United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from________to_________
Commission File Number 0-25714
THE AEGIS CONSUMER FUNDING GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-3008867
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
525 Washington Blvd., 29th Floor, Jersey City, NJ 07310
(Address of principal executive offices) (Zip Code)
(201) 418-7300
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X No .
----- -----
As of November 24, 1997, 17,677,217 shares of the issuer's common
stock were outstanding.
<PAGE>
THE AEGIS CONSUMER FUNDING GROUP, INC.
FORM 10-Q
INDEX
Page
PART I. FINANCIAL INFORMATION No.
Item 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited):
Consolidated Condensed Statements of Financial Condition -
September 30, 1997 and June 30, 1997. . . 3
Consolidated Condensed Statements of Operations - three
months ended September 30, 1997 and 1996. 4
Consolidated Condensed Statements of Cash Flows - three
months ended September 30, 1997 and 1996. 5
Notes to Consolidated Condensed Financial Statements . 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS. . . . . . . . . . . . . . . . 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . 21
Item 2. Changes in Securities. . . . . . . . . . . 21
Item 3. Defaults upon Senior Securities. . . . . . 22
Item 4. Submission of Matters to a Vote of Security Holders. . 22
Item 5. Other information. . . . . . . . . . . . . 22
Item 6. Exhibits and Reports on Form 8-K . . . . . 22
SIGNATURES . . . . . . . . . . . . . . . . . . . . . 23
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . 22
<PAGE> 2
PART I. FINANCIAL INFORMATION:
Item 1. Consolidated Condensed Financial Statements
THE AEGIS CONSUMER FUNDING GROUP, INC.
Consolidated Condensed Statements of Financial Condition
(unaudited)
September 30, 1997 June 30,
-------------------- --------
Pro-forma Actual 1997
---------- ------ ----
Cash and cash equivalents $3,181,876 $3,181,876 $4,492,591
Automobile finance receivables, net 63,538,260 63,538,260 34,654,507
Retained interests in securitized
receivables 32,531,513 32,531,513 33,329,946
Other assets, including fixed assets 12,495,386 12,809,860 11,005,696
---------- ---------- ----------
$111,747,035 $112,061,509 $83,482,740
============ ============ ===========
Liabilities and stockholders' equity
Warehouse credit facilities $52,581,753 $52,581,753 $17,407,004
Notes payable 34,327,089 34,327,089 36,812,869
Accounts payable and accrued expenses 14,303,414 15,221,748 15,808,781
---------- ----------- ----------
Total liabilities 101,213,256 102,130,590 70,028,654
----------- ----------- ----------
Subordinated debentures, net - 24,079,365 24,031,746
----------- ----------- ----------
Stockholders' equity:
Common stock, $.01 par value; 30,000,000
shares authorized; 17,677,217 shares
issued and outstanding 176,772 176,772 176,772
Preferred stock, $0.10 par value; 2,000,000
shares authorized:
Series C, 1,100 shares designated; 920
shares issued; 106 shares outstanding 11 11 11
Series D, E and F, 25,550 shares designated;
24,079 sharesissued and outstanding in
pro-forma 1997 2,408 - -
Paid-in capital 47,004,051 22,324,234 22,303,034
Retained deficit since date of
recapitalization (March 1, 1992) (36,649,463) (36,649,463)(33,057,477)
Total stockholders' equity 10,533,779 (14,148,446)(10,577,660)
----------- ----------- -----------
$111,746,035 $112,061,509 $83,482,740
=========== =========== ==========
See accompanying notes.
<PAGE> 3
THE AEGIS CONSUMER FUNDING GROUP,INC.
Consolidated Condensed Statements of Operations
Three months ended September 30, 1997 and 1996
(unaudited)
1997 1996
---- ----
Revenues:
Gains on securitizations and securities sales $2,913,365 $8,349,120
Servicing fee income 3,227,047 1,030,249
Interest income 3,055,186 4,112,605
Fees and commissions earned 567,371 46,555
Other income 490,882 150,249
--------- ---------
10,253,851 13,688,778
---------- ----------
Operating expenses:
Salaries and other employee costs 5,991,016 2,219,607
Provision for credit losses 1,112,709 536,175
Interest expense 3,367,353 3,013,473
Other expenses 3,353,557 2,604,790
--------- ----------
13,824,635 8,374,045
------------ ----------
Net (loss) income before income taxes (3,570,784) 5,314,733
Taxes on income - 2,179,040
---------- ---------
Net (loss) income ($3,570,784) $3,135,693
=========== =========
Net (loss) income available to common
stockholders ($3,570,784) $3,135,693
=========== ==========
Primary Earnings Per Share:
Net (loss) income available to common
stockholders ($3,591,984) $3,135,693
============ ===========
Net (loss) income per common and common
equivalent share ($0.20) $0.19
======= =====
Weighted average common and common
equivalent shares 17,677,217 16,484,713
========== ==========
Fully Diluted Earnings Per Share:
Net (loss) income available to common
stockholders ($3,591,984) $3,135,693
============ ==========
Net (loss) income per common and common
equivalent share ($0.20) $0.19
======= =====
Weighted average common and common
equivalent shares 17,677,217 16,491,910
========== ==========
See accompanying notes.
<PAGE> 4
THE AEGIS CONSUMER FUNDING GROUP, INC.
Consolidated Condensed Statements of Cash Flows
Three months ended September 30, 1997 and 1996
(unaudited)
1997 1996
---- -----
Cash flows from operating activities:
Net (loss) income ($3,570,784) $3,135,643
Adjustments to reconcile net (loss)
income to net cash used in
operating activities:
Amortization and depreciation expense 250,240 277,146
Provision for credit losses, net 1,112,709 536,175
Unrealized gains on securitization
transactions - (12,109,339)
Write down of retained interests in
securitized receivables - 2,000,000
Increase in automobile finance receivables
portfolio (29,996,462) (13,631,601)
Increase in interest and other
receivables (1,583,883) (1,861,272)
(Increase) decrease in other assets (130,312) 1,888,306
Increase (decrease) in accounts payable
and accrued expenses (831,240) 4,212,045
Increase in income taxes payable - 2,149,297
Increase in other liabilities 244,207 1,431,044
--------- ----------
Net cash used in operating activities (34,505,525) (11,972,556)
------------- ------------
Cash flows from investing activities:
Distributions from retained interests in
securitized receivables 798,433 642,885
Additional payments to securitized
receivable trusts - (2,429,659)
Purchases of fixed assets (292,590) (1,686,515)
--------- -----------
Net cash provided by (used in)
investing activities 505,843 (3,473,289)
------- -----------
Cash flows from financing activities:
Proceeds from borrowing under warehouse
credit facilities 123,817,491 221,308,450
Repayment of borrowing under warehouse
credit facilities (88,642,744) (213,624,669)
Proceeds from borrowing under notes payable -
14,522,975
Repayment of borrowing under notes payable (2,485,780) (7,138,258)
Purchase of treasury stock - (340,000)
---------- ------------
Net cash provided by financing activities 32,688,967 14,728,498
---------- ----------
Net decrease in cash and cash equivalents (1,310,715) (717,347)
Cash and cash equivalents, beginning of
period 4,492,591 3,090,624
--------- ----------
Cash and cash equivalents, end of period $3,181,876 $2,373,277
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period:
Interest $3,379,585 $2,917,413
========== ==========
Income taxes $50,125 $ 91,800
======= ========
See accompanying notes.
<PAGE> 5
THE AEGIS CONSUMER FUNDING GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The interim financial data is unaudited; however, in the opinion of
management, the interim data includes all adjustments, consisting only
of normal recurring adjustments, necessary for a fair statement of the
results for the interim periods. Results for interim periods are not
necessarily indicative of the results for a full year. The
consolidated financial statements included herein have been prepared
by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission (the "SEC"). Pursuant to interim accounting
disclosure rules and regulations, certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted. The organization and business of the Company,
accounting policies followed by the Company and other information are
contained in the notes to the Company's consolidated financial
statements filed as part of the Company's Form 10-K for the fiscal
year ended June 30, 1997. This quarterly report should be read in
conjunction with such annual Form 10-K.
In February 1997, the Financial Accounting Standards 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 presentation 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 Incentive Stock Options. 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 three months ended September 30, 1996 would have been $0.20.
All other per share data would have been the same as reported amounts.
2. LIQUIDITY
As reflected in the accompanying September 30, 1997 consolidated condensed
financial statements and for fiscal year ended June 30, 1997, 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
severe liquidity problems due to the lack of committed 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"),
to advise the Company on alternatives and to raise additional capital.
With the assistance of Whitehall, in October 1997 the Company successfully
negotiated the conversion of its 12% subordinated debentures with a face
value of $21.3 million and accrued interest of approximately $1.0 million
into Preferred Stock of approximately $21.1 million and in November 1997 the
conversion of the remaining $4.0 million of subordinated debt into
preferred stock in November 1997 (See Note 6). The September 30, 1997
pro-forma consolidated statement of financial condition gives effect
to these conversions as if they occurred on September 30, 1997. Also
with the assistance of Whitehall, in November 1997, the Company
negotiated the sale of its servicing subsidiary, Systems & Services
Technologies, Inc. ("SST"), for $7.0 million (See Note 6).
Additionally, during the quarter ended September 30, 1997, the Company
reduced the number of its employees, scaled back the extent of its
operations, including the consolidation of two processing centers to
one and is moving its corporate offices to Marietta, Georgia. The
Company expects to incur a restructuring charge in the quarter ending
December 31, 1997. These steps coupled with the cash proceeds from
the sale of SST should assist the Company in meeting its funding
requirements.
<PAGE> 6
There can be no assurance that the Company's efforts to alleviate its
liquidity problems and restore its operations to profitability 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. WAREHOUSE AND OTHER CREDIT FACILITIES
As of September 30, 1997, the Company securitized an aggregate amount
of $476.4 million in six securitization transactions under its $1.0
billion purchase facility. Future securitizations under the purchase
facility ($523.6 million as of September 30, 1997) are subject to
customary conditions and are uncommitted. The purchase facility
provides for initial financing through the Company's $75.0 million
warehouse line as the finance contracts are acquired and subsequently
sold, generally on a monthly basis, into the purchase facility.
On November 21, 1997, the Company received a temporary increase in its
$75.0 million warehouse line of $5.0 million providing it with $80.0
million in its warehouse line expiring on December 5, 1997. The
Company expects to sell approximately $67.0 million of finance contracts
by the expiration date of the extension. After the completion of the sale,
the Company will have approximately $11.0 milliion outstanding under
its $75.0 milliion warehouse line.
4. COMMITMENTS AND CONTINGENCIES
The Company is subject to various other legal proceedings and claims
that arise in the ordinary course of business. In the opinion of
management of the Company, based in part on the advice of counsel, the
amount of any ultimate liability with respect to these actions will
not materially affect the results of operations, cash flows or
financial position of the Company.
5. CAPITAL STOCK
No warrants that were issued and outstanding at September 30, 1997 have
been exercised as of November 24, 1997.
6. SUBSEQUENT EVENTS
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 Subordinated 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
and the dividend rate is 12%. Had these conversions of debt to equity
occurred prior to the Company's quarter ended September 30, 1997, the
Company's positive net worth would have been approximately $10.5
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.
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
<PAGE> 7
remaining purchase price of $5.0 million will be received upon
completion of the sale agreement. In connection with the sale, 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%.
The Company does not expect to record a gain on this transaction
unless the repurchase option expires unexercised. The Company expects
to consolidate the results of SST's operations until the repurchase
agreement expires. Furthermore, under the proposed terms, positive
cash flows, if any, from the operations of SST will be available to
pay down amounts owed under notes payable of the Company.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
The following discussion and analysis of financial condition and
results of operations of the Company relates to the fiscal quarters
ended September 30, 1997 and 1996 and should be read in conjunction
with the Company's Consolidated Condensed Financial Statements and
Notes thereto included elsewhere in this quarterly report. The
unaudited results for the three months ended September 30, 1997 are
not necessarily indicative of results to be expected for the entire
fiscal year.
Overview
The Company is a specialty consumer finance company engaged in
acquiring, securitizing and servicing finance contracts originated by
Dealers in connection with the sale of late-model used and, to a
lesser extent, new cars to consumers with sub-prime credit. Since
commencing the acquisition of finance contracts in May 1992 through
September 30, 1997, the Company has acquired approximately $1.37
billion of finance contracts, of which $1.12 billion have been
securitized in twenty-three 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
---------------------------------------------------------------------------------------------
Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30,
1995 1995 1996 1996 1996 1996 1997 1997 1997
------ ------ ------ ------ ------ ------ ------ ------ ------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Number of finance contracts
acquired during period 5,943 8,190 10,569 12,037 15,401 14,584 8,992 8,745 8,724
Average finance contract balance $12.3 $12.2 $12.4 $12.4 $12.3 $12.3 $12.6 $12.6 $12.8
Aggregate value of finance
contracts acquired during
period 72,562 100,582 128,781 149,612 190,843 179,933 110,580 110,485 112,044
Gains from securitization
transactions(1)(2) 6,023 7,424 12,759 10,824 10,349 (578) 5,979 5,797 2,913
Gains from whole loan sales 48 64 111 290 - - 37 - -
Net interest (expense) income 866 1,021 546 993 2,129 2,747 2,894 1,931 (312)
Revenue(3)(4) 7,034 6,946 10,341 11,916 10,675 (26,747) 4,765 (5,291) 6,886
Finance contracts securitized
during period 67,630 85,368 130,138 149,274 173,258 4,870 238,393 148,814 87,316
Finance contracts sold during
period 1,000 1,801 2,752 2,250 - - 15,000 - -
Servicing portfolio(at period
end)(5) 197,911 287,481 401,704 500,694 645,551 759,304 783,757 813,055 838,067
<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 securitizations
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>
Revenues
<PAGE> 8
The Company's primary sources of revenues consist of three components:
gains from securitization transactions, servicing fees and interest
income.
Gains 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 Vender's Single Insurance Policy ("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.
The Company's current assumptions utilized in evaluating its retained interests
in securitized receivables, incorporate higher default rates over the life of
the securitization trust and lower recovery rates on the underlying collateral,
resulting in immaterial amounts of unrealized gains, if any at all.
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.
Servicing Fee Income. Servicing fees are earned at a contracted rate,
based on the receivable balance outstanding, from the owner of the
asset. SST services the finance contracts of the Company, which are
eliminated in consolidation, and certain securitization trusts. Servicing
fee income includes fees earned on subservicing agreements with third
party servicers.
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) third party servicing fees, including expenses incurred,
(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.
The following table provides information for each of the Company s
<PAGE> 9
rated securitizations:
<TABLE>
<CAPTION>
Weighted
Remaining Average Weighted
balance at Finance Average
Original Sept. 30, Contract Certificate Current Gross Net
Securitizations Balance 1997 Rate(1) Rate(1) Ratings Spread (1)(2) Spread(1)(3)
- --------------- ------- --------- -------- ----------- -------- ------------- ------------
(dollars in thousands)
Aegis Auto Receivables Trust,
Series:
<S> <C> <C> <C> <C> <C> <C> <C>
1994-A . . $18,539 $1,965 20.28% 7.74% A(4) 12.54% 8.70%
1994-2 . . 23,251 3,782 19.82 8.04 A+(4) 11.78 8.12
1994-3 . . 21,000(5) 4,440 19.66 9.46 A+(4) 10.20 6.46
1995-1 . . 21,000(5) 5,364 20.41 8.60 A+(4) 11.81 8.46
1995-2 . . 54,000(5) 16,343 19.94 7.16 A+(4) 12.78 8.98
1995-3 . . 60,000(5) 21,044 20.04 7.09 A+(4) 12.95 10.12
1995-4 . . 70,000(5) 27,984 19.88 6.65 BBB+(4) 13.23 10.41
1996-1 . . 92,000(5) 42,614 20.13 8.44(6) (7) 11.69 8.89
1996-2 . . 105,000(5) 58,288 20.10 8.93(8) (9) 11.17 8.40
1996-3 . . 110,000(5) 69,385 20.20 8.82(10) (11) 11.40 8.75
Aegis Auto
Owners Trust . . . 148,347 78,140 20.14 6.53 (12) 13.61 10.87
<FN>
(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 &
Poor s 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 $179,827 20.43% 9.5%(4) 10.93% 8.46%
1997-2 . . 37,163 30,306 20.67 9.75(5) 10.92 8.48
1997-3 . . 38,475 33,449 20.73 9.53(6) 11.20 8.81
1997-4 . . 74,721 68,355 20.40 9.38(7) 11.22 8.62
1997-5 . . 48,128 47,182 20.6 9.18(8) 11.39 8.91
1997-6 . . 39,189 38,895 20.5 9.32(9) 11.17 8.69
<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%
<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%.
<PAGE> 10
<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%.
<F8>
(8) The weighted average Certificate Rate is composed of the
following: the Class A certificate rate is 6.90% and the Class B
Certificate rate is 13.41%.
<F9>
(9) The weighted average Certificate Rate is composed of the
following: the Class A certificate rate is 7.05% and the Class B
Certificate Rate is 13.54%.
</FN>
</TABLE>
Results of Operations
Three Months Ended September 30, 1997 Compared To Three Months Ended
September 30, 1996
Revenues
Revenues decreased to $10.2 million for the three months ended
September 30, 1997 from $13.7 million for the three months ended
September 30, 1996, a decrease of $3.5 million or 25.5%.
Gains or losses from Securitization Transactions. Gains from
securitization transactions decreased to $2.9 million for the three
months ended September 30, 1997 from $8.3 million for the three months
ended September 30, 1996, a decrease of $5.4 million or 65.1%. The
decrease in gains or losses from securitization transactions is a
result of (i) the Company's current assumptions utilized in evaluating
its retained interests in securitized receivables, which incorporate
higher expected default rates over the life of the securitization
trust and lower recovery rates on the underlying collateral, compared
to the levels used in the comparable period a year ago and (ii) the
decrease in finance contracts securitized during the three months
ended September 30, 1997 to $87.3 million from $173.3 million in the
three months ended September 30, 1996, a decrease of $86.0 million or
49.6%.
Quarterly, the Company revalues its retained interests in securitized
receivables using estimated future 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 three months ended September 30, 1996 and 1997, the Company
incurred $2.0 million and none, respectively, 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 and recoveries.
Servicing Fee Income. Servicing fee income increased to $3.2 million
for the three months ended September 30, 1997 from $1.0 million for
the three months ended September 30, 1996, an increase of $2.2 million
or 220%. This increase is a result of the Company's servicing
subsidiary operating in the 1997 period, when it was in its
developmental stages in the comparable prior period.
Interest Income. Interest income decreased to $3.1 million for the
three months ended September 30, 1997 from $4.1 million for the three
months ended September 30,1996, a decrease of $1.0 million or 25.7%.
The decrease in interest income is attributed to the amount of non performing
finance contracts in the finance contract portfolio. As of September 30, 1997
and 1996, finance contracts in the repossession process were $10.1 million and
$4.0 million, respectively. Finance contracts held in the repossession process
do not provide interest income to the Company. Furthermore, the servicing fee
expenses, which reduces interest income, increased due to the higher volume of
finance contracts in the repossession process.
Additionally, the Company recorded interest income of approximately $249,000
and $513,000 for the three months ended September 30, 1997 and 1996,
respectively, on the lease portfolio, a decrease of approximatley $264,000.
The decrease is attributedto the amortization in the lease portfolio.
<PAGE> 11
Operating Expenses. Operating expenses increased to $13.8 million for
the three months ended September 30, 1997 from $8.4 million for the
three months ended September 30, 1996, an increase of $5.4 million or
64.3%.
Interest Expense. Interest expense increased to $3.4 million for the
three months ended September 30, 1997 from $3.0 million for the three
months ended September 30, 1996, an increase of $354,000 or 11.7%, as
a result of the increased financing required to maintain the Company's
operations. The increase in interest expense represents 6.5% 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 8.625% to 9.6875% for the three months
ended September 30, 1997 compared to rate ranging from 9.4102% to
9.5156% for the three months ended September 30, 1996. The Company's
monthly average outstanding balance on its warehouse credit facility
decreased to $39.9 million for the three months ended September 30,
1997 from $54.5 million for the three months ended September 30, 1996.
Approximately, $9.9 million of the Company's finance contracts owned
are financed by notes payable at a fixed rate of 12%. The Company also
incurred interest on notes payable and subordinated debt for the three months
ended September 30, 1996 and 1997 at a 12% interest rate on a monthly average
outstanding balance of $58.9 million for the three months ended September 30,
1997 compared to a monthly outstanding average balance of $31.3 million for
the three months ended September 30, 1996.
Salaries and Other Employee Costs. Salaries and other employee costs
increased to $6.0 million for the three months ended September 30,
1997 from $2.2 million for the three months ended September 30, 1996,
an increase of $3.8 million or 169.9%. The Company's number of
employees decreased to 334 at September 30, 1997 from approximately
350 employees at September 30, 1996. The number of employees at
September 30, 1997 is after the Company's layoffs of approximately 50
employees which occurred at quarter end. The Company's servicing
subsidiary, SST had an increase in employees of approximately 190
representing approximately $1.4 million of the increase. SST will continue
to expand its operations in an effort to maintain the number of
finance contracts per collector at levels acceptable to the Company. During
the three months ended September 30, 1997, the Company recorded a charge
and/or reserve allowances aggregating $425,000 relating to advances to
executive officers that are either no longer due and payable to the Company
or their collection is questionable due to the termination of such executives.
The balance of the increase is attributable to decreases in the
Company's ratios for capitalizing expenses relating to finance
contracts originated in accordance with relevant accounting rules
incurred to acquire finance contracts in the three months ended
September 30, 1997 from the comparable period a year ago.
Provision for Credit Losses. The provision for credit losses
increased to $1.1 million for the three months ended September 30,
1997 from $536,000 for the three months ended September 30, 1996, an
increase of $577,000 or 107.5%. The provision for credit losses for
the three months ended September 30, 1996 includes an adjustment for
$500,000 for recoveries of sales taxes paid on automobile finance
contracts which became delinquent and/or defaulted. Exclusive of this
adjustment, the provision for credit losses would have been
substantially the same for the three month periods. The Company's
provision for credit losses is affected by: (i) the Company's volume
of finance contracts acquired; (ii) the increase in delinquent
automobile finance receivables (as discussed below); (iii) the change
in the Company's historical loss ratios; and (iv) the ratio of current
finance contracts to non-current finance contracts at September 30,
1997 (70.4%) compared to September 30, 1996 (69.6%). 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 13.3% in 1997 from 5.4% in 1996. The
Company maintains residual value insurance relating to its entire
lease portfolio.
All Other Operating Expenses. All other operating expenses increased
to $3.4 million for the three months ended September 30, 1997 from
$2.6 million for the three months ended September 30, 1996, an
increase of $749,000 or 28.7%. The significant components of the
increase in all other operating expenses are increases in professional
fees and general and administrative expenses. Professional fees
increased to $674,000 for the three months ended September 30, 1997
from $504,000 for the three months ended September 30, 1996, an
increase of $170,000 (22.7% of the total increase) or 33.7% primarily
due to increased legal fees incurred for defending the Company's on
<PAGE> 12
going litigation. In general, the Company's general and
administrative expenses increased to support the Company's expanding
loan servicing processing center (SST).
Taxes on Income. For the three months ended September 30, 1997, the
Company recorded valuation allowance of $1.5 million (100% of the
Company's tax benefit at an effective tax rate of 42%) as an
adjustment to the income tax benefit relating to losses incurred in
excess of previously earned income. A tax expense of $2.2 million was
recorded by the Company for the three months ended September 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 $3.6 million
for the three months ended September 30, 1997. The net loss resulted
from several factors including: (1) 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, (2) the decrease
in the amount of finance contracts securitized to $87.3 million for
the three months ended September 30, 1997 from $173.3 million, a
decrease of $86.0 million or 49.6%, (3) an increase in operating
expenses to $13.8 million for the three months ended September 30,
1997 from $8.4 million for the three months ended September 30, 1996,
an increase of $5.5 million or 65.0% and (4) a deferred tax asset
valuation adjustment of $1.5 million taken on losses incurred in
excess of previously earned income.
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,
increased to $65.9 million at September 30, 1997 from $34.7 million at
June 30, 1997, an increase of $31.2 million or 89.9%. Finance
contracts held for sale increased to $44.0 million at September 30,
1997 from $11.0 million at June 30, 1997 an increase of $33.0 million
or 33.3%. Finance contracts held for investment decreased to $9.9
million at September 30, 1997 from $12.8 million at June 30, 1997, a
decrease of $2.9 million or 22.9%. As of September 30, 1997,
approximately 65.2% of finance contracts held for investment
were in the repossession process. The increase was offset by an
increase in the allowance for credit losses to $8.0 million at
September 30, 1997 from $6.9 at June 30, 1997 and a decrease in
automobile leases held for investment to $9.7 million at September 30,
1997 from $10.8 million at June 30, 1997, a decrease in the automobile
leases of $1.1 million or 10.2%, 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.
Retained Interests in Securitized Receivables. The following table
provides historical data regarding the retained interests in
securitized receivables for the periods shown:
<TABLE>
<CAPTION>
Three Months Ended
Year Ended June 30, September 30,
------------------ ------------------
1997 1997
---- ----
(dollars in thousands)
<S> <C> <C>
Beginning balance. . . $70,243 $33,330
Additions. . . . . . . 13,709 -
Amortization . . . . . (1,622) (798)
Write downs. . . . . . (49,000) -
<PAGE> 13
-------- --------
Ending balance . . . . $33,330 $32,532
======= =======
</TABLE>
Delinquency Experience
The following tables reflect the delinquency experience of finance
contracts acquired, including those sold in whole finance contract
sales or securitizations, by the Company at the dates shown:
<TABLE>
<CAPTION>
Finance Contract Portfolio
At June 30, At September 30,
------------ -----------------
1997 1997
---- ----
(dollars in thousands)
<S> <C> <C> <C> <C>
Principal balance
outstanding(1) . $813,055 $838,067
Number of finance
contracts outstanding (1). . 75,847 79,398
Delinquent loans
31-59 days. . . $71,008 8.7% $70,798 8.5%
60-89 days . . 21,831 2.7% 23,817 2.8%
90 days and over. . . 4,781 0.6% 2,807 0.3%
------- ---- ------ ----
Total. . . . . 97,620 12.0% 97,422 11.6%
Finance contracts in repossession
or bankruptcy(2) . 69,485 8.5% 86,044 10.3%
------ ----- ------ ----
Grand Total $167,105 20.5% $183,466 21.9%
======= ==== ======== =====
<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>
Credit Loss and Repossession 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
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 has experienced
claim denials under these policies, which it is contesting. If it is
unsuccessful in its efforts, the Company may experience an adverse
financial impact. The Company reports the remaining deficiency as a
net charge-off against the allowance for credit losses for automobile
finance receivables owned by the Company. For finance contracts held
in securitization trusts, charge-offs are accounted for in accordance
with the underlying pooling and servicing agreements.
Because of the Company's limited operating history through the fiscal
year ended June 30, 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 quarter ended September 30, 1997, the Company's
<PAGE> 14
liquidated and defaulted receivables rate increased to 28.5% from
22.1% in the fiscal year ended June 30, 1997 and from 13.1% in the
fiscal year ended June 30, 1996. Additionally, the Company's net
charge-offs as a percentage of the average principal balance outstanding
for the three months ended September 30, 1997 increased to 21.2% from 12.1%
in the fiscal year ended June 30, 1997 and from 6.6% in the fiscal year
ended June 30, 1996. The increase in default rates from June 30, 1997 to
September 30, 1997 can be attributed to the change in the definition of a
defaulted receivable in the purchase facility to 90 days delinquent
from other pooling and servicing arrangements which define receivables
defaulted at either 120 days or 180 days. The causes for the increase
in the Company's net charge-off rate is due to the (i) increase in
defaulted receivables, (ii) deterioration in the Company's recovery
rates from the disposition of repossessed vehicles, and (iii) slower
than expected settlement of credit default insurance claims. Without
decreasing the delinquency and/or charge-off rates in the portfolio,
the Company's ability to obtain credit or securitize 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>
Fiscal Year Ended Three Months
June 30,(*) Ended September 30,
-------------------- -------------------
1996 1997 1997
----- ----- -----
(dollars in thousands)
<S> <C> <C> <C>
Average principal balance
outstanding(1) . . . . . . . $304,394 $624,341 $738,038
Balance of liquidated and defaulted
receivables(2) . . . . . . . $39,932 $138,008 $52,572
Recoveries (3) and (4) . . . . 16,039 46,952 12,056
------- ------- -------
Gross charge-off(5). . . . . . 23,893 91,056 40,516
Credit default insurance approvals (6) 3,849 15,611 1,409
------- ------- -------
Net charge-offs. . . . . . . . $20,044 $75,445 $39,107
======= ======= =======
Liquidated and defaulted receivables
as a percentage of average principal
balance outstanding(7). . . 13.1% 22.1% 28.5%
Gross charge-offs as a percentage of
average principal balance
outstanding (7) 7.6 14.6 22.0
Net charge-offs as a percentage of average
principal balance outstanding (7) . 6.6 12.1 21.2
<FN>
<F1>
(1) Arithmetic mean of beginning and ending outstanding principal
balance, excluding defaulted receivables, of finance contracts
acquired including those previously sold in securitization
transactions.
<F2>
(2) Defaults recognized in accordance with the terms underlying the
specific pooling and servicing agreements.
<F3>
(3) Includes proceeds from collateral liquidations, property insurance
claims, rebates, borrowers and other sources.
<F4>
(4) Includes recoveries on liquidated and defaulted receivables
recognized in prior periods.
<F5>
(5) Balance of liquidated and defaulted receivables minus recoveries.
<F6>
(6) Value of credit insurance approvals.
<F7>
(7) September 30, 1997 percentages are annualized.
<F8>
(8) The amounts and percentages for the fiscal years ended June 30, 1996 and
1997 have been restated from previously reported information to reflect
the changes in definations and timing of defaulted receivables.
</FN>
</TABLE>
The Company has prepared analyses, based on its own credit experience
and available industry data, to identify the relationship between
finance contract delinquency and default rates at the various stages
of a finance contract repayment term. The results of these analyses,
which have been incorporated into the Company's methodology of
determining gains from securitization transactions, suggest that the
probability of a finance contract becoming delinquent or going into
default is highest during the "seasoning period" that occurs between
the sixth and the eighteenth month payment period from the acquisition
date.
A greater portion of the Company's finance contract acquisition volume
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
<PAGE> 15
delinquency and default rates) is sufficient to offset the total
finance contract portfolio delinquency and default rates.
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 in the
fiscal year ended June 30, 1997 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 assumed responsibility for all
customer contact with respect to all existing leases and with respect
to finance contracts that were included in the Company's December 1994
securitization transaction and all finance contracts acquired
thereafter. In addition, the Company assumed responsibility for
liquidation activities on its entire finance contract portfolio
(including securitized finance contracts) at such time. 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 agreement 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. On November 10, 1997, the Company agreed
in principle, subject to certain creditors and shareholder approval,
to sell all of its stock of its wholly owned subsidiary, SST.
The Company intends to continue tho have SST service its finance
contracts. (See "Liquidity and Capital Resources").
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 re-marketing 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.
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 $48.1
million loss in the fifteen month period ended September 30, 1997.
The Company has funded its negative operating cash flows principally
through borrowings from financial institutions, sales of equity
securities and most recently, the sale of SST, its servicing
subsidiary. 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 business 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 in 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
<PAGE> 16
securitization, making such portion available for future borrowing.
The terms under the purchase facility provide the Company with a
monthly securitization strategy. In the three months ended September
30, 1997, the Company completed two securitizations aggregating $87.3
million under the terms of the purchase facility. Since establishing
the Purchase Facility in March 1997, the Company has sold an aggregate
amount of $476.6 million and expects to securitize monthly. 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 securitization, 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.
On November 10, 1997, the Company agreed in principle, subject to
certain creditor and shareholder approval, to sell all of the stock of
its wholly owned subsidiary, SST, for $7.0 million to a related entity
of III Finance. The Company received a downpayment 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 the proceeds of this sale will enhance the
Company s liquidity and operating capital position. It is anticipated
that the sale of SST will be completed in the first quarter of
calendar 1998. SST will continue to service the Company's finance
contracts subsequent to the sale. The Company does not expect to
record a gain on this transaction unless the repurchase option expires
unexercised. The Company expects to consolidate the results of SST's
operations until the repurchase agreement expires. Furthermore, under
the proposed terms, positive cash flows, if any, from the operations
of SST will be available to pay down amounts owed under notes payable.
The following table sets forth the major components of the increase
(decrease) in cash and cash equivalents for the periods shown:
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1996 1997
------ -----
(dollars in thousands)
<S> <C> <C>
Net cash used in operating activities(1) . . . . ($11,972) ($34,506)
Net cash (used in) provided by investing
activities(2). . . . . . (3,473) 506
Net cash provided by financing activities. . . . 14,728 32,689
--------- --------
Net decrease in cash and cash
equivalents. . . . . . . ($717) ($1,311)
========= ========
<FN>
<F1>
(1) Includes net cash used in acquisition of automobile finance
contracts of ($13,632) in the three months ended September 30, 1996
and ($29,996) in the three months ended September 30, 1997
<F2>
(2) Includes net cash (used in) provided by warehouse credit
facilities of ($7,684) in the three months ended September 30, 1996
and $35,175 in the three months ended September 30, 1997
</FN>
</TABLE>
Net cash used in operating activities primarily represents cash flows
utilized to support the Company's acquisition of finance contracts,
including amounts representing capitalized acquisition costs, net of
cash proceeds of sales, including through securitizations, and
repayments from automobile finance receivables. The cash used to
acquire finance contracts is generated primarily by financing
activities under the Company's warehouse credit facilities.
Another 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
<PAGE> 17
discounted present value of the amount of anticipated collections
from securitized receivables over the amounts due investors in the
securitizations. These amounts were $12.1 million and none for the
three months ended September 30, 1996 and 1997, respectively. The
Company's current assumptions utilized in evaluating its retained
interests in securitized receivables, incorporate higher expected
default rates over the life of the securitization trust and lower
recovery rates on the underlying collateral resulting in immaterial
amounts of unrealized gains, if any at all. During the three months
ended September 30, 1996 and 1997, the Company received cash proceeds
of $643,000 and $798,000 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 $277,000 and $250,000 for the three months ended
September 30, 1996 and 1997, respectively; and provision for credit
losses, which amounted to $536,000 for the three months ended
September 30, 1996 and $1.1 million for the three months ended
September 30, 1997. The Company also incurred non-cash charges of
$2.0 million for the three months ended September 30, 1996 for write
downs on retained interests in securitized receivables with no such
charge in the current period.
To the extent that the foregoing activities were net users of cash,
such cash was provided primarily by borrowings under notes payable of
$14.5 million for the three months ended September 30, 1996 ($2.0
million under a subordinated debt agreement) and no such borrowings
for the three months ended September 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 $643,000 and $798,000, respectively, in the
three months ended September 30, 1996 and 1997. The remaining
principal payments of $6.5 million and $1.6 million in the three
months ended September 30, 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") in which its
finance contracts are sold to a trust which, in turn, sells securities
to investors. Generally, the Company is required to make an initial
cash deposit to the trust as a form of credit enhancement for the
securitization. The terms of the Agreements generally require that
the excess servicing cash flows of the finance contracts be retained
in a bank account under the control of the trustee (the "Reserve
Fund") until the Reserve Fund meets predetermined deposit
requirements. Any cash flows in excess of Reserve Fund requirements
are released to the Company on a monthly basis. For the three months
ended September 30, 1996 and 1997, the Company received $643,000, and
$798,000 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
<PAGE> 18
met within a predetermined time frame. For the three months ended
September 30, 1996 the Company paid additional cash contributions to
certain Reserve Funds of $2.4 million.
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 30, 1997, the Company securitized an aggregate amount
of $476.3 million in four securitization transactions. Future
securitizations under the Purchase Facility ($523.7 million as of
September 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.
The Company's $75.0 million warehouse line supporting the purchase
facility, 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 facility may
be used for the purpose of acquiring automobile finance contracts in
accordance with the Company's underwriting guidelines.
On November 21, 1997, the Company received a temporary increase in tis
$75.0 million warehouse line of $5.0 million providing it with $80.0
million in its warehouse line expiring on December 5, 1997. The Company
expects to sell approximately $67.0 million of finance contracts by
the expiration date of the extension. After the completion of the sale,
the Company will have approximately $11.0 million outstanding under its
$75.0 million warehouse line.
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 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. 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.
The Company has approximately $226.0 million available under its
$533.0 million Securitization Facility with Greenwich Capital Markets,
Inc. ("Greenwich"). 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 have since
restructured the $5.0 million subordinated debt agreement. The term
of the loan was extended for four years from the date of closing of
the Debenture (described below), the interest rate decreased to 12.0%
per annum, payable monthly and the Company paid down the debt to $4.0
million. 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, Greenwich
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 is convertible into common stock at
$2.00 per share. Had these conversions of debt to equity occurred
<PAGE> 19
prior to the Company's the three months ended September 30, 1997, the
Company's net worth would have been approximately $10.6 million.
For the fiscal years ended June 30, 1995, 1996 and 1997 and for the
three months ended September 30, 1997, the Company securitized
approximately $119.3 million, $432.4 million , $565.3 million and
$86.3 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 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. The Company sold an
aggregate of approximately $148.4 million of automobile receivables
into this facility. 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 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
$2.00 per common share. (The Debenture was converted into Series D
Preferred Shares, described below). The Debenture had a term of
seven years and 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 were convertible, were redeemable at
anytime by the Company for cash.
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, as described above, the Company's holders of its
$4.0 million 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 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 is currently implementing its strategic business plan,
which includes rebuilding the Company's equity; reducing debt burden
as well as the related expense; enhancing operating capital,
restructuring operations and administrative functions to achieve
efficiencies, reducing operating expenses, introducing new products
and services and restructuring existing products and enhancing credit
management processes. Management believes that cash flows from
operations, the sale of SST, the Purchase Facility and its warehouse
credit facilities, 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
<PAGE> 20
needs. The Company will have raised 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 closing of the sale) and believes it needs at least
another $3.0 million in order to implement its strategic business
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 its strategic business 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 utilized to support
the Company's 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 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.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - Not Applicable
Item 2. Changes in Securities - Not Applicable
(a) Not Appicable
(b) - (c) On October 16, 1997, III Finance Ltd. and The High Risk
Opportunities Hub Fund Ltd., the holders of $21,333,333 principal amount
at maturity of 12% Exchangable Subrodinated Noted due 2004 of the Aegis Auto
Finance, Inc. (the "Notes"), exchanged the Notes for non-voting Class D
Convertible Preferred Stock of the Company (the "Class D Preferred").
The Class D Preferred has a 12.7518% dividend rate and a redemption value
of approximately $21.1 million. On November 12, 1997, Greenwich Capital
Financial Products, Inc. ("Greenwich"), the holder of $4 million of
subordinated debt of the Company issued pursuant to a Credit Agreement
dated May 16, 1996 between the Company, as borrower, certain of its
subsidiaries, as guarantors, and Greenwich, as lender, exchanged such debt
for $2 million redemption value of each of the Comapny's non-voting Class E
Redeemable Preferred Stock and non-voting Class F Redeemable Preferred Stock,
each carrying a dividend rate of 12% (respectively, the "Class E Preferred"
and the "Class F Preferred").
<PAGE> 21
The Certificates of Designation, Preferences and Rights for the Class D
Preferred, the Class E Preferred and the Class F Preferred create classes
of securities which rank prior to the Company's common stock, par value $.01
per share (the "Common Stock"), as to distributions of assets upon liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary, as
to divivends.
Each of these transactions was exempt from registration pursuant to Section
4(1) of the Securities Act of 1933, as amended. Each holder of a share of
Class D Preferred, Class E Preferred or Class F Preferred is entitled to
cause the Company to redeem such stock, in which event the Company has the
option (i) to issue to such redeeming holder Common Stock of the Company
valued at $1.26 per share in the case of the Class D Preferred and Class E
Preferred or $2.00 per share in the case of the Class F Preferred, in each
case having an aggregate value eual to the preferred stock's redemption value,
or (ii) to pay the redeeming holder in cash the current market value, of the
Common Stock that would have been issued under clause (i). In addition,
the Company has the right, at its option, to redeem the Class D Preferred,
the Class E Preferred and the Class F Preferred for cash equal to such stock's
redemption value, in which case it must also issue to the holder warrants to
purchase that number of shares of Commn Stock that would have been issued
pursuant to clause (i) of the preceeding sentence for an aggregate exercise
price equal to the redemption value of the preferred stock being
redeemed. If the Class D Preferred, Class E Preferred and Class F Preferred
were all presented for redemption by the holders, and the Company elected to
issue Common Stock in respect of such redemptions, the Company would issue
approximately 16.75 million, 1.59 million and 1.0 million shares of Common
Stock, respectively, representing 48.67%, 9.19%, and 5.35% of Common Stock,
giving effect in each case only to the redemption of such class of preferred
stock.
Item 3. Defaults Upon Senior Securities - Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. (a) Exhibits -
Page
Exhibit No. Description No.
3.6 Certificate of Designation, Preferences, and Rights
of Class D Redeemable Preferred Stock of The Aegis
Consumer Funding Group, Inc.
3.6.1 Certificate of Amendment of Certificate of Designation,
Preferences, and Rights of Class D Redeemable Preferred
Stock of The Aegis Consumer Funding Group, Inc.
3.7 Certificate of Amendment of Certificate of Designation,
Preferences, and Rights of Class E Redeembale Preferred
Stock of The Aegis Consumer Funding Group, Inc.
3.8 Certificate of Amendment of Certificate of Designations,
Preferences, and Rights of Class F Redeembable Preferred
Stock of The Aegis Consumer Funding Group, Inc.
10.95.5 Registration Rights Agreement dated as of November 10, 1997
by and between The Aegis Consumer Funding Group, Inc. and
Greenwich Capital Financial Products, Inc.
10.95.6 Securities Purchase Agreement dated as of November 10,
1997 by and among The Aegis Consumer Funding Group, Inc.,
and Greenwich Capital Financial Products, Inc.
10.107.3.1 Amendment No. 1 to Registration Rights Agreement dated as of
November 10, 1997 by and between The Aegis Consumer Funding
Group, Inc., III Finance Ltd., and the High Risk Opportunities
Hub Fund Ltd.
10.107.2.1 Agreement dated October 16, 1997 by and between The Aegis
Consumer Funding Group, Inc., III Finance., and The High Risk
Opportunities Hub Fund Ltd.
27 Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8-K were filed by
the Company during the quarter ended September 30, 1997.
<PAGE> 22
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE AEGIS CONSUMER FUNDING GROUP, INC.
Date: November 26, 1997 By: /s/ Dina L. Penepent
------------------------------------
Dina L. Penepent
Chief Financial Officer,
Executive Vice-President and
Secretary
Signing on behalf of the registrant
and as principal financial and
accounting officer.
<PAGE> 23
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 subsequent 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 liquida-
tion, 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 consideration 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
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF DESIGNATIONS, PREFERENCES,
AND RIGHTS
OF
CLASS D REDEEMABLE PREFERRED STOCK
OF
THE AEGIS CONSUMER FUNDING GROUP, INC.
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
It is hereby certified that:
1. The name of the corporation is The Aegis
Consumer Funding Group, Inc. (the "Corporation").
2. The Corporation has not issued any shares
of its Class D Redeemable Preferred Stock.
3. The board of directors of the Corporation
has adopted the following resolution:
RESOLVED, the Certificate of Designations, Preferences,
and Rights of Class D Redeemable Preferred Stock of the
Corporation (the "Certificate of Designations") is hereby amended
as follows:
(i) The rate referenced in the first sentence of
Section 2(a) of the Certificate of Designations at which
holders of the Class D Preferred Stock shall be entitled
to preferential cash dividends shall be 12.7518%.
(ii) The first paragraph of Section 3.1 of the
Certificate of Designations shall be amended to state in its
entirety as follows:
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"); provided,
however, that if there shall be an insufficient
number of authorized shares of Common Stock
available for the Corporation to effect a
redemption pursuant to clause (i) above, the
Corporation may then redeem the shares of
Preferred Stock by the payment of (x) that number
of shares of Common Stock then available for
issuance plus (y) shares of a series of convertible
preferred stock (the "New Preferred Stock") to be
designated by the Corporation's Board of
Directors, that shall (I) as nearly as possible have
the same rights and other attributes as the
Common Stock into which such shares of New
Preferred Stock are convertible pursuant to clause
(II) below, and (II) be automatically convertible,
upon amending the Corporation's certificate of
incorporation to provide for sufficient
authorization, into that number of shares of
Common Stock which, when added to the number
of shares of Common Stock being issued pursuant
to clause (x) above, shall equal the number of
shares that would have been issued upon
redemption of such Class D Preferred Stock
pursuant to clause (i) above. 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 $1.26, 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:
(iii) Section 3.3 of the Certificate of Designations
shall be amended to state in its entirety as follows:
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, including
without limitation, a provision that the warrants
shall expire on April 30, 2004, 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.
4. This amendment was duly adopted in
accordance with the provisions of Section 151 of the General
Corporation Law of the State of Delaware. Resolutions
authorizing said amendment were duly adopted by the directors
of the Corporation by unanimous written consent on October 16,
1997.<PAGE>
IN WITNESS WHEREOF, the undersigned has
executed this Certificate on this 16th day of October 1997.
THE AEGIS CONSUMER
FUNDING GROUP, INC.
By:
William Henle
Chief Operating Officer
Attest:
_________________________
Dina L. Penepent
Secretary
CERTIFICATE OF DESIGNATIONS, PREFERENCES, AND
RIGHTS
OF
CLASS F 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 F 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. Two thousand
one hundred (2,100) shares of the Class F 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 F Redeemable Preferred Stock"
(hereinafter called the "Class F Preferred Stock").
2. Dividends and Distributions.
(a) The holders of the Class F Preferred Stock
shall be entitled to preferential cash dividends with respect
thereto at the rate of 12% of the Stated Value thereof per
annum, payable ratably per share of Class F 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 F 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 subsequent dividend
accrual periods. Accrued but unpaid dividends shall not bear
interest.
(c) Whenever dividends or distributions payable on
the Class F 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 F
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 F 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 liquida-
tion, dissolution or winding up) with the Class
F Preferred Stock except dividends or
distributions paid ratably on the Class F
Preferred Stock and all such parity stock on
which dividends or distributions 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 consideration shares of any stock ranking
on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the
Class F 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 F Preferred Stock; or
(iv) purchase or otherwise acquire for consideration
any shares of Class F Preferred Stock, or any
shares of stock ranking on a parity with the
Class F 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 F 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 F 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"); provided, however, that if there
shall be an insufficient number of authorized shares of
Common Stock available for the Corporation to effect
a redemption pursuant to clause (i) above, the
Corporation may then redeem the shares of Preferred
Stock by the payment of (x) that number of shares of
Common Stock then available for issuance plus (y)
shares of a series of convertible preferred stock (the
"New Preferred Stock") to be designated by the
Corporation's Board of Directors, that shall (I) as
nearly as possible have the same rights and other
attributes as the Common Stock into which such shares
of New Preferred Stock are convertible pursuant to
clause (II) below, and (II) be automatically convertible,
upon amending the Corporation's certificate of
incorporation to provide for sufficient authorization,
into that number of shares of Common Stock which,
when added to the number of shares of Common Stock
being issued pursuant to clause (x) above, shall equal
the number of shares that would have been issued upon
redemption of such Class F Preferred Stock pursuant to
clause (i) above. 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 F 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 F Preferred
Stock (i) shall be entitled, upon the effectiveness of such merger or
consolidation, to redeem the Class F 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 F Preferred Stock
in proportion to the number of shares of Class F Preferred Stock held
by them, redeem the shares of Class F 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 F 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 F
Preferred Stock (the "Redemption Price"). In the case of any
redemption of Class F 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 F
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, including
without limitation, a provision that the warrants shall expire on April
30, 2004, 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 F Preferred Stock being redeemed to purchase that number of
shares of Common Stock which would have been issued had such
shares of Class F Preferred Stock been redeemed pursuant to clause (i)
of Section 3.1. In the event the Corporation elects to redeem Class F
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 Securities Purchase
Agreement related to the issuance of the Class F Preferred Stock ) or
an Affiliate of such Purchaser, the Corporation may elect to pay the
Redemption Price in shares of Common Stock, calculated by reference
to the current market price per share set forth in Section 3.1(8) hereof,
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 F Preferred Stock on the Redemption Date or by the Corporation
to each holder of Class F 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 F
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 F
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 F 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 F 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 F 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 F 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 F 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 F Preferred
Stock for which the Redemption Price shall not have been paid,
dividends shall continue to accrue on such redeemed shares of Class F
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 F 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 F 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 F 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
F 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 F 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 F Preferred Stock in respect to
distributions upon a Liquidation of the Corporation ("Junior Stock"),
an amount equal to the Stated Value of such Class F 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 F 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 F
Preferred Stock not less than thirty days prior to any payment date
stated therein.
5. Voting Rights. The holders of the shares of
Class F 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 F 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 F 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 F 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 F Redeemable Preferred Stock be executed by its
duly authorized officers this 10th day of November, 1997.
THE AEGIS CONSUMER
FUNDING GROUP, INC.
By:
William Henle
Chief Operating Officer
Attest:
_________________________
Dina L. Penepent
Secretary
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement (this
"Agreement"), dated as of November 10, 1997
by and between The Aegis Consumer Funding
Group, Inc., a Delaware corporation (the
"Company"), and Greenwich Capital Financial
Products, Inc. (the "Holder").
RECITALS
WHEREAS, the Company, as borrower,
Aegis Consumer Finance, Inc. and Aegis Auto
Finance, Inc., as guarantors and the Holder
have heretofore entered into an Amended and
Restated Credit Agreement dated as of June
23, 1997, to a Credit Agreement (as so
amended and restated, the "Credit
Agreement"), dated as of May 16, 1996, and in
connection therewith the Company granted
certain warrants to purchase Common Stock the
"warrants"); and
WHEREAS, pursuant to that certain
Securities Purchase Agreement dated as of the
date hereof, by and between the Company and
the Holder (the "Purchase Agreement"), the
Holder has agreed to deliver to the Company
such documents as are necessary to terminate
such Holder's rights under the Credit
Agreement (other than the provisions of
paragraphs (iii) and (iv) of Section 10.04
thereof, which shall survive such termination
and shall remain in full force and effect in
accordance with the terms of the Credit
Agreement) and the Company has agreed to (i)
issue to the Holder in exchange therefor
shares of Preferred Stock having an aggregate
stated value of $4,000,000 and (ii) to cause
any shares of the Preferred Stock or shares
of Common Stock issued upon redemption of
shares of Preferred Stock or upon exercise of
warrants to purchase Common Stock issued upon
redemption of shares of Preferred Stock, to
be registered pursuant to the Securities Act;
and
WHEREAS, the parties hereto hereby
desire to set forth the Holder's 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 termination by the Holder of the Credit
Agreement 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 Person named as the Holder in the first
paragraph of this Agreement and Transferees
of such Person's 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 E and Class F
Redeemable Preferred Stock, 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 Holder
requesting such registration an opinion of
counsel reasonably satisfactory to such
Holder 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, without
limitation, a Person will be deemed to be a
holder or owner 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 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, 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 request 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 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 cause
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 Registrable 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 number 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 to 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 Registration 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 Selling Holders (in the case of a
non-underwritten offering) of any preliminary
prospectus or prospectus made available by
the Company to such Selling Holders 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 misrepre-
sentation.
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 (a "Transferee"), 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, it being
understood, however, that, in the event of a
Demand Registration hereunder, if III
Finance, Ltd. and/or The High Risk
Opportunities Hub Fund Ltd. (collectively,
"III") seek to include therein securities of
the Company subject to that certain
Registration Rights Agreement dated as of
April 30, 1997 by and between the Company and
III, any reduction of Registrable Securities
thereunder and hereunder included in such
registration statement based on a
determination of the underwriter will, as
between III and the Holders, be borne pro
rata by them.
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) 418-7379
Attention: William Henle
If to the Holder:
Greenwich Capital Financial
Products, Inc.
600 Steamboat Road
Greenwich, Connecticut 06830
Telecopy: (203) 629-4571
Attention: Charles A. Forbes, Jr.
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 embodies 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. Attorney's 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:
William Henle
Title:
Chief Operating Officer
GREENWICH
CAPITAL FINANCIAL
PRODUCTS,
INC.
By:
Name:
Title:<PAGE>
SCHEDULE 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, $.01 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
November __, 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.
SECURITIES PURCHASE AGREEMENT,
dated as of November 10, 1997 (the
"Agreement"), by and among The Aegis Consumer
Funding Group, Inc., a Delaware corporation
("the Company"), 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 Registration
Rights Agreement, and the Certificates of
Designation.
"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.
"Certificates of Designation" means
(i) the Certificate of Designations,
Preferences, and Rights of Class E Redeemable
Preferred Stock of the Company and (ii) the
Certificate of Designations, Preferences, and
Rights of Class F Redeemable Preferred Stock
of the Company.
"Closing" has the meaning provided
therefor in Section 2.1 of this Agreement.
"Code" means the Internal Revenue
Code of 1986, as amended.
"Commission" means the Securities
and Exchange Commission.
"Common Stock" means the common
stock, par value $.01 per share, of the
Company.
"Company" means The Aegis Consumer
Funding Group, Inc., a Delaware corporation.
"Credit Agreement" means the
Amended and Restated Credit Agreement, dated
as of June 23, 1997, to a Credit Agreement
dated May 16, 1996, by and between the
Company, as borrower, Aegis Auto Finance,
Inc. and Aegis Consumer Finance, Inc. as
guarantors, and Greenwich Capital Financial
Products, Inc., as lender.
"Disclosure Documents" means,
collectively, (i) the most recent Annual
Report on Form 10-K filed by the Company,
(ii) all other reports and statements,
including quarterly Reports on Form 10-Q
filed by the Company and any of its Sub-
sidiaries under the Exchange Act prior to the
date hereof but subsequent to the most recent
Annual Report on Form 10-K filed by the
Company, (iii) the Press Release issued by
the Company dated October 17, 1997 containing
results for the fiscal year ended June 30,
1997 and (iv) a draft of the press release to
be issued by the Company relating to the
conversion by Greenwich Capital Financial
Products, Inc. of Company debt held by it
under the Credit Agreement for shares of
Preferred Stock and to the sale by the
Company of the stock of Systems & Services
Technologies, Inc.
"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.
"Holders" means the holders from
time to time of any of the Securities,
whether or not such Holders were original
Purchasers of Securities hereunder.
"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 stated
value of the Securities.
"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 E and Class F Redeemable Preferred
Stock of the Company described in the
Certificates 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 7.4 of this Agreement.
"Registration Rights Agreement"
means that Registration Rights Agreement of
even date herewith by and between the Company
and each Purchaser relating to the Securities
and the Common Stock issuable upon redemption
thereof or upon exercise of the warrants
issuable upon redemption thereof.
"Securities" means the shares of
Preferred Stock consisting of $2,000,000
stated value of the Class E Redeemable
Preferred Stock of the Company and $2,000,000
stated value of the Class F Redeemable
Preferred Stock of the Company.
"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.
"Warrant" shall mean that Warrant
dated as of May 17, 1996 granted by the
Company to Greenwich Capital Markets, Inc.
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 stated
value of Securities set forth opposite such
Purchaser's name on the execution pages
hereof. The consideration for such purchase
and sale shall be the delivery by the
Purchaser to the Company of such documents as
are necessary to terminate its rights under
the Credit Agreement and any related
collateral agreements, and including, without
limitation, the original note or notes issued
by the Company under the Credit Agreement,
marked "Canceled"; provided, however, that
the provisions in paragraphs (iii) and (iv)
of Section 10.04 of the Credit Agreement (the
"Surviving Provisions") shall survive such
termination and shall remain in full force
and effect in accordance with the terms of
the Credit Agreement.
The purchase and sale of Securities
to the Purchasers will take place at a
closing (the "Closing") at the offices of
Herzfeld & Rubin, P.C., 40 Wall Street, New
York, New York on such date not later than
November __, 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's delivery to such Purchaser of
certificates representing the Securities 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).
Payment of the purchase price for
the Securities to be purchased hereunder
shall be made by the delivery to the Company
at the Time of Purchase of such documents as
are necessary to terminate the lender's
rights under the Credit Agreement and all
related collateral agreements, subject to the
survival of the Surviving Provisions as set
forth in the first paragraph of this Section
2.1. Purchaser agrees that from time to time
it shall promptly execute and deliver all
further instruments and documents and take
all such further action that may be necessary
or desirable to effect the foregoing
termination.
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
standard Securities Act legend applicable to
restricted securities.
(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, in
either case 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.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and
Warranties of the Company. The Company
represents and warrants to, and covenants and
agrees with, each of the Purchasers as
follows:
(a) Organization, Standing,
Etc. The Company is a corporation
duly organized and in good standing
under the laws of the State of
Delaware. The Company is duly
qualified and in good standing as a
foreign corporation, and is
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. The Company has
all requisite corporate power and
authority to own its assets and to
carry on its businesses as
currently conducted. The Company
has all requisite corporate power
and authority (i) to execute,
deliver and perform its obligations
under the Basic Documents, (ii) to
issue the Securities pursuant
hereto in the manner and for the
purpose contemplated by this Agree-
ment and (iii) to execute, deliver
and perform its obligations under
all other agreements and
instruments executed and delivered
by, or to be executed and delivered
by, the Company pursuant to or in
connection with the Basic
Documents. The Basic Documents
have been duly and validly
authorized executed and delivered
by the Company and each constitutes
a valid and binding agreement of
the Company 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 hereunder 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 Company at
June 30, 1996 and the related
consolidated statements of income
and retained earnings and cash
flows of the Company for the fiscal
year ended on said date, which
statements have been certified by
Ernst & Young, LLP, independent
certified public accountants, and
such statements present fairly the
consolidated financial position of
the Company 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
consolidated statements of income
and retained earnings or financial
highlights as set forth in (A) the
Company's Form 10-Qs for the
periods ending September 30, 1996,
December 31, 1996 and March 31,
1997 and (B) the Press Release
issued by the Company on October
17, 1997. 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 June 30, 1997, there has been
no material adverse change in the
condition (financial or otherwise),
properties, assets, business or
results of operations of the
Company and its Subsidiaries, taken
as a whole, other than those
changes disclosed in the unaudited
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 as the case may be, of the
Basic Documents and the issuance of
the Securities, and the execution,
delivery and performance by the
Company of all other agreements and
instruments to be executed and
delivered by the Company pursuant
hereto or in connection herewith or
therewith, and compliance by the
Company 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 any of its 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;
(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 any of its
Subsidiaries is a party or by which
the Company or any of its or their
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.
(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 any of its
Subsidiaries 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 or its Subsidiaries, taken
as a whole, or (ii) the rights or
remedies of the Purchasers under
the Basic Documents or on the
ability of the Company to perform
its 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 of the Basic
Documents.
(g) Investment Company Act.
The Company is not 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 is not subject to any
Federal or state statute or
regulation limiting the ability of
the Company to issue and sell the
Securities and perform its
obligations under the Basic
Documents.
(i) Disclosure Documents.
The Disclosure Documents were
prepared with reasonable care on
the basis set forth therein and
those of the Disclosure Documents
that 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
Company and its Subsidiaries, taken
as a whole, or the ability of the
Company to perform its obligations
under the Basic Documents.
(j) Statutory Compliance.
The Company is in compliance with
all applicable statutes, laws,
ordinances or government rules and
regulations to which it is subject,
noncompliance with which would
materially adversely affect the
condition (financial or otherwise),
properties, assets, business or
results of operations of the
Company.
(k) Taxes. All material tax
returns required to be filed by the
Company 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 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.
(l) Due Issuance. The Securities
have been duly and validly authorized by all
necessary corporate
action and, when issued
and delivered in
accordance with the terms
of this Agreement against
payment therefor, will
have been duly authorized
and delivered by the
Company and 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 any of its Affiliates or any person
authorized to act on its
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. 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.
(o) III Exchange. On October
16, 1997, III Finance Ltd. ("III")
and The High Risk Opportunities Hub
Fund Ltd. ("Hub" and, together with
III, the "III Funds") converted
$21,333,333 Exchangeable
Subordinated Notes Due 2004 (the
"Exchangeable Notes"), of Aegis
Auto Finance, Inc., the Company's
wholly owned Subsidiary, for an
aggregate of 21,106.78 shares of
the Company's Class D Redeemable
Preferred Stock. The Registration
Rights Agreement dated April 30,
1997 between the Company and the
III Funds, as amended as of the
date hereof pursuant to an
amendment in the form attached
hereto as Exhibit A (the
"Amendment"), the Certificate of
Designations relating to the
Company's Class D Preferred Stock
filed on May 16, 1997 (as amended
on October 17, 1997), the Agreement
dated as of October 16, 1997
between the Company and the III
Funds relating to the exchange of
the $21,333,333 Exchangeable Notes
held by them for shares of the
Company's Class D Preferred Stock
and the proxies dated as of October
16, 1997 given by Pacific Capital
Group, Inc., Atlas Holdings Group,
Inc. and Robert I. Weingarten, with
respect to increasing the
authorized issuance of Common
Stock, are the only agreements or
instruments in effect which relate
to the III Funds' rights in respect
of the Class D Preferred Stock.
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 with
no present 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 upon exercise
of the securities which may be issued upon
redemption thereof 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 or other assets 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 under 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. Each Purchaser
further represents that it 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 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 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, subsequent to the
date of the last of such unaudited
financial statements.
(d) 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.
(e) The Basic Documents shall
have been duly executed and
delivered by all the respective
parties thereto.
(f) 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.
(g) The Purchasers shall have
received evidence satisfactory to
them that the Certificates of
Designation have been filed with
the Secretary of State of the State
of Delaware.
(h) The Company and the III
Funds have duly executed and
delivered the Amendment.
(i) The Company shall have
paid the reasonable fees and
expenses of Fulbright & Jaworski,
L.L.P., counsel to the Purchaser.
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 agrees 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, so long as the
Securities are held by the Purchasers, it
will permit any Person designated by such
Purchaser in writing, at such Purchaser's
expense, to visit and inspect any of the
Company's offices, or to inspect the
corporate books and financial records of the
Company and its Subsidiaries and to discuss
their affairs, finances and accounts with the
principal officers of 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 Nasdaq Listing. Upon
the redemption of the Securities in exchange
for shares of Common Stock, the Company shall
file an application to have such additional
shares of Common Stock listed on the Nasdaq
National Market or such other securities
exchange or market, if any, on which such
Common Stock is then listed.
Section 5.4 Availability of
Capital Stock. The Company shall resolve to
amend its Certificate of Incorporation, and
thereafter use its best efforts to obtain the
requisite approval of such amendment by its
stockholders at a meeting of stockholders to
be held as soon as practicable after the date
hereof (which, in any event, shall be the
first meeting of the stockholders of the
Company after the date hereof), so that the
Company may cause such amendment to be filed
with the Secretary of State of the State of
Delaware and to become effective, to effect
an increase in the authorized issuance of the
Common Stock so that the Company shall have
authorized a sufficient number of shares of
Common Stock to be able to effect a
redemption of all shares of Preferred Stock
that are to be issued and outstanding upon
the consummation of this Agreement. Subject
to the foregoing, the Company shall at all
times reserve and keep available out of its
authorized but unissued Common Stock, for the
purposes of effecting the redemption of the
Securities, the full number of shares of
Common Stock then issuable upon the exchange
of the Securities, provided, that if at any
time (including at the Time of Purchase) the
number of shares of Common Stock remaining
unissued and available for issuance shall be
insufficient to permit the redemption of the
Securities, the Company will, from time to
time, in accordance with the laws of the
State of Delaware, increase the authorized
amount of Common Stock to permit such
exchange or redemption. In the event of the
consolidation or merger of the Company with
another corporation where the Company 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 redemption of the Preferred Stock.
ARTICLE VI
INDEMNITY; CONTRIBUTION
Section 6.1 Indemnity.
(a) Indemnification. The Company
agrees and covenants to 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 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 the
Company shall not be liable under this
paragraph (a) for any amounts paid in
settlement of claims without its 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 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 further agrees 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 is liable to indemnify. The
indemnity, contribution and expense
reimbursement obligations of the Company
under this Article VI shall be in addition to
any liability the Company may otherwise have.
(b) Procedure. Promptly after
receipt by an indemnified party under this
Article VI 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 indemnified 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 6.2 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 VII
MISCELLANEOUS
Section 7.1 No Waiver;
Modifications in Writing. No failure or
delay on the part of the Company 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 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 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 in any case shall
entitle the Company to any other or further
notice or demand in similar or other
circumstances.
Section 7.2 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, shall be
given by similar means to The Aegis Consumer
Funding Group, Inc., 525 Washington
Boulevard, 29th Floor, Jersey City, New
Jersey 07310, Attention: Corporate 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 7.3 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 there-
with, 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 7.4 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 7.5 Binding Effect;
Assignment. 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 7.6 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 conflict of
laws. 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 7.7 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 7.8 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 7.9 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 7.10 No Recourse Against
Others. A director, officer, employee or
stockholder, as such, of the Company shall
not have any liability for any obligations of
the Company 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
hereunto duly authorized, as of the date
first above written.
THE AEGIS CONSUMER
FUNDING GROUP, INC.
By:
Name: William Henle
Title: Chief
Operating Officer
Accepted and Agreed as of
the date first above written
Name of Purchaser
By:
Name:
Title:
Aggregate stated value of
Securities to be purchased by
Purchaser
$ Class E Redeemable
Preferred Stock
$ Class F Redeemable
Preferred Stock
Nominee (name in which Securities are to
be registered, if different than name of
Purchaser)
THE AEGIS CONSUMER FUNDING GROUP, INC.
SECURITIES PURCHASE AGREEMENT
Dated as of November 10, 1997
$4,000,000 Aggregate Stated Value
Redeemable Preferred Stock
Bomrind\Aegis\GreenPur.Ag4
AGREEMENT
This AGREEMENT (this "Agreement") is made as
of October 16, 1997 by and between THE AEGIS CONSUMER
FUNDING GROUP, INC. (the "Company"), III FINANCE
LTD. ("III") and THE HIGH RISK OPPORTUNITIES HUB
FUND LTD. ("Hub," and along with III the "Purchasers").
Capitalized terms used but not defined herein shall have the
respective meanings ascribed to them in the Indenture (as defined
below).
WHEREAS, Aegis Auto Finance, Inc. ("AAF")
and Norwest Bank Minnesota, National Association, as trustee,
have heretofore entered into an Indenture, dated as of April 30,
1997 (the "Indenture"), in connection with $21,333,333 principal
amount at maturity of AAF's 12% Exchangeable Subordinated
Notes due April 30, 2004 (the "Notes");
WHEREAS, the Purchasers purchased the Notes
pursuant to a Note Purchase Agreement dated as of April 30,
1997 by and among AAF, the Company and the Purchasers and
are the sole holders of the Notes;
WHEREAS, the Purchasers desire to exchange the
Notes held by them for shares of Class D Redeemable Preferred
Stock (the "Preferred Stock"), subject to the modifications
described in the Certificate of Amendment to Certificate of
Designation for the Preferred Stock set forth as Exhibit A hereto
(the "Certificate of Amendment"); and
WHEREAS, the Purchasers and the Company
desire to so modify the terms of the Preferred Stock;
NOW, THEREFORE, in consideration of the
foregoing premises and other good and valuable consideration,
the receipt of which is duly acknowledged, the parties hereto
hereby agree as follows:
1. The Company shall cause the Certificate of
Amendment as set forth in Exhibit A annexed hereto to be filed
with the Secretary of State of the State of Delaware.
2. Immediately upon filing of the Certificate
of Amendment with the Secretary of State of the State of
Delaware, the Purchasers shall exchange with the Company the
Notes held by such Purchasers, having an aggregate principal
amount at maturity of $21,333,333, for shares of Preferred Stock
having an aggregate Stated Value of $21,106,780, such exchange
to be evidenced by, among other things, the execution and
delivery of cross-receipts in the form annexed hereto as Exhibit
B and the deliveries contemplated thereby.
3. The Company agrees that it will resolve to
amend (the "Amendment") its Certificate of Incorporation, as
described below, and will thereafter use its best efforts to
obtain
the requisite approval of the Amendment by its stockholders (the
"Stockholder Approval") at a meeting of stockholders to be held
as soon as practicable after the date hereof, so that the Company
may cause the Amendment to be filed with the Secretary of State
of the State of Delaware and to become effective. It shall be a
condition to the effectiveness of this Agreement that Gary
Winnick, Robert I. Weingarten and Palomba Weingarten, shall
have delivered to the Purchasers proxies, in the form annexed
hereto as Exhibit C, in favor of the Amendment. The Company
represents and warrants that the aggregate number of shares of
Common Stock (as hereinafter defined), covered by the foregoing
proxies represent approximately 36.4% of the outstanding shares
of Common Stock as of the date hereof. The Amendment shall
increase the authorized issuance of the common stock, par value
$.01 per share (the "Common Stock"), of the Company, so that
the Company shall have authorized a sufficient number of shares
of Common Stock to be able to effect a redemption of all shares
of Preferred Stock that are to be issued and outstanding upon the
consummation of this Agreement.
4. Within 5 days of obtaining Stockholder
Approval, the Company shall cause the Amendment to be filed
with the Secretary of State of the State of Delaware.
5. Subject to Sections 3 and 4 hereof, the
Company shall 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 are issued and outstanding, 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 outstanding, the Company shall promptly seek
such corporate action (including, without limitation, obtaining
any
requisite approval of its stockholders) as may 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 Company with
another corporation where the Company 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 redemption of the
Preferred Stock in accordance with the provisions of this Section
5.
6. This Agreement 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.
7. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an
original, but all of which taken together shall constitute but
one
and the same instrument.<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement 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.
THE AEGIS
CONSUMER FUNDING
GROUP, INC.
By:
Name:
Title:
III FINANCE LTD.
By:
Name: Kevin
Brandt
Title: Director
THE HIGH RISK
OPPORTUNITIES HUB
FUND LTD.
By:
Name: Kevin
Brandt
Title: Director
F:\ATTORNEY\BOMRIND\AEGIS\AEGSNEW2.AGR
AMENDMENT NO. 1 TO REGISTRATION RIGHTS
AGREEMENT
Amendment No. 1 to Registration
Rights Agreement (this "Amendment No. 1"),
dated as of November 10, 1997 by and between
The Aegis Consumer Funding Group, Inc., a
Delaware corporation (the "Company"), III
Finance Ltd. ("III"), and The High Risk
Opportunities Hub Fund Ltd. ("Hub" and,
together with III, the "Holders")
RECITALS
WHEREAS, the Company and the
Holders have heretofore entered into a
Registration Rights Agreement dated as of
April 30, 1997 (the "Agreement");
WHEREAS, the Company and Greenwich
Capital Financial Products, Inc. contemplate
entering into an agreement (the "Greenwich
Agreement") pursuant to which Greenwich will
convert $4,000,000 of the Company's debt held
by Greenwich into shares of preferred stock
of the Company (the "Preferred Stock");
WHEREAS, as a condition precedent
to the execution of the Greenwich Agreement,
Greenwich requires that the shares of
Preferred Stock be granted the same
registration rights granted to the Holders
under the Agreement;
WHEREAS, the Holders are desirous
that the Greenwich Agreement be executed and
that Greenwich convert the $4,000,000 debt
held by it into the Preferred Stock; and
WHEREAS, the Company and the
Holders, therefore, desire to amend the
Agreement;
NOW, THEREFORE, for good and
valuable consideration, the receipt and
sufficiency of which are hereby acknowledged,
the parties hereto agree that:
1. Section 10.4 of the Agreement shall
be amended to state in its entirety as
follows:
10.4 The Company shall
not grant to any Person, (other
than a Holder of Registrable
Securities) any registration
rights, other then such
registration rights granted to
Greenwich Financial Capital
Products ("Greenwich") pursuant to
that certain registration rights
agreement entered into between
Greenwich and the Company dated
November 10, 1997 (the "Greenwich
Agreement"), 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, it being understood
that if the Holders cause the
Company to effect a Demand
Registration and Greenwich seeks to
include therein Registrable
Securities (as defined in the
Greenwich Agreement) held by it,
any reduction of Registrable
Securities thereunder and hereunder
included in such registration based
on a determination by the
underwriter will, as between
Greenwich and the Holders, be borne
pro rata by them.
2. As amended by this Amendment No. 1,
the terms and provisions of the Agreement
shall remain in full force and effect.
3. This Amendment No. 1 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.
<PAGE>
IN WITNESS WHEREOF, this Amendment
No. 1 has been duly executed by the parties
hereto as of the date first written above.
THE AEGIS
CONSUMER
FUNDING GROUP,
INC.
By:
Name:
William Henle
Title:
Chief Operating Officer
III FINANCE
LTD.
By:
Name:
David Bree
Title:
THE HIGH RISK
OPPORTUNITIES HUB
FUND LTD.
By:
Name: David Bree
Title:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF THE AEGIS CONSUMER FUNDING
GROUP, INC. AND SUBSIDIARIRES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS WHICH STARTS ON PAGE 3 OF THIS REPORT.
</LEGEND>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 3-MOS 3-MOS
<FISCAL-YEAR-END> JUN-30-1998 JUN-30-1997 JUN-30-1998 JUN-30-1997
<PERIOD-END> SEP-30-1997 SEP-30-1996 SEP-30-1997 SEP-30-1996
<CASH> $3,181,876 $4,492,591 0 0
<SECURITIES> 0 0 0 0
<RECEIVABLES> 63,538,260 34,654,507 0 0
<ALLOWANCES> 0 0 0 0
<INVENTORY> 0 0 0 0
<CURRENT-ASSETS> 0 0 0 0
<PP&E> 0 0 0 0
<DEPRECIATION> 0 0 0 0
<TOTAL-ASSETS> $112,061,509 $83,482,740 0 0
<CURRENT-LIABILITIES> $102,130,590 $70,028,654 0 0
<BONDS> 0 0 0 0
0 0 0 0
11 11 0 0
<COMMON> 176,772 176,772 0 0
<OTHER-SE> 0 0 0 0
<TOTAL-LIABILITY-AND-EQUITY> $112,061,509 $83,482,740 0 0
<SALES> 0 0 0 0
<TOTAL-REVENUES> $10,253,851 $13,688,778 0 0
<CGS> 0 0 0 0
<TOTAL-COSTS> 0 0 0 0
<OTHER-EXPENSES> 9,344,573 4,824,397 0 0
<LOSS-PROVISION> 1,112,709 536,175 0 0
<INTEREST-EXPENSE> 3,367,353 3,013,473 0 0
<INCOME-PRETAX> (3,570,784) 5,314,733 0 0
<INCOME-TAX> 0 2,179,040 0 0
<INCOME-CONTINUING> (3,570,784) 3,135,693 0 0
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> ($3,570,784) $3,135,693 0 0
<EPS-PRIMARY> ($0.20) $0.19 0 0
<EPS-DILUTED> ($0.20) $0.19 0 0
</TABLE>
