such
period, plus (ii) non-cash amortization expense for such period, to
the
extent deducted in computing net income, including, without
limitation, amortization of goodwill and other intangible assets,
plus
(iii) depreciation for such period, to the extent deducted in
computing
net income, plus (iv) all other non-cash charges (including without
limitation, write-offs of receivables, whether directly or
indirectly
owned, and charges relating to purchase accounting adjustments), to
the extent deducted in computing net income for such period, plus
(v)
cash receipts on account of the collection, sale or liquidation of
any
receivables or inventory (including repossessed or leased auto-
mobiles) received by the Company, the Parent or any of their
Subsidiaries to the extent not otherwise added in the computation
of
net income described above, plus (vi) receipts by the Company, the
Parent or any of their respective Subsidiaries of cash collections
on
account of any retained yield or other residual interests in any
securitizations to the extent not otherwise added in the
computation of
net income described above, minus (vii) Capital Expenditures paid
in
cash by the Parent, the Company or their respective subsidiaries in
the ordinary course of operations during such period, to the extent
permitted under this Indenture and not otherwise deducted in
computing net income for such period, minus (viii) principal and/or
indemnification payments made on the Senior Indebtedness and
principal payments made on all other Indebtedness of the Parent and
its Subsidiaries permitted to be incurred under this Indenture (in
each
case to the extent that such principal or indemnification payment
was
not deducted in computing net income), minus (ix) required deposits
to any reserve or similar funds established in connection with any
securitizations, to the extent that the cash so deposited was
included
in the calculation of net income for such period or added to
Accumulated Cash Flow pursuant to one of the other clauses
contained in this definition, minus (x) non-cash gains included in
the
computation of net income and which are attributable to accelerated
recognition of future interest income upon receipt by the Parent,
the
Company or its Subsidiaries of residual interests in connection
with
the securitization of interest-bearing receivables, plus (xi) net
cash
proceeds of any issuance of equity securities by the Parent, plus
(xii)
the net cash proceeds of any issuance of Indebtedness for borrowed
money (other than Senior Indebtedness and other than Indebtedness
with respect to the issuance of the Securities) received by the
Parent,
the Company or its Subsidiaries during such period, plus (xiii) the
excess, if any, of (A) the net cash proceeds received by the
Parent,
the Company or any Subsidiary under any Indebtedness incurred
primarily for the financing and acquisition of automobile purchase
or
leasing contracts over (B) the cash expense to the Company, the
Parent and/or such Subsidiary of acquiring any such contracts. All
such amounts shall be calculated in accordance with generally
accepted accounting principles consistently applied with those in
effect as of the date hereof.
ARTICLE XV
Collateral; Guaranty
SECTION 15.01. Collateral Documents.
In order to secure the due and punctual payment of the
principal of and interest on the Securities and all other amounts
payable by the Company under this Indenture, the Company and
certain of its Affiliates shall execute the Collateral Documents
granting the Trustee a security interest in certain assets of the
Company and its Affiliates (the "Collateral") as set forth in such
Collateral Documents for the benefit of the Security Holders and
other secured parties as set forth in the Collateral Documents.
The
Company and/or its Affiliates, as the case may be, have full right,
power and lawful authority to grant, bargain, sell, release,
convey,
hypothecate, assign, mortgage, pledge, transfer and confirm,
absolutely, the property constituting the Collateral, in the manner
and
form done, or intended to be done, in the Collateral Documents,
free
and clear of all liens, pledges, charges and encumbrances,
whatsoever, except the liens created by the Collateral Documents
and
except to the extent otherwise provided therein, and (a) will
forever
warrant and defend the title to the same against the claims of all
persons whatsoever, (b) will execute, acknowledge and deliver to
the
Trustee such further assignments, transfers, assurances or other
instruments as the Trustee may require or request and (c) will do
or
cause to be done all such acts and things as may be necessary or
proper, or as may be required by the Trustee to assure and confirm
to the Trustee the security interest in the Collateral contemplated
hereby, by the Collateral Documents, or any part thereof, as from
time to time constituted, so as to render the same available for
the
security and benefit of this Indenture and of the Securities
secured
hereby, according to the intent and purposes herein expressed. The
Collateral Documents will create a direct and valid lien on the
property constituting the Collateral, as set forth in the
Collateral
Documents. To the extent applicable, the Collateral Documents will
be governed by the Uniform Commercial Code.
Each Security Holder, by accepting a Security, agrees to all
of the terms and provisions of the Collateral Documents, as such
agreement may be amended from time to time pursuant to the
provisions hereof and thereof. The terms of the release of any
Collateral and the rights of the holders with respect thereto shall
be
governed by this Indenture and the Collateral Documents.
SECTION 15.02. Suits to Protect the Collateral.
The Trustee shall have power to institute and to maintain
such suits and proceedings as it may deem expedient to prevent any
impairment of the Collateral by any acts that may be unlawful or in
violation of the Collateral Documents or this Indenture, and such
suits and proceedings as it may deem expedient to preserve or
protect
its interests and the interests of the Security Holders in the
Collateral
(including power to institute and maintain suits or proceedings to
restrain the enforcement of or compliance with any legislative or
other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid if the enforcement of, or
compliance with, such enactment, rule or order would impair the
security hereunder or be prejudicial to the interests of the
Security
Holders or the Trustee).
SECTION 15.03. Guaranty
In order to further assure its due and punctual payment of the
principal and interest on the Securities and all other amounts
payable
by the Company under this Indenture, the Parent shall execute a
full
and unconditional guaranty (the "Guaranty") in the form annexed
hereto as Exhibit C.
SECTION 15.04. Authorization to Receive Funds.
The Trustee is authorized to receive any funds for the benefit
of Security Holders distributed under the Collateral Documents or
the
Guaranty and to make further distributions of such funds to the
Holders in accordance with the provisions of the Indenture and the
Collateral Documents or the Guaranty, as the case may be.
_________________________
This instrument may be executed in any number of
counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but
one
and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Indenture to be duly executed, and their respective corporate
seals to be hereunto affixed and attested, all as of the day and
year
first above written.
AEGIS AUTO FINANCE, INC.
[SEAL]
ATTEST By:
Name:
Title:
Name:
Title:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
Trustee:
[SEAL]
By:
Name:
Title:
Acknowledged and Agreed as to applicable provisions related to the
Common Stock, the Preferred Stock, the Warrants (including,
without limitation, any obligation to issue or exchange any of the
foregoing) the Guaranty and any covenant contained herein
applicable
to the Parent.
THE AEGIS CONSUMER FUNDING GROUP,INC.
[SEAL]
ATTEST By:
Name:
Title:
Name:
Title:
<PAGE>
STATE OF )
) ss.:
COUNTY OF )
On the _____ day of _______________, ____, before
me personally came _________________________, to me known,
who, being by me duly sworn, did depose and say that he/she is
_________________________ of AEGIS AUTO FINANCE, INC.,
one of the corporations described in and which executed the
foregoing instrument; that he/she knows the seal of said
corporation;
that the seal affixed to said instrument is such corporate seal;
that it
was so affixed by authority of the Board of Directors of said
corporation, and that he/she signed his/her name thereto by like
authority.
Notary
Public
STATE OF )
) ss.:
COUNTY OF )
On the _____ day of _______________, ____, before
me personally came _________________________, to me known,
who, being by me duly sworn, did depose and say that he/she is
_________________________ of THE AEGIS CONSUMER
FUNDING GROUP, INC., one of the corporations described in and
which executed the foregoing instrument; that he/she knows the seal
of said corporation; that the seal affixed to said instrument is
such
corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation, and that he/she signed his/her name
thereto by like authority.
Notary
Public
STATE OF )
) ss.:
COUNTY OF )
On the ____ day of _______________, ____, before
me personally came ____________________, to me known, who,
being by me duly sworn, did depose and say that he/she is
_________________________ of NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, one of the corporations described in
and which executed the foregoing instrument; that he/she knows the
seal of said corporation; that the seal affixed to said instrument
is
such corporate seal; that it was so affixed by authority of the
Board
of Directors of said corporation, and that he/she signed his/her
name
thereto by like authority.
Notary Public
THE SECURITY REPRESENTED HEREBY HAS
NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND IS A RESTRICTED
SECURITY AS THAT TERM IS DEFINED IN
RULE 144 UNDER THE SECURITIES ACT. THIS
SECURITY MAY NOT BE OFFERED FOR SALE,
SOLD, OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN EXEMPTION FROM
REGISTRATION OR QUALIFICATION UNDER
THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAW, THE AVAILABILITY OF
WHICH IS TO BE ESTABLISHED TO THE
SATISFACTION OF THIS CORPORATION,
INCLUDING, WITHOUT LIMITATION, BY
DELIVERY OF AN OPINION OF COUNSEL IN
FORM AND SCOPE SATISFACTORY TO THE
CORPORATION AS TO THE AVAILABILITY OF
SUCH EXEMPTION.
AEGIS AUTO FINANCE, INC.
12% EXCHANGEABLE SUBORDINATED NOTE
DUE 2004
No. ________ $5,000,000
Aegis Auto Finance, Inc., a corporation duly
organized and existing under the laws of Delaware
(herein called the "Company", which term includes
any successor Person under the Indenture hereinafter
referred to), for value received, hereby promises to
pay to The High Risk Opportunities Hub Fund, Ltd.,
or registered assigns, the principal sum of Five
Million Dollars ($5,000,000) on April 30, 2004, and
to pay interest thereon from May __, 1997 or from the
most recent Interest Payment Date to which interest
has been paid or duly provided for, semi-annually in
arrears on November 1 and May 1 in each year (each,
an "Interest Payment Date"), commencing November
1, 1997 at the rate of 12% per annum, until the
principal hereof is due, and at the rate of 14% per
annum compounded semi-annually, on any overdue
principal and, to the extent permitted by law, on any
overdue interest. Interest on the Securities shall be
computed on the basis of a 360-day year of twelve
30-day months. The interest so payable, and
punctually paid or duly provided for, on any Interest
Payment Date will, as provided in the Indenture, be
paid to the Person in whose name this Security (or one
or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such
interest, which shall be the April 25 or October 25
(whether or not a Business Day), as the case may be,
next preceding such Interest Payment Date. Except as
otherwise provided in the Indenture, any such interest
not so punctually paid or duly provided for will
forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the
Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee,
notice whereof shall be given to Holders of Securities
no more than 15 days and not less than 10 days prior
to such Special Record Date, or be paid at any time in
any other lawful manner not inconsistent with the
requirements of any automated quotation system or
securities exchange on which the Securities may be
quoted or listed, and upon such notice as may be
required by such quotation system or exchange, as the
case may be, all as more fully provided in the
Indenture. Payments of principal shall be made upon
the surrender of this Security at the option of the
Holder at the Corporate Trust Office of the Trustee, or
at such other office or agency of the Company as may
be designated by it for such purpose, in such coin or
currency of the United States of America as at the
time of payment shall be legal tender for the payment
of public and private debts; provided, however; that at
the option of the Company payment of interest may be
made by check, mailed to the address of the Person
entitled thereto as such address shall appear in the
Security Register.
Except as specifically provided in the
Indenture, the Company shall not be required to make
any payment with respect to any tax, assessment or
other governmental charge imposed by any
governmental or any political subdivision or taxing
authority thereof or therein.
Reference is hereby made to the further
provisions of this Security set forth on the reverse
hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon
has been executed by the Trustee referred to on the
reverse hereof by manual signature, this Security shall
not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has
caused this instrument to be duly executed under its
corporate seal.
Dated:
AEGIS AUTO FINANCE, INC.
[Corporate Seal]
By:
Title:
Name:
Attest:
Title:
<PAGE>
Reverse of Security.
This Security is one of a duly authorized issue
of Securities of the Company designated as its 12%
Exchangeable Subordinated Notes Due 2004 (herein
called the "Securities"), limited in aggregate principal
amount to $21,333,333 issued under an Indenture,
dated as of April 30, 1997 (herein called the
"Indenture"), between the Company and Norwest
Bank, N.A. as Trustee (herein called the "Trustee",
which term includes any successor trustee under the
Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the
Trustee, the holders of Senior Indebtedness and the
Holders of the Securities and of the terms upon which
the Securities are authenticated and delivered. The
Securities are issuable in "registered form" only (as
such term is defined in Section 163(f), 871(h)(2) and
881(c)(2) of the Code) without coupons in the
minimum denomination of $1,000 and any integral
multiple of one dollar.
Subject to and upon compliance with the
provisions of the Indenture, the Holder of this
Security, is entitled, at his option, at any time after
April 30, 1997 and before the close of business on
April 30, 2004, to exchange this Security (or any
portion of the principal amount hereof that is a
minimum of $1,000 and an integral multiple of one
dollar provided that the unexchanged portion of such
principal amount is $1,000 or any amount in excess
thereof) at the principal amount hereof or of such
portion, into fully paid and nonassessable shares of
Preferred Stock at an Exchange Price equal to
$1,000.00 aggregate principal amount of Securities for
each share of Preferred Stock by surrender of this
Security, duly endorsed or assigned to the Company or
in blank, and accompanied by the exchange notice
hereon duly executed, to the Company at the
Corporate Trust Office of the Trustee, or at such other
office or agency as the Company may designate (an
"Exchange Agent") (subject to any laws or regulations
applicable thereto and subject to the right of the
Company to terminate the appointment of any
Exchange Agent) for such purpose; provided,
however, that if this Security (or a portion hereof) has
been called for redemption on a Redemption Date
occurring during the period from the close of business
on any Regular Record Date next preceding any
Interest Payment Date to the opening of business on
such Interest Payment Date and is surrendered for
exchange during such period, then no payment or
adjustment shall be required of the Holder of this
Security upon such surrender with respect to interest
payable hereon on such Interest Payment Date. In the
event of an exchange, the Holder of this Security shall
be entitled to receive on the next Interest Payment
Date, accrued interest from the Interest Payment Date
immediately preceding the exchange of this Security to
the date this Security is surrendered for exchange. No
payment or adjustment is to be made on exchange of
this Security (or any portion hereof) for dividends on
the Preferred Stock issued on exchange. The delivery
to the Holder of the fixed number of shares of
Preferred Stock (together with any cash adjustment, as
provided in the Indenture) for which the Security is
exchanged shall be deemed to satisfy the Company's
obligation to pay the principal amount of the Security.
Where necessary, upon exchange, the Parent will issue
fractional shares of Preferred Stock. In addition, the
Indenture provides that in the case of certain
consolidations or mergers to which The Aegis
Consumer Funding Group, Inc. (the "Parent") is a
party or the conveyance, transfer, sale or lease of all
or substantially all of the property and assets of the
Parent, the Indenture shall be amended, without the
consent of any Holders of Securities, so that this
Security, if then Outstanding, will be exchanged
thereafter, during the period this Security shall be
redeemable as specified above, only for the kind and
amount of securities, cash and other property
receivable upon such consolidation, merger,
conveyance, transfer, sale or lease by a holder of the
number of shares of Preferred Stock for which this
Security could have been exchanged (assuming the
redemption of the shares of Preferred Stock)
immediately prior to such consolidation, merger,
conveyance, transfer, sale or lease (assuming such
holder of Preferred Stock was not a Constituent
Person, failed to exercise any rights of election and
received per share the kind and amount of securities,
cash and other property received per share by a
plurality of Non-Electing Shares).
The Securities are subject to redemption upon
not less than 30 nor more than 60 days' notice by
mail, at any time, and from time to time, in whole or
in part, at the election of the Company, at a
Redemption Price equal to 100% of the principal
amount, together with accrued interest to the
Redemption Date; provided, however, that interest
installments whose Stated Maturity is on or prior to
such Redemption Date will be payable to the Holders
of such Securities (or any Predecessor Securities) of
record at the close of business on the relevant Record
Dates referred to on the face hereof all as provided in
the Indenture.
In the event that the Securities are redeemed,
in whole or in part, prior to April 30, 2004, Warrants
shall be issued by the Parent upon such redemption
granting the Person previously holding the redeemed
Security rights to purchase, for cash in an amount
equal to the principal amount of the Securities so
redeemed, a number of shares of Preferred Stock
equivalent to the number of shares of Preferred Stock
(or other securities or property) such Person could
have received pursuant to the exchange rights provided
by the redeemed Securities.
In the event of redemption or exchange of this
Security in part only, a new Security or Securities for
the unredeemed or unexchanged portion hereof will be
issued in the name of the Holder hereof upon the
cancellation hereof.
In any case where the due date for the
payment of the principal of or interest on any Security
or the last day on which a Holder of a Security has a
right to exchange his Security shall be, at any Place of
Payment or Place of Exchange, as the case may be, a
day on which banking institutions at such Place of
Payment or Place of Exchange are authorized or
obligated by law or executive order to close, then
payment of principal, or interest, or delivery for
exchange of such Security need not be made on or by
such date at such place but may be made on or by the
next succeeding day at such place which is not a day
on which banking institutions are authorized or
obligated by law or executive order to close, with the
same force and effect as if made on the date for such
payment or the date fixed for redemption, or by such
last day for exchange, and no interest shall accrue on
the amount so payable for the period after such date so
long as payment is made on the next succeeding day at
such place which is not a day on which banking
institutions are authorized or obligated by law or
executive order to close.
The indebtedness evidenced by this Security
is, to the extent provided in the Indenture, subordinate
and subject in right of payment to the prior payment in
full of all Senior Indebtedness, and this Security is
issued subject to the provisions of the Indenture with
respect thereto. Each Holder of this Security, by
accepting the same, (a) agrees to and shall be bound
by such provisions, (b) authorizes and directs the
Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination
so provided and (c) appoints the Trustee his
attorney-in-fact for any and all such purposes.
If an Event of Default shall occur and be
continuing, the principal of all the Securities may be
declared due and payable in the manner and with the
effect provided in the Indenture.
The Indenture permits, with certain exceptions
as therein provided, the amendment thereof and the
modification of the rights and obligations of the
Company and the rights of the Holders of the
Securities under the Indenture at any time by the
Company and the Trustee with the consent of the
Holders of not less than a majority in aggregate
principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions
permitting the Holders of specified percentages in
aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the
Securities, to waive compliance by the Company with
certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this
Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security
and of any Security issued upon the registration of
transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or
waiver is made upon this Security.
No reference herein to the Indenture and no
provision of this Security or of the Indenture shall
alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of
and interest on this Security on the respective Stated
Maturities expressed herein (or in the case of
redemption, on the Redemption Date) or to exchange
this Security or issue Warrants as provided in the
Indenture.
As provided in and subject to the provisions of
the Indenture, the Holder of this Security shall not
have the right to institute any proceeding with respect
to the Indenture or for the appointment of a receiver
or trustee or for any other remedy thereunder, unless
such Holder shall have previously given the Trustee
written notice of a continuing Event of Default, the
Holders of not less than 25% in principal amount of
the Outstanding Securities shall have made written
request to the Trustee to institute proceedings in
respect of such Event of Default as Trustee and
offered the Trustee indemnity satisfactory to it and the
Trustee shall not have received from the Holders of a
majority in principal amount of the Securities
Outstanding a direction inconsistent with such request
and shall have failed to institute any such proceeding
for 60 days after receipt of such notice, request and
offer of indemnity. The foregoing shall not apply to
any suit instituted by the Holder of this Security for
the enforcement of any payment of principal hereof or
interest hereon on or after the respective due dates
expressed herein or for the enforcement of the right to
exchange or redeem this Security as provided in the
Indenture.
As provided in the Indenture and subject to
certain limitations therein set forth, the transfer of this
Security is registrable in the Security Register upon
surrender of this Security for registration of transfer at
the office or agency of the Company maintained for
that purpose pursuant to Section 10.03 of the
Indenture, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to
the Company and the Security Registrar duly executed
by the Holder hereof or his attorney duly authorized in
writing, and thereupon, one or more new Securities,
of authorized denominations and for the same
aggregate principal amount will be issued to the
designated transferee or transferees. No service
charge shall be made for any such registration of
transfer or exchange, but the Company may require
payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
Prior to due presentment of this Security for
registration of transfer, the Company, the Trustee and
any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the
owner hereof for all purposes, whether or not this
Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice
to the contrary.
All terms used in this Security and not defined
herein but which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
ABBREVIATIONS
The following abbreviations, when used in the
inscription of the face of this Security, shall be
construed as though they were written out in full
according to applicable laws or regulations:
TENCOM as tenants in common
UNIF GIFT MIN ACT-__________________
TENENT as tenants by the entireties
(Cust)
JTTEN as joint tenants with right
as Custodian for ______________
under of survivorship and not as
(Minor)
tenants in common
Uniform Gifts to Minors Act of
_______________
(State)
Additional abbreviations may also be used
though not in the above list.
<PAGE>
THE SECURITY REPRESENTED HEREBY HAS
NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND IS A RESTRICTED
SECURITY AS THAT TERM IS DEFINED IN
RULE 144 UNDER THE SECURITIES ACT. THIS
SECURITY MAY NOT BE OFFERED FOR SALE,
SOLD, OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN EXEMPTION FROM
REGISTRATION OR QUALIFICATION UNDER
THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAW, THE AVAILABILITY OF
WHICH IS TO BE ESTABLISHED TO THE
SATISFACTION OF THIS CORPORATION,
INCLUDING, WITHOUT LIMITATION, BY
DELIVERY OF AN OPINION OF COUNSEL IN
FORM AND SCOPE SATISFACTORY TO THE
CORPORATION AS TO THE AVAILABILITY OF
SUCH EXEMPTION.
AEGIS AUTO FINANCE, INC.
12% EXCHANGEABLE SUBORDINATED NOTE
DUE 2004
No. ________ $16,333,333
Aegis Auto Finance, Inc., a corporation duly
organized and existing under the laws of Delaware
(herein called the "Company", which term includes
any successor Person under the Indenture hereinafter
referred to), for value received, hereby promises to
pay to III Finance, Ltd., or registered assigns, the
principal sum of Sixteen Million Three Hundred and
Thirty Three Thousand and Three Hundered and
Thirty Three Dollars ($16,333,333) on April 30,
2004, and to pay interest thereon from May __, 1997
or from the most recent Interest Payment Date to
which interest has been paid or duly provided for,
semi-annually in arrears on November 1 and May 1 in
each year (each, an "Interest Payment Date"),
commencing November 1, 1997 at the rate of 12% per
annum, until the principal hereof is due, and at the
rate of 14% per annum compounded semi-annually, on
any overdue principal and, to the extent permitted by
law, on any overdue interest. Interest on the
Securities shall be computed on the basis of a 360-day
year of twelve 30-day months. The interest so
payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular
Record Date for such interest, which shall be the April
25 or October 25 (whether or not a Business Day), as
the case may be, next preceding such Interest Payment
Date. Except as otherwise provided in the Indenture,
any such interest not so punctually paid or duly
provided for will forthwith cease to be payable to the
Holder on such Regular Record Date and may either
be paid to the Person in whose name this Security (or
one or more Predecessor Securities) is registered at the
close of business on a Special Record Date for the
payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of
Securities no more than 15 days and not less than 10
days prior to such Special Record Date, or be paid at
any time in any other lawful manner not inconsistent
with the requirements of any automated quotation
system or securities exchange on which the Securities
may be quoted or listed, and upon such notice as may
be required by such quotation system or exchange, as
the case may be, all as more fully provided in the
Indenture. Payments of principal shall be made upon
the surrender of this Security at the option of the
Holder at the Corporate Trust Office of the Trustee, or
at such other office or agency of the Company as may
be designated by it for such purpose, in such coin or
currency of the United States of America as at the
time of payment shall be legal tender for the payment
of public and private debts; provided, however; that at
the option of the Company payment of interest may be
made by check, mailed to the address of the Person
entitled thereto as such address shall appear in the
Security Register.
Except as specifically provided in the
Indenture, the Company shall not be required to make
any payment with respect to any tax, assessment or
other governmental charge imposed by any
governmental or any political subdivision or taxing
authority thereof or therein.
Reference is hereby made to the further
provisions of this Security set forth on the reverse
hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon
has been executed by the Trustee referred to on the
reverse hereof by manual signature, this Security shall
not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has
caused this instrument to be duly executed under its
corporate seal.
Dated:
AEGIS AUTO FINANCE, INC.
[Corporate Seal]
By:
Title:
Name:
Attest:
Title:
<PAGE>
Reverse of Security.
This Security is one of a duly authorized issue
of Securities of the Company designated as its 12%
Exchangeable Subordinated Notes Due 2004 (herein
called the "Securities"), limited in aggregate principal
amount to $21,333,333 issued under an Indenture,
dated as of April 30, 1997 (herein called the
"Indenture"), between the Company and Norwest
Bank, N.A. as Trustee (herein called the "Trustee",
which term includes any successor trustee under the
Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the
Trustee, the holders of Senior Indebtedness and the
Holders of the Securities and of the terms upon which
the Securities are authenticated and delivered. The
Securities are issuable in "registered form" only (as
such term is defined in Section 163(f), 871(h)(2) and
881(c)(2) of the Code) without coupons in the
minimum denomination of $1,000 and any integral
multiple of one dollar.
Subject to and upon compliance with the
provisions of the Indenture, the Holder of this
Security, is entitled, at his option, at any time after
April 30, 1997 and before the close of business on
April 30, 2004, to exchange this Security (or any
portion of the principal amount hereof that is a
minimum of $1,000 and an integral multiple of one
dollar provided that the unexchanged portion of such
principal amount is $1,000 or any amount in excess
thereof) at the principal amount hereof or of such
portion, into fully paid and nonassessable shares of
Preferred Stock at an Exchange Price equal to
$1,000.00 aggregate principal amount of Securities for
each share of Preferred Stock by surrender of this
Security, duly endorsed or assigned to the Company or
in blank, and accompanied by the exchange notice
hereon duly executed, to the Company at the
Corporate Trust Office of the Trustee, or at such other
office or agency as the Company may designate (an
"Exchange Agent") (subject to any laws or regulations
applicable thereto and subject to the right of the
Company to terminate the appointment of any
Exchange Agent) for such purpose; provided,
however, that if this Security (or a portion hereof) has
been called for redemption on a Redemption Date
occurring during the period from the close of business
on any Regular Record Date next preceding any
Interest Payment Date to the opening of business on
such Interest Payment Date and is surrendered for
exchange during such period, then no payment or
adjustment shall be required of the Holder of this
Security upon such surrender with respect to interest
payable hereon on such Interest Payment Date. In the
event of an exchange, the Holder of this Security shall
be entitled to receive on the next Interest Payment
Date, accrued interest from the Interest Payment Date
immediately preceding the exchange of this Security to
the date this Security is surrendered for exchange. No
payment or adjustment is to be made on exchange of
this Security (or any portion hereof) for dividends on
the Preferred Stock issued on exchange. The delivery
to the Holder of the fixed number of shares of
Preferred Stock (together with any cash adjustment, as
provided in the Indenture) for which the Security is
exchanged shall be deemed to satisfy the Company's
obligation to pay the principal amount of the Security.
Where necessary, upon exchange, the Parent will issue
fractional shares of Preferred Stock. In addition, the
Indenture provides that in the case of certain
consolidations or mergers to which The Aegis
Consumer Funding Group, Inc. (the "Parent") is a
party or the conveyance, transfer, sale or lease of all
or substantially all of the property and assets of the
Parent, the Indenture shall be amended, without the
consent of any Holders of Securities, so that this
Security, if then Outstanding, will be exchanged
thereafter, during the period this Security shall be
redeemable as specified above, only for the kind and
amount of securities, cash and other property
receivable upon such consolidation, merger,
conveyance, transfer, sale or lease by a holder of the
number of shares of Preferred Stock for which this
Security could have been exchanged (assuming the
redemption of the shares of Preferred Stock)
immediately prior to such consolidation, merger,
conveyance, transfer, sale or lease (assuming such
holder of Preferred Stock was not a Constituent
Person, failed to exercise any rights of election and
received per share the kind and amount of securities,
cash and other property received per share by a
plurality of Non-Electing Shares).
The Securities are subject to redemption upon
not less than 30 nor more than 60 days' notice by
mail, at any time, and from time to time, in whole or
in part, at the election of the Company, at a
Redemption Price equal to 100% of the principal
amount, together with accrued interest to the
Redemption Date; provided, however, that interest
installments whose Stated Maturity is on or prior to
such Redemption Date will be payable to the Holders
of such Securities (or any Predecessor Securities) of
record at the close of business on the relevant Record
Dates referred to on the face hereof all as provided in
the Indenture.
In the event that the Securities are redeemed,
in whole or in part, prior to April 30, 2004, Warrants
shall be issued by the Parent upon such redemption
granting the Person previously holding the redeemed
Security rights to purchase, for cash in an amount
equal to the principal amount of the Securities so
redeemed, a number of shares of Preferred Stock
equivalent to the number of shares of Preferred Stock
(or other securities or property) such Person could
have received pursuant to the exchange rights provided
by the redeemed Securities.
In the event of redemption or exchange of this
Security in part only, a new Security or Securities for
the unredeemed or unexchanged portion hereof will be
issued in the name of the Holder hereof upon the
cancellation hereof.
In any case where the due date for the
payment of the principal of or interest on any Security
or the last day on which a Holder of a Security has a
right to exchange his Security shall be, at any Place of
Payment or Place of Exchange, as the case may be, a
day on which banking institutions at such Place of
Payment or Place of Exchange are authorized or
obligated by law or executive order to close, then
payment of principal, or interest, or delivery for
exchange of such Security need not be made on or by
such date at such place but may be made on or by the
next succeeding day at such place which is not a day
on which banking institutions are authorized or
obligated by law or executive order to close, with the
same force and effect as if made on the date for such
payment or the date fixed for redemption, or by such
last day for exchange, and no interest shall accrue on
the amount so payable for the period after such date so
long as payment is made on the next succeeding day at
such place which is not a day on which banking
institutions are authorized or obligated by law or
executive order to close.
The indebtedness evidenced by this Security
is, to the extent provided in the Indenture, subordinate
and subject in right of payment to the prior payment in
full of all Senior Indebtedness, and this Security is
issued subject to the provisions of the Indenture with
respect thereto. Each Holder of this Security, by
accepting the same, (d) agrees to and shall be bound
by such provisions, (e) authorizes and directs the
Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination
so provided and (f) appoints the Trustee his
attorney-in-fact for any and all such purposes.
If an Event of Default shall occur and be
continuing, the principal of all the Securities may be
declared due and payable in the manner and with the
effect provided in the Indenture.
The Indenture permits, with certain exceptions
as therein provided, the amendment thereof and the
modification of the rights and obligations of the
Company and the rights of the Holders of the
Securities under the Indenture at any time by the
Company and the Trustee with the consent of the
Holders of not less than a majority in aggregate
principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions
permitting the Holders of specified percentages in
aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the
Securities, to waive compliance by the Company with
certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this
Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security
and of any Security issued upon the registration of
transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or
waiver is made upon this Security.
No reference herein to the Indenture and no
provision of this Security or of the Indenture shall
alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of
and interest on this Security on the respective Stated
Maturities expressed herein (or in the case of
redemption, on the Redemption Date) or to exchange
this Security or issue Warrants as provided in the
Indenture.
As provided in and subject to the provisions of
the Indenture, the Holder of this Security shall not
have the right to institute any proceeding with respect
to the Indenture or for the appointment of a receiver
or trustee or for any other remedy thereunder, unless
such Holder shall have previously given the Trustee
written notice of a continuing Event of Default, the
Holders of not less than 25% in principal amount of
the Outstanding Securities shall have made written
request to the Trustee to institute proceedings in
respect of such Event of Default as Trustee and
offered the Trustee indemnity satisfactory to it and the
Trustee shall not have received from the Holders of a
majority in principal amount of the Securities
Outstanding a direction inconsistent with such request
and shall have failed to institute any such proceeding
for 60 days after receipt of such notice, request and
offer of indemnity. The foregoing shall not apply to
any suit instituted by the Holder of this Security for
the enforcement of any payment of principal hereof or
interest hereon on or after the respective due dates
expressed herein or for the enforcement of the right to
exchange or redeem this Security as provided in the
Indenture.
As provided in the Indenture and subject to
certain limitations therein set forth, the transfer of this
Security is registrable in the Security Register upon
surrender of this Security for registration of transfer at
the office or agency of the Company maintained for
that purpose pursuant to Section 10.03 of the
Indenture, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to
the Company and the Security Registrar duly executed
by the Holder hereof or his attorney duly authorized in
writing, and thereupon, one or more new Securities,
of authorized denominations and for the same
aggregate principal amount will be issued to the
designated transferee or transferees. No service
charge shall be made for any such registration of
transfer or exchange, but the Company may require
payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
Prior to due presentment of this Security for
registration of transfer, the Company, the Trustee and
any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the
owner hereof for all purposes, whether or not this
Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice
to the contrary.
All terms used in this Security and not defined
herein but which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
ABBREVIATIONS
The following abbreviations, when used in the
inscription of the face of this Security, shall be
construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT-__________________
TEN ENT - as tenants by the entireties
(Cust)
JT TEN - as joint tenants with right
as Custodian for ______________
under of survivorship and not as
(Minor)
tenants in common
Uniform Gifts to Minors Act of
_______________
(State)
Additional abbreviations may also be used
though not in the above list.
<PAGE>
THE SECURITY REPRESENTED HEREBY HAS
NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND IS A RESTRICTED
SECURITY AS THAT TERM IS DEFINED IN
RULE 144 UNDER THE SECURITIES ACT. THIS
SECURITY MAY NOT BE OFFERED FOR SALE,
SOLD, OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN EXEMPTION FROM
REGISTRATION OR QUALIFICATION UNDER
THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAW, THE AVAILABILITY OF
WHICH IS TO BE ESTABLISHED TO THE
SATISFACTION OF THIS CORPORATION,
INCLUDING, WITHOUT LIMITATION, BY
DELIVERY OF AN OPINION OF COUNSEL IN
FORM AND SCOPE SATISFACTORY TO THE
CORPORATION AS TO THE AVAILABILITY OF
SUCH EXEMPTION.
AEGIS AUTO FINANCE, INC.
12% EXCHANGEABLE SUBORDINATED NOTE
DUE 2004
No. ________ $_________
Aegis Auto Finance, Inc., a corporation duly
organized and existing under the laws of Delaware
(herein called the "Company", which term includes
any successor Person under the Indenture hereinafter
referred to), for value received, hereby promises to
pay to _____________ ___________, or registered
assigns, the principal sum of _______________
Dollars ($_________) on April 30, 2004, and to pay
interest thereon from May __, 1997 or from the most
recent Interest Payment Date to which interest has
been paid or duly provided for, semi-annually in
arrears on November 1 and May 1 in each year (each,
an "Interest Payment Date"), commencing November
1, 1997 at the rate of 12% per annum, until the
principal hereof is due, and at the rate of 14% per
annum compounded semi-annually, on any overdue
principal and, to the extent permitted by law, on any
overdue interest. Interest on the Securities shall be
computed on the basis of a 360-day year of twelve
30-day months. The interest so payable, and
punctually paid or duly provided for, on any Interest
Payment Date will, as provided in the Indenture, be
paid to the Person in whose name this Security (or one
or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such
interest, which shall be the April 25 or October 25
(whether or not a Business Day), as the case may be,
next preceding such Interest Payment Date. Except as
otherwise provided in the Indenture, any such interest
not so punctually paid or duly provided for will
forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the
Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee,
notice whereof shall be given to Holders of Securities
no more than 15 days and not less than 10 days prior
to such Special Record Date, or be paid at any time in
any other lawful manner not inconsistent with the
requirements of any automated quotation system or
securities exchange on which the Securities may be
quoted or listed, and upon such notice as may be
required by such quotation system or exchange, as the
case may be, all as more fully provided in the
Indenture. Payments of principal shall be made upon
the surrender of this Security at the option of the
Holder at the Corporate Trust Office of the Trustee, or
at such other office or agency of the Company as may
be designated by it for such purpose, in such coin or
currency of the United States of America as at the
time of payment shall be legal tender for the payment
of public and private debts; provided, however; that at
the option of the Company payment of interest may be
made by check, mailed to the address of the Person
entitled thereto as such address shall appear in the
Security Register.
Except as specifically provided in the
Indenture, the Company shall not be required to make
any payment with respect to any tax, assessment or
other governmental charge imposed by any
governmental or any political subdivision or taxing
authority thereof or therein.
Reference is hereby made to the further
provisions of this Security set forth on the reverse
hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon
has been executed by the Trustee referred to on the
reverse hereof by manual signature, this Security shall
not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has
caused this instrument to be duly executed under its
corporate seal.
Dated:
AEGIS AUTO FINANCE, INC.
[Corporate Seal]
By:
Title:
Name:
Attest:
Title:
<PAGE>
Reverse of Security.
This Security is one of a duly authorized issue
of Securities of the Company designated as its 12%
Exchangeable Subordinated Notes Due 2004 (herein
called the "Securities"), limited in aggregate principal
amount to $21,333,333 issued under an Indenture,
dated as of April 30, 1997 (herein called the
"Indenture"), between the Company and Norwest
Bank, N.A. as Trustee (herein called the "Trustee",
which term includes any successor trustee under the
Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the
Trustee, the holders of Senior Indebtedness and the
Holders of the Securities and of the terms upon which
the Securities are authenticated and delivered. The
Securities are issuable in "registered form" only (as
such term is defined in Section 163(f), 871(h)(2) and
881(c)(2) of the Code) without coupons in the
minimum denomination of $1,000 and any integral
multiple of one dollar.
Subject to and upon compliance with the
provisions of the Indenture, the Holder of this
Security, is entitled, at his option, at any time after
April 30, 1997 and before the close of business on
April 30, 2004, to exchange this Security (or any
portion of the principal amount hereof that is a
minimum of $1,000 and an integral multiple of one
dollar provided that the unexchanged portion of such
principal amount is $1,000 or any amount in excess
thereof) at the principal amount hereof or of such
portion, into fully paid and nonassessable shares of
Preferred Stock at an Exchange Price equal to
$1,000.00 aggregate principal amount of Securities for
each share of Preferred Stock by surrender of this
Security, duly endorsed or assigned to the Company or
in blank, and accompanied by the exchange notice
hereon duly executed, to the Company at the
Corporate Trust Office of the Trustee, or at such other
office or agency as the Company may designate (an
"Exchange Agent") (subject to any laws or regulations
applicable thereto and subject to the right of the
Company to terminate the appointment of any
Exchange Agent) for such purpose; provided,
however, that if this Security (or a portion hereof) has
been called for redemption on a Redemption Date
occurring during the period from the close of business
on any Regular Record Date next preceding any
Interest Payment Date to the opening of business on
such Interest Payment Date and is surrendered for
exchange during such period, then no payment or
adjustment shall be required of the Holder of this
Security upon such surrender with respect to interest
payable hereon on such Interest Payment Date. In the
event of an exchange, the Holder of this Security shall
be entitled to receive on the next Interest Payment
Date, accrued interest from the Interest Payment Date
immediately preceding the exchange of this Security to
the date this Security is surrendered for exchange. No
payment or adjustment is to be made on exchange of
this Security (or any portion hereof) for dividends on
the Preferred Stock issued on exchange. The delivery
to the Holder of the fixed number of shares of
Preferred Stock (together with any cash adjustment, as
provided in the Indenture) for which the Security is
exchanged shall be deemed to satisfy the Company's
obligation to pay the principal amount of the Security.
Where necessary, upon exchange, the Parent will issue
fractional shares of Preferred Stock. In addition, the
Indenture provides that in the case of certain
consolidations or mergers to which The Aegis
Consumer Funding Group, Inc. (the "Parent") is a
party or the conveyance, transfer, sale or lease of all
or substantially all of the property and assets of the
Parent, the Indenture shall be amended, without the
consent of any Holders of Securities, so that this
Security, if then Outstanding, will be exchanged
thereafter, during the period this Security shall be
redeemable as specified above, only for the kind and
amount of securities, cash and other property
receivable upon such consolidation, merger,
conveyance, transfer, sale or lease by a holder of the
number of shares of Preferred Stock for which this
Security could have been exchanged (assuming the
redemption of the shares of Preferred Stock)
immediately prior to such consolidation, merger,
conveyance, transfer, sale or lease (assuming such
holder of Preferred Stock was not a Constituent
Person, failed to exercise any rights of election and
received per share the kind and amount of securities,
cash and other property received per share by a
plurality of Non-Electing Shares).
The Securities are subject to redemption upon
not less than 30 nor more than 60 days' notice by
mail, at any time, and from time to time, in whole or
in part, at the election of the Company, at a
Redemption Price equal to 100% of the principal
amount, together with accrued interest to the
Redemption Date; provided, however, that interest
installments whose Stated Maturity is on or prior to
such Redemption Date will be payable to the Holders
of such Securities (or any Predecessor Securities) of
record at the close of business on the relevant Record
Dates referred to on the face hereof all as provided in
the Indenture.
In the event that the Securities are redeemed,
in whole or in part, prior to April 30, 2004, Warrants
shall be issued by the Parent upon such redemption
granting the Person previously holding the redeemed
Security rights to purchase, for cash in an amount
equal to the principal amount of the Securities so
redeemed, a number of shares of Preferred Stock
equivalent to the number of shares of Preferred Stock
(or other securities or property) such Person could
have received pursuant to the exchange rights provided
by the redeemed Securities.
In the event of redemption or exchange of this
Security in part only, a new Security or Securities for
the unredeemed or unexchanged portion hereof will be
issued in the name of the Holder hereof upon the
cancellation hereof.
In any case where the due date for the
payment of the principal of or interest on any Security
or the last day on which a Holder of a Security has a
right to exchange his Security shall be, at any Place of
Payment or Place of Exchange, as the case may be, a
day on which banking institutions at such Place of
Payment or Place of Exchange are authorized or
obligated by law or executive order to close, then
payment of principal, or interest, or delivery for
exchange of such Security need not be made on or by
such date at such place but may be made on or by the
next succeeding day at such place which is not a day
on which banking institutions are authorized or
obligated by law or executive order to close, with the
same force and effect as if made on the date for such
payment or the date fixed for redemption, or by such
last day for exchange, and no interest shall accrue on
the amount so payable for the period after such date so
long as payment is made on the next succeeding day at
such place which is not a day on which banking
institutions are authorized or obligated by law or
executive order to close.
The indebtedness evidenced by this Security
is, to the extent provided in the Indenture, subordinate
and subject in right of payment to the prior payment in
full of all Senior Indebtedness, and this Security is
issued subject to the provisions of the Indenture with
respect thereto. Each Holder of this Security, by
accepting the same, (g) agrees to and shall be bound
by such provisions, (h) authorizes and directs the
Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination
so provided and (i) appoints the Trustee his
attorney-in-fact for any and all such purposes.
If an Event of Default shall occur and be
continuing, the principal of all the Securities may be
declared due and payable in the manner and with the
effect provided in the Indenture.
The Indenture permits, with certain exceptions
as therein provided, the amendment thereof and the
modification of the rights and obligations of the
Company and the rights of the Holders of the
Securities under the Indenture at any time by the
Company and the Trustee with the consent of the
Holders of not less than a majority in aggregate
principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions
permitting the Holders of specified percentages in
aggregate principal amount of the Securities at the
time Outstanding, on behalf of the Holders of all the
Securities, to waive compliance by the Company with
certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this
Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security
and of any Security issued upon the registration of
transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or
waiver is made upon this Security.
No reference herein to the Indenture and no
provision of this Security or of the Indenture shall
alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of
and interest on this Security on the respective Stated
Maturities expressed herein (or in the case of
redemption, on the Redemption Date) or to exchange
this Security or issue Warrants as provided in the
Indenture.
As provided in and subject to the provisions of
the Indenture, the Holder of this Security shall not
have the right to institute any proceeding with respect
to the Indenture or for the appointment of a receiver
or trustee or for any other remedy thereunder, unless
such Holder shall have previously given the Trustee
written notice of a continuing Event of Default, the
Holders of not less than 25% in principal amount of
the Outstanding Securities shall have made written
request to the Trustee to institute proceedings in
respect of such Event of Default as Trustee and
offered the Trustee indemnity satisfactory to it and the
Trustee shall not have received from the Holders of a
majority in principal amount of the Securities
Outstanding a direction inconsistent with such request
and shall have failed to institute any such proceeding
for 60 days after receipt of such notice, request and
offer of indemnity. The foregoing shall not apply to
any suit instituted by the Holder of this Security for
the enforcement of any payment of principal hereof or
interest hereon on or after the respective due dates
expressed herein or for the enforcement of the right to
exchange or redeem this Security as provided in the
Indenture.
As provided in the Indenture and subject to
certain limitations therein set forth, the transfer of this
Security is registrable in the Security Register upon
surrender of this Security for registration of transfer at
the office or agency of the Company maintained for
that purpose pursuant to Section 10.03 of the
Indenture, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to
the Company and the Security Registrar duly executed
by the Holder hereof or his attorney duly authorized in
writing, and thereupon, one or more new Securities,
of authorized denominations and for the same
aggregate principal amount will be issued to the
designated transferee or transferees. No service
charge shall be made for any such registration of
transfer or exchange, but the Company may require
payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith.
Prior to due presentment of this Security for
registration of transfer, the Company, the Trustee and
any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the
owner hereof for all purposes, whether or not this
Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice
to the contrary.
All terms used in this Security and not defined
herein but which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
ABBREVIATIONS
The following abbreviations, when used in the
inscription of the face of this Security, shall be
construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT-__________________
TEN ENT - as tenants by the entireties
(Cust)
JT TEN - as joint tenants with right
as Custodian for ______________ under
of survivorship and not as
(Minor)
tenants in common
Uniform Gifts to Minors Act of
_______________
(State)
Additional abbreviations may also be used
though not in the above list.
NOTE PURCHASE
AGREEMENT, dated as of April , 1997 (the
"Agreement"), by and among Aegis Auto Finance,
Inc., a Delaware Corporation (the "Company"),
The Aegis Consumer Funding Group, Inc., a
Delaware corporation ("Parent"), and the
Purchaser or Purchasers named on the execution
pages hereof.
In consideration of the mutual
covenants and agreements set forth herein and for
good and valuable consideration, the receipt of
which is hereby acknowledged, the parties agree
as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. As used
in this Agreement, and unless the context requires
a different meaning, the following terms have the
meanings indicated:
"Act" means the Securities Act of
1933, as amended, and the rules and regulations of
the Commission thereunder.
"Affiliate" of any specified Person
means any other Person directly or indirectly
controlling or controlled by or under direct or
indirect common control with such specified
Person. For the purposes of this definition,
"control" when used with respect to any Person
means the power to direct the management and
policies of such Person, directly or indirectly,
whether through the ownership of voting
securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings
correlative to the foregoing.
"Agreement" means this Agreement,
as the same may be amended, supplemented or
modified in accordance with the terms hereof and
in effect.
"Basic Documents" means,
collectively, the Agreement, the Guaranty, the ^
Collateral Documents, the Registration Rights
Agreement, the Indenture and the Securities.
"Business Day" means each
Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking
institutions in the City of New York or London,
England are not required to be open.
"Certificate of Designation" shall
have the meaning ascribed thereto in the
Indenture.
"Closing" has the meaning provided
therefor in Section 2.1 of this Agreement.
"Code" means the Internal Revenue
Code of 1986, as amended.
"Collateral Documents" has the
meaning ascribed thereto in the Indenture.
"Commission" means the Securities
and Exchange Commission.
"Common Stock" has the meaning
ascribed thereto in the Indenture.
"Company" means Aegis Auto
Finance, Inc., a Delaware corporation.
"Default" means any event, act or
condition which, with notice or lapse of time or
both, would constitute an Event of Default.
"Disclosure Documents" means,
collectively, (i) the most recent Annual Report on
Form 10-K filed by the Parent and (ii) all other
reports and statements, including quarterly Reports
on Form 10-Q filed by the Parent and any of its
Subsidiaries under the Exchange Act prior to the
date hereof but subsequent to the most recent
Annual Report on Form 10-K.
"Event of Default" means any event
defined as an Event of Default in the Indenture.
"Exchange Act" means the
Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission
thereunder.
"GAAP" means generally accepted
accounting principles set forth in the opinions and
pronouncements of the Accounting Principles
Board of the American Institute of Certified
Public Accountants and statements and
pronouncements of the Financial Accounting
Standards Board or in such other statements by
such other entity as may be approved by a
significant segment of the accounting profession,
which are applicable to the circumstances as of the
date of determination.
"Guaranty" has the meaning
ascribed thereto in the Indenture.
"Holders" means the holders from
time to time of any of the Securities, whether or
not such Holders were original Purchasers of
Securities hereunder.
"Indenture" means the Indenture,
substantially in the form of Exhibit 1 hereto.
"Investment Company Act" means
the Investment Company Act of 1940, as
amended, and the rules and regulations of the
Commission thereunder.
"Lien" means, with respect to any
asset, (i) any mortgage, lien, pledge, encumbrance,
charge or security interest of any kind in or on
such asset, (ii) the interest of a vendor or lessor
under any conditional sale agreement, capital lease
or other title retention agreement relating to such
asset or (iii) in the case of securities, any purchase
option, call or similar right of a third party with
respect to such securities.
"Majority of the Purchasers" means
those Purchasers which, at the time of
determination thereof, individually or in the
aggregate, are committed to purchase pursuant to
this Agreement a majority of the principal
amount of the Securities.
"Parent" shall mean The Aegis
Consumer Funding Group, Inc., a Delaware
corporation.
"Permitted Liens" means (i) Liens
for taxes, assessments, governmental charges or
claims which are being contested in good faith by
appropriate proceedings promptly instituted and
diligently conducted and for which a reserve or
other appropriate provision, if any, as shall be
required in conformity with GAAP shall have
been made which (x) do not in the aggregate
materially detract from the value of such property
or assets or materially impair the use thereof in
the operation of the business of the Company or
any Subsidiary of the Company or (y) are being
contested in good faith by appropriate
proceedings, which proceedings have the effect of
preventing the forfeiture or sale of the property or
assets subject to such Lien; (ii) statutory Liens of
landlords, and warehousemen's, mechanics',
suppliers', materialmen's, repairmen's, or other
like Liens arising in the ordinary course of
business and with respect to amounts not yet
delinquent or being contested in good faith by
appropriate proceedings, which proceedings have
the effect of preventing the forfeiture or sale of
the property or asset subject to such Lien; and
(iii) existing Liens as of the date hereof.
"Person" means an individual or a
corporation, limited liability company partnership,
trust, incorporated or unincorporated association,
joint venture, joint stock company, government (or
an agency or political subdivision thereof) or other
entity of any kind.
"Preferred Stock" shall mean the
Class D Redeemable Preferred Stock of the Parent
described in the Certificate of Designation.
"Purchaser" means each Person who
accepts and agrees to the terms hereof, as
indicated by signature on the execution page of
this Agreement or a counterpart as referred to in
Section 8.6 of this Agreement and, subject to
Article VI of this Agreement, each Substitute
Purchaser (as such term is defined in Article VI).
"Securities" has the meaning
ascribed thereto in the Indenture.
^
"State" means each of the states of
the United States, the District of Columbia and the
Commonwealth of Puerto Rico.
"Subsidiary" means, with respect to
any Person, (i) a corporation a majority of whose
capital stock with voting power, under ordinary
circumstances, to elect directors is at the time,
directly or indirectly, owned by such Person, by
one or more Subsidiaries of such Person or by
such Person and one or more Subsidiaries thereof
or (ii) any other Person (other than a corporation)
in which such Person, one or more Subsidiaries
thereof or such Person and one or more
Subsidiaries thereof, directly or indirectly, at the
date of determination thereof, has at least majority
ownership interest.
"Time of Purchase" has the
meaning provided therefor in Section 2.1 of this
Agreement.
"Trustee" means the Trustee under
the Indenture.
"Warrant" has the meaning ascribed
thereto in the Indenture.
Section 1.2 Accounting Terms;
Financial Statements. All accounting terms used
herein not expressly defined in this Agreement
shall have the respective meanings given to them
in accordance with generally accepted accounting
principles.
ARTICLE II
PURCHASE OF SECURITIES;
RIGHTS OF HOLDERS OF SECURITIES
Section 2.1 Purchase of Securities.
Subject to the terms and conditions herein set
forth, the Company agrees that it will sell to
each Purchaser, and each such Purchaser agrees,
severally and not jointly, that it will purchase from
the Company at the Time of Purchase, the
principal amount of Securities set forth opposite
such Purchaser's name on the execution pages
hereof at a price equal to 93.75% of the aggregate
principal amount of Securities to be purchased by
such Purchaser. The Securities shall have the
terms set forth in the Indenture.
The purchase and sale of Securities
to the Purchasers will take place at a closing (the
"Closing") at the offices of Sidley & Austin, 875
Third Avenue, New York, New York on such date
not later than April 30, 1997 (subject to extension
if the Purchasers agree to extend the Time of
Purchase, upon request to do so by the Company)
and at such time as the Company shall specify by
notice to the Purchasers at least one full Business
Day prior thereto. The date and time at which the
Closing is to be concluded is the "Time of
Purchase."
Delivery of the Securities to be
purchased by a Purchaser pursuant to this
Agreement shall be made at the Closing by the
Company delivering to such Purchaser the
Security to be purchased by such Purchaser
hereunder (registered in the name of such
Purchaser or such other Person (which shall be an
Affiliate of such Purchaser or a nominee of such
Purchaser or such Affiliate) as such Purchaser may
have designated in writing to the Company prior
to the Time of Purchase), unless prior to the Time
of Purchase such Purchaser shall have requested,
in writing, the Company to deliver more than one
Security, in which event the Company will deliver
to such Purchaser the number of Securities so
requested, registered in such name or names and
in such principal amounts (which shall not in the
aggregate exceed the aggregate principal amount
of Securities to be purchased by such Purchaser)
as shall have been specified in such a request.
Payment of the purchase price for
the Securities to be purchased hereunder shall be
made by each Purchaser by wire transfer (to such
account of the Company as shall have been
furnished to the Purchasers at the time the
Company notifies the Purchasers of the Time of
Purchase) of immediately available funds.
The Company will bear all expenses
of shipping any of the Securities (including,
without limitation, insurance expenses) from New
York City to such other places within the United
States of America as any Purchaser shall specify.
Any tax on the issuance of any of the Securities
will be paid by the Company at the Time of
Purchase.
Section 2.2 Restrictions on
Transfer. (a)(i) Unless a registration statement
with respect thereto under the Act is at the time in
effect, no Security shall be transferred (such term
to include any disposition which would constitute
a sale within the meaning of the Act), except upon
compliance with the conditions specified in this
subsection (a), and unless such a registration
statement is effective or such conditions are
complied with, the Company may issue or cause
to be issued stop orders preventing any such
transfer, subject to a Holder's right at all times to
sell or otherwise dispose of all or any part of the
Securities under a registration under the Act or
any exemption from such registration available
under the Act.
(ii) Each Security initially issued
under this Agreement and each Security issued in
exchange therefor shall (unless otherwise
permitted by the provisions of subsection (b)) be
stamped or otherwise imprinted with a legend in
substantially the form set forth in Section 3.05(i)
of the Indenture.
(b) The holder of each Security
by the acceptance thereof agrees that it shall not
transfer such Security unless a registration
statement under the Act is in effect with respect to
such transfer or, prior to such transfer, it shall
have delivered to the Company (x) an opinion of
counsel, experienced in matters under the Act,
reasonably acceptable to the Company and counsel
to the Company which opinion shall be in a form
reasonably acceptable to the Company and counsel
to the Company or (y) a "no action" letter from
the Commission to the effect that the proposed
transfer may be effected without registration under
the Act; provided, however, that in case of any
sale or other transfer of Securities to any Person
who is an institutional investor, no opinion of
counsel or "no action" letter shall be required if
such holder obtains and delivers to the Company a
written representation from such Person that it is
an institutional investor, including an insurance
company, and is acquiring the Securities for its
own account or as trustee for a commingled
pension trust fund for purposes of investment and
with no intention of distributing or reselling said
Securities in any transaction which would be in
violation of the securities laws of the United
States of America or any State, subject,
nevertheless, to such Person's disposition of its
property being at all times within its control,
including such Person's right at all times to sell or
otherwise dispose of all or any part of the
Securities under a registration under the Act or
any exemption from such registration available
under the Act.
Section 2.3 Indemnification for
Taxes. (a) So long as the Person to whom such
payment is due has complied with the
requirements of Sections 2.3(d) and (e) hereof, all
payments (including, without limitation, payments
on account of principal, interest and fees) shall be
made by the Company without deduction or
withholding for or on account of any tax,
assessment or other governmental charge imposed
by any jurisdiction (not being a branch profits tax,
a franchise tax or a tax imposed on the overall net
income of its lending office by the jurisdiction in
which it is incorporated, in which its lending
office is located or in which it is managed and
controlled) ("Taxes"). If the Company is required
by law to make any deduction or withholding of
any Taxes of any jurisdiction from any payment
due hereunder to a person who has complied with
the requirements of Sections 2.3(d) and (e) hereof,
then the amount payable will be increased to such
amount which, after deduction from such
increased amount of all such Taxes required to be
withheld or deducted therefrom, will not be less
than the amount due and payable hereunder had
no such deduction or withholding been required.
(b) If the Company makes any
payment hereunder in respect of which it is
required by law to make any deduction or
withholding of any Taxes, it shall pay the full
amount to be deducted or withheld to the relevant
taxation or other authority within the time allowed
for such payment under applicable law and shall
deliver to the Purchasers as soon as practicable
after it has made such payment to the applicable
authority a receipt issued by such authority or a
statement of the Company confirming the payment
to such authority of all amounts so required to be
deducted or withheld from such payment.
(c) If any Purchaser is required
by law to make any payment on account of Taxes
on or in relation to any sum received or receivable
hereunder by such Purchaser or any liability for
Taxes in respect of any such payment is imposed,
levied or assessed against any Purchaser, the
Company will, upon demand and delivery to the
Company of a photocopy of a receipt (if any)
issued by the applicable authority which received
such payment or a statement of such Purchaser
confirming such payment to such authority,
promptly indemnify such Purchaser against such
tax payment or liability, together with any interest,
penalties and expenses payable or incurred in
connection therewith.
(d) Each Purchaser shall submit
to the Company, on the Closing Date and from
time to time as required by law, two duly
completed and signed copies of one of the
following as such Purchaser may deem
appropriate: Form 1001 (relating to such Purchaser
and evidencing its entitlement to a complete
exemption from withholding on all amounts to be
paid by the Company and received by such
Purchaser pursuant to this Agreement), Form 4224
(relating to all amounts to be paid by the
Company and received by such Purchaser pursuant
to this Agreement) or Form W-8 of the United
States Internal Revenue Service.
(e) Thereafter and from time to
time, each Purchaser shall (in particular, but
without limitation, within 10 days of the transfer
or assignment to it becoming effective, each
transferee and each assignee of each Purchaser and
each subsequent transferee and assignee shall),
submit to the Company such additional duly
completed and signed copies of one or the other
(as each Purchaser (or any assignee or transferee)
may deem appropriate) of such Forms 1001, 4224,
W-8 (or such successor Forms as shall be adopted
from time to time by the relevant United States
taxing authorities) or of such a certification as
may be (a) notified by the Company to each
Purchaser, and (b) required under then current
United States law or regulations to avoid United
States withholding taxes on payments in respect of
all amounts to be paid by the Company and
received by each Purchaser.
(f) The Company shall, upon
receipt of any of the forms or certificates referred
to in such Section 2.3(d) or (e) hereof,
acknowledge such receipt and the compliance by
such Purchaser with such Section 2.3(d) or (e), as
the case may be.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and
Warranties of the Company and Parent. The
Company and Parent, jointly and severally,
represent and warrant to, and covenant and agree
with, each of the Purchasers as follows:
(a) Organization,
Standing, Etc. The Company and
the Parent are corporations duly
organized and in good standing
under the laws of their respective
jurisdictions of incorporation. The
Company and the Parent are duly
qualified and in good standing as
foreign corporations, and are
authorized to do business, in each
jurisdiction in which the ownership
or leasing of any property or the
character of its operations makes
such qualification necessary and in
which the failure so to qualify
could have a material adverse effect
on the condition (financial or
otherwise), properties, assets,
business or results of operations of
the Company and the Parent, taken
as a whole. The Company and the
Parent have all requisite corporate
power and authority to own their
respective assets and to carry on
their respective businesses as
currently conducted. The Company
and the Parent have all requisite
corporate power and authority (i) to
execute, deliver and perform their
respective obligations under the
Basic Documents, (ii) to issue the
Securities pursuant hereto in the
manner and for the purpose
contemplated by this Agreement
and (iii) to execute, deliver and
perform their respective obligations
under all other agreements and
instruments executed and delivered
by, or to be executed and delivered
by, the Company or the Parent
pursuant to or in connection with
the Basic Documents. The Basic
Documents have been duly and
validly authorized executed and
delivered by the Company or the
Parent, as the case may be, and
each constitutes a valid and binding
agreement of the Company or the
Parent, as the case may be,
enforceable in accordance with its
terms (except in each such case as
enforceability may be limited by
bankruptcy, insolvency,
reorganization and other similar
laws now or hereafter in effect
relating to or affecting creditors'
rights generally and except that the
remedy of specific performance and
injunctive and other forms of
equitable relief are subject to certain
equitable defenses and to the
discretion of the court before which
any proceeding therefor may be
brought and except as rights to
indemnity and contribution here-
under and thereunder may be
limited by Federal or state securities
laws).
(b) Financial Statements.
(i) The Company has delivered to
the Purchasers the consolidated
balance sheet of the Parent at June
30, 1996 and the related
consolidated statements of income
and retained earnings and cash
flows of the Parent for the fiscal
year ended on said date, which
statements have been certified by
Ernst & Young, LLP, independent
certified public accountants, such
statements present fairly the
consolidated financial position of
the Parent and the results of its
operations for the periods covered
thereby and all such financial
statements have been prepared in
accordance with GAAP consistently
applied, and (ii) the Company has
delivered to the Purchasers
unaudited consolidated balance
sheets and the unaudited interim
consolidated statements of income
and retained earnings as set forth in
the Company's Form 10-Q for the
period ending December 31, 1996.
The unaudited consolidated
financial statements in (ii) above
have been prepared in accordance
with GAAP applied on a basis
consistent with those of the audited
financial statements referred to in
(i) above and otherwise consistent
with the accounting methodology
contained in GAAP.
(c) No Material Change.
Since December 31, 1996, there has
been no material adverse change in
the condition (financial or
otherwise), properties, assets,
business or results of operations of
the Parent and its Subsidiaries,
taken as a whole, other than those
changes disclosed in the unaudited
interim financial statements referred
to in Section 3.1 (b)(ii) or the
Disclosure Documents.
(d) Conflicting
Agreements and Other Matters.
The execution, delivery and
performance by the Company or the
Parent, as the case may be, of the
Basic Documents and the issuance
and performance by the Company
of its obligations under the
Securities, and the execution,
delivery and performance by the
Company or the Parent, as the case
may be, of all other agreements and
instruments to be executed and
delivered by the Company or the
Parent, as the case may be, pursuant
hereto or in connection herewith or
therewith, and compliance by the
Company or the Parent, as the case
may be, with the terms and
provisions hereof and thereof do not
and will not (i) violate, in any
material respect, any provision of
any law, rule or regulation,
including, without limitation,
Regulation G, T, U or X of the
Board of Governors of the Federal
Reserve System (but excluding state
securities or "blue sky" laws), order,
writ, judgment, injunction, statute,
decree, determination or award of
any court or any public,
governmental or regulatory agency
or body applicable to the Company
or the Parent, as the case may be,
or any of their respective properties
or assets; (ii) conflict with or result
in a breach of or constitute a
default under any provision of the
charter or by-laws of the Company
or the Parent, as the case may be;
(iii) require any consent, approval
or notice under or result in a
violation or breach of or constitute
(with or without due notice or lapse
of time or both) a default (or give
rise to any right of termination,
cancellation or acceleration) under
any of the terms, conditions or
provisions of any note, bond,
mortgage, indenture or loan or
credit agreement, license, or any
other agreement or instrument or
obligation to which the Company or
the Parent is a party or by which
the Company or the Parent or any
of their respective properties or
assets may be bound; or (iv) result
in or require the creation or
imposition of any Lien upon or
with respect to any of the properties
now owned or hereafter acquired by
the Company or the Parent, except
as permitted or contemplated by the
Indenture.
(e) Litigation,
Proceedings; Defaults. Except as
set forth in the Disclosure
Documents, there are no actions,
suits or proceedings pending or
threatened with respect to the
Company or the Parent that would
reasonably be expected to have a
materially adverse effect on (i) the
business, properties, assets,
operations or condition (financial or
otherwise) or results of operations
of the Company and the Parent
taken as a whole or (ii) the rights or
remedies of the Purchasers under
the Basic Documents or on the
ability of the Company and the
Parent to perform their respective
obligations under the Basic
Documents.
(f) Governmental
Consents, etc. Except to the extent
obtained or made prior to the date
hereof, no authorization, consent,
approval, license, qualification or
formal exemption from, nor any
filing, declaration or registration
with, any court, governmental body
or regulatory agency or authority or
any securities exchange or any other
person is required in connection
with the issuance and sale of the
Securities or the execution, delivery
or performance by the Company or
the Parent, as the case may be, of
the Basic Documents (other than
filings with the appropriate filing
offices to perfect the Liens and
security interests to be afforded
thereby).
(g) Investment Company
Act. Neither the Company nor the
Parent is an "investment company"
or a company "controlled" by an
"investment company" within the
meaning of the Investment
Company Act of 1940, as amended,
and the rules and regulations of the
Commission promulgated
thereunder.
(h) Governmental
Regulation. The Company and the
Parent are not subject to any
Federal or state statute or regulation
limiting the ability of the Company
or the Parent to issue and sell the
Securities and perform their
respective obligations under the
Basic Documents.
(i) Disclosure
Documents. The Disclosure
Documents were prepared with
reasonable care on the basis set
forth therein and when they were
filed with the Commission
conformed in all material respects
to the requirements of the Exchange
Act. The Disclosure Documents
did not, as of their respective dates,
contain any untrue statement of a
material fact or omit to state any
material fact required to be stated
therein or necessary in order to
make the statements made therein,
in light of the circumstances under
which they were made, not
misleading. There is no fact known
by the Company which has not
been disclosed in the Disclosure
Documents which materially
adversely affects the condition
(financial or otherwise), properties,
assets, business or results of
operations of the Parent and its
Subsidiaries, taken as a whole, or
the ability of the Company or the
Parent to perform their respective
obligations under the Basic
Documents.
(j) Statutory
Compliance. The Company and the
Parent are in compliance with all
applicable statutes, laws, ordinances
or government rules and regulations
to which they are subject,
noncompliance with which would
materially adversely affect the
condition (financial or otherwise),
properties, assets, business or results
of operations of the Company and
the Parent, taken as a whole.
(k) Taxes. All material
tax returns required to be filed by
the Company or the Parent in any
jurisdiction have been so filed, or
are under valid extensions, and all
taxes, assessments, fees and other
charges due or claimed to be due
from the Company or the Parent
which are shown therein as due and
payable have been paid, other than
those being contested in good faith
or those currently payable without
penalty or interest. The Company
knows of no material proposed
additional tax assessments against it
or Parent.
(l) Due Issuance. The Securities
have been duly and validly authorized by all
necessary corporate action
and, when executed and
authenticated in accordance
with the terms of the
Indenture and issued and
delivered in accordance with
the terms of this Agreement
against payment therefor,
will have been duly
authorized, executed,
authenticated and delivered
by the Company and will
constitute valid and binding
obligations of the Company
entitled to the benefits of the
Indenture, enforceable
against the Company in
accordance with their terms
(except as enforceability
may be limited by
bankruptcy, insolvency,
reorganization and other
similar laws now or
hereinafter in effect relating
to or affecting creditors'
rights generally, except that
the remedy of specific and
injunctive and other forms
of equitable relief are subject
to certain equitable defenses
and to the discretion of the
court before which any
proceeding therefor may be
brought and except as the
enforcement of
indemnification provisions
may be limited by public
policy or applicable law).
The Preferred Stock issuable
upon exchange of the
Securities and the Common
Stock and Warrants issuable
upon redemption of the
Preferred Stock, have each
been duly and validly
authorized by all necessary
corporate action (or will be
authorized promptly in
accordance with the
Indenture) and upon
exchange of the Securities or
redemption of the Preferred
Stock, as the case may be,
will be duly and validly
outstanding and fully paid
and will be non-assessable.
Except as set forth in the
Disclosure Documents, there
are no outstanding options,
conversion rights, warrants,
preemptive rights, rights of
first refusal or other rights,
or agreements or
commitments obligating the
Company to issue, transfer
or sell any interests in the
equity of the Company other
than employee stock options
granted pursuant to the
option plans described in the
Disclosure Documents.
(m) No Offer. Neither the
Company nor the Parent or any of the Affiliates
or any person
authorized to act on
their behalf has sold,
offered for sale,
solicited offers to
buy or otherwise
negotiated in respect
of Securities in a
manner which would
require registration
under the Act.
(n) No Registration or
Qualification. Subject to compliance by the
Purchasers with the
representations and
warranties set forth
in Section 3.2 hereof,
it is not necessary in
connection with the
offer, sale and
delivery of the
Securities to the
Purchasers
contemplated by this
Agreement to register
the Securities under
the Act or to qualify
the Indenture under
the Trust Indenture
Act of 1939, as
amended.
Section 3.2 Representations and
Warranties of the Purchasers. (a) Each
Purchaser (as to itself only) represents and
warrants to, and covenants and agrees with, the
Company that the Securities to be acquired by it
pursuant to this Agreement are being acquired for
its own account and/or on behalf of managed
accounts who are purchasing for their own
accounts ("Accounts") and not for the account of
any Plan (or, if such Securities are being acquired
for the account of any such Plan, such acquisition
does not involve a nonexempt prohibited
transaction within the meaning of Section 406 of
the Employee Retirement Income Security Act of
1974, as amended ("ERISA") or Section 4975 of
the Code) and with no intention of distributing or
reselling such Securities or any part thereof or any
securities for which the Securities may be
exchanged or which may be issued upon
redemption of the Securities or of the securities
for which they may be exchanged in any
transaction which would be in violation of the
securities laws of the United States of America or
any State, without prejudice, however, to a
Purchaser's rights at all times to sell or otherwise
dispose of all or any part of such Securities or any
such other securities under a registration under the
Act or under an exemption from such registration
available under such Act, and subject,
nevertheless, to the disposition of a Purchaser's
property being at all times within its control.
(b) Each Purchaser represents
that no part of the funds to be used to purchase
the Securities to be purchased by it constitutes
assets allocated to any qualified trust which
contains the assets of any employee benefit plan
with respect to which the Company is a party in
interest or disqualified person.
(c) Each Purchaser (as to itself
only) hereby represents to the Company and to
each of the other Purchasers that unless otherwise
approved by the Company as an "accredited
investor" (as defined in Rule 501 of Regulation D
of the Act), (i) it is an institutional investor,
(ii) by reason of its business and financial
experience, and the business and financial
experience of those Persons, if any, retained by it
to advise it with respect to its investment in the
Securities, such Purchaser, together with such
advisors, has such knowledge, sophistication and
experience in business and financial matters so as
to be capable of evaluating the merits and risks of
the prospective investment or (iii) if it is
purchasing the securities to be purchased by it on
behalf of accounts, it is doing so pursuant to
authority granted to it by each such account; the
Securities being purchased hereunder for such
account are being purchased for the account of
such account; the representations and warranties
set forth in this Section 3.2 are true and correct as
to each such account and the Securities being
purchased by or for such account; and each such
account will be fully bound by and subject to this
Agreement in all respects as a Purchaser. Each
Purchaser further represents that it or each of the
accounts, as the case may be, can afford to suffer
the loss of its entire investment in the Securities
and is not purchasing the Securities in reliance
upon any investigation made by any other
Purchaser.
ARTICLE IV
CONDITIONS PRECEDENT TO CLOSING
Section 4.1 Conditions Precedent
to Obligations of the Purchasers. The obligation
of each Purchaser to purchase the Securities to be
purchased by it hereunder is subject to the
satisfaction of the following conditions at the
Time of Purchase:
(a) The representations
and warranties made by the
Company herein shall be true and
correct in all material respects
(except for changes expressly
provided for or contemplated in this
Agreement) on and as of the Time
of Purchase with the same effect as
though such representations and
warranties had been made on and as
of the Time of Purchase.
(b) The Company and
the Parent shall have performed and
complied in all material respects
with all covenants, agreements and
conditions set forth or contemplated
herein which are required to be
performed or complied with by
them at or prior to the Time of
Purchase.
(c) Except as disclosed
in the Disclosure Documents or the
unaudited interim financial
statements referred to in Section
3.1(b), there shall not have occurred
any material adverse change or any
development involving a
prospective material adverse change
in the condition (financial or
otherwise), business, assets,
properties, prospects or results of
operations of the Company and the
Parent, taken as a whole,
subsequent to the date of the last of
such unaudited financial statements.
(d) At the Time of
Purchase and after giving effect to
the consummation of the
transactions contemplated by this
Agreement, there shall exist no
Default or Event of Default.
(e) The purchase of the
Securities agreed to be purchased
by such Purchaser hereunder shall
not at the Time of Purchase be
prohibited or enjoined (temporarily
or permanently) under the laws of
any jurisdiction to which such
Purchaser is subject.
(f) The Basic Documents
shall have been duly executed and
delivered by all the respective
parties thereto.
(g) At the Time of
Purchase, such Purchaser shall
have received a certificate dated the
Time of Purchase signed by the
Chairman or the President or the
Executive Vice President of the
Parent stating that the conditions
specified in Sections 4.1(a), (b), (c)
and (d) have been satisfied at the
Time of Purchase.
(h) As to each Purchaser,
the transactions contemplated by
this Agreement (i) shall not be
prohibited by an applicable law or
governmental regulation (including,
without limitation, Regulation G, T,
U or X of the Board of Governors
of the Federal Reserve System),
(ii) shall not subject the Purchaser
to any penalty or, in its reasonable
judgment, other onerous condition
under or pursuant to any applicable
law or governmental regulations,
and (iii) shall be permitted by the
laws and regulations of the
jurisdiction to which it is subject.
(i) The Trustee shall
have received an executed copy of ^
each of the Collateral Documents
together with delivery of ^ any
collateral required to be delivered
pursuant to and in accordance with
the terms of ^ the Collateral
Documents.
(j) The Trustee shall
have received an executed copy of
the Guaranty.
(k) The Trustee shall have
received evidence satisfactory to it that the
Certificate of Designation has been filed
with the Secretary of State of the State of
Delaware.
(l) Each Purchaser shall have
received from Herzfeld & Rubin an opinion
addressed to the
Purchaser, dated the
Closing Date, the
substantive context of
which shall be in
substantially the form
of Exhibit A.
Section 4.2 Conditions Precedent
to obligations of the Company. The obligation of
the Company to issue and sell the Securities is
subject to the satisfaction of the following
conditions at the Time of Purchase:
(a) The representations
and warranties made by the
Purchasers herein shall be true and
correct in all material respects on
and as of the Time of Purchase
with the same effect as though such
representations and warranties had
been made on and as of the Time of
Purchase.
(b) The purchase or sale
of the Securities shall not be
enjoined (temporarily or
permanently) at the Time of
Purchase.
ARTICLE V
COVENANTS
Section 5.1 Certain Amendments.
The Company and the Parent agree not to amend
or change any of the applicable Basic Documents
in a manner adverse to it or the Purchasers
without the consent of a majority of the
Purchasers.
Section 5.2 Inspection. The
Company covenants that it will permit any Person
designated by such Purchaser in writing, at such
Purchaser's expense, to visit and inspect any of
the Parent's or the Company's offices, or to
inspect the corporate books and financial records
of the Parent or the Company and their respective
Subsidiaries and to discuss their affairs, finances
and accounts with the principal officers of the
Parent or the Company and their respective
Subsidiaries, all at such reasonable times and as
often as Purchaser may reasonably request. Each
Purchaser agrees that any information obtained by
it as a result of such visits, inspections and
discussions or pursuant to this Agreement shall be
confidential and shall not be used by it as the
basis for any market transactions in securities of
the Company unless and until such information
has been made generally available to the public.
Notwithstanding the foregoing, there will be no
such inspection rights granted to Purchasers under
this Section 5.2 as long as the Company is
required to file reports with the Commission
pursuant to Section 13(a) or 15(d) of the
Exchange Act.
Section 5.3 Availability of Capital
Stock. The Company shall at all times reserve
and keep available out of its authorized but
unissued Preferred Stock, for the purposes of
effecting the exchange of the Securities, the full
number of shares of Preferred Stock then issuable
upon the exchange of the Securities. The
Company shall at all times reserve and keep
available out of its authorized but unissued
Common Stock, for the purpose of effecting the
redemption of the Preferred Stock, the full number
of shares of Common Stock then issuable upon the
redemption of the Preferred Stock, provided, that
if at any time the number of shares of Preferred
Stock or Common Stock remaining unissued and
available for issuance shall be insufficient to
permit the exchange or redemption of the
Securities, as the case may be, the Company will,
from time to time, in accordance with the laws of
the State of Delaware, increase the authorized
amount of Preferred Stock or Common Stock to
permit such exchange or redemption.
Section 5.4 The Company and the
Parent covenant that, until such time as the
Securities have been paid in full or are deemed to
be satisfied and discharged in full pursuant to the
Indenture, they will not, and will not permit any
of their respective Subsidiaries to, redeem any of
the Preferred Stock pursuant to Section 3.3 of the
Certificate of Designation.
ARTICLE VI
SUBSTITUTION OF PURCHASERS
Section 6.1 Substitution of
Purchasers. If (i) one or more of the Purchasers
(a "Non-Purchaser") does not purchase all or part
of the Securities which such Non-Purchaser(s) has
agreed to purchase hereunder, and (ii) one or more
other Purchasers or one or more other Persons (a
"Substitute Purchaser") is willing to assume the
obligations of the Non-Purchaser(s) under this
Agreement, then the obligations of the Non-
Purchaser(s) to purchase Securities pursuant to this
Agreement may be assumed by the Substitute
Purchaser(s), and such Substitute Purchaser(s)
shall be substituted for the Non-Purchaser(s) under
this Agreement, by such Substitute Purchaser(s)
executing and delivering a copy of this Agreement
and thereby becoming a party hereto. The
inclusion of this Section 6.1 in this Agreement,
and the assumption by a Substitute Purchaser of
the obligations of a Non-Purchaser pursuant to this
Section 6.1, shall not constitute a waiver of any
rights the Company may have against such Non-
Purchaser if such Non-Purchaser has defaulted in
its obligations under this Agreement.
ARTICLE VII
INDEMNITY; CONTRIBUTION
Section 7.1 Indemnity.
(a) Indemnification. The
Company and the Parent agree and covenant to
jointly and severally hold harmless and indemnify
each of the Purchasers and (i) any Affiliates
thereof and (ii) any managed accounts who are
purchasing for their own account (including any
director, officer, employee, agent, investment
adviser, or controlling person of any of the
foregoing) from and against any losses, claims,
damages, liabilities and expenses (including but
not limited to attorneys' fees and expenses of
investigation preparation or defending against any
litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in
settlement of any claim or litigation) incurred by
such Purchaser pursuant to any actual or
threatened third-party action, suit, proceeding or
investigation (including expenses of investigation)
(A) arising out of or based upon any untrue
statement of any material fact contained in the
Disclosure Documents, or arising out of or based
upon the omission to state a material fact required
to be stated therein or necessary to make the
statements therein, in light of the circumstances
under which they were made, not misleading,
(B) arising out of or based upon any breach by the
Company or the Parent of the representations,
warranties and agreements herein or (C) arising
out of or based upon or in any way related or
attributed to claims, actions or proceedings by any
party other than such Purchaser relating to this
Agreement; provided, however, that neither the
Company nor the Parent shall be liable under this
paragraph (a) for any amounts paid in settlement
of claims without their consent, which consent
shall not be unreasonably withheld or to the extent
that it is finally judicially determined that such
losses, claims, damages or liabilities (i) arose out
of the gross negligence or willful misconduct of
such Purchaser and such negligence or misconduct
was not committed by such Purchaser or its agents
in reliance upon any of the Company's or the
Parent's warranties, covenants or promises herein
or in any other documents contemplated hereby or
thereby, including certificates delivered by the
Company pursuant hereto, or (ii) arose from a
violation by such Purchaser of legal requirements
applicable to such Purchaser primarily because of
its character as a particular type of regulated
institution. The Company and the Parent further
agree promptly upon demand by such Purchaser to
reimburse each Purchaser for any legal and other
expenses as they are incurred by it in connection
with investigating, preparing to defend or
defending any lawsuits, claims or other
proceedings or investigations arising in any
manner out of or in connection with such person
being a Purchaser and as to which the Company
and the Parent is liable to indemnify. The
indemnity, contribution and expense
reimbursement obligations of the Company and
the Parent under this Article VII shall be in
addition to any liability the Company and the
Parent may otherwise have.
(b) Procedure. Promptly after
receipt by an indemnified party under this Article
VII of notice of the commencement of any action,
proceeding or investigation or threat thereof, such
indemnified party will, if a claim in respect
thereof is to be made against the indemnifying
party hereunder, notify in writing the
indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying
party will not relieve it from any liability which it
may have to any indemnified party except to the
extent that any indemnifying party is prejudiced
by such omission. In case any such action shall
be brought against any indemnified party and it
shall notify the indemnifying party of the
commencement thereof, the indemnifying party
shall be entitled to participate therein and, to the
extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably
satisfactory to such indemnified party (who shall
not, except with the consent of the indemnified
party, which consent shall not be unreasonably
withheld, be counsel to the indemnifying party),
and, after notice from the indemnifying party to
such indemnified party of its elections to assume
the defense thereof and the actual assumption of
such defense, the indemnifying party shall not be
liable to such indemnified party under these
indemnification provisions for any legal expenses
of other counsel or any other expenses, in each
case subsequently incurred by such indemnified
party, in connection with the defense thereof other
than reasonable costs of investigation, unless in
the reasonable judgment of such indemnified party
a conflict of interest may exist between such
indemnified party and any other of such
indemnified parties with respect to such claim, in
which event the indemnifying party shall be
obligated to pay the fees and expenses of one
additional counsel. The indemnifying party will
not be subject to any liability for any settlement
made without its consent (which will not be
unreasonably withheld).
Section 7.2 Notification. The
Company agrees promptly to notify each
Purchaser of the commencement of any litigation
or proceeding against it or any of its officers or
directors in connection with the issue and sale of
any of the Securities, or in any way related or
attributed to this Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Home Office Payment.
The Company agrees that, so long as any
Purchaser (including Substitute Purchasers)
hereunder shall own the Securities purchased by it
hereunder and, notwithstanding any provision in
the Indenture to the contrary, the Company will
make any payments to such Purchaser of principal,
premium, if any, and interest due thereon by
check or wire transfer, at the election of the
Purchaser, in immediately available funds by
12:00 noon, New York time, at the location of
such Purchaser's account, on the date of payment
to such account as specified by separate written
notice to the Company by such Purchaser
(providing sufficient information with such wire
transfer to identify the source and application of
the funds and requesting the bank to send a credit
advice thereof to such Purchaser), or to such other
account or in such other similar manner as such
Purchaser may designate to the Company in
writing. Each Purchaser electing to have home
office payments hereby agrees that before selling,
transferring or otherwise disposing of any such
Security, it will make a notation thereon, or
submit the same to the applicable Trustee for
notation thereon, of the date to which interest has
been paid thereon and the amount of all
redemptions previously made in respect thereof, or
surrender the same to such Trustee in exchange
for a Security or Securities aggregating the same
principal amount as the unredeemed principal
amount of the Securities surrendered.
Section 8.2 Termination. This
Agreement may be terminated (as to the party
electing to so terminate it) at any time prior to the
Time of Purchase:
(a) by the Company and
the Parent if any of the conditions
specified in Section 4.2 of this
Agreement have not been met or
waived by it pursuant to the terms
of this Agreement by April 30,
1997 or at such earlier date that it
becomes apparent that any such
condition can no longer be satisfied;
(b) by any Purchaser if
any of the conditions specified in
Section 4.1 of this Agreement have
not been met or waived pursuant to
the terms of this Agreement by
April 30, 1997 or at such earlier
date that it becomes apparent that
any such condition can no longer be
satisfied.
Section 8.3 No Waiver;
Modifications in Writing. No failure or delay on
the part of the Company or the Parent or any
Purchaser in exercising any right, power or
remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of
any such right, power or remedy preclude any
other or further exercise thereof or the exercise of
any other right, power or remedy. The remedies
provided for herein are cumulative and are not
exclusive of any remedies that may be available to
the parties hereto at law or in equity or otherwise.
No waiver of or consent to any departure by the
Company or the Parent from any provision of this
Agreement shall be effective unless signed in
writing by the party entitled to the benefit thereof,
provided that notice of any such waiver shall be
given to each party hereto as set forth below.
Except as otherwise provided herein, no
amendment, modification or termination of any
provision of this Agreement shall be effective
unless signed in writing by or on behalf of each
Purchaser. Any amendment, supplement or
modification of or to any provision of this
Agreement, any waiver of any provision of this
Agreement, and any consent to any departure by
the Company or the Parent from the terms of any
provision of this Agreement, shall be effective
only in the specific instance and for the specific
purpose for which made or given. Except where
notice is specifically required by this Agreement,
no notice to or demand on the Company or the
Parent in any case shall entitle the Company or
the Parent to any other or further notice or
demand in similar or other circumstances.
Section 8.4 Communications. All
notices, demands and other communications
provided for hereunder shall be in writing, and, if
to the Purchasers, shall be given by registered or
certified mail, return receipt requested, telecopy,
courier service or personal delivery, addressed to
each Purchaser as shown on the execution pages
hereof or to such other address as such Purchaser
may designate to the Company in writing and, if
to the Company or the Parent, shall be given by
similar means to Aegis Auto Finance, Inc., c/o
The Aegis Consumer Funding Group, Inc., 525
Washington Boulevard, 29th Floor, Jersey City,
New Jersey 07310, Attention: Executive Vice
President and General Counsel, or to such other
address as the Company may designate in writing,
and shall be deemed given when received. A
copy of any notice hereunder shall be provided to
the Trustee at the address set forth in the
Indenture.
Section 8.5 Costs, Expenses and
Taxes. The Company agrees to pay all costs and
expenses in connection with the negotiation,
preparation, printing, typing, reproduction,
execution and delivery of this Agreement, each of
the Basic Documents, any amendment or
supplement to or modification of any of the
foregoing, and any and all other documents
furnished pursuant hereto or thereto or in
connection herewith or therewith, excluding the
fees and expenses of counsel retained by the
Purchasers in connection herewith, all reasonable
costs and expenses in connection with the
administration of this Agreement and all costs and
expenses (including, without limitation, reasonable
attorneys' fees and expenses), if any, in
connection with the enforcement of this
Agreement, the Securities, any of the Basic
Documents, or any other agreement furnished
pursuant hereto or thereto or in connection
herewith or therewith. In addition, the Company
shall pay any and all stamp, transfer and other
similar taxes payable or determined to be payable
in connection with the execution and delivery of
this Agreement or the original issuance of the
Securities, and shall save and hold each Purchaser
harmless from and against any and all liabilities
with respect to or resulting from any delay in
paying, or omission to pay, such taxes. The
Company shall bear all expenses of shipping the
Securities (including, without limitation, insurance
expenses) from New York City to such other
places within the United States of America as any
Purchaser shall specify.
Section 8.6 Execution in
Counterparts. This Agreement may be executed
in any number of counterparts and by different
parties hereto on separate counterparts, each of
which counterparts, when so executed and
delivered, shall be deemed to be an original and
all of which counterparts, taken together, shall
constitute but one and the same Agreement.
Section 8.7 Binding Effect;
Assignment. Subject to Article VI hereof, prior
to the Time of Purchase the rights and obligations
of any Purchaser under this Agreement may not be
assigned to any other Person except with the prior
consent of the Company, which shall not be
unreasonably withheld. Except as expressly
provided in this Agreement, this Agreement shall
not be construed so as to confer any right or
benefit upon any Person other than the parties to
this Agreement, and their respective successors
and assigns. This Agreement shall be binding
upon the Company and each Purchaser, and their
successors and assigns.
Section 8.8 Governing Law. This
Agreement shall be deemed to be a contract made
under the laws of the State of New York, and for
all purposes shall be construed in accordance with
the laws of said State, without regard to principles
of conflicts of law. Each of the parties hereto
agrees to submit to the jurisdiction of the federal
and state courts sitting in the State of New York
in any action or proceeding arising out of or
relating to this Agreement.
Section 8.9 Severability of
Provisions. Any provision of this Agreement
which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or
unenforceability without invalidating the
remaining provisions hereof or affecting the
validity or enforceability of such provision in any
other Jurisdiction.
Section 8.10 Article and Section
Headings. The Article and Section headings used
or contained in this Agreement are for
convenience of reference only and shall not affect
the construction of this Agreement.
Section 8.11 Attorneys' Fees. In
any action or proceeding brought to enforce any
provision of this Agreement or any of the Basic
Documents, or where any provision hereof or
thereof is validly asserted as a defense, the
successful party shall be entitled to recover
reasonable attorneys' fees in addition to any other
available remedy.
Section 8.12 No Recourse Against
Others. A director, officer, employee or
stockholder, as such, of the Company or the
Parent shall not have any liability for any
obligations of the Company or the Parent under
the Securities or this Agreement or for any claim
based on, in respect of or by reason of such
obligations or their creation. Each Purchaser by
accepting a Security waives and releases all such
liability.<PAGE>
PURCHASE AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF the
parties hereto have caused this Agreement to be
executed by their respective officers hereunder
duly authorized, as of the date first above written.
AEGIS AUTO FINANCE, INC.
By:
Name:
Title:
THE AEGIS CONSUMER FUNDING GROUP,
INC.
By:
Name:
Title:
Accepted and Agreed as of
the date first above written
Name of Purchaser
By:
Name:
Title:
Aggregate principal amount of
Securities to be purchased by
Purchaser
$
Designated Bank
Account No.
Attention:
Taxpayer I.D. No.
Nominee (name in which Securities are to
be registered, if different than name of
Purchaser)
AEGIS AUTO FINANCE, INC.
NOTE PURCHASE AGREEMENT
Dated as of April , 1997
$21,333,333 of Debentures
<PAGE>
- ------------------ COMPARISON OF FOOTERS
- ------------------
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement (this
"Agreement") dated as of April 30, 1997 by and
between The Aegis Consumer Funding Group, Inc.,
a Delaware corporation (the "Company"), and the
Persons named on Schedule 1 as Holders (each, a
"Holder" and collectively, the "Holders").
RECITALS
WHEREAS, pursuant to that certain
Note Purchase Agreement dated as of the date
hereof, by and between the Company and the
Holders (the "Purchase Agreement"), the Holders
have agreed to purchase $21,333,333 aggregate
principal amount of 12% Exchangeable
Subordinated Notes due April 30, 2004 (the
"Notes") from the Company and the Company has
agreed to provide certain rights to the Holders to
cause (i) any shares of Preferred Stock issued upon
exchange of the Notes or upon the exercise of
Warrants to purchase Preferred Stock and (ii) any
shares of Common Stock issued upon redemption of
shares of Preferred Stock or upon exercise of
Warrants to purchase Common Stock to be
registered pursuant to the Securities Act; and
WHEREAS, the parties hereto hereby
desire to set forth the Holders' rights and the
Company's obligations to cause the registration of
the Registrable Securities pursuant to the Securities
Act;
NOW, THEREFORE, in
consideration of the purchase by the Holders of the
Notes pursuant to the Purchase Agreement, and for
other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
Section 1. Definitions and Usage.
As used in this Agreement:
1.1. Definitions.
Agent. "Agent" means the principal
placement agent on an agented placement of
Registrable Securities.
Commission. "Commission" shall mean the
Securities and Exchange Commission.
Common Stock. "Common Stock" shall
mean (i) the common stock, par value $.01 per
share, of the Company, and (ii) shares of capital
stock of the Company issued by the Company in
respect of or in exchange for shares of such
common stock in connection with any stock
dividend or distribution, stock split-up,
recapitalization, recombination or exchange by the
Company generally of shares of such common stock.
Continuously Effective. "Continuously
Effective," with respect to a specified registration
statement, shall mean that it shall not cease to be
effective and available for Transfers of Registrable
Securities thereunder for longer than either (i) any
ten (10) consecutive business days, or (ii) an
aggregate of fifteen (15) business days during the
period specified in the relevant provision of this
Agreement.
Demanding Holders. "Demanding Holders"
shall have the meaning set forth in Section 2.1(i).
Demand Registration. "Demand
Registration" shall have the meaning set forth in
Section 2.1(i).
Exchange Act. "Exchange Act" shall mean
the Securities Exchange Act of 1934, as amended.
Holders. "Holders" shall mean the Persons
named on Schedule 1 as Holders of Registrable
Securities and Transferees of such Persons'
Registrable Securities with respect to the rights that
such Transferees shall have acquired in accordance
with Section 8, at such times as such Persons shall
own Registrable Securities.
Majority Selling Holders. "Majority Selling
Holders" shall mean those Selling Holders whose
Registrable Securities included in such registration
represent a majority of the Registrable Securities of
all Selling Holders included therein.
Person. "Person" shall mean any individual,
corporation, partnership, joint venture, association,
joint-stock company, limited liability company, trust,
unincorporated organization or government or other
agency or political subdivision thereof.
Piggyback Registration. "Piggyback
Registration" shall have the meaning set forth in
Section 3.
Preferred Stock. "Preferred Stock" shall
mean (i) the Class D Redeemable Preferred Stock of
the Company, par value $.10 per share, stated value
$1,000 per share, of the Company and (ii) shares of
capital stock of the Company issued by the
Company in respect of or in exchange for shares of
such preferred stock in connection with any stock
dividend or distribution, stock split-up,
recapitalization, recombination or exchange by the
Company generally of shares of such preferred
stock.
Purchase Agreement. "Purchase Agreement"
shall have the meaning set forth in the Recitals.
Register, Registered and Registration.
"Register", "registered", and "registration" shall
refer to a registration effected by preparing and
filing a registration statement or similar document in
compliance with the Securities Act, and the
declaration or ordering by the Commission of
effectiveness of such registration statement or
document.
Registrable Securities. "Registrable
Securities" shall mean, subject to Section 8 and
Section 10.3: (i) the Shares owned by a Holder on
the date of determination, (ii) any shares of
Common Stock or Preferred Stock or other
securities issued as (or issuable upon the conversion
or exercise of any warrant, right or other security
which is issued as) a dividend or other distribution
with respect to, or in exchange by the Company
generally for, or in replacement by the Company
generally of, such Shares; and (iii) any securities
issued in exchange for Shares in any merger or
reorganization of the Company; provided, however,
that Registrable Securities shall not include any
Shares which have theretofore been registered and
sold pursuant to the Securities Act or which have
been sold to the public pursuant to Rule 144 or any
similar rule promulgated by the Commission
pursuant to the Securities Act, and, provided further,
the Company shall have no obligation under Section
2 or Section 3 to register any Registrable Securities
of a Holder if the Company shall deliver to the
Holders requesting such registration an opinion of
counsel reasonably satisfactory to such Holders and
its counsel to the effect that the proposed sale or
disposition of all of the Registrable Securities for
which registration was requested does not require
registration under the Securities Act for a sale or
disposition in a single public sale, and offers to
remove any and all legends restricting transfer from
the certificates evidencing such Registrable
Securities. For purposes of this Agreement, a
Person will be deemed to be a holder of Registrable
Securities whenever such Person has the then-
existing right to acquire such Registrable Securities
(by conversion, purchase or otherwise), whether or
not such acquisition has actually been effected.
Registrable Securities then outstanding.
"Registrable Securities then outstanding" shall mean,
with respect to a specified determination date, the
Registrable Securities owned by all Holders on such
date.
Registration Expenses. "Registration
Expenses" shall have the meaning set forth in
Section 6.1.
Securities Act. "Securities Act" shall mean
the Securities Act of 1933, as amended.
Selling Holders. "Selling Holders" shall
mean, with respect to a specified registration
pursuant to this Agreement, Holders whose
Registrable Securities are included in such
registration.
Shares. "Shares" shall mean the shares of
Preferred Stock issuable upon exchange of the Notes
or upon the exercise of any warrants issuable upon
the redemption of the Notes and the shares of
Common Stock issuable upon redemption of the
Preferred Stock or upon the exercise of any warrants
issuable upon the redemption of the Preferred Stock.
Transfer. "Transfer" shall mean and include
the act of selling, giving, transferring, creating a
trust (voting or otherwise), assigning or otherwise
disposing of Registrable Securities (other than
pledging, hypothecating or otherwise transferring as
security) (and correlative words shall have
correlative meanings); provided however, that any
transfer or other disposition upon foreclosure or
other exercise of remedies of a secured creditor after
an event of default under or with respect to a
pledge, hypothecation or other transfer as security
shall constitute a "Transfer".
Underwriters' Representative.
"Underwriters' Representative shall mean the
managing underwriter, or, in the case of a co-
managed underwriting, the managing underwriter
designated as the Underwriters' Representative by
the co-managers.
Violation. "Violation" shall have the
meaning set forth in Section 7.1.
1.2 Usage.
(i) References to a Person are also
references to its assigns and successors in interest
(by means of merger, consolidation or sale of all or
substantially all the assets of such Person or
otherwise, as the case may be).
(ii) References to Registrable Securities
"owned" by a Holder shall include Registrable
Securities beneficially owned by such Person but
which are held of record in the name of a nominee,
trustee, custodian, or other agent, but shall exclude
Shares held by a Holder in a fiduciary capacity for
customers of such Person.
(iii) References to a document are to it as
amended, waived and otherwise modified from time
to time and references to a statute or other
governmental rule are to it as amended and
otherwise modified from time to time (and
references to any provision thereof shall include
references to any successor provision).
(iv) References to Sections or to
Schedules or Exhibits are to sections hereof or
schedules or exhibits hereto, unless the context
otherwise requires.
(v) The definitions set forth herein are
equally applicable both to the singular and plural
forms and the feminine, masculine and neuter forms
of the terms defined.
(vi) The term "including" and correlative
terms shall be deemed to be followed by "without
limitation" whether or not followed by such words
or words of like import.
(vii) The term "hereof" and similar terms
refer to this Agreement as a whole.
(viii) The "date of" any notice or request
given pursuant to this Agreement shall be
determined in accordance with Section 13.
Section 2. Demand Registration.
2.1. (i) The Company covenants and
agrees with the Holders of the Shares, that upon
written request of Holders that own an aggregate of
51% or more of the Registrable Securities then
outstanding (the "Demanding Holders"), the
Company shall cause there to be filed with the
Commission a registration statement meeting the
requirements of the Securities Act (a "Demand
Registration"), and each Demanding Holder shall be
entitled to have included therein (subject to Section
2.7) all or such number of such Demanding Holder's
Registrable Securities as the Demanding Holder
shall report in writing. Any request made pursuant
to this Section 2.1 shall be addressed to the attention
of the Secretary of the Company, and shall specify
the number of Registrable Securities to be
registered, the intended methods of disposition
thereof and that the request is for a Demand
Registration pursuant to this Section 2.1(i).
(ii) Whenever the Company shall have
received a demand pursuant to Section 2.1(i) to
effect the registration of any Registrable Securities,
the Company shall promptly give written notice of
such proposed registration to all Holders. Any such
Holder may, within twenty (20) days after receipt of
such notice, request in writing that all of such
Holder's Registrable Securities, or any portion
thereof designated by such Holder, be included in
the registration.
2.2. Following receipt of a request for a
Demand Registration, the Company shall:
(i) File the registration statement with
the Commission as promptly as practicable, and
shall use the Company's best efforts to have the
registration statement declared effective under the
Securities Act as soon as reasonably practicable, in
each instance giving due regard to the need to
prepare current financial statements, conduct due
diligence and complete other actions that are
reasonably necessary to effect a registered public
offering.
(ii) Use the Company's best efforts to
keep the relevant registration statement Continuously
Effective for up to 180 days or until such earlier
date as of which all the Registrable Securities under
such Registration Statement shall have been
disposed of in the manner described in the
Registration Statement. Notwithstanding the
foregoing, if for any reason the effectiveness of a
registration pursuant to this Section 2 is suspended,
the foregoing period shall be extended by the
aggregate number of days of such suspension.
2.3. The Company shall be obligated to
effect no more than two Demand Registrations. For
purposes of the preceding sentence, registration shall
not be deemed to have been effected (i) unless a
registration statement with respect thereto has
become effective, (ii) if after such registration
statement has become effective, such registration or
the related offer, sale or distribution of Registrable
Securities thereunder is interfered with by any stop
order, injunction or other order or requirement of
the Commission or other governmental agency or
court for any reason not attributable to the Selling
Holders and such interference is not thereafter
eliminated, or (iii) if reasonable and customary
conditions to closing applicable to the Company
specified in the underwriting agreement, if any,
entered into in connection with such registration are
not satisfied or waived. If the Company shall have
complied with its obligations under this Agreement,
a right to demand a registration pursuant to this
Section 2 shall be deemed to have been satisfied
upon the earlier of (x) the date as of which all of
the Registrable Securities included therein shall have
been disposed of pursuant to the Registration
Statement, and (y) the date as of which such
Demand Registration shall have been Continuously
Effective for a period of 180 days.
2.4. A registration pursuant to this Section
2 shall be on such appropriate registration form of
the Commission as shall (i) be selected by the
Company and be reasonably acceptable to the
Majority Selling Holders, and (ii) permit the
disposition of the Registrable Securities in
accordance with the intended method or methods of
disposition specified in the request pursuant to
Section 2.1(i).
2.5. If any registration pursuant to Section
2 involves an underwritten offering (whether on a
"firm", "best efforts" or "all reasonable efforts" basis
or otherwise), or an agented offering, the Majority
Selling Holders, shall have the right to select the
underwriter or underwriters and manager or
managers to administer such underwritten offering
or the placement agent or agents for such agented
offering; provided, however, that each Person so
selected shall be reasonably acceptable to the
Company.
2.6. Whenever the Company shall effect
a registration pursuant to this Section 2 in
connection with an underwritten offering by one or
more Selling Holders of Registrable Securities: (i)
if such Selling Holders have requested the inclusion
therein of more than one class of Registrable
Securities, and the Underwriters' Representative or
Agent advises each such Selling Holder in writing
that, in its opinion, the inclusion of more than one
class of Registrable Securities would adversely
affect such offering, the Demanding Holders holding
at least a majority of the Registrable Securities
proposed to be sold therein by them, shall decide
which class of Registrable Securities shall be
included therein in such offering and the related
registration, and the other class shall be excluded;
and (ii) if the Underwriters' Representative or Agent
advises each such Selling Holder in writing that, in
its opinion, the amount of securities requested to be
included in such offering (whether by Selling
Holders or others) exceeds the amount which can be
sold in such offering within a price range acceptable
to the Majority Selling Holders, securities shall be
included in such offering and the related
registration, to the extent of the amount which can
be sold within such price range.
Section 3. Piggyback Registration.
3.1. If at any time the Company proposes
to register (including for this purpose a registration
effected by the Company for shareholders of the
Company other than the Holders) securities under
the Securities Act in connection with a public
offering solely for cash on Form S-1, S-2 or S-3 (or
any replacement or successor forms), the Company
shall promptly give each Holder of Registrable
Securities written notice of such registration (a
"Piggyback Registration"). Upon the written request
of each Holder given within 20 days following the
date of such notice, the Company shall cause to be
included in such registration statement and use its
best efforts to be registered under the Securities Act
all the Registrable Securities that each such Holder
shall have requested to be registered. The Company
shall have the absolute right to withdraw or cease to
prepare or file any registration statement for any
offering referred to in this Section 3 without any
obligation or liability to any Holder.
3.2. If the Underwriters' Representative or
Agent shall advise the Company in writing (with a
copy to each Selling Holder) that, in its opinion, the
amount of Registrable Securities requested to be
included in such registration would materially
adversely affect such offering, or the timing thereof,
then the Company will include in such registration,
to the extent of the amount and class which the
Company is so advised can be sold without such
material adverse effect in such offering: first, all
securities proposed to be sold by the Company for
its own account; second, the Registrable Securities
requested to be included in such registration by
Holders pursuant to this Section 3, and all other
securities being registered pursuant to the exercise of
contractual rights comparable to the rights granted
in this Section 3, pro rata based on the estimated
gross proceeds from the sale thereof; provided,
however, that the Holders of Registrable Securities
may have their respective proportions of included
securities reduced below their pro rata portion to the
extent, but only to the extent, that such reduction is
required by the Registration Rights Agreement dated
as of January 29, 1996 by and among the Company,
Swartz
Investments, Inc. and the subscribers to the
Company's Series C Preferred Stock; and third all
other securities requested to be included in such
registration.
3.3. Each Holder shall be entitled to have
its Registrable Securities included in an unlimited
number of Piggyback Registrations pursuant to this
Section 3.
3.4. If the Company has previously filed
a registration statement with respect to Registerable
Securities pursuant to Section 2, and if such
previous registration has not been withdrawn or
abandoned, the Company will not file or cause to be
effected any other registration of any of its equity
securities or securities convertible or exchangeable
into or exercisable for its equity securities under the
Securities Act (except on Form S-8 or any successor
form), whether on its own behalf or at the request of
any holder or holders of such securities, until a
period of 90 days has elapsed from the effective
date of such a previous registration.
Section 4. Registration Procedures. Whenever
required under Section 2 or Section 3 to effect the
registration of any Registrable Securities, the
Company shall, as expeditiously as practicable:
4.1. Prepare and file with the Commission
a registration statement with respect to such
Registrable Securities and use the Company's best
efforts to cause such registration statement to
become effective; provided, however, that before
filing a registration statement or prospectus or any
amendments or supplements thereto, including
documents incorporated by reference after the initial
filing of the registration statement and prior to
effectiveness thereof, the Company shall furnish to
one firm of counsel for the Selling Holders (selected
by the Majority Selling Holders) copies of all such
documents in the form substantially as proposed to
be filed with the Commission at least four (4)
business days prior to filing for review and
comment by such counsel and if such counsel
reasonably disagrees with the Company as to the
contents of any such disclosure, the Selling Holders
may withdraw any Shares to be so registered from
any such filing; provided, however, that a demand
registration shall not be deemed to have been
effected for purposes of Section 2 in connection
with any registration statement from which such
Shares are so withdrawn.
4.2. Prepare and file with the Commission
such amendments and supplements to such
registration statement and the prospectus used in
connection with such registration statement as may
be necessary to comply with the provisions of the
Securities Act and rules thereunder with respect to
the disposition of all securities covered by such
registration statement. If the registration is for an
underwritten offering, the Company shall amend the
registration statement or supplement the prospectus
whenever required by the terms of the underwriting
agreement entered into pursuant to Section 5.2. In
the event that any Registrable Securities included in
a registration statement subject to, or required by,
this Agreement remain unsold at the end of the
period during which the Company is obligated to
use its best efforts to maintain the effectiveness of
such registration statement, the Company may file a
post-effective amendment to the registration
statement for the purpose of removing such
Securities from registered status.
4.3. Furnish to each Selling Holder of
Registrable Securities, without charge, such numbers
of copies of the registration statement, any pre-
effective or post-effective amendment thereto, the
prospectus, including each preliminary prospectus
and any amendments or supplements thereto, in each
case in conformity with the requirements of the
Securities Act and the rules thereunder, and such
other related documents as any such Selling Holder
may reasonably request in order to facilitate the
disposition of Registrable Securities owned by such
Selling Holder.
4.4. Use the Company's best efforts (i) to
register and qualify the securities covered by such
registration statement under such other securities or
Blue Sky laws of such states or jurisdictions as shall
be reasonably requested by the Underwriters'
Representative or Agent (as applicable, or if
inapplicable, the Majority Selling Holders), and (ii)
to obtain the withdrawal of any order suspending the
effectiveness of a registration statement, or the
lifting of any suspension of the qualification (or
exemption from qualification) of the offer and
transfer of any of the Registrable Securities in any
jurisdiction, at the earliest possible moment;
provided, however, that the Company shall not be
required in connection therewith or as a condition
thereto to qualify to do business or to file a general
consent to service of process in any such states or
jurisdictions.
4.5. In the event of any underwritten or
agented offering, enter into and perform the
Company's obligations under an underwriting or
agency agreement (including indemnification and
contribution obligations of underwriters or agents),
in usual and customary form, with the managing
underwriter or underwriters of or agents for such
offering. The Company shall also cooperate with
the Majority Selling Holders and the Underwriters'
Representative or Agent for such offering in the
marketing of the Registerable Shares, including
making available the Company's officers,
accountants, counsel, premises, books and records
for such purpose, but the Company shall not be
required to incur any out-of-pocket expense pursuant
to this sentence.
4.6. Promptly notify each Selling Holder
of any stop order issued or threatened to be issued
by the Commission in connection therewith and take
all reasonable actions required to prevent the entry
of such stop order or to remove it if entered.
4.7. Make generally available to the
Company's security holders copies of all periodic
reports, proxy statements, and other information
referred to in Section 10.1 and an earnings statement
satisfying the provisions of Section 11(a) of the
Securities Act no later than 90 days following the
end of the 12-month period beginning with the first
month of the Company's first fiscal quarter
commencing after the effective date of each
registration statement filed pursuant to this
Agreement.
4.8. Make available for inspection by any
Selling Holder, any underwriter participating in such
offering and the representatives of such Selling
Holder and Underwriter (but not more than one firm
of counsel to such Selling Holders), all financial and
other information as shall be reasonably requested
by them, and provide the Selling Holder, any
underwriter participating in such offering and the
representatives of such Selling Holder and
Underwriter the opportunity to discuss the business
affairs of the Company with its principal executive
officers and independent public accountants who
have certified the audited financial statements
included in such registration statement, in each case
all as necessary to enable them to exercise their due
diligence responsibility under the Securities Act;
provided, however, that information that the
Company determines, in good faith, to be
confidential and which the Company advises such
Person in writing, is confidential shall not be
disclosed unless such Person signs a confidentiality
agreement reasonably satisfactory to the Company or
the related Selling Holder of Registrable Securities
agrees to be responsible for such Person's breach of
confidentiality on terms reasonably satisfactory to
the Company.
4.9. Use the Company's best efforts to
obtain a so-called "comfort letter" from its
independent public accountants, and legal opinions
of counsel to the Company addressed to the
Underwriters and, if such counsel is also
representing the Selling Holders, to such Selling
Holders, in customary form and covering such
matters of the type customarily covered by such
letters. The Company shall furnish to each Selling
Holder copies of any such comfort letter or legal
opinion that is not otherwise addressed to such
Selling Holder. Delivery of any such opinion or
comfort letter shall be subject to the recipient
furnishing such written representations or
acknowledgments as are customarily provided by
selling shareholders who receive such comfort letters
or opinions.
4.10. Provide and cause to be maintained a
transfer agent and registrar for all Registrable
Securities covered by such registration statement
from and after a date not later than the effective
date of such registration statement.
4.11. Use all reasonable efforts to cause the
Registrable Securities covered by such registration
statement (i) if the Common Stock or Preferred
Stock is then listed on a securities exchange or
included for quotation in a recognized trading
market, to continue to be so listed or included for a
reasonable period of time after the offering, and (ii)
to be registered with or approved by such other
United States or state governmental agencies or
authorities as may be necessary by virtue of the
business and operations of the Company to enable
the Selling Holders of Registrable Securities to
consummate the disposition of such Registrable
Securities.
4.12. Use the Company's reasonable efforts
to provide a CUSIP number for the Registrable
Securities prior to the effective date of the first
registration statement including Registrable
Securities.
4.13. Take such other actions as are
reasonably required in order to expedite or facilitate
the disposition of Registrable Securities included in
each such registration.
Section 5. Holders' Obligations. It shall be a
condition precedent to the obligations of the
Company to take any action pursuant to this
Agreement with respect to the Registrable Securities
of any Selling Holder of Registrable Securities that
such Selling Holder shall:
5.1. Furnish to the Company such
information regarding such Selling Holder, the
number of the Registrable Securities owned by it,
and the intended method of disposition of such
securities and such other information known to such
Selling Holder as shall reasonably be required to
effect the registration of such Selling Holder's
Registrable Securities, and to cooperate with the
Company in preparing such registration.
5.2. Agree to sell their Registrable
Securities to the underwriters at the same price and
on substantially the same terms and conditions as
the Company or the other Persons on whose behalf
the registration statement was being filed have
agreed to sell their securities, and to execute the
underwriting agreement agreed to by the Majority
Selling Holders (in the case of a registration under
Section 2) or the Company (in the case of a
registration under Section 3).
Section 6. Expenses of Registration. Expenses
in connection with registrations pursuant to this
Agreement shall be allocated and paid as follows:
6.1. With respect to each Demand
Registration, the Company shall bear and pay all
expenses incurred in connection with any
registration, filing, or qualification of Registrable
Securities with respect to such Demand Registrations
for each Selling Holder (which right may be
assigned to any Person to whom Registrable
Securities are Transferred as permitted by Section
8), including all registration, filing and National
Association of Securities Dealers, Inc. fees, all fees
and expenses of complying with securities or blue
sky laws, all word processing, duplicating and
printing expenses, messenger and delivery expenses,
the reasonable fees and disbursements of counsel for
the Company, and of the Company's independent
public accountants, including the expenses of "cold
comfort" letters required by or incident to such
performance and compliance, and, in the case of a
demand registration pursuant to Section 2, the
reasonable fees and disbursements of one firm of
counsel for the Selling Holders of Registrable
Securities (selected by Demanding Holders owning
a majority of the Registrable Securities owned by
Demanding Holders to be included in a Demand
Registration) (the "Registration Expenses"), but
excluding underwriting discounts and commissions
relating to Registrable Securities (which shall be
paid on a pro rata basis by the Selling Holders) and
any fees and disbursements of counsel for the
Selling Holders of Registrable Securities in any
registration pursuant to Section 3, provided,
however, that the Company shall not be required to
pay for any expenses of any registration proceeding
begun pursuant to Section 2 if the registration is
subsequently withdrawn at the request of the
Majority Selling Holders (in which case all Selling
Holders shall bear such expense), unless Holders
whose Registrable Securities constitute a majority of
the Registrable Securities then outstanding agree that
such withdrawn registration shall constitute one of
the demand registrations under Section 2 hereof.
6.2. The Company shall bear and pay all
Registration Expenses incurred in connection with
any Piggyback Registrations pursuant to Section 3
for each Selling Holder (which right may be
Transferred to any Person to whom Registrable
Securities are Transferred as permitted by Section
8), but excluding underwriting discounts and
commissions relating to Registrable Securities
(which shall be paid on a pro rata basis by the
Selling Holders of Registrable Securities).
6.3. Any failure of the Company to pay
any Registration Expenses as required by this
Section 6 shall not relieve the Company of its
obligations under this Agreement.
Section 7. Indemnification; Contribution. If any
Registrable Securities are included in a registration
statement under this Agreement:
7.1. To the extent permitted by applicable
law, the Company shall indemnify and hold
harmless each Selling Holder, each Person, if any,
who controls such Selling Holder within the
meaning of the Securities Act, and each officer,
director, partner, and employee of such Selling
Holder and such controlling Person, against any and
all losses, claims, damages, liabilities and expenses
(joint or several), including attorneys' fees and
disbursements and expenses of investigation,
incurred by such party pursuant to any actual or
threatened action, suit, proceeding or investigation,
or to which any of the foregoing Persons may
become subject under the Securities Act, the
Exchange Act or other federal or state laws, insofar
as such losses, claims, damages, liabilities and
expenses arise out of or are based upon any of the
following statements, omissions or violations
(collectively a "Violation"):
(i) Any untrue statement or
alleged untrue statement of a material fact contained
in such registration statement, including any
preliminary prospectus or final prospectus contained
therein, or any amendments or supplements thereto;
(ii) The omission or alleged
omission to state therein a material fact required to
be stated therein, or necessary to make the
statements therein not misleading; or
(iii) Any violation or alleged
violation by the Company of the Securities Act, the
Exchange Act, any applicable state securities law or
any rule or regulation promulgated under the
Securities Act, the Exchange Act or any applicable
state securities law; provided, however, that the
indemnification required by this Section 7.1 shall
not apply to amounts paid in settlement of any such
loss, claim, damage, liability or expense if such
settlement is effected without the consent of the
Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable in any
such case for any such loss, claim, damage, liability
or expense to the extent that it arises out of or is
based upon a Violation which (i) occurs in reliance
upon and in conformity with written information
furnished to the Company by the indemnified party
expressly for use in connection with such
registration or (ii) arises from an untrue statement or
omission of a material fact contained in a
preliminary prospectus if such untrue statement or
omission was corrected in a subsequent preliminary
prospectus or the final prospectus and copies of any
such subsequent preliminary prospectus or final
prospectus have been made available by the
Company to the Underwriters (or the Selling
Holders in the case of a non-underwritten offering).
The Company shall also indemnify underwriters,
selling brokers, dealer managers and similar
securities industry professionals participating in the
distribution, their officers, directors, agents and
employees and each person who controls such
persons (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act)
to the same extent as provided above with respect to
the indemnification of the Selling Holders.
7.2. To the extent permitted by applicable
law, each Selling Holder shall indemnify and hold
harmless the Company, each of its directors, each of
its officers who shall have signed the registration
statement, each Person, if any, who controls the
Company within the meaning of the Securities Act,
any other Selling Holder, any controlling Person of
any such other Selling Holder and each officer,
director, partner, and employee of such other Selling
Holder and such controlling Person, against any and
all losses, claims, damages, liabilities and expenses
(joint and several), including attorneys' fees and
disbursements and expenses of investigation,
incurred by such party pursuant to any actual or
threatened action, suit, proceeding or investigation,
or to which any of the foregoing Persons may
otherwise become subject under the Securities Act,
the Exchange Act or other federal or state laws,
insofar as such losses, claims, damages, liabilities
and expenses arise out of or are based upon any
Violation, in each case to the extent (and only to the
extent) that such Violation (i) occurs in reliance
upon and in conformity with written information
furnished by such Selling Holder expressly for use
in connection with such registration or (ii) arises out
of the failure to distribute by the Underwriters (or
the Selling Holders in the case of a non-
underwritten offering) of any preliminary prospectus
or prospectus made available by the Company to the
Underwriters (or such Selling Holders, as the case
may be) which corrects an untrue statement or
omission of a material fact contained in a previous
preliminary prospectus; provided, however, that (x)
the indemnification required by this Section 7.2
shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or expense if
settlement is effected without the consent of the
relevant Selling Holder of Registrable Securities,
which consent shall not be unreasonably withheld,
and (y) in no event shall the amount of any
indemnity under this Section 7.2 exceed the gross
proceeds from the applicable offering received by
such Selling Holder.
7.3. Promptly after receipt by an
indemnified party under this Section 7 of notice of
the commencement of any action, suit, proceeding,
investigation or threat thereof made in writing for
which such indemnified party may make a claim
under this Section 7, such indemnified party shall
deliver to the indemnifying party a written notice of
the commencement thereof and the indemnifying
party shall have the right to participate in, and, to
the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed,
to assume the defense thereof with counsel
reasonably satisfactory to each of the parties;
provided, however, that an indemnified party shall
have the right to retain its own counsel, with the
fees and disbursements and expenses to be paid by
the indemnifying party, if representation of such
indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to
actual or potential differing interests between such
indemnified party and any other party represented
by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party
within a reasonable time following the
commencement of any such action, if prejudicial to
its ability to defend such action, shall relieve such
indemnifying party of any liability to the
indemnified party under this Section 7 but shall not
relieve the indemnifying party of any liability that it
may have to any indemnified party otherwise than
pursuant to this Section 7. Any fees and expenses
incurred by the indemnified party (including any
fees and expenses incurred in connection with
investigating or preparing to defend such action or
proceeding) shall be paid to the indemnified party,
as incurred, within thirty (30) days of written notice
thereof to the indemnifying party (regardless of
whether it is ultimately determined that an
indemnified party is not entitled to indemnification
hereunder). Any such indemnified party shall have
the right to employ separate counsel in any such
action, claim or proceeding and to participate in the
defense thereof, but the fees and expenses of such
counsel shall be the expenses of such indemnified
party unless (i) the indemnifying party has agreed to
pay such fees and expenses or (ii) the indemnifying
party shall have failed to promptly assume the
defense of such action, claim or proceeding or (iii)
the named parties to any such action, claim or
proceeding (including any impleaded parties) include
both such indemnified party and the indemnifying
party, and such indemnified party shall have been
advised by counsel that there may be one or more
legal defenses available to it which are different
from or in addition to those available to the
indemnifying party and that the assertion of such
defenses would create a conflict of interest such that
counsel employed by the indemnifying party could
not faithfully represent the indemnified party (in
which case, if such indemnified party notifies the
indemnifying party in writing that it elects to
employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not
have the right to assume the defense of such action,
claim or proceeding on behalf of such indemnified
party, it being understood, however, that the
indemnifying party shall not, in connection with any
one such action, claim or proceeding or separate but
substantially similar or related actions, claims or
proceedings in the same jurisdiction arising out of
the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more
than one separate firm of attorneys (together with
appropriate local counsel) at any time for all such
indemnified parties. No indemnifying party shall be
liable to an indemnified party for any settlement of
any action, proceeding or claim without the written
consent of the indemnifying party, which consent
shall not be unreasonably withheld.
7.4. If the indemnification required by this
Section 7 from the indemnifying party is unavailable
to an indemnified party hereunder in respect of any
losses, claims, damages, liabilities or expenses
referred to in this Section 7:
(i) The indemnifying party, in
lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims,
damages, liabilities or expenses in such proportion
as is appropriate to reflect the relative fault of the
indemnifying party and indemnified parties in
connection with the actions which resulted in such
losses, claims, damages, liabilities or expenses, as
well as any other relevant equitable considerations.
The relative fault of such indemnifying party and
indemnified parties shall be determined by reference
to, among other things, whether any Violation has
been committed by, or relates to information
supplied by, such indemnifying party or indemnified
parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or
prevent such Violation. The amount paid or payable
by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set
forth in Section 7.1 and Section 7.2, any legal or
other fees or expenses reasonably incurred by such
party in connection with any investigation or
proceeding.
(ii) The parties hereto agree that
it would not be just and equitable if contribution
pursuant to this Section 7.4 were determined by pro
rata allocation or by any other method of allocation
which does not take into account the equitable
considerations referred to in Section 7.4(i). No
Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person
who was not guilty of such fraudulent
misrepresentation.
7.5. If indemnification is available under
this Section 7, the indemnifying parties shall
indemnify each indemnified party to the full extent
provided in this Section 7 without regard to the
relative fault of such indemnifying party or
indemnified party or any other equitable
consideration referred to in Section 7.4.
7.6. The obligations of the Company and
the Selling Holders of Registrable Securities under
this Section 7 shall survive the completion of any
offering of Registrable Securities pursuant to a
registration statement under this Agreement, and
otherwise.
Section 8. Transfer of Registration Rights.
Rights with respect to Registrable Securities may be
Transferred by the Holder to any Person in
connection with the Transfer of Registrable
Securities to such Person, in all cases, if (x) any
such Transferee that is not a party to this Agreement
shall have executed and delivered to the Secretary of
the Company a properly completed agreement
substantially in the form of Exhibit A, and (y) the
Transferor shall have delivered to the Secretary of
the Company, no later than 15 days following the
date of the Transfer, written notification of such
Transfer setting forth the name of the Transferor,
name and address of the Transferee, and the number
of Registrable Securities which shall have been so
Transferred.
Section 9. Holdback. Each Holder entitled
pursuant to this Agreement to have Registrable
Securities included in a registration statement
prepared pursuant to this Agreement, if so requested
by the Underwriters' Representative or Agent in
connection with an offering of any Registrable
Securities, shall not effect any public sale or
distribution of shares of Common Stock or Preferred
Stock or any securities convertible into or
exchangeable or exercisable for shares of Common
Stock or Preferred Stock, including a sale pursuant
to Rule 144 under the Securities Act (except as part
of such underwritten or agented registration), during
the 5-day period prior to, and during the 90-day
period beginning on, the date such registration
statement is declared effective under the Securities
Act by the Commission, provided that such Holder
is timely notified of such effective date in writing
by the Company or such Underwriters'
Representative or Agent. In order to enforce the
foregoing covenant, the Company shall be entitled
to impose stop-transfer instructions with respect to
the Registrable Securities of each Holder until the
end of such period.
Section 10. Covenants of the Company. The
Company hereby agrees and covenants as follows:
10.1. The Company shall file as and when
applicable, on a timely basis, all reports required to
be filed by it under the Exchange Act. If the
Company is not required to file reports pursuant to
the Exchange Act, upon the request of any Holder
of Registrable Securities, the Company shall make
publicly available the information specified in
subparagraph (c)(2) of Rule 144 of the Securities
Act, and take such further action as may be
reasonably required from time to time and as may
be within the reasonable control of the Company, to
enable the Holders to Transfer Registrable Securities
without registration under the Securities Act within
the limitation of the exemptions provided by Rule
144 under the Securities Act or any similar rule or
regulation hereafter adopted by the Commission.
10.2. The Company shall not, and shall not
permit its majority owned subsidiaries to, effect any
public sale or distribution of any shares of Common
Stock or Preferred Stock or any securities
convertible into or exchangeable or exercisable for
shares of Common Stock or Preferred Stock, during
the five business days prior to, and during the 90-
day period beginning on, the commencement of a
public distribution of the Registrable Securities
pursuant to any registration statement prepared
pursuant to Section 2 of this Agreement
10.3. The Company shall not, directly or
indirectly, (x) enter into any merger, consolidation
or reorganization in which the Company shall not be
the surviving corporation or (y) Transfer or agree to
Transfer all or substantially all the Company's
assets, unless prior to such merger, consolidation,
reorganization or asset Transfer, the surviving
corporation or the Transferee, respectively, shall
have agreed in writing to assume the obligations of
the Company under this Agreement, and for that
purpose references hereunder to "Registrable
Securities" shall be deemed to include the securities
which the Holders of Registrable Securities would
be entitled to receive in exchange for Registrable
Securities pursuant to any such merger,
consolidation or reorganization.
10.4. The Company shall not grant to any
Person (other than a Holder of Registrable
Securities) any registration rights with respect to
securities of the Company, or enter into any
agreement, that would entitle the holder thereof to
have securities owned by it included in a Demand
Registration unless such registration rights provide
that in the event that the Underwriter of any such
demand registration determines that marketing
factors require a limitation of the number of
Registrable Securities to be underwritten, the
Underwriter may limit the number of Registrable
Securities to be included in the demand registration
and underwritten public offering such that all of the
Registrable Securities to be sold by any such Person
shall be excluded and withdrawn from such
registration prior to the exclusion and withdrawal of
any Registrable Securities to be sold by any Selling
Holder.
Section 11. Amendment, Modification and
Waivers; Further Assurances.
(i) This Agreement may be amended
with the consent of the Company and the Company
may take any action herein prohibited, or omit to
perform any act herein required to be performed by
it, only if the Company shall have obtained the
written consent of Holders owning Registrable
Securities possessing a majority in number of the
Registrable Securities then outstanding to such
amendment, action or omission to act.
(ii) No waiver of any terms or conditions
of this Agreement shall operate as a waiver of any
other breach of such terms and conditions or any
other term or condition, nor shall any failure to
enforce any provision hereof operate as a waiver of
such provision or of any other provision hereof. No
written waiver hereunder, unless it by its own terms
explicitly provides to the contrary, shall be
construed to effect a continuing waiver of the
provisions being waived and no such waiver in any
instance shall constitute a waiver in any other
instance or for any other purpose or impair the right
of the party against whom such waiver is claimed in
all other instances or for all other purposes to
require full compliance with such provision.
(iii) Each of the parties hereto shall
execute all such further instruments and documents
and take all such further action as any other party
hereto may reasonably require in order to effectuate
the terms and purposes of this Agreement.
Section 12. Assignment; Benefit. This Agreement
and all of the provisions hereof shall be binding
upon and shall inure to the benefit of the parties
hereto and their respective heirs, assigns, executors,
administrators or successors; provided, however, that
except as specifically provided herein with respect
to certain matters, neither this Agreement nor any of
the rights, interests or obligations hereunder shall be
assigned or delegated by the Company without the
prior written consent of Holders owning Registrable
Securities possessing a majority in number of the
Registrable Securities outstanding on the date as of
which such delegation or assignment is to become
effective. A Holder may Transfer its rights
hereunder to a successor in interest to the
Registrable Securities owned by such assignor only
as permitted by Section 8.
Section 13. Miscellaneous.
13.1. Governing Law. THIS
AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF DELAWARE,
WITHOUT GIVING REGARD TO THE
CONFLICT OF LAWS PRINCIPLES
THEREOF.
13.2. Notices. All notices and requests
given pursuant to this Agreement shall be in writing
and shall be made by hand-delivery, first-class mail
(registered or certified, return receipt requested),
confirmed facsimile or overnight air courier
guaranteeing next business day delivery to the
relevant address set forth below or in the relevant
agreement in the form of Exhibit A whereby such
party became bound by the provisions of this
Agreement.
If to the Company:
The Aegis Consumer Funding Group, Inc.
525 Washington Street, 29th Floor
Jersey City, New Jersey 07310
Telecopy: (201) 418-7370
Attention: Gary Peiffer
If to the Holder:
III Finance Ltd.
c/o Admiral Administration, Ltd.
Anchorage Center, 2nd Floor
Grand Cayman, Cayman Islands, B.W.I.
Telecopy: (345) 949-0705
Attention: David Bree
with a copy to:
III Offshore Advisors
250 South Australian Avenue, Suite 600
West Palm Beach, FL 33401
Telecopy: (561) 655-5885
Attention: Robert Fasulo
Except as otherwise provided in this Agreement, the
date of each such notice and request shall be
deemed to be, and the date on which each such
notice and request shall be deemed given shall be:
at the time delivered, if personally delivered or
mailed; when receipt is acknowledged, if sent by
facsimile; and the next business day after timely
delivery to the courier, if sent by overnight air
courier guaranteeing next business day delivery.
13.3. Entire Agreement; Integration. This
Agreement supersedes all prior agreements between
or among any of the parties hereto with respect to
the subject matter contained herein and therein, and
such agreements embody the entire understanding
among the parties relating to such subject matter.
13.4. Injunctive Relief. Each of the parties
hereto acknowledges that in the event of a breach by
any of them of any material provision of this
Agreement, the aggrieved party may be without an
adequate remedy at law. Each of the parties
therefore agrees that in the event of such a breach
hereof the aggrieved party may elect to institute and
prosecute proceedings in any court of competent
jurisdiction to enforce specific performance or to
enjoin the continuing breach hereof. By seeking or
obtaining any such relief, the aggrieved party shall
not be precluded from seeking or obtaining any
other relief to which it may be entitled.
13.5. Section Headings. Section headings
are for convenience of reference only and shall not
affect the meaning of any provision of this
Agreement.
13.6 Counterparts. This Agreement may
be executed in any number of counterparts, each of
which shall be an original, and all of which shall
together constitute one and the same instrument. All
signatures need not be on the same counterpart.
13.7. Severability. If any provision of this
Agreement shall be invalid or unenforceable, such
invalidity or unenforceability shall not affect the
validity and enforceability of the remaining
provisions of this Agreement, unless the result
thereof would be unreasonable, in which case the
parties hereto shall negotiate in good faith as to
appropriate amendments hereto.
13.8. Filing. A copy of this Agreement
and of all amendments thereto shall be filed at the
principal executive office of the Company with the
corporate recorder of the Company.
13.9. Termination. This Agreement may be
terminated at any time by a written instrument
signed by the parties hereto. Unless sooner
terminated in accordance with the preceding
sentence, this Agreement (other than Section 7
hereof) shall terminate in its entirety on such date as
there shall be no Registrable Securities outstanding,
provided that any shares of Common Stock or
Preferred Stock previously subject to this Agreement
shall not be Registrable Securities following the sale
of any such shares in an offering registered pursuant
to this Agreement.
13.10. Attorneys' Fees. In any action or
proceeding brought to enforce any provision of this
Agreement, or where any provision hereof is validly
asserted as a defense, the successful party shall be
entitled to recover reasonable attorneys' fees
(including any fees incurred in any appeal) in
addition to its costs and expenses and any other
available remedy.
13.11. No Third Party Beneficiaries.
Nothing herein expressed or implied is intended to
confer upon any person, other than the parties hereto
or their respective permitted assigns, successors,
heirs and legal representatives, any rights, remedies,
obligations or liabilities under or by reason of this
Agreement.
IN WITNESS WHEREOF, this
Agreement has been duly executed by the parties
hereto as of the date first written above.
THE AEGIS CONSUMER FUNDING GROUP,
INC.
By:______________________________
Name:
Title:
THE HIGH RISK OPPORTUNITIES HUB
FUND, LTD.
By:_____________________________
Name:
Title:
III FINANCE, LTD.
By:______________________________
Name:
Title:
<PAGE>
SCHEDULE 1
to Registration
Rights Agreement
HOLDERS OF REGISTRABLE SECURITIES
Principal
Amount of Notes Holder
to be Purchased
The High Risk Opportunities
Hub Fund, Ltd. . . . . . . . . . . . . $5,000,000
III Finance, Ltd.. . . . . . . . . . . .$16,333,333
TOTAL. . . . . . . . . . . . . . . . . .$21,333,333
<PAGE>
EXHIBIT A
to Registration
Rights Agreement
AGREEMENT TO BE BOUND
BY THE REGISTRATION RIGHTS
AGREEMENT
The undersigned, being the transferee
of [_____ shares of the common stock, $.01 par
value per share] [_____ shares of the preferred
stock, $.10 par value per share; $1,000 stated value
per share] [or describe other capital stock received
in exchange for such common stock] (the
"Registrable Securities"), of The Aegis Consumer
Funding Group, Inc., a Delaware corporation (the
"Company"), as a condition to the receipt of such
Registrable Securities, acknowledges that matters
pertaining to the registration of such Registrable
Securities are governed by the Registration Rights
Agreement dated as of March ___, 1997 initially
between the Company and the Holder referred to
therein (the "Agreement"), and the undersigned
hereby (1) acknowledges receipt of a copy of the
Agreement, and (2) agrees to be bound as a Holder
by the terms of the Agreement, as the same has
been or may be amended from time to time.
Agreed to this __ day of
______________, ____________.
_________________________________
_________________________________
_________________________________
Include address for notices.
A:\10_107_3.WPD
GUARANTY
Dated April 30, 1997
From
THE AEGIS CONSUMER FUNDING GROUP, INC.
as Guarantor
in favor of
THE TRUSTEE REFERRED TO
IN THE INDENTURE REFERRED TO HEREIN
<PAGE>
GUARANTY
GUARANTY dated April 30, 1997
made by The Aegis Consumer Funding Group, Inc., a
Delaware corporation (the "Guarantor"), in favor of the
Trustee (as defined in the Indenture referred to below).
PRELIMINARY STATEMENT
The Trustee is a party to an Indenture
dated as of April 30, 1997 (said Indenture, as it may
hereafter be amended, supplemented or otherwise
modified from time to time, being the "Indenture," the
terms defined therein and not otherwise defined herein
being used herein as therein defined) with Aegis Auto
Finance, Inc., a Delaware corporation (the "Borrower").
It is a condition precedent to the purchase of Securities
under the Indenture that the Guarantor shall have
executed and delivered this Guaranty.
NOW, THEREFORE, in consideration
of the premises and in order to induce the purchase of
Securities under the Indenture, the Guarantor hereby
agrees as follows:
Section 1. Guaranty. The Guarantor
hereby unconditionally and irrevocably guarantees the
punctual payment when due, whether at stated maturity,
by acceleration or otherwise, of all obligations of the
Borrower now or hereafter existing under the Indenture,
whether for principal, interest, fees, expenses or
otherwise (such obligations being the "Guaranteed
Obligations"), and agrees to pay any and all expenses
(including counsel fees and expenses) incurred by the
Trustee in enforcing any rights under this Guaranty.
Without limiting the generality of the foregoing, the
Guarantor's liability shall extend to all amounts that
constitute part of the Guaranteed Obligations and would
be owed by the Borrower to the Trustee or any other
Person under the Indenture but for the fact that they are
unenforceable or not allowable due to the existence of
a bankruptcy, reorganization or similar proceeding
involving the Borrower.
Section 2. Guaranty Absolute. The
Guarantor guarantees that the Guaranteed Obligations
will be paid strictly in accordance with the terms of the
Indenture, regardless of any law, regulation or order
now or hereafter in effect in any jurisdiction affecting
any of such terms or the rights of the Trustee with
respect thereto. The obligations of the Guarantor under
this Guaranty are independent of the Guaranteed
Obligations or any other obligations of any other party
under the Indenture, and a separate action or actions
may be brought and prosecuted against the Guarantor
to enforce this Guaranty, irrespective of whether any
action is brought against the Borrower or any other
party or whether the Borrower or any other party is
joined in any such action or actions. The liability of
the Guarantor under this Guaranty shall be irrevocable,
absolute and unconditional irrespective of, and the
Guarantor hereby irrevocably waives any defenses it
may now or hereafter have in any way relating to, any
or all of the following:
(a) any lack of validity or
enforceability of the Indenture or any
agreement or instrument relating
thereto;
(b) any change in the time,
manner or place of payment of, or in
any other term of, all or any of the
Guaranteed Obligations, or any other
amendment or waiver of or any consent
to departure from the Indenture,
including, without limitation, any
increase in the Guaranteed Obligations
resulting from the extension of
additional credit to the Borrower or any
of its Subsidiaries or otherwise;
(c) any taking, exchange,
release or non-perfection of any
Collateral, or any taking, release or
amendment or waiver of or consent to
departure from any other guaranty, for
all or any of the Guaranteed
Obligations;
(d) any manner of
application of Collateral, or proceeds
thereof, to all or any of the Guaranteed
Obligations, or any manner of sale or
other disposition of any Collateral for
all or any of the Guaranteed
Obligations under the Indenture or any
other assets of the Borrower or any of
its Subsidiaries;
(e) any change,
restructuring or termination of the
corporate structure or existence of the
Borrower or any of its Subsidiaries; or
(f) any other circumstance
(including, without limitation, any
statute of limitations) or any existence
of or reliance on any representation by
the Trustee that might otherwise
constitute a defense available to, or a
discharge of, the Borrower, the
Guarantor or any other guarantor or
surety.
This Guaranty shall continue to be effective or be
reinstated, as the case may be, if at any time any
payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by the Trustee
or any other Person upon the insolvency, bankruptcy or
reorganization of the Borrower or otherwise, all as
though such payment had not been made.
Section 3. Waivers and
Acknowledgments. (a) The Guarantor hereby waives
promptness, diligence, notice of acceptance and any
other notice with respect to any of the Guaranteed
Obligations and this Guaranty and any requirement that
the Trustee protect, secure, perfect or insure any lien or
any property subject thereto or exhaust any right or
take any action against the Borrower or any other
Person or any Collateral.
(b) The Guarantor hereby waives
any right to revoke this Guaranty, and acknowledges
that this Guaranty is continuing in nature and applies to
all Guaranteed Obligations, whether existing now or in
the future.
(c) The Guarantor acknowledges
that it will receive substantial direct and indirect
benefits from the financing arrangements contemplated
by the Indenture and that the waivers set forth in this
Section 3 are knowingly made in contemplation of such
benefits.
Section 4. Subrogation. The Guarantor
will not exercise any rights that it may now or
hereafter acquire against the Borrower that arise from
the existence, payment, performance or enforcement of
the Guarantor's Obligations under this Guaranty,
including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or
indemnification and any right to participate in any
claim or remedy of the Trustee against the Borrower or
any Collateral, whether or not such claim, remedy or
right arises in equity or under contract, statute or
common law, including, without limitation, the right to
take or receive from the Borrower directly or indirectly,
in cash or other property or by set-off or in any other
manner, payment or security on account of such claim,
remedy or right, unless and until all of the Guaranteed
Obligations and all other amounts payable under this
Guaranty shall have been paid in full in accordance
with the terms of the Indenture. If any amount shall
be paid to the Guarantor in violation of the preceding
sentence at any time prior to the payment in full of the
Guaranteed Obligations and all other amounts payable
under this Guaranty, such amount shall be held in trust
for the benefit of the Trustee and shall forthwith be
paid to the Trustee to be credited and applied to the
Guaranteed Obligations and all other amounts payable
under this Guaranty, whether matured or unmatured, in
accordance with the terms of the Indenture, or to be
held as Collateral for any Guaranteed Obligations or
other amounts payable under this Guaranty thereafter
arising. If (i) the Guarantor shall make payment to the
Trustee of all or any part of the Guaranteed
Obligations, (ii) all of the Guaranteed Obligations and
all other amounts payable under this Guaranty shall be
paid in full and (iii) the Maturity date shall have
occurred, the Trustee will, at the Guarantor's request
and expense, execute and deliver to the Guarantor
appropriate documents, without recourse and without
representation or warranty, necessary to evidence the
transfer by subrogation to the Guarantor of an interest
in the Guaranteed Obligations resulting from such
payment by the Guarantor.
Section 5. Representations and
Warranties. The Guarantor hereby represents and
warrants as follows:
(a) The Guarantor (i) is a
corporation duly organized, validly
existing and in good standing under the
laws of the jurisdiction of its
incorporation, (ii) is duly qualified and
in good standing as a foreign
corporation in each other jurisdiction in
which it owns or leases property or in
which the conduct of its business
requires it to so qualify or be licensed
except where the failure to so qualify
or be licensed would not have a
material adverse effect on the business
or properties, taken as a whole, or the
condition, financial or otherwise, of the
Guarantor (a "Material Adverse
Effect"), and (iii) has all requisite
corporate power and authority to own
or lease and operate its properties and
to carry on its business as now
conducted and as proposed to be
conducted.
(b) The execution, delivery
and performance by the Guarantor of
this Guaranty are within the Guarantor's
corporate powers, have been duly
authorized by all necessary corporate
action, and do not (i) contravene the
Guarantor's charter or bylaws,
(ii) violate any law (including, without
limitation, the Securities Exchange Act
of 1934 and the Racketeer Influenced
and Corrupt Organizations Chapter of
the Organized Crime Control Act of
1970), rule, regulation (including,
without limitation, Regulations G, T, U
and X of the Board of Governors of
the Federal Reserve System), order,
writ, judgment, injunction, decree,
determination or award, (iii) conflict
with or result in the breach of, or
constitute a default under, any loan
agreement, contract, indenture,
mortgage, deed of trust, lease or other
instrument binding on or affecting the
Guarantor, any of its Subsidiaries or
any of its or their properties, the effect
of which conflict, breach or default is
reasonably likely to have a Material
Adverse Effect, or (iv) except for the
Liens created under the Indenture, result
in or require the creation or imposition
of any Lien upon or with respect to
any of the properties of the Guarantor
or any of its Subsidiaries. The
Guarantor is not in violation of any
such law, rule, regulation, order, writ,
judgment, injunction, decree,
determination or award, or in breach of
any such contract, loan agreement,
indenture, mortgage, deed of trust, lease
or other instrument, the violation or
breach of which would be reasonably
likely to have a Material Adverse
Effect.
(c) No authorization or
approval or other action by, and no
notice to or filing with, any
governmental authority or regulatory
body or any other third party is
required for (i) the due execution,
delivery, recordation, filing or
performance by the Guarantor of this
Guaranty, and (ii) the exercise by the
Trustee of its rights under this
Guaranty.
(d) This Guaranty has been
duly executed and delivered by the
Guarantor. This Guaranty is the legal,
valid and binding obligation of the
Guarantor, enforceable against the
Guarantor in accordance with its terms
except as enforceability may be limited
by bankruptcy, insolvency,
reorganization, moratorium or other
laws relating to or limiting creditors'
rights or by equitable principles
generally.
(e) There are no conditions
precedent to the effectiveness of this
Guaranty that have not been satisfied or
waived.
(f) The Guarantor has,
independently and without reliance upon
the Trustee, and based on such
documents and information as it has
deemed appropriate, made its own
credit analysis and decision to enter
into this Guaranty.
Section 6. Amendments, Etc. No
amendment or waiver of any provision of this Guaranty
and no consent to any departure by the Guarantor
therefrom shall in any event be effective unless the
same shall be in writing and signed by the Trustee, and
then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for
which given.
Section 7. Notices, Etc. All notices
and other communications provided for hereunder shall
be in writing (including telegraphic, telecopy or telex
communication) and mailed, telegraphed, telecopied,
telexed or delivered by overnight courier of nationally
recognized standing to it, if to the Guarantor, addressed
to 525 Washington Blvd., 29th Floor, Jersey City, New
Jersey 07310 Attn: Gary D. Peiffer, General Counsel,
if to the Trustee, at its address specified in the
Indenture, or as to any party, at such other address as
shall be designated by such party in a written notice to
each other party complying as to delivery with the
terms of this Section 7. All such notices and other
communications shall, when mailed, telecopied,
telegraphed, telexed or sent by courier, be effective
when deposited in the mails, delivered to the telegraph
company, transmitted by telecopier, confirmed by telex
answerback or delivered to the overnight courier,
respectively, addressed as aforesaid.
Section 8. No Waiver; Remedies. No
failure on the part of the Trustee to exercise, and no
delay in exercising, any right hereunder shall operate as
a waiver thereof; nor shall any single or partial exercise
of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
Section 9. Right of Set-off. Upon
(a) the occurrence and during the continuance of any
Event of Default and (b) the making of the request or
the granting of the consent specified by Section 5.02 of
the Indenture to authorize the Trustee to declare the
Securities due and payable pursuant to the provisions of
said Section 5.02, the Trustee is hereby authorized at
any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all
deposits (general or special, time or demand,
provisional or final) at any time held and other
indebtedness at any time owing by the Trustee to or for
the credit or the account of the Guarantor against any
and all of the Guaranteed Obligations of the Guarantor
now or hereafter existing under this Guaranty, whether
or not such Trustee shall have made any demand under
this Guaranty and although such Guaranteed Obligations
may be unmatured. The Trustee agrees promptly to
notify the Guarantor after any such set-off and
application; provided, however, that the failure to give
such notice shall not affect the validity of such set-off
and application. The rights of the Trustee under this
Section are in addition to other rights and remedies
(including, without limitation, other rights of set-off)
that the Trustee may have.
Section 10. Indemnification. Without
limitation on any other Guaranteed Obligations of the
Guarantor or remedies of the Trustee under this
Guaranty, the Guarantor shall, to the fullest extent
permitted by law, indemnify, defend and save and hold
harmless the Trustee from and against, and shall pay on
demand, any and all losses, liabilities, damages, costs,
expenses and charges (including the fees and
disbursements of the Trustee's legal counsel) suffered
or incurred by the Trustee as a result of any failure of
any Guaranteed Obligations to be the legal, valid and
binding obligations of the Borrower enforceable against
the Borrower in accordance with their terms.
Section 11. Continuing Guaranty;
Assignments under the Indenture. This Guaranty is a
continuing guaranty and shall (a) remain in full force
and effect until the later of the payment in full of the
Guaranteed Obligations and all other amounts payable
under this Guaranty and the Maturity date, (b) be
binding upon the Guarantor, its successors and assigns,
and (c) inure to the benefit of and be enforceable by
the Trustee and its successors, transferees and assigns.
Section 12. Governing Law;
Jurisdiction. This Guaranty shall be governed by, and
construed in accordance with, the laws of the State of
New York.
Section 13. Subordination. The
Guarantor expressly covenants and agrees, and the
Trustee acknowledges, that the indebtedness guaranteed
hereby and the liabilities of the Guarantor hereunder are
expressly made subordinate and subject in prior right of
payment to the prior right of payment of Senior
Indebtedness to the extent and manner set forth in
Article Twelve of the Indenture.
<PAGE>
IN WITNESS WHEREOF, the
Guarantor has caused this Guaranty to be duly executed
and delivered by its officer thereunto duly authorized as
of the date first above written.
THE AEGIS CONSUMER FUNDING GROUP, INC.
By:
Name:
Title:
PLEDGE AGREEMENT
between
The Aegis Consumer Funding Group, Inc.,
as Pledgor
AND
Norwest Bank Minnesota, National Association,
as Trustee
Dated as of April 30, 1997
<PAGE>
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (the "Pledge
Agreement"), dated as of April 30, 1997, is executed by and
among THE AEGIS CONSUMER FUNDING GROUP, INC., a
Delaware corporation (the "Pledgor") and NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION, a national banking
association (the "Indenture Trustee") as Trustee under that certain
Indenture dated April 30, 1997 (the "Indenture") between Aegis
Auto Finance, Inc. a wholly owned subsidiary of the Pledgor
("AAF" or the "Borrower") and the Indenture Trustee with respect
to $21,333,333 aggregate principal amount at maturity 12%
Exchangeable Subordinated Notes due 2004 (the "Notes").
Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings ascribed to such terms in the
Indenture.
WITNESSETH:
WHEREAS, the Indenture Trustee has agreed to
purchase the Notes from the Pledgor on the terms and conditions
set forth in the Indenture;
WHEREAS, the Pledgor has entered into a
Guaranty of even date herewith (the "Guaranty"), pursuant to
which the Pledgor guaranties all of the Obligations of AAF to the
Indenture Trustee;
WHEREAS, the Pledgor directly owns 100% of the
issued and outstanding capital stock of (a) Aegis Capital Markets,
Inc. (d/b/a Markets), (b) Aegis Securitized Assets, Inc., (c) Aegis
Automobile Assets, Inc., (d) Aegis Consumer Finance, Inc., (e)
Remodelers of America, Inc., (f) Aegis Financial Advisors, Inc.,
(g) Aegis Securities Corporation and (h) Systems & Services
Technologies, Inc. (such direct subsidiaries and any other
subsidiary hereafter acquired or formed by the Pledgor, the "Direct
Subsidiaries") and will derive direct and indirect economic benefit
from the sale of Notes to the Pledgor under the Indenture; and
WHEREAS, the Indenture Trustee has required, as
a condition to its entering into the Indenture, that the Pledgor
execute and deliver this Pledge Agreement;
NOW, THEREFORE, for and in consideration of
the foregoing and of any financial accommodations or extensions
of credit (including, without limitation, any loan or advance by
renewal, refinancing or extension of the agreements described
hereinabove or otherwise) heretofore, now or hereafter made to or
for the benefit of the Pledgor pursuant to the Indenture or any
other agreement, instrument or document executed pursuant to or
in connection therewith, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Pledgor and the Indenture Trustee hereby agree
as follows:
1. Pledge. The Pledgor hereby pledges to the
Indenture Trustee, and grants to the Indenture Trustee a security
interest in, the following (collectively, the "Pledged Collateral"):
(a) The shares of the capital stock of each Direct
Subsidiary, now or at any time or times hereafter owned
by the Pledgor, and the certificates representing the shares
of such capital stock (such now-owned shares being
identified on Exhibit A next to each Direct Subsidiary), all
options and warrants for the purchase of shares of the stock
of any Direct Subsidiary now or hereafter held in the name
of the Pledgor (all of said capital stock, options and
warrants and all capital stock held in the name of the
Pledgor as a result of the exercise of such options or
warrants being hereinafter collectively referred to as the
"Pledged Stock"), and all dividends, cash, instruments and
other property from time to time received, receivable or
otherwise distributed in respect of, or in exchange for, any
or all of the Pledged Stock it being understood that the
Pledged Stock and stock powers for each Direct Subsidiary
have been delivered to III Finance, Ltd. (the "Lender") to
secure Senior Indebtedness of the Pledgor to the Lender;
(b) All additional shares of stock of any Direct
Subsidiary from time to time acquired by the Pledgor in
any manner, and the certificates representing such
additional shares (any such additional shares shall
constitute part of the Pledged Stock and the Indenture
Trustee are irrevocably authorized to amend Exhibit A
from time to time to reflect such additional shares), and all
options, warrants, dividends, cash, instruments and other
rights and options from time to time received, receivable or
otherwise distributed in respect of or in exchange for any
or all of such shares;
(c) The property and interests in property described
in Section 3 below; and
(d) All proceeds of the foregoing.
2. Security for Liabilities. The Pledged Collateral
secures the prompt payment, performance and observance of (i)
the Borrower's obligations and liabilities under the Indenture and
each agreement, document or instrument executed pursuant to or
in connection with the Indenture, (ii) the Pledgor's obligations and
liabilities under the Guaranty and (iii) the Pledgor's obligations
and liabilities under this Pledge Agreement and each agreement,
document or instrument executed pursuant to or in connection
with this Pledge Agreement (all such obligations and liabilities of
the Pledgor and the Borrower now or hereafter existing being
hereinafter referred to as the "Liabilities").
3. Pledged Collateral Adjustments. If, during the
term of this Pledge Agreement:
(a) Any stock dividend, reclassification,
readjustment or other change is declared or made in the
capital structure of any Direct Subsidiary, or any option
included within the Pledged Collateral is exercised, or
both, or
(b) Any subscription warrants or any other rights
or options shall be issued in connection with the Pledged
Collateral,
then all new, substituted and additional shares, warrants, rights,
options or other securities, issued by reason of any of the
foregoing, shall be immediately delivered to and held by the
Indenture Trustee under the terms of this Pledge Agreement and
shall constitute Pledged Collateral hereunder; provided, however,
that nothing contained in this Section 3 shall be deemed to permit
any stock dividend, issuance of additional stock, warrants, rights
or options, reclassification, readjustment or other change in the
capital structure of a Direct Subsidiary which is not permitted in
the Indenture.
4. Subsequent Changes Affecting Pledged
Collateral. The Pledgor represents and warrants that it has made
its own arrangements for keeping itself informed of changes or
potential changes affecting the Pledged Collateral (including, but
not limited to, rights to convert, rights to subscribe, payment of
dividends, reorganization or other exchanges, tender offers and
voting rights), and the Pledgor agrees that the Indenture Trustee
shall have no obligation to inform the Pledgor of any such
changes or potential changes or to take any action or omit to take
any action with respect thereto. The Indenture Trustee may, after
the occurrence of an Event of Default, without notice and at its
option, transfer or register the Pledged Collateral or any part
thereof into its or its nominee's name with or without any
indication that such Pledged Collateral is subject to the security
interest hereunder. In addition, the Indenture Trustee may at any
time exchange certificates or instruments representing or
evidencing Pledged Shares for certificates or instruments of
smaller or larger denominations.
5. Representations and Warranties. The Pledgor
represents and warrants as follows:
(a) The Pledgor is the legal and beneficial owner
of the Pledged Stock, which represents 100% of the issued and
outstanding common stock of each Direct Subsidiary identified on
Exhibit A, free and clear of any Lien except for the security
interest created by this Pledge Agreement or in connection with
any Senior Indebtedness and the Pledgor owns no other stock
other than that identified on Exhibit A;
(b) The Pledgor has full corporate power and
authority to enter into this Pledge Agreement;
(c) There are no restrictions upon the voting rights
associated with, or upon the transfer of, any of the Pledged
Collateral;
(d) The Pledgor has the right to vote, pledge and
grant a security interest in or otherwise transfer such Pledged
Collateral free of any Liens other than the Lien created pursuant
to this Pledge Agreement or in connection with any Senior
Indebtedness;
(e) No authorization, approval, or other action by,
and no notice to or filing with, any Governmental Authority or
regulatory body is required either (i) for the pledge of the Pledged
Collateral pursuant to this Pledge Agreement or for the execution,
delivery or performance of this Pledge Agreement by the Pledgor
or (ii) for the exercise by the Indenture Trustee of the voting or
other rights provided for in this Pledge Agreement or the remedies
in respect of the Pledged Collateral pursuant to this Pledge
Agreement (except as may be required in connection with such
disposition by laws affecting the offering and sale of securities
generally); and
(f) The pledge of the Pledged Collateral pursuant
to this Pledge Agreement creates a valid and perfected first
priority security interest in the Pledged Collateral, in favor of the
Indenture Trustee, securing the payment and performance of the
Liabilities.
6. Voting Rights. During the term of this Pledge
Agreement, and except as provided in this Section 7(b) below, the
Pledgor shall have the right to vote the Pledged Stock on all
corporate questions in a manner not inconsistent with the terms of
this Pledge Agreement, the Guaranty, the Indenture and any other
agreement, instrument or document executed pursuant thereto or in
connection therewith. After the occurrence of an Event of
Default, the Indenture Trustee or either of the Indenture Trustee'
nominees may, at the Indenture Trustee' or such nominee's option
and following written notice from the Indenture Trustee to the
Pledgor, exercise all voting powers pertaining to the Pledged
Collateral, including the right to take action by shareholder
consent. Such authorization shall constitute an irrevocable voting
proxy from the Pledgor to the Indenture Trustee or, at the
Indenture Trustee's option, to the Indenture Trustee's nominees.
7. Dividends and Other Distributions. (a) So long
as no Event of Default or Default shall have occurred:
(i) The Pledgor shall be entitled to receive and
retain any and all dividends and interest paid in respect of the
Pledged Collateral, provided, however, that any and all
(A) dividends and interest paid or payable other
than in cash with respect to, and instruments and other
property received, receivable or otherwise distributed with
respect to, or in exchange for, any of the Pledged
Collateral;
(B) dividends and other distributions paid or
payable in cash with respect to any of the Pledged
Collateral on account of a partial or total liquidation or
dissolution or in connection with a reduction of capital,
capital surplus or paid-in surplus; and
(C) cash paid, payable or otherwise distributed
with respect to principal of, or in redemption of, or in
exchange for, any of the Pledged Collateral;
shall be Pledged Collateral, and shall be forthwith delivered to the
Indenture Trustee to hold as Pledged Collateral and shall, if
received by the Pledgor, be received in trust for the Indenture
Trustee, be segregated from the other property or funds of the
Pledgor, and be delivered immediately to the Indenture Trustee as
Pledged Collateral in the same form as so received (with any
necessary endorsement); and
(ii) The Indenture Trustee shall execute and deliver
(or cause to be executed and delivered) to the Pledgor all such
proxies and other instruments as the Pledgor may reasonably
request for the purpose of enabling the Pledgor to receive the
dividends or interest payments which it is authorized to receive
and retain pursuant to clause (i) above.
(b) After the occurrence of an Event of Default:
(i) All rights of the Pledgor to receive the
dividends and interest payments which it would otherwise be
authorized to receive and retain pursuant to Section 7(a)(i) hereof
shall cease, and all such rights shall thereupon become vested in
the Indenture Trustee, which shall thereupon have the sole right to
receive and hold as Pledged Collateral such dividends and interest
payments;
(ii) All dividends and interest payments which are
received by the Pledgor contrary to the provisions of clause (i) of
this Section 7(b) shall be received in trust for the Indenture
Trustee, shall be segregated from other funds of the Pledgor and
shall be paid over immediately to the Indenture Trustee as Pledged
Collateral in the same form as so received (with any necessary
endorsements);
(iii) The Pledgor shall, upon the request of the
Indenture Trustee, at Pledgor's expense, use its best efforts to
obtain all necessary governmental approvals for the sale of the
Pledged Collateral, as requested by the Indenture Trustee;
(iv) The Pledgor shall, upon the request of the
Indenture Trustee, at the Pledgor's expense, do or cause to be
done all such other acts and things as may be necessary to make
such sale of the Pledged Collateral or any part thereof valid and
binding and in compliance with applicable law.
The Pledgor will reimburse the Indenture Trustee for all expenses
incurred by the Indenture Trustee, including, without limitation,
reasonable attorneys' and accountants' fees and expenses in
connection with the foregoing. The Pledgor agrees that, in light
of the fact that federal and state securities laws impose certain
restrictions on the method by which the Pledged Collateral may be
sold, it will be commercially reasonable if a private sale, upon at
least ten (10) days' notice to the Pledgor, is arranged so as to
avoid a public offering, even though the sales price established
and/or obtained at such private sale may be substantially less than
prices which could have been obtained for such security on any
market or exchange or in any other public sale.
8. Transfers and Other Liens. The Pledgor agrees
that it will not (i) sell or otherwise dispose of, or grant any option
with respect to, any of the Pledged Collateral without the prior
written consent of the Indenture Trustee or (ii) create or permit to
exist any Lien upon or with respect to any of the Pledged
Collateral, except for the security interest under this Pledge
Agreement.
9. Remedies. (a) The Indenture Trustee shall
have, in addition to any other rights given under this Pledge
Agreement or by law, all of the rights and remedies with respect
to the Pledged Collateral of a secured party under the Uniform
Commercial Code as in effect in the State of New York. After
the occurrence of an Event of Default and following written notice
to the Pledgor, the Indenture Trustee (personally or through an
agent) is hereby authorized and empowered to transfer and register
in its name or in the name of its nominee the whole or any part of
the Pledged Collateral, to exercise all voting rights with respect
thereto, to collect and receive all cash dividends and other
distributions made thereon, and to otherwise act with respect to
the Pledged Collateral as though the Indenture Trustee were the
outright owner thereof. The Pledgor hereby irrevocably
constitutes and appoints the Indenture Trustee as the proxy and
attorney-in-fact of the Pledgor, with full power of substitution to
do so, such proxy becoming effective upon the occurrence of an
Event of Default and following written notice thereof; provided,
however, that the Indenture Trustee shall have no duty to exercise
any such right or to preserve the same and shall not be liable for
any failure to do so or for any delay in doing so. In addition,
after the occurrence of an Event of Default, the Indenture Trustee
shall have such powers of sale and other powers as may be
conferred by applicable law. With respect to the Pledged
Collateral or any part thereof which shall then be in or shall
thereafter come into the possession or custody of the Indenture
Trustee or which the Indenture Trustee shall otherwise have the
ability to transfer under applicable law, the Indenture Trustee may,
in its sole discretion, without notice except as specified below,
after the occurrence of an Event of Default, sell or cause the same
to be sold at any exchange, broker's board or at public or private
sale, in one or more sales or lots, at such price as the Indenture
Trustee may deem best, for cash or on credit or for future
delivery, without assumption of any credit risk, and the purchaser
of any or all of the Pledged Collateral so sold shall thereafter own
the same, absolutely free from any claim, encumbrance or right of
any kind whatsoever. The Indenture Trustee may, in its own
name, or in the name of a designee or nominee, buy the Pledged
Collateral at any public sale and, if permitted by applicable law,
buy the Pledged Collateral at any private sale. The Pledgor will
pay to the Indenture Trustee all reasonable expenses (including,
without limitation, court costs and reasonable attorneys' and
paralegals' fees and expenses) of, or incidental to, the enforcement
of any of the provisions hereof. The Indenture Trustee agrees to
distribute any proceeds of the sale of the Pledged Collateral in
accordance with the Indenture and the Pledgor shall remain liable
for any deficiency following the sale of the Pledged Collateral.
(b) Unless any of the Pledged Collateral threatens
to decline speedily in value or is or becomes of a type sold on a
recognized market, the Indenture Trustee will give the Pledgor
reasonable notice of the time and place of any public sale thereof,
or of the time after which any private sale or other intended
disposition is to be made. Any sale of the Pledged Collateral
conducted in conformity with reasonable commercial practices of
banks, commercial finance companies, insurance companies or
other financial institutions disposing of property similar to the
Pledged Collateral shall be deemed to be commercially reasonable.
Notwithstanding any provision to the contrary contained herein,
the Pledgor agrees that any requirements of reasonable notice shall
be met if such notice is received by the Pledgor as provided in
Section 25 below at least ten (10) days before the time of the sale
or disposition; provided, however, that the Indenture Trustee may
give any shorter notice that is commercially reasonable under the
circumstances. Any other requirement of notice, demand or
advertisement for sale is waived, to the extent permitted by law.
(c) In view of the fact that federal and state
securities laws may impose certain restrictions on the method by
which a sale of the Pledged Collateral may be effected after an
Event of Default, the Pledgor agrees that after the occurrence of
an Event of Default, the Indenture Trustee may, from time to
time, attempt to sell all or any part of the Pledged Collateral by
means of a private placement restricting the bidders and
prospective purchasers to those who are qualified and will
represent and agree that they are purchasing for investment only
and not for distribution. In so doing, the Indenture Trustee may
solicit offers to buy the Pledged Collateral, or any part of it, from
a limited number of investors deemed by the Indenture Trustee, in
its reasonable judgment, to be financially responsible parties who
might be interested in purchasing the Pledged Collateral. If the
Indenture Trustee solicits such offers from not less than three (3)
such investors, then the acceptance by the Indenture Trustee of the
highest offer obtained therefrom shall be deemed to be a
commercially reasonable method of disposing of such Pledged
Collateral; provided, however, that this Section does not impose a
requirement that the Indenture Trustee solicit offers from three or
more investors in order for the sale to be commercially reasonable.
10. Security Interest Absolute. All rights of the
Indenture Trustee and security interests hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and
unconditional irrespective of:
(a) Any lack of validity or enforceability of the
Indenture, the Guaranty or any other agreement or
instrument relating thereto;
(b) Any change in the time, manner or place of
payment of, or in any other term of, all or any part of the
Liabilities, or any other amendment or waiver of or any
consent to any departure from the Guaranty or the
Indenture;
(c) Any exchange, release or non-perfection of any
other collateral, or any release or amendment or waiver of
or consent to departure from any guaranty, for all or any
part of the Liabilities; or
(d) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, the
Pledgor in respect of the Liabilities or of this Pledge
Agreement.
11. Indenture Trustee Appointed Attorney-in-Fact.
The Pledgor hereby appoints the Indenture Trustee its
attorney-in-fact, with full authority, in the name of the Pledgor or
otherwise, after the occurrence of an Event of Default, from time
to time in the Indenture Trustee's sole discretion, to take any
action and to execute any instrument which the Indenture Trustee
may deem necessary or advisable to accomplish the purposes of
this Pledge Agreement, including, without limitation, to receive,
endorse and collect all instruments made payable to the Pledgor
representing any dividend, interest payment or other distribution in
respect of the Pledged Collateral or any part thereof and to give
full discharge for the same and to arrange for the transfer of all or
any part of the Pledged Collateral on the books of a Direct
Subsidiary to the name of the Indenture Trustee or its nominees.
12. Waivers. (a) The Pledgor waives presentment
and demand for payment of any of the Liabilities, protest and
notice of dishonor or Event of Default with respect to any of the
Liabilities and all other notices to which the Pledgor might
otherwise be entitled except as otherwise expressly provided
herein, in the Guaranty or in the Indenture.
(b) The Pledgor agrees that all of its obligations
under this Pledge Agreement shall remain in full force and effect
without defense, offset or counterclaim of any kind,
notwithstanding that the Pledgor's rights against the Borrower may
be impaired, destroyed or otherwise affected by reason of any
action or inaction on the part of the Indenture Trustee.
(c) The Pledgor hereby expressly waives the
benefits of any laws purporting to allow a guarantor or pledgor to
revoke a continuing guaranty or pledge with respect to any
transactions occurring after the date of the guaranty or pledge.
13. Term. This Pledge Agreement shall remain in
full force and effect until the Liabilities have been fully and
indefeasibly paid in cash, all commitments to lend under the
Indenture have expired and the Indenture has been terminated
pursuant to its terms. Upon the termination of this Pledge
Agreement as provided above (other than as a result of the sale of
the Pledged Collateral), the Indenture Trustee will release the
security interest created hereunder and, if they then have
possession of the Pledged Stock, will deliver the Pledged Stock
and the Powers to the Pledgor.
14. Definitions. The singular shall include the
plural and vice versa and any gender shall include any other
gender as the context may require.
15. Successors and Assigns. This Pledge
Agreement shall be binding upon and inure to the benefit of the
Pledgor, the Indenture Trustee and its respective successors and
assigns. The Pledgor's successors and assigns shall include,
without limitation, a receiver, trustee or debtor-in-possession of or
for the Pledgor.
16. GOVERNING LAW. THIS PLEDGE
AGREEMENT HAS BEEN EXECUTED AND DELIVERED BY
THE PARTIES HERETO IN NEW YORK, NEW YORK. ANY
DISPUTE BETWEEN THE INDENTURE TRUSTEE AND THE
PLEDGOR ARISING OUT OF OR RELATED TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH THIS PLEDGE AGREEMENT, AND
WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR
OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK,
INCLUDING SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAWS BUT OTHERWISE WITHOUT
REGARD TO CONFLICTS OF LAWS PROVISIONS.
17. Consent to Jurisdiction; Counterclaims; Forum
Non Conveniens. (a) Exclusive Jurisdiction. Except as provided
in subsection (b) of this Section 17, the Indenture Trustee and the
Pledgor agree that all disputes between them arising out of or
related to the relationship established between them in connection
with this Pledge Agreement, whether arising in contract, tort,
equity, or otherwise, shall be resolved only by state or federal
courts located in New York, New York, but the parties
acknowledge that any appeals from those courts may have to be
heard by a court located outside of New York, New York.
(b) Other Jurisdictions. The Indenture Trustee
shall have the right to proceed against the Pledgor or its property
in a court in any location to enable the Indenture Trustee to obtain
personal jurisdiction over the Pledgor, to realize on the Pledged
Collateral or any other security for the Liabilities or to enforce a
judgment or other court order entered in favor of the Indenture
Trustee. The Pledgor shall not assert any permissive
counterclaims in any proceeding brought by the Indenture Trustee
arising out of or relating to this Pledge Agreement.
(c) Venue; Forum Non Conveniens. Each of the
Pledgor and the Indenture Trustee waives any objection that it
may have (including, without limitation, any objection to the
laying of venue or based on forum non conveniens) to the location
of the court in which any proceeding is commenced in accordance
with this Section 17.
18. WAIVER OF JURY TRIAL. EACH OF THE
PLEDGOR AND THE INDENTURE TRUSTEE WAIVES ANY
RIGHT TO TRIAL BY JURY IN ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE,
BETWEEN THE INDENTURE TRUSTEE AND THE
PLEDGOR ARISING OUT OF OR RELATED TO THE
TRANSACTIONS CONTEMPLATED BY THIS PLEDGE
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT
OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH. EITHER THE PLEDGOR OR
THE INDENTURE TRUSTEE MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS PLEDGE
AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE
OF THE CONSENT OF THE PARTIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
19. Waiver of Bond. The Pledgor waives the
posting of any bond otherwise required of the Indenture Trustee in
connection with any judicial process or proceeding to realize on
the Pledged Collateral or any other security for the Liabilities, to
enforce any judgment or other court order entered in favor of the
Indenture Trustee, or to enforce by specific performance,
temporary restraining order, or preliminary or permanent
injunction, this Pledge Agreement or any other agreement or
document between the Indenture Trustee and the Pledgor.
20. Advice of Counsel. The Pledgor represents
and warrants to the Indenture Trustee that it has consulted with its
legal counsel regarding all waivers under this Pledge Agreement,
including without limitation those under Section 12 and Sections
16 through 19 hereof, that it believes that it fully understands all
rights that it is waiving and the effect of such waivers, that it
assumes the risk of any misunderstanding that it may have
regarding any of the foregoing, and that it intends that such
waivers shall be a material inducement to the Indenture Trustee to
extend the indebtedness secured hereby.
21. Severability. Whenever possible, each
provision of this Pledge Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but, if
any provision of this Pledge Agreement shall be held to be
prohibited or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the
remaining provisions of this Pledge Agreement.
22. Further Assurances. The Pledgor agrees that it
will cooperate with the Indenture Trustee and will execute and
deliver, or cause to be executed and delivered, all such other stock
powers, proxies, instruments and documents, and will take all such
other actions, including, without limitation, the execution and
filing of financing statements, as the Indenture Trustee may
reasonably request from time to time in order to carry out the
provisions and purposes of this Pledge Agreement.
23. The Indenture Trustee' Duty of Care. The
Indenture Trustee shall not be liable for any acts, omissions, errors
of judgment or mistakes of fact or law including, without
limitation, acts, omissions, errors or mistakes with respect to the
Pledged Collateral, except for those arising out of or in connection
with the Indenture Trustee's (i) gross negligence or willful
misconduct, or (ii) failure to use reasonable care with respect to
the safe custody of the Pledged Collateral in the Indenture
Trustee's possession. Without limiting the generality of the
foregoing, the Indenture Trustee shall be under no obligation to
take any steps necessary to preserve rights in the Pledged
Collateral against any other parties but may do so at its option.
All expenses incurred in connection therewith shall be for the sole
account of the Pledgor, and shall constitute part of the Liabilities
secured hereby.
24. Notices. All notices and other communications
required or desired to be served, given or delivered hereunder
shall be made in writing or by a telecommunications device
capable of creating a written record and shall be addressed to the
party to be notified as follows:
if to the Pledgor, at
The Aegis Consumer Funding Group, Inc.
525 Washington Boulevard
Jersey City, New Jersey 07310
Attention: President
Telecopy: (201) 418-7379
if to the Indenture Trustee, at
Norwest Bank Minnesota, National Association,
as Indenture Trustee
Corporate Trust Department
6th & Marquette Avenue
Minneapolis, Minnesota 55479-0069
Telecopy: (612) 667-9825
with copies to
III Offshore Advisors
250 South Australian Avenue, Suite 600
West Palm Beach, Florida 33401
Attention: Robert Fasulo
Telecopy: (407) 655-5496
and
III Finance, Ltd.
c/o Admiral Administration Ltd.
Anchorage Center, 2nd Floor
Grand Cayman, Cayman Islands
British West Indies
Attention: David Bree
Telecopy: (345) 949-0705
or, as to each party, at such other address as designated by such
party in a written notice to the other party. All such notices and
communications shall be deemed to be validly served, given or
delivered (i) three (3) days following deposit in the United States
mails, with proper postage prepaid; (ii) upon delivery thereof if
delivered by hand to the party to be notified; (iii) one Business
Day after delivery thereof to a reputable overnight courier service,
with delivery charges prepaid; or (iv) upon transmission thereof
with confirmation of successful transmission from the sending
telecommunications device, if sent by telecommunications device.
25. Amendments, Waivers and Consents. No
amendment or waiver of any provision of this Pledge Agreement
nor consent to any departure by the Pledgor herefrom, shall in any
event be effective unless the same shall be in writing and signed
by each of the Indenture Trustee pursuant to the terms of the
Indenture, and then such amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose
for which given.
26. Section Headings. The section headings herein
are for convenience of reference only, and shall not affect in any
way the interpretation of any of the provisions hereof.
27. Execution in Counterparts. This Pledge
Agreement may be executed in any number of counterparts, each
of which shall be an original, but all of which shall together
constitute one and the same agreement.
28. Merger. This Pledge Agreement represents the
final agreement of the Pledgor with respect to the matters
contained herein and may not be contradicted by evidence of prior
or contemporaneous agreements, or subsequent oral agreements,
between the Pledgor and the Indenture Trustee.
29. Bailment, Agency for Possession; Stock
Powers. The Indenture Trustee hereby appoints III Finance as its
agent for purposes of perfecting its security interests and liens on
the Pledged Collateral. The Indenture Trustee hereby agrees that
upon the payment in full of all Senior Indebtedness by AAF, and
provided that there shall be indebtedness owing by the Pledgor
under the Indenture after payment of all Senior Indebtedness, III
Finance shall deliver to the Indenture Trustee the Pledged Stock
then in its possession, together with all stock powers related
thereto and until such time, the Indenture Trustee shall not possess
any Pledged Stock nor any stock powers related thereto.
30. Subordination. The Pledgor expressly
covenants and agrees, and the Indenture Trustee acknowledges,
that the indebtedness secured hereby and the liabilities of the
Pledgor hereunder are expressly made subordinate and subject in
prior right of payment to the prior payment of Senior Indebtedness
to the extent and in the manner set forth in Article XII of the
Indenture.
<PAGE>
IN WITNESS WHEREOF, the Pledgor and the
Indenture Trustee have executed this Pledge Agreement as of the
date set forth above.
THE AEGIS CONSUMER FUNDING GROUP, INC.
By:________________________
Name: ___________________
Title: __________________
NORWEST
BANK
MINNESOTA,
NATIONAL
ASSOCIATIO
N,
as Trustee
By:
_________________________
Name:
___________________
Title:
____________________
<PAGE>
ACKNOWLEDGMENT
The undersigned hereby acknowledges receipt of a
copy of the foregoing Pledge Agreement, agrees promptly to note
on its books the security interests granted under such Pledge
Agreement, and waives any rights or requirement at any time
hereafter to receive a copy of such Pledge Agreement in
connection with the registration of any Pledged Collateral in the
name of the Indenture Trustee or its nominee or the exercise of
voting rights by the Indenture Trustee or its nominees.
AEGIS CAPITAL MARKETS, INC.
(D/B/A MARKETS)
By:___________________________
Name: _____________________
Title: ______________________
AEGIS SECURITIZED ASSETS, INC.
By:___________________________
Name: _____________________
Title: ______________________
AEGIS AUTOMOBILE ASSETS, INC.
By:__________________________
Name: _____________________
Title: ______________________
AEGIS CONSUMER FINANCE, INC.
By:___________________________
Name: ____________________
Title: ______________________
<PAGE>
REMODELERS OF AMERICA, INC.
By:___________________________
Name: _____________________
Title: ______________________
AEGIS FINANCIAL ADVISORS, INC.
By:__________________________
Name: _____________________
Title: ______________________
AEGIS SECURITIES CORPORATION
By:___________________________
Name: _____________________
Title: ______________________
SYSTEM AND SERVICES TECHNOLOGY, INC.
By:___________________________
Name: _____________________
Title: ______________________
<PAGE>
EXHIBIT A
to
PLEDGE AGREEMENT
dated as of April 30, 1997
Pledged Stock Certificates
Number of
Name of Direct
Issued and
Subsidiary
Outstanding Shares
Aegis Capital Markets, Inc.
[__________]
(d/b/a Markets)
Aegis Securitized Assets, Inc.
[__________]
Aegis Automobile Assets, Inc.
[__________]
Aegis Consumer Finance, Inc.
[__________]
Remodelers of America, Inc.
[__________]
Aegis Financial Advisors, Inc.
[__________]
Aegis Securities Corporation
[__________]
System and Services Technology, Inc.
[__________]
<PAGE>
TABLE OF CONTENTS
1. Pledge.............................................2
2. Security for Liabilities...........................2
3. Pledged Collateral Adjustments.....................2
4. Subsequent Changes Affecting Pledged Collateral....3
5. Representations and Warranties.....................3
6. Voting Rights......................................4
7. Dividends and Other Distributions..................4
8. Transfers and Other Liens..........................5
9. Remedies...........................................6
10. Security Interest Absolute.........................7
11. Indenture Trustee Appointed Attorney-in-Fact.......7
12. Waivers............................................7
13. Term...............................................8
14. Definitions........................................8
15. Successors and Assigns.............................8
16. GOVERNING LAW......................................8
17. Consent to Jurisdiction; Counterclaims; Forum Non
Conveniens.........................................8
18. WAIVER OF JURY TRIAL...............................9
19. Waiver of Bond.....................................9
20. Advice of Counsel..................................9
21. Severability.......................................9
22. Further Assurances................................10
23. The Indenture Trustee' Duty of Care...............10
24. Notices...........................................10
25. Amendments, Waivers and Consents..................11
26. Section Heading...................................11
27. Execution in Counterparts.........................11
28. Merger............................................11
29. Bailment, Agency for Possession; Stock Powers.....11
EXHIBITS
EXHIBIT A Pledged Stock Certificates
A:\10_107_5.WPD September 3, 1997 (5:7p)
EXECUTION COPY
PLEDGE AGREEMENT
between
Aegis Consumer Finance, Inc.,
as Pledgor
AND
Norwest Bank Minnesota, National Association,
as Trustee
Dated as of April 30, 1997
<PAGE>
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (the
"Pledge Agreement"), dated as of April 30, 1997,
is executed by and between AEGIS CONSUMER
FINANCE, INC., a Delaware corporation (the
"Pledgor"), NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, a national banking
association (the "Indenture Trustee") as Trustee
under that certain Indenture dated April 30, 1997
(the "Indenture") between Aegis Auto Finance,
Inc. ("AAF" or the "Borrower"), an affiliate of the
Pledgor and the Indenture Trustee with respect to
$21,333,333 aggregate principal amount at
maturity 12% Exchangeable Subordinated Notes
due 2004 (the "Notes"). Capitalized terms used
herein and not otherwise defined herein shall have
the respective meanings ascribed to such terms in
the Indenture.
WITNESSETH:
WHEREAS, the Indenture Trustee
has agreed to purchase the Notes from AAF on
the terms and conditions set forth in the Indenture;
WHEREAS, the Pledgor owns
certain limited partnership interests ("LP Units") in
each of Aegis Auto Receivables 1994-A, L.P.,
Aegis Auto Receivables 1994-2, L.P., Aegis Auto
Receivables 1994-3, L.P. and Aegis Auto
Receivables 1995-1, L.P. (collectively the
"Subsidiary Partnerships" and each a "Subsidiary
Partnership") and will derive direct and indirect
economic benefit from the sale of Notes to AAF
under the Indenture; and
WHEREAS, the Indenture Trustee
has required, as a condition to its entering into the
Indenture, that the Pledgor execute and deliver this
Pledge Agreement;
NOW, THEREFORE, for and in
consideration of the foregoing and of any financial
accommodations or extensions of credit (including,
without limitation, any loan or advance by
renewal, refinancing or extension of the
agreements described hereinabove or otherwise)
heretofore, now or hereafter made to or for the
benefit of the Pledgor pursuant to the Indenture or
any other agreement, instrument or document
executed pursuant to or in connection therewith,
and for other good and valuable consideration, the
receipt and sufficiency of which are hereby
acknowledged, the Pledgor and the Indenture
Trustee hereby agree as follows:
1. Pledge. The Pledgor hereby
pledges to the Indenture Trustee, and grants to the
Indenture Trustee a security interest in, the
following (collectively, the "Pledged Collateral"):
(a) all of Pledgor's rights in the LP
Units (the "Pledged LP Units") and all of
Pledgor's rights as a partner in each
Subsidiary Partnership and to the property
(and interests in property) that is owned by
each Subsidiary Partnership;
(b) all of Pledgor's rights, if any,
to participate in the management of each
Subsidiary Partnership;
(c) all rights, privileges, authority
and powers of Pledgor as owner or holder
of the LP Units in each Subsidiary
Partnership, including, but not limited to,
all general intangibles and contract rights
related thereto;
(d) all documents and certificates
representing or evidencing Pledgor's
partnership interest in each Subsidiary
Partnership;
(e) all of Pledgor's interest in and
to the profits and losses of the Subsidiary
Partnerships and Pledgor's right as a
partner of the Subsidiary Partnerships to
receive distributions of the Subsidiary
Partnership's respective assets, upon
complete or partial liquidation or
otherwise;
(f) all of Pledgor's right, title and
interest to receive payments of principal
and interest on any loans and/or other
extensions of credit made by Pledgor or its
Affiliates to the Subsidiary Partnerships
and any all instruments creating or
evidencing such rights;
(g) all distributions, cash,
instruments and other property from time
to time received, receivable or otherwise
distributed in respect of, or in exchange
for, Pledgor's partnership interest in the
Subsidiary Partnerships; and
(h) any other right, title, interest,
privilege, authority and power of the
Pledgor in or relating to the Subsidiary
Partnerships, all whether now existing or
hereafter arising, and whether arising under
a partnership agreement (as the same may
be amended, modified or restated from
time to time) or otherwise, or at law or in
equity and any and all proceeds of any of
the foregoing and all books and records of
the Pledgor pertaining to any of the
foregoing.
Notwithstanding the foregoing, it is
expressly understood and agreed that the security
interest in the Pledged Collateral shall be
subordinate to the security interest of III Finance,
Ltd. (the "Lender") in connection with Senior
Indebtedness provided by the Lender to the
Pledgor.
2. Security for Liabilities. The
Pledged Collateral secures the prompt payment,
performance and observance of (i) AAF's
obligations and liabilities under the Indenture and
each agreement, document or instrument executed
pursuant to or in connection with the Indenture
and (ii) the Pledgor's obligations and liabilities
under this Pledge Agreement and each agreement,
document or instrument executed pursuant to or in
connection with this Pledge Agreement (all such
obligations and liabilities of the Pledgor or AAF
now or hereafter existing being hereinafter
referred to as the "Liabilities").
3. Pledged Collateral Adjustments.
If, during the term of this Pledge Agreement any
additional percentage interests, shares, units,
options or warrants of partnership interests in the
Subsidiary Partnerships (whether or not
certificated or otherwise evidenced in writing), any
subscriptions, warrants or any other rights or
options issued in connection with any of the
Pledged Collateral or any options, warrants or
convertible securities in connection with the
Pledged Collateral shall be acquired by the
Pledgor by purchase, additional contribution,
reclassification or otherwise (such acquired
collateral, the "Additional Collateral"), then all
such Additional Collateral shall be immediately
delivered to and held by the Indenture Trustee
under the terms of this Pledge Agreement and
shall constitute Pledged Collateral hereunder;
provided, however, that nothing contained in this
Section 3 shall be deemed to permit any issuance
of additional percentage interests, shares, units,
options or warrants of partnership interests which
is not permitted in the Indenture.
4. Subsequent Changes Affecting
Pledged Collateral. The Pledgor represents and
warrants that it has made its own arrangements for
keeping itself informed of changes or potential
changes affecting the Pledged Collateral, and the
Pledgor agrees that the Indenture Trustee shall
have no obligation to inform the Pledgor of any
such changes or potential changes or to take any
action or omit to take any action with respect
thereto. The Indenture Trustee may, after the
occurrence of an Event of Default, without notice
and at its option, transfer or register the Pledged
Collateral or any part thereof into its or its
nominee's name with or without any indication
that such Pledged Collateral is subject to the
security interest hereunder. In addition, the
Indenture Trustee may at any time exchange
certificates or instruments representing or
evidencing Pledged Shares for certificates or
instruments of smaller or larger denominations.
5. Representations and Warranties.
The Pledgor represents and warrants as follows:
(a) The Pledgor is the legal and
beneficial owner of the Pledged LP Units
identified on Exhibit A, free and clear of any Lien
except for the security interest created by this
Pledge Agreement or in connection with any
Senior Indebtedness and the Pledgor owns no
other LP Units other than that identified on
Exhibit A;
(b) The Pledgor has full corporate
power and authority to enter into this Pledge
Agreement;
(c) There are no restrictions upon
the voting rights associated with, or upon the
transfer of, any of the Pledged Collateral;
(d) The Pledgor has the right to
vote, pledge and grant a security interest in or
otherwise transfer such Pledged Collateral free of
any Liens other than the Lien created pursuant to
this Pledge Agreement or in connection with any
Senior Indebtedness.
(e) No authorization, approval, or
other action by, and no notice to or filing with,
any Governmental Authority or regulatory body is
required either (i) for the pledge of the Pledged
Collateral pursuant to this Pledge Agreement or
for the execution, delivery or performance of this
Pledge Agreement by the Pledgor or (ii) for the
exercise by the Indenture Trustee of the voting or
other rights provided for in this Pledge Agreement
or the remedies in respect of the Pledged
Collateral pursuant to this Pledge Agreement
(except as may be required in connection with
such disposition by laws affecting the offering and
sale of securities generally); and
(f) The pledge of the Pledged
Collateral pursuant to this Pledge Agreement
creates a valid and perfected security interest in
the Pledged Collateral, in favor of the Indenture
Trustee, securing the payment and performance of
the Liabilities.
6. Voting Rights. During the term
of this Pledge Agreement, and except as provided
in this Section 7(b) below, the Pledgor shall have
the right to vote the Pledged LP Units on all
partnership questions in a manner not inconsistent
with the terms of this Pledge Agreement, the
Indenture and any other agreement, instrument or
document executed pursuant thereto or in
connection therewith. After the occurrence of an
Event of Default, the Indenture Trustee or its
nominee may, at the Indenture Trustee's or such
nominee's option and following written notice
from the Indenture Trustee to the Pledgor,
exercise all voting powers pertaining to the
Pledged Collateral, including the right to take
action by partners consent. Such authorization
shall constitute an irrevocable voting proxy from
the Pledgor to the Indenture Trustee or, at the
Indenture Trustee's option, to the Indenture
Trustee's nominee.
7. Partnership Income and Other
Distributions. (a) So long as no Event of Default
or Default shall have occurred:
(i) The Pledgor shall be entitled to
receive and retain any and all partnership income
and interest paid in respect of the Pledged
Collateral, provided, however, that any and all
(A) partnership income and interest
paid or payable other than in cash with
respect to, and instruments and other
property received, receivable or otherwise
distributed with respect to, or in exchange
for, any of the Pledged Collateral;
(B) partnership income and other
distributions paid or payable in cash with
respect to any of the Pledged Collateral on
account of a partial or total liquidation or
dissolution of the limited partnership; and
(C) cash paid, payable or otherwise
distributed with respect to principal of, or
in redemption of, or in exchange for, any
of the Pledged Collateral;
shall be Pledged Collateral, and shall be forthwith
delivered to the Indenture Trustee to hold as
Pledged Collateral and shall, if received by the
Pledgor, be received in trust for the Indenture
Trustee, be segregated from the other property or
funds of the Pledgor, and be delivered
immediately to the Indenture Trustee as Pledged
Collateral in the same form as so received (with
any necessary endorsement); and
(ii) The Indenture Trustee shall
execute and deliver (or cause to be executed and
delivered) to the Pledgor all such proxies and
other instruments as the Pledgor may reasonably
request for the purpose of enabling the Pledgor to
receive the partnership income or interest
payments which it is authorized to receive and
retain pursuant to clause (i) above.
(b) After the occurrence of an
Event of Default:
(i) All rights of the Pledgor to
receive the partnership income and interest
payments which it would otherwise be authorized
to receive and retain pursuant to Section 7(a)(i)
hereof shall cease, and all such rights shall
thereupon become vested in the Indenture Trustee,
which shall thereupon have the sole right to
receive and hold as Pledged Collateral such
dividends and interest payments;
(ii) All partnership income and
interest payments which are received by the
Pledgor contrary to the provisions of clause (i) of
this Section 7(b) shall be received in trust for the
Indenture Trustee, shall be segregated from other
funds of the Pledgor and shall be paid over
immediately to the Indenture Trustee as Pledged
Collateral in the same form as so received (with
any necessary endorsements);
(iii) The Pledgor shall, upon the
request of the Indenture Trustee, at Pledgor's
expense, use its best efforts to obtain all necessary
governmental approvals for the sale of the Pledged
Collateral, as requested by the Indenture Trustee;
(iv) The Pledgor shall, upon the
request of the Indenture Trustee, at the Pledgor's
expense, do or cause to be done all such other acts
and things as may be necessary to make such sale
of the Pledged Collateral or any part thereof valid
and binding and in compliance with applicable
law.
The Pledgor will reimburse the Indenture Trustee
for all expenses incurred by the Indenture Trustee,
including, without limitation, reasonable attorneys'
and accountants' fees and expenses in connection
with the foregoing. The Pledgor agrees that, in
light of the fact that federal and state securities
laws impose certain restrictions on the method by
which the Pledged Collateral may be sold, it will
be commercially reasonable if a private sale, upon
at least ten (10) days' notice to the Pledgor, is
arranged so as to avoid a public offering, even
though the sales price established and/or obtained
at such private sale may be substantially less than
prices which could have been obtained for such
security on any market or exchange or in any
other public sale.
8. Transfers and Other Liens. The
Pledgor agrees that it will not (i) sell or otherwise
dispose of, or grant any option with respect to,
any of the Pledged Collateral without the prior
written consent of the Indenture Trustee, or (ii)
create or permit to exist any Lien upon or with
respect to any of the Pledged Collateral except for
the security interest under this Pledge Agreement
and in connection with any Senior Indebtedness.
9. Remedies. (a) The Indenture
Trustee shall have, in addition to any other rights
given under this Pledge Agreement or by law, all
of the rights and remedies with respect to the
Pledged Collateral of a secured party under the
Uniform Commercial Code as in effect in the
State of New York. After the occurrence of an
Event of Default and following written notice to
the Pledgor, the Indenture Trustee (personally or
through an agent) is hereby authorized and
empowered to transfer and register in its name or
in the name of its nominee the whole or any part
of the Pledged Collateral, to exercise all voting
rights with respect thereto, to collect and receive
all cash dividends and other distributions made
thereon, and to otherwise act with respect to the
Pledged Collateral as though the Indenture Trustee
were the outright owner thereof. The Pledgor
hereby irrevocably constitutes and appoints the
Indenture Trustee as the proxy and attorney-in-fact
of the Pledgor, with full power of substitution to
do so, such proxy becoming effective upon the
occurrence of an Event of Default and following
written notice thereof; provided, however, that the
Indenture Trustee shall have no duty to exercise
any such right or to preserve the same and shall
not be liable for any failure to do so or for any
delay in doing so. In addition, after the
occurrence of an Event of Default, the Indenture
Trustee shall have such powers of sale and other
powers as may be conferred by applicable law.
With respect to the Pledged Collateral or any part
thereof which shall then be in or shall thereafter
come into the possession or custody of the
Indenture Trustee or which the Indenture Trustee
shall otherwise have the ability to transfer under
applicable law, the Indenture Trustee may, in its
sole discretion, without notice except as specified
below, after the occurrence of an Event of
Default, sell or cause the same to be sold at any
exchange, broker's board or at public or private
sale, in one or more sales or lots, at such price as
the Indenture Trustee may deem best, for cash or
on credit or for future delivery, without
assumption of any credit risk, and the purchaser of
any or all of the Pledged Collateral so sold shall
thereafter own the same, absolutely free from any
claim, encumbrance or right of any kind
whatsoever. The Indenture Trustee may, in its
own name, or in the name of a designee or
nominee, buy the Pledged Collateral at any public
sale and, if permitted by applicable law, buy the
Pledged Collateral at any private sale. The
Pledgor will pay to the Indenture Trustee all
reasonable expenses (including, without limitation,
court costs and reasonable attorneys' and
paralegals' fees and expenses) of, or incidental to,
the enforcement of any of the provisions hereof.
The Indenture Trustee agrees to distribute any
proceeds of the sale of the Pledged Collateral in
accordance with the Indenture and the Pledgor
shall remain liable for any deficiency following
the sale of the Pledged Collateral.
(b) Unless any of the Pledged
Collateral threatens to decline speedily in value or
is or becomes of a type sold on a recognized
market, the Indenture Trustee will give the
Pledgor reasonable notice of the time and place of
any public sale thereof, or of the time after which
any private sale or other intended disposition is to
be made. Any sale of the Pledged Collateral
conducted in conformity with reasonable
commercial practices of banks, commercial
finance companies, insurance companies or other
financial institutions disposing of property similar
to the Pledged Collateral shall be deemed to be
commercially reasonable. Notwithstanding any
provision to the contrary contained herein, the
Pledgor agrees that any requirements of reasonable
notice shall be met if such notice is received by
the Pledgor as provided in Section 25 below at
least ten (10) days before the time of the sale or
disposition; provided, however, that the Indenture
Trustee may give any shorter notice that is
commercially reasonable under the circumstances.
Any other requirement of notice, demand or
advertisement for sale is waived, to the extent
permitted by law.
(c) In view of the fact that federal
and state securities laws may impose certain
restrictions on the method by which a sale of the
Pledged Collateral may be effected after an Event
of Default, the Pledgor agrees that after the
occurrence of an Event of Default, the Indenture
Trustee may, from time to time, attempt to sell all
or any part of the Pledged Collateral by means of
a private placement restricting the bidders and
prospective purchasers to those who are qualified
and will represent and agree that they are
purchasing for investment only and not for
distribution. In so doing, the Indenture Trustee
may solicit offers to buy the Pledged Collateral, or
any part of it, from a limited number of investors
deemed by the Indenture Trustee, in its reasonable
judgment, to be financially responsible parties who
might be interested in purchasing the Pledged
Collateral. If the Indenture Trustee solicits such
offers from not less than three (3) such investors,
then the acceptance by the Indenture Trustee of
the highest offer obtained therefrom shall be
deemed to be a commercially reasonable method
of disposing of such Pledged Collateral; provided,
however, that this Section does not impose a
requirement that the Indenture Trustee solicit
offers from three or more investors in order for
the sale to be commercially reasonable.
10. Security Interest Absolute. All
rights of the Indenture Trustee and security
interests hereunder, and all obligations of the
Pledgor hereunder, shall be absolute and
unconditional irrespective of:
(a) Any lack of validity or
enforceability of the Indenture or any other
agreement or instrument relating thereto;
(b) Any change in the time,
manner or place of payment of, or in any
other term of, all or any part of the
Liabilities, or any other amendment or
waiver of or any consent to any departure
from the Indenture;
(c) Any exchange, release or
non-perfection of any other collateral, or
any release or amendment or waiver of or
consent to departure from any guaranty, for
all or any part of the Liabilities; or
(d) any other circumstance which
might otherwise constitute a defense
available to, or a discharge of, the Pledgor
in respect of the Liabilities or of this
Pledge Agreement.
11. Indenture Trustee Appointed
Attorney-in-Fact. The Pledgor hereby appoints
the Indenture Trustee its attorney-in-fact, with full
authority, in the name of the Pledgor or otherwise,
after the occurrence of an Event of Default, from
time to time in the Indenture Trustee's sole
discretion, to take any action and to execute any
instrument which the Indenture Trustee may deem
necessary or advisable to accomplish the purposes
of this Pledge Agreement, including, without
limitation, to receive, endorse and collect all
instruments made payable to the Pledgor
representing any dividend, interest payment or
other distribution in respect of the Pledged
Collateral or any part thereof and to give full
discharge for the same and to arrange for the
transfer of all or any part of the Pledged Collateral
on the books of a Direct Subsidiary to the name
of the Indenture Trustee or its nominee.
12. Waivers. (a) The Pledgor
waives presentment and demand for payment of
any of the Liabilities, protest and notice of
dishonor or Event of Default with respect to any
of the Liabilities and all other notices to which the
Pledgor might otherwise be entitled except as
otherwise expressly provided herein or in the
Indenture.
(b) The Pledgor agrees that all of
its obligations under this Pledge Agreement shall
remain in full force and effect without defense,
offset or counterclaim of any kind.
(c) The Pledgor hereby expressly
waives the benefits of any laws purporting to
allow a guarantor or pledgor to revoke a
continuing guaranty or pledge with respect to any
transactions occurring after the date of the
guaranty or pledge.
13. Term. This Pledge Agreement
shall remain in full force and effect until the
Liabilities have been fully and indefeasibly paid in
cash, all obligations if the Pledgor in connection
with the Notes have been repaid and the Indenture
has been terminated pursuant to its terms. Upon
the termination of this Pledge Agreement as
provided above (other than as a result of the sale
of the Pledged Collateral), the Indenture Trustee
will release the security interest created hereunder.
14. Definitions. The singular shall
include the plural and vice versa and any gender
shall include any other gender as the context may
require.
15. Successors and Assigns. This
Pledge Agreement shall be binding upon and inure
to the benefit of the Pledgor, the Indenture Trustee
and their respective successors and assigns. The
Pledgor's successors and assigns shall include,
without limitation, a receiver, trustee or
debtor-in-possession of or for the Pledgor.
16. GOVERNING LAW. THIS
PLEDGE AGREEMENT HAS BEEN
EXECUTED AND DELIVERED BY THE
PARTIES HERETO IN NEW YORK, NEW
YORK. ANY DISPUTE BETWEEN THE
INDENTURE TRUSTEE AND THE PLEDGOR
ARISING OUT OF OR RELATED TO THE
RELATIONSHIP ESTABLISHED BETWEEN
THEM IN CONNECTION WITH THIS PLEDGE
AGREEMENT, AND WHETHER ARISING IN
CONTRACT, TORT, EQUITY, OR
OTHERWISE, SHALL BE RESOLVED IN
ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, INCLUDING
SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAWS BUT OTHERWISE
WITHOUT REGARD TO CONFLICTS OF
LAWS PROVISIONS.
17. Consent to Jurisdiction;
Counterclaims; Forum Non Conveniens. (a)
Exclusive Jurisdiction. Except as provided in
subsection (b) of this Section 17, the Indenture
Trustee and the Pledgor agree that all disputes
between them arising out of or related to the
relationship established between them in
connection with this Pledge Agreement, whether
arising in contract, tort, equity, or otherwise, shall
be resolved only by state or federal courts located
in New York, New York, but the parties
acknowledge that any appeals from those courts
may have to be heard by a court located outside of
New York, New York.
(b) Other Jurisdictions. The
Indenture Trustee shall have the right to proceed
against the Pledgor or its property in a court in
any location to enable the Indenture Trustee to
obtain personal jurisdiction over the Pledgor, to
realize on the Pledged Collateral or any other
security for the Liabilities or to enforce a
judgment or other court order entered in favor of
the Indenture Trustee. The Pledgor shall not
assert any permissive counterclaims in any
proceeding brought by the Indenture Trustee
arising out of or relating to this Pledge
Agreement.
(c) Venue; Forum Non
Conveniens. Each of the Pledgor and the
Indenture Trustee waives any objection that it may
have (including, without limitation, any objection
to the laying of venue or based on forum non
conveniens) to the location of the court in which
any proceeding is commenced in accordance with
this Section 17.
18. WAIVER OF JURY TRIAL.
EACH OF THE PLEDGOR AND THE
INDENTURE TRUSTEE WAIVES ANY RIGHT
TO TRIAL BY JURY IN ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT,
TORT, OR OTHERWISE, BETWEEN THE
INDENTURE TRUSTEE AND THE PLEDGOR
ARISING OUT OF OR RELATED TO THE
TRANSACTIONS CONTEMPLATED BY THIS
PLEDGE AGREEMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN
CONNECTION HEREWITH. EITHER THE
PLEDGOR OR THE INDENTURE TRUSTEE
MAY FILE AN ORIGINAL COUNTERPART
OR A COPY OF THIS PLEDGE AGREEMENT
WITH ANY COURT AS WRITTEN EVIDENCE
OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT
TO TRIAL BY JURY.
19. Waiver of Bond. The Pledgor
waives the posting of any bond otherwise required
of the Indenture Trustee in connection with any
judicial process or proceeding to realize on the
Collateral or any other security for the Liabilities,
to enforce any judgment or other court order
entered in favor of the Indenture Trustee, or to
enforce by specific performance, temporary
restraining order, or preliminary or permanent
injunction, this Pledge Agreement or any other
agreement or document between the Indenture
Trustee and the Pledgor.
20. Advice of Counsel. The
Pledgor represents and warrants to the Indenture
Trustee that it has consulted with its legal counsel
regarding all waivers under this Pledge
Agreement, including without limitation those
under Section 12 and Sections 16 through 19
hereof, that it believes that it fully understands all
rights that it is waiving and the effect of such
waivers, that it assumes the risk of any
misunderstanding that it may have regarding any
of the foregoing, and that it intends that such
waivers shall be a material inducement to the
Indenture Trustee to extend the indebtedness
secured hereby.
21. Severability. Whenever
possible, each provision of this Pledge Agreement
shall be interpreted in such manner as to be
effective and valid under applicable law, but, if
any provision of this Pledge Agreement shall be
held to be prohibited or invalid under applicable
law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the
remaining provisions of this Pledge Agreement.
22. Further Assurances. The
Pledgor agrees that it will cooperate with the
Indenture Trustee and will execute and deliver, or
cause to be executed and delivered, all such
proxies, instruments and documents, and will take
all such other actions, including, without
limitation, the execution and filing of financing
statements, as the Indenture Trustee may
reasonably request from time to time in order to
carry out the provisions and purposes of this
Pledge Agreement.
23. The Indenture Trustee' s Duty
of Care. The Indenture Trustee shall not be liable
for any acts, omissions, errors of judgment or
mistakes of fact or law including, without
limitation, acts, omissions, errors or mistakes with
respect to the Pledged Collateral, except for those
arising out of or in connection with the Indenture
Trustee's (i) gross negligence or willful
misconduct, or (ii) failure to use reasonable care
with respect to the safe custody of the Pledged
Collateral in the Indenture Trustee's possession.
Without limiting the generality of the foregoing,
the Indenture Trustee shall be under no obligation
to take any steps necessary to preserve rights in
the Pledged Collateral against any other parties but
may do so at its option. All expenses incurred in
connection therewith shall be for the sole account
of the Pledgor, and shall constitute part of the
Liabilities secured hereby.
24. Notices. All notices and other
communications required or desired to be served,
given or delivered hereunder shall be made in
writing or by a telecommunications device capable
of creating a written record and shall be addressed
to the party to be notified as follows:
if to the Pledgor, at
Aegis Auto Consumer Finance, Inc.
525 Washington Boulevard
Jersey City, New Jersey 07310
Attention: President
Telecopy: (201) 418-7379
if to the Indenture Trustee, at
Norwest Bank Minnesota, National Association,
as Trustee
Corporate Trust Department
6th & Marquette Avenue
Minneapolis, Minnesota 55479-0069
Telecopy: (612) 667-9825
with copies to
III Offshore Advisors
250 South Australian Avenue, Suite 600
West Palm Beach, Florida 33401
Attention: Robert Fasulo
Telecopy: (407) 655-5496
<PAGE>
and
III Finance, Ltd.
c/o Admiral Administration Ltd.
Anchorage Center, 2nd Floor
Grand Cayman, Cayman Islands
British West Indies
Attention: David Bree
Telecopy: (345) 949-0705
or, as to each party, at such other address as
designated by such party in a written notice to the
other party. All such notices and communications
shall be deemed to be validly served, given or
delivered (i) three (3) days following deposit in
the United States mails, with proper postage
prepaid; (ii) upon delivery thereof if delivered by
hand to the party to be notified; (iii) one Business
Day after delivery thereof to a reputable overnight
courier service, with delivery charges prepaid; or
(iv) upon transmission thereof with confirmation
of successful transmission from the sending
telecommunications device, if sent by
telecommunications device.
25. Amendments, Waivers and
Consents. No amendment or waiver of any
provision of this Pledge Agreement nor consent to
any departure by the Pledgor herefrom, shall in
any event be effective unless the same shall be in
writing and signed by the Indenture Trustee
pursuant to its authority under the Indenture, and
then such amendment, waiver or consent shall be
effective only in the specific instance and for the
specific purpose for which given.
26. Section Headings. The section
headings herein are for convenience of reference
only, and shall not affect in any way the
interpretation of any of the provisions hereof.
27. Execution in Counterparts.
This Pledge Agreement may be executed in any
number of counterparts, each of which shall be an
original, but all of which shall together constitute
one and the same agreement.
28. Merger. This Pledge
Agreement represents the final agreement of the
Pledgor with respect to the matters contained
herein and may not be contradicted by evidence of
prior or contemporaneous agreements, or
subsequent oral agreements, between the Pledgor
and the Indenture Trustee.
29. Subordination. The Pledgor
expressly covenants and agrees, and the Indenture
Trustee acknowledges, that the indebtedness
secured hereby and the liabilities of the Pledgor
hereunder are expressly made subordinate and
subject in prior right of payment to the prior
payment of Senior Indebtedness to the extent and
in the manner set forth in Article XII of the
Indenture.
IN WITNESS WHEREOF, the
Pledgor and the Indenture Trustee have executed
this Pledge Agreement as of the date set forth
above.
AEGIS CONSUMER FINANCE,INC.
By:________________________
Name: ___________________
Title: ____________________
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:_________________________
Name: ___________________
Title: ____________________
<PAGE>
ACKNOWLEDGMENT
The undersigned hereby
acknowledges receipt of a copy of the foregoing
Pledge Agreement, agrees promptly to note on its
books the security interests granted under such
Pledge Agreement, and waives any rights or
requirement at any time hereafter to receive a
copy of such Pledge Agreement in connection
with the registration of any Pledged Collateral in
the name of the Indenture Trustee or its nominee
or the exercise of voting rights by the Indenture
Trustee or its nominee.
AEGIS AUTO RECEIVABLES 1994-A, L.P.
By: ___________________________
its General Partner
By: ________________________
Name: ______________________
AEGIS AUTO RECEIVABLES 1994-2, L.P.
By: ___________________________
its General Partner
By: ________________________
Name: ______________________
AEGIS AUTO RECEIVABLES 1994-3, L.P.
By: ___________________________
its General Partner
By: ________________________
Name: ______________________
AEGIS AUTO RECEIVABLES 1995-1, L.P.
By: ___________________________
its General Partner
By: ________________________
Name: ______________________
EXHIBIT A
to
PLEDGE AGREEMENT
dated as of April 30, 1997
Pledged LP Units
Number of
Name of Subsidiary
Issued and
Partnership
Outstanding LP Units
Aegis Auto Receivables 1994-A, L.P.
[___________]
Aegis Auto Receivables 1994-2, L.P.
[___________]
Aegis Auto Receivables 1994-3, L.P.
[___________]
Aegis Auto Receivables 1995-1, L.P.
[___________]
<PAGE>
TABLE OF CONTENTS
1. Pledge......................................1
2. Security for Liabilities....................2
3. Pledged Collateral Adjustments..............2
4. Subsequent Changes Affecting Pledged
Collatera.......................................3
5. Representations and Warranties..............3
6. Voting Rights...............................4
7. Partnership Income and Other Distributions..4
8. Transfers and Other Lien....................5
9. Remedies....................................5
10. Security Interest Absolute.................7
11. Indenture Trustee Appointed Attorney in
Fact............................................7
12. Waivers....................................7
13. Term.......................................8
14. Definitions................................8
15. Successors and Assigns.....................8
16. GOVERNING LAW..............................8
17. Consent to Jurisdiction; Counterclaims;
Forum Non Conveniens............................8
18. WAIVER OF JURY TRIAL.......................9
19. Waiver of Bond.............................9
20. Advice of Counsel..........................9
21. Severability...............................9
22. Further Assurances.........................9
23. The Indenture Trustee' s Duty of Care.....10
24. Notices...................................10
25. Amendments, Waivers and Consents..........11
26. Section Headings..........................11
27. Execution in Counterparts.................11
28. Merger....................................11
29. Subordination.............................11
Exhibit A Pledged LP Units
A:\10_107_6.WPD September 16, 1997 (11:40a)
EXECUTION COPY
PLEDGE AGREEMENT
between
Aegis Capital Markets, Inc. (d/b/a Markets)
as Pledgor
AND
Norwest Bank Minnesota, National Association,
as Trustee
Dated as of April 30, 1997
<PAGE>
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (the "Pledge
Agreement"), dated as of April 30, 1997, is executed by and
among AEGIS CAPITAL MARKETS, INC. (D/B/A
MARKETS), a Delaware corporation (the "Pledgor") and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
a national banking association (the "Indenture Trustee") as Trustee
under that certain Indenture dated April 30, 1997 (the "Indenture")
between Aegis Auto Finance, Inc. an affiliate of the Pledgor
("AAF" or the "Borrower") and the Indenture Trustee with respect
to $21,333,333 aggregate principal amount at maturity 12%
Exchangeable Subordinated Notes due 2004 (the "Notes").
Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings ascribed to such terms in the
Indenture.
WITNESSETH:
WHEREAS, the Indenture Trustee has agreed to
purchase the Notes from the Pledgor on the terms and conditions
set forth in the Indenture;
WHEREAS, the Pledgor directly owns 100% of the
issued and outstanding capital stock of (a) Commission Finance
92-1 Incorporated, (b) Receivables Finance 93-1 Incorporated, (c)
MF Receivable Finance Company and (d) MF Commission
Finance 1994-1 Corporation (such direct subsidiaries and any other
subsidiary hereafter acquired or formed by the Pledgor, the "Direct
Subsidiaries") and will derive direct and indirect economic benefit
from the sale of Notes to the Pledgor under the Indenture; and
WHEREAS, the Indenture Trustee has required, as
a condition to its entering into the Indenture, that the Pledgor
execute and deliver this Pledge Agreement;
NOW, THEREFORE, for and in consideration of
the foregoing and of any financial accommodations or extensions
of credit (including, without limitation, any loan or advance by
renewal, refinancing or extension of the agreements described
hereinabove or otherwise) heretofore, now or hereafter made to or
for the benefit of the Pledgor pursuant to the Indenture or any
other agreement, instrument or document executed pursuant to or
in connection therewith, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Pledgor and the Indenture Trustee hereby agree
as follows:
1. Pledge. The Pledgor hereby pledges to the
Indenture Trustee, and grants to the Indenture Trustee a security
interest in, the following (collectively, the "Pledged Collateral"):
(a) The shares of the capital stock of each Direct
Subsidiary, now or at any time or times hereafter owned
by the Pledgor, and the certificates representing the shares
of such capital stock (such now-owned shares being
identified on Exhibit A next to each Direct Subsidiary), all
options and warrants for the purchase of shares of the stock
of any Direct Subsidiary now or hereafter held in the name
of the Pledgor (all of said capital stock, options and
warrants and all capital stock held in the name of the
Pledgor as a result of the exercise of such options or
warrants being hereinafter collectively referred to as the
"Pledged Stock"), and all dividends, cash, instruments and
other property from time to time received, receivable or
otherwise distributed in respect of, or in exchange for, any
or all of the Pledged Stock it being understood that the
Pledged Stock and stock powers for each Direct Subsidiary
have been delivered to III Finance, Ltd. (the "Lender") to
secure Senior Indebtedness of the Pledgor to the Lender;
(b) All additional shares of stock of any Direct
Subsidiary from time to time acquired by the Pledgor in
any manner, and the certificates representing such
additional shares (any such additional shares shall
constitute part of the Pledged Stock and the Indenture
Trustee are irrevocably authorized to amend Exhibit A
from time to time to reflect such additional shares), and all
options, warrants, dividends, cash, instruments and other
rights and options from time to time received, receivable or
otherwise distributed in respect of or in exchange for any
or all of such shares;
(c) The property and interests in property described
in Section 3 below; and
(d) All proceeds of the foregoing.
2. Security for Liabilities. The Pledged Collateral
secures the prompt payment, performance and observance of (i)
the Borrower's obligations and liabilities under the Indenture and
each agreement, document or instrument executed pursuant to or
in connection with the Indenture and (ii) the Pledgor's obligations
and liabilities under this Pledge Agreement and each agreement,
document or instrument executed pursuant to or in connection
with this Pledge Agreement (all such obligations and liabilities of
the Pledgor and the Borrower now or hereafter existing being
hereinafter referred to as the "Liabilities").
3. Pledged Collateral Adjustments. If, during the
term of this Pledge Agreement:
(a) Any stock dividend, reclassification,
readjustment or other change is declared or made in the
capital structure of any Direct Subsidiary, or any option
included within the Pledged Collateral is exercised, or
both, or
(b) Any subscription warrants or any other rights
or options shall be issued in connection with the Pledged
Collateral,
then all new, substituted and additional shares, warrants, rights,
options or other securities, issued by reason of any of the
foregoing, shall be immediately delivered to and held by the
Indenture Trustee under the terms of this Pledge Agreement and
shall constitute Pledged Collateral hereunder; provided, however,
that nothing contained in this Section 3 shall be deemed to permit
any stock dividend, issuance of additional stock, warrants, rights
or options, reclassification, readjustment or other change in the
capital structure of a Direct Subsidiary which is not permitted in
the Indenture.
4. Subsequent Changes Affecting Pledged
Collateral. The Pledgor represents and warrants that it has made
its own arrangements for keeping itself informed of changes or
potential changes affecting the Pledged Collateral (including, but
not limited to, rights to convert, rights to subscribe, payment of
dividends, reorganization or other exchanges, tender offers and
voting rights), and the Pledgor agrees that the Indenture Trustee
shall have no obligation to inform the Pledgor of any such
changes or potential changes or to take any action or omit to take
any action with respect thereto. The Indenture Trustee may, after
the occurrence of an Event of Default, without notice and at its
option, transfer or register the Pledged Collateral or any part
thereof into its or its nominee's name with or without any
indication that such Pledged Collateral is subject to the security
interest hereunder. In addition, the Indenture Trustee may at any
time exchange certificates or instruments representing or
evidencing Pledged Shares for certificates or instruments of
smaller or larger denominations.
5. Representations and Warranties. The Pledgor
represents and warrants as follows:
(a) The Pledgor is the legal and beneficial owner
of the Pledged Stock, which represents 100% of the issued and
outstanding common stock of each Direct Subsidiary identified on
Exhibit A, free and clear of any Lien except for the security
interest created by this Pledge Agreement or in connection with
any Senior Indebtedness and the Pledgor owns no other stock
other than that identified on Exhibit A;
(b) The Pledgor has full corporate power and
authority to enter into this Pledge Agreement;
(c) There are no restrictions upon the voting rights
associated with, or upon the transfer of, any of the Pledged
Collateral;
(d) The Pledgor has the right to vote, pledge and
grant a security interest in or otherwise transfer such Pledged
Collateral free of any Liens other than the Lien created pursuant
to this Pledge Agreement or in connection with any Senior
Indebtedness;
(e) No authorization, approval, or other action by,
and no notice to or filing with, any Governmental Authority or
regulatory body is required either (i) for the pledge of the Pledged
Collateral pursuant to this Pledge Agreement or for the execution,
delivery or performance of this Pledge Agreement by the Pledgor
or (ii) for the exercise by the Indenture Trustee of the voting or
other rights provided for in this Pledge Agreement or the remedies
in respect of the Pledged Collateral pursuant to this Pledge
Agreement (except as may be required in connection with such
disposition by laws affecting the offering and sale of securities
generally); and
(f) The pledge of the Pledged Collateral pursuant
to this Pledge Agreement creates a valid and perfected first
priority security interest in the Pledged Collateral, in favor of the
Indenture Trustee, securing the payment and performance of the
Liabilities.
6. Voting Rights. During the term of this Pledge
Agreement, and except as provided in this Section 7(b) below, the
Pledgor shall have the right to vote the Pledged Stock on all
corporate questions in a manner not inconsistent with the terms of
this Pledge Agreement, the Indenture and any other agreement,
instrument or document executed pursuant thereto or in connection
therewith. After the occurrence of an Event of Default, the
Indenture Trustee or either of the Indenture Trustee' nominees
may, at the Indenture Trustee' or such nominee's option and
following written notice from the Indenture Trustee to the Pledgor,
exercise all voting powers pertaining to the Pledged Collateral,
including the right to take action by shareholder consent. Such
authorization shall constitute an irrevocable voting proxy from the
Pledgor to the Indenture Trustee or, at the Indenture Trustee's
option, to the Indenture Trustee's nominees.
7. Dividends and Other Distributions. (a) So long
as no Event of Default or Default shall have occurred:
(i) The Pledgor shall be entitled to receive and
retain any and all dividends and interest paid in respect of the
Pledged Collateral, provided, however, that any and all
(A) dividends and interest paid or payable other
than in cash with respect to, and instruments and other
property received, receivable or otherwise distributed with
respect to, or in exchange for, any of the Pledged
Collateral;
(B) dividends and other distributions paid or
payable in cash with respect to any of the Pledged
Collateral on account of a partial or total liquidation or
dissolution or in connection with a reduction of capital,
capital surplus or paid-in surplus; and
(C) cash paid, payable or otherwise distributed
with respect to principal of, or in redemption of, or in
exchange for, any of the Pledged Collateral;
shall be Pledged Collateral, and shall be forthwith delivered to the
Indenture Trustee to hold as Pledged Collateral and shall, if
received by the Pledgor, be received in trust for the Indenture
Trustee, be segregated from the other property or funds of the
Pledgor, and be delivered immediately to the Indenture Trustee as
Pledged Collateral in the same form as so received (with any
necessary endorsement); and
(ii) The Indenture Trustee shall execute and deliver
(or cause to be executed and delivered) to the Pledgor all such
proxies and other instruments as the Pledgor may reasonably
request for the purpose of enabling the Pledgor to receive the
dividends or interest payments which it is authorized to receive
and retain pursuant to clause (i) above.
(b) After the occurrence of an Event of Default:
(i) All rights of the Pledgor to receive the
dividends and interest payments which it would otherwise be
authorized to receive and retain pursuant to Section 7(a)(i) hereof
shall cease, and all such rights shall thereupon become vested in
the Indenture Trustee, which shall thereupon have the sole right to
receive and hold as Pledged Collateral such dividends and interest
payments;
(ii) All dividends and interest payments which are
received by the Pledgor contrary to the provisions of clause (i) of
this Section 7(b) shall be received in trust for the Indenture
Trustee, shall be segregated from other funds of the Pledgor and
shall be paid over immediately to the Indenture Trustee as Pledged
Collateral in the same form as so received (with any necessary
endorsements);
(iii) The Pledgor shall, upon the request of the
Indenture Trustee, at Pledgor's expense, use its best efforts to
obtain all necessary governmental approvals for the sale of the
Pledged Collateral, as requested by the Indenture Trustee;
(iv) The Pledgor shall, upon the request of the
Indenture Trustee, at the Pledgor's expense, do or cause to be
done all such other acts and things as may be necessary to make
such sale of the Pledged Collateral or any part thereof valid and
binding and in compliance with applicable law.
The Pledgor will reimburse the Indenture Trustee for all expenses
incurred by the Indenture Trustee, including, without limitation,
reasonable attorneys' and accountants' fees and expenses in
connection with the foregoing. The Pledgor agrees that, in light
of the fact that federal and state securities laws impose certain
restrictions on the method by which the Pledged Collateral may be
sold, it will be commercially reasonable if a private sale, upon at
least ten (10) days' notice to the Pledgor, is arranged so as to
avoid a public offering, even though the sales price established
and/or obtained at such private sale may be substantially less than
prices which could have been obtained for such security on any
market or exchange or in any other public sale.
8. Transfers and Other Liens. The Pledgor agrees
that it will not (i) sell or otherwise dispose of, or grant any option
with respect to, any of the Pledged Collateral without the prior
written consent of the Indenture Trustee or (ii) create or permit to
exist any Lien upon or with respect to any of the Pledged
Collateral, except for the security interest under this Pledge
Agreement.
9. Remedies. (a) The Indenture Trustee shall
have, in addition to any other rights given under this Pledge
Agreement or by law, all of the rights and remedies with respect
to the Pledged Collateral of a secured party under the Uniform
Commercial Code as in effect in the State of New York. After
the occurrence of an Event of Default and following written notice
to the Pledgor, the Indenture Trustee (personally or through an
agent) is hereby authorized and empowered to transfer and register
in its name or in the name of its nominee the whole or any part of
the Pledged Collateral, to exercise all voting rights with respect
thereto, to collect and receive all cash dividends and other
distributions made thereon, and to otherwise act with respect to
the Pledged Collateral as though the Indenture Trustee were the
outright owner thereof. The Pledgor hereby irrevocably
constitutes and appoints the Indenture Trustee as the proxy and
attorney-in-fact of the Pledgor, with full power of substitution to
do so, such proxy becoming effective upon the occurrence of an
Event of Default and following written notice thereof; provided,
however, that the Indenture Trustee shall have no duty to exercise
any such right or to preserve the same and shall not be liable for
any failure to do so or for any delay in doing so. In addition,
after the occurrence of an Event of Default, the Indenture Trustee
shall have such powers of sale and other powers as may be
conferred by applicable law. With respect to the Pledged
Collateral or any part thereof which shall then be in or shall
thereafter come into the possession or custody of the Indenture
Trustee or which the Indenture Trustee shall otherwise have the
ability to transfer under applicable law, the Indenture Trustee may,
in its sole discretion, without notice except as specified below,
after the occurrence of an Event of Default, sell or cause the same
to be sold at any exchange, broker's board or at public or private
sale, in one or more sales or lots, at such price as the Indenture
Trustee may deem best, for cash or on credit or for future
delivery, without assumption of any credit risk, and the purchaser
of any or all of the Pledged Collateral so sold shall thereafter own
the same, absolutely free from any claim, encumbrance or right of
any kind whatsoever. The Indenture Trustee may, in its own
name, or in the name of a designee or nominee, buy the Pledged
Collateral at any public sale and, if permitted by applicable law,
buy the Pledged Collateral at any private sale. The Pledgor will
pay to the Indenture Trustee all reasonable expenses (including,
without limitation, court costs and reasonable attorneys' and
paralegals' fees and expenses) of, or incidental to, the enforcement
of any of the provisions hereof. The Indenture Trustee agrees to
distribute any proceeds of the sale of the Pledged Collateral in
accordance with the Indenture and the Pledgor shall remain liable
for any deficiency following the sale of the Pledged Collateral.
(b) Unless any of the Pledged Collateral threatens
to decline speedily in value or is or becomes of a type sold on a
recognized market, the Indenture Trustee will give the Pledgor
reasonable notice of the time and place of any public sale thereof,
or of the time after which any private sale or other intended
disposition is to be made. Any sale of the Pledged Collateral
conducted in conformity with reasonable commercial practices of
banks, commercial finance companies, insurance companies or
other financial institutions disposing of property similar to the
Pledged Collateral shall be deemed to be commercially reasonable.
Notwithstanding any provision to the contrary contained herein,
the Pledgor agrees that any requirements of reasonable notice shall
be met if such notice is received by the Pledgor as provided in
Section 25 below at least ten (10) days before the time of the sale
or disposition; provided, however, that the Indenture Trustee may
give any shorter notice that is commercially reasonable under the
circumstances. Any other requirement of notice, demand or
advertisement for sale is waived, to the extent permitted by law.
(c) In view of the fact that federal and state
securities laws may impose certain restrictions on the method by
which a sale of the Pledged Collateral may be effected after an
Event of Default, the Pledgor agrees that after the occurrence of
an Event of Default, the Indenture Trustee may, from time to
time, attempt to sell all or any part of the Pledged Collateral by
means of a private placement restricting the bidders and
prospective purchasers to those who are qualified and will
represent and agree that they are purchasing for investment only
and not for distribution. In so doing, the Indenture Trustee may
solicit offers to buy the Pledged Collateral, or any part of it, from
a limited number of investors deemed by the Indenture Trustee, in
its reasonable judgment, to be financially responsible parties who
might be interested in purchasing the Pledged Collateral. If the
Indenture Trustee solicits such offers from not less than three (3)
such investors, then the acceptance by the Indenture Trustee of the
highest offer obtained therefrom shall be deemed to be a
commercially reasonable method of disposing of such Pledged
Collateral; provided, however, that this Section does not impose a
requirement that the Indenture Trustee solicit offers from three or
more investors in order for the sale to be commercially reasonable.
10. Security Interest Absolute. All rights of the
Indenture Trustee and security interests hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and
unconditional irrespective of:
(a) Any lack of validity or enforceability of the
Indenture or any other agreement or instrument relating
thereto;
(b) Any change in the time, manner or place of
payment of, or in any other term of, all or any part of the
Liabilities, or any other amendment or waiver of or any
consent to any departure from the Indenture;
(c) Any exchange, release or non-perfection of any
other collateral, or any release or amendment or waiver of
or consent to departure from any guaranty, for all or any
part of the Liabilities; or
(d) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, the
Pledgor in respect of the Liabilities or of this Pledge
Agreement.
11. Indenture Trustee Appointed Attorney-in-Fact.
The Pledgor hereby appoints the Indenture Trustee its
attorney-in-fact, with full authority, in the name of the Pledgor or
otherwise, after the occurrence of an Event of Default, from time
to time in the Indenture Trustee's sole discretion, to take any
action and to execute any instrument which the Indenture Trustee
may deem necessary or advisable to accomplish the purposes of
this Pledge Agreement, including, without limitation, to receive,
endorse and collect all instruments made payable to the Pledgor
representing any dividend, interest payment or other distribution in
respect of the Pledged Collateral or any part thereof and to give
full discharge for the same and to arrange for the transfer of all or
any part of the Pledged Collateral on the books of a Direct
Subsidiary to the name of the Indenture Trustee or its nominees.
12. Waivers. (a) The Pledgor waives presentment
and demand for payment of any of the Liabilities, protest and
notice of dishonor or Event of Default with respect to any of the
Liabilities and all other notices to which the Pledgor might
otherwise be entitled except as otherwise expressly provided
herein or in the Indenture.
(b) The Pledgor agrees that all of its obligations
under this Pledge Agreement shall remain in full force and effect
without defense, offset or counterclaim of any kind,
notwithstanding that the Pledgor's rights against the Borrower may
be impaired, destroyed or otherwise affected by reason of any
action or inaction on the part of the Indenture Trustee.
(c) The Pledgor hereby expressly waives the
benefits of any laws purporting to allow a guarantor or pledgor to
revoke a continuing guaranty or pledge with respect to any
transactions occurring after the date of the guaranty or pledge.
13. Term. This Pledge Agreement shall remain in
full force and effect until the Liabilities have been fully and
indefeasibly paid in cash, all commitments to lend under the
Indenture have expired and the Indenture has been terminated
pursuant to its terms. Upon the termination of this Pledge
Agreement as provided above (other than as a result of the sale of
the Pledged Collateral), the Indenture Trustee will release the
security interest created hereunder and, if they then have
possession of the Pledged Stock, will deliver the Pledged Stock
and the Powers to the Pledgor.
14. Definitions. The singular shall include the
plural and vice versa and any gender shall include any other
gender as the context may require.
15. Successors and Assigns. This Pledge
Agreement shall be binding upon and inure to the benefit of the
Pledgor, the Indenture Trustee and its respective successors and
assigns. The Pledgor's successors and assigns shall include,
without limitation, a receiver, trustee or debtor-in-possession of or
for the Pledgor.
16. GOVERNING LAW. THIS PLEDGE
AGREEMENT HAS BEEN EXECUTED AND DELIVERED BY
THE PARTIES HERETO IN NEW YORK, NEW YORK. ANY
DISPUTE BETWEEN THE INDENTURE TRUSTEE AND THE
PLEDGOR ARISING OUT OF OR RELATED TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH THIS PLEDGE AGREEMENT, AND
WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR
OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK,
INCLUDING SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAWS BUT OTHERWISE WITHOUT
REGARD TO CONFLICTS OF LAWS PROVISIONS.
17. Consent to Jurisdiction; Counterclaims; Forum
Non Conveniens. (a) Exclusive Jurisdiction. Except as provided
in subsection (b) of this Section 17, the Indenture Trustee and the
Pledgor agree that all disputes between them arising out of or
related to the relationship established between them in connection
with this Pledge Agreement, whether arising in contract, tort,
equity, or otherwise, shall be resolved only by state or federal
courts located in New York, New York, but the parties
acknowledge that any appeals from those courts may have to be
heard by a court located outside of New York, New York.
(b) Other Jurisdictions. The Indenture Trustee
shall have the right to proceed against the Pledgor or its property
in a court in any location to enable the Indenture Trustee to obtain
personal jurisdiction over the Pledgor, to realize on the Pledged
Collateral or any other security for the Liabilities or to enforce a
judgment or other court order entered in favor of the Indenture
Trustee. The Pledgor shall not assert any permissive
counterclaims in any proceeding brought by the Indenture Trustee
arising out of or relating to this Pledge Agreement.
(c) Venue; Forum Non Conveniens. Each of the
Pledgor and the Indenture Trustee waives any objection that it
may have (including, without limitation, any objection to the
laying of venue or based on forum non conveniens) to the location
of the court in which any proceeding is commenced in accordance
with this Section 17.
18. WAIVER OF JURY TRIAL. EACH OF THE
PLEDGOR AND THE INDENTURE TRUSTEE WAIVES ANY
RIGHT TO TRIAL BY JURY IN ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE,
BETWEEN THE INDENTURE TRUSTEE AND THE
PLEDGOR ARISING OUT OF OR RELATED TO THE
TRANSACTIONS CONTEMPLATED BY THIS PLEDGE
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT
OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH. EITHER THE PLEDGOR OR
THE INDENTURE TRUSTEE MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS PLEDGE
AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE
OF THE CONSENT OF THE PARTIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
19. Waiver of Bond. The Pledgor waives the
posting of any bond otherwise required of the Indenture Trustee in
connection with any judicial process or proceeding to realize on
the Pledged Collateral or any other security for the Liabilities, to
enforce any judgment or other court order entered in favor of the
Indenture Trustee, or to enforce by specific performance,
temporary restraining order, or preliminary or permanent
injunction, this Pledge Agreement or any other agreement or
document between the Indenture Trustee and the Pledgor.
20. Advice of Counsel. The Pledgor represents
and warrants to the Indenture Trustee that it has consulted with its
legal counsel regarding all waivers under this Pledge Agreement,
including without limitation those under Section 12 and Sections
16 through 19 hereof, that it believes that it fully understands all
rights that it is waiving and the effect of such waivers, that it
assumes the risk of any misunderstanding that it may have
regarding any of the foregoing, and that it intends that such
waivers shall be a material inducement to the Indenture Trustee to
extend the indebtedness secured hereby.
21. Severability. Whenever possible, each
provision of this Pledge Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but, if
any provision of this Pledge Agreement shall be held to be
prohibited or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the
remaining provisions of this Pledge Agreement.
22. Further Assurances. The Pledgor agrees that it
will cooperate with the Indenture Trustee and will execute and
deliver, or cause to be executed and delivered, all such other stock
powers, proxies, instruments and documents, and will take all such
other actions, including, without limitation, the execution and
filing of financing statements, as the Indenture Trustee may
reasonably request from time to time in order to carry out the
provisions and purposes of this Pledge Agreement.
23. The Indenture Trustee' Duty of Care. The
Indenture Trustee shall not be liable for any acts, omissions, errors
of judgment or mistakes of fact or law including, without
limitation, acts, omissions, errors or mistakes with respect to the
Pledged Collateral, except for those arising out of or in connection
with the Indenture Trustee's (i) gross negligence or willful
misconduct, or (ii) failure to use reasonable care with respect to
the safe custody of the Pledged Collateral in the Indenture
Trustee's possession. Without limiting the generality of the
foregoing, the Indenture Trustee shall be under no obligation to
take any steps necessary to preserve rights in the Pledged
Collateral against any other parties but may do so at its option.
All expenses incurred in connection therewith shall be for the sole
account of the Pledgor, and shall constitute part of the Liabilities
secured hereby.
24. Notices. All notices and other communications
required or desired to be served, given or delivered hereunder
shall be made in writing or by a telecommunications device
capable of creating a written record and shall be addressed to the
party to be notified as follows:
if to the Pledgor, at
Aegis Capital Markets, Inc. (d/b/a Markets)
525 Washington Boulevard
Jersey City, New Jersey 07310
Attention: President
Telecopy: (201) 418-7379
if to the Indenture Trustee, at
Norwest Bank Minnesota, National Association,
as Trustee
Corporate Trust Department
6th & Marquette Avenue
Minneapolis, Minnesota 55479-0069
Telecopy: (612) 667-9825
with copies to
III Offshore Advisors
250 South Australian Avenue, Suite 600
West Palm Beach, Florida 33401
Attention: Robert Fasulo
Telecopy: (407) 655-5496
and
III Finance, Ltd.
c/o Admiral Administration Ltd.
Anchorage Center, 2nd Floor
Grand Cayman, Cayman Islands
British West Indies
Attention: David Bree
Telecopy: (345) 949-0705
or, as to each party, at such other address as designated by such
party in a written notice to the other party. All such notices and
communications shall be deemed to be validly served, given or
delivered (i) three (3) days following deposit in the United States
mails, with proper postage prepaid; (ii) upon delivery thereof if
delivered by hand to the party to be notified; (iii) one Business
Day after delivery thereof to a reputable overnight courier service,
with delivery charges prepaid; or (iv) upon transmission thereof
with confirmation of successful transmission from the sending
telecommunications device, if sent by telecommunications device.
25. Amendments, Waivers and Consents. No
amendment or waiver of any provision of this Pledge Agreement
nor consent to any departure by the Pledgor herefrom, shall in any
event be effective unless the same shall be in writing and signed
by each of the Indenture Trustee pursuant to the terms of the
Indenture, and then such amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose
for which given.
26. Section Headings. The section headings herein
are for convenience of reference only, and shall not affect in any
way the interpretation of any of the provisions hereof.
27. Execution in Counterparts. This Pledge
Agreement may be executed in any number of counterparts, each
of which shall be an original, but all of which shall together
constitute one and the same agreement.
28. Merger. This Pledge Agreement represents the
final agreement of the Pledgor with respect to the matters
contained herein and may not be contradicted by evidence of prior
or contemporaneous agreements, or subsequent oral agreements,
between the Pledgor and the Indenture Trustee.
29. Bailment, Agency for Possession; Stock
Powers. The Indenture Trustee hereby appoints III Finance as its
agent for purposes of perfecting its security interests and liens on
the Pledged Collateral. The Indenture Trustee hereby agrees that
upon the payment in full of all Senior Indebtedness by AAF, and
provided that there shall be indebtedness owing by the Pledgor
under the Indenture after payment of all Senior Indebtedness, III
Finance shall deliver to the Indenture Trustee the Pledged Stock
then in its possession, together with all stock powers related
thereto and until such time, the Indenture Trustee shall not possess
any Pledged Stock nor any stock powers related thereto.
30. Subordination. The Pledgor expressly
covenants and agrees, and the Indenture Trustee acknowledges,
that the indebtedness secured hereby and the liabilities of the
Pledgor hereunder are expressly made subordinate and subject in
prior right of payment to the prior payment of Senior Indebtedness
to the extent and in the manner set forth in Article XII of the
Indenture.
<PAGE>
IN WITNESS WHEREOF, the Pledgor and the
Indenture Trustee have executed this Pledge Agreement as of the
date set forth above.
AEGIS CAPITAL MARKETS, INC.
(D/B/A MARKETS)
By:________________________
Name: ___________________
Title: __________________
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
By:
_________________________
Name:
___________________
Title:
____________________
<PAGE>
ACKNOWLEDGMENT
The undersigned hereby acknowledges receipt of a
copy of the foregoing Pledge Agreement, agrees promptly to note
on its books the security interests granted under such Pledge
Agreement, and waives any rights or requirement at any time
hereafter to receive a copy of such Pledge Agreement in
connection with the registration of any Pledged Collateral in the
name of the Lenders or its nominee or the exercise of voting
rights by the Lenders or their nominees.
RECEIVABLES FINANCE 92-1
INCORPORATED
By:___________________________
Name: _____________________
Title: _____________________
RECEIVABLES FINANCE 93-1
INCORPORATED
By:___________________________
Name: _____________________
Title: ______________________
MF RECEIVABLE FINANCE COMPANY
By:___________________________
Name: _____________________
Title: ______________________
MF COMMISSION FINANCE 1994-1
CORPORATION
By:___________________________
Name: _____________________
Title: ______________________
EXHIBIT A
to
PLEDGE AGREEMENT
dated as of April 30, 1997
Pledged Stock Certificates
Number of
Name of Direct
Issued and
Subsidiary
Outstanding Shares
Commission Finance 92-1 Incorporated
[__________]
Receivables Finance 93-1 Incorporated
[__________]
MF Receivable Finance Company
[__________]
MF Commission Finance 1994-1 Corporation
[__________]
<PAGE>
TABLE OF CONTENTS
1. Pledge........................................................2
2. Security for Liabilities......................................2
3. Pledged Collateral Adjustments................................2
4. Subsequent Changes Affecting Pledged Collateral...............3
5. Representations and Warranties................................3
6. Voting Right..................................................4
7. Dividends and Other Distributions.............................4
8. Transfers and Other Liens.....................................5
9. Remedies......................................................6
10. Security Interest Absolute...................................7
11. Indenture Trustee Appointed Attorney-in-Fact.................7
12. Waivers......................................................7
13. Term.........................................................8
14. Definitions..................................................8
15. Successors and Assigns.......................................8
16. GOVERNING LAW................................................8
17. Consent to Jurisdiction; Counterclaims; Forum Non
Conveniens...................................................8
18. WAIVER OF JURY TRIAL.........................................9
19. Waiver of Bond...............................................9
20. Advice of Counsel............................................9
21. Severability.................................................9
22. Further Assurances..........................................10
23. The Indenture Trustee' Duty of Care.........................10
24. Notices.....................................................10
25. Amendments, Waivers and Consents............................11
26. Section Headings............................................11
27. Execution in Counterparts...................................11
28. Merger......................................................11
29. Bailment, Agency for Possession; Stock Powers...............11
30. Subordination...............................................11
EXHIBITS
EXHIBIT A Pledged Stock Certificates
I:\DINA\SECREPOR\10_107_7.WPD September 4, 1997 (11:53a)
[S&A Draft: 5/13/97]
PLEDGE AGREEMENT
between
Aegis Auto Finance, Inc.,
as Pledgor
AND
Norwest Bank Minnesota, National Association,
as Trustee
Dated as of April 30, 1997
<PAGE>
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (the "Pledge
Agreement"), dated as of April 30, 1997, is executed by and
between AEGIS AUTO FINANCE, INC., a Delaware corporation
(the "Pledgor") and NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, a national banking association (the
"Indenture Trustee") as Trustee under that certain Indenture dated
April 30, 1997 between the Pledgor and the Indenture Trustee (the
"Indenture") with respect to $21,333,333 aggregate principal
amount at maturity 12% Exchangeable Subordinated Notes due
2004 (the "Notes"). Capitalized terms used herein and not
otherwise defined herein shall have the respective meanings
ascribed to such terms in the Indenture.
WITNESSETH:
WHEREAS, the Indenture Trustee has agreed to
purchase the Notes from the Pledgor on the terms and conditions
set forth in the Indenture;
WHEREAS, the Pledgor directly owns 100% of the
issued and outstanding capital stock of Aegis Auto Funding Corp.
IV (the "SPC"), Aegis Auto Funding Corp. II ("AAFC II") and
Aegis Auto Funding Corp. ("AAFC") (such direct subsidiaries and
any other subsidiary hereafter acquired or formed by the Pledgor,
the "Direct Subsidiaries") and will derive direct and indirect
economic benefit from the sale of Notes to the Pledgor under the
Indenture; and
WHEREAS, the Indenture Trustee has required, as
a condition to its entering into the Indenture, that the Pledgor
execute and deliver this Pledge Agreement;
NOW, THEREFORE, for and in consideration of
the foregoing and of any financial accommodations or extensions
of credit (including, without limitation, any loan or advance by
renewal, refinancing or extension of the agreements described
hereinabove or otherwise) heretofore, now or hereafter made to or
for the benefit of the Pledgor pursuant to the Indenture or any
other agreement, instrument or document executed pursuant to or
in connection therewith, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Pledgor and the Indenture Trustee hereby agree
as follows:
1. Pledge. The Pledgor hereby pledges to the
Indenture Trustee, and grants to the Indenture Trustee a security
interest in, the following (collectively, the "Pledged Collateral"):
(a) The shares of the capital stock of each Direct
Subsidiary, now or at any time or times hereafter owned
by the Pledgor, and the certificates representing the shares
of such capital stock (such now-owned shares being
identified on Exhibit A next to each Direct Subsidiary), all
options and warrants for the purchase of shares of the stock
of any Direct Subsidiary now or hereafter held in the name
of the Pledgor (all of said capital stock, options and
warrants and all capital stock held in the name of the
Pledgor as a result of the exercise of such options or
warrants being hereinafter collectively referred to as the
"Pledged Stock"), and all dividends, cash, instruments and
other property from time to time received, receivable or
otherwise distributed in respect of, or in exchange for, any
or all of the Pledged Stock it being understood that the
Pledged Stock and stock powers for each Direct Subsidiary
have been delivered to III Finance, Ltd. (the "Lender") to
secure Senior Indebtedness of the Pledgor to the Lender.
(b) All additional shares of stock of any Direct
Subsidiary from time to time acquired by the Pledgor in
any manner, and the certificates representing such
additional shares (any such additional shares shall
constitute part of the Pledged Stock and the Indenture
Trustee is irrevocably authorized to amend Exhibit A from
time to time to reflect such additional shares), and all
options, warrants, dividends, cash, instruments and other
rights and options from time to time received, receivable or
otherwise distributed in respect of or in exchange for any
or all of such shares;
(c) The property and interests in property described
in Section 3 below; and
(d) All proceeds of the foregoing.
Notwithstanding the foregoing, it is expressly
understood and agreed that the security interest in the Pledged
Stock shall be subordinate to the security interest of the Lender in
the Pledged Collateral given by the Pledgor to secure Senior
Indebtedness.
2. Security for Liabilities. The Pledged Collateral
secures the prompt payment, performance and observance of (i)
the Pledgor's obligations and liabilities under the Indenture and
each agreement, document or instrument executed pursuant to or
in connection with the Indenture and (ii) the Pledgor's obligations
and liabilities under this Pledge Agreement and each agreement,
document or instrument executed pursuant to or in connection
with this Pledge Agreement (all such obligations and liabilities of
the Pledgor now or hereafter existing being hereinafter referred to
as the "Liabilities").
3. Pledged Collateral Adjustments. If, during the
term of this Pledge Agreement:
(a) Any stock dividend, reclassification,
readjustment or other change is declared or made in the
capital structure of any Direct Subsidiary, or any option
included within the Pledged Collateral is exercised, or
both, or
(b) Any subscription warrants or any other rights
or options shall be issued in connection with the Pledged
Collateral,
then all new, substituted and additional shares, warrants, rights,
options or other securities, issued by reason of any of the
foregoing, shall be immediately delivered to and held by the
Indenture Trustee under the terms of this Pledge Agreement and
shall constitute Pledged Collateral hereunder; provided, however,
that nothing contained in this Section 3 shall be deemed to permit
any stock dividend, issuance of additional stock, warrants, rights
or options, reclassification, readjustment or other change in the
capital structure of a Direct Subsidiary which is not permitted in
the Indenture.
4. Subsequent Changes Affecting Pledged
Collateral. The Pledgor represents and warrants that it has made
its own arrangements for keeping itself informed of changes or
potential changes affecting the Pledged Collateral (including, but
not limited to, rights to convert, rights to subscribe, payment of
dividends, reorganization or other exchanges, tender offers and
voting rights), and the Pledgor agrees that the Indenture Trustee
shall have no obligation to inform the Pledgor of any such
changes or potential changes or to take any action or omit to take
any action with respect thereto. The Indenture Trustee may, after
the occurrence of an Event of Default, without notice and at its
option, transfer or register the Pledged Collateral or any part
thereof into its or its nominee's name with or without any
indication that such Pledged Collateral is subject to the security
interest hereunder. In addition, the Indenture Trustee may at any
time exchange certificates or instruments representing or
evidencing Pledged Shares for certificates or instruments of
smaller or larger denominations.
5. Representations and Warranties. The Pledgor
represents and warrants as follows:
(a) The Pledgor is the legal and beneficial owner
of the Pledged Stock, which represents 100% of the issued and
outstanding common stock of each Direct Subsidiary identified on
Exhibit A, free and clear of any Lien except for the security
interest created by this Pledge Agreement or in connection with
any Senior Indebtedness and the Pledgor owns no other stock
which is excluded from the security interest granted hereby except
for stock in Aegis Auto Funding Corp. III.
(b) The Pledgor has full corporate power and
authority to enter into this Pledge Agreement;
(c) There are no restrictions upon the voting rights
associated with, or upon the transfer of, any of the Pledged
Collateral;
(d) The Pledgor has the right to vote, pledge and
grant a security interest in or otherwise transfer such Pledged
Collateral free of any Liens other than the Lien created pursuant
to this Pledge Agreement or in connection with any Senior
Indebtedness.
(e) No authorization, approval, or other action by,
and no notice to or filing with, any Governmental Authority or
regulatory body is required either (i) for the pledge of the Pledged
Collateral pursuant to this Pledge Agreement or for the execution,
delivery or performance of this Pledge Agreement by the Pledgor
or (ii) for the exercise by the Indenture Trustee of the voting or
other rights provided for in this Pledge Agreement or the remedies
in respect of the Pledged Collateral pursuant to this Pledge
Agreement (except as may be required in connection with such
disposition by laws affecting the offering and sale of securities
generally); and
(f) The pledge of the Pledged Collateral pursuant
to this Pledge Agreement creates a valid and perfected security
interest in the Pledged Collateral, in favor of the Indenture
Trustee, securing the payment and performance of the Liabilities;
6. Voting Rights. During the term of this Pledge
Agreement, and except as provided in this Section 7(b) below, the
Pledgor shall have the right to vote the Pledged Stock on all
corporate questions in a manner not inconsistent with the terms of
this Pledge Agreement, the Indenture and any other agreement,
instrument or document executed pursuant thereto or in connection
therewith. After the occurrence of an Event of Default, the
Indenture Trustee or its nominee may, at the Indenture Trustee's
or such nominee's option and following written notice from the
Indenture Trustee to the Pledgor, exercise all voting powers
pertaining to the Pledged Collateral, including the right to take
action by shareholder consent. Such authorization shall constitute
an irrevocable voting proxy from the Pledgor to the Indenture
Trustee or, at the Indenture Trustee's option, to the Indenture
Trustee's nominee.
7. Dividends and Other Distributions. (a) So long
as no Event of Default or Default shall have occurred:
(i) The Pledgor shall be entitled to receive and
retain any and all dividends and interest paid in respect of the
Pledged Collateral, provided, however, that any and all
(A) dividends and interest paid or payable other
than in cash with respect to, and instruments and other
property received, receivable or otherwise distributed with
respect to, or in exchange for, any of the Pledged
Collateral;
(B) dividends and other distributions paid or
payable in cash with respect to any of the Pledged
Collateral on account of a partial or total liquidation or
dissolution or in connection with a reduction of capital,
capital surplus or paid-in surplus; and
(C) cash paid, payable or otherwise distributed
with respect to principal of, or in redemption of, or in
exchange for, any of the Pledged Collateral;
shall be Pledged Collateral, and shall be forthwith delivered to the
Indenture Trustee to hold as Pledged Collateral and shall, if
received by the Pledgor, be received in trust for the Indenture
Trustee, be segregated from the other property or funds of the
Pledgor, and be delivered immediately to the Indenture Trustee as
Pledged Collateral in the same form as so received (with any
necessary endorsement); and
(ii) The Indenture Trustee shall execute and deliver
(or cause to be executed and delivered) to the Pledgor all such
proxies and other instruments as the Pledgor may reasonably
request for the purpose of enabling the Pledgor to receive the
dividends or interest payments which it is authorized to receive
and retain pursuant to clause (i) above.
(b) After the occurrence of an Event of Default:
(i) All rights of the Pledgor to receive the
dividends and interest payments which it would otherwise be
authorized to receive and retain pursuant to Section 7(a)(i) hereof
shall cease, and all such rights shall thereupon become vested in
the Indenture Trustee, which shall thereupon have the sole right to
receive and hold as Pledged Collateral such dividends and interest
payments;
(ii) All dividends and interest payments which are
received by the Pledgor contrary to the provisions of clause (i) of
this Section 7(b) shall be received in trust for the Indenture
Trustee, shall be segregated from other funds of the Pledgor and
shall be paid over immediately to the Indenture Trustee as Pledged
Collateral in the same form as so received (with any necessary
endorsements);
(iii) The Pledgor shall, upon the request of the
Indenture Trustee, at Pledgor's expense, use its best efforts to
obtain all necessary governmental approvals for the sale of the
Pledged Collateral, as requested by the Indenture Trustee;
(iv) The Pledgor shall, upon the request of the
Indenture Trustee, at the Pledgor's expense, do or cause to be
done all such other acts and things as may be necessary to make
such sale of the Pledged Collateral or any part thereof valid and
binding and in compliance with applicable law.
The Pledgor will reimburse the Indenture Trustee for all expenses
incurred by the Indenture Trustee, including, without limitation,
reasonable attorneys' and accountants' fees and expenses in
connection with the foregoing. The Pledgor agrees that, in light
of the fact that federal and state securities laws impose certain
restrictions on the method by which the Pledged Collateral may be
sold, it will be commercially reasonable if a private sale, upon at
least ten (10) days' notice to the Pledgor, is arranged so as to
avoid a public offering, even though the sales price established
and/or obtained at such private sale may be substantially less than
prices which could have been obtained for such security on any
market or exchange or in any other public sale.
8. Transfers and Other Liens. The Pledgor agrees
that it will not (i) sell or otherwise dispose of, or grant any option
with respect to, any of the Pledged Collateral without the prior
written consent of the Indenture Trustee, or (ii) create or permit to
exist any Lien upon or with respect to any of the Pledged
Collateral except for the security interest under this Pledge
Agreement and in connection with any Senior Indebtedness.
9. Remedies. (a) The Indenture Trustee shall
have, in addition to any other rights given under this Pledge
Agreement or by law, all of the rights and remedies with respect
to the Pledged Collateral of a secured party under the Uniform
Commercial Code as in effect in the State of New York. After
the occurrence of an Event of Default and following written notice
to the Pledgor, the Indenture Trustee (personally or through an
agent) is hereby authorized and empowered to transfer and register
in its name or in the name of its nominee the whole or any part of
the Pledged Collateral, to exercise all voting rights with respect
thereto, to collect and receive all cash dividends and other
distributions made thereon, and to otherwise act with respect to
the Pledged Collateral as though the Indenture Trustee were the
outright owner thereof. The Pledgor hereby irrevocably
constitutes and appoints the Indenture Trustee as the proxy and
attorney-in-fact of the Pledgor, with full power of substitution to
do so, such proxy becoming effective upon the occurrence of an
Event of Default and following written notice thereof; provided,
however, that the Indenture Trustee shall have no duty to exercise
any such right or to preserve the same and shall not be liable for
any failure to do so or for any delay in doing so. In addition,
after the occurrence of an Event of Default, the Indenture Trustee
shall have such powers of sale and other powers as may be
conferred by applicable law. With respect to the Pledged
Collateral or any part thereof which shall then be in or shall
thereafter come into the possession or custody of the Indenture
Trustee or which the Indenture Trustee shall otherwise have the
ability to transfer under applicable law, the Indenture Trustee may,
in its sole discretion, without notice except as specified below,
after the occurrence of an Event of Default, sell or cause the same
to be sold at any exchange, broker's board or at public or private
sale, in one or more sales or lots, at such price as the Indenture
Trustee may deem best, for cash or on credit or for future
delivery, without assumption of any credit risk, and the purchaser
of any or all of the Pledged Collateral so sold shall thereafter own
the same, absolutely free from any claim, encumbrance or right of
any kind whatsoever. The Indenture Trustee may, in its own
name, or in the name of a designee or nominee, buy the Pledged
Collateral at any public sale and, if permitted by applicable law,
buy the Pledged Collateral at any private sale. The Pledgor will
pay to the Indenture Trustee all reasonable expenses (including,
without limitation, court costs and reasonable attorneys' and
paralegals' fees and expenses) of, or incidental to, the enforcement
of any of the provisions hereof. The Indenture Trustee agrees to
distribute any proceeds of the sale of the Pledged Collateral in
accordance with the Indenture and the Pledgor shall remain liable
for any deficiency following the sale of the Pledged Collateral.
(b) Unless any of the Pledged Collateral threatens
to decline speedily in value or is or becomes of a type sold on a
recognized market, the Indenture Trustee will give the Pledgor
reasonable notice of the time and place of any public sale thereof,
or of the time after which any private sale or other intended
disposition is to be made. Any sale of the Pledged Collateral
conducted in conformity with reasonable commercial practices of
banks, commercial finance companies, insurance companies or
other financial institutions disposing of property similar to the
Pledged Collateral shall be deemed to be commercially reasonable.
Notwithstanding any provision to the contrary contained herein,
the Pledgor agrees that any requirements of reasonable notice shall
be met if such notice is received by the Pledgor as provided in
Section 25 below at least ten (10) days before the time of the sale
or disposition; provided, however, that the Indenture Trustee may
give any shorter notice that is commercially reasonable under the
circumstances. Any other requirement of notice, demand or
advertisement for sale is waived, to the extent permitted by law.
(c) In view of the fact that federal and state
securities laws may impose certain restrictions on the method by
which a sale of the Pledged Collateral may be effected after an
Event of Default, the Pledgor agrees that after the occurrence of
an Event of Default, the Indenture Trustee may, from time to
time, attempt to sell all or any part of the Pledged Collateral by
means of a private placement restricting the bidders and
prospective purchasers to those who are qualified and will
represent and agree that they are purchasing for investment only
and not for distribution. In so doing, the Indenture Trustee may
solicit offers to buy the Pledged Collateral, or any part of it, from
a limited number of investors deemed by the Indenture Trustee, in
its reasonable judgment, to be financially responsible parties who
might be interested in purchasing the Pledged Collateral. If the
Indenture Trustee solicits such offers from not less than three (3)
such investors, then the acceptance by the Indenture Trustee of the
highest offer obtained therefrom shall be deemed to be a
commercially reasonable method of disposing of such Pledged
Collateral; provided, however, that this Section does not impose a
requirement that the Indenture Trustee solicit offers from three or
more investors in order for the sale to be commercially reasonable.
10. Security Interest Absolute. All rights of the
Indenture Trustee and security interests hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and
unconditional irrespective of:
(a) Any lack of validity or enforceability of the
Indenture or any other agreement or instrument relating
thereto;
(b) Any change in the time, manner or place of
payment of, or in any other term of, all or any part of the
Liabilities, or any other amendment or waiver of or any
consent to any departure from the Indenture;
(c) Any exchange, release or non-perfection of any
other collateral, or any release or amendment or waiver of
or consent to departure from any guaranty, for all or any
part of the Liabilities; or
(d) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, the
Pledgor in respect of the Liabilities or of this Pledge
Agreement.
11. Indenture Trustee Appointed Attorney-in-Fact.
The Pledgor hereby appoints the Indenture Trustee its
attorney-in-fact, with full authority, in the name of the Pledgor or
otherwise, after the occurrence of an Event of Default, from time
to time in the Indenture Trustee's sole discretion, to take any
action and to execute any instrument which the Indenture Trustee
may deem necessary or advisable to accomplish the purposes of
this Pledge Agreement, including, without limitation, to receive,
endorse and collect all instruments made payable to the Pledgor
representing any dividend, interest payment or other distribution in
respect of the Pledged Collateral or any part thereof and to give
full discharge for the same and to arrange for the transfer of all or
any part of the Pledged Collateral on the books of a Direct
Subsidiary to the name of the Indenture Trustee or its nominee.
12. Waivers. (a) The Pledgor waives presentment
and demand for payment of any of the Liabilities, protest and
notice of dishonor or Event of Default with respect to any of the
Liabilities and all other notices to which the Pledgor might
otherwise be entitled except as otherwise expressly provided
herein or in the Indenture.
(b) The Pledgor agrees that all of its obligations
under this Pledge Agreement shall remain in full force and effect
without defense, offset or counterclaim of any kind.
(c) The Pledgor hereby expressly waives the
benefits of any laws purporting to allow a guarantor or pledgor to
revoke a continuing guaranty or pledge with respect to any
transactions occurring after the date of the guaranty or pledge.
13. Term. This Pledge Agreement shall remain in
full force and effect until the Liabilities have been fully and
indefeasibly paid in cash, all obligations if the Pledgor in
connection with the Notes have been repaid and the Indenture has
been terminated pursuant to its terms. Upon the termination of
this Pledge Agreement as provided above (other than as a result of
the sale of the Pledged Collateral), the Indenture Trustee will
release the security interest created hereunder and, if they then
have possession of the Pledged Stock, will deliver the Pledged
Stock and the Powers to the Pledgor.
14. Definitions. The singular shall include the
plural and vice versa and any gender shall include any other
gender as the context may require.
15. Successors and Assigns. This Pledge
Agreement shall be binding upon and inure to the benefit of the
Pledgor, the Indenture Trustee and their respective successors and
assigns. The Pledgor's successors and assigns shall include,
without limitation, a receiver, trustee or debtor-in-possession of or
for the Pledgor.
16. GOVERNING LAW. THIS PLEDGE
AGREEMENT HAS BEEN EXECUTED AND DELIVERED BY
THE PARTIES HERETO IN NEW YORK, NEW YORK. ANY
DISPUTE BETWEEN THE INDENTURE TRUSTEE AND THE
PLEDGOR ARISING OUT OF OR RELATED TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH THIS PLEDGE AGREEMENT, AND
WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR
OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK,
INCLUDING SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAWS BUT OTHERWISE WITHOUT
REGARD TO CONFLICTS OF LAWS PROVISIONS.
17. Consent to Jurisdiction; Counterclaims; Forum
Non Conveniens. (a) Exclusive Jurisdiction. Except as provided
in subsection (b) of this Section 17, the Indenture Trustee and the
Pledgor agree that all disputes between them arising out of or
related to the relationship established between them in connection
with this Pledge Agreement, whether arising in contract, tort,
equity, or otherwise, shall be resolved only by state or federal
courts located in New York, New York, but the parties
acknowledge that any appeals from those courts may have to be
heard by a court located outside of New York, New York.
(b) Other Jurisdictions. The Indenture Trustee
shall have the right to proceed against the Pledgor or its property
in a court in any location to enable the Indenture Trustee to obtain
personal jurisdiction over the Pledgor, to realize on the Pledged
Collateral or any other security for the Liabilities or to enforce a
judgment or other court order entered in favor of the Indenture
Trustee. The Pledgor shall not assert any permissive
counterclaims in any proceeding brought by the Indenture Trustee
arising out of or relating to this Pledge Agreement.
(c) Venue; Forum Non Conveniens. Each of the
Pledgor and the Indenture Trustee waives any objection that it
may have (including, without limitation, any objection to the
laying of venue or based on forum non conveniens) to the location
of the court in which any proceeding is commenced in accordance
with this Section 17.
18. WAIVER OF JURY TRIAL. EACH OF THE
PLEDGOR AND THE INDENTURE TRUSTEE WAIVES ANY
RIGHT TO TRIAL BY JURY IN ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE,
BETWEEN THE INDENTURE TRUSTEE AND THE
PLEDGOR ARISING OUT OF OR RELATED TO THE
TRANSACTIONS CONTEMPLATED BY THIS PLEDGE
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT
OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH. EITHER THE PLEDGOR OR
THE INDENTURE TRUSTEE MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS PLEDGE
AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE
OF THE CONSENT OF THE PARTIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
19. Waiver of Bond. The Pledgor waives the
posting of any bond otherwise required of the Indenture Trustee in
connection with any judicial process or proceeding to realize on
the Collateral or any other security for the Liabilities, to enforce
any judgment or other court order entered in favor of the
Indenture Trustee, or to enforce by specific performance,
temporary restraining order, or preliminary or permanent
injunction, this Pledge Agreement or any other agreement or
document between the Indenture Trustee and the Pledgor.
20. Advice of Counsel. The Pledgor represents
and warrants to the Indenture Trustee that it has consulted with its
legal counsel regarding all waivers under this Pledge Agreement,
including without limitation those under Section 12 and Sections
16 through 19 hereof, that it believes that it fully understands all
rights that it is waiving and the effect of such waivers, that it
assumes the risk of any misunderstanding that it may have
regarding any of the foregoing, and that it intends that such
waivers shall be a material inducement to the Indenture Trustee to
extend the indebtedness secured hereby.
21. Severability. Whenever possible, each
provision of this Pledge Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but, if
any provision of this Pledge Agreement shall be held to be
prohibited or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the
remaining provisions of this Pledge Agreement.
22. Further Assurances. The Pledgor agrees that it
will cooperate with the Indenture Trustee and will execute and
deliver, or cause to be executed and delivered, all such other stock
powers, proxies, instruments and documents, and will take all such
other actions, including, without limitation, the execution and
filing of financing statements, as the Indenture Trustee may
reasonably request from time to time in order to carry out the
provisions and purposes of this Pledge Agreement.
23. The Indenture Trustee' s Duty of Care. The
Indenture Trustee shall not be liable for any acts, omissions, errors
of judgment or mistakes of fact or law including, without
limitation, acts, omissions, errors or mistakes with respect to the
Pledged Collateral, except for those arising out of or in connection
with the Indenture Trustee's (i) gross negligence or willful
misconduct, or (ii) failure to use reasonable care with respect to
the safe custody of the Pledged Collateral in the Indenture
Trustee's possession. Without limiting the generality of the
foregoing, the Indenture Trustee shall be under no obligation to
take any steps necessary to preserve rights in the Pledged
Collateral against any other parties but may do so at its option.
All expenses incurred in connection therewith shall be for the sole
account of the Pledgor, and shall constitute part of the Liabilities
secured hereby.
24. Notices. All notices and other communications
required or desired to be served, given or delivered hereunder
shall be made in writing or by a telecommunications device
capable of creating a written record and shall be addressed to the
party to be notified as follows:
if to the Pledgor, at
Aegis Auto Finance, Inc.
525 Washington Boulevard
Jersey City, New Jersey 07310
Attention: President
Telecopy: (201) 418-7379
if to the Indenture Trustee, at
Norwest Bank Minnesota, National Association,
as Trustee
Corporate Trust Department
6th & Marquette Avenue
Minneapolis, Minnesota 55479-0069
Telecopy: (612) 667-9825
with copies to
III Offshore Advisors
250 South Australian Avenue, Suite 600
West Palm Beach, Florida 33401
Attention: Robert Fasulo
Telecopy: (407) 655-5496
and
III Finance, Ltd.
c/o Admiral Administration Ltd.
Anchorage Center, 2nd Floor
Grand Cayman, Cayman Islands
British West Indies
Attention: David Bree
Telecopy: (345) 949-0705
or, as to each party, at such other address as designated by such
party in a written notice to the other party. All such notices and
communications shall be deemed to be validly served, given or
delivered (i) three (3) days following deposit in the United States
mails, with proper postage prepaid; (ii) upon delivery thereof if
delivered by hand to the party to be notified; (iii) one Business
Day after delivery thereof to a reputable overnight courier service,
with delivery charges prepaid; or (iv) upon transmission thereof
with confirmation of successful transmission from the sending
telecommunications device, if sent by telecommunications device.
25. Amendments, Waivers and Consents. No
amendment or waiver of any provision of this Pledge Agreement
nor consent to any departure by the Pledgor herefrom, shall in any
event be effective unless the same shall be in writing and signed
by the Indenture Trustee pursuant to its authority under the
Indenture, and then such amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose
for which given.
26. Section Headings. The section headings herein
are for convenience of reference only, and shall not affect in any
way the interpretation of any of the provisions hereof.
27. Execution in Counterparts. This Pledge
Agreement may be executed in any number of counterparts, each
of which shall be an original, but all of which shall together
constitute one and the same agreement.
28. Merger. This Pledge Agreement represents the
final agreement of the Pledgor with respect to the matters
contained herein and may not be contradicted by evidence of prior
or contemporaneous agreements, or subsequent oral agreements,
between the Pledgor and the Indenture Trustee.
29. Bailment, Agency for Possession; Stock
Powers. The Indenture Trustee hereby appoints III Finance as its
agent for purposes of perfecting its security interests and liens on
the Pledged Collateral. The Indenture Trustee hereby agrees that
upon the payment in full of all Senior Indebtedness by AAF, and
provided that there shall be indebtedness owing by the Pledgor
under the Indenture after payment of all Senior Indebtedness, III
Finance shall deliver to the Indenture Trustee the Pledged Stock
then in its possession, together with all stock powers related
thereto and until such time, the Indenture Trustee shall not possess
any Pledged Stock nor any stock powers related thereto.
30. Subordination. The Pledgor expressly
covenants and agrees, and the Indenture Trustee acknowledges,
that the indebtedness secured hereby and the liabilities of the
Pledgor hereunder are expressly made subordinate and subject in
prior right of payment to the prior payment of Senior Indebtedness
to the extent and in the manner set forth in Article XII of the
Indenture.<PAGE>
IN WITNESS WHEREOF, the Pledgor and the
Indenture Trustee have executed this Pledge Agreement as of the
date set forth above.
AEGIS AUTO FINANCE, INC.
By: _________________________
Name: ___________________
Title: ____________________
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
By:_________________________
Name: ___________________
Title: __________________
<PAGE>
ACKNOWLEDGMENT
The undersigned hereby acknowledges receipt of a
copy of the foregoing Pledge Agreement, agrees promptly to note
on its books the security interests granted under such Pledge
Agreement, and waives any rights or requirement at any time
hereafter to receive a copy of such Pledge Agreement in
connection with the registration of any Pledged Collateral in the
name of the Indenture Trustee or its nominee or the exercise of
voting rights by the Indenture Trustee or its nominee.
AEGIS AUTO FUNDING CORP. IV
By:___________________________
Name: _____________________
Title: ______________________
AEGIS AUTO FUNDING CORP. II
By:__________________________
Name: _____________________
Title: ______________________
AEGIS AUTO FUNDING CORP.
By:___________________________
Name: _____________________
Title: ______________________
<PAGE>
EXHIBIT A
to
PLEDGE AGREEMENT
dated as of April 30, 1997
Pledged Stock Certificates
Number of
Name of Direct
Issued and
Subsidiary
Outstanding Shares
Aegis Auto Funding Corp. IV
[__________]
Aegis Auto Funding Corp. II
[__________]
Aegis Auto Funding Corp.
[__________]
<PAGE>
<PAGE>
TABLE OF CONTENTS
1. Pledge........................................................1
2. Security for Liabilities......................................2
3. Pledged Collateral Adjustments................................2
4. Subsequent Changes Affecting Pledged Collateral...............3
5. Representations and Warranties................................3
6. Voting Rights.................................................4
7. Dividends and Other Distributions.............................4
8. Transfers and Other Liens.....................................5
9. Remedies......................................................5
10. Security Interest Absolute...................................7
11. Indenture Trustee Appointed Attorney-in-Fact.................7
12. Waivers......................................................8
13. Term.........................................................8
14. Definitions..................................................8
15. Successors and Assigns.......................................8
16. GOVERNING LAW................................................8
17. Consent to Jurisdiction; Counterclaims; Forum Non
Conveniens........................................................8
18. WAIVER OF JURY TRIAL.........................................9
19. Waiver of Bond...............................................9
20. Advice of Counsel............................................9
21. Severability.................................................9
22. Further Assurances..........................................10
23. The Indenture Trustee' s Duty of Care.......................10
24. Notices.....................................................10
25. Amendments, Waivers and Consents............................11
26. Section Headings............................................11
27. Execution in Counterparts...................................11
28. Merger......................................................11
29. Bailment; Stock Powers......................................11
30. Subordination...............................................11
EXHIBITS
EXHIBIT A Pledged Stock Certificates
A:\10_107_8.WPD September 16, 1997 (11:52a)
EXECUTION COPY
PLEDGE AGREEMENT
between
Aegis Consumer Finance, Inc.,
as Pledgor
AND
Norwest Bank Minnesota, National Association,
as Trustee
Dated as of April 30, 1997
<PAGE>
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (the "Pledge
Agreement"), dated as of April 30, 1997, is executed by and
among AEGIS CONSUMER FINANCE, INC., a Delaware
corporation (the "Pledgor") and NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION, a national banking
association (the "Indenture Trustee") as Trustee under that certain
Indenture dated April 30, 1997 (the "Indenture") between Aegis
Auto Finance, Inc. an affiliate of the Pledgor ("AAF" or the
"Borrower") and the Indenture Trustee with respect to $21,333,333
aggregate principal amount at maturity 12% Exchangeable
Subordinated Notes due 2004 (the "Notes"). Capitalized terms
used herein and not otherwise defined herein shall have the
respective meanings ascribed to such terms in the Indenture.
WITNESSETH:
WHEREAS, the Indenture Trustee has agreed to
purchase the Notes from the Pledgor on the terms and conditions
set forth in the Indenture;
WHEREAS, the Pledgor directly owns 100% of the
issued and outstanding capital stock of (a) Aegis Acceptance Corp.
and (b) Aegis Auto Finance, Inc. (such direct subsidiaries and any
other subsidiary hereafter acquired or formed by the Pledgor, the
"Direct Subsidiaries") and will derive direct and indirect economic
benefit from the sale of Notes to the Pledgor under the Indenture;
and
WHEREAS, the Indenture Trustee has required, as
a condition to its entering into the Indenture, that the Pledgor
execute and deliver this Pledge Agreement;
NOW, THEREFORE, for and in consideration of
the foregoing and of any financial accommodations or extensions
of credit (including, without limitation, any loan or advance by
renewal, refinancing or extension of the agreements described
hereinabove or otherwise) heretofore, now or hereafter made to or
for the benefit of the Pledgor pursuant to the Indenture or any
other agreement, instrument or document executed pursuant to or
in connection therewith, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Pledgor and the Indenture Trustee hereby agree
as follows:
1. Pledge. The Pledgor hereby pledges to the
Indenture Trustee, and grants to the Indenture Trustee a security
interest in, the following (collectively, the "Pledged Collateral"):
(a) The shares of the capital stock of each Direct
Subsidiary, now or at any time or times hereafter owned
by the Pledgor, and the certificates representing the shares
of such capital stock (such now-owned shares being
identified on Exhibit A next to each Direct Subsidiary), all
options and warrants for the purchase of shares of the stock
of any Direct Subsidiary now or hereafter held in the name
of the Pledgor (all of said capital stock, options and
warrants and all capital stock held in the name of the
Pledgor as a result of the exercise of such options or
warrants being hereinafter collectively referred to as the
"Pledged Stock"), and all dividends, cash, instruments and
other property from time to time received, receivable or
otherwise distributed in respect of, or in exchange for, any
or all of the Pledged Stock it being understood that the
Pledged Stock and stock powers for each Direct Subsidiary
have been delivered to III Finance, Ltd. (the "Lender") to
secure Senior Indebtedness of the Pledgor to the Lender;
(b) All additional shares of stock of any Direct
Subsidiary from time to time acquired by the Pledgor in
any manner, and the certificates representing such
additional shares (any such additional shares shall
constitute part of the Pledged Stock and the Indenture
Trustee are irrevocably authorized to amend Exhibit A
from time to time to reflect such additional shares), and all
options, warrants, dividends, cash, instruments and other
rights and options from time to time received, receivable or
otherwise distributed in respect of or in exchange for any
or all of such shares;
(c) The property and interests in property described
in Section 3 below; and
(d) All proceeds of the foregoing.
2. Security for Liabilities. The Pledged Collateral
secures the prompt payment, performance and observance of (i)
the Borrower's obligations and liabilities under the Indenture and
each agreement, document or instrument executed pursuant to or
in connection with the Indenture and (ii) the Pledgor's obligations
and liabilities under this Pledge Agreement and each agreement,
document or instrument executed pursuant to or in connection
with this Pledge Agreement (all such obligations and liabilities of
the Pledgor and the Borrower now or hereafter existing being
hereinafter referred to as the "Liabilities").
3. Pledged Collateral Adjustments. If, during the
term of this Pledge Agreement:
(a) Any stock dividend, reclassification,
readjustment or other change is declared or made in the
capital structure of any Direct Subsidiary, or any option
included within the Pledged Collateral is exercised, or
both, or
(b) Any subscription warrants or any other rights
or options shall be issued in connection with the Pledged
Collateral,
then all new, substituted and additional shares, warrants, rights,
options or other securities, issued by reason of any of the
foregoing, shall be immediately delivered to and held by the
Indenture Trustee under the terms of this Pledge Agreement and
shall constitute Pledged Collateral hereunder; provided, however,
that nothing contained in this Section 3 shall be deemed to permit
any stock dividend, issuance of additional stock, warrants, rights
or options, reclassification, readjustment or other change in the
capital structure of a Direct Subsidiary which is not permitted in
the Indenture.
4. Subsequent Changes Affecting Pledged
Collateral. The Pledgor represents and warrants that it has made
its own arrangements for keeping itself informed of changes or
potential changes affecting the Pledged Collateral (including, but
not limited to, rights to convert, rights to subscribe, payment of
dividends, reorganization or other exchanges, tender offers and
voting rights), and the Pledgor agrees that the Indenture Trustee
shall have no obligation to inform the Pledgor of any such
changes or potential changes or to take any action or omit to take
any action with respect thereto. The Indenture Trustee may, after
the occurrence of an Event of Default, without notice and at its
option, transfer or register the Pledged Collateral or any part
thereof into its or its nominee's name with or without any
indication that such Pledged Collateral is subject to the security
interest hereunder. In addition, the Indenture Trustee may at any
time exchange certificates or instruments representing or
evidencing Pledged Shares for certificates or instruments of
smaller or larger denominations.
5. Representations and Warranties. The Pledgor
represents and warrants as follows:
(a) The Pledgor is the legal and beneficial owner
of the Pledged Stock, which represents 100% of the issued and
outstanding common stock of each Direct Subsidiary identified on
Exhibit A, free and clear of any Lien except for the security
interest created by this Pledge Agreement or in connection with
any Senior Indebtedness and the Pledgor owns no other stock
other than that identified on Exhibit A;
(b) The Pledgor has full corporate power and
authority to enter into this Pledge Agreement;
(c) There are no restrictions upon the voting rights
associated with, or upon the transfer of, any of the Pledged
Collateral;
(d) The Pledgor has the right to vote, pledge and
grant a security interest in or otherwise transfer such Pledged
Collateral free of any Liens other than the Lien created pursuant
to this Pledge Agreement or in connection with any Senior
Indebtedness;
(e) No authorization, approval, or other action by,
and no notice to or filing with, any Governmental Authority or
regulatory body is required either (i) for the pledge of the Pledged
Collateral pursuant to this Pledge Agreement or for the execution,
delivery or performance of this Pledge Agreement by the Pledgor
or (ii) for the exercise by the Indenture Trustee of the voting or
other rights provided for in this Pledge Agreement or the remedies
in respect of the Pledged Collateral pursuant to this Pledge
Agreement (except as may be required in connection with such
disposition by laws affecting the offering and sale of securities
generally); and
(f) The pledge of the Pledged Collateral pursuant
to this Pledge Agreement creates a valid and perfected first
priority security interest in the Pledged Collateral, in favor of the
Indenture Trustee, securing the payment and performance of the
Liabilities.
6. Voting Rights. During the term of this Pledge
Agreement, and except as provided in this Section 7(b) below, the
Pledgor shall have the right to vote the Pledged Stock on all
corporate questions in a manner not inconsistent with the terms of
this Pledge Agreement, the Indenture and any other agreement,
instrument or document executed pursuant thereto or in connection
therewith. After the occurrence of an Event of Default, the
Indenture Trustee or either of the Indenture Trustee' nominees
may, at the Indenture Trustee' or such nominee's option and
following written notice from the Indenture Trustee to the Pledgor,
exercise all voting powers pertaining to the Pledged Collateral,
including the right to take action by shareholder consent. Such
authorization shall constitute an irrevocable voting proxy from the
Pledgor to the Indenture Trustee or, at the Indenture Trustee's
option, to the Indenture Trustee's nominees.
7. Dividends and Other Distributions. (a) So long
as no Event of Default or Default shall have occurred:
(i) The Pledgor shall be entitled to receive and
retain any and all dividends and interest paid in respect of the
Pledged Collateral, provided, however, that any and all
(A) dividends and interest paid or payable other
than in cash with respect to, and instruments and other
property received, receivable or otherwise distributed with
respect to, or in exchange for, any of the Pledged
Collateral;
(B) dividends and other distributions paid or
payable in cash with respect to any of the Pledged
Collateral on account of a partial or total liquidation or
dissolution or in connection with a reduction of capital,
capital surplus or paid-in surplus; and
(C) cash paid, payable or otherwise distributed
with respect to principal of, or in redemption of, or in
exchange for, any of the Pledged Collateral;
shall be Pledged Collateral, and shall be forthwith delivered to the
Indenture Trustee to hold as Pledged Collateral and shall, if
received by the Pledgor, be received in trust for the Indenture
Trustee, be segregated from the other property or funds of the
Pledgor, and be delivered immediately to the Indenture Trustee as
Pledged Collateral in the same form as so received (with any
necessary endorsement); and
(ii) The Indenture Trustee shall execute and deliver
(or cause to be executed and delivered) to the Pledgor all such
proxies and other instruments as the Pledgor may reasonably
request for the purpose of enabling the Pledgor to receive the
dividends or interest payments which it is authorized to receive
and retain pursuant to clause (i) above.
(b) After the occurrence of an Event of Default:
(i) All rights of the Pledgor to receive the
dividends and interest payments which it would otherwise be
authorized to receive and retain pursuant to Section 7(a)(i) hereof
shall cease, and all such rights shall thereupon become vested in
the Indenture Trustee, which shall thereupon have the sole right to
receive and hold as Pledged Collateral such dividends and interest
payments;
(ii) All dividends and interest payments which are
received by the Pledgor contrary to the provisions of clause (i) of
this Section 7(b) shall be received in trust for the Indenture
Trustee, shall be segregated from other funds of the Pledgor and
shall be paid over immediately to the Indenture Trustee as Pledged
Collateral in the same form as so received (with any necessary
endorsements);
(iii) The Pledgor shall, upon the request of the
Indenture Trustee, at Pledgor's expense, use its best efforts to
obtain all necessary governmental approvals for the sale of the
Pledged Collateral, as requested by the Indenture Trustee;
(iv) The Pledgor shall, upon the request of the
Indenture Trustee, at the Pledgor's expense, do or cause to be
done all such other acts and things as may be necessary to make
such sale of the Pledged Collateral or any part thereof valid and
binding and in compliance with applicable law.
The Pledgor will reimburse the Indenture Trustee for all expenses
incurred by the Indenture Trustee, including, without limitation,
reasonable attorneys' and accountants' fees and expenses in
connection with the foregoing. The Pledgor agrees that, in light
of the fact that federal and state securities laws impose certain
restrictions on the method by which the Pledged Collateral may be
sold, it will be commercially reasonable if a private sale, upon at
least ten (10) days' notice to the Pledgor, is arranged so as to
avoid a public offering, even though the sales price established
and/or obtained at such private sale may be substantially less than
prices which could have been obtained for such security on any
market or exchange or in any other public sale.
8. Transfers and Other Liens. The Pledgor agrees
that it will not (i) sell or otherwise dispose of, or grant any option
with respect to, any of the Pledged Collateral without the prior
written consent of the Indenture Trustee or (ii) create or permit to
exist any Lien upon or with respect to any of the Pledged
Collateral, except for the security interest under this Pledge
Agreement.
9. Remedies. (a) The Indenture Trustee shall
have, in addition to any other rights given under this Pledge
Agreement or by law, all of the rights and remedies with respect
to the Pledged Collateral of a secured party under the Uniform
Commercial Code as in effect in the State of New York. After
the occurrence of an Event of Default and following written notice
to the Pledgor, the Indenture Trustee (personally or through an
agent) is hereby authorized and empowered to transfer and register
in its name or in the name of its nominee the whole or any part of
the Pledged Collateral, to exercise all voting rights with respect
thereto, to collect and receive all cash dividends and other
distributions made thereon, and to otherwise act with respect to
the Pledged Collateral as though the Indenture Trustee were the
outright owner thereof. The Pledgor hereby irrevocably
constitutes and appoints the Indenture Trustee as the proxy and
attorney-in-fact of the Pledgor, with full power of substitution to
do so, such proxy becoming effective upon the occurrence of an
Event of Default and following written notice thereof; provided,
however, that the Indenture Trustee shall have no duty to exercise
any such right or to preserve the same and shall not be liable for
any failure to do so or for any delay in doing so. In addition,
after the occurrence of an Event of Default, the Indenture Trustee
shall have such powers of sale and other powers as may be
conferred by applicable law. With respect to the Pledged
Collateral or any part thereof which shall then be in or shall
thereafter come into the possession or custody of the Indenture
Trustee or which the Indenture Trustee shall otherwise have the
ability to transfer under applicable law, the Indenture Trustee may,
in its sole discretion, without notice except as specified below,
after the occurrence of an Event of Default, sell or cause the same
to be sold at any exchange, broker's board or at public or private
sale, in one or more sales or lots, at such price as the Indenture
Trustee may deem best, for cash or on credit or for future
delivery, without assumption of any credit risk, and the purchaser
of any or all of the Pledged Collateral so sold shall thereafter own
the same, absolutely free from any claim, encumbrance or right of
any kind whatsoever. The Indenture Trustee may, in its own
name, or in the name of a designee or nominee, buy the Pledged
Collateral at any public sale and, if permitted by applicable law,
buy the Pledged Collateral at any private sale. The Pledgor will
pay to the Indenture Trustee all reasonable expenses (including,
without limitation, court costs and reasonable attorneys' and
paralegals' fees and expenses) of, or incidental to, the enforcement
of any of the provisions hereof. The Indenture Trustee agrees to
distribute any proceeds of the sale of the Pledged Collateral in
accordance with the Indenture and the Pledgor shall remain liable
for any deficiency following the sale of the Pledged Collateral.
(b) Unless any of the Pledged Collateral threatens
to decline speedily in value or is or becomes of a type sold on a
recognized market, the Indenture Trustee will give the Pledgor
reasonable notice of the time and place of any public sale thereof,
or of the time after which any private sale or other intended
disposition is to be made. Any sale of the Pledged Collateral
conducted in conformity with reasonable commercial practices of
banks, commercial finance companies, insurance companies or
other financial institutions disposing of property similar to the
Pledged Collateral shall be deemed to be commercially reasonable.
Notwithstanding any provision to the contrary contained herein,
the Pledgor agrees that any requirements of reasonable notice shall
be met if such notice is received by the Pledgor as provided in
Section 25 below at least ten (10) days before the time of the sale
or disposition; provided, however, that the Indenture Trustee may
give any shorter notice that is commercially reasonable under the
circumstances. Any other requirement of notice, demand or
advertisement for sale is waived, to the extent permitted by law.
(c) In view of the fact that federal and state
securities laws may impose certain restrictions on the method by
which a sale of the Pledged Collateral may be effected after an
Event of Default, the Pledgor agrees that after the occurrence of
an Event of Default, the Indenture Trustee may, from time to
time, attempt to sell all or any part of the Pledged Collateral by
means of a private placement restricting the bidders and
prospective purchasers to those who are qualified and will
represent and agree that they are purchasing for investment only
and not for distribution. In so doing, the Indenture Trustee may
solicit offers to buy the Pledged Collateral, or any part of it, from
a limited number of investors deemed by the Indenture Trustee, in
its reasonable judgment, to be financially responsible parties who
might be interested in purchasing the Pledged Collateral. If the
Indenture Trustee solicits such offers from not less than three (3)
such investors, then the acceptance by the Indenture Trustee of the
highest offer obtained therefrom shall be deemed to be a
commercially reasonable method of disposing of such Pledged
Collateral; provided, however, that this Section does not impose a
requirement that the Indenture Trustee solicit offers from three or
more investors in order for the sale to be commercially reasonable.
10. Security Interest Absolute. All rights of the
Indenture Trustee and security interests hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and
unconditional irrespective of:
(a) Any lack of validity or enforceability of the
Indenture or any other agreement or instrument relating
thereto;
(b) Any change in the time, manner or place of
payment of, or in any other term of, all or any part of the
Liabilities, or any other amendment or waiver of or any
consent to any departure from the Indenture;
(c) Any exchange, release or non-perfection of any
other collateral, or any release or amendment or waiver of
or consent to departure from any guaranty, for all or any
part of the Liabilities; or
(d) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, the
Pledgor in respect of the Liabilities or of this Pledge
Agreement.
11. Indenture Trustee Appointed Attorney-in-Fact.
The Pledgor hereby appoints the Indenture Trustee its
attorney-in-fact, with full authority, in the name of the Pledgor or
otherwise, after the occurrence of an Event of Default, from time
to time in the Indenture Trustee's sole discretion, to take any
action and to execute any instrument which the Indenture Trustee
may deem necessary or advisable to accomplish the purposes of
this Pledge Agreement, including, without limitation, to receive,
endorse and collect all instruments made payable to the Pledgor
representing any dividend, interest payment or other distribution in
respect of the Pledged Collateral or any part thereof and to give
full discharge for the same and to arrange for the transfer of all or
any part of the Pledged Collateral on the books of a Direct
Subsidiary to the name of the Indenture Trustee or its nominees.
12. Waivers. (a) The Pledgor waives presentment
and demand for payment of any of the Liabilities, protest and
notice of dishonor or Event of Default with respect to any of the
Liabilities and all other notices to which the Pledgor might
otherwise be entitled except as otherwise expressly provided
herein or in the Indenture.
(b) The Pledgor agrees that all of its obligations
under this Pledge Agreement shall remain in full force and effect
without defense, offset or counterclaim of any kind,
notwithstanding that the Pledgor's rights against the Borrower may
be impaired, destroyed or otherwise affected by reason of any
action or inaction on the part of the Indenture Trustee.
(c) The Pledgor hereby expressly waives the
benefits of any laws purporting to allow a guarantor or pledgor to
revoke a continuing guaranty or pledge with respect to any
transactions occurring after the date of the guaranty or pledge.
13. Term. This Pledge Agreement shall remain in
full force and effect until the Liabilities have been fully and
indefeasibly paid in cash, all commitments to lend under the
Indenture have expired and the Indenture has been terminated
pursuant to its terms. Upon the termination of this Pledge
Agreement as provided above (other than as a result of the sale of
the Pledged Collateral), the Indenture Trustee will release the
security interest created hereunder and, if they then have
possession of the Pledged Stock, will deliver the Pledged Stock
and the Powers to the Pledgor.
14. Definitions. The singular shall include the
plural and vice versa and any gender shall include any other
gender as the context may require.
15. Successors and Assigns. This Pledge
Agreement shall be binding upon and inure to the benefit of the
Pledgor, the Indenture Trustee and its respective successors and
assigns. The Pledgor's successors and assigns shall include,
without limitation, a receiver, trustee or debtor-in-possession of or
for the Pledgor.
16. GOVERNING LAW. THIS PLEDGE
AGREEMENT HAS BEEN EXECUTED AND DELIVERED BY
THE PARTIES HERETO IN NEW YORK, NEW YORK. ANY
DISPUTE BETWEEN THE INDENTURE TRUSTEE AND THE
PLEDGOR ARISING OUT OF OR RELATED TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH THIS PLEDGE AGREEMENT, AND
WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR
OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK,
INCLUDING SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAWS BUT OTHERWISE WITHOUT
REGARD TO CONFLICTS OF LAWS PROVISIONS.
17. Consent to Jurisdiction; Counterclaims; Forum
Non Conveniens. (a) Exclusive Jurisdiction. Except as provided
in subsection (b) of this Section 17, the Indenture Trustee and the
Pledgor agree that all disputes between them arising out of or
related to the relationship established between them in connection
with this Pledge Agreement, whether arising in contract, tort,
equity, or otherwise, shall be resolved only by state or federal
courts located in New York, New York, but the parties
acknowledge that any appeals from those courts may have to be
heard by a court located outside of New York, New York.
(b) Other Jurisdictions. The Indenture Trustee
shall have the right to proceed against the Pledgor or its property
in a court in any location to enable the Indenture Trustee to obtain
personal jurisdiction over the Pledgor, to realize on the Pledged
Collateral or any other security for the Liabilities or to enforce a
judgment or other court order entered in favor of the Indenture
Trustee. The Pledgor shall not assert any permissive
counterclaims in any proceeding brought by the Indenture Trustee
arising out of or relating to this Pledge Agreement.
(c) Venue; Forum Non Conveniens. Each of the
Pledgor and the Indenture Trustee waives any objection that it
may have (including, without limitation, any objection to the
laying of venue or based on forum non conveniens) to the location
of the court in which any proceeding is commenced in accordance
with this Section 17.
18. WAIVER OF JURY TRIAL. EACH OF THE
PLEDGOR AND THE INDENTURE TRUSTEE WAIVES ANY
RIGHT TO TRIAL BY JURY IN ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE,
BETWEEN THE INDENTURE TRUSTEE AND THE
PLEDGOR ARISING OUT OF OR RELATED TO THE
TRANSACTIONS CONTEMPLATED BY THIS PLEDGE
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT
OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH. EITHER THE PLEDGOR OR
THE INDENTURE TRUSTEE MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS PLEDGE
AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE
OF THE CONSENT OF THE PARTIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
19. Waiver of Bond. The Pledgor waives the
posting of any bond otherwise required of the Indenture Trustee in
connection with any judicial process or proceeding to realize on
the Pledged Collateral or any other security for the Liabilities, to
enforce any judgment or other court order entered in favor of the
Indenture Trustee, or to enforce by specific performance,
temporary restraining order, or preliminary or permanent
injunction, this Pledge Agreement or any other agreement or
document between the Indenture Trustee and the Pledgor.
20. Advice of Counsel. The Pledgor represents
and warrants to the Indenture Trustee that it has consulted with its
legal counsel regarding all waivers under this Pledge Agreement,
including without limitation those under Section 12 and Sections
16 through 19 hereof, that it believes that it fully understands all
rights that it is waiving and the effect of such waivers, that it
assumes the risk of any misunderstanding that it may have
regarding any of the foregoing, and that it intends that such
waivers shall be a material inducement to the Indenture Trustee to
extend the indebtedness secured hereby.
21. Severability. Whenever possible, each
provision of this Pledge Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but, if
any provision of this Pledge Agreement shall be held to be
prohibited or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the
remaining provisions of this Pledge Agreement.
22. Further Assurances. The Pledgor agrees that it
will cooperate with the Indenture Trustee and will execute and
deliver, or cause to be executed and delivered, all such other stock
powers, proxies, instruments and documents, and will take all such
other actions, including, without limitation, the execution and
filing of financing statements, as the Indenture Trustee may
reasonably request from time to time in order to carry out the
provisions and purposes of this Pledge Agreement.
23. The Indenture Trustee' Duty of Care. The
Indenture Trustee shall not be liable for any acts, omissions, errors
of judgment or mistakes of fact or law including, without
limitation, acts, omissions, errors or mistakes with respect to the
Pledged Collateral, except for those arising out of or in connection
with the Indenture Trustee's (i) gross negligence or willful
misconduct, or (ii) failure to use reasonable care with respect to
the safe custody of the Pledged Collateral in the Indenture
Trustee's possession. Without limiting the generality of the
foregoing, the Indenture Trustee shall be under no obligation to
take any steps necessary to preserve rights in the Pledged
Collateral against any other parties but may do so at its option.
All expenses incurred in connection therewith shall be for the sole
account of the Pledgor, and shall constitute part of the Liabilities
secured hereby.
24. Notices. All notices and other communications
required or desired to be served, given or delivered hereunder
shall be made in writing or by a telecommunications device
capable of creating a written record and shall be addressed to the
party to be notified as follows:
if to the Pledgor, at
Aegis Consumer Finance, Inc.
525 Washington Boulevard
Jersey City, New Jersey 07310
Attention: President
Telecopy: (201) 418-7379
if to the Indenture Trustee, at
Norwest Bank Minnesota, National Association,
as Trustee
Corporate Trust Department
6th & Marquette Avenue
Minneapolis, Minnesota 55479-0069
Telecopy: (612) 667-9825
with copies to
III Offshore Advisors
250 South Australian Avenue, Suite 600
West Palm Beach, Florida 33401
Attention: Robert Fasulo
Telecopy: (407) 655-5496
and
III Finance, Ltd.
c/o Admiral Administration Ltd.
Anchorage Center, 2nd Floor
Grand Cayman, Cayman Islands
British West Indies
Attention: David Bree
Telecopy: (345) 949-0705
or, as to each party, at such other address as designated by such
party in a written notice to the other party. All such notices and
communications shall be deemed to be validly served, given or
delivered (i) three (3) days following deposit in the United States
mails, with proper postage prepaid; (ii) upon delivery thereof if
delivered by hand to the party to be notified; (iii) one Business
Day after delivery thereof to a reputable overnight courier service,
with delivery charges prepaid; or (iv) upon transmission thereof
with confirmation of successful transmission from the sending
telecommunications device, if sent by telecommunications device.
25. Amendments, Waivers and Consents. No
amendment or waiver of any provision of this Pledge Agreement
nor consent to any departure by the Pledgor herefrom, shall in any
event be effective unless the same shall be in writing and signed
by each of the Indenture Trustee pursuant to the terms of the
Indenture, and then such amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose
for which given.
26. Section Headings. The section headings herein
are for convenience of reference only, and shall not affect in any
way the interpretation of any of the provisions hereof.
27. Execution in Counterparts. This Pledge
Agreement may be executed in any number of counterparts, each
of which shall be an original, but all of which shall together
constitute one and the same agreement.
28. Merger. This Pledge Agreement represents the
final agreement of the Pledgor with respect to the matters
contained herein and may not be contradicted by evidence of prior
or contemporaneous agreements, or subsequent oral agreements,
between the Pledgor and the Indenture Trustee.
29. Bailment, Agency for Possession; Stock
Powers. The Indenture Trustee hereby appoints III Finance as its
agent for purposes of perfecting its security interests and liens on
the Pledged Collateral. The Indenture Trustee hereby agrees that
upon the payment in full of all Senior Indebtedness by AAF, and
provided that there shall be indebtedness owing by the Pledgor
under the Indenture after payment of all Senior Indebtedness, III
Finance shall deliver to the Indenture Trustee the Pledged Stock
then in its possession, together with all stock powers related
thereto and until such time, the Indenture Trustee shall not possess
any Pledged Stock nor any stock powers related thereto.
30. Subordination. The Pledgor expressly
covenants and agrees, and the Indenture Trustee acknowledges,
that the indebtedness secured hereby and the liabilities of the
Pledgor hereunder are expressly made subordinate and subject in
prior right of payment to the prior payment of Senior Indebtedness
to the extent and in the manner set forth in Article XII of the
Indenture.<PAGE>
IN WITNESS WHEREOF, the Pledgor and the
Indenture Trustee have executed this Pledge Agreement as of the
date set forth above.
AEGIS CONSUMER FINANCE, INC.
By:________________________
Name: ___________________
Title: __________________
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
By:________________________
Name: ___________________
Title: ____________________
<PAGE>
ACKN OWLEDGMENT
The undersigned hereby acknowledges receipt of a
copy of the foregoing Pledge Agreement, agrees promptly to note
on its books the security interests granted under such Pledge
Agreement, and waives any rights or requirement at any time
hereafter to receive a copy of such Pledge Agreement in
connection with the registration of any Pledged Collateral in the
name of the Lenders or its nominee or the exercise of voting
rights by the Lenders or their nominees.
AEGIS ACCEPTANCE CORP.
By: ___________________________
Name: _____________________
Title: ______________________
AEGIS AUTO FINANCE, INC.
By:___________________________
Name: _____________________
Title: ______________________
<PAGE>
EXHIBIT A
to
PLEDGE AGREEMENT
dated as of April 30, 1997
Pledged Stock Certificates
Number of
Name of Direct
Issued and
Subsidiary
Outstanding Shares
Aegis Auto Finance, Inc.,
[__________]
formerly known as The Clearing
House Corp.
Aegis Acceptance Corp.
[__________]
formerly known as Equivest Auto
Credit Corp.
<PAGE>
TABLE OF CONTENTS
1. Pledge............................................................2
2. Security for Liabilities..........................................2
3. Pledged Collateral Adjustments....................................2
4. Subsequent Changes Affecting Pledged Collateral...................3
5. Representations and Warrantie.....................................3
6. Voting Rights.....................................................4
7. Dividends and Other Distributions.................................4
8. Transfers and Other Liens.........................................5
9. Remedies..........................................................6
10. Security Interest Absolute.......................................7
11. Indenture Trustee Appointed Attorney-in-Fact.....................7
12. Waivers..........................................................7
13. Term.............................................................8
14. Definitions......................................................8
15. Successors and Assigns...........................................8
16. GOVERNING LAW....................................................8
17. Consent to Jurisdiction; Counterclaims; Forum Non
Conveniens............................................................8
18. WAIVER OF JURY TRIAL.............................................9
19. Waiver of Bond...................................................9
20. Advice of Counsel................................................9
21. Severability.....................................................9
22. Further Assurances..............................................10
23. The Indenture Trustee' Duty of Care.............................10
24. Notices.........................................................10
25. Amendments, Waivers and Consents................................11
26. Section Headings................................................11
27. Execution in Counterparts.......................................11
28. Merger..........................................................11
29. Bailment, Agency for Possession; Stock Powers...................11
30. Subordination...................................................11
EXHIBITS
EXHIBIT A Pledged Stock Certificates
A:\10_107_9.WPD September 4, 1997 (11:54a)
EXECUTION COPY
SECURITY AGREEMENT
between
Aegis Auto Finance, Inc.,
as Grantor
AND
Norwest Bank Minnesota, National Association
as Trustee
as Secured Party
Dated as of April 30, 1997
<PAGE>
TABLE OF CONTENTS
SECTION 1. Defined Terms . . . . . . . . .1
SECTION 2 Grant of Security. . . . . . . .3
SECTION 3. Security for Obligations;
Subordination of Security Interest. . .4
SECTION 4. Grantor Remain Liable . . . . .4
SECTION 5. Release of Security Interest. .4
SECTION 6. Representations and Warranties.5
SECTION 7. Perfection and Maintenance of
Security Interest and Lien. . . . . . .5
SECTION 8. Financing Statements. . . . . .6
SECTION 9. Filing Costs. . . . . . . . . .6
SECTION 10. Schedule of Collateral . . . .6
SECTION 11. Grantor Covenants . . . . . . .6
SECTION 12. The Secured Party Appointed
Attorney-in-Fact. . . . . . . . . . . .7
SECTION 13. The Secured Party May Perform .8
SECTION 14. Secured Party's Duties. . . . .8
SECTION 15. Remedies. . . . . . . . . . . .8
SECTION 16. Exercise of Remedies. . . . . .9
SECTION 17. Injunctive Relief . . . . . . 10
SECTION 18. Interpretation and Inconsistencies;
Merger. . . . . . . . . . . . . . . . 10
SECTION 19. Expenses. . . . . . . . . . . 10
SECTION 20. Amendments, Etc.. . . . . . . 10
SECTION 21. Notices . . . . . . . . . . . 10
SECTION 22. Continuing Security Interest;
Termination . . . . . . . . . . . . . 10
SECTION 22. Severability; No Strict
Construction. . . . . . . . . . . . . 11
SECTION 23. GOVERNING LAW . . . . . . . . 11
SECTION 24. CONSENT TO JURISDICTION;
SERVICE OF PROCESS; JURY TRIAL. . . . 11
(A) EXCLUSIVE JURISDICTION. . . 11
(B) OTHER JURISDICTIONS . . . . 12
(C) SERVICE OF PROCESS. . . . . 12
(D) WAIVER OF JURY TRIAL. . . . 12
(E) WAIVER OF BOND. . . . . . . 12
(F) ADVICE OF COUNSEL . . . . . 12
SECTION 25. Subordination . . . . . . . . 13
SECURITY AGREEMENT
This SECURITY AGREEMENT ("Agreement"), dated as
of April 30, 1997 is made by Aegis Auto Finance, Inc., a
Delaware corporation (the "Grantor") and Norwest Bank
Minnesota, National Association, as Trustee (the "Secured Party")
under that certain Indenture, dated as of April 30, 1997 (the
"Indenture") between the Secured Party and the Grantor with
respect to $21,333,333 aggregate principal amount at maturity
12% Exchangeable Subordinated Notes due 2004 (the "Notes").
PRELIMINARY STATEMENT
WHEREAS, the Grantor has entered into a Loan and
Security Agreement, dated as of March 14, 1997 with III Finance
Ltd., and III Global, Ltd. (the "Lenders"), pursuant to which the
Lenders agree to lend to the Grantor up to $50,000,000 on a
revolving basis for the purchase of new and used automobiles,
light trucks, vans and minivans (the "Loan Warehouse Facility");
WHEREAS, it is a condition precedent under the Indenture
that this Agreement be entered into between the Grantor and the
Secured Party;
NOW, THEREFORE, in consideration of the premises set
forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. Defined Terms. Unless otherwise defined
herein, terms defined in the Indenture are used herein as therein
defined, and the following terms shall have the following
meanings (such meanings being equally applicable to both the
singular and the plural forms of the terms defined):
"Agreement" shall mean this Security Agreement, as the
same may from time to time be amended, restated, modified or
supplemented, and shall refer to this Agreement as the same may
be in effect at the time such reference becomes operative.
"Automobile" shall mean the new or used automobile,
light truck, van or minivan that is purchased by the Grantor in
connection with the Loan Warehouse Facility.
"Collateral" shall have the meaning given such term in
Section 2 hereof.
"Contract" shall mean with respect to each Receivable, the
note, retail sales installment contract or other evidence of an
obligor's obligation to repay the Receivable, executed by such
user in connection with the purchase of an Automobile.
"Dealer" shall mean an automobile dealer that enters into
a Dealer Agreement with the Grantor or one of its Affiliates.
"Dealer Agreement" shall mean an agreement between a
Dealer and the Grantor or one of its Affiliates, pursuant to which
the Grantor or one of its Affiliates acquires Contracts for its
benefit.
"Indenture" shall have the meaning set forth in the first
paragraph hereof.
"Lien" shall mean any security interest, charge, pledge,
option or lien or other encumbrance of any nature, whether
arising under contract or by operation of law.
"Notes" shall have the meaning set forth in the first
paragraph hereof.
"Obligations" shall mean any and all indebtedness of the
Grantor evidenced by the Indenture and the Notes and any other
obligations of the Grantor relating thereto.
"RDI Policy" shall mean the risk default policy maintained
with a risk default insurer with respect to the Receivables.
"Receivables" shall mean all indebtedness of an obligor
evidenced by a Contract, whether such Contract is originated by
the Grantor or purchased from a Dealer by the Grantor pursuant
to a Dealer Agreement or Agreements, which indebtedness is or
has been reflected in a Receivable schedule furnished by the
Grantor to the Lenders in connection with the Loan Warehouse
Facility.
"Servicer" shall mean the Grantor or such other Person
acceptable to the Grantor's lenders who, pursuant to a Servicing
Agreement, has agreed to perform various services on behalf of
the Grantor with respect to the Receivables.
"Servicing Agreement" shall mean an agreement between
the Grantor and a Servicer pursuant to which a Servicer agrees to
perform various services on behalf of the Grantor with respect to
that Receivable.
"Title" shall mean, with respect to each Receivable, the
original certificate or other instrument or registration evidencing
ownership of the related Automobile, which certificate, other
instrument or registration shall have the lien of the Grantor noted
thereon and, if applicable, a UCC financing statement signed by
the obligor and filed in the appropriate jurisdiction evidencing the
perfection of the lien granted by the obligor and the Grantor as
secured party.
"VSI Policy" shall mean the vendors' single interest
physical damage insurance policy maintained with respect to the
Receivables.
"UCC" shall mean the Uniform Commercial Code as the
same may, from time to time, be in effect in the State of New
York; provided, however, in the event that, by reason of
mandatory provisions of law, any or all of the attachment,
perfection or priority of the Secured Party security interest in any
Collateral is governed by the Uniform Commercial Code as in
effect in a jurisdiction other than the State of New York, the term
"UCC" shall mean the Uniform Commercial Code as in effect in
such other jurisdiction for purposes of the provisions hereof
relating to such attachment, perfection or priority and for
purposes of definitions related to such provisions.
SECTION 2 Grant of Security. To secure the prompt
and complete payment, observance and performance of the
Obligations, the Grantor hereby grants, assigns and pledges to the
Secured Party, a security interest in all of Grantor's right, title
and interest in and to the following, whether now owned or
existing or hereafter arising or acquired and wheresoever located
and whether the same comprise accounts, instruments, chattel
paper, general intangibles or inventory (the "Collateral"):
(a) All of the Grantor's right, title and interest in and to
the Receivables, the related Contracts, the Titles evidencing the
liens securing the Receivables and the Automobiles secured such
Receivables;
(b) All documents and instruments, including all books,
records, files, tapes, correspondence, and other information or
materials relating to the Receivables, the Contracts, the Titles, the
Automobiles and any Dealer Agreement, whether now or
hereafter delivered to, or in the possession, custody or control of,
the Grantor, the Servicer, any subservicer, any Dealer and/or the
Lenders or the Secured Party;
(c) All rights of the Grantor under any Dealer
Agreement, including all amounts received or receivable by the
Grantor from any Dealer pursuant to the terms of any Dealer
Agreement, and all amounts received or receivable by a Grantor
from the Servicer pursuant to the terms of any Servicing
Agreement, including, without limitation, on account of principal
and interest payments on the Receivables or the Contracts, all net
proceeds received by virtue of liquidation of any Receivables, any
retained proceeds received under any property damage, casualty
or other insurance policy with respect to any Receivable, all
proceeds received under the RDI Policy and the VSI Policy with
respect to claims made under the RDI Policy and the VSI Policy
and any and all interest of the Grantor in any property damage,
casualty or other insurance policies as the same relate to the
Automobile securing the Receivables;
(d) All right, title and interest of the Grantor in and to
any deposit accounts required to be maintained in connection with
the Loan Warehouse Facility, any and all cash deposited by the
Grantor, or by any Dealer in any such account, and all
investments held in and all rights with respect to any such
account;
(e) Any and all interest of the Grantor (i) in and under the
Servicing Agreement and (ii) in, to and under any tax refunds
receivable by the Grantor on account of any defaults under the
Receivables.
(f) All cash and non-cash proceeds of the foregoing items
(a) - (e) and the documents pertaining thereto, together with
whatever is receivable or received when any of items (a) through
(e) or the proceeds thereof are sold, collected, leased or
exchanged or otherwise disposed of, whether such disposition is
voluntary or involuntary and also includes, without limitation, all
rights to payment with respect to any cause of action affecting or
relating to the foregoing and all additions thereto, substitutions
therefor and replacements thereof.
SECTION 3. Security for Obligations; Subordination of
Security Interest. This Agreement secures the payment of all
Obligations of the Grantor now or hereafter existing under the
Indenture. The parties hereby agree that the security interest
granted to the Secured Party hereunder shall be subordinate to
any security interest granted by the Grantor to the Lenders in
connection with any Senior Indebtedness owed to such Lenders.
SECTION 4. Grantor Remain Liable. Anything herein
to the contrary notwithstanding, (a) Grantor shall remain solely
liable under the contracts and agreements included in the Col-
lateral to the extent set forth therein to perform all of their duties
and obligations thereunder to the same extent as if this Agreement
had not been executed, (b) the exercise by the Secured Party of
any of its rights hereunder shall not release the Grantor from any
of its duties or obligations under the contracts and agreements
included in the Collateral, and (c) the Secured Party shall have no
responsibility, obligation or liability under the contracts and
agreements included in the Collateral by reason of this
Agreement, nor shall the Secured Party be required or obligated,
in any manner, to (i) perform or fulfill any of the obligations or
duties of the Grantor thereunder, (ii) make any payment, or make
any inquiry as to the nature or sufficiency of any payment
received by the Grantor or the sufficiency of any performance by
any party under any such contract or agreement or (iii) present or
file any claim, or take any action to collect or enforce any claim
for payment assigned hereunder.
SECTION 5. Release of Security
Interest. Notwithstanding anything to the contrary in Sections 2
and 3 hereof, in the event that any Receivables (the "Released
Receivables") are now or hereafter sold from time to time to
Aegis Auto Funding Corp. IV, a Delaware corporation, (the
"Purchaser") pursuant to that certain Master Purchase Agreement
(the "Master Purchase Agreement") between the Grantor, as
seller, and the Purchaser, as purchaser, dated as of March 1,
1997 and (y) transferred by the Purchaser to one of the various
securitization trusts established pursuant to that certain Master
Trust Agreement dated as of March 1, 1997 (the "Master Trust
Agreement") between the Purchaser and Norwest Bank
Minnesota, National Association, then, in such event, the
collateral evidenced by this financing statement shall not include
such Released Receivables, the Contracts relating thereto, the
Automobiles securing such Released Receivables nor the Titles
evidencing such Automobiles nor any other related property
described above which evidences or otherwise secures the
Released Receivables and which is transferred to the Purchaser
and by the Purchaser to a trust as described above in connection
with the sale of the related Released Receivable. The foregoing
release does not in any way release the secured party's security
interest in and to the rights, whether now existing or hereafter
acquired or arising, (i) to receive payment of the purchase price
owed by the Purchaser for and in consideration of the sale of the
Released Receivables to Purchaser nor (ii) to receive distributions
or other payments made by the Purchaser to the Grantor on
account of the Grantor's interests as a shareholder of the
Purchaser.
SECTION 6. Representations and Warranties. The
Grantor represents and warrants, as of the date of this Agreement
and as of each date hereafter until termination of this Agreement
pursuant to Section 21:
(a) The correct corporate name of the Grantor is set forth
in the first paragraph of this Agreement. The chief place of
business and chief executive office of the Grantor is located at the
address of the Grantor set forth below the Grantor's signature on
this Agreement.
(b) The Grantor is the legal and beneficial owner of the
Collateral free and clear of all liens except for the Lien granted to
the Lenders in connection with any Senior Indebtedness owed to
such Lenders.
(c) This Agreement creates in favor of the Secured Party
a legal, valid and enforceable security interest in the Collateral.
When financing statements have been filed in the office of the
Secretary of State of New Jersey against the Grantor, the Secured
Party will have a lien on, and security interest in, the Collateral
in which a security interest may be perfected by such filing,
subject only to liens permitted by this Agreement.
(d) No authorization, approval or other action by, and no
notice to or filing with, any governmental authority other than
such that has already been taken or made and which is in full
force and effect, is required (i) for the grant by the Grantor of the
security interest in the Collateral granted hereby, (ii) the
execution, delivery or performance of this Agreement by the
Grantor or (iii) for the exercise by the Secured Party of any of its
rights or remedies hereunder.
SECTION 7. Perfection and Maintenance of Security
Interest and Lien. The Grantor agrees that until all of the
Obligations have been fully satisfied, the Secured Party's security
interest in and liens on and against the Collateral and all proceeds
and products thereof, shall continue in full force and effect. The
Grantor shall perform any and all steps reasonably requested by
the Secured Party to perfect, maintain and protect the Secured
Party's security interest in and liens on and against the Collateral
granted or purported to be granted hereby or to enable the Secured
Party to exercise its rights and remedies hereunder with respect to
any Collateral, including, without limitation, (i) executing and
filing financing or continuation statements, or amendments thereof,
in form and substance reasonably satisfactory to the Secured Party,
(ii) delivering to the Secured Party all certificates and other
instruments (including, without limitation, all letters of credit on
which the Grantor is named as beneficiary) representing or
evidencing Collateral, which certificates or other instruments have
been duly endorsed and are accompanied by duly executed instru-
ments of transfer or assignment and (iii) marking conspicuously
each document, contract, chattel paper and all records pertaining
to the Collateral with a legend, in form and substance satisfactory
to the Secured Party, indicating that such document, contract,
chattel paper, or Collateral is subject to the security interest
granted hereby and (iv) executing and delivering an amendment to
the Designee Agreement to reflect the security interest granted
hereby and any and all further instruments and documents, and
taking all further action, as the Secured Party may reasonably
request.
SECTION 8. Financing Statements. To the extent
permitted by applicable law, the Grantor hereby authorizes the
Secured Party to file one or more financing or continuation
statements and amendments thereto, disclosing the security interest
granted to the Secured Party under this Agreement without the
Grantor's signature appearing thereon and the Secured Party
agrees to notify the Grantor when such a filing has been made.
The Grantor agrees, to the extent permitted by applicable law, that
a carbon, photographic, photostatic, or other reproduction of this
Agreement or of a financing statement is sufficient as a financing
statement.
SECTION 9. Filing Costs. The Grantor shall pay the
costs of, or incidental to, all recordings or filings of all financing
statements, including, without limitation, any filing expenses
incurred by the Secured Party pursuant to Section 7.
SECTION 10. Schedule of Collateral. The Grantor shall
furnish to the Secured Party from time to time statements and
schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Secured
Party may reasonably request, all in reasonable detail.
SECTION 11. Grantor Covenants. The Grantor covenants
and agrees with the Secured Party that from and after the date of
this Agreement and until termination of this Agreement pursuant
to Section 21, the Grantor shall:
(a) maintain adequate books, accounts and records and
prepare all financial statements required hereunder in accordance
with generally accepted accounting principles and, once per
calendar year after reasonable notice, and at any time after the
occurrence and during the continuance of an Event of Default,
permit employees or agents of the Secured Party at any reasonable
time to inspect the properties of the Grantor and to examine or
audit its books, accounts and records and make copies and memo-
randa thereof;
(b) maintain, or shall cause the Servicer and each
subservicer under the Loan Warehouse Facility to maintain
pursuant to the terms of the Servicing Agreement, all records
necessary for compliance with the exception to withholding for
portfolio interest under Section 871(h) of the Internal Revenue
Code;
(c) furnish to the Secured Party such periodic, special, or
other reports and information as reasonably requested by the
Secured Party;
(d) maintain and keep in force in adequate amounts
insurance with responsible and reputable companies or implement
and maintain a reasonable program of self-insurance, and accept
no self-insurance risks which are substantially greater than those
historically carried by the Grantor;
(e) pay or cause to be paid all insurance premiums with
respect to the Insurance Policies and all charges and fees relating
thereto;
(f) not compromise, extend, release or adjust payments on
any Receivables, except upon full payment thereof or as provided
in the Servicing Agreement; provided, that the Grantor may,
consistent with its present business practices and subject to the
rights of the Secured Party from and after an Event of Default,
compromise, extend, release or adjust payments on, or otherwise
take possession of an Automobile in respect of a delinquent
Receivable or other past-due Receivable in an effort to maximize
the collectibility thereof;
(g) not transfer, sell or assign any Receivable to any
Person other than the Lenders or the Secured Party or deliver or
permit delivery of any Lease to any Person other than the Lenders
or the Secured Party or the Servicer prior to the repayment in full
of the related Receivable, or deliver or permit delivery of any
Title to any Person other than the Lenders or the Secured Party or
the Servicer prior to the recovery in full of any residual value with
respect to the related Automobile;
(h) not grant, create, incur, permit or suffer to exist any
Lien upon any Collateral except for the Liens granted to III
Finance or the Lenders in connection with any Senior
Indebtedness or to the Secured Party to secure the Obligations
hereunder; and
(i) not change the location of its chief executive office and
principal place of business from Newport Tower, 525 Washington
Street, 29th Floor, Jersey City, New Jersey 07310, (b) change their
name or (c) change their identity or corporate structure to such an
extent that any financing statement filed in connection with this
Agreement would become seriously misleading, unless the Grantor
shall have given the Secured Party at least 30 days prior written
notice thereof and prior to effecting any such change, taken such
steps as the Secured Party may deem necessary or desirable to
continue the perfection and priority of the Liens in favor of the
Secured Party granted in connection herewith.
SECTION 12. The Secured Party Appointed Attorney-in-
Fact. The Grantor hereby irrevocably appoints the Secured Party
as the Grantor's attorney-in-fact, with full authority in the place
and stead of the Grantor and in the name of the Grantor or
otherwise, from time to time in the Secured Party's discretion, to
take any action and to execute any instrument which the Secured
Party may deem necessary or advisable to accomplish the purposes
of this Agreement, upon the occurrence of an Event of Default, to:
(a) notify any Person obligated on any Collateral of the
rights of the Secured Party hereunder;
(b) enter into any extension, settlement or compromise
agreement relating to or affecting the Collateral and, in connection
therewith, to sell, transfer or dispose of any of the Collateral, and
take such action as the Secured Party may deem proper and apply
any money or property received in exchange for any of such
Collateral to any of the Obligations, including, without limitation,
directing the Servicer to remit to the Secured Party all funds held
by the Servicer on account of the Collateral;
(c) sell, transfer, dispose of or otherwise release any of the
Collateral;
(d) endorse, deliver evidence of title, enforce and collect
by legal action or otherwise any of the Collateral;
(e) receive payment or performance in connection with
any insurance claims, claims for breach of warranty or any other
claims concerning any of the Collateral; and
(f) protect, defend and preserve the Collateral and any
rights or interests of the Secured Party with regard thereto,
including, without limitation, filing or prosecution of any third
party claim or other legal action or proceeding which the Secured
Party deems necessary to protect any of the rights, interests or
priorities of the Secured Party with respect to any of the
Collateral.
SECTION 13. The Secured Party May Perform. If the
Grantor fails to perform any agreement contained herein, the
Secured Party may, upon three days' prior notice to the Grantor,
perform, or cause performance of, such agreement, and the
expenses of the Secured Party incurred in connection therewith
shall be payable by the Grantor under Section 18.
SECTION 14. Secured Party's Duties. The powers
conferred on the Secured Party hereunder are solely to protect its
interest in the Collateral and shall not impose any duty upon the
Secured Party to exercise any such powers. Except for the safe
custody of any Collateral in its possession and the accounting for
moneys actually received by them hereunder, the Secured Party
shall not have any duty as to any Collateral. The Secured Party
shall be deemed to have exercised reasonable care in the custody
and preservation of the Collateral in its possession if the Collateral
is accorded treatment substantially equal to that which the Secured
Party accords its own property, it being understood that the
Secured Party shall be under no obligation to take any necessary
steps to preserve rights against prior parties or any other rights
pertaining to any Collateral, but may do so at its option, and all
reasonable expenses incurred in connection therewith shall be for
the sole account of the Grantor and shall be added to the
Obligations.
SECTION 15. Remedies. (a) If any Event of Default
shall have occurred and be continuing:
(i) the Secured Party shall have, in addition to other rights
and remedies provided for herein or otherwise available to it, all
the rights and remedies of a Secured Party upon default under the
UCC (whether or not the UCC applies to the affected Collateral)
and further, the Secured Party may, without notice, demand or
legal process of any kind (except as may be required by law), all
of which the Grantor waive, at any time or times, (x) enter
Grantor's owned or leased premises and take physical possessions
of the Collateral and maintain such possession on Grantor's owned
or leased premises, at no cost to the Secured Party, or remove the
Collateral, or any part thereof, to such other place(s) as the
Secured Party may desire, (y) require the Grantor to, and the
Grantor hereby agrees that it will at its expense and upon request
of the Secured Party forthwith, assemble all or any part of the
Collateral as directed by the Secured Party and make it available
to the Secured Party at a place to be designated by the Secured
Party which is reasonably convenient to the Secured Party and
(z) without notice except as specified below, sell, lease, assign,
grant an option or options to purchase or otherwise dispose of the
Collateral or any part thereof at public or private sale, at any
exchange, broker's board or at any of the offices of the Secured
Party or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as the Secured Party may deem commer-
cially reasonable. The Grantor agrees that, to the extent notice of
sale shall be required by law, at least ten (10) days' notice to the
Grantor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable
notification. The Secured Party shall not be obligated to make
any sale of Collateral regardless of notice of sale having been
given. The Secured Party may adjourn any public or private sale
from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned;
(ii) the Secured Party shall apply all cash proceeds
received by it in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral (after payment of
any amounts payable to the Secured Party pursuant to Section 18),
against all or any part of the Obligations in such order as may be
required by the Loan Agreement, or, to the extent not specified
therein, as is determined by the Secured Party. Any surplus of
such cash or cash proceeds held by the Secured Party and
remaining after payment in full of all the Obligations shall be paid
over to the Grantor or to whomsoever may be lawfully entitled to
receive such surplus;
(b) the Grantor waives all claims, damages and demands
against the Secured Party arising out of the repossession, retention
or sale of any of the Collateral or any part or parts thereof, except
any such claims, damages and awards arising out of the gross
negligence or willful misconduct of the Secured Party, as
determined in a final non-appealable judgment of a court of
competent jurisdiction; and
(c) The rights and remedies provided under this Agree-
ment are cumulative and may be exercised singly or concurrently
and are not exclusive of any rights and remedies provided by law
or equity.
SECTION 16. Exercise of Remedies. In connection with
the exercise of its remedies pursuant to Section 15, the Secured
Party may, (i) exchange, enforce, waive or release any portion of
the Collateral and any other security for the Obligations, (ii) apply
such Collateral or security and direct the order or manner of sale
thereof as the Secured Party may, from time to time, determine
and (iii) settle, compromise, collect or otherwise liquidate any
such Collateral or security in any manner following the occurrence
of a Default, without affecting or impairing the Secured Party's
rights to take any other further action with respect to any
Collateral or security or any part thereof.
SECTION 17. Injunctive Relief. The Grantor recognizes
that in the event the Grantor fails to perform, observe or discharge
any of their obligations or liabilities under this Agreement, any
remedy of law may prove to be inadequate relief to the Secured
Party; therefore, the Grantor agrees that the Secured Party, if it so
determines and requests, shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity
of proving actual damages.
SECTION 18. Interpretation and Inconsistencies; Merger.
(a) The rights and duties created by this Agreement shall,
in all cases, be interpreted consistently with, and shall be in
addition to (and not in lieu of), the rights and duties created by
the Indenture.
(b) Except as provided in subsection (a) above, this
Agreement represents the final agreement of the Grantor and the
Secured Party with respect to the matters contained herein and
may not be contradicted by evidence of prior or contemporaneous
agreements, or subsequent oral agreements, between the Grantor
and the Secured Party.
SECTION 19. Expenses. The Grantor will upon demand
pay to the Secured Party the amount of any and all reasonable
expenses, including the reasonable fees and disbursements of its
counsel and of any experts and agents, incurred in connection with
the enforcement of the Indenture and/or of this Agreement.
SECTION 20. Amendments, Etc. No amendment or
waiver of any provision of this Agreement nor consent to any
departure by the Grantor herefrom shall in any event be effective
unless the same shall be in writing and signed by the Secured
Party and the Grantor, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose
for which given.
SECTION 21. Notices. All notices and other
communications provided for hereunder shall be delivered to the
applicable party in writing, by telecopy, mail, messenger or
overnight courier delivery, and to the address set forth below
such party's name under this Agreement, or to another address as
to which such party shall have informed the other party hereto by
written notice given in the manner described above.
SECTION 22. Continuing Security Interest; Termination.
(a) Except as provided in Section 21(b), this Agreement shall
create a continuing security interest in the Collateral and shall
(i) remain in full force and effect until the later of the payment or
satisfaction in full of the Obligations (other than contingent
indemnity obligations), (ii) be binding upon the Grantor, its
successors and assigns and (iii) inure, together with the rights and
remedies of the Secured Party hereunder, to the benefit of the
Secured Party, its successors and assigns. Nothing set forth herein
or in the Loan Agreement is intended or shall be construed to give
any other person any right, remedy or claim under, to or in respect
of this Agreement or any Collateral. The Grantor's successors
and assigns shall include, without limitation, a receiver, trustee or
debtor-in-possession thereof or therefor.
(b) Upon the payment in full in cash of the Obligations
(other than contingent indemnity obligations), this Agreement and
the security interest granted hereby shall terminate and all rights to
the Collateral shall revert to the Grantor. Upon any such
termination of security interest, the Grantor shall be entitled to the
return, upon their request and at their expense, of such of the
Collateral held by the Secured Party as shall not have been sold or
otherwise applied pursuant to the terms hereof and the Secured
Party will, at the Grantor's expense, execute and deliver to the
Grantor such other documents as the Grantor shall reasonably
request to evidence such termination.
SECTION 22. Severability; No Strict Construction. It is
the parties' intention that this Agreement be interpreted in such a
way that it is valid and effective under applicable law. However,
if one or more of the provisions of this Agreement shall for any
reason be found to be invalid or unenforceable, the remaining
provisions of this Agreement shall be unimpaired.
SECTION 23. GOVERNING LAW. ANY DISPUTE
BETWEEN THE GRANTOR AND THE SECURED PARTY
ARISING OUT OF, CONNECTED WITH, RELATED TO,
OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED BETWEEN THEM IN CONNECTION
WITH, THIS AGREEMENT OR THE LOAN AGREEMENT,
AND WHETHER ARISING IN CONTRACT, TORT,
EQUITY, OR OTHERWISE, SHALL BE RESOLVED IN
ACCORDANCE WITH THE INTERNAL LAWS
(INCLUDING SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW BUT OTHERWISE WITHOUT
REGARD TO THE CONFLICTS OF LAWS PROVISIONS)
OF THE STATE OF NEW YORK.
SECTION 24.
CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY
TRIAL.
(A) EXCLUSIVE JURISDICTION. EXCEPT AS
PROVIDED IN SUBSECTION (B), EACH OF THE PARTIES
HERETO AGREES THAT ALL DISPUTES BETWEEN THEM
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN CONNECTION WITH THIS AGREE-
MENT OR THE INDENTURE, WHETHER ARISING IN CON-
TRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE
RESOLVED EXCLUSIVELY BY STATE OR FEDERAL
COURTS LOCATED IN NEW YORK, NEW YORK, BUT THE
PARTIES HERETO ACKNOWLEDGE THAT ANY APPEALS
FROM THOSE COURTS MAY HAVE TO BE HEARD BY A
COURT LOCATED OUTSIDE OF NEW YORK, NEW YORK.
EACH OF THE PARTIES HERETO WAIVES IN ALL
DISPUTES BROUGHT PURSUANT TO THIS SUBSECTION
ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION
OF THE COURT CONSIDERING THE DISPUTE.
(B) OTHER JURISDICTIONS. THE GRANTOR
AGREES THAT THE SECURED PARTY SHALL HAVE THE
RIGHT TO PROCEED AGAINST THE GRANTOR OR ITS
PROPERTY IN A COURT IN ANY LOCATION TO ENABLE
SUCH PERSON TO (1) OBTAIN PERSONAL JURISDICTION
OVER THE GRANTOR OR (2) REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER ENTERED IN FAVOR OF SUCH PERSON.
THE GRANTOR AGREES THAT THEY WILL NOT ASSERT
ANY PERMISSIVE COUNTERCLAIMS IN ANY
PROCEEDING BROUGHT BY SUCH PERSON TO REALIZE
ON THE COLLATERAL OR ANY OTHER SECURITY FOR
THE OBLIGATIONS OR TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER IN FAVOR OF SUCH PERSON. THE
GRANTOR WAIVES ANY OBJECTION THAT IT MAY HAVE
TO THE LOCATION OF THE COURT IN WHICH SUCH
PERSON HAS COMMENCED A PROCEEDING DESCRIBED
IN THIS SUBSECTION.
(C) SERVICE OF PROCESS. THE GRANTOR
WAIVES PERSONAL SERVICE OF ANY PROCESS UPON IT
AND, AS ADDITIONAL SECURITY FOR THE
OBLIGATIONS, IRREVOCABLY APPOINTS CT
CORPORATION SYSTEM, GRANTOR'S REGISTERED
AGENT, WHOSE ADDRESS IS 1633 BROADWAY, NEW
YORK, NEW YORK 10019, AS GRANTOR'S AGENT FOR
THE PURPOSE OF ACCEPTING SERVICE OF PROCESS
ISSUED BY ANY COURT. THE GRANTOR IRREVOCABLY
WAIVES ANY OBJECTION (INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION OF THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS) WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY SUCH ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH
IN ANY JURISDICTION SET FORTH ABOVE.
(D) WAIVER OF JURY TRIAL. EACH OF THE
PARTIES HERETO IRREVOCABLY WAIVES ANY RIGHT
TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT,
OR OTHERWISE, ARISING OUT OF, CONNECTED WITH,
RELATED TO OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED BETWEEN THEM IN CONNECTION WITH
THIS AGREEMENT OR THE INDENTURE OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION
HEREWITH. EACH OF THE PARTIES HERETO AGREES
AND CONSENTS THAT ANY SUCH CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY
COURT TRIAL WITHOUT A JURY AND THAT ANY
PARTY HERETO MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS AGREEMENT
WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE PARTIES HERETO TO THE WAIVER
OF THEIR RIGHT TO TRIAL BY JURY.
(E) WAIVER OF BOND. THE GRANTOR WAIVES
THE POSTING OF ANY BOND OTHERWISE REQUIRED OF
ANY PARTY HERETO IN CONNECTION WITH ANY
JUDICIAL PROCESS OR PROCEEDING TO REALIZE ON
THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS OR TO ENFORCE ANY JUDGMENT OR
OTHER COURT ORDER ENTERED IN FAVOR OF SUCH
PARTY, OR TO ENFORCE BY SPECIFIC PERFORMANCE,
TEMPORARY RESTRAINING ORDER, PRELIMINARY OR
PERMANENT INJUNCTION, THIS AGREEMENT.
(F) ADVICE OF COUNSEL. EACH OF THE PARTIES
REPRESENTS TO EACH OTHER PARTY HERETO THAT IT
HAS DISCUSSED THIS AGREEMENT AND, SPECIFICALLY,
THE PROVISIONS OF THIS SECTION 24, WITH ITS
COUNSEL.
SECTION 25. Subordination. The Grantor expressly
covenants and agrees, and the Trustee acknowledges, that the
indebtedness secured hereby and the liabilities of the Grantor
hereunder are expressly made subordinate and subject in prior
right of payment to the prior payment of Senior Indebtedness to
the extent and in the manner set forth in Article XII of the
Indenture.
<PAGE>
IN WITNESS WHEREOF, The Grantor has caused this
Agreement to be duly executed and delivered by their officers
thereunto duly authorized as of the date first above written.
AEGIS AUTO
FINANCE, INC.
By:_____________________________
Name:
Title:
Address: Newport Tower
525 Washington Street
29th Floor
Jersey City, New Jersey 07310
Telecopy: (201) 418-7370
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
By:_______________________________
Name:
Title:
Address: Corporate Trust Department
6th & Marquette Avenue
Minneapolis, Minnesota 55479-0069
Telecopy: (612) 667-9825
A:\10107_10.WPD September 4, 1997 (12:45p)
EXECUTION COPY
SECURITY AGREEMENT
between
Aegis Acceptance Corp. and
Aegis Consumer Finance, Inc.,
as Grantors
AND
III Finance, Ltd. and
III Global, Ltd.,
as Secured Parties
Dated as of March 14, 1997
<PAGE>
TABLE OF CONTENTS
SECTION 1. Defined Terms...............1
SECTION 2 Grant of Security............3
SECTION 3. Security for Obligations;
Subordination of Security Interest ..4
SECTION 4. Grantors Remain Liable..........4
SECTION 5. Representations and Warranties...5
SECTION 6. Perfection and Maintenance of
Security Interest and Lien.............5
SECTION 7. Financing Statements..............6
SECTION 8. Filing Cost......................6
SECTION 9. Schedule of Collateral...........6
SECTION 10. Grantor Covenants..................6
SECTION 11. The Secured Parties Appointed
Attorneys-in-Fact..................7
SECTION 12. The Secured Parties May
Perform............................8
SECTION 13. Secured Parties' Duties..........8
SECTION 14. Remedies......................9
SECTION 15. Exercise of Remedies................10
SECTION 16. Injunctive Relief...................10
SECTION 17. Interpretation and Inconsistencies;
Merger.................................10
SECTION 18. Expenses............................10
SECTION 19. Amendments, Etc....................10
SECTION 20. Notices..............................10
SECTION 21. Continuing Security Interest;
Termination...............................11
SECTION 22. Severability; No Strict
Construction.................................11
SECTION 23. GOVERNING
LAW...........................11
SECTION 24. CONSENT TO JURISDICTION;
SERVICE OF PROCESS; JURY
TRIAL........................................11
(A) EXCLUSIVE JURISDICTION.............12
(B) OTHER JURISDICTIONS...........12
(C) SERVICE OF PROCESS................12
(D) WAIVER OF JURY TRIAL..................12
(E) WAIVER OF BOND...................13
(F) ADVICE OF COUNSEL...............13
SCHEDULE 1 LOCATIONS
WHERE UCC1
FINANCING
STATEMENTS ARE
TO BE FILED
SECURITY AGREEMENT
This SECURITY AGREEMENT
("Agreement"), dated as of March 14, 1997 is
made by Aegis Acceptance Corp., a Delaware
corporation ("AAC") and Aegis Consumer
Finance, Inc., a Delaware corporation ("ACF" and
together with AAC, the "Grantors" and each a
"Grantor") and III Finance, Ltd., a Cayman Islands
company ("III Finance") and III Global, Ltd., a
Cayman Islands company ("III Global", and
together with III Finance, the "Secured Parties"
and each a "Secured Party").
PRELIMINARY STATEMENT
WHEREAS, the Grantors have entered into
a Loan and Security Agreement, dated as of
February 28, 1994 with III Finance, pursuant to
which III Finance agreed to lend to the Grantors
up to $50,000,000 on a revolving basis for the
purchase and leasing of new and used
automobiles, light trucks, vans and minivans (the
"Lease Warehouse Facility");
WHEREAS, pursuant to that certain Loan
and Security Agreement, of even date herewith
(the "Loan Agreement"), between the Secured
Parties and Aegis Auto Finance, Inc., a Delaware
corporation and an Affiliate of the Grantors (the
"Borrower"), the Secured Parties have agreed to
lend to the Borrower up to $50,000,000 on a
revolving credit basis (the "Loan Warehouse
Facility") and in order to secure all indebtedness
of the Borrower evidenced by such Loan
Warehouse Facility and other obligations of the
Borrower relating thereto (all such obligations
hereinafter referred to as the "Obligations"), the
Grantors have agreed to grant to the Secured
Parties the security interest described herein; and
WHEREAS, it is a condition precedent
under the Loan Warehouse Facility that this
Agreement be entered into between the Grantors
and the Secured Parties;
NOW, THEREFORE, in consideration of
the premises set forth herein and for other good
and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. Defined Terms. Unless
otherwise defined herein, terms defined in the
Indenture are used herein as therein defined, and
the following terms shall have the following
meanings (such meanings being equally applicable
to both the singular and the plural forms of the
terms defined):
"Agreement" shall mean this Security
Agreement, as the same may from time to time be
amended, restated, modified or supplemented, and
shall refer to this Agreement as the same may be
in effect at the time such reference becomes
operative.
"Automobile" shall mean the new or used
automobile, light truck, van or minivan that is
purchased by the Grantors for lease to a particular
lessee.
"Collateral" shall have the meaning given
such term in Section 2 hereof.
"Dealer" shall mean an automobile dealer
that enters into a Dealer Agreement with a
Grantor or an Affiliate of a Grantor.
"Dealer Agreement" shall mean an
agreement between a Dealer and a Grantor or an
Affiliate of a Grantor, pursuant to which the
Grantors or an Affiliate of the Grantors agrees to
purchase Automobiles for leasing to Users.
"Designee Agreement" shall mean that
certain Designee Agreement delivered by Norwest
Bank Minnesota, N.A. on February 28, 1994 in
connection with that certain Trust Agreement of
the same date with respect to the Lease Warehouse
Facility, and designating III Finance as the
beneficiary of a security interest in the
Automobiles.
"Financing Agreements" shall mean all
agreements, instruments and documents,
including, without limitation, the Dealer
Agreement, the Servicing Agreement, the Leases,
the Titles, the notes and all other assignments,
security agreements, loan agreements, notes,
guarantees, certificates of title, subordination
agreements, pledges, powers of attorney,
consents, assignments, contracts, notices, leases,
financing statements, instruments, documents and
all other written matter whether heretofore, now
or hereafter executed by or on behalf of any
Grantor in connection with the transactions
contemplated by the Lease Warehouse Facility.
"Indenture Trustee" shall mean Norwest
Bank Minnesota, N.A., a national banking
association, in its capacity as indenture trustee
under that certain indenture dated as of March __,
1997 with the Borrower in connection with the
issuance by the Borrower of subordinated
debentures.
"Insurance Policies" shall have the
meaning set forth in Section 2(c) hereof.
"Lease" shall mean, with respect to each
Receivable, the related lease pursuant to which
the User leases an Automobile.
"Lease Warehouse Facility" shall have the
meaning set forth in the first preliminary
statement hereof.
"Lien" shall mean any security interest,
charge, pledge, option or lien or other
encumbrance of any nature, whether arising under
contract or by operation of law.
"Obligations" shall have the meaning given
such term in the second preliminary statement
hereof.
"Receivables" shall mean the right to
receive all payments due under the Leases
identified to III Finance in connection with the
Lease Warehouse Facility.
"Servicing Agreement" shall mean that
certain Master Servicing Agreement by and
between Aegis Capital Markets, Inc. and a
Servicer, as amended and supplemented by that
certain letter agreement dated as of October 25,
1993 by and between the Grantors and the
Servicer or any other servicing agreement relating
to the Receivables or Leases.
"Servicer" shall mean American Lenders
Facilities, Inc., a California corporation or any
other servicer under a Servicing Agreement.
"Servicer's File" shall mean, with respect
to each Receivable, the original Lease, Title, all
original instruments modifying the terms and
conditions of such Receivable, the original
endorsements or assignments of such Lease,
factory invoices and work orders describing the
Automobile, the bill of sale and guaranty of title,
insurance policies, tax receipts, property and
casualty insurance policies or binders naming the
Servicer as loss payee or additional named
insured, as is appropriate, insurance premium
receipts, ledger sheets, payment records,
insurance claim files and correspondence, all
documentation in connection with any
modification, release, accommodation, cosigning
or guaranty of the Receivable and any other
documentation executed or otherwise obtained in
connection with any Receivable which the
Servicer is required to hold under the terms of the
Servicing Agreement.
"Title" shall mean, with respect to each
Receivable, the original certificate or other
instrument or registration evidencing ownership of
the related Automobile, which certificate, other
instrument or registration shall identify a Grantor
as owner.
"UCC" shall mean the Uniform
Commercial Code as the same may, from time to
time, be in effect in the State of New York;
provided, however, in the event that, by reason of
mandatory provisions of law, any or all of the
attachment, perfection or priority of the Secured
Parties security interest in any Collateral is
governed by the Uniform Commercial Code as in
effect in a jurisdiction other than the State of New
York, the term "UCC" shall mean the Uniform
Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof
relating to such attachment, perfection or priority
and for purposes of definitions related to such
provisions.
"User" shall mean the obligor under a
Receivable.
SECTION 2 Grant of Security. To
secure the prompt and complete payment,
observance and performance of the Obligations,
the Grantors hereby grant, assign and pledge to
the Secured Parties, a security interest in all of
Grantors' right, title and interest in and to the
following, whether now owned or existing or
hereafter arising or acquired and wheresoever
located and whether the same comprise accounts,
instruments, chattel paper, general intangibles or
inventory (the "Collateral"):
(a) All of such Grantors' right, title and
interest in and to the Receivables, the related
Leases and the Automobiles leased thereunder,
including all rights to the Titles evidencing
ownership of such Automobiles and all rights
under any Dealer Agreements with respect to such
Automobiles.
(b) All documents and instruments,
including all books, records, files, tapes,
correspondence, and other information or
materials relating to the Receivables, the Leases,
the Titles, the Automobiles and any Dealer
Agreement, whether now or hereafter delivered
to, or in the possession, custody or control of,
either Grantor, any Servicer or subservicer, any
Dealer and/or any Secured Party.
(c) All amounts received or receivable by
a Grantor from any Dealer pursuant to the terms
of any Dealer Agreement, and all amounts
received or receivable by a Grantor from the
Servicer or any subservicer pursuant to the terms
of any Servicing Agreement relating to the
Receivables or the Leases, all net proceeds
received by virtue of liquidation of any
Receivables or Automobiles, any proceeds
received under any property damage, casualty or
other insurance policy with respect to any
Receivable or Automobile, all proceeds received
under the insurance policies required to be
maintained under the Lease Warehouse Facility
("Insurance Policies") with respect to claims made
thereunder and any and all interest of the Grantors
in any Insurance Policies or any other property
damage, casualty or other insurance policies as
the same relate to the Automobiles, the Leases
and/or the Receivables.
(d) All right, title and interest of the
Grantors in and to any hedging or depository
accounts required to be maintained in connection
with the Lease Warehouse Facility, and any and
all cash deposited by the Grantors, or by any
Dealer in any such accounts, and all investments
held in and all rights with respect to such
accounts.
(e) Any and all interest of any Grantors in
and under the Servicing Agreement.
(f) All cash and non-cash proceeds of the
foregoing items (a) - (e) and the documents
pertaining thereto, together with whatever is
receivable or received when any of items (a)
through (e) or the proceeds thereof are sold,
collected, leased or exchanged or otherwise
disposed of, whether such disposition is voluntary
or involuntary and also includes, without
limitation, all rights to payment with respect to
any cause of action affecting or relating to the
foregoing and all additions thereto, substitutions
therefor and replacements thereof.
SECTION 3. Security for Obligations;
Subordination of Security Interest. This
Agreement secures the payment of all Obligations
of the Borrower now or hereafter existing under
the Loan Agreement. The parties hereby agree
that the security interest granted to the Secured
Parties hereunder shall be subordinate to any
security interest granted by the Grantors to III
Finance in connection with the Lease Warehouse
Facility.
SECTION 4. Grantors Remain
Liable. Anything herein to the contrary
notwithstanding, (a) Grantors shall remain solely
liable under the contracts and agreements included
in the Collateral to the extent set forth therein to
perform all of their duties and obligations
thereunder to the same extent as if this Agreement
had not been executed, (b) the exercise by the
Secured Parties of any of their rights hereunder
shall not release the Grantors from any of their
duties or obligations under the contracts and
agreements included in the Collateral, and (c) the
Secured Parties shall have no responsibility,
obligation or liability under the contracts and
agreements included in the Collateral by reason of
this Agreement, nor shall the Secured Parties be
required or obligated, in any manner, to
(i) perform or fulfill any of the obligations or
duties of the Grantors thereunder, (ii) make any
payment, or make any inquiry as to the nature or
sufficiency of any payment received by the
Grantors or the sufficiency of any performance by
any party under any such contract or agreement
or (iii) present or file any claim, or take any
action to collect or enforce any claim for payment
assigned hereunder.
SECTION 5. Representations and
Warranties. The Grantors represent and warrant,
as of the date of this Agreement and as of each
date hereafter until termination of this Agreement
pursuant to Section 21:
(a) The correct corporate names of the
Grantors are set forth in the first paragraph of this
Agreement. The chief place of business and chief
executive office of the Grantors are located at the
address of the Grantors set forth below each
Grantor's signature on this Agreement.
(b) The Grantors are the legal and
beneficial owners of the Collateral free and clear
of all liens except for the Lien granted to III
Finance under the Lease Warehouse Facility and
the Lien granted to the Indenture Trustee in
connection with the issuance by the Borrower of
subordinated debentures.
(c) This Agreement creates in favor of the
Secured Parties a legal, valid and enforceable
security interest in the Collateral. When
financing statements have been filed in the
appropriate offices against the Grantors in the
locations listed on Schedule 1, the Secured Parties
will have a lien on, and security interest in, the
Collateral in which a security interest may be
perfected by such filing, subject only to liens
permitted by this Agreement.
(d) No authorization, approval or other
action by, and no notice to or filing with, any
governmental authority, other than such that has
already been taken or made and which is in full
force and effect, is required (i) for the grant by
the Grantors of the security interest in the
Collateral granted hereby, (ii) the execution,
delivery or performance of this Agreement by the
Grantors or (iii) for the exercise by the Secured
Parties of any of their rights or remedies
hereunder.
SECTION 6. Perfection and Maintenance
of Security Interest and Lien. The Grantors agree
that until all of the Obligations have been fully
satisfied, the Secured Parties' security interests in
and liens on and against the Collateral and all
proceeds and products thereof, shall continue in
full force and effect. The Grantors shall perform
any and all steps reasonably requested by the
Secured Parties to perfect, maintain and protect
the Secured Parties' security interests in and liens
on and against the Collateral granted or purported
to be granted hereby or to enable the Secured
Parties to exercise their rights and remedies
hereunder with respect to any Collateral,
including, without limitation, (i) executing and
filing financing or continuation statements, or
amendments thereof, in form and substance
reasonably satisfactory to the Secured Parties,
(ii) delivering to the Secured Parties all certificates
and other instruments (including, without
limitation, all letters of credit on which the
Grantors are named as beneficiaries) representing
or evidencing Collateral, which certificates or
other instruments have been duly endorsed and are
accompanied by duly executed instruments of
transfer or assignment, (iii) marking conspicuously
each document, contract, chattel paper and all
records pertaining to the Collateral with a legend,
in form and substance satisfactory to the Secured
Parties, indicating that such document, contract,
chattel paper, or Collateral is subject to the
security interest granted hereby and (iv) executing
and delivering an amendment to the Designee
Agreement to reflect the security interest granted
hereby and any and all further instruments and
documents, and taking all further action, as the
Secured Parties may reasonably request.
SECTION 7. Financing Statements. To
the extent permitted by applicable law, the
Grantors hereby authorize the Secured Parties to
file one or more financing or continuation
statements and amendments thereto, disclosing the
security interest granted to the Secured Parties
under this Agreement without the Grantors'
signatures appearing thereon and the Secured
Parties agree to notify the Grantors when such a
filing has been made. The Grantors agree that, to
the extent permitted by applicable law, a carbon,
photographic, photostatic, or other reproduction of
this Agreement or of a financing statement is
sufficient as a financing statement.
SECTION 8. Filing Costs. The Grantors
shall pay the costs of, or incidental to, all
recordings or filings of all financing statements,
including, without limitation, any filing expenses
incurred by the Secured Parties pursuant to
Section 7.
SECTION 9. Schedule of Collateral. The
Grantors shall furnish to the Secured Parties from
time to time statements and schedules further
identifying and describing the Collateral and such
other reports in connection with the Collateral as
the Secured Parties may reasonably request, all in
reasonable detail.
SECTION 10. Grantor Covenants. The
Grantors covenant and agree with the Secured
Parties that from and after the date of this
Agreement and until termination of this
Agreement pursuant to Section 21, the Grantors
shall:
(a) maintain adequate books, accounts and
records and prepare all financial statements
required hereunder in accordance with generally
accepted accounting principles and, once per
calendar year after reasonable notice, and at any
time after the occurrence and during the
continuance of an Event of Default, permit
employees or agents of the Secured Parties at any
reasonable time to inspect the properties of the
Grantors and to examine or audit their books,
accounts and records and make copies and memo-
randa thereof;
(b) maintain, or shall cause the Servicer
and each subservicer under the Lease Warehouse
Facility to maintain pursuant to the terms of the
Servicing Agreement, all records necessary for
compliance with the exception to withholding for
portfolio interest under Section 871(h) of the
Internal Revenue Code;
(c) furnish to the Secured Parties such
periodic, special, or other reports and information
as reasonably requested by the Secured Parties;
(d) maintain and keep in force in adequate
amounts insurance with responsible and reputable
companies or implement and maintain a
reasonable program of self-insurance, and accept
no self-insurance risks which are substantially
greater than those historically carried by the
Grantors;
(e) pay or cause to be paid all insurance
premiums with respect to the Insurance Policies
and all charges and fees relating thereto;
(f) not compromise, extend, release or
adjust payments on any Leases or Receivables,
except upon full payment thereof or as provided in
the Servicing Agreement; provided, that any
Grantor may, consistent with its present business
practices and subject to the rights of the Secured
Parties from and after an Event of Default,
compromise, extend, release or adjust payments
on, or otherwise take possession of an Automobile
in respect of a delinquent Receivable or other
past-due Receivable in an effort to maximize the
collectibility thereof;
(g) not transfer, sell or assign any
Receivable or Lease to any Person other than III
Finance, or deliver or permit delivery of any
Lease to any Person other than III Finance or the
Servicer prior to the repayment in full of the
related Receivable, or deliver or permit delivery of
any Title to any Person other than III Finance or
the Servicer prior to the recovery in full of any
residual value with respect to the related
Automobile;
(h) not grant, create, incur, permit or suffer
to exist any Lien upon any Collateral except for
the Liens granted to III Finance pursuant to the
Lease Warehouse Facility, to the Secured Parties
to secure the Obligations hereunder, or to the
Indenture Trustee in connection with the issuance
by the Borrower of subordinated debentures; and
(i) not change the location of their chief
executive office and principal place of business
from Newport Tower, 525 Washington Street,
29th Floor, Jersey City, New Jersey 07310, (b)
change their name or (c) change their identity or
corporate structure to such an extent that any
financing statement filed in connection with this
Agreement would become seriously misleading,
unless the Grantors shall have given the Secured
Parties at least 30 days prior written notice thereof
and prior to effecting any such change, taken such
steps as the Secured Parties may deem necessary
or desirable to continue the perfection and priority
of the Liens in favor of the Secured Parties
granted in connection herewith.
SECTION 11. The Secured Parties
Appointed Attorneys-in-Fact. The Grantors
hereby irrevocably appoint the Secured Parties as
the Grantors' attorneys-in-fact, with full authority
in the place and stead of the Grantors and in the
name of the Grantors or otherwise, from time to
time in the Secured Parties' discretion, to take any
action and to execute any instrument which the
Secured Parties may deem necessary or advisable
to accomplish the purposes of this Agreement,
upon the occurrence of an Event of Default, to:
(a) perform any obligation of the Grantors
under the Lease Warehouse Facility in a Grantor's
name or otherwise;
(b) notify any Person obligated on any
Collateral of the rights of the Secured Parties
hereunder;
(c) enter into any extension, settlement or
compromise agreement relating to or affecting the
Collateral and, in connection therewith, to sell,
transfer or dispose of any of the Collateral, and
take such action as the Secured Parties may deem
proper and apply any money or property received
in exchange for any of such Collateral to any of
the Obligations, including, without limitation,
directing the Servicer to remit to the Secured
Parties all funds held by the Servicer on account
of the Collateral;
(d) sell, transfer, dispose of or otherwise
release any of the Collateral;
(e) endorse, deliver evidence of title,
enforce and collect by legal action or otherwise
any of the Collateral;
(f) receive payment or performance in
connection with any insurance claims, claims for
breach of warranty or any other claims concerning
any of the Collateral; and
(g) protect, defend and preserve the
Collateral and any rights or interests of the
Secured Parties with regard thereto, including,
without limitation, filing or prosecution of any
third party claim or other legal action or proceed-
ing which the Secured Parties deem necessary to
protect any of the rights, interests or priorities of
the Secured parties with respect to any of the
Collateral.
SECTION 12. The Secured Parties May
Perform. If the Grantors fail to perform any
agreement contained herein, the Secured Parties
may, upon three days' prior notice to the Grantors,
perform, or cause performance of, such agreement,
and the expenses of the Secured Parties incurred
in connection therewith shall be payable by the
Grantors under Section 18.
SECTION 13. Secured Parties' Duties.
The powers conferred on the Secured Parties here-
under are solely to protect their interest in the
Collateral and shall not impose any duty upon
either Secured Party to exercise any such powers.
Except for the safe custody of any Collateral in
their possession and the accounting for moneys ac-
tually received by them hereunder, the Secured
Parties shall not have any duty as to any
Collateral. The Secured Parties shall be deemed
to have exercised reasonable care in the custody
and preservation of the Collateral in their
possession if the Collateral is accorded treatment
substantially equal to that which the Secured
Parties accord their own property, it being
understood that the Secured Parties shall be under
no obligation to take any necessary steps to
preserve rights against prior parties or any other
rights pertaining to any Collateral, but may do so
at their option, and all reasonable expenses
incurred in connection therewith shall be for the
sole account of the Grantors or the Borrower and
shall be added to the Obligations.
SECTION 14. Remedies. (a) If any
Event of Default shall have occurred and be
continuing:
(i) the Secured Parties shall have, in
addition to other rights and remedies provided for
herein or otherwise available to them, all the
rights and remedies of a Secured Party upon
default under the UCC (whether or not the UCC
applies to the affected Collateral) and further, the
Secured Parties may, without notice, demand or
legal process of any kind (except as may be
required by law), all of which the Grantors waive,
at any time or times, (x) enter Grantors' owned or
leased premises and take physical possession of
the Collateral and maintain such possession on
Grantors' owned or leased premises, at no cost to
the Secured Parties, or remove the Collateral, or
any part thereof, to such other place(s) as the
Secured Parties may desire, (y) require the
Grantors to, and the Grantors hereby agree that
they will at their expense and upon request of the
Secured Parties forthwith, assemble all or any part
of the Collateral as directed by the Secured Parties
and make it available to the Secured Parties at a
place to be designated by the Secured Parties
which is reasonably convenient to the Secured
Parties and (z) without notice except as specified
below, sell, lease, assign, grant an option or
options to purchase or otherwise dispose of the
Collateral or any part thereof at public or private
sale, at any exchange, broker's board or at any of
the offices of the Secured Parties or elsewhere, for
cash, on credit or for future delivery, and upon
such other terms as the Secured Parties may deem
commercially reasonable. The Grantors agree
that, to the extent notice of sale shall be required
by law, at least ten (10) days' notice to the
Grantors of the time and place of any public sale
or the time after which any private sale is to be
made shall constitute reasonable notification. The
Secured Parties shall not be obligated to make any
sale of Collateral regardless of notice of sale
having been given. The Secured Parties may
adjourn any public or private sale from time to
time by announcement at the time and place fixed
therefor, and such sale may, without further
notice, be made at the time and place to which it
was so adjourned;
(ii) the Secured Parties shall apply all cash
proceeds received by the Secured Parties in
respect of any sale of, collection from, or other
realization upon all or any part of the Collateral
(after payment of any amounts payable to the
Secured Parties pursuant to Section 18), against
all or any part of the Obligations in such order as
may be required by the Loan Agreement, or, to
the extent not specified therein, as is determined
by the Secured Parties. Any surplus of such cash
or cash proceeds held by the Secured Parties and
remaining after payment in full of all the
Obligations shall be paid over to the Grantors or
to whomsoever may be lawfully entitled to receive
such surplus;
(b) the Grantors waive all claims, damages
and demands against the Secured Parties arising
out of the repossession, retention or sale of any of
the Collateral or any part or parts thereof, except
any such claims, damages and awards arising out
of the gross negligence or willful misconduct of
the Secured Parties, as determined in a final non-
appealable judgment of a court of competent
jurisdiction; and
(c) The rights and remedies provided
under this Agreement are cumulative and may be
exercised singly or concurrently and are not
exclusive of any rights and remedies provided by
law or equity.
SECTION 15. Exercise of Remedies. In
connection with the exercise of their remedies
pursuant to Section 14, the Secured Parties may,
(i) exchange, enforce, waive or release any portion
of the Collateral and any other security for the
Obligations, (ii) apply such Collateral or security
and direct the order or manner of sale thereof as
the Secured Parties may, from time to time,
determine and (iii) settle, compromise, collect or
otherwise liquidate any such Collateral or security
in any manner following the occurrence of a
Default, without affecting or impairing the
Secured Parties' rights to take any other further
action with respect to any Collateral or security or
any part thereof.
SECTION 16. Injunctive Relief. The
Grantors recognize that in the event the Grantors
fail to perform, observe or discharge any of their
obligations or liabilities under this Agreement, any
remedy of law may prove to be inadequate relief
to the Secured Parties; therefore, the Grantors
agree that the Secured Parties, if they so determine
and request, shall be entitled to temporary and
permanent injunctive relief in any such case
without the necessity of proving actual damages.
SECTION 17. Interpretation and
Inconsistencies; Merger.
(a) The rights and duties created by this
Agreement shall, in all cases, be interpreted
consistently with, and shall be in addition to (and
not in lieu of), the rights and duties created by the
Loan Agreement.
(b) Except as provided in subsection (a)
above, this Agreement represents the final
agreement of the Grantors and the Secured Parties
with respect to the matters contained herein and
may not be contradicted by evidence of prior or
contemporaneous agreements, or subsequent oral
agreements, between the Grantors and the Secured
Parties.
SECTION 18. Expenses. The Grantors
will upon demand pay to the Secured Parties the
amount of any and all reasonable expenses,
including the reasonable fees and disbursements of
their counsel and of any experts and agents,
incurred in connection with the enforcement of the
Loan Agreement and/or of this Agreement.
SECTION 19. Amendments, Etc. No
amendment or waiver of any provision of this
Agreement nor consent to any departure by the
Grantors herefrom shall in any event be effective
unless the same shall be in writing and signed by
the Secured Parties and the Grantors, and then
such waiver or consent shall be effective only in
the specific instance and for the specific purpose
for which given.
SECTION 20. Notices. All notices and
other communications provided for hereunder shall
be delivered to the applicable party in writing, by
telecopy, mail, messenger or overnight courier
delivery, and to the address set forth below such
party's name under this Agreement, or to another
address as to which such party shall have
informed the other party hereto by written notice
given in the manner described above.
SECTION 21. Continuing Security
Interest; Termination. (a) Except as provided in
Section 21(b), this Agreement shall create a
continuing security interest in the Collateral and
shall (i) remain in full force and effect until the
later of the payment or satisfaction in full of the
Obligations (other than contingent indemnity
obligations), (ii) be binding upon the Grantors,
their successors and assigns and (iii) inure,
together with the rights and remedies of the
Secured Parties hereunder, to the benefit of the
Secured Parties, their successors and assigns.
Nothing set forth herein or in the Loan Agreement
is intended or shall be construed to give any other
person any right, remedy or claim under, to or in
respect of this Agreement or any Collateral. The
Grantors' successors and assigns shall include,
without limitation, a receiver, trustee or debtor-in-
possession thereof or therefor.
(b) Upon the payment in full in cash of
the Obligations (other than contingent indemnity
obligations), this Agreement and the security
interest granted hereby shall terminate and all
rights to the Collateral shall revert to the Grantors.
Upon any such termination of security interest, the
Grantors shall be entitled to the return, upon their
request and at their expense, of such of the
Collateral held by the Secured Parties as shall not
have been sold or otherwise applied pursuant to
the terms hereof and the Secured Parties will, at
the Grantors' expense, execute and deliver to the
Grantors such other documents as the Grantors
shall reasonably request to evidence such
termination.
SECTION 22. Severability; No Strict
Construction. It is the parties' intention that this
Agreement be interpreted in such a way that it is
valid and effective under applicable law.
However, if one or more of the provisions of this
Agreement shall for any reason be found to be
invalid or unenforceable, the remaining provisions
of this Agreement shall be unimpaired.
SECTION 23. GOVERNING LAW.
ANY DISPUTE BETWEEN THE GRANTORS
AND THE SECURED PARTIES ARISING
OUT OF, CONNECTED WITH, RELATED
TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN
THEM IN CONNECTION WITH, THIS
AGREEMENT OR THE LOAN
AGREEMENT, AND WHETHER ARISING IN
CONTRACT, TORT, EQUITY, OR
OTHERWISE, SHALL BE RESOLVED IN
ACCORDANCE WITH THE INTERNAL
LAWS (INCLUDING SECTION 5-1401 OF
THE GENERAL OBLIGATIONS LAW BUT
OTHERWISE WITHOUT REGARD TO THE
CONFLICTS OF LAWS PROVISIONS) OF
THE STATE OF NEW YORK.
SECTION 24.
CONSENT TO JURISDICTION; SERVICE OF
PROCESS; JURY TRIAL.
(A) EXCLUSIVE JURISDICTION.
EXCEPT AS PROVIDED IN SUBSECTION (B),
EACH OF THE PARTIES HERETO AGREES
THAT ALL DISPUTES BETWEEN THEM
ARISING OUT OF, CONNECTED WITH,
RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN
THEM IN CONNECTION WITH THIS AGREE-
MENT OR THE LOAN AGREEMENT,
WHETHER ARISING IN CONTRACT, TORT,
EQUITY, OR OTHERWISE, SHALL BE
RESOLVED EXCLUSIVELY BY STATE OR
FEDERAL COURTS LOCATED IN NEW
YORK, NEW YORK, BUT THE PARTIES
HERETO ACKNOWLEDGE THAT ANY
APPEALS FROM THOSE COURTS MAY
HAVE TO BE HEARD BY A COURT
LOCATED OUTSIDE OF NEW YORK, NEW
YORK. EACH OF THE PARTIES HERETO
WAIVES IN ALL DISPUTES BROUGHT
PURSUANT TO THIS SUBSECTION ANY
OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT CONSIDERING
THE DISPUTE.
(B) OTHER JURISDICTIONS. THE
GRANTORS AGREE THAT THE SECURED
PARTIES SHALL HAVE THE RIGHT TO
PROCEED AGAINST THE GRANTORS OR
THEIR PROPERTY IN A COURT IN ANY
LOCATION TO ENABLE SUCH PERSON TO
(1) OBTAIN PERSONAL JURISDICTION OVER
THE GRANTORS OR (2) REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY
FOR THE OBLIGATIONS OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER
ENTERED IN FAVOR OF SUCH PERSON.
THE GRANTORS AGREE THAT THEY WILL
NOT ASSERT ANY PERMISSIVE
COUNTERCLAIMS IN ANY PROCEEDING
BROUGHT BY SUCH PERSON TO REALIZE
ON THE COLLATERAL OR ANY OTHER
SECURITY FOR THE OBLIGATIONS OR TO
ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF SUCH PERSON. THE
GRANTORS WAIVE ANY OBJECTION THAT
THEY MAY HAVE TO THE LOCATION OF
THE COURT IN WHICH SUCH PERSON HAS
COMMENCED A PROCEEDING DESCRIBED
IN THIS SUBSECTION.
(C) SERVICE OF PROCESS. EACH
GRANTOR WAIVES PERSONAL SERVICE OF
ANY PROCESS UPON IT AND, AS
ADDITIONAL SECURITY FOR THE
OBLIGATIONS, IRREVOCABLY APPOINTS
CT CORPORATION SYSTEM, GRANTOR'S
REGISTERED AGENT, WHOSE ADDRESS IS
1633 BROADWAY, NEW YORK, NEW YORK
10019, AS GRANTOR'S AGENT FOR THE
PURPOSE OF ACCEPTING SERVICE OF
PROCESS ISSUED BY ANY COURT. EACH
GRANTOR IRREVOCABLY WAIVES ANY
OBJECTION (INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION OF THE
LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS)
WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING WITH RESPECT
TO THIS AGREEMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN
CONNECTION HEREWITH IN ANY
JURISDICTION SET FORTH ABOVE.
(D) WAIVER OF JURY TRIAL.
EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLV-
ING ANY DISPUTE, WHETHER SOUNDING
IN CONTRACT, TORT, OR OTHERWISE,
ARISING OUT OF, CONNECTED WITH,
RELATED TO OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN
THEM IN CONNECTION WITH THIS
AGREEMENT OR THE LOAN AGREEMENT
OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED
OR DELIVERED IN CONNECTION
HEREWITH. EACH OF THE PARTIES
HERETO AGREES AND CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY AND
THAT ANY PARTY HERETO MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF
THIS AGREEMENT WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT
OF THE PARTIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY
JURY.
(E) WAIVER OF BOND. THE
GRANTORS WAIVE THE POSTING OF ANY
BOND OTHERWISE REQUIRED OF ANY
PARTY HERETO IN CONNECTION WITH
ANY JUDICIAL PROCESS OR PROCEEDING
TO REALIZE ON THE COLLATERAL OR
ANY OTHER SECURITY FOR THE
OBLIGATIONS OR TO ENFORCE ANY
JUDGMENT OR OTHER COURT ORDER
ENTERED IN FAVOR OF SUCH PARTY, OR
TO ENFORCE BY SPECIFIC PERFORMANCE,
TEMPORARY RESTRAINING ORDER,
PRELIMINARY OR PERMANENT
INJUNCTION, THIS AGREEMENT.
(F) ADVICE OF COUNSEL. EACH OF
THE PARTIES REPRESENTS TO EACH
OTHER PARTY HERETO THAT IT HAS
DISCUSSED THIS AGREEMENT AND,
SPECIFICALLY, THE PROVISIONS OF THIS
SECTION 24, WITH ITS COUNSEL.
<PAGE>
IN WITNESS WHEREOF, the Grantors
have caused this Agreement to be duly executed
and delivered by their officers thereunto duly
authorized as of the date first above written.
AEGIS ACCEPTANCE CORP.
By:_______________________________
Name:
Title:
Address: Newport Tower
525 Washington Street
29th Floor
Jersey City, New Jersey 07310
Telecopy: (201) 418-7370
AEGIS CONSUMER FINANCE, INC.
By:_______________________________
Name:
Title:
Address: Newport Tower
525 Washington Street
29th Floor
Jersey City, New Jersey 07310
Telecopy: (201) 418-7370
III FINANCE, LTD.
By:_____________________________
Name:
Title:
Address: c/o Admiral Administration Ltd.
P.O. Box 32021, SMB
Anchorage Centre, 2nd Floor
Grand Cayman, Cayman Islands
British West Indies
Telecopy: (354) 949-0705
III GLOBAL, LTD.
By:____________________________
Name:
Title:
Address: c/o Admiral Administration Ltd.
P.O. Box 32021, SMB
Anchorage Centre, 2nd Floor
Grand Cayman, Cayman Islands
British West Indies
Telecopy: (354) 949-0705 <PAGE>
SCHEDULE 1
to
SECURITY AGREEMENT
dated as of March ___, 1997
LOCATIONS WHERE UCC1
FINANCING STATEMENTS ARE TO BE
FILED
Attached.
I:\DINA\SECREPOR\10_10711.WPD September 24, 1997 (10:7a)
EXECUTION COPY
LIEN SUBORDINATION AGREEMENT
LIEN SUBORDINATION
AGREEMENT ("Subordination Agreement"), dated
as of April 30, 1997, by Norwest Bank Minnesota,
National Association, as "Indenture Trustee" (as
defined below), in favor of III Finance Ltd., a
Cayman Islands corporation and such other parties
as may be holders of "Senior Indebtedness" (as such
term is defined in the Indenture referred to below).
W I T N E S S
E T H :
WHEREAS, pursuant to that certain
Indenture (the "Indenture") dated as of April 30,
1997 between, Aegis Auto Finance, Inc. (the
"Company") and Norwest Bank Minnesota, National
Association, as Trustee (herein called the "Indenture
Trustee"), the Issuer has issued those certain
$21,333,333 12% Exchangeable Subordinated Notes
(the "Securities"); and
WHEREAS, pursuant to the
"Collateral Documents" (as defined in the
Indenture), the Securities are secured by certain
"Collateral" (as defined in the Indenture), as more
expressly referenced in Section 15.01 of the
Indenture; and
WHEREAS, the Securities are also by
their terms subordinated in right of payment and
priority to the payment of "Senior Indebtedness" (as
defined in the Indenture), which Senior Indebtedness
is also secured by the Collateral; and
WHEREAS, the parties hereto are
entering into this Agreement in order, among other
things, to evidence the subordination of the
Indenture Trustee's lien on the Collateral and the
Proceeds and to define certain of the respective
rights of the Indenture Trustee and the holders of
Senior Indebtedness (or their representatives) with
respect to the Collateral and the Proceeds thereof.
NOW, THEREFORE, in
consideration of the premises and the mutual
agreements contained herein, the parties hereto agree
as follows:
1. Definitions. (a) Defined Terms. Capitalized
terms used herein and not otherwise defined in this
Agreement shall have the meanings ascribed to such
terms in the Indenture. In addition, the terms
defined above shall have their respective meanings
set forth above and the following terms shall have
the following meanings:
"Grantor" shall mean the Company,
the Parent and any of their Affiliates which now or
hereafter may grant a security interest to the
Indenture Trustee in order to secure the Junior
Indebtedness.
"Junior Indebtedness" shall mean all
principal and interest owed under or on account of
the Securities.
"Possessory Collateral" shall mean all
Collateral constituting instruments, certificated
securities or documents (each as defined in the
UCC) or other property in which a security interest
can be perfected only by possession.
"Proceeds" shall have the meaning set
forth in Section 9-306(1) of the UCC, and in any
event shall include (i) any and all proceeds of any
insurance, indemnity, warranty or guaranty payable
to either Company from time to time with respect to
any of the Collateral, (ii) any and all payments (in
any form whatsoever) made or due and payable to
either Company from time to time in connection
with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the
Collateral by any governmental authority, (iii) any
dividends, distributions, redemptions or similar
payments in respect of any Collateral; and (iv) any
and all amounts from time to time paid or payable
under or in connection with any of the Collateral.
"Secured Parties" shall mean each of
(i) the Indenture Trustee and (ii) any Senior Secured
Party.
"Senior Secured Party" shall mean
any holder of Senior Indebtedness or representative
of such holder which has been granted a security
interest in or lien on any of the Collateral.
"Senior Security Agreement" shall
mean any security agreement, loan and security
agreement, pledge agreement, depositary account
agreement or any other agreement whereby a
security interest in or lien has been created on any
of the Collateral in favor of a Senior Secured Party.
"UCC" means the Uniform
Commercial Code as from time to tome in effect in
the State of New York.
(b) Other
Definitional
Provisions.
The words "hereof", and "herein" and "hereunder"
and words of similar import when used in this
Agreement shall refer to this Agreement as a whole
and not to any particular provisions of this
Agreement, and Section references are to this
Agreement, unless otherwise specified. Wherever
appropriate in context, terms used herein in the
singular also include the plural, and vice-versa, and
each masculine, feminine or neuter pronoun shall
also include the other gender.
Section 2. Priorities Regarding
Collateral. Notwithstanding any term or provision
to the contrary contained in any Collateral
Document or any Senior Security Agreement
respecting any of the foregoing, and notwithstanding
the time, order or method of attachment or
perfection of any security interest, lien or
encumbrance granted thereby or the time or order of
filing or recording of financing statements or other
liens, pledges or security interests, and
notwithstanding anything contained in any filing or
agreement to which any Secured Party may now or
hereafter be a party, the Indenture Trustee hereby
agrees that all liens and security interests of the
Indenture Trustee, whether now or hereafter arising
and howsoever existing, in any of the Collateral and
the Proceeds thereof shall be and hereby are
subordinated to the liens and security interests of
each Senior Secured Party in the Collateral and
Proceeds thereof as collateral security for any of the
Senior Indebtedness. All amounts in respect of the
Collateral or Proceeds thereof, all amounts in respect
of such Collateral and any Proceeds thereof received
by any Secured Party (net of collection costs and
expenses) shall be distributed to all Senior Secured
Parties in satisfaction of the Senior Indebtedness
before any such amounts may be distributed to the
Indenture Trustee for satisfaction of the Junior
Indebtedness. The priority of interest of one Senior
Secured Party as against another Senior Secured
Party shall be as established by other law or
agreement without regard to this Agreement.
Section 3. Rights to Enforce;
Amounts in Trust. (a) The Indenture Trustee shall
have no right to possession of any Collateral or any
Proceeds thereof, or to enforce the collection
thereof, whether by notice to any person obligated
to make payments constituting such Collateral or
otherwise, or to foreclose upon any such Collateral
or any Proceeds thereof, whether by judicial action
or otherwise, unless and until all of the Senior
Indebtedness shall have been fully paid and satisfied
and all commitments on the part of any Senior
Secured Party to advance further funds to or for the
benefit of any Grantor have been terminated. In the
event that any Senior Secured Party sells, assigns,
disposes of or otherwise releases and of the
Collateral in order to satisfy the Senior
Indebtedness, the Indenture Trustee shall thereupon
execute and deliver to such Senior Secured Party
such termination statements and releases as such
Senior Secured Party shall reasonably request to
release the Indenture Trustee's security interest in or
lien against such Collateral. The Indenture Trustee
acknowledges and agrees that, to the extent the
terms and provisions of this Agreement are
inconsistent with the Collateral Documents or the
Indenture, the Collateral Documents and the
Indenture shall be deemed to be subject to this
Agreement.
(b) Should any payment or
distribution on account of the Collateral or any
Proceeds thereof be received by the Indenture
Trustee in violation of this Agreement, the Indenture
Trustee shall receive and hold such payment or
distribution in trust, as trustee, for the benefit of the
Senior Secured Parties and shall forthwith deliver
the same to the Senior Secured Party claiming a first
priority interest therein, in precisely the form
received (except for the endorsement or assignment
by the Indenture Trustee where necessary), for
application to all or any of the Senior Indebtedness,
provided, however, that the Indenture Trustee shall
be under no obligation to make such delivery in the
event that it has been given conflicting demands by
differing Senior Secured Parties unless the Indenture
Trustee shall have been indemnified to its
satisfaction against liability for following any such
instruction. In the event of the failure of the
Indenture Trustee to make any such endorsement or
assignment to a Senior Secured Party as required
hereinabove, then such other Secured Party or any
of its officers or employees is hereby irrevocably
authorized to make the same.
Section 4. Further Assurances. The
Indenture Trustee agrees for the benefit of the
Senior Secured Parties to execute further documents
or amendments, and to undertake such other actions,
as may be necessary to effect the purposes of this
Agreement, including, without limitation, any
registration or recordation upon any applicable
public records, or any bailment agreements or
notices required with respect to any Possessory
Collateral in the possession or under the control of
the Indenture Trustee. No Senior Secured Party
shall be under any duty to or obligation to the
Indenture Trustee or the holder of the Securities to
ensure that the Indenture Trustee's security interest
in any Possessory Collateral has been perfected,
which duties shall remain the obligations of the
relevant Grantor as set forth in any Collateral
Document.
Section 5. No Liability. Except as
may be otherwise expressly agreed by a Secured
Party, the Indenture Trustee has not made to any
Senior Secured Party and no Senior Secured Party
has made to the Indenture Trustee nor does the
Indenture Trustee hereby or otherwise make any
representations or warranties, express or implied, nor
does the Indenture Trustee assume any liability to
any other Secured Party nor does any such Secured
Party have any liability to the Indenture Trustee
with respect to: (a) obligors under any instruments
of guarantee; (b) the enforceability, validity, value
or collectibility of the extension of any of the credit
facilities to any Grantor, any collateral therefor, or
any guarantee or security which may have been
granted to any of them in connection with any
Senior Indebtedness or Junior Indebtedness; or (c)
any Grantor's title or right to transfer any of the
Collateral. Except as otherwise provided under the
UCC, no Senior Secured Party shall be liable to the
Indenture Trustee nor shall the Indenture Trustee be
liable to any Senior Secured Party for any action or
failure to act or any error or judgment, negligence,
or mistake or oversight whatsoever on its part or the
part of any of its agents, officers, employees or
attorneys with respect to any transaction relating to
any Indebtedness of any Grantor or any security or
guarantees therefor, provided that nothing in this
Section 5 shall relieve any party from liability
arising on account of such party's gross negligence
or willful misconduct.
Section 6. Amendments, Agreements,
Etc. (a) Each Senior Secured Party, at any time and
from time to time may enter into such agreement or
agreements with the Grantors as such Senior
Secured Party may deem proper, extending the time
of payment of or renewing or otherwise altering the
terms of all or any of the Senior Indebtedness, as
the case may be, without in any way thereby
impairing or affecting this Agreement.
(b) The Indenture Trustee hereby
agrees that it shall not have, and hereby waives, any
claim it might otherwise now or hereafter have
against any Senior Secured Party which claim (i)
would not have existed but for a Grantor's grant of
a junior lien to the Indenture Trustee in any of the
Collateral and (ii) arises out of, any and all actions
which a Senior Secured Party, in good faith, takes
or omits to take (including without limitation,
actions with respect to the creation, perfection or
continuation of liens or security interests in the
Collateral and any other security for the Senior
Indebtedness and actions with respect to the
collection or foreclosure upon, sale, release, or
depreciation of, or failure to realize upon, any of
such Collateral and actions with respect to the
collection of any claim for all or any part of the
Senior Indebtedness from any account debtor,
guarantor or any other party) or to the collection of
such Senior Indebtedness or the valuation, use,
protection or release of any Collateral and/or other
security for the Senior Indebtedness other than those
resulting from the gross negligence or willful
misconduct of such Senior Secured Party. Without
limiting the foregoing, the Indenture Trustee agrees
that it will not in any manner interfere with or
otherwise oppose a sale or other disposition of
Collateral to which the applicable Senior Secured
Parties have otherwise consented.
Section 7. Bankruptcy Issues. The
agreements of the parties set forth herein shall
survive the filing of a petition in bankruptcy by or
against any Grantor and the Indenture Trustee agrees
that it will not object to or oppose a sale or other
disposition of any Collateral (or any portion thereof)
free and clear of security interests, liens or other
claims of the Indenture Trustee under Section 363 of
the Bankruptcy Code of 1978, as amended (the
"Bankruptcy Code") or any other provision of the
Bankruptcy Code if the applicable Senior Secured
Party has consented to such sale or disposition of
such Collateral and so long as the Proceeds of such
disposition (net of any amounts which are required
by court order to be paid to third parties) are applied
in accordance with Section 2 hereof. The Indenture
Trustee further agrees that it will not seek to have
the automatic stay lifted with respect to such
Collateral without the prior written consent of all
Senior Secured Parties claiming an interest in such
Collateral.
Section 8. Notices. The Indenture
Trustee hereby expressly waives all notice of the
acceptance by any Senior Secured Party of the
subordination and other provisions of this
Agreement and all other notices not specifically
required pursuant to the terms of this Agreement
whatsoever, and the undersigned expressly waives
reliance by any such Senior Secured Party upon the
subordination and other agreements as herein
provided.
Section 9. Successors and
Assigns. This Agreement shall be binding upon and
shall insure to the benefit of each Secured Party and
its respective participants, successors and assigns.
Section 10.
Counterparts.
This
Agreement may be executed in any number of
counterparts and by the different parties hereto in
separate counterparts, each of which when so
executed and delivered shall be deemed an original,
and all of which shall together constitute one and
the same agreement.
Section 11. Waivers and
Amendments. Neither this Agreement nor any terms
hereof may be amended, modified or otherwise
supplement except in writing signed by the parties
hereto.
Section 12.
Governing
Law.
THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH, AND GOVERNED
BY THE LAWS OF THE STATE OF NEW
YORK.
Section 13. Third Party Rights.
This Agreement is solely for the benefit of the
Secured Parties and their respective participants,
successors and assigns, and no other person, firm,
entity or corporation, including, but not limited to,
the Companies, shall have any right, benefit, priority
or interest under, or because of the existence of, this
Agreement.
Section 14. Merger. This
Agreement represents the agreements of the
Indenture Trustee and the Grantors with respect to
the subject matter hereof and there are no
agreements, promises, undertakings, representations
or warranties relative to the subject matter hereof
not expressly set forth or referred to herein, and this
Agreement supersedes all prior agreements, if any,
relative to the subject matter hereof.
IN WITNESS WHEREOF, the parties
hereto have caused this Agreement to be duly
executed by their proper and duly authorized
officers as of the day and year first above written.
Each of the Grantors, although not a direct party
hereto, has signed below to indicate its
understanding of the foregoing and its acceptance
and agreement with all of the terms and provisions
hereof.
NORWEST BANK MINNESOTA, N.A.,
AS INDENTURE TRUSTEE
By__________________
Name:_______________
Title:______________
III FINANCE LTD.
By__________________
Name:_______________
Title:______________
Acknowledged and agreed to
as of the date first above
written:
THE AEGIS CONSUMER FUNDING GROUP,
INC.
By_________________________________
Name:______________________________
Title:_______________________________
AEGIS AUTO FINANCE, INC.
By_________________________________
Name:______________________________
Title:_____________________________
AEGIS CONSUMER FINANCE, INC.
By_________________________________
Name:______________________________
Title:_____________________________
AEGIS CAPITAL MARKETS, INC.
By_________________________________
Name:______________________________
Title:_____________________________
AEGIS ACCEPTANCE CORP.
By_________________________________
Name:______________________________
Title:_____________________________
CERTIFICATE OF DESIGNATIONS,
PREFERENCES, AND RIGHTS
OF
CLASS D REDEEMABLE PREFERRED STOCK
OF
THE AEGIS CONSUMER FUNDING GROUP, INC.
The Aegis Consumer Funding Group, Inc., a
Delaware corporation (the "Corporation"), hereby
certifies that (i) no shares of its Class D Redeemable
Preferred Stock have been issued and (ii) pursuant to
the authority contained in Article FOURTH of its
Certificate of Incorporation, and in accordance with the
provisions of Section 151 of the General Corporation
Law of the State of Delaware, the Corporation's Board
of Directors has duly adopted the following resolution
stating the voting powers, designations, preferences,
and relative, participating, optional, and other special
rights of the shares of each such series, and the
qualifications, limitations, or restrictions thereof:
RESOLVED, that a series of the authorized
preferred stock, par value $.10 per share, of the
Corporation be created hereby, and that the
designations and amounts thereof and the voting
powers, preferences, and relative, participating,
optional and other special rights of the shares of such
series, and the qualifications, limitations, or restrictions
thereof, are as follows:
1. Designations and Numbers of Shares.
Twenty-one thousand three hundred and fifty (21,350)
shares of the Class D Redeemable Preferred Stock of
the Corporation are hereby constituted as a series of
preferred stock, $.10 par value per share, stated value
$1,000 per share (the "Stated Value"), and designated
as "Class D Redeemable Preferred Stock" (hereinafter
called the "Class D Preferred Stock").
2. Dividends and Distributions.
(a) The holders of the Class D
Preferred Stock shall be entitled to preferential
cash dividends with respect thereto at the rate
of 8% of the Stated Value thereof per annum,
payable ratably per share of Class D Preferred
Stock outstanding if, as and when declared by
the board of directors of the Corporation or
any duly authorized committee of that board
(the "Board of Directors") out of funds legally
available for the payment thereof. Such
preferential dividends shall accrue daily from
the date of issuance and shall be payable on
the 1st day of May and November, or if any
such dividend payment date is a Saturday,
Sunday or legal holiday, then on the next day
which is not a Saturday, Sunday or legal
holiday.
(b) Dividends on the Class D
Preferred Stock shall be cumulative so that if,
for any dividend accrual period, cash dividends
in the amount specified in paragraph (a) of this
Section 2 are not declared and paid or set aside
for payment, the amount of accrued but unpaid
dividends shall accumulate, and such accrued
but unpaid dividends shall be added to the
preferential cash dividends payable for sub-
sequent dividend accrual periods. Accrued but
unpaid dividends shall not bear interest.
(c) Whenever dividends or
distributions payable on the Class D Preferred
Stock, as provided in this Section 2, are in
arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or
not declared, on shares of Class D Preferred
Stock outstanding shall have been paid in full,
the Corporation shall not:
(i) declare or pay dividends on,
make any other distributions
on, or redeem or purchase or
otherwise acquire for
consideration any shares of
stock ranking junior (either as
to dividends or upon
liquidation, dissolution or
winding up) to the Class D
Preferred Stock;
(ii) declare or pay dividends on or
make any other distributions on
any shares of stock ranking on
a parity (either as to dividends
or upon liquidation, dissolution
or winding up) with the Class
D Preferred Stock except
dividends paid ratably on the
Class D Preferred Stock and all
such parity stock on which
dividends are payable or in
arrears in proportion to the
total amounts to which the
holders of all such shares are
then entitled;
(iii) redeem, retire or purchase or
otherwise acquire for con-
sideration shares of any stock
ranking on a parity (either as to
dividends or upon liquidation,
dissolution or winding up) with
the Class D Preferred Stock,
provided that the Corporation
may at any time redeem,
purchase or otherwise acquire
shares of any such parity stock
in exchange for shares of any
stock of the Corporation
ranking junior (either as to
dividends or upon dissolution,
liquidation or winding up) to
the Class D Preferred Stock; or
(iv) purchase or otherwise acquire
for consideration any shares of
Class D Preferred Stock, or
any shares of stock ranking on
a parity with the Class D
Preferred Stock, except in
accordance with a purchase
offer made in writing or by
publication (as determined by
the Board of Directors) to all
holders of such shares upon
such terms as the Board of
Directors, after consideration of
the respective annual dividend
rates and other relative rights
and preferences of the
respective series and classes,
shall determine in good faith
will result in fair and equitable
treatment among the respective
series or classes.
3. Redemption.
3.1 Redemption at Option of Holder. The
holders of the Class D Preferred Stock or any of them
may, at any time or from time to time, cause the
Corporation to redeem any or all of the shares of
Preferred Stock held by them (each date being set for
redemption being referred to herein as a "Redemption
Date"), at a price payable, at the Corporation's option,
with (i) that number of shares of the common stock,
par value $.01 per share (the "Common Stock"), of the
Corporation equal to the number determined by
dividing the aggregate Stated Value with respect to the
shares of Class D Preferred Stock being redeemed by
the Redemption Value (as defined below) or (ii) cash
in an amount equal to the aggregate market price on
the Calculation Date (as defined below) of the shares
of Common Stock referenced in clause (i) above (the
"Redemption Price"). For purposes of the preceding
sentence and Section 3.3 hereof, the market price of a
share of Common Stock on any Calculation Date shall
be the average closing sale price on the Nasdaq
National Market of such a share during the 15 trading
days ending on the third business day before the
specified Redemption Date (the "Calculation Date"),
and if such stock is not then traded on the Nasdaq
National Market, then the average closing sale price
during such period on the principal market on which
such stock is traded, and if closing sale prices are not
available, then the average of the closing bid and asked
prices for such days. For purposes hereof, the
Redemption Value for each share of Common Stock
shall equal $2.00, subject to adjustment after the date
(the "Closing Date") of the Indenture (the "Indenture")
between Aegis Auto Finance, Inc. and Norwest Bank,
N.A., as Trustee relating to $21,333,333 of 12%
Exchangeable Subordinated Notes due 2004 of Aegis
Auto Finance, Inc. as follows:
(1) In case the Corporation shall
pay or make a dividend or other distribution on
any class of capital stock of the Corporation
payable in shares of Common Stock, the
Redemption Value in effect at the opening of
business on the day following the date fixed
for the determination of shareholders entitled to
receive such dividend or other distribution shall
be decreased by multiplying such Redemption
Value by a fraction of which the numerator
shall be the number of shares of Common
Stock outstanding at the close of business on
the date fixed for such determination and the
denominator shall be the sum of such number
of shares and the total number of shares
constituting such dividend or other distribution,
such decrease to become effective immediately
after the opening of business on the day
following the date fixed for such
determination. For the purposes of this
paragraph (1), the number of shares of
Common Stock at any time outstanding shall
not include shares held in the treasury of the
Corporation but shall include shares issuable in
respect of scrip certificates issued in lieu of
fractions of shares of Common Stock. The
Corporation will not pay any dividend or make
any distribution on shares of Common Stock
held in the treasury of the Corporation.
(2) In case the Corporation shall
issue rights, options or warrants to all holders
of its Common Stock entitling them to
subscribe for or purchase shares of Common
Stock at a price per share less than the current
market price per share (determined as provided
in paragraph (8) of this Section 3.1) of the
Common Stock on the date fixed for the
determination of stockholders entitled to
receive such rights, options or warrants, the
Redemption Value in effect at the opening of
business on the day following the date fixed
for such determination shall be decreased by
multiplying such Redemption Value by a
fraction of which the numerator shall be the
number of shares of Common Stock
outstanding at the close of business on the date
fixed for such determination plus the number
of shares of Common Stock which the
aggregate offering price of the total number of
shares of Common Stock so offered for
subscription or purchase would purchase at
such current market price per share and the
denominator shall be the number of shares of
Common Stock outstanding at the close of
business on the date fixed for such
determination plus the number of shares of
Common Stock so offered for subscription or
purchase, such decrease to become effective
immediately after the opening of business on
the day following the date fixed for such
determination. For the purposes of this
paragraph (2), the number of shares of
Common Stock at any time outstanding shall
not include shares held in the treasury of the
Corporation but shall include shares issuable in
respect of scrip certificates issued in lieu of
fractions of shares of Common Stock. The
Corporation will not issue any rights, options
or warrants in respect of shares of Common
Stock held in the treasury of the Corporation.
(3) In case outstanding shares of
Common Stock shall be subdivided into a
greater number of shares of Common Stock,
and, conversely, in case outstanding shares of
Common Stock shall each be combined into a
smaller number of shares of Common Stock,
the Redemption Value in effect at the opening
of business on the day following the day upon
which such subdivision or combination
becomes effective shall be adjusted by
multiplying the Redemption Value in effect
immediately prior to the close of business on
the date fixed for such subdivision or
combination by a fraction of which the
numerator shall be the number of shares of
Common Stock outstanding immediately prior
to such subdivision or combination and the
denominator of which shall be the number of
shares of Common Stock outstanding
immediately following such subdivision or
combination. For the purposes of this
paragraph (3), the number of shares of
Common Stock at any time outstanding shall
not include shares held in the treasury of the
Corporation but shall include shares issuable in
respect of scrip certificates issued in lieu of
fractions of shares of Common Stock. The
Corporation will not pay any dividend or make
any distribution on shares of Common Stock
held in the treasury of the Corporation. Such
increase or reduction, as the case may be, is to
become effective immediately after the opening
of business on the day following the day upon
which such subdivision or combination
becomes effective.
(4) In case the Corporation shall,
by dividend or otherwise, distribute to all
holders of its Common Stock evidences of its
indebtedness, shares of any class of capital
stock, or other property (including securities,
but excluding (i) any rights, options or
warrants referred to in paragraph (2) of this
Section, (ii) any dividend or distribution paid
exclusively in cash in an amount not exceeding
cumulative net income of the Corporation and
its subsidiaries from the Closing Date through
the date of the Corporation's most recent
quarterly financial statements, including any
extraordinary or non-recurring income, gain or
loss, net, in either case, of the applicable
income tax effect of such non-recurring item,
(iii) any dividend or distribution referred to in
paragraph (1) of this Section and
(iv) distributions, in connection with any
merger, consolidation, conveyance, sale,
transfer or lease of assets, or share exchange
with respect to which Section 3.2 applies), the
Redemption Value shall be decreased by
multiplying the Redemption Value in effect
immediately prior to the close of business on
the date fixed for the determination of
stockholders entitled to receive such
distribution by a fraction of which the
numerator shall be the current market price per
share (determined as provided in paragraph (8)
of this Section 3.1) of the Common Stock on
the date fixed for such determination (the
"Reference Date") less the then fair market
value (as determined by the Board of
Directors, whose determination shall be
conclusive and described in a resolution duly
adopted by the Board of Directors, a copy of
which shall be certified by the Secretary or an
Assistant Secretary of the Corporation to have
been duly adopted by the Board of Directors
and to be in full force and effect on the date of
such certification (a "Board Resolution")) on
the Reference Date of the portion of the assets,
shares or evidences of indebtedness so
distributed as is applicable to one share of
Common Stock and the denominator shall be
the current market price per share of the
Common Stock on the Reference Date, such
adjustment to become effective immediately
prior to the opening of business on the day
following the Reference Date.
(5) In case a tender offer or
exchange offer made by the Corporation or any
Subsidiary (as defined below) for all or any
portion of the Common Stock shall expire and
such tender or exchange offer (as amended
upon the expiration thereof) shall require the
payment to stockholders (based on the
acceptance (up to any maximum specified in
the terms of the tender or exchange offer) of
Purchased Shares (as defined below) of an
aggregate consideration having a fair market
value (as determined by the Board of
Directors, whose determination shall be
conclusive and described in a Board
Resolution) that combined together with the
aggregate of the cash plus the fair market value
(as determined by the Board of Directors,
whose determination shall be conclusive and
described in a Board Resolution), as of the
expiration of such tender or exchange offer, of
consideration payable in respect of any other
tender or exchange offer by the Corporation or
any Subsidiary for all or any portion of the
Common Stock expiring within the 12 months
preceding the expiration of such tender or
exchange offer and in respect of which no
adjustment pursuant to this paragraph (5) has
been made (the "combined tender and cash
amount") is in excess of 10% of the product of
the current market price per share of the
Common Stock (determined as provided in
paragraph (8) of this Section 3.1) as of the last
time (the "Expiration Time") tenders or
exchanges could have been made pursuant to
such tender or exchange offer (as it may be
amended) multiplied by the number of shares
of Common Stock outstanding (including any
tendered or exchanged shares) as of the
Expiration Time, then, and in each such case,
immediately prior to the opening of business
on the day after the date of the Expiration
Time, the Redemption Value shall be adjusted
so that the same shall equal the price
determined by multiplying the Redemption
Value immediately prior to close of business
on the date of the Expiration Time by a
fraction (i) the numerator of which shall be
equal to (A) the product of (I) the current
market price per share of the Common Stock
(determined as provided in paragraph (8) of
this Section 3.1) on the date of the Expiration
Time and (II) the number of shares of
Common Stock outstanding (including any
tendered or exchanged shares) on the date of
the Expiration Time less (B) the combined
tender and cash amount, and (ii) the
denominator of which shall be equal to the
product of (A) the current market price per
share of the Common Stock (determined as
provided in paragraph (8) of this Section 3.1)
as of the Expiration Time multiplied by (B) the
number of shares of Common Stock
outstanding (including any tendered or
exchanged shares) as of the Expiration Time
less the number of all shares validly tendered
or exchanged and not withdrawn as of the
Expiration Time (the shares deemed so
accepted up to any such maximum, being
referred to as the "Purchased Shares"),
provided, however, that if the foregoing
fraction is greater than one, no adjustment shall
be made, and further provided, that if such
fraction is zero or less, the Redemption Value
shall be adjusted to $.01. "Subsidiary" means
a corporation more than 50% of the
outstanding voting stock of which is owned,
directly or indirectly, by the Company or by
one or more other Subsidiaries, or by the
Company and one or more other Subsidiaries.
For the purposes of the definition of
Subsidiary, "voting stock" means stock which
ordinarily has voting power for the election of
directors, whether at all times or only so long
as no senior class of stock has such voting
power by reason of any contingency.
(6) In case the Corporation shall
issue to an Affiliate (as defined below) shares
of its Common Stock at a price per share less
than the current market price per share
(determined as provided in paragraph (8) of
this Section 3.1) on the date the Corporation
issues such additional shares, the Redemption
Value shall be reduced immediately thereafter
so that it shall equal the price determined by
multiplying such Redemption Value in effect
immediately prior thereto by a fraction of
which the numerator shall be the number of
shares of Common Stock outstanding
immediately prior to the issuance of such
additional shares plus the number of shares of
Common Stock which the aggregate offering
price of the total number of shares of Common
Stock so offered would purchase at such
current market price per share and the
denominator shall be the number of shares of
Common Stock that would be outstanding
immediately after the issuance of such
additional shares. Such adjustment shall be
made successively whenever such an issuance
is made. For the purposes of this paragraph
(6), the number of shares of Common Stock at
any time outstanding shall not include shares
held in the treasury of the Corporation but
shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares
of Common Stock. This paragraph (6) shall
not apply to Common Stock issued to any
employee or director under bona fide employee
benefits plans adopted by the Board of
Directors and approved by the holders of
Common Stock when required by law.
"Affiliate" of any specified Person (as defined
in Section 3.2) means any other Person directly
or indirectly controlling or controlled by or
under direct or indirect common control with
such specified Person. For the purposes of this
definition, "control", when used with respect to
any specified Person, means the power to
direct the management and policies of such
Person, directly or indirectly, whether through
the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the
foregoing.
(7) The reclassification or
recapitalization of Common Stock into
securities other than Common Stock (other
than a consolidation or merger to which
Section 3.2 applies or a change in par value, or
from par value to no par value, or from no par
value to par value) shall be deemed to involve
(a) a distribution of such securities other than
Common Stock to all holders of Common
Stock as specified in paragraph (4) of this
Section 3.1 (and the effective date of such
reclassification shall be deemed to be "the date
fixed for the determination of stockholders
entitled to receive such distribution" and "the
date fixed for such determination" within the
meaning of paragraph (4) of this Section 3.1)
and (b) a subdivision or combination, as the
case may be, of the number of shares of
Common Stock outstanding immediately prior
to such reclassification into the number of
shares of Common Stock outstanding
immediately thereafter as specified in
paragraph (3) of this Section 3.1 (and the
effective date of such reclassification shall be
deemed to be "the day upon which such
subdivision becomes effective" or "the day
upon which such combination becomes
effective", as the case may be, and "the day
upon which such subdivision or combination
becomes effective" within the meaning of
paragraph (3) of this Section 3.1).
(8) For the purpose of any
computation under paragraph (2), (4), (5) or
(6) of this Section 3.1), the current market
price per share of Common Stock on any date
shall be calculated by the Corporation and be
deemed to be the average of the daily closing
prices per share of Common Stock on the
Nasdaq National Market, and if such stock is
not then traded on the Nasdaq National Market
then the average closing price during such
period on the principal market on which such
stock is traded, and if such closing sale price is
not available, then the average of the closing
bid and asked prices for the five consecutive
trading days selected by the Corporation
commencing not more than 10 trading days
before, and ending not later than, the earlier of
the day in question and the day before the "ex"
date with respect to the issuance or distribution
requiring such computation. For purposes of
this paragraph, the term "'ex' date", when used
with respect to any issuance or distribution,
means the first date on which the Common
Stock trades regular way in the applicable
securities market or on the applicable securities
exchange without the right to receive such
issuance or distribution.
(9) No adjustment in the
Redemption Value shall be required unless
such adjustment (plus any adjustments not
previously made by reason of this paragraph
(9)) would require an increase or decrease of at
least one percent in such price; provided,
however, that any adjustments which by reason
of this paragraph (9) are not required to be
made shall be carried forward and taken into
account in any subsequent adjustment. All
calculations shall be made to the nearest cent
or to the nearest one-hundredth of a share, as
the case may be.
3.2. Provision in Case of Merger or Similar
Transaction. In case of any consolidation or merger
of the Corporation with or into any other Person
("Person" means any individual, corporation, limited
liability company, partnership, joint venture, joint stock
company, trust, unincorporated organization, or
government or any agency or political subdivision
thereof), any merger of another Person with or into the
Corporation (other than a merger which does not result
in any reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock or
Class D Preferred Stock), any conveyance, sale,
transfer or lease of all or substantially all of the assets
of the Corporation or compulsory share exchange, the
Person formed by such consolidation or resulting from
such merger, which acquires such assets or which
acquires the shares of the Corporation pursuant to such
share exchange, as the case may be, shall, in the
agreement relating to such transaction and in the
charter documents of such entity, provide that the
holders of shares of Class D Preferred Stock (i) shall
be entitled, upon the effectiveness of such merger or
consolidation, to redeem the Class D Preferred Stock
for a consideration equal to the market value of the
shares of stock or other securities or property which
the holder of shares of Common Stock referenced in
clause (i) of the definition of Redemption Price in
Section 3.1 would have been entitled to receive upon
such merger or consolidation and (ii) shall have
thereafter rights as nearly equivalent as possible to the
rights set forth in this Section 3.
3.3 Redemption at Option of Corporation.
The Corporation may, subject to applicable law, at any
time, in whole or in part, on a pro-rata basis among
the holders of Class D Preferred Stock in proportion to
the number of shares of Class D Preferred Stock held
by them, redeem the shares of Class D Preferred Stock
from each holder thereof (each date set for redemption
being referred to herein as a "Redemption Date") at a
price per share of Class D Preferred Stock payable in
cash equivalent to (i) the Stated Value plus (ii) all
accrued and unpaid dividends (whether or not declared
or due) to the Redemption Date fixed for the
redemption of such shares of Class D Preferred Stock
(the "Redemption Price"). In the case of any
redemption of Class D Preferred Stock for cash at the
Corporation's option in accordance with this Section
3.3, the Corporation shall deliver on the Redemption
Date to the holder of shares of Class D Preferred Stock
being redeemed, along with the Redemption Price
thereof, warrants, in form substantially similar to the
Warrants (as defined in the Indenture) and including
provisions substantially similar to the provisions of the
Indenture applicable to the Warrants, and including
anti-dilution provisions substantially similar to the
provisions set forth in Sections 3.1 and 3.2 hereof,
having an aggregate exercise price equal to the
aggregate Stated Value of the Class D Preferred Stock
being redeemed to purchase that number of shares of
Common Stock which would have been issued had
such shares of Class D Preferred Stock been redeemed
pursuant to clause (i) of Section 3.1. In the event the
Corporation elects to redeem Class D Preferred Stock
pursuant to this Section 3.3 at a time when it is not
held by a Purchaser (as such term is defined in the
Note Purchase Agreement related to the Securities
issued pursuant to the Indenture) or an Affiliate of
such Purchaser, the Corporation may elect to pay the
Redemption Price in shares of Common Stock having
an aggregate market price equal to such Redemption
Price, in which case no warrants shall be issued
pursuant to the preceding sentence with respect to such
redemption.
3.4 Procedures Applicable to Redemptions.
(a) Redemption Notice. At least
(30) days but not more than sixty (60) days prior to a
Redemption Date, written notice (a "Redemption
Notice") shall be delivered to the Corporation by each
holder seeking to cause the Corporation to redeem
shares of Class D Preferred Stock on the Redemption
Date or by the Corporation to each holder of Class D
Preferred Stock the Corporation seeks to redeem on
such Redemption Date (in each case, a "Redeeming
Holder"). The Redemption Notice shall state:
(i) the number of shares of
Class D Preferred
Stock to be redeemed
from such Redeeming
Holder;
(ii) the Redemption
Date and the
Redemption
Price; and
(iii) in the case of a
Redemption Notice
given by the
Corporation, the
manner and place
designated for the
Redeeming Holders to
surrender to the
Corporation their
certificates representing
the shares of Class D
Preferred Stock to be
redeemed in exchange
for the Redemption
Price.
If a Redeeming Holder or Redeeming
Holders deliver a Redemption Notice, the Corporation
shall, within 15 days after the date thereof, deliver to
the Redeeming Holders a notice (the "Election Notice")
setting forth the information described in clause (iii)
above
and stating the Corporation's election to pay the
Redemption Price in cash or shares of Common Stock,
and, if in shares of Common Stock, a statement of the
number of shares of Common Stock constituting the
Redemption Price.
(b) Deliveries of Stock Certificates.
On or before the Redemption Date, each Redeeming
Holder shall surrender to the Corporation the certificate
or certificates representing the shares of Class D
Preferred Stock to be redeemed, in the manner and the
place designated in the Redemption Notice or the
Election Notice, as the case may be, and thereupon the
Redemption Price for those shares shall be payable on
the Redemption Date to the order of the person whose
name appears on that certificate or certificates, and
each surrendered certificate shall be canceled and
retired. In the event that less than all of the shares of
Class D Preferred Stock represented by a certificate
surrendered for redemption are redeemed as aforesaid,
a new certificate or certificates shall be issued
representing the unredeemed shares.
(c) Cessation of Dividend Accrual.
If on the Redemption Date the Redemption Price is
either paid or made available for payment through the
deposit arrangement specified in clause (d) below, then
notwithstanding that certificates evidencing any of the
shares of Class D Preferred Stock so elected to be
redeemed shall not have been surrendered, dividends
on such shares shall cease to accrue after the
Redemption Date and all rights with respect to the
redeemed shares of Class D Preferred Stock shall
forthwith after the Redemption Date terminate, except
only the right of the Redeeming Holders to receive the
Redemption Price without interest upon surrender of
their certificate or certificates representing the shares of
Class D Preferred Stock that have been redeemed,
subject to applicable law. If the Corporation shall
default in the payment of the Redemption Price, then,
with respect to all shares of Class D Preferred Stock
for which the Redemption Price shall not have been
paid, dividends shall continue to accrue on such
redeemed shares of Class D Preferred Stock and all
other rights shall remain in effect with respect to such
shares until the Corporation shall pay the Redemption
Price on such shares.
(d) Deposit of Funds for
Redemption. On or prior to the Redemption Date, the
Corporation shall deposit in a segregated trust account
with any bank or trust company having total assets at
least equal to $100 million a sum equal to the
aggregate Redemption Price (either in cash or
certificates representing shares of Common Stock) of
all shares of Class D Preferred Stock to be redeemed,
with irrevocable instructions and authority to the bank
or trust company to pay, or deliver on or after the
Redemption Date or prior thereto, the Redemption
Price to the respective holders upon the surrender of
their share certificates. From and after the Redemption
Date if such deposit shall have been made, the shares
so put or called for redemption shall be redeemed and
shall after such redemption be canceled and no longer
be available for issuance as shares of Class D Preferred
Stock by the Corporation but shall have the status of
authorized but unissued shares of Preferred Stock of
the Corporation without designation as to rights,
preferences, limitations or series until such shares are
once more designated as part of a particular series with
particular rights, preferences or limitations by the
Board of Directors of the Corporation. The deposit
shall constitute full payment of the redeemed shares of
Class D Preferred Stock to their holders, and from and
after the Redemption Date the shares shall be deemed
to be no longer outstanding, and the holders thereof
shall cease to be stockholders with respect thereto
except for the right to receive from the bank or trust
company payment or delivery of the Redemption Price
of the shares, without interest, upon surrender of their
certificates therefor. Any funds so deposited and
unclaimed at the end of one year from the Redemption
Date shall be released or repaid to the Corporation,
after which time the holders of shares redeemed shall
be entitled to receive payment of the Redemption Price
only from the Corporation. No sinking fund shall be
established in relation to the redemption of Class D
Preferred Stock.
4. Liquidation. Upon any voluntary or
involuntary dissolution, liquidation, or winding up of
the Corporation (a "Liquidation"), the holder of each
share of Class D Preferred Stock then outstanding shall
be entitled to be paid out of the assets of the
Corporation available for distribution to its
stockholders, before any distribution of assets shall be
made to the holders of Common Stock of the
Corporation or to the holders of other stock of the
Corporation that ranks junior to such series of the
Class D Preferred Stock in respect to distributions
upon a Liquidation of the Corporation ("Junior Stock"),
an amount equal to the Stated Value of such Class D
Preferred Stock, plus an amount equal to all dividends
accrued and unpaid on such share on the date fixed for
distribution of assets of the Corporation to the holders
of the Class D Preferred Stock. Neither a
consolidation or merger of the Corporation with or into
any other entity, nor a merger of any other entity with
or into the Corporation, nor a sale or transfer of all or
any part of the Corporation's assets for cash or
securities or any other property, shall be considered a
Liquidation. Written notice of any Liquidation shall
be given to the holders of the Class D Preferred Stock
not less than thirty days prior to any payment date
stated therein.
5. Voting Rights. The holders of
the shares of Class D Preferred Stock shall not be
entitled to cast votes on any matter.
6. Holders, Notices. The term
"holder" or "holders" wherever used herein with
respect to a holder or holders of shares of Class D
Preferred Stock shall mean the holder or holders of
record of such shares as set forth on the stock transfer
records of the Corporation. Whenever any notice is
required to be given under this Certificate of
Designation, such notice may be given personally or
by mail. Any notice given to a holder of any share of
Class D Preferred Stock shall be sufficient if given to
the holder of record of such share at the last address
set forth for such holder on the stock transfer records
of the Corporation. Any notice given by mail shall be
deemed to have been given when deposited in the
United States mail with postage thereon prepaid. The
Corporation shall send to the holders of the Class D
Preferred Stock copies of any notices, statements, or
other communications sent to the holders of the
Common Stock and of the setting of a record date for
the holders of the Common Stock for any purpose.
<PAGE>
IN WITNESS WHEREOF, The Aegis
Consumer Funding Group, Inc. has caused this
Certificate of Designation, Preferences, and Rights of
the Class D Redeemable Preferred Stock be executed
by its duly authorized officers this __ day of May,
1997.
THE AEGIS CONSUMER FUNDING GROUP, INC.
By:
Angelo R. Appierto
Chairman of the Board of Directors
and Chief Executive Officer
Attest:
_________________________
Dina L. Penepent
Secretary
EXECUTION COPY
AMENDED AND RESTATED MASTER
LOAN AGREEMENT
This Amended and Restated Master Loan
Agreement ("Agreement") is made as of this 30th
day
of
April, 1997
among AEGIS CONSUMER
FINANCE, INC. ("ACF"), a Delaware corporation,
AEGIS
AUTO FINANCE, INC., a Delaware
corporation
("AAF") (AAF and ACF are sometimes
referred to hereinafter individually as a "Borrower"
and collectively as the "Borrowers") and III
FINANCE LTD., a Cayman Islands company
("Lender").
PRELIMINARY STATEMENT:
WHEREAS, Borrowers and Lender
are party to certain "Existing Loan Agreements" (as
defined herein);
WHEREAS, Borrowers and Lender
have agreed, on the terms and conditions set forth
herein, to modify certain terms of the Loan
Agreements and to amend and restate all of the
terms and provisions of the Loan Agreements in this
Agreement;
NOW, THEREFORE, in
consideration of the terms and conditions contained
herein, and of the loans or extension of credit
previously or hereafter made to or for the benefit of
Borrowers by Lender hereunder, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 General Terms. When
used herein, the following terms shall have the
following meanings:
"AAC" shall mean Aegis Acceptance
Corp., a Delaware corporation.
"AAF I" shall mean Aegis Auto
Funding Corp., a Delaware corporation.
"AAF II" shall mean Aegis Auto
Funding Corp. II, a Delaware corporation.
"AAF IV" shall mean Aegis Auto
Funding Corp. IV, a Delaware corporation.
"ACM" shall mean Aegis Capital
Markets, Inc., a Delaware corporation.
"Additional Loan" shall have the
meaning set forth in Section 2.1.
"Affiliate" shall mean, as to any
Person, any other Person that, directly or
indirectly, controls, is controlled by or is
under common control with such Person or
is a director or officer of such Person.
"Backup Servicer" shall have, with
respect to any Trust, the meaning set forth in
the applicable Pooling and Servicing
Agreement. The term includes, without
limitation, each "Backup Servicer" under and
as defined in any Existing Loan Agreement.
"Business Day" shall mean any day
other than a Saturday, Sunday, legal holiday
or other day under the laws of Bermuda, the
United States, or the State of New York, on
which commercial banking institutions are
obligated by law or executive order to be
closed.
"Change in Control" shall mean any
of the following: (i) the Parent ceases to be
the owner, directly or indirectly, of 100% of
the equity interest in, and capital stock of
either Borrower; or (ii) any of Joseph
Battiato, Angelo Appierto or Gary Peiffer
shall cease to hold their current positions or
cease to be otherwise actively involved in
the management of either Borrower,
provided, however, that should any one of
the foregoing individuals (and only one)
cease to hold his current office or cease to
be actively involved in management of either
Borrower and the Parent as a result of death,
disability or discharge for cause, then no
"Change of Control" shall be deemed to have
occurred under this definition unless and
until another of the foregoing individuals
ceases to hold his current office or ceases to
be actively involved in management as
described above.
"Collateral" shall mean all
"Collateral" as defined in any of the Existing
Loan Agreements and all other property and
interests of property in which a security
interest has been granted to Lender to secure
the Obligations and shall include all
Warehouse Collateral and all Pledged Stock,
LP Units and related property pledged under
any Pledge Agreement.
"Default" shall mean any event
which, with the passage of time or the giving
of notice, or both, would constitute an Event
of Default.
"Distribution Date" shall have, with
respect to any Trust, the meaning set forth in
the applicable Pooling and Servicing
Agreement.
"Effective Date" shall mean the date
on which this Agreement shall have become
effective in accordance with the terms of
Section 3.1.
"ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as
amended from time to time, together with
any regulations promulgated and rulings
issued thereunder from time to time.
"Event of Default" shall mean any
one or more of the events specified in
Section 7.1.
"Excess Receipts" shall have, with
respect to any Trust, the meaning set forth in
the applicable Pooling and Servicing
Agreement. The term includes, without
limitation, all of the "Excess Receipts" under
and as defined in any Existing Loan
Agreement.
"Existing AAF Loan
Agreements" shall mean (i) those
certain Loan and Security
Agreements between AAF and
Lender, dated as of June 20, 1995,
September 25, 1995, December 20,
1995, March 22, 1996, May 20,
1996, June 25, 1996 and September
12, 1996, respectively, as the same
have been amended, restated or
otherwise modified from time to time
and (ii) the Old Warehouse Loan
Agreement.
"Existing ACF Loan
Agreements" shall mean those certain
Loan and Security Agreements
between Aegis Consumer Finance,
Inc. and Lender, dated as of August
11, 1994, September 28, 1994,
December 22, 1994 and March 22,
1995, respectively, as the same have
been amended, restated or otherwise
modified from time to time.
"Existing Loan Agreements"
shall mean the Existing ACF Loan
Agreements and the Existing AAF
Loan Agreements.
"Existing Loans" shall mean the
"Loans" outstanding
as of the date hereof
under
the Existing Loan
Agreements,
including all "Loans" evidenced by that
certain Amended and Restated Promissory
Note dated March 19, 1997 in the principal
amount of $23,357,834.12.
"Financing Agreements" shall mean
all agreements, instruments and documents,
including, without limitation, this
Agreement, the Guaranty, the Note, the
Pledge Agreements, the SPC
Acknowledgments, the Partnership
Acknowledgments, and all other assignments,
security agreements, pledge instructions, loan
agreements, notes, guarantees, certificates of
title, subordination agreements, pledges,
powers of attorney, consents, assignments,
contracts, notices, leases, financing
statements, instruments, documents and all
other written matter whether heretofore, now
or hereafter executed by or on behalf of
Borrowers in connection with the
transactions contemplated by this Agreement.
"Funding Date" shall mean any date
on which an Additional Loan is made
hereunder.
"Global" shall mean III Global Ltd.,
a Cayman islands company.
"Governmental Authority" shall mean
any nation or government, any federal, state,
local or other political subdivision thereof
and any entity exercising executive,
legislative, judicial, regulatory or
administrative functions of or pertaining to
government.
"Guaranty" shall mean that certain
Guaranty executed by Parent pursuant to
which Parent guaranties all of the
Obligations of Borrowers to Lender under
this Agreement.
"Indebtedness" of any Person shall
mean (i) indebtedness of such Person for
borrowed money, (ii) obligations of such
Person evidenced by bonds, debentures,
notes or other similar instruments, (iii)
obligations of such Person to pay the
deferred purchase price of property or
services (excluding trade payables payable
within 30 days of delivery of goods or
services), (iv) obligations of such Person as
lessee under leases which shall have been or
should be, in accordance with generally
accepted accounting principles, recorded as
a capital lease, (v) obligations secured by
any Lien upon property or assets owned by
such Person, even though such Person has
not assumed or become liable for the
payment of such obligations, and (vi)
obligations of such Person under direct or
indirect guaranties in respect of, and
obligations (contingent or otherwise) to
purchase or otherwise acquire, or otherwise
to assure a creditor against loss in respect of,
indebtedness or obligations of others of the
kinds referred to in clause (i) through (v)
above.
"Indenture" shall mean that certain
Indenture as of even date herewith relating
to the Subordinated Debentures.
"Indenture Trustee" shall mean
Norwest Bank Minnesota, N.A., as trustee
for the holders of the Subordinated
Debentures, or any successor trustee.
"Intercreditor Agreement" shall mean
that certain Intercreditor dated August 13,
1996 by and among Lender, Borrowers and
Greenwich Capital Financial Products, Inc.,
as such agreement may be superseded and
restated by a new Intercreditor Agreement
among such parties and the Indenture
Trustee to be executed after the effective
date hereof.
"IRC" shall mean the Internal
Revenue Code of 1986, as amended.
"Lease Warehouse Facility" shall
mean the outstanding credit facility made by
Lender to AAC and Aegis Consumer
Finance, Inc., a Delaware corporation,
pursuant to the Loan and Security
Agreement, dated February 28, 1994, as
amended from time to time.
"Loan Warehouse Facility" shall
mean the outstanding credit facility made by
Lender to AAF pursuant to the Loan and
Security Agreement, dated as of March 14,
1997 among Lender, AAF and Global.
"Lien" shall mean any security
interest, charge, pledge, option or lien or
other encumbrance of any nature, whether
arising under contract or by operation of
law.
"Loans" shall mean the Existing
Loans and the Additional Loans.
"LP Unit" shall mean each unit
representing a limited partnership interest in
any of the Partnerships.
"Master Certificate Purchase
Agreement" shall mean that certain Master
Certificate Purchase Agreement, dated as of
March 14, 1997 from AAF IV and the
Parent to Finance and Global.
0
"Master Trust Agreement" shall mean
that certain Master Trust Agreement, dated
as of March 1, 1997 between AAF IV and
Norwest Bank Minnesota, National
Association, as Trustee.
"Note" shall mean (i) the amended
and restated promissory note of Borrowers in
favor of Lender substantially in the form of
Exhibit A and (ii) any other note which
Lender may request from Borrowers in order
to evidence an Additional Loan.
"Obligations" shall mean all of the
payment and performance obligations and
liabilities of Borrowers to Lender under this
Agreement, the Existing Loan Agreements,
the other Financing Agreements, and the
other "Financing Agreements" (as such term
is defined in each Existing Loan Agreement.
"Old Warehouse Loan Agreement"
shall mean that certain Loan and Security
Agreement among AAF, ACM, AAC and
Lender, dated as of November 8, 1993, as
the same has been amended, restated or
otherwise modified from time to time,
including that certain Master Amendment to
Loan and Security Agreements dated as of
March 19, 1997 by and among Borrowers
and Lender whereby ACF agreed to assume
certain obligations of AAF thereunder and
whereby each of the Borrowers agreed to
certain amendments to such old agreement.
"Parent" shall mean The Aegis
Consumer Funding Group, Inc., a Delaware
corporation formerly known as Aegis
Holdings Corporation.
"Partnership Acknowledgments" shall
mean those certain Acknowledgments
executed by each of the Partnerships as of
the date hereof whereby such Partnership
acknowledges the terms of this Agreement
and the Pledge Agreements and agrees to
comply with certain provisions hereof
pertaining to such Partnership and agrees to
pay directly to the Lender any and all
amounts owed by such Partnership to either
Borrower.
"Partnership Agreement" shall mean,
with respect to any Partnership, the
Agreement of Limited Partnership or
equivalent agreement for such Partnership.
"Partnerships" shall mean the
following partnerships, each a Delaware
limited partnership, owned directly or
indirectly by ACF: Aegis Auto Receivables
1994-A, Aegis Auto Receivables 1994-2,
Aegis Auto Receivables 1994-3, Aegis Auto
Receivables 1995-1.
"Person" shall mean any individual,
sole proprietorship, partnership, joint
venture, trust, unincorporated organization,
association, corporation, institution, entity,
party or government (whether national,
federal, state, provincial, county, city,
municipal or otherwise, including without
limitation, any instrumentality, division,
agency, body or department thereof).
"Pledge Agreements" shall mean each
of those certain Pledge Agreements dated as
of even date herewith whereby the
Borrowers reaffirm and restate the pledges of
the Pledged SPC Stock and the LP Units
previously made under or in connection with
the Existing Loan Agreements.
"Pledged SPC Stock" shall mean all
of the issued and outstanding stock of AAF
I, AAF II and AAF IV.
"Pooling and Servicing Agreement"
shall mean, with respect to any Trust, the
Pooling and Servicing Agreement executed
in connection with the formation of such
Trust. The term includes, without limitation,
each "Pooling and Servicing Agreement"
under and as defined in any Existing Loan
Agreement.
"Purchase Agreement"
shall
mean,
with respect to any Trust, the Purchase
Agreement
whereby AAF sold the
"Receivables" to an SPC or Partnership, as
applicable, for re-sale to the applicable Trust.
The term includes, without limitation, each
"Purchase Agreement" under and as defined
in any Existing Loan Agreement.
"RDI Policy" shall mean one of the
risk default policies maintained with respect
to the Receivables.
"Receivables" shall mean all
indebtedness of an obligor evidenced by a
retail installment sales contract and security
agreement or similar contract, whether such
contract is originated by either Borrower or
purchased from a dealer by either Borrower,
which indebtedness either (i) is included in
the "Warehouse Collateral" under the Loan
Warehouse Facility or (ii) has been sold by
a Borrower to an SPC or Partnership and re-
sold by such SPC or Partnership to a Trust.
"Registry" shall have the meaning set
forth in Section 8.8.
"Report Date" shall mean the 20th
day of each calendar month or, if such day
is not a Business Day, then the next
succeeding Business Day.
"Residual Interest" shall have, with
respect to any Trust, the meaning set forth in
the applicable Pooling and Servicing
Agreement. The term includes, without
limitation, each "Residual Interest" under and
as defined in any Existing Loan Agreement.
"Servicer" shall
have, with respect to
any Trust, the
meaning set forth in the
applicable Pooling
and Servicing Agreement.
"SPC" shall mean
any of AAF I,
AAF II and AAF IV, each a Delaware
corporation and
a wholly-owned subsidiary
of
AAF.
"SPC Acknowledgments"
shall mean
those certain
Acknowledgments
executed by
each of the
SPCs
as of the
date hereof
whereby
such SPC
acknowledges
the terms
of this Agreement
and the Pledge
Agreements and
agrees
to comply with
certain provisions hereof pertaining to the
SPCs
and
agrees to pay directly to the
Lender any and all amounts owed by such
SPC to either Borrower.
"Subordinated Debentures" shall
mean AAF's $21,333,333 12% Exchangeable
Subordinated Debentures guaranteed by the
Parent.
"Termination Date" shall mean the
earlier of (i) the fourth anniversary of the
date hereof and (ii) the date on which
Lender terminates this Agreement pursuant
to Section 7.1(A).
"Trust" shall mean any of the grantor
trusts established by an SPC or a Partnership
pursuant to a Pooling and Servicing
Agreement. The term includes, without
limitation, each "Trust" under and as defined
in any Existing Loan Agreement and each
Trust created under the Master Trust
Agreement.
"Trust Certificates" shall mean, with
respect to any Trusts, the pass-through
certificates issued pursuant to the applicable
Pooling and Servicing Agreement. The term
includes all such certificates purchased
pursuant to the Master Certificate Purchase
Agreement.
"Trustee" shall mean, with respect to
any Trust, the trustee named in the
applicable Pooling and Servicing Agreement.
"VSI Policy" shall mean the vendors'
single interest physical damage insurance
policy maintained with respect to the
Receivables.
"Warehouse Collateral" shall mean all
of the "Collateral" pledged by AAF to the
Lender under the Old Warehouse Loan
Agreement.
Section 1.2 Terms Defined in
Uniform Commercial Code. All other terms
contained in this Agreement (and which are not
otherwise specifically defined herein) shall have the
meanings provided by the Uniform Commercial
Code as in effect from time to time in the State of
New York (the "Code") to the extent the same are
used or defined therein.
Section 1.3 Accounting Terms. All
accounting terms not specifically defined herein
shall be construed in accordance with generally
accepted accounting principles, consistently applied.
Section 1.4 Other Terms. 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 similar import when used
in this Agreement shall refer to this Agreement as a
whole and not to any particular provisions of this
Agreement. Wherever appropriate in context, terms
used herein in the singular also include the plural,
and vice-versa, and each masculine, feminine or
neuter pronoun shall also include the other gender.
Section 1.5 Preliminary Statement.
The Preliminary Statement is incorporated herein by
this reference thereto.
ARTICLE II
LOANS AND INTEREST
Section 2.1 Loans. (a) Subject to
the terms and conditions contained in the Existing
Loan Agreements, Lender has previously extended
to Borrowers the Existing Loans, for which
Borrowers are liable on a joint and several basis,
and Lender may, in its sole discretion from time to
time, hereafter extend further loans ("Additional
Loans") to Borrowers on a joint and several basis.
Borrowers hereby acknowledge that Lender has no
commitment to make any Additional Loans and that
the provisions contained herein are for
administrative convenience in the event that any
such Additional Loans are made the repayment
terms of which are to be governed hereby.
(b) The aggregate principal amount
of the Existing Loans shall be evidenced by a Note
(as described in clause (i) of the definition thereof),
dated the date hereof (or, if later, as of the Effective
Date) and in the aggregate outstanding principal
amount of the Existing Loans; in the event that
Lender so requests, any Additional Loans may be
evidenced either by a new Note or by an amendment
of the existing Note to reflect the increased principal
amount resulting from such Additional Loans;
provided, however, that failure to obtain any such
Note or amendment shall not affect the obligations
of Borrowers hereunder or under any other Note to
repay any Additional Loan or any other Loan.
(c) Borrowers may prepay any
portion of the Loans in whole or in part; provided,
however, that simultaneously with such prepayment,
Borrowers shall pay all interest accrued and unpaid
on the amount so prepaid through the date of
prepayment.
Section 2.2 Making the Additional
Loans. (a) No Additional Loan shall be in an
aggregate amount of less than $100,000.
(b) If Borrowers have so requested
and Lender has so agreed to make any Additional
Loan, then, Borrowers shall deliver a written notice
of borrowing to Lender in the form of Exhibit B
hereto setting forth the requested amount of such
Additional Loan and acknowledging that any loan
advanced by Lender pursuant to such request
constitutes an Additional Loan within the meaning
of this Agreement.
Section 2.3 Note. Concurrently with
the execution hereof, Borrowers shall execute and
deliver to Lender a Note to evidence the aggregate
amount of all Existing Loans outstanding at this
time. Such Note shall be dated the date hereof (or,
if later, as of the Effective Date) and shall mature
on the Termination Date. Lender is hereby
authorized to endorse the amount of each Additional
Loan, each repayment or prepayment of principal of
any Loan on the schedule attached to and
constituting a part of such Note, which endorsement
shall constitute prima facie evidence of the accuracy
of the information so endorsed; provided, that
failure by Lender to make such endorsement shall
not affect the obligations of Borrowers hereunder or
under any Note. In lieu of endorsing such schedule,
Lender is hereby authorized, at its option, to record
such Loans (including Additional Loans),
repayments or prepayments in its books and records,
such books and records constituting prima facie
evidence of the accuracy of the information
contained therein.
Section 2.4 Interest. (a) Borrowers
hereby promise, jointly and severally, to pay to
Lender interest on the unpaid principal amount of
each Loan for the period commencing on the date
such Loan was made until, but not including, the
date such Loan shall be paid in full. All Loans shall
bear interest at a rate equal to twelve percent (12%)
per annum. Each interest payment shall be
computed on the basis of a 360-day year for the
actual number of days elapsed. Interest shall be
paid, monthly in arrears on each Distribution Date
for all accrued and unpaid interest on the unpaid
principal of the Loans through such date. In
addition, on any date of any principal prepayment
hereunder pursuant to Sections 2.5 and 7.1, the
Borrowers shall pay accrued and unpaid interest on
the amount of such prepayment to the extent such
interest is not otherwise paid pursuant to the
immediately preceding sentence.
(b) After the occurrence and during
the continuance of an Event of Default, the Loans
shall bear interest at a rate equal to the rate set forth
in Section 2.4(a) plus two percent (2.00%).
(c) Notwithstanding the foregoing,
nothing in this Agreement shall require Borrowers
to pay interest at a rate exceeding the maximum rate
(the "Maximum Rate") permitted by applicable law.
If the interest rate provided for hereunder on any
date would exceed the Maximum Rate, then the
interest rate shall be automatically reduced to the
Maximum Rate and the interest rate for any
subsequent period, to the extent less than the
Maximum Rate, shall be increased to equal the
Maximum Rate until such time as the interest paid
hereunder equals the amount which would have been
paid if the interest otherwise payable hereunder had
at all times been permitted under applicable law.
Section 2.5 Repayments;
Prepayments. (a) The Loans shall be payable as
follows:
(i) Whenever either Borrower
receives, whether directly or indirectly, (x) a
payment or distribution from or on account
of any LP Units or Pledged Stock or any
Excess Receipts or any other payment or
other distribution from an SPC or a
Partnership, then such Borrower shall
immediately prepay the Loans by the amount
of the payment or distribution so received.
Such prepayments shall be applied to the
Obligations as set forth in Section 2.5(b) and
shall be accompanied by a payment of all
interest accrued and unpaid through the date
of such mandatory prepayment and allocable
to the amount so prepaid.
(ii) Whenever either Borrower,
directly or indirectly, receives a payment or
other distribution which constitutes proceeds
of any Warehouse Collateral, whether upon
a sale of Receivables included therein to an
SPC or otherwise, then such Borrower shall
immediately prepay the Loans by the amount
of the payment or other distribution so
received. Such prepayments shall be applied
to the Obligations as set forth in Section
2.5(b) and shall be accompanied by a
payment of all interest accrued and unpaid
through the date of such mandatory
prepayment and allocable to the amount so
prepaid.
(iii) Within 15 days after unaudited
financial statements are issued by the Parent
during each of the first three quarters of its
fiscal year and within 15 days after its
audited year-end financial statements are
issued, the Borrower shall prepay the
outstanding principal balance of the Loan by
the amount of "Accumulated Cash Flow" (as
defined in the Indenture) less any amounts of
such "Accumulated Cash Flow" which are
required to be paid to Greenwich Capital
Financial Products, Inc. or its assigns under
the Intercreditor Agreement.
(iv) The entire remaining outstanding
principal balance of the Loans, together with
any accrued and unpaid interest and any
other Obligations hereunder, shall be due and
payable on the Termination Date.
(v) In addition to the foregoing, if the
Lender ceases trading activities, dissolves or
commences distribution of a material portion
of its assets, then the Lender may demand
payment of all Loans then outstanding, in
which event the entire remaining outstanding
principal balance of the Loans, together with
any accrued and unpaid interest and any
other Obligations hereunder, shall be due and
payable on the ninetieth day following such
written notice.
(b) Subject to Section 7.2(d), all
payments of any amounts due under any provision
of this Agreement or any other Financing
Agreement, shall be applied in the following order:
first to payment of interest due and owing; second
to the then outstanding principal balance of the
Loans; and third to the remaining balance of the
Obligations. If any payment becomes due on a
Saturday, Sunday or any day on which Lender is
legally closed for business, such payment shall be
made on the next succeeding Business Day, and, in
the case of a principal payment, interest on such
principal payment shall be payable for such
extension of time and shall be included with such
payment.
(c) Borrowers shall make each
payment hereunder and under the Note on the day
when due in lawful money of the United States of
America to Lender at The First National Bank of
Chicago, Chicago, Illinois, account number 52-
61333, or at such other account which Lender may
hereafter designate to Borrowers in writing.
(d) The obligation of each Borrower
to pay the Loans and other Obligations shall be a
general obligation of such Borrower, absolute and
unconditional, and all such obligations shall be joint
and several.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1 Conditions Precedent to
this Agreement. This Agreement is subject to the
satisfaction of all of the following conditions
precedent:
(a) Documents. Lender shall have
received, on or before the Effective Date, this
Agreement, the initial Note, the SPC
Acknowledgments, the Partnership
Acknowledgments, the Guaranty, and all other
agreements, documents, financing statements and
instruments described in the List of Closing
Documents
attached hereto as Exhibit
C
and made
a part hereof, each duly executed where appropriate,
dated the
Effective Date
where appropriate and in
form and substance reasonably satisfactory to
Lender.
(b) Governmental and Other
Consents and Approvals. All notices to and filings
with all regulatory bodies and other Persons required
to be given or made, and all consents or other
approvals therefrom shall have been obtained in
connection with the transactions contemplated by
this Agreement and the other Financing Agreements.
(c)
Issuance of Subordinated
Debentures. AAF shall have issued the
Subordinated Debentures and the proceeds thereof
shall have been used to reduce the Existing Loans to
a principal amount not greater than $34,753,667.00.
(d) Restructuring of Other Debt.
Greenwich Capital Financial Products, Inc., shall
have consented to the issuance of the Subordinated
Debentures and the proposed terms of the new
Intercreditor Agreement.
Section 3.2 Conditions Precedent to
Additional Loans. In the event that Lender agrees
to make any Additional Loans hereunder, the
obligation of Lender to make such Additional Loans
shall be subject to the conditions precedent that on
the Funding Date therefor (a) the following
statements shall be true (and the request for any
Additional Loans and the acceptance by Borrowers
of the proceeds of such Additional Loan, shall
constitute a representation and warranty by
Borrowers that on the date of making of such
Additional Loan such statements are true):
(i) The representations and
warranties contained in Article IV are true
and correct in all respects on and as of the
date of such Additional Loan, before and
after giving effect to such Additional Loan,
as though made on and as of such date;
(ii) No event has occurred and is
continuing, or would result from such
Additional Loan, which constitutes a Default
or an Event of Default;
(iii) There has been no material
adverse change in the business operations or
financial condition of Parent or Borrower
since April 30, 1997;
(iv) No law, regulation, order,
judgment or decree of any Governmental
Authority shall enjoin, prohibit or restrain, or
impose or result in the imposition of any
material adverse condition upon, Lender's
making of the requested Additional Loan;
(v) After giving effect to the
requested Additional Loan, the aggregate
outstanding principal amount of all Loans,
loans under the Lease Warehouse Facility,
Loan Warehouse Facility, principal
investments in any of the Trust Certificates
and any other loans, advances and other
extensions of credit made or held by Lender
to either Borrower and/or any of their
respective Affiliates, would not exceed 25%
of Lender's "net assets" as such term is
defined in such Lender's Articles of
Association; and
(vi) the Lender shall have received
such other approvals, opinions or documents
as Lender may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into this
Agreement, each Borrower hereby makes the
following representations and warranties to Lender,
each of which shall survive the execution and
delivery of this Agreement or any other Financing
Agreement and shall be deemed remade as of the
date of each Additional Loan:
Section 4.1 Corporate Existence.
Each of the Borrowers, the Parent, each SPC and
each Partnership is duly organized, validly existing
and in good standing under the laws of the State of
Delaware, and has authority to conduct business and
is in good standing in all other states where the
nature and extent of the business transacted by it or
the ownership of its assets makes such authorization
necessary.
Section 4.2 Corporate Authority; No
Conflicts. The borrowings hereunder and the
execution, delivery and performance by each
Borrower of this Agreement, the Note and the other
Financing Agreements (i) are within such
Borrower's corporate powers, (ii) have been duly
authorized by all necessary corporate and
stockholder action, (iii) do not contravene such
Borrower's Certificate of Incorporation or by-laws,
and (iv) do not contravene nor result in a default
under, nor result in the creation of a Lien (other
than the Liens in favor of Lender created pursuant
to the terms of this Agreement) under, any law or
any contractual restriction binding on or affecting
such Borrower. No consent or approval of any
holder of any indebtedness or obligation of either
Borrower, and no consent, permission, authorization,
order or license of any Governmental Authority, is
necessary in connection with the execution, delivery
and performance of the Financing Agreements,
including, without limitation, this Agreement and the
Note, or any transaction contemplated hereby or
thereby. The execution, delivery and performance
by the Parent of the Guaranty (i) are within the
Parent's corporate powers, (ii) have been duly
authorized by all necessary corporate and
stockholder action, (iii) do not contravene the
Parent's Certificate of Incorporation or by-laws, and
(iv) do not contravene nor result in a default under,
nor result in the creation of a Lien under, any law
or any contractual restriction binding on or affecting
the Parent. The execution, delivery and
performance by each SPC of the SPC
Acknowledgements to which it is a party and the
execution, delivery and performance by each
Partnership of the Partnership Acknowledgments to
which it is a party (i) are within such SPC's or
Partnership's corporate or partnership powers, as
applicable, (ii) have been duly authorized by all
necessary corporate, stockholder and/or partnership
or partner action, as applicable, (iii) do not
contravene such SPC's Certificate of Incorporation
or by-laws or such Partnership's Partnership
Agreement, and (iv) do not contravene nor result in
a default under, nor result in the creation of a Lien
under, any law or contractual restriction binding on
or affecting such SPC or such Partnership. This
Agreement, the Note and the other Financing
Agreements to which the Borrower is a party
constitute valid, binding and legal obligations of the
Borrower enforceable in accordance with their
terms, the Guaranty constitutes the valid, binding
and legal obligation of the Parent enforceable in
accordance with its terms, the SPC
Acknowledgements constitute the valid, binding and
legal obligations of each SPC party thereto
enforceable in accordance with their terms, and the
Partnership Acknowledgements constitute the valid,
binding and legal obligations of each Partnership
party thereto enforceable in accordance with their
terms.
Section 4.3 Financial Condition. The
audited consolidated and consolidating financial
statements of the Parent and the Borrowers dated as
of June 30, 1996, and all interim financial
statements previously delivered to the Lender are
complete and correct in all material respects and
such financial statements have been prepared in
conformity with generally accepted accounting
principles and practices consistently applied and
fairly present the financial condition and results of
operations of the Parent and the Borrowers as of the
date thereof (and for the period then ended) in
conformity with such accounting principles and
practices (subject, in the case of interim statements,
to normal year-end adjustments). Since December
31, 1996, there has been no material adverse change
in such financial condition or results of operation for
the Parent or the Borrowers.
Section 4.4 Litigation. Except as
described on Schedule 4.4, there is no litigation, tax
claim, proceeding or dispute pending or, to either
Borrower's knowledge, threatened against either
Borrower, the Parent, any SPC or any Partnership,
or affecting their respective properties or assets,
which, if determined adversely to such Borrower,
the Parent, such SPC or such Partnership as the case
may be, (a) could reasonably be expected to
adversely affect (i) the execution, delivery or
enforceability of this Agreement or the other
Financing Agreements, or (ii) the ability of either
Borrower to perform its obligations under this
Agreement or any of the other Financing
Agreements, or (b) could reasonably be expected to
have a material adverse effect on the financial
condition of the Borrowers, any SPC or any
Partnership.
Section 4.5 Compliance with Laws
and Regulations. Borrowers, the Parent, each SPC
and each Partnership are in compliance with all
laws, orders, regulations and ordinances of all
Governmental Authorities relating to their business
operations and assets.
Section 4.6 Title to Pledged Stock,
LP Units and Excess Receipts. The Borrowers have
previously delivered to the Lender true, complete
and accurate copies of each SPC's Certificate of
Incorporation and of each Partnership's Partnership
Agreement. AAF is the legal and beneficial owner
of 100% of the Pledged Stock and ACF is the legal
and beneficial owner of 100% of the LP Units, in
each case free and clear of any Lien except for
Liens in favor of Lender securing the Obligations,
Liens securing the Subordinated Debentures and any
other Liens described in the Intercreditor
Agreement. Each SPC and each Partnership is the
legal and beneficial holder of the Residual Interest
created under any Pooling and Servicing Agreement
to which it is a party, in each case free and clear of
any Lien, and each SPC and/or Partnership has the
unencumbered right to receive the Excess Receipts
relating to such Residual Interest. Except as
otherwise provided in the Pooling and Servicing
Agreements, the Partnership Agreements or in any
SPC's Certificate of Incorporation, there are no
restrictions upon any of the rights associated with,
or the transfer of, any of the Pledged Stock or LP
Units which would interfere with the Lender's
ability to exercise the Lender's rights and remedies
hereunder. Neither Borrower has any obligation to
make capital contributions or make any other
payments to any SPC or Partnership with respect to
such Borrower's interests, the non-payment of which
would in any way create a right of offset from that
SPC or Partnership as against distributions otherwise
payable to such Borrower. The SPCs and the
Partnerships (i) have conducted no business other
than the transactions evidenced by and contemplated
(x) under their respective Purchase Agreements
and
Pooling
and Servicing
Agreements,
(ii)
have
no
properties other than the Residual
Interests
and (iii)
have
no Indebtedness to any third-parties (including
Affiliates) except for any Indebtedness expressly
created under the above-referenced agreements.
Section 4.7 No Defaults. No event
has occurred and is continuing
as of the date hereof,
or
would result from the making of
an Additional
Loan,
which constitutes a Default or an Event of
Default.
None of the Borrowers,
Parent, SPCs
or
Partnerships is
in default under any loan or credit
agreement or any other material agreement, lease or
instrument to which they are parties or by which it
or any of their properties are
bound other than the
defaults set forth on Schedule 4.7 attached hereto.
Section 4.8 Taxes. Each of
the
Borrowers
and the Parent have filed all required
federal and local tax returns and paid all material
taxes due pursuant to said returns or any assessments
against
such Borrower
or Parent, as the case may be,
except for those taxes being contested in good faith
and for which adequate reserves have been provided
on the books and records of
such Borrower
or
Parent, as the case may be.
Section 4.9 Margin Stock. None of
the proceeds of
the Loans
have been or will
be used,
directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of purchasing or
carrying any "margin stock" within the meaning of
Regulation G and Regulation X of the Board of
Governors of the Federal Reserve System.
Neither
Borrower
is
engaged
in the business of extending
credit for the purpose of purchasing or carrying any
such margin stock and no part of the proceeds of
any Loans
have been or will
be used to purchase or
carry any such margin stock of for any other
purpose that violates or is inconsistent with such
Regulation G or Regulation X.
Section 4.10 Investment Company
Act.
Neither of the Borrowers
is
an
"investment
company" or a company "controlled" by an
"investment company," within the meaning of the
Investment Company Act of 1940, as amended.
Section 4.11 Disclosure. No
representation or warranty of
either Borrower
contained in this Agreement or any certificate or
similar instrument required to be furnished to
Lender by or on behalf of
such Borrower
in
connection with the transactions contemplated by
this Agreement contains or will contain any untrue
statement of a material fact or omits to state a
material fact (known to
such Borrower,
in the case
of any document not furnished by it) necessary in
order to make the statements contained herein or
therein not misleading.
Section 4.12 Chief Executive Office.
Each Borrower's
chief executive office and principal
place of business are located at 525 Washington
Street, Jersey City, New Jersey 07310, or, from and
after the date hereof, at such other location with
respect to which all necessary actions under Section
5.11 hereof have been performed.
Section 4.13 Pooling and Servicing
Agreement.
Borrowers have previously delivered to
Lender true, complete and accurate copies of each
Pooling and Servicing Agreement. There are no
agreements written or otherwise, which would
modify or otherwise affect the rights of the SPCs
and/or the Partnerships under the Pooling and
Servicing Agreements. All of the representations
and warranties made by either Borrower, any
Partnership, any SPC or any Affiliates thereof in the
aforementioned agreements are true and correct in
all material respects and are hereby confirmed.
Section 4.14 ERISA. The Borrowers
and their Affiliates are in material compliance with
all provisions of ERISA, no contribution failure has
occurred with respect to any "benefit plan" under
ERISA, nor does any such plan have any
accumulated or waived funding deficiency.
ARTICLE V
COVENANTS
Each Borrower jointly and severally
covenants and agrees that, so long as any
Obligations remain outstanding, and (even if there
shall be no Obligations outstanding) so long as this
Agreement remains in effect:
Section 5.1 Reports/Financial
Information. Borrowers shall deliver to Lender:
(a) As soon as practicable, and in
any event within forty-five (45) days after the end
of each calendar month, the consolidated balance
sheet and income statement of Parent and its
subsidiaries as at the end of such month, which for
each month coinciding with the end of a calendar
quarter shall set forth comparative figures for the
related periods in the prior fiscal year, all of which
shall be certified by the chief financial officer, chief
accounting officer or chief executive officer of
Borrower, subject to changes resulting from audit
and normal year-end adjustments;
(b) As soon as practicable, and in any
event within one-hundred-twenty (120) days after
the end of each fiscal year of Parent, the
consolidated balance sheet and income statement of
Parent and its subsidiaries as at the end of such
year, certified by independent certified public
accountants of recognized national standing whose
certification shall be without qualification as to the
scope of audit, together with a certificate of such
accounting firm stating that in the course of its
regular audit of the business of the Parent and
Borrower, which audit was conducted in accordance
with generally accepted auditing standards, such
accounting firm has obtained no knowledge of any
Default or Event of Default under Sections 5.1(a),
(b), (f), 5.2(a), 5.6(a), 5.10 or 5.12 hereof which has
occurred or is continuing or, if in the opinion of
such accounting firm such a Default or Event of
Default under the above-referenced Sections has
occurred and is continuing, a statement as to the
nature thereof;
(c) On or before the Report Date of
each calendar month, a schedule of activity for the
preceding calendar month, which sets forth (i) the
aggregate outstanding principal amount of
receivables held in any Trust and of the Trust
Certificates relating thereto, (ii) copies of the
monthly reports distributed to holders of Trust
Certificates pursuant to the applicable Pooling and
Servicing Agreement and (iii) any other pertinent
information reasonably requested by Lender.
(d) Promptly upon receipt thereof,
copies of (i) any financial reports or other
information required to be delivered by either
Borrower, any SPC or any Partnership pursuant to
the terms of any Pooling and Servicing Agreement
and (ii) any written reports, certifications or other
material notices given to either Borrower, any SPC
or any Partnership by the Trustee, Servicer or
Backup
Servicer.
(e) Promptly, such other financial or
portfolio information related to this Agreement or
the Financing Agreements that Lender may
reasonably request from time to time.
(f)
Promptly after the sending or
filing thereof, copies of all reports that the Parent or
the Borrower sends to any of its security holders,
and copies of all reports and registration statements
that the Parent or any subsidiary files with the
Securities and Exchange Commission or any
national securities exchange.
Section 5.2 Notices.
Each Borrower
shall give prompt written notice to Lender of:
(a) Any litigation, including, without
limitation, adversary proceedings or contested
matters brought by Parent,
either Borrower
or by
any other Person against Parent or
either Borrower
(or any material change in such litigation), where
the amount in controversy is $100,000 or more and
all litigation when the aggregate amounts in con-
troversy equal or exceed $500,000, or any other liti-
gation or proceeding which
such Borrower
deems
material or which could materially and adversely
affect the operations, financial condition or prospects
of Parent and/or
such Borrower,
and, if requested by
Lender, deliver to Lender copies of all pleadings
with respect to any such matters served on or filed
by Parent or
such Borrower;
(b) Any Event of Default or Default
and
Borrowers'
proposed cure therefor; any such
notice shall refer to this Agreement, describe such
Event of Default or Default and state that such
notice is a "Notice of Default"; and
Section 5.3 Corporate Existence.
Each Borrower
shall maintain and preserve its
corporate existence and all rights, privileges and
franchises now enjoyed, and conduct its business in
accordance with the terms of, and otherwise comply
with, its formation documents.
Each Borrower
shall
cause
each SPC
and each Partnership to
maintain
and preserve its corporate
or partnership existence
as
applicable and
all rights, privileges and franchises
now enjoyed by
such SPC or Partnership.
Section 5.4 Compliance with
Law
and Financing Agreements.
Each Borrower
shall,
and shall cause
each SPC
or Partnership to,
comply
in all material respects with all applicable laws,
rules, regulations and
orders. Each Borrower
shall
comply promptly with any and all covenants and
provisions of this Agreement,
each Note
and the
other Financing Agreements, and shall cause
each
SPC and Partnership to
comply promptly with any
and all covenants and provisions to be performed by
such parties under the Pooling and Servicing
Agreements.
Section 5.5 Indebtedness; Liens;
Sales of Assets. Neither Borrower shall create, incur,
assume or suffer to exist any Indebtedness, nor
allow any of its Subsidiaries to create, incur, assume
or suffer to exist any Indebtedness, except for (i)
Indebtedness incurred under this Agreement, (ii)
Indebtedness evidenced by the Subordinated
Debentures, (iii) Indebtedness incurred under the
Loan Warehouse Facility or the Lease Warehouse
Facility, (iv) Indebtedness incurred under the Master
Certificate Purchase Agreement, the Master Trust
Agreement, any Purchase Agreement or any Pooling
and Servicing Agreement and (v) Indebtedness
described on Schedule 5.5 hereto. Neither Borrower
shall not sell, assign (by operation of law or
otherwise) or otherwise dispose of, or create or
suffer to exist, any Lien upon or with respect to, any
of its properties or assets, except for (x) Liens to
secure the Indebtedness described in clauses (ii)
through (iv) above, (y) Permitted Existing Liens and
(z) Liens incurred to evidence the sales of
Receivables pursuant to any Purchase Agreement or
Pooling and Servicing Agreement.
Section 5.6 Books and Records;
Right of Inspection. (a)
Each Borrower
shall, and
shall cause
each SPC
and Partnership to,
maintain
adequate books, accounts and records, and prepare
all financial statements required hereunder in
accordance with generally accepted accounting
principles and, once per calendar year after
reasonable notice, and at any time after the
occurrence and during the continuance of an Event
of Default, permit employees or agents of Lender at
any reasonable time to inspect the properties of
Borrowers, the
SPCs
and the Partnerships and to
examine or audit each of their books, accounts and
records and make copies and memoranda thereof.
(b)
Each Borrower
shall maintain all
records necessary for compliance with the exception
to withholding for portfolio interest under Section
871(h) of the Internal Revenue Code.
Section 5.7 Further Assurances. (a)
Borrowers
shall furnish to Lender such periodic,
special, or other reports and information as
reasonably requested by Lender.
(b) From time to time,
each at
its
own expense,
each Borrower
will take whatever
action is reasonably requested by Lender or its legal
counsel to preserve, protect or perfect the security
interest in the Collateral granted pursuant to Article
VI, including, without limitation, executing UCC
financing statements, endorsing notes, executing
additional security documents or delivering
possession of Collateral, and shall perform such acts
as Lender shall reasonably deem necessary or
appropriate to effectuate the purposes of this
Agreement.
Each Borrower
will appear in and
defend at
its own
expense any action or proceeding
which may affect
such Borrower's
title to the
Collateral, the security interest granted hereunder or
any SPC's
or Partnership's title
to
any Excess
Receipts
and/or Residual
Interests.
Section 5.8 Maintenance of
Insurance. (a)
Borrowers
shall
maintain and keep in
force in adequate amounts insurance with
responsible and reputable companies or implement
and maintain a reasonable program of self-insurance,
and accept no self-insurance risks which are
substantially greater than those historically carried
by
Borrowers.
(b)
Borrowers
shall pay or cause to
be paid all insurance premiums with respect to the
RDI Policies and the VSI Policies and all charges
and fees relating thereto.
Section 5.9 Pooling and Servicing
Agreement. Without the prior written consent of
Lender, Borrower shall not, and shall not permit any
of its affiliates to (i) amend, modify, restate,
supplement, cancel or terminate any Pooling and
Servicing Agreement, (ii) waive any of its rights
under any provision thereof, (iii) consent to any
deviation from the terms thereof or (iv) otherwise
grant any consents provided for thereunder, or
default in its obligations thereunder.
Section 5.10 Merger; Consolidation,
Etc. Neither Borrower shall, nor permit any SPC or
Partnership to, liquidate, dissolve, merge into or
consolidate with another entity; or sell, lease or
otherwise dispose of all or a substantial portion of
its business or assets, except for sales of Receivables
to various Trusts as contemplated under the Master
Trust Agreement. Neither Borrower shall permit
any SPC or Partnership to engage in any business
other than the holding of the Residual Interests, nor
to acquire any other assets nor incur any
Indebtedness not expressly permitted under Section
4.6 hereof.
Section 5.11 Change of Principal
Office. Neither Borrower shall (a) change the
location of its chief executive office and principal
place of business from Newport Tower, 525
Washington Street, Jersey City, New Jersey 07310
or (b) change its name, identity or corporate
structure to such an extent that any financing
statement filed in connection with this Agreement
would become seriously misleading, unless such
Borrower shall have given Lender at least 30 days
prior written notice thereof and prior to effecting
any such change, taken such steps as Lender may
deem necessary or desirable to continue the
perfection and priority of the Liens in favor of
Lender granted in connection herewith.
Section 5.12 Net Worth. The sum of
the Parent's consolidated total assets minus the
Parent's consolidated total liabilities (each
determined in conformity with generally accepted
accounting principles, consistently applied and
without duplication) shall not be less than the
greater of (i)$10,000,000 and (ii) ten percent (10%)
of the Parent's consolidated assets (without
duplication) on any subsequent date; provided,
however that for purposes of this Section, any
Collateral shall constitute an asset of its applicable
owner, and any assets which have been sold by any
Person in a non-recourse sale to an unaffiliated third
party in a securitization transaction shall not
constitute assets of any such Person.
Section 5.13 Actions with Respect to
Receivables. Neither Borrower shall, without the
prior written consent of each Lender:
(a) Compromise, extend, release or
adjust payments on any Receivables included in the
Collateral and not otherwise pledged under the Loan
Warehouse Facility or sold under a Purchase
Agreement, accept a conveyance of an automobile
in full or partial satisfaction of any such Receivable,
or release the lien noted on any title to any
automobile securing any Receivable except upon full
payment thereof; provided, that the Borrowers may,
consistent with AAF's present business practices and
subject to the rights of the Lender from and after an
Event of Default, compromise, extend, release or
adjust payments on, or otherwise accept a
conveyance of an automobile in respect of a past-
due Receivable in an effort to maximize the
collectibility thereof;
(b) Transfer, sell or assign any
Receivable to any Person except to a Dealer as
permitted pursuant to a Dealer Agreement or to an
SPC under a Purchase Agreement, or deliver or
permit delivery of any original contract or title to
any Person other than a Lender or the servicer for
such Receivable prior to the repayment in full of the
Receivable which is secured by the lien noted on the
relevant title except that the Borrower shall be
allowed to effect such delivery as may be necessary
to consummate a sale of Receivables under any
Purchase Agreement.
ARTICLE VI
COLLATERAL
Section 6.1 Security Interest. To
secure the prompt and complete payment,
observance and performance of all of the
Obligations,
each Borrower
hereby (1) reaffirms the
grant of a security interest in the Collateral made
under the Existing Loan
Agreements, (2)
hereby
pledges
and grants to Lender a security interest in
and assignment of all of Borrower's rights, title and
interest in and to
the Collateral so described,
whether now owned or existing or hereafter arising
or acquired and wheresoever located and whether
the same comprise accounts, instruments, securities,
chattel paper or general intangibles. Without
limiting the foregoing, the Borrowers hereby
reaffirm the grant of security contained in the Old
Warehouse Loan Agreement and agree to comply
with all covenants contained in Sections 6.4 and 6.5
thereof with respect to such Collateral to the extent
the same were incorporated into the Existing Loan
Agreements by virtue of the Master Amendment to
Loan and Security Agreements dated as of March
19, 1997.
Section 6.2 Release of Security
Interest. Notwithstanding the foregoing Section 6.1,
upon the sale of any Receivables to AAF IV
pursuant to or in connection with a Purchase
Agreement and upon prepayment of the Loans in
accordance with Section 2.5 hereof, the Lender's
lien on the Receivables so sold shall be
automatically released from the security interest
granted to the Lender under Section 6.1 hereof.
ARTICLE VII
DEFAULT; REMEDIES
Section 7.1 Events of Default. Upon
the occurrence of any of the following events (each
an "Event of Default"):
(a) Either Borrower fails to make
any payment of principal of or interest on any Note,
or payment of any other Obligation due hereunder,
under each Note or under any other Financing
Agreement on or before the date such payment is
due;
(b) Any breach by either Borrower in
the due observance or performance of any covenant
set forth in Sections 5.1 to 5.3, 5.5, 5.6, 5.8 to 5.13,
and such breach continues unremedied for ten (10)
Business Days after any officer of such Borrower
obtains knowledge thereof;
(c) Any breach by either Borrower of
any covenant, other than those covenants
enumerated in Section 7.1 (a) or (b) of this
Agreement, which remains unremedied for thirty
(30) days after the earlier of (i) an officer of such
Borrower obtaining knowledge thereof or (ii) notice
thereof having been made to such Borrower;
(d) Any representation or warranty
made by either Borrower under this Agreement or
by either Borrower or Parent under any other
Financing Agreement or in any certificate, report,
financial statement or other agreement, instrument or
document furnished in connection with this
Agreement or any other Financing Agreement shall
prove to have been false or misleading in any
material respect when made;
(e) Default in, or breach of, any
provision of the SPC Acknowledgments or the
Partnership Acknowledgments by any SPC or
Partnership;
(f) Any representation or warranty
made by either Borrower, any SPC, any Partnership
or any Affiliates in any Purchase Agreement or
Pooling and Servicing Agreement or in any
certificate or report a copy of which is delivered to
Lender pursuant to this Agreement shall prove to
have been false or misleading in any material
respect when made;
(g) The occurrence of a default,
breach or failure of condition by either Borrower,
any guarantor of the Obligations or Parent under any
other Financing Agreement which (unless such
default otherwise constitutes an Event of Default
pursuant to the other provisions of this Section 7.1)
is not remedied within the applicable cure period
contained therein, if any;
(h) Any default by either Borrower,
any guarantor of the Obligations or the Parent after
any applicable notice and cure period, shall occur
under any Indebtedness with respect to which such
Borrower or Parent, as applicable, is a party as
borrower or guarantor, provided, that any such
default by Parent described in this subsection
7.01(h) shall not constitute an Event of Default
unless the aggregate Indebtedness owed under such
agreement is greater than or equal to $100,000;
(i) Any of the Borrowers, the Parent,
the SPCs, the Partnerships and any guarantor of the
Obligations shall generally not pay its debts as they
become due or shall admit in writing its inability to
pay its debts, or shall make a general assignment for
the benefit of creditors;
(j) Either Borrower, the Parent, any
SPC, any Partnership or any guarantor of the
Obligations shall (i) apply for or consent to the
appointment of a receiver, trustee, custodian,
intervenor or liquidator of it, or of all or a
substantial part of its assets, (ii) file a voluntary
petition in bankruptcy, (iii) file a petition or answer
seeking reorganization or an arrangement with
creditors, or to take advantage of any applicable
liquidation, conservatorship bankruptcy, moratorium,
arrangement, receivership, insolvency, reorganization
or similar laws affecting the rights of creditors
generally, (iv) file an answer admitting the material
allegations of, or consent to, or default in answering,
a petition filed against it in any bankruptcy,
reorganization or insolvency proceeding, or (v) take
corporate action for the purpose of effecting any of
the foregoing;
(k) An involuntary petition or
complaint shall be filed against either Borrower, the
Parent, any SPC, any Partnership or any guarantor
of the Obligations seeking bankruptcy or
reorganization of such Person or the appointment of
a receiver, custodian, trustee, intervenor or liquidator
of such Person, or all or substantially all of its
assets, and such petition or complaint shall not have
been dismissed within sixty (60) days of the filing
thereof; or an order, order for relief, judgment or
decree shall be entered by any court of competent
jurisdiction or other competent authority approving
a petition or complaint seeking reorganization of
such Person or appointing a receiver, custodian,
trustee, intervenor or liquidator of such Person, or of
all or substantially all of its assets;
(l) Any final judgment or order for
the payment of money in excess of $100,000 shall
be rendered against either Borrower, the Parent, any
SPC or any Partnership, and either (i) enforcement
proceedings shall have been commenced by any
creditor upon such judgment or order or (ii) the
same remains undischarged or unpaid for a period of
sixty (60) days, during which period the execution
of such judgment is not effectively stayed;
(m) (i) Any of the Financing
Agreements, or any Lien or priority claim granted
thereunder shall terminate, cease to be effective or
cease to be the legal, valid, binding and enforceable
obligation of the Borrowers, the Parent, the SPCs,
the Partnerships or any guarantor of the Obligations;
(ii) either Borrower or any of their respective
Affiliates, shall, directly or indirectly, contest in any
manner such effectiveness, validity, binding nature
or enforceability (it being understood that Borrowers
may, in good faith, question the accuracy of any
mathematical calculation of an amount owed
hereunder); or (iii) any Lien or priority claim
securing the Obligations
shall cease to be
effective
and, except as otherwise permitted under the
applicable Financing Agreements, of first priority;
(n) Any Person shall levy on, seize
or attach all or any material portion of the assets of
either Borrower, the Parent, any SPC or any
Partnership or any guarantor of the Obligations and
within thirty (30) days thereafter such person shall
not have dissolved such levy or attachment, as the
case may be, and, if applicable, regained possession
of such seized assets;
(o) the occurrence of a Change in
Control;
(p) any RDI Policy or VSI Policy
shall cease to be in full force and effect, unless
replaced by a substitute RDI Policy or VSI Policy
acceptable to the Lenders;
(r) an "Event of Backup Servicing
Default" shall have occurred and been continuing
under any Pooling and Servicing Agreement; or
(s) this Agreement, any Note or any
other Financing Agreement shall for any reason
cease to be in full force and effect, or be declared
null and void or unenforceable in whole or in part
as the result of any action initiated by any Person
other than Lender;
then, and in every such event and at any time
thereafter during the continuance of such event,
Lender may, at the same or different times, take one
or more of the following actions:
(A) By notice to Borrowers (which
may be telephonic notice confirmed in
writing) declare Lender's obligation to make
any future Loans hereunder terminated
and/or declare the occurrence of the
Termination Date, whereupon, in each case,
such obligations shall be terminated and/or
the Termination Date shall have occurred;
and
(B) By notice to Borrowers,
declare the unpaid principal amount
and interest of the Loans and all
other amounts payable by Borrowers
hereunder to be forthwith due and
payable, whereupon such amounts
shall become forthwith due and
payable, both as to principal and
interest, without presentment,
demand, protest or any other notice
of any kind, all of which are hereby
expressly waived, anything contained
herein or in the Financing
Agreements to the contrary
notwithstanding.
Notwithstanding the foregoing, upon
the occurrence of an Event of Default described in
paragraph (j) or (k) of this Section 7.1, with respect
to either Borrower, the Parent, any SPC or any
Partnership, the actions described in paragraphs (A)
and (B) above shall occur automatically without the
requirement of giving of any notice to Borrowers.
Section 7.2 Remedies. (a) Lender
shall have all rights and remedies provided to
Lender at law, in equity, under the Financing
Agreements and under the Uniform Commercial
Code as in effect in the State of New York (the
"Code"), all of which rights and remedies shall be
cumulative, and, in addition, upon the occurrence of
any Event of Default, Lender may exercise any one
or more of the following rights and remedies:
(i) Exercise all the rights and
remedies available to secured parties
under the provisions of the Code.
(ii) Institute legal
proceedings to foreclose upon and
against the Lien granted by the
Financing Agreements to recover
judgment for the Obligations and to
collect the same out of any of the
Collateral or the proceeds of any sale
thereof.
(iii) Without being
responsible for loss or damage to
such Collateral beyond the
responsibility to use reasonable care
with respect to the Collateral, require
delivery to Lender of any Collateral
then being held by either Borrower,
sell and dispose of, or cause to be
sold and disposed of, all or any part
of the Collateral at one or more
public or private sales, or other
dispositions, at such places and times
and on such terms and conditions and
in such order as Lender may deem
fit, without any previous demand or
advertisement but with reasonable
notification to Borrowers of any such
sale or other disposal. Reasonable
notification pursuant to this
Section 7.2(a)(iii) shall be deemed to
be written or telephonic notice at
least ten (10) days prior to such
public or private sale.
(b) Any notice of sale or other
disposition, advertisement and other notice or
demand, any right or equity of redemption and any
obligation of a prospective purchaser to inquire as to
the power and authority of Lender to sell or
otherwise dispose of the Collateral or as to the
application of the proceeds of sale or otherwise,
which would otherwise be required by, or available
to Borrowers under, applicable law are hereby
expressly waived by Borrowers to the fullest extent
permitted by such law.
(c) All moneys received or collected
by Lender pursuant to this Agreement from and
after an Event of Default shall be applied, at
Lender's discretion, first to the payment of all costs
incurred in the collection of such moneys (including
reasonable attorneys' fees and legal expenses). All
remaining amounts shall be applied pursuant to
Section 2.5(b). The balance, if any, of such moneys
remaining after payment in full of the Obligations
shall be remitted to
Borrowers
or as otherwise
directed by a court of competent jurisdiction.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Amendments, etc. No
amendment or waiver of any provision of this
Agreement or the Note, nor consent to any departure
by
either Borrower
therefrom, shall be effective
unless the same shall be in writing and signed by
Lender, and then such waiver or consent shall be
effective only in the specific instance and for the
specific purpose for which given.
Section 8.2 Notices. All notices and
other communications provided for hereunder shall
be in writing (including telegraphic or facsimile
transmission) and mailed by registered mail, return
receipt requested, or telexed, telecopied or hand
delivered, (a) as to Lender:
III Finance Ltd.
c/o Admiral Administration, Ltd.
Anchorage Centre, 2nd Floor
Grand Cayman, Cayman Islands,
B.W.I.
Telecopy: (345) 949-0705
Confirmation: (345) 949-0704
Attention: David Bree
with a copy, in either case to:
III Offshore Advisors
250 South Australian Avenue, Suite
600
West Palm Beach, Florida 33401
Telecopy: (561) 655-6871
Confirmation: (561) 655-5885
Attention: Robert Fasulo
and
James River Capital
103 Sabot Park
Manakin-Sabot, Virginia 23103
Telecopy: (804) 784-5833
Confirmation: (804) 784-4500
Attention: Kevin Brandt
(b) as to Borrower:
Aegis Auto Finance, Inc.
525 Washington Street, 29th Floor
Jersey City, New Jersey, 07310
Telecopy: (201) 418-7370
Confirmation: (201) 418-7379
Attention: Joseph Battiato
or (c) at such other address as shall be designated by
such party in a 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 be received
when transmitted so long as the transmitting
machine has provided an electronic confirmation of
such transmission.
Section 8.3 Survival of
Representations and Warranties. All representations
and warranties made herein shall survive the
execution, delivery and acceptance of this
Agreement, each Note and the other Financing
Agreements.
Section 8.4 No Waiver; Remedies.
No failure on the part of Lender to exercise, and no
delay in exercising any right hereunder or under any
Note or any other Financing Agreement shall
operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder or under any
Note preclude any other or further exercise thereof
or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of
any remedies provided by law.
Section 8.5 Costs and Expenses.
Except as otherwise provided in the immediately
subsequent sentence, each party hereto agrees to pay
its own costs and expenses (including attorneys' and
paralegals' fees and expenses) in connection with
the execution and delivery of this Agreement, any
Note and the other Financing Agreements.
Borrowers jointly and severally agree to pay (a) all
costs and expenses incurred by Lender in
maintaining, preserving or insuring any Collateral
and (b) all costs and expenses of Lender (including
reasonable attorneys' and paralegals' fees and
expenses) in connection with the enforcement of this
Agreement, each Note, the other Financing
Agreements and/or the Lien on any of the Collateral.
All of the costs, fees and expenses enumerated in
the immediately preceding sentence shall constitute
Obligations and shall be secured by the Collateral.
Section 8.6 Relationship; Indemnity.
(a) The relationship of each Borrower to the Lender
under the Financing Agreements is, and shall at all
times remain, solely that of borrower and lender;
other than as set forth in Section 7.2(a)(iii), Lender
does not undertake or assume any responsibility or
duty to either Borrower or to any third party with
respect to the Collateral.
(b) Each Borrower hereby, jointly
and severally, indemnifies and agrees to hold
harmless Lender and its officers, directors,
employees, attorneys and agents (collectively, the
"Indemnified Parties") from any and all losses,
damages (whether general, punitive or otherwise),
liabilities, claims, causes of action and other costs
and expenses, including reasonable attorneys' fees,
which any Indemnified Party may suffer or incur by
or as a result of claims by third parties in any
manner relating to or arising out of this Agreement
or the other Financing Agreements, or any act, event
or transaction related thereto, the making of Loans,
the use or intended use of the proceeds of the
Loans, or any of the other transactions contemplated
by the Financing Agreements.
(c) Promptly after any Indemnified
Party is served with process in connection with the
commencement of any action, such Indemnified
Party shall, if a claim against a Borrower in respect
thereof is to be made pursuant to this
indemnification, notify such Borrower of the
commencement thereof. Each Borrower shall pay
any Obligations arising under this indemnity to such
Indemnified Party immediately upon demand. The
duty of each Borrower to indemnify Lender shall
survive the release and cancellation of this
Agreement or any of the other Financing
Agreements.
Section 8.7 Successors and Assigns;
Assignment. This Agreement shall be binding upon
and inure to the benefit of Borrower and Lender and
their respective successors and assigns, except that
no Borrower shall have the right to assign its rights
hereunder or any interest herein without the prior
written consent of Lender. Lender, at its sole
option, shall have the right to assign this Agreement,
the Note and any of its rights and interest hereunder
and thereunder.
Section 8.8 Registered Obligations.
The Loans (including each Note evidencing the
Loans) are registered obligations and the right, title
and interest of Lender and its assigns (and of a
Person who takes a participation in a Loan directly
from Lender) in and to such Loan shall be
transferrable only upon notation of such transfer in
a registry (the "Registry") maintained to record the
interest of Lender and its assigns (and such direct
participants). A Note shall only evidence Lender's,
or its assigns', right, title and interest in and to the
related Loans, and in no event is any such Note to
be considered a bearer instrument or obligation.
This Section 8.8 shall be construed so that the Loans
are at all times maintained in "registered form"
within the meaning of Section 163(f), 871(h)(2) and
881(c)(2) of the IRC and any related regulations (or
any successor provisions of the IRC or such
regulations). Borrower shall maintain the Registry
in which Borrowers will register the Loans. No
transfer by Lender or any of its assigns of (or direct
participant with respect to) any of the Loans shall be
permitted or effective unless and until recorded on
the Registry. Any such transfer shall be made only
by written application by the transferring Lender, its
assigns, or participants to Borrowers stating the
name of the proposed transferee. Borrowers agree
that within five (5) Business Days after its receipt of
such written notice, Borrowers shall, at their own
expense, record such transfer on the Registry and
shall, if requested by Lender or the transferee,
execute new Notes to the order of Lender and/or the
transferee, as applicable, in exchange for the
surrendered Note or Notes. Such new Note or
Notes shall be in an aggregate principal amount
equal to the unpaid aggregate principal amount of
such surrendered Note or Notes, shall be dated the
effective date of the assignment and shall otherwise
be in substantially the form of Exhibit B.
Section 8.9 Binding Effect;
Governing Law. This Agreement constitutes the
complete and final expression of the parties'
agreement with respect to the matters set forth
herein and supersedes all oral negotiations and prior
writings in respect of such matters. This Agreement
and the Note shall be governed by, and construed in
accordance with, the laws and decisions of the State
of New York. Whenever possible, each provision of
this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law,
but if any provision of this Agreement shall be
prohibited or invalid under applicable law, such
provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating
the remainder of such provision or the remaining
provisions of this Agreement.
Section 8.10 WAIVER OF TRIAL
BY JURY; SUBMISSION TO JURISDICTION.
BORROWERS AND LENDER EACH HEREBY
AGREE TO WAIVE ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION ARISING UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR
ANY FINANCING AGREEMENT, WHETHER
SOUNDING IN TORT, CONTRACT OR
OTHERWISE. EACH BORROWER HEREBY
CONSENTS TO THE JURISDICTION OF ANY
LOCAL OR FEDERAL COURT LOCATED
WITHIN THE STATE OF NEW YORK AND
WAIVES ANY OBJECTION WHICH SUCH
BORROWER MAY HAVE BASED ON
IMPROPER VENUE OR FORUM NON
CONVENIENS TO THE CONDUCT OF ANY
PROCEEDING IN ANY SUCH COURT;
NOTHING IN THIS SECTION 8.10 SHALL
AFFECT LENDER'S RIGHT TO BRING ANY
ACTION OR PROCEEDING AGAINST EITHER
BORROWER OR ITS PROPERTY IN THE
COURTS OF ANY OTHER JURISDICTION.
Section 8.11 Term. This Agreement
shall become effective when executed and delivered
by the parties hereto and shall expire upon that date
occurring on or after the Termination Date when
Lender has received indefeasible payment in full in
cash of the Obligations. Notwithstanding the
foregoing, Borrowers' agreement to indemnify
Lender under Section 8.6 shall survive the
termination of this Agreement.
Section 8.12 Headings. Article and
Section headings in this Agreement are included for
convenience of reference only and shall not affect
any construction or interpretation of this Agreement.
Section 8.13 Counterparts. This
Agreement may be executed by the parties hereto in
separate counterparts, each of which when so
executed shall be deemed to be an original and both
of which taken together shall constitute one and the
same agreement.
Section 8.14 Joint and Several
Obligations. (a) All of the obligations of
Borrowers under this Agreement and the other
Financing Agreements shall be joint and several.
Each Borrower hereby waives promptness, diligence
and notice of acceptance of this Amendment, of any
action taken or omitted in reliance hereon or of any
default by the other Borrower or any Affiliates in
the payment of any Obligations or in the
performance of any covenants, agreements, terms,
conditions under this Agreement or any other
Financing Agreement. Each Borrower expressly
waives the right to require the Lender to protect,
secure, perfect, insure, proceed against or exhaust
any security granted by the other Borrower or any
other Affiliate as security for the payment of any
Obligations or to exhaust any right or take any
action against such other Borrower or Affiliate or
their respective properties before pursuing its
remedies against the Collateral owned by such
Borrower.
(b) The obligations of each Borrower under
this Section 8.14 shall be absolute and
unconditional, shall not be subject to any
counterclaim, set-off, deduction or defense based
upon any claim any other Borrower or Affiliate may
have against each other or against the Lender and
shall remain in full force and effect without regard
to and shall not be released, discharged or in any
way affected or impaired by, any thing, event,
happening, matter, circumstance or condition
whatsoever (whether or not the Borrowers shall have
any knowledge or notice thereof or consent thereto),
including, without limitation: (i) any lack of en-
forceability of any Obligation, (ii) any change of the
time, manner or place of payment, or any other
term, of any Obligation (including, without
limitation, any renewal or extension of time for
payment), (iii) any exchange, release, or non-
perfection of any Collateral, (iv) any law, regulation
or order of any jurisdiction affecting any term of
any Obligation or Borrowers' or any Affiliates'
rights with respect thereto, (v) any bankruptcy,
insolvency, reorganization, arrangement,
readjustment, composition, liquidation or similar
proceedings with respect to the other Borrower or
any Affiliate or any other obligor or guarantor of
any Obligation and (vi) any other circumstance
which might otherwise constitute a defense available
to, or a discharge of, Borrower or a guarantor.
(c) Any rights of subrogation of either
Borrower to the rights of Lender as against the other
Borrower or any Affiliates and any claims arising
therefrom shall at all times be, in all respects
subordinate and junior to all Obligations until such
time that all such Obligations shall have been paid
in full in cash.
Section 8.15 Reference to and Effect
Upon Existing Loan Agreements; No Novation.
This Agreement, together with the Pledge
Agreements, amends and restates the Existing Loan
Agreements. The Borrowers and the Lender all
hereby agree that, upon the effectiveness of this
Agreement, the Existing Loan Agreements shall no
longer be of any force or effect except to evidence
the terms under which the Loans outstanding prior
to the effectiveness of this Agreement were made
and to the extent that any of the covenants contained
therein are expressly ratified herein or in the Pledge
Agreements. To the extent that the indebtedness
evidenced by any Note and this Agreement includes
indebtedness previously outstanding under the
Existing Loan Agreements, this Agreement and such
Note merely restate the terms of such indebtedness,
are given in substitution for and not in payment of
the Existing Loan Agreements or the promissory
notes issued thereunder, and are not intended to
cause a novation of any such indebtedness.
[Rest of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, the parties
hereto have caused this Agreement to be executed
by their respective officers thereunto duly
authorized, as of the date first written above.
III FINANCE LTD.
By______________________________
Name:
Title:
AEGIS AUTO FINANCE, INC.
By______________________________
Name:
Title:
AEGIS CONSUMER FINANCE, INC.
By______________________________
Name:
Title:
<PAGE>
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
Section 1.1 General Terms.. . . . . . . . .1
Section 1.2 Terms Defined in Uniform Commercial
Code.. . . . . . . . . . . . . . . . . . . .8
Section 1.3 Accounting Terms. . . . . . . .8
Section 1.4 Other Terms.. . . . . . . . . .8
Section 1.5 Preliminary Statement.. . . . .8
ARTICLE II
LOANS AND INTEREST
Section 2.1 Loans.. . . . . . . . . . . . .9
Section 2.2 Making the Additional Loans.. .9
Section 2.3 Note. . . . . . . . . . . . . .9
Section 2.4 Interest. . . . . . . . . . . 10
Section 2.5 Repayments; Prepayments.. . . 10
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1 Conditions Precedent to this
Agreement. . . . . . . . . . . . . . . . . 12
Section 3.2 Conditions Precedent to Additional
Loans. . . . . . . . . . . . . . . . . . . 12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Corporate Existence.. . . . . 13
Section 4.2 Corporate Authority; No Conflicts.14
Section 4.3 Financial Condition.. . . . . 14
Section 4.4 Litigation. . . . . . . . . . 15
Section 4.5 Compliance with Laws and
Regulations.15 . . . . . . . . . . . . . . .
Section 4.6 Title to Pledged Stock, LP Units and
Excess
Receipts. . . . . . . . . . . 15
Section 4.7 No Defaults.. . . . . . . . . 16
Section 4.8 Taxes.. . . . . . . . . . . . 16
Section 4.9 Margin Stock. . . . . . . . . 16
Section 4.10 Investment Company Act. . . . 16
Section 4.11 Disclosure. . . . . . . . . . 16
Section 4.12 Chief Executive Office. . . . 17
Section 4.13 Pooling and Servicing Agreement17
Section 4.14 ERISA . . . . . . . . . . . . 17
ARTICLE V
COVENANTS
Section 5.1 Reports/Financial Information.17
Section 5.2 Notices.. . . . . . . . . . . 18
Section 5.3 Corporate Existence.. . . . . 19
Section 5.4 Compliance with Law and Financing
Agreements.. . . . . . . . . . . . . . . . 19
Section 5.5 Indebtedness; Liens; Sales of Assets19
Section 5.6 Books and Records; Right of
Inspection.. . . . . . . . . . . . . . . . 20
Section 5.7 Further Assurances. . . . . . 20
Section 5.8 Maintenance of Insurance. . . 20
Section 5.9 Pooling and Servicing Agreement.20
Section 5.10 Merger; Consolidation, Etc. . 21
Section 5.11 Change of Principal Office. . 21
Section 5.12 Net Worth.. . . . . . . . . . 21
Section 5.13 Actions with Respect to Receivables21
ARTICLE VI
COLLATERAL
Section 6.1 Security Interest.. . . . . . 22
Section 6.2 Release of Security Interest. 22
ARTICLE VII
DEFAULT; REMEDIES
Section 7.1 Events of Default.. . . . . . 23
Section 7.2 Remedies. . . . . . . . . . . 26
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Amendments, etc.. . . . . . . 27
Section 8.2 Notices.. . . . . . . . . . . 27
Section 8.3 Survival of Representations and
Warranties.. . . . . . . . . . . . . . . . 28
Section 8.4 No Waiver; Remedies.. . . . . 28
Section 8.5 Costs and Expenses. . . . . . 28
Section 8.6 Relationship; Indemnity . . . 28
Section 8.7 Successors and Assigns; Assignment29
Section 8.8 Registered Obligations. . . . 29
Section 8.9 Binding Effect; Governing Law.30
Section 8.10 WAIVER OF TRIAL BY JURY;
SUBMISSION TO
JURISDICTION. . . . . . . . . 30
Section 8.11 Term. . . . . . . . . . . . . 30
Section 8.12 Headings. . . . . . . . . . . 31
Section 8.13 Counterparts. . . . . . . . . 31
Section 8.14 Joint and Several Obligations.31
Section 8.15 Reference to and Effect Upon Existing
Loan
Agreements; No Novation . . . 32
AMENDED AND RESTATED NOTE
U.S. $34,753,667.00
May 21, 1997
FOR VALUE RECEIVED, each of
AEGIS AUTO FINANCE, INC., a Delaware
corporation, and AEGIS CONSUMER FINANCE,
INC., a Delaware corporation (individually a
"Borrower") do hereby jointly and severally
promises to pay to III FINANCE LTD., a Cayman
Islands company ("Lender"), the principal amount
of U.S. $34,753,667.00 (THIRTY FOUR
MILLION SEVEN HUNDRED FIFTY THREE
THOUSAND SIX HUNDRED SIXTY SEVEN
AND 00/100 DOLLARS) on the "Termination
Date" (as defined in the Loan Agreement referred
to below), and to pay interest on the unpaid
principal balance hereof at a rate per annum equal
to 12%, payable monthly in arrears on each
"Distribution Date" (as defined in the Loan
Agreement) for all accrued and unpaid interest on
the unpaid principal of the Loans through such
date. In addition, on any date of any principal
prepayment pursuant to Section 2.5 and 7.1 of the
Loan Agreement, the Borrowers shall pay accrued
and unpaid interest on the amount of such
prepayment to the extent such interest is not
otherwise paid pursuant to the immediately
preceding sentence.
Interest shall be calculated on the
basis of a 360-day year for the actual number of
days elapsed. Upon the occurrence and during the
continuance of an Event of Default, the interest
rate shall be increased by two percent (2.00%) per
annum above the rate of interest otherwise
applicable. In no event shall the interest payable
hereunder exceed the Maximum Rate.
This Note is a "Note" referred to in
and issued pursuant to that certain Amended and
Restated Master Loan Agreement dated as of April
30, 1997 among Borrowers and Lender (as
amended, restated, supplemented or otherwise
modified from time to time, the "Loan
Agreement"), Capitalized terms used herein
without definition are used as defined in the Loan
Agreement. This Note is entitled to the benefits
of, the Loan Agreement, to which reference is
hereby made for a more complete statement of the
terms and conditions under which the Loans
evidenced hereby are made and are to be repaid.
This Note is a registered obligation
(as more particularly described in Section 8.8 of
the Loan Agreement), and it is the intent of the
parties to the Loan Agreement that the Loans be
maintained in "registered form" within the
meaning of Section 163(f), 871(h) (2) and 881 (c)
(2) of the Internal Revenue Code.
Upon and after the occurrence of an
Event of Default, this Note may, as provided in
the Loan Agreement, without demand, notice or
legal process of any kind, be declared, and
immediately shall become, due and payable. The
Loan Agreement also contains provisions for
optional and mandatory prepayments on account
of the principal hereof prior to maturity upon the
terms and conditions specified therein.
All payments of principal of and
interest on this Note shall be made to Lender at
such account as Lender shall in writing direct
Borrowers, in immediately available funds and in
currency of the United States of America which at
the time of payment shall be legal tender for the
payment of public and private debts.
Each Borrower jointly and severally
promises to pay all costs and expenses, including
reasonable attorneys' fees and disbursements
incurred in the collection and enforcement of this
Note or any appeal of a judgment rendered
thereon, all in accordance with the provisions of
the Loan Agreement. Each Borrower hereby
waives diligence, presentment, protest, demand
and notice of every kind except as required
pursuant to the Loan Agreement and to the full
extent permitted by law the right to plead any
statute of limitations as a defense to any demands
hereunder.
This Note is secured by all
Collateral securing the Obligations pursuant to the
Loan Agreement and the other Financing
Agreements.
This Note amends and restates
various promissory notes (the "Prior Notes")
issued pursuant to various loan agreements as
more particularly described in the Loan
Agreement. Borrowers hereby acknowledge and
agree that this Note is intended in substitution for,
and not in payment of, the Prior Notes, and is not
intended to cause a novation thereof or of the
indebtedness evidenced thereby.
THIS NOTE SHALL BE
GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
AEGIS CONSUMER FINANCE, INC.
By
Name: Joseph F. Battiato
Title: President
AEGIS AUTO FINANCE, INC.
By
Name: Joseph F. Battiato
President
A:\10_108_1.WPD September 16, 1997 (2:38pm)
EXECUTION COPY
PLEDGE AGREEMENT
between
Aegis Auto Finance, Inc.
as Pledgor
AND
III Finance, Ltd.,
Dated as of April 30, 1997
<PAGE>
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (the
"Pledge Agreement"), dated as of April 30, 1997,
is executed by and between AEGIS AUTO
FINANCE, INC., a Delaware corporation (the
"Pledgor") and III FINANCE, LTD., a Cayman
Islands company, ("Lender"). Capitalized terms
used herein and not otherwise defined herein shall
have the respective meanings ascribed to such
terms in the Loan Agreement (as defined below).
WITNESSETH:
WHEREAS, the Pledgor, Aegis
Consumer Finance, Inc. ("ACF") and the Lender
are parties to a certain Amended and Restated
Master Loan Agreement (the "Loan Agreement"),
which Loan Agreement, among other things,
restates the terms of various Existing Loan
Agreements;
WHEREAS, the Pledgor directly
owns 100% of the issued and outstanding capital
stock of Aegis Auto Funding Corp. IV (the
"SPC"), Aegis Auto Funding Corp. II ("AAFC II")
and Aegis Auto Funding Corp. ("AAFC") (such
direct subsidiaries and any other subsidiary
hereafter acquired or formed by the Pledgor, the
"Direct Subsidiaries") and has previously pledged
an interest in the Pledged Collateral relating to the
above-named subsidiaries under the Existing Loan
Agreements; and
WHEREAS, the Lender has
required, as a condition to its entering into the
Loan Agreement, that the Pledgor execute and
deliver this Pledge Agreement to re-evidence its
obligations in respect of the Pledged Collateral (as
defined below);
NOW, THEREFORE, for and in
consideration of the foregoing and of any financial
accommodations or extensions of credit (including,
without limitation, any loan or advance by
renewal, refinancing or extension of the
agreements described hereinabove or otherwise)
heretofore, now or hereafter made to or for the
benefit of the Pledgor pursuant to the Loan
Agreement, or any other agreement, instrument or
document executed pursuant to or in connection
therewith, and for other good and valuable
consideration, the receipt and sufficiency of which
are hereby acknowledged, the Pledgor and the
Lender hereby agree as follows:
1. Pledge. The Pledgor hereby
pledges to the Lender, and grants to the Lender a
security interest in, the following (collectively, the
"Pledged Collateral"):
(a) The shares of the capital stock
of each Direct Subsidiary, now or at any
time or times hereafter owned by the
Pledgor, and the certificates representing
the shares of such capital stock (such
now-owned shares being identified on
Exhibit A next to each Direct Subsidiary),
all options and warrants for the purchase of
shares of the stock of any Direct
Subsidiary now or hereafter held in the
name of the Pledgor (all of said capital
stock, options and warrants and all capital
stock held in the name of the Pledgor as a
result of the exercise of such options or
warrants being hereinafter collectively
referred to as the "Pledged Stock"), and all
dividends, cash, instruments and other
property from time to time received,
receivable or otherwise distributed in
respect of, or in exchange for, any or all of
the Pledged Stock it being understood that
the Pledged Stock and the stock powers for
each Direct Subsidiary have been
previously delivered to the Lender in
connection with the Existing Loan
Agreements;
(b) All additional shares of stock
of any Direct Subsidiary from time to time
acquired by the Pledgor in any manner,
and the certificates representing such
additional shares (any such additional
shares shall constitute part of the Pledged
Stock and the Lender is irrevocably
authorized to amend Exhibit A from time
to time to reflect such additional shares),
and all options, warrants, dividends, cash,
instruments and other rights and options
from time to time received, receivable or
otherwise distributed in respect of or in
exchange for any or all of such shares;
(c) The property and interests in
property described in Section 3 below; and
(d) All proceeds of the foregoing.
2. Security for Liabilities. The
Pledged Collateral secures the prompt payment,
performance and observance of (i) the Pledgor's
obligations and liabilities under the Loan
Agreement and each agreement, document or
instrument executed pursuant to or in connection
with the Loan Agreement and (ii) the Pledgor's
obligations and liabilities under this Pledge
Agreement and each agreement, document or
instrument executed pursuant to or in connection
with this Pledge Agreement (all such obligations
and liabilities of the Pledgor now or hereafter
existing being hereinafter referred to as the
"Liabilities").
3. Pledged Collateral Adjustments.
If, during the term of this Pledge Agreement:
(a) Any stock dividend,
reclassification, readjustment or other
change is declared or made in the capital
structure of any Direct Subsidiary, or any
option included within the Pledged
Collateral is exercised, or both, or
(b) Any subscription warrants or
any other rights or options shall be issued
in connection with the Pledged Collateral,
then all new, substituted and additional shares,
warrants, rights, options or other securities, issued
by reason of any of the foregoing, shall be
immediately delivered to and held by the Lender
under the terms of this Pledge Agreement and
shall constitute Pledged Collateral hereunder;
provided, however, that nothing contained in this
Section 3 shall be deemed to permit any stock
dividend, issuance of additional stock, warrants,
rights or options, reclassification, readjustment or
other change in the capital structure of a Direct
Subsidiary which is not permitted in the Loan
Agreement.
4. Subsequent Changes Affecting
Pledged Collateral. The Pledgor represents and
warrants that it has made its own arrangements for
keeping itself informed of changes or potential
changes affecting the Pledged Collateral
(including, but not limited to, rights to convert,
rights to subscribe, payment of dividends,
reorganization or other exchanges, tender offers
and voting rights), and the Pledgor agrees that the
Lender shall have no obligation to inform the
Pledgor of any such changes or potential changes
or to take any action or omit to take any action
with respect thereto. The Lender may, after the
occurrence of an Event of Default, without notice
and at its option, transfer or register the Pledged
Collateral or any part thereof into its or its
nominee's name with or without any indication
that such Pledged Collateral is subject to the
security interest hereunder. In addition, the
Lender may at any time exchange certificates or
instruments representing or evidencing Pledged
Shares for certificates or instruments of smaller or
larger denominations.
5. Representations and Warranties.
The Pledgor represents and warrants as follows:
(a) The Pledgor is the legal and
beneficial owner of the Pledged Stock, which
represents 100% of the issued and outstanding
common stock of each Direct Subsidiary identified
on Exhibit A, free and clear of any Lien except
for the security interest created by this Pledge
Agreement, pursuant to the Existing Loan
Agreements and in connection with that certain
Indenture, dated as of the date hereof (the
"Indenture") between the Pledgor and Norwest
Bank Minnesota, N.A., as Indenture Trustee (the
"Indenture Trustee"), and the Pledgor owns no
other stock which is excluded from the security
interest granted hereby except for stock in Aegis
Auto Funding Corp. III.
(b) The Pledgor has full corporate
power and authority to enter into this Pledge
Agreement;
(c) There are no restrictions upon
the voting rights associated with, or upon the
transfer of, any of the Pledged Collateral;
(d) The Pledgor has the right to
vote, pledge and grant a security interest in or
otherwise transfer such Pledged Collateral free of
any Liens other than the Lien created pursuant to
this Pledge Agreement, the Existing Loan
Agreements or in connection with the Indenture;
(e) No authorization, approval, or
other action by, and no notice to or filing with,
any Governmental Authority or regulatory body is
required either (i) for the pledge of the Pledged
Collateral pursuant to this Pledge Agreement or
for the execution, delivery or performance of this
Pledge Agreement by the Pledgor or (ii) for the
exercise by the Lender of the voting or other
rights provided for in this Pledge Agreement or
the remedies in respect of the Pledged Collateral
pursuant to this Pledge Agreement (except as may
be required in connection with such disposition by
laws affecting the offering and sale of securities
generally); and
(f) The pledge of the Pledged
Collateral pursuant to this Pledge Agreement
creates a valid and perfected security interest in
the Pledged Collateral, in favor of the Lender,
securing the payment and performance of the
Liabilities.
6. Voting Rights. During the term
of this Pledge Agreement, and except as provided
in this Section 7(b) below, the Pledgor shall have
the right to vote the Pledged Stock on all
corporate questions in a manner not inconsistent
with the terms of this Pledge Agreement, the Loan
Agreement and any other agreement, instrument or
document executed pursuant thereto or in
connection therewith. After the occurrence of an
Event of Default, the Lender or its nominee may,
at the Lender's or such nominee's option and
following written notice from the Lender to the
Pledgor, exercise all voting powers pertaining to
the Pledged Collateral, including the right to take
action by shareholder consent. Such authorization
shall constitute an irrevocable voting proxy from
the Pledgor to the Lender or, at the Lender's
option, to the Lender's nominee.
7. Dividends and Other
Distributions. (a) So long as no Event of Default
or Default shall have occurred:
(i) The Pledgor shall be entitled to
receive and retain any and all dividends and
interest paid in respect of the Pledged Collateral,
provided, however, that any and all
(A) dividends and interest paid or
payable other than in cash with respect to,
and instruments and other property
received, receivable or otherwise
distributed with respect to, or in exchange
for, any of the Pledged Collateral;
(B) dividends and other
distributions paid or payable in cash with
respect to any of the Pledged Collateral on
account of a partial or total liquidation or
dissolution or in connection with a
reduction of capital, capital surplus or
paid-in surplus; and
(C) cash paid, payable or otherwise
distributed with respect to principal of, or
in redemption of, or in exchange for, any
of the Pledged Collateral;
shall be Pledged Collateral, and shall be forthwith
delivered to the Lender to hold as Pledged
Collateral and shall, if received by the Pledgor, be
received in trust for the Lender, be segregated
from the other property or funds of the Pledgor,
and be delivered immediately to the Lender as
Pledged Collateral in the same form as so received
(with any necessary endorsement); and
(ii) The Lender shall execute and
deliver (or cause to be executed and delivered) to
the Pledgor all such proxies and other instruments
as the Pledgor may reasonably request for the
purpose of enabling the Pledgor to receive the
dividends or interest payments which it is
authorized to receive and retain pursuant to clause
(i) above.
(b) After the occurrence of an
Event of Default:
<PAGE>
(i) All rights of the Pledgor to
receive the dividends and interest payments which
it would otherwise be authorized to receive and
retain pursuant to Section 7(a)(i) hereof shall
cease, and all such rights shall thereupon become
vested in the Lender, which shall thereupon have
the sole right to receive and hold as Pledged
Collateral such dividends and interest payments;
(ii) All dividends and interest
payments which are received by the Pledgor
contrary to the provisions of clause (i) of this
Section 7(b) shall be received in trust for the
Lender, shall be segregated from other funds of
the Pledgor and shall be paid over immediately to
the Lender as Pledged Collateral in the same form
as so received (with any necessary endorsements);
(iii) The Pledgor shall, upon the
request of the Lender, at Pledgor's expense, use its
best efforts to obtain all necessary governmental
approvals for the sale of the Pledged Collateral, as
requested by the Lender;
(iv) The Pledgor shall, upon the
request of the Lender, at the Pledgor's expense, do
or cause to be done all such other acts and things
as may be necessary to make such sale of the
Pledged Collateral or any part thereof valid and
binding and in compliance with applicable law.
The Pledgor will reimburse the Lender for all
expenses incurred by the Lender, including,
without limitation, reasonable attorneys' and
accountants' fees and expenses in connection with
the foregoing. The Pledgor agrees that, in light of
the fact that federal and state securities laws
impose certain restrictions on the method by
which the Pledged Collateral may be sold, it will
be commercially reasonable if a private sale, upon
at least ten (10) days' notice to the Pledgor, is
arranged so as to avoid a public offering, even
though the sales price established and/or obtained
at such private sale may be substantially less than
prices which could have been obtained for such
security on any market or exchange or in any
other public sale.
8. Transfers and Other Liens. The
Pledgor agrees that it will not (i) sell or otherwise
dispose of, or grant any option with respect to,
any of the Pledged Collateral without the prior
written consent of the Lender, or (ii) create or
permit to exist any Lien upon or with respect to
any of the Pledged Collateral except for the
security interest under this Pledge Agreement, the
Existing Loan Agreements and in connection with
the Indenture.
9. Remedies. (a) The Lender
shall have, in addition to any other rights given
under this Pledge Agreement or by law, all of the
rights and remedies with respect to the Pledged
Collateral of a secured party under the Uniform
Commercial Code as in effect in the State of New
York. After the occurrence of an Event of
Default and following written notice to the
Pledgor, the Lender (personally or through an
agent) is hereby authorized and empowered to
transfer and register in its name or in the name of
its nominee the whole or any part of the Pledged
Collateral, to exercise all voting rights with
respect thereto, to collect and receive all cash
dividends and other distributions made thereon,
and to otherwise act with respect to the Pledged
Collateral as though the Lender were the outright
owner thereof. The Pledgor hereby irrevocably
constitutes and appoints the Lender as the proxy
and attorney-in-fact of the Pledgor, with full
power of substitution to do so, such proxy
becoming effective upon the occurrence of an
Event of Default and following written notice
thereof; provided, however, that the Lender shall
have no duty to exercise any such right or to
preserve the same and shall not be liable for any
failure to do so or for any delay in doing so. In
addition, after the occurrence of an Event of
Default, the Lender shall have such powers of sale
and other powers as may be conferred by
applicable law. With respect to the Pledged
Collateral or any part thereof which shall then be
in or shall thereafter come into the possession or
custody of the Lender or which the Lender shall
otherwise have the ability to transfer under
applicable law, the Lender may, in its sole
discretion, without notice except as specified
below, after the occurrence of an Event of
Default, sell or cause the same to be sold at any
exchange, broker's board or at public or private
sale, in one or more sales or lots, at such price as
the Lender may deem best, for cash or on credit
or for future delivery, without assumption of any
credit risk, and the purchaser of any or all of the
Pledged Collateral so sold shall thereafter own the
same, absolutely free from any claim,
encumbrance or right of any kind whatsoever.
The Lender may, in its own name, or in the name
of a designee or nominee, buy the Pledged
Collateral at any public sale and, if permitted by
applicable law, buy the Pledged Collateral at any
private sale. The Pledgor will pay to the Lender
all reasonable expenses (including, without
limitation, court costs and reasonable attorneys'
and paralegals' fees and expenses) of, or
incidental to, the enforcement of any of the
provisions hereof. The Lender agrees to distribute
any proceeds of the sale of the Pledged Collateral
in accordance with the Loan Agreement and the
Pledgor shall remain liable for any deficiency
following the sale of the Pledged Collateral.
(b) Unless any of the Pledged
Collateral threatens to decline speedily in value or
is or becomes of a type sold on a recognized
market, the Lender will give the Pledgor
reasonable notice of the time and place of any
public sale thereof, or of the time after which any
private sale or other intended disposition is to be
made. Any sale of the Pledged Collateral
conducted in conformity with reasonable
commercial practices of banks, commercial
finance companies, insurance companies or other
financial institutions disposing of property similar
to the Pledged Collateral shall be deemed to be
commercially reasonable. Notwithstanding any
provision to the contrary contained herein, the
Pledgor agrees that any requirements of reasonable
notice shall be met if such notice is received by
the Pledgor as provided in Section 25 below at
least ten (10) days before the time of the sale or
disposition; provided, however, that the Lender
may give any shorter notice that is commercially
reasonable under the circumstances. Any other
requirement of notice, demand or advertisement
for sale is waived, to the extent permitted by law.
(c) In view of the fact that federal
and state securities laws may impose certain
restrictions on the method by which a sale of the
Pledged Collateral may be effected after an Event
of Default, the Pledgor agrees that after the
occurrence of an Event of Default, the Lender
may, from time to time, attempt to sell all or any
part of the Pledged Collateral by means of a
private placement restricting the bidders and
prospective purchasers to those who are qualified
and will represent and agree that they are
purchasing for investment only and not for
distribution. In so doing, the Lender may solicit
offers to buy the Pledged Collateral, or any part of
it, from a limited number of investors deemed by
the Lender, in its reasonable judgment, to be
financially responsible parties who might be
interested in purchasing the Pledged Collateral. If
the Lender solicits such offers from not less than
three (3) such investors, then the acceptance by
the Lender of the highest offer obtained therefrom
shall be deemed to be a commercially reasonable
method of disposing of such Pledged Collateral;
provided, however, that this Section does not
impose a requirement that the Lender solicit offers
from three or more investors in order for the sale
to be commercially reasonable.
10. Security Interest Absolute. All
rights of the Lender and security interests
hereunder, and all obligations of the Pledgor
hereunder, shall be absolute and unconditional
irrespective of:
(a) Any lack of validity or
enforceability of the Loan Agreement or
any other agreement or instrument relating
thereto;
(b) Any change in the time,
manner or place of payment of, or in any
other term of, all or any part of the
Liabilities, or any other amendment or
waiver of or any consent to any departure
from the Loan Agreement;
(c) Any exchange, release or
non-perfection of any other collateral, or
any release or amendment or waiver of or
consent to departure from any guaranty, for
all or any part of the Liabilities; or
(d) any other circumstance which
might otherwise constitute a defense
available to, or a discharge of, the Pledgor
in respect of the Liabilities or of this
Pledge Agreement.
11. Lender Appointed
Attorney-in-Fact. The Pledgor hereby appoints
the Lender its attorney-in-fact, with full authority,
in the name of the Pledgor or otherwise, after the
occurrence of an Event of Default, from time to
time in the Lender's sole discretion, to take any
action and to execute any instrument which the
Lender may deem necessary or advisable to
accomplish the purposes of this Pledge
Agreement, including, without limitation, to
receive, endorse and collect all instruments made
payable to the Pledgor representing any dividend,
interest payment or other distribution in respect of
the Pledged Collateral or any part thereof and to
give full discharge for the same and to arrange for
the transfer of all or any part of the Pledged
Collateral on the books of a Direct Subsidiary to
the name of the Lender or its nominee.
12. Waivers. (a) The Pledgor
waives presentment and demand for payment of
any of the Liabilities, protest and notice of
dishonor or Event of Default with respect to any
of the Liabilities and all other notices to which the
Pledgor might otherwise be entitled except as
otherwise expressly provided herein or in the Loan
Agreement.
(b) The Pledgor agrees that all of
its obligations under this Pledge Agreement shall
remain in full force and effect without defense,
offset or counterclaim of any kind.
(c) The Pledgor hereby expressly
waives the benefits of any laws purporting to
allow a guarantor or pledgor to revoke a
continuing guaranty or pledge with respect to any
transactions occurring after the date of the
guaranty or pledge.
13. Term. This Pledge Agreement
shall remain in full force and effect until the
Liabilities have been fully and indefeasibly paid in
cash, all obligations if the Pledgor in connection
with the Loan Agreements have been repaid and
the Loan Agreement has been terminated pursuant
to its terms. Upon the termination of this Pledge
Agreement as provided above (other than as a
result of the sale of the Pledged Collateral), the
Lender will release the security interest created
hereunder and, if they then have possession of the
Pledged Stock, will deliver the Pledged Stock and
the Powers to the Pledgor.
14. Definitions. The singular shall
include the plural and vice versa and any gender
shall include any other gender as the context may
require.
15. Successors and Assigns. This
Pledge Agreement shall be binding upon and inure
to the benefit of the Pledgor, the Lender and their
respective successors and assigns. The Pledgor's
successors and assigns shall include, without
limitation, a receiver, trustee or
debtor-in-possession of or for the Pledgor.
16. GOVERNING LAW. THIS
PLEDGE AGREEMENT HAS BEEN
EXECUTED AND DELIVERED BY THE
PARTIES HERETO IN NEW YORK, NEW
YORK. ANY DISPUTE BETWEEN THE
LENDER AND THE PLEDGOR ARISING OUT
OF OR RELATED TO THE RELATIONSHIP
ESTABLISHED BETWEEN THEM IN
CONNECTION WITH THIS PLEDGE
AGREEMENT, AND WHETHER ARISING IN
CONTRACT, TORT, EQUITY, OR
OTHERWISE, SHALL BE RESOLVED IN
ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, INCLUDING
SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAWS BUT OTHERWISE
WITHOUT REGARD TO CONFLICTS OF
LAWS PROVISIONS.
17. Consent to Jurisdiction;
Counterclaims; Forum Non Conveniens. (a)
Exclusive Jurisdiction. Except as provided in
subsection (b) of this Section 17, the Lender and
the Pledgor agree that all disputes between them
arising out of or related to the relationship
established between them in connection with this
Pledge Agreement, whether arising in contract,
tort, equity, or otherwise, shall be resolved only
by state or federal courts located in New York,
New York, but the parties acknowledge that any
appeals from those courts may have to be heard
by a court located outside of New York, New
York.
(b) Other Jurisdictions. The
Lender shall have the right to proceed against the
Pledgor or its property in a court in any location
to enable the Lender to obtain personal
jurisdiction over the Pledgor, to realize on the
Pledged Collateral or any other security for the
Liabilities or to enforce a judgment or other court
order entered in favor of the Lender. The Pledgor
shall not assert any permissive counterclaims in
any proceeding brought by the Lender arising out
of or relating to this Pledge Agreement.
(c) Venue; Forum Non
Conveniens. Each of the Pledgor and the Lender
waives any objection that it may have (including,
without limitation, any objection to the laying of
venue or based on forum non conveniens) to the
location of the court in which any proceeding is
commenced in accordance with this Section 17.
18. WAIVER OF JURY TRIAL.
EACH OF THE PLEDGOR AND THE Lender
WAIVES ANY RIGHT TO TRIAL BY JURY IN
ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE,
BETWEEN THE LENDER AND THE
PLEDGOR ARISING OUT OF OR RELATED
TO THE TRANSACTIONS CONTEMPLATED
BY THIS PLEDGE AGREEMENT OR ANY
OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH. EITHER THE
PLEDGOR OR THE Lender MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF
THIS PLEDGE AGREEMENT WITH ANY
COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE PARTIES HERETO TO
THE WAIVER OF THEIR RIGHT TO TRIAL
BY JURY.
19. Waiver of Bond. The Pledgor
waives the posting of any bond otherwise required
of the Lender in connection with any judicial
process or proceeding to realize on the Collateral
or any other security for the Liabilities, to enforce
any judgment or other court order entered in favor
of the Lender, or to enforce by specific
performance, temporary restraining order, or
preliminary or permanent injunction, this Pledge
Agreement or any other agreement or document
between the Lender and the Pledgor.
20. Advice of Counsel. The
Pledgor represents and warrants to the Lender that
it has consulted with its legal counsel regarding all
waivers under this Pledge Agreement, including
without limitation those under Section 12 and
Sections 16 through 19 hereof, that it believes that
it fully understands all rights that it is waiving and
the effect of such waivers, that it assumes the risk
of any misunderstanding that it may have
regarding any of the foregoing, and that it intends
that such waivers shall be a material inducement
to the Lender to extend the indebtedness secured
hereby.
21. Severability. Whenever
possible, each provision of this Pledge Agreement
shall be interpreted in such manner as to be
effective and valid under applicable law, but, if
any provision of this Pledge Agreement shall be
held to be prohibited or invalid under applicable
law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the
remaining provisions of this Pledge Agreement.
22. Further Assurances. The
Pledgor agrees that it will cooperate with the
Lender and will execute and deliver, or cause to
be executed and delivered, all such other stock
powers, proxies, instruments and documents, and
will take all such other actions, including, without
limitation, the execution and filing of financing
statements, as the Lender may reasonably request
from time to time in order to carry out the
provisions and purposes of this Pledge Agreement.
23. The Lender' s Duty of Care.
The Lender shall not be liable for any acts,
omissions, errors of judgment or mistakes of fact
or law including, without limitation, acts,
omissions, errors or mistakes with respect to the
Pledged Collateral, except for those arising out of
or in connection with the Lender's (i) gross
negligence or willful misconduct, or (ii) failure to
use reasonable care with respect to the safe
custody of the Pledged Collateral in the Lender's
possession. Without limiting the generality of the
foregoing, the Lender shall be under no obligation
to take any steps necessary to preserve rights in
the Pledged Collateral against any other parties but
may do so at its option. All expenses incurred in
connection therewith shall be for the sole account
of the Pledgor, and shall constitute part of the
Liabilities secured hereby.
24. Notices. All notices and other
communications required or desired to be served,
given or delivered hereunder shall be made in
writing or by a telecommunications device capable
of creating a written record and shall be addressed
to the party to be notified as follows:
if to the Pledgor, at
Aegis Auto Finance, Inc.
525 Washington Boulevard
Jersey City, New Jersey 07310
Attention: President
Telecopy: (201) 418-7379
if to the Lender, at
III Finance, Ltd.
c/o Admiral Administration Ltd.
Anchorage Center, 2nd Floor
Grand Cayman, Cayman Islands
British West Indies
Attention: David Bree
Telecopy: (345) 949-0705
with copies to
III Offshore Advisors
250 South Australian Avenue, Suite
600
West Palm Beach, Florida 33401
Attention: Robert Fasulo
Telecopy: (407) 655-5496
or, as to each party, at such other address as
designated by such party in a written notice to the
other party. All such notices and communications
shall be deemed to be validly served, given or
delivered (i) three (3) days following deposit in
the United States mails, with proper postage
prepaid; (ii) upon delivery thereof if delivered by
hand to the party to be notified; (iii) one Business
Day after delivery thereof to a reputable overnight
courier service, with delivery charges prepaid; or
(iv) upon transmission thereof with confirmation
of successful transmission from the sending
telecommunications device, if sent by
telecommunications device.
25. Amendments, Waivers and
Consents. No amendment or waiver of any
provision of this Pledge Agreement nor consent to
any departure by the Pledgor herefrom, shall in
any event be effective unless the same shall be in
writing and signed by the Lender pursuant to its
authority under the Loan Agreement, and then
such amendment, waiver or consent shall be
effective only in the specific instance and for the
specific purpose for which given.
26. Section Headings. The section
headings herein are for convenience of reference
only, and shall not affect in any way the
interpretation of any of the provisions hereof.
27. Execution in Counterparts.
This Pledge Agreement may be executed in any
number of counterparts, each of which shall be an
original, but all of which shall together constitute
one and the same agreement.
28. Merger. This Pledge
Agreement represents the final agreement of the
Pledgor with respect to the matters contained
herein and may not be contradicted by evidence of
prior or contemporaneous agreements, or
subsequent oral agreements, between the Pledgor
and the Lender.
29. Reference to and Effect Upon
Existing Pledge Agreements; No Novation. This
Pledge Agreement amends and restates previously
delivered pledge agreements executed and
delivered by the Pledgor to the Lender in
connection with Existing Loan Agreements. This
Pledge Agreement merely restates the grant of the
security interest in the Pledged Collateral granted
to the Lender in connection with the Existing
Loan Agreements and shall not be construed as a
novation of such grant.
30. Stock Powers. Upon the
payment in full of all "Senior Indebtedness" (as
defined in the Indenture) by the Borrower to the
Lender, and if there shall be any indebtedness
owing by the Pledgor under the Indenture, the
Lender shall deliver to the Indenture Trustee the
Pledged Stock then in its possession, together with
all stock powers related thereto.
<PAGE>
IN WITNESS WHEREOF, the
Pledgor and the Lender have executed this Pledge
Agreement as of the date set forth above.
AEGIS AUTO FINANCE, INC.
By: _________________________
Name: ___________________
Title: ____________________
III FINANCE, LTD.
By: _________________________
Name: ___________________
Title: ____________________
<PAGE>
ACKNOWLEDGMENT
The undersigned hereby
acknowledges receipt of a copy of the foregoing
Pledge Agreement, agrees promptly to note on its
books the security interests granted under such
Pledge Agreement, and waives any rights or
requirement at any time hereafter to receive a
copy of such Pledge Agreement in connection
with the registration of any Pledged Collateral in
the name of the Lender or its nominee or the
exercise of voting rights by the Lender or its
nominee.
AEGIS AUTO FUNDING CORP. IV
By: ___________________________
Name: _____________________
Title: ______________________
AEGIS AUTO FUNDING CORP. II
By: ___________________________
Name: _____________________
Title: ______________________
AEGIS AUTO FUNDING CORP.
By: ___________________________
Name: _____________________
Title: ______________________
<PAGE>
EXHIBIT A
to
PLEDGE AGREEMENT
dated as of April 30, 1997
Pledged Stock Certificates
Number of
Name of Direct
Issued and
Subsidiary
Outstanding Shares
Aegis Auto Funding Corp. IV
[__________]
Aegis Auto Funding Corp. II
[__________]
Aegis Auto Funding Corp.
[__________]
<PAGE>
TABLE OF CONTENTS
1. Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Security for Liabilities . . . . . . . . . . . . . . . . . . . . . 2
3. Pledged Collateral Adjustments . . . . . . . . . . . . . . . . . . 2
4. Subsequent Changes Affecting Pledged
Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5. Representations and Warranties . . . . . . . . . . . . . . . . . . 3
6. Voting Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
7. Dividends and Other Distributions. . . . . . . . . . . . . . . . . 4
8. Transfers and Other Liens. . . . . . . . . . . . . . . . . . . . . 5
9. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
10. Security Interest Absolute. . . . . . . . . . . . . . . . . . . . 7
11. Lender Appointed Attorney-in-Fact . . . . . . . . . . . . . . . . 7
12. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
13. Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
14. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
15. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . 8
16. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . 8
17. Consent to Jurisdiction;
Counterclaims; Forum Non Conveniens. . . . . . . . . . . . . . . . . . 8
18. WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . 9
19. Waiver of Bond. . . . . . . . . . . . . . . . . . . . . . . . . . 9
20. Advice of Counsel . . . . . . . . . . . . . . . . . . . . . . . . 9
21. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
22. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . 9
23. The Lender' s Duty of Care. . . . . . . . . . . . . . . . . . . . 9
24. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
25. Amendments, Waivers and Consents. . . . . . . . . . . . . . . . .11
26. Section Headings. . . . . . . . . . . . . . . . . . . . . . . . .11
27. Execution in Counterparts . . . . . . . . . . . . . . . . . . . .11
28. Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
29. Reference to and Effect Upon Existing
Pledge Agreements; No Novation . . . . . . . . . . . . . . . . . . . .11
30. Stock Powers. . . . . . . . . . . . . . . . . . . . . . . . . . .11
EXHIBITS
EXHIBIT A Pledged Stock
Certificates
EXHIBIT B Form of Stock Power
A:\10_108_2.WPD September 4, 1997 (12:4p)
EXECUTION COPY
PLEDGE AGREEMENT
between
Aegis Consumer Finance, Inc.
as Pledgor
AND
III Finance, Ltd.,
Dated as of April 30, 1997
<PAGE>
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (the
"Pledge Agreement"), dated as of April 30, 1997,
is executed by and between AEGIS CONSUMER
FINANCE, INC., a Delaware corporation (the
"Pledgor") and III FINANCE, LTD., a Cayman
Islands company, ("Lender"). Capitalized terms
used herein and not otherwise defined herein shall
have the respective meanings ascribed to such
terms in the Loan Agreement (as defined below).
WITNESSETH:
WHEREAS, the Pledgor, Aegis
Auto Finance, Inc. ("AAF" or the "Borrower") and
the Lender are parties to a certain Amended and
Restated Master Loan Agreement (the "Loan
Agreement"), which Loan Agreement, among
other things, restates the terms of various Existing
Loan Agreements;
WHEREAS, the Pledgor owns
certain limited partnership interests ("LP Units") in
each of Aegis Auto Receivables 1994-A, L.P.,
Aegis Auto Receivables 1994-2, L.P., Aegis Auto
Receivables 1994-3, L.P. and Aegis Auto
Receivables 1995-1, L.P. (collectively the
"Subsidiary Partnerships" and each a "Subsidiary
Partnership") and has previously pledged an
interest in the Pledged Collateral relating to the
above-named subsidiaries under the Existing Loan
Agreements; and
WHEREAS, the Lender has
required, as a condition to its entering into the
Loan Agreement, that the Pledgor execute and
deliver this Pledge Agreement to re-evidence its
obligations in respect of the Pledged Collateral (as
defined below);
NOW, THEREFORE, for and in
consideration of the foregoing and of any financial
accommodations or extensions of credit (including,
without limitation, any loan or advance by
renewal, refinancing or extension of the
agreements described hereinabove or otherwise)
heretofore, now or hereafter made to or for the
benefit of the Pledgor pursuant to the Loan
Agreement, or any other agreement, instrument or
document executed pursuant to or in connection
therewith, and for other good and valuable
consideration, the receipt and sufficiency of which
are hereby acknowledged, the Pledgor and the
Lender hereby agree as follows:
1. Pledge. The Pledgor hereby
pledges to the Lender, and grants to the Lender a
security interest in, the following (collectively, the
"Pledged Collateral"):
(a) all of Pledgor's rights in the LP
Units (the "Pledged LP Units") and all of
Pledgor's rights as a partner in each
Subsidiary Partnership and to the property
(and interests in property) that is owned by
each Subsidiary Partnership;
(b) all of Pledgor's rights, if any,
to participate in the management of each
Subsidiary Partnership;
(c) all rights, privileges, authority
and powers of Pledgor as owner or holder
of the LP Units in each Subsidiary
Partnership, including, but not limited to,
all general intangibles and contract rights
related thereto;
(d) all documents and certificates
representing or evidencing Pledgor's
partnership interest in each Subsidiary
Partnership;
(e) all of Pledgor's interest in and
to the profits and losses of the Subsidiary
Partnerships and Pledgor's right as a
partner of the Subsidiary Partnerships to
receive distributions of the Subsidiary
Partnership's respective assets, upon
complete or partial liquidation or
otherwise;
(f) all of Pledgor's right, title and
interest to receive payments of principal
and interest on any loans and/or other
extensions of credit made by Pledgor or its
Affiliates to the Subsidiary Partnerships
and any all instruments creating or
evidencing such rights;
(g) all distributions, cash,
instruments and other property from time
to time received, receivable or otherwise
distributed in respect of, or in exchange
for, Pledgor's partnership interest in the
Subsidiary Partnerships; and
(h) any other right, title, interest,
privilege, authority and power of the
Pledgor in or relating to the Subsidiary
Partnerships, all whether now existing or
hereafter arising, and whether arising under
a partnership agreement (as the same may
be amended, modified or restated from
time to time) or otherwise, or at law or in
equity and any and all proceeds of any of
the foregoing and all books and records of
the Pledgor pertaining to any of the
foregoing.
2. Security for Liabilities. The
Pledged Collateral secures the prompt payment,
performance and observance of (i) the Pledgor's
obligations and liabilities under the Loan
Agreement and each agreement, document or
instrument executed pursuant to or in connection
with the Loan Agreement and (ii) the Pledgor's
obligations and liabilities under this Pledge
Agreement and each agreement, document or
instrument executed pursuant to or in connection
with this Pledge Agreement (all such obligations
and liabilities of the Pledgor now or hereafter
existing being hereinafter referred to as the
"Liabilities").
3. Pledged Collateral Adjustments.
If, during the term of this Pledge Agreement any
additional percentage interests, shares, units,
options or warrants of partnership interests in the
Subsidiary Partnerships (whether or not
certificated or otherwise evidenced in writing), any
subscriptions, warrants or any other rights or
options issued in connection with any of the
Pledged Collateral or any options, warrants or
convertible securities in connection with the
Pledged Collateral shall be acquired by the
Pledgor by purchase, additional contribution,
reclassification or otherwise (such acquired
collateral, the "Additional Collateral"), then all
such Additional Collateral shall be immediately
delivered to and held by the Lender under the
terms of this Pledge Agreement and shall
constitute Pledged Collateral hereunder; provided,
however, that nothing contained in this Section 3
shall be deemed to permit any issuance of
additional percentage interests, shares, units,
options or warrants of partnership interests which
is not permitted in the Loan Agreement.
4. Subsequent Changes Affecting
Pledged Collateral. The Pledgor represents and
warrants that it has made its own arrangements for
keeping itself informed of changes or potential
changes affecting the Pledged Collateral
(including, but not limited to, rights to convert,
rights to subscribe, payment of dividends,
reorganization or other exchanges, tender offers
and voting rights), and the Pledgor agrees that the
Lender shall have no obligation to inform the
Pledgor of any such changes or potential changes
or to take any action or omit to take any action
with respect thereto. The Lender may, after the
occurrence of an Event of Default, without notice
and at its option, transfer or register the Pledged
Collateral or any part thereof into its or its
nominee's name with or without any indication
that such Pledged Collateral is subject to the
security interest hereunder. In addition, the
Lender may at any time exchange certificates or
instruments representing or evidencing Pledged
Shares for certificates or instruments of smaller or
larger denominations.
5. Representations and Warranties.
The Pledgor represents and warrants as follows:
(a) The Pledgor is the legal and
beneficial owner of the Pledged LP Units
identified on Exhibit A, free and clear of any Lien
except for the security interest created by this
Pledge Agreement or in connection with any
Senior Indebtedness and the Pledgor owns no
other LP Units other than that identified on
Exhibit A;
(b) The Pledgor has full corporate
power and authority to enter into this Pledge
Agreement;
(c) There are no restrictions upon
the voting rights associated with, or upon the
transfer of, any of the Pledged Collateral;
(d) The Pledgor has the right to
vote, pledge and grant a security interest in or
otherwise transfer such Pledged Collateral free of
any Liens other than the Lien created pursuant to
this Pledge Agreement, the Existing Loan
Agreements or in connection with that certain
Indenture dated as of April 30, 1997 (the
"Indenture") between the Borrower and Norwest
Minnesota Bank, N.A., as Indenture Trustee;
(e) No authorization, approval, or
other action by, and no notice to or filing with,
any Governmental Authority or regulatory body is
required either (i) for the pledge of the Pledged
Collateral pursuant to this Pledge Agreement or
for the execution, delivery or performance of this
Pledge Agreement by the Pledgor or (ii) for the
exercise by the Lender of the voting or other
rights provided for in this Pledge Agreement or
the remedies in respect of the Pledged Collateral
pursuant to this Pledge Agreement (except as may
be required in connection with such disposition by
laws affecting the offering and sale of securities
generally); and
(f) The pledge of the Pledged
Collateral pursuant to this Pledge Agreement
creates a valid and perfected security interest in
the Pledged Collateral, in favor of the Lender,
securing the payment and performance of the
Liabilities.
6. Voting Rights. During the term
of this Pledge Agreement, and except as provided
in this Section 7(b) below, the Pledgor shall have
the right to vote the Pledged LP Units on all
corporate questions in a manner not inconsistent
with the terms of this Pledge Agreement, the Loan
Agreement and any other agreement, instrument or
document executed pursuant thereto or in
connection therewith. After the occurrence of an
Event of Default, the Lender or its nominee may,
at the Lender's or such nominee's option and
following written notice from the Lender to the
Pledgor, exercise all voting powers pertaining to
the Pledged Collateral, including the right to take
action by shareholder consent. Such authorization
shall constitute an irrevocable voting proxy from
the Pledgor to the Lender or, at the Lender's
option, to the Lender's nominee.
7. Dividends and Other
Distributions. (a) So long as no Event of Default
or Default shall have occurred:
(i) The Pledgor shall be entitled to
receive and retain any and all dividends and
interest paid in respect of the Pledged Collateral,
provided, however, that any and all
(A) dividends and interest paid or
payable other than in cash with respect to,
and instruments and other property
received, receivable or otherwise
distributed with respect to, or in exchange
for, any of the Pledged Collateral;
(B) dividends and other
distributions paid or payable in cash with
respect to any of the Pledged Collateral on
account of a partial or total liquidation or
dissolution or in connection with a
reduction of capital, capital surplus or
paid-in surplus; and
(C) cash paid, payable or otherwise
distributed with respect to principal of, or
in redemption of, or in exchange for, any
of the Pledged Collateral;
shall be Pledged Collateral, and shall be forthwith
delivered to the Lender to hold as Pledged
Collateral and shall, if received by the Pledgor, be
received in trust for the Lender, be segregated
from the other property or funds of the Pledgor,
and be delivered immediately to the Lender as
Pledged Collateral in the same form as so received
(with any necessary endorsement); and
(ii) The Lender shall execute and
deliver (or cause to be executed and delivered) to
the Pledgor all such proxies and other instruments
as the Pledgor may reasonably request for the
purpose of enabling the Pledgor to receive the
dividends or interest payments which it is
authorized to receive and retain pursuant to clause
(i) above.
(b) After the occurrence of an
Event of Default:
(i) All rights of the Pledgor to
receive the dividends and interest payments which
it would otherwise be authorized to receive and
retain pursuant to Section 7(a)(i) hereof shall
cease, and all such rights shall thereupon become
vested in the Lender, which shall thereupon have
the sole right to receive and hold as Pledged
Collateral such dividends and interest payments;
(ii) All dividends and interest
payments which are received by the Pledgor
contrary to the provisions of clause (i) of this
Section 7(b) shall be received in trust for the
Lender, shall be segregated from other funds of
the Pledgor and shall be paid over immediately to
the Lender as Pledged Collateral in the same form
as so received (with any necessary endorsements);
(iii) The Pledgor shall, upon the
request of the Lender, at Pledgor's expense, use its
best efforts to obtain all necessary governmental
approvals for the sale of the Pledged Collateral, as
requested by the Lender;
(iv) The Pledgor shall, upon the
request of the Lender, at the Pledgor's expense, do
or cause to be done all such other acts and things
as may be necessary to make such sale of the
Pledged Collateral or any part thereof valid and
binding and in compliance with applicable law.
The Pledgor will reimburse the Lender for all
expenses incurred by the Lender, including,
without limitation, reasonable attorneys' and
accountants' fees and expenses in connection with
the foregoing. The Pledgor agrees that, in light of
the fact that federal and state securities laws
impose certain restrictions on the method by
which the Pledged Collateral may be sold, it will
be commercially reasonable if a private sale, upon
at least ten (10) days' notice to the Pledgor, is
arranged so as to avoid a public offering, even
though the sales price established and/or obtained
at such private sale may be substantially less than
prices which could have been obtained for such
security on any market or exchange or in any
other public sale.
8. Transfers and Other Liens. The
Pledgor agrees that it will not (i) sell or otherwise
dispose of, or grant any option with respect to,
any of the Pledged Collateral without the prior
written consent of the Lender, or (ii) create or
permit to exist any Lien upon or with respect to
any of the Pledged Collateral except for the
security interest under this Pledge Agreement, the
Existing Loan Agreements and in connection with
the Indenture.
9. Remedies. (a) The Lender
shall have, in addition to any other rights given
under this Pledge Agreement or by law, all of the
rights and remedies with respect to the Pledged
Collateral of a secured party under the Uniform
Commercial Code as in effect in the State of New
York. After the occurrence of an Event of
Default and following written notice to the
Pledgor, the Lender (personally or through an
agent) is hereby authorized and empowered to
transfer and register in its name or in the name of
its nominee the whole or any part of the Pledged
Collateral, to exercise all voting rights with
respect thereto, to collect and receive all cash
dividends and other distributions made thereon,
and to otherwise act with respect to the Pledged
Collateral as though the Lender were the outright
owner thereof. The Pledgor hereby irrevocably
constitutes and appoints the Lender as the proxy
and attorney-in-fact of the Pledgor, with full
power of substitution to do so, such proxy
becoming effective upon the occurrence of an
Event of Default and following written notice
thereof; provided, however, that the Lender shall
have no duty to exercise any such right or to
preserve the same and shall not be liable for any
failure to do so or for any delay in doing so. In
addition, after the occurrence of an Event of
Default, the Lender shall have such powers of sale
and other powers as may be conferred by
applicable law. With respect to the Pledged
Collateral or any part thereof which shall then be
in or shall thereafter come into the possession or
custody of the Lender or which the Lender shall
otherwise have the ability to transfer under
applicable law, the Lender may, in its sole
discretion, without notice except as specified
below, after the occurrence of an Event of
Default, sell or cause the same to be sold at any
exchange, broker's board or at public or private
sale, in one or more sales or lots, at such price as
the Lender may deem best, for cash or on credit
or for future delivery, without assumption of any
credit risk, and the purchaser of any or all of the
Pledged Collateral so sold shall thereafter own the
same, absolutely free from any claim,
encumbrance or right of any kind whatsoever.
The Lender may, in its own name, or in the name
of a designee or nominee, buy the Pledged
Collateral at any public sale and, if permitted by
applicable law, buy the Pledged Collateral at any
private sale. The Pledgor will pay to the Lender
all reasonable expenses (including, without
limitation, court costs and reasonable attorneys'
and paralegals' fees and expenses) of, or
incidental to, the enforcement of any of the
provisions hereof. The Lender agrees to distribute
any proceeds of the sale of the Pledged Collateral
in accordance with the Loan Agreement and the
Pledgor shall remain liable for any deficiency
following the sale of the Pledged Collateral.
(b) Unless any of the Pledged
Collateral threatens to decline speedily in value or
is or becomes of a type sold on a recognized
market, the Lender will give the Pledgor
reasonable notice of the time and place of any
public sale thereof, or of the time after which any
private sale or other intended disposition is to be
made. Any sale of the Pledged Collateral
conducted in conformity with reasonable
commercial practices of banks, commercial
finance companies, insurance companies or other
financial institutions disposing of property similar
to the Pledged Collateral shall be deemed to be
commercially reasonable. Notwithstanding any
provision to the contrary contained herein, the
Pledgor agrees that any requirements of reasonable
notice shall be met if such notice is received by
the Pledgor as provided in Section 25 below at
least ten (10) days before the time of the sale or
disposition; provided, however, that the Lender
may give any shorter notice that is commercially
reasonable under the circumstances. Any other
requirement of notice, demand or advertisement
for sale is waived, to the extent permitted by law.
(c) In view of the fact that federal
and state securities laws may impose certain
restrictions on the method by which a sale of the
Pledged Collateral may be effected after an Event
of Default, the Pledgor agrees that after the
occurrence of an Event of Default, the Lender
may, from time to time, attempt to sell all or any
part of the Pledged Collateral by means of a
private placement restricting the bidders and
prospective purchasers to those who are qualified
and will represent and agree that they are
purchasing for investment only and not for
distribution. In so doing, the Lender may solicit
offers to buy the Pledged Collateral, or any part of
it, from a limited number of investors deemed by
the Lender, in its reasonable judgment, to be
financially responsible parties who might be
interested in purchasing the Pledged Collateral. If
the Lender solicits such offers from not less than
three (3) such investors, then the acceptance by
the Lender of the highest offer obtained therefrom
shall be deemed to be a commercially reasonable
method of disposing of such Pledged Collateral;
provided, however, that this Section does not
impose a requirement that the Lender solicit offers
from three or more investors in order for the sale
to be commercially reasonable.
10. Security Interest Absolute. All
rights of the Lender and security interests
hereunder, and all obligations of the Pledgor
hereunder, shall be absolute and unconditional
irrespective of:
(a) Any lack of validity or
enforceability of the Loan Agreement or
any other agreement or instrument relating
thereto;
(b) Any change in the time,
manner or place of payment of, or in any
other term of, all or any part of the
Liabilities, or any other amendment or
waiver of or any consent to any departure
from the Loan Agreement;
(c) Any exchange, release or
non-perfection of any other collateral, or
any release or amendment or waiver of or
consent to departure from any guaranty, for
all or any part of the Liabilities; or
(d) any other circumstance which
might otherwise constitute a defense
available to, or a discharge of, the Pledgor
in respect of the Liabilities or of this
Pledge Agreement.
11. Lender Appointed
Attorney-in-Fact. The Pledgor hereby appoints
the Lender its attorney-in-fact, with full authority,
in the name of the Pledgor or otherwise, after the
occurrence of an Event of Default, from time to
time in the Lender's sole discretion, to take any
action and to execute any instrument which the
Lender may deem necessary or advisable to
accomplish the purposes of this Pledge
Agreement, including, without limitation, to
receive, endorse and collect all instruments made
payable to the Pledgor representing any dividend,
interest payment or other distribution in respect of
the Pledged Collateral or any part thereof and to
give full discharge for the same and to arrange for
the transfer of all or any part of the Pledged
Collateral on the books of a Direct Subsidiary to
the name of the Lender or its nominee.
12. Waivers. (a) The Pledgor
waives presentment and demand for payment of
any of the Liabilities, protest and notice of
dishonor or Event of Default with respect to any
of the Liabilities and all other notices to which the
Pledgor might otherwise be entitled except as
otherwise expressly provided herein or in the Loan
Agreement.
(b) The Pledgor agrees that all of
its obligations under this Pledge Agreement shall
remain in full force and effect without defense,
offset or counterclaim of any kind.
(c) The Pledgor hereby expressly
waives the benefits of any laws purporting to
allow a guarantor or pledgor to revoke a
continuing guaranty or pledge with respect to any
transactions occurring after the date of the
guaranty or pledge.
13. Term. This Pledge Agreement
shall remain in full force and effect until the
Liabilities have been fully and indefeasibly paid in
cash, all obligations if the Pledgor in connection
with the Loan Agreements have been repaid and
the Loan Agreement has been terminated pursuant
to its terms. Upon the termination of this Pledge
Agreement as provided above (other than as a
result of the sale of the Pledged Collateral), the
Lender will release the security interest created
hereunder.
14. Definitions. The singular shall
include the plural and vice versa and any gender
shall include any other gender as the context may
require.
15. Successors and Assigns. This
Pledge Agreement shall be binding upon and inure
to the benefit of the Pledgor, the Lender and their
respective successors and assigns. The Pledgor's
successors and assigns shall include, without
limitation, a receiver, trustee or
debtor-in-possession of or for the Pledgor.
16. GOVERNING LAW. THIS
PLEDGE AGREEMENT HAS BEEN
EXECUTED AND DELIVERED BY THE
PARTIES HERETO IN NEW YORK, NEW
YORK. ANY DISPUTE BETWEEN THE
LENDER AND THE PLEDGOR ARISING OUT
OF OR RELATED TO THE RELATIONSHIP
ESTABLISHED BETWEEN THEM IN
CONNECTION WITH THIS PLEDGE
AGREEMENT, AND WHETHER ARISING IN
CONTRACT, TORT, EQUITY, OR
OTHERWISE, SHALL BE RESOLVED IN
ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, INCLUDING
SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAWS BUT OTHERWISE
WITHOUT REGARD TO CONFLICTS OF
LAWS PROVISIONS.
17. Consent to Jurisdiction;
Counterclaims; Forum Non Conveniens. (a)
Exclusive Jurisdiction. Except as provided in
subsection (b) of this Section 17, the Lender and
the Pledgor agree that all disputes between them
arising out of or related to the relationship
established between them in connection with this
Pledge Agreement, whether arising in contract,
tort, equity, or otherwise, shall be resolved only
by state or federal courts located in New York,
New York, but the parties acknowledge that any
appeals from those courts may have to be heard
by a court located outside of New York, New
York.
(b) Other Jurisdictions. The
Lender shall have the right to proceed against the
Pledgor or its property in a court in any location
to enable the Lender to obtain personal
jurisdiction over the Pledgor, to realize on the
Pledged Collateral or any other security for the
Liabilities or to enforce a judgment or other court
order entered in favor of the Lender. The Pledgor
shall not assert any permissive counterclaims in
any proceeding brought by the Lender arising out
of or relating to this Pledge Agreement.
(c) Venue; Forum Non
Conveniens. Each of the Pledgor and the Lender
waives any objection that it may have (including,
without limitation, any objection to the laying of
venue or based on forum non conveniens) to the
location of the court in which any proceeding is
commenced in accordance with this Section 17.
18. WAIVER OF JURY TRIAL.
EACH OF THE PLEDGOR AND THE Lender
WAIVES ANY RIGHT TO TRIAL BY JURY IN
ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE,
BETWEEN THE LENDER AND THE
PLEDGOR ARISING OUT OF OR RELATED
TO THE TRANSACTIONS CONTEMPLATED
BY THIS PLEDGE AGREEMENT OR ANY
OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH. EITHER THE
PLEDGOR OR THE Lender MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF
THIS PLEDGE AGREEMENT WITH ANY
COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE PARTIES HERETO TO
THE WAIVER OF THEIR RIGHT TO TRIAL
BY JURY.
19. Waiver of Bond. The Pledgor
waives the posting of any bond otherwise required
of the Lender in connection with any judicial
process or proceeding to realize on the Collateral
or any other security for the Liabilities, to enforce
any judgment or other court order entered in favor
of the Lender, or to enforce by specific
performance, temporary restraining order, or
preliminary or permanent injunction, this Pledge
Agreement or any other agreement or document
between the Lender and the Pledgor.
20. Advice of Counsel. The
Pledgor represents and warrants to the Lender that
it has consulted with its legal counsel regarding all
waivers under this Pledge Agreement, including
without limitation those under Section 12 and
Sections 16 through 19 hereof, that it believes that
it fully understands all rights that it is waiving and
the effect of such waivers, that it assumes the risk
of any misunderstanding that it may have
regarding any of the foregoing, and that it intends
that such waivers shall be a material inducement
to the Lender to extend the indebtedness secured
hereby.
21. Severability. Whenever
possible, each provision of this Pledge Agreement
shall be interpreted in such manner as to be
effective and valid under applicable law, but, if
any provision of this Pledge Agreement shall be
held to be prohibited or invalid under applicable
law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the
remaining provisions of this Pledge Agreement.
22. Further Assurances. The
Pledgor agrees that it will cooperate with the
Lender and will execute and deliver, or cause to
be executed and delivered, all such other proxies,
instruments and documents, and will take all such
other actions, including, without limitation, the
execution and filing of financing statements, as the
Lender may reasonably request from time to time
in order to carry out the provisions and purposes
of this Pledge Agreement.
23. The Lender' s Duty of Care.
The Lender shall not be liable for any acts,
omissions, errors of judgment or mistakes of fact
or law including, without limitation, acts,
omissions, errors or mistakes with respect to the
Pledged Collateral, except for those arising out of
or in connection with the Lender's (i) gross
negligence or willful misconduct, or (ii) failure to
use reasonable care with respect to the safe
custody of the Pledged Collateral in the Lender's
possession. Without limiting the generality of the
foregoing, the Lender shall be under no obligation
to take any steps necessary to preserve rights in
the Pledged Collateral against any other parties but
may do so at its option. All expenses incurred in
connection therewith shall be for the sole account
of the Pledgor, and shall constitute part of the
Liabilities secured hereby.
24. Notices. All notices and other
communications required or desired to be served,
given or delivered hereunder shall be made in
writing or by a telecommunications device capable
of creating a written record and shall be addressed
to the party to be notified as follows:
if to the Pledgor, at
Aegis Consumer Finance, Inc.
525 Washington Boulevard
Jersey City, New Jersey 07310
Attention: President
Telecopy: (201) 418-7379
if to the Lender, at
III Finance, Ltd.
c/o Admiral Administration Ltd.
Anchorage Center, 2nd Floor
Grand Cayman, Cayman Islands
British West Indies
Attention: David Bree
Telecopy: (345) 949-0705
with copies to
III Offshore Advisors
250 South Australian Avenue, Suite
600
West Palm Beach, Florida 33401
Attention: Robert Fasulo
Telecopy: (407) 655-5496
or, as to each party, at such other address as
designated by such party in a written notice to the
other party. All such notices and communications
shall be deemed to be validly served, given or
delivered (i) three (3) days following deposit in
the United States mails, with proper postage
prepaid; (ii) upon delivery thereof if delivered by
hand to the party to be notified; (iii) one Business
Day after delivery thereof to a reputable overnight
courier service, with delivery charges prepaid; or
(iv) upon transmission thereof with confirmation
of successful transmission from the sending
telecommunications device, if sent by
telecommunications device.
25. Amendments, Waivers and
Consents. No amendment or waiver of any
provision of this Pledge Agreement nor consent to
any departure by the Pledgor herefrom, shall in
any event be effective unless the same shall be in
writing and signed by the Lender pursuant to its
authority under the Loan Agreement, and then
such amendment, waiver or consent shall be
effective only in the specific instance and for the
specific purpose for which given.
26. Section Headings. The section
headings herein are for convenience of reference
only, and shall not affect in any way the
interpretation of any of the provisions hereof.
27. Execution in Counterparts.
This Pledge Agreement may be executed in any
number of counterparts, each of which shall be an
original, but all of which shall together constitute
one and the same agreement.
28. Merger. This Pledge
Agreement represents the final agreement of the
Pledgor with respect to the matters contained
herein and may not be contradicted by evidence of
prior or contemporaneous agreements, or
subsequent oral agreements, between the Pledgor
and the Lender.
29. Reference to and Effect Upon
Existing Pledge Agreements; No Novation. This
Pledge Agreement amends and restates previously
delivered pledge agreements executed and
delivered by the Pledgor to the Lender in
connection with Existing Loan Agreements. This
Pledge Agreement merely restates the grant of the
security interest in the Pledged Collateral granted
to the Lender in connection with the Existing
Loan Agreements and shall not be construed as a
novation of such grant.
<PAGE>
IN WITNESS WHEREOF, the
Pledgor and the Lender have executed this Pledge
Agreement as of the date set forth above.
AEGIS CONSUMER FINANCE, INC.
By: _________________________
Name: ___________________
Title: ____________________
III FINANCE, LTD.
By: _________________________
Name: ___________________
Title: ____________________
<PAGE>
ACKNOWLEDGMENT
The undersigned hereby
acknowledges receipt of a copy of the foregoing
Pledge Agreement, agrees promptly to note on its
books the security interests granted under such
Pledge Agreement, and waives any rights or
requirement at any time hereafter to receive a
copy of such Pledge Agreement in connection
with the registration of any Pledged Collateral in
the name of the Lender or its nominee or the
exercise of voting rights by the Lender or its
nominee.
AEGIS AUTO RECEIVABLES 1994-A, L.P.
By: ___________________________
its General Partner
By: ________________________
Name: ______________________
AEGIS AUTO RECEIVABLES 1994-2, L.P.
By: ___________________________
its General Partner
By: ________________________
Name: ______________________
AEGIS AUTO RECEIVABLES 1994-3, L.P.
By: ___________________________
its General Partner
By: ________________________
Name: ______________________
AEGIS AUTO RECEIVABLES 1995-1, L.P.
By: ___________________________
its General Partner
By: ________________________
Name: ______________________
TABLE OF CONTENTS
1. Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Security for Liabilities . . . . . . . . . . . . . . . . . . . . . 2
3. Pledged Collateral Adjustments . . . . . . . . . . . . . . . . . . 2
4. Subsequent Changes Affecting Pledged
Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5. Representations and Warranties . . . . . . . . . . . . . . . . . . 3
6. Voting Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
7. Dividends and Other Distributions. . . . . . . . . . . . . . . . . 4
8. Transfers and Other Liens. . . . . . . . . . . . . . . . . . . . . 5
9. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
10. Security Interest Absolute. . . . . . . . . . . . . . . . . . . . 7
11. Lender Appointed Attorney-in-Fact . . . . . . . . . . . . . . . . 7
12. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
13. Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
14. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
15. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . 8
16. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . 8
17. Consent to Jurisdiction;
Counterclaims; Forum Non Conveniens. . . . . . . . . . . . . . . . . . 8
18. WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . 9
19. Waiver of Bond. . . . . . . . . . . . . . . . . . . . . . . . . . 9
20. Advice of Counsel . . . . . . . . . . . . . . . . . . . . . . . . 9
21. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
22. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . 9
23. The Lender' s Duty of Care. . . . . . . . . . . . . . . . . . . . 9
24. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
25. Amendments, Waivers and Consents. . . . . . . . . . . . . . . . .11
26. Section Headings. . . . . . . . . . . . . . . . . . . . . . . . .11
27. Execution in Counterparts . . . . . . . . . . . . . . . . . . . .11
28. Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
29. Reference to and Effect Upon Existing
Pledge Agreements; No Novation . . . . . . . . . . . . . . . . . . . .11
A:\10_108_3.WPD September 4, 1997 (12:16p)
D AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREE
MENT, by and between THE AEGIS CONSUMER
FUNDING GROUP, INC., a Delaware corpora-
tion, with offices at 525 Washington
Blvd., Jersey City, New Jersey 07310
(the "Company"), and JOSEPH F. BATTIATO,
residing at 125 Johanna Lane, Staten
Island, New York 10309 (the "Execu-
tive"), is amended and restated as of
April 1, 1997.
W I T N E S S E T H:
WHEREAS, the Executive and the
Company have entered into an Employment
Agreement dated as of March 1, 1994, as
amended (the "Prior Agreement"), pursu
ant to which the Executive holds the
office of President;
WHEREAS, the Company has deter
mined that it is in its best interest
and that of its stockholders to recog-
nize the contribution that the Executive
has made and is expected to continue to
make to the Company's business and to
retain his services in the future;
WHEREAS, in view of recent
changes in the industry in which the
Company is involved, the Company has
determined that it is in its best
interest and that of its stockholders to
revise and restate the terms of
Executive's continued employment with
the Company; and
WHEREAS, the Executive and the
Company desire to terminate and
supersede the Prior Agreement, except
with respect to the amendment dated
April 26, 1996, concerning a change in
control of the Company, and to set forth
in this Agreement the terms and condi
tions of the Executive's continued
employment with the Company;
NOW, THEREFORE, in consideration
of the premises and the mutual covenants
contained herein, the parties hereto
agree as follows:
1. Employment. The Company
agrees to and does hereby continue to
employ the Executive, and the Executive
agrees to and does hereby accept contin
ued employment by the Company, subject
to the terms and conditions herein set
forth.
2. Term. The term of the Exec
utive's employment hereunder shall com
mence as of April 1, 1997 (the "Effec-
tive Time") and shall terminate on April
1, 1999 (such period hereinafter
referred to as the "Term") unless
terminated prior to such date.
3. Duties.
(a) During the Term, the
Executive shall be employed as a senior
executive officer of the Company and
shall be in charge of and responsible
for the general and supervisory duties
normally and customarily attendant to
such office in a consumer finance and
loan servicing business and shall render
such other lawful services, and exercise
such powers, which are from time to time
requested of him, assigned to him or
vested in him by the Board of Directors
of the Company (the "Board") and which
are commensurate with his position as
President.
(b) The Executive agrees
that, during the Term, unless the Board
shall otherwise consent, he will devote
substantially his full time, energies,
labor and skills to the business of the
Company. The Company shall provide the
Executive with his own office space and
appropriate administrative or clerical
assistance, all in a location reasonably
appropriate to enable the Executive to
fulfill his duties, and each commen-
surate with the Executive's position,
duties and responsibilities.
(c) It is hereby
acknowledged that, subject to Paragraph
10 hereof, the Executive may either
presently, or in the future, be involved
in business, charitable or community
activities so long as such other
activities do not interfere with the
performance by the Executive of his
duties hereunder.
4. Compensation. In
consideration for services performed
hereunder, the Company shall pay to the
Executive an annual salary of $300,000,
in installments payable in accordance
with the Company's customary payroll
practices. In addition, the Company
shall reimburse the Executive for all
expenses reasonably incurred by him in
connection with the performance of his
duties hereunder and the business of the
Company upon the submission to the
Company of appropriate receipts there-
for.
The Executive acknowledges, with
respect to the loan (the "Advance") made
by the Company to the Executive in
accordance with the provisions of that
certain amendment, dated as of April 22,
1996, to the Prior Agreement, that
(i) as no bonus shall become due to the
Executive with respect to the Company's
fiscal year ending June 30, 1997, the
Advance shall be used as an offset
against the Bonus (as defined under
Section 6 hereof) to which the Executive
may become entitled, and (ii) the terms
of the repayment of the Advance shall
otherwise remain in full force and
effect. In the event that the Execu
tive's employment hereunder is termi
nated by the Company without Cause or by
the Executive for Good Reason (as each
such term is defined in Section 8
hereof), the Advance shall be a non-
recourse loan to the extent the Bonus is
insufficient to repay the Advance.
5. Vacation. The Executive
shall be entitled to four weeks' paid
vacation during each twelve (12) month
period of his employment hereunder, to
be taken at times mutually agreeable to
the Executive and the Company.
6. Bonus.
(a) Determination of
Bonus Pool. A Bonus Pool shall be
determined for the period commencing on
July 1, 1997 and ending on June 30, 2000
(the "Bonus Period").
(i) "Consolidated Net
After Tax Income" ("CNATI") shall
mean, with respect to any period,
the net after tax income of the
Company from operations currently
conducted by the Company (including
for such purposes the servicing and
origination of automobile loans or
mortgages) before extraordinary
items as reported on the audited
financial statements of the Company
with respect to such period, which
amount shall be: (A) increased to
eliminate bonuses paid or payable
hereunder; (B) reduced to eliminate
any gain accrued on sales in such
fiscal year with respect to securi-
tization, whether or not any such
securitization was effected in such
fiscal year; (C) increased or
reduced without duplication, to give
effect to net cash received or
disbursed in connection with
securitizations; (D) adjusted to
eliminate any income attributable to
securitization of assets by the Com
pany prior to the securitization
designated as "97-1"; and (E)
adjusted to provide for applicable
taxes (current and deferred) on (A),
(B), (C) and (D) above.
(ii) An amount ("Total
Assets") shall be determined by ag
gregating the total weighted average
of assets owned by the Company dur
ing the Bonus Period, whether such
assets are owned by the Company (in
cluding its subsidiaries) or by a
special purpose vehicle, excluding
for this purpose assets owned by the
Company prior to the securitization
designated as "97-1". For purposes
of this Agreement, a "special pur-
pose vehicle" shall be a corporation
or other entity created for the pur
pose of effecting securitizations in
which the Company has a retained
interest or which have recourse to
the Company and which are not other-
wise reflected as consolidated sub
sidiaries on the Company's financial
statements.
(iii) A percentage ("ROA")
shall be determined by dividing the
CNATI for the Bonus Period by Total
Assets for the Bonus Period and di
viding the quotient thereof by the
number three (3).
(iv) The amount of the
Bonus Pool for the Bonus Period
shall be determined in accordance
with the following schedule:
(A) if ROA is less than
.5%, the Bonus Pool
shall be 0% of
CNATI;
(B) if ROA is at least
.5% but no greater
than .749%, the
Bonus Pool shall be
16% of CNATI in
excess of the amount
of CNATI that would
equal an ROA of .5%
(such amount of
CNATI equaling an
ROA of .5% being
hereinafter referred
to as "Base CNATI");
(C) if ROA is at least
.75% but no greater
than .875%, the
Bonus Pool shall
equal (x) 5% of Base
CNATI plus (y) 16%
of CNATI in excess
of Base CNATI;
(D) if ROA is at least
.876% but no greater
than .99%, the Bonus
Pool shall equal (x)
7.5% of Base CNATI
plus (y) 16% of
CNATI in excess of
Base CNATI;
(E) if ROA is at least
1.0% but no greater
than 1.249%, the
Bonus Pool shall
equal (x) 10% of
Base CNATI plus (y)
16% of CNATI in
excess of Base
CNATI;
(F) if ROA is at least
1.25% but no greater
than 1.499%, the
Bonus Pool shall
equal (x) 12.5% of
Base CNATI plus (y)
16% of CNATI in
excess of Base
CNATI; and
(G) if ROA is 1.5% or
more, the Bonus Pool
shall equal 16% of
CNATI.
(b) Allocation of Bonus
Pool. As soon as practicable, but no
later than sixty (60) days following the
certification of the Company's financial
statements in respect of the fiscal year
of the Company ending June 30, 2000, the
Bonus Pool shall be allocated by the
then most senior executive among Messrs.
Angelo Appierto, Joseph Battiato, Gary
Peiffer and Jorge Rios, in such
individual's sole discretion, between
(i) the Senior Executive Group, consist-
ing of Messrs. Angelo Appierto, Joseph
Battiato, Gary Peiffer and Jorge Rios,
and (ii) the Executive Group, consisting
of the Chief Financial Officer, any
Executive Vice President and such other
employees of the Company as the Chairman
shall in his discretion designate;
provided, however, that no less than 5%
of the Bonus Pool shall be allocated to
the Executive Group. Except as herein-
below provided, one-fourth (1/4) of that
portion of the Bonus Pool allocated to
the Senior Executive Group in accordance
with the immediately preceding sentence
shall be allocated to each of the mem-
bers of the Senior Executive Group (such
individual's allocation, the "Bonus"),
and that portion of the Bonus Pool
allocated to the Executive Group in
accordance with the immediately
preceding sentence shall be allocated
among the members of the Executive Group
as determined by the Chairman in his
sole discretion. If the employment of
the Executive is terminated by the Com
pany without Cause or by the Executive
with Good Reason, he shall be entitled
to receive 100% of his Bonus at such
time as the Bonus otherwise becomes pay-
able. If the employment of the Execu
tive is terminated by the Company for
Cause or by the Executive without Good
Reason (A) during the first year of the
Term, the Executive's right to receive
any portion of the Bonus shall be for
feited or (B) during the second year of
the Term, he shall be entitled to re
ceive, at such time as the Bonus other
wise becomes payable, an amount equal to
one-half (1/2) of the Bonus otherwise
attributable to him. In the event that,
prior to February 1, 1999, the Company
offers to the Executive an extension of
his employment for at least one (1) year
following the end of the Term on terms
substantially similar to those provided
herein and the Executive does not accept
such offer, the Executive shall be enti-
tled to receive, at the time such Bonus
otherwise becomes payable, an amount
equal to two-thirds (2/3) of the Bonus
otherwise attributable to him. In the
event that, prior to February 1, 1999,
the Company does not offer to the Execu-
tive an extension of his employment for
at least one (1) year following the end
of the Term on terms substantially simi-
lar to those provided herein, the Execu-
tive shall be entitled to receive, at
the time such Bonus otherwise becomes
payable, an amount equal to five-sixths
(5/6) of the Bonus otherwise attribut
able to him. Any portion of the Bonus
not paid to the Executive by operation
of this Agreement shall be allocated in
such amounts and to such employees as
the Board of Directors may in its dis
cretion determine.
(c) Payment of Bonuses.
The bonus determined pursuant to this
Section 6 shall be paid to the Executive
not less than ten (10) business days
following the allocations described in
subparagraph (b) hereof; provided,
however, that to the extent that the
determination of CNATI set forth in
subparagraph (a) hereof includes income
accrued as a result of securitizations
effected during the Bonus Period com
mencing with the securitization desig
nated by the Company as "1997-1," that
portion of the Bonus Pool allocated to
such income will be paid only when and
to the extent that case is released to
the Company from the reserve fund or
funds applicable to such
securitizations. The Company's
obligation to pay the Executive the
Bonus accrued pursuant to this Section 6
shall survive the termination of this
Agreement.
7. Benefits.
(a) Throughout the Term,
the Executive shall be eligible to
participate in any pension, profit-shar-
ing, stock option or similar plan or
program of the Company now existing or
established hereafter for the benefit of
its employees generally, to the extent
that he is eligible under the general
provisions thereof. The Executive shall
also be entitled to participate in any
group insurance, hospitalization,
medical, health and accident, disability
or similar or nonsimilar plan or program
of the Company now existing or
established hereafter for the benefit of
its employees or executives generally,
to the extent that he is eligible under
the general provisions thereof. To the
extent that it can be accomplished
without cost to the Company above that
payable in respect of other senior
officers of the Company, the benefits
under such plans and programs shall be
at least equivalent to the benefits
available to the Executive under plans
and programs in which he was par-
ticipating on January 1, 1994. To the
extent that the foregoing plans and
programs do not provide the Executive
with disability insurance providing a
maximum benefit level of at least
$10,000 per month, the Company shall
supplement such plans and programs to
provide such coverage.
(b) The Company shall
reimburse the Executive in a monthly
amount not to exceed $1,000 in respect
of the cost of leasing or purchasing an
automobile to be used by him in connec-
tion with the Company's business. In
addition, the Company shall be responsi-
ble for all reasonable costs of
operating, repairing, maintaining and
insuring such automobile.
(c) The Company shall
provide the Executive with a policy of
term life insurance in an amount equal
to $1 million (or, in the Executive's
discretion, any other form or amount of
life insurance at an annual premium cost
to the Company not in excess of the
annual premium for such a policy provid-
ing $1 million of term life insurance),
payable to such beneficiary or such
beneficiaries as shall be designated in
writing by the Executive. Such policy
shall be owned by the Executive or any
person or entity designated by him. Any
incremental increase in the premium cost
arising by virtue of the Executive being
uninsurable at standard rates shall be
paid by the Executive.
(d) In the event that
the Executive shall die prior to the end
of the Term, then, as an additional
death benefit, the Company shall pay to
the Executive's beneficiary or
beneficiaries, as the Executive shall
have indicated in writing to the Company
(or, if no such beneficiary has been
designated, to the Executive's estate),
an amount equal to one-half (1/2) of the
Executive's annual salary in effect at
the time of the Executive's death, pur
suant to the terms of this Agreement.
Such death benefit shall be paid (i) in
addition to any sum otherwise required
to be paid to such beneficiary or to the
Executive's estate by the Company and
(ii) in six (6) equal consecutive
monthly installments, commencing on the
first date following the Executive's
death that the Executive would have
otherwise received a salary payment
hereunder if the Executive had survived.
(e) In the event the
Company shall cause the Executive to
relocate to offices not within reason-
able commuting distance of his then
current residence, the Executive shall
be entitled to receive full reim-
bursement from the Company for all
customary expenses incurred in
connection with the Executive's moving
his residence to a location within
reasonable commuting distance of such
new office location. Such expenses
shall include but not be limited to the
costs of moving, packing and storing the
Executive's personal effects, real
estate brokerage fees and legal and
other incidental costs. In addition,
provided that the Executive is making a
reasonably diligent effort to sell his
then current residence at a price
established in good faith based upon
then current market conditions in the
immediate vicinity, pending the
Executive's sale of his then current
residence the Company shall make avail-
able to the Executive appropriate living
facilities maintained by the Company in
the vicinity of the new office location
and shall reimburse the cost of travel
ing once a week between such residence
and office locations. The Company shall
further reimburse the Executive upon
sale of such residence for the amount,
if any, by which the net proceeds from
such sale (after brokerage, legal and
other incidental closing costs) are less
than the costs to the Executive of such
residence, including any improvements
thereto. The Company shall further pay
the Executive an amount equal to the
federal, state and local income taxes
due (at the highest marginal brackets
then in effect) from the Executive with
respect to all amounts payable by the
Company pursuant to this subsection (e)
to the extent not deductible to the
Executive under the Internal Revenue
Code of 1986, as amended, and the regu-
lations thereunder.
8. Termination of Executive's
Employment.
(a) Notwithstanding any
provisions contained herein to the con
trary, the Executive's employment may be
terminated by the Company upon the Exec
utive's death or disability (as defined
below) or for Cause (as defined below),
and the Executive may terminate his
employment for Good Reason (as defined
below);
(b) For purposes of this
Agreement, "disability" shall mean the
Executive is mentally or physically
disabled from properly and fully per
forming his duties and responsibilities
hereunder for a period of 120 consecu-
tive days or for 180 days, even though
not consecutive, within any 360-day
period, all as evidenced by the written
certification of a qualified medical
doctor agreed to by the Company and the
Executive or, in the absence of such
agreement, by a doctor selected by the
agreement of a qualified medical doctor
selected by each of the Company and the
Executive;
(c) For purposes of this
Agreement, "Cause" shall mean: (i) the
conviction of the Executive of a felony
by a federal or state court of competent
jurisdiction; (ii) the continued failure
by the Executive to substantially per
form the Executive's duties with the
Company (other than any such failure
resulting from the Executive's incapac
ity due to physical or mental illness or
any such actual or anticipated failure
after the issuance of a notice of termi
nation for Good Reason by the Executive)
after a written demand for substantial
performance is delivered to the Execu
tive by the Board, which demand specifi
cally identifies the manner in which the
Board believes that the Executive has
not substantially performed his duties,
(iii) the engaging by the Executive in
conduct which is demonstrably and mate
rially injurious to the Company or its
subsidiaries, monetarily or otherwise,
or (iv) the engaging by the Executive in
an actual act of dishonesty intended to
result in gain to the Executive at the
expense of the Company. In no event
shall Cause be deemed to include any
action or inaction on the part of the
Executive undertaken in good faith,
consistent with his fiduciary duties to
the Company, which are within the "busi
ness judgement rule" as such rule or
embodiment thereof has been interpreted
in accordance with the laws of the ap
plicable jurisdiction.
A notice of termination for
Cause shall include a copy of a resolu
tion duly adopted by the affirmative
vote of a majority of the entire member
ship of the Board (not including the
Executive) at a meeting of the Board
which was called and held for the pur
pose of considering such termination
(after reasonable notice to the Execu-
tive and an opportunity for the Execu
tive, together with the Executive's
counsel, to be heard before the Board)
finding that, in the good faith opinion
of the Board, the Executive was guilty
of conduct set forth in the immediately
preceding paragraph, and specifying the
particulars thereof in detail.
(d) For purposes of this
Agreement, "Good Reason" shall mean any
of the following: (i) the assignment to
the Executive of duties inconsistent
with the Executive's position, duties,
responsibilities, titles or offices as
described herein, (ii) any material
reduction by the Company of the Execu
tive's duties or responsibilities (in
cluding the appointment, without the
Executive's consent, of an executive
officer senior to him other than the
Chairman of the Board, the Vice Chairman
or the Chief Executive Officer), (iii)
any reduction by the Company of the
Executive's compensation as set forth in
Paragraphs 4, 5, 6 or 7 hereof (it being
understood that a reduction of benefits
applicable to all executives of the
Company (including the Executive) shall
not be deemed a reduction of the Execu
tive's compensation package for purposes
of this definition) or (iv) requiring
the Executive to be based without his
consent at a location not within rea-
sonable commuting distance of his then
current residence.
(e) In the event that
the Executive's employment hereunder is
terminated as a result of death, dis-
ability or by the Company for Cause, or
by the Executive without Good Reason, or
in the event that this Agreement is not
renewed or extended at the end of the
Term, then the Company shall have no
further obligations or liabilities to
the Executive hereunder, such that all
benefits and salary (but not the Com
pany's obligation to pay the Executive's
Bonus) provided for within this Agree-
ment (except for any death or disability
benefits that would otherwise continue
past the date of such termination) shall
terminate simultaneously with the termi
nation of the Executive's employment
except for benefits and salary earned
and accrued through the date of such
termination. Nothing in this subsection
(e) shall supersede any rights of the
Executive to receive any amounts or
benefits otherwise due to him upon the
occurrence of any of the events
described in the immediately preceding
sentence, whether such rights are
created by this Agreement or otherwise.
(f) In the event that
the Executive's employment hereunder is
terminated by the Company other than for
Cause, death, disability, or because the
Agreement has not been renewed or
extended, or by the Executive for Good
Reason, the Company shall continue to
provide the Executive with the salary,
bonus and benefits enumerated in Para-
graphs 4, 6 and 7 hereof, respectively,
at the levels in effect immediately
prior to such termination (or, if
applicable, the occurrence of the event
constituting Good Reason), for the
remainder of the Term (such period, the
"Severance Period"). In addition,
following the Severance Period, the
Executive shall continue to be entitled
to receive payment of the Bonus earned
in accordance with Section 6 hereof.
(g) If the Executive's
employment hereunder is terminated under
Section 8(f) hereof, the Executive shall
be required to mitigate damages; provid-
ed, however, that the Executive shall
not be required to accept employment
that requires him to perform duties
inconsistent with those of a senior
executive officer or professional at a
level for which he is qualified by rea
son of experience and education. Any
salary, bonus and benefits (to the ex
tent provided at no additional cost to
the Executive) received by the Executive
during or with respect to the Severance
Period and attributable to services
rendered by the Executive to persons or
entities other than the Company shall be
applied to reduce the Company's obliga
tion to make payments and provide bene
fits attributable to periods after such
termination.
9. Stock Options. (a)
Effective as of the date hereof,
options to purchase an aggregate of
300,000 shares of common stock of the
Company previously awarded under the
Company's 1994 Stock Option Plan (as
amended) (the "1994 Plan") shall be
cancelled to the Company. In consider-
ation for such cancellation, the
Compensation Committee of the Board
shall, effective as of the date hereof,
grant to the Executive an option to
purchase 259,695 Shares (as defined in
the 1994 Plan) under the terms set forth
in the 1994 Plan, except as provided
below:
Option exercise price per share:
$2.50;
Term of Option: 10 years from
the date of grant; and
Termination of Employment: if
the Executive's employment
hereunder is terminated by the
Company other than for Cause or
by the Executive for Good Reason
(as such terms are defined
herein), the option shall remain
exercisable, to the extent
exercisable as of the effective
date of such termination, for a
period of the lesser of (1) 1
year following the effective
date of such termination and
(2) the original term of such
option.
(b) In addition, effective
as of the date hereof, options to pur-
chase an aggregate of 35,000 shares of
common stock of the Company previously
awarded under the Company's 1996 Stock
Option Plan (as amended) (the "1996
Plan") shall be cancelled to the
Company. In consideration for such
cancellation, the Compensation Committee
of the Board shall, effective as of the
date hereof, grant to the Executive an
option to purchase 30,305 Shares (as
defined in the 1996 Plan) under the
terms set forth in the 1996 Plan, except
that provisions in respect of the option
exercise price, term and exercisability
of such option set forth above in
subsection (a) of this Section 9 shall
also apply to the option granted hereun-
der.
10. Covenants of the
Executive.
(a) The Executive
acknowledges that his employment by the
Company will throughout his employment
bring him into close contact with many
confidential affairs of the Company,
including information about costs,
profits, markets, sales, key personnel,
pricing policies, operational methods,
and other business affairs, methods and
information, including plans for future
developments, not readily available to
the public. The Executive further ac-
knowledges that the services to be per
formed under this Agreement are of a
special, unique, unusual, extraordinary
and intellectual character, and that the
Company currently competes or intends to
compete with other organizations that
are located in all of the states of the
United States. In recognition of the
foregoing, the Executive covenants and
agrees that:
(i) he will not knowingly
divulge any material confidential
matters of the Company which are not
otherwise in the public domain and
will not intentionally disclose them
to anyone outside of the Company
during his employment by the Company
hereunder, other than in the proper
performance of the duties contem-
plated herein, or following the ex
piration or termination for any rea
son of his employment with the
Company;
(ii) he will deliver
promptly to the Company upon the
termination of his employment, or at
any other time the Company may so
request, at the Company's expense,
all memoranda, notes, records,
reports and other documents (and all
copies thereof) relating to the
businesses of the Company which he
obtained while employed by, or
otherwise serving or acting on
behalf of, the Company, or any of
its subsidiaries or affiliates, and
which he may then possess or have
under his control; and
(iii) for so long as the
Executive continues to receive
salary from the Company, whether
under the terms of this Agreement or
otherwise (including, but not lim
ited to, the duration of the Sever
ance Period), the Executive will
not, unless the Board shall other-
wise consent, alone or together with
any other person, firm, partnership,
corporation or other entity what-
soever (except any subsidiaries or
affiliates of the Company), directly
or indirectly, whether as an offi-
cer, director, stockholder, partner,
proprietor, associate, employee,
representative, public relations or
advertising representative, man-
agement consultant or otherwise:
(A) engage in or
(B) become or be inter
ested in or associ-
ated with any other
person, corporation,
firm, partnership or
other entity whatso
ever engaged in
any business which is competitive
with any business conducted or con
templated by the Company (a "Similar
Business").
(b) Notwithstanding the
provisions of subsection (a)(iii) of
this Paragraph 10, the Executive may
own, as an inactive investor, securities
of a corporation engaged in a competi
tive line of business whose equity secu
rities are registered under Section
12(b) or 12(g) of the Exchange Act, so
long as his beneficial ownership in any
one such corporation shall not in the
aggregate constitute more than five
percent (5%) of any class of equity
securities of such corporation.
(c) As a separate and
independent covenant, the Executive
agrees that during the Term, including
any extensions or renewals therof, and
for a period of six months thereafter,
the Executive will not, without the
consent of the Company (which consent
shall not be unreasonably withheld) in
any way, directly or indirectly, for the
purpose of conducting or engaging in any
Similar Business, call upon, solicit,
advise or otherwise do, or attempt to
do, business with any clients, customers
or accounts of the Company (including
for such purposes any subsidiaries of
the Company) with whom the Exeuctive had
any dealings during the course of the
Executive's employment with the Company
or any of its affiliates or interfere or
attempt to interfere with any officers,
employees, representatives or agents of
the Company, or induce or attempt to
induce any of them to leave the employ
of or violate the terms of their con-
tracts with the Company.
(d) The Executive agrees
that the remedy at law for any breach or
threatened breach of any covenant con
tained in this Paragraph 10 will be
inadequate and that the Company, in
addition to such other remedies as may
be available to it, at law or in equity,
shall be entitled to injunctive relief
without bond or other security.
11. Governing Law. This Agree
ment shall be construed in accordance
with and governed by the laws of the
State of New York applicable to
contracts executed in and to be
performed solely within such state.
12. Notices. All notices
required or permitted to be given by
either party hereunder, including notice
of change of address, shall be in writ
ing and delivered by hand, or mailed,
postage prepaid, certified or registered
mail, return receipt requested, to the
other party as follows:
If to the Company: The Aegis Consumer Fund
ing Group, Inc.
525 Washington Blvd.
Jersey City, New Jersey 07310
Attention: Angelo Appierto
Chairman of the Board
If to the Executive: Joseph F. Battiato
125 Johanna Lane
Staten Island, New York 10309
13. Miscellaneous.
(a) Entire Agreement.
This Agreement constitutes the entire
agreement among the parties with respect
to the subject matter hereof and super
sedes any and all prior oral or written
agreements and understandings; however,
this Agreement shall not supersede, dimin-
ish or modify any rights of the Executive
under any employee benefit plans of the
Company. There are no oral promises,
conditions, representations, under-
standings, interpretations or terms of any
kind as conditions or inducements to the
execution hereof or in effect among the
parties. This Agreement may not be
amended, and no provision hereof shall be
waived, except by a writing signed by the
Company and the Executive, or in the case
of a waiver, by the party waiving
compliance therewith, which states that it
is intended to amend or waive a provision
of this Agreement. Any waiver of any
rights or failure to act in a specific
instance shall relate only to such
instance and shall not be construed as an
agreement to waive any rights or failure
to act in any other instance, whether or
not similar.
(b) Further Acts. The
parties hereto agree that, after the exe
cution of this Agreement, they will make,
do, execute or cause to be made, done or
executed all such further and other lawful
acts, deeds, things, devices, conveyances
and assurances in law whatsoever as may be
required to carry out the true intention
and to give full force and effect to this
Agreement.
(c) Severability. Should
any provision of this Agreement be held by
a court of competent jurisdiction to be
unenforceable or prohibited by an applica-
ble law, this Agreement shall be consid
ered divisible as to such provision, which
shall be inoperative, and the remainder of
this Agreement shall be valid and binding
as though such provision were not included
herein.
(d) Successors and As
signs. This Agreement shall inure to the
benefit of, and be binding upon, the Com
pany and any corporation with which the
Company merges or consolidates or to which
the Company sells all or substantially all
of its assets, and upon the Executive and
his executors, administrators, heirs and
legal representatives.
(e) Headings. All head
ings in this Agreement are for convenience
only and are not intended to affect the
meaning of any provision hereof.
(f) Counterparts. This
Agreement may be executed in two or more
counterparts with the same effect as if
the signatures to all such counterparts
were upon the same instrument, and all
such counterparts shall constitute but one
instrument.
(g) Costs of the Agree
ment. The Company agrees to reimburse the
Executive for all of the costs of
negotiating and drafting this Agreement,
including the reasonable fees and expenses
of the Executive's attorneys, such reim-
bursement to be paid whether or not this
Agreement becomes effective.
<PAGE>
IN WITNESS WHEREOF, the Executive
has executed this Agreement and the Com
pany has caused this Agreement to be exe
cuted by its duly authorized officer as of
the day and year first above written.
THE AEGIS CONSUMER
FUNDING
GROUP, INC.
By:
Name:
Title:
Joseph F. Battiato
EXECUTION COPY
GUARANTY
GUARANTY dated as of April 30,
1997 made by The Aegis Consumer Funding
Group, Inc., a Delaware corporation (the
"Guarantor"), in favor of the Lender (as defined in
the Loan Agreement referred to below).
PRELIMINARY STATEMENT
III Finance Ltd., a Cayman Islands
company (the "Lender") is party to the Amended
and Restated Loan Agreement dated as of April
30, 1997 (said agreement, as it may hereafter be
amended, supplemented or otherwise modified
from time to time, being the "Loan Agreement,"
the terms defined therein and not otherwise
defined herein being used herein as therein
defined) with Aegis Auto Finance, Inc., a
Delaware corporation and Aegis Consumer
Finance, Inc., (collectively, the "Borrowers"). The
Loan Agreement restates in full the terms and
conditions of several Existing Loan Agreements
the obligations under which have been guaranteed
by the Guarantor, and it is a condition precedent
to the effectiveness of the Loan Agreement that
the Guarantor shall have executed and delivered
this Guaranty in order to re-evidence its Guaranty
obligations.
NOW, THEREFORE, in
consideration of the premises and in order to
induce the Lender to enter into the Loan
Agreement, the Guarantor hereby reaffirms all of
its obligations under the guarantees previously
made by it in respect of the indebtedness under
the Existing Loan Agreements and the Loan
Agreement and further agrees as follows:
Section 1. Guaranty. The
Guarantor hereby unconditionally and irrevocably
guarantees the punctual payment when due,
whether at stated maturity, by acceleration or
otherwise, of all obligations of the Borrowers now
or hereafter existing under the Loan Agreement,
whether for principal, interest, fees, expenses or
otherwise (such obligations being the "Guaranteed
Obligations"), and agrees to pay any and all
expenses (including reasonable counsel fees and
expenses) incurred by the Lender in enforcing any
rights under this Guaranty. Without limiting the
generality of the foregoing, the Guarantor's
liability shall extend to all amounts that constitute
part of the Guaranteed Obligations and would be
owed by the Borrowers to the Lender or any other
Person under the Loan Agreement but for the fact
that they are unenforceable or not allowable due to
the existence of a bankruptcy, reorganization or
similar proceeding involving either Borrower.
Section 2. Guaranty Absolute. The
Guarantor guarantees that the Guaranteed
Obligations will be paid strictly in accordance
with the terms of the Loan Agreement, regardless
of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such
terms or the rights of the Lender with respect
thereto. The obligations of the Guarantor under
this Guaranty are independent of the Guaranteed
Obligations or any other obligations of any other
party under the Loan Agreement, and a separate
action or actions may be brought and prosecuted
against the Guarantor to enforce this Guaranty,
irrespective of whether any action is brought
against either Borrower or any other party or
whether either Borrower or any other party is
joined in any such action or actions. The liability
of the Guarantor under this Guaranty shall be
irrevocable, absolute and unconditional
irrespective of, and the Guarantor hereby
irrevocably waives any defenses it may now or
hereafter have in any way relating to, any or all of
the following:
(a) any lack of validity or
enforceability of the Loan Agreement or
any agreement or instrument relating
thereto;
(b) any change in the time, manner
or place of payment of, or in any other
term of, all or any of the Guaranteed
Obligations, or any other amendment or
waiver of or any consent to departure from
the Loan Agreement, including, without
limitation, any increase in the Guaranteed
Obligations resulting from the extension of
additional credit to either Borrower or any
of its Affiliates or otherwise;
(c) any taking, exchange, release or
non-perfection of any Collateral, or any
taking, release or amendment or waiver of
or consent to departure from any other
guaranty, for all or any of the Guaranteed
Obligations;
(d) any manner of application of
Collateral, or proceeds thereof, to all or
any of the Guaranteed Obligations, or any
manner of sale or other disposition of any
Collateral for all or any of the Guaranteed
Obligations under the Loan Agreement or
any other assets of either Borrower or any
of its Affiliates; or
(e) any change, restructuring or
termination of the corporate structure or
existence of either Borrower or any of its
Affiliates.
This Guaranty shall continue to be effective or be
reinstated, as the case may be, if at any time any
payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by the
Lender or any other Person upon the insolvency,
bankruptcy or reorganization of either Borrower or
otherwise, all as though such payment had not
been made.
Section 3. Waivers and
Acknowledgments. (a) The Guarantor hereby
waives promptness, diligence, notice of acceptance
and any other notice with respect to any of the
Guaranteed Obligations and this Guaranty and any
requirement that the Lender protect, secure,
perfect or insure any lien or any property subject
thereto or exhaust any right or take any action
against the Borrowers or any other Person or any
Collateral.
(b) The Guarantor hereby waives
any right to revoke this Guaranty, and
acknowledges that this Guaranty is continuing in
nature and applies to all Guaranteed Obligations,
whether existing now or in the future.
(c) The Guarantor acknowledges
that it will receive substantial direct and indirect
benefits from the financing arrangements
contemplated by the Loan Agreement and that the
waivers set forth in this Section 3 are knowingly
made in contemplation of such benefits.
Section 4. Subrogation. The
Guarantor will not exercise any rights that it may
now or hereafter acquire against the Borrowers
that arise from the existence, payment,
performance or enforcement of the Guarantor's
Obligations under this Guaranty, including,
without limitation, any right of subrogation,
reimbursement, exoneration, contribution or
indemnification and any right to participate in any
claim or remedy of the Lender against the
Borrowers or any Collateral, whether or not such
claim, remedy or right arises in equity or under
contract, statute or common law, including,
without limitation, the right to take or receive
from either Borrower directly or indirectly, in cash
or other property or by set-off or in any other
manner, payment or security on account of such
claim, remedy or right, unless and until all of the
Guaranteed Obligations and all other amounts
payable under this Guaranty shall have been paid
in full in accordance with the terms of the Loan
Agreement. If any amount shall be paid to the
Guarantor in violation of the preceding sentence at
any time prior to the payment in full of the
Guaranteed Obligations and all other amounts
payable under this Guaranty, such amount shall be
held in trust for the benefit of the Lender and
shall forthwith be paid to the Lender to be
credited and applied to the Guaranteed Obligations
and all other amounts payable under this
Guaranty, whether matured or unmatured, in
accordance with the terms of the Loan Agreement,
or to be held as Collateral for any Guaranteed
Obligations or other amounts payable under this
Guaranty thereafter arising. If (i
) the Guarantor
shall make payment to the Lender of all or any
part of the Guaranteed Obligations and (ii) all of
the Guaranteed Obligations and all other amounts
payable under this Guaranty shall be paid in full,
the Lender will, at the Guarantor's request and
expense, execute and deliver to the Guarantor
appropriate documents, without recourse and
without representation or warranty, necessary to
evidence the transfer by subrogation to the
Guarantor of an interest in the Guaranteed
Obligations resulting from such payment by the
Guarantor.
Section 5. Representations and
Warranties. The Guarantor hereby represents and
warrants as follows:
(a) The Guarantor (i) is a
corporation duly organized, validly existing
and in good standing under the laws of the
jurisdiction of its incorporation, (ii) is duly
qualified and in good standing as a foreign
corporation in each other jurisdiction in
which it owns or leases property or in
which the conduct of its business requires
it to so qualify or be licensed except where
the failure to so qualify or be licensed
would not have a material adverse effect
on the business or properties, taken as a
whole, or the condition, financial or
otherwise, of the Guarantor (a "Material
Adverse Effect"), and (iii) has all requisite
corporate power and authority to own or
lease and operate its properties and to carry
on its business as now conducted and as
proposed to be conducted.
(b) The execution, delivery and
performance by the Guarantor of this
Guaranty are within the Guarantor's
corporate powers, have been duly
authorized by all necessary corporate
action, and do not (i) contravene the
Guarantor's charter or bylaws, (ii) violate
any law (including, without limitation, the
Securities Exchange Act of 1934 and the
Racketeer Influenced and Corrupt
Organizations Chapter of the Organized
Crime Control Act of 1970), rule,
regulation (including, without limitation,
Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System),
order, writ, judgment, injunction, decree,
determination or award, (iii) conflict with
or result in the breach of, or constitute a
default under, any loan agreement,
contract, indenture, mortgage, deed of trust,
lease or other instrument binding on or
affecting the Guarantor, any of its
subsidiaries or any of its or their
properties, the effect of which conflict,
breach or default is reasonably likely to
have a Material Adverse Effect, or (iv)
except for the Liens created under the
Loan Agreement, result in or require the
creation or imposition of any Lien upon or
with respect to any of the properties of the
Guarantor or any of its subsidiaries. The
Guarantor is not in violation of any such
law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award,
or in breach of any such contract, loan
agreement, indenture, mortgage, deed of
trust, lease or other instrument, the
violation or breach of which would be
reasonably likely to have a Material
Adverse Effect.
(c) No authorization or approval or
other action by, and no notice to or filing
with, any governmental authority or
regulatory body or any other third party is
required for (i) the due execution, delivery,
recordation, filing or performance by the
Guarantor of this Guaranty, and (ii) the
exercise by the Lender of its rights under
this Guaranty.
(d) This Guaranty has been duly
executed and delivered by the Guarantor.
This Guaranty is the legal, valid and
binding obligation of the Guarantor,
enforceable against the Guarantor in
accordance with its terms except as
enforceability may be limited by
bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or
limiting creditors' rights or by equitable
principles generally.
(e) There are no conditions
precedent to the effectiveness of this
Guaranty that have not been satisfied or
waived.
(f) The Guarantor has,
independently and without reliance upon
the Lender, and based on such documents
and information as it has deemed
appropriate, made its own credit analysis
and decision to enter into this Guaranty.
Section 6. Amendments, Etc. No
amendment or waiver of any provision of this
Guaranty and no consent to any departure by the
Guarantor therefrom shall in any event be
effective unless the same shall be in writing and
signed by the Lender, and then such waiver or
consent shall be effective only in the specific
instance and for the specific purpose for which
given.
Section 7. Notices, Etc. All notice
and other communications provided for hereunder
shall be in writing (including telegraphic,
telecopy
or telex communication) and mailed, telegraphed,
telecopied
, telexed or delivered by overnight
courier of nationally recognized standing to it, if
to the Guarantor, addressed to 525 Washington
Boulevard,
29th
Floor, Jersey City, New Jersey
07310, Attention: Gary D.
Peiffer
, General
Counsel, if to the Lender, at its address specified
in the Loan Agreement, or as to any party, at such
other address as shall be designated by such party
in a written notice to each other party complying
as to delivery with the terms of this Section 7.
All such notices and other communications shall,
when mailed,
telecopied
, telegraphed, telexed or
sent by courier, be effective when deposited in the
mails, delivered to the telegraph company,
transmitted by
telecopier
, confirmed by telex
answerback
or delivered to the overnight courier,
respectively, addressed as aforesaid.
Section 8. No Waiver, Remedies.
No failure on the part of the Lender to exercise,
and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder
preclude any other or further exercise thereof or
the exercise of any other right. The remedies
herein provided are cumulative and not exclusive
of any remedies provided by law.
Section 9. Indemnification.
Without limitation on any other Guaranteed
Obligations of the Guarantor or remedies of the
Lender under this Guaranty, the Guarantor shall,
to the fullest extent permitted by law, indemnify,
defend and save and hold harmless the Lender
from and against, and shall pay on demand, any
and all losses, liabilities, damages, costs, expenses
and charges (including the reasonable fees and
disbursement of the Lender's legal counsel)
suffered or incurred by the Lender as a result of
any failure of any Guaranteed Obligations to be
the legal, valid and binding obligations of either
Borrower enforceable against such Borrower in
accordance with their terms.
Section 10. Continuing Guaranty;
Assignments under the Loan Agreement. This
Guaranty is a continuing guaranty and shall (a)
remain in full force and effect until the later of the
payment in full of the Guaranteed Obligations and
all other amounts payable under this Guaranty and
the Termination Date, (b) be binding upon the
Guarantor, its successors and assigns, and (c) inure
to the benefit of and be enforceable by the Lender
and its successors, transferees and assigns.
Section 11. Governing Law;
Jurisdiction. This Guaranty shall be governed by,
and construed in accordance with, the laws of the
State of New
York.
Section 12. Reference to and Effect
on Earlier Guaranties. This Guaranty restates the
terms of various earlier guarantees executed by the
Guarantor in connection with the Existing Loan
Agreements. The Guarantor hereby
acknowledges and agrees that this Guaranty is
intended simply to reevidence its existing guaranty
obligations and to restate certain of the terms
relating thereto and is not intended to be deemed
the incurrence of a new guaranty obligation.
<PAGE>
IN WITNESS WHEREOF, the
Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto
duly authorized as of the date first above written.
THE AEGIS CONSUMER FUNDING GROUP,
INC
By: _____________________________________
Name: _______________________________
Title: ________________________________
EXECUTIVE EMPLOYMENT
AGREEMENT
EXECUTIVE EMPLOYMENT AGREEMENT made as of
July 1, 1997, by and between The Aegis Consumer Funding Group,
Inc., a Delaware corporation, with offices at 525 Washington
Blvd., Jersey City, New Jersey 07310 (the "Company"), and
William F. Henle, residing at 5005 East Crestview Drive, Paradise
Valley, Arizona 85253 (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive,
and the Executive desires to be employed by the Company, upon the
terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and
the mutual covenants contained herein, the parties hereto agree as
follows:
1. Employment. The Company agrees to and does hereby
employ the Executive, and the Executive agrees to and does hereby
accept employment by the Company, subject to the terms and
conditions herein set forth.
2. Term. The term of the Executive's employment
hereunder shall commence on the date hereof (the "Effective Date")
and, unless sooner terminated as set forth below, shall terminate on
June 30, 1999 (such period hereinafter referred to as the "Term").
3. Duties.
(a) During the Term, the Executive shall be employed as
Executive Vice President and Chief Operating Officer of the
Company and shall be in charge of and responsible for the general
and supervisory duties normally and customarily attendant to such
office in a business entity of the size and type of the Company as
such duties may be reasonably defined by the Board of Directors of
the Company (the "Board"). Executive shall also render such other
lawful services, and exercise such powers, which are from time to
time reasonably requested of him, assigned to him or vested in him
by the Board and which are commensurate with his position.
(b) The Executive agrees that, during the Term, unless
the Board shall otherwise consent, he will devote substantially his
full time, energies, labor and skills to the business of the Company.
The Company shall provide the Executive with his own office space
and appropriate administrative or clerical assistance, all in a location
reasonably appropriate to enable the Executive to fulfill his duties,
and each commensurate with the Executive's position, duties and
responsibilities.
(c) It is hereby acknowledged that, subject to Paragraph
10 hereof, the Executive may either presently, or in the future, be
involved in business, charitable or community activities so long as
such other activities do not unreasonably interfere with the
performance by the Executive of his duties hereunder.
4. Compensation. In consideration for services performed
hereunder, the Company shall pay to the Executive an annual salary
of $250,000 from the date hereof through June 30, 1998; and an
annual salary of $275,000 from July 1, 1998 through June 30, 1999.
Compensation payable to the Executive shall be payable in
accordance with the Company's customary payroll practices. In
addition, the Company shall reimburse the Executive for all
expenses reasonably incurred by him in connection with the
performance of his duties hereunder and the business of the
Company upon the submission to the Company of appropriate
receipts therefor.
5. Vacation. The Executive shall be entitled to 4 weeks
paid vacation during each consecutive 12 months of his employment
hereunder. Vacation shall be taken at times mutually agreeable to
the Executive and the Company.
6. Bonus. The Executive shall be entitled to receive
bonuses in accordance with the terms of this Section. For the
purposes of any allocation and payment of bonuses, the Executive
shall be deemed a member of the executive group. The Executive
understands that the Company practice with respect to bonuses
provides that upon authorization by the Company's Compensation
Committee of the Board of Directors ("Committee") of an amount
representing a total bonus pool available to all executives, the
Chairman of the Board allocates the bonus pool among all
executives in such amounts as he shall determine in his discretion.
The Executive shall be entitled to participate in any bonus pools
authorized by the Committee which are applicable for the fiscal
years of the Company ending June 30, 1998 and June 30, 1999,
subject to an allocation of such pools that is within the discretion of
the Chairman of the Board and subject to the provisions of Section
7 of this Agreement.
7. Benefits.
(a) Throughout the Term, the Executive shall be eligible to
participate in any pension, profit-sharing, stock option or similar
plan or program of the Company now existing or established
hereafter for the benefit of its employees generally, to the extent that
he is eligible under the general provisions thereof. The Executive
shall also be entitled to participate in any group insurance,
hospitalization, medical, health and accident, disability or similar or
non-similar plan or program of the Company now existing or
established hereafter for the benefit of its employees or executives
generally, to the extent that he is eligible under the general
provisions thereof. To the extent that the foregoing plans and
programs do not provide the Executive with disability insurance
providing a maximum benefit level of at least $10,000 per month,
the Company shall supplement such plans and programs to provide
such coverage.
(b) The Company shall provide the Executive with a policy
of term life insurance in an amount equal to $1 Million (or, in the
Executive's discretion, any other form or amount of life insurance
at an annual premium cost to the Company not in excess of the
annual premium for a policy providing $1 Million of term life
insurance), payable to such beneficiary or such beneficiaries as shall
be designated in writing by the Executive. Such policy shall be
owned by the Executive or any person or entity designated by him.
(d) In the event the Company shall cause the Executive to
relocate to offices not within reasonable commuting distance of his
then current residence, the Executive shall be entitled to receive full
reimbursement from the Company for all customary expenses
incurred in connection with the Executive's moving his residence to
a location within reasonable commuting distance of such new office
location. Such expenses shall include but not be limited to the costs
of moving, packing and storing the Executive's personal effects, real
estate brokerage fees and legal and other incidental costs. In
addition, provided that the Executive is making a reasonably diligent
effort to sell his then current residence at a price established in good
faith based upon then current market conditions in the immediate
vicinity, pending the Executive's sale of his then current residence
the Company shall make available to the Executive appropriate
living facilities maintained by the Company in the vicinity of the
new office location and shall reimburse the cost of traveling once a
week between such residence and office locations. The Company
shall further reimburse the Executive upon sale of such residence for
the amount, if any, by which the net proceeds from such sale (after
brokerage, legal and other incidental closing costs) are less then the
costs to the Executive of such residence, including any
improvements thereto. The Company shall further pay the Executive
an amount equal to the federal, state and local income taxes due (at
the highest marginal brackets then in effect) from the Executive with
respect to all amounts payable by the Company pursuant to this
subsection (e) to the extent not deductible to the Executive under the
Internal Revenue Code of 1986, as amended, and the regulations
thereunder.
8. Termination of Executive's Employment.
(a) Notwithstanding any provisions contained herein to the
contrary, the Executive's employment may be terminated by the
Company upon the Executive's death or disability (as defined below)
or for Cause (as defined below), and the Executive may terminate
his employment for Good Reason (as defined below);
(b) For purposes of this Agreement, "disability" shall mean
the Executive is mentally or physically disabled from properly and
fully performing his duties and responsibilities hereunder for a
period of 120 consecutive days or for 180 days, even though not
consecutive, within any 360-day period, all as evidenced by the
written certification of a qualified medical doctor agreed to by the
Company and the Executive or, in the absence of such agreement,
by a doctor selected by the agreement of a qualified medical doctor
selected by each of the Company and the Executive;
(c) For purposes of this Agreement, "Cause" shall mean: (i)
the conviction of the Executive of a felony by a federal or state
court of competent jurisdiction; (ii) the continued failure by the
Executive to substantially perform the Executive's duties with the
Company (other than any such failure resulting from the Executive's
incapacity due to physical or mental illness or any such actual or
anticipated failure after the issuance of a notice of termination for
Good Reason by the Executive) after a written demand for
substantial performance is delivered to the Executive by the Board,
which demand specifically identifies the manner in which the Board
believes that the Executive had not substantially performed his
duties, (iii) engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company or its
subsidiaries, monetarily or otherwise, or (iv) the engaging by the
Executive in an actual act of dishonesty intended to result in gain to
the Executive at the expense of the Company.
A notice of termination for Cause shall include a copy of a
resolution duly adopted by the affirmative vote of a majority of the
entire membership of the Board at a meeting of the Board which
was called and held for the purpose of considering such termination
(after reasonable notice to the Executive and an opportunity for the
Executive, together with the Executive's counsel, to be heard before
the Board) finding that, in the good faith opinion of the Board, the
Executive was guilty of conduct set forth in the immediately
preceding paragraph, and specifying the particulars thereof in detail.
(d) For purposes of this Agreement, "Good Reason" shall
mean any of the following: (i) the assignment to the Executive of
duties inconsistent with the Executive's position, duties,
responsibilities, titles or offices as described herein, (ii) any material
reduction by the Company of the Executive's duties or
responsibilities, (iii) any reduction by the Company of the
Executive's compensation as set forth in Paragraphs 4, 5, 6, or 7
hereof (it being understood that a reduction of benefits applicable to
all executives of the Company including the Executive shall not be
deemed a reduction of the Executive's compensation package for
purposes of this definition) or (iv) requiring the Executive to be
based without his consent at a location not within reasonable
commuting distance of his then current residence.
(e) In the event that the Executive's employment hereunder
is terminated as a result of death or disability of Executive or for
Cause by the Company, or without Good Reason by the Executive,
or in the event that this Agreement is not renewed or extended at the
end of the Term, then the Company shall have no further obligations
or liabilities to the Executive hereunder except as may be
specifically provided herein, such that all benefits and salary
provided for within this Agreement shall terminate simultaneously
with the termination of the Executive's employment except for
benefits, bonuses and salary earned and accrued through the date of
such termination; provided, however, that in no event shall the
Executive be entitled to receive any bonuses, whether or not earned
or accrued, if his employment is terminated by the Company for
Cause or by the Executive without Good Reason. Nothing in this
subsection (e) shall supersede any rights of the Executive to receive
any amounts or benefits otherwise due to him upon the occurrence
of any of the events described in the immediately preceding
sentence, whether such rights are created by this Agreement or
otherwise.
(f) In the event the Executive's employment hereunder
is terminated by the Company other than for Cause, death,
disability, or by the Executive for Good Reason, the Company shall
continue to provide the Executive with the salary, bonus and
benefits enumerated in Paragraphs 4, 6, and 7 hereof, respectively,
at the levels in effect immediately prior to such termination (or, if
applicable, the occurrence of the event constituting Good Reason)
for the remainder of the Term (such period, the "Severance
Period").
(g) If the Executive's employment hereunder is
terminated under Section 8(f) hereof, any salary, bonus and benefits
(to the extent provided at no additional cost to the Executive)
received by the Executive during or with respect to the Severance
Period and attributable to services rendered by the Executive to
persons or entities other than the Company shall be applied to
reduce the Company's obligation to make payments and provide
benefits hereunder.
(h) In the event the Company desires to extend the Term,
or offer the Executive a new employment agreement to be effective
after the expiration of the Term, it shall so notify the Executive
prior to December 31, 1998 ("Notice Date"). In the event the
Company shall not have delivered such notice prior to the Notice
Date, the Executive shall be entitled to assume that this Agreement
shall not be renewed or extended; he shall be permitted thereafter
to expend time during normal business hours to seek alternate
employment provided that he shall exercise his reasonable best
efforts to avoid unreasonable disruption of the performance of his
duties hereunder.
9. Stock Options. Effective on the date of this
Agreement, the Company shall grant to the Executive options to
purchase 200,000 shares of common stock of the Company under
the Company's 1996 Stock Option Plan (the "Plan") at the fair
market value of such shares at the time of grant. The options shall
have a term of ten years. The options shall vest as to 25,000 shares
on the date hereof; options for an additional 25,000 shares shall vest
on December 31, 1997; options for an additional 50,000 shares
shall vest on June 30, 1998; and the balance of the 100,000 Options
shall vest on June 30, 1999. In the event the employment of the
Executive is terminated by the Company with Cause, or is
terminated by the Executive without Good Reason, any options not
previously vested shall be thereupon forfeited; if the Executive's
employment is terminated by the Company without Cause or by the
Executive with Good Reason, all options not previously vested shall
thereupon immediately vest. In all other respects the options shall
be subject to such terms as are consistent with the terms of the Plan.
10. Covenants of the Executive.
(a) The Executive acknowledges that his employment by
the Company will throughout his employment bring him into close
contact with many confidential affairs of the Company, including
information about costs, profits, markets, sales, key personnel,
pricing policies, operational methods, and other business affairs,
methods and information, including plans for future developments,
not readily available to the public. The Executive further
acknowledges that the services to be performed under this
Agreement are of a special, unique, unusual, extraordinary and
intellectual character, and that the Company currently competes or
intends to compete with other organizations that are located in all of
the states of the United States. In recognition of the foregoing, the
Executive covenants and agrees that:
(i) he will not knowingly divulge any material
confidential matters of the Company which are not
otherwise in the public domain and will not
intentionally disclose them to anyone outside of the
Company during his employment by the Company
hereunder or following the expiration or termination
of his employment with the Company for any reason:
(ii) he will deliver promptly to the Company at the
end of the Term, or at any other time the Company
may so request, at the Company's expense, all
memoranda, notes, records, reports and other
documents (and all copies thereof) relating to the
businesses of the Company which he obtained while
employed by, or otherwise serving or acting on
behalf of, the Company, or any of its subsidiaries or
affiliates, and which he may then possess or have
under his control; and
(b) Executive agrees that during that period of
time that constitutes the Term, including any extensions or renewals
thereof (whether or not the Executive is actually employed for the
entire period that is herein contemplated to be the Term including
any extensions or renewals thereof ) and provided that the Company
continues to faithfully perform all of its obligations hereunder and
provided that Executive has not been terminated by the Company
without Cause or by Executive with Good Reason, Executive will
not, without the prior consent of the Company, whether directly or
indirectly, as principal or as agent, officer director, employee,
consultant, or otherwise, alone or in association with any other
person, firm, corporation or other business organization, carry on,
or be engaged, concerned, or take part in, or render services to or
own, share in the earnings of, or invest in the stock, bonds, or other
securities of any person, firm, corporation, or other business
organization engaged anywhere in the United States in a business
which would be deemed competitive to the business of the
Company or to any other business which the Company or any
member of the "Affiliated Group" is engaged in or is the process of
actually implementing during the time during which the Executive
is employed (a "Similar Business"). "Affiliated Group" is defined
as the Company, or any of its subsidiaries. The foregoing
notwithstanding, during the Term Executive may invest in stock,
bonds, or other securities of any Similar Business (but without
otherwise participating in such Similar Business) if such stock,
bonds, or other securities are listed on any national or regional
securities exchange or have been registered under Section l2(g) of
the Securities Exchange Act of l934 provided that such investment
does not exceed, in the case of any class of the capital stock of any
one issuer, 2% of the issued and outstanding shares, or, in the case
of other securities, 2% of the aggregate principal amount thereof
issued and outstanding.
(c) As a separate and independent covenant,
Executive agree that during the Term, including any extensions or
renewals thereof, and for a period of six months thereafter,
Executive will not, without the consent of the Company (which
consent shall not be unreasonably withheld) in any way, directly or
indirectly, for the purpose of conducting or engaging in any Similar
Business, call upon, solicit, advise or otherwise do, or attempt to
do, business with any clients, customers or accounts of the
Affiliated Group with whom Executive had any dealings during the
course of Executive's employment with the Company or any of its
affiliates or interfere or attempt to interfere with any officers,
employees, representatives or agents of the Affiliated Group, or
induce or attempt to induce any of them to leave the employ of or
violate the terms of their contracts with the Affiliated Group.
(d) If, in any judicial proceeding, a court shall
determine that the geographical, temporal or other scope of any of
the covenants contained in this Paragraph 10 is so broad or long as
to be unenforceable, then the geographical or other scope of such
covenant shall be deemed to be restricted so as to be enforceable
under applicable law.
(e) Executive's obligations under this Section 10
hereof shall survive any termination of this Agreement by the
Company with Cause or by the Executive without Good Reason;
provided, however, that the survival of these provisions shall not
operate to extend the length of time the Executive shall be
prohibited from engaging in the activities prohibited hereunder
beyond June 30, 1999 unless the employment of the Executive is
extended or renewed beyond such time in which event such
obligations shall be extended to be co-terminus with the actual
termination of Executive's employment.
(f) The Executive agrees that the remedy at law for
any breach or threatened breach of any covenant contained in this
Paragraph 10 will be inadequate and that the Company, in addition
to such other remedies as may be available to it, at law or in equity,
shall be entitled to injunctive relief without bond or other security.
11. Representation by Counsel - Interpretation. Each of
the parties hereto acknowledge that it is being represented by
counsel of its choice in connection with this Agreement; that it is
freely waiving any rights or claims being waived by it pursuant to
this Agreement; and that this Agreement has been entered into by
it freely and voluntarily and without duress or coercion of any kind.
In the interpretation of this Agreement, whether by a court or
otherwise, no weight or presumption shall be given or ascribed by
virtue of the drafting of this Agreement by one party or the other;
both parties shall be deemed to have contributed to the drafting of
this Agreement equally.
12. Governing Law - Jurisdiction. This Agreement shall
be construed in accordance with and governed by the laws of the
State of New Jersey applicable to contracts executed in and to be
performed solely within such state.
13. Relocation. The parties hereto understand that the
Executive will be required to relocate his current residence in
Arizona to the New York metropolitan area to perform his duties
hereunder at the inception of this Agreement and that such
relocation shall not be governed by the provisions of Sections 7(e)
or 8(d) hereof. However, the Company does agree to reimburse the
Executive for the following specific relocation expenses:
(a) travel expenses between New Jersey and
Arizona incurred at the request of the Company for
the Executive and his spouse from and after the date
hereof until the sooner of habitation in a new
residence in the New York area or six months from
the date hereof;
(b) up to 12 round trips for the Executive and his
spouse and children for the purpose of locating a
residence in the New York area
(c) use of the Company apartment in New Jersey for
6 months of temporary housing;
(d) all moving expenses incurred in relocating to
New Jersey on a "cupboard to cupboard" basis
including the transport of up to three cars;
(e) all normal and customary home sale expenses
including but not limited to commissions, inspections,
fees, and taxes;
(f) all normal and customary home purchase
expenses including but not limited to inspections, fees
and taxes but excluding any mortgage origination
points.
(g) Incremental federal and state income taxes due
as a result of reimbursement of such relocation
expenses.
All relocation expenses submitted for reimbursement shall be
reasonable, properly supported by receipts or other documentation
acceptable to the Company and shall not, in the aggregate exceed
$80,000. If the Executive's employment with the Company shall be
terminated, in the first six months, by the Executive without Good
Reason, the relocation fee shall be reimbursed to the Company on
a pro-rata basis.
14. Notices. All notices required or permitted to be given
by either party hereunder, including notice of change of address,
shall be in writing and delivered by hand, or mailed, postage
prepaid, certified or registered mail, return receipt requested, to the
other party as follows:
If to the Company:
The Aegis Consumer Funding Group, Inc.
525 Washington Blvd.
Jersey City, NJ 07310
Attention: Angelo R. Appierto
If to the Executive: William F. Henle
5005 East Crestview Drive
Paradise Valley, Arizona 85253
15. Miscellaneous.
a) Entire Agreement. This Agreement (together with any
agreement regarding options granted to the Executive to purchase
securities) constitutes the entire agreement among the parties with
respect to the subject matter hereof and supersedes any and all prior
oral or written agreements and understandings; however, this
Agreement shall not supersede, diminish or modify any rights of the
Executive under any employee benefit plans of the Company. There
are no oral promises, conditions, representations, understandings,
interpretations or terms of any kind as conditions or inducements to
the execution hereof or in effect among the parties. This Agreement
may not be amended, and no provision hereof shall be waived,
except by a writing signed by the Company and the Executive, or
in the case of a waiver, by the party waiving compliance therewith,
which states that it is intended to amend or waive a provision of this
Agreement. Any waiver of any rights or failure to act in a specific
instance shall relate only to such instance and shall not be construed
as an agreement to waive any rights or failure to act in any other
instance, whether or not similar.
(b) Further Acts. The parties hereto agree that, after the
execution of this Agreement, they will make, do, execute or cause
to be made, done or executed all such further and other lawful acts,
deeds, things, devices, conveyances and assurances in law
whatsoever as may be required to carry out the true intention and to
give full force and effect to this Agreement.
(c) Severability. Should any provision of this Agreement be
held by a court of competent jurisdiction to be unenforceable or
prohibited by an applicable law, this Agreement shall be considered
divisible as to such provision, which shall be inoperative, and the
remainder of this Agreement shall be valid and binding as though
such provision were not included herein.
(d) Successors and Assigns. This Agreement shall inure to
the benefit of, and be binding upon, the Company and any
corporation with which the Company merges or consolidates or to
which the Company sells all or substantially all of its assets, and
upon the Executive and his executors, administrators, heirs and legal
representatives.
(e) Headings. All headings in this Agreement are for
convenience only and are not intended to affect the meaning of any
provision hereof.
(f) Counterparts. This Agreement may be executed in two
or more counterparts with the same effect as if the signatures to all
such counterparts were upon the same instrument, and all such
counterparts shall constitute but one instrument.
IN WITNESS WHEREOF, the Executive has executed
this Agreement and the Company has caused this Agreement to be
executed by its duly authorized officer as of the day and year first
above written.
THE AEGIS CONSUMER FUNDING GROUP, INC.
EXECUTIVE
By:____________________________
Name: ____________________
William F. Henle
Title:__________________________
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the use our report dated October 20, 1997 (except for as to
Notes 2 and 17, as to which such date is November 14, 1997) with respect to
the consolidated financial statements of The Aegis Consumer Funding Group,
Inc. included in the 1997 Annual Report on Form 10-K.
s/ERNST & YOUNG LLP
New York, New York
November 19, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE AEGIS CONSUMER FUNDING GROUP,
INC. AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS WHICH START ON PAGE F-1 OF THIS REPORT.
</LEGEND>
<S> <C> <C> <C> <C>
<C>
<PERIOD-TYPE> YEAR YEAR 12-MOS 12-MOS
12-MOS
<FISCAL-YEAR-END> JUN-30-1996 JUN-30-1997 JUN-30-1995 JUN-30-1996
JUN-30-1997
<PERIOD-END> JUN-30-1996 JUN-30-1997 JUN-30-1995 JUN-30-1996
JUN-30-1997
<CASH> $8,775,975 $4,492,591 0 0
0
<SECURITIES> 0 0 0 0
0
<RECEIVABLES> 44,201,906 41,571,988 0 0
0
<ALLOWANCES> (3,143,684) (6,914,481) 0 0
0
<INVENTORY> 0 0 0 0
0
<CURRENT-ASSETS> 0 0 0 0
0
<PP&E> 2,529,429 6,311,086 0 0
0
<DEPRECIATION> (712,073) (1,313,368) 0 0
0
<TOTAL-ASSETS> $127,137,105 $83,482,740 0 0
0
<CURRENT-LIABILITIES> $93,145,640 $70,028,654 0 0
0
<BONDS> 0 24,031,746 0 0
0
0 0 0 0
0
53 11 0 0
0
<COMMON> 154,560 176,772 0 0
0
<OTHER-SE> 33,836,852 (10,754,443) 0 0
0
<TOTAL-LIABILITY-AND-EQUITY> $127,137,105 $83,482,740 0 0
0
<SALES> 0 0 0 0
0
<TOTAL-REVENUES> 0 0 $17,810,301 $46,327,887
($9,239)
<CGS> 0 0 0 0
0
<TOTAL-COSTS> 0 0 0 0
0
<OTHER-EXPENSES> 0 0 9,033,417 15,971,915
26,897,838
<LOSS-PROVISION> 0 0 941,354 3,504,622
9,426,802
<INTEREST-EXPENSE> 0 0 4,793,885 10,090,712
16,588,261
<INCOME-PRETAX> 0 0 3,041,645 16,760,638
(52,922,140)
<INCOME-TAX> 0 0 1,768,024 7,472,022
(8,427,030)
<INCOME-CONTINUING> 0 0 0 0
0
<DISCONTINUED> 0 0 0 0
0
<EXTRAORDINARY> 0 0 0 0
0
<CHANGES> 0 0 0 0
0
<NET-INCOME> 0 0 $1,273,621 $9,288,616
($44,495,110)
<EPS-PRIMARY> 0 0 $0.12<F1>
$0.65 ($2.71)
<EPS-DILUTED> 0 0 $0.11<F1>
$0.61 ($2.71)
<FN>
<F1>Amount reflects pro-forma adjustments in connection with the Company's
initial public offering on April 5, 1995 for (i) the redemption of
approximately $2.5 million of the Company's preferred stock Series B and
related dividends paid of $194,198, (ii) the termination of a consulting
agreement providing consulting fees of $139,751, net of taxes, (iii) the
repayment of approximately $5.0 million of indebtedness under the
Company's revolving credit facility and related interest expense of
$192,157, net of taxes.
</FN>
</TABLE>
