As filed with the Securities and Exchange Commission on September 24, 1996
Registration No. ___________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
Registration Statement
Under the
Securities Act of 1933
ACC CONSUMER FINANCE CORPORATION
--------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware
--------
(State or Other Jurisdiction of Incorporation or Organization)
6141
----
(Primary Standard Industrial Classification Code No.)
33-0682821
----------
(I.R.S. Employer Identification No.)
12750 High Bluff Drive, Suite 320
San Diego, California 92130
(619) 793-6300
--------------------------------
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
ROCCO J. FABIANO
CHIEF EXECUTIVE OFFICER
ACC CONSUMER FINANCE CORPORATION
12750 High Bluff Drive, Suite 320
San Diego, California 92130
(619) 793-6300
--------------------------------
(Name, address, including zip code, and telephone number
of agent for service of process)
Copy to:
Barbara L. Borden, Esquire William T. Quicksilver, Esquire
Sheppard, Mullin, Richter & Hampton LLP Manatt, Phelps & Phillips LLP
501 West Broadway, 19th Floor 11355 West Olympic Boulevard
San Diego, California 92101 Los Angeles, California 90064
(619) 338-6500 (310) 312-4000
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
Page 1 of 606
<PAGE>
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, check the following box. [__]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check
the following box and list the Securities Act registration
statement number of earlier effective registration statement for
the same offering [___]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [__]
CALCULATION OF REGISTRATION FEE
Title of Each Proposed Proposed
Class of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered<F1> Per Unit Price Fee
- -------------------------------------------------------------------------------
Notes $17,250,000 $1.00 $17,250,000 $5,949
- -------------------------------------------------------------------------------
[FN]
<F1> Includes $2,250,000 in Notes that the Underwriters have the
option to purchase to cover over-allotments, if any.
The registrant hereby amends this registration statement on such
date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment that specifically states that
this registration statement shall thereafter become effective in
accordance with Section 8(b) of the Securities Act of 1933 or until the
registration statement shall become effective on such date as the
Commission, acting pursuant to Section 8(a), may determine.
Exhibit Index on Page 135
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Page 2 of 606
<PAGE>
ACC CONSUMER FINANCE CORPORATION
Cross Reference Sheet
Item No. and Heading In
Form S-1 Registration Statement Location in Prospectus
- ------------------------------- ----------------------
1. Forepart of the Registration Forepart of Registration
Statement and Outside Front Cover Statement and Outside Front
Page of Prospectus Cover Page of Prospectus
2. Inside Front and Outside Back Inside Front and Outside Back
Cover Pages of Prospectus Cover Pages of Prospectus
3. Summary Information, Risk Factors Risk Factors; Summary
and Ratio of Earnings to Fixed Charges Financial Data
4. Use of Proceeds Use of Proceeds
5. Plan of Distribution Plan of Distribution
6. Description of Securities to be Description of the Notes
Registered
7. Interest of Named Experts and Counsel Not applicable.
8. Information with Respect to the
Registrant:
(a) Description of Business (a) Business
(b) Description of Property (b) Business
(c) Legal Proceedings (c) Business
(d) Market Price Information (d) Underwriting
(e) Financial Statements (e) Consolidated Financial
(f) Selected Financial Data Statements
(g) Supplementary Financial Information (f) Selected Consolidated
(h) Management's Discussion and Financial Data
Analysis (g) Not applicable.
(i) Changes in and Disagreements with (h) Management's Discussion and
Accountants Analysis of Financial
(j) Directors and Executive Officers Condition and Results of
(k) Executive Compensation Operations
(l) Security Ownership and Certain (i) Not applicable.
Beneficial Owners (j) Management
(m) Certain Relationships and Related (k) Management
Transactions (l) Principal Stockholders
(m) Certain Transactions
9. Disclosure of Commission Position on Indemnification of Directors and
Indemnification for Securities Act Officers
Liabilities
-3-
Page 3 of 606
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with
the Securities and Exchange Commission. These securities may not be
sold nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall there be any
sale of these securities in any State in which such offer, solicitation
or sale would be unlawful prior to registration or qualification under
the securities laws of any such State.
PROSPECTUS
SUBJECT TO COMPLETION, DATED ____________, 1996
$15,000,000
ACC CONSUMER FINANCE CORPORATION
____% Notes due 2003
The ___% Notes due _____________ 2003 (the "Notes") offered hereby
are unsecured general obligations of ACC Consumer Finance Corporation
("ACC"). Interest on the Notes is payable monthly in arrears commencing
____________, 1996.
ACC will redeem, at any time, at par plus accrued interest, Notes
tendered for a deceased beneficial owner within 60 days of presentation of
the necessary documents, up to an annual maximum of $25,000 per beneficial
owner and up to an annual aggregate maximum of $300,000. The Notes are
redeemable at the option of ACC in whole or in part, at any time on or
after __________, 1999, at the redemption prices set forth herein, plus
accrued interest.
The Notes will be issued in integral multiples of $1,000 and will
be in fully registered form. No sinking fund will be established for the
Notes. See "Description of the Notes." The minimum principal amount of
Notes which may be purchased is $1,000. ACC has been advised by the
Underwriters that each Underwriter intends to make a market in the Notes;
however, the Notes will not be listed for trading on the Nasdaq National
Market or any exchange, and no assurance can be given that an active
trading market for the Notes will develop.
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
NOTES OFFERED HEREBY.
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
===============================================================================
Price to Underwriting Proceeds to
Public Discount<F1> Company<F2>
- -------------------------------------------------------------------------------
Per Note . . . . . . . . . . . 100% _______% _______%
Total<F3>. . . . . . . . .$15,000,000 $_________ $_________
===============================================================================
[FN]
<F1> See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
<F2> Before deducting expenses payable by ACC estimated at $________.
-1-
Page 4 of 606
<PAGE>
<F3> ACC has granted the Underwriters an option exercisable within 30 days
from the date of this Prospectus to purchase up to $2,250,000
aggregate principal amount of additional Notes on the same terms and
conditions set forth above to cover over-allotments, if any. If all
such Notes are purchased, the total Price to Public, Underwriting
Discount and Proceeds to ACC will be $17,250,000, $____________ and
$______________, respectively. See "Underwriting."
The Notes are offered by the Underwriters, subject to receipt and
acceptance of such Notes by the Underwriters and subject to their rights
to reject any order in whole or in part and to withdraw, cancel or modify
the offer without notice. The Notes will bear interest from the date of
delivery to the Underwriters. It is expected that the Notes will be ready
for delivery on or about ___________, 1996.
--------------------
McDonald & Company J.C. Bradford & Co.
Securities, Inc.
The Date of this Prospectus is __________, 1996
-2-
Page 5 of 606
<PAGE>
ACC CONSUMER FINANCE CORPORATION
Regional Credit Centers<F1> and Significant States<F2>
------------------------------------------------------
As of ____________, 1996
[FN]
<F1> See "Business -- Purchase of Contracts" for a discussion of the
Company's regional credit centers.
<F2> Significant States are any states wherein the Company purchased more
than $500,000 in Contracts in the three-month period ending
____________, 1996.
------------
The Company intends to furnish its Noteholders with annual reports
containing audited financial statements each fiscal year.
------------
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT
OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
NOTES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------
[inside cover]
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Page 6 of 606
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information and consolidated financial statements, including the
notes thereto, appearing elsewhere in this Prospectus or incorporated
herein by reference. Unless otherwise indicated, all information set forth
herein does not reflect the exercise of the Underwriters' over-allotment
option. This Prospectus contains certain statements regarding the
Company's plans and objectives for future operations, the Company's future
economic performance and assumptions relating to future operations or
future economic performance that constitute "forward looking information"
under the Securities Litigation Reform Act of 1995. Each of such
statements is subject to risks, as set forth under "Risk Factors" that
could cause actual results to differ materially from the results included
in the forward looking information.
Unless the context otherwise requires, all references in this
Prospectus to the Company refer to ACC Consumer Finance Corporation, OFL-A
Receivables Corp., a wholly-owned special purpose subsidiary of ACC that
takes title to all Contracts and is the record lienholder of all financed
vehicles and the obligor under the Company's warehouse and other financing
facilities ("OFL-A"), and ACC Receivables Corp. ("Receivables"), a
wholly-owned special purpose subsidiary of ACC formed in connection with
the Company's issuance of asset-backed securities. All references to ACC,
unless the context otherwise requires, refer to ACC Consumer Finance
Corporation, which is the issuer of the Notes. ACC provides the Contract
acquisition and portfolio servicing functions and incurs virtually all of
the Company's operating expenses. However, OFL-A and Receivables own
substantially all of the earning assets of the Company.
THE COMPANY
The Company specializes in the indirect financing of automobile
installment contracts ("Contracts"), originated primarily by franchised
automobile dealers, for consumers who pose credit risks due to past credit
problems, limited or no credit histories and/or low incomes ("Non-Prime
Borrowers"). These consumers are unlikely to qualify for financing from
traditional automobile financing sources such as commercial banks, savings
and loans, thrift and loans, credit unions and the captive finance
companies of automobile manufacturers. Through its financing program, the
Company provides automobile dealers ("Dealers") with a source of financing
for Non-Prime Borrowers.
ACC was founded by three senior executives with extensive
experience in non-prime credit evaluation, asset securitization and
collections. ACC has experienced significant growth since its formation in
July 1993. From June 30, 1995, to June 30, 1996, the outstanding balance
of Contracts serviced by the Company increased from $78 million to $173
million, or 122%. The volume of Contracts purchased by the Company
increased from $44 million during the six-month period ended June 30,
1995, to $79 million during the six-month period ended June 30, 1996, or
80%. During the six-month period ended June 30, 1996, ACC reported net
income of $1.9 million (with a 42% effective tax rate), compared to net
income of $2.3 million (with a 1.5% effective tax rate), for the six-month
period ended June 30, 1995. In May 1996, the Company sold 2,000,000 shares
-4-
Page 7 of 606
<PAGE>
of its common stock in an initial public offering that generated net
proceeds of approximately $12.6 million.
The automobile finance market is one of the largest consumer
finance markets in the United States, with $356 billion in outstanding
credit as of January 1996. Since its formation, ACC has targeted the
highly fragmented non-prime segment of this market which has an estimated
$70 billion in outstanding credit. The Company's business plan focuses on
the following strategies:
Market Focus. The Company targets major metropolitan areas and
expands into those markets in which it can recruit salespeople with
non-prime lending experience. The Company believes that major metropolitan
areas provide concentrations of high volume Dealers which can be
effectively serviced by its regional sales managers. The Company attempts
to develop a broad Dealer base to avoid dependence on a limited number of
Dealers. As of June 30, 1996, the Company directly marketed its program to
Dealers in 22 states, and during the six-month period ended June 30, 1996,
65% of the Contracts were purchased from Dealers in the states of California,
Florida, Pennsylvania and Texas. During the six-month period ended June 30,
1996, the Company purchased Contracts from 1,055 Dealers. As of June 30,
1996, no Dealer accounted for more than 3% of the Company's Contract
portfolio and the ten Dealers from which the Company purchased the most
Contracts accounted for approximately 13% of the Company's Contract
portfolio, in aggregate.
Late-Model Used Vehicle Contracts From Franchised Dealers. The
Company's financing program targets the purchase of Contracts for
late-model used vehicles that are originated by franchised Dealers. As of
June 30, 1996, the median model year in the Company's Contract portfolio
was 1993. As of June 30, 1996, approximately 85% of Contracts serviced by
the Company financed used vehicles and 97% were acquired from franchised
Dealers. The average discount and the weighted average coupon on Contracts
purchased during the six-month period ended June 30, 1996, were 5.0% and
20.7%, respectively. The Company believes that late-model used vehicles
represent the largest segment of the used vehicle market, while posing
less risk of default due to mechanical problems than do older used
vehicles. The Company targets franchised Dealers because the financial
requirements and customer service standards imposed on these dealers by
automobile manufacturers generally result in a high level of financial
stability and customer satisfaction. As a result, the Company believes, in
general, Contracts from these Dealers expose the Company to less risk of
Dealer misrepresentation and lower levels of borrower default.
Credit Scoring and Risk Management System. In order to manage the
higher risks associated with Non-Prime Borrowers, the Company maintains a
database which tracks key underwriting parameters for each Contract
purchased. This database is then used to statistically compare the
characteristics of performing Contracts to nonperforming Contracts. Using
this analysis, the Company periodically refines and enhances the
proprietary credit scoring system used by its credit officers. The Company
believes that this approach to credit underwriting allows the Company to
offer to Dealers a series of different pricing programs tied to the
expected economic value of each program to the Company. In addition, the
Company has assigned designated lending limits for each credit officer.
-5-
Page 8 of 606
<PAGE>
For the six-month period ended June 30, 1996, net charge-offs as a
percentage of average servicing portfolio was 3.8% and as of June 30,
1996, delinquencies of 31 days or more were 4.0% of servicing portfolio.
Regional Credit Centers. The Company's regional credit centers in
Atlanta, Georgia; Dallas, Texas; Miami, Florida; Newark, Delaware; and San
Diego, California process and approve applications from the 22 states in
which the Company directly markets its program. The Company believes this
regional structure meets the Company's Dealer service objectives without
sacrificing economies of scale and operating controls.
Centralized Funding and Collection Management. The Company manages
all Contract funding and collection activities from its headquarters in
San Diego. Through this central operation, the Company conducts an
extensive pre-funding verification process on 100% of the Contracts, which
generally includes a direct telephone interview with the borrower. The
Company typically returns Contract packages that fail to meet its
requirements. The Company also monitors the performance of each of its
Dealers and conducts a post-funding quality control review of a random
sample of 5% of all Contracts purchased by ACC. The Company pursues a
collection strategy of early and frequent contact with delinquent
borrowers using a high-penetration autodialer to begin contacting
borrowers who become six days delinquent. ACC believes that its
centralized funding and collection structure allows for maximum operating
control and cost efficiency.
Asset Securitizations. As of the date of this Prospectus, the
Company has issued five asset-backed securities involving Contracts
aggregating approximately $232 million. Each of the securities was rated
AAA by Standard & Poor's Ratings Group ("S&P") and Aaa by Moody's
Investors Service, Inc. ("Moody's"), based on a guaranty by Financial
Security Assurance Inc. ("FSA"). The Company issues asset-backed
securities to redeploy capital, reduce its interest rate risk and
recognize gains from the sale of the Contracts. Warehouse financing is
provided by Cargill Financial Services Corporation ("Cargill") under a
facility which expires in July 1998.
------------
ACC was incorporated in California on June 3, 1993, under the name
of American Credit Corporation, changed its name to ACC Consumer Finance
Corporation in October 1995, was reincorporated in Delaware in November
1995 and became a public company in May 1996. ACC's executive offices are
located at 12750 High Bluff Drive, Suite 320, San Diego, California 92130,
and its telephone number is (619) 793-6300.
-6-
Page 9 of 606
<PAGE>
THE OFFERING
Securities Offered ........ $15,000,000 principal amount of ____% Notes due
2003 assuming no exercise of the Underwriters'
over-allotment option to purchase up to an
additional $2,250,000 principal amount of Notes.
The Notes are unsecured, general obligations of
the Company. See "Description of the Notes" for a
more detailed description of the Notes offered
hereby.
Maturity .................. ____________, 2003
Interest Payment Dates .... Interest is payable monthly in arrears commencing
__________, 1996.
Redemption Upon Death of Upon the Death of a Noteholder: Notes tendered by
Noteholder ................ the personal representative or surviving joint
tenant or tenant in common of a deceased beneficial
owner shall be redeemed within 60 days of tender,
at par plus accrued interest, subject to the amount
limitations set forth below.
Amount Limitations: Of the Notes tendered, the
Company is only required to redeem, for the period
from the date of issuance until _________, 1997,
and for each 12-month period ending __________,
thereafter, an aggregate maximum of $300,000 per
year, subject to a maximum of $25,000 per
beneficial owner, per 12-month period.
Redemption Upon Occurrence In the event of a Fundamental Structural Change
of Certain Events ......... (as that term is defined herein), Noteholder will
have the right (through a date within 75 days of
occurrence of the event) to require the Company to
purchase the holder's Notes at a price equal to
par plus accrued interest; provided that such right
shall not be exercisable if within 40 days after
the occurrence of such event the Notes have
received a specified rating from a nationally
recognized statistical rating organization. See
"Description of the Notes -- Noteholders' Right to
Prepayment After Fundamental Structural Change."
Redemption at Company's
Option .................... The Notes may be redeemed at the Company's option
on or after ___________, 1999, at the redemption
prices set forth herein.
Sinking Fund .............. None.
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Page 10 of 606
<PAGE>
Certain Covenants of In the Indenture, the Company agrees to certain
the Company ............... limitations on dividends and additional
indebtedness, to maintain certain levels of cash
or marketable investment securities, and, unless
certain conditions are met to redeem Notes tendered
by Noteholders in the event of certain transactions
relating to the Company.
Use of Proceeds............ The net proceeds from the sale of the Notes will be
contributed to OFL-A for use in part to repay
temporarily a subordinated debt facility (the "NIM
Facility") and for the Company's general working
capital purposes.
Risk Factors .............. Certain risk factors beginning on page 12 should be
considered in connection with the purchase of the
Notes.
Trustee.................... Norwest Bank Minnesota, National Association.
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Page 11 of 606
<PAGE>
<TABLE>
SUMMARY FINANCIAL DATA
<CAPTION>
Six-Month July 15, 1993
Six Months Ended Transition (Inception)
June 30, Year Ended Period Ended Through
------------------------ Dec. 31, Dec. 31, June 30,
1996 1995 1995<F1> 1994<F1> 1994<F1>
------ ------ -------- -------- --------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Interest Income Before
Provision for Contract
Losses $ 2,034,604 $ 2,080,441 $ 3,332,354 $ 2,187,843 $ 606,177
Gain on Sale of Contracts 6,584,609 3,913,477 8,056,136 -- --
Servicing Income
and Ancillary Fees 1,811,747 500,717 1,757,257 28,237 6,653
Litigation Settlement
Income -- -- -- 325,000 --
------------ ------------ ------------ ------------ ------------
Total Revenues 10,430,960 6,494,635 13,145,747 2,541,080 612,830
Provision for Contract
Losses (348,784) (10,348) (673,802) (902,361) (592,325)
Operating Expenses (6,763,069) (4,149,601) (8,796,590) (2,630,925) (2,608,467)
------------ ------------ ------------ ------------ ------------
Income (Loss) Before Taxes 3,319,107 2,334,686 3,675,355 (992,206) (2,587,962)
Net Income (Loss) 1,925,107 2,299,686 3,466,355 (992,206) (2,587,962)
Preferred Stock
Dividends 116,818 96,827 215,419 82,621 152,673
------------ ------------ ------------ ------------ ------------
Net Income (Loss) Available
to Common Shareholders $ 1,808,289 $ 2,202,859 $ 3,250,936 $(1,074,827) $(2,740,635)
============ ============ ============ ============ ============
Primary Income per Common
Share<F2> $ 0.29 $ -- $ 0.62 $ -- $ --
Fully Diluted Income
per Common Share 0.29 -- 0.55 -- --
Weighted Average Shares
Outstanding (Primary) 6,724,938 -- 5,624,305 -- --
Weighted Average Shares
Outstanding (Fully Diluted) 6,736,596 -- 6,292,478 -- --
Pro Forma Ratio of Earnings
to Fixed Charges<F3> 2.28% -- 1.74% -- --
STATEMENT OF CASH FLOWS DATA:
Net Cash Provided By (Used
In) Operating Activities $ (4,395,063) $ 7,505,732 $ 771,386 $ (1,588,352) $ (3,397,671)
Net Cash Provided By (Used
In) Investing Activities 1,597,287 927,556 (808,470) (24,505,335) (16,135,420)
Net Cash Provided By (Used
In) Financing Activities 2,776,156 (7,964,723) 13,923 26,199,046 19,571,565
(Decrease) Increase In
Cash and Cash Equivalents (21,620) 468,565 (23,161) 105,359 38,474
</TABLE>
-9-
Page 12 of 606
<PAGE>
As of As of As of
June 30, 1996 Dec. 31, 1995 Dec. 31, 1994
Balance Sheet Data: ------------- ------------- -------------
Total Assets $ 53,942,978 $ 46,908,938 $ 42,331,518
Net Installment Contracts
Held-for-Sale 22,365,001 28,187,778 --
Held-for-Investment 220,830 509,388 38,613,239
Allowance for Contract Losses 388,200 476,808 1,181,004
Asset-Backed Securities 6,684,022 3,910,080 --
Excess Servicing Receivables 9,365,618 5,590,878 --
Repurchase Facility, Net 23,598,232 29,708,252 40,492,594
Other Borrowings 2,388,036 7,439,597 --
Total Liabilities 32,721,312 40,624,138 41,433,745
Redeemable Preferred Stock -- 6,279,049 4,358,377
Shareholders' Equity 21,221,666 5,751 (3,460,604)
Pro Forma Ratio of
Indebtedness to
Consolidated Net Worth<F4> 1.82% 7.11% --
Return (Loss) on
Average Assets (Annualized) 7.65% 6.92% (6.65)%
Return (Loss) on
Average Equity (Annualized)<F5> 32.46% 102.37% (160.91)%
[FN]
<F1> Effective as of January 1, 1995, the Company changed its fiscal year
end from June 30 to December 31. Each of the periods ended June 30,
1994, December 31, 1994, and December 31, 1995, is an audited period.
<F2> Due to the significant changes in the capital structure of the
Company, historical net income (loss) per common share prior to the
year ended December 31, 1995, is not presented.
<F3> For purposes of calculating the pro forma ratio of earnings to fixed
charges, earnings consist of income before income taxes, plus fixed
charges. Fixed charges consist of the interest on all indebtedness
and the representative interest factor of rent expense.
<F4> For purposes of calculating the pro forma ratio of indebtedness to
consolidated net worth, as adjusted for the issuance of the Notes,
indebtedness excludes secured indebtedness with respect to which the
sole recourse of the lender in the event of nonpayment or other default
is to the collateral, and consolidated net worth represents consolidated
net worth determined in accordance with generally accepted accounting
principles, less goodwill.
<F5> The calculation of return (loss) on average equity for December 31, 1995
and 1994 includes the redeemable Preferred Stock.
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Page 13 of 606
<PAGE>
SUMMARY OPERATING DATA
Three Months Ended
---------------------------------------------------
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
1996 1996 1995 1995 1995
---- ---- ---- ---- ----
CONTRACT PURCHASE DATA:
Amount of Contracts(000's)$ 45,253 $ 33,715 $ 26,478 $ 28,642 $ 24,673
Number of Contracts 3,682 2,746 2,184 2,366 2,058
Average Coupon on Contracts 20.72% 20.65% 20.47% 20.33% 19.93%
Average Discount of
Contracts<F1> 5.16% 4.87% 5.14% 6.00% 6.98%
Average Amount Financed
under Contracts $ 12,290 $ 12,278 $ 12,124 $ 12,106 $ 11,989
Average Original Term
of Contracts (months) 57 57 58 57 56
Active Dealers<F2> 1,055 813 547 546 472
Number of Regional
Sales Managers 35 32 25 19 15
Number of Significant
States<F3> 15 13 12 10 7
OPERATING DATA:
Principal Balance of
Servicing Portfolio
at Period End (000's)<F4>$172,562 $139,969 $117,539 $100,028 $ 78,118
Net Charge-offs as a
Percentage of Average
Servicing Portfolio
(annualized)<F5> 3.40% 4.40% 4.53% 3.82% 2.67%
Delinquencies 31 days
or more as a Percentage
of Servicing Portfolio
at Period End<F6> 3.96% 2.73% 4.25% 4.11% 2.79%
[FN]
<F1> Includes acquisition fees.
<F2> Active Dealers include any Dealers from which Contracts were purchased
within the six months prior to the period end.
<F3> Significant States are any states wherein the Company purchased
more than $500,000 in Contracts during the period.
<F4> All amounts are based on the full amount remaining to be repaid on
each Contract at period end. The information in the table represents
the principal amount of all Contracts owned and serviced by the
Company, including Contracts sold in asset-backed securities.
<F5> Net charge-offs are net of recoveries and include the remaining
Contract balance at time of charge-off. In the case of repossession,
net charge-offs include the remaining Contract balance at the time of
repossession less liquidation proceeds (for disposed vehicles), NADA
wholesale value (for vehicles repossessed but not sold) or claims
receivable under the Company's vendor single interest insurance policy.
Net charge-offs do not include repossessions that are less than 120 days
delinquent and are not yet charged-off.
<F6> The Company considers a Contract delinquent when an obligor fails to make
at least 90% of the contractual payment by the stated due date. The period
of delinquency is based upon the number of days payments are contractually
past due. Contracts not yet 31 days late are not considered to be
delinquent. The delinquency rate excludes amounts in repossession.
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Page 14 of 606
<PAGE>
RISK FACTORS
Credit Risks
The Company specializes in the indirect financing of Contracts
for consumers who typically have had past credit problems (including
bankruptcy), have limited or no credit histories and/or have low
incomes. Consequently, a high credit risk is inherent in the
Contracts purchased by the Company. The performance of Contracts
serviced by the Company or purchased in the future may be directly
affected by unemployment trends and other economic factors beyond the
Company's control. These factors could impair the Company's ability
to predict or manage effectively the default rates of its Contracts
and could cause the Company to incur increased operating expenses
associated with the servicing of these Contracts. An increase in
delinquencies, default rates or charge-offs in its Contract portfolio
could trigger defaults under the Company's senior financing facilities
and asset securitizations or constitute triggering events in the asset
securitizations. Any such default or triggering event would increase
the restrictions on the Company's access to cash from credit
enhancement cash reserves and adversely affect the Company's cash flow
and its ability to pay interest and principal on the Notes and the
redemption price of any Notes tendered to the Company. There is no
assurance that the Company's credit evaluation and collection
processes will prevent excessive defaults or that the Company will be
able to purchase Contracts with yields commensurate with the portfolio
credit risk. See "Business -- Purchase of Contracts," and see
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and see "Business -- Financing."
Liquidity and Capital Resources
Negative Operating Cash Flows. The Company's business requires
substantial cash to support the funding of credit enhancement cash
reserves for its asset securitizations, issuance costs of its asset
securitizations, operating expenses, tax payments due in recognition
of gains on sales of Contracts (for which no cash is received by the
Company), debt service and other cash requirements. These cash
requirements increase as the volume of Contracts purchased and
serviced by the Company increases. Historically, the Company has
operated on a negative cash flow basis and expects its negative cash
flow to continue as the volume of Contract purchases increases and the
securitization program grows. The Company has funded its negative
operating cash flows principally through borrowings under its secured
financing facilities and sales of equity securities, and will use the
proceeds of the Notes to fund, in part, its negative operating cash
flow. In order to execute its business strategy, the Company is
dependent upon its warehouse facility (and the replacement of the
warehouse facility in 1998), its asset securitization program and its
ongoing ability to access capital markets to obtain long term debt and
equity capital. There is no assurance that the Company will have
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<PAGE>
access to capital markets when needed or will be able to obtain
capital or financing facilities at costs and on terms satisfactory to
the Company. Factors that affect the Company's access to capital
markets or the cost of capital include, among others, interest rates,
general economic conditions and the Company's results of operations,
financial condition, business prospects (including competitive
conditions), leverage and the performance of its asset
securitizations. In addition, covenants in the Indenture and in
future debt securities and financing facilities may significantly
restrict the Company's ability to incur additional indebtedness or
issue new equity securities. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations --
Financial Condition and Liquidity."
Corporate Structure and Limits on Availability of Cash to Obligor
on the Notes. Due to the structure of the Company's existing secured
financing facilities, substantially all of the earning assets of the
Company are owned by OFL-A and Receivables, which are wholly-owned,
special purpose subsidiaries of ACC, the obligor on the Notes. In
effect, the Notes will be subordinated to the secured financing
facilities. ACC is dependent upon cash flow from OFL-A and
Receivables to fund its operations. As a result, ACC's ability to
service its obligations on the Notes or repurchase the Notes will
depend upon cash flow from its subsidiaries. Such cash flow could be
adversely impaired by the occurrence of triggering events on any of
the asset securitizations or a default on a secured facility. All of
the assets of OFL-A are pledged as collateral to secure the financing
facilities and ACC's stock in OFL-A and Receivables are pledged as
collateral for the financing facilities and securitizations. OFL-A's
activities are limited to the purchase of Contracts and Receivables'
activities are limited to the purchase and sale of Contracts in
connection with asset securitizations and activities incident thereto.
Neither OFL-A nor Receivables may incur any liabilities other than the
existing secured financing facilities. ACC provides the Company's
Contract acquisition and portfolio servicing functions and incurs
virtually all of the Company's operating expenses. However, ACC's
direct cash flow is limited to servicing fees, interest income and
proceeds from the sale of securities, and these sources are inadequate
to fund the Company's operations. There is no assurance that either
subsidiary will have sufficient cash to cover ACC's operations and
fund obligations under the Notes even in the absence of a triggering
event or default. See "Risk Factors -- Disadvantageous Structure of
the Repurchase Facility in the Event of ACC's or Cargill's
Bankruptcy," and see "Business -- Financing."
Ability to Service Debt. Although the Company believes that its
will have adequate sources of liquidity to fund its interest and
principal obligations, redemption payments and other obligations on
the Notes, there is no assurance that the Company will not encounter
liquidity problems that could adversely affect its ability to meet
such obligations, respond to economic, competitive or other conditions
affecting the Company's operations, results of operations and business
prospects and execute its business strategy. See "Management's
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<PAGE>
Discussion and Analysis of Financial Condition and Results of
Operations -- Financial Condition and Liquidity."
Leverage. The issuance of the Notes offered hereby will have the
effect of increasing the Company's leverage. At June 30, 1996, on an
"as adjusted basis" to give effect to the offering of the Notes and
the repayment of the NIM Facility, the aggregate outstanding
consolidated indebtedness of the Company would have been approximately
$45 million, of which $27 million would have been indebtedness of OFL-A
to which the Notes are in effect subordinated. The degree to which
the Company is leveraged could have important consequences to the
holders of the Notes and to the Company (including the Company's
ability to service its debt and redemption obligations under the
Notes). The consequences of increased leverage include: (i) the
Company's increased vulnerability to changes in economic conditions
and competition; (ii) the potential limitations on the Company's
access to capital markets and ability to refinance its warehouse
facility; and (iii) the dedication of a substantial portion of the
Company's available cash to debt service, thereby reducing cash
available to fund expanding business operations and future business
opportunities. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Financial Condition
and Liquidity" and see "Description of the Notes."
Dependence Upon Financing Facilities and Upon Cargill. The
Company has depended upon the warehouse financing facility (the
"Repurchase Facility") between ACC, OFL-A and Cargill, which expires
in July 1998, to finance its acquisition of Contracts. The Company
also has relied upon other Cargill financing facilities to fund its
asset securitizations, finance equipment acquisitions and provide
working capital. Cargill is a principal shareholder of the Company.
The Company's ability to continue to borrow under the financing
facilities is dependent upon its compliance with the covenants and
other requirements of the agreements. If the Repurchase Facility were
to be terminated, the outstanding balance would become immediately
payable and there is no assurance the Company could find alternative
financing. See "Business -- Financing," and see "Certain
Transactions" and see "Risk Factors -- Dependence on Key Personnel."
The Company has depended upon Cargill as its principal financing
source and will continue following the offering to depend upon the
Repurchase Facility. If Cargill were to discontinue its warehouse
financing for Contract acquisitions, there is no assurance that the
Company could find alternative financing on as favorable terms. See
"Certain Transactions."
Disadvantageous Structure of the Repurchase Facility in the Event
of the Company's or Cargill's Bankruptcy. In the event that ACC or
OFL-A became a debtor under the United States Bankruptcy Code
("Bankruptcy Code"), the structure of the Repurchase Facility could be
disadvantageous to the Company and make it very difficult to
reorganize in bankruptcy without the cooperation of Cargill. If
Cargill did not cooperate in a bankruptcy, Cargill could attempt to
liquidate the Contracts without bankruptcy court approval and without
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giving the Company an opportunity to formulate a plan of
restructuring. An untimely liquidation of the Contracts subject to
the facility could result in the Company receiving little or no
proceeds from the liquidating sales, depending upon the liquidation
prices (net of costs) and the other cross-collateralized obligations
of the Company to Cargill. The loss of these Contracts also would
adversely affect the Company's balance sheet and financial condition,
and could prevent the Company from restructuring. Further, Cargill
could elect to remove ACC as the servicer of the Contracts subject to
the facility, thereby terminating ACC's right to receive the 4%
servicing fee. In the event that Cargill becomes a debtor under the
Bankruptcy Code, there is a risk that Cargill could terminate the
Company's right to repurchase the Contracts as an executory contract,
which could cause the Company to lose the net interest income from the
Contracts subject to the Repurchase Facility and any future gain on
sale from the sale of the Contracts in an asset-backed security. See
"Business -- Financing."
Dependence Upon Asset Securitizations. The Company recently has
relied and expects to continue to rely on the issuance of asset-backed
securities as a means of providing long-term, fixed rate financing of
Contracts and generating servicing revenues. Gains from the issuance
of these securities are expected to generate a significant portion of
the Company's revenues. The gain on sale, however, does not generate
any cash in the short term and is subject to taxation. The timing of
the issuance of any asset-backed security is affected by a number of
factors, some of which are beyond the Company's control, including,
among others, conditions in the asset-backed securities market,
interest rates and approvals from third parties. Some or all of these
factors may cause delays in closing a securitization or may even
prevent such transactions entirely. Further, the Company's asset
securitization program could be adversely affected by the performance
of its existing securitizations, any significant changes in its credit
enhancement requirements and/or the loss of its guaranty relationship
with FSA. See "Business -- Securitization of Contracts."
Interest Rate Risk
Two primary components of the Company's earnings are: (i) net
yield on Contracts, which is the spread between the interest earned on
the Contracts in the Company's portfolio and the interest paid by the
Company on the Repurchase Facility and (ii) gain on sale, which is
based upon the spread between the interest earned on the Contracts
included in asset-backed securities and the pass-through rate paid to
senior bondholders. The Company's net interest income and future
gains on sale could be adversely affected by rising interest rates,
because while the interest rates on the Contracts in the Company's
portfolio are fixed, a portion of the Company's cost of funds is
variable. There is no assurance that the Company's cost of funds will
not have an adverse effect on the Company's ability to maintain
profitability. See "Business -- Financing" and see "Business --
Securitization of Contracts."
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<PAGE>
The Company has adopted a hedging program to mitigate the risk of
reduced income from changes in interest rates during the period after
a Contract is purchased and prior to the time it is sold in an asset-
backed security. There is no assurance that this hedging program will
benefit the Company or offset entirely corresponding losses with
respect to Contracts affected by an interest rate fluctuation; or that
the hedging program itself will not cause the Company to incur losses.
See "Business -- Hedging Program."
Competition and Consolidation of Industry
The automobile financing business, and the non-prime credit
segment in which the Company operates, are highly competitive. The
Company competes with a growing number of publicly and privately held
national, regional and local companies that specialize in non-prime
automobile finance. In addition, the Company competes, or may compete
in the future, for business with more traditional automobile financing
sources, such as commercial banks and automobile manufacturers'
captive finance companies. Many of the Company's competitors and
potential competitors have substantially greater financial, marketing
and other resources than the Company, and may be more successful in
expanding into new geographic markets, building dealer networks and
increasing market share through internal growth or acquisition. The
larger, more established companies have access to capital markets for
unsecured commercial paper, investment-grade corporate debt
instruments and to other funding sources that may provide them with an
advantageous cost of capital relative to the Company's cost of
capital. The non-prime finance segment of the automobile financing
industry, which is currently highly fragmented, may be subject to
significant future consolidation. See "Business -- Competition."
Geographic Concentration
The Company's Contract purchases currently are concentrated in
California, Texas, Florida and Pennsylvania. As of June 30, 1996, 76%
of the Contracts serviced by ACC were purchased from Dealers in these
states. An economic slowdown or recession, or a change in the
regulatory or legal environment, in one or more of these states could
have a material adverse effect on the performance of the Company's
existing Contract portfolio and on its Contract purchases. See
"Business -- Purchase of Contracts" and see "Business --
Concentrations of Contract Purchases."
Impact of Government Regulation and Litigation
The Company's business is subject to numerous federal and state
consumer protection laws and regulations which are subject to change.
An adverse change in or interpretation of existing laws or
regulations, the promulgation of any new laws or regulations, or the
failure to comply with any of such laws and regulations could have an
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<PAGE>
adverse effect on the Company's business and its financial condition.
See "Business -- Government Regulation."
Given the consumer-oriented nature of the industry, industry
participants are from time to time named as defendants in litigation
involving alleged violations of federal and state consumer protection
or other similar laws and regulations. A judgment against the Company
in connection with any litigation could have a material adverse effect
on the Company's financial condition and its results of operations.
In addition, if it were determined that a Dealer failed to comply with
applicable laws or a number of Contracts purchased by the Company
involved violations of applicable laws, the Company's financial
condition and results of operations could be materially adversely
affected. See "Business -- Government Regulation."
Dependence on Key Personnel
The Company is dependent upon its founding executive officers,
Rocco J. Fabiano, Gary S. Burdick and Rellen M. Stewart (the
"Founders"). The loss of the services of one or more of the Founders
could have a material adverse effect on the Company's business and
there is no assurance that the Company would be able to replace any of
the Founders without incurring additional costs or without disruptions
to the Company. In addition, if any two of the three Founders are not
employed by the Company, Cargill will have the option of terminating
the Company's warehouse financing facility. The Company maintains key
man life insurance in the amount of $500,000 on each of the Founders.
See "Risk Factors -- Dependence Upon Warehouse Financing Facility and
Upon Cargill," and see "Risk Factors -- Dependence Upon Asset
Securitizations" and see "Management -- Directors and Executive
Officers."
The Company's ability to implement its business strategy depends
upon its ability to attract and retain a sufficient number of
qualified employees to maintain its underwriting standards and
collection procedures and to support its expansion into new geographic
markets. There is no assurance that the Company will be able to
recruit and retain such personnel. See "Risk Factors -- Dependence on
Dealer Relationships," and see "Business -- Purchase of Contracts" and
see "Business -- Servicing of Contracts."
Dependence on Dealer Relationships
The Company's ability to expand into new geographic markets and
to maintain or increase its volume of Contract purchases is dependent
upon maintaining and expanding the network of Dealers from which it
purchases Contracts. The Company's loss of any of its regional sales
managers could adversely affect the Company's relationships with
participating Dealers and future purchases of Contracts. Increased
competition, including without limitation, competition from captive
finance companies and other factors, could have an adverse effect on
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<PAGE>
the Company's ability to maintain or expand its Dealer network. See
"Business -- Purchase of Contracts" and see "Business -- Competition."
Changes In Market Conditions
The Company's business of financing automobile sales is directly
related to the automobile industry's sales of new and used
automobiles. Automobile sales are cyclical in nature and are affected
by general economic conditions, including employment rates, interest
rates, real wages and other economic conditions. An increase in
interest rates, economic slowdown or recession could adversely affect
automobile sales and, in turn, reduce the number of Contracts
available for purchase by automobile finance companies such as the
Company. A change in general economic conditions also could affect
adversely the performance of the portfolio of Contracts owned and
serviced by the Company, including Contracts sold in asset-backed
securities. See "Business -- Non-Prime Automobile Finance Industry."
Reliance on Systems and Controls
The Company depends heavily upon its systems and controls, many
of which are designed specifically for its business. These systems
and controls support the evaluation, acquisition, monitoring,
collecting and administering of the Company's portfolio as well as
support general accounting and other management functions of the
Company. There is no assurance that these systems and controls,
including those specially designed and built for the Company, are
adequate or will continue to be adequate to support the Company's
growth. A failure of the automated systems, including a failure of
data integrity or accuracy, could have a material adverse effect upon
the Company's business and financial condition. See "Business --
Management Information Systems."
Control by Existing Shareholder
As of September 1, 1996, investment funds managed by Strome
Susskind Investment Management, L.P. ("SSIM"), beneficially owned
38.7% of the outstanding shares of Common Stock of the Company. As a
result, SSIM has significant influence over matters requiring approval
of the Company's stockholders, including the election or removal of
directors. Currently, two of the Company's five directors are limited
partners of SSIM, and shareholders, directors and officers of the
corporate general partner of SSIM.
Limited Covenants in the Indenture; Absence of Sinking Fund
The Indenture pursuant to which the Notes will be issued contains
financial and operating covenants including, among others, limitations
on the Company's ability to pay dividends, incur additional
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<PAGE>
indebtedness and engage in certain transactions. This includes
limitations on certain consolidations, mergers or transfers of all or
substantially all of its assets. The covenants in the Indenture are
limited and are not designed to protect the Noteholders in the event
of a material adverse change in the Company's financial condition or
results of operations. Further, the Notes do not have the benefit of
any sinking fund payments by the Company. See "Description of the
Notes."
Risk of Redemption
ACC at its option, is permitted at any time beginning ________,
1999 to redeem, in whole or in part, any or all of the outstanding
Notes, at principal, plus accrued interest, plus a premium (of 4% in
1999, 2% in 2000, and zero in 2001 and thereafter). There is no
assurance that an investor in the Notes will be able to reinvest the
proceeds of the redemption and receive an interest rate and rate of
return comparable to the rate of return that would have been achieved
on the Notes through the remainder of the original term of the Notes.
See "Description of the Notes -- Optional Redemption by the Company."
Limited Market for Notes
The Company has no present intention to have the Notes authorized
for quotation on the Nasdaq Stock Market National Market or any other
quotation system or listed on any securities exchange. Although the
Company has been advised by the Underwriters that they currently
intend to make a market in the Notes, the Underwriters are not
obligated to make a market or to continue to make a market if one
develops. There can be no assurance that an active trading market in
the Notes will develop or, if developed, will continue. See
"Description of the Notes."
USE OF PROCEEDS
The net proceeds to ACC from the sale of Notes offered hereby,
and after deducting the underwriting discount and estimated offering
expenses payable by ACC of $__________, are estimated to be
approximately $__________ ($__________ if the Underwriters' over-
allotment option is exercised in full). ACC intends to contribute net
proceeds to OFL-A to repay temporarily the amounts outstanding under
the financing facility evidenced by the "Subordinated Certificate and
Net Interest Margin Certificate Financing Facility Agreement" dated as
of September 15, 1995, between ACC, OFL-A and Cargill, as amended
(the "NIM Facility"), which amount is expected to be $7.4 million at
the closing of the offering. ACC used the funds borrowed under the
NIM Facility to pay credit enhancement and securitization expenses
incurred in connection with the sale of ACC's asset-backed securities
and, to a lesser extent, for working capital. The NIM Facility, which
expires in May 1998, is a floating rate facility priced at 7% above
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<PAGE>
the one-month LIBOR, reset daily. The Company intends to use the
remaining proceeds for general working capital purposes.
CAPITALIZATION
The following table sets forth capitalization of the Company as
of June 30, 1996, and as adjusted to reflect the sale by the Company
of $15,000,000 of Notes offered hereby (assuming the Underwriters'
over-allotment option is not exercised) and the application of the
estimated net proceeds therefrom as described in "Use of Proceeds."
The table should be read in conjunction with the Company's
Consolidated Financial Statements and the related notes thereto
included elsewhere in this Prospectus.
As of June 30, 1996
------------------------
As
Actual Adjusted
------ --------
(Dollars in Thousands)
Repurchase Facility, Net $23,598 $23,598
Other Borrowings 2,819 431
Notes -- 15,000
Total 26,417 39,029
Shareholders' Equity:
Preferred Stock, $.001 par value, 1,817,718
shares authorized and none issued and
outstanding -- --
Common Stock, $.001 par value, 18,000,000
shares authorized, 8,292,478 shares issued
and outstanding 8 8
Additional Paid-in Capital 19,977 19,977
Accumulated Earnings<F1> 1,237 1,237
------- -------
Total Shareholders' Equity $21,222 $21,222
------- -------
Total Capitalization $47,639 $60,251
======= =======
[FN]
<F1> Does not consider the impact of the rate differentials of the NIM
Facility and the Notes as the impact is not significant.
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SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth certain summary consolidated
financial information for the Company. The following information as
of December 31, 1995, and 1994, and for the year ended December 31,
1995, the six-month transition period ended December 31, 1994, and the
period from July 15, 1993 (inception), through June 30, 1994, has been
derived from the Company's Consolidated Financial Statements which
have been audited by KPMG Peat Marwick LLP, independent auditors,
whose report with respect thereto appears elsewhere in this
Prospectus. The information as of June 30, 1994, has been derived
from audited Consolidated Financial Statements of the Company which
are not presented herein. The information as of and for the six-month
periods ended June 30, 1996, and 1995, has been derived from the
Company's unaudited Consolidated Financial Statements. In the opinion
of management, the unaudited Consolidated Financial Statements have
been prepared on the same basis as the audited Consolidated Financial
Statements and include all normal, recurring adjustments which
management considers necessary for the fair presentation of financial
position and results of operations for those periods. The
consolidated financial data should be read in conjunction with the
Consolidated Financial Statements and related notes thereto and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus. The
results for the six-month period ended June 30, 1996, are not
necessarily indicative of results that may be expected for the year
ending December 31, 1996.
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<PAGE>
<TABLE>
SUMMARY FINANCIAL DATA
<CAPTION>
Six-Month July 15, 1993
Six Months Ended Transition (Inception)
June 30, Year Ended Period Ended Through
------------------------ Dec. 31, Dec. 31, June 30,
1996 1995 1995<F1> 1994<F1> 1994<F1>
------ ------ -------- -------- --------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Interest Income Before
Provision for Contract
Losses $ 2,034,604 $ 2,080,441 $ 3,332,354 $ 2,187,843 $ 606,177
Gain on Sale of Contracts 6,584,609 3,913,477 8,056,136 -- --
Servicing Income
and Ancillary Fees 1,811,747 500,717 1,757,257 28,237 6,653
Litigation Settlement
Income -- -- -- 325,000 --
------------ ------------ ------------ ------------ ------------
Total Revenues 10,430,960 6,494,635 13,145,747 2,541,080 612,830
Provision for Contract
Losses (348,784) (10,348) (673,802) (902,361) (592,325)
Operating Expenses (6,763,069) (4,149,601) (8,796,590) (2,630,925) (2,608,467)
------------ ------------ ------------ ------------ ------------
Income (Loss) Before Taxes 3,319,107 2,334,686 3,675,355 (992,206) (2,587,962)
Net Income (Loss) 1,925,107 2,299,686 3,466,355 (992,206) (2,587,962)
Preferred Stock
Dividends 116,818 96,827 215,419 82,621 152,673
------------ ------------ ------------ ------------ ------------
Net Income (Loss) Available
to Common Shareholders $ 1,808,289 $ 2,202,859 $ 3,250,936 $(1,074,827) $(2,740,635)
============ ============ ============ ============ ============
Primary Income per Common
Share<F2> $ 0.29 $ -- $ 0.62 $ -- $ --
Fully Diluted Income
per Common Share 0.29 -- 0.55 -- --
Weighted Average Shares
Outstanding (Primary) 6,724,938 -- 5,624,305 -- --
Weighted Average Shares
Outstanding (Fully Diluted) 6,736,596 -- 6,292,478 -- --
Pro Forma Ratio of Earnings
to Fixed Charges<F3> 2.28% -- 1.74% -- --
STATEMENT OF CASH FLOWS DATA:
Net Cash Provided By (Used
In) Operating Activities $ (4,395,063) $ 7,505,732 $ 771,386 $ (1,588,352) $ (3,397,671)
Net Cash Provided By (Used
In) Investing Activities 1,597,287 927,556 (808,470) (24,505,335) (16,135,420)
Net Cash Provided By (Used
In) Financing Activities 2,776,156 (7,964,723) 13,923 26,199,046 19,571,565
(Decrease) Increase In
Cash and Cash Equivalents (21,620) 468,565 (23,161) 105,359 38,474
</TABLE>
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<PAGE>
As of As of As of
June 30, 1996 Dec. 31, 1995 Dec. 31, 1994
------------- ------------- -------------
Balance Sheet Data:
Total Assets $ 53,942,978 $ 46,908,938 $ 42,331,518
Net Installment Contracts
Held-for-Sale 22,365,001 28,187,778 --
Held-for-Investment 220,830 509,388 38,613,239
Allowance for Contract Losses 388,200 476,808 1,181,004
Asset-Backed Securities 6,684,022 3,910,080 --
Excess Servicing Receivables 9,365,618 5,590,878 --
Repurchase Facility, Net 23,598,232 29,708,252 40,492,594
Other Borrowings 2,388,036 7,439,597 --
Total Liabilities 32,721,312 40,624,138 41,433,745
Redeemable Preferred Stock -- 6,279,049 4,358,377
Shareholders' Equity 21,221,666 5,751 (3,460,604)
Pro Forma Ratio of
Indebtedness to
Consolidated Net Worth<F4> 1.82% 7.11% --
Return (Loss) on
Average Assets (Annualized) 7.65% 6.92% (6.65)%
Return (Loss) on
Average Equity (Annualized)<F5> 32.46% 102.37% (160.91)%
[FN]
<F1> Effective as of January 1, 1995, the Company changed its fiscal year
end from June 30 to December 31. Each of the periods ended June 30,
1994, December 31, 1994, and December 31, 1995, is an audited period.
<F2> Due to the significant changes in the capital structure of the
Company, historical net income (loss) per common share prior to the
year ended December 31, 1995, is not presented.
<F3> For purposes of calculating the pro forma ratio of earnings to fixed
charges, earnings consist of income before income taxes, plus fixed
charges. Fixed charges consist of the interest on all indebtedness
and the representative interest factor of rent expense.
<F4> For purposes of calculating the pro forma ratio of indebtedness to
consolidated net worth, as adjusted for the issuance of the Notes,
indebtedness excludes secured indebtedness with respect to which the
sole recourse of the lender in the event of nonpayment or other
default is to the collateral, and consolidated net worth represents
consolidated net worth determined in accordance with generally
accepted accounting principles, less goodwill.
<F5> The calculation of return (loss) on average equity for December 31, 1995
and 1994 includes the redeemable Preferred Stock.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
From the inception of the Company on July 15, 1993, through
April 30, 1995, the primary source of revenue for the Company was net
interest income on the Contracts owned by the Company. In May 1995,
the Company initiated an asset-backed securitization program by which
the Company sells its Contracts and retains subordinate asset-backed
securities ("Subordinated Securities"), excess servicing receivables
("ESRs") and credit enhancement cash reserves. The Company completed
its first securitization, ACC Auto Grantor Trust 1995-A (the "1995-A
Transaction"), effective May 1, 1995. Since that transaction, the
Company has completed four additional securitizations, the last one
of which closed in September 1996. To the date of this Prospectus,
the Company has sold $232 million of Contracts through asset
securitizations, including $49 million of Contracts in September 1996.
Since initiation of the asset-backed securitization program, the
Company's earnings have been increasingly attributable to the gains
recognized on the sale of the Contracts. In addition, servicing
revenues are expected to comprise a greater percent of the Company's
revenues as a result of the growth of the servicing portfolio. In
contrast, interest income is expected to be a declining portion of
total revenues.
In May 1996, the Company sold in an initial public offering
2,000,000 shares of its Common Stock which generated net proceeds of
approximately $12.6 million. The proceeds were used to partially
pay-down the NIM Facility, temporarily reduce advances on the
Repurchase Facility, and for other general corporate purposes. In
addition, each share of the Company's Preferred Stock automatically
converted into 23 shares of Common Stock upon consummation of the
offering. Total cumulative dividends of $574,454 were paid to the
holders of the Preferred Stock subsequent to the conversion.
Results of Operations
The Six Months Ended June 30, 1996, Compared to the
Six Months Ended June 30, 1995
During the six-months ended June 30, 1996, income before taxes
increased to $3.3 million compared to $2.3 million for the same period
in the prior year. This increase is primarily due to an increase in
the gain on sale of Contracts of $2.7 million which is the result of
the sale of $82 million of Contracts in the six-months ended June 30,
1996, compared to $51 million during the same period in 1995.
Partially offsetting the increase in the gain on sale was an increase
in operating expenses of $2.6 million as a result of the Company's
expanded purchasing and servicing operations. The Company reported
net income of $1.9 million during the six-month period ended June 30,
1996, compared to $2.3 million for the six-month period ended June 30,
1995. The decrease in net income resulted from an increase in the
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<PAGE>
Company's effective tax rate which was 42% during the first six months
of 1996, compared to a nominal 1.5% in the same period a year earlier.
Net Interest Income. The Company generated approximately $2.0
million of net interest income during the six-month period ended June
30, 1996, compared to $2.1 million in the six-month period ended June
30, 1995. The principal source of the Company's net interest income
was the net yield on Contracts (yield on Contracts less the cost of
the Repurchase Facility) which amounted to $1.8 million during the
six-month period ended June 30, 1996, compared to $1.7 million during
the six-month period ended June 30, 1995. This small increase
resulted from a lower average balance of Contracts owned offset by
higher net yield in the six-month period ended June 30, 1996, compared
to the same period in 1995. The yield on Contracts increased to 21.6%
and the average rate on the Repurchase Facility decreased to 8.8% in
the six-month period ended June 30, 1996, compared to 19.9% and 9.5%,
respectively, in the six-month period ended June 30, 1995. During
the six-month period ended June 30, 1996, the Company earned interest
income of $785,000 on asset-backed securities and cash balances held
in restricted accounts, compared to $431,000 in the six-month period
ended June 30, 1995. The Company recognized interest expense on other
borrowings and leases of $586,000 in the six-month period ended
June 30, 1996 compared to $55,000 in the six-month period a year
earlier.
Contract Loss Provision. The Company recorded a provision for
Contract losses of $349,000 for the six-month period ended June 30,
1996, compared to $10,000 for the six-month period ended June 30,
1995. The 1995 provision included a provision for Contract losses of
$410,000 and a one-time recapture of $400,000 from the allowance for
Contract losses provided for in a prior period on Contracts sold in
conjunction with 1995-A Transaction. The allowance for Contract
losses is maintained at a level deemed by management to be adequate to
provide for losses in the held for investment portfolio.
Servicing Revenues. The Company recorded $1.8 million of
servicing and ancillary fees for the six-month period ended June 30,
1996, compared to $501,000 for the six-month period ended June 30,
1995. This substantial increase in servicing revenues arose from an
increase in the average size of the portfolio of Contracts serviced
for others to $107 million during the six-month period ended June 30,
1996, as compared to $17 million during the same period in 1995.
Until the completion of the 1995-A Transaction in May 1995, the
Company serviced only owned Contracts and recognized no servicing
revenue.
Gain on the Sale of Contracts. The Company recognized a gain of
$6.6 million on the sale of $82 million of Contracts in connection
with the 1996-A Transaction and 1996-B Transaction during the
six-month period ended June 30, 1996, compared to $3.9 million on the
sale of $51 million of Contracts in connection with the 1995-A
Transaction in the six-month period ended June 30, 1995. See Note 5
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of the Notes to Consolidated Financial Statements for the methodology
for calculating the gain.
Operating Expenses. The Company reported operating expenses of
$6.8 million during the six-month period ended June 30, 1996, compared
to $4.2 million for the six-month period ended June 30, 1995. The
increase in expenses reflected the growth in the amount of Contracts
purchased and serviced by the Company. The operating expense ratio
(annualized operating expenses as a percentage of the average
Contracts owned and serviced) improved to 9.4% for the six-month
period ended June 30, 1996 from 13.9% during the six-month period
ended June 30, 1995.
Personnel expenses for the six-month period ended June 30, 1996,
were $3.8 million, compared to $2.6 million during the six-month
period ended June 30, 1995. Personnel expenses consisted primarily of
salaries and wages, performance incentives, employee benefits and
payroll taxes. The overall increase in personnel expenses reflected
the growth of the Company's full-time employees from 98 as of June 30,
1995, to 175 as of June 30, 1996. The Company expects that its number
of full-time employees will continue to increase commensurate with the
growth of the Company's servicing portfolio.
The Company's general and administrative expenses increased to
$1.7 million for the six-month period ended June 30, 1996, from
$1.1 million for the six-month period June 30, 1995. These expenses
consisted primarily of telecommunications, travel, professional fees,
insurance expenses, credit bureau expenses and management information
systems expenses. The increase in general and administrative expenses
reflected the substantial growth in the Company.
Servicing expenses increased to $758,000 for the six-month period
ended June 30, 1996, compared to $164,000 for the six-month period
ended June 30, 1995, due to the substantial growth of the total
servicing portfolio. These expenses consisted primarily of out-of-
pocket collection and repossession expenses.
Occupancy and equipment expenses increased to $214,000 for the
six-month period ended June 30, 1996, from $170,000 for the six-month
period ended June 30, 1995. The increase in occupancy and equipment
expenses reflected the expansion of its headquarters office space and
its regional operations since June 30, 1995. The Company expects its
occupancy expenses to increase as the Company expands its headquarters
facility to accommodate growth in servicing.
Income Taxes. For the six-month period ended June 30, 1996, the
effective tax rate was 42%, compared to 1.5% for the six-month period
ended June 30, 1995. The low effective tax rate for the six-month
period ended June 30, 1995, was due to the reversal of the valuation
allowance on gross deferred tax assets during fiscal year 1995.
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<PAGE>
The Year Ended December 31, 1995, Compared to the Six-Month Transition
Period Ended December 31, 1994, Compared to the Year Ended June 30,
1994
At the inception of the Company on July 15, 1993, the Company
adopted a fiscal year end of June 30. The Company's initial fiscal
year ended June 30, 1994 (the "initial fiscal year"). On January 23,
1996, the Company elected to change its fiscal year end to
December 31, with the change effective as of January 1, 1995. The
purpose of this change was to conform the Company's fiscal year to the
fiscal year adopted by its primary competitors. As a result of the
change in fiscal year end, the transition period from July 1, 1994,
through December 31, 1994 (the "transition period") constitutes an
audited period. Neither the actual results of the transition period
nor the annualized results of the transition period are indicative of
the results that would have been achieved in a 12-month fiscal year.
The Company reported net income of $3,466,000 during the year
ended December 31, 1995 ("fiscal year 1995"), compared to a net loss
of $992,000 for the transition period and a net loss of $2,588,000 for
the initial fiscal year. The Company's purchasing and servicing
operations expanded significantly during fiscal year 1995, compared to
the transition period and the initial fiscal year. During fiscal year
1995, the Company sold $101 million of Contracts in asset-backed
securities and recognized an $8.1 million gain on sale of such
Contracts. The Company did not sell contracts during the transition
period or the initial fiscal year.
Net Interest Income. The Company generated approximately $3.3
million of net interest income during fiscal year 1995, compared to
$2.2 million in the transition period and $606,000 in the initial
fiscal year. The principal source of the Company's net interest
income was the yield on Contracts, net of the cost of the Repurchase
Facility, which amounted to $2,895,000 during fiscal year 1995
compared to $2,184,000 during the transition period and $557,000
during the initial fiscal year. In addition, during fiscal year 1995,
the Company earned interest of $927,000 on Subordinated Securities and
cash balances held in restricted accounts, and paid interest of
$490,000 on other borrowings.
During fiscal year 1995, the Company recognized interest income
of $114,000 from discount amortization, compared to $424,000 during
the transition period and $96,000 during the initial fiscal year. As
of January 1, 1995, the Company deemed all of its Contracts to be held
for sale, except Contracts which were 31 days or more delinquent.
Thereafter, the Company discontinued the amortization of the purchase
discounts, except in the case of Contract payoffs.
Contract Loss Provision. The Company recorded a provision for
Contract losses of $674,000 for fiscal year 1995, compared to $902,000
for the transition period and $592,000 for the initial fiscal year.
The allowance for Contract losses is maintained at a level deemed by
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management to be adequate to provide for losses in the held for
investment portfolio.
Servicing Revenues. The Company recorded $1,757,000 of servicing
and ancillary fees during fiscal year 1995, compared to $28,000 for
the transition period and $7,000 for the initial fiscal year. For
fiscal year 1995, the substantial increase in servicing revenues arose
from eight months of servicing on the 1995-A Transaction and the four
months of servicing on the 1995-B Transaction. Since the Company had
not yet sold any Contracts in asset-backed securities in its initial
fiscal year or the transition period, the Company's servicing revenues
were limited to ancillary fees.
Gain on the Sale of Contracts. The Company recognized a gain on
sale of $8.1 million in fiscal year 1995, representing 7.7% of the
principal amount of $51 million in Contracts sold in the 1995-A
Transaction and 8.6% of the principal amount of $50 million in
contracts in the 1995-B Transaction. There were no such transactions
in the transition period or in the initial fiscal year. See Note 5 of
Notes to Consolidated Financial Statements for the methodology used to
calculate the gain on sale.
Litigation Settlement Income. During the transition period, the
Company received a payment of $325,000 in connection with the
settlement of litigation. Management does not expect this source of
income to be recurring.
Operating Expenses. The Company reported operating expenses of
$8.8 million during fiscal year 1995, compared to $2.6 million for the
transition period and $2.6 million for the initial fiscal year. The
increase in expenses reflected the growth in the amount of Contracts
purchased and serviced by the Company. The operating expense ratio
improved to 10.72% for fiscal year 1995, from 16.35% for the
transition period and 82.55% for the initial fiscal year.
Personnel expenses for fiscal year 1995 were $5.3 million,
compared to $1.7 million for the transition period and $1.9 million
for the initial fiscal year. The increase in personnel expenses
reflected the growth of the Company's full-time employees from 64 as
of June 30, 1994, to 82 as of December 31, 1994, and 139 as of
December 31, 1995.
The Company's general and administrative expenses increased to
$2.4 million for fiscal year 1995, from $701,000 for the transition
period and $493,000 for the initial fiscal year. The increase in
general and administrative expenses reflected the substantial growth
of the Company.
Servicing expenses increased to $408,000 for fiscal year 1995, as
compared to $56,000 for the transition period. These expenses
consisted primarily of out-of-pocket collection and repossession
expenses. The increase in servicing expenses is due to the
substantial growth of the Company's total servicing portfolio from
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$43 million to $118 million as of December 31, 1994, and December 31,
1995, respectively. During the initial fiscal year, the Company
recognized no servicing expenses.
Occupancy and equipment expenses increased to $372,000 for fiscal
year 1995, from $101,000 for the transition period, and $101,000 for
the initial fiscal year. The increase in occupancy and equipment
expenses generally reflected growth in the activity of the Company.
More specifically, the Company significantly expanded its headquarters
office space and its regional operations since December 31, 1994.
Income Taxes. For the fiscal year 1995, representing the
Company's first year of earnings, the effective tax rate was 5.7%
compared to zero for the transition period and the initial fiscal
year. This low effective tax rate for fiscal year 1995 was due to the
reversal of the valuation allowance on gross deferred tax assets of
$1,358,000 during fiscal year 1995.
Credit Performance and Reserves
The table below provides the Company's historic delinquency
experience and amounts in repossession with respect to its gross
servicing portfolio, which includes Contracts owned by the Company and
Contracts sold in asset-backed securities, at the dates indicated.
All amounts and percentages are based on the full amount remaining to
be repaid on each Contract, net of any unearned finance charges.
Delinquency Experience
June 30, March 31, Dec. 31, Sept. 30, June 30,
1996 1996 1995 1995 1995
---- ---- ---- ---- ----
Gross Servicing
Portfolio (000's) $172,562 $139,969 $117,539 $100,028 $ 78,118
Period of
Delinquencies
(000's)<F1>:
31-60 Days 4,827 2,256 3,217 2,620 1,504
61-90 Days 1,347 1,010 1,171 838 363
91+ Days 662 561 608 652 309
-------- -------- -------- -------- --------
Total Delinquencies
(000's) $ 6,836 $ 3,827 $ 4,996 $ 4,110 $ 2,176
======== ======== ======== ======== ========
Total Delinquencies
as a Percentage of
Servicing Portfolio 3.96% 2.73% 4.25% 4.11% 2.79%
Amount in Repossession
(000's)<F2> $ 1,369 $ 1,130 $ 861 $ 755 $ 571
Amount in Repossession
as a Percentage of
Servicing Portfolio 0.79% 0.81% 0.73% 0.75% 0.73%
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[FN]
<F1> The Company considers a Contract delinquent when an obligor
fails to make at least 90% of the contractual payment by the
stated due date. The period of delinquency is based upon the
number of days payments are contractually past due. Contracts
not yet 31 days past due are not considered to be delinquent.
<F2> Amount in repossession represents the outstanding principal on
Contracts for which vehicles have been repossessed, but not yet
liquidated. For the quarters ended June 30, 1996, and March 31,
1996, the amounts are net of reinstated repossessions.
The table below provides the Company's historic net charge-off
experience with respect to its average gross servicing portfolio,
which includes Contracts owned by the Company and Contracts sold in
asset-backed securities, during the periods indicated. All amounts
and percentages are based on the full amount remaining to be repaid on
each Contract, net of any unearned finance charges.
Net Charge-off Experience
Three Months Ended
June 30, March 31, Dec. 31, Sept. 30, June 30,
1996 1996 1995 1995 1995
---- ---- ---- ---- ----
Average Servicing
Portfolio<F1>
Outstanding (000's) $156,266 $128,754 $108,784 $ 89,073 $ 68,057
Net Charge-Offs
(000's)<F2><F3> $ 1,329 $ 1,417 $ 1,233 $ 851 $ 455
Annualized Net
Charge-Offs as a
Percentage of Average
Servicing Portfolio 3.40% 4.40% 4.53% 3.82% 2.67%
[FN]
<F1> Average of receivables outstanding as of the beginning and
the end of the period.
<F2> Charge-off amounts exclude the effect of accrued interest,
discounts paid by the dealers and potential recoveries from
legal proceedings against borrowers.
<F3> Net charge-offs are net of recoveries and include the remaining
Contract balance at time of charge-off. In the case of repossession,
net charge-offs include the remaining Contract balance at the time
of repossession less liquidation proceeds (for disposed vehicles),
NADA wholesale value (for vehicles repossessed but not sold) or
claims receivable under the Company's vendor single interest
insurance policy. Net charge-offs do not include repossessions
that are less than 120 days delinquent and are not yet charged-off.
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The management of the Company believes that the payment practices
of Non-Prime Borrowers are partially a function of the time of year.
Since Non-Prime Borrowers typically have low disposable incomes, they
tend with more frequency to fall behind in payments on their Contracts
during the early winter months, when the holiday season generates
competing demands for their limited disposable income and when these
borrowers encounter weather-related work slow-downs. As a result, if
all other factors are equal, management expects delinquencies to be
highest in the fourth quarter. Due to the 60-120 day lag between
initial delinquency and charge-off, management expects these seasonal
factors to cause charge-offs to be highest in the fourth and first
quarters. The improvement in charge-offs and the increase in
delinquencies for the quarter ended June 30, 1996, compared to the
quarter ended March 31, 1996, follows these seasonal trends.
The Company maintains an allowance for losses on Contracts that
are held for investment. The Company determines an allowance for
Contract losses based on an estimate of the losses inherent in the
held for investment portfolio, including estimates of the frequency of
defaults for various delinquency ranges and the expected average
severity of losses on these defaults. The allowance for Contract
losses as of June 30, 1996, was $388,000 or 61% of the Contracts held
for investment. As of December 31, 1995, the allowance for Contract
losses was $477,000, or 46% of the Contracts held for investment.
In connection with the valuation of the ESRs, the Company
projects loan losses in the pool of Contracts which effectively
represent the estimated undiscounted recourse loss allowance contained
within the valuation of the ESRs. As of June 30, 1996, the estimated
undiscounted recourse loss allowance embedded in the ESRs was
$12.5 million. The combined allowance for losses on Contracts held
for investment and the recourse loss allowance embedded in the ESRs
was 7.5% of the gross Contracts serviced as of June 30, 1996, as
compared to 6.4% at December 31, 1995.
Since January 1, 1995, the Company has maintained, at its own
expense, supplemental vendor single interest ("VSI") insurance that
protects the Company's interest in the collateral against uninsured
physical damaged (including total loss) and skips. From January 1,
1995, through June 30, 1996, the Company's recoveries on its VSI
insurance reduced its net charge-offs by $846,000 and the total
premiums paid by the Company were $554,000. The Company does not
expect its current carrier to offer a renewal of the existing policy
and the Company may elect to discontinue maintaining VSI insurance
when its current policy expires on December 31, 1996. This could
result in certain modifications to the requirements for the credit
enhancement cash reserves for the asset securitizations, which could
delay the Company's receipt of cash from such reserves.
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<PAGE>
Financial Condition and Liquidity
The Company's financing needs are primarily driven by two
factors. First, the Company requires working capital to fund its
operating expenses because the net interest income earned on the
Contracts owned by the Company is restricted and not available for
general operating purposes. Second, the securitization program is
capital intensive as the Company must fund credit enhancement and
securitization expenses. The Company expects to have an ongoing need
for cash to support the securitization program, and expects this need
will exceed the amount of the proceeds of the offering. The Company
expects to borrow under the NIM Facility to fund, among other things,
its credit enhancement and securitization expenses during the next 12
months. Further, OFL-A and Receivables generate substantially all of
the cash income of the Company (from the ESRs and Subordinated
Securities), as well as all the financing capital (from the Repurchase
Facility and NIM Facility). ACC's only substantial source of cash
comes from fees generated from servicing Contracts pledged to Cargill
in conjunction with the Repurchase Facility and Contracts sold in
conjunction with asset-backed securitizations. Because ACC is
responsible for virtually all operating expenses, cash infusions from
its subsidiaries are required regularly. These interim financings are
recognized as intercompany loans and eliminated during consolidation
of the financial statements of the Company.
The Company reported total assets of $54 million as of June 30,
1996, compared to $47 million as of December 31, 1995, and $42 million
as of December 31, 1994. As of June 30, 1996, and December 31, 1995,
these assets consisted primarily of Contracts held for sale,
Subordinated Securities, ESRs and credit enhancement cash reserves.
The Company had $99,000 of cash and cash equivalents as of
June 30, 1996, compared to $121,000 as of December 31, 1995. The
Company also had $7.3 million in cash balances held in restricted bank
accounts and in credit enhancement cash reserves as of June 30, 1996,
compared to $5.1 million as of December 31, 1995. See Note 2 of Notes
to Consolidated Financial Statements.
The Company owned net Contracts of $23 million as of June 30,
1996, compared to $29 million as of December 31, 1995. During the
six-month period ended June 30, 1996, the Company acquired $79 million
of Contracts and sold $82 million of Contracts in the 1996-A
Transaction and 1996-B Transaction. The average discount and weighted
average coupon on the Contracts acquired during the six-months ended
June 30, 1996, was 5.0% and 20.7%, respectively. During fiscal year
1995, the Company acquired $99 million of Contracts and sold
$101 million of Contracts in the 1995-A Transaction and 1995-B
Transaction. During the transition period, the Company acquired
$29 million of Contracts and made no sales.
As of June 30, 1996, the Company owned $9.4 million of ESRs and
$6.7 million of Subordinated Securities, compared to $5.6 million and
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<PAGE>
$3.9 million, as of December 31, 1995. There were no such investments
as of December 31, 1994. These assets represented 29.8% and 20.3% of
the total assets of the Company as of June 30, 1996, and December 31,
1995, respectively. The value of these assets would be reduced in the
event of a material increase in the charge-off and prepayment
experience relative to the Company's estimates at the time of sale.
As of June 30, 1996, the principal amount owed under the
Repurchase Facility was $19 million and had Contract shipments in
process of $4.9 million, compared to $29 million and $626,000,
respectively, as of December 31, 1995. The Repurchase Facility
balance was collateralized by $24 million of net Contracts and
restricted cash reserves of $1.1 million as of June 30, 1996.
During the six-month period ended June 30, 1996, the Company used
net cash for operations of $4.4 million, compared to net cash provided
by operations of $7.5 million during the six-month period ended
June 30, 1995. The decrease in cash provided by operations was
primarily due to a net decrease in cash from the acquisition and sale
of Contracts held for sale of $6.7 million and a net increase in
accounts receivable of $3.4 million. The Company sold $82 million of
Contracts, acquired $79 million of Contracts and temporarily used
corporate cash to fund the acquisition of approximately $5.1 million
of Contracts in the six-month period ended June 30, 1996, compared to
the sale of $51 million of Contracts, the acquisition of $44 million
of Contracts and the outside financing of all Contract acquisitions
during the six-month period ended June 30, 1995. Additionally, the
Company deposited $2.2 million into restricted cash accounts and in
credit enhancement cash reserves during the six-month period ended
June 30, 1996 as compared to $62,000 during the same period in 1995.
The net cash provided by operations in fiscal year 1995 was
$771,000 compared to net cash used of $1.6 million for the transition
period and $3.4 million in the initial fiscal year. The net cash
provided by operations increased in fiscal year 1995, as compared to
the transition period and the initial fiscal year, was due to the
income associated with the sale and servicing of Contracts in the
1995-A Transaction and 1995-B Transaction.
During the six-month period ended June 30, 1996, and fiscal year
1995, cash generated from payments received on Contracts financed
under the Repurchase Facility was used to reduce indebtedness under,
or was deposited into restricted accounts as additional collateral
for, the Repurchase Facility. Proceeds from the sale of asset-backed
securities were also used by the Company to reduce indebtedness under
the Repurchase Facility. Following each of the asset securitization
transactions, excess servicing cash flows were deposited into
restricted accounts to build credit enhancements. Once the amounts in
these credit enhancement cash reserves reach required levels, any
additional excess servicing revenues will be distributed to the
Company. In January 1996, and May 1996, respectively, the reserves
associated with the 1995-A transaction and 1996-B transaction met
required levels and approximately $2.4 million has been released, or
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<PAGE>
approved for release, from these reserves during the six-month period
ended June 30, 1996. These proceeds were used to reduce the amount
owed by the Company under the NIM Facility. To date, the required
levels have not been met by the reserves associated with the 1996-A
transaction or the 1996-B transaction. Under normal circumstances,
the Company expects to meet required levels eight to 12 months
following the effective date of a securitization, however, there is no
assurance that this expectation will be met and the occurrence of any
triggering event would delay release of excess cash.
The net cash provided by investing activities was $1.6 million
during the six-month period ended June 30, 1996, compared to net cash
provided of $928,000 in the six-month period ended June 30, 1995.
This increase in cash provided was primarily due to collections
associated with a larger balance of Subordinated Securities, net of an
increased balance of Contracts held for investment. The cash used in
investing activities was $808,000 for fiscal year 1995, compared to
$24.5 million used for investing activities during the transition
period and $16.1 million used in investing activities during the
initial fiscal year. The decrease in cash used by investing
activities during the fiscal year 1995, compared to the transition
period, was the result of the classification of the Contracts to a
held for sale status during the quarter ended March 31, 1995. The
increase in cash used during the transition period compared to the
initial fiscal year was the result of a higher volume of Contract
purchases.
The net cash provided by financing activities was $2.8 million
for the six-month period ended June 30, 1996, compared to net cash
used of $8.0 million for the six-month period ended June 30, 1995.
The increase in cash provided by financing activities was primarily
due to net cash of $12.6 million raised in the Company's initial
public offering and $1.0 million from the issuance of Preferred Stock,
net of $7.0 million used to partially pay-down the outstanding balance
of the NIM Facility. Additionally, the Company reduced the balance
of the Repurchase Facility by $6.2 million in the six-month period
ended June 30, 1996, compared to $12.1 million in the same period a
year earlier. The net cash provided by financing activities for
fiscal year 1995 was $14,000, compared to $26.2 million for the
transition period. The overall decrease in cash provided by financing
activities was primarily due to the sale of Contracts in the 1995-A
Transaction, the 1995-B Transaction, the 1996-A Transaction and 1996-B
Transaction. In addition, the Company obtained $1.9 million from the
issuance of Preferred Stock and $7.4 million from draws under the NIM
Facility after retiring a bridge financing facility in fiscal year
1995.
The Company has financed its acquisition of Contracts primarily
through the Repurchase Facility. Cargill finances 100% of the
purchase price of the Contracts under the Repurchase Facility. The
Company has also used the proceeds of the retired bridge facility and,
subsequently, the NIM Facility to finance credit enhancement and
securitization expenses arising from the issuance of asset-backed
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<PAGE>
securities and for working capital. A breach under either the
Repurchase Facility or the NIM Facility could prohibit the Company
from obtaining financing under both of the facilities and would
require ACC to obtain an alternative source of financing or limit its
purchase of Contracts. The Company intends to use the proceeds of
this offering to temporarily reduce borrowing under the Repurchase
Facility and to repay temporarily the NIM Facility and for general
working capital purposes.
The Company's business requires substantial cash to support the
funding of credit enhancement cash reserves for its asset
securitizations, issuance costs of its asset securitizations,
operating expenses, tax payments due in recognition of gains on sales
of Contracts (for which no cash is received by the Company), debt
service and other cash requirements. These cash requirements increase
as the volume of Contracts purchased and serviced by the Company
increases. Historically, the Company has operated on a negative cash
flow basis and expects its negative cash flow to continue as the
volume of Contract purchases increases and the securitization program
grows. The Company has funded its negative operating cash flows
principally through borrowings under the NIM Facility (and the bridge
facility retired by the NIM Facility) and proceeds from the sale of
equity securities, and will use the proceeds of the Notes to fund, in
part, its negative operating cash flow. In order to execute its
business strategy, the Company is dependent upon the Repurchase
Facility (and the replacement of the Repurchase Facility in 1998), its
asset securitization program and its ongoing ability to access capital
markets to obtain long term debt and equity capital. There is no
assurance that the Company will have access to capital markets when
needed or will be able to obtain capital or financing facilities at
costs and on terms satisfactory to the Company. Factors that affect
the Company's access to capital markets or the cost of capital
include, among others, interest rates, general economic conditions
and the Company's results of operations, financial condition, business
prospects (including competitive conditions), leverage and the
performance of its asset securitizations. In addition, covenants in
the Indenture and in future debt securities and financing facilities
may significantly restrict the Company's ability to incur additional
indebtedness or issue new equity securities.
Interest Rate Risk Management
The Company's hedging plan includes the sale of futures contracts
on two-year Treasury securities. These sales are made by the Company
in amounts which generally correspond to the principal amount of
expected sales of asset-backed securities. The market value of these
futures contracts responds inversely to changes in the value of the
Contracts. Gains and losses relative to these hedging transactions
are deferred and recognized at the time of securitization as an
adjustment to the gain or loss on sale. The Company recognized net
gains on the hedging program of $20,000 during the six-month period
ended June 30, 1996, as compared to net losses of $682,000 during the
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six-month period ended June 30, 1995. As of June 30, 1996, and
December 31, 1995, the Company had unrealized losses under the hedging
program of $49,000 and $225,000, respectively.
At any point in time, the portfolio may be partially or fully
hedged. As of June 30, 1996, the Company owned $24 million of
Contracts and maintained a $20 million hedge position.
Impact of New Accounting Standards
In October 1995, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards ("SFAS")
No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123") which
defines a fair value based method of accounting for employee stock
options or similar equity instruments granted after December 31, 1994.
SFAS 123 is effective for the Company beginning during the fiscal year
ending December 31, 1996. However, SFAS 123 also allows an entity to
continue to account for these plans according to accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"), provided pro forma disclosures of net income and earnings
per share are made as if the fair value based method of accounting
defined by SFAS 123 had been applied. The Company has elected to
continue to measure compensation cost related to employee stock
purchase options using APB 25, and will provide pro forma disclosures
as required in the 1996 consolidated financial statements.
In June 1996, the FASB issued SFAS 125 which establishes
accounting for transfers and servicing of financial assets and
extinguishment of liabilities. This statement specifies when
financial assets and liabilities are to be removed from an entity's
financial statements, the accounting for servicing assets and
liabilities and the accounting for assets that can be contractually
prepaid in such a way that the holder would not recover substantially
all of its recorded investment.
Under SFAS 125, an entity recognizes only assets it controls and
liabilities it has incurred, discontinues recognition of assets only
when control has been surrendered, and discontinues recognition of
liabilities only when they have been extinguished. SFAS 125 requires
that the selling entity continue to carry retained interests,
including servicing assets, relating to assets it no longer
recognizes. Such retained interests are based on the relative fair
values of the retained interests of the subject assets at the date of
transfer. Transfers not meeting the criteria for sale recognition are
accounted for as a secured borrowing with a pledge of collateral.
Under SFAS 125, certain collateralized borrowings may result in assets
no longer being recognized if the assets are provided as collateral
and the secured party takes control of the collateral. This
determination is based upon whether: (1) the secured party is
permitted to repledge or sell the collateral and (2) the debtor does
not have the right to redeem the collateral on short notice.
Extinguishments of liabilities are recognized only when the debtor
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pays the creditor and is relieved of its obligation for the liability,
or when the debtor is legally released from being the primary obligor
under the liability, either judicially or by the creditor.
SFAS 125 requires an entity to recognize its obligation to
service financial assets that are retained in a transfer of assets in
the form of a servicing asset or liability. The servicing asset or
liability is to be amortized in proportion to, and over the period of,
net servicing income or loss. Servicing assets and liabilities are to
be assessed for impairment based on their fair value.
SFAS 125 modifies the accounting for interest-only strips or
retained interests in securitizations, such as capitalized servicing
fees receivable, that can be contractually prepaid or otherwise
settled in such a way that the holder would not recover substantially
all of its recorded investment. In this case, it requires that they
be classified as available for sale or as trading securities.
Interest-only strips and retained interests are to be recorded at
market value. Changes in market value are included in operations, if
classified as trading securities, or in shareholders' equity as
unrealized holding gains or losses, net of the related tax effect, if
classified as available for sale. Management of the Company is
currently in the process of evaluating the financial impact of this
statement on the Company.
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BUSINESS
General
The Company specializes in the indirect financing of Contracts
originated primarily by franchised Dealers for Non-Prime Borrowers.
By purchasing Contracts financing primarily late-model used vehicles
as well as some new vehicles, the Company provides an alternative
source of financing for Non-Prime Borrowers who might not be able to
qualify for traditional automobile loans or leases. The Company's
business strategy currently calls for the sale of all Contracts
through asset securitizations, rather than holding Contracts to
maturity. To this end, the Company periodically securitizes pools of
its Contracts in order to redeploy its capital, reduce interest rate
risk and realize a gain on the sale of these Contracts. The Company
believes that its competitive advantages include its national
presence, risk-based pricing, financial resources, nationwide
consistency of credit decisions and quality Dealer service.
The Company commenced business operations in July 1993. The
Company was initially capitalized primarily through equity investments
by its Founders and two funds managed by SSIM, Strome Partners, L.P.
and Strome Offshore Limited (the "SSIM Funds"); and through subsequent
equity investments by the SSIM Funds, Cargill and the Founders. In
July 1993, the Company entered into the Repurchase Facility with
Cargill through which it has financed its purchases of Contracts.
Cargill's operations consist of global proprietary trading activities
as well as other specialized financial services. Cargill was founded
in 1984 and currently manages more than $6 billion in assets. Cargill
is headquartered in Minneapolis, Minnesota, and has more than 650
employees worldwide.
Non-Prime Automobile Finance Industry
Automobile financing is one of the largest consumer finance
markets in the United States, with $356 billion in automobile-related
credit outstanding as of January 1996. In general, the automobile
finance industry can be divided into two principal segments: a prime
credit market and a non-prime credit market. Traditional automobile
finance companies, such as commercial banks, savings and loans, thrift
and loans, credit unions and captive finance companies of automobile
manufacturers, generally provide credit to the most creditworthy
borrowers, or so-called "prime borrowers."
The so-called "non-prime" credit market, in which the Company
operates, provides financing to Non-Prime Borrowers, who are those
borrowers who have had past credit problems (including bankruptcy),
have limited or no credit histories and/or have low incomes.
Historically, traditional automobile financing sources have not
serviced the non-prime market or have done so only through programs
that were not consistently available. An industry group of
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independent finance companies specializing in non-prime automobile
financing is now emerging, but the industry remains highly fragmented,
with no company having a significant share of this non-prime market.
The Company estimates that the size of the non-prime automobile
market may be as large as $70 billion in outstanding installment debt.
The Company believes that the number of Non-Prime Borrowers is
increasing due to, among other factors, declining real wages, the
greater willingness on the part of consumers to seek bankruptcy
protection, the high cost of new automobiles relative to consumer
incomes and the greater availability of late-model used vehicles
coming off short-term lease programs. The Company's program is
designed to provide financing to this market segment.
Business Strategy
The Company's primary objective is to increase its net income by
expanding market share. The Company believes it has the operational
and administrative capacity to expand its business and attain this
objective. The Company's strategies for achieving this objective,
which focus on credit quality, efficiency of operations and expansion,
are as follows:
o Enforcing nationwide consistency of underwriting standards
and controls, including verification and document review;
o Increasing the volume of Contract purchases from existing
Dealers;
o Increasing the number of active Dealers in the Company's
existing geographic markets;
o Entering selected new markets in metropolitan areas where
the Company can recruit experienced regional sales managers
or correspondents;
o Using the Company's Contract database to refine underwriting
standards, program pricing and overall credit risk
evaluation capabilities;
o Attracting and retaining qualified employees;
o Maintaining reliable funding sources;
o Approving applications and funding Contract purchases in a
timely manner; and
o Maintaining and improving the Company's delinquency
monitoring and collection processes.
Overall, the Company's strategy is to purchase Contracts with
yields, after discounts, that compensate the Company for the credit
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risk inherent in the non-prime market, and to manage this credit risk
through the Company's internal credit evaluation and its proactive
collection processes.
Purchase of Contracts
Sales and Marketing
The Company markets its financing program primarily to franchised
Dealers and to a limited number of independent used automobile
Dealers. Before purchasing Contracts from a Dealer, ACC and the
Dealer enter into an agreement ("Dealer Agreement") that provides the
Company with recourse to the Dealer in cases of Dealer fraud or a
breach of the Dealer's representations and warranties. As of June 30,
1996, the Company had 1,055 active Dealers, compared to 472 active
Dealers as of June 30, 1995. The Company considers a Dealer to be
active if the Company has purchased Contracts from the Dealer during
the previous six months.
The Company typically solicits business from Dealers through its
regional sales managers ("RSMs"), each of whom is assigned an
exclusive territory. The Company typically hires RSMs who have
experience with the purchase of non-prime Contracts and who have pre-
existing, established relationships with Dealers in a particular major
metropolitan area. As of June 30, 1996, the Company had 35 RSMs.
RSMs meet regularly with Dealers and provide information about
the Company's program, train Dealer personnel as to the Company's
program requirements and assist Dealers in identifying consumers who
qualify for ACC's program. As of June 30, 1996, the Company directly
marketed its program to Dealers in 22 states: Arizona, California,
Colorado, Delaware, Florida, Georgia, Illinois, Kentucky, Maryland,
Missouri, Nevada, New Jersey, North Carolina, Oklahoma, Oregon,
Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington
and West Virginia. The Company targets major metropolitan areas
because it believes they provide concentrations of high volume
Dealers, which can be effectively serviced by its RSMs. The Company
purchased $500,000 or more of Contracts from 15 states during the
quarter ended June 30, 1996, compared to seven states during the
quarter ended June 30, 1995.
RSMs typically target the late-model used vehicle business of
franchised Dealers. The Company believes that late-model used
vehicles represent the largest segment of the used vehicle market,
while posing less risk of default due to mechanical problems than do
older used vehicles. The Company targets franchised Dealers because
the financial requirements and customer service standards imposed on
these dealers by automobile manufacturers generally result in a high
level of financial stability and customer satisfaction. As a result,
the Company believes that, in general, Contracts from these Dealers
expose the Company to less risk of Dealer misrepresentation and lower
levels of borrower default.
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Dealer Reviews
Each month, senior management reviews Dealer performance reports
that track, by Dealer, the number of applications submitted, the
number of applications approved, the number of applications funded,
the ratio of applications funded to applications received ("efficiency
ratio"), delinquency ratios and default rates. Senior management
maintains a Dealer "watch list" to track the performance of Dealers
with low efficiency ratios, high delinquency ratios or high loss
levels relative to the overall portfolio. Based upon senior
management's subjective assessment of these factors, during the six
months ended June 30, 1996, the Company discontinued the purchase of
Contracts from approximately 30 Dealers due to unsatisfactory results.
Regional Credit Centers
The Company serves its Dealers on a regional basis through its
regional credit centers. The Company believes that these regional
centers provide a sufficient local market presence to meet the needs
of its Dealers, without incurring the reduction in operating controls
and economies of scale that can result from operating a large number
of small branches. The Company currently has regional credit centers
in Atlanta, Georgia; Dallas, Texas; Miami, Florida; Newark, Delaware;
and San Diego, California.
Application Processing and Purchase Criteria
Dealers submit credit applications to one of the Company's
regional credit centers, typically by facsimile. Upon the Company's
receipt of a credit application, a credit processor uses an automated
system to obtain credit histories, determine the wholesale value of
the vehicle and calculate the credit score of the application. The
Company's credit officers use the credit score as a guide to evaluate
applications, but the approval/declination decision is not based
solely on the credit score. Individual credit officers have limited
approval authority and the approval of a more senior credit manager is
required when the credit score or the amount financed exceeds the
individual credit officer's approval limits. The Company's regional
credit centers then notify Dealers by facsimile of a credit decision,
usually within three hours of receipt of the application.
During the six-month period ended June 30, 1996, the Company
approved approximately 17% of the applications it received and funded
approximately 59% of the applications that were approved. The Company
believes Dealers select among finance companies based upon price,
term, advance, down payment requirements, stipulations, timeliness of
the finance company's approval and the historic reliability of the
finance company's funding of purchases. The Company strives to
maintain its competitiveness by meeting Dealer needs without
compromising its credit standards.
The Non-Prime Borrowers under Contracts of the type typically
purchased by the Company generally have credit histories which include
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past bankruptcies, significant charged-off accounts and/or multiple
collection accounts. Further, other Contracts may be purchased by the
Company for borrowers with limited or no credit histories. In light
of the deficiencies in the borrowers' credit histories, the Company's
credit officers evaluate other potential offsetting factors such as
the borrowers' residence stability, employment stability, income level
relative to expenses and past performance on other automobile-related
debt. If, in the credit officers' judgment, there are enough
offsetting positive factors, such Contracts may be approved for
purchase by the Company.
To be eligible for purchase, a Contract must be fully amortizing
and provide for level payments over the term of the Contract, must
grant a first priority security interest in the financed vehicle to
OFL-A, must prohibit the sale or transfer of the financed vehicle
without the Company's consent and must allow for acceleration of the
maturity of the Contract if the vehicle is sold or transferred without
this consent. The portions of payments on Contracts allocable to
principal and interest are, for payoff and deficiency purposes,
determined in accordance with the law of the state in which the
Contract was originated.
Each Contract includes a requirement that the borrower maintain
fire, theft and collision insurance on the financed vehicle and name
the Company as a loss payee. As part of the funding process, the
Company verifies by telephone that insurance is in place on the
financed vehicle; however, as of June 30, 1996, approximately 14% of
borrowers had canceled their insurance or allowed their insurance
policies to lapse. Although the Contracts permit the Company to
force-place insurance, the Company, as a matter of policy, generally
does not force-place insurance due to the added collection and
litigation risk.
Funding Package Completion, Verification and Funding
After receiving an approval from one of the Company's regional
credit centers and compiling a set of documents the Dealers believe to
be consistent with the Company's documentation requirements, the
Dealers send these funding packages to the Company's central funding
group in San Diego. The Company generally requires that funding
packages include proof of the borrower's residency, income, insurance
and title.
The Company's funding department reviews each Contract and
verifies the application data and Contract documentation. The funding
department also confirms or reconfirms the borrower's employment and
the insurance on the vehicle. The Company believes one of the most
important verifications is a direct telephone interview of the
borrower to confirm the terms of the Contract, the source of the down
payment and the equipment on the vehicle. The Company typically will
not fund a Contract without a prior telephone interview of the
borrower. The Company believes this process reduces the risk of
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misrepresentation by Dealers and/or borrowers and provides a basis for
future borrower contact.
A funding package may be returned if it does not comply with the
terms of the initial approval or if the Company discovers facts that
were not disclosed during the approval process. The Company returns
unfunded approximately 10% of all completed funding packages for these
reasons, a portion of which are resubmitted in approvable form. As an
additional quality control check, the Company's data processing
systems perform an automated review of the Contracts and identify any
characteristics not in compliance with the Company's minimum
underwriting standards.
Post-Funding Quality Reviews
The Company uses its automated systems to continue to monitor
Contracts after funding. In addition, the Company's quality control
manager, who reports directly to the Chief Executive Officer,
completes a full quality control review of a random sample of 5% of
the newly-originated Contracts. This review focuses on compliance
with underwriting standards, the quality of the credit decision and
the completeness of Contract documentation. On a periodic basis, the
Company's quality control manager issues a report to the Company's
senior management summarizing (by credit processor and credit officer)
policy exceptions, processing errors, documentation deficiencies and
credit decisions which the quality control manager considered overly
aggressive. The bonuses of the Company's credit officers are, in
part, dependent upon results of these quality control reviews.
Risk-Based Pricing
The Company uses statistical information and its automated
Contract purchasing systems to establish different pricing programs by
geographic region, by borrower credit characteristics or, in some
cases, by Dealer; all tied to the expected economic value of each
program to the Company.
The Company maintains a database which tracks key underwriting
parameters for each Contract purchased since the formation of the
Company. This database is updated periodically to reflect the payment
performance of each Contract. The Company uses this information to
identify and aggregate a pool of Contracts that have failed to perform
as anticipated. Each Contract in this pool is then matched against a
performing Contract with the same date of purchase. By statistically
comparing the characteristics of these two pools over time, the
Company is able to refine periodically its credit evaluation processes
and believes it is better able to price each of its programs based
upon the expected risk of each program.
Correspondents
The Company has established relationships with a limited number
of third-party marketing organizations which generate Contracts for
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the Company. The Contracts generated by these correspondents meet the
same standards and undergo the same pre-funding review as Contracts
arising from ACC's regional credit centers. As of June 30, 1996, the
Company had four active correspondent relationships and less than 2%
of the Company's Contract portfolio was generated through these
correspondents. The Company believes that, either as a result of
geographic coverage or established industry contacts, certain
correspondents can generate Contracts for the Company on a more cost-
effective basis than the Company's RSMs. Thus, the Company may
purchase a greater portion of its Contracts through these
correspondents in the future.
Bulk Purchases
To date, the Company has reviewed a small number of portfolios
for purchase in bulk and has, on occasion, made unsuccessful bids on
portfolios. These portfolios have been as large as $40 million in
Contracts and the Company may bid on portfolios of comparable size or
larger in the future. As of June 30, 1996, the Company had not
consummated a bulk portfolio purchase, either because the portfolios
offered for sale did not satisfy the Company's due diligence
requirements or because the asking price exceeded the Company's
valuation of the portfolio. The Company believes bulk purchases
represent opportunities to exploit the Company's servicing expertise
and the flexibility of the Repurchase Facility. Thus, the Company
intends to continue to explore such purchase opportunities and may
purchase Contracts in bulk from other originators if the price and
quality of the portfolio are satisfactory to the Company. Purchases
in bulk involve a greater risk of misrepresentation than Contracts
purchased directly by the Company. The Company believes the risk can
be mitigated by the Company's review of the seller's underwriting
standards, the Company's due diligence concerning the seller and by
representations and warranties made by the seller.
Contract Portfolio
The following table sets forth certain data for the Contracts
purchased by the Company for the periods indicated.
Contracts Purchased During
the Three Months Ended
-------------------------------------------------
June 30, March 31, Dec. 31, Sept. 30, June 30,
1996 1996 1995 1995 1995
---- ---- ---- ---- ----
Amount of Contracts (000's) $45,253 $33,715 $26,478 $28,642 $24,673
Average Amount Financed
Under Contracts $12,290 $12,278 $12,124 $12,106 $11,989
Average Coupon on Contracts 20.72% 20.65% 20.47% 20.33% 19.93%
Average Original Term
of Contracts (months) 57 57 58 57 56
Average Discount of
Contracts, including
Acquisition Fees 5.16% 4.87% 5.14% 6.00% 6.98%
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The Company expects from time to time to make changes to its
underwriting guidelines and program requirements to respond to
competitive conditions in the non-prime automobile financing market.
These changes are likely to affect the characteristics of the
portfolio, may increase portfolio risk and/or reduce the Company's
discounts and interest margins. See "Risk Factors -- Credit Risks"
and see "Risk Factors -- Competition and Consolidation of Industry."
Concentrations of Contract Purchases
The following table sets forth information by state concerning
Contract purchases and servicing portfolio amounts outstanding for the
period and at the date indicated.
Contracts Purchased During Servicing Portfolio
the Six Months Ended Outstanding Balances as of
June 30, 1996 June 30, 1996
-------------------------- --------------------------
$000's % $000's %
------ --- ------ ---
California $21,081 26% $ 52,582 30%
Texas 14,758 19 40,330 24
Florida 10,305 13 22,679 13
Pennsylvania 5,182 7 14,751 9
All Other 27,642 35 42,220 24
------- --- -------- ---
$78,968 100% $172,562 100%
======= === ======== ===
The Company attempts to develop a broad Dealer base to avoid
dependence on a limited number of Dealers. As of June 30, 1996, no
Dealer accounted for more than 3% of the Company's Contract portfolio
and the ten Dealers from which the Company purchased the most
Contracts accounted for approximately 13% of the Contract portfolio,
in aggregate. The Company's financing program also concentrates on
purchases of Contracts for late-model used vehicles that are
originated by franchised Dealers. As of June 30, 1996, 85% of
Contracts serviced by the Company financed used vehicles and 97% were
acquired from franchised Dealers.
Servicing of Contracts
General
ACC services all of the Contracts the Company originates, whether
owned by the Company or sold in an asset-backed security. ACC's
servicing generally consists of payment and pay-off processing,
collecting, insurance tracking, title tracking, responding to borrower
inquiries, investigating delinquencies, repossessing and reselling
collateral, collection reporting and credit performance monitoring.
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Billing and Collection Process
The Company sends each borrower a monthly bill, rather than using
payment coupon books. All payments are directed to the Company's
lock-box account at a regional commercial bank. On a daily basis, the
lock-box bank retrieves and processes payments received, and then
deposits the entire amount into the lock-box account. A simultaneous
electronic data transfer of borrower payment data is made to the
Company for posting to the Company's computerized records.
The Company's collection process is based on a strategy of
closely monitoring Contracts and maintaining frequent contact with
borrowers. As part of this process, the Company makes early, frequent
contact with delinquent borrowers and attempts to educate borrowers on
how to manage monthly budgets. The Company attempts to identify the
underlying causes of a borrower's delinquency and to make an early
collection risk assessment. The Company believes that its proactive
collection process, including the early identification of payment
problems, reduces its repossession rates and loss levels.
In support of its collection efforts, the Company maintains a
collection software package with customized features designed for
high-intensity collection operations, which includes a high-
penetration autodialer. With the aid of the autodialer, the Company
initially attempts to contact any borrower whose account becomes six
days past due. See "Business -- Management Information Systems."
Although the Company emphasizes telephonic contact, the Company
also typically sends past due notices to borrowers when an account
becomes ten days past due. In some cases, the Company uses the
Western Union Quick Collection Service to collect borrowers' payments
and to reduce the incidence of bad checks. When necessary, the
Company uses a network of independent agencies to make field visits to
borrowers.
Extensions and Modifications
If a borrower has current financial difficulties, but has
previously demonstrated a positive history of payment on the Contract,
the Company will permit a payment extension of not more than two
months during the term of a Contract. Senior management of the
Company must approve each extension and less than 2% of the Contracts
in the Company's servicing portfolio have been extended as of June 30,
1996. Further, the Company typically permits only one extension over
the term of a Contract and the Company neither restructures Contracts
nor forbears any payments on Contracts.
Repossession
The Company repossesses a vehicle when resolution of a
delinquency is not likely or when the Company believes that its
collateral is at risk. The Company makes these judgments based upon
its collectors' discussions with borrowers, the ability or inability
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to locate the borrowers and/or the vehicles, the receipt of notices of
liens and other information. The Company uses independent, licensed
and bonded repossession agencies to repossess vehicles as well as the
services of an agency that traces skips (where neither the borrower
nor the vehicle can be located) to supplement its own efforts in
locating vehicles. When a vehicle is repossessed, it generally is
sold through a public auction within 60 days of the repossession. The
Company generally uses its own staff to pursue recoveries of
deficiency balances, but may also use outside collection agencies
which share in any recoveries. If the Company has reason to believe
that a Dealer violated any representations or warranties made to the
Company on a defaulted Contract, the Company may pursue its remedies
against the Dealer under the Dealer Agreement.
The Company employs the same policies for charging-off Contracts
on both Contracts it owns and on Contracts sold in asset-backed
securities. The Company expects to incur a loss whenever it
repossesses a vehicle. When the Company sells a repossessed vehicle,
it records a net loss equal to the outstanding principal balance of
the Contract, less the proceeds from the sale of the vehicle.
If an account becomes 120 days delinquent (other than accounts in
bankruptcy) and the Company has repossessed the vehicle, but not yet
received the sale proceeds, then the Company records a loss equal to
the outstanding principal balance of the Contract, less the estimated
auction value of the vehicle (which is based upon wholesale used car
values published by nationally recognized firms) and any expected
recoveries under its VSI insurance. This VSI insurance protects the
Company's interest in the collateral against uninsured physical damage
(including total loss) and skips. If an account becomes 120 days
delinquent and the Company has not repossessed the vehicle, then the
Company records a loss equal to the outstanding principal balance of
the Contract. In the event a borrower is a skip, the Company reduces
its loss by the expected recoveries under its VSI insurance. Any
recoveries received subsequent to the Contract being charged-off,
including amounts (i) from the borrower's insurance policies or
service contracts, (ii) from Dealers under a breach of the Dealer
Agreements or (iii) from deficiency balances recovered from borrowers,
are treated as loss adjustments in the period when these recoveries
are received. See "Management's Discussion and Analysis of Financial
Conditions and Results of Operations" for a discussion of VSI
insurance.
Management Information System
The Company relies on automated information management and data
processing systems to maximize productivity, minimize credit losses
and maintain data integrity. The Company operates its information
management, accounting and data processing systems on a Model 300, IBM
AS400 ("AS400").
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The Company uses its own proprietary Application Processing
System and Contract Management System, both of which operate on the
AS400. The Application Processing System tracks applications through
the approval process and provides status reports to sales and credit
administration personnel on approved and declined Contracts. This
system is also used for credit scoring and credit review. The
Application Processing System electronically transmits all data to the
Contract Management System. The Contract Management System analyzes
Contracts for compliance with the Company's underwriting standards,
tracks key underwriting characteristics for all funded Contracts,
tracks approval trends, analyzes charge-offs, monitors delinquencies
and measures pool performance.
The Company uses the Universal Loan Accounting package resident
on the AS400 for all aspects of its loan accounting and payment
processing. The Company's general ledger is maintained on the MAS-90
General Ledger package. The Company uses collection software that
operates on the AS400. The Company also has installed IBM's
ImagePlus(TM) imaging system on the AS400 to make Contract documents
available on-screen, decrease data entry costs and aid disaster
recovery. Further, the Company has installed video teleconference and
document sharing systems, which facilitate interaction between the
Company's headquarters and its regional credit centers. In its
collection efforts, the Company uses a Telerelations, Inc. high-
penetration autodialer, which is a PC-LAN-based system interfaced to
the AS400.
The Company backs up its systems on a daily basis and stores the
backup tapes offsite. The Company also has implemented a disaster
recovery plan that is intended to restore critical business operations
within 48 hours of a disaster. In an emergency, IBM will deliver
replacement parts for the AS400 within 24 hours. Additionally, the
Company has the contractual right to access SunGard's nationwide
recovery facilities, which are fully equipped and permit access to
hardware, software and telephones. The Company has made a significant
investment in its hardware and software systems and intends to
continue to upgrade these systems as its needs dictate.
Financing
Repurchase Facility
On July 15, 1993, ACC and OFL-A entered into the Repurchase
Facility with Cargill to finance the Company's purchase of Contracts
and enable the Company to accumulate Contracts in sufficient volume to
issue asset-backed securities. The interest rate on the Repurchase
Facility is the one-month LIBOR, plus 3.25%, and the facility reprices
on a daily basis. As of June 30, 1996, the rate on the Repurchase
Facility was 8.75%. The Repurchase Facility commitment period runs
until July 1998. During the commitment period, both Cargill and the
Company have the obligation (with limited exceptions) to finance under
the facility all of the Contracts that the Company purchases in
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conformance with the Company's underwriting guidelines which have been
approved by Cargill. As of June 30, 1996, the outstanding principal
amount financed under the Repurchase Facility was $19 million. See
"Risk Factors -- Dependence Upon Warehouse Financing Facility and Upon
Cargill" and see "Certain Transactions."
Under the Repurchase Facility, OFL-A retains the essential risks
of ownership, including credit and interest rate risk, and, therefore,
accounts for each transaction as a financing of Contracts. Since OFL-
A is obligated to repurchase from Cargill any Contracts that are
charged-off under the Company's charge-off policy, OFL-A bears the
credit risk of owning the Contracts. Since the interest rate of the
facility floats with LIBOR and the interest rate on each financed
Contract is fixed at the time of its origination, OFL-A retains
interest rate risk on the Contracts. Although accounted for as a
financing, for legal reasons, the Repurchase Facility is structured as
a sale of Contracts to Cargill with a right to repurchase the
Contracts. OFL-A purchases each Contract from the Dealer. OFL-A then
transfers each conforming Contract to Cargill, typically for 100% of
the Company's basis in such Contract, plus a portion of the operating
expenses associated with the Company's acquisition of the Contract.
OFL-A has the right to repurchase the Contracts (generally for sale
through an asset-backed security) for a specified amount for each
Contract, which includes outstanding principal, accrued interest and a
repurchase fee. See "Certain Transactions -- Transaction with
Cargill."
While Cargill holds title to the Contracts, all principal
payments on the Contracts are applied to reduce the principal balance
of the Repurchase Facility. All interest received on Contracts under
the Repurchase Facility is used as follows: first to pay custodian
fees; second to pay OFL-A amounts sufficient to make any payments it
owes pursuant to a tax sharing agreement with ACC; third to pay ACC a
servicing fee equal to 4% per annum of the monthly pay-off balance of
the Contracts; fourth to pay Cargill interest on the facility balance;
and fifth to pay Cargill the aggregate balance (net of recoveries) of
charged-off Contracts. All remaining interest is distributed to a
cash reserve account held by the custodian as additional collateral
for the facility. The cash reserve builds, without any cap on its
amount, until the Company disposes of the Contracts through an asset-
backed securitization, a whole-loan sale or other disposition. Upon a
disposition, OFL-A is entitled to receive the balance of the cash
reserve account. As of June 30, 1996, less than $5,000 was held in
such cash reserve account.
Cargill has the right, at its election, to terminate the
Repurchase Facility upon the occurrence of any "Termination Event" as
defined therein. The following events, among others, would constitute
Termination Events under the Repurchase Facility: (i) a change in
control or ownership of ACC, (ii) aggregate Contract purchases of less
than $75 million in any 12-month period, (iii) an average delinquency
rate during any three-month period, computed using the current pay-off
balance of Contracts collateralizing the Repurchase Facility
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("Collateral"), equal to or greater than 15%, (iv) an annualized six-
month net charge-off rate, computed using the current pay-off balance
of the Collateral, equal to or greater than 10% or (v) if any two of
the Founders are no longer employed by ACC. In addition, the
Repurchase Facility is subject to early amortization in the event that
the aggregate balance of the facility exceeds $100 million or in the
event that the Company fails to sell Contracts through an asset
securitization or whole loan sale within 18 months of the last asset
securitization or whole loan sale ("Early Amortization Event"). As of
the date of this Prospectus, the Company is in compliance with all its
covenants under the Repurchase Agreement and no Termination Event or
Early Amortization Event has occurred.
In the event that ACC or OFL-A became a debtor under the United
States Bankruptcy Code ("Bankruptcy Code"), the structure of the
Repurchase Facility could provide Cargill with greater rights than
Cargill would have had if the facility were structured as a secured
loan transaction. There is no assurance that the Company could be
reorganized in a bankruptcy without the cooperation of Cargill. The
Repurchase Facility characterizes each purchase of a Contract by
Cargill as a "securities contract" as defined in Section 741 of the
Bankruptcy Code. If this characterization were upheld, Cargill would
not be subject to the automatic stay (that normally precludes a
secured party from liquidating collateral without prior bankruptcy
court approval) and Cargill could liquidate the Contracts during an
early stage of an ACC or OFL-A bankruptcy. Under the servicing
agreement with ACC, Cargill also would have the right to remove ACC as
the servicer of the Contacts subject to the facility, thereby
terminating ACC's right to receive the 4% servicing fee (which might
then be its primary source of operating funds). Further, the
structure of the facility would make it difficult for ACC to gain
access to any of the cash generated by the Contracts subject to the
facility, even though the liquidation value of the Contracts and the
cash reserves held by Cargill exceeded OFL-A's obligations to Cargill.
In the event that Cargill became a debtor under the Bankruptcy
Code, Cargill as debtor in possession or a bankruptcy trustee could
attempt to terminate the Repurchase Facility and cutoff the Company's
right to repurchase the Contracts. The Company would contend that
Cargill was not the owner of the Contracts, but only a secured party
holding the Contracts as collateral for the facility, and that Cargill
could not terminate the repurchase right. If Cargill were successful
in terminating the facility, then the Company would have only pre-
bankruptcy, unsecured claims against Cargill for breach of contract
damages. Those damages would approximate the value of the net
interest income that would have been earned on Contracts while owned
by the Company or the gain on sale that would have been realized
through the sale of such Contracts. Such claims would likely be paid
on a pro rata basis with all other unsecured creditors of Cargill, and
there is no assurance that Cargill would have adequate funds, if any,
to pay the Company what the Company would have realized through the
repurchase of the Contracts.
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NIM Facility
In order to obtain financing to fund credit enhancement and
securitization expenses for its asset-backed securities and, to a
lesser extent, for working capital, the Company and Cargill entered
into the NIM Facility on September 15, 1995. The NIM Facility enables
the Company to obtain additional debt financing through a pledge of
OFL-A's interest in the Subordinated Securities and ESRs. OFL-A is
obligated to pay Cargill an annual commitment fee of $150,000, payable
in quarterly installments of $37,500. The NIM Facility can be prepaid
at any time upon 30 days' notice. Until the NIM Facility is retired,
borrowings under this facility can be redrawn at the time of an asset-
backed securities issuance by Receivables. The facility had an
outstanding balance of $2.4 million as of June 30, 1996, and is
subject to a maximum outstanding balance of $15 million, with the
borrowing base subject to the current valuation of the Subordinated
Securities and ESRs pledged as collateral. ACC intends to provide a
portion of the proceeds of approximately $7.4 million to OFL-A to
repay the outstanding balance of the NIM Facility and to reborrow
under the facility, as necessary. The NIM Facility expires in May
1998. As of the date of this Prospectus, the Company is in compliance
with all of its covenants under the NIM Facility and no event of
default has occurred.
The Repurchase Facility and the NIM Facility are cross-
collateralized and contain cross-default provisions so that a default
under either facility will constitute a default under both facilities
and could result in the acceleration of the payment obligations under
both facilities and a foreclosure on the collateral of both
facilities. ACC has guaranteed up to $5 million on both facilities
and has pledged all of its OFL-A stock as collateral for the
facilities. See "Certain Transactions -- Transactions With Cargill."
Hedging Program
The Company maintains an ongoing hedging program for the purpose
of mitigating the potential impact of changing interest rates on the
gain on the sale of Contracts. The hedging strategy is implemented
through the forward sale of two-year Treasury notes or futures
Contracts on two-year Treasury instruments, with Cargill acting as the
counterparty to these hedging transactions. Gains and losses on the
hedging program are recorded as an adjustment to the accounting basis
of the Contracts until such time that the Contracts are sold. At the
time of sale, the previously unrealized gains or losses are recognized
as an adjustment to the gain on the sale of the Contracts. See
"Certain Transactions."
The Company began actively using the hedging program in January
1995 and the extent to which the Contracts held by the Company are
hedged has varied and will continue to vary from time to time,
depending upon prevailing interest rates and other economic factors.
The Repurchase Facility requires the Company to maintain its hedging
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program whenever the two-year Treasury rate is greater than 7.5%. The
Company generally has maintained the hedging program even when it was
not required to do so, but may choose not to maintain the hedging
program based on management's assessment of interest rate risk and the
costs associated with the hedging program.
Securitization of Contracts
In June 1995, the Company began selling its portfolio of
Contracts to investors through the issuance of asset-backed
securities. The periodic securitization of Contracts is an integral
part of the Company's business plan. The issuance of these securities
enables the Company to redeploy capital, reduce its interest rate risk
and recognize gains from the sale of the Contracts. As of the date of
this Prospectus, the Company has completed five securitizations, the
1995-A Transaction, the 1995-B Transaction, the 1996-A Transaction,
the 1996-B Transaction and 1996-C Transaction, involving Contracts
aggregating approximately $232 million.
These asset-backed securities are treated as sales of the
Contracts and Contracts sold in a security are removed from the
consolidated balance sheet of the Company. The asset-backed
securities are generally structured as follows: ACC repurchases a pool
of Contracts from Cargill under the Repurchase Facility and
simultaneously sells the pool to Receivables, which then sells the
pool to a trust in exchange for interest-bearing certificates of an
amount equal to the aggregate principal balance of the Contracts. The
certificates are then sold to one or more institutional investors.
The certificates sold to investors have been rated "AAA" by S&P
and "Aaa" by Moody's based on the FSA guarantee. Cargill serves as
sponsor for the certificates and guarantees certain representations
and warranties made by the Company. The certificates sold to
investors have fixed pass-through interest rates which have ranged
from 5.95% to 6.90%.
The Company retains the right to service the Contracts sold to
the trust and receives monthly base servicing fees of approximately 3%
per annum on the outstanding balance of Contracts sold in asset-backed
securities. In addition, Receivables (or OFL-A if Receivables' rights
are assigned to OFL-A for pledge under the NIM Facility) is entitled
to receive excess interest arising from collections, to the extent
that these collections exceed payments to investors, contributions to
the credit enhancement cash reserves, base servicing fees and certain
other fees. Generally, certificates are sold to investors without
recourse, except that the representations and warranties provided by
Dealers to the Company are similarly provided by the Company to the
investors and to FSA, along with certain indemnities. These
indemnities are secured by a pledge of all of the stock of
Receivables. Receivables is obligated to repurchase a Contract from
the trust if the Contract fails to conform to normal representations
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and warranties relating to the collateral. Receivables bears the risk
of loss on Contracts it repurchases.
Each issuance of securities results in the recognition of a "net
gain on sale of contracts" on the Company's consolidated statement of
operations for the period in which the sale was made. The discounted
present value of the excess cash flow expected from the security is
recognized as an increase in the ESRs on the Company's consolidated
balance sheet. Because the interest rate on the Contracts is
relatively high in comparison to the pass-through interest rate paid
to investors, the net gain on sale can be significant. In calculating
this net gain on sale, the Company must estimate the future rates of
prepayments, delinquencies, defaults and loss severity as they impact
the amount and timing of the cash flows used in the gain on sale
calculation. The cash flows expected to be received by Receivables,
before expected losses, are then discounted at a market interest rate
that the Company believes an unaffiliated third-party purchaser would
require as a rate of return on such a financial instrument. Expected
losses are discounted using a rate equivalent to the risk-free rate
which is equivalent to the rate earned on securities rated AAA or
better, with a duration similar to the estimated duration for the
underlying Contracts. See Note 1(g) of Notes to Consolidated
Financial Statements.
In future periods, the Company will recognize additional revenue
if the actual performance of the Contracts is better than that
originally estimated. If the actual performance of the Contracts is
worse than originally estimated, then the Company will be required to
recognize a write-down against the ESRs, which would result in a
reduction in net income during the period in which the write-down
occurred.
Under the servicing agreement for each security, the Company is
obligated to service all Contracts sold to the trusts in accordance
with the Company's standard procedures. The servicing agreements
generally provide that the Company will bear all costs and expenses
incurred in connection with the management, administration and
collection of the Contracts serviced. The servicing agreements can be
terminated by the investor in the event of certain defaults by the
Company and under certain other circumstances.
Competition
The automobile financing business is highly competitive. The
Company competes with a growing number of publicly and privately held
national, regional and local automobile finance companies that
specialize in non-prime automobile finance, many of which compete
directly with the Company for Contracts. These competitors include
AutoFinance Group (now a subsidiary of KeyCorp), Consumer Portfolio
Services, Inc., AmeriCredit Corp., First Merchants Acceptance Corp.
and TransSouth (a subsidiary of Ford Motor Credit Corporation). The
Company does not believe that any of the finance companies
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specializing in Non-Prime Borrowers currently has more than a 2%
market share.
In addition, the Company competes, or may compete in the future,
for business with more traditional automobile financing sources, such
as commercial banks, savings and loans, thrift and loans, credit
unions and captive finance companies of automobile manufacturers such
as General Motors Acceptance Corporation, Ford Motor Credit
Corporation, Chrysler Financial Corporation, Toyota Motor Credit
Corporation, Nissan Motors Acceptance Corporation and American Honda
Finance. These traditional automobile finance companies may lower
credit standards or introduce programs for Non-Prime Borrowers to
attract more financing business or, in the case of the captive finance
companies, to stimulate new vehicle sales.
Many of the Company's competitors and potential competitors have
substantially greater financial, marketing and other resources than
the Company and may be more successful in expanding into new
geographic markets, building Dealer networks and increasing market
share through internal growth or acquisition. The larger, more
established companies have access to unsecured commercial paper,
investment-grade corporate debt and to other funding sources that may
provide them with an advantageous cost of capital relative to the
Company's cost of capital.
The captive finance companies and many of the other traditional
automobile finance companies have long-standing relationships with
Dealers that may give them a competitive advantage in establishing
dealer networks for the purchase of Contracts. Many of these
companies provide other types of financing, including inventory
financing, which is not offered by the Company.
The Company believes that the industry competes for Dealers on
the basis of the price charged to the Dealer for the purchase of
Contracts (which is a function of the discount to the face value of a
Contract and any applicable fees), advance limitations, down payment
requirements, stipulations, the timeliness of the finance company's
response to an application, the approved Contract terms, documentation
requirements for purchase of the Contract and the historic reliability
of the finance company's funding of purchases. The Company believes
that its competitive advantages include geographic diversification,
risk-based pricing, financial resources, nationwide consistency of
credit decisions and quality Dealer service.
Government Regulation
The Company has obtained and maintains licenses and registrations
required by certain states' sales finance company laws and/or laws
regulating purchases of installment or conditional sales contracts.
The Company intends to obtain and maintain any and all additional
qualifications, registrations and licenses necessary for the lawful
conduct of its business and operations.
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Numerous federal and state consumer protection laws, including
the Federal Truth-In-Lending Act, the Federal Equal Credit Opportunity
Act, the Fair Credit Reporting Act, the Federal Fair Debt Collection
Practices Act, the Federal Trade Commission Act, the Federal Reserve
Board's Regulations B and Z, and state motor vehicle retail
installment sales acts, retail installment sales acts and other
similar laws regulate the origination and collection of consumer
receivables and impact the Company's business. The relevant laws,
among other things, (A) require the Company to (i) obtain and maintain
certain licenses and qualifications, (ii) limit the finance charges,
fees and other charges on the Contracts purchased and (iii) provide
specified disclosures to consumers; (B) limit the terms of the
Contracts; (C) regulate the credit application and evaluation process;
(D) regulate certain servicing and collection practices; and (E)
regulate the repossession and sale of collateral. These laws impose
specific statutory liabilities upon creditors who fail to comply with
their provisions and may give rise to defense to payment of the
consumer's obligation. In addition, certain of the laws make the
assignee of a consumer installment contract liable for the violations
of the assignor.
The Dealer Agreement contains representations and warranties by
the Dealer that, as of the date of assignment, the Dealer has complied
with all applicable laws and regulations with respect to each
Contract. The Dealer is obligated to indemnify the Company for any
breach of any of the representations and warranties and to repurchase
any non-conforming Contracts. The Company generally verifies Dealer
compliance with usury laws, but does not audit a Dealer's full
compliance with applicable laws. There is no assurance the Company
will detect all Dealer violations or that individual Dealers will have
the financial ability and resources either to repurchase Contracts or
indemnify the Company against losses. Accordingly, failure by Dealers
to comply with applicable laws, or with their representations and
warranties, could have a material adverse effect on the Company.
The Company believes it is currently in compliance in all
material respects with applicable laws, but there can be no assurance
that the Company will be able to maintain such compliance. The
failure to comply with such laws, or a determination by a court that
the Company's interpretation of law was erroneous, could have a
material adverse effect upon the Company. Furthermore, the adoption
of additional laws, changes in the interpretation and enforcement of
current laws or the expansion of the Company's business into
jurisdictions that have adopted more stringent regulatory requirements
than those in which the Company currently conducts business, could
have a material adverse effect upon the Company.
If a borrower defaults on a Contract, the Company as the servicer
of the Contract is entitled to exercise the remedies of a secured
party under the Uniform Commercial Code ("UCC"), which typically
includes the right to repossession by self-help means unless such
means would constitute a breach of peace. The UCC and other state
laws regulate repossession and sales of collateral (A) by requiring
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reasonable notice to the borrower of (i) the date, time and place of
any public sale of the collateral, (ii) the date after which any
private sale of the collateral may be held and (iii) the borrower's
right to redeem the financed vehicle prior to any such sale; and (B)
by providing that any such sale must be conducted in a commercially
reasonable manner. Financed vehicles repossessed generally are resold
by the Company through unaffiliated wholesale automobile networks or
auctions which are attended principally by used automobile Dealers.
Under the UCC and other laws applicable in most states, a
creditor is entitled, subject to possible prohibitions or limitations,
to obtain a deficiency judgment from a borrower for any deficiency on
repossession and resale of the vehicle securing the unpaid balance of
the borrower's installment contract. Since a deficiency judgment
against a borrower would be a personal judgment for the shortfall, and
the defaulting borrower may have very little capital or few sources of
income, in many cases it is not prudent to seek a deficiency judgment
against a borrower or, if one is obtained, it may be settled at a
significant discount.
Property
The Company's headquarters are located in San Diego, California,
where it leases approximately 25,000 rentable square feet of general
office space from unaffiliated lessors. The headquarters leases
expire at various times between January 1998 and November 2002. The
base monthly rent for all San Diego properties leased by the Company
is $34,000. The Company has an option to extend most of the
headquarters lease for an additional three years upon terms
substantially similar to those of the existing lease.
The Company also leases from unaffiliated lessors four offices
that it uses as regional credit centers, located in Dallas, Texas;
Atlanta, Georgia; Miami, Florida; and Newark, Delaware. The office in
Dallas consists of approximately 1,836 rentable square feet for which
the lease expires March 1, 1998. The base monthly rent is $2,334.
The Company has an option to renew the lease for an additional three
years, on substantially similar terms. The office in Atlanta consists
of approximately 2,100 rentable square feet for which the lease
expires January 31, 1998. The monthly rent is $2,363. The office in
Miami consists of approximately 1,662 rentable square feet for which
the lease expires June 10, 2001. The base monthly rent is $2,250.
The office in Newark consists of approximately 3,414 rentable square
feet for which the lease expires April 15, 1999. The base monthly
rent is $5,050.
Employees
As of June 30, 1996, the Company had 175 full-time employees.
The Company believes that its relations with its employees are good.
The Company is not a party to any collective bargaining agreement.
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Legal Proceedings
As of the date of this Prospectus, the Company is involved as a
defendant in certain litigation and threatened litigation arising in
the normal course of business. While the outcome of the pending and
threatened litigation cannot be predicted with certainty, the
Company's management believes that all pending and threatened claims
will be resolved on terms and for amounts that will not have a
material effect on the Company's business or consolidated financial
condition.
The Company regularly initiates and intends to continue
initiating legal proceedings as a plaintiff in connection with its
routine collection activities.
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MANAGEMENT
Directors and Executive Officers
The information set forth below describes the directors and
executive officers of the Company as of September 1, 1996.
Name Age Position
- ---- --- --------
Rocco J. Fabiano 40 Chairman of the Board, Chief
Executive Officer
Gary S. Burdick 40 President
Rellen M. Stewart 43 Chief Operating Officer, Chief
Financial Officer, Treasurer
R. Frank Mercer 50 Senior Vice President, Chief
Credit Officer
Brett L. Beckerman 31 Vice President - Information
Technology
Jack R. Cohen 44 Vice President - General Counsel,
Secretary
John J. Cruz 48 Vice President - Collections
Anthony N. Fiduk 40 Vice President - Sales and
Marketing
Ernest M. Garcia 48 Vice President - Correspondent
Purchases
Michael D. LoPresti 44 Vice President - National Sales
Manager
Tammy S. Ramos 35 Vice President - Funding
Shaemus A. Garland 31 Controller
Ethan J. Falk 42 Director
Jack P. Fitzpatrick 42 Director
Jeffrey S. Lambert 33 Director
Jeffrey E. Susskind 43 Director
Rocco J. Fabiano, Chairman of the Board and Chief Executive
Officer. Mr. Fabiano is a Founder of ACC and is the Chairman of the
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Board and Chief Executive Officer, pursuant to an Employment Agreement
described below. In August 1995, Mr. Fabiano was acquitted of
criminal charges relating to a signing bonus received in 1989 from an
unrelated, regulated financial institution. Pending resolution of
this matter, from July 1993 to September 1995, Mr. Fabiano was a full-
time consultant to ACC. In 1991, Mr. Fabiano co-founded Consumer
Portfolio Services, Inc., and acted as a consultant to that company
until December 1992, at which time he began work on the formation of
ACC. Mr. Fabiano was Chairman of the Board of Far Western Bank from
May 1989 to December 1990, at which time Far Western Bank was placed
under the control of the Federal Deposit Insurance Corporation. He
also has been an Executive Vice President of Imperial Corporation of
America, Chief Operating Officer of Ameristar Mortgage Corporation and
Senior Consultant for KPMG Peat Marwick. Mr. Fabiano holds a B.S. in
Genetics and an M.S. in Protein Chemistry from Colorado State
University and an M.B.A. in Finance from Cornell University.
Gary S. Burdick, President. Mr. Burdick is a Founder of ACC and
has been the President since September 1995, pursuant to an
Employment Agreement, described below. Mr. Burdick was Chairman of
the Board and Chief Executive Officer of ACC from July 1993 to
September 1995. Mr. Burdick worked from January through June of 1993
as an advisor to the Ministry of Privatization for the Czech Republic
in Prague as part of a United States State Department Aid to
Developing Nations program. From May 1991 to December 1992,
Mr. Burdick was an independent consultant and contributed time to
Rebuild L.A. Mr. Burdick was a Director of Prudential Securities from
1989 to April 1991. He also has specialized in mortgage finance and
asset securitizations as a Vice President of Goldman Sachs and a Vice
President of Lehman Brothers. Mr. Burdick holds a B.A. in Economics
and a B.S. in Environmental Studies from the University of California
at Santa Barbara.
Rellen M. Stewart, Chief Operating Officer, Chief Financial
Officer and Treasurer. Mr. Stewart is a Founder of ACC and has been
the Chief Operating Officer and Chief Financial Officer of ACC since
July 1993, pursuant to an Employment Agreement, described below. Mr.
Stewart was also President of ACC from July 1993 to September 1995.
From 1988 to July 1993, Mr. Stewart was an Executive Vice President of
EurekaBank. From 1977 to 1988, Mr. Stewart was employed by KPMG Peat
Marwick becoming a Partner in 1984 and later becoming the firm's
National Practice Director for consulting to the mortgage industry.
He also has been a Financial Analyst for Wells Fargo Bank.
Mr. Stewart holds a B.S. in Business Administration and an M.B.A. in
Finance from the University of California at Berkeley.
R. Frank Mercer, Senior Vice President, Chief Credit Officer.
Mr. Mercer joined ACC in July 1993 as Vice President - Credit
Administration. He was promoted to Senior Vice President in May 1994
and was made Chief Credit Officer in September 1995. Mr. Mercer
worked as an independent banking consultant and mortgage broker from
December 1992 to July 1993. From 1990 to November 1992, Mr. Mercer
was a Vice President - Financial Services of Olympian Bancorp. He
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also has held positions as Vice President - Consumer Loan Operations
at Imperial Savings Association, Vice President of Landmark Thrift and
Loan, Principal of RFM Financial Services and District Manager for
Mellon Financial Services.
Brett L. Beckerman, Vice President - Information Technology.
Mr. Beckerman has been Vice President - Information Technology since
August 1993. From 1989 to August 1993, Mr. Beckerman was Data
Processing Supervisor for LSI Financial Group. He also has been an
Operations Manager of Vision, Inc., and a Senior Computer Operator for
Quintec Insulectro. Mr. Beckerman holds a B.S. in Management
Information Systems from California State University at Long Beach.
Jack R. Cohen, Vice President - General Counsel and Secretary.
Mr. Cohen joined ACC as Vice President - Corporate Counsel in August
1995. He became Secretary of the Company in September 1995 and
General Counsel in August 1996. Mr. Cohen was in private practice
from November 1994 to July 1995. Mr. Cohen was Executive Vice
President and General Counsel of Coast to Coast Marketing, Inc., from
February 1992 to October 1994. From May 1991 to January 1992,
Mr. Cohen was Vice President and Attorney for Republic Factors Corp.
He also has been Vice President and Senior Counsel of Imperial Savings
Association, Associate Attorney for Jennings, Engstrand and Henrikson
and Law Clerk for the U.S. Bankruptcy Court. Mr. Cohen holds a B.A.
in Psychology from Clark University and a J.D. from University of
San Diego School of Law.
John J. Cruz, Vice President - Collections. Mr. Cruz joined ACC
in July 1993 as Vice President - Collections. From July 1991 to July
1993, Mr. Cruz was Collections Manager for Consumer Portfolio
Services, Inc. Mr. Cruz was Vice President and Collections Manager of
Far Western Bank from 1987 to April 1991. He also has held the
position of General Manager of Pacific Coast Collections.
Anthony N. Fiduk, Vice President - Sales and Marketing.
Mr. Fiduk has been ACC's Vice President - Sales and Marketing since
December 1993. From November 1992 to November 1993, Mr. Fiduk was
Finance Manager for Huntington Beach Dodge, Inc., and from July 1992
to October 1992 was Regional Marketing Director for Bedford Financial
Corp. Mr. Fiduk was a Loan Officer with Interstate Diversified
Financial from September 1990 to June 1992. He also has held
positions as Assistant Vice President - Loan Originations for Far
Western Bank, Credit Underwriter for Lloyd Anderson Companies and
Branch Manager for Transamerica Financial Services, Inc. Mr. Fiduk
holds a B.A. in Economics from University of California at San Diego.
Ernest M. Garcia, Vice President - Correspondent Purchases.
Mr. Garcia has been with ACC since November 1993 and became Vice
President - Correspondent Purchases in February 1996. From May 1994
to February 1996, he had been the Company's Vice President - Credit
Administration. Mr. Garcia was an Assistant Vice President for First
Fidelity Thrift and Loan from 1989 to September 1993. He also has
held positions as Assistant Vice President for American Thrift and
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Loan, Branch Manager for California Thrift and Loan and Branch Manager
for Household Finance.
Michael D. LoPresti, Vice President - National Sales Manager.
Mr. LoPresti has been Vice President - National Sales Manager of ACC
since August 1993. From January 1992 to July 1993, Mr. LoPresti was
Regional Vice President for Consumer Portfolio Services, Inc.
Mr. LoPresti was New Car Manager for Long Beach Toyota from 1990 to
January 1992. He also has held positions as Vice President - Loan
Originations of Far Western Bank, General Sales Manager for Auto
Circus, Inc. and Finance Manager for Maurice J. Sopp and Son
Chevrolet.
Tammy S. Ramos, Vice President - Funding. Ms. Ramos has been
with ACC since February 1994 and became Vice President - Funding in
March 1996. From February 1994 to March 1996, she had been the
Company's Manager - Funding. From 1987 until joining the Company in
February 1994, Ms. Ramos had been an Operations Manager for First
Fidelity Thrift and Loan. She also held the position of Operations
Manager for the City of Margatte, Florida.
Shaemus A. Garland, Controller. Mr. Garland has been the
Controller of ACC since September 1995. From November 1993 to
September 1995, Mr. Garland was the Company's Accounting Manager.
Previously, Mr. Garland spent four years with the United States Marine
Corps. He holds a B.S. in Accounting from San Diego State University.
Ethan J. Falk, Director. Mr. Falk has been a Director since
February 1995. Mr. Falk has been a shareholder in the law firm of
Falk & Sharp, Professional Corporation, since 1990. Prior to founding
Falk & Sharp, Mr. Falk was a partner in the law firm of Lillick &
McHose. Mr. Falk holds a B.A. in Mathematics from the State
University of New York at Binghamton and a J.D. from the University of
Michigan Law School.
Jack P. Fitzpatrick, Director. Mr. Fitzpatrick has been a
Director since February 1995. Mr. Fitzpatrick is the Chief Financial
Officer of Multichannel Communications Sciences, Inc. and has held
this position since July 1995. From July 1993 to May 1995, Mr.
Fitzpatrick was the Chief Financial Officer of Diatek/Arkive
Information Systems. From 1989 to July 1993, Mr. Fitzpatrick was the
Chief Financial Officer and, later, Vice President of Sales for
Pacific Data Products. He also has held positions as Chief Financial
Officer of Syntro, Manager of Strategic Planning for Xerox and Senior
Consultant for KPMG Peat Marwick. Mr. Fitzpatrick holds a B.A. in
Applied Mathematics, an M.S. in Computer Science and an M.B.A. from
Harvard University.
Jeffrey S. Lambert, Director. Mr. Lambert has been a Director
since July 1993. Mr. Lambert is the Chief Financial Officer and a
Director of the general partner of Strome Susskind Investment
Management, L.P., and Strome Susskind Securities, L.P., a member firm
of the National Association of Securities Dealers, and has held both
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positions since November 1993. Mr. Lambert is also the Chief
Financial Officer and a Director of Strome Susskind & Co. and has held
this position since July 1992. From 1987 to July 1992, Mr. Lambert
was the Chief Financial Officer of Kayne Anderson & Co. He also has
held the position of Senior Accountant for Oppenheim, Appell & Dixon.
Mr. Lambert holds a B.S. in Accounting from California State
University Northridge.
Jeffrey E. Susskind, Director. Mr. Susskind has been a Director
since July 1993. Mr. Susskind is a Vice President and Director of the
general partner of Strome Susskind Investment Management, L.P., and
Strome Susskind Securities, L.P., and has held both positions since
November 1993. Mr. Susskind is also a Vice President and Director of
Strome Susskind & Co. and has held this position since February 1992.
From 1987 to July 1992, Mr. Susskind was an Analyst with Kayne
Anderson & Co. He also has held the position of Analyst with Goldman
Sachs and with Donaldson, Lufkin & Jenrette. Mr. Susskind holds a
B.S. in Economics from the University of Pennsylvania and a J.D. from
the University of Michigan Law School.
Election of Directors
All directors hold office until their respective terms expire and
the election and qualification of their successors (except in cases of
death, removal or resignation). Officers are elected at each annual
meeting of the Board of Directors and serve at its discretion.
Committees of the Board of Directors
In September 1995, the Board of Directors of the Company
established a Compensation Committee and Audit Committee. The
Compensation Committee is responsible for determining executive
compensation policies and administering the Company's compensation
plans, stock options and other stock option plans. The current
members of the Compensation Committee are Messrs. Fitzpatrick, Lambert
and Susskind. The Audit Committee is responsible for recommending
independent auditors, reviewing the audit plan, the adequacy of
internal controls, the audit report and management letter and
undertaking such other related functions as the Board of Directors may
authorize. The current members of the Audit Committee are Messrs.
Falk, Fitzpatrick and Lambert.
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Executive Compensation
The following table shows, for the most recent fiscal year, the
cash compensation paid by the Company as well as all other
compensation paid or accrued for those years to its Chief Executive
Officer and the four most highly compensated executive officers (other
than the Chief Executive Officer) (the "Named Executives") as of
December 31, 1995.
Summary Compensation Table
Long Term
Annual Compensation<F1> Compensation
Year Ended ------------------- Stock
December 31 Salary Bonus Option Shares
----------- ------ ----- -------------
Rocco J. Fabiano 1995 $217,233 $180,000 30,000
Chairman of the Board
and Chief Executive
Officer<F2>
Gary S. Burdick 1995 183,900 180,000 30,000
President<F2>
Rellen M. Stewart 1995 183,900 180,000 30,000
Chief Operating Officer,
Chief Financial Officer
and Treasurer<F2>
R. Frank Mercer 1995 101,500 18,000 35,000
Senior Vice President
and Chief Credit Officer
Michael D. LoPresti 1995 85,800 20,000 28,000
National Sales Manager
[FN]
<F1> The compensation described in this table does not include
medical insurance, retirement benefits and other benefits
received by the foregoing executive officers that are
available generally to all employees of the Company; and it
does not include certain perquisites and other personal
benefits received by the foregoing executive officers of the
Company, the value of which did not exceed the lesser of
$50,000 or 10% of the executive officer's cash compensation
in the table.
<F2> See "Management -- Directors and Executive Officers" for the
positions held, and the periods for which they were held, by
Mr. Fabiano, Mr. Burdick and Mr. Stewart during the fiscal
year ended December 31, 1995.
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Stock Option Grants Table
The following table shows certain information concerning stock
options granted during fiscal year 1995 to the Company's Named
Executives.
Fiscal Year 1995 Stock Option Grants
% of
Total Potential
Options Expir- Realizable
Options Granted to Exercise ation Value<F2>
Name Granted Employees Price<F1> Date @5% @10%
- -------------------------------------------------------------------------------
Rocco J. Fabiano 30,000 8.28% $7.25 2005 $120,000 $295,500
Gary S. Burdick 30,000 8.28% $7.25 2005 $120,000 $295,500
Rellen M. Stewart 30,000 8.28% $7.25 2005 $120,000 $295,500
R. Frank Mercer 35,000 9.66% $7.25 2005 $140,000 $344,750
Michael D. LoPresti 28,000 7.73% $7.25 2005 $112,000 $275,800
[FN]
<F1> The exercise price may be paid in cash or, at the discretion of
the Compensation Committee, by tendering shares of ACC Common
Stock, or the delivery of an irrevocable direction to a
securities broker to sell shares and deliver the sales proceeds
to the Company in payment of all or part of the exercise price,
instead of cash.
<F2> The potential realizable value is calculated pursuant to SEC
regulations by assuming the indicated annual rates of stock price
appreciation for the option term from May 1996 when the exercise
price of the option was determined. Actual realized value will
depend on the actual annual rate of stock price appreciation for
the option term.
Aggregated Stock Option Exercises and Fiscal Year-End Stock Option
Value Table
The following table sets forth certain information regarding the
number and value of specified unexercised options held by the
Company's Named Executives as of December 31, 1995:
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Number of Value of Unexercised
Unexercised Options In-The-Money Options
-------------------------- --------------------------
Exercisable Unexercisable Exercisable Unexercisable<F1>
----------- ------------- ----------- --------------
Rocco J. Fabiano - 30,000 - $52,500
Gary S. Burdick - 30,000 - 52,500
Rellen M. Stewart - 30,000 - 52,500
R. Frank Mercer - 35,000 - 61,250
Michael D. LoPresti - 28,000 - 49,000
[FN]
<F1> The value of the Unexercisable In-The-Money Options is based upon
the closing price of ACC's Common Stock on the Nasdaq National
Market on September 19, 1996. Each of the Options has an
exercise price of $7.25 per share.
Fabiano, Burdick and Stewart Employment Agreements
Messrs. Fabiano, Burdick and Stewart are employed under separate
employment agreements, each of which expires on December 31, 1998. If
the Company terminates any employment agreement without cause or if
Mr. Fabiano, Mr. Burdick or Mr. Stewart terminates his employment for
"good reason" (defined in the agreement as termination following
either an uncured breach by the Company, a reduction in duties, a
reduction in compensation or an involuntary relocation), then the
terminated employee is entitled to severance pay in an amount equal to
the greater of the remaining base salary that would have been payable
through the end of the term of the employment agreement or one-year's
base salary, plus a prorated portion of the bonus he would have
otherwise received for the year in which such termination occurred.
Each of them is paid a base annual salary of $195,000, and each of
them is entitled to an annual bonus of 50% to 100% of his base salary,
based on a straight line sliding scale, if the Company achieves Return
on Average Equity ("ROAE") between 15% and 35%. ROAE is calculated at
the end of each calendar year as the sum of the ending book value of
the Company for each of preceding five quarters divided by five. Each
of them is also entitled to insurance benefits, an automobile
allowance of $9,000 per year and participation in employee benefit
plans adopted by the Company for senior executives.
Founders' Stock
In connection with the founding of the Company, Messrs. Fabiano,
Burdick and Stewart purchased for the then current aggregate fair
market value of $22,000, $22,000 and $16,000, respectively, 506,000,
506,000 and 368,000 shares, respectively, of the Common Stock of the
Company.
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1995 Stock Option Plan
The Company's proposed 1995 stock option plan ("Employee Plan")
covers 450,000 shares of Common Stock. The Employee Plan permits the
grant of incentive stock options or non-qualified options to any
employees of the Company. Incentive stock options may not have an
exercise price of less than the fair market value of the Common Stock
on the date of grant, except options granted to holders of more than
10% of the Company's Common Stock may not have an exercise price of
less than 110% of the fair market value of the Common Stock on the
date of the grant. The Compensation Committee of the Board of
Directors administers the Employee Plan and determines the employees
who may participate, the amount and timing of each option grant and
the vesting schedule for options. Under the Employee Plan, all
options must vest at a rate of at least 25% per year and may not have
a term in excess of 10 years. At June 30, 1996, an aggregate 418,088
shares of Common Stock were subject to outstanding options. The
options will vest over four years at a rate of 25% per year and expire
10 years from the date of grant.
401(k) Plan
Effective February 1, 1994, the Company established a tax-
deferred savings plan (the "401(k) Plan") that is intended to qualify
under Section 401(a) of the Internal Revenue Code of 1986, as amended.
All full-time employees of the Company who have attained age 21 and
have completed three months of service to the Company are eligible to
participate in the 401(k) Plan. A participant may elect to contribute
a percentage of his or her compensation to the 401(k) Plan on a pre-
tax basis, subject to statutory limitations. The Company may, in its
sole discretion, make matching contributions. Each participant's
individual account is invested in selected investment alternatives as
directed by the trustees of the 401(k) Plan. The current trustees of
the 401(k) Plan are Messrs. Fabiano, Burdick and Stewart. A
participant's 401(k) contributions are fully vested and non-
forfeitable at all times. Matching contributions made by the Company
are subject to divestment provisions until a participant has been
employed by the Company for three years. With certain exceptions,
participants in the 401(k) Plan shall receive benefits in the form of
an immediate annuity for the life of the participant, with a survivor
annuity for the life of the participant's spouse. Under the same
matching program available to all employees, the Company has
contributed $1,000 per year to the individual accounts of each of the
Founders.
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Director Compensation
At present, each director who is not employed by ACC or its
affiliates is paid an annual retainer of $7,000 plus $1,500 for each
Board of Directors meeting attended by the director and $500 for each
committee meeting held on a day and at a location other than the day
and location of a regularly scheduled Board meeting. ACC reimburses
reasonable out-of-pocket expenses for all directors to attend
meetings.
Director Stock Option Plan
The Company's separate stock option plan for its non-employee
Directors (the "Director Plan") covers 100,000 shares of Common Stock.
The Director Plan provides for the award of non-qualified options,
which expire five years from the date of grant, covering 20,000 shares
of Common Stock to each non-employee director on the date of the
plan's adoption and to any future elected or appointed non-employee
director. Each of the options granted to the four current non-
employee directors is at an exercise price of $7.25 per share. One-
fourth of the option shares are exercisable and the balance vest over
three years from the date of grant at a rate of one-third per year.
Any future option grant will be at an exercise price equal to the fair
market value of the Common Stock on the date of the grant. At
June 30, 1996, 80,000 shares of Common Stock were subject to
outstanding options.
Compensation Committee Interlocks and Insider Participation
The current members of the Compensation Committee are
Messrs. Fitzpatrick, Lambert and Susskind. Mr. Susskind is a Vice
President and a Director of the corporate general partner of SSIM and
Mr. Lambert is the Chief Financial Officer and a Director of the
corporate general partner of SSIM. SSIM is the general partner of
Strome Partners, L.P. and the investment advisor of Strome Offshore
Limited.
The Company has entered into certain transactions with Strome
Partners, L.P. and Strome Offshore Limited, its two major
shareholders, and other shareholders of the Company. The Company
believes that each such transaction has been on terms no less
favorable to the Company than could have been obtained in a
transaction with an independent third party. Each of the transactions
was reviewed and approved by the Board of Directors of the Company.
Bridge Financing Facility. Pursuant to a Credit Facility
Agreement dated as of June 24, 1994, between the Company and Strome
Partners, L.P., the Company borrowed $2.5 million to fund
securitization expenses, at annual rates of 12% for the first six
months and 25% thereafter. The debt was repaid and the facility was
retired on September 15, 1995, using proceeds of the NIM Facility.
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Consulting Arrangement. SSIM provided the Company with
consulting services in connection with its initial public offering and
its retention of managing underwriters and was paid $150,000 for its
services.
Stock Sale. In January 1996, the Company established and
designated Series C Preferred Stock and sold 3,057 shares, 3,058
shares and 1,798 shares of Series C Preferred Stock to Strome Offshore
Limited, Strome Partners, L.P., and Cargill, respectively. The
purchase price for such shares was their then current aggregate fair
market value of $1,000,995. The proceeds were used to fund the
Company's operations during the first quarter of fiscal year 1996.
Limitation of Liability and Indemnification
The Company's Certificate of Incorporation (the "Certificate")
eliminates the personal liability of directors for monetary damages
for breach of fiduciary duties to the fullest extent permitted by the
Delaware General Corporation Law. The Company's Certificate and
Bylaws also provide that the Company shall indemnify its directors and
officers to the fullest extent permitted by the Delaware General
Corporation Law. The Company has entered into indemnification
agreements with each of its directors and certain of its officers
providing for such indemnification and advancement of expenses. The
Company also maintains directors' and officers' liability insurance
providing total coverage of $10 million.
CERTAIN TRANSACTIONS
Transactions with Cargill
The Company has entered into financing and related transactions
with Cargill, one of the principal stockholders of the Company.
Cargill has the right, upon request, to receive board materials and
have access to the same books and records to which a director has
access under Delaware law. The Company believes that each transaction
with Cargill has been on terms no less favorable to the Company than
could have been obtained in a transaction with an independent third
party. Each of the transactions was reviewed and approved by the
Board of Directors of the Company.
Repurchase Facility. On July 15, 1993, Cargill and the Company
entered into the Repurchase Facility, which expires on July 15, 1998.
In consideration of the Repurchase Facility, ACC granted Cargill a
warrant to acquire 35,294 shares of Series A Preferred Stock at an
exercise price between $33.17 and $63.17 based upon the consolidated
book value per share of ACC's Common Stock. ACC valued the warrant at
$128,000 on the date of grant. Cargill exercised the warrant on
September 29, 1995, at an exercise price of $33.17 per share and a
total exercise price of $1,170,702. On June 24, 1994, Cargill
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purchased 39,008 shares of Common Stock of the Company for an
aggregate of $5,936, its then current fair market value. See
"Business -- Financing" and see "Principal Stockholders."
Under the Repurchase Facility, the Company is obligated to
maintain certain servicing standards and may not alter the
underwriting standards for Contracts financed under the Repurchase
Facility without prior approval from Cargill. The Company is
obligated to pay Cargill a repurchase fee in connection with each
asset securitization or bulk sale of Contracts financed under the
Repurchase Facility. The repurchase fee is calculated as a percentage
of the Contracts sold through a securitization, with the percentage
based upon the cumulative amount of Contract sales. Until cumulative
sales equal or exceed $250 million, the Company will pay a 2%
repurchase fee. The repurchase fee is 1.5% for cumulative sales
between $250 million and $400 million, 1% for cumulative sales between
$400 million and $500 million, and 0.5% for cumulative sales in excess
of $500 million. As of the date of this Prospectus, the Company's
total sales through asset-backed securities equal $232 million. See
"Business -- Financing."
Equipment Leasing Facility. On September 23, 1994, the Company
entered into a master equipment finance lease ("Equipment Lease") with
Cargill Leasing Corporation ("Cargill Leasing"). Cargill Leasing is a
wholly-owned subsidiary of Cargill, Incorporated, and an affiliate of
Cargill. Under the Equipment Lease, Cargill Leasing finances from
time to time the Company's acquisition of MIS equipment, including the
AS400, and office equipment, subject to the parties' prior agreement
and execution of a schedule relating to the transaction. The
Equipment Lease is collateralized by the financed equipment. As of
the date of this Prospectus, the Company has entered into seven
transactions financing equipment with an aggregate original cost of
$731,000. The Company currently pays approximately $23,000 per month
to Cargill Leasing. Each transaction has a three-year term and the
last transaction currently expires in November 1998.
NIM Facility. As of September 1, 1995, Cargill, OFL-A and
Norwest Bank Minnesota, N.A., as paying agent, entered into the NIM
Facility Agreement as described in "Business -- Financing." Cargill
has the option to terminate the NIM Facility if an event of default
occurs under the NIM Facility or a termination event occurs under the
Repurchase Facility. Under the NIM Facility Agreement, the following
events, among others, constitute events of default: (i) a material
adverse change in the financial condition of OFL-A, ACC or
Receivables, (ii) failure of ACC, OFL-A or Receivables to maintain a
consolidated stockholders' equity of at least $2,000,000, $50,000, and
$50,000, respectively, if the condition is not remedied within ten
days; (iii) a change in control of ACC, OFL-A or Receivables;
(iv) either (A) any two of Rocco Fabiano, Gary Burdick or Rellen
Stewart are no longer employed by ACC, unless the successors are
acceptable to Cargill, or (B) Rocco Fabiano, Gary Burdick and Rellen
Stewart collectively own less than ten percent of ACC's Common Stock,
on a fully diluted basis; (v) except in certain circumstances, Moody's
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Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings Group
("S&P") shall have downgraded any asset-backed security of the Company
other than as result of the downgrading of FSA or other related surety
company; (vi) in connection with any structured finance transaction
(including any subsequent asset-backed security), the initial credit
enhancement levels required to achieve an overall "BBB" rating from
either Moody's or S&P is equal to or greater than nine percent of the
aggregate unpaid principal balance of the Contracts so financed; (vii)
Cargill, as sponsor, shall be obligated to make any payments in
respect of any asset securitization or any other eligible transaction
due to a default by the Company; (viii) the occurrence of more than
three collateral events with respect to Contracts financed under the
Repurchase Facility or in pool of Contracts securing any Subordinated
Certificates or excess servicing revenues pledged as collateral to
Cargill under the NIM Facility; (ix) except in certain circumstances,
the occurrence of valuation adjustments of an aggregate, cumulative,
amount of 20% or more of the Subordinated Certificates and ESRs
securing the NIM Facility; or (x) an interest rate (equal to LIBOR
plus seven percent) that is equal to or greater than 18% for 30 or
more consecutive days. A collateral event means with respect to the
Contracts securing the Repurchase Facility or with respect to any pool
of Contracts in an asset-backed security, the occurrence of any of the
following events during any monthly period: (i) a trailing three-
month annualized net charge-off rate equal to or greater than ten
percent; (ii) a trailing six-month annualized net charge-off rate
equal to or greater than nine percent, (iii) a trailing three-month
delinquency rate equal to or greater than nine percent; (iv) a
trailing six-month delinquency rate equal to or greater than eight
percent; (v) a trailing three-month annualized repossession rate equal
to or greater than 15%; or (vi) a trailing six-month annualized
repossession rate equal to or greater than 14%. See "Business --
Financing."
Sponsorship of Asset-Backed Securities. Cargill serves as a
sponsor of each of the asset securitization transactions that the
Company has completed to date. As sponsor, Cargill is obligated,
pursuant to the Pooling and Servicing Agreement for the transaction,
to repurchase Contracts from the trust under certain circumstances if
(i) any of the representations and warranties made by Receivables with
respect to the Contracts or (ii) so long as ACC is the servicer of the
pools, if certain covenants made therein by ACC; are breached in a
manner that materially and adversely affects the interests of the
trust, the certificate holders and FSA, and if Receivables or ACC has
not cured the breach or repurchased the Contracts. ACC is obligated
to indemnify Cargill against any third party claim arising out of the
events or facts giving rise to a breach of the representations,
warranties or covenants of Receivables or ACC. Cargill serves as
sponsor in consideration of the repurchase fee payable under the
Repurchase Facility.
Hedging Program. Under the Repurchase Facility, the Company is
obligated to maintain a hedging program under certain circumstances.
Cargill acts as the counterparty for the Company's hedging positions.
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In exchange for this service, the Company pays Cargill nominal
administrative fees and reimburses Cargill for its direct costs of
executing the hedging transaction. These administrative fees and
direct cost reimbursements have totaled approximately $4,430 since the
inception of the hedging program. The Company believes that it could
directly acquire hedging positions through U.S. government securities
dealers, although such dealers might require more collateral from ACC
than does Cargill.
Stock Sale. Cargill purchased 1,798 shares of Series C Preferred
Stock in January 1996 at its fair market value. See "Compensation
Committee Interlocks and Insider Participation."
Agreements with Strome Partners, Strome Offshore Limited and Others
The Company has entered into certain transactions with Strome
Partners, L.P. and Strome Offshore Limited, its two major
shareholders, and other shareholders of the Company. See
"Compensation Committee Interlocks and Insider Participation."
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PRINCIPAL STOCKHOLDERS
Common Stock
The following table sets forth the number and percentage of
shares of Common Stock owned beneficially as of September 1, 1996:
(i) by each person known to the Company to be the beneficial owner of
more than 5% of the outstanding Common Stock, (ii) each of the
Company's directors and (iii) all directors and executive officers of
the Company as a group. Except as noted below, and subject to
applicable community property and similar laws, each shareholder has
sole voting and investment power with respect to the shares shown.
Amount and
Nature of
Beneficial Percent
Name of Beneficial Owner Ownership<F1> of Class<F2>
- ------------------------ ------------- ------------
Strome Offshore Limited<F3>..........................1,637,255 19.5%
Strome Partners, L.P.<F3>............................1,613,933 19.2%
Cargill Financial Services Corporation<F4>.............957,950 11.4%
Rocco J. Fabiano<F5>...................................663,504 7.9%
Gary S. Burdick<F6>....................................631,220 7.5%
Rellen M. Stewart<F6>..................................465,116 5.5%
Ethan J. Falk<F7>.......................................10,000 *
Jack P. Fitzpatrick<F8>.................................67,615 *
Jeffrey S. Lambert<F9>..................................10,000 *
Jeffrey E. Susskind<F9>.................................10,000 *
Directors/Officers as a group........................1,882,278 22.4%
*Less than 1%.
[FN]
<F1> Includes the ownership of the named individual or member of
a group of shares of Common Stock obtainable within 60 days
upon the exercise of options.
<F2> Each beneficial owner's percentage ownership is determined
assuming that shares that may be acquired by such person or
group within 60 days following September 1, 1996, have been
acquired but that shares acquirable by other beneficial
owners within the same 60 days have not been acquired.
<F3> The address of Strome Partners, L.P., is 100 Wilshire
Boulevard, 15th Floor, Santa Monica, California 90401. The
address of Strome Offshore Limited is c/o Meespierson
(Cayman) Ltd., British Amer Centre, POB 2003, Dr. Roy's
Drive Georgetown, Grand Cayman, Cayman Islands. SSIM is the
beneficial owner of such shares. The address of SSIM is 100
Wilshire Boulevard, 15th Floor, Santa Monica, California
90401.
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<F4> The stockholder's address is 6000 Clearwater Drive,
Minnetonka, Minnesota 55343-9497.
<F5> The stockholder's address is the same address as the
Company's address. The shares in the table include 57,615
shares held in the name of the Fabiano Irrevocable Trust.
Mr. Fabiano disclaims beneficial ownership of such shares.
The balance of the shares in the table are held in the name
of the Fabiano Revocable Trust of March 28, 1991, of which
Mr. Fabiano and his wife, Joan Fabiano, are trustees.
<F6> The stockholder's address is the same address as the
Company's address.
<F7> The director holds vested options to purchase 10,000 shares
of Common Stock. The director's address is 660 South
Figueroa Street, Suite 1600, Los Angeles, California 90017-3474.
<F8> The number of shares in the table includes 57,615 shares
held in the name of the Fabiano Irrevocable Trust for which
Mr. Fitzpatrick serves as trustee. Also, the director holds
vested options to purchase 10,000 shares of Common Stock.
The director's address is 9775 Town Center Drive, Suite 110,
San Diego, California, 92121.
<F9> The director holds vested options to purchase 10,000 shares
of Common Stock. The director's address is 100 Wilshire
Boulevard, 15th Floor, Santa Monica, California 90401.
DESCRIPTION OF THE NOTES
General
The Notes are to be issued under the Indenture, a copy of which
is filed as an exhibit to the Registration Statement of which this
Prospectus is a part. The following statements, unless the context
otherwise requires, are summaries of the substance or general effect
of certain provisions of the Indenture and are qualified in their
entirety by reference to the Indenture. Unless otherwise defined
herein, capitalized terms used in this Prospectus have the same
meaning as defined in the Indenture.
The Notes will be limited in aggregate principal amount to
$17,250,000 (including Notes issuable upon exercise of the over-
allotment option) and will be issued as fully-registered Notes only in
integral multiples of $1,000. The Notes will bear interest at the
rate of ____% per annum from and after the date of delivery, and
payments of interest will be made monthly in arrears beginning
___________, 1996, to Noteholders of record as of the close of
business on the 15th day of the preceding month. At the option of the
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Company, interest may be paid by Company checks mailed to registered
Noteholders.
The Notes will mature on ____________, 2003, and payments of the
principal of the Notes will be made at the main office of the Trustee
in Minneapolis, Minnesota. The Notes are also exchangeable and
transferable at such office, without charge therefor, except for any
tax or other governmental charge connected therewith. The Notes are
direct unsecured obligations of the Company.
Noteholders' Rights to Redemption Upon Death of a Holder
In the event of the death of a Noteholder (including tenants by
the entirety, joint tenants and tenants in common) or beneficial
owner, upon the request of the personal representative or surviving
tenant of any such deceased Noteholder or beneficial owner, the
Company shall redeem the Notes subject to certain limitations. Any
such redemption shall be at a price of 100% of the principal amount
plus accrued interest to the date of redemption. Any redemption will
take place within 60 days of the Trustee's receipt of a redemption
request, unless the redemption exceeds the annual aggregate and per
Noteholder limitations.
The Company is not obligated to redeem more than $25,000 of the
Notes tendered by the personal representative or surviving joint
tenant or tenant in common of a deceased Noteholder or beneficial
owner in any Redemption Period (as defined below) ("Per Holder
Redemption Limitation"), except that in the case of Notes registered
in the name of banks, trust companies or broker-dealers who are
members of a national securities exchange of the National Association
of Securities Dealers, Inc. ("Qualified Institutions"), the Per Holder
Redemption Limitation applies to each beneficial owner of Notes held
by any Qualified Institution. Further, the Company is not obligated
to redeem more than an aggregate of $300,000 of the Notes ("Aggregate
Redemption Limitation") tendered for all deceased Noteholders within
any 12-month period commencing ____________ and ending ____________
each year ("Redemption Period").
A Note held in tenancy by the entirety, joint tenancy or tenancy
in common will be deemed to be held by a single holder, and the death
of a tenant by the entirety, joint tenant or tenant in common will be
deemed the death of a holder. The death of a person who, during his
lifetime, was entitled to substantially all of the beneficial
ownership interest of a Note, will be deemed the death of a holder,
regardless of the registered holder, if such beneficial interest can
be established to the satisfaction of the Trustee. Such beneficial
interest will be deemed to exist in typical cases of street name or
nominee ownership, ownership by a custodian for the benefit of a minor
under the Uniform Gifts to Minors Act, community property or other
joint ownership arrangements between a husband and wife (including
individual retirement accounts of Keogh plans maintained solely by or
for the decedent, or by or for the decedent and spouse) and trusts and
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<PAGE>
certain other arrangements whereby a person has substantially all of
the beneficial ownership interests in the Notes during his lifetime.
Beneficial interests shall include the power to sell, transfer or
other dispose of a Note and the right to receive the proceeds
therefrom, as well as interest and principal payable with respect
thereto.
Except in the case of Qualified Institutions and the personal
representative or surviving tenant of a deceased Noteholder, no
particular form of request for redemption or authority to request
payment is necessary. However, in order for Notes to be validly
tendered for redemption, the Trustee must have received: (1) a written
request for redemption, (2) the Notes to be redeemed and (3) in the
case of a surviving tenant or personal representative of a deceased
Noteholder or beneficial owner, appropriate evidence of death and such
other additional documents as the Trustee shall require, including,
but not limited to, inheritance or estate tax waivers and evidence of
authority of the personal representative. Any Notes tendered or any
request for redemption may be withdrawn by written request received by
the Trustee prior to the issuance of a check in payment thereof.
Requests for redemption covering Notes not paid will remain in effect
unless withdrawn. A Noteholder who has tendered a Note for redemption
shall continue to receive all monthly interest payments prior to the
date of redemption.
Notes tendered by the personal representative or surviving tenant
of a deceased Noteholder or beneficial owner shall be redeemed first
in order of the Trustee's receipt of a written request for redemption.
Notes tendered following a deceased Noteholder's death that are not
redeemed during a Redemption Period due to the limitations, will be
held for redemption in order of receipt, subject to the Per Holder
Redemption Limitation and the Aggregate Redemption Limitation, within
60 days following the commencement of the next succeeding Redemption
Period until paid, unless sooner withdrawn.
The Company's obligation to redeem Notes properly tendered for
redemption is not cumulative. Although the Company is obligated to
redeem in any Redemption Period up to $300,000 of the Notes issued
under the Indenture, it is not required to establish a sinking fund or
otherwise set aside funds for that purpose, and the Company has no
present intention of setting aside funds for redemption of Notes prior
to maturity. The Company intends to redeem Notes tendered out of its
internally-generated funds or, if necessary, short-term or other long-
term borrowing. The obligation to redeem the Notes, however, is an
unsecured obligation of the Company.
Nothing in the Indenture prohibits the Company from purchasing
any Notes on the open market. However, the Company may not use any
Notes purchased on the open market as a credit against amounts the
Company is otherwise obligated under the Indenture to purchase.
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<PAGE>
Noteholder's Rights to Redemption After Fundamental Structural Change
In the event of any Fundamental Structural Change of the Company
(as defined herein below), each Noteholder will have the right, at the
Noteholder's option and subject to the terms and conditions of the
Indenture, to require the Company to purchase for cash all or any part
(provided the principal amount of such part is $1,000 or an integral
multiple thereof) of the holder's Notes on the date that is 75 days
after the occurrence of the a Fundamental Structural Change (the
"Repurchase Date") at a price equal to 100% of the principal amount
thereof plus accrued interest to the Repurchase Date, unless on or
before the date that is 40 days after the occurrence of a Fundamental
Structural Change, the Notes have received a rating of Baa3 or better
by Moody's Investors Service, Inc., or BBB - or better by either
Standard & Poor's Corporation or Duff & Phelps Credit Rating Co.
Neither the Board of Directors of the Company nor the Trustee has the
ability to waive the Company's obligation to redeem a holder's Notes
upon request in the event of a Fundamental Structural Change.
Exercise of this redemption option by a Noteholder is irrevocable.
If within 40 days after a Fundamental Structural Change the Notes
have not received a rating as described in the immediately preceding
paragraph, the Company is obligated to provide promptly, but in any
event within three business days after expiration of such 40 days
period, notice to the Trustee, who shall promptly (and in all events
within five days after receipt of notice from the Company) notify all
Noteholders, of a Fundamental Structural Change, which notice shall
state, among other things (i) the availability of the redemption
option, (ii) the date before which a Noteholder must notify the Trustee
of such Noteholder's intention to exercise the redemption option (which
date shall be no more than three business days prior to the Repurchase
Date) and (iii) the procedure such Noteholder must follow to exercise
such right. To exercise this right, the Noteholder must deliver to
the Trustee on or before the close of business on the Repurchase Date,
written notice of such Noteholder's redemption election and the Notes
to be redeemed free of liens or encumbrances. If a Noteholder fails
to tender Notes for repurchase by the Repurchase Date, the redemption
option shall lapse.
Under the Indenture, a "Fundamental Structural Change" in ACC is
deemed to have occurred at such time as (i) ACC shall convey,
transfer or lease all or substantially all of its assets to any person
other than a direct or indirect subsidiary of ACC and other than as
part of a Contract securitization or sale entered into in the ordinary
course of business, (ii) ACC is party to any merger or consolidation
if following the transaction the stockholders of ACC immediately prior
to the transaction do not control a majority of the stock of ACC or
the surviving entity following the transaction, (iii) any person shall
purchase or otherwise acquire in one or more transactions beneficial
ownership of 50% or more of the Common Stock of ACC outstanding on the
date immediately prior to the last purchase or other acquisition, (iv)
ACC or any subsidiary shall purchase or otherwise acquire in one or
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more transactions during the 12-month period preceding the date of the
last such purchase or other acquisition an aggregate of 25% or more of
the Common Stock of ACC outstanding on the date immediately prior to
the last such purchase or acquisition or (v) ACC shall make a
distribution of cash, property or securities to holders of Common
Stock in their capacity as such (including by means of dividends,
reclassification or recapitalization) which, together with all other
distributions during such 12-month period preceding the date of such
distribution, has an aggregate fair market value in excess of an
amount equal to 25% of the fair market value of Common Stock of ACC
outstanding on the date immediately prior to such distribution.
Although there is a developing body of case law interpreting the
phrase "substantially all," there is no precise established definition
of the phrase under applicable law. Accordingly, the ability of a
Noteholder to require ACC to repurchase such Notes as a result of
conveyance, transfer or lease of less than all of the assets of ACC to
another person may be uncertain.
Except as described above with respect to a Fundamental
Structural Change, the Indenture does not contain any other provisions
that permit the Noteholders to require that the Company repurchase the
Notes in the event of a takeover or similar transaction. Moreover, a
recapitalization of the Company or a transaction entered into by the
Company with management or their affiliates would not necessarily be
included within the definition of a "Fundamental Structural Change."
Accordingly, while such definitions cover a wide variety of
arrangements which have traditionally been used to effect highly-
leveraged transactions, the Indenture does not afford the Noteholders
protection in all circumstances from highly leveraged transactions,
reorganizations, restructurings, mergers or similar transactions
involving the Company and its subsidiaries that may adversely affect
Noteholders.
The Fundamental Structural Change purchase feature of the Notes
may, in certain circumstances, make more difficult or discourage a
takeover of the Company and thus removal of incumbent management. The
Fundamental Structural Change purchase feature, however, is not the
result of management's knowledge of any specific effort to obtain
control of the Company or part of a plan by management to adopt a
series of anti-takeover provisions. Rather, the terms of the
Fundamental Structural Change purchase feature is a result of
negotiations between the Company and the Underwriters.
To the extent that the right of redemption by a Noteholder in the
event of a Fundamental Structural Change constitutes a tender offer
under Section 14(e) of the Exchange Act and the rule thereunder, the
Company will comply with all applicable tender offer rules.
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<PAGE>
Optional Redemption by the Company
Beginning ___________, 1999, the Company shall have the option to
redeem, upon not less than 30 and not more than 60 days' notice, all
or any portion of the Notes.
If the Company redeems the Notes prior to maturity, it will pay
in cash a redemption price equal to the following percentages of the
principal amount of the Notes redeemed, plus interest to the date
fixed for redemption:
If Reduced During Redemption
the 12 Months Beginning Price
----------------------- -----------
__________, 1999.................................... 104%
__________, 2000.................................... 102%
__________, 2001 and thereafter..................... 100%
If less than all the Notes are redeemed, the particular Notes to
be redeemed will be selected by lot by the Trustee. Notice of
redemption will be mailed to each holder of Notes to be redeemed at
the address appearing in the registry books for the Notes maintained
by the Company.
Events of Default; Notice and Waiver
The following will be Events of Default: (a) default in the
payment of principal, or premium, if any, when due; (b) default in the
payment of any interest when due, continued for five days; (c) default
in the making of any redemption payment when due, continued for five
days; (d) default in the performance of any other covenant or warranty
of the Company, continued for 30 days (or, in certain circumstances,
60 days) after written notice to the Company by the Trustee or to the
Company and the Trustee by the holders of 10% in principal amount of
the outstanding Notes; (e) any default by the Company under the terms
of any instrument under which Indebtedness (as defined in the
Indenture) in an aggregate principal amount in excess of $1,000,000
outstanding is accelerated and such acceleration shall not be
rescinded or annulled within 10 days after written notice to the
Company from the Trustee or to the Trustee from the holders of not
less than 25% in principal amount of the outstanding Notes; or
(f) certain events of bankruptcy, insolvency or reorganization. If
any Event of Default shall occur and be continuing, the Trustee or the
holders of not less than 25% in principal amount of outstanding Notes
may declare the Notes immediately due and payable.
The Company is required to deliver annually to the Trustee an
officers' certificate as to the absence or existence of any default in
the performance of any covenant contained in the Indenture during the
preceding year.
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<PAGE>
The Indenture provides that the Trustee will, within 60 days
after obtaining notice of the occurrence of a default, give the
Noteholders (and to certain other persons and former Noteholders)
notice of all uncured defaults known to it; but, except in the case of
a default in the payment of principal, or premium, if any, or interest
on any of the Notes, the Trustee shall be protected in withholding
such notice if it in good faith determines that the withholding of
such notice is in the interest of such Noteholders.
The holders of a majority of the aggregate principal amount of
outstanding Notes may on behalf of the holders of all Notes waive
certain past defaults, not including a default in payment of
principal, or premium, if any, or interest on any Note.
Restrictions on Additional Indebtedness
The Company is prohibited by the Indenture from permitting its
total Indebtedness (as defined in the Indenture), which excludes
secured indebtedness with respect to which the sole recourse of the
lender in the event of nonpayment or other default is to the
collateral and includes the Notes, to exceed six (6) times the
Company's Consolidated Net Worth (as defined in the Indenture) at any
time. At June 30, 1996, assuming that the Notes were then
outstanding, such Indebtedness was approximately 1.22 times the
Company's Consolidated Net Worth.
Liquidity Maintenance Requirement
The Company is not required to establish a sinking fund for the
purpose of redeeming the Notes. ACC has covenanted, however, to
maintain on or before ten days prior to and until the next Interest
Payment Date (as defined in the Indenture), Permitted Investments (as
defined in the Indenture) the fair market values of which are equal to
six times the aggregate amount of interest payable with respect to the
Notes for the next succeeding Interest Payment Date. The Company is
required to deliver to the Trustee, within 30 days after the end of
each fiscal quarter, an officer's certificate as to compliance with
this covenant.
Limitations on Dividends and Other Payments
ACC has agreed pursuant to the Indenture that it will not make,
pay or declare any of the following (each a "Restricted Payment"):
(i) any dividend or other distribution of property or assets other
than dividends paid solely in the Company's stock, (ii) a repayment or
defeasance of any indebtedness which is subordinate to the Notes
(except, so long as the Notes are not in default, scheduled payments
of principal and interest thereon), (iii) an exchange of equity for
debt issued subsequent to __________, 1996, or (iv) any stock
repurchase, unless such Restricted Payment is less than the sum of
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<PAGE>
(A) $1,000,000 plus (B) 45% of the Company's or its subsidiaries'
cumulative net income earned during the period commencing __________,
1996, and ending on the date of such Restricted Payment, plus (C) the
cumulative cash and non-cash proceeds to the Company of all public or
private equity offerings during such time. In addition, the Company
is prohibited by the Indenture from making any Restricted Payment if,
by so doing, the Company will be in violation of any other provisions
of the Indenture or any other loan agreement or indenture to which the
Company is a party.
Merger, Consolidation or Sale of Assets; Successor Corporation
The Company has covenanted that it will not merge or consolidate
with, or sell all or substantially all of its assets to, any person,
firm or corporation unless the Company is the continuing corporation
in such transaction and, immediately thereafter, is not in default
under the Indenture or, if it is not the continuing corporation, the
successor corporation expressly assumes the Company's obligations
under the Indenture and, immediately after such transaction, the
successor corporation is not in default under the Indenture. Any
successor corporation shall succeed to and be substituted for the
Company as if such successor corporation has been named as the Company
in the Indenture.
Modification of the Indenture
Modifications and amendments of the Indenture may be made by the
Company and the Trustee with the consent of the holders of 66-2/3% in
principal amount of or interest on any Note or change the stated
maturity of the principal or the interest payment dates or change the
currency in which the Notes are to be paid, without the consent of
each holder of any Note affected thereby, or (ii) reduce the
percentage of holders of Notes necessary to modify or alter the
Indenture, without the consent of the holders of all Notes then
outstanding.
The Trustee
Norwest Bank Minnesota, National Association, is the Trustee
under the Indenture. Its mailing address is Norwest Center, Sixth
Street and Marquette Avenue, Minneapolis, Minnesota 55479-0069.
The Indenture contains a provision pursuant to which the Company
will indemnify the Trustee against any and all losses or liabilities
incurred by the Trustee in connection with its execution and
performance of the Indenture; provided, however, that such
indemnification will not extend to losses resulting from a breach of
the Trustee's duties under the Indenture. The Indenture provides that
the holders of a majority in principal amount of the outstanding Notes
may direct the time, method and place of conducting any proceeding for
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any remedy available to the Trustee or exercising any trust or power
conferred upon the Trustee, subject to certain limitations set forth
in the Indenture. The Trustee is not required to take any action at
the direction of the Noteholders unless such Noteholders have provided
the Trustee with a reasonable indemnity.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
Set forth below is a discussion of certain federal income tax
consequences to persons purchasing the Notes. The discussion relates
only to the material federal income tax consequences regarding the
initial purchase, ownership and disposition of the Notes and is not
necessarily inclusive of all matters which may be of interest to an
individual investor. The discussion below likewise does not address
the tax treatment to certain holders subject to special treatment
under the federal income tax laws (for example, dealers in securities,
banks, life insurance companies, tax-exempt organizations and foreign
taxpayers), nor does it discuss any aspect of state, local or foreign
taxation. Each prospective investor should consult with his or her
own tax advisor concerning the particular tax consequences to the
investor of the purchase, ownership and disposition of the Notes,
including the applicability of any state, local or foreign tax laws to
which the investor may be subject.
Payments of Interest
Interest on the Notes generally will be taxable to the holder as
ordinary income at the time it is paid or accrued in accordance with
the holder's method of accounting for tax purposes.
Sale or Redemption
Generally, any sale or redemption of Notes will result in taxable
gain or loss equal to the difference between the amount of cash or the
property received and the holder's adjusted tax basis in the Note.
Generally, a holder's adjusted tax basis in a Note will equal the cost
of the Note to such holder. Any gain or loss upon a sale or other
disposition of a Note (including the redemption of a Note or the
payment of its principal amount at maturity), will be recognized as
capital gain or loss, which will be long term if the Note has been
held by the holder for more than one year.
Backup Withholding
The Company is required to comply with information reporting
requirements imposed by the Code and will be required to withhold 31%
of the interest paid to holders of the Notes who are subject to the
backup withholding rules and who (i) fail to provide to the Company
their correct taxpayer identification number under penalty of perjury,
(ii) furnish an incorrect taxpayer identification number, (iii) fail
to report properly interest or dividends or (iv) under certain
circumstances, fail to provide the Company with a certified statement,
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<PAGE>
under penalty of perjury, that the holder is not subject to backup
withholding. Any amounts so withheld from payments on the Notes will
be paid over to the Internal Revenue Service and will be allowed as a
credit against the holder's federal income tax. Certain holders
(including, among others, corporations and foreign individuals who
comply with certain certification requirements) are not subject to
backup withholding. Holders should consult their tax advisors as to
their qualification for exemption from backup withholding and the
procedure for obtaining such exemption.
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<PAGE>
UNDERWRITING
Pursuant to the Underwriting Agreement, and subject to the terms
and conditions thereof, the Underwriters named below, have agreed,
severally, to purchase from ACC the principal amount of Notes set
forth below opposite their respective names.
Name of Underwriter Amount of Notes
------------------- ---------------
McDonald & Company Securities, Inc. $_________
J.C. Bradford & Co. _________
Total $15,000,000
===========
In the Underwriting Agreement, the Underwriters have agreed,
subject to the terms and conditions therein set forth, to purchase all
the principal amount of Notes offered hereby if any of such Notes are
purchased.
ACC has granted to the Underwriters and option, exercisable
during the 30 days after the date of the Prospectus, to purchase up to
$2,250,000 in aggregate principal amount of the Notes at the Price to
Public set forth on the cover page hereof less an underwriting
discount. The Underwriters may exercise such option to purchase
solely for the purpose of covering over-allotments, if any, incurred
in the sale of Notes offered hereby.
The Underwriters have advised ACC that they propose initially to
offer the Notes to the public at the public offering price set forth
on the cover page of this Prospectus and to certain dealers at such a
price less a concession not in excess of ___% of the principal amount.
The Underwriters may allow and such dealers may reallow a concession
not in excess of ___% of the principal amount to certain other
dealers. After the initial public offering of the Notes, the public
offering price and such concessions may be changed.
The offering of the Notes is made for delivery when, as and if
accepted by the Underwriters and subject to prior sale and to
withdrawal, cancellation or modification of the offer without notice.
The Underwriters reserve the right to reject any order for the
purchase of Notes.
There is no public market for the Notes and ACC does not intend
to apply for listing of the Notes on the Nasdaq National Market or any
securities exchange. ACC has been advised by the Underwriters that,
following the public offering of the Notes, the Underwriters presently
intend to make a market in the Notes; however, the Underwriters are
not obligated to do so, and any market-making activity with respect to
the Notes may be discontinued at any time without notice. There can
be no assurances as to the liquidity of the public market for the
Notes or that an active public market for the Notes will develop. If
an active market does not develop, the market price and liquidity of
the Notes may be adversely affected.
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The Underwriting Agreement provides that ACC will indemnify the
Underwriters, and controlling persons, if any, against certain
liabilities, including liabilities under the Securities Act of 1933,
as amended, or to contribute to payments which the Underwriters or any
such controlling persons may be required to make in respect thereof.
LEGAL MATTERS
The legality of the Notes offered hereby is being passed upon for
ACC by Sheppard, Mullin, Richter & Hampton LLP, whose address is
501 West Broadway, Suite 1900, San Diego, California 92101. Certain
legal matters in connection with the sale of the Notes offered hereby
will be passed upon for the Underwriters by Manatt, Phelps & Phillips
LLP whose address is 11355 West Olympic Boulevard, Los Angeles,
California 90064.
EXPERTS
The Consolidated Financial Statements of the Company as of
December 31, 1995, and December 31, 1994, and for the year ended
December 31, 1995, and for the six-month transition period ended
December 31, 1994, and for the period from July 15, 1993 (the
inception of the Company) through June 30, 1994, have been included
herein and in the Registration Statement in reliance upon the report
of KPMG Peat Marwick LLP, independent auditors, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting
and auditing.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission
(the "SEC") a registration statement (as amended, the "Registration
Statement") under the Securities Act with respect to the securities
offered by this Prospectus. This Prospectus, which constitutes a part
of the Registration Statement, does not contain all the information
set forth in the Registration Statement. For further information with
respect to the Company and the securities offered hereby, reference is
made to the Registration Statement and to the exhibits and schedules
filed therewith. Statements contained in this Prospectus as to the
contents of any contract or other document referred to are not
necessarily complete, and in each instance reference is made to the
copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all
respects by such reference.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 and in accordance therewith files
reports and other information with the SEC. A copy of the
Registration Statement, including exhibits and schedules thereto,
filed by the Company with the SEC, as well as reports and other
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information filed by the Company with the SEC may be inspected without
charge (and copies of the material contained therein may be obtained
from the SEC upon payment of applicable copying charges) at the public
reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the following regional addresses:
Los Angeles Regional Office, 3600 Wilshire Boulevard, Suite 100-J,
Los Angeles, California 90010; Chicago Regional Office, 500 West
Madison, Suite 1400, Chicago, Illinois 60661; and New York Regional
Office, 7 World Trade Center, Suite 1300, New York, New York 10048.
The SEC maintains a Web site on the Internet that contains reports,
proxy and information statements and other information regarding
registrants that file electronically with the SEC at
http://www.sec.gov.
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INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
ACC Consumer Finance Corporation:
We have audited the accompanying consolidated balance sheets of ACC
Consumer Finance Corporation and subsidiaries (the Company) as of
December 31, 1995 and 1994, and the related consolidated statements of
operations, shareholders' equity and cash flows for the year ended
December 31, 1995, the six-month transition period ended December 31,
1994 and the period from July 15, 1993 (inception) through June 30,
1994. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
accounting standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of ACC Consumer Finance Corporation and subsidiaries as of
December 31, 1995 and 1994, and the results of their operations and
their cash flows for the year ended December 31,1 995, the six-month
transition period ended December 31, 1994 and the period from July 15,
1993 (inception) through June 30, 1994, in conformity with generally
accepted accounting principles.
[handwritten] KPMG Peat Marwick LLP
San Diego, California
April 15, 1996
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<PAGE>
ACC Consumer Finance Corporation
Consolidated Balance Sheets
June 30, Dec. 31 Dec. 31,
1996 1995 1994
---- ---- ----
(unaudited)
Assets
Cash and Cash Equivalents $ 99,052 $ 120,672 $ 143,833
Restricted Cash (2) 1,113,743 1,032,683 1,918,915
Credit Enhancement Cash Reserve (2) 6,143,649 4,052,524 --
Installment Contracts Held-for-
Sale, net (3) 22,365,001 28,187,778 --
Installment Contracts Held-for-
Investment, net (4) 220,830 509,388 38,613,239
Interest Receivable 294,575 386,673 579,569
Asset-Backed Securities (5 and 10) 6,684,022 3,910,080 --
Excess Servicing Receivables (6
and 10) 9,365,618 5,590,878 --
Accounts Receivable (7) 6,017,260 1,423,112 115,769
Fixed Assets, Net (8) 951,855 842,016 490,220
Repossessed Vehicles 139,475 211,619 196,225
Prepaid Expenses 227,582 427,456 73,404
Other Assets 320,316 214,059 200,344
----------- ----------- -----------
Total Assets $53,942,978 $46,908,938 $42,331,518
=========== =========== ===========
Liabilities and Shareholders'
Equity
Repurchase Facility, Net (9) $23,598,232 $29,708,252 $40,492,594
Amount Due to Bank 2,613,270 1,537,290 289,932
Other Borrowings (10) 2,388,036 7,439,597 --
Tax Liability (14) 1,208,723 123,909 --
Lease Liability (13) 431,454 519,486 205,919
Accounts Payable and Accrued
Liabilities 2,481,597 1,295,604 445,300
----------- ----------- -----------
Total Liabilities 32,721,312 40,624,138 41,433,745
See accompanying notes to consolidated financial statements.
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ACC Consumer Finance Corporation
Consolidated Balance Sheets
(continued)
June 30, Dec. 31, Dec. 31,
1996 1995 1994
---- ---- ----
(unaudited)
Redeemable Preferred Stock, $.001
par value, Authorized 182,282
Shares (1 and 11)
Series A - 0, 162,831 and 127,537
shares issued and outstanding at
June 30, 1996 (unaudited),
December 31, 1995, and December 31,
1994, respectively, and
Series B - 0, 11,538 and 0 shares
issued and outstanding at June 30,
1996 (unaudited), December 31, 1995,
and December 31, 1994, respectively,
and
Series C - 0 shares issued and
outstanding at June 30, 1996
(unaudited), December 31, 1995,
and December 31, 1994 -- 6,279,049 4,358,377
Shareholders' Equity (1)
Preferred Stock, $.001 par value,
1,817,718 shares authorized and
none issued and outstanding(11) -- -- --
Common Stock, $.001 par value,
Authorized 18,000,000, 8,292,478
and 2,099,992 shares Issued and
Outstanding as of June 30, 1996
(unaudited), December 31, 1995,
and December 31, 1994, respectively 8,292 2,100 2,100
Additional Paid-in Capital 19,976,534 117,464 117,464
Accumulated Earnings (Deficit) 1,236,840 (113,813) (3,580,168)
----------- ----------- -----------
Total Shareholders' Equity 21,221,666 5,751 (3,460,604)
Commitments and Contingencies(13)
Total Liabilities and
Shareholders' Equity $53,942,978 $46,908,938 $42,331,518
=========== =========== ===========
See accompanying notes to consolidated financial statements.
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<TABLE>
ACC Consumer Finance Corporation
Consolidated Statements of Operations
<CAPTION>
Six-Month July 15,
Transition 1993
Six Months Ended Year Period (Inception)
June 30, Ended Ended Through
-------------------- Dec. 31, Dec. 31, June 30,
1996 1995 1995 1994 1994
------ ------ ------ ------ ------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest Income $ 4,284,417 $ 4,533,063 $ 7,531,690 $ 3,496,763 $ 811,516
Interest Expense (2,249,813) (2,452,622) (4,199,336) (1,308,920) (205,339)
------------ ------------ ------------ ------------ ------------
Net Interest Income 2,034,604 2,080,441 3,332,354 2,187,843 606,177
CONTRACT LOSSES
Provision for
Contract Losses (4) (348,784) (10,348) (673,802) (902,361) (592,325)
------------ ------------ ------------ ------------ ------------
Net Interest Income
after Provision for
Contract Losses 1,685,820 2,070,093 2,658,552 1,285,482 13,852
OTHER INCOME
Servicing and Ancillary
Fees (3 and 6) 1,811,747 500,717 1,757,257 28,237 6,653
Litigation Settlement Income -- -- -- 325,000 --
Gain on Sale of
Contracts (3 and 6) 6,584,609 3,913,477 8,056,136 -- --
------------ ------------ ------------ ------------ ------------
Total Other Income 8,396,356 4,414,194 9,813,393 353,237 6,653
------------ ------------ ------------ ------------ ------------
Total Income 10,082,176 6,484,287 12,471,945 1,638,719 20,505
EXPENSES
Personnel 3,841,537 2,590,344 5,280,161 1,691,212 1,924,588
General and Administrative 1,740,961 1,104,474 2,449,217 701,366 493,056
Servicing 758,109 164,234 408,231 56,299 --
Occupancy and Equipment 213,504 170,067 372,254 101,333 100,779
Depreciation and Amortization 208,958 120,482 286,727 80,715 90,044
------------ ------------ ------------ ------------ ------------
Total Expenses 6,763,069 4,149,601 8,796,590 2,630,925 2,608,467
Income (Loss)
Before Taxes 3,319,107 2,334,686 3,675,355 (992,206) (2,587,962)
Income Tax Expense (14) 1,394,000 35,000 209,000 -- --
------------ ------------ ------------ ------------ ------------
Net Income (Loss) $ 1,925,107 $ 2,299,686 $ 3,466,355 $ (992,206) $ (2,587,962)
------------ ------------ ------------ ------------ ------------
Preferred Stock Dividends (11) $ 116,818 $ 96,827 $ 215,419 $ 82,621 $ 152,673
------------ ------------ ------------ ------------ ------------
Net Income (Loss) Available
to Common Shareholders $ 1,808,289 $ 2,202,859 $ 3,250,936 $ (1,074,827) $ (2,740,635)
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
-89-
Page 92 of 606
<PAGE>
ACC Consumer Finance Corporation
Consolidated Statements of Operations
(continued)
Six Months Ended Year Ended
June 30, 1996 December 31, 1995
---------------- -----------------
Net Income per Common Share and
Common Share Equivalent (1)
Primary $ .29 $ .62
Fully Diluted .29 .55
Shares Used in Computing Net Income
Per Common Share and Common Share
Equivalent (1)
Primary 6,724,938 5,624,305
Fully Diluted 6,736,596 6,292,478
See accompanying notes to consolidated financial statements.
-90-
Page 93 of 606
<PAGE>
<TABLE>
ACC Consumer Finance Corporation
Consolidated Statements of Shareholders' Equity
<CAPTION>
Retained Notes
Common Stock Additional Earnings Receivable
----------------------- Paid-In (Accumulated from
Shares Amount Capital Deficit) Shareholders Total
------ ------ ------- -------- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
Balance at July 15, 1993
(Inception) -- $ -- $ -- $ -- $ -- $ --
Issuance of
Common Stock 2,099,992 2,100 117,464 -- -- 119,564
Net Loss -- -- -- (2,587,962) -- (2,587,962)
Issuance of Notes
Receivable from
Shareholders -- -- -- -- (33,628) (33,628)
------------ ------------ ------------ ------------ ------------ ------------
Balance at June 30, 1994 2,099,992 2,100 117,464 (2,587,962) (33,628) (2,502,026)
Payment on Notes
Receivable from
Shareholders -- -- -- -- 33,628 33,628
Net Loss -- -- -- (992,206) -- (992,206)
------------ ------------ ------------ ------------ ------------ ------------
Balance at
December 31, 1994 2,099,992 2,100 117,464 (3,580,168) -- (3,460,604)
Net Income -- -- -- 3,466,355 -- 3,466,355
------------ ------------ ------------ ------------ ------------ ------------
Balance at
December 31, 1995 2,099,992 2,100 117,464 (113,813) -- 5,751
Net Income (unaudited) -- -- -- 1,925,107 -- 1,925,107
Issuance of Common
Stock, net (unaudited) 2,000,000 2,000 12,583,218 -- -- 12,585,218
Payment of Preferred
Stock Dividends
(unaudited) -- -- -- (574,454) -- (574,454)
Noncash Conversion
of Preferred Stock to
Common Stock (unaudited) 4,192,486 4,192 7,275,852 -- -- 7,280,044
------------ ------------ ------------ ------------ ------------ ------------
Balance at June 30,
1996 (unaudited) 8,292,478 $ 8,292 $ 19,976,534 $ 1,236,840 $ -- $ 21,221,666
============ ============ ============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
-91-
Page 94 of 606
<PAGE>
<TABLE>
ACC Consumer Finance Corporation
Consolidated Statements of Cash Flows
<CAPTION>
Six-Month July 15,
Transition 1993
Six Months Ended Year Period (Inception)
June 30, Ended Ended Through
-------------------- Dec. 31, Dec. 31, June 30,
1996 1995 1995 1994 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (Loss) $ 1,925,107 $ 2,299,686 $ 3,466,355 $ (992,206) $ (2,587,962)
Adjustments To Reconcile
net income (loss) to
Net Cash Used In
Operating Activities:
Gain on Sale of Contracts (6,584,609) (3,913,477) (8,056,136) -- --
Amortization and Depreciation 2,543,055 648,917 2,382,908 (289,041) 26,548
Provision for Contract Losses 348,784 10,348 673,802 902,361 592,325
Provision for Deferred
Income Taxes, net -- -- 174,000 -- --
Net Cash Deposited into
Restricted Accounts (2,172,185) (62,349) (3,166,292) (1,245,225) (673,689)
Net Deferred Fees -- -- 572,709 (88,685) (77,363)
Changes in operating assets:
Net Decrease in
Contracts Held for Sale 1,697,296 8,439,015 5,435,470 -- --
Interest Receivable 92,098 223,308 192,896 (402,845) (176,723)
Accounts Receivable (4,594,148) (1,200,829) (1,307,343) 357,338 (473,107)
Other Assets (121,142) (27,005) (43,144) (52,468) (177,177)
Prepaid Expenses 199,874 (23,295) (354,052) (60,234) (13,170)
Changes in operating liabilities:
Net Increase in Accounts Payable
and Other Liabilities 2,270,807 1,111,413 800,213 282,653 162,647
------------ ------------ ------------ ------------ ------------
Net Cash (Used In)
Provided By
Operating Activities (4,395,063) 7,505,732 771,386 (1,588,352) (3,397,671)
CASH FLOWS FROM INVESTING ACTIVITIES
Net Decrease (Increase) in
Contracts Held for Investment (437,392) 261,876 (2,617,056) (24,524,573) (15,375,670)
Principal Paydowns of
Asset-Backed Securities 1,018,190 108,113 710,880 -- --
Fees for Arranging
Repurchase Facility -- -- -- -- (360,000)
Proceeds from Liquidation
of Repossessed Vehicles 1,320,400 949,600 1,706,800 244,000 --
Purchases of Fixed Assets (303,911) (392,033) (609,094) (224,762) (399,750)
------------ ------------ ------------ ------------ ------------
Net Cash Provided By (Used
In) Investing Activities $ 1,597,287 $ 927,556 $ (808,470) $(24,505,335) $(16,135,420)
See accompanying notes to consolidated financial statements.
-92-
Page 95 of 606
<PAGE>
ACC Consumer Finance Corporation
Consolidated Statements of Cash Flows
(continued)
<CAPTION>
Six-Month July 15,
Transition 1993
Six Months Ended Year Period (Inception)
June 30, Ended Ended Through
-------------------- Dec. 31, Dec. 31, June 30,
1996 1995 1995 1994 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES
Net Decrease (Increase)
in Repurchase Facility $ (6,171,990) $(12,113,093) $(10,907,271) $ 25,476,742 15,448,076
Increase in
Other Borrowings 1,948,439 2,520,548 9,939,597 -- --
Repayment of
Other Borrowings (7,000,000) -- (2,500,000) -- --
Net Decrease (Increase)
in Capital Leases (88,032) 299,526 313,567 205,919 --
Increase in Amount
Due to Bank 1,075,980 -- 1,247,358 232,780 57,153
Payment on Notes Receivable
from Shareholders -- -- -- 33,628 --
Net Proceeds from Issuance
of Common Stock 12,585,218 -- -- -- 85,936
Net Proceeds from Issuance
of Preferred Stock 1,000,995 749,970 1,920,672 249,977 3,980,400
Payment of Preferred
Stock Dividends (574,454) -- -- -- --
------------ ------------ ------------ ------------ ------------
Net Cash Provided By (Used
In) Financing Activities 2,776,156 (7,964,723) 13,923 26,199,046 19,571,565
(Decrease) Increase In Cash
and Cash Equivalents (21,620) 468,565 (23,161) 105,359 38,474
Cash and Cash Equivalents
At Beginning of Period 120,672 143,833 143,833 38,474 --
------------ ------------ ------------ ------------ ------------
Cash and Cash Equivalents
At End of Period $ 99,052 $ 612,398 $ 120,672 $ 143,833 $ 38,474
============ ============ ============ ============ ============
See accompanying notes to consolidated financial statements.
-93-
Page 96 of 606
<PAGE>
ACC Consumer Finance Corporation
Consolidated Statements of Cash Flows
(continued)
<CAPTION>
Six-Month July 15,
Transition 1993
Six Months Ended Year Period (Inception)
June 30, Ended Ended Through
-------------------- Dec. 31, Dec. 31, June 30,
1996 1995 1995 1994 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE
Interest Paid $ 2,087,757 $ 2,457,550 $ 4,073,177 $ 1,038,586 $ 97,839
Taxes Paid $ 309,186 $ -- $ -- $ -- $ --
Non-Cash Conversion of
Preferred Stock $ 7,280,044 $ -- $ -- $ -- $ --
Non-Cash Issuance of Common
Stock in Exchange for
Notes Receivable $ -- $ -- $ -- $ -- $ 33,628
Non-Cash Issuance of Warrants
in Conjunction with
Repurchase Facility $ -- $ -- $ -- $ -- $ 128,000
Transfers of Contracts
Held for Sale to
Asset-Backed Securities $ 3,631,000 $ 2,266,572 $ 4,484,392 $ -- $ --
Transfers of Contracts
Held for Investment to
Repossessed Vehicles $ 1,248,256 $ 1,007,872 $ 1,722,194 $ 440,225 $ --
Transfers of Contracts
Held for Investment to
Contracts Held for Sale $ 986,196 $ 38,862,581 $ 40,907,980 $ -- $ --
Transfers of Contracts
Held for Sale to Contracts
Held for Investment $ 1,857,286 $ 1,937,922 $ 2,762,889 $ -- $ --
See accompanying notes to consolidated financial statements.
</TABLE>
-94-
Page 97 of 606
<PAGE>
ACC CONSUMER FINANCE CORPORATION
Notes to Consolidated Financial Statements
For the Six Months Ended June 30, 1996 and 1995 (unaudited), and
the Year Ended December 31, 1995,
and the Six-Month Transition Period Ended December 31, 1994
and the Period from July 15, 1993 (inception) to June 30, 1994
--------------------------------------------------------------
(1) Nature of Business and Summary of Significant Accounting Policies
(a) Nature of Business
ACC Consumer Finance Corporation (ACC) initiated business in
California on July 15, 1993, under the name American Credit
Corporation. The Company changed its name in October 1995 and was
reincorporated in Delaware in November 1995. ACC and its wholly-owned
subsidiaries, OFL-A Receivables Corp. (OFL-A) and ACC Receivables
Corp. (Receivables) (collectively, the Company), engage primarily in
the business of purchasing, selling and servicing automobile
installment sale contracts (the Contracts). The Company specializes
in Contracts with borrowers who generally would not qualify for
traditional financing, such as that provided by commercial banks or
captive finance companies of automobile manufacturers. The Company
purchases Contracts directly from automobile dealers, with the intent
to resell them to institutional investors in the form of securities
backed by the Contracts.
The Company conducts its activities through three legal entities. The
Company's operations (underwriting and Contract servicing) are
conducted by ACC. The Contracts are purchased and held until sale by
OFL-A, which is a special purpose financing corporation. Upon sale,
the Contracts are concurrently transferred from OFL-A to ACC, from ACC
to Receivables, and then from Receivables to a trust. Receivables
retains subordinated asset-backed securities (Subordinated Securities)
and excess servicing receivables (ESRs) in the securitization
transactions.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of ACC,
OFL-A and Receivables. All significant intercompany accounts and
transactions have been eliminated in consolidation.
(c) Change in Year End
On January 23, 1996, the Board of Directors approved a change in year
end for federal and state taxes and for financial statement reporting
from June 30 to December 31. The change for financial reporting
purposes was effective as of January 1, 1995.
-95-
Page 98 of 606
<PAGE>
ACC CONSUMER FINANCE CORPORATION
Notes to Consolidated Financial Statements
(Continued)
(d) Initial Public Offering
In May 1996, the Company sold in an initial public offering 2,000,000
shares of its Common Stock which generated net proceeds of
approximately $12.6 million. The proceeds were used to partially
pay-down the NIM Facility (included in Other Borrowings), temporarily
reduce advances on the Company's warehouse facility (Repurchase
Facility), and for other general corporate purposes. In addition,
each share of the Company's redeemable Preferred Stock automatically
converted into 23 shares of Common Stock upon consummation of the
offering. Total cumulative dividends of $574,454 were paid to the
holders of the redeemable Preferred Stock subsequent to the
conversion.
(e) Installment Contracts Held For Sale
The Contracts are acquired from automobile dealers. The Contracts
provide for interest of approximately 20%. Each Contract provides for
full amortization, equal monthly payments and can be fully prepaid by
the borrower at any time.
The Contracts are purchased at a discount and are recorded net of the
discount. The Company also recognizes the interest accrued on
Contracts through the date of purchase as an addition to the discount.
Nonrefundable fees and related direct costs are deferred and netted
against the Contract balances.
The Company has purchased the Contracts with the intent to resell them
in the future. Contracts held for sale are stated at the lower of
aggregate cost or market value.
The Contracts are financed under the terms of a repurchase agreement
(Repurchase Agreement) and are accounted for as a financing of the
Contracts. Under the terms of the agreement, the Company maintains
the essential elements of ownership of the Contracts, particularly
credit risk and interest rate risk.
(f) Installment Contracts Held for Investment
Since January 1, 1995, all Contracts have been purchased with the
intent to be sold in asset-backed securities. Contracts that are
identified as ineligible during the securitization process (primarily
due to their payment history) are transferred to Contracts held for
investment until such time that the deficiency has been resolved.
These Contracts are transferred to held for investment at the lower of
cost or market value and are accounted for net of an allowance for
losses, as determined by historical loss experience and current
delinquency levels. Effective January 1, 1995, concurrent with
-96-
Page 99 of 606
<PAGE>
ACC CONSUMER FINANCE CORPORATION
Notes to Consolidated Financial Statements
(Continued)
management's intent to sell the Contracts, amortization of the
purchase discount and net deferred fees was discontinued.
(g) Allowance for Contract Losses
The allowance for Contract losses is maintained at a level deemed by
management to be adequate to provide for the inherent risks in the
Contracts held for investment. Management considers past loss
experience and delinquency levels in determining the adequacy of the
allowance for credit losses.
The Company's policy is to charge-off the principal balance of all
Contracts which are 120 or more days delinquent, except Contracts
which are involved in bankruptcies which are charged-off at 210 or
more days delinquent. In addition, the Company charges off Contracts
prior to becoming 120 or 210 days delinquent if management has
knowledge of specific circumstances that impair the collectibility of
the outstanding balances. The Company maintains general loss
allowances for the Contracts held for investment.
(h) Excess Servicing Receivables
The Company has created ESRs as a result of the sale of Contracts in
the ACC Auto Grantor Trust 1995-A (the 1995-A Transaction), the ACC
Auto Grantor Trust 1995-B (the 1995-B Transaction), the ACC Auto
Grantor Trust 1996-A (the 1996-A Transaction) (unaudited) and the ACC
Auto Grantor Trust 1996-B Transaction (the 1996-B Transaction)
(unaudited). ESRs are determined by computing the present value of
the excess of the weighted average coupon on the Contracts sold
(ranging from 19.77% to 20.62%) over the sum of: (i) the coupon on
the senior bonds (ranging from 5.95% to 6.90%), (ii) a base servicing
fee paid to the Company (ranging from 3.00% to 3.15%) and (iii) the
charge-offs expected to be incurred on the portfolio of Contracts
sold. For purposes of the projection of the excess servicing cash
flows, the Company assumes that annual charge-offs (including accrued
interest) will cumulatively approximate 10% to 11% of the original
principal of the Contracts sold, over the life of the portfolio.
Further, the Company uses an estimated average Contract life of 1.5 to
1.7 years. The cash flows expected to be received by the Company,
before expected losses, are then discounted at a market interest rate
that the Company believes an unaffiliated third-party purchaser would
require as a rate of return on such a financial instrument. Expected
losses are discounted using a rate equivalent to the risk-free rate
which is equivalent to the rate earned on securities rated AAA or
better with a duration similar to the duration estimated for the
underlying Contracts. This results in an effective overall discount
rate of approximately 15%. The excess servicing cash flows are only
-97-
Page 100 of 606
<PAGE>
ACC CONSUMER FINANCE CORPORATION
Notes to Consolidated Financial Statements
(Continued)
available to the Company to the extent that there is no impairment of
the credit enhancements established at the time the Contracts are
sold. ESRs are amortized using the interest method and are offset
against servicing and ancillary fees. To the extent that the actual
future performance results are different from the excess cash flows
the Company estimated, the Company's ESRs will be adjusted quarterly
with corresponding adjustments made to income in that period. In
connection with the valuation of ESRs, the Company projects losses in
the pool of Contracts which effectively represents the estimated
undiscounted recourse loss allowance offset with the ESRs. As of June
30, 1996 (unaudited), and December 31, 1995, the estimated
undiscounted recourse loss allowance embedded in the ESRs, excluding
accrued interest, was $12.5 million and $7.5 million, respectively.
This recourse loss allowance represents 8.45% and 8.14% of the
Contracts serviced for others as of June 30, 1996, and December 31,
1995, respectively.
The carrying value of the ESRs is subject to the provisions of the
Emerging Issues Task Force (EITF) 88-11 which states that an
enterprise that sells the right to receive the interest payments, the
principal payments, or a portion of either or both, relating to a loan
should allocate the recorded investment in that loan between the
portion of the loan sold and the portion retained based on the
relative fair values of those portions.
(i) Asset-Backed Securities
In accordance with SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities" (Statement 115), management determines
the appropriate classification of securities at the time of purchase.
If management has the intent and the Company has the ability at the
time of purchase to hold securities until maturity, they are
classified as held-to-maturity. Asset-backed securities held-to-
maturity are stated at estimated fair value at the time of
securitization adjusted for the amortization of premiums and accretion
of discounts over the maturity of the related security. These asset-
backed securities have contractual terms to maturity, but require
periodic payments to reduce principal. In addition, expected
maturities will differ from contractual maturities because borrowers
have the right to prepay the underlying installment contracts.
Effective July 1, 1994, the Company adopted Statement 115. The
carrying value of the asset-backed securities is subject to the
provisions of the EITF 88-11 and are recorded net of a discount, which
is amortized using the interest method.
-98-
Page 101 of 606
<PAGE>
ACC CONSUMER FINANCE CORPORATION
Notes to Consolidated Financial Statements
(Continued)
(j) Net Gain on Sale
Each issuance of an asset-backed security results in the recognition
of a "net gain on sale of contracts" on the Company's consolidated
statement of operations for the period in which the sale was made.
These gains are recognized to the extent that the net proceeds from
the sale are greater than the relative fair value of the Contracts
sold. This gain is subject to the provisions of the EITF 88-11 that
states that any gain recognized when a portion of a loan is sold
should not exceed the gain that would be recognized if the entire loan
were sold.
(k) Repossessed Vehicles
Vehicles acquired from non-payment of indebtedness are recorded at the
lower of the estimated fair market value or the outstanding Contract
balance. Such assets are generally sold within 60 days and any
difference between the sales price, net of expenses, and the carrying
amount is treated as a charge-off or recovery. In addition, the
Company recognizes claims submitted pursuant to a vendor single
interest policy as accounts receivables.
(l) Fixed Assets
Furniture, fixtures and equipment are initially recorded at cost.
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets (six months to five years).
(m) Organizational Expenses
The Company incurred expenses in connection with the organization of
the business. These expenses were capitalized and are amortized on a
straight-line basis over a five-year period.
(n) Repurchase Facility Fees
The Company incurred fees of $488,000 in connection with the
Repurchase Facility. These fees reflected cash payments made and the
estimated value of Preferred Stock warrants issued in conjunction with
the Repurchase Facility. The Repurchase Facility costs have been
deferred and are amortized over the five-year term of the Repurchase
Facility as an adjustment to interest expense.
(o) Servicing and Ancillary Fees
Servicing fees are reported as income when earned, net of related
amortization of excess servicing.
-99-
Page 102 of 606
<PAGE>
ACC CONSUMER FINANCE CORPORATION
Notes to Consolidated Financial Statements
(Continued)
The Company has the right to collect late payment fees and non-
sufficient funds fees from borrowers. In addition, the Company from
time to time incurs collection costs in connection with delinquent
accounts. Ancillary fees are accounted for on a cash basis.
Collection expenditures are recorded as expenses in the period
incurred. Any reimbursements of collection costs are recognized as an
expense recovery in the period that the proceeds are received.
(p) Reclassification
Certain amounts for the prior period have been reclassified to conform
to the 1995 presentation.
(q) Income Taxes
The Company filed consolidated federal income and combined state
franchise tax returns on a fiscal year basis through June 30, 1995,
and will file on a calendar basis thereafter. The Company accounts
for income taxes in accordance with SFAS No. 109 (Statement 109).
Under the asset and liability method of Statement 109, deferred income
taxes are recognized based on future tax consequences due to
differences between (i) the financial statement carrying amounts of
existing assets and liabilities and (ii) their respective tax bases.
Deferred tax assets and liabilities are measured using tax rates
expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under
Statement 109, the effect on deferred taxes of a change in tax rates
is recognized in income in the period that includes the enactment
date.
(r) Cash and Cash Equivalents
For purposes of the consolidated financial statements, cash and cash
equivalents include highly liquid debt and investment instruments with
an original maturity of three months or less.
(s) Hedging
The Company enters into forward contracts as hedges relating to the
Contract portfolio. These financial instruments are designed to
minimize exposure and reduce risk from interest rate fluctuations.
Gains and losses on forward contracts are deferred and recognized as
adjustments to the basis of the Contracts until such time that the
Contracts are sold. Such amounts are realized upon the sale of
Contracts that are hedged.
-100-
Page 103 of 606
<PAGE>
ACC CONSUMER FINANCE CORPORATION
Notes to Consolidated Financial Statements
(Continued)
(t) Net Income (Loss) Per Share
Due to the significant changes in the capital structure of the Company
upon the closing of the initial public offering as discussed at
Note 1(d) above, historical net income (loss) per share prior to the
year ended December 31, 1995, is not presented. Net income per share
is computed using the weighted average number of shares of Common
Stock outstanding and common equivalent shares, unless the effect of
common stock equivalents are anti-dilutive. However, pursuant to
Securities and Exchange Commission Staff Accounting Bulletins, Common
Stock and common equivalent shares issued during the 12-month period
prior to the offering have been included in the calculation as if they
were outstanding for all periods presented, even if anti-dilutive.
(u) Use of Estimates
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities to
prepare these consolidated financial statements in conformity with
generally accepted accounting principals. Actual results could differ
from those estimates.
(2) Restricted Cash and Credit Enhancement Cash Reserve
With regard to Contracts owned, the Company is required to deposit all
borrower payments, Contract liquidation proceeds and certain other
receipts into restricted bank accounts under the control of a
custodian. These accounts are owned by the Company, but funds may
only be released by the custodian under the terms of the Repurchase
Facility. Generally, the funds will be released only upon the
repurchase and sale of the Contracts. As of June 30, 1996
(unaudited), December 31, 1995, and December 31, 1994, $1.1 million,
$1.0 million and $1.9 million was held in the restricted bank
accounts, respectively.
The Company is a party to an agreement in connection with the sale of
Contracts in asset-backed securities. The terms of the agreement
provide that simultaneous with each sale of certificates to investors,
the Company makes a cash contribution, as a credit enhancement, to a
credit enhancement cash reserve under the control of a trustee.
Subsequent to the sale, cash received from the ESRs and Subordinated
Securities is deposited into the credit enhancement cash reserve. The
credit enhancement cash reserve is owned by the Company, but funds
will only be released by the trustee when certain credit enhancement
requirements are met. The agreement provides that the amount of cash
to be maintained in the credit enhancement cash reserve shall be at a
specified percentage of the principal balance of the senior bonds. As
-101-
Page 104 of 606
<PAGE>
ACC CONSUMER FINANCE CORPORATION
Notes to Consolidated Financial Statements
(Continued)
principal payments are made to the bondholders, and if the pledged
cash is in excess of the specified percentage of the principal balance
of the bonds, the trustee will release the excess amount to the
Company. As of June 30, 1996 (unaudited), and December 31, 1995,
$6.1 million and $4.1 million, respectively, of cash were invested in
short-term instruments and are included in the credit enhancement cash
reserve on the consolidated balance sheets. There were no ESRs as of
December 31, 1994.
(3) Installment Contracts Held-For-Sale
Installment Contracts held for sale are summarized as follows:
June 30, 1996 Dec. 31, 1995
------------- -------------
(unaudited)
Principal Balance $23,458,719 $29,517,717
Purchase Discount (1,494,332) (1,161,892)
Deferred Expenses (Net Fees) 351,359 (392,889)
Unrealized Hedge Losses 49,255 224,842
----------- ------------
$22,365,001 $28,187,778
=========== ===========
As of June 30, 1996 (unaudited), December 31, 1995, and December 31,
1994, approximately $24 million, $31 million and $43 million,
respectively, of the Contracts, including some Contracts held for
investment, have been sold to Cargill Financial Services Corporation
(Cargill) subject to the terms of the Repurchase Facility. These
Contracts are held by a custodian until such time that they are
repurchased. (See Notes 4 and 9.) There were no Contracts held for
sale as of December 31, 1994.
The Company maintains an ongoing hedging program to minimize the
impact of changing interest rates on the value of the Contracts. The
hedging strategy is implemented through the forward sale of two-year
Treasury notes or futures Contracts or two-year Treasury instruments
with remaining terms of approximately 1.5 years to 2 years, with
Cargill acting as the counterparty to these hedging transactions. As
of June 30, 1996 (unaudited), the Company had two-year Treasury
futures Contracts with a notional amount of $20 million for sale in
September 1996. As of December 31, 1995, the Company had sold forward
$25 million of Treasury notes for delivery in January 1996. As of
December 31, 1994, the Company had no forward sales outstanding.
The Company recognizes unrealized gains and losses on the hedging
transactions as an adjustment to the basis of the Contracts. Gains
and losses are recognized upon sale of the Contracts. The Company
recognized $20,000 of net gains on the hedging program during the six
-102-
Page 105 of 606
<PAGE>
ACC CONSUMER FINANCE CORPORATION
Notes to Consolidated Financial Statements
(Continued)
months ended June 30, 1996 (unaudited). The Company recognized
$927,000 of losses on the hedging program during the year ended
December 31, 1995. During the six-month transition period ended
December 31, 1994, there were no gains or losses from hedging
transactions.
In addition to the Contracts owned by the Company, the Company
serviced $148 million and $87 million of Contracts as of June 30, 1996
(unaudited), and December 31, 1995, respectively. As of December 31,
1994, the Company did not service Contracts outside of those owned by
the Company. The Company services Contracts for borrowers residing in
approximately 40 states, with the largest concentrations of Contracts
in California, Texas, Florida and Pennsylvania. An economic slowdown
or recession or a change in the regulatory or legal environment in one
or more of these states could have a material adverse effect on the
performance of the Company's existing servicing portfolio and on its
Contract purchases.
During the six-month period ended June 30, 1996 (unaudited), and the
fiscal year ended December 31, 1995, the Company sold $82 million and
$101 million, respectively, of Contracts in connection with the
securitization transactions. For the same periods, the Company
recognized gains associated with these securitizations of $6.6 million
(unaudited) and $8.1 million, respectively. No Contracts were sold in
the six-month transition period ended December 31, 1994.
Contract packages are submitted to the Company for funding by
automobile dealers. The Company evaluates each customer's
creditworthiness on a case-by-case basis. As of June 30, 1996
(unaudited), and December 31, 1995, Contract packages representing
$3.6 million and $2.1 million, respectively, were submitted to the
Company for funding.
(4) Installment Contracts Held For Investment
Contracts held for investment represent Contracts that are ineligible
for sale primarily due to their delinquent status or represent
Contracts which management had no present intention to sell. The held
for investment Contracts are also subject to the terms of the
Repurchase Facility and are held by a custodian until they are
repurchased. The Contracts held for investment are comprised of the
following:
-103-
Page 106 of 606
<PAGE>
ACC CONSUMER FINANCE CORPORATION
Notes to Consolidated Financial Statements
(Continued)
June 30, Dec. 31, Dec. 31,
1996 1995 1994
---- ---- ----
(unaudited)
Principal Balance $ 640,000 $ 1,040,695 $ 42,649,366
Purchase Discount (40,490) (40,727) (3,021,171)
Deferred Expenses (Net Fees) 9,520 (13,772) 166,048
Allowance for Contract Losses (388,200) (476,808) (1,181,004)
------------ ------------ ------------
$ 220,830 $ 509,388 $ 38,613,239
============ ============ ============
The Company maintains an allowance for Contract losses based on the
outstanding principal balance of Contracts held for investment. A
summary of the activity in the allowance for Contract losses is as
follows:
<TABLE>
<CAPTION>
Six-Month
Six Months Transition
Ended June 30 Year Ended Period Ended Year Ended
-------------------------- Dec. 31, Dec. 31, June 30,
1996 1995 1995 1994 1994
------ ------ ------ ------ -----
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Beginning Balance $ 476,808 $ 1,181,004 $ 1,181,004 $ 580,462 $ --
Provision 348,784 10,348 673,802 902,361 592,325
Charge-offs (578,415) (702,182) (1,435,224) (302,735) (11,863)
Recoveries 141,023 13,275 57,226 916 --
----------- ----------- ----------- ----------- -----------
Ending Balance $ 388,200 $ 502,445 $ 476,808 $ 1,181,004 $ 580,462
=========== =========== =========== =========== ===========
</TABLE>
(5) Asset-Backed Securities
In connection with the securitizations, the Company retained
Subordinated Securities representing 5% of the principal balance of
the Contracts sold. The Subordinated Securities from the 1995-A
Transaction, the 1995-B Transaction, the 1996-A Transaction and the
1996-B Transaction have pass-through rates of 6.70%, 6.40%, 5.95% and
6.90%, respectively. These securities have been valued at a discount
to yield approximately 13% to 14%. There were no Subordinated
Securities at December 31, 1994. The Subordinated Securities are as
follows:
-104-
Page 107 of 606
<PAGE>
<TABLE>
ACC CONSUMER FINANCE CORPORATION
Notes to Consolidated Financial Statements
(Continued)
<CAPTION>
June 30, 1996 December 31, 1995
----------------------- ---------------------
(unaudited)
Carrying Fair Carrying Fair
Value Value Value Value
----- ----- ----- -----
<S> <C> <C> <C> <C>
ACC Auto Grantor Trust 1995-A
(net of discount of $131,239
and $192,094 at June 30, 1996,
(unaudited) and December 31, 1995,
respectively) $1,414,501 $1,519,000 $1,804,770 $1,961,000
ACC Auto Grantor Trust 1995-B
(net of discount of $171,138
and $237,770 at June 30, 1996
(unaudited) and December 31, 1995,
respectively) 1,766,993 1,896,000 2,105,310 2,290,000
ACC Auto Grantor Trust 1996-A
(net of discount of $175,257
at June 30, 1996 (unaudited)) 1,505,538 1,626,000 -- --
ACC Auto Grantor Trust 1996-B
(net of discount of $251,510
at June 30, 1996 (unaudited)) 1,996,990 2,206,000 -- --
---------- ---------- ---------- ----------
Total $6,684,022 $7,247,000 $3,910,080 $4,251,000
========== ========== ========== ==========
</TABLE>
(6) Excess Servicing Receivables
A summary of the activity in ESRs is as follows:
Six Months
Ended Year Ended
June 30, 1996 Dec. 31, 1995
------------- -------------
(unaudited)
Beginning Balance $5,590,878 $ -
ACC Auto Grantor Trust 1995-A - 3,716,807
ACC Auto Grantor Trust 1995-B - 3,983,892
ACC Auto Grantor Trust 1996-A 2,968,000 -
ACC Auto Grantor Trust 1996-B 3,240,000 -
Amortization (2,433,260) (2,109,821)
---------- ----------
Ending Balance $9,365,618 $5,590,878
========= =========
There were no ESRs at December 31, 1994.
-105-
Page 108 of 606
<PAGE>
ACC CONSUMER FINANCE CORPORATION
Notes to Consolidated Financial Statements
(Continued)
(7) Accounts Receivable
As of June 30, 1996 (unaudited), December 31, 1995, and December 31,
1994, the Company had approximately $4.9 million, $626,000 and
$116,000, respectively, due from Cargill for net Contracts funded by
the Company which were delivered to a custodian, but not yet funded
through the Repurchase Facility.
(8) Fixed Assets, Net
Furniture, fixtures and equipment consisted of the following:
June 30, Dec. 31, Dec. 31,
1996 1995 1994
---- ---- ----
(unaudited)
Furniture, Fixtures & Equipment $ 854,293 $ 679,826 $ 330,281
Leasehold Improvements 93,409 70,889 19,969
Computer Equipment 589,815 482,891 274,262
----------- ----------- -----------
1,537,517 1,233,606 624,512
Less Accumulated Depreciation (585,662) (391,590) (134,292)
----------- ----------- -----------
Fixed Assets, Net $ 951,855 $ 842,016 $ 490,220
=========== =========== ===========
The Company has entered into lease arrangements with Cargill Leasing
Corporation, an affiliate of Cargill, for the sale and leaseback of
certain of its furniture and equipment. These leases are accounted
for as capital leases. The original cost of the equipment subject to
the capital leases is $731,000. (See Note 13.)
(9) Repurchase Facility, Net
The Company has entered into a financing arrangement, the object of
which is to provide interim financing for the Contracts purchased.
When the Contracts are repurchased from Cargill, the Company is
obligated to pay Cargill a repurchase fee that is calculated as a
percentage of the Contracts ranging from 2% to .5%, depending upon the
cumulative amount of Contract sales.
The Repurchase Facility expires in July 1998. Under the terms of the
Repurchase Facility, the Company will sell Contracts to Cargill with
an agreement to repurchase the Contracts. The repurchase is intended
to occur concurrent with the sale of the Contracts. The Repurchase
Facility requires Contracts to be held by a custodian and requires the
Company to deposit borrower payments into restricted bank accounts.
-106-
Page 109 of 606
<PAGE>
ACC CONSUMER FINANCE CORPORATION
Notes to Consolidated Financial Statements
(Continued)
The Company is obligated to repurchase Contracts in the event that:
(i) the Contracts do not conform to the terms of the Repurchase
Facility, (ii) a breach of a representation or warranty has occurred
or (iii) the Company has defaulted under the terms of the Repurchase
Facility. In addition, the Repurchase Facility contains certain
restrictive covenants that include, without limitation, achieving
specific Contract purchase volumes. If these covenants are not met, a
termination of the facility could occur. As of June 30, 1996
(unaudited), December 31, 1995, and December 31, 1994, management
believes the Company was in compliance with such covenants.
The Repurchase Facility balance is net of deferred costs of $248,000,
$310,000 and $432,000 as of June 30, 1996 (unaudited), December 31,
1995, and December 31, 1994, respectively. Interest on the Repurchase
Facility accrues at a fixed margin (3.25% over the one-month LIBOR as
of June 30, 1996 (unaudited), and December 31, 1995 and 3.00% over the
three-month LIBOR as of December 31, 1994). The relevant LIBOR was
5.5% as of June 30, 1996 (unaudited), 5.719% as of December 31, 1995,
and 6.812% as of December 31, 1994. In addition to funds in the
restricted cash accounts, advances on the Repurchase Facility were
secured by Contracts aggregating approximately $24 million,
$31 million and $43 million as of June 30, 1996 (unaudited),
December 31, 1995, and December 31, 1994, respectively. These amounts
include $5.1 million, $642,000 and $122,000 of gross Contracts which
were delivered, but not yet funded by Cargill, as of June 30, 1996
(unaudited), December 31, 1995, and December 31, 1994, respectively.
(10) Other Borrowings
In September 1995, the Company entered into a Subordinated Certificate
and Net Interest Margin Certificate Financing Facility Agreement (NIM
Facility) with Cargill, as amended, that permits up to $15 million in
borrowings collateralized by the Subordinated Securities and the ESRs.
The facility was increased to $15 million on May 22, 1996. The NIM
Facility and the Repurchase Facility have cross-default and cross-
collateralization clauses which state that the Company must be in
compliance with all covenants relating to both agreements at all
times. As of June 30, 1996 (unaudited), the Company has drawn
approximately $2.4 million under this facility. As of December 31,
1995, the Company has drawn $7.4 million under this facility. The
interest rate on the NIM Facility is the one-month LIBOR, plus 7%.
The Company also pays an annual commitment fee of $150,000, which is
payable in four quarterly installments. The NIM Facility has a
contractual maturity date of May 22, 1998. Under the NIM Facility
Agreement, the following events, among others, constitute events of
default: (i) a material adverse change in the financial condition of
OFL-A, the Company or Receivables, (ii) a change in control of ACC,
-107-
Page 110 of 606
<PAGE>
ACC CONSUMER FINANCE CORPORATION
Notes to Consolidated Financial Statements
(Continued)
OFL-A or Receivables; (iii) Moody's Investors Service, Inc. (Moody's)
or Standard & Poor's Ratings Group (S&P) shall have downgraded any
asset-backed security of ACC other than as result of the downgrading
of FSA or other related surety company; (iv) in connection with any
structured finance transaction (including any subsequent asset-backed
security), the initial credit enhancement levels required to achieve
an overall "BBB" rating from either Moody's or S&P is equal to or
greater than nine percent of the aggregate unpaid principal balance of
the Contracts so financed; (v) Cargill, as sponsor, shall be obligated
to make any payments in respect of any asset securitization
transaction or any other eligible transaction due to a default by the
Company; (vi) the occurrence of more than three collateral events with
respect to Contracts financed under the Repurchase Facility or in pool
of Contracts securing any Subordinated Certificates or excess
servicing revenues pledged as collateral to Cargill under the NIM
Facility; (vii) the occurrence of valuation adjustments of an
aggregate, cumulative, amount of 20% or more of the Subordinated
Certificates and ESRs securing the NIM Facility; or (viii) an interest
rate (equal to LIBOR plus seven percent) that is equal to or greater
than 18% for 30 or more consecutive days. A collateral event means
with respect to the Contracts securing the Repurchase Facility or with
respect to any pool of Contracts in an asset-backed security, the
occurrence of any of the following events during any monthly period:
(i) a trailing three-month annualized net charge-off rate equal to or
greater than ten percent; (ii) a trailing six-month annualized net
charge-off rate equal to or greater than nine percent, (iii) a
trailing three-month delinquency rate equal to or greater than nine
percent; (iv) a trailing six-month delinquency rate equal to or
greater than eight percent; (v) a trailing three-month annualized
repossession rate equal to or greater than 15%; or (vi) a trailing
six-month annualized repossession rate equal to or greater than 14%.
The Company retired a bridge financing facility of $2.5 million
(Bridge Financing Facility) with proceeds of the NIM Facility. The
Bridge Financing Facility had an interest rate of 12% through
December 5, 1995, and 25% thereafter.
(11) Preferred Stock
(a) Redeemable Preferred Stock
Each share of all series of outstanding redeemable Preferred Stock was
converted into 23 shares of Common Stock in May 1996 when the Company
completed its initial offering of its Common Stock. (See Note 1(d).)
In June 1996, $574,454 of dividends were paid to the holders of the
redeemable Preferred Stock.
-108-
Page 111 of 606
<PAGE>
ACC CONSUMER FINANCE CORPORATION
Notes to Consolidated Financial Statements
(Continued)
The holders of the Series A Preferred Stock were entitled to receive
cumulative dividends equal to 4% of the stated value of the shares
($33.17) when and as declared by the Board of Directors. No dividends
were declared or paid prior to the earlier of: (i) July 15, 1998,
(ii) 30 days following the Company's initial public offering or
(iii) a liquidation of the Company. As of December 31, 1995, and
December 31, 1994, $416,000 and $235,000, respectively, of dividends
on Series A Preferred Stock had accumulated. Upon liquidation,
holders of the Series A Preferred Stock were entitled to receive, in
preference to any payment on the Common Stock, an amount equal to the
stated value of the shares, plus any accrued and unpaid dividends.
The Series A Preferred Stock was redeemable, at the option of the
holder, five years from the date of issue at the stated value, plus
accumulated dividends. Each share of Series A Preferred Stock
automatically converted into a share of Common Stock upon the closing
of the Company's firm commitment underwritten public offering of its
Common Stock.
In March 1995, the Company issued Series B Preferred Stock. The
holders of the Series B Preferred Stock were entitled to receive
cumulative dividends equal to 6% of the stated value of the shares
($65.00) when and as declared by the Board of Directors. No dividends
were declared or paid until the earlier of: (i) July 15, 1998,
(ii) 30 days following the Company's initial public offering, (iii) a
liquidation of the Company or (iv) redemption of the Preferred Stock.
As of December 31, 1995, $34,000 of dividends on Series B Preferred
Stock had accumulated. Upon liquidation, holders of the Series B
Preferred Stock were entitled to receive, in preference to any
payments on the Common Stock, an amount equal to the stated value,
plus accrued and unpaid dividends. The Series B Preferred Stock was
redeemable, at the option of the holder, two years from the issue at
the stated value, plus accumulated dividends. Each share of Series B
Preferred Stock automatically converted into a share of Common Stock
upon the closing of the Company's firm commitment underwritten public
offering of its Common Stock.
In January 1996 (unaudited), the Company issued Series C Preferred
Stock. The holders of the Series C Preferred Stock were entitled to
receive cumulative dividends equal to 4% of the stated value of the
shares ($126.50) when and as declared by the Board of Directors. No
dividends were declared or paid prior to the earlier of: (i) July 15,
1998, (ii) 30 days following the Company's initial public offering or
(iii) a liquidation of the Company. Upon liquidation, holders of the
Series C Preferred Stock were entitled to receive, in preference to
any payment on the Common Stock, an amount equal to the stated value
of the shares, plus any accrued and unpaid dividends. The Series C
Preferred Stock was redeemable, at the option of the holder, five
-109-
Page 112 of 606
<PAGE>
ACC CONSUMER FINANCE CORPORATION
Notes to Consolidated Financial Statements
(Continued)
years from the date of issue at the stated value, plus accumulated
dividends. Each share of Series C Preferred Stock automatically
converted into a share of Common Stock upon the closing of the
Company's firm commitment underwritten public offering of its Common
Stock.
The changes in redeemable Preferred Stock are as follows:
<TABLE>
<CAPTION>
Series A Series B Series C
Preferred Stock Preferred Stock Preferred Stock Total
--------------- --------------- --------------- -----
Shares Amount Shares Amount Shares Amount Amount
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
June 30, 1994 120,000 $ 4,108,400 -- $ -- -- $ -- $ 4,108,400
Issuance of
Series A
Preferred Stock 7,537 249,977 -- -- -- -- 249,977
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at
December 31, 1994 127,537 4,358,377 -- -- -- -- 4,358,377
Issuance of
Series B
Preferred Stock -- -- 11,538 749,970 -- -- 749,970
Exercise of Warrants 35,294 1,170,702 -- -- -- -- 1,170,702
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at
December 31, 1995 162,831 5,529,079 11,538 749,970 -- -- 6,279,049
Issuance of Series C
Preferred Stock
(unaudited) -- -- -- 7,913 1,000,995 1,000,995
----------- ----------- ----------- ----------- ----------- ----------- -----------
Conversion to
Common Stock (162,831) (5,529,079) (11,538) (749,970) (7,913) (1,000,995) (7,280,044)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at
June 30, 1996
(unaudited) -- $ -- -- $ -- -- $ -- $ --
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
(b) Blank Check Preferred Stock
The Company's Certificate of Incorporation authorizes the
issuance of 1,817,718 shares of Preferred Stock that have not been
designated or issued ("blank check preferred") and may be subject,
without stockholder approval, to being issued in one or more series
with such preferences, limitations and relative rights as are
-110-
Page 113 of 606
<PAGE>
ACC CONSUMER FINANCE CORPORATION
Notes to Consolidated Financial Statements
(Continued)
determined by the Board of Directors of the Company at the time of the
issuance.
(c) Warrants
In July 1993, the Company issued to Cargill a warrant in connection
with the Repurchase Facility for 35,294 shares of the Company's Series
A Preferred Stock. The warrant entitled Cargill to acquire a like
number of shares of Series A Preferred Stock for an exercise price in
the range of $33.17 per share and $66.17 per share based upon the net
book value per share of the Common Stock. The warrants were to expire
on the earlier of: (i) July 15, 1999, (ii) the closing of an initial
public offering or (iii) the termination of the Repurchase Facility by
Cargill due to a material breach by Cargill. The warrant was fully
exercised by Cargill on September 29, 1995, at an exercise price of
$33.17 per share.
(12) Fair Value of Financial Instruments
Statement of Financial Accounting No. 107, "Disclosures About Fair
Value of Financial Instruments," requires that the Company disclose
estimated fair values for its financial instruments, as well as the
methods and significant assumptions used to estimate fair values. The
following information does not purport to represent the aggregate net
fair value of the Company.
June 30, 1996 December 31, 1995
----------------------- ---------------------
(unaudited)
Carrying Fair Carrying Fair
Financial Instrument Value Value Value Value
- -------------------- ----- ----- ----- -----
Installment Contracts
Held for Sale $22,365,001 $23,458,719 $28,187,778 $29,517,717
Installment Contracts
Held for Investment 220,830 220,830 509,388 509,388
Asset-Backed Securities 6,684,022 7,247,000 3,910,080 4,251,000
Excess Servicing
Receivables 9,365,618 10,227,000 5,590,878 5,753,000
Repurchase Facility 23,598,232 23,598,232 29,708,252 29,708,252
Other Borrowings 2,388,036 2,388,036 7,439,597 7,439,597
Lease Liabilities 431,454 467,540 519,486 568,815
Hedge Position 48,397 48,397 224,842 224,842
Installment Contracts Held for Sale
The carrying value of Contracts held for sale represents the Company's
cost basis in the Contracts. Also, since the Company intends to hold
the Contracts for a relatively short period of time and sell them
-111-
Page 114 of 606
<PAGE>
ACC CONSUMER FINANCE CORPORATION
Notes to Consolidated Financial Statements
(Continued)
through a securitization, typically at par, fair values of Contracts
held for sale is estimated to be par value.
Installment Contracts Held for Investment
Estimates have been made, based on historical experience, of the value
of the non-performing Contracts within the held for investment
portfolio. The carrying value is reported net of an allowance for the
probable losses on these Contracts and is a reasonable estimate of
what management believes to be the fair value of the Contracts in this
portfolio.
Asset-Backed Securities and Excess Servicing Receivables
The fair value of the asset-backed securities (elsewhere referred to
as Subordinated Securities) and the ESRs is estimated by discounting
future cash flows using credit and discount rates that the Company
believes reflect the estimated credit, interest rate and prepayment
risks associated with similar types of instruments.
Repurchase Facility and Other Borrowings
The carrying value approximates fair value as these facilities reprice
frequently at market rates.
Lease Liabilities
The fair value of the lease liabilities is estimated by discounting
the future cash payout with obligations using a rate that the Company
believes reflects the market rate for similar types of instruments.
Hedge Liability
The carrying value approximates fair values as this position refixes
frequently at market rates. The fair value of the hedge position is
based upon quoted market prices.
(13) Commitments and Contingencies
(a) Leases
The Company leases office space, computers and other equipment under
various operating leases. Future minimum rental payments on these
operating leases are as follows:
-112-
Page 115 of 606
<PAGE>
ACC CONSUMER FINANCE CORPORATION
Notes to Consolidated Financial Statements
(Continued)
Year Ended
December 31,
------------
1996 $ 529,075
1997 496,021
1998 403,340
1999 270,866
2000 277,733
Thereafter 349,837
---------
Total Payments $2,326,872
Total lease expenses for the six-month periods ended June 30, 1996 and
1995 (unaudited), were $294,778 and $198,762, respectively. Total
lease expense for the year ended December 31, 1995, the six-month
transition period ended December 31, 1994, and the period from
July 15, 1993, to June 30, 1994, was $445,342, $133,755 and $102,885,
respectively.
The Company also leases furniture and equipment under various capital
leases with a related party. The future minimum lease payments on
these capital leases are as follows:
Year Ended
December 31,
------------
1996 $ 280,250
1997 279,812
1998 106,766
-------
Total Payments 666,828
Less Amount
Representing Interest (147,342)
-------
Total Lease Liability $ 519,486
==========
(b) Litigation
The Company is subject to lawsuits which arise in the ordinary course
of business. Management is of the opinion, based in part upon
consultation with its counsel, that the liability to the Company, if
any, arising from existing and threatened lawsuits would have no
material adverse effect on the Company's financial position and
results of operations.
-113-
Page 116 of 606
<PAGE>
ACC CONSUMER FINANCE CORPORATION
Notes to Consolidated Financial Statements
(Continued)
(14) Income Taxes
The components of income tax expense for the year ended December 31,
1995, for the six-month transition period ended December 31, 1994, and
for the period from July 15, 1993 to June 30, 1994, are as follows:
Six-Month
Transition Period from
Period July 15, 1993,
Year Ended Ended through
Dec. 31, 1995 Dec. 31, 1994 June 30, 1994
------------- ------------- -------------
Current Income Taxes
Federal $ 12,000 $ -- $ --
State 23,000 -- --
----------- ----------- -----------
Total 35,000 -- --
----------- ----------- -----------
Deferred Income Taxes
Federal 1,171,000 (329,000) (818,000)
State 361,000 (24,000) (187,000)
----------- ----------- -----------
Total 1,532,000 (353,000) (1,005,000)
----------- ----------- -----------
Change in Valuation Allowance (1,358,000) 353,000 1,005,000
----------- ----------- -----------
Total $ 209,000 $ -- $ --
=========== =========== ===========
-114-
Page 117 of 606
<PAGE>
ACC CONSUMER FINANCE CORPORATION
Notes to Consolidated Financial Statements
(Continued)
A reconciliation of expected income taxes computed using the federal
income tax rate of 34% to taxes actually provided is set forth as
follows:
Six-Month
Transition Period from
Period July 15, 1993,
Year Ended Ended through
Dec. 31, 1995 Dec. 31, 1994 June 30, 1994
------------- ------------- -------------
Computed Expected Income Taxes $ 1,250,000 $ (337,000) $ (880,000)
Change in Valuation Allowance,
Net of (Utilization)
Non-recognition of Net
Operating Loss Carryforward (1,358,000) 353,000 880,000
State Taxes, Net of Federal
Benefit 339,000 -- --
Alternative Minimum Tax 12,000 -- --
Other (34,000) (16,000) --
----------- ----------- -----------
$ 209,000 $ -- $ --
=========== =========== ===========
-115-
Page 118 of 606
<PAGE>
ACC CONSUMER FINANCE CORPORATION
Notes to Consolidated Financial Statements
(Continued)
Deferred income taxes result from the temporary differences between
the tax basis of an asset or a liability and its reported amount in
the consolidated balance sheets. The components that comprise
deferred tax assets and liabilities at December 31, 1995, and
December 31, 1994, are as follows:
Dec. 31, 1995 Dec. 31, 1994
------------- -------------
Deferred Tax Assets:
Allowance for Contract Losses $ 216,000 $ 409,000
Net Operating Loss Carryforwards 452,000 965,000
Amortization 245,000 --
Other 190,000 65,000
----------- -----------
Total Gross Deferred Tax Assets 1,103,000 1,439,000
Less Valuation Allowance -- (1,358,000)
----------- -----------
Net Deferred Tax Assets 1,103,000 81,000
----------- -----------
Deferred Tax Liabilities:
Gain on Securitization (1,020,000) --
Amortization -- (9,000)
Deferred Fees (161,000) --
Other (96,000) (72,000)
----------- -----------
Total Gross Deferred Tax Liabilities (1,277,000) (81,000)
----------- -----------
Net Deferred Taxes $ (174,000) $ --
=========== ===========
Based upon the level of historical taxable income and projections for
future taxable income over the periods in which the deferred tax
assets are deductible, management believes it is more likely than not
that the Company will realize the benefits of these deductible
differences, net of the existing valuation allowance, at December 31,
1995, and 1994, respectively.
At December 31, 1995, the Company had net operating loss carryforwards
for federal and state income tax purposes of approximately
$1.2 million and $166,000, respectively, which are available to offset
future taxable income, if any, through the year 2010 and 2000,
respectively.
-116-
Page 119 of 606
<PAGE>
ACC CONSUMER FINANCE CORPORATION
Notes to Consolidated Financial Statements
(Continued)
An effective tax rate of 42% and 1.5% was used in determining the
income tax expense for the six months ended June 30, 1996 and 1995
(unaudited), respectively.
(15) 401(k) Plan
The Company adopted a defined contribution plan, pursuant to Internal
Revenue Code Section 401(k), effective February 1, 1994. Eligible
employees, generally those who have completed more than 90 days of
service, may elect to contribute from 2% to 20% of their pre-tax
compensation. Voluntary Company contributions to the plan are
allocated based on 50% of the employee contributions up to $1,000 per
calendar year. The plan may be terminated by the Company at any time.
Employer contributions to the plan were approximately $37,000, $25,000
and $14,000 for the year ended December 31, 1995, the six-month
transition period ended December 31, 1994, and the period from
July 15, 1993, to June 30, 1994, respectively.
(16) Stock Option Plans
The Company's 1995 stock option plan (Employee Plan) covers 450,000
shares of common stock. The Employee Plan permits the grant of
incentive stock options or non-qualified options to any employees of
the Company. Incentive stock options may not have an exercise price
of less than the fair market value of the Common Stock on the date of
grant, except options granted to holders of more than 10% of the
Company's Common Stock may not have an exercise price of less than
110% of the fair market value of the Common Stock on the date of the
grant. The Compensation Committee of the Board of Directors
administers the Employee Plan and determines the employee who may
participate, the amount of timing of each option grant and the vesting
schedule for options. As of June 30, 1995, stock options representing
418,088 shares of common stock were outstanding.
The Company's separate stock option plan for its non-employee
Directors (Director Plan) covers 100,000 shares of Common Stock. The
Director Plan provides for the award of non-qualified options, which
expire five years from the date of grant, covering 20,000 shares of
Common Stock to each non-employee director on the date of the plan's
adoption and to any future elected or appointed non-employee director.
Each of the options granted to the four current non-employee directors
is at an exercise price of $7.25 per share. One-fourth of the option
shares are exercisable immediately as of the offering, and the balance
will vest over the subsequent three years at a rate of one-third per
year. Any future option grant will be at an exercise price equal to
the fair market value of the Common Stock on the date of the grant.
-117-
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<PAGE>
At June 30, 1996, stock options representing 80,000 shares of Common
Stock were outstanding.
(17) Related Party Transactions
At inception, the Company entered into a consulting contract with
Rocco J. Fabiano to assist in the management of the Company. Terms of
the contract required the Company to pay the consultant $220,000
annually, plus additional bonus compensation, through July 15, 1997.
Additionally, the Company had employment contracts with Gary S.
Burdick and Rellen M. Stewart, which extended through July 15, 1997.
During the year ended December 31, 1995, the Company entered into
Employment Agreements with all three of the Founders, which supersede
previous agreements and extend through December 31, 1998.
Additionally, the Company has other borrowings with shareholders as
discussed in Notes 9 and 10 and capital lease arrangements with a
related party as discussed in Notes 8 and 13.
-118-
Page 121 of 606
<PAGE>
No dealer, sales representative
or any other person has been authorized
to give any information or to make any
representations other than those contained $15,000,000
in this Prospectus in connection with ____% Notes Due 2003
the offer made hereby and, if given or
made, such information or representations
must not be relied upon as having been ACC CONSUMER
authorized by the Company or any of the
Underwriters. This Prospectus does not FINANCE
constitute an offer to sell or a solici-
tation of and offer to buy any securities CORPORATION
other than the Notes to which it relates or
an offer to, or a solicitation of, any
person in any jurisdiction where such an
offer or solicitation would be unlawful.
Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any
circumstances, create an implication that
there has been no change in the affairs of
the Company or that information contained
herein is correct as of any time subsequent
to the date hereof. --------------------
TABLE OF CONTENTS Page PROSPECTUS
Prospectus Summary.................. 4 --------------------
The Company ........................ 4
The Offering........................ 7
Summary Financial and Operating Data 9
Risk Factors........................ 12
Use of Proceeds..................... 17
Capitalization...................... 18
Selected Consolidated Financial Data 19
Management's Discussion and McDonald & Company
Analysis of Financial Condition Securities, Inc.
and Results of Operations.......... 22
Business............................ 33
Management.......................... 48 J.C. Bradford & Co.
Certain Transactions................ 56
Principal Stockholders.............. 59
Description of the Notes ........... 60
Certain Federal Income Tax
Considerations..................... 66
Underwriting........................ 67 ____________, 1996
Legal Matters....................... 68
Experts............................. 68
Available Information............... 68
Until ________, 1996 (25 days
after the date of this Prospectus), all
dealers effecting transactions in the
registered securities, whether or not
participating in this distribution, may
be required to deliver a Prospectus.
This is in addition to the obligation
of dealers to deliver a Prospectus when
acting as underwriters and with respect
to their unsold allotments or subscriptions.
-119-
Page 122 of 606
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The estimated expenses of the Company in connection with the
offering are as follows:
SEC registration fee ....................... $ 5,949
NASD fee ...................................
Printing and engraving expenses............. ______
Accounting fees and expenses................ ______
Legal fees and expenses..................... ______
Blue Sky filing fees and expenses........... ______
Trustee's and registrar fees ............... ______
Miscellaneous .............................. 25,000
--------
TOTAL ................................ $ ________
Item 14. Indemnification of Directors and Officers.
Article 9 of the Company's Bylaws generally provides that the
Company will indemnify its directors and officers to the fullest
extent authorized or permitted under the Delaware General Corporation
Law and that the Company will make advancements of expenses at the
request of a director or officer. The Delaware General Corporation
Law authorizes a corporation, under certain circumstances, to
indemnify its directors and officers (including to reimburse them for
expenses incurred). Reference is made to Exhibit 3.2 of this
Registration Statement for the complete text of Article 9 of the
Company's Bylaws.
The Company's Certificate of Incorporation generally limits the
personal liability of directors for monetary damages for breaches of
fiduciary duty. If a director were to breach such duty in performing
his or her duties as a director, neither the Company nor its
shareholders could recover monetary damages from the director, and the
only course of action available to the Company's shareholders would be
equitable remedies, such as an action to enjoin or rescind a
transaction involving a breach of fiduciary duty. To the extent
claims against directors are limited to equitable remedies, the
II-1
Page 123 of 606
<PAGE>
provision in the Certificate of Incorporation may reduce the
likelihood of derivative litigation and may discourage shareholders or
management from initiating litigation against directors for breach of
their fiduciary duty.
Under the Certificate of Incorporation, a director shall remain
liable for monetary damages to the extent provided by applicable law
(i) for any breach of the duty of loyalty to the Company or its
shareholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law,
(iii) pursuant to Section 174 of the Delaware General Corporation Law
and (iv) for any transaction from which the director derived an
improper personal benefit.
Reference is made to Exhibits 3.1 of this Registration Statement
for the complete text of the Certificate of Incorporation, as amended.
Delaware corporations are also authorized to obtain insurance to
protect directors and officers from certain liabilities, including
liabilities against which corporations cannot indemnify their
directors and officers. The Company maintains directors' and officers
liability insurance providing aggregate coverage in the amount of
$10 million.
The Company also has agreements with certain of its directors and
officers providing for indemnification and advancement of expenses.
Reference is made to Exhibit 10.30 to this Registration Statement for
the complete text of a form of such agreements.
For provisions regarding the indemnification of the Company and
the directors and officers of the Company by the Underwriters against
certain liabilities, including liabilities under the Securities Act,
reference is made to Section ___ of the Underwriting Agreement, filed
as Exhibit 1 to this Registration Statement.
Item 15. Recent Sales of Unregistered Securities.
Except as set forth below, there have been no unregistered sales
of securities by the Company within the past three years. In making
such sales, and based on facts summarized by footnote below, the
Company relied upon the exemption from registration under Section 4(2)
of the Securities Act of 1933, as amended. Except as indicated by
footnote, all securities referenced in the following table were sold
for cash.
II-2
Page 124 of 606
<PAGE>
Number
Date of Shares Series and Class<F1> Consideration
- ---- --------- -------------------- -------------
June 24, 1994 11,304 Common Stock, no par value $ 39,564<F2>
September 12, 1994 7,537 Series A Preferred Stock $ 249,977<F3>
March 28, 1995 11,538 Series B Preferred Stock $ 749,970<F4>
September 29, 1995 35,294 Series A Preferred Stock $1,170,702<F5>
January 23, 1996 7,913 Series C Preferred Stock $1,000,995<F6>
[FN]
<F1> All offers and sales were made to a limited number of
offerees, without any advertisement or general solicitation
and without the involvement of an underwriter or selling
agent. All of the transactions were negotiated at arm's
length, including transactions with the Founders, the SSIM
Funds and Cargill. Each of the investors did and was able to
do his or its own due diligence, and each made appropriate
representations of investment intent. All of the issued
shares of Common Stock and Preferred Stock were issued
subject to restrictions prohibiting transfer thereof unless
in compliance with applicable securities laws, and all of the
certificates representing such shares include restrictive
legends.
<F2> Constituted a sale of shares to two of the Founders, an
irrevocable trust established for the third Founder's
children (which sale was made at the direction of the
Founder), and Cargill.
<F3> Constituted a sale of shares to existing shareholders (two
Founders and the SSIM Funds).
<F4> Constituted a sale of shares to existing shareholders (the
Founders and the SSIM Funds).
<F5> Exercise of Warrant issued to Cargill on July 15, 1993.
<F6> Constituted a sale of shares to existing shareholders (the
SSIM Funds and Cargill).
II-3
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<PAGE>
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
1.1 Proposed form of Underwriting Agreement.+
3.1 The Company's Certificate of Incorporation, filed with
the Delaware Secretary of State on November 9, 1995, as
amended.
3.2 The Company's Bylaws.
4.1 Proposed form of Trust Indenture
4.2 Proposed form of Note (included in Exhibit 4.1)
5.1 Opinion of Sheppard, Mullin, Richter & Hampton LLP as to
the legality of the securities being registered.+
10.1 Investors Rights Agreement, dated as of July 15,
1993, by and among the Company and certain of its
shareholders.*
10.2 Definitive Commitment, dated July 15, 1993, by and
among the Company, Cargill Financial Services
Corporation and OFL-A Receivables ("OFL-A"), together
with the First Amendment thereto dated June 24, 1994,
and the Third Amendment thereto dated September 29,
1995.*
10.3 Master Contract Repurchase Agreement, dated July 15,
1993, by and among the Company, Cargill Financial
Services Corporation and OFL-A, together with the
First Amendment thereto dated June 24, 1994, the
Amendment thereto dated as of September 15, 1995, and
the Third Amendment thereto dated as of September 29,
1995.*
10.4 Master Contract Servicing Agreement, dated July 15,
1993, by and among the Company, Cargill Financial
Services Corporation and OFL-A, together with the
First Amendment thereto dated June 24, 1994, and the
Amendment thereto dated as of September 15, 1995.*
10.5 Master Contract Custodial Agreement, dated July 15,
1993, by and among the Company, Cargill Financial
Services Corporation, OFL-A and Norwest Bank.*
10.6 Intentionally Omitted
10.7 Subordinated Certificate and Net Interest Margin
Certificate Financing Facility Agreement, dated as of
II-4
Page 126 of 606
<PAGE>
September 1, 1995, by and among OFL-A, Cargill
Financial Services Corporation and Norwest Bank,
together with Supplement No. 1 thereto dated
September 15, 1995.*
10.8 ACC Limited Guarantee, dated as of September 1, 1995,
executed by the Company, relating to Exhibit 10.7.*
10.9 Stock Pledge and Collateral Agency Agreement, dated
as of September 1, 1995, by and among the Company,
Cargill Financial Services Corporation and Norwest
Bank, relating to Exhibit 10.7.*
10.10 Office Lease by and between the Company and Pardee
Construction Company, dated August 6, 1993.*
10.11 Lease Agreement by and among the Company, Thomas E.
Orton, Brannen/Goddard Company, and The Griffin
Company, dated December 1, 1994.*
10.12 The Courtyard Office Lease Agreement by and among the
Company and Metropolitan Life Insurance Company,
dated January 9, 1995.*
10.13 Master Lease Number 137902, dated February 21, 1995,
by and between the Company and Computer Sales
International, Inc.*
10.14 Master Equipment Lease No. 90011, dated September 23,
1994, by and between the Company and Cargill Leasing
Corporation.*
10.15 Master Lease dated June 24, 1994, by and between the
Company and Sun Data, Inc., and related purchase
option.*
10.16 Pooling and Servicing Agreement relating to ACC Auto
Grantor Trust 1995-A dated as of June 1, 1995 by and
among Cargill Financial Services Corporation, ACC
Receivables Corp., the Company and Norwest Bank
Minnesota, NA.*
10.17 Servicer's Indemnification Agreement dated as of
June 2, 1995 between Company and CS First Boston
Corporation.*
10.18 Indemnification Agreement dated as of June 1, 1995 by
and among Cargill Financial Services Corporation, the
Company, ACC Receivables Corp., Financial Security
Assurance, Inc. and CS First Boston Corporation.*
II-5
Page 127 of 606
<PAGE>
10.19 Insurance and Indemnity Agreement dated as of June 1,
1995 by and among Financial Security Assurance, Inc.,
Cargill Financial Services Corporation, the Company
and ACC Receivables.*
10.20 Purchase Agreement and Assignment dated as of June 1,
1995, between the Company and ACC Receivables.*
10.21 Pooling and Servicing Agreement relating to ACC Auto
Grantor Trust 1995-B dated as of September 1, 1995 by
and among Cargill Financial Services Corporation, ACC
Receivables Corp., the Company, Norwest Bank
Minnesota, NA, and Norwest Bank.*
10.22 Servicer's Indemnification Agreement dated as of
August 30, 1995, between the Company and CS First
Boston Corporation.*
10.23 Indemnification Agreement dated as of September 1,
1995 by and among Cargill Financial Services
Corporation, the Company, ACC Receivables Corp.,
Financial Security Assurance, Inc. and CS First
Boston.*
10.24 Insurance and Indemnity Agreement dated as of
September 1, 1995 by and among Cargill Financial
Services Corporation, the Company and ACC
Receivables.*
10.25 Master Spread Account Agreement dated as of June 1,
1995, by and among ACC Receivables, the Company,
Financial Security Assurance, Inc., and Norwest Bank,
together with the Series 1995-B Supplement thereto
dated as of September 1, 1995, the Amendment thereto
dated August 28, 1995, and the Amendment thereto
dated September 15, 1995.*
10.26 Purchase Agreement and Assignment dated as of
September 1, 1995, between the Company and ACC
Receivables.*
10.27 Employment Agreement by and between the Company and
Rocco J. Fabiano.*
10.28 Employment Agreement by and between the Company and
Gary S. Burdick.*
10.29 Employment Agreement by and between the Company and
Rellen M. Stewart.*
II-6
Page 128 of 606
<PAGE>
10.30 Form of Indemnification Agreement between ACC
Consumer Finance Corporation and certain of its
directors and officers.*
10.31 Tax Sharing Agreement, dated July 15, 1993, between
the Company and OFL-A.*
10.32 Intentionally Omitted
10.33 The Company's 401(k) Salary Savings Plan and Trust
Agreement, effective as of February 1, 1994.*
10.34 The Company's 1995 Stock Option Plan.*
10.35 The Company's Directors' 1995 Stock Option Plan.*
10.36 Consulting Agreement dated as of October 17, 1995, by
and between the Company and Strome Susskind
Investment Management, L.P.*
10.37 Amendment and Waiver Concerning Existing Agreements
dated as of January 23, 1996, by and among the
Company, Strome Partners, L.P., Strome Offshore
Limited, Rocco J. Fabiano, Gary S. Burdick, Rellen M.
Stewart and Cargill.*
10.38 Fourth Amendment to Master Contract Repurchase
Agreement dated as of March 31, 1996, by and among
Norwest Bank, Cargill and OFL-A.*
10.39 Third Amendment to Investor Rights Agreement dated as
of March 31, 1996, by and among the Company, Strome
Partners, L.P., Strome Offshore Limited, Rocco J.
Fabiano, Gary S. Burdick, Rellen M. Stewart and
Cargill.*
10.40 First Amendment to Subordinated Certificate and Net
Interest Margin Certificate Financing Facility
Agreement*
10.41 Pooling and Servicing Agreement relating to ACC Auto
Grantor Trust 1996-A dated as of March 1, 1996 by and
among Cargill Financial Services Corporation, ACC
Receivables Corp., the Company and Norwest Bank
Minnesota, NA.*
10.42 Servicer's Indemnification Agreement dated as of
March 1, 1996 between the Company and CS First Boston
Corporation.*
10.43 Indemnification Agreement dated as of March 1, 1996
by and among Cargill Financial Services Corporation,
II-7
Page 129 of 606
<PAGE>
the Company, ACC Receivables Corp., Financial
Security Assurance, Inc. and CS First Boston
Corporation.*
10.44 Insurance and Indemnity Agreement dated as of
March 1, 1996 among Financial Security Assurance,
Inc., Cargill Financial Services Corporation, the
Company and ACC Receivables Corp.*
10.45 Series 1996-A Supplement dated as of March 1, 1996 to
the Master Spread Account Agreement dated as of
June 1, 1995 among ACC Receivables Corp., Financial
Security Assurance, Inc. and Norwest Bank.*
10.46 Acknowledgment and Assignment dated as of
February 29, 1996 by and between the Company and
OFL-A.*
10.47 Equipment Lease dated November 8, 1995, by and
between the Company and Sun Data, Inc., and related
purchase option.*
10.48 Agreement of Lease dated March 1996 by and between
American Trading Real Estate Properties, Inc. and the
Company.*
10.49 Sublease dated April 1996 by and between the Company
and First Fidelity Thrift & Loan Association.*
10.50 Pooling and Servicing Agreement relating to ACC Auto
Grantor Trust 1996-A dated as of June 1, 1996 by and
among Cargill Financial Services Corporation, ACC
Receivables Corp., the Company and Norwest Bank
Minnesota, NA.
10.51 Servicer's Indemnification Agreement dated as of June
1, 1996 between the Company and CS First Boston
Corporation.
10.52 Indemnification Agreement dated as of June 1, 1996 by
and among Cargill Financial Services Corporation, the
Company, ACC Receivables Corp., Financial Security
Assurance, Inc. and CS First Boston Corporation.
10.53 Insurance and Indemnity Agreement dated as of June 1,
1996 among Financial Security Assurance, Inc.,
Cargill Financial Services Corporation, the Company
and ACC Receivables Corp.+
10.54 Series 1996-B Supplement dated as of June 1, 1996 to
the Master Spread Account Agreement dated as of
II-8
Page 130 of 606
<PAGE>
June 1, 1995 among ACC Receivables Corp., Financial
Security Assurance, Inc. and Norwest Bank.
10.55 Acknowledgment and Assignment dated as of May 31,
1996 by and between the Company and OFL-A.
10.56 Presidential Circle Standard Office Lease by and
between the Company and Colony Presidential Partners,
LP, dated June 11, 1996.
10.57 Office Building Lease by and between the Company and
Plaza Holdings, Inc., dated August 23, 1996.
11.1 Statement of Computation of Weighted Average Shares
Outstanding.
12.1 Statement of Computation of Ratios.
21.1 List of Subsidiaries.
23.1 Consent of Sheppard, Mullin, Richter & Hampton LLP
(included in Exhibit 5.1)+.
23.2 Consent of independent auditors.
24.1 Power of Attorney (included on signature page).
25.1 Form T-1, Statement of Eligibility and Qualification
under the Trust Indenture Act of 1939 of Trustee.
27.1 Financial Data Schedule.
- ---------------------------
* Incorporated by reference to exhibits filed with the Commission in
the Company's Registration Statement on Form S-1 (Registration No.
33-98626).
+ To be Filed by Amendment.
II-9
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<PAGE>
Item 17 Undertakings.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the
Articles of Incorporation or Bylaws of the Registrant and the Delaware
General Corporations Law or otherwise, the Registrant has been
informed that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed
in the Securities Act of 1933, as amended, and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered hereunder,
the Registrant will, unless in the opinion of its counsel the matter
has already been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the
Securities Act of 1933, as amended, and shall be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes:
1. that for purposes of determining any liability under the
Securities Act of 1933, as amended, the information omitted
from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act of 1933, as amended, shall be deemed to be
part of this registration statement as of the time it was
declared effective.
2. that for the purpose of determining any liability under the
Securities Act of 1933, as amended, each such post-effective
amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering
thereof.
3. to provide to the underwriter at the closing specified in the
underwriting agreements certificates in such denominations
and registered in such names as required by the underwriter
to permit prompt delivery to each purchaser.
II-10
Page 132 of 606
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-1
and has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the County of
San Diego, State of California, on September 24, 1996.
ACC CONSUMER FINANCE CORPORATION
By /s/ Rocco J. Fabiano
------------------------------
Rocco J. Fabiano, Chairman of the
Board and Chief Executive Officer
By /s/ Rellen M. Stewart
------------------------------
Rellen M. Stewart, Chief Operating
Officer, Chief Financial Officer
and Treasurer
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Rocco J.
Fabiano, Gary S. Burdick and Rellen M. Stewart, jointly and
severally, his attorneys-in-fact, each with the power of
substitution, for him in any and all capacities, and sign any and
all amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with the exhibits
thereto, and any other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that each of said
attorneys-in-fact, or a substitute or substitutes, may do or
cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933,
this Registration statement has been signed below by the
II-11
Page 133 of 606
<PAGE>
following persons on behalf of the registrant and in the
capacities indicated.
SIGNATURE CAPACITY DATE
- --------- -------- ----
/s/ Rocco J. Fabiano September 24, 1996
- ----------------------- ------------------
Rocco J. Fabiano Chairman of the Board and
Chief Executive Officer
/s/ Gary S. Burdick September 24, 1996
- ----------------------- ------------------
Gary S. Burdick President
/s/ Rellen M. Stewart September 24, 1996
- ----------------------- ------------------
Rellen M. Stewart Chief Operating Officer, Chief
Financial Officer and Treasurer
/s/ Shaemus A. Garland September 24, 1996
- ----------------------- ------------------
Shaemus A. Garland Controller
/s/ Ethan J. Falk September 24, 1996
- ----------------------- ------------------
Ethan J. Falk Director
/s/ Jack P. Fitzpatrick September 24, 1996
- ----------------------- ------------------
Jack P. Fitzpatrick Director
/s/ Jeffrey S. Lambert September 24, 1996
- ----------------------- ------------------
Jeffrey S. Lambert Director
/s/ Jeffrey E. Susskind September 24, 1996
- ----------------------- ------------------
Jeffrey E. Susskind Director
II-12
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<PAGE>
EXHIBIT INDEX
-------------
Exhibit
No. Description Page
- -----------------------------------------------------------------------------
1.1 Proposed form of Underwriting Agreement.+
3.1 The Company's Certificate of Incorporation, filed with
the Delaware Secretary of State on November 9, 1995, as
amended. 141
3.2 The Company's Bylaws. 170
4.1 Proposed form of Trust Indenture 198
4.2 Proposed form of Note (included in Exhibit 4.1)
5.1 Opinion of Sheppard, Mullin, Richter & Hampton LLP as to
the legality of the securities being registered.+
10.1 Investors Rights Agreement, dated as of July 15,
1993, by and among the Company and certain of its
shareholders.*
10.2 Definitive Commitment, dated July 15, 1993, by and
among the Company, Cargill Financial Services
Corporation and OFL-A Receivables ("OFL-A"), together
with the First Amendment thereto dated June 24, 1994,
and the Third Amendment thereto dated September 29,
1995.*
10.3 Master Contract Repurchase Agreement, dated July 15,
1993, by and among the Company, Cargill Financial
Services Corporation and OFL-A, together with the
First Amendment thereto dated June 24, 1994, the
Amendment thereto dated as of September 15, 1995, and
the Third Amendment thereto dated as of September 29,
1995.*
10.4 Master Contract Servicing Agreement, dated July 15,
1993, by and among the Company, Cargill Financial
Services Corporation and OFL-A, together with the
First Amendment thereto dated June 24, 1994, and the
Amendment thereto dated as of September 15, 1995.*
10.5 Master Contract Custodial Agreement, dated July 15,
1993, by and among the Company, Cargill Financial
Services Corporation, OFL-A and Norwest Bank.*
10.6 Intentionally Omitted
Page 135 of 606
<PAGE>
10.7 Subordinated Certificate and Net Interest Margin
Certificate Financing Facility Agreement, dated as of
September 1, 1995, by and among OFL-A, Cargill
Financial Services Corporation and Norwest Bank,
together with Supplement No. 1 thereto dated
September 15, 1995.*
10.8 ACC Limited Guarantee, dated as of September 1, 1995,
executed by the Company, relating to Exhibit 10.7.*
10.9 Stock Pledge and Collateral Agency Agreement, dated
as of September 1, 1995, by and among the Company,
Cargill Financial Services Corporation and Norwest
Bank, relating to Exhibit 10.7.*
10.10 Office Lease by and between the Company and Pardee
Construction Company, dated August 6, 1993.*
10.11 Lease Agreement by and among the Company, Thomas E.
Orton, Brannen/Goddard Company, and The Griffin
Company, dated December 1, 1994.*
10.12 The Courtyard Office Lease Agreement by and among the
Company and Metropolitan Life Insurance Company,
dated January 9, 1995.*
10.13 Master Lease Number 137902, dated February 21, 1995,
by and between the Company and Computer Sales
International, Inc.*
10.14 Master Equipment Lease No. 90011, dated September 23,
1994, by and between the Company and Cargill Leasing
Corporation.*
10.15 Master Lease dated June 24, 1994, by and between the
Company and Sun Data, Inc., and related purchase
option.*
10.16 Pooling and Servicing Agreement relating to ACC Auto
Grantor Trust 1995-A dated as of June 1, 1995 by and
among Cargill Financial Services Corporation, ACC
Receivables Corp., the Company and Norwest Bank
Minnesota, NA.*
10.17 Servicer's Indemnification Agreement dated as of
June 2, 1995 between Company and CS First Boston
Corporation.*
10.18 Indemnification Agreement dated as of June 1, 1995 by
and among Cargill Financial Services Corporation, the
Company, ACC Receivables Corp., Financial Security
Assurance, Inc. and CS First Boston Corporation.*
10.19 Insurance and Indemnity Agreement dated as of June 1,
1995 by and among Financial Security Assurance, Inc.,
Cargill Financial Services Corporation, the Company
and ACC Receivables.*
Page 136 of 606
<PAGE>
10.20 Purchase Agreement and Assignment dated as of June 1,
1995, between the Company and ACC Receivables.*
10.21 Pooling and Servicing Agreement relating to ACC Auto
Grantor Trust 1995-B dated as of September 1, 1995 by
and among Cargill Financial Services Corporation, ACC
Receivables Corp., the Company, Norwest Bank
Minnesota, NA, and Norwest Bank.*
10.22 Servicer's Indemnification Agreement dated as of
August 30, 1995, between the Company and CS First
Boston Corporation.*
10.23 Indemnification Agreement dated as of September 1,
1995 by and among Cargill Financial Services
Corporation, the Company, ACC Receivables Corp.,
Financial Security Assurance, Inc. and CS First
Boston.*
10.24 Insurance and Indemnity Agreement dated as of
September 1, 1995 by and among Cargill Financial
Services Corporation, the Company and ACC
Receivables.*
10.25 Master Spread Account Agreement dated as of June 1,
1995, by and among ACC Receivables, the Company,
Financial Security Assurance, Inc., and Norwest Bank,
together with the Series 1995-B Supplement thereto
dated as of September 1, 1995, the Amendment thereto
dated August 28, 1995, and the Amendment thereto
dated September 15, 1995.*
10.26 Purchase Agreement and Assignment dated as of
September 1, 1995, between the Company and ACC
Receivables.*
10.27 Employment Agreement by and between the Company and
Rocco J. Fabiano.*
10.28 Employment Agreement by and between the Company and
Gary S. Burdick.*
10.29 Employment Agreement by and between the Company and
Rellen M. Stewart.*
10.30 Form of Indemnification Agreement between ACC
Consumer Finance Corporation and certain of its
directors and officers.*
10.31 Tax Sharing Agreement, dated July 15, 1993, between
the Company and OFL-A.*
10.32 Intentionally Omitted
10.33 The Company's 401(k) Salary Savings Plan and Trust
Agreement, effective as of February 1, 1994.*
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<PAGE>
10.34 The Company's 1995 Stock Option Plan.*
10.35 The Company's Directors' 1995 Stock Option Plan.*
10.36 Consulting Agreement dated as of October 17, 1995, by
and between the Company and Strome Susskind
Investment Management, L.P.*
10.37 Amendment and Waiver Concerning Existing Agreements
dated as of January 23, 1996, by and among the
Company, Strome Partners, L.P., Strome Offshore
Limited, Rocco J. Fabiano, Gary S. Burdick, Rellen M.
Stewart and Cargill.*
10.38 Fourth Amendment to Master Contract Repurchase
Agreement dated as of March 31, 1996, by and among
Norwest Bank, Cargill and OFL-A.*
10.39 Third Amendment to Investor Rights Agreement dated as
of March 31, 1996, by and among the Company, Strome
Partners, L.P., Strome Offshore Limited, Rocco J.
Fabiano, Gary S. Burdick, Rellen M. Stewart and
Cargill.*
10.40 First Amendment to Subordinated Certificate and Net
Interest Margin Certificate Financing Facility
Agreement*
10.41 Pooling and Servicing Agreement relating to ACC Auto
Grantor Trust 1996-A dated as of March 1, 1996 by and
among Cargill Financial Services Corporation, ACC
Receivables Corp., the Company and Norwest Bank
Minnesota, NA.*
10.42 Servicer's Indemnification Agreement dated as of
March 1, 1996 between the Company and CS First Boston
Corporation.*
10.43 Indemnification Agreement dated as of March 1, 1996
by and among Cargill Financial Services Corporation,
the Company, ACC Receivables Corp., Financial
Security Assurance, Inc. and CS First Boston
Corporation.*
10.44 Insurance and Indemnity Agreement dated as of
March 1, 1996 among Financial Security Assurance,
Inc., Cargill Financial Services Corporation, the
Company and ACC Receivables Corp.*
10.45 Series 1996-A Supplement dated as of March 1, 1996 to
the Master Spread Account Agreement dated as of
June 1, 1995 among ACC Receivables Corp., Financial
Security Assurance, Inc. and Norwest Bank.*
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<PAGE>
10.46 Acknowledgment and Assignment dated as of
February 29, 1996 by and between the Company and
OFL-A.*
10.47 Equipment Lease dated November 8, 1995, by and
between the Company and Sun Data, Inc., and related
purchase option.*
10.48 Agreement of Lease dated March 1996 by and between
American Trading Real Estate Properties, Inc. and the
Company.*
10.49 Sublease dated April 1996 by and between the Company
and First Fidelity Thrift & Loan Association.*
10.50 Pooling and Servicing Agreement relating to ACC Auto
Grantor Trust 1996-A dated as of June 1, 1996 by and
among Cargill Financial Services Corporation, ACC
Receivables Corp., the Company and Norwest Bank
Minnesota, NA. 283
10.51 Servicer's Indemnification Agreement dated as of June
1, 1996 between the Company and CS First Boston
Corporation. 428
10.52 Indemnification Agreement dated as of June 1, 1996 by
and among Cargill Financial Services Corporation, the
Company, ACC Receivables Corp., Financial Security
Assurance, Inc. and CS First Boston Corporation. 438
10.53 Insurance and Indemnity Agreement dated as of June 1,
1996 among Financial Security Assurance, Inc.,
Cargill Financial Services Corporation, the Company
and ACC Receivables Corp.+
10.54 Series 1996-B Supplement dated as of June 1, 1996 to
the Master Spread Account Agreement dated as of
June 1, 1995 among ACC Receivables Corp., Financial
Security Assurance, Inc. and Norwest Bank. 455
10.55 Acknowledgment and Assignment dated as of May 31,
1996 by and between the Company and OFL-A. 469
10.56 Presidential Circle Standard Office Lease by and
between the Company and Colony Presidential Partners,
LP, dated June 11, 1996. 471
10.57 Office Building Lease by and between the Company and
Plaza Holdings, Inc., dated August 23, 1996. 537
11.1 Statement of Computation of Weighted Average Shares
Outstanding.
12.1 Statement of Computation of Ratios. 594
Page 139 of 606
<PAGE>
21.1 List of Subsidiaries. 595
23.1 Consent of Sheppard, Mullin, Richter & Hampton LLP
(included in Exhibit 5.1)+.
23.2 Consent of independent auditors. 596
24.1 Power of Attorney (included on signature page).
25.1 Form T-1, Statement of Eligibility and Qualification
under the Trust Indenture Act of 1939 of Trustee. 597
27.1 Financial Data Schedule.
Page 140 of 606
<PAGE>
EXHIBIT 3.1
State of Delaware
Office of the Secretary of State PAGE 1
-----------------------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "ACC CONSUMER FINANCE CORPORATION", FILED IN THIS OFFICE ON THE
NINTH DAY OF NOVEMBER, A.D. 1995, AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ Edward J. Freel
[seal] -----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 7706613
DATE: 11-09-95
Page 141 of 606
<PAGE>
CERTIFICATE OF INCORPORATION
OF
ACC CONSUMER FINANCE CORPORATION
ARTICLE I.
The name of the Corporation is ACC CONSUMER FINANCE CORPORATION.
ARTICLE II.
The address of the registered office of the Corporation in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington,
County of New Castle. The name of its registered agent at that address is The
Corporation Trust Company.
ARTICLE III.
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware (the "GCL").
ARTICLE IV.
A. Authorized Common Stock and Preferred Stock. The total authorized
number of shares of the Corporation shall be 20,000,000 shares, consisting of
18,000,000 shares designated as Common Stock, $.001 par value, and 2,000,000
shares designated as Preferred Stock, $.001 par value. Of the authorized shares
of Preferred Stock, 162,831 are hereby designated as Series A Preferred Stock;
11,538 are hereby designated as Series B Preferred Stock; and 1,825,631 shares
of Preferred Stock may be established and designated by the Board of Directors
of the Corporation, and thereafter issued, as described below.
B. Powers of Board of Directors to Establish and Designate Series of
Preferred Stock. In addition to Series A Preferred Stock and Series B Preferred
Stock, described below, shares of the Preferred Stock may be issued from time to
time in one or more other series. The Board of Directors of the Corporation is
hereby expressly authorized to establish and designate one or more additional
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<PAGE>
series of the Preferred Stock, to fix the number of shares constituting each
series, and to fix the designations and the powers, preferences, qualifications,
limitations, restrictions and dividend, conversion, redemption, distribution,
liquidation, special voting and other rights of the shares of each series and
the variations of the relative powers, rights, preferences, qualifications,
limitations and restrictions as between series, and to increase and to decrease
(but not below the number of shares of such series then outstanding) the number
of shares constituting each such additional series. Such determinations may be
fixed by a resolution or resolutions adopted by the Board of Directors.
C. Particular Rights, Preferences, Privileges and Restrictions (Other than
Voting Rights) of the Series A Preferred Stock and the Series B Preferred Stock.
1. Designation of Preferred. 162,831 shares of Preferred Stock are
designated Series A Preferred Stock (the "Series A Preferred") and 11,538 shares
of Preferred Stock are designated Series B Preferred Stock ("the Series B
Preferred") (the Series A Preferred and the Series B Preferred are collectively
referred to herein as the "Preferred"), with the rights, preferences and
privileges specified herein.
2. Dividend Rights of Preferred. The holders of the then outstanding
shares of Preferred shall be entitled to receive dividends at the rate of $1.33
per share of Series A Preferred per annum and $3.90 per share of Series B
Preferred per annum when, as and if declared by the Board of Directors out of
any funds legally available therefor, prior and in preference to any declaration
or payment of any dividend on the Common Stock ("Common"), and/or any other
series of Preferred Stock established and designated by the Board of Directors
as described above, of the Corporation (other than dividends and related
declarations of dividends payable to holders of Common and payable in Common or
other securities and rights convertible into or entitling the holder thereof to
receive, directly or indirectly, additional shares of Common). Such dividends
shall be payable and accumulate annually and shall be cumulative whether or not
there are funds legally available therefor and whether or not declared by the
Board of Directors. Unpaid dividends shall continue to accumulate annually on
each such share of Preferred until the date of payment of any unpaid cumulative
dividends, provided that unpaid dividends thereafter shall continue to
accumulate hereunder. No interest (or equivalent) shall be earned or accrued on
any unpaid cumulative dividends. No holder of shares of the Corporation's stock
shall be entitled to any right or remedy by virtue of the failure to declare or
pay any cumulative dividends. The Board shall not be obligated to declare
dividends, notwithstanding the availability of funds for that purpose, and in no
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<PAGE>
event shall any dividend be paid prior to the earlier of (i) July 8, 1998,
(ii) thirty (30) days following the closing of a firm commitment underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Act"), covering the offer and sale of
Common (whether for the account of the Corporation or for the account of one or
more stockholders of the Corporation) to the public at an aggregate offering
price of not less than $7,500,000 and at a public offering price (prior to
underwriters' discounts and expenses) equal to or exceeding $75 per share of
Common (as adjusted for any stock dividends, combinations or splits with respect
to such shares) (the "Company IPO"), (iii) a liquidation of the Corporation (as
described in Section 3 below) or (iv) any redemption of the Preferred pursuant
to Section 5 below.
No dividends (other than those to holders of Common payable solely
in Common, described above and discussed in Section 4c(6)) shall be declared or
paid on any Common and/or any other series of Preferred Stock established and
designated by the Board of Directors as described above, during any fiscal year
of the Corporation until the full annual dividend on the Preferred (and any
dividends from prior year(s) accumulated but unpaid) shall have been paid or
declared and set apart. No dividend shall accumulate or be paid or payable for
any partial period.
Dividends, if paid, or if declared and set apart for payment, must
be paid contemporaneously on all series of Preferred for which any shares are
issued and outstanding, and, if less than full dividends are paid or declared
and set apart for payment, the same percentage of the dividend rate shall be
paid on or declared and set apart for payment for each series of Preferred for
which any shares are issued and outstanding.
3. Liquidation Preference.
a. In the event of any liquidation, dissolution or winding up
of the Corporation, either voluntary or involuntary, the holders of the
Preferred shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the Corporation to the
holders of the Common and/or any other series of Preferred Stock established and
designated by the Board of Directors as described above, by reason of their
ownership thereof, the sum of (i) $33.17 per share for each share of Series A
Preferred and $65.00 per share of Series B Preferred then held by them and (ii)
an amount equal to all declared and/or accumulated but unpaid dividends on the
Series A Preferred and Series B Preferred then held by them. If, upon the
occurrence of such event, the assets and funds thus distributed among the
holders of the Series A Preferred and Series B Preferred shall be
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Page 144 of 606
<PAGE>
insufficient to permit the payment to such holders of the full aforesaid
preferential amount, then the entire assets and funds of the Corporation legally
available for distribution shall be distributed ratably among the holders of the
Series A Preferred and Series B Preferred in proportion to the preferential
amount each such holder would have been entitled to receive pursuant to this
Section 3 if such distribution had been sufficient to permit the full payment of
such preferential amount. After payment has been made to the holders of the
Series A Preferred and Series B Preferred of the full amounts to which they
shall be entitled as aforesaid, the holders of any other series of Preferred
Stock shall be entitled to receive assets as provided by the Board of Directors
upon establishment and designation of such series and the holders of the Common
shall be entitled to receive all remaining assets of the Corporation, if any,
pro rata based on the number of shares of Common then outstanding.
b. For purposes of this Section 3, a merger or consolidation
of the Corporation with or into any other corporation or corporations (other
than a merger or consolidation effected solely for the purpose of changing the
Corporation's state of incorporation), or the merger of any other corporation or
corporations into the Corporation, in which consolidation or merger the
stockholders of the Corporation receive distributions in cash or in securities
of another corporation or corporations as a result of such consolidation or
merger, or a sale of all or substantially all of the assets of the Corporation
(other than securitization or similar transactions in the ordinary course of the
Corporation's business), shall be treated as a liquidation, dissolution or
winding up of the Corporation.
4. Conversion. The holders of the Preferred shall
have conversion rights as follows (the "Conversion Rights"):
a. Optional and Automatic Conversion. Each share of the
Preferred shall be convertible at the option of the holder thereof, without
payment of additional consideration, at any time after the date of issuance of
such share, and prior to five (5) days preceding the date of redemption thereof,
at the office of the Corporation or any transfer agent for the Preferred, into
such number of fully paid and nonassessable shares of Common as is determined by
dividing $33.17 per share of Series A Preferred and $65.00 per share of Series B
Preferred, by the Series A Conversion Price and Series B Conversion Price,
respectively, determined as hereinafter provided, in effect at the time of
conversion. The price at which shares of Common shall be deliverable upon
conversion of the Series A Preferred (the "Series A Conversion Price") shall
initially be $33.17 per share of Common and the price at which shares of Common
shall be deliverable upon conversion of the Series B Preferred (the Series B
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Page 145 of 606
<PAGE>
Conversion Price") shall be $65.00 per share of Common. The term "Conversion
Price" as used hereinafter shall mean the Series A Conversion Price and/or
the Series B Conversion Price, as required by the context. Such initial
Conversion Price shall be subject to adjustment as hereinafter provided.
Each share of Preferred shall automatically be converted into
shares of Common at the then effective Conversion Price in the event of either
(i) the Company IPO, or (ii) with respect to the Series A Preferred, the written
consent of holders of more than 50% of the then outstanding shares of Series A
Preferred voting as a class and, with respect to the Series B Preferred, the
written consent of holders of more than 50% of the then outstanding shares of
Series B Preferred voting as a class. In the event of the automatic conversion
of either series of Preferred upon a public offering as aforesaid, the
conversion shall be deemed to have occurred automatically at the closing of such
public offering.
b. Mechanics of Conversion. No fractional shares of Common
shall be issued upon conversion of the Preferred. In lieu of any fractional
shares to which the holder would otherwise be entitled, the Corporation shall
pay cash equal to such fraction multiplied by the then effective Conversion
Price. Before any holder of Preferred shall be entitled to convert the same into
full shares of Common, it shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or of any transfer
agent for the Preferred, and shall give written notice to the Corporation at
such office that it elects to convert the same (except that no such written
notice of election to convert shall be necessary in the event of an automatic
conversion pursuant to Section 4a). The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Preferred a certificate or certificates, registered in such names as specified
by the holder, for the number of shares of Common to which he shall be entitled
as aforesaid and a check payable to the holder in the amount of any cash amounts
payable as the result of a conversion into fractional shares of Common. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of Preferred to be
converted, and the person or persons entitled to receive the shares of Common
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common on such date (except that in the
event of an automatic conversion pursuant to clause (i) of the second paragraph
of Section 4a such conversion shall be deemed to have been made immediately
prior to the closing of the offering referred to in such clause (i) of Section
4a). If the conversion is in connection with an underwritten offer of
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<PAGE>
securities registered pursuant to the Act, the conversion may, at the option of
any holder tendering Preferred for conversion, be conditioned upon the closing
with the underwriter of the sale of securities pursuant to such offering, in
which event the person(s) entitled to receive the Common issuable upon such
conversion of the Preferred shall not be deemed to have converted such Preferred
until immediately prior to the closing of such sale of securities.
If, on the date of conversion of any share of Preferred, there
are accumulated and unpaid dividends pursuant to Section 2 with respect to such
share, the Corporation shall defer payment of any such accrued but unpaid
dividends until thirty (30) days following the Company IPO or a liquidation of
the Corporation (as described in Section 3 above), whichever occurs first, but
in no event later than July 8, 1998. The Corporation in its sole discretion may
elect to pay any accumulated but unpaid dividends or any portion thereof in cash
or shares of Common. To the extent that the Corporation elects to convert any
such accumulated dividends to Common, the number of shares of Common to be
delivered thereby shall be determined, with respect to each share of Preferred
so converted, by dividing (i) the aggregate amount of then accumulated but
unpaid dividends with respect to such share by (ii) the greater of (A) the fair
market value per share of the Common on the date of conversion as determined in
good faith by the Corporation's Board of Directors, or (B) the Conversion Price
in effect on such conversion date with respect to such share of Preferred.
c. Adjustments to Conversion Price for
Diluting Issues.
(1) Special Definitions. For purposes of
this Section 4c, the following definitions shall apply:
(a) "Options" shall mean rights,
options or warrants to subscribe for, purchase or otherwise acquire either
Common or Convertible Securities.
(b) "Original Issue Date" shall mean
July 15, 1993 with respect to the Series A Preferred, and September 12, 1994
with respect to the Series B Preferred.
(c) "Convertible Securities" shall mean
any evidences of indebtedness, shares (other than Preferred) or other securities
convertible into or exchangeable for Common.
(d) "Additional Shares of Common"
shall mean all shares of Common issued (or, pursuant to Section 4c(3),
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Page 147 of 606
<PAGE>
deemed to be issued) by the Corporation, other than shares of Common
issued or issuable or deemed to be issued:
(i) upon conversion of shares of
Series A and/or Series B Preferred;
(ii) as a result of an adjustment
made pursuant to Sections 4c(4), 4c(6), or 4c(7);
(iii) to officers, directors,
employees of and/or consultants to, the Corporation pursuant to
stock option or purchase plans or agreements approved by the
Board of Directors;
(iv) relating to 1,696 shares of
Common originally issued to Cargill Financial Services Corporation as shares of
common stock of American Credit Corporation, a California corporation, on July
24, 1994;
(v) as a dividend or distribution
on Series A Preferred or Series B Preferred; or
(vi) by way of dividend or other
distribution on shares of Common excluded from the definition of Additional
Shares of Common by the foregoing clauses (i), (ii), (iii), (iv), (v) or this
clause (vi).
(2) No Adjustment of Conversion Price. No
adjustment in the Conversion Price of a particular share of Preferred shall be
made in respect of the issuance of Additional Shares of Common unless the
consideration per share for an Additional Share of Common issued or deemed to be
issued by the Corporation is less than the Conversion Price in effect on the
date of, and immediately prior to such issue, for such share of Preferred.
(3) Deemed Issue of Additional Shares of
Common.
(a) Options and Convertible Securities.
In the event the Corporation at any time or from time to time shall issue any
Options or Convertible Securities or shall fix a record date for the
determination of holders of any class of securities entitled to receive any such
Options or Convertible Securities, then the maximum number of shares (as set
forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Common issuable
upon the exercise of such Options or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible Securities,
shall be deemed to be Additional Shares of Common issued as of the time of such
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<PAGE>
issue or, in case such a record date shall have been fixed, as of the close of
business on such record date, provided that Additional Shares of Common shall
not be deemed to have been issued unless the consideration per share (determined
pursuant to Section 4c(5) hereof) of such Additional Shares of Common would be
less than the Conversion Price in effect on the date of and immediately prior to
such issue, or such record date, as the case may be, and provided further that
in any such case in which Additional Shares of Common are deemed to be issued;
(i) no further adjustment in the
Conversion Price shall be made upon the subsequent issue of Convertible
Securities or shares of Common upon the exercise of such Options or conversion
or exchange of such Convertible Securities;
(ii) if such Options or Convertible
Securities by their terms provide, with the passage of time or otherwise, for
any increase in the consideration payable to the Corporation, or decrease in the
number of shares of Common issuable, upon the exercise, conversion or exchange
thereof, the Conversion Price computed upon the original issue thereof (or upon
the occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or decrease insofar as it
affects such Options or the rights of conversion or exchange under such
Convertible Securities; and
(iii) upon the expiration of any
such Options or any rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the Conversion Price computed
upon the original issue thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments based thereon, shall, upon such
expiration, be recomputed as if:
1. in the case of
Convertible Securities or Options for Common the only Additional Shares of
Common issued were the shares of Common, if any, actually issued upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities and the consideration received therefor was the consideration
actually received by the Corporation for the issue of all such Options, whether
or not exercised, plus the consideration actually received by the Corporation
upon such exercise, or for the issue of all such Convertible Securities which
were actually converted or exchanged, plus the additional consideration, if any,
actually received by the Corporation upon such conversion or exchange, and
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<PAGE>
2. in the case of Options
for Convertible Securities only the Convertible Securities, if any, actually
issued upon the exercise thereof were issued at the time of issue of such
Options, and the consideration received by the Corporation for the Additional
Shares of Common deemed to have been then issued was the consideration actually
received by the Corporation for the issue of all such Options, whether or not
exercised, plus the consideration deemed to have been received by the
Corporation upon the issue of the Convertible Securities with respect to which
such Options were actually exercised; and
(iv) no readjustment pursuant to
clause (ii) or (iii) above shall have the effect of increasing the Conversion
Price to an amount which exceeds the lower of (i) the Conversion Price on the
original adjustment date prior to the original adjustment, or (ii) the
Conversion Price that would have resulted from any issuance of Additional Shares
of Common between the original adjustment date and such readjustment date.
(b) Stock Dividends and Subdivisions.
In the event that the Corporation at any time or from time to time shall declare
or pay any dividend on the Common payable in Common, or effect a subdivision of
the outstanding shares of Common into a greater number of shares of Common (by
reclassification or otherwise than by payment of a dividend in Common), then and
in any such event, Additional Shares of Common shall not be deemed to have been
issued, but rather the provisions of Section 4c(6) below shall apply.
(4) Adjustment of Conversion Price Upon
Issuance of Additional Shares of Common. In the event the Corporation shall
issue Additional Shares of Common (including Additional Shares of Common deemed
to be issued pursuant to Section 4c(3)) without consideration or for a
consideration per share less than the Conversion Price in effect on the date of
and immediately prior to such issue, then and in such event, such Conversion
Price shall be reduced, concurrently with such issue, to a price (calculated to
the nearest cent) determined by multiplying such Conversion Price by a fraction,
the numerator of which shall be the number of shares of Common outstanding
immediately prior to such issue plus the number of shares of Common which the
aggregate consideration received by the Corporation for the total number of
Additional Shares of Common so issued would purchase at such Conversion Price
and the denominator of which shall be the number of shares of Common outstanding
immediately prior to such issue plus the number of such Additional Shares of
Common so issued; provided, however, that for the purposes of this Section (4)),
all shares of Common issuable upon exercise of outstanding Options, or upon
conversion of outstanding Convertible Securities, shall be deemed to be
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<PAGE>
outstanding, and immediately after any Additional Shares of Common are deemed
issued pursuant to Section 4c(3), such Additional Shares of Common shall be
deemed to be outstanding.
(5) Determination of Consideration. For
purposes of Section 4c, the consideration received by the Corporation for the
issue of any Additional Shares of Common shall be computed as follows:
(a) Cash and Property: Such
consideration shall:
(i) insofar as it consists of
cash, be computed at the aggregate amount of cash received by the Corporation
excluding amounts paid or payable for accrued interest or accrued dividends;
(ii) insofar as it consists of
property other than cash, be computed at the fair value thereof at the time of
such issue, as determined in good faith by the Corporation's Board of Directors;
and
(iii) in the event Additional
Shares of Common are issued together with other shares or securities or other
assets of the Corporation for consideration which covers both, be the proportion
of such consideration so received, computed as provided in clauses (i) and (ii)
above, as determined in good faith by the Board.
(b) Options and Convertible Securities.
The consideration per share received by the Corporation for Additional Shares of
Common deemed to have been issued pursuant to Section 4c(3)(a), relating to
Options and Convertible Securities, shall be determined by dividing:
(i) the total amount, if any,
received or receivable by the Corporation as consideration for the issue of such
Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent adjustment of
such consideration) payable to the Corporation upon the exercise of such Options
or the conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities; by
(ii) the maximum number of shares
of Common (as set forth in the instruments relating thereto, without
regard to any provision contained therein for a subsequent adjustment
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of such number) issuable upon the exercise of such Options or the conversion
or exchange of such Convertible Securities.
(6) Adjustments for Subdivisions, Dividends,
Combinations or Consolidations of Common.
(a) In the event the outstanding shares
of Common shall be combined or consolidated, by reclassification or otherwise,
into a lesser number of shares of Common, the Conversion Price in effect
immediately prior to such combination or consolidation shall, concurrently with
the effectiveness of such combination or consolidation, be proportionately
increased.
(b) In the event the Corporation shall
declare or pay any dividend on the Common payable in Common or in the event the
outstanding shares of Common shall be subdivided, by reclassification or
otherwise than by payment of a dividend in Common, into a greater number of
shares of Common, the Conversion Price in effect immediately prior to such
dividend or subdivision shall be proportionately decreased:
(i) in the case of any such
dividend, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend, or
(ii) in the case of any such
subdivision, at the close of business on the date immediately prior to the date
upon which such corporate action becomes effective.
If such record date shall have been
fixed and such dividend shall not have been fully paid on the date fixed
therefor, the adjustment previously made in the Conversion Price which became
effective on such record date shall be canceled as of the close of business on
such record date, and thereafter the Conversion Price shall be adjusted as of
the time of actual payment of such dividend.
(7) Adjustments for Other Reclassifications,
Dividends and Distributions. If there occurs any capital reorganization or any
reclassification of the capital stock of the Corporation (other than a
subdivision, dividend, combination, consolidation or other transaction provided
for in Section 2 or Section 4c(6)), each share of Series A Preferred and Series
B Preferred shall thereafter be convertible into the same kind and amounts of
securities or other assets, or both, that were issuable or distributable to the
holders of shares of outstanding Common Stock of the Corporation upon such
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reorganization or reclassification, in respect of that number of shares of
Common Stock into which such shares of Series A Preferred or Series B Preferred
might have been converted immediately prior to such reorganization or
reclassification; and in any such case, appropriate adjustments (as determined
by the Board of Directors) shall be made in the application of the provisions
herein set forth with respect to the rights and interests thereafter of the
holders of Series A Preferred and Series B Preferred to the end that the
provisions of this Certificate of Incorporation shall thereafter be applicable,
as nearly as reasonably may be, in relation to any securities or other assets
thereafter deliverable upon the conversion of the Series A Preferred and Series
B Preferred.
d. No Impairment. The Corporation shall not, by amendment of
this Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Preferred and the Series B
Preferred against impairment.
e. Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 4,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Series A Preferred and/or Series B Preferred, as the case may be, a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Corporation shall, upon
the written request at any time of any holder of Series A Preferred or Series B
Preferred, furnish or cause to be furnished to such holder a like certificate
setting forth (i) such adjustments and readjustments, (ii) the Conversion Price
at the time in effect, and (iii) the number of shares of Common and the amount,
if any, of other property which at the time would be received upon the
conversion of the Series A Preferred or the Series B Preferred.
f. Notices of Record Date. In the event that
the Corporation shall propose at any time:
(1) to declare any dividend or distribution
upon its Common Stock, whether in cash, property, stock or other securities,
whether or not a regular cash dividend and whether or not out of earnings or
earned surplus;
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(2) to offer for subscription pro rata to
the holders of any class or series of its stock any additional
shares of stock of any class or series or other rights;
(3) effect any reclassification or
recapitalization of its Common shares outstanding involving a
change in the Common shares; or
(4) merge or consolidate with or into any
other corporation, or sell, lease or convey all or
substantially all its property or business, or to liquidate,
dissolve or wind up;
then, in connection with each such event, the Corporation shall
send to the holders of the Preferred shares:
(a) at least 10 days' prior written
notice of the date on which a record shall be taken for such dividend,
distribution or subscription rights (and specifying the date on which the
holders of Common shares shall be entitled thereto) or for determining rights to
vote in respect of the matters referred to in (3) and (4) above; and
(b) in the case of the matters referred
to in (3) and (4) above, at least 10 days' prior written notice of the date when
the same shall take place (and specifying, if practicable, or estimating the
date on which the holders of Common shares shall be entitled to exchange their
Common shares for securities or other property deliverable upon the occurrence
of such event).
Each such written notice shall be given
by first class mail, postage prepaid, addressed to the holders of the Preferred
at the address for each such holder as shown on the books of the Corporation.
(g) Common Stock Reserved. The Corporation 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 conversion of the shares of the
Preferred, such number of shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of the Preferred
(including those shares of Preferred issuable upon the exercise of all
outstanding warrants to acquire shares of Preferred), and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Preferred, the
Corporation shall take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
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5. Redemption at Option of Holder.
a. Each holder of shares of the Series A Preferred shall have
the option, but not the obligation, at any time subsequent to five years from
the Original Issue Date of the Series A Preferred, to require the Corporation to
redeem, at the Redemption Price provided for below, all or any part of such
holder's shares of the Series A Preferred as requested by such holder upon
ninety (90) days prior written notice to the Corporation (the "Redemption
Request") specifying the number of shares to be redeemed and the effective date
of such redemption pursuant to this Section 5 (the "Redemption Date").
b. Each holder of shares of the Series B Preferred shall have
the option, but not the obligation, at any time subsequent to two years from the
Original Issue Date of the Series B Preferred, to require the Corporation to
redeem, at the Redemption Price provided for below, all or any part of such
holder's shares of the Series B Preferred pursuant to a Redemption Request
specifying the number of shares to be redeemed and the Redemption Date.
c. The price at which shares of Preferred shall be redeemed
pursuant to this Section 5 (the "Redemption Price") shall be the price per share
(appropriately adjusted for any stock dividends, combinations or splits or
similar events with respect to such shares) that is equal to $33.17 per share of
Series A Preferred (the "Series A Original Issue Price") and $65.00 per share of
Series B Preferred (the "Series B Original Issue Price"), plus all accumulated
and/or declared but unpaid dividends with respect to such share.
d. Within ten (10) days of receipt of any Redemption Request as
provided for in this Section 5, the Corporation shall cause a copy thereof to be
mailed, first class postage prepaid, to each holder of record (at the close of
business on the business day next preceding the day on which such copy is
mailed) of the Preferred, other than the holders requesting redemption pursuant
to such Redemption Request, at the address last shown in the stock books of the
Corporation for such holder. The Corporation shall also include with such copy a
statement notifying such holder of the facts relating to the redemption
requested to be effected pursuant to this Section 5, and informing such holder
of its right to have all or part of its shares of Preferred redeemed pursuant to
this Section 5. Each such other holder shall have the right to require the
Corporation to redeem, on the Redemption Date, all or part of such holder's
shares of Preferred concurrently with the shares to be redeemed pursuant to such
Redemption Request by delivering a written request therefor to the Corporation
specifying the number of shares requested to be redeemed pursuant to this
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Section 5 within thirty (30) days of receipt of such copy of such Redemption
Request by such holder.
e. At least fifteen (15) but no more than thirty (30) days prior
to a Redemption Date, written notice shall be mailed, first class postage
prepaid, to each holder of record (at the close of business on the business day
next preceding the day on which notice is given) of the Preferred to be redeemed
pursuant to this Section 5, at the address last shown on the records of the
Corporation for such holder, notifying such holder of the redemption to be
effected and specifying the number of shares to be redeemed from such holder,
the Redemption Date, the Redemption Price, the place at which payment may be
obtained and calling upon such holder to surrender to the Corporation, in the
manner and at the place designated, his certificate or certificates representing
the shares to be redeemed (the "Redemption Notice"). Except as provided in
Section 5f, on or after the Redemption Date, each holder of Preferred to be
redeemed shall surrender to the Corporation the certificate or certificates
representing such shares, in the manner and at the place designated in the
Redemption Notice, and thereupon the Redemption Price of such shares shall be
payable to the order of the person whose name appears on such certificate or
certificates as the owner thereof and each surrendered certificate shall be
canceled. In the event less than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares.
f. From and after the Redemption Date, unless there shall have
been a default in payment of the Redemption Price, all rights of the holders of
shares of Preferred designated for redemption in the Redemption Notice as
holders of Preferred (except the right to receive the Redemption Price without
interest upon surrender of their certificate or certificates) shall cease with
respect to such shares, and such shares shall not thereafter be transferred on
the books of the Corporation or be deemed to be outstanding for any purpose
whatsoever. If the funds of the Corporation legally available for redemption of
shares of Series A Preferred and Series B Preferred on any Redemption Date are
insufficient to redeem the total number of shares of Series A Preferred and
Series B Preferred to be redeemed on such date, those funds which are legally
available will be used to redeem the maximum possible number of such shares
ratably among the holders of such shares to be redeemed based upon their
holdings of Preferred. For the purpose of determining whether funds are legally
available for redemption of shares of Preferred as provided herein, the
Corporation shall value its assets at the highest amount permissible under
applicable law. The shares of Preferred not redeemed shall remain outstanding
and entitled to all the rights and preferences provided herein. At any time
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thereafter when additional funds of the Corporation are legally available for
the redemption of shares of Preferred such funds will immediately be used to
redeem the balance of the shares which the Corporation has become obliged to
redeem on any Redemption Date, but which it has not redeemed.
g. Subject to Section 5f, on or prior to each Redemption Date,
the Corporation shall deposit the Redemption Price of all shares of Preferred to
be redeemed pursuant to this Section 5 and not yet redeemed with a bank or trust
corporation having aggregate capital and surplus in excess of $100,000,000 as a
trust fund for the benefit of the respective holders of the shares designated
for redemption and not yet redeemed, with irrevocable instructions and authority
to the bank or trust corporation to pay the Redemption Price for such shares to
their respective holders on or after the Redemption Date upon receipt of
notification from the Corporation that such holder has surrendered his share
certificate to the Corporation pursuant to Section 5e above. As of the
Redemption Date, to the extent adequate funds are on hand in the deposit
account, the deposit shall constitute full payment of the shares to their
holders, and from and after the Redemption Date the shares so called for
redemption shall be redeemed and shall be deemed to be no longer outstanding,
and the holders thereof shall cease to be stockholders with respect to such
shares and shall have no rights with respect thereto except the rights to
receive from the bank or trust corporation payment of the Redemption Price of
the shares, without interest, upon surrender of their certificates therefor.
Such instructions shall also provide that any moneys deposited by the
Corporation pursuant to this Section 5g for the redemption of shares thereafter
converted into shares of the Corporation's Common Stock pursuant to Section 4
hereof prior to the Redemption Date shall be returned to the Corporation
forthwith upon such conversion. The balance of any moneys deposited by the
Corporation pursuant to this Section 5g remaining unclaimed at the expiration of
two (2) years following the Redemption Date shall thereafter be returned to the
Corporation upon its request expressed in a resolution of its Board of
Directors.
D. Voting Rights of Stockholders.
1. Voting Rights in General. Except as otherwise required
by law and as provided in Sections 3 and 4 below:
a. each share of Common issued and outstanding shall
have one vote;
b. each share of Preferred issued and outstanding
shall have the number of votes equal to the number of Common shares into
which such share of Preferred is convertible as adjusted from time to time
pursuant to Section 4 above;
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c. the Common and the Preferred shall vote
together as a single class; and
d. each share of Preferred Stock other than
Preferred issued and outstanding shall have the number of votes determined by
the Board of Directors upon establishment and designation of such shares as
described in Section 4 below.
2. Fractional Votes. Notwithstanding the foregoing, fractional
votes by the holders of Preferred shall not be permitted and any fractional
voting rights resulting from the above formula with respect to Preferred (after
aggregating all shares into which shares of Preferred held by each holder could
be converted) shall be rounded to the nearest whole number.
3. Voting Rights for Election of Directors. Notwithstanding
Section 1 above, and so long as at least sixty thousand (60,000) shares of
Preferred remain outstanding, the holders of the Series B Preferred shall be
entitled to elect two (2) directors, the holders of the Common voting together
as a single class shall be entitled to elect one (1) director and all remaining
directors shall be elected by the holders of the Common and Preferred voting
together as a single class. The directors whom the holders of Series B Preferred
shall be entitled to elect voting alone as a class shall both be in Class III;
and the director whom the holders of Common shall be entitled to elect voting
alone as a class shall be in Class II; as such Classes are described in Article
V of this Certificate of Incorporation. At such time as less than sixty thousand
(60,000) shares of Preferred shall be outstanding, and therefore, the Common and
Preferred shall vote together as a single class in the election of all
directors. The holders of shares of Preferred Stock other than Preferred shall
have no voting rights with respect to the election of directors until the
Company IPO, and following the Company IPO such holders shall have such rights
as given by the Board of Directors upon establishment and designation of such
shares.
4. Voting Rights Designated by Board of Directors. Subject to
the provisions of Section 3 above, the Board of Directors shall fix the voting
rights of each share of Preferred Stock other than Preferred at the time of
establishment and designation of such share as provided in this Certificate of
Incorporation.
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E. Covenants.
In addition to any other rights provided by law and so long as
at least sixty thousand (60,000) shares of Preferred remain outstanding, the
Corporation shall not, without first obtaining the affirmative vote or written
consent of:
1. The holders of not less than a majority of all outstanding
shares of Series A Preferred and a majority of all outstanding shares of Series
B Preferred, with each such series voting separately as a single class:
a. alter or change the rights, preferences,
or privileges of the Preferred materially or adversely;
b. increase the authorized number of shares
of Preferred;
c. create any new class or series of stock
or any other securities convertible into equity securities of the Corporation
having a preference over the Preferred with respect to voting rights,
liquidation preferences or dividends; or
d. take any action that results in any
merger or consolidation of the Corporation, any sale of all or substantially all
of the assets of the Corporation (other than securitization or similar
transactions in the ordinary course of the Corporation's business) or any
reorganization of the Corporation's capital structure.
2. The holders of not less than a majority of all outstanding
shares of Series A Preferred, a majority of all outstanding shares of Series B
Preferred, a majority of each additional outstanding series of Preferred Stock,
if any, and a majority of all outstanding shares of Common, each voting
separately as a single class:
a. alter or change the terms or provisions
of Section D above (Voting Rights) or this Section E2a.
F. Residual Rights.
All rights accruing to the outstanding shares of the Corporation not
expressly provided for to the contrary herein shall be vested in the Common,
subject to any rights expressly granted by the Board of Directors with respect
to shares of any series of Preferred Stock (other than Preferred) established
and designated as provided herein.
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G. Certain Repurchases Deemed to be Distributions.
Notwithstanding any other provisions of this Article III, the
corporation may, subject to restrictions imposed by applicable law, make any
necessary distributions in connection with the repurchase of shares of Common
issued to or held by officers, directors or employees of or consultants to the
Corporation upon termination of their employment or services pursuant to
agreements providing for the right of said repurchase between the Corporation
and such person.
ARTICLE V.
The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors. The number of directors which
shall constitute the Board of Directors shall be as specified in the Bylaws of
the Corporation.
The directors shall be divided into three classes, designated Class I,
Class II and Class III. The directors in Class III and one of the directors in
Class II shall be elected pursuant to the provisions of Section D3 of Article IV
of this Certificate of Incorporation, if applicable. Each class shall consist,
as nearly as may be possible, of one-third of the total number of directors
constituting the entire Board of Directors. The term of the initial Class I
directors shall terminate on the date of the 1996 annual meeting of
stockholders; the term of the initial Class II directors shall terminate on the
date of the 1997 annual meeting of stockholders; and the term of the initial
Class III directors shall terminate on the date of the 1998 annual meeting of
stockholders. At each annual meeting of stockholders beginning in 1996,
successors to the class of directors whose term expires at that annual meeting
shall be elected for a three-year term. If the number of directors is changed,
any increase or decrease shall be apportioned among the classes so as to
maintain the number of directors in each class as nearly equal as possible, and
any additional directors of any class elected to fill a vacancy resulting from
an increase in such class shall hold office for a term that shall coincide with
the remaining term of that class, but in no case will a decrease in the number
of directors shorten the term of any incumbent director. A director shall hold
office until the annual meeting for the year in which his term expires and until
his successor shall be elected and shall qualify, subject, however, to prior
death, resignation, retirement, disqualification or removal from office. Any
vacancy on the Board of Directors, howsoever resulting, may be filled by a
majority of the directors then in office, even if less than a quorum, or by a
sole remaining director. Any director elected to fill a vacancy shall hold
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office for a term that shall coincide with the term of the class to which such
director shall have been elected.
ARTICLE VI.
Any or all of the directors of the Corporation may be removed from
office at any time, but only by the affirmative vote of the holders of a
majority, if such removal is for cause, and of the holders of at least
two-thirds, if such removal is without cause, of the outstanding shares of
Voting Stock (as hereinafter defined) of the Corporation, considered for
purposes of this Article VI as one class; provided, however, that a director
elected by a particular class or series as provided in Section D3 of Article IV
of this Certificate of Incorporation may be removed only by the affirmative vote
of the holders of a majority, if such removal is for cause, and of the holders
of at least two-thirds, if such removal is without cause, of the outstanding
shares of the particular class or series of shares that elected such director.
ARTICLE VII.
Elections of directors at an annual or special meeting of stockholders
shall be by written ballot unless the Bylaws of the Corporation shall otherwise
provide.
ARTICLE VIII.
Except as otherwise provided in Article IV, no action may be taken by
the stockholders except at an annual or special meeting of stockholders, and no
action may be taken by stockholders by written consent.
ARTICLE IX.
Special meetings of the stockholders of the Corporation for any
purpose or purposes may be called as provided in the Bylaws of the Corporation.
ARTICLE X.
The affirmative vote of the holders of not less than two-thirds of the
outstanding shares of "Voting Stock" (as hereinafter defined) of the
Corporation, voting as a single class, shall be required for the approval or
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authorization of any "Business Combination" (as hereinafter defined) of the
Corporation with any "Related Person" (as hereinafter defined); provided,
however, that the two-thirds voting requirement shall not be applicable if:
1. The Board of Directors of the Corporation by a majority vote
of the directors then holding office (a) has expressly approved in advance
the acquisition of the outstanding shares of Voting Stock of the Corporation
that caused the Related Person to become a Related Person or (b) has
approved the Business Combination prior to the Related Person involved in
the Business Combination having become a Related Person;
2. The Board of Directors of the Corporation by
a majority vote of the disinterested directors approves the
Business Combination;
3. The Business Combination is solely between
the Corporation and another corporation, 100% of the Voting
Stock of which is owned directly or indirectly by the
Corporation; or
4. The Business Combination is a merger or consolidation and the
cash or fair market value of the property, securities or other consideration
to be received per share by holders of Common Stock of the Corporation in
the Business Combination is not less than the highest per share price (with
appropriate adjustments for recapitalizations and for stock splits, stock
dividends and like distributions) paid by the Related Person in acquiring
any of its holdings of the Corporation's Common Stock.
For the purposes of this Article:
(i) The term "Business Combination" shall mean (a) any merger or
consolidation of the Corporation or a subsidiary with or into a Related Person,
(b) any sale lease, exchange, transfer or other disposition, including, without
limitation, a mortgage or any other security device, of all or any "Substantial
Part" (as hereinafter defined) of the assets either of the Corporation
(including, without limitation, any voting securities of a subsidiary) or of a
subsidiary to a Related Person, (c) any merger or consolidation of a Related
Person with or into the Corporation or a subsidiary of the Corporation, (d) any
sale, lease, exchange, transfer or other disposition of all or any Substantial
Part of the assets of a Related Person to the Corporation or a subsidiary of the
Corporation, (e) the issuance of any securities (other than by way of pro rata
distribution to all stockholders) of the Corporation or a subsidiary of
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the Corporation to a Related Person, (f) the acquisition by the Corporation or a
subsidiary of the Corporation of any securities of a Related Person, (g) any
recapitalization that would have the effect of increasing the voting power of a
Related Person, and (h) any agreement, contract or other arrangement providing
for any of the transactions described in this definition of Business
Combination.
(ii) The term "Related Person" shall mean and include any
individual, corporation, partnership or other person or entity which, together
with its "Affiliates" and "Associates" (as defined on September 1, 1995 in Rule
12b-2 under the Securities Exchange Act of 1934), is the "Beneficial Owner" (as
defined on September 1, 1995 in Rule 13d-3 under the Securities Exchange Act of
1934) of in the aggregate 10% or more of the outstanding Voting Stock of the
Corporation, and any Affiliate or Associate of any such individual, corporation,
partnership or other person or entity.
(iii) The term "Substantial Part" shall mean more than 10% of the
book value of the total assets of the company in question as of the end of its
most recent fiscal year ending prior to the time the determination is being
made.
(iv) Without limitation, any shares of Common Stock of the
Corporation that any Related Person has the right to acquire pursuant to any
agreement, or upon exercise of conversion rights, warrants or options, or
otherwise, shall be deemed beneficially owned by the Related Person.
(v) For the purpose of Section 4 of this Article, the term "other
consideration to be received" shall include, without limitation, Common Stock of
the Corporation retained by its existing public stockholders in the event of a
Business Combination in which the Corporation is the surviving corporation.
(vi) The term "Voting Stock" shall mean all outstanding shares of
capital stock of the Corporation or another corporation entitled to vote
generally in the election of directors (other than Class III directors elected
pursuant to Section D3 of Article III of this Certificate of Incorporation) and
each reference to a proportion of shares of Voting Stock shall refer to such
proportion of the votes entitled to be cast by such shares.
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Nothing contained in this Article X shall be construed to limit any
right conferred by the Corporation's charter documents or the GCL on any class
of stock of the Corporation to approve any Business Combination by class vote.
ARTICLE XI.
No director of the Corporation shall be personally liable to the
Corporation or it stockholders for monetary damages for any breach of fiduciary
duty by such a director as a director. Notwithstanding the foregoing sentence, a
director shall be liable to the extent provided by applicable law (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the
GCL, or (iv) for any transaction from which such director derived an improper
personal benefit. No amendment to or repeal of this Article XI or adoption of
any provision of this Certificate of Incorporation inconsistent with this
Article XI shall apply to or have any effect on the liability or alleged
liability of any director of the Corporation for or with respect to any acts or
omissions of such director occurring prior to such amendment, repeal or
adoption. If the GCL is hereafter amended to authorize the further elimination
or limitation of the liability of a director, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the GCL, as so amended.
ARTICLE XII.
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to adopt, repeal, alter,
amend or rescind the Bylaws of the Corporation. In addition, the Bylaws of the
Corporation may be adopted, repealed, altered, amended or rescinded by the
affirmative vote of the holders of not less than two-thirds of the outstanding
stock of the Corporation entitled to vote thereon.
ARTICLE XIII.
The provisions set forth in this Article XIII, in the second paragraph
of Article V herein and in Articles VI, VIII, IX, X and XII herein may not be
repealed or amended in any respect, unless such action is approved by the
affirmative vote of the holders of not less than two-thirds of the outstanding
stock of the Corporation entitled to vote thereon.
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ARTICLE XIV.
Subject to the foregoing, the Corporation reserves the right to
repeal, alter, amend or rescind any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred on stockholders herein are granted subject to this reservation.
ARTICLE XV.
Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of ss.291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for this
corporation under the provisions of ss.279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority
in number representing three fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and
to any reorganization of this corporation as consequence of such compromise
or arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
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stockholders or class of stockholders, of this corporation, as the case may
be, and also on this corporation.
ARTICLE XVI.
The incorporator is Christopher J. Kearns, whose mailing address is
501 West Broadway, 19th Floor, San Diego, California 92101.
IN WITNESS WHEREOF, ACC CONSUMER FINANCE CORPORATION has caused this
Certificate of Incorporation to be signed November 8, 1995, in the City and
County of San Diego, State of California.
ACC CONSUMER FINANCE CORPORATION
By /s/ Christopher J. Kearns
------------------------------
Christopher J. Kearns, Incorporator
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State of Delaware
Office of the Secretary of State PAGE 1
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I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "ACC CONSUMER FINANCE CORPORATION", FILED IN THIS OFFICE ON THE SIXTEENTH DAY
OF MAY, A.D. 1996, AT 4 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ Edward J. Freel
[seal] -----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 7949560
DATE: 05-16-96
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CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF ACC CONSUMER FINANCE CORPORATION
ACC Consumer Finance Corporation, a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify:
FIRST: That the board of directors of said Corporation adopted a
resolution proposing and declaring advisable the following amendment to the
Certificate of Incorporation of said Corporation:
RESOLVED: that ARTICLE IV shall be amended by as
follows:
Upon the filing of this Certificate of Amendment, every one (1)
outstanding share of Common Stock, $.001 par value, of the
Corporation ("Common Stock"), shall be split and converted into
twenty-three (23) shares of Common Stock; and neither (i) the
authorized or outstanding shares of Common Stock, Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock nor any
other Preferred Stock of the Corporation, nor (ii) the powers,
preferences or rights of any stockholder of the Corporation, shall
otherwise be affected.
SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders have given written consent to said amendment in accordance with the
provisions of Section 228 of the General Corporation Law of the State of
Delaware, and said written consent was filed with the Corporation.
THIRD: That the aforesaid amendment was duly adopted in accordance
with applicable provisions of Sections 141, 242 and 228 of General Corporation
Law of the State of Delaware.
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FOURTH: That the capital of the Corporation will not
be reduced under or by reason of said amendment.
IN WITNESS WHEREOF, said ACC Consumer Finance Corporation has caused
this Certificate of Amendment to be signed by Rocco J. Fabiano, its Chairman of
the Board and Chief Executive Officer, and attested by Jack R. Cohen, its
Secretary as of May 13 , 1996.
----------
ACC CONSUMER FINANCE CORPORATION,
a Delaware corporation
By /s/ Rocco J. Fabiano
-----------------------
Rocco J. Fabiano,
Chairman of the Board and
Chief Executive Officer
ATTEST:
/s/ Jack R. Cohen
- -----------------------------
Jack R. Cohen,
Secretary
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EXHIBIT 3.2
BYLAWS
OF
ACC CONSUMER FINANCE CORPORATION
ARTICLE 1.
CORPORATE OFFICES
1.1 Principal Office. The principal office of the
corporation shall be 12750 High Bluff Drive, Suite 320,
San Diego, California 92130.
1.2 Registered Office. The registered office of the
corporation required by the Delaware General Corporation Law to
be maintained in the State of Delaware may, but need not, be
identical with the principal office, and the address of the
registered office may be changed from time to time by the board
of directors.
1.3 Other Offices. The board of directors may at
any time establish other offices at any place or places within
or outside the State of Delaware where the corporation is
qualified to do business.
ARTICLE 2.
MEETINGS OF STOCKHOLDERS
2.1 Place of Meetings. Meetings of stockholders
shall be held at any place, within or outside the State of
Delaware, designated by the board of directors. In the absence
of any such designation, stockholders' meetings shall be held
at the registered office of the corporation.
2.2 Annual Meeting. The annual meeting of stock-
holders shall be held each year on a date and at a time desig-
nated by the board of directors. At the meeting, directors
shall be elected and any other proper business may be
transacted.
2.3 Special Meeting. In addition to such special
meetings as are required by applicable law, a special meeting
of the stockholders may be called at any time only by the board
of directors, the chairman of the board, the chief executive
officer, the president or, upon the written request of a
stockholder or stockholders holding shares in aggregate
entitled to cast not less then 10% of the votes at the meeting,
by the secretary.
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If a special meeting is called by any person or
persons other than the board of directors, the request shall be
in writing, specifying the time of such meeting (which shall be
not less than thirty-five (35) nor more than sixty (60) days
after the receipt of the request) and the general nature of the
business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or
other facsimile transmission to the chairman of the board, the
chief executive officer, the president, any vice president or
the secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in
such notice. The officer receiving the request shall cause
notice to be promptly given to the stockholders entitled to
vote, in accordance with the provisions of Sections 2.4
and 2.7, explaining that a meeting will be held at the time
requested by the person or persons calling the meeting, and
specifying such time. If the notice is not given within
twenty (20) days after the receipt of the request, the person
or persons requesting the meeting may give the notice. Nothing
contained in this paragraph of this Section 2.3 shall be
construed as limiting, fixing or affecting the time when a
meeting of stockholders called by action of the board of
directors may be held.
2.4 Notice of Stockholders' Meetings. Except as
otherwise required by applicable law, all notices of meetings
of stockholders shall be in writing and shall be sent or
otherwise given in accordance with Section 2.7 of these Bylaws
not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at
such meeting. The notice shall specify the place, date and
hour of the meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called.
2.5 Director Nominations. Only persons who are
nominated in accordance with the procedures set forth in this
Section 2.5 shall be eligible for election as directors.
Nominations of persons for election to the board of directors
of the corporation may be made at a meeting of stockholders by
or at the direction of the board of directors or by any
stockholder of the corporation entitled to vote for the
election of directors at the meeting who complies with the
notice procedure set forth in this Section 2.5. Such
nominations, other than those made by or at the direction of
the board of directors, shall be made pursuant to timely notice
in writing to the secretary of the corporation. To be timely,
a stockholder notice shall be delivered to or mailed and
received at the principal executive office of the corporation
not less than sixty (60) days nor more than ninety (90) days
prior to the meeting; provided, however, that in the event that
less than sixty (60) days' notice or prior public disclosure of
the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not
later than the close of business on the 10th day following the
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day on which such notice of the date of the meeting was mailed
or such public disclosure was made. Such stockholder's notice
shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or re-election as a director,
(i) the name, age, business address and residence address of
such person, (ii) the principal occupation or employment of
such person, (iii) the class and number of shares of the
corporation that are beneficially owned by such person and
(iv) any other information relating to such person that is
required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required in such case
pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (including without limitation such person's
written consent to being named in the proxy statement as a
nominee and to serving as a director if elected); and (b) as to
the stockholder giving the notice (i) the name and address, as
they appear on the corporation's books, of such stockholder and
(ii) the class and number of shares of the corporation that are
beneficially owned by such stockholder. At the request of the
board of directors, any person nominated by the board of
directors for election as a director shall furnish to the
secretary of the corporation that information required to be
set forth in a stockholder's notice of nomination pertaining to
the nominee. No person shall be eligible for election as a
director of the corporation unless nominated in accordance with
the procedures set forth in this Section 2.5. The chairman of
the meeting shall, if the facts warrant, determine that a
nomination was not made in accordance with the procedures
prescribed by these Bylaws, and if he should so determine, he
shall so declare to the meeting and the defective nomination
shall be disregarded.
2.6 Business Introduced by Stockholders. With
respect to business introduced by a stockholder that is not
specified in the notice of annual meeting, the stockholder must
have given timely notice thereof in writing to the secretary of
the corporation for that business to be properly introduced at
the annual meeting. To be timely, the notice must be delivered
to or mailed and received by the secretary of the corporation
in the same manner and subject to the same time requirements in
accordance with the procedure set forth in Section 2.5. As to
each matter the stockholder proposes to bring before the
meeting, the stockholder's notice must set forth the following:
(i) a brief description of the business sought to be presented
at the meeting and the reasons for conducting such business at
the meeting, (ii) the name and record address of the
stockholder proposing such business, (iii) the class, series
and number of shares of corporation stock that are beneficially
owned by the stockholder and (iv) any material interest of the
stockholder in such business.
2.7 Manner of Giving Notice; Affidavit of Notice.
Except as otherwise required by applicable law, written notice
of any meeting of stockholders, if mailed, shall be given when
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deposited in the United States mail, postage prepaid, directed
to the stockholder at his address as it appears on the records
of the corporation. An affidavit of the secretary or an
assistant secretary or of the transfer agent of the corporation
that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.8 Quorum. The holders of a majority of the stock
issued and outstanding and entitled to vote at the meeting,
present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction
of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum is not
present or represented at any meeting of the stockholders, then
either (i) the chairman of the meeting or (ii) a majority
of the stockholders entitled to vote at the meeting, present in
person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than
announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is
present or represented, any business may be transacted that
might have been transacted at the meeting as originally
noticed.
2.9 Adjourned Meeting; Notice. When a meeting is
adjourned to another time or place, unless these Bylaws or the
certificate of incorporation or applicable law otherwise
requires, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at
which the adjournment is taken. At the adjourned meeting, the
corporation may transact any business that might have been
transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or, if after the adjournment, a new
record date is fixed for the adjourned meeting, a notice of the
adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
2.10 Conduct of Business. The chairman of any
meeting of stockholders shall determine the order of business
and the procedure at the meeting, including such regulation of
the manner of voting and the conduct of business and discussion
as seem to the chairman to be in order.
2.11 Voting. The stockholders entitled to vote at
any meeting of stockholders shall be determined in accordance
with the provisions of Section 2.13 of these Bylaws, subject to
the provisions of Sections 217 and 218 of the General
Corporation Law of Delaware (relating to voting rights of
fiduciaries, pledgors and joint owners of stock and to voting
trusts and other voting agreements).
Except as may be otherwise provided in the
certificate of incorporation, each stockholder entitled to vote
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shall be entitled to one vote for each share of capital stock
held by such stockholder.
Directors shall be elected by plurality of the votes
cast by holders of shares entitled to vote thereon. All other
elections shall be determined and all questions decided by
majority vote of the number of shares entitled to vote and
represented at any meeting at which there is a quorum, except
in such cases as shall otherwise be required by statute, the
certificate of incorporation or these Bylaws.
2.12 Waiver of Notice. Whenever notice is required
to be given under any provision of the General Corporation Law
of Delaware or of the certificate of incorporation or these
Bylaws, a written waiver thereof, signed by the person entitled
to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Attendance of a person
at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the
express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special
meeting of stockholders need be specified in any written waiver
of notice unless so required by the certificate of
incorporation or these Bylaws.
2.13 Record Date for Stockholder Notice; Voting.
Except as otherwise required by applicable law, in order that
the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any
adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other
lawful action, the board of directors may fix, in advance, a
record date, which shall not be more than sixty (60) nor less
than ten (10) days before the date of such meeting, nor more
than sixty (60) days prior to any other action.
If the board of directors does not so fix a record
date:
(i) The record date for determining
stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or,
if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held.
(ii) The record date for determining
stockholders for any other purpose shall be at the close
of business on the day on which the board of directors
adopts the resolution relating thereto.
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A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply
to any adjournment of the meeting; provided, however, that the
board of directors may fix a new record date for the adjourned
meeting.
2.14 Proxies. Each stockholder entitled to vote at
a meeting of stockholders may authorize another person or
persons to act for him by a written proxy, signed by the
stockholder and filed with the secretary of the corporation,
but no such proxy shall be voted or acted upon after three (3)
years from its date, unless the proxy provides for a longer
period. A proxy shall be deemed signed if the stockholder's
name is placed on the proxy (whether by manual signature,
facsimile signature, typewriting, telegraphic transmission or
otherwise) by the stockholder or the stockholder's attorney in
fact. The revocability of a proxy that states on its face that
it is irrevocable shall be governed by the provisions of
Section 212(c) of the General Corporation Law of Delaware.
2.15 List of Stockholders Entitled to Vote. The
officer who is in charge of the stock ledger of the corporation
shall prepare and make, at least ten (10) days before every
meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the
number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during the ordinary
business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during
the whole time thereof, and may be inspected by any stockholder
who is present. Such list shall presumptively determine the
identity of the stockholders entitled to vote at the meeting
and the number of shares held by each of them.
ARTICLE 3.
DIRECTORS
3.1 Powers. Subject to the provisions of the
General Corporation Law of Delaware and any limitations in the
certificate of incorporation or these Bylaws relating to action
required to be approved by the stockholders of the outstanding
shares, the business, property and affairs of the corporation
shall be managed and all corporate powers shall be exercised by
or under the direction of the board of directors.
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3.2 Number of Directors. The authorized number of
directors shall be not less than five nor more than nine. The
board of directors shall consist of five persons (one person in
Class I, and two persons in each of Class II and Class III,
which Classes are described in the certificate of
incorporation) until changed by a proper amendment to this
Section 3.2. No reduction of the authorized number of
directors shall have the effect of removing any director before
that director's term of office expires.
3.3 Election, Qualification and Term of Office of
Directors. Except as provided in Section 3.4 of these Bylaws,
a class of directors shall be elected at each annual meeting of
stockholders to hold office until the expiration of the
director's term, as specified in the certificate of incorpora-
tion. Directors need not be stockholders unless so required by
the certificate of incorporation or these Bylaws, wherein other
qualifications for directors may be prescribed. Each director,
including a director elected to fill a vacancy, shall hold
office until his successor is elected and qualified or until
his earlier resignation or removal. Elections of directors
need not be by written ballot.
3.4 Resignation and Vacancies. Any director may
resign at any time upon written notice to the attention of the
secretary of the corporation. When one or more directors so
resigns and the resignation is effective at a future date, a
majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or
vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, and each
director so chosen shall hold office as provided in this
section in the filling of other vacancies.
Unless otherwise provided in the certificate of
incorporation or these Bylaws, any vacancy in the board,
whether because of death, resignation, disqualification, an
increase in the number of directors or any other cause may be
filled by a majority of directors then in office, although less
than a quorum, or by a sole remaining director.
If at any time, by reason of death or resignation or
other cause, the corporation should have no directors in
office, then any officer or any stockholder or an executor,
administrator, trustee or guardian of a stockholder, or other
fiduciary entrusted with like responsibility for the person or
estate of a stockholder, may for the purpose of electing
directors call a special meeting of stockholders in accordance
with the provisions of the certificate of incorporation or
these Bylaws, or may apply to the Court of Chancery for a
decree summarily ordering an election as provided in
Section 211 of the General Corporation Law of Delaware.
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If, at the time of filling any vacancy, the directors
then in office constitute less than a majority of the whole
board (as constituted immediately prior to the filling of such
vacancy), then the Court of Chancery may, upon application of
any stockholder or stockholders holding at least ten (10)
percent of the total number of the shares at the time
outstanding having the right to vote for such director,
summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the
directors chosen by the directors then in office as aforesaid,
which election shall be governed by the provisions of
Section 211 of the General Corporation Law of Delaware as far
as possible.
3.5 Place of Meeting; Meetings By Telephone. The
board of directors of the corporation may hold meetings, both
regular and special, either within or outside the State of
Delaware.
Unless otherwise restricted by the certificate of
incorporation or by these bylaws, members of the board of
directors, or any committee designated by the board of
directors, may participate in a meeting of the board of
directors, or any committee, by means of conference telephone
or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and
such participation in a meeting shall constitute presence in
person at the meeting.
3.6 Regular Meetings. Regular meetings of the board
of directors may be held without notice at such time and at
such place as shall from time to time be determined by the
board.
3.7 Special Meetings; Notice. Special meetings of
the board of directors for any purpose or purposes may be
called at any time by the chairman of the board, the chief
executive officer, the president, any vice president, the
secretary or any two (2) directors.
Notice of the time and place of special meetings
shall be delivered personally or by telephone to each director
or sent by first-class mail or telegram, charges prepaid, or
facsimile transmission, addressed to each director at that
director's address as it is shown on the records of the
corporation. If the notice is mailed, it shall be deposited in
the United States mail at least three (3) days before the time
of the holding of the meeting. If the notice is delivered
personally or by telephone, telegram, or facsimile
transmission, it shall be delivered personally or by telephone,
or to the telegraph company, or by facsimile transmission, at
least twenty-four (24) hours before the time of the holding of
the meeting. Any oral notice given personally or by telephone
may be communicated either to the director or to a person at
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the office of the director if the person giving the notice has
reason to believe the notice will be communicated promptly to
the director. The notice need not specify the purpose of the
meeting or, if the meeting is to be held at the principal
executive office of the corporation, the place of the meeting.
3.8 Quorum. At all meetings of the board of
directors, a majority of the authorized number of directors
shall constitute a quorum for the transaction of business and
the act of a majority of the directors present at any meeting
at which there is a quorum shall be the act of the board of
directors, except as may be otherwise specifically provided by
statute or by the certificate of incorporation. If a quorum is
not present at any meeting of the board of directors, then the
directors present may adjourn the meeting from time to time,
without notice other than an announcement at the meeting, until
a quorum is present.
A meeting at which a quorum is initially present may
continue to transact business notwithstanding the withdrawal of
directors, if any action taken is approved by at least a
majority of the required quorum for that meeting.
3.9 Waiver of Notice. Whenever notice is required
to be given under any provision of the General Corporation Law
of Delaware or of the certificate of incorporation or these
Bylaws, a written waiver thereof, signed by the person entitled
to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Attendance of a person
at a meeting shall constitute a waiver of notice of such
meetings except when the person attends a meeting for the
express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any meeting of the
directors, or members of a committee of directors, need be
specified in any written waiver of notice unless so required by
the certificate of incorporation or these Bylaws.
3.10 Board Action by Written Consent Without a
Meeting. Unless otherwise restricted by the certificate of
incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the board of directors, or of any
committee thereof, may be taken without a meeting if all
members of the board or committee, as the case may be, consent
thereto in writing and the writing or writings are filed with
the minutes of proceedings of the board or committee.
3.11 Fees and Compensation of Directors. Unless
otherwise restricted by the certificate of incorporation or
these Bylaws, the board of directors shall have the authority
to fix the compensation of a director.
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3.12 Approval of Loans to Officers. The corporation
may lend money to, or guarantee any obligation of, or otherwise
assist any officer or other employee of the corporation or of
any of its subsidiaries, including any officer or employee who
is a director of the corporation or of any of its subsidiaries,
whenever, in the judgment of the directors, such loan, guaranty
or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be
with or without interest and may be unsecured, or secured in
such manner as the board of directors shall approve, including,
without limitation, a pledge of shares of stock of the
corporation. Nothing contained in this section shall be deemed
to deny, limit or restrict the powers of guaranty or warranty
of the corporation at common law or under any statute.
3.13 Removal of Directors. Unless otherwise
restricted by statute, by the certificate of incorporation or
by these Bylaws, any director or the entire board of directors
may be removed, but only by the affirmative vote of the holders
of a majority, if such removal is for cause, and of the holders
of at least two-thirds, if such removal is without cause, of
the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors.
ARTICLE 4.
COMMITTEES
4.1 Committees of Directors. The board of directors
may, by resolution passed by a majority of the whole board,
designate one or more committees, with each committee to
consist of one or more of the directors of the corporation.
The number of committee members may be increased or decreased
from time to time by resolution adopted by a majority of the
entire board of directors. Each committee member shall serve
as such until the earliest of (i) the expiration of his term as
a director, (ii) his resignation as a committee member or as a
director or (iii) his removal as a committee member or as a
director. The board may designate one or more directors as
alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the
absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute
a quorum, may unanimously appoint another member of the board
of directors to act at the meeting in the place of any such
absent or disqualified member. Any such committee, to the
extent provided in the resolution of the board of directors or
in these Bylaws, shall have and may exercise all the powers and
authority of the board of directors in the management of the
business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers that may
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require it; but no such committee shall have the power or
authority to (i) amend the certificate of incorporation (except
that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares
of stock adopted by the board of directors as provided in
Section 151(a) of the General Corporation Law of Delaware, fix
the designations and any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any
distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other
class or classes or any other series of the same or any other
class or classes of stock of the corporation or fix the number
of shares of any series of stock or authorize the increase or
decrease of the shares of any series), (ii) adopt an agreement
of merger or consolidation under Sections 251 or 252 of the
General Corporation Law of Delaware, (iii) recommend to the
stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets,
(iv) recommend to the stockholders a dissolution of the
corporation or a revocation of a dissolution or (v) amend these
Bylaws; and, unless the board resolution establishing the
committee, these Bylaws or the certificate of incorporation
expressly so provides, no such committee shall have the power
or authority to declare a dividend, to authorize the issuance
of stock or to adopt a certificate of ownership and merger
pursuant to Section 253 of the General Corporation Law of
Delaware.
4.2 Committee Minutes. Each committee shall keep
regular minutes of its meetings and report the same to the
board of directors when required to do so by the board of
directors.
4.3 Meetings and Actions of Committees. Meetings
and actions of committees shall be governed by, and held and
taken in accordance with Section 3.5 (place of meetings and
meetings by telephone), Section 3.6 (regular meeting),
Section 3.7 (special meetings and notice), Section 3.8
(quorum), Section 3.9 (waiver of notice), and Section 3.10
(action without a meeting) of these Bylaws, with such changes
in the context of those provisions as are necessary to
substitute the committee and its members for the board of
directors and its members; provided, however, that the time of
regular meetings of committees may be determined either by
resolution of the board of directors or by resolution of the
committee, that special meetings of committees may also be
called by resolution of the board of directors and that notice
of special meetings of committees shall also be given to all
alternate members, who shall have the right to attend all
meetings of the committee. The board of directors may adopt
rules for the government of any committee not inconsistent with
the provisions of these Bylaws.
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ARTICLE 5.
OFFICERS
5.1 Officers. The Corporation shall have a chairman
of the board, a chief executive officer or a president or both,
a secretary, a chief financial officer and treasurer, a chief
operating officer and a chief credit officer. The corporation
may also have, at the discretion of the board of directors, one
or more vice presidents, one or more assistant secretaries, one
or more assistant treasurers and any such other officers as may
be appointed in accordance with the provisions of Section 5.3
of these Bylaws. Any number of offices may be held by the same
person.
5.2 Appointment of Officers. The officers of the
corporation, except such officers as may be appointed in
accordance with the provisions of Section 5.3 or 5.5 of these
Bylaws, shall be appointed by the board of directors.
5.3 Subordinate Officers. The board of directors
may appoint, or empower the chief executive officer and/or the
president to appoint, such other officers and agents as the
business of the corporation may require, each of whom shall
hold office for such period, have such authority, and perform
such duties as are provided in these Bylaws or as the board of
directors may from time to time determine.
5.4 Removal and Resignation of Officer. Any officer
may be removed, either with or without cause, by an affirmative
vote of the majority of the board of directors at any regular
or special meeting of the board, or, by any officer upon whom
such power of removal may be conferred by the board of
directors.
Any officer may resign at any time by giving written
notice to the corporation. Any resignation shall take effect
at the date of the receipt of that notice or at any later time
specified in that notice; and unless otherwise specified in
that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without
prejudice to the rights, if any, of the corporation under any
contract to which the officer is a party.
5.5 Vacancies in Offices. Any vacancy occurring in
any office of the corporation shall be filled by the board of
directors.
5.6 Chairman Of The Board. The chairman of the
board shall, if present, preside at all meetings of the board
of directors and stockholders and exercise and perform such
other powers and duties as may be from time to time assigned to
him by the board of directors or prescribed by these Bylaws.
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If at any time there is no chief executive officer or
president, the chairman of the board shall in addition have the
powers and duties prescribed in Section 5.7 or 5.8 of this
Article 5, as applicable.
5.7 Chief Executive Officer. The chief executive
officer shall, subject to the control of the board of
directors, have general direction and strategic control of the
business and the officers of the corporation. In the absence
of the chairman of the board, the chief executive officer shall
preside at all meetings of the stockholders and at all meetings
of the board of directors. The chief executive officer shall
exercise and perform such other powers and duties as may from
time to time be assigned to him by the board of directors or
these Bylaws.
5.8 President. The president shall have general
supervision and control of the sales and marketing and
administration of the corporation and shall have such other
powers and duties as may be prescribed by the board of
directors or these Bylaws, subject to the control of the board
of directors, the chairman of the board and the chief executive
officer.
5.9 Chief Operating Officer. The chief operating
officer shall have general supervision and control over the
operations of the corporation, subject to the control of the
board of directors, chairman of the board, chief executive
officer and president. The chief operating officer may sign
and execute, in the name of the corporation, any instrument
authorized by the board of directors, except when a signing
and/or execution thereof shall have been expressly delegated by
the board of directors or by these Bylaws to some other officer
or agent of the corporation. The chief operating officer shall
have all the general powers and duties of management usually
vested in the chief operating officer of a corporation, and
shall have such other powers and duties as may be prescribed
from time to time by the board of directors of these Bylaws.
5.10 Vice Presidents. In the absence or disability
of the chairman of the board, the chief executive officer, the
president and the chief operating officer, the vice presidents,
if any, in order of their rank as fixed by the board of
directors or, if not ranked, a vice president designated by the
board of directors, shall perform all the duties of the
president and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the president. The
vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them
respectively by the board of directors, these Bylaws, the
chairman of the board or the chief executive officer.
5.11 Secretary. The secretary shall keep or cause
to be kept, at the principal executive office of the
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corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of
directors, committees of directors and stockholders. The
minutes shall show the time and place of each meeting, the name
of those present at directors' meetings or committee meetings,
the number of shares present or represented at stockholders'
meetings and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the
principal executive office of the corporation or at the office
of the corporation's transfer agent or registrar, as determined
by resolution of the board of directors, a share register, or a
duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such
shares and the number and date of cancellation of every
certificate surrendered for cancellation.
The secretary shall give, or cause to be given,
notice of all meetings of the stockholders and of the board of
directors required to be given by law or by these Bylaws. The
secretary shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and
perform such other duties as may be prescribed by the board of
directors or by these Bylaws.
5.12 Chief Credit Officer. The chief credit officer
shall be responsible for the credit approval department and the
loan underwriting and review process of loans purchased by the
corporation. The chief credit officer will be responsible for
oversight of underwriting personnel of the corporation. The
chief credit officer shall also have such other powers and
duties as may be prescribed from time to time by the board of
directors or these Bylaws.
5.13 Chief Financial Officer and Treasurer. The
chief financial officer and treasurer shall be the principal
accounting officer of the corporation and shall keep and
maintain, or cause to be kept and maintained, adequate and
correct books and records of accounts of the properties and
business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains,
losses, capital, retained earnings and shares. The books of
account shall at all reasonable times be open to inspection by
any director.
The chief financial officer and treasurer shall
deposit all moneys and other valuables in the name and to the
credit of the corporation with such depositories as may be
designated by the board of directors. The chief financial
officer and treasurer shall disburse the funds of the
corporation as may be ordered by the board of directors, shall
render to the chief executive officer, the president and/or
directors, whenever they request it, an account of all his
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transactions as chief financial officer and treasurer and of
the financial condition of the corporation, and shall have
other powers and perform such other duties as may be prescribed
by the board of directors or by these Bylaws.
5.14 Authority and Duties of Officers. In addition
to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform
such duties in the management of the business of the
corporation as may be designated from time to time by the board
of directors.
ARTICLE 6.
RECORDS AND REPORTS
6.1 Maintenance and Inspection of Records. The cor-
poration shall, whether at its principal executive offices or
at such places as designated by the board of directors, keep a
record of its stockholders listing their names and addresses
and the number and class of shares held by each stockholder, a
copy of these Bylaws as amended to date, accounting books and
other records.
Any stockholder of record, in person or by attorney
or other agent, shall, upon written demand under oath stating
the purpose thereof, have the right during the usual hours of
business to inspect for any proper purpose the corporation's
stock ledger, a list of its stockholders and its other books
and records and to make copies or extracts therefrom. A proper
purpose shall mean a purpose reasonably related to such
person's interest as a stockholder. In every instance where an
attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a
power of attorney or such other writing that authorizes the
attorney or other agent to so act on behalf of the stockholder.
The demand under oath shall be directed to the corporation at
its registered office in Delaware or at its principal place of
business.
6.2 Inspection by Directors. Any director shall
have the right to examine the corporation's stock ledger, a
list of its stockholders and its other books and records for a
purpose reasonably related to his position as a director. The
Court of Chancery is hereby vested with the exclusive
jurisdiction to determine whether a director is entitled to the
inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books
and records, the stock ledger, and the stock list and to make
copies or extract therefrom. The Court may, in its discretion,
prescribe any limitations or conditions with reference to the
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inspection, or award such other and further relief as the Court
may deem just and proper.
6.3 Annual Statement to Stockholders. The board of
directors shall present at each annual meeting and at any
special meeting of the stockholders when called for by vote of
the stockholders, a full and clear statement of the business
and condition of the corporation.
ARTICLE 7.
GENERAL MATTERS
7.1 Checks. From time to time, the board of
directors shall determine, by resolution, which person or
persons may sign or endorse all checks, drafts, other orders
for payment of money, notes or other evidences of indebtedness
that are issued in the name of or payable to the corporation,
and only the persons so authorized shall sign or endorse those
instruments.
7.2 Execution of Corporation Contracts and Instru-
ments. The board of directors, except as otherwise provided in
these Bylaws, may authorize any officer or officers, or agent
or agents, to enter into any contract or execute any instrument
in the name of and on behalf of the corporation; such authority
may be general or confined to specific instances. Unless so
authorized or ratified by the board of directors or within the
agency power of an officer, no officer, agent or employee shall
have any power or authority to bind the corporation by any
contract or engagement or to pledge its credit or to render it
liable for any purpose or for any amount.
7.3 Stock Certificates; Partly Paid Shares. The
shares of the corporation shall be represented by certificates,
provided that the board of directors of the corporation may
provide by resolution or resolutions that some or all of any or
all classes or series of its stock shall be uncertificated
shares. Any such resolution shall not apply to shares repre-
sented by a certificate until such certificate is surrendered
to the corporation. Notwithstanding the adoption of such a
resolution by the board of directors, every holder of stock
represented by certificates and upon request every holder of
uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or
vice-chairman of the board of directors or the chief executive
officer or president, and by the chief financial officer and
treasurer or an assistant treasurer, or the secretary or an
assistant secretary of the corporation representing the number
of shares registered in certificate form. Any or all of the
signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose
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facsimile signature has been placed upon a certificate has
ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the corporation
with the same effect as if he were such officer, transfer agent
or registrar at the date of issue.
The corporation may issue the whole or any part of
its shares as partly paid and subject to call for the remainder
of the consideration to be paid therefor. Upon the face or
back of each stock certificate issued to represent any such
partly paid shares and upon the books and records of the
corporation in the case of uncertificated partly paid shares,
the total amount of the consideration to be paid therefor and
the amount paid thereon shall be stated. Upon the declaration
of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class,
but only upon the basis of the percentage of the consideration
actually paid thereon.
7.4 Special Designation on Certificates. If the
corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the
designations, the preferences and the relative, participating,
optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set
forth in full or summarized on the face or back of the
certificate that the corporation shall issue to represent such
class or series of stock; provided, however, that, except as
otherwise provided in Section 202 of the General Corporation
Law of Delaware, in lieu of the foregoing requirements, there
may be set forth on the face or back of the certificate that
the corporation shall issue to represent such class or series
of stock, a statement that the corporation will furnish without
charge to each stockholder who so requests the powers, the
designations, the preferences and the relative, participating,
optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.
7.5 Lost Certificates. Except as provided in this
Section 7.5, no new certificates for shares shall be issued to
replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time.
The corporation may issue a new certificate of stock or uncer-
tificated shares in the place of any certificate theretofore
issued by it, alleged to have been lost, stolen or destroyed,
and the corporation may require the owner of the lost, stolen
or destroyed certificate, or his legal representative, to give
the corporation a bond sufficient to indemnify it against any
claim that may be made against it on account of the alleged
loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
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7.6 Construction; Definitions. Unless the context
requires otherwise, the general provisions, rules of
construction and definitions in the Delaware General
Corporation Law shall govern the construction of these Bylaws.
Without limiting the generality of this provision, the singular
number includes the plural, the plural number includes the
singular and the term "person" includes both a corporation and
a natural person.
7.7 Dividends. The directors of the corporation,
subject to any restrictions contained in (i) the General
Corporation Law of Delaware or (ii) the certificate of
incorporation, may declare and pay dividends upon the shares of
its capital stock. Dividends may be paid in cash, in property
or in shares of the corporation's capital stock.
The directors of the corporation may set apart out of
any of the funds of the corporation available for dividends a
reserve or reserves for any proper purpose and may abolish any
such reserve. Such purposes shall include but not be limited
to equalizing dividends, repairing or maintaining any property
of the corporation and meeting contingencies.
7.8 Fiscal Year. The fiscal year of the corporation
shall be fixed by resolution of the board of directors and may
be changed by the board of directors.
7.9 Seal. The corporation may adopt a corporate
seal, which may be altered at its pleasure, and may use the
same by causing it or a facsimile thereof to be impressed or
affixed or in any other manner reproduced.
7.10 Transfer of Stock. Upon surrender to the
corporation or the transfer agent of the corporation of a
certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer,
it shall be the duty of the corporation to issue a new
certificate to the person entitled thereto, cancel the old
certificate and record the transaction in its books.
7.11 Stock Transfer Agreement. The corporation
shall have power to enter into and perform any agreement with
any number of stockholders of any one or more classes of stock
of the corporation to restrict the transfer of shares of stock
of the corporation of any one or more classes owned by such
stockholders in any manner not prohibited by the General
Corporation Law of Delaware.
7.12 Registered Stockholders. The corporation shall
be entitled to recognize the exclusive right of a person regis-
tered on its books as the owner of shares to receive dividends
and to vote as such owner, shall be entitled to hold liable for
calls and assessments the person registered on its books as the
owner of shares and shall not be bound to recognize any
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equitable or other claim to or interest in such share or shares
on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided
by the laws of Delaware.
ARTICLE 8.
AMENDMENTS
Bylaws of the corporation may be adopted, amended or
repealed by the requisite number of stockholders entitled to
vote as required by the certificate of incorporation; provided,
however, that the corporation may, in its certificate of incor-
poration, confer the power to adopt, amend or repeal Bylaws
upon the directors.
ARTICLE 9.
INDEMNIFICATION
9.1 Indemnification -- Third Party Proceedings. The
corporation (i) shall indemnify any person who is or was a
party or is threatened to be made a party to any proceeding
(other than an action by or in the right of the corporation to
procure a judgment in its favor) by reason of the fact that
such person is or was a director or officer of the corpora-
tion, or any subsidiary of the corporation (the "Indemnitee"),
and (ii) may indemnify a person who is or was a party or is
threatened to be made a party to any proceeding (other than an
action by or in the right of the corporation to procure a
judgment in its favor) by reason of the fact that such person
is or was an employee or other agent of the corporation (the
"Indemnitee Agent"), and such proceeding relates to any action
or inaction on the part of Indemnitee or Indemnitee Agent while
an officer, director, employee or agent, or by reason of the
fact that Indemnitee or Indemnitee Agent is or was serving at
the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including, subject
to Section 9.20, attorneys' fees and disbursements and any
expenses of establishing a right to indemnification pursuant to
this Article 9 or under Delaware law), judgments, fines,
settlements (if such settlement is approved in advance by the
corporation, which approval shall not be unreasonably withheld)
and other amounts actually and reasonably incurred by
Indemnitee or Indemnitee Agent in connection with such
proceeding if Indemnitee or Indemnitee Agent acted in good
faith and in a manner Indemnitee or Indemnitee Agent rea-
sonably believed to be in or not opposed to the best interests
of the corporation and, in the case of a criminal proceeding,
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if Indemnitee or Indemnitee Agent had no reasonable cause to
believe Indemnitee's or Indemnitee Agent's conduct was
unlawful. The termination of any proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere
or its equivalent shall not, of itself, create a presumption
that Indemnitee or Indemnitee Agent did not act in good faith
and in a manner that Indemnitee or Indemnitee Agent reasonably
believed to be in or not opposed to the best interests of the
corporation, or, with respect to any criminal proceeding, shall
not create a presumption that Indemnitee or Indemnitee Agent
had reasonable cause to believe that Indemnitee's or Indemnitee
Agent's conduct was unlawful.
9.2 Indemnification -- Proceedings by or in the
Right of the Corporation. The corporation shall indemnify
Indemnitee and may indemnify Indemnitee Agent if Indemnitee, or
Indemnitee Agent, as the case may be, was or is a party or is
threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation
or any subsidiary of the corporation to procure a judgment in
its favor by reason of the fact that Indemnitee or Indemnitee
Agent is or was a director, officer, employee or other agent of
the corporation, or any subsidiary of the corporation, and such
action relates to any action or inaction on the part of
Indemnitee or Indemnitee Agent while an officer, director,
employee or agent, or by reason of the fact that Indemnitee or
Indemnitee Agent is or was serving at the request of the
corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including, subject to
Section 9.20, attorneys' fees and disbursements and any
expenses of establishing a right to indemnification pursuant to
this Article 9 or under Delaware law) and, to the fullest
extent permitted by law, amounts paid in settlement, in each
case to the extent actually and reasonably incurred by
Indemnitee or Indemnitee Agent in connection with the defense
or settlement of the action or suit if Indemnitee or Indemnitee
Agent acted in good faith and in a manner Indemnitee or
Indemnitee Agent believed to be in or not opposed to the best
interests of the corporation, except that no indemnification
shall be made with respect to any claim, issue or matter to
which Indemnitee (or Indemnitee Agent) shall have been adjudged
to have been liable to the corporation in the performance of
Indemnitee's or Indemnitee Agent's duty to the corporation,
unless and only to the extent that the Court of Chancery or the
court in which such action or suit is or was pending shall
determine upon application that, in view of all the
circumstances of the case, Indemnitee (or Indemnitee Agent) is
fairly and reasonably entitled to indemnity for expenses and
then only to the extent that such court shall determine is
proper.
9.3 Determination of Right of Indemnification. Any
indemnification under Section 9.1 or 9.2 (unless ordered by a
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court) shall be made by the corporation unless a determination
is reasonably and promptly made (i) by the board of directors
by a majority vote of a quorum consisting of directors who were
not parties to such action, suit or proceeding, or (ii) if such
a quorum is not obtainable, or, even if obtainable, if a quorum
of disinterested directors so directs, by independent legal
counsel in a written opinion, or (iii) by the stockholders,
that such person acted in bad faith and in a manner that such
person did not believe to be in or not opposed to the best
interests of the corporation, or, with respect to any criminal
proceeding, that such person believed or had reasonable cause
to believe that his conduct was unlawful.
9.4 Successful Defense on Merits. To the extent
that Indemnitee (or Indemnitee Agent) without limitation has
been successful on the merits in defense of any proceeding
referred to in Sections 9.1 or 9.2 above, or in defense of any
claim, issue or matter therein, the corporation shall indemnify
Indemnitee (or Indemnitee Agent) against expenses (including
attorneys' fees and disbursements) actually and reasonably
incurred by Indemnitee (or Indemnitee Agent) in connection
therewith.
9.5 Certain Terms Defined. For purposes of this
Article 9, references to "other enterprises" shall include
employee benefit plans, references to "fines" shall include any
excise taxes assessed on Indemnitee or Indemnitee Agent with
respect to an employee benefit plan, and references to
"proceeding" shall include any threatened, pending or com-
pleted action or proceeding, whether civil, criminal,
administrative or investigative. References to "corporation"
include all constituent corporations absorbed in a consolida-
tion or merger as well as the resulting or surviving corpora-
tion, so that any person who is or was a director, officer,
employee or other agent of such a constituent corporation or
who, being or having been such a director, officer, employee or
other agent of another corporation, partnership, joint venture,
trust or other enterprise shall stand in the same position
under the provisions of this Article 9 with respect to the
resulting or surviving corporation as such person would if he
or she had served the resulting or surviving corporation in the
same capacity.
9.6 Advancement of Expenses. The corporation shall
advance all expenses incurred by Indemnitee and may advance all
or any expenses incurred by Indemnitee Agent in connection with
the investigation, defense, settlement (excluding amounts actu-
ally paid in settlement of any action, suit or proceeding) or
appeal of any civil or criminal action, suit or proceeding
referenced in Sections 9.1 or 9.2 hereof; provided, that Indem-
nitee or Indemnitee Agent undertakes to repay such amounts
advanced only if, and to the extent that, it shall be
determined ultimately that Indemnitee or Indemnitee Agent is
not entitled to be indemnified by the corporation as authorized
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hereby. The advances to be made hereunder shall be paid by the
corporation (i) to Indemnitee within twenty (20) days following
delivery of a written request therefor by Indemnitee to the
corporation; and (ii) to Indemnitee Agent within twenty (20)
days following the later of a written request therefor by
Indemnitee Agent to the corporation and determination by the
corporation to advance expenses to Indemnitee Agent pursuant to
the corporation's discretionary authority hereunder.
9.7 Notice of Claim. Indemnitee shall, as a
condition precedent to his or her right to be indemnified under
this Article 9, and Indemnitee Agent shall, as a condition
precedent to his or her ability to be indemnified under this
Article 9, give the corporation notice in writing as soon as
practicable of any claim made against Indemnitee or Indemnitee
Agent, as the case may be, for which indemnification will or
could be sought under this Article 9. Notice to the
corporation shall be directed to the secretary of the
corporation at the principal business office of the corpora-
tion (or such other address as the corporation shall designate
in writing to Indemnitee or Indemnitee Agent). In addition,
Indemnitee or Indemnitee Agent shall give the corporation such
information and cooperation as it may reasonably require and as
shall be within Indemnitee's or Indemnitee Agent's power.
9.8 Enforcement Rights. Any indemnification
provided for in Sections 9.1 or 9.2 or 9.4 shall be made no
later than sixty (60) days after receipt of the written request
of Indemnitee. If a claim or request under this Article 9 or
under any statute providing for indemnification is not paid by
the corporation, or on its behalf, within sixty (60) days after
written request for payment thereof has been received by the
corporation, Indemnitee may, but need not, at any time
thereafter bring suit against the corporation to recover the
unpaid amount of the claim or request, and subject to
Section 6.20, Indemnitee shall also be entitled to be paid for
the expenses (including attorneys' fees and disbursements) of
bringing such action. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses
incurred in connection with any action, suit or proceeding in
advance of its final disposition) that Indemnitee has not met
the standards of conduct that make it permissible under
applicable law for the corporation to indemnify Indemnitee for
the amount claimed, but the burden of proving such defense
shall be on the corporation, and Indemnitee shall be entitled
to receive interim payments of expenses pursuant to Section 9.6
unless and until such defense may be finally adjudicated by
court order or judgment for which no further right of appeal
exists. The parties hereto intend that if the corporation
contests Indemnitee's right to indemnification, the question of
Indemnitee's right to indemnification shall be a decision for
the court, and no presumption regarding whether the applicable
standard has been met will arise based on any determination or
lack of determination of such by the corporation (including its
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board of directors or any subgroup thereof, independent legal
counsel or its stockholders). The board of directors may, in
its discretion, provide by resolution for similar or identical
enforcement rights for any Indemnitee Agent.
9.9 Assumption of Defense. In the event the
corporation shall be obligated to pay the expenses of any
proceeding against an Indemnitee (or Indemnitee Agent), the
corporation, if appropriate, shall be entitled to assume the
defense of such proceeding with counsel approved by Indemnitee
(or Indemnitee Agent), which approval shall not be unreason-
ably withheld, upon the delivery to Indemnitee (or Indemnitee
Agent) of written notice of its election so to do. After
delivery of such notice, approval of such counsel by Indem-
nitee (or Indemnitee Agent) and the retention of such counsel
by the corporation, the corporation will not be liable to
Indemnitee (or Indemnitee Agent) under this Article 9 for any
fees of counsel subsequently incurred by Indemnitee (or
Indemnitee Agent) with respect to the same proceeding, unless
(i) the employment of counsel by Indemnitee (or Indemnitee
Agent) is authorized by the corporation, (ii) Indemnitee (or
Indemnitee Agent) shall have reasonably concluded that there
may be a conflict of interest of such counsel retained by the
corporation between the corporation and Indemnitee (or
Indemnitee Agent) in the conduct of such defense, or (iii) the
corporation ceases or terminates the employment of such coun-
sel with respect to the defense of such proceeding, in any of
which events then the fees and expenses of Indemnitee's (or
Indemnitee Agent's) counsel shall be at the expense of the
corporation. At all times, Indemnitee (or Indemnitee Agent)
shall have the right to employ other counsel in any such pro-
ceeding at Indemnitee's (or Indemnitee Agent's) expense.
9.10 Approval of Expenses. No expenses for which
indemnity shall be sought under this Article 9, other than
those in respect of judgments and verdicts actually rendered,
shall be incurred without the prior consent of the corporation,
which consent shall not be unreasonably withheld.
9.11 Subrogation. In the event of payment under
this Article 9, the corporation shall be subrogated to the
extent of such payment to all of the rights of recovery of the
Indemnitee (or Indemnitee Agent), who shall do all things that
may be necessary to secure such rights, including the execution
of such documents necessary to enable the corporation
effectively to bring suit to enforce such rights.
9.12 Exceptions. Notwithstanding any other
provision herein to the contrary, the corporation shall not be
obligated pursuant to this Article 9:
(a) Claims Initiated by Indemnitee. To indemnify or
advance expenses to Indemnitee with respect to proceedings or
claims initiated or brought voluntarily by Indemnitee and not
-23-
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<PAGE>
by way of defense, except with respect to proceedings brought
to establish or enforce a right to indemnification under this
Article 9 or any other statute or law or as otherwise required
under the Delaware General Corporation Law, but such
indemnification or advancement of expenses may be provided by
the corporation in specific cases if the board of directors has
approved the initiation or bringing of such suit; or
(b) Lack of Good Faith. To indemnify Indemnitee for
any expenses incurred by the Indemnitee with respect to any
proceeding instituted by Indemnitee to enforce or interpret
this Article 9, if a court of competent jurisdiction determines
that such proceeding was not made in good faith or was
frivolous; or
(c) Insured Claims. To indemnify Indemnitee for
expenses or liabilities of any type whatsoever (including, but
not limited to, judgments, fines, ERISA excise taxes or penal-
ties, and amounts paid in settlement) that have been paid
directly to Indemnitee by an insurance carrier under a policy
of officers' and directors' liability insurance maintained by
the corporation; or
(d) Claims Under Section 16(b). To indemnify Indem-
nitee for expenses and the payment of profits arising from the
purchase and sale by Indemnitee of securities in violation of
Section 16(b) of the Securities Exchange Act of 1934, as
amended, or any similar successor statute.
9.13 Partial Indemnification. If Indemnitee is
entitled under any provision of this Article 9 to
indemnification by the corporation for some or a portion of the
expenses, judgments, fines or penalties actually or reasonably
incurred by the Indemnitee in the investigation, defense,
appeal or settlement of any civil or criminal action, suit or
proceeding, but not, however, for the total amount thereof, the
corporation shall nevertheless indemnify Indemnitee for the
portion of such expenses, judgments, fines or penalties to
which Indemnitee is entitled.
9.14 Coverage. This Article 9 shall, with respect
to expenses incurred following adoption of this Article 9, to
the extent permitted by law, apply to acts or omissions of
(a) Indemnitee that occurred prior to the adoption of this
Article 9 if Indemnitee was a director or officer of the
corporation, or any predecessor corporation or constituent
corporation in a merger involving the corporation, or was
serving at the request of the corporation as a director or
officer of another corporation, partnership, joint venture,
trust or other enterprise, at the time such act or omission
occurred; and (b) Indemnitee Agent that occurred prior to the
adoption of this Article 9 if Indemnitee Agent was an employee
or other agent of the corporation, or any preclusion or
constituent corporation to a merger involving the corporation,
-24-
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<PAGE>
or was serving at the request of the corporation as an employee
or agent of another corporation, partnership, joint venture,
trust or other enterprise at the time such act or omission
occurred. All rights to indemnification under this Article 9
shall be deemed to be provided by a contract between the
corporation and the Indemnitee in which the corporation hereby
agrees to indemnify Indemnitee to the fullest extent permitted
by law, including those circumstances in which indemnification
would otherwise be discretionary and notwithstanding that such
indemnification is not specifically authorized by these Bylaws
or by statute. Any repeal or modification of these Bylaws, the
Delaware General Corporation Law or any other applicable law
shall not affect any rights or obligations then existing under
this Article 9. The provisions of this Article 9 shall
continue as to Indemnitee and Indemnitee Agent for any action
taken or not taken while serving in an indemnified capacity
even though the Indemnitee or Indemnitee Agent may have ceased
to serve in such capacity at the time of any action, suit or
other covered proceeding. This Article 9 shall be binding upon
the corporation and its successors and assigns and shall inure
to the benefit of Indemnitee and Indemnitee Agent and
Indemnitee's and Indemnitee Agent's estate, heirs, legal
representatives and assigns.
9.15 Non-Exclusivity. Nothing herein shall be
deemed to diminish or otherwise restrict any rights to which
Indemnitee or Indemnitee Agent may be entitled under these
Bylaws, any agreement, any vote of stockholders or
disinterested directors, or under the laws of the State of
Delaware. The corporation may enter into indemnification
agreements with its directors, officers, employees or agents.
9.16 Severability. Nothing in this Article 9 is
intended to require or shall be construed as requiring the
corporation to do or fail to do any act in violation of
applicable law. If this Article 9 or any portion hereof shall
be invalidated on any ground by any court of competent
jurisdiction, then the corporation shall nevertheless indemnify
Indemnitee or Indemnitee Agent to the fullest extent permitted
by any applicable portion of this Article 9 that shall not have
been invalidated.
9.17 Enforceability Acknowledgment. In certain
instances, Federal law or applicable public policy may prohibit
the corporation from indemnifying its directors and officers
under this Article 9 or otherwise. The corporation, if appro-
priate, may undertake with the Securities and Exchange
Commission to submit the question of indemnification to a court
in certain circumstances for a determination of the
corporation's right under public policy to indemnify an
Indemnitee or Indemnitee Agent.
9.18 Officer And Director Liability Insurance. The
corporation shall, from time to time, make the good faith
-25-
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determination whether or not it is practicable for the
corporation to obtain and maintain a policy or policies of
insurance with reputable insurance companies providing the
officers and directors of the corporation with coverage for
losses from wrongful acts, or to ensure the corporation's
performance of its indemnification obligations under this
Article 9. Among other considerations, the corporation will
weigh the costs of obtaining such insurance coverage against
the protection afforded by such coverage. Notwithstanding the
foregoing, the corporation shall have no obligation to obtain
or maintain such insurance if the corporation determines in
good faith that such insurance is not reasonably available, if
the premium costs for such insurance are disproportionate to
the amount of coverage provided, if the coverage provided by
such insurance is limited by exclusions so as to provide an
insufficient benefit, or if Indemnitee is covered by similar
insurance maintained by a subsidiary or parent of the
corporation.
9.19 Notice To Insurers. If, at the time of the
receipt of a notice of a claim pursuant to Section 9.7 hereof,
the corporation has director and officer liability insurance in
effect, the corporation shall give prompt notice of the
commencement of such proceeding to the insurers in accordance
with the procedures set forth in the respective policies. The
corporation shall thereafter take all necessary or desirable
action to cause such insurers to pay, on behalf of the
Indemnitee, all amounts payable as a result of such proceeding
in accordance with the terms of such policies.
9.20 Attorneys' Fees. In the event that any action
is instituted by Indemnitee under this Article 9 to enforce or
interpret any of the terms hereof, Indemnitee shall be entitled
to be paid all court costs and expenses, including reasonable
attorneys' fees, incurred by Indemnitee with respect to such
action, unless as a part of such action, the court of competent
jurisdiction determines that the action was not instituted in
good faith or was frivolous. In the event of an action insti-
tuted by or in the name of the corporation under this
Article 9, or to enforce or interpret any of the terms of this
Article 9, Indemnitee shall be entitled to be paid all court
costs and expenses, including attorneys' fees, incurred by
Indemnitee in defense of such action (including with respect to
Indemnitee's counterclaims and cross-claims made in such
action), unless as a part of such action the court determines
that Indemnitee's defenses to such action were not made in good
faith or were frivolous. The board of directors may, in its
discretion, provide by resolution for payment of such
attorneys' fees to any Indemnitee Agent.
9.21 Notice. All notices, requests, demands and
other communications under this Article 9 shall be in writing
and shall be deemed duly given (i) if delivered by hand and
receipted for by the addressee, on the date of such receipt, or
-26-
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<PAGE>
(ii) if mailed by domestic certified or registered mail with
postage prepaid, on the third business day after the date
postmarked.
-27-
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<PAGE>
CERTIFICATE OF ADOPTION OF BYLAWS
OF
ACC CONSUMER FINANCE CORPORATION
The undersigned person appointed in the Certificate
of Incorporation to act as the Incorporator of ACC CONSUMER
FINANCE CORPORATION, hereby adopts the foregoing bylaws,
comprising nineteen (19) pages, as the Bylaws of the
corporation.
Executed this 9th day of November , 1995.
----- -----------
/s/ Christopher J. Kearns
--------------------------------------
Christopher J. Kearns
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<PAGE>
EXHIBIT 4.1
===============================================================================
ACC CONSUMER FINANCE CORPORATION
AND
NORWEST BANK MINNESOTA, N.A.
TRUSTEE
------------------------------------
INDENTURE
Dated as of [November ____], 1996
------------------------------------
$[17,250,000]
_____% NOTES
DUE DECEMBER 1, 2003
===============================================================================
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<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1
DEFINITIONS...................................................... 9
ARTICLE 2
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF NOTES............................................16
SECTION 2.1. Designation, Amount and Issue of Notes.............16
SECTION 2.2. Form of Notes......................................16
SECTION 2.3. Denominations, Dates, Interest Payment and
Record Dates.......................................16
SECTION 2.4. Numbers and Legends on Notes.......................19
SECTION 2.5. Execution of Notes.................................19
SECTION 2.6. Registration of Transfer of Notes..................19
SECTION 2.7. Exchange and Registration of Transfer of
Notes..............................................19
SECTION 2.8. Temporary Notes....................................20
SECTION 2.9. Recognition of Registered Holders of
Definitive Notes and Temporary Notes...............21
SECTION 2.10. Mutilated, Destroyed, Lost or Stolen Notes........21
SECTION 2.11. Form and Authentication of Notes..................22
SECTION 2.12. Surrender and Cancellation of Notes...............22
ARTICLE 3
PARTICULAR COVENANTS OF THE COMPANY..............................22
SECTION 3.1. Will Punctually Pay Principal, Premiums and
Interest on the Notes..............................22
SECTION 3.2.
(A) Office or Agency...................................23
i
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<PAGE>
(B) Appointment of Trustee as paying Agent; Duty of
Paying Agent Other Than Trustee....................23
(C) Duty of Company Acting as Paying Agent.............24
(D) Delivery to Trustee................................24
(E) All Sums to be Held Subject to Section 15.2........24
SECTION 3.3. Will Pay Indebtedness..............................24
SECTION 3.4. Will Maintain Office...............................25
SECTION 3.5. Will Keep, and Permit Examination of, Records
and Books of Account and Will Permit Visitation
of Property........................................25
SECTION 3.6. Corporate Existence................................25
SECTION 3.7. Maintenance of Properties..........................25
SECTION 3.8. Payment of Taxes and Other Claims..................26
SECTION 3.9. Will Furnish Annual Certificates...................26
SECTION 3.10. Restrictions on Indebtedness......................26
SECTION 3.11. Liquidity Maintenance Requirement.................26
SECTION 3.12. Limitation on Dividends and Other Payments........27
ARTICLE 4
NOTEHOLDER LISTS AND REPORTS BY
THE COMPANY AND THE TRUSTEE......................................27
SECTION 4.1. Noteholder Lists, Etc..............................27
SECTION 4.2. Reports by Company.................................29
SECTION 4.3. Reports by Trustee.................................30
ARTICLE 5
REDEMPTION OF NOTES AT COMPANY'S OPTION..........................30
SECTION 5.1. Election by Company to Redeem Notes................30
SECTION 5.2. Redemption of Part of Notes........................31
ii
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<PAGE>
SECTION 5.3. Notice of Redemption...............................31
SECTION 5.4. Deposit of Redemption Price........................32
SECTION 5.5. Date on Which Notes Cease to Bear Interest, Etc....32
SECTION 5.6. All Notes Delivered................................33
ARTICLE 6
REDEMPTION OF NOTES AT HOLDER'S OPTION...........................33
SECTION 6.1. Redemption Right at Holder's Option................33
SECTION 6.2. Redemption Procedure...............................33
SECTION 6.3. Withdrawal.........................................35
SECTION 6.4. Redemption Register................................35
SECTION 6.5. Redemption Upon Fundamental Structural Change
or Significant Subsidiary Disposition..............36
SECTION 6.6. Redemption of Notes Subject to Article 5...........37
ARTICLE 7
REMEDIES OF TRUSTEE AND NOTEHOLDERS UPON DEFAULT.................37
SECTION 7.1. Definition of Default and Event of Default.........37
SECTION 7.2. Trustee to Give Noteholders Notice of Defaults.....38
SECTION 7.3. Declaration of Principal and Accrued interest
Due Upon Default; Holders of Specified Percentage
of Notes May Waive Default Declaration.............39
SECTION 7.4. Power of Trustee to Protect and Enforce Rights.....40
SECTION 7.5. Remedies Cumulative................................40
SECTION 7.6. Holders of Specified Percentage of Notes May
Direct Judicial Proceedings by Trustee.............41
SECTION 7.7. Disposition of Proceeds of Sale....................41
SECTION 7.8.
(A) Payment of Principal and Interest to
Trustee Upon Occurrence of Certain Defaults;
Judgment May be Taken by Trustee...................41
iii
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<PAGE>
(B) Enforcement of Rights by Trustee During
Continuance of an Event of Default.................42
(C) Application of Moneys Collected by Trustee.........42
SECTION 7.9. Possession of Notes Unnecessary in Action by
Trustee............................................43
SECTION 7.10. Trustee May File Necessary Proofs..................43
SECTION 7.11. Limitation Upon Right of Noteholders to
Institute Certain Legal Proceedings................44
SECTION 7.12. Right of Noteholder to Receive and Enforce
Payment Not Impaired...............................44
SECTION 7.13. Court May Require Undertaking to Pay Costs.........45
SECTION 7.14. Unenforceable Provision Inoperative................45
SECTION 7.15. If Enforcement Proceedings Abandoned, Status
Quo Is Established.................................45
SECTION 7.16. Noteholders May Waive Certain Defaults.............45
ARTICLE 8
EVIDENCE OF RIGHTS OF NOTEHOLDERS
AND OWNERSHIP OF NOTES...........................................46
SECTION 8.1. Evidence of Ownership of Definitive Notes and
Temporary Notes Issued Hereunder in Registered
Form...............................................46
ARTICLE 9
CONSOLIDATION, MERGER AND SALE...................................46
SECTION 9.1. Company May Merge, Consolidate, Etc., Upon
Certain Terms......................................46
SECTION 9.2. Successor Corporation to be Substituted............47
SECTION 9.3. Opinion of Counsel.................................47
SECTION 9.4. Article 9 Subject to Provision of Section 6.5......47
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<PAGE>
ARTICLE 10
CONCERNING THE TRUSTEE...........................................47
SECTION 10.1. Requirement of Corporate Trustee, Eligibility.....47
SECTION 10.2. Acceptance of Trust...............................48
SECTION 10.3. Disclaimer........................................49
SECTION 10.4. Trustee May Own Notes.............................50
SECTION 10.5. Trustee May Rely on Certificates, Etc.............50
SECTION 10.6. Money Held in Trust Not Required to be
Segregated........................................51
SECTION 10.7. Compensation, Reimbursement, Indemnity,
Security..........................................51
SECTION 10.8. Conflict of Interest..............................52
SECTION 10.9. Resignation, Removal, Appointment of
Successor Trustee.................................58
SECTION 10.10. Acceptance by Successor Trustee...................59
SECTION 10.11.
(A) Notice, Etc. on Behalf of Company Delivered
to Trustee.........................................59
(B) Cash, Securities, Etc. to be Held by Trustee.......59
SECTION 10.12. Merger or Consolidation of Trustee................60
SECTION 10.13. Authenticating Agent..............................60
ARTICLE 11
DISCHARGE OF INDENTURE...........................................61
SECTION 11.1. Acknowledgment of Discharge.......................61
SECTION 11.2. Money Held in Trust...............................62
ARTICLE 12
MEETING OF NOTEHOLDERS...........................................63
SECTION 12.1. Purposes for Which Meetings May be
Called ...........................................63
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<PAGE>
SECTION 12.2. Call of Meetings by Trustee; Generally............63
SECTION 12.3. Call of Meetings by Trustee; Notice...............63
SECTION 12.4. Meetings, Notice and Entitlement to be
Present...........................................64
SECTION 12.5. Regulations May be Made by Trustee................64
SECTION 12.6. Manner of Voting at Meetings and Record to be
Kept..............................................66
SECTION 12.7. Evidence of Action by Holders of Specified
Percentage of Notes...............................66
SECTION 12.8. Exercise of Right of Trustee or Noteholders
May Not be Hindered or Delayed by Call of Meeting
of Noteholders....................................66
ARTICLE 13
SUPPLEMENTAL INDENTURES..........................................67
SECTION 13.1. Purposes for Which Supplemental Indentures
May be Executed by Company and Trustee............67
SECTION 13.2. Modification of Indenture by Written Consent
of Noteholders....................................68
SECTION 13.3. Requirements for Execution; Duties and
Immunities of Trustee.............................69
SECTION 13.4. Supplemental Indentures Part of
Indenture.........................................69
SECTION 13.5. Notes Executed After Supplemental Indenture
to be Approved by Trustee.........................70
SECTION 13.6. Supplemental Indentures Required to Comply
with Trust Indenture Act of 1939..................70
ARTICLE 14
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS...........................................70
SECTION 14.1. Immunity of Certain Persons.......................70
vi
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<PAGE>
ARTICLE 15
MISCELLANEOUS....................................................70
SECTION 15.1. Benefits Restricted to Parties and to Holders
of Notes..........................................70
SECTION 15.2. Deposits for Notes Not Claimed for Specified
Period to be Returned to Company on Demand........71
SECTION 15.3. Formal Requirements of Certificates and
Opinions Hereunder................................71
SECTION 15.4. Evidence of Act of the Noteholders................72
SECTION 15.5. Parties to Include Successors and
Assigns...........................................73
SECTION 15.6. In Event of Conflict with Trust Indenture
Act, Provisions Therein to Control................73
SECTION 15.7. Request, Notices, Etc. to Trustee.................73
SECTION 15.8. Manner of Notice..................................73
SECTION 15.9. Severability......................................74
SECTION 15.10. Payments Due on Days When Banks Closed............74
SECTION 15.11. Backup Withholding Forms..........................74
SECTION 15.12. Titles of Articles of this Indenture Not
Part Thereof......................................74
SECTION 15.13. Execution in Counterparts.........................75
SECTION 15.14. Governing Law.....................................75
vii
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<PAGE>
ACC CONSUMER FINANCE CORPORATION
_____% Notes due December 1, 2003
TIE-SHEET
of provisions of Trust Indenture Act of 1939 and the Indenture dated as
of [November ___], 1996, between ACC Consumer Finance Corporation and
Norwest Bank Minnesota, N.A., Trustee.
TRUST INDENTURE
ACT OF 1939
SECTION INDENTURE SECTION
- ---------------------------------------------- -------------------------------
310 (a)(1) (2) (3)............................. 10.1 and 10.12
(a) (4)................................. Not applicable
(b)..................................... 10.8 and 10.9
(c)..................................... Not applicable
311 (c)........................................ Not applicable
312 (a)........................................ 4.1(A) and (B)
(b)..................................... 4.1(C)
(c)..................................... 4.1(D)
313 (a)........................................ 4.3
(b)..................................... Not applicable
(c)..................................... 4.3
(d)..................................... 4.3
314 (a)........................................ 4.2(A) and (B)
(b)..................................... Not applicable
(c)..................................... 15.3
(d)..................................... Not applicable
(e)..................................... 15.3
315 (a)........................................ 10.2(A)
(b)..................................... 7.2
(c)..................................... 10.2(B)
(d)..................................... 10.2(C)
(e)..................................... 7.13
316 (a) (1).................................... 7.6 and 7.16
(a) (2)................................. Not applicable
(b)..................................... 7.12
317 (a)........................................ 7.8 and 7.10
(b)..................................... 3.2(B) and (C)
318 (a)........................................ 15.6
- -----------------------------
This tie-sheet does not constitute a part of the Indenture.
Page 206 of 606
<PAGE>
This INDENTURE, dated as of [November ___], 1996, between ACC
CONSUMER FINANCE CORPORATION, a Delaware corporation (herein called the
"Company") and NORWEST BANK MINNESOTA, N.A., a national banking
association, the mailing address of which is [INSERT ADDRESS] (herein,
together with each successor as such trustee hereunder, called the
"Trustee").
WITNESSETH:
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized the issue of its ____% Notes due December 1, 2003 (hereinafter
sometimes called the "Notes") in the aggregate principal amount of up to
$17,250,000 and, to provide the terms and conditions upon which the Notes
are to be authenticated, issued and delivered, the Company has duly
authorized the execution of this Indenture;
WHEREAS, the Notes and the Trustee's certificate of
authentication to be borne by the Notes are to be substantially in the
following forms, respectively:
[FORM OF FACE OF NOTES]
No. ACC Consumer Finance Corporation $
___% NOTE DUE DECEMBER l, 2003
ACC Consumer Finance Corporation, a corporation organized and
existing under the laws of the State of Delaware (hereinafter called the
"Company," which term shall include any successor corporation as defined in
the Indenture referred to on the reverse side hereof), for value received,
hereby promises to pay to _______________, or registered assigns, the sum
of _______________ Dollars on or before December 1, 2003, in such coin or
currency of the United States of America as at the time of payment is legal
tender for public and private debts, and to pay interest (calculated on the
basis of a 360-day year of twelve 30-day months) on the unpaid principal
amount hereof in like coin or currency from the Interest Payment Date to
which interest hereon has been paid immediately preceding the date hereof
(unless the date hereof is an Interest Payment Date to which interest has
been paid, in which case from the date hereof) or, if no interest has been
paid on this Note since the Original Issue Date hereof, as defined in the
Indenture referred to on the reverse side hereof, from such Original Issue
Date, at the rate of ___% per annum, payable monthly on the first day of
each month, commencing December 1, 1996, until the principal hereof shall
have been paid or duly provided for. The interest so payable on any
Interest Payment Date will be paid to the person in whose name this Note is
registered at the applicable Regular Record Date unless the Company shall
default in the payment of interest due on such Interest Payment Date, in
which case such defaulted interest shall be paid to the person in whose
name this Note is registered at the close of business on a Special Record
Date for the payment of such defaulted interest established by notice to
the registered holders of Notes given by mail to said holders as their
1
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<PAGE>
names and addresses appear in the Note Register (as defined in the
Indenture referred to on the reverse side hereof) not less than 10 days
preceding such Special Record Date. The principal hereof and the interest
hereon shall be payable at the Main Office of Norwest Bank Minnesota, N.A.,
Trustee under the Indenture referred to on the reverse side hereof, in
Minneapolis, Minnesota, provided, however, that the interest on this Note
may be payable, at the option of the Company, by check mailed to the person
entitled thereto as such person's address shall appear on the Note Register
(including the records of any Note Co-Registrar).
Reference is hereby made to the further provisions of this Note
set forth on the reverse side hereof, and such further provisions shall for
all purposes have the same effect as though fully set forth at this place.
This Note shall not be entitled to any benefit under the
Indenture referred to on the reverse side hereof, or be or become valid or
obligatory for any purpose, until the authentication certificate endorsed
hereon shall have been signed by Norwest Bank Minnesota, N.A., Trustee
under such Indenture, or a successor trustee thereto under such Indenture.
IN WITNESS WHEREOF, ACC CONSUMER FINANCE CORPORATION has caused
this Note to be signed in its name by its Chief Executive Officer,
President, Chief Operating Officer or one of its Vice Presidents by such
person's signature or a facsimile thereof, and its corporate seal to be
affixed or printed or engraved hereon, or a facsimile thereof, and attested
by its Secretary or one of its Assistant Secretaries by such person's
signature or a facsimile thereof.
Dated: ACC CONSUMER FINANCE CORPORATION
By:_________________________________
Title:______________________________
[CORPORATE SEAL]
Attest:
________________________________
Title:__________________________
2
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<PAGE>
[FORM OF TRUSTEE'S AUTHENTICATION CERTIFICATE]
TRUSTEE'S AUTHENTICATION CERTIFICATE
This Note is one of the Notes described or provided for in the
Indenture referred to on the reverse side hereof.
NORWEST BANK MINNESOTA, N.A.
as Trustee
By:____________________________________
Authorized Officer
[FORM OF REVERSE OF NOTE]
ACC Consumer Finance Corporation
_____% NOTE DUE DECEMBER 1, 2003
This Note is one of a duly authorized issue of Notes of the
Company designated as its ____% Notes due November 1, 2003 (herein called
the "Notes"), limited in aggregate principal amount of $17,250,000 (except
for Notes authenticated and delivered upon transfer of, or in exchange for
or in lieu of other Notes), all issued and to be issued only in fully
registered form without coupons under an indenture (herein, together with
any Supplemental Indenture, called the "Indenture"), dated as of [November
___, 1996], duly executed and delivered by ACC Consumer Finance Corporation
to Norwest Bank Minnesota, N.A., Minneapolis, Minnesota, Trustee (the
Trustee, together with its successors being herein called the "Trustee"),
to which Indenture (which is hereby made a part hereof and to all of which
the holder by acceptance hereof assents) reference is hereby made for a
description of the respective rights of and restrictions upon the Company
and the holders of the Notes, and the rights, limitations of rights, duties
and immunities of the Trustee in respect thereof.
The Notes are redeemable at the option of the Company as a whole
at any time, or in part from time to time, prior to maturity, commencing
December 1, 1999, on not less than 30 nor more than 60 days' notice given
as provided in the Indenture, upon payment of the then applicable
redemption price (expressed in percentages of the principal amount) set
forth below under the heading "General Redemption Prices," together in each
case with accrued and unpaid interest to the date fixed for redemption, all
subject to the conditions more fully set forth in the Indenture. The
General Redemption Prices (expressed in percentages of the principal
amount) applicable during the 12-month period beginning December________ 1
in the years indicated below are as follows:
3
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<PAGE>
General Redemption Prices
If redeemed during the 12-month period beginning December 1,
1999 .................................. 104%
2000 .................................. 102%
2001 and thereafter ................... 100%
In the event of the death of any holder, the Company shall
redeem Notes within 60 days following receipt by the Trustee of a written
request therefor from such holder's personal representative, or surviving
joint tenant(s), tenant by the entirety or tenant(s) in common subject to an
annual limitation of $25,000 per holder and an aggregate $300,000; provided
that all such Notes presented for payment in the event of the death of the
holder that were not redeemed due to the $25,000 or $300,000
4
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<PAGE>
limitations shall be redeemed during the following twelve (12)-month
period(s) in the order of their receipt. Holders of Notes presented for
redemption shall be entitled to and shall receive scheduled monthly payments
of interest thereon on Interest Payment Dates until their Notes are redeemed.
In the event that there shall occur a Fundamental Structural
Change (as defined in the Indenture), the holder of this Note shall have the
right, subject to certain conditions stated in the Indenture, to present
it for payment prior to maturity, and the Company will redeem the same (or
any portion of the principal amount thereof which is $1,000 or an integral
multiple thereof, as the holder shall specify). The $25,000 individual and
$300,000 aggregate redemption limitations shall not apply to any such
redemption.
Notes may be presented for redemption by delivering to the
Trustee: (i) a written request for redemption, in form satisfactory to the
Trustee, signed by the registered holder(s) or his duly authorized
representative, (ii) the original Note to be redeemed and (iii) appropriate
evidence of death and, if made by a representative or surviving joint
tenant, tenant by the entirety or tenant in common of a deceased holder
appropriate evidence of authority to make such request. No particular
forms of request for redemption or authority to request redemption are
necessary. The price to be paid by the Company for all Notes or portions
thereof presented to it for redemption is 100% of the principal amount or
respective portions thereof plus accrued but unpaid interest to the date
of payment. Any acquisition of Notes by the Company other than by
redemption at the option of any holder shall not be included in the
computation of either the $25,000 or $300,000 limitation for any period.
For purposes of a holder's request for redemption, a Note held
in tenancy by the entirety, joint tenancy or tenancy in common will be
deemed to be held by a single holder and the death of a tenant by the
entirety, joint tenant or tenant in common will be deemed the death of a
holder. The death of a person, who, during his lifetime, was entitled to
substantially all of the beneficial ownership interests of a Note will be
deemed the death of the holder, regardless of the registered holder, if
such beneficial interest can be established to the satisfaction of the
Trustee. For purposes of a holder's request for redemption and a request
for redemption on behalf of a deceased holder, a beneficial interest shall
be deemed to exist in cases of street name or nominee ownership, ownership
under the Uniform Gifts to Minors Act, community property or other joint
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ownership arrangements between a husband and wife (including individual
retirement accounts or Keogh [H.R. 10] plans maintained solely by or for
the holder or decedent or by or for the holder or decedent and his
spouse), and trusts and certain other arrangements where a person has
substantially all of the beneficial ownership interests in the Notes
during his lifetime. Beneficial ownership interests shall include the
power to sell, transfer or otherwise dispose of a Note and the right to
receive the proceeds therefrom, as well as interest and principal payable
with respect thereto.
In the case of Notes registered in the names of banks, trust
companies or broker-dealers who are members of a national securities
exchange or the National Association of Securities Dealers, Inc.
("Qualified Institutions"), the $25,000 limitation shall apply to each
beneficial owner of Notes held by a Qualified Institution and the death of
such beneficial owner shall entitle a Qualified Institution to seek
redemption of such Notes as if the deceased beneficial owner were the
record holder. Such Qualified Institution, in its request for redemption
on behalf of beneficial owners, must submit evidence, satisfactory to the
Trustee, that it holds Notes on behalf of such beneficial owners and must
certify that the aggregate amount of requests for redemption tendered by
such Qualified Institution on behalf of such beneficial owner in the
initial period or in any subsequent 12-month period does not exceed
$25,000.
In the case of any Notes which are presented for redemption in
part only, upon redemption the Company shall execute and the Trustee shall
authenticate and deliver to or on the order of the holder of such Notes,
without service charge, a new Note(s), of any authorized denomination or
denominations as requested by such holder, in aggregate principal amount
equal to the unredeemed portion of the principal of the Notes so
presented.
In the case of any Notes or portion thereof which are
presented for redemption by a holder and which have not been redeemed at
the time the Company gives notice of its election to redeem Notes at its
option, such Notes or portion thereof shall first be subject to redemption
by the Company at its option as described above and it any such Notes or
portion thereof are not redeemed by the Company they shall remain subject
to redemption pursuant to presentment by the holder.
Any Notes presented for redemption by the holder may be
withdrawn by the person(s) presenting the same upon delivery of a written
request for such withdrawal to the Trustee prior to the issuance of a check in
payment thereof in the case of Notes presented by reason of the death of a
holder.
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If the Company shall deposit with the Trustee in trust funds
sufficient to pay the principal of all of the Notes, or such of the Notes
as have been or are to be called for redemption, any premium, if any,
thereon, and all interest payable on such Notes to the date on which they
become due and payable, at maturity or upon redemption or otherwise and
shall comply with the other provisions of the Indenture in respect
thereof, then from and after said date (or prior thereto as provided in
the Indenture), such Notes shall no longer be entitled to any benefit
under the Indenture and, as respects the Company's liability thereon, such
Notes shall be deemed to have been paid.
To the extent permitted by, and as provided in, the Indenture,
the Company may, by entering into an indenture or indentures supplemental
to the Indenture, modify, alter, add to or eliminate in any manner any
provisions of the Indenture, or the rights of the Noteholders or the
rights and obligations of the Company, upon the consent, as in the
Indenture provided, of the holders of not less than sixty-six and
two-thirds percent (66-2/3%) in principal amount of the Notes then
Outstanding. Notwithstanding the foregoing, no Supplemental Indenture
shall, without the consent of the holder of each Outstanding Note affected
thereby, change the Stated Maturity of the principal of, or any
installment of interest on any Note, or reduce the principal amount
thereof or the rate of interest thereon, reduce the percentage of the
aggregate principal amount of Outstanding Notes the consent of the holders
of which is required for any Supplemental Indenture or for any waiver of
compliance with certain provisions of the Indenture, or modify any of the
provisions of the Indenture relating to the foregoing, all except as
provided in the Indenture.
If an Event of Default, as defined in the Indenture, shall
have occurred and be continuing, the principal of and all interest accrued
on all the Notes at any such time Outstanding under the Indenture may be
declared, and upon such declaration shall become, immediately due and
payable, in the manner, with the effect and subject to the conditions
provided in the Indenture. The Indenture provides that such declaration
and its consequence may be waived by the holders of a majority in
principal amount of the Notes then Outstanding.
The Notes are issuable as registered Notes without coupons in
denominations of integral multiples of $1,000. Subject to the provisions
of the Indenture, the transfer of this Note is registrable by the
registered holder hereof, in person or by his attorney duly authorized in
writing, at the Main Office of Norwest Bank Minnesota, N.A., in
Minneapolis, Minnesota, on books of the Company to be kept for that
purpose at said office, upon surrender and cancellation of this Note duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Trustee, and thereupon a new fully
registered Note of the same series, of the same aggregate principal amount
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and in authorized denominations, will be issued to the transferee or
transferees in exchange therefor; and this Note, with or without others
of the same series, may in like manner be exchanged for one or more new
fully registered Notes of the same series of other authorized
denominations but of the same aggregate principal amount; all as
provided in the Indenture. No service charge shall be made for any such
transfer, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge or expense that may be
imposed in relation thereto.
Prior to due presentment for registration of transfer, the
Company, the Trustee or any agent of the Company or the Trustee may deem
and treat the person in whose name this Note shall be registered at any
given time upon the Note Register as the absolute owner of this Note for
the purpose of receiving any payment of, or on account of, the principal
and interest on this Note and for all other purposes whether or not this
Note be overdue; and neither the Company nor the Trustee, nor any agent
of either of them, shall be bound by any notice to the contrary.
No recourse under any obligation, covenant or agreement
contained in the Indenture or in any Note, or because of the creation of
the indebtedness represented hereby, shall be had against any
incorporator, any past, present or future stockholder, or any officer or
director of the Company or any successor corporation, as such under any
rule of law, statute or constitution.
In any case where the date fixed for the payment of
principal or interest on any of the Notes or the date fixed for
redemption thereof shall not be a business day, then payment of
such principal or interest need not be made on such date, but may
be made on the next succeeding business day with the same force
and effect as if made on the date fixed for such payment or
redemption, and no interest shall accrue for the period from or
after such date.
All terms used in this Note which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
[END OF FORM OF NOTES]
8
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WHEREAS, this Indenture is subject to the provisions of the
Trust Indenture Act of 1939, as amended, that are required to be part of
this Indenture and shall, to the extent applicable, be governed by such
provisions;
WHEREAS, all acts and things necessary to make the Notes,
when executed by the Company and authenticated and delivered by the
Trustee, as in this Indenture provided, and issued, the valid, binding and
legal obligations of the Company, and to constitute these presents a valid
agreement according to its terms, have been done and performed, and the
execution of this Indenture and the issue hereunder of the Notes have in
all respects been duly authorized;
NOW THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon
which the Notes are, and are to be, authenticated, issued and delivered,
and in consideration of the premises, of the purchase and acceptance of
the Notes by the holders thereof and of the sum of one dollar duly paid to
it by the Trustee at the execution of these presents the receipt whereof
is hereby acknowledged, the Company covenants and agrees with the Trustee
for the equal and proportionate benefit of the respective holders from
time to time of the Notes, as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. The terms defined in this ARTICLE 1 shall (except as
herein otherwise expressly provided) for all purposes of this Indenture,
have the respective meanings specified in this Article and include the
plural as well as the singular. Any term defined in the Trust Indenture
Act of 1939, either directly or by reference therein, and not defined in
this Indenture, unless the context otherwise specifies or requires, shall
have the meaning assigned to such term therein as in force on the date of
this Indenture.
"Act" when used with respect to any Noteholder has the
meaning specified in SECTION 15.4.
"Affected" has the meaning specified in SECTION 13.2.
"Affiliate" means any person which directly or indirectly
controls, is controlled by, or is under direct or indirect common control
with, the Company. A person shall be deemed to control a corporation,
partnership or other entity, for the purpose of this definition, if such
person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such corporation,
9
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partnership or other entity, whether through the ownership of voting
securities, by contract, or otherwise.
"Applicant" has the meaning specified in SECTION 4.1.
"Authenticating Agent" means the agent of the Trustee which
at the time shall be appointed and acting pursuant to SECTION 10.13.
"Board of Directors" or "Board" means the Board of
Directors of the Company or any committee of such Board of Directors,
however designated, authorized to exercise the powers of such Board of
Directors in respect of the matters in question.
"Business Day" means any day which is not a Saturday,
Sunday or other day on which banking institutions in the State in which
the Trustee shall maintain its principal office are authorized or
obligated by law or required by executive order to close.
"Capital Stock" includes any and all shares, interests,
participations or other equivalents (however designated) of corporate
stock of any corporation.
"Certified Resolution" means a copy of a resolution or
resolutions certified, by the Secretary or an Assistant Secretary of the
corporation referred to, as having been duly adopted by the Board of
Directors of such corporation or any committee of such Board of Directors,
however designated, authorized to exercise the powers of such Board of
Directors in respect of the matters in question and to be in full force
and effect on the date of such certification.
"Common Stock" means any Capital Stock of a corporation
which is not preferred as to the payment of dividends or the distribution
of assets on any voluntary or involuntary liquidation over shares of any
other class of Capital Stock of such corporation.
"Company" shall mean and include ACC Consumer Finance
Corporation until any successor corporation shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor corporation.
"Company Order" and "Company Request" mean, respectively, a
written order or request signed in the name of the Company by its Chairman
of the Board, President, Chief Operating Officer, Chief Financial Officer,
Secretary or Assistant Secretary and delivered to the Trustee.
"Consolidated Net Worth" of any person means the consolidated
net worth of such person and its Subsidiaries, determined in accordance with
generally accepted accounting principles, less good.
10
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"Corporation" shall mean and include corporations,
associations companies and business trusts.
"Daily Newspaper" shall mean a newspaper in the English
language of general circulation in New York, New York and customarily
published on each business day of the year, whether or not such newspaper
is published on Saturdays, Sundays and legal holidays.
"Date of this Indenture" means the date set forth on the
cover page of this Indenture.
"Day" means a calendar day.
"Default" means any act or occurrence of the character
specified in SECTION 7.1, but excluding any notice or lapse of time, or
both, specified therein.
"Defaulted Interest" has the meaning specified in
SECTION 2.3.
"Event of Default" means any act or occurrence of the
character specified in SECTION 7.1.
"Executive Officer" means, with respect to any corporation,
the Chairman of the Board, the Chief Executive Officer, the President, the
Chief Operating Officer or the Chief Financial Officer of such
corporation.
"Federal Bankruptcy Act" means Title I of the Bankruptcy
Reform Act of 1978, as amended, and codified at Title 11 of the United
States Code and the Federal Rules of Bankruptcy Procedure as in effect as
of the date hereof or as hereafter amended.
"Fundamental Structural Change" means the occurrence of any
one or more of the following: (A) the Company shall convey, transfer or
lease all or substantially all of its assets to any person other than a
Subsidiary of the Company, other than as part of a loan securitization or
sale entered into in the ordinary course of its business; (B) the Company
shall be a party to any merger or consolidation if following such
transaction the persons who were stockholders of the Company immediately
prior to the transaction do not control at least a majority of the issued
and outstanding Capital Stock of the Company or the surviving corporation;
(C) any person shall purchase or otherwise acquire in one or more
transactions beneficial ownership of fifty percent (50%) or more of the
common stock of the Company outstanding on the date immediately prior to
the last such purchase or other acquisition; (D) the Company or any
Subsidiary shall purchase or otherwise acquire in one or more transactions
during the 12-month period preceding the date of the last such purchase or
other acquisition an aggregate of twenty-five percent (25%) or more of the
Common Stock of the Company outstanding on the date immediately prior
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<PAGE>
to the last such purchase or acquisition; or (E) the Company shall make a
distribution of cash, property or securities to holders of Common Stock
(in their capacity as such) (including by means of dividend,
reclassification or recapitalization) which, together with all other such
distributions during such 12-month period preceding the date of such
distribution, has an aggregate fair market value in excess of an amount
equal to twenty-five percent (25%) of the fair market value of the Common
Stock of the Company outstanding on the date immediately prior to such
distribution.
"Indebtedness" means, without duplication (i) any liability
of any person (a) for borrowed money, (b) evidenced by a note, debenture
or similar instrument (including a purchase money obligation) given in
connection with the acquisition of any property or assets (other than
inventory or similar property acquired in the ordinary course of
business), including securities, or (c) for the payment of money relating
to a capitalized loan obligation; (ii) any guarantee by any person of, or
any commitment relating to, any liability of others described in the
preceding clause (i); and (iii) any amendment, renewal, extension or
refunding of any liability referred to in clause (i) and (ii) above, all
as determined for such person and its Subsidiaries on a consolidated basis
in accordance with generally accepted accounting principles; provided,
however, that Indebtedness shall not include any liability, the payment or
performance of which is secured by a security interest in any property or
asset, if recourse by the obligee under such liability upon the
non-payment or non-performance thereof is limited to realization pursuant
to such security interest upon such property or asset.
"Indenture" means this instrument as originally executed or
as it may from time to time be supplemented or amended by one or more
indentures supplemental hereto entered into pursuant to the applicable
provisions hereof.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Notes.
"Lien" means any mortgage, lien, pledge, charge or other
security interest or encumbrance of any kind.
"Main Office" with reference to the Trustee shall mean the
principal corporate trust office of the Trustee, which office is, on the
date of this Indenture, located at Norwest Bank Minnesota, N.A., Norwest
Center, Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479-0069.
"Maturity" or "Mature," when used with respect to any Note,
means the date on which the principal of such Note becomes due and payable
as therein or herein provided, whether at Stated Maturity or by
declaration of acceleration, call for redemption at the option of the Company
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pursuant to ARTICLE 5 or presentment for repayment as provided in ARTICLE
6 hereof, or otherwise.
"Note" or "Notes" mean one or more of the Notes comprising
the Company's issue of Notes issued, authenticated and delivered under
this Indenture.
"Note Co-Registrar" has the meaning specified in
SECTION 2.6.
"Note Register" and "Note Registrar" have the
respective meanings specified in SECTION 2.6.
"Noteholder," "Holder of the Notes," "Holder" or "holder"
or other similar terms mean any person in whose name, as of any particular
date, a Note is registered on the Note Register.
"Officers' Certificate" means a certificate signed by an
Executive Officer, the Controller, or the Secretary or an Assistant
Secretary of the Company, and delivered to the Trustee. Each such
certificate, to the extent required, shall comply with the provisions of
SECTION 15.3 hereof.
"Original Issue Date" with respect to any Note (or portion
thereof) means the earlier of (A) the date of such Note or (B) the date of
any Note (or portion thereof) for which such Note was issued (directly or
indirectly) on registration of transfer, exchange or substitution.
"Original Purchasers" means the original purchasers of the
Notes pursuant to that certain Underwriting Agreement by and among those
parties and the Company.
"Outstanding" means, as of the date of determination, all
Notes which theretofore shall have been authenticated and delivered by the
Trustee under this Indenture, except (A) Notes theretofore canceled by the
Trustee or delivered to the Trustee for cancellation, (B) Notes or
portions thereof for the payment or redemption of which money in the
necessary amount shall have been deposited with the Trustee or any Paying
Agent in trust for the holders of the Notes; provided, however, that in
the case of redemption, any notice required shall have been given or have
been provided for to the satisfaction of the Trustee, and (C) Notes in
exchange or substitution for or in lieu of which other Notes have been
authenticated and delivered under any of the provisions of this Indenture.
Notwithstanding the foregoing provision of this paragraph, Notes in
exchange or substitution for or in lieu of which other Notes have been
Authenticated and delivered under SECTION 2.10 hereof and which have not
been surrendered to the Trustee for cancellation or the payment of which
shall not have been duly provided for, shall be deemed to be Outstanding.
In determining whether the Noteholders of the requisite principal amount
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<PAGE>
of Notes Outstanding have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, Notes owned by the Company
or any other obligor upon the Notes or any Affiliate of the company,
including any Subsidiary, or such other obligor shall be disregarded and
deemed not Outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Notes which the
Trustee knows to be so owned shall be disregarded. Notes so owned which
have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Notes and that the pledgee is not the
Company or any other obligor upon the Notes or any Affiliate of the
Company or a Subsidiary or such other obligor.
"Over-allotment Option" means the option granted by the
Company to the Original Purchasers to purchase up to $2,250,000 aggregate
principal amount of the Notes to cover over-allotments pursuant to the
Underwriting Agreement by and among the Company and such parties dated as
of the date of this Indenture.
"Paying Agent" means any person authorized by the Company
to pay the principal of, premium, if any, and interest on any Notes on
behalf of the Company.
"Permitted Investments" means the investments described
on Exhibit A hereto<F1>.
"Person" means any individual, partnership, corporation,
trust, unincorporated association, Joint venture, government or any
department or agency thereof, or any other entity.
"Place of payment" means such place as designated in
SECTION 2.3 hereof.
"Predecessor Note" of any particular Note means every
previous Note evidencing all or a portion of the same debt as that
evidenced by such particular Note; and, for the purposes of this
definition, any Note authenticated and delivered under SECTION 2.10 in
lieu of a lost, destroyed or stolen Note shall be deemed to evidence the
same debt as the lost, destroyed or stolen Note.
"Proceeding" means any suit in equity, action at law or
other legal, equitable, administrative or similar proceeding.
"Redemption Date," when used with respect to any Note to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
[FN]
<F1> Exhibit A must be provided.
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<PAGE>
"Regular Record Date" has the meaning specified in
SECTION 2.3.
"Responsible Officers" of the Trustee means the President,
the Chairman of the Board, every Vice President, every Assistant Vice
President, the Cashier, every Assistant Cashier, the Secretary, every
Assistant Secretary, the Treasurer, every Assistant Treasurer, every Trust
Officer, every Assistant Trust Officer, the Controller, every Assistant
Controller, and every other officer and assistant officer of the Trustee
customarily performing functions similar to those performed by the persons
who at the time shall be any such officers and also means, with respect to
a particular corporate trust matter, any other officer to whom such
corporate trust matter is referred because of his knowledge and
familiarity with a particular subject.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to SECTION 2.3.
"Stated Maturity," when used with respect to any Note or
any installment of interest thereon, means the date specified in such Note
as the fixed date on which the principal of such Note or such installment
of interest is due and payable.
"Subsidiary" means any corporation more than fifty percent
(50%) of whose shares of stock having general voting power under ordinary
circumstances to elect a majority of the board of directors of such
corporation irrespective of whether or not at the time stock of any other
class or classes shall or might have voting power by reason of the
15
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happening of any contingency, is owned or controlled directly or
indirectly by the Company.
"Supplemental Indenture" means any indenture supplemental
to this Indenture hereafter duly authorized and entered into in accordance
with the provisions of this Indenture.
"Trustee" means Norwest Bank Minnesota, N.A., and, subject
to the provisions of the Indenture, shall also include any successor
trustee.
"Trust Indenture Act" or "TIA" means the Trust Indenture
Act of 1939, as in force at the date as of which this instrument was
executed.
All accounting terms used in this Indenture shall have the
meanings assigned to them in accordance with generally accepted accounting
principles and practices employed at the time by the Company.
ARTICLE 2
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION
AND EXCHANGE OF NOTES
SECTION 2.1. DESIGNATION, AMOUNT AND ISSUE OF NOTES. The Notes
shall be designated as set forth in the form of Note hereinabove recited.
Notes in the aggregate principal amount of up to $17,250,000 (and as
otherwise provided in SECTION 2.10, upon the execution of this Indenture,
or from time to time within 30 days thereafter), may be executed by the
Company and delivered to the Trustee for authentication, and the Trustee
shall thereupon authenticate and deliver said Notes to or upon the written
order of the Company, signed by an Executive Officer of the Company,
without any further action by the Company hereunder.
SECTION 2.2. FORM OF NOTES. The Notes and the Trustee's
certificate of authentication to be borne by the Notes shall be
substantially in the form as in this Indenture hereinabove recited. Any of
the Notes may have imprinted thereon such legends or endorsements as the
officers executing the same may approve (execution thereof to be
conclusive evidence of such approval) and as are not inconsistent with the
provisions of this Indenture, or as may be required to comply with any law
or with any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange on which the Notes may be listed, or to
conform to usage.
SECTION 2.3. DENOMINATIONS, DATES, INTEREST PAYMENT AND RECORD
DATES. The Notes shall be issuable as registered Notes without coupons in
the denominations of $1,000 and any integral multiple of $1,000, and shall
be numbered, lettered, or otherwise distinguished in such manner or in
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accordance with such plan as the officers of the Company executing the
same may determine with the approval of the Trustee.
The Notes shall be dated the date of authentication thereof
by the Trustee. The Stated Maturity of the Notes is December 1, 2003. The
Notes shall bear interest annually (calculated on the basis of a 360-day
year of twelve 30-day months) at the rate set forth in their titles,
payable monthly in each year, from the Interest Payment Date immediately
preceding the date of such Note to which interest on the Notes has been
paid (unless the date of such Note is the date to which interest on the
Notes has been paid, in which case from the date of such Note), or, if no
interest has been paid on the Notes since the Original issue Date of such
Note, from such Original Issue Date, which interest shall be paid on the
first day of each month, commencing December 1, 1996, until payment of the
principal thereof becomes due, and at the same rate per annum on any
overdue principal and (to the extent legally enforceable) on any overdue
installment of interest; and shall be payable as to principal and interest
at the Main Office of the Trustee and at such other office or agency as
provided in this Indenture.
Notwithstanding the foregoing, so long as there is no
existing default in the payment of interest on the Notes, all Notes
authenticated by the Trustee between the Regular Record Date (as
hereinafter defined) for any Interest Payment Date and such Interest
Payment Date shall bear interest from such Interest Payment Date;
provided, however, that if and to the extent that the Company shall
default in the payment of the interest due on such Interest Payment Date,
then any such Note shall bear interest from the Interest Payment Date
immediately preceding the date of authentication of such Note to which
interest on the Notes has been paid, or if no interest has been paid on
such Notes since the Original Issue Date of such Notes from such Original
Issue Date or from such other date as shall have been fixed by this
Indenture or any Supplemental Indenture hereto.
Interest on any Note which is payable, and is punctually
paid or duly provided for, on any Interest Payment Date shall be paid to
the person in whose name that Note (or one or more predecessor Notes) is
registered at the close of business on the Regular Record Date for such
interest as specified in this SECTION 2.3. The term "Regular Record Date"
with respect to a regular monthly Interest Payment Date for the Notes
shall mean the close of business on the fifteenth day of the month
(whether or not a business day) immediately preceding such Interest
Payment Date.
Any interest on any Note which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the
registered holder on the relevant Regular Record Date by virtue of having
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been such holder; and such Defaulted Interest may be paid by the Company,
at its election in each case, as provided in clause (A) or clause (B)
below:
(A) The Company may elect to make payment of any Defaulted
Interest to the persons in whose names the Notes (or their respective
predecessor Notes) are registered at the close of business on a special
record date (the "Special Record Date") for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company shall
notify the Trustee in writing of the amount of Defaulted Interest proposed
to be paid on each Note and the date of the proposed payment, and at the
same time the Company shall deposit with the Trustee an amount of money
equal to the aggregate amount proposed to be paid in respect of such
Defaulted Interest or shall make arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment, such money
when deposited to be held in trust for the benefit of the persons entitled
to such Defaulted Interest as in this clause provided. Thereupon the
Trustee shall fix a Special Record Date for the payment of such Defaulted
Interest which shall be not more than twenty (20) nor less than ten (10)
days prior to the date of the proposed payment and not less than
thirty-five (35) days after the receipt by the Trustee of the notice of
the proposed payment. The Trustee shall promptly notify the Company of
such Special Record Date and, in the name and at the expense of the
Company, shall cause notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor to be mailed, first class
postage prepaid, to each Noteholder at his address as it appears in the
Note Register, not less than ten (10) days prior to such Special Record
Date. The Trustee may, in its discretion, in the name and at the expense
of the Company, cause a similar notice to be published at least once in a
Daily Newspaper in each Place of Payment, but such publication shall not
be a condition precedent to the establishment of such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor having been mailed as aforesaid, such Defaulted
interest shall be paid to the persons in whose names the Notes (or their
respective predecessor Notes) are registered on such Special Record Date
and shall no longer be payable pursuant to the following clause (B).
(B) The Company may make payment of any Defaulted Interest
in any other lawful manner if, after notice given by the Company to the
Trustee of the proposed payment pursuant to this clause, such payment
shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each
Note delivered under this Indenture upon transfer of or in exchange for or
in lieu of any other Note shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Note.
The principal of and the premium, if any, and the
interest on the Notes shall be paid at the office or agency of
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the Company which shall be located at the Main Office of the Trustee (the
"Place of Payment") in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts; provided, however, that interest on any Notes
may be payable, at the option of the Company, by check mailed to the
person entitled thereto as such person's address shall appear on the Note
Register.
SECTION 2.4. NUMBERS AND LEGENDS ON NOTES. Notes may bear such
numbers, letters or other marks of identification or designation, may be
endorsed with or have incorporated in the text thereof such legends or
recitals with respect to transferability or in respect of the Note or
Notes for which they are exchangeable, and may contain such provisions,
specifications and descriptive words, not inconsistent with the provisions
of this Indenture, as may be determined by the Company or as may be
required to comply with any law or with any rule or regulation made
pursuant thereto.
SECTION 2.5. EXECUTION OF NOTES. Each Note shall be signed in the
name and on behalf of the Company by one of its Executive Officers. The
signature of an Executive Officer of the Company may, if permitted by law,
be in the form of a facsimile signature and may be imprinted or otherwise
reproduced on the Notes. In case any officer of the Company who shall have
signed, or whose facsimile signature shall be borne by, any of the Notes
shall cease to be such Executive Officer of the Company before the Notes
so executed shall be actually authenticated and delivered by the Trustee,
such Notes shall nevertheless bind the Company and may be authenticated
and delivered as though the person whose signature appears on such Notes
had not ceased to be such Executive Officer of the Company.
SECTION 2.6. REGISTRATION OF TRANSFER OF NOTES. The Company shall
keep or cause to be kept at the Main Office of the Trustee books for the
registration of transfer of Notes issued hereunder (herein sometimes
referred to as the "Note Register") and upon presentation for such purpose
at such office the Company will register or cause to be registered the
transfer therein, under such reasonable regulations as it may prescribe,
of such Notes. The Trustee is hereby appointed Note Registrar for the
purpose of registering Notes and transfers of Notes as herein provided.
The Company may appoint one or more Note Co-Registrars for such purpose as
the Board of Directors may determine where Notes may be presented or
surrendered for registration, registration of transfer or exchange and
such books, at all reasonable times, shall be open for inspection by the
Trustee.
SECTION 2.7. EXCHANGE AND REGISTRATION OF TRANSFER OF NOTES.
Whenever any Note shall be surrendered to the Company at an office or
agency referred to in SECTION 3.2 hereof, for registration of transfer or
exchange, duly endorsed or accompanied by a proper written instrument or
instruments of assignment and transfer thereof or for exchange in form
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satisfactory to the Company and the Trustee, or any Note Registrar or Note
Co-Registrar, duly executed by the holder thereof or his attorney duly
authorized in writing, the Company shall execute, and the Trustee shall
authenticate and deliver, in exchange therefor, a Note or Notes in the
name of the designated transferee, as the case may require, for a like
aggregate principal amount and of such authorized denomination or
denominations as may be requested. All Notes issued upon any registration
of transfer or exchange of Notes shall be the valid obligations of the
Company, evidencing the same debt, and entitled to the same benefits under
this Indenture, as the Notes surrendered upon such registration of
transfer or exchange,
The Company, at its option, may require the payment of a
sum sufficient to reimburse it for any stamp tax or other governmental
charge or expense that may be imposed in connection with any exchange or
transfer of Notes other than exchanges pursuant to SECTION 2.8 or 13.5 not
involving any transfer. No service charge will be made for any such
transaction.
The Company shall not be required to issue or to make
registrations of transfer or exchanges of Notes for a period of fifteen
(15) days immediately preceding the date of any selection of Notes to be
redeemed. The Company shall not be required to issue or to make
registrations of transfer or exchanges of any Notes which have been
selected for redemption in whole or in part, except in the case of any
Note to be redeemed in part, for which the Company shall register
transfers and make exchanges of the portion thereof not so to be redeemed.
Upon delivery by any Note Co-Registrar of a Note in
exchange for a Note surrendered to it in accordance with the provisions of
this Indenture, the Note so delivered shall for all purposes of this
Indenture be deemed to be duly registered in the Note Register; provided,
however, that in making any determination as to the identity of persons
who are holders, the Trustee shall, subject to the provisions of SECTION
10.2 be fully protected in relying on the Note Register kept at the Main
Office of the Trustee.
SECTION 2.8. TEMPORARY NOTES. Pending the preparation of
definitive Notes the Company may execute and, upon Company Order, the
Trustee shall authenticate and deliver temporary Notes which may be
printed, lithographed, typewritten, mimeographed or otherwise reproduced.
Temporary Notes shall be issuable in any authorized denomination and
substantially of the tenor of the definitive Notes in lieu of which they
are issued, but with such omissions, insertions and variations as may be
appropriate for temporary Notes, all as may be determined by the officers
of the Company executing such Notes as evidenced by their execution of
such Notes. Every such temporary Note shall be authenticated by the
Trustee upon the same condition and in substantially the same manner, and
with the same effect, as the definitive Notes. If temporary Notes are
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issued, without unreasonable delay, the Company will execute and deliver
to the Trustee definitive Notes and thereupon any and all temporary Notes
may be surrendered in exchange therefor, at the offices referred to in
SECTION 3.2, and the Trustee shall authenticate and deliver in exchange
for such temporary Notes an equal aggregate principal amount of definitive
Notes of authorized denominations. Such exchange shall be made by the
Company at its own expense and without any charge therefor. Until so
exchanged, the temporary Notes shall in all respects be entitled to the
same benefits under this Indenture as definitive Notes authenticated and
delivered hereunder.
SECTION 2.9. RECOGNITION OF REGISTERED HOLDERS OF DEFINITIVE NOTES
AND TEMPORARY NOTES. The Company, the Trustee or any agent of the Company
or the Trustee may deem and treat (A) the registered holder of any
temporary Note, and (B) the registered holder of any definitive Note, as
the absolute owner of such Note in accordance with SECTION 8.1.
SECTION 2.10. MUTILATED, DESTROYED, LOST OR STOLEN NOTES. In case
any Note shall become mutilated or be destroyed, lost or stolen, then upon
the satisfaction of the conditions hereinafter set forth in this SECTION
2.10 the Company (A) shall, in the case of any mutilated Note, and (B)
shall, in the case of any destroyed, lost or stolen Note, in the absence
of notice to the Company or the Trustee that such Note has been acquired
by a bona fide purchaser, execute, and upon the written request of the
Company, the Trustee shall authenticate and deliver, a new Note of like
principal amount bearing a number not contemporaneously outstanding, in
exchange and substitution for and upon surrender and cancellation of the
mutilated Note or in lieu of and substitution for the Note so destroyed,
lost or stolen; provided, however, that if any such mutilated, destroyed,
lost or stolen Note shall have become or shall be about to become due and
payable, or shall have been selected or called for redemption, the Company
may instead of issuing a substituted Note, pay such Note without requiring
the surrender thereof, except that such mutilated Note shall be
surrendered. The applicant for such substituted Note shall furnish to the
Company and to the Trustee evidence satisfactory to them, in their
discretion, of the ownership of and the destruction, loss or theft of such
Note and shall furnish to the Company and to the Trustee and any Note
Registrar such security and/or indemnity as may be required by them to
save each of them, harmless, and, if required, shall reimburse the Company
for all expenses (including any tax or other governmental charge and the
fees and expenses of the Trustee) in connection with the preparation,
authentication and delivery of such substituted Note, and shall comply
with such other reasonable regulations as the Company, the Trustee, or
either of them, may prescribe.
Every new Note issued pursuant to this SECTION 2.10 in lieu
of any destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Company, whether or not the
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destroyed, lost or stolen Note shall be at any time enforceable by anyone,
and shall be entitled to all the benefits of this Indenture equally and
proportionally with any and all other Notes duly issued hereunder.
The provisions of this SECTION 2.10 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect
to the replacement or payment of mutilated, destroyed, lost or stolen
Notes.
SECTION 2.11. FORM AND AUTHENTICATION OF NOTES. Subject to the
qualifications hereinbefore set forth, the Notes to be secured hereby
shall be substantially of the tenor and effect set forth in the recitals
hereto, and no Notes shall be secured hereby or entitled to the benefit
hereof, or shall be or become valid or obligatory for any purpose unless
there shall be endorsed thereon an authentication certificate,
substantially in the form set forth in the recitals hereto, executed by
the Trustee; and such certificate on any Note issued by the Company shall
be conclusive evidence and the only competent evidence that it has been
duly authenticated and delivered hereunder.
SECTION 2.12. SURRENDER AND CANCELLATION OF NOTES. All Notes
surrendered for payment, redemption, transfer, exchange or conversion
shall, if surrendered to any person other than the Trustee, be delivered
to the Trustee and if not already canceled, shall be promptly canceled by
it. The Company may at any time deliver to the Trustee for cancellation
any Notes previously authenticated and delivered hereunder, which the
Company may have acquired in any manner whatsoever, and all Notes so
delivered shall be promptly canceled by the Trustee. No Notes shall be
authenticated in lien of or in exchange for any Notes canceled as provided
in this SECTION 2.12, except as expressly permitted by this Indenture. The
Trustee shall deliver all canceled Notes held by it to the Company at
least annually.
ARTICLE 3
PARTICULAR COVENANTS OF THE COMPANY
Anything in this Indenture or in any Note to the contrary
notwithstanding, the Company, expressly for the equal and ratable benefit
of the original and future holders of the Notes, covenants and agrees as
follows:
SECTION 3.1. WILL PUNCTUALLY PAY PRINCIPAL, PREMIUMS AND INTEREST
ON THE NOTES. The Company will duly and punctually pay, or cause to be
paid, the principal, premium, if any, and interest to become due in
respect of the Notes Outstanding according to the provisions hereof and
thereof.
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SECTION 3.2.
(A) OFFICE OR AGENCY. The Company will maintain an office
or agency in the Place of Payment where Notes may be presented or
surrendered for payment, where Notes may be surrendered for registration
of transfer or exchange and where notices and demands to or upon the
Company in respect of the Notes and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the location,
and of any change in the location, of such office or agency. If at any
time the Company shall fail to maintain such office or agency or shall
fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Main Office
of the Trustee, and the Company hereby appoints the Trustee its agent to
receive all such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or
more other offices or agencies where the Notes may be presented or
surrendered for any or all of the purposes specified above in this SECTION
3.2(A) and may from time to time rescind such designations, as the Company
may deem desirable or expedient; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in each Place of Payment for
such purposes. The Company will give prompt written notice to the Trustee
of any such designation and any change in the location of any such other
office or agency.
(B) APPOINTMENT OF TRUSTEE AS PAYING AGENT; DUTY OF PAYING
AGENT OTHER THAN TRUSTEE. The Company hereby appoints the Trustee as
Paying Agent and the Company covenants that, if it shall appoint a Paying
Agent other than the Trustee, it will cause such Paying Agent to execute
and deliver to the Trustee an instrument in which such Paying Agent shall
agree with the Trustee, subject to the provisions of this SECTION 3.2,
(1) that such Paying Agent shall hold all sums held
by it as such agent for the payment of the principal of and the
premium, if any, or the interest on any of the Notes in trust for
the benefit of the holders of such Notes or the Trustee;
(2) that such Paying Agent shall give the Trustee
notice of any Default of the Company in making any payment of the
principal of and the premium, if any, or the interest on the Notes
when the same shall be due and payable; and
(3) at any time during the continuance of any such
Default, upon the written request of the Trustee, forthwith to pay
to the Trustee all sums so held in trust by such Paying Agent.
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(C) DUTY OF COMPANY ACTING AS PAYING AGENT. The Company
covenants and agrees that, if it should at any time act as its own Paying
Agent, it will, on or before each due date of the principal of and the
premium if any, or the interest on the Notes set aside and segregate and
hold in trust for the benefit of the holders of the Notes a sum sufficient
to pay such principal and premium, if any, or interest so becoming due
until such sums shall be paid to such holders or otherwise disposed of as
herein provided and will notify the Trustee of its action or of any
failure to take such action.
Whenever the Company shall have one or more Paying Agents,
it will, prior to each due date of the principal of, and premium, if any,
or interest on, any Notes, deposit with one or more Paying Agents a sum
sufficient to pay the principal, and premium, if any, or interest, so
becoming due, such sum to be held in trust for the benefit of the holders
of Notes entitled to such principal, premium or interest, and (unless such
Paying Agent is the Trustee) the Company will promptly notify the Trustee
of its action or failure so to act.
(D) DELIVERY TO TRUSTEE. Anything in this SECTION 3.2 to
the contrary notwithstanding, the Company may at any time, for the
purposes of obtaining the satisfaction and discharge of this Indenture or
for any other reason, pay, or by Company Order direct any Paying Agent to
pay, to the Trustee all sums held in trust by the Company or any Paying
Agent as required by this SECTION 3.2 such sums to be held by the Trustee
upon the trusts contained in this Indenture. Upon such payment by any
Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such money.
(E) ALL SUMS TO BE HELD SUBJECT TO SECTION 15.2. Anything
in this SECTION 3.2 to the contrary notwithstanding, the holding of sums
in trust as provided in this SECTION 3.2 is subject to the provisions of
SECTION 15.2 hereof.
SECTION 3.3. WILL PAY INDEBTEDNESS. The Company will, and will
cause each Subsidiary to, pay or cause to be paid all of their respective
Indebtedness, as and when same shall become due and payable, and will
observe, perform and discharge in accordance with their terms all of the
covenants, conditions and obligations which are imposed on it by any and
all mortgages, indentures and other agreements evidencing or securing
Indebtedness of the Company or pursuant to which such Indebtedness is
issued, so as to prevent the occurrence of any act or omission which is a
default thereunder, and which remains uncured or is not waived for a
period of thirty (30) days; provided that this provision shall not be
construed to create any liability on the part of the Company for any
Indebtedness of its Subsidiaries. The Company will notify the Trustee of
any breach of the covenants contained in this SECTION 3.3 within ten (10)
days after the Company has knowledge of such breach.
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SECTION 3.4. WILL MAINTAIN OFFICE. The Company will maintain an
office of the Company, which shall be and remain the principal place of
business of the Company, in San Diego, California; provided, however, that
upon at least thirty (30) days, prior written notice to the Trustee, the
Company may move such office and records to any other address as set forth
in such notice.
SECTION 3.5. WILL KEEP, AND PERMIT EXAMINATION OF, RECORDS AND
BOOKS OF ACCOUNT AND WILL PERMIT VISITATION OF PROPERTY. The Company will
(A) keep proper records and books of account in accordance with generally
accepted accounting principles consistently applied, reflecting all
financial transactions of the Company and each Subsidiary, and (B) permit
or cause to permit the Trustee, personally or by its agents, accountants
and attorneys, to visit or inspect any of the properties, examine the
records and books of account and discuss the affairs, finances and
accounts, of the Company and each Subsidiary, with the officers of the
Company and Subsidiaries at such reasonable times as may be requested by
the Trustee. The Trustee shall be under no duty to make any such visit,
inspection or examination.
The Company covenants that books of record and account will
be kept in which full, true and correct entries will be made of all
dealings or transactions of, or in relation to, the properties, business
and affairs of the Company.
SECTION 3.6. CORPORATE EXISTENCE. The Company will do or cause to
be done all things necessary to preserve and keep in full force and effect
its corporate existence, and that of each Subsidiary and the rights
(charter and statutory) and franchises of the Company and its
Subsidiaries; provided, however, that the Company shall not be required to
preserve any such right or franchise if the Company shall determine that
the preservation thereof is no longer desirable in the conduct of the
business of the Company and its Subsidiaries considered as a whole and
that the loss thereof is not disadvantageous in any material respect to
the holders of the Notes.
SECTION 3.7. MAINTENANCE OF PROPERTIES. The Company will cause all
properties used or useful in the conduct of its business or the business
of any Subsidiary to be maintained and kept in good condition, repair and
working order and supplied with all necessary equipment and will cause to
be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Company may be
necessary so that the business carried on in the connection therewith may
be properly and advantageously conducted at all times; provided, however,
that nothing in this Section shall prevent the Company or any Subsidiary
from discontinuing the operation and maintenance of any such properties,
or disposing of any of them, it such discontinuance or disposal is, in the
judgment of the Company or of the Subsidiary concerned, desirable in the
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conduct of its business or the business of any Subsidiary and not
disadvantageous in any material respect to the holders of the Notes.
SECTION 3.8. PAYMENT OF TAXES AND OTHER CLAIMS. The Company will
pay or discharge or cause to be paid or discharged, before the same shall
become delinquent, (i) all taxes, assessments and governmental charges
levied or imposed upon the Company or any Subsidiary or upon the income,
profits or property of the Company or any Subsidiary, and (ii) all lawful
claims for labor, materials and supplies which, if unpaid, might by law
become a lien upon the property of the Company or any Subsidiary;
provided, however, that the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or, validity is being
contested in good faith by appropriate proceedings and the Company shall
have set aside on its books adequate reserves with respect thereto
(segregated to the extent required by generally accepted accounting
principles).
SECTION 3.9. WILL FURNISH ANNUAL CERTIFICATES. The Company will
file with the Trustee, within one hundred twenty (120) days after the end
of each fiscal year of the Company commencing with the fiscal year ending
December 31, 1996, an Officers' Certificate stating, as to each signer
thereof, that:
(A) a review of the activities of the Company during such
year and of performance under this Indenture has been made under his
supervision; and
(B) to the best of his knowledge, based on such review, the
Company has fulfilled all of its obligations under this Indenture
throughout such year, or, if there has been a Default in the fulfillment
of any such obligation, specifying each such Default known to him and the
nature and status thereof.
SECTION 3.10. RESTRICTIONS ON INDEBTEDNESS. The Company covenants
that (i) it will not, nor will it permit any Subsidiary to, incur, create,
assume or otherwise become liable with respect to any Indebtedness unless
the Company is in compliance with all the terms, conditions and provisions
of the Indenture and (ii) it will not permit its Indebtedness and that of
its Subsidiaries, consolidated in accordance with generally accepted
accounting principles, to exceed six (6) times the Company's Consolidated
Net Worth. The Company will deliver to the Trustee, within 30 days after
the end of each fiscal quarter, an Officer's Certificate, which shall set
forth the relevant calculations, stating that the Company is, as of the
end of such fiscal quarter (and at all times during such fiscal quarter
has been), in compliance with the provisions of this SECTION 3.10.
SECTION 3.11. LIQUIDITY MAINTENANCE REQUIREMENT. On or
before ten days prior to and until the next succeeding Interest
Payment Date, the Company shall maintain, at the parent company
level, Permitted Investments the fair market value of which are
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equal to or in excess of the product of (a) the aggregate amount of
interest payable with respect to the Notes for the next succeeding
Interest Payment Date (b) multiplied by six (6). The Company will deliver
to the Trustee, within 30 days after the end of each fiscal quarter, an
Officer's Certificate stating that the Company is, and at all times during
the prior fiscal quarter has been, in compliance with the provisions of
this SECTION 3.11.
SECTION 3.12. LIMITATION ON DIVIDENDS AND OTHER PAYMENTS. The
Company will not declare or pay any of the following (each, a "Restricted
Payment"): (i) any dividend or other distribution of property or assets
other than a dividend payable solely in shares of Capital Stock of the
Company; (ii) a repayment or defeasance of any Indebtedness subordinate in
right of payment of interest or principal to the Notes (except so long as
the Notes are not in default, scheduled payments of principal and interest
may be made in accordance with the terms of such subordinated
indebtedness); (iii) an exchange of Capital Stock of the Company for an
instrument evidencing Indebtedness of the Company incurred after
_____________, 199__ or (iv) any repurchase by the Company of its Capital
Stock. Notwithstanding the foregoing, the Company (and any of its
Subsidiaries) may declare or pay a Restricted Payment, if such Restricted
Payment when aggregated with all other Restricted Payments made by the
Company or any Subsidiary after _______________, 199__, is less than the
sum of (A) $1,000,000; (B) forty-five percent (45%) of the Company's (and
its Subsidiaries') cumulative net income earned during the period
commencing on ________________, 1996 and ending on the date on which the
Restricted Payment is to be made and (C) the cumulative cash [and
non-cash] proceeds to the Company of all public or private offerings of
its Capital Stock during such period; provided that, notwithstanding the
foregoing, the Company shall make no Restricted Payment if the making of
the Restricted Payment would cause the Company not to be in compliance
with the terms, conditions and provisions of the Indenture or any other
indenture or loan agreement to which the Company is a party.
ARTICLE 4
NOTEHOLDER LISTS AND REPORTS BY
THE COMPANY AND THE TRUSTEE
SECTION 4.1. NOTEHOLDER LISTS, ETC.
(A) The Company will furnish or cause to be furnished to
the Trustee, monthly, not more than fifteen (15) days after each Regular
Record Date a list, in such form as the Trustee may reasonably require, of
the names and addresses of the holders of Notes as of such Regular Record
Date, and at such other times, as the Trustee may request in writing,
within thirty (30) days after receipt by the Company of any such request,
a list of similar form and content as of a date not more than fifteen (15)
days prior to the time such list is furnished; provided, however, that
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so long as the Trustee is the sole Note Registrar, no such list shall be
required to be furnished.
(B) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of the holders of Notes
received by the Trustee in its capacity as Note Registrar contained in the
most recent list furnished to it as provided in subdivision (A) of this
SECTION 4.1. The Trustee may destroy any list furnished to it as provided
in subdivision (A) of this SECTION 4.1, upon receipt of a new list so
furnished.
(C) In case three (3) or more holders of Notes (hereinafter
called "Applicants") apply in writing to the Trustee, and furnish to the
Trustee reasonable proof that each such Applicant has owned a Note for a
period of at least six (6) months preceding the date of such application,
and such application states that the Applicants desire to communicate with
other holders of Notes with respect to their rights under this Indenture
or under the Notes, and is accompanied by a copy of the form of proxy or
other communication which such Applicants propose to transmit, then the
Trustee shall, within five (5) business days after the receipt of such
application, at its election, either
(1) afford to such Applicants access to the
information preserved at the time by the Trustee in accordance
with the provisions of subdivision (B) of this SECTION 4.1; or
(2) inform such Applicants as to the approximate
number of holders of Notes whose names and addresses appear in the
information preserved at the time by the Trustee, in accordance
with the provisions of subdivision (B) of this SECTION 4.1, and as
to the approximate cost of mailing to such Noteholders the form of
proxy or other communication, if any, specified in such
application.
If the Trustee shall elect not to afford to such Applicants access to such
information, the Trustee shall, upon the written request of such
Applicants, mail to each Noteholder whose name and address appears in the
information preserved at the time by the Trustee in accordance with the
provisions of subdivision (B) of this SECTION 4.1, a copy of the form of
proxy or other communication which is specified in such request, with
reasonable promptness after a tender to the Trustee of the material to be
mailed and of payment or provision for the payment of the reasonable
expenses of mailing, unless within five (5) days after such tender the
Trustee shall mail to such Applicants and file with the Securities and
Exchange Commission together with a copy of the material to be mailed, a
written statement to the effect that, in the opinion of the Trustee, such
mailing would be contrary to the best interests of the holders of Notes,
or would be in violation of applicable law. Such written statement shall
specify the basis of such opinion. If said Commission, after opportunity
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for a hearing upon the objections specified in the written statement so
filed, shall enter an order refusing to sustain any of such objections or
if, after the entry of an order sustaining one (1) or more of such
objections, said Commission shall find, after notice and opportunity for a
hearing, that all the objections so sustained have been met and shall
enter an order so declaring, the Trustee shall mail copies of such
material to all such Noteholders with reasonable promptness after the
entry of such order and the renewal of such tender; otherwise the Trustee
shall be relieved of any obligation or duty to such Applicants respecting
their application.
(D) Every holder of the Notes, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor
the Trustee, nor any Paying Agent shall be held accountable by reason of
the disclosure of any such information as to the names and addresses of
the holders of Notes in accordance with the provisions of subdivision (C)
of this SECTION 4.1, regardless of the source from which such information
was derived, and that the Trustee shall not be held accountable by reason
of mailing any material pursuant to a request made under said subdivision
(C).
SECTION 4.2. REPORTS BY COMPANY. The Company covenants and
agrees:
(A) To file with the Trustee within fifteen (15) days after
the Company is required to file the same with the Securities and Exchange
Commission, copies of the annual reports and of the information,
documents, and other reports (or copies of such portions of any of the
foregoing as such Commission may from time to time by rules and
regulations prescribe) which the Company may be required to file with such
Commission pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934; or, if the Company is not required to file
information, documents, or reports pursuant to either of such Sections,
then the Company will file with the Trustee and the Securities and
Exchange Commission, in accordance with rules and regulations prescribed
from time to time by said Commission, such of the supplementary and
periodic information, documents, and reports which may be required
pursuant to Section 13 of the Securities Exchange Act of 1934 in respect
of a security listed and registered on a national securities exchange as
may be prescribed from time to time in such rules and regulations;
(B) To file with the Trustee and the Securities and
Exchange Commission, in accordance with the rules and regulations
prescribed from time to time by said Commission, such additional
information, documents and reports with respect to compliance by the
Company with the conditions and covenants provided for in this Indenture
as may be required from time to time by such rules and regulations,
including, in the case of annual reports, if required by such rules and
regulations, certificates or opinions of independent public accountants,
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conforming to the requirements, if any, of SECTION 15.3 hereof, as to
compliance with conditions or covenants, compliance with which is subject
to verification by accountants;
(C) To transmit to the holders of the Notes, in the manner
and to the extent provided in subsection (c) Section 313 of the TIA, such
series of any information, documents, and reports required to be filed by
the Company pursuant to subdivision (A) or subdivision (B) as may be
required by the rules and regulations promulgated by the Securities and
Exchange Commission; and
(D) To furnish to the Trustee with or as a part of each
annual report and each other document or report filed with the Trustee
pursuant to subdivision (A), (B) or (C) of this SECTION 4.2, an Officers'
Certificate stating that in the opinion of each of the signers such annual
report or other document or report complies with the requirements of such
subdivision (A), (B) or (C).
Each certificate furnished to the Trustee pursuant to the
provisions of this SECTION 4.2 shall conform to the requirements of
SECTION 15.3 hereof.
SECTION 4.3. REPORTS BY TRUSTEE. The Trustee shall transmit to the
Noteholders as provided in TIA Section 313(c), if required thereunder,
within sixty (60) days after January 1, 1997 and each January 1
thereafter, a brief report as provided in TIA Section 313(a). A copy of
each such report shall, at the time of such transmission to the
Noteholders, be filed by the Trustee with each stock exchange upon which
the Notes are listed and also with the Securities and Exchange Commission.
ARTICLE 5
REDEMPTION OF NOTES AT COMPANY'S OPTION
SECTION 5.1. ELECTION BY COMPANY TO REDEEM NOTES. The Notes shall
be redeemable at any time prior to the Stated Maturity thereof, upon
notice as provided in this ARTICLE 5, as a whole at any time, or in part
from time to time (but only in principal amounts of $1,000 or any integral
multiple thereof), at the option of the Company; provided, however, that
the Company may not redeem any Notes pursuant to such option prior to
December 1, 1999. Any such redemption shall be at the applicable
redemption prices (expressed in percentages of the principal amount) set
forth in the Notes together with accrued and unpaid interest on the
principal amount to be redeemed to the Redemption Date.
The election of the Company to redeem any Notes shall be
evidenced by a Certified Resolution. Whenever any of the Notes Outstanding
are to be redeemed pursuant to this SECTION 5.1, the Company shall give
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the Trustee at least sixty (60) days' written notice (or such shorter
period of time as is acceptable to the Trustee) prior to the Redemption
Date of such Redemption Date and of the principal amount of Notes to be
redeemed.
SECTION 5.2. REDEMPTION OF PART OF NOTES. In case of the
redemption of less than all of the Outstanding Notes, the Notes to be
redeemed shall be selected by the Trustee by lot, not more than sixty (60)
days prior to the Redemption Date, from the Outstanding Notes not
previously called for redemption, which method may provide for the
selection for redemption of portions (equal to $1,000 or any integral
multiple thereof) of the principal amount of Notes of a principal amount
larger than $1,000.
In the case of any partial redemption, the Trustee shall
promptly notify the Company in writing of the serial numbers (and, in the
case of any Note which is to be redeemed in part only, the portion of the
principal amount thereof to be redeemed) of the Notes selected for
redemption.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of Notes
shall relate, in the case of any Note redeemed or to be redeemed only in
part, to the portion of the principal of such Note which has been or is to
be redeemed.
SECTION 5.3. NOTICE OF REDEMPTION. Notice of redemption shall be
given by first-class mail, postage prepaid, mailed not less than thirty
(30) nor more than sixty (60) days prior to the Redemption Date, to each
holder of Notes to be redeemed, at his last address appearing in the Note
Register.
All notices of redemption shall state:
(A) The Redemption Date;
(B) The redemption price;
(C) If less than all Outstanding Notes are to be redeemed,
the serial numbers (and, in the case of any Note which is to be redeemed
in part only, the portion of the principal amount thereof to be redeemed)
of the Notes to be redeemed;
(D) That on the Redemption Date the redemption price of
each of the Notes to be redeemed will become due and payable, and that
interest thereon shall cease to accrue from and after said date; and
(E) The place where such Notes are to be surrendered for
payment of the redemption price, which shall be the office or agency of
the Company in the Place of Payment.
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Notice of redemption of Notes to be redeemed shall be given
by the Company or, at the Company's request, by the Trustee in the name
and at the expense of the Company.
Failure to give notice of redemption, or any defect
therein, to any holder of any Note selected for redemption shall not
impair or affect the validity of the redemption of any other Note.
SECTION 5.4. DEPOSIT OF REDEMPTION PRICE. On or before the
business day immediately preceding any Redemption Date the Company shall
deposit with the Trustee or with a Paying Agent (or, if the Company is
acting as its own Paying Agent, segregate and hold in trust as provided in
SECTION 3.2(C) hereof) an amount of money sufficient to pay the redemption
price of all principal of, and (unless such Redemption Date is an Interest
Payment Date) accrued interest on, the Notes which are to be redeemed on
that date.
SECTION 5.5. DATE ON WHICH NOTES CEASE TO BEAR INTEREST, ETC.
Notice of redemption having been given as aforesaid, the Notes so to be
redeemed shall, on the Redemption Date, become due and payable at the
redemption price therein specified and from and after such date (unless
the Company shall default in the payment of the redemption price) such
Notes shall cease to bear interest. Upon surrender of any such Note for
redemption in accordance with said notice, such Note shall be paid by the
Company at the redemption price together with accrued interest thereon to
the Redemption Date; provided, however, that installments of interest
whose Stated Maturity is on or prior to the Redemption Date shall be
payable to the holders of such Notes, or one or more predecessor Notes,
registered as such on the relevant Regular Record Dates according to the
terms and provisions of SECTION 2.3 hereof.
If any Note called for redemption shall not be so paid upon
surrender thereof for redemption, the principal, and premium, if any,
shall, until paid, bear interest from the Redemption Date at the rate
borne by the Note.
Any Note which is to be redeemed only in part shall be
surrendered at the office or agency designated pursuant to SECTION 3.2(A)
hereof (with, if the Company or the Trustee so requires, due endorsement
by or a written instrument of transfer in form satisfactory to the Company
and the Trustee duly executed by, the holder thereof or his
attorney-in-fact duly authorized in writing) and the Company shall execute
and the Trustee shall authenticate and deliver to the holder of such Note,
without service charge, a new Note or Notes of any authorized denomination
or denominations as requested by such holder in an aggregate principal
amount equal to and in exchange for the unredeemed portion of the
principal of the Note so surrendered.
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SECTION 5.6. ALL NOTES DELIVERED. All Notes redeemed pursuant to
SECTION 5.1 hereof shall be canceled and destroyed by the Trustee in
accordance with the existing regulations of (or those hereafter
promulgated by) the Securities and Exchange Commission, and the Trustee
shall deliver its certificate thereof to the Company.
ARTICLE 6
REDEMPTION OF NOTES AT HOLDER'S OPTION UPON DEATH OF HOLDER
SECTION 6.1. REDEMPTION RIGHT AT HOLDER'S OPTION. Unless pursuant
to the terms of SECTION 7.1 the Notes have been declared due and payable
prior to their maturity by reason of an Event of Default and such Event of
Default has not been waived and such declaration has not been rescinded or
annulled, in the event of a holder has the right to present Notes for payment
prior to their maturity, and the company will redeem the same (or any portion
of the principal amount thereof which is $1,000 or an integral multiple
thereof, as the holder may specify) subject to the limitations that the
Company will not be obligated to redeem, during an initial period
beginning with the original issuance of the Notes and ending December 1,
1997, or during any twelve (12)-month period ending December 1 thereafter,
(A) the portion of a Note or Notes presented by a holder exceeding an
aggregate principal amount of $25,000 per holder or (B) Notes presented by
all holders in an aggregate principal amount exceeding $300,000.
SECTION 6.2. REDEMPTION PROCEDURE. The Company will (subject to the
$25,000 and $300,000 limitations), at any time upon the death of any holder,
redeem Notes within 60 days following receipt by the Trustee of a written
request therefor from such holder's personal representative, or surviving
joint tenant(s), tenant by the entirety or tenant(s) in common.
Notes not redeemed on or before any Redemption Date because
of the $25,000 or $300,000 limitations be redeemed during the following
twelve (12)-month period(s) in the order of their receipt. Holders of Notes
presented for redemption shall be entitled to and shall receive scheduled
monthly payments of interest thereon on scheduled Interest Payment Dates
until their Notes are redeemed.
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Notes may be presented for redemption by delivering to the
Trustee: (A) a written request for redemption, in form satisfactory to the
Trustee, signed by the registered holder(s) or his duly authorized
representative, (B) the Note to be redeemed, free and clear of any liens
or encumbrances of any kind, and (C) appropriate evidence of death and, if
made by a representative of a deceased holder, appropriate evidence of
authority to make such request. No particular forms of request for
redemption or authority to request redemption are necessary (other than
those required of a representative of a deceased holder). The price to be
paid by the Company for all Notes or portions thereof presented to it
pursuant to the provisions described in this ARTICLE 6 is 100% of the
principal amount thereof or portion thereof plus accrued but unpaid
interest to the date of payment. Any acquisition of Notes by the Company
other than by redemption at the option of any holder pursuant to SECTION
6.1 shall not be included in the computation of either the $25,000 or
$300,000 limitation for any period.
For purposes of this SECTION 6.2, a Note held in tenancy by
the entirety, joint tenancy or tenancy in common will be deemed to be held
by a single holder and the death of a tenant by the entirety, joint tenant
or tenant in common will be deemed the death of a holder. The death of a
person, who, during his lifetime, was entitled to substantially all of the
beneficial interests of ownership of a Note will be deemed the death of
the holder, regardless of the registered holder, if such beneficial
interest can be established to the satisfaction of the Trustee. For
purposes of a holder's request for redemption and a request for redemption
on behalf of a deceased holder, such beneficial interest shall be deemed
to exist in cases of street name or nominee ownership, ownership under the
Uniform Gifts to Minors Act, community property or other joint ownership
arrangements between a husband and wife (including individual retirement
accounts or Keogh [H.R. 10] plans maintained solely by or for the holder
or decedent or by or for the holder or decedent and his spouse), and
trusts and certain other arrangements where a person has substantially all
of the beneficial ownership interests in the Notes during his lifetime.
Beneficial interests shall include the power to sell, transfer or
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otherwise dispose of a Note and the right to receive the proceeds
therefrom, as well as interest and principal payable with respect
thereto.
In the case of Notes registered in the names of banks,
trust companies or broker-dealers who are members of a national securities
exchange or the National Association of Securities Dealers, Inc.
("Qualified Institutions"), the $25,000 limitation shall apply to each
beneficial owner of Notes held by a Qualified Institution and the death of
such beneficial owner shall entitle a Qualified Institution to seek
redemption of such Notes as if the deceased beneficial owner were the
record holder. Such Qualified Institution, in its request for redemption
on behalf of such beneficial owners, must submit evidence, satisfactory to
the Trustee, that it holds Notes on behalf of such beneficial owner and
must certify that the aggregate amount of requests for redemption tendered
by such Qualified Institution on behalf of such beneficial owner in the
initial period or in any subsequent twelve (12)-month period does not
exceed $25,000.
In the case of any Notes which are presented for redemption
in part only, upon such redemption the Company shall execute and the
Trustee shall authenticate and deliver to or on the order of the holder of
such Notes, without service charge, a new Note(s), of any authorized
denomination or denominations as requested by such holder, in aggregate
principal amount equal to the unredeemed portion of the principal of the
Notes so presented.
Nothing herein shall prohibit the Company from redeeming,
in acceptance of tenders made pursuant hereto, Notes in excess of the
principal amount that the Company is obligated to redeem, nor from
purchasing any Notes in the open market. However, the Company may not use
any Notes purchased in the open market as a credit against its redemption
obligations hereunder.
SECTION 6.3. WITHDRAWAL. Notes presented for redemption at the
option of the holder may be withdrawn by the person(s) presenting the same
upon delivery of a written request for such withdrawal to the Trustee prior
to the issuance of a check in payment thereof in the case of Notes presented
by reason of the death of a holder.
SECTION 6.4. REDEMPTION REGISTER. The Trustee shall maintain at
its Main Office a register (the "Redemption Register") in which it shall
record, in order of receipt, all requests for redemption received by the
Trustee under SECTION 6.2. Unless withdrawn, all such requests shall
remain in effect during the period in which they are received and
thereafter from period to period, until the Notes which are the subject of
such request have been redeemed.
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SECTION 6.5. REDEMPTION UPON FUNDAMENTAL STRUCTURAL CHANGE. In the
event that there shall occur a Fundamental Structural Change with respect to
the Company, then each holder shall have the right, at the holder's option,
to require the Company to redeem such holder's Notes, including any portion
thereof which is $1,000 or any integral multiple thereof on the date (the
"Repurchase Date") that is seventy-five (75) days after the occurrence of
the Fundamental Structural Change at the redemption price in cash of 100% of
the principal amount thereof or portion thereof plus accrued but unpaid
interest to the date of payment, unless on or before the date that is
forty (40) days after the occurrence of the Fundamental Structural Change,
the Notes have received a rating of BBB or better by Standard & Poor's
Corporation or Duff & Phelps Credit Rating Co., Inc. or Baa3 or better by
Moody's Investors Service, Inc. (either, a "Required Rating"). Exercise of
this redemption option by a holder is irrevocable. The Company's obligation
to redeem the Notes pursuant to this SECTION 6.5 shall not be subject to
the $25,000 individual or $300,000 aggregate redemption limitations.
Forty (40) days after the occurrence of a Fundamental
Structural Change, unless the Notes have received a Required Rating, the
Company promptly, but in any event within three (3) business days after
expiration of such forty (40)-day period, shall give notice to the Trustee,
who shall promptly, but in any event within five (5) days of receipt of
notice from the Company, notify the Noteholders, of the occurrence of such
Fundamental Structural Change, of the date before which a holder must notify
the Trustee of such holder's intention to exercise the redemption option,
which date shall be not more than three (3) business days prior to the
Repurchase Date and of the procedure which such holder must follow to
xercise such right. To exercise the redemption, the holder of a Note or
Notes must deliver to the Trustee on or before the Repurchase Date:
(A) written notice of such holder's election to redeem pursuant to this
SECTION 6.5; in form satisfactory to the Trustee, signed by the registered
holder(s) or his duly authorized representative; and (B) the Note or Notes
to be redeemed, free and clear of any liens or encumbrances of any kind.
Any Noteholder who fails to comply with the terms of the preceding sentence
shall not be entitled to have its Note or Notes redeemed pursuant to this
SECTION 6.5 in connection with such Fundamental Structural Change.
In the case of any Notes which are presented for redemption
in part only, upon such redemption the Company shall execute and the
Trustee shall authenticate and deliver to or on the order of the holder of
such Notes, without service charge, a new Note(s), of any authorized
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denomination or denominations as requested by such holder, in aggregate
principal amount equal to the unredeemed portion of the principal of the
Notes so presented.
SECTION 6.6. REDEMPTION OF NOTES SUBJECT TO ARTICLE 5. In the case
of any Notes or portion thereof which are presented for redemption
pursuant to this ARTICLE 6 and which have not been redeemed at the time
the Company gives notice of its election to redeem Notes pursuant to
ARTICLE 5, such Notes or portion thereof shall first be subject to
redemption pursuant to ARTICLE 5 and if any such Notes or portion thereof
are not redeemed pursuant to ARTICLE 5 they shall remain subject to
redemption pursuant to ARTICLE 6.
ARTICLE 7
REMEDIES OF TRUSTEE AND NOTEHOLDERS UPON DEFAULT
SECTION 7.1. DEFINITION OF DEFAULT AND EVENT OF DEFAULT. The
following events are hereby defined for all purposes of this Indenture
(except where the term is otherwise defined for specific purposes) as
"Events of Default" (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation
of law or pursuant to any judgment, decree or order of any court or any
order, rule or regulation of any administrative or governmental body):
(A) Failure to Pay the principal of or the premium, if any,
on any Note as and when the same shall become due and payable at maturity;
or
(B) Failure to pay any installment of interest upon any
Note as and when the same shall have become due and payable, and
continuance of such default for a period of five (5) days; or
(C) Default in the meeting or satisfaction of any
redemption payment with respect to any of the Notes as and when the same
shall became due and payable, and continuance of such default for a period
of five (5) days; or
(D) The entry of a decree or order by a court or regulatory
authority having jurisdiction in the premises adjudging the Company or any
Subsidiary a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or composition of
or in respect of the Company or any Subsidiary under the Federal
Bankruptcy Act or any other applicable Federal or State law, or appointing
a receiver, liquidator, assignee, trustee or sequestrator (or other
similar official) of the Company or any Subsidiary, or ordering the
winding-up or liquidation of its affairs, and the continuance of any such
decree or order unstayed and in effect for a period of sixty (60)
consecutive days; or
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(E) The institution by the Company or any Subsidiary of
proceedings to be adjudicated a bankrupt or insolvent, or the consent by
it to the institution of bankruptcy or insolvency proceedings against it,
or the filing by it of a petition or answer or consent seeking
reorganization or relief under the Federal Bankruptcy Act or any other
applicable Federal or State law, or the Consent by it to the filing of any
such petition or to the appointment of a receiver, liquidator, assignee,
trustee or sequestrator (or other similar official) of the Company or any
Subsidiary, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its
debts generally as they become due, or the taking of action by the Company
or any Subsidiary in furtherance of any such action; or
(F) Default in the performance, or breach, of any covenant
or warranty of the Company in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere
specifically dealt with in this SECTION 7.1), and continuance of such
default or breach for a period of thirty (30) days (or, in the case of a
default or breach relating to SECTION 3.11, sixty (60) days) after there
has been given, by registered or certified mail, to the Company by the
Trustee, or to the Trustee and the Company by the holders of at least ten
percent (10%) in principal amount of the Outstanding Notes affected (as
such term is defined in SECTION 13.2), a written notice specifying such
default or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" hereunder; or
(G) An event of default as defined in any mortgage,
indenture or instrument, under which there may be issued, or by which
there may be secured or evidenced, any Indebtedness of the Company,
whether such Indebtedness now exists or shall hereafter be created, shall
happen and shall result in such Indebtedness in an aggregate principal
amount in excess of $1,000,000 becoming or being declared due and payable
prior to the date on which it would otherwise become due and payable, and
such acceleration shall not be rescinded or annulled within ten (10) days
after written notice to the Company from the Trustee, or to the Trustee
and the Company from the holders of not less than twenty-five percent
(25%) in aggregate principal amount of the Notes then Outstanding.
SECTION 7.2. TRUSTEE TO GIVE NOTEHOLDERS NOTICE OF DEFAULTS. The
Trustee shall, within sixty (60) days after the occurrence thereof, give
to (i) the Noteholders, as their names and addresses appear in the Note
Register, (ii) such holders of the Notes who have, within the last two (2)
years preceding the mailing of such notice, filed their names and
addresses with the Trustee for that purpose and (iii) such holders of the
Notes whose names and address are provided to the Trustee in accordance
with Section 312 of the TIA, notice, by first-class mail, of all defaults
known to the Trustee, unless such defaults shall have been cured or waived
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before the giving of such notice (the term "Defaults" for the purposes of
this SECTION 7.2 being hereby defined to be the events specified in
subdivisions (A), (B), (C), (D), (E), (F) and (G) of SECTION 7.1 hereof,
not including any periods of grace provided for in said subdivisions and
irrespective of the mailing of any written demand specified in
subdivisions (F) and (G) but in the case of any default as specified in
subdivisions (B) and (C) of SECTION 7.1 hereof, no such notice shall be
given until at least ten (10) days after the occurrence thereof, and in
the case of any default as specified in subdivisions (F) and (G) of
SECTION 7.1 hereof, no such notice shall be given until at least thirty
(30) days after the occurrence thereof); provided, however, that except in
the case of default in the payment of the principal of or the premium, if
any, or the interest on any of the Notes, the Trustee shall be protected
in withholding such notice if and so long as the board of directors, board
of trustees, executive committee, or a trust committee of directors,
trustees or Responsible Officers, of the Trustee in good faith determines
that the withholding of such notice is in the interests of the
Noteholders.
SECTION 7.3. DECLARATION OF PRINCIPAL AND ACCRUED INTEREST DUE
UPON DEFAULT; HOLDERS OF SPECIFIED PERCENTAGE OF NOTES MAY WAIVE DEFAULT
DECLARATION. If an Event of Default occurs and is continuing as defined in
SECTION 7.1 hereof, the Trustee may, and the holders of not less than
twenty-five percent (25%) in principal amount of the Notes at the time
Outstanding hereunder may, by notice in writing given to the Company (and
to the Trustee if such notice be given by Noteholders) declare the
principal of all of the Notes hereby secured and the interest accrued
thereon immediately due and payable, and such principal and interest shall
thereupon become and be immediately due and payable; subject, however, to
the right of the holders of a MAJORITY in principal amount of all
Outstanding Notes, by written notice to the Company and to the Trustee
thereafter to consent to a waiver of such past Event of Default before any
final judgment or decree for the payment of the moneys due shall have been
obtained or entered as hereinafter provided and if before such judgment or
decree all covenants with respect to which Default shall have been made
shall be fully performed or made good to the reasonable satisfaction of
the Trustee, and all arrears of interest with interest upon overdue
installments of interest (to the extent that payment of such interest is
enforceable under applicable law) at the interest rate per annum
applicable to the Notes and the principal and premium, if any, of all
outstanding Notes which shall have become due otherwise than by
acceleration under this SECTION 7.3 and all sums paid or advanced by the
Trustee hereunder and the reasonable compensation, disbursements, expenses
and advances of the Trustee, its agents and attorneys, and all other
indebtedness secured hereby, except the principal of any Notes not then
due by their terms and except interest accrued on such Notes since the
last Interest Payment Date, shall be paid, or the amount thereof shall be
paid to the Trustee for the benefit of those entitled thereto. Such
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Default and its consequences shall thereupon be deemed to have been cured
and such declaration of the maturity of the Notes shall be void and of no
further effect, but no such cure shall extend to or affect any subsequent
Event of Default or impair any right consequent thereon.
SECTION 7.4. POWER OF TRUSTEE TO PROTECT AND ENFORCE RIGHTS. Upon
the occurrence of one or more Events of Default, the Trustee by such
officer or agent as it may appoint in its discretion, with or without
entry, may proceed to protect and enforce its rights and the rights of
holders of the Outstanding Notes by a suit or suits in equity or at law,
whether for the specific performance of any covenant or agreement
contained herein, or in aid of the execution of any power herein granted,
or for the enforcement of any other appropriate legal or equitable remedy,
as the Trustee shall deem most effectual to protect and enforce any of its
rights or duties and the rights of holders of the Outstanding Notes.
Upon the written request of the holders of a MAJORITY in
principal amount of the then Outstanding Notes, in case an Event of
Default shall have occurred and be continuing as aforesaid, subject to
SECTIONS 10.2 and 10.5, it shall be the duty of the Trustee upon being
indemnified as provided in SECTION 7.11, to exercise such one or more of
the remedies available for the protection and enforcement of its rights
and the rights of the Noteholders (including the taking of appropriate
judicial proceedings by action, suit or otherwise) as the Trustee shall
deem best.
SECTION 7.5. REMEDIES CUMULATIVE. No remedy herein conferred upon
or reserved to the Trustee or the Noteholders is intended to be exclusive
of any other right or remedy, but each and every such right or remedy
shall be cumulative, and shall be in addition to every other remedy given
hereunder as now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any
other appropriate right or remedy.
(A) DELAY, ETC. NOT A WAIVER OF RIGHTS. No delay or
omission to exercise any right or power accruing upon any Event of Default
shall impair any such right or power or shall be construed to be a waiver
of any such Event of Default or an acquiescence therein; and every such
right and power may be exercised from time to time and as often as may be
deemed expedient.
(B) WAIVER OF DEFAULT NOT TO EXTEND TO SUBSEQUENT DEFAULTS.
No waiver of any Event of Default whether by the Trustee or by the
Noteholders, shall extend to or shall affect any subsequent Event of
Default or shall impair any rights or remedies consequent thereon.
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SECTION 7.6. HOLDERS OF SPECIFIED PERCENTAGE OF NOTES MAY DIRECT
JUDICIAL PROCEEDINGS BY TRUSTEE. The holders of not less than a majority
in principal amount of the Notes at the time Outstanding hereunder may
direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any power conferred upon the
Trustee; provided, however, that such direction shall not be otherwise
than in accordance with the provisions of law and this Indenture and the
Trustee may take any other action deemed proper by them, or either of
them, which is not inconsistent with such direction.
SECTION 7.7. DISPOSITION OF PROCEEDS OF SALE. The purchase money
or proceeds of any sale made pursuant to judicial proceedings for the
enforcement of this Indenture, shall be applied, as follows:
First. To the payment of all sums payable to the Trustee
hereunder by reason of any expenses or liability incurred or advances made
in connection with the management or administration of the trusts hereby
created.
Second. To the payment in full of the amounts then due and
unpaid for the principal of and the premium, if any, and the interest on
the Outstanding Notes, with interest on the overdue principal and (to the
extent that payment of such interest is enforceable under applicable law)
on overdue installments of interest at the interest rate per annum
applicable to the Notes; and in case such proceeds shall be insufficient
to pay in full the amounts so due and unpaid, then to the payment thereof
ratably, according to the aggregate of such principal, premium and
interest, without preference or priority as to any Outstanding Note over
any other Outstanding Note or of principal, premium, if any, or interest
over principal, premium, if any, or interest, or of any installment of
interest over any other installment of interest, upon presentation of such
Notes and their surrender if fully paid, or for proper notation if only
partially paid.
Third. Any surplus thereof remaining to the Company,
its successors or assigns or to whosoever may be lawfully
entitled to receive the same, or as a court of competent
jurisdiction may direct.
SECTION 7.8.
(A) PAYMENT OF PRINCIPAL AND INTEREST TO TRUSTEE UPON
OCCURRENCE OF CERTAIN DEFAULTS; JUDGMENT MAY BE TAKEN BY TRUSTEE. The
Company covenants that (i) in case an Event of Default shall occur with
respect to the payment of any installment of interest upon any of the
Notes as and when the same shall become due and payable, or (ii) in case
an Event of Default shall occur with respect to the payment of the
principal of, and premium, if any, on, any of the Notes as and when the
same shall have become due and payable, then upon demand of the Trustee,
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the Company will pay to the Trustee, for the benefit of the holders of the
Notes, the whole amount that then shall have become due and payable on all
such Notes for principal, and premium, if any, and interest, with interest
upon the overdue principal, and premium, if any, and (to the extent that
payment of such interest is enforceable under applicable law) upon the
overdue installments of interest at the respective applicable rates borne
by the Notes; and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements, and advances of the
Trustee, its agents and counsel.
In case the Company shall fail to pay the same forthwith
upon such demand, the Trustee, in its name and as trustee of an express
trust, may institute a judicial proceeding for the collection of the sums
so due and unpaid, and may prosecute such proceeding to judgment or final
decree, and may enforce the same against the Company or any other obligor
upon the Notes and collect the moneys adjudged or decreed to be payable in
the manner provided by law out of the property of the Company or any other
obligor upon the Notes, wherever situated.
(B) ENFORCEMENT OF RIGHTS BY TRUSTEE DURING CONTINUANCE OF
AN EVENT OF DEFAULT. If an Event of Default occurs and is continuing, the
Trustee, may in the exercise of discretion proceed to protect and enforce
its rights and the rights of the Noteholders by such appropriate judicial
proceedings as deemed most effectual to protect and enforce any such
rights, whether for the specified enforcement of any covenant or agreement
in this Indenture or in aid of the exercise of any power granted herein,
or to enforce any other proper remedy.
(C) APPLICATION OF MONEYS COLLECTED BY TRUSTEE. Any moneys
collected by the Trustee, or either of them, under this SECTION 7.8 shall
be applied by the Trustee:
First. To the payment of the costs and expenses
reasonably incurred (including any sums due the Trustee) in the
proceedings resulting in the collection of such moneys.
Second. To the payment of the amounts then due and unpaid
upon the Outstanding Notes for principal of and the premium, if any, and
the interest on the Outstanding Notes, with interest on the overdue
principal and (to the extent that payment of such interest is enforceable
under applicable law) on overdue installments of interest at the interest
rate per annum applicable to the particular series of Notes; and in case
such proceeds shall be insufficient to pay in full the amounts so due and
unpaid, then to the payment thereof ratably, according to the aggregate of
such principal, premium and interest, without preference or priority as to
any Outstanding Note over any other Outstanding Note or of principal,
premium, if any, or interest over principal, premium, if any, or interest,
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or of any installment of interest over any other installment of interest,
upon presentation of such Notes and their surrender if fully paid, or for
proper notation if only partially paid.
SECTION 7.9. POSSESSION OF NOTES UNNECESSARY IN ACTION BY TRUSTEE.
All rights of action and claims under this Indenture or the Notes may be
prosecuted and enforced by the Trustee, without the possession of any of
the Notes or the production thereof in any proceeding relating thereto,
and any such proceeding instituted by the Trustee, shall be brought in its
name as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for
the ratable benefit of the holders of the Outstanding Notes in respect of
which such judgment has been recovered.
SECTION 7.10. TRUSTEE MAY FILE NECESSARY PROOFS. The Trustee
(irrespective of whether the principal of the Notes shall then be due and
payable as therein expressed and irrespective of whether the Trustee,
shall have made any demand for such payment), may file such proofs of
claim and other papers or documents as may be necessary or advisable in
order to have the claims of the Trustee, and of the Noteholders allowed in
any judicial proceedings relative to the Company or its creditors or
property. In case of any receivership, insolvency, bankruptcy,
reorganization or other similar proceedings affecting the Company or its
property, the Trustee (irrespective of whether the principal of the Notes
shall then be due and payable and irrespective of whether the Trustee,
shall have made any demand for such payment) shall be entitled and
empowered either in its name or as trustee of an express trust or as
attorney in fact for the holders of the Notes, or in any one or more of
such capacities, to file a proof of claim for the whole amount of
principal and interest (with interest upon such overdue principal and, to
the extent that payment of such interest is enforceable under applicable
law, upon overdue installments of interest at the interest rate per annum
applicable to the particular series of Notes) and any premium which may be
or become owing and unpaid in respect of the Notes and to file such other
papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel) and of the Noteholders allowed in any such proceedings
and to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any
receiver, assignee, trustee, liquidator, sequestrator (or other similar
official) in any such judicial proceeding is hereby authorized by each
Noteholder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the
Noteholders, to pay to the Trustee, any amount due the Trustee, for the
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reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee,
under SECTION 10.7.
Nothing herein contained shall be deemed to authorize the
Trustee, to authorize or consent to or accept or adopt on behalf of any
Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any holder thereof, or to
authorize the Trustee, to vote in respect of the claim of any Noteholder
in any such proceeding.
SECTION 7.11. LIMITATION UPON RIGHT OF NOTEHOLDERS TO INSTITUTE
CERTAIN LEGAL PROCEEDINGS. No Noteholder shall have any right to institute
any suit, action or proceeding in equity or at law for the foreclosure of
this Indenture, or for the execution of any trust hereunder, including the
appointment of a receiver or trustee, or for any other remedy hereunder,
including without limitation the institution of nonjudicial foreclosure
proceedings, unless (A) such holder previously shall have delivered to the
Trustee written notice that one or more Events of Default, which Events of
Default shall be specified in such notice, has occurred and is continuing,
and (B) the holders of not less than twenty-five percent (25%) in
principal amount of the then Outstanding Notes shall have requested the
Trustee in writing and shall have afforded to it reasonable opportunity
either to proceed to exercise the powers hereinbefore granted, or to
institute such action, suit or proceeding in its own name, and (C) one or
more Noteholders shall have offered to the Trustee adequate security and
indemnity, satisfactory to it, against the costs, expenses and liabilities
to be incurred therein or thereby and the Trustee, shall have refused or
neglected to act on such notification, request and offer of indemnity for
at least sixty (60) days and no direction inconsistent with such
notification shall have been given to the Trustee by holders of not less
than a majority in principal amount of the Outstanding Notes; and such
notification, request and offer of indemnity are hereby declared, in every
such case, at the option of the Trustee, to be conditions precedent to the
exercise of the powers and trusts of this Indenture and to any action or
cause of action for foreclosure, including the appointment of a receiver
or trustee, or for any other remedy hereunder; it being understood and
intended that no Noteholder shall have any right in any manner whatsoever
by his action to affect, disturb or prejudice the rights of any other
holder, or obtain or seek to obtain priority or preference over any other
holder, or to enforce any right hereunder, except in the manner herein
provided to the extent permitted by law, and that all proceedings at law
or in equity shall be instituted, had or maintained in the manner herein
provided, and for the equal and ratable benefit of all holders of the
Outstanding Notes.
SECTION 7.12. RIGHT OF NOTEHOLDER TO RECEIVE AND ENFORCE
PAYMENT NOT IMPAIRED. Notwithstanding any other provision of
this Indenture, the right of any holder of any Note to receive
payment of the principal of, premium, if any, and interest on
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such Note, on or after the respective Stated Maturities expressed in such
Note, or to institute suit for the enforcement of any such payment on or
after such respective Stated Maturities, shall not be impaired or affected
without the consent of such holder, except that no Noteholder may
institute any such suit if and to the extent that the institution or
prosecution thereof or the entry of judgment therein would, under
applicable law, result in the surrender, impairment, waiver, or loss under
this Indenture upon any property subject hereto.
SECTION 7.13. COURT MAY REQUIRE UNDERTAKING TO PAY COSTS. All
parties to this Indenture agree, and each holder of any Note by his
acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture or in any suit against the Trustee, for any
action taken or omitted by it, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court
may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due
regard to the merits and good faith of the claims or defenses made by such
party litigant; but to the extent permitted by law the provisions of this
SECTION 7.13 shall not apply to any suit instituted by the Trustee, to any
suit instituted by any Noteholder or group of Noteholders holding in the
aggregate more than ten percent (10%) in aggregate principal amount of the
Outstanding Notes, or to any suit instituted by any Noteholder for the
enforcement of the payment of the principal of, premium, if any, or
interest on any Note on or after the respective Stated Maturities
expressed in such Note (or, in the case of redemption, on or after the
Redemption Date).
SECTION 7.14. UNENFORCEABLE PROVISION INOPERATIVE. To the extent
that any provision of this ARTICLE 7 may be invalid or unenforceable under
any applicable law, such provision shall be deemed inoperative and
inapplicable and shall not be included in the terms of this Indenture.
SECTION 7.15. IF ENFORCEMENT PROCEEDINGS ABANDONED, STATUS QUO IS
ESTABLISHED. In case the Trustee or any Noteholder shall have proceeded to
enforce any right or remedy under this Indenture, and such proceedings
shall have been discontinued or abandoned for any reason, or shall have
been determined adversely to the Trustee or to such Noteholder, then and
in every such case the Company, the Trustee and the Noteholders, subject
to any determination in such proceedings, shall be restored severally and
respectively to their former positions and rights hereunder, and
thereafter all rights, remedies and powers of the Trustee and Noteholders
shall continue as if no such proceedings had been instituted.
SECTION 7.16. NOTEHOLDERS MAY WAIVE CERTAIN DEFAULTS. The
holders of not less than the required percentage in principal
amount of the Outstanding Notes Specified in SECTION 7.3 may on
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behalf of the holders of all the Notes waive any past Default hereunder
and its consequences, except a Default:
(A) in the payment of the principal of (or premium, if
any) or interest on any Note, or
(B) in respect of a covenant or provision hereof which
under ARTICLE 13 cannot be modified or amended without the consent of the
holder of each Outstanding Note affected.
Upon any such waiver, such Default shall cease to exist,
and any Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other Default or impair any right consequent
thereon.
ARTICLE 8
EVIDENCE OF RIGHTS OF NOTEHOLDERS
AND OWNERSHIP OF NOTES
SECTION 8.1. EVIDENCE OF OWNERSHIP OF DEFINITIVE NOTES AND
TEMPORARY NOTES ISSUED HEREUNDER IN REGISTERED FORM. Prior to due
presentment for registration of transfer of any Note, the Company, the
Trustee, any Note Registrar, or any agent of the Company or the Trustee
may deem and treat the person in whose name any Note shall be registered
at any given time upon the Note Register as the absolute owner of such
Note for the purpose of receiving any payment of, or on account of, the
principal, premium, if any, and interest on such Note and for all other
purposes whether or not such Note be overdue; and neither the Company nor
the Trustee, nor any agent of the Company or the Trustee shall be bound by
any notice to the contrary. All such payments made in accordance with the
provisions of this SECTION 8.1 shall be valid, and, to the extent of the
sum or sums so paid, effectual to satisfy and discharge the liability for
moneys payable upon any such Note.
ARTICLE 9
CONSOLIDATION, MERGER AND SALE
SECTION 9.1. COMPANY MAY MERGE, CONSOLIDATE, ETC., UPON CERTAIN
TERMS. The Company covenants that it will not merge or consolidate with
any other corporation or sell or convey all or substantially all of its
assets to any person, firm or corporation, unless (i) either (a) the
Company shall all be the continuing corporation, or (b) the successor
corporation (if other than the Company) shall be a corporation organized
under the laws of the United States of America or any State thereof and
shall expressly assume the due and punctual payment of the principal of
and premium, if any, and interest on all the Notes, according to their
tenor, and the due and punctual performance and observance of all of the
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covenants and conditions of this Indenture to be performed by the Company,
by Supplemental Indenture satisfactory to the Trustee, executed and
delivered to the Trustee by such corporation, and (ii) the Company or such
successor corporation, as the case may be, shall not, immediately after
such merger or consolidation, or such sale or conveyance, be in default in
the performance of any such covenant or condition.
SECTION 9.2. SUCCESSOR CORPORATION TO BE SUBSTITUTED. In case of
any such consolidation, merger, sale or conveyance, and upon any such
assumption by the successor corporation, such successor corporation shall
succeed to and be substituted for the Company, with the same effect as if
it had been named herein as the Company, and the Company shall thereupon
be released from all obligations hereunder and under the Notes and the
Company as the predecessor corporation may thereupon or at any time
thereafter be dissolved, wound up or liquidated. Such successor
corporation thereupon may cause to be signed, and may issue either in its
own name or in the name of ACC Consumer Finance Corporation any or all of
the Notes issuable hereunder which theretofore shall not have been signed
by the Company and delivered to the Trustee; and, upon the order of such
successor corporation instead of the Company and subject to all the terms,
conditions and imitations in this Indenture prescribed, the Trustee shall
authenticate and shall deliver any Notes which previously shall have been
signed and delivered by the officers of the Company to the Trustee for
authentication, and any Notes which such successor corporation thereafter
shall cause to be signed and delivered to the Trustee for that purpose.
In case of any such consolidation, merger, sale or
conveyance such changes in phraseology and form (but not in substance) may
be made in the Notes thereafter to be issued as may be appropriate.
SECTION 9.3. OPINION OF COUNSEL. The Trustee, subject to TIA
Sections 315(a), (c) and (d) and to SECTION 10.5, may receive an Opinion
of Counsel as conclusive evidence that any such consolidation, merger,
sale or conveyance and any such assumption complies with the provisions of
this ARTICLE 9.
SECTION 9.4. ARTICLE 9 SUBJECT TO PROVISION OF SECTION 6.5.
Notwithstanding the foregoing, the transactions contemplated by ARTICLE 9
are subject to the redemption provisions of SECTION 6.5, if applicable.
ARTICLE 10
CONCERNING THE TRUSTEE
SECTION 10.1. REQUIREMENT OF CORPORATE TRUSTEE,
ELIGIBILITY. There shall at all times be a Trustee hereunder
which shall be a banking corporation organized and doing business
under the laws of the United States of America or of any state,
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authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $60,000,000 subject to
supervision or examination by Federal or State authority, or any affiliate
of such a banking corporation, which also is a corporation organized and
doing business under the laws of the United States of America or of any
State, authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least $10,000,000 subject to
supervision or examination by Federal or State authority. If such
corporation publishes reports of condition at least annually, pursuant to
law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this SECTION 10.1 the combined capital
and surplus of the Trustee shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published.
If at any time the Trustee shall cease to be eligible in accordance with
the provisions of this SECTION 10.1 it shall resign immediately in the
manner and with the effect hereinafter specified in this ARTICLE 10.
SECTION 10.2. ACCEPTANCE OF TRUST. The Trustee accepts the trusts
hereby created upon the terms and conditions in this Indenture specified,
to all of which the Company and the holders of Outstanding Notes by their
acceptance thereof agree:
(A) Except during the continuance of an Event of
Default,
(1) the Trustee undertakes to perform such duties
and only such duties as are specifically set forth in this
Indenture, and no implied covenants or obligations shall be read
into this Indenture against the Trustee, and;
(2) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to it, and conforming to the
requirements of this Indenture; but in the case of any such
certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee
shall be under a duty to examine the same to determine whether or
not they conform to the requirements of this Indenture.
(B) In case an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers
vested in it by this Indenture, and use the same degree of care and skill
in their exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.
(C) No provision of this Indenture shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that
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(1) this subdivision shall not be construed to
limit the effect of subdivision (A) of this Section;
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible officer unless it
shall be proved that the Trustee was negligent in ascertaining
pertinent facts;
(3) the Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the direction of the holders of not less than a
majority in principal amount of the Notes at the time Outstanding
relating to the time, method, and place of conducting any
proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred upon the Trustee under this
Indenture;
(4) none of the provisions contained in this
Indenture shall require the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of
any of its rights or powers, if there is reasonable ground for
believing that the repayment of such funds are adequate indemnity
against such risk or liability is not reasonably assured to it;
and
(5) the permissive right of the Trustee to do things
enumerated in this Indenture shall not be construed as a duty, and
the Trustee shall not be answerable for other than its negligence
or willful default.
(D) Whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting the
liability of or affording protection to the Trustee shall be subject to
the provisions of this Section.
(E) The Trustee shall not be required to take notice or be
deemed to have notice of any Event of Default hereunder except failure by
the Company to cause to be made any of the payments to the Trustee
required to be made to the Trustee by any provision hereof or failure by
the Company to file with the Trustee any document required by this
Indenture to be so filed subsequent to the issuance of the Notes, unless
the Trustee shall be specifically notified in writing of such Default by
the Company or by the holders of at least twenty-five percent (25%) in
aggregate principal amount of Outstanding Notes, and all notices or other
instruments required by this Indenture to be delivered to the Trustee
must, in order to be effective, be delivered at the Main Office of the
Trustee, and in the absence of such notice so delivered the Trustee may
conclusively assume there is no Event of Default except as aforesaid.
SECTION 10.3. DISCLAIMER. The recitals contained herein
and in the Notes (except as contained in the Trustee's certificate of
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authentication) shall be taken as the statements of the Company, and the
Trustee assumes no responsibility for the correctness of the same. The
Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Notes issued hereunder. The Trustee shall be under no
responsibility or duty with respect to the disposition of any Notes
authenticated and delivered hereunder or the application or use of the
proceeds thereof or the application or use of any moneys paid to the
Company under any of the provisions hereof.
SECTION 10.4. TRUSTEE MAY OWN NOTES. The Trustee, the Paying
Agent, the Note Registrar or any Note Co-Registrar or other agent of the
Company or of the Trustee may become the owner or pledgee of Notes and,
subject to SECTIONS 10.9 and 10.10, if operative, may otherwise deal with
the Company with the same rights it would have if it were not a Trustee,
Paying Agent, Note Registrar, Note Co-Registrar or other agent of the
Company or of the Trustee.
SECTION 10.5. TRUSTEE MAY RELY ON CERTIFICATES, ETC. To
the extent permitted by SECTION 10.2 hereof:
(A) The Trustee may rely and shall be protected in acting
upon any resolution, certificate, opinion, notice, request, consent,
order, appraisal, report, Note or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(B) The Trustee may consult with counsel, who may be of
counsel to the Company, and the written advice of such counsel or any
Opinion of Counsel shall be full and complete authorization and protection
in respect of any action taken or suffered by it hereunder in good faith
and in reliance thereon;
(C) Any request or direction of the Company mentioned
herein shall be sufficiently evidenced by a Company Request or Company
Order and any resolution of the Board of Directors may be sufficiently
evidenced by a Certified Resolution;
(D) Whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the Trustee
(unless other evidence be herein specifically prescribed) may, in the
absence of bad faith, rely upon an Officers' Certificate;
(E) The Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the request
or direction of any of the holders pursuant to this Indenture, unless such
holders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred, as
the case may be, in compliance with such request or direction;
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(F) The Trustee shall not be bound to make any
investigation into the facts or matters stated in any such document set
forth in SECTION 10.5(A), but the Trustee, in its exercise of discretion,
may make such further inquiry or investigation into such facts or matters
as may seem necessary, and, if the Trustee shall determine to make such
further inquiry or investigation, the Trustee shall be entitled to examine
the books, records and premises of the Company, personally or by agent or
attorney;
(G) The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and the Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed
with due care hereunder; and
(H) The Trustee shall not be required to give any debenture
or surety in respect of the execution of the said trusts and powers or
otherwise in respect of the premises.
SECTION 10.6. MONEY HELD IN TRUST NOT REQUIRED TO BE SEGREGATED.
Subject to the provisions of SECTION 15.2 hereof, all moneys received by
the Trustee hereunder or in respect of the Notes shall, until used or
applied as herein provided, be held in trust for the purposes for which
they were received, but need not be segregated front other funds except to
the extent required by law.
Any interest allowed on or income or other return arising
from any such moneys shall be paid from time to time to the Company upon
company order in accordance with the provisions hereof; provided, however,
that the Trustee shall not be required to pay to the Company any interest
earned by the Trustee on funds received by the Trustee too late in the
Trustee's banking day to permit the Trustee to invest such funds overnight
for the account of the Company and provided, further, that no such
interest, income or return shall be paid to the Company during any period
during which an Event of Default has occurred and is continuing.
SECTION 10.7. COMPENSATION, REIMBURSEMENT, INDEMNITY,
SECURITY. The Company covenants and agrees to pay to the Trustee
from time to time, and the Trustee shall be entitled to receive,
reasonable compensation for all services rendered by it in the
execution of the trusts hereby created and in the exercise and
performance of all services rendered hereunder, which
compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust, and
except as otherwise expressly provided herein, the Company will
upon request of the Trustee reimburse the Trustee for all
reasonable advances made or incurred by the Trustee in accordance
with any provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of its agents and
counsel, except any such expense or disbursement as may be
attributable to negligence or bad faith). The Company also
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covenants to indemnify the Trustee for, and to hold it harmless against,
any loss, liability or expense incurred without negligence or bad faith on
the part of the Trustee arising out of or in connection with the
acceptance or administration of this trust, including the costs and
expenses of defending against any claim or liability in connection with
the exercise or performance of any of the powers or duties hereunder.
If, and to the extent that the Trustee and its counsel and
other agents do not receive compensation for services rendered,
reimbursements of its advances, expenses and disbursements, or indemnity,
as herein provided, as the result of allowances made in any
reorganization, bankruptcy, receivership, liquidation or other proceeding
or by any plan of reorganization or readjustment of obligations of the
Company or the Trustee shall be entitled, in priority to the holders of
the Notes, to receive any distributions of any securities, dividends or
other disbursements which would otherwise be made to the holders of Notes
in any such proceeding or proceedings and the Trustee is hereby
constituted and appointed, irrevocably, the attorney in fact for the
holders of the Notes and each of them to collect and receive, in their
name, place and stead, such distributions, dividends or other
disbursements, to deduct therefrom the amounts due to the Trustee its
counsel and other agents on account of services rendered, advances,
expenses, and disbursements made or incurred, or indemnity, and to pay and
distribute the balance to the holders of the Notes, pro-rata based upon
the respective principal amounts of the Notes held by them.
SECTION 10.8. CONFLICT OF INTEREST.
(A) If the Trustee has or shall acquire any conflicting
interest, as defined in this SECTION 10.8, the Trustee shall within ninety
(90) days after ascertaining that there is such conflicting interest,
either eliminate such conflicting interest or resign in the manner and
with the effect hereinafter specified in this ARTICLE 10.
(B) In the event that the Trustee shall fail to comply with
the provisions of the preceding subdivision (A) of this SECTION 10.8, the
Trustee shall within ten (10) days after the expiration of such ninety
(90)-day period transmit notice of such failure to the Noteholders, in the
manner and to the extent provided in SECTION 4.3.
(C) For the purposes of this Section, the Trustee shall be
deemed to have a conflicting interest if there is an Event of Default (as
defined in SECTION 7.1 but exclusive of any grace period or notice
requirement) and:
(1) the Trustee is trustee under another indenture
under which any other securities, or certificates of interest or
participation in any other securities, of the Company, are
outstanding unless such other indenture is a collateral trust
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indenture under which the only collateral consists of notes
issued under this Indenture; provided, however, that there
shall be excluded from the operation of this clause (1)
any indenture under which other securities, or certificates of
interest or participation in other securities, of the Company are
outstanding, if the Company shall have sustained the burden of
proving, on application to the Securities and Exchange Commission
and after opportunity for hearing thereon, that trusteeship under
this Indenture and such other indenture is not so likely to
involve a material conflict of interest as to make it necessary in
the public interest or for the protection of investors to
disqualify the Trustee from acting as such under this Indenture or
such other indenture or indentures;
(2) the Trustee or any of the directors or
executive officers of the Trustee is an obligor upon the
Notes or an underwriter for the Company;
(3) the Trustee directly or indirectly controls or
is directly or indirectly controlled by or is under direct or
indirect common control with the Company or an underwriter for the
Company;
(4) the Trustee or any of the directors or executive
officers of the Trustee is a director, officer, employee,
appointee or representative of the Company, or of an underwriter
(other than the Trustee) for the Company who is currently engaged
in the business of underwriting, except that (a) one (1)
individual may be a director or an executive officer, or both, of
the Trustee and a director or an executive officer or both, of the
Company, but may not be at the same time an executive officer of
the Trustee and the Company; (b) if and so long as the number of
directors of any Trustee in office is more than nine (9), one (1)
additional individual may be a director or an executive officer,
or both, of such Trustee and a director of the Company; and (c)
the Trustee may be designated by the Company or by an underwriter
for the Company to act in the capacity of transfer agent,
registrar, custodian, Paying Agent, fiscal agent, escrow agent or
depositary or in any other similar capacity or, subject to the
provisions of paragraph (1) of this Subdivision (C), to act as
trustee, whether under an indenture or otherwise;
(5) ten percent (10%) or more of the voting
securities of the Trustee is beneficially owned either by the
Company or by any director, or executive officer thereof, or
twenty percent (20%) or more of such voting securities is
beneficially owned, collectively, by any two (2) or more of such
persons; or ten percent (10%) or more of the voting securities of
the Trustee is beneficially owned either by an underwriter for the
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Company or by any director or executive officer thereof, or
is beneficially owned, collectively, by any two (2) or more
such persons;
(6) the Trustee is the beneficial owner of or holds
as collateral security for an obligation which is in default (as
hereinafter in this subdivision (C) of this SECTION 10.8 defined),
(a) five percent (5%) or more of the voting securities or ten
percent (10%) or more of any other class of security of the
Company, not including the Notes issued under this Indenture and
securities issued under any other indenture under which the
Trustee is also trustee, or (b) ten percent (10%) or more of any
class of security of an underwriter for the Company;
(7) the Trustee is the beneficial owner of, or holds
as collateral security for an obligation which is in default (as
hereinafter in this subdivision (C) of this SECTION 10.8 defined),
five percent (5%) or more of the voting securities of any person
who, to the knowledge of the Trustee owns ten percent (10%) or
more of the voting securities of, or controls directly or
indirectly or is under direct or indirect common control with, the
Company;
(8) the Trustee is the beneficial owner of or holds
as collateral security for an obligation which is in default (as
hereinafter in this subdivision (C) of this SECTION 10.8 defined),
ten percent (10%) or more of any class of security of any person
who, to the knowledge of the Trustee owns fifty percent (50%) or
more of the voting securities of the Company;
(9) the Trustee owns on January 1 in any calendar
year in the capacity of executor, administrator, testamentary or
inter vivos trustee, guardian, committee or conservator, or in any
other similar capacity, an aggregate of twenty-five percent (25%)
or more of the voting securities or of any class of security, of
any person, the beneficial ownership of a specified percentage of
which would have constituted a conflicting interest under clause
(6), (7) or (8) of this subdivision (C). As to any such securities
of which the Trustee acquired ownership through becoming executor,
administrator or testamentary trustee of an estate which included
it, the provisions of the preceding sentence shall not apply for a
period of two (2) years from the date of such acquisition, to the
extent that such securities included in such estate do not exceed
twenty-five percent (25%) of such voting securities or twenty-five
percent (25%) of any such class of security. Promptly after
January 1, in each calendar year, the Trustee shall make a check
of its or his holdings of such securities in any of the
above-mentioned capacities as of January 1. If the Company fails
to make payment in full of principal or interest upon the Notes
when and as the same becomes due and payable, and such failure
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continues for thirty (30) days thereafter, the Trustee shall
make a prompt check of its holdings of such securities in any
of the above-mentioned capacities as of the date of the
expiration of such thirty-day period and after such date,
notwithstanding the foregoing provisions of this clause (9),
all such securities so held by the Trustee with sole or joint
control over such securities vested in it or him, shall, but only
so long as such failure shall continue, be considered. as though
beneficially owned by the Trustee for the purposes of clauses (6),
(7) and (8) of this subdivision (C); or
(10) the Trustee shall be or become a creditor of
the Company (except under the circumstances described under
paragraphs (1), (3), (4), (5) or (6) of Section 311(b) of the TIA.
The specifications of percentages in clauses (5) to (9),
inclusive, of this subdivision (C) shall not be construed as indicating
that the ownership of such percentages of the securities of a person is or
is not necessary or sufficient to constitute direct or indirect control
for the purposes of clause (3) or (7) of this subdivision (C).
For the purposes of clauses (6), (7), (8) and (9) of this
subdivision (C) only, (a) the terms "security" and "securities" shall
include only such securities as are generally known as corporate
securities, but shall not include any note or other evidence of
indebtedness issued to evidence an obligation to repay moneys lent to a
person by one or more banks, trust companies or banking firms or any
certificate of interest or participation in any such note or evidence of
indebtedness, (b) an obligation shall be deemed to be in default when a
default in payment of principal shall have continued for thirty (30) days
or more and shall not have been cured; and (c) the Trustee shall not be
deemed to be the owner or holder of (i) any security which it holds as
collateral security (as trustee or otherwise) for an obligation which is
not in default as above defined, or (ii) any security which it holds as
collateral security under this Indenture, irrespective of any default
hereunder, or (iii) any security which it holds as agent for collection,
or as custodian, escrow agent or depositary, or in any similar
representative capacity.
(D) The percentages of voting securities and other
securities specified in this SECTION 10.8 shall be calculated in
accordance with the following provisions:
(1) A specified percentage of the voting securities
of the Trustee, the Company or any other person referred to in
this SECTION 10.8 (each of whom is referred to as a "person" in
this subdivision (D)) means such amount of the outstanding voting
securities of such person as entitles the holder or holders
thereof to cast such specified percentage of the aggregate votes
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which the holders of all the outstanding voting securities of such
person are entitled to cast in the direction or management of the
affairs of such person.
(2) A specified percentage of a class of securities
of a person means such percentage of the aggregate amount of
securities of the class outstanding.
(3) The term "amount," when used in regard to
securities, means the principal amount if relating to evidences of
indebtedness, the number of shares if relating to capital shares,
and the number of units if relating to any other kind of security.
(4) The term "outstanding" means issued and not held
by or for the account of the issuer. The following securities
shall not be deemed outstanding within the meaning of this
definition:
(a) securities of an issuer held in a
sinking fund relating to securities of the issuer of the
same class;
(b) securities of an issuer held in a
sinking fund relating to another class of securities of the
issuer, if the obligation evidenced by such other class of
securities is not in default as to principal or interest or
otherwise;
(c) securities pledged by the issuer thereof
as security for an obligation of the issuer not in default
as to principal or interest or otherwise; or
(d) securities held in escrow if placed in
escrow by the issuer thereof;
provided, however, that any voting securities of an issuer shall be deemed
outstanding if any person other than the issuer is entitled to exercise
the voting rights thereof.
(5) A security shall be deemed to be of the same
class as another security, if both securities confer upon the
holder or holders thereof substantially the same rights and
privileges; provided, however, that, in the case of secured
evidences of indebtedness, all of which are issued under a single
indenture, differences in the interest rates or maturity dates of
various series thereof shall not be deemed sufficient to
constitute such series different classes; and provided, further,
that, in the case of unsecured evidences of indebtedness,
differences in the interest rates or maturity dates thereof shall
not be deemed sufficient to constitute them securities of
different classes, whether or not they are issued under a single
indenture.
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(E) For the purposes of this SECTION 10.8, unless otherwise
provided:
(1) The term "underwriter" when used with reference
to the Company means every person, who, within three (3) years
prior to the time as of which the determination is made, has
purchased from the Company with a view to, or has offered or has
sold for the Company in connection with, the distribution of any
security of the Company outstanding at such time, or has
participated or has had a direct or indirect participation in any
such undertaking, or has participated or has had a participation
in the direct or indirect underwriting of any such undertaking,
but such term shall not include a person whose interest was
limited to a commission from an underwriter or dealer not in
excess of the usual and customary distributors' or sellers'
commission.
(2) The term "director" means any director of a
corporation, or any individual performing similar functions with
respect to any organization whether incorporated or
unincorporated.
(3) The term "person" means an individual, a
corporation, a partnership, an association, a joint-stock company,
a trust, an unincorporated organization, or a government or
political subdivision thereof. As used in this clause, the term
"trust" shall include only a trust where the interest or interests
of the beneficiary or beneficiaries are evidenced by a security.
(4) The term "voting security" means any security
presently entitling the owner or holder thereof to vote in the
direction or management of the affairs of a person, or any
security issued under or pursuant to any trust, agreement or
arrangement whereby a trustee or trustees or agent or agents for
the owner or holder of such security are presently entitled to
vote in the direction or management of the affairs of a person.
(5) The term "Company" means any obligor upon the
Notes.
(6) The term "executive officer" means the
president, every vice president, every trust officer, the cashier,
the secretary, and the treasurer of a corporation, and any
individual customarily performing similar functions with respect
to any organization whether incorporated or unincorporated, but
shall not include the chairman of the board of directors.
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SECTION 10.9. RESIGNATION, REMOVAL, APPOINTMENT OF
SUCCESSOR TRUSTEE.
(A) No resignation or removal of the Trustee, and no
appointment of a successor Trustee pursuant to this ARTICLE 10 shall
become effective until the acceptance of appointment by the successor
Trustee under this SECTION 10.9 and SECTION 10.10.
(B) The Trustee may resign at any time by giving written
notice thereof to the Company. If an instrument of acceptance by a
successor Trustee shall not have been delivered to the Trustee within
thirty (30) days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(C) The Trustee may be removed at any time by Act of the
holders of a majority in principal amount of the Outstanding Notes,
delivered to the Trustee and to the Company.
(D) If at any time:
(1) the Trustee shall fail to comply with SECTION
10.8 after written request therefor by the Company or by any
Noteholder who has been a bona fide holder of a Note for at least
six (6) months, or
(2) the Trustee shall cease to be eligible under
SECTION 10.1 and shall fail to resign after written request
therefor by the Company or by any such Noteholder, or
(3) the Trustee Shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or a receiver of the
Trustee or of its property shall be appointed or any public
officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, (a) the Company by a Certified Resolution may
remove the Trustee or (b) subject to SECTION 7.13, any Noteholder who has
been a bona fide holder of a Note for at least six (6) months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee and the appointment
of a successor Trustee.
(E) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of the
Trustee for any cause, the Company, by a Certified Resolution, shall
promptly appoint a successor Trustee. If, within one (1) year after such
resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee shall be appointed by Act of the holders of a majority
in principal amount of the Outstanding Notes delivered to the Company and
the retiring Trustee, the successor Trustee so appointed shall, forthwith
upon its acceptance of such appointment, become the successor Trustee and
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supersede the successor Trustee appointed by the Company. If no successor
Trustee shall have been so appointed by the Company or the Noteholders and
accepted appointment in the manner hereinafter provided, any Noteholder
who has been a bona fide holder of a Note for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(F) The Company shall give notice of each resignation and
each removal of a Trustee and each appointment of a successor Trustee by
mailing written notice of such event by first-class mail, postage prepaid,
to the holders of Notes in the manner and to the extent provided in
SECTION 4.3. Each notice shall include the name of the successor Trustee
and address of the Main Office of the successor Trustee.
SECTION 10.10. ACCEPTANCE BY SUCCESSOR TRUSTEE. Every successor
Trustee appointed hereunder shall execute, acknowledge and deliver to the
Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on request of the
Company or the respective successor Trustee, the respective retiring
Trustee shall, upon payment of its charges, execute and deliver an
instrument transferring to such respective successor Trustee all the
rights, powers and trusts of the retiring respective Trustee, and shall
duly assign, transfer and deliver to such respective successor Trustee all
property and money held by such respective retiring Trustee hereunder,
subject nevertheless to its lien, if any, provided for in SECTION 10.7.
Upon request of any such respective successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Trustee all such rights, powers and
trusts.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this ARTICLE 10 to the extent operative.
SECTION 10.11.
(A) NOTICE, ETC. ON BEHALF OF COMPANY DELIVERED TO TRUSTEE.
Except as herein expressly provided to the contrary, any notice, request,
or other writing by or on behalf of the Company delivered to the Trustee
shall be deemed to have been delivered to the Trustee hereunder as
effectually as if delivered to each of them.
(B) CASH, SECURITIES, ETC. TO BE HELD BY TRUSTEE.
Notwithstanding anything herein contained to the contrary, all
cash collected by, or payable to, the Trustee pursuant to this
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Indenture shall be paid to and deposited with, and all stocks, debentures
and other obligations or securities shall be held by, the Trustee, except
as otherwise required by law.
Whenever any moneys, debentures, shares of stock or other
obligations are, under any provisions of this Indenture, paid or delivered
to or deposited with the Trustee, the same shall be deemed for all
purposes hereunder to be part of the security for the Notes issued
hereunder, but nothing contained in this SECTION 10.11 shall be deemed to
affect or impair any power or right conferred by any provision of this
Indenture upon the Trustee to apply, disburse or otherwise act or deal
with respect to any moneys, debentures, shares of stock or other
obligations received or held by it as aforesaid.
SECTION 10.12. MERGER OR CONSOLIDATION OF TRUSTEE. Any corporation
into which the Trustee may be merged or with which it may be consolidated
or any corporation resulting from any merger, conversion, or consolidation
to which the Trustee shall be a party, or any corporation succeeding to
all or substantially all the corporate trust business of the Trustee shall
be the successor of the Trustee hereunder provided such corporation shall
be otherwise qualified and eligible under this ARTICLE 10, to the extent
operative, without the execution or filing of any paper or the performance
of any further act on the part of any other parties hereto, anything
herein to the contrary notwithstanding. In case any of the Notes shall
have been authenticated, but not delivered, by the Trustee then in office,
any such successor to the Trustee by merger, conversion or consolidation
may adopt such authentication and deliver the said Notes so authenticated
with the same effect as if such successor Trustee had itself authenticated
such Notes.
SECTION 10.13. AUTHENTICATING AGENT. As long as any of the Notes
remain Outstanding, upon a Company Order there shall be an authenticating
agent appointed by the Trustee for such period as the Company shall elect,
to act on behalf of the Trustee and subject to its direction in connection
with the authentication of the Notes as set forth in this Indenture. Such
authenticating agent shall at all times be a banking corporation organized
and doing business under the laws of the United States or any State,
authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $60,000,000 subject to
supervision or examination by Federal or State authority, or an affiliate
of such banking corporation, which is also a corporation organized and
doing business under the laws of the United States or of any State,
authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $10,000,000 subject to
supervision or examination by Federal or State authority. If such
corporation publishes reports of condition at least annually, pursuant to
law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this SECTION 10.13 the combined
capital and surplus of such corporation shall be deemed to be its
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combined capital and surplus as set forth in its most recent report of
condition so published.
Whenever reference is made in this Indenture to the
authentication and delivery of Notes by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an authenticating
agent and a certificate of authentication executed on behalf of the
Trustee by an authenticating agent.
Any corporation in which any authenticating agent may be
merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to
which any authenticating agent shall be a party, or any corporation
succeeding to the corporate agency business of any authenticating agent,
shall continue to be the authenticating agent without the execution or
filing of any paper or any further act on the part of the Trustee or the
authenticating agent.
Any authenticating agent may at any time resign by giving
written notice of resignation to the Trustee and to the Company. The
Trustee may at any time terminate the agency of any authenticating agent
by giving written notice of termination to such authenticating agent and
to the Company. Upon receiving such a notice of resignation or upon such a
termination, or in case at any time any authenticating agent shall cease
to be eligible in accordance with the provisions of this SECTION 10.13,
the Trustee promptly shall appoint a successor authenticating agent, shall
give written notice of such appointment to the Company and shall mail
notice of such appointment to all holders of Notes as the names and
addresses of such holders appear on the Note Register. Any successor
authenticating agent upon acceptance of its appointment hereunder shall
become vested with all the rights, powers, duties and responsibilities of
its predecessor hereunder. No successor authenticating agent shall be
appointed unless eligible under the provisions of this SECTION 10.13.
The Trustee agrees to pay to the authenticating agent from
time to time reasonable compensation for its services, and the Trustee
shall be entitled to be reimbursed for such payments from the Company
subject to the provisions of SECTION 10.7. The provisions of SECTION 8.1,
10.3 and 10.4 shall be applicable to any authenticating agent.
ARTICLE 11
DISCHARGE OF INDENTURE
SECTION 11.1. ACKNOWLEDGMENT OF DISCHARGE. This Indenture
shall cease to be of further effect (except as to any surviving
rights of registration of transfer or exchange of Notes herein
expressly provided for and rights to receive payments of interest
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thereon), and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments acknowledging satisfaction, cancellation
and discharge of this Indenture, when
(A) either
(1) all Notes theretofore authenticated and
delivered other than (a) Notes which have been destroyed, lost or
stolen and which have been replaced or paid as provided in SECTION
2.10, and (b) Notes for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the Company
and thereafter repaid to the Company or discharged from such
trust, as provided in SECTION 15.2 have been delivered to the
Trustee for cancellation; or
(2) all such Notes not theretofore delivered to
the Trustee for cancellation
(a) have become due and payable, or
(b) will become due and payable at their
Stated Maturity within one (1) year, or
(c) are to be called for redemption within
one (1) year under arrangements satisfactory to the Trustee for
the giving of notice of redemption by the Trustee in the name, and
at the expense, of the Company, and the Company, in the case of
(a), (b) or (c) above, has deposited or caused to be deposited
with the Trustee, as trust funds in trust for the purpose, an
amount sufficient to pay and discharge the entire indebtedness on
such Notes not theretofore delivered to the Trustee for
cancellation, for principal, and premium, if any, and interest to
the date of such deposit (in the case of Notes which have become
due and payable), or to the Stated Maturity or Redemption Date, as
the case may be;
(B) the Company has paid or caused to be paid all
other sums payable hereunder by the Company; and
(C) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge
of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this
Indenture the obligations of the Company to the Trustee under SECTION 10.7
shall survive.
SECTION 11.2. MONEY HELD IN TRUST. All money deposited
with the Trustee pursuant to SECTION 11.1 shall be held in trust
and applied by it, in accordance with the provisions of the Notes
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and this Indenture, to the payment, either directly or through any Paying
Agent (including the Company acting as its own Paying Agent), as the
Trustee may determine, to the persons entitled thereto, of the principal,
and premium, if any, and interest for whose payment such money has been
deposited with the Trustee; but such money need not be segregated from
other funds except to the extent required by law. The Trustee shall give
notice in the name and at the expense of the Company of the immediate
availability of the money deposited with the Trustee pursuant to SECTION
11.1 to the persons entitled to such money.
ARTICLE 12
MEETING OF NOTEHOLDERS
SECTION 12.1. PURPOSES FOR WHICH MEETINGS MAY BE CALLED. A meeting
of the Noteholders may be called at any time and from time to time
pursuant to the provisions of this ARTICLE 12 for any of the following
purposes:
(A) To give any notice to the Company or to the Trustee, or
to give any directions to the Trustee, or to consent to the waiving of any
Event of Default hereunder and its consequences, or to take any other
action authorized to be taken by the Noteholders pursuant to any of the
provisions of ARTICLE 2;
(B) To remove the Trustee and appoint a successor
trustee pursuant to any of the provisions of ARTICLE 10;
(C) To consent to the execution of an indenture or
indentures supplemental hereto pursuant to the provisions of
ARTICLE 13; or
(D) To take any other action authorized to be taken by or
on behalf of Noteholders of any specified aggregate principal amount of
the Notes under any other provisions of this Indenture, or authorized or
permitted by law.
SECTION 12.2. CALL OF MEETINGS BY TRUSTEE; GENERALLY. Meetings of
Noteholders may be held at such place or places and at such time or times
in any Place of Payment as the Trustee or, in case of its failure to act,
the Company or the Noteholders calling the meeting, shall from time to
time determine.
SECTION 12.3. CALL OF MEETINGS BY TRUSTEE; NOTICE. The Trustee may
at any time call a meeting of the Noteholders to take any action specified
in SECTION 12.2 at such place designated in SECTION 12.2 as the Trustee
shall determine. Notice of every meeting of the Noteholders, setting forth
the time and place of such meeting and in general terms the action
proposed to be taken at such meeting, and specifying each series of Notes
which would be affected by the proposed action, shall be mailed by the
Trustee at the expense of the Company, first-class postage prepaid,
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to the Noteholders at their last addresses as they shall appear upon the
Note Register, not less than twenty (20) nor more than one hundred twenty
(120) days prior to the date fixed for the meeting. Any defect in said
notice shall not, however, in any way impair or affect the validity of any
such meeting.
The Trustee may in its discretion determine, subject to the
meaning of the term "affected" as set forth in SECTION 13.2, whether or
not Notes of any particular series would be affected by action proposed to
be taken at a meeting and any such determination shall be conclusive upon
the holders of Notes of such series and all other series. Subject to the
provisions of SECTION 10.2, the Trustee shall not be liable for any such
determination made in good faith.
Any meeting of the Noteholders shall be valid without
notice if Noteholders, holding all Notes then outstanding, which would be
affected by the action proposed to be undertaken, are present in person or
by proxy or have waived notice before or after the meeting by Noteholders,
and if the company and the Trustee are either present by duly authorized
representatives or have, before or after the meeting, waived notice.
In case at any time the Company, pursuant to a Certified
Resolution, or Noteholders holding at least ten percent (10%) in aggregate
principal amount of the Notes then Outstanding, which would be affected by
the action proposed to be undertaken, shall have requested the Trustee to
call a meeting of the Noteholders to take any action authorized by SECTION
12.1, by written request setting forth in reasonable detail the action
proposed to be taken at the meeting, and the Trustee shall not have mailed
the notice of such meeting within twenty (20) days after receipt of such
request, then the Company or Noteholders holding the amount above
specified may determine the time and the place for such meeting and may
call such meeting for such purpose by giving notice thereof in the manner
provided in this SECTION 12.3.
SECTION 12.4. MEETINGS, NOTICE AND ENTITLEMENT TO BE PRESENT. Only
Noteholders holding Notes, which would be affected by the action proposed
to be undertaken, and persons appointed by an instrument in writing as
proxy for such a Noteholder by such a Noteholder are entitled to notice of
and to vote at any meeting of the Noteholders. The only persons who shall
be entitled to be present or to speak at any meeting of the Noteholders
shall be the persons entitled to vote at such meeting and their counsel,
any representatives of the Trustee and its counsel, and any
representatives of the Company and its counsel.
SECTION 12.5. REGULATIONS MAY BE MADE BY TRUSTEE.
Notwithstanding any other provisions of this Indenture, the
Trustee may make such reasonable regulations as it may deem
advisable for any meeting of the Noteholders, in regard to proof
of the holding of Notes and of the appointment of proxies, and in
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regard to the appointment and duties of inspectors of votes, the
submission and examination of proxies, certificates and other evidence of
the right to vote, and such other matters concerning the conduct of the
meeting as it shall deem appropriate.
Such regulations (A) may provide for the closing of the
Note Register for such period act the Trustee may deem necessary or (B)
may fix a record and time for determining the record Noteholders of the
Notes entitled to vote at such meeting. All Noteholders seeking to attend
or vote at a meeting in person or by proxy must, if required by any
authorized representative of the Trustee or the Company or by any other
Noteholder, produce the Notes claimed to be owned or represented at such
meeting, and every one seeking to attend or vote shall, if required as
aforesaid, produce such further proof of Note ownership or personal
identity as shall be satisfactory to the authorized representative of the
Trustee, or if none be present then to the inspectors of votes hereinafter
provided for.
The Trustee shall, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting shall have been
called by the Company or by the Noteholders as provided in SECTION 12.3,
in which case the Company or the Noteholders calling the meeting, as the
case may be, shall in like manner appoint a temporary chairman. A
permanent chairman and a permanent secretary of the meeting may be elected
by vote of Noteholders holding a majority in principal amount of the Notes
represented at the meeting and entitled to vote.
At any meeting each Noteholder or proxy shall be entitled
to one vote for each $1,000 principal amount of Notes then Outstanding
owned by such Noteholder or represented by such proxy; provided, however,
that no vote shall be cast or counted at any meeting in respect of any
Notes challenged as not Outstanding and ruled by the temporary or
permanent chairman of the meeting to be not Outstanding. The temporary or
permanent chairman of the meeting shall have no right to vote other than
by virtue of Notes held by him or instruments in writing as aforesaid duly
designating him as the person to vote on behalf of other Noteholders.
At any meeting of Noteholders, the presence of persons
holding or representing Notes in an aggregate principal amount sufficient
under the appropriate provision of this Indenture to take action upon the
business for the transaction of which such meeting was called shall
constitute a quorum. Any meeting of holders duly called pursuant to
SECTION 12.3 may be adjourned from time to time by vote of the holders (or
proxies for the holders) of a majority in aggregate principal amount of
the Notes represented at the meeting and entitled to vote, whether or not
a quorum shall be present; and the meeting may be held as so adjourned
without further notice.
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SECTION 12.6. MANNER OF VOTING AT MEETINGS AND RECORD TO BE KEPT.
The vote upon any resolution submitted to any meeting of the Noteholders
shall be by written ballots on which shall be subscribed the signatures of
the Noteholders or of their representatives by proxy and the principal
amount of the Notes voted by the ballot. The temporary or permanent
chairman of the meeting shall appoint two (2) inspectors of votes, who
shall count all votes cast at the meeting for or against any resolution
and who shall make and file with the secretary of the meeting their
verified written reports in duplicate of all votes cast at the meeting. A
record at least in duplicate of the proceedings of each meeting of the
Noteholders shall be prepared by the secretary of the meeting and there
shall be attached to said record the original reports of the inspectors of
votes on any vote by ballot taken thereat and affidavits by one (1) or
more persons having knowledge of the facts setting forth a copy of the
notice of the meeting and showing that said notice was mailed as provided
in SECTION 12.3. The record shall be signed and verified by the affidavits
of the permanent chairman and secretary of the meeting and one copy
thereof shall be delivered to the Company and another to the Trustee to be
preserved by the Trustee, the latter to have attached thereto the ballots
voted at the meeting.
Any record so signed and verified shall be conclusive
evidence of the matters therein stated.
SECTION 12.7. EVIDENCE OF ACTION BY HOLDERS OF SPECIFIED
PERCENTAGE OF NOTES. Whenever in this Indenture it is provided that the
holders of a specified percentage in aggregate principal amount of the
Notes of any series may take any action (including the making of any
demand or request, the giving of any notice, consent, or waiver or the
taking of any other action) the fact that at the time of taking any such
action the holders of such specified percentage have joined therein may be
evidenced (A) by any instrument or any number of instruments of similar
tenor executed by holders in person or by agent or proxy appointed in
writing, or (B) by the record of the holders of Notes voting in favor
thereof at any meeting of holders duly called and held in accordance with
the provisions of this ARTICLE 12, or (C) by a combination of such
instrument or instruments and any such record of such a meeting of
holders.
SECTION 12.8. EXERCISE OF RIGHT OF TRUSTEE OR NOTEHOLDERS MAY NOT
BE HINDERED OR DELAYED BY CALL OF MEETING OF NOTEHOLDERS. Nothing in this
ARTICLE 12 contained shall be deemed or construed to authorize or permit,
by reason of any call of a meeting of the Noteholders or any rights
expressly or impliedly conferred hereunder to make such call, any
hindrance or delay in the exercise of any right or rights conferred upon
or reserved to the Trustee or to the Noteholders under any of the
provisions of this Indenture or of the Notes.
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ARTICLE 13
SUPPLEMENTAL INDENTURES
SECTION 13.1. PURPOSES FOR WHICH SUPPLEMENTAL INDENTURES MAY BE
EXECUTED BY COMPANY AND TRUSTEE. Without the consent of the holders of any
Notes, the Company, when authorized by a Certified Resolution of its Board
of Directors, and the Trustee may at any time and from time to time, enter
into any indenture or indentures supplemental hereto, in form satisfactory
to the Trustee, for one or more of the following purposes:
(A) To evidence the succession of another corporation to
the Company, or successive successions, and the assumption by the
successor corporation of the covenants, agreements and obligations of the
Company pursuant to ARTICLE 9 hereof;
(B) To add to the covenants of the Company such further
covenants for the protection of the Noteholders, to insure the enforcement
of the remedies of the Trustee and Noteholders upon an Event of Default by
the Company, or to surrender any right or power herein conferred upon the
Company as the Board of Directors shall consider to be necessary for the
protection of the Noteholders, and to make the occurrence and continuance
of a default under any of such additional covenants a Default permitting
the enforcement of all or any of the several remedies provided in this
Indenture; provided, however, that in respect of any such additional
covenant, such Supplemental Indenture may provide for a particular period
of grace after default (which period may be shorter or longer than that
allowed in the case of other Defaults) or may provide for an immediate
enforcement of said remedy or remedies upon such default or may limit the
remedies available to the Trustee upon such default or may authorize the
holders of not less than a majority in aggregate principal amount of the
Outstanding Notes to waive such default and prescribe limitations on such
rights of waiver; or
(C) To cure any ambiguity or to correct or supplement any
provision contained in this Indenture which may be inconsistent with any
other provision contained herein or in any Supplemental Indenture, or to
make such other provisions in regard to matters or questions arising under
this Indenture as shall not be inconsistent with the provisions and
purposes of this Indenture, provided any such action shall not adversely
affect the interest of the Noteholders.
Nothing contained in this ARTICLE 13 shall affect or limit
the right or obligation of the Company to execute and deliver to the
Trustee any instrument of further assurance or other instrument which
elsewhere in this Indenture it is provided shall be delivered to the
Trustee.
The Trustee is hereby authorized and directed to join with
the Company in the execution of any such Supplemental Indenture, to make
any further appropriate agreements and stipulations which may be herein
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contained and to accept the conveyance, transfer and assignment of any
property thereunder, but the Trustee shall not be obligated to enter into
any such Supplemental Indenture which, in its opinion, does not afford
adequate protection to the Trustee or adversely affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise or
adversely affects the interests of the Noteholders.
SECTION 13.2. MODIFICATION OF INDENTURE BY WRITTEN CONSENT OF
NOTEHOLDERS. With the consent (evidenced as provided in ARTICLE 12 of the
holders of not less than sixty-six and two-thirds percent (66-2/3%) in
aggregate principal amount of the Notes then Outstanding, by Act of said
holders delivered to the Company and the Trustee, the Company (when
authorized by a Certified Resolution) and the Trustee at any time and from
time to time, by entering into an indenture or indentures supplemental
hereto, may modify, alter, add to or eliminate in any manner (with the
approval of any governmental agency if required by law) any provisions of
this Indenture or the rights of the Noteholders or the rights and
obligations of the Company; provided, however, that no such Supplemental
Indenture shall, without the consent of the holder of each Outstanding
Note affected thereby:
(A) change the Stated Maturity of the principal of, or any
installment of interest on, any Note, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon
redemption thereof, or the coin or currency in which, any Note or the
interest thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof
(or, in the case of redemption, on or after the Redemption Date), or
impair the right to require redemption as set forth in SECTION 6.5, or
(B) reduce the percentage(s) of the aggregate principal
amount of Outstanding Notes, the consent of the holders of which is
required for any such Supplemental Indenture, or the consent of whose
holders is required for any waiver (of compliance with certain provisions
of this Indenture or certain Defaults hereunder and their consequences)
provided for in this Indenture, or
(C) modify any of the provisions of this SECTION 13.2 or
SECTION 7.16, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the holder of each Note affected thereby.
Notes shall be deemed to be "affected" by a Supplemental
Indenture, if such Supplemental Indenture adversely affects or diminishes
the rights of holders thereof against the Company or against the property
of the Company. The Trustee may in the exercise of its discretion, subject
to SECTION 10.2, determine whether or not any Notes would be affected by
any Supplemental Indenture and any such determination shall be
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conclusive upon the holders of all Notes, whether theretofore or
thereafter authenticated and delivered hereunder.
It shall not be necessary for any Act of Noteholders under
this SECTION 13.2 to approve the particular form of any proposed
Supplemental Indenture, but it shall be sufficient if such Act shall
approve the substance thereof.
Any Supplemental Indenture authorized by the provisions of
this SECTION 13.2 shall be executed by the Company and the Trustee in
accordance with the terms of SECTION 13.3.
Promptly after the execution by the Company and the Trustee
of any Supplemental Indenture pursuant to the provisions of SECTION 13.3,
the Company shall mail to the holders of the Notes at their last addresses
as they shall appear on the Note Register of the Company a notice setting
forth in general terms the substance of such Supplemental Indenture. Any
failure of the Company to mail such notice, or any defect therein, shall
not, however, in any way impair or affect the validity of any such
Supplemental Indenture.
SECTION 13.3. REQUIREMENTS FOR EXECUTION; DUTIES AND IMMUNITIES OF
TRUSTEE. Prior to the execution of any Supplemental Indenture, the Trustee
shall receive a Company Request, accompanied by a Certified Resolution
authorizing the execution of any Supplemental Indenture pursuant to
SECTION 13.1 or SECTION 13.2, and, if pursuant to SECTION 13.2, evidence
filed with the Trustee of the Act of Noteholders as aforesaid.
In executing, or accepting the additional trusts created
by, any Supplemental Indenture permitted by this Article or the
modifications thereby of the trusts created by this Indenture, the Trustee
shall be entitled to receive, and subject to SECTION 10.2 shall be fully
protected in relying upon, an Opinion of Counsel stating that the
execution of such Supplemental Indenture is authorized or permitted by
this Indenture and stating such other matters as the Trustee may
reasonably request. The Trustee may, but shall not be obligated to, enter
into any such Supplemental Indenture which affects the Trustee's rights,
duties or immunities under this Indenture or otherwise.
SECTION 13.4. SUPPLEMENTAL INDENTURES PART OF INDENTURE. Upon the
execution of any Supplemental Indenture pursuant to the provisions of this
ARTICLE 13, this Indenture shall be, and shall be deemed to be, modified
and amended in accordance therewith and the respective rights,
limitations, duties and obligations under this Indenture of the Company,
the Trustee and the Noteholders, and each of them, shall thereafter be
determined, exercised and enforced hereunder, subject in all respects to
such modifications and amendments, and all the terms and conditions of any
such Supplemental Indenture shall be, and shall be deemed to be, part
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of the terms and conditions of this Indenture for any and all purposes, as
if originally contained herein.
SECTION 13.5. NOTES EXECUTED AFTER SUPPLEMENTAL INDENTURE TO BE
APPROVED BY TRUSTEE. Notes authenticated and delivered after the execution
of any Supplemental Indenture pursuant to the provisions of this ARTICLE
13 may, and shall if required by the Trustee, bear a notation in form
approved by the Trustee, as to any matter provided for in such
Supplemental Indenture. If the Company and the Trustee shall so determine,
new Notes modified so as to conform, in the opinion of the Trustee and the
Board of Directors of the Company, to any modification of this Indenture
contained in any such Supplemental Indenture, may be prepared by the
Company, authenticated by the Trustee and delivered without expense to the
holders of the Outstanding Notes, upon surrender of such Notes, the new
Notes so issued to be in an aggregate principal amount equal to the
aggregate principal amount of those so surrendered.
SECTION 13.6. SUPPLEMENTAL INDENTURES REQUIRED TO COMPLY WITH
TRUST INDENTURE ACT OF 1939. No Supplemental Indenture shall be entered
into pursuant to any authorization contained in this Indenture which shall
not comply with the provisions of the Trust Indenture Act of 1939 as then
in effect.
ARTICLE 14
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
SECTION 14.1. IMMUNITY OF CERTAIN PERSONS. No recourse for the
payment of the principal of or premium, if any, or interest on any Note,
or for any claim based thereon or otherwise in respect thereof, and no
recourse under or upon any obligation, covenant or agreement of the
Company, contained in this Indenture or in any Supplemental Indenture, or
in any Note, or because of the creation of any indebtedness represented
thereby, shall be had against any incorporator, stockholder, officer or
director, as such, past, present or future, of the Company or any
successor corporation, either directly or through the Company or any
successor corporation, whether by virtue of any constitution, statute or
rule of law, or by the enforcement of any assessment or penalty or
otherwise; it being expressly understood that all such liability is hereby
expressly waived and released as a condition of, and as a consideration
for, the execution of this Indenture and the issue of the Notes.
ARTICLE 15
MISCELLANEOUS
SECTION 15.1. BENEFITS RESTRICTED TO PARTIES AND TO HOLDERS
OF NOTES. Except as provided herein, nothing in this Indenture,
expressed or implied, is intended, or shall be construed, to confer
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upon, or to give to, any person other than the parties hereto and the
holders of the Notes Outstanding hereunder any right, remedy, or claim
under or by reason of this Indenture or any covenant, condition,
stipulation, promise or agreement hereof, and all the covenants,
conditions, stipulations, promises and agreements contained in this
Indenture by and on behalf of the Company shall be for the sole and
exclusive benefit of the parties hereto, and of the holders of the Notes
Outstanding hereunder.
SECTION 15.2. DEPOSITS FOR NOTES NOT CLAIMED FOR SPECIFIED PERIOD
TO BE RETURNED TO COMPANY ON DEMAND. Any moneys deposited with the Trustee
or any Paying Agent, or then held by the Company, in trust for the payment
of the principal of, and premium, if any, or interest on any Note and
remaining unclaimed for six (6) years after the date upon which the
principal of and premium, if any, or interest on such Notes shall have
become due and payable, shall be paid to the Company upon Company Request,
or, if then held by the Company, shall be discharged from such trust; and
the holder shall thereafter, as an unsecured general creditor, be entitled
to look only to the Company for payment thereof, and all liability of the
Trustee or any Paying Agent with respect to such trust money, and all
liability of the Company, as trustee thereof, shall thereupon cease;
provided, however, that, before being required to make any such payment to
the Company, the Trustee, or any Paying Agent, may, at the expense of the
Company, cause to be published once in a Daily Newspaper in such areas as
the Trustee, or any Paying Agent, as the case may be, may deem necessary a
notice that such moneys remain unclaimed and that, after a date named in
said notice, the balance of such moneys then unclaimed will be returned to
the Company.
SECTION 15.3. FORMAL REQUIREMENTS OF CERTIFICATES AND
OPINIONS HEREUNDER.
(A) Each certificate or opinion which is specifically
required by the provisions of this Indenture to be delivered to the
Trustee with respect to compliance with a condition or covenant herein
contained shall include (1) a statement that each person signing such
certificate or opinion has read such covenant or condition; (2) a brief
statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or
opinions are based; (3) a statement that, in the opinion of each such
person, he has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and (4) a statement as to
whether or not in the opinion of each such person such condition or
covenant has been complied with.
(B) Every request or Application by the Company for action
by the Trustee shall be accompanied by an Officers' Certificate stating
that all conditions precedent, if any, to such action, provided for in this
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Indenture (including any covenants compliance with which constitutes a
condition precedent) have been complied with and an Opinion of Counsel
stating that in the opinion of such counsel all conditions precedent, if
any, to such action, provided for in this Indenture (including any
covenants compliance with which constitutes a condition precedent) have
been complied with, except that in the case of any such request or
Application as to which the furnishing of such documents is specifically
required by any provision of this Indenture relating to such particular
request or Application, no additional certificate or opinion need be
furnished.
(C) In any case where several matters are required to be
certified by, or covered by an opinion of, any specified person, it is not
necessary that all such matters be certified by, or covered by the opinion
of, only one such person, or that they be so certified or covered by only
one document, but one such person may certify or give an opinion with
respect to some matters and one or more other such persons as to other
matters, and any such person may certify or give an opinion as to such
matters in one or several documents.
SECTION 15.4. EVIDENCE OF ACT OF THE NOTEHOLDERS. Any request,
demand, authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be given or taken by Noteholders may be
embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Noteholders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Trustee, and, where it is hereby expressly required, to
the Company. Such instrument or instruments (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the
"Act" of the Noteholders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such
agent, shall be sufficient for any purpose of this Indenture and (subject
to SECTION 10.2) conclusive in favor of the Trustee and the Company, if
made in the manner provided in this Section.
The fact and date of the execution by any person of any
such instrument or writing may be proved by the affidavit of a witness of
such execution or by the certificate of any notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the
execution thereof. Where such execution is by an officer of a corporation
or a member of a partnership, on behalf of such corporation or
partnership, or by a fiduciary, such certificate or affidavit shall also
constitute sufficient proof of his authority. The fact and date of the
execution of any such instrument or writing, or the authority of the
person executing the same, may also be proved in any other manner which
the Trustee deems sufficient.
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Any request, demand, authorization, direction, notice,
consent, waiver or other action by the holder of any Note shall bind every
future holder to the same Note and the holder of every Note issued upon
the transfer thereof or in exchange therefor or in lieu thereof, in
respect of anything done or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is
made upon such Note.
SECTION 15.5. PARTIES TO INCLUDE SUCCESSORS AND ASSIGNS. Subject
to the provisions of ARTICLES 9 and 10 hereof, whenever in this Indenture
any of the parties hereto is named or referred to, such name or reference
shall be deemed to include the successors or assigns of such party, and
all the covenants and agreements in this Indenture contained by or on
behalf of the Company or by or on behalf of the Trustee shall bind and
inure to the benefit of the respective successors and assigns of such
parties whether so expressed or not.
SECTION 15.6. IN EVENT OF CONFLICT WITH TRUST INDENTURE ACT,
PROVISIONS THEREIN TO CONTROL. If any provision of this Indenture limits,
qualifies, or conflicts with another provision of this Indenture required
to be included herein by any of the provisions of the Trust Indenture Act
such required provision shall control. Provisions required by said Trust
Indenture Act to be included herein which are not included herein are
hereby incorporated herein by reference to said Trust Indenture Act.
SECTION 15.7. REQUEST, NOTICES, ETC. TO TRUSTEE. Any
request, demand, authorization, direction, notice, consent,
waiver or Act of the Noteholders or other document provided or
permitted by this Indenture to be made upon, given, or furnished
to, or filed with:
(A) the Trustee by any Noteholder or by the Company shall
be sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Main Office, or
(B) the Company by the Trustee or by any Noteholders shall
be sufficient for every purpose hereunder (except as herein otherwise
provided) if in writing and mailed, first-class, postage prepaid, to the
Company addressed to it at 12750 High Bluff Drive, Suite 320, San Diego,
California 92130, or at any other address previously furnished in writing
to the Trustee by the Company.
SECTION 15.8. MANNER OF NOTICE. Where this Indenture provides for
notice to Noteholders of any event, such notice shall be sufficiently
given (unless otherwise herein expressly provided) if in writing and
mailed, first-class, postage prepaid, to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than
the latest date, and not earlier than the earliest date, prescribed for
the giving of such notice. In any case where notice to Noteholders is
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given by mail, neither the failure to mail such notice, nor any defect in
any notice so mailed, to any particular Noteholder shall affect the
sufficiency of such notice with respect to other Noteholders, and any
notice which is mailed in the manner herein provided shall be conclusively
presumed to have been duly given.
Where this Indenture provides for notice in any manner,
such notice may be waived in writing by the person entitled to receive
such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Noteholders shall be
filed with the Trustee, but such filing shall not be condition precedent
to the validity of any action taken in reliance upon such waiver.
In case, by reason of the suspension of regular mail
service as a result of a strike, work stoppage or similar activity, it
shall be impractical to mail notice of any event to Noteholders when such
notice is required to be given pursuant to any provision of this
Indenture, then any manner of giving such notice as shall be satisfactory
to the Trustee shall be deemed to be a sufficient giving of such notice.
SECTION 15.9. SEVERABILITY. In case any provision in this
Indenture or in the Notes shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall
not in any way be affected or impaired thereby.
SECTION 15.10. PAYMENTS DUE ON DAYS WHEN BANKS CLOSED. In any case
where the date of any Interest Payment Date or Redemption Date, or the
Stated Maturity of any Note, or any date on which any Defaulted Interest
is proposed to be paid or any date on which any other payment is to be
made or any action is to be taken shall not be a business day, then
(notwithstanding any other provision of the Notes or this Indenture)
payment of the principal of, and premium, if any, or interest on, any
Notes or other payment or action need not be made or taken on such date,
but may be made or taken on the next succeeding business day with the same
force and effect as if made on the nominal date of any such interest
Payment Date or Redemption Date or Stated Maturity or date for the payment
of Defaulted Interest or date for any other payment or action, as the case
may be, and no interest shall accrue for the period from and after any
such nominal date.
SECTION 15.11. BACKUP WITHHOLDING FORMS. The Company shall provide
the Trustee with Backup Withholding Forms prescribed by the Internal
Revenue Service and shall indemnity the Trustee for any penalties,
expenses, costs and liabilities assessed against the Trustee for using
improper forms.
SECTION 15.12. TITLES OF ARTICLES OF THIS INDENTURE NOT PART
THEREOF. The titles of the several Articles of this Indenture and the
table of contents shall not be deemed to be any part hereof.
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SECTION 15.13. EXECUTION IN COUNTERPARTS. This Indenture is being
executed in several counterparts, each of which shall for all purposes be
deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument.
SECTION 15.14. GOVERNING LAW. This Indenture and each Note issued
hereunder shall be governed by the laws of the State of California as to
all matters affecting the duties, liabilities, privileges, rights and
obligations of the Noteholders, the Company and the Trustee and any agents
of the foregoing, including but not limited to, matters of validity,
construction, effect and performance.
IN WITNESS WHEREOF, ACC CONSUMER FINANCE CORPORATION has
caused its name to be hereunto affixed, and this instrument to be signed
by one of its Executive Officers and its corporate seal to be affixed
hereto, and the same to be attested by its Secretary or an Assistant
Secretary; and NORWEST BANK MINNESOTA, N.A., in token of its acceptance of
the trust hereby created, has caused its corporate name to be hereunto
affixed, and this instrument to be signed and sealed by one of its Vice
Presidents and its corporate seal to be attested by one of its Assistant
Secretaries, as of the day and year first written above.
ACC CONSUMER FINANCE CORPORATION
ATTEST:
By:___________________________________
Chairman of the Board,
President or Vice President
______________________________
Assistant Secretary
[Seal]
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NORWEST BANK MINNESOTA, N.A.
ATTEST: By:___________________________________
Authorized Officer
______________________________
Attesting Officer
[Seal]
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EXHIBIT 10.50
POOLING AND SERVICING AGREEMENT
RELATING TO
ACC AUTO GRANTOR TRUST 1996-B
among
CARGILL FINANCIAL SERVICES CORPORATION
as Sponsor
ACC RECEIVABLES CORP.
as Seller
ACC CONSUMER FINANCE CORPORATION
as Servicer
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
as Trustee, Backup Servicer and Collateral Agent
----------------------
Dated as of June 1, 1996
----------------------
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TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS............................................ 1
Section 1.1. Definitions.................................... 1
Section 1.2. Usage of Terms................................. 19
Section 1.3. Calculations................................... 20
Section 1.4. Section References............................. 20
Section 1.5. Action by or Consent of Certificateholders..... 20
Section 1.6. No Recourse.................................... 20
Section 1.7. Material Adverse Effect........................ 20
ARTICLE II CREATION OF TRUST...................................... 21
Section 2.1. Creation of Trust.............................. 21
ARTICLE III CONVEYANCE OF RECEIVABLES; ACCEPTANCE BY
TRUSTEE; ORIGINAL ISSUANCE OF CERTIFICATES............. 21
Section 3.1. Conveyance of Receivables...................... 21
Section 3.2. [Reserved.].................................... 22
Section 3.3. Custody of Receivable Files.................... 22
Section 3.4. Conditions to Acceptance by Trustee............ 23
Section 3.5. Representations and Warranties of Seller....... 23
Section 3.6. Representations and Warranties of Sponsor...... 31
Section 3.7. Repurchase of Receivables Upon Breach of
Representation and Warranty.................... 32
Section 3.8. Nonpetition Covenant........................... 33
Section 3.9. Collecting Lien Certificates................... 33
ARTICLE IV ADMINISTRATION AND SERVICING OF RECEIVABLES............ 34
Section 4.1. Duties of the Servicer......................... 34
Section 4.2. Collection of Receivable Payments;
Modification and Amendment of Receivables;
Lockbox Agreements............................. 35
Section 4.3. Realization Upon Receivables................... 38
Section 4.4. Insurance...................................... 39
Section 4.5. Maintenance of Security Interests in
Vehicles....................................... 39
Section 4.6. Covenants, Representations and Warranties of
Servicer....................................... 41
Section 4.7. Purchase of Receivables Upon Breach of
Covenant or Representation and Warranty.........43
Section 4.8. Total Servicing Fee; Payment of Compensating
Interest; Payment of Certain Expenses by
Servicer....................................... 44
Section 4.9. Servicer's Certificate......................... 45
Section 4.10. Annual Statement as to Compliance; Notice
of Servicer Termination Event.................. 45
Section 4.11. Annual Independent Accountants' Report......... 46
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Page
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Section 4.12. Access to Certain Documentation and
Information Regarding Receivables............. 47
Section 4.13. Monthly Tape.................................. 47
Section 4.14. Retention and Termination of Servicer......... 48
Section 4.15. Fidelity Bond................................. 49
ARTICLE V DISTRIBUTIONS; STATEMENTS TO
CERTIFICATEHOLDERS.................................... 49
Section 5.1. Accounts...................................... 49
Section 5.2. Collections................................... 50
Section 5.3. Application of Collections.................... 51
Section 5.4. Additional Deposits........................... 52
Section 5.5. Distributions................................. 52
Section 5.6. [Reserved..................................... 54
Section 5.7. Net Deposits.................................. 54
Section 5.8. Statements to Certificateholders.............. 55
Section 5.9. Optional Deposits by the Certificate
Insurer....................................... 56
ARTICLE VI THE SPREAD ACCOUNT AND THE POLICY..................... 56
Section 6.1. Spread Account................................ 56
Section 6.2. Policy........................................ 56
Section 6.3. Withdrawals from Spread Account............... 57
Section 6.4. Claims Under Policy........................... 57
Section 6.5. Preference Claims; Direction of Proceedings... 58
Section 6.6. Surrender of Policy........................... 59
ARTICLE VII THE CERTIFICATES...................................... 59
Section 7.1. The Certificates.............................. 59
Section 7.2. Authentication of Certificates................ 61
Section 7.3. Registration of Transfer and Exchange
of Certificates............................... 62
Section 7.4. Mutilated, Destroyed, Lost or Stolen
Certificates.................................. 64
Section 7.5. Persons Deemed Owners......................... 65
Section 7.6. Access to List of Certificateholders'
Names and Addresses........................... 65
Section 7.7. Maintenance of Office or Agency............... 65
ARTICLE VIII THE SELLER............................................ 66
Section 8.1. Liability of Seller........................... 66
Section 8.2. Merger or Consolidation of, or Assumption
of the Obligations of, Seller; Amendment
of Certificate of Incorporation............... 66
Section 8.3. Limitation on Liability of Seller and Others.. 67
Section 8.4. Seller May Own Certificates................... 67
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Page
----
ARTICLE IX THE SERVICER........................................... 68
Section 9.1. Liability of Servicer; Indemnities............. 68
Section 9.2. Merger or Consolidation of, or Assumption
of the Obligations of, the Servicer or
Backup Servicer................................ 69
Section 9.3. Limitation on Liability of Servicer, Backup
Servicer and Others............................ 70
Section 9.4. Delegation of Duties........................... 71
Section 9.5. Servicer and Backup Servicer Not to Resign..... 71
ARTICLE X SERVICER TERMINATION EVENTS............................ 72
Section 10.1. Servicer Termination Event..................... 72
Section 10.2. Consequences of a Servicer Termination Event... 74
Section 10.3. Appointment of Successor....................... 75
Section 10.4. Notification to Certificateholders............. 76
Section 10.5. Waiver of Past Defaults........................ 76
ARTICLE XI THE TRUSTEE............................................ 76
Section 11.1. Duties of Trustee.............................. 76
Section 11.2. Trustee's Assignment of Administrative
Receivables and Warranty Receivables........... 78
Section 11.3. Certain Matters Affecting the Trustee.......... 78
Section 11.4. Trustee Not Liable for Certificates or
Receivables.................................... 80
Section 11.5. Trustee May Own Certificates................... 80
Section 11.6. Trustee's Fees and Expenses; Indemnification... 81
Section 11.7. Eligibility Requirements for Trustee........... 81
Section 11.8. Resignation or Removal of Trustee.............. 81
Section 11.9. Successor Trustee.............................. 82
Section 11.10. Merger or Consolidation of Trustee............. 83
Section 11.11. Appointment of Co-Trustee or Separate Trustee.. 83
Section 11.12. Representations and Warranties of Trustee...... 85
Section 11.13. Tax Returns.................................... 85
Section 11.14. Trustee May Enforce Claims Without Possession
of Certificates................................ 86
Section 11.15. Suit for Enforcement........................... 86
Section 11.16. Rights to Direct Trustee....................... 86
ARTICLE XII TERMINATION............................................ 87
Section 12.1. Termination of the Trust....................... 87
Section 12.2. Optional Purchase of All Receivables........... 88
ARTICLE XIII MISCELLANEOUS PROVISIONS............................... 88
Section 13.1. Amendment...................................... 88
Section 13.2. Protection of Title to Trust................... 89
Section 13.3. Limitation on Rights of Certificateholders..... 91
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Page
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Section 13.4. Governing Law.................................. 92
Section 13.5. Severability of Provisions..................... 93
Section 13.6. Assignment..................................... 93
Section 13.7. Certificates Nonassessable and Fully Paid...... 93
Section 13.8. Third-Party Beneficiaries...................... 93
Section 13.9. Financial Security as Controlling Party........ 93
Section 13.10. Counterparts................................... 94
Section 13.11. Notices........................................ 94
Section 13.12. Successors and Assigns......................... 94
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SCHEDULES
Schedule A -- Schedule of Receivables
EXHIBITS
Exhibit A -- Form of Class A Certificate
Exhibit B -- Form of Class B Certificate
Exhibit C -- Form of Class C Certificate
Exhibit D -- Form of Series 1996-B Supplement to the Master
Spread Account Agreement
Exhibit E -- Form of Servicer's Certificate
Exhibit F -- Form of Policy
Exhibit G -- Form of Representation Letter -- Initial Purchaser
Exhibit H -- Form of Representation Letter
Exhibit I -- Form of Purchase Agreement and Assignment
Exhibit J -- Servicer's Request for Release
Exhibit K -- Form of Fee Letter
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THIS POOLING AND SERVICING AGREEMENT ("this Agreement"), dated as
of June 1, 1996, is made with respect to the formation of the ACC Auto Grantor
Trust 1996-B, among Cargill Financial Services Corporation, a Delaware
corporation, as Sponsor (the "Sponsor"), ACC Receivables Corp., a Delaware
corporation, as Seller (the "Seller"), ACC Consumer Finance Corporation, a
Delaware corporation, (previously named American Credit Corporation) ("ACC"),
(in its capacity as Servicer, the "Servicer") and Norwest Bank Minnesota,
National Association, a national banking association, as Trustee (in such
capacity, the "Trustee"), as Backup Servicer (in such capacity, the "Backup
Servicer") and as Collateral Agent (in such capacity, the "Collateral Agent").
WHEREAS, the Seller wishes to establish a trust and provide for
the allocation and sale of the beneficial interests therein and the maintenance
and distribution of the trust estate;
WHEREAS, the Servicer has agreed to service the Receivables,
which constitute the principal assets of the trust estate;
WHEREAS, all things necessary to make the Certificates, when
executed and authenticated by the Trustee, valid instruments, and to make this
Agreement a valid agreement, in accordance with their and its terms, have been
done; and
WHEREAS, Norwest Bank Minnesota, National Association is willing
to serve in the capacity of Trustee, Backup Servicer and Collateral Agent
hereunder.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Sponsor, the Seller, the Servicer, the Trustee,
the Backup Servicer and Collateral Agent hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. All terms defined in the Spread Account
Agreement (as defined below) shall have the same meaning in this Agreement.
Whenever capitalized and used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the following
meanings:
ACC: shall have the meaning set forth in the first paragraph of
this Agreement.
Accountants' Report: The report of a firm of nationally
recognized independent accountants described in Section 4.11.
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Administrative Receivable: With respect to any Collection Period,
a Receivable which the Servicer is required to purchase pursuant to Section 4.7.
Affiliate: With respect to any Person, any other Person directly
or indirectly controlling, controlled by, or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person, means the power to
direct the management and voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
Aggregate Principal Balance: With respect to any Determination
Date, the sum of the Principal Balances (computed as of the related Record Date)
for all Receivables (other than (i) any Receivable that became a Liquidated
Receivable during the related Collection Period and (ii) any Receivable that
became a Purchased Receivable on the immediately preceding Deposit Date).
American Credit Corporation: American Credit Corporation, a
California corporation, the corporate predecessor to ACC, and which changed its
name to ACC Consumer Finance Corporation, a California corporation and was
merged into ACC on November 9, 1995.
Amount Available: With respect to any Distribution Date, the sum
of (i) the Available Funds for the immediately preceding Determination Date,
plus (ii) the Deficiency Claim Amount, if any, received by the Trustee with
respect to such Distribution Date, plus (iii) the Policy Claim Amount, if any,
received by the Trustee with respect to such Distribution Date.
Amount Financed: With respect to a Receivable, the aggregate
amount advanced under such Receivable toward the purchase price of the Financed
Vehicle and related costs, including amounts advanced in respect of accessories,
insurance premiums, service and warranty contracts, other items customarily
financed as part of retail automobile installment sale contracts or promissory
notes, and related costs.
Annual Percentage Rate or APR: With respect to a Receivable, the
rate per annum of finance charges stated in such Receivable as the "annual
percentage rate" (within the meaning of the Federal Truth-in-Lending Act). If
after the Closing Date, the rate per annum with respect to a Receivable as of
the Closing Date is reduced as a result of (i) an insolvency proceeding
involving the Obligor or (ii) pursuant to the Soldiers' and Sailors' Civil
Relief Act of 1940, Annual Percentage Rate or APR shall refer to such reduced
rate.
Annual Trustee's Fee: Shall have the meaning set forth in Section
11.6.
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Available Funds: With respect to any Determination Date, the sum
of (i) the Collected Funds for such Determination Date, (ii) all Purchase
Amounts deposited in the Collection Account on the related Deposit Date and
(iii) any Compensating Interest actually deposited by the Servicer on such
Determination Date.
Average Delinquency Ratio: With respect to any Distribution Date,
the arithmetic average of the Delinquency Ratio for such Distribution Date and
the Delinquency Ratios for the two immediately preceding Distribution Dates.
Backup Servicer: Shall have the meaning set forth in the first
paragraph of this Agreement.
Basic Servicing Fee: With respect to any Collection Period, the
fee payable to the Servicer for services rendered during such Collection Period,
which shall be equal to one-twelfth of the Basic Servicing Fee Rate multiplied
by the sum of the Principal Balances for all Receivables as of the first day of
the Collection Period.
Basic Servicing Fee Rate: 3.00% per annum, payable monthly at
one-twelfth of the annual rate.
Business Day: Any day other than a Saturday, Sunday, legal
holiday or other day on which commercial banking institutions or trust companies
in California, Minnesota, New York or any other location of any successor
Servicer, successor Trustee or successor Collateral Agent are authorized or
obligated by law, executive order or governmental decree to be closed.
Calendar Quarter: The three-month period ending on the last day
of March, June, September or December.
Certificate: Any one of the Class A Certificates, Class B
Certificates or Class C Certificates executed by the Trustee on behalf of the
Trust in substantially the form set forth in Exhibit A, B or C, respectively.
Certificate Insurer: Financial Security Assurance Inc., a
monoline insurance company incorporated under the laws of the State of New York,
or any successor thereto, as issuer of the Policy.
Certificate Majority: Holders of Class A Certificates and Class B
Certificates representing a majority of the sum of the Class A Certificate
Balance and the Class B Certificate Balance, or if there are no Class A
Certificates outstanding, holders of Class B Certificates representing a
majority of the Class B Certificate Balance.
Certificateholder or Holder: The Person in whose name a
Certificate is registered in the Certificate Register.
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Certificate Register and Certificate Registrar: The register
maintained and the registrar appointed pursuant to Section 7.3.
Class: A class of Certificates.
Class A Certificate: Any one of the Certificates executed by the
Trust and authenticated by the Trustee in substantially the form set forth in
Exhibit A hereto.
Class A Certificate Balance: Initially, the Class A Percentage of
the Cut-off Date Principal Balance and, thereafter, the initial Class A
Certificate Balance reduced by all amounts distributed to the Class A
Certificateholders and allocable to principal.
Class A Certificate Factor: As of any Distribution Date, a
seven-digit decimal figure equal to the Class A Certificate Balance as of the
close of business on such Distribution Date divided by the initial Class A
Certificate Balance as of the Cut-off Date.
Class A Distributable Amount: On any Distribution Date, the sum
of the Class A Principal Distributable Amount and the Class A Interest
Distributable Amount.
Class A Interest Carryover Shortfall: As of the close of business
on any Distribution Date, the excess of the Class A Interest Distributable
Amount for such Distribution Date plus any outstanding Class A Interest
Carryover Shortfall from the preceding Distribution Date plus interest on such
outstanding Class A Interest Carryover Shortfall, to the extent permitted by
law, at the Class A Pass-Through Rate from such preceding Distribution Date
through the current Distribution Date, over the amount of interest that the
holders of the Class A Certificates actually received on such current Distribu
tion Date.
Class A Interest Distributable Amount: With respect to any
Distribution Date, the sum of (i) for the initial Distribution Date forty-four
(44) days of interest and for any Distribution Date thereafter, thirty (30) days
of interest, in any case calculated on the basis of a 360-day year consisting of
twelve 30-day months, at the Class A Pass-Through Rate on the Class A
Certificate Balance as of the close of business on the last day of the preceding
Collection Period and (ii) any outstanding Class A Interest Carryover Shortfall.
Class A Pass-Through Rate: 6.90% per annum, calculated on the
basis of a 360-day year consisting of twelve 30-day months.
Class A Percentage: 95%.
Class A Principal Carryover Shortfall: As of the close of
business on any Distribution Date, the excess of the Class A Principal
Distributable Amount plus any outstanding Class A Principal Carryover Shortfall
from the preceding Distribution Date over the amount of principal that
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the holders of the Class A Certificates actually received on such current
Distribution Date.
Class A Principal Distributable Amount: With respect to any
Distribution Date other than the Final Scheduled Distribution Date, without
duplication, the sum of the Class A Percentage of (i) the principal portion of
all Collected Funds (including the principal portion of all prepayments)
received during the immediately preceding Collection Period (other than
Liquidated Receivables and Purchased Receivables), (ii) the Principal Balance of
all Receivables that became Liquidated Receivables during the related Collection
Period (other than Purchased Receivables), (iii) the principal portion of the
Purchase Amount of all Receivables that became Purchased Receivables as of the
immediately preceding Record Date, plus, in the sole discretion of the
Certificate Insurer, the Principal Balance allocable to the Class A Certificates
as of the immediately preceding Record Date of all the Receivables that were
required to be purchased pursuant to Sections 3.7 and 4.7 as of the immediately
preceding Record Date but were not so purchased and (iv) the aggregate amount of
Cram Down Losses that shall have occurred during the related Collection Period.
With respect to the Final Scheduled Distribution Date, the amount described in
the preceding paragraph or, if greater, the amount necessary to reduce the Class
A Certificate Balance to zero on such Final Scheduled Distribution Date.
Class B Certificate: Any one of the Certificates executed by the
Trust and authenticated by the Trustee in substantially the form set forth in
Exhibit B hereto.
Class B Certificate Balance: Initially, the Class B Percentage of
the Cut-off Date Principal Balance and, as of any date thereafter, the initial
Class B Certificate Balance reduced by (i) all amounts previously distributed to
Class B Certificateholders and allocable to principal and (ii) on any
Distribution Date on which (x) the sum of the Class A Certificate Balance and
the Class B Certificate Balance as of such Distribution Date and after taking
into account all distributions to be made on such Distribution Date exceeds (y)
the Pool Balance as of the close of business on the last day of the immediately
preceding Collection Period, the amount of such excess.
Class B Certificate Factor: As of any Distribution Date, a
seven-digit decimal figure equal to the Class B Certificate Balance as of the
close of business on such Distribution Date divided by the initial Class B
Certificate Balance.
Class B Distributable Amount: On any Distribution Date, the sum
of the Class B Principal Distributable Amount and the Class B Interest
Distributable Amount.
Class B Interest Carryover Shortfall: As of the close of business
on any Distribution Date, the excess of the Class B Interest Distributable
Amount for such Distribution Date plus any outstanding Class B Interest
Carryover Shortfall from the preceding Distribution Date plus interest on such
outstanding Class B Interest Carryover Shortfall, to the extent permitted by
law, at the Class B Pass-Through Rate from such preceding Distribution Date
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through the current Distribution Date, over the amount of inter est that the
holders of the Class B Certificates actually received on such current
Distribution Date.
Class B Interest Distributable Amount: With respect to any
Distribution Date, the sum of (i) for the initial Distribution Date forty-four
(44) days of interest and for any Distribution Date thereafter, thirty (30) days
of interest, in any case calculated on the basis of a 360-day year consisting of
twelve 30-day months, at the Class B Pass-Through Rate on the Class B
Certificate Balance as of the close of business on the last day of the preceding
Collection Period and (ii) any outstanding Class B Interest Carryover Shortfall.
Class B Pass-Through Rate: 6.90% per annum, calculated on the
basis of a 360-day year consisting of twelve 30-day months.
Class B Percentage: 5%.
Class B Principal Carryover Shortfall: As of the close of
business on any Distribution Date, the excess of the Class B Principal
Distributable Amount plus any out standing Class B Principal Carryover Shortfall
from the preceding Distribution Date over the amount of principal that the
holders of the Class B Certificates actually received on such current
Distribution Date.
Class B Principal Distributable Amount: With respect to any
Distribution Date, without duplication, the sum of the Class B Percentage of:
(i) the principal portion of all Collected Funds (including the principal
portion of all prepayments) received during the immediately preceding Collection
Period (other than Liquidated Receivables and Purchased Receivables), (ii) the
Principal Balance of all Receivables that became Liquidated Receivables during
the related Collection Period (other than Purchased Receivables), (iii) the
principal portion of the Purchase Amount of all Receivables that became
Purchased Receivables as of the immediately preceding Record Date, and (iv) the
aggregate amount of Cram Down Losses that shall have occurred during the related
Collection Period.
Class C Certificate: Any one of the Certificates executed by the
Trust and authenticated by the Trustee in substantially the form set forth in
Exhibit C.
Closing Date: June 20, 1996.
Collateral Agent: The Collateral Agent named in the Spread
Account Agreement, and any successor thereto pursuant to the terms of the Spread
Account Agreement.
Collateral Insurance: Shall have the meaning set forth in Section
4.4(c).
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Collected Funds: With respect to any Determination Date, the
amount of funds in the Collection Account representing collections on the
Receivables during the related Collection Period, including all Liquidation
Proceeds collected during the related Collection Period (but excluding any
Purchase Amounts).
Collection Account: The account designated as the Collection
Account in, and which is established and maintained pursuant to, Section 5.1(a).
Collection Period: With respect to a Determination Date or a
Distribution Date, the calendar month preceding the month in which such
Determination Date or Distribution Date occurs (such calendar month being
referred to as the "related" Collection Period with respect to such
Determination Date or Distribution Date). Any amount stated "as of the close of
business of the last day of a Collection Period" shall give effect to the
following calculations as determined as of the end of the day on such last day:
(i) all applications of collections, and (ii) all distributions.
Collection Records: All manually prepared or computer generated
records relating to collection efforts or payment histories with respect to the
Receivables.
Compensating Interest: Shall have the meaning set forth in
Section 4.8(b) hereof.
Computer Tape or Listing: The computer tape or listing generated
on behalf of the Seller which provides information relating to the Receivables
and which was used by the Seller and ACC in selecting the Receivables conveyed
to the Trust hereunder.
Corporate Trust Office: The principal office of the Trustee at
which at any particular time its corporate trust business shall be administered,
which office at the Closing Date is located at Sixth Street and Marquette
Avenue, Minneapolis, Minnesota 55479-0069, Attention: Corporate Trust
Department. The telecopy number for the Corporate Trust Office on the Closing
Date is (612) 667-9825.
Coupon Rate: With respect to any Receivable, the rate of interest
borne by such Receivable.
Cram Down Loss: With respect to a Receivable, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the amount owed on a Receivable or otherwise modifying or restructuring
the scheduled payments to be made on a Receivable, an amount equal to the excess
of the principal balance of such Receivable immediately prior to such order over
the principal balance of such Receivable as so reduced or the net present value
(using as the discount rate the higher of the APR on such Receivable or the rate
of interest, if any, specified by the court in such order) of the scheduled
payments as so modified or restructured. A "Cram Down Loss" shall be deemed to
have occurred on the date of issuance of such order.
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Credit Enhancement Fee: With respect to any Distribution Date,
the amount for deposit in the Spread Account pursuant to Section 5.5(b)(vi).
Cumulative Default Rate: Shall have the meaning set forth in the
Series 1996- B Supplement.
Cumulative Loss Rate: Shall have the meaning set forth in the
Series 1996-B Supplement.
Cut-off Date: The close of business on May 31, 1996.
Cut-off Date Principal Balance: $45,508,441.14.
Dealer: A seller of new or used automobiles or light trucks that
originated one or more of the Receivables and sold the respective Receivable,
directly or indirectly, to OFLA.
Dealer Agreement: An agreement by and among ACC (or American
Credit Corporation, as the case may be), OFL-A and a Dealer relating to the sale
of retail installment sale contracts and installment notes to OFL-A and all
documents and instruments relating thereto.
Dealer Assignment: With respect to a Receivable, the executed
assignment executed by a Dealer conveying such Receivable to OFL-A.
Dealer Underwriting Guide: means the underwriting manual used by
ACC in the purchase of Receivables as amended from time to time.
Defaulted Receivable: With respect to any Distribution Date, a
Receivable with respect to which: (i) ninety percent or more of a Scheduled
Payment is 120 or more days delinquent, (ii) the Servicer has repossessed the
related Financed Vehicle (and any applicable redemption period has expired) or
(iii) such Receivable is in default and the Servicer has determined in good
faith that payments thereunder are not likely to be resumed; provided, however,
that a Receivable shall not be a Defaulted Receivable if the Servicer has
determined in good faith that insurance proceeds with respect to such Receivable
are likely to be paid.
Deficiency Claim Amount: Shall have the meaning set forth in
Section 6.3(a).
Deficiency Claim Date: With respect to any Distribution Date, the
fourth Business Day immediately preceding such Distribution Date, provided,
however, that if the Servicer's certificate to be delivered pursuant to Section
4.9 is not delivered until the third Business Day immediately preceding such
Distribution Date, then the Deficiency Claim Date shall be the third Business
Day immediately preceding such Distribution Date.
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Deficiency Notice: Shall have the meaning set forth in Section
6.3(a).
Delinquency Ratio: With respect to any Distribution Date, a
fraction (a) the numerator of which is equal to the aggregate Principal Balance
(as of the related Record Date) of all Receivables that were 30 or more days
delinquent with respect to more than ninety percent of a Scheduled Payment and
(b) the denominator of which is equal to the aggregate Principal Balance of the
Receivables as of the related Record Date.
Deposit Date: With respect to any Collection Period, the Business
Day immediately preceding the related Determination Date.
Depository: The Depository Trust Company, 55 Water Street, New
York, New York 10041 and any successor Depository hereafter named.
Determination Date: With respect to a Collection Period, the 5th
Business Day prior to the related Distribution Date.
Direct Participant: A broker, dealer, bank or other financial
institution or other Person for whom from time to time the Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
Distribution Amount: With respect to a Distribution Date, the sum
of (i) the Available Funds for such Distribution Date, plus (ii) the Deficiency
Claim Amount, if any, received by the Trustee with respect to such Distribution
Date.
Distribution Date: With respect to a Collection Period, the 15th
day of the next succeeding calendar month, or if such 15th day is not a Business
Day, the next succeeding Business Day, commencing July 15, 1996.
Draw Date: With respect to any Distribution Date, the third
Business Day immediately preceding such Distribution Date.
Electronic Ledger: The electronic master record of the retail
installment sales contracts or installment loans of the Servicer.
Eligible Account: (i) A segregated trust account that is
maintained with a depository institution acceptable to the Certificate Insurer
(so long as an Insurer Default shall not have occurred and be continuing), or
(ii) a segregated direct deposit account maintained with a depository
institution or trust company organized under the laws of the United States of
America, or any of the States thereof, or the District of Columbia, having a
certificate of deposit, short term deposit or commercial paper rating of at
least A-1+ by Standard & Poor's and P-1 by Moody's and (so long as an Insurer
Default shall not have occurred and be continuing) acceptable to the Certificate
Insurer. In either case, such depository institution or trust company
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shall have been approved by the Controlling Party (as defined in the Spread
Account Agreement), acting in its discretion, by written notice to the
Collateral Agent.
Eligible Investments: Any one or more of the following types of
investments:
(i) (a) direct interest-bearing obligations of, and
interest-bearing obligations guaranteed as to timely payment of
principal and interest by, the United States or any agency or
instrumentality of the United States the obligations of which are backed
by the full faith and credit of the United States; and (b) direct
interest-bearing obligations of, and interest-bearing obligations
guaranteed as to timely payment of principal and interest by, the
Federal National Mortgage Association or the Federal Home Loan Mortgage
Corporation, but only if, at the time of investment, such obligations
are rated AAA by Standard & Poor's and Aaa by Moody's;
(ii) demand or time deposits in, certificates of deposit of,
or bankers' acceptances issued by any depository institution or trust
company organized under the laws of the United States or any State and
subject to supervision and examination by federal and/or State banking
authorities (including, if applicable, the Trustee or any agent of the
Trustee acting in their respective commercial capacities); provided that
the short-term unsecured debt obligations of such depository institution
or trust company at the time of such investment, or contractual
commitment providing for such investment, are rated AAA by Standard &
Poor's and Aaa by Moody's;
(iii) repurchase obligations pursuant to a written agreement
(1) with respect to any obligation described in clause (i) above, where
the Trustee has taken actual or constructive delivery of such obligation
in accordance with Section 5.1, and (2) entered into with a depository
institution or trust company organized under the laws of the United
States or any State thereof, the deposits of which are insured by the
Federal Deposit Insurance Corporation and the short-term unsecured debt
obligations of which are rated "A-1+" by Standard & Poor's and "P-1" by
Moody's (including, if applicable, the Trustee or any agent of the
Trustee acting in their respective commercial capacities);
(iv) securities bearing interest or sold at a discount issued
by any corporation incorporated under the laws of the United States or
any State whose long-term unsecured debt obligations are rated AAA by
Standard & Poor's and Aaa by Moody's at the time of such investment or
contractual commitment providing for such investment; provided, however,
that securities issued by any particular corporation will not be
Eligible Investments to the extent that an investment therein will cause
the then outstanding principal amount of securities issued by such
corporation and held as part of the Collection Account to exceed 10% of
the Eligible Investments held in the Collection Account (with Eligible
Investments held in the Collection Account valued at par);
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(v) commercial paper that (1) is payable in United States
dollars and (2) is rated AAA by Standard & Poor's and Aaa by Moody's;
(vi) any money market fund that (1) has been rated by one or
both of the Rating Agencies in its highest rating category (including
any designations of "plus" or "minus" and numerical gradations within
such rating category) for such money market funds and (2) has been
approved by the Certificate Insurer so long as no Insurer Default has
occurred, as an Eligible Investment; and
(vii) any other demand or time deposit, obligation, security
or investment as may be acceptable to the Certificate Insurer, as
evidenced by the prior written consent of the Certificate Insurer, as
may from time to time be confirmed in writing to the Trustee by the
Certificate Insurer.
Eligible Servicer: ACC, the Backup Servicer or another Person
which at the time of its appointment as Servicer, (i) is servicing a portfolio
of motor vehicle retail installment sales contracts and/or motor vehicle
installment loans, (ii) is legally qualified and has the capacity to service the
Receivables, (iii) has demonstrated the ability professionally and competently
to service a portfolio of motor vehicle retail installment sales contracts
and/or motor vehicle installment loans similar to the Receivables with
reasonable skill and care, and (iv) is qualified and entitled to use, pursuant
to a license or other written agreement, and agrees to maintain the
confidentiality of, the software which the Servicer uses in connection with
performing its duties and responsibilities under this Agreement or otherwise has
available software which is adequate to perform its duties and responsibilities
under this Agreement.
Exchange Act: the Securities Exchange Act of 1934, as amended.
Final Scheduled Distribution Date: August 15, 2001.
Financed Vehicle: A new or used automobile or light truck, van or
mini-van together with all accessories thereto, securing or purporting to secure
an Obligor's indebtedness under a Receivable.
Global Security: A Class A Certificate evidencing all or part of
an issuance of Class A Certificates, registered in the name of the Depository or
its nominee, and delivered to the Trustee as agent for the Depository and
bearing the legend prescribed in Section 7.3 of this Agreement.
Guaranteed Distributions: With respect to each Distribution Date,
the distribution to be made to Class A Certificateholders in an aggregate amount
equal to (i) the Class A Interest Distributable Amount and (ii) the Class A
Principal Distributable Amount each as due and payable on such Distribution
Date, in each case in accordance with the original terms of the Class A
Certificates when issued and without regard to any amendment or modification
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of the Class A Certificates or this Agreement which has not been consented
to by the Certificate Insurer; Guaranteed Distributions do not include (x)
any portion of the Class A Interest Distributable Amount due to Class A
Certificateholders because the appropriate notice and certificate for
payment in proper form was not timely received by the Certificate Insurer,
and (y) any portion of the Class A Interest Distributable Amount due to
Class A Certificateholders representing interest on any Class A Interest
Carryover Shortfall unless, in each case, the Certificate Insurer elects,
in its sole discretion, to pay such amount in whole or in part.
Independent Accountants: Shall have the meaning set forth in
Section 4.11(a).
Indirect Participant: Any financial institution for whom any
Direct Participant holds an interest in a Class A Certificate.
Insurance Agreement: The Insurance and Indemnity Agreement among
the Sponsor, the Certificate Insurer, the Seller and ACC.
Insurance Agreement Event of Default: An "Event of Default" as
defined in the related Insurance Agreement.
Insurance Policy: With respect to a Receivable, any insurance
policy (including the insurance policies described in Section 3.5(a)(xxiii))
benefiting the holder of the Receivable providing loss or physical damage,
credit life, credit disability, theft, mechanical breakdown or similar coverage
with respect to the Financed Vehicle or the Obligor.
Insurer Default: The occurrence and continuance of any of the
following events:
(a) the Certificate Insurer shall have failed to make a
payment required under the Policy in accordance with its terms;
(b) The Certificate Insurer shall have (i) filed a
petition or commenced any case or proceeding under any provision
or chapter of the United States Bankruptcy Code or any other
similar federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation or reorganization, (ii) made a
general assignment for the benefit of its creditors, or (iii) had
an order for relief entered against it under the United States
Bankruptcy Code or any other similar federal or state law
relating to insolvency, bankruptcy, rehabilitation, liquidation
or reorganization which is final and nonappealable; or
(c) a court of competent jurisdiction, the New York
Department of Insurance or other competent regulatory authority
shall have entered a final and nonappealable order, judgment or
decree (i) appointing a custodian, trustee, agent or receiver
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for the Certificate Insurer or for all or any material portion of
its property or (ii) authorizing the taking of possession by a
custodian, trustee, agent or receiver of the Certificate Insurer
(or the taking of possession of all or any material portion of
the property of the Certificate Insurer).
Lien: Any security interest, lien, charge, pledge, preference,
equity or encumbrance of any kind, including tax liens, mechanics' liens and any
liens that attach by operation of law.
Lien Certificate: With respect to a Financed Vehicle, an original
certificate of title, certificate of lien or other notification issued by the
Registrar of Titles of the applicable state to a secured party which indicates
that the lien of the secured party on the Financed Vehicle is recorded on the
original certificate of title. In any jurisdiction in which the original
certificate of title is required to be given to the Obligor, the term "Lien
Certificate" shall mean only a certificate or notification issued to a secured
party.
Liquidated Receivable: With respect to any Collection Period, a
Receivable as to which (i) 60 days have elapsed since the Servicer repossessed
the Financed Vehicle, (ii) the Servicer has determined in good faith that all
amounts it expects to recover have been received, (iii) ninety percent or more
of a Scheduled Payment shall have become 120 or more days delinquent, or in the
case of an Obligor who is subject to bankruptcy proceedings, 210 or more days
delinquent or (iv) the Financed Vehicle has been sold and the proceeds received.
Any Receivable that becomes a Purchased Receivable on or before the related
Deposit Date shall not be a Liquidated Receivable.
Liquidation Proceeds: With respect to a Liquidated Receivable,
all amounts realized with respect to such Receivable (other than amounts
withdrawn from the Spread Account and drawings under the Policy) net of amounts
that are required to be refunded to the Obligor on such Receivable; provided,
however, that the Liquidation Proceeds with respect to any Receivable shall in
no event be less than zero.
Local Bank: A depository institution named by the Servicer and,
so long as an Insurer Default shall not have occurred and be continuing,
acceptable to the Certificate Insurer, or, if an Insurer Default shall have
occurred and be continuing, a Certificate Majority.
Local Collection Account: The segregated account maintained on
behalf of the Trust by the Local Bank pursuant to Section 4.2(d).
Lockbox Account: An account maintained on behalf of the Trustee
by the Lockbox Bank pursuant to Section 4.2(d).
Lockbox Agreement: The Lockbox Agreement dated as of August 18,
1994 by and among First Interstate Bank, Los Angeles, and American Credit
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Corporation, as amended, modified or supplemented from time to time, or any
other agreement, in form and substance acceptable to the Certificate Insurer,
or if an Insurer Default shall have occurred and be continuing, to a
Certificate Majority.
Lockbox Bank: First Interstate Bank, Los Angeles or any other
depository institution named by the Servicer and, so long as an Insurer Default
shall not have occurred and be continuing, acceptable to the Certificate
Insurer, or, if an Insurer Default shall have occurred and be continuing, to a
Certificate Majority.
Monthly Records: All records and data maintained by the Servicer
with respect to the Receivables, including the following with respect to each
Receivable: the account number; the originating Dealer; Obligor name; Obligor
address; Obligor home phone number; Obligor business phone number; original
Principal Balance; original term; Annual Percentage Rate; current Principal
Balance; current remaining term; origination date; first payment date; final
scheduled payment date; next payment due date; date of most recent payment;
new/used classification; collateral description; days currently delinquent;
number of contract extensions (months) to date; amount of Scheduled Payment;
current Insurance Policy expiration date; and past due late charges.
Moody's: Moody's Investors Service, Inc., or any successor
thereto.
Net Loss Rate: For any Collection Period, the product, expressed
as a percentage, of twelve multiplied by a fraction, the numerator of which is
equal to (i) the sum of (a) the aggregate of the Principal Balances as of the
related Record Date of all Receivables that became Liquidated Receivables during
the related Collection Period and (b) the amount of any Cram Down Losses less
(ii) the Liquidation Proceeds received by the Trust with respect to Receivables
which became Liquidated Receivables in prior Collection Periods, and the
denominator of which is equal to the average of the Aggregate Principal Balance
as of the related Record Date and the Aggregate Principal Balance as of the
first day of the related Collection Period.
Notice of Deficiency: A written or telecopied notice from the
Trustee to the Certificate Insurer, substantially in the form of Exhibit A to
the Policy.
Obligor: The purchaser or the co-purchasers of the Financed
Vehicle and any other Person or Persons who are primarily or secondarily
obligated to make payments under a Receivable.
Officer's Certificate: A certificate signed by the chairman of
the board, the vice chairman, the president, the chief financial officer or any
executive vice president.
OFL-A: OFL-A Receivables Corp., a Delaware corporation and
wholly-owned subsidiary of ACC.
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Opinion of Counsel: A written opinion of counsel reasonably
acceptable to the Certificate Insurer, which opinion is acceptable in form and
substance to the Trustee and, if such opinion or a copy thereof is required by
the provisions of this Agreement to be delivered to the Certificate Insurer, to
the Certificate Insurer.
Person: Any legal person, including any individual, corporation,
partnership, limited liability company, joint venture, estate, association,
joint stock company, trust, unincorporated organization or government or any
agency or political subdivision thereof, or any other entity.
Policy: The financial guaranty insurance policy number 50472-N
issued by the Certificate Insurer to the Trustee for the benefit of the Class A
Certificateholders, including any endorsements thereto.
Policy Claim Amount: Shall have the meaning set forth in Section
6.4(a).
Policy Payments Account: The account designated as the Policy
Payments Account in, and which is established and maintained pursuant to,
Section 5.1
Pool Balance: As of the close of business on the last day of a
Collection Period, the aggregate Principal Balance of the Receivables (excluding
Purchased Receivables and Liquidated Receivables).
Pool Factor: With respect to any Distribution Date, a seven digit
decimal figure equal to, as applicable, the Class A Certificate Balance as of
such Distribution Date (after giving effect to distributions on such date)
divided by the Class A Certificate Balance as of the Closing Date, or, the Class
B Certificate Balance as of such Distribution Date (after giving effect to
distributions on such date) divided by the Class B Certificate Balance as of the
Closing Date.
Preference Claim: Shall have the meaning set forth in Section
6.5(b).
Prepayment: Any payment in full made by an Obligor of the
Principal Balance of a Receivable which is received by the Servicer in advance
of the scheduled maturity date for such Receivable.
Principal Balance: With respect to any Receivable, as of any
date, the Amount Financed minus (i) that portion of all amounts received with
respect to such Receivable on or prior to such date and allocable to principal
in accordance with the terms of the Receivable, and (ii) any Cram Down Loss in
respect of such Receivable.
Purchase Agreement: The Purchase Agreement and Assignment dated
as of June 20, 1996 between ACC and the Seller relating to the purchase by the
Seller from ACC of the Receivables as set forth in Exhibit I.
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Purchase Amount: With respect to a Receivable, the Principal
Balance and all accrued and unpaid interest on the Receivable as of the date of
purchase.
Purchased Receivable: As of any Record Date, any Receivable that
became a Warranty Receivable or Administrative Receivable as of such Record Date
(or which the Seller, ACC, the Servicer or the Sponsor has elected to purchase
as of an earlier Record Date, as permitted hereunder) and as to which the
Purchase Amount has been deposited in the Collection Account by the Seller, ACC,
the Servicer or the Sponsor, as applicable, on or before the related Deposit
Date.
Rating Agency: Each of Moody's and Standard & Poor's, so long as
such Persons maintain a rating on the Certificates; and if either Moody's or
Standard & Poor's no longer maintains a rating on the Certificates, such other
nationally recognized statistical rating organization selected by the Sponsor
and (so long as an Insurer Default shall not have occurred and be continuing)
acceptable to the Certificate Insurer.
Receivable: A retail installment sale contract or promissory note
(and related security agreement) for a new or used automobile or light truck,
vans or mini-vans (and all accessories thereto) that is included in the Schedule
of Receivables, and all rights and obligations under such a contract, but not
including (i) any Liquidated Receivable (other than for purposes of calculating,
as applicable, the Class A Principal Distributable Amount and the Class B
Principal Distributable Amount hereunder), or (ii) any Purchased Receivable on
or after the Record Date immediately preceding the Deposit Date on which payment
of the Purchase Amount is made in connection therewith pursuant to Section 5.4.
Receivable File: The documents, electronic entries, instruments
and writings listed in Section 3.3 pertaining to a particular Receivable.
Record Date: With respect to any Determination Date or
Distribution Date, the last day of the immediately preceding calendar month.
Registrar of Titles: With respect to any state, the governmental
agency or body responsible for the registration of, and the issuance of
certificates of title relating to, motor vehicles and liens thereon.
Related Documents: The Certificates, the Purchase Agreement, the
Indemnification Agreement, the Spread Account Agreement, the Insurance
Agreement, the Lockbox Agreement and the Initial Purchaser Agreement dated June
13, 1996 between the Seller and the initial purchaser of the Certificates. The
Related Documents to be executed by any party are referred to herein as "such
party's Related Documents," "its Related Documents" or by a similar expression.
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Representation Letter: Letters to, or agreements with, the
Depository to effectuate a book entry system with respect to the Class A
Certificates registered in the Certificate Register under the nominee name of
the Depository.
Repurchase Events: The occurrence of a breach of any of the
Seller's or the Servicer's representations and warranties in this Agreement
which requires the repurchase of a Receivable by the Seller, ACC, the Servicer
or the Sponsor pursuant hereto.
Required Deposit Rating: A rating on short-term unsecured debt
obligations of "P-1" by Moody's and at least "A-1+" by Standard & Poor's (or
such other rating as may be acceptable to the Rating Agencies and, so long as an
Insurer Default shall not have occurred and be continuing, the Certificate
Insurer) so as to not affect the rating on the Certificates.
Requisite Amount: shall have the meaning set forth in the Spread
Account Agreement.
Responsible Officer: When used with respect to the Trustee, any
officer of the Trustee assigned by the Trustee to administer its corporate trust
affairs relating to the Trust. When used with respect to any other Person that
is not an individual, the President, any Vice-President or Assistant
Vice-President or the Controller of such Person, or any other officer or
employee having similar functions.
Rule of 78s Method: means the method under which a portion of a
payment allocated to earned interest and the portion allocable to principal is
determined according to the sum of the month's digits or any equivalent method
commonly referred to as the "Rule of 78s."
Rule of 78s Receivable: means any Receivable under which the
portion of a payment allocable to interest and the portion allocable to
principal is determined in accordance with the Rule of 78s Method.
Schedule of Receivables: The Schedule of Receivables attached
hereto as Schedule A.
Scheduled Payment: With respect to any Collection Period for any
Receivable, the amount set forth in such Receivable as required to be paid by
the Obligor in such Collection Period. If after the Closing Date, the Obligor's
obligation under a Receivable with respect to a Collection Period has been
modified so as to differ from the amount specified in such Receivable as a
result of (i) the order of a court in an insolvency proceeding involving the
Obligor, (ii) pursuant to the Soldiers' and Sailors' Civil Relief Act of 1940 or
(iii) modifications or extensions of the Receivable permitted by Section 4.2(b),
the Scheduled Payment with respect to such Collection Period shall refer to the
Obligor's payment obligation with respect to such Collection Period as so
modified.
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Seller: shall have the meaning set forth in the first paragraph
of this Agreement.
Series: The Certificates issued pursuant to this Agreement.
Series 1996-B Supplement: means the Series 1996-B Supplement
dated as of June 1, 1996 to the Spread Account Agreement among the Seller, the
Certificate Insurer, the Collateral Agent and the Trustee, as set forth in
substantially the form of Exhibit D.
Servicer: shall have the meaning set forth in the first paragraph
of this Agreement.
Servicer Extension Notice: The notice delivered pursuant to
Section 4.14.
Servicing Procedures Manual: means the servicing manual used by
ACC in the servicing of the Receivables as amended from time to time.
Servicer Termination Event: An event described in Section 10.1.
Servicer's Certificate: With respect to each Determination Date,
a certificate, completed by and executed on behalf of the Servicer, in
accordance with Section 4.9, substantially in the form attached hereto as
Exhibit E.
Simple Interest Method: The method of allocating a fixed level
payment on an obligation between principal and interest, pursuant to which the
portion of such payment that is allocated to interest is equal to the product of
the fixed rate of interest on such obligation multiplied by the period of time
(expressed as a fraction of a year, based on the actual number of days in the
calendar month and 365 days in the calendar year) elapsed since the preceding
payment under the obligation was made.
Simple Interest Receivable: A Receivable under which the portion
of the payment allocable to interest and the portion allocable to principal is
determined in accordance with the Simple Interest Method.
Sponsor: shall have the meaning set forth in the first paragraph
of this Agreement.
Spread Account: The Spread Account established and maintained
pursuant to the Spread Account Agreement. The Spread Account shall in no event
be deemed part of the Trust Property.
Spread Account Agreement: The Master Spread Account Agreement
dated as of June 1, 1995 among the Seller, the Certificate Insurer, the
Collateral Agent and the Trustee, as the same may be amended, supplemented
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(including the Series 1996-B Supplement) or otherwise modified in accordance
with the terms thereof.
Standard & Poor's: Standard & Poor's Ratings Services, a division
of The McGraw Hill Companies, Inc., or any successor thereto.
Supplemental Servicing Fee: With respect to any Collection Period
(i) all administrative fees, expenses and charges paid by or on behalf of
Obligors, including late fees, prepayment fees and liquidation fees collected on
the Receivables during such Collection Period and (ii) the net realized earnings
on all investments of funds deposited in the Collection Account.
this Agreement: shall have the meaning set forth in the first
paragraph of this Agreement.
Total Servicing Fee: The sum of the Basic Servicing Fee and the
Supplemental Servicing Fee.
Trigger Event: shall have the meaning set forth in the Series
1996-B Supplement.
Trust: shall have the meaning set forth in Section 2.1.
Trust Property: The property and proceeds of every description
conveyed pursuant to Section 3.1, together with certain monies paid on or after
the Cut-off Date with respect to the Receivables, the Policy, the Collection
Account (including all Eligible Investments therein and all proceeds therefrom),
the Policy Payments Account, the Lockbox Account, the Local Collections Account
and certain other rights under this Agreement. Although the Class A and the
Class B Certificateholders have directed that the Seller, as their agent, place
the Spread Account in trust with and pledge the Spread Account to, the Trustee
for the benefit of the Class A Certificateholders and the Certificate Insurer
pursuant to the Spread Account Agreement, the Spread Account shall not under any
circumstances be deemed to be a part of or otherwise included in the Trust or
the Trust Property.
Trustee: shall have the meaning set forth in the first paragraph
of this Agreement.
UCC: The Uniform Commercial Code as in effect in the relevant
jurisdiction.
Warranty Receivable: With respect to any Collection Period, a
Receivable which the Seller or the Sponsor has become obligated to repurchase
pursuant to Section 3.7.
Section 1.2. Usage of Terms. With respect to all terms used in
this Agreement, the singular includes the plural and the plural the singular;
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words importing any gender include the other genders; references to
"writing" include printing, typing, lithography, and other means of
reproducing words in a visible form; references to agreements and other
contractual instruments include all subsequent amendments thereto or changes
therein entered into in accordance with their respective terms and not
prohibited by this Agreement; references to Persons include their permitted
successors and assigns; and the terms "include" or "including" mean "include
without limitation" or "including without limitation."
Section 1.3. Calculations. All calculations of the amount of
interest accrued on the Certificates and all calculations of the amount of the
Basic Servicing Fee shall be made on the basis of a 360-day year consisting of
twelve 30-day months. All references to the Principal Balance of a Receivable as
of a Record Date shall refer to the close of business on such day.
Section 1.4. Section References. All references to Articles,
Sections, paragraphs, subsections, exhibits and schedules shall be to such
portions of this Agreement unless otherwise specified.
Section 1.5. Action by or Consent of Certificateholders. Whenever
any provision of this Agreement refers to action to be taken, or consented to,
by Certificate holders, such provision shall be deemed to refer to
Certificateholders of record as of the Record Date immediately preceding the
date on which such action is to be taken, or consent given, by
Certificateholders. Solely for the purposes of any action to be taken, or
consented to, by Certificateholders, any Certificate registered in the name of
the Seller, ACC or any Affiliate thereof shall be deemed not to be outstanding
and the interest in the Trust evidenced thereby shall not be taken into account
in determining whether the requisite interest in the Trust necessary to effect
any such action or consent has been obtained; provided, however, that, solely
for the purpose of determining whether the Trustee is entitled to rely upon any
such action or consent, only Certificates which the Trustee knows to be so owned
shall be so disregarded.
Section 1.6. No Recourse. No recourse may be taken, directly or
indirectly, under this Agreement or any certificate or other writing delivered
in connection herewith or therewith, against any stockholder, officer, or
director, as such, of the Seller, ACC, the Servicer or the Trustee or of any
predecessor or successor of the Seller, ACC, the Servicer or the Trustee.
Section 1.7. Material Adverse Effect. Whenever a determination is
to be made under this Agreement as to whether a given event, action, course of
conduct or set of facts or circumstances could or would have a material adverse
effect on the Trust or the Certificateholders (or any similar or analogous
determination), such determination shall be made without taking into account the
insurance provided by the Policy.
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ARTICLE II
CREATION OF TRUST
Section 2.1. Creation of Trust. The Seller does hereby create and
establish, pursuant to the laws of the State of New York and this Agreement a
trust (the "Trust"), which for convenience shall be known as "ACC Auto Grantor
Trust 1996-B."
ARTICLE III
CONVEYANCE OF RECEIVABLES; ACCEPTANCE BY TRUSTEE;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 3.1. Conveyance of Receivables. (a) Subject to the terms
and conditions of this Agreement, the Seller hereby sells, transfers, assigns,
and otherwise conveys to the Trustee, in trust for the benefit of the
Certificateholders, without recourse (but without limitation of its obligations
in this Agreement), all of the right, title and interest of the Seller in and to
the Receivables, all monies at any time paid or payable thereon or in respect
thereof after the Cut-off Date (including amounts due on or before the Cut-off
Date but received by ACC or the Seller after the Cut-off Date), an assignment of
security interests of OFL-A or ACC in the Financed Vehicles, the Insurance
Policies and any proceeds from any Insurance Policies relating to the
Receivables, the Obligors or the Financed Vehicles, including rebates of
premiums, all Collateral Insurance relating to the Receivables, rights of OFL-A
or ACC (including in its capacity as successor to American Credit Corporation)
against Dealers with respect to the Receivables under the Dealer Agreements and
the Dealer Assignments, all items contained in the Receivable Files, any and all
other documents that ACC keeps on file in accordance with its customary
procedures relating to the Receivables, the Obligors or the Financed Vehicles,
property (including the right to receive future Liquidation Proceeds) that
secures a Receivable and that has been acquired by or on behalf of the Trust
pursuant to liquidation of such Receivable, and all proceeds of the foregoing.
(b) It is the intention of the Seller that the transfer and assignment
contemplated by this Agreement shall constitute a sale of the Receivables and
other Trust Property from the Seller to the Trust and the beneficial interest in
and title to the Receivables and the other Trust Property shall not be part of
the Seller's estate in the event of the filing of a bankruptcy petition by or
against the Seller under any bankruptcy law. In the event that, notwithstanding
the intent of the Seller, the transfer and assignment contemplated hereby is
held not to be a sale, this Agreement shall constitute a grant of a security
interest in the property referred to in this Section 3.1 for the benefit of the
Certificateholders. The execution and delivery of this Agreement shall
constitute an acknowledgment by the Seller and the Trustee on behalf of the
Certificateholders that they intend to establish (for Federal tax purposes) a
trust, rather than an association taxable as a corporation. The powers granted
and obligations undertaken in this Agreement shall be construed so as to further
such intent.
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(c) The Seller hereby directs the Trustee to, and the Trustee
does hereby, accept the Trust Property conveyed by the Seller pursuant to this
Section 3.1. The Trustee declares that the Trustee shall hold such Trust
Property upon the trusts herein set forth for the benefit of all present and
future Certificateholders, subject to the terms and provisions of this
Agreement.
Section 3.2. [Reserved.]
Section 3.3. Custody of Receivable Files. (a) In connection with
the sale, transfer and assignment of the Receivables and the other Trust
Property to the Trust pursuant to this Agreement, the Seller shall deliver to
the Trustee the following documents or instruments in its possession which shall
be delivered to the Trustee on or before two Business Days prior to the Closing
Date with respect to each Receivable:
(i) The fully executed original of the Receivable (together
with any agreements modifying the Receivable, including, without
limitation, any extension agreements);
(ii) Documents evidencing or related to any Insurance Policy;
(iii) The original credit application of each Obligor, fully
executed by each such Obligor on ACC's customary form, or on a form
approved by ACC, for such application; and
(iv) the Lien Certificate, or, if not yet received, a copy of
the application therefor, showing OFL-A, American Credit Corporation or
ACC as secured party and such documents, if any, that ACC keeps on file
in accordance with its customary procedures indicating that the Financed
Vehicle is owned by the Obligor and subject to the interest of OFL-A or
ACC (as successor to American Credit Corporation where American Credit
Corporation is shown as the secured party) as first lienholder or
secured party.
(b) Upon payment in full on any Receivable, the Servicer will
notify the Trustee by an Officer's Certificate (which certification shall
include a statement to the effect that all amounts received in connection with
such payments which are required to be deposited in the Collection Account
pursuant to Section 5.1 have been so deposited) and shall request delivery of
the Receivable and Receivable File to the Servicer. From time to time as
appropriate for servicing and enforcing any Receivable, the Trustee shall, upon
written request of an officer of the Servicer and delivery to the Trustee of a
receipt signed by such officer in the form of Exhibit J attached hereto, cause
the original Receivable and the related Receivable File to be released to the
Servicer. The Trustee may rely and shall be protected when acting or refraining
from acting upon any certificate, request or receipt under this Section. The
Servicer's receipt of a Receivable and/or Receivable File shall obligate the
Servicer to return the original Receivable and the related Receivable File to
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the Trustee when its need by the Servicer has ceased unless the Receivable
shall be liquidated or repurchased as described in Section 3.7 or 4.7.
Section 3.4. Conditions to Acceptance by Trustee. As conditions
to the execution and delivery of the Certificates by the Trustee on the Closing
Date, the Trustee shall have received the following on or before the Closing
Date:
(a) The Schedule of Receivables certified by the President,
Controller or Treasurer of the Seller;
(b) Copies of resolutions of the Board of Directors of the Seller
approving the execution, delivery and performance of this Agreement and
the transactions contemplated hereby, certified by a Secretary or an
Assistant Secretary of the Seller;
(c) Copies of resolutions of the Board of Directors of the
Servicer approving the execution, delivery and performance of this
Agreement and the transactions contemplated hereby, certified by a
Secretary or an Assistant Secretary of the Servicer;
(d) Evidence that all filings (including, without limitation, UCC
filings) required to be made by any Person and actions required to be
taken or performed by any Person in any jurisdiction to give the Trustee
a first priority perfected lien on, or ownership interest in, the
Receivables and the other Trust Property have been made, taken or
performed; and
(e) An executed copy of the Policy and Spread Account Agreement.
Section 3.5. Representations and Warranties of Seller. The Seller
hereby makes the following representations and warranties to the other parties
hereto and the Certificate Insurer on which the Trustee relies in accepting the
Receivables and the other Trust Property in trust and issuing the Certificates
and upon which the Certificate Insurer relies in issuing the Policy. Unless
otherwise specified, such representations and warranties are made as of the
Closing Date, and shall survive the sale, transfer, and assignment of the
respective Receivables to the Trustee.
(a)(i) Characteristics of Receivables. Each Receivable (A) was
originated by a Dealer for the retail sale of a Financed Vehicle in the
ordinary course of such Dealer's business and, such Dealer had all
necessary licenses and permits to originate Receivables in the state
where such Dealer was located, was fully and properly executed by the
parties thereto, was purchased by OFL-A, American Credit Corporation or
ACC from such Dealer under an existing Dealer Agreement with OFL-A or
ACC (including in its capacity as successor to American Credit
Corporation) and was validly assigned by such Dealer to OFL-A, American
Credit Corporation (in its capacity as the predecessor of ACC) or ACC
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(in its individual capacity and in its capacity as successor to American
Credit Corporation), (B) contains customary and enforceable provisions
such as to render the rights and remedies of the holder thereof adequate
for realization against the collateral security, and (C) is a fully
amortizing Simple Interest Receivable or Rule of 78s Receivable which
provides for level monthly payments (provided that the payment in the
first Collection Period and the final Collection Period of the life of
the Receivable may be minimally different from the level payment) which,
if made when due, shall fully amortize the Amount Financed over the
original term.
(ii) No Fraud or Misrepresentation. Each Receivable was
originated by a Dealer to an Obligor and was sold by the Dealer to ACC,
American Credit Corporation (in its capacity as the predecessor of ACC)
or OFL-A without any fraud or material misrepresentation on the part of
such Dealer in either case or on the part of the Obligor.
(iii) Compliance with Law. All requirements of applicable
federal, state and local laws, and regulations thereunder (including,
without limitation, usury laws, the Federal Truth-in-Lending Act, the
Equal Credit Opportunity Act, the Fair Credit Billing Act, the Fair
Credit Reporting Act, the Fair Debt Collection Practices Act, the
Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the
Federal Reserve Board's Regulations "B" and "Z", the Soldiers' and
Sailors' Civil Relief Act of 1940, the Minnesota Motor Vehicle Retail
Installment Sales Act, and state adaptations of the National Consumer
Act and of the Uniform Consumer Credit Code and other consumer credit
laws and equal credit opportunity and disclosure laws) in respect of all
of the Receivables, each and every sale of Financed Vehicles and the
sale of any physical damage, credit life and credit accident and health
insurance and any extended service contracts, have been complied with in
all material respects, and each Receivable and the sale of the Financed
Vehicle evidenced by each Receivable and the sale of any physical
damage, credit life and credit accident and health insurance and any
extended service contracts complied at the time it was originated or
made and now complies in all material respects with all applicable legal
requirements.
(iv) Origination. Each Receivable was originated in the
United States and, at the time of origination materially conformed to
all requirements of the "Dealer Underwriting Guide" applicable to such
Receivable.
(v) Binding Obligation. Each Receivable represents the
genuine, legal, valid and binding payment obligation of the Obligor
thereon, enforceable by the holder thereof in accordance with its terms,
except (A) as enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the enforcement of creditors'
rights generally and by equitable limitations on the availability of
specific remedies, regardless of whether such enforceability is
considered in a proceeding in equity or at law and (B) as such
Receivable may be modified by the application after the Cut-off Date of
the Soldiers' and Sailors' Civil Relief Act of 1940, as amended;
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and all parties to each Receivable had full legal capacity to execute
and deliver such Receivable and all other documents related thereto and
to grant the security interest purported to be granted thereby.
(vi) No Government Obligor. None of the Receivables shall
be due from the United States of America or any State or from any
agency, department, subdivision or instrumentality thereof.
(vii) Obligor Bankruptcy. As of the Cut-off Date, no Obligor
had been identified on the records of ACC as being the subject of a
current bankruptcy proceeding.
(viii) Schedule of Receivables. The information pertaining to
each Receivable set forth in the Schedule of Receivables and in the
Private Placement Memorandum, was true and correct in all material
respects as of the close of business on the Cut-off Date.
(ix) Marked Records. By the Closing Date, ACC will have
caused the portions of ACC's servicing records relating to the
Receivables to be clearly and unambiguously marked to show that the
Receivables constitute part of the Trust Property and are owned by the
Trust in accordance with the terms of the Agreement.
(x) Computer Tape or Listing. The Computer Tape or Listing
made available by ACC to the Trustee on the Closing Date was complete
and accurate as of the Cut-off Date and includes a description of the
same Receivables that are described in the Schedule of Receivables.
(xi) Chattel Paper. The Receivables constitute chattel paper
within the meaning of the UCC.
(xii) One Original. There is only one original executed copy
of each Receivable.
(xiii) Receivable Files Complete. There exists a Receivable
File pertaining to each Receivable and such Receivable File contains,
without limitation, (a) a fully executed original of the Receivable,
endorsed, "Pay to the order of Norwest Bank Minnesota, National
Association as custodian under the Master Contract Custodial Agreement
by and among Cargill Financial Services Corporation, American Credit
Corporation, OFL-A Receivables Corp., and Norwest Bank Minnesota,
National Association dated July 15, 1993" and signed in the name of
OFL-A by an authorized officer, (b) a certificate of insurance,
application form for insurance signed by the Obligor, or a signed
representation letter from the Obligor named in the Receivable pursuant
to which the Obligor has agreed to obtain physical damage insurance for
the related Financed Vehicle, (c) the original Lien Certificate or
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application therefor together with an assignment of the Lien Certificate
executed by the Seller to the Trustee and (d) an original credit
application signed by the Obligor. Each of such documents which is
required to be signed by the Obligor has been signed by the Obligor in
the appropriate spaces. All blanks on any form have been properly filled
in and each form has otherwise been correctly prepared. Notwithstanding
the above, a copy of the complete Receivable File for each Receivable,
which fulfills the documentation requirements of the Dealer Underwriting
Guide as in effect at the time of purchase is in the possession of the
Servicer.
(xiv) Receivables in Force. No Receivable has been satisfied,
subordinated or rescinded, and the Financed Vehicle securing each such
Receivable has not been released from the lien of the related Receivable
in whole or in part. No provisions of any Receivable have been waived,
altered or modified in any respect since its origination, except by
instruments or documents identified in the Receivable File held by the
Trustee. No Receivable has been modified as a result of application of
the Soldiers' and Sailors' Civil Relief Act of 1940, as amended.
(xv) Lawful Assignment. No Receivable was originated in, or is
subject to the laws of, any jurisdiction the laws of which would make
unlawful, void or voidable the sale, transfer and assignment of such
Receivable under this Agreement or pursuant to transfers of the
Certificates. The Seller has not entered into any agreement with any
account debtor that prohibits, restricts or conditions the assignment of
any portion of the Receivables.
(xvi) Good Title. No Receivable has been sold, transferred,
assigned or pledged by the Seller to any Person other than the Sponsor
or the Trustee; immediately prior to the conveyance of the Receivables
to the Trust pursuant to this Agreement, the Seller was the sole owner
thereof and had good and indefeasible title thereto, free of any Lien
and, upon execution and delivery of this Agreement by the Seller, the
Trustee shall have good and indefeasible title to and will be the sole
owner of such Receivables, free of any Lien. No Dealer has a
participation in, or other right to receive, proceeds of any Receivable.
Neither ACC nor the Seller has taken any action to convey any right to
any Person that would result in such Person having a right to payments
received under the related Insurance Policies or the related Dealer
Agreements or Dealer Assignments or to payments due under such
Receivables.
(xvii) Security Interest in Financed Vehicle. Each Receivable
created or shall create a valid, binding and enforceable first priority
security interest in favor of OFL-A or ACC in the Financed Vehicle. The
Lien Certificate for each Financed Vehicle shows, or if a new or
replacement Lien Certificate is being applied for with respect to such
Financed Vehicle the Lien Certificate will be received within 180 days
of the Closing Date and will show, OFL-A, American Credit Corporation
(in its capacity as the predecessor of ACC) or ACC (both in its
individual capacity and in its capacity as the successor to American
Credit Corporation) named as the original secured party under each
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Receivable and, accordingly, ACC or OFL-A, as the case may be,
will be the holder of a first priority security interest in such
Financed Vehicle. With respect to each Receivable for which the Lien
Certificate has not yet been returned from the Registrar of Titles,
OFL-A or ACC has received written evidence from the related Dealer that
such Lien Certificate showing OFL-A, American Credit Corporation (in its
capacity as the predecessor of ACC) or ACC (both in its individual
capacity and in its capacity as the successor to American Credit
Corporation) as first lienholder has been applied for. If the Receivable
was originated in a state in which a filing or recording is required of
the secured party to perfect a security interest in motor vehicles, such
filings or recordings have been duly made to show OFL-A, American Credit
Corporation (in its capacity as the predecessor of ACC) or ACC (both in
its individual capacity and in its capacity as the successor to American
Credit Corporation) named as the original secured party under the
related Receivable. Such security interest in the Financed Vehicle has
been validly assigned by OFL-A or ACC (including an assignment by ACC as
successor to American Credit Corporation), as the case may be, to the
Seller pursuant to the Purchase Agreement and by the Seller to the
Trustee pursuant to this Agreement.
Immediately after the sale, transfer and assignment thereof to
the Trust, each Receivable will be secured by an enforceable and
perfected first priority security interest in the Financed Vehicle in
favor of the Trust as secured party, which security interest is prior to
all other liens upon and security interests in such Financed Vehicle
which now exist or may hereafter arise or be created (except, as to
priority, for any lien for taxes, labor or materials affecting a
Financed Vehicle). As of the Cut-off Date, there were no Liens or claims
for taxes, work, labor or materials affecting a Financed Vehicle which
are or may be Liens prior or equal to the lien of the related
Receivable. Not more than 10% of the Cut-off Date Principal Balance of
the Receivables have Lien Certificates on which "American Credit
Corporation" is named as the original secured party, and, with respect
to such Receivables, such naming of "American Credit Corporation" will
not, by itself, impair the Trustee's first priority perfected interest
in the related Financed Vehicle.
(xviii) All Filings Made. All filings (including, without
limitation, UCC filings) required to be made by any Person and actions
required to be taken or performed by any Person in any jurisdiction to
give the Trustee a first priority perfected lien on, or ownership
interest in, the Receivables and the proceeds thereof and the other
Trust Property have been made, taken or performed.
(xix) No Impairment. Neither ACC nor the Seller has done anything
to convey any right to any Person that would result in such Person
having a right to payments due under the Receivable or otherwise to
impair the rights of the Trust and the Certificateholders in any
Receivable or the proceeds thereof.
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(xx) Receivable Not Assumable. No Receivable is assumable by
another Person in a manner which would release the Obligor thereof from
such Obligor's obligations to the Seller with respect to such
Receivable.
(xxi) No Defenses. No Receivable is subject to any right of
rescission, setoff, counterclaim or defense and no such right has been
asserted or threatened with respect to any Receivable.
(xxii) No Default. There has been no default, breach, violation
or event permitting acceleration under the terms of any Receivable
(other than payment delinquencies of not more than 30 days) and no
condition exists or event has occurred and is continuing that with
notice, the lapse of time or both would constitute a default, breach,
violation or event permitting acceleration under the terms of any
Receivable, and there has been no waiver of any of the foregoing. As of
the Cut-off Date, no Financed Vehicle had been repossessed.
(xxiii) Insurance. At the time of the origination of each
Receivable, the related Financed Vehicle was covered by a comprehensive
and collision insurance policy (i) in an amount at least equal to the
lesser of (a) its maximum insurable value or (b) the principal amount
due from the Obligor under the related Receivable, (ii) naming OFL-A and
its successors and assigns as loss payee and (iii) insuring against loss
and damage due to fire, theft, transportation, collision and other risks
generally covered by comprehensive and collision coverage. Each
Receivable requires the Obligor to maintain physical loss and damage
insurance, naming OFL-A and its successors and assigns as additional
insured parties, and each Receivable permits the holder thereof to
obtain physical loss and damage insurance at the expense of the Obligor
if the Obligor fails to do so.
(xxiv) Receivables. (i) Each Receivable had a remaining
maturity, as of the Cut-off Date of at least 20 months but not more than
60 months; (ii) each Receivable had an original maturity of at least 24
months but not more than 60 months; (iii) each Receivable had an
original Amount Financed of at least $2,562.95 and not more than
$24,976.49; (iv) each Receivable had a Principal Balance as of the
Cut-off Date of at least $153.32 and not more than $24,711.42; (v) each
Receivable has an Annual Percentage Rate of at least 17.06% and not more
than 29.00%; (vi) no Receivable was more than 30 days past due as of the
Cut-off Date; (vii) no funds have been advanced by the Seller, the
Servicer, OFL-A, the Sponsor, any Dealer, or anyone acting on behalf of
any of them in order to cause any Receivable to qualify under subclause
(vi) of this clause (xxiv); (viii) no Receivable has a final scheduled
payment date on or after July 15, 2001; (ix) the Principal Balance of
each Receivable set forth in Schedule of Receivables is true and
accurate in all material respects as of the Cutoff Date, and (x) no more
than 10.79% of the aggregate Principal Balance for all the Receivables
will be attributable to loans for the purchase of new Financed Vehicles,
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and no more than 89.21% of the aggregate Principal Balance for all the
Receivables will be attributable to loans for the purchase of used
Financed Vehicles.
(xxv) Origination. Each Receivable was originated in the
United States and, at the time of origination, materially conformed to
all requirements of the ACC underwriting policies and guidelines then in
effect and applicable to such Receivable.
(xxvi) No Adverse Selection. No selection procedures adverse to
the Certificateholders or to the Certificate Insurer have been utilized
in selecting such Receivable from all other similar Receivables
originated by ACC.
(b) Organization and Good Standing. The Seller has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of Delaware, with power and authority to own
its properties and to conduct its business as such properties are
currently owned and such business is currently conducted, and had at all
relevant times, and now has, power, authority and legal right to
acquire, own and sell the Receivables and the other property transferred
to the Trust pursuant to Section 3.1(a).
(c) Due Qualification. The Seller is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of its property or the conduct of its business
requires such qualification.
(d) Power and Authority. The Seller has the power and authority
to execute and deliver this Agreement and the Related Documents to which
it is a party and to carry out its terms and their terms, respectively;
the Seller has full power and authority to sell and assign the Trust
Property to be sold and assigned to and deposited with the Trustee by it
and has duly authorized such sale and assignment to the Trustee by all
necessary corporate action; and the execution, delivery and performance
of this Agreement and the Related Documents to which it is a party have
been duly authorized by the Seller by all necessary corporate action.
(e) Valid Sale; Binding Obligations. This Agreement, when duly
executed and delivered, shall effect a valid sale, transfer and
assignment of the Receivables and the other Trust Property, enforceable
against the Seller and creditors of and purchasers from the Seller; and
this Agreement and the Related Documents to which the Seller is a party,
when duly executed and delivered, shall constitute legal, valid and
binding obligations of the Seller enforceable in accordance with their
respective terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by equitable limitations
on the availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
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(f) No Violation. The consummation of the transactions
contemplated by this Agreement and the Related Documents to which it is
a party and the fulfillment of the terms of this Agreement and the
Related Documents to which it is a party shall not conflict with, result
in any breach of any of the terms and provisions of or constitute (with
or without notice, lapse of time or both) a default under, the
certificate of incorporation or by-laws of the Seller, or any indenture,
agreement, mortgage, deed of trust or other instrument to which the
Seller is a party or by which it is bound, or result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms
of any such indenture, agreement, mortgage, deed of trust or other
instrument, other than this Agreement, or violate any law, order, rule
or regulation applicable to the Seller of any court or of any federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or any of its
properties.
(g) No Proceedings. There are no proceedings or investigations
pending or, to the Seller's knowledge, threatened against the Seller or
ACC, before any court, regulatory body, administrative agency or other
tribunal or governmental instrumentality having jurisdiction over the
Seller or its properties (i) asserting the invalidity of this Agreement
or any of the Related Documents, (ii) seeking to prevent the issuance of
the Certificates or the consummation of any of the transactions
contemplated by this Agreement or any of the Related Documents, (iii)
seeking any determination or ruling that might materially and adversely
affect the performance by the Seller of its obligations under, or the
validity or enforceability of, this Agreement or any of the Related
Documents, (iv) involving the Seller and which might adversely affect
the federal income tax or other federal, state or local tax attributes
of the Certificates, or (v) that could have a material adverse effect on
the Receivables.
(h) Approvals. All approvals, authorizations, consents, orders or
other actions of any person, corporation or other organization, or of
any court, governmental agency or body or official, required in
connection with the execution and delivery by the Seller of this
Agreement and the consummation of the transactions contemplated hereby
(including the sale, transfer and assignment of the Receivables to the
Trust) have been or will be taken or obtained on or prior to the Closing
Date.
(i) Chief Executive Office. The chief executive office of the
Seller is at Plaza del Mar, 12526 High Bluff Drive, Suite 300,
San Diego, California 92130.
Section 3.6. Representations and Warranties of Sponsor. The
Sponsor hereby makes the following representations and warranties on which the
Trustee relies in accepting the Receivables and the other Trust Property in
trust and issuing the Certificates and upon which the Certificate Insurer relies
in issuing the Policy. Such representations and warranties are made as of the
Closing Date and shall survive the sale, transfer, and assignment of the
respective Receivables to the Trustee.
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(a) Organization and Good Standing. The Sponsor has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of Delaware, with power and authority to own
its properties and to conduct its business as such properties are
currently owned and such business is currently conducted.
(b) Due Qualification. The Sponsor is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of its property or the conduct of its business
requires such qualification.
(c) Power and Authority. The Sponsor has the power and authority
to execute and deliver this Agreement and the Related Documents to which
it is a party and to carry out its terms and their terms, respectively;
and the execution, delivery and performance of this Agreement and the
Related Documents to which it is a party have been duly authorized by
the Sponsor by all necessary corporate action.
(d) Binding Obligations. This Agreement and the Related Documents
to which the Sponsor is a party, when duly executed and delivered, shall
constitute legal, valid and binding obligations of the Sponsor
enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization
or other similar laws affecting the enforcement of creditors' rights
generally and by equitable limitations on the availability of specific
remedies, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the Related Documents to which it is
a party and the fulfillment of the terms of this Agreement and the
Related Documents to which it is a party shall not conflict with, result
in any breach of any of the terms and provisions of or constitute (with
or without notice, lapse of time or both) a default under, the
certificate of incorporation or by-laws of the Sponsor, or any
indenture, agreement, mortgage, deed of trust or other instrument to
which the Sponsor is a party or by which it is bound, or result in the
creation or imposition of any Lien upon any of its properties pursuant
to the terms of any such indenture, agreement, mortgage, deed of trust
or other instrument, or violate any law, order, rule or regulation
applicable to the Sponsor of any court or of any federal or state
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Sponsor or any of its
properties, or in any way materially adversely affect the interests of
the Certificateholders or the Trust in any Receivable, or affect the
Sponsor's ability to perform its obligations under this Agreement.
(f) No Proceedings. There are no material proceedings or
investigations pending or, to the best of the Sponsor's knowledge,
threatened against the Sponsor, before any court, regulatory body,
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administrative agency or other tribunal or governmental
instrumentality having jurisdiction over the Sponsor or its
properties (i) asserting the invalidity of this Agreement or any
of the Related Documents to which it is a party, (ii) seeking to
prevent the issuance of the Certificates or the consummation of
any of the transactions contemplated by this Agreement or any of
the Related Documents to which it is a party, or (iii) seeking
any determination or ruling that might materially and adversely
affect the performance by the Sponsor of its obligations under,
or the validity or enforceability of, this Agreement or any of
the Related Documents to which it is a party.
(g) Approvals. All approvals, authorizations, consents, orders or
other actions of any person, corporation or other organization, or of
any court, governmental agency or body or official, required in
connection with the execution and delivery by the Sponsor of this
Agreement have been or will be taken or obtained on or prior to the
Closing Date.
(h) Chief Executive Office. The chief executive office of the
Sponsor is at 6000 Clearwater Drive, Minnetonka, Minnesota 55343-9497.
Section 3.7. Repurchase of Receivables Upon Breach of
Representation and Warranty. The Seller, the Servicer, the Sponsor or the
Trustee, as the case may be, shall inform the other parties to this Agreement
and the Certificate Insurer promptly, in writing, upon the discovery of any
breach of the Seller's representations and warranties pursuant to Section
3.5(a); provided, however, that the failure to give any such notice shall not
derogate from any obligation of the Seller or the Sponsor; provided, further
that, the Trustee and the Backup Servicer shall have no duty to inquire into or
to investigate the breach of any such representations and warranties. Unless the
breach shall have been cured by the last day of the first full calendar month
following the discovery by or notice to the Seller of the breach, the Seller
shall have an obligation, and the Trustee shall (provided that it either has
made such discovery or has received such notice thereof) enforce such obligation
of the Seller, and, if necessary, to the extent that the Seller fails to effect
its repurchase obligation, the obligation of ACC under the Purchase Agreement,
to repurchase any Receivable materially and adversely affected by the breach;
provided, however, that the failure to enforce the obligation shall not derogate
from any obligation of the Sponsor. Such repurchase shall be made by the last
day of the first full calendar month following the discovery by or notice to the
Seller of the breach. The Trustee shall notify the Sponsor and the Certificate
Insurer in writing promptly of any failure by the Seller and ACC to so
repurchase any Receivable. The Sponsor shall have an obligation, and the Trustee
shall (provided that it either has made such discovery or has received such
notice thereof) enforce such obligation of the Sponsor, to repurchase any such
Receivable by the fifth Business Day following such notification by the Trustee
(which notice shall be given at the request of the Certificate Insurer). In
consideration of the purchase of the Receivable, the Seller or the Sponsor shall
remit, or the Seller shall cause ACC to remit the Purchase Amount, in the manner
specified in Section 5.4. The sole remedy of the Trustee, the Trust, or the
Certificateholders with respect to a breach of the Seller's representations
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and warranties pursuant to Section 3.5(a) shall be to require the Seller to
repurchase Receivables pursuant to this Section 3.7 or, to enforce the
obligation of ACC to the Seller to repurchase such Receivables pursuant to the
Purchase Agreement or, to enforce the obligation of the Sponsor to repurchase
such Receivables pursuant to this Section 3.7.
In addition to the foregoing and notwithstanding whether the
related Receivable shall have been purchased by the Seller, ACC or the Sponsor,
the Seller shall indemnify the Trustee, the Backup Servicer, the Collateral
Agent, the Certificate Insurer, the Trust, the Sponsor and the
Certificateholders against all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel, which may be
asserted against or incurred by any of them as a result of third party claims
arising out of the events or facts giving rise to a breach of the
representations and warranties set forth in Section 3.5(a).
Section 3.8. Nonpetition Covenant. Until one year plus one day
shall have elapsed since the termination of the Trust in accordance with Section
12.1, none of the Seller, the Servicer, the Trustee, ACC nor the Sponsor shall
petition or otherwise invoke the process of any court or government authority
for the purpose of commencing or sustaining a case against the Seller or the
Trust under any federal or state bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of the Seller or the Trust or any substantial part of its
property, or ordering the winding up or liquidation of the affairs of the Seller
or the Trust.
Section 3.9. Collecting Lien Certificates. In the case of any
Receivable in respect of which written evidence from the Dealer selling the
related Financed Vehicle indicating that the Lien Certificate for such Financed
Vehicle showing OFL-A, American Credit Corporation or ACC as first lienholder
has been applied for from the Registrar of Titles and such evidence was
delivered to the Trustee on the Closing Date in lieu of a Lien Certificate, the
Servicer shall use its best efforts to collect such Lien Certificate from the
Registrar of Titles as promptly as practicable. If such Lien Certificate showing
OFL-A, American Credit Corporation or ACC as first lienholder is not received by
the Trustee within 180 days after the Closing Date, and, notwithstanding the
Servicer's continued efforts to obtain such Lien Certificate, a loss occurs as a
result of the failure to receive the Lien Certificate within such 180 days, then
the representation and warranty in Section 3.5(a)(xvii) in respect of such
Receivable shall be deemed to have been incorrect in a manner that materially
and adversely affects such Receivable, the Certificateholders, the Certificate
Insurer and the Trust.
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ARTICLE IV
ADMINISTRATION AND SERVICING OF RECEIVABLES
Section 4.1. Duties of the Servicer. (a) The Servicer is hereby
authorized to act as agent for the Trust and in such capacity shall manage,
service, administer and make collections on the Receivables, and perform the
other actions required by the Servicer under this Agreement. The Servicer agrees
that its servicing of the Receivables shall be carried out in accordance with
customary and usual procedures of institutions which service motor vehicle
retail installment sales contracts and, to the extent more exacting, the degree
of skill and attention that the Servicer exercises from time to time with
respect to all comparable motor vehicle receivables that it services for itself
or others in accordance with ACC's Servicing Procedures Manual as in effect at
the current time for servicing all its other comparable motor vehicle
receivables. The Servicer's duties shall include, without limitation, collection
and posting of all payments, responding to inquiries of Obligors on the
Receivables, investigating delinquencies, sending payment statements to
Obligors, reporting any required tax information to Obligors, policing the
collateral, complying with the terms of the Lockbox Agreement, accounting for
collections and furnishing monthly and annual statements to the Trustee and the
Certificate Insurer with respect to distributions, monitoring the status of
Insurance Policies with respect to the Financed Vehicles and performing the
other duties specified herein. The Servicer shall also administer and enforce
all rights and responsibilities of the holder of the Receivables provided for in
the Dealer Agreements (and shall maintain possession of the Dealer Agreements,
to the extent it is necessary to do so), the Dealer Assignments and the
Insurance Policies, to the extent that such Dealer Agreements, Dealer
Assignments and Insurance Policies relate to the Receivables, the Financed
Vehicles or the Obligors.
To the extent consistent with the standards, policies and
procedures otherwise required hereby, the Servicer shall follow its customary
standards, policies, and procedures and shall have full power and authority,
acting alone, to do any and all things in connection with such managing,
servicing, administration and collection that it may deem necessary or
desirable. Without limiting the generality of the foregoing, the Servicer is
hereby authorized and empowered by the Trustee to execute and deliver, on behalf
of the Certificateholders and the Trustee or any of them, any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge, and all other comparable instruments, with respect to the Receivables
and with respect to the Financed Vehicles; provided, however, that
notwithstanding the foregoing, the Servicer shall not, except pursuant to an
order from a court of competent jurisdiction, release an Obligor from payment of
any unpaid amount under any Receivable or waive the right to collect the unpaid
balance of any Receivable from the Obligor, except that the Servicer may forego
collection efforts if the amount subject to collection is de minimis and if it
would forego collection in accordance with its customary procedures. The
Servicer is hereby authorized to commence, in its own name or in the name of the
Trustee (provided the Servicer has obtained the Trustee's consent, which consent
shall not be unreasonably withheld), a legal proceeding to enforce a Receivable
pursuant to Section 4.3 or to commence or participate in any other legal
proceeding (including, without limitation, a bankruptcy proceeding) relating
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to or involving a Receivable, an Obligor or a Financed Vehicle. If the
Servicer commences or participates in such a legal proceeding in its own
name, the Trustee shall thereupon be deemed to have automatically assigned such
Receivable to the Servicer solely for purposes of commencing or participating in
any such proceeding as a party or claimant, and the Servicer is authorized and
empowered by the Trustee to execute and deliver in the Servicer's name any
notices, demands, claims, complaints, responses, affidavits or other documents
or instruments in connection with any such proceeding. The Trustee shall furnish
the Servicer with any powers of attorney and other documents which the Servicer
may reasonably request in writing and which the Servicer deems necessary or
appropriate and take any other steps which the Servicer may deem necessary or
appropriate to enable the Servicer to carry out its servicing and administrative
duties under this Agreement.
Section 4.2. Collection of Receivable Payments; Modification and
Amendment of Receivables; Lockbox Agreements. (a) Consistent with the standards,
policies and procedures required by this Agreement, the Servicer shall make
reasonable efforts to collect all payments called for under the terms and
provisions of the Receivables as and when the same shall become due, and shall
follow such collection procedures as it follows with respect to all comparable
automobile receivables that it services for itself or others and otherwise act
with respect to the Receivables, the Dealer Agreements, the Dealer Assignments,
the Insurance Policies and the other Trust Property in such manner as will, in
the reasonable judgment of the Servicer, maximize the amount to be received by
the Trust with respect thereto. The Servicer is authorized in its discretion to
waive any prepayment charge, late payment charge or any other similar fees that
may be collected in the ordinary course of servicing any Receivable.
(b) The Servicer may at any time agree to a modification or
amendment of a Receivable in order to (i) change the Obligor's regular due date
to a date within 30 days in which such due date occurs, (ii) re-amortize the
scheduled payments on the Receivable following a partial prepayment of principal
or (iii) convert a Rule of 78s Receivable to a Simple Interest Receivable.
(c) The Servicer may grant payment extensions on, or other
modifications or amendments to, a Receivable (including those modifications
permitted by Section 4.2(b)) in accordance with its customary procedures if the
Servicer believes in good faith that such extension, modification or amendment
is necessary to avoid a default on such Receivable, will maximize the amount to
be received by the Trust with respect to such Receivable, and is otherwise in
the best interests of the Trust; provided, however, that:
(i) The aggregate period of all extensions on a Receivable shall
not exceed two months;
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(ii) In no event may a Receivable be extended by the Servicer beyond
the Collection Period immediately preceding the Final Scheduled
Distribution
Date;
(iii) So long as an Insurer Default shall not have occurred and be
continuing, the Servicer shall not amend or modify a Receivable
(except as provided in Section 4.2(b) and this Section 4.2(c))
without the written consent of the Certificate Insurer;
(iv) As of any Record Date the number of Receivables the term of which
have been extended during the preceding 12-month period shall not
exceed 4% of the number of Receivables which comprise the pool of
Receivables underlying the Class A Certificate Balance and the
Class B Certificate Balance at the beginning of the preceding
12-month period;
(v) No such extension, modification or amendment shall be granted
more than 90 days after the Closing Date if such action would
have the effect of causing such Receivable to be deemed to have
been exchanged for another Receivable within the meaning of
Section 1001 of the Internal Revenue Code of 1986, as amended, or
any proposed, temporary or final Treasury Regulations issued
thereunder;
(vi) If an Insurer Default shall have occurred and be continuing, the
Servicer may not extend or modify any Receivable (other than as
permitted by Section 4.2(b)); and
(vii) So long as an Insurer Default shall not have occurred and be
continuing, the term of each Receivable may only be extended
once.
(d) The Servicer shall use its best efforts to cause Obligors to
make all payments on the Receivables, whether by check or by direct debit of the
Obligor's bank account, to be made directly to one or more Lockbox Banks, acting
as agent for the Trust pursuant to a Lockbox Agreement. Amounts received by a
Lockbox Bank in respect of the Receivables may initially be deposited into a
demand deposit account maintained by the Lockbox Bank as agent for the Trust and
for other owners of automobile receivables serviced by the Servicer. The
Servicer shall use its best efforts to cause any Lockbox Bank to deposit all
payments on the Receivables in the Lockbox Account no later than the Business
Day after receipt, and to cause all amounts credited to the Lockbox Account on
account of such payments to be transferred to the Collection Account, no later
than the second Business Day after receipt of such payments. The Lockbox Account
shall be a demand deposit account held by the Lockbox Bank, or at the request of
the Certificate Insurer (unless an Insurer Default shall have occurred and be
continuing) an Eligible Account satisfying clause (i) of the definition thereof.
Any payments on the Receivables inadvertently received by the Servicer shall be
deposited directly into the Local Collection Account, and the Servicer shall
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cause the Local Bank to deposit all such payments on the Receivables in
the Collection Account no later than the second Business Day after receipt
of such payments.
Prior to the Closing Date, the Servicer shall have notified each
Obligor that makes its payments on the Receivables by check to make such
payments thereafter directly to the Lockbox Bank (except in the case of Obligors
that have already been making such payments to the Lockbox Bank).
Notwithstanding any Lockbox Agreement, or any of the provisions
of this Agreement relating to the Lockbox Agreement, the Servicer shall remain
obligated and liable to the Trustee and Certificateholders for servicing and
administering the Receivables and the other Trust Property in accordance with
the provisions of this Agreement without diminution of such obligation or
liability by virtue thereof.
In the event the Servicer shall for any reason no longer be
acting as such, the Backup Servicer or successor Servicer shall thereupon assume
all of the rights and, from the date of assumption, all of the obligations of
the outgoing Servicer under the Lockbox Agreement. The Backup Servicer or any
other successor Servicer shall not be liable for any acts, omissions or
obligations of the Servicer prior to such succession. In such event, the
successor Servicer shall be deemed to have assumed all of the outgoing
Servicer's interest therein and to have replaced the outgoing Servicer as a
party to each such Lockbox Agreement to the same extent as if such Lockbox
Agreement had been assigned to the successor Servicer, except that the outgoing
Servicer shall not thereby be relieved of any liability, or obligations on the
part of the outgoing Servicer to the Lockbox Bank under such Lockbox Agreement.
The outgoing Servicer shall, upon request of the Trustee, but at the expense of
the outgoing Servicer, deliver to the successor Servicer all documents and
records relating to each such Agreement and an accounting of amounts collected
and held by the Lockbox Bank and otherwise use its best efforts to effect the
orderly and efficient transfer of any Lockbox Agreement to the successor
Servicer. In the event that the Certificate Insurer (so long as an Insurer
Default shall not have occurred and be continuing) or a Certificate Majority (if
an Insurer Default shall have occurred and be continuing) elects to change the
identity of the Lockbox Bank, the Servicer, at its expense, shall cause the
Lockbox Bank to deliver, at the direction of the Certificate Insurer (so long as
an Insurer Default shall not have occurred and be continuing) or a Certificate
Majority (if an Insurer Default shall have occurred and be continuing) to the
Trustee or a successor Lockbox Bank, all documents and records relating to the
Receivables and all amounts held (or thereafter received) by the Lockbox Bank
(together with an accounting of such amounts) and shall otherwise use its best
efforts to effect the orderly and efficient transfer of the lockbox arrangements
and the Servicer shall notify the Obligors to make payments to the Lockbox
Account established by the successor.
(e) The Servicer shall remit all payments by or on behalf of the
Obligors received directly by the Servicer to the Local Collection Account,
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without deposit into any intervening account as soon as practicable, but
in no event later than the Business Day after receipt thereof.
Section 4.3. Realization Upon Receivables. (a) Consistent with
the standards, policies and procedures required by this Agreement, the Servicer
shall use its best efforts to repossess (or otherwise comparably convert the
ownership of) and liquidate any Financed Vehicle securing a Receivable with
respect to which the Servicer has determined that payments thereunder are not
likely to be resumed, as soon as is practicable after default on such Receivable
but in no event later than the date on which ninety percent or more of a
Scheduled Payment has become 120 or more days delinquent. The Servicer is
authorized to follow such customary practices and procedures as it shall deem
necessary or advisable, consistent with the standard of care required by Section
4.1, which practices and procedures may include reasonable efforts to realize
upon any recourse to Dealers, selling the related Financed Vehicle at public or
private sale, the submission of claims under an Insurance Policy and other
actions by the Servicer in order to realize upon such a Receivable. The
foregoing is subject to the provision that, in any case in which the Financed
Vehicle shall have suffered damage, the Servicer shall not expend funds in
connection with any repair or towards the repossession of such Financed Vehicle
unless it shall determine in its discretion that such repair and/or repossession
shall increase the proceeds of liquidation of the related Receivable by an
amount greater than the amount of such expenses. All amounts received upon
liquidation of a Financed Vehicle shall be remitted directly by the Servicer to
the Collection Account without deposit into any intervening account as soon as
practicable, but in no event later than the Business Day after receipt thereof.
The Servicer shall be entitled to recover all reasonable expenses incurred by it
in the course of repossessing and liquidating a Financed Vehicle, but only out
of the cash proceeds of such Financed Vehicle, any deficiency obtained from the
Obligor or any amounts received from the related Dealer, which amounts may be
retained by the Servicer (and shall not be required to be deposited in the
Collection Account) to the extent of such expenses. The Servicer shall recover
such reasonable expenses based on the information contained in the Servicer's
Certificate delivered on the related Determination Date. The Servicer shall pay
on behalf of the Trust any personal property taxes assessed on repossessed
Financed Vehicles; the Servicer shall be entitled to reimbursement of any such
tax from Liquidation Proceeds with respect to such Receivable.
(b) If the Servicer elects to commence a legal proceeding to
enforce a Dealer Agreement or Dealer Assignment, the act of commencement shall
be deemed to be an automatic assignment from the Trustee to the Servicer of the
rights under such Dealer Agreement and Dealer Assignment for purposes of
collection only. If, however, in any enforcement suit or legal proceeding, it is
held that the Servicer may not enforce a Dealer Agreement or Dealer Assignment
on the grounds that it is not a real party in interest or a Person entitled to
enforce the Dealer Agreement or Dealer Assignment, the Trustee, at the
Servicer's expense, or the Seller, at the Seller's expense, shall take such
steps as the Servicer deems necessary to enforce the Dealer Agreement or Dealer
Assignment, including bringing suit in its name or the name of the Seller or of
the Trustee for the benefit of the Certificate holders. All amounts recovered
shall be remitted directly by the Servicer to the Collection Account
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without deposit into any intervening account as soon as practicable, but
in no event later than the Business Day after receipt thereof.
Section 4.4. Insurance. (a) The Servicer shall monitor the status
of the insurance policies referred to in Section 3.5(a)(xxiii) in accordance
with its customary servicing procedures. If the Servicer shall determine that an
Obligor has failed to obtain or maintain a physical loss and damage insurance
policy covering the related Financed Vehicle which satisfies the conditions set
forth in clause (i) of Section 3.5(a) (xxiii) (including during the repossession
of such Financed Vehicle) the Servicer shall be diligent in carrying on its
customary servicing procedures to enforce the rights of the holder of the
Receivable thereunder to ensure that the Obligor obtains such physical loss and
damage insurance.
(b) The Servicer may sue to enforce or collect upon the Insurance
Policies, in its own name, if possible, or as agent of the Trust. If the
Servicer elects to commence a legal proceeding to enforce an Insurance Policy,
the act of commencement shall be deemed to be an automatic assignment of the
rights of the Trust under such Insurance Policy to the Servicer for purposes of
collection only. If, however, in any enforcement suit or legal proceeding it is
held that the Servicer may not enforce an Insurance Policy on the grounds that
it is not a real party in interest or a holder entitled to enforce the Insurance
Policy, the Trustee, on behalf of the Trust, at the Servicer's expense, or the
Seller, at the Seller's expense, shall take such steps as the Servicer deems
necessary to enforce such Insurance Policy, including bringing suit in its name
or the name of the Trustee for the benefit of the Certificate holders.
(c) The Servicer shall maintain a vendor's single interest or
other collateral protection insurance policy with respect to all Financed
Vehicles ("Collateral Insurance") which policy by its terms insures against
physical damage in the event any Obligor fails to maintain physical damage
insurance with respect to the related Financed Vehicle. ACC or OFL-A will be
named insureds under all policies of Collateral Insurance and the Trustee will
be named as the loss payee. Each Financed Vehicle was covered by Collateral
Insurance providing coverage upon repossession of such Financed Vehicle. The
Servicer shall maintain Collateral Insurance at all times unless the amounts
required in accordance with the definition of Requisite Amount are deposited in
the Spread Account.
(d) Costs incurred by the Servicer in maintaining such Collateral
Insurance shall be paid by the Servicer. The Servicer will cause ACC and OFL-A
to be named as named insureds and the Trustee to be named as loss payee under
all policies of Collateral Insurance.
Section 4.5. Maintenance of Security Interests in Vehicles. (a)
Consistent with the policies and procedures required by this Agreement, the
Servicer shall take such steps as are necessary to maintain perfection of the
security interest created by each Receivable in the related Financed Vehicle on
behalf of the Trust, including but not limited to obtaining the execution by the
Obligors and the recording, registering, filing, re-recording, re-filing, and
re-registering of all security agreements, financing statements and continuation
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statements as are necessary to maintain the security interest granted by the
Obligors under the respective Receivables. The Trustee hereby authorizes the
Servicer, and the Servicer agrees, to take any and all steps necessary to
re-perfect such security interest on behalf of the Trust as necessary because of
the relocation of a Financed Vehicle or for any other reason. In the event that
the assignment of a Receivable to the Trustee on behalf of the Trust is
insufficient, without a notation on the related Financed Vehicle's certificate
of title, or without fulfilling any additional administrative requirements under
the laws of the state in which the Financed Vehicle is located, to perfect a
security interest in the related Financed Vehicle in favor of the Trust, the
parties hereto agree that OFL-A's, American Credit Corporation's (in its
capacity as predecessor to ACC) or ACC's (in its individual capacity and as the
successor to American Credit Corporation) designation as the secured party on
the certificate of title is, with respect to each secured party, as applicable,
in its capacity as agent of the Trust.
(b) So long as an Insurer Default shall not have occurred and be
continuing, upon the occurrence of an Insurance Agreement Event of Default, the
Certificate Insurer may instruct the Trustee and the Servicer to take or cause
to be taken such action as may, in the opinion of counsel to the Certificate
Insurer, be necessary or desirable to perfect or re-perfect the security
interests in the Financed Vehicles securing the Receivables in the name of the
Trustee on behalf of the Trust by amending the title documents of such Financed
Vehicles or by such other reasonable means as may, in the opinion of counsel to
the Certificate Insurer, be necessary or prudent. If an Insurer Default shall
have occurred and be continuing, upon the occurrence of a Servicer Termination
Event, the Trustee and the Servicer shall take or cause to be taken such action
as may, in the opinion of counsel acceptable to the Trustee and the Sponsor, be
necessary to perfect or re-perfect the security interests in the Financed
Vehicles securing the Receivables in the name of the Trustee on behalf of the
Trust by amending the title documents of such Financed Vehicles or by such other
reasonable means as may, in the opinion of counsel to the Trustee, be necessary
or prudent. ACC hereby agrees to pay all expenses related to such perfection or
re-perfection and to take all action necessary therefor. In addition, prior to
the occurrence of an Insurance Agreement Event of Default, the Certificate
Insurer may (unless an Insurer Default shall have occurred and be continuing)
instruct the Trustee and the Servicer to take or cause to be taken such action
as may, in the opinion of counsel to the Certificate Insurer, be necessary to
perfect or re-perfect the security interest in the Financed Vehicles underlying
the Receivables in the name of the Trustee, including by amending the title
documents of such Financed Vehicles or by such other reasonable means as may, in
the opinion of counsel to the Certificate Insurer, be necessary or prudent;
provided, however, that (unless an Insurer Default shall have occurred and be
continuing) if the Certificate Insurer requests that the title documents be
amended prior to the occurrence of an Insurance Agreement Event of Default, the
out-of-pocket expenses of the Servicer or the Trustee in connection with such
action shall be reimbursed to the Servicer or the Trustee, as applicable, by the
Certificate Insurer.
Section 4.6. Covenants, Representations and Warranties of
Servicer. The Servicer hereby makes the following representations, warranties
and covenants to the other parties hereto and the Certificate Insurer on which
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the Trustee shall rely in accepting the Receivables in trust and issuing the
Certificates and on which the Certificate Insurer shall rely in issuing the
Policy.
(a) The Servicer covenants as follows:
(i) Liens in Force. The Financed Vehicle securing each Receivable
shall not be released in whole or in part from the security interest
granted by the Receivable, except upon payment in full of the Receivable
or as otherwise contemplated herein;
(ii) No Impairment. The Servicer shall do nothing to impair the
rights of the Trust or the Certificateholders in the Receivables,
the Dealer Agreements, the Dealer Assignments, the Insurance
Policies or the other Trust Property;
(iii) No Amendments. The Servicer shall not extend or otherwise
amend the terms of any Receivable, except in accordance with Section
4.2; and
(iv) Servicing of Receivables. The Servicer shall service the
Receivables as required by the terms of this Agreement and in material
compliance with the current Servicing Procedures Manual for servicing
all its other comparable motor vehicle receivables.
(b) The Servicer represents and warrants to the Sponsor, the
Trustee, the Certificate Insurer and the Certificateholders as of the Closing
Date as to itself:
(i) Organization and Good Standing. The Servicer has been duly
organized and is validly existing and in good standing under the laws of
the State of Delaware, with power, authority and legal right to own its
properties and to conduct its business as such properties are currently
owned and such business is currently conducted, and had at all relevant
times, and now has, power, authority and legal right to enter into and
perform its obligations under this Agreement;
(ii) Due Qualification. The Servicer is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of property or the conduct of its business (involving
the servicing of the Receivables as required by this Agreement) requires
or shall require such qualification;
(iii) Power and Authority. The Servicer has the power and
authority to execute and deliver this Agreement and its Related
Documents and to carry out its terms and their terms, respectively, and
the execution, delivery and performance of this Agreement and the
Servicer's Related Documents have been duly authorized by the Servicer
by all necessary corporate action;
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(iv) Binding Obligation. This Agreement and the Servicer's
Related Documents shall constitute legal, valid and binding obligations
of the Servicer enforceable in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, or other similar laws affecting the enforcement of
creditors' rights generally and by equitable limitations on the
availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law;
(v) No Violation. The consummation of the transactions
contemplated by this Agreement and the Servicer's Related Documents, and
the fulfillment of the terms of this Agreement and the Servicer's
Related Documents, shall not conflict with, result in any breach of any
of the terms and provisions of, or constitute (with or without notice or
lapse of time) a default under, the certificate of incorporation or
bylaws of the Servicer, or any indenture, agreement, mortgage, deed of
trust or other instrument to which the Servicer is a party or by which
it is bound or any of its properties are subject, or result in the
creation or imposition of any Lien upon any of its properties pursuant
to the terms of any such indenture, agreement, mortgage, deed of trust
or other instrument, other than this Agreement, or violate any law,
order, rule or regulation applicable to the Servicer of any court or of
any federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Servicer or
any of its properties, or in any way materially adversely affect the
interest of the Certificateholders or the Trust in any Receivable, or
affect the Servicer's ability to perform its obligations under this
Agreement;
(vi) No Proceedings. There are no proceedings or investigations
pending or, to the Servicer's knowledge, threatened against the
Servicer, before any court, regulatory body, administrative agency or
other tribunal or governmental instrumentality having jurisdiction over
the Servicer or its properties (A) asserting the invalidity of this
Agreement or any of the Related Documents, (B) seeking to prevent the
issuance of the Certificates or the consummation of any of the
transactions contemplated by this Agreement or any of the Related
Documents, (C) seeking any determination or ruling that might materially
and adversely affect the performance by the Servicer of its obligations
under, or the validity or enforceability of, this Agreement or any of
the Related Documents, (D) involving the Servicer and which might
adversely affect the federal income tax or other federal, state or local
tax attributes of the Certificates, or (E) that could have a material
adverse effect on the Receivables. To the Servicer's knowledge, there
are no proceedings or investigations pending or threatened against the
Servicer, before any court, regulatory body, administrative agency or
other tribunal or governmental instrumentality having jurisdiction over
the Servicer or its properties relating to the Servicer which might
adversely affect the federal income tax or other federal, state or local
tax attributes of the Certificates;
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(vii) Approvals. All approvals, authorizations, consents, orders
or other actions of any person, corporation or other organization, or of
any court, governmental agency or body or official, required in
connection with the execution and delivery by the Servicer of this
Agreement and the consummation of the transactions contemplated hereby
have been or will be taken or obtained on or prior to the Closing Date.
(viii) No Consents. The Servicer is not required to obtain the
consent of any other party or any consent, license, approval or
authorization, or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement;
(ix) Collateral Insurance. As of the Closing Date, the Servicer
maintained Collateral Insurance which policy by its terms insured
against physical damage in the event any Obligor fails to maintain
physical damage insurance with respect to the related Financed Vehicle.
OFL-A and ACC are named as named insured under all policies of
Collateral Insurance and the Trust is named as loss payee. As of the
Closing Date, each Financed Vehicle was covered by Collateral Insurance
providing coverage upon repossession of such Financed Vehicle.
(x) Chief Executive Office. The chief executive office of ACC
is located at 12750 High Bluff Drive, Suite 320, San Diego, California
92130.
Section 4.7. Purchase of Receivables Upon Breach of Covenant or
Representation and Warranty. The Seller, the Servicer, the Sponsor or the
Trustee, as the case may be, shall inform the other parties to this Agreement
and the Certificate Insurer promptly, in writing, upon the discovery of any
breach of the Servicer's representations and warranties and covenants pursuant
to Sections 4.5(a) or 4.6(a); provided, however, that the failure to give any
such notice shall not derogate from any obligation of the Servicer hereunder to
repurchase any Receivable; provided, further that, the Trustee and the Backup
Servicer shall have no duty to inquire into or to investigate the breach of any
such representations and warranties and covenants. Unless the breach shall have
been cured by the last day of the first full calendar month following the
discovery by or notice to the Servicer of the breach, the Servicer shall have an
obligation, and the Trustee shall (provided that it either has made such
discovery or has received such notice thereof) enforce such obligation of the
Servicer, to repurchase any Receivable materially and adversely affected by the
breach. The Trustee shall notify the Sponsor and the Certificate Insurer
promptly, in writing, of any failure by the Servicer to so repurchase any
Receivable. In consideration of the purchase of the Receivable, the Servicer
shall remit the Purchase Amount in the manner specified in Section 5.4.
In addition to the foregoing and notwithstanding whether the
related Receivable shall have been purchased by the Servicer, the Servicer shall
indemnify the Seller, the Trustee, the Backup Servicer, the Collateral Agent,
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the Certificate Insurer, the Trust, the Sponsor and the Certificateholders
against all costs, expenses, losses, damages, claims and liabilities,
including reasonable fees and expenses of counsel, which may be asserted
against or incurred by any of them as a result of third party claims arising
out of the events or facts giving rise to a breach of the covenants or
representations and warranties set forth in Sections 4.5(a) or 4.6.
Section 4.8. Total Servicing Fee; Payment of Compensating
Interest; Payment of Certain Expenses by Servicer. (a) On each Distribution
Date, the Servicer shall be entitled to receive out of the Collection Account
the Basic Servicing Fee and any Supplemental Servicing Fee for the related
Collection Period pursuant to Section 5.5.
(b) On or prior to each Determination Date, the Servicer shall
deposit in the Collection Account with respect to any Prepayment received on a
Receivable during the related Collection Period, out of its own funds without
any right of reimbursement therefor, an amount equal to the difference between
(x) 30 days' interest at an interest rate at the related Coupon Rate on the
Principal Balance of such Receivable as of the first day of the related
Collection Period and (y) the interest actually paid by the Obligor with respect
to the Receivable during such Collection Period (any such amount paid by the
Servicer, "Compensating Interest"). The Servicer shall in no event be required
to pay Compensating Interest with respect to any Collection Period in an amount
in excess of the aggregate Basic Servicing Fee received by the Servicer with
respect to all Receivables for the related Collection Period. In the event that
the Servicer is terminated pursuant to Section 10.2 the terminated Servicer
shall be required to pay Compensating Interest during the term of the Backup
Servicer and any successor Servicer. The terminated Servicer shall in no event
be required to pay Compensating Interest with respect to any Collection Period
in an amount in excess of the aggregate Basic Servicing Fee that would otherwise
be paid to the Servicer with respect to all Receivables during the Collection
Period.
(c) The Servicer shall be required to pay all expenses incurred
by it in connection with its activities under this Agreement (including taxes
imposed on the Servicer, expenses incurred in connection with distributions and
reports to Certificateholders and the Certificate Insurer and all other fees and
expenses of the Trust including taxes levied or assessed against the Trust, and
claims against the Trust in respect of indemnification not expressly stated
under this Agreement to be for the account of the Trust). The Servicer shall be
liable for the fees and expenses of the Trustee, the Backup Servicer, the
Collateral Agent, the Lockbox Bank (and any fees under the Lockbox Agreement)
and the Independent Accountants.
Section 4.9. Servicer's Certificate. (a) No later than 10:00 a.m.
New York City time on each Determination Date, the Servicer shall deliver to the
Trustee, the Backup Servicer, the Certificate Insurer, the Collateral Agent, the
Sponsor and each Rating Agency a Servicer's Certificate executed by a
Responsible Officer of the Servicer containing, among other things, (i) all
information necessary to enable the Trustee to make any withdrawal and deposit
required by Section 6.3, to give any notice required by Sections 6.3 or 6.4 and
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make the distributions required by Section 5.5, (ii) all information necessary
to enable the Trustee to send the statements to Certificateholders and the
Certificate Insurer required by Section 5.8, (iii) a listing of all Warranty
Receivables and Administrative Receivables purchased as of the related Deposit
Date, identifying the Receivables so purchased, and (iv) all information
necessary to enable the Trustee to reconcile all deposits to, and withdrawals
from, the Collection Account for the related Collection Period and Distribution
Date, including the accounting required by Section 5.7. Receivables purchased by
the Servicer or by the Seller or ACC or the Sponsor on the related Deposit Date
and each Receivable which became a Liquidated Receivable or which was paid in
full during the related Collection Period shall be identified by account number
(as set forth in the Schedule of Receivables). A copy of such certificate may be
obtained by any Certificateholder by a request in writing to the Trustee
addressed to the Corporate Trust Office.
(b) In addition to the information required by Section 4.9(a),
the Servicer shall include in the copy of the Servicer's Certificate delivered
to the Certificate Insurer and the Sponsor (i) the Delinquency Ratio, Average
Delinquency Ratio, the Net Loss Rate, the Cumulative Default Rate and the
Cumulative Loss Rate for such Determination Date, (ii) whether any Trigger Event
has occurred as of such Determination Date, (iii) whether any Trigger Event that
may have occurred as of a prior Determination Date is deemed cured as of such
Determination Date, and (iv) whether to the knowledge of the Servicer an
Insurance Agreement Event of Default has occurred.
Section 4.10. Annual Statement as to Compliance; Notice of
Servicer Termination Event. (a) The Servicer shall deliver to the Trustee, the
Backup Servicer, the Certificate Insurer, the Sponsor, the Certificateholders
and each Rating Agency, on or before September 30 (or 90 days after the end of
the Servicer's fiscal year, if other than June 30) of each year, beginning on
the first September 30 (or other applicable date) next following the date that
is six months after the Closing Date, an Officer's Certificate, dated as of June
30 (or other applicable date) of such year, stating that (i) a review of the
activities of the Servicer during the preceding 12-month period (or such other
period as shall have elapsed from the Closing Date to the date of the first such
certificate) and of its performance under this Agreement has been made under
such officer's supervision, and (ii) to such officer's knowledge, based on such
review, the Servicer has fulfilled all its obligations under this Agreement
throughout such period, or, if there has been a default in the fulfillment of
any such obligation, specifying each such default known to such officer and the
nature and status thereof.
(b) The Servicer shall deliver to the Trustee, the Backup
Servicer, the Certificate Insurer, the Collateral Agent, the Sponsor, the
Certificateholders and each Rating Agency, promptly after having obtained
knowledge thereof, but in no event later than two Business Days thereafter,
written notice in an Officer's Certificate of any event which with the giving of
notice or lapse of time, or both, would become a Servicer Termination Event
under Section 10.1(a). The Seller or the Servicer shall deliver to the Trustee,
the Backup Servicer, the Certificate Insurer, the Collateral Agent, the Servicer
or the Seller (as applicable), the Sponsor, the Certificateholders and
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each Rating Agency promptly after having obtained knowledge thereof, but in no
event later than two Business Days thereafter, written notice in an Officer's
Certificate of any event which with the giving of notice or lapse of time, or
both, would become a Servicer Termination Event under any other clause of
Section 10.1.
Section 4.11. Annual Independent Accountants' Report. (a) The
Servicer shall, at its expense, cause a firm of nationally recognized
independent certified public accountants (the "Independent Accountants"), who
may also render other services to the Servicer or to the Seller, to deliver to
the Trustee, the Backup Servicer, the Certificate Insurer, the Sponsor, the
Certificateholders and each Rating Agency, on or before September 30 (or 90 days
after the end of the Servicer's fiscal year, if other than June 30) of each
year, beginning on the first September 30 (or other applicable date) after the
date that is six months after the Closing Date (but in no event later than
September 30, 1997), with respect to the twelve months ended the immediately
preceding June 30 (or other applicable date) (or such other period as shall have
elapsed from the Closing Date to the date of such certificate), a statement (the
"Accountant's Report") addressed to the Board of Directors of the Servicer, to
the Trustee, the Backup Servicer, the Sponsor and to the Certificate Insurer, to
the effect that such firm has audited the financial statements of the Servicer
and issued its report thereon and that such audit (1) was made in accordance
with generally accepted auditing standards, and accordingly included such tests
of the accounting records and such other auditing procedures as such firm
considered necessary in the circumstances; (2) included an examination of
documents and records relating to the servicing of automobile installment sales
contracts under pooling and servicing agreements substantially similar one to
another (such statement to have attached thereto a schedule setting forth the
pooling and servicing agreements covered thereby, including this Agreement); (3)
included an examination of the delinquency and loss statistics relating to the
Servicer's portfolio of automobile installment sales contracts; and (4) except
as described in the statement, disclosed no exceptions or errors in the records
relating to automobile and light truck loans serviced for others that, in the
firm's opinion, generally accepted auditing standards requires such firm to
report. The Accountants' Report shall further state that (1) a review in
accordance with agreed upon procedures was made of three randomly selected
Servicer's Certificates for the Trust; (2) except as disclosed in the Report, no
exceptions or errors in the Servicer's Certificates so examined were found; and
(3) the delinquency and loss information relating to the Receivables contained
in the Servicer Certificates were found to be accurate.
(b) The Accountants' Report shall also indicate that the firm is
independent of the Seller and the Servicer within the meaning of the Code of
Professional Ethics of the American Institute of Certified Public Accountants.
(c) A copy of the Accountants' Report may be obtained by any
Certificate holder by a request in writing to the Trustee addressed to the
Corporate Trust Office.
Section 4.12. Access to Certain Documentation and Information
Regarding Receivables. The Servicer shall provide to representatives of the
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Trustee, the Backup Servicer, the Sponsor and the Certificate Insurer
reasonable access to the documentation regarding the Receivables. Each of
the Seller and Servicer will permit any authorized representative or agent
designated by the Sponsor to visit and inspect any of the properties of the
Seller or Servicer, as the case may be, to examine the corporate books and
financial records of the Seller or Servicer, as the case may be, its records
relating to the Receivables, and make copies thereof or extracts therefrom and
to discuss the affairs, finances, and accounts of the Seller or Servicer, as the
case may be, with its principal officers, as applicable, and its independent
accountants. Any expense incident to the exercise by the Sponsor of any right
under this Section 4.12 shall be borne by ACC, so long as ACC is the Servicer.
The Servicer shall provide such access to any Certificateholder only in such
cases where the Servicer is required by applicable statutes or regulations
(whether applicable to the Servicer or to such Certificateholder) to permit such
Certificateholder to review such documentation. In each case, such access shall
be afforded without charge but only upon reasonable request and during normal
business hours. Nothing in this Section 4.12 shall derogate from the obligation
of the Servicer to observe any applicable law prohibiting disclosure of
information regarding the Obligors, and the failure of the Servicer to provide
access as provided in this Section 4.12 as a result of such obligation shall not
constitute a breach of this Section 4.12. Any Certificateholder, by its
acceptance of a Certificate (or by acquisition of its beneficial interest
therein), shall be deemed to have agreed to keep confidential and not to use for
its own benefit any information obtained by it pursuant to this Section 4.12,
except as may be required by applicable law.
Section 4.13. Monthly Tape. On or before the fourth Business Day,
but in no event later than the fifth calendar day, of each month, the Servicer
will deliver to the Trustee, the Sponsor, and the Backup Servicer a computer
tape and a diskette (or any other electronic transmission acceptable to the
Trustee, the Sponsor, and the Backup Servicer) in a format acceptable to the
Trustee, the Sponsor and the Backup Servicer containing the information with
respect to the Receivables as of the preceding Record Date necessary for
preparation of the Servicer's Certificate relating to the immediately succeeding
Determination Date and necessary to determine the application of collections as
provided in Section 5.3. The Backup Servicer shall use such tape or diskette (or
other electronic transmission acceptable to the Trustee and the Backup Servicer)
to verify the Servicer's Certificate delivered by the Servicer, and in the event
that the Backup Servicer discovers a discrepancy or discrepancies, the Backup
Servicer shall certify to the Certificate Insurer that it has verified the
Servicer's Certificate in accordance with this Section 4.13 and shall notify the
Servicer and the Certificate Insurer of any such discrepancies, in each case, on
or before the second Business Day following the Determination Date. In the event
that the Backup Servicer reports any discrepancies, the Servicer and the Backup
Servicer shall attempt to reconcile such discrepancies prior to the related
Deficiency Claim Date, but in the absence of a reconciliation, the Servicer's
Certificate shall control for the purpose of calculations and distributions with
respect to the related Distribution Date. In the event that the Backup Servicer
and the Servicer are unable to reconcile discrepancies with respect to a
Servicer's Certificate by the related Distribution Date, the Servicer shall
cause the Independent Accountants, at the Servicer's expense, to audit the
Servicer's Certificate and, prior to the fourth Business Day, but in no
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event later than the fifth calendar day, of the following month, reconcile the
discrepancies. The effect, if any, of such reconciliation shall be reflected
in the Servicer's Certificate for such next succeeding Determination Date.
In addition, the Servicer shall, if so requested by the
Certificate Insurer (unless an Insurer Default shall have occurred and be
continuing) deliver to the Backup Servicer its Collection Records and its
Monthly Records within one Business Day of demand therefor and a computer tape
containing as of the close of business on the date of demand all of the data
maintained by the Servicer in computer format in connection with servicing the
Receivables.
Other than the duties specifically set forth in this Agreement,
the Backup Servicer shall have no obligations hereunder, including, without
limitation, to supervise, verify, monitor or administer the performance of the
Servicer. The Backup Servicer shall have no liability for any actions taken or
omitted by the Servicer. The duties and obligations of the Backup Servicer shall
be determined solely by the express provisions of this Agreement and no implied
covenants or obligations shall be read into this Agreement against the Backup
Servicer.
Section 4.14. Retention and Termination of Servicer. The Servicer
hereby covenants and agrees to act as such under this Agreement for an initial
term, commencing on the Closing Date and ending on September 30, 1996, which
term shall be extendible by the Certificate Insurer for successive quarterly
terms ending on each successive December 31, March 31, June 30 and September 30
(or, pursuant to revocable written standing instructions from time to time to
the Servicer and the Trustee, for any specified number of terms greater than
one), until the termination of the Trust. Each such notice (including each
notice pursuant to standing instructions, which shall be deemed delivered at the
end of successive quarterly terms for so long as such instructions are in
effect) (a "Servicer Extension Notice") shall be delivered by the Certificate
Insurer to the Trustee and the Servicer. The Servicer hereby agrees that, as of
the date hereof and upon its receipt of any such Servicer Extension Notice, the
Servicer shall become bound, for the initial term beginning on the date hereof
and for the duration of the term covered by such Notice, to continue as the
Servicer subject to and in accordance with the other provisions of this
Agreement. Until such time as an Insurer Default shall have occurred and be
continuing, the Trustee agrees that if as of the fifteenth day prior to the last
day of any term of the Servicer the Trustee shall not have received any Servicer
Extension Notice from the Certificate Insurer, the Trustee will, within five
days thereafter, give written notice of such non-receipt to the Certificate
Insurer, the Sponsor, the Backup Servicer (or any alternate successor servicer
appointed by the Certificate Insurer pursuant to Section 10.3(b)) and the
Servicer and the Servicer's term shall not be extended unless a Servicer
Extension Notice is received on or before the last day of such term.
Section 4.15. Fidelity Bond. The Servicer shall maintain a
fidelity bond in such form and amount as is customary for entities acting as
custodian of funds and documents in respect of consumer contracts on behalf of
institutional investors.
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ARTICLE V
DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS
Section 5.1. Accounts. (a) The Servicer shall establish the
Collection Account in the name of the Trustee for the benefit of the
Certificateholders. The Servicer shall also establish the Policy Payments
Account in the name of the Trustee for the benefit of the Class A
Certificateholders. Each of the Collection Account and the Policy Payments
Account shall be an Eligible Account and initially shall be a segregated trust
account established with the Trustee and maintained with the Trustee.
(b) All amounts held in the Collection Account shall, to the
extent permitted by applicable laws, rules and regulations, be invested, as
directed in writing by the Servicer, in Eligible Investments that mature not
later than one Business Day prior to the Distribution Date for the Collection
Period to which such amounts relate. Any such written direction shall certify
that any such investment is authorized by this Section 5.1. Investments in
Eligible Investments shall be made in the name of the Trustee on behalf of the
Trust, and such investments shall not be sold or disposed of prior to their
maturity. The Trustee may trade with itself or an Affiliate in the purchase or
sale of Eligible Investments. Any investment of funds in the Collection Account
shall be made in Eligible Investments held by a financial institution with
respect to which (a) such institution has noted the Trustee's interest therein
by book entry or otherwise and (b) a confirmation of the Trustee's interest has
been sent to the Trustee by such institution, provided that such Eligible
Investments are (i) specific certificated securities (as such term is used in
Minn. Stat. ss. 336.8-313(1)(d)(i)), and (ii) either (A) in the possession of
such institution or (B) in the possession of a clearing corporation as such term
is used in Minn Stat. ss. 336.8-313(1)(g) in New York or Minnesota, registered
in the name of such clearing corporation, not endorsed for collection or
surrender or any other purpose not involving transfer, not containing any
evidence of a right or interest inconsistent with the Trustee's security
interest therein, and held by such clearing corporation in an account of such
institution. Subject to the other provisions hereof, the Trustee shall have sole
control over each such investment and the income thereon, and any certificate or
other instrument evidencing any such investment, if any, shall be delivered
directly to the Trustee or its agent, together with each document of transfer,
if any, necessary to transfer title to such investment to the Trustee in a
manner which complies with this Section 5.1. All interest, dividends, gains upon
sale and other income from, or earnings on, investments of funds in the
Collection Account shall be deposited in the Collection Account and distributed
on the next Distribution Date pursuant to Section 5.5. The Seller shall deposit
in the Collection Account an amount equal to any net loss on such investments
immediately as realized. The Trustee shall not be liable for any losses suffered
on amounts of Eligible Investments in any account under this Agreement, except
to the extent that the Trustee, in its corporate capacity, is the obligor on any
such Eligible Investments. Amounts in the Policy Payments Account shall not be
invested. On the Closing Date, the Servicer shall deposit, or cause to be
deposited, in the Collection Account (i) all Scheduled Payments and prepayments
of Receivables received by the Local Bank after the Cut-off Date and on or prior
to the Closing Date or received by the Lockbox Bank after the Cut-off Date and
at least two Business Days prior to the Closing Date and (ii) all Liquidation
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Proceeds and proceeds of Insurance Policies realized in respect of a Financed
Vehicle and applied by the Servicer after the Cut-off Date and (iii) any
Compensating Interest.
Section 5.2. Collections. (a) Pursuant to the Lockbox Agreement,
the Lockbox Bank shall remit to the Collection Account within two Business Days
of receipt thereof (i) all payments by or on behalf of the Obligors and (ii) all
Liquidation Proceeds, each as collected during the Collection Period. In
addition, the Servicer shall remit all payments by or on behalf of the Obligors
received by the Servicer with respect to the Receivables (other than Purchased
Receivables), and all Liquidation Proceeds, no later than the Business Day
following receipt directly (without deposit into any intervening account) into
the Local Collection Account, and the Local Bank shall deposit all such payments
on the Receivables into the Collection Account no later than the Business Day
after receipt of such payments. Within one Business Day of the initial issuance
of the Certificates, the Lockbox Bank shall deposit into the Collection Account
the foregoing amounts received during the current Collection Period through such
date of issuance. On the Closing Date, the Servicer or the Seller shall deposit
into the Local Collection Account all payments by or on behalf of the Obligors
on the Receivables and any Liquidation Proceeds received by ACC, the Seller or
the Servicer after the Cut-off Date on or prior to the second Business Day
immediately preceding the Closing Date, and the Local Bank shall deposit all
such payments on the Receivables into the Collection Account no later than the
Business Day after receipt of such payments. The Servicer shall remit
Compensating Interest directly to the Collection Account.
(b) The Servicer will be entitled to be reimbursed from amounts
on deposit in the Collection Account with respect to a Collection Period for
amounts previously deposited in the Collection Account but later determined by
the Servicer or the Lockbox Bank to have resulted from mistaken deposits or
postings or checks returned for insufficient funds. The amount to be reimbursed
hereunder shall be paid to the Servicer on the related Distribution Date
pursuant to Section 5.5(b)(i) upon certification by the Servicer of such amounts
and the provision of such information to the Trustee and the Certificate Insurer
as may be necessary in the opinion of the Certificate Insurer to verify the
accuracy of such certification. In the event that the Certificate Insurer has
not received evidence satisfactory to it of the Servicer's entitlement to
reimbursement pursuant to this Section 5.2(b), the Certificate Insurer shall
(unless an Insurer Default shall have occurred and be continuing) give the
Trustee notice to such effect, following receipt of which the Trustee shall not
make a distribution to the Servicer in respect of such amount pursuant to
Section 5.5, or if the Servicer prior thereto has been reimbursed pursuant to
Section 5.5 or Section 5.7, the Trustee shall withhold such amounts from amounts
otherwise distributable to the Servicer on the next succeeding Distribution
Date.
Section 5.3. Application of Collections. For the purposes of this
Agreement, all collections for a Collection Period shall be applied by the
Servicer as follows:
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(a) With respect to each Receivable (other than a Purchased
Receivable), payments by or on behalf of the Obligor (other than of
Supplemental Servicing Fees with respect to such Receivable, to the
extent collected) shall be applied, in the case of a Rule of 78s
Receivable, first, to the Scheduled Payment of such Rule of 78s
Receivable and, second, to any late fees accrued with respect to such
Rule of 78s Receivable, in the case of a Simple Interest Receivable, to
interest and principal in accordance with the Simple Interest Method,
and in the case of a Rule of 78s Receivable, to interest and principal
in accordance with the actuarial method. With respect to Simple Interest
Receivables, any prepayment of principal during each Collection Period
shall be immediately applied to reduce the principal balance of such
Receivable during such Collection Period. Notwithstanding any of the
foregoing provisions of this Section 5.3(a), if application of any
payment made with respect to a Rule of 78s Receivable to prepay such
Rule of 78s Receivable as provided above would reduce the principal
balance of such Rule of 78s Receivable to zero, only the portion of such
payment that reduces the principal balance of such Rule of 78s
Receivable to zero shall be applied to prepay such Rule of 78s
Receivable. Any remaining portion of such payment and any payments made
thereafter with respect to such Rule of 78s Receivable shall be paid to
the Servicer as additional servicing compensation.
(b) With respect to each Receivable that has become a Purchased
Receivable on any Deposit Date, the Purchase Amount shall be applied,
for purposes of this Agreement only, to interest and principal on the
Receivable in accordance with the terms of the Receivable as if the
Purchase Amount had been paid by the Obligor on the Record Date. The
Servicer shall not be entitled to any Supplemental Servicing Fees with
respect to such a Receivable. Nothing contained herein shall relieve any
Obligor of any obligation relating to any Receivable.
(c) All amounts collected that are payable to the Servicer as
Supplemental Servicing Fees hereunder shall be deposited in the
Collection Account and paid to the Servicer in accordance with Section
5.5(b)(i).
(d) All payments by or on behalf of an Obligor received with
respect to any Purchased Receivable after the Record Date immediately
preceding the Deposit Date on which the Purchase Amount was paid by the
Seller, ACC, the Servicer or the Sponsor shall be paid to the Seller,
ACC, the Servicer or the Sponsor, respectively, and shall not be
included in the Available Funds.
Section 5.4. Additional Deposits. On or before each Deposit Date,
the Servicer, the Seller, ACC or the Sponsor shall deposit into the Collection
Account the aggregate Purchase Amounts with respect to Administrative
Receivables and Warranty Receivables, respectively. All such deposits of
Purchase Amounts shall be made in immediately available funds. On or before each
Draw Date, the Trustee shall remit to the Collection Account any amounts
delivered to the Trustee by the Collateral Agent.
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Section 5.5. Distributions. (a) [Reserved.]
(b) On each Distribution Date, the Trustee shall (x) distribute
all amounts deposited by the Certificate Insurer under Section 5.9 as directed
by the Certificate Insurer in writing, and (y) (based solely on the information
contained in the Servicer's Certificate delivered with respect to the related
Determination Date) distribute the following amounts and in the following order
of priority:
(i) first, from the Distribution Amount, to the Servicer, the
Basic Servicing Fee for the related Collection Period, any Supplemental
Servicing Fees for the related Collection Period, and any amounts
specified in Section 5.2(b), to the extent the Servicer has not
reimbursed itself in respect of such amounts pursuant to Section 5.7;
(ii) second, from the Distribution Amount, to any Lockbox Bank,
Trustee, Backup Servicer, Collateral Agent or Local Bank (including the
Trustee if acting in any such additional capacity), any accrued and
unpaid fees (in each case, to the extent such Person has not previously
received such amount from the Servicer or ACC);
(iii) third, from the Amount Available to the Class A
Certificateholders, the Class A Interest Distributable Amount for such
Distribution Date;
(iv) fourth, from the Amount Available to the Class A
Certificateholders, the sum of (x) the Class A Principal Distributable
Amount for such Distribution Date and (y) the Class A Principal
Carryover Shortfall, if any, for such Distribution Date;
(v) fifth, from the Distribution Amount, to the Certificate
Insurer, to the extent of any amounts owing to the Certificate Insurer
under the Insurance Agreement and not paid, whether or not ACC is also
obligated to pay such amounts;
(vi) sixth, from Available Funds to the Collateral Agent
certain amounts for deposit in the Spread Account up to the Requisite
Amount in accordance with the Spread Account Agreement;
(vii) seventh, from Available Funds to the Class B
Certificateholders, the Class B Interest Distributable Amount for such
Distribution Date;
(viii) eighth, from Available Funds to the Class B
Certificateholders, the sum of (x) the Class B Principal Distributable
Amount for such Distribution Date and (y) the Class B Principal
Carryover Shortfall, if any, for such Distribution Date;
(ix) ninth, to the Spread Account, all remaining Available
Funds; and
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(x) tenth, from the Spread Account, from amounts released
under priority EIGHTH of Section 3.03(b) of the Spread Account
Agreement, as directed by the Seller in the following order (x) first to
the Sponsor in an amount equal to all amounts owed by ACC to the Sponsor
pursuant to Section 5.1(b) of the Purchase Agreement, (y) second, to the
Class B Certificateholders to the extent that any amounts due thereunder
are unpaid and (z) third, to the Class C Certificateholders.
Distributions hereunder to the Sponsor shall be made by the Trustee by check
mailed to the address specified in Section 13.11 or by wire transfer using a
mutually agreeable methodology.
(c) Subject to Section 12.1 respecting the final payment upon
retirement of each Certificate, and provided that the Trustee has received the
applicable Servicer's Certificate, on each Distribution Date the Trustee shall
distribute to each Certificateholder of record on the preceding Record Date
either (i) by wire transfer, in immediately available funds to the account of
such holder at a bank or other entity having appropriate facilities therefor, if
such Certificateholder holds Certificates representing at least $5 million in
Class A Certificate Balance or Class B Certificate Balance as of the Cut-off
Date, and if such Certifi cateholder shall have provided to the Trustee
appropriate written instructions not later than 15 days prior to such
Distribution Date, or (ii) by check mailed to such Certificateholder at the
address of such Holder appearing in the Certificate Register, such Holder's
interest in the Trust of either the Class A Distributable Amount or the Class B
Distributable Amount, as applicable, to the extent funds therefor are
distributed under Section 5.5(b).
(d) Each Certificateholder, by its acceptance of its Certificate,
will be deemed to have consented to the provisions of paragraph (b) above
relating to the priority of distributions, and will be further deemed to have
acknowledged that such Certificateholders will not be entitled to receive
amounts in respect of such distributions until such amounts have been
distributed to such Certificateholder pursuant to such provisions; provided,
that the foregoing shall not restrict the right of any Certificateholder, upon
compliance with the provisions hereof, from seeking to compel the performance of
the provisions hereof by the parties hereto.
In furtherance of and not in limitation of the foregoing, each
Class B Certificateholder and Class C Certificateholder by acceptance of its
Class B Certificate or Class C Certificate, as the case may be, specifically
acknowledges that no amounts shall be received by it, nor shall it have any
right to receive any amounts, unless and until such amounts have been released
pursuant to Section 3.03(b) EIGHTH of the Spread Account Agreement for
distribution to such Class B Certificateholder or Class C Certificateholder, as
the case may be, pursuant to paragraph (b)(x) above. Each Class B
Certificateholder and Class C Certificateholder, by its acceptance of its Class
B Certificate or Class C Certificate, as the case may be, further specifically
acknowledges that it has no right to or interest in any moneys at any time held
pursuant to the Spread Account Agreement or pursuant hereto prior to the release
of such moneys as aforesaid, such moneys being held in trust for the benefit of
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the Certificateholders and the Certificate Insurer, as their interests may
appear prior to such release. Notwithstanding the foregoing, in the event that
it is ever determined that the moneys held in the Spread Account constitute a
pledge of collateral, then the provisions of this Agreement and the Spread
Account Agreement shall be considered to constitute a security agreement and the
Seller, the Class B Certificateholders and the Class C Certificateholders hereby
grant to the Collateral Agent and to the Trustee a first priority perfected
security interest in such amounts, to be applied as set forth in Section 3.03(b)
EIGHTH of the Spread Account Agreement in the case of Spread Account moneys.
Section 5.6. [Reserved.]
Section 5.7. Net Deposits. The Servicer may make the remittances
to be made by it pursuant to Sections 5.2 and 5.4 net of amounts (which amounts
may be netted prior to any such remittance for a Collection Period) to be
distributed to it pursuant to Sections 4.8 and 5.2(b) and (subject to payment by
the Servicer of amounts otherwise payable pursuant to Section 5.5(b)(ii))
5.5(b)(i), for so long as no Servicer Termination Event has occurred and is
continuing; provided, however, that the Servicer shall account for all of such
amounts in the related Servicer's Certificate as if such amounts were deposited
and distributed separately; and provided, further, that if an error is made by
the Servicer in calculating the amount to be deposited or retained by it, with
the result that an amount less than required is deposited in the Collection
Account, the Servicer shall make a payment of the deficiency to the Collection
Account, immediately upon becoming aware, or receiving notice from the Trustee,
of such error.
Section 5.8. Statements to Certificateholders. (a) On each
Distribution Date, the Trustee shall include with each distribution to each
Certificateholder, a statement (which statement shall also be provided to the
Certificate Insurer, the Sponsor and to each Rating Agency) based on information
in the Servicer's Certificate delivered on the related Determination Date
pursuant to Section 4.9, setting forth for the Collection Period relating to
such Distribution Date the following information:
(i) in the case of the Class A and Class B Certificateholders,
the amount of such distribution allocable to principal;
(ii) in the case of the Class A and Class B Certificateholders,
the amount of such distribution allocable to interest;
(iii) the amount of such distribution payable out of amounts
withdrawn from the Spread Account or pursuant to a claim on the Policy;
(iv) the Class A Certificate Balance and the Class B
Certificate Balance, as applicable, (after giving effect to
distributions made on such Distribution Date);
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(v) the amount of fees paid by the Trust with respect to
such Collection Period;
(vi) the amount of the Class A Interest Carryover Shortfall,
Class A Principal Carryover Shortfall, Class B Interest Carryover
Shortfall and Class B Principal Carryover Shortfall, if any, on such
Distribution Date and the change in such amounts from those of the prior
Distribution Date;
(vii) the Class A Certificate Factor and B Certificate Factor
as of such Distribution Date;
(viii) the Delinquency Ratio, Average Delinquency Ratio, the
Net Loss Rate, the Cumulative Default Rate and the Cumulative Loss Rate
for such Determination Date;
(ix) whether any Trigger Event has occurred as of such
Determination Date;
(x) whether any Trigger Event that may have occurred as of a
prior Determination Date is Deemed Cured (as defined in the Spread
Account Agreement), as of such Determination Date;
(xi) whether an Insurance Agreement Event of Default has
occurred; and
(xii) the Pool Factor (after giving effect to distributions made
on such Distribution Date).
Each amount set forth pursuant to subclauses (i) (such amounts broken down by
Class of Certificate), (ii) (such amounts broken down by Class of Certificate),
(v) and (vi) above shall be expressed as a dollar amount per $1,000 of original
principal balance of a Certificate of the related Class.
(b) Within the prescribed period of time for tax reporting
purposes after the end of each calendar year during the term of this Agreement,
the Trustee shall mail, to each Person who at any time during such calendar year
shall have been a Holder of a Certificate, a statement containing the sum of the
amounts set forth in clauses (i), (ii), and (v) (separately indicating amounts
in respect of the Class A Certificates and the Class B Certificates in the case
of (i) and (ii)) and such other information, requested in writing by the
Servicer, if any, as the Servicer determines is reasonably necessary to permit
the Certificateholder to ascertain its share of the gross income and deductions
of the Trust (exclusive of the Supplemental Servicing Fee), for such calendar
year or, in the event such Person shall have been a Holder of a Certificate
during a portion of such calendar year, for the applicable portion of such year,
for the purposes of such Certificateholder's preparation of federal income tax
returns.
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Section 5.9. Optional Deposits by the Certificate Insurer. The
Certificate Insurer shall at any time, and from time to time, with respect to a
Distribution Date, have the option (but shall not be required, except as
provided in Section 6.4 and in accordance with the terms of the Policy) to
deliver amounts to the Trustee for deposit into the Collection Account for any
of the following purposes: (i) to provide funds in respect of the payment of
fees or expenses of any provider of services to the Trust with respect to such
Distribution Date, (ii) to distribute as a component of the Class A Principal
Distributable Amount to the extent that the Class A Certificate Balance as of
the Determination Date preceding such Distribution Date exceeds the Class A
Percentage of the Aggregate Principal Balance as of such Determination Date, or
(iii) to include such amount as part of the Class A Distributable Amount for
such Distribution Date to the extent that without such amount a draw would be
required to be made on the Policy.
ARTICLE VI
THE SPREAD ACCOUNT AND THE POLICY
Section 6.1. Spread Account. The Seller agrees, simultaneously
with the execution and delivery of this Agreement, to execute and deliver a
supplement to the Spread Account Agreement, in the form attached as Exhibit D
hereto, and, pursuant to the terms thereof, to deposit zero dollars in the
Spread Account.
Section 6.2. Policy. ACC, the Servicer, and the Seller agree,
simultaneously with the execution and delivery of this Agreement, to cause the
Certificate Insurer to issue the Policy for the benefit of the Trust in
accordance with the terms thereof.
Section 6.3. Withdrawals from Spread Account. (a) In the event
that the Servicer's Certificate with respect to any Determination Date shall
state that the amount of the Available Funds with respect to such Determination
Date is less than the sum of the amounts payable on the related Distribution
Date pursuant to clauses (i) through (v) of Subsection 5.5(b) (such deficiency
being a "Deficiency Claim Amount") then on the Deficiency Claim Date immediately
preceding such Distribution Date, the Trustee shall deliver to the Collateral
Agent, the Certificate Insurer, and the Servicer, by hand delivery, telex or
facsimile transmission, a written notice (a "Deficiency Notice") specifying the
Deficiency Claim Amount for such Distribution Date. Such Deficiency Notice shall
direct the Collateral Agent to remit such Deficiency Claim Amount (to the extent
of the funds available to be distributed pursuant to the Spread Account
Agreement) to the Trustee for deposit in the Collection Account.
(b) Any Deficiency Notice shall be delivered by 10:00 a.m., New
York City time, on the fourth Business Day preceding such Distribution Date. The
amounts distributed by the Collateral Agent to the Trustee pursuant to a
Deficiency Notice shall be deposited by the Trustee into the Collection Account
pursuant to Section 5.4.
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Section 6.4. Claims Under Policy. (a) In the event that the
Trustee has delivered a Deficiency Notice with respect to any Determination
Date, the Trustee shall determine on the related Draw Date whether the sum of
(i) the amount of Available Funds with respect to such Determination Date (as
stated in the Servicer's Certificate with respect to such Determination Date)
plus (ii) the amount of the Deficiency Claim Amount, if any, to be delivered by
the Collateral Agent to the Trustee pursuant to a Deficiency Notice delivered
with respect to such Distribution Date (as stated in the certificate delivered
on the immediately preceding Deficiency Claim Date by the Collateral Agent
pursuant to Section 3.03(a) of the Spread Account Agreement) would be
insufficient, after giving effect to the distributions required by Section
5.5(b)(i)-(ii), to pay the Class A Interest Distributable Amount and the Class A
Principal Distributable Amount for the related Distribution Date, then in such
event the Trustee shall furnish to the Certificate Insurer (with a copy to the
Sponsor) no later than 12:00 noon New York City time on the related Draw Date a
completed Notice of Deficiency in the amount of the shortfall in amounts so
available to pay the Guaranteed Distributions with respect to such Distribution
Date (the amount of any such shortfall being hereinafter referred to as the
"Policy Claim Amount"). Amounts paid by the Certificate Insurer under the Policy
shall be deposited by the Trustee into the Policy Payments Account and
thereafter into the Collection Account for payment to Class A Certificateholders
on the related Distribution Date (or promptly following payment on a later date
as set forth in the Policy).
(b) Any notice delivered by the Trustee to the Certificate
Insurer pursuant to subsection 6.4(a) shall specify the Policy Claim Amount
claimed under the Policy and shall constitute a "Notice of Deficiency" under the
Policy. In accordance with the provisions of the Policy, the Certificate Insurer
is required to pay to the Trustee the Policy Claim Amount properly claimed
thereunder by 12:00 noon, New York City time, on the later of (i) the third
Business Day following receipt on a Business Day of the Notice of Claim, and
(ii) the applicable Distribution Date. Any payment made by the Certificate
Insurer under the Policy shall be applied solely to the payment of the Class A
Certificates, and for no other purpose.
(c) The Trustee shall (i) receive as attorney-in-fact of each
Certificateholder any Policy Claim Amount from the Certificate Insurer and (ii)
deposit the same in the Collection Account for disbursement to the Class A
Certificateholders as set forth in clauses (iii) and (iv) of subsection 5.5(b).
Any and all Policy Claim Amounts disbursed by the Trustee from claims made under
the Policy shall not be considered payment by the Trust or from the Spread
Account with respect to such Class A Certificates, and shall not discharge the
obligations of the Trust with respect thereto. The Certificate Insurer shall, to
the extent it makes any payment with respect to the Class A Certificates, become
subrogated to the rights of the recipients of such payments to the extent of
such payments. Subject to and conditioned upon any payment with respect to the
Class A Certificates by or on behalf of the Certificate Insurer, the Trustee
shall assign to the Certificate Insurer all rights to the payment of interest or
principal with respect to the Class A Certificates which are then due for
payment to the extent of all payments made by the Certificate Insurer and the
Certificate Insurer may exercise any option, vote, right, power or the like with
respect to the Class A Certificates to the extent that it has made payment
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pursuant to the Policy. To evidence such subrogation, the Certificate
Registrar shall note the Certificate Insurer's rights as subrogee upon
the register of Class A Certificateholders upon receipt from the Certificate
Insurer of proof of payment by the Certificate Insurer of any Class A
Interest Distributable Amount or Class A Principal Distributable Amount.
(d) The Trustee shall be entitled to enforce on behalf of the
Class A Certifi cateholders the obligations of the Certificate Insurer under the
Policy. Notwithstanding any other provision of this Agreement, the Class A
Certificateholders are not entitled to institute proceedings directly against
the Certificate Insurer.
Section 6.5. Preference Claims; Direction of Proceedings. (a) In
the event that the Trustee has received a certified copy of an order of the
appropriate court that any Class A Interest Distributable Amount or Class A
Principal Distributable Amount paid on a Class A Certificate has been avoided in
whole or in part as a preference payment under applicable bankruptcy law, the
Trustee shall so notify the Certificate Insurer, shall comply with the
provisions of the Policy to obtain payment by the Certificate Insurer of such
avoided payment, and shall, at the time it provides notice to the Certificate
Insurer, notify Holders of the Class A Certificates by mail that, in the event
that any Class A Certificateholder's payment is so recoverable, such Class A
Certificateholder will be entitled to payment pursuant to the terms of the
Policy. Pursuant to the terms of the Policy, the Certificate Insurer will make
such payment on behalf of the Class A Certificateholder to the receiver,
conservator, debtorin-possession or trustee in bankruptcy named in the Order (as
defined in the Policy) and not to the Trustee or any Class A Certificateholder
directly (unless a Class A Certificateholder has previously paid such payment to
the receiver, conservator, debtor-in-possession or trustee in bankruptcy, in
which case the Certificate Insurer will make such payment to the Trustee for
distribution to such Class A Certificateholder upon proof of such payment
reasonably satisfactory to the Certificate Insurer).
(b) The Trustee shall promptly notify the Certificate Insurer of
any proceeding or the institution of any action (of which the Trustee has actual
knowledge) seeking the avoidance as a preferential transfer under applicable
bankruptcy, insolvency, receivership, rehabilitation or similar law (a
"Preference Claim") of any distribution made with respect to the Class A
Certificates. Each Holder, by its purchase of Class A Certificates, and the
Trustee hereby agree that so long as an Insurer Default shall not have occurred
and be continuing, the Certificate Insurer may at any time during the
continuation of any proceeding relating to a Preference Claim direct all matters
relating to such Preference Claim including, without limitation, (i) the
direction of any appeal of any order relating to any Preference Claim and (ii)
the posting of any surety, supersedeas or performance bond pending any such
appeal at the expense of the Certificate Insurer, but subject to reimbursement
as provided in the Insurance Agreement. In addition, and without limitation of
the foregoing, as set forth in Section 6.4(c), the Certificate Insurer shall be
subrogated to, and each Class A Certificate holder and the Trustee hereby
delegate and assign, to the fullest extent permitted by law, the rights of the
Trustee and each Class A Certificateholder in the conduct of any proceeding with
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respect to a Preference Claim, including, without limitation, all rights of any
party to an adversary proceeding action with respect to any court order issued
in connection with any such Preference Claim.
Section 6.6. Surrender of Policy. The Trustee shall surrender the
Policy to the Certificate Insurer for cancellation upon its expiration in
accordance with the terms thereof.
ARTICLE VII
THE CERTIFICATES
Section 7.1. The Certificates. (a) Subject to Section 7.1(b), the
Class A Certificates and the Class B Certificates shall be issued in minimum
denominations of $500,000 and integral multiples of $1,000 in excess thereof,
except that one Class A Certificate and one Class B Certificate shall be issued
in a denomination that includes any residual amount. The Certificates shall be
executed on behalf of the Trustee by manual or facsimile signature of any
Responsible Officer of the Trustee having such authority and attested on behalf
of the Trustee by the manual or facsimile signature of a Responsible Officer of
the Trustee. Certificates bearing the manual or facsimile signatures of
individuals who were, at the time when such signatures were affixed, authorized
to sign on behalf of the Trustee shall be valid and binding obligations of the
Trust, notwithstanding that such individuals or any of them have ceased to be so
authorized prior to the execution and delivery of such Certificates. All
Certificates shall be dated the date of their execution.
(b) It is intended that the Class A Certificates be registered so
as to participate in a global book-entry system with the Depository, as set
forth herein. The Class A Certificates shall, except as otherwise provided in
the next paragraph, be initially issued in the form of a single fully registered
Class A Certificate with a denomination equal to the Class A Certificate
Balance. Upon initial issuance, the ownership of each such Class A Certificate
shall be registered in the Certificate Register in the name of Cede & Co., or
any successor thereto, as nominee for the Depository.
The Seller and the Trustee are hereby authorized to execute and
deliver the Representation Letter with the Depository.
With respect to Class A Certificates registered in the
Certificate Register in the name of Cede & Co., as nominee of the Depository,
the Trust and the Trustee shall have no responsibility or obligation to Direct
or Indirect Participants or beneficial owners for which the Depository holds
Class A Certificates from time to time as a Depository. Without limiting the
immediately preceding sentence, the Trust and the Trustee shall have no
responsibility or obligation with respect to (i) the accuracy of the records of
the Depository, Cede & Co., or any Direct or Indirect Participant with respect
to any ownership interest in any Class A Certificate, (ii) the delivery to any
Direct or Indirect Participant or any other Person, other than a
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Certificateholder, of any notice with respect to the Class A Certificates
or (iii) the payment to any Direct or Indirect Participant or any other Person,
other than a Certificate holder, of any amount with respect to any distribution
of principal or interest on the Class A Certificates. No Person other than a
Certificateholder shall receive a certificate evidencing such Class A
Certificate.
Upon delivery by the Depository to the Trustee of written notice
to the effect that the Depository has determined to substitute a new nominee in
place of Cede & Co., the name "Cede & Co." in this Agreement shall refer to such
new nominee of the Depository.
(c) Notwithstanding any other provisions of this Section 7.1 or
of Section 7.3 unless and until a Global Security is exchanged in whole for
Certificates in definitive form, a Global Security may be transferred, in whole,
but not in part, and in the manner provided in this Section 7.1 only by the
Depository to a nominee of such Depository or by a nominee of such Depository to
such Depository or any other nominee of such Depository or by such Depository or
any such nominee to a successor Depository selected or approved by the Trust or
to a nominee of such successor Depository or in the manner specified in Section
7.1(d).
(d) If (i) the Depository for the Class A Certificates
represented by a Global Security at any time notifies the Trust that it is
unwilling or unable to continue as Depository of the Class A Certificates or if
at any time the Depository shall no longer be a clearing agency registered under
the Exchange Act and any other applicable statute or regulation, and a successor
Depository is not appointed or approved by the Trust within 90 days after the
Trust receives such notice or becomes aware of such condition, as the case may
be, (ii) the Trust, at its option, elects to terminate the book-entry system
through the Depository or (iii) after the occurrence of a Servicer Termination
Event, the Certificate Insurer (or, if an Insurer Default exists, either the
Trustee or the Certificateholders evidencing not less than a Certificate
Majority) advises the Depository in writing that the continuation of a
book-entry system through the Depository is no longer in the Certificate
Insurer's or the Certificateholders', as the case may be, best interest, the
Trust will promptly execute, and the Trustee will promptly authenticate and make
available for delivery, Certificates in definitive form, in authorized
denominations and in an aggregate principal amount equal to the principal amount
of the Global Security then outstanding in exchange for such Global Security and
Sections 7.1(b), (c) and (d) hereof shall no longer be applicable to the Class A
Certificates. Upon the exchange of the Global Securities for such Certificates
in definitive form, in authorized denominations, such Global Securities shall be
canceled by the Trustee. Such Certificates in definitive form issued in exchange
of the Global Securities pursuant to this Section 7.1(c) shall be registered in
such names and in such authorized denominations as the Depository, pursuant to
instructions from its Direct or Indirect participants or otherwise, shall
instruct the Trustee. The Trustee may conclusively rely on any such instructions
furnished by the Depository and shall not be liable for any delay in delivery of
such instructions. The Trustee shall make such Certificates available for
delivery to the Persons in whose names such Certificates are so registered.
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(e) Notwithstanding any other provision of this Agreement to the
contrary, so long as any Class A Certificate is registered in the name of Cede &
Co., as nominee of the Depository, all distributions of principal or interest on
such Class A Certificates as the case may be and all notices with respect to
such Class A Certificates as the case may be shall be made and given,
respectively, in the manner provided in the Representation Letter.
Section 7.2. Authentication of Certificates. The Trustee shall
cause the Certificates to be executed on behalf of the Trust, authenticated, and
delivered to or upon the order of the Seller, signed by its chairman of the
board, its vice chairman, its chief financial officer, its president, any vice
president, its treasurer, or any assistant treasurer, its secretary or any
assistant secretary, without further corporate action by the Seller, in exchange
for the Receivables and the other Trust Property, simultaneously with the sale,
assignment and transfer to the Trust of the Receivables, and the delivery to the
Trustee of the Receivable Files and the other Trust Property. Such Certificates
shall be duly executed by the Trustee, in authorized denominations equaling in
the aggregate the Cut-off Date Principal Balance and evidencing the entire
ownership of the Trust. No Certificate shall entitle its holder to any benefit
under the Agreement, or shall be valid for any purpose, unless there shall
appear on such Certificate a certificate of authentication substantially in the
form set forth in Exhibit A or Exhibit B hereto executed by the Trustee by
manual signature of an authorized signatory; such authentication shall
constitute conclusive evidence that such Certificate shall have been duly
authenticated and delivered hereunder. All Certificates shall be dated the date
of their authentication and shall be numbered in the manner determined by the
Trustee.
Section 7.3. Registration of Transfer and Exchange of
Certificates. (a) The Certificate Registrar shall keep or cause to be kept, at
the office or agency maintained pursuant to Section 7.7, a Certificate Register
in which, subject to such reasonable regulations as it may prescribe, the
Trustee shall provide for the registration of Certificates and of transfers and
exchanges of Certificates as herein provided. The Trustee shall be the initial
Certificate Registrar. In the event that, subsequent to the Cut-off Date, the
Trustee notifies the Servicer that it is unable to act as Certificate Registrar,
the Servicer shall appoint another bank or trust company, having an office or
agency located in Minneapolis, Minnesota, agreeing to act in accordance with the
provisions of this Agreement applicable to it, and otherwise acceptable to the
Trustee, to act as successor Certificate Registrar under this Agreement.
The Certificates have not been registered under the Securities
Act or any state securities law. The Certificate Registrar shall not register
the transfer of any Class A Certificate or Class B Certificate or Class C
Certificate unless such resale or transfer is pursuant to an effective
registration statement under the Securities Act or is to the Seller or unless it
shall have received (i) a representation letter substantially in the form of
Exhibit H hereto or (ii) such other representations (or an Opinion of Counsel)
satisfactory to the Seller or CS First Boston Corporation to the effect that
such resale or transfer is made (A) in a transaction exempt from the
registration requirements of the Securities Act and applicable state securities
laws, or (B) to a person who the transferor of the Certificate reasonably
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believes is a qualified institutional buyer (within the meaning of Rule 144A
under the Securities Act) that is aware that such resale or other transfer is
being made in reliance upon Rule 144A. Until the earlier of (i) such time as the
Certificates shall be registered pursuant to a registration statement filed
under the Securities Act and (ii) the date three years from the later of the
date of the original authentication and delivery of the Certificates and the
date any Certificate was acquired from the Seller or any affiliate of the
Seller, the Certificates shall bear a legend as follows:
[UNLESS AND UNTIL THIS CLASS A CERTIFICATE IS EXCHANGED IN
WHOLE FOR CERTIFICATES IN DEFINITIVE FORM, THIS CERTIFICATE MAY
NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A
NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO
THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE
DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A
NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS NOTE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TO
THE TRUSTEE FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF THE
DEPOSITORY OR ITS NOMINEE OR SUCH OTHER NAME AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY AND ANY PAYMENT IS
MADE TO THE DEPOSITORY OR ITS NOMINEE, ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL SINCE THE REGISTERED OWNER HEREOF HAS AN INTEREST
HEREIN.]* THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE
SECURITIES LAWS OF ANY STATE IN RELIANCE UPON EXEMPTIONS PROVIDED
BY THE SECURITIES ACT AND SUCH STATE SECURITIES LAWS. NO RESALE
OR OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE UNLESS SUCH
RESALE OR TRANSFER (A) IS MADE IN ACCORDANCE WITH SECTION 7.3 OF
THE POOLING AND SERVICING AGREEMENT RELATING TO ACC AUTO GRANTOR
TRUST 1996-B (THE "AGREEMENT") AND (B) IS MADE (i) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (ii)
IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, (iii) TO THE
SELLER OR (iv) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE
144A UNDER THE SECURITIES ACT THAT IS AWARE THAT THE RESALE OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A AND (C)
UPON THE SATISFACTION OF CERTAIN OTHER REQUIREMENTS SPECIFIED IN
THE AGREEMENT. NEITHER THE SELLER, THE SERVICER, THE TRUST NOR
THE TRUSTEE IS OBLIGATED TO REGISTER THE CERTIFICATES UNDER THE
SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS.
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* The language in this parenthetical shall be applicable only in the
case of the Class A Certificate so long as the Class A Certificate exists in
global form.
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The Certificate Registrar shall not register the initial placement of the Class
A Certificates unless it shall have received a Purchaser Representation Letter
in the form of Exhibit G. Neither the Seller, the Servicer, the Trust, ACC nor
the Trustee is obligated to register the Certificates of any Class under the
Securities Act or to take any other action not otherwise required under the
Agreement to permit the transfer of Certificates without registration.
Notwithstanding anything to the contrary herein, the Certificate
Registrar shall not register the transfer of any Certificate unless it shall
have received either (a) a representation letter substantially in the form of
Exhibit H hereto or (b) an Opinion of Counsel from the prospective transferee of
such Certificate, acceptable to, and in form and substance satisfactory to, the
Trustee and the Seller, that (i) such a transfer may be made pursuant to an
exemption from the Securities Act, including Rule 144A thereunder, and
applicable state securities laws and (ii) opines that the representations
contained in item 8 of such Exhibit H (relating to ERISA) are true.
(b) Upon surrender for registration of transfer of any
Certificate at the Corporate Trust Office, the Trustee shall, subject to Section
7.3(a), execute, authenticate, and deliver, in the name of the designated
transferee or transferees, one or more new Certificates in authorized
denominations of a like aggregate amount dated the date of authentication by the
Trustee. At the option of a Holder, Certificates may be exchanged for other
Certificates of authorized denominations of a like aggregate amount upon
surrender of the Certificates to be exchanged at the Corporate Trust Office.
(c) Every Certificate presented or surrendered for registration
of transfer or exchange shall be accompanied by a written instrument of transfer
in form satisfactory to the Trustee and the Certificate Registrar duly executed
by the holder or his attorney duly authorized in writing. Each Certificate
surrendered for registration of transfer or exchange shall be cancelled and
subsequently disposed of by the Trustee.
(d) No service charge shall be made for any registration of
transfer or exchange of Certificates, but the Trustee may require payment of a
sum sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
(e) The Certificates and this Agreement may be amended or
supplemented from time to time without the consent of any of the
Certificateholders to modify restrictions on and procedures for resale and other
transfers of the Certificates of any Class to reflect any change in applicable
law or regulations (or the interpretation thereof) or practices relating to the
resale or transfer of restricted securities generally.
Section 7.4. Mutilated, Destroyed, Lost or Stolen Certificates.
If (a) any mutilated Certificate is surrendered to the Certificate Registrar, or
the Certificate Registrar receives evidence to its satisfaction of the
destruction, loss or theft of any Certificate, and (b) there is delivered to the
Certificate Registrar, the Trustee and (unless an Insurer Default shall have
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occurred and be continuing) the Certificate Insurer such security or indemnity
as may be required by them to save each of them harmless, then, in the
absence of notice to the Certificate Registrar or the Trustee that such
Certificate has been acquired by a bona fide purchaser, the Trustee on behalf of
the Trust shall execute and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
tenor and interest in the Trust. In connection with the issuance of any new
Certificate under this Section 7.4, the Trustee may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and expenses of the
Trustee and the Certificate Registrar) connected therewith. Any duplicate
Certificate issued pursuant to this Section 7.4 shall constitute complete and
indefeasible evidence of ownership in the Trust, as if originally issued,
whether or not the lost, stolen or destroyed Certificate shall be found at any
time.
Section 7.5. Persons Deemed Owners. Prior to due presentation of
a Certificate for registration of transfer, the Trustee, the Certificate
Registrar and any agent of the Trustee or the Certificate Registrar may treat
the person in whose name any Certificate is registered as the owner of such
Certificate for the purpose of receiving distributions pursuant to Section 5.5
and for all other purposes whatsoever, and neither the Trustee, the Certificate
Registrar, the Certificate Insurer nor any agent of the Trustee, the Certificate
Registrar or the Certificate Insurer shall be affected by any notice to the
contrary.
Section 7.6. Access to List of Certificateholders' Names and
Addresses. The Trustee shall furnish or cause to be furnished to the Servicer or
(unless an Insurer Default shall have occurred and be continuing) the
Certificate Insurer, within 10 days after receipt by the Trustee of a written
request therefor from such party, a list, in such form as such party may
reasonably require, of the names and addresses of the Certificateholders as of
the most recent Record Date for payment of distributions to Certificateholders.
If three or more Certi ficateholders, or one or more Certificateholders
evidencing not less than 25% of the Class A Certificate Balance and the Class B
Certificate Balance (hereinafter referred to as "Applicants"), apply in writing
to the Trustee, and such application states that the Applicants desire to
communicate with other Certificateholders of such Class with respect to their
rights under this Agreement or under the Certificates and is accompanied by a
copy of the communication that such Applicants propose to transmit, then the
Trustee shall, within five Business Days after the receipt of such application,
afford such Applicants access, during normal business hours, to the current list
of Certificateholders. Every Certificateholder, by receiving and holding a
Certificate, agrees with the Servicer and the Trustee that neither the Servicer
nor the Trustee shall be held accountable by reason of the disclosure of any
such information as to the names and addresses of the Certificateholders under
this Agreement, regardless of the source from which such information was
derived.
Section 7.7. Maintenance of Office or Agency. The Trustee shall
maintain in Minneapolis, Minnesota, an office or offices or agency or agencies
where Certificates may be surrendered for registration of transfer or exchange
and an office in Minneapolis, Minnesota where notices and demands to or upon the
Trustee in respect of the Certificates and this Agreement may be served. The
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Trustee initially designates the Corporate Trust Office as specified in
this Agreement as its office for such purposes. The Trustee shall give
prompt written notice to the Servicer and to Certificateholders of any
change in the location of the Certificate Register or any such office or agency.
ARTICLE VIII
THE SELLER
Section 8.1. Liability of Seller. The Seller shall be liable
hereunder only to the extent of the obligations in this Agreement specifically
undertaken by the Seller and the representations made by the Seller. The Seller
shall indemnify, defend, and hold harmless the Trustee from and against any
loss, liability or reasonable expense incurred by reason of (a) the Seller's
willful misfeasance, bad faith, or negligence in the performance of its duties
under this Agreement, or by reason of reckless disregard of its obligations and
duties under this Agreement or (b) the Seller's violation of Federal or state
securities laws in connection with the sale of the Certificates.
Indemnification under this Section 8.1 shall include, without
limitation, reasonable fees and expenses of counsel and expenses of litigation.
If the Seller shall have made any indemnity payments to the Trustee pursuant to
this Section 8.1 and the Trustee thereafter shall collect any of such amounts
from others, the Trustee shall repay such amounts to the Seller, without
interest.
Section 8.2. Merger or Consolidation of, or Assumption of the
Obligations of, Seller; Amendment of Certificate of Incorporation.
(a) The Seller shall not merge or consolidate with any other
Person or permit any other Person to become the successor to the Seller's
business without (so long as an Insurer Default shall not have occurred and be
continuing) the prior written consent of the Sponsor, the Certificate Insurer
and if an Insurer Default has occurred and is continuing, the Certificate
Majority. Any Person (i) into which the Seller may be merged or consolidated,
(ii) which may result from any merger or consolidation to which the Seller shall
be a party, or (iii) which may succeed to the properties and assets of the
Seller substantially as a whole, which Person in any of the foregoing cases (x)
has a certificate of incorporation containing provisions relating to limitations
on business and other matters substantively identical to those contained in the
Seller's certificate of incorporation, and (y) executes an agreement of
assumption to perform every obligation of the Seller under this Agreement, shall
be the successor to the Seller under this Agreement without the execution or
filing of any document or any further act on the part of any of the parties to
this Agreement. The Seller shall provide prompt notice of any merger,
consolidation or succession pursuant to this Section 8.2 to the Trustee, the
Certificate Insurer, the Sponsor, the Certificateholders and the Rating Agency.
Notwithstanding the foregoing, as a condition to the consummation of the
transactions referred to in clauses (i), (ii) and (iii) above, (w) immediately
after giving effect to such transaction, no representation or warranty
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made pursuant to Section 3.5 shall have been breached (for purposes hereof,
such representations and warranties shall speak as of the date of the
consummation of such transaction) and no event that, after notice or lapse
of time, or both, would become a Servicer Termination Event shall have
occurred and be continuing, (x) the Seller shall have delivered to the
Trustee and the Sponsor an Officer's Certificate and an Opinion of Counsel
each stating that such consolidation, merger or succession and such agreement
of assumption comply with this Section 8.2 and that all conditions precedent,
if any, provided for in this Agreement relating to such transaction have been
complied with, (y) the Seller shall have delivered to the Certificate Insurer,
the Trustee and the Sponsor an Opinion of Counsel, stating, in the opinion of
such counsel, either (A) all financing statements and continuation statements
and amendments thereto have been executed and filed that are necessary to
preserve and protect the interest of the Trustee in the Trust Property and
reciting the details of the filings or (B) no such action shall be necessary
to preserve and protect such interest, and (z) immediately after giving effect
to such transaction, no Insurance Agreement Event of Default and no event that,
after notice or lapse of time, or both, would become an Insurance Agreement
Event of Default shall have occurred and be continuing. The Seller shall
provide notice of any merger, consolidation or succession pursuant to this
Section 8.2 to each Rating Agency and shall have received confirmation from each
Rating Agency that the then current rating of the Certificates will not be
downgraded as a result of such merger, consolidation or succession.
Notwithstanding anything herein to the contrary, the execution of the foregoing
agreement of assumption and compliance with clauses (w), (x), (y) and (z) above
shall be conditions to the consummation of the transactions referred to in
clause (i), (ii) or (iii) above.
(b) The Seller hereby agrees that it shall not (i) take any
action prohibited by Article II of its certificate of incorporation or (ii)
without the prior written consent of the Trustee and the Sponsor and (so long as
an Insurer Default shall not have occurred and be continuing) the Certificate
Insurer and without giving prior written notice to the Rating Agencies, amend
Article II or Article V of its certificate of incorporation.
Section 8.3. Limitation on Liability of Seller and Others. The
Seller and any director or officer or employee or agent of the Seller may rely
in good faith on the written advice of counsel or on any document of any kind
prima facie properly executed and submitted by any Person respecting any matters
arising under this Agreement. The Seller shall not be under any obligation to
appear in, prosecute or defend any legal action that is not incidental to its
obligations as Seller of the Receivables under this Agreement and that in its
opinion may involve it in any expense or liability.
Section 8.4. Seller May Own Certificates. Each of the Seller and
any Affiliate of the Seller may in its individual or any other capacity become
the owner or pledgee of Certificates with the same rights as it would have if it
were not the Seller or an Affiliate thereof except as otherwise specifically
provided herein. Certificates so owned by or pledged to the Seller or such
Affiliate shall have an equal and proportionate benefit under the provisions of
this Agreement, without preference, priority, or distinction as among all of the
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Certificates; provided, however, that any Certificates owned by the Seller or
any Affiliate thereof, during the time such Certificates are owned by them,
shall be without voting rights for any purpose set forth in this Agreement and
will not be entitled to the benefits of the Policy. The Seller shall notify the
Trustee and the Certificate Insurer promptly after it or any of its Affiliates
become the owner or pledgee of a Certificate.
ARTICLE IX
THE SERVICER
Section 9.1. Liability of Servicer; Indemnities. (a) The Servicer
shall be liable hereunder only to the extent of the obligations in this
Agreement specifically undertaken by the Servicer and the representations made
by the Servicer and to the extent not covered in Section 3.05 of the Insurance
Agreement.
(b) The Servicer shall defend, indemnify and hold harmless the
Trustee, the Backup Servicer, the Collateral Agent, the Certificate Insurer, the
Sponsor, their respective officers, directors, agents and employees, the Trust,
and the Certificateholders from and against any and all costs, expenses, losses,
damages, claims and liabilities, including reasonable fees and expenses of
counsel and expenses of litigation arising out of or resulting from the use,
ownership or operation by the Servicer or any Affiliate thereof of any Financed
Vehicle;
(c) The Servicer shall defend, indemnify and hold harmless the
Trust, the Trustee, the Backup Servicer, the Collateral Agent, the Sponsor, the
Certificate Insurer, their respective officers, directors, agents and employees,
and the Certificateholders from and against any taxes that may at any time be
asserted against the Trust, the Trustee or the Certifi cateholders with respect
to the transactions contemplated in this Agreement, including, without
limitation, any sales, gross receipts, general corporation, tangible personal
property, privilege or license taxes (but not including any taxes asserted with
respect to, and as of the date of, the sale of the Receivables and the other
Trust Property to the Trustee or the issuance and original sale of the
Certificates, or asserted with respect to ownership of the Receivables, or
federal or other income taxes arising out of distributions on the Certificates)
and costs and expenses in defending against the same;
(d) The Servicer shall indemnify, defend and hold harmless the
Trust, the Trustee, the Backup Servicer, the Certificate Insurer, the Sponsor,
the Collateral Agent, their respective officers, directors, agents and employees
and the Certificateholders from and against any and all costs, expenses, losses,
claims, damages, and liabilities to the extent that such cost, expense, loss,
claim, damage, or liability arose out of, or was imposed upon the Trustee, the
Backup Servicer, the Trust, the Certificate Insurer, the Sponsor, the Collateral
Agent or the Certificateholders through the breach of this Agreement, the
negligence, willful misfeasance, or bad faith of the Servicer in the performance
of its duties under this Agreement or by reason of reckless disregard of its
obligations and duties under this Agreement; and
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(e) The Servicer shall indemnify, defend, and hold harmless the
Trustee, its officers, directors, agents and employees, from and against all
costs, taxes (other than income taxes on fees and expenses payable to the
Trustee), expenses, losses, claims, damages and liabilities arising out of or
incurred in connection with the acceptance or performance of the trusts and
duties contained in this Agreement, except to the extent that such cost, taxes
(other than income taxes), expense, loss, claim, damage or liability (A) is due
to the willful misfeasance, bad faith or gross negligence of the Trustee, or (B)
arises from the Trustee's breach of any of its representations or warranties set
forth in Section 11.12; provided, however, that amounts payable under this
paragraph shall be increased by the amount of income taxes actually paid by the
Trustee in respect of any indemnity payment unless the Trustee received or can
reasonably be expected to receive a tax deduction for the related loss or cost.
(f) For purposes of this Section 9.1, in the event of the
termination of the rights and obligations of the Servicer (or any successor
thereto pursuant to Section 9.2) as Servicer pursuant to Section 10.1, or a
resignation by such Servicer pursuant to this Agreement, such Servicer shall be
deemed to be the Servicer pending appointment of a successor Servicer pursuant
to Section 10.3. The provisions of this Section 9.1(f) shall in no way affect
the survival pursuant to Section 9.1(g) of the indemnification by the Servicer
provided by Sections 9.1(b) through 9.1(e).
(g) Indemnification under this Article shall survive the
termination of this Agreement and shall include reasonable fees and expenses of
counsel and expenses of litigation. If the Servicer shall have made any
indemnity payments pursuant to this Article and the recipient thereafter
collects any of such amounts from others, the recipient shall promptly repay
such amounts collected to the Servicer, without interest. Notwithstanding any
other provision of this Agreement, the obligations of the Servicer described in
this Section shall not terminate or be deemed released upon the resignation or
termination of ACC as the Servicer and shall survive any termination of this
Agreement.
Section 9.2. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer or Backup Servicer. (a) The Servicer shall not
merge or consolidate with any other Person, convey, transfer or lease
substantially all its assets as an entirety to another Person, or permit any
other Person to become the successor to the Servicer's business unless, after
the merger, consolidation, conveyance, transfer, lease or succession, the
successor or surviving entity shall be an Eligible Servicer and shall be capable
of fulfilling the duties of the Servicer contained in this Agreement. So long as
ACC is the Servicer, any such merger, consolidation, conveyance, transfer, lease
or succession shall not occur without the written consent of the Sponsor, unless
any such Person assumes and relieves the Sponsor of the Sponsor's duties and
obligations under this Agreement, including its repurchase obligations under
Section 3.7. Any Person (i) into which the Servicer may be merged or
consolidated, (ii) resulting from any merger or consolidation to which the
Servicer shall be a party, (iii) which acquires by conveyance, transfer, or
lease substantially all of the assets of the Servicer, or (iv) succeeding to the
business of the Servicer, in any of the foregoing cases shall execute an
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agreement of assumption to perform every obligation of the Servicer under
this Agreement and, whether or not such assumption agreement is executed,
shall be the successor to the Servicer under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties to this Agreement, anything in this Agreement to the contrary
notwithstanding; provided, however, that nothing contained herein shall be
deemed to release the Servicer from any obligation. The Servicer shall provide
notice of any merger, consolidation or succession pursuant to this Section
9.2(a) to ACC, the Trustee, the Backup Servicer, the Certificate Insurer, the
Sponsor, the Certificateholders and each Rating Agency. Notwithstanding the
foregoing, as a condition to the consummation of the transactions referred to in
clauses (i), (ii), (iii) and (iv) above, (x) immediately after giving effect to
such transaction, no representation or warranty made pursuant to Section 4.6
shall have been breached (for purposes hereof, such representations and
warranties shall speak as of the date of the consummation of such transaction)
and no event that, after notice or lapse of time, or both, would become an
Insurance Agreement Event of Default, shall have occurred and be continuing, (y)
the Servicer shall have delivered to the Trustee, the Certificate Insurer and
the Sponsor an Officer's Certificate and an Opinion of Counsel each stating that
such consolidation, merger or succession and such agreement of assumption comply
with this Section 9.2(a) and that all conditions precedent, if any, provided for
in this Agreement relating to such transaction have been complied with, and (z)
the Servicer shall have delivered to the Trustee, the Certificate Insurer and
the Sponsor an Opinion of Counsel, stating, in the opinion of such counsel,
either (A) all financing statements and continuation statements and amendments
thereto have been executed and filed that are necessary to preserve and protect
the interest of the Trustee in the Trust Property and reciting the details of
the filings or (B) no such action shall be necessary to preserve and protect
such interest.
(b) Any Person (i) into which the Backup Servicer may be merged
or consolidated, (ii) resulting from any merger or consolidation to which the
Backup Servicer shall be a party, (iii) which acquires by conveyance, transfer
or lease substantially all of the assets of the Backup Servicer, or (iv)
succeeding to the business of the Backup Servicer, in any of the foregoing cases
shall execute an agreement of assumption to perform every obligation of the
Backup Servicer under this Agreement and, whether or not such assumption
agreement is executed, shall be the successor to the Backup Servicer under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties to this Agreement, anything in this Agreement to the
contrary notwithstanding; provided, however, that nothing contained herein shall
be deemed to release the Backup Servicer from any obligation.
Section 9.3. Limitation on Liability of Servicer, Backup Servicer
and Others. Neither the Servicer, the Backup Servicer nor any of the directors
or officers or employees or agents of the Servicer or Backup Servicer shall be
under any liability to ACC, the Trust, the Certificateholders or the Sponsor,
except as provided in this Agreement, for any action taken or for refraining
from the taking of any action pursuant to this Agreement; provided, however,
that this provision shall not protect the Servicer, the Backup Servicer or any
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such person against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence (excluding errors in judgment) in
the performance of duties (including negligence with respect to the Servicer's
indemnification obligations hereunder), by reason of reckless disregard of
obligations and duties under this Agreement or any violation of law by the
Servicer, Backup Servicer or such person, as the case may be; further provided,
that this provision shall not affect any liability to indemnify the Trustee for
costs, taxes, expenses, claims, liabilities, losses or damages paid by the
Trustee in its individual capacity. The Servicer, the Backup Servicer and any
director, officer, employee or agent of the Servicer or Backup Servicer may rely
in good faith on the advice of counsel or on any document of any kind prima
facie properly executed and submitted by any Person respecting any matters
arising under this Agreement. The Backup Servicer shall not be required to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if the repayment of such funds or adequate written indemnity
against such risk or liability is not reasonably assured to it in writing prior
to the expenditure or risk of such funds or incurrence of financial liability.
Section 9.4. Delegation of Duties. So long as ACC is the
Servicer, the Servicer may delegate duties under this Agreement to an Affiliate
of ACC with the prior written consent of the Certificate Insurer, the Sponsor,
the Trustee and the Backup Servicer. The Servicer also may at any time perform
the specific duty of repossession of Financed Vehicles through sub-contractors
who are in the business of servicing automotive receivables and may perform
other specific duties through such sub-contractors with the prior written
consent of the Certificate Insurer (unless an Insurer Default shall have
occurred and be continuing); provided, however, that no such delegation or
subcontracting duties by the Servicer shall relieve the Servicer of its
responsibility with respect to such duties. So long as no Insurer Default shall
have occurred and be continuing, neither ACC nor any other party acting as
Servicer hereunder shall appoint any subservicer hereunder without the prior
written consent of the Certificate Insurer, the Trustee, the Sponsor and the
Backup Servicer.
Section 9.5. Servicer and Backup Servicer Not to Resign. Subject
to the provisions of Section 9.2, neither the Servicer nor the Backup Servicer
shall resign from the obligations and duties imposed on it by this Agreement as
Servicer or Backup Servicer except upon a determination that by reason of a
change in legal requirements the performance of its duties under this Agreement
would cause it to be in violation of such legal requirements in a manner which
would result in a material adverse effect on the Servicer or the Backup
Servicer, as the case may be, and the Certificate Insurer (so long as an Insurer
Default shall not have occurred and be continuing) or a Certificate Majority (if
an Insurer Default shall have occurred and be continuing) does not elect to
waive the obligations of the Servicer or the Backup Servicer, as the case may
be, to perform the duties which render it legally unable to act or to delegate
those duties to another Person. Any such determination permitting the
resignation of the Servicer or Backup Servicer shall be evidenced by an Opinion
of Counsel to such effect delivered and acceptable to the Trustee, the Sponsor
and the Certificate Insurer (unless an Insurer Default shall have occurred and
be continuing). No resignation of the Servicer shall become effective until, so
long as no Insurer Default shall have occurred and be continuing, the Backup
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Servicer or an entity acceptable to the Certificate Insurer shall have
assumed the responsibilities and obligations of the Servicer or, if an
Insurer Default shall have occurred and be continuing, the Backup Servicer
or a successor Servicer that is an Eligible Servicer shall have assumed
the responsibilities and obligations of the Servicer. No resignation of the
Backup Servicer shall become effective until, so long as no Insurer Default
shall have occurred and be continuing, an entity acceptable to the Certificate
Insurer shall have assumed the responsibilities and obligations of the Backup
Servicer or, if an Insurer Default shall have occurred and be continuing, a
Person that is an Eligible Servicer shall have assumed the responsibilities and
obligations of the Backup Servicer; provided, however, that in the event a
successor Backup Servicer is not appointed within 60 days after the Backup
Servicer has given notice of its resignation as permitted by this Section 9.5,
the Backup Servicer may petition a court for its removal.
ARTICLE X
SERVICER TERMINATION EVENTS
Section 10.1. Servicer Termination Event. For purposes of this
Agreement, each of the following shall constitute a "Servicer Termination
Event":
(a) Any failure by the Servicer or, so long as ACC or an
Affiliate of the Seller is the Servicer, the Seller to deliver to the
Trustee for distribution to Certificate holders or deposit in the Spread
Account any proceeds or payment required to be so delivered under the
terms of the Certificates or this Agreement (including deposits of the
Purchase Amount pursuant to Section 3.7 and Section 4.7) that continues
unremedied for a period of two Business Days (one Business Day with
respect to payment of Purchase Amounts) after written notice is received
by the Servicer from the Trustee, the Sponsor or (unless an Insurer
Default shall have occurred and be continuing) the Certificate Insurer
or after discovery of such failure by a Responsible Officer of the
Servicer;
(b) Failure by the Servicer to deliver to the Trustee and (so
long as an Insurer Default shall not have occurred and be continuing)
the Certificate Insurer the Servicer's Certificate required by Section
4.9 by 12:00 noon on the second Business Day after the date such
certificate is required to be delivered;
(c) Failure on the part of the Servicer to observe its covenants
and agreements set forth in Section 9.2(a);
(d) Failure on the part of the Servicer or, so long as ACC or an
Affiliate of the Seller is the Servicer, the Seller, duly to observe or
perform in any material respect any other covenants or agreements of the
Servicer or, so long as ACC is the Servicer, the Seller, as the case may
be, set forth in the Certificates or in this Agreement, (or, as to ACC,
if ACC is the Servicer, the Purchase Agreement) which failure continues
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unremedied for a period of 30 days after the date on which written
notice of such failure, requiring the same to be remedied, shall have
been given to the Servicer by the Trustee, the Sponsor or the
Certificate Insurer (or, if an Insurer Default shall have occurred and
be continuing, any Certificateholder);
(e) The entry of a decree or order for relief by a court or
regulatory authority having jurisdiction in respect of the Servicer (or
the Seller) in an involuntary case under the federal bankruptcy laws, as
now or hereafter in effect, or another present or future, federal or
state, bankruptcy, insolvency or similar law, or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar
official of the Servicer (or the Seller) or of any substantial part of
their respective properties or ordering the winding up or liquidation of
the affairs of the Servicer (or the Seller) and the continuance of any
such decree or order unstayed and in effect for a period of 60
consecutive days or the commencement of an involuntary case under the
federal bankruptcy laws, as now or hereinafter in effect, or another
present or future federal or state bankruptcy, insolvency or similar law
and such case is not dismissed within 60 days; or
(f) The commencement by the Servicer (or, if ACC or an Affiliate
of the Seller is the Servicer, the Seller) of a voluntary case under the
federal bankruptcy laws, as now or hereafter in effect, or any other
present or future, federal or state, bankruptcy, insolvency or similar
law, or the consent by the Servicer (or, if ACC or an Affiliate of the
Seller is the Servicer, the Seller) to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Servicer (or, if ACC or an
Affiliate of the Seller is the Servicer, the Seller) or of any
substantial part of its property or the making by the Servicer (or, if
ACC or an affiliate of the Seller is the Servicer, the Seller) of an
assignment for the benefit of creditors or the failure by the Servicer
(or, if ACC or an affiliate of the Seller is the Servicer, the Seller)
generally to pay its debts as such debts become due or the taking of
corporate action by the Servicer (or, if ACC or an affiliate of the
Seller is the Servicer, the Seller) in furtherance of any of the
foregoing; or
(g) Any representation, warranty or statement of the Servicer
(or, if ACC or an affiliate of the Seller is the Servicer, the Seller)
made in this Agreement or any certificate, report or other writing
delivered pursuant hereto shall prove to be incorrect in any material
respect as of the time when the same shall have been made (excluding,
however, any representation or warranty set forth in Section 3.5(a)),
and the incorrectness of such representation, warranty or statement has
a material adverse effect on the Trust and, within 30 days after written
notice thereof shall have been given to the Servicer (or, if ACC or an
affiliate of the Seller is the Servicer, the Seller) by the Trustee, the
Sponsor or the Certificate Insurer (or, if an Insurer Default shall have
occurred and be continuing, a Certificateholder), the circumstances or
condition in respect of which such representation, warranty or statement
was incorrect shall not have been eliminated or otherwise cured;
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(h) So long as an Insurer Default shall not have occurred and be
continuing, the Certificate Insurer shall not have delivered a Servicer
Extension Notice pursuant to Section 4.14;
(i) So long as an Insurer Default shall not have occurred and be
continuing, (x) an Insurance Agreement Event of Default shall have
occurred or (y) an Insurance Agreement Event of Default with respect to
another Series (as defined in the Spread Account Agreement) shall have
occurred; or
(j) A claim is made under the Policy.
Section 10.2. Consequences of a Servicer Termination Event. If a
Servicer Termination Event shall occur and be continuing, so long as no Insurer
Default shall have occurred and be continuing, the Certificate Insurer (or, if
an Insurer Default shall have occurred and be continuing, any of the Trustee,
the Sponsor or the Holders of Certificates evidencing not less than a
Certificate Majority), by notice given in writing to the Servicer (and to the
Trustee if given by the Certificate Insurer, the Sponsor or the
Certificateholders) may terminate all of the rights and obligations of the
Servicer under this Agreement. On or after the receipt by the Servicer of such
written notice, or, if the Certificate Insurer shall not have delivered a
Servicer Extension Notice pursuant to Section 4.14 all authority, power,
obligations and responsibilities of the Servicer under this Agreement, whether
with respect to the Certificates or the Trust Property or otherwise,
automatically shall pass to, be vested in and become obligations and
responsibilities of the Backup Servicer; provided, however, that the Backup
Servicer (i) shall have no liability with respect to any obligation which was
required to be performed by the prior Servicer prior to the date that the Backup
Servicer becomes the Servicer or any claim of a third party based on any alleged
action or inaction of the prior Servicer and (ii) shall have no duty or
obligation with respect to the Servicer's obligations set forth in Sections
4.8(b). The Backup Servicer is authorized and empowered by this Agreement to
execute and deliver, on behalf of the prior Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination, whether to complete the transfer and endorsement of the
Receivables and the other Trust Property and related documents to show the
Trustee as lienholder or secured party on the related Lien Certificates, or
otherwise. The prior Servicer agrees to cooperate with the Backup Servicer in
effecting the termination of the responsibilities and rights of the prior
Servicer under this Agreement, including, without limitation and at the prior
Servicer's expense, the transfer to the Backup Servicer for administration by it
of all cash amounts that shall at the time be held by the prior Servicer for
deposit, or have been deposited by the prior Servicer, in the Collection Account
or thereafter received with respect to the Receivables and the delivery to the
Backup Servicer of all Receivable Files, Monthly Records and Collection Records
and a computer tape in readable form containing all information necessary to
enable the Backup Servicer or a successor Servicer to service the Receivables
and the other Trust Property. If requested by the Certificate Insurer (unless an
Insurer Default shall have occurred and be continuing), the Backup Servicer or
successor Servicer shall terminate the Lockbox Agreement and direct the
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Obligors to make all payments under the Receivables directly to the successor
Servicer (in which event the successor Servicer shall process such payments in
accordance with Section 4.2(e)), or to a lockbox established by the successor
Servicer at the direction of the Certificate Insurer (unless an Insurer Default
shall have occurred and be continuing), at the prior Servicer's expense. The
Trustee and the Backup Servicer may set off and deduct any amounts owed by the
terminated Servicer from any amounts payable to the terminated Servicer pursuant
to the preceding sentence. The terminated Servicer shall grant the Trustee, the
Backup Servicer and the Certificate Insurer reasonable access to the terminated
Servicer's premises at the terminated Servicer's expense.
Section 10.3. Appointment of Successor. (a) On and after (i) the
time the Servicer receives a notice of termination pursuant to Section 10.2 or
(ii) upon the resignation of the Servicer pursuant to Section 9.5 or (iii) the
receipt by the Backup Servicer (or any alternate successor Servicer appointed by
the Certificate Insurer pursuant to Section 10.3(b)), of written notice from the
Certificate Insurer that the Certificate Insurer is not extending the Servicer's
term pursuant to Section 4.14, the Backup Servicer shall be the successor in all
respects to the Servicer in its capacity as servicer under this Agreement and
the transactions set forth or provided for in this Agreement, and shall be
subject to all the responsibilities, restrictions, duties, liabilities and
termination provisions relating thereto placed on the Servicer by the terms and
provisions of this Agreement; provided, however, that the Backup Servicer (i)
shall not be liable for any acts, omissions or obligations of the Servicer prior
to such succession or for any breach by the Servicer of any of its
representations and warranties contained in this Agreement or in any related
document or agreement and (ii) shall have no duty or obligation with respect to
the Servicer's obligations set forth in Section 4.8(b). The Trustee and such
successor shall take such action, consistent with this Agreement, as shall be
necessary to effectuate any such succession. If a successor Servicer is acting
as Servicer hereunder, it shall be subject to termination under Section 10.2
upon the occurrence of any Servicer Termination Event applicable to it as
Servicer.
(b) The Certificate Insurer may (so long as an Insurer Default
shall not have occurred and be continuing) exercise at any time its right to
appoint as Backup Servicer or as successor to the Servicer a person other than
the Person serving as Backup Servicer at the time, and (without limiting its
obligations under the Policy) shall have no liability to the Trustee, ACC, the
Seller, the Person then serving as Backup Servicer, any Certificateholder or any
other Person if it does so. Notwithstanding the above, if the Backup Servicer
shall be legally unable or unwilling to act as Servicer and an Insurer Default
shall have occurred and be continuing, the Backup Servicer, the Trustee or a
Certificate Majority may petition a court of competent jurisdiction to appoint
any Eligible Servicer as the successor to the Servicer. Pending such
appointment, the Backup Servicer shall act as successor Servicer unless it is
legally unable to do so, in which event the outgoing Servicer shall continue to
act as Servicer until a successor has been appointed and accepted such
appointment. Subject to Section 9.5, no provision of this Agreement shall be
construed as relieving the Backup Servicer of its obligation to succeed as
successor Servicer upon the termination of the Servicer pursuant to Section 10.2
or the resignation of the Servicer pursuant to Section 9.5. If upon the
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termination of the Servicer pursuant to Section 10.2 or the resignation of the
Servicer pursuant to Section 9.5, the Certificate Insurer appoints a successor
Servicer other than the Backup Servicer, the Backup Servicer shall not be
relieved of its duties as Backup Servicer hereunder.
(c) Any successor Servicer shall be entitled to such compensation
(whether payable out of the Collection Account or otherwise) as the Servicer
would have been entitled to under the Agreement if the Servicer had not resigned
or been terminated hereunder. If any successor Servicer is appointed for any
reason, the Certificate Insurer and such successor Servicer may agree on
additional compensation to be paid to such successor Servicer, which additional
compensation shall be payable out of funds on deposit in the Spread Account. In
addition, any successor Servicer shall be entitled, out of funds in the Spread
Account, to reasonable transition expenses incurred in acting as successor
Servicer.
Section 10.4. Notification to Certificateholders. Upon any
termination of, or appointment of a successor to, the Servicer pursuant to this
Article X, the Trustee shall give prompt written notice thereof to
Certificateholders at their respective addresses appearing in the Certificate
Register and to each Rating Agency.
Section 10.5. Waiver of Past Defaults. So long as no Insurer
Default shall have occurred and be continuing, the Certificate Insurer (or, if
an Insurer Default shall have occurred and be continuing, a Certificate
Majority) may, on behalf of all Holders of Certificates, waive any default by
the Servicer in the performance of its obligations hereunder and its
consequences. Upon any such waiver of a past default, such default shall cease
to exist, and any Servicer Termination Event arising therefrom shall be deemed
to have been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent
thereon.
ARTICLE XI
THE TRUSTEE
Section 11.1. Duties of Trustee. (a) Subject to paragraph (c) of
this Section 11.1, the Trustee, both prior to and after the occurrence of a
Servicer Termination Event, undertakes to perform as Trustee such duties and
only such duties as are specifically set forth in this Agreement.
(b) The Trustee, upon receipt of any resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee that are specifically required to be furnished pursuant to any
provisions of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement.
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(c) No provision of this Agreement shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act (other than errors in judgment) or its own bad faith or willful
misfeasance; provided, however, that:
(i) the duties and obligations of the Trustee shall be determined
solely by the express provisions of this Agreement, the Trustee shall
not be liable except for the performance of such duties and obligations
as are specifically set forth in this Agreement, no implied covenants or
obligations shall be read into this Agreement against the Trustee and,
in the absence of bad faith on the part of the Trustee, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon any certificates or opinions
furnished to the Trustee and conforming to the requirements of this
Agreement;
(ii) the Trustee shall not be liable for an error of judgment
made in good faith by a Responsible Officer of the Trustee, unless it
shall be proven that the Trustee was negligent in performing its duties
in accordance with the terms of this Agreement;
(iii) the Trustee shall not be liable for any action taken,
suffered or omitted to be taken by it in good faith and reasonably
believed by it to be authorized or within the discretion or rights or
powers conferred upon it by this Agreement; and
(iv) the Trustee shall not be liable for any action it takes or
omits to take in good faith at the direction of the Certificate Insurer
(or, after an Insurer Default shall have occurred and be continuing, a
Certificate Majority); provided that the Trustee shall not be authorized
hereunder to comply with any direction which is not authorized by the
terms of this Agreement.
(d) Notwithstanding any other provision of this Agreement, the
Trustee shall not be required to expend or risk its own funds or otherwise incur
financial liability in the performance of any of its duties under this
Agreement, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
none of the provisions contained in this Agreement shall in any event require
the Trustee to perform, or be responsible for the manner of performance of, any
of the obligations of the Servicer under this Agreement except during such time,
if any, as the Backup Servicer shall be the successor to, and be vested with the
rights, duties, powers and privileges of, the Servicer in accordance with the
terms of this Agreement.
(e) The Trustee shall not be charged with knowledge of any
failure by the Servicer to comply with the obligations of the Servicer referred
to in this Agreement, or of any failure by the Seller to comply with the
obligations of the Seller referred to in this Agreement, unless a Trustee
officer obtains actual knowledge of such failure (it being understood that
knowledge of the Servicer is not attributable to the Trustee) or the Trustee
receives written notice of such failure from the Servicer or the Seller, as the
case may be, or the Certificate Insurer (or, if an Insurer Default shall
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have occurred and be continuing, the Holders of Certificates evidencing not less
than 25% of the sum of the Class A Certificate Balance and the Class B
Certificate Balance, or, if there are no Class A Certificates then outstanding,
by Holders of Class B Certificates evidencing not less than 25% of the Class B
Certificate Balance); and
(f) Except for actions expressly authorized by this Agreement,
the Trustee shall take no action reasonably likely to impair the security
interests created or existing under any Receivable or Financed Vehicle or to
impair the value of any Receivable or Financed Vehicle.
Section 11.2. Trustee's Assignment of Administrative Receivables
and Warranty Receivables. With respect to all Administrative Receivables and all
Warranty Receivables purchased by the Servicer, the Seller, ACC or the Sponsor,
as the case may be, the Trustee shall take any and all actions reasonably
requested by the Seller, ACC, Servicer or the Sponsor, at the expense of the
Person whose obligation was to repurchase the Administrative Receivable, to
assign, without recourse, representation or warranty, to the Seller, ACC, the
Servicer or the Sponsor, as applicable, including, without limitation, all the
items conveyed to the Trustee pursuant to Section 3.1(a) with respect to such
purchased Receivable, all monies due thereon, the security interests in the
related Financed Vehicles, proceeds from any Insurance Policies, proceeds from
recourse against Dealers on such Receivables and the interests of the Trust in
certain rebates of premiums and other amounts relating to the Insurance Policies
and any documents relating thereto, such assignment being an assignment outright
and not for security; and the Seller, ACC, the Servicer or the Sponsor, as
applicable, shall thereupon own such Receivable, and all such security and
documents, free of any further obligation to the Trustee or the
Certificateholders with respect thereto. Each of the Servicer, the Trustee and
the Seller shall cooperate with respect to the orderly transfer of the servicing
to the party purchasing the Administrative Receivable hereunder, and each of the
Servicer, the Trustee and the Seller shall cooperate with such party to ensure
that the purchasing party is subrogated to the rights of each such Person with
respect to such Receivable.
Section 11.3. Certain Matters Affecting the Trustee. Except as
otherwise provided in Section 11.1(c):
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officer's Certificate,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond or
other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(b) the Trustee may consult with counsel and any Opinion of
Counsel shall be full and complete authorization and protection in
respect of any action taken or suffered or omitted by it under
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this Agreement in good faith and in accordance with such
Opinion of Counsel;
(c) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement, or to institute,
conduct or defend any litigation under this Agreement or in relation to
this Agreement, at the request, order or direction of any of the
Certificateholders or the Certificate Insurer, pursuant to the
provisions of this Agreement, unless such Certificateholders or the
Certificate Insurer shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that
may be incurred therein or thereby; provided, however, that the Trustee
shall, upon the occurrence of a Servicer Termination Event (that has not
been cured), exercise the rights and powers vested in it by this
Agreement with reasonable care and skill;
(d) the Trustee shall not be bound to make any investigation into
the facts of matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond or other paper or document, unless requested in writing to do so by
the Certificate Insurer or by Holders of Certificates evidencing not
less than 25% of the sum of the Class A Certificate Balance and the
Class B Certificate Balance, or, if there are no Class A Certificates
then outstanding, by Holders of Class B Certificates evidencing not less
than 25% of the Class B Certificate Balance; provided, however, that if
the payment within a reasonable time to the Trustee of the costs,
expenses or liabilities likely to be incurred by it in the making of
such investigation is, in the opinion of the Trustee, not reasonably
assured to the Trustee by the security afforded to it by the terms of
this Agreement, the Trustee may require reasonable indemnity against
such cost, expense or liability as a condition to so proceeding; the
reasonable expense of every such examination shall be paid by the Person
making such request or, if paid by the Trustee, shall be reimbursed by
the Person making such request upon demand;
(e) The Trustee may execute any of the trusts or powers under
this Agreement or perform any duties under this Agreement ether directly
or by or through agents or attorneys or custodians. The Trustee shall
not be responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by the Trustee. The Trustee
shall not be responsible for any misconduct or negligence attributable
to the acts or omissions of the Servicer;
(f) The Trustee may rely, as to factual matters relating to the
Seller or the Servicer, on an Officer's Certificate of a Responsible
Officer of the Seller or Servicer, respectively; and
(g) The Trustee shall not be required to take any action or
refrain from taking any action under this Agreement, or any Related
Document referred to herein, nor shall any provision of this Agreement,
or any such Related Document be deemed to impose a duty on the Trustee
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to take action, if the Trustee shall have been advised by counsel
that such action is contrary to the terms of this Agreement,
or any Related Document or is contrary to law.
Section 11.4. Trustee Not Liable for Certificates or Receivables.
The Trustee makes no representations as to the validity or sufficiency of this
Agreement or of the Certificates (other than the execution of the Certificates)
or of any Receivable or Related Document, except to the extent otherwise
expressly provided herein. The Trustee shall at no time (except during such
time, if any, as it is acting as successor Servicer) have any responsibility or
liability for or with respect to the legality, validity and enforceability of
any security interest in any Financed Vehicle or any Receivable, or the
perfection and priority of such a security interest or the maintenance of any
such perfection and priority, or for or with respect to the efficiency of the
Trust or its ability to generate the payments to be distributed to
Certificateholders under this Agreement, including, without limitation, the
existence, condition, location and ownership of any Financed Vehicle; the
existence and enforceability of any insurance thereon; the existence of any
Receivable or any computer or other record thereof (it being understood that the
Trustee has not reviewed and does not intend to review such matters, the sole
responsibility for such review being vested in the Seller and the Servicer as
applicable); the completeness of any Receivable; the receipt by the Servicer of
any Receivable; the performance or enforcement of any Receivable; the compliance
by the Seller and the Servicer with any covenant or the breach by the Seller and
the Servicer of any warranty or representation made under this Agreement or in
any related document and the accuracy of any such warranty or representation
prior to the Trustee's receipt of notice or other discovery of any noncompliance
therewith or any breach thereof, any investment of monies by or at the direction
of the Servicer or any loss resulting therefrom (it being understood, however,
that the Trustee shall remain responsible for any Trust Property that it may
hold directly); the acts or omissions of the Seller, the Servicer, the Sponsor
or any Obligor; any action of the Servicer taken in the name of the Trustee; the
accuracy, content or completeness of any offering documents used in connection
with the sale of the Certificates or any action by the Trustee taken at the
instruction of the Sponsor, the Servicer, the Seller, the Certificate Insurer or
the Certificateholders holding the requisite percentage of Certificates;
provided, however, that the foregoing shall not relieve the Trustee of its
obligation to perform its duties under this Agreement, whether as Trustee or as
Backup Servicer. The Trustee shall not be accountable for the use or application
by the Sponsor or the Seller of any of the Certificates or of the proceeds of
such Certificates, or for the use or application of any funds paid to the
Servicer in respect of the Receivables prior to the time such funds are
deposited in the Collection Account.
Section 11.5. Trustee May Own Certificates. The Trustee in its
individual or any other capacity may become the owner or pledgee of Certificates
with the same rights as it would have if it were not Trustee and may deal with
the Seller and the Servicer in banking transactions with the same rights as it
would have if it were not Trustee.
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Section 11.6. Trustee's Fees and Expenses; Indemnification. The
Servicer in a separate agreement (the "Fee Letter"), in the form attached hereto
as Exhibit K, has covenanted and agreed to pay to the Trustee, and the Trustee
shall be entitled to, certain annual fees (the "Annual Trustee's Fee") (which
shall not be limited by any provision of law in regard to the compensation of a
trustee of an express trust) for all services, including services as Backup
Servicer, rendered by it in the execution of the trusts created by this
Agreement and in the exercise and performance of any of the powers and duties
under this Agreement of the Trustee. To the extent not covered by Article IX,
the Seller and the Servicer shall indemnify, defend, and hold harmless the
Trustee and the Backup Servicer from and against all costs, expenses, losses,
claims, damages and liabilities arising out of or incurred in connection with
the acceptance of the performance of the trusts and duties contained in this
Agreement, except to the extent that such cost, expense, loss, claim, damage or
liability is due to the bad faith or gross negligence (except for errors in
judgment) of the Trustee or the Backup Servicer, respectively. In addition, the
Servicer in Section 9.1 has agreed to indemnify the Trustee with respect to
certain matters, and the Certificateholders in their individual capacity under
Section 11.3(c) or (d) may agree to indemnify the Trustee under certain
circumstances. The provisions of this Section 11.6 (i) shall not be in
limitation of the Fee Letter entered into in connection with this Agreement
between the Servicer and the Trustee, (ii) shall not terminate or be deemed
released upon the resignation or termination of ACC as the Servicer and (iii)
shall survive any termination of this Agreement.
Section 11.7. Eligibility Requirements for Trustee. The Trustee
under this Agreement shall at all times be a corporation duly organized and
validly existing under the laws of its jurisdiction of incorporation authorized
under such laws to exercise corporate trust powers, having a combined capital
and surplus of at least $50,000,000 and subject to supervision or examination by
federal or state authority, satisfactory to the Sponsor and (so long as an
Insurer Default shall not have occurred and be continuing) satisfactory to the
Certificate Insurer, and (if Moody's then has a rating outstanding on the
Certificates) with a long-term debt rating from Moody's of "Baa3" or higher or
otherwise acceptable to Moody's. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purpose of this
Section 11.7, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Trustee shall cease to
be eligible in accordance with the provisions of this Section 11.7, the Trustee
shall resign immediately in the manner and with the effect specified in Section
11.8.
Section 11.8. Resignation or Removal of Trustee. (a) Subject to
the provisions of subsection (c) of this Section 11.8, the Trustee may at any
time resign and be discharged from the trusts created by this Agreement by
giving written notice thereof to the Servicer and the Sponsor. Upon receiving
such notice of resignation, the Servicer, with the consent of the Certificate
Insurer (unless an Insurer Default shall have occurred and be continuing) and
the Sponsor, shall promptly appoint a successor Trustee by written instrument,
in duplicate, one copy of which instrument shall be delivered to the resigning
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Trustee and one copy to the successor Trustee. If no successor Trustee shall
have been so appointed and have accepted appointment within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 11.8 and shall fail to resign
after written request therefor by the Servicer, or if at any time the Trustee
shall be legally unable to act, or shall be adjudged a bankrupt or insolvent or
a receiver of the Trustee or of its property shall be appointed or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Servicer or (so long as an Insurer Default shall not have occurred and be
continuing) the Certificate Insurer shall remove the Trustee. If the Trustee is
removed under the authority of the immediately preceding sentence, the Servicer
or the Certificate Insurer, as the case may be, shall promptly appoint a
successor Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the Trustee so removed and one copy to the
successor trustee. The Servicer shall also pay all fees due and owing to the
outgoing Trustee. Any successor trustee shall (so long as an Insurer Default
shall not have occurred and be continuing) be acceptable to the Certificate
Insurer and the Sponsor.
(c) Any resignation or removal of the Trustee and appointment of
a successor Trustee pursuant to any of the provisions of this Section 11.8 shall
not become effective until acceptance of appointment by the successor Trustee as
provided in Section 11.9.
(d) If the Trustee and the Backup Servicer shall be the same
Person and the rights and obligations of the Backup Servicer shall have been
terminated pursuant to Section 10.2, then the Certificate Insurer (or, if an
Insurer Default shall have occurred and be continuing, a Certificate Majority)
shall have the option, by 60 days' prior notice in writing to the Sponsor, the
Seller, the Servicer and the Trustee, to remove the Trustee, and the Certificate
Insurer shall not have any liability to the Trustee, ACC, the Sponsor, the
Seller, the Servicer or any Certificateholder in connection with such removal.
Section 11.9. Successor Trustee. (a) Any successor Trustee
appointed as provided in Section 11.8 shall execute, acknowledge and deliver to
the Servicer and the Certificate Insurer, and to its predecessor Trustee an
instrument accepting such appointment under this Agreement, and thereupon the
resignation or removal of the predecessor Trustee shall become effective and
such successor trustee, without any further act, deed or conveyance (except as
provided below), shall become fully vested with all the rights, powers, duties
and obligations of its predecessor under this Agreement, with like effect as if
originally named as Trustee; but, on request of the Servicer and the Certificate
Insurer, or the successor trustee, such predecessor Trustee shall, upon payment
of its charges then unpaid, execute and deliver an instrument transferring to
such successor trustee all of the rights, powers and trusts of the Trustee so
ceasing to act, and shall duly assign, transfer and deliver to such successor
trustee all property and money held by such trustee so ceasing to act hereunder.
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Upon request of any such successor trustee, the Seller, on behalf of the Trust,
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor trustee all such rights, powers and trusts. The
predecessor Trustee shall deliver to the successor Trustee all documents and
statements held by it under this Agreement or any Related Document; and the
predecessor Trustee and the other parties to the Related Documents shall amend
any Related Document to make the successor Trustee the successor to the
predecessor Trustee thereunder; and the Servicer and the predecessor Trustee
shall execute and deliver such instruments and do such other things as may
reasonably be required for fully and certainly vesting and confirming in the
successor Trustee all such rights, powers, duties and obligations. No successor
Trustee shall accept appointment as provided in this Section 11.9 unless at the
time of such acceptance such successor Trustee shall be eligible under the
provisions of Section 11.7. Upon acceptance of appointment by a successor
Trustee as provided in this Section 11.9, the Seller shall mail notice by
first-class mail of the successor of such Trustee and the address of the
successor Trustee's corporate trust office under this Agreement to each Rating
Agency, the Sponsor, the Certificate Insurer and all Holders of Certificates at
their addresses as shown in the Certificate Register. If the Seller fails to
mail such notice within 10 days after acceptance of appointment by the successor
Trustee, the successor Trustee shall cause such notice to be mailed at the
expense of the Seller.
Section 11.10. Merger or Consolidation of Trustee. Any
corporation into which the Trustee may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which the Trustee shall be a party, or any corporation succeeding to the
business of the Trustee, shall be the successor of the Trustee under this
Agreement, provided such corporation shall be eligible under the provisions of
Section 11.7, without the execution or filing of any instrument or any further
act on the part of any of the parties to this Agreement, anything in this
Agreement to the contrary notwithstanding. The Trustee or its successor
hereunder shall provide the Servicer and the Certificate Insurer with prompt
notice of any such transaction.
Section 11.11. Appointment of Co-Trustee or Separate Trustee. (a)
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Property or any Financed Vehicle may at the time be located, the
Trustee, with the consent of the Servicer and (so long as an Insurer Default
shall not have occurred and be continuing) the Certificate Insurer, shall have
the power and may execute and deliver all instruments to appoint one or more
Persons approved by the Trustee to act as co-trustee or co-trustees, jointly
with the Trustee, or separate trustee or separate trustees, of all or any part
of the Trust Property, and to vest in such Person or Persons, in such capacity
and for the benefit of the Certificate holders, such title to the Trust
Property, or any part thereof, and, subject to the other provisions of this
Section 11.11, such powers, duties, obligations, rights and trusts as the
Servicer, the Trustee and (so long as an Insurer Default shall not have occurred
and be continuing) the Certificate Insurer may consider necessary or desirable.
If the Servicer shall not have consented to such appointment within 15 days
after the receipt by it of a request to do so, or if a Servicer Termination
Event shall have occurred and be continuing, the consent of the Servicer
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shall not be required. No co-Trustee or separate Trustee under this Agreement
shall be required to meet the terms of eligibility as a successor trustee
under Section 11.7 and no notice to Certificateholders of the appointment
of any co-trustee or separate trustee shall be required under Section 11.9.
Every separate trustee and co-trustee shall, to the extent permitted by law,
be appointed and act subject to the following provisions and conditions:
(i) All rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Trustee
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed by
the Trustee, the Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust Property or any
portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely at
the direction of the Trustee;
(ii) No trustee under this Agreement shall be personally liable
by reason of any act or omission of any other trustee under this
Agreement; and
(iii) The Servicer, the Trustee and provided no Insurer Default
shall have occurred and be continuing, the Certificate Insurer acting
jointly may at any time accept the resignation of or remove any separate
trustee or co-trustee.
(b) Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article XI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Every such instrument shall be filed with the Trustee and a
copy thereof given to the Sponsor and the Servicer.
(c) Any separate trustee or co-trustee may at any time constitute
the Trustee, its agent or attorney-in-fact, with full power and authority, to
the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
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Section 11.12. Representations and Warranties of Trustee. Each of
the Trustee and Backup Servicer represents and warrants as of the date of this
Agreement that:
(a) it is either (i) a banking corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation or (ii) a national banking association duly organized,
validly existing and in good standing under the laws of the United
States of America;
(b) it has full power, authority and legal right to execute,
deliver and perform this Agreement, and has taken all necessary action
to authorize the execution, delivery and performance by it of this
Agreement;
(c) the execution, delivery and performance by it of this
Agreement (a) do not violate any provision of any law or regulation
governing the banking and trust powers of it or any order, writ,
judgment, or decree of any court, arbitrator, or governmental authority
applicable to it or any of its assets, (b) do not violate any provision
of its corporate charter or by-laws, or (c) to the best of its knowledge
do not violate any provision of, or constitute, with or without notice
or lapse of time, a default under, or result in the creation or
imposition of any lien on any of the Trust Property pursuant to the
provisions of any mortgage, indenture, contract, agreement or other
undertaking other than this Agreement to which it is a party;
(d) the execution, delivery and performance by it of this
Agreement do not require the authorization, consent or approval of, the
giving of notice to, the filing or registration with, or the taking of
any other action in respect of, any governmental authority or agency
regulating its banking and corporate trust activities; and
(e) this Agreement has been duly executed and delivered by it and
constitutes the legal, valid and binding agreement of it, enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting
the enforcement of creditors' rights generally and by equitable
limitations on the availability of specific remedies, regardless of
whether such enforceability is considered in a proceeding in equity or
at law.
Section 11.13. Tax Returns. In the event the Trust shall be
required to file tax returns, the Servicer shall prepare or shall cause to be
prepared any tax returns required to be filed by the Trust and shall remit such
returns to the Trustee for signature at least five Business Days before such
returns are due to be filed. The Trustee, upon request, shall furnish the
Servicer with all such information known to the Trustee as may be reasonably
required in connection with the preparation of all tax returns of the Trust, and
shall execute such returns and cause such returns to be filed on or prior to the
date on which such returns are due.
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Section 11.14. Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name as trustee. Any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Certificate holders in respect of which such judgment has
been obtained.
Section 11.15. Suit for Enforcement. If a Servicer Termination
Event shall occur and be continuing, the Trustee, in its discretion may (but
shall have no duty or obligation so to proceed), subject to the provisions of
Section 11.1, proceed to protect and enforce its rights and the rights of the
Certificateholders under this Agreement by a suit, action or proceeding in
equity or at law or otherwise, whether for the specific performance of any
covenant or agreement contained in this Agreement or in aid of the execution of
any power granted in this Agreement or for the enforcement of any other legal,
equitable or other remedy as the Trustee, being advised by counsel, shall deem
most effectual to protect and enforce any of the rights of the Trustee or the
Certificateholders.
Section 11.16. Rights to Direct Trustee. Subject to Section
11.3(c), the Certificate Insurer (or, if an Insurer Default shall have occurred
and be continuing, a Certificate Majority) shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee;
provided, however, that subject to Section 11.1, the Trustee shall have the
right to decline to follow any such direction if the Trustee being advised by
counsel determines that the action so directed may not lawfully be taken, or if
the Trustee in good faith shall, by a Responsible Officer, determine that the
proceedings so directed would be in violation of this Agreement or any of the
Related Documents or would subject it to personal liability against which it has
not been provided reasonable indemnity or (in the case of directions provided by
a Certificate Majority) be unduly prejudicial to the rights of Certificate
holders not parties to such direction; and provided, further, that nothing in
this Agreement shall impair the right of the Trustee to take any action deemed
proper by the Trustee and which is not inconsistent with such direction by the
Certificate Insurer or the Certificate holders.
ARTICLE XII
TERMINATION
Section 12.1. Termination of the Trust. (a) The respective
obligations and responsibilities of the Seller, the Servicer, the Certificate
Insurer, the Sponsor, the Backup Servicer and the Trustee created by this
Agreement and the Trust created by this Agreement shall terminate upon the
latest of (i) the maturity or other liquidation of the last Receivable
(including the purchase as of any Record Date by the Seller or the Servicer at
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its option of the corpus of the Trust as described in Section 12.2) and the
subsequent distribution to Certi ficateholders pursuant to Section 5.5 of the
amount required to be deposited pursuant to Section 12.2 or (ii) the payment to
Certificateholders of all amounts required to be paid to them pursuant to this
Agreement and the payment to the Certificate Insurer of all amounts payable or
reimbursable to it pursuant to this Agreement and the Insurance Agreement. In
either case, there shall be delivered to the Trustee and the Certificate Insurer
an Opinion of Counsel that all applicable preference periods under federal,
state and local bankruptcy insolvency and similar laws have expired with respect
to the payments pursuant to clause (ii); provided, however, that in no event
shall the trust created by this Agreement continue beyond the expiration of 21
years from the death of the last survivor of the descendants living on the date
of this Agreement of Rose Kennedy of the Commonwealth of Massachusetts; and
provided, further, that the rights to indemnification under Sections 9.1 and
11.6 shall survive the termination of the Trust. The Servicer shall promptly
notify the Trustee, the Certificate Insurer and each Rating Agency, of any
prospective termination pursuant to this Section 12.1.
(b) Notice of any final distribution, specifying the Distribution
Date upon which the Certificateholders may surrender their Certificates to the
Trustee for payment of the final distribution and retirement of the
Certificates, shall be given promptly by the Trustee by letter to
Certificateholders mailed not earlier than the 1st day and not later than the
10th day of the month of such final distribution specifying (i) the Distribution
Date upon which final payment of the Certificates shall be made upon
presentation and surrender of Certificates at the office of the Trustee therein
specified, (ii) the amount of any such final payment, and (iii) that the Record
Date otherwise applicable to such Distribution Date is not applicable, payments
being made only upon presentation and surrender of the Certificates at the
office of the Trustee therein specified. The Trustee shall give such notice to
the Certificate Registrar at the time such notice is given to
Certificateholders. In the event such notice is given, the Servicer or the
Trustee, as the case may be, shall make deposits into the Collection Account in
accordance with Section 5.4, or, in the case of an optional purchase of
Receivables pursuant to Section 12.2, the Servicer or the Seller, as the case
may be, shall deposit the amount specified in Section 12.2. Upon presentation
and surrender of the Certificates, the Trustee shall cause to be distributed to
Certificateholders amounts distributable on such Distribution Date pursuant to
Section 5.5.
(c) In the event that all of the Certificateholders shall not
surrender their Certificates for retirement within six months after the date
specified in the above-mentioned written notice, the Trustee shall have a second
written notice sent to the remaining Certifi cateholders to surrender their
Certificates for retirement and receive the final distribution with respect
thereto. If within one year after the second notice all the Certificates shall
not have been surrendered for retirement, the Trustee may take appropriate
steps, or may appoint an agent to take appropriate steps, to contact the
remaining Certificateholders concerning surrender of their Certificates, and the
cost thereof shall be paid out of the funds and other assets that remain subject
to this Agreement. As soon as practicable after the termination of the Trust,
the Trustee shall surrender the Policy to the Certificate Insurer for
cancellation.
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Section 12.2. Optional Purchase of All Receivables. On each
Determination Date as of which the Aggregate Principal Balance is less than 10%
of the Cut-off Date Principal Balance, the Servicer and the Seller each shall
have the option to purchase the corpus of the Trust (with the consent of the
Certificate Insurer, if such purchase would result in a claim on the Policy or
would result in any amount owing to the Certificate Insurer remaining unpaid).
To exercise such option, the Servicer or the Seller, as the case may be, shall
pay the aggregate Purchase Amounts for the Receivables, plus the appraised value
of any other property (including the right to receive any future recoveries)
held as part of the Trust, such appraisal to be conducted by an appraiser
mutually agreed upon by the Servicer or the Seller, as the case may be, and the
Certificate Insurer (or the Trustee, if an Insurer Default shall have accrued
and be continuing), and shall succeed to all interests in and to the Trust
Property. The fees and expenses related to such appraisal shall be paid by the
party exercising the option to purchase.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.1. Amendment. (a) This Agreement may be amended by
ACC, the Seller, the Servicer, the Backup Servicer, the Sponsor, the Trustee,
with the prior written consent of the Certificate Insurer (so long as an Insurer
Default shall not have occurred and be continuing) but without the consent of
any of the Certificateholders, (i) to cure any ambiguity, or (ii) to correct or
supplement any provisions in this Agreement; provided, however, that such action
shall not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of the Certificateholders, provided, further,
that if an Insurer Default has occurred and is continuing, such action shall not
amend, modify or limit the Certificate Insurer's rights under (i) Section
5.5(b), (ii) any rights to indemnification to which the Certificate Insurer is
entitled hereunder or (iii) any defined terms used in preceding clauses (i) or
(ii).
(b) This Agreement may also be amended from time to time by ACC,
the Seller, the Servicer, the Backup Servicer, the Sponsor and the Trustee with
the prior written consent of the Certificate Insurer (so long as an Insurer
Default shall not have occurred and be continuing) and with the consent of a
Certificate Majority (which consent of any Holder of a Certificate given
pursuant to this Section 13.1(b) or pursuant to any other provision of this
Agreement shall be conclusive and binding on such Holder and on all future
Holders of such Certificate and of any Certificate issued upon the transfer
thereof or in exchange thereof or in lieu thereof whether or not notation of
such consent is made upon the Certificate) for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement, or of modifying in any manner the rights of the Holders of
Certificates; provided, however, that no such amendment shall (a) increase or
reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Receivables or distributions that shall be required
to be made on any Certificate or the Class A Pass-Through Rate or the Class B
Pass-Through Rate or (b) reduce the aforesaid percentage required to consent
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to any such amendment or any waiver hereunder, without the consent of the
Holders of all Certificates then outstanding, provided, further, that if an
Insurer Default has occurred and is continuing, such action shall not amend,
modify or limit the Certificate Insurer's rights under (i) Section 5.5(b), (ii)
any rights to indemnification to which the Certificate Insurer is entitled
hereunder or (iii) any defined terms used in preceding clauses (i) or (ii).
(c) Prior to the execution of any such amendment or consent, the
Trustee shall furnish written notification of the substance of such amendment or
consent to each Rating Agency.
(d) Promptly after the execution of any such amendment or
consent, the Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder.
(e) It shall not be necessary for the consent of
Certificateholders pursuant to Section 13.1(b) to approve the particular form of
any proposed amendment or consent, but it shall be sufficient if such consent
shall approve the substance thereof. The manner of obtaining such consents (and
any other consents of Certificateholders provided for in this Agreement) and of
evidencing the authorization of the execution thereof by Certificateholders
shall be subject to such reasonable requirements as the Trustee may prescribe,
including the establishment of record dates.
(f) Prior to the execution of any amendment to this Agreement,
the Trustee shall be entitled to receive and rely upon an Opinion of Counsel
stating that the execution of such amendment is authorized or permitted by this
Agreement, in addition to the Opinion of Counsel referred to in Section 13.2(i).
The Trustee may, but shall not be obligated to, enter into any such amendment
which affects the Trustee's own rights, duties or immunities under this
Agreement or otherwise.
Section 13.2. Protection of Title to Trust. (a) The Seller or the
Servicer or both shall execute and file such financing statements and cause to
be executed and filed such continuation and other statements, all in such manner
and in such places as may be required by law fully to preserve, maintain and
protect the interest of the Trust, the Trustee and the Certificate Insurer under
this Agreement in the Trust Property and in the proceeds thereof. The Seller or
the Servicer or both shall deliver (or cause to be delivered) to the Trustee,
the Sponsor and the Certificate Insurer file-stamped copies of, or filing
receipts for, any document filed as provided above, as soon as available
following such filing.
(b) Neither the Seller nor the Servicer shall change its name,
identity or corporate structure in any manner that would, could or might make
any financing statement or continuation statement filed by the Seller in
accordance with paragraph (a) above seriously misleading within the meaning of
Section 9-402(7) of the UCC, unless it shall have given the Trustee, the Sponsor
and the Certificate Insurer (so long as an Insurer Default shall not have
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occurred and be continuing) at least 60 days prior written notice thereof, and
shall promptly file appropriate amendments to all previously filed financing
statements and continuation statements.
(c) Each of the Seller and the Servicer shall give the Trustee,
the Sponsor and the Certificate Insurer at least 60 days' prior written notice
of any relocation of its principal executive office if, as a result of such
relocation, the applicable provisions of the UCC would require the filing of any
amendment of any previously filed financing or continuation statement or of any
new financing statement. The Servicer shall at all times maintain each office
from which it services Receivables and its principal executive office within the
United States of America.
(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader thereof
to know at any time the status of such Receivable, including payments and
recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Collection Account
in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that,
from and after the time of sale under this Agreement of the Receivables to the
Trust, the Servicer's master computer records (including any backup archives)
that refer to any Receivable indicate clearly (with reference to the particular
grantor trust) that the Receivable is owned by the Trust. Indication of the
Trust's ownership of a Receivable shall be deleted from or modified on the
Servicer's computer systems when, and only when, the Receivable has been paid in
full or repurchased by ACC, the Seller, the Servicer or the Sponsor.
(f) If at any time the Seller or the Servicer proposes to sell,
grant a security interest in, or otherwise transfer any interest in automotive
receivables to any prospective purchaser, lender or other transferee, the
Servicer shall give to such prospective purchaser, lender or other transferee
computer tapes, records or printouts (including any restored from backup
archives) that, if they refer in any manner whatsoever to any Receivable,
indicate clearly that such Receivable has been sold and is owned by the Trust
unless such Receivable has been paid in full or repurchased by ACC, the Seller,
the Servicer or the Sponsor.
(g) The Servicer shall permit the Trustee, the Backup Servicer,
the Certificate Insurer, the Sponsor, the Seller and their respective agents, at
any time to inspect, audit and make copies of and abstracts from the Servicer's
records regarding any Receivables or any other portion of the Trust Property.
(h) The Servicer shall furnish to the Trustee, the Backup
Servicer, the Sponsor, the Seller and the Certificate Insurer at any time upon
request a list of all Receivables then held as part of the Trust, together with
a reconciliation of such list to the Schedule of Receivables and to each of the
Servicer's Certificates furnished before such request indicating removal of
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Receivables from the Trust. The Trustee shall hold any such list and Schedule of
Receivables for examination by interested parties during normal business hours
at the Corporate Trust Office upon reasonable notice by such Persons of their
desire to conduct an examination.
(i) The Seller and the Servicer shall deliver to the Trustee, the
Sponsor and the Certificate Insurer simultaneously with the execution and
delivery of this Agreement and of each amendment thereto and upon the occurrence
of the events giving rise to an obligation to give notice pursuant to Section
13.2(b) or (c), an Opinion of Counsel (a) stating that, in the opinion of such
Counsel, all financing statements and continuation statements have been executed
and filed that are necessary fully to preserve and protect the interest of the
Trustee in the Receivables and the other Trust Property, and reciting the
details of such filing or referring to prior Opinions of Counsel in which such
details are given, (b) stating that, in the opinion of such counsel, no such
action is necessary to preserve and protect such interest, or (c) stating in the
opinion of such counsel, any action which is necessary to preserve and protect
such interest during the following 12-month period.
(j) The Servicer shall deliver to the Trustee, the Sponsor and
the Certificate Insurer, within 90 days after the beginning of each calendar
year beginning with the first calendar year beginning more than three months
after the Closing Date, an Opinion of Counsel, either (a) stating that, in the
opinion of such counsel, all financing statements and continuation statements
have been executed and filed that are necessary fully to preserve and protect
the interest of the Trustee in the Receivables, and reciting the details of such
filings or referring to prior Opinions of Counsel in which such details are
given, or (b) stating that, in the opinion of such counsel, no action shall be
necessary to preserve and protect such interest.
Section 13.3. Limitation on Rights of Certificateholders. (a) The
death or incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations and liabilities of the parties to
this Agreement or any of them.
(b) No Certificateholder shall have any right to vote (except as
provided in this Section 13.3 or Sections 10.2, 10.5 or 13.1) or in any manner
otherwise control the operation and management of the Trust, or the obligations
of the parties to this Agreement, nor shall anything set forth in this
Agreement, or contained in the terms of the Certificates, be construed so as to
constitute the Certificateholders from time to time as partners or members of an
association; nor shall any Certificateholder be under any liability to any third
person by reason of any action taken by the parties to this Agreement pursuant
to any provision of this Agreement or any Related Document.
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(c) So long as no Insurer Default has occurred and is continuing,
except as otherwise specifically provided herein, whenever Class A
Certificateholder action, consent or approval is required under this Agreement,
such action, consent or approval shall be deemed to have been taken or given on
behalf of, and shall be binding upon, all Class A Certificateholders if the
Certificate Insurer agrees to take such action or give such consent or approval.
If an Insurer Default shall have occurred and is continuing, no
Certificateholder shall have any right by virtue or by availing itself of any
provisions of this Agreement to institute any suit, action, or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee a written notice of default
and of the continuance thereof, as provided in this Agreement and unless also
the Holders of Certificates evidencing not less than 25% of the sum of the Class
A Certificate Balance and the Class B Certificate Balance, or, if there are no
Class A Certificates then outstanding, by Holders of Class B Certificates
evidencing not less than 25% of the Class B Certificate Balance shall have made
written request upon the Trustee to institute such action, suit or proceeding in
its own name as Trustee under this Agreement and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby, and the Trustee, for 30 days
after its receipt of such notice, request, and offer of indemnity, shall have
neglected or refused to institute any such action, suit, or proceeding and
during such 30-day period, no request or waiver inconsistent with such written
request has been given to the Trustee pursuant to and in compliance with this
Section 13.3 or Section 10.5; it being understood and intended, and being
expressly covenanted by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more Holders of Certificates
shall have any right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement to affect, disturb, or prejudice
the rights of the Holders of any other of the Certificates, or to obtain or seek
to obtain priority over or preference to any other such Holder, or to enforce
any right under this Agreement, except in the manner provided in this Agreement
and for the equal, ratable, and common benefit of all Certificateholders. For
the protection and enforcement of the provisions of this Section 13.3, each and
every Certificateholder and the Trustee shall be entitled to such relief as can
be given either at law or in equity. Nothing in this Agreement shall be
construed as giving the Certificateholders any right to make a claim under the
Policy.
Section 13.4. Governing Law. This Agreement, the Certificates and
the rights of the Certificateholders shall be governed by and construed in
accordance with the laws of the State of New York without regard to the
principles of conflicts of laws thereof and the obligations, rights and remedies
of the parties under this Agreement and each Certificateholder shall be
determined in accordance with such laws.
Section 13.5. Severability of Provisions. If any one or more of
the covenants, agreements, provisions or terms of this Agreement shall be for
any reason whatsoever held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity
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or enforceability of the other provisions of this Agreement or of the
Certificates or the rights of the Holders thereof.
Section 13.6. Assignment. Notwithstanding anything to the
contrary contained in this Agreement, except as provided in Section 8.2 or
Section 9.2 and as provided in the provisions of the Agreement concerning the
resignation of the Servicer and the Backup Servicer, this Agreement may not be
assigned by ACC, the Seller, the Servicer or the Sponsor without the prior
written consent of the Trustee and the Certificate Insurer (or, if an Insurer
Default shall have occurred and be continuing the Trustee and a Certificate
Majority).
Section 13.7. Certificates Nonassessable and Fully Paid.
Certificateholders shall not be personally liable for obligations of the Trust,
the interests in the Trust represented by the Certificates shall be
nonassessable for any losses or expenses of the Trust or for any reason
whatsoever, and Certificates upon authentication thereof by the Trustee pursuant
to Section 7.2 are and shall be deemed fully paid.
Section 13.8. Third-Party Beneficiaries. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. Except as otherwise provided in
this Article XIII, no other Person shall have any right or obligation hereunder.
The Certificate Insurer and its successors and assigns shall be a third-party
beneficiary to the provisions of this Agreement, and shall be entitled to rely
upon and directly enforce such provisions of this Agreement so long as no
Insurer Default shall have occurred and be continuing. Except as expressly
stated otherwise herein or in the Related Documents, any right of the
Certificate Insurer to direct, appoint, consent to, approve of, or take any
action under this Agreement, shall be a right exercised by the Certificate
Insurer in its sole and absolute discretion. The Certificate Insurer may
disclaim any of its rights and powers under this Agreement (but not its duties
and obligations under the Policy) upon delivery of a written notice to the
Trustee. Following the occurrence and during the continuance of an Insurance
Default, all rights of the Certificate Insurer hereunder shall vest in the
Certificateholders and in the Certificate Majority.
Section 13.9. Financial Security as Controlling Party. Each
Certificateholder by purchase of the Certificates held by it acknowledges that
the Trustee on behalf of the Trust, as partial consideration of the issuance of
the Policy, has agreed that the Certificate Insurer shall have certain rights
hereunder for so long as no Insurer Default shall have occurred and be
continuing. So long as an Insurer Default has occurred and is continuing, any
provision giving the Certificate Insurer the right to direct, appoint or consent
to, approve of, or take any action under this Agreement shall be inoperative
during the period of such Insurer Default and such right shall instead vest in
the Trustee acting at the direction of the Holders of Certificates. The
Certificate Insurer may disclaim any of its rights and powers under this
Agreement (but not its duties and obligations under the Policy) upon delivery of
a written notice to the Trustee. The Certificate Insurer may give or withhold
any consent hereunder in its sole and absolute discretion.
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Section 13.10. Counterparts. This Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and all of which counterparts shall constitute but
one and the same instrument.
Section 13.11. Notices. All demands, notices and communications
under this Agreement shall be in writing, personally delivered or mailed by
certified mail-return receipt requested, and shall be deemed to have been duly
given upon receipt (a) in the case of ACC, the Seller and for so long as ACC is
the Servicer, the Servicer, at the following address: ACC Consumer Finance
Corporation, 12750 High Bluff Drive, Suite 320, San Diego, California 92130, (b)
in the case of the Trustee, and, for so long as the Trustee is the Backup
Servicer, the Trustee, at the Corporate Trust Office, Sixth Street and
Marquette, Minneapolis, Minnesota 55479-0069, Attention: Amy Johnson, (c) in the
case of the Sponsor, Cargill Financial Services Corporation, 6000 Clearwater
Drive, Minnetonka, Minnesota 55343-9497, Attention: Structured Finance Funding
Desk, and with a copy to Cargill Financial Services Corporation, 6000 Clearwater
Drive, Minnetonka, MN 55343-9497, Attention: Law Department (d) in the case of
each Rating Agency, ABS Monitoring Department, 99 Church Street, New York, New
York 10007 (for Moody's) and 26 Broadway, New York, New York 10004 (for Standard
& Poor's), and (e) in the case of the Certificate Insurer, Financial Security
Assurance Inc., 350 Park Avenue, New York, New York 10022, Attention:
Surveillance Department, Re: ACC Auto Grantor Trust 1996-B, or at such other
address as shall be designated by any such party in a written notice to the
other parties. Any notice required or permitted to be mailed to a
Certificateholder shall be given by first class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register, and any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder receives
such notice.
Section 13.12. Successors and Assigns. This Agreement shall be
binding upon the parties hereto and their respective successors and assigns, and
shall inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns permitted hereunder. All covenants and
agreements contained herein shall be binding upon, and inure to the benefit of,
the Trustee, the Backup Servicer, the Sponsor and the Certificateholders and
their respective permitted successors and assigns, if any. Any request, notice,
direction, consent, waiver or other instrument or action by any
Certificateholder shall bind its successors and assigns.
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IN WITNESS WHEREOF, the Sponsor, the Seller, ACC, the Servicer,
the Trustee, the Backup Servicer and the Collateral Agent have caused this
Pooling and Servicing Agreement to be duly executed by their respective
officers, effective as of the day and year first above written.
CARGILL FINANCIAL SERVICES
CORPORATION, as Sponsor
By_____________________________
Name: David A. Netjes
Title: Director, Corporate Capital Group
ACC RECEIVABLES CORP.,
as Seller
By_____________________________
Gary S. Burdick
President
ACC CONSUMER FINANCE
CORPORATION, as Servicer
By_____________________________
Gary S. Burdick
President
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee, Backup Servicer and Collateral Agent
By_____________________________
Name: Michael G. Luger
Title: Corporate Trust Officer
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SCHEDULE A
SCHEDULE OF RECEIVABLES
95
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EXHIBIT A
FORM OF CLASS A CERTIFICATE
---------------------------
SEE ATTACHED PAGES FOR CERTAIN DEFINITIONS
[UNLESS AND UNTIL THIS CLASS A CERTIFICATE IS EXCHANGED IN WHOLE
FOR CERTIFICATES IN DEFINITIVE FORM, THIS CERTIFICATE MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A
NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY
OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE
OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TO THE TRUSTEE FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF THE
DEPOSITORY OR ITS NOMINEE OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY AND ANY PAYMENT IS MADE TO THE DEPOSITORY OR
ITS NOMINEE, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF HAS AN INTEREST
HEREIN.]** THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE IN
RELIANCE UPON EXEMPTIONS PROVIDED BY THE SECURITIES ACT AND SUCH STATE
SECURITIES LAWS. NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE
UNLESS SUCH RESALE OR TRANSFER (A) IS MADE IN ACCORDANCE WITH SECTION 7.3 OF THE
POOLING AND SERVICING AGREEMENT RELATING TO THE ACC AUTO GRANTOR TRUST 1996-B
(THE "AGREEMENT") AND (B) IS MADE (i) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, (ii) IN A TRANSACTION EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS, (iii) TO THE SELLER OR (iv) TO A PERSON WHO THE TRANSFEROR REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT THAT IS AWARE THAT THE RESALE OR OTHER TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A AND (C) UPON THE SATISFACTION OF CERTAIN
- --------
** The language in this parenthetical shall be applicable only in the case
of the Class A Certificate so long as the Class A Certificate exists in global
form.
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OTHER REQUIREMENTS SPECIFIED IN THE AGREEMENT. NEITHER THE SELLER, THE SERVICER,
THE TRUST NOR THE TRUSTEE IS OBLIGATED TO REGISTER THE CERTIFICATES UNDER THE
SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS.
NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE
UNLESS THE CERTIFICATE REGISTRAR SHALL HAVE RECEIVED A REPRESENTATION LETTER IN
SUBSTANTIALLY THE FORM REQUIRED BY THE AGREEMENT REFERRED TO BELOW FROM THE
TRANSFEREE OF THIS CERTIFICATE OR SUCH OTHER REPRESENTATIONS (OR AN OPINION OF
COUNSEL) AS MAY BE APPROVED BY THE SELLER OR CS FIRST BOSTON CORPORATION, TO THE
EFFECT THAT SUCH A TRANSFER MAY BE MADE PURSUANT TO AN EXEMPTION FROM THE
SECURITIES ACT, INCLUDING RULE 144A THEREUNDER, AND APPLICABLE STATE SECURITIES
LAWS AND (A) SUCH TRANSFEREE WILL NOT ACQUIRE THIS CERTIFICATE WITH THE ASSETS
OF ANY "EMPLOYEE BENEFIT PLAN" AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA") OR SECTION
4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), (B)
SPECIFIED CONDITIONS OF AN "UNDERWRITER EXEMPTION" DESCRIBED IN SECTION V(h) OF
PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-60") ARE SATISFIED WITH
RESPECT TO SUCH TRANSFEREE OR (C) IN THE CASE OF A TRANSFER TO AN INSURANCE
COMPANY GENERAL ACCOUNT, EITHER (A) ABOVE, (B) ABOVE OR, PURSUANT TO SECTION I
OF PTCE 95-60, THE ACQUISITION AND HOLDING OF THE CERTIFICATE AND, PURSUANT TO
SECTION III OF PTCE 95-60, THE SERVICING, MANAGEMENT AND OPERATION OF THE TRUST
ARE WITH RESPECT TO SUCH TRANSFEREE EXEMPT FROM THE "PROHIBITED TRANSACTION"
PROVISIONS OF ERISA AND THE CODE.
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ACC AUTO GRANTOR TRUST 1996-B
6.90% ASSET BACKED CERTIFICATE, CLASS A
NUMBER CUSIP NO. 00079EAD7
A-1 $43,233,000.00
THIS CERTIFIES THAT _________________ is the registered owner of
a $43,233,000.00 dollar nonassessable, fully-paid interest in the ACC Auto
Grantor Trust 1996-B (the "Trust") formed by ACC Receivables Corp., a Delaware
corporation (the "Seller"). The Trust was created pursuant to a Pooling and
Servicing Agreement dated as of June 1, 1996 (the "Agreement"), among Cargill
Financial Services Corporation, as sponsor (the "Sponsor"), the Seller, ACC
Consumer Finance Corporation ("ACC"), as servicer (the "Servicer"), and Norwest
Bank Minnesota, National Association, as trustee (the "Trustee"), a summary of
certain of the pertinent provisions of which is set forth below. Reference is
made to the further provisions of this Class A Certificate set forth in the
attached pages 3 through 7, which further provisions shall for all purposes have
the same effect as if set forth at this place. Unless the certificate of
authentication hereon shall have been executed by an authorized signatory of the
Trustee, by manual signature, this Class A Certificate shall not entitle the
holder hereof to any benefit under the Agreement or be valid for any purpose.
All capitalized terms not otherwise defined herein have the meanings assigned to
them in the Agreement.
IN WITNESS WHEREOF, the Trustee on behalf of the Trust and not in
its individual capacity has caused this Class A Certificate to be duly executed.
ACC AUTO GRANTOR TRUST 1996-B
By: NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as
Trustee
By:________________________________
DATED: June 20, 1996
This is one of the Class A Certificates referred
to in the within-mentioned Agreement.
Norwest Bank Minnesota, National
Association, as Trustee
By:_________________________________
Authorized Signatory
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This Certificate evidences an interest in the Trust, as defined
above, the prop erty of which includes a pool of retail installment sale
contracts secured by new and used automobiles, light duty trucks, vans and
mini-vans and sold to the Trust by ACC Receivables Corp. This Certificate does
not represent an interest in or obligation of ACC Receivables Corp., ACC, in its
individual capacity or as the Servicer or any of their respective affiliates
thereof, except to the extent described below.
To the extent not otherwise defined herein, the capitalized terms
used herein have the meanings assigned to them in the Agreement. This
Certificate is one of the duly authorized Certificates designated as "6.90%
Asset Backed Certificates, Class A" (herein called the "Class A Certificates").
Also issued under the Agreement are Certificates designated as "6.90% Asset
Backed Certificates, Class B" (the "Class B Certificates") and "Asset Backed
Certificates, Class C" (the "Class C Certificates"). The Class B Certificates
and the Class A Certificates are hereinafter collectively called the
"Certificates." The aggre gate undivided interest in the Trust evidenced by all
Class A Certificates is 95%. This Class A Certificate is issued under and is
subject to the terms, provisions, and conditions of the Agreement, to which
Agreement the holder of this Class A Certificate by virtue of the accep tance
hereof assents and by which such holder is bound. The property of the Trust
includes (as more fully described in the Agreement) a pool of retail installment
sale contracts for new and used automobiles, light duty trucks, vans and
mini-vans (the "Receivables"), certain monies due thereunder with respect to the
Receivables on or after June 1, 1996, security interests in the vehicles
financed thereby, certain bank accounts and the proceeds thereof, property
securing the Receivables and held by the Trustee, proceeds from claims on
physical damage, credit life and disability insurance policies covering vehicles
financed thereby and the obligors thereunder, all Collateral Insurance relating
to the Receivables and the financed vehicles, certain rights against Dealers and
in contracts with Dealers, all right, title and interest of the Seller in and to
the Purchase Agreement and any and all proceeds of the foregoing.
Under the Agreement, there will be distributed on the 15th day of
each month or, if such 15th day is not a Business Day, the next Business Day
(the "Distribution Date"), commencing on July 15, 1996, to the person in whose
name this Class A Certificate is registered at the close of business on the last
day of the prior calendar month (the "Record Date"), to the extent available
from the Amount Available, such Class A Certificateholder's fractional undivided
interest in the sum of the Class A Interest Distributable Amount for such
Distribution Date, any outstanding Class A Interest Carryover Shortfall for such
Distribution Date, the Class A Principal Distributable Amount for such
Distribution Date and any Class A Principal Carryover Shortfall for such
Distribution Date.
Except as otherwise provided in the Agreement, distributions on
this Class A Certificate will be made by the Trustee by wire transfer (as
provided in the Agreement), check or money order mailed to the Class A
Certificateholder of record in the Certificate Register without the presentation
or surrender of this Class A Certificate or the making of any notation hereon.
Except as otherwise provided in the Agreement and notwithstanding the above, the
A-4
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<PAGE>
final distribution on this Class A Certificate will be made after due notice by
the Trustee of the pendency of such distribution and only upon presentation and
surrender of this Class A Certificate at the office or agency maintained for
that purpose by the Trustee in Minneapolis, Minnesota. The Record Date otherwise
applicable to such distribution shall not be applicable.
The Certificates do not represent an obligation of, or an
interest in, the Seller, the Servicer, the Trustee, the Sponsor or any affiliate
of any of them. The Certificates are limited in right of payment to certain
collections and recoveries respecting the Receivables, all as more specifically
set forth in the Agreement. A copy of the Agreement may be examined during
normal business hours at the principal office of the Seller, and at such other
places, if any, designated by the Seller, by any Certificateholder upon request.
As provided in the Agreement, so long as no Insurer Default has
occurred and is continuing, with certain exceptions whenever Class A
Certificateholder action, consent or approval is required under the Agreement,
such action, consent or approval shall be deemed to have been taken or given on
behalf of, and shall be binding upon, all Class A Certificateholders if the
Certificate Insurer agrees to take such action or give such consent or approval.
If an Insurer Default shall have occurred and is continuing, no
Certificateholder shall have any right by virtue or by availing itself of any
provisions of the Agreement to institute any suit, action, or proceeding in
equity or at law upon or under or with respect to the Agreement, unless such
Holder previously shall have given to the Trustee a written notice of default
and of the continuance thereof, as provided in the Agreement and unless also the
Holders of Certificates evidencing not less than 25% of the sum of the Class A
Certificate Balance and the Class B Certificate Balance, or, if there are no
Class A Certificates then outstanding, by Holders of Class B Certificates
evidencing not less than 25% of the Class B Certificate Balance shall have made
written request upon the Trustee to institute such action, suit or proceeding in
its own name as Trustee under the Agreement.
The Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Seller and the rights of the Certificateholders under the Agreement at any time
by the Seller and the Trustee with the consent of the Certificate Insurer and
the Holders of Certificates, voting together as a Class, evidencing not less
than a Certificate Majority. Any such consent by the Holder of this Certificate
shall be conclusive and binding on such Holder and on all future Holders of this
Certificate and of any Certificate issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Certificates. Notwithstanding the foregoing, however, no consent of
any Class A Certificateholder or the Class B Certificateholders shall be
required in connection with any amendment in order for the Class C
Certificateholder to sell, assign, transfer or otherwise dispose of the excess
interest.
As provided in the Agreement and subject to certain limitations
set forth therein, the transfer of this Certificate is registrable in the
Certificate Registrar upon surrender of this Certificate for registration
A-5
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<PAGE>
of transfer at the offices or agencies maintained by the Trustee in its capacity
as Certificate Registrar, or by any successor Certificate Registrar, in the City
of Minneapolis, Minnesota, accompanied by a written instrument of transfer in
form satisfactory to the Trustee and the Certificate Registrar duly executed by
the holder hereof or such holder's attorney duly authorized in writing, and
thereupon one or more new Certificates of authorized denominations evidencing
the same aggregate interest in the Trust will be issued to the designated
transferee.
The Class A Certificates and the Class B Certificates are
issuable only as registered Certificates without coupons in minimum
denominations of $500,000 and integral multiples of $1,000 in excess thereof;
however, one Certificate of each such Class may be issued in a denomination
representing or including any remaining portion of the original Class A
Certificate Balance or the original Class B Certificate Balance, as the case may
be. As provided in the Agreement and subject to certain limitations therein set
forth, Certificates are exchangeable for new Certificates of authorized
denominations evidencing the same aggregate denomination, as requested by the
holder surrendering the same. No service charge will be made for any such
registration of transfer or exchange, but the Trustee may require payment of a
sum sufficient to cover any tax or governmental charges payable in connection
therewith.
The Trustee, the Certificate Registrar, and any agent of the
Trustee or the Certificate Registrar may treat the person in whose name this
Class A Certificate is registered as the owner hereof for all purposes, and
neither the Trustee, the Certificate Registrar, nor any such agent shall be
affected by any notice to the contrary.
Each Certificateholder by purchase of the Certificates held by it
acknowledges that the Trustee, as partial consideration of the issuance of the
Policy, has agreed that the Certificate Insurer shall have certain rights
hereunder for so long as no Insurer Default shall have occurred and be
continuing. So long as an Insurer Default has occurred and is continuing, any
provision giving the Certificate Insurer the right to direct, appoint or consent
to, approve of, or take any action under this Agreement shall be inoperative
during the period of such Insurer Default and such right shall instead vest in
the Trustee acting at the direction of the Holders of Certificates. The
Certificate Insurer may disclaim any of its rights and powers under this
Agreement (but not its duties and obligations under the Policy) upon delivery of
a written notice to the Trustee. The Certificate Insurer may give or withhold
any consent hereunder in its sole and absolute discretion.
The obligations and responsibilities created by the Agreement and
the Trust created thereby shall terminate upon the payment to Certificateholders
of all amounts required to be paid to them pursuant to the Agreement and the
disposition of all property held as part of the Trust. The Servicer of the
Receivables may at its option purchase the corpus of the Trust at a price
specified in the Agreement, and such purchase of the Receivables and other
property of the Trust will effect early retirement of the Certificates; however,
such right of purchase is exercisable only as of the last day of any Collection
Period as of which the Pool Balance is less than 10% of the Cut-off Date
Principal Balance.
A-6
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<PAGE>
The recitals contained herein (other than the certificate of
authentication herein) shall be taken as the statements of the Seller or the
Servicer, as the case may be, and the Trustee assumes no responsibility for the
correctness thereof. The Trustee makes no representations as to the validity or
sufficiency of this Certificate (other than the certificate of authentication
herein), or of any Receivable or related document.
This Certificate is governed by the provisions of the Agreement
and of the internal laws of the State of New York, and the Holder hereof, by its
ownership hereof, shall be deemed to have consented to the exclusive application
of such governing provisions.
A-7
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<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
___________________________________________________
(Please print or typewrite name and address, including
postal zip code, of assignee)
___________________________________________________
the within Certificate, and all rights thereunder, hereby
irrevocably constituting and appointing
________________________ Attorney to transfer said Certificate on the books of
the Certificate Registrar, with full power of substitution in the premises.
Dated:
_____________________________*
Signature Guaranteed:
_____________________________*
* NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
A-8
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<PAGE>
EXHIBIT B
FORM OF CLASS B CERTIFICATE
---------------------------
SEE ATTACHED PAGES FOR CERTAIN DEFINITIONS
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF CERTAIN PAYMENTS TO
THE CLASS A CERTIFICATES AS DESCRIBED IN THE AGREEMENT REFERRED TO HEREIN.
DISTRIBUTIONS HEREON ARE SUBJECT TO THE PRIOR RIGHT OF THE CLASS A
CERTIFICATEHOLDERS TO RECEIVE AMOUNTS ON DEPOSIT IN THE SPREAD ACCOUNT.
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE
IN RELIANCE UPON EXEMPTIONS PROVIDED BY THE SECURITIES ACT AND SUCH STATE
SECURITIES LAWS. NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE
UNLESS SUCH RESALE OR TRANSFER (A) IS MADE IN ACCORDANCE WITH SECTION 7.3 OF THE
POOLING AND SERVICING AGREEMENT RELATING TO ACC AUTO GRANTOR TRUST 1996-B (THE
"AGREEMENT") AND (B) IS MADE (i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, (ii) IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, (iii)
TO THE SELLER OR (iv) TO A PERSON WHO THE TRANSFEROR REASONABLY BE LIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT THAT IS AWARE THAT THE RESALE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A AND (C) UPON THE SATISFACTION OF CERTAIN OTHER
REQUIREMENTS SPECIFIED IN THE AGREEMENT. NEITHER THE SELLER, THE SERVICER, THE
TRUST NOR THE TRUSTEE IS OBLIGATED TO REGISTER THE CERTIFICATES UNDER THE
SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS.
NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE
UNLESS THE CERTIFICATE REGISTRAR SHALL HAVE RECEIVED A REPRESENTATION LETTER IN
SUBSTANTIALLY THE FORM REQUIRED BY THE AGREEMENT REFERRED TO BELOW FROM THE
TRANSFEREE OF THIS CERTIFICATE OR SUCH OTHER REPRESENTATIONS (OR AN OPINION OF
COUNSEL) AS MAY BE APPROVED BY THE SELLER OR CS FIRST BOSTON CORPORATION, TO THE
EFFECT THAT SUCH A TRANSFER MAY BE MADE PURSUANT TO AN EXEMPTION FROM THE
SECURITIES ACT, INCLUDING RULE 144A THEREUNDER, AND APPLICABLE STATE SECURITIES
LAWS AND (A) SUCH TRANSFEREE WILL NOT ACQUIRE THIS CERTIFICATE WITH THE ASSETS
B-1
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<PAGE>
OF ANY "EMPLOYEE BENEFIT PLAN" AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA") OR SECTION
4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") OR (B)
IN THE CASE OF A TRANSFER TO AN INSURANCE COMPANY GENERAL ACCOUNT, EITHER (A)
ABOVE OR, IF THE CLASS B CERTIFICATES HAVE BEEN PLACED OR UNDERWRITTEN BY AN
ENTITY WHICH HAS AN UNDERWRITER EXEMPTION (AS DESCRIBED IN PROHIBITED
TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-60")), PURSUANT TO SECTION I OF PTCE
95-60, THE ACQUISITION AND HOLDING OF THE CERTIFICATE AND, PURSUANT TO SECTION
III OF PTCE 95-60, THE SERVICING, MANAGEMENT AND OPERATION OF THE TRUST ARE,
WITH RESPECT TO SUCH TRANSFEREE, EXEMPT FROM THE "PROHIBITED TRANSACTION"
PROVISIONS OF ERISA AND THE CODE.
BY ACCEPTANCE OF THIS CERTIFICATE, THE HOLDER HEREOF ACKNOWLEDGES
AND AGREES THAT IT (A) SHALL RECEIVE NO DISTRIBUTIONS WITH RESPECT HERETO UNLESS
AND UNTIL THE CORRESPONDING AMOUNTS ARE RELEASED FROM THE SPREAD ACCOUNT CREATED
UNDER THE SPREAD ACCOUNT AGREEMENT REFERENCED IN THE AGREEMENT AND (B) SHALL BE
BOUND BY THE PROVISIONS OF THE AGREEMENT, A COPY OF WHICH MAY BE OBTAINED FROM
THE TRUSTEE UPON REQUEST. THE HOLDER OF THIS CERTIFICATE HAS NO RIGHTS OR
INTERESTS IN ANY AMOUNTS AT ANY TIME HELD IN THE SPREAD ACCOUNT UNLESS AND UNTIL
SUCH AMOUNTS ARE RELEASED.
B-2
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<PAGE>
ACC GRANTOR TRUST 1996-B
6.90% ASSET BACKED CERTIFICATE, CLASS B
NUMBER
B-1
THIS CERTIFIES THAT ____________ is the registered owner of a
$2,275,441.14 dollars, fully-paid interest in the ACC Auto Grantor Trust 1996-B
(the "Trust") formed by ACC Receivables Corp., a Delaware corporation (the
"Seller"). The Trust was created pursuant to a Pooling and Servicing Agreement
dated as of June 1, 1996 (the "Agreement"), among Cargill Financial Services
Corporation, as sponsor (the "Sponsor"), the Seller, ACC Consumer Finance
Corporation ("ACC"), as Servicer (the "Servicer"), and Norwest Bank Minnesota,
National Association, as Trustee (the "Trustee"), a summary of certain of the
pertinent provisions of which is set forth below.
Reference is made to the further provisions of this Class B
Certificate set forth in the attached pages 3 through 7, which further
provisions shall for all purposes have the same effect as if set forth at this
place. Unless the certificate of authentication hereon shall have been executed
by an authorized signatory of the Trustee, by manual signature, this Class B
Certificate shall not entitle the holder hereof to any benefit under the
Agreement or be valid for any purpose. All capitalized terms not otherwise
defined herein have the meanings assigned to them in the Agreement.
IN WITNESS WHEREOF, the Trustee on behalf of the Trust and not in
its individual capacity has caused this Class B Certificate to be duly executed.
ACC AUTO GRANTOR TRUST 1996-B
By: Norwest Bank Minnesota, National
Association, as Trustee
By:______________________________________
DATED: June 20, 1996
This is one of the Class B Certificates referred
to in the within-mentioned Agreement.
Norwest Bank Minnesota, National
Association, as Trustee
By:___________________________
Authorized Signatory
B-3
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<PAGE>
This Certificate evidences an interest in the Trust, as defined
below, the property of which includes a pool of retail installment sale
contracts secured by new and used automobiles, light duty trucks, vans and
mini-vans and sold to the Trust by ACC Receivables Corp. This Certificate does
not represent an interest in or obligation of ACC Receivables Corp., ACC, in its
individual capacity or as the Servicer or any of their respective affiliates
thereof, except to the extent described below.
To the extent not otherwise defined herein, the capitalized terms
used herein have the meanings assigned to them in the Agreement. This
Certificate is one of the duly authorized Certificates designated as "6.90%
Asset Backed Certificates, Class B" (herein called the "Class B Certificates").
Also issued under the Agreement are Certificates designated as "6.90% Asset
Backed Certificates, Class A" (the "Class A Certificates") and "Asset Backed
Certificates, Class C" (the "Class C Certificates"). The Class B Certificates,
the Class A Certificates and the Class C Certificates are hereinafter
collectively called the "Certificates." The aggregate undivided interest in the
Trust evidenced by all Class B Certificates is 5%. This Class B Certificate is
issued under and is subject to the terms, provisions, and conditions of the
Agreement, to which Agreement the holder of this Class B Certificate by virtue
of the acceptance hereof assents and by which such holder is bound. The property
of the Trust includes (as more fully described in the Agreement) a pool of
retail installment sale contracts for new and used automobiles, light duty
trucks, vans and mini-vans (the "Receivables"), certain monies due thereunder
with respect to Receivables, on or after June 1, 1996, security interests in the
vehicles financed thereby, certain bank accounts and the proceeds thereof,
property securing the Receivables and held by the Trustee, proceeds from claims
on physical damage, credit life and disability insurance policies covering
vehicles financed thereby and the obligors thereunder, all Collateral Insurance
relating to the Receivables and the financed vehicles, certain rights against
Dealers and in contracts with Dealers, all right, title and interest of the
Seller in and to the Purchase Agreement and any and all proceeds of the
foregoing. The rights of the holders of the Class B Certificates to receive
certain payments are subordinated to the rights of the holders of the Class A
Certificates, as set forth in the Agreement.
Under the Agreement, there will be distributed on the 15th day of
each month or, if such 15th day is not a Business Day, the next Business Day
(the "Distribution Date"), commencing on July 15, 1996, to the person in whose
name this Class B Certificate is registered at the close of business on the last
day of the prior calendar month (the "Record Date"), to the extent available
from Available Funds, such Class B Certificateholder's fractional undivided
interest in the sum of the Class B Interest Distributable Amount for such
Distribution Date, any outstanding Class B Interest Carryover Shortfall for such
Distribution Date, the Class B Principal Distribution Amount for such
Distribution Date and any Class B Principal Carryover Shortfall for such
Distribution Date.
Except as otherwise provided in the Agreement, distributions on
this Class B Certificate will be made by the Trustee by wire transfer (as
provided in the Agreement), check or money order mailed to the Class B
Certificateholder of record in the Certificate Register without the
B-4
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<PAGE>
presentation or surrender of this Class B Certificate or the making of any
notation hereon. Except as otherwise provided in the Agreement and
notwithstanding the above, the final distribution on this Class B Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Class B
Certificate at the office or agency maintained for that purpose by the Trustee
in Minneapolis, Minnesota.
The Certificates do not represent an obligation of, or an
interest in, the Seller, the Servicer, the Trustee, the Sponsor or any affiliate
of any of them. The Certificates are limited in right of payment to certain
collections and recoveries respecting the Receivables, all as more specifically
set forth in the Agreement. A copy of the Agreement may be examined during
normal business hours at the principal office of the Seller, and at such other
places, if any, designated by the Seller, by any Certificateholder upon request.
The Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Seller and the rights of the Certificateholders under the Agreement at any time
by the Seller and the Trustee with the consent of the Certificate Insurer and
the Holders of Certificates, voting together as a Class, evidencing not less
than a Certificate Majority. Any such consent by the Holder of this Certificate
shall be conclusive and binding on such Holder and on all future Holders of this
Certificate and of any Certificate issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Certificates. Notwithstanding the foregoing, however, no consent of
any Class A Certificateholder or Class B Certificateholder shall be required in
connection with any amendment in order for the Class C Certificateholder to
sell, assign, transfer or otherwise dispose of the excess interest.
As provided in the Agreement and subject to certain limitations
set forth therein, the transfer of this Certificate is registrable in the
Certificate Registrar upon surrender of this Certificate for registration of
transfer at the offices or agencies maintained by the Trustee in its capacity as
Certificate Registrar, or by any successor Certificate Registrar, in
Minneapolis, Minnesota, accompanied by a written instrument of transfer in form
satisfactory to the Trustee and the Certificate Registrar duly executed by the
holder hereof or such holder's attorney duly authorized in writing, and
thereupon one or more new Certificates of authorized denominations evidencing
the same aggregate interest in the Trust will be issued to the designated
transferee.
The Class A Certificates and Class B Certificates are issuable
only as registered Certificates without coupons in minimum denominations of
$500,000 and integral multiples of $1,000 in excess thereof; however, one
Certificate of each such Class may be issued in a denomination representing or
including any remaining portion of the original Class A Certificate Balance or
the original Class B Certificate Balance, as the case may be. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates are
B-5
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<PAGE>
exchangeable for new Certificates of authorized denominations evidencing the
same aggregate denomination, as requested by the holder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or governmental charges payable in connection therewith.
Each Certificateholder by purchase of the Certificates held by it
acknowledges that the Trustee, as partial consideration of the issuance of the
Policy, has agreed that the Certificate Insurer shall have certain rights
hereunder for so long as no Insurer Default shall have occurred and be
continuing. So long as an Insurer Default has occurred and is continuing, any
provision giving the Certificate Insurer the right to direct, appoint or consent
to, approve of, or take any action under this Agreement shall be inoperative
during the period of such Insurer Default and such right shall instead vest in
the Trustee acting at the direction of the Holders of Certificates. The
Certificate Insurer may disclaim any of its rights and powers under this
Agreement (but not its duties and obligations under the Policy) upon delivery of
a written notice to the Trustee. The Certificate Insurer may give or withhold
any consent hereunder in its sole and absolute discretion.
The Trustee, the Certificate Registrar, and any agent of the
Trustee or the Certificate Registrar may treat the person in whose name this
Class B Certificate is registered as the owner hereof for all purposes, and
neither the Trustee, the Certificate Registrar, nor any such agent shall be
affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement and
the Trust created thereby shall terminate upon the payment to Certificateholders
of all amounts required to be paid to them pursuant to the Agreement and the
disposition of all property held as part of the Trust. The Servicer of the
Receivables may at its option purchase the corpus of the Trust at a price
specified in the Agreement, and such purchase of the Receivables and other
property of the Trust will effect early retirement of the Certificates; however,
such right of purchase is exercisable only as of the last day of any Collection
Period as of which the Pool Balance is less than 10% of the sum of the Cut-off
Date Principal Balance.
The recitals contained herein (other than the certificate of
authentication herein) shall be taken as the statements of the Seller or the
Servicer, as the case may be, and the Trustee assumes no responsibility for the
correctness thereof. The Trustee makes no representations as to the validity or
sufficiency of this Certificate (other than the certificate of authentication
herein), or of any Receivable or related document.
This Certificate is governed by the provisions of the Agreement
and of the internal laws of the State of New York, and the Holder hereof, by its
ownership hereof, shall be deemed to have consented to the exclusive application
of such governing provisions.
B-6
Page 397 of 606
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns
and transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
______________________________________________
(Please print or typewrite name and address,
including postal zip code, of assignee)
_______________________________________________
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
________________________ Attorney to transfer said Certificate on the books of
the Certificate Registrar, with full power of substitution in the premises.
Dated: _______________
_____________________________*
Signature Guaranteed:
_____________________________*
* NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
B-7
Page 398 of 606
<PAGE>
EXHIBIT C
FORM OF CLASS C CERTIFICATE
---------------------------
SEE ATTACHED PAGES FOR CERTAIN DEFINITIONS
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF CERTAIN PAYMENTS TO
THE CLASS A CERTIFICATES AND THE CLASS B CERTIFICATES AS DESCRIBED IN THE
AGREEMENT REFERRED TO HEREIN. DISTRIBUTIONS HEREON ARE SUBJECT TO THE PRIOR
RIGHT OF THE CLASS A CERTIFICATEHOLDERS AND THE CLASS B CERTIFICATEHOLDERS TO
RECEIVE AMOUNTS ON DEPOSIT IN THE SPREAD ACCOUNT.
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE
IN RELIANCE UPON EXEMPTIONS PROVIDED BY THE SECURITIES ACT. NO RESALE OR OTHER
TRANSFER OF THIS CERTIFICATE MAY BE MADE UNLESS SUCH RESALE OR TRANSFER (A) IS
MADE IN ACCORDANCE WITH SECTION 7.3 OF THE POOLING AND SERVICING AGREEMENT
RELATING TO ACC AUTO GRANTOR TRUST 1996-B (THE "AGREEMENT") AND (B) IS MADE (i)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (ii)
IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS, (iii) TO THE SELLER OR (iv) TO A PERSON
WHO THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN
THE MEANING OF RULE 144A UNDER THE SECURITIES ACT THAT IS AWARE THAT THE RESALE
OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A AND (C) UPON THE
SATISFACTION OF CERTAIN OTHER REQUIREMENTS SPECIFIED IN THE AGREEMENT. NEITHER
THE SELLER, THE SERVICER, THE TRUST NOR THE TRUSTEE IS OBLIGATED TO REGISTER THE
CERTIFICATES UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS.
NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE
UNLESS THE CERTIFICATE REGISTRAR SHALL HAVE RECEIVED A REPRESENTATION LETTER IN
SUBSTANTIALLY THE FORM REQUIRED BY THE AGREEMENT REFERRED TO BELOW FROM THE
TRANSFEREE OF THIS CERTIFICATE OR SUCH OTHER REPRESENTATIONS (OR AN OPINION OF
COUNSEL) AS MAY BE APPROVED BY THE SELLER OR CS FIRST BOSTON CORPORATION, TO THE
EFFECT THAT SUCH A TRANSFER MAY BE MADE PURSUANT TO AN EXEMPTION FROM THE
SECURITIES ACT, INCLUDING RULE 144A THEREUNDER, AND APPLICABLE STATE SECURITIES
LAWS AND (A) SUCH TRANSFEREE WILL NOT ACQUIRE THIS CERTIFICATE WITH THE ASSETS
OF ANY "EMPLOYEE BENEFIT PLAN" AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE
C-1
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<PAGE>
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA") OR SECTION
4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") OR (B)
IN THE CASE OF A TRANSFER TO AN INSURANCE COMPANY GENERAL ACCOUNT, EITHER (A)
ABOVE OR, IF THE CLASS C CERTIFICATES HAVE BEEN PLACED OR UNDERWRITTEN BY AN
ENTITY WHICH HAS AN UNDERWRITER EXEMPTION (AS DESCRIBED IN PROHIBITED
TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-60")), PURSUANT TO SECTION I OF PTCE
95-60, THE ACQUISITION AND HOLDING OF THE CERTIFICATE AND, PURSUANT TO SECTION
III OF PTCE 95-60, THE SERVICING, MANAGEMENT AND OPERATION OF THE TRUST ARE WITH
RESPECT TO SUCH TRANSFEREE EXEMPT FROM THE "PROHIBITED TRANSACTION" PROVISIONS
OF ERISA AND THE CODE.
BY ACCEPTANCE OF THIS CERTIFICATE, THE HOLDER HEREOF ACKNOWLEDGES
AND AGREES THAT IT (A) SHALL RECEIVE NO DISTRIBUTIONS WITH RESPECT HERETO UNLESS
AND UNTIL THE CORRESPONDING AMOUNTS ARE RELEASED FROM THE SPREAD ACCOUNT CREATED
UNDER THE SPREAD ACCOUNT AGREEMENT REFERENCED IN THE AGREEMENT AND (B) SHALL BE
BOUND BY THE PROVISIONS OF THE AGREEMENT, A COPY OF WHICH MAY BE OBTAINED FROM
THE TRUSTEE UPON REQUEST. THE HOLDER OF THIS CERTIFICATE HAS NO RIGHTS OR
INTERESTS IN ANY AMOUNTS AT ANY TIME HELD IN THE SPREAD ACCOUNT UNLESS AND UNTIL
SUCH AMOUNTS ARE RELEASED.
ACC AUTO GRANTOR TRUST 1996-B
ASSET BACKED CERTIFICATE
CLASS C
evidencing an interest in the Trust, as defined below, the property of
which includes a pool of retail installment sale contracts secured by
new and used automobiles, light duty trucks, vans mini-vans and sold to
the Trust by ACC Receivables Corp.
(This Certificate does not represent an interest in or obligation of ACC
Receivables Corp. or ACC Consumer Finance Corporation or any of their
respective affiliates thereof, except to the extent described below.)
C-2
Page 400 of 606
<PAGE>
NUMBER
C-1
THIS CERTIFIES THAT _____________________ is the registered owner
of a ONE HUNDRED PERCENT (100%), fully-paid interest in the ACC Auto Grantor
Trust 1996-B (the "Trust") formed by ACC Receivables Corp., a Delaware
corporation (the "Seller"). The Trust was created pursuant to a Pooling and
Servicing Agreement dated as of June 1, 1996 (the "Agreement"), among Cargill
Financial Services Corporation, as Sponsor (the "Sponsor"), the Seller, ACC
Consumer Finance Corporation, as Servicer (the "Servicer"), and Norwest Bank
Minnesota, National Association, as Trustee (the "Trustee"), a summary of
certain of the pertinent provisions of which is set forth below.
Reference is made to the further provisions of this Class C
Certificate set forth in the attached pages 3 through 6, which further
provisions shall for all purposes have the same effect as if set forth at this
place. Unless the certificate of authentication hereon shall have been executed
by an authorized officer of the Trustee, by manual signature, this Class C
Certificate shall not entitle the holder hereof to any benefit under the
Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee on behalf of the Trust and not in
its individual capacity has caused this Class C Certificate to be duly executed.
ACC AUTO GRANTOR TRUST 1996-B
By: NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:__________________________________
DATED: June 20, 1996
This is one of the Class C Certificates referred
to in the within-mentioned Agreement.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:_____________________________
Authorized Officer
C-3
Page 401 of 606
<PAGE>
To the extent not otherwise defined herein, the capitalized terms
used herein have the meanings assigned to them in the Agreement. This
Certificate is one of the duly authorized Certificates designated as "Asset
Backed Certificates, Class C" (herein called the "Class C Certificates"). Also
issued under the Agreement are Certificates designated as "6.90% Asset Backed
Certificates, Class A" (the "Class A Certificates") and Certificates designated
as "6.90% Asset Backed Certificates, Class B" (the "Class B Certificates"). The
Class A Certificates, the Class B Certificates and the Class C Certificates are
hereinafter collectively called the "Certificates." The aggregate undivided
interest in the Trust evidenced by all Class C Certificates is 100%. This Class
C Certificate is issued under and is subject to the terms, provisions, and
conditions of the Agreement, to which Agreement the holder of this Class C
Certificate by virtue of the acceptance hereof assents and by which such holder
is bound. The property of the Trust includes (as more fully described in the
Agreement) a pool of retail installment sale contracts for new and used
automobiles, light duty trucks, vans and mini-vans (the "Receivables"), certain
monies due thereunder with respect to the Receivables on or after June 1, 1996,
security interests in the vehicles financed thereby, certain bank accounts and
the proceeds thereof, property securing the Receivables and held by the Trustee,
proceeds from claims on physical damage, credit life and disability insurance
policies covering vehicles financed thereby and the obligors thereunder, all
Collateral Insurance relating to the Receivables and the financed vehicles,
certain rights against Dealers and in contracts with Dealers, all right, title
and interest of the Seller in and to the Purchase Agreement and any and all
proceeds of the foregoing. The rights of the holders of the Class C Certificates
to receive certain payments are subordinated to the rights of the holders of the
Class A Certificates and the Class B Certificates, as set forth in the
Agreement.
Under the Agreement, there will be distributed on the 15th day of
each month or, if such 15th day is not a Business Day, the next Business Day
(the "Distribution Date"), commencing on July 15, 1996, to the person in whose
name this Class C Certificate is registered at the close of business on the last
day of the current calendar month (the "Record Date"), such Class C
Certificateholder's fractional undivided interest in the amount available in the
Spread Account in excess of the Requisite Amount for the next succeeding
Distribution Date, after giving effect to (A) the amounts required to be
distributed to the holders of Class A Certificates and Class B Certificates
pursuant to the subordination of the rights of the holders of Class C
Certificates, (B) the amount required to be deposited in the Spread Account and
(C) the amounts required to pay the Total Servicing Fee (including any unpaid
Servicing Fees with respect to prior Collection Periods) payable to the Servicer
on such Distribution Date.
Distributions on this Class C Certificate will be made by the
Trustee by wire transfer (as provided in the Agreement), check or money order
mailed to the Class C Certificateholder of record in the Certificate Register
without the presentation or surrender of this Class C Certificate or the making
of any notation hereon. Except as otherwise provided in the Agreement and
notwithstanding the above, the final distribution on this Class C Certificate
will be made after due notice by the Trustee of the pendency of such
C-4
Page 402 of 606
<PAGE>
distribution and only upon presentation and surrender of this Class C
Certificate at the office or agency maintained for that purpose by the Trustee.
The Certificates do not represent an obligation of, or an
interest in, the Seller, the Servicer, the Trustee, the Sponsor or any affiliate
of any of them. The Certificates are limited in right of payment to certain
collections and recoveries respecting the Receivables, all as more specifically
set forth in the Agreement. A copy of the Agreement may be examined during
normal business hours at the principal office of the Seller, and at such other
places, if any, designated by the Seller, by any Certificateholder upon request.
The Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Seller and the rights of the Certificateholders under the Agreement at any time
by the Seller and the Trustee with the consent of the Certificate Insurer and
the Holders of Certificates, voting together as a Class, evidencing not less
than a Certificate Majority. Any such consent by the Holder of this Certificate
shall be conclusive and binding on such Holder and on all future Holders of this
Certificate and of any Certificate issued upon the registration of transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Certificates. Notwithstanding the foregoing, however, no consent of
any Class A Certificateholder or Class B Certificateholder shall be required in
connection with any amendment in order for the Class C Certificateholder to
sell, assign, transfer or otherwise dispose of the excess interest.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies maintained by the Trustee in its capacity as
Certificate Registrar, or by any successor Certificate Registrar, in
Minneapolis, Minnesota, accompanied by a written instrument of transfer in form
satisfactory to the Trustee and the Certificate Registrar duly executed by the
holder hereof or such holder's attorney duly authorized in writing, and
thereupon one or more new Certificates of authorized denominations evidencing
the same aggregate interest in the Trust will be issued to the designated
transferee.
The Class C Certificates are issuable only as registered
Certificates without coupons in denominations of integral (i.e., 1%, 2%, etc.)
fractional undivided interests in the Trust which in the aggregate do not exceed
100%. As provided in the Agreement and subject to certain limitations therein
set forth, this Certificate is exchangeable for new Certificates of authorized
denominations evidencing the same aggregate denomination, as requested by the
holder surrendering the same. No service charge will be made for any such
registration of transfer or exchange, but the Trustee may require payment of a
sum sufficient to cover any tax or governmental charges payable in connection
therewith.
C-5
Page 403 of 606
<PAGE>
The Trustee, the Certificate Registrar, and any agent of the
Trustee or the Certificate Registrar may treat the person in whose name this
Class C Certificate is registered as the owner hereof for all purposes, and
neither the Trustee, the Certificate Registrar, nor any such agent shall be
affected by any notice to the contrary.
Each Certificateholder by purchase of the Certificates held by it
acknowledges that the Trustee, as partial consideration of the issuance of the
Policy, has agreed that the Certificate Insurer shall have certain rights
hereunder for so long as no Insurer Default shall have occurred and be
continuing. So long as an Insurer Default has occurred and is continuing, any
provision giving the Certificate Insurer the right to direct, appoint or consent
to, approve of, or take any action under this Agreement shall be inoperative
during the period of such Insurer Default and such right shall instead vest in
the Trustee acting at the direction of the Holders of Certificates. The
Certificate Insurer may disclaim any of its rights and powers under this
Agreement (but not its duties and obligations under the Policy) upon delivery of
a written notice to the Trustee. The Certificate Insurer may give or withhold
any consent hereunder in its sole and absolute discretion.
The obligations and responsibilities created by the Agreement and
the Trust created thereby shall terminate upon the payment to Certificateholders
of all amounts required to be paid to them pursuant to the Agreement and the
disposition of all property held as part of the Trust. The Servicer of the
Receivables may at its option purchase the corpus of the Trust at a price
specified in the Agreement, and such purchase of the Receivables and other
property of the Trust will effect early retirement of the Certificates; however,
such right of purchase is exercisable only as of the last day of any Collection
Period as of which the Pool Balance is less than 10% of the Cut-off Date
Principal Balance.
The recitals contained herein (other than the certificate of
authentication herein) shall be taken as the statements of the Seller or the
Servicer, as the case may be, and the Trustee assumes no responsibility for the
correctness thereof. The Trustee makes no representations as to the validity or
sufficiency of this Certificate (other than the certificate of authentication
herein), or of any Receivable or related document.
This Certificate is governed by the provisions of the Agreement
and of the internal laws of the State of New York, and the Holder hereof, by its
ownership hereof, shall be deemed to have consented to the exclusive application
of such governing provisions.
C-6
Page 404 of 606
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
_____________________________________________
(Please print or typewrite name and address,
including postal zip code, of assignee)
_____________________________________________
the within Certificate, and all rights thereunder,
hereby irrevocably constituting and appointing
________________________ Attorney to transfer said Certificate on the books of
the Certificate Registrar, with full power of substitution in the premises.
Dated:
_____________________________*
Signature Guaranteed:
_____________________________*
* NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
C-7
Page 405 of 606
<PAGE>
EXHIBIT D
FORM OF SUPPLEMENT TO THE SPREAD ACCOUNT AGREEMENT
[SEE TAB 6]
D-1
Page 406 of 606
<PAGE>
EXHIBIT E
FORM OF SERVICER'S CERTIFICATE
------------------------------
ACC CONSUMER FINANCE CORPORATION
Monthly Servicing Report:
ACC Auto Loan Trust 1996-B
Collection Period Ending: dd/mm/yy
I. Original Deal Parameter Inputs
(A) Original Total Portfolio $ --
(B) Class A Certificate Ownership Interest of the Trust 0.00%
(C) Original Class A Certificate Balance $ --
(D) Class A Certificate Rate 0.00%
(E) Class B Certificate Ownership Interest of the Trust
(F) Original Class B Certificate Balance
(G) Class B Certificate Rate
(H) Servicing Fee Rate 0.00%
(I) Original Weighted Average Coupon (WAC) 0.00%
(J) Original Weighted Average Remaining Term (WAM) 0.000
(K) Number of Contracts 0
(L) Reserve Fund
i. Reserve Fund Initial Deposit Percentage 0.00%
ii. Reserve Fund Initial Deposit $ --
iii.Specified Reserve Fund Balance Percentage 0.00%
iv. Specified Reserve Fund Balance $ --
v. Reserve Fund Floor Percent 0.00%
vi. Reserve Fund Floor Amount $ --
II. Inputs from Previous Monthly Servicer Reports
(A) Total Portfolio Outstanding $ --
(B) Total Portfolio Pool Factor .0000
(C) Class A Certificate Balance $ --
(D) Class A Principal Factor .0000
(E) Class B Certificate Balance
(F) Class B Principal Factor
(G) Reserve Fund Balance $ --
(H) Payahead Account Balance $ --
(I) B Certificate Interest Carry Forward $ --
(J) B Certificate Principal Carry Forward $ --
III. Inputs from Other Sources
(A) Collection Account Investment Income $ --
(B) Aggregate Net Losses for Collection Period $ --
(C) Number of Vehicles Repossessed During the Collection
Period 0
E-1
Page 407 of 606
<PAGE>
IV. Pool Balances and Portfolio Information
Beginning Principal End
of Period Distributions of Period
--------- ------------- ---------
(A) Balances and Principal Factors
i. Class A Certificate Balance $ -- $ -- $ --
ii. Class A Principal Factor .0000 .0000 .0000
iii. Class B Certificate Balance $ -- $ -- $ --
iv. Class B Principal Factor .0000 .0000 .0000
----------------------------------------
0
v. Total Current Pool Balance $ -- $ -- $ --
vi. Total Current Pool Factor .0000 .0000
Beginning Current Losses End
of Period Net of Recoveries of Period
--------- ----------------- ---------
vii. Liquidated Receivables $ -- $ -- $ --
----------------------------------------
viii. Total Receivables $ -- $ -- $ --
(B) Portfolio Information
i. Weighted Average Coupon (WAC) 0.00%
ii. Weighted Average Remaining Maturity (WAM) 0
iii. Remaining Number of Current Contracts 0
V. Collections
(A) Total Principal Payments Received (Excluding Repurchases) $ --
(B) Total Interest Payments Received $ --
(C) Recoveries on Liquidated Receivables $ --
(D) Late and Penalty Fees $ --
(E) Principal on Repurchased Receivables $ --
(F) Amounts reimbursed to borrowers $ --
(G) Repossession and liquidation expenses paid
proceeds out of recovery $ --
(H) Collection Account Investment Income $ --
Total Distributable Amount $ --
VI. Distributions
(A) Principal Payments Received (Excluding Repurchases) $ --
(B) Principal on Repurchased Contracts $ --
(C) Gross Balance of Liquidated Receivables $ --
---------
(D) Total Principal Reduction $ --
(E) Class A Distributable Amount
i. Class A Monthly Interest Payment $ --
ii. Monthly Principal to Class A $ --
(F) Class B Distributable Amount
i. Class B Monthly Interest Payment $ --
ii. Monthly Principal to Class B $ --
E-2
Page 408 of 606
<PAGE>
(G) Net Servicing Fee $ --
---------
Total Distributions $ --
Net Available $ --
(H) B Certificate Principal and Interest Carryover $ --
---------
Net to Spread Account $ --
=========
VII. Reconciliation of Spread Account
(A) Beginning Balance of Spread Account $ --
(B) Draw for Class A Distributable Amount and
Servicing Fee $ --
(C) Reserve Fund Investment Income $ --
(D) Amount Available for Deposit to Spread Account $ --
(E) Spread Account Balance Prior to Release $ --
(F) Spread Account Requirement $ --
(G) Spread Account Release to B Certificate Holders $ --
(H) Spread Account Release to Seller $ --
---------
(I) Ending Spread Account Balance $ --
=========
(J) Ending Spread Account Balance as a % of outstanding
Portfolio 0.00%
=========
VIII.Tests for increase in Spread Account Balance
(A) Cumulative Default Rate
i. Defaulted Receivables for Current Collection Period 0.00%
ii. Current Period Default % of Original Portfolio 0.00%
iii.Cumulative Defaulted Receivables 0.00%
iv. Original Total Portfolio 0.00%
---------
v. Cumulative Default Rate 0.00%
vi. Trigger Indicator 0.00%
vii.Action: trigger was not hit None
(B) Cumulative Loss Rate
i. Net Losses for Current Collection Period 0.00%
ii. Curent Period Net Losses % of Original Portfolio 0.00%
iii.Cumulative Net Losses 0.00%
iv. Original Total Portfolio 0.00%
---------
v. Cumulative Loss Rate 0.00%
vi. Trigger Indicator 0.00%
vii.Action: trigger was not hit None
E-3
Page 409 of 606
<PAGE>
(C) Net Loss Rate
i. Original Total Portfolio $ --
ii. Preceding Collection Period Cumulative Forward
Net Losses $ --
iii.Current Collection Period Net Losses $ --
--------
iv. Cumulative Net Losses as of the End of
Collection Period the Current $ --
v. Net Loss Rate 0.00%
vi. Trigger Indicator 0.00%
vii.Trigger was not hit Action None
(D) Average Number of Contracts Over 30 Days Delinquent
(net of repossessions on hand)
i. Second Preceding Collection Period 00.0%
ii. Preceding Collection Period 0.00%
iii.Current Collection Period 0.00%
---------
iv. Three Month Average 0.00%
v. Trigger Indicator 0.00%
vi. Action: trigger was not hit None
(E) Average Recovery Rate
i. Second Preceding Collection Period 00.0%
ii. Preceding Collection Period 00.0%
iii.Current Collection Period 00.0%
---------
iv. Three Month Average 00.0%
v. Trigger Indicator 0.00%
vi. Trigger was not hit Action None
E-4
Page 410 of 606
<PAGE>
EXHIBIT F
FORM OF POLICY
--------------
[SEE TAB 7]
F-1
Page 411 of 606
<PAGE>
EXHIBIT G
FORM OF REPRESENTATION LETTER -- INITIAL PURCHASER
--------------------------------------------------
(Non-Rule 144A)
Norwest Bank Minnesota, National Association
Sixth Street at Marquette Avenue
Minneapolis, Minnesota 55479-0069
ACC Receivables Corp.
Plaza del Mar
12526 High Bluff Drive, Suite 300
San Diego, California 92130
CS First Boston Corporation
55 East 52nd Street
Park Avenue Plaza
New York, New York 10055
Re: ACC Auto Grantor Trust 1996-B
6.90% Asset Backed Certificates, Class A
The undersigned purchaser ("Purchaser") understands that the purchase of
the above-referenced certificates (the "Certificates") may be made only by
institutions which are "Accredited Investors" under Regulation D, as promulgated
under the Securities Act of 1933, as amended (the "1933 Act"), which includes
banks, savings and loan associations, registered brokers and dealers, insurance
companies, investment companies, and organizations described in Section
501(c)(3) of the Internal Revenue Code, corporations, business trusts and
partnerships, not formed for the specific purpose of acquiring the Certificates
offered, with total assets in excess of $5,000,000. The undersigned represents
on behalf of the Purchaser that the Purchaser is an "Accredited Investor" within
the meaning of such definition. Purchaser is urged to review carefully the
responses, representations and warranties it is making herein.
Representations and Warranties
- ------------------------------
Purchaser makes the following representations and warranties in order to
permit the Trustee, ACC Receivables Corp. ("ACC Receivables"), and CS First
Boston Corporation to determine its suitability as a purchaser of Certificates
and to determine that the exemption from registration relied upon by ACC
Receivables under Section 4(2) of the 1933 Act is available to it.
G-1
Page 412 of 606
<PAGE>
1. The execution and delivery of this Representation Letter has been
duly authorized by the Purchaser by all necessary corporate action on its part,
including due authorization and approval by the Board of Directors or other
governing body of the purchaser.
2. The Purchaser understands that the Certificates have not been and
will not be registered under the 1933 Act in reliance upon the exemption
provided in Section 4(2) of the 1933 Act or any other applicable exemption, that
the Certificates have not and will not be registered or qualified under the
securities or "blue sky" laws of any jurisdiction, that the Certificates may be
resold (which resale is not currently contemplated) or otherwise transferred
only if so registered or qualified or if an exemption from registration or
qualification is available, that ACC Receivables is not required to register the
Certificates and that any transfer must comply with Section 7.3 of the Pooling
and Servicing Agreement relating to the Certificates.
3. The Purchaser will comply with all applicable federal and state
securities laws in connection with any subsequent resale of the Certificates.
4. The Purchaser is a sophisticated institutional investor and has
knowledge and experience in financial and business matters and is capable of
evaluating the merits and risks of its investment in the Certificates and is
able to bear the economic risk of such investment. The Purchaser has been given
such information concerning the Certificates, the underlying installment sale
contracts and ACC Receivables as it has requested.
5. The Purchaser is acquiring the Certificates as principal for its own
account (or for the account of one or more other institutional investors for
which it is acting as duly authorized fiduciary or agent) for the purpose of
investment and not with a view to or for sale in connection with any
distribution thereof, subject nevertheless to any requirement of law that the
disposition of the Purchaser's property will at all times be and remain within
its control.
6. The Purchaser represents that either (a) it is not (i) an employee
benefit plan (as defined in section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) subject to the provisions of Title I
of ERISA, (ii) a plan described in section 4975(e)(1) of the Internal Revenue
Code of 1986, or (iii) an entity whose underlying assets are deemed to be assets
of a plan described in (i) or (ii) above by reason of such plan's investment in
the entity (any such entity described in clauses (i) through (iii), a "Benefit
Plan Entity")* or (b) it is an insurance company general account and, pursuant
- ------------------
* Do not include option (b) or (c) for acquisitions or transfers of a class
of Certificates which has not been placed or underwritten by an entity which has
an Underwriter Exemption (as described in Prohibited Transaction Class Exception
95-60) and do not include option (c) for acquisitions or transfers of
Certificates that (i) evidence rights and interests that are subordinated to the
rights and interests evidenced by other Certificates of the Trust, or (ii) occur
at any time during which the Certificates being acquired or transferred are not
rated in one of the top three rating categories of any rating agency that
satisfies the requirements of Prohibited Transaction Exemption 89-90 and that
(a) is rating the Certificates as of the date hereof and (b) has been requested
by the issuer of the Certificates to rate the Certificates.
G-2
Page 413 of 606
<PAGE>
to Section I of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60"), the
acquisition and holding of the Class A Certificates and, pursuant to Section III
of PTCE 95-60, the servicing, management and operation of the Trust are with
respect to such Purchaser exempt from the "prohibited transaction" provisions of
ERISA and the Code or (c) if the Purchaser is a Benefit Plan Entity, the
following:
(i) the Purchaser is not a Benefit Plan Entity with respect to an
employee benefit plan sponsored by any member of the Restricted Group (as
defined in the Private Placement Memorandum);
(ii) either (A) the person who has discretionary authority or
renders investment advice to the Purchaser with respect to the investment of
plan assets in the Class A Certificates is not an Obligor (or an affiliate) with
respect to the Receivables (as defined in the Private Placement Memorandum), or
(B) the person who has such discretionary authority or renders such investment
advice is an Obligor (or an affiliate) with respect to less than 5 percent of
the Receivables; and, immediately after the acquisition of the Class A
Certificates, no more than 25 percent of the assets of the Purchaser are
invested in certificates representing an interest in a trust containing assets
sold or serviced by the same entity ; and
(iii) the Purchaser is an "accredited investor" as defined in
Rule 501(a) of Regulation D pursuant to the 1933 Act.
7. The Purchaser understands that such Certificate will bear a legend as
set forth in the form of Certificate included in the Pooling and Servicing
Agreement.
8. The Purchaser agrees that it will obtain from any purchaser of the
Certificates from it substantially the same representations, warranties and
agreements contained in the foregoing paragraphs 1 through 7 and in this
paragraph 8.
The representations and warranties contained herein will be binding upon
the heirs, executors, administrators and other successors of the undersigned. If
there is more than one signatory hereto, the obligations, representations,
warranties and agreements of the undersigned are made jointly and severally.
G-3
Page 414 of 606
<PAGE>
Executed at _____________________________, this __ day of _________,
199_.
________________________________
Purchaser's Name (Print)
By______________________________
Signature
Its______________________________
________________________________
Address of Purchaser
________________________________
Purchaser's Taxpayer
Identification Number
G-4
Page 415 of 606
<PAGE>
EXHIBIT H
FORM OF REPRESENTATION LETTER
-----------------------------
(Rule 144A)
Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0069
Re: ACC Auto Grantor Trust 1996-B
6.90% Asset Backed Certificates, Class A
Dear Sirs:
____________________________ (the "Purchaser") is today purchasing in a
private resale from _________________________ (the "Seller") [$______________ in
aggregate principal amount (representing ___% interest) of]* the above captioned
certificates (the "Certificates"), issued pursuant to the Pooling and Servicing
Agreement dated as of June 1, 1996 among Cargill Financial Services Corporation,
as Sponsor, ACC Receivables Corp., as seller (the "Company"), ACC Consumer
Finance Corporation, as servicer ("Servicer"), and Norwest Bank Minnesota,
National Association, as trustee (the "Trustee").
In connection with the purchase of the Certificates, the Purchaser
hereby represents and warrants to you as follows:
1. The execution and delivery of this Representation Letter has been
duly authorized by the Purchaser by all necessary corporate action on its part,
including due authorization and approval by the Board of Directors or other
governing body of the purchaser.
2. The Purchaser understands that the Certificates have not been and
will not be registered under the 1933 Act in reliance upon the exemption
provided in Section 4(2) of the 1933 Act or any other applicable exemption, that
the Certificates have not and will not be registered or qualified under the
securities or "blue sky" laws of any jurisdiction, that the Certificates may be
resold (which resale is not currently contemplated) or otherwise transferred
only if so registered or qualified or if an exemption from registration or
qualification is available, that ACC Receivables is not required to register the
Certificates and that any transfer must comply with Section 7.3 of the Pooling
and Servicing Agreement relating to the Certificates.
- --------------
* Include bracketed language so long as Certificates are in book-entry form.
H-1
Page 416 of 606
<PAGE>
3. The Purchaser is acquiring the Certificates for its own account only
for investment and not for any other person, and not with a view to, or for
resale in connection with, a distribution that would constitute a violation of
the 1933 Act or any state securities law (subject to the understanding that
disposition of the Purchaser's property will remain at all times within its
control). The Purchaser is not an affiliate of the Trustee, any custodian of the
Certificates or the Company or any affiliate thereof.
4. The Purchaser agrees that the Certificates must be held indefinitely
by it unless (i) subsequently registered under the 1933 Act or (ii) an exemption
from the registration requirements of the 1933 Act is available.
5. The Purchaser agrees that if at some time it wishes to dispose of or
exchange any of the Certificates, it will not transfer or exchange any of the
Certificates unless such transfer or exchange is in accordance with the
provisions of Section 7.3 of the Pooling and Servicing Agreement, dated as of
June 1, 1996 among Cargill Financial Services Corporation, as sponsor, ACC
Receivables Corp., as seller, ACC Consumer Finance Corporation, as servicer, and
Norwest Bank Minnesota, National Association, as Trustee, Backup Servicer and
Collateral Agent (the "Pooling and Servicing Agreement").
6. The Purchaser is a qualified institutional buyer as defined in Rule
144A of the 1933 Act and has completed either of the forms of certification to
that effect attached hereto as Annex 1 or Annex 2; it is aware that the sale to
it is being made in reliance on Rule 144A; it is acquiring the Certificates for
its own account or for the account of a qualified institutional buyer; it
understands that such Certificates may be resold, pledged or transferred only
(i) to a person who the Seller reasonably believes is a qualified institutional
buyer that purchases for its own account or for the account of a qualified
institutional buyer to whom notice is given that the resale, pledge or transfer
is being made in reliance on Rule 144A; or (ii) pursuant to another exemption
from registration under the 1933 Act.
7. Neither the Purchaser nor anyone acting on its behalf has offered,
transferred, pledged, sold or otherwise disposed of any Certificate, any
interest in any Certificate or any other similar security of the Company to, or
solicited any offer to buy or accept a transfer, pledge or other disposition of
any Certificate any interest in any Certificate or any other similar security of
the Company with, any person in any manner, or made any general solicitation by
means of general advertising or in any other manner, or taken any other action,
which would constitute a distribution of the Certificates under the 1933 Act or
which would render the disposition of any Certificate a violation of Section 5
of the 1933 Act or any state securities law, require registration or
qualification pursuant thereto, or require registration of the Trust under the
Investment Company Act of 1940, nor will it act, nor has it authorized or will
it authorize any person to act, in such manner with respect to the Certificates.
8. The Purchaser represents that either (a) it is not (i) an employee
benefit plan (as defined in section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) subject to the provisions of Title I
H-2
Page 417 of 606
<PAGE>
of ERISA, (ii) a plan described in section 4975(e)(1) of the Internal Revenue
Code of 1986, or (iii) an entity whose underlying assets are deemed to be assets
of a plan described in (i) or (ii) above by reason of such plan's investment in
the entity (any such entity described in clauses (i) through (iii), a "Benefit
Plan Entity")* or (b) it is an insurance company general account and, pursuant
to Section I of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60"), the
acquisition and holding of the Class A Certificates and, pursuant to Section III
of PTCE 95-60, the servicing, management and operation of the Trust are with
respect to such Purchaser exempt from the "prohibited transaction" provisions of
ERISA and the Code or (c) if the Purchaser is a Benefit Plan Entity, the
following:
(i) the Purchaser is not a Benefit Plan Entity with respect to an
employee benefit plan sponsored by any member of the Restricted Group (as
defined in the Private Placement Memorandum);
(ii) either (A) the person who has discretionary authority or
renders investment advice to the Purchaser with respect to the investment of
plan assets in the Class A Certificates is not an Obligor (or an affiliate) with
respect to the Receivables (as defined in the Private Placement Memorandum), or
(B) the person who has such discretionary authority or renders such investment
advice is an Obligor (or an affiliate) with respect to less than 5 percent of
the Receivables; and, immediately after the acquisition of the Class A
Certificates, no more than 25 percent of the assets of the Purchaser are
invested in certificates representing an interest in a trust containing assets
sold or serviced by the same entity; and
(iii) the Purchaser is an "accredited investor" as defined in
Rule 501(a) of Regulation D pursuant to the 1933 Act.
9. The Purchaser understands that there is no market, nor is there any
assurance that a market will develop, for the Certificates and that the Seller
does not have any obligation to make or facilitate any such market (or to
otherwise repurchase the Certificates from the Purchaser) under any
circumstances.
10. The Purchaser has consulted with its own legal counsel, independent
accountants and financial advisors to the extent it deems necessary regarding
- ------------------
* Do not include option (b) or (c) for acquisitions or transfers of a class
of Certificates which has not been placed or underwritten by an entity which has
an Underwriter Exemption (as described in Prohibited Transaction Class Exception
95-60) and do not include option (c) for acquisitions or transfers of
Certificates that (i) evidence rights and interests that are subordinated to the
rights and interests evidenced by other Certificates of the Trust, or (ii) occur
at any time during which the Certificates being acquired or transferred are not
rated in one of the top three rating categories of any rating agency that
satisfies the requirements of Prohibited Transaction Exemption 89-90 and that
(a) is rating the Certificates as of the date hereof and (b) has been requested
by the issuer of the Certificates to rate the Certificates.
H-3
Page 418 of 606
<PAGE>
the tax consequences to it of ownership of the Certificates, is aware that its
taxable income with respect to the Certificates in any accounting period may not
correspond to the cash flow (if any) from the Certificates for such period, and
is not purchasing the Certificates in reliance on any representations of the
Seller or its counsel with respect to tax matters.
11. The Purchaser has reviewed the Private Placement Memorandum (the
"Memorandum") dated June 13, 1996, with respect to the Certificates, and the
agreements and other materials referred to therein, and has had the opportunity
to ask questions and receive answers concerning the terms and conditions of the
transactions contemplated by the Memorandum and to obtain additional information
necessary to verify the accuracy and completeness of any information furnished
to the Purchaser or to which the Purchaser had access.
12. The Purchaser hereby further agrees to be bound by all the terms and
conditions of the Certificates as provided in the Pooling and Servicing
Agreement.
13. If the Purchaser sells any of the Certificates, the Purchaser will
obtain from any subsequent purchaser the same representations contained in this
Representation Letter.
Very truly yours,
Dated: ___________________ By:____________________________
Name:
H-4
Page 419 of 606
<PAGE>
Annex 1 to Exhibit H
Qualified Institutional Buyer Status Under SEC Rule 144A
--------------------------------------------------------
(Buyers other than investment companies)
Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0069
Name of Buyer: ________________________________ ("Buyer")
I hereby certify that as indicated below, I am the President, Chief
Financial Officer, Senior Vice President or other executive officer of Buyer.
In connection with purchases by Buyer from time to time, I hereby
certify to you and, if you act as broker for one or more customers, to such
customers, that Buyer is a "qualified institutional buyer" as defined in Rule
144A under the Securities Act of 1933 ("Rule 144A") because (i) Buyer owned
and/or invested on a discretionary basis $_______* in securities (except for the
excluded securities referred to below) as of the end of Buyer's most recent
fiscal year (such amount being calculated in accordance with Rule 144A) and (ii)
Buyer satisfies the criteria in the category marked below.
Corporation, etc. Buyer is a corporation (other than a bank, savings and
loan association or similar institution), Massachusetts or similar
business trust, partnership, or charitable organization described in
Section 501(c)(3) of the Internal Revenue Code.
Bank. Buyer (a) is a national bank or banking institution organized
under the laws of any State, territory or the District of Columbia, the
business of which is substantially confined to banking and is supervised
by the State or territorial banking commission or similar official or is
a foreign bank or equivalent institution, and (b) has an audited net
worth of at least $25,000,000 as demonstrated in its latest annual
financial statements, a copy of which is attached hereto.
Savings and Loan. Buyer (a) is a savings and loan association, building
and loan association, cooperative bank, homestead association or similar
institution, which is supervised and examined by a State or Federal
authority having supervision over any such institution or is a foreign
savings and loan association or equivalent institution and (b) has
- -----------------
* Buyer must own and/or invest on a discretionary basis at least
$100,000,000 in securities unless Buyer is a dealer, and, in that case, Buyer
must own and/or invest on a discretionary basis at least $10,000,000 in
securities.
H-A1-1
Page 420 of 606
<PAGE>
an audited net worth of at least $25,000,000 as demonstrated in its
latest annual financial statements, a copy of which is attached
hereto.
Broker-dealer. Buyer is a dealer registered pursuant to Section 15 of
the Securities Exchange Act of 1934.
Insurance Company. Buyer is an insurance company whose primary and
predominant business activity is the writing of insurance or the
reinsuring of risks underwritten by insurance companies and which is
subject to supervision by the insurance commissioner or a similar
official or agency of a State, territory or the District of Columbia.
State or Local Plan. Buyer is a plan established and maintained by a
State, its political subdivisions, or any agency or instrumentality of a
State or its political subdivisions, for the benefit of its employees.
ERISA Plan. Buyer is an employee benefit plan within the meaning of
Title I of the Employee Retirement Income Security Act of 1974.
Investment Advisor. Buyer is an investment advisor registered under
the Investment Advisers Act of 1940.
The term "securities" as used herein does not include (i) securities of
issuers that are affiliated with Buyer (ii) securities that are part of an
unsold allotment to or subscription by Buyer (if Buyer is a dealer), (iii)
securities issued or guaranteed by the U.S. or any instrumentality thereof, (iv)
bank deposit notes and certificates of deposit, (v) loan participations, (vi)
repurchase agreements, (vii) securities owned but subject to a repurchase
agreement and (viii) currency, interest rate and commodity swaps.
For purposes of determining the aggregate of securities owned and/or
invested on a discretionary basis by Buyer, Buyer used the cost of such
securities to Buyer and did not include any of the securities referred to in the
preceding paragraph.
Further, in determining such aggregate amount, Buyer may have included
securities owned by subsidiaries of Buyer, but only if such subsidiaries are
consolidated with Buyer in its financial statements prepared in accordance with
generally accepted accounting principles and if the investments of such
subsidiaries are managed under Buyer's direction. However, such securities were
not included if Buyer is a majority-owned, consolidated subsidiary of another
enterprise and Buyer is not itself a reporting company under the Securities
Exchange Act of 1934.
Buyer acknowledges that it is familiar with Rule 144A and understands
that you and your customers (if you act as a broker for one or more customers)
H-A1-2
Page 421 of 606
<PAGE>
are and will continue to rely on the statements made herein because one or more
sales by you for your own account or your customer's account to Buyer may be in
reliance on Rule 144A.
Will Buyer be purchasing Rule 144A
___ ___ securities only for Buyer's own account?
Yes No
If the answer to this question is "no", Buyer agrees that, in connection
with any purchase of securities sold to Buyer for the account of a third party
(including any separate account) in reliance on Rule 144A, buyer will only
purchase for the account of a third party that at the time is a "qualified
institutional buyer" within the meaning of Rule 144A. In addition, Buyer agrees
that Buyer will not purchase securities for a third party unless Buyer has
obtained a current representation letter from such third party or taken other
appropriate steps contemplated by Rule 144A to conclude that such third party
independently meets the definition of "qualified institutional buyer" set forth
in Rule 144A.
Buyer agrees to notify you of any changes in the information and
conclusions herein. Until such notice is given to you, Buyer's purchase of
securities from you, or through you from your customers, will constitute a
reaffirmation of the foregoing certifications and acknowledgments as of the date
of such purchase.
Further, if Buyer is a bank or savings and loan as provided above, Buyer
agrees that is will furnish you with updated annual financial statements
promptly after they become available.
Date: ________________ Very truly yours,
____________________________
Print Name of Buyer
By__________________________
Name:
Title:
H-A1-3
Page 422 of 606
<PAGE>
Annex 2 to Exhibit H
Norwest Bank Minnesota, National Association
Norwest Center
Sixth Street at Marquette Avenue
Minneapolis, Minnesota 55479-0069
Name of Buyer: ________________________________________ ("Buyer")
Name of Investment Adviser: ____________________________ ("Adviser")
I hereby certify that, as indicated below, I am the President, Chief
Financial Officer or Senior Vice President of Buyer or, if Buyer is a "qualified
institutional buyer" as defined in Rule 144A under the Securities Act of 1933
("Rule 144A") because Buyer is part of a Family of Investment Companies (as
defined below), of Adviser.
In connection with purchases by Buyer from time to time, I hereby
certify to you and, if you act as broker for one or more customers, to such
customers, that Buyer is a "qualified institutional buyer" as defined in Rule
144A under the Securities Act of 1933 ("Rule 144A") because (i) Buyer is an
investment company registered under the Investment Company Act of 1940 and (ii)
as marked below, Buyer alone, or Buyer's Family of Investment Companies, owned
at least $100,000,000 in securities (other than the excluded securities referred
to below) as of the end of Buyer's most recent fiscal year.
_____ Buyer owned $___________ in securities (other than the excluded
securities referred to below) as of the end of Buyer's most recent
fiscal year (such amount being calculated in accordance with Rule 144A).
_____ Buyer is part of a Family of Investment Companies which owned in the
aggregate $____________ in securities (other than the excluded
securities referred to below) as of the end of Buyer's most recent
fiscal year (such amount being calculated in accordance with Rule 144A).
For purposes of determining the amount of securities owned by Buyer or Buyer's
Family of Investment Companies, I used the cost of such securities.
The term "Family of Investment Companies" as used herein means two or
more registered investment companies (or series thereof) that have the same
investment adviser or investment advisers that are affiliated (by virtue of
being majority owned subsidiaries of the same parent or because one investment
adviser is a majority owned subsidiary of the other).
The term "securities" as used herein does not include (i) securities of
issuers that are affiliated with Buyer or are part of Buyer's Family of
H-A2-1
Page 423 of 606
<PAGE>
Investment Companies, (ii) securities issued or guaranteed by the U.S., or any
instrumentality thereof, (iii) bank deposit notes and certificates of deposit,
(iv) loan participations, (v) repurchase agreements, (vi) securities owned but
subject to a repurchase agreement and (vii) currency, interest rate and
commodity swaps.
On behalf of Buyer, I acknowledge that Buyer is familiar with Rule 144A
and understands that you and your customers (if you act as a broker for one or
more customers) are and will continue to rely on the statements made herein
because one or more sales to Buyer by you for your own account or your
customer's account will be in reliance on Rule 144A. In addition, on behalf of
Buyer, I agree that, in connection with any purchase of securities sold by or
through you in reliance on Rule 144A, Buyer will only purchase for Buyer's own
account.
Finally, on behalf of Buyer or Adviser (as appropriate), I also agree to
notify you of any changes in the information and conclusions herein. Until such
notice is given to you, Buyer's purchase from time to time of securities from
you, or through you from your customers, will constitute a reaffirmation of the
foregoing certifications and acknowledgements by me as of the date of such
purchase.
Date: _________________ Very truly yours,
______________________________
Name:
Title:
On behalf of:
______________________________
Name of Buyer:
or
______________________________
Name of Adviser:
H-A2-2
Page 424 of 606
<PAGE>
EXHIBIT I
FORM OF PURCHASE AGREEMENT AND ASSIGNMENT
-----------------------------------------
[SEE TAB 10]
I-1
Page 425 of 606
<PAGE>
EXHIBIT J
REQUEST BY THE SERVICER FOR RELEASE
OF RECEIVABLES AND RECEIVABLES FILES
------------------------------------
TO: Norwest Bank Minnesota, National Association,
as Trustee
Sixth Street and Marquette Avenue
Minneapolis, MN 55479-0069
Attention: Corporate Trust Office
Gentlemen:
In connection with the administration of the Receivables held by
you as Trustee, under the Pooling and Servicing Agreement dated as of June 1,
1996 among Cargill Financial Services Corporation, as Sponsor, ACC Consumer
Finance Corporation, as Servicer, ACC Receivables Corp., as Seller, and you, as
Trustee, Backup Servicer and Collateral Agent, the undersigned requests the
release of the Receivables and the related Receivables Files for the Receivables
identified in the schedule attached to this Request.
ACC CONSUMER FINANCE
CORPORATION, as Servicer
By:___________________________
Name:_________________________
Title:________________________
Date:_________________________
ACKNOWLEDGED BY:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:______________________
Name:____________________
Title:___________________
Date:____________________
J-1
Page 426 of 606
<PAGE>
EXHIBIT K
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
CORPORATE TRUST DEPARTMENT
Schedule of Fees
for
Trustee, Paying Agent, Back-up Servicer and Loan File Custodian
CARGILL/ACC
AUTOMOBILE SECURITIZATION TRANSACTION
-------------------------------------
I. COUNSEL FEE: $5,000.00 Capped
Fees for Counsel are guaranteed not to exceed the above amount and cover the
review of both draft and final documentation. Fee includes an opinion that the
Pooling and Servicing Agreement is a valid, binding and enforceable agreement of
the Trustee. Should other opinions be required, notice will be given in advance
concerning the billing of additional amounts. Fee payable at closing.
II. ANNUAL ADMINISTRATION FEE: 5 Basis Points
A fee for the administration of the Trust will be charged monthly on the
outstanding principal balance at the beginning of the month as indicated above.
This fee includes all responsibilities as Trustee, Paying Agent, Collateral
Agent and Registrar as specified in the Pooling and Servicing Agreement.
III. BACKUP SERVICING: 10 Basis Points
Fees for acting as Back-up Servicer on this transaction will be charged monthly
on the outstanding principal balance at the beginning of the month as indicated
above. Responsibilities include all Back-up Servicing duties as specified in the
governing documents. Assumes reconciliation of monthly Servicer's statement and
verification of Servicer's calculations.
IV LOAN FILE CUSTODIAN: Covered in Administration Fee
Responsibilities include loan file safekeeping and substitution services for all
loan files.
K-1
Page 427 of 606
<PAGE>
EXHIBIT 10.51
SERVICER'S INDEMNIFICATION AGREEMENT
------------------------------------
Servicer's Indemnification Agreement between ACC Consumer Finance
Corporation ("ACC") and CS First Boston Corporation, as Initial Purchaser (the
"Initial Purchaser"), dated as of June 1, 1996.
The Initial Purchaser and ACC Receivables Corp. (the "Company") are
entering into an Initial Purchaser Agreement (the "Initial Purchaser Agreement")
dated the date hereof, providing for the purchase by the Initial Purchaser of
the 6.90% Asset Backed Certificates, Class A (the "Certificates") of the ACC
Auto Grantor Trust 1996-B (the "Trust"). The Certificates represent beneficial
interests in a pool of non-prime motor vehicle retail installment sale contracts
(the "Receivables") secured by new and used automobiles and light duty trucks,
sold by ACC to the Company pursuant to the Purchase Agreement and Assignment
(the "Purchase Agreement") dated as of June 1, 1996. The Certificates, the 6.90%
Asset Backed Certificates, Class B (the "Class B Certificates") and the Class C
Certificates (the "Class C Certificates") of the Trust will be issued pursuant
to a Pooling and Servicing Agreement (the "Pooling and Servicing Agreement")
dated as of June 1, 1996 among the Company as Seller, ACC as Servicer, and
Norwest Bank Minnesota, National Association as Trustee. ACC will act as
Servicer of the Receivables. This Servicer's Indemnification Agreement is being
entered into by the parties hereto as a condition to the Initial Purchaser
Agreement and to induce the Initial Purchaser to enter into the same.
Capitalized terms used and not otherwise defined herein shall have the meanings
assigned to such terms in the Purchaser Agreement.
1. REPRESENTATIONS AND WARRANTIES OF ACC. ACC represents and warrants
to, and agrees with, the Initial Purchaser that:
(i) ACC has read and has assisted the Company in the
preparation of a preliminary private placement memorandum (the
"Preliminary Memorandum") and will read and will assist in the preparation
of a final private placement memorandum (the "Memorandum"). Insofar as it
relates to ACC and its operations and the Receivables, the Preliminary
Memorandum contains, and the Memorandum will contain, all information
material to an investor's decision to purchase the Certificates. At all
times up to and including the Issuance Date (as defined in the Initial
Purchaser Agreement), insofar as it relates to ACC and its operations and
the Receivables, the Memorandum will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
that this representation and warranty does not apply to statements or
omissions in the Memorandum made in reliance upon and in conformity with
information furnished to ACC in writing by the Initial Purchaser,
expressly for use therein.
1
Page 428 of 606
<PAGE>
(ii) As of the Issuance Date, the representations and
warranties of ACC in the Purchase Agreement and the Pooling and Servicing
Agreement will be true and correct.
(iii) Neither ACC nor any affiliate of ACC nor anyone acting
on behalf of ACC or any such affiliate, other than the Initial Purchaser,
has, directly or indirectly, offered or sold, or attempted to offer or
sell, any of the Receivables or any interest therein to, or solicited
offers to buy any of the Receivables or any interest therein from, or
otherwise approached or negotiated with respect thereto with, any
prospective purchaser, except that ACC has negotiated the sale of the
Receivables, the Class B Certificate and the Class C Certificate to the
Company.
(iv) Neither ACC nor, to the best of its knowledge, any agent
acting on its behalf, has taken or will take any action which would
subject the sale of the Receivables or any interest therein to the
provisions of Section 5 of the Securities Act of 1933, as amended (the
"1933 Act") or to the registration provisions of any state securities laws
of any applicable jurisdiction.
(v) The materials concerning ACC and its operations and the
Receivables provided by or on behalf of ACC from time to time to holders
of the Certificates or to prospective purchasers with respect to resales
of Certificates pursuant to Rule 144A(d)(4) of the rules and regulations
promulgated under the 1933 Act (the "Rules and Regulations") by the
Securities and Exchange Commission (the "Commission"), when so provided,
will not, insofar as they relate to ACC or the Receivables, contain an
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, insofar as they relate
to ACC or the Receivables, in light of the circumstances under which they
were made, not misleading.
(vi) Neither ACC nor any successor owner of the Receivables is
required by virtue of ownership of the Receivables to be registered as an
"investment company" as such term is defined in the Investment Company Act
of 1940, as amended (the "1940 Act").
(vii) ACC will not apply the proceeds of the sale of the
Receivables to purchase securities within the meaning of Regulation T
promulgated by the Federal Reserve Board.
The Initial Purchaser hereby acknowledges that ACC makes no
representation or warranty as to the truth or accuracy of any information
contained in the Preliminary Memorandum or the Memorandum that relates to the
Company.
2
Page 429 of 606
<PAGE>
2. CERTAIN AGREEMENTS OF ACC. ACC agrees with you that:
(a) During the term of the Initial Purchaser Agreement, neither ACC
nor anyone acting on behalf of ACC, other than the Initial Purchaser, shall
directly or indirectly, offer or sell, or attempt to offer, sell, or dispose of
the Receivables or any interest therein to any person other than the Company.
(b) ACC shall furnish or make available to the Initial Purchaser or
its counsel such additional documents and information regarding ACC and its
operations and other affairs and the Receivables as the Initial Purchaser may
from time to time reasonably request, including any and all documentation
reasonably requested in connection with its due diligence efforts regarding
information in the Memorandum and in order to evidence the accuracy or
completeness of any of the conditions contained in this Agreement; and all
actions taken by ACC to authorize the sale and servicing of the Receivables
shall be reasonably satisfactory in form and substance to the Initial Purchaser.
(c) ACC shall, at all times upon request of a Purchaser or its
advisers, or both, from the date hereof through the Issuance Date, (i) make
available to each Purchaser or its advisers, or both, prior to acceptance of its
purchase, such information (in addition to that contained in the Memorandum)
concerning the offering, ACC, the Receivables and any other relevant matters as
it possesses or can acquire without unreasonable effort or expense and (ii)
provide each Purchaser or its advisers, or both, prior to acceptance of its
purchase, the opportunity to ask questions of, and receive answers from, ACC
with respect to such matters.
(d) ACC agrees to provide any holder of Certificates or prospective
purchasers of Certificates such information as may be required to render the
Certificates eligible for resale pursuant to Rule 144A of the Rules and
Regulations.
(e) ACC shall cause its books and records to be marked to show that
it has sold the Receivables, and from and after the Closing Date ACC shall not
take any action inconsistent with its sale of the Receivables, other than as
permitted by the Pooling and Servicing Agreement.
(f) For a period from the date of this Agreement until the
retirement of the Certificates, (i) ACC will furnish to the Initial Purchaser
copies of each certificate and annual statement of compliance delivered to the
Trustee pursuant to Article IV of the Pooling and Servicing Agreement and the
3
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<PAGE>
annual independent certified public accountant's servicing reports furnished to
the Trustee pursuant to Article IV of the Pooling and Servicing Agreement, by
first-class mail as soon as practicable after such statements and reports are
furnished to the Trustee and (ii) on each Determination Date or as soon
thereafter as practicable, ACC shall give notice substantially in the form of
Exhibit A hereto by telecopy (212) 479-5502, Attention: Investment Banking
Department, to the Initial Purchaser of the Pool Factor as of the Record Date.
(g) So long as any of the Certificates are outstanding, ACC
will furnish to the Initial Purchaser, by overnight mail as soon as
practicable, all documents distributed to Certificateholders, and such other
information concerning the Receivables as the Initial Purchaser may from time
to time reasonably request.
(h) To the extent, if any, that the ratings provided with respect to
the Certificates by Standard & Poor's Ratings Group and Moody's Investors
Service, Inc. are conditional upon the furnishing of documents or the taking of
any other actions by ACC, ACC shall furnish such documents and take any such
other actions to the extent deemed reasonable by ACC.
(i) ACC shall promptly notify you of any intention it or any of its
affiliates may have to offer to one or more investors within six (6) months
after the Issuance Date receivables for the purpose of issuing securities of a
same or similar class as the Certificates (directly or through any trust) and
shall not commence any such offering unless, if you shall notify it within two
weeks after receipt of such notification that you request an opinion from
counsel to ACC that such offering would not be integrated with the offering of
the Certificates under the federal securities laws in a manner which would
render unavailable the exemption from the registration provisions of the Act
relied upon in making this offering of the Certificates, you shall have received
such opinion.
3. INDEMNIFICATION AND CONTRIBUTION. (a) ACC agrees (i) to indemnify
and hold harmless the Initial Purchaser and each person, if any, who controls
the Initial Purchaser within the meaning of either the Securities Act of 1933,
as amended (the "Act") or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the respective officers, directors and employees of each
such person, against any and all losses, claims, damages or liabilities to which
they become subject insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any registration
statement, private placement memorandum or prospectus, investor presentation
materials or similar documents as approved by ACC prepared in connection with
the activities of the Initial Purchaser pursuant to the Initial Purchaser
Agreement, or in any revision or amendment of any thereof or in any supplement
to any thereof (any such revision, amendment or supplement which has been
approved by ACC collectively hereinafter referred to as the "Offering
Materials"); or arise out of or are based upon the omission or alleged omission
to state therein a material fact necessary in order to make the statement
therein, in light of the circumstances under which they were made, not
4
Page 431 of 606
<PAGE>
misleading, and (ii) to reimburse such indemnified party for reasonable legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action as such expenses are
incurred; PROVIDED, HOWEVER, that ACC will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with written
information or analysis (if any) furnished to ACC by the Initial Purchaser
specifically for use in the Offering Materials.
(b) The Initial Purchaser agrees to indemnify and hold harmless ACC,
and each person who controls ACC within the meaning of either the Act or the
Exchange Act and the respective officers, directors and employees of each such
person, against any and all losses, claims, damages or liabilities to which they
may become subject insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the Offering
Materials, or arise out of or are based upon the omission or alleged omission to
state therein a material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information or analysis furnished to ACC by
the Initial Purchaser specifically for use in the Offering Materials and agrees
to reimburse such indemnified party for reasonable legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action as such expenses are incurred.
(c) ACC shall in addition indemnify and hold harmless the Initial
Purchaser for any losses, claim, damages, or liabilities to which they become
subject in connection with the use in connection with the offering for resale of
the Certificates of any materials which would constitute "computational
materials", "collateral term sheets" or "structural term sheets" (collectively,
"Computational Materials") under the Commission's "no-action letter" definitions
of such terms as of the date hereof, except to the extent that any such losses,
claims, damages or liabilities result from the negligence of Initial Purchaser
in the preparation of such Computational Materials. Initial Purchaser shall
indemnify and hold harmless ACC for any losses, claims, damages or liabilities
which result from the negligence of the Initial Purchaser in the preparation of
such Computational Materials, and provided that in no event shall the Initial
Purchaser be liable to the Seller Parties under this paragraph (c) in an amount
in excess of the Initial Purchaser's resale profit on its sale to the
Purchasers.
(d) Promptly after receipt by an indemnified party under this
Section 3 of notice of the commencement of any actual or written threatened
action, such indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under this Section 3. notify the indemnifying
5
Page 432 of 606
<PAGE>
party in writing of the commencement thereof; but the omission and/or delay
so to notify the indemnifying party will not relieve the indemnifying
party from any liability under this Section 3 (except to the extent the
indemnifying party is prejudiced by such omission and/or delay). In case any
such action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may elect by written
notice delivered to the indemnifying party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party, which consent shall not be unreasonably withheld) , and after notice from
the indemnified party to such indemnified party of its election so to assume the
defense thereof (except as set forth below), the indemnifying party will not be
liable to such indemnified party under this Section 3 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof. If the indemnified party shall have reasonably concluded that a
material conflict of interest exists between the indemnifying party and the
indemnified party, then the indemnified party shall have the right to select
separate counsel to assert such legal defenses. An indemnifying party shall not
be liable for any settlement of any claim effected without its consent.
(e) If the indemnification provided for in this Item 3 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims damages or liabilities referred to in subsection (a) or (b) above (i) in
such proportion as is appropriate to reflect the relative benefits received by
ACC on the one hand and the Initial Purchaser on the other from the offering of
the Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of ACC on the one hand and the Initial Purchaser on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by ACC on the one hand and the
Initial Purchaser on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering (before deducting expenses) received by
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ACC bear to the total underwriting discounts and commissions received by the
Initial Purchaser. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by ACC or the Initial Purchaser and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any action or claim which is the subject of this
subsection (d). Notwithstanding the provisions of this subsection (d), the
Initial Purchaser shall not be required to contribute any amount in excess of
the amount by which the total price at which the Securities underwritten by it
and distributed to the public were offered to the public exceeds the amount of
any damages which the Initial Purchaser has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Initial Purchaser's
obligations in this subsection (d) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(f) ACC further agrees that it will not settle or compromise or
consent to the entry of any judgment in any pending or threatened action in
respect of which indemnification may be sought hereunder (whether or not the
Initial Purchaser is a party therein) unless ACC has given the Initial
Purchaser reasonable prior written notice thereof and after consultation with
the Initial Purchaser has used all efforts to obtain an unconditional release
of the Initial Purchaser from all liability arising therefrom; PROVIDED,
HOWEVER, that (i) ACC shall not be obligated to increase its liability and/or
pay any monetary sums in order to obtain such release (ii) in the event such
release of the Initial Purchaser is not obtained, ACC shall not be precluded
from settling, compromising or consenting to the entry of any judgment in any
pending or threatened action and (iii) any such release of liability of the
Initial Purchaser shall not affect the Initial Purchaser's indemnification
obligations to ACC hereunder.
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(g) The Initial Purchaser further agrees that it will not settle or
compromise or consent to the entry of any judgment in any pending or threatened
action in respect of which indemnification may be sought hereunder (whether or
not ACC is a party therein) unless the Initial Purchaser has given ACC
reasonable prior written notice thereof and after consultation with ACC has used
all reasonable efforts to obtain an unconditional release of ACC from all
liability arising therefrom; PROVIDED, HOWEVER, that (i) the Initial Purchaser
shall not be obligated to increase its liability and/or pay any monetary sums in
order to obtain such release, (ii) in the event such release of ACC is not
obtained, the Initial Purchaser shall not be precluded from settling,
compromising or consenting to the entry of any judgment in any pending or
threatened action and (iii) any such release of liability of ACC shall not
affect ACC's indemnification obligations to the Initial Purchaser hereunder.
(h) Any settlement, compromise or consent to the entry of any
judgment under subsection (e) or (f) shall not affect either party's
indemnification obligations hereunder.
4. NO TERMINATION. ACC agrees that it shall not terminate, amend or
modify the Purchase Agreement or any portion thereof without the prior written
consent of the Initial Purchaser.
5. NOTICES. All communications hereunder will be in writing and, if
sent to the Initial Purchaser, will be mailed, delivered or telegraphed and
confirmed to the Initial Purchaser at CS First Boston Corporation, Park Avenue
Plaza, 55 East 52nd Street, New York, New York 10055, Attention: Investment
Banking Department, Transactions Advisory Group; if sent to ACC, will be mailed,
delivered or telegraphed, and confirmed to it at 12750 High Bluff Drive, Suite
320, San Diego, California 92130, Attention: Gary S. Burdick.
6. COUNTERPARTS. This Servicer's Indemnification Agreement may be
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original, but all of such counterparts shall together constitute
one instrument.
7. TERMS. Capitalized terms used but not defined herein shall have the
meanings ascribed thereto in the Initial Purchaser Agreement.
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8. GOVERNING LAW. This Servicer's Indemnification Agreement shall be
construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have entered into this
Servicer's Indemnification Agreement as of the date first above written.
ACC CONSUMER FINANCE CORPORATION
By: _____________________________
Name: Gary S. Burdick
Title: President
CS FIRST BOSTON CORPORATION
By: _____________________________
Name: Richard D'Albert
Title: Vice President
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<PAGE>
EXHIBIT A
FORM OF SERVICER'S CERTIFICATE
CS FIRST BOSTON CORPORATION
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
Re: Pooling and Servicing Agreement dated as of June 1, 1996 (the
"Pooling and Servicing Agreement") among Cargill Financial
Services Corporation, CC Receivables Corp., ACC Consumer Finance
Corporation and Norwest Bank Minnesota, National ASSOCIATION,
AS TRUSTEE
Ladies and Gentlemen:
Determination Date to which this Certificate relates:
________________________, 19__
For Monthly Period ending on _________________, 19__
1. The undersigned Servicing Officer does hereby certify that the
Pool Factor is __________________________.
2. Capitalized terms used in this Certificate shall have the same
meanings as in the Pooling and Servicing Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand as of the above
referenced Determination Date.
ACC CONSUMER FINANCE CORPORATION
By:__________________________
Servicing Officer
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<PAGE>
EXHIBIT 10.52
Execution Copy
==========================================================================
INDEMNIFICATION AGREEMENT
among
FINANCIAL SECURITY ASSURANCE INC.,
ACC CONSUMER FINANCE CORPORATION,
ACC RECEIVABLES CORP.,
CARGILL FINANCIAL SERVICES CORPORATION
and
CS FIRST BOSTON CORPORATION
Dated as of June 1, 1996
ACC Auto Grantor Trust 1996-B
6.90% Asset Backed Certificates, Class A
$43,233,000.00
==========================================================================
Page 438 of 606
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Representations, Warranties and Agreements of Financial
Security . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 3. Representations, Warranties and Agreements of The
Initial Purchaser . . . . . . . . . . . . . . . . . . . . 5
Section 4. Representations, Warranties and Agreements of CFSC. . . . 6
Section 5. Representations, Warranties and Agreements of ACC and
the Company . . . . . . . . . . . . . . . . . . . . . . . 7
Section 6. Indemnification . . . . . . . . . . . . . . . . . . . . . 7
Section 7. Indemnification Procedures . . . . . . . . . . . . . . . 8
Section 8. Contribution . . . . . . . .. . . . . . . . . . . . . . . 10
Section 9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 10
EXHIBIT A - Opinion of Assistant General Counsel
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<PAGE>
INDEMNIFICATION AGREEMENT
-------------------------
INDEMNIFICATION AGREEMENT dated as of June 1, 1996, among FINANCIAL
SECURITY ASSURANCE INC. ("Financial Security"), ACC CONSUMER FINANCE
CORPORATION ("ACC"), ACC RECEIVABLES CORP. (the "Company"), CARGILL
FINANCIAL SERVICES CORPORATION ("CFSC") and CS FIRST BOSTON CORPORATION
(the "Initial Purchaser"):
Section 1. Definitions. For purposes of this Agreement, the
following terms shall have the meanings provided below:
"ACC" means ACC Consumer Finance Corporation, a Delaware
corporation successor to, by merger of, ACC Consumer Finance
Corporation, a California corporation, previously named American Credit
Corporation.
"ACC Party" means any of ACC, its parents, subsidiaries and
affiliates and any shareholder, director, officer, employee, agent or
"controlling person" (as such term is used in the Securities Act) of any
of the foregoing.
"Agreement" means this Indemnification Agreement, as amended from
time to time.
"CFSC Information" has the meaning provided in Section 4 hereof.
"CFSC Party" means any of CFSC, its parents, subsidiaries and
affiliates and any shareholder, director, officer, employee, agent or
"controlling person" (as such term is used in the Securities Act) of any
of the foregoing.
"Federal Securities Laws" means the Securities Act, the Securities
Exchange Act of 1934, the Trust Indenture Act of 1939, the Investment
Company Act of 1940, the Investment Advisers Act of 1940 and the Public
Utility Holding Company Act of 1935, each as amended from time to time,
and the rules and regulations in effect from time to time under such
Act.
"Financial Security Agreements" means this Agreement, the Stock
Pledge Agreement, the Spread Account Agreement and the Insurance
Agreement.
"Financial Security Information" has the meaning provided in
Section 2(g) hereof.
"Financial Security Party" means any of Financial Security, its
parent, subsidiaries and affiliates, and any shareholder, director,
officer, employee, agent or "controlling person" (as such term is used
in the Securities Act) of any of the foregoing.
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"Indemnified Party" means any party entitled to any indemnification
pursuant to Section 4 hereof.
"Indemnifying Party" means any party required to provide
indemnification pursuant to Section 6 hereof.
"Initial Purchaser Agreement" means the Initial Purchaser Agreement
dated June 13, 1996, among ACC, the Company and the Initial Purchaser in
respect of the Securities.
"Initial Purchaser Information" has the meaning provided in Section
3(c) hereof.
"Initial Purchaser Party" means any of the Initial Purchaser, its
parent, subsidiaries and affiliates and any shareholder, director,
officer, employee, agent of "controlling person" (as such term is used
in the Securities Act) of any of the foregoing.
"Insurance Agreement" means the Insurance and Indemnity Agreement,
dated as of June 1, 1996, among Financial Security, the Company, ACC and
CFSC.
"Losses" means (a) any actual out-of-pocket damages incurred by the
party entitled to indemnification or contribution hereunder, (b) any
actual out-of-pocket costs or expenses incurred by such party, including
reasonable fees or expenses of its counsel and other expenses incurred
in connection with investigating or defending any claim, action or other
proceeding which entitle such party to be indemnified hereunder (subject
to the limitations set forth in Section 7 hereof), to the extent not
paid, satisfied or reimbursed from funds provided by any other Person
other than an affiliate of such party (provided that the foregoing shall
not create or imply any obligation to pursue recourse against any such
other Person), plus (c) interest on the amount paid by the party
entitled to indemnification or contribution from the date of such
payment to the date of payment by the party who is obligated to
indemnify or contribute hereunder at the statutory rate applicable to
judgments for breach of contract.
"Offering Circular" means the Preliminary Private Placement
Memorandum dated June 11, 1996 and Private Placement Memorandum relating
to the Securities dated June 13, 1996 and any amendment or supplement
thereto.
"Offering Document" means the Offering Circular and any other
material or documents delivered by the Initial Purchaser to any Person
in connection with the offer or sale of the Securities.
"Person" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization or other organization or
entity (whether governmental or private).
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<PAGE>
"Policy" means the financial guaranty insurance policy delivered by
Financial Security with respect to the Securities.
"Securities" means the ACC Auto Grantor Trust 1996-B 6.90% Asset
Backed Certificates, Class A, described in the Offering Circular and
covered by the Policy.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Series 1996-B Supplement" means the Series 1996-B Supplement dated
as of June 1, 1996 to the Spread Account Agreement, 1996, among the
Seller, Financial Security, the Collateral Agent named therein and the
trustees specified therein.
"Spread Account Agreement" means the Master Spread Account
Agreement dated as of June 1, 1995 among the Company, ACC, CFSC, the
Collateral Agent and the Trustees specified therein, as amended and as
supplemented by the Series 1995-B Supplement, the Series 1996-A
Supplement and the Series 1996-B Supplement, and as such may be amended,
supplemented or otherwise modified in accordance with the terms thereof.
"Stock Pledge Agreement" means the Stock Pledge Agreement, dated as
of June 1, 1995, among ACC, Financial Security and Norwest Bank
Minnesota, National Association.
Section 2. Representations, Warranties and Agreements of
Financial Security. Financial Security represents, warrants and agrees
with the parties hereto as follows:
(a) Organization, Etc. Financial Security is a stock
insurance company duly organized, validly existing and authorized
to transact financial guaranty insurance business under the laws of
the State of New York.
(b) Authorization, Etc. The Policy and the Financial
Security Agreements have been duly authorized, executed and
delivered by Financial Security.
(c) Validity, Etc. The Policy and the Financial Security
Agreements constitute valid and binding obligations of Financial
Security, enforceable against Financial Security in accordance with
their terms, subject, as to the enforcement of remedies, to
bankruptcy, insolvency, reorganization, rehabilitation, moratorium
and other similar laws affecting the enforceability of creditors'
rights generally applicable in the event of the bankruptcy or
insolvency of Financial Security and to the application of general
principles of equity and subject, in the case of this Agreement, to
principles of public policy limiting the right to enforce the
indemnification provisions contained herein.
3
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<PAGE>
(d) Exemption From Registration. The Policy is exempt from
registration under the Securities Act.
(e) No Conflicts. Neither the execution or delivery by
Financial Security of the Policy or the Financial Security
Agreements, nor the performance by Financial Security of its
obligations thereunder, will conflict with any provision of the
certificate of incorporation or the bylaws of Financial Security
nor result in a breach of, or constitute a default under, any
material agreement or other instrument to which Financial Security
is a party or by which any of its property is bound nor violate any
judgment, order or decree applicable to Financial Security of any
governmental or regulatory body, administrative agency, court or
arbitrator having jurisdiction over Financial Security (except
that, in the published opinion of the Securities and Exchange
Commission, the indemnification provisions of this Agreement,
insofar as they relate to indemnification for liabilities arising
under the Securities Act, are against public policy as expressed in
the Securities Act and are therefore unenforceable).
(f) Financial Information. The consolidated balance sheets
of Financial Security as of December 31, 1994 and December 31, 1995
and the related consolidated statements of income, changes in
shareholder's equity and cash flows for the fiscal years then ended
and the interim consolidated balance sheet of Financial Security as
of March 31, 1996, and the related statements of income, changes in
shareholder's equity and cash flows for the interim period then
ended, furnished by Financial Security to the Initial Purchaser for
inclusion in the Offering Circular as Appendix C thereto, fairly
present in all material respects the financial condition of
Financial Security as of such dates and for such periods in
accordance with generally accepted accounting principles
consistently applied (subject as to interim statements to normal
year-end adjustments) and since the date of the most current
interim consolidated balance sheet referred to above there has been
no change in the financial condition of Financial Security which
would materially and adversely affect its ability to perform its
obligations under the Policy
(g) Financial Security Information. The information in the
Offering Circular set forth under the caption "The Certificate
Insurer" (as revised from time to time in accordance with the
provisions hereof, the "Financial Security Information") is limited
and does not purport to provide the scope of disclosure required to
be included in a prospectus with respect to a registrant in
connection with the offer and sale of securities of such registrant
registered under the Securities Act. Within such limited scope of
disclosure, however, as of the date of the Offering Circular and as
of the date hereof, the Financial Security Information does not
contain any untrue statement of a material fact, or omit to state a
material fact necessary to make the statements contained therein,
4
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<PAGE>
in the light of the circumstances under which they were made, not
misleading.
(h) Additional Information. Financial Security will furnish
to the Initial Purchaser, CFSC or ACC, upon request of the Initial
Purchaser, CFSC or ACC, as the case may be, copies of Financial
Security's most recent financial statements (annual or interim, as
the case may be) which fairly present in all material respects the
financial condition of Financial Security as of the dates and for
the periods indicated, in accordance with generally accepted
accounting principles consistently applied except as noted therein
(subject, as to interim statements, to normal year-end
adjustments). In addition, if the delivery of an Offering Circular
relating to the Securities is required at any time prior to the
expiration of nine months after the time of issue of the Offering
Circular in connection with the offering or sale of the Securities,
ACC or the Initial Purchaser will notify Financial Security of such
requirement to deliver an Offering Circular and Financial Security
will promptly provide the Initial Purchaser and CFSC with any
revisions to the Financial Security Information that are in the
judgment of Financial Security necessary to prepare an amended
Offering Circular or a supplement to the Offering Circular.
(i) Opinion of Counsel. Financial Security will furnish to
the Initial Purchaser, ACC and CFSC on the closing date for the
sale of the Securities an opinion of its Assistant General Counsel,
to the effect set forth in Exhibit A attached hereto, dated such
closing date and addressed to ACC, the Initial Purchaser and CFSC.
(j) Consents and Reports of Independent Accountants.
Financial Security will furnish to the Initial Purchaser, ACC and
CFSC, upon request, as comfort from its independent accountants in
respect of its financial condition, (i) at the expense of the
Person specified in the Insurance Agreement, a copy of the Offering
Circular, including either a manually signed consent or a manually
signed report of Financial Security's independent accountants and
(ii) the quarterly review letter by Financial Security's
independent accountants in respect of the most recent interim
financial statements of Financial Security.
Nothing in this Agreement shall be construed as a representation or
warranty by Financial Security concerning the rating of its
claims-paying ability by Moody's Investors Service, Inc. or Standard &
Poor's Corporation or any other rating agency (collectively, the "Rating
Agencies"). The Rating Agencies, in assigning such ratings, take into
account facts and assumptions not described in the Offering Circular and
the facts and assumptions which are considered by the Rating Agencies,
and the ratings issued thereby, are subject to change over time.
Section 3. Representations, Warranties and Agreements of the
Initial Purchaser. The Initial Purchaser represents, warrants and
agrees with the parties hereto as follows:
5
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<PAGE>
(a) Compliance With Laws. The Initial Purchaser will comply
in all material respects with all legal requirements in connection
with offers and sales of the Securities and make such offers and
sales in the manner provided in the Offering Circular.
(b) Offering Document. The Initial Purchaser will not use,
or distribute to other broker-dealers for use, any Offering
Document in connection with the offer and sale of the Securities
unless such Offering Document includes such information as has been
furnished by Financial Security for inclusion therein and the
information therein concerning Financial Security has been approved
by Financial Security in writing. Financial Security hereby
consents to the information in respect of Financial Security
included in the Offering Circular. Each Offering Document will
include the following statement:
"The Policy is not covered by the property/casualty
insurance security fund specified in Article 76 of the
New York Insurance Law."
Each Offering Document including financial information with respect
to Financial Security prepared in accordance with generally
accepted accounting principles will include the following statement
immediately preceding such financial information:
"The New York State Insurance Department recognizes only
statutory accounting practices for determining and
reporting the financial condition and results of
operations of an insurance company, for determining its
solvency under the New York Insurance Law, and for
determining whether its financial condition warrants the
payment of a dividend to its stockholders. No
consideration is given by the New York State Insurance
Department to financial statements prepared in accordance
with generally accepted accounting principles in making
such determinations."
(c) Initial Purchaser Information. All material provided by
the Initial Purchaser for inclusion in the Offering Circular (as
revised from time to time, the "Initial Purchaser Information"),
insofar as such information relates to the Initial Purchaser, is
true and correct in all material respects. In respect of the
Offering Circular, the Initial Purchaser Information is limited to
the information set forth under the caption "Method of
Distribution" in the Offering Circular.
Section 4. Representations, Warranties and Agreements of CFSC.
CFSC represents, warrants and agrees with the parties hereto that all
material provided by CFSC for inclusion in the Offering Circular (as
revised from time to time, "CFSC Information"), insofar as such
information relates to CFSC, is true and correct in all material
respects. In respect of the Offering Circular, CFSC Information is
6
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<PAGE>
limited to the information set forth under the caption "The Sponsor" in
the Offering Circular.
Section 5. Representations, Warranties and Agreements of ACC
and the Company. ACC represents, warrants and agrees, with respect to
itself and with respect to the Company, and the Company represents,
warrants and agrees with respect to itself, as follows:
(a) The offer and sale of the Securities comply in all
material respects with all requirements of law, including all
applicable securities laws.
(b) Without limitation of the representation set forth in (a)
above, the Offering Circular does not contain any untrue statement
of a material fact and does not omit to state a material fact
required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were
made, not misleading; provided that no representation is made with
respect to (i) the Initial Purchaser Information, (ii) the
Financial Security Information and (iii) the CFSC Information.
Section 6. Indemnification.
(a) Financial Security agrees, upon the terms and subject to
the conditions provided herein, to indemnify, defend and hold
harmless each ACC Party, each Initial Purchaser Party and each CFSC
Party against (i) any and all Losses incurred by them with respect
to the offer and sale of the Securities and resulting from
Financial Security's breach of any of its representations,
warranties or agreements set forth in Section 2 hereof and (ii) any
and all Losses to which any ACC Party, Initial Purchaser Party or
CFSC Party may become subject, under the Securities Act or
otherwise, insofar as such Losses arise out of or result from an
untrue statement of a material fact contained in any Offering
Document or the omission to state therein a material fact required
to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent,
that such untrue statement or omission was made in the Financial
Security Information included therein in accordance with the
provisions hereof.
(b) The Initial Purchaser agrees, upon the terms and subject
to the conditions provided herein, to indemnify, defend and hold
harmless each Financial Security Party and each CFSC Party against
(i) any and all Losses incurred by them with respect to the offer
and sale of the Securities and resulting from the Initial
Purchaser's breach of any of its representations, warranties or
agreements set forth in Section 3 hereof and (ii) any and all
Losses to which any Financial Security Party or CFSC Party may
become subject, under the Securities Act or otherwise, insofar as
such Losses arise out of or result from an untrue statement of a
material fact contained in any Offering Document or the omission to
7
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state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue
statement or omission was made in the Initial Purchaser Information
included therein.
(c) CFSC agrees, upon the terms and subject to the conditions
provided herein, to indemnify, defend and hold harmless each
Financial Security Party, each ACC Party and each Initial Purchaser
Party against (i) any and all Losses incurred by them with respect
to the offer and sale of the Securities and resulting from CFSC's
breach of any of its representations, warranties or agreements set
forth in Section 4 hereof and (ii) any and all Losses to which any
Financial Security Party, ACC Party or Initial Purchaser Party may
become subject, under the Securities Act or otherwise, insofar as
such Losses arise out of or result from an untrue statement of a
material fact contained in any Offering Document or the omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue
statement or omission was made in CFSC Information included
therein.
(d) Each of ACC and the Company, jointly and severally,
agrees, upon the terms and subject to the conditions provided
herein, to indemnify, defend and hold harmless each CFSC Party
against any and all Losses incurred by them (i) by reason of any
statement, omission or action (other than of or by any CFSC Party)
in connection with the offering, issuance, sale or delivery of the
Securities; (ii) resulting from the breach by ACC or the Company of
any of its representations, warranties or agreements set forth in
Section 5 hereof and (iii) under the Securities Act or otherwise,
insofar as such Losses arise out of or result from an untrue
statement of a material fact contained in any Offering Document or
the omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
except insofar as such Losses arise out of or are based upon any
untrue statement or omission in the Financial Security Information
or the CFSC Information included in any Offering Document.
(e) Upon the incurrence of any Losses for which a party is
entitled to indemnification hereunder, the Indemnifying Party shall
reimburse the Indemnified Party promptly upon establishment by the
Indemnified Party to the Indemnifying Party of the Losses incurred.
Section 7. Indemnification Procedures. Except as provided
below in Section 8 with respect to contribution, the indemnification
provided herein by an Indemnifying Party shall be the exclusive remedy
of any and all Indemnified Parties for the breach of a representation,
warranty or agreement hereunder by an Indemnifying Party; provided,
however, that each Indemnified Party shall be entitled to pursue any
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other remedy at law or in equity for any such breach so long as the
damages sought to be recovered shall not exceed the Losses incurred
thereby resulting from such breach. In the event that any action or
regulatory proceeding shall be commenced or claim asserted which may
entitle an Indemnified Party to be indemnified under this Agreement,
such party shall give the Indemnifying Party written or telegraphic
notice of such action or claim reasonably promptly after receipt of
written notice thereof. The Indemnifying Party shall be entitled to
participate in and, upon notice to the Indemnified Party, assume the
defense of any such action or claim in reasonable cooperation with, and
with the reasonable cooperation of, the Indemnified Party. The
Indemnified Party shall have the right to employ separate counsel in any
such action and to participate in the defense thereof at the expense of
the Indemnified Party; provided, however, that the fees and expenses of
such separate counsel shall be at the expense of the Indemnifying Party
if (i) the Indemnifying Party has agreed to pay such fees and expenses,
(ii) the Indemnifying Party shall have failed to assume the defense of
such action or proceeding and employ counsel satisfactory to the
Indemnified Party in any such action or proceeding or (iii) the named
parties to any such action or proceeding (including any impleaded
parties) include both the Indemnified Party and the Indemnifying Party,
and the Indemnified Party shall have been advised by counsel that (A)
there may be one or more legal defenses available to it which are
different from or additional to those available to the Indemnifying
Party and (B) the representation of the Indemnifying Party and the
Indemnified Party by the same counsel would be inappropriate or contrary
to prudent practice (in which case, if the 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 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 or proceeding or separate but substantially similar or
related actions 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
at any time for all ACC Parties, one such firm for all Initial Purchaser
Parties, one such firm for all CFSC Parties and one such firm for all
Financial Security Parties, as the case may be, which firm shall be
designated in writing by ACC in respect of the ACC Parties, by the
Initial Purchaser in respect of the Initial Purchaser Parties, by CFSC
in respect of the CFSC Parties and by Financial Security in respect of
the Financial Security Parties. The Indemnifying Party shall not be
liable for any settlement of any such claim or action unless the
Indemnifying Party shall have consented thereto or be in default in its
obligations hereunder. Any failure by an Indemnified Party to comply
with the provisions of this Section shall relieve the Indemnifying Party
of liability only if such failure is prejudicial to the position of the
Indemnifying Party and then only to the extent of such prejudice.
9
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<PAGE>
Section 8. Contribution.
(a) To provide for just and equitable contribution if the
indemnification provided by any Indemnifying Party is determined to be
unavailable for any Indemnified Party (other than due to application of
this Section), each Indemnifying Party shall contribute to the Losses
arising from any breach of any of its representations, warranties or
agreements contained in this Agreement on the basis of the relative
fault of each of the parties as set forth in Section 8(b) below;
provided, however, that an Indemnifying Party shall in no event be
required to contribute to all Indemnified Parties an aggregate amount in
excess of the Losses incurred by such Indemnified Parties resulting from
the breach of representations, warranties or agreements contained in
this Agreement.
(b) The relative fault of each Indemnifying Party, on the one
hand, and of each Indemnified Party, on the other, shall be determined
by reference to, among other things, whether the breach of, or alleged
breach of, any representations, warranties or agreements contained in
this Agreement relates to information supplied by, or action within the
control of, the Indemnifying Party or the Indemnified Party and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such breach.
(c) The parties agree that Financial Security shall be solely
responsible for the Financial Security Information, the Initial
Purchaser shall be solely responsible for the Initial Purchaser
Information and CFSC shall be solely responsible for the CFSC
Information and that the balance of each Offering Document shall be the
responsibility of ACC and the Company.
(d) Notwithstanding anything in this Section 8 to the contrary,
the Initial Purchaser shall not be required to contribute an amount in
excess of the amount by which the total underwriting discounts and
commissions received by the Initial Purchaser exceeds the amount of any
damages that such Initial Purchaser has otherwise been required to pay
in respect of any breach by the Initial Purchaser of its representations
or warranties contained in Section 3 hereof.
(e) No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) (of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(f) Upon the incurrence of any Losses entitled to contribution
hereunder, the contributor shall reimburse the party entitled to
contribution promptly upon establishment by the party entitled to
contribution to the contributor of the Losses incurred.
Section 9. Miscellaneous.
(a) Notices. All notices and other communications provided for
under this Agreement shall be delivered to the address set forth below
10
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<PAGE>
or to such other address as shall be designated by the recipient in a
written notice to the other party or parties hereto:
If to Financial Security:
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Surveillance Department
Re: ACC Auto Grantor Trust, 6.90% Asset
Backed Certificates, Series 1996-B
Confirmation: (212) 826-0100
Facsimile Nos.: (212) 339-3518, (212)
339-3529
(in each case in which notice or other communication
to Financial Security refers to an Event of Default,
a claim on the Policy or with respect to which
failure on the part of Financial Security to respond
shall be deemed to constitute consent or acceptance,
then a copy of such notice or other communication
should also be sent to the attention of each of the
General Counsel and the Head-Financial Guaranty
Group and shall be marked to indicate "URGENT
MATERIAL ENCLOSED.")
If to the Company: ACC Receivables Corp.
Plaza del Mar
12526 High Bluff Drive
Suite 300
San Diego, CA 92130
Attention: Gary Burdick
Facsimile No.: (619) 755-8348
Confirmation: (619) 792-3506
If to the Initial Purchaser:
CS First Boston Corporation
55 East 52nd Street, 39th Floor
New York, New York 10055
Attention: Transactions Advisory Group
Facsimile No: (212) 318-0532
Confirm No: (212) 909-2225
If to CFSC: Cargill Financial Services Corporation
6000 Clearwater Drive
Minnetonka, Minnesota 55343-9497
Attn: Structured Finance Funding Desk
Facsimile No.: 612-984-3844
Telephone No.: 612-984-3058
11
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<PAGE>
with a copy to: Cargill Financial Services Corporation
6000 Clearwater Dr.
Minnetonka, MN 55343-9497
Attn: Law Department
Facsimile No.: 612-984-3898
Telephone No.: 612-984-6334
If to ACC: ACC Consumer Finance Corporation
12750 High Bluff Drive
Suite 320
San Diego, California 92130
Attention: Gary Burdick
Facsimile No: (619) 793-6333
Confirmation: (619) 793-6000
(b) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(c) Assignments. This Agreement may not be assigned by any party
without the express written consent of each other party. Any assignment
made in violation of this Agreement shall be null and void.
(d) Amendments. Amendments of this Agreement shall be in writing
signed by each party hereto.
(e) Survival, Etc. The indemnity and contribution agreements
contained in this Agreement shall remain operative and in full force and
effect, regardless of (i) any investigation made by or on behalf of any
Indemnifying Party, (ii) the issuance of the Securities or (iii) any
termination of this Agreement or the Policy. The indemnification
provided in this Agreement will be in addition to any liability which
the parties may otherwise have and shall in no way limit any obligations
of the parties to the Initial purchaser or the Insurance Agreement.
(f) Counterparts. This Agreement may be executed in counterparts
by the parties hereto, and all such counterparts shall constitute one
and the same instrument.
12
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered as of the date first above written.
FINANCIAL SECURITY ASSURANCE INC.
By: /s/ Claire M. Robinson
---------------------------------
Name: Claire M. Robinson
Title: Managing Director
ACC CONSUMER FINANCE CORPORATION
By: /s/ Gary S. Burdick
---------------------------------
Name:
Title:
ACC RECEIVABLES CORP.
By: /s/ Gary S. Burdick
---------------------------------
Name:
Title:
CS FIRST BOSTON CORPORATION
By: /s/ [illegible]
---------------------------------
Name:
Title:
CARGILL FINANCIAL SERVICES
CORPORATION
By: /s/ [illegible]
---------------------------------
Name:
Title:
13
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<PAGE>
EXHIBIT A
OPINION OF ASSISTANT GENERAL COUNSEL
Based upon the foregoing, I am of the opinion that:
1. Financial Security is a stock insurance company duly
organized, validly existing and authorized to transact financial
guaranty insurance business under the laws of the State of New
York.
2. The Policy and the Financial Security Agreements have
been duly authorized, executed and delivered by Financial Security.
3. The Policy and the Financial Security Agreements
constitute valid and binding obligations of Financial Security,
enforceable against Financial Security in accordance with their
terms, subject, as to the enforcement of remedies, to bankruptcy,
insolvency, reorganization, rehabilitation, moratorium and other
similar laws affecting the enforceability of creditors' rights
generally applicable in the event of the bankruptcy or insolvency
of Financial Security and to the application of general principles
of equity and subject, in the case of the Indemnification
Agreement, to principles of public policy limiting the right to
enforce the indemnification provisions contained therein insofar as
they relate to indemnification for liabilities arising under
applicable securities laws.
4. The Policy is exempt from registration under the
Securities Act of 1933, as amended (the "Act").
5. Neither the execution or delivery by Financial Security
of the Policy or the Financial Security Agreements, nor the
performance by Financial Security of its obligations thereunder,
will conflict with any provision of the certificate of
incorporation or the bylaws of Financial Security or violate any
law or regulation, which violation would impair the binding effect
or enforceability of the Policy or any of the Agreements or, to the
best of my knowledge (after due inquiry), result in a breach of, or
constitute a default under, any agreement or other instrument to
which Financial Security is a party or by which it or any of its
property is bound or, to the best of my knowledge (after due
inquiry), violate any judgment, order or decree applicable to
Financial Security of any governmental or regulatory body,
administrative agency, court or arbitrator having jurisdiction over
Financial Security (except that in the published opinion of the
Securities and Exchange Commission the indemnification provisions
of the Indemnification Agreement, insofar as they relate to
indemnification for liabilities arising under the Act, are against
public policy as expressed in the Act and are therefore
unenforceable).
A-1
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<PAGE>
In addition, please be advised that I have reviewed the
description of Financial Security under the caption "The
Certificate Insurer" in the Private Placement Memorandum dated June
13, 1996 (the "Offering Document") of ACC with respect to the
Securities. The information provided in the Offering Document with
respect to Financial Security is limited and does not purport to
provide the scope of disclosure required to be included in a
prospectus with respect to a registrant under the Act in connection
with the public offer and sale of securities of such registrant.
Within such limited scope of disclosure, however, there has not
come to my attention any information which would cause me to
believe that the description of Financial Security referred to
above, as of the date of the Offering Document or as of the date of
this opinion, contained or contains any untrue statement of a
material fact or omitted or omits to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (except
that I express no opinion with respect to any financial statements
or other financial information contained or referred to therein).
A-2
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<PAGE>
EXHIBIT 10.54
SERIES 1996-B SUPPLEMENT
dated as of June 1, 1996,
to the
MASTER SPREAD ACCOUNT AGREEMENT,
dated as of June 1, 1995,
among
ACC RECEIVABLES CORP.
FINANCIAL SECURITY ASSURANCE INC.
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee and as Collateral Agent
Page 455 of 606
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS............................................. 2
Section 1.1 Definitions........................................ 2
Section 1.2 Rules of Interpretation............................ 7
ARTICLE II CREDIT ENHANCEMENT FEE; SERIES
SUPPLEMENTS; THE COLLATERAL............................. 7
Section 2.1 Series 1996-B Credit Enhancement Fee............... 7
Section 2.2 Series Supplements................................. 7
Section 2.3 Grant of Security Interest by the Seller........... 8
ARTICLE III SPREAD ACCOUNT.......................................... 9
Section 3.1 Establishment of Series 1996-B Spread Account;
Initial Spread Account Deposit..................... 9
ARTICLE IV AMENDMENT TO SECTION 1.01............................... 9
Section 4.1 Amendment to Section 1.01.......................... 9
ARTICLE V MISCELLANEOUS........................................... 10
Section 5.1 Further Assurances................................. 10
Section 5.2 Governing Law...................................... 10
Section 5.3 Counterparts....................................... 10
Section 5.4 Headings........................................... 10
i
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<PAGE>
SERIES 1996-B SUPPLEMENT
SERIES 1996-B SUPPLEMENT, dated as of JUNE 1, 1996 (the "Series
1996-B Supplement"), by and among ACC RECEIVABLES CORP., a Delaware corporation
(the "Seller"), FINANCIAL SECURITY ASSURANCE INC., a New York stock insurance
company ("Financial Security") and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
a national banking association in its capacities as Trustee under the Series
1996-B Pooling and Servicing Agreement referred to below, as agent for the
Certificateholders with respect to Series 1996-B (the "Trustee") and as
Collateral Agent (as defined below).
RECITALS
--------
1. The parties hereto have previously entered into a Master Spread
Account Agreement, dated as of June 1, 1995 (as amended or supplemented from
time to time, the "Spread Account Agreement"), and, as contemplated by Section
2.02 of the Spread Account Agreement, this Series 1996-B Supplement constitutes
a Series Supplement to the Spread Account Agreement so that hereafter this
Series 1996-B Supplement shall form a part of the Spread Account Agreement for
all purposes thereof, and all references herein and hereafter to the Spread
Account Agreement shall mean the Spread Account Agreement, as supplemented
hereby.
2. ACC Auto Grantor Trust, 1996-B (the "Series 1996-B Trust") is
being formed contemporaneously herewith pursuant to a Pooling and Servicing
Agreement, dated as of June 1, 1996 (the "Series 1996-B Pooling and Servicing
Agreement"), among Cargill Financial Services Corporation, as Sponsor, the
Seller, ACC Consumer Finance Corporation (successor to American Credit
Corporation) ("ACC"), as Servicer and the Trustee, as Trustee, Backup Servicer
and Collateral Agent.
3. Pursuant to the Series 1996-B Pooling and Servicing Agreement,
the Seller sold to the Series 1996-B Trust all of its right, title and interest
in and to the Receivables and certain other Trust Property in exchange for the
Series 1996-B Certificates.
4. The Seller requested that Financial Security issue the Series
1996-B Policy to the Trustee to guarantee payment of the Guaranteed
Distributions (as defined in such Policy) on each Distribution Date in respect
of the Series 1996-B Certificates.
1
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<PAGE>
5. In partial consideration of the issuance of the Series 1996-B
Policy, the Seller has agreed that Financial Security shall have certain rights
as Controlling Party, to the extent set forth herein with respect to the Series
1996-B Trust.
6. The Seller is a wholly owned special purpose subsidiary of ACC.
The Series 1996-B Trust has agreed to pay a certain Credit Enhancement Fee to
the Seller in consideration of the obligations of the Seller pursuant hereto in
respect of the Series 1996-B Certificates and in consideration of the
obligations of ACC pursuant to the Series 1996-B Insurance Agreement (such
obligations forming part of the Series 1996-B Insurer Secured Obligations
referred to herein). The Series 1996-B Insurer Secured Obligations form part of
the consideration to Financial Security for its issuance of the Series 1996-B
Policy.
7. In order to secure the performance of the Series 1996-B Secured
Obligations, to further effect and enforce the subordination provisions to which
the Credit Enhancement Fee is subject, and in consideration of the receipt of
the Credit Enhancement Fee, the Seller agreed to pledge the Series 1996-B
Collateral as Collateral to the Collateral Agent for the benefit of Financial
Security and for the benefit of the Trustee on behalf of the Trust, upon the
terms and conditions set forth herein.
AGREEMENTS
----------
In consideration of the premises, and for other good and valuable
consideration, the adequacy, receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. All terms defined in Section 1.1 of the
Series 1996-B Pooling and Servicing Agreement shall have the same meaning with
respect to this Series 1996-B Supplement. The following terms shall have the
following respective meanings:
"Controlling Party" means with respect to Series 1996-B, the Person
designated as the Controlling Party pursuant to Section 6.01 of the Spread
Account Agreement.
"CSFC" means Cargill Financial Services Corporation, a Delaware
corporation.
2
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<PAGE>
"Cumulative Default Rate" means with respect to any Distribution
Date, a fraction expressed as a percentage (i) the numerator of which is the sum
of (a) the aggregate of the Principal Balances (as of the related Record Date)
of all Receivables which became Defaulted Receivables, (b) the aggregate of the
Principal Balances (as of the related repurchase date) of Receivables that
became Purchased Receivables that were 30 days or more delinquent with respect
to all or any portion of a Scheduled Payment at the time of such repurchase and
which were purchased during the period from the Cut-off Date through the end of
the preceding Collection Period and (ii) the denominator of which is equal to
the Series 1996-B Cut-off Date Principal Balance.
"Cumulative Loss Rate" means, as of any Distribution Date, a
fraction, expressed as a percentage, the numerator of which is equal to (i) the
sum of (a) the aggregate of the Principal Balances as of the related Record Date
of all Receivables that became Liquidated Receivables, and (b) the amount of any
Cram Down Losses less (ii) the Liquidation Proceeds received by the Trust with
respect to Receivables which became Liquidated Receivables and which were
purchased during the period from the Cut-off Date through the end of the
preceding Collection Period, and the denominator of which is equal to the Series
1996-B Cut-off Date Principal Balance.
"Deemed Cured" means that, as of a Determination Date immediately
following the last calendar month of a Determination Period, no Trigger Event
has occurred and no Trigger Event has occurred at any time during the
immediately preceding Determination Period.
Determination Period" means the period from and including the first
day and to and including the last day of each of the following:
Time Period
Closing Date through November 30, 1996
December 1, 1996 through February 28, 1997
March 1, 1997 through May 31, 1997
June 1, 1997 through August 31, 1997
September 1, 1997 through November 30, 1997
December 1, 1997 through February 28, 1998
March 1, 1998 through May 31, 1998
June 1, 1998 through August 31, 1998
September 1, 1998 through November 30, 1998
December 1, 1998 through February 28, 1999
March 1, 1999 through May 31, 1999
June 1, 1999 through August 31, 1999
September 1, 1999 through November 30, 1999
December 1, 1999 through February 29, 2000
March 1, 2000 through May 31, 2000
3
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<PAGE>
Time Period
- -----------
June 1, 2000 through the Final Scheduled Distribution Date
"Requisite Amount" means, with respect to Series 1996-B as of any
Determination Date after giving effect to any Principal Distribution to be made
on the related Distribution Date, the greater of (a) the lesser of (i) 2% of the
initial Certificate Balance and (ii) the greater of (A) the Certificate Balance
and (B) $100,000 and (b) (i) if no Trigger Event shall exist as of such
Determination Date, and no Insurance Agreement Event of Default shall have
occurred as of such Determination Date, (A) 7% of the Certificate Balance, or
(B) in the absence of vendors single interest insurance with respect to Series
1996-B, 8.5% of the Certificate Balance; (ii) if a Trigger Event shall have
occurred as of such Determination Date (and until such Trigger Event is Deemed
Cured) and no Insurance Agreement Event of Default shall have occurred as of
such Determination Date, 13% of the Certificate Balance; or (iii) if an
Insurance Agreement Event of Default shall have occurred as of such
Determination Date, an unlimited amount.
"Security Interests" means, with respect to the Series 1996-B
Certificates, the security interests and Liens in the Series 1996-B Collateral
granted pursuant to this Series 1996-B Supplement.
"Series 1996-B" means the supplemental Series contemplated by the
Spread Account Agreement and established pursuant to the Series 1996-B Pooling
and Servicing Agreement.
"Series 1996-B Certificates" means the Certificates issued on the
date hereof pursuant to the Series 1996-B Pooling and Servicing Agreement (any
such Class of Certificates referred to herein as "Series 1996-B Class A
Certificates," "Series 1996-B Class B Certificates," or "Series 1996-B Class C
Certificates").
"Series 1996-B Collateral" has the meaning specified in Section
2.3(a) hereof.
"Series 1996-B Credit Enhancement Fee" means the amount
distributable on each Distribution Date pursuant to Section 5.5(b)(vi) of the
Series 1996-B Pooling and Servicing Agreement.
"Series 1996-B Initial Spread Account Deposit" means zero dollars
with respect to Series 1996-B.
"Series 1996-B Insurance Agreement" means the Insurance Agreement
related to the Series 1996-B Class A Certificates.
4
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<PAGE>
"Series 1996-B Insurer Secured Obligations" means, with respect to
Series 1996-B, all amounts and obligations which may at any time be owed to or
on behalf of Financial Security (or any agents, accountants or attorneys for
Financial Security) under the Series 1996-B Insurance Agreement or under any
Transaction Document, regardless of whether such amounts are owed now or in the
future, whether liquidated or unliquidated, contingent or non-contingent.
"Series 1996-B Policy" means the financial guaranty insurance
policy issued by Financial Security with respect to the Series 1996-B Class A
Certificates.
"Series 1996-B Pooling and Servicing Agreement" means the Pooling
and Servicing Agreement, dated as of June 1, 1996, among CFSC, as sponsor, the
Seller, ACC, as Servicer, and Norwest Bank Minnesota, National Association, as
Trustee (in such capacity referred to herein as "Trustee"), as Backup Servicer
(in such capacity, the "Backup Servicer") and as Collateral Agent (in such
capacity, the "Collateral Agent"), as such agreement may be supplemented,
amended or modified from time to time.
"Series 1996-B Secured Obligations" means the Series 1996-B Insurer
Secured Obligations and the Series 1996-B Trustee Secured Obligations.
"Series 1996-B Spread Account" means the Spread Account established
pursuant to Section 3.1(a) hereof.
"Series 1996-B Supplement" means this Series 1996-B Supplement
which constitutes a Series Supplement to the Spread Account Agreement
"Series 1996-B Trustee" means Norwest Bank Minnesota, National
Association, not in its individual capacity but solely as Trustee, or its
successor in interest, and any successor Trustee appointed as provided in the
Series 1996-B Pooling and Servicing Agreement.
"Series 1996-B Trustee Secured Obligations" means, with respect to
Series 1996-B, all amounts and obligations which ACC or the Seller may at any
time owe to or on behalf of the Trustee, the Trust or the Certificateholders
under the Series 1996-B Pooling and Servicing Agreement.
"Trigger Event" means, with respect to Series 1996-B, as of any
Determination Date with respect to Series 1996-B that any one of the following
events shall have occurred and shall not have terminated or be Deemed Cured:
(a) the Average Delinquency Ratio as of any Determination Date
shall be equal to or greater than 6.00%;
5
Page 461 of 606
<PAGE>
(b) the Cumulative Default Rate with respect to a Determination
Date shall be equal to or greater than the Cumulative Default Rate for the time
period, each as listed below, in which such Determination Date occurs:
Cumulative
Time Period Default Rate
- ----------- ------------
Closing Date through November 30, 1996 6.00%
December 1, 1996 through February 28, 1997 8.00%
March 1, 1997 through May 31, 1997 10.00%
June 1, 1997 through August 31, 1997 12.00%
September 1, 1997 through November 30, 1997 14.00%
December 1, 1997 through February 28, 1998 15.00%
March 1, 1998 through May 31, 1998 16.00%
June 1, 1998 through August 31, 1998 17.00%
September 1, 1998 through November 30, 1998 18.00%
December 1, 1998 through February 28, 1999 19.00%
March 1, 1999 through May 31, 1999 20.00%
June 1, 1999 through August 31, 1999 20.50%
September 1, 1999 through November 30, 1999 21.00%
December 1, 1999 through February 29, 2000 21.50%
March 1, 2000 through May 31, 2000 21.80%
June 1, 2000 through the Final Scheduled Distribution Date 22.00%
(c) the Cumulative Loss Rate with respect to a Distribution Date
shall be equal to or greater than the Cumulative Loss Rate for the time
period, each as listed below, in which such Distribution Date occurs:
Cumulative
Time Period Loss Rate
- ----------- ---------
Closing Date through November 30, 1996 3.00%
December 1, 1996 through February 28, 1997 4.00%
March 1, 1997 through May 31, 1997 5.00%
June 1, 1997 through August 31, 1997 6.00%
September 1, 1997 through November 30, 1997 7.00%
December 1, 1997 through February 28, 1998 7.50%
March 1, 1998 through May 31, 1998 8.00%
June 1, 1998 through August 31, 1998 8.50%
September 1, 1998 through November 30, 1998 9.00%
December 1, 1998 through February 28, 1999 9.50%
March 1, 1999 through May 31, 1999 10.00%
June 1, 1999 through August 31, 1999 10.25%
September 1, 1999 through November 30, 1999 10.50%
6
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<PAGE>
Cumulative
Time Period Loss Rate
- ----------- ---------
December 1, 1999 through February 29, 2000 10.75%
March 1, 2000 through May 31, 2000 10.90%
June 1, 2000 through the Final Scheduled Distribution Date 11.00%
Section 1.2 Rules of Interpretation. The terms "hereof," "herein,"
"hereto" or "hereunder," unless otherwise modified by more specific reference,
shall refer to this Series 1996-B Supplement. Unless otherwise indicated in
context, the terms "Article," "Section," or "Exhibit" shall refer to an Article
or Section of, or Exhibit to, this Series 1996-B Supplement. The definition of a
term shall include the singular, the plural, the past, the present, the future,
the active and the passive forms of such term. A term defined herein and used
herein preceded by a Series designation, shall mean such term as it relates to
the Series designated.
ARTICLE II
CREDIT ENHANCEMENT FEE; SERIES SUPPLEMENTS; THE COLLATERAL
Section 2.1 Series 1996-B Credit Enhancement Fee. The Series 1996-B
Pooling and Servicing Agreement provides for the payment to the Seller of the
Series 1996-B Credit Enhancement Fee, to be paid to the Seller by distribution
of such amounts to the Collateral Agent for deposit and distribution pursuant to
this Agreement. The Seller hereby agrees that payment of the Series 1996-B
Credit Enhancement Fee in the manner and subject to the conditions set forth
herein and in the Series 1996-B Pooling and Servicing Agreement is adequate
consideration and the exclusive consideration to be received by the Seller for
the obligations of the Seller pursuant hereto (including, without limitation,
the transfer by the Seller to the Collateral Agent of the Series 1996-B Initial
Spread Account Deposit) and pursuant to the Series 1996-B Insurance Agreement.
The Seller hereby agrees with the Trustee and with Financial Security that
payment of the Series 1996-B Credit Enhancement Fee to the Seller is expressly
conditioned on subordination of the Series 1996-B Credit Enhancement Fee to
payments on the senior Series 1996-B Certificates, payments of amounts due to
Financial Security and the other obligations of the Trust, in each case to the
extent provided in Section 5.5 of the Series 1996-B Pooling and Servicing
Agreement, as applicable, and Section 3.03 of the Spread Account Agreement, and
the Security Interests of the Secured Parties in the Series 1996-B Collateral
is intended to effect and enforce such subordination and to provide security for
the Series 1996-B Secured Obligations.
Section 2.2 Series Supplements. As provided in and subject to the
conditions specified in Section 2.02 of the Spread Account Agreement, the
7
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<PAGE>
parties hereto are entering into this Series 1996-B Supplement with respect to
the Series 1996-B Certificates.
Section 2.3 Grant of Security Interest by the Seller.
(a) In order to secure the performance of the Series 1996-B Secured
Obligations, the Series 1996-A Secured Obligations, the Series 1995-A Secured
Obligations and the Series 1995-B Secured Obligations, to the extent provided
herein and in the Spread Account Agreement, the Seller hereby pledges, assigns,
grants, transfers and conveys to the Collateral Agent, on behalf of and for the
benefit of the Secured Parties, a lien on and security interest in (which lien
and security interest is intended to be prior to all other Liens), all of its
right, title and interest in and to the following (all being collectively
referred to herein as the "Series 1996-B Collateral" and constituting Collateral
hereunder):
(i) the Series 1996-B Credit Enhancement Fee and all rights and
remedies that the Seller may have to enforce payment of the Series 1996-B
Credit Enhancement Fee whether under the Series 1996-B Pooling and
Servicing Agreement or otherwise;
(ii) the Series 1996-B Spread Account established pursuant to
Section 3.1 hereof, and each other account owned by the Seller and
maintained by the Collateral Agent (including, without limitation, the
Initial Spread Account Deposit and all additional monies, checks,
securities, investments and other documents from time to time held in or
evidencing any such accounts);
(iii) all of the Seller's right, title and interest in and to
investments made with proceeds of the property described in clauses (i)
and (ii) above, or made with amounts on deposit in the Series 1996-B
Spread Account;
(iv) all distributions, revenues, products, substitutions,
benefits, profits and proceeds, in whatever form, of any of the foregoing;
(v) the Series 1995-A Collateral;
(vi) the Series 1995-B Collateral; and
(vii) the Series 1996-A Collateral.
(b) In order to effectuate the provisions and purposes of this
Series 1996-B Supplement, including for the purpose of perfecting the security
interests granted hereunder, the Seller represents and warrants that it has,
prior to the execution of this Series 1996-B Supplement, executed and filed an
appropriate Uniform Commercial Code financing statement in California and
Minnesota sufficient to ensure that the Collateral
8
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<PAGE>
Agent, as agent for the Secured Parties, has a first priority perfected security
interest in all Series 1996-B Collateral which can be perfected by the filing of
a financing statement.
ARTICLE III
SPREAD ACCOUNT
Section 3.1 Establishment of Series 1996-B Spread Account;
Initial Spread Account Deposit.
(a) On or prior to the Closing Date relating to the Series 1996-B
Certificates, the Collateral Agent shall establish with respect to Series
1996-B, at its office or at another depository institution or trust company, an
Eligible Account, designated "Spread Account-Series 1996-B-Norwest Bank
Minnesota, National Association, as Collateral Agent for Financial Security and
another Secured Party" (the "Series 1996-B Spread Account").
(b) On the Closing Date with respect to Series 1996-B, the
Collateral Agent shall deposit the Initial Spread Account Deposit with respect
to Series 1996-B received from the Seller into the Series 1996-B Spread Account.
ARTICLE IV
AMENDMENT TO SECTION 1.01
Section 4.1 Amendment to Section 1.01. The definition of
"Delinquency Claim Date" in Section 1.01 is hereby amended and restated to read
as follows:
"Delinquency Claim Date" means, with respect to any Distribution
Date, the fourth Business Day immediately preceding such Distribution Date,
provided, however, that if the Servicer's certificate to be delivered pursuant
to Section 4.9 of the Series 1996-B Pooling and Servicing Agreement is not
delivered until the third Business Day immediately preceding such Distribution
Date, then the Deficiency Claim Date shall be the third Business Day immediately
preceding such Distribution Date.
9
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ARTICLE V
MISCELLANEOUS
Section 5.1 Further Assurances. Each party hereto shall take such
action and deliver such instruments to any other party hereto, in addition to
the actions and instruments specifically provided for herein, as may be
reasonably requested or required to effectuate the purpose or provisions of this
Series 1996-B Supplement or to confirm or perfect any transaction described or
contemplated herein.
Section 5.2 Governing Law. This Series 1996-B Supplement shall be
governed by and construed, and the obligations, rights and remedies of the
parties hereunder shall be determined, in accordance with the laws of the State
of New York.
Section 5.3 Counterparts. This Series 1996-B Supplement may be
executed in two or more counterparts by the parties hereto, and each such
counterpart shall be considered an original and all such counterparts shall
constitute one and the same instrument.
Section 5.4 Headings. The headings of sections and paragraphs and
the Table of Contents contained in this Series 1996-B Supplement are provided
for convenience only. They form no part of this Series 1996-B Supplement and
shall not affect its construction or interpretation.
10
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Series
1996-B Supplement as of the date set forth on the first page hereof.
ACC RECEIVABLES CORP.
By_____________________________
Name: Gary S. Burdick
Title: President
FINANCIAL SECURITY ASSURANCE INC.
By_____________________________
Name: Claire M. Robinson
Title: Managing Director
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By_____________________________
Name: Michael G. Luger
Title: Corporate Trust Officer
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Collateral Agent
By______________________________
Name: Michael G. Luger
Title: Corporate Trust Officer
11
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<PAGE>
(Signature page for Series 1996-B Supplement)
12
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<PAGE>
EXHIBIT 10.55
ACKNOWLEDGEMENT AND ASSIGNMENT
------------------------------
This Acknowledgement and Assignment is made as of the 31st day
of May, 1996 (this "Assignment"), by and between ACC CONSUMER FINANCE
CORPORATION, a Delaware corporation (the "Assignor"), and OFL-A
RECEIVABLES CORP., a Delaware corporation (the "Assignee").
WHEREAS, the parties hereto desire to acknowledge certain
circumstances relating to the ownership of the Contracts; and
WHEREAS, the Assignor desires to transfer to the Assignee and
the Assignee desires to purchase from the Assignor all of the Assignor's
right, title and interest in and to the Contracts.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter contained, and for other good and valuable
consideration, the receipt of which is acknowledged, the Assignor and the
Assignee intending to be legally bound, hereby agree as follows:
Section 1. Acknowledgement.
The parties hereto acknowledge as follows:
(a) Due to administrative or clerical error, the Assignor
is listed as the lienholder on the certificates of title for the vehicles
financed pursuant to the Contracts.
(b) The Assignor holds mere record title for the Assignee
as the beneficial owner of the liens on such vehicles and will continue
to hold such record title as the nominee, agent and bailee for and on
behalf of the Assignee.
(c) Other than pursuant to this Assignment, the Assignor
has not granted or assigned any lien with respect to such vehicles.
Section 2. Assignment.
The Assignor hereby sells, transfers, assigns and otherwise
conveys to the Assignee without recourse all right, title and interest of
the Assignor in and to the Contracts.
For purposes of this Assignment, "Contracts" means (i) those
contracts listed on Schedule I hereto where the Assignor is listed as the
lienholder on the certificates of title for the vehicles financed
pursuant to such Contracts, (ii) the Assignor's interest in the security
interests in the related vehicles granted by the obligors pursuant to
such contracts listed on Schedule I hereto where the Assignor is listed
as the lienholder on the certificates of title for the vehicles financed
pursuant to such Contracts, (iii) any related insurance policies and (iv)
any other related documents.
1
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<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Assignment
to be duly executed as of the date first written above.
ACC CONSUMER FINANCE
CORPORATION,
as Assignor
By: /s/ Gary S. Burdick
-----------------------------
Name: Gary S. Burdick
Title: President
2
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<PAGE>
EXHIBIT 10.56
PRESIDENTIAL CIRCLE
STANDARD OFFICE LEASE
Page 471 of 606
<PAGE>
INDEX TO
PRESIDENTIAL CIRCLE
STANDARD OFFICE LEASE
LEASE Page No.
--------
BASIC LEASE INFORMATION RIDER.............................................I
1. PREMISES; COMMON AREAS.............................................1
2. LEASE TERM; LEASE DATE.............................................1
3. RENT...............................................................1
4. SECURITY DEPOSIT; SECURITY INTEREST................................5
5. USE................................................................7
6. ACCEPTANCE OF PREMISES; LANDLORD'S WORK............................8
7. PARKING............................................................9
8. BUILDING SERVICES.................................................10
9. SECURITY..........................................................12
10. REPAIRS, MAINTENANCE AND UTILITIES................................13
11. TENANT'S ALTERATIONS..............................................14
12. LANDLORD'S ADDITIONS AND ALTERATIONS..............................17
13. ASSIGNMENT AND SUBLETTING.........................................17
14. TENANT'S INSURANCE COVERAGE.......................................24
15. LANDLORD'S INSURANCE COVERAGE.....................................25
16. WAIVER OF RIGHT OF RECOVERY.......................................25
17. DAMAGE OR DESTRUCTION BY CASUALTY.................................26
18. CONDEMNATION AND EMINENT DOMAIN...................................27
19. LIMITATION OF LANDLORD'S LIABILITY; INDEMNIFICATION...............28
20. RELOCATION OF TENANT..............................................29
21. COMPLIANCE WITH LAWS AND PROCEDURES...............................30
22. RIGHT OF ENTRY....................................................30
23. DEFAULT...........................................................30
Page 472 of 606
<PAGE>
24. LANDLORD'S REMEDIES FOR TENANT'S DEFAULT..........................32
25. LANDLORD'S RIGHT TO PERFORM FOR TENANT'S ACCOUNT..................33
26. LIENS.............................................................33
27. NOTICES...........................................................33
28. MORTGAGE; ESTOPPEL CERTIFICATE; SUBORDINATION.....................34
29. MODIFICATIONS.....................................................36
30. TRANSFER BY LANDLORD..............................................36
31. SURRENDER OF PREMISES; HOLDING OVER...............................36
32. NO WAIVER;, CUMULATIVE REMEDIES...................................37
33. WAIVER............................................................38
34. CONSENTS AND APPROVALS............................................38
35. RULES AND REGULATIONS.............................................39
36. SUCCESSORS AND ASSIGNS............................................39
37. QUIET ENJOYMENT...................................................39
38. ENTIRE AGREEMENT..................................................39
39. HAZARDOUS MATERIALS...............................................39
40. BANKRUPTCY PROVISIONS.............................................41
41. FAILURE TO GIVE POSSESSION........................................43
42. DELIVERY OF GUARANTY..............................................43
43. MISCELLANEOUS.....................................................43
EXHIBIT(S)
Exhibit "A" Floor Plan
Exhibit "B" Work Letter
Exhibit "C" Rules and Regulations
GUARANTY
N/A
----------------------------
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<PAGE>
Basic Lease Information Rider
Presidential Circle
Standard Office Lease
Preamble Date of Lease: June 11, 1996
Preamble Landlord: COLONY PRESIDENTIAL PARTNERS, L.P.
Preamble Tenant: ACC Consumer Finance Corporation, a Delaware
corporation
Section 1 Premises: Suite 445-S, as shown on Exhibit "A", of
Presidential Circle, 4000 Hollywood Boulevard,
Hollywood, Florida 33021 (Presidential Circle together
with the parking facilities included therein are
collectively referred to as the "Building").
Section 1 Net Rentable Area of Premises 1,662 square feet,
(based on a usable square footage of approximately
1,445 square feet and a common area factor of 15%):
which Net Rentable Area (and usable square feet and
common area factor) is stipulated and agreed to by
parties.
Section 2 Commencement Date: As defined in the Work Letter
Agreement attached to this Lease as Exhibit "B".
Section 2 Expiration Date: Five (5) years after Commencement
Date.
Section 2 Lease Term: Five (5) years.
Section 3 Base Rent in the First Lease Year shall be Twenty Four
Thousand Nine Hundred Thirty and 00/100 Dollars
($24,930.00) per annum, or Fifteen and 00/100 Dollars
($15.00) per square foot of Net Rentable Area of the
Premises, payable monthly in advance, without
deduction or offset, on the first day of each calendar
month together with applicable sales tax and
applicable local taxes, in equal installments of Two
Thousand Seventy Seven and 50/100 Dollars ($2,077.50)
each together with applicable sales tax and applicable
local taxes, beginning on the Commencement Date.
Notwithstanding the foregoing, the first payment of
Base Rent due hereunder shall be paid by Tenant on the
date on which this Lease has been signed by Tenant.
Each year commencing on the Commencement Date (or
commencing on the first day of the first month
following the Commencement Date if the Commencement
Date is other than the first day of the month, in
Page I
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<PAGE>
which event the First Lease Year shall include the
period between the Commencement Date and the first
month thereafter) or anniversary thereof is hereafter
referred to as a "Lease Year."
Base Rent in the Second Lease Year shall be Twenty
Five Thousand Nine Hundred Twenty Seven and 20/100
Dollars ($25,927.20) per annum, or Fifteen and 60/100
Dollars ($15.60) per square foot of Net Rentable Area
of the Premises, payable monthly in advance, without
deduction or offset, on the first day of each calendar
month together with applicable sales tax and
applicable local taxes, in equal installments of Two
Thousand One Hundred Sixty and 60/100 Dollars
($2,160.60) each together with applicable sales tax
and applicable local taxes.
Base Rent in the Third Lease Year shall be Twenty Six
Thousand Nine Hundred Seventy Four and 26/100 Dollars
($26,974.26) per annum, or Sixteen and 23/100 Dollars
($16.23) per square foot of Net Rentable Area of the
Premises, payable monthly in advance, without
deduction or offset, on the first day of each calendar
month together with applicable sales tax and
applicable local taxes, in equal installments of Two
Thousand Two Hundred Forty Seven and 86/100 Dollars
($2,247.86) each together with applicable sales tax
and applicable local taxes.
Base Rent in the Fourth Lease Year shall be Twenty
Eight Thousand Fifty Four and 56/100 Dollars
($28,054.56) per annum, or Sixteen and 88/100 Dollars
($16.88) per square foot of Net Rentable Area of the
Premises, payable monthly in advance, without
deduction or offset, on the first day of each calendar
month together with applicable sales tax and
applicable local taxes, in equal installments of Two
Thousand Three Hundred Thirty Seven and 88/100 Dollars
($2,337.88) each together with applicable sales tax
and applicable local taxes.
Base Rent in the Fifth Lease Year shall be Twenty Nine
Thousand One Hundred Eighty Four and 72/100 Dollars
($29,184.72) per annum, or Seventeen and 56/1 00
Dollars ($17.56) per square foot Net Rentable Area of
the Premises, payable monthly in advance, without
deduction or offset, on the first day of each calendar
month together with applicable sales tax and
applicable local taxes, in equal installments of Two
Thousand Four Hundred Thirty Two and 06/100 Dollars
($2,432.06) each together with applicable sales tax
and applicable local taxes.
PRESIDENTIAL CIRCLE STANDARD OFFICE LEASE
Page II
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<PAGE>
Section 3 Tenant's Share: .585 %. Landlord and Tenant
acknowledge that Tenant's Share has been obtained by
taking the Net Rentable Area of the Premises and
dividing such number by the Net Rentable Area of the
Building (hereinafter defined), and multiplying such
quotient by 100. In the event Tenant's Share is
changed during a calendar year by reason of a change
in the Net Rentable Area of the Premises, Tenant's
Share shall thereafter mean the result obtained by
dividing the new Net Rentable Area of the Premises by
the Net Rentable Area of the Building and multiplying
such quotient by 100. The "Net Rentable Area of the
Building" is 284,000 square feet, which is stipulated
and agreed to by the parties.
Section 3 With respect to the current calendar year, estimated
Overhead Rent shall be One Thousand One Hundred Thirty
and 16/100 Dollars ($1,130.16) per month (based on
$8.16 per rentable square foot) payable monthly in
advance, without deduction or offset, on the first day
of each calendar month, each such monthly payment
together with applicable sales tax and applicable
local taxes, beginning on the Commencement Date.
Notwithstanding the foregoing, the first payment of
Overhead Rent due hereunder shall be paid by Tenant on
the date on which this Lease has been executed by
Tenant.
Section 4 Security Deposit: $3,400.12.
Section 5 Use of Premises: Financing Company
Tenant's Address for Notices Prior to Commencement
ACC Consumer Finance Company
12750 High Bluff Drive
Suite 320
San Diego, CA 92130
Tenant's Address for Notices After Commencement Date:
The Premises 4000 Hollywood Boulevard
Suite #445-S
Hollywood, FL 33021
Landlord's Address for Notices:
Colony Presidential Partners, L.P.
c/o Colony Advisors
1999 Avenue of the Stars
Suite 1200
Los Angeles, California 90067
PRESIDENTIAL CIRCLE STANDARD OFFICE LEASE
Page III
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<PAGE>
and to:
Continental Real Estate Companies
2665 South Bayshore Drive,
Suite 1002
Miami, Florida 33133
Attention: Carol Greenberg Brooks
Section 7 Number of Garage Parking Spaces: Up to Two (2)
Initial monthly rate per Parking Space: $40.00
Section 15 Amount of General Comprehensive Liability Insurance:
$1,000,000.00
Section 41 Tenant's Real Estate Broker: None
Landlord's Real Estate Broker: Continental Real Estate
Companies - Commercial Properties Corp.
Section 42 Guarantor(s): N/A
Work Letter:
Paragraph 1.3 Landlord's Contribution: $16,620.00
Paragraph 1.7 Tenant's Construction Agent: R. Frank Mercer
Certain of the information relating to the Lease, including many of the
principal economic terms, are set forth in the foregoing Basic Lease
Information Rider (the "BLI Rider"). The BLI Rider and the Lease are, by
this reference, hereby incorporated into one another. In the event of any
direct conflict between the terms of the BLI Rider and the terms of the
Lease, the BLI Rider shall control. Where the Lease simply supplements the
BLI Rider and does not conflict directly therewith, the Lease shall
control.
IN WITNESS WHEREOF, Landlord and Tenant have signed this BLI Rider as
of this 11th day of June, 1996.
PRESIDENTIAL CIRCLE STANDARD OFFICE LEASE
Page IV
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<PAGE>
WITNESSES: LANDLORD:
/s/ J. Mallory COLONY PRESIDENTIAL PARTNERS, L.P.
- ---------------------------
By: Presidential Genpar, Inc.
/s/ [illegible]
- ---------------------------
(As to Landlord) By: /s/ Kevin C. McTavish
----------------------------
Kevin C. McTavish
Vice President
WITNESSES: "TENANT"
/s/ Pamela S. Thomas ACC CONSUMER FINANCE CORPORATION
- ---------------------------
By: /s/ Roy Frank Mercer S.V.P.
-------------------------------
/s/ Katheryn L. Graver
- ---------------------------
(As to Tenant)
PRESIDENTIAL CIRCLE STANDARD OFFICE LEASE
Page V
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<PAGE>
PRESIDENTIAL CIRCLE
STANDARD OFFICE LEASE
THIS LEASE ("Lease") is made as of the 11th of June, 1996, by and
between COLONY PRESIDENTIAL PARTNERS, LP, a Delaware limited partnership
("Landlord"), and ACC Consumer Finance Corporation ("Tenant").
W I T N E S S E T H:
1. PREMISES; COMMON AREAS
Landlord leases to Tenant and Tenant leases from Landlord the
Premises described in the Basic Lease Information Rider (the "BLI Rider")
attached to the front of this Lease and incorporated into this Lease by
this reference, and as more particularly shown on the floor plan attached
hereto as Exhibit "A" and by this reference incorporated herein
("Premises"). The parties hereby stipulate and agree that the Premises
contains the number of Net Rentable Area set forth in the BLI Rider,
notwithstanding any variation, if any, between such number and the actual
net rentable area of the Premises. In addition to the Premises, Tenant has
the right to use, in common with others, the lobby, public entrances,
public stairways, public areas and public elevators of the Building and the
parking areas of the Building, subject to the limitations set forth in this
Lease (the "Common Areas"). The Common Areas serving the Building, will
at all times be subject to Landlord's exclusive control and management in
accordance with the terms and provisions of this Lease.
2. LEASE TERM; LEASE DATE
A. GENERAL. The lease term ("Lease Term") is for the period of time
set forth in the BLI Rider, commencing on the Lease commencement date set
forth in the BLI Rider ("Commencement Date") and ending on the Lease
expiration date set forth in the BLI Rider ("Expiration Date"). Tenant's
obligation to pay Rent (as hereafter defined) will commence on the
Commencement Date.
3. RENT
A. BASE RENT. During the Lease Term, Tenant will pay as the base
rent for the Premises ("Base Rent") the amounts set forth in the BLI Rider,
with same being payable without demand, setoff or deduction, in advance,
on or before the first day of each month, in equal monthly installments of
the amounts set forth in the BLI Rider plus applicable sales and other such
taxes as are now or later enacted.
B. OVERHEAD RENT. Beginning on the Commencement Date, Tenant shall
pay Tenant's Share, as defined in the BLI Rider, of (i) the total amount
of the annual Operating Expenses (as hereafter defined) and (ii) the total
amount of Taxes (as hereafter defined). As used herein, "Overhead Rent"
means the total of Tenant's Share of Operating Expenses and Taxes.
PRESIDENTIAL CIRCLE STANDARD OFFICE LEASE
Page 1
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<PAGE>
Landlord shall notify Tenant within sixty (60) days of the date hereof, and
within sixty (60) days after the end of each calendar year hereafter
ensuing or earlier during the Lease Term, of the amount which Landlord
reasonably estimates will be the amount of Overhead Rent for the current
calendar year. One-twelfth (1/12) of the estimated Overhead Rent shall be
payable monthly, in advance, along with the monthly payment of the Base
Rent, during the balance of said calendar year, commencing on the first day
of the first month following Tenant's receipt of such notification. Until
Tenant's receipt of such notification, Tenant shall continue paying the
monthly installments of Overhead Rent paid by Tenant during the preceding
calendar year. Any deficiency in the monthly installment paid by Tenant
pending notification of increased Overhead Rent shall be paid to Landlord
on the first day of the first month following Tenant's receipt of such
notification. Any overage in the monthly installment paid by Tenant to
Landlord pending notification shall be credited against the monthly
installment of Overhead Rent to be paid by Tenant on the first day of the
first month following Tenant's receipt of such notification. On or before
March 31 following the end of each calendar year during the Lease Term,
Landlord shall use diligent efforts to provide Tenant with a reconciliation
statement showing the amount of the actual components of Overhead Rent for
the previous calendar year. If the reconciliation statement reflects an
underpayment in either component of Overhead Rent, Landlord shall also
deliver to Tenant an invoice which Tenant shall pay within thirty (30) days
following receipt of such invoice or with the due date of its next monthly
payment of Rent, whichever shall first occur. If the reconciliation
statement reflects an overpayment in either component of Overhead Rent,
Tenant shall be entitled to a credit against the next payment(s) of Rent
in an amount equal to the overpayment. In no event shall the Base Rent set
forth in subsection 3(A) ever be reduced by operation of this subsection
3(B). Landlord's failure to render a reconciliation statement with respect
to any Overhead Rent shall not prejudice Landlord's right to thereafter
render a reconciliation statement with respect thereto. For a period of
thirty (30) days after receipt of the reconciliation statement, Tenant
shall have the right, upon three business days' advance notice, to visit
Landlord's office in the Building during Business Hours, as hereafter
defined, to inspect its books and records concerning the Overhead Rent.
When calculating annual Taxes, such calculation shall, with respect to ad
valorem taxes, be calculated with reference to the gross amount set forth
in the official tax bill issued by the appropriate taxing authorities,
irrespective of the amount actually paid by Landlord for such calendar year
in light of a protest or dispute over the amount of such Taxes. In the
event the Taxes for any calendar year are in fact contested by Landlord,
however, ultimately the amount payable for that calendar year shall be the
amount found to be payable in a final determination, whether such final
determination is in the form of a pronouncement from the appropriate
tribunal or a settlement. The delivery of the aforedescribed projection
statement within sixty (60) days of the date hereof and after January I of
each year thereafter and/or the reconciliation after March 31 shall not be
deemed a waiver of any of Landlord's rights to collect monies and/or a
waiver of any of the duties and obligations of Tenant as described in this
section or as provided elsewhere in the Lease. As used in this Section 3,
the following terms shall have the following meanings:
PRESIDENTIAL CIRCLE STANDARD OFFICE LEASE
Page 2
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<PAGE>
(1) The term "Operating Expenses" shall mean (i) any and all
reasonable costs and expenses (whether directly or through independent
contractors) of ownership, management, operation, repair and maintenance
of the Building, including, without limitation, wages, salaries,
professionals' fees, taxes, insurance, benefits and other payroll burdens
of all employees, Building management fee (or if no managing agent is
employed by Landlord, a sum in lieu thereof which is not in excess of the
then prevailing rates for management fees in the City of Hollywood for
first-class office building similar to the Building), janitorial,
maintenance, guard and other services, building management office rent or
rental value, power, fuel, water, waste disposal, landscaping care,
lighting, garbage removal, window cleaning, system maintenance, parking
area care, and any and all other utilities, materials, supplies,
maintenance, repairs, insurance applicable to the Building and Landlord's
personal property and depreciation on personal property, and (ii) the cost
(amortized over such reasonable period as Landlord shall determine together
with interest at the rate of twelve percent (12%) per annum on the
unamortized balance) of any capital improvements made to the Building by
Landlord after the date of this Lease that reduce other Operating Expenses
or made to the Building by Landlord after the date of this Lease that are
required under any governmental law or regulation or in compliance with any
Mortgage (as hereafter defined) or insurance policy; provided, however,
that Operating Expenses shall not include real property taxes, depreciation
(for accounting purposes) on the Building other than depreciation on
carpeting and wallcovering in public corridors and Common Areas (it being
understood and agreed that costs and expenses relating to physical
depreciation of the Building and/or Common Areas which requires maintenance
or repair are includible among Operating Expenses), costs of tenants'
improvements, real estate broker's commissions, interest and capital items
other than those referred to in subsection (ii) above. Landlord shall
maintain accounting books and records in accordance with sound accounting
principles. Landlord hereby agrees to deduct each calendar year from the
amount of the Operating Expenses the total amount of any and all sums,
amounts or charges paid by Tenant or other tenants of the Building directly
to landlord or its agent for specific tenant requested services or specific
utility charges, if applicable.
(2) The term "Taxes" shall mean the gross amount of all
impositions, taxes, assessments (special or otherwise), water and sewer
assessments and other governmental liens or charges of any and every kind,
nature and sort whatsoever, ordinary and extraordinary, foreseen and
unforeseen, and substitutes therefor, including all taxes whatsoever
(except for taxes for the following categories which shall be excluded from
the definition of Taxes: any inheritance, estate, succession, transfer or
gift taxes imposed upon Landlord or any income taxes specifically payable
by Landlord as a separate tax-paying entity without regard to Landlord's
income source as arising from or out of the Building and/or the land on
which it is located) attributable in any manner to the Building, the land
on which the Building is located or the rents (however the term may be
defined) receivable therefrom, or any part thereof, or any use thereon, or
any facility located therein or used in conjunction therewith or any charge
or other amount required to be paid to any governmental authority, whether
PRESIDENTIAL CIRCLE STANDARD OFFICE LEASE
Page 3
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<PAGE>
or not any of the foregoing shall be designated "real estate tax", "sales
tax", "rental tax", "excise tax", "business tax", or designated in any
other manner.
Tenant hereby agrees that the Overhead Rent from time to time computed
by Landlord shall be final and binding for all purposes of this Lease
unless, within thirty (30) days after Landlord provides Tenant with written
notice of the amount thereof, Tenant provides Landlord with written notice
(i) disputing the mathematical accuracy of such amount (the "Disputed
Amount"), (ii) designating an attorney or accountant, reasonably acceptable
to landlord, and appointed by Tenant, at its sole cost and expense, to
review the mathematical accuracy of the Disputed Amount with Landlord
and/or its designated representatives, and (iii) agreeing to pay all of
Landlord's costs and expenses in connection with such review, including
attorneys' fees and accountants' fees, unless as a result thereof the
Disputed Amount is demonstrated to reflect a mathematical error in excess
of five percent (5%) of the amount actually due from Tenant. Landlord
hereby agrees, in the event it receives such notice from Tenant, to
cooperate in promptly completing such review and promptly refunding any
portion of the Disputed Amount which exceeds the amount actually due from
Tenant. Pending the determination of the Disputed Amount, Tenant shall pay
the Overhead Rent in accordance with the statement prepared by Landlord,
without prejudice to Tenant's position.
Notwithstanding anything contained in this Lease to the contrary, with
respect to the current calendar year, it is hereby acknowledged that
Landlord has notified Tenant, as required in this subsection 3(B) hereof,
of the amount of the estimated Overhead Rent as set forth in the BLI Rider.
C. LATE CHARGE. Tenant covenants and agrees to pay a late charge
in the amount of four percent (4%) (or the maximum rate permitted by law,
whichever is less) for any payment of Rent not received by Landlord within
ten (10) days after same is due; provided, however, if any payment of Rent
is not received by Landlord on or before the date when same is due more
than two times during any calendar year, then the foregoing late charge
shall thereafter be applicable to any payment of Rent not received by
landlord on or before the date when same is due. Tenant shall also pay
Landlord interest at a rate equal to the lesser of (i) eighteen percent
(18%) per annum or (ii) the maximum annual rate permitted by law, accruing
on any Rent(s) outstanding. Tenant shall pay Landlord any such late
charge(s) or interest within five (5) days after landlord notifies Tenant
of same. Nothing contained herein shall be construed to be a limitation
or substitution for any other rights and remedies of Landlord hereunder or
to grant Tenant any extension of time within which to make any payment of
Rent under this Lease.
D. DEFINITION OF RENT. The term "Rent" shall refer collectively to
Base Rent, Overhead Rent and Additional Rent. The term "Additional Rent"
is sometimes used herein to refer to any and all other sums payable by
Tenant hereunder, including, but not limited to, parking charges and sums
payable on account of default by Tenant. All Rent shall be paid by Tenant
without offset, demand or other credit, and shall be payable only in lawful
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money of the United States of America which shall be legal tender in
payment of all debts and dues, public and private, at the time of payment.
All sums payable by Tenant hereunder by check shall be issued against a
financial institution located in the United States of America. The Rent
shall be paid by Tenant at the Building management office located in the
Building or elsewhere as designated by Landlord in writing to Tenant. Any
Rent payable for a portion of a month shall be prorated based upon the
number of days in the applicable calendar month. If a check issued by
Tenant for payment of Rent is returned due to insufficient funds, Tenant
shall be charged $50 which shall constitute Additional Rent hereunder and
payable within five days of rendition of a bill therefor.
E. RENT TAXES. In addition to Base Rent and Overhead Rent, Tenant
shall and hereby agrees to pay to Landlord each month a sum equal to any
sales tax, tax on rentals and any other similar charges now existing or
hereafter imposed, based upon the privilege of leasing the space leased
hereunder or based upon the amount of rent collected therefor, which shall
constitute Additional Rent under this Lease.
F. COMMENCEMENT OTHER THAN FIRST DAY. If Tenant's possession of the
Premises commences on any day other than the first day of the month, Tenant
shall occupy the Premises under the terms of this Lease and the pro rata
portion of the Rent shall be paid by Tenant; provided, however, that in
such an event the Commencement Date, for the purposes of this Lease, shall
be deemed to be the first day of the month immediately following the month
in which possession is given.
G. OVERHEAD RENT AFTER EXPIRATION DATE. Overhead Rent for the final
months of this Lease is due and payable even though it may not be
calculated until subsequent to the Expiration Date of the Lease. Tenant
expressly agrees that Landlord, at Landlord's sole and reasonable
discretion, may apply the Security Deposit as defined in the BLI Rider, in
full or partial satisfaction of any Overhead Rent due for the final months
of this Lease. If said Security Deposit is greater than the amount of any
such Overhead Rent and there are no other sums or amounts owed Landlord by
Tenant by reason of any other terms, provisions, covenants or conditions
of this Lease, then Landlord shall refund the balance of said Security
Deposit to Tenant as provided herein. Nothing herein contained shall be
construed to relieve Tenant, or imply that Tenant is relieved, of the
liability for or the obligation to pay any Overhead Rent due for the final
months of this Lease by reason of the provisions of this paragraph, nor
shall Landlord be required first to apply said Security Deposit to such
Overhead Rent if there are any other sums or amounts owed Landlord by
Tenant by reason of any other terms, provisions, covenants or conditions
of this Lease.
4. SECURITY DEPOSIT; SECURITY INTEREST
A. SECURITY DEPOSIT. Tenant concurrently with the execution
of this Lease, has deposited with Landlord the Security Deposit set forth
in the BLI Rider. Except as provided in the BLI Rider, this sum will be
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retained by Landlord as security for the payment by Tenant of the Rent and
for the faithful performance by Tenant of all the other terms and
conditions of this Lease. In the event Tenant fails to faithfully perform
the terms and conditions of this Lease, Landlord, at Landlord's option, may
at any time apply the Security Deposit or any part thereof toward the
payment of the Rent and/or toward the performance of Tenant's obligations
under this Lease; in such event, within five (5) days after notice, Tenant
will deposit with Landlord cash sufficient to restore the Security Deposit
to its original amount. The Security Deposit is not liquidated damages.
Landlord may (but is not obligated to) exhaust any or all rights and
remedies against Tenant before resorting to the Security Deposit. Landlord
will not be required to pay Tenant any interest on the Security Deposit nor
hold same in a separate account. If Landlord sells or otherwise conveys
the Building, Landlord will deliver the Security Deposit or the unapplied
portion thereof to the new owner. Tenant agrees that if Landlord turns
over the Security Deposit or the unapplied portion thereof to the new owner
Tenant will look to the new owner only and not to Landlord for its return
upon expiration of the Lease Term. If Tenant assigns this Lease with the
consent of Landlord, the Security Deposit will remain with Landlord for the
benefit of the new tenant and will be returned to such tenant upon the same
conditions as would have entitled Tenant to its return. Tenant shall not
be permitted to assign its rights to or otherwise encumber the Security
Deposit.
B. SECURITY INTEREST. In addition to any statutory lien
granted to landlords under the laws of Florida, Landlord shall have, at all
times, and Tenant hereby grants and agrees to grant Landlord a valid
security interest to secure payment of Rent and all other sums payable
under this Lease as Rent becoming due hereunder from Tenant, and to secure
performance of Tenant's obligations under this Lease and payment of any
damages or loss which Landlord may suffer by reason of the breach by Tenant
of any covenant, agreement or condition contained herein, upon all goods,
equipment, fixtures, furniture, improvements, inventory, chattel, and other
personal property of Tenant presently, or which may hereafter be situated
within the Premises whether now owned or hereafter acquired, and all
proceeds therefrom, including, without limitation, insurance proceeds
(collectively "Personal Property), and such Personal Property shall not,
during any period a default exists, be removed from the Premises without
prior written consent of Landlord, which consent may be withheld in
Landlord's sole discretion, until all arrearages in Rent, as well as any
and all other sums of money then due to Landlord hereunder, shall first
have been paid and discharged and all the covenants, agreements and
conditions hereof have been fully complied with and performed by Tenant.
In the event of a default by Tenant hereunder, Landlord may, in addition
to any other remedies provided elsewhere herein or allowed by law, all of
which are cumulative, enter upon the Premises and take possession of any
and all Personal Property of Tenant situated within the Premises, without
liability for trespass or conversion, and sell the same at public or
private sale, with or without having such property at the sale, after
giving Tenant reasonable notice of the time and place of any public sale
or of the time after which any private sale is to be made, at which sale
the Landlord or its assigns may purchase such Personal Property unless
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otherwise prohibited by law. Unless otherwise provided by law, and without
intending to exclude any other manner of giving Tenant reasonable notice,
the requirement of reasonable notice shall be met if such notice is given
in the manner prescribed in this Lease at least five (5) days before the
time of sale. The proceeds from any such disposition, less any and all
expenses connected with the taking of possession, holding and selling of
the Personal Property (including, without limitation, reasonable attorney's
fees and legal expenses) shall be applied as a credit against the
indebtedness secured by the security interest granted in this Section. Any
surplus shall be paid to Tenant or as otherwise required by law, and Tenant
shall pay any deficiencies forthwith. Notwithstanding anything contained
herein to the contrary, Landlord's security interest outlined herein, shall
be subordinate to any financing leases for Tenant's furniture, machinery
and equipment, located in the Premises.
5. USE
A. GENERAL. Tenant will use and occupy the Premises solely for
the operation of the business set forth in the BLI Rider and for no other
use whatsoever. Tenant acknowledges that its type of business, as above
specified, is a material consideration for Landlord's execution of this
Lease. Tenant will not commit waste upon the Premises nor suffer or permit
the Premises or any part of them to be used in any manner, or suffer or
permit anything to be done in or brought into or kept in the Premises or
the Building, which would: (i) violate any law or requirement of public
authorities, (ii) cause injury to the Building or any part thereof, (iii)
annoy or offend other tenants or their patrons or interfere with the normal
operations of HVAC, plumbing or other mechanical or electrical systems of
the Building or the elevators installed therein, (iv) constitute a public
or private nuisance, or (v) alter the appearance of the exterior of the
Building or of any portion of the interior other than the Premises pursuant
to the provisions of this Lease. Tenant agrees and acknowledges that
Tenant shall be responsible for obtaining any special amendments to the
certificate of occupancy for the Premises and/or the Building and any other
governmental permits, authorizations or consents required solely on account
of Tenant's use of the Premises.
B. PROHIBITED USES. Notwithstanding anything to the contrary
in this Lease or the BLI Rider, including but not limited to, the "Use of
Premises" Section of the BLI Rider, Tenant hereby represents, warrants and
agrees that Tenant's business is not and shall not be, and that Tenant
shall not use the Premises or any part thereof, or permit the Premises or
any part thereof to be used, (i) for the business of photographic,
multilith or multigraph reproductions or offset printing; (ii) for a retail
banking, trust company, depository, guarantee or safe deposit business open
to the general public, (iii) as a savings bank, a savings and loan company
open to the general public, (iv) for the sale to the general public of
travelers checks, money orders, drafts, foreign exchange or letters of
credit or for the receipt of money for transmission, (v) as a stock
broker's or dealer's office or for the underwriting or sale of securities
open to the general public, (vi) as a restaurant or bar or for the sale of
confectionery, soda, beverages, sandwiches, ice cream or baked goods or for
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the preparation, dispensing or consumption of food or beverages in any
manner whatsoever, (vii) as a news or cigar stand, (viii) as an employment
agency, labor union office, physician's or dentist's office, dance or music
studio, school (except for the training of employees of Tenant), (ix) as
a barber shop or beauty salon, or (x) for the business of (a) operating a
shared office facility, that is, a business which subleases space and/or
offers centralized services to subtenants or customers on a shared basis,
such as secretarial, receptionist, telephone, etc., or (b) for a fee to
persons inside or outside of the Building, providing as a service word
processing, secretarial, video conferencing, conference services, telephone
answering, receptionist or mail receipt services. Nothing in this Section
shall preclude Tenant from using any part of the Premises for photographic,
multilith or multigraph reproductions to the extent that such uses are
incidental to Tenant's own business or activities.
6. ACCEPTANCE OF PREMISES; LANDLORD'S WORK
Improvements, if any, to be made to the Premises by Tenant
shall be made in accordance with the Work Letter. Improvements, if any,
to be made to the Premises by Landlord are specifically set forth in the
Work Letter and there are no others. All leasehold improvements (as
distinguished from trade fixtures and apparatus) installed in the Premises
at any time, whether by or on behalf of Tenant or by or on behalf of
Landlord, shall not be removed from the Premises at any time, unless such
removal is consented to in writing, in advance, by Landlord; and at the
expiration of this Lease (either on the Termination Date or upon such
earlier termination as provided in this Lease), all such leasehold
improvements shall be deemed to be part of the Premises, shall not be
removed by Tenant when it vacates the Premises, and title thereto shall
vest solely in Landlord (unless Landlord, by notice to Tenant no later than
twenty days prior to the date fixed as the termination of this Lease,
elects to relinquish Landlord's right thereto and to have them removed by
Tenant, in which event the same shall be removed from the Premises by
Tenant prior to the expiration of this Lease, at Tenant's expense) without
payment of any nature to Tenant. All trade fixtures and apparatus (as
distinguished from leasehold improvements) owned by Tenant and installed
in the Premises shall remain the property of Tenant and shall be removable
at any time, including upon the expiration of the Term; and provided
further, that Tenant shall repair any damage to the Premises caused by the
removal of said trade fixtures and apparatus and shall restore the Premises
to substantially the same condition as existed prior to the installation
of said trade fixtures and apparatus. All property permitted or required
to be removed by Tenant at the end of the term remaining in the Premises
after Tenant's removal shall be deemed abandoned and may, at the election
of Landlord, either be retained as Landlord's property or may be removed
from the Premises by Landlord, at Tenant's expense. The taking of
possession by Tenant (or any permitted assignee or subtenant of Tenant) of
all or any portion of the Premises for the conduct of business will be
deemed conclusive evidence that Tenant has found the Premises, and all of
their fixtures and equipment, acceptable.
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7. PARKING
A. GENERAL. As long as Tenant is not in default under this
Lease, Landlord will provide Tenant during the Lease Term with unassigned,
nonexclusive parking spaces in the Building parking garage for the number
of automobiles set forth in the BLI Rider. Such parking spaces may be used
only by principals and employees of Tenant. Tenant will pay parking rent
(plus tax) each month, per parking space, in the amount set forth in the
BLI Rider with respect to the Building garage, which payment shall
constitute Additional Rent hereunder. Tenant and Tenant's principals,
employees, guests and visitors shall have the right, on a nonexclusive
basis, to use the ground level non-garage parking areas surrounding the
Building.
B. RATES. Commencing on the first day of the Second Lease Year
and on the first day of each Lease thereafter during the Lease Term, or
renewal term thereafter, the monthly parking rent payable by Tenant with
respect to the Building garage, as set forth in the BLI Rider, shall be
increased by the Cost of Living Adjustment, which shall be computed as
follows: Such monthly parking rent the First Lease Year shall be multiplied
by a percentage equal to the percentage increase, if any, since the date
of the execution of this Lease, in the revised Consumer Price Index, U.S.
Cities Average, for Urban Wage Earners and Clerical Workers, All Items,
1977 = 100. It is understood that the Consumer Price Index is published
monthly each year, and that the percentages used as a basis for the purpose
of computing the aforesaid percentage increase, if any, shall be (i) the
index figure published last prior to the Commencement Date (the base index
number) and (ii) the index figure published last prior to the date of the
commencement of the relevant Lease Year (the current index number). In the
event that the Consumer Price Index is no longer published, the parties
hereto agree to substitute a comparable index therefor. In no event shall
the monthly parking rent payable by Tenant during any Lease Year be less
than the monthly parking rent payable during the previous Lease Year. If
Tenant fails to pay parking charges when due, in addition to all other
remedies available to Landlord, Landlord may, by written notice to Tenant,
elect to proceed as provided under the default provisions of this Lease
and/or cease to provide all or any of the foregoing parking spaces.
C. RESERVATIONS. Landlord has and reserves the right to alter
the methods used to control parking and the right to establish such
controls and rules and regulations (such as parking stickers to be affixed
to vehicles) regarding parking that Landlord may deem desirable. Without
liability, Landlord will have the right to tow or otherwise remove vehicles
improperly parked, blocking ingress or egress lanes, or violating parking
rules, at the expense of the offending tenant and/or owner of the vehicle.
In the event Tenant fails to utilize, regularly and consistently, all of
the garage parking spaces for which Tenant pays parking rent under the BLI
Rider, Landlord shall have the right to terminate Tenant's right to use
such unused parking. Upon such termination of the use of garage parking
spaces by Landlord, Tenant shall receive a reduction in parking rent in an
amount equal to the number of parking spaces taken hereunder, times the per
space rent paid by Tenant. Tenant agrees (i) to comply with the notice of
termination; (ii) that such termination shall become unconditionally
effective, without further documentation on the noticed date of
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termination; and (iii) that such termination shall not constitute an
eviction, constructive or otherwise, a default or breach by Landlord or any
kind, or the basis for any form of Rent abatement, set-off, claim or like
action by Tenant. Landlord and Tenant further agree that any garage
parking spaces, the use of which are terminated under the aforementioned
procedure, shall be made available by Landlord to Tenant or other tenants,
as Landlord elects in its reasonable discretion.
D. CONDITIONS. Tenant's right to use, and its right to permit
its principals and guests to use, the parking facilities pursuant to this
Lease are subject to the following conditions: (i) Landlord has made no
representations or warranties with respect to the parking area, the number
of spaces located therein or access thereto; (ii) Landlord reserves the
right to reduce the number of spaces in the parking area (garage and non-
garage) by not more than ten percent (10%) of the then number of parking
area spaces in the parking area and/or change access thereto provided that
the number of garage spaces specified in the BLI Rider continue to be
available for Tenant's use; and none of the foregoing shall entitle Tenant
to any claim against Landlord or to any abatement of Rent (or any part
thereof); (iii) Landlord has no obligation to provide a parking lot
attendant and Landlord shall have no liability on account of any loss or
damage to any vehicle or the contents thereof, Tenant hereby agreeing to
bear the risk of loss for same; ( iv) Tenant, its agents, employees and
invitees, shall park their automobiles and other vehicles only where and
as designated from time to time by Landlord within the parking area; (v)
if and when so requested by Landlord, Tenant shall furnish Landlord with
the license numbers of any vehicles of Tenant, its agents and employees;
and (vi) Landlord (or the operator of the parking area) may charge Tenant
(and/or its employees, invitees and visitors) directly for the parking fee
established by Landlord (or such operator) from time to time for the use
of such parking area.
8. BUILDING SERVICES
A. GENERAL. In general, the services set forth below will be
provided by Landlord at a service level set, defined and regulated by
Landlord consistent with office buildings of similar quality to and in the
same immediate geographic area as the Building. During the Lease Term, the
regular business hours ("Business Hours") of the Building will be 8:00 a.m.
to 6:00 p.m., Monday through Friday, and on Saturday, 9:00 a.m. to 1:00
p.m. on a limited basis so long as Tenant provides Landlord with advance
notice of Tenant's requirement for same, except holidays generally
recognized by state and federal governments or as may be shortened in
accordance with applicable policies or regulations adopted by any utility
company servicing the Building or government. Landlord reserves the right
to increase the Business Hours. The Building will be accessible to Tenant,
its subtenants, agents, servants, employees, contractors, invitees or
licensees (collectively, "Tenant's Agents") twenty-four hours per day,
seven days per week except in the case of temporary closure due to
emergencies, repairs, casualty, governmental or quasi-governmental
requirements or as Landlord reasonably deems necessary in order to prevent
damage or injury to person or property.
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(1) JANITORIAL SERVICE:
Landlord agrees to provide during the Lease Term janitorial
services for the Premises customarily provided in office buildings of
similar quality to and in the same immediate geographic area as the
Building, all as more particularly determined by Landlord in its
discretion. Janitorial service will be provided after Business Hours at
the Building, but no janitorial services will be provided on Saturdays,
Sundays and holidays generally recognized by state and federal government.
Should Tenant require additional janitorial services beyond those
customarily provided by Landlord, Tenant may request same in writing from
Landlord and if Landlord agrees to provide such services, Tenant will be
billed for same by Landlord at a reasonable rate, as determined by
Landlord, and those costs and expenses when billed will be Additional Rent
due under this Lease.
(2) ELECTRICITY:
(a) During the Lease Term, electric power will be
provided by Landlord on a Rent-inclusion basis for the purposes of lighting
and general office equipment use in amounts consistent with Building
standard electrical capacities. The Building standard mechanical and
electrical systems are designed to accommodate loads generated by lights
and standard office equipment such as computers, dictating equipment and
photocopy equipment, during Business Hours (up to the standard maximum
capacities as set forth in the Work Letter attached hereto as Exhibit "B").
(b) If Tenant's use of the Premises requires more
electrical power than that required for standard electrical needs, whether
by intensity of use, load or type of equipment, Landlord may bill Tenant
for such additional use and such billings will constitute Additional Rent.
Landlord will utilize Landlord's customary method of billing Tenant for
excess electrical power consumption. At Landlord's option, Landlord, at
Tenant's expense, may have an engineer estimate Tenant's usage, and bill
Tenant at standard utility rates for the excess usage or install a submeter
for the purposes of monitoring Tenant's excess power consumption. Landlord
and Tenant agree that Landlord's implementation of the electrical
monitoring and billing procedures set forth herein shall in no way be
construed so as to deem Landlord a private or public utility company.
(c) Landlord reserves the right, after Business Hours,
to turn off all unnecessary lighting in the unoccupied areas of the
Building and the Premises to minimize the energy consumption of the
Building in both the Common Areas and the Premises.
(3) HVAC SERVICES:
Landlord agrees to provide, on a Rent inclusion basis, during
Business Hours, heating, ventilating and air conditioning for the purposes
of comfort control. If Tenant additional HVAC services for comfort
control at times other than during Business Hours upon notice given to
Landlord no later than noon on the date on which after Business Hours
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services are required, Landlord will bill Tenant as Additional Rent for the
number of hours used at Landlord's then standard prevailing rate for after-
hours use of HVAC services. Landlord and Tenant acknowledge that
Landlord's standard prevailing rate for after-hours use of HVAC services,
as of the date of this Lease, is $17.00 per hour, which rate will be
subject to change during the Lease Term from time to time, in Landlord's
sole discretion, based upon operational costs and expenses, including wear
and tear on the system and its components. The HVAC air distribution
system and control system will remain under the control of Landlord, who
will regulate the systems' setting and adjustment. At Landlord's option,
Landlord may secure HVAC controls (thermostats) in lockable metal boxes to
regulate the efficiency and use of the system. Tenant agrees that Landlord
will have complete control over the setting and regulation of all air
distribution, vents, vanes and dampers so as to provide comfortable working
conditions.
(4) WATER AND SEWER:
Landlord agrees to provide municipally supplied cold water and
sewer services to the Common Areas for lavatory purposes.
(5) ELEVATOR SERVICE:
Landlord will provide elevator service during Business Hours and,
at Landlord's sole discretion, Landlord may provide restricted elevator
service during non-Business Hours.
B. INTERRUPTION OF SERVICES. It is understood and agreed that
Landlord does not warrant that any of the services referred to above, or
any other services which Landlord may supply, will be free from
interruption. Tenant acknowledges that any one or more of such services
may be suspended by reason of accident or repairs, alterations or
improvements necessary to be made, or by strikes or lockouts, or by reason
of operation of law, or other causes beyond the control of Landlord. No
such interruption or discontinuance of service will be deemed an eviction
or a disturbance of Tenant's use and possession of the Premises or any part
thereof, or render Landlord liable to Tenant for damages or abatement of
Rent or relieve Tenant from the responsibility of performing any of
Tenant's obligations under this Lease.
9. SECURITY
With respect to security for the Building and the parking
garage(s), Landlord and Tenant hereby agree as follows:
A. TENANT'S RESPONSIBILITY. Tenant shall: (1) abide by all
policies, procedures and rules and regulations for use of the access
system, (2) report promptly the loss or theft of all keys which would
permit unauthorized entrance to the Premises, Building or parking
garage(s), (3) report to Landlord the employment or discharge of employees
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and their vehicle's make, model, and license number, (4) promptly report
to Landlord door-to-door solicitation or other unauthorized activity in the
Building or parking garage(s), and (5) promptly inform the Landlord's
Building manager in the event of a break-in or other emergency.
B. INTERRUPTION OF SECURITY. Tenant acknowledges that the
security, if any, provided by Landlord may be suspended or modified at
Landlord's sole discretion or as a result of causes beyond the reasonable
control of Landlord. No such interruption, discontinuance or modification
of security service will constitute an eviction, constructive eviction, or
a disturbance of Tenant's use and possession of the Premises, and further,
no interruption, discontinuance or modification of security service will
render Landlord liable to Tenant or third-parties for damages, abatement
of Rent, or otherwise, or relieve Tenant of the responsibility of
performing Tenant's obligations under this Lease. The furnishing of any
security services in the Building by Landlord shall not be deemed to impose
an obligation on Landlord for the security of the Premises and Tenant
waives any rights or claims against Landlord or Landlord's managing agent
by reason of the acts and/or omissions of Landlord in connection therewith.
10. REPAIRS, MAINTENANCE AND UTILITIES
A. LANDLORD'S RESPONSIBILITIES. During the Lease Term,
Landlord shall define, set, and maintain the level of repairs and
maintenance for the Building, the Common Areas, and all other areas serving
the Building, in a manner comparable to office buildings of similar quality
to and in the immediate geographic area of the Building, subject to
reimbursement by Tenant to Landlord for Overhead Rent pursuant to
subsection 3(B) hereof. Landlord's responsibilities with respect to this
paragraph are as follows: (1) the structural and roof systems of the
Building and parking garage(s), (2) the Building standard electrical and
mechanical systems, (3) the primary water and sewer systems of the
Building, (4) the Building Common Areas and the common area furniture,
fixtures, and equipment, (5) the landscaped areas in and about the
Building, (6) the parking lot(s) and garage(s) of the Building, and (7)
replacement of Building standard fluorescent light bulbs in the Premises
and Common Areas.
B. TENANT'S RESPONSIBILITIES. During the Lease Term, Tenant
will take good care of the Premises and the fixtures and appurtenances
therein and Tenant will repair and maintain the following at Tenant's
expense:
(1) The interior portion of the demising walls, the
interior partition walls of the Premises and their wall-covering, and the
entry door to the Premises, reasonable wear and tear excepted.
(2) The electrical and mechanical systems which are for the
exclusive use and benefit of Tenant including, without limitation, the
pipes, lines and conduits of all electrical and other mechanical systems
wholly within the Premises. The following examples are for clarification
and are not all inclusive: (a) electrical services for computers or
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similar items, (b) projection room equipment such as dimmers, curtains, or
similar items, (c) water closet plumbing, kitchen plumbing or similar
items, (d) HVAC for other than comfort cooling in the Premises, (e)
security systems for the Premises, (f) telephone system for the Premises;
and (g) other similar systems.
(3) Except for the janitorial services to be provided by
Landlord, if any, as set forth in this Lease, the repair and maintenance
of the floor covering of the Premises, including VCT flooring, ceramic
tiles, marble, wood flooring, or similar coverings, shall be performed by
Landlord upon Tenant's request, at Tenant's expense, and Tenant will be
billed for same as Additional Rent.
(4) All cabinets and millwork (regardless of ownership) so
long as said cabinets and millwork are for the exclusive use and benefit
of Tenant.
(5) All other personal property, improvements or fixtures,
except any of same expressly designated in this Lease as those which
Landlord shall maintain. Those items to be repaired and maintained by
Tenant include, but are not limited to, the following: (a) ceiling tiles
and ceiling grid, (b) molding or other woodwork and panelling, (c) light
fixtures and bulbs, (d) draperies, blinds or wallhangings, (e) glass
partition walls, (f) water closets and kitchen areas, (g) doors and
locksets, and (h) vaults, safes, or secured areas. For the aforesaid
items, Landlord may elect, with Tenant's approval (which approval will not
be unreasonably withheld) to maintain and repair same at Tenant's expense
and Tenant will be billed for same as Additional Rent.
C. REPAIRS AND MAINTENANCE; MISCELLANEOUS. Notwithstanding
anything to the contrary in this Lease, Landlord shall have no
responsibility to repair or maintain the Building, any of its components,
the Common Areas, the Premises, or any fixture, improvement, trade fixture,
or any item of personal property contained in the Building, the Common
Areas, and/or the Premises if such repairs or maintenance are required
because of the occurrence of any of the following: (i) the acts, misuse,
improper conduct, omission or neglect of Tenant or Tenant's Agents, or (ii)
the conduct of business in the Premises. Should Landlord elect to make
repairs or maintenance occasioned by the occurrence of any of the
foregoing, Tenant shall pay as Additional Rent all such costs and expenses
incurred by Landlord. Landlord shall have the right to approve in advance
all work, repair, maintenance or otherwise, to be performed under this
Lease by Tenant and all of Tenant's repairmen, contractors, subcontractors
and suppliers performing work or supplying materials. Tenant shall be
responsible for all permits, inspections and certificates for accomplishing
the above. Tenant shall obtain lien waivers for all work done in or to the
Premises.
11. TENANT'S ALTERATIONS
A. GENERAL. During the Lease Term, Tenant will make no
alterations, additions or improvements in or to the Premises or the
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Building, of any kind or nature, including, but not limited to,
alterations, additions or improvements in, to, or on, telephone or computer
installations (any and all of such alterations, additions or improvements
other than those set forth in the Work Letter attached hereto are
collectively referred to in this Lease as the "Alteration(s)"), without the
prior written consent of Landlord, which consent shall not be unreasonably
withheld provided, however, that Landlord's consent may be arbitrarily
withheld with respect to Alterations which affect either the structure or
structural elements of the Premises or the Building or the electrical,
plumbing or other mechanical systems in the Building. Tenant shall submit
to Landlord detailed drawings and plans of the proposed alterations at the
time Landlord's consent is sought. Should Landlord consent to any proposed
Alterations by Tenant, such consent will be conditioned upon Tenant's
agreement to comply with all requirements established by Landlord,
including safety requirements and the matters referenced in Section 22 of
this Lease. As stated herein, all Alterations made hereunder will become
Landlord's property when incorporated into or affixed to the Building.
However, at Landlord's option Landlord may, at the expiration of the Lease
Term, require Tenant, at Tenant's expense, to remove Alterations made by
or on behalf of Tenant and to restore the Premises to their original
condition.
Prior to making any Alterations, Tenant shall (i) at its expense,
obtain all permits, approvals and certificates required by any governmental
or quasi-governmental bodies, and deliver copies thereof to Landlord and
(ii) furnish to Landlord duplicate original policies of worker's
compensation (covering all persons to be employed by Tenant, and Tenant's
contractors and subcontractors in connection with such Alterations) and
comprehensive public liability (including property damage coverage,
completed operations/products liability) insurance in such amounts as
Landlord may reasonably require, naming Landlord and its agents as
additional insureds as indicated in Section 14 hereof. Before proceeding
with any permitted Alteration which will cost more than $100,000.00
(exclusive of the cost of decorating work and items constituting Tenant's
Personal Property) as estimated by a reputable contractor designated by
Landlord, Tenant shall obtain and deliver to Landlord either (i) a
performance bond and a labor and materials payment bond (issued by a
corporate surety licensed to do business in Florida) each in an amount
equal to 125% of such estimated cost and in a form satisfactory to Landlord
or (ii) such other security as shall be satisfactory to Landlord.
All work performed by or on behalf of Tenant shall be subject to
inspection by representatives of Landlord who shall be permitted access and
the opportunity to inspect the same at all reasonable times, but this
provision shall not in any way whatsoever create any obligation on Landlord
to conduct such an inspection or any liability on Landlord by reason of
such inspection.
Movement of all work persons and materials shall only be done at the
direction, the times and in the manner designated by Landlord.
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Tenant shall not place a load upon any floor of the Premises exceeding
the floor load per square foot area which such floor was designed to carry
and which is allowed by law. The floor of the Premises will carry 75
pounds live load per square foot of floor space.
Business machines and mechanical equipment used by Tenant which cause
vibration, noise, cold or heat that may be transmitted to the Building
structure or to any leased space to such a degree as to be objectionable
to Landlord or to any other tenant in the Building shall be placed and
maintained by Tenant at its expense in settings of cork, rubber or spring
type vibration eliminators sufficient to absorb and prevent such vibration
or noise, or prevent transmission of such cold or heat. The parties hereto
recognize that the operation of the elevators, air conditioning and heating
equipment will cause some vibration, noise, heat or cold which may be
transmitted to other parts of the Building and the demised premises.
Landlord shall be under no obligation to endeavor to reduce such vibration,
noise, heat or cold beyond what is customary in current good building
practice for buildings of the same type as the Building.
B. ALTERATION FEE
(1) Tenant shall pay to Landlord as Additional Rent in
connection with all Alterations a fee (the "Alteration Fee") for its
supervision and overhead in connection with each such Alteration, for
Landlord's review and approval of all plans and specifications for such
Alteration, for Landlord's construction coordination and monitoring of such
Alteration, and for all other reasonable costs and expenses incurred by
Landlord as a result of or in connection with each such Alteration, a fee
equal to five percent (5 %) of the total construction cost of each such
Alteration. There shall be excluded from the computation of the
construction cost of each Alteration the cost of furniture, removable
furnishings, draperies, office equipment, painting, carpeting, removable
cabinetry, items of special decoration and telephone installation and
engineer's, architects', space planners' and other professionals' fees.
(2) Prior to making any Alteration, Tenant shall submit to
Landlord a statement of Tenant's independent architect, if one is employed,
or Tenant's contractor, estimating the total cost of such Alteration and
the estimated time required to complete such Alteration. The Alteration
Fee shall be calculated on the basis of such estimate and paid in equal
monthly installments during the course of the performance of the
Alteration, together with the monthly installments of Base Rent thereafter
coming due. Within ten business days after completion of the Alteration,
Tenant shall pay to Landlord the entire balance of the Alteration Fee if
not theretofore paid in full.
(3) Within ten business days after completion of any
Alteration, Tenant shall submit to Landlord a statement of Tenant's
independent architect, if one is employed, or Tenant's contractor,
certifying the total cost of such Alteration. The Alteration Fee shall be
adjusted, if necessary, based on the certification. If the Alteration Fee,
as adjusted, shall be greater than the amount theretofore paid to Landlord
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by Tenant on account of such Alteration Fee, Tenant shall pay such
deficiency simultaneously with the delivery to Landlord of the
certification, which deficiency shall bear interest at the annual rate (the
"Applicable Rate") equal to two percent (2%) in excess of the publicly
announced prime (or corporate base) rate of interest then in effect at
Citibank, N.A. (or its successors) until paid if not paid within the time
required for the payment thereof. If such Alteration Fee, as adjusted, is
less than the amount theretofore paid to Landlord by Tenant on account of
such Alteration Fee, Landlord, within 30 days after Landlord's receipt of
the certification, shall either pay to Tenant the amount of such
overpayment or credit Tenant the amount of the overpayment against Rent
payments coming due. If Landlord shall dispute the statement certifying
the total costs of such Alteration, Landlord shall have the right, within
30 days after receipt of the certification, to employ an independent
certified public accountant to review Tenant's books and records relating
to such Alteration. The determination of such accountant shall be
conclusively binding upon the parties, and, if necessary, the Alteration
Fee shall be adjusted accordingly based upon such determination. If such
determination shall reveal that the Alteration Fee paid on account of such
Alteration shall have been understated by more than five percent (5 %),
then Tenant shall pay the fees of the accountant in connection with such
review, and the payment to be made to Landlord as a result of such
understatement shall bear interest at the Applicable Rate. Any adjustment
in the Alteration Fee, together with interest thereon at the Applicable
Rate, as well as any payment of the fees of such accountant, shall be paid
by Tenant to Landlord as additional rent within ten business days after
such accountant's determination.
12. LANDLORD'S ADDITIONS AND ALTERATIONS
Landlord has the right to make changes in and about the Building,
garages and parking areas, including, but not limited to, signs, entrances,
address or name of Building. Such changes may include, but not be limited
to, rehabilitation, redecoration, refurbishment and refixturing of the
Building and expansion of or structural changes to the Building. The right
of Tenant to quiet enjoyment and peaceful possession given under the Lease
will not be deemed breached or interfered with by reason of Landlord's
actions pursuant to this Section so long as such actions do not materially
deprive Tenant of its use and enjoyment of the Premises.
13. ASSIGNMENT AND SUBLETTING
A. LANDLORD'S CONSENT REQUIRED. Except as provided below with
respect to assignment of this Lease following Tenant's bankruptcy, Tenant
will not effect a Transfer (as hereinafter defined) without first obtaining
the consent of Landlord. As used in this Section 13, any of the following
shall be deemed to be a transfer (each a "Transfer"): assignment of this
Lease, in whole or in part; sublet of all or any part of the Premises; any
license allowing anyone other than Tenant to use or occupy all or any part
of the Premises; a pledge or encumbrance by mortgage or other instrument
of Tenant's interest in this Lease; any transfer of corporate shares as
described in subsection C of this Section 13; any transfer of partnership
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interest as described in subsection D of this Section 13; or any transfer
of limited liability company interests as described in subsection E of this
Section 13. Consent by Landlord to any Transfer shall not constitute a
waiver of the requirement for such consent to any subsequent Transfer.
If Tenant shall at any time or times during the term of this
Lease desire to assign this Lease or sublet all or a part of the Premises,
Tenant shall give written notice thereof to Landlord, which notice shall
be accompanied by (i) a conformed or photostatic copy of the proposed
assignment or sublease, (ii) a statement setting forth in reasonable detail
the identity of the proposed assignee or subtenant, the nature of its
business and its proposed use of the Premises, (iii) current financial
information with respect to the proposed assignee or subtenant, and such
other information as Landlord may reasonably request, and (iv) if only a
portion of the Premises is to be sublet, the notice shall be accompanied
by a reasonably accurate floor plan of the Premises indicating the portion
of the Premises to be sublet. Such notice shall be deemed an offer from
Tenant to Landlord whereby Landlord (or Landlord's designee) may, at its
option, (x) sublease such space from Tenant upon the terms and conditions
hereinafter set forth, if the proposed transaction is a sublease of all or
part of the Premises for less than substantially all of the balance of the
Term, (y) terminate this Lease, if the proposed transaction is an
assignment or a sublease of all or substantially all of the Premises for
substantially all of the balance of the Term, or (z) terminate this Lease
with respect to the space covered by the proposed sublease, if the proposed
transaction is a sublease of a part of the Premises for substantially all
of the balance of the Term. Said options may be exercised by Landlord by
notice to Tenant at any time within 15 days after such notice has been
given by Tenant to Landlord; and during such 15-day period Tenant shall not
assign this Lease or sublet such space to any person.
If Landlord exercises its option to terminate this Lease in the
case where Tenant desires either to assign this Lease or sublet all or
substantially all of the Premises for substantially all of the balance of
the Term, then this Lease shall end and expire on the date that such
assignment or sublet was to be effective or commence, as the case may be
and the Rent shall be paid and apportioned to such date.
If Landlord exercises its option to terminate this Lease in part
in any case where Tenant desires to sublet part of the Premises for
substantially all of the balance of the Term, then (i) this Lease shall end
and expire with respect to such part of the Premises on the date that the
proposed sublease was to commence; (ii) from and after such date the Rent
shall be adjusted, based upon the proportion that the rentable area of the
Premises remaining bears to the total rentable area of the Premises; and
(iii) Tenant shall pay Landlord, upon demand, the costs incurred by
Landlord in physically separating such part of the Premises from the
balance of the Premises and in complying with any laws and requirements of
any public authorities relating to such separation, unless such costs were
to be borne by the proposed sublessee.
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If Landlord exercises its option to sublet the portion of the
Premises which Tenant desires to sublet, such sublease to Landlord or its
designee (as subtenant) shall be at the lower of (x) the rental rate per
rentable square foot of Rent then payable pursuant to this Lease or (y) the
rental set forth in the proposed sublease, and shall be for the same term
as that of the proposed subletting, and:
(i) The sublease shall be expressly subject to all of the
covenants, agreements, terms, provisions and conditions of this Lease
except such as are irrelevant or inapplicable, and except as otherwise
expressly set forth to the contrary in this Section;
(ii) Such sublease shall be upon the same terms and
conditions as those contained in the proposed sublease, except such as are
irrelevant or inapplicable and except as otherwise expressly set forth to
the contrary in this Section;
(iii) Such sublease shall give the sublessee the
unqualified and unrestricted right, without Tenant's permission, to assign
such sublease or any interest therein and/or to sub-sublet the space
covered by such sublease or any part or parts of such space to any person
or entity, including Tenant's proposed subtenant and to make any and all
changes, alterations, and improvements in the space covered by such
sublease and if the proposed sublease will result in all or substantially
all of the demised premises being sublet, Landlord or its designee shall
have the option to extend the term of the sublease for the balance of the
term of the Lease less one day;
(iv) Such sublease shall provide that any assignee or
further subtenant of Landlord or its designee may, at the election of
Landlord, be permitted to make alterations, decorations and installations
in such space or any part thereof and shall also provide in substance that
any such alterations, decorations and installations in such space made by
any assignee or subtenant of Landlord or its designee may be removed, in
whole or in part, by such assignee or subtenant, at, its option, prior to
or upon the expiration or other termination of such sublease provided that
such assignee or subtenant, at its expense, shall repair any damage and
injury to such space so sublet caused by such removal; and
(v) Such sublease shall also provide that (1) the parties
to such sublease expressly negate any intention that any estate created
under such sublease be merged with any other estate held by either of said
parties, (2) any assignment or subletting by Landlord or its designee (as
the subtenant) may be for any purpose or purposes that Landlord, in
Landlord's sole discretion, shall deem suitable or appropriate, (3) Tenant,
at Tenant's expense, shall at all times provide and permit reasonably
appropriate means of ingress and egress from such space so sublet by Tenant
to Landlord or its designee, (4) Landlord, at Tenant's expense, may make
such alterations as may be required or deemed necessary by Landlord to
physically separate the subleased space from the balance of the demised
premises and to comply with any laws and requirements of public authorities
relating to such separation, and (5) at the expiration of the term of such
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sublease, Tenant will accept the space covered by such sublease in its then
existing condition, subject to the obligations of the sublessee to make
such repairs thereto as may be necessary to preserve the premises demised
by such sublease in good order and condition.
B. CONDITIONS FOR TRANSFER APPROVAL. If Landlord does not
exercise its option to so sublet the Premises or terminate this Lease in
whole or in part, and, providing that Tenant is not then in default of any
of Tenant's obligations under this Lease, Landlord's consent (which must
be in writing and in form satisfactory to Landlord) to the proposed
assignment or sublease shall not be unreasonably withheld, provided and
upon condition that:
(1) In Landlord's judgment, the proposed assignee or
subtenant or occupant is engaged in a business or activity, which (a) is
in keeping with the then standards of the Building, and (b) will not
violate any negative covenant as to use contained in any other lease of
office space in the Building;
(2) The proposed assignee or subtenant or occupant is a
reputable person of good character and with sufficient financial worth
considering the responsibility involved, and Landlord has been furnished
with reasonable proof thereof;
(3) The form of the proposed sublease or instrument of
assignment or occupancy shall be reasonably satisfactory to Landlord, and
shall comply with the applicable provisions of this Section;
(4) There shall not be more than a total of two (2)
occupants (including Tenant, Landlord or its designee) of the Premises; and
(5) The proposed subtenant or assignee or occupant shall
not be entitled, directly or indirectly, to diplomatic or sovereign
immunity and shall be subject to the service of process in, and the
jurisdiction of the courts of the State of Florida.
(6) Such transferee shall assume in writing, in a form
acceptable to Landlord, all of Tenant's obligations hereunder and Tenant
shall provide Landlord with a copy of such assumption/transfer document;
(7) Tenant shall pay to Landlord a transfer fee of One
Thousand Five Hundred Dollars ($1,500.00) prior to the effective date of
the Transfer in order to reimburse Landlord for all of its internal costs
and expenses incurred with respect to the Transfer, including, without
limitation, costs incurred in connection with the review of financial
materials, meetings with representative of transferor and/or transferee and
preparation, review, approval and execution of the required transfer
documentation, and, in addition, Tenant shall reimburse Landlord for any
reasonable out-of-pocket costs and expenses incurred with respect to such
Transfer;
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(8) Neither (1) the proposed assignee or subtenant nor (2)
any person which, directly or indirectly, controls, is controlled by, or
is under common control with, the proposed assignee or subtenant or any
person who controls the proposed assignee or subtenant, is then an occupant
of any part of the Building;
(9) The proposed assignee or subtenant is not a person or
entity with whom Landlord is then negotiating to lease space in the
Building (or with whom Landlord has negotiated a lease of space in the
Building within the past six months);
(10) The amount of the aggregate rent to be paid by the
proposed subtenant is not less than the then current market rent per
rentable square foot for the Premises as though the Premises were vacant;
(11) Tenant shall not have (1) advertised or publicized in
any way the availability of the Premises without the prior written consent
of Landlord, nor shall any advertisement state the name (as distinguished
from the address) of the Building or the proposed rental, (2) listed the
Premises for subletting or assignment with a broker, agent or
representative other than the then managing agent of the Building or other
agent designated by Landlord, or (3) offered the Premises for subletting
or assignment at a rental rate less than the greater of (A) the Rent then
payable hereunder for such space, or (B) the Rent at which Landlord is then
offering to lease other space in the Building;
(12) As of the effective date of the Transfer and continuing
throughout the remainder of the Term, the Base Rent shall not be less than
the Base Rent set forth in the BLI Rider;
(13) Tenant to which the Premises were initially leased
shall continue to remain liable under this Lease for the performance of all
terms, including but not limited to, payment of Rent due under this Lease.
Notwithstanding, the Landlord agrees to reasonably consider releasing
Tenant from its obligations hereunder, if Tenant provides acceptable and
confirmed information as to the financial status and viability of the
proposed subtenant or assignee;
(14) Tenant's guarantor shall continue to remain liable
under the terms of the Guaranty of this Lease and, if Landlord deems it
necessary, such guarantor shall execute such documents necessary to insure
the continuation of its guaranty;
(15) Each of Landlord's Mortgagees shall have consented in
writing to such Transfer.
C. TRANSFER OF CORPORATE SHARES. If Tenant is a corporation
other than a corporation the outstanding voting stock of which is listed
on a "national securities exchange," as defined in the Securities Exchange
Act of 1934) and if at any time after execution of this Lease any part or
all of the corporate shares shall be transferred by sale, assignment,
bequest, inheritance, operation of law or other disposition (including, but
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not limited to, such a transfer to or by a receiver or trustee in federal
or state bankruptcy, insolvency, or other proceedings) so as to result in
a change in the present control of said corporation by the person(s) now
owning a majority of said corporate shares, a Transfer shall be deemed to
have occurred and the provisions of this Section 13 shall apply with
respect to Landlord's and Tenant's rights and obligations. Tenant shall
give Landlord notice that such transfer is imminent at least fifteen (15)
days prior to the date of such transfer.
D. TRANSFER OF PARTNERSHIP INTERESTS. If Tenant is a general
or limited partnership and if at any time after execution of this Lease any
part or all of the interests in the capital or profits of such partnership
or any voting or other interests therein shall be transferred by sale,
assignment, bequest, inheritance, operation of law or other disposition
(including, but not limited to, such a transfer to or by a receiver or
trustee in federal or state bankruptcy, insolvency or other proceedings,
and also including, but not limited to, any adjustment in such partnership
interests) so as to result in a change in the present control of said
partnership by the person or persons now having control of same, a Transfer
shall be deemed to have occurred and the provisions of this Section 13
shall apply with respect to Landlord's and Tenant's rights and obligations.
Tenant shall give Landlord notice that such Transfer is imminent at least
fifteen (15) days prior to the date of such Transfer.
E. TRANSFER OF LIMITED LIABILITY COMPANY INTERESTS. If Tenant
is a limited liability company and if at any time after execution of this
Lease any part or all of the interests in the capital or profits of such
company or any voting or other interests therein shall be transferred by
sale, assignment, bequest, inheritance, operation of law or other
disposition (including, but not limited to, such a transfer to or by a
receiver or trustee in federal or state bankruptcy, insolvency or other
proceedings, and also including, but not limited to, any adjustment in such
company interests) so as to result in a change in the present control of
said company by the person or persons now having control of same, a
Transfer shall be deemed to have occurred and the provisions of this
Section 13 shall apply with respect to Landlord's and Tenant's rights and
obligations. Tenant shall give Landlord notice that such Transfer is
imminent at least fifteen (15) days prior to the date of such Transfer.
F. ACCEPTANCE OF RENT FROM TRANSFEREE. The acceptance by
Landlord of the payment of Rent following any assignment or other Transfer
prohibited by this Section shall not be deemed to be a consent by Landlord
to any such assignment or other Transfer nor shall the same be deemed to
be a waiver of any right or remedy of Landlord hereunder.
G. ADDITIONAL PROVISIONS RESPECTING TRANSFERS. Without
limiting Landlord's right to withhold its consent to any Transfer by
Tenant, and regardless of whether Landlord shall have consented to any such
Transfer, neither Tenant nor any other person having an interest in the
possession, use or occupancy of the Premises or any part thereof shall
enter into any lease, sublease, license, concession, assignment or other
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Transfer or agreement for possession, use or occupancy of all or any
portion of the Premises, which provides for rental or other payment for
such use, occupancy or utilization based, in whole or in part, on the net
income or profits derived by any person or entity from the space so leased,
used or occupied, and any such purported lease, sublease, license,
concession, assignment or other Transfer or agreement shall be absolutely
void and ineffective as a conveyance of any right or interest in the
possession, use or occupancy of all or any part of the Premises. There
shall be no deduction from the rental payable under any sublease or other
Transfer from the amount thereof passed on to any person or entity, for any
expenses or costs related in any way to the subleasing or Transfer of such
place.
If Landlord shall consent to any Transfer, Tenant shall in
consideration therefor, pay to Landlord as Additional Rent an amount equal
to one-half (1/2) the Transfer Consideration. For purposes of this
Section, the term "Transfer Consideration" with respect to a sublease shall
mean in any Lease Year (i) any rents, additional charges or other
consideration payable to Tenant by the transferee of the Transfer which is
in excess of the Base Rent and Overhead Rent accruing during such Lease
Year, (ii) all sums paid for the sale or rental of Tenant's fixtures,
leasehold improvements, equipment, furniture or other personal property in
excess of the fair market sale or rental value thereof as of the date of
the Transfer and (iii) all sums paid for services provided by Tenant to the
transferee (including, without limitation, secretarial, word processing,
receptionist, conference rooms, and library) in excess of the fair market
value of such services. The term Transfer Consideration in the case of an
assignment shall mean an amount equal to all sums and other consideration
paid to Tenant by the assignee for or by reason of such assignment
(including, but not limited to, sums paid for the sale or rental of
Tenant's fixtures, leasehold improvements, equipment, furniture or other
personal property). The Transfer Consideration shall be paid to Landlord
as and when paid by the transferee to Tenant. Landlord shall have the
right to audit Tenant's books and records upon reasonable notice to
determine the amount of Transfer Consideration payable to Landlord. In the
event such audit reveals an understatement of Transfer Consideration in
excess of five percent (5 %) of the actual Transfer Consideration due
Landlord, Tenant shall pay for the cost of such audit within ten (10) days
after Landlord's written demand for same.
H. If Landlord shall decline to give its consent to any
proposed assignment or sublease, or if Landlord shall exercise any of its
options under this Section 13, Tenant shall indemnify, defend and hold
Landlord harmless against and from any and all loss, liability, damages,
costs and expenses (including reasonable counsel fees) resulting from any
claims that may be made against Landlord by the proposed assignee or
subtenant or by any brokers or other persons claiming a commission or
similar compensation in connection with the proposed assignment or
sublease.
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I. With respect to each and every sublease or subletting
authorized by Landlord under the provisions of this Lease, it is further
agreed:
(i) No subletting shall be for a term ending later than one
day prior to the Expiration Date of this Lease.
(ii) No sublease shall be valid, and no subtenant shall take
possession of the Premises or any part thereof, until an executed
counterpart of such sublease has been delivered to Landlord.
(iii) Each sublease shall provide that it is subject and
subordinate to this Lease and to the matters to which this Lease is or
shall be subordinate, and that in the event of termination, re-entry or
dispossess by Landlord under this Lease Landlord may, at its option, evict
the subtenant or take over all of the right, title and interest of Tenant,
as sublessor, under such sublease, and such subtenant shall, at Landlord's
option, attorn to Landlord pursuant to the then executory provisions of
such sublease, except that Landlord shall not (A) be liable for any
previous act or omission of Tenant under such sublease, (B) be subject to
any offset, not expressly provided in such sublease, which theretofore
accrued to such subtenant against Tenant, or (C) be bound by any previous
modification of such sublease or by any previous prepayment of more than
one month's rent.
J. Tenant's subleases must contain the following language:
"This sublease may not be assigned and the subleased premises may not be
further sublet in whole or in part without the prior written consent of
Landlord."
14. TENANT'S INSURANCE COVERAGE
A. GENERAL. Tenant agrees that, at all times during the Lease
Term (as well as prior and subsequent thereto if Tenant or any of Tenant's
Agents should then use or occupy any portion of the Premises), it will keep
in force, with an insurance company licensed to do business in the State
of Florida, and at least A-rated and having a financial rating of at least
"13" in the most current edition of Best's Insurance Reports and acceptable
to Landlord, (i) without deductible, comprehensive general liability
insurance, including coverage for bodily injury and death, property damage
and personal injury and contractual liability as referred to below, in the
amount of not less than the amount set forth in the BLI Rider, combined
single limit per occurrence for injury (or death) and damages to property,
(ii) with deductible of not more than Five Thousand Dollars ($5,000.00),
insurance on an "All Risk or Physical Loss" basis, including sprinkler
leakage, vandalism, malicious mischief, fire and extended coverage,
covering all improvements to the Premises, fixtures, furnishings, removable
floor coverings, equipment, signs and all other decoration or stock in
trade, in the amounts of not less than the full replacement value thereof,
and (iii) workmen's compensation and employer's liability insurance, if
required by statute. Such policies will: (i) include Landlord and such
other parties as Landlord may reasonably designate as additional insureds,
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(ii) be considered primary insurance, (iii) include within the terms of the
policy or by contractual liability endorsement coverage insuring Tenant's
indemnity obligations under Section 19, and (v) provide that it may not be
cancelled or changed without at least thirty (30) days prior written notice
from the company providing such insurance to each party insured thereunder.
Tenant will also maintain throughout the Lease Term worker's compensation
insurance with not less than the maximum statutory limits of coverage.
B. EVIDENCE. The insurance coverages to be provided by Tenant
will be for a period of not less than one year. At least fifteen (15) days
prior to the Commencement Date, Tenant will deliver to Landlord original
certificates of all such paid-up insurance; thereafter, at least fifteen
(15) days prior to the expiration of any policy Tenant will deliver to
Landlord such original certificates as will evidence a paid-up renewal or
new policy to take the place of the one expiring.
15. LANDLORD'S INSURANCE COVERAGE
A. GENERAL. Landlord will at all times during the Lease Term
maintain a policy or policies of insurance insuring the Building against
loss or damage by fire, explosion or other hazards and contingencies
typically covered by insurance for an amount acceptable to the Lenders.
Landlord reserves the right to self insure in lieu of maintaining such
policies.
B. TENANT'S ACTS. Tenant will not do or permit anything to be
done upon or bring or keep or permit anything to be brought or kept upon
the Premises which will increase Landlord's rate of insurance on the
Building. If by reason of the failure of Tenant to comply with the terms
of this Lease, or by reason of Tenant's occupancy (even though permitted
or contemplated by this Lease), the insurance rate shall at any time be
higher than it would otherwise be, Tenant will reimburse Landlord for that
part of all insurance premiums charged because of such violation or
occupancy by Tenant. Tenant agrees to comply with any requests or
recommendation made by Landlord's insurance underwriter inspectors.
16. WAIVER OF RIGHT OF RECOVERY
A. GENERAL. Except as provided in Section 39, neither Landlord
nor Tenant shall be liable to the other for any damage to any building,
structure or other tangible property, or any resulting loss of income, or
losses under worker's compensation laws and benefits, even though such loss
or damage might have been occasioned by the negligence of such party, its
agents or employees. The provisions of this Section shall not limit the
indemnification for liability to third parties pursuant to Section 19. As
used in this Section 16.A., "damage" refers to any loss, destruction or
other damage.
B. EXCLUSIONS. Tenant acknowledges that Landlord will not
carry insurance on improvements, furniture, furnishings, trade fixtures,
equipment installed in or made to the Premises by or for Tenant, and Tenant
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agrees that Tenant, and not Landlord, will be obligated to promptly repair
any damage thereto or replace the same.
17. DAMAGE OR DESTRUCTION BY CASUALTY
A. ABSOLUTE RIGHT TO TERMINATE. If by fire or other casualty
the Premises are damaged or destroyed to the extent of twenty five-percent
(25%) or more of the replacement cost thereof, or the Building is damaged
or destroyed to the extent of twenty-five per cent (25 %) or more of the
replacement cost thereof (whether or not the Premises is damaged or
destroyed), Landlord will have the option of terminating this Lease or any
renewal thereof by serving written notice upon Tenant within one hundred
and eighty (180) days from the date of the casualty and any prepaid Rent
or Additional Rent will be prorated as of the date of termination of this
Lease and the unearned portion of such Rent will be refunded to Tenant
without interest.
B. QUALIFIED RIGHT TO TERMINATE. If by fire or other casualty
either the Premises or the Building is damaged or destroyed to the extent
of less than twenty-five per cent (25%) but more than ten percent (10%) of
the replacement cost of the Premises or the Building (as applicable) (or
the Premises or Building are damaged to a lesser degree but Section 17C
does not apply because of the number of years remaining in the Lease Term),
then Landlord may either terminate this Lease by serving written notice
upon Tenant within one hundred and eighty (180) days of the date of
destruction or Landlord may restore the Premises.
C. OBLIGATION TO RESTORE. If by fire or other casualty either
the Premises or the Building is destroyed or damaged, but only to the
extent of ten percent (10%) or less of the replacement cost of the Premises
or the Building (as applicable), and, also, the unexpired Lease Term,
including any previously exercised renewal option, is more than three
years, then Landlord will restore the Premises.
D. RENT ADJUSTMENTS. In the event of restoration by Landlord,
all Base Rent and Additional Rent paid in advance shall be apportioned as
of the date of damage or destruction and all such Base Rent and Additional
Rent as above described thereafter accruing shall be equitably and
proportionately adjusted according to the nature and extent of the
destruction or damage, pending substantial completion of rebuilding,
restoration or repair. In the event the destruction or damage is so
extensive as to make it unfeasible for Tenant to conduct Tenant's business
in the Premises, Rent and Additional Rent under this Lease will be
completely abated until the Premises are substantially restored by Landlord
or until Tenant resumes use and occupancy of the Premises, whichever shall
first occur. Landlord will not be liable for any damage to or any
inconvenience or interruption of business of Tenant or any of Tenant's
Agents occasioned by fire or other casualty.
E. QUALIFICATIONS. Said restoration, rebuilding or repairing
will exist and will be at Landlord's sole cost and expense, subject to the
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availability of applicable insurance proceeds. Landlord shall have no duty
to restore, rebuild or replace Tenant's personal property and trade
fixtures. Notwithstanding anything to the contrary in this Lease,
including, but not limited to this Section 17, Landlord's obligation(s) to
repair, rebuild or restore the Building or the Premises shall exist (i)
only to the extent of insurance proceeds received by Landlord in connection
with the condition or event which gave rise to Landlord's obligation to
repair, rebuild or restore and/or (ii) only so long as the area unaffected
by the casualty may, as determined by Landlord using reasonable business
judgment, be restored as a profitable, self functioning unit.
F. WAIVER OF SUBROGATION. Each party shall look first to any
insurance in its favor before making any claim against the other party for
recovery for loss or damage resulting from fire or other casualty, and to
the extent that such insurance is in force and collectible and to the
extent permitted by law, Landlord and Tenant each hereby releases and
waives all right of recovery against the other or any one claiming through
or under each of them by way of subrogation or otherwise. The foregoing
release and waiver shall be in force only if both releasors' insurance
policies contain a clause providing that such a release or waiver shall not
invalidate the insurance. If, and to the extent, that such waiver can be
obtained only by the payment of additional premiums, then the party
benefitting from the waiver shall pay such premium within ten days after
written demand or shall be deemed to have agreed that the party obtaining
insurance coverage shall be free of any further obligation under the
provisions hereof with respect to waiver of subrogation.
18. CONDEMNATION AND EMINENT DOMAIN
A. ABSOLUTE RIGHT TO TERMINATE. If all or a material part of
the Premises or the Building or the parking spaces is taken for any public
or quasi-public use under any governmental law, ordinance or regulation or
by right of eminent domain or by purchase in lieu thereof, and the taking
would prevent or materially interfere with the use of the Premises for the
purpose for which they are then being used, this Lease will terminate and
the Rent and Additional Rent will be abated during the unexpired portion
of this Lease effective on the date physical possession is taken by the
condemning authority. Tenant will have no claim to the condemnation award.
B. OBLIGATION TO RESTORE. In the event an immaterial part of
the Premises or the Building or the parking spaces is taken for any public
or quasi-public use under any governmental law, ordinance or regulation,
or by right of eminent domain or by purchase in lieu thereof, and this
Lease is not terminated as provided in subsection A above, then Landlord
shall, subject to the remaining provisions of this Section, at Landlord's
expense, restore the Premises to the extent necessary to make them
reasonably tenantable. The Rent and Additional Rent payable under this
Lease during the unexpired portion of the Lease Term shall be adjusted to
such an extent as may be fair and reasonable under the circumstances.
Tenant shall have no claim to the condemnation award with respect to the
leasehold estate but, in a subsequent, separate proceeding, may make a
separate claim for trade fixtures installed in the Premises by and at the
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expense of Tenant and Tenant's moving expense. In no event will Tenant
have any claim for the value of the unexpired Lease Term.
C. QUALIFICATIONS. Notwithstanding the foregoing, Landlord's
obligation to restore exists (i) only if and/or to the extent, that the
condemnation or similar award received by Landlord is sufficient to
compensate Landlord for its loss and its restoration costs and/or (ii) the
area unaffected by the condemnation or similar proceeding may, as
determined by Landlord's judgment, be restored as a profitable, and self
functioning unit.
19. LIMITATION OF LANDLORD'S LIABILITY; INDEMNIFICATION
A. PERSONAL PROPERTY. All personal property placed or moved
into the Building will be at the sole risk of Tenant or other owner.
Landlord will not be liable to Tenant or others for any damage to person
or property arising from environmental concerns, as hereafter defined,
theft, vandalism, HVAC malfunction, the bursting or leaking of water pipes,
any act or omission of any cotenant or occupant of the Building or of any
other person, or otherwise.
B. LIMITATIONS. Notwithstanding any contrary provision of this
Lease: (i) Tenant will look solely (to the extent insurance coverage is not
applicable or available) to the interest of Landlord (or its successor as
Landlord hereunder) in the Building for the satisfaction of any judgment
or other judicial process requiring the payment of money as a result of any
negligence or breach of this Lease by Landlord or its successor or of
Landlord's managing agent (including any beneficial owners, partners,
corporations and/or others affiliated or in any way related to Landlord or
such successor or managing agent) and Landlord has no personal liability
hereunder of any kind, and (ii) Tenant's sole right and remedy in any
action or proceeding concerning Landlord's reasonableness (where the same
is required under this Lease) will be an action for declaratory judgment
and/or specific performance.
C. INDEMNITY. Tenant agrees to indemnify, defend and hold
harmless Landlord and its agents from and against all claims, causes of
actions, liabilities, judgments, damages, losses, costs and expenses,
including reasonable attorneys' fees and costs, including appellate
proceedings and bankruptcy proceedings, incurred or suffered by Landlord
and arising from or in any way connected with the Premises or the use
thereof or occupation thereof or any acts, omissions, neglect or fault of
Tenant or any of Tenant's Agents, including, but not limited to, any breach
of this Lease or any death, personal injury or property damage occurring
in or about the Premises or the Building or arising from Environmental
concerns, as hereafter defined. Tenant will reimburse Landlord upon
request for all costs incurred by Landlord in the interpretation and
enforcement of any provisions of this Lease and/or the collection of any
sums due to Landlord under this Lease, including collection of agency fees,
and reasonable attorneys' fees and costs, regardless of whether litigation
is commenced, and through all appellate actions and proceedings, including
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bankruptcy proceedings, if litigation is commenced. The foregoing claims,
causes of actions, liabilities, judgments, damages, losses, costs and
expenses shall include but not be limited to any of same arising from
Tenant's failure to comply with any of the requirements of Americans with
Disabilities Act ("ADA') within the Premises.
20. RELOCATION OF TENANT
A. GENERAL. Recognizing that the Building is large and the
needs of tenants as to space may vary from time to time, and in order for
Landlord to accommodate Tenant and prospective tenants, Landlord expressly
reserves the right, prior to and/or during the Lease Term, at Landlord's
sole expense, to move Tenant from the Premises and relocate Tenant in other
space of Landlord's choosing of approximately the same dimensions and size
within the Building (the "New Space"), which New Space will be decorated
by Landlord at its expense. Landlord may use decorations and materials
from the existing Premises, or other materials, so that the New Space will
be comparable in its interior design and decoration to the space from which
Tenant is removed.
B. NO INTERFERENCE. During the relocation period Landlord will
use reasonable efforts not to unduly interfere with Tenant's business
activities and Landlord agrees to substantially complete the relocation
within a reasonable time under all then existing circumstances.
C. PREMISES. This Lease and each of its terms and conditions
will remain in full force and effect and be applicable to the New Space and
the New Space will be deemed to be the Premises demised hereunder; upon
request Tenant will execute such documents which may be requested to
evidence, acknowledge and confirm the relocation (but it will be effective
even in the absence of such confirmation).
D. COSTS. Landlord's obligation for expenses of removal and
relocation will be the actual cost of relocating and decorating the New
Space, and Tenant agrees that Landlord's exercise of its election to remove
and relocate Tenant will not release Tenant in whole or in part from its
obligations hereunder for the full Lease Term. Further, upon being
furnished with verifiable receipts, Landlord will reimburse Tenant up to
$500.00 on account of reprinting new stationery. No rights granted in this
Lease to Tenant, including the right of peaceful possession and quiet
enjoyment, will be deemed breached or interfered with by reason of
Landlord's exercise of the relocation right reserved herein except that
Tenant will be entitled to an abatement of Rent for the time period, if
any, during its usual and customary hours of business in which it is out
of business due to Landlord's relocation activities, in which in no event
shall exceed two (2) business days.
E. NOTICE. If Landlord exercises its relocation right,
(i) Tenant will be given ninety (90) days prior notice in writing and
(ii) Landlord will reimburse Tenant for the actual and reasonable cost of
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telephone and computer and other equipment relocation necessitated by the
exercise of said right of relocation.
21. COMPLIANCE WITH LAWS AND PROCEDURES
A. COMPLIANCE. Tenant, at its sole cost, will promptly comply
with all applicable laws, guidelines, rules, regulations and requirements,
whether of federal, state, or local origin, applicable to the Premises and
the Building, including, but not limited to, the Americans with
Disabilities Act, 42 U.S.C. section 12101 et seq, and those for the correction,
prevention and abatement of nuisance, unsafe conditions, or other
grievances arising from or pertaining to the use or occupancy of the
Premises. Tenant at its sole cost and expense s hall be solely responsible
for taking any and all measures which are required to comply with the
requirements of the ADA within the Premises. Any Alterations to the
Premises made by or on behalf of Tenant for the purpose of complying with
the ADA or which otherwise require compliance with the ADA shall be done
in accordance with this Lease; provided, that Landlord's consent to such
Alterations shall not constitute either Landlord's assumption, in whole or
in part, of Tenant's responsibility for compliance with the ADA, or
representation or confirmation by Landlord that such Alterations comply
with the provisions of the ADA.
B. RADON. In accordance with Florida Law, the following
disclosure is hereby made:
RADON GAS: Radon is a naturally occurring radioactive gas that,
when it has accumulated in a building in sufficient quantities,
may present health risk to persons who are exposed to it over
time. Levels of radon that exceed Federal and State Guidelines
have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your
county public health unit.
22. RIGHT OF ENTRY
Landlord and its agents will have the right to enter the Premises
during all reasonable hours to make necessary repairs to the Premises. In
the event of an emergency, Landlord or its agents may enter the Premises
at any time, without notice, to appraise and correct the emergency
condition. Said right of entry will, after reasonable notice, likewise
exist for the purpose of removing placards, signs, fixtures, alterations,
or additions which do not conform to this Lease. Landlord or its agents
will have the right to exhibit the Premises at any time to prospective
tenants after reasonable telephonic notice, within one hundred and eighty
(180) before the Expiration Date of the Lease.
23. DEFAULT
A. EVENTS OF DEFAULT BY TENANT. If (1) Tenant fails to pay
Rent within ten (10) days after the date due or (2) Tenant fails to cure
any other default within thirty (30) days after notice from Landlord
specifying the nature of such default (unless such default is of a nature
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that it cannot be completely cured within said thirty (30) day period and
steps have been diligently commenced to cure or remedy it within such
thirty (30) day period and are thereafter pursued with reasonable diligence
and in good faith), or (3) Tenant vacates, abandons or surrenders all or
any part of the Premises prior to the Expiration Date, or (4) Tenant fails
to fulfill any of the terms or conditions of any other lease heretofore
made by Tenant for space in the Building or (5) the appointment of a
trustee or a receiver to take possession of all or substantially all of
Tenant's assets occurs, or if the attachment, execution or other judicial
seizure of all or substantially all of Tenant's assets located at the
Premises, or of Tenant's interest in this Lease, occurs, or (6) Tenant or
any of its successors or assigns or any guarantor of this Lease
("Guarantor") should file any voluntary petition in bankruptcy,
reorganization or arrangement, or an assignment for the benefit of
creditors or for similar relief under any present or future statute, law
or regulation relating to relief of debtors, or (7) Tenant or any of its
successors or assigns or any Guarantor should be adjudicated bankrupt or
have an involuntary petition in bankruptcy, reorganization or arrangement
filed against it, or (8) Tenant shall permit, allow or suffer to exist any
lien, judgment, writ, assessment, charge, attachment or execution upon
Landlord's or Tenant's interest in this Lease or to the Premises, and/or
the fixtures, improvements and furnishings located thereon; then, Tenant
shall be in default hereunder.
B. REPEATED LATE PAYMENT. Regardless of the number of times
of Landlord's prior acceptance of late payments and/or late charges, (i)
if Landlord notifies Tenant twice in any 6-month period that Base Rent or
any Overhead Rent or any Additional Rent has not been paid when due, then
any other late payment within such 6-month period shall automatically
constitute a default hereunder and (ii) the mere acceptance by Landlord of
late payments in the past shall not, regardless of any applicable laws to
the contrary, thereafter be deemed to waive Landlord's right to strictly
enforce this Lease, including Tenant's obligation to make payment of Rent
on the exact day same is due, against Tenant.
C. LANDLORD'S DEFAULT. If Tenant asserts that Landlord has
failed to meet any of its obligations under this Lease, Tenant shall
provide written notice ("Notice of Default') to Landlord specifying the
alleged failure to perform, and Tenant shall send by certified mail, return
receipt requested, a copy of such Notice of Default to any and all mortgage
holders, provided that Tenant has been previously advised of the
address(es) of such mortgage holder(s). Landlord shall have a thirty (30)
day period after receipt of the Notice of Default in which to commence
curing any non performance by Landlord, and Landlord shall have as much
time thereafter to complete such cure as is necessary so long as Landlord's
cure efforts are diligent and continuous. If Landlord has not begun the
cure within thirty (30) days of receipt of the Notice of Default, or
Landlord does not thereafter diligently and continuously attempt to cure,
then Landlord shall be in default under this Lease. If Landlord is in
default under this Lease, then the mortgage holder(s) shall have an
additional thirty (30) days, after receipt of a second written notice from
Tenant, within which to cure such default or, if such default cannot be
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cured within that time, then such additional time as may be necessary so
long as their efforts are diligent and continuous.
24. LANDLORD'S REMEDIES FOR TENANT'S DEFAULT
A. LANDLORD'S OPTIONS. If Tenant is in default of this Lease,
Landlord may, at its option, in addition to such other remedies as may be
available under Florida law:
(1) terminate this Lease and Tenant's right of possession;
or
(2) terminate Tenant's right to possession but not the
Lease and/or proceed in accordance with any and all provisions of Section B
below.
B. LANDLORD'S REMEDIES.
(1) Landlord may without further notice reenter the
Premises either by force or otherwise and dispossess Tenant by summary
proceedings or otherwise, as well as the legal representative(s) of Tenant
and/or other occupant(s) of the Premises, and remove their effects and hold
the Premises as if this Lease had not been made, and Tenant hereby waives
the service of notice of intention to re-enter or to institute legal
proceedings to that end; and/or at Landlord's option,
(2) All Rent, for the balance of the Term will, at the
election of Landlord, be accelerated and the present worth of same for the
balance of the Lease Term, net of amounts actually collected by Landlord,
shall become immediately due thereupon and be paid, together with all
expenses of every nature which Landlord may incur such as (by way of
illustration and not limitation) those for attorneys' fees, brokerage,
advertising, and refurbishing the Premises in good order or preparing them
for re-rental. For purposes of this clause (2), "present worth" shall be
computed by discounting such amount to present worth at a discount rate
equal to one percentage point above the discount rate then in effect at the
Federal Reserve Bank nearest to the location of the Building; and/or at
Landlord's option,
(3) Landlord may re-let the Premises or any part thereof,
either in the name of Landlord or otherwise, for a term or terms which may
at Landlord's option be less than or exceed the period which would
otherwise have constituted the balance of the Lease Term, and may grant
concessions or free rent or charge a higher rental than that reserved in
this Lease; and/or at Landlord's option,
(4) Tenant or its legal representative(s) will also pay to
Landlord as liquidated damages any deficiency between the Rent hereby
reserved and/or agreed to be paid and the net amount, if any, of the rents
collected on account of the lease or leases of the Premises for each month
of the period which would otherwise have constituted the balance of the
Lease Term.
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25. LANDLORD'S RIGHT TO PERFORM FOR TENANT'S ACCOUNT
If Tenant fails to observe or perform any term or condition of
this Lease within the grace period, if any, applicable thereto, then Landlord
may immediately or at any time thereafter perform the same for the account of
Tenant. If Landlord makes any expenditure or incurs any obligation for the
payment of money in connection with such performance for Tenant's account
(including reasonable attorneys' fees and costs in instituting, prosecuting
and/or defending any action or proceeding through appeal), the sums paid or
obligations incurred, with interest at the lesser of (i) eighteen percent
(18%) per annum or (ii) to maximum annual rate permitted by law, will be paid
by Tenant to Landlord within ten (10) days after rendition of a bill or
statement to Tenant. In the event Tenant in the performance or non-
performance of any term or condition of this Lease should cause an emergency
situation to occur or arise within the Premises or in the Building, Landlord
will have all rights set forth in this Section immediately without the
necessity of providing Tenant any advance notice.
26. LIENS
A. GENERAL. In accordance with the applicable provisions of
the Florida Mechanic's Lien Law and specifically Florida Statutes, Section
713. 10, no interest of Landlord whether personally or in the Premises, or
in the underlying land or Building of which the Premises are a part or the
leasehold interest aforesaid shall be subject to liens for improvements
made by Tenant or caused to be made by Tenant hereunder. Further, Tenant
acknowledges that Tenant, with respect to improvements or alterations made
by Tenant or caused to be made by Tenant hereunder, shall promptly notify
the contractor making such improvements to the Premises of this provision
exculpating Landlord's liability for such liens.
B. DEFAULT. Notwithstanding the foregoing, if any mechanic's
lien or other lien, attachment, judgment, execution, writ, charge or
encumbrance is filed against the Building or the Premises or this
leasehold, or any alterations, fixtures or improvements therein or thereto,
as a result of any work action or inaction done by or at the direction of
Tenant or any of Tenant's Agents, Tenant will discharge same of record
within ten (10) days after the filing thereof, failing which Tenant will
be in default under this Lease. In such event, without waiving Tenant's
default, Landlord, in addition to all other available rights and remedies,
without further notice, may discharge the same of record by payment,
bonding or otherwise, as Landlord may elect, and upon request Tenant will
reimburse Landlord for all reasonable costs and expenses so incurred by
Landlord plus interest thereon at the rate of eighteen percent (18%) per
annum.
27. NOTICES
Notices to Tenant under this Lease will be addressed to Tenant
and mailed or delivered to the address set forth for Tenant in the BLI
Rider. Notices to Landlord under this Lease (as well as the required
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copies thereof) will be addressed to Landlord (and its agents) and mailed
or delivered to the address set forth in the BLI Rider. Notices will be
personally delivered or given by registered or certified mail, return
receipt requested. Notices delivered personally will be deemed to have
been given as of the date of delivery and notices given by mail will be
deemed to have been given forty-eight (48) hours after the time said
properly addressed notice is placed in the mail. Each party may change its
address from time to time by written notice given to the other as specified
above.
28. MORTGAGE; ESTOPPEL CERTIFICATE; SUBORDINATION
Landlord has the unrestricted right to convey, mortgage and
refinance the Building, or any part thereof. Tenant agrees that from time
to time, within seven (7) days after notice, Tenant shall execute and
deliver to Landlord, its mortgagee or any other person or entity designated
by Landlord, such instruments as Landlord, its mortgagee or such designee
may require, certifying the amount of the Security Deposit and whether this
Lease is in full force and effect, and listing any modifications. The
estoppel certificate is intended to be for the benefit of Landlord, any
purchaser or mortgagee of Landlord, any purchaser or assignee of Landlord's
mortgage, or any other person or entity designated by Landlord. The
estoppel certificate will also contain such other information as Landlord,
its mortgagee or any such designee may request. If for any reason Tenant
does not timely comply with the foregoing provisions of this paragraph,
Tenant will be deemed to have confirmed that this Lease is in full force
and effect with no defaults on the part of either party and without any
right of Tenant to offset, deduct or withhold any Rent or Additional Rent.
If Tenant fails to execute, acknowledge and deliver any such estoppel
certificate within seven (7) days after request therefor, the same is
deemed executed by Tenant and Tenant hereby irrevocably constitutes and
appoints Landlord as Tenant's attorney-in-fact, coupled with an interest,
to execute and deliver any such estoppel certificate on behalf of Tenant.
This Lease is and at all times will be subject and subordinate to all
present and future mortgages or ground leases which may affect the Building
and/or the parking garage(s), and to all recastings, renewals,
modifications, consolidations, replacements, and extensions of any such
mortgages), and to all increases and voluntary and involuntary advances
made thereunder. The foregoing will be self-operative and no further
instrument of subordination will be required. In the event that the holder
("Lender") of any encumbrance ("Mortgage") on the Building or any other
person acquires title to the Building pursuant to the exercise of any
remedy provided for in the Mortgage or by reason of the acceptance of a
deed in lieu of foreclosure (the Lender, any other such person and their
participants, successors and assigns being referred to herein as the
"Purchaser"), Tenant covenants and agrees to attorn to and recognize and
be bound to Purchaser as its new Landlord, and except as provided below,
this Lease shall continue in full force and effect as a direct Lease
between Tenant and Purchaser, except that, notwithstanding anything to the
contrary herein or in the Lease, the provisions of the Mortgage will govern
with respect to the disposition of proceeds of insurance policies or
condemnation or eminent domain awards.
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A. In no event shall Lender or any other Purchaser be:
(1) liable for any act or omission of Landlord or any prior
landlord;
(2) liable for the return of any security deposit;
(3) subject to any offsets or defenses that the Tenant
might have against Landlord or any prior landlord;
(4) bound by any payment or Rent that Tenant might have
paid to Landlord or any prior landlord for more than the current month; or
(5) bound by any amendment or modifications of the Lease
made without Lender's or such other Purchaser's prior written consent.
B. Provided that Landlord has previously notified Tenant of
Lender's address for notice, Tenant agrees to give prompt written notice
to Lender of any default by Landlord that would entitle Tenant to cancel
this Lease, and agrees that notwithstanding any provision of this Lease,
no notice of cancellation thereof given on behalf of Tenant shall be
effective unless Lender has received said notice and has failed within 30
days of the date of receipt thereof to cure Landlord's default, or if the
default cannot be cured within 30 days, has failed to commence and to
diligently pursue the cure of Landlord's default which gave rise to such
right of cancellation. Tenant further agrees to give such notices to any
successor of Lender, provided that such successor shall have given written
notice of Tenant of its acquisition of Lender's interest in the Mortgage
and designated the address to which such notices are to be sent.
C. Tenant acknowledges that Landlord may execute and deliver
to Lender an Assignment of Leases and Rents conveying the rentals under
this Lease as additional security for the loan secured by the Mortgage, and
Tenant hereby expressly consents to such Assignment.
D. Tenant agrees that it will not, without the prior written
consent of Lender, do any of the following, and any such purported action
without such consent shall be void as against Lender:
(1) modify this Lease or any extensions or renewals thereof
in such a way as to reduce the Rent, accelerate Rent payments, shorten the
original term, or change any renewal option;
(2) terminate this Lease except as provided by its terms;
or
(3) tender or accept a surrender of this Lease or make
prepayment in excess of one month of rent thereunder.
E. The foregoing provisions shall be self-operative and effective
without the execution of any further instruments on the part of Lender or
Tenant. However, Tenant agrees to execute and deliver to Lender or to any
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person to whom Tenant herein agrees to attorn such other instruments as
either shall request in order to effectuate said provisions. If Tenant
fails to execute, acknowledge or deliver any such instruments within 10
days after request therefor, the same are deemed executed by Tenant and
Tenant hereby irrevocably constitutes and appoints Landlord as Tenant's
attorney-in-fact, coupled with an interest, to execute and deliver any such
instruments for and on behalf of Tenant.
29. MODIFICATIONS
A. MORTGAGE MODIFICATION. If a mortgagee of the Building requests
modifications to this Lease as a condition to disbursing any monies to be
secured by the mortgage, Tenant agrees that within seven (7) days after
request by the mortgagee, Tenant will execute, acknowledge and deliver to
the mortgagee an agreement, in form and substance satisfactory to the
mortgagee, evidencing such modifications, provided they do not increase
Tenant's obligations under this Lease or materially adversely affect the
leasehold interest created by this Lease.
B. ESTOPPEL LETTER. Tenant agrees that within seven (7) days after
request by any mortgagee of the Building, Tenant will execute, acknowledge
and deliver to the mortgagee a notice in form and substance satisfactory
to the mortgagee (as prepared by Landlord), setting forth such information
as the mortgagee may require with respect to this Lease and/or the
Premises. If for any reason Tenant does not timely comply with the
provisions of this paragraph, Tenant will be deemed to have confirmed that
this Lease is in full force and effect with no defaults on the part of
either party and without any right of Tenant to offset, deduct or withhold
any Rent or Additional Rent. If Tenant fails to execute, acknowledge and
deliver any such statement to Landlord within seven (7) days after request
therefor, the same is deemed executed by Tenant and Tenant hereby
irrevocably constitutes and appoints Landlord as Tenant's attorney-in-fact,
coupled with an interest, to execute and deliver any such instrument on
behalf of Tenant.
30. TRANSFER BY LANDLORD
If Landlord's interest in the Building terminates by reason of a bona
fide sale or other transfer, Landlord will thereupon be released from all
further liability to Tenant under this Lease. At the expiration or
termination of the Lease Term, Tenant shall deliver to Landlord all keys
to the Premises and make known to Landlord the location and combination of
all safes, locks and similar items.
31. SURRENDER OF PREMISES; HOLDING OVER
A. SURRENDER. Tenant agrees to surrender the Premises to Landlord
on the Expiration Date (or sooner termination of the Lease Term pursuant
to other applicable provisions hereof) in as good condition as they were
at the commencement of Tenant's occupancy, ordinary wear and tear, and
damage by fire and windstorm excepted.
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B. RESTORATION. In all events, Tenant will promptly restore all
damage caused in connection with any removal of Tenant's personal property.
Tenant will pay to Landlord, upon request, all damages that Landlord may
suffer on account of Tenant's failure to surrender possession as and when
aforesaid and will indemnify Landlord against all liabilities, costs and
expenses (including all reasonable attorneys' fees and costs if any)
arising out of Tenant's delay in so delivering possession, including claims
of any succeeding tenant.
C. REMOVAL. Upon expiration of the Lease Term, Tenant will not be
required to remove Building standard items from the Premises, all of such
Building standard items being the property of Landlord.
D. HOLDOVER. If Tenant shall be in possession of the Premises after
the expiration of the Term, in the absence of any agreement extending the
Term, the tenancy under this Lease shall become one from month to month,
terminable by either party on thirty (30) days' prior notice, and shall be
subject to all of the terms and conditions of this Lease as though the Term
had been extended from month to month, except that (i) the Base Rent
payable hereunder for each month during said holdover period shall be equal
to twice the monthly installment of Base Rent payable during the last month
of the Term and (ii) all Overhead Rent payable hereunder shall be prorated
for each month during such holdover period.
E. NO SURRENDER. No offer of surrender of the Premises, by delivery
to Landlord or its agent of keys to the Premises or otherwise, will be
binding on Landlord unless accepted by Landlord, in writing, specifying the
effective surrender of the Premises. At the expiration or termination of
the Lease Term, Tenant shall deliver to Landlord all keys to the Premises
and make known to Landlord the location and combinations of all locks,
safes and similar items. No receipt of money by Landlord from Tenant after
the Expiration Date (or sooner termination) shall reinstate, continue or
extend the Lease Term, unless Landlord specifically agrees to same in
writing signed by Landlord at the time such payment is made by Tenant.
32. NO WAIVER; CUMULATIVE REMEDIES
A. NO WAIVER. No waiver of any provision of this Lease by Landlord
will be deemed to imply or constitute a further waiver by Landlord of the
same or any other provision hereof. The rights and remedies of Landlord
under this Lease or otherwise are cumulative and are not intended to be
exclusive and the use of one will not be taken to exclude or waive the use
of another, and Landlord will be entitled to pursue all rights and remedies
available to landlords under the laws of the State of Florida. Landlord,
in addition to all other rights which it may have under this Lease, hereby
expressly reserves all rights in connection with the Building or the
Premises not expressly and specifically granted to Tenant under this Lease
and Tenant hereby waives all claims for damages, loss, expense, liability,
eviction or abatement it has or may have against Landlord on account of
Landlord's exercise of its reserved rights, including, but not limited to,
Landlord's right to alter the existing name, address, style or
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configuration of the Building or the Common Areas, signage, suite
identifications, parking facilities, lobbies, entrances and exits,
elevators and stairwells, unless the same has a material detrimental effect
on Tenant's ability to do business.
B. RENT PAYMENTS. No receipt of money by Landlord from Tenant at
any time, or any act, or thing done by, Landlord or its agent shall be
deemed a release of Tenant from any liability whatsoever to pay Rent,
Additional Rent, or any other sums due hereunder, unless such release is
in writing, subscribed by a duly authorized officer or agent of Landlord
and refers expressly to this Section. Any payment by Tenant or receipt by
Landlord of less than the entire amount due at such time shall be deemed
to be on account of the earliest sum due. No endorsement or statement on
any check or any letter accompanying any check or payment shall be deemed
an accord and satisfaction. In the case of such a partial payment or
endorsement, Landlord may accept such payment, check or letter without
prejudice to its right to collect all remaining sums due and pursue all of
its remedies under the Lease.
33. WAIVER
To the extent permitted by law, Tenant hereby waives: (a) jury trial
in any action or proceeding regarding a monetary default by Tenant and/or
Landlord's right to possession of the Premises, and (b) in any action or
proceeding by Landlord for eviction where Landlord has also filed a
separate action for damages, Tenant waives the right to interpose any
counterclaim (except a mandatory or compulsory counterclaim) in such
eviction action. Moreover, Tenant agrees that it shall not interpose or
maintain any counterclaim in such damages action unless it pays and
continues to pay all Rent, as and when due, into the registry of the court
in which the damages action is filed. In the event of any dispute
hereunder, or any default in the performance of any term or condition of
this Lease, the prevailing party in litigation shall be entitled to recover
all costs and expenses associated therewith, including reasonable
attorneys' fees.
34. CONSENTS AND APPROVALS
If Tenant requests Landlord's consent or approval under this Lease,
and if in connection with such requests Landlord deems it necessary to seek
the advice of its attorneys, architects and/or other experts, then Tenant
shall pay the reasonable fee of Landlord's attorneys, architects and/or other
experts in connection with the consideration of such request and/or the
preparation of any documents pertaining thereto. Whenever under this Lease
Landlord's consent or approval is expressly or impliedly required, the same
shall be in writing and may be arbitrarily withheld except as otherwise
specified herein.
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35. RULES AND REGULATIONS
Tenant agrees to abide by all rules and regulations attached hereto
as Exhibit "C" and incorporated herein by this reference, as reasonably
amended and supplemented from time to time by Landlord. Landlord will not
be liable to Tenant for violation of the same or any other act or omission
by any other tenant.
36. SUCCESSORS AND ASSIGNS
This law will be binding upon and inure to the benefit of the
respective heirs, personal and
legal representatives, successors and permitted assigns of the parties
hereto.
37. QUIET ENJOYMENT
In accordance with and subject to the terms and provisions of this
Lease, Landlord warrants that it has full right to execute and to perform
under this Lease and to grant the estate demised and that Tenant, upon
Tenant's payment of the required Rent and Additional Rent and performing
of all of the terms, conditions, covenants, and agreements contained in
this Lease, shall peaceably and quietly have, hold and enjoy the Premises
during the full Lease Term.
38. ENTIRE AGREEMENT
This Lease, together with the BLI Rider, exhibits, schedules, addenda
and guaranties (as the case may be) fully incorporated into this Lease by
this reference, contains the entire agreement between the parties hereto
regarding the subject matters referenced herein and supersedes all prior
oral and written agreements between them regarding such matters. This
Lease may be modified only by an agreement in writing dated and signed by
Landlord and Tenant after the date hereof.
39. HAZARDOUS MATERIALS
A. PROHIBITION OF STORAGE. As used herein, "Hazardous Materials
Laws" means all federal, state and local laws, statutes, ordinances and
regulations, rules, rulings, policies, orders and administrative actions
and orders relating to industrial hygiene, environmental protection or the
use, analysis, generation, manufacture, storage, disposal or transportation
of any oil, flammable explosives, asbestos, urea formaldehyde, radioactive
materials or waste, infectious waste, or other hazardous, toxic,
contaminated or polluting materials, substances or wastes, including,
without limitation, any 'hazardous substances," "hazardous wastes,"
"hazardous materials" or "toxic substances" under any such laws, ordinances
or regulations (collectively, "Hazardous Materials"). Tenant shall, at its
own expense, at all times and in all respects: (i) comply with all
Hazardous Materials Laws regarding Hazardous Materials introduced in or
about the Building by or at the direction of Tenant or in connection with
Tenant's use of the Premises ("Tenant's Hazardous Materials"); and (ii)
procure, maintain in effect and comply with all conditions of any and all
permits, licenses and other governmental and regulatory approvals relating
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to Tenant's Hazardous Materials within, on, under or about the Building in
conformity with all applicable Hazardous Materials Laws and prudent
industry practices regarding management of such Hazardous Materials.
Landlord recognizes and agrees that Tenant may use Tenant's Hazardous
Materials in normal quantities that are applicable to general office use
and that such use by Tenant shall not be deemed a violation of this
Section, so long as the levels are not in violation of any Hazardous
Materials Laws. Upon termination or expiration of the Lease, Tenant shall,
at its own expense, cause all of Tenant's Hazardous Materials to be removed
from the Premises and Building Common Area and transported for use, storage
or disposal in accordance and compliance with all applicable Hazardous
Materials Laws. Landlord acknowledges that it is not the intent of this
Section to prohibit Tenant from operating its business as described in this
Lease. Tenant may operate its business according to the custom of the
industry so long as the use or presence of Tenant's Hazardous Materials is
strictly and properly monitored according to all applicable governmental
requirements. Tenant shall indemnify, protect, defend (by counsel
reasonably acceptable to Landlord), and hold Landlord and Landlord's Agents
free and harmless from and against any and all claims, liabilities,
penalties, forfeitures, losses and expenses (including attorneys' fees) or
death of or injury to any person or damage to any property whatsoever,
including, without limitation, the Building common area, arising from or
caused in whole or in part, directly or indirectly, by the presence in or
about the Building of any of Tenant's Hazardous Materials or by Tenant's
failure to comply with any Hazardous Materials Law regarding Tenant's
Hazardous Materials or in connection with any removal, remediation, clean
up, restoration and materials required hereunder to return the Premises and
any other property of whatever nature to their condition existing prior to
the appearance of Tenant's Hazardous Materials.
B. DISCLOSURE WARNING AND NOTICE OBLIGATIONS. Tenant shall comply
with all laws, ordinances and regulations in the State where the Premises
is located regarding the disclosure of the presence or danger of Tenant's
Hazardous Materials. Tenant acknowledges and agrees that all reporting and
warning obligations required under the Hazardous Materials -Laws with
respect to Tenant's Hazardous Materials are the sole responsibility of
Tenant, whether or not such Hazardous Materials Laws permit or require
Landlord to provide such reporting or warnings, and Tenant shall be solely
responsible for complying with such Hazardous Materials Laws regarding the
disclosure of, the presence or danger of Tenant's Hazardous Materials.
Tenant shall immediately notify Landlord, in writing, of any complaints,
notices, warnings, reports or asserted violations of which Tenant becomes
aware relating to Hazardous Materials on or about the Premises. Tenant
shall also immediately notify Landlord if Tenant knows or has reason to
believe Tenant's Hazardous Materials have or will be released in or about
the Building.
C. ENVIRONMENTAL TESTS AND AUDITS. Tenant shall not perform or
cause to be performed, any Hazardous Materials surveys, studies, reports
or inspection, relating to the Premises without obtaining Landlord's
advance written consent, which consent may be withheld in Landlord's sole
discretion. At any time prior to the expiration of the Lease Term,
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Landlord shall have the right to enter upon the Premises in order to
conduct appropriate tests and to deliver to Tenant the results of such
tests to demonstrate that levels of any Hazardous Materials in excess of
permissible levels has occurred as a result of Tenant's use of the
Premises.
D. SURVIVAL/TENANT'S OBLIGATIONS. The respective rights and
obligations of Landlord and Tenant under this Section shall survive the
expiration or termination of this Lease.
40. BANKRUPTCY PROVISIONS
A. EVENT OF BANKRUPTCY. If this Lease is assigned to any person or
entity pursuant to the provisions of the United States Bankruptcy Code, II
U.S.C. Section 101 et seq. (the "Bankruptcy Code"), any and all monies or
other consideration payable or otherwise to be delivered in connection with
such assignment shall be paid or delivered to Landlord, shall be and remain
the exclusive property of Landlord, and shall not constitute the property
of Tenant or of the estate of Tenant within the meaning of the Bankruptcy
Code. Any and a monies or other considerations constituting Landlord's
property under this Section not paid or delivered to Landlord shall be held
in trust for the benefit of Landlord and shall be promptly paid or
delivered to Landlord. Any person or entity to which this Lease is
assigned pursuant to the provisions of the Bankruptcy Code shall be deemed
without further act or deed to have assumed all of the obligations arising
under this Lease on and after the date of such assignment.
B. ADDITIONAL REMEDIES. In addition to any rights or remedies
heretofore or hereinafter conferred upon Landlord under the terms of this
Lease, the following remedies and provisions shall specifically apply in
the event Tenant is in default of this Lease:
(1) In all events, any receiver or trustee in bankruptcy shall
either expressly assume or reject this Lease within sixty (60) days following
the entry of an "Order for Relief" or within such earlier time as may be
provided by applicable law.
(2) In the event of an assumption of this Lease by a debtor or by a
trustee, such debtor or trustee shall within fifteen (15) days after such
assumption (i) cure any default or provide adequate assurance that defaults
will be promptly cured; (ii) compensate Landlord for actual pecuniary loss or
provide adequate assurance that compensation will be made for actual monetary
loss, including, but not limited to, all attorneys' fees and costs incurred
by Landlord resulting from any such proceedings; and (iii) provide adequate
assurance of future performance.
(3) Where a default exists under this Lease, the trustee or debtor
assuming this Lease may not require Landlord to provide services or supplies
incidental to this Lease before its assumption by such trustee or debtor,
unless Landlord is compensated under the terms of this Lease for such
services and supplies provided before the assumption of such Lease.
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(4) The debtor or trustee may only assign this Lease if (i) it is
assumed and the assignee agrees to be bound by this Lease, (ii) adequate
assurance of future performance by the assignee is provided, whether or not
there has been a default under this Lease, and (iii) the debtor or trustee
has received Landlord's prior written consent pursuant to the provisions of
this Lease. Any consideration paid by any assignee in excess of the rental
reserved in this Lease shall be the sole property of, and paid to, Landlord.
(5) Landlord shall be entitled to the fair market value for the
Premises and the services provided by Landlord (but in no event less than the
rental reserved in this Lease) subsequent to the commencement of a bankruptcy
event.
(6) Any security deposit given by Tenant to Landlord to secure the
future performance by Tenant of all or any of the terms and conditions of
this Lease shall be automatically transferred to Landlord upon the entry of
an "Order of Relief".
(7) The parties agree that Landlord is entitled to adequate
assurance of future performance of the terms and provisions of this Lease in
the event of an assignment under the provisions of the Bankruptcy Code. For
purposes of any such assumption or assignment of this Lease, the parties
agree that the term "adequate assurance" shall include, without limitation,
at least the following: (i) any proposed assignee must have, as demonstrated
to Landlord's satisfaction, a net worth (as defined in accordance with
generally accepted accounting principles consistently applied) in an amount
sufficient to assure that the proposed assignee will have the resources to
meet the financial responsibilities under this Lease, including the payment
of all Rent; the financial condition and resources of Tenant are material
inducements to Landlord entering into this Lease; (ii) any proposed assignee
must have engaged in the permitted use described in the BLI Rider for at
least five (5) years prior to any such proposed assignment, the parties
hereby acknowledging that in entering into this Lease, Landlord considered
extensively Tenant's permitted use and determined that such permitted
business would add substantially to the tenant balance in the Building, and
were it not for Tenant's agreement to operate only Tenant's permitted
business on the Premises, Landlord would not have entered into this Lease,
and that Landlord's operation of the Building will be materially impaired if
a trustee in bankruptcy or any assignee of this Lease operates any business
other than Tenant's permitted business; (iii) any assumption of this Lease by
a proposed assignee shall not adversely affect Landlord's relationship with
any of the remaining tenants in the Building taking into consideration any
and all other "use" clauses and/or "exclusivity" clauses which may then exist
under their leases with Landlord; and (iv) any proposed assignee must not be
engaged in any business or activity which it will conduct on the Premises and
which will subject the Premises to contamination by any Hazardous Materials.
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41. FAILURE TO GIVE POSSESSION
If Landlord is unable to give possession of the Premises on the
date of the commencement of the term hereof, because of the holding-over
or retention of possession of any tenant, undertenant or occupants,
Landlord shall not be subject to any liability for failure to give
possession on said date and the validity of the Lease shall not be impaired
under such circumstances, nor shall the same be construed in any wise to
extend the term of this Lease, but the Rent payable hereunder shall be
abated (provided Tenant is not responsible for Landlord's inability to
obtain possession) until after Landlord shall have given Tenant written
notice that the Premises are substantially ready for Tenant's occupancy.
42. DELIVERY OF GUARANTY
At or prior to the parties execution of this Lease Landlord has
delivered to Tenant a form of guaranty (the "Guaranty") to be signed by
each Guarantor identified in the BLI Rider. Tenant's failure to deliver
the Guaranty fully executed by the Guarantor within 5 days from the
earliest date on which this Lease has been signed by the parties shall
constitute an Event of Default.
43. MISCELLANEOUS
A. If Tenant has a lease for other space in the Building, any
default by Tenant under such lease will constitute a default hereunder.
B. If any term or condition of this Lease or the application
thereof to any person or circumstance is, to any extent, invalid or
unenforceable, the remainder of this Lease, or the application of such term
or condition to persons or circumstances other than those as to which it
is held invalid or unenforceable, is not to be affected thereby and each
term and condition of this Lease is to be valid and enforceable to the
fullest extent permitted by law. This Lease will be construed in
accordance with the laws of the State of Florida.
C. Submission of this Lease to Tenant does not constitute an
offer, and this Lease becomes effective only upon execution and delivery
by both Landlord and Tenant.
D. Tenant acknowledges that it has not relied upon any
statement, representation, prior or contemporaneous written or oral
promises, agreements or warranties, except such as are expressed herein.
E. Tenant will pay before delinquency all taxes assessed
during the Lease Term against any occupancy interest in the Premises or
personal property of any kind owned by or placed in, upon or about the
Premises by Tenant.
F. If Tenant, with Landlord's consent, occupies the Premises
or any part thereof prior to the beginning of the Lease Term, all
provisions of this Lease will be in full force and effect commencing upon
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such occupancy, and Base Rent and Additional Rent, where applicable, for
such period will be paid by Tenant at the same rate herein specified.
G. Each party represents and warrants that it has not dealt
with any agent or broker in connection with this transaction except for the
agents or brokers specifically set forth in the BLI Rider with respect to
each Landlord and Tenant. If either party's representation and warranty
proves to be untrue, such party will indemnify the other party against all
resulting liabilities, costs, expenses, claims, demands and causes of
action, including reasonable attorneys' fees and costs through all
appellate actions and proceedings, if any. The foregoing will survive the
end of the Lease Term.
H. Neither this Lease nor any memorandum hereof will be
recorded by Tenant.
I. Nothing contained in this Lease shall be deemed by the
parties hereto or by any third party to create the relationship of
principal and agent, partnership, joint venturer or any association between
Landlord and Tenant, it being expressly understood and agreed that neither
the method of computation of Rent nor any other provisions contained in
this Lease nor any act of the parties hereto shall be deemed to create any
relationship between Landlord and Tenant other than the relationship of
landlord and tenant.
J. Whenever in this Lease the context allows, the word
"including' will be deemed to mean "including without limitation". 'Me
headings of articles, sections or paragraphs are for convenience only and
shall not be relevant for purposes of interpretation of the provisions of
this Lease.
K. This Lease does not create, nor will Tenant have, any
express or implied easement for or other rights to air, light or view over
or about the Building or any part thereof.
L. Landlord reserves the right to use, install, monitor, and
repair pipes, ducts and conduits within the walls, columns, and ceilings
of the Premises.
M. Any acts to be performed by Landlord under or in
connection with this Lease may be delegated by Landlord to its managing agent
or other authorized person or firm.
N. It is acknowledged that each of the parties hereto has
been fully represented by legal counsel and that each of such legal counsel
has contributed substantially to the content of this Lease. Accordingly, this
Lease shall not be more strictly construed against either party hereto by
reason of the fact that one party may have drafted or prepared any or all
of the terms and provisions hereof.
O. Landlord and Tenant acknowledge that the terms and
provisions of this Lease have been negotiated based upon a variety of
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factors, occurring at a coincident point in time, including, but not
limited to: (i) the individual principals involved and the financial
strength of Tenant, (ii) the nature of Tenant's business and use of the
Premises, (iii) the current leasing market place and the economic
conditions affecting rental rates, (iv) the present and projected tenant
mix of the Building, and (v) the projected juxtaposition of tenants on the
floor(s) upon which the Premises are located and the floors within the
Building. Therefore, recognizing the totality, uniqueness, complexity and
interrelation of the aforementioned factors, the Tenant agrees to use its
best efforts not to disseminate in any manner whatsoever, (whether by word
of mouth, mechanical reproduction, physical tender or by any manner of
visual or aural transmission or review) the terms and conditions of this
Lease to third parties who could in any way be considered presently or in
the future as prospective tenants for this or any other leasehold property
with which Landlord may be involved.
P. If more than one person or entity is named herein as Tenant,
their liability hereunder will be joint and several. In case Tenant is a
corporation, Tenant (a) represents and warrants that this Lease has been
duly authorized, executed and delivered by and on behalf of Tenant and
constitutes the valid and binding agreement of Tenant in accordance with
the terms hereof, and (b) Tenant shall deliver to Landlord or its agent,
concurrently with the delivery of this Lease, executed by Tenant, certified
resolutions of the board of directors (and shareholders, if required)
authorizing Tenant's execution and delivery of this Lease and the
performance of Tenant's obligations hereunder. In case Tenant is a
partnership, Tenant represents and warrants that all of the persons who are
general or managing partners in said partnership have executed this Lease
on behalf of Tenant, or that this Lease has been executed and delivered
pursuant to and in conformity with a valid and effective authorization
therefor by all of the general or managing partners of such partnership,
and is and constitutes the valid and binding agreement of the partnership
every partner therein in accordance with its terms. It is agreed that each
and every present and future partner in Tenant shall be and remain at all
times jointly and severally liable hereunder and that neither the death,
resignation or withdrawal of any partner, nor the subsequent modification
or waiver of any of the terms and provisions of this Lease, shall release
the liability of such partner under the terms of this Lease unless and
until Landlord shall have consented in writing to such release.
Q. Landlord has made no inquiries about and makes no
representations (express or implied) concerning whether Tenant's proposed
use of the Premises is permitted under applicable law, including applicable
zoning law; should Tenant's proposed use be prohibited, Tenant shall be
obligated to comply with applicable law and this Lease shall nevertheless
remain in fall force and effect.
R. Notwithstanding anything to the contrary in this Lease, if
Landlord cannot perform any of its obligations due to events beyond
Landlord's control, the time provided for performing such obligations shall
be extended by a period of time equal to the duration of such events.
Events beyond Landlord's control include, but are not limited to,
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hurricanes and floods and other acts of God, war, civil commotion, labor
disputes, strikes, fire, flood or other casualty, shortages of labor or
material, government regulation or restriction and weather conditions.
S. Tenant agrees to pay, before delinquency, all taxes
assessed during the Lease Term agreement (i) all personal property, trade
fixtures, and improvements located in or upon the Premises and (ii) any
occupancy interest of Tenant in the Premises.
T. If the Rent shall be or become uncollectible by virtue
of any law, governmental order or regulation, or direction of any public
officer or body pursuant to law, Tenant shall enter into such agreement or
agreements and take such other action (without additional expense to
Tenant) as Landlord may request, as may be legally permissible, to permit
Landlord to collect the Rent which may from time to time during the
continuance of such rent restriction be legally permissible, but not in
excess of the amounts of Rent additional rent payable under this Lease.
Upon the termination of such rent restriction prior to the expiration of
the term of this Lease, (a) the Rent shall become payable under this Lease
in the amount of the Rent set forth in this Lease for the period following
such termination, and (b) Tenant shall pay to Landlord, if legally
permissible, an amount equal to (i) the Rent which would have been paid
pursuant to this Lease, but for such rent restriction, less (ii) the Rent
paid by Tenant to Landlord during the period that such rent restriction was
in effect.
U. If Tenant is in arrears in payment of Rent, Tenant waives
Tenant's right, if any, to designate the items against which any payments
made by Tenant are to be credited, and Tenant agrees that Landlord may
apply any payments made by Tenant to any items Landlord sees fit,
notwithstanding any designation or request by Tenant to credit such
payments to certain items.
V. Irrespective of the place of execution or performance,
Landlord and Tenant and their successors and assigns and any guarantor of
Tenant's obligations hereunder hereby agree that this Lease shall be
governed by and construed and enforced in accordance with the laws of the
State of Florida without giving reference to principles of conflicts of
law. The state courts of the State of Florida shall have jurisdiction to
hear and determine any dispute between Landlord and Tenant pertaining
directly or indirectly to this Lease or any matter arising therefrom, and
Tenant and any guarantor of Tenant's obligations hereunder hereby expressly
PRESIDENTIAL CIRCLE STANDARD OFFICE LEASE
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<PAGE>
consent and submit in advance to such jurisdiction in any action or
proceeding commenced in such courts by either party hereto.
IN WITNESS WHEREOF, the parties have signed and delivered this Lease
as of the day and year first above written.
WITNESSES: LANDLORD:
/s/ J. Mallory COLONY PRESIDENTIAL PARTNERS, L.P.
- ---------------------------
By: Presidential Genpar, Inc.
/s/ [illegible]
- ---------------------------
(As to Landlord) By: /s/ Kevin C. McTavish
----------------------------
Kevin C. McTavish
Vice President
WITNESSES: "TENANT"
ACC CONSUMER FINANCE CORPORATION
- ---------------------------
By: /s/ Roy Frank Mercer S.V.P.
-------------------------------
/s/ Katheryn L. Graver
- ---------------------------
(As to Tenant)
PRESIDENTIAL CIRCLE STANDARD OFFICE LEASE
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<PAGE>
EXHIBIT "A"
Architectural Drawing of Presidential Circle Building
PRESIDENTIAL CIRCLE STANDARD OFFICE LEASE
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<PAGE>
EXHIBIT "B"
WORK LETTER AGREEMENT
In the event of any inconsistencies between this Agreement and the
Lease dated concurrently herewith to which this Agreement is attached as
Exhibit "B", this Agreement shall control. Capitalized terms used in
this Agreement shall, unless otherwise specifically set forth herein,
have the same meanings as in the Lease.
1. Landlord shall complete or cause the completion of the initial
buildout of the Premises as shown on the Final Plans (defined in
Paragraph 2.) and as more fully described in this Section ("Tenant's
Initial Improvements"). As Tenant's agent, Landlord shall retain an
architect and/or engineer licensed in the State of Florida to prepare
complete and detailed demolition, architectural, structural, mechanical
and engineering plans and specifications prepared by and stamped and
certified by such architect or engineer, showing Tenant's Initial
Improvements ("Construction Plans"). The cost of the Construction Plans
shall be the responsibility of Tenant, except that if Paragraph 2.
establishes a financial contribution of Landlord toward the cost of
Tenant's Initial Improvements, Landlord will pay the cost of the
Construction Plans out of such financial contribution. The Construction
Plans shall be substantially in accordance with the preliminary space
plan initialed by the parties at or prior to execution of the Lease, and
shall otherwise be acceptable to Landlord in its reasonable discretion.
Tenant's Initial Improvements shall meet or exceed the Building minimum
standards for Tenant's Initial Improvements ("Minimum Building Materials
and Construction") as determined by Landlord in its reasonable
discretion. If applicable, Tenant's Construction Plans shall include
all information necessary to reflect Tenant's requirements for the
installation of any supplemental air conditioning system and ductwork,
heating, electrical, plumbing and other mechanical systems and all work
necessary to connect any special or non-standard facilities to the
Building's base mechanical, electrical and structural systems. Tenant's
submission shall include not less than one (1) set of sepias, three (3)
signed and sealed sets, and six (6) bidding sets of black and white
prints for each bidder. Tenant's Construction Plans shall include, but
not be limited to, indication or identification of the following:
A. locations and structural design of all floor area
requiring live load capacities in excess of 75 pounds per square
foot;
B. the density of occupancy in large work areas;
C. the location of any food service areas or vending
equipment rooms if permitted by Landlord,
D. areas requiring 24-hour air conditioning, Tenant's
supplemental HVAC units (if any), and electrical consumption
submeters if required by Landlord;
PRESIDENTIAL CIRCLE STANDARD OFFICE LEASE
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<PAGE>
E. location of rooms for telephone equipment;
F. locations and types of plumbing, if any, required for
toilets (other than core facilities), sinks, drinking fountains,
etc.;
G. light switching of offices, conference rooms, etc.;
H. layouts for specially installed equipment, including
computers, size and capacity of mechanical and electrical services
required and heat projection of equipment;
I. dimensioned location of: (a) electrical receptacles (120
volts), including receptacles for wall clocks, and telephone
outlets and their respective locations (wall or floor), (b)
electrical receptacles for use in the operation of Tenant's
business equipment which requires 208 volts or separate electrical
circuits, (c) electronic calculating, CRT systems, etc., and (d)
special audio-visual requirements;
J. special fire protection equipment and raised flooring
where permitted by Budding systems and otherwise approved by
Landlord;
K. reflected ceiling plan;
L. information concerning air conditioning loads, including,
but not limited to, air volume amounts at all supply vents;
M. non-building standard ceiling heights and/or materials;
N. materials, colors and designs of wall coverings and
finishes;
O. painting and decorative treatment required to complete
all construction;
P. swing of each door;
Q. a schedule for doors (including dimensions for
undercutting of doors to clear carpeting) and frames complete with
hardware, and
R. all other information necessary to make the work complete
and in all respects ready for operation.
2. As used herein, "Final Plans" refers to the Construction Plans
after the same have been approved in writing by Landlord. Other than
Landlord's Contribution, if any, set forth in the BLI Rider which
Landlord shall contribute to the cost of the Construction Plans and
Tenant's Initial Improvements ('Landlord's Contribution"), Tenant shall
PRESIDENTIAL CIRCLE STANDARD OFFICE LEASE
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<PAGE>
be responsible for the entire cost of Tenant's Initial Improvements
including any revisions to the Final Plans ("Revisions").
3 . Promptly following Landlord's approval of the Final Plans,
Landlord shall cause the Final Plans to be submitted for bids to not
fewer than two (2) contractors selected by Landlord. Promptly following
Landlord's receipt of the bids from such two (2) contractors, Landlord
shall submit to Tenant the estimate of the cost of Tenant's Initial
Improvements which exceeds Landlord's Contribution ("Tenant's Extra
Cost"). Tenant shall either approve or disapprove the estimate of
Tenant's Extra Cost within three (3) days after submission by Landlord.
If Tenant shall disapprove all or a portion of the estimate of the
Tenant's Extra Cost, Landlord shall as Tenant's agent and at Tenant's
expense cause the Construction Plans to be revised and resubmitted to
the applicable contractors for revised bids. This process shall
continue until Tenant approves Tenant's Extra Cost estimate; provided,
however, such process shall not continue more than thirty (30) days
following Landlord's initial advice as to the amount of Tenant's Extra
Cost, during which such thirty (30) day period, Tenant shall be required
to approve the then-existing amount of Tenant's Extra Cost based on
Landlord's and Tenant's negotiations with the selected contractor.
Notwithstanding the foregoing, Tenant shall approve of Tenant's Extra
Cost if (i) the same is not more than 5 % greater than Landlord's
Contribution or (ii) Landlord agrees in writing that it shall pay any
portion of Tenant's Extra Cost that exceeds an amount equal to 105 % of
Landlord's Contribution. Tenant's approval of Tenant's Extra Cost shall
be evidenced by the payment of same to Landlord, and Tenant shall be
responsible for the payment of any sales or other taxes applicable to
Tenant's Extra Cost. Landlord agrees that, unless Tenant is in default
of its obligations under this Work Letter Agreement or the Lease, it
shall only disburse the Tenant's Extra Cost monies on account of work in
place. Time shall be of the essence with respect to Tenant's
obligations hereunder.
4. Landlord shall not be responsible or liable for any delay in
substantially completing Tenant's Initial Improvements as a result of
any act, neglect, failure or omission of Tenant, its agents, servants,
employees, contractors, or subcontractors ("Tenant Delay"). Tenant
Delay includes without limitation any of the following:
A. Tenant's failure to furnish plans, drawings, and
specifications in accordance with and at the times required by this
Work Letter; or
B. any delays resulting from the disapproval by Landlord or
Landlord's Consultant of all or a portion of Tenant's revised plans
and specifications as resubmitted after initial submission; or
C. any delays resulting from Tenant's disapproval of the
cost of Tenant's Extra Cost, which delay shall be deemed to
commence upon the date of Tenant's disapproval of the cost of
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<PAGE>
Tenant's Extra Cost and end on the date of Tenant's final approval
of such cost; or
D. Tenant's request for materials, finishes or installations
which are not readily available at the time Landlord is ready to
install same; or
E. Any change(s) to or revision(s) of the Final Plans
("Revisions"); or
F. the performance of work by a person, firm or corporation
employed by Tenant and delays in the completion of the said work by
said person, firm, or corporation.
5. Tenant shall pay to Landlord a sum equal to any additional
cost to Landlord in completing Tenant's Initial Improvements resulting
from any Tenant Delay. Any such sums shall be in addition to any sums
payable pursuant to paragraph 3 and shall be paid to Landlord within ten
(10) days after Landlord submits an invoice to Tenant therefor. Such
costs shall be collectible in the same manner as Additional Rent whether
or not the Lease Term shall have commenced, and if Tenant defaults in
the payment of such cost, Landlord shall have no obligation to continue
the performance of Tenant's Initial Improvements until Tenant shall have
cured such default.
6. Except as hereinafter provided, neither Tenant nor its agents,
employees, invitees or independent contractors shall enter the Premises
during construction of Tenant's Initial Improvements. Tenant hereby
designates Tenant's Construction Agent as set forth in the BLI Rider for
the purposes of submitting to Landlord or Landlord's Consultant and
authorizing Revisions to the Final Plans. Tenant's Construction Agent
shall have the right from time to time to inspect the Premises during
the course of Tenant's Initial Improvements provided Tenant's
Construction Agent shall make a prior appointment with Landlord and/or
its contractor at a mutually convenient time.
7. Upon the granting of consent by Landlord or Landlord's
Consultant, which shall not be unreasonably withheld, Tenant or its
agents may enter the Premises prior to the Commencement Date to perform
such decorative or other tenant finishing work ("Tenant Work") as it may
desire provided that the Tenant Work in no way interferes with the
performance of Tenant's Initial Improvements and such entry shall be
deemed under all the terms, covenants and conditions of this Lease,
except the covenant to pay Base Rent. In the event Landlord, in its
sole discretion, determines that the performance by Tenant or any of its
agents of any Tenant Work is impeding or impairing in any way the
performance of Tenant's Initial Improvements, then, upon notice to
Tenant, Tenant shall cease or cause the cessation of such Tenant Work
until the receipt of notification from Landlord or Landlord's Consultant
that Tenant may once again enter the Premises in order to perform the
Tenant Work. In the event Tenant Agent or Tenant's contractor enters
the Building, as may be permitted by Landlord or Landlord's Consultant,
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<PAGE>
Tenant shall indemnify and hold Landlord harmless from and against any
and all loss, liability, damage, cost and expense, including without
limitation, reasonable attorneys' fees and disbursements, claimed or
actually arising from, growing out of or related to (a) any act,
INITIALS neglect or failure to act of Tenant or anyone entering the
Building with Tenant's permission, (b) the performance of Tenant Work,
or (c) any other reason whatsoever arising out of said entry upon the
Building. The provisions of this section shall survive the termination
of this Lease.
8. Tenant shall have the right to make Revisions. All Revisions
shall be subject to Landlord's prior written approval,.which shall not
be unreasonably withheld provided the Revisions are non-structural in
nature. Landlord shall either approve or disapprove the Revisions
within five (5) business days after submission thereof by Tenant.
Without limiting the generality of the foregoing, no Revision will be
approved unless (a) all changes to and modifications from the Final
Plans are circled or highlighted as per standard practices and (b) said
Revisions conform with the requirements of this Work Letter. Landlord
or Landlord's Consultant shall notify Tenant in writing of the cost of
the Revisions, and any Tenant Delay that the performance of the same may
entail. If Tenant agrees with the cost and delay of such Revisions,
Tenant shall acknowledge Tenant's approval in writing within three (3)
business days after Landlord's notice thereof to Tenant. If Tenant
fails to approve of the cost of such Revisions (and, if requested by
Landlord, the amount of any Tenant Delay that Landlord estimates will
occur as a result of such Revisions) within three (3) business days,
Landlord or Landlord's Consultant shall not approve such Revisions. The
cost of any Revisions shall be borne solely by Tenant. An additional
fee based on such cost shall be payable in the manner and at the times
set forth in paragraph 3.
9. Landlord shall, subject to Tenant Delays and any other cause
beyond Landlord's reasonable control, use due diligence to complete
Tenant's Initial Improvements as soon as may be practicable, but
Landlord shall not be liable in any manner whatsoever for its failure to
do so by any particular date.
10. Landlord shall notify Tenant of the date of Substantial
Completion at least five (5) days prior thereto. As used herein,
"Substantial Completion" shall mean that, with the exception of punch-
list items, Tenant's Initial Improvements shall have been completed in
accordance with the Final Plans and all mechanical systems serving or
affecting the Premises shall then be in working order. Landlord and
Tenant shall thereupon set a mutually convenient time for Tenant's
Construction Agent and Landlord or Landlord's Consultant to inspect the
Premises, at which time Tenant's architect shall prepare and submit to
Landlord a punch list of items to be completed. Upon completion of the
inspection, Tenant's Construction Agent shall acknowledge in writing
that substantial completion has occurred, subject to any punch list
items to be completed. Landlord shall diligently complete the approved
work on the punch list items. In the event Tenant shall fail to confer
PRESIDENTIAL CIRCLE STANDARD OFFICE LEASE
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<PAGE>
with Landlord within five (5) days of Landlord's notice setting forth
the date of Substantial Completion, which conference shall confirm
Substantial Completion of Tenant's Initial Improvements has occurred,
(a) Tenant shall have no right to enter the Premises for the purposes of
conducting its business therefrom until Tenant and Tenant's Construction
Agent met with Landlord in the Premises and prepare a punch list of
incomplete items, if applicable, and (b) Tenant's Initial Improvements
shall be deemed completed and satisfactory in all respects. As used in
the Lease, the "Commencement Date" shall be the earliest of the
following: (a) the date of Substantial Completion; (b) the date on which
Tenant takes possession of the Premises; and (c) the date that
Substantial Completion would have occurred but for any Tenant Delay as
determined by Landlord in its reasonable discretion. Notwithstanding
the foregoing, the Commencement Date shall not be set earlier than the
Substantial Completion date on account of Tenant Delay resulting from
excusable Revisions. Excusable Revisions are those that are
necessitated by (i) failure of the Final Plans to comply with applicable
building code requirements or (ii) discrepancies between the Final Plans
and actual conditions of the Building.
11. In the event of any dispute as to when and whether the work
performed or required to be performed by Landlord has been substantially
completed, the certificate of Landlord's Consultant or a temporary or
final certificate of occupancy or completion (as may be applicable)
issued by the local governmental authority shall be conclusive evidence
of such completion, effective on the date of the issuance of such
certificate to Tenant.
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<PAGE>
EXHIBIT "C"
RULES AND REGULATIONS
1. The sidewalks, entrances, passages, courts, elevators,
vestibules, stairways, corridors, and halls shall not be obstructed or
encumbered by any Tenant or used for any purpose other than ingress and
egress to and from the Premises.
2. No awnings or other projections shall be attached to the
outside walls of the Building without the prior written consent of
Landlord, in Landlord's sole discretion. No curtains, blinds, shades,
or screens shall be attached to or hung in, or used in connection with,
any window or door of the Premises, without the prior written consent of
Landlord, in Landlord's sole and reasonable discretion. Such awnings,
projections, curtains, blinds, shades, screens or other fixtures must be
of a quality, type, design, and color, and attached in the manner
approved by Landlord, in Landlord's sole discretion.
3. No sign, advertisement, notice or other lettering shall be
exhibited, inscribed, painted or affixed by any Tenant on any part of
the outside of the Premises or Building or on the inside of the Premises
if the same can be seen from the outside of the Premises without the
prior written consent of Landlord, in Landlord's sole and reasonable
discretion, except that the name of Tenant may appear on the entrance
door of the Premises. In the event of a violation of the foregoing by
Tenant, Landlord may remove same without any liability and may charge
the expense incurred by such removal to the Tenant or Tenants violating
this rule. Interior signs on doors and the directory shall be
inscribed, painted or affixed for each Tenant by Landlord at the expense
of such Tenant and shall be of a size and style acceptable to the
Landlord, in Landlord's sole discretion.
4. Tenant shall not occupy or permit any portion of the Premises
demised to it to be occupied as an office for a public stenographer or
typist, or as a barber or manicure shop, or as an employment bureau.
Tenant shall not engage or pay any employees on the Premises, except
those actually working for Tenant at the Premises, nor advertise for
labor giving an address at the Premises. The Premises shall not be used
for gambling, lodging, or sleeping or for any immoral or illegal
purposes. The Premises shall not be used for the manufacture, storage,
or sale of merchandise, goods or property of any kind whatsoever.
5. The sashes, sash doors, skylights, windows, and doors that
reflect or admit light and air into the halls, passageway or other
public places in the Building shall not be covered or obstructed by any
Tenant nor shall any bottles, parcels or other articles be placed on the
window sills. No materials shall be placed in the corridors or
vestibules nor shall any articles obstruct any air conditioning supply
or exhaust vent.
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6. The water and wash closets and other plumbing fixtures shall
not be used for any purposes other than those for which they were
constructed and no sweepings, rubbish, rags, or other substances shall
be thrown therein. All damages resulting from any misuse of the
fixtures by Tenant, its servants, employees, agents, or licensees shall
be borne by Tenant.
7. No Tenant shall mark, paint, drill into, or in any way deface
any part of the Premises or the Building of which they form a part. No
boring, cutting, or stringing of wires shall be permitted, except with
the prior written consent of Landlord, and as it may direct. Should a
Tenant require telegraphic, telephonic, annunciator or other
communication service, Landlord will direct the electricians where and
how wires are to be introduced and placed, and none shall be introduced
or placed except as Landlord shall direct. Electric current shall not
be used for power or heating without Landlord's prior written
permission. Neither Tenant nor Tenant's Agents including, but not
limited to, electrical repairmen and telephone installers, shall lift,
remove or in any way alter or disturb any of the interior ceiling
materials of the Premises or Building, nor shall any of same have any
access whatsoever to the area above the interior ceiling of the Premises
or the Building except with the prior written consent of Landlord and in
accordance with guidelines established by Landlord. No antennas shall
be permitted.
8. No bicycles, vehicles, or animals of any kind shall be brought
into or kept in or about the Premises. No Tenant shall cause or permit
any unusual or objectionable odors to be produced upon or permeate from
the Premises.
9. Landlord shall have the right to retain a passkey and to enter
the Premises at any time, to examine same or to make such alterations
and repairs as may be deemed necessary, or to exhibit same to
prospective Tenants during normal business hours.
10. No Tenant shall make, or permit to be made, any unseemly or
disturbing noises or disturb or interfere with occupants of this or
neighboring buildings or premises or those having business with them,
whether by the use of any musical instrument, radio, talking machine,
unmusical noise, whistling, singing, or in any other way. No Tenant
shall throw anything out of doors, windows, skylights, or down the
passageways.
11. No additional locks or bolts of any kind shall be placed upon
any of the doors or windows by any Tenant, nor shall any changes be made
in existing locks or the mechanism thereof. Each Tenant must, upon the
termination of his tenancy restore to the Landlord all keys of offices
and toilet rooms, either furnished to, or otherwise procured by, such
Tenant. Tenant shall pay to the Landlord the cost of any lost keys.
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12. Tenant will refer all contractors, contractors'
representatives and installation technicians, rendering any service to
Tenant, to Landlord for Landlord's supervision, approval, and control
before performance of any contractual service. This provision shall
apply to all work performed in the building, including installations of
telephones, telegraph equipment, electrical devices and attachments, and
installations of any nature affecting floors, walls, woodwork, trim,
windows, ceilings, equipment or any other physical portion of the
Building.
13. All removals, or the carrying in or out of any safes, freight,
furniture or bulky matter of any description must take place during the
hours which the Landlord or its agent may determine from time to time.
All such movement shall be under supervision of Landlord and in the
manner agreed between Tenant and Landlord by pre-arrangement before
performance. Such pre-arrangements initiated by Tenant will include
determination by Landlord, subject to his decision and control, of the
time, method, and routing of movement and limitations imposed by safety
or other concerns which may prohibit any article, equipment or any other
item from being brought into the building. Landlord reserves the right
to prescribe the weight and position of all safes, which must be placed
upon 2-inch thick plank strips to distribute the weight. Any damage
done to the Building or to other Tenants or to other persons in bringing
in or removing safes, furniture or other bulky or heavy articles shall
be paid for by the Tenant.
14. Tenant agrees that all machines or machinery placed in the
Premises by Tenant will be erected and placed so as to prevent any
vibration or annoyance to any other Tenants in the Building of which the
Premises are a part, and it is agreed that upon written request of
Landlord, Tenant will, within ten (10) days after the making of such
notice, provide approved settings for the absorbing, preventing, or
decreasing of noise from any or all machines or machinery placed in the
Premises.
15. Each Tenant shall, at its expense, provide artificial light
for the employees of the Landlord while doing janitor service or other
cleaning, and in making repairs or alterations in said Premises.
16. The requirements of Tenant will be attended to only upon
written application at the office of the Building. Employees of
Landlord shall not receive or carry messages for or to any Tenant or
other person nor contract with or render free or paid services to any
Tenant or Tenant's agent, employees, or invitees.
17. Canvassing, soliciting, and peddling in the Building is
prohibited and each Tenant shall cooperate to prevent the same.
18. Tenant shall have the free use of the mail chutes, if any,
installed in the Building, but the Landlord in no wise guarantees
efficiency of the said mail chutes and shall be in no wise responsible
for any damage or delay which may arise from use thereof.
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19. Landlord will not be responsible for lost, stolen, or damaged
property, equipment, money, or jewelry from Tenant's area or public
rooms regardless of whether such loss occurs when area is locked against
entry or not.
20. Landlord specifically reserves the right to refuse admittance
to the Building from 7 p.m. to 7 a.m. daily, or on Saturdays, Sundays or
legal holidays, to any person or persons who cannot furnish satisfactory
identification, or to any person or persons who, for any other reason in
the Landlord's judgment, should be denied access to the Premises.
Landlord, for the protection of the Tenant and Tenant's effects may
prescribe hours and intervals during the night and on Saturdays, Sundays
and holidays, when all persons entering and departing the Building shall
be required to enter their names, the offices to which they are going or
from which they are leaving, and the time of entrance and departure in a
register provided for the purpose by the Landlord.
21. No Tenant, nor any of Tenant's Agents, shall at any time bring
or keep upon the Premises any inflammable, combustible, or explosive
fluid, chemical, or substance.
22. Landlord reserves the right to make such other and further
reasonable rules and regulations as in its judgment may from time to
time be needed for the safety, care and cleanliness of the Premises, and
for the preservation of good order therein and any such other or further
rules and regulations shall be binding upon the parties hereto with the
same force and effect as if they had been inserted herein at the time of
the execution hereof.
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EXHIBIT 10.57
OFFICE BUILDING LEASE
THIS LEASE (the "Lease"), dated August 23, 1996, for
reference purposes only, is entered into between Landlord
(as defined below) and Tenant (as defined below), and
consists of the Basic Lease Provisions, the General Office
Lease Provisions and all addenda and exhibits identified at
the end of the Basic Lease Provisions.
BASIC LEASE PROVISIONS
1. Landlord: Plaza Holdings, Inc., a California corporation.
2. Tenant: ACC Consumer Finance Corporation, a Delaware corporation.
3. Project: That certain office building project commonly known
as Plaza Del Mar in the City of San Diego, San Diego County,
California, as generally shown on the site plan attached as
Exhibit "A", but reserving the right to make additions,
deletions and modifications thereto as provided herein.
(Section 1.1)
4. Premises and Building: Suite No. 160 on Floor No. One (1) in
the Building having the street address 12526 High Bluff
Drive, San Diego, California 92130, and as generally shown on
Exhibit "B" hereto. (Section 1.1)
5. Estimated Commencement Date: October 15, 1996. (Section 2.1)
6. Term: Fifteen (15) months, with Tenant having one (1) option
to extend the Lease Term for a period of one (1) year in
accordance with Paragraph 23. of the First Addendum. (Section 2.1)
7. Initial Basic Monthly Rent: Agreed to be $9,106.90 (based
upon $1.70 per square foot of Tenant's Rentable Area), plus
separately metered electricity to the Premises. (Section 3.1)
8. Increases to Basic Monthly Rent: Not applicable during the
initial Lease Term. See Paragraph 23. of the First Addendum
(Section 3.2).
9. Tenant's Rentable Area: Agreed to be 5,357 square feet.
(Section 1.1)
10. Tenant's Usable Area: Agreed to be 4,745 square feet.
11. Tenant's Pro Rata Share is 4.65% (subject to adjustment as
provided herein). (Section 3.3[b])
12. Security Deposit: $9,106.90 (Section 18).
LANDLORD'S INITIALS: TENANT'S INITIALS:
/s/ JK /s/ GSB
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13. Permitted Use: General office use. (Section 5)
14. Payments and Notices shall be addressed to: (Section 21.10)
Landlord's Agent: Janez Properties, Inc.
12520 High Bluff Drive, Suite 100
San Diego, CA 92130
Tenant: ACC Consumer Finance Corporation
12750 High Bluff Drive, Suite 320
San Diego, CA 92130
15. Broker(s): Name: Mr. Joe Anderson
Company: Business Real Estate Brokerage Company
Address: 5050 Avenida Encinas, Suite 150
City: Carlsbad, CA 92008
Phone: (619) 431-4209 (Section 21.11)
16. Guarantor of Lease (if applicable): Not applicable.
LEASE ADDENDUM AND EXHIBITS
First Addendum .........Additional Lease Terms
Exhibit "A".............Site Plan of Project
Exhibit "B".............Floor Plan of Premises
Exhibit "C..............Memorandum of Actual
Commencement
and Expiration Dates
Exhibit "D .............Rules and Regulations
LANDLORD'S INITIALS: TENANT'S INITIALS:
/s/ JK /s/ GSB
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<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. PREMISES.......................................................1
1.1 Premises; Building; Project.......................................1
1.2 Acceptance of Premises............................................1
1.3 Building Name and Address.........................................2
SECTION 2. TERM...........................................................2
2.1 Term..............................................................2
2.2 Delay in Possession...............................................2
2.3 Early Possession..................................................3
2.4 Holding Over .....................................................3
2.5 Surrender of Premises.............................................4
SECTION 3. RENT AND OTHER PAYMENTS........................................4
3.1 Basic Monthly Rent................................................4
3.2 Basic Monthly Rent Increases......................................4
3.3 Project Expenses..................................................4
3.4 Prorations........................................................9
3.5 No Offsets or Conditional Payments................................9
3.6 Rent..............................................................9
SECTION 4. TAXES PAYABLE BY TENANT....................................9
4.1 Tenant's Personal Property and Trade Fixtures.....................9
4.2 Above Standard Tenant Improvements...............................10
SECTION 5. USE OF PREMISES...........................................10
5.1 Limitation of Use................................................10
5.2 Compliance with Governmental and Insurance
Requirements.....................................................10
5.3 Assumption of Risk of Noncompliance..............................11
SECTION 6. REPAIRS, MAINTENANCE, ALTERATIONS AND ADDITIONS...............11
6.1 Tenant Repairs and Maintenance...................................11
6.2 Landlord Repairs and Maintenance.................................12
6.3 Alterations and Additions........................................12
6.4 Mechanics' Liens.................................................13
6.5 Signs............................................................14
6.6 Hazardous Materials..............................................14
SECTION 7. BUILDING SERVICES ............................................15
7.1 Utility Services...............................................15
7.2 Excessive Use..................................................16
7.3 Janitorial, Refuse Removal and Lighting Services...............16
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7.4 Interruption of Utility Service................................16
7.5 Exoneration of Landlord and Management Company From
Liability......................................................16
SECTION 8. COMMON AREAS...................................................17
SECTION 9. LANDLORD'S RIGHT OF ACCESS.....................................17
9.1 Landlord's Right of Access.....................................17
SECTION 10. INDEMNIFICATION..............................................18
SECTION 11. INSURANCE....................................................18
11.1 Tenant Insurance..............................................18
11.2 Landlord Insurance............................................20
11.3 Waivers of Subrogation........................................20
SECTION 12. DAMAGE OR DESTRUCTION OF BUILDING OR PREMISES................20
12.1 Partial Damage..................................................20
12.2 Destruction of Building.........................................21
12.3 Effect of Lease Termination.....................................21
12.4 Reconstruction..................................................21
12.5 Rent Abatement..................................................21
12.6 Damage Due to Tenant's Fault....................................22
SECTION 13. EMINENT DOMAIN...............................................22
SECTION 14. ASSIGNING, SUBLETTING AND OTHER TRANSFERS....................22
14.1 No Assignment Without Consent....................................22
14.2 Procedure for Requesting.........................................23
14.3 Terms of Consent.................................................23
14.4 Right of Refusal; Termination....................................24
14.5 Additional Events Constituting an Assignment.....................25
14.6 Landlord's Remedies..............................................25
14.7 Hypothecation of Lease...........................................26
14.8 Additional Terms Applicable to Subleases.........................26
SECTION 15. SUBORDINATION; ATTORNMENT AND NON-DISTURBANCE................27
15.1 Subordination....................................................27
15.2 Attornment.......................................................27
15.3 Non-Disturbance..................................................27
15.4 Self-Executing...................................................28
SECTION 16. DEFAULT AND REMEDIES.........................................28
16.1 Events of Default................................................28
16.2 Landlord's Remedies..............................................29
16.3 No Effect on Indemnification.................................... 31
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16.4 No Acceptance of Surrender ......................................31
16.5 Cumulative Remedies..............................................31
16.6 Landlord's Cure of Tenant's Default..............................31
16.7 Late Charges and Interest on Past Due Obligations................31
16.8 Accord and Satisfaction..........................................32
SECTION 17. LIABILITY OF LANDLORD........................................32
17.1 Landlord's Inability to Perform..................................32
17.2 Release Upon Sale................................................33
17.3 Limitation on Recourse of Tenant.................................33
SECTION 18. SECURITY DEPOSIT.............................................33
SECTION 19. RIGHT TO TRANSFER............................................34
SECTION 20. PARKING......................................................34
20.1 Parking Areas and Structures...................................34
20.2 Parking Charges; Regulation and Use............................35
SECTION 21. GENERAL PROVISIONS...........................................35
21.1 Index..........................................................35
21.2 Interpretation.................................................35
21.3 Time of the Essence............................................35
21.4 Successors and Assigns.........................................35
21.5 Waiver and Default.............................................36
21.6 Entire Agreement; Amendments, Representations to
Tenant by Third Parties........................................36
21.7 Severability ..................................................37
21.8 Counterparts...................................................37
21.9 Attorneys' Fees................................................37
21.10 Notices........................................................37
21.11 Brokers........................................................38
21.12 Examination of Lease...........................................38
21.13 Rules and Regulations..........................................38
21.14 Estoppel Certificate...........................................38
21.15 Corporate Tenant...............................................39
21.16 Recordation of Lease...........................................39
21.17 Multiple Tenants...............................................39
21.18 Compliance with Recorded Covenants, Conditions and
Restrictions...................................................39
SECTION 22. SPECIAL NOTICE--READ BEFORE EXECUTING THIS
AGREEMENT.................................................40
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GENERAL OFFICE LEASE PROVISIONS
-------------------------------
SECTION 1. PREMISES.
1.1 Premises; Buildings; Project. Subject to all
of the terms, covenants and conditions contained in this
Lease, Landlord hereby leases to Tenant, and Tenant hereby
leases from Landlord, the Premises identified in the Basic
Lease Provisions. The Premises are located within the
Building and the Project identified in the Basic Lease
Provisions.
Landlord makes no express or implied warranty that
the Project will remain as it presently exists or as shown
on Exhibit A, and expressly reserves the right to (i) add or
delete buildings and to modify existing buildings, and (ii)
modify the layout, configuration and composition of the
parking, driveway and landscaped areas.
Tenant acknowledges that the Premises do not
include the areas between any finished ceiling and the slab
of the Building floor above such ceiling, and Landlord
reserves the use of such areas. Landlord further reserves
the right to locate or relocate (both vertically and
horizontally), install, maintain, use, repair and replace
pipes, utility lines, ducts, conduits, flues, refrigerant
lines, drains, sprinkler mains and valves, access panels,
wires and appurtenant meters or equipment, and structural
elements leading through, under or above the Premises in
locations which will not materially interfere with Tenant's
use of the Premises.
The rentable square footage contained within the
Premises and the Project shall initially be the agreed-upon
figures set forth in the Basic Lease Provisions, provided
that if alterations or additions are subsequently made to
buildings within the Project, such figures may be
redetermined for purposes of redetermining Tenant's Pro Rata
Share of Project Expenses (but not Basic Monthly Rent), by
Landlord's architect using any reasonable method
substantially in accordance with applicable B.O.M.A.
guidelines most recently issued.
1.2 Acceptance of Premises. Tenant acknowledges
that, except as specifically set forth in this Lease,
neither Landlord nor any representative of Landlord has made
any representation or warranty with respect to the Premises
or the Building or the suitability or fitness of either for
any purpose. The taking of possession or use of the Premises
by Tenant for any purpose other than construction shall
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conclusively establish that the Premises and the Building were
in satisfactory condition and in conformity with the provisions
of this Lease in all respects. If there is no Work Letter, or
if no items are required of Landlord under the Work Letter, by
taking possession of the Premises Tenant accepts the Premises
in its existing condition, and waives any right or claim
against Landlord arising out of the condition of the Premises,
except for hidden defects. Nothing contained in this Section
shall affect the Commencement of the Term or the obligation of
Tenant to pay rent. Landlord shall diligently complete all
punch list items of which it is notified as provided above.
1.3 Address. Tenant shall not utilize any name
selected by Landlord from time to time for the Building and/or
the Project as any part of Tenant's corporate or trade name.
Landlord shall have the right to change the name, number or
designation of the Building or Project without liability to
Tenant.
SECTION 2. TERM.
2.1 Term. The Term shall be for the period shown
in the Basic Lease Provisions. The Term shall commence
("Commencement Date") on the earlier of (a) subject to the
provisions of Section 2.2, the Estimated Commencement Date
as set forth in the Basic Lease Provisions, or (b) the date
Tenant acquires possession or commences use of the premises.
Within ten (10) days after possession of the Premises is
tendered to Tenant, the parties shall memorialize on a form
provided by Landlord the actual Commencement Date and the
expiration date ("Expiration Date") of this Lease. Tenant's
failure to execute such form shall not affect the validity
of Landlord's determination of those dates.
2.2 Delay in Possession. Landlord shall use good faith
efforts to make the Premises ready for occupancy (as defined
below) on or before the Estimated Commencement Date. However,
if Landlord, for any reason whatsoever, cannot deliver
possession of the Premises ready for occupancy to Tenant on or
before the Estimated Commencement Date, this Lease shall not be
void or voidable nor shall Landlord be liable to Tenant for any
resulting loss or damage. However, Tenant shall not be liable
for any rent and the Commencement Date shall not occur until
Landlord tenders possession of the Premises ready for occupancy
(as defined below), except that if Landlord's failure to so
tender possession on the Estimated Commencement Date is
attributable to any action or inaction by Tenant (including
without limitation any tenant improvement construction change
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orders requested by Tenant or Tenant's failure to supply any
information required from Tenant or the furnishing by Tenant of
inaccurate or erroneous estimates, specifications, dates or
other information), then the Commencement Date shall not be
advanced to the date on which possession of the Premises is
tendered to Tenant, and Landlord shall be entitled to full
performance by Tenant (including the payment of rent) from the
date Landlord would have been able to deliver the Premises to
Tenant but for Tenant's delay(s).
The Premises shall be deemed "ready for occupancy"
when (a) the Building's sanitary, electrical, heating,
ventilation and air-conditioning systems are operational to the
extent necessary to service the Premises (b) Landlord has
provided reasonable access to the Premises by Tenant, its
agents, employees, licensees and invitees so that the Premises
may be used without substantial interference.
2.3 Early Possession. If Tenant is permitted (in
Landlord's sole discretion) to wholly or partially occupy the
Premises for construction or other purposes prior to the
Commencement Date, all of the terms of this Lease shall apply
other than the obligation to pay Basic Monthly Rent or
additional rent.
2.4 Holding Over. This Lease shall terminate without
further notice upon the expiration of the Term, and any holding
over by Tenant after the expiration shall not constitute a
renewal or extension of this Lease, nor give Tenant any rights
under this Lease, except when in writing signed by both
parties. If Tenant holds over for any period after the
expiration (or earlier termination) of the Term, Landlord may,
at its option, treat Tenant as a tenant at sufferance only,
commencing on the first (1st) day following the termination of
this Lease and subject to all of the terms of this Lease,
except that the Basic Monthly Rent shall be the greater of (i)
one hundred fifty percent (150%) of the Basic Monthly Rent for
the month immediately preceding the date of termination or (ii)
the then currently scheduled rent for comparable space in the
Building. If Tenant fails to surrender the Premises upon the
expiration of this Lease despite demand to do so by Landlord,
Tenant shall indemnify and hold Landlord harmless from all loss
or liability, including without limitation, any claims made by
any succeeding tenant relating to such failure to surrender.
Acceptance by Landlord of rent after the termination shall not
constitute a consent to a holdover or result in a renewal of
this Lease. The foregoing provisions of this Section are in
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addition to and do not affect Landlord's right of re-entry or
any other rights of Landlord under this Lease or at law.
2.5 Surrender of Premises. On the Expiration Date,
Tenant shall surrender the Premises in the same condition as it
existed upon delivery of possession thereof under this Lease,
reasonable wear and tear excepted. Tenant shall surrender all
keys for the Premises to Landlord or its designated agent at
the place then fixed for the payment of rent and shall inform
Landlord or its designated agent of all combinations on locks,
safes, and vaults, if any, in the Premises. Tenant shall
remove all its personal property and trade fixtures (including
vaults) from the Premises prior to surrendering the Premises
and shall repair any damage caused by such removal, Such
repairs shall be performed in a manner satisfactory to Landlord
and shall include, but not be limited to, the following: cap
all plumbing, cap all electrical wiring, repair all holes in
walls, restore damaged floor and/or ceiling tiles, and clean
Premises thoroughly. Tenant's obligation to observe or perform
this covenant shall survive the expiration or other termination
of the term of this Lease.
SECTION 3. RENT AND OTHER PAYMENTS.
3.1 Basic Monthlv Rent. Tenant agrees to pay to
Landlord, or to any other person as directed from time to time
by notice from Landlord, basic monthly rent ("Basic Monthly
Rent") in advance on or before the first day of each whole or
partial calendar month during the Term hereof; provided that
Tenant shall pay to Landlord upon execution of this Lease, in
advance, one full month's Basic Monthly Rent which shall be
applied to the first Basic Monthly Rent owing under this Lease.
3.2 Basic Monthly Rent Increases. The Basic Monthly
Rent shall be subject to periodic increases as provided in the
Basic Lease Provisions and/or in the First Addendum to this
Lease.
3.3 Project Expenses.
(a) Project Expenses. The term "Project
Expenses" shall include all of the following:
(i) Utility Costs: Any and all expenses
incurred by Landlord in connection with electricity,
air conditioning, heating, steam, solar heated water,
natural gas, sewer charges, trash collection and any
and all other utilities furnished to the Building and
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Project, including any taxes thereon, and including
any maintenance and service contracts in connection
therewith;
(ii) Operating Costs: Any and all costs and
expenses incurred by Landlord in connection with the
management, maintenance, operation, security and
repair of the Building and the Project, the equipment
therein, exterior doors and plate glass windows,
adjacent walks, parking areas and parking structures,
Common Areas, landscaped areas and all areas
appurtenant thereto including, but not limited to,
janitorial costs, service contracts, cleaning supplies
and materials, salaries, wages, management fees,
medical and general welfare benefits, pension
payments, payroll taxes, workers' compensation, and
uniforms for employees engaged in the management,
operation, maintenance, security, and/or repair of
buildings within the Project. As used herein
"management" shall include, without limitation,
Landlord's expenses to supervise and/or employ and
maintain property management personnel and facilities
for the Building and the Project to provide for the
Project's management, maintenance, operation, security
and repair, including the fair market value of
Landlord's and the property manager's offices in the
Project, provided that such offices are devoted solely
to the management and operation of the Project.
Operating Costs shall not include depreciation of any
building within the Project or equipment therein, loan
payments or real estate broker commissions;
(iii) Tax Costs: Any and all real estate
taxes or assessments (whether general, special,
ordinary or extraordinary), personal property taxes,
license and permit fees, occupancy taxes, commercial
rent taxes, improvement bonds, and any other levies,
impositions or taxes of any nature (other than
inheritance, personal income or estate taxes) levied
or imposed by any authority having the direct or
indirect power to tax (including without limitation
any city, state or federal government, or any school,
agricultural, sanitary, fire, street, drainage or
other improvement district thereof) upon or against
any legal or equitable interest of Landlord in the
Premises, Building or Project, any rent or other
income therefrom, and/or Landlord's business of
leasing the Project. Tax Costs also include any such
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tax, fee, levy, assessment or charge, or any increase
therein, imposed by reason of events occurring, or
changes in applicable law taking effect, during the
Term, including any change in the ownership of the
Premises, Building or Project or completion of
improvements therein, whether or not contemplated by
the parties.
(iv) Insurance Costs: Any and all expenses
incurred by Landlord in connection with providing
insurance for the Building and the Project in such
amounts and conditions as Landlord in its discretion
shall determine to be necessary or desirable to fully
provide for the safety and financial well being of
Landlord, the Project, the tenants within the Project,
lenders, beneficiaries under deeds of trust, and all
persons and entities who are associated therewith and
for all risks, obligations and responsibilities which
Landlord may be liable for, including without
limitation, fire insurance and extended (broad form)
coverage, earthquake and flood coverage, plate glass
insurance, public liability and property damage, rent
loss and all other insurance to the extent that such
insurance is maintained by Landlord. Landlord may,
but shall not be required, except as otherwise
provided under the terms of this Lease, maintain any
particular type or amount of insurance for the benefit
of Landlord, the Project or Tenant. Landlord may, at
its discretion, increase or add additional insurance
or coverage from time to time. Any amounts spent by
Landlord to fund deductibles under any insurance
policy shall also be deemed an Insurance Cost; and
(v) Capital Improvement Costs: The cost of
any equipment, device, alteration, addition, retrofit,
upgrade or other improvement acquired or constructed
subsequent to the Commencement Date in order to (i)
achieve economies in the operation, maintenance and
repair of the Building or other buildings in the
Project, (ii) comply with any statutory or other legal
requirements regarding the services required to be
provided by Landlord under Section 7.1, or (iii)
comply with any building codes or other statutory or
legal requirements with respect to the Building or any
other portion of the Project, including without
limitation requirements relating to fire, health,
safety, disabled persons or construction; provided the
cost thereof is capitalized on the books of Landlord
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in accordance with generally accepted accounting
practices. Capital Improvement Costs shall be
amortized by multiplying the actual cost, including
financing costs, of each individual improvement by the
constant annual percentage required to fully amortize
such cost on a straight-line basis over the useful
life of such improvement as reasonably estimated by
Landlord. Project Expenses shall include only the
portions of any Capital Improvement Costs that are
amortized over any applicable period during the Term.
(b) Tenant's Pro Rata Share. The term "Tenant's
Pro Rata Share" shall mean the percentage having as its
numerator the number of rentable square feet within the
Premises and having as its denominator the number of rentable
square feet within the Project, which initial percentage is set
forth in the Basic Lease Provisions; provided, however, that
(i) if any item or component of Project Expenses is segregated
and paid separately by any other tenant(s) in the Project with
respect to such tenant(s)' premises, then Tenant's Pro Rata
Share for such item or component shall be adjusted so that such
tenant(s)' premises are not considered in computing the total
rentable area of the Project, solely with respect to that item
or component of Project Expenses, (ii) if any item or component
of Property Expenses is segregated and paid separately by
Tenant under this Lease, then such item or component shall be
excluded from the determination of Property Expenses hereunder,
and (iii) Tenant's Pro Rata Share shall be subject to
adjustment in the event of any subsequent changes to the
rentable square footage of the Premises or the Project.
(c) Tenant's Obligation to Pay Increases in
Project Expenses Over Base Year Project Expenses. As used
herein, the term "accounting year" means any period from
November 1 through October 31, and the term "Base Year" means
the particular accounting year from November 1, 1996 through
October 31, 1997. Commencing as of the first annual
anniversary of the Commencement Date, Tenant shall pay to
Landlord, as additional rent, Tenant's Pro Rata Share of any
excess of (i) any Project Expenses thereafter incurred during
any whole or partial accounting year during the Term of this
Lease, over (ii) Project Expenses incurred during the Base Year
(or prorated portion thereof in the event of a partial
accounting year). For purposes of prorating Project Expenses
incurred during any partial accounting year (or partial Base
Year), it shall be assumed that Project Expenses are evenly
incurred during the applicable accounting year (or Base Year).
Further, any and all Project Expenses which vary depending upon
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occupancy shall be adjusted to reflect at least 95% occupancy
of the rentable square footage of any building in the Project
during any period in which such building is not fully occupied.
(d) Estimated Monthly Payment. Landlord shall
use reasonable efforts to submit to Tenant on or before January
1 of each calendar year a statement of the actual Project
Expenses for the prior accounting year, and a statement of the
estimated Project Expenses for the current accounting year.
The estimated cost statement shall be determined by Landlord
based upon its operating budget for the current accounting
year, and the estimated cost statement shall be conclusive and
binding upon Tenant. Landlord's failure to give any statement
by such date shall not constitute a waiver by Landlord of its
right to give such statement at any later date.
Upon receipt of the estimated cost statement,
Tenant shall pay to Landlord with the next regular monthly rent
payment, one-twelfth (1/12) of the excess of the total
estimated Project Expenses for the current accounting year over
the total actual Project Expenses for the Base Year, multiplied
by the number of months since the commencement of the current
accounting year, less any sums already paid by Tenant for such
period. Subsequent installments in an equal amount shall be
payable with each monthly rent payment until the next actual
cost statement is delivered. Landlord may change the monthly
estimate payable by Tenant at any time during the accounting
year by written notice to Tenant if Landlord's operating budget
for such year changes.
If any actual cost statement shows that Tenant's
total estimated payments made during the covered period were
less than the total amount owing hereunder for such period
based upon actual Project Expenses, Tenant shall pay with the
next monthly rent payment due a lump sum equal to the
underpayment. If any actual cost statement shows that Tenant's
total estimated payments made during the covered period were
less than the total amount owing hereunder for such period
based upon actual Project Expenses, the amount of the
overpayment shall be credited against Tenant's next monthly
rent payment.
The provisions of this Section shall survive the
expiration or earlier termination of this Lease, and
when an actual cost statement is made for the
accounting year in which this Lease expires or
terminates, Tenant shall promptly pay any underpayment
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to Landlord, and conversely, Landlord shall promptly
refund any overpayment to Tenant.
(a) Affiliated Service Companies. Nothing herein
shall be implied to prohibit, and Tenant hereby
acknowledges that Landlord may perform the janitorial,
property management, repair or other services itself
or through affiliated companies, provided the cost
thereof charged to Tenant shall not exceed the
reasonable comparable cost of such services by non-
affiliated companies.
3.4 Prorations. If the Commencement Date or the
Expiration Date occurs on a day other than on the first or last
day, respectively, of a calendar month, the Basic Monthly Rent
and additional rent for that month shall be prorated on the
basis of the actual number of days in that month.
3.5 No Offsets or Conditional Payments. All Basic
Monthly Rent, additional rent and any other charges and
payments to be made by Tenant to Landlord under any provision
of this Lease shall be payable in lawful money of the United
States without any demand, deduction or offset for any reason
or of any kind whatsoever.
No payment by Tenant or receipt by Landlord of a
lesser amount than the rent herein stipulated shall be deemed
to be other than a partial payment of the rent herein
stipulated, nor shall any endorsement or statement on any check
or any letter accompanying any check or payment as rent be
deemed an accord and satisfaction, and Landlord may accept such
check or payment without prejudice to Landlord's right to
recover the balance of such rent or pursue any other remedy
provided in this Lease.
3.6 Rent. Any and all sums payable by Tenant to
Landlord pursuant to this Lease, whether or not so designated,
shall be deemed to be rent owing under this Lease.
SECTION 4. TAXES PAYABLE BY TENANT.
4.1 Tenant's Personal Property and Trade Fixtures.
Tenant shall be liable for and pay at least ten (10) days prior to
delinquency all taxes assessed or levied upon Tenant's trade
fixtures, furnishings, equipment, and all other personal
property located in the Premises. If possible, Tenant shall
cause such taxes to be assessed and billed separately from the
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property of Landlord, but if such taxes are assessed and billed
together with the property of Landlord, Tenant shall pay to
Landlord Tenant's share of such taxes within ten (10) days
after Landlord's delivery to Tenant of a statement in writing
setting forth Landlord's reasonable determination of the amount
of such taxes applicable to Tenant's property.
4.2 Above Standard Tenant Improvements. If tenant
improvements in the Premises, whether installed and/or paid
for by Landlord or Tenant and whether or not affixed to the
real property so as to become a part thereof, are assessed
for real property tax purposes at a valuation higher than
the valuation attributable to Landlord's standard tenant
improvement allowance for the Project, then Landlord may
deem the real property taxes and assessments levied against
Landlord or the Project by reason of such excess assessed
valuation to be taxes levied against personal property of
Tenant that are governed by the provisions of Section 4.1.
If the records of the County Assessor are available and
sufficiently detailed to serve as a basis for determining
the amount by which Tenant's improvements are assessed at a
higher valuation than Landlord's standard allowance, such
records shall be binding on both Landlord and Tenant.
Otherwise, the amount payable by Tenant pursuant to this
Section 4.2 shall be reasonably determined by Landlord.
SECTION 5. USE OF PREMISES.
5.1 Limitation of Use. Tenant shall use and occupy
the Premises solely for the purpose specified in the Basic
Lease Provisions, and Tenant shall not use or occupy the
Premises or permit the same to be used or occupied for any
other purposes without the prior written consent of Landlord.
Tenant agrees that it will not do or permit anything to be done
in or about the Premises which will in any way obstruct or
interfere with or infringe upon the rights of other tenants or
occupants of the Project, or injure or annoy them, or use or
allow the Premises to be used for any improper, immoral,
unlawful, or objectionable purpose, nor shall Tenant cause,
maintain or permit any nuisance in, on or about the Premises.
5.2 Compliance with Governmental and Insurance
Requirements. Tenant shall not use or occupy the Premises in
violation of the certificate of occupancy issued for the
Building or Premises or any law, ordinance or regulation or
other directive of any federal, state or local governmental
authority and shall at its sole cost and expense fully comply
therewith. Tenant shall fully comply at its expense with any
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and all existing or subsequently imposed requirements of any
governmental or quasi-governmental entity relating to energy
conservation, traffic control, air quality, water quality or
any other environmental concern including, without limitation,
any traffic management program affecting the Building or the
Project. Tenant shall not do or permit to be done anything
which will invalidate or Increase the cost of any fire,
extended coverage or other insurance Policy covering the
Project and/or the Building. In addition to any other remedies
available to Landlord, including but not limited to Landlord's
right to declare such a use a breach of this Lease, Tenant
shall promptly upon demand reimburse Landlord for any
additional premium charges for such policy or policies caused
by reason of Tenant's failure to comply with the provisions of
this Section.
5.3 Assumption of Risk of Noncompliance. Tenant
hereby warrants that it has investigated whether its
proposed use of the Premises and its proposed manner of
operation will comply with the requirements of this Section
5 and Tenant assumes the risk that its proposed use of the
Premises and its proposed manner of operation are, and will
continue to be, in compliance with all said requirements,
including, without limitation, all zoning laws regulating
the use and enjoyment of the Premises. Tenant shall have
sole responsibility for obtaining at its expense any
governmental permits or approvals (such as, but not limited
to, a conditional use permit) required to operate its
business at the Premises.
SECTION 6. REPAIRS, MAINTENANCE, ALTERATIONS AND ADDITIONS.
6.1 Tenant Repairs and Maintenance. Tenant shall at
its sole cost and expense keep and maintain in good condition
and repair the Premises and every part thereof including,
without limitation, floor coverings, interior walls, ceilings,
doors, carpeting, painting, wall coverings, drapes and other
window treatments, and all fixtures and equipment therein and
excluding only those repair obligations assumed by Landlord in
Section 6.2 below. Tenant shall cause all of the foregoing
repairs and maintenance to be done at Tenant's expense and only
by licensed contractors after giving notice to Landlord of the
work to be performed, and the name(s) and California license
number(s) of contractor(s). Tenants shall require all such
contractors to comply with Landlord's requirements regarding
any work to be done. If Tenant fails to repair and maintain the
Premises, Landlord may, on ten (10) days prior notice (except
that no notice shall be required in case of an emergency) enter
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the Premises and perform such work itself, in which event
Tenant shall reimburse Landlord upon demand as additional rent
all costs so incurred, plus an administrative fee equal to ten
percent (10%) of all such costs. Tenant shall not commit or
permit to be committed any waste in or upon the Premises. As a
material inducement to Landlord entering into this Lease,
Tenant hereby waives the provisions of Section 1932(1) and 1942
of the Civil Code.
6.2 Landlord Repairs and Maintenance. Landlord
shall (i) keep in good order, condition and repair the
foundations, exterior plate glass, exterior walls and doors,
down spouts, gutters and roof of the Building and all
unexposed electrical, heating, plumbing and sewage systems,
and (ii) repair and maintain the mechanical systems
necessary to provide those utilities and Building services
to the Premises which Landlord has specifically agreed to
provide pursuant to Section 7 below, and (iii) repair and
maintain the Common Areas. The cost of repairing any damage
to the Premises, the Building or the Project caused by the
act or negligence of Tenant, its employees, contractors,
agents, visitors, invitees, permittees, licensees or anyone
under Tenant's control or supervision shall be reimbursed by
Tenant to Landlord upon demand together with an
administrative fee equal to ten percent (10%) of all such
costs. Landlord shall not be required at any time to make
any repairs, maintenance, improvements, alterations,
changes, additions, or replacements of any nature whatsoever
in or to the Premises or the Project except as specifically
provided in this Lease.
6.3 Alterations and Additions. Any alterations,
changes, additions, modifications or improvements ("Alterations
and Additions") installed by Tenant, its contractor or agents
at any time prior to or during the term of this Lease shall be
done only in compliance with each of the following
requirements: (i) no such work shall proceed without Landlord's
prior written approval which shall not be unreasonably
withheld; (ii) all such work shall be done in conformity with a
valid building permit and all other applicable permits or
licenses when and where required, copies of which shall be
furnished to Landlord before the work is commenced, and all
such work shall be performed so as to be acceptable to any
governmental authority or agency having or exercising
jurisdiction over the work, and so as to be reasonably
satisfactory to Landlord; provided, however, that Landlord
shall have no responsibility therefor either to Tenant or to
third parties, notwithstanding any failure by Landlord to
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object to any such work; (iii) Tenant shall reimburse Landlord
for any extra expense incurred by Landlord by reason of faulty
work done by Tenant or its contractors, or by reason of delays
caused by such work, or by reason of inadequate cleanup; (iv)
all data processing, photocopying, copying and other special
electrical equipment shall have a separate outlet, and Tenant
shall pay any additional costs on account of any increased
support to the floor load necessary therefor, or for any other
equipment; provided, however, that Landlord makes no
representation or warranty as to the suitability of the
Premises for such equipment; (v) Tenant or its contractors,
before commencing any Alterations and Additions in, on or
around the Premises, shall give sufficient notice thereof to
Landlord for Landlord's preparation, posting and recordation of
an appropriate notice of nonresponsibility, as provided in
California Civil Code Section 3094, or any related, successor
or similar provision of law. Within ten (10) days after
substantial completion of any Alterations and Additions, Tenant
shall record in the Office of the County Recorder in the county
in which the Building is located, a notice of completion as
permitted by law. Notwithstanding the foregoing, Tenant shall
not affix any material to the exterior windows of the Building,
shall not permit any logo sign or other such material within
the Premises to be visible from the outside of the Building;
and shall not use any window coverings other than the Building
standard coverings provided by Landlord. In the event that any
alterations or improvements to the Premises by Tenant (and/or
any change in use of the Premises by Tenant) necessitates that
the Common Areas of the Building or Project be altered in order
to comply with the requirements of the Americans With
Disabilities Act or other statutes or legal requirements,
Tenant shall be responsible for the cost of such repairs to the
Common Areas.
6.4 Mechanics' Liens. Tenant hereby agrees to keep
the Premises, the Building, and the Project free from any liens
arising out of any work performed, materials furnished or
obligations incurred by or on behalf of Tenant. Within twenty
(20) days after the filing of any such lien, Tenant shall
either (i) cause the lien to be discharged of record, or (ii)
if Tenant in good faith determines that such lien should be
contested, furnish such security as Landlord may require
(including, without limitation, a release bond under Section
3143 of the California Civil Code or any successor statute) to
release the Premises, Building and Project from the effect of
the lien. Failure by Tenant to fulfill either of the
alternatives set forth in the immediately preceding sentence
within such twenty (20) day period shall constitute a default
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by Tenant hereunder and shall entitle Landlord to itself obtain
the security described above and the cost thereof shall
immediately become owing to Landlord by Tenant as additional
rent. Tenant shall indemnify, defend (with counsel approved by
Landlord), protect and hold Landlord and the Premises, Building
and Project harmless from and against any and all claims,
suits, judgments, liabilities or losses (including reasonable
attorneys' fees and costs of suit) in any way arising from
Tenant's failure to comply with this Section. In addition,
Tenant shall pay Landlord's attorney's fees and costs in
participating in such action if Landlord shall decide it is in
its best interests to do so.
6.5 Signs. Tenant may not erect, place or maintain
any sign, exterior advertising medium or other device on the
Building, the Project, or any window or door of the Premises,
without the prior written consent of Landlord. Tenant shall at
its own expense maintain and keep in good order all signs
permitted by Landlord to be placed on the Building or the
Project.
SEE FIRST ADDENDUM, PARAGRAPH 25
6.6 Hazardous Materials. As used herein, "Hazardous
Materials" means any and all substance or substances: (i) the
presence of which requires investigation or remediation under
any federal, state or local statute, regulation, ordinance,
order, action, policy or common law; (ii) which is or becomes
defined as a "hazardous waste," "hazardous substance,"
pollutant or contaminant under any federal, state or local
statute, regulation, rule or ordinance or amendments thereto
including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. Section
9601 et seq.) and/or the Resource Conservation and Recovery Act
(42 U.S.C. Section 6901 et seq.); or (iii) which contain
gasoline, diesel fuel or other petroleum hydrocarbons. Tenant
shall not (and shall not permit its officers, employees,
contractors, sublessees, agents, invitees or permitees to)
store, use, discharge or release any Hazardous Materials in,
on, under or about the Premises, Building or Project (including
without limitation discharge into any drains, toilets or other
water or waste disposal systems). Notwithstanding the above,
Tenant may store and use in the Premises small quantities of
cleaning and office supplies that are normal and customary for
general office use. Tenant shall be responsible for, and shall
indemnify, defend, protect, and hold Landlord harmless from and
against, any and all claims, suits, orders, judgments, clean-up
or remediation costs, liabilities or losses arising from any
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release of Hazardous Materials by Tenant in, on or about the
Premises in violation of the covenants in this Section.
SECTION 7. BUILDING SERVICES.
7.1 Utility Services. So long as Tenant is not in
default hereunder, Landlord agrees, subject to the terms and
conditions hereinafter set forth, to furnish or cause to be
furnished to the Premises air conditioning and heat during
Landlord's normal operating hours, in such quantity and of such
quality as is reasonably necessary for Tenant's comfortable use
and enjoyment of the Premises for the purposes permitted
hereunder. Landlord makes no representation with respect to
air quality or the adequacy or fitness of the air conditioning
or ventilating equipment in the Building to maintain
temperatures which may be required for, or because of, any
equipment of Tenant other than normal fractional horsepower
office equipment, and Landlord shall have no responsibility for
loss or damage in connection therewith. Landlord shall provide
a main electric line to the Building. Tenant shall be
responsible for contracting and paying for electric power to
the Premises directly with the local utility.
Landlord's normal hours of operating the Building's
systems (including the HVAC system) shall be from 8:00 a.m. to
6:00 p.m., Monday through Friday, excluding holidays. Tenant
shall have access to the Premises and use of the Building's
systems (including the HVAC system) twenty-four (24) hours per
day, seven (7) days per week.
If any governmental entity promulgates or revises any
statute, ordinance or building, fire or other code or imposes
mandatory or voluntary controls or guidelines on Landlord or
the Project or any part thereof, relating to the use or
conservation of energy, water, gas, light or electricity or the
reduction of automobile or other emissions or the provision of
any other utility or service provided with respect to this
Lease or in the event Landlord is required or elects to make
alterations to the Building or any other part of the Project in
order to comply with such mandatory or voluntary controls or
guidelines, Landlord may, in its discretion, comply with such
mandatory or voluntary controls or guidelines or make such
alterations to the Building or any other part of the Project
related thereto. Such compliance and the making of such
alterations shall in no event entitle Tenant to any damages or
relieve Tenant of the obligation to pay the full rent required
hereunder or constitute or be construed as a constructive or
other eviction of Tenant. In addition, the cost of such
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compliance and alterations shall be deemed to be a Capital
Improvement Cost as defined in Section 3.3(a)(v) of this Lease.
7.2 Excessive Use. Tenant shall pay to Landlord any
excessive or extraordinary Utility Costs or Operating Costs as
Landlord may, in its reasonable discretion, determine to be
incurred as a result of Tenants' excessive or extraordinary
use, including, but not limited to, use at times other than
Landlord's normal operating hours as defined in Section 7.1
above. Landlord may, at Landlord's discretion, reasonably
estimate the amount of such use and costs, and bill Tenant
periodically for the same.
7.3 Janitorial, Refuse Removal and Lighting Services.
Landlord shall provide reasonable janitorial and refuse removal
services (not including cleaning, maintenance or providing
supplies for kitchens, eating facilities, computer centers,
special equipment areas, security vaults or other extraordinary
or special uses in the Premises) on Mondays through Fridays,
excluding holidays. Landlord shall also relamp and maintain
building standard fluorescent lighting fixtures.
7.4 Interruption of Utility Service. Regardless of
cause, Landlord shall not be liable for any damages (direct,
indirect or consequential), reduction of rent or termination of
this Lease for a failure or reduction in utility service unless
the failure or reduction is caused by Landlord's reasonable
refusal to provide such utility service.
7.5 Exoneration of Landlord and Management Company
from Liability. Neither Landlord nor its designated management
company shall be liable for injury to Tenant's business, for
loss of income therefrom or for damage which may be sustained
by the person or property of Tenant, its employees, invitees,
customers, agents, or contractors, or any other person in or
about the Premises caused by, or resulting from, fire, steam,
electricity, gas, water, or rain which may leak or flow from or
into any part of the Premises, or from the breakage, leakage,
obstruction, or other defects of the pipes, sprinklers, wires,
appliances, plumbing, air conditioning, or lighting fixtures of
the same whether said damage or injury result from conditions
arising upon the Premises or from other sources or places, and
regardless of whether the cause of such damage or injury or the
means of repairing same is inaccessible to Tenant. Neither
Landlord nor its designated management company shall be liable
for any damages arising from any act or neglect of any other
tenant of the Building or of the complex of which the Building
is a part.
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SECTION 8. COMMON AREAS.
The term "Common Areas" as used in this Lease shall mean all
areas and facilities in the Project (either within or outside
of any buildings in the Project) which are provided and
designated from time to time by Landlord for the general use
and convenience of tenants of the Project and their respective
employees, invitees or other visitors. Common Areas include,
without limitation, elevators, lobbies, hallways, service
quarters, restrooms (if not part of the Premises), stairways,
walls, walkways, parking structures and areas, landscaped areas
and sidewalks. Tenant, its employees and invitees shall have
the nonexclusive right to use the Common Areas along with
others entitled to use same, subject to Landlord's rights and
duties as provided herein. Landlord shall maintain the Common
Areas subject, however, to Tenant's reimbursement of Tenant's
Pro Rata Share of such costs pursuant to Section 3 hereof.
Without Tenant's advance notice or consent and without any
liability to Tenant in any respect, unless otherwise
specifically provided elsewhere herein, Landlord shall have the
right to: (i) temporarily close the Common Areas or any part
thereof for maintenance, alteration or improvement purposes;
(ii) change the size, use, shape or nature of any such Common
Areas, provided such change does not deprive the Project of the
number of parking spaces required by the governing local
jurisdiction.
SECTION 9. LANDLORD'S RIGHT OF ACCESS.
9.1 Landlord's Right of Access. Landlord reserves for
itself and its agents the right at any and all times to enter the
Premises upon reasonable prior notice (except in case of emergency)
for purposes of (i) providing any service to be provided by
Landlord to Tenant hereunder; (ii) examining or inspecting the
Premises; (iii) serving or posting and keeping posted thereon
notices of nonresponsibility as provided by California Civil
Code Section 3094 or by any related, successor or similar
provision of law or which Landlord deems necessary for the
protection of Landlord, the Building or the Project; (iv)
showing the same to prospective tenants, purchasers, investors
or lenders; (v) making such changes or repairs to the Premises
or to any other portion of the Project as Landlord may deem
necessary or desirable, including the right to install wires,
cables and any communication or utility facilities that may
serve the Premises or other portions of the Building, all
without being deemed guilty of an eviction of Tenant and
without abatement of rent. Landlord shall not be liable for
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any inconvenience, annoyance or injury to Tenant's business
arising from the making of any repairs, alterations, additions
or improvements to the Premises, the Building or the Project.
However, Landlord shall use its best efforts to minimize any
such inconvenience, annoyance or injury to Tenant's business.
SECTION 10. INDEMNIFICATION. SEE FIRST ADDENDUM, PARAGRAPH 26.
Tenant shall indemnify, defend, protect and hold
Landlord, and its directors, officers, employees, agents,
partners, shareholders and affiliates harmless from and against
any and all claims, suits, judgments, liabilities, damages and
expenses (including without limitation actual attorneys' fees
of counsel approved by Landlord and costs and expenses of suit)
arising from or related to (i) Tenant's breach or default in
the performance of any obligation of Tenant under this Lease,
or (ii) Tenant's use or occupancy of the Premises or the
conduct of its business or any activity, work or thing done,
permitted or suffered by Tenant in or about the Premises or the
Project.
SECTION 11. INSURANCE.
11.1 Tenant Insurance. At all times throughout
the Term, Tenant shall carry and maintain, at its sole expense,
all of the following insurance:
(a) Worker's Compensation and Employer's
Liability Insurance. Worker's compensation and employer's
liability insurance as required by applicable law.
(b) Personal Property Casualty Insurance.
Casualty insurance covering Tenant's leasehold improvements,
trade fixtures, equipment and other personal property from
time to time situated within the Premises in an amount equal
to its full replacement cost, insuring against all perils
included within the classification of fire and extended
coverage, including sprinkler damage, vandalism and malicious
mischief. All insurance proceeds received under such policy
shall be used for the repair or replacement of the property
damaged or destroyed unless the Lease is terminated in
accordance with Section 12.
(c) Public Liability Insurance. A policy of
comprehensive or commercial general liability insurance,
including coverage (by endorsement of necessary) for death,
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bodily injury, broad form property damage,
premises/operations, blanket contractual liability,
independent contractors, personal injury and products/
completed operations, insuring against liability arising
out of ownership, use or occupancy of the Premises, with
a combined single liability limit of not less than
$1,000,000 per occurrence. Such minimum liability limit
will be increased from time to time if Landlord's
insurance advisor or Project lender reasonably
determines that a higher limit is customary for similar
uses. Such policy shall: (i) be on an occurrence (and
not on a claims-made) basis; (ii) not have an aggregate
liability limit unless such aggregate liability limit
applies only to the Premises and the amount thereof is
approved in writing by Landlord; (iii) have a maximum
deductible of $5000 unless a higher deductible is
approved by Landlord in writing; (iv) be issued by an
insurance company or companies licensed to do business
in California and approved by Landlord, and having a
financial rating of Class A-X or better as rated in the
most current available "Best's Key Rating Guide"; (v) be
primary and noncontributing with any insurance
maintained by Landlord; (vi) name Landlord, and any
person or entity designated by Landlord, as additional
insureds; (vii) have a cross-liability or severability
of interests endorsement; and (viii) provide (by
endorsement if necessary) that the insurance issued
thereunder shall not be altered or canceled until after
at least 30 days prior written notice to all additional
insureds.
Tenant shall provide Landlord with certificates of
insurance acceptable to Landlord issued by each of the
insurance companies issuing any of the policies required
pursuant to Section 11.1, and Landlord shall have the right to
review copies of such policies to verify compliance with the
requirements of this Lease. Evidence of insurance coverage
shall be furnished to Landlord at least fifteen (15) days prior
to the effective date of any new or substituted coverage.
Tenant may satisfy its insurance obligations hereunder by
carrying such insurance under a blanket policy or policies of
insurance, provided that (i) such policy meets all of the
specific requirements of this Section 11.1, including, without
limitation, the aggregate liability requirements of
subsection(c) above, and (ii) Landlord approves all other terms
of such policy, which approval will not be unreasonably
withheld. If Tenant fails to maintain any insurance required
under this Section, Landlord may itself maintain such insurance
and charge the cost thereof to Tenant as additional rent. Such
amount shall be due and owing within ten days following written
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request therefor, and shall bear interest as provided in
Section 16.7.
11.2 Landlord Insurance. Landlord shall, at
Landlord's expense, procure and maintain at all times during
the term of this Lease, a policy or policies of insurance
covering loss or damage to the Building in the amount of the
full replacement cost new without deduction for depreciation
thereof (exclusive of Tenant's trade fixtures, inventory,
personal property and equipment), providing Protection against
all perils included within the classification of fire and
extended coverage, vandalism coverage, malicious mischief,
sprinkler leakage, water damage, and such other special
extended coverage which Landlord may deem advisable.
Additionally, Landlord may but shall not be required to carry:
(i) Comprehensive or Commercial General Liability Insurance
and/or Excess Liability Coverage Insurance; and (ii) Earthquake
and/or Flood Damage Insurance; and (iii) Rent Income Insurance;
and (iv) such other insurance as Landlord or its lender deems
advisable, all such insurance to be carried in such amounts and
with such limits as Landlord or its lender may deem
appropriate. The costs of such insurance shall be included as
an Insurance Cost.
11.3 Waivers of Subrogation. Each party hereby
waives any and all rights to recover against the other or
against any other tenant or occupant of the Building, or
against the directors, officers, employees, agents,
representatives, customers, or business visitors of such other
party or of such other tenant or occupant of the Building, the
amount of any damage to the waiving party or loss of its
property or the property of others under its control arising
from any cause insured against under such party's insurance
policy, provided such waiver is permitted by each party's
insurance policy or by endorsement thereon without invalidation
of the policy. This waiver shall not be construed to limit or
restrict any indemnity made by Tenant under the terms of this
Lease, nor shall it preclude any claim by either party against
the other under an insurance policy which insures both parties.
SECTION 12. DAMAGE OR DESTRUCTION OF BUILDING OR PREMISES
12.1 Partial Damage. Except as provided in
Section 12.2, if the Premises or the Building is damaged by
fire or other insured casualty and insurance proceeds have been
made available therefor by the holder(s) of any mortgages or
deeds of trust covering the Building or the Project, the damage
shall be repaired by and at the expense of Landlord to the
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extent such insurance proceeds are available therefor, provided
that the cost of repair is less than twenty-five percent (25%)
of the fair market value of the Building immediately prior to
the damage, and this Lease shall continue in full force and
effect.
12.2 Destruction of Building. If the cost of
reconstruction would be greater than twenty-five percent (25%)
of the fair market value of the Building immediately prior to
the damage, notwithstanding that the Premises may be unaffected
by such damage, or in the event of an uninsured loss, or in the
event insurance proceeds are not made available to Landlord for
reconstruction, Landlord shall have the right to terminate this
Lease by giving to Tenant thirty (30) days' prior notice
thereof, which notice shall be given, if at all, within sixty
(60) days following the date on which the destruction occurs.
12.3 Effect of Lease Termination. Upon any
termination of this Lease under any of the provisions of this
Section 12, rent shall be prorated as of the effective date of
such termination, and Tenant and Landlord shall each be
released from any further obligations hereunder accruing after
the effective date of such termination, except that such
release shall not relieve Tenant of its obligation to pay any
sums then accrued or any obligations regarding surrender of the
Premises, and Landlord shall return any portion of the Security
Deposit to which Tenant is entitled pursuant to Section 18.
12.4 Reconstruction. If Landlord is required or
elects to repair any damage to the Premises in accordance with
this Section 12, Landlord shall restore the Premises
substantially to their same condition that existed immediately
prior to the damage or destruction, including any leasehold
improvements installed by Landlord, but excluding Tenant's
trade fixtures and other personal property in the Premises.
12.5 Rent Abatement. In the event of any
reconstruction and restoration as herein provided, Tenant's
rent shall be equitably abated by the percentage by which
Tenant's use of the Premises is impaired commencing from the
date of destruction and continuing during the period of such
reconstruction or restoration; provided, however, that there
shall be no rent abatement whatsoever if either (i) the damage
is due to the act, omission, fault or neglect of Tenant or its
employees, agents or visitors or (ii) if the use and enjoyment
of the Premises is not affected for more than two (2) business
days of operation. Tenant understands that Landlord will not
carry insurance of any kind on Tenant's furniture and
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furnishings or on any trade fixtures or equipment, inventory or
other personal items removable by Tenant under the provisions
of this Lease, that Landlord shall not be obligated to repair
any damage thereto or replace the same, and that Tenant shall
not be entitled to any compensation from Landlord for loss of
the same or for loss of the use of the whole or any part of the
Premises, or any inconvenience, interruption or annoyance
occasioned to Tenant or its business by such damage,
reconstruction or restoration.
12.6 Damage Due to Tenant's Fault. Subject to
Section 11.3, all damage or injury to the Premises or the
Project or any part thereof caused by the negligent act or
omission of Tenant, its employees, agents, invitees, or
licensees, shall be promptly repaired by Tenant at Tenant's
sole cost and expense to the satisfaction of Landlord.
SECTION 13. EMINENT DOMAIN.
If the whole of the Premises or so much thereof as to
render the balance unusable by Tenant is taken under power of
eminent domain, or sold, transferred or conveyed in lieu
thereof, this Lease shall automatically terminate as of the
date possession is required to be surrendered to the condemning
authority. No award for any partial or entire taking shall be
apportioned and Tenant hereby releases any claim to and assigns
to Landlord any award which may be made in such taking or
condemnation, together with any and all rights of Tenant now or
hereafter arising in or to the same or any part thereof;
provided, however, that nothing contained herein shall be
deemed to give Landlord any interest in, or to require Tenant
to assign to Landlord any award made to Tenant for the taking
of personal property and trade fixtures belonging to Tenant and
removable by Tenant at the expiration of the term hereof as
provided hereunder or for the interruption of, or damage to,
Tenant's business, or for any relocation expenses that may be
payable to Tenant. In the event of a partial taking, or a
sale, transfer or conveyance in lieu thereof, which does not
result in a termination of this Lease pursuant to the
foregoing, rent shall be abated in proportion to the percentage
loss of rentable square footage within the Premises.
SECTION 14. ASSIGNING, SUBLETTING AND OTHER TRANSFERS.
14.1 No Assignment Without Consent. Tenant shall
not voluntarily, involuntarily or by operation of law assign or
otherwise transfer this Lease in whole or in part, nor sublet
or otherwise transfer or permit the occupancy by third parties
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of all or any portion of the Premises (each of the foregoing
are referred to herein as an "Assignment"), except in strict
compliance with this Section 14. If Tenant desires to effect
an Assignment, Tenant shall request Landlord's consent in
accordance with Section 14.2 below. Provided that Landlord
does not elect one of the options in Section 14.4 (which
options may be elected in Landlord's sole and absolute
discretion), Landlord shall not unreasonably withhold or delay
its consent to a proposed Assignment. Landlord's consent to
any Assignment shall be subject to the terms and conditions
contained in Section 14.3. Any attempted Assignment without
Landlord's prior written consent shall be void so as not to
confer any rights upon any third person, The provisions of this
Section 14 shall constitute the sole means for requesting
Landlord's consent. Landlord's consent to any Assignment shall
not be construed as a consent to any other Assignment, and any
other Assignment shall require Landlord's consent as provided
in this Section 14. Tenant's remedy in the event Landlord
withholds its consent under this Section 14 shall be limited to
an action for specific performance or declaratory relief to
obtain such consent. Landlord may accept rent and/or
performance of obligations from any proposed assignee or other
third party pending approval or disapproval of a proposed
Assignment, without waiving or being estopped from exercising
its remedies for the default by Tenant of any of the
requirements of this Section 14.
14.2 Procedure for Requesting. If Tenant desires
at any time to effect an Assignment, Tenant must first notify
Landlord in writing of its desire to do so and shall submit in
writing to Landlord: (i) the name and address of the proposed
assignee ("Assignee"); (ii) the nature of the Assignee's
business to be carried on in the Premises; (iii) the terms and
provisions of the proposed Assignment; and (iv) such financial
information as Landlord may reasonably request concerning the
Assignee including, without limitation, at least a current
financial statement, balance sheet and profit and loss
statement, and the last year's income tax return executed under
penalty of perjury and prepared in a complete, true and correct
manner in reasonable compliance with generally accepted
accounting and tax principles.
14.3 Terms of Consent. Landlord's actual or
deemed consent to any Assignment shall be deemed to be subject
to and to incorporate therein each of the following terms,
unless specifically waived by Landlord in its written consent:
(i) Tenant shall remain fully liable under this Lease during
the unexpired term hereof; (ii) Tenant shall pay to Landlord a
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processing fee, not to exceed Five Hundred Dollars ($500);
(iii) if Tenant's Assignment provides for the receipt by, on
behalf or on account of Tenant of any consideration of any kind
whatsoever in excess of the rent and other charges due Landlord
under this Lease (which comparison shall be made on a per
rentable square foot basis if only a portion of the Premises is
subject to the Assignment), and after deducting from such
excess Tenant's actual direct costs of effecting such
Assignment (such as broker fees, attorney fees and tenant
improvement costs paid by Tenant), Tenant shall pay such excess
amounts to Landlord as and when they are received; (iv) any
Assignment shall be effected on forms approved by Landlord as
to form and substance; (v) Tenant shall not then be in default
hereunder in any respect; (vi) the Assignee shall agree in
writing to assume, be bound by and perform all of the terms,
covenants and conditions of this Lease which could reasonably
be construed as applicable to such Assignee; (vii) the
Assignee's proposed use of the Premises shall be permissible
hereunder and shall be consistent and compatible with other
tenants in the Project; (viii) Landlord shall not be bound by
any provision of any agreement pertaining to Tenant's
Assignment; and (ix) Tenant shall deliver to Landlord one fully
executed original copy of any and all written instruments
evidencing or relating to the Assignment. No Assignment shall
become effective until Tenant and/or its Assignee has delivered
the funds and documents required under subsections (ii), (iv),
(vi) and (ix) above.
Tenant hereby agrees and acknowledges that the above
terms imposed upon the granting of Landlord's consent are
reasonable and Landlord's imposition of such terms shall under
no circumstances impair or limit Landlord's rights and remedies
under California Civil Code Section 1951.4 or any related,
successor or similar provision of law.
14.4 Right of Refusal: Termination.
Notwithstanding any other provision hereof, in lieu of giving
such consent, Landlord may, at its election, elect to (i)
construe a Proposed Assignment as an offer by Tenant of an
Assignment of the Premises (or applicable portion thereof
covered by the Assignment) to Landlord, which offer may be
accepted by written notice to Tenant, whereupon the Assignment
to Landlord shall automatically be deemed consummated on all
the terms and provisions set forth in such proposed Assignment
except that Landlord may further assign or otherwise transfer
such interest without Tenant's review or consent; or, (ii)
terminate this Lease (or in the case of a proposed Assignment
of a portion of the Premises, elect to terminate this Lease
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with respect to that portion) by delivery to Tenant of written
notice of such termination, whereupon Tenant shall be deemed
released and discharged from any liability under the Lease (or
from a proportionate share of liability based upon the
reduction of rentable square footage within the Premises)
accruing after the effective date of such termination.
14.5 Additional Events Constituting an
Assignment. If Tenant is a corporation (provided that such
corporation is not publicly traded on a recognized stock
exchange), an unincorporated association, a partnership, a
limited liability company, or any other entity, then any
transfer or transfers (on a cumulative basis) of any stock
or interest in such corporation, association, partnership,
company or other entity greater than fifty percent (50%)
thereof shall be deemed an Assignment within the meaning and
provisions of this Section 14 and shall be subject to the
provisions hereof. Further, the involvement of Tenant or its
assets in any transaction or series of transactions (by way
of merger, sale, acquisition, financing, refinancing,
transfer, leveraged buy-out or otherwise), whether or not a
formal assignment or hypothecation of this Lease or Tenant's
assets occurs, which results or will result in a reduction
of the Net Worth (as defined below) of Tenant, by an amount
equal to or greater than twenty-five percent (25%) of the
Net Worth of Tenant as it was represented to Landlord at the
time of execution of this Lease, or at the time of the most
recent Assignment to which Landlord has consented, or as it
exists immediately prior to such transaction or transactions
constituting such reduction, at whichever time such Net
Worth of Tenant was or is greater, shall be considered an
Assignment of this Lease by Tenant to which Landlord may
reasonably withhold its consent. The "Net Worth" for
purposes of this Lease shall mean the net worth of Tenant
(excluding any guarantors) established under generally
accepted accounting principles consistently applied.
14.6 Landlord Remedies. The occurrence of an
Assignment without Landlord's consent as required herein shall,
at Landlord's option, constitute (i) a material default under
this Lease after notice and the expiration of the cure period
provided in Section 16.1(c), or (ii) a material noncurable
default without the necessity of any notice and grace period.
If Landlord elects to treat such Assignment as a noncurable
default, Landlord shall have the right to either: (i) terminate
this Lease; or (ii) upon thirty (30) days written notice
("Landlord's Notice") to Tenant, increase the Basic Monthly
Rent to fair market rental value or one hundred ten percent
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(110%) of the Basic Monthly Rent then in effect, whichever is
greater. Pending determination of the new fair market rental
value (which shall be determined in the same manner as the fair
market rent for any option period if this Lease contains an
option to extend), if disputed by Tenant, Tenant shall pay the
amount set forth in Landlord's Notice until the amount is
finally determined. At such time as the amount is finally
determined, any overpayment shall be credited against the next
installment(s) of Basic Monthly Rent coming due, and any
underpayment shall be immediately due payable by Tenant as
additional rent. Further, in the event of such a market value
adjustment, (i) any index-oriented rental adjustment formula
contained in this Lease shall be adjusted to require that the
base index be determined with reference to the index applicable
to the time of such market value adjustment, and (ii) any fixed
rental adjustments scheduled during the remainder of the Lease
term shall be increased in the same ratio as the new market
rent bears to the Basic Monthly Rent in effect immediately
prior to the market value adjustment.
14.7 Hypothecation of Lease. Tenant shall not
encumber, hypothecate or otherwise grant any security interest
or lien upon its interest in this Lease or any portion thereof
(each of the foregoing actions are referred to herein as a
"Hypothecation") without Landlord's prior written consent which
may be withheld in Landlord's sole and absolute discretion
(notwithstanding anything in Section 14.1 to the contrary).
Any Hypothecation given without Landlord's prior written
consent shall be null and void. Any person or entity who
succeeds to Tenants interest in this Lease pursuant to a
Hypothecation shall be subject to the provisions of Section
14.3 and 14.4, and any subsequent Assignment shall be subject
to all of the provisions of this Section 14.
14.8 Additional Terms Applicable to Subleases.
The following terms and conditions shall apply to each sublease
("Sublease") made by Tenant of all or any part of the Premises
and shall be deemed included in each Sublease whether or not
expressly incorporated therein:
(a) A termination of this Lease for any reason or
a voluntary surrender of this Lease shall terminate the
Sublease, unless Landlord, at its option and without any
obligation to do so, elects in writing to require the
subtenant to attorn to Landlord, in which event the subtenant
shall attorn to Landlord and Landlord shall recognize the
subtenant under the terms of the Sublease from and after the
time of Landlord's written notice to the expiration of the
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Sublease, provided, however, (i) Landlord shall not be liable
for any prepaid rents or security deposit paid by the
subtenant or for any prior defaults of the sublessor under
the Sublease, and (ii) Landlord shall not be bound by the
subtenant's payment of any rent beyond the current month's
rent owing under the Sublease.
(b) Any matter or thing requiring the consent of
the sublessor under the Sublease shall also require the
consent of Landlord.
(c) No subtenant shall further assign or sublet
all or any part of the Premises without Landlord's prior
consent in the manner required herein.
SECTION 15. SUBORDINATION; ATTORNMENT AND NON-DISTURBANCE.
15.1 Subordination. This Lease and any options
granted herein shall be subject and subordinate to any
underlying ground or master lease, mortgage, deed of trust, or
other hypothecation or security device ("Security Device" or
"Security Devices") now existing or hereafter placed by
Landlord upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and
to all renewals, modifications, consolidations, replacements
and extensions thereof. Landlord's interest in this Lease may
be assigned to any holder of any Security Device.
Notwithstanding the above, any holder of a Security Device may
unilaterally subordinate the lien of its Security Device to
this Lease by written notice to Tenant or by recording a
written subordination in the Official Records of the County in
which the Premises are located, in which case this Lease shall
be unaffected by the foreclosure of the subordinated Security
Device notwithstanding the relative dates of the documentation
or recordation thereof.
15.2 Attornment. Subject to the non-disturbance
provisions of Section 15.3, Tenant agrees to attorn to the
holder of a Security Device who acquires title to the Premises
through a foreclosure of its Security Device and that such
holder shall not be (i) liable for any act or omission of any
prior lessor or with respect to events occurring prior to its
acquisition of ownership, (ii) subject to any offsets or
defenses which Tenant might have against any prior lessor, or
(iii) bound by prepayment of more than one month's rent.
15.3 Non-Disturbance. With respect to any
Security Device entered into by Landlord after the execution of
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this Lease, Tenant's subordination of this Lease shall be
subject to receiving assurance (a "non-disturbance agreement")
from the holder thereof that Tenant's possession and this
Lease, including any options to extend the term hereof, will
not be disturbed so long as Tenant is not in default hereunder
and attorns to the record owner of the Premises.
15.4 Self-Executing. The agreements contained in
this Section 15 shall be effective without the execution of any
further documents; provided, however, that upon written request
from Landlord or any holder or potential holder of a Security
Device in connection with a sale, financing or refinancing of
the Premises, Tenant shall execute such further writings as may
be reasonably required to separately document any subordination
or non-subordination, attornment and/or non-disturbance
agreement provided for herein.
SECTION 16. DEFAULT AND REMEDIES.
16.1 Events of Default. The occurrence of any of
the following shall constitute a material default by Tenant
under this Lease:
(a) the failure by Tenant to make any regularly
scheduled payment of Basic Monthly Rent or additional rent
owing under this Lease as and when due;
(b) the failure by Tenant to pay any other sum
owing under this Lease, where such failure shall continue for
a period of three (3) days after written notice thereof from
Landlord to Tenant (Landlord's giving of a three day notice
in accordance with the requirements of California Code of
Civil Procedure Section 1161, or successor statute then in
effect, shall satisfy the foregoing requirement);
(c) the failure by Tenant to render prompt and
complete performance and observance of any other express or
implied covenant, agreement or obligation of Tenant contained
in this Lease and the continuation of such failure for a
period of ten (10) days after notice thereof from Landlord to
Tenant (Landlord's giving of a ten day notice in accordance
with the requirements of California Code of Civil Procedure
Section 1161, or successor statute then in effect, shall
satisfy the foregoing requirement); provided that if the
nature of Tenant's default is such that more than ten (10)
days are reasonably required for its cure, then Tenant shall
not be deemed to be in default if Tenant shall commence such
cure within the ten (10) day period and thereafter diligently
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prosecute such cure to completion, but in any event such cure
must be completed within ninety (90) days following the date
on which such notice is given;
(d) the discovery by Landlord of any material
falsity in any financial statement or representation of
Tenant or any guarantor given to Landlord to induce it to
enter into this Lease;
(e) Tenant's vacating or abandoning the Premises;
or
(f) the making by Tenant of any general
assignment or general arrangement for the benefit of
creditors; the filing by or against Tenant of a petition to
have Tenant adjudged bankrupt or of a petition for
reorganization or arrangement under any law relating to
bankruptcy (unless, in the case of a petition filed against
Tenant, the same is dismissed within sixty (60) days); the
appointment of a trustee or receiver to take possession of
substantially all of Tenant's assets located at the Premises,
or of Tenant's interest in this Lease, unless possession is
restored to Tenant within thirty (30) days; or the
attachment, execution, or other judicial seizure of
substantially all of Tenant's assets located at the Premises,
or of Tenant's interest or estate created under this Lease,
unless such seizure is discharged within thirty (30) days.
16.2 Landlord's Remedies. In the event of
Tenant's default under this Lease, then in addition to any
other remedies then available to Landlord, Landlord may
exercise the following remedies:
(a) Terminate Tenant's right to possession of the
Premises because of such breach, and upon termination,
recover from Tenant as damages (i) the worth at the time of
award of any unpaid rent which had been earned at the time of
termination, plus (ii) the worth at the time of award of the
amount by which the unpaid rent which would have been due and
payable after termination until the time of award exceeds the
amount of such rent loss that Tenant proves could have been
reasonably avoided, plus (iii) the worth at the time of award
of the amount by which the unpaid rent for the balance of the
Term after the time of award exceeds the amount of such rent
loss that Tenant proves could be reasonably avoided, plus
(iv) any other amounts necessary to compensate Landlord for
all of the detriment proximately caused by Tenant's failure
to perform Tenant's obligations under this Lease, or which in
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the ordinary course of things would be likely to result
therefrom, including, without limitation, any costs or
expenses incurred by Landlord (A) in retaking possession of
the Premises, (B) in maintaining, repairing, preserving,
restoring, replacing, cleaning, altering or rehabilitating
the Premises or any portion thereof, including such acts for
reletting to a new tenant or tenants, (C) for leasing
commissions, or (D) for any other costs necessary or
appropriate to relet the Premises, plus (v) at Landlord's
election, such other amounts and remedies in addition to or
in lieu of the foregoing as may be permitted from time to
time by the laws of the State of California including,
without limitation, the remedies provided by California Civil
Code Section 1951.2, as amended or as superseded by any
successor statute.
The "worth at the time of award" of the amounts
referred to in subsections (i) and (ii) of the immediately
preceding paragraph shall be computed by allowing interest at
the lesser of twelve percent (12%) per annum or the maximum
rate permitted by law. The "worth at the time of award" of
the amount referred to in subsection (iii) of the immediately
preceding paragraph shall be computed by discounting such
amount at the discount rate of the Federal Reserve Bank of
San Francisco at the time of award plus 1%. Tenant hereby
waives redemption or relief from forfeiture under California
Code of Civil Procedure Sections 1174 and 1179, or under any
other present or future law, in the event Tenant is evicted
or Landlord takes possession of the Premises by reason of any
default of Tenant hereunder;
(b) Not terminate Tenant's right to possession
because of such breach, but continue this Lease in full force
and effect; and in that event (i) Owner may enforce all
rights and remedies under this Lease and under the provisions
of Section 1951.4 of the California Civil Code, as amended or
as superseded by any successor statute, including the right
to recover the rent and all other charges due hereunder as
such rent and other charges become due hereunder, and (ii)
Tenant may assign its interest in this Lease with Landlord's
prior written consent, which shall not be unreasonably
withheld, as provided in Section 14; or
(c) To the extent permitted by law, and in
addition to the above remedies, Landlord may, with or without
terminating this Lease, reenter the Premises and remove all
persons and property from the Premises. Such property may be
removed and stored in a public warehouse or elsewhere at the
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cost of and for the account of Tenant. No re-entry or taking
possession of the Premises by Landlord pursuant to this
paragraph shall be construed as an election to terminate this
Lease unless a written notice of such intention is given to
Tenant.
16.3 No Effect on Indemnification. Nothing in
Section 16.2 shall be deemed to affect Landlord's right to
indemnification against liabilities arising for personal
injuries or property damage under the indemnification
provisions of this Lease.
16.4 No Acceptance of Surrender. Landlord's re-
entry to perform acts of maintenance or preservation of, or in
connection with efforts to relet the Premises or any portion
thereof, or the appointment of a receiver upon Landlord's
initiative to protect Landlord's interest under this Lease
shall not terminate Tenant's right to possession of the
Premises or any portion thereof. No act by Landlord other than
giving written notice of termination to Tenant shall terminate
this Lease.
16.5 Cumulative Remedies. All rights, powers and
remedies of Landlord hereunder and under any other agreement
now or hereafter in force between Landlord and Tenant shall be
cumulative and alternative and shall be in addition to all
rights, powers and remedies given to Landlord by law, and the
exercise of one or more of such rights or remedies shall not
impair Landlord's right to exercise any other right or remedy.
16.6 Landlord's Cure of Tenant's Default. If at
any time during the term hereof Tenant fails, refuses or
neglects to do any of the things herein provided to be done by
Tenant, Landlord shall have the right but not the obligation to
do the same, but at the cost and for the account of Tenant, the
amount of any money so expended or obligations so incurred by
Landlord together with interest thereon as specified in Section
16.7 shall be repaid to Landlord immediately upon demand
therefor, and unless so paid shall be added to the next monthly
rent payment coming due hereunder and shall be payable as rent.
Landlord's performance of any obligation of Tenant shall not be
deemed a waiver of any default of Tenant hereunder.
16.7 Late Charges and Interest on Past Due
Obligations. If any Payment of Basic Monthly Rent or
additional rent has not been received by Landlord within ten
(10) days after such amount shall be due, then without any
requirement for notice to Tenant, Tenant shall pay to
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Landlord a late charge equal to ten percent (10%) of such
overdue amount. In addition, any amount due from Tenant to
Landlord hereunder, including Basic Monthly Rent and
additional rent, which is not paid when due shall bear
interest at the rate which is the lesser of twelve percent
(12%) per annum or the maximum permitted by law, from the
due date until paid. Acceptance of any late charge or
interest payment by Landlord shall not excuse or cure any
default by Tenant under this Lease. The parties further
agree that the payment of late charge and the payment of
interest provided for in this Section are distinct and
separate from one another in that the payment of interest is
to compensate Landlord for the use of Landlord's money by
Tenant, while the payment of late charges is to compensate
Landlord for the additional administrative expense incurred
by Landlord in handling and processing delinquent payments.
16.8 Accord and Satisfaction. No payment by
Tenant or receipt by Landlord of a lesser amount than the rent
herein stipulated shall be deemed to be other than a partial
payment of the rent herein stipulated, nor shall any
endorsement or statement on any check or any letter
accompanying any check or payment as rent be deemed an accord
and satisfaction, and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of
such rent or pursue any other remedy provided in this Lease.
SECTION 17. LIABILITY OF LANDLORD.
17.1 Landlord's Inability to Perform. Landlord
shall not be in default under this Lease as a result of its
inability to fulfill any of its obligations hereunder or its
delay in doing so, if such inability or delay is caused by
reason of any act of God, war, revolt, civil arrest, strike,
lockout, labor trouble, inability to secure materials,
restrictive governmental laws, regulations or approvals, or any
other similar cause including, but not limited to,
impossibility due to excessive or unreasonable costs beyond the
reasonable control of Landlord. Further, Landlord shall not be
deemed to be in default in the performance of any obligation
required to be performed by it hereunder unless and until it
has failed to perform such obligation within thirty (30) days
after notice by Tenant to Landlord specifying how Landlord has
failed to perform such obligation; provided, however, that if
the nature of Landlord's obligation is such that more than
thirty (30) days are required for its performance, then
Landlord shall not be deemed to be in default if it shall
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commence such performance within the thirty (30) day period and
thereafter diligently prosecutes same to completion.
17.2 Release Upon Sale. In the event of any
transfer(s) of Landlord's interest in the Project, the Building
or the Premises, other than a transfer for security purposes
only, Landlord, or Landlord's successors, shall be
automatically relieved of any and all obligations and
liabilities on the part of Landlord accruing hereunder from and
after the date of such transfer (except that Landlord's
liability with respect to the Security Deposit shall be
governed by Section 18), it being intended hereby that the
covenants and obligations contained in this Lease on the part
of Landlord shall, subject to the aforesaid provisions, be
binding on Landlord, its successors and assigns, only during
and in respect of their respective successive periods of
ownership.
17.3 Limitation on Recourse of Tenant. Tenant's
sole recourse under this Lease against Landlord is to the
interest of Landlord in and to the Premises and any portion
of the Project then owned by Landlord. Tenant shall have no
right to satisfy any judgment which it may have against
Landlord from any other assets of Landlord or from any other
assets of any partner, venturer or shareholder of Landlord.
The provisions of this Section are not intended to limit the
Tenant's right to seek injunctive relief or specific
performance, or Tenant's right to claim the proceeds of
insurance (if any) specifically maintained by Landlord for
Tenant's benefit. The foregoing limitations shall also apply
to any successor to Landlord's interest in the Premises.
SECTION 18. SECURITY DEPOSIT.
Upon its execution of this Lease, Tenant shall deposit
with Landlord the Security Deposit designated in the Basic
Lease Provisions. The Security Deposit shall be held by
Landlord, without liability for interest, as partial security
for the full and faithful performance by Tenant of all the
terms, covenants, and conditions of this Lease to be performed
by Tenant, including, without limitation, those relating to the
payment of rent, repairing the Premises (other than normal wear
and tear) and cleaning the Premises upon termination of the
Term. Landlord may commingle the Security Deposit and shall
not be required to keep it separate from its general funds. In
the event of the failure of Tenant to abide by any of the
terms, covenants and conditions of this Lease, including
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without limitation those relating to rent, repairs and cleaning
as stated above, then Landlord at its option, may use any
amount of the Security Deposit to pay any overdue rent or to
compensate Landlord for any loss or damage sustained or
suffered due to such failure by Tenant. Tenant shall, upon the
written demand of Landlord, immediately remit to Landlord a
sufficient amount in the form of a cashier's check to restore
the Security Deposit to the original sum deposited. Failure to
do so within five (5) days after such demand shall constitute a
material breach of this Lease. Provided Tenant is not then in
default under this Lease, within thirty (30) days following the
later to occur of (i) the expiration of the term of this Lease
or (ii) the date on which Landlord receives possession of the
Premises, Landlord shall return to Tenant (or at Landlord's
option to any assignee of Tenant's interest under this Lease)
any unused portion of the Security Deposit. In the event of a
transfer or assignment of Landlord's title or interest in the
Premises, Landlord shall deliver to the transferee or assignee
(in cash or by credit) any unused portion of the Security
Deposit then held by Landlord, and thereupon Landlord shall be
relieved of any further liability to Tenant with respect to the
Security Deposit.
SECTION 19. RIGHT TO TRANSFER.
Landlord, by written notice to Tenant, may require
that on the date specified in such notice (which shall be at
least ninety (90) days subsequent to the giving of such notice)
Tenant shall surrender the Premises and in lieu thereof enter
into an amended lease or new lease for other space in the
Building (as described in such notice) of substantially similar
size and layout for the balance of the Term and upon all the
terms and conditions of this Lease, except that if the new
Premises contains fewer rentable square feet, the Basic Monthly
Rent and Tenant's Pro Rata share of Project Expenses shall be
proportionately reduced. In the event of any such relocation,
Landlord, at its expense, shall prepare and decorate the space
in which Tenant is to be relocated so as to be substantially
similar in layout and decoration to the Premises, including all
tenant improvements (with such changes as Tenant reasonably may
request, provided they do not increase the cost or time within
which the space can be prepared for Tenant's occupancy) and shall
move Tenant's furniture, fixtures, and equipment to such space.
SECTION 20. PARKING.
20.1 Parking Areas and Structures. Landlord shall
have the right to redesign, modify, construct or change any
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parking areas or parking structures within the Project at any
time or times, provided that any such change does not deprive
the Project of the number of parking spaces required by the
governing local jurisdiction. At any time, upon not less than
fifteen (15) days prior written notice, Landlord may designate
specific parking areas, structures or spaces within the Project
in which Tenant's automobiles must be parked.
SECTION 21. GENERAL PROVISIONS.
21.1 Index. References in this Lease to the
"Index" shall mean the United States Department of Labor,
Bureau of Labor Statistics, Consumer Price Index --ALL URBAN
CONSUMERS, Los Angeles- Anaheim-Riverside average (Base
1982-84=100). If the base year of the Index is changed, the
Index shall be converted in accordance with the conversion
factor published by the United States Department of Labor,
Bureau of Labor Statistics. If, for any reason, there is a
major change in the method of calculation or formulation of
the Index, or should the Index no longer be published, then
Landlord and Tenant shall mutually select such other
commodity index that produces substantially the same result
as would be obtained if the Index had not been discontinued
or revised. If the parties shall be unable to agree upon a
successor index, the parties shall refer the choice of the
successor index to arbitration in accordance with the rules
of the American Arbitration Association.
21.2 Interpretation. This Agreement shall be
interpreted under the laws of the State of California. This
Lease shall not be interpreted either for or against either
party due to another party's preparation of this Lease. As
used herein, the masculine, feminine or neuter genders and the
singular or plural numbers shall each be deemed to include the
others. The captions are for convenience only, and do not in
any way limit or amplify the provisions hereof. All of the
provisions of this Lease are to be construed as covenants and
agreements, as though the words importing such covenants and
agreements were used in each separate provision hereof.
21.3 Time of the Essence. Time is of the essence
as to each obligation and deadline for performance thereof set
forth in this Agreement.
21.4 Successors and Assigns. All of the
covenants, conditions and provisions of this Lease shall be
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binding upon and shall inure to the benefit of the parties
hereto and their respective heirs, personal representatives,
successors and assigns, subject at all times, however, to all
agreements and restrictions contained herein respecting
assignment, subleasing, hypothecation and other transfers.
SEE FIRST ADDENDUM, PARAGRAPH 27
21.5 Waiver and Default. No waiver by Landlord of
any provision of this Lease shall be deemed to be a waiver of
any other provision hereof or of any subsequent breach by
Tenant of the same or any other provision. No delay on the
part of Landlord in exercising any of its rights hereunder
shall operate as a waiver of such rights, or of any other right
of Landlord, nor shall any delay, omission or waiver on any one
occasion be deemed a bar to, or a waiver of the same or any
other right on any other occasion, nor shall Landlord's receipt
from Tenant of any rent or other sum with knowledge of any
breach by Tenant of any of its covenants hereunder be deemed to
be a waiver of such breach. Neither Landlord's failure to bill
Tenant for any rent or other sum payable hereunder as it
becomes due hereunder, nor its error in such billing or failure
to provide any other documentation in connection therewith,
shall operate as a waiver of Landlord's right to collect any
such rent or other sum payable hereunder which may have at any
time become due hereunder in the full amount to which Landlord
is entitled pursuant to the terms and provisions hereof.
Landlord's consent to or approval of any act by Tenant
requiring Landlord's consent or approval shall not be deemed to
render unnecessary the obtaining of Landlord's consent to or
approval of any subsequent act of Tenant whether or not similar
to the act so consented to or approved. No act or thing done
by Landlord or Landlord's agents during the term of this Lease
shall be deemed an acceptance of a surrender of the Premises,
and no agreement to accept such surrender shall be valid unless
in writing and signed by Landlord.
21.6 Entire Agreement; Amendments, Representations
to Tenant by Third Parties. This Lease constitutes the entire
agreement between the parties hereto with respect to the
subject matter hereof, and no prior oral or written agreement
or understanding pertaining to any such matter shall be
effective for any purpose. No provision of this Lease may be
amended or supplemented except by an agreement in writing
signed by the party or parties to be bound thereby. Tenant
warrants and represents that there have been no representations
or statements of fact with respect to the Premises, the
Building, the Project, the surrounding area or otherwise,
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whether by Landlord, its agents or representatives, any lease
broker or any other person, which representations or statements
have in any way induced Tenant to enter into this Lease or
which have served as the basis in any way for Tenant's decision
to execute this Lease, except as contained in this Lease.
Tenant agrees and acknowledges that no lease broker, agent, or
other person has had or does have the authority to bind
Landlord to any statement, covenant, warranty or representation
except as contained in this Lease and that no person purporting
to hold such authority shall bind Landlord and that it is not
reasonable for Tenant to have assumed that any person had or
has such authority. Further, neither Landlord's execution of
this Lease nor any other of its acts shall be construed in any
way to indicate Landlord's ratification, consent to or approval
of any act, statement or representation of any third person
except as specifically set forth in this Lease.
21.7 Severability. Any provision of this Lease
which shall prove to be invalid, void or illegal shall in no
way affect, impair or invalidate any other provision hereof and
such other provisions shall remain in full force and effect.
21.8 Counterparts. This Lease may be executed in
any number of counterparts, each of which shall be an original
and all of which together shall constitute and be construed as
one and the same instrument.
21.9 Attorneys' Fees. In the event of any
litigation between Tenant and Landlord to enforce or interpret
any provision of this Lease or otherwise arising with respect
to the subject matter hereof, the prevailing party in such
litigation shall be entitled to all costs and expenses,
including, without limitation, reasonable attorneys' fees.
21.10 Notices. Any notice required or permitted to
be given hereunder shall be in writing and shall be (i)
delivered personally, (ii) sent via commercial messenger,
courier or overnight mail service, or (iii) sent by United
States mail, registered or certified delivery, return receipt
requested, in each case addressed to the Tenant or to Landlord
at the respective addresses set forth in the Basic Lease
Provisions. Personally delivered notices shall be deemed given
upon actual delivery to the appropriate address. Notices sent
via commercial messenger, courier or overnight mail service
shall be deemed given upon actual delivery to the appropriate
address, as evidenced by the receipt of the delivery service.
Mailed notices shall be deemed given upon the earlier of three
business days after deposit into the United States mail,
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registered or certified, with postage prepaid, or the date of
the actual receipt as evidenced by the return receipt. Either
party may specify a different address for notice purposes in
the manner aforesaid. A copy of all notices to be given to
Landlord hereunder shall be concurrently transmitted by Tenant
to any additional party hereafter designated by a notice from
Landlord to Tenant.
21.11 Brokers. In connection with this Lease, Tenant
warrants and represents that it has had dealings only with the
broker or brokers specified in the Basic Lease Provisions and
that it knows of no other person who is or might be entitled to
a commission, finder's fee or other like payment in connection
with this Lease, and Tenant does hereby indemnify and agree to
hold Landlord harmless from and against any and all loss,
liability and expenses that Landlord may incur should Tenant's
warranty and representation prove incorrect.
21.12 Examination of Lease. Landlord's submission of
this instrument for examination or signature by Tenant,
Tenant's agents or attorneys, does not constitute a reservation
of, or an option to lease, and this instrument shall not be
effective or binding as a lease or otherwise, until its
execution and delivery by both Landlord and Tenant.
21.13 Rules and Regulations. Tenant shall faithfully
observe and strictly comply with the Rules and Regulations as
set forth in Exhibit "D" hereto. The Rules and Regulations may
be amended or supplemented by Landlord from time to time.
Landlord shall not be liable to Tenant for violation by any
other tenant in the Building or the Project of the Rules and
Regulations, or for the breach of any covenant or condition in
any lease.
21.14 Estoppel Certificate. Tenant shall, at any
time and from time to time, no later than ten (10) days after
receipt of a written request from Landlord, execute,
acknowledge and deliver to Landlord or to any other person or
entity as Landlord may request including, but not limited to, a
purchaser, investor or lender of the Project or any part
thereof, an estoppel certificate (in the form requested by
Landlord or such purchaser, investor or lender) certifying (i)
that this Lease is unmodified and in full force and effect (or,
if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force
and effect), (ii) the dates to which the rent and other
charges, if any, are paid in advance and the amount of Tenant's
Security Deposit, if any, (iii) that there are not, to Tenant's
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best knowledge, any uncured defaults on the part of Landlord
hereunder, nor any events or conditions then in existence
which, with the passage of time or notice or both, would
constitute a default on the part of Landlord hereunder, or
specifying such defaults, events or conditions, if any are
claimed, and (iv) any other representations or certifications
as may be reasonably requested. It is expressly understood and
agreed that any such estoppel certificate may be relied upon by
any prospective purchaser or encumbrancer of all or any portion
of the Project. Tenant's failure to deliver such estoppel
certificate within such time shall, at the option of Landlord,
constitute a default under this Lease and, further, shall serve
as a conclusive admission by Tenant that all matters stated in
such estoppel certificate delivered to Tenant are true and
correct.
21.16 Corporate Tenant. If Tenant is a corporation,
the parties executing this Lease on behalf of Tenant hereby
covenant and warrant that (i) Tenant is a duly qualified
corporation and that all steps have been taken prior to the
date hereof to qualify Tenant to do business in the State of
California; (ii) that all franchise and corporate taxes have
been paid to date; and (iii) all future forms, reports, fees
and other documents necessary to comply with applicable laws
have been and will be filed when due.
21.16 Recordation of Lease. Neither this Lease nor
any memorandum hereof shall be recorded without the express
written consent of Landlord.
21.17 Multiple Tenants. If there is more than one
person, firm, corporation, partnership or other entity
comprising Tenant, then (i) the term "Tenant", as used herein,
shall include all of the undersigned; (ii) each and every
provision in this Lease shall be binding on each and every one
of the undersigned; (iii) each of the undersigned shall be
jointly and severally liable hereunder; (iv) Landlord shall
have the right to join one or all of the undersigned in any
proceeding or to proceed against them in any order; (v)
Landlord shall have the right to release any one or more of the
undersigned without in any way prejudicing its right to proceed
against the others.
21.18 Compliance with Recorded Covenants, Conditions
and Restrictions. This Lease shall be subject and subordinate
to, and Landlord reserves the right, to record covenants,
conditions and restrictions governing the use, ownership and
occupancy of the Project. Tenant agrees, as a material part of
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this Lease, to comply with the provisions of any such recorded
covenants, conditions or restrictions, and the failure to so
comply shall be deemed a breach of this Lease.
SECTION 22. SPECIAL NOTICE--READ BEFORE EXECUTING THIS
AGREEMENT.
Each party acknowledges, covenants and warrants to the
other, and agrees that the other party may rely upon in
executing this Agreement, each of the following:
A. THAT I HAVE READ AND FULLY UNDERSTOOD EACH AND
EVERY TERM AND CONDITION OF THIS AGREEMENT AND ANY ATTACHMENTS
IN ITS ENTIRETY AND THE CONSEQUENCES THEREOF.
B. THAT I HAVE HAD AN OPPORTUNITY AND HAVE BEEN
ADVISED TO SEEK MY OWN INDEPENDENT LEGAL AND BUSINESS ADVICE
CONCERNING THIS AGREEMENT.
IN WITNESS hereof, the parties hereto have executed
this Agreement on the day and year written below.
TENANT:
ACC CONSUMER FINANCE CORPORATION, a Delaware corporation
By: /s/ Gary S. Burdick Date: 9/4/96
------------------------- -------------------
Gary S. Burdick, President
LANDLORD:
PLAZA HOLDINGS, INC., a California corporation
By: /s/ John I. Kocmur Date: 9/4/96
------------------------- --------------------
John I. Kocmur, Vice President
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<PAGE>
FIRST ADDENDUM
(Additional Lease Terms)
THIS ADDENDUM is attached to and made a part of that certain
Office Building Lease dated August 23, 1996 (the "Lease") by
and between Plaza Holdings, Inc., a California corporation
("Landlord") and ACC Consumer Finance Corporation, a Delaware
corporation ("Tenant"), with respect to premises (the
"Premises") located in the Project (as defined in the Lease)
located in the City of San Diego, San Diego County, California.
The following new terms or modifications to existing terms are
hereby made a part of the Lease as though fully set forth
therein:
23. Option to Extend Lease Term. Provided that Tenant is
not in default with any of the terms and conditions of
the Lease, Tenant shall have one (1) option to extend
the Lease Term for a period of one (1) year (the
"Option Period") by providing Landlord with one hundred
twenty (120) days' prior written notice of Tenant's
intention to exercise this option. The Basic Monthly
Rent for the one-year Option Period shall be increased
by the percentage increase of the Consumer Price Index
("CPI"), subject to a three percent (3%) per annum
minimum and a five percent (5%) per annum maximum
increase.
24. Tenant Improvements. Landlord shall, at Landlord's sole
cost and expense, using building standard materials and
finishes, recarpet and paint the Premises based upon
mutually-agreed-on plans and specifications. With the
exception of agreed-upon modifications, existing
improvements, including but not limited to: ceiling
tiles, blinds, lighting, walls, doors and frames, door
hardware, cabinetry, HVAC, electrical and plumbing
fixtures, shall remain "as is".
25. Hazardous Materials. As it pertains to Section 6.6,
Hazardous Materials, of the Lease, Landlord shall
indemnify, defend, protect and hold Tenant, and its
directors, employees, agents, partners, shareholders
and affiliates harmless from and against any and all
claims, suits judgments, liabilities, damages and
expenses (including without limitation actual
attorneys' fees of counsel approved by Tenant and cost
and expenses of suit) arising from or related to
Hazardous Materials at the Project, or in the Premises,
prior to the signing of this Lease.
26. Indemnification. As it pertains to Section 10,
Indemnification, of the Lease, Landlord shall indemnify,
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defend, protect and hold Tenant, and its directors,
officers, employees, agents, partners, shareholders and
affiliates harmless from and against any and all
claims, suits, judgments, liabilities, damages and
expenses (including without limitation actual
attorneys' fees of counsel approved by Tenant and costs
and expenses of suit) arising from or related to
Landlord's breach or default in the performance of any
obligation of Landlord under this Lease.
27. Waiver and Default. As it pertains to Section 21.5,
Waiver and Default, no waiver by Tenant of any
provision of this Lease shall be deemed to be a waiver
of any other provision hereof or of any subsequent
breach by Landlord of the same or any other provision.
No delay on the part of Tenant in exercising any of its
rights hereunder shall operate as a waiver of such
rights, or of any other right of Tenant, nor shall any
delay, omission or waiver on any one occasion be deemed
a bar to, or a waiver of the same or any other right on
any other occasion, nor shall Tenant's receipt from
Landlord of any rent or other sum with knowledge of any
breach by Landlord of any of its covenants hereunder be
deemed to be a waiver of such breach. Neither Tenant's
failure to bill Landlord for any rent or other sum
payable hereunder as it becomes due hereunder, nor its
error in such billing or failure to provide any other
documentation in connection therewith, shall operate as
a waiver of Tenant's right to collect any such sum
payable hereunder which may have at any time become due
hereunder in the full amount to which Tenant is
entitled pursuant to the terms and provisions hereof.
Tenant's consent to or approval of any act by Landlord
requiring Tenant's consent or approval shall not be
deemed to render unnecessary the obtaining of Tenant's
consent to or approval of any subsequent act of
Landlord whether or not similar to the act so consented
to or approved. No act or thing done by Tenant or
Tenant's agents during the term of this Lease shall be
deemed an acceptance of a surrender of the Premises,
and no agreement to accept such surrender shall be
valid unless in writing and signed by Tenant.
28. Vending Machines. As it pertains to Paragraph 3. of
Exhibit "D", RULES AND REGULATIONS, attached hereto,
Landlord shall permit Tenant to install one (1) vending
machine in the Premises for the purpose of dispensing
soft drinks. Tenant shall be responsible for the
maintenance of, and any and all problems associated
with, the operation of this vending machine. Tenant
shall remove the vending machine, at Tenant's
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sole cost and expense, upon the termination of this
Lease, or Tenant's vacating the Premises.
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<PAGE>
EXHIBIT "A"
PLAZA DEL MAR
12520 & 12526 HIGH BLUFF DRIVE, SAN DIEGO, CALIFORNIA 92130
[MAP LOCATED HERE]
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EXHIBIT "B"
FLOOR PLAN OF THE PREMISES
ACC CONSUMER FINANCE CORPORATION
RENTABLE SQUARE FEET: 5,357 / USABLE SQUARE FEET: 4,745
SUITE 160 AT 12526 HIGH BLUFF DRIVE, SAN DIEGO, CALIFORNIA
[MAP LOCATED HERE]
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EXHIBIT "C"
MEMORANDUM OF ACTUAL COMMENCEMENT
AND EXPIRATION DATES
THIS MEMORANDUM is made and entered into as of _____________, 1996,
by and between Plaza Holdings, Inc., a California corporation
("Landlord") and ACC Consumer Finance Corporation, a Delaware
corporation ("Tenant") with respect to that certain Office
Building Lease between Landlord and Tenant dated as of August
23, 1996 (the "Lease").
The Term of the Lease commenced on ____________________,
1996, which date is defined in the Lease as the Commencement
Date, and shall expire, unless sooner terminated, on 1998,
which is defined in the Lease as the Expiration Date.
IN WITNESS WHEREOF, Landlord and Tenant have executed this
Memorandum as of the date set forth in the first paragraph
above.
LANDLORD:
PLAZA HOLDINGS, INC., a California corporation
By:____________________________
John I. Kocmur, Vice President
TENANT:
ACC CONSUMER FINANCE CORPORATION, a Delaware corporation
By:____________________________
Gary S. Burdick, President
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<PAGE>
EXHIBIT "D"
RULES AND REGULATIONS
---------------------
The following Rules and Regulations shall be in effect
at the Building. Landlord reserves the right to adopt
reasonable modifications and additions at any time, to be
effective upon written notice to tenants. In the case of any
conflict between these regulations and the Lease, the Lease
shall be controlling.
1. Except as otherwise provided in the Lease or any
exhibits thereto, no sign, placard, picture, advertisement,
name or notice shall be inscribed, displayed or printed or
affixed on or to any part of the outside or inside of the
Building without the prior written consent of Landlord. Unless
Landlord has provided such prior written consent, Landlord
shall have the right to remove any such sign, placard, picture,
advertisement, name or notice, without liability or prior
notice to Tenant, and at the expense of Tenant.
All approved signs or lettering on doors and walls to
the Premises shall be printed, painted, affixed or inscribed at
the expense of Tenant by Landlord or by a person approved by
Landlord in a manner and style acceptable to Landlord.
Tenant shall not use any blinds, shades, awnings, or
screens in connection with any window or door of the Premises
unless approved in writing by Landlord. Tenant shall not use
drape or window covering facing any exterior glass surface
other than the standard drape established by Landlord.
2. Except with the prior written consent of Landlord,
no Tenant shall sell, or permit the sale at retail, of
newspapers, magazines, periodicals or theater tickets, in or
from the Premises, nor shall any Tenant carry on, or permit or
allow any employee or other person to carry on the business of
manufacturing of any kind, nor the business of a public barber
shop, beauty parlor, manicure or chiropodist or any other
business not specifically permitted in the Lease.
SEE FIRST ADDENDUM, PARAGRAPH 28.
3. No Tenant shall allow the solicitation of its
employees or invitees by any personal goods or services vendors
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other than as approved or provided by Landlord. The term
"personal goods or services vendors" means persons who
periodically enter the Building for the purpose of selling
goods or services to a Tenant other than goods or services
which are used by a Tenant solely for the purpose of conducting
its business on the Premises. "Personal goods or services"
include, but are not limited to, drinking water and other
beverages, food, barbering services and shoe shining services.
Landlord reserves the right to prohibit entry to the Building
of any personal goods or services vendors not approved or
provided by Landlord. No vending machines or machines of any
description shall be installed, maintained or operated upon the
Premises without the prior written consent of Landlord.
4. The bulletin board or directory of the Building
shall be provided exclusively for the display of the name and
location of Tenants only, and Landlord reserves the right to
exclude any other names therefrom and otherwise limit the
number of listings thereon.
5. The sidewalks, halls, passages, exits, entrances,
and stairways shall not be obstructed by any of Tenants or used
by them for any purpose other than for ingress to and egress
from their respective premises. The halls, passages, exits,
entrances, stairways, balconies and roof are not for the use of
the general public and Landlord shall in all cases retain the
right to control and prevent access thereto by all persons
whose presence in the judgment of Landlord shall be prejudicial
to the safety, character, reputation and interests of the
Building and its Tenants, provided that nothing herein
contained shall be construed to prevent such access to persons
with whom Tenant normally deals in the ordinary course of
Tenant's business unless such persons are engaged in illegal
activities. No Tenant and no employees or invitees of any
Tenant shall go upon the roof of the Building.
6. Each Tenant, upon the termination of the tenancy,
shall deliver to Landlord the keys of offices, rooms and toilet
rooms which shall have been furnished to Tenant or which Tenant
shall have had made, and in the event of loss of any keys so
furnished, shall pay Landlord the cost of replacement. Tenant
shall not alter any lock or install any new or additional locks
or any bolts on any door of the Premises without the prior
written consent of Landlord.
7. The toilet rooms, toilets, urinals, wash bowls and
other apparatus shall not be used for any purpose other than
that for which they were constructed and no foreign substance
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of any kind whatsoever shall be thrown therein, and the expense
of any breakage, stoppage, or damage resulting from the
violation of this rule shall be borne by Tenant who, or whose
employees or invitees, shall have caused it.
8. Tenant shall not overload the floor of the
Premises or mark, drive nails, screw or drill into the
partitions, woodwork or plaster or in any way deface the
Premises or any part thereof.
9. Upon initial move-in, move-out, or at any other
time during occupancy, no furniture, freight, packages,
supplies, merchandise or equipment of any kind shall be brought
into the Building except during hours and in a manner approved
by Landlord in writing. All deliveries described above shall
utilize the freight elevator only. Any handtrucks permitted in
the Building must be equipped with soft rubber tires and
sideguards.
10. Landlord shall have the right to prescribe the
weight, size and position of all safes, computers, sofas and
other heavy objects brought into the Premises. If considered
necessary by Landlord,, such heavy objects or equipment shall
be placed on a platform of such thickness as is necessary to
properly distribute the weight. Landlord will not be
responsible for loss of or damage to any such property from any
cause, and all damage done to the Building by moving or
maintaining any such property shall be repaired at the expense
of Tenant.
11. Landlord shall be responsible for providing
janitorial services to the Building and Premises. Any
additional cleaning of the Premises required by Tenant shall
also be provided by Landlord's janitorial service at Tenant's
expense. Landlord shall have the right to prohibit access to
the Building to any janitorial or cleaning service other than
Landlord's. Tenant shall not cause any unnecessary labor by
reason of Tenant's carelessness or indifference in the
preservation of good order and cleanliness. Landlord shall not
be responsible to any Tenant for any loss of property on the
Premises, however, occurring, or for any damage done to the
effects of any Tenant by the janitor or any other employee or
any other person. Normal janitorial service shall not include
shampooing of carpets or rugs or moving of furniture or other
special services (such as cleaning of kitchen appliances).
Window cleaning shall be done only by Landlord.
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12. Tenant shall not use, keep or permit to be used or
kept any foul or noxious gas or substance in the Premises, or
permit or suffer the Premises to be occupied or used in any
manner offensive or objectionable to Landlord or other
occupants of the Building by reason of noise, odors and/or
vibrations, or interfere in any way with other Tenants or those
having business therein, nor shall any animals or birds be
brought in or kept in or about the Premises or the Building.
Smoking or carrying lighted cigars or cigarettes in the
elevators of the Building is prohibited.
13. No cooking except for cooking that can be done in
a microwave oven shall be done or permitted by any Tenant on
the Premises, nor shall the Premises be used for the
manufacture or storage of merchandise, for washing clothes, for
lodging, or for any improper, objectionable or immoral purpose.
14. Tenant shall not use or keep in the Premises or
the Building any kerosene, gasoline or inflammable, explosive
or combustible fluid or material, or use any method of heating
or air-conditioning other than that supplied by Landlord.
15. Landlord will direct electricians as to where and
how telephone and telegraph wires are to be introduced. No
boring or cutting for wires or stringing of wires will be
allowed without written consent of Landlord. The location of
telephones, call boxes and other office equipment affixed to
the Premises shall be subject to the approval of Landlord.
16. No Tenant shall lay linoleum, tile, carpet or
other similar floor covering so that the same shall be affixed
to the floor of the Premises in any manner except as approved
by Landlord. The expenses of repairing any damage resulting
from a violation of this rule or removal of any floor covering
shall be borne by Tenant.
17. Landlord reserves the right to close and keep
locked all entrance and exit doors and otherwise regulate
access of all persons to the halls, corridors, and stairways in
the Building on Saturdays, Sundays and legal holidays and on
other days except during normal operating hours, and at such
other times as Landlord may deem advisable for the adequate
protection and safety of the Building, its Tenants and property
in the Building. Access to the Premises may be refused unless
the person seeking access is known to the employee of the
Building in charge, and has a pass or is otherwise properly
identified. Landlord shall in no case be liable for damages
LANDLORD'S INITIALS: TENANT'S INITIALS:
/s/ JK /s/ GSB
- --------------------- --------------------
4 of 6
Page 591 of 606
<PAGE>
for any error with regard to the admission or exclusion from
the Building of any person.
18. Tenant shall see that the doors of the Premises
are closed and securely locked before leaving the Building, and
must observe strict care and caution that all water apparatus
are entirely shut off before Tenant or Tenant's employees leave
the Building, and that all electricity, gas or air shall
likewise be carefully shut off, so as to prevent waste or
damage.
19. Any person whose presence in the Building at any
time shall in the sole judgment of Landlord, be prejudicial to
the safety, character, reputation and interests of the Building
or its Tenants may be denied access to the Building or may be
ejected therefrom. Landlord may require any person leaving the
Building with any package or other object to exhibit a pass
from Tenant from whose Premises the package or object is being
removed, but the establishment and enforcement of such a
requirement shall not impose any responsibility on Landlord for
the protection of any Tenant against the removal of property
from the Premises of Tenant.
20. Tenant shall cooperate with Landlord in obtaining
maximum effectiveness of the cooling system by closing drapes
when the sun's rays fall directly on windows of the Premises.
Tenant shall not obstruct, alter or in any way impair the
efficient operation of Landlord's heating, ventilating and air-
conditioning system and shall not place bottles, machines,
parcels or any other articles on the induction unit enclosure
so as to interfere with air flow. Tenant shall not tamper with
or change the setting of any thermostats or temperature control
valves.
21. Landlord shall have the right, exercisable without
notice and without liability to Tenant, to change the name and
street address of the building of which the Premises are a
part.
22. Canvassing, soliciting and peddling within the
Property is prohibited unless specifically approved by
Landlord, and each Tenant shall cooperate to prevent such
activity.
23. All parking areas plus other Common Areas forming
a part of the Property shall be under the sole and absolute
control of Landlord with the exclusive right to regulate and
control these areas. Tenant agrees to conform to the rules and
LANDLORD'S INITIALS: TENANT'S INITIALS:
/s/ JK /s/ GSB
- --------------------- --------------------
5 of 6
Page 592 of 606
<PAGE>
regulations that may be established by Landlord for these areas
from time to time.
24. Landlord shall have the right to prohibit any
advertising by any Tenant which, in Landlord's opinion, may
impair the reputation of the Building or its desirability as a
location for offices, and upon written notice from Landlord,
any Tenant shall refrain from or discontinue such advertising.
25. Tenant shall not do or permit anything to be done
in or bring or keep anything in the Premises, which shall in
any way increase the rate of fire insurance for the Building or
its contents; or obstruct or interfere with the rights of other
Tenants or in any way injure or annoy them; or conflict with
the regulations of the fire department or the fire laws, or
with any insurance policy for the Building or any part thereof
or with any rules and ordinances established by the Board of
Health or other governmental authority.
26. Tenant shall not install equipment, such as but
not limited to, electric tabulating or computer equipment,
requiring electrical or air conditioning service in excess of
those to be provided by Landlord under the Lease.
LANDLORD'S INITIALS: TENANT'S INITIALS:
/s/ JK /s/ GSB
- --------------------- --------------------
6 of 6
Page 593 of 606
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11.1
ACC Consumer Finance Corporation
Computation of Weighted Shares Outstanding
Three Months Ended June 30,
1996 1995
------------------------------------------------------------
Issue Fully Fully
Date Primary Diluted Primary Diluted
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Shares
Outstanding at
Beginning of
Period $6,292,478 $6,292,478 $5,298,717 $5,298,717
Convertible
Preferred Stock
Warrants
Treasury Stock
Method 7/15/93 -- -- 398,710 398,710
Common Stock 5/22/96 857,143 857,143 -- --
Employee Stock
Options
Treasury Stock
Method 11/30/96 -- 20,685 -- --
Subsequent
Options
Treasury Stock
Method 1/23/96 7,777 10,410 -- --
---------- ---------- ---------- ----------
Page 594 of 606
<PAGE>
Weighted Average
Shares at End of
Period
7,157,398 7,180,716 5,697,427 5,697,427
========== ========== ========== ==========
Six Months Ended June 30,
1996 1995
------------------------------------------------------------
Shares
Outstanding at
Beginning of
Period $6,110,479 $6,110,479 $5,033,343 $5,033,343
Series B
Preferred Stock
As if Converted
date of
Issuance
3/28/95 -- -- 137,819 137,819
Convertible
Preferred Stock
Warrants
Treasury Stock
Method 7/15/93 -- -- 199,355 199,355
Series C
Preferred Stock
As if converted
from Beginning
of all Periods
Presented (SAB
No. 83) 1/15/96 181,999 181,999 -- --
Common Stock 5/22/96 428,571 428,571 -- --
Page 595 of 606
<PAGE>
Employee Stock
Options
Treasury Stock
Method 11/30/96 -- 10,342 -- --
Subsequent
Options
Treasury Stock
Method 1/23/96 3,889 5,205 -- --
---------- ---------- ---------- ----------
Weighted Average
Shares at End of
Period
6,724,938 6,736,596 5,370,517 5,370,517
========== ========== ========== ==========
</TABLE>
Page 596 of 606
<PAGE>
EXHIBIT 12.1
ACC CONSUMER FINANCE CORPORATION
Schedule of Ratio of Earnings to Fixed Charges
Six Months Period
Ending June 30, Year Ending
--------------- December 31,
1996 1995
------ ------
Net Income (Loss) Before Taxes $3,319,107 $3,675,355
Total Interest Expense 2,249,813 4,199,336
Rent Expense Interest Allocation 115,310 188,950
---------- ----------
Adjusted Income (Loss) 5,684,230 8,063,641
Total Interest Expense 2,249,813 4,199,336
Rent Expense Interest Allocation 115,310 188,950
---------- ----------
Total Fixed Charges $2,365,123 $4,388,286
Ratio of Earnings to Fixed Charges 2.40% 1.84%
-1-
Page 597 of 606
<PAGE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES
--------------------
OFL-A RECEIVABLES CORP., a Delaware corporation
ACC RECEIVABLES CORP., a Delaware corporation
Page 598 of 606
<PAGE>
EXHIBIT 23.2
The Board of Directors
ACC Consumer Finance Corporation
We consent to the use of our report included herein and to the reference
to our firm under the headings "Selected Consolidated Financial Data" and
"Experts" in the registration statement.
/s/ KPMG Peat Marwick LP
San Diego, California
September 20, 1996
-1-
Page 599 of 606
<PAGE>
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM T-1
Statement of Eligibility
Under the Trust Indenture Act of 1939 of a
Corporation Designated to Act as Trustee
--------------------
___CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact Name of trustee as specified in its charter)
A National Banking Association 41-1592157
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national Identification No.)
bank)
Sixth Street and Marquette Avenue 55479
Minneapolis, Minnesota (Zip Code)
(Address of principal executive offices)
--------------------
ACC CONSUMER FINANCE CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 33-0567304
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12750 High Bluff Drive 92130
Suite 320 (Zip Code)
San Diego, CA
(Address of principal executive offices)
---------------------
10.25% Notes Due 2003
(Title of the indenture securities)
-1-
Page 600 of 606
<PAGE>
Item 1. GENERAL INFORMATION. Furnish the following information as to the
trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
Comptroller of the Currency
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
Item 2. AFFILIATIONS WITH THE OBLIGOR. If the obligor is an affiliate of the
trustee, describe each such affiliation.
None with respect to the trustee.
No responses are included for Items 3-15 of this Form T-1 because the obligor
is not in default as provided under Item 13.
Item 16. LIST OF EXHIBITS. List below all exhibits filed as a part
of this Statement of Eligibility. Norwest Bank incorporates by reference into
this Form T-1 the exhibits attached hereto.
Exhibit 1. a. A copy of Articles of Association of the
trustee now in effect.*
Exhibit 2. a. A copy of the certificate of authority of the
trustee to commence business issued June 28, 1872, by
the Comptroller of the Currency to The Northwestern
National Bank of Minneapolis.*
b. A copy of the certificate of the Comptroller of
the Currency dated January 2, 1934, approving the
consolidation of the Northwestern National Bank of
Minneapolis and the Minnesota Loan and Trust Company of
Minneapolis.*
c. A copy of the certificate of the Acting Comptroller
of the Currency dated January 12, 1943, as to change of
corporate title of Northwestern National Bank and Trust
Company of Minneapolis to Northwestern National Bank of
Minneapolis.*
-2-
Page 602 of 606
<PAGE>
d. A copy of the certificate of the Comptroller of
the Currency dated May 1, 1983, authorizing Norwest Bank
Minneapolis, National Association, to act as
fiduciary.*
Exhibit 3. A copy of the authorization of the trustee to
exercise corporate trust powers issued January 2, 1934,
by the Federal Reserve Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section
321(b) of the Act.
Exhibit 7. A copy of the latest report of condition of the
trustee published pursuant to law or the requirements
of its supervising or examining authority.**
Exhibit 8. A copy of the certificate dated May 10, 1983 of
name change from Northwestern National Bank Minneapolis
to Norwest Bank Minneapolis, National Association.*
Exhibit 9. A copy of the certificate dated January 11, 1988,
of name change from Norwest Bank Minneapolis, National
Association to Norwest Bank Minnesota, National
Association.*
* Incorporated by reference to the exhibit of the same number filed
with the registration statement number 33-66086.
** Incorporated by reference to the exhibit of the same number filed
with the registration statement number 333-07005.
-3-
Page 603 of 606
<PAGE>
NORWEST BANKS
Norwest Bank Minnesota, N.A.
Corporate Trust
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0069
612-667-8058
EXHIBIT 6
September 19, 1996
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In accordance with Section 321(b) of the Trust Indenture Act of 1939, as
amended, the undersigned hereby consents that reports of examination of the
undersigned made by Federal or State authorities authorized to make such
examination may be furnished by such authorities to the Securities and
Exchange Commission upon its request therefor.
Very truly yours,
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
Curtis D. Schwegman
Assistant Vice President
Page 604 of 606
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, Norwest Bank Minnesota, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the city of
Minneapolis and State of Minnesota on the 19th day of September, 1996.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
/s/ Curtis D. Schwegman
----------------------------------
Curtis D. Schwegman
Assistant Vice President
Page 605 of 606
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 7,356,444
<SECURITIES> 16,049,640
<RECEIVABLES> 6,311,835
<ALLOWANCES> (388,200)
<INVENTORY> 22,974,031
<CURRENT-ASSETS> 687,373
<PP&E> 1,537,617
<DEPRECIATION> (585,662)
<TOTAL-ASSETS> 53,942,978
<CURRENT-LIABILITIES> 32,721,312
<BONDS> 0
0
0
<COMMON> 19,984,826
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 53,942,978
<SALES> 6,584,609
<TOTAL-REVENUES> 12,680,773
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (6,763,069)
<LOSS-PROVISION> (348,784)
<INTEREST-EXPENSE> (2,249,813)
<INCOME-PRETAX> 3,319,107
<INCOME-TAX> (1,394,000)
<INCOME-CONTINUING> 1,925,107
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,925,107
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0.28
</TABLE>
