<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Quarterly Period Ended June 30, 1997
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the period from _________________ to
__________________.
Commission File No. 0-27268
ACC CONSUMER FINANCE CORPORATION
(Exact Name of Registrant as Specified in its Charter)
a Delaware corporation 33-0682821
------------------------------- ---------------------------------
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
12750 High Bluff Drive, Suite 320
San Diego, California 92130
-------------------------------------- ----------
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (619) 793-6300
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past ninety days.
Yes X No
----- -----
As of July 28, 1997, the following number of shares of the Company's
capital stock were outstanding: 8,480,478.
<PAGE> 2
ACC CONSUMER FINANCE CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Part I. FINANCIAL INFORMATION
Item 1: Financial Statements
Condensed consolidated balance sheets as of June 30, 1997, and
December 31, 1996 ......................................................... 1
Condensed consolidated statements of operations for the three-month
and six-month periods ended June 30, 1997, and 1996 ....................... 2
Condensed consolidated statements of cash flows for the
three-month and six-month periods ended June 30, 1997, and 1996 ........... 3
Notes to condensed consolidated financial Statements ...................... 5
Item 2: Management's discussion and analysis of financial condition ............. 9
Part II. OTHER INFORMATION
Item 4: Submission of Matters to a Vote of Security Holders ..................... 19
Item 6: Exhibits and Reports on Form 8-K ........................................ 19
Signatures ...................................................................... 20
</TABLE>
<PAGE> 3
ACC CONSUMER FINANCE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DEC. 31,
1997 1996
----------- -----------
(UNAUDITED)
ASSETS
<S> <C> <C>
Cash and Cash Equivalents ........................... $ 2,067,441 $ 1,101,598
Restricted Cash ..................................... 2,934,638 1,561,293
Credit Enhancement Cash Reserves .................... 13,120,594 8,353,180
Installment Contracts Held-for-Sale, net ............ 40,239,260 21,078,692
Installment Contracts Held-for-Investment, net ...... 2,294,302 3,428,643
Asset-Backed Securities Available-for-Sale .......... 6,328,000 7,832,174
Excess Servicing Receivables, at fair value ......... 23,041,000 15,573,618
Accounts Receivable ................................. 3,449,157 3,229,933
Interest Receivable ................................. 512,940 324,889
Fixed Assets, net ................................... 1,470,177 1,140,525
Repossessed Vehicles ................................ 181,775 297,565
Prepaid Expenses .................................... 580,117 394,571
Other Assets ........................................ 702,427 316,709
----------- -----------
Total Assets .................................... 96,921,828 64,633,390
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Warehouse Facilities, net ........................... 32,676,451 11,026,130
Redeemable Subordinated Notes, net .................. 19,163,378 19,196,110
Other Borrowings .................................... -- --
Amount Due to Bank .................................. 4,505,916 3,070,453
Lease Liability ..................................... 222,007 332,259
Tax Liability ....................................... 5,234,950 3,305,287
Accounts Payable and Accrued Liabilities ............ 4,587,520 3,183,435
----------- -----------
Total Liabilities ............................... 66,390,222 40,113,674
Shareholders' Equity:
Preferred Stock, $.001 Par Value, 1,817,718 Shares
Authorized and No Shares Issued and Outstanding -- --
Common Stock, $.001 Par Value, Authorized 18,000,000,
8,480,478 and 8,292,478 Shares Issued and
Outstanding as of June 30, 1997 and December 31,
1996, Respectively ............................. 8,481 8,292
Additional Paid-in-Capital .......................... 21,660,467 19,931,825
Unrealized Gain on Securities, net .................. 891,480 168,175
Retained Earnings ................................... 7,971,178 4,411,424
----------- -----------
Total Shareholders' Equity ...................... 30,531,606 24,519,716
Commitments and Contingencies
Total Liabilities and Shareholders' Equity ...... $96,921,828 $64,633,390
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 1
<PAGE> 4
ACC CONSUMER FINANCE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE-MONTH PERIOD ENDED JUNE 30, SIX-MONTH PERIOD ENDED JUNE 30,
--------------------------------- -------------------------------
1997 1996 1997 1996
------------ ----------- ------------ ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Interest Income
Interest Income ............. $ 2,802,546 $ 2,260,024 $ 5,481,713 $ 4,284,417
Interest Expense ............ (1,336,174) (1,156,888) (2,878,551) (2,249,813)
------------ ----------- ------------ ------------
Net Interest Income ..... 1,466,372 1,103,136 2,603,162 2,034,604
Contract Losses
Provision for Contract
Losses ...................... (263,693) (199,921) (481,196) (348,784)
------------ ----------- ------------ ------------
Net Interest Income after
Provision for Contract
Losses .................. 1,202,679 903,215 2,121,966 1,685,820
Other Income
Servicing and Ancillary Fees 2,648,777 962,868 4,450,249 1,811,747
Gain on Sale of Contracts ... 6,913,362 3,683,023 12,736,139 6,584,609
------------ ----------- ------------ ------------
Total Other Income ...... 9,562,139 4,645,891 17,186,388 8,396,356
Total Income ............ 10,764,818 5,549,106 19,308,354 10,082,176
Expenses
Personnel ................... 3,188,490 1,987,799 5,782,724 3,841,537
General and Administrative .. 1,868,229 992,406 3,278,492 1,740,961
Servicing ................... 889,022 377,203 1,549,771 758,109
Occupancy and Equipment ..... 266,593 120,803 484,206 213,504
Depreciation and Amortization 152,738 109,338 285,580 208,958
------------ ----------- ------------ ------------
Total Expenses .......... 6,365,072 3,587,549 11,380,773 6,763,069
Income Before Taxes ......... 4,399,746 1,961,557 7,927,581 3,319,107
Income Tax Expense .......... 1,848,000 824,000 3,330,000 1,394,000
------------ ----------- ------------ ------------
Income Before Extraordinary Loss 2,551,746 1,137,557 4,597,581 1,925,107
Extraordinary Loss on
Extinguishment of Repurchase
Facility, net of Tax Benefit . -- -- (1,037,827) --
------------ ----------- ------------ ------------
Net Income .............. $ 2,551,746 $ 1,137,557 $ 3,559,754 $ 1,925,107
Preferred Stock Dividends ....... -- 43,490 -- 116,818
------------ ----------- ------------ ------------
Net Income Available to Common
Shareholders ................. $ 2,551,746 $ 1,094,067 $ 3,559,754 $ 1,808,289
============ =========== ============ ============
Net Income per Common Share and
Common Share Equivalent:
Income Before Extraordinary
Loss ..................... $ 0.30 $ 0.16 $ 0.54 $ 0.29
Extraordinary Loss .......... -- -- (0.12) --
============ =========== ============ ============
Net Income .............. $ 0.30 $ 0.16 $ 0.42 $ 0.29
============ =========== ============ ============
Shares Used in Computing Income
per Common Share and Common
Share Equivalent ............. 8,556,992 7,157,398 8,523,623 6,724,938
============ =========== ============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 2
<PAGE> 5
ACC CONSUMER FINANCE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX-MONTH PERIOD ENDED JUNE 30,
--------------------------------
1997 1996
------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Cash Flows from Operating Activities
Net Income ............................................ $ 3,559,754 $ 1,925,107
Adjustments to Reconcile Net Income to Net Cash
Used in Operating Activities:
Gain on Sale of Contracts ......................... (12,736,139) (6,584,609)
Amortization and Depreciation ..................... 5,278,532 2,543,055
Provision for Contract Losses ..................... 481,196 348,784
Deferred Acquisition Expenses ..................... (1,749,080) (707,080)
Non-cash Fee Paid Upon Extinguishment of Repurchase
Facility ....................................... 1,789,357 --
Changes in Operating Assets:
Net (Increase) Decrease in Contracts Held for Sale (14,066,164) 2,404,376
Net Cash Deposited into Restricted Accounts ....... (6,140,759) (2,172,185)
Interest Receivable ............................... (188,051) 92,098
Accounts Receivable ............................... (219,224) (4,594,148)
Other Assets ...................................... (401,342) (121,142)
Prepaid Expenses .................................. (256,988) 199,874
Changes in Operating Liabilities:
Accounts Payable and Accrued Liabilities .......... 2,718,445 2,315,516
------------ ------------
Net Cash Used in Operating Activities .......... (21,930,463) (4,350,354)
Cash Flows from Investing Activities
Net Increase in Contracts Held for Investment .......... (1,914,830) (437,392)
Principal Paydowns of Asset Backed Securities .......... 1,727,870 1,018,190
Proceeds from Liquidation of Repossessed Automobiles ... 870,375 1,320,400
Purchases of Fixed Assets, net ......................... (599,607) (303,911)
------------ ------------
Net Cash Provided by Investing Activities ...... 83,808 1,597,287
Cash Flows from Financing Activities
Net Increase (Decrease) in Warehouse Facility Balance . 21,389,412 (6,171,990)
Increase in Other Borrowing ........................... -- 1,948,439
Repayment of Other Borrowing .......................... -- (7,000,000)
Net Decrease in Capital Leases ........................ (110,252) (88,032)
Increase in Amount Due to Bank ........................ 1,435,463 1,075,980
Net Proceeds from Exercise of Employee Stock Options .. 97,875 --
Net Proceeds from Issuance of Common Stock ............ -- 12,540,509
Net Proceeds from Issuance of Preferred Stock ......... -- 1,000,995
Payment of Preferred Stock Dividends .................. -- (574,454)
------------ ------------
Net Cash Provided by Financing Activities ...... 22,812,498 2,731,447
Increase (Decrease) in Cash and Cash Equivalents .......... 965,843 (21,620)
Cash and Cash Equivalents at Beginning of Period .......... 1,101,598 120,672
============ ============
Cash and Cash Equivalents at End of Period ................ $ 2,067,441 $ 99,052
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 3
<PAGE> 6
ACC CONSUMER FINANCE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (CONTINUED)
<TABLE>
<CAPTION>
SIX-MONTH PERIOD ENDED JUNE 30,
-------------------------------
1997 1996
----------- ----------
(unaudited) (unaudited)
<S> <C> <C>
Supplemental Disclosure
Interest Paid ....................................... $1,793,654 $2,087,757
Taxes Paid .......................................... $1,155,400 $ 349,831
Unrealized Gain on Securities, Available-for-Sale,
and Excess Servicing Recievables, at Fair Value .. $1,247,078 $ --
Non-cash Conversion of Preferred Stock .............. $ -- $7,280,044
Non-cash Issuance of Common Stock ................... $1,613,776 $ --
Transfers of Contracts:
Held for Sale to Asset Backed Securities ......... $ -- $3,631,000
Held for Investment to Repossessed Automobiles ... $ 754,585 $1,248,256
Held for Investment to Held for Sale ............. $2,746,544 $ 986,196
Held for Sale to Held for Investment ............. $ 933,154 $1,857,286
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 4
<PAGE> 7
ACC CONSUMER FINANCE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR
THE THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
(1) NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
The consolidated financial statements include the accounts of ACC
Consumer Finance Corporation (ACC) and its wholly-owned subsidiaries, OFL-A
Receivables Corp. (OFL-A), ACC Receivables Corp. (Receivables), ACC Funding
Corp. (Funding), ACC Liquidity, LLC (Liquidity), and Accent Financial Services
Corp. (Accent) (collectively, the Company). All material intercompany accounts
and transactions have been eliminated. The consolidated financial statements as
of June 30, 1997, and for the three-month and six-month periods ended June 30,
1997, and 1996, are unaudited and reflect all adjustments (consisting of normal
recurring adjustments) which are, in the opinion of management, necessary for a
fair presentation of the financial position and operating results in the interim
periods. The consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto for the year ended
December 31, 1996. The results of operations for the three-month and six-month
periods ended June 30, 1997, are not necessarily indicative of the results for
the entire year ending December 31, 1997.
(b) New Accounting Pronouncements
In June 1996, the FASB issued Statement of Financial Accounting
Standards (SFAS) No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinquishment of Liabilities". Beginning January 1, 1997, the
Company adopted SFAS No. 125 and recorded its Excess Servicing Receivables
(ESRs) and other retained interests at fair value. An adjustment to the ESRs
carrying value of $1.2 million was included in shareholders' equity as
unrealized gains, net of tax.
(2) INSTALLMENT CONTRACTS HELD-FOR-SALE
Installment Contracts held-for-sale are summarized as follows:
<TABLE>
<CAPTION>
JUNE 30, 1997 DEC. 31, 1996
------------- -------------
<S> <C> <C>
Principal Balance ................ $ 41,891,045 $ 21,888,020
Purchase Discount ................ (2,448,851) (1,071,263)
Net Deferred Expenses ............ 767,368 231,586
Unrealized Hedge Losses .......... 29,698 30,349
------------ ------------
$ 40,239,260 $ 21,078,692
============ ============
</TABLE>
In addition to the Contracts owned by the Company, the Company serviced
$351 million and $225 million of Contracts for others as of June 30, 1997, and
December 31, 1996, respectively. The Company services Contracts for borrowers
residing in approximately 40 states, with the largest concentrations of
Contracts in California, Florida, Georgia, Pennsylvania, and Texas . 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.
Page 5
<PAGE> 8
ACC CONSUMER FINANCE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(3) INSTALLMENT CONTRACTS HELD-FOR-INVESTMENT
Installment Contracts held-for-investment represent Contracts that are
ineligible for sale (primarily due to their delinquent status) or represent
Contracts which management has no present intention to sell. Included in
installment Contracts held-for-investment are performing Contracts which are
pledged in connection with the ACC Auto Grantor Trust 1996-D Transaction. The
principal balance of these pledged Contracts was $2.6 million and $2.9 million
as of June 30, 1997 and December 31, 1996, respectively. The Contracts
held-for-investment are comprised of the following:
<TABLE>
<CAPTION>
JUNE 30, 1997 DEC. 31, 1996
------------- -------------
<S> <C> <C>
Principal Balance .................... $ 2,807,256 $ 4,151,152
Purchase Discount .................... (133,807) (200,292)
Net Deferred Expenses ................ 33,853 42,783
Allowance for Contract Losses ........ (413,000) (565,000)
----------- -----------
$ 2,294,302 $ 3,428,643
=========== ===========
</TABLE>
(4) EXCESS SERVICING RECEIVABLES
The Company has created ESRs as a result of the sale of Contracts in the
securitization transactions. 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 asset-backed securities
(ranging from 5.95% to 7.03%), (ii) a base servicing fee paid to the Company
(ranging from 3.00% to 3.15%) and (iii) the net 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 has assumed that net charge-offs
(including accrued interest) will approximate a percentage in the range of 11.5%
to 13.0% of the original principal of the Contracts sold, over the life of the
portfolio. Further, the Company used an estimated average Contract life ranging
from 1.5 to 1.8 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
risk-free rate equivalent to the rate earned on securities rated AAA/Aaa or
better with a duration similar to the duration estimated for the underlying
Contracts. This currently results in an effective overall discount rate of
approximately 15% to 17% on an annualized basis, depending on the age of the
securitization transaction. The excess servicing cash flows are only 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
estimated excess cash flows, the ESRs will be adjusted on a quarterly basis with
corresponding adjustments made to income.
A summary of the activity in ESRs is as follows:
<TABLE>
<CAPTION>
SIX-MONTH
PERIOD ENDED YEAR ENDED
JUNE 30, 1997 DEC. 31, 1996
------------- -------------
<S> <C> <C>
Beginning Balance ...................... $ 15,573,618 $ 5,590,878
Additions from Securitizations ....... 11,218,000
14,864,000
Amortization of Excess Servicing ..... (5,000,000) (4,881,260)
Unrealized Gain ...................... 1,249,382 --
------------ ------------
Ending Balance ......................... $ 23,041,000 $ 15,573,618
============ ============
</TABLE>
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 against the ESRs. As of June 30, 1997, and
December 31, 1996, the estimated undiscounted recourse loss allowance embedded
in the ESRs, excluding accrued interest, was $31.6 million and $19.2 million,
respectively. This recourse loss allowance
Page 6
<PAGE> 9
ACC CONSUMER FINANCE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
represents 9.0% and 8.8% of the Contracts serviced for others as of June 30,
1997, and December 31, 1996, respectively.
(5) WAREHOUSE FACILITIES, NET
The Company has entered into financing arrangements, the object of which
is to provide financing for the Contracts during the interim period between
purchase of the Contracts and the sale of those Contracts in asset-backed
securities. As of March 31, 1997, the Company's primary warehouse facility was a
commercial paper backed facility sponsored by Credit Suisse First Boston (CSFB)
(the CP Facility). Prior to March 31, 1997, the Company's primary financing
facility was the Repurchase Facility with Cargill Financial Services Corporation
(Cargill).
(a) Commercial Paper backed Facility
On March 27,1997, the Company entered into a $100 million warehouse
facility. The lenders are CSFB and a commercial paper conduit and the borrower
is Liquidity, a newly-formed Delaware limited liability company, wholly-owned by
special purpose subsidiaries of ACC. The facility is secured by Contracts
pledged by Liquidity (purchased in a true sale from OFL-A or ACC) and is
guaranteed by Financial Securities Assurance Corp. (FSA). The facility bears
interest at the weighted average interest rate of the commercial paper conduit
lender plus commissions and expenses, repriced daily, unless the lenders, in
their sole discretion, determine in good faith that the commercial paper rate is
unavailable or not desirable and apply a bank rate equal to the euro-dollar rate
plus 75 basis points. The interest rate on the CP Facility was 5.7% and the
outstanding balance was $32.9 million as of June 30, 1997.
Advances under the CP Facility are limited to the borrowing base. The
borrowing base is calculated under a formula that takes into account, among
other factors, the principal balance of the eligible Contracts pledged under the
facility, the current interest rate for US Treasury securities with a 21-month
remaining term or the one-month LIBOR, which ever is greater, and the weighted
average coupon rate of the Contracts pledged under the facility. The borrowing
base cannot exceed 93% of the principal balance of eligible Contracts. The CP
Facility requires the borrower to do a take out financing within four months of
the closing of the CP Facility and at least once each six months thereafter.
Additionally, prior to September 1997, the Company is obligated to secure an
additional warehouse facility from another lender, with a minimum line of credit
of $50 million. The Company is in the process of procuring a second warehouse
line.
The events of default under the CP Facility include a downgrade of the
claims paying ability of FSA by S&P or Moody's, the average delinquency rate on
the Contracts pledged in connection with the facility exceeding 2.5% during the
preceding four months or the occurrence of a servicer event of default. A
servicer event of default includes: (i) total delinquencies as a percentage of
the Company's servicing portfolio in excess of 8% during the preceding three
months and (ii) annualized net charge-offs as a percentage of the average
servicing portfolio in excess of 7% during the preceding six months. The lenders
have the right to replace ACC as the servicer upon the occurrence of a servicer
event of default. In addition, the CP Facility contains certain covenants. If
these covenants are not met, a termination of the facility could occur. As of
June 30, 1997, management believes the Company was in compliance with all such
covenants.
(b) Repurchase Facility
Cargill financed 100% of the purchase price of the Contracts under the
Repurchase Facility. The interest rate on the Repurchase Facility was the
one-month LIBOR, plus 3.25%. The relevant LIBOR was 5.7% as of June 30, 1997,
and 5.5% as of December 31, 1996. Under the terms of the Repurchase Facility,
the Company would sell Contracts to Cargill with an agreement to repurchase the
Contracts. The repurchase was intended to occur concurrent with the sale of the
Contracts. When the Contracts were repurchased from Cargill, the Company was
obligated to pay Cargill a repurchase fee approximating 2% of the Contracts.
Page 7
<PAGE> 10
ACC CONSUMER FINANCE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
In January 1997, the Company entered into an agreement with Cargill that
gave the Company the option to extinguish the Repurchase Facility through May
31, 1997. In exchange for this early extinguishment option, the Company issued
Cargill 174,500 shares of unregistered Common Stock. Also included in this
agreement was a modification of the NIM Facility (included in Other Borrowings
on the consolidated balance sheet) that reduced maximum borrowings from $15
million to $10 million. The Company exercised this option and extinguished the
Repurchase Facility on March 31, 1997. The Company recognized an extraordinary
loss of approximately $1.0 million in connection with this extinguishment, which
equals the fair value of the shares issued to Cargill and certain unamortized
debt issuance costs, net of tax.
Page 8
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Except for the historical information contained herein, the following
discussion includes forward looking information that involves risks and
uncertainties. The Company's actual results could differ materially from those
discussed herein. Factors that could cause such differences include those
discussed in the Company's Form 10-K for the year ended December 31, 1996.
RESULTS OF OPERATIONS
The Three-month Period Ended June 30, 1997, Compared to the Three-month Period
Ended June 30, 1996
During the three-month period ended June 30, 1997, the Company's net
income increased 124% to $2.6 million, from $1.1 million during the three-month
period ended June 30, 1996. This increase was primarily due to increases in the
gain on sale of Contracts, and servicing and ancillary fees totaling $4.9
million, which resulted from an increase in Contracts sold in asset-backed
securities and in the average balance of Contracts serviced for others. During
the three-month period ended June 30, 1997, an aggregate of $100.2 million of
Contracts were sold by the Company and the average balance of Contracts serviced
for others was $330 million, compared to $45.5 million of Contracts sold and an
average balance of Contracts serviced for others of $131 million during the same
period in 1996. Partially offsetting these increases was an increase in
operating expenses of $2.8 million as a result of the Company's expanded
purchasing and servicing operations. The Company purchased $120.7 million of
Contracts during the three-month period ended June 30, 1997, as compared to
$45.3 million during the same period in the prior year.
NET INTEREST INCOME. The Company earned approximately $1.5 million of
net interest income during the three-month period ended June 30, 1997, compared
to $1.1 million during the three-month period ended June 30, 1996. The principal
source of the Company's net interest income was the net yield on Contracts
(yield on Contracts less the cost of the warehouse facility) which increased to
$1.2 million during the three-month period ended June 30, 1997, from $882,000
during the three-month period ended June 30, 1996. This increase resulted
primarily from a higher yield on Contracts and a lower rate paid on the
warehouse facility during the three-month period ended June 30, 1997, as
compared to the rate paid during the same period in the prior year. The yield on
Contracts increased to 23.0% during the three-month period ended June 30, 1997,
from 21.7% during the three-month period ended June 30, 1996. The average rate
paid on the warehouse facility was 7.3% during the three-month period ended June
30, 1997, compared to 9.1% during the three-month period ended June 30, 1996.
During the three-month period ended June 30, 1997, the Company earned
interest income of $928,000 on asset-backed securities and cash balances held in
restricted accounts and as credit enhancement cash reserves, compared to
$489,000 during the three-month period ended June 30, 1996. This increase is due
to significantly higher volumes of asset-backed securities issued during the
three-month period ended June 30, 1997, compared to the same period in the prior
year. During the period from the cutoff date of a securitization to the closing
date of a securitization (the Closing Period), the Company earns interest on the
senior and subordinated certificates or notes. The Company earned approximately
$410,000 on $100 million of asset-backed securities during the Closing Period of
the 1997-B Transaction during the three-month period ended June 30, 1997,
compared to $157,000 on $46 million of asset-backed securities during the
Closing Period of the 1996-B Transaction during the same period in 1996.
The Company recognized interest expense on other borrowings of $622,000
during the three-month period ended June 30, 1997, compared to $267,000 during
the same period in the prior year. Other Borrowings consist of total amounts
owed under the 1996 Notes, the NIM Facility and lease liability. The increase in
interest expense is due to interest payments on the 1996 Notes, partially offset
by reduced interest payments on the NIM Facility. During the three-month period
ended June 30, 1997, the Company recognized $550,000 of interest expense on the
1996 Notes, and $57,000 in interest expense on the NIM Facility, compared to
$240,000 in interest expense on the NIM Facility during the three-month period
ended June 30, 1996. The average balance of the NIM Facility during the
three-month period ended June 30, 1997 was $786,000, as compared to an average
balance of $6.5 million during the three-month period ended June 30, 1996.
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CONTRACT LOSS PROVISION. The Company recorded a provision for Contract
losses of $264,000 for the three-month period ended June 30, 1997, compared to
$200,000 for the three-month period ended June 30, 1996. 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 $2.6 million of servicing and
ancillary fees for the three-month period ended June 30, 1997, compared to
$963,000 for the three-month period ended June 30, 1996. This substantial
increase in servicing revenues arose from an increase in the average balance of
Contracts serviced for others to $330 million during the three-month period
ended June 30, 1997, from $131 million during the same period in 1996. Future
servicing revenues could be adversely affected, if the levels of charge-offs,
prepayments or market discount rates in any pool of Contracts serviced for
others exceeds the estimates of such levels used by the Company from time to
time to value its Subordinated Securities and ESRs.
GAIN ON THE SALE OF CONTRACTS. The Company recognized a gain on sale of
Contracts of $6.9 million during the three-month period ended June 30, 1997,
representing approximately 6.9% of the $100.2 million of Contracts sold in
connection with asset-backed securitizations, compared to a gain of $3.7
million, or approximately 8.1% of the $45.5 million of Contracts sold during the
three-month period ended June 30, 1996.
OPERATING EXPENSES. The Company reported operating expenses of $6.4
million during the three-month period ended June 30, 1997, compared to $3.6
million for the three-month period ended June 30, 1996. 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 average Contracts owned and serviced) improved to 7.3% for the
three-month period ended June 30, 1997, from 9.2% during the three-month period
ended June 30, 1996.
Personnel expenses for the three-month period ended June 30, 1997, were
$3.2 million, compared to $2.0 million during the three-month period ended June
30, 1996. 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 175 as of June 30, 1996, to 340 as of June 30, 1997. The Company
expects that its number of full-time employees will continue to increase
commensurate with the growth of the Company's Contract portfolio.
The Company's general and administrative expenses increased to $1.9
million for the three-month period ended June 30, 1997, from $992,000 for the
three-month period ended June 30, 1996. These expenses consisted primarily of
telecommunications expenses, travel expenses, marketing expenses, professional
fees, insurance expenses, credit bureau expenses and management information
systems expenses. The increase in general and administrative expenses reflected
the substantial expansion of the Company's operations.
Servicing expenses increased to $889,000 for the three-month period
ended June 30, 1997, compared to $377,000 for the three-month period ended June
30, 1996, due to the substantial growth of the total Contracts owned and
serviced by the Company. These expenses consisted primarily of out-of-pocket
collection, repossession and liquidation expenses.
Occupancy and equipment expenses increased to $267,000 for the
three-month period ended June 30, 1997, from $121,000 for the three-month period
ended June 30, 1996. The increase in occupancy and equipment expenses reflected
the expansion of the Company's headquarters office space and its regional
operations since June 30, 1996. During the three-month period ended June 30,
1997, the Company entered into an agreement to lease new Corporate headquarters
space in San Diego, California from an unaffiliated lessor. The building is
currently under construction and the Company is expected to move in and begin
paying rent in October 1997. The new office space consists of approximately
46,000 square feet and the base monthly rent approximates $76,000, subject to
annual increases. Currently, the Company leases approximately 25,000 square feet
and pays $37,000 per month. During the three-month period ended June 30, 1997,
the Company entered into a lease for a new regional credit center in St. Louis,
Missouri and is in the process of leasing and opening a new collections center
outside of San Diego where it will conduct a portion of its early collection
activity. The Company expects its occupancy expenses to continue to increase as
the Company expands its headquarters and other facilities to accommodate the
expansion of the Company's operations.
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INCOME TAXES. The effective tax rate for the three-month periods ended
June 30, 1997 and 1996, was 42%.
The Six-month Period Ended June 30, 1997, Compared to the Six-month Period Ended
June 30, 1996
During the six-month period ended June 30, 1997, the Company's net
income before extraordinary loss increased 139% to $4.6 million, from $1.9
million during the six-month period ended June 30, 1996. This increase is
primarily due to increases in the gain on sale of Contracts, and servicing and
ancillary fees totaling $8.8 million, which resulted from an increase in
Contracts sold in asset-backed securities and in the average balance of
Contracts serviced for others. During the six-month period ended June 30, 1997,
an aggregate of $175.1 million of Contracts were sold by the Company and the
average balance of Contracts serviced for others was $281 million, compared to
$81.8 million of Contracts sold and an average balance of Contracts serviced for
others of $111 million during the same period in 1996. Partially offsetting
these increases was an increase in operating expenses of $4.6 million as a
result of the Company's expanded purchasing and servicing operations. The
Company purchased $197.4 million of Contracts during the six-month period ended
June 30, 1997, as compared to $79.0 million during the same period in the prior
year. Additionally, the Company recognized a $1.0 million loss upon
extinguishment of the Repurchase Facility, net of tax, as an extraordinary loss
during the six-month period ended June 30, 1997. The Company reported net income
of $3.6 million during the six-month period ended June 30, 1997, compared to
$1.9 million for the six-month period ended June 30, 1996.
NET INTEREST INCOME. The Company earned approximately $2.6 million of
net interest income during the six-month period ended June 30, 1997, compared to
$2.0 million during the six-month period ended June 30, 1996. The principal
source of the Company's net interest income was the net yield on Contracts
(yield on Contracts less the cost of the warehouse facility) which increased to
$2.0 million during the six-month period ended June 30, 1997, from $1.8 million
during the six-month period ended June 30, 1996. This increase resulted
primarily from a higher yield on Contracts and a lower rate paid on the
warehouse facility during the six-month period ended June 30, 1997, as compared
to the same period in the prior year. The yield on Contracts increased to 21.8%
during the six-month period ended June 30, 1997, from 21.4% during the six-month
period ended June 30, 1996. The average rate paid on the warehouse facility was
8.1% during the six-month period ended June 30, 1997, compared to 9.1% during
the six-month period ended June 30, 1996.
During the six-month period ended June 30, 1997, the Company earned
interest income of $1.9 million on asset-backed securities and cash balances
held in restricted accounts and as credit enhancement cash reserves, compared to
$786,000 during the six-month period ended June 30, 1996. This increase is due
to significantly higher volumes of asset-backed securities issued during the
six-month period ended June 30, 1997, compared to the same period in the prior
year. The Company earned approximately $874,000 on $180.0 million of
asset-backed securities during the Closing Period of the 1997-A and 1997-B
Transactions during the six-month period ended June 30, 1997, compared to
$386,000 on $81.8 million of asset-backed securities during the Closing Period
of the 1996-A and 1996-B Transactions during the same period in 1996.
The Company recognized interest expense on other borrowings of $1.2
million during the six-month period ended June 30, 1997, compared to $586,000 in
the prior year. The increase in interest expense is due to interest payments on
the 1996 Notes, partially offset by reduced interest payments on the NIM
Facility. During the six-month period ended June 30, 1997, the Company
recognized $1.1 million of interest expense on the 1996 Notes, and $103,000 in
interest expense on the NIM Facility, compared to $531,000 in interest expense
on the NIM Facility during the six-month period ended June 30, 1996. The average
balance of the NIM Facility during the six-month period ended June 30, 1997 was
$476,000, as compared to $7.3 million during the six-month period ended June 30,
1996.
CONTRACT LOSS PROVISION. The Company recorded a provision for Contract
losses of $481,000 for the six-month period ended June 30, 1997, compared to
$349,000 for the six-month period ended June 30, 1996. 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 $4.5 million of servicing and
ancillary fees for the six-month period ended June 30, 1997, compared to $1.8
million for the six-month period ended June 30, 1996.
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This substantial increase in servicing revenues arose from an increase in the
average balance of Contracts serviced for others to $281 million during the
six-month period ended June 30, 1997, from $111 million during the same period
in 1996. Future servicing revenues could be adversely affected, if the levels of
charge-offs, prepayments or market discount rates in any pool of Contracts sold
exceeds the estimates of such levels used by the Company from time to time to
value its Subordinated Securities and ESRs.
GAIN ON THE SALE OF CONTRACTS. The Company recognized a gain on sale of
Contracts of $12.7 million during the six-month period ended June 30, 1997,
representing approximately 7.3% of the $175.1 million of Contracts sold in
asset-backed securities; compared to a gain of $6.6 million, or approximately
8.0% of the $81.8 million of Contracts sold in asset-backed securitizations
during the six-month period ended June 30, 1996.
OPERATING EXPENSES. The Company reported operating expenses of $11.4
million during the six-month period ended June 30, 1997, compared to $6.8
million for the six-month period ended June 30, 1996. The increase in expenses
reflected the growth in the amount of Contracts purchased and serviced by the
Company. The operating expense ratio improved to 7.3% for the six-month period
ended June 30, 1997, from 9.5% during the six-month period ended June 30, 1996.
Personnel expenses for the six-month period ended June 30, 1997, were
$5.8 million, compared to $3.8 million during the six-month period ended June
30, 1996. The overall increase in personnel expenses reflected the growth of the
Company's full-time employees from 175 as of June 30, 1996, to 340 as of June
30, 1997.
The Company's general and administrative expenses increased to $3.3
million for the six-month period ended June 30, 1997, from $1.7 million for the
six-month period ended June 30, 1996. The increase in general and administrative
expenses reflected the substantial expansion of the Company's operations.
Servicing expenses increased to $1.5 million for the six-month period
ended June 30, 1997, compared to $758,000 for the six-month period ended June
30, 1996, due to the substantial growth of the total Contracts owned and
serviced by the Company.
Occupancy and equipment expenses increased to $484,000 for the six-month
period ended June 30, 1997, from $214,000 for the six-month period ended June
30, 1996. The increase in occupancy and equipment expenses reflected the
expansion of the Company's headquarters office space and its regional operations
since June 30, 1996.
INCOME TAXES. The effective tax rate for each of the six-month periods
ended June, 1997 and 1996, was 42%.
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CREDIT PERFORMANCE
The tables below provide the Company's historic delinquency experience
and net charge-off experience with respect to its entire Contract portfolio,
which includes Contracts owned by the Company and Contracts sold in asset-backed
securities, at the dates, and for 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.
<TABLE>
<CAPTION>
DELINQUENCY EXPERIENCE
------------------------------------------------------------
JUNE 30, MAR. 31, DEC. 31, SEPT. 30, JUNE 30,
1997 1997 1996 1996 1996
-------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Gross Servicing Portfolio (000s) ...... $395,695 $303,986 $251,751 $209,761 $172,562
Period of Delinquencies (000s) (1):
31-60 Days ........................ 12,636 8,149 8,323 6,234 4,827
61-90 Days ........................ 4,217 2,957 2,847 1,832 1,347
91 Days or more ................... 1,787 1,512 1,516 1,088 662
-------- -------- -------- -------- --------
Total Delinquencies (000s) ............ $ 18,640 $ 12,618 $ 12,686 $ 9,154 $ 6,836
======== ======== ======== ======== ========
Total Delinquencies as a Percentage
of Servicing Portfolio ............ 4.71% 4.15% 5.04% 4.36% 3.96%
Amount in Repossession (000s) (2) ..... $ 3,080 $ 2,454 $ 2,216 $ 1,685 $ 1,369
Amount in Repossession as a
Percentage of Servicing Portfolio . 0.78% 0.81% 0.88% 0.80% 0.79%
</TABLE>
<TABLE>
<CAPTION>
NET CHARGE-OFF EXPERIENCE
FOR THE THREE-MONTH PERIOD ENDED
------------------------------------------------------------
JUNE 30, MAR. 31, DEC. 31, SEPT. 30, JUNE 30,
1997 1997 1996 1996 1996
-------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Average Servicing Portfolio
Outstanding (000s) (3) ........... $350,132 $274,507 $232,617 $191,162 $156,266
Net Charge-offs (000s) (4)(5) ......... $ 4,082 $ 3,543 $ 2,945 $ 2,227 $ 1,329
Annualized Net Charge-offs as a
Percentage of Average
Servicing Portfolio ............... 4.66% 5.16% 5.06% 4.66% 3.40%
</TABLE>
(1) The Company considers a Contract delinquent when an obligor fails to make
at least 90% of a 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. As of June 30, 1997, the Company had granted payment
extensions of 30 days or more for Contracts representing 1.43% of the
outstanding balance of the entire Contract portfolio, and these Contracts
were not considered delinquent.
(2) Amount in repossession represents the outstanding principal on Contracts
for which vehicles have been repossessed, but not yet liquidated.
(3) For three-month periods ended after September 30, 1996, averages of
Contracts outstanding are as of the beginning and the end of each month
during the period. For prior periods, averages of Contracts outstanding
are as of the beginning and the end of the period presented.
(4) Charge-off amounts exclude the effect of accrued interest, discounts paid
by the dealers and potential recoveries from legal proceedings against
borrowers.
(5) 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 VSI insurance. 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 its
borrowers are partially a function of the time of year. Since these borrowers
typically have low disposable incomes, they tend with more frequency to become
late in payments on their Contracts during the fall and 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 calendar 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 calendar quarters. The
increase in charge-offs and delinquencies during the three-month period ended
June 30, 1997, as compared to the three-month period ended June 30, 1996, is
primarily due to the seasoning of the total Contract portfolio. Higher
repossession rates and a weaker auction market for repossessed vehicles also
contributed to a higher net loss rate during the three-month period ended June
30, 1997 as compared to the same period in the prior year.
Since January 1, 1995, the Company has maintained, at its own expense,
vendor single interest (VSI) insurance that protects the Company's interest in
the collateral against uninsured physical damaged (including total loss). For
the periods presented above, the Company's recoveries on its VSI insurance
reduced its net charge-offs (including Contracts owned and sold) by $1.7 million
and the total premiums paid by the Company were $1.4 million. Commencing January
1, 1997, the Company's VSI insurance no longer covers losses due to skips.
Historically, most skips have been located either by the Company or by the VSI
insurance provider, and the Company believes that it can internally manage skips
more efficiently. Proceeds collected in connection with skips approximated
$110,000 in aggregate during the periods presented. The average net loss rate
for periods in which the VSI policy covered skips in the table above was 5.4%,
annually. Had the VSI policy not covered skips, the average net loss rate would
have been 5.5%, annually, for those same periods.
ALLOWANCE FOR CONTRACT LOSSES
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. As of June 30, 1997, and December 31, 1996, Contracts
held-for-investment included the Spread Receivables. The allowance for Contract
losses as of June 30, 1997, was $413,000, or 15% of the total Contracts
held-for-investment. As of December 31, 1996, the allowance for Contract losses
was $565,000, or 14% of the total Contracts held-for-investment.
In connection with the valuation of the ESRs, the Company projects
losses in the pool of Contracts which effectively represents the estimated
undiscounted recourse loss allowance contained within the valuation of the ESRs.
As of June 30, 1997, and December 31, 1996, the estimated undiscounted recourse
loss allowance embedded in the ESRs (excluding accrued interest) was $31.6
million and $19.2 million, respectively.
The combined allowance for losses on Contracts held-for-investment and
the recourse loss allowance embedded in the ESRs was 8.1% of the Contracts owned
and serviced as of June 30, 1997, as compared to 7.9% at December 31, 1996.
FINANCIAL CONDITION AND LIQUIDITY
The Company's financing needs are primarily driven by three factors.
First, the Company requires working capital to fund its operating expenses,
interest on its indebtedness, and income taxes, because the net interest income
earned on the Contracts owned by the Company are or have been restricted and
interest and excess servicing cash flows on Subordinated Securities and ESRs
owned by the Company are not available for general operating purposes until
certain credit enhancement reserve requirement levels have been met. Second, as
of March 27, 1997, the Company also requires cash to fund a portion of the
Contracts purchased, since the CP Facility does not cover 100% of the Contract
purchase price. Third, 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 operations, Contract
purchases and the securitization program. Other than cash received from fees
generated from servicing Contracts owned or serviced, ACC relies on intercompany
loans from
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its subsidiaries to fund operating expenses and to service ACC's indebtedness.
These intercompany loans are eliminated during consolidation of the financial
statements of the Company.
On March 27, 1997, the Company entered into the CP Facility. The lenders
are a commercial paper conduit and CSFB, and the borrower is Liquidity. The CP
Facility is secured by Contracts pledged by Liquidity (purchased in a true sale
from OFL-A or ACC) and is guaranteed by FSA. The CP Facility bears interest at
the weighted average of the commercial paper issued by the conduit plus
commissions and expenses, repriced daily, unless the lenders, in their sole
discretion, determine in good faith that the commercial paper rate is
unavailable or not desirable and apply a bank rate equal to the euro-dollar rate
plus 75 basis points. The interest rate on the CP Facility (including
commissions and expenses) was 5.7% as of June 30, 1997.
Under the CP Facility, the Company is obligated to secure an additional
warehouse facility from another lender, with a minimum line of credit of $50
million. The Company anticipates that the funds available under the CP Facility,
the additional facility and the NIM Facility, proceeds from the sale of
Subordinated Securities and cash flows from ESRs, will be sufficient to satisfy
the Company's estimated cash requirements for at least the next 12 months. If
these funds are not available for any reason or if the Company's cash
requirements increase, the Company may be required to seek additional funding.
Advances under the CP Facility are limited to the borrowing base. The
borrowing base is calculated under a formula that takes into account, among
other factors, the principal balance of the Contracts pledged under the
facility, the current interest rate for United States Treasury securities with a
21-month remaining term or the one-month LIBOR, whichever is greater, and the
weighted average coupon rate of the Contracts pledged under the CP Facility. The
borrowing base cannot exceed 93% of the principal balance of eligible Contracts.
As of June 30, 1997, the advance rate was 91.7% of eligible Contracts, including
a 1% liquidity cash reserve. If Treasury rates or the LIBOR rises or the
weighted average coupon of Contracts being purchased by the Company declines,
then the advance rate will decline if all other factors remain the same. A
decrease in advance rates will increase the Company's capital requirements for
the CP Facility and adversely affect its liquidity.
Historically, the Company has operated on a negative cash flow basis
and, depending upon the Company's growth of Contract purchase volumes and its
Contract securitization program, its negative cash flow may continue into the
foreseeable future. The Company has funded its negative operating cash flows
principally through borrowings under the NIM Facility, and proceeds from the
issuance of the 1996 Notes and equity securities. Additionally, the Company has
sold the Subordinated Securities created in connection with the 1997-A and
1997-B Transaction, which generated $10.5 million in cash during the six-month
period ended June 30, 1997. The Company may continue this practice in future
transactions, but there is no assurance that there will be a liquid market for
such Subordinated Securities. During the six-month period ended June 30, 1997,
the Company also reduced its current cash requirements by changing the structure
of its asset securitization transactions to a structure that permits deferral of
income taxes on the gain on sale. In all prior securitization transactions, the
gain on sale has resulted in a cash tax obligation in the current period. As of
June 30, 1997, there were no advances outstanding on the NIM Facility and the
NIM Facility had a borrowing base of $10 million based upon collateral available
to be pledged. If the Company continues to sell the Subordinated Securities in
connection with future securitization transactions, the Company's available
borrowing base under the NIM Facility, which is based upon the NIM Facility's
valuation of Subordinated Securities and ESRs pledged as collateral, may decline
to less than $10 million.
In order to execute its business strategy, the Company is dependent upon
its warehouse facility, its asset securitization program and its ongoing ability
to access capital markets to obtain long term debt and equity capital. Factors
that affect the Company's access to capital markets and sources of financing,
and the cost of capital, include, among others, interest rates, general economic
conditions, the performance of the Company's competitors, the performance of the
Company's asset securitizations, and the Company's results of operations,
financial condition, business prospects (including competitive conditions) and
leverage. In addition, covenants in the indenture for the 1996 Notes and in
outstanding and future debt securities and financing facilities may
significantly restrict the Company's ability to incur additional indebtedness or
issue new equity securities.
During the three-month period ended March 31, 1997 and the six-month
period ended June 30, 1996, cash generated from payments received on Contracts
financed under the warehouse facility were used to reduce
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<PAGE> 18
indebtedness under, or were deposited into restricted accounts as additional
collateral for, the warehouse facility. During the three-month period ended June
30, 1997, approximately $2.5 million of payments received on Contracts financed
under the warehouse facility were distributed, or approved for distribution, to
the Company. Proceeds from the securitization of Contracts were used by the
Company to reduce indebtedness under both of these facilities. Following each of
the asset securitization transactions, excess servicing cash flows were
deposited into restricted accounts to build credit enhancement cash reserves.
Once the amounts in these credit enhancements reach required levels, any
additional excess servicing revenues are distributed to the Company. Under
normal circumstances, for securitization transactions done without the sale of
Subordinated Securities, the Company expects to reach required credit
enhancement levels eight to twelve months following the effective date of the
securitizations. For securitizations involving the sale of Subordinated
Securities, the Company expects to reach required credit enhancement levels 18
to 24 months after the effective date, as all excess distributions from the
credit enhancement cash reserves will be used initially to pay down the
Subordinated Securities. However, there is no assurance that this expectation
will be met and the occurrence of any triggering event would delay release of
excess cash by increasing credit enhancement cash reserve requirements on those
transactions. During the six-month period ended June 30, 1997, $3.9 million was
distributed, or was approved for distribution, to the Company from the credit
enhancement cash reserves.
During the six-month period ended June 30, 1997, the Company used net
cash from operations of $21.9 million, compared to $4.4 million during the
six-month period ended June 30, 1996. This increase in cash used by operating
activities is primarily due to increases in net cash deposited into restricted
accounts and an increase in Contracts held for sale.
The net cash provided by investing activities was $84,000 during the
six-month period ended June 30, 1997, compared to $1.6 million in the six-month
period ended June 30, 1996. This decrease in cash provided was primarily due to
an increase in Contracts held for investment and a reduction in proceeds from
liquidation of repossessed automobiles partially offset by an increase in
principal collections on asset-backed securities.
The net cash provided by financing activities for the six-month period
ended June 30, 1997, was $22.8 million, $21.4 million of which was generated
through the warehouse facility. The net cash provided by financing activities
for the six-month period ended June 30, 1996, was $2.7 million. The Company
raised over $13.5 million in common and preferred stock issuances during the
six-month period ended June 30, 1996. These proceeds were used to reduce
advances under the warehouse facility resulting in a net decrease in the
warehouse facility balance of $6.2 million and to pay down the NIM facility
balance resulting in a net decrease of $5.1 million.
INTEREST RATE RISK MANAGEMENT
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. 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.
The market value of these futures Contracts responds inversely to
changes in the value of the Contracts. The Company recognized net losses on the
hedging program of $36,000 during the six-month period ended June 30, 1997, as
compared to net gains of $20,000 during the six-month period ended June 30,
1996. As of June 30, 1997 and December 31, 1997, the Company had unrealized
losses under the hedging program of $30,000.
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 Company 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. As of June 30, 1997, the Company
owned $37.2 million of Contracts (excluding approximately $2.6 million of
performing Contracts pledged as credit enhancements and $4.8 million of
Contracts set aside in connection with the 1997-B transaction) and maintained a
$35 million hedge position consisting of futures contracts on two-year treasury
instruments.
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The Securities and Exchange Commission has approved rule amendments to
clarify and expand existing disclosure requirements for derivative financial
instruments. The amendments require enhanced disclosure of accounting policies
for derivative financial instruments in the footnotes to the consolidated
financial statements. In addition, the amendments expand existing disclosure
requirements to include quantitative and qualitative information about market
risk inherent in market risk sensitive instruments. The required quantitative
and qualitative information should be disclosed outside the consolidated
financial statements and related notes thereto. The enhanced accounting policy
disclosure requirements are effective for the three-month period ended June 30,
1997. As the Company believes that the derivative financial instrument
disclosure contained within the notes to the consolidated financial statements
for its fiscal year ended December 31, 1996 annual report filed on form 10-K
substantially conforms with the accounting policy requirements of these
amendments, no further interim period disclosure has been provided.
CURRENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) issued Statement of
Accounting Standards No. 128, "Earnings per Share" (SFAS 128) and "Disclosure of
Information about Capital Structure" (SFAS 129) in February 1997, and issued
"Reporting Comprehensive Income" (SFAS 130) and "Disclosures About Segments of
an Enterprise and Related Information" (SFAS 131) in June 1997.
SFAS 128 simplifies the standards for computing and presenting earnings
per share (EPS) as previously prescribed by Accounting Principles Board Opinion
No. 15, "Earnings per Share". SFAS 128 replaces primary EPS with basic EPS and
fully diluted EPS with diluted EPS. Basic EPS excludes dilution and is computed
by dividing income available to common stockholders by the weighted average
number of common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other outstanding contracts
to issue common stock were exercised or converted into common stock or resulted
from issuance of common stock that then shared in earnings. SFAS 128 also
requires dual presentation of basic and diluted EPS on the face of the statement
of operations and a reconciliation of the numerator and denominator of the basic
EPS computation to the numerator and denominator of the diluted EPS computation.
SFAS 128 is effective for financial statements issued for periods ending after
December 15, 1997, and earlier application is not permitted.
SFAS 129 consolidates existing reporting standards for disclosing
information about an entity's capital structure. SFAS 129 also supersedes
specific requirements found in previously issued accounting statements. SFAS 129
must be adopted for financial statements for periods ending after December 15,
1997.
SFAS 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statements. SFAS 130 requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. SFAS 130 does
not require a specific format for that financial statement but requires that an
enterprise display an amount representing total comprehensive income for the
period in that financial statement. SFAS 130 also requires that an enterprise
(a) classify items of other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of a statement of financial position. SFAS 130 is effective for fiscal
years beginning after December 15, 1997. Reclassification of financial
statements for earlier periods provided for comparative purposes is required.
SFAS 131 establishes standards for the way public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. SFAS 131 supersedes FASB Statement No. 14,
"Financial Reporting for Segments of a Business Enterprise," but retains the
requirements to report information about major customers. It amends FASB
Statement No.4, "Consolidation of All Majority Owned Subsidiaries," to remove
the special disclosure requirements for previously unconsolidated subsidiaries.
SFAS 131 requires that a public business enterprise report financial and
descriptive information about its reportable operating segments. Operating
segments are components of an enterprise about which separate
Page 17
<PAGE> 20
financial information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in assessing
performance. Generally, financial information is required to be reported on the
basis that is used internally for evaluating segment performance and deciding
how to allocate resources to segments. SFAS 131 requires that a public business
enterprise report a measure of segment profit or loss, certain specific revenue
and expense items, and segment assets. It requires reconciliations of total
segment revenues, total segment profit or loss, total segment assets, and other
amounts disclosed for segments to corresponding amounts in the enterprise's
general-purpose financial statements. It requires that all public business
enterprises report information about revenues derived from the enterprise's
products or services (or groups of similar products and services), about the
countries in which the enterprise earns revenues and holds assets, and about
major customers regardless of whether that information is used in making
operating decisions.
Page 18
<PAGE> 21
Part II. Other Information
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) An annual meeting was held on May 6, 1997.
b) The following individuals were nominated and elected as class II
directors of the Company: Rocco J. Fabiano and Jack P. Fitzpatrick.
<TABLE>
<CAPTION>
Votes:
-------------------------------------------------
Total as
For Against Abstain of Record Date
--------- ------- ------- ---------------
<S> <C> <C> <C> <C>
Rocco J. Fabiano 8,258,046 - 200 8,258,246
Jack P. Fitzpatrick 8,258,046 - 200 8,258,246
</TABLE>
The following Directors terms expire after the date of the meeting and
continue in office: Jeffrey Susskind, Jeffrey S. Lambert, and Ethan J.
Falk.
a) The selection of KPMG Peat Marwick LLP as the auditors of the Company for
the fiscal year ended December 31, 1997 was ratified.
<TABLE>
<CAPTION>
Votes:
------------------------------------------------
Total as
For Against Abstain of Record Date
--------- ------- ------- --------------
<S> <C> <C> <C> <C>
KPMG Peat Marwick 8,257,096 1,000 150 8,258,246
</TABLE>
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The exhibits listed below are filed with this report.
<TABLE>
<S> <C>
10.1 Purchase and Sale Agreement among ACC Liquidity LLC, OFL-A
Receivables Corp., ACC Receivables Corp and ACC Consumer Finance
Corporation dated March 27, 1997
10.2 Custodial Agreement among Financial Security Assurance, Inc.,
Credit Suisse First Boston, New York Branch, Norwest Bank
Minnesota, National Association, ACC Consumer Finance
Corporation and ACC Liquidity, LLC dated March 27, 1997
10.3 Receivables Financing Agreement among ACC Liquidity LLC, ACC
Consumer Finance Corporation, Alpine Securitization Corp.,
The Financial Institutions, Credit Suisse First Boston, New York
Branch and Norwest Bank Minnesota dated March 27, 1997
10.4 Torrey Reserve Office Lease between American Assets, Inc. and
ACC Consumer Finance Corporation dated April 7, 1997
10.5 Torrey Reserve Addendum to Lease between American Assets, Inc.
and ACC Consumer Finance Corporation dated April 7, 1997
11 Computation of Weighted Average Shares Outstanding
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K. On April 21, 1997, the Company filed a current
report on Form 8-K reporting in item 5 the new commercial paper backed
facility entered into on March 27, 1997.
Page 19
<PAGE> 22
SIGNATURES
In accordance with the Securities Exchange Act of 1934, this report has
been duly signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Date: August 12, 1997 By: /s/ ROCCO J. FABIANO
-----------------------------------
Rocco J. Fabiano
Chairman of the Board and Chief
Executive Officer
Date: August 12, 1997 By: /s/ RELLEN M. STEWART
-----------------------------------
Rellen M. Stewart
Chief Operating Officer and Chief
Financial Officer
Date: August 12, 1997 By: /s/ SHAEMUS A. GARLAND
-----------------------------------
Shaemus A. Garland
Vice President and Controller
Page 20
<PAGE> 23
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
<S> <C> <C>
10.1 Purchase and Sale Agreement among ACC Liquidity LLC, OFL-A
Receivables Corp., ACC Receivables Corp and ACC Consumer Finance
Corporation dated March 27, 1997
10.2 Custodial Agreement among Financial Security Assurance, Inc.,
Credit Suisse First Boston, New York Branch, Norwest Bank
Minnesota, National Association, ACC Consumer Finance
Corporation and ACC Liquidity, LLC dated March 27, 1997
10.3 Receivables Financing Agreement among ACC Liquidity LLC, ACC
Consumer Finance Corporation, Alpine Securitization Corp.,
The Financial Institutions, Credit Suisse First Boston, New York
Branch and Norwest Bank Minnesota dated March 27, 1997
10.4 Torrey Reserve Office Lease between American Assets, Inc. and
ACC Consumer Finance Corporation dated April 7, 1997
10.5 Torrey Reserve Addendum to Lease between American Assets, Inc.
and ACC Consumer Finance Corporation dated April 7, 1997
11 Computation of Weighted Average Shares Outstanding
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.1
EXECUTION COPY
PURCHASE AND SALE AGREEMENT
between
ACC LIQUIDITY LLC,
as purchaser,
OFL-A RECEIVABLES CORP.,
as seller,
ACC RECEIVABLES CORP.
and
ACC CONSUMER FINANCE CORPORATION
dated as of
March 27, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I DEFINITIONS................................................1
SECTION 1.1 General....................................................1
SECTION 1.2 Specific Terms.............................................1
SECTION 1.3 Certain References.........................................3
SECTION 1.4 No Recourse................................................3
ARTICLE II CONVEYANCE OF THE RECEIVABLES...............................
AND THE OTHER CONVEYED PROPERTY............................3
SECTION 2.1 Conveyance of the Receivables and the Other Conveyed
Property...................................................3
ARTICLE III CONDITIONS OF SALE.........................................5
SECTION 3.1 Conditions Precedent to the Initial Conveyance.............5
SECTION 3.2 Conditions Precedent to All Sales..........................6
ARTICLE IV REPRESENTATIONS AND WARRANTIES.............................7
SECTION 4.1 Representations and Warranties of OFL-A....................7
SECTION 4.2 Representations and Warranties of the Purchaser...........11
SECTION 4.3 Indemnification...........................................13
ARTICLE V COVENANTS OF OFL-A........................................15
SECTION 5.1 Protection of Title of the Purchaser......................15
SECTION 5.2 Other Liens or Interests..................................16
SECTION 5.3 Costs and Expenses........................................16
ARTICLE VI REPURCHASES...............................................17
SECTION 6.1 Repurchase of Transferred Receivables Upon Breach of
Warranty..................................................17
SECTION 6.2 Right to Repurchase Transferred Receivables...............17
SECTION 6.3 Reassignment of Purchased Receivables.....................18
SECTION 6.4 Waivers...................................................18
ARTICLE VII MISCELLANEOUS...................................................18
SECTION 7.1 Liability of OFL-A........................................18
SECTION 7.2 Merger or Consolidation of OFL-A or the Purchaser.........18
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 7.3 Limitation on Liability of OFL-A and Others.............19
SECTION 7.4 [Intentionally Omitted].................................19
SECTION 7.5 Amendment...............................................19
SECTION 7.6 Notices.................................................20
SECTION 7.7 Merger and Integration..................................20
SECTION 7.8 Severability of Provisions..............................20
SECTION 7.9 Intention of the Parties................................20
SECTION 7.10 Governing Law...........................................21
SECTION 7.11 Counterparts............................................21
SECTION 7.12 Nonpetition Covenant....................................21
</TABLE>
EXHIBIT A -- Form of Assignment
SCHEDULE A -- Schedule of Receivables
SCHEDULE B -- Representations and Warranties of Seller
ii
<PAGE> 4
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT, dated as of March 27, 1997,
executed between ACC Liquidity LLC, a Delaware limited liability company, as
purchaser (the "Purchaser"), OFL-A Receivables Corp., a Delaware corporation, as
seller ("OFL-A"), ACC Receivables Corp., a Delaware corporation ("ACC
Receivables"), and ACC Consumer Finance Corporation, a Delaware corporation
("ACC").
W I T N E S S E T H:
WHEREAS, the Purchaser, has agreed to purchase from OFL-A, and
OFL-A, pursuant to this Agreement, is selling to the Purchaser certain
Receivables and Other Conveyed Property (in each case, as hereinafter defined)
related thereto.
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 Purchaser, OFL-A, ACC Receivables and
ACC, intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 General. The specific terms defined in this Article
include the plural as well as the singular. Words herein importing a gender
include the other gender. References herein to "writing" include printing,
typing, lithography, and other means of reproducing words in 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 or the Receivables
Financing Agreement (as hereinafter defined). References herein to Persons
include their permitted successors and assigns. The terms "include" or
"including" mean "include without limitation" or "including without limitation".
The words "herein", "hereof" and "hereunder" and other words of similar import
refer to this Agreement as a whole and not to any particular Article, Section or
other subdivision, and Article, Section, Schedule and Exhibit references, unless
otherwise specified, refer to Articles and Sections of and Schedules and
Exhibits to this Agreement. Capitalized terms used herein without definition
shall have the respective meanings assigned to such terms in the Receivables
Financing Agreement.
SECTION 1.2 Specific Terms. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings:
"ACC" has the meaning specified in the Preamble.
<PAGE> 5
"ACC Repurchase Event" means any event which requires ACC, as
Servicer, to repurchase a Receivable under Section 8.7 of the Receivables
Financing Agreement.
"Agreement" shall mean this Purchase and Sale Agreement and all
amendments hereof and supplements hereto.
"American Credit Corporation" means the predecessor of ACC.
"OFL-A" has the meaning specified in the Preamble.
"OFL-A Repurchase Event" means the occurrence of a breach of any of
OFL-A=s representations and warranties under Section 4.1(a).
"Other Conveyed Property" means, with respect to any Transferred
Receivable, all monies at any time paid or payable on such Receivable or in
respect thereof after the applicable Purchase Date (including amounts due on or
before the applicable Purchase Date but received by OFL-A or ACC after such
Purchase Date), an assignment of security interests in the Financed Vehicles,
the Insurance Policies and any proceeds from any Insurance Policies relating to
such Receivable, the Obligors or the Financed Vehicles, including rebates of
premiums, rights under any Collateral Insurance relating to such Receivable,
rights of OFL-A or ACC against Dealers with respect to such Receivable under the
Dealer Agreements and the Dealer Assignments, all items contained in the related
Receivable File, any and all other documents or electronic records that OFL-A or
ACC keeps on file in accordance with its customary procedures relating to
Receivables, the Obligors or the Financed Vehicles, property (including the
right to receive future Liquidation Proceeds) that secures such Receivable and
that has been acquired by or on behalf of OFL-A or ACC pursuant to liquidation
of such Receivable, and all proceeds of the foregoing.
"Purchase Date" has the meaning specified in Section 2.1(b).
"Purchase Price" means with respect to the Eligible Receivables to
be sold by OFL-A to the Purchaser on any Purchase Date, the fair market value of
such Eligible Receivables giving effect to historical data with respect to
defaults, delinquency and similar data.
"Purchaser" has the meaning specified in the Preamble.
"Receivables Financing Agreement" means the Receivables Financing
Agreement, dated as of March 27, 1997, by and among the Purchaser, ACC, as
Servicer, Alpine Securitization Corp., Credit Suisse, New York Branch, as Agent,
the financial institutions set forth on the signature pages thereto and Norwest
Bank Minnesota, National Association, as Backup Servicer and Custodian.
"Request Notice" means a notice in the form of a computer print-out,
tape or other form acceptable to the Purchaser, which, inter alia, (a) enables
the Purchaser to identify all
2
<PAGE> 6
Receivables to be sold on the succeeding Purchase Date by OFL-A to the
Purchaser, (b) sets forth the amount of payments received on each Receivable
since the prior Purchase Date and (c) sets forth the Purchase Price for the
following Purchase Date.
"Request Notice Date" has the meaning specified in Section 2.1(b).
"Schedule of Receivables" means the schedule of all retail
installment sales contracts and promissory notes sold pursuant to this Agreement
which is attached hereto as Schedule A.
"Schedule of Representations" means the Schedule of Representations
and Warranties attached hereto as Schedule B.
"Transferred Receivable" has the meaning specified in Section
2.1(b).
SECTION 1.3 Certain References. All references to the Principal
Balance of a Receivable as of a Purchase Date shall refer to the close of
business on such day.
SECTION 1.4 No Recourse. Without limiting the obligations of OFL-A
hereunder, 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 (x)
OFL-A, or (y) of any predecessor or successor of OFL-A.
ARTICLE II
CONVEYANCE OF THE RECEIVABLES
AND THE OTHER CONVEYED PROPERTY
SECTION 2.1 Conveyance of the Receivables and the Other Conveyed
Property. (a) Subject to the terms and conditions of this Agreement, on and
after the date of this Agreement, OFL-A hereby agrees to sell, transfer, assign,
and otherwise convey, from time to time, to the Purchaser, without recourse (but
without limitation of its obligations in this Agreement), and the Purchaser
hereby agrees to purchase, all right, title and interest of OFL-A in and to
certain Receivables and Other Conveyed Property originated by OFL-A. It is the
intention of OFL-A and the Purchaser that the transfers and assignments
contemplated by this Agreement shall constitute sales of such Receivables and
Other Conveyed Property from OFL-A to the Purchaser, conveying good title
thereto free and clear of any Liens, and such Receivables and Other Conveyed
Property shall not be part of OFL-A's estate in the event of the filing of a
bankruptcy petition by or against OFL-A under any bankruptcy or similar law.
(b) OFL-A shall, on the Closing Date and on a date occurring no less
frequently than weekly thereafter (each a "Request Notice Date") deliver to the
Purchaser a
3
<PAGE> 7
Request Notice identifying (i) all outstanding Receivables and Other Conveyed
Property originated and owned by OFL-A through such date and (ii) all other
Receivables and Other Conveyed Property not previously purchased and sold, in
each case in accordance with the procedures described in this Section 2.1(b). No
later than the Business Day following the delivery of a Request Notice (each a
"Purchase Date"), the Purchaser and OFL-A shall identify Eligible Receivables
and Other Conveyed Property related thereto designated in such Request Notice
arising since the last Purchase Date which are to be purchased and sold
("Transferred Receivables") on such Purchase Date. Each such identification
shall be made as of the opening of business of OFL-A on each Purchase Date. Each
delivery of a Request Notice shall be accompanied by an updated Schedule of
Receivables, which schedule shall be attached hereto as Schedule A and made a
part hereof. Each schedule so delivered shall supersede any prior schedules so
delivered.
(c) The price paid for Transferred Receivables and Other Conveyed
Property related thereto shall be the Purchase Price, which shall be in the
minimum amount of $1,000,000 for any purchase and integral multiples of $50,000
in excess thereof. Such Purchase Price shall be paid by means of an immediate
cash payment to OFL-A by wire transfer on the applicable Purchase Date to an
account designated by OFL-A on or before such Purchase Date. On each Purchase
Date, the Transferred Receivables and Other Conveyed Property related thereto
shall be assigned, and on such Purchase Date the Purchaser shall pay the
Purchase Price for such Transferred Receivables and Other Conveyed Property
related thereto.
(d) On and after each Purchase Date hereunder, the Purchaser shall
own the Transferred Receivables and the Other Conveyed Property which have been
(assuming compliance with the terms hereof) identified as being transferred to
the Purchaser under this Section 2.1 and OFL-A shall not take any action
inconsistent with such ownership and shall not claim any ownership interest in
such Transferred Receivables and Other Conveyed Property.
(e) Until the occurrence of a Servicer Termination Event or a
resignation pursuant to the Receivables Financing Agreement, ACC, as Servicer,
shall conduct the servicing, administration and collection of the Receivables
transferred hereunder and shall take, or cause to be taken, all such actions as
may be necessary or advisable to service, administer and collect such
Transferred Receivables, from time to time, all in accordance with (i) the terms
of the Receivables Financing Agreement, (ii) customary and prudent servicing
procedures for sub-prime auto loans of a similar type and (iii) all applicable
laws, rules and regulations. Documents relating to Receivables transferred
hereunder shall be held in trust by the Custodian for the benefit of the
Purchaser and its assignees as the owners thereof, and possession of any
incident relating to the Transferred Receivables so retained is for the sole
purpose of facilitating the servicing of the Receivables. Such retention and
possession thereof is at the will of the Purchaser and its assignees and in a
custodial capacity for their benefit only.
4
<PAGE> 8
ARTICLE III
CONDITIONS OF SALE
SECTION 3.1 Conditions Precedent to the Initial Conveyance. The
initial conveyance hereunder is subject to the condition precedent that the
Purchaser shall have received on or before the date of the initial conveyance
under this Agreement, each dated such date (unless otherwise indicated), in form
and substance satisfactory to the Purchaser:
(i) an Assignment executed by OFL-A, substantially in the form of
Exhibit A attached hereto;
(ii) a copy of resolutions duly adopted by the Board of Directors of
OFL-A approving this Agreement, the Assignment and the other documents to
be delivered by it hereunder and the transactions and matters contemplated
hereby, certified by its Secretary or Assistant Secretary;
(iii) the charter, as amended, of OFL-A, certified by the Secretary
of State of Delaware, dated not earlier than 10 days prior to the date of
the initial conveyance;
(iv) a good standing certificate for OFL-A issued by the Secretary
of State of Delaware, dated not earlier than 10 days prior to the date of
the initial conveyance;
(v) a copy of OFL-A's by-laws, as amended, certified by its
Secretary or Assistant Secretary;
(vi) a certificate of the Secretary or Assistant Secretary of OFL-A
certifying the names and true signatures of the officers authorized on its
behalf to sign this Agreement, the Assignment, and the other documents to
be delivered by it hereunder (on which certificate the Purchaser may
conclusively rely until such time as the Purchaser shall receive from
OFL-A a revised certificate meeting the requirements of this subsection
(vi)) and certifying that (A) OFL-A is qualified as a foreign corporation
in all such jurisdictions and still in good standing in all jurisdictions,
(B) all representations and warranties made by OFL-A in this Agreement are
true and correct and (C) no financing statements or other similar
instruments and documents relating to the Transferred Receivables or the
Other Conveyed Property have been filed in any jurisdiction, other than
those financing statements, other similar instruments and documents shown
on the certified copies of the requests for information or copies (Form
UCC-11)(or a similar search report certified by a party acceptable to the
Purchaser) provided pursuant to clause (ix);
(vii) copies of proper financing statements (Form UCC-1), dated on
or prior to the date of the initial conveyance, naming OFL-A as the
assignor of the Transferred Receivables and the Other Conveyed Property
and the Purchaser as assignee, or other
5
<PAGE> 9
similar instruments or documents, in form and substance sufficient for
filing under the UCC or any comparable law of any and all jurisdictions as
may be necessary or, in the opinion of the Purchaser desirable to perfect
the Purchaser's ownership interest in all Transferred Receivables and
Other Conveyed Property, in each case in which an interest may be assigned
hereunder;
(viii) copies of properly executed termination statements or
statements of release (Form UCC-2) or other similar instruments or
documents, if any, in form and substance satisfactory for filing under the
UCC or any comparable law of any and all jurisdictions as may be necessary
or, in the opinion of the Purchaser, desirable to release all security
interests and similar rights of any Person in the Transferred Receivables
and Other Conveyed Property previously granted by OFL-A;
(ix) certified copies of requests for information or copies (Form
UCC-11) (or a similar search report certified by a party acceptable to
OFL-A), dated a date reasonably near and prior to the date of the initial
conveyance, listing all effective financing statements and other similar
instruments and documents including those referred to above in subsections
(vii) and (viii) which name ACC or OFL-A (under its present name and any
previous name) as debtor and which are filed in the jurisdictions in which
filings are to be made pursuant to such subsections (vii) and (viii)
above, together with copies of such financing statements, none of which,
except those filed pursuant to subsections (vii) and (viii), above, shall
cover any Transferred Receivables or Other Conveyed Property;
(x) any necessary third party consents to the closing of the
transactions contemplated hereby, in the form and substance satisfactory
to the Purchaser; and
(xi) a favorable opinion of Dewey Ballantine, counsel to OFL-A, with
respect to such matters as the Purchaser may reasonably request.
SECTION 3.2 Conditions Precedent to All Sales. The obligation of
the Purchaser to pay for each Transferred Receivable and the Other Conveyed
Property on each Purchase Date (including the initial Purchase Date) shall be
subject to the further conditions precedent (any one of which can be waived by
the Purchaser) that on such Purchase Date:
(a) The following statements shall be true:
(i) the representations and warranties of OFL-A contained in Section
4.1 shall be correct on and as of such Purchase Date in all material
respects, before and after giving effect to such conveyance and to the
application of proceeds therefrom, as though made on and as of such date;
and
(ii) OFL-A is in compliance with each of its covenants and other
agreements set forth herein; and
6
<PAGE> 10
(iii) each Transferred Receivable designated as an Eligible
Receivable is an Eligible Receivable
(b) the Purchaser shall have received an Assignment, substantially
in the form of Exhibit A attached hereto, dated the related Purchase Date,
executed by OFL-A; and
(c) OFL-A shall have taken such other action, including delivery of
approvals, consents, opinions, documents and instruments to the Purchaser, as
the Purchaser may reasonably request; and
(d) There shall have been no material adverse change in the
condition (financial or otherwise), business, operations, results of operations
or properties of OFL-A since the preceding conveyance.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 Representations and Warranties of OFL-A. OFL-A makes
the following representations and warranties, on which the Purchaser relies in
purchasing the Transferred Receivables and the Other Conveyed Property related
thereto and in granting a security interest in the Receivables and the Other
Conveyed Property related thereto to the Investors under the Transferred
Receivables Financing Agreement and on which the Insurer will rely in issuing
the Policy. Such representations are made as of the execution and delivery of
this Agreement or other time specified in the Schedule of Representations, but
shall survive the sale, transfer and assignment of the Transferred Receivables
and the Other Conveyed Property related thereto hereunder, and the grant of a
security interest to the Custodian on behalf of the Secured Parties under the
Receivables Financing Agreement.
(a) Schedule of Representations. The representations and warranties
made by OFL-A, as seller hereunder and set forth on the Schedule of
Representations are true and correct.
(b) Organization and Good Standing. OFL-A 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 and own the
Transferred Receivables and the Other Conveyed Property, and to transfer
the Transferred Receivables and the Other Conveyed Property to the
Purchaser and to enter into and perform its obligations under this
Agreement.
7
<PAGE> 11
(c) Due Qualification. OFL-A 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. OFL-A has the power and authority to
execute and deliver this Agreement, the Receivables Financing Agreement
and the Transaction Documents to such which it is a party and to carry out
its terms and their terms, respectively; OFL-A has full power and
authority to sell and assign the Transferred Receivables and Other
Conveyed Property to be sold and assigned to the Purchaser hereunder and
has duly authorized such sale and assignment to the Purchaser by all
necessary corporate action and the execution, delivery and performance of
this Agreement, the Receivables Financing Agreement and the Transaction
Documents to which it is a party have been duly authorized by OFL-A by all
necessary corporate action.
(e) Valid Sale; Binding Obligations. This Agreement, the Receivables
Financing Agreement, each Assignment and the Transaction Documents to
which OFL-A is party have been and will be duly executed and delivered and
shall effect a valid sale, transfer and assignment of the Transferred
Receivables and the Other Conveyed Property, enforceable against OFL-A and
creditors of and purchasers (other than bona fide purchasers taking
without notice) from OFL-A, and this Agreement, the Receivables Financing
Agreement and such Transaction Documents shall constitute legal, valid and
binding obligations of OFL-A 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.
(f) No Violation. The consummation of the transactions contemplated
by this Agreement, the Receivables Financing Agreement and the Transaction
Documents, and the fulfillment of the terms of this Agreement, the
Receivables Financing Agreement and the Transaction 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 or lapse of
time) a default under, the articles of incorporation or bylaws of OFL-A,
or any indenture, agreement, mortgage, deed of trust or other instrument
to which OFL-A 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
the Receivables Financing Agreement, or violate any law, order, rule or
regulation applicable to OFL-A of any court or of any federal or state
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over OFL-A or any of its properties,
or in any way affect OFL-A's ability to perform its obligations under this
Agreement.
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(g) No Proceedings. There are no proceedings or investigations
pending or, to OFL-A's knowledge, threatened against OFL-A, before any
court, regulatory body, administrative agency or other tribunal or
governmental instrumentality having jurisdiction over OFL-A or its
properties (A) asserting the invalidity of this Agreement or any of the
Transaction Documents, (B) seeking to prevent the consummation of any of
the transactions contemplated by this Agreement or any of the Transaction
Documents, (C) seeking any determination or ruling that might materially
and adversely affect the performance by OFL-A of its obligations under, or
the validity or enforceability of, this Agreement or any of the
Transaction Documents (D) involving OFL-A or (E) that could have a
material adverse effect on the Transferred Receivables.
(h) No Consents. OFL-A 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.
(i) Collateral Insurance. As of the Closing Date, ACC maintained
Collateral Insurance. OFL-A or ACC is named as named insured under all
policies of Collateral Insurance. As of the Closing Date, each Financed
Vehicle was covered by Collateral Insurance providing coverage upon
repossession of such Financed Vehicle.
(j) Approvals. All approvals, authorizations, 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 OFL-A of this Agreement and the consummation of
the transactions contemplated hereby (including the sale, transfer and
assignment of Transferred Receivables to the Purchaser) have been or will
be taken or obtained on or prior to the Closing Date.
(k) Chief Executive Office. The chief executive office of OFL-A is
located at 12750 High Bluff Drive, Suite 320, San Diego, California 92130.
(l) Solvency. OFL-A is solvent and will not become insolvent after
giving effect to the transactions contemplated by this Agreement and the
Transaction Documents. OFL-A has no Indebtedness to any Person other than
pursuant to this Agreement and the Transaction Documents. OFL-A, after
giving effect to the transactions contemplated by this Agreement and the
Transaction Documents, will have an adequate amount of capital to conduct
its business in the foreseeable future.
(m) Tax Treatment. For federal income tax, reporting and accounting
purposes, OFL-A will treat the purchase or absolute assignment of each
Transferred Receivable pursuant to this Agreement as a purchase or
absolute assignment of OFL's full right, title and ownership interest in
such Transferred Receivable to the Purchaser and OFL-A has not in any
other manner accounted for or treated the transactions in Receivables.
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(n) Compliance With Laws. OFL-A has complied and will comply in all
respects with all applicable laws, rules, regulations, judgments,
agreements, decrees and orders with respect to its business and properties
and all Collateral.
(o) Taxes. OFL-A has filed on a timely basis all tax returns
(including, without limitation, foreign, federal, state, local and
otherwise) required to be filed, is not liable for taxes payable by any
other Person and has paid or made adequate provisions for the payment of
all taxes, assessments and other governmental charges due from OFL-A. No
tax lien or similar adverse claim has been filed, and no claim is being
asserted, with respect to any such tax, assessment or other governmental
charge. Any taxes, fees and other governmental charges payable by OFL-A in
connection with the execution and delivery of this Agreement and the
Transaction Documents and the transactions contemplated hereby or thereby
have been paid or shall have been paid if and when due at or prior to the
related Purchase Date.
(p) Request Notice. Each Request Notice is accurate in all material
respects.
(q) No Liens, Etc. The Collateral and each part thereof is owned by
OFL-A free and clear of any adverse claim or restrictions on
transferability and OFL-A has the full right, corporate power and lawful
authority to assign, transfer and pledge the same and interests therein,
and upon transfer hereunder the Purchaser will have acquired good and
marketable title to and a valid and the sole record and beneficial
ownership interest in such Collateral, free and clear of any adverse claim
or restrictions on transferability. No effective financing statement or
other instrument similar in effect covering all or any part of the
Collateral is on file in any recording office, except such as may have
been filed in favor of the Custodian as "Secured Party" pursuant to
Article XI of the Receivables Financing Agreement or, with respect to the
Receivables, in favor of the Purchaser pursuant to this Agreement.
(r) Securities Act of 1933; Investment Company Act of 1940. Each
purchase of Receivables hereunder will constitute (i) a "current
transaction" within the meaning of Section 3(a)(3) of the Securities Act
of 1933, as amended, and (ii) a purchase or other acquisition of notes,
drafts, acceptances, open accounts receivable or other obligations
representing part or all of the sales price of merchandise, insurance or
services within the meaning of Section 3(c)(5) of the Investment Company
Act of 1940, as amended.
(s) Information True and Correct. All information heretofore or
hereafter furnished by or on behalf of OFL-A to the Purchaser in
connection with this Agreement or any transaction contemplated hereby is
and will be true and complete in all material respects and does not and
will not omit to state a material fact necessary to make the statements
contained therein not misleading.
(t) ERISA Compliance. OFL-A is in compliance with ERISA and has not
incurred and does not expect to incur any liabilities (except for premium
payments arising
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in the ordinary course of business) to the Pension Benefit Guaranty
Corporation (or any successor thereto) under ERISA.
(u) No Material Adverse Effect; No Default. (a) OFL-A is not a party
to any indenture, loan or credit agreement or any lease or other agreement
or instrument or subject to any charter or corporation restriction that
could have, and no provision of applicable law or governmental regulation
is reasonably likely to have, a material adverse effect on the condition
(financial or otherwise), business, operations, results of operations or
properties of OFL-A, or could have such an effect on the ability of OFL-A
to carry out its obligations under this Agreement and the other
Transaction Documents to which OFL-A is a party and (b) OFL-A is not in
default under or with respect to any contract, agreement, lease or other
instrument to which OFL-A is a party and which is material to OFL-A's
condition (financial or otherwise), business, operations or properties,
and OFL-A has not delivered or received any notice of default thereunder.
(v) Financial or Other Condition. There has been no material adverse
change in the condition (financial or otherwise), business, operations,
results of operations, or properties of OFL-A.
(w) Investment Company Status. OFL-A is not an "investment company"
or an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company," as such terms are defined in the Investment
Company Act of 1940, as amended. The consummation of the transactions
contemplated by this Agreement and the other Transaction Documents to
which OFL-A is a party will not violate any provision of such Act or any
rule, regulation or order issued by the Securities and Exchange Commission
thereunder.
(x) No Shared Obligations. There is not now, nor will there be at
any time in the future, any agreement or understanding between OFL-A and
the Purchaser (other than as expressly set forth herein) providing for the
allocation or sharing of obligations to make payments or otherwise in
respect of any taxes, fees, assessments or other governmental charges.
(y) Representation and Warranties True and Correct. Each of the
representations and warranties of OFL-A contained in this Agreement and
the Transaction Documents to which it is a party is true and correct in
all material respects and OFL-A hereby makes each such representation and
warranty to, and for the benefit of the Purchaser as if the same were set
forth in full herein.
SECTION 4.2 Representations and Warranties of the Purchaser. The
Purchaser makes the following representations and warranties, on which OFL-A
relies in selling, assigning, transferring and conveying Transferred Receivables
and the Other Conveyed Property to the Purchaser hereunder. Such representations
are made as of the execution and delivery of this Agreement, but shall survive
the sale, transfer and assignment of Transferred Receivables
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and the Other Conveyed Property hereunder and the grant of a security interest
in Transferred Receivables by the Purchaser under the Receivables Financing
Agreement.
(a) Organization and Good Standing. The Purchaser has been duly
organized and is validly existing and in good standing as a limited
liability company under the laws of the State of Delaware, with the 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 has, full power, authority and legal
right to acquire and own the Transferred Receivables and the Other
Conveyed Property, and to grant a security interest in the Transferred
Receivables and the Other Conveyed Property to the Custodian on behalf of
the Secured Parties pursuant to the Receivables Financing Agreement.
(b) Due Qualification. The Purchaser 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 pr the conduct of its business requires
such qualification.
(c) Power and Authority. The Purchaser has the power, authority and
legal right to execute and deliver this Agreement and to carry out the
terms hereof and to acquire the Transferred Receivables and the Other
Conveyed Property hereunder; and the execution, delivery and performance
of this Agreement and all of the documents required pursuant hereto have
been duly authorized by the Purchaser by all necessary action.
(d) No Consent Required. The Purchaser is not required to obtain the
consent of any other Person, or any consent, license, approval or
authorization or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery or
performance of this Agreement, the Receivables Financing Agreement and the
Transaction Documents to which it is a party, except for such as have been
obtained, effected or made.
(e) Binding Obligation. This Agreement constitutes a legal, valid
and binding obligation of the Purchaser, enforceable against the Purchaser
in accordance with its terms, subject, as to enforceability, to applicable
bankruptcy, insolvency, reorganization, conservatorship, receivership,
liquidation and other similar laws and to general equitable principles.
(f) No Violation. The execution, delivery and performance by the
Purchaser of this Agreement, the consummation of the transactions
contemplated by this Agreement, the Receivables Financing Agreement and
the Transaction Documents and the fulfillment of the terms of this
Agreement, the Receivables Financing Agreement and the Transaction
Documents to which it is a party do not and will 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
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Purchaser, or conflict with or breach any of the terms or provisions of,
or constitute (with or without notice or lapse of time) a default under,
any indenture, agreement, mortgage, deed of trust or other instrument to
which the Purchaser is a party or by which the Purchaser is bound or to
which 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 the Receivables Financing Agreement), or violate any law,
order, rule or regulation, applicable to the Purchaser or its properties,
of any federal or state regulatory body, any court, administrative agency,
or other governmental instrumentality having jurisdiction over the
Purchaser or any of its properties.
(g) No Proceedings. There are no proceedings or investigations
pending, or, to the knowledge of the Purchaser, threatened against the
Purchaser, before any court, regulatory body, administrative agency, or
other tribunal or governmental instrumentality having jurisdiction over
the Purchaser or its properties: (i) asserting the invalidity of this
Agreement, the Receivables Financing Agreement or any of the Transaction
Documents, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement, the Receivables Financing
Agreement or any of the Transaction Documents, (iii) seeking any
determination or ruling that might materially and adversely affect the
performance by the Purchaser of its obligations under, or the validity or
enforceability of, this Agreement, the Receivables Financing Agreement or
any of the Transaction Documents or (iv) that may adversely affect the
federal or state income tax attributes of, or seeking to impose any
excise, franchise, transfer or similar tax upon, the transfer and
acquisition of the Transferred Receivables and the Other Conveyed Property
hereunder or the grant by the Purchaser of a security interest in the
Transferred Receivables and the Other Conveyed Property to the Custodian
on behalf of the Secured Parties pursuant to the Receivables Financing
Agreement.
In the event of any breach of a representation and warranty made by the
Purchaser hereunder, OFL-A covenants and agrees that OFL-A will not take any
action to pursue any remedy that either may have hereunder, in law, in equity or
otherwise, until a year and a day have passed since all obligations of the
Purchaser under the Receivables Financing Agreement and any other Transaction
Document (as defined under the Receivables Financing Agreement) have been paid
in full. OFL-A and the Purchaser agree that damages will not be an adequate
remedy for such breach and that this covenant may be specifically enforced by
the Purchaser.
SECTION 4.3 Indemnification.
(a) OFL-A shall defend, indemnify and hold harmless the Purchaser,
the Insurer, the Backup Servicer, each Investor and the Agent from and
against any and all costs, expenses, losses, damages, claims, and
liabilities, arising out of or resulting from any breach of any of OFL-A's
representations and warranties and covenants contained herein.
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(b) OFL-A shall defend, indemnify and hold harmless the Purchaser,
the Insurer, the Backup Servicer, each Investor and the Agent from and
against any and all costs, expenses, losses, damages, claims, and
liabilities, arising out of or resulting, from the use, ownership or
operation by OFL-A or any Affiliate thereof of a Financed Vehicle.
(c) OFL-A will defend and indemnify the Purchaser, the Insurer, the
Backup Servicer, each Investor and the Agent against any and all costs,
expenses, losses, damages, claims and liabilities arising out of or
resulting from any action taken, or failed to be taken, by it in respect
of any portion of the Transferred Receivables or the Other Conveyed
Property other than in accordance with this Agreement or the Transferred
Receivables Financing Agreement.
(d) OFL-A agrees to pay, and shall defend, indemnify and hold
harmless the Purchaser, the Insurer, the Backup Servicer, each Investor
and the Agent from and against any taxes that may at any time be asserted
against the Purchaser, the Insurer, the Backup Servicer, any Investor or
the Agent with respect to the transactions contemplated in this Agreement,
including, without limitation, any sales, gross receipts, general
corporation, tangible or intangible personal property, privilege, or
license taxes (but, not including any taxes asserted with respect to, and
as of the date of, the sale, transfer and assignment of the Transferred
Receivables and the Other Conveyed Property related thereto to the
Purchaser or asserted with respect to ownership of the Transferred
Receivables and Other Conveyed Property which shall be indemnified by
OFL-A pursuant to clause (e) below) and costs and expenses in defending
against the same, arising by reason of the acts to be performed by OFL-A
under this Agreement or imposed against such Persons.
(e) OFL-A agrees to pay, and to indemnify, defend and hold harmless
the Purchaser, the Insurer, the Backup Servicer, each Investor and the
Agent from, any taxes which may at any time be asserted against such
Persons with respect to, and as of the date of, the conveyance or
ownership of the Transferred Receivables or the Other Conveyed Property
related thereto hereunder, including, without limitation, any sales, gross
receipts, personal property, tangible or intangible personal property,
privilege or license taxes and costs and expenses in defending against the
same, arising by reason of the acts to be performed by OFL-A under this
Agreement or imposed against such Persons.
(f) OFL-A shall defend, indemnify, and hold harmless the Purchaser,
the Insurer, the Backup Servicer, each Investor and the Agent 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 Purchaser, the Insurer,
the Backup Servicer, each Investor and the Agent through, the negligence,
willful misfeasance, or bad faith of OFL-A in the performance of its
duties under this Agreement or by reason of reckless disregard of OFL-A's
obligations and duties under this Agreement.
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(g) OFL-A shall indemnify, defend and hold harmless the Purchaser,
the Insurer, the Backup Servicer, each Investor and the Agent from and
against any loss, liability or expense imposed upon, or incurred by, the
Purchaser, the Insurer, any Investor or the Agent as result of the failure
of any Transferred Receivable, or the sale of the related Financed
Vehicle, to comply with all requirements of applicable law.
(h) ACC shall defend, indemnify, and hold harmless the Purchaser
from and against all costs, expenses, losses, claims, damages, and
liabilities arising out of or incurred in connection with the acceptance
or performance of ACC=s trusts and duties as Servicer under the
Receivables Financing Agreement, except to the extent that such cost,
expense, loss, claim, damage, or liability shall be due to the willful
misfeasance, bad faith, or negligence (except for errors in judgment) of
the Purchaser.
Indemnification under this Section 4.3 shall include reasonable fees
and expenses of counsel and expenses of litigation. The indemnity obligations
hereunder shall be in addition to any obligation that OFL-A or ACC may otherwise
have.
ARTICLE V
COVENANTS OF OFL-A
SECTION 5.1 Protection of Title of the Purchaser.
(a) At or prior to the Closing Date, OFL-A shall have filed or
caused to be filed UCC-1 financing statements, executed by OFL-A as seller
or debtor, naming the Purchaser as purchaser or secured party and
describing the Transferred Receivables and the Other Conveyed Property
being sold by it to the Purchaser as collateral, with the office of the
Secretary of State of the State of California and in such other locations
as the Purchaser shall have required. From time to time thereafter, OFL-A
shall execute and file such financing statements and cause to be executed
and filed such continuation statements, all in such manner and in such
places as may be required by law to fully preserve, maintain and protect
the interest of the Purchaser under this Agreement and of the Custodian on
behalf of the Secured Parties under the Receivables Financing Agreement in
the Transferred Receivables and the Other Conveyed Property, as the case
may be, and in the proceeds thereof. OFL-A shall deliver (or cause to be
delivered) to the Purchaser, the Insurer, each Investor and the Agent
file-stamped copies of, or filing receipts for, any document filed as
provided above, as soon as available following such filing. In the event
that OFL-A fails to perform its obligations under this subsection, the
Purchaser may do so, at the expense of OFL-A.
(b) OFL-A shall not change its name, identity, or corporate
structure in any manner that would, could or might make any financing
statement or continuation statement filed by OFL-A (or by the Purchaser on
behalf of OFL-A) in accordance with
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paragraph (a) above seriously misleading within the meaning of Section
9-402(7) of the UCC, unless OFL-A shall have given the Purchaser, each
Investor, the Agent and the Insurer at least 60 days prior written notice
thereof, and shall promptly file appropriate amendments to all previously
filed financing statements and continuation statements.
(c) OFL-A shall give the Purchaser, the Insurer (so long as an
Insurer Default shall not have occurred and be continuing), each Investor
and the Agent 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. OFL-A shall at all times maintain each office from
which it services Receivables and its principal executive office within
the United States of America.
(d) OFL-A and ACC shall maintain its computer systems so that, from
and after the time of sale under this Agreement of Transferred Receivables
to the Purchaser and the grant of a security interest in such Transferred
Receivables by the Purchaser to the Custodian on behalf of the Secured
Parties, ACC's and OFL-A's master computer records (including archives)
that shall refer to a Transferred Receivable indicate clearly that such
Transferred Receivable has been sold to the Purchaser and a security
interest therein has been granted by the Purchaser to the Custodian on
behalf of the Secured Parties. Indication of the Custodian=s security
interest in a Transferred Receivable shall be deleted from or modified on
ACC's and OFL-A's computer systems when, and only when, such Transferred
Receivable shall be transferred in connection with any Take-Out
Securitization or purchased by ACC in accordance with Section 6.2 hereof.
(e) If at any time OFL-A shall propose to sell, grant a security
interest in, or otherwise transfer any interest in motor vehicle
receivables to any prospective purchaser, lender or other transferee,
OFL-A shall give to such prospective purchaser, lender, or other
transferee computer tapes, records, or print-outs (including any restored
from archives) that, if they shall refer in any manner whatsoever to any
Transferred Receivable shall indicate clearly that such Transferred
Receivable has been so sold to the Purchaser and is subject to a security
interest in favor of the Custodian on behalf of the Secured Parties.
SECTION 5.2 Other Liens or Interests. Except for the conveyances
hereunder, OFL-A will not sell, pledge, assign or transfer to any other Person,
or grant, create, incur, assume or suffer to exist any Lien on the Transferred
Receivables, the Other Conveyed Property or any interest therein, and OFL-A
shall defend the right, title, and interest of the Purchaser and the Custodian
on behalf of the Secured Parties in and to the Transferred Receivables and the
Other Conveyed Property related thereto against all claims of third parties
claiming through or under OFL-A.
SECTION 5.3 Costs and Expenses. OFL-A and ACC shall pay all
reasonable costs and disbursements in connection with the performance of their
respective obligations
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hereunder and under the Receivables Financing Agreement and Transaction
Documents to which it is a party.
ARTICLE VI
REPURCHASES
SECTION 6.1 Repurchase of Transferred Receivables Upon Breach of
Warranty. (a) Upon the occurrence of (x) an ACC Repurchase Event or (y) an OFL-A
Repurchase Event that materially and adversely affects the related Transferred
Receivable, ACC or OFL-A, as the case may be, shall, unless such breach shall
have been cured in all material respects, repurchase the related Transferred
Receivable from the Purchaser by the last day of the first full calendar month
following discovery or notice to ACC or OFL-A, as the case may be, of such
breach, and, on or before the related Distribution Date, ACC shall pay the
Purchase Amount to the Purchaser pursuant to the Receivables Financing
Agreement. Any such repurchase resulting from an ACC Repurchase Event shall take
place in the manner specified in Section 8.7 of the Receivables Financing
Agreement. Notwithstanding any other provision of this Agreement or the
Receivables Financing Agreement to the contrary, the obligation of ACC under
this Section shall not terminate upon a termination of ACC as Servicer under the
Receivables Financing Agreement and shall be performed in accordance with the
terms hereof notwithstanding the failure of the Servicer or the Purchaser to
perform any of their respective obligations with respect to such Transferred
Receivable under the Receivables Financing Agreement.
(b) ACC acknowledges that (i) it acts as agent for OFL-A in
connection with the origination of Receivables, including but not limited to,
Transferred Receivables and (ii) the occurrence of an OFL-A Repurchase Event may
materially and adversely affect the Transferred Receivables. Therefore, upon the
occurrence of an OFL-A Repurchase Event that materially and adversely affects
the related Transferred Receivable, ACC shall, unless such breach shall be cured
in all material respects, purchase the related Transferred Receivable from the
Purchaser by the last day of the first full calendar month following discovery
or notice to ACC or OFL-A of such breach, and, on or before the related
Distribution Date, ACC shall pay the Purchase Amount to the Purchaser pursuant
to the Receivables Financing Agreement.
(c) In addition to the foregoing and notwithstanding whether the
related Transferred Receivable shall have been purchased by ACC or OFL-A, as the
case may be, ACC or OFL-A, as the case may be, shall indemnify the Backup
Servicer, the Insurer, each Investor and the Agent against all costs, expenses,
losses, damages, claims and liabilities, including reasonable fees and 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 ACC
Repurchase Events or OFL-A Repurchase Events, as the case may be.
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SECTION 6.2 Right to Repurchase Transferred Receivables. (a) ACC
may, at its option, on the last day of any Collection Period, repurchase from
the Purchaser any Transferred Receivables that are Defaulted Receivables as of
such day at a purchase price determined from time to time by ACC and the
Purchaser; provided, however, that, after giving effect to any such repurchase,
no Event of Default, Unmatured Event of Default or Facility Termination Date
shall have occurred.
(b) The Purchaser shall, at the request of ACC Receivables (which
request shall be delivered in connection with any Take-Out Securitization), at
any time transfer, by way of dividend or repurchase, to ACC Receivables
Transferred Receivables at a purchase price, in respect of any Transferred
Receivables that are repurchased, equal to the then outstanding principal
balance of such Transferred Receivable together with accrued but unpaid interest
thereon; provided, however, that, after giving effect to any such transfer, no
Event of Default, Unmatured Event of Default or Facility Termination Date shall
have occurred.
SECTION 6.3 Reassignment of Purchased Receivables. Upon deposit in
the Collection Account of the Purchase Amount of any Transferred Receivable
repurchased by ACC or OFL-A under Section 6.1 or Section 6.2, the Purchaser and
each Investor shall take such steps as may be reasonably requested by ACC or
OFL-A, as the case may be, in order to assign to ACC or OFL-A, as the case may
be, all of the Purchaser's and each Investor's right, title and interest in and
to such Transferred Receivable and all security and documents and all Other
Conveyed Property conveyed to the Purchaser and each Investor directly relating
thereto, without recourse, representation or warranty, except as to the absence
of liens, charges or encumbrances created by or arising as a result of actions
of the Purchaser or any Investor. Such assignment shall be a sale and assignment
outright, and not for security. If, following the reassignment of a Transferred
Receivable, in any enforcement suit or legal proceeding, it is held that ACC or
OFL-A, as the case may be, enforce any such Transferred Receivable on the ground
that it shall not be a real party in interest or a holder entitled to enforce
the Transferred Receivable, the Purchaser and each Investor shall, at the
expense of ACC or OFL-A, as the case may be, take such steps as ACC or OFL-A, as
the case may be, deems reasonably necessary to enforce the Transferred
Receivable, including bringing suit in the Purchaser's or each Investor's name.
SECTION 6.4 Waivers. No failure or delay on the part of the
Purchaser or any Investor as assignee of the Purchaser, in exercising any power,
right or remedy under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or remedy preclude
any other or future exercise thereof or the exercise of any other power, right
or remedy.
18
<PAGE> 22
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 Liability of OFL-A. OFL-A shall be liable in
accordance herewith only to the extent of the obligations in this Agreement
specifically undertaken by OFL-A and its representations and warranties.
SECTION 7.2 Merger or Consolidation of OFL-A or the Purchaser. Any
corporation or other entity (i) into which OFL-A or the Purchaser may be merged
or consolidated, (ii) resulting from any merger or consolidation to which OFL-A
or the Purchaser is a party or (iii) succeeding to the business of OFL-A or the
Purchaser, in the case of the Purchaser, which corporation has a certificate of
incorporation containing provisions relating to limitations on business and
other matters substantively identical to those contained in the Purchaser's
certificate of incorporation, provided that in any of the foregoing cases such
corporation shall execute an agreement of assumption to perform every obligation
of OFL-A or the Purchaser, as the case may be, under this Agreement and, whether
or not such assumption agreement is executed, shall be the successor to OFL-A or
the Purchaser, as the case may be, hereunder (without relieving OFL-A or the
Purchaser of its responsibilities hereunder, if it survives such merger or
consolidation) without the execution or filing of any document or any further
act by any of the parties to this Agreement. Notwithstanding the foregoing, so
long as an Insurer Default shall not have occurred and be continuing the
Purchaser shall not merge or consolidate with any other Person or permit any
other Person to become the successor to the Purchaser's business without the
prior written consent of the Insurer. OFL-A or the Purchaser shall promptly
inform the other party, each Investor, the Agent and, so long as an Insurer
Default shall not have occurred and be continuing, the Insurer of such merger,
consolidation or purchase and assumption. Notwithstanding the foregoing, as a
condition to the consummation of the transactions referred to in clauses (i),
(ii) and (iii) above, (x) immediately after giving effect to such transaction,
no representation or warranty made pursuant to Sections 4.1 and 4.2 or covenant
made pursuant to Section 4.3, 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 event of default under the Insurance Agreement,
shall have occurred and be continuing, (y) OFL-A or the Purchaser, as
applicable, shall have delivered to Alpine and the Agent 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
7.2 and that all conditions precedent, if any, provided for in this Agreement
relating to such transaction have been complied with, and (z) OFL-A or the
Purchaser, as applicable, shall have delivered to each Investor and the Agent 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 Custodian on behalf of the Secured Parties in the Transferred Receivables
and the Other Conveyed Property and reciting the details of the filings or (B)
no such action shall be necessary to preserve and protect such interest.
19
<PAGE> 23
SECTION 7.3 Limitation on Liability of OFL-A and Others. OFL-A and
any director, officer, employee or agent of either 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.
OFL-A shall not be under any obligation to appear in, prosecute or defend any
legal action that is not incidental to its obligations under this Agreement, the
Receivables Financing Agreement or its Transaction Documents and that in its
opinion may involve it in any expense or liability.
SECTION 7.4 [Intentionally Omitted]
SECTION 7.5 Amendment.
(a) This Agreement may be amended by ACC, OFL-A and the Purchaser,
with the prior written consent of the Insurer (so long as an Insurer Default
shall not have occurred and be continuing) (i) to cure any ambiguity or (ii) to
correct any provisions in this Agreement.
(b) This Agreement may also be amended from time to time by ACC,
OFL-A and the Purchaser, with the prior written consent of the Insurer (so long
as an Insurer Default shall not have occurred and be continuing), and with the
consent of each Investor and the Agent, for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Agreement; provided, however, that no such amendment shall increase or reduce in
any manner the amount of, or accelerate or delay the timing of, collections of
payments on Transferred Receivables.
(c) Prior to the execution of any such amendment or consent, OFL-A
shall have furnished written notification of the substance of such amendment or
consent to each Rating Agency.
SECTION 7.6 Notices. All demands, notices and communications to
ACC, OFL-A or the Purchaser hereunder shall be in writing, personally delivered,
or sent by telecopier (subsequently confirmed in writing), reputable overnight
courier or mailed by certified mail, return receipt requested, and shall be
deemed to have been given upon receipt (a) in the case of ACC, to ACC Consumer
Finance Corporation, 12750 High Bluff Drive, Suite 320, San Diego, California
92130, Attention: Chief Financial Officer, or such other address as shall be
designated by ACC in a written notice delivered to the other party or to the
Trustee, as applicable, or (b) in the case of the Purchaser, to [ ], Plaza del
Mar, 12526 High Bluff Drive, Suite 300, San Diego, California 92130, Attention:
President, or (c) in the case of the Insurer, to Financial Security Assurance
Inc., 350 Park Avenue, New York, NY 10022, Attention: Surveillance Department
Re: ________________________________________, or (d) in the case of OFL-A, to
OFL-A Receivables Corp., 2131 Palomar Airyos Road, Suite 300, Carlsbad, CA
92009-2115, Attention Mr. Gary Burdick.
20
<PAGE> 24
SECTION 7.7 Merger and Integration. Except as specifically stated
otherwise herein, this Agreement, the Receivables Financing Agreement and the
Transaction Documents set forth the entire understanding of the parties relating
to the subject matter hereof, and all prior understandings, written or oral, are
superseded by this Agreement, the Receivables Financing Agreement and the
Transaction Documents. This Agreement may not be modified, amended, waived or
supplemented except as provided herein.
SECTION 7.8 Severability of Provisions. If any one or more of the
covenants, provisions or terms of this Agreement shall be for any reason
whatsoever held invalid, then such covenants, provisions or terms shall be
deemed severable from the remaining covenants, provisions or terms of this
Agreement and shall in no way affect the validity or enforceability of the other
provisions of this Agreement.
SECTION 7.9 Intention of the Parties. The execution and delivery
of this Agreement shall constitute an acknowledgment by OFL-A and the Purchaser
that they intend that the assignment and transfer herein contemplated constitute
a sale and assignment outright, and not for security, of the Transferred
Receivables and the Other Conveyed Property conveying good title thereto free
and clear of any Liens, from OFL-A to the Purchaser, and that the Transferred
Receivables and the Other Conveyed Property shall not be a part of OFL-A=s
estate in the event of the bankruptcy, reorganization, arrangement, insolvency
or liquidation proceeding, or other proceeding under any federal or state
bankruptcy or similar law, or the occurrence of another similar event, of, or
with respect to, OFL-A. In the event that such conveyance is determined to be
made as security for a loan made by the Purchaser to OFL-A, the parties intend
that OFL-A shall have granted to the Purchaser a security interest in all right,
title and interest in and to the Transferred Receivables and the Other Conveyed
Property conveyed pursuant to Section 2.1, and that this Agreement shall
constitute a security agreement under applicable law.
SECTION 7.10 Governing Law. This Agreement shall be 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 shall be determined in accordance with such
laws.
SECTION 7.11 Counterparts. For the purpose of facilitating the
execution of this Agreement and for other purposes, 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 7.12 Nonpetition Covenant. Until one year and one day
after the latest maturing commercial paper issued by Alpine shall be paid in
full, neither ACC, OFL-A nor the Purchaser shall petition or otherwise invoke
the process of any court or government authority for the purpose of commencing
or sustaining a case against Alpine (or, in the case of ACC or OFL-A, against
the Purchaser) under any federal or state bankruptcy, insolvency or similar law
or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator
or other similar
21
<PAGE> 25
official of Alpine (or the Purchaser) or any substantial part of its property,
or ordering the winding up or liquidation of the affairs of Alpine (or the
Purchaser).
[Remainder of Page Intentionally Left Blank]
22
<PAGE> 26
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
ACC LIQUIDITY LLC,
as Purchaser
By: /s/ GARY S. BURDICK
----------------------------------
Name: Gary S. Burdick
Title: President
OFL-A RECEIVABLES CORP.,
as Seller
By: /s/ GARY S. BURDICK
----------------------------------
Name: Gary S. Burdick
Title: President
ACC CONSUMER FINANCE
CORPORATION
By: /s/ GARY S. BURDICK
----------------------------------
Name: Gary S. Burdick
Title: President
ACC RECEIVABLES CORP.
By:
By: /s/ GARY S. BURDICK
----------------------------------
Name: Gary S. Burdick
Title: President
[Signature Page to Purchase and Sale Agreement]
<PAGE> 27
EXHIBIT A
FORM OF ASSIGNMENT
ASSIGNMENT, dated as of ___________ between OFL-A Receivables Corp.
(the "Seller") and ACC Liquidity LLC ("Purchaser").
1. We refer to the Purchase and Sale Agreement (the
"Purchase Agreement") dated as of March 27, 1997 between
the Seller, the Purchaser, ACC Receivables Corp. and ACC
Consumer Finance Corporation. All provisions of the
Purchase Agreement are incorporated herein by reference.
All capitalized terms shall have the meanings set forth
in the Purchase Agreement.
2. The Seller does hereby sell, transfer, assign, and
otherwise convey, from time to time, to Purchaser,
without recourse (but without limitation of its
obligations in the Purchase Agreement), and the
Purchaser hereby agrees to purchase, all right, title
and interest of Seller in and to certain Transferred
Receivables and the Other Conveyed Property pursuant to
the Purchase Agreement.
3. The Seller does hereby remake the representations and
warranties set forth in Section 4.1 of the Purchase
Agreement with full force and effect as if the same were
fully set forth herein.
IN WITNESS WHEREOF, the parties have caused this Assignment to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
OFL-A RECEIVABLES CORP. ACC LIQUIDITY LLC
BY: ACC FUNDING CORP.,
ITS MANAGING MEMBER
By: By:
------------------------------ -------------------------------
Name: Name:
Title: Title:
1
<PAGE> 28
SCHEDULE A
SCHEDULE OF RECEIVABLES
SEE SCHEDULE A TO RECEIVABLES FINANCING AGREEMENT
Sch. A-1
<PAGE> 29
SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF OFL-A
1. Characteristics of Transferred Receivables. Each Transferred
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 (in its individual capacity and in its capacity as successor
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.
2. No Fraud or Misrepresentation. Each Transferred Receivable was
originated by a Dealer 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.
3. 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 Transferred
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 Transferred Receivable and the sale of the Financed Vehicle evidenced
by each Transferred 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.
Sch. B-1
<PAGE> 30
4. Origination. Each Transferred Receivable was originated in the
United States of America and, at the time of origination materially conformed to
all requirements of the Dealer Underwriting Guide applicable to such Transferred
Receivable.
5. Binding Obligation. Each Transferred 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 Transferred Receivable may be modified by the application after
the relevant Purchase Date of the Soldiers' and Sailors' Civil Relief Act of
1940, as amended; and all parties to each Transferred Receivable had full legal
capacity to execute and deliver such Transferred Receivable and all other
documents related thereto and to grant the security interest purported to be
granted thereby.
6. No Government Obligor. None of the Transferred Receivables shall
be due from the United States of America or any State or from any agency,
department, subdivision or instrumentality thereof.
7. Obligor Bankruptcy. As of the applicable Purchase Date, no
Obligor had been identified on the records of ACC or OFL-A as being the subject
of a current bankruptcy proceeding.
8. Schedule of Receivables. The information pertaining to each
Transferred Receivable set forth in each Schedule of Receivables was true and
correct in all material respects as of the close of business on the relevant
Purchase Date.
9. Marked Records. By the closing Date and on each relevant date
thereafter, ACC will have caused the portions of ACC's servicing records
relating to the Transferred Receivables to be clearly and unambiguously marked
to show that the Transferred Receivables have been transferred to the Purchaser
and are owned by the Purchaser and subject to a security interest in accordance
with the terms of this Agreement and the Receivables Financing Agreement.
10. Computer Tape or Listing. The Computer Tape or Listing made
available by OFL-A to the Purchaser from time to time was complete and accurate
as of the related Purchase Date and includes a description of the same
Receivables that are described in the related Schedule of Receivables.
11. Chattel paper. The Transferred Receivables constitute chattel
paper within the meaning of the UCC.
12. One Original. There is only one original executed copy of each
Transferred Receivable.
Sch. B-2
<PAGE> 31
13. Receivable Files Complete. There exists a Receivable File
pertaining to each Transferred Receivable and such Receivable File contains,
without limitation, (a) a fully executed original of such Transferred
Receivable, endorsed, "Pay to the order of Norwest Bank Minnesota, National
Association as custodian" 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
Transferred Receivable pursuant to which the Obligor has agreed to obtain
physical damage insurance for the related Financed Vehicle, (c) the original
Lien Certificate or application therefor together with an assignment of the
Lien Certificate executed by OFL-A to the Purchaser 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 required by OFL-A to be completed 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
Transferred 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 Custodian.
14. Transferred Receivables in Force. No Transferred Receivable has
been satisfied, subordinated or rescinded, and the Financed Vehicle securing
each such Transferred Receivable has not been released from the lien of the
related Transferred Receivable in whole or in part. No provisions of any
Transferred 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 Custodian. No Transferred Receivable has been
modified as a result of application of the Soldiers' and Sailors' Civil Relief
Act of 1940, as amended.
15. Lawful Assignment. No Transferred 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
Transferred Receivable under this Agreement. OFL-A has not entered into any
agreement with any account debtor that prohibits, restricts or conditions the
assignment of any portion of the Transferred Receivables.
16. Good Title. No Transferred Receivable has been sold,
transferred, assigned or pledged by OFL-A to any Person other than the
Purchaser; immediately prior to the conveyance of Transferred Receivables to
the Purchaser pursuant to this Agreement, OFL-A 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 OFL-A, the Purchaser shall have good and
indefeasible title to and will be the sole owner of such Transferred
Receivables, free of any Lien. No Dealer has a participation in, or other right
to receive, proceeds of any Transferred Receivable. OFL-A has not 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
Transferred Receivables.
17. Security Interest in Financed Vehicle. Each Transferred
Receivable created or shall create a valid, binding and enforceable first
priority security interest in favor of
Sch.B-3
<PAGE> 32
OFL-A of 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 of American Credit
Corporation) named as the original secured party under each Transferred
Receivable and, accordingly, ACC, ACC d/b/a accent Financial Services 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 Transferred Receivable for which
the Lien Certificate has not yet been returned from the Registrar of Title,
OFL-A, ACC d/b/a Accent Financial Services 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,
ACC d/b/a Accent Financial Services (both in its individual capacity and in its
capacity as the successor of American Credit Corporation) as first lienholder
has been applied for. If the Transferred 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, ACC d/b/a Accent financial Services (both in its
individual capacity and in its capacity as the successor of American Credit
Corporation) named as the original secured party under the related Transferred
Receivable. Such security interest in the Financed Vehicle has been validly
assigned by OFL-A or ACC (including an assignment by ACC as successor by merger
to ACC Consumer (previously named American Credit Corporation)), as the case
may be, to the Purchaser pursuant to the Agreement.
Immediately after the sale, transfer and assignment thereof to the
Purchaser, each Transferred Receivable will be secured by an enforceable and
perfected first priority security interest in the Financed Vehicle in favor of
OFL-A 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 relevant Purchase
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 Transferred Receivable.
18. 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 Custodian for the
benefit of the Secured Parties a first priority perfected lien on, or ownership
interest in, the Transferred Receivables and the proceeds thereof and the Other
Conveyed Property related thereto have been made, taken or performed.
19. No Impairment. OFL-A has not done anything to convey any
right to any Person that would result in such Person having a right to payments
due under the Transferred Receivable or otherwise to impair the rights of the
Purchaser and the Investors in any Transferred Receivable or the proceeds
thereof.
Sch.B-4
<PAGE> 33
20. Receivable Not Assumable. No Transferred Receivable is
assumable by another Person in a manner which would release the Obligor thereof
from such Obligor's obligations to OFL-A with respect to such Transferred
Receivable.
21. No Defenses. No Transferred 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 Transferred Receivable.
22. No Default. There has been no default, breach, violation or
event permitting acceleration under the terms of any Transferred 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 Transferred Receivable, and there has been
no waiver or any of the foregoing. As of the relevant Purchase Date, no
Financed Vehicle had been repossessed.
23. Insurance. At the time of the origination of each Transferred
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 and (b) the principal amount due from the Obligor
under the related Transferred Receivable, (ii) naming OFL-A and it successor
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 Transferred 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 Transferred
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.
24. Receivables. As of the relevant Purchase Date, each
Transferred Receivables: (i) had an original maturity of at least 18 months but
not more than 72 months; (ii) an original Amount Financed of at least $3,000
and not more than $27,000; (iii) had an Annual Percentage Rate of at least
14.50% and not more than 27%; (iv) was not more than 30 days past due; (v) no
funds had been advanced by ACC, the Servicer, OFL-A, any Dealer, or anyone
acting on behalf of any of them in order to cause any Receivable to qualify
under subclause (iv) of this clause (24); and (vi) no provision thereof waived,
altered or modified in any respect since its origination.
25. Origination. Each Transferred Receivable was originated in the
United States of America and, at the time of origination, materially conformed
to all requirements of the OFL-A underwriting policies and guidelines then in
effect and applicable to such Transferred Receivable.
26. Selection Procedures. No selection procedures adverse to the
Purchaser have been or will be utilized in selecting any Receivable to be sold
to the Purchaser from all other similar Receivables originated by OFL-A.
Sch.B-5
<PAGE> 34
27. No Defaulted or Delinquent Receivables. None of the
Transferred Receivables is a Defaulted or Delinquent Receivable.
Sch.B-6
<PAGE> 1
EXHIBIT 10.2
EXECUTION COPY
================================================================================
CUSTODIAL AGREEMENT
among
FINANCIAL SECURITY ASSURANCE, I NC.,
CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH,
as Agent,
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Custodian,
ACC CONSUMER FINANCE CORPORATION
and
ACC LIQUIDITY, LLC
Dated March 27, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Section 1. Definitions..........................................................1
Section 2. Delivery Of Contract Files...........................................4
Section 3. Certification........................................................4
Section 4. Deficiencies In Contract Files.......................................5
Section 5. Distributions.........................................................6
Section 6. Obligations Of The Custodian.........................................8
Section 7. Release Of Contract Files............................................9
Section 8. Release Upon Repurchase Or Payment In Full...........................9
Section 9. Fees And Expenses Of The Custodian...................................9
Section 10. Examination Of Contract Files......................................10
Section 11. Representations And Warranties Of The Custodian....................10
Section 12. Insurance Of The Custodian.........................................10
Section 13. Periodic Statements................................................10
Section 14. Copies Of Contract Documents.......................................11
Section 15. Resignation By And Removal Of The Custodian; Successor Custodian...11
Section 16. Indemnity..........................................................11
Section 17. Limitations Of Liability...........................................12
Section 18. Term Of Agreement..................................................12
Section 19. Authorized Representatives.........................................13
Section 20. Notices............................................................13
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 21. Governing Law; Venue; Consent to Jurisdiction......................14
Section 22. Assignment.........................................................14
Section 23. Counterparts.......................................................14
Section 24. Headings...........................................................15
Section 25. Third Party Beneficiaries..........................................15
Section 26. Certain Remedies...................................................15
Section 27. Remedies...........................................................17
Section 28. Optional Preservation of the Receivables...........................19
Section 29. Claims Under Note Policy...........................................19
Section 30. Withdrawals from Spread Account....................................20
</TABLE>
ii
<PAGE> 4
CUSTODIAL AGREEMENT
CUSTODIAL AGREEMENT dated March 27, 1997 among Financial
Security Assurance, Inc., as guarantor under the Policy ("FSA"), Credit Suisse
First Boston, New York Branch, as agent for the Purchasers (as hereinafter
defined) (in such capacity, the "Agent"), Norwest Bank Minnesota, National
Association, a national banking association, and ACC Liquidity LLC, a Delaware
limited liability company (the "Borrower") and ACC Consumer Finance Corporation
("ACC"), as servicer and as originator.
WHEREAS, ACC is the owner of certain Contracts (as hereinafter
defined);
WHEREAS, Borrower desires to purchase certain of such
Contracts;
WHEREAS, the Investors (as hereinafter defined) has agreed to
finance the purchase of such Contracts pursuant to the Receivables Financing
Agreement (as hereinafter defined);
WHEREAS, ACC will deliver to the Custodian the Contracts, and
the Secured Parties desire that the Custodian take possession of such Contracts
as the custodian for, and bailee of, the Secured Parties in order to perfect the
Secured Parties' security interest in such Contracts and other documents, in
each case in accordance with the terms and conditions of this Agreement; and
WHEREAS, ACC will service the Contracts pursuant to the
Receivables Financing Agreement (as hereinafter defined).
NOW, THEREFORE, ACC, the Borrower, FSA, the Custodian and the
Agent intending to be legally bound, hereby agree as follows:
Section 1. Definitions. For all purposes of this Agreement,
the following terms shall have the meanings set forth below, unless the context
clearly indicates otherwise. Capitalized terms used herein but not otherwise
defined shall have the meanings set forth in the Receivables Financing
Agreement.
"ACC" has the meaning specified in the Preamble.
"Agent" has the meaning specified in the Preamble.
"Agreement" means this Custodial Agreement, as it may be
amended, supplemented or otherwise modified from time to time.
"Alpine" means Alpine Securitization Corp., a Delaware
corporation.
"Alpine Priority Payment" means amounts payable to Alpine, the
Lenders and the Placement Agent pursuant to clauses FIRST, SECOND and THIRD of
paragraph 3 of the Fee Letter.
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"Alpine Secondary Payment" means amounts payable to the
Placement Agent, Alpine, the Agent, the Facility Agent, any Lender or any entity
which enters into a commitment to make Advances on purchase interests therein or
in the Notes pursuant to clauses FOURTH and FIFTH of paragraph 3 of the Fee
Letter.
"Amount Available" means, with respect to any Distribution
Date, the sum of (i) the amount on deposit in the Collection Account at the end
of the preceding Collection Period plus (ii) the amount on deposit in the
Liquidity Account at the end of the preceding Collection Period and plus (iii)
on the first Distribution Date following the Facility Termination Date, the
amount described in Section 5(c) hereof.
"Authorized Representative" is defined in Section 19.
"Borrower" has the meaning specified in the Preamble.
"Borrowing Base Notice of Pledge" has the meaning specified in
Section 3(d).
"Business Day" means any day other than (i) a Saturday or a
Sunday or (ii) another day on which banking institutions (including any
applicable Federal Reserve Bank) in the States of California, Minnesota or New
York are authorized or obligated by law, executive order or governmental decree
to be closed.
"Certification" means either of the Receipt Certification or
the Collateral Receipt.
"Collateral Receipt" is defined in Section 3(b).
"Contract" means a new or used automobile or light truck
installment sale contract or promissory note, purchased by Borrower,
underwritten by ACC and financed by Alpine pursuant to the Receivables Financing
Agreement.
"Contract File" means, with respect to a Contract, the file
maintained by the Custodian with respect to such Contract, which includes,
without limitation, the following items: (i) the fully executed original
Contract, endorsed, "Pay to the order of Norwest Bank Minnesota, National
Association, as custodian" and signed in the name of OFL-A Receivables Corp. by
an authorized officer (together with any agreements modifying the Contract
including, without limitation, any extension agreements), (ii) documents
evidencing or relating 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 Receivables Corp., American Credit Corporation, ACC d/b/a Accent
Financial Services 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
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as the secured party) as first lienholder or secured party, together with an
assignment of the Lien Certificate by the Borrower to the Custodian.
"Contract Schedule" means the schedule of Contracts appended
to a Notice of Pledge delivered by the Borrower to the Custodian, such schedule
identifying each Contract by (i) the social security number, name and mailing
address of the Obligor, (ii) the account number, (iii) the Purchase Amount, (iv)
the Amount Financed, (v) the Principal Balance as of the Purchase Date, (vi) the
day of the month on which Scheduled Payments are due, (vii) the first date on
which a Scheduled Payment is due, (viii) the Annual Percentage Rate, (ix) the
amount of the Scheduled Payment, (x) the original term of the Contract and (xi)
the remaining term of the Contract.
"Custodian" means Norwest Bank Minnesota, National
Association, not in its individual capacity, but solely as Custodian under this
Agreement, and any successors thereto.
"Custodian's Fee" is defined in Section 9.
"Deficiency" means a failure of a document to correspond
substantively to the information on the Contract Schedule or the absence of a
required document or required information from a Contract File.
"Deficiency Claim Date" means, with respect to any
Distribution Date, the fourth Business Day preceding such Distribution Date.
"Draw Date" means, with respect to a Distribution Date,
the third Business Day immediately preceding such Distribution Date.
"Financed Vehicle" means the new or used automobile or light
duty truck, together with all accessories, additions and parts constituting a
part thereof and all accessions thereto.
"FSA" has the meaning specified in the Preamble.
"FSA Priority Payment" has the meaning set forth in clause
FIFTH of Section 5(b) hereof.
"FSA Secondary Payment" means amounts owing to FSA under the
Insurance Agreement and not paid pursuant to clause SEVENTH of Section 5(b)
hereof.
"Increased Costs" means collectively, any increased cost, loss
or liability owing to Alpine, the Agent and/or a Lender under Article VI of the
Receivables Financing Agreement.
"Indemnity Amounts" means collectively, all indemnity
obligations owing to Alpine, the Agent, any Lender, any other owners by
assignment, participation or otherwise of an Advance and/or any entity which
enters into a commitment to make Advances or purchase interests therein under
Article XVII of the Receivables Financing Agreement.
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"Insurance Agreement" means the Insurance and Indemnity
Agreement dated as of March 27, 1997, among FSA, the Borrower, ACC and OFL-A.
"Net Amount Available" means, with respect to any
Distribution Date, the amount described in clause (i) of the definition of
"Amount Available."
"Net Total Amount Available" means, with respect to any
Distribution Date, the Total Amount Available minus the amount on deposit in the
Liquidity Account at the opening of business on such Distribution Date.
"Notice of Pledge" means a fully executed Confirmation and
Notice of Pledge in the form of Exhibit A to this Agreement.
"Person" means an individual, corporation (including a
business trust), partnership, limited liability company, joint venture, joint
stock company, trust, unincorporated association or government or any agency or
political subdivision thereof or any other entity.
"Receipt Certification" is defined in Section 3(a).
"Receivables Financing Agreement" means the Receivables
Financing Agreement, dated as of March 27, 1997, by and among the Borrower, ACC,
as Servicer, Alpine, Credit Suisse First Boston, New York Branch, as Agent, the
financial institutions party thereto and Norwest Bank Minnesota, National
Association, as Backup Servicer and Custodian.
"Request for Release and Receipt of Documents" means a request
for release substantially in the form of Exhibit D to this Agreement.
"Scheduled Payment" means with respect to any Contract, the
periodic payment set forth in such Contract (excluding, however, any portion of
such payment that represents late payment charges and payment in respect of
taxes, licenses or similar items).
"Secured Parties" means, collectively, Alpine, FSA, each
Purchaser, each Lender and all other owners by assignment, participation or
otherwise of an Advance or the Note and, to the extent of the undivided
interests so purchased, shall include any participants.
"Servicer" means ACC and any successor servicer appointed
pursuant to the Receivables Financing Agreement.
"Spread Account Agreement" means the Spread Account
Agreement dated as of June 1, 1995 among ACC Funding Corp., ACC Receivables
Corp., FSA and the Custodian.
"Total Amount Available" means, with respect to any
Distribution Date, the sum of (i) the Amount Available and (ii) the amount
deposited with the Custodian pursuant to Section 30 hereof from the Spread
Account.
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Section 2. Delivery Of Contract Files. ACC hereby agrees to
deliver from time to time to the Custodian, as custodian for the Secured
Parties, pursuant to any Notice of Pledge, complete Contract Files in loan
number sequence corresponding to the Contract Schedule attached to such Notice
of Pledge.
The Custodian shall be entitled to rely upon each Contract
Schedule provided by ACC as the conclusive schedule in its review, pursuant to
Section 3, of the Contract Files. From time to time, ACC shall forward to the
Custodian for inclusion in the appropriate Contract File, any additional
original documents evidencing any assumption or modification of a Contract
approved by ACC in accordance with its then current underwriting guidelines.
Section 3. Certification. (a) Upon receipt by the Custodian of
the Contract Files, the Custodian shall deliver by 3:30 p.m. New York time to
FSA, ACC and the Agent a certificate (the "Receipt Certification"), in
substantially the form annexed as Exhibit B, to the effect that, as to each
Contract listed on the related Contract Schedule attached to such Receipt
Certification (other than any Contract paid in full or any Contract specifically
identified in such Receipt Certification as not covered by such Receipt
Certification), the Custodian is in receipt of a Contract File, and the name of
the Obligor on the Contract in such Contract File and the Amount Financed set
forth in such Contract matches such information as set forth in the accompanying
Contract Schedule.
(b) Within one (1) Business Day after the delivery to the
Custodian of the Contract Files, the Custodian shall deliver to FSA, ACC and the
Agent a receipt (the "Collateral Receipt") in substantially the form annexed as
Exhibit C, to the effect that, as to each Contract listed on the related
Contract Schedule attached to such Collateral Receipt (other than any Contract
paid in full or any Contract specifically identified in such Collateral Receipt
as not covered by such Collateral Receipt), (i) all documents required to be
delivered to the Custodian pursuant to Section 2 are in its possession,
including the fully executed Contract, endorsed as provided in the definition of
"Contract File" in Section 1, (ii) such documents have been reviewed by it
and have not been materially mutilated, damaged or torn and relate to such
Contract and (iii) with respect to items (i) (but only with respect to name and
mailing address), (ii), (viii), (ix) and (x) in the definition of "Contract
Schedule" in Section 1, the information set forth on the Contract Schedule
accurately reflects the information set forth in the Contract.
(c) Contract Files received by the Custodian after 12:00 noon
(Minneapolis time) shall be deemed to have been received on the next Business
Day. The Custodian shall be under no duty or obligation to inspect, review or
examine any such documents, instruments, certificates or other papers to
determine that they are genuine, enforceable, or appropriate for the represented
purpose or that they are other than what they purport to be on their face. The
Custodian shall be under no duty to determine whether any item in the Contract
File is an original document. ACC shall notify the Custodian by telephone one
(1) Business Day before each Business Day on which ACC expects to deliver
Contract Files to the Custodian and shall inform the Custodian as to the number
of Contract Files to be delivered on such Business Day.
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<PAGE> 9
(d) By 3:00 p.m. New York time, the Custodian shall deliver to
FSA and the Agent a written Notice of Pledge (each, a "Borrowing Base Notice of
Pledge"), to the effect that, the Borrowing Base Certificate delivered to the
Custodian on the prior Business Day pursuant to Section 11.4(a) of the
Receivables Financing Agreement (i) has been examined and recalculated (after
taking into account the Contract Files delivered on the Business Day on which
the Borrowing Base Notice of Pledge is to be delivered) by the Custodian and
(ii) does or does not evidence the existence of a Borrowing Base Deficiency.
(e) ACC, FSA, the Agent and the Custodian may from time to
time agree in writing to alternative certification procedures with respect to
any Contracts or Borrowing Base Certificates.
Section 4. Deficiencies In Contract Files. (a) If any
Certification discloses any Deficiencies in the related Contract Files, then the
Custodian promptly shall notify ACC, the Borrower, FSA and the Agent of such
Deficiencies. The Agent and FSA, acting unanimously, promptly shall notify the
Custodian and ACC in writing that either (i) the Deficiencies noted in such
Certification are waived or (ii) ACC shall cure the Deficiencies within the time
period set forth in such notice.
(b) If a notice given to the Custodian pursuant to clause (a)
states that ACC shall take the action specified in clause (ii) of clause (a)
above and ACC fails to take such action within the time period set forth in such
notice, then the Custodian shall notify the Agent, FSA and ACC of such failure
and shall release or shall retain the deficient Contract File in accordance with
the written instructions of the Agent and FSA.
(c) Within one (1) Business Day after receipt by the Custodian
of any additional documents pursuant to clause (a) above, the Custodian shall
review such documents and deliver to the Agent and FSA a revised Certification.
If the updated list of deficiencies shall indicate any remaining Deficiencies in
a Contract File, the provisions of this Section 4 shall again be followed.
Section 5. Distributions. (a) On each Distribution Date
prior to the Facility Termination Date, the Custodian shall distribute, in
accordance with the applicable Servicer's Certificate, the following amounts in
the following order of priority:
(i) FIRST, unless ACC and the Controlling Party shall choose
otherwise in accordance with the provisions of clause TENTH hereof, and
shall have furnished the Custodian with a written notice to such
effect, to the extent that ACC or any Affiliate thereof is not the
Servicer, to the Servicer, from the Amount Available the Servicing Fee
for the related Collection Period and any amounts specified in Section
8.18(b) of the Receivables Financing Agreement;
(ii) SECOND, pro rata, from the Amount Available to Alpine, any
Lockbox Bank, Custodian or Backup Servicer (including the Custodian if
acting in any such additional capacity), any accrued and unpaid fees
and expenses (as set forth in each such Person's
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<PAGE> 10
respective fee agreement) (in each case, to the extent such Person
has not previously received such amount from the Servicer or ACC);
(iii) THIRD, pro rata, from the Amount Available to the Agent on
behalf of Alpine, itself, any Lender or any entity which enters into a
commitment to make Advances or purchase interests therein or in the
Notes, any Increased Costs due and owing to such Person up to, in the
aggregate for all such persons, an amount equal to .75% of the
outstanding principal amount of Advances on such Distribution Date;
(iv) FOURTH, to the Agent, from the Total Amount Available any
Yield due under the Receivables Financing Agreement in respect of
outstanding Advances;
(v) FIFTH, from the Net Total Amount Available, to FSA, to
the extent of any amounts owing to FSA under the Insurance Agreement
and not paid in respect of any premiums;
(vi) SIXTH, to the Liquidity Account, from the Net Amount
Available, the amount of any Liquidity Account Shortfall; and
(vii) SEVENTH, from the Net Amount Available, to the Agent, the
principal amount of any Advances which pursuant to the Receivables
Financing Agreement to be paid or prepaid pursuant to Section 4.1
thereof;
(viii) EIGHTH, pro rata, from the Net Amount Available, to the
Agent on behalf of Alpine, itself, any Lender or any entity which
enters into a commitment to make Advances on purchase interests therein
or in the Notes, any Increased Costs and Indemnity Amounts due and
owing to such Person and not previously paid pursuant to clause THIRD
above;
(ix) NINTH, from the Total Amount Available, to FSA, to the
extent of any amounts owing to FSA under the Insurance Agreement and
not paid except any amounts paid under clause FIFTH;
(x) TENTH, to the extent that ACC or any Affiliate thereof is
the Servicer, from the Net Amount Available, to the Servicer, the
Servicing Fee for the related Collection Period and any amounts
specified in Section 8.18(b) of the Receivables Financing Agreement;
provided, however, that ACC and the Controlling Party may deem amounts
due pursuant to this clause NINTH to be due pursuant to clause FIRST
above;
(xi) ELEVENTH, to the Borrower, all remaining amounts of the
Net Amount Available.
(b) On each Distribution Date on or after the Facility
Termination Date, the Custodian shall distribute, in accordance with the
applicable Servicer's Certificate, the following amounts in the following order
of priority:
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(i) FIRST, unless ACC and the Controlling Party shall choose
otherwise in accordance with the provisions of clause TENTH hereof, to
the extent that ACC or any Affiliate thereof is not the Servicer, to
the Servicer, from the Amount Available, the Servicing Fee for the
related Collection Period and any amounts specified in Section 8.18(b)
of the Receivables Financing Agreement;
(ii) SECOND, pro rata from the Amount Available, to the
Custodian or Backup Servicer (including the Custodian if acting in any
such additional capacity), any accrued and unpaid fees and expenses (as
set forth in each such Personos respective fee agreement) (in each
case, to the extent such Person has not previously received such amount
from the Servicer or ACC);
(iii) THIRD, to the Agent on behalf of the Investors from the
Total Amount Available, any Yield due under the Receivables Financing
Agreement in respect of outstanding Advances;
(iv) FOURTH, to the Custodian from the Total Amount Available,
for distribution in accordance with the Fee Letter, an amount equal to
(x) the sum of the daily interest, for each day during the same period
for which Yield is calculated for purposes of paragraph THIRD above,
equal to the product of (A) the Maximum Interest Rate, (B) the
outstanding principal balance of all Advances and (C) 1/360, minus, (y)
the amount of Yield distributed pursuant to clause THIRD above;
(v) FIFTH, to the extent that ACC or an Affiliate thereof is
the Servicer, from the Amount Available, in the following order of
priority (x) to the extent of any amounts owing to FSA in respect of
premiums under the Insurance Agreement and not paid to FSA, up to an
amount equal to the Premium payable pursuant to the Insurance Agreement
(the "FSA Priority Payment") and (y) to the Facility Agent, the
positive difference between the Servicing Fee for the related
Collection Period (to the extent not previously paid pursuant to clause
FIRST above) and the amount paid pursuant to subclause (x) above, to be
distributed by the Facility Agent pursuant to the Fee Letter;
(vi) SIXTH, to the Agent on behalf of the Investors, as a
payment of principal in reduction of outstanding Advances (x) from the
Total Amount Available, the excess of (I) the outstanding principal
amount of Advances over (II) the Aggregate Outstanding Principal
balance of all Receivables as of the end of the prior Collection
Period; and (y) from the Amount Available, the amount necessary to
reduce the outstanding principal balance of the Advances to zero;
(vii) SEVENTH, to FSA, from the Total Amount Available, to the
extent of any amounts owing to FSA under the Insurance Agreement in
respect of amounts disbursed by FSA to pay the items set forth in
paragraphs THIRD, FOURTH, FIFTH and SIXTH above and not previously
repaid to FSA (the "FSA Secondary Payment");
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(viii) EIGHTH, pro rata from the Amount Available, to Alpine, the
Lenders, the Placement Agent and FSA, the Alpine Priority Payment and
the FSA Priority Payment, in each case to the extent not previously
paid, together with interest thereon at the Yield rate then in effect;
(ix) NINTH, pro rata from the Amount Available, to Alpine, the
Lenders, the Placement Agent and FSA, in respect of the Alpine
Secondary Payment and the FSA Secondary Payment, together with interest
thereon at the Yield rate then in effect;
(x) TENTH, to the extent that ACC or any Affiliate thereof is
the Servicer, to the Servicer, the Servicing Fee for the related
Collection Period and any amounts specified in Section 8.18(b) of the
Receivables Financing Agreement; provided, however, that ACC and the
Controlling Party may deem amounts due pursuant to this clause TENTH to
be due pursuant to clause FIRST above; and
(xi) ELEVENTH, to the Borrower, from the Amount Available
all remaining amounts.
(c) On each Interim Distribution Date prior to the Facility
Termination Date, the Custodian shall distribute, in accordance with written
direction received by it from the Servicer or the Agent, amounts in the
Collection Account:
(i) on the date of any Take-Out Securitization, in
repayment of Advances pursuant to Section 4.1(d) of the Receivables
Financing Agreement;
(ii) on the date of any prepayment Under Section 4.1(a)
of the Receivables Financing Agreement, in prepayment of Advances
pursuant to such Section;
(iii) on the date of any reduction in the Facility Limit shall
become effective pursuant to Section 2.7 of the Receivables Financing
Agreement, in prepayment of Advances pursuant to Section 4.1(b) of the
Receivables Financing Agreement; and
(iv) on the last day of any Fixed Period for any Advance, in
payment of accrued Yield due and unpaid with respect to such Advance.
(d) The Custodian shall withdraw and deposit in the Collection
Account from the Liquidity Account amounts needed to pay the amounts described
in Section 5(a) FIRST, SECOND, THIRD, FOURTH hereof. On the first Distribution
Date following the Facility Termination Date, all amounts on deposit in the
Liquidity Account and in the Collateral Accountshall be deposited in the
Collection Account and considered part of the Amount Available on such
Distribution Date, and the Liquidity Account and the Collateral Account shall be
closed.
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Section 6. Obligations Of The Custodian. (a) The Custodian
shall segregate and maintain continuous custody of the Contract Files in secure
facilities in accordance with customary standards for such custody. The
Contracts shall be maintained in fireproof facilities.
(b) With respect to the documents constituting each Contract
File, the Custodian shall on and after the delivery thereof to the Custodian (i)
act exclusively as the custodian for and the bailee (solely for purposes of UCC
Section 9-305) of the Secured Parties, (ii) hold all documents constituting such
Contract File received by it for the exclusive use and benefit of the Secured
Parties, and (iii) make disposition thereof only in accordance with the terms of
this Agreement or with written instructions furnished by the Controlling Party
and (prior to the Remarketing Date) the Agent.
(c) Upon the release of any Contract from the lien created
pursuant to the Receivables Financing Agreement, the Custodian shall deliver,
upon receipt of written instructions from the Borrower, such Contract to the
Borrower or the Borrower's designee.
(d) In the event that (i) any Secured Party, ACC, the Agent,
the Borrower or the Custodian shall be served by a third party with any type of
levy, attachment, writ or court order with respect to any Contract File or a
document included within a Contract File or (ii) a third party shall institute
any court proceeding by which any Contract File or a document included within a
Contract File shall be required to be delivered otherwise than in accordance
with the provisions of this Agreement, the party receiving such service shall
promptly deliver or cause to be delivered to the other parties to this Agreement
copies of all court papers, orders, documents and other materials concerning
such proceedings. The Custodian shall continue to hold and maintain all Contract
Files that are the subject of such proceedings pending a final order of a court
of competent jurisdiction permitting or directing disposition thereof. Upon
final determination of such court, the Custodian shall dispose of such Contract
File or a document included within such Contract File as directed by such
determination or, if no such determination is made, in accordance with the
provisions of this Agreement. Expenses of the Custodian incurred as a result of
such proceedings shall be borne by the Borrower.
Section 7. Release Of Contract Files. From time to time and as
appropriate for the repossession or servicing of any of the Contracts, the
Custodian is hereby authorized, upon receipt of a Request for Release and
Receipt of Documents, to release to the Servicer or the Borrower within, on a
best efforts basis, one (1) Business Day, but in no case more than two (2)
Business Days, the related Contract File or the documents from a Contract File
set forth in such Request for Release and Receipt of Documents. If the Custodian
receives such request after 12:00 noon (Minneapolis time), such request shall be
deemed to have been received on the next Business Day. All documents so released
to the Servicer or the Borrower shall be held by the Servicer or the Borrower in
trust for the benefit of the Secured Parties. The Servicer or the Borrower shall
return to the Custodian each and every document previously requested from the
Contract File when the Serviceros or the Borrower's need therefor in connection
with such foreclosure or servicing no longer exists, unless the Contract shall
be liquidated, in which case, upon receipt of a certification to this effect
from ACC or the Borrower to the Custodian in a Request for Release and Receipt
of
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Documents, ACC or the Borrower, prior Request and Receipt of Documents
relating to such Contract File shall be returned by the Custodian to ACC or the
Borrower.
Section 8. Release Upon Dividend, Repurchase Or Payment In
Full. Upon the transfer of any Contract by way of dividend or repurchase
pursuant to the Purchase and Contribution Agreement or the payment in full of
any Contract, which shall be evidenced by the delivery to the Custodian of the
Borrower's Request for Release and Receipt of Documents, the Custodian shall
release the related Contract File to the Borrower or ACC in accordance with the
time parameters set forth in Section 7.
Section 9. Fees And Expenses Of The Custodian. It is
understood that the Custodian shall be entitled to charge fees and receive
reimbursement for expenses (such fees and reimbursement are referred to
hereinafter as the "Custodian's Fee"), including fees and expenses of its agents
and counsel and expenses incurred in connection with the transfer of Contract
Files pursuant to Section 15(c), and such Custodian's Fee shall be the sole
obligation of the Borrower. Such agreed upon Custodian's Fee shall be set forth
in a separate fee letter submitted by the Custodian to the Borrower.
Section 10. Examination Of Contract Files. Upon reasonable
prior written notice to the Custodian, any Secured Party, the Agent, ACC or the
Borrower or any of their representatives and agents will be permitted during
normal business hours to examine the Contract Files, documents, records and
other papers in the possession, or under the control, of the Custodian relating
to any or all of the Contracts. Any expenses incurred by the Custodian in
connection with such examination shall be borne by the party making the request.
Section 11. Representations And Warranties Of The Custodian.
The Custodian represents and warrants as of the date hereof that:
(a) It is 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 do not violate (i) any provision of any law or regulation governing
the banking and trust powers of it or any order, writ, judgment, or decree or
any court, arbitrator, or governmental authority applicable to it or any of its
assets or (ii) any provision of its corporate charter or by-laws;
(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
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(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 12. Insurance Of The Custodian. The Custodian shall,
at its own expense, maintain at all times during the term of this Agreement and
keep in full force and effect (a) fidelity insurance and, as to any successor
custodian, errors and omissions insurance, (b) theft of documents insurance, and
(c) forgery insurance. All such insurance shall be in amounts, with standard
coverage and subject to deductibles, as are customary for similar insurance
typically maintained by banks that act as custodian in similar transactions.
Section 13. Periodic Statements. Within 30 days after the
written request of the Agent, ACC, the Borrower or FSA, the Custodian shall
provide to the requesting party at such partyos expense a list of all the
Contracts for which the Custodian holds a Contract File pursuant to this
Agreement. Such list may be in the form of a copy of all Contract Schedules with
manual deletions to specifically denote any Contracts paid off, liquidated,
released or repurchased since the date of this Agreement.
Section 14. Copies Of Contract Documents. Within five (5)
Business Days after the written request of the Agent or FSA, and at the expense
of the requesting party, the Custodian shall provide such Person with copies of
the documents in the Contract Files.
Section 15. Resignation By And Removal Of The Custodian;
Successor Custodian. (a) The Custodian may at any time resign and terminate its
obligations under this Agreement upon at least 60 days prior written notice to
FSA and the Agent. Promptly after receipt of notice of the Custodian's
resignation, ACC with the consent of the Controlling Party and the Agent shall
appoint, by written instrument, a successor custodian. If ACC fails to appoint a
successor within 30 days of the notice of the Custodians resignation, the
Controlling Party and the Agent shall appoint a successor custodian. If a
successor custodian is not appointed in accordance with the foregoing
procedures, the Custodian may petition a court of competent jurisdiction to
appoint a successor custodian. One (1) original counterpart of such instrument
of appointment shall be delivered to each of FSA, the Agent, the Custodian and
the successor custodian.
(b) The Controlling Party and the Agent, with cause, upon at
least 60 days written notice to the Custodian, may remove and discharge the
Custodian (or any successor custodian thereafter appointed) from the performance
of its obligations under this Agreement. A copy of such notice shall be
delivered to each other party hereto. Promptly after the giving of notice of
removal of the Custodian, ACC with the consent of the Controlling Party and the
Agent shall appoint, by written instrument, a successor custodian. One (1)
original counterpart of such instrument of appointment shall be delivered to
each of FSA, the Agent, the Custodian and the successor custodian.
12
<PAGE> 16
(c) In the event of any such resignation or removal, the
Custodian shall promptly transfer to the successor custodian, as directed in
writing by ACC, the Controlling Party and the Agent, all the Contract Files
being administered under this Agreement and, to the extent (if any) and in the
manner directed by ACC, the Controlling Party and the Agent, the Custodian shall
complete the endorsements on the Contracts.
Section 16. Indemnity. The Borrower agrees to indemnify and
hold harmless the Custodian and its directors, officers, agents and employees
against any and all claims, damages, losses, liabilities or expenses (including,
but not limited to, reasonable attorneys' fees, court costs and costs of
investigation) of any kind or nature whatsoever arising out of or in connection
with this Agreement and the related transaction documents that may be imposed
upon, incurred by or asserted against the Custodian; provided, however, that
this Section 16 shall not relieve the Custodian from liability for its willful
misfeasance, bad faith or gross negligence. The provisions of this Section 16
shall survive the resignation or removal of the Custodian or any successor
custodian and the termination of this Agreement.
Section 17. Limitations Of Liability. (a) The Custodian shall
not be liable to the Borrower, ACC, FSA, the Agent, any Secured Party or any
other Person with respect to any action taken or not taken by it in good faith
in the performance of its obligations under this Agreement. The obligations of
the Custodian shall be determined solely by the express provisions of this
Agreement. No representation, warranty, covenant, agreement, obligation or duty
of the Custodian shall be implied with respect to this Agreement or the
Custodian's services hereunder.
(b) The Custodian may rely, and shall be protected in acting
or refraining to act, upon and need not verify the accuracy of, (i) any oral
instructions from any persons the Custodian believes to be authorized to give
such instructions, who shall only be, with respect to ACC, the Borrower, FSA and
the Agent, persons the Custodian believes in good faith to be Authorized
Representatives and (ii) any written instruction, notice, order, request,
direction, certificate, opinion or other instrument or document believed by the
Custodian to be genuine and to have been signed and presented by the proper
party or parties, which, with respect to the Borrower, ACC, FSA and the Agent,
shall mean signature and presentation by Authorized Representatives whether such
presentation is by personal delivery, express delivery or facsimile.
(c) The Custodian may consult with counsel nationally
recognized in the area of commercial transactions with regard to legal questions
arising out of or in connection with this Agreement, and the advice or opinion
of such counsel shall be full and complete authorization and protection in
respect of any action taken, omitted or suffered by the Custodian in reasonable
reliance, in good faith, and in accordance therewith; provided, however, that if
FSA and the Agent, acting unanimously give instructions to the Custodian or
provide an opinion of counsel selected by them, which in either case conflicts
with any such advice or opinion of counsel, then the Custodian shall follow such
instructions of the FSA and the Agent, acting unanimously (unless such
instructions violate the express terms of this Agreement or violate applicable
law) or such opinion of counsel selected by the Agent, and shall be fully
protected in acting or refraining to act thereon.
13
<PAGE> 17
(d) No provision of this Agreement shall require the Custodian
to expend or risk its own funds or otherwise incur financial liability in the
performance of its duties under this Agreement if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity is not
reasonably assured to it.
Section 18. Term Of Agreement. This Agreement shall be
terminated upon the earliest of (a) the final payment or other liquidation (or
advance with respect thereto) of the last Contract in the Contract Files, (b)
the disposition of all property acquired upon repossession in connection with
any Contract in the Contract Files or (c) the final payment of all obligations
and the termination of any commitment of the Lenders and FSA under the
Transaction Documents.
If any of the circumstances described in the preceding
paragraph shall occur, promptly after written notice from ACC or the Borrower
and the Controlling Party to the Custodian to such effect, all documents
remaining in the Contract Files shall be delivered to the Borrower.
Section 19. Authorized Representatives. The names of the
officers of ACC, the Borrower, FSA and the Agent who are authorized to give and
receive notices, requests and instructions and to deliver certificates and
documents in connection with this Agreement on behalf of ACC, the Borrower, FSA
and the Agent ("Authorized Representatives") are set forth in Exhibit E hereto,
along with the specimen signature of each such officer. From time to time, ACC,
the Borrower, FSA and the Agent may, by delivering to the Custodian a revised
exhibit, change the information previously given, but the Custodian shall be
entitled to rely conclusively on the most recent exhibit until receipt of a
superseding exhibit.
Section 20. Notices. All demands, notices and communications
relating to this Agreement shall be in writing and shall be deemed to have been
duly given when received by the other party or parties at the address shown
below, whether by personal delivery, express delivery or facsimile, or such
other address as may hereafter be furnished to the other party or parties by
like notice. Any such demand, notice or communication hereunder shall be deemed
to have been received on the date delivered to or received at the premises of
the addressee.
If to the Borrower:
ACC Liquidity, LLC
12750 High Bluff Drive, Suite 320
San Diego, CA 92130
Attn:
Telephone:
Telecopy:
14
<PAGE> 18
If to ACC:
ACC Consumer Finance Corporation
12750 High Bluff Drive, Suite 320
San Diego, CA 92130
Attn:
Telephone:
Telecopy:
If to the Custodian:
Norwest Bank Minnesota, National Association,
as Custodian
Sixth Street and Marquette Avenue
Minneapolis, MN 55479-0069
Attn: Corporate Trust Service - Asset-Backed Administration
Telephone: (612) 667-2410
Telecopy: (612) 667-3539
If to the Agent:
Credit Suisse First Boston, New York Branch
Eleven Madison Avenue
New York, New York 10010
Attn: Asset Finance Department
Telephone: (212) 325-9076
Telecopy: (212) 325-6677
If to Alpine:
Alpine Securitization Corp.
c/o Credit Suisse First Boston, New York Branch, as Administrative
Agent
Eleven Madison Avenue
New York, New York 10010
Attn: Asset Finance Department
Telephone: (212) 325-9076
Telecopy: (212) 325-6677
15
<PAGE> 19
If to FSA:
Financial Security Assurance, Inc.
350 Park Avenue
New York, New York 10022
Attn:
Telephone:
Telecopy:
Section 21. Governing Law; Venue; Consent to Jurisdiction.
(a) This Agreement shall be governed by the laws of the State of Minnesota,
without regard to the conflict of law rules thereof.
(b) Venue for any action brought under this Agreement shall be
in the federal district court sitting in Minneapolis, Minnesota. Each party to
this Agreement hereby consents to the jurisdiction of such court.
Section 22. Assignment. No party to this Agreement may assign
its rights or delegate its obligations under this Agreement without the express
written consent of the other parties, except that Alpine may assign its rights
and delegate its obligations to any Lender or any entity providing a commitment
to purchase interests in Advances or Notes.
Section 23. Counterparts. For the purpose of facilitating the
execution of this Agreement and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which shall be
deemed to be an original, and together shall constitute and be one and the same
instrument.
Section 24. Headings. The section headings are not part of
this Agreement and shall not be used in its interpretation.
Section 25. Third Party Beneficiaries. It is hereby agreed by
the parties hereto that each Purchaser, each Lender and any purchaser of the
Note are, and are intended to be, third party beneficiaries under this
Agreement.
Section 26. Certain Remedies. If, prior to a Remarketing
Date, any Facility Termination Event or, after a Remarketing Date, any Event of
Default shall have occurred and be continuing:
(a) At the direction of the Controlling Party, the Custodian
may exercise in respect of the Collateral, in addition to other rights and
remedies provided for herein or otherwise available to it, all the rights and
remedies of a secured party on default under the U.C.C. (whether or not the
U.C.C. applies to the affected Collateral) and also may at the direction of the
Controlling Party, without notice except as specified below, sell the Collateral
or any part thereof at public or private sale, at any of the Custodian's offices
or elsewhere, for cash, on credit or for future delivery,
16
<PAGE> 20
and upon such other terms as the Custodian may deem commercially reasonable. The
Borrower agrees that, to the extent notice of sale shall be required by law, at
least twenty days' prior notice to the Borrower of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Custodian shall not be obligated to make
any sale of Collateral regardless of notice of sale having been given. The
Custodian may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
(b) The Custodian may (at the direction of the Controlling
Party) give notice to any Lockbox Bank, as provided in the Lockbox Agreement, of
the transfer to the Custodian (for the benefit of the Secured Parties) of
dominion and control over the Lockbox Account. Borrower hereby transfers to the
Custodian (for the benefit of the Secured Parties), effective when the Custodian
shall give notice to the Lockbox Bank as provided in the Lockbox Agreement, the
exclusive dominion and control over the Lockbox Account, and shall take any
further action that the Custodian may reasonably request to effect such
transfer. Borrower shall not terminate the Lockbox Bank or make any change in
its instructions regarding payments to be made by such Lockbox Bank, unless the
Custodian shall have received duly executed counterparts of a new Lockbox
Agreement and copies of such instructions and previously shall have consented in
writing to such termination or change (which, in the case of any such
termination, shall not be unreasonably withheld, conditioned or delayed by the
Custodian).
(c) If, prior to a Remarketing Date, a Facility Termination
Event, or, after a Remarketing Date, an Event of Default, occurs and is
continuing, the Custodian may in its discretion but with the consent of the
Controlling Party and shall, at the direction of the Controlling Party, proceed
to protect and enforce its rights and the rights of the Investors by such
appropriate proceedings as the Custodian or the Controlling Party shall deem
most effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in any Transaction Document or in aid
of the exercise of any power granted herein, or to enforce any other proper
remedy or legal or equitable right vested in the Custodian by any Transaction
Document or by law.
(d) In case there shall be pending, relative to the Borrower
or any other obligor upon the Notes or any Person having or claiming an
ownership interest in the Collateral proceedings under Title 11 of the United
States Code or any other applicable Federal or state bankruptcy, insolvency or
other similar law, or in case a receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, sequestrator or similar official shall have been
appointed for or taken possession of the Borrower or its property or such other
obligor or Person, or in case of any other comparable judicial proceedings
relative to the Borrower or other obligor upon the Notes, or to the creditors of
property of the Borrower or such other obligor, the Custodian, irrespective of
whether the principal of any Notes shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the
Custodian shall have made any demand pursuant to the provisions of this Section,
shall be entitled and empowered, by intervention in such proceedings or
otherwise:
17
<PAGE> 21
(i) to file and prove a claim or claims for the whole amount
of principal and Yield 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 Custodian (including any claim for
reasonable compensation to the Custodian and each predecessor
Custodian, and their respective agents, attorneys and counsel, and for
reimbursement of all expenses and liabilities incurred, and all
advances, if any, made, by the Custodian and each predecessor
Custodian, except as a result of negligence, bad faith or wilful
misconduct) and of the Investors allowed in such proceedings;
(ii) unless prohibited by applicable law and regulations, to
vote on behalf of the holders of Notes in any election of a trustee, a
standby trustee or person performing similar functions in any such
proceedings;
(iii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute all amounts
received with respect to the claims of the Investors and of the
Custodian on their behalf; and
(iv) to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims
of the Custodian or the Investors allowed in any judicial proceedings
relative to the Custodian, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such proceeding is hereby authorized by each of such Investors to make
payments to the Custodian, and, in the event that the Custodian shall consent to
the making of payments directly to such Investors, to pay to the Custodian such
amounts as shall be sufficient to cover reasonable compensation to the
Custodian, each predecessor Custodian and their respective agents, attorneys and
counsel, and all other expenses and liabilities incurred, and all advances made,
by the Custodian and each predecessor Custodian except as a result of
negligence, bad faith or wilful misconduct.
(e) Nothing herein contained shall be deemed to authorize the
Custodian to authorize or consent to or vote for or accept or adopt on behalf of
any Investor any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any holder thereof or to authorize the
Custodian to vote in respect of the claim of any Investor in any such proceeding
except, as aforesaid, to vote for the election of a trustee in bankruptcy or
similar person.
(f) All rights of action and of asserting claims under the
Transaction Documents, may be enforced by the Custodian without the possession
of any of the Notes or the production thereof in any trial or other proceedings
relative thereto, and any such action or proceedings instituted by the Custodian
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment, subject to the payment of the expenses, disbursements and
compensation of the Custodian, each predecessor Custodian and their respective
agents and attorneys, shall be for the ratable benefit of the holders of the
Notes.
18
<PAGE> 22
(g) In any proceedings brought by the Custodian (and also any
proceedings involving the interpretation of any provision of any Transaction
Document, the Custodian shall be held to represent all the Investors, and it
shall not be necessary to make any Investor a party to any such proceedings.
Section 27. Remedies. (a) If, prior to a Remarketing Date,
a Facility Termination Event, or, after a Remarketing Date, an Event of Default,
shall have occurred and be continuing, the Controlling Party may do one or more
of the following (subject to Section 28):
(i) institute Proceedings in its own name and on behalf of the
Secured Parties as trustee of an express trust for the collection of
all amounts then payable on the Notes or under the Receivables
Financing Agreement with respect thereto, whether by declaration or
otherwise, enforce any judgment obtained, and collect from the Borrower
and any other obligor upon such Notes moneys adjudged due;
(ii) institute Proceedings from time to time for the
complete or partial foreclosure upon the Collateral;
(iii) exercise any remedies of a secured party under the UCC
and take any other appropriate action to protect and enforce the right
and remedies of the Custodian and the holders of the Note; and
(iv) sell the Collateral or any portion thereof or rights or
interest therein, at one or more public or private sales called and
conducted in any manner permitted by law; provided, however, that after
the Remarketing Date:
(A) if the Insurer is the Controlling Party, the
Insurer may not sell or otherwise liquidate the Collateral
following an Insurance Agreement Event of Default unless
(I) such Insurance Agreement Event of
Default arises from a claim being made on the Policy
or from the insolvency of the Borrower or the Seller,
or
(II) the proceeds of such sale or
liquidation distributable to the Investor are
sufficient to discharge in full all amounts then due
and unpaid upon such Notes for principal and Yield;
or
(B) if the Agent is the Controlling Party, the
Agent may not sell or otherwise liquidate the Collateral
following an Event of Default unless
(x) the holders of 100% of the
outstanding amount of the Notes consent
thereto,
19
<PAGE> 23
(y) the proceeds of such sale or
liquidation distributable to the Investors
are sufficient to discharge in full all
amounts then due and unpaid upon such Notes
for principal and interest, or
(z) the Agent determines that the
Collateral will not continue to provide
sufficient funds for the payment of
principal of and interest on the Notes as
they would have become due if the Notes had
not been declared due and payable, and the
Agent obtains the consent of holders of
66-2/3% of the outstanding amount of the
Notes.
In determining such sufficiency or insufficiency with respect
to clause (y) and (z), the Agent may, but need not, obtain and rely upon an
opinion of an independent investment banking or accounting firm of national
reputation as to the feasibility of such proposed action and as to the
sufficiency of the Collateral for such purpose.
Section 28. Optional Preservation of the Receivables. If the
Agent is the Controlling Party and if the Notes have been declared to be due and
payable following (prior to a Remarketing Date) a Facility Termination Event, or
(after a Remarketing Date), an Event of Default, and such declaration and its
consequences have not been rescinded and annulled, the Agent may, but need not,
elect to direct the Custodian to maintain possession of the Collateral. It is
the desire of the parties hereto and the Investors that there be at all times
sufficient funds for the payment of principal of and Yield on the Notes, and the
Agent shall take such desire into account when determining whether or not to
direct the Custodian to maintain possession of the Collateral. In determining
whether to direct the Custodian to maintain possession of the Collateral, the
Agent may, but need not, obtain and rely upon an opinion of an independent
investment banking or accounting firm of national reputation as to the
feasibility of such proposed action and as to the sufficiency of the Collateral
for such purpose.
Section 29. Withdrawals from Spread Account.
(a) In the event that the Servicer's Certificate with respect
to any Determination Date shall state that the Deficiency Claim Amount (as
defined below) with respect to the related Distribution Date is greater than
zero, then on the Deficiency Claim Date immediately preceding such Distribution
Date, the Custodian shall deliver to the Collateral Agent, the Agent, FSA and
the Servicer, by hand delivery, telex or facsimile transmission, a written
notice (a "Deficiency Notice"). Such Deficiency Notice shall direct the
Collateral Agent under the Spread Account Agreement to remit such Deficiency
Claim Amount (to the extent of the funds available to be distributed pursuant to
the Spread Account Agreement) to the Custodian for deposit in the Collection
Account. The "Deficiency Claim Amount" with respect to any Distribution Date
shall equal the amount by which the amounts described in Sections 5(a) FOURTH
and FIFTH or Sections 5(b) THIRD, FOURTH, SIXTH (x) and SEVENTH exceed the
amounts available for payment of such amounts, as set forth in such clauses.
20
<PAGE> 24
(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 Custodian pursuant to a
Deficiency Notice shall be deposited by the Custodian into the Collection
Account.
Section 30. Claims Under Policy.
(a) In the event that the Custodian has determined that there
are insufficient funds on deposit, for the payment of the amounts set forth in
Section 5(a) FOURTH or Sections 5(b) THIRD, FOURTH or SIXTH (x) and, on the
Distribution Date on or immediately following the date that is three months
after the final scheduled maturity date of the last maturing Receivable in the
Total Receivables Pool, SIXTH (y) with respect to any Distribution Date based
upon the amounts available for payment of such amounts, as set forth in such
clauses, the Custodian shall furnish to the Insurer a completed Notice of Claim
under and in accordance with the Policy in the amount of the insufficiency (the
"Policy Claim Amount") no later than the Draw Date. Amounts paid by the
Insurer pursuant to a claim submitted under this Section 29(a) shall be paid by
the Custodian to the Agent for payment to the Investors or in respect of the
payment of the Post Termination Fee, to the Facility Agent for payment pursuant
to the Fee Letter. Any payment made by the Insurer under the Policy shall be
applied solely to the payment of the Notes and the Post Termination Fee, and for
no other purpose.
(b) Any and all amounts claimed under the Policy and disbursed
by the Custodian from claims made under the Policy shall not be considered
payment by the Borrower with respect to such Notes or otherwise, and shall not
discharge the obligations of the Borrower with respect thereto. FSA shall, to
the extent it makes any payment with respect to the Notes or the Post
Termination Fee, 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 Notes or the Post Termination Fee by or on behalf of
FSA, the Custodian shall assign to FSA all rights to the payment of Yield or
principal with respect to the Notes or the Post Termination Fee which are then
due for payment to the extent of all payments made by FSA, and FSA may exercise
any option, vote, right, power or the like with respect to the Notes to the
extent that it has made payment of principal and Yield pursuant to the Policy.
To evidence such subrogation, the Custodian shall note FSA's rights as subrogee
upon the Note Register upon receipt from FSA of proof of payment by FSA under
the Policy. The foregoing subrogation shall in all cases be subject to the
rights of the Investors to receive all payments in respect of the Notes.
(c) The Custodian shall keep a complete and accurate record of
all funds paid by FSA for Yield and principal paid in respect of the Notes. FSA
shall have the right to inspect such records at reasonable times upon one
Business Day's prior notice to the Custodian.
(d) The Custodian shall be entitled to enforce on behalf of
the Investors the obligations of FSA under the Policy. Notwithstanding any other
provision of any Transaction Document, the Investors are not entitled to
institute proceedings directly against FSA.
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<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized representatives to hereunto set their hand as of the day and year
first above written.
FINANCIAL SECURITY ASSURANCE, INC.
By: /s/
----------------------------------------
Name:
Title:
CREDIT SUISSE FIRST BOSTON, NEW YORK
BRANCH, as Agent
By: /s/
----------------------------------------
Name:
Title:
By: /s/ ERIC K. SHEA
----------------------------------------
Name: Eric K. Shea
Title: Associate
<PAGE> 26
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Custodian
By: /s/ JASON VAN VLEET
----------------------------------------
Name: Jason Van Vleet
Title: Corporate Trust Officer
ACC LIQUIDITY, LLC
By: ACC Funding Corp., its Manager
By: /s/
--------------------------------
Name:
Title:
ACC CONSUMER FINANCE CORPORATION
By: /s/
----------------------------------------
Name:
Title:
<PAGE> 27
EXHIBIT A
CONFIRMATION AND NOTICE OF PLEDGE
To: Norwest Bank Minnesota, National Association,
as Custodian
Sixth Street and Marquette Avenue
Minneapolis, MN 55479-0070
Attention: Corporate Trust Services - Asset-Backed Administration
Gentlemen:
The undersigned hereby notifies you, as Custodian, that the
Contracts and related Contract Files specified in the attached Schedule A (the
"Pledged Contracts") have been pledged by us pursuant to a Receivables Financing
Agreement (the "Security Agreement") dated as of March , 1997 among Alpine
Securitization Corp. (the "Pledgee"), Credit Suisse First Boston, New York
Branch, Norwest Bank Minnesota, National Association, ACC Liquidity, LLC (the
"Borrower") and ACC Consumer Finance Corporation ("ACC"), and are to be held by
you as bailee of, and agent for, the Pledgee as secured party pursuant to the
provisions of the Custodial Agreement dated March __, 1997 among the Pledgee,
Credit Suisse First Boston, New York Branch, Financial Security Assurance, Inc.,
the Borrower, ACC and Norwest Bank Minnesota, National Association, until
released or transferred as provided in the Custodial Agreement. Capitalized
words and phrases used herein shall have the respective meanings assigned to
them in the Custodial Agreement.
A security interest in the Pledged Contracts has been granted
to the Pledgee, a corporation having an address at 11 Madison Avenue, New York,
New York 10010, pursuant to the Security Agreement. You are instructed to enter
the Pledgee's name and address in your records as the pledgee of such Pledged
Contracts and to promptly provide to the Pledgee an acknowledgment of this
Notice of Pledge and Notice of Pledge by signing in the space provided below and
delivering an acknowledged copy of this Notice of Pledge and Notice to the
Pledgee at the above address. Such acknowledgment will serve to confirm that
this Notice of Pledge and Notice of Pledge has been duly received by you and
that (i) the related Contract Files are being held by you as bailee of, and
agent for, the Pledgee and (ii) you have duly reflected on your records that the
Pledgee has been granted a security interest in and to such Contracts and
related Contract Files all in accordance with the provisions of the Custodial
Agreement.
ACC CONSUMER FINANCE CORPORATION
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Date:
-----------------------------------
A-1
<PAGE> 28
ACKNOWLEDGED BY:
NORWEST BANK MINNESOTA, National
Association, as Custodian
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Date:
-----------------------------
A-2
<PAGE> 29
EXHIBIT B
No.
----
RECEIPT CERTIFICATION
Credit Suisse First Boston,
New York Branch
Attn:
--------------------------------
11 Madison Avenue
New York, New York 10010
Financial Security Assurance, Inc.
Attn:
--------------------------------
350 Park Avenue
New York, New York 10022
Re: Custodial Agreement (the "Custodial Agreement") dated
March ___, 1997 among Financial Security Assurance, Inc., Credit Suisse
First Boston, New York Branch, ACC Liquidity, LLC, and ACC Consumer
Finance Corporation and Norwest Bank Minnesota, NationalAssociation, as
Custodian
Aggregate Contract Balance
of the Contracts on the
Contract Schedule dated
, 199 : $
- -------------------- -- ------------
Gentlemen:
In accordance with the provisions of Section 3 of the
Custodial Agreement, the undersigned, as Custodian, hereby certifies that, as to
each Contract listed in the Contract Schedule dated ____________ __, 199_ (other
than any Contract paid in full or any Contract listed on an attachment hereto),
it is in receipt of a Contract File including the fully executed Contract,
endorsed as provided in the definition of "Contract File" in Section 1 of the
Custodial Agreement and the name of the Obligor on and the Amount Financed under
each such executed Contract conforms to the infomration contained in the
attachment, [except for each Contract File listed on the Schedule of Exceptions
attached hereto]. The Custodian has made no independent examination of such
documents beyond the review specifically required in the Custodial Agreement.
The Custodian makes no representations as to: (i) the validity, legality,
sufficiency, enforceability or genuineness of any such documents contained in
each or any of the Contracts identified on the Contract Schedule, (ii) the
collectibility, insurability, effectiveness or suitability of any such Contract
and (iii) whether any document has been originally executed.
B-1
<PAGE> 30
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the Custodial Agreement.
NORWEST BANK MINNESOTA, National
Association, as Custodian
By:
--------------------------------------
Print Name:
-------------------------------
Title:
-----------------------------------
B-2
<PAGE> 31
EXHIBIT C
No.
-----
COLLATERAL RECEIPT
Credit Suisse First Boston,
New York Branch
Attn:
----------------------------------
11 Madison Avenue
New York, New York 10010
Financial Security Assurance, Inc.
Attn:
----------------------------------
350 Park Avenue
New York, New York 10022
Re: Custodial Agreement (the "Custodial Agreement") dated
March __, 1997, among Alpine Securitization Corp.,
Financial Security Assurance, Inc., Credit Suisse First Boston,
New York Branch, [ ], ACC Consumer
Finance Corporation and Norwest Bank Minnesota, National
Association, as Custodian
Aggregate Contract Balance
of the Contracts on the
Contract Schedule dated
, 199 : $
- ----------- -- - ---------------------
Gentlemen:
In accordance with the provisions of Section 3 of the
Custodial Agreement, the undersigned, as Custodian, hereby certifies that, as to
each Contract listed in the Contract Schedule dated ____________ __, 199_ (other
than any Contract paid in full or any Contract listed on an attachment hereto),
it has reviewed the documents delivered to it pursuant to Section 2 of the
Custodial Agreement and has determined that, excepting the Deficiencies, if any,
described on the annex hereto (i) all such documents are in its possession, (ii)
such documents have been reviewed by it and have not been materially mutilated,
damaged or torn and relate to such Contract and (iii) with respect to the name
and mailing address of the Obligor, the account number, the Contract Interest
Rate, the amount of the Scheduled Payment and the original term of the Contract,
the information set forth in the Contract Schedule respecting such Contract
accurately reflects the information set forth in the Contract. The Custodian has
made no independent examination of such documents beyond the review specifically
required in the Custodial Agreement. The Custodian makes no
C-1
<PAGE> 32
representations as to: (i) the validity, legality, sufficiency, enforceability
or genuineness of any such documents contained in each or any of the Contracts
identified on the Contract Schedule, (ii) the collectibility, insurability,
effectiveness or suitability of any such Contract and (iii) whether any document
has been originally executed.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the Custodial Agreement.
NORWEST BANK MINNESOTA, National Association,
as Custodian
By:
---------------------------------------
Print Name:
-------------------------------
Title:
------------------------------------
C-2
<PAGE> 33
EXHIBIT D
REQUEST FOR RELEASE AND RECEIPT OF DOCUMENTS
To: Norwest Bank Minnesota, N.A., as Custodian
Sixth Street and Marquette Avenue
Minneapolis, MN 55479-0070
Attention: Corporate Trust Service - Asset-Backed Administration
Re: Custodial Agreement (the "Custodial Agreement") dated
March __, 1997, among Alpine Securitization Corp., Financial Security
Assurance, Inc., Credit Suisse First Boston, New York Branch, ACC
Liquidity, LLC, ACC Consumer Finance Corporation and Norwest Bank
Minnesota, National Association, as Custodian
Gentlemen:
In connection with the administration of the Contracts held by
you as the Custodian for the Agent and the Insurer, we request the release, and
acknowledge receipt, of the (Contract File/specify documents) for the Contract
described below, for the reason indicated.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the Custodial Agreement.
Obligor's Name, Address & Zip Code:
Contract Number:
Reason for Requesting Documents (check one or more)
______ 1. Contract Paid in Full
______ 2. Contract Repurchased
______ 3. Contract Liquidated
______ 4. Contract in Repossession
D-2
<PAGE> 34
______ 5. Other (explain)
If item 1, 2 or 3 above is checked, and if all or part of the Contract File was
previously released to us, please release to us our previous receipt on file
with you, as well as any additional documents in your possession relating to the
above specified Contract.
The undersigned hereby certifies that if a release has been requested due to
payment in full of a Receivable or repurchase upon breach of a representation or
warranty, all amounts received in connection therewith which are required to be
deposited in the Collection Account pursuant to Section 8.18 of the Receivables
Financing agreement have been so deposited.
If item 4 or 5 above is checked, upon our return of the above document(s) to you
as the Custodian, please acknowledge your receipt by signing in the space
indicated below, and returning this form.
ACC CONSUMER FINANCE CORPORATION
By:
---------------------------------------
Print Name:
-------------------------------
Title:
------------------------------------
DOCUMENTS RETURNED TO THE CUSTODIAN:
NORWEST BANK MINNESOTA, National
Association, as Custodian
By:
---------------------------------------
Print Name:
-------------------------------
Title:
------------------------------------
Date:
-------------------------------------
D-2
<PAGE> 35
AUTHORIZED REPRESENTATIVES
A. ACC CONSUMER FINANCE CORPORATION
Name Specimen Signature
Gary S. Burdick /s/ GARY S. BURDICK
----------------------- -----------------------------
Rellen Stewart
----------------------- -----------------------------
B. ACC LIQUIDITY LLC
Name Specimen Signature
Gary S. Burdick /s/ GARY S. BURDICK
--------------------- -----------------------------
Rellen Stewart
--------------------- -----------------------------
C. FINANCIAL SECURITY ASSURANCE
Name Specimen Signature
----------------------- -----------------------------
----------------------- -----------------------------
D. CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH
Name Specimen Signature
--------------------- -----------------------------
--------------------- -----------------------------
<PAGE> 1
EXHIBIT 10.3
EXECUTION COPY
================================================================================
RECEIVABLES FINANCING AGREEMENT
dated as of March 27, 1997
among
ACC LIQUIDITY LLC,
ACC CONSUMER FINANCE CORPORATION,
as Servicer,
ALPINE SECURITIZATION CORP.,
THE FINANCIAL INSTITUTIONS NAMED HEREIN,
as Lenders,
CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH,
as Agent,
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Backup Servicer and Custodian
================================================================================
<PAGE> 2
TABLE OF CONTENTS
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RECEIVABLES FINANCING AGREEMENT.........................................................1
BACKGROUND..............................................................................1
ARTICLE I DEFINITIONS..............................................................1
SECTION 1.1 Defined Terms.........................................1
SECTION 1.2 Other Definitional Provisions........................34
ARTICLE II THE FACILITY, ADVANCE PROCEDURES AND NOTE...............................35
SECTION 2.1 Facility.............................................35
SECTION 2.2 Advance Procedures...................................35
SECTION 2.3 Funding..............................................35
SECTION 2.4 Representation and Warranty..........................36
SECTION 2.5 [Intentionally left blank]...........................36
SECTION 2.6 [Intentionally left blank]...........................36
SECTION 2.7 Voluntary Termination of Facility; Reduction of
Facility Limit.......................................36
SECTION 2.8 Note.................................................36
ARTICLE III YIELD, FEES, ETC........................................................37
SECTION 3.1 Yield Rates..........................................37
SECTION 3.2 Yield Payment Dates..................................37
SECTION 3.3 Yield Allocations; Selection of Fixed Periods, etc...38
SECTION 3.4 Fees.................................................38
SECTION 3.5 Computation of Yield and Fees........................38
ARTICLE IV REPAYMENTS AND PREPAYMENTS..............................................39
SECTION 4.1 Repayments and Prepayments...........................39
ARTICLE V PAYMENTS................................................................40
SECTION 5.1 Making of Payments...................................40
SECTION 5.2 Application of Certain Payments......................40
SECTION 5.3 Due Date Extension...................................40
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ARTICLE VI INCREASED COSTS, ETC....................................................40
SECTION 6.1 Increased Costs......................................40
SECTION 6.2 Additional Yield on Advances Bearing a
Eurodollar Rate......................................41
SECTION 6.3 Funding Losses.......................................42
ARTICLE VII CONDITIONS TO ADVANCES..................................................42
SECTION 7.1 Initial Advance......................................43
SECTION 7.2 All Advances.........................................43
ARTICLE VIII ADMINISTRATION AND SERVICING OF RECEIVABLES.............................44
SECTION 8.1 Duties of the Servicer...............................44
SECTION 8.2 Collection of Receivable Payments; Modification
and Amendment of Receivables; Lockbox Agreements.....46
SECTION 8.3 Realization Upon Receivables.........................48
SECTION 8.4 Insurance............................................50
SECTION 8.5 Maintenance of Security Interests in Financed
Vehicles.............................................50
SECTION 8.6 Covenants, Representations and Warranties of
Servicer.............................................51
SECTION 8.7 Purchase of Receivables Upon Breach of Covenant
or Representation and Warranty.......................55
SECTION 8.8 Total Servicing Fee; Payment of Certain Expenses
by Servicer..........................................55
SECTION 8.9 Servicer's Certificate...............................56
SECTION 8.10 Annual Statement as to Compliance; Notice of
Servicer Termination Event...........................56
SECTION 8.11 Annual Independent Accountants' Report...............57
SECTION 8.12 Access to Certain Documentation and Information
Regarding Receivables................................58
SECTION 8.13 Monthly Tape.........................................58
SECTION 8.14 Retention of Servicer................................59
SECTION 8.15 Fidelity Bond........................................59
SECTION 8.16 Insurance............................................60
SECTION 8.17 Accounts.............................................60
SECTION 8.18 Collections..........................................60
SECTION 8.19 Application of Collections...........................61
</TABLE>
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ARTICLE IX GRANT OF SECURITY INTERESTS.............................................61
SECTION 9.1 Borrower's Grant of Security Interest................61
SECTION 9.2 Delivery of Collateral...............................63
SECTION 9.3 Borrower Remains Liable..............................63
SECTION 9.4 Covenants of the Borrower and Servicer Regarding
the Collateral.......................................64
SECTION 9.5 Release of Borrower Collateral.......................67
ARTICLE X REPRESENTATIONS AND WARRANTIES OF
THE BORROWER............................................................68
SECTION 10.1 Organization and Good Standing.......................68
SECTION 10.2 Due Qualification....................................69
SECTION 10.3 Power and Authority..................................69
SECTION 10.4 Security Interest; Binding Obligations...............69
SECTION 10.5 No Violation.........................................69
SECTION 10.6 No Proceedings.......................................70
SECTION 10.7 No Consents..........................................70
SECTION 10.8 Approvals............................................70
SECTION 10.9 Chief Executive Office...............................70
SECTION 10.10 Solvency.............................................70
SECTION 10.11 Tax Treatment........................................71
SECTION 10.12 Compliance With Laws.................................71
SECTION 10.13 Taxes................................................71
SECTION 10.14 Borrowing Base Certificate...........................71
SECTION 10.15 No Liens, Etc........................................71
SECTION 10.16 Purchase and Sale....................................72
SECTION 10.17 Securities Act of 1933; Investment Company Act
of 1940..............................................72
SECTION 10.18 Information True and Correct.........................72
SECTION 10.19 ERISA Compliance.....................................72
SECTION 10.20 No Material Adverse Effect; No Default...............72
SECTION 10.21 Financial or Other Condition.........................73
SECTION 10.22 Investment Company Status............................73
SECTION 10.23 No Shared Obligations................................73
SECTION 10.24 Representation and Warranties True and Correct.......73
SECTION 10.25 Eligible Receivables.................................73
</TABLE>
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ARTICLE XI COVENANTS OF THE BORROWER...............................................74
SECTION 11.1 Protection of Security Interest of the Secured
Parties..............................................74
SECTION 11.2 Other Liens or Interests.............................75
SECTION 11.3 Costs and Expenses...................................75
SECTION 11.4 Reporting Requirements...............................75
SECTION 11.5 Tangible Net Worth...................................76
SECTION 11.6 Take-Out Securitization..............................77
SECTION 11.7 Warehouse Facility...................................77
ARTICLE XII THE SERVICER............................................................77
SECTION 12.1 Liability of Servicer; Indemnities...................77
SECTION 12.2 Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer or Backup Servicer......79
SECTION 12.3 Limitation on Liability of Servicer, Backup Servicer
and Others...........................................80
SECTION 12.4 Delegation of Duties.................................81
SECTION 12.5 Servicer and Backup Servicer Not to Resign...........81
ARTICLE XIII SERVICER TERMINATION EVENTS.............................................82
SECTION 13.1 Servicer Termination Event...........................82
SECTION 13.2 Consequences of a Servicer Termination Event.........84
SECTION 13.3 Appointment of Successor Servicer....................85
ARTICLE XIV FACILITY TERMINATION EVENTS; EVENTS OF DEFAULT; THEIR EFFECT............86
SECTION 14.1 Facility Termination Events..........................86
SECTION 14.2 Effect of Facility Termination Event.................88
SECTION 14.3 Rights Upon Event of Default.........................88
ARTICLE XV THE AGENT...............................................................90
SECTION 15.1 Authorization and Action.............................90
SECTION 15.2 Exculpation..........................................90
SECTION 15.3 Agent and Affiliates.................................90
SECTION 15.4 Replacement Agent....................................91
ARTICLE XVI ASSIGNMENTS.............................................................91
SECTION 16.1 Restrictions on Assignments..........................91
</TABLE>
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SECTION 16.2 Documentation........................................92
SECTION 16.3 Rights of Assignee...................................92
SECTION 16.4 Notice of Assignment.................................92
SECTION 16.5 Registration; Registration of Transfer and Exchange..92
SECTION 16.6 Mutilated, Destroyed, Lost and Stolen Notes..........93
SECTION 16.7 Persons Deemed Owners................................94
SECTION 16.8 Cancellation.........................................94
ARTICLE XVII INDEMNIFICATION.........................................................95
SECTION 17.1 General Indemnity of the Borrower....................95
SECTION 17.2 [Intentionally left blank]...........................97
SECTION 17.3 Sale.................................................97
ARTICLE XVIII MISCELLANEOUS...........................................................97
SECTION 18.1 No Waiver; Remedies..................................97
SECTION 18.2 Amendments, Waivers..................................98
SECTION 18.3 Notices, Etc.........................................98
SECTION 18.4 Costs, Expenses and Taxes............................98
SECTION 18.5 Binding Effect; Survival.............................99
SECTION 18.6 Captions and Cross References........................99
SECTION 18.7 Severability........................................100
SECTION 18.8 Governing Law.......................................100
SECTION 18.9 Counterparts........................................100
SECTION 18.10 WAIVER OF JURY TRIAL................................100
SECTION 18.11 Third Party Beneficiary.............................100
SECTION 18.12 No Proceedings......................................101
SECTION 18.13 ENTIRE AGREEMENT....................................101
SECTION 18.14 Preference Claims...................................101
SECTION 18.15 Subrogation.........................................102
ARTICLE XIX THE CUSTODIAN AS AGENT.................................................103
SECTION 19.1 Duties of the Agent.................................103
SECTION 19.2 Certain Matters Affecting the Agents................105
SECTION 19.3 Agent Not Liable for Notes or Receivables...........106
SECTION 19.4 Agent May Own Notes.................................107
SECTION 19.5 Agent's Indemnification.............................107
SECTION 19.6 Eligibility Requirements for Agent..................107
SECTION 19.7 Resignation or Removal of Agent.....................108
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SECTION 19.8 Successor Agent.....................................108
SECTION 19.9 Merger or Consolidation of Agent....................109
SECTION 19.10 Appointment of Co-Agent or Separate Agent...........109
SECTION 19.11 Agent May Enforce Claims Without Possession
of Notes............................................111
SECTION 19.12 Suit for Enforcement................................111
</TABLE>
EXHIBITS
EXHIBIT A Form of Advance Request (Section 2.2)
EXHIBIT B Form of Note (Section 2.8)
EXHIBIT C [Intentionally Left Blank]
EXHIBIT D Form of Borrowing Base Certificate (Section 11.4)
EXHIBIT E Form of Servicer's Certificate (Section 8.9)
vi
<PAGE> 8
RECEIVABLES FINANCING AGREEMENT
THIS RECEIVABLES FINANCING AGREEMENT is made and entered into as of March
27, 1997, among ACC LIQUIDITY LLC, a Delaware limited liability company having
its principal office at 12750 High Bluff Drive, Suite 320, San Diego, California
92130 (the "Borrower"), ACC CONSUMER FINANCE CORPORATION, a Delaware corporation
having its principal office at 12750 High Bluff Drive, Suite 320, San Diego,
California 92130 ("ACC"), as servicer, ALPINE SECURITIZATION CORP., a Delaware
corporation having its principal office c/o Credit Suisse First Boston, New York
Branch, Eleven Madison Avenue, New York, New York, 10010 ("Alpine"), THE
FINANCIAL INSTITUTIONS SET FORTH ON THE SIGNATURE PAGES HERETO and their
permitted assigns, as lenders (the "Banks" and, together with Alpine, the
"Lenders"), CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH ("CSFB"), as agent (the
"Agent") for the Investors, and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a
national banking association, as backup servicer and custodian.
BACKGROUND
1. The Borrower desires that the Lenders extend financing to the
Borrower, on the terms and conditions set forth herein.
2. The Lenders are willing to provide such financing on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Defined Terms. As used in this Agreement, the following terms
have the following meanings:
"ACC" has the meaning set forth in the Preamble.
"Accountants' Report" has the meaning set forth in Section 8.11(a).
<PAGE> 9
"Adjusted Term Index Rate" means, as of any date, the product of the Term
Index Rate and the Advance Rate.
"Adjusted Total Expense Percentage" means, as of any date, the sum of (x)
the Servicing Fee Rate plus (y) the Custodial Fee Rate plus (z) the product of
(1) the Premium Rate and (2) the Advance Rate.
"Adjusted Yield Rate" means, as of any date, the product of (a) the sum of
(i) if Alpine is the only Lender making and maintaining Advances, LIBOR plus
.55% or, otherwise, the weighted average of the rates used to determine Yield in
accordance with the definition thereof plus (ii) the ratio (expressed as a
percentage) of any amounts due and payable pursuant to Sections 6.1, 6.2 and 6.3
of this Agreement on the immediately preceding Distribution Date to the
outstanding principal amount of Advances on such Distribution Date and (b) the
Advance Rate.
"Advance" means any amount disbursed by any Lender to the Borrower under
this Agreement.
"Advance Rate" means 94%, or, upon written notice given by the Borrower to
the other parties under the Agreement, such other lower rate agreed to by the
Borrower and the Insurer from time to time; provided, however, that at any time
that the Servicer does not maintain Collateral Insurance with respect to all
Financed Vehicles, the "Advance Rate" shall mean the Advance Rate pursuant to
the preceding clause less 1.0%.
"Advance Request" has the meaning set forth in Section 2.2.
"Adverse Claim" means any claim of ownership or any lien, security
interest, title retention, trust or other charge or encumbrance, or other type
of preferential arrangement having the effect or purpose of creating a lien or
security interest, other than the security interest created under this
Agreement.
"Affected Person" has the meaning set forth in Section 6.1(a).
"Affiliate" of any Person means any other Person that (i) directly or
indirectly controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any employee benefit plan) or (ii) is an officer or director of
such Person. A Person shall be deemed to be "controlled by" any other Person if
such other Person possesses, directly or indirectly, power
2
<PAGE> 10
(a) to vote 5% or more of the securities (on a fully diluted
basis) having ordinary voting power for the election of
directors or managing partners; or
(b) to direct or cause the direction of the management and
policies of such Person whether by contract or
otherwise.
The word "Affiliated" has a correlative meaning.
"Agent" has the meaning set forth in the Preamble.
"Agent's Account" has the meaning set forth in Section 5.1.
"Aggregate Outstanding Principal Balance" means, with respect to any group
of Receivables as of any date, the sum of the outstanding Principal Balances of
all such Receivables as at the opening of business of such date.
"Agreement" shall mean this Receivables Financing Agreement, as it may be
amended, supplemented or otherwise modified from time to time.
"Allocations" has the meaning set forth in Section 3.3(a).
"Alpine" has the meaning set forth in the Preamble.
"Alternate Base Rate" means a fluctuating rate per annum as shall be in
effect from time to time, which rate shall be at all times equal to the highest
of:
(a) the rate of interest announced publicly by CSFB in New
York, New York, from time to time as CSFB's base
commercial lending rate;
(b) 1/2 of one percent above the latest three-week moving
average of secondary market morning offering rates in
the United States for three-month certificates of
deposit of major United States money market banks, such
three-week moving average being determined weekly on
each Monday (or, if such day is not a Business Day, on
the next succeeding Business Day) for the three-week
period ending on the previous Friday by CSFB on the
basis of such rates reported by certificate of deposit
dealers to and published by the Federal Reserve Bank
3
<PAGE> 11
of New York or, if such publication shall be suspended
or terminated, on the basis of quotations for such rates
received by CSFB from three New York certificate of
deposit dealers of recognized standing selected by CSFB,
in either case adjusted to the nearest 1/4 of one
percent or, if there is no nearest 1/4 of one percent,
to the next higher 1/4 of one percent; and
(c) the Federal Funds Rate.
"Amount Financed" means, 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" means 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 relevant Obligor or (ii) pursuant to the Soldiers' and Sailors'
Civil Relief Act of 1940, the "Annual Percentage Rate" or "APR" shall refer to
such reduced rate.
"Backup Servicer" means Norwest Bank Minnesota, National Association,
together with its permitted successors and assigns.
"Bank Rate" for any Advance means a rate per annum equal to 0.75% per
annum above the Eurodollar Rate for each Advance or portion thereof; provided,
however, that in the case of
(i) any Fixed Period on or prior to the first day of which a Bank
shall have notified the Agent that the introduction of or any change in or
in the interpretation of any law or regulation makes it unlawful, or any
central bank or other governmental authority asserts that it is unlawful,
for such Bank to fund such Advance at the Bank Rate set forth above (and
such Bank shall not have subsequently notified the Agent that such
circumstances no longer exist),
4
<PAGE> 12
(ii) any Fixed Period of one to (and including) 29 days, in the
event the Eurodollar Rate is not reasonably available to the Agent for
such a Fixed Period,
(iii) any Fixed Period as to which the related Advance will not be
funded by issuance of commercial paper, as determined by the Agent (on
behalf of Alpine) by 12:00 noon (New York City time) on the third Business
Day preceding the first day of such Fixed Period, or
(iv) any Fixed Period for an Advance the principal amount of which
allocated to the Banks in the aggregate is less than $500,000,
the "Bank Rate" shall be a rate per annum equal to the Alternate Base Rate in
effect on the first day of such Fixed Period; provided, further, that the Agent
and the Borrower may agree in writing from time to time upon a different "Bank
Rate."
"Bank Rate Allocation" has the meaning set forth in Section 3.3(a).
"Bankruptcy Code" means the Bankruptcy Code, 11 U.S.C. 101, et seq., as
amended.
"Banks" has the meaning set forth in the Preamble.
"Base Fee Percentage" means, as of any date, the positive difference, if
any, of (i) the excess, if any, of (x) yield rate of weighted average life
AAA-rated, privately issued automobile asset-backed securities (A) issued by ACC
or an Affiliate thereof, or, if neither ACC nor any Affiliate have issued any
such securities in the calendar quarter immediately preceding such date, such
other issuer chosen by the Placement Agent in its sole discretion, (B)
guaranteed by the Insurer or a similar monoline insurance company and (C) with a
weighted average life similar to that of the Total Receivables Pool on such
date, as determined by the Placement Agent over (y) the Index Rate or other
appropriate index as determined by the Placement Agent on such date over (ii)
0.75%.
"Borrower" has the meaning set forth in the Preamble.
"Borrower Account Collateral" has the meaning set forth in Section 9.1(c).
"Borrower Assigned Agreements" has the meaning set forth in Section
9.1(b).
5
<PAGE> 13
"Borrowing Base" means the excess of (a) (i) on any day during a
Collection Period occurring prior to the Distribution Date occurring during such
Collection Period, an amount equal to (A) with respect to all Eligible
Receivables that were purchased by the Borrower prior to the first day of the
Collection Period immediately preceding such Distribution Date, an amount equal
to the aggregate outstanding Principal Balance of all such Eligible Receivables
as of the last day of the second Collection Period preceding such Distribution
Date, plus (B) with respect to all Eligible Receivables that were purchased by
the Borrower on or after the first day of the Collection Period immediately
preceding such Distribution Date, an amount equal to the outstanding Principal
Balance thereof as of the date such Receivables were purchased by the Borrower
or (ii) on any day during a Collection Period occurring on or after the
Distribution Date occurring during such Collection Period, an amount equal to
(A) with respect to all Eligible Receivables that were purchased by the Borrower
prior to the first day of such Collection Period, an amount equal to the
aggregate outstanding Principal Balance of all such Eligible Receivables as of
the last day of the Collection Period immediately preceding such Distribution
Date plus (B) with respect to all Eligible Receivables that were purchased by
the Borrower on or after the first day of such Collection Period, an amount
equal to the outstanding Principal Balance thereof as of the date such
Receivables were purchased by the Borrower over (b) the Required Holdback as of
such date.
"Borrowing Base Certificate" has the meaning set forth in Section 11.4.
"Borrowing Base Confirmation" has the meaning set forth in the Custodial
Agreement.
"Borrowing Base Deficiency" has the meaning set forth in Section 14.1(e).
"Borrower Collateral" has the meaning set forth in Section 9.1.
"Business Day" shall mean any day on which (a) commercial banks in New
York City are not authorized or required to be closed, and (b) in the case of a
Business Day which relates to a Eurodollar Advance, dealings are carried on in
the London interbank Eurodollar market.
"Change of Control" means, as of any date, fewer than two of the three
Founding Members shall be actively involved in the management of ACC. For the
purposes hereof, "Founding Members" shall mean each of Gary Burdick, Rellen
Stewart and Rocco Fabiano.
"Closing Date" means March 27, 1997.
6
<PAGE> 14
"Collateral" means the Transferred Receivables in the Total Receivables
Pool together with the Other Conveyed Property. "Collateral Insurance" means a
vendor's single interest or other collateral protection insurance policy with
respect to Financed Vehicles, 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 Finance Vehicle.
"Collateral Account" means the account designated as the Collateral
Account in, and which is established and maintained pursuant to, Section
8.17(c).
"Collateral Receipt" has the meaning set forth in the Custodial Agreement.
"Collected Funds" means, with respect to any Determination Date, the
amount of funds in the Collection Account representing collections on the Total
Receivables Pool during the related Collection Period, including all Liquidation
Proceeds collected during the related Collection Period (but excluding any
Purchase Amounts).
"Collection Account" means the account designated as the Collection
Account in, and which is established and maintained pursuant to, Section
8.17(a).
"Collection Period" means, 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) or in the case of the initial
Distribution Date and Determination Date, the period commencing at the opening
of business on the Closing Date and ending at the end of the calendar month
following the calendar month in which the Closing Date occurs. 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" means all manually prepared or computer generated
records relating to collection efforts or payment histories with respect to the
Transferred Receivables.
"Commercial Paper Rate" for Advances means, to the extent Alpine funds
such Advances by issuing commercial paper, the sum of (i) the weighted average
of the rates at which commercial paper notes of Alpine issued to fund such
Advances may be sold by any placement agent or commercial paper dealer selected
by the Agent on behalf of
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Alpine, as agreed in good faith between each such agent or dealer and the
Agent; provided if the rate (or rates) as agreed between any such agent or
dealer and the Agent for any Advance is a discount rate (or rates), then such
rate shall be the rate (or if more than one rate, the weighted average of the
rates) resulting from converting such discount rate (or rates) to an
interest-bearing equivalent rate per annum plus (ii) any and all commissions of
placement agents and commercial paper dealers in respect of commercial paper
issued to fund the making or maintenance of any Advance plus (iii) any and all
reasonable costs and expenses of any issuing and paying agent or other Person
responsible for the administration of Alpine's commercial paper program in
connection with the preparation, completion, issuance, delivery or payment of
commercial paper issued to fund the making or maintenance of any Advance.
"Computer Tape or Listing" means the computer tape or listing generated on
behalf of the Borrower which provides information relating to the Receivables in
the Total Receivables Pool and which was used by the Borrower and ACC in
selecting the Transferred Receivables conveyed to the Borrower under the
Purchase and Sale Agreement.
"Concentration Limit" means, as of any date, the greater of (i) 2.5% of
the Aggregate Outstanding Principal Balance of all Eligible Receivables on such
date and (ii) $300,000.
"Contingent Liability" means any agreement, undertaking or arrangement by
which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to, or otherwise to invest in, a
debtor, or otherwise to assure a creditor against loss) the indebtedness,
obligation or any other liability of any other Person (other than by
endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other Person.
The amount of any Person's obligation under any Contingent Liability shall
(subject to any limitation set forth therein) be deemed to be the outstanding
principal amount (or maximum outstanding principal amount, if larger) of the
debt, obligation or other liability guaranteed thereby.
"Controlling Party" means:
(a) prior to the Remarketing Date:
(i) so long as no Insurer Default or Secondary Rating Event
shall have occurred and be continuing, the Insurer;
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(ii) if an Insurer Default (other than an Insurer Default
described in clause (a) or clause (d) of the definition
thereof) or Secondary Rating Event shall have occurred
and be continuing, the Insurer and the Agent acting
unanimously; or
(iii) if an Insurer Default described in clause (a) or clause
(d) of the definition thereof shall have occurred and
shall have continued for five (5) Business Days after
its occurrence, the Agent; and
(b) after the Remarketing Date:
(i) so long as no Insurer Default shall have occurred and be
continuing, the Insurer; or
(ii) if an Insurer Default shall have occurred and be
continuing, the Agent.
"Coupon Rate" means, with respect to any Receivable, the rate of interest
borne by such Receivable.
"CP Allocation" has the meaning set forth in Section 3.3(a).
"Cram Down Loss" means, 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 such Receivable or otherwise modifying or
restructuring the scheduled payments to be made on such 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.
"CSFB" has the meaning set forth in the Preamble.
"Custodial Agreement" means the Custodial Agreement dated March 27, 1997
among the Custodian, the Insurer, the Agent, the Borrower and the Servicer,
including all amendments, modifications and supplements thereto.
"Custodial Fee Rate" means 0.065%.
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"Custodian" means Norwest Bank Minnesota, National Association and any
successors and assigns in its capacity as custodian under the Custodial
Agreement.
"Dealer" means a seller of new or used automobiles or light trucks that
originated one or more of the Receivables in the Total Receivables Pool and sold
the respective Receivable, directly or indirectly, to OFL-A or ACC.
"Dealer Agreement" means 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" means, with respect to a Transferred Receivable, the
executed assignment executed by a Dealer conveying such Receivable to OFL-A.
"Dealer Underwriting Guides" means, collectively, (i) the underwriting
manuals used by ACC in the purchase of Receivables and (ii) the Consumer
Underwriting Guide used by ACC d/b/a Accent Financial Services, in each case as
amended from time to time.
"Default Rate" has the meaning set forth in Section 3.l(c).
"Defaulted Receivable" means, with respect to any Distribution Date, a
Receivable with respect to which: (i) ninety percent or more of a Scheduled
Payment is 60 or more days delinquent, (ii) the Servicer has repossessed the
related Financed Vehicle (and any applicable redemption period has expired),
(iii) such Receivable is in default and the Servicer has determined in good
faith that payments thereunder are not likely to be resumed or (iv) the Obligor
has been identified on the records of the Servicer as being the subject of a
current bankruptcy proceeding.
"Deficiency Amount" means, as of any date, an amount equal to the product
of (x) the Deficiency Percentage, (y) the Aggregate Outstanding Principal
Balance of Eligible Receivables as of such date and (z) 1.5.
"Deficiency Percentage" means, as of any date, the positive excess, if
any, of (i) the sum of (A) 10% plus (B) the Adjusted Total Expense Percentage
plus (C) the greater of (x) the Adjusted Term Index Rate and (y) the Adjusted
Yield Rate over (ii) the weighted average APR for all Receivables in the Total
Receivables Pool.
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"Delinquency Ratio" means, as of any date, the ratio (expressed as a
percentage) computed by dividing:
(a) the sum of (i) the Aggregate Outstanding Principal Balance of
Receivables in the Total Receivables Pool which became
Defaulted Receivables during the Collection Period preceding
such date plus (ii) the Aggregate Outstanding Principal
Balance of Receivables in the Total Receivables Pool which
were Delinquent Receivables on the last day of the immediately
preceding Collection Period
by
(b) the sum of the Aggregate Outstanding Principal Balance of all
Transferred Receivables in the Total Receivables Pool on the
last day of the immediately preceding Collection Period plus,
without duplication, if a Take-Out Securitization has occurred
during such preceding Collection Period, the Aggregate
Outstanding Principal Balance of all Transferred Receivables
which were included in such Take-Out Securitization.
"Delinquent Receivable" means a Receivable (other than a Defaulted
Receivable) with respect to which ninety percent or more of a Scheduled Payment
is 30 or more days past due.
"Deposit Date" means, with respect to any Collection Period, the Business
Day immediately preceding the related Determination Date.
"Determination Date" means, with respect to a Collection Period, the 5th
Business Day prior to the related Distribution Date.
"Distribution Date" means the 20th day of each calendar month, or if such
20th day is not a Business Day, the next succeeding Business Day, commencing May
20, 1997.
"Dollar(s)" and the sign "$" mean lawful money of the United States of
America.
"Eligible Account" means (i) a segregated trust account or (ii) a
segregated direct deposit account, in each case, 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
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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 Controlling Party. In either case, such depository institution
or trust company shall have been approved by the Controlling Party, acting in
its discretion, by written notice to the Custodian.
"Eligible Assignee" has the meaning set forth in Section 16.1.
"Eligible Receivable" means a Transferred Receivable:
(a) that (i) was originated directly by ACC d/b/a Accent Financial
Services with the consumer or 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 (in its individual capacity and in its capacity
as successor to American Credit Corporation), (ii) 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 (iii) 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;
(b) that was originated by a Dealer 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;
(c) with respect to which 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
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Act, the Federal Reserve Board's Regulations "B" and "Z", the Soldiers'
and Sailors' Civil Relief Act of 1940, the Minnesota Motor Financed
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 in the Total Receivables Pool, 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 in the Total Receivables Pool and the sale of the Financed
Vehicle evidenced by each Receivable in the Total Receivables Pool 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;
(d) that was originated in the United States of America and, at the
time of origination materially conformed to all requirements of the Dealer
Underwriting Guides and ACC's Funding Department Guidelines applicable to
such Receivable;
(e) which 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 of the Soldiers' and
Sailors' Civil Relief Act of 1940, as amended; 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;
(f) which is not due from the United States of America or any State
or from any agency, department, subdivision or instrumentality thereof;
(g) which, as of the relevant Purchase Date, (i) had an original
maturity of at least 18 months but not more than 72 months, (ii) had an
original Amount Financed of at least $3,000 and not more than $27,000,
(iii) had an Annual Percentage Rate of at least 14.50% and not more than
27%, (iv) was not more than 30 days past due, (v) no funds have been
advanced by the Borrower, the Servicer, OFL-A, any Dealer, or anyone
acting on behalf of any of them in order to cause
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such Receivable to qualify under subclause (iv) of this clause (g), and
(vi) had no provision thereof waived, altered or modified in any respect
since its origination;
(h) with respect to which the information pertaining to such
Receivable set forth in each Schedule of Receivables is true and correct
in all material respects;
(i) with respect to which, by the related Purchase Date and on each
relevant date thereafter, ACC will have caused the portions of ACC's
servicing records relating to such Receivable to be clearly and
unambiguously marked to show that such Receivable constitutes part of the
Collateral and is subject to a first priority security interest in
accordance with the terms of this Agreement;
(j) with respect to which the Computer Tape or Listing to be made
available by ACC to the Agent from time to time was complete and accurate
as of the related Purchase Date and includes a description of the same
Receivables that are described in the related Schedule of Receivables;
(k) which constitutes chattel paper within the meaning of the UCC;
(l) of which there is only one original executed copy;
(m) with respect to which there exists a Receivable File and such
Receivable File contains, without limitation, (a) a fully executed
original of such Receivable, endorsed, "Pay to the order of Norwest Bank
Minnesota, National Association, as custodian" 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 application
therefor together with an assignment of the Lien Certificate executed by
ACC to the Borrower and (d) an original credit application signed by the
Obligor; and (x) each of the documents relating thereto which is required
to be signed by the Obligor has been signed by the Obligor in the
appropriate spaces and (y) all blanks on any form relating thereto
required by ACC to be completed have been properly filled in and each form
has otherwise been correctly prepared; and, notwithstanding the above,
with respect to which, a copy of the complete Receivable File for such
Receivable, which fulfills the documentation requirements of the Dealer
Underwriting Guides as in effect at the time of purchase is in the
possession of the Custodian;
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(n) which has not been satisfied, subordinated or rescinded, and the
Financed Vehicle securing such Receivable has not been released from the
lien of such Receivable in whole or in part;
(o) which was not 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 and
with respect to which ACC has not entered into any agreement with any
account debtor that prohibits, restricts or conditions the assignment of
any portion of such Receivable;
(p) which has not been sold, transferred, assigned or pledged by the
Borrower to any Person. No Dealer has a participation in, or other right
to receive, proceeds of any Receivable in the Total Receivables Pool and
with respect to which the Borrower has not 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 Policy or the related Dealer
Agreement or Dealer Assignment or to payments due under such Receivable;
(q) which creates or shall create a valid, binding and enforceable
first priority security interest in favor of OFL-A or ACC, ACC d/b/a
Accent Financial Services in the Financed Vehicle;
(r) which is secured by an enforceable and perfected first priority
security interest in the Financed Vehicle in favor of OFL-A or ACC 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); and, with respect
to which there are no Liens or claims for taxes, work, labor or materials
affecting the related Financed Vehicle which are or may be Liens prior or
equal to the lien of such Receivable;
(s) as to which 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
Custodian, on behalf of the Secured Parties, a first priority perfected
lien on, or ownership interest in, the Transferred Receivables and the
proceeds thereof and the other Collateral have been made, taken or
performed;
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(t) as to which neither ACC nor the Borrower has done anything to
convey any right to any Person that would result in such Person having a
right to payments due under such Receivable or otherwise to impair the
rights of the Agent, the Custodian or the Investors in such Receivable or
the proceeds thereof;
(u) which is not assumable by another Person in a manner which would
release the Obligor thereof from such Obligor's obligations to the
Borrower with respect to such Receivable;
(v) which is not subject to any right of rescission, setoff,
counterclaim or defense and no such right has been asserted or threatened
with respect to any Transferred Receivable;
(w) as to which there has been no default, breach, violation or
event permitting acceleration under the terms of such 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 such Receivable, and there has
been no waiver of any of the foregoing, and with respect to which the
related Financed Vehicle had not been repossessed;
(x) at the time of the origination of which, 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 and (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 and with respect to which the Obligor
is required to maintain physical loss and damage insurance, naming OFL-A
and its successors and assigns as additional insured parties, and such
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;
(y) with respect to which the following is true:
The Lien Certificate for the related 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, ACC d/b/a Accent
Financial Services (both in
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its individual capacity and in its capacity as the successor of American
Credit Corporation) named as the original secured party under such
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, ACC d/b/a Accent
Financial Services has received written evidence from the related Dealer
or the Obligor that such Lien Certificate showing OFL-A, American Credit
Corporation (in its capacity as the predecessor of ACC) or ACC, ACC d/b/a
Accent Financial Services (both in its individual capacity and in its
capacity as the successor of 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, ACC d/b/a Accent Financial
Services (both in its individual capacity and in its capacity as the
successor of American Credit Corporation) named as the original secured
party under the related Receivable;
(z) as to which no selection procedures adverse to the Investors or
to the Insurer have been utilized in selecting such Receivable from all
other similar Receivables originated by ACC;
(aa) that, as of the last day of the immediately preceding
Collection Period, is not a Defaulted Receivable; and
(bb) the Principal Balance of which, as of the first day of the
current Collection Period, if such Receivable is more than 30 but fewer
than 60 days past due, does not, when added to the Principal Balances of
all other Transferred Receivables that are more than 30 but fewer than 60
days past due on such day, exceed the Concentration Limit.
For purposes of this definition, the eligibility of Receivables will be
determined from time to time, such that a Receivable that was an Eligible
Receivable at one time but that subsequently fails to meet all applicable
eligibility requirements will no longer be an Eligible Receivable (unless and
until it again meets all applicable eligibility requirements).
"Eligible Servicer" means 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
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and has the capacity to service the Transferred 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 Transferred 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.
"ERISA" means the U.S. Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurodollar Advance" means any Advance (or portion thereof) that bears
Yield at the Eurodollar Rate.
"Eurodollar Rate" means, for any Fixed Period, a rate per annum equal to
the rate per annum at which deposits in U.S. dollars are offered by the
principal office of CSFB in London, England to prime banks in the London
interbank market at 11:00 A.M. (London time) two Business Days before the first
day of such Fixed Period in an amount substantially equal to the principal
amount of the Advance associated with such Fixed Period on such first day and
for a period equal to such Fixed Period.
"Eurodollar Rate Reserve Percentage" of any Lender for any Fixed Period in
respect of which Yield is computed by reference to the Eurodollar Rate means the
reserve percentage applicable two Business Days before the first day of such
Fixed Period under regulations issued from time to time by the Board of
Governors of the Federal Reserve System (or any successor) (or if more than one
such percentage shall be applicable, the daily average of such percentages for
those days in such Fixed Period during which any such percentage shall be so
applicable) for determining the maximum reserve requirement (including, without
limitation, any emergency, supplemental or other marginal reserve requirement)
for such Lender with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities (or with respect to any other category of liabilities
that includes deposits by reference to which the yield rate on Eurocurrency
Liabilities is determined) having a term equal to such Fixed Period.
"Event of Bankruptcy" shall be deemed to have occurred with respect to a
Person if either:
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(a) a case or other proceeding shall be commenced, without the
application or consent of such Person, in any court, seeking the
liquidation, reorganization, debt arrangement, dissolution, winding up, or
composition or readjustment of debts of such Person, the appointment of a
trustee, receiver, custodian, liquidator, assignee, sequestrator or the
like for such Person or all or substantially all of its assets, or any
similar action with respect to such Person under any law relating to
bankruptcy, insolvency, reorganization, winding up or composition or
adjustment of debts, and such case or proceeding shall continue
undismissed, or unstayed and in effect, for a period of 60 consecutive
days; or an order for relief in respect of such Person shall be entered in
an involuntary case under the federal bankruptcy laws or other similar
laws now or hereafter in effect; or
(b) such Person shall commence a voluntary case or other proceeding
under any applicable bankruptcy, insolvency, reorganization, debt
arrangement, dissolution or other similar law now or hereafter in effect,
or shall consent to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator (or other similar
official) for such Person or for any substantial part of its property, or
shall make any general assignment for the benefit of creditors, or shall
fail to, or admit in writing its inability to, pay its debts generally as
they become due, or, if a corporation or similar entity, its board of
directors shall vote to implement any of the foregoing.
"Event of Default" means, from and after a Remarketing Date, any of
the events described in Section 14.1(a) and, so long as no Insurer Default
shall have occurred and be continuing, Sections 13.1(i), 14.1(b) and (d).
"Facility" has the meaning set forth in Section 2.1.
"Facility Agent" means, with respect to payments under the Fee Letter,
CSFB, as agent for the Lenders and the Placement Agent.
"Facility Limit" means $100,000,000, ,as such amount may be reduced
pursuant to Section 2.7. References to the unused portion of the Facility Limit
shall mean, at any time, the Facility Limit, as then reduced pursuant to Section
2.7 minus the sum of the then outstanding principal amount of Advances under
this Agreement.
"Facility Termination Date" means the earliest to occur of (i) the Stated
Maturity Date, (ii) the date of any termination of the Facility, in whole, by
the Borrower pursuant
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to Section 2.7, and (iii) the effective date on which the Facility is terminated
pursuant to Section 14.2.
"Facility Termination Event" means any of the events described in Section
14.1.
"Federal Funds Rate" means, for any period, a fluctuating rate per annum
equal for each day during such period to the weighted average of the rates on
overnight federal funds transactions with members of the Federal Reserve System
arranged by federal funds brokers, as published for such day (or, if such day is
not a Business Day, for the next preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such transactions
received by the Agent from three federal funds brokers of recognized standing
selected by it.
"Fee Letter" has the meaning set forth in Section 3.4.
"Fees" means all fees and other amounts payable by the Borrower to the
Facility Agent pursuant to the Fee Letter.
"Financed Vehicle" means any automobile, light duty truck, van, minivan or
sport utility vehicle, together with all accessories, additions and parts
constituting a part thereof and all accessions thereto.
"Fixed Period" means with respect to any Advance (or portion thereof):
(a) the period commencing on the date of the initial funding of such
Advance (or such portion) and ending such number of days (not to exceed 69
days) thereafter as the Agent shall select, after consultation with the
Borrower; and
(b) thereafter, each period commencing on the last day of the
immediately preceding Fixed Period for such Advance (or such portion) and
ending such number of days (not to exceed 69 days) thereafter as the Agent
shall then select, after consultation with the Borrower;
provided, however, that:
(i) any Fixed Period in respect of which Yield is computed by
reference to the Bank Rate shall be a period of from one to and
including 29 days (if reasonably available to the Agent), or a
period of one, two or three
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months (or such other period up to 100 days (if reasonably available
to the Agent)), as the Borrower may select, as herein provided;
(ii) any such Fixed Period (other than a Fixed Period
consisting of one day) that would otherwise end on a day that is not
a Business Day shall be extended to the next succeeding Business Day
(unless the related Advance shall be accruing Yield at a rate
determined by reference to the Eurodollar Rate, in which case if
such succeeding Business Day is in a different calendar month, such
Fixed Period shall instead be shortened to the next preceding
Business Day);
(iii) in the case of Fixed Periods of one day, (A) the initial
Fixed Period shall be the day of the initial funding of such
Advance, and (B) any subsequently occurring Fixed Period that is one
day shall, if the immediately preceding Fixed Period is more than
one day, be the last day of such immediately preceding Fixed Period,
and if the immediately preceding Fixed Period is one day, shall be
the next day following such immediately preceding Fixed Period; and
(iv) if any Fixed Period for any Advance that commences before
the Facility Termination Date would otherwise end on a date
occurring after the Facility Termination Date, such Fixed Period
shall end on the Facility Termination Date and the duration of each
such Fixed Period that commences on or after the Facility
Termination Date, if any, shall be of such duration as shall be
selected by the Agent.
"GAAP" means generally accepted United States accounting principles.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments;
(b) all obligations, contingent or otherwise, relative to the face
amount of all letters of credit, whether or not drawn, and banker's
acceptances issued for the account of such Person;
(c) all obligations of such Person as lessee under leases that have
been or should be, in accordance with GAAP, recorded as capitalized lease
liabilities;
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(d) all other items that, in accordance with GAAP, would be included
as liabilities on the liability side of the balance sheet of such Person
as of the date at which Indebtedness is to be determined;
(e) whether or not so included as liabilities in accordance with
GAAP, all obligations of such Person to pay the deferred purchase price of
property or services, and indebtedness (excluding prepaid interest
thereon) secured by a lien on property owned or being purchased by such
Person (including indebtedness arising under conditional sales or other
title retention agreements), whether or not such indebtedness shall have
been assumed by such Person or is limited in recourse; and
(f) all Contingent Liabilities of such Person in respect of any of
the foregoing.
"Indemnified Amounts" has the meaning set forth in Section 17.1.
"Indemnified Party" has the meaning set forth in Section 17.1.
"Indemnity Agreement" means the Insurance and Indemnity Agreement dated
March 27, 1997 among the Insurer, the Borrower and the Servicer, including all
amendments, modifications and supplements thereto.
"Independent Accountants" has the meaning set forth in Section 8.11(a).
"Index Rate" means, as of any date, the yield rate on United States
treasury securities trading closest to par on such date and maturing in 21
months, or such period of time corresponding to the average life as determined
by the Placement Agent from time to time by written notification to the Insurer,
the Custodian and the Agent representing the expected average life of the
outstanding Notes at such time assuming the Facility Termination Date had
occurred on such date as reported in "Money Rates" section of The Wall Street
Journal on such date, provided, that for purposes of determining the Index Rate
to be utilized in setting the Maximum Interest Rate, the Index Rate shall be set
by the Agent and the Insurer collectively based on the most liquid off the run
issue at such time and on such date to be determined by the Agent and Insurer
collectively based on the corresponding average life of the Notes; provided that
if the Agent and the Insurer cannot agree to such Index Rate on such date and
time, then the Agent, on or prior to the end of the next succeeding Business Day
after the date such parties fail to agree, shall select such Index Rate by
referring to the GovPX page of the financial market reporting services run
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by Bloomberg, L.P. and selecting the most liquid off the run issue with a
corresponding expected average life of the Notes as determined by the Placement
Agent.
"Insurance Agreement Event of Default" means an "Event of Default" as
defined in the Indemnity Agreement.
"Insurance Policies" means, with respect to a Receivable, any insurance
policy (including the insurance policies described in subsection (x) of the
definition of "Eligible Receivable") 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" means Financial Security Assurance Inc. as guarantor under the
Policy.
"Insurer Default" means the occurrence and continuance of any of the
following events:
(a) the Insurer shall have failed to make a payment required under
the Policy in accordance with its terms;
(b) the Insurer shall have (i) filed a petition or commenced any
case or proceeding under any provision or chapter of the 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 Bankruptcy Code or any other
similar federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation or reorganization which is final and
nonappealable;
(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 for the 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 Insurer (or
the taking of possession of all or any material portion of the property of
the Insurer); or
(d) the Insurer is prohibited pursuant to a final non-appealable
order or decree under applicable law from performing its obligations under
the Policy.
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"Insurer Downgrade Date" shall be deemed to have occurred, if at all, on
the 181st day after the Insurer's claims-paying ability is rated AA or Aa2 or
less by either of the Rating Agencies, unless during the period prior to such
181st day, the Insurer is replaced as the Insurer hereunder or its claims-paying
ability is rated higher than AA or Aa2 by either of the Rating Agencies.
"Interim Distribution Date" means any Business Day, other than a
Distribution Date on which the Custodian shall pay principal, interest and
certain other amounts in accordance with this Agreement and the Custodial
Agreement.
"Investor" means (i) Alpine, (ii) all other owners by assignment or
participation of an Advance and, to the extent of the undivided interests so
purchased, shall include any participants, (iii) all Lenders, (iv) all holders
of a Note and (v) to the extent of any payment under the Policy, the Insurer.
"Lenders" has the meaning set forth in the Preamble.
"LIBOR" means, as of any date, a rate per annum equal to the rate reported
in the "Money Rates" section of The Wall Street Journal on such date as the
London interbank offered rate for one month periods.
"Lien" means 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" means, 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" means, 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.
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"Liquidation Proceeds" means, with respect to a Liquidated Receivable, all
amounts realized with respect to such Receivable (other than 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.
"Liquidity Account" means the account designated as the Liquidity Account
in, and which is established and maintained pursuant to Section 8.17(b).
"Liquidity Amount" means, as of any date, an amount equal to the product
of (A)(x) the aggregate principal amount of all Advances as of such date, giving
effect to Advances to be made on such date, divided by (y)the Advance Rate and
(B) the greater of (i) 1% and (ii) (x) the sum of (1) the Adjusted Yield Rate
plus (2) the Adjusted Total Expense Percentage divided by (y) 12.
"Liquidity Amount Shortfall" means, as of any date, an amount (if
positive) equal to the Liquidity Amount for such date minus the amount deposit
in the Liquidity Account on such date.
"Lockbox Agreement" means the Lockbox Agreement dated as of March 27,
1997, by and among the Lockbox Bank, and American Credit Corporation, as
amended, modified or supplemented from time to time, or any other agreement, in
form and substance acceptable to the Agent and, so long as an Insurer Default
shall not have occurred and be continuing, the Insurer.
"Lockbox Bank" means Wells Fargo or any other depository institution named
by the Servicer and acceptable to the Agent and, so long as an Insurer Default
shall not have occurred and be continuing, the Insurer.
"Loss Ratio" means, as of any date, the average of the loss ratios
(expressed as a percentage) for the six Collection Periods immediately preceding
such date, as computed based on the methodology set forth in ACC's then most
recent report on Form 10-Q or Form 10-K, as applicable, for calculation of net
losses on Receivables originated and serviced by ACC.
"Maximum Interest Rate" means, as of any date after the Facility
Termination Date, the sum of (i) the greater of (x) the Term Index Rate and (y)
the weighted average APR for all Receivables in the Total Receivables Pool minus
the Adjusted Total Expense Percentage minus 10% plus (ii) 1%, to the extent that
during the period ending 90 days
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after the Facility Termination Date both (x) a Remarketing Date has occurred and
(y) a Primary Rating Event has occurred and is continuing.
"Monthly Records" means all records and data maintained by the Servicer
with respect to the Transferred Receivables, including the following with
respect to each Transferred 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" means Moody's Investors Service, Inc.
"Note" means a promissory grid note, in the form of Exhibit B, made
payable to the order of the Agent, on behalf of the Investors.
"Note Register" has the meaning set forth in Section 16.5(a).
"Note Registrar" has the meaning set forth in Section 16.5(a).
"Obligations" means all obligations (monetary or otherwise) of the
Borrower to the Investors, the Insurer or Agent arising under or in connection
with this Agreement, the Note(s) and each other Transaction Document.
"Obligor" means a Person obligated to make payments with respect to a
Transferred Receivable.
"Officer's Certificate" means 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" means OFL-A Receivables Corp., a Delaware corporation and
wholly-owned subsidiary of ACC.
"Opinion of Counsel" means a written opinion of independent counsel
reasonably acceptable to the Insurer, which opinion, if such opinion or a copy
thereof is required by the provisions of this Agreement to be delivered to the
Insurer, is acceptable in form and substance to the Insurer.
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"Other Conveyed Property" has the meaning set forth in the Purchase and
Sale Agreement.
"Permitted Investment" means, at any time:
(a) any evidence of Indebtedness, maturing not later than the
Business Day immediately preceding the next Distribution Date, issued or
guaranteed by the United States Government or any agency thereof;
(b) commercial paper, maturing not later than the Business Day
immediately preceding the next Distribution Date, in each case issued by a
corporation (other than the Borrower or any Affiliate of the Borrower)
organized under the laws of any state of the United States or of the
District of Columbia and rated at least A-1 by Standard & Poor's or P-1 by
Moody's;
(c) any certificate of deposit (or time deposits represented by such
certificates of deposit) or bankers acceptance, maturing not later than
the Business Day immediately preceding the next Distribution Date, or
overnight federal funds transactions that are issued or sold by a
commercial banking institution that is a member of the Federal Reserve
System and has a combined capital and surplus and undivided profits of not
less than $500,000,000; or
(d) any repurchase agreement entered into with CSFB (or other
commercial banking institution of the stature referred to in clause
(c)(i)) that
(i) is secured by a fully perfected security interest in any
obligation of the type described in any of clauses (a) through (c);
and
(ii) has a market value at the time such repurchase agreement
is entered into of not less than 100% of the repurchase obligation
of CSFB (or other commercial banking institution) thereunder.
(e) with the prior written consent of the Controlling Party, money
market mutual funds registered under the Investment Company Act of 1940,
as amended, having a rating, at the time of such investment, from each of
the Rating Agencies in the highest investment category granted thereby;
and
(f) any other investment as may be acceptable to the Controlling
Party, as evidenced by a writing to that effect, as may from time to time
be confirmed in writing to the Custodian by the Controlling Party.
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Any Permitted Investments may be purchased by or through the Custodian or
any of its Affiliates.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture, government or any agency or political subdivision thereof or any other
entity.
"Placement Agent" means Credit Suisse First Boston Corp.
"Policy" means that certain financial guaranty policy no. 50580-N issued
by the Insurer for the benefit of the Investors.
"Preference Claim" has the meaning set forth in Section 18.14(b).
"Pre-funded Amount" has the meaning set forth in Section 3.1.
"Premium Rate" means 0.475% per annum.
"Primary Rating Event" means that the claims-paying ability of the Insurer
is rated less than AAA or Aaa or is on credit watch with negative implications
by either of the Rating Agencies.
"Principal Balance" means, with respect to any Receivable, as of any date,
the Amount Financed minus (i) that portion of all amounts received by the
Servicer or the Lockbox Bank with respect to such Receivable on or prior to such
date and allocable to principal in accordance with the terms of such Receivable,
and (ii) any Cram Down Loss in respect of such Receivable.
"Program" has the meaning set forth in Section 8.11(a).
"Purchase Amount" means, with respect to a Receivable, the Principal
Balance and all accrued and unpaid interest on such Receivable as of the date of
purchase by the Servicer pursuant to Section 8.7.
"Purchase and Sale Agreement" means the Purchase and Sale Agreement, dated
as of March 27, 1997, by and among the Borrower, OFL-A and ACC.
"Purchase Date" has the meaning set forth in the Purchase and Sale
Agreement.
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"Rating Agencies" means Standard & Poor's and Moody's.
"Receipt Certification" has the meaning set forth in the Custodial
Agreement.
"Receivable" means any right to payment from a Person, and includes
without limitation the right to payment of any interest or finance charges and
other obligations of such Person with respect thereto.
"Receivable File" means, with respect to each Receivable in the Total
Receivables Pool:
(a) the fully executed original of such Receivable (together with
any agreements modifying such Receivable, including, without limitation,
any extension agreements);
(b) documents evidencing or related to any Insurance Policy;
(c) 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
(d) the Lien Certificate, or, if not yet received, a copy of the
application therefor, showing OFL-A, American Credit Corporation, ACC
d/b/a Accent Financial Services 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.
"Record Date" means with respect to any Determination Date or Distribution
Date, the last day of the immediately preceding calendar month.
"Registrar of Titles" means, 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.
"Remarketing Date" means the date on which the Note is transferred to any
Person other than a Lender, the Placement Agent or any entity which enters into
a commitment to purchase interests in Advances or the Notes held by the Lenders.
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"Required Holdback" means, as of any date, the sum of (i) the greater of
(a) the product of (1) 1 minus the Advance Rate and (2) the Aggregate
Outstanding Principal Balance of Eligible Receivables on such date and (b)
$300,000 and (ii) the Deficiency Amount for such date.
"Responsible Officer" means, with respect to any Person that is not an
individual, the President, any Vice-President or Assistant Vice-President,
Corporate Trust Officer 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" means the Schedule of Receivables in the form
attached hereto as Schedule A as supplemented from time to time in connection
with the transfer of Receivables by OFL-A to the Borrower.
"Scheduled Payment" means, with respect to any Receivable, the periodic
payment set forth in such Receivable (excluding, however, any portion of such
payment that represents late payment charges and payments in respect of taxes,
licenses or similar items).
"Secondary Rating Event" means that the claims-paying ability of the
Insurer is rated less than A or A2 by either of the Rating Agencies.
"Secured Obligations" has the meaning set forth in the Custodial
Agreement.
"Secured Parties" has the meaning set forth in the Custodial Agreement.
"Servicer" means ACC or, as applicable, any successor servicer appointed
pursuant to Section 13.3.
"Servicer Delinquency Ratio" means, as of any date, the ratio, expressed
as a percentage, computed by dividing (i) the Aggregate Outstanding Principal
Balance on such date of all Receivables serviced by the Servicer (A) that are
Delinquent Receivables
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and (B) as to which ninety percent or more of a Scheduled Payment is more than
30 days past due (including all Receivables for which the related Financed
Vehicle has been repossessed and the proceeds thereof have not yet been realized
by the Servicer) by (ii) the average Aggregate Outstanding Principal Balance of
all Receivables originated and serviced by the Servicer for the last day of the
preceding Collection Period.
"Servicer Extension Notice" has the meaning set forth in Section 8.14.
"Servicer Termination Event" has the meaning set forth in Section 13.1.
"Servicer's Certificate" means, with respect to each Determination Date, a
certificate, completed by and executed on behalf of the Servicer, in accordance
with Section 8.9, substantially in the form attached hereto as Exhibit E.
"Servicing Fee" means, as of any Distribution Date, an amount equal to the
product of (i) 1/12 of the Servicing Fee Rate and (ii) the Aggregate Outstanding
Principal Balance of Receivables in the Total Receivables Pool as of the first
day of the Collection Period immediately preceding such Distribution Date.
"Servicing Fee Rate" means 2.75%.
"Servicing Procedures Manual" means the servicing manual used by ACC in
the servicing of Receivables, as amended from time to time.
"Settlement Date" means, with respect to any Advance, (x) each
Distribution Date, (y) prior to a Remarketing Event, at the option of the Agent
or the Borrower, the last day of the current Fixed Period of such Advance or (z)
the date on which the Borrower shall prepay Advances pursuant to Section 4.1
hereof.
"Simple Interest Method" means 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" means 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.
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"Standard & Poor's" means Standard & Poor's, a division of The McGraw-Hill
Companies, Inc.
"Stated Maturity Date" means March 26, 1998, as extended as specified in
and upon notice to the Borrower and Insurer by the Lenders; provided that on and
after the Facility Termination Date, the "Stated Maturity Date" shall be the
Distribution Date occurring during the 75th month following the Facility
Termination Date, or such other date as determined by the Placement Agent on the
Remarketing Date.
"Subsidiary" means, with respect to any Person, a corporation of which
such Person and/or its other Subsidiaries own, directly or indirectly, such
number of outstanding shares as have more than 50% of the ordinary voting power
for the election of directors.
"Take-Out Securitization" means (i) a financing transaction of any sort
undertaken by the Borrower or any Affiliate of the Borrower secured, directly or
indirectly, by any Transferred Receivables or (ii) any other asset
securitization, secured loans or similar transactions involving any Transferred
Receivables or any beneficial interest therein.
"Tangible Net Worth" means with respect to the Borrower, the net worth of
the Borrower calculated in accordance with GAAP after subtracting therefrom the
aggregate amount of the Borrower's intangible assets, including, without
limitation, goodwill, franchises, licenses, patents, trademarks, tradenames,
copyrights and service marks.
"Term Index Rate" means, as of any date, the sum of (x) the Index Rate
plus (y) the Term Index Spread plus (z) the Base Fee Percentage.
"Term Index Spread" means 2% or such lower percentage as may be set for a
specified period or periods by the Lenders by written notice to the Borrower,
the Insurer and the Custodian.
"Total Expense Percentage" means, as of any date, the sum of (x) the
Servicing Fee Rate plus (y) the fee to be paid to the Custodian pursuant to the
Custodial Agreement plus (z) the Premium Rate.
"Total Receivables Pool" means all Receivables owned by the Borrower.
"Transaction Documents" means this Agreement, the Note(s), the Fee Letter,
the Custodial Agreement, the Purchase and Sale Agreement, the Indemnity
Agreement, the
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Policy and the other documents to be executed and delivered in connection with
this Agreement.
"Transferred Receivable" has the meaning set forth in the Purchase and
Sale Agreement.
"Transfer Request" has the meaning set forth in Section 9.5(a).
"UCC" means the Uniform Commercial Code as from time to time in effect in
the applicable jurisdiction or jurisdictions.
"Unmatured Event of Default" means any event that, if it continues
uncured, will, with lapse of time or notice or lapse of time and notice,
constitute an Event of Default.
"Warehouse Facility" means, as of any date, any subsequent agreement or
agreements entered into from time to time after the date hereof, providing for
the financing of the Receivables, as such agreement or agreements may be
amended, supplemented or otherwise modified from time to time (i) in an amount
equal at least to the lesser of (x) 50% of the outstanding principal amount of
Receivables originated by ACC in the immediately preceding calendar quarter and
(y) $50,000,000, and (ii) with respect to which the Custodian acts as custodian
thereunder for the benefit of the Lenders.
"Warranty Receivable" means, with respect to any Collection Period, a
Receivable that the Servicer has become obligated to repurchase pursuant to
Section 8.7.
"Yield" means, with respect to any period, the sum of the following:
(i) without duplication of the amount set forth in the
immediately following clause (ii), the sum of the daily interest
accrued on the commercial paper outstanding on each day during such
period net of investment earnings on any Pre-funded Amount equal,
for any such day, to the product of (x) the outstanding principal
amount of commercial paper on such day, (y) the Commercial Paper
Rate and (z) 1/360, plus
(ii) if any commercial paper has been issued during such
period to fund the interest component on any other commercial paper
maturing on a date other than a Settlement Date, the sum of the
daily interest accrued on such additional commercial paper
outstanding on each day during such period equal, for any such day,
to the product of (x) the outstanding
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principal amount of such additional commercial paper on such day,
(y) the Commercial Paper Rate and (z) 1/360, plus
(iii) the sum of the daily interest accrued on Advances funded
or maintained other than through the issuance of commercial paper on
each day during such period equal, for any such day, to the product
of (x) the outstanding principal amount of such Advances on such
day, (y) the Bank Rate and (z) the applicable computation period
determined in accordance with Section 3.5 of this Agreement,
less the amount of Yield paid on all Interim Distribution Dates during such
period; and on any day on and after the Remarketing Date, the "Yield" for any
period shall equal the sum of the daily interest for each such day during such
period equal to the product of (x) the rate determined by the Placement Agent
and set forth in the applicable note purchase agreement (which rate shall not
exceed the Maximum Interest Rate) and (y) the outstanding principal of all
Advances on such day, and (z) 1/360.
SECTION 1.2 Other Definitional Provisions. (a) Unless otherwise specified
therein, all terms defined in this Agreement have the meanings as so defined
herein when used in the Note or any other Transaction Document, certificate,
report or other document made or delivered pursuant hereto.
(b) Each term defined in the singular form in Section 1.1 or
elsewhere in this Agreement shall mean the plural thereof when the plural
form of such term is used in this Agreement, the Note or any other
Transaction Document, certificate, report or other document made or
delivered pursuant hereto, and each term defined in the plural form in
Section 1.1 shall mean the singular thereof when the singular form of such
term is used herein or therein.
(c) The words "hereof," "herein," "hereunder" and similar terms when
used in this Agreement shall refer to this agreement as a whole and not to
any particular provision of this Agreement, and article, section,
subsection, schedule and exhibit references herein are references to
articles, sections, subsections, schedules and exhibits to this Agreement
unless otherwise specified.
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ARTICLE II
THE FACILITY, ADVANCE PROCEDURES AND NOTE
SECTION 2.1 Facility. On the terms and subject to the conditions set forth
in this Agreement, Alpine may, in its sole discretion, and, if Alpine elects not
to, the Banks shall, make Advances to the Borrower on a revolving basis from
time to time before the Facility Termination Date in such amounts as may be from
time to time requested by the Borrower pursuant to Section 2.2 (the "Facility");
provided, however, that the aggregate principal amount of all Advances from time
to time outstanding hereunder shall not exceed the lesser of (a) the Facility
Limit and (b) the Borrowing Base. Within the limits of the Facility, the
Borrower may borrow, prepay and reborrow under this Section 2.1. Under no
circumstances shall any Lender make any such Advance if after giving effect
thereto the aggregate outstanding principal balance of all Advances would exceed
the Facility Limit.
SECTION 2.2 Advance Procedures. The Borrower may request an Advance
hereunder by giving notice to the Agent, the Custodian and the Insurer of a
proposed Advance not later than 1:00 P.M., New York time, one Business Day prior
to the proposed date of such Advance. Each such notice (herein called an
"Advance Request") shall be in the form of Exhibit A and shall include the date
and amount of such proposed Advance, the desired duration of the Fixed Period
for such Advance and the supplement to the Schedule of Receivables setting forth
the information required therein with respect to the Receivables to be acquired
by the Borrower with the proceeds of the proposed Advance. Any Advance Request
given by the Borrower pursuant to this Section 2.2 shall be irrevocable and
binding on the Borrower.
SECTION 2.3 Funding. Subject to the satisfaction of the conditions
precedent set forth in Article VII with respect to such Advance and the
limitations set forth in Section 2.1, the Lenders shall make the proceeds of
such requested Advance available as follows: first, to the extent there is a
Liquidity Amount Shortfall on the proposed date of the Advance, an amount equal
to the Liquidity Amount Shortfall shall be deposited by the Lenders in the
Liquidity Account and, second, all amounts of the proposed Advance in excess of
any Liquidity Amount Shortfall shall be made available to the Custodian at
Account No. 13313510 at Norwest Bank Minnesota, National Association in same day
funds no later than 3:00 p.m., New York time, on the proposed date of the
Advance. Each Advance shall be on a Business Day and shall be in an amount of at
least $1,000,000 (or an integral multiple of $50,000 in excess thereof);
provided, however, that, subject to Section 2.1 and Section 7.2, on any
Settlement Date for any existing
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Advance, the Borrower may request the Lenders (a) to fund all or a part of such
existing Advance, and (b) to fund any increase in such Advance in such amount as
may be specified by the Borrower in the related Advance Request.
SECTION 2.4 Representation and Warranty. Each request for an Advance
pursuant to Section 2.2 shall automatically constitute a representation and
warranty by the Borrower to the Agent and the Lenders that, on the requested
date of such Advance, (a) the representations and warranties contained in
Article IX will be true and correct as of such requested date as though made on
such date, (b) no Event of Default or Unmatured Event of Default has occurred
and is continuing or will result from the making of such Advance, and (c) after
giving effect to such requested Advance, the aggregate principal balance of the
outstanding Advances hereunder will not exceed the Borrowing Base.
SECTION 2.5 [Intentionally left blank]
SECTION 2.6 [Intentionally left blank]
SECTION 2.7 Voluntary Termination of Facility; Reduction of Facility
Limit. The Borrower may, in its sole discretion for any reason upon at least
five Business Days' notice to the Agent, terminate the Facility in whole or
reduce in part the unused portion of the Facility Limit; provided, however, that
(a) each such partial reduction will be in a minimum amount of $5,000,000 or a
higher integral multiple of $1,000,000, (b) in the event of a partial reduction
and after giving effect to any such partial reduction and any prior partial
reduction, the remaining Facility Limit will not be less than $50,000,000, and
(c) in connection therewith the Borrower complies with Section 3.2(b) and
Section 4.l(b).
SECTION 2.8 Note. All Advances shall be evidenced by one or more Notes,
with appropriate insertions, payable to the order of the Agent, on behalf of the
Investors. The Borrower hereby irrevocably authorizes the Agent to make (or
cause to be made) appropriate notations on the grid attached to the Note(s) (or
on any continuation of such grid, or at the Agent's option, in its records),
which notations, if made, shall evidence, inter alia, the date of, the
outstanding principal of, and the yield rate and Fixed Period applicable to the
Advances evidenced thereby. Such notations shall be rebuttably presumptive
evidence of the subject matter thereof absent manifest error; provided, however,
that the failure to make any such notations shall not limit or otherwise affect
any Obligations of the Borrower.
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ARTICLE III
YIELD, FEES, ETC.
SECTION 3.1 Yield Rates. The Borrower hereby promises to pay Yield
on the unpaid principal amount of each Advance (or each portion thereof) for the
period commencing on the date of such Advance until such Advance is paid in full
and on the outstanding principal amount (the "Pre-funded Amount") of any
commercial paper issued, as determined by the Agent in consultation with the
Borrower, with the intention of disbursing the proceeds thereof as an Advance on
a date after the date of such issuance, as follows:
(a) at all times while the making or maintenance of such Advance (or
the applicable portion thereof) and the Pre-funded Amount is funded by
Alpine by the issuance of commercial paper at a rate per annum equal to
the Commercial Paper Rate;
(b) at all times while the making or maintenance of such Advance (or
the applicable portion thereof) (i) is funded by Alpine during each Fixed
Period for such Advance (or such portion) other than by the issuance of
commercial paper or (ii) is funded by the Lenders, at a rate per annum
equal to the Bank Rate; and
(c) notwithstanding the provisions of the preceding clauses (a) and
(b), in the event that an Event of Default has occurred and is continuing,
at a rate per annum (the "Default Rate") equal to the Alternate Base Rate
(but not less than the Yield in effect for such Advance as at the date of
such Event of Default), plus a margin of 2%.
After the date any principal amount of any Advance is due and payable
(whether on the Stated Maturity Date, upon acceleration or otherwise) or after
any other monetary Obligation of the Borrower arising under this Agreement shall
become due and payable, the Borrower shall pay (to the extent permitted by law,
if in respect of any unpaid amounts representing Yield,) Yield (after as well as
before judgment) on such amounts at a rate per annum equal to the Alternate Base
Rate plus a margin of 2%. No provision of this Agreement or the Note shall
require the payment or permit the collection of Yield in excess of the maximum
permitted by applicable law.
SECTION 3.2 Yield Payment Dates. Yield accrued on each Advance shall be
payable, without duplication:
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(a) on the Stated Maturity Date;
(b) on the date of any payment or prepayment, in whole or in part,
of principal outstanding on such Advance; and
(c) on each Distribution Date provided that, prior to the
Remarketing Date, Yield relating to such Advance may be payable, at the
option of the Agent or the Borrower, on the related Settlement Date.
SECTION 3.3 Yield Allocations; Selection of Fixed Periods, etc. (a) The
Agent shall, from time to time and in its sole discretion in good faith,
determine whether Yield in respect of the Advances then outstanding, or any
portion thereof, shall be calculated by reference to the Commercial Paper Rate
(such portion being herein called a "CP Allocation") or the Bank Rate (such
portion being herein called a "Bank Rate Allocation", and together with a CP
Allocation individually called an "Allocation", and collectively,
"Allocations"); provided, however, that the Agent may determine, at any time and
in its sole discretion in good faith, that the Commercial Paper Rate is
unavailable or otherwise not desirable, in which case the Advances will be
allocated to a Bank Rate Allocation (unless the Default Rate is in effect). The
Agent shall provide the Borrower with reasonably prompt notice of the
Allocations made by it pursuant to this Section 3.3(a).
(b) The Agent, in its sole discretion in good faith after
consultation with the Borrower, shall select the duration of the initial
and each subsequent Fixed Period relating to each Advance. In selecting
such Fixed Period, the Agent shall use reasonable efforts, taking into
consideration market conditions, to accommodate the Borrower's
preferences; provided, however, that the Agent shall have the ultimate
authority to make all such selections. Unless consented to or directed by
the Agent, the aggregate number of Fixed Periods for all Advances
outstanding at any one time hereunder shall not exceed 12, it being
understood that if necessary to match the funding requirement of Alpine,
any Advance may be divided into portions having different Fixed Periods.
SECTION 3.4 Fees. The Borrower agrees to pay to CSFB, as agent for the
Lenders, certain fees in the amounts and on the dates set forth in the letter
agreement among the Agent, the Borrower, ACC, the Placement Agent and the
Custodian as of the date hereof (as the same may be amended, supplemented or
otherwise modified, the "Fee Letter").
SECTION 3.5 Computation of Yield and Fees. All Yield and Fees shall be
computed on the basis of the actual number of days (including the first day but
excluding
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the last day) occurring during the period for which such Yield or fee is payable
over a year comprised of 360 days (or, in the case of Yield on an Advance
bearing Yield at the Alternate Base Rate, 365 days or, if appropriate, 366
days).
ARTICLE IV
REPAYMENTS AND PREPAYMENTS
SECTION 4.1 Repayments and Prepayments. The Borrower shall repay in full
the unpaid principal amount of each Advance on the Stated Maturity Date. Prior
thereto, the Borrower:
(a) may, from time to time on any Business Day, make a prepayment,
in whole or in part, of the outstanding principal amount of any Advance;
provided, however, that
(i) all such voluntary prepayments shall require at least one
but no more than five Business Days' prior written notice to the
Agent; and
(ii) all such voluntary partial prepayments shall be in a
minimum amount of $1,000,000 and an integral multiple of $500,000;
(b) shall, on each date when any reduction in the Facility Limit
shall become effective pursuant to Section 2.7, make a prepayment of the
Advances in an amount equal to the excess, if any, of the aggregate
outstanding principal amount of the Advances over the Facility Limit as so
reduced;
(c) shall, immediately upon any acceleration of the Stated Maturity
Date of any Advances pursuant to Section 14.2, repay all Advances, unless,
pursuant to Section 14.2(a), only a portion of all Advances is so
accelerated, in which event the Borrower shall repay the accelerated
portion of the Advances; and
(d) shall, on the date the Borrower receives any net proceeds from
any Take-Out Securitization (after deducting all costs and expenses of
such Take-Out Securitization), make a prepayment of the Advances in an
amount substantially equal to such net proceeds or, if less, the total
outstanding amount of Advances.
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Each such prepayment shall be subject to the payment of any amounts
required by Section 6.3 resulting from a prepayment or payment of an Advance
prior to the Settlement Date with respect thereto.
ARTICLE V
PAYMENTS
SECTION 5.1 Making of Payments. Subject to, and in accordance with, the
provisions of the Custodial Agreement, all payments of principal of, or Yield
on, the Advances and of all Fees and the amounts shall be made by the Borrower
no later than 2:00 p.m., New York time, on the day when due in lawful money of
the United States of America in same day funds to the Agent, at its special
account (account number 930539- 08) maintained at the office of CSFB at Eleven
Madison Avenue, New York, New York or such other account as the Agent shall
designate in writing to the Borrower, the Custodian and the Insurer (the
"Agent's Account"). Funds received by the Agent after 2:00 p.m. New York time,
on the date when due, will be deemed to have been received by the Agent on its
next following Business Day.
SECTION 5.2 Application of Certain Payments. Each payment of principal of
the Advances shall be applied to such Advances as the Borrower shall direct or,
in the absence of such notice or during the existence of an Event of Default or
after the Facility Termination Date, as the Agent shall determine prior to the
Remarketing Date, in its discretion and, after the Remarketing Date, as directed
by the holders of the Notes.
SECTION 5.3 Due Date Extension. If any payment of principal or Yield with
respect to any Advance falls due on a day which is not a Business Day, then such
due date shall be extended to the next following Business Day, and additional
Yield shall accrue and be payable for the period of such extension at the rate
applicable to such Advance.
ARTICLE VI
INCREASED COSTS, ETC.
SECTION 6.1 Increased Costs. (a) If due to the introduction of or any
change in or in the interpretation of any law or regulation occurring or issued
after the date hereof, the Agent, any Lender, any entity which enters into a
commitment to make Advances or
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purchase interests therein, or any of their respective Affiliates (each an
"Affected Person") determines that compliance with any law or regulation or any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law) affects or would affect the amount of
capital required or expected to be maintained by such Affected Person and such
Affected Person determines that the amount of such capital is increased by or
based upon the existence of any commitment to make Advances related to this
Agreement or to the funding thereof and other commitments of the same type,
then, upon demand by such Affected Person (with a copy to the Agent) (which
demand shall be accompanied by a statement setting forth the basis for the
calculations of the amount being claimed), the Borrower shall immediately pay to
the Agent, for the account of such Affected Person (as a third-party
beneficiary), from time to time as specified by such Affected Person, additional
amounts sufficient to compensate such Affected Person in the light of such
circumstances, to the extent that such Affected Person reasonably determines
such increase in capital to be allocable to the existence of any of such
commitments. Such written statement shall, in the absence of manifest error, be
rebuttably presumptive evidence of the subject matter thereof. Any Affected
Person claiming any additional amounts payable pursuant to this Section 6.1(a)
agrees to use reasonable efforts (consistent with legal and regulatory
restrictions) to designate a different office or branch of such Affected Person
if the making of such a designation would avoid the need for, or reduce the
amount of, any such additional amounts and would not, in the reasonable judgment
of such Affected Person, be otherwise disadvantageous to such Lender.
(b) If, due to either (i) the introduction of or any change (other
than any change by way of imposition or increase of reserve requirements
referred to in Section 6.2) in or in the interpretation of any law or
regulation or (ii) compliance with any guideline or request from any
central bank or other governmental authority (whether or not having the
force of law) issued or delivered after the date hereof, there shall be
any increase in the cost to a Lender of agreeing to make Advances in
respect of which Yield is computed by reference to the Eurodollar Rate,
then, upon demand by such Lender (with a copy to the Agent) (which demand
shall be accompanied by a statement setting forth the basis for the amount
being claimed), the Borrower shall immediately pay to the Agent, for the
account of such Lender (as a third-party beneficiary), from time to time
as specified by such Lender, additional amounts sufficient to compensate
such Lender for such increased costs. Such written statement shall, in the
absence of manifest error, be rebuttably presumptive evidence of the
subject matter thereof.
SECTION 6.2 Additional Yield on Advances Bearing a Eurodollar Rate. The
Borrower shall pay to any Lender, so long as such Lender shall be required under
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regulations of the Board of Governors of the Federal Reserve System to maintain
reserves with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities, additional Yield on the unpaid Advances of such Lender
during each Fixed Period in respect of which Yield is computed by reference to
the Eurodollar Rate, for such Fixed Period, at a rate per annum equal at all
times during such Fixed Period to the remainder obtained by subtracting (i) the
Eurodollar Rate for such Fixed Period from (ii) the rate obtained by dividing
such Eurodollar Rate referred to in clause (i) above by that percentage equal to
100% minus the Eurodollar Rate Reserve Percentage of such Lender for such Fixed
Period, payable on each date on which Yield is payable on such Advances. Such
additional Yield shall be determined by such Lender and notice thereof
(accompanied by a statement setting forth the basis for the amount being
claimed) given to the Borrower through the Agent within 30 days after any Yield
payment is made with respect to which such additional Yield is requested. Such
written statement shall, in the absence of manifest error, be rebuttably
presumptive evidence of the subject matter thereof.
SECTION 6.3 Funding Losses. The Borrower hereby agrees that upon demand by
any Affected Person (which demand shall be accompanied by a statement setting
forth the basis for the calculations of the amount being claimed) the Borrower
will indemnify such Affected Person against any net loss or expense which such
Affected Person may sustain or incur (including, without limitation, any net
loss or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Affected Person to fund or maintain any
Advance to the Borrower or any Pre- funded Amount), as reasonably determined by
such Affected Person, as a result of (a) any payment or prepayment (including
any mandatory prepayment) of any Advance on a date other than the Settlement
Date for such Advance, or (b) any failure of the Borrower to accept or request
the disbursement of any Pre-funded Amount to make any Advance on a date
specified therefor in a related Advance Request. Such written statement shall,
in the absence of manifest error, be rebuttably presumptive evidence of the
subject matter thereof.
ARTICLE III
CONDITIONS TO ADVANCES
The making of any Advance hereunder is subject to the following conditions
precedent:
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SECTION 7.1 Initial Advance. The making of the initial Advance is,
in addition to the conditions precedent specified in Section 7.2, subject to the
condition precedent that the Agent and the Insurer shall have each received all
of the following, each duly executed and dated the date of such Advance (or such
earlier date as shall be satisfactory to the Agent), in form and substance
satisfactory to the Agent and the Insurer:
(a) Resolutions. Certified copies of resolutions of the Board of
Directors of the Borrower authorizing or ratifying the execution, delivery
and performance, respectively, of this Agreement and the other Transaction
Documents to which it is a party.
(b) Incumbency and Signatures. A certificate of the Secretary or an
Assistant Secretary of the Borrower certifying the names of its officer or
officers authorized to sign this Agreement, and the other Transaction
Documents.
(c) Closing Certificate. A certificate from an authorized officer of
the Borrower as to the satisfaction of the conditions set forth in clauses
(a), (b) and (c) of Section 7.2.1 as at the date of this Agreement.
(d) Borrowing Base Certificate. A Borrowing Base Certificate duly
executed by the chief financial officer of the Borrower showing a
calculation of the Borrowing Base as of the date of such initial Advance.
(e) Transaction Documents. Executed counterparts of each Transaction
Document, duly executed by each of the parties thereto, and all conditions
to the effectiveness thereof set forth therein shall have been satisfied
in all respects.
(f) Other. Such other documents as the Agent or the Insurer may
reasonably request.
SECTION 7.2 All Advances. The making of the initial Advance and each
subsequent Advance are subject to the following further conditions precedent
that:
(a) No Default, etc. (i) No Event of Default (including, without
limitation, an Insurance Agreement Event of Default) or Unmatured Event of
Default has occurred and is continuing or will result from the making of
such Advance, (ii) the representations and warranties of the Borrower
contained in Article IX are true and correct as of the date of such
requested Advance, with the same effect as though made on the date of such
Advance, and (iii) after giving
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effect to such Advance, the aggregate outstanding principal balance of the
Advances hereunder will not exceed the Borrowing Base.
(b) Advance Request, etc. The Agent and the Insurer shall have
received the Advance Request for such Advance in accordance with Section
2.2, together with all items required to be delivered in connection
therewith.
(c) Facility Termination Date. The Facility Termination Date shall
not have occurred.
(d) Minimum Advance Amount. The amount of such Advance is not less
than $1,000,000.
(e) Collateral Receipt/Receipt Certification. The Agent shall have
received either a Collateral Receipt or a Receipt Certification in respect
of each Receivable identified as an "Eligible Receivable" in the Borrowing
Base Confirmation to be delivered pursuant to Section 7.2(f) below.
(f) Borrowing Base Confirmation. The Agent shall have received a
Borrowing Base Confirmation.
(g) Insurer Downgrade. The Insurer Downgrade Date shall not have
occurred.
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 8.1 Duties of the Servicer. The Servicer is hereby authorized to
act for the Borrower and in such capacity shall manage, service, administer and
make collections on the Transferred Receivables, and perform the other actions
required by the Servicer under this Agreement for the benefit of the Investors.
The Servicer agrees that its servicing of the Transferred 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 from time to time for servicing all its
other comparable motor vehicle receivables. The Servicer's duties shall include,
without
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limitation, collection and posting of all payments, responding to inquiries of
Obligors on the Transferred 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 Agent and the 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
Transferred 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
Transferred 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 Borrower to execute and deliver, on behalf of the Borrower, the
Insurer, the Investors, the Custodian 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 Transferred 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 Transferred Receivable or waive the right to collect
the unpaid balance of any Transferred 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 Borrower, the Custodian and the Investors (provided the Servicer
has obtained the Borrower's, the Custodian's and the Agent's consent, as the
case may be, which consent shall not be unreasonably withheld), a legal
proceeding to enforce a Transferred Receivable pursuant to Section 8.3 or to
commence or participate in any other legal proceeding (including, without
limitation, a bankruptcy proceeding) relating to or involving a Transferred
Receivable, an Obligor or a Financed Vehicle. If the Servicer commences or
participates in such a legal proceeding in its own name, the Borrower, the
Custodian or the Investors, as the case may be, shall thereupon be deemed to
have automatically assigned such Transferred Receivable to the Servicer solely
for purposes of commencing or participating in any such proceeding as a party or
claimant, and the
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Servicer is authorized and empowered by the Borrower, the Custodian or the
Investors, as the case may be, 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 Borrower, the
Custodian or the Investors, as the case may be, 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 8.2 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
Transferred 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 Transferred Receivables, the Dealer Agreements, the Dealer
Assignments and the Insurance Policies in such manner as will, in the reasonable
judgment of the Servicer, maximize the amount to be received by the Borrower and
the Investors 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 Transferred
Receivable.
(b) The Servicer may at any time agree to a modification or
amendment of a Transferred 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 Transferred 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 Transferred Receivable (including those
modifications permitted by Section 8.2(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 Transferred Receivable, will maximize the amount to be received by
the Borrower and the Investors with respect to such Transferred
Receivable, and is otherwise in the best interests of the Borrower and the
Investors; provided, however, that:
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(i) the aggregate period of all extensions on a Transferred
Receivable shall not exceed two months;
(ii) any such extension shall not extend beyond 75 months
after the Facility Termination Date;
(iii) the Servicer shall not amend or modify a Transferred
Receivable (except as provided in Section 8.2(b) and this Section
8.2(c)) without the written consent of the Controlling Party; and
(iv) so long as an Insurer Default shall not have occurred and
be continuing, the term of each Transferred Receivable may only be
extended once.
(d) The Servicer shall use its best efforts to cause Obligors to
make all payments on the Transferred 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 Investors pursuant to a
Lockbox Agreement. Amounts received by a Lockbox Bank in respect of the
Transferred Receivables may initially be deposited into a demand deposit
account maintained by the Lockbox Bank as agent for the Investors and for
other owners of automobile receivables serviced by the Servicer. The
Lockbox Banks shall, pursuant to the Lockbox Agreement, deposit all
payments on the Transferred Receivables in the Lockbox Account no later
than the Business Day after receipt and transfer all amounts credited to
the Lockbox Account on account of such payments 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 Controlling Party, an Eligible Account
satisfying clause (i) of the definition thereof. Any payments on the
Transferred Receivables inadvertently received by the Servicer shall be
deposited directly into 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 Transferred 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
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liable to the Investors for servicing and administering the Transferred
Receivables 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 Agent, 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
Controlling Party 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 Controlling Party, the Agent or a successor Lockbox Bank, all
documents and records relating to the Transferred 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 Collection Account,
without deposit into any intervening account as soon as practicable, but
in no event later than the Business Day after receipt thereof.
SECTION 8.3 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 Transferred
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 Transferred 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
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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 8.1, 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 Transferred 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 Transferred 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 not be permitted to
retain any such expenses in excess of the amounts specified as part of the
information contained in the Servicer's Certificate delivered on the next
succeeding Determination Date. The Servicer shall pay on behalf of the Borrower
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 Transferred 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 Borrower and [the Custodian]
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 Borrower, at the Servicer'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. All amounts recovered 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.
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SECTION 8.4 Insurance. (a) The Servicer shall monitor the status of the
Insurance Policies 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 subsection (x) of the definition of
"Eligible Receivable" (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 Borrower and
the Investors. 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 Borrower, the Custodian and
the Investors 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 Borrower shall take such steps as the
Servicer deems necessary to enforce such Insurance Policy, including
bringing suit in its name.
SECTION 8.5 Maintenance of Security Interests in Financed Vehicles. (a)
Consistent with its obligations under this Agreement and the Custodial
Agreement, the Servicer shall take such steps as are necessary to maintain
perfection of the security interest created by each Transferred Receivable in
the related Financed Vehicle on behalf of the Borrower and the Secured Parties,
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 statements as are
necessary to maintain the security interest granted by the Obligors under the
respective Receivables. The Borrower and the Secured Parties each 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 Borrower and the
Secured Parties as necessary because of the relocation of a Financed Vehicle or
for any other reason. In the event that the assignment of a Transferred
Receivable to the Borrower and the Secured Parties 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 Borrower and the Secured
Parties, the parties hereto agree that OFL-A's, American Credit Corporation's
(in its capacity as predecessor to
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ACC) or ACC's or ACC's d/b/a Accent Financial Services (both 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 Borrower and the Secured
Parties.
(b) Upon the occurrence of an Insurance Agreement Event of Default,
the Controlling Party may instruct the Borrower and the Servicer to take
or cause to be taken such action as may, in the opinion of counsel to the
Controlling Party, be necessary or desirable to perfect or re-perfect the
security interests in the Financed Vehicles securing the Transferred
Receivables in the name of the Borrower and the Custodian by amending the
title documents of such Financed Vehicles or by such other reasonable
means as may, in the opinion of counsel to the Controlling Party, be
necessary or prudent. The Borrower hereby agrees to pay all expenses
related to such perfection or re-perfection and to take all action
necessary therefor; provided, however, that if the 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,
the Borrower and the Custodian in connection with such action shall be
reimbursed to the Servicer, the Borrower or the Custodian, as applicable,
by the Insurer.
SECTION 8.6 Covenants, Representations and Warranties of Servicer. The
Servicer hereby makes the following representations, warranties and covenants to
the other parties hereto and the Insurer on which the Lenders shall rely in
making the Advances and on which the Insurer shall rely in issuing the Policy.
(a) The Servicer covenants to the Borrower, the Agent, the Investors
and the Insurer as follows:
(i) Liens in Force. The Financed Vehicle securing each
Transferred Receivable shall not be released in whole or in part
from the security interest granted by such Receivable, except upon
payment in full of such Receivable or as otherwise contemplated
herein;
(ii) No Impairment. The Servicer shall do nothing to impair
the rights of the Borrower, the Investors or the Insurer in the
Transferred Receivables, the Dealer Agreements, the Dealer
Assignments or the Insurance Policies;
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(iii) No Amendments. The Servicer shall not extend or
otherwise amend the terms of any Transferred Receivable, except in
accordance with Section 8.2;
(iv) Servicing of Receivables. The Servicer shall service the
Transferred 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 and the Servicer shall not change the manner in which it
services the Receivables in any way that can have an adverse effect
on the Receivables;
(v) Compliance with Laws. The Servicer shall comply with the
laws of each state in which a Transferred Receivable is located,
including, without limitation, all federal and state laws regarding
the collection and enforcement of consumer debt;
(vi) Notice of Relocation. The Servicer shall give the Agent
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 the Collateral
and its principal executive office within the United States of
America;
(vii) Maintenance of Computer Systems, etc. The Servicer shall
maintain its computer systems so that, from and after the time of
the first Advance under this Agreement, the Servicer's master
computer records (including archives) that shall refer to the
Collateral indicate clearly that such Collateral is subject to first
priority security interest in favor of the Custodian, for the
benefit of the Secured Parties. Indication of the Custodian's
security interest shall be deleted from or modified on the
Servicer's computer systems when, and only when, the Collateral in
question shall have been paid in full; and
(viii) Other Sales, Grants or Transfers. If at any time the
Servicer shall propose to sell, grant a security interest in, or
otherwise transfer any interest in motor vehicle 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 print-outs (including any
restored from archives) that, if they shall refer in any manner
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whatsoever to any Collateral shall indicate clearly that such
Collateral is subject to a first priority security interest in favor
of the Custodian.
(b) The Servicer represents and warrants to the Borrower, the Agent,
the Investors and the Insurer, as of the Closing Date as to itself that:
(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;
(iii) 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 Transferred 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 the Transaction
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 Transaction Documents to which
it is a party have been duly authorized by the Servicer by all
necessary corporate action;
(iv) Binding Obligation. This Agreement and the Transaction
Documents to which it is a party 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 Transaction Documents to
which it is a party, and the fulfillment of the terms of this
Agreement and the
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Transaction 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 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 Borrower, the Investors or the
Insurer in any Transferred 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 Transaction Documents, (B) seeking to prevent the consummation
of any of the transactions contemplated by this Agreement or any of
the Transaction 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 Transaction Documents, or (D) that
could have a material adverse effect on the Transferred Receivables;
(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;
(vii) 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
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authority, bureau or agency in connection with the execution,
delivery, performance, validity or enforceability of this Agreement;
and
(ix) Chief Executive Office. The chief executive office of ACC
is located at 12750 High Bluff Drive, Suite 320, San Diego,
California 92130.
SECTION 8.7 Purchase of Receivables Upon Breach of Covenant or
Representation and Warranty. The Borrower or the Servicer, as the case may be,
shall inform the other parties to this Agreement and the Insurer promptly, in
writing, upon the discovery of any breach of the Servicer's representations and
warranties and covenants pursuant to Section 8.5(a) or 8.6; provided, however,
that the failure to give any such notice shall not derogate from any obligation
of the Servicer hereunder to repurchase any Transferred Receivable; provided,
further that, 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 Borrower and the Agent
shall (provided that it either has made such discovery or has received such
notice thereof) enforce such obligation of the Servicer, to repurchase any
Transferred Receivable materially and adversely affected by the breach. The
Borrower shall notify the Agent and the Insurer promptly, in writing, of any
failure by the Servicer to so repurchase any Transferred Receivable. In
consideration of the purchase of the Transferred Receivable, the Servicer shall
remit the Purchase Amount in the manner specified in Section 8.8(b).
In addition to the foregoing and notwithstanding whether the related
Transferred Receivable shall have been purchased by the Servicer, the Servicer
shall indemnify the Backup Servicer, the Insurer, the Borrower, the Agent and
the Investors 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 Section 8.5(a) or 8.6.
SECTION 8.8 Total Servicing Fee; Payment of Certain Expenses by Servicer.
(a) Subject to, and in accordance with, the provisions of the Custodial
Agreement, on each Distribution Date, the Servicer shall be entitled to receive
out of the Collection Account the Servicing Fee for the related Collection
Period.
(b) 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 and the Insurer). The Servicer shall be liable for
the fees and
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expenses of the Backup Servicer, the Lockbox Bank (and any fees under the
Lockbox Agreement) and the Independent Accountants.
SECTION 8.9 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 Backup
Servicer, the Insurer, the Borrower and the Agent a Servicer's Certificate
executed by a Responsible Officer of the Servicer in the form attached hereto as
Exhibit E. Transferred Receivables purchased by the Servicer or ACC and each
Transferred 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).
(b) In addition to the information required by Section 8.9(a), the
Servicer shall include in the copy of the Servicer's Certificate delivered
to the Insurer, the Borrower and the Agent (i) whether any Event of
Default or Unmatured Event of Default has occurred as of such
Determination Date, (ii) whether any Event of Default or Unmatured Event
of Default that may have occurred as of a prior Determination Date is
deemed cured as of such Determination Date, and (iii) whether to the
knowledge of the Servicer an Insurance Agreement Event of Default has
occurred.
SECTION 8.10 Annual Statement as to Compliance; Notice of Servicer
Termination Event. (a) The Servicer shall deliver to the Backup Servicer, the
Insurer, the Borrower, and the Agent, on or before December 31 (or 90 days after
the end of the Servicer's fiscal year, if other than December 31) of each year,
beginning on the first December 31 (or other applicable date) next following the
date that is six months after the Closing Date, an Officer's Certificate, dated
as of December 31 (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 Backup Servicer, the Insurer,
the Borrower and the Agent, 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 13.1. The Borrower or the Servicer shall deliver to
the Backup Servicer, the Insurer, the Borrower and the
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Agent 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 13.1.
SECTION 8.11 Annual Independent Accountants' Report. (a) The Servicer
shall, at its expense, cause a firm of nationally recognized independent
certified public accountants acceptable to the Insurer (as long as no Insurer
Default has occurred and is continuing), the Agent (and upon which the
Controlling Party may rely) (the "Independent Accountants"), who may also render
other services to the Servicer or to the Borrower to deliver to the Borrower,
the Agent, the Backup Servicer and the Insurer, on or before March 31 (or 90
days after the end of the Servicer's fiscal year, if other than December 31) of
each year, beginning on the first March 31 (or other applicable date) after the
date that is six months after the Closing Date (but in no event later than March
31, 1998), with respect to the twelve months ended the immediately preceding
December 31 (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
"Accountants' Report") addressed to the Board of Directors of the Servicer, to
the Agent, to the Backup Servicer and to the Insurer, to the effect that such
firm has audited the financial statements of the Servicer and has examined the
Servicer's Certificates and issued its report thereon and that such
audit/examination (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
and the Borrower's portfolio of automobile installment sales contracts; (4)
included tests relating to auto loans serviced for others in accordance with the
requirements of the Uniform Single Audit Program for Mortgage Bankers (the
"Program"), to the extent the procedures in the Program are applicable to the
servicing obligations set forth in this Agreement; and (5) except as described
in the report, 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 or paragraph four of the Program
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; (2) except as disclosed in the
Accountant's Report, no exceptions or errors in the Servicer's Certificates so
examined were found; (3) the delinquency and loss information relating to the
Transferred Receivables contained in the Servicer
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Certificates were found to be accurate; and (4) except for (i) such exceptions
as the Independent Accountants believe to be immaterial, and (ii) such other
exceptions as shall be set forth in the Accountants' Report, the Independent
Accountants have examined the Servicer's Certificates delivered during the
previous calendar year and such records relating to the Transferred Receivables
as the Independent Accountants deem necessary as a basis for the Accountants'
Report.
(b) The Accountants' Report shall also indicate that the firm is
independent of the Borrower and the Servicer within the meaning of the
Code of Professional Ethics of the American Institute of Certified Public
Accountants.
SECTION 8.12 Access to Certain Documentation and Information Regarding
Receivables. The Servicer shall provide to representatives of the Backup
Servicer, the Borrower, the Agent and the Insurer reasonable access to the
documentation regarding the Transferred Receivables including, without
limitation, copies of the Dealer Underwriting Guides and the Servicing
Procedures Manual. Nothing in this Section 8.12 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 8.12 as a result of such obligation
shall not constitute a breach of this Section 8.12.
SECTION 8.13 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 Backup Servicer a computer tape and a diskette (or any other
electronic transmission acceptable to the Backup Servicer) in a format
acceptable to the Backup Servicer containing the information with respect to the
Transferred Receivables as of the last day of the immediately preceding calendar
month 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 the Custodial Agreement. The Backup
Servicer shall use such tape or diskette (or other electronic transmission
acceptable to 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 Agent and
the Insurer that it has verified the Servicer's Certificate in accordance with
this Section 8.13 and shall notify the Servicer, the Agent and the 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 Distribution 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
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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 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 Controlling Party
or the Agent, 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
Transferred 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 8.14 Retention of Servicer. ACC hereby covenants and agrees to act
as such under this Agreement for an initial term, commencing on the Closing Date
and ending on June 30, 1997, which term shall be extendible by the Controlling
Party 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, for any specified number of
terms greater than one). 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 Controlling Party to the Servicer.
ACC hereby agrees that, as of the date hereof and upon its receipt of any such
Servicer Extension Notice, ACC 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.
SECTION 8.15 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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SECTION 8.16 Insurance. The Servicer shall maintain customary
amounts of insurance coverage, including, without limitation, coverage for fire,
theft, workers compensation and servicer liability arising from the collection
of Transferred Receivables. The Servicer shall be entitled to self-insure with
respect to such insurance so long as the long-term unsecured debt obligations of
the Servicer are rated in the second highest long-term debt category by each of
the Rating Agencies.
SECTION 8.17 Accounts. (a) The Servicer shall establish the
Collection Account in the name of the Custodian for the benefit of the Secured
Parties. The Collection Account shall be an Eligible Account and initially shall
be a segregated trust account established and maintained with the Custodian.
(b) The Servicer shall establish the Liquidity Account in the name
of the Custodian for the Benefit of the Secured Parties. The Liquidity
Account shall be an Eligible Account and initially shall be a segregated
trust account established and maintained with the Custodian.
(c) The Servicer shall establish the Collateral Account in the name
of the Custodian for the benefit of the Secured Parties. The Collateral
Account shall be an Eligible Account and initially shall be a segregated
trust account established and maintained with the Custodian.
(d) The Custodian shall deposit to the Collateral Account any amount
delivered to it by the Borrower and designated to be deposited in the
Collateral Account. The Custodian shall withdraw and pay to the Borrower
upon the Borrower's request, any amount on deposit in the Collateral
Account, provided, that following such withdrawal, no Borrowing Base
Deficiency shall result.
SECTION 8.18 Collections. (a) Pursuant to the Lockbox Agreements, the
Lockbox Banks 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 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
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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 upon certification by the Servicer of such amounts and
the provision of such information to the Custodian, the Agent and the
Insurer as may be necessary in the opinion of the Agent and the Insurer to
verify the accuracy of such certification. In the event that the Agent and
the Insurer have not received evidence satisfactory to it of the
Servicer's entitlement to reimbursement pursuant to this Section 8.18(b),
the Insurer or the Agent shall give the Custodian notice to such effect,
following receipt of which the Custodian shall not make a distribution to
the Servicer in respect of such amount, or if the Servicer prior thereto
has been reimbursed, the Custodian shall withhold such amounts from
amounts otherwise distributable to the Servicer on the next succeeding
Distribution Date.
SECTION 8.19 Application of Collections. For the purposes of this
Agreement, all collections for a Collection Period shall be applied by the
Servicer with respect to each Transferred Receivable (other than a Purchased
Receivable) as follows: (i) in the case of a Rule of 78s Receivable, first, with
respect to the Scheduled Payment of such Rule of 78s Receivable, to interest and
principal in accordance with the actuarial method, and, second, to any late fees
accrued with respect to such Rule of 78s Receivable, and (ii) in the case of a
Simple Interest Receivable, to interest and principal in accordance with the
Simple Interest 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 8.19, 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.
ARTICLE IX
GRANT OF SECURITY INTERESTS
SECTION 9.1 Borrower's Grant of Security Interest. As security for
the prompt payment or performance in full when due, whether at stated maturity,
by acceleration or otherwise, of all Obligations, the Borrower hereby assigns
and pledges to the Custodian,
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for the benefit of the Secured Parties, and grants to the Custodian, for the
benefit of the Secured Parties, a security interest in and lien upon, all of the
Borrower's right, title and interest in and to the following, in each case
whether now or hereafter existing or in which Borrower now has or hereafter
acquires an interest and wherever the same may be located (collectively, the
"Borrower Collateral"):
(a) all Collateral;
(b) the Purchase and Sale Agreement, each Lockbox Agreement and all
other Transaction Documents now or hereafter in effect relating to the
purchase, servicing or processing of Transferred Receivables
(collectively, the "Borrower Assigned Agreements"), including (i) all
rights of the Borrower to receive moneys due and to become due under or
pursuant to the Borrower Assigned Agreements, (ii) all rights of the
Borrower to receive proceeds of any insurance, indemnity, warranty or
guaranty with respect to the Borrower Assigned Agreements, (iii) the
Borrower's right of foreclosure as lienholder of the vehicles underlying
the Receivables, (iv) claims of the Borrower for damages arising out of or
for breach of or default under the Borrower Assigned Agreements, and (v)
the right of the Borrower to amend, waive or terminate the Borrower
Assigned Agreements, to perform under the Borrower Assigned Agreements and
to compel performance and otherwise exercise all remedies and rights under
the Borrower Assigned Agreements; provided, that to the extent the
foregoing applies to the Transferred Receivables as well as other
receivables originated and/or serviced by ACC, the foregoing shall apply
only to the Transferred Receivables;
(c) all of the following (the "Borrower Account Collateral"):
(i) each Lockbox Account, the Lockboxes and all funds held in
each Lockbox Account and the Lockboxes and all certificates and
instruments, if any, from time to time representing or evidencing
each Lockbox Account, the Lockboxes or such funds,
(ii) the Collection Account, all funds held in the Collection
Account, and all certificates and instruments, if any, from time to
time representing or evidencing the Collection Account or such
funds,
(iii) all investments from time to time of amounts in each
Lockbox Account and the Collection Account, and all certificates and
instruments, if any, from time to time representing or evidencing
such investments,
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(iv) all notes, certificates of deposit and other instruments
from time to time delivered to or otherwise possessed by an Investor
or any assignee or agent on behalf of an Investor in substitution
for or in addition to any of the then existing Borrower Account
Collateral, and
(v) all interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any and all of the then
existing Borrower Account Collateral;
(d) all additional property that may from time to time hereafter be
granted and pledged by the Borrower or by anyone on its behalf under this
Agreement, including the deposit with the Custodian or the Agent of
additional moneys by the Borrower; and
(e) all proceeds, accessions, substitutions, rents and profits of
any and all of the foregoing Borrower Collateral (including proceeds that
constitute property of the types described in Sections 9.1(a) through (d)
above) and, to the extent not otherwise included, all payments under
insurance (whether or not an Investor or any assignee or agent on behalf
of an Investor is the loss payee thereof) or any indemnity, warranty or
guaranty payable by reason of loss or damage to or otherwise with respect
to any of the foregoing Borrower Collateral.
SECTION 9.2 Delivery of Collateral. All documents in the Receivables File
and all other documents representing or evidencing Collateral shall be delivered
to and held by or on behalf of the Custodian pursuant to the Custodial
Agreement, and shall be in suitable form for transfer by delivery, shall be
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance satisfactory to the Custodian or shall be duly endorsed in
the manner set forth in clause (m) of the definition of "Eligible Receivable",
as applicable, and to the extent not constituting an assignment shall be
irrevocable powers of attorney coupled with an interest.
SECTION 9.3 Borrower Remains Liable. Notwithstanding anything in
this Agreement, (a) the Borrower shall remain liable under the Transferred
Receivables, Borrower Assigned Agreements and other agreements included in the
Collateral to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the
Agent, a Secured Party or the Custodian of any of its rights under this
Agreement shall not release the Borrower or the Servicer from any of their
respective duties or obligations under the Transferred Receivables, Borrower
Assigned Agreements or other agreements included in the
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Collateral, (c) the Agent, the Secured Parties and the Custodian shall not have
any obligation or liability under the Transferred Receivables, Borrower Assigned
Agreements or other agreements included in the Collateral by reason of this
Agreement, and (d) neither the Agent, the Custodian nor the Secured Parties
shall be obligated to perform any of the obligations or duties of the Borrower
or the Servicer under the Transferred Receivables, Borrower Assigned Agreements
or other agreements included in the Collateral or to take any action to collect
or enforce any claim for payment assigned under this Agreement.
SECTION 9.4 Covenants of the Borrower and Servicer Regarding the
Collateral.
(a) Offices and Records. The Borrower shall keep its chief place of
business and chief executive offices and the office where it keeps its
records at the location specified in Section 10.9 or, upon 60 days prior
written notice to the Custodian and the Insurer, at such other location in
a jurisdiction where all action required by Section 9.4(f) shall have been
taken with respect to the Collateral. The Borrower and the Servicer shall,
for not less than three years or for such longer period as may be required
by law, from the date on which any Transferred Receivable arose, maintain
the records with respect to each Transferred Receivable, including records
of all payments received, credits granted and merchandise returned. The
Borrower and the Servicer will permit representatives of the Agent, the
Insurer, the Backup Servicer and the Custodian at any time and from time
to time during normal business hours, and at such times outside of normal
business hours as the Agent, the Insurer, the Backup Servicer and the
Custodian shall reasonably request, (i) to inspect and make copies of and
abstracts from such records, and (ii) to visit the properties of the
Borrower or the Servicer utilized in connection with the collection,
processing or servicing of the Transferred Receivables for the purpose of
examining such records, and to discuss matters relating to the Receivables
or the Borrower's or Servicer's performance under this Agreement with any
officer or employee of the Borrower or Servicer having knowledge of such
matters. In connection therewith, the Agent, the Insurer, the Backup
Servicer or the Custodian may institute procedures to permit it to confirm
the Obligor balances in respect of any Transferred Receivables. Each of
the Borrower and the Servicer agrees to render to the Agent, the Insurer,
the Backup Servicer and the Custodian such clerical and other assistance
as may be reasonably requested with regard to the foregoing. If an Event
of Default shall have occurred and be continuing, promptly upon request
therefor, the Borrower or the Servicer shall deliver to the Custodian
records reflecting activity through the close of business on the
immediately preceding Business Day.
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(b) Maintain Records of Transferred Receivables. The Borrower and
the Servicer shall, at their own cost and expense, maintain satisfactory
and complete records of the Collateral, including a record of all payments
received and all credits granted with respect to the Collateral and all
other dealings with the Collateral. Each of the Borrower and the Servicer
will mark conspicuously with a legend, in form and substance satisfactory
to the Agent and the Insurer, its records, computer tapes, computer disks
and credit files pertaining to the Collateral, and its file cabinets or
other storage facilities where it maintains information pertaining to the
Collateral, to evidence this Agreement and the assignment and security
interest granted by this Article IX. Upon the occurrence and during the
continuation of an Event of Default, the Borrower and Servicer shall (i)
deliver and turn over to the Backup Servicer or to its representatives, or
at the option of the Backup Servicer shall provide the Backup Servicer or
its representatives with access to, after the occurrence of an Event of
Default, at any time, and during all other times, during ordinary business
hours, on demand of the Backup Servicer, all of the Borrower's and
Servicer's facilities, personnel, books and records pertaining to the
Collateral, including all records, and (ii) allow the Backup Servicer to
occupy the premises of the Borrower and the Servicer where such books and
records are maintained, and utilize such premises, the equipment thereon
and any personnel of the Borrower or the Servicer that the Backup Servicer
may wish to employ to administer, service and collect the Transferred
Receivables.
(c) Performance of Borrower Assigned Agreements. The Borrower shall
(i) perform and observe all the terms and provisions of the Borrower
Assigned Agreements to be performed or observed by it, maintain the
Borrower Assigned Agreements in full force and effect, enforce the
Borrower Assigned Agreements in accordance with their terms and take all
such action to such end as may be from time to time requested by the
Investors, and (ii) upon request of the Agent, the Insurer or the
Investors, make to any other party to the Borrower Assigned Agreements
such demands and requests for information and reports or for action as the
Borrower is entitled to make under the Borrower Assigned Agreements.
(d) Notice of Adverse Claim. Each of the Borrower and the Servicer
shall advise the Investors, the Agent, the Insurer and the Custodian
promptly, in reasonable detail, (i) of any Adverse Claim known to it made
or asserted against any of the Borrower Collateral, and (ii) of the
occurrence of any event which would have a material adverse effect on the
aggregate value of the Borrower Collateral or on the assignments and
security interests granted by the Borrower in this Agreement.
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(e) Further Assurances; Financing Statements.
(i) Each of the Borrower and the Servicer severally agrees
that at any time and from time to time, at its expense, it shall
promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or desirable or
that any Secured Party or the Agent may request to perfect and
protect the assignments and security interests granted or purported
to be granted by this Article XI or to enable such Secured Party,
the Agent or the Custodian to exercise and enforce its rights and
remedies under this Agreement with respect to any Collateral.
Without limiting the generality of the foregoing, the Borrower shall
execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices as may be
necessary or desirable or that any Secured Party or the Agent may
request to protect and preserve the assignments and security
interests granted by this Agreement.
(ii) The Borrower and each Secured Party hereby severally
authorize the Custodian to execute for filing by the Controlling
Party one or more financing or continuation statements, and
amendments thereto, relating to all or any part of the Collateral
without the signature of the Borrower or the Secured Parties where
permitted by law. A carbon, photographic or other reproduction of
this Agreement or any financing statement covering the Collateral or
any part thereof shall be sufficient as a financing statement where
permitted by law. The Controlling Party will promptly send to the
Borrower any financing or continuation statements thereto which it
files without the signature of the Borrower and will promptly send
to each Secured Party and the Borrower any financing or continuation
statements thereto which it files without the signature of the
Secured Parties except, in the case of filings of copies of this
Agreement as financing statements, the Controlling Party will
promptly send the Borrower and each Secured Party, as the case may
be, the filing or recordation information with respect thereto.
(iii) Each of the Borrower and the Servicer shall furnish to
the Custodian from time to time such statements and schedules
further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Controlling Party
or the Agent may reasonably request, all in reasonable detail.
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SECTION 9.5 Release of Borrower Collateral.
(a) Generally. For purposes of selling and transferring Receivables
to third parties in connection with other securitizations (including any
Take-Out Securitization), so long as there is no Event of Default, or
event which, with the passage of time, the giving of notice, or both,
would constitute an Event of Default hereunder, the Borrower may obtain
releases of the Custodian's (for the benefit of the Secured Parties)
security interest in all or any part of the Borrower Collateral and from
time to time, to the extent that (immediately after giving effect to any
requested release) there exists no Borrowing Base Deficiency and there is
no Event of Default, or event which, with the passage of time, the giving
of notice, or both, would constitute an Event of Default. Each request for
a partial release of Collateral (a "Transfer Request") shall be addressed
to the Agent (with a copy thereof sent by the Borrower or the Servicer to
the Insurer and the Custodian), demonstrating compliance with the
immediately preceding sentence and acknowledging that the receipt of
proceeds from such sale or transfer to third parties shall be deposited
into the Collection Account in accordance with Section 8.18.
(b) Transfers. With respect to each Transfer Request that is
received by the Agent by 12:00 noon, New York time on a Business Day, the
Agent shall use due diligence and reasonable efforts to review such
Transfer Requests and prepare the files, identified in each Transfer
Request, for shipment by 12:00 noon, New York time on the second
succeeding Business Day.
(c) Continuation of Lien. Unless released in writing by the Secured
Parties, as herein provided, the security interest in favor of the
Custodian, for the benefit of the Secured Parties, in all Borrower
Collateral shall continue in effect until such time as the Secured Parties
shall have received payment in full of the proceeds from the sale or
transfer of such Borrower Collateral to third parties in accordance with
this Section 9.5.
(d) Application of Proceeds; No Duty. Neither of the Agent, nor the
Custodian, nor any Secured Party shall be under any duty at any time to
credit Borrower for any amount due from any third party in respect of any
purchase of any Borrower Collateral contemplated above, until the
Custodian has actually received such amount in immediately available funds
for deposit to the Collection Account. Neither the Custodian nor any
Secured Party, nor the Agent shall be under any duty at any time to
collect any amounts or otherwise enforce any obligations due from any
third party in respect of any such purchase of
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Receivables covered by the release of such portion of Borrower Collateral
or in respect of a securitization thereof with a third party.
(e) Representation in Connection with Releases, Sales and Transfers.
The Borrower represents and warrants that each request for any release or
transfer pursuant to Section 9.5(a) shall automatically constitute a
representation and warranty to the Secured Parties, the Agent and the
Custodian to the effect that immediately before and after giving effect to
such release or Transfer Request, there is no Event of Default, or event
which, with the passage of time, the giving of notice, or both, would
constitute an Event of Default (including, without limitation a Borrowing
Base Deficiency or an Insurance Agreement Event of Default).
(f) Release of Security Interest. Upon the Agent's request, the
Custodian shall promptly release, at the Borrower's expense, all UCC
financing statements in connection with the release of such part of
Borrower Collateral covered in connection with the Transfer Request and
shall deliver, at the Borrower's expense, the documents and certificates
on the released portion of Borrower Collateral to the trustee or such
similar entity in connection with the third party securitization
(including any Take-Out Securitization); provided that the trustee or such
similar entity in connection with the third party securitization
(including any Take-Out Securitization) acknowledges and agrees (i) that
all proceeds thereof that it receives are held in trust for the Secured
Parties and (ii) at such time that the Secured Parties shall instruct such
trustee to transfer such proceeds, the trustee shall transfer such funds
pursuant to such instructions.
ARTICLE X
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
In order to induce the other parties hereto to enter into this Agreement
and, in the case of Alpine and the Lenders, to make Advances hereunder, and the
Insurer, to issue the Policy, the Borrower hereby represents and warrants to the
Agent, the Insurer and the Investors as to itself, as of the Closing Date and
the date of each Advance, as follows:
SECTION 10.1 Organization and Good Standing. The Borrower has been duly
organized and is validly existing as a limited liability company 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
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conducted, and had at all relevant times and now has, power, authority and legal
right to acquire and own the Transferred Receivables and the Other Conveyed
Property, and to grant to the Custodian a first priority security interest in
the Transferred Receivables and the Other Conveyed Property and to enter into
and perform its obligations under this Agreement.
SECTION 10.2 Due Qualification. The Borrower 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.
SECTION 10.3 Power and Authority. The Borrower has the power and authority
to execute and deliver this Agreement and the other Transaction Documents to
which it is a party and to carry out its terms and their terms, respectively;
the Borrower has full power and authority to grant to the Custodian, for the
benefit of the Secured Parties, a perfected first priority security interest in
the Transferred Receivables and the Other Conveyed Property and has duly
authorized such grant by all necessary corporate action and the execution,
delivery and performance of this Agreement and the other Transaction Documents
to which it is a party have been duly authorized by the Borrower by all
necessary corporate action.
SECTION 10.4 Security Interest; Binding Obligations. This Agreement and
the Transaction Documents to which it is a party have been duly executed and
delivered and shall create a valid first priority security interest in the
Transferred Receivables and the Other Conveyed Property in favor of the
Custodian, enforceable against the Borrower and creditors of and purchasers from
the Borrower, and this Agreement and the other Transaction Documents to which it
is a party shall constitute legal, valid and binding obligations of the Borrower
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.
SECTION 10.5 No Violation. The consummation of the transactions
contemplated by this Agreement and the other Transaction Documents to which it
is a party, and the fulfillment of the terms of this Agreement and the other
Transaction 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 or lapse of time) a default under, the articles of incorporation or
bylaws of the Borrower, or any indenture, agreement, mortgage, deed of trust or
other instrument to which the Borrower is a party
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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 Borrower of any court or of any federal or state
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over the Borrower or any of its properties, or in any way or
affect the Borrower's ability to perform its obligations under this Agreement or
the other Transaction Documents to which it is a party.
SECTION 10.6 No Proceedings. There are no proceedings or investigations
pending or, to the Borrower's knowledge, threatened against the Borrower, before
any court, regulatory body, administrative agency or other tribunal or
governmental instrumentality having jurisdiction over the Borrower or its
properties (A) asserting the invalidity of this Agreement or any of the other
Transaction Documents, (B) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or any of the other Transaction
Documents, (C) seeking any determination or ruling that might materially and
adversely affect the performance by the Borrower of its obligations under, or
the validity or enforceability of, this Agreement or any of the other
Transaction Documents (D) involving the Borrower or (E) that could have a
material adverse effect on the Transferred Receivables.
SECTION 10.7 No Consents. The Borrower 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 or the other Transaction Documents to which it
is a party.
SECTION 10.8 Approvals. All approvals, authorizations, 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 Borrower of this Agreement and the other
Transaction Documents and the consummation of the transactions contemplated
hereby have been or will be taken or obtained on or prior to the Closing Date.
SECTION 10.9 Chief Executive Office. The chief executive office of the
Borrower is located at 12750 High Bluff Drive, Suite 320, San Diego, California
92130.
SECTION 10.10 Solvency. The Borrower is solvent and will not become
insolvent after giving effect to the transactions contemplated by this Agreement
and the Transaction Documents. The Borrower has no Indebtedness to any Person
other than
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pursuant to this Agreement and the other Transaction Documents. The Borrower,
after giving effect to the transactions contemplated by this Agreement and the
other Transaction Documents, will have an adequate amount of capital to conduct
its business in the foreseeable future.
SECTION 10.11 Tax Treatment. For federal income tax, reporting and
accounting purposes, the Borrower will treat the purchase or absolute assignment
of each Transferred Receivable and Other Conveyed Property pursuant to the
Purchase and Sale Agreement as a purchase or absolute assignment of ACC's full
right, title and ownership interest in such Transferred Receivable and Other
Conveyed Property (and those Transferred Receivables and Other Conveyed Property
contributed to the Borrower by ACC pursuant to the Purchase and Sale Agreement
shall be accounted for as an increase in the stated capital of the Borrower) and
the Borrower has not in any other manner accounted for or treated the transfer
to it of Transferred Receivables and Other Conveyed Property.
SECTION 10.12 Compliance With Laws. The Borrower has complied and will
comply in all respects with all applicable laws, rules, regulations, judgments,
agreements, decrees and orders with respect to its business and properties and
all Collateral.
SECTION 10.13 Taxes. The Borrower has filed on a timely basis all tax
returns (including, without limitation, foreign, federal, state, local and
otherwise) required to be filed, is not liable for taxes payable by any other
Person and has paid or made adequate provisions for the payment of all taxes,
assessments and other governmental charges due from the Borrower. No tax lien or
similar adverse claim has been filed, and no claim is being asserted, with
respect to any such tax, assessment or other governmental charge. Any taxes,
fees and other governmental charges payable by the Borrower in connection with
the execution and delivery of this Agreement and the other Transaction Documents
and the transactions contemplated hereby or thereby including the transfer of
each Transferred Receivable and Other Conveyed Property to the Borrower have
been paid or shall have been paid if and when due at or prior to the Closing
Date and the relevant Purchase Date, as the case may be.
SECTION 10.14 Borrowing Base Certificate. Each Borrowing Base Certificate
is accurate in all material respects as of the date thereof.
SECTION 10.15 No Liens, Etc. The Collateral and each part thereof is owned
by the Borrower free and clear of any adverse claim or restrictions on
transferability and the Borrower has the full right, corporate power and lawful
authority to assign, transfer and pledge the same and interests therein, and
upon the making of each Advance, the
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Custodian, for the benefit of the Secure Parties, will have acquired a
perfected, first priority and valid security interest in such Collateral, free
and clear of any adverse claim or restrictions on transferability. No effective
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording office, except such as may
have been filed in favor of the Custodian as "Secured Party" pursuant to Article
XI of this Agreement or, with respect to the Transferred Receivables, in favor
of the Borrower pursuant to the Purchase and Sale Agreement.
SECTION 10.16 Purchase and Sale. Each Transferred Receivable and Other
Conveyed Property was purchased by or contributed to the Borrower on the
relevant Purchase Date pursuant to the Purchase and Sale Agreement.
SECTION 10.17 Securities Act of 1933; Investment Company Act of 1940. Each
purchase of Transferred Receivables and Other Conveyed Property under the
Purchase and Sale Agreement will constitute (i) a "current transaction" within
the meaning of Section 3(a)(3) of the Securities Act of 1933, as amended, and
(ii) a purchase or other acquisition of notes, drafts, acceptances, open
accounts receivable or other obligations representing part or all of the sales
price of merchandise, insurance or services within the meaning of Section
3(c)(5) of the Investment Company Act of 1940, as amended.
SECTION 10.18 Information True and Correct. All information heretofore or
hereafter furnished by or on behalf of the Borrower to the Insurer, Alpine, the
Agent or the Custodian in connection with this Agreement or any transaction
contemplated hereby is and will be true and complete in all material respects
and does not and will not omit to state a material fact necessary to make the
statements contained therein not misleading.
SECTION 10.19 ERISA Compliance. The Borrower is in compliance with ERISA
and has not incurred and does not expect to incur any liabilities (except for
premium payments arising in the ordinary course of business) to the Pension
Benefit Guaranty Corporation (or any successor thereto) under ERISA.
SECTION 10.20 No Material Adverse Effect; No Default. (a) Except as
otherwise disclosed to the Agent and the Insurer, the Borrower is not a party to
any indenture, loan or credit agreement or any lease or other agreement or
instrument or subject to any charter or corporation restriction that could have,
and no provision of applicable law or governmental regulation is reasonably
likely to have, a material adverse effect on the condition (financial or
otherwise), business, operations, results of operations or properties of the
Borrower, or could have such an effect on the ability of the Borrower to carry
out its obligations under this Agreement and the other Transaction Documents to
which the Borrower is a party and (b) the Borrower is not in default under or
with respect
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to any contract, agreement, lease or other instrument to which the Borrower is a
party and which is material to the Borrower's condition (financial or
otherwise), business, operations or properties, and the Borrower has not
delivered or received any notice of default thereunder.
SECTION 10.21 Financial or Other Condition. There has been no material
adverse change in the condition (financial or otherwise), business, operations,
results of operations, or properties of the Borrower.
SECTION 10.22 Investment Company Status. The Borrower is not an
"investment company" or an "affiliated person" of, or "promoter" or "principal
underwriter" for, an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended. The making of the Advances by the
Lenders, the application of the proceeds and repayment thereof by the Borrower
and the consummation of the transactions contemplated by this Agreement and the
other Transaction Documents to which the Borrower is a party will not violate
any provision of such Act or any rule, regulation or order issued by the
Securities and Exchange Commission thereunder.
SECTION 10.23 No Shared Obligations. There is not now, nor will there be
at any time in the future, any agreement or understanding between ACC and the
Borrower (other than as expressly set forth herein) providing for the allocation
or sharing of obligations to make payments or otherwise in respect of any taxes,
fees, assessments or other governmental charges.
SECTION 10.24 Representation and Warranties True and Correct. Each of the
representations and warranties of the Borrower contained in this Agreement and
the other Transaction Documents is true and correct in all material respects and
the Borrower hereby makes each such representation and warranty to, and for the
benefit of, the Insurer, the Investors, the Agent and the Custodian as if the
same were set forth in full herein.
SECTION 10.25 Eligible Receivables. All Receivables included in the
Borrowing Base as of the most recently delivered Borrowing Base Certificate are
Eligible Receivables.
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ARTICLE XI
COVENANTS OF THE BORROWER
From the date hereof until the first day, following the Facility
Termination Date, on which all Obligations shall have been finally and fully
paid and performed, the Borrower hereby covenants and agrees with the Investors,
the Insurer and the Agent that it will:
SECTION 11.1 Protection of Security Interest of the Secured Parties. (a)
At or prior to the Closing Date, the Borrower shall have filed or caused to be
filed UCC-1 financing statements, executed by the Borrower as debtor, naming the
Custodian (for the benefit of the Secured Parties) as secured party and
describing the Collateral, with the office of the Secretary of State of the
State of California and in such other locations as the Agent shall have
required. From time to time thereafter, the Borrower shall execute and file such
financing statements and cause to be executed and filed such continuation
statements, all in such manner and in such places as may be required by law
fully to preserve, maintain and protect the interest of the Investors under this
Agreement in the Collateral and in the proceeds thereof. The Borrower shall
deliver (or cause to be delivered) to the Agent (with a copy to the Insurer)
file-stamped copies of, or filing receipts for, any document filed as provided
above, as soon as available following such filing. In the event that the
Borrower fails to perform its obligations under this subsection, the Agent, the
Insurer, or the Custodian at the direction of the Agent or the Controlling
Party, may do so, in each case at the expense of the Borrower.
(b) The Borrower shall not change its name, identity, or corporate
structure in any manner that would, could or might make any financing
statement or continuation statement filed by the Borrower (or by the
Agent, the Insurer or the Custodian on behalf of the Borrower) in
accordance with paragraph (a) above seriously misleading within the
meaning of Section 9-402(7) of the UCC, unless the Borrower shall have
given the Agent and the Insurer at least 60 days prior written notice
thereof, and shall promptly file appropriate amendments to all previously
filed financing statements and continuation statements.
(c) The Borrower shall give the Agent and the 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
Borrower shall at all times maintain its principal executive office within
the United States of America.
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(d) The Borrower shall maintain its computer systems, if any, so
that, from and after the time of the first Advance under this Agreement,
the Borrower's master computer records (including archives) that shall
refer to the Collateral indicate clearly that such Collateral is subject
to first priority security interest in favor of the Custodian, for the
benefit of the Secured Parties. Indication of the Custodian's (for the
benefit of the Secured Parties) security interest shall be deleted from or
modified on the Borrower's computer systems when, and only when, the
Collateral in question shall have been paid in full.
(e) If at any time the Borrower shall propose to sell, grant a
security interest in, or otherwise transfer any interest in motor vehicle
receivables to any prospective purchaser, lender or other transferee, the
Borrower shall give to such prospective purchaser, lender, or other
transferee computer tapes, records, or print-outs (including any restored
from archives) that, if they shall refer in any manner whatsoever to any
Collateral shall indicate clearly that such Collateral is subject to a
first priority security interest in favor of the Custodian, for the
benefit of the Secured Parties.
SECTION 11.2 Other Liens or Interests. Except for the security interest
granted hereunder, the Borrower will not sell, pledge, assign or transfer to any
other Person, or grant, create, incur, assume or suffer to exist any Lien on the
Collateral or any interest therein, and the Borrower shall defend the right,
title, and interest of the Custodian (for the benefit of the Secured Parties),
the Investors and the Agent in and to the Collateral against all claims of third
parties claiming through or under the Borrower.
SECTION 11.3 Costs and Expenses. The Borrower shall pay all of its
reasonable costs and disbursements in connection with the performance of its
obligations hereunder and under the Transaction Documents.
SECTION 11.4 Reporting Requirements. The Borrower shall furnish, or cause
to be furnished, to the Agent, the Insurer and the Custodian:
(a) daily, a certificate in the form attached hereto as Exhibit D
(the "Borrowing Base Certificate") as of the preceding Business Day;
(b) as soon as available and in any event within 90 days (or next
succeeding Business Day if the last day of such period is not a Business
Day) after the end of each fiscal year, a copy of the annual 10-K report
and audited consolidated financial statements for such year for ACC and
its consolidated
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Subsidiaries, certified, in a manner acceptable to the Controlling Party
and the Agent, by independent public accountants acceptable to the
Controlling Party and the Agent and each other report or statement sent to
shareholders or publicly filed by ACC or the Borrower;
(c) as soon as available and in any event within 45 days (or next
succeeding Business Day if the last day of such period is not a Business
Day) after the end of each of the first three quarters of each fiscal year
of ACC, a consolidated balance sheet of ACC and its consolidated
Subsidiaries as of the end of such quarter and including the prior
comparable period, and consolidated statements of income and retained
earnings, and of cash flow, of ACC and its consolidated Subsidiaries for
such quarter and for the period commencing at the end of the previous
fiscal year and ending with the end of such quarter, certified by the
chief financial officer or chief accounting officer of ACC identifying
such documents as being the documents described in this paragraph (c) and
stating that the information set forth therein fairly presents the
financial condition of ACC and its consolidated Subsidiaries as of and for
the periods then ended, subject to year-end adjustments consisting only of
normal, recurring accruals and confirming that ACC is in compliance with
all financial covenants in this Agreement;
(d) as soon as possible and in any event within five days after the
occurrence of an Event of Default (including without limitation a material
adverse change in the financial condition of the Borrower as determined by
the Controlling Party and the Agent and notified in writing to the
Borrower) or an Unmatured Event of Default, the statement of the chief
executive officer of the Borrower setting forth complete details of such
Event of Default or Unmatured Event of Default and the action which the
Borrower has taken, is taking and proposes to take with respect thereto;
(e) promptly, from time to time, such other information, documents,
records or reports respecting the Transferred Receivables, the Other
Conveyed Property or the Financed Vehicles or the condition or operations,
financial or otherwise, of the Borrower, or ACC or any of its
Subsidiaries, as the Insurer (as long as no Insurer Default has occurred
and is continuing) and the Agent may, from time to time, reasonably
request.
SECTION 11.5 Tangible Net Worth. The Borrower shall maintain Tangible Net
Worth of at least $1,000,000.
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SECTION 11.6 Take-Out Securitization. The Borrower shall effect or cause
an Affiliate to effect a Take-Out Securitization no more than four months after
the Closing Date and thereafter no more than six months after the immediately
preceding Take-Out Securitization.
SECTION 11.7 Warehouse Facility. ACC shall maintain at all times after six
months following the Closing Date, no less than one Warehouse Facility in
addition to that provided under this Agreement.
ARTICLE XII
THE SERVICER
SECTION 12.1 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;
(b) The Servicer shall defend, indemnify and hold harmless the
Investors, the Agent, the Backup Servicer, their respective officers,
directors, agents and employees from and against any and all costs,
expenses, losses, damages, claims, liabilities, penalties, fines,
forfeitures and judgments, 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
Investor, the Agent, their respective officers, directors, agents and
employees from and against any taxes that may at any time be asserted
against any of them 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 and costs and expenses in defending against the same;
(d) The Servicer shall indemnify, defend and hold harmless the
Investors, the Agent, the Backup Servicer, their respective officers,
directors, agents and employees from and against any and all costs,
expenses, losses, claims, damages, and liabilities to the extent that such
cost, expense, loss, claim, damage, liability, penalty, fine, forfeiture
or judgment arose out of, or was imposed upon the Investors, the Agent or
the Backup Servicer through the breach of this Agreement by the Servicer,
the negligence, willful misfeasance or bad faith of the
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Servicer in the performance of its duties under this Agreement or by
reason of reckless disregard of its obligations and duties under this
Agreement;
(e) For purposes of this Section 12.1, in the event of the
termination of the rights and obligations of the Servicer (or any
successor thereto pursuant to Section 12.2) as Servicer pursuant to
Section 13.1, 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 13.3. The
provisions of this Section 12.1(e) shall in no way affect the survival
pursuant to Section 12.1(f) of the indemnification by the Servicer
provided by Sections 12.1(b) through 12.1(d); and
(f) 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 12.1 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;
excluding, however, (1) Indemnified Amounts to the extent determined by a court
of competent jurisdiction to have resulted from gross negligence or willful
misconduct on the part of any Indemnified Party or its agent or subcontractor,
(2) Indemnified Amounts to the extent solely due to non-payment by any Obligor
of an amount due and payable with respect to a Transferred Receivable, (3) any
loss in value of any Transferred Receivable or related Financed Vehicle or
Permitted Investment due to changes in market conditions or for other reasons
beyond the control of the Servicer or (4) any tax upon or measured by net income
on any Indemnified Party. Without limiting the foregoing, but subject to the
exclusions (1) through (4) above, the Servicer agrees to indemnify each
Indemnified Party for Indemnified Amounts arising out of or relating to:
(i) the breach of any representation or warranty made by the
Servicer (or any of its respective officers) under or in connection
with this Agreement or the other Transaction Documents, any
Servicer's Certificate, Borrowing Base Certificate or any other
information, report or certificate delivered by the Servicer
pursuant hereto or thereto, which shall have been false or incorrect
in any material respect when made or deemed made;
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(ii) the failure by the Servicer to comply in any material way
with any applicable law, rule or regulation with respect to any
Transferred Receivable or any Financed Vehicle, or the nonconformity
of any Transferred Receivable with any such applicable law, rule or
regulation;
(iii) any failure of the Servicer, or otherwise, to perform
its duties or obligations in accordance with the provisions of
Article VIII or any provision contained in any other Transaction
Document; or
(iv) the commingling of the proceeds of Collateral at any time
with other funds.
SECTION 12.2 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. 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 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 12.2(a) to the Insurer, the Agent and the Backup Servicer.
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 8.6 shall have been breached (for purposes
hereof, such representations and warranties shall speak as of the date of the
consummation of such transaction), (y) the Servicer shall have delivered to the
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Insurer and the Agent 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 12.2(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 Insurer and the
Agent 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 security
interest of the Custodian (for the benefit of the Secured Parties) in the
Transferred Receivables 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 12.3 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 the Borrower, the Investors or the Agent, 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 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. 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.
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SECTION 12.4 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 Insurer, the Agent and the Backup Servicer. The
Servicer also may at any time perform the specific duty of repossession of
Financed Vehicles through subcontractors 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 Controlling Party;
provided, however, that no such delegation or subcontracting duties by the
Servicer shall relieve the Servicer of its responsibility with respect to such
duties. Neither ACC nor any other party acting as Servicer hereunder shall
appoint any subservicer hereunder without the prior written consent of the
Insurer, the Agent and the Backup Servicer.
SECTION 12.5 Servicer and Backup Servicer Not to Resign. Subject to the
provisions of Section 12.2, 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 Controlling Party 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 Agent and, unless an Insurer Default
shall have occurred and be continuing, the Insurer. No resignation of the
Servicer shall become effective until the Backup Servicer or an entity
acceptable to the Controlling Party shall have assumed the responsibilities and
obligations of the Servicer. No resignation of the Backup Servicer shall become
effective until an entity acceptable to the Controlling Party 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 12.5, the Backup Servicer may petition a court for its removal.
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ARTICLE XIII
SERVICER TERMINATION EVENTS
SECTION 13.1 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 Borrower is the Servicer, the Borrower to deliver to the Custodian
any proceeds or payment required to be so delivered under the terms of
this Agreement (or, if ACC or an Affiliate of the Borrower is the
Servicer, under the Purchase and Sale Agreement) that continues unremedied
for a period of two Business Days (or, with respect to any Purchase
Amounts, one Business Day) after written notice is received by the
Servicer from the Agent or, without duplication, the Controlling Party or
after discovery of such failure by a Responsible Officer of the Servicer;
(b) Failure by the Servicer to deliver the Servicer's Certificate
required by Section 8.9 by 12:00 noon New York City time 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 12.2(a);
(d) Failure on the part of the Servicer or, so long as ACC or an
Affiliate of the Borrower is the Servicer, the Borrower, 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 Borrower, as the case
may be, set forth in this Agreement (or, as to ACC, if ACC is the
Servicer, the Purchase and Sale Agreement), which failure continues
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 Agent or the Insurer;
(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 Borrower) in an involuntary case under the Bankruptcy Code, 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 Borrower) or of any substantial part of
their respective properties or ordering the winding up or liquidation of
the affairs of the Servicer (or the Borrower) or the commencement of an
involuntary case under the
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Bankruptcy Code, 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;
(f) The commencement by the Servicer (or, if ACC or an Affiliate of
the Borrower is the Servicer, the Borrower) of a voluntary case under the
Bankruptcy Code, 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 Borrower is the
Servicer, the Borrower) 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
Borrower is the Servicer, the Borrower) or of any substantial part of its
property or the making by the Servicer (or, if ACC or an Affiliate of the
Borrower is the Servicer, the Borrower) of an assignment for the benefit
of creditors or the failure by the Servicer (or, if ACC or an Affiliate of
the Borrower is the Servicer, the Borrower) 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 Borrower is the Servicer, the Borrower)
in furtherance of any of the foregoing;
(g) Any representation, warranty or statement of the Servicer (or,
if ACC or an Affiliate of the Borrower is the Servicer, the Borrower) 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 the definition of "Eligible
Receivable"), and, within 30 days after written notice thereof shall have
been given to the Servicer (or, if ACC or an Affiliate of the Borrower is
the Servicer, the Borrower) by the Agent or the Insurer the circumstances
or condition in respect of which such representation, warranty or
statement was incorrect shall not have been eliminated or otherwise cured;
(h) So long as an Insurer Default shall not have occurred and be
continuing, the Insurer shall not have delivered a Servicer Extension
Notice pursuant to Section 8.14;
(i) So long as an Insurer Default shall not have occurred and be
continuing, an Insurance Agreement Event of Default shall have occurred;
(j) A claim is made under the Policy;
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(k) The average Servicer Delinquency Ratio for the preceding three
Collection Periods exceeds 8%; or
(l) The Loss Ratio exceeds 7%.
SECTION 13.2 Consequences of a Servicer Termination Event. If a Servicer
Termination Event shall occur and be continuing, the Controlling Party, by
written notice given to the Servicer, 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 Insurer shall not have delivered a
Servicer Extension Notice pursuant to Section 8.14, all authority, power,
obligations and responsibilities of the Servicer under this Agreement,
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 Section
8.8(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
Transferred Receivables and related documents to show the Custodian (for the
benefit of the Secured Parties) as lienholder or secured party, 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 Transferred 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 Transferred
Receivables. If requested by the Controlling Party, the Backup Servicer or
successor Servicer shall terminate each Lockbox Agreement and direct the
Obligors to make all payments under the Transferred Receivables directly to the
successor Servicer (in which event the successor Servicer shall process such
payments in accordance with Section 8.2(e)), or to a lockbox established by the
successor Servicer at the direction of the Insurer (unless an Insurer Default
shall have occurred and be continuing), at the prior Servicer's expense. 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
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the preceding sentence. The terminated Servicer shall grant the Agent, the
Backup Servicer and the Insurer reasonable access to the terminated Servicer's
premises at the terminated Servicer's expense.
SECTION 13.3 Appointment of Successor Servicer. (a) On and after (i) the
time the Servicer receives a notice of termination pursuant to Section 13.2 or
(ii) upon the resignation of the Servicer pursuant to Section 12.5 or (iii) the
receipt by the Backup Servicer (or any alternate successor Servicer appointed by
the Insurer pursuant to Section 13.3(b)), of written notice from the Insurer
that the Insurer is not extending the Servicer's term pursuant to Section 8.14,
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 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. 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 13.2
upon the occurrence of any Servicer Termination Event applicable to it as
Servicer.
(b) The Controlling Party may 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
Investors, the Borrower, ACC, the Person then serving as Backup Servicer
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 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 12.5, 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 13.2 or the resignation of the Servicer
pursuant to Section 12.5. If upon the termination of the Servicer pursuant
to Section 13.2 or the resignation of the Servicer pursuant to Section
12.5, the Controlling Party
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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 Insurer and such successor Servicer may
agree on additional compensation to be paid to such successor Servicer. In
addition, any successor Servicer shall be entitled to reasonable
transition expenses incurred in acting as successor Servicer.
ARTICLE XIV
FACILITY TERMINATION EVENTS; EVENTS
OF DEFAULT; THEIR EFFECT
SECTION 14.1 Facility Termination Events. Each of the following shall
constitute a Facility Termination Event under this Agreement:
(a) Default in the payment when due of any principal of any Advance,
which default shall continue unremedied for one Business Day, or default
in the payment of any other amount payable by the Borrower hereunder,
including, without limitation, any Yield on any Advance or any Fees;
(b) (i) The Borrower shall fail to perform or observe any other
term, covenant (other than the covenant contained in Section 11.5) or
agreement contained in this Agreement, or any other Transaction Document
on its part to be performed or observed and, except in the case of the
covenants and agreements contained in Sections 11.6 and 11.7, as to each
of which no grace period shall apply, any such failure shall remain
unremedied for 30 days after knowledge thereof or after written notice
thereof shall have been given by the Agent or the Insurer to the Borrower
or (ii) the Borrower shall fail to observe the covenant contained in
Section 11.5 for five consecutive days;
(c) Any representation or warranty of the Borrower made or deemed to
have been made hereunder or in any other Transaction Document or any other
writing or certificate furnished by or on behalf of the Borrower to the
Agent or the Insurer for purposes of or in connection with this Agreement
or any other
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Transaction Document (including any certificates delivered pursuant
to Section 7.1.3 and any Servicer's Certificate or Borrowing Base
Certificate delivered pursuant to Section 11.4) shall prove to have been
false or incorrect in any material respect when made or deemed to have
been made; provided that no breach shall be deemed to occur hereunder in
respect of any representation or warranty relating to any Eligible
Receivable if as a result thereof an Event of Default under Section
14.1(a) shall not occur.
(d) An Event of Bankruptcy shall have occurred and remained
continuing with respect to the Borrower or any member of the Borrower;
(e) The aggregate principal amount of all Advances outstanding
hereunder exceeds the Borrowing Base and such condition continues
unremedied for one Business Day (such excess referred to as the "Borrowing
Base Deficiency");
(f) The Internal Revenue Service shall file notice of a lien
pursuant to Section 6323 of the Internal Revenue Code with regard to any
of the assets of the Borrower and such lien shall not have been released
within 30 days, or the Pension Benefit Guaranty Corporation shall file
notice of a lien pursuant to Section 4068 of ERISA with regard to any of
the assets of the Borrower and such lien shall not have been released
within 30 days;
(g) (i) Any Transaction Document or any lien or security interest
granted thereunder by the Borrower, shall (except in accordance with its
terms), in whole or in part, terminate, cease to be effective or cease to
be the legally valid, binding and enforceable obligation of the Borrower;
or (ii) the Borrower or any other party shall, directly or indirectly,
contest in any manner such effectiveness, validity, binding nature or
enforceability; or (iii) any security interest securing any Obligation
shall, in whole or in part, cease to be a perfected first priority
security interest against the Borrower;
(h) A Servicer Termination Event shall have occurred;
(i) The average Delinquency Ratio for the preceding four Collection
Periods exceeds 2.5%;
(j) An Insurer Default shall have occurred; or
(k) A Secondary Rating Event shall have occurred.
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SECTION 14.2 Effect of Facility Termination Event.
(a) Optional Termination. Upon notice by the Agent to the Insurer or
the Insurer to the Agent that a Facility Termination Event (other than a
Facility Termination Event described in Section 14.1(d) has occurred, the
Agent or, except with respect to the Facility Termination Events set forth
in Sections 14.1(j) and (k), the Insurer may declare all or any portion of
the outstanding principal amount of the Advances and other Obligations to
be due and payable and/or the Facility (if not theretofore terminated) to
be terminated, whereupon the full unpaid amount of such Advances and other
Obligations which shall be so declared due and payable shall be and become
immediately due and payable, without further notice, demand or
presentment, and/or, as the case may be, the Facility shall terminate.
(b) Automatic Termination. Upon the occurrence of a Facility
Termination Event described in Section 14.1(d) or upon receipt by the
Agent of notice from the Insurer that a Servicer Termination Event
described in Section 13.1(i), the Facility Termination Date shall be
deemed to have occurred automatically, and all outstanding Advances under
this Agreement and all other Obligations under this Agreement shall become
immediately and automatically due and payable, all without presentment,
demand, protest, or notice of any kind.
SECTION 14.3 Rights Upon Event of Default. (a) If an Insurer Default shall
not have occurred and be continuing and an Event of Default shall have occurred
and be continuing, the Notes shall become immediately due and payable at 100% of
the outstanding principal amount of the Notes, together with accrued Yield
thereto. If an Event of Default shall have occurred and be continuing, the
Controlling Party may direct the Custodian to exercise any of the remedies
specified in the Custodial Agreement in respect of the Collateral. In the event
of any acceleration of any Notes by operation of this Section 14.3, the
Custodian shall continue to be entitled to make claims under the Policy pursuant
to the Custodial Agreement for payments on the Notes. Payments under the Policy
following acceleration of any Notes shall be applied by the Custodian:
FIRST: to holders of the Notes for amounts due and unpaid on the
Notes for Yield, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for Yield; and
SECOND: to holders of the Notes for amounts due and unpaid on the
Notes for principal, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for principal.
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(b) In the event any Notes are accelerated due to an Event of
Default, the Insurer shall have the right (in addition to its obligation
to make payments on the Notes in accordance with the Policy), but not the
obligation, to make payments under the Policy or otherwise of interest and
principal due on such Notes, in whole or in part, on any date or dates
following such acceleration as the Insurer, in its sole discretion, shall
elect.
(c) If an Insurer Default shall have occurred and be continuing and
an Event of Default shall have occurred and be continuing, the Agent in
its discretion may, or if so requested in writing by holders of the Notes
representing not less than a majority of the outstanding principal amount
of the Notes, declare by written notice to the Borrower that the Notes
have become due and payable, whereupon they shall become, immediately due
and payable at 100% of the outstanding principal amount of the Notes,
together with accrued Yield thereon.
(d) If an Insurer Default shall have occurred and be continuing,
then at any time after such declaration of acceleration of maturity has
been made and before a judgment or decree for payment of the money due has
been obtained by the Agent as hereinafter provided, the holders of Notes
representing a majority of the outstanding principal amount of the Notes,
by written notice to the Borrower and the Agent, may rescind and annul
such declaration and its consequences if:
(i) the Borrower has paid or deposited with the Agent a sum
sufficient to pay
(A) all payments of principal of and Yield on all Notes
and all other amounts that would then be due hereunder or upon
such Notes if the Event of Default giving rise to such
acceleration had not occurred; and
(B) all sums paid or advanced by the Agent hereunder and
the reasonable compensation, expenses, disbursements and
advances of the Agent and its agents and counsel; and
(ii) all Events of Default, other than the nonpayment of the
principal of the Notes that has become due solely by such
acceleration, have been cured or waived.
No such rescission shall affect any subsequent default or impair any right
consequent thereto.
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ARTICLE XV
THE AGENT
SECTION 15.1 Authorization and Action. The Investors hereby appoint CSFB,
and, pursuant to Section 15.4 hereof, the Custodian, agent for purposes of the
Transaction Documents and authorize CSFB, in such capacity, to take such action
on behalf under each Transaction Document and to exercise such powers, hereunder
and thereunder as are delegated to the Agent by the terms hereof and thereof,
together with such powers as are reasonably incidental thereto.
SECTION 15.2 Exculpation. Neither the Agent (acting in such capacity under
the Transaction Documents) nor any of its directors, officers, agents or
employees shall be liable to any Investor for any action taken or omitted to be
taken by it or them under or in connection with the Transaction Documents,
except for its or their own gross negligence or willful misconduct. Without
limiting the generality of the foregoing, the Agent: (a) may consult with legal
counsel (including counsel for the Borrower and the Servicer), independent
certified public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (b) makes no
warranty or representation to any Investor, and shall not be responsible to any
Investor, for any statements, warranties or representations made by the
Borrower, in or in connection with any Transaction Document; (c) shall not have
any duty to ascertain or to inquire as to the performance or observance of any
of the terms, covenants or conditions of any Transaction Document on the part of
the Borrower or Servicer or to inspect the property (including the books and
records) of the Borrower or Servicer; (d) shall not be responsible to any
Investor for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement, the Note, any other Transaction Document
or any other instrument or document provided for herein or delivered or to be
delivered hereunder or in connection herewith; and (e) shall incur no liability
under or in respect of any Transaction Document by acting upon any notice
(including notice by telephone), consent, certificate or other instrument or
writing (which may be by telex or facsimile transmission) believed by it to be
genuine and signed or sent by the proper party or parties.
SECTION 15.3 Agent and Affiliates. The Agent, including, but not limited
to, CSFB and the Custodian, and any of its Affiliates may generally engage in
any kind of business with the Borrower, the Servicer, the Backup Servicer, any
Obligor, any of their respective Affiliates and any Person who may do business
with or own securities of the
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Borrower, the Servicer, the Backup Servicer, any Obligor or any of their
respective Affiliates, all as if the Agent were not the Agent hereunder and
without any duty to account therefor to any Investor.
SECTION 15.4 Replacement Agent. Upon the occurrence of the Facility
Termination Date and the sale of the Note to a Person other than the Placement
Agent, CSFB or any Lender, the Custodian shall automatically become the Agent
hereunder.
ARTICLE XVI
ASSIGNMENTS
SECTION 16.1 Restrictions on Assignments. The Borrower may not assign its
rights hereunder or any interest herein without the prior written consent of the
Agent and neither the Insurer nor any Investor may assign its rights hereunder,
any Advance or the Note (or any portion thereof) to any Person without the prior
written consent of the Borrower or the Insurer (as the Borrower only, such
consent not to be unreasonably withheld); provided, however, that any Lender may
assign, or grant a security interest in, all or any portion of the Advances and
the Note to (i) CSFB or any of its Affiliates or (ii) any Person managed by CSFB
or any of its Affiliates, and (iii) and to any Person providing liquidity with
respect to this Agreement (each, an "Eligible Assignee"), in each case under
clauses (i), (ii) and (iii) above, without the prior written consent of the
Borrower or the Insurer; provided, further, however, that after the occurrence
of the Facility Termination Date, any Lender may, subject to the provisions of
Section 16.5, assign all or a portion of any Note held by it to a Person other
than those identified in clauses (i), (ii) and (iii) above without the prior
written consent of the Borrower or the Insurer; provided, further, however, that
if the Facility Termination Date shall have occurred as a result of the
occurrence of an Insurer Default or a Secondary Rating Event, the Borrower shall
have the right, but not the obligation, to bid in any public or private sale of
the Notes to purchase the Note from the Lenders.
Within five Business Days after notice to the Borrower of any proposed
assignment by an Investor for which the Borrower's consent is required, the
Borrower agrees to advise the Agent of its consent or non-consent thereto. If
the Borrower does not consent to such assignment by the end of such five
Business Day period, such Investor may immediately assign the Advances and/or
its Note (or portion thereof) that was subject to such proposal to an Eligible
Assignee referred to in either clause (i), (ii) or (iii) of the previous
paragraph. Subject to Section 16.2, all of the aforementioned assignments
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shall be upon such terms and conditions as such Investor and the assignee may
mutually agree.
SECTION 16.2 Documentation. Each Investor shall deliver to each assignee
an assignment, in such form as such Investor and the related assignee may agree,
duly executed by such Investor assigning any such Advance to the assignee, such
Investor shall promptly execute and deliver all further instruments and
documents, and take all further action, that the assignee may reasonably
request, in order to perfect, protect or more fully evidence the assignee's
right, title and interest in and to such Advance, and to enable the assignee to
exercise or enforce any rights hereunder or under the Note evidencing such
Advance.
SECTION 16.3 Rights of Assignee. Upon the foreclosure of any assignment of
any Advances made for security purposes, or upon any other assignment of any
Advance from any Investor pursuant to this Article XVI, the respective assignee
receiving such assignment shall have all of the rights of such Investor
hereunder with respect to such Advances and all references to the Investors in
Section 6.1 shall be deemed to apply to such assignee.
SECTION 16.4 Notice of Assignment. Each Investor shall provide notice to
the Borrower of any assignment hereunder by such Investor to any assignee. Each
Investor authorizes the Agent to, and the Agent agrees that it shall, endorse
the Note to reflect any assignments made pursuant to this Article XVI or
otherwise.
SECTION 16.5 Registration; Registration of Transfer and Exchange. (a) The
Custodian shall keep a register (the "Note Register") in which, subject to such
reasonable regulations as it may prescribe, the Custodian shall provide for the
registration of Notes and of transfer of Notes. The Custodian is hereby
appointed "Note Registrar" for the purpose of registering Notes and transfers of
Notes as herein provided.
(b) Each person who has or who acquired a Note shall be deemed by
the acceptance of acquisition of such Notes to have agreed to be bound by
the provisions of this Section 16.5. No Note may be transferred, and the
Custodian shall not register the transfer of a Note, unless the proposed
transferee shall have delivered to the Custodian either (i) evidence
satisfactory to it that the transfer of a Note is exempt from registration
or qualification under the Securities Act of 1933, as amended, and all
applicable state securities laws and that the transfer does not constitute
a "prohibited transaction" under ERISA or (ii) an express agreement by the
proposed transferee to be bound by and to abide by the provisions of this
Section 16.5, the restrictions noted on the face of such Note.
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(c) At the option of the holder thereof, any Note may be exchanged
for one or more new Notes of any authorized denominations and of a like
class and aggregate principal amount at an office or agency of the
Borrower. Whenever any Notes are so surrendered for exchange, the Borrower
shall execute and the Custodian shall authenticate and deliver the new
Notes which the holder making the exchange is entitled to receive.
(d) Upon surrender for registration of transfer of any Note at an
office or agency of the Borrower, the Borrower shall execute and the
Custodian shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Notes of any authorized
denominations and of a like class and aggregate principal amount.
(e) All Notes issued upon any registration of transfer or exchange
of any Note in accordance with the provisions of this Agreement shall be
the valid obligations of the Borrower, evidencing the same debt, and
entitled to the same benefits under this Agreement, as the Note(s)
surrendered upon such registration of transfer or exchange.
(f) Every Note presented or surrendered for registration of transfer
or for exchange shall (if so required by the Borrower or the Custodian) be
fully endorsed, or be accompanied by a written instrument of transfer in
form satisfactory to the Note Registrar, duly executed by the holder
thereof or his attorney duly authorized in writing. Each such Note shall
be accompanied by a statement providing the name of the transferee and
indicating whether the transferee is subject to income tax backup
withholding requirements and whether the transferee is the sole beneficial
owner of such Notes.
(g) No service charge shall be made for any registration of transfer
or exchange of Notes, but the Borrower may require payment from the
transferee holder of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any
registration of transfer of exchange of Notes, other than exchanges
pursuant to this Section 16.5.
(h) The holders of the Notes shall be bound by the terms and
conditions of this Agreement.
SECTION 16.6 Mutilated, Destroyed, Lost and Stolen Notes. (a) If any
mutilated Note is surrendered to the Custodian, the Borrower shall execute and
the Custodian shall
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authenticate and deliver in exchange therefor a new Note of like class and tenor
and principal amount and bearing a number not contemporaneously outstanding.
(b) If there shall be delivered to the Borrower and the Custodian
prior to the payment of the Notes (i) evidence to their satisfaction of
the destruction, loss or theft of any Note and (ii) such security or
indemnity as may be required by them to save each of them and any agent of
either of them harmless, then, in the absence of notice to the Borrower or
the Custodian that such Note has been acquired by a bona fide purchaser,
the Borrower shall execute and the Custodian shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Note, a new Note of
like class, tenor and principal amount and bearing a number not
contemporaneously outstanding.
(c) Upon the issuance of any new Note under this Section 16.6, the
Borrower may require the payment from the transferor holder 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 Custodian) connected therewith.
(d) Every new Note issued pursuant to this Section 16.6 and in
accordance with the provisions of this Agreement, in lieu of any
destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Borrower, whether or not the destroyed, lost
or stolen Note shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Agreement equally and proportionately
with any and all other Notes duly issued hereunder.
(e) The provisions of this Section 16.6 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 16.7 Persons Deemed Owners. The Borrower, the Servicer, the
Custodian and any agent of the Borrower, the Servicer or the Custodian may treat
the holder of any Note as the owner of such Note for all purposes whatsoever,
whether or not such Note may be overdue, and none of the Borrower, the Servicer,
the Custodian and any agent of the Borrower, the Servicer or the Custodian shall
be affected by notice to the contrary; provided that payment on the Stated
Maturity Date shall be made to the holder as of the preceding Record Date.
SECTION 16.8 Cancellation. All Notes surrendered for payment or
registration of transfer or exchange shall be delivered to the Custodian and
shall be promptly canceled
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by it and may be destroyed pursuant to the Custodian's securities retention
policies. The Borrower shall promptly deliver to the Custodian for cancellation
any Notes previously authenticated and delivered hereunder which the Borrower
may have acquired in any manner whatsoever, and all Notes so delivered shall be
promptly canceled by the Custodian. No Notes shall be authenticated in lieu of
or in exchange for any Notes canceled as provided in this Section 16.8, except
as expressly permitted by this Agreement.
ARTICLE XVII
INDEMNIFICATION
SECTION 17.1 General Indemnity of the Borrower. Without limiting
any other rights which any such Person may have hereunder or under applicable
law, the Borrower hereby agrees to indemnify the Agent, the Investors, the
Custodian, the Backup Servicer and each Eligible Assignee and each of their
Affiliates, and each of their respective successors, transferees, participants
and assigns and all officers, directors, shareholders, controlling persons,
employees and agents of any of the foregoing (each of the foregoing Persons
being individually called an "Indemnified Party"), forthwith on demand, from and
against any and all damages, losses, claims, liabilities and related costs and
expenses, including reasonable attorneys' fees and disbursements (all of the
foregoing being collectively called "Indemnified Amounts") awarded against or
incurred by any of them arising out of or relating to any Transaction Document
or the transactions contemplated thereby or the use of proceeds therefrom by the
Borrower, including (without limitation) in respect of the funding of any
Advance or in respect of any Transferred Receivable, excluding, however, (a)
Indemnified Amounts to the extent determined by a court of competent
jurisdiction to have resulted from gross negligence or willful misconduct on the
part of any Indemnified Party or its agent or subcontractor, (b) non-payment by
any Obligor of an amount due and payable with respect to a Transferred
Receivable, (c) any loss in value of any Financed Vehicle or Permitted
Investment due to changes in market conditions or for other reasons beyond the
control of the Borrower or (d) any tax upon or measured by net income on any
Indemnified Party. Without limiting the foregoing, but subject to the exclusions
(a) through (d) above, the Borrower agrees to indemnify each Indemnified Party
for Indemnified Amounts arising out of or relating to:
(i) the grant of a security interest to the Custodian (for the
benefit of the Secured Parties);
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(ii) the breach of any representation or warranty made by the
Borrower (or any of its officers) under or in connection with this
Agreement or the other Transaction Documents, any Servicer's
Certificate, Borrowing Base Certificate or any other information,
report or certificate delivered by the Borrower or Servicer pursuant
hereto or thereto, which shall have been false or incorrect in any
material respect when made or deemed made;
(iii) the failure by the Borrower to comply in any material
way with any applicable law, rule or regulation with respect to any
Transferred Receivable or any Financed Vehicle, or the nonconformity
of any Transferred Receivable with any such applicable law, rule or
regulation;
(iv) the failure to vest and maintain vested in the Custodian,
for the benefit of the Secured Parties, a first-priority security
interest in all the Collateral, free and clear of any Lien, other
than a Lien arising solely as a result of an act of any Investor, or
any assignee of any Investor;
(v) the failure to file, or any delay in filing, financing
statements or other similar instruments or documents under the UCC
of any applicable jurisdiction or other applicable laws with respect
to any Collateral;
(vi) any dispute, claim, offset or defense (other than
discharge in bankruptcy) of an Obligor to the payment of any
Transferred Receivable (including, without limitation, a defense
based on such Transferred Receivable not being a legal, valid and
binding obligation of such Obligor enforceable against it in
accordance with its terms);
(vii) any failure of ACC or an Affiliate of the Borrower, as
Servicer, or otherwise, to perform its duties or obligations in
accordance with the provisions of Article VIII or any provision
contained in any Transaction Document;
(viii) any claim involving products liability that arises out
of or relates to merchandise or services that are the subject of any
Transferred Receivable or strict liability claim in connection with
any Financed Vehicle;
(ix) any tax or governmental fee or charge (but not including
taxes upon or measured by net income), all interest and penalties
thereon or with respect thereto, and all out-of-pocket costs and
expenses, including the reasonable fees and expenses of counsel in
defending against the same,
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which may arise by reason of the making, maintenance or funding,
directly or indirectly, of any Advance, or any other interest in the
Collateral; or
(x) the commingling of the proceeds of Collateral at any time
with other funds.
SECTION 17.2 [Intentionally left blank]
SECTION 17.3 Sale. (a) If for any reason (other than the exclusions (a)
through (d) set forth in the first paragraph of Section 17.1) the
indemnification provided above in Section 17.1 is unavailable to an Indemnified
Party or is insufficient to hold an Indemnified Party harmless, then the
Borrower shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, claim, damage or liability in such proportion as
is appropriate to reflect not only the relative benefits received by such
Indemnified Party, on the one hand, and the Borrower, on the other hand, but
also the relative fault of such Indemnified Party, on the one hand, and the
Borrower, on the other hand, as well as any other relevant equitable
considerations.
(b) If for any reason (other than the exclusions (1) through (4) set
forth in Section 12.1(f)) the indemnification provided above in Section
12.1 is unavailable to an Indemnified Party or is insufficient to hold an
Indemnified Party harmless, then the Servicer shall contribute to the
amount paid or payable by such Indemnified Party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect
not only the relative benefits received by such Indemnified Party, on the
one hand, and the Servicer, on the other hand, but also the relative fault
of such Indemnified Party, on the one hand, and the Servicer, on the other
hand, as well as any other relevant equitable considerations.
ARTICLE XVIII
MISCELLANEOUS
SECTION 18.1 No Waiver; Remedies. No failure on the part of any Investor,
the Agent, any Indemnified Party or any Affected Person to exercise, and no
delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by any of them of any
right, power or remedy hereunder preclude any other or further exercise thereof,
or the exercise of any other right, power or remedy. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
Without limiting the foregoing, each Eligible Assignee
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is hereby authorized by the Borrower at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by it to or for the credit or the account
of the Borrower, now or hereafter existing under this Agreement, to the Agent,
any Affected Person, any Indemnified Party or any Investor or their respective
successors and assigns.
SECTION 18.2 Amendments, Waivers. No amendment, modification or waiver of,
or consent with respect to, any provision of this Agreement and any Schedules
hereto, or the Note shall in any event be effective unless the same shall be in
writing and signed and delivered by (i) the Borrower, the Insurer and the Agent
(with respect to an amendment), (ii) the Agent and the Insurer (with respect to
a waiver or consent) or the Borrower (with respect to a waiver or consent by
it), or (iii) the Agent and the Insurer (with respect to a waiver of any Event
of Default), as the case may be, and then any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 18.3 Notices, Etc. All notices and other communications provided
for hereunder shall, unless otherwise stated herein, be in writing (including
facsimile communication) and shall be personally delivered or sent by certified
mail, postage prepaid, or by facsimile, to the intended party at the address or
facsimile number of such party set forth under its name on the signature pages
hereof or at such other address or facsimile number as shall be designated by
such party in a written notice to the other parties hereto. All such notices and
communications shall be effective, (a) if personally delivered, when received,
(b) if sent by certified mail, three Business Days after having been deposited
in the mail, postage prepaid, (c) if sent by overnight courier, one Business Day
after having been given to such courier, and (d) if transmitted by facsimile,
when sent, receipt confirmed by telephone or electronic means, except that
notices and communications pursuant to Section 2.2 shall not be effective until
received.
SECTION 18.4 Costs, Expenses and Taxes. (a) In addition to the rights of
indemnification granted under Section 17.1, the Borrower agrees to pay on demand
all reasonable costs and expenses in connection with the preparation, execution,
delivery and administration of this Agreement, the liquidity asset purchase
agreement or other liquidity support facility and the other documents and
agreements to be delivered hereunder, and any amendments, waivers or consents
executed in connection with this Agreement and the liquidity asset purchase
agreement or other liquidity support facility, including, without limitation,
the reasonable fees and out-of-pocket expenses of counsel for the Agent, CSFB,
the Investors and their respective Affiliates with respect thereto and with
respect to advising the Agent, CSFB, the Investors and their respective
Affiliates as to
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their rights and remedies under this Agreement and the liquidity asset purchase
agreement or other liquidity support facility, and all costs and expenses, if
any (including reasonable counsel fees and expenses), of the Agent, CSFB, the
Investors and their respective Affiliates, in connection with the enforcement of
this Agreement and the liquidity asset purchase agreement or other liquidity
support facility and the other documents and agreements to be delivered
hereunder.
(b) In addition, the Borrower shall pay (i) any and all commissions
of placement agents and commercial paper dealers in respect of commercial
paper notes issued to fund the making or maintenance of any Advance, (ii)
any and all reasonable costs and expenses of any issuing and paying agent
or other Person responsible for the administration of Alpine's commercial
paper program in connection with the preparation, completion, issuance,
delivery or payment of commercial paper notes issued to fund the making or
maintenance of any Advance, and (iii) any and all stamp and other taxes
and fees payable in connection with the execution, delivery, filing and
recording of this Agreement or the other documents or agreements to be
delivered hereunder, and agrees to save each Indemnified Party harmless
from and against any liabilities with respect to or resulting from any
delay in paying or omission to pay such taxes and fees.
SECTION 18.5 Binding Effect; Survival. This Agreement shall be binding
upon and inure to the benefit of the Borrower, the Investors, the Agent and
their respective successors and assigns, and the provisions of Article VI and
Article XVII shall inure to the benefit of the Affected Persons and the
Indemnified Parties, respectively, and their respective successors and assigns;
provided, however, nothing in the foregoing shall be deemed to authorize any
assignment not permitted by Article XVI. This Agreement shall create and
constitute the continuing obligations of the parties hereto in accordance with
its terms, and shall remain in full force and effect until such time, after the
Facility Termination Date when all Obligations have been finally and fully paid
and performed. The rights and remedies with respect to any breach of any
representation and warranty made by the Borrower pursuant to Article IX and the
indemnification and payment provisions of Article VI and Article XVII shall be
continuing and shall survive any termination of this Agreement and any
termination of ACC's rights to act as Servicer hereunder or under any other
Transaction Document.
SECTION 18.6 Captions and Cross References. The various captions
(including, without limitation, the table of contents) in this Agreement are
provided solely for convenience of reference and shall not affect the meaning or
interpretation of any provision of this Agreement. Unless otherwise indicated,
references in this Agreement to any Section, Schedule or Exhibit are to such
Section of or Schedule or Exhibit to this
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Agreement, as the case may be, and references in any Section, subsection, or
clause to any subsection, clause or subclause are to such subsection, clause or
subclause of such Section, subsection or clause.
SECTION 18.7 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
SECTION 18.8 Governing Law. THIS AGREEMENT AND THE NOTE SHALL BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO ANY OTHERWISE APPLICABLE CONFLICT OF LAW PRINCIPLES.
SECTION 18.9 Counterparts. This Agreement may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
but all of which shall constitute together but one and the same agreement.
SECTION 18.10 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT,
OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF THE BORROWER, THE AGENT, THE INVESTORS OR ANY OTHER
AFFECTED PERSON. THE BORROWER, ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL
AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF
EACH OTHER TRANSACTION DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION
IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE INVESTORS ENTERING INTO THIS
AGREEMENT AND EACH SUCH OTHER TRANSACTION DOCUMENT.
SECTION 18.11 Third Party Beneficiary. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. The 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 to enforce such provisions of this
Agreement so long as no Insurer Default shall have occurred and be continuing.
Except as expressly stated otherwise in the Agreement
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any right of the Insurer to direct, appoint, consent to, approve of, or take any
action under the Agreement or the Custodial Agreement, shall be exercised by the
Insurer in its sole and absolute discretion.
SECTION 18.12 No Proceedings. (a) Each of the Borrower, the
Servicer, the Backup Servicer, each Investor (other than Alpine) and the Insurer
hereby agrees that it will not institute against Alpine, or join any other
Person in instituting against Alpine, any insolvency proceeding (namely, any
proceeding of the type referred to in the definition of Event of Bankruptcy) so
long as any commercial paper or other senior indebtedness issued by Alpine shall
be outstanding or there shall not have elapsed one year plus one day since the
last day on which any such commercial paper or other senior indebtedness shall
be outstanding. The foregoing shall not limit such Person's right to file any
claim in or otherwise take any action with respect to any insolvency proceeding
that was instituted by any Person other than such Person.
(b) Each of the Servicer, the Backup Servicer, each Investor, the
Agent, the Insurer and any assignee of the Note hereby agrees that it will
not institute against Alpine or the Borrower, or join any other Person in
instituting against Alpine or the Borrower, any insolvency proceeding
(namely, any proceeding of the type referred to in the definition of Event
of Bankruptcy) so long as, in the case of Alpine, any commercial paper or
other senior indebtedness issued by Alpine shall be outstanding or there
shall not have elapsed one year plus one day since the last day on which
any such commercial paper or other senior indebtedness shall be
outstanding and, in the case of the Borrower, any Advances or other
amounts due from the Borrower hereunder shall be outstanding or there
shall not have elapsed one year plus one day since the last day on which
any such Advances or other amounts shall be outstanding. The foregoing
shall not limit such Person's right to file any claim in or otherwise take
any action with respect to any insolvency proceeding that was instituted
by any Person other than such Person.
SECTION 18.13 ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER TRANSACTION
DOCUMENTS EXECUTED AND DELIVERED HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES HERETO AND THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
SECTION 18.14 Preference Claims. (a) In the event that the Custodian or
the Agent has received a certified copy of an order of the appropriate court
that any amount
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paid on a Note has been avoided in whole or in part as a preference payment
under applicable bankruptcy law, the Custodian or the Agent shall so notify the
Insurer and shall comply with the provisions of the Policy to obtain payment by
the Insurer of such avoided payment. The Agent shall furnish to the Insurer its
records evidencing the payments of principal of and interest on Notes, if any,
which have been made by the Agent and subsequently recovered from Investors, and
the dates on which such payments were made. Pursuant to the terms of the Policy,
the Insurer will make such payment on behalf of the Investors to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the Order
(as defined in the Policy) and not to the Agent or any Investor directly (unless
an Investor has previously paid such payment to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy, in which case the Insurer will
make such payment to the Agent for distribution to such Investor upon proof of
such payment reasonably satisfactory to the Insurer).
(b) The Agent shall promptly notify the Insurer of any proceeding or
the institution of any action (of which the Agent 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 Notes.
Each Investor, by its purchase of Notes, and the Agent hereby agree that
so long as an Insurer Default shall not have occurred and be continuing,
the 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, supersedes or performance bond pending any such appeal at
the expense of the Insurer, but subject to reimbursement as provided in
the Indemnity Agreement. In addition, and without limitation of the
foregoing, as set forth in Section 30(b) of the Custodial Agreement, the
Insurer shall be subrogated to, and each Investor and the Agent hereby
delegate and assign, to the fullest extent permitted by law, the rights of
the Agent and each Investor in the conduct of any proceeding with 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 18.15 Subrogation. Any and all amounts claimed under the Policy
and disbursed by the Custodian from claims made under the Policy shall not be
considered payment by the Borrower with respect to such Notes or otherwise, and
shall not discharge the obligations of the Borrower with respect thereto. The
Insurer shall, to the extent it makes any payment with respect to the Notes or
the Post Termination Fee, become subrogated to the rights of the recipients of
such payments to the extent of such payments.
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Subject to and conditioned upon any payment with respect to the Notes or the
Post Termination Fee by or on behalf of the Insurer, the Custodian shall assign
to the Insurer all rights to the payment of Yield or principal with respect to
the Notes or the Post Termination Fee which are then due for payment to the
extent of all payments made by the Insurer, and the Insurer may exercise any
option, vote, right, power or the like with respect to the Notes to the extent
that it has made payment of principal and Yield pursuant to the Policy. To
evidence such subrogation, the Custodian shall note the Insurer's rights as
subrogee upon the Note Register upon receipt from the Insurer of proof of
payment by the Insurer hereunder and under the Policy. The foregoing subrogation
shall in all cases be subject to the rights of the Investors to receive all
payments in respect of the Notes.
ARTICLE XIX
THE CUSTODIAN AS AGENT
The provisions of this Article XIX shall apply only to the extent that the
Custodian becomes the Agent following the Remarketing Date.
SECTION 19.1 Duties of the Agent. (a) Subject to paragraph (c) of this
Section 19.1, the Agent undertakes to perform as Agent such duties and only such
duties as are specifically set forth in this Agreement.
(b) The Agent, upon receipt of any resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments
furnished to the Agent 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.
(c) No provision of this Agreement shall be construed to relieve the
Agent 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 Agent shall be
determined solely by the express provisions of this Agreement, the
Agent 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 Agent and, in the absence of bad faith on the part of
the Agent, the Agent may conclusively rely as to the
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truth of the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions furnished to
the Agent and conforming to the requirements of this Agreement;
(ii) the Agent shall not be liable for an error of judgment
made in good faith by a Responsible Officer of the Agent, unless it
shall be proven that the Agent was negligent in performing its
duties in accordance with the terms of this Agreement;
(iii) the Agent 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 Agent shall not be liable for any action it takes or
omits to take in good faith at the direction of the Controlling
Party or the holders of the Notes; provided that the Agent 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 Agent
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 Agent 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 Back-Up Servicer
(if the Agent and the Back-up Servicer are the same entity) 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 Agent 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, unless a Responsible Officer obtains actual knowledge of
such failure (it being understood that knowledge of the Servicer is not
attributable to the Agent) or the Agent receives written notice of such
failure from the Servicer or any holders of the Notes.
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(f) Except for actions expressly authorized by this Agreement, the
Agent shall take no action reasonably likely to impair the security
interests created or existing under any Receivable or Finance Vehicle or
to impair the value of any Receivable or Financed Vehicle.
SECTION 19.2 Certain Matters Affecting the Agents. Except as otherwise
provided in Section 19.1(c):
(a) The Agent 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 Agent 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 the Agent under this Agreement in
good faith and in accordance with such Opinion of Counsel;
(c) Notwithstanding anything to the contrary, the Agent 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 holders of the Notes pursuant to the provisions of
this Agreement unless such holders shall have furnished to the Agent
security or indemnity satisfactory to the Agent against the costs,
expenses and liabilities that may be incurred therein or thereby;
provided, however, that the Agent 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 Agent 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 documents, unless requested in writing to do so by
holders of Notes evidencing not less than 25% of the outstanding principal
balance of the Notes; provided, however, that if the payment within a
reasonable time to the Agent of the costs, expenses or liabilities likely
to be incurred by it in the making of such investigation is, in the
opinion of the Agent, not reasonably assured to the Agent by the security
afforded to it by the terms of this Agreement, the Agent may require
indemnity satisfactory to it against such cost, expense or liability as a
condition to so proceeding; the
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reasonable expense of every such examination shall be paid by the Person
making such request or, if paid by the Agent, shall be reimbursed by the
Person making such request upon demand;
(e) The Agent may execute any of the trusts or powers under this
Agreement or perform any duties under this Agreement either directly or by
or through agents or attorneys or custodians. The Agent shall not be
responsible for any misconduct or negligence on the part of any agent or
attorney appointed with due care by the Agent. The Agent shall not be
responsible for any misconduct or negligence attributable to the acts or
omissions of the Servicer;
(f) The Agent may rely, as to factual matters relating to the
servicer, on an Officer's Certificate of the Servicer; and
(g) The Agent shall not be required to take any action or refrain
from taking any action under this Agreement, or any Transaction Document
referred to herein, nor shall any provision of this Agreement or any such
Transaction Document be deemed to impose a duty on the agent to take
action, if the Agent shall have been advised by counsel that such action
is contrary to the terms of this Agreement or any Transaction Document or
is contrary to law.
SECTION 19.3 Agent Not Liable for Notes or Receivables. The Agent makes no
representations as to the validity or sufficiency of this Agreement or of the
Notes (other than the execution of the Notes or of any Receivable or Transaction
Document, except to the extent otherwise expressly provided herein. The Agent
shall at no time (except during such time, if any, as it is acting a successor
Servicer) have any responsibility or liability for or with respect to the
legality, validity or 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 Collateral or its ability to generate the
payments to be distributed to holders of the Notes under this Agreement,
including, without limitation, the existence, condition, location and ownership
of any Financed Vehicle; the performance or enforcement of any Receivable; the
compliance by the Seller, the Servicer or the Custodian with any covenant or the
breach by the Seller or 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 Agent'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 Agent shall remain otherwise responsible
for any Collateral that it may hold directly); the acts or omissions of the
Servicer, the Custodian (if other
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than the Agent), the Seller or any Obligor, any action of the Servicer taken in
the name of the Agent; or any action by the Agent taken at the instruction of
the Servicer, the Seller, or the holders of Notes holding the requisite
percentage of Notes; provided, however, that the foregoing shall not relieve the
Agent of its obligations to perform its duties under this Agreement, whether as
Agent or as Back-up Servicer. The Agent shall not be accountable for the use or
application by the Seller of any of the Notes or of the proceeds of such Notes,
or for the use or application of any funds paid to the Servicer in respect of
the Transferred Receivables prior to the time such funds are deposited in the
Collection Account.
SECTION 19.4 Agent May Own Notes. The Agent in its individual or any other
capacity may become the owner or pledgee of Notes with the same rights as it
would have if it were not the Agent and may deal with the Servicer in banking
transactions with the same rights as it would have if it were not the Agent.
SECTION 19.5 Agent's Indemnification. The Borrower and the Servicer shall
indemnify, defend, and hold harmless the Agent and the Back-up 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
negligence (except for errors in judgment) of the Agent or the Back-up Servicer,
respectively. In addition, the Borrower in Section 17.1 has agreed to indemnify
the Agent with respect to certain matters. The provisions of this Section 19.5,
(i) shall not terminate or be deemed released upon the resignation or
termination of ACC Consumer Finance Corporation as the Servicer, (ii) shall
survive any termination of this Agreement and (iii) shall continue for the
benefit of any trustee which has resigned or been removed.
SECTION 19.6 Eligibility Requirements for Agent. The Agent 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. 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 19.6,
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 agent shall cease to be eligible in
accordance with the provisions of this Section 19.6, the Agent shall resign
immediately in the manner and with the effect specified in Section 19.6.
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SECTION 19.7 Resignation or Removal of Agent. (a) Subject to the
provisions of subsection (c) of this Section 19.7, the Agent may at any time
resign from the trusts created by this Agreement by giving 30 days' written
notice thereof to the Servicer and the Borrower. Upon receiving such notice of
resignation, the Servicer, shall promptly appoint a successor Agent by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
resigning Agent and one copy to the successor Agent. If no successor Agent shall
have been so appointed and have accepted appointment within thirty (30) days
after the giving of such notice of resignation, the resigning Agent may petition
any court of competent jurisdiction for the appoint of a successor Agent.
(b) If at any time the Agent shall cease to be eligible in
accordance with the provisions of this Section 19.7 and shall fail to
resign after written request therefor by the Servicer or the Borrower, or
if at any time the Agent shall be legally unable to act, or shall be
adjudged a bankrupt or insolvent or a receiver of the Agent or of its
property shall be appointed or any public officer shall take charge or
control of the Agent or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then the Servicer or the
Borrower shall remove the Agent. If the Servicer or the Borrower, as the
case may be, removed the Agent under the authority of the immediately
preceding sentence, the Servicer or the Borrower, as the case may be,
shall promptly appoint a successor Agent by written instrument, in
duplicate, one copy of which instrument shall be delivered to the Agent so
removed and one copy to the successor Agent. The Servicer or Agent, as the
case may be, shall also pay all fees due and owing to the outgoing Agent.
(c) Any resignation or removal of the Agent and appointment of a
successor Agent pursuant to any of the provisions of this Section 19.7
shall not become effective until acceptance of appointment by the
successor agent as provided in Section 19.8.
(d) If the Agent and the Back-up Servicer shall be the same Person
and the rights and obligations of the Back-up Servicer shall have been
terminated, then the Controlling Party shall have the option, by sixty
(60) days' prior notice in writing to the Borrower, the Seller, the
Servicer and the Agent to remove the Agent.
SECTION 19.8 Successor Agent. Any successor Agent appointed as provided in
Section 19.7 shall execute, acknowledge and deliver to the Servicer, and to its
predecessor Agent an instrument accepting such appointment under this Agreement,
and
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thereupon the resignation or removal of the predecessor Agent shall become
effective and such successor agent, without any further act, deed or conveyance
(except as provided below), shall become fully vested with all the rights,
power, duties and obligations of its predecessor under this Agreement, with like
effect as if originally named as Agent; but, on request of the Servicer, or the
successor Agent, such predecessor Agent shall, upon payment of its charges then
unpaid, execute and deliver an instrument transferring to such successor Agent
all of the rights, powers and trusts of the Agent so ceasing to act, and shall
duly assign, transfer and deliver to such successor agent all property and money
held by such agent so ceasing to act hereunder. Upon request of any such
successor Agent, the Borrower shall execute any and all instruments for more
fully and certainly vesting in and confirming to such successor Agent all such
rights, powers and trusts. The predecessor Agent shall deliver to the successor
Agent all documents and statements held by it under this Agreement or any
Transaction Document; and the predecessor Agent and the other parties to the
Transaction Documents shall amend any Transaction Document to make the successor
Agent the successor to the predecessor Agent thereunder; and the Servicer and
the predecessor Agent 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 Agent all such rights, powers, duties and
obligations. No successor Agent shall accept appointment as provided in this
Section 19.8 unless at the time of such acceptance such successor Agent shall be
eligible under the provisions of Section 19.6. Upon acceptance of appointment by
a successor Agent as provided in this Section 19.8, the Borrower shall mail
notice by first-class mail of the successor of such Agent and the address of the
successor Agent's corporate trust office under this Agreement to all holders of
Notes at their addresses as shown in the Note Register. If the Borrower fails to
mail such notice within ten (10) days after acceptance of appointment by the
successor Agent, the successor Agent shall cause such notice to be mailed at the
expense of the Agent.
SECTION 19.9 Merger or Consolidation of Agent. Any corporation into which
the Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Agent shall be a party,
or any corporation succeeding to the corporate trust business of the Agent,
shall be the successor of the Agent under this Agreement, provided such
corporation shall be eligible under the provisions of Section 19.6, 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 Agent or its successor hereunder shall provide the Servicer
with prompt notice of any such transaction.
SECTION 19.10 Appointment of Co-Agent or Separate Agent. (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 Collateral or any
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Financed Vehicle may at the time be located, the Agent, with the consent of the
Servicer shall have the power and may execute and deliver all instruments to
appoint one or more Persons approved by the Agent to act as co-agent or
co-agents, jointly with the Agent, or separate agent or separate agents, of all
or any part of the Collateral, and to vest in such Person or Persons, in such
capacity and for the benefit of the Investors, such title to the Collateral, or
any part thereof, and, subject to the other provisions of this Section 19.10,
such powers, duties, obligations, rights and trusts as the Servicer and the
Agent may consider necessary or desirable. If the Servicer shall not have
consented to such appointment within fifteen (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 shall not be required. No
co-agent or separate agent under this Agreement shall be required to meet the
terms of eligibility as a successor agent under Section 19.6 and no notice to
holders of Notes of the appointment of any co-agent or separate agent shall be
required under Section 19.8. Every separate agent and co-agent 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 Agent shall be conferred or imposed upon and
exercised or performed by the Agent and such separate agent or
co-agent jointly (it being understood that such separate agent or
co-agent is not authorized to act separately without the Agent
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 Agent, the Agent 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 Collateral or
any portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate agent or co-agent, but solely at
the direction of the Agent;
(ii) No trustee under this Agreement shall be personally
liable by reason of any act or omission of any other agent under
this Agreement; and
(iii) The Servicer and the Agent acting jointly may at any
time accept the resignation of or remove any separate agent or
co-agent.
(b) Any notice, request or other writing given to the Agent shall be
deemed to have been given to each of the then separate agent and co-agent,
as effectively as if given to each of them. Every instrument appointing
any separate agent or co-agent shall refer to this Agreement and the
conditions of this Article XIX. Each separate agent and co-agent, upon its
acceptance of the trusts
110
<PAGE> 118
conferred, shall be vested with the estates of property specified in its
instrument of appointment, either jointly with the Agent 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
Agent. Every such instrument shall be filed with the Agent and a copy
thereof given to the servicer.
(c) Any separate agent or co-agent may, at any time constitute the
Agent, 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 agent or
co-agent 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 Agent, to the extent permitted by law, without the
appointment of a new or successor agent.
SECTION 19.11 Agent May Enforce Claims Without Possession of Notes. All
rights of action and claims under this Agreement or the Notes may be prosecuted
and enforced by the Agent without the possession of any of the Notes or the
production thereof in any proceeding relating thereto, and any such proceeding
instituted by the Agent shall be brought in its own name as agent. Any recovery
of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Agent, its agents and
counsel, be for the ratable benefit of the Investors in respect of which such
judgment has been obtained.
SECTION 19.12 Suit for Enforcement. If a Servicer Termination Event shall
occur and be continuing, the Agent, in its discretion may (but shall have no
duty or obligation so to proceed), subject to the provisions of Section 19.1,
proceed to protect and enforce its rights and the rights of the Investors 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
Agent, being advised by counsel, shall deem most effectual to protect and
enforce any of the rights of the Agent or the Investors.
[signature pages begin on next page]
111
<PAGE> 119
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized as of the day and year
first above written.
ACC LIQUIDITY LLC
By: ACC Funding Corp.
By: /s/ GARY S. BURDICK
----------------------------
Name: Gary S. Burdick
Title: President
12526 High Bluff Drive
Suite 300
San Diego, California 92130
Attention: President
Facsimile No.: (619) 755-8348
ACC CONSUMER FINANCE
CORPORATION
By: /s/ GARY S. BURDICK
------------------------------
Name: Gary S. Burdick
Title: President
12750 High Bluff Drive
Suite 320
San Diego, California 92130
Attention: Chief Financial Officer
Facsimile No.: (619) 793-6333
<PAGE> 120
ALPINE SECURITIZATION CORP.
By: CREDIT SUISSE FIRST BOSTON,
New York Branch, as
Attorney-in-Fact
By: /s/ DAVID SHRENZEL
--------------------------
Name: David Shrenzel
Title: Vice President
By: /s/ ERIC K. SHEA
---------------------------
Name: Eric K. Shea
Title: Associate
Eleven Madison Avenue
New York, New York 10010
Attention: Asset Finance
Department
Facsimile No.: (212) 325-6677
CREDIT SUISSE FIRST BOSTON, NEW
YORK BRANCH, as Agent
By: /s/ DAVID SHRENZEL
--------------------------
Name: David Shrenzel
Title: Vice President
By: /s/ ERIC K. SHEA
---------------------------
Name: Eric K. Shea
Title: Associate
Eleven Madison Avenue
New York, New York 10010
Attention: Asset Finance Department
Facsimile No.: (212) 325-6677
<PAGE> 121
CREDIT SUISSE FIRST BOSTON, NEW
YORK BRANCH, as a Lender
By: /s/ DAVID SHRENZEL
--------------------------
Name: David Shrenzel
Title: Vice President
By: /s/ ERIC K. SHEA
---------------------------
Name: Eric K. Shea
Title: Associate
Eleven Madison Avenue
New York, New York 10010
Attention: Asset Finance Department
Facsimile No.: (212) 325-6677
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Backup
Servicer and Custodian
By: /s/ JASON VAN VLEET
-------------------------------
Name: Jason Van Vleet
Title: Corporate Trust Officer
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Service -
Asset Backed
Administration
Facsimile No.: (612) 667-3539
<PAGE> 122
EXHIBIT A
ADVANCE REQUEST
Credit Suisse First Boston, New York Branch, as agent
Eleven Madison Avenue
New York, New York 10010
Attention:
[_________________]
Gentlemen and Ladies:
This Advance Request is delivered to you pursuant to Section 2.2 of the
Receivables Financing Agreement, dated as of _________ __, 1997 (together with
all amendments, if any, from time to time made thereto, the "Receivables
Financing Agreement"), among [ ], ACC Consumer Finance Corporation,
Norwest Bank Minnesota, National Association, Alpine Securitization Corp. and
Credit Suisse First Boston, New York Branch (the "Agent"). Unless otherwise
defined herein or the context otherwise requires, capitalized terms used herein
have the meanings provided in the Receivables Financing Agreement.
[ ] hereby requests that an Advance be made in the aggregate
principal amount of $______ on_________ , 19__ [having a Fixed Period
of___________days].
[ ] hereby acknowledges that, pursuant to Section 2.4 of the
Receivables Financing Agreement, each of the delivery of this Advance Request
and the acceptance by [ ] of the proceeds of the Advances requested hereby
constitutes a representation and warranty by [ ] that, on the date of such
Advances, and before and after giving effect thereto and to the application of
the proceeds therefrom in accordance with the Transaction Documents, all
applicable statements set forth in Section 2.4 are true and correct in all
material respects.
[ ] agrees that if prior to the time of the Advance requested
hereby any matter certified to herein by it will not be true and correct at such
time as if then made, it will immediately so notify the Agent. Except to the
extent, if any, that prior to the time of the Advance requested hereby the Agent
shall receive written notice to the contrary from
<PAGE> 123
[ ], each matter certified to herein shall be deemed once again
to be certified as true and correct at the date of such Advance as if then made.
[ ] has caused this Advance Request to be executed and delivered,
and the certification and warranties contained herein to be made, by its duly
authorized officer this _________ day of ____________, 19__.
[ ]
By:________________________
Title:
2
<PAGE> 124
EXHIBIT B
NOTE
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW, AND MAY NOT BE
DIRECTLY OR INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF BY THE OWNER
HEREOF UNLESS SUCH TRANSACTION IS EXEMPT FROM REGISTRATION UNDER THE ACT AND
SUCH STATE LAWS, AND WILL NOT BE A "PROHIBITED TRANSACTION" UNDER THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"). BY ACCEPTANCE OF
THIS NOTE, THE HOLDER AGREES TO BE BOUND BY ALL THE TERMS OF THE RECEIVABLES
FINANCING AGREEMENT.
$______________ _________ __, 1997
FOR VALUE RECEIVED, the undersigned, [ ], a Delaware corporation (the
"Borrower"), promises to pay to the order of Credit Suisse First Boston, New
York Branch, as Agent for the Investors, on the Stated Maturity Date the
principal sum of _________________________ _______ ($___________) or, if less,
the aggregate unpaid principal amount of all Advances shown on the schedule
attached hereto (and any continuation thereof) and/or in the records of Agent
made by the Investors pursuant to that certain Receivables Financing Agreement,
dated as of _________ __, 1997 (together with all amendments and other
modifications, if any, from time to time thereafter made thereto, the
"Receivables Financing Agreement"), among the Borrower, ACC Consumer Finance
Corporation, Norwest Bank Minnesota, National Association, Alpine and Credit
Suisse First Boston, New York Branch, as Agent. Unless otherwise defined,
capitalized terms used herein have the meanings provided in the Receivables
Financing Agreement.
The Borrower also promises to pay Yield on the unpaid principal amount
hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, at the
rates per annum and on the dates specified in the Receivables Financing
Agreement.
<PAGE> 125
Payments of both principal and Yield are to be made in lawful money of the
United States of America in same day or immediately available funds to the
account designated by the Agent pursuant to the Receivables Financing Agreement.
This Note is the Note referred to in, and evidences indebtedness
incurred under, the Receivables Financing Agreement, and the holder hereof is
entitled to the benefits of the Receivables Financing Agreement, to which
reference is made for a description of the security for this Note and for a
statement of the terms and conditions on which the Borrower is permitted and
required to make prepayments and repayments of principal of the indebtedness
evidenced by this Note and on which such indebtedness may be declared to be
immediately due and payable.
All parties hereto, whether as makers, endorsers, or otherwise,
severally waive presentment for payment, demand, protest and notice of dishonor.
As provided in the Receivables Financing Agreement and subject to
certain limitations therein set forth, the transfer of this Note is registrable
in the Note Register, upon surrender of this Note for registration of transfer
at the office or agency of the Custodian in The City of New York, and at any
other office or agency maintained by the Borrower for that purpose, duly
endorsed by, or accompanied by a written instrument of transfer in the form
satisfactory to the Note Registrar duly executed by, the holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Notes, of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Notes are issuable only in registered form without coupons in
minimum denominations of $100,000. As provided in the Agreement and subject to
certain limitations therein set forth, Notes are exchangeable for a like
aggregate principal amount of Notes of a different authorized denomination, as
requested by the holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Borrower may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Borrower, the Custodian and any agent of the Borrower or the
Custodian may treat the Person in whose name this Note is registered as the
owner hereof for all purposes, whether or not this Note may be overdue, and
neither the Borrower, the Custodian nor any such agent shall be affected by
notice to the contrary.
2
<PAGE> 126
The holder hereof hereby agrees, and any assignee of such holder, by
accepting such assignment, shall be deemed to have agreed, that it will not
institute against Alpine or the Borrower, or join any other Person in
instituting against Alpine or the Borrower, any insolvency proceeding (namely,
any proceeding of the type referred to in the definition of Event of Bankruptcy)
so long as, in the case of Alpine, any commercial paper or other senior
indebtedness issued by Alpine shall be outstanding or there shall not have
elapsed one year plus one day since the last day on which any such commercial
paper or other senior indebtedness shall be outstanding and, in the case of the
Borrower, any Advances or other amounts due from the Borrower hereunder shall be
outstanding or there shall not have elapsed one year plus one day since the last
day on which any such Advances or other amounts shall be outstanding. The
foregoing shall not limit such Person's right to file any claim in or otherwise
take any action with respect to any insolvency proceeding that was instituted by
any Person other than such Person.
THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY OTHERWISE
APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS.
[ ]
By:___________________________
Name:
Title:
Personally appeared before me ________________________ [name of notary],
in _____________________[county], ____________________ [state], the above-named
3
<PAGE> 127
_______________________ [name of person executing], known or proved to me to be
the same person who executed the foregoing instrument and to be the
_______________________ [title] of [ ] and acknowledged to me that he
executed the same as his free act and deed and the free act and deed of [ ].
Subscribed and sworn before me this ____ day of _________, 1997.
_____________________________
NOTARY PUBLIC
COUNTY OF __________________
STATE OF ___________________
My commission expires the ____
day of ____________, 199_.
4
<PAGE> 128
Form of Assignment Form
ASSIGNMENT FORM
If you the holder want to assign this Note, fill in the form below and
have your signature guaranteed:
I or we assign and transfer this Note to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint__________________________ , agent to transfer this Note
on the books of the Borrower. The agent may substitute another to act for him.
Dated:__________________________ Signed:______________________________
______________________________
(sign exactly as the name appears
on the other side of this Note)
Signature Guarantee____________________________________________________________
Important Notice: When you sign your name to this Assignment Form without
filling in the name of your "Assignee" or "Attorney", this Note becomes fully
negotiable, similar to a check endorsed in blank. Therefore, to safeguard a
signed Note, it is recommended that you fill in the name of the new owner in the
"Assignee" blank. Alternatively, instead of using this Assignment Form, you may
sign a separate "power of attorney" form and then mail the unsigned Note and the
signed "power of attorney" in separate envelopes. For added protection, use
certified or registered mail for a Note.
<PAGE> 129
===============================================================================
Schedule attached to Note Dated _________ __, 1997 of [ ] payable to the order
of Credit Suisse First Boston, New York Branch, as Agent
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Date of Amount of Amount of
Advance Advance Repayment
- -------------------------------------------------------------------------------
<S> <C> <C>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
===============================================================================
</TABLE>
<PAGE> 130
EXHIBIT D
FORM OF BORROWING BASE CERTIFICATE
<PAGE> 131
[FINANCIAL SECURITY ASSURANCE INC. LETTERHEAD]
PREMIUM LETTER
March 27, 1997
ACC Consumer Finance Corporation
Plaza del Mar
12750 High Bluff Drive
Suite 230
San Diego, California 92130
ACC Liquidity LLC
Plaza del Mar
12750 High Bluff Drive
Suite 230
San Diego, California 92130
Re: Repayment Obligations of ACC Liquidity LLC
to Alpine Securitization Corp. and the Lenders with
respect to Advances
---------------------------------------------------
Ladies and Gentlemen:
This letter will confirm the agreement of ACC Consumer Finance
Corporation ("ACC"), ACC Liquidity LLC ("ACCL") and Financial Security Assurance
Inc. ("Financial Security") that the following nonrefundable payments are to be
made at, in connection with, and subject to, the closing of the above-described
transaction and in consideration of the issuance by Financial Security of its
Financial Guaranty Insurance Policy No. 50580-N (the "Policy") in respect
thereof. The amounts payable hereunder shall be nonrefundable for any reason
whatsoever, including the lack of any payment under the Policies or any other
circumstances relating to the repayment obligations of ACCL to the Lenders with
respect to Advances (the "Obligation") or provision being made for payment of
the Obligations or the Notes prior to maturity. Capitalized terms used herein
but not defined herein or by specific reference shall have the meanings
specified in the Insurance Agreement (as defined below).
-1-
<PAGE> 132
The payments payable pursuant to the terms hereof (except as otherwise
noted) shall constitute the "Premium" referred to in that certain Insurance and
Indemnity Agreement dated as of March 27, 1997 (the "Insurance Agreement" among
Financial Security, ACC and ACCL. This Letter is the Premium Letter referred to
in the Insurance Agreement. The obligations of ACC and ACCL hereunder constitute
obligations of ACC and ACCL under the Insurance Agreement.
EXPECTED CLOSING DATE: March 27, 1997
Type of Payment Amount Payee Re:
- --------------- ------ ----- ---
Federal Funds Wire $65,000 Mayer, Brown & Platt Legal Fees and
Disbursements
The Premium shall be payable each month in arrears on the first
Distribution Date (as defined in the Receivables Financing Agreement) and shall
be equal to the sum of (a) the product of (i) 45 basis points per annum, (ii)
the average outstanding principal amount of Advances during the related
Collection period and (iii) 1/12 (or, in the case of the Collection period in
which the Date of Issuance occurs, a fraction the numerator of which is equal to
the actual number of days from the Date of Issuance to and including the last
day of such Collection Period and the denominator of which is 360) and (b) the
product of (i) 5 basis points per annum, (ii) the difference between (x) the
Facility Limit and (y) the amount calculated pursuant to clause (a)(ii) above
and (iii) 1/12 (or, in the case of the Collection Period in which the Date of
Issuance occurs, a fraction the numerator of which is equal to the actual number
of days from the Date of Issuance to and including the last day of such
Collection period and the denominator of which is 360) (the sum of (a) and (b),
the "Premium Rate"). The out-of-pocket expenses, legal fees and disbursements
(in the amounts specified above) shall be paid by ACC to Financial Security or
Mayer, Brown & Platt, as applicable, on the Date of Issuance.
If an Event of Default occurs and is continuing under the Insurance
Agreement, Financial Security will be entitled on each Distribution Date
thereafter to a Premium Supplement equal to the product of (i) 0.50%, (ii) the
outstanding principal amount of Advances at the beginning of the Collection
period during which such Event of Default occurs and (iii) 1/12.
If ACC breaches the covenant set forth in Section 2.02(n) of the
Insurance Agreement, Financial Security will be entitled on each Distribution
Date following the date that is 135 days from the Date of Issuance to an
Additional premium Supplement equal to the product of (i) 0.30%, (ii) the
average outstanding principal amount of Advances during the related Collection
period and (iii) 1/12. Such Additional Premium Supplement shall not be payable
on any Distribution Date following the Facility Termination Date.
-2-
<PAGE> 133
Unless another account is designated to you in writing by the President
or a Managing Director of Financial Security, Federal funds wire transfers to
Financial Security shall be made with the following details specifically stated
on the wire instructions:
BANK: THE BANK OF NEW YORK
ABA #021000018
For the Account of: Financial Security Assurance Inc.
Account Number: 8900297263
Policy Number: 50580-N
Sincerely,
FINANCIAL SECURITY ASSURANCE INC.
By: /s/
--------------------------------
Authorized Officer
-3-
<PAGE> 134
Agreed and accepted as
of the date first above written:
ACC CONSUMER FINANCE CORPORATION
/s/
- ----------------------------------
Name:
Title:
ACC LIQUIDITY LLC
By: ACC FUNDING CORP.,
its managing member
By: /s/
--------------------------------
Name:
Title:
-4-
<PAGE> 1
EXHIBIT 10.4
================================================================================
TORREY RESERVE
OFFICE LEASE
Between
American Assets, Inc.,
a California corporation
(LANDLORD)
and
ACC Consumer Finance Corporation,
a Delaware corporation
(TENANT)
Date: April 7, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SUBJECT MATTER PAGE
<S> <C> <C>
Article 1 PROJECT, BUILDING, AND PREMISES 1
Article 2 SUBSTITUTION OF OTHER PREMISES 1
Article 3 LEASE TERM 2
Article 4 BASIC RENT 2
Article 5 ADDITIONAL RENT 2
Article 6 SECURITY DEPOSIT 5
Article 7 USE 6
Article 8 COMPLIANCE WITH LAWS 6
Article 9 HAZARDOUS MATERIAL 6
Article 10 UTILITIES AND SERVICES 7
Article 11 REPAIRS AND MAINTENANCE 8
Article 12 ALTERATIONS AND ADDITIONS 9
Article 13 COVENANT AGAINST LIENS 10
Article 14 EXCULPATION, INDEMNIFICATION, AND INSURANCE 10
Article 15 DAMAGE AND DESTRUCTION 14
Article 16 CONDEMNATION 15
Article 17 ASSIGNMENT AND SUBLEASING 16
Article 18 SURRENDER OF PREMISES 19
Article 19 HOLDING OVER 19
Article 20 ESTOPPEL CERTIFICATES 19
Article 21 SUBORDINATION, NONDISTURBANCE, AND ATTORNMENT 20
Article 22 DEFAULTS AND REMEDIES 20
Article 23 LANDLORD'S RIGHT TO PERFORM TENANT'S OBLIGATIONS 21
Article 24 LATE PAYMENTS 22
Article 25 NONWAIVER 22
Article 26 WAIVER OF RIGHT TO JURY TRIAL; DISPUTE RESOLUTION 22
Article 27 ATTORNEY FEES AND COSTS 23
Article 28 LANDLORD'S ACCESS TO PREMISES 23
Article 29 SIGNS 23
Article 30 TENANT PARKING 23
Article 31 MISCELLANEOUS 24
Exhibit A DIAGRAM OF PREMISES
Exhibit B SITE PLAN OF PROJECT
Exhibit C TENANT WORK LETTER AGREEMENT
Exhibit D NOTICE OF BASIC LEASE INFORMATION
Exhibit E RULES AND REGULATIONS
Exhibit F ESTOPPEL CERTIFICATE
</TABLE>
<PAGE> 3
Part I
SUMMARY OF BASIC LEASE INFORMATION
The basic terms of this Lease are:
1. Date of Lease: April 7, 1997
-------------------------------------------------------------
2. Landlord: American Assets, Inc., a California corporation
------------------------------------------------------------------
3. Tenant: ACC Consumer Finance Corporation, a Delaware corporation
--------------------------------------------------------------------
4. Premises, Building and Project:
(a) Building Address (Section 1.1): 11452 El Camino Real
San Diego, CA 92130
----------------------------------------
(b) Number of Rentable Square Feet in Building (Section 1.1): 75,043
--------------
(c) Premises (Section 1.1): Approximately 36,980 Rentable Square Feet of
space located on the 3rd & 4th floor(s), as set forth in Exhibit A,
known as Suite(s) 300 and 400.
5. Lease Term:
(a) Duration (Section 3.1): Seven (7) years and zero months;
----------------- --------
*SEE ADDENDUM
(b) Lease Commencement Date (Section 3.1): The earlier of (1) the date on
which Tenant occupies all or part of the Premises (other than in
connection with the construction of the Premises) and (2) the date on
which the Tenant Improvements are Substantially Complete subject to
acceleration due to Tenant delays;
The anticipated Lease Commencement Date is October 1, 1997
(c) Lease Expiration Date (Section 3.1): The last day of the month in which
the Eighty-fourth (84th) anniversary of the Lease Commencement Date
occurs;
6. Basic Rent (Section 4.1):
<TABLE>
<CAPTION>
Lease Year Monthly Basic Rent Basic Rent/RSF/Mo.
---------- ------------------ ------------------
<S> <C> <C>
1 $61,017.00 $1.65
2 $62,866.00 $1.70
3 $64,715.00 $1.75
4 $66,564.00 $1.80
5 $68,413.00 $1.85
6 $70,262.00 $1.90
7 $72,111.00 $1.95
</TABLE>
7. Additional Rent (Article 5):
(a) Base Year (Subsection 5.2.1): The calendar year of 1998
---------------------
(b) Tenant's Share of Direct Expenses (Subsection 5.2.6): Approximately
49.28 percent.
8. Security Deposit (Section 6.1): $61,017.00
--------------------------------------------
9. Permitted Use (Section 7.1): Administrative offices for consumer finance
company
10. Parking (Section 30.1): Tenant shall be entitled to the use of 103 parking
spaces on an unreserved basis and 29 under building parking spaces on a
reserved basis.
11. Addresses for notices:
(a) Landlord's address (Subsection 31.11.3): American Assets, Inc.
11455 El Camino Real, Suite 200
San Diego, CA 92130-2045
Attn: Property Manager
Page 1 of 2
<PAGE> 4
(b) Tenant's address (Subsection 31.11.3):
(1) Before Lease Commencement Date: ACC Consumer Finance Corp.
12750 High Bluff Drive, Suite 320
San Diego, CA 92130-2045
Attn: Mr. Gary S. Burdick
(2) After Lease Commencement Date: ACC Consumer Finance Corp.
11452 El Camino Real, Suite 400
San Diego, CA 92130-2045
Attn: Mr. Gary S. Burdick
(c) Address of Landlord's lender (Subsection 31.11.4):
Wells Fargo Bank
401 B Street, Suite 304
San Diego, CA 92101
Attn: Mr. Jeff Stitez
12. Brokers (Section 31.23): CB Commercial (Dick Balestri) representing Landlord
and Business Real Estate Brokerage Co. (Joe Anderson) representing Tenant.
Each reference in this Lease to any provision in this Summary shall be construed
to incorporate all the terms provided under that provision of the Summary. In
the event of any conflict between a provision in this Summary and a provision in
the balance of the Lease, the latter shall control.
Page 2 of 2
<PAGE> 5
Part II
LEASE PROVISIONS
Article 1
PROJECT, BUILDING, AND PREMISES
1.1. Lease of Premises. Landlord leases to Tenant and Tenant leases from
Landlord the premises described in Summary of Basic Lease Information Section 4
(c) (Premises), which are located in the building described in Summary Section 4
(a) (Building), reserving to Landlord the rights described in Lease Section 1.3.
The outline of the Premises is set forth in Exhibit A. The Rentable Area and
Usable Area of the Premises and the Rentable Area of the Building are set forth
in Summary Sections 4 (b) and 4 (c). The Building, the areas servicing the
Building (including any adjacent parking structure and parking area), and the
land on which the Building and those areas are located (as shown on the site
plan attached to this Lease as Exhibit B are sometimes collectively referred to
as the "Project". Tenant acknowledges that Landlord has made no representation
or warranty regarding the condition of the Premises, Building and/or Project
except as specifically stated in this Lease.
1.2. Appurtenant Rights. Tenant is granted the right at all times during
the Lease Term to the nonexclusive use of the main lobby of the Building, common
corridors and hallways, stairwells, elevators, restrooms, sidewalks, driveways,
parking areas, landscaped areas and other public or common areas located on the
Project. Landlord, however, has the sole discretion to determine the manner in
which those public and common areas are maintained and operated, and the use of
those areas shall be subject to the Rules and Regulations, as defined in Section
7.2.
1.3. Landlord's Reservation of Rights. The following rights are reserved
to Landlord: (a) the right to all of the Building, except for the space within
the Premises; (b) the right to change all elements of the Project; (c) the
rights reserved to Landlord by provisions of this Lease or by operation of law;
(d) the exclusive right to consent to the use or occupancy of the Premises by
anyone other than Tenant; and (e) all rights in the economic value of the
leasehold estate in the Premises, as stated in Articles 16 and 17.
1.4. Preparation of Premises; Acceptance. The rights and obligations of
the parties regarding the construction of the Premises before the commencement
of the Lease Term are stated in the Tenant Improvement Agreement attached to
this Lease as Exhibit C. If this Lease conflicts with the Tenant Improvement
Agreement, the Tenant Improvement Agreement shall prevail.
1.5. Rentable Area and Usable Area.
1.5.1. Standard of Calculation. For purposes of this Lease, "Rentable
Area", "Rentable Square Feet", "Rentable Square Footage", "Usable Area", "Usable
Square Feet", and "Usable Square Footage" shall be calculated under the American
National Standard Method for Measuring Floor Area in Office Buildings, ANSI
Z65.1C1996 (revised and adopted June 7, 1996) or successor standard(s), adopted
by the Building Owners and Managers Association International (BOMA).
1.5.2. Verification of Rentable Area of Premises and Building. The
Rentable Area of the Premises and the Building is subject to verification from
time to time by Landlord's space planner or architect. That verification shall
be made in accordance with this Section 1.5. Tenant's space planner or architect
may consult with Landlord's space planner or architect regarding that
verification. The determination of Landlord's space planner or architect,
however, shall be conclusive and binding on the parties.
1.5.3. Adjustment of Rent. If Landlord's space planner or architect
determines that the Rentable Area of the Premises or the Building is different
from that stated in this Lease, all Rent that is based on that incorrect amount
shall be modified in accordance with that determination. If that determination
is made, it shall be confirmed in writing by Landlord to Tenant.
Article 2
SUBSTITUTION OF OTHER PREMISES
2.1. Substitution of Other Premises. Landlord shall have the right to
relocate Tenant to other space in the Building or Project comparable to the
Premises in accordance with the following: (a) Landlord shall give Tenant at
least sixty (60) days' notice of Landlord's intention to relocate the Premises;
(b) the new premises shall be converted at Landlord's expense to substantially
the same size, dimensions, configuration, decor, and nature as the Premises
described in this Lease; (c) the physical relocation of the Premises shall be
accomplished by Landlord at its expense on a weekend. If the relocation has not
been completely accomplished before the Monday immediately following that
weekend, Rent shall abate in full from the time that the physical relocation
commences to the time that it is completed; (d) all costs incurred by Tenant as
a result of the relocation (including costs incurred in changing addresses on
stationery, business cards, directories, advertising, and other such items)
shall be paid by Landlord in a sum not to exceed One Thousand Dollars; (e)
Landlord shall not have the right to relocate the Premises more than once during
the Lease Term; (f) if the new premises are smaller than the Premises as they
existed before the relocation, Basic Rent shall be reduced to an amount computed
by multiplying the Basic Rent specified in Section 4.1 by a fraction, the
numerator of which shall be the Rentable Area of the new premises and the
denominator of which shall be the Rentable Area of the Premises immediately
before the relocation; (g) if the Rentable Area of the new premises is larger
than the Rentable Area of the Premises immediately before the relocation,
Tenant's Share of
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<PAGE> 6
Direct Expenses shall not increase but shall continue to be based on the
Rentable Area of the Premises immediately before the relocation; (h) the parties
shall execute an amendment to this Lease stating the relocation of the Premises
and the reduction, if any, in Basic Rent. After the date on which Tenant is
relocated to the new premises, the term "Premises" in this Lease shall refer to
the new premises; (i) if a dispute arises in connection with this Section, the
dispute shall be resolved by arbitration under Section 26.2, except that: (1) if
the dispute concerns the recalculation of Rent under subparagraph (f) or the
reduction of Tenant's Share of Direct Expenses under Subsection 5.2.6, the/each
arbitrator must be a licensed architect with a minimum of five (5) years' space
planning experience in office buildings similar to the Building; and (2) the
arbitrator(s) must render a final decision within thirty (30) days after the
date on which the arbitrator(s) is/are selected. *SEE ADDENDUM
Article 3
LEASE TERM
3.1. Lease Term. The provisions of this Lease shall be effective as of
the date of this Lease. The term of this Lease (Lease Term) shall be the period
stated in Summary of Basic Lease Information Section 5 (a). The Lease Term shall
commence on the date (Lease Commencement Date) stated in Summary Section 5 (b)
and shall expire on the date (Lease Expiration Date) stated in Summary Section 5
(c) unless this Lease is sooner terminated as provided in this Lease.
3.2. Confirmation of Lease Information. At any time during the Lease
Term, Landlord may deliver to Tenant a notice in the form set forth in Exhibit
D, attached to this Lease, which Tenant shall execute and return to Landlord
within five (5) days after receipt.
3.3. Lease Year. For purposes of this Lease, the term "Lease Year" means
each consecutive twelve month (12 month) period during the Lease Term as long
as: (a) the first Lease Year commences on the Lease Commencement Date and ends
on the last day of the eleventh (11th) calendar month thereafter; (b) the second
(2nd) and each succeeding Lease Year commences on the first day of the next
calendar month; and (c) the last Lease Year ends on the Lease Expiration Date or
earlier date of termination.
3.4. Delay in Delivery of Premises. If Landlord is unable to deliver
possession of the Premises to Tenant on or before the Lease Commencement Date,
Landlord shall not be subject to any liability for its failure to do so. This
failure shall not affect the validity of this Lease or the obligations of Tenant
under it, but the Lease Term shall commence on the date on which Landlord
delivers possession of the Premises to Tenant. *SEE ADDENDUM
Article 4
BASIC RENT
4.1. Definition of "Basic Rent"; No Set off. Tenant shall pay to
Landlord basic rent (Basic Rent) in equal monthly installments as set forth in
Summary of Basic Lease Information Section 6 in advance on or before the first
day of every calendar month during the Lease Term, without any set-off or
deduction. Payment must be in United States dollars and shall be made at the
management office of the Building or at any other place that Landlord may from
time to time designate in writing.
4.2. Initial Payment; Proration. The Basic Rent for the first full
calendar month of the Lease Term shall be paid when Tenant executes this Lease.
If any payment date (including the Lease Commencement Date) for "Rent", as
defined in Section 5.1, falls on a day other than the first day of that calendar
month, or if any Rent payment is for a period shorter than one calendar month,
the Rent for that fractional calendar month shall accrue on a daily basis for
each day of that fractional month at a daily rate equal to 1/365 of the total
annual Rent. All other payments or adjustments that are required to be made
under the terms of this Lease and that require proration on a time basis shall
be prorated on the same basis.
4.3. Application of Payments. All payments received by Landlord from
Tenant shall be applied to the oldest payment obligation owed by Tenant to
Landlord. No designation by Tenant, either in a separate writing or on a check
or money order, shall modify this clause or have any force or effect. *SEE
ADDENDUM
4.4. Certified Funds. If any non-cash payment made by Tenant is not paid
by the bank or other institution on which it is drawn, Landlord shall have the
right, exercised by notice to Tenant, to require that Tenant make all future
payments by certified funds or cashier's check. *SEE ADDENDUM
Article 5
ADDITIONAL RENT
5.1. Additional Rent; Rent. In addition to paying the Basic Rent
specified in Article 4, Tenant shall pay as additional rent Tenant's Share of
the annual Direct Expenses (as defined in subsections 5.2.2 and 5.2.6) that are
in excess of the amount of Direct Expenses applicable to the Base Year (as
defined in Subsection 5.2.1). That additional rent, together with other amounts
of any kind (other than Basic Rent) payable by Tenant to Landlord under the
terms of this Lease, shall be collectively referred to in this Lease as
"Additional Rent". Basic Rent and Additional Rent are collectively referred to
in this Lease as "Rent". All amounts due under this Article 5 as Additional Rent
are payable for the same periods and in the same manner, time, and place as the
Basic Rent. Without limitation on other obligations of Tenant that survive the
expiration of the Lease Term, Tenant's obligations to
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pay the Additional Rent provided for in this Article 5 survive the expiration of
the Lease Term. *SEE ADDENDUM
5.2. Definitions. The following definitions apply in this Article 5:
5.2.1. Base Year. "Base Year" means the period stated in Summary of
Basic Lease Information Section 7 (a).
5.2.2. Direct Expenses. "Direct Expenses" mean Operating Expenses
plus Tax Expenses.
5.2.3. Expense Year. "Expense Year" means each calendar year in which
any portion of the Lease Term falls, through and including the calendar year in
which the Lease Term expires.
5.2.4. Operating Expenses. "Operating Expenses" means all expenses,
costs, and amounts of every kind that Landlord pays or incurs during any Expense
Year because of or in connection with the ownership, operation, management,
maintenance, or repair of the Common Areas of the Building and the Project.
Operating Expenses includes an allocable percentage of Direct Expenses Landlord
pays or incurs in operating, maintaining and repairing those portions of the
Project other than the Building including any owner's association or similar
fees, assessments or dues presently or hereafter established for the Project.
5.2.4.1. Examples of Operating Expenses. The definition of
"Operating Expenses" includes any amounts paid or incurred for: (a) the cost of
supplying any utilities to the Common Areas of the Building and the Project, (b)
the cost of operating, managing, maintaining, and repairing the following
systems: utility, mechanical, sanitary, storm drainage, escalator, and elevator,
(c) the cost of supplies and tools and of equipment, maintenance, and service
contracts in connection with those systems, (d) the cost of licenses,
certificates, permits, and inspections, (e) the cost of contesting the validity
or applicability of any government enactments that may affect the Operating
Expenses, (f) the costs incurred in connection with the implementation and
operation of a parking or transportation management program or similar program,
(g) the cost of insurance carried by Landlord, in amounts reasonably determined
by Landlord, (h) fees, charges, and other costs including management fees (or
amounts in lieu of such fees), consulting fees, legal fees, and accounting fees
of all persons engaged by Landlord or otherwise reasonably incurred by Landlord
in connection with the operation, management, maintenance, and repair of the
Building and the Project, (i) the cost of parking area maintenance, repair, and
restoration, including resurfacing, repainting, restriping, and cleaning, (j)
wages, salaries, and other compensation and benefits of all persons engaged in
the operation, maintenance, or security of the Building and the Project plus
employer's Social Security taxes, unemployment taxes, insurance, and any other
taxes imposed on Landlord that may be levied on those wages, salaries, and other
compensation and benefits. If any of Landlord's employees provide services for
more than one project of Landlord, only the prorated portion of those employees'
wages, salaries, other compensation and benefits, and taxes reflecting the
percentage of their working time devoted to the Project shall be included in
Operating Expenses, (k) payments under any easement, license, operating
agreement, declaration, restrictive covenant, or instrument relating to the
sharing of costs by the Building or the Project, (l) amortization (including
interest on the unamortized cost at a rate equal to the floating commercial loan
rate announced from time to time by Bank of America as its prime rate plus two
(2) percentage points per annum) of the cost of acquiring or renting personal
property used in the maintenance, repair, and operation of the Building and the
Project, (m) the cost of capital improvements or other costs incurred in
connection with the Building or the Project that (1) are intended as a labor
saving device or to effect other economies in the maintenance or operation of
all or part of the Building or the Project or (2) are required under any
government law or regulation but that were not required in connection with the
Building or the Project when permits for the construction of the Building or the
Project were obtained. All permitted capital expenditures shall be amortized
(including interest on the unamortized cost at the rate stated in subparagraph
(l)) over their useful life, as reasonably determined by Landlord.
5.2.4.2. Adjustment of Operating Expenses. Operating Expenses shall be
adjusted as follows:
5.2.4.2.1. Gross Up Adjustment When Building Is Less Than
Fully Occupied. If the occupancy of the Building during any part of any Expense
Year (including the Base Year) is less than 95%, Landlord shall make an
appropriate adjustment of the variable components of Operating Expenses for that
Expense Year, as reasonably determined by Landlord using sound accounting and
management principles, to determine the amount of Operating Expenses that would
have been incurred had the Building been 95% occupied. This amount shall be
considered to have been the amount of Operating Expenses for that Expense Year.
For purposes of this Subsection 5.2.4.2.1, "variable components" include only
those component expenses that are affected by variations in occupancy levels.
5.2.4.2.2. Adjustment When Landlord Does Not Furnish a
Service to All Tenants. If, during any part of any Expense Year (including the
Base Year), Landlord is not furnishing a particular service or work (the cost of
which, if furnished by Landlord, would be included in Operating Expenses) to a
tenant (other than Tenant) that has undertaken to perform such service or work
in lieu of receiving it from Landlord, Operating Expenses for that Expense Year
shall be considered to be increased by an amount equal to the additional
Operating Expenses that Landlord would reasonably have incurred during this
period if Landlord had furnished such service or work to that tenant.
5.2.4.3. Exclusions From Operating Expenses. Despite any
other provision of Subsection 5.2.4, Operating Expenses shall not include: (a)
depreciation, interest, and amortization on mortgages or ground
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lease payments, except as otherwise stated in this Section 5.2, (b) legal fees
incurred in negotiating and enforcing tenant leases, (c) real estate brokers'
leasing commissions, (d) initial improvements or alterations to tenant spaces,
(e) the cost of providing any service directly to and paid directly by any
tenant, (f) any costs expressly excluded from Operating Expenses elsewhere in
this Lease, (g) costs of any items for which Landlord receives reimbursement
from insurance proceeds or a third party. Insurance proceeds shall be excluded
from Operating Expenses in the year in which they are received, except that any
deductible amount under any insurance policy shall be included within Operating
Expenses, (h) costs of capital improvements, except as otherwise stated in this
Section 5.2.
5.2.5. Tax Expenses. "Tax Expenses" means all federal, state, county,
or local government or municipal taxes, fees, charges, or other impositions of
every kind (whether general, special, ordinary, or extraordinary) that are paid
or incurred by Landlord during any Expense Year (without regard to any different
fiscal year used by any government or municipal authority) because of or in
connection with the ownership, leasing, and operation of the Building and the
Project. These expenses include taxes, fees, and charges such as real property
taxes, general and special assessments, transit taxes, leasehold taxes, and
taxes based on the receipt of rent (including gross receipts or sales taxes
applicable to the receipt of rent, unless required to be paid by Tenant);
personal property taxes imposed on the fixtures, machinery, equipment,
apparatus, systems, and equipment; appurtenances; furniture; and other personal
property used in connection with the Building and the Project.
5.2.5.1. Adjustment of Taxes. For purposes of this Lease, Tax
Expenses shall be calculated as if the tenant improvements in the Building were
fully constructed and the Project, the Building, and all tenant improvements in
the Building were fully assessed for real estate tax purposes. Landlord
specifically agrees that the gross receipts component of Tax Expenses for the
Base Year and each subsequent year shall be calculated as if the Building were
one hundred percent (100%) occupied with rent paying tenants. Accordingly,
during the portion of any Expense Year occurring after the Base Year, Tax
Expenses shall be considered to be increased appropriately.
5.2.5.2. Included Tax Expenses. Tax Expenses shall include: (a)
any assessment, tax, fee, levy, or charge in addition to, or in partial or total
substitution of, any assessment, tax, fee, levy, or charge previously included
within the definition of "real property tax". Tenant and Landlord acknowledge
that Proposition 13 was adopted by the voters of the State of California in June
1978 and that assessments, taxes, fees, levies, and charges may be imposed by
government agencies for services such as fire protection; street, sidewalk, and
road maintenance; conservation; refuse removal; and other government services
formerly provided without charge to property owners or occupants. In further
recognition of the decrease in the level and quality of government services and
amenities as a result of Proposition 13 (or as a result of any other restriction
on real property taxes whether by law or by choice of the applicable legislative
or assessing body), Tax Expenses shall also include any government or private
assessments (or the Building's or Project's contribution toward a government or
private cost sharing agreement) for the purpose of augmenting or improving the
quality of services and amenities normally provided by government agencies.
Tenant and Landlord intend that all new and increased assessments, taxes, fees,
levies, and charges and all similar assessments, taxes, fees, levies, and
charges be included within the definition of "Tax Expenses" for purposes of this
Lease, (b) any assessment, tax, fee, levy, or charge allocable to, or measured
by, the area of the Premises or the rent payable under this Lease, including any
gross income tax with respect to the receipt of that rent, or on or relating to
the possession, leasing, operating, management, maintenance, alteration, repair,
use, or occupancy by Tenant of the Premises or any portion of the Premises, (c)
any assessment, tax, fee, levy, or charge on this transaction or any document to
which Tenant is a party, creating or transferring an interest or an estate in
the Premises, (d) any possessory taxes charged or levied in place of real
property taxes.
5.2.5.3. Contest Costs; Refunds. Any expenses incurred by
Landlord in attempting to protest, reduce, or minimize Tax Expenses shall be
included in Tax Expenses in the Expense Year in which those expenses are paid.
Except for tax refunds resulting from a Proposition 8 reduction under Subsection
5.2.5.6, tax refunds shall be deducted from Tax Expenses. Such tax refunds shall
be deducted from Tax Expenses in the Expense Year in which they are received by
Landlord. *SEE ADDENDUM
5.2.5.4. Excluded Taxes. Despite any other provision of
Subsection 5.2.5 (except as provided in Subsection 5.2.5.2 or levied entirely or
partially in lieu of Tax Expenses), the following shall be excluded from Tax
Expenses: (a) all excess profits taxes, franchise taxes, gift taxes, capital
stock taxes, inheritance and succession taxes, estate taxes, federal and state
income taxes, and other taxes applied or measured by Landlord's general or net
income (as opposed to rents, receipts, or income attributable to operations at
the Building); (b) any items included as Operating Expenses; and (c) any items
paid by Tenant under Section 5.5.
5.2.6. Tenant's Share. "Tenant's Share" means the percentage stated
in Summary of Basic Lease Information Section 7 (b). Tenant's Share is
calculated by multiplying the number of Rentable Square Feet of the Premises by
100 and dividing the product by the total Rentable Square Feet in the Building.
If either the Premises or the Building are expanded or reduced, Tenant's Share
shall be appropriately adjusted. Tenant's Share for the Expense Year in which
that change occurs shall be determined on the basis of the number of days during
the Expense Year in which each such Tenant's Share was in effect.
5.3. Calculation and Payment of Additional Rent. Tenant's Share of any
Direct Expenses for any Expense Year shall be calculated and paid as follows:
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5.3.1. Calculation of Excess. If Tenant's Share of Direct Expenses
for any Expense Year ending or beginning within the Lease Term exceeds Tenant's
Share of the amount of Direct Expenses applicable to the Base Year, Tenant shall
pay as Additional Rent to Landlord an amount equal to that excess (Excess), in
the manner stated in Subsection 5.3.2.
5.3.2. Statement of Actual Direct Expenses and Payment by Tenant.
Landlord shall endeavor to give to Tenant on or before the first day of April
following the end of each Expense Year a statement (Statement) stating the
Direct Expenses incurred or accrued for that preceding Expense Year and
indicating the amount, if any, of any Excess. On receipt of the Statement for
each Expense Year ending during the Lease Term for which an Excess exists,
Tenant shall pay, with its next installment of Basic Rent due, the full amount
of that Excess, less the amounts (if any) paid during that Expense Year as
Estimated Excess (as defined in Subsection 5.3.3). Landlord's failure to furnish
the Statement for any Expense Year in a timely manner shall not prejudice
Landlord from enforcing its rights under this Article 5. Even if the Lease Term
has expired and Tenant has vacated the Premises, if an Excess exists when the
final determination is made of Tenant's Share of the Direct Expenses for the
Expense Year in which this Lease terminates, Tenant shall immediately pay to
Landlord the amount calculated under Subsection 5.3.1. The provisions of this
Subsection 5.3.2 shall survive the expiration or earlier termination of the
Lease Term.
5.3.3. Statement of Estimated Direct Expenses. Landlord shall give
Tenant a yearly expense estimate statement (Estimate Statement) stating: (a)
Landlord's reasonable estimate (Estimate) of the total amount of Direct Expenses
for the then current Expense Year; and (b) the estimated excess (Estimated
Excess). The Estimated Excess shall be calculated by comparing estimated Direct
Expenses (which shall be based on the Estimate) to the amount of Direct Expenses
applicable to the Base Year. Landlord's failure to furnish the Estimate
Statement for any Expense Year in a timely manner shall not preclude Landlord
from enforcing its rights to collect any Estimated Excess under this Article 5.
If an Estimated Excess is calculated for the then current Expense Year, Tenant
shall pay, with its next installment of Basic Rent due, a fraction of that
Estimated Excess for the then current Expense Year (reduced by any amounts paid
as provided in the last sentence of this Subsection 5.3.3). The numerator of
that fraction shall be the number of months that have elapsed in that current
Expense Year (including the month of the payment), and the denominator shall be
twelve (12). Until a new Estimate Statement is furnished, Tenant shall pay
monthly, along with the monthly Basic Rent installments, an amount equal to one
twelfth (1/12th) of the total Estimated Excess stated in the previous Estimate
Statement delivered by Landlord to Tenant.
5.4. Allocation of Direct Expenses. Despite any other provision of this
Article 5, in the calculation of Direct Expenses for the Base Year: (a) Direct
Expenses shall not include any increase in Tax Expenses attributable to (1)
special assessments, charges, costs, or fees; or (2) modifications or changes in
government laws or regulations, including institution of a split tax roll; and
(b) Operating Expenses shall exclude (1) market wide labor rate increases
arising from extraordinary circumstances (such as boycotts and strikes) and (2)
utility rate increases arising from extraordinary circumstances (such as
conservation surcharges, boycotts, embargoes, or other shortages).
5.5. Taxes and Other Charges for Which Tenant Is Directly Responsible.
Tenant shall reimburse Landlord, on demand, as Additional Rent for any taxes
required to be paid by Landlord that are not already included in Tax Expenses,
excluding state, local, and federal personal or corporate income taxes measured
by the net income of Landlord from all sources and estate and inheritance taxes,
regardless of whether such taxes are now customary or within the contemplation
of the parties to this Lease, when those taxes are: (a) measured by or
reasonably attributable to: (1) the cost or value of Tenant's equipment,
furniture, fixtures, and other personal property located in the Premises; or (2)
the cost or value of any leasehold improvements made in or to the Premises by or
for Tenant (to the extent that the cost or value of those leasehold improvements
exceeds the cost or value of a building standard build out, as determined by
Landlord, regardless of whether title to those improvements is vested in Tenant
or Landlord); (b) assessed on or related to the possession, leasing, operation,
management, maintenance, alteration, repair, use, or occupancy by Tenant of: (1)
the Premises; (2) any portion of the Project; or (3) the parking facility used
by Tenant in connection with this Lease; or (c) assessed either on this
transaction or on any document to which Tenant is a party that creates or
transfers an interest or an estate in the Premises.
5.6. Landlord's Books and Records. If Tenant disputes the amount of
Additional Rent stated in the Statement, Tenant may designate, within thirty
(30) days after receipt of that Statement, an independent certified public
accountant to inspect Landlord's records which inspection shall be at Tenant's
sole cost and expense. Tenant is not entitled to request the inspection,
however, if Tenant is then in default under this Lease. The accountant must be a
member of a nationally recognized accounting firm and must not charge a fee
based on the amount of Additional Rent that the accountant is able to save
Tenant by the inspection. Tenant must give reasonable notice to Landlord of the
request for inspection, and the inspection must be conducted in Landlord's
offices at a reasonable time or times. If, after that inspection, Tenant still
disputes the Additional Rent, a certification of the proper amount shall be
made, at Tenant's expense, by Landlord's independent certified public
accountant. That certification shall be final and conclusive. *SEE ADDENDUM
Article 6
SECURITY DEPOSIT
6.1. Security Deposit. Concurrently with Tenant's execution of this
Lease, Tenant shall deposit with Landlord a cash sum in the amount stated in
Summary of Basic Lease Information Section 8 (Security Deposit). Landlord shall
hold the Security Deposit as security for the performance of Tenant's
obligations under this Lease. If Tenant defaults on any provision of this Lease,
Landlord may, without prejudice to any other remedy it has, apply all or part of
the Security Deposit to: (a) any Rent or other sum in default; (b) any amount
that Landlord may spend
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or become obligated to spend in exercising Landlord's rights under Article 23;
or (c) any expense, loss, or damage that Landlord may suffer because of Tenant's
default. Tenant waives the provisions of California Civil Code Section 1950.7,
and all other provisions of law now in force or that become in force after the
date of execution of this Lease, that provide that Landlord may claim from a
security deposit only those sums reasonably necessary to remedy defaults in the
payment of Rent, to repair damage caused by Tenant, or to clean the Premises.
Landlord and Tenant agree that Landlord may, in addition, claim those sums
reasonably necessary to compensate Landlord for any other foreseeable or
unforeseeable loss or damage caused by the act or omission of Tenant or Tenant's
officers, agents, employees, independent contractors, or invitees. If Landlord
disposes of its interest in the Premises, Landlord may deliver or credit the
Security Deposit to Landlord's successor in interest in the Premises and
thereupon be relieved of further responsibility with respect to the Security
Deposit. Tenant may not assign or encumber the Security Deposit without the
consent of Landlord. Any attempt to do so shall be void and shall not be binding
on Landlord. If Landlord applies any portion of the Security Deposit, Tenant
shall, within thirty (30) days after demand by Landlord, deposit with Landlord
an amount sufficient to restore the Security Deposit to its original amount.
Tenant is not entitled to any interest on the Security Deposit. If Tenant
performs every provision of this Lease to be performed by Tenant, the unused
portion of the Security Deposit shall be returned to Tenant or the last assignee
of Tenant's interest under this Lease within thirty (30) days following the
expiration or termination of the Lease Term. *SEE ADDENDUM
Article 7
USE
7.1. Permitted Use. Tenant shall use the Premises solely for the
"Permitted Use", as defined in Summary of Basic Lease Information Section 9.
Tenant shall not use or permit the Premises to be used for any other purpose
without Landlord's prior written consent, which may be granted or withheld in
Landlord's sole discretion. Tenant shall comply with the rules attached to this
Lease as Exhibit E and any amendments or additions promulgated by Landlord from
time to time for the safety, care, and cleanliness of the Premises, Building,
and Project or for the preservation of good order (Rules and Regulations).
Landlord shall not be responsible to Tenant for the failure of any other tenants
or occupants of the Building to comply with the Rules and Regulations. In
addition to complying with other provisions of this Lease concerning the use of
the Premises: (a) Tenant shall not use or allow any person to use the Premises
for any purpose that is contrary to the Rules and Regulations, that violates any
Laws and Orders, that constitutes waste or nuisance, or that would unreasonably
annoy other occupants of the Building or the owners or occupants of buildings
adjacent to the Building; and (b) Tenant shall comply with all recorded
covenants, conditions, and restrictions that now or later affect the Project.
Article 8
COMPLIANCE WITH LAWS
8.1. Definition of "Laws and Orders". For purposes of this Article 8,
the term "Laws and Orders" includes all federal, state, county, city, or
government agency laws, statutes, ordinances, standards, rules, requirements, or
orders now in force or hereafter enacted, promulgated, or issued. The term also
includes government measures regulating or enforcing public access,
occupational, health, or safety standards for employers, employees, landlords,
or tenants.
8.2. Repairs, Replacements, Alterations, and Improvements. Tenant shall
continuously and without exception repair and maintain the Premises, including
tenant improvements, Alterations, fixtures, and furnishings, in an order and
condition in compliance with all Laws and Orders. Tenant, at Tenant's sole
expense, shall promptly make all repairs, replacements, alterations, or
improvements needed to comply with all Laws and Orders to the extent that the
Laws and Orders relate to or are triggered by (a) Tenant's particular use of the
Premises, (b) the Tenant Improvements located in the Premises, or (c) any
Alterations located in the Premises. Landlord, at Landlord's sole expense, shall
promptly make all repairs, replacements, alterations, or improvements needed to
comply with all Laws and Orders to the extent that the Laws and Orders relate to
the Base Building. If, however, such compliance work on the Base Building is
triggered by the Tenant Improvements or Alterations requested by Tenant under
Article 12, Tenant shall bear all expense of such work on the Base Building.
8.3. Collateral Estoppel. The judgment of any court of competent
jurisdiction, or the admission of Tenant in any judicial or administrative
action or proceeding that Tenant has violated any Laws and Orders shall be
conclusive, between Landlord and Tenant, of that fact, whether or not Landlord
is a party to that action or proceeding.
Article 9
HAZARDOUS MATERIAL
9.1. Use of Hazardous Material. Tenant shall not cause or permit any
Hazardous Material, as defined in Section 9.6, to be generated, brought onto,
used, stored, or disposed of in or about the Premises or the Building by Tenant
or its agents, employees, contractors, subtenants, or invitees, except for
limited quantities of standard office and janitorial supplies containing
chemicals categorized as Hazardous Material. Tenant shall: (a) Use, store, and
dispose of all such Hazardous Material in strict compliance with all applicable
statutes, ordinances, and regulations in effect during the Lease Term that
relate to public health and safety and protection of the environment
(Environmental Laws), including those Environmental Laws identified in Section
9.6, and (b) Comply at all times during the Lease Term with all Environmental
Laws.
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<PAGE> 11
9.2. Notice of Release or Investigation. If, during the Lease Term
(including any extensions), Tenant becomes aware of (a) any actual or threatened
release of any Hazardous Material on, under, or about the Premises or the
Building or (b) any inquiry, investigation, proceeding, or claim by any
government agency or other person regarding the presence of Hazardous Material
on, under, or about the Premises or the Building, Tenant shall give Landlord
written notice of the release or investigation within five (5) days after
learning of it and shall simultaneously furnish to Landlord copies of any
claims, notices of violation, reports, or other writings received by Tenant that
concern the release or investigation.
9.3. Asbestos Notification. Tenant acknowledges that Landlord has
advised Tenant that the Building contains or, because of its age, is likely to
contain asbestos containing materials (ACM's). If Tenant undertakes any
alterations, additions, or improvements to the Premises, as permitted by Article
12, Tenant shall, in addition to complying with the requirements of Article 12,
undertake the alterations, additions, or improvements in a manner that avoids
disturbing any ACM's present in the Building. If ACM's are likely to be
disturbed in the course of such work, Tenant shall encapsulate or remove the
ACM's in accordance with an approved asbestos removal plan and otherwise in
accordance with all applicable Environmental Laws, including giving all notices
required by Health and Safety Code Sections 25915-25919.7. *SEE ADDENDUM
9.4. Indemnification. Tenant shall, at Tenant's sole expense and with
counsel reasonably acceptable to Landlord, indemnify, defend, and hold harmless
Landlord and Landlord's shareholders, directors, officers, employees, partners,
affiliates, and agents with respect to all losses arising out of or resulting
from the release of any Hazardous Material in or about the Premises or the
Building, or the violation of any Environmental Law, by Tenant or Tenant's
agents, contractors, or invitees. This indemnification includes: (a) losses
attributable to diminution in the value of the Premises or the Building; (b)
loss or restriction of use of rentable space in the Building; (c) adverse effect
on the marketing of any space in the Building; and (d) all other liabilities,
obligations, penalties, fines, claims, actions (including remedial or
enforcement actions of any kind and administrative or judicial proceedings,
orders, or judgments), damages (including consequential and punitive damages),
and costs (including attorney, consultant, and expert fees and expenses)
resulting from the release or violation. This indemnification shall survive the
expiration or termination of this Lease.
9.5. Remediation Obligations. If the presence of any Hazardous Material
brought onto the Premises or the Building by Tenant or Tenant's employees,
agents, contractors, or invitees results in contamination of the Building,
Tenant shall promptly take all necessary actions, at Tenant's sole expense, to
return the Premises or the Building to the condition that existed before the
introduction of such Hazardous Material. Tenant shall first obtain Landlord's
approval of the proposed remedial action. This provision does not limit the
indemnification obligation set forth in Section 9.4.
9.6. Definition of "Hazardous Material". As used in this Article 9, the
term "Hazardous Material" shall mean any hazardous or toxic substance, material,
or waste that is or becomes regulated by the United States, the State of
California, or any local government authority having jurisdiction over the
Building. Hazardous Material includes: (a) any "hazardous substance", as that
term is defined in the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 (CERCLA) (42 United States Code Sections 9601-9675); (b)
"Hazardous waste", as that term is defined in the Resource Conservation and
Recovery Act of 1976 (RCRA) (42 United States Code Sections 6901-6992k); (c) any
pollutant, contaminant, or hazardous, dangerous, or toxic chemical, material, or
substance, within the meaning of any other applicable federal, state, or local
law, regulation, ordinance, or requirement (including consent decrees and
administrative orders imposing liability or standards of conduct concerning any
hazardous, dangerous, or toxic waste, substance, or material, now or hereafter
in effect); (d) petroleum products; (e) radioactive material, including any
source, special nuclear, or byproduct material as defined in 42 United States
Code Sections 2011-2297gB4; (f) Asbestos in any form or condition; and (g)
Polychlorinated biphenyls (PCBs) and substances or compounds containing PCBs.
Article 10
UTILITIES AND SERVICES
10.1. Standard Tenant Utilities and Services. Subject to applicable
government rules, regulations, and guidelines and the rules or actions of the
public utility furnishing the service, Landlord shall provide the following
utilities and services on all days during the Lease Term, unless otherwise
stated in the Lease:
10.1.1. Heating and Air Conditioning. Landlord shall provide
heating and air conditioning when necessary for normal comfort for normal office
use in the Premises, as reasonably determined by Landlord, on Mondays through
Fridays from 7 a.m. through 7 p.m. and on Saturdays from 9 a.m. through 1 p.m.
(Building Hours) except for the dates of observation of New Year's Day, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day, and other
locally or nationally recognized holidays (Holidays). *SEE ADDENDUM
10.1.2. Electricity. Landlord shall provide electricity for
lighting and power in the Premises if: (a) the connected electrical load for
lighting does not exceed an average of one (1) watt per Usable Square Foot of
the Premises during the Building Hours on a monthly basis; and (b) the connected
electrical load for all other power purposes does not exceed an average of two
(2) watts per Usable Square Foot of the Premises during the Building Hours on a
monthly basis. Electricity for Tenant's lighting and other power purposes shall
be at a nominal one hundred and twenty (120) volts. No electrical circuit for
the supply of power shall require a current capacity exceeding twenty (20)
amperes. Landlord shall replace lamps, starters, and ballasts for Building
standard lighting
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fixtures within the Premises on Tenant's request and at Tenant's expense. Tenant
shall replace lamps, starters, and ballasts for non Building standard lighting
fixtures within the Premises at Tenant's expense. All electricity used by Tenant
in the Premises shall be separately metered and shall be paid by Tenant directly
to the utility provider. *SEE ADDENDUM
10.1.3. Water. Landlord shall provide city water from the regular
Building outlets for drinking, lavatory, and toilet purposes.
10.1.4. Janitorial Services. Landlord shall provide five-(5) day
per week janitorial services in and about the Premises. Landlord shall not be
required to provide janitorial services to above standard improvements installed
in the Premises such as metallic trim, wood floor covering, glass panels,
interior windows, kitchens, executive workrooms, and shower facilities. *SEE
ADDENDUM
10.2. Over-standard Tenant Use. Tenant shall not, without Landlord's
prior written consent, use heat generating machines, machines other than normal
fractional horsepower office machines, or equipment or lighting other than
building standard lights in the Premises that may affect the temperature
otherwise maintained by the air conditioning system or increase the water
normally furnished to the Premises by Landlord under Section 10.1. If such
consent is given, Landlord shall have the right to install supplementary air
conditioning units or other facilities in the Premises, including supplementary
or additional metering devices. On billing by Landlord, Tenant shall pay the
cost for such supplementary facilities, including the cost of (a) installation,
operation, and maintenance; (b) increased wear and tear on existing equipment;
and (c) other similar charges. If Tenant uses water, electricity, heat, or air
conditioning in excess of that required to be supplied by Landlord under Section
10.1, Tenant shall pay to Landlord, on billing, the cost of (a) the excess
service; (b) installation, operation, and maintenance of equipment installed to
supply the excess service; and (c) increased wear and tear on existing equipment
caused by Tenant's excess consumption. Landlord may install devices to
separately meter any increased use. On demand, Tenant shall pay the increased
cost directly to Landlord, including the cost of the additional metering
devices. Tenant's use of electricity shall never exceed the capacity of the
feeders serving the Building and Premises or the risers or wiring installation.
If Tenant wishes to use heat, ventilation, or air conditioning during hours
other than those for which Landlord is obligated to supply such utilities under
Section 10.1, Tenant shall give Landlord such prior notice as Landlord shall
from time to time establish as appropriate, and Landlord shall supply such
utilities to Tenant at an hourly cost to Tenant as Landlord shall from time to
time establish. Amounts payable by Tenant to Landlord under this Section 10.2
for use of additional utilities shall be considered Additional Rent under this
Lease and shall be billed on a monthly basis.
10.3. Interruption of Utilities. Tenant agrees that Landlord shall not
be liable for damages, by abatement of Rent or otherwise, for failure to furnish
or delay in furnishing any service (including telephone and telecommunication
services) or for diminution in the quality or quantity of any service when the
failure, delay, or diminution is entirely or partially caused by: (a) breakage,
repairs, replacements, or improvements; (b) strike, lockout, or other labor
trouble; (c) inability to secure electricity, gas, water, or other fuel at the
Building after reasonable effort to do so; (d) accident or casualty; (e) act or
default of Tenant or other parties; or (f) any other cause beyond Landlord's
reasonable control. Such failure, delay, or diminution shall not be considered
to constitute an eviction or a disturbance of Tenant's use and possession of the
Premises or relieve Tenant from paying Rent or performing any of its obligations
under this Lease. Landlord shall not be liable under any circumstances for a
loss of or injury to property or for injury to or interference with Tenant's
business, including loss of profits through, in connection with, or incidental
to a failure to furnish any of the utilities or services under this Article 10.
Landlord may comply with mandatory or voluntary controls or guidelines
promulgated by any government entity relating to the use or conservation of
energy, water, gas, light, or electricity or the reduction of automobile or
other emissions without creating any liability of Landlord to Tenant under this
Lease as long as compliance with voluntary controls or guidelines does not
materially and unreasonably interfere with Tenant's use of the Premises. *SEE
ADDENDUM
Article 11
REPAIRS AND MAINTENANCE
11.1. Tenant's Repair and Maintenance Obligations. Tenant shall, at
Tenant's sole expense and in accordance with the terms of this Lease (including
Article 12), keep the Premises (including all Tenant Improvements, Alterations,
fixtures, and furnishings) in good order, repair, and condition at all times
during the Lease Term. Under Landlord's supervision, subject to Landlord's prior
approval, and within any reasonable period specified by Landlord, Tenant shall,
at Tenant's sole expense and in accordance with the terms of this Lease
(including Article 12) promptly and adequately repair all damage to the Premises
and replace or repair all damaged or broken fixtures and appurtenances. At
Landlord's option or if Tenant fails to make such repairs, Landlord may, but
need not, make the repairs and replacements. On receipt of an invoice from
Landlord, Tenant shall pay Landlord Landlord's out of pocket costs incurred in
connection with such repairs and replacements plus a percentage of such costs,
to be uniformly established for the Building, sufficient to reimburse Landlord
for all overhead, general conditions, fees, and other costs and expenses arising
from Landlord's involvement with such repairs and replacements. Tenant waives
and releases its rights, including its right to make repairs at Landlord's
expense, under California Civil Code Sections 1941-1942 or any similar law,
statute, or ordinance now or hereafter in effect. *SEE ADDENDUM
11.2. Landlord's Repair and Maintenance Obligations. Subject to Articles
15 and 16, Landlord shall, as part of the Operating Expenses (to the extent
permitted by Article 5), repair and maintain in good order and
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<PAGE> 13
condition (reasonable wear and tear excepted): (a) the structural portions of
the Premises; (b) the Base Building; (c) the Base Building Systems located
outside the Premises; (d) the exterior portions of the Building and Project; and
(e) all other common areas located in the Building, or in or on the Project,
including the parking facilities serving the Building. Repairs shall be made
promptly when appropriate to keep the applicable portion of the Premises,
Building, Project, and other items in the condition described in this clause.
Landlord shall not be in default of its repair and maintenance obligations under
this Section 11.2 if Landlord performs the repairs and maintenance within thirty
(30) days after written notice by Tenant to Landlord of the need for such
repairs and maintenance. If, due to the nature of the particular repair or
maintenance obligation, more than thirty (30) days are reasonably required to
complete it, Landlord shall not be in default under this Section 11.2 if
Landlord begins work within this thirty-day (30-day) period and diligently
prosecutes this work to completion. Except as provided in Subsection 22.7.2 or
Section 11.3, no abatement of rent and no liability of Landlord shall result for
any injury to or interference with Tenant's business arising from the making of
or failure to make any repairs, replacements, alterations, or improvements in or
to any portion of the Premises, Building, Project, fixtures, appurtenances, or
equipment. Except as provided in Section 11.3, Tenant waives and releases its
rights, including its right to make repairs at Landlord's expense, under
California Civil Code Sections 1941-1942 or any similar law, statute, or
ordinance now or hereafter in effect.
Article 12
ALTERATIONS AND ADDITIONS
12.1. Landlord's Consent to Alterations. Tenant may not make any
improvements, alterations, additions, or changes to the Premises (Alterations)
without obtaining Landlord's prior written consent.
12.1.1. Consent Procedure; Conditions. Tenant shall request such
consent by written notice to Landlord, which must be accompanied by detailed and
complete plans and specifications for the proposed work. As a condition of its
consent to Alterations, Landlord may impose any requirements that Landlord
considers desirable, including a requirement that Tenant provide Landlord with a
surety bond, a letter of credit, or other financial assurance that the cost of
the Alterations will be paid when due. *SEE ADDENDUM
12.1.2. Reasonable Consent. Landlord shall not unreasonably
withhold its consent to proposed Alterations. The Alterations for which Landlord
may reasonably withhold consent include those that would or could: (a) affect
the structure of the Building or any portion of the Building other than the
interior of the Premises; (b) affect the Base Building Systems of the Premises
or Building; (c) result in Landlord's being required under Laws and Orders to
perform any work that Landlord could otherwise avoid or defer (Additional
Required Work); (d) result in an increase in the demand for utilities or
services that Landlord is required to provide; or (e) cause an increase in the
premiums for hazard or liability insurance carried by Landlord. "Base Building
Systems" means all systems and equipment (including plumbing; heating,
ventilation, and air conditioning; electrical; fire/life safety; elevator; and
security systems) that serve all or part of the Building.
12.1.3. Costs of Review. Tenant shall reimburse Landlord for the
reasonable fees and costs of any architects, engineers, or other consultants
retained by Landlord to review the proposed Alterations.
12.2. Compliance of Alterations With Laws and Insurance Requirements.
Tenant shall cause all Alterations to comply with the following: (a) applicable
Laws and Orders; (b) applicable requirements of a fire rating bureau; or (c)
applicable requirements of Landlord's hazard insurance carrier to the extent
that Tenant is informed of them. Tenant shall also comply with those
requirements in the course of constructing the Alterations. Before beginning
construction of any Alteration, Tenant shall obtain a valid building permit and
any other permits required by any government entity having jurisdiction over the
Premises. Tenant shall provide copies of those permits to Landlord before the
work begins. Tenant shall, at Tenant's sole expense, perform any Additional
Required Work in the Premises, which shall be subject to the same requirements
as any Alteration. If any Additional Required Work must be performed outside the
Premises, Landlord may elect to perform that work at Tenant's expense. No
consent by Landlord to any proposed work shall constitute a waiver of Tenant's
obligations under this Section 12.2.
12.3. Manner of Construction. Tenant shall build Alterations entirely
within the Premises and in conformance with Landlord's construction rules and
regulations, using only contractors and subcontractors approved in writing by
Landlord. All work relating to any Alterations shall be done in a good and
workmanlike manner, using new materials equivalent in quality to those used in
the construction of the initial improvements to the Premises. All work shall be
diligently prosecuted to completion. Tenant shall ensure that all work is
performed in a manner that does not obstruct access to or through the Building
or its common areas and that does not interfere either with other tenants' use
of their premises or with any other work being undertaken in the Building.
Tenant shall take all measures necessary to ensure that labor peace is
maintained at all times. Within twenty (20) days after completion of any
Alterations, Tenant shall deliver to Landlord a reproducible copy of the
drawings of Alterations as built.
12.4. Payment for Improvements. Tenant shall promptly pay all charges
and costs incurred in connection with any Alteration, as and when required by
the terms of any agreements with contractors, designers, or suppliers. At least
seven (7) days before beginning construction of any Alteration, Tenant shall
give Landlord written notice of the expected commencement date of that
construction to permit Landlord to post and record a notice of
non-responsibility. On completion of any Alteration, Tenant shall: (a) cause a
timely notice of completion to be recorded in the office of the recorder of the
county in which the Building is located, in accordance with Civil Code Section
3093 or any successor statute; (b) deliver to Landlord evidence of full payment
and unconditional final waivers of all liens for labor, services, or materials;
and (c) pay to Landlord five percent (5%) of the cost of constructing the
Page 9 of 26
<PAGE> 14
Alteration to compensate Landlord for all overhead, costs, and expenses arising
from Landlord's involvement with that work. *SEE ADDENDUM
12.5. Construction Insurance. Before construction begins, Tenant shall
deliver to Landlord reasonable evidence that damage to, or destruction of, the
Alterations during construction will be covered either by the policies that
Tenant is required to carry under Article 14 or by a policy of builder's all
risk insurance in an amount approved by Landlord. If Landlord requires Tenant to
provide builder's all risk insurance for the proposed Alterations, Tenant shall
provide a copy of the policy, any endorsements, and an original certificate of
insurance that complies with Subsection 14.9.2. Tenant shall cause each
contractor and subcontractor to maintain all workers' compensation insurance
required by law and liability insurance (including property damage) in amounts
reasonably required by Landlord. Tenant shall provide evidence of that insurance
to Landlord before construction begins.
12.6. Landlord's Property. All Alterations, signs, fixtures, or
equipment that may be installed or placed in or about the Premises from time to
time shall be and become the property of Landlord on installation. Tenant may
remove any trade fixtures or freestanding kitchen or office equipment that
Tenant can substantiate to Landlord has not been paid for with any tenant
improvement allowance funds provided to Tenant by Landlord. Tenant must repair
any damage to the Premises and Building caused by that removal. By written
notice to Tenant either before expiration of the Lease Term or within a
reasonable time after any earlier termination of this Lease, Landlord may
require Tenant, at Tenant's sole expense, to remove any Alterations and restore
the Premises to their configuration and condition before the Alterations were
made. If Tenant fails to complete that restoration before expiration of the
Lease Term or, in the case of earlier termination, within fifteen (15) days
after written notice from Landlord requesting the restoration, Landlord may do
so and charge the cost of the restoration to Tenant.
12.7. Initial Improvements. The terms of the Tenant Improvement
Agreement, attached to this Lease as Exhibit C, and not the terms of this
Article 12 shall govern the construction of the initial improvements to the
Premises.
Article 13
COVENANT AGAINST LIENS
13.1. Covenant Against Liens. Tenant shall not be the cause or object of
any liens or allow such liens to exist, attach to, be placed on, or encumber
Landlord's or Tenant's interest in the Premises, Building, or Project by
operation of law or otherwise. Tenant shall not suffer or permit any lien of
mechanics, material suppliers, or others to be placed against the Premises,
Building, or Project with respect to work or services performed or claimed to
have been performed for Tenant or materials furnished or claimed to have been
furnished to Tenant or the Premises. Landlord has the right at all times to post
and keep posted on the Premises any notice that it considers necessary for
protection from such liens. At least seven (7) days before beginning
construction of any Alteration or Tenant Improvements, Tenant shall give
Landlord written notice of the expected commencement date of that construction
to permit Landlord to post and record a notice of non-responsibility. If any
such lien attaches or Tenant receives notice of any such lien, Tenant shall
cause the lien to be immediately released and removed of record. Despite any
other provision of this Lease, if the lien is not released and removed within
five (5) days after Landlord delivers notice of the lien to Tenant, Landlord may
immediately take all action necessary to release and remove the lien, without
any duty to investigate the validity of it. All expenses (including reasonable
attorney fees) incurred by Landlord in connection with the lien shall be
considered Additional Rent under this Lease and be immediately due and payable
by Tenant.
Article 14
EXCULPATION, INDEMNIFICATION, AND INSURANCE
14.1. Definition of "Tenant Parties" and "Landlord Parties". For
purposes of this Article 14, the term "Tenant Parties" refers singularly and
collectively to Tenant and Tenant's officers, members, partners, agents,
employees, and independent contractors as well as to all persons and entities
claiming through any of these persons or entities. The term "Landlord Parties"
refers singularly and collectively to Landlord and the partners, venturers,
trustees, and ancillary trustees of Landlord and the respective officers,
directors, shareholders, members, parents, subsidiaries, and any other
affiliated entities, personal representatives, executors, heirs, assigns,
licensees, invitees, beneficiaries, agents, servants, employees, and independent
contractors of these persons or entities.
14.2.1. Exculpation. To the fullest extent permitted by law,
Tenant, on its behalf and on behalf of all Tenant Parties, waives all claims (in
law, equity, or otherwise) against Landlord Parties arising out of, knowingly
and voluntarily assumes the risk of, and agrees that Landlord Parties shall not
be liable to Tenant Parties for any of the following: (a) Injury to or death of
any person; or (b) Loss of, injury or damage to, or destruction of any tangible
or intangible property, including the resulting loss of use, economic losses,
and consequential or resulting damage of any kind from any cause. Landlord
Parties shall not be liable under this clause regardless of whether the
liability results from any active or passive act, error, omission, or negligence
of any of the Landlord Parties; or is based on claims in which liability without
fault or strict liability is imposed or sought to be imposed on any of the
Landlord Parties. This exculpation clause shall not apply to claims against
Landlord Parties to the extent that a final judgment of a court of competent
jurisdiction establishes that the injury, loss, damage, or destruction was
proximately caused by Landlord Parties', fraud, willful injury to person or
property, or violation of law. *SEE ADDENDUM
14.2.2. Survival of Exculpation. The clauses of this Section 14.2
shall survive the expiration or earlier termination of this Lease until all
claims within the scope of this Section 14.2 are fully, finally, and
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absolutely barred by the applicable statutes of limitations.
14.2.3. Tenant's Acknowledgment of Fairness. Tenant acknowledges
that this Section 14.2 was negotiated with Landlord, that the consideration for
it is fair and adequate, and that Tenant had a fair opportunity to negotiate,
accept, reject, modify, or alter it. *SEE ADDENDUM
14.2.4. No Exculpation for Non-delegable Duties. This exculpation
clause may not be interpreted or construed as an attempt by Landlord to be
relieved of liability arising out of a non-delegable duty on the part of
Landlord.
14.2.5. Waiver of Civil Code Section 1542. With respect to the
exculpation provided in this Article 14, Tenant waives the benefits of Civil
Code Section 1542, which provides:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
14.3. Indemnification.
14.3.1. Tenant's Indemnification of Landlord Parties. To the
fullest extent permitted by law, Tenant shall, at Tenant's sole expense and with
counsel reasonably acceptable to Landlord, indemnify, defend, and hold harmless
Landlord Parties from and against all Claims, as defined in Subsection 14.3.2,
from any cause, arising out of or relating (directly or indirectly) to this
Lease, the tenancy created under this Lease, or the Premises, including: (a) the
use or occupancy, or manner of use or occupancy, of the Premises or Building by
Tenant Parties; (b) any act, error, omission, or negligence of Tenant Parties or
of any invitee, guest, or licensee of Tenant in, on, or about the Project; (c)
Tenant's conducting of its business; (d) any alterations, activities, work, or
things done, omitted, permitted, allowed, or suffered by Tenant Parties in, at,
or about the Premises or Building, including the violation of or failure to
comply with any applicable laws, statutes, ordinances, standards, rules,
regulations, orders, decrees, or judgments in existence on the Lease
Commencement Date or enacted, promulgated, or issued after the date of this
Lease; and (e) any breach or default in performance of any obligation on
Tenant's part to be performed under this Lease, whether before or during the
Lease Term or after its expiration or earlier termination.
14.3.2. Definition of Claims. For purposes of this Lease,
"Claims" means any and all claims, losses, costs, damage, expenses, liabilities,
liens, actions, causes of action (whether in tort or contract, law or equity, or
otherwise), charges, assessments, fines, and penalties of any kind (including
consultant and expert expenses, court costs, and attorney fees actually
incurred).
14.3.3. Type of Injury or Loss. This indemnification extends to
and includes Claims for: (a) injury to any persons (including death at any time
resulting from that injury); (b) loss of, injury or damage to, or destruction of
property (including all loss of use resulting from that loss, injury, damage, or
destruction); and (c) all economic losses and consequential or resulting damage
of any kind.
14.3.4. Active or Passive Negligence; Strict Liability. Except as
provided in this Subsection 14.3.4, the indemnification in Subsection 14.3.1
shall apply regardless of the active or passive negligence of Landlord Parties
and regardless of whether liability without fault or strict liability is imposed
or sought to be imposed on Landlord Parties. The indemnification in Subsection
14.3.1 shall not apply to the extent that a final judgment of a court of
competent jurisdiction establishes that a Claim against one Landlord Party was
proximately caused by the willful misconduct of that Landlord Party. In that
event, however, this indemnification shall remain valid for all other Landlord
Parties.
14.3.5. Indemnification Independent of Insurance Obligations. The
indemnification provided in this Article 14 may not be construed or interpreted
as in any way restricting, limiting, or modifying Tenant's insurance or other
obligations under this Lease and is independent of Tenant's insurance and other
obligations. Tenant's compliance with the insurance requirements and other
obligations under this Lease shall not in any way restrict, limit, or modify
Tenant's indemnification obligations under this Lease.
14.3.6. Attorney Fees. The prevailing party shall be entitled to
recover its actual attorney fees and court costs incurred in enforcing the
indemnification clauses set forth in this Section 14.3.
14.3.7. Survival of Indemnification. The clauses of this Section
14.3 shall survive the expiration or earlier termination of this Lease until all
claims against Landlord Parties involving any of the indemnified matters are
fully, finally, and absolutely barred by the applicable statutes of limitations.
14.3.8. Duty To Defend. Tenant's duty to defend Landlord Parties
is separate and independent of Tenant's duty to indemnify Landlord Parties. The
duty to defend includes claims for which Landlord Parties may be liable without
fault or strictly liable. The duty to defend applies regardless of whether the
issues of negligence, liability, fault, default, or other obligation on the part
of Tenant Parties have been determined. The duty to defend applies immediately,
regardless of whether Landlord Parties have paid any sums or incurred any
detriment arising out of or relating (directly or indirectly) to any Claims. It
is the express intention of the parties that Landlord Parties
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be entitled to obtain summary adjudication or summary judgment regarding
Tenant's duty to defend Landlord Parties at any stage of any claim or suit
within the scope of this Section 14.3.
*SEE ADDENDUM
14.4. Compliance with Insurer Requirements. Tenant shall, at Tenant's
sole expense, comply with all requirements, guidelines, rules, orders, and
similar mandates and directives pertaining to the use of the Premises and the
Building, whether imposed by Tenant's insurers, Landlord's insurers, or both. If
Tenant's business operations, conduct, or use of the Premises or the Building
cause any increase in the premium for any insurance policies carried by
Landlord, Tenant shall, within ten (10) business days after receipt of written
notice from Landlord, reimburse Landlord for the increase. Tenant shall, at
Tenant's sole expense, comply with all rules, orders, regulations, or
requirements of the American Insurance Association (formerly the National Board
of Fire Underwriters) and of any similar body.
14.5. Tenant's Liability Coverage. Tenant shall, at Tenant's sole
expense, maintain the coverages set forth in this Section 14.5.
14.5.1. Commercial General Liability Insurance. Tenant shall
obtain commercial general liability insurance written on an "occurrence" policy
form, covering bodily injury, property damage, personal injury, and advertising
injury arising out of or relating (directly or indirectly) to Tenant's business
operations, conduct, assumed liabilities, or use or occupancy of the Premises or
the Building.
14.5.2. Broad Form Coverage. Tenant's liability coverage shall
include all the coverages typically provided by the Broad Form Comprehensive
General Liability Endorsement, including broad form property damage coverage
(which shall include coverage for completed operations). Tenant's liability
coverage shall further include premises operations coverage, products completed
operations coverage, owners and contractors protective coverage (when reasonably
required by landlord), and the broadest available form of contractual liability
coverage. It is the parties' intent that Tenant's contractual liability coverage
provide coverage to the maximum extent possible of Tenant's indemnification
obligations under this Lease.
14.5.3. Primary Insured. Tenant shall be the first or primary
named insured.
14.5.4. Additional Insured. Landlord Parties and any lender of
Landlord shall be named by endorsement as additional Insured under Tenant's
general liability coverage. The additional insured endorsement must be on ISO
Form CG 20 11 11 85 or an equivalent acceptable to Landlord, with such
modifications as Landlord may require.
14.5.5. Cross Liability; Severability of Interests. Tenant's
general liability policies shall be endorsed as needed to provide cross
liability coverage for Tenant, Landlord, and any lender of Landlord and to
provide severability of interests.
14.5.6. Primary Insurance Endorsements for Additional Insureds.
Tenant's general liability policies shall be endorsed as needed to provide that
the insurance afforded by those policies to the additional insured is primary
and that all insurance carried by Landlord Parties is strictly excess and
secondary and shall not contribute with Tenant's liability insurance.
14.5.7. Scope of Coverage for Additional Insureds. The coverage
afforded to Landlord and any lender of Landlord must be at least as broad as
that afforded to Tenant and may not contain any terms, conditions, exclusions,
or limitations applicable to Landlord or any lender of Landlord that do not
apply to Tenant.
14.5.8. Delivery of Certificate, Policy, and Endorsements. Before
the Lease Commencement Date, Tenant shall deliver to Landlord the endorsements
referred to in this Section 14.5 as well as a certified copy of Tenant's
liability policy or policies and an original certificate of insurance, executed
by an authorized agent of the insurer or insurers, evidencing compliance with
the liability insurance requirements. The certificate shall provide for no less
than thirty (30) days' advance written notice to Landlord from the insurer or
insurers of any cancellation, non-renewal, or material change in coverage or
available limits of liability and shall confirm compliance with the liability
insurance requirements in this Lease. The "endeavor to" and "failure to mail
such notice shall impose no obligation or liability of any kind upon the
Company" language and any similar language shall be stricken from the
certificate.
14.5.9. Concurrency of Primary, Excess, and Umbrella Policies.
Tenant's liability insurance coverage may be provided by a combination of
primary, excess, and umbrella policies, but those policies must be absolutely
concurrent in all respects regarding the coverage afforded by the policies. The
coverage of any excess or umbrella policy must be at least as broad as the
coverage of the primary policy.
14.5.10. Liability Limits. The minimum acceptable limit of
liability for Tenant's liability insurance is two million dollars
($2,000,000.00) (general aggregate other than products and completed
operations).
14.5.11. "Per Location" Endorsement. Tenant shall, at Tenant's
sole expense, procure a "per location" endorsement or equivalent reasonably
acceptable to Landlord so that the general aggregate and other limits apply
separately and specifically to the Premises. *SEE ADDENDUM
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<PAGE> 17
14.5.12. Survival of Insurance Requirements. Tenant shall, at
Tenant's sole expense, maintain in full force and effect the liability insurance
coverages required under this Lease and shall maintain Landlord Parties and any
lender specified by Landlord as additional insured, as required by Subsection
14.5.4 of this lease, for a period of no less than two (2) years after
expiration or earlier termination of this Lease.
14.6. Tenant's Workers' Compensation and Employer Liability Coverage.
Tenant shall procure and maintain workers' compensation insurance as required by
law and employer's liability insurance with limits of no less than one million
dollars ($1,000,000).
14.7. Tenant's First Party Insurance. Tenant shall, at Tenant's sole
expense, procure and maintain the first party insurance coverages described in
this Section 14.7.
14.7.1. Tenant's Property Insurance. Tenant shall procure and
maintain property insurance coverage for: (a) all office furniture, trade
fixtures, office equipment, merchandise, and all other items of Tenant's
property in, on, at, or about the Premises and the Building, including property
installed by, for, or at the expense of Tenant; (b) "Tenant Improvements", as
defined in the Tenant Improvement Agreement; and (c) all other improvements,
betterment's, alterations, and additions to the Premises. Tenant's property
insurance must fulfill the following requirements: (a) it must be written on the
broadest available "all risk" (special causes of loss) policy form or an
equivalent form acceptable to Landlord; (b) it must include earthquakes as a
covered cause of loss; (c) it must include an agreed amount endorsement for no
less than one hundred percent (100%) of the full replacement cost (new without
deduction for depreciation) of the covered items and property; and (d) the
amounts of coverage must meet any coinsurance requirements of the policy or
policies. It is the parties' intent that Tenant shall structure its property
insurance program so that no coinsurance penalty shall be imposed and there
shall be no valuation shortfalls or disputes with any insurer or with Landlord.
The property insurance coverage shall include vandalism and malicious mischief
coverage, sprinkler leakage coverage, and earthquake sprinkler leakage coverage.
*SEE ADDENDUM
14.7.2. Business Income and Extra Expense Coverage. Tenant shall
further procure and maintain business income (business interruption) insurance
and extra expense coverage with coverage amounts that shall reimburse Tenant for
all direct or indirect loss of income and charges and costs incurred arising out
of all perils insured against by Tenant's property insurance coverage, including
prevention of, or denial of use of or access to, all or part of the Premises or
the Building, as a result of those perils. The business income and extra expense
coverage shall provide coverage for no less than twelve (12) months of the loss
of income, charges, and costs contemplated under the Lease and shall be carried
in amounts necessary to avoid any coinsurance penalty that could apply. The
business income and extra expense coverage shall be issued by the insurer that
issues Tenant's other first party coverage.
14.8. Other Tenant Insurance Coverage. Once every three (3) years during
the Lease Term and any renewal term, Landlord shall have the right to engage an
insurance consultant to review the insurance coverages maintained by Tenant. If,
in the opinion of that consultant, any aspect of Tenant's general liability,
property, or other insurance program is inadequate to protect the interests of
Landlord or Landlord's lenders, as contemplated in this Article 14, Tenant
shall, at Tenant's sole expense, comply promptly with the consultant's
recommendations.
14.9. Form of Policies and Additional Requirements.
14.9.1. Insurance Independent of Exculpation and Indemnification.
The insurance requirements set forth in Sections 14.4-14.10 are independent of
Tenant's exculpation, indemnification, and other obligations under this Lease
and shall not be construed or interpreted in any way to restrict, limit, or
modify Tenant's exculpation, indemnification, and other obligations or to limit
Tenant's liability under this Lease.
14.9.2. Form of Policies. In addition to the requirements set
forth in Subsection 14.5.8, the insurance required of Tenant under this Article
14 must: (a) name Landlord and any other party Landlord specifies by endorsement
as an additional insured; (b) be issued by an insurance company with a rating of
no less than ABVIII in the current Best's Insurance Guide, or that is otherwise
acceptable to Landlord, and admitted to engage in the business of insurance in
the State of California; (c) be primary insurance for all claims under it and
provide that any insurance carried by Landlord Parties and Landlord lenders is
strictly excess, secondary, and noncontributing with any insurance carried by
Tenant; and (d) provide that insurance may not be canceled, non-renewed, or the
subject of material change in coverage or available limits of coverage, except
on thirty (30) days' prior written notice to Landlord and Landlord's lenders.
14.9.3. Tenant's Delivery of Policy, Endorsements, and
Certificates. Tenant shall deliver the policy or policies, along with any
endorsements to them and certificates required by this Article 14, to Landlord:
(a) on or before the Lease Commencement Date; (b) at least thirty (30) days
before the expiration date of any policy; and (c) on renewal of any policy.
14.9.4. Deductibles and Self Insured Retention's. All deductibles
and self insured retention's under Tenant's policies are subject to Landlord's
prior written approval.
14.10. Waiver of Subrogation. Landlord and Tenant agree to cause the
insurance companies issuing their respective property (first party) insurance to
waive any subrogation rights that those companies may have against
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<PAGE> 18
Tenant or Landlord, respectively, as long as the insurance is not invalidated by
the waiver. If the waivers of subrogation are contained in their respective
insurance policies, Landlord and Tenant waive any right that either may have
against the other on account of any loss or damage to their respective property
to the extent that the loss or damage is insured under their respective
insurance policies.
Article 15
DAMAGE AND DESTRUCTION
15.1. Repair of Damage by Landlord. Tenant agrees to notify Landlord in
writing promptly of any damage to the Premises resulting from fire, earthquake,
or any other identifiable event of a sudden, unexpected, or unusual nature
(Casualty). If the Premises are damaged by a Casualty or any common areas of the
Building providing access to the Premises are damaged to the extent that Tenant
does not have reasonable access to the Premises and if neither Landlord nor
Tenant has elected to terminate this Lease under Section 15.3 or 15.4, Landlord
shall promptly and diligently restore such common areas, the Base Building of
the Premises, and the Tenant Improvements originally constructed by Landlord to
substantially the same condition as existed before the Casualty, except for
modifications required by building codes and other laws and except for any other
modifications to the common areas considered desirable by Landlord. In making
these modifications, Landlord shall not materially impair Tenant's access to the
Premises. Landlord's obligation to restore is subject to reasonable delays for
insurance adjustment and other matters beyond Landlord's reasonable control and
subject to the other clauses of this Article 15. If Tenant requests that
Landlord modify the Tenant Improvements in connection with the rebuilding,
Landlord may condition its consent to those modifications on: (a) Tenant's
payment to Landlord before construction is begun of any sums in excess of the
amount of insurance proceeds received by Landlord that are needed to complete
the Tenant Improvements; and (b) Confirmation by Landlord's architect or
contractor that the modifications will not increase the scope of work or the
time necessary to complete the Tenant Improvements.
15.2. Repair Period Notice. Landlord shall, within the later of (a)
sixty (60) days after the date on which Landlord determines the full extent of
the damage caused by the Casualty or (b) thirty (30) days after Landlord has
determined the extent of the insurance proceeds available to effectuate repairs,
provide written notice to Tenant indicating the anticipated period for repairing
the Casualty (Repair Period Notice). The Repair Period Notice shall also state,
if applicable, Landlord's election either to repair or to terminate the Lease
under Section 15.3.
15.3. Landlord's Option To Terminate or Repair. Landlord may elect
either to terminate this Lease or to effectuate repairs if: (a) the Repair
Period Notice estimates that the period for repairing the Casualty exceeds two
hundred and seventy (270) days from the date of the commencement of the repair;
(b) the estimated repair cost exceeds the insurance proceeds, if any, available
for such repair (not including the deductible, if any, on Landlord's property
insurance), plus any amount that Tenant is obligated or elects to pay for such
repair; (c) the estimated repair cost of the Premises or the Building, even
though covered by insurance, exceeds fifty percent (50%) of the full replacement
cost; or (d) the Building cannot be restored except in a substantially different
structural or architectural form than existed before the Casualty. Landlord's
election shall be stated in the Repair Period Notice.
*SEE ADDENDUM
15.4. Tenant's Option To Terminate. If the Repair Period Notice provided
by Landlord indicates that the anticipated period for repairing the Casualty
exceeds two hundred and seventy (270) days, Tenant may elect to terminate this
Lease by providing written notice (Tenant's Termination Notice) to Landlord
within ten (10) days after receiving the Repair Period Notice. If Tenant does
not elect to terminate within this ten day (10 day) period, Tenant shall be
considered to have waived the option to terminate. *SEE ADDENDUM
15.5. Rent Abatement Due to Casualty. Landlord and Tenant agree that, if
the Casualty was not the result of the negligence or willful misconduct of
Tenant or Tenant's employees, contractors, licensees, or invitees, Tenant shall
be provided with a proportionate abatement of Rent based on the Rentable Square
Footage of the Premises rendered unusable (due to physical damage to the
Premises or Base Building Systems or the unavailability of access to the
Premises) and not used by Tenant, but only to the extent that Landlord is
reimbursed from the proceeds of rental interruption insurance purchased by
Landlord as a part of Operating Expenses. That proportional abatement, if any,
shall be provided during the period beginning on the later of (a) the date of
the Casualty or (b) the date on which Tenant ceases to occupy the Premises and
ending on the date of Substantial Completion of Landlord's restoration
obligations as provided in this Article 15. Subject to Section 15.4, the Rent
abatement provided in this Section 15.5 is Tenant's sole remedy due to the
occurrence of the Casualty. Landlord shall not be liable to Tenant or any other
person or entity for any direct, indirect, or consequential damage (including
but not limited to lost profits of Tenant or loss of or interference with
Tenant's business), whether or not caused by the negligence of Landlord or
Landlord's employees, contractors, licensees, or invitees, due to, arising out
of, or as a result of the Casualty (including but not limited to the termination
of the Lease in connection with the Casualty). Tenant agrees to maintain
business interruption insurance in amounts and with coverage no less than that
required by Subsection 14.7.2 to provide coverage regarding such matters.
15.6. Damage Near End of Term. Despite any other provision of this
Article 15, if the Premises or the Building is destroyed or damaged by a
Casualty during the last eighteen (18) months of the Lease Term, Landlord shall
have the option to terminate this Lease by giving written notice to Tenant of
the exercise of that option within thirty (30) days after that damage or
destruction.
15.7. Effective Date of Termination; Rent Apportionment. If Landlord or
Tenant elects to terminate this Lease under this Article 15 in connection with a
Casualty, this termination shall be effective thirty (30) days after
Page 14 of 26
<PAGE> 19
delivery of notice of such election. Tenant shall pay Rent, properly apportioned
up to the date of the Casualty. After the effective date of the termination,
Landlord and Tenant shall be discharged of all future obligations under this
Lease, except for those provisions that, by their terms, survive the expiration
or earlier termination of the Lease.
15.8. Waiver of Statutory Provisions. The provisions of this Lease,
including those in this Article 15, constitute an express agreement between
Landlord and Tenant that applies in the event of any Casualty to the Premises,
Building, or Project. Tenant, therefore, fully waives the provisions of any
statute or regulation, including California Civil Code Sections 1932(2) and
1933(4), for any rights or obligations concerning a Casualty.
Article 16
CONDEMNATION
16.1. Definition of "Condemnation". As used in this Lease, the term
"Condemnation" means a permanent taking through (a) the exercise of any
government power (by legal proceedings or otherwise) by any public or quasi
public authority or by any other party having the right of eminent domain
(Condemnor) or (b) a voluntary sale or transfer by Landlord to any Condemnor,
either under threat of exercise of eminent domain by a Condemnor or while legal
proceedings for condemnation are pending.
16.2. Effect on Rights and Obligations. If, during the Lease Term or the
period between the date of execution of this Lease and the date on which the
Lease Term begins, there is any Condemnation of all or part of the Premises,
Building, or Project on which the Premises and Building are constructed, the
rights and obligations of the parties shall be determined under this Article 16,
and Rent shall not be affected or abated except as expressly provided in this
Article. Landlord shall notify Tenant in writing of any Condemnation within
thirty (30) days after the later of (a) the filing of a complaint by Condemnor
or (b) the final agreement and determination by Landlord and Condemnor of the
extent of the taking (Condemnation Notice).
16.3. Termination of Lease.
16.3.1. Definition of "Termination Date". The "Termination Date"
shall be the earliest of: (a) the date on which Condemnor takes possession of
the property that is subject to the Condemnation; (b) the date on which title to
the property subject to the Condemnation is vested in Condemnor; (c) if Landlord
has elected to terminate, the date on which Landlord requires possession of the
property in connection with the Condemnation, as specified in written notice
delivered to Tenant no less than thirty (30) days before that date; or (d) if
Tenant has elected to terminate, thirty (30) days after Landlord's receipt of
written notice of termination from Tenant. If both Landlord and Tenant have
elected to terminate under this Article 16, the Termination Date shall be the
earliest of the dates described in (a) - (c) above.
16.3.2. Automatic Termination. If the Premises are totally taken
by Condemnation, this Lease shall terminate as of the Termination Date, and the
Condemnation Award shall be allocated between Landlord and Tenant in accordance
with Section 16.5.
16.3.3. Landlord's Right To Terminate. Landlord shall have the
option to terminate this Lease if: (a) ten percent (10%) or more of the Rentable
Square Feet of the Building or the Premises is taken through Condemnation; (b)
any portion of the Building or Project necessary for Landlord to operate the
Building efficiently is taken through Condemnation; or (c) any other areas
providing access to the Premises or Building are taken through Condemnation. To
elect to terminate the Lease under this Subsection 16.3.3, Landlord must provide
written notice of its election (Landlord's Taking Termination Notice) to Tenant
within thirty (30) days after the later of (a) the filing of a complaint by
Condemnor or (b) the final agreement and determination by Landlord and Condemnor
of the extent of the taking. In that event, this Lease shall be terminated on
the Termination Date, and all Rent shall be prorated to that date. If Landlord
does not elect to terminate under this Subsection 16.3.3, Landlord shall,
subject to Subsection 16.3.4, be obligated to the extent of severance damages
received by Landlord to reasonably restore (to the extent feasible) the Premises
or access to the Premises, subject to Landlord's obtaining all necessary
approvals, permits, and authorizations relating to such work. *SEE ADDENDUM
16.3.4. Tenant's Right To Terminate.
16.3.4.1. Grounds; Termination Notice. Tenant shall have
the option to terminate this Lease by providing thirty (30) days' written notice
to Landlord if one or both of the following are taken through Condemnation: (a)
twenty five percent (25%) or more of the Usable Square Feet of the Premises; or
(b) any portion of the Building that provides Tenant with its access to the
Premises and that, if taken, would eliminate Tenant's access to the Premises.
Tenant's notice must be given within thirty (30) days after Tenant's receipt of
the Condemnation Notice required by Section 16.2.
16.3.4.2. Landlord's Restoration Notice. Despite Tenant's
termination right, this Lease shall continue in full force and effect if
Landlord gives Tenant written notice (Restoration Notice) within thirty (30)
days after the date on which the nature and extent of the Condemnation are
finally determined, stating that: (a) Landlord shall, at Landlord's sole
expense, reconfigure the remaining Premises or provide alternative, reasonable
access to Tenant so that the area of the Premises shall be substantially the
same after the Condemnation and Tenant shall have reasonable access to the
Premises after the Condemnation; (b) Landlord shall begin the restoration as
soon as reasonably practicable; and (c) Landlord has reasonably determined that
such restoration can be completed within ninety (90) days after the date of the
notice.
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<PAGE> 20
16.3.5. Tenant's Waiver. Tenant agrees that its rights to
terminate this Lease due to partial Condemnation are governed by this Article
16. Tenant waives all rights it may have under California Code of Civil
Procedure Section 1265.130, or otherwise, to terminate this Lease based on a
partial Condemnation.
16.3.6. Proration of Rent. If this Lease is terminated under this
Article 16, the termination shall be effective on the Termination Date, and
Landlord shall prorate Rent to that date. Tenant shall be obligated to pay Rent
for the period up to, but not including, the Termination Date as prorated by
Landlord. Landlord shall return to Tenant prepaid Rent allocable to any period
on or after the Termination Date.
16.4. Effect of Condemnation if Lease Is Not Terminated. If any part of
the Premises is taken by Condemnation and this Lease is not terminated, Rent
shall be proportionately reduced based on the Rentable Square Footage of the
Premises taken. Landlord and Tenant agree to enter into an amendment to this
Lease within thirty (30) days after the partial taking, confirming the reduction
in Rentable Square Footage of the Premises and the reduction in Rent. If
Landlord gives Tenant a timely Restoration Notice under Subsection 16.3.4.2,
this Lease shall continue in full force and effect without any reduction of Rent
(unless the Premises as restored are smaller than the existing Premises, in
which case Rent shall be proportionately reduced based on the reduced Rentable
Square Footage), except that Rent shall be abated for the portion of the
Premises not usable by Tenant until Landlord completes the restoration as
provided in the Restoration Notice.
16.5. Allocation of Award.
16.5.1. Landlord's Right to Award. Except as provided in
Subsection 16.5.2 in connection with a Condemnation: (a) Landlord shall be
entitled to receive all compensation and anything of value awarded, paid, or
received in settlement or otherwise (Award); and (b) Tenant irrevocably assigns
and transfers to Landlord all rights to and interests in the Award and fully
releases and relinquishes any claim to, right to make a claim on, or interest in
the Award, including any amount attributable to any excess of the market value
of the Premises for the remainder of the Lease Term over the present value as of
the Termination Date of the Rent payable for the remainder of the Term (commonly
referred to as the "bonus value" of the Lease).
16.5.2. Tenant's Right to Compensation. Despite Subsection
16.5.1, Tenant shall have the right to make a separate claim in the Condemnation
proceeding, as long as the Award payable to Landlord is not reduced thereby,
for: (a) the taking of the unamortized or under appreciated value of any
leasehold improvements owned by Tenant that Tenant has the right to remove at
the end of the Lease Term and that Tenant elects not to remove; (b) reasonable
removal and relocation costs for any leasehold improvements that Tenant has the
right to remove and elects to remove (if Condemnor approves of the removal); and
(c) relocation costs under Government Code Section 7262, the claim for which
Tenant may pursue by separate action independent of this Lease.
16.6. Temporary Taking. If a temporary taking of part of the Premises
occurs through (a) the exercise of any government power (by legal proceedings or
otherwise) by Condemnor or (b) a voluntary sale or transfer by Landlord to any
Condemnor, either under threat of exercise of eminent domain by a Condemnor or
while legal proceedings for condemnation are pending, Rent shall abate during
the time of such taking in proportion to the portion of the Premises taken. The
entire Award relating to the temporary taking shall be and remain the property
of Landlord. Tenant irrevocably assigns and transfers to Landlord all rights to
and interest in the Award and fully releases and relinquishes any claim to,
right to make a claim on, and any other interest in the Award.
Article 17
ASSIGNMENT AND SUBLEASING
17.1. Restricted Transfers.
17.1.1. Consent Required. Definition of "Transfer". Tenant shall
obtain Landlord's written consent before entering into or permitting any
Transfer. A "Transfer" consists of any of the following, whether voluntary or
involuntary and whether effected by death, operation of law, or otherwise: (a)
any assignment, mortgage, pledge, encumbrance, or other transfer of any interest
in this Lease; (b) any sublease or occupancy of any portion of the Premises by
any persons other than Tenant and its employees; and (c) any of the changes
(e.g., a change of ownership or reorganization) included in the definition of
Transfer in Section 17.7. Any person to whom any Transfer is made or sought to
be made is a "Transferee".
17.1.2. Landlord's Remedies. If a Transfer fails to comply with
this Article 17, Landlord may, at its option, do either or both of the
following: (a) void the Transfer or (b) declare Tenant in material and incurable
default under Section 22.1 notwithstanding any cure period specified in Section
22.1.
17.2. Transfer Procedure. Before entering into or permitting any
transfer, Tenant shall provide to Landlord a written "Transfer Notice" at least
forty-five (45) days before the proposed effective date of the Transfer. The
Transfer Notice shall include all of the following: (a) information regarding
the proposed Transferee, including the name, address, and ownership of
Transferee; the nature of Transferee's business; Transferee's character and
reputation; and Transferee's current financial statements (certified by an
officer, a partner, or an owner of Transferee); (b) all the terms of the
proposed Transfer, including the consideration payable by Transferee; the
portion of the Premises that is subject to the Transfer (Subject Space); a
general description of any planned alterations or improvements to the Subject
Space; the proposed use of the Subject Space; the effective date of the
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<PAGE> 21
Transfer; a calculation of the "Transfer Premium", as defined in Subsection
17.4.2, payable in connection with the Transfer; and a copy of all documentation
concerning the proposed Transfer; (c) any other information or documentation
reasonably requested by Landlord; and (d) an executed estoppel certificate from
Tenant in the form attached to this Lease as Exhibit F. As a condition to the
effectiveness of the Transfer Notice, Tenant shall, when providing a Transfer
Notice, pay an application fee of $500.00 toward Landlord's administrative and
other costs in reviewing and processing the Transfer Notice. In addition, within
thirty (30) days after Landlord's written request, Tenant shall pay as
Additional Rent any reasonable legal fees that Landlord incurs in reviewing and
processing the Transfer Notice (Transfer Fee). Tenant shall pay the Transfer Fee
whether or not Landlord consents to the Transfer. If Landlord consents to any
Transfer and does not exercise its rights under Section 17.5, the following
limits apply: (a) Landlord does not agree to waive or modify the terms and
conditions of this Lease. (b) Landlord does not consent to any further Transfer
by either Tenant or Transferee. (c) Tenant remains liable under this Lease, and
any guarantor of the Lease remains liable under the guaranty. (d) Tenant may
enter into that Transfer in accordance with this Article 17 if: (1) the Transfer
occurs within six (6) months after Landlord's consent; (2) the Transfer is on
substantially the same terms as specified in the Transfer Notice; and (3) Tenant
delivers to Landlord, promptly after execution, an original, executed copy of
all documentation pertaining to the Transfer in a form reasonably acceptable to
Landlord (including Transferee's agreement to be subject and subordinate to the
Lease and to assume Tenant's obligations under the Lease to the extent
applicable to the Subject Space). (e) if the Transfer occurs after six (6)
months or the terms of the Transfer have materially changed from those in the
Transfer Notice, Tenant shall submit a new Transfer Notice under Subsection
17.2.1, requesting Landlord's consent, and the Subject Space shall again be
subject to Landlord's rights, if any, under Section 17.5. A material change is
one the terms of which would have entitled Landlord to refuse to consent to the
Transfer initially or would cause the proposed Transfer to be more favorable to
Transferee than the terms in the original Transfer Notice.
17.3. Landlord's Consent.
17.3.1. Reasonable Consent. Landlord may not unreasonably
withhold its consent to any proposed Transfer that complies with this Article
17. Reasonable grounds for denying consent include any of the following: (a)
Transferee's character, reputation, credit history, or business is not
consistent with the character or quality of the Building; (b) Transferee would
be a significantly less prestigious occupant of the Building than Tenant; (c)
Transferee is either a government agency or an instrumentality of one; (d)
Transferee's intended use of the Premises is inconsistent with the Permitted Use
or will materially and adversely affect Landlord's interest; (e) Transferee's
financial condition is or may be inadequate to support the Lease obligations of
Transferee under the Transfer documents; (f) the Transfer would cause Landlord
to violate another lease or agreement to which Landlord is a party or would give
a Building tenant the right to cancel its lease; (g) Transferee occupies space
in the Building and such space is not contiguous to the Premises, is negotiating
with Landlord to lease space in the Building, or has negotiated with Landlord
during the six (6) months immediately preceding the Transfer Notice; or (h)
Transferee does not intend to occupy the entire Premises and conduct business
there for a substantial portion of the term of the Transfer; or (i) the rent
charged by Tenant to Transferee during the term of that Transfer, using a
present value analysis, is less than ninety percent (90%) of the rent then being
quoted by Landlord for comparable space in the Building for a comparable term
(Quoted Rent), using a present value analysis.
17.3.2. Landlord's Written Response. Within a reasonable time
after receipt of a Transfer Notice that complies with Subsection 17.2.1,
Landlord shall approve or disapprove the proposed Transfer in writing.
17.3.3. Tenant's Remedies. If Landlord wrongfully denies or
conditions its consent, Tenant may seek only declaratory and injunctive relief.
Tenant specifically waives any damage claims against Landlord in connection with
the withholding of consent.
17.3.4. Tenant's Indemnity. Tenant shall indemnify, defend, and
hold harmless Landlord from and against all Claims by any third party (including
the proposed Transferee) arising out of or relating (directly or indirectly) to
a proposed Transfer. If a judicial determination is made that any of the Claims
were caused solely by Landlord's breach of this Article 17, however, Tenant's
indemnity obligation shall not extend to those Claims.
*SEE ADDENDUM
17.4 Transfer Premium.
17.4.1. Transfer Premium. As a reasonable condition to Landlord's
consent to any Transfer, Tenant shall pay to Landlord fifty percent (50%) of any
Transfer Premium, as defined in this Subsection 17.4.1. "Transfer Premium" means
all Basic Rent, additional rent, and other consideration payable by Transferee
to Tenant (including key money and bonus money and any payment in excess of fair
market value for services rendered by Tenant to Transferee or assets, fixtures,
inventory, equipment, or furniture transferred by Tenant to Transferee in
connection with the Transfer (Transferee Rent)), after deducting the Rent
payable by Tenant under this Lease (excluding the Transfer Premium) for the
Subject Space (Tenant Rent). If part of the Transfer Premium is payable by
Transferee other than in cash, Landlord's share of that non-cash consideration
shall be in a form reasonably satisfactory to Landlord. Tenant shall pay the
Transfer Premium on a monthly basis, together with its payment of Additional
Rent under Article 5. In calculating the Transfer Premium, Tenant Rent,
Transferee Rent, and Quoted Rent, the parties shall first adjust the rent to the
actual effective rent to be paid, taking into consideration any and all
leasehold concessions, including any rent credit and tenant improvement
allowance. For purposes of calculating the effective rent, all those concessions
shall be amortized on a straight-line basis over the relevant term. On
Landlord's request, Tenant shall furnish a complete statement, certified by an
independent certified public accountant or
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Tenant's chief financial officer, describing in detail the computation of any
Transfer Premium that Tenant has derived or will derive from the Transfer. If
Landlord's independent certified public accountant finds that the Transfer
Premium for any Transfer has been understated, Tenant shall, within thirty (30)
days after demand, pay the deficiency and Landlord's costs of that audit. If
Tenant has understated the Transfer Premium by more than ten percent (10%),
Landlord may, at its option, declare Tenant in material and incurable default
under Section 22.1 notwithstanding any cure period specified in Section 22.1.
*SEE ADDENDUM
17.5 Landlord's Option to Recapture Space.
17.5.1. Landlord's Recapture Right. Despite any other provision
of this Article 17, Landlord has the option, by written notice to Tenant
(Recapture Notice) within thirty (30) days after receiving any Transfer Notice,
to recapture the Subject Space by terminating this Lease for the Subject Space
or taking an assignment or a sublease of the Subject Space from Tenant. A timely
Recapture Notice terminates this Lease or creates an assignment or a sublease
for the Subject Space for the same term as the proposed Transfer, effective as
of the date specified in the Transfer Notice. If Landlord declines or fails
timely to deliver a Recapture Notice, Landlord shall have no further right under
this Section 17.5 to the Subject Space unless it becomes available again after
Transfer by Tenant.
17.5.2. Consequences of Recapture. To determine the new Basic
Rent under this Lease if Landlord recaptures the Subject Space, the original
Basic Rent under the Lease shall be multiplied by a fraction, the numerator of
which is the Rentable Square Feet of the Premises retained by Tenant after
Landlord's recapture and the denominator of which is the total Rentable Square
Feet of the Premises before Landlord's recapture. The Additional Rent, to the
extent that it is calculated on the basis of the Rentable Square Feet within the
Premises, shall be reduced to reflect Tenant's proportionate share based on the
Rentable Square Feet of the Premises retained by Tenant after Landlord's
recapture. This Lease as so amended shall continue thereafter in full force and
effect. Either party may require written confirmation of the amendments to this
Lease necessitated by Landlord's recapture of the Subject Space. If Landlord
recaptures the Subject Space, Landlord shall, at Landlord's sole expense,
construct any partitions required to segregate the Subject Space from the
remaining Premises retained by Tenant. Tenant shall, however, pay for painting,
covering, or otherwise decorating the surfaces of the partitions facing the
remaining Premises retained by Tenant.
17.6 Effect of Transfer. If this Lease is assigned, Landlord may collect
Rent directly from Transferee. If all or part of the Premises is subleased and
Tenant defaults, Landlord may collect Rent directly from Transferee. Landlord
may then apply the amount collected from Transferee to Tenant's monetary
obligations under this Lease. Collecting Rent from a Transferee or applying that
Rent to Tenant's monetary obligations does not waive any provisions of this
Article 17.
17.7. Transfers of Ownership Interests and Other Organizational Changes.
17.7.1. Change of Ownership; Reorganization. For purposes of this
Article 17, "Transfer" also includes: (a) if Tenant is a partnership or limited
liability company: (1) a change in ownership effected voluntarily,
involuntarily, or by operation of law within a twelve month (12 month) period,
of twenty five percent (25%) or more of the partners or members or twenty five
percent (25%) or more of the partnership or membership interests; or (2) the
dissolution of the partnership or limited liability company without its
immediate reconstitution. (b) if Tenant is a closely held corporation (i.e., one
whose stock is not publicly held and not traded through an exchange or over the
counter): (1) the sale or other transfer , within a twelve month (12 month)
period, of more than an aggregate of twenty five percent (25%) of the voting
shares of Tenant (other than to immediate family members by reason of gift or
death); (2) the sale, mortgage, hypothecation, or pledge, within a twelve month
(12 month) period, of more than an aggregate of twenty five percent (25%) of the
value of Tenant's unencumbered assets; or (3) the dissolution, merger,
consolidation, or other reorganization of Tenant.
17.7.2. Transfer to Affiliate. Despite any other provision of
this Lease, Landlord's consent is not required for any Transfer to an Affiliate,
as defined in Subsection 17.7.3, as long as the following conditions are met:
(a) at least ten (10) business days before the Transfer, Landlord receives
written notice of the Transfer (as well as any documents or information
reasonably requested by Landlord regarding the Transfer or Transferee); (b) the
Transfer is not a subterfuge by Tenant to avoid its obligations under the Lease;
(c) if the Transfer is an assignment, Transferee assumes in writing all of
Tenant's obligations under this Lease relating to the Subject Space; and (d)
Transferee has a tangible net worth, as evidenced by financial statements
delivered to Landlord and certified by an independent certified public
accountant in accordance with generally accepted accounting principles that are
consistently applied (Net Worth), at least equal to Tenant's Net Worth either
immediately before the Transfer or as of the date of this Lease, whichever is
greater.
17.7.3. Definition of "Affiliate". An "Affiliate" means any
entity that controls, is controlled by, or is under common control with Tenant.
"Control" means the direct or indirect ownership of more than fifty percent
(50%) of the voting securities of an entity or possession of the right to vote
more than fifty percent (50%) of the voting interest in the ordinary direction
of the entity's affairs.
17.8. Restrictions on Marketing the Space. Tenant may not enter into any
listing agreement for marketing the Subject Space other than through the
exclusive leasing agent designated by Landlord for the Building. Tenant may not
promote or advertise the availability of the Subject Space unless Landlord has
approved Tenant's
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advertising or promotional materials in writing. Tenant may not market the
Subject Space at a rate less than the Quoted Rent. *SEE ADDENDUM
Article 18
SURRENDER OF PREMISES
18.1. Surrender of Premises. No act of Landlord or its authorized
representatives shall constitute Landlord's acceptance of a surrender of the
Premises by Tenant unless that intent is specifically acknowledged in a writing
signed by Landlord. At the option of Landlord, a surrender and termination of
this Lease shall operate as an assignment to Landlord of all subleases or
sub-tenancies. Landlord shall exercise this option by giving notice of that
assignment to all subtenants within ten (10) days after the effective date of
the surrender and termination.
18.2. Removal of Tenant Property by Tenant. On the expiration or earlier
termination of the Lease Term, Tenant shall quit the Premises and surrender
possession to Landlord in accordance with this Section 18.2. Tenant shall leave
the Premises in as good order and condition as when Tenant took possession of
the Premises, except for reasonable wear and tear and repairs that are
specifically made the responsibility of Landlord. On expiration or termination,
Tenant shall, without expense to Landlord, remove or cause to be removed from
the Premises: (a) all debris and rubbish; (b) any items of furniture, equipment,
freestanding cabinet work, and other articles of personal property owned by
Tenant or installed or placed by Tenant at its expense in the Premises; (c) any
similar articles of any other persons claiming under Tenant that Landlord, in
Landlord's sole discretion, requires to be removed; and (d) any alterations and
improvements that Tenant is required to remove under Article 12. Tenant shall,
at Tenant's sole expense, repair all damage or injury that may occur to the
Premises or the Building caused by Tenant's removal of those items and shall
restore the Premises and Building to their original condition.
Article 19
HOLDING OVER
19.1. Holdover Rent. If Tenant remains in possession of the Premises
after expiration or earlier termination of this Lease with Landlord's express
written consent, Tenant's occupancy shall be a month to month tenancy at a rent
agreed on by Landlord and Tenant but in no event less than the Basic Rent and
Additional Rent payable under this Lease during the last full month before the
date of expiration or earlier termination of this Lease. The month to month
tenancy shall be on the terms and conditions of this Lease except as provided in
(a) the preceding sentence and (b) the lease clauses (if any) concerning lease
term, expansion rights, purchase option, and extension rights. Landlord's
acceptance of rent after such holding over with Landlord's written consent shall
not result in any other tenancy or in a renewal of the original term of this
Lease. If Tenant remains in possession of the Premises after expiration or
earlier termination of this Lease without Landlord's consent, Tenant's continued
possession shall be on the basis of a tenancy at sufferance and Tenant shall pay
as rent during the holdover period an amount equal to the greater of: (a) one
hundred and fifty percent (150%) of the fair market rental (as reasonably
determined by Landlord) for the Premises; or (b) two hundred percent (200%) of
the Basic Rent and Additional Rent payable under this Lease for the last full
month before the date of expiration or termination.
19.2. No Consent or Waiver Implied. Landlord shall construe nothing in
this Article 19 as implied consent to any holding over by Tenant. Landlord
expressly reserves the right to require Tenant to surrender possession of the
Premises to Landlord as provided in this Lease on expiration or other
termination of this Lease. The provisions of this Article 19 shall not be
considered to limit or constitute a waiver of any other rights or remedies of
Landlord provided in this Lease or at law.
Article 20
ESTOPPEL CERTIFICATES
20.1. Tenant's Obligation To Provide Estoppel Certificates. Within ten
(10) days after a written request by Landlord, Tenant shall execute and deliver
to Landlord an estoppel certificate, substantially in the form of Exhibit F (or
other form required by any existing or prospective lender, mortgagee, or
purchaser of all or part of the Building), indicating in the certificate any
exceptions to the statements in the certificate that may exist at that time. The
certificate shall also contain any other information reasonably requested by
Landlord or any existing or prospective lender, mortgagee, or purchaser.
20.2. Additional Requested Documents or Instruments. Within ten (10)
days after a written request by Landlord, Tenant shall execute and deliver
whatever other documents or instruments may be reasonably required for sale or
financing purposes, including (if requested by Landlord) a current financial
statement and financial statements for the two (2) years preceding the current
financial statement year. Those statements shall be prepared in accordance with
generally accepted accounting principles and shall be audited by an independent
certified public accountant.
20.3. Failure To Deliver. Tenant's failure to execute or deliver an
estoppel certificate in the required time period shall constitute an
acknowledgment by Tenant that the statements included in the estoppel
certificate are true and correct, without exception. Tenant's failure to execute
or deliver an estoppel certificate or other document or instrument required
under this Article 20 in a timely manner shall be a material breach of this
Lease.
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Article 21
SUBORDINATION, NONDISTURBANCE, AND ATTORNMENT
21.1. Automatic Subordination. This Lease is subject and subordinate to:
(a) the lien of any mortgages, deeds of trust, or other encumbrances
(Encumbrances) of the Building and Project; (b) all present and future ground or
underlying leases (Underlying Leases) of the Building and Project now or
hereafter in force against the Building and Project; (c) all renewals,
extensions, modifications, consolidations, and replacements of the items
described in subparagraphs (a) - (b); and (d) All advances made or hereafter to
be made on the security of the Encumbrances. Despite any other provision of this
Article 21, any Encumbrance holder or lessor may elect that this Lease shall be
senior to and have priority over that Encumbrance or Underlying Lease whether
this Lease is dated before or after the date of the Encumbrance or Underlying
Lease.
21.2. Subordination Agreement; Agency. This subordination is self
operative, and no further instrument of subordination shall be required to make
it effective. To confirm this subordination, however, Tenant shall, within five
(5) days after Landlord's request, execute any further instruments or assurances
in recordable form that Landlord reasonably considers necessary to evidence or
confirm the subordination or superiority of this Lease to any such Encumbrances
or Underlying Leases. Tenant irrevocably appoints the President, Managing
General Partner or Manager of Landlord, as Tenant's agent to execute and deliver
in the name of Tenant any such instrument(s) if Tenant fails to do so. This
authorization shall in no way relieve Tenant of the obligation to execute such
instrument(s) of subordination or superiority. Tenant's failure to execute and
deliver such instrument(s) shall constitute a default under this Lease.
21.3. Attornment. Tenant covenants and agrees to attorn to the
transferee of Landlord's interest in the Building and/or Project by foreclosure,
deed in lieu of foreclosure, exercise of any remedy provided in any Encumbrance
or Underlying Lease, or operation of law (without any deductions or setoffs), if
requested to do so by the transferee, and to recognize the transferee as the
lessor under this Lease. The transferee shall not be liable for: (a) any acts,
omissions, or defaults of Landlord that occurred before the sale or conveyance;
or (b) the return of any security deposit except for deposits actually paid to
the transferee.
21.4. Notice of Default; Right To Cure. Tenant agrees to give written
notice of any default by Landlord to the holder of any prior Encumbrance or
Underlying Lease. Tenant agrees that, before it exercises any rights or remedies
under the Lease, the lien-holder or lessor shall have the right, but not the
obligation, to cure the default within the same time, if any, given to Landlord
to cure the default, plus an additional thirty (30) days. Tenant agrees that
this cure period shall be extended by the time necessary for the lien-holder to
begin foreclosure proceedings and to obtain possession of the Building or
Project, as applicable.
*SEE ADDENDUM
Article 22
DEFAULTS AND REMEDIES
22.1. Tenant's Default. The occurrence of any of the following shall
constitute a default by Tenant under this Lease: (a) Tenant's failure to pay
when due any Rent required to be paid under this Lease if the failure continues
for three (3) days after written notice of the failure from Landlord to Tenant;
(b) Tenant's failure to provide any instrument or assurance as required by
Section 21.2 or estoppel certificate as required by Section 20.1 if the failure
continues for five (5) days after written notice of the failure from Landlord to
Tenant; (c) Tenant's failure to perform any other obligation under this Lease if
the failure continues for fifteen (15) days after written notice of the failure
from Landlord to Tenant; (d) Tenant's abandonment of the Premises, including
Tenant's absence from the Premises for three (3) consecutive days (excluding
Saturdays, Sundays, and California legal holidays) while in default of any
provision of this Lease; (e) to the extent permitted by law: (1) a general
assignment by Tenant or any guarantor of the Lease for the benefit of creditors;
(2) the filing by or against Tenant, or any guarantor, of any proceeding under
an insolvency or bankruptcy law, unless (in the case of an involuntary
proceeding) the proceeding is dismissed within sixty (60) days; (3) the
appointment of a trustee or receiver to take possession of all or substantially
all the assets of Tenant or any guarantor, unless possession is unconditionally
restored to Tenant or that guarantor within thirty (30) days and the trusteeship
or receivership is dissolved; (4) any execution or other judicially authorized
seizure of all or substantially all the assets of Tenant located on the
Premises, or of Tenant's interest in this Lease, unless that seizure is
discharged within thirty (30) days; (f) the committing of waste on the Premises;
or (g) Tenant's failure to occupy the Premises within ten (10) business days
after the Premises are ready for occupancy.
22.2. Replacement of Statutory Notice Requirements. When this Lease
requires service of a notice, that notice shall replace rather than supplement
any equivalent or similar statutory notice, including any notices required by
Code of Civil Procedure Section 1161 or any similar or successor statute. When a
statute requires service of a notice in a particular manner, service of that
notice (or a similar notice required by this Lease) in the manner required by
Section 31.11 shall replace and satisfy the statutory service of notice
procedures, including those required by Code of Civil Procedure Section 1162 or
any similar or successor statute.
22.3. Landlord's Remedies on Tenant's Default. On the occurrence of a
default by Tenant, Landlord shall have the right to pursue any one or more of
the following remedies in addition to any other remedies now or later available
to Landlord at law or in equity. These remedies are not exclusive but
cumulative.
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22.3.1. Termination of Lease. Landlord may terminate this Lease
and recover possession of the Premises. Once Landlord has terminated this Lease,
Tenant shall immediately surrender the Premises to Landlord. On termination of
this Lease, Landlord may recover from Tenant all of the following: (a) the worth
at the time of the award of any unpaid Rent that had been earned at the time of
the termination, to be computed by allowing interest at the rate set forth in
Article 24 but in no case greater than the maximum amount of interest permitted
by law; (b) the worth at the time of the award of the amount by which the unpaid
Rent that would have been earned between the time of the termination and the
time of the award exceeds the amount of unpaid Rent that Tenant proves could
reasonably have been avoided, to be computed by allowing interest at the rate
set forth in Article 24 but in no case greater than the maximum amount of
interest permitted by law; (c) the worth at the time of the award of the amount
by which the unpaid Rent for the balance of the Lease Term after the time of the
award exceeds the amount of unpaid Rent that Tenant proves could reasonably have
been avoided, to be computed by discounting that amount at the discount rate of
the Federal Reserve Bank of San Francisco at the time of the award plus one
percent (1%); (d) Any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform obligations under
this Lease, including brokerage commissions and advertising expenses, expenses
of remodeling the Premises for a new tenant (whether for the same or a different
use), and any special concessions made to obtain a new tenant; and (e) any other
amounts, in addition to or in lieu of those listed above, that may be permitted
by applicable law.
22.3.2. Continuation of Lease in Effect. Landlord shall have the
remedy described in Civil Code Section 1951.4, which provides that, when a
tenant has the right to sublet or assign (subject only to reasonable
limitations), the landlord may continue the lease in effect after the Tenant's
breach and abandonment and recover Rent as it becomes due. Accordingly, if
Landlord does not elect to terminate this Lease on account of any default by
Tenant, Landlord may enforce all of Landlord's rights and remedies under this
Lease, including the right to recover all Rent as it becomes due.
22.3.3. Tenant's Subleases. Whether or not Landlord elects to
terminate this Lease on account of any default by Tenant, Landlord may: (a)
terminate any sublease, license, concession, or other consensual arrangement for
possession entered into by Tenant and affecting the Premises. (b) choose to
succeed to Tenant's interest in such an arrangement. If Landlord elects to
succeed to Tenant's interest in such an arrangement, Tenant shall, as of the
date of notice by Landlord of that election, have no further right to, or
interest in, the Rent or other consideration receivable under that arrangement.
22.4. Form of Payment After Default. If Tenant fails to pay any amount
due under this Lease within three (3) days after the due date or if Tenant draws
a check on an account with insufficient funds, Landlord shall have the right to
require that any subsequent amounts paid by Tenant to Landlord under this Lease
(to cure a default or otherwise) be paid in the form of cash, money order,
cashier's or certified check drawn on an institution acceptable to Landlord, or
other form approved by Landlord despite any prior practice of accepting payments
in a different form.
22.5. Efforts To Relet. For purposes of this Article 22, Tenant's right
to possession shall not be considered to have been terminated by Landlord's
efforts to relet the Premises, by Landlord's acts of maintenance or preservation
with respect to the Premises, or by appointment of a receiver to protect
Landlord's interests under this Lease. This list is merely illustrative of acts
that may be performed by Landlord without terminating Tenant's right to
possession.
22.6. Acceptance of Rent Without Waiving Rights. Under Article 25,
Landlord may accept Tenant's payments without waiving any rights under this
Lease, including rights under a previously served notice of default. If Landlord
accepts payments after serving a notice of default, Landlord may nevertheless
commence and pursue an action to enforce rights and remedies under the
previously served notice of default without giving Tenant any further notice or
demand.
22.7. Tenant's Remedies on Landlord's Default. Tenant waives any right
to terminate this Lease and to vacate the Premises on Landlord's default under
this Lease. Tenant's sole remedy on Landlord's default is an action for damages
or injunctive or declaratory relief.
Article 23
LANDLORD'S RIGHT TO PERFORM TENANT'S OBLIGATIONS
23.1. Landlord's Right To Perform Tenant's Obligations. All obligations
to be performed by Tenant under this Lease shall be performed by Tenant at
Tenant's expense and without any reduction of Rent. If Tenant's failure to
perform an obligation continues for five (5) days after notice to Tenant,
Landlord may perform the obligation on Tenant's behalf, without waiving
Landlord's rights for Tenant's failure to perform any obligations under this
Lease and without releasing Tenant from such obligations.
23.2. Reimbursement by Tenant. Within fifteen (15) days after receiving
a statement from Landlord, Tenant shall pay to Landlord the amount of expense
reasonably incurred by Landlord, under Section 23.1, in performing Tenant's
obligation.
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Article 24
LATE PAYMENTS
24.1. Late Charges. If any Rent payment is not received by Landlord or
Landlord's designee within five (5) days after that Rent is due, Tenant shall
pay to Landlord a late charge equal to the greater of One Hundred Dollars
($100), or ten percent (10%) of the overdue amount as liquidated damages, in
lieu of actual damages (other than interest under Section 24.2 and attorney fees
and costs under Section 27.1). Tenant shall pay this amount for each calendar
month in which all or any part of any Rent payment remains delinquent for more
than five (5) days after the due date. The parties agree that this late charge
represents a reasonable estimate of the expenses that Landlord will incur
because of any late payment of Rent (other than interest and attorney fees and
costs). Landlord's acceptance of any liquidated damages shall not constitute a
waiver of Tenant's default with respect to the overdue amount or prevent
Landlord from exercising any of the rights and remedies available to Landlord
under this Lease. Tenant shall pay the late charge as Additional Rent with the
next installment of Rent. *SEE ADDENDUM
24.2. Interest. If any Rent payment is not received by Landlord or
Landlord's designee within five (5) days after that Rent is due, Tenant shall
pay to Landlord interest on the past due amount, from the date due until paid,
at the rate of eighteen percent (18%) per annum from the due date of such amount
(Interest Rate). Despite any other provision of this Lease, the total liability
for interest payments shall not exceed the limits, if any, imposed by the usury
laws of the State of California. Any interest paid in excess of those limits
shall be refunded to Tenant by application of the amount of excess interest paid
against any sums outstanding in any order that Landlord requires. If the amount
of excess interest paid exceeds the sums outstanding, Landlord shall refund the
portion exceeding those sums in cash to Tenant. To ascertain whether any
interest payable exceeds the limits imposed, any non-principal payment
(including late charges) shall be considered to the extent permitted by law to
be an expense or a fee, premium, or penalty rather than interest.
Article 25
NONWAIVER
25.1. Non-waiver. No waiver of any provision of this Lease shall be
implied by any failure of Landlord to enforce any remedy for the violation of
that provision, even if that violation continues or is repeated. Any waiver by
Landlord of any provision of this Lease must be in writing. Such written waiver
shall affect only the provision specified and only for the time and in the
manner stated in the writing.
25.2. Acceptance and Application of Payment. Not Accord and
Satisfaction. No receipt by Landlord of a lesser payment than the Rent required
under this Lease shall be considered to be other than on account of the earliest
amount due, and no endorsement or statement on any check or letter accompanying
a payment or check shall be considered an accord and satisfaction. Landlord may
accept checks or payments without prejudice to Landlord's right to recover all
amounts due and pursue all other remedies provided for in this Lease. Landlord's
receipt of monies from Tenant after giving notice to Tenant terminating this
Lease shall in no way reinstate, continue, or extend the Lease Term or affect
the Termination Notice given by Landlord before the receipt of those monies.
After serving notice terminating this Lease, filing an action, or obtaining
final judgment for possession of the Premises, Landlord may receive and collect
any Rent due, and the payment of that Rent shall not waive or affect such prior
notice, action, or judgment.
Article 26
WAIVER OF RIGHT TO JURY TRIAL
26.1. Waiver of Right to Jury Trial. Landlord and Tenant waive their
respective rights to trial by jury of any contract or tort claim, counterclaim,
cross complaint, or cause of action in any action, proceeding, or hearing
brought by either party against the other on any matter arising out of or in any
way connected with this Lease, the relationship of Landlord and Tenant, or
Tenant's use or occupancy of the Premises, including any claim of injury or
damage or the enforcement of any remedy under any current or future law,
statute, regulation, code, or ordinance.
------------------------- -----------------------
Landlord's Initials Tenant's Initials
Article 27
ATTORNEY FEES AND COSTS
27.1 Legal Costs. If either party incurs any costs or expenses in
connection with any action instituted by either party by reason of any dispute
pursuant to this Lease or for the recovery of any sum due under this Lease, or
because of the breach of any provisions of this Lease by either party, or for
any other relief pursuant to this Lease, or in the event of any other litigation
between the parties with respect to this Lease, then all costs and expenses,
including without limitation, its actual professional fees such as appraisers',
accountants, and attorneys' fees, incurred by the prevailing party therein shall
be paid by the other party, which obligation on the part of the other party
shall be deemed to have accrued on the date of the commencement of such action
or dispute and shall be enforceable whether or not the action is prosecuted to
judgment. The provisions contained in this Section 27.1 shall survive the
expiration or earlier termination of this Lease, and in the event any action or
proceeding is instituted to recover possession of the Premises following the
expiration or earlier termination of this Lease, the provisions contained in
this Section 27.1 shall be applicable.
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Article 28
LANDLORD'S ACCESS TO PREMISES
28.1. Landlord's Access to Premises. Landlord and its agents shall have
the right at all reasonable times to enter the Premises to: (a) inspect the
Premises; (b) show the Premises to prospective purchasers, mortgagees, or
tenants or to ground lessors or underlying lessors; (c) serve, post, and keep
posted notices required by law or that Landlord considers necessary for the
protection of Landlord or the Building; or (d) make repairs, replacements,
alterations, or improvements to the Premises or Building that Landlord considers
necessary or desirable. Despite any other provision of this Article 28, Landlord
may enter the Premises at any time to: (a) perform services required of
Landlord; (b) take possession due to any breach of this Lease; or (c) perform
any covenants of Tenant that Tenant fails to perform. *SEE ADDENDUM
28.2. Tenant's Waiver. Landlord may enter the Premises without the
abatement of Rent and may take steps to accomplish the stated purposes. Tenant
waives any claims for damages caused by Landlord's entry, including damage
claims for: (a) injuries; (b) inconvenience to or interference with Tenant's
business; (c) lost profits; and (d) loss of occupancy or quiet enjoyment of the
Premises. *SEE ADDENDUM
Article 29
SIGNS
29.1. Building Name; Landlord's Signage Rights. Subject to Tenant's
signage rights under this Article 29, Landlord may at any time change the name
of the Building and install, affix, and maintain all signs on the exterior and
interior of the Building as Landlord may, in Landlord's sole discretion, desire.
Tenant shall not have or acquire any property right or interest in the name of
the Building. Tenant may use the name of the Building or pictures or
illustrations of the Building in advertising or other publicity during the Lease
Term. *SEE ADDENDUM
29.2. Tenant's Signage Rights Within Building.
29.2.1. Single Tenant Floor. If the Premises comprise an entire
floor of the Building, Tenant may, at Tenant's sole expense, install
identification signs (including its logo) anywhere in the Premises, including
the elevator lobby of the Premises, subject to the following requirements: (a)
Tenant must obtain Landlord's prior written approval for such signs, which
Landlord may, in Landlord's sole discretion, grant or deny; (b) all signs must
be in keeping with the quality, design, and style of the Building; and (c) no
sign may be visible from the exterior of the Building.
29.2.2. Multi Tenant Floor. If other tenants occupy space on the
floor on which the Premises are located, Landlord shall provide Tenant's
identifying signs at Tenant's expense. The signs shall be comparable to those
used by Landlord for other similar floors in the Building and shall comply with
Landlord's Building standard signage program.
29.2.3. Prohibited Signs and Other Items. Tenant may not display
any signs on the exterior or roof of the Building or in the common areas of the
Building or the Project. Tenant may not install or display any signs, window
coverings, blinds (even if located behind the Landlord approved window coverings
for the Building), or other items visible from the exterior of the Premises
without Landlord's prior written approval, which Landlord may, in Landlord's
sole discretion, grant or withhold. Any signs, notices, logos, pictures, names,
or advertisements that are installed by or for Tenant without Landlord's
approval may be removed without notice by Landlord at Tenant's expense. The
provisions of this Subsection 29.2.3 are subject to Section 29.3 or 29.4.
Article 30
TENANT PARKING
30.1. Number of Parking Passes. Tenant shall be entitled to receive
parking passes from Landlord for the number of parking spaces for Tenant's use
as set forth in Summary of Basic Lease Information Section 12. *SEE ADDENDUM
30.2. Location of Parking. Landlord specifically reserves the right to
designate and to change the location, size, configuration, design, layout, and
all other aspects of the parking facility, including the initiation or
discontinuance of a valet system. Landlord may close off or restrict access to
the parking facility from time to time to facilitate construction, alteration,
or improvements, without incurring any liability to Tenant and without any
abatement of Rent under this Lease.
30.3. Parking Rules and Regulations. Tenant's continued right to use the
parking passes is conditioned on Tenant's abiding by all rules and regulations
prescribed from time to time for the orderly operation and use of the parking
facility. Tenant shall use all reasonable efforts to ensure that Tenant's
employees and visitors also comply with such rules and regulations.
30.4. Nontransferable Passes. The parking passes rented by Tenant under
this Article 30 are provided to Tenant solely for use by Tenant's personnel (not
including Tenant's invitees and guests). These passes may not be transferred,
assigned, subleased, or otherwise alienated by Tenant without Landlord's prior
approval. *SEE ADDENDUM
Page 23 of 26
<PAGE> 28
Article 31
MISCELLANEOUS
31.1. Captions. The captions of articles and sections and the table of
contents of this Lease are for convenience only and have no effect on the
interpretation of the provisions of this Lease.
31.2. Word Usage. Unless the context clearly requires otherwise, the
plural and singular numbers shall each be considered to include the other; the
masculine, feminine, and neuter genders shall each be considered to include the
others; "Shall", "will", "must", "agrees", and "covenants" are each mandatory;
"May" is permissive; "Or" is not exclusive; and "Includes" and "including" are
not limiting.
31.3. Counting Days. Days shall be counted by excluding the first day
and including the last day. If the last day is a Saturday, Sunday, or legal
holiday as described in Government Code Sections 6700-6701, it shall be
excluded. Any act required by this Lease to be performed by a certain day shall
be timely performed if completed before 5 p.m. local time on that date. If the
day for performance of any obligation under this Lease is a Saturday, Sunday, or
legal holiday, the time for performance of that obligation shall be extended to
5 p.m. local time on the first following date that is not a Saturday, Sunday, or
legal holiday.
31.4. Entire Agreement; Amendments. This Lease and all exhibits addenda,
schedules, and agreements referred to in this Lease constitute the final,
complete, and exclusive statement of the terms of the agreement between Landlord
and Tenant pertaining to Tenant's lease of space in the Building and supersede
all prior and contemporaneous understandings or agreements of the parties.
Neither party has been induced to enter into this Lease by, and neither party is
relying on, any representation or warranty outside those expressly set forth in
this Lease. This Lease may be amended only by an agreement in writing signed by
Landlord and Tenant.
31.5. Exhibits. The Exhibits and Addendum, if applicable, attached to
this Lease are a part of this Lease and incorporated into this Lease by
reference.
31.6. Reasonableness and Good Faith. Except as limited elsewhere in this
Lease, whenever this Lease requires Landlord or Tenant to give its consent or
approval to any action on the part of the other, such consent or approval shall
not be unreasonably withheld or delayed.
31.7. Partial Invalidity. If a court or arbitrator of competent
jurisdiction holds any Lease clause to be invalid or unenforceable in whole or
in part for any reason, the validity and enforceability of the remaining
clauses, or portions of them, shall not be affected unless an essential purpose
of this Lease would be defeated by loss of the invalid or unenforceable
provision.
31.8. Binding Effect. Subject to Article 17 and Sections 31.16-31.17,
this Lease shall bind and benefit the parties to this Lease and their legal
representatives and successors in interest.
31.9. Independent Covenants. This Lease shall be construed as though the
covenants between Landlord and Tenant are independent and not dependent. Tenant
expressly waives the benefit of any statute to the contrary and agrees that if
Landlord fails to perform its obligations under this Lease, Tenant shall not be
entitled: (a) to make any repairs or perform any acts at Landlord's expense; or
(b) to any setoff of the Rent or other amounts owing under this Lease against
Landlord. The foregoing, however, shall in no way impair Tenant's right to bring
a separate action against Landlord for any violation by Landlord of the
provisions of this Lease if notice is first given to Landlord and any lender of
whose address Tenant has been notified, and an opportunity is granted to
Landlord and that lender to correct those violations as provided in Section 21.4
and Subsection 22.7.1.
31.10. Governing Law. This Lease shall be construed and enforced in
accordance with the laws of the State of California.
31.11. Notices. All notices (including requests, demands, approvals, or
other communications) under this Lease shall be in writing.
31.11.1. Method of Delivery. Notice shall be sufficiently given
for all purposes as follows: (a) when personally delivered to the recipient,
notice is effective on delivery, (b) when mailed first class to the last address
of the recipient known to the party giving notice, notice is effective on
delivery, (c) when mailed by certified mail with return receipt requested,
notice is effective on receipt if delivery is confirmed by a return receipt, (d)
when delivered by overnight delivery FedEx/Airborne/United Parcel Service/DHL
WorldWide Express with charges prepaid or charged to the sender's account,
notice is effective on delivery if delivery is confirmed by the delivery
service, (e) when sent by telex or fax to the last telex or fax number of the
recipient known to the party giving notice, notice is effective on receipt as
long as (1) a duplicate copy of the notice is promptly given by first class or
certified mail or by overnight delivery or (2) the receiving party delivers a
written confirmation of receipt. Any notice given by telex or fax shall be
considered to have been received on the next business day if it is received
after 5 p.m. (recipient's time) or on a non-business day.
31.11.2. Refused, Unclaimed, or Undeliverable Notices. Any
correctly addressed notice that is refused, unclaimed, or undeliverable because
of an act or omission of the party to be notified shall be considered to
Page 24 of 26
<PAGE> 29
be effective as of the first date that the notice was refused, unclaimed, or
considered undeliverable by the postal authorities, messenger, or overnight
delivery service.
31.11.3. Addresses. Addresses for purposes of giving notice are
set forth in Section 13 of the Summary of Basic Lease Information. Either party
may change its address or telex or fax number by giving the other party notice
of the change in any manner permitted by this Section 31.11.
31.11.4. Lenders and Ground Lessor. If Tenant is notified of the
identity and address of Landlord's lender or ground or underlying lessor, Tenant
shall give to that lender or ground or underlying lessor written notice of any
default by Landlord under the terms of this Lease.
31.12. Force Majeure. If performance by a party of any portion of this
Lease is made impossible by any prevention, delay, or stoppage caused by
strikes; lockouts; labor disputes; acts of God; inability to obtain services,
labor, or materials or reasonable substitutes for those items; government
actions; civil commotion; fire or other casualty; or other causes beyond the
reasonable control of the party obligated to perform, performance by that party
for a period equal to the period of that prevention, delay, or stoppage is
excused. Tenant's obligation to pay Rent, however, is not excused by this
Section 31.12.
31.13. Time of the Essence. Time is of the essence of this Lease and
each of its provisions.
31.14. Modifications Required by Landlord's Lender. If any lender of
Landlord or ground lessor of the Building and/or Project requires a modification
of this Lease that will not increase Tenant's cost or expense or materially or
adversely change Tenant's rights and obligations, this Lease shall be so
modified and Tenant shall execute whatever documents are required and deliver
them to Landlord within ten (10) days after the request.
31.15. Recording; Memorandum of Lease. Except as provided in this
Section 31.15, neither this Lease nor any memorandum, affidavit, or other
writing relating to this Lease may be recorded by Tenant or anyone acting
through, under, or on behalf of Tenant. Recordation in violation of this
provision constitutes an act of default by Tenant. On request by Landlord or any
lender or ground lessor, Tenant shall execute a short form of Lease for
recordation, containing (among other customary provisions) the names of the
parties and a description of the Premises and the Lease Term. Tenant shall
execute, acknowledge before a notary public, and deliver that form to Landlord
within ten (10) days after the request.
31.16. Liability of Landlord. Except as otherwise provided in this Lease
or applicable law, for any breach of this Lease the liability of Landlord
(including all persons and entities that comprise Landlord, and any successor
landlord) and any recourse by Tenant against Landlord shall be limited to the
interest of Landlord and Landlord's successors in interest in and to the
Building and Project. On behalf of itself and all persons claiming by, through,
or under Tenant, Tenant expressly waives and releases Landlord from any personal
liability for breach of this Lease.
31.17. Transfer of Landlord's Interest. Landlord has the right to
transfer all or part of its interest in the Building and Project and in this
Lease. On such a transfer, Landlord shall automatically be released from all
liability accruing under this Lease, and Tenant shall look solely to that
transferee for the performance of Landlord's obligations under this Lease after
the date of transfer, subject to Section 6.2. Landlord may assign its interest
in this Lease to a mortgage lender as additional security. This assignment shall
not release Landlord from its obligations under this Lease, and Tenant shall
continue to look to Landlord for the performance of its obligations under this
Lease.
31.18. Joint and Several Obligations of Tenant. If more than one
individual or entity comprises Tenant, the obligations imposed on each
individual or entity that comprises Tenant under this Lease shall be joint and
several.
31.19. Submission of Lease. Submission of this document for examination
or signature by the parties does not constitute an option or offer to lease the
Premises on the terms in this document or a reservation of the Premises in favor
of Tenant. This document is not effective as a lease or otherwise until executed
and delivered by both Landlord and Tenant.
31.20. Legal Authority.
31.20.1. Corporate Authority. If Tenant is a corporation, each
individual executing this Lease on behalf of that corporation represents and
warrants that: (a) the individual is authorized to execute and deliver this
Lease on behalf of that corporation in accordance with a duly adopted resolution
of the corporation's board of directors and in accordance with that
corporation's articles of incorporation or charter and bylaws; (b) this Lease is
binding on that corporation in accordance with its terms; (c) the corporation is
a duly organized and legally existing corporation in good standing in the State
of California; and (d) the execution and delivery of this Lease by that
corporation shall not result in any breach of or constitute a default under any
mortgage, deed of trust, lease loan, credit agreement, partnership agreement, or
other contract or instrument to which that corporation is a party or by which
that corporation may be bound. If Tenant is a corporation, Tenant shall, within
fifteen (15) days after the date of this Lease, deliver to Landlord a copy of a
resolution of Tenant's board of directors authorizing or ratifying the execution
and delivery of this Lease. The secretary or assistant secretary of the
corporation must duly certify that resolution. If Tenant fails to comply with
this Subsection 31.20.1, each individual executing this Lease on behalf of the
corporation shall be personally liable for all of Tenant's obligations under
this Lease.
Page 25 of 26
<PAGE> 30
31.20.2. Partnership Authority. If Tenant is a partnership, each
individual executing this Lease on behalf of the partnership represents and
warrants that: (a) the individual is duly authorized to execute and deliver this
Lease on behalf of the partnership in accordance with the partnership agreement,
or an amendment to the partnership agreement, now in effect; (b) this Lease is
binding on that partnership; (c) the partnership is a duly organized and legally
existing partnership and has filed all certificates required by law; and (d) the
execution and delivery of this Lease shall not result in any breach of or
constitute a default under any mortgage, deed of trust, lease, loan, credit
agreement, partnership agreement, or other contract or instrument to which the
partnership is a party or by which the partnership may be bound.
31.20.3. Limited Liability Company Authority. If Tenant is a
limited liability company, each individual executing this Lease on behalf of
that company represents and warrants that: (a) the individual(s) executing this
Lease on behalf of the company has/have full power and authority under the
company's governing documents to execute and deliver this Lease in the name of
and on behalf of the company and to cause the company to perform its obligations
under this Lease; (b) the company is a limited liability company duly organized
and validly existing under the laws of the State of California; and (c) the
company has the power and authority under applicable law and its governing
documents to execute and deliver this Lease and to perform its obligations under
this Lease.
31.21. Right To Lease. Landlord reserves the absolute right to contract
with any other person or entity to be a tenant in the Building as Landlord, in
Landlord's sole business judgment, determines best to promote the interests of
the Building. Tenant does not rely on the expectation, and Landlord does not
represent, that any specific tenant or type or number of tenants will, during
the Lease Term, occupy any space in the Building.
31.22. No Air Rights. No rights to any view from the Premises or to
exterior light or air to the Premises are created under this Lease.
31.23. Brokers. Landlord and Tenant each represents to the other that it
has had no dealings with any real estate broker or agent in connection with the
negotiation of this Lease, except for the real estate brokers or agents
specified in Summary of Basic Lease Information Section 14 (Brokers) and that
they know of no other real estate broker or agent who is entitled to a
commission or finder's fee in connection with this Lease. Each party shall
indemnify, protect, defend, and hold harmless the other party against all
claims, demands, losses, liabilities, lawsuits, judgments, and costs and
expenses (including reasonable attorney fees) for any leasing commission,
finder's fee, or equivalent compensation alleged to be owing on account of the
indemnifying party's dealings with any real estate broker or agent other than
the Brokers. The terms of this Section 31.23 shall survive the expiration or
earlier termination of the Lease Term.
31.24. Transportation Management. Tenant shall fully comply with all
current or future compulsory programs imposed by any public authority, intended
to manage parking, transportation, or traffic in and around the Building. In
connection with this compliance, Tenant shall take responsible action for the
transportation planning and management of all employees located at the Premises
by working directly with Landlord, any government transportation management
organization, or other transportation related committees or entities. This
provision includes programs such as the following: (a) restrictions on the
number of peak hour vehicle trips generated by Tenant; (b) encouragement of
increased vehicle occupancy through employer sponsored financial or in kind
incentives; (c) implementation of an in house or area wide ridesharing program
and appointment of an employee transportation coordinator; and (d) flexible work
shifts for employees.
Executed as of the date stated in Summary of Basic Lease Information
Section 1.
LANDLORD: TENANT:
American Assets, Inc., ACC Consumer Finance Corporation,
a California corporation a Delaware corporation
By: /s/ JOHN W. CHAMBERLAIN By: /s/ GARY S. BURDICK
------------------------------------- ------------------------------
Name: John W. Chamberlain Name: Gary S. Burdick
Title: President Title: President
By:
------------------------------
Name:
----------------------
Title:
---------------------
Page 26 of 26
<PAGE> 31
EXHIBIT A
DIAGRAM OF PREMISES
This Exhibit A is intended to show the general configuration of the Premises as
of the Commencement Date and is not a representation or warranty by Landlord as
to the size, nature or exact configuration of the Premises.
<PAGE> 32
EXHIBIT B
SITE PLAN OF PROJECT
This Exhibit B is intended to show the general configuration of the Project and
the Building as of the Commencement Date and is not a representation or warranty
by Landlord as to the size, nature or exact configuration of the Project or
Building.
<PAGE> 33
EXHIBIT C
TENANT WORKLETTER AGREEMENT
This Tenant Work Letter Agreement shall set forth the terms and
conditions relating to the construction of the tenant improvements within the
Premises. This Tenant Work Letter Agreement is essentially organized
chronologically and addresses the issues of the construction of the Premises, in
sequence, as such issues will arise during the actual construction of the
Premises. All references in this Tenant Work Letter Agreement to Articles or
Sections of "this Lease" shall mean the relevant portion of Articles 1 through
31 of the Torrey Reserve Office Lease to which this Tenant Work Letter Agreement
is attached as Exhibit C and of which this Tenant Work Letter Agreement forms a
part, and all references in this Tenant Work Letter Agreement to Sections of
this "Tenant Work Letter Agreement" shall mean the relevant portion of Sections
1 through 5 of this Tenant Work Letter Agreement.
Section 1
CONSTRUCTION DRAWINGS FOR THE PREMISES
Landlord shall construct the improvements in the Premises (the "Tenant
Improvements") pursuant to those certain plans and specifications and finish
schedule prepared Smith Consulting Architects dated _______, 19___, containing
Sheet Nos. _______ though __________, and preliminary construction cost budget
prepared by ___________ dated ________, 19__, containing pages _____ through
_____ (collectively, the "Approved Working Drawings and Budget"). Tenant shall
make no changes or modifications to the Approved Working Drawings and Budget
without the prior written consent of Landlord, which consent may be withheld in
Landlord's sole discretion if such change or modification would directly or
indirectly delay the "Substantial Completion," as that term is defined in
Section 4.1 of this Tenant Work Letter Agreement, of the Premises or increase
the cost of designing or constructing the Tenant Improvements. *SEE ADDENDUM
Section 2
OVER-ALLOWANCE AMOUNT
Upon Tenant's execution of this Lease, Tenant shall deliver to Landlord
cash in an amount (the "Over-Allowance Amount") equal to Zero ($00.00). The
Over-Allowance Amount shall be disbursed by Landlord prior to the disbursement
of any portion of Landlord's contribution to the construction of the Tenant
Improvements. In the event that after Tenant's execution of this Lease, any
revisions, changes, or substitutions shall be made to the Approved Space Plan
and Finish Standards or the Tenant Improvements, any additional costs which
arise in connection with such revisions, changes or substitutions shall be paid
by Tenant to Landlord immediately upon Landlord's request as an addition to the
Over-Allowance Amount.
Section 3
CONTRACTOR'S WARRANTIES AND GUARANTIES
Landlord hereby assigns to Tenant all warranties and guaranties by the
contractor who constructs the Tenant Improvements (the "Contractor") relating to
the Tenant Improvements, and Tenant hereby waives all claims against Landlord
relating to, or arising out of the construction of, the Tenant Improvements.
Section 4
COMPLETION OF THE TENANT IMPROVEMENTS;
LEASE COMMENCEMENT DATE
4.1 Substantial Completion. For purposes of this Lease, "Substantial
Completion" of the Premises shall occur upon the completion of construction of
the Tenant Improvements in the Premises pursuant to the Approved Space Plan and
Finish Standards, with the exception of any punch list items and any tenant
fixtures, work-stations, built-in furniture, or equipment to be installed by
Tenant or under the supervision of Contractor.
4.2 Delay of the Substantial Completion of the Premises. Except as
provided in this Section 4.2, the Lease Commencement Date shall occur as set
forth in Article 3 of the Lease and Section 4.1, above. If there shall be a
delay or there are delays in the Substantial Completion of the Premises or in
the occurrence of any of the other conditions precedent to the Lease
Commencement Date, as set forth in Article 3 of the Lease, as a direct,
indirect, partial, or total result of:
4.2.1 Tenant's failure to timely approve any matter requiring
Tenant's approval;
4.2.2 A breach by Tenant of the terms of this Tenant Work Letter
Agreement or the Lease;
4.2.3 Tenant's request for changes in the Approved Space Plan
and Finish Standards;
4.2.4 Changes in any of the Approved Space Plan and Finish
Standards because the same do not comply with applicable laws;
4.2.5 Tenant's requirement for materials, components, finishes or
improvements which are not available in a commercially reasonable time
given the anticipated date of Substantial Completion of the
Page 27 of 26
<PAGE> 34
Premises, as set forth in the Lease, or which are different from, or not
included in, Landlord's standard improvement package items for the
Building;
4.2.6 Changes to the base, shell and core work of the Building
required by the Approved Space Plan and Finish Standards; or
4.2.7 Any other acts or omissions of Tenant, or its agents, or
employees,
then, notwithstanding anything to the contrary set forth in the Lease or this
Tenant Work Letter Agreement and regardless of the actual date of the
Substantial Completion of the Premises, the Lease Commencement Date shall be
deemed to be the date the Lease Commencement Date would have occurred if no
Tenant delay or delays, as set forth above, had occurred.
Section 5
MISCELLANEOUS
5.1 Tenant's Entry Into the Premises Prior to Substantial Completion.
Provided that Tenant and its agents do not interfere with Contractor's work in
the Building and the Premises, Contractor shall allow Tenant access to the
Premises prior to the Substantial Completion of the Premises for the purpose of
Tenant installing over-standard equipment or fixtures (including Tenant's data
and telephone equipment) in the Premises. Prior to Tenant's entry into the
Premises as permitted by the terms of this Section 5.1, Tenant shall submit a
schedule to Landlord and Contractor, for their approval, which schedule shall
detail the timing and purpose of Tenant's entry. Tenant shall hold Landlord
harmless from and indemnify, protect and defend Landlord against any loss or
damage to the Building or Premises and against injury to any persons caused by
Tenant's actions pursuant to this Section 5.1.
5.2 Tenant's Representative. Tenant has designated Mr. Gary Burdick as
its sole representative with respect to the matters set forth in this Tenant
Work Letter Agreement, who, until further notice to Landlord, shall have full
authority and responsibility to act on behalf of the Tenant as required in this
Tenant Work Letter Agreement.
5.3 Landlord's Representative. Landlord has designated Mr. Rick McKee
(Landlord's Vice President of Construction) as its sole representative with
respect to the matters set forth in this Tenant Work Letter Agreement, who,
until further notice to Tenant, shall have full authority and responsibility to
act on behalf of the Landlord as required in this Tenant Work Letter Agreement.
5.4 Tenant's Agents. All subcontractors, laborers, materialmen, and
suppliers retained directly by Tenant shall conduct their activities in and
around the Premises, Building and the Project in a harmonious relationship with
all other subcontractors, laborers, materialmen and suppliers at the Premises,
Building and Project and, if necessary, Tenant shall employ union labor to
achieve such harmonious relations. *SEE ADDENDUM
5.5 Time of the Essence in This Tenant Work Letter Agreement. Unless
otherwise indicated, all references herein to a "number of days" shall mean and
refer to calendar days. In all instances where Tenant is required to approve or
deliver an item, if no written notice of approval is given or the item is not
delivered within the stated time period, at Landlord's sole option, at the end
of such period the item shall automatically be deemed approved or delivered by
Tenant and the next succeeding time period shall commence.
5.6 Tenant's Lease Default. Notwithstanding any provision to the
contrary contained in this Lease, if an event of default as described in Article
22 of the Lease, or a default by Tenant under this Tenant Work Letter Agreement,
has occurred at any time on or before the Substantial Completion of the
Premises, then (i) in addition to all other rights and remedies granted to
Landlord pursuant to the Lease, Landlord shall have the right to cause
Contractor to cease the construction of the Premises (in which case, Tenant
shall be responsible for any delay in the Substantial Completion of the Premises
caused by such work stoppage as set forth in Section 4 of this Tenant Work
Letter Agreement), and (ii) all other obligations of Landlord under the terms of
this Tenant Work Letter Agreement shall be forgiven until such time as such
default is cured pursuant to the terms of the Lease.
Executed as of the date stated in Summary of Basic Lease Information
contained in Section 1 of the Lease.
LANDLORD: TENANT:
American Assets, Inc., ACC Consumer Finance Corporation,
a California corporation a Delaware corporation
By: /s/ JOHN W. CHAMBERLAIN By: /s/ GARY S. BURDICK
------------------------------------- ------------------------------
Name: John W. Chamberlain Name: Gary S. Burdick
Title: Chief Executive Officer Title: President
By:
------------------------------
Name:
----------------------
Title:
---------------------
Page 2 of 2
<PAGE> 35
Exhibit D
NOTICE OF BASIC LEASE INFORMATION
To: ___________________________________
___________________________________
___________________________________
RE: Office Lease, dated ___________________
LANDLORD: _______________________________________________________
TENANT: _________________________________________________________
PREMISES: _______________________________________________________
BUILDING: The Building located at _______________________________
RESPONSE DEADLINE: ______________________________________________
Dear Sir or Madam:
In accordance with the office lease referred to above (Lease), we wish
to advise you and confirm the following:
1. Construction of the Tenant Improvements is Substantially Complete,
and the Lease Term shall commence as of ___________________, for a term of
____________ months, ending on ___________________.
2. The exact Rentable Area of the Premises is _________________ Rentable
Square Feet.
3. In accordance with the Lease, Basic Rent began to accrue on ________,
the amount of __________________.
4. If the Lease Commencement Date is other than the first day of the
month, the first billing shall contain a prorata adjustment based on the actual
number of days in the first calendar month. Each subsequent billing, with the
exception of the final billing, shall be for the full amount of the monthly
installment as provided for in the Lease.
5. Basic Rent and any estimated Operating Expense and Tax payments are
due and payable in advance on the first day of each month during the Lease Term.
Your rent checks should be made payable to __________________________________ at
___________________________.
6. Tenant's Share, as adjusted based on the exact number of Rentable
Square Feet in the Premises, is ____.
LANDLORD
____________________________________,
a __________________________________
By: ________________________________
Name: __________________________
Title: _________________________
<PAGE> 36
EXHIBIT E
RULES AND REGULATIONS
Tenant shall comply with the following Rules and Regulations. Landlord
shall not be responsible to Tenant for the nonperformance of any of these Rules
and Regulations.
1. Locks; Keys. Tenant shall not alter any lock or install any new or
additional locks or bolts on any doors or windows of the Premises without
obtaining Landlord's prior written consent. Tenant shall bear the cost of any
lock changes or repairs required by Tenant. Landlord for the Premises shall
furnish two keys, and any additional keys required by Tenant must be obtained
from Landlord at a reasonable cost to be established by Landlord.
2. Doors Opening to Public Corridors. All doors opening to public
corridors must be kept closed at all times except for normal ingress to and
egress from the Premises.
3. Securing Doors; Admission to Building. Landlord reserves the right to
close and keep locked all entrance and exit doors of the Building during the
hours when Comparable Buildings are customarily closed and locked. When
departing after the Building's normal Business Hours, Tenant and Tenant's
employees and agents must be sure that the doors to the Building are securely
closed and locked. Any person, including Tenant and Tenant's employees and
agents, who enters or leaves the Building at any time when it is locked or at
any time considered to be after the Building's normal Business Hours, may be
required to sign the Building register. Access to the Building may be refused
unless the person seeking access has proper identification or has previously
arranged a pass for access to the Building. Landlord and its agents shall not be
liable for damages for any error concerning the admission to, or exclusion from,
the Building of any person. Landlord reserves the right, in the event of
invasion, mob, riot, public excitement, or other commotion, to prevent access to
the Building or Project during the continuance of that event by any means it
considers appropriate for the safety and protection of life and property.
4. Furniture, Freight, and Equipment; Service Deliveries. No furniture,
freight, or equipment of any kind may be brought into the Building without prior
notice to Landlord. All moving activity into or out of the Building must be
scheduled with Landlord and done only at the time and in the manner designated
by Landlord. No service deliveries (other than messenger services) shall be
allowed between the hours of 4 p.m. and 6 p.m., Monday through Friday. Landlord
may at any time restrict the elevators and areas of the Building into which
messengers may enter and may require that Tenant leave deliveries at the lobby
security desk for pickup. Landlord may prescribe the weight, size, and position
of all safes and other heavy property brought into the Building and the times
and manner of moving those items within and out of the Building. Tenant shall
not overload the floor of the Premises. If considered necessary by Landlord,
safes and other heavy objects must stand on supports that are adequate to
distribute the weight properly. Landlord shall not be responsible for loss of or
damage to any safe or property. Any damage to any part of the Building or to its
contents, occupants, or visitors caused by moving or maintaining any safe or
other property referred to in this clause shall be the sole responsibility and
expense of Tenant.
5. Receipt of Deliveries; Use of Elevators. No furniture, packages,
supplies, equipment, or merchandise may be received in the Building or carried
up or down in the elevators, except between those hours and in that specific
elevator that Landlord shall designate.
6. No Disturbance of Other Occupants. Tenant shall not disturb, solicit,
or canvass any occupant of the Project and shall cooperate with Landlord and
Landlord's agents to prevent those actions.
8. Use of Restrooms; Responsibility for Damage. The restrooms, 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 of any kind shall
be thrown into them. The expense of any breakage, stoppage, or damage resulting
from violation of this rule shall be borne by the tenant who caused, or whose
employees or agents caused, the breakage, stoppage, or damage.
9. Heating and Air-Conditioning. Tenant shall not use any method of
heating or air-conditioning, other than that supplied by Landlord, without
Landlord's prior written consent.
10. Foul or Noxious Gases or Substances; Noninterference With Others.
Tenant shall not use or keep, or allow to be used or kept, any foul or noxious
gas or substance in or on the Premises. Tenant shall not allow the Premises to
be occupied or used in a manner causing noise, odors, or vibrations that are
offensive or objectionable to Landlord or other occupants of the Project.
11. Animals, Birds, and Vehicles. Tenant shall not bring into, or keep
within, the Premises, Building, or Project any animals, birds, or vehicles
(e.g., bicycles).
12. Cooking; No Use of Premises for Improper Purposes. No cooking shall
be done or permitted on the Premises, except that Underwriters' Laboratory
(UL)-approved equipment and microwave ovens may be used in the Premises for
heating food and brewing coffee, tea, hot chocolate, and similar beverages for
employees and visitors. This use must be in accordance with all applicable
federal, state, and city laws, codes, ordinances, rules, and regulation
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<PAGE> 37
13. Telephone and Other Wires. Tenant may not introduce telephone wires
or other wires into the Premises without first obtaining Landlord's approval of
the method and location of such introduction. No boring or cutting for telephone
wires or other wires shall be allowed without Landlord's consent. The location
of telephones, call boxes, and other office equipment affixed to the Premises
shall be subject to Landlord's prior approval.
14. Exclusion or Expulsion. Landlord reserves the right to exclude or
expel from the Project any person who, in Landlord's judgment, is under the
influence of alcohol or drugs or commits any act in violation of any of these
Rules and Regulations.
15. Loitering Prohibited. Tenant and Tenant's employees and agents shall
not loiter in or on the entrances, corridors, sidewalks, lobbies, halls,
stairways, elevators, or common areas for the purpose of smoking tobacco
products or for any other purpose. Tenant and Tenant's employees and agents
shall not obstruct those areas but use them only as a means of ingress to and
egress from the Premises.
16. Operation of Electricity, Water, and Air-Conditioning. Tenant shall
not waste electricity, water, or air-conditioning and shall cooperate fully with
Landlord to ensure the most effective operation of the Building's heating and
air-conditioning system. Tenant shall not adjust any controls of that heating
and air-conditioning system.
17. Disposal of Trash and Garbage. Tenant shall store all trash and
garbage within the interior of the Premises. Tenant shall not place or have
placed in the trash boxes or receptacles any material that may not or cannot be
disposed of in the ordinary and customary manner of removing and disposing of
trash in the vicinity of the Building. In disposing of trash and garbage, Tenant
shall comply fully with any law or ordinance governing that disposal. All trash,
garbage, and refuse disposal shall be made only through entry-ways and elevators
provided for that purpose and shall be made only at times designated by
Landlord.
18. Compliance With Safety Regulations. Tenant shall comply with all
safety, fire protection, and evacuation procedures and regulations established
by Landlord or by any government agency.
19. Protection of Premises. Tenant shall assume all responsibility,
including keeping doors locked and other means of entry to the Premises closed,
for protecting the Premises from theft, robbery, and pilferage.
20. Awnings, Curtains, and Electrical Ceiling Fixtures. No awnings or
other projection shall be attached to the outside walls of the Building without
Landlord's prior written consent. No curtains, blinds, shades, or screens shall
be attached to, hung in, or used in connection with any window or door of the
Premises without Landlord's prior written consent. All electrical ceiling
fixtures hung in offices or spaces along the perimeter of the Building must be
fluorescent or of a quality, type, design, and bulb color approved by Landlord.
Tenant shall abide by Landlord's regulations concerning the opening and closing
of window coverings attached to those windows, if any, in the Premises that have
a view of any interior portion of the Building or Building Common Areas.
21. Non-obstruction of Light. Tenant shall not cover or obstruct the
sashes, sash doors, skylights, windows, and doors that reflect or admit light
and air into the halls, passageways, or other public places in the Building.
Tenant shall not place any bottles, parcels, or other articles on the
windowsills.
22. Provision of Information to Tenant's Employees. Tenant shall comply
with requests by Landlord that Tenant inform Tenant's employees of items of
importance to Landlord.
23. Hand Trucks and Similar Equipment. Without Landlord's prior consent,
Tenant shall not use, in any space or in the public halls of the Building, any
hand trucks unless they are equipped with rubber tires and side guards or
similar equipment. Tenant shall not bring any other vehicles of any kind into
the Building.
24. Use of Building's Name or Likeness. Without Landlord's prior written
consent, Tenant shall not use the Building's name or any photograph or other
likeness of the Building in connection with, or in promoting or advertising,
Tenant's business, except that Tenant may include the Building's name in
Tenant's address.
25. Parking Rules and Regulations. Without Landlord's prior written
consent, no automobile detailing or washing shall be permitted in the parking
areas of the Building or Project.
26. Rules Changes; Waivers. Landlord reserves the right at any time to
change or rescind any one or more of these Rules and Regulations or to make any
additional reasonable Rules and Regulations that, in Landlord's judgment, may be
necessary for: (a) The management, safety, care, and cleanliness of the
Premises, Building, and Project; (b) The preservation of good order; and (c) The
convenience of other occupants and tenants in the Premises, Building, and
Project.
Landlord may waive any one or more of these Rules and Regulations for the
benefit of any particular tenants. No waiver by Landlord shall be construed as a
waiver of those Rules and Regulations in favor of any other tenant, and no
waiver shall prevent Landlord from enforcing those Rules or Regulations against
any other tenant of the Project. Tenant shall be considered to have read these
Rules and Regulations and to have agreed to abide by them as a condition of
Tenant's occupancy of the Premises.
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<PAGE> 38
EXHIBIT F
ESTOPPEL CERTIFICATE
The undersigned certifies as follows:
1. The undersigned (Tenant) and _______________________________, a
___________________ (Landlord) entered into a written office lease dated
_________________________, in which Landlord leased to Tenant and Tenant leased
from Landlord premises in the office building located at
__________________________ (Building). The Building is described in Lease
Article 1 (Project, Building and Premises). The Lease has been amended,
modified, and supplemented as follows:
____________________________________________________. The lease, as amended,
modified, and supplemented, is referred to in this Certificate as the "Lease."
2. Under the Lease, Tenant has leased approximately ___________ rentable
square feet of space (Premises) in the Building and has paid to Landlord a
security deposit of __________. The term of the Lease began on ___________, and
expires on _____________, subject to any options to extend identified in Section
4 of this Exhibit. Tenant has paid Basic Rent through ___________. The next
payment of Basic Rent in the amount of __________ is due on __________________.
Tenant is required to pay _________ percent of the direct expenses (as defined
in Lease Article 5) for the Building and Project, in excess of direct expenses
for base year _________.
3. Tenant is entitled to _____________ unreserved parking spaces free of
charge and ____________ parking spaces at a charge of ____________ per month per
space.
4. The Lease provides for ______________ option(s) to extend the term of
the Lease for ___________ years each. The rental rate for each extension term is
as follows: _____________________________.
5. There are no oral or written amendments, modifications, or
supplements to the Lease except as stated in Section 1 of this Certificate. A
true, correct, and complete copy of the Lease, including all amendments,
modifications, and supplements, is attached to this Certificate. The Lease, as
amended, modified and supplemented, is in full force and effect and represents
the entire agreement between Landlord and Tenant pertaining to the Premises, the
Building, and the Project.
6. All space and improvements leased by Tenant have been completed and
furnished in accordance with the provisions of the lease, and Tenant has
accepted and taken possession of the Premises. All contributions required to be
paid by Landlord to date for improvements to the Premises have been paid in
full.
7. Landlord is not in default in the performance of any of the terms or
provisions of the Lease. Tenant is not in default in the performance of any of
the terms or provisions of the Lease and has not assigned, transferred, or
hypothecated the Lease or any interest in the Lease or subleased all or part of
the Premises.
8. There are no setoffs or credits against Rent payable under the Lease.
No free periods or rental abatements, rebates, or concessions have been granted
to Tenant, except as follows: _________________________.
9. Tenant has no actual or constructive knowledge of any processing,
use, storage, disposal, release, or treatment of any hazardous or toxic material
or substance on the Premises or the Project except as follows:
________________________________________________________________________________
10. There are no pending actions, voluntary or involuntary, under any
bankruptcy or insolvency laws of the United States or any state against Tenant
or any guarantor of Tenant's obligations under the Lease.
This Certificate is given to _________________________ as [lender or
purchaser] with the understanding that he/she/it or his/her/its assignee shall
rely on it in connection with the [acquisition of the Building and/or
Project/making a loan secured by the Building, the land upon which the Building
is located and the Project]. Following that [acquisition/loan], Tenant agrees
that the Lease shall remain in full force and effect and shall bind and inure to
the benefit of the [purchaser/lender] and its successor in interest.
TENANT
____________________________________,
a __________________________________
By: ________________________________
Name: __________________________
Title: _________________________
<PAGE> 1
EXHIBIT 10.5
TORREY RESERVE
ADDENDUM TO LEASE
This Addendum to Lease ("Addendum") is made to the Lease dated as of
June 16, 1997 ("Lease"), by and between AMERICAN ASSETS, INC., A CALIFORNIA
CORPORATION ("Landlord") and ACC CONSUMER FINANCE CORPORATION, A DELAWARE
CORPORATION ("Tenant").
Landlord and Tenant hereby agree that notwithstanding anything
contained in the Lease to the contrary, the provisions set forth below shall be
deemed to be a part of the Lease and shall supersede, to the extent appropriate,
any contrary provision in the Lease. All references in the Lease and in this
Addendum to "Lease" shall be construed to mean the Lease as amended and
supplemented by this Addendum. All capitalized terms used in this Addendum
unless specifically defined in this Addendum shall have the same meaning as the
terms used in the Lease.
AGREEMENT
1. Option to Extend Term.
1.1 Grant of Option. Landlord hereby grants to Tenant two (2)
options ("Extension Options") to extend the initial Lease Term for additional
periods of five (5) years each (the "First Extension Term and Second Extension
Term"). The First Extension Term and the Second Extension Term are sometimes
referred to herein collectively and individually as an "Extension Term." Each
Extension Option must be exercised, if at all, by written notice ("Option
Notice") delivered by Tenant to Landlord not later than twelve (12) months prior
to the end of the initial Lease Term or First Extension Term, as the case may
be. Further, each Extension Option shall not be deemed to be properly exercised
if, as of the date of the Option Notice or at the end of the initial Lease Term
or the First Extension Term, Tenant (i) is in default under the Lease, (ii) has
assigned this Lease or its interest therein or (iii) has sublet all or
substantially all of the Premises. Provided Tenant has properly and timely
exercised the Extension Option in question, the initial Lease Term or First
Extension Term, as the case may be, shall be extended for an additional period
of five (5) years, and all terms, covenants and conditions of the Lease shall
remain unmodified and in full force and effect, except that the Basic Rent shall
be modified as set forth below.
1.2 Basic Rent During Extension Term(s). Basic Rent shall be payable
during each Extension Term in accordance with Section 4.1 of this Lease, except
that the monthly Basic Rent payable for the first twelve (12) months of each
Extension Term shall be equal to one-twelfth (1/12) of that amount determined by
multiplying the rentable area of the Premises by the "Fair Market Rental Value"
for the Premises at the time Tenant delivers its Option Notice to Landlord. The
"Fair Market Rental Value" shall mean 95% of the prevailing rental rate, on a
rentable per square foot per year basis, then being obtained by Landlord in the
Building and Project for space similar in size and quality to that of the
Premises; provided, however, in no event shall the Fair Market Rental Value be
less than the annual rate per rentable square foot at which the Basic Rent was
payable during the last year of the initial Term or the First Extension Term, as
the case may be. Once determined, the Basic Rent payable for the first twelve
(12) months of the Extension Term in question shall be increased on each
anniversary date of such Extension Term by an amount equal to the rentable area
of the Premises multiplied by $.05. The Base Year for each Extension Term shall
be the calendar year immediately preceding commencement of the Extension Term in
question and Tenant shall pay, as Additional Rent hereunder, Tenant's Share of
the annual Direct Expenses that are in excess of the amount of Direct Expenses
applicable to such Base Year commencing with the first year of such Extension
Term.
1.2.1 Negotiating Period. Provided the conditions to Tenant's right to
exercise the applicable Option to Extend hereunder are satisfied, Landlord
shall, within ten (10) business days after receipt of Tenant's Option Notice,
deliver to Tenant a written determination of the then Fair Market Rental Value
as determined by Landlord using the
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<PAGE> 2
criteria set forth above ("Landlord's Determination"). Tenant shall have ten
(10) business days from the date of Landlord's delivery to notify Landlord in
writing of Tenant's acceptance of Landlord's Determination or deliver to
Landlord Tenant's written determination of the then Fair Market Rental Value
using the criteria set forth above ("Tenant's Determination"). If Tenant does
not deliver to Landlord the Tenant's Determination within such 10-day period,
Tenant shall be deemed to have accepted the Landlord's Determination and the
rental rate set forth in the Landlord's Determination shall be the Fair Market
Rental Value used to determine the Basic Rent payable for the first twelve (12)
months of the applicable Extension Term. If Tenant does deliver the Tenant's
Determination within such 10-day period, then Landlord and Tenant will have ten
(10) days from the date of delivery of Tenant's Determination to negotiate a
Fair Market Rental Value acceptable to both Landlord and Tenant (the
"Negotiating Period").
1.2.2 Arbitration. If no agreement can be reached as to the Fair Market
Rental Value within the Negotiating Period, then, within seven (7) days after
the Negotiating Period expires, Tenant and Landlord shall mutually appoint a
certified M.A.I. appraiser that has at least five (5) years full-time commercial
appraisal experience. If Landlord and Tenant are unable to agree on an
appraiser, either of the parties to this Lease, after giving five (5) days prior
written notice to the other party, may apply to the then President of the San
Diego Board of Realtors for the selection of an appraiser who meets the
foregoing qualifications, which selection shall be made within three (3) days.
The appraiser selected by the President of the Board of Realtors shall be a
person who has not previously acted in any capacity for either party. The
appraiser shall, within ten (10) days of his appointment, review the original
Landlord's Determination and Tenant's Determination of the Fair Market Rental
Value and such other information as he shall deem necessary and shall determine
which of the two is closer to the actual Fair Market Rental Value. The appraiser
shall be instructed, in deciding whether the Landlord's Determination or the
Tenant's Determination of the Fair Market Rental Value is closer to the actual
Fair Market Rental Value, to use the criteria as to Fair Market Rental Value set
forth above. The appraiser shall not establish his own Fair Market Rental Value,
and must select either Landlord's or Tenant's Determination and shall
immediately notify the parties of his selection. The Fair Market Rental Value
determined by Landlord or Tenant and selected as the one closer to the actual
Fair Market Rental Value by the appraiser shall be the Fair Market Rental Value
used to determine the Basic Rent payable during the first twelve (12) months of
the Extension Term in question and such Basic Rent shall be subject to annual
adjustment as et forth in Subsection 1.2 above. Each of the parties shall bear
one-half the cost of the appraiser. If the Fair Market Rental Value shall not
have been determined by the commencement of the applicable Extension Term,
Tenant shall continue to pay the Basic Rent payable as of the month immediately
preceding such commencement until the Fair Market Rental Value is established at
which time there shall be an adjustment between the parties so that the Basic
Rent established for the Extension Term using the Fair Market Rental Value shall
be retroactive to the commencement of the applicable Extension Term.
2. Right of First Offer.
2.1 Right of First Offer. If at anytime after the Lease
Commencement Date any leased space becomes available on the second floor of the
Building or on a floor designated by Landlord in Building 1 or 2, Torrey Reserve
- - North Court, or if a prospective tenant expresses interest in any unleased
space on the second floor of the Building or on a floor designated by Landlord
in Building 1 or 2, Torrey Reserve - North Court (collectively, the "First Offer
Space"), Landlord shall give Tenant written notice thereof, and if, within three
(3) business days thereafter, Tenant shall give Landlord written notice that
Tenant elects to negotiate for a lease of the First Offer Space, Landlord shall
not offer the First Offer Space for rent to a third party for a ten (10)
calendar day period after Landlord receives Tenant's notice of a desire to
negotiate for the First Offer Space. If Tenant elects to negotiate for a lease
of the First Offer Space, the rental rate and other terms then being offered to
other prospective tenants of the Building and Project shall be used by the
parties as a guideline for their negotiations. If within such ten (10) calendar
day period, the parties
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<PAGE> 3
fail to agree on the terms of a lease thereof, Landlord may offer such space to
a third party. If the third-party lease shall not be made, Tenant's rights
hereunder shall apply to any subsequent third-party offer.
2.2 Restrictions on Right of First Offer. The Right of First-Offer
shall be personal to the originally named Tenant and shall be exercisable only
by the originally named Tenant (and not any assignee, sublessee, or other
transferee of Tenant's interest in this Lease). The originally named Tenant may
exercise the Right of First Offer only if that Tenant occupies the entire
Premises as of the date of Tenant's election to negotiate for a lease for the
First Offer Space. Tenant shall not have the right to lease the First Offer
Space if Tenant is in default under this Lease as of the date of the attempted
exercise of the Right of First Offer by Tenant or as of the scheduled date of
delivery of the First Offer Space to Tenant.
3. Substitution of Other Premises (Subsection 2.1). Subsection 2.1 is
deemed deleted in its entirety.
4. Delay in Delivery of the Premises (Section 3.4). The following are
deemed added as Subsections 3.4.1 and 3.4.2:
3.4.1 Outside Delivery Date/Rent Abatement for Late Delivery
of Premises/Tenant's Right to Terminate. Notwithstanding
anything contained to the contrary herein, provided this Lease
is executed by Landlord and Tenant on or before April 9, 1997,
and except for delays caused by events Force Majeure (as
defined in Section 31.12 of this Lease) or Tenant's failure to
timely and completely comply with all terms and conditions of
this Lease, Tenant shall be entitled to and shall receive one
(1) day of abated Basic Rent (at the rate payable as of the
Commencement Date) for each day Landlord is delayed in
delivering possession of the Premises to Tenant after November
1, 1997. Such abated Basic Rent shall be applied to the first
due and owing Basic Rent accruing after the Commencement Date.
Furthermore, except for delays caused by events Force Majeure
(as defined in Section 31.12 of this Lease) or Tenant's
failure to timely and completely comply with all terms and
conditions of this Lease, and provided Tenant is not in
default under this Lease, if Landlord has not delivered
possession of the Premises to Tenant on or before January 1,
1998, Tenant shall have the right to terminate this Lease,
which right shall be exercised by Tenant, if at all, on or
before 5:00 p.m. on the next business day following January 1,
1998.
3.4.2 Pre-delivery Status Reports. Landlord agrees, without
liability for failing to do so, to provide Tenant with written
status updates regarding completion of the Tenant Improvements
and the actual Commencement Date at intervals of ninety (90),
sixty (60) and thirty (30) days prior to the date Landlord
expects to tender possession of the Premises to Tenant.
5. Application of Payments (Section 4.3). Section 4.3 is deemed deleted and
the following is deemed inserted in place thereof:
4.3 Application of Payments. All payments of Basic Rent and
Additional Rent received by Landlord from Tenant shall be
applied to the oldest payment of Basic Rent or Additional Rent
owed by Tenant to Landlord. No designation by Tenant, either
in a separate writing or on a check or money order, shall
modify this clause or have any force or effect.
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<PAGE> 4
6. Certified Funds (Section 4.4). Section 4.4 is deemed deleted and the
following is deemed inserted in place thereof:
4.4 Certified Funds. If any non-cash payment made by Tenant is
not paid by the bank or other institution on which it is drawn
for any reason other than such bank or other institution's
fault or inadvertence, Landlord shall have the right,
exercised by notice to Tenant, to require that Tenant make all
future payments by certified funds or cashier's check.
7. Additional Rent; Rent (Lease, Subsection 5.1); Statement of Actual
Direct Expenses and Payment by Tenant (Lease, Subsection 5.3.2). Notwithstanding
anything contained to the contrary in Subsection 5.1 or Subsection 5.3.2 of the
Lease, Tenant's Share of annual "Operating Expenses" which are controllable by
Landlord (i.e., all Operating Expenses except Building and Project Common Area
utilities, Building and Project Tax Expenses, and Building and Project insurance
premiums including any deductible amount paid by Landlord) ("Controllable
Operating Expenses"), shall not increase by an amount per square foot which is
more than six percent (6%) per calendar year of the amount of Tenant's Share of
Controllable Operating Expenses per square foot for the immediately preceding
calendar year, on a cumulative basis (Annual Cap). Any increase in Tenant's
Share of Controllable Operating Expenses, which exceeds the Annual Cap, shall
hereinafter be referred to as the "Carry Over Increase". The Carry Over Increase
shall be carried over to subsequent years and applied to increases in Tenant's
Share of Controllable Operating Expenses where the increase in Tenant's Share of
Controllable Operating Expenses does not exceed the Annual Cap.
For example, assume Tenant's Share of Controllable Operating Expenses
for the Base Year (1998) is determined to be $4.00 per square foot per year and
Tenant's Share of actual Controllable Operating Expenses for calendar year 1999
is determined to be $4.40 per square foot per year (i.e., an increase of 10%).
In such case, Tenant's Share of Controllable Operating Expenses for 1999 would
be $4.24 per square foot per year as a result of the Annual Cap (i.e. $4.00 x
1.06 = $4.24) and the Carry Over Increase would be four percent (4%) (i.e. 10%
actual increase in Tenant's Share of Controllable Operating Expenses less the 6%
Annual Cap). Assume further, however, that Tenant's Share of actual Controllable
Operating Expenses for calendar year 2000 is determined to be $4.40 per square
foot per year (i.e., an increase of only 4% over Tenant's Share of Controllable
Operating Expenses for 1999). In such case, Tenant's Share of Controllable
Operating Expenses for calendar year 2000 could not exceed $4.58 per square foot
per year (i.e. $4.24 x the 1999 actual increase of 4% plus the Carry Over
Increase of 2% for calendar year 2000).
8. Contest Costs; Refunds (Subsection 5.2.5.3). Subsection 5.2.5.3 is
deemed deleted and the following is deemed inserted in place thereof:
5.2.5.3 Contest Costs; Refunds. Any expenses reasonably
incurred by Landlord in attempting to protest, reduce, or
minimize Tax Expenses with the purpose and intent to reduce
Tenant's Share of Tax Expenses shall be included in Tax
Expenses in the Expense Year in which those expenses are paid.
Except for tax refunds resulting from a Proposition 8
reduction under Subsection 5.2.5.6, tax refunds shall be
deducted from Tax Expenses. Such tax refunds shall be deducted
from Tax Expenses in the Expense Year in which they are
received by Landlord.
9. Landlord's Books and Records (Section 5.6). The third sentence of
Section 5.6 is deemed deleted and the following is deemed inserted in place
thereof:
The accountant must be a member of a nationally recognized
accounting firm.
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<PAGE> 5
10. Security Deposit (Section 6.1). The third sentence of Section 6.1 is
deemed deleted. Furthermore, the sixth sentence of Section 6.1 is deemed deleted
and the following is deemed inserted in place thereof:
If Landlord reasonably applies any portion of the Security
Deposit, Tenant shall, within thirty (30) days after demand by
Landlord, deposit with Landlord an amount sufficient to
restore the Security Deposit to its original amount.
11. Asbestos Notification (Section 9.3). Section 9.3 is deemed deleted.
12. Heating and Air Conditioning (Subsection 10.1.1). Upon Tenant's
request, Landlord shall make HVAC service available to the Premises during
non-standard Building Hours. The cost of such non-standard Building Hour HVAC
service shall be paid by Tenant to Landlord, as Additional Rent hereunder, at
Landlord's actual per hour cost which cost shall not exceed $25.00 per hour
during the initial Lease Term. During any extension or renewal of the initial
Lease Term, such services shall provided to Tenant at Landlord's actual cost
without regard to a maximum per hour charge.
13. Electricity (Subsection 10.1.2). The following is deemed added as the
last sentence of Subsection 10.1.2:
In addition to the foregoing, Landlord shall provide
sufficient connected electrical load to the Premises to
operate computers and air conditioning systems to be installed
in the Computer Room Landlord is to construct within the
Premises in accordance with Exhibit C attached to this Lease.
14. Janitorial Services (Subsection 10.1.4). The last sentence of
Subsection 10.1.4 is deemed deleted and the following is deemed inserted in
place thereof:
Such janitorial service shall include cleaning of interior
windows and kitchens within the Premises and exercise and
shower facilities located within the Common Areas of the
Building.
15. Interruption of Utilities (Section 10.3). The following is deemed added
as the last sentence of Section 10.3:
Landlord covenants and agrees to exercise commercially
reasonable efforts to promptly resolve any such failure,
delay, or diminution of any utility service and to restore
Tenant's access thereto as soon as possible.
16. Tenant's Repair and Maintenance Obligations (Section 11.1). The fourth
sentence of Section 11.1 is deemed deleted and the following is deemed inserted
in place thereof:
At Landlord's option or if Tenant fails to make such repairs,
Landlord may, but need not, make the repairs and replacements.
On receipt of an invoice from Landlord, and provided such
repairs and replacements were not necessary as a result of the
negligence or willful misconduct of Landlord, its agents,
employees, or contractors, Tenant shall pay Landlord
Landlord's out of pocket costs incurred in connection with
such repairs and replacements plus a reasonable amount to
reimburse Landlord for all overhead, general conditions, fees,
and other costs and expenses arising from Landlord's
involvement with such repairs and replacements.
Page 5 of 12
<PAGE> 6
17. Landlord's Repair and Maintenance Obligations (Section 11.2). The
following is deemed added to the end of Section 11.2:
Notwithstanding anything contained to the contrary in Section
11.1 above or this Section 11.2, Tenant shall have the limited
right to make emergency repairs to the Premises subject to
Tenant's good faith effort to first notify Landlord of the
need for such repairs and thereafter allowing Landlord a
reasonable period of time within which to make the emergency
repairs. If Tenant performs any emergency repairs, the repairs
shall be made only to the extent necessary to prevent or
minimize imminent injury or harm to persons or property in or
about the Premises or to permit Tenant to continue to or to
re-commence the conduct of business in the Premises and
Landlord shall, within thirty (30) days of Landlord's receipt
of an invoice therefor, reimburse Tenant for all costs and
expenses reasonably incurred and actually paid by Tenant in
connection therewith. Tenant shall have no right to offset or
deduct the amount of such emergency repairs from any Basic
Rent, Additional Rent or other amount owed Landlord under this
Lease.
18. Consent Procedure; Conditions (Subsection 12.1.1). Subsection 12.1.1 is
deemed deleted and the following is deemed inserted in place thereof:
12.1.1 Consent Procedure; Conditions. Tenant shall request
such consent by written notice to Landlord, which must be
accompanied by detailed and complete plans and specifications
for the proposed work. As a condition of its consent to
Alterations, Landlord may impose any reasonable requirements
that Landlord considers desirable, including a requirement
that Tenant provide Landlord with a surety bond, a letter of
credit, or other financial assurance that the cost of the
Alterations will be paid when due but only to the extent that
such costs exceed the amount of the Security Deposit then on
deposit with Landlord.
19. Payment for Improvements (Section 12.4). Subsection (c) of Section 12.4
is deemed deleted.
20. Exculpation (Subsection 14.2.1). The last sentence of Subsection 14.2.1
is deemed deleted and the following is deemed inserted in place thereof:
This exculpation clause shall not apply to claims against
Landlord Parties to the extent that a final judgment of a
court of competent jurisdiction establishes that the injury,
loss, damage, or destruction was proximately caused by
Landlord Parties' negligence, fraud, willful injury to person
or property, or violation of law.
21. Tenant's Acknowledgement of Fairness (Section 14.2.3). Subsection
14.2.3 is deemed deleted.
22. Indemnification (Section 14.3). The following is deemed added to the
Lease as Subsections 14.3.9:
14.3.9 Landlord's Indemnification of Tenant. Because Landlord
is required to maintain insurance on the Building and Tenant
compensates Landlord for such insurance as part of Tenant's
Share of Operating Expenses and because of the waivers of
subrogation in section 14.10, Landlord shall, with counsel
reasonably acceptable to Tenant,
Page 6 of 12
<PAGE> 7
indemnify, defend, and hold harmless Tenant Parties from and
against all Claims for injury to or death of persons or
damage to property outside the Premises to the extent that
such Claims are covered by such insurance (or would have
been covered had Landlord carried the insurance required
under this Lease), even if resulting from the negligent
acts, omissions, or willful misconduct of Tenant Parties. In
addition, Landlord shall, with counsel reasonably acceptable
to Tenant, indemnify, defend, and hold harmless Tenant
Parties from and against all Claims resulting from the
negligent acts, omissions, or willful misconduct of Landlord
Parties in connection with Landlord Parties' activities in,
on, or about the Project or Building, except to the extent
that such Claim is for damage to the Tenant Improvements and
Tenant's personal property, fixtures, furniture, and
equipment in the Premises and is covered by insurance that
Tenant is required to obtain under this Lease (or would have
been covered had Tenant carried the insurance required under
this Lease).
23. "Per Location" Endorsement (Subsection 4.5.11). Subsection 14.5.11 is
deemed deleted and the following inserted in place thereof:
If, at anytime during the Term of this Lease, Tenant's primary
liability coverage is less than $2,000,000.00, Tenant shall,
at Tenant's sole expense, procure a "per location" endorsement
or equivalent reasonably acceptable to Landlord so that the
general aggregate and other limits apply separately and
specifically to the Premises.
24. Tenant's Property Insurance (Subsection 14.7.1). Subsection 15.4.7.1
(b) is deemed deleted.
25. Landlord's Option to Terminate or Repair (Section 15.2). In the first
sentence of Section 15.2, the words "sixty (60) days" are deemed deleted and the
words "thirty (30) days" are deemed inserted in place thereof.
26. Landlord's Option to Terminate (Section 15.3). In the first sentence of
Section 15.3, the words "two hundred and seventy (270)" are deemed deleted and
the words "one hundred eighty (180)" are deemed inserted in place thereof.
27. Tenant's Option to Terminate (Section 15.4). In the first sentence of
Section 15.3, the words "two hundred and seventy (270)" are deemed deleted and
the words "one hundred eighty (180)" are deemed inserted in place thereof.
28. Landlord's Right to Terminate (Section 16.3.3). The first sentence of
Subsection 16.3.3 is deemed deleted and the following is deemed inserted in
place thereof:
Landlord shall have the option to terminate this Lease if: (a)
twenty-five percent (25%) or more of the Rentable Square Feet
of the Building or the Premises is taken through Condemnation;
(b) any portion of the Building or Project necessary for
Landlord to operate the Building efficiently is taken through
Condemnation; or (c) any other areas providing access to the
Premises or Building are taken through Condemnation.
Page 7 of 12
<PAGE> 8
29. Landlord's Consent (Section 17.3). The following is deemed added as
Subsection 17.3.4 of the Lease:
17.2.4 Disputes Regarding Assignment and Subletting.
17.2.4.1 Arbitration. Subject to the limitations
contained in Subsection 17.3.3 above, any dispute regarding a
requested assignment of this Lease or a requested subletting
of all or any portion of the Premises shall be resolved, at
the option of Landlord or Tenant, by neutral binding
arbitration before a single arbitrator, to be held in
accordance with the real estate rules of the American
Arbitration Association. Judgment on the award rendered by the
arbitrator may be entered in any Court having jurisdiction
over the dispute. The Arbitrator shall be an attorney familiar
with handling commercial lease matters. Hearings shall be held
in the City of San Diego, California or other venue determined
by mutual agreement of the parties.
17.2.4.2 Demand and Limitations on Claims. Any demand
for arbitration must be made in writing to the other party and
the American Arbitration Association. No demand for
arbitration may be made after the date on which the
institution of legal proceedings based on the dispute is
barred by the applicable statute of limitations.
17.2.4.3 Provisional Remedies. The parties shall each
have the right to file with a court of competent jurisdiction
an application for temporary or preliminary injunctive relief
or temporary protective order, if the arbitration award to
which the applicant may be entitled may be rendered
ineffectual in the absence of such relief or id there is no
other adequate remedy. This application shall not waive a
party's arbitration rights hereunder.
17.2.4.4 Powers and Duties of Arbitrator. The
arbitrator shall have the power to grant declaratory or
equitable relief only and shall not have the power to award
damages. The arbitrator shall prepare and provide to the
parties a written decision on all matters subject to the
arbitration, including factual findings and the reasons that
form the basis of the arbitrators decision. The arbitrator
shall not have the power to commit errors of law or legal
reasoning, and the decision of the arbitrator shall be vacated
or corrected for any such error or on any other grounds
specified in Code of Civil Procedure section 1286.2 or section
1286.6. The decision of the arbitrator shall be mailed to the
parties no later than thirty (30) days after the close of the
arbitration hearing. The arbitration proceedings shall be
reported by a certified shorthand court reporter. Written
transcripts of the proceedings shall be prepared and made
available to the parties.
17.2.4.5 Discovery/Evidence/Costs. The parties shall
have the right to discovery in accordance with Code of Civil
Procedure sections 1283.05 and 1283.1 as long as the
arbitrator's permission shall not be required to take a
discovery deposition. All discovery disputes shall be resolved
by the arbitrator. The provisions of the California Evidence
Code shall apply to the arbitration hearing. Costs and fees
Page 8 of 12
<PAGE> 9
of the arbitrator shall be borne by the non-prevailing party
unless the arbitrator for good cause determines otherwise. The
prevailing party shall be awarded reasonable attorney fees,
expert and non-expert witness expenses, and other costs and
expenses incurred in connection with the arbitration.
17.2.4.6 Notice. BY INITIALING IN THE SPACE BELOW,
YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF A
REQUESTED ASSIGNMENT OF THIS LEASE OR A REQUESTED SUBLETTING
OF ALL OR A PORTION OF THE PREMISES DECIDED BY NEUTRAL
ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING
UP ANY RIGHTS YOU MAY HAVE OR POSSESS TO HAVE THE DISPUTE
LITIGATED IN A COURT OR JURY TRIAL. BY INITIALLING BELOW, YOU
ARE GIVING UP JUDICIAL RIGHT TO DISCOVERY AND APPEAL, UNLESS
THOSE RIGHTS ARE SPECIFICALLY INCLUDED HEREIN. IF YOU REFUSE
TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU
MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE
CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS
ARBITRATION PROVISION IS VOLUNTARY. I/WE HAVE READ AND
UNDERSTOOD THE FOREGOING AND AGREE TO BE SUBMIT DISPUTES
DESCRIBED HEREIN TO NEUTRAL ARBITRATION.
-------------------- -----------------
Landlord's Initials Tenant's Initials
30. Transfer Premium (Subsection 17.4.1). The first sentence of Subsection
17.4.1 is deemed deleted and the following is deemed inserted in place thereof:
As a reasonable condition to Landlord's consent to any
Transfer, Tenant shall pay to Landlord twenty-five percent
(25%) of any Transfer Premium, as defined in this Subsection
17.4.1.
31. Restrictions on Marketing the Space (Section 17.8). Section 17.8 is
deemed deleted.
32. Late Charge (Section 24.1). The first sentence of Section 24.1 is
deemed deleted and the following is deemed inserted in place thereof:
If any Rent payment is not received by Landlord or Landlord's
designee within five (5) days after that Rent is due, Tenant
shall pay to Landlord a late charge equal to the greater of
One Hundred Dollars ($100), or eight percent (8%) of the
overdue amount as liquidated damages, in lieu of actual
damages (other than interest under Section 24.2 and attorney
fees and costs under Section 27.1).
33. Landlord's Access to Premises (Section 28.1). The first sentence of
Section 28.1 is deemed deleted and the following is deemed inserted in place
thereof:
Landlord and its agents and employees shall have the right,
following reasonable advance written notice to Tenant, to
enter the Premises to: (a) inspect the Premises; (b) show the
Premises to prospective purchasers, mortgagees, or tenants or
to ground lessors or underlying lessors; (c) serve, post, and
keep posted notices required by law or that Landlord considers
necessary for the protection of Landlord or the Building; or
(d) make repairs, replacements, alterations, or improvements
to the Premises or Building that Landlord considers necessary
or desirable.
Page 9 of 12
<PAGE> 10
34. Tenant's Waiver (Section 28.2). Section 28.2 is deemed deleted and the
following is deemed inserted in place thereof:
Subject to the provision of Section 28.1 above, Landlord may
enter the Premises without the abatement of Rent and may take
steps to accomplish the stated purposes. Tenant waives any
claims for damages caused by Landlord's entry, including
damage claims for: (a) injuries; (b) inconvenience to or
interference with Tenant's business; (c) lost profits; and (d)
loss of occupancy or quiet enjoyment of the Premises.
35. Nontransferable Passes (Section 30.4). Section 30.4 is deemed deleted
and the following is deemed inserted in place thereof:
30.4 Nontransferable Passes. The parking passes granted by
Landlord to Tenant under this Article 30 are provided to
Tenant solely for use by Tenant's personnel (not including
Tenant's invitees and guests). These passes may not be
transferred, assigned, subleased, or otherwise alienated by
Tenant without Landlord's prior approval.
36. Building Name; Tenant's Signage Rights (Subsection 29.1). Landlord
agrees that, for so long as Tenant leases and occupies the Premises, and
provided Tenant shall not be in default under this Lease, Tenant shall have the
right to place one (1) top parapet level exterior tenant identification sign on
the Southwest fascia of the Building and one (1) top parapet level tenant
identification sign on the Southeast fascia of the Building (collectively, the
"Parapet Signs"). Landlord shall have the right to review and approve the
design, dimensions, construction and exact location of the Parapet Signs prior
to their fabrication or installation on the Building. Tenant's rights hereunder
are further conditioned upon (i) the Parapet Signs being permitted by applicable
code, ordinance, statute, rule or regulation or by any action or rule of any
governmental authority having jurisdiction over such matters, and (ii) all
consents necessary from all governmental authorities having jurisdiction over
such matters having been obtained by Tenant.
Tenant will bear the entire cost associated with creating, designing,
manufacturing, and installing the Parapet Signs and all costs of illuminating
(if Tenant chooses to illuminate the Parapet Signs), operating, maintaining and
insuring the Parapet Signs ("Lighting Cost"). If any Lighting Cost is invoiced
to Landlord, such cost shall become Additional Rent due upon invoice therefrom
by Landlord. Upon the expiration or earlier termination of this Lease or
Tenant's right to possession of the Premises Tenant shall, at Tenant's sole cost
and expense, cause the Parapet Signs to be removed and shall repair and restore
those portions of the Building affected by the installation or removal of the
Parapet Signs, to the condition existing prior to their installation or to a
condition otherwise satisfactory to Landlord. Tenant acknowledges and agrees
that Landlord shall have the right to grant other tenants of the Building or
Project the right to install signage on the exterior of the Building or other
buildings within the Project.
37. Subordination, Non-disturbance, and Attornment (Article 21). Landlord
agrees that, concurrently with execution of this Lease, it will exercise
commercially reasonable efforts to provide Tenant with non-disturbance
agreements in favor of Tenant from any ground lessors, mortgage holders or lien
holders then in existence. Landlord also agrees to exercise commercially
reasonable efforts to provide Tenant with non-disturbance agreements in favor of
Tenant from any ground lessors, mortgage holders or lien holders of Landlord who
later come into existence at any time during the Lease Term. All such agreements
shall provide that as long as Tenant is not in default of the provisions of this
Lease, this Lease shall remain in effect, notwithstanding a judicial foreclosure
or sale in lieu of foreclosure.
Page 10 of 12
<PAGE> 11
38. Number of Parking Passes (Section 30.1). Section 30.1 is deemed deleted
and the following is deemed inserted in place thereof:
30.1 Parking Passes/Parking Management Plan. Tenant shall
receive parking passes for the number of parking spaces set
forth Summary of Basic Lease Information Section 12. At
Tenant's request, Landlord will design, implement and
administer a transportation and parking plan ("Transportation
and Parking Plan") to assist Tenant with its higher than
allocated parking requirements. Landlord contemplates that the
Transportation and Parking Plan may initially involve a valet
service and/or a shuttle service during peak hours to and from
offsite parking areas such as the Carmel Valley Coaster depot
or CalTrans Park and Ride location. The cost of designing,
implementing, administering and operating the Transportation
and Parking Plan shall be borne by Tenant and other users who
make arrangements through Tenant to utilize such services.
39. Construction Drawings for the Premises (Exhibit C, Section 1). Section
1 of Exhibit C is deemed deleted and the following is deemed inserted in place
thereof:
Landlord shall construct the improvements in the Premises (the
"Tenant Improvements") pursuant to those certain plans and
specifications prepared by Smith Consulting Architects dated
February 20, 1997, consisting of Sheet TS 1 dated March 26,
1997, Sheet TS 2 dated February 13, 1997, Sheet A1.1 dated
March 26, 1997, Sheet A1.2 dated March 26, 1997, Sheet A2.1
dated March 24, 1997, Sheet A2.2 dated March 24, 1997, Sheet
A3 dated March 25, 1997, Sheet A4 dated March 21, 1997, Sheet
A5 dated March 21, 1997, Sheet A6 dated March 25, 1997,
Building Standard Tenant Improvement Finishes dated February
20, 1997, pages 1 through 9 and that certain document
describing additional work to be performed by Landlord in the
Computer Room and 3rd Floor File Storage Room, which document
is attached hereto and made a part hereof as Exhibit C-1
(collectively, the "Approved Plans and Specifications").
Tenant shall make no changes or modifications to the Approved
Plans and Specifications without the prior written consent of
Landlord, which consent may be withheld in Landlord's
reasonable discretion if such change or modification would
directly or indirectly delay the "Substantial Completion," as
that term is defined in Section
Page 11 of 12
<PAGE> 12
4.1 of this Tenant Work Letter Agreement, of the Premises or
increase the cost of designing or constructing the Tenant
Improvements.
40. Tenant's Agents (Section 5.4, Exhibit C). A period (.) is deemed placed
after the word "Project" and the balance of Section 5.4 of Exhibit C is deemed
deleted.
41. Effectiveness of Lease. Except as and to the extent modified by this
Addendum, all provisions of the Lease shall remain in full force and effect.
LANDLORD TENANT
American Assets, Inc., ACC Consumer Finance Corporation,
a California corporation a Delaware corporation
By: /s/ JOHN W. CHAMBERLAIN By: /s/ GARY S. BURDICK
------------------------------------- ------------------------------
Name: John W. Chamberlain Name: Gary S. Burdick
Title: Chief Executive Officer Title: President
By:
------------------------------
Name:
----------------------
Title:
---------------------
Page 12 of 12
<PAGE> 1
Exhibit 11
Computation of Weighted Average Shares Outstanding
A) Weighted average shares used to calculate primary earnings per share:
<TABLE>
<CAPTION>
THREE-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30, 1997 JUNE 30, 1996
------------- -------------
<S> <C> <C>
Beginning Shares outstanding...............................8,476,978 6,292,478
Issuance of Common Stock............................... - 857,143
Employee Stock Options
Treasury Stock Method............................. 78,745 7,777
Exercise of Employee Stock
options........................................... 1,269 -
--------- ---------
Weighted average shares outstanding........................8,556,992 7,157,398
========= =========
</TABLE>
<TABLE>
<CAPTION>
SIX-MONTH SIX-MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30, 1997 JUNE 30, 1996
------------- -------------
<S> <C> <C>
Beginning Shares outstanding...............................8,292,478 6,110,479
Issuance of Common Stock............................. 145,577 428,571
Issuance of Preferred Stock
As if converted from beginning of all
periods presented (SAB No. 83)...................... - 181,999
Employee Stock Options
Treasury Stock Method............................ 78,400 3,889
Exercise of Employee Stock options.................... 7,168 -
--------- ---------
Weighted average shares outstanding........................8,523,623 6,724,938
========= =========
</TABLE>
B) Weighted average shares used to calculate fully-diluted earnings per share:
<TABLE>
<CAPTION>
THREE-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30, 1997 JUNE 30, 1996
------------- -------------
<S> <C> <C>
Beginning Shares outstanding...............................8,476,978 6,292,478
Issuance of Common Stock.............................. - 857,143
Employee Stock Options
Treasury Stock Method............................ 104,409 31,095
Exercise of Employee Stock
options......................................... 1,269 -
--------- ---------
Weighted average shares outstanding........................8,582,656 7,180,716
========= =========
</TABLE>
<TABLE>
<CAPTION>
SIX-MONTH SIX-MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30, 1997 JUNE 30, 1996
------------- -------------
<S> <C> <C>
Beginning Shares outstanding...............................8,292,478 6,110,479
Issuance of Common Stock................................145,577 428,571
Issuance of Preferred Stock
As if converted from beginning of all
periods presented (SAB No. 83)...................... - 181,999
Employee Stock Options
Treasury Stock Method............................ 91,231 15,547
Exercise of Employee Stock options.................... 7,169 -
--------- ---------
Weighted average shares outstanding........................8,536,455 6,736,596
========= =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 18,122,673
<SECURITIES> 6,328,000
<RECEIVABLES> 3,449,157
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 44,510,821
<PP&E> 2,371,709
<DEPRECIATION> (901,532)
<TOTAL-ASSETS> 96,921,828
<CURRENT-LIABILITIES> 41,769,887
<BONDS> 19,163,378
0
0
<COMMON> 21,668,948
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 96,921,828
<SALES> 0
<TOTAL-REVENUES> 22,668,101
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (11,380,773)
<LOSS-PROVISION> (481,196)
<INTEREST-EXPENSE> (2,878,551)
<INCOME-PRETAX> 7,927,581
<INCOME-TAX> (3,330,000)
<INCOME-CONTINUING> 4,597,581
<DISCONTINUED> 0
<EXTRAORDINARY> (1,037,827)
<CHANGES> 0
<NET-INCOME> 3,559,754
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.42
</TABLE>
