<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
---------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER: 28050
ONYX ACCEPTANCE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 33-0577635
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8001 IRVINE CENTER DRIVE, 5TH FLOOR
IRVINE, CA. 92618
(949) 790-5400
(Address and telephone number of principal executive offices)
---------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
As of November 10, 1998, there were 6,168,754 shares of registrant's
Common Stock, par value $.01 per share outstanding.
================================================================================
<PAGE> 2
ONYX ACCEPTANCE CORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Financial Condition at September 30, 1998 and
December 31, 1997 ............................................................................ 3
Condensed Consolidated Statements of Income for the three months and nine months ended
September 30, 1998 and September 30, 1997 .................................................... 4
Condensed Consolidated Statements of Cash Flows for the nine months ended
September 30, 1998, and September 30, 1997.................................................... 5
Notes to Condensed Consolidated Financial Statements ............................................ 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ........... 8
PART II. OTHER INFORMATION
Item 5. Other Information ...............................................................................16
Item 6. Exhibits and Reports on Form 8-K ................................................................21
SIGNATURES ...............................................................................................22
EXHIBIT INDEX ............................................................................................23
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ONYX ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash & cash equivalents........................... $ 5,771,881 $ 991,010
Trust receivables ................................ 33,943,061 27,628,619
Contracts held for sale (Net of allowance) ....... 125,345,160 64,342,309
Retained interest in securitized assets .......... 72,715,609 48,838,815
Other assets ..................................... 6,475,773 4,767,490
------------ ------------
Total assets ................................. $244,251,484 $146,568,243
============ ============
LIABILITIES
Accounts payable ................................. $ 12,881,739 $ 8,458,147
Debt ............................................. 174,977,933 91,508,209
Other liabilities ................................ 11,692,430 6,046,395
------------ ------------
Total liabilities ............................ 199,552,102 106,012,751
EQUITY
Common stock
Par value $.01 per share; authorized
15,000,000 shares; issued and outstanding
6,168,754 as of September 30, 1998 and
issued and outstanding 6,017,635 as of
December 31, 1997 ............................ 61,687 60,176
Paid in capital .................................. 37,841,627 37,810,158
Retained earnings ................................ 6,796,068 2,685,158
------------ ------------
Total equity ................................. 44,699,382 40,555,492
------------ ------------
Total liabilities and equity ................. $244,251,484 $146,568,243
============ ============
</TABLE>
See the accompanying notes to the condensed consolidated financial statements.
3
<PAGE> 4
ONYX ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES:
Finance Revenue ................. $ 7,001,062 $ 3,659,736 $16,703,145 $ 8,807,440
Interest Expense ................ 4,213,990 2,096,118 10,651,700 4,981,310
----------- ----------- ----------- -----------
Net Finance Revenue ............. 2,787,072 1,563,618 6,051,445 3,826,130
Provision for Credit Losses ..... 597,957 100,045 1,229,764 604,639
----------- ----------- ----------- -----------
Net Finance Revenue after
Provision for Credit Losses ..... 2,189,115 1,463,573 4,821,681 3,221,491
Gain on Sale of Contracts ....... 11,031,440 6,937,574 29,104,633 15,013,786
Service Fee Income .............. 2,960,356 1,049,636 7,718,625 6,644,991
EXPENSES:
Salaries and Benefits ....... 7,216,960 4,644,626 19,492,705 12,389,370
Depreciation ................ 565,600 349,515 1,307,918 810,316
Occupancy ................... 500,371 386,517 1,315,224 1,043,791
General and Administrative
Expenses..................... 4,595,279 2,943,706 12,496,254 7,343,420
----------- ----------- ----------- -----------
Total Expenses .................. 12,878,210 8,324,364 34,612,101 21,586,897
----------- ----------- ----------- -----------
Net Income before Taxes ......... 3,302,701 1,126,419 7,032,838 3,293,371
Income Taxes ................ 1,373,923 468,590 2,921,931 1,369,887
----------- ----------- ----------- -----------
Net Income after Taxes .......... $ 1,928,778 $ 657,829 $ 4,110,907 $ 1,923,484
=========== =========== =========== ===========
Net Income per share - Basic .... $ 0.31 $ 0.11 $ 0.67 $ 0.32
Net Income per share - Diluted .. $ 0.30 $ 0.10 $ 0.64 $ 0.30
Basic Shares Outstanding ........ 6,162,374 6,016,471 6,093,198 5,994,696
Diluted Shares Outstanding ...... 6,381,882 6,379,802 6,445,412 6,386,216
</TABLE>
See the accompanying notes to the condensed consolidated financial statements.
4
<PAGE> 5
ONYX ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1998 1997
------------- -------------
(UNAUDITED)
<S> <C> <C>
Net cash used in operating activities ..................... $ (76,587,801) $ (57,483,979)
INVESTING ACTIVITIES:
Purchases of property and equipment .................. (2,411,692) (1,451,371)
------------- -------------
Cash used in investing activities ........... (2,411,692) (1,451,371)
FINANCING ACTIVITIES:
Proceeds from exercise of options/warrants ........... 32,981 57,562
Payments on capital lease obligations ................ (473,577) (370,952)
Proceeds from drawdown on excess
servicing line of credit, net ........................ 15,972,101 18,500,000
Paydown of warehouse lines related
to securitization and sale ........................... (624,456,000) (340,500,000)
Proceeds from warehouse lines ........................ 682,956,181 382,497,213
Proceeds from subordinated debt ...................... 10,000,000 0
Payments in other loans .............................. (251,322) (251,320)
------------- -------------
Net cash provided by financing activities ... 83,780,364 59,932,503
------------- -------------
Increase in cash and cash equivalents ....... 4,780,871 997,153
Cash and cash equivalents at beginning of period .......... 991,010 603,028
------------- -------------
Cash and cash equivalents at end of period .. $ 5,771,881 $ 1,600,181
============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid ............................................. $ 10,453,649 $ 4,818,269
Capital lease additions ................................... $ 132,577 $ 383,139
</TABLE>
See the accompanying notes to the condensed consolidated financial statements.
5
<PAGE> 6
ONYX ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The condensed consolidated financial statements included herein are
unaudited and have been prepared by the Company in accordance with generally
accepted accounting principles for interim financial reporting and Securities
and Exchange Commission regulations. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to the regulations. In the opinion of management, the financial
statements reflect all adjustments (of a normal and recurring nature) which are
necessary to present fairly the financial position, results of operations and
cash flows for the interim periods. Operating results for the three and nine
months ended September 30, 1998 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1998. The condensed
consolidated financial statements should be read in conjunction with the audited
financial statements and footnotes thereto for the year ended December 31, 1997
included in the Company's 1997 Annual Report on Form 10-K and the 10-Q for the
quarters ended June 30, 1998 and March 31, 1998.
USE OF ESTIMATES
In conformity with generally accepted accounting principles, management
utilizes assumptions and estimates that affect the reported value of retained
interest in securitized assets and the gain on sale of Contracts. Such
assumptions include, but are not limited to, estimates of loan prepayments,
defaults, recovery rates and present value discount rates. The Company uses a
combination of its own historical experience, industry statistics and
expectation of future performance to determine such estimates. Actual results
may differ from the Company's estimates due to numerous factors both within and
beyond the control of Company management. Changes in these factors could require
the Company to revise its assumptions concerning the amount of voluntary
prepayments, the frequency and or severity of defaults and the recovery rates
associated with the disposition of repossessed vehicles.
NOTE 2 - CONTRACTS HELD FOR SALE
Contracts held for sale consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- -------------
<S> <C> <C>
Contracts held for sale ......... $ 134,678,766 $ 71,216,278
Less unearned interest .......... 10,097,204 7,835,794
------------- -------------
124,581,562 63,380,484
Allowance for credit losses ..... (915,323) (316,902)
Dealer participation ............ 1,678,921 1,278,727
------------- -------------
Total ........................... $ 125,345,160 $ 64,342,309
============= =============
</TABLE>
NOTE 3 - RETAINED INTEREST IN SECURITIZED ASSETS
Retained interest in securitized assets ("RISA") capitalized upon
securitization of Contracts represents the present value of the estimated future
earnings to be received by the Company from the excess spread created in
securitization transactions. Excess spread is calculated by taking the
difference between the coupon rate of the Contracts sold and the certificate
rate paid to the investors less contractually specified servicing and guarantor
fees and projected credit losses, after giving effect to estimated prepayments.
Prepayment and credit loss assumptions are utilized to project future
earnings and are based on historical experience, industry statistics and
expectation of future performance. All assumptions are evaluated each quarter
and adjusted, if appropriate, to reflect the actual performance of the
Contracts.
6
<PAGE> 7
Future earnings are discounted at a rate management believes to be
representative of market at the time of securitization. The balance of RISA is
amortized against actual retained interest income earned on a monthly basis over
the expected repayment life of the underlying Contracts. RISA is classified in a
manner similar to available for sale securities and as such is marked to market
each quarter. Market value changes are calculated by discounting the remaining
projected excess spread using a current market discount rate. Any changes in the
market value of the RISA are reported as a separate component of other
comprehensive income as an unrealized gain or loss, net of deferred taxes. As of
September 30, 1998 the market value of RISA approximated cost. The Company
retains the rights to service all Contracts it securitizes.
The Company is currently using securitization assumptions that are
consistent with its historical performance, industry statistics and expectation
of future performance. These assumptions are an ABS prepayment speed of 1.75%,
an annualized net credit loss rate of 2.0% and a discount rate of 3.50% over the
pass-through rate.
The following table presents the balances and activity for RISA:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Beginning balance .... $ 48,838,815 $ 29,632,039
Additions ............ 56,678,824 45,940,000
Amortization ......... (32,802,030) (26,733,224)
------------ ------------
Ending balance ....... $ 72,715,609 $ 48,838,815
============ ============
</TABLE>
In initially valuing the RISA, the Company establishes an off balance sheet
allowance for expected future credit losses. The allowance is based upon
historical experience and management's estimate of future performance regarding
credit losses. The amount is reviewed periodically and adjustments are made if
actual experience or other factors indicate that future performance may differ
from management's prior estimates.
The following table presents the estimated net undiscounted retained
interest earnings to be received from securitizations. Estimated net
undiscounted RISA earnings are calculated by taking the difference between the
coupon rate of the Contracts sold and the certificate rate paid to the
investors, less the contractually specified servicing fee of 1.0% and guarantor
fees, after giving effect to estimated prepayments and assuming no losses. To
arrive at the RISA, this amount is reduced by the off balance sheet allowance
established for potential future losses and by discounting to present value.
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
-------------- ------------
<S> <C> <C>
Estimated net undiscounted RISA earnings .... $ 120,312,317 $ 78,579,178
Off balance sheet allowance for losses ...... 40,570,184 24,787,037
Discount to present value ................... 7,026,524 4,953,326
-------------- ------------
Retained interest in securitized assets ..... $ 72,715,609 $ 48,838,815
Outstanding balance of Contracts
sold through securitizations ........... $1,039,551,336 $693,896,100
</TABLE>
Management believes that the off balance sheet allowance for losses is
currently adequate to absorb potential losses in the securitized portfolio.
7
<PAGE> 8
NOTE 4 - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share ("EPS"):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Income .................................... $1,928,778 $ 657,829 $4,110,907 $1,923,484
========== ========== ========== ==========
Weighted average shares outstanding ........... 6,162,374 6,016,471 6,093,198 5,994,696
Net effect of dilutive stock
Options/warrants ............................ 219,508 363,331 352,214 391,520
Diluted weighted average shares outstanding ... 6,381,882 6,379,802 6,445,412 6,386,216
Net income per share:
Basic EPS ..................................... $ 0.31 $ 0.11 $ 0.67 $ 0.32
========== ========== ========== ==========
Diluted EPS ................................... $ 0.30 $ 0.10 $ 0.64 $ 0.30
========== ========== ========== ==========
</TABLE>
NOTE 5 - NEW PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
No. 133"). SFAS No. 133 establishes the accounting and reporting standards for
derivative instruments, and for hedging activities. It requires that an entity
recognizes all derivatives as either assets or liabilities in the statement of
financial position and measures those instruments as fair value.
The Company is presently assessing the presentation and effect of SFAS No.
133 on the financial statements of the Company.
SFAS No. 133 is effective for fiscal years beginning after June 15, 1998.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Onyx Acceptance Corporation (the "Company" or "Registrant") is a
specialized consumer finance company engaged in the purchase, securitization and
servicing of Contracts originated by franchised and select independent
automobile dealerships and to a lesser extent the origination of motor vehicle
loans on a direct basis to consumers (collectively the "Contracts"). The Company
focuses its efforts on acquiring Contracts that are collateralized by late model
used and, to a lesser extent, new automobiles, that are entered into with
purchasers whom the Company believes have a favorable credit profile.
The Company generates revenues primarily through the purchase, origination,
warehousing, subsequent securitization and ongoing servicing of Contracts. The
Company earns net interest income on Contracts held during the warehousing
period. Upon the securitization and sale of Contracts, the Company recognizes a
gain on sale of Contracts, receives future servicing cash flows and earns
servicing fees from the trusts over the life of the related securitization.
RESULTS OF OPERATIONS
NET FINANCE REVENUE
Net finance revenue is the difference between the rate earned on Contracts
and the interest costs associated with the Company's borrowings. Net finance
revenue totaled $2.8 million for the three months ended September 30, 1998
compared to $1.6 million for the same period in 1997. For the nine months ended
September 30, 1998, net finance revenue was $6.1 million as compared to $3.8
million for the same period in 1997. These increases are due to the higher
amounts of average Contracts held for sale during the period.
8
<PAGE> 9
Prior to securitizing Contracts, the Company earns interest income on its
Contracts, pays interest expense to fund the Contracts and absorbs any credit
losses. After securitization, the net earnings are recorded as retained interest
income as a component of servicing income.
PROVISION FOR CREDIT LOSSES
The Company maintains an allowance for credit losses to cover anticipated
losses for Contracts held for sale. The allowance for credit losses is increased
by charging the provision for credit losses and decreased by actual losses on
the Contracts held for sale or by the reduction of the amount of Contracts held
for sale. The level of the allowance is based principally on the outstanding
balance of Contracts held for sale and the historical loss trends for the period
of time the loans are held before being sold in a securitization. When the
Company sells Contracts in a securitization transaction, it reduces its
allowance for credit losses and factors potential losses into its calculation of
gain on sale. The Company believes that the allowance for credit losses is
currently adequate to absorb potential losses. The provision for credit losses
totaled $597,957 for the quarter ended September 30, 1998 compared to $100,045
for the same period in 1997. Provision for credit losses consists of net credit
losses incurred during the period plus future provision for losses reserved
against the net changes in Contracts held for sale during the period. Net credit
losses accounted for $182,358 during the third quarter of 1998 compared to
$125,590 in the third quarter of 1997. The increase in net credit losses was due
to an increase in the average Contracts held for sale in the period. Future
provisions totaled $415,599 and $(25,545) for the third quarter of 1998 and 1997
respectively. Contracts held for sale increased by $24.3 million for the third
quarter of 1998 versus a $4.7 million decrease for the third quarter of 1997.
Provision for credit losses for the nine month period ended September 30, 1998
were $1.2 million compared to $604,639 for the period ended September 30, 1997.
At September 30, 1998, Contracts held for sale were $125.3 million compared to
$64.3 million at December 31, 1997.
GAIN ON SALE OF CONTRACTS
The Company recorded a gain on sale of Contracts of $11.0 million for the
three months ended September 30, 1998 compared to $6.9 million for the same
period of 1997. The increase in the gain on sale is primarily the result of an
increase in Contracts sold. For the nine months ended September 30, 1998, the
Company recorded a gain on sale of $29.1 million compared to a gain on sale of
$15.0 million for the same period in 1997. Contracts sold during the third
quarter of 1998 totaled $250.0 million compared to $149.6 million during the
same period of 1997. Net interest rate spreads, inclusive of all costs,
decreased to 2.64% for the third quarter 1998 securitization vs. 2.70% for the
securitization completed in the third quarter 1997. Interest rate spread is
affected by product mix, general market conditions and overall market interest
rates. The risks inherent in interest rate fluctuation are reduced through
hedging activities. To protect against changes in interest rates, the Company
may hedge Contracts prior to their securitization with forward interest rate
swap agreements. Gains or losses on these forward interest rate swap agreements
are included as part of the basis of the underlying Contracts and recognized
when the Contracts are securitized.
SERVICING INCOME
Servicing fee income includes retained interest income, contractual
servicing income and other fee income. Retained interest income represents
excess spread earned on securitized loans less any losses not absorbed by the
off balance sheet allowance for losses. Retained interest income is dependent
upon the average excess spread on the Contracts sold and the size of the
serviced portfolio. Changes in the amount of prepayments and credit losses may
also affect the amount and timing of retained interest income. Contractual
servicing income is earned at a rate of 1% per annum on the outstanding balance
of Contracts securitized. Other fee income consists primarily of documentation
fees, late charges and deferment fees and is dependent on the number of
Contracts originated and the dollar amount outstanding. Increased competition
may also affect the amount of other fee income that the Company may earn when
originating or servicing Contracts.
Servicing fee income increased to $3.0 million during the third quarter of
1998 from $1.0 million during the same period in 1997 due primarily to higher
contractual service fees related to the growth in the servicing portfolio.
Servicing fee income for the nine month period ended September 30, 1998 was $7.7
million compared to $6.6 million for the like period in 1997.
9
<PAGE> 10
OPERATING EXPENSES
Total operating expenses were $12.9 million for the three months ended
September 30, 1998 compared to $8.3 million for the same period in 1997. The
increase in total operating expenses is primarily attributable to an increase in
the amount of Contracts serviced by the Company. The serviced portfolio
increased to $1.2 billion at September 30, 1998 from $649.6 million at September
30, 1997. Total operating expenses for the nine month period ending September
30, 1998 were $34.6 million compared to $21.6 million for the same period in
1997.
The Company incurred salary and benefit expenses of $7.2 million during the
third quarter of 1998 compared with $4.6 million for the third quarter of 1997,
an increase of 56.5%. This increase is attributable to the incremental staffing
requirements related to the expansion of operations and the growth of the
servicing portfolio. The number of employees at the Company increased from 302
at September 30, 1997 to 499 at September 30, 1998. Salary and benefit expenses
for the nine month period ended September 30, 1998 were $19.5 million compared
to $12.4 million for the nine months ending September 30, 1997.
Depreciation expenses increased to $565,600 for the three months ended
September 30, 1998 compared to $349,515 for the same period of 1997 as the
Company continued to invest in technology and infrastructure. Expansion into new
states resulted in an increase in occupancy costs to $500,371 for the three
months ending September 30, 1998 from $386,517 in the like period in 1997.
General and administrative expenses increased to $4.6 million in the third
quarter of 1998 from $2.9 million in the third quarter of 1997, due primarily to
an increase in the dollar amount of the servicing portfolio.
INCOME TAXES
The Company files federal and state tax returns. The effective tax rates
for the three months and nine months ended September 30, 1998 and 1997 were
41.6%.
FINANCIAL CONDITION
CONTRACTS HELD FOR SALE
Contracts held for sale totaled $125.3 million at September 30, 1998
compared to $64.3 million at December 31, 1997. The balance in the held for sale
portfolio is largely dependent upon the timing of the origination and
securitization of Contracts. The Company completed securitization transactions
of $631.8 million and a whole loan sale of $15.0 million during the nine months
of 1998. The Company plans to continue to securitize Contracts on a regular
basis.
TRUST RECEIVABLES
The excess cash flow generated by Contracts sold to trusts is deposited
into spread accounts by the trustee under the terms of the securitization
transactions. The excess spread is released to the Company after the spread
accounts reach a predetermined funding level. Amounts due from trusts represent
funds due to the Company not yet released from the spread accounts. The amounts
due from trusts at September 30, 1998 were $33.9 million as compared with $27.6
million at year-end 1997. The increase in accounts due from trusts is a result
of the increased amount of loans sold.
10
<PAGE> 11
The following table illustrates the changes in the Company's Contract
acquisition volume, securitization activity and servicing portfolio during the
past five fiscal quarters:
SELECTED QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED
--------------------------------------------------------------------
SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1997 1997 1998 1998 1998
-------- -------- -------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Contracts purchased/originated during period .. $152,334 $182,310 $218,204 $ 229,660 $ 286,470
Average monthly volume during period .......... 50,778 60,770 72,735 76,553 95,490
Gain on sale of Contracts ..................... 6,938 7,809 8,667 9,406 11,031
Contracts securitized during period ........... 149,600 166,000 173,000 208,759 250,000
Contracts sold during period .................. 0 0 15,000 0 0
Servicing portfolio at period end ............. 649,563 757,277 884,692 1,009,246 1,176,153
</TABLE>
ASSET QUALITY
With the continued expansion of the Company in the eastern United States
and the significant growth in the existing branches, the Company undertook a
project to centralize and improve its servicing and collection process. The
Company believes that a centralized group is efficient and effective, and
assures that collection practices and policies are applied consistently
throughout the Company. Management continues to rely on the use of current
technology such as predictive dialers utilizing automated processing for
contacting delinquent borrowers, including a payment system that allows
electronic payment on delinquent accounts to be applied the same day as the
contact with the borrower. Over the past few quarters, management has focused on
the hiring, training and retention of a centralized collection staff. During the
third quarter of 1998 the Company continued to realize some of the benefits of
the centralization and training of the collection department. At September 30,
1998, delinquencies for the servicing portfolio represented 2.02% of the amount
of Contracts in the Company's servicing portfolio or $23.8 million as compared
to 2.51% at December 31, 1997 or $19.0 million. Loan losses for the servicing
portfolio as a percentage of average serviced loans outstanding decreased to
1.72% during the quarter compared to 2.16% for the third quarter of 1997.
DELINQUENCY EXPERIENCE OF SERVICING PORTFOLIO
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------------ ---------------------
AMOUNT NO. AMOUNT NO.
---------- ------- -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Servicing portfolio ............. $1,176,153 115,151 $757,277 73,502
Delinquencies(1)(2)
31-59 days ......... 15,565 1,643 11,902 1,211
60-89 days ......... 4,114 413 3,370 346
90+ days ........... 4,103 383 3,743 316
---------- ------- -------- ------
Total ........................... $ 23,781 2,439 $ 19,015 1,873
Total delinquencies as a
percent of Servicing portfolio .. 2.02% 2.12% 2.51% 2.55%
</TABLE>
(1) Delinquencies include principal amounts only.
(2) The period of delinquency is based on the number of days payments are
contractually past due.
11
<PAGE> 12
LOAN LOSS EXPERIENCE OF SERVICING PORTFOLIO
<TABLE>
<CAPTION>
FOR THE NINE MONTH PERIOD FOR THE QUARTERS ENDED
ENDED SEPTEMBER 30, SEPTEMBER 30,
-------------------------- --------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Period end Contracts outstanding ...... $1,176,153 $ 649,563 $1,176,153 $ 649,563
Average servicing portfolio(1) ........ $ 945,077 $ 518,898 $1,083,919 $ 606,412
Number of gross charge-offs ........... 2,740 1,466 984 603
Gross charge-offs ..................... $14,827 $8,987 $5,453 $3,679
Net charge-offs ....................... $12,576 $7,881 $4,659 $3,270
Annualized net charge-offs as a percent
of average Servicing portfolio ...... 1.77% 2.03% 1.72% 2.16%
</TABLE>
(1) Average is based on daily balances.
(2) Net charge-offs are gross charge-offs minus recoveries of Contracts
previously charged off.
12
<PAGE> 13
THE FOLLOWING TABLE ILLUSTRATES THE MONTHLY PERFORMANCE OF EACH OF THE
SECURITIZED POOLS OUTSTANDING FOR THE PERIOD FROM THE DATE OF SECURITIZATION
THROUGH SEPTEMBER 30, 1998:
<TABLE>
<CAPTION>
MONTH 95-1 96-1 96-2 96-3 96-4 97-1 97-2 97-3 97-4 98-1 98-A 98-B
- ----- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 0.00% 0.00% 0.01% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2 0.01% 0.03% 0.07% 0.02% 0.02% 0.00% 0.00% 0.00% 0.00% 0.01% 0.01%
3 0.02% 0.05% 0.20% 0.07% 0.05% 0.03% 0.02% 0.02% 0.01% 0.02% 0.03%
4 0.02% 0.11% 0.33% 0.16% 0.14% 0.06% 0.07% 0.09% 0.04% 0.08% 0.07%
5 0.05% 0.23% 0.46% 0.43% 0.24% 0.13% 0.22% 0.13% 0.11% 0.14%
6 0.06% 0.40% 0.78% 0.54% 0.38% 0.26% 0.32% 0.24% 0.20% 0.24%
7 0.08% 0.69% 0.98% 0.74% 0.53% 0.37% 0.59% 0.36% 0.28% 0.40%
8 0.10% 0.82% 1.15% 0.97% 0.81% 0.52% 0.80% 0.47% 0.43%
9 0.21% 0.93% 1.39% 1.13% 0.98% 0.60% 0.91% 0.62% 0.55%
10 0.24% 1.15% 1.52% 1.32% 1.18% 0.76% 1.07% 0.73% 0.72%
11 0.29% 1.25% 1.69% 1.47% 1.43% 0.92% 1.26% 0.81%
12 0.41% 1.47% 1.94% 1.60% 1.63% 1.02% 1.42% 0.94%
13 0.55% 1.65% 2.08% 1.77% 1.73% 1.13% 1.58% 1.10%
14 0.70% 1.79% 2.34% 1.94% 1.87% 1.23% 1.68%
15 0.83% 2.02% 2.52% 2.09% 2.07% 1.40% 1.80%
16 0.98% 2.25% 2.76% 2.27% 2.23% 1.56% 1.97%
17 1.06% 2.43% 2.89% 2.42% 2.33% 1.68%
18 1.11% 2.59% 3.10% 2.57% 2.49% 1.75%
19 1.27% 2.77% 3.14% 2.70% 2.62% 1.85%
20 1.37% 2.93% 3.30% 2.83% 2.73%
21 1.41% 3.06% 3.47% 2.94% 2.84%
22 1.54% 3.15% 3.60% 3.00% 2.93%
23 1.59% 3.21% 3.70% 3.08%
24 1.69% 3.28% 3.81% 3.17%
25 1.76% 3.40% 3.93% 3.28%
26 1.83% 3.43% 4.06%
27 1.86% 3.55% 4.13%
28 1.97% 3.60% 4.22%
29 2.01% 3.73% 4.23%
30 2.08% 3.75%
31 2.13% 3.79%
32 2.16% 3.85%
33 2.26% 3.88%
34 2.27%
35 2.28%
36 2.28%
37 2.30%
38 2.28%
39 2.28%
40 2.26%
41 2.26%
42 2.25%
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company requires substantial cash and capital resources to operate its
business. Its primary uses of cash include: (i) acquisition of Contracts; (ii)
payments of dealer participation; (iii) securitization costs, (iv) settlements
of hedging transactions; (v) operating expenses; and (vi) interest expense. The
capital resources available to the Company include: (i) interest income during
the warehousing period; (ii) servicing fees; (iii) releases from spread
accounts; (iv) settlements of hedging transactions; (v) sales of Contracts in
securitizations; and (vi) borrowings under its credit facilities. Management
believes that the resources available to the Company provide the needed capital
to fund the expansion of the Company, Contract purchases, and investments in
origination and servicing capabilities.
13
<PAGE> 14
Cash used in operating activities was $76.6 million for the nine months
ended September 30, 1998, compared to $57.5 million used in the nine months
ended September 30, 1997. The increase in cash used in operating activities was
attributable to the fact that for the nine month period ended September 30,
1998, Contract purchases exceeded Contracts sold in sales and securitizations by
$87.6 million. Cash used in investing activities was $2.4 million for the
quarter ended September 30, 1998 compared to $1.5 million for the quarter ended
September 30, 1997. A reduction in the use of the Company's capital lease lines
contributed to the increase in investing activities. Cash provided by financing
activities was $83.8 million for the quarter ended September 30, 1998, compared
to $59.9 million for the quarter ended September 30, 1997. Proceeds from
subordinated debt along with an increase in the issuance of commercial paper,
net of pay downs related to securitization and sale, contributed to the change
in cash provided by financing activities.
Warehouse Lines
The Company's wholly owned special purpose subsidiary, Onyx Acceptance
Financial Corporation ("OAFC"), is party to a $325 million auto loan warehouse
program (the "CP Facility") with Triple-A One Funding Corporation ("Triple-A").
Triple-A is a commercial paper asset-backed conduit lender sponsored by MBIA
Insurance Corporation ("MBIA"). This facility provides funds to purchase
Contracts and was increased during the third quarter from $245 million to $325
million. The advance rate to OAFC is 98% of adjusted eligible principal balance
of each Contract. This lending facility was extended in the third quarter and
will expire in September 2001.
The Company, through another finance subsidiary, Onyx Acceptance Funding
Corporation ("Fundco") holds a $100 million line with Merrill Lynch Mortgage
Capital, Inc. ("MLMCI") (the "Merrill Line") which provides funding for the
purchase and origination of Contracts. The Merrill Line provides an advance rate
of approximately 95% of the principal balance of the Contracts that are used for
collateral. The interest rate is based on LIBOR. The Merrill Line has a term of
one year and matures in February 1999.
Residual Facilities
The Company has a $45 million residual facility with State Street Bank,
BankBoston, and The Travelers Insurance Company (the "Residual Facility") under
which the Company may (subject to borrowing base availability) borrow for
working capital purposes. Under the term of the Residual Facility, the available
borrowings are determined by a collateral based formula of a percentage of the
value of the excess cash flow to be received from certain securitizations and
trust receivables. The Residual Facility converts from revolving loans to
fully-amortizing two-year term loans on June 12, 1999 or earlier, upon the
occurrence of certain "credit triggers".
Fundco has two $50 million residual facilities with MLMCI and Salomon
Brothers Realty Corp., ("SBRC") respectively, (the "Residual Lines "). The
Residual Lines are used by the Company to finance operating requirements. The
amounts available for borrowing under each line are determined using a
collateral based formula of a percentage of the value of excess cash flow to be
received from certain securitizations, and, with respect to the MLMCI facility,
a percentage of the amount of the Merrill Line outstanding on a quarterly basis.
The interest rates are based on LIBOR and the Residual Lines have a term of one
year. The facility provided by MLMCI matures in February 1999; the facility
provided by SBRC matures in September 1999.
The Company during the first quarter of 1998, completed a $10.0 million
subordinated debt offering. The term of the debt is for two years ending
February 27, 2000, with an option by the Company to extend the term by three
years during which the loan would fully amortize. The debt bears a fixed
interest rate of 9.5%.
SECURITIZATIONS AND LOAN SALES.
In September, 1998, the Company consummated a securitization in the amount
of $250.0 million compared to $149.6 million in the third quarter of 1997. The
dollar weighted average investor rate for the third quarter 1998 securitization
was 5.78% and a net interest rate spread inclusive of all costs of 2.64% as
compared to a dollar weighted average investor rate of 6.35% and a net interest
rate spread inclusive of all costs of 2.70% for the securitization completed in
the third quarter 1997. For the nine month period ended September 30, 1998, the
Company securitized and sold a total of $646.8 million of Contracts. Of this
total, $631.8 million were securitized, while $15.0 million were sold on a whole
loan basis, with servicing retained. For the nine months ended September 30,
1998, the Company recorded a gain on sale of $29.1 million on total sales and
securitizations of $646.8 million as compared to a gain on sale of $15.0 million
with securitizations totaling $361.3 million for the first nine months of 1997.
14
<PAGE> 15
The Contracts originated and held by the Company during the warehousing
period are all fixed rate and accordingly, the Company has exposure to changes
in interest rates. The Company is able through the use of varying maturities on
advances from the CP Facility to lock in rates during the warehousing period,
when in management's judgment it is appropriate, to mitigate interest rate
exposure. Further, the Company often employs a hedging strategy which primarily
includes the execution of forward interest rate swaps. These hedges are entered
into by the Company in numbers and amounts which generally correspond to the
anticipated principal amount of the related securitization or whole loan sale.
As of September 30, 1998, the Company had executed forward interest rate swaps
of $160 million, which become effective November 27, 1998.
YEAR 2000
The Company is substantially dependent on its and third party computer systems,
business applications and other information technology systems ("IT systems"),
due to the nature of its consumer finance business and the increasing number of
electronic transactions in the industry. Historically, many IT systems were
developed to recognize the year as a two-digit number, with the digits "00"
being recognized as the year 1900. The year 2000 presents a number of potential
problems for such systems, including potentially significant processing errors
or failure. Given the Company's reliance on its computer systems, the Company's
results of operations could be materially adversely affected by any significant
errors or failures.
The Company has developed and is in the midst of executing a comprehensive plan
designed to address the "year 2000" issue for its in house and third party IT
applications. Earlier this year, the Company completed a detailed risk
assessment of its various in house and third party computer systems, business
applications and other affected systems, formulated a plan for specific
remediation efforts and began certain of such remediation efforts. The Company
assembled survey data from third party vendors and certain other parties with
which the Company communicates electronically to determine the compliance
efforts being undertaken by these parties and to assess the Company's potential
exposure to any non-compliant systems operated by these parties. During the
remainder of 1998 and the first quarter of 1999, the Company expects to continue
and complete its remediation efforts and to undertake internal testing of its in
house and third party systems and applications.
The Company currently estimates that its costs related to year 2000 compliance
remediation for Company-owned IT systems and applications will be approximately
$300,000 in 1998 and approximately $150,000 in 1999. The amount expected to be
expended during 1998 represents approximately 15% of the Company's IT systems
budget. As of September 30, 1998, the Company had expended approximately
$200,000 for remediation of its IT software systems and applications. By the
second quarter of 1999, the Company expects to undergo third-party review of its
year 2000 remediation efforts. This third party review will include an
assessment of the procedures undertaken by the Company as well as a computer
software test of selected portions of the Company's computer code. The Company
currently expects that its year 2000 remediation efforts will be completed by
the second quarter of 1999. The Company expenses year 2000 remediation costs as
incurred and expects to fund these costs through cash flow from operations.
The Company's most critical operating system is the loan accounting system which
is maintained by a third party vendor. The Company is included in a user task
force that provides input to the vendor for the year 2000 project. The changes
to the loan accounting system were substantially complete by September 30, 1998
and the system is undergoing testing by the service bureau. The testing should
be completed by December 31, 1998. The Company is developing a testing plan and
will be provided a testing system under a separate environment to allow the
Company to test the system during the first quarter of 1999. In addition, the
user task force is also testing the system during the first quarter of 1999. The
service bureau is confident that the changes to the system will be tested and in
production by the end of the second quarter of 1999. The Company does not at
this time see any issues with the timing or the proposed changes to the system.
Based on the survey data and other information compiled by the Company to date,
the Company has not identified any other third parties that the Company expects
will suffer year 2000 related problems likely to have a significant adverse
effect on the Company's operations. However, many of these third parties are
currently in the process of implementing the critical portions of their own year
2000 compliance measures. As a result, at the current time the Company does not
have sufficient information to determine whether its external relationships will
be materially adversely affected by the year 2000 compliance problems.
The Company is currently formulating detailed contingency plans in the event
that its various systems and applications do not achieve year 2000 compliance in
a timely fashion. The contingency plans are focused on identifying potential
failure scenarios for the Company's IT systems and those of third parties with
which the Company interacts and on ensuring the continuation of critical
15
<PAGE> 16
business operations. The Company currently expects that this contingency
planning will be completed by the end of 1998. During the first half of 1999,
the Company expects to integrate each of these contingency plans into a
Company-wide contingency plan.
If the Company's year 2000 issues were not completely resolved prior to the end
of 1999, the Company could be subject to a number of potential consequences,
including among others, an inability to timely and accurately process and
collect payments from customers and originate Contracts in a timely manner. The
Company is attempting to limit its exposure to year 2000 issues by closely
monitoring its own year 2000 remediation efforts, assessing the year 2000
compliance efforts of various third parties with which it interacts and
developing contingency plans addressing potential problems that could have a
material adverse effect on the Company's results of operations. Although the
Company intends to put into place programs and procedures designed to mitigate
the aforementioned risks, there can be no assurances that all potential problems
may be mitigated by these procedures.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133. "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
No. 133"). SFAS No. 133 establishes the accounting and reporting standards for
derivative instruments, and for hedging activities. It requires that an entity
recognizes all derivatives as either assets or liabilities in the statement of
financial position and measures those instruments at fair value.
The Company is presently assessing the presentation and effect of SFAS No.
133 on the financial statements of the Company.
SFAS No. 133 is effective for fiscal years beginning after June 15, 1998.
PART II. OTHER INFORMATION
Item 5. Other Information.
FORWARD-LOOKING STATEMENTS
The preceding Management's Discussion and Analysis of the Company's
Financial Condition and Results of Operations contain certain "forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995, which provides a new "safe harbor" for these types of statements. This
Quarterly Report on Form 10-Q contains forward-looking statements which reflect
the current views of Onyx Acceptance Corporation with respect to future events
and financial performance. These forward looking statements are subject to
certain risks and uncertainties, including those identified below which could
cause actual results to differ materially from historical results or those
anticipated. Forward-looking terminology can be identified by the use of terms
such as "may, "will," "expect," "anticipate," "estimate," "should" or "continue"
or the negative thereof or other variations thereon or comparable terminology.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of their dates. Onyx Acceptance Corporation
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
The following factors could cause actual results to differ materially from
historical results or those anticipated: (1) the level of demand for auto
contracts, which is affected by such external factors as the level of interest
rates, the strength of the various segments of the economy, debt burden held by
the consumer and demographics of the lending markets of Onyx Acceptance
Corporation; (2) continued dealer relationships; (3) fluctuations between
consumer interest rates and the cost of funds; (4) federal and state regulation
of auto lending operations; (5) competition within the consumer lending
industry; (6) the availability and cost of securitization transactions and (7)
the availability and cost of warehouse and residual financing.
RISK FACTORS
Except for the historical information contained herein, the matters
discussed in this Quarterly Report are forward-looking statements which involve
risk and uncertainties, including but not limited to economic, competitive and
governmental factors affecting the Company's operations and other factors
discussed in the Company's periodic filings with the Securities and Exchange
Commission.
16
<PAGE> 17
Liquidity. The Company requires substantial cash to implement its business
strategy, including cash to: (i) acquire Contracts; (ii) pay dealer
participation; (iii) pay securitization costs ; (iv) settle hedge transactions;
(v) satisfy working capital requirements ; and (vi) pay interest expense. These
cash requirements increase as the Company's volume of purchases or originations
of Contracts increases. A substantial portion of the Company's revenues in any
period is represented by gain on sale of Contracts in such period but the cash
underlying such revenues is received over the life of the Contracts. In
addition, cash paid by the Company for dealer participation is not recovered at
the time of securitizations, but over the life of the Contract. The Company has
operated and expects to continue to operate on a negative cash flow basis as
long as the volume of Contract purchases continues to grow. The Company has
historically funded these negative operating cash flows principally through
borrowings from financial institutions, sales of equity securities and sales of
subordinated notes. No assurance can be given, however, that the Company will
have access to the capital markets in the future for equity or debt issuances or
for securitizations, or that financing through borrowings or other means will be
available on acceptable terms to satisfy the Company's cash requirements to
implement its business strategy.
The Company's inability to access the capital markets or obtain acceptable
financing could have a material adverse effect on the Company's results of
operations and financial condition.
Dependence on Warehouse and Residual Financing. The Company depends on
warehousing facilities with financial institutions to finance the purchase or
origination of Contracts pending securitization. The Company's wholly owned
special purpose subsidiary, Onyx Acceptance Financial Corporation ("OAFC"), is
party to a $325 million auto loan warehouse program (the "CP Facility") with
Triple-A One Funding Corporation ("Triple-A"). Triple-A is a commercial paper
asset-backed conduit lender sponsored by MBIA Insurance Corporation ("MBIA").
This facility provides funds to purchase Contracts and was increased during the
third quarter from $245 million to $325 million. The advance rate to OAFC is 98%
of adjusted eligible principal balance of each Contract. This loan term was
extended in the third quarter and will expire in September 2001.
The Company, through another finance subsidiary, Onyx Acceptance Funding
Corporation ("Fundco") holds a $100 million line with Merrill Lynch Mortgage
Capital, Inc. ("MLMCI") (the "Merrill Line") which provides funding for the
purchase and origination of Contracts. The Merrill Line provides an advance rate
of approximately 95% of the principal balance of the Contracts that are used for
collateral. The interest rate is based on LIBOR and has a term of one year and
matures in February 1999.
The Company has a $45 million residual facility with State Street Bank,
BankBoston, and The Travelers Insurance Company (the "Residual Facility") under
which the Company may (subject to borrowing base availability) borrow for
working capital purposes. Under the term of the Residual Facility, the available
borrowings are determined by a collateral based formula of a percentage of the
value of the excess cash flow to be received from certain securitizations and
trust receivables. The Residual Facility converts from revolving loans to
fully-amortizing two-year term loans in June 1999 or earlier upon the occurrence
of certain "credit triggers".
Fundco has two $50 million residual facilities with MLMCI and SBRC
respectively, (the "Residual Lines "). The Residual Lines are used by the
Company to finance operating requirements. The amounts available for borrowing
under each line are determined using a collateral based formula of a percentage
of the value of excess cash flow to be received from certain securitizations,
and, with respect to the MLMCI facility, a percentage of the amount of the
Merrill Line outstanding on a quarterly basis. The interest rates are based on
LIBOR and the Residual Lines have a term of one year. The facility provided by
MLMCI matures in February 1999; the facility provided by SBRC matures in
September 1999.
The Company's business strategy will require continued availability of
financing during the warehousing period. There can be no assurance that such
financing will be available to the Company on favorable terms. The inability of
the Company to arrange new warehousing credit facilities or to extend its
existing credit facilities when they expire would have a material adverse effect
on the Company's results of operations and financial condition.
The continued availability of the CP Facility is subject to, among other
things, maintenance of a target net yield, and compliance by the Company with
certain financial covenants contained in the sale and servicing agreement
between the Company, as seller, and the Company's wholly owned special purpose
finance subsidiary, OAFC as purchaser of contracts held for sale. These
covenants include a minimum ratio of net worth to total assets, minimum net
yield, ratio of RISA plus trust receivables to tangible net worth, minimum cash
on hand and minimum earnings coverage. All covenants are tested quarterly except
for minimum net yield and net cash on hand, which are tested monthly.
17
<PAGE> 18
The continued availability of the Residual Facility is subject to, among
other things, substantially similar financial covenants to those of the CP
Facility except that leverage is measured as the ratio of net worth plus
subordinated debt to total liabilities plus net worth, and is tested at quarter
end. Additionally, the Company is subject under the documentation governing the
Residual Facility, to minimum net worth and subordinated debt plus net worth
tests, a limitation on quarterly operating losses and covenants restricting
delinquencies, losses, prepayments and net yields of Contracts included in a
securitization. The continued availability of the Merrill Line and the Residual
Lines are subject to certain financial covenants, which are primarily dependent
upon the net worth of the Company.
Dependence on Securitization Program. The Company relies significantly upon
securitizations to generate cash proceeds for repayment of its credit facilities
and to create availability to purchase additional Contracts. Further, gain on
sale of Contracts generated by the Company's securitizations represents a
significant portion of the Company's revenues. Several factors affect the
Company's ability to complete securitizations of its Contracts, including
conditions in the securities markets generally, conditions in the asset-backed
securities market specifically, the credit quality of the Company's portfolio of
Contracts and the Company's ability to obtain credit enhancement. If the Company
were unable to profitably securitize a sufficient number of its Contracts in a
particular financial reporting period, then the Company's revenues for such
period would decline and could result in lower income or a loss for such period.
In addition, unanticipated delays in closing a securitization could also
increase the Company's interest rate risk by increasing the warehousing period
for its Contracts.
Dependence on Credit Enhancement. Since inception, through September 30,
1998 each of the Company's securitizations has utilized credit enhancement in
the form of a financial guarantee insurance policy issued by MBIA, or a
predecessor, in order to achieve "AAA/Aaa" ratings. This form of credit
enhancement reduces the costs of the securitizations relative to alternative
forms of credit enhancements currently available to the Company. MBIA is not
required to insure future securitizations nor is the Company restricted in its
ability to obtain credit enhancement from providers other than MBIA or to use
other forms of credit enhancement. There can be no assurance that the Company
will be able to obtain credit enhancement in any form from MBIA or any other
provider of credit enhancement on acceptable terms or that future
securitizations will be similarly rated. The Company also relies on MBIA's
financial guarantee insurance policy to reduce its borrowing cost under the
"A-1/P-1" rated CP Facility. A downgrading of MBIA's credit rating or MBIA's
withdrawal of credit enhancement could result in higher interest costs for
future Company securitizations and financing costs during the warehousing
period. Such events could have a material adverse effect on the Company's
results of operations and financial condition.
Interest Rate Risk. The Company's profitability is largely determined by
the difference, or "spread," between the effective rate of interest received on
the Contracts acquired by the Company and the interest rates payable under its
credit facilities during the warehousing period or for securities issued in
securitizations. Several factors affect the Company's ability to manage interest
rate risk. First, the Contracts are purchased at fixed interest rates, while
amounts borrowed under the Company's credit facilities bear interest at variable
rates that are subject to frequent adjustment to reflect prevailing rates for
short-term borrowings. The Company's policy is to increase the buy rates it
posts with dealerships or to increase rates it uses to solicit to consumers for
Contracts in response to increases in its cost of funds during the warehousing
period. However, there is generally a time lag before such increased borrowing
costs can be offset by increases in the buy rates for Contracts and, in certain
instances, the rates charged by its competitors may limit the Company's ability
to pass through its increased costs of warehousing financing. Second, the spread
can be adversely affected after a Contract is purchased and while it is held
during the warehousing period by increases in the prevailing rates in the
commercial paper markets. The CP Facility permits the Company to select
maturities of up to 270 days for commercial paper issued under the CP Facility.
Third, the interest rate demanded by investors in securitizations is a function
of prevailing market rates for comparable transactions and the general interest
rate environment. Because the Contracts purchased by the Company have fixed
rates, the Company bears the risk of spreads narrowing because of interest-rate
increases during the period from the date the Contracts are purchased until the
closing of its securitization of such Contracts. The Company employs a hedging
strategy that is intended to minimize this risk which historically has involved
the execution of forward interest rate swaps or the use of a pre-funding
structure for its securitizations. There can be no assurance, however, that this
strategy will consistently or completely offset adverse interest-rate movements
during the warehousing period or that the Company will not sustain losses on
hedging transactions. The Company's hedging strategy requires estimates by
management of monthly Contract acquisition volume and timing of its
securitizations. If such estimates are materially inaccurate, then the Company's
gains on sales of Contracts and results of operations could be adversely
affected. In addition, to the extent that the interest rates charged on
Contracts sold in a securitization with a pre-funding structure decline below
the rates prevailing at the time that the securitization closed the Company has
some interest rate exposure to falling interest rates during the pre-funding
period. Such a rate decline would reduce the interest rate spread because the
interest rate on the
18
<PAGE> 19
securities would remain fixed. This, in time, would negatively impact the gains
on sale of Contracts and the Company's results of operations.
Default and Prepayment Risk. The Company's results of operations, financial
condition and liquidity depend, to a material extent, on the performance of
Contracts purchased and warehoused by the Company. A portion of the Contracts
acquired by the Company may default or prepay during the warehousing period. The
Company bears the risk of losses resulting from payment defaults during the
warehousing period. In the event of payment default, the collateral value of the
Financed Vehicle may not cover the outstanding Contract balance and costs of
recovery. The Company maintains an allowance for credit losses on Contracts held
during the warehousing period, which reflects management's estimates of
anticipated credit losses during such period. If the allowance is inadequate,
then the Company would recognize as an expense the losses in excess of such
allowance and results of operations could be adversely affected. In addition,
under the terms of the CP Facility, the Company will not be able to borrow
against defaulted Contracts.
Prepayment or default of Contracts in the servicing portfolio can also
adversely affect the Company's servicing income. The Company's contractual
servicing revenue is based on a percentage of the outstanding balance of such
Contracts. Thus, if Contracts are prepaid or charged-off, then the Company's
servicing revenue will decline to the extent of such prepaid or charged-off
Contracts.
The gain on sale of Contracts recognized by the Company in each
securitization and the value of the RISA in each transaction reflects
management's estimate of future credit losses and prepayments for the Contracts
included in that securitization. If actual rates of credit loss or prepayments,
or both, on such Contracts exceeded those estimated, the value of the RISA would
be impaired. The Company periodically reviews its credit loss and prepayment
assumptions relative to the performance of the securitized Contracts and to
market conditions. If necessary, the Company would adjust the value of the RISA
by making a charge to servicing fee income. However, the Company's results of
operations and liquidity could be adversely affected if credit loss or
prepayment levels on securitized Contracts substantially exceeded anticipated
levels. Further, any write down of RISA would reduce the amount available to the
Company under the Residual Facility or Residual Lines, possibly requiring the
Company to pay down amounts outstanding under the Residual Facility or Residual
Lines or provide additional collateral to cure a potential borrowing base
deficiency.
Loss of Servicing Rights and Suspension of Future Servicing Cash Flows. The
Company is entitled to receive servicing income only while it acts as servicer
for Contracts during the warehousing period and under the servicing agreement
for securitized Contracts. Any loss of the servicing rights would have a
material adverse effect on the Company's operations and financial condition.
The Company's right to act as servicer can be terminated by MBIA, as
program manager, on Contracts funded by the CP Facility, upon the occurrence of
certain servicer termination events (as defined in the sale and servicing
agreement). Servicer termination events include material misrepresentations or
material breaches of warranties or covenants by Onyx or OAFC, including the
financial covenants of Onyx contained in the sale and servicing agreement.
The Company's loss of the servicing rights under the Company's sale and
servicing agreements, the sale and servicing agreements under the owner trusts
or the pooling and servicing under the grantor trusts, or the occurrence of a
trigger event that would block release of future servicing cash flows from the
trusts' spread accounts would have a material adverse effect on the Company's
results of operations and financial condition.
Variable Quarterly Earnings. The Company's revenues and losses have
fluctuated in the past and are expected to fluctuate in the future principally
as a result of the timing and size of its securitizations. Several factors
affecting the Company's business can cause significant variations in its
quarterly results of operations. In particular, variations in the volume of the
Company's Contract acquisitions, the interest rate spreads between the Company's
cost of funds and the average interest rate of purchased Contracts, the
effectiveness of the Company's hedging strategies, the certificate rate for
securitizations, and the timing and size of securitizations, can result in
significant increases or decreases in the Company's revenues from quarter to
quarter. Any significant decrease in the Company's quarterly revenues could have
a material adverse effect on the Company's results of operations and its
financial condition.
Dependence on Key Personnel. The Company's future operating results depend
in significant part upon the continued service of its key senior management
personnel, none of whom is bound by an employment agreement. The Company's
future operating results also depend in part upon its ability to attract and
retain qualified management, technical, and sales and support personnel for its
operations. Competition for such personnel is intense, and there can be no
assurance that the Company will be successful in attracting or retaining such
personnel. The loss of any key employee, the failure of any key employee to
perform in his or her current position or
19
<PAGE> 20
the Company's inability to attract and retain skilled employees, as needed,
could materially adversely affect the Company's results of operations and
financial condition. The Company presently maintains a key man life insurance
policy on John W. Hall in the amount of $3 million.
Competition. Competition in the field of financing retail motor vehicles
sales is intense. The automobile finance market is highly fragmented and
historically has been serviced by a variety of financial entities including the
captive finance affiliates of major automotive manufacturers, banks, savings
associations, independent finance companies, credit unions and leasing
companies. Several of these competitors have greater financial resources than
the Company and may have a significantly lower cost of funds. Many of these
competitors also have long-standing relationships with automobile dealerships
and offer dealerships or their customers other forms of financing or services
not provided by the Company. Furthermore, during the past two years, a number of
automobile finance companies have completed public offerings of common stock,
the proceeds from which are to be used, at least in part, to fund expansion and
finance increased purchases of Contracts. However, in 1996 and 1997, many of
these auto finance companies experienced significant liquidity and performance
challenges due to the intense competition. The Company's ability to compete
successfully depends largely upon its relationships with dealerships and the
willingness of dealerships to offer those Contracts that meet the Company's
underwriting criteria to the Company for purchase. There can be no assurance
that the Company will be able to continue to compete successfully in the markets
it serves.
The Effect of Adverse Economic Conditions. The Company is a motor vehicle
consumer auto finance company whose activities are dependent upon the sale of
motor vehicles. The ability of the Company to continue to acquire Contracts in
the markets in which it operates and to expand into additional markets is
dependent upon the overall level of sales of new and used motor vehicles in
those markets. A prolonged downturn in the sale of new and used motor vehicles,
whether nationwide or in the California markets, could have a material adverse
impact upon the Company, the results of its operations and its ability to
implement its business strategy.
The automobile industry generally is sensitive to adverse economic
conditions both nationwide and in California. Periods of rising interest rates
reduce economic activity, and higher rates of unemployment generally result in a
reduction in the rate of sales of motor vehicles and higher default rates on
motor vehicle loans. There can be no assurance that such economic conditions
will not occur, or that such conditions will not result in such severe
reductions in the Company's revenues or cash flows available to the Company to
permit the Company to remain current on its credit facilities.
Regulation. The Company's business is subject to numerous federal and state
consumer protection laws and regulations, which, among other things: (i) require
the Company to obtain and maintain certain licenses and qualifications; (ii)
limit the interest rates, fees and other charges the Company is allowed to
charge; (iii) limit or prescribe certain other terms of the Company's Contracts;
(iv) require specific disclosures; and (v) define the Company's rights to
repossess and sell collateral. The Company believes it is in compliance in all
material respects with all such laws and regulations, and that such laws and
regulations have had no material adverse effect on the Company's ability to
operate its business. However, the Company's failure to comply with applicable
laws and regulations, changes in existing laws or regulations, or in the
interpretation thereof, or the promulgation of any additional laws or
regulations could have a material adverse effect on the Company's results of
operations and financial condition.
20
<PAGE> 21
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT TITLE
----------- -------------
<S> <C>
*3.4 Certificate of Incorporation of the Company.
*3.5 Bylaws of the Company.
10.106 Amended and Restated Sale and Servicing Agreement between Onyx
Acceptance Corporation and Onyx Acceptance Financial
Corporation dated as of September 4, 1998.
10.107 Amended and Restated Triple-A One Funding Corporation Credit
Agreement between and among Onyx Acceptance Financial
Corporation, Triple-A One Funding Corporation, CapMAC
Financial Services, Inc. and Capital Markets Assurance
Corporation dated as of September 4, 1998.
10.108 Amended and Restated Triple-A One Funding Corporation Security
Agreement between and among Onyx Acceptance Financial
Corporation, Triple-A One Funding Corporation and Capital
Markets Assurance Corporation dated as of September 4, 1998.
10.109 Amended and Restated Subordinated Security Agreement between
Onyx Acceptance Corporation and Onyx Acceptance Financial
Corporation dated as of September 4, 1998.
10.110 Amended and Restated Insurance and Indemnity Agreement between
and among Onyx Acceptance Corporation, Capital Markets
Assurance Corporation, Onyx Acceptance Financial Corporation
and Triple-A One Funding Corporation dated as of September 4,
1998.
10.111 Master Loan Agreement Between Onyx Acceptance Funding
Corporation and Salomon Brothers Realty Corp. Dated September
3, 1998
21.1 Subsidiaries of the Registrant.
27.1 Financial Data Schedule.
</TABLE>
- ------------
* Incorporated by reference from the Company's Registration
Statement on Form S-1 (Registration No. 333-680)
(b) Reports on Form 8-K
None.
21
<PAGE> 22
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ONYX ACCEPTANCE CORPORATION
By: /s/ JOHN W. HALL
----------------------------------
John W. Hall
President and Principal
Executive Officer
Date: November 13, 1998
By: /s/ DON P. DUFFY
----------------------------------
Don P. Duffy
Executive Vice President and
Principal Financial Officer
Date: November 13, 1998
22
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ---------- ----------- ----
<S> <C> <C>
10.106 Amended and Restated Sale and Servicing Agreement between Onyx
Acceptance Corporation and Onyx Acceptance Financial Corporation
dated as of September 4, 1998.
10.107 Amended and Restated Triple-A One Funding Corporation Credit
Agreement between and among Onyx Acceptance Financial
Corporation, Triple-A One Funding Corporation, CapMAC Financial
Services, Inc. and Capital Markets Assurance Corporation dated as
of September 4, 1998.
10.108 Amended and Restated Triple-A One Funding Corporation Security
Agreement between and among Onyx Acceptance Financial
Corporation, Triple-A One Funding Corporation and Capital Markets
Assurance Corporation dated as of September 4, 1998.
10.109 Amended and Restated Subordinated Security Agreement between Onyx
Acceptance Corporation and Onyx Acceptance Financial Corporation
dated as of September 4, 1998.
10.110 Amended and Restated Insurance and Indemnity Agreement between
and among Onyx Acceptance Corporation, Capital Markets Assurance
Corporation, Onyx Acceptance Financial Corporation and Triple-A
One Funding Corporation dated as of September 4, 1998.
10.111 Master Loan Agreement Between Onyx Acceptance Funding Corporation
and Salomon Brothers Realty Corp. Dated September 3, 1998
21.1 Subsidiaries of the Registrant
27.1 Financial Data Schedule
</TABLE>
23
<PAGE> 1
EXHIBIT 10.106
EXECUTION COPY
ONYX ACCEPTANCE FINANCIAL CORPORATION
--------------------------
AMENDED AND RESTATED
SALE AND SERVICING AGREEMENT
dated as of September 4, 1998
ONYX ACCEPTANCE CORPORATION
----------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
<S> <C>
ARTICLE I
DEFINITIONS
Section 1.1 Definitions......................................................... 1
ARTICLE II
PURCHASES AND SALES
Section 2.1 Agreements to Purchase and to Sell.................................. 2
Section 2.2 Purchase Price...................................................... 3
Section 2.3 Payment of Purchase Price........................................... 3
Section 2.4 Delivery............................................................ 4
ARTICLE III
CONDITIONS TO PURCHASE
Section 3.1 Conditions to Effectiveness......................................... 4
Section 3.2 Conditions Precedent to Payment of Purchase......................... 4
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 4.1 Representations and Warranties of the Seller and the Servicer....... 5
Section 4.2 Representations and Warranties of the Seller Concerning Contracts... 9
Section 4.3 Covenants of Seller................................................. 11
Section 4.4 Covenants of Servicer.............................................. 16
Section 4.5 Repurchase of Ineligible Contracts.................................. 17
Section 4.6 Financial Covenants of Seller....................................... 18
Section 4.7 Representations and Warranties of Finco............................. 19
ARTICLE V
SELLER NOTE AND SUBORDINATED NOTE
Section 5.1 Seller Note......................................................... 21
Section 5.2 Restrictions on Transfer of Seller Note............................. 21
Section 5.3 Subordinated Note................................................... 21
Section 5.4 Restrictions on Transfer of Subordinated Note....................... 24
ARTICLE VI
TERMINATION OF COMMITMENT
Section 6.1 Termination......................................................... 24
Section 6.2 Remedies............................................................ 23
ARTICLE VII
INDEMNIFICATION, ADDITIONAL COSTS AND INSPECTION
Section 7.1 Indemnities......................................................... 24
Section 7.2 Rights of Inspection................................................ 26
ARTICLE VIII
THE SERVICER
Section 8.1 Appointment of Servicer............................................. 27
Section 8.2 Collections......................................................... 27
Section 8.3 Maintenance of Records; Quarterly and Annual Reports................ 27
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Section 8.4 Servicing Fee....................................................... 29
Section 8.5 Resignation; Sub-Contracting........................................ 29
Section 8.6 Termination......................................................... 29
Section 8.7 Delivery of Investor Report......................................... 30
Section 8.8 Daily Report........................................................ 30
Section 8.9 Monthly Report...................................................... 30
Section 8.10 Servicer Termination Events........................................ 30
Section 8.11 Servicer Termination............................................... 31
Section 8.12 Appointment of Successor Servicer.................................. 32
ARTICLE IX
MISCELLANEOUS
Section 9.1 Notices, Etc........................................................ 33
Section 9.2 Successors and Assigns.............................................. 34
Section 9.3 Confirmation of Intent; Security Interest........................... 34
Section 9.4 Payments............................................................ 34
Section 9.5 Rights to Enable Successor Servicing................................ 34
Section 9.6 Costs; Expenses and Taxes........................................... 35
Section 9.7 Severability Clause................................................. 35
Section 9.8 Amendments; Governing Law........................................... 35
Section 9.9 No Recourse......................................................... 35
Section 9.10 Further Assurances................................................. 35
Section 9.11 Termination........................................................ 36
Section 9.12 Assignment to Program Manager...................................... 36
Section 9.13 Counterparts....................................................... 36
Section 9.14 Headings........................................................... 36
Section 9.15 No Bankruptcy Petition Against Finco............................... 36
</TABLE>
EXHIBIT A -- Seller Note
EXHIBIT B -- Subordinated Note
EXHIBIT C -- Officer's Certificate
EXHIBIT D -- List of Lock-Box Banks and Numbers of Lock-Boxes
EXHIBIT E -- Clearing Account Bank and Account Number
EXHIBIT F -- Form of Investor Report
EXHIBIT G -- Form of Servicer's Certificate
EXHIBIT H -- Form of Daily Report
EXHIBIT I -- Form of Monthly Report
SCHEDULE 4.1(h)-1 Principal Place of Business, Etc. of Seller
SCHEDULE 4.1(h)-2 Principal Place of Business, Etc. of Servicer
SCHEDULE 4.1(j)-1 Trade Names of Seller
SCHEDULE 4.1(j)-2 Trade Names of Servicer
SCHEDULE 4.1(q)-1 Subsidiaries of Seller
SCHEDULE 4.1(q)-2 Subsidiaries of Servicer
SCHEDULE 8.1 Credit and Collection Policy
SCHEDULE 9.5 Licenses, Patents, Computer Hardware and Software, Etc.
ii
<PAGE> 4
AMENDED AND RESTATED
SALE AND SERVICING AGREEMENT
AMENDED AND RESTATED SALE AND SERVICING AGREEMENT (this
"Agreement"), dated as of September 4, 1998, among ONYX ACCEPTANCE CORPORATION,
a Delaware corporation, as seller (in such capacity, the "Seller") and as
servicer (in such capacity, the "Servicer"), and ONYX ACCEPTANCE FINANCIAL
CORPORATION, a Delaware corporation (together with its successors and assigns,
"Finco"), as the purchaser.
W I T N E S S E T H:
WHEREAS, the Seller in the ordinary course of its business
originates and purchases from loans secured by automobiles and light trucks; and
WHEREAS, the Seller wishes to sell certain of such loans from
time to time to Finco and Finco desires to purchase such loans; and
WHEREAS, from time to time in accordance with the consummation
of the transactions contemplated herein, Finco desires to finance the purchases
of such loans by advances made by Triple-A One Funding Corporation, which
advances will be secured by the loans purchased by Finco;
WHEREAS, the Seller and Finco have entered into the Sale and
Servicing Agreement dated as of September 8, 1994 (as amended to the date
hereof, the "Original Sale Agreement"); and
WHEREAS, the parties hereto wish to amend and restate the
original Sale Agreement as hereinafter provided.
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions.
(a) As used in this Agreement, capitalized terms used herein
shall, unless otherwise defined herein, have the meanings assigned to them in
the Amended and Restated Definitions List dated as of the date hereof that
refers to this Agreement, which is incorporated herein by reference (the
"Definitions List").
(b) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular
<PAGE> 5
provision of this Agreement, and Section, subsection, Schedule and Exhibit
references are to this Agreement unless otherwise specified.
(c) Capitalized terms used herein shall be equally applicable
to both the singular and plural forms of such terms.
ARTICLE II
PURCHASES AND SALES
Section 2.1 Agreements to Purchase and to Sell
(a) As of the Closing Date, the Seller does hereby sell,
transfer, assign, set over and otherwise convey, to Finco and Finco does hereby
purchase, without recourse (except as expressly provided herein) all right,
title and interest of the Seller in and to (i) all Contracts originated,
purchased or owned by the Seller that have Outstanding Balances as of the
Cut-Off Date and all payment and enforcement rights (but not any obligations)
to, in and under such Contracts, all rights in and to any Insurance Policies and
any and all security interests in the Vehicles, (ii) all monies due and to
become due, and all amounts received, with respect to the foregoing, (iii) any
and all Files related to such Contracts, including the Dealer Assignment related
to each Contract (iv) all proceeds of the foregoing (including, without
limitation, "proceeds" as defined in Section 9-306 of the UCC as in effect in
the State of California) and (v) all Recoveries related to such Contracts;
provided that the Seller shall not be obligated to sell any Contract to Finco
which is purchased or originated by the Seller for the sole purpose of selling
such Contract to an unaffiliated third party.
(b) On each Purchase Date occurring prior to the Commitment
Termination Date (other than the Purchase Date occurring on the Closing Date),
the Seller does hereby agree to sell, transfer, assign, set over and otherwise
convey, without recourse (except as expressly provided herein), to Finco and
Finco does hereby agree to purchase, without recourse (except as expressly
provided herein) all right, title and interest of the Seller in and to (i) all
Contracts originated, purchased or owned by the Seller that have Outstanding
Balances as of the close of business on the Business Day immediately preceding
such Purchase Date and all payment and enforcement rights (but not any
obligations) to, in and under such Contracts, all rights in and to any Insurance
Policies and any and all security interests in the Vehicles, (ii) all monies due
and to become due, and all amounts received, with respect to the foregoing,
(iii) any and all Files related to such Contracts, including the Dealer
Assignment related to each Contract (iv) all proceeds of the foregoing
(including, without limitation, "proceeds" as defined in Section 9-306 of the
UCC as in effect in the State of California) and (v) all Recoveries related to
such Contracts; provided that the Seller shall not be obligated to sell any
Contract to Finco which (i) the Seller sells to a Subsidiary of the Seller
pursuant to the Merrill Repurchase Facility or other similar facility with the
consent of the Program Manager or (ii) is purchased or originated by the Seller
for the sole purpose of selling such Contract to an unaffiliated third party.
Finco shall not be obligated to make any purchase hereunder on or after the
Commitment Termination Date.
2
<PAGE> 6
(c) It is the express and specific intent of the parties that
the transfer of the Purchased Contracts from the Seller to Finco, as provided in
this Agreement, is and shall be construed for all purposes as a true, complete
and absolute sale of the Purchased Contracts.
(d) The Seller acknowledges that the Purchased Contracts are
subject to the security interest of the Collateral Agent for the benefit of
Triple-A One pursuant to the Triple-A One Security Agreement and that Triple-A
One has assigned its rights under the Triple-A One Note (together with its
related rights under the Triple-A One Security Agreement) to the Bank Collateral
Agent pursuant to the Note Pledge Agreement.
(e) In connection with the Seller's sale of Contracts set
forth herein the Seller hereby transfers to Finco all its right, title and
interest in and to each Lock-Box.
(f) In selecting the Contracts to be sold pursuant to clauses
(a) and (b), the Seller shall employ selection procedures which are not adverse
to the interests of Finco, Triple-A One or the Collateral Agent.
Section 2.2. Purchase Price.
(a) The amount payable to the Seller by Finco on the Closing
Date shall be equal to the aggregate Outstanding Balances of the Contracts set
forth on the Contract List for such Closing Date as set forth in the initial
Daily Report.
(b) The amount payable to the Seller by Finco on each Purchase
Date occurring prior to the Commitment Termination Date (other than the Purchase
Date occurring on the Closing Date) in connection with any sale hereunder shall
be equal to the aggregate Outstanding Balances of the Contracts set forth on the
Contract List for such Purchase Date, as set forth in the Daily Report dated
such Purchase Date.
(c) The Outstanding Balance of Finance Charges shall not be
included in the calculation of the Purchase Price of any Contracts purchased on
any Purchase Date other than the Purchase Date occurring on the Closing Date. On
the Closing Date, the Outstanding Balance of Finance Charges shall be included
in the calculation of the Purchase Price.
Section 2.3. Payment of Purchase Price.
(a) Prior to 9 A.M. (New York City time) on each Purchase
Date, including the Closing Date, the Servicer will determine the Purchase Price
to be paid on such Purchase Date. The Purchase Price shall be paid in the manner
provided below:
(i) in cash, in an amount equal to the lesser of (A) Available
Funds on such Purchase Date and (B) the Purchase Price;
(ii) to the extent that the Purchase Price exceeds the amount
of the cash payment in (i) above, such excess shall be paid, on the
Closing Date, by means of the issuance to the Seller of the
Subordinated Note in an initial principal amount equal to the
3
<PAGE> 7
Subordinated Interest on the Closing Date, and on each Purchase Date
subsequent to the Closing Date, by adjusting the principal amount of
the Subordinated Note to equal the Subordinated Interest on such
Purchase Date; and
(iii) to the extent that the Purchase Price exceeds the amount
of the cash payment in (i) above and the adjustment to the principal
amount of the Subordinated Note in accordance with (ii) above, such
excess shall be paid on the Closing Date by means of the issuance to
the Seller of the Seller Note in the initial principal amount equal to
the Seller Interest on the Closing Date, and on each Purchase Date
subsequent to the Closing Date by adjusting the principal amount of the
Seller Interest on such Purchase Date.
(b) Unless otherwise specified herein, all payments of the
Purchase Price shall be made not later than 4:00 P.M. (New York City time) on
the date specified therefor in lawful money of the United States of America in
same day funds by depositing such amounts in the bank account designated in
writing by the Seller to Finco, with a copy to the Program Manager.
Section 2.4 Delivery. The Seller hereby agrees that all
chattel paper and instruments (as each such term is defined in the UCC), if any,
representing or evidencing any of the Purchased Contracts shall be promptly
transferred to Finco pursuant to duly executed transfer instruments in form and
substance satisfactory to Finco, the Collateral Agent and the Program Manager.
All such chattel paper and instruments shall be delivered into the possession of
Finco or to such Person as Finco may designate, on or prior to the Purchase
Date.
ARTICLE III
CONDITIONS TO PURCHASE
Section 3.1. Conditions to Effectiveness. On or prior to the
date hereof, the following conditions shall have been satisfied:
(a) the conditions set forth in subsection 4.1 of the Triple-A
One Credit Agreement shall have been satisfied; and
(b) a Responsible Officer of the Servicer shall have executed
and delivered an officer's certificate to Finco, with copies to CapMAC and the
Program Manager, listing the servicing officers of the Servicer.
Section 3.2. Conditions Precedent to Payment of Purchase. As
a condition precedent to the obligation of Finco to make payment of the Purchase
Price on any Payment Date including the Closing Date, the following conditions
shall have been satisfied on or prior to such Payment Date:
(a) no Unmatured Wind-Down Event or Wind-Down Event shall have
occurred and be continuing on such Payment Date or would result from such
payment or from the application of the proceeds therefrom. By accepting payment
for the Purchased Contracts the Seller shall be deemed to certify that this
condition has been satisfied;
4
<PAGE> 8
(b) Finco shall have received all other approvals, legal
opinions, documents, instruments or items of information as it may request and
all of the foregoing shall be satisfactory in form and substance to Finco, and
all corporate and other proceedings required to be taken following the Closing
Date shall be satisfactory in form and substance to Finco;
(c) all corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the transactions
contemplated by this Agreement and the other Operative Documents shall be
satisfactory in form and substance to Finco;
(d) an authorized officer of the Seller shall have executed
and delivered an officer's certificate to Finco, with copies to CapMAC and the
Program Manager, substantially in the form of Exhibit C; and
(e) the conditions set forth in subsections 4.1, 4.2 and 4.3
of the Triple-A One Credit Agreement shall have been satisfied.
ARTICLE IV
REPRESENTATIONS, WARRANTIES
AND COVENANTS
Section 4.1. Representations and Warranties of the Seller and
the Servicer The Seller represents and warrants to Finco and the Program
Manager, as of the date of this Agreement and as of any future Purchase Date,
and the Servicer represents and warrants (except as to clause (m) of this
Section 4.1, as to which the Servicer makes no representation or warranty) to
Finco and the Program Manager, as of the date of this Agreement and as of each
Payment Date, as follows:
(a) Corporate Existence. It is a corporation duly
incorporated, validly existing and in good standing under the laws of the state
of its incorporation, and is duly qualified to do business and is in good
standing in every jurisdiction in which the nature of its business requires it
to be so qualified.
(b) Corporate Power; Authorization; Non-Contravention. The
execution, delivery and performance by it of this Agreement and all other
agreements, instruments and documents to be delivered by it hereunder, and the
transactions contemplated hereby and thereby, are within its corporate powers,
have been duly authorized by all necessary corporate action, do not contravene
(i) any Requirement of Law applicable to it or (ii) any Contractual Obligation
of it, and do not result in or require the creation of any Lien or any other
claim upon or with respect to any of its properties (other than those
contemplated hereunder); and no transaction contemplated hereby requires
compliance with any bulk sales act or similar law. This Agreement and all the
other Operative Documents to which it is a party have been duly executed and
delivered on its behalf.
5
<PAGE> 9
(c) No Consents. No authorization or approval or other action
by, and no notice to or filing with, any Governmental Authority or regulatory
body is required for the due execution, delivery and performance by it of this
Agreement or any other agreement, document or instrument to be delivered by it
hereunder, or for the perfection of, or the exercise by, Finco of its rights or
remedies under this Agreement, or any other agreement, document or instrument,
except for the filing of the UCC financing statements referred to in clause (n)
of this Section 4.1, all of which, on or prior to the Closing Date, shall have
been duly made and shall be in full force and effect.
(d) Enforceable Obligation. This Agreement is and will be its
legal, valid and binding obligation, enforceable against it in accordance with
its terms except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforceability of creditors' rights generally and by general equitable
principles (whether considered in proceedings in equity or at law).
(e) Financial Condition. Its unaudited, consolidated and
consolidating balance sheets and those of its consolidated Subsidiaries as at
June 30, 1998 and the related unaudited statements of income and retained
earnings and of cash flows of it and its consolidated Subsidiaries for the
fiscal year then ended, certified by PricewaterhouseCoopers LLP or other
independent certified public accountants of nationally recognized standing,
copies of all of which have been furnished to Finco and the Program Manager,
fairly present the financial condition of it and its consolidated Subsidiaries
as at such date and the results of the operations of it and its consolidated
Subsidiaries for the period ending on such date, all in accordance with GAAP,
and since June 30, 1998 there has been no adverse change in such condition or
operations or in the collectibility of the Contracts.
(f) Material Litigation. Except as otherwise disclosed in
writing to Finco and the Program Manager prior to the date hereof, there is no
pending or threatened action, suit or proceeding against or affecting it or any
of its Subsidiaries or any of their respective officers or directors, in such
capacity, or the property of it or of any of its Subsidiaries, in any court, or
before any arbitrator of any kind, or before or by any governmental body.
(g) Accuracy of Information. (i) Each exhibit, financial
statement, document, book, record, report and other item of written information
furnished by it to the Program Manager or Finco in connection with the Operative
Documents is accurate as of its date and as of the date so furnished and (ii)
all financial projections contained therein are based on reasonable and stated
assumptions, and no such document contains any material misstatement of fact or
omits to state a material fact.
(h) Principal Place of Business. Its principal place of
business and chief executive office is located at the address referred to in
Section 9.1 and the locations of the offices where it keeps all the records
relating to the Contracts, including without limitation, the Files are listed on
Schedule 4.1(h)-1 (as to the Seller) and on Schedule 4.1(h)-2 (as to the
Servicer) hereto.
6
<PAGE> 10
(i) Lock-Box. The names and addresses of all the Lock-Box
Banks, together with the account numbers of each Lock-Box, are specified in
Exhibit D hereto. Each Obligor has been directed to remit all funds in respect
of the Purchased Contracts only into the Lock-Boxes.
(j) Clearing Account. The name and address of the Clearing
Account Bank, together with the account number thereof, are specified in Exhibit
E. All funds in respect of the Purchased Contracts at any time on deposit in the
Clearing Account are held by the Clearing Account Bank subject to the security
interest of Capital Markets Assurance Corporation as collateral agent on behalf
of and for the benefit of Triple-A One Funding Corporation.
(k) Names. Except as set forth on Schedule 4.1(j)-1 (as to the
Seller) and Schedule 4.1(j)-2 (as to the Servicer), it has no tradenames,
fictitious names, assumed names or "doing business as" names.
(l) ERISA
(i) Schedule B (Actuarial Information) to its 1994 annual
report (Form 5500 Series) for each Plan, copies of which will be filed
with the IRS and furnished to the Program Manager and Finco, will be
complete and accurate and fairly present the funding status of such
Plan.
(ii) Each Plan which is intended to be qualified under Section
401(a) of the Code has been determined by the IRS to be so qualified or
such determination has been requested, and each trust related to any
such Plan has been determined to be exempt from federal income tax
under Section 501(a) of the Code, or such determination has been
requested, and neither it nor any ERISA Affiliate has breached any of
the responsibilities, obligations or duties imposed on it by ERISA, the
Code or regulations promulgated thereunder with respect to any Plan.
(iii) Neither it nor any ERISA Affiliate maintains or
contributes to any employee welfare benefit plan within the meaning of
Section 3(1) of ERISA which provides benefits to employees after
termination of employment other than as required by Section 601 of
ERISA.
(iv) No Plan has incurred any accumulated funding deficiency
(as defined in Section 302 of ERISA and 412(a) of the Code), whether or
not waived.
(v) Neither it nor any ERISA Affiliate nor any fiduciary of
any Plan (i) has engaged in a nonexempt prohibited transaction
described in Sections 406 of ERISA or 4975 of the Code or (ii) has
taken or failed to take any action which would constitute or result in
an ERISA Termination Event.
(vi) Neither it nor any ERISA Affiliate has incurred, and no
condition exists or event or transaction has occurred with respect to
any Plan that could result in, any withdrawal liability under Section
4201 of ERISA that remains unpaid or liability to the
7
<PAGE> 11
PBGC which remains outstanding other than the payment of premiums, and
there are no premium payments which have become due which are unpaid.
(vii) Neither it nor any ERISA Affiliate has (i) failed to
make a required contribution or payment to a Plan, (ii) made a complete
or partial withdrawal from a Multiple Employer Plan or a Multiemployer
Plan or (iii) failed to make a required installment or any other
required payment under Section 412 of the Code on or before the due
date for such installment or other payment.
(viii) Neither it nor any ERISA Affiliate is required to
provide security to a Plan under Section 401(a)(29) of the Code due to
a Plan amendment that results in an increase in current liabilities for
the plan year.
(m) Treatment of Transaction. It has not prepared any
financial statement which accounts for the transactions contemplated hereby in
any manner other than the sale of the Purchased Contracts by it, and it has not
in any other respect accounted for or treated the transactions in the Purchased
Contracts by it contemplated hereby (including but not limited to accounting and
tax reporting purposes) in any manner other than as a sale of, or absolute
assignment of, its full right, title and ownership interest in, the Purchased
Contracts, to Finco.
(n) Requirements of Law. Neither it nor any Subsidiary is in
violation of any Requirement of Law that could materially adversely affect its
operations or the conduct of its businesses or which is inconsistent with the
transactions contemplated by this Agreement.
(o) UCC Filings to Evidence Sale and Ownership Transfer. All
filings and recordings (including pursuant to the UCC in effect in the state in
which its principal place of business is located) required to perfect a first
priority ownership interest in the Purchased Contracts in favor of Finco have
been accomplished and are in full force and effect.
(p) Taxes. It has filed or caused to be filed all Federal,
state and other tax returns which are required to be filed and has paid all
taxes shown to be due and payable on said returns or on any Federal, state and
other tax assessments made against it or any of its property and all other
taxes, fees or other charges imposed on it or any of its property by any
Governmental Authority having taxing power (other than any the amount or
validity of which are currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with GAAP have been
provided on the books of the Seller); no tax Lien has been filed, and no claim
is being asserted, with respect to any such tax, fee or other charge.
(q) Investment Company Act; other Regulations. It is not an
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. It is not
subject to regulation under any Federal or state statute or regulation which
limits its ability to incur Debt.
(r) Subsidiaries. Schedule 4.1(q)-1 (as to the Seller) and
Schedule 4.1(q)-2 (as to the Servicer) lists all of its Subsidiaries.
8
<PAGE> 12
(s) Year 2000 Compliance.
(i) It has (a) initiated a review and assessment of all areas
within its and each of its Subsidiaries' business and operations
(including those affected by suppliers, vendors and customers) that
could be adversely affected by the "Year 2000 Problem" (that is, the
risk that computer applications used by it or any of its Subsidiaries
(or suppliers, vendors and customers) may be unable to recognize and
perform properly date-sensitive functions involving certain dates prior
to and any date after December 31, 1999), (b) developed a plan and
timeline for addressing the Year 2000 Problem on a timely basis, and
(c) to date, implemented that plan in accordance with that timetable.
Based on the foregoing, it believes that all computer applications
(including those of its suppliers, vendors and customers) that are
material to its or any of its Subsidiaries' business and operations are
reasonably expected on a timely basis to be able to perform properly
date-sensitive functions for all dates before and after January 1, 2000
(that is, be "Year 2000 Compliant"), except to the extent that a
failure to do so could not be reasonably expected to have a material
adverse effect on it or on the Program, or result in a Wind-Down Event.
(ii) It (a) has completed a review and assessment of all
computer applications (including, but not limited to those of its
suppliers, vendors, customers, and any third party servicers), which
are related to or involved in the origination, collection, management
or servicing of the Purchased Receivables (the "Receivables Systems")
and (ii) has determined that such Receivable Systems are Year 2000
Compliant or will be Year 2000 Compliant on or before December 31, 1999
and thereafter.
(iii) The costs of all assessment, remediation, testing and
integration related to its plan for becoming Year 2000 Compliant will
not have a material adverse effect on its financial condition or
operations.
Section 4.2. Representations and Warranties of the Seller
Concerning Contracts. On each Purchase Date the Seller represents and warrants
to Finco and the Program Manager as follows:
(a) Eligible Contract. Each Contract to be sold by it on such
day is an Eligible Contract.
(b) Liens. Each Contract to be sold by it on such day is owned
by it free and clear of any Lien or claim of any kind or any offset and, upon
transfer to Finco pursuant to this Agreement, Finco will acquire a valid
ownership interest in each Purchased Contract free and clear of any Lien or
claim of any kind or any offset and no effective financing statement or other
instrument similar in effect covering any such Purchased Contract shall at any
time be on file in any recording office except those relating to this Agreement
and the transactions contemplated hereby.
9
<PAGE> 13
(c) Compliance with Laws. Each Contract to be sold by it on
such day complies with all laws and regulations applicable thereto, including,
without limitation, all consumer credit laws.
(d) Enforceable Obligations. Each Contract to be sold by it on
such day is in full force and effect and represents a legal, valid and binding
obligation of the Obligor enforceable against the Obligor in accordance with its
terms (except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforceability of creditors' rights generally and by general equitable
principles whether considered in proceedings in equity or at law) and
constitutes "chattel paper" under the UCC in effect in the state in which the
principal place of business of the Seller is located.
(e) Valid Sale. The sale pursuant to this Agreement by the
Seller and the purchase by Finco of the Purchased Contracts on such Purchase
Date constitutes and will constitute a valid sale of such Purchased Contracts
and the other Collateral and the proceeds thereof, which sale is and will be
enforceable against the Seller and all existing and future creditors of the
Seller and all subsequent purchasers from the Seller or Finco of any of the
Purchased Contracts. Upon the filing of the financing statements described in
Section 4.1(o) with the Secretary of State of the State of California evidencing
the sale of the Purchased Contracts to Finco and, in the case of Purchased
Contracts hereafter created and the proceeds thereof, upon the sale, transfer
and assignment thereof to Finco, Finco shall have a first priority perfected
ownership interest in the Purchased Contracts and the other Collateral.
(f) Credit and Collection Policy. The Credit and Collection
Policy has been complied with in all respects with respect to each Contract to
be sold by it on such day and no change has been made in the character of its
business or (except to the extent required by law and of which CapMAC and the
Program Manager have received written notice prior to the applicable Purchase
Date) in the Credit and Collection Policy, which change could, in either case,
impair the collectibility of any Purchased Contract.
(g) Contract Information. The Contract Information delivered
by the Seller to Finco (if the Seller is the Servicer) or by the Seller to the
Servicer (if the Seller is not the Servicer) with respect to each Purchased
Contract on such Purchase Date is true and correct.
(h) Inspections. Each Contract that is not originated by a
Vehicle Dealer has been inspected by CSI Escrow Document Services, Inc., the
Servicer or any other inspection company reasonably acceptable to the Program
Manager ("Inspector"), and the Inspector has issued a written inspection report
(the "Vehicle Condition Report") describing the Vehicle and the equipment in the
Vehicle, confirming the vehicle identification number and certifying that the
Vehicle is in good repair.
(i) Repossessed Vehicles. As of the last day of any month, the
aggregate Outstanding Balance of Purchased Contracts secured by Vehicles
previously repossessed by the Seller (each a "Repossessed Vehicle") shall not
exceed 1% of the aggregate Outstanding Balance of all Purchased Contracts then
financed by Triple-A One Loans.
10
<PAGE> 14
(j) Documentation. All documents used by the Seller in
connection with the purchase or origination of Contracts (including, without
limitation, any security agreement, loan contract or promissory note), and all
certificates of title and entries in the Paperless Title System for Vehicles
securing Contracts use the following words to identify the lender, secured party
or obligee: (i) "Onyx Acceptance Corporation" or some abbreviation thereof which
unmistakably identifies the Seller as secured party or (ii) "ABNI, Inc." or
"C.U. Acceptance Corporation"; provided, however, that the name "ABNI, Inc." or
"C.U. Acceptance Corporation" may only be used in such documents with respect to
Contracts for which the Program Manager has received an opinion of counsel
addressed to the Program Manager satisfactory in form and substance to the
Program Manager from counsel to the Seller acceptable to the Program Manager in
its reasonable judgment, to the effect that (x) under the law of the state in
which the related Vehicle is registered, the Seller has a first priority
perfected security interest in the related Vehicle notwithstanding the use of
such name and (y) under applicable law, the use of such name rather than "Onyx
Acceptance Corporation" or some other abbreviation thereof which unmistakably
identifies the Seller as secured party will not affect the Seller's ownership
interest in the Contracts and the Seller's security interest in the related
Vehicles.
(k) Lienholder on Title. Prior to January 1, 1997, the
Seller's lien in any Vehicle registered in California securing a Purchased
Contract was obtained by submitting the appropriate documents to the California
Department of Motor Vehicles and was not obtained by electronically transmitting
information to such department of Motor Vehicles.
(l) Contract Files. It has delivered to Finco the Files
relating to each Contract sold to Finco on such Purchase Date; provided,
however, that as to any Purchased Contract, if (a) as evidenced by an opinion of
counsel delivered to and in form and substance satisfactory to the Program
Manager and the Collateral Agent, (x) an optical image or other representation
of the Files are enforceable in the relevant jurisdictions to the same extent as
the original of such document and (y) such optical image or other representation
does not impair the ability of an owner of such Contract to transfer its
interest in such Contract, and (b) the retention of such documents in such
format will not result in a reduction of the then current rating of the
transaction and Triple-A One, without regard to the Surety Bonds, such optical
image or other representation may be held by the Servicer, as custodian for
Triple-A One in lieu of the Files.
Section 4.3. Covenants of Seller. The Seller covenants and
agrees with Finco that so long as this Agreement shall remain in effect:
(a) Corporate Existence. It will preserve and maintain its
corporate existence, rights, franchises and privileges in the jurisdiction of
its incorporation, and qualify and remain qualified and in good standing as a
foreign corporation in each jurisdiction where the failure to maintain such
existence, rights, franchises, privileges and qualifications could affect (i)
the rights or interests of Finco hereunder, (ii) the collectibility of any
Contract or (iii) its ability to perform its obligations hereunder.
(b) Master Record of the Contracts. It will, at its own cost
and expense, retain a master record of the Contracts sold by it and copies of
all documents and records relating to
11
<PAGE> 15
each such Purchased Contract and, at its own cost and expense, mark such master
record to the effect that the Purchased Contracts listed thereon have been sold
to Finco.
(c) Recovery Procedure. It will maintain its Recovery
Procedure in good operational order and permit representatives of Finco access
to its management employees to fully discuss such Recovery Procedure during
normal business hours. If it obtains a third party to maintain such Recovery
Procedure, then it shall arrange to permit representatives of Finco access
during normal business hours to such system to make such inspections and
examinations as it deems necessary.
(d) Conduct of Business. It will comply with all applicable
laws, rules, regulations, and orders with respect to it, its business and
properties and all Contracts it originates or purchases, the failure to comply
with which could have a material adverse affect on it or on such Contracts.
(e) Defense of the Purchased Contracts. It will not create,
permit or suffer to exist, and will take such other actions as are necessary to
remove, any Lien, claim or right in, to or on any Purchased Contract, and will
defend the right, title and interest of Finco in and to the Purchased Contracts
against the claims and demands of all Persons whomsoever, other than (i) the
Liens created hereby and by the transactions contemplated hereby or (ii) Liens
for taxes which are being contested in good faith by appropriate proceedings,
provided that adequate reserves with respect thereto are maintained on the books
of Finco in conformity with GAAP.
(f) Notice. It will advise Finco (with a copy to the Program
Manager) in detail, of (i) any Lien asserted or claim made against any Purchased
Contract, (ii) the occurrence of any breach by it of any of its representations,
warranties and covenants contained herein, (iii) the occurrence of any Wind-Down
Event or Unmatured Wind-Down Event, (iv) any litigation, investigation or
proceeding which may exist at any time between it and any Governmental Authority
or other Person or default or event of default under any of its Contractual
Obligations, which in either case could have a material adverse effect on the
value of the Purchased Contracts or its ability to satisfy its obligations
hereunder and (v) any material adverse change in its business, properties,
operations or financial or other condition or the occurrence of any other event
which could have an adverse effect on the collectibility or value of the
Purchased Contracts, in each case immediately upon ascertaining or obtaining
knowledge of any of the foregoing. Each notice pursuant to this subsection shall
be accompanied by a statement of a Responsible Officer setting forth details of
the occurrence referred to therein and stating what action it proposes to take
with respect thereto.
(g) Maintain Interest.
(i) It shall, with respect to any and all Purchased Contracts
and security interests in Vehicles sold hereunder, at its expense,
perform all acts and execute all documents requested by Finco or the
Program Manager, as the case may be, at any time to evidence, perfect,
maintain and enforce the ownership interest and security interest,
respectively, of Finco and the Program Manager therein and the first
priority of such ownership interest and security interest,
respectively. It will, at the request of a duly
12
<PAGE> 16
authorized officer of Finco or the Program Manager, execute and deliver
financing statements evidencing the ownership interest of Finco in all
of the foregoing, which financing statements must be satisfactory in
form and substance to the Program Manager, and the Seller authorizes
Finco to file one or more financing statements signed only by Finco. It
also hereby irrevocably appoints Finco its attorney-in-fact to file one
or more financing statements signed on behalf of the Seller by Finco as
the attorney-in-fact of the Seller.
(ii) It will not, without providing 30 days' notice to Finco
and the Program Manager, and without filing such amendments to any
previously filed financing statements as Finco or the Program Manager
may require, (A) change the location of its chief executive office or
the location of the offices where the documents and records relating to
the Contracts are kept or (B) change its name, identity or corporate
structure in any manner which might make any financing statement or
continuation statement filed by it pursuant to the transactions
contemplated hereby seriously misleading within the meaning of 9-402(7)
of any applicable enactment of the UCC.
(h) Annual Certificate. It will deliver to Finco, the
Collateral Agent and the Program Manager concurrently with the delivery of its
annual financial statements delivered pursuant to subsection (l) of this Section
4.3, a Certificate of a Responsible Officer dated as of a date during the 90-day
period following the end of the immediately preceding fiscal year, either (i)
stating that such action has been taken with respect to the recording,
registering, filing, re-recording, re-registering and re-filing of financing
statements, continuation statements or other instructions or documents as is
necessary to preserve and protect the interest of Finco in and to the Purchased
Contracts and Vehicles and reciting the details of such action or referring to
opinions of counsel in which such details are given and stating what action is
required to be taken in the subsequent 13-month period to preserve and protect
such interest or (ii) stating that no such action is necessary to preserve and
protect such interest.
(i) Credit and Collection Policy. It will (i) at all times
comply with its Credit and Collection Policy, including, but not limited to, its
customary practices with respect to granting rebates and discounts and (ii) not
change the terms of the contracts and agreements relating to the Contracts
(including, without limitation, the terms of sale or the interest rate charged
to any Obligor under any Contract), its normal policies and procedures with
respect to the servicing thereof (including, without limitation, the amount and
timing of finance charges, fees and write-offs) or its Credit and Collection
Policy, except with the prior written consent of CapMAC or as required by any
Requirement of Law (in which case the Servicer shall give CapMAC and the Program
Manager immediate written notice of such Requirement of Law).
(j) Collections. If it receives Collections, it agrees to hold
such Collections in trust for the benefit of Finco and any such Collections
received in the Lock-Boxes shall be transferred to the Clearing Account on the
same Business Day and any Collections received in any other manner shall be
transferred to the Clearing Account on the next Business Day after receipt.
Collections shall be transferred from the Clearing Account to the Collection
Account on the next Business Day after deposit into the Clearing Account.
13
<PAGE> 17
(k) Obligations Under the Contracts and Dealer Assignments. It
will duly fulfill all obligations on its part to be fulfilled under or in
connection with each Contract and Dealer Assignment and will do nothing (except
as may be permitted by Section 4.5 hereof) to impair the rights of Finco in the
Purchased Contracts. It agrees that, for the benefit of Finco, it will continue
to make and pursue claims on the Contracts sold by it hereunder to the extent
that any law, regulation or contractual provision requires that it directly make
and pursue such claims, for the benefit of Finco; provided that the Seller
agrees that it is making and pursuing such claims for the benefit of Finco and
its assignees, and that any funds received by the Seller based on such claims
will be transferred to the Clearing Account within one Business Day of being
received and will thereafter be transferred to the Collection Account on the
next Business Day after deposit into the Clearing Account.
(l) Financial Statements. It will furnish to Finco (with a
copy to the Program Manager):
(i) as soon as available, but in any event within 90 days
after the end of each fiscal year, a copy of its consolidated balance
sheets as at the end of such year and the related statements of income
and retained earnings and of cash flows for such year, setting forth in
each case in comparative form the figures for the previous year,
reported on by PricewaterhouseCoopers or other independent certified
public accountants of nationally recognized standing;
(ii) as soon as available, but in any event not later than 90
days after the end of each of its fiscal years, a copy of its unaudited
consolidating balance sheets as at the end of such year and the related
consolidating statements of income and retained earnings and of cash
flows for such year, setting forth in each case in comparative form the
figures for the previous year, certified by a Responsible Officer as
being fairly stated in all respects;
(iii) as soon as available, but in any event not later than 45
days (or 90 days with respect to the fourth quarter) after the end of
each quarterly period of each of its fiscal years, a copy of its
unaudited consolidated and consolidating balance sheets, as at the end
of such quarter and the related unaudited statements of income and
retained earnings and of consolidated cash flows for such period and
the portion of the fiscal year through the end of such period, setting
forth in each case in comparative form the projected budget amounts for
such period and the figures for the previous year, certified by a
Responsible Officer as being fairly stated in all respects when
considered in relation to its financial statements (subject to normal
year-end audit adjustments); and
(iv) as soon as available, but in any event not later than 30
days after the end of each month of each of its fiscal years, a copy of
its unaudited consolidated balance sheets, as at the end of such period
and the related unaudited statements of income and retained earnings
and of cash flows for such period and the portion of the fiscal year
through the end of such period, setting forth in each case in
comparative form the projected budget amounts for such period and the
figures for the previous year, certified by a Responsible
14
<PAGE> 18
Officer as being fairly stated in all respects when considered in
relation to its financial statements (subject to normal year-end audit
adjustments);
all such financial statements to be complete and correct in all
respects and to be prepared in detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with
prior periods; provided, however, that the unaudited financial
statements referred to in clause (iii) and (iv) above need not contain
footnotes required under GAAP.
(m) Certificates; Other Information. It will furnish to Finco,
with a copy to the Program Manager:
(i) concurrently with the delivery of the financial statements
referred to in clause (i) of paragraph (l) a certificate of its
independent certified public accountants reporting on such financial
statements stating that in making its normal examination for purposes
of its annual audit no knowledge was obtained of any Wind-Down Event or
Unmatured Wind-Down Event, except as specified in such certificate;
(ii) concurrently with the delivery of the financial
statements referred to in clauses (i) and (ii) of paragraph (l) a
certificate of a Responsible Officer stating that during such period it
has observed or performed all of its covenants and other agreements,
and satisfied every condition, contained in this Agreement and the
other Operative Documents to be observed, performed or satisfied by it,
and that such Officer has obtained no knowledge of any Unmatured
Wind-Down Event or Wind-Down Event except as specified in such
certificate; such certificate shall set forth the details of each
Unmatured Wind-Down Event and Wind-Down Event and the action which it
has taken and proposes to take with respect thereto;
(iii) no later than December 15th of each year, projections by
it of its operating budget and cash flow budget on a monthly basis for
the next fiscal year, certified by a Responsible Officer as being
prepared in good faith on the basis of the assumptions stated therein,
which assumptions were reasonable in light of conditions existing at
the time of delivery thereof and represented, at the time of delivery,
as its best estimate of its future financial performance;
(iv) within five Business Days after the same are sent, made
or filed, copies of all financial statements and reports which it may
send to, make to, or file with, the Securities and Exchange Commission
or any state securities commission and any financial statements and
reports which it may send to, make to, or file with, any other
Governmental Authority; and
(v) promptly, such additional financial and other information
as Finco may from time to time reasonably request.
15
<PAGE> 19
(n) Delivery of Other Reports. It will furnish, or instruct
the Servicer to furnish any other reports required to be delivered pursuant to
this Agreement and the other Operative Documents.
(o) Annual Certificate. Concurrently with the delivery of its
financial statements with respect to each fiscal year required to be delivered
pursuant to clauses (i) and (ii) of paragraph (l), it will furnish to Finco and
the Program Manager, a certificate of a Responsible Officer to the effect that
the facts upon which counsel to the Seller relied in giving its legal opinion on
the Closing Date, to the effect that the Seller and Finco would not be
substantively consolidated for purposes of the Bankruptcy Code of 1978, as
amended, have not changed.
(p) Insurance.
(i) It will maintain, or cause to be maintained on its behalf,
with financially sound and reputable insurance companies, insurance on
all its property in at least such amounts and against at least such
risks as are usually insured against in the same general area by
companies engaged in the same or a similar business and furnish to
Finco (with a copy to the Program Manager), at least annually, and
otherwise upon written request, full information as to the insurance
carried. All such insurance policies relating to any Collateral shall
name Finco and the Program Manager as additional insureds and loss
payees, as applicable, and shall provide that Finco and the Program
Manager receive at least 30 days' prior written notice of the
cancellation thereof.
(ii) It will require each Obligor to obtain physical damage
insurance covering the Vehicle as of the execution of the related
Purchased Contract. It will monitor such physical damage insurance with
respect to each Purchased Contract. It will maintain in full force and
effect the Blanket Policy. It will immediately deposit to the
Collection Account all amounts received by it in respect of or as
proceeds of any Insurance Policy.
(q) Merger or Consolidation. It shall not be a party to any
merger, consolidation, or other corporate transaction pursuant to which the
surviving entity or corporate successor is (i) not Onyx Acceptance Corporation,
or (ii) not rated at least investment grade by the Rating Agencies, unless
CapMAC shall have otherwise consented in writing.
(r) Merrill Repurchase Facility. It will furnish to Finco,
with a copy to the Program Manager, concurrently with the delivery thereof to
Merrill Lynch, (1) a copy of all documents executed in connection with the
Merrill Repurchase Facility, (2) a copy of each monthly servicer report
delivered in connection with the Merrill Repurchase Facility, and (3) copies of
all amendments, waivers or other modifications to any documents executed in
connection with such facility.
Section 4.4. Covenants of Servicer. The Servicer covenants
and agrees with Finco and the Program Manager that so long as this Agreement
shall remain in effect:
(a) Corporate Existence. It will preserve and maintain its
existence as a corporation in good standing under the laws of the state of its
incorporation and in every
16
<PAGE> 20
jurisdiction where the failure to maintain such existence or good standing could
adversely affect the rights and interests of Finco or the Program Manager
hereunder, or its ability to perform its obligations hereunder.
(b) Preservation of Electronic Ledger. It will, at its own
cost and expense, (i) retain the electronic ledger used by it as a master record
of the Purchased Contracts and copies of all documents relating to each
Purchased Contract as custodian for Finco, the Program Manager, the Collateral
Agent and other Persons with interests in the Purchased Contracts, (ii) mark
such electronic ledger to the effect that the Purchased Contracts have been
transferred and assigned to Finco and are subject to a security interest in
favor of the Collateral Agent, (iii) arrange for and maintain for the term of
this Agreement an appropriate off-site location for the storage of duplicate or
back-up tapes containing the master record of the Purchased Contracts and
deliver or cause to be delivered on at least a weekly basis to such site, such
duplicate or back-up tapes, (iv) provide or arrange for irrevocable access by
the Program Manager and Finco to the off-site storage facility maintained by the
Servicer pursuant to subsection 4.4(b)(iii) hereof and (v) deliver duplicate or
back-up tapes containing the master record of the Purchased Contracts to the
Program Manager upon request by the Program Manager.
(c) Notices, etc. It will advise Finco and the Program Manager
promptly, in reasonable detail, (i) of any Lien asserted or claim made against
any of the Purchased Contracts of which it obtains knowledge, (ii) of the
occurrence of any breach by it of any of its representations, warranties and
covenants contained herein and (iii) of the occurrence of any other event, which
could have a material adverse effect on its business, properties or financial or
other condition or on the Program or on its ability to perform its obligations
hereunder.
(d) Right of Inspection. It will permit each of Finco and the
Program Manager, and their representatives, at all times to have full and free
access, during normal business hours, to all of its books, correspondence and
records insofar as they relate to the Contracts, the Vehicles or the Files, and
Finco and the Program Manager, and their representatives may examine the same,
take extracts therefrom and make photocopies thereof, and it agrees to render to
Finco and the Program Manager, or their representatives, at its sole cost and
expense such clerical and other assistance as may be reasonably requested with
regard thereto.
(e) Delivery of Notices, Etc. It will deliver or cause to be
delivered to Finco, Triple-A One, the Program Manager and the Collateral Agent,
as the case may be, such notices, documents, reports, certificates and other
documents (i) required to be delivered by it pursuant to the Operative Documents
and (ii) as may be reasonably requested by the Program Manager from time to
time.
(f) Merger or Consolidation. It shall not be a party to any
merger, consolidation, or other corporate transaction pursuant to which the
surviving entity or corporate successor is (i) not Onyx Acceptance Corporation,
or (ii) not rated at least investment grade by the Rating Agencies, unless
CapMAC shall have otherwise consented in writing.
17
<PAGE> 21
(g) FDI Service Agreement. It will maintain the FDI Service
Agreement or a similar agreement with a service provider acceptable to the
Program Manager and the Collateral Agent in full force and effect at all times.
It shall perform its obligations under the FDI Service Agreement and the
Agreement Regarding the Use of FDI's Services for the benefit of the Program
Manager and the Collateral Agent, including, without limitation, the payment of
all fees and expenses thereunder. It shall not amend, terminate or otherwise
modify the FDI Service Agreement without the written consent of the Program
Manager and the Collateral Agent, which shall not be unreasonably withheld.
Section 4.5. Repurchase of Ineligible Contracts. On each
Business Day, the Seller will notify the Servicer and Finco of the aggregate
Outstanding Balances of Purchased Contracts, if any, that are determined to be
Ineligible Contracts as of the preceding Business Day. The Seller shall
repurchase such Ineligible Contracts on the next Determination Date (a
"Repurchase Date") by depositing in the Collection Account the Purchase Price
originally paid by Finco with respect to such Ineligible Contract, plus an
amount equal to the amount of interest (calculated at the rate of interest per
annum as set forth in such Ineligible Contract) that accrued on such Ineligible
Contract from and including the Purchase Date related to such Ineligible
Contract to, but excluding, the Repurchase Date, less an amount equal to the
amount of Collections received by Finco and deposited to the Collection Account
with respect to such Ineligible Contract to, but excluding the Repurchase Date.
On such Repurchase Date upon the payment in full in cash of the Repurchase Price
by the Seller, Finco shall automatically and without further action (other than
the execution and filing of applicable UCC Financing Statements in connection
with the reconveyance of such Ineligible Contract) be deemed to transfer,
assign, set-over and otherwise convey to the Seller, without recourse,
representation or warranty, all the right, title and interest of Finco in and to
such Ineligible Contracts, all monies due or to become due with respect thereto,
and all proceeds thereof.
Section 4.6. Financial Covenants of Seller. The Seller
covenants and agrees with Finco that so long as this Agreement shall remain in
effect:
(a) Ratio of Net Worth to Total Assets. The ratio of Net Worth
to Total Assets shall be at least 15% as of the end of each fiscal quarter.
(b) Minimum Adjusted EBITDA Coverage. The minimum Adjusted
EBITDA Coverage shall be greater than 1.5 as of the end or each fiscal quarter.
(c) Ratio of Securitization Assets to Adjusted Tangible Net
Worth. The ratio of Securitization Assets to Adjusted Tangible Net Worth shall
not be greater than 3:1 as of the end of each fiscal quarter.
(d) Minimum Cash Balance. The Minimum Cash Balance shall be an
amount equal to not less than $ 1,000,000 as of the last day of each calendar
month.
As used in this Section the following terms shall have the following meanings:
18
<PAGE> 22
"Adjusted EBITDA Coverage": The sum of: (1) pre-tax income,
(2) interest expense, (3) amortization of excess servicing asset and (4) other
amortization and depreciation, less any gain on sale recognized according to
FASB 125, divided by interest expense, each of the above listed items as they
appear in the consolidated financial statements of Onyx prepared in accordance
with GAAP.
"Adjusted Tangible Net Worth": The sum of (i) Net Worth and
(ii) Subordinated Debt; provided, however, that Subordinated Debt shall not
exceed 20% of Net Worth.
"Minimum Cash Balance": (a) As of the last day of each
calendar month (other than March, June, September and December), the aggregate
amount of cash on hand or on deposit in banks with respect to Onyx and its
Subsidiaries and (b) as of the last day of each calendar quarter, cash and cash
equivalents as it appears in the consolidated financial statements of Onyx and
its Subsidiaries prepared in accordance with GAAP (and filed with the SEC on
Form 10-Q and 10-K.
"Net Worth": The amount equal to Total Assets minus Total
Liabilities of Onyx and its Subsidiaries on a consolidated basis calculated in
accordance with GAAP minus any intangible assets including inter alia, good
will, franchises and intellectual property.
"Securitization Assets": The sum of: (1) trust receivables and
(2) excess servicing (retained interest in securitized assets net of
amortization), each of the above listed items as they appear in the consolidated
financial statements of Onyx and its Subsidiaries prepared in accordance with
GAAP.
"Subordinated Debt": The total subordinated debt and
non-common equity (i.e. preferred stock) of Onyx and its Subsidiaries on a
consolidated basis having maturities of 3 years or more (pre-amortization).
"Total Assets": All assets which in accordance with GAAP would
be included in determining total assets as shown on the assets side of the
consolidated balance sheet of Onyx and its Subsidiaries.
"Total Liabilities": All liabilities which in accordance with
GAAP would be included in determining total liabilities as shown on the
liability side of the consolidated balance sheet of Onyx and its Subsidiaries.
Section 4.7. Representations and Warranties of Finco. Finco
represents and warrants to the Seller and the Program Manager that, as of the
date hereof and as of each Purchase Date:
(a) Corporate Existence. Finco is a corporation duly
incorporated, validly existing and in good standing under the laws of Delaware
and is duly qualified to do business, and is in good standing in every
jurisdiction in which the nature of its business requires it to be so qualified.
19
<PAGE> 23
(b) Corporate Power; Authorization; Non-Contravention. The
execution, delivery and performance by Finco of this Agreement and all other
agreements, instruments and documents to be delivered by it hereunder, and the
transactions contemplated hereby and thereby, are within Finco's corporate
powers, have been duly authorized by all necessary corporate action, do not
contravene (i) Finco's charter or by-laws, (ii) any Requirement of Law
applicable to Finco or (iii) any Contractual Obligation, and do not result in or
require the creation of any Lien upon or with respect to any of its properties
(other than as contemplated hereunder and under the terms and conditions of the
Operative Documents). This Agreement has been duly executed and delivered on
behalf of Finco.
(c) Enforceable Obligation. This Agreement is the legal, valid
and binding obligation of Finco enforceable against Finco in accordance with its
terms except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforceability of creditors' rights generally and by general equitable
principles (whether considered in a proceeding in equity or at law).
20
<PAGE> 24
ARTICLE V
SELLER NOTE AND SUBORDINATED NOTE
Section 5.1. Seller Note (a) On the Closing Date, Finco shall
issue to the Seller the seller note substantially in the form of Exhibit A (the
"Seller Note"). The principal amount of the Seller Note shall be calculated
pursuant to the Daily Report and, on any day, shall be equal to the Seller
Interest on such day. The Seller Note shall (x) be dated the Closing Date, and
(y) be stated to mature on the Scheduled Maturity Date. Interest on the
principal amount of the Seller Note shall accrue and be payable on each
Determination Date, as provided in the Triple-A One Security Agreement, at a
rate per annum equal to the Seller Note Interest Rate. Accrued but unpaid
interest on Seller Note shall not be capitalized. The principal amount of the
Seller Note shall not be increased after the Commitment Termination Date.
(a) Seller agrees and confirms that the Seller Note represents
solely an obligation of Finco to make certain payments from funds available
under the Triple-A One Security Agreement and only to the extent, in the manner
and at the times set forth in the Triple-A One Security Agreement, and that the
Seller Note does not represent an interest in, and is not secured by, the
Purchased Contracts, the proceeds thereof or any other Collateral.
(b) Finco may at any time and from time to time prepay the
Seller Note, in whole or in part, without premium or penalty.
Section 5.2. Restrictions on Transfer of Seller Note. Neither
the Seller Note nor any right of the Seller to receive any payment thereunder,
shall be assigned, transferred, exchanged, pledged, hypothecated, participated
or otherwise conveyed except with the prior written consent of the Program
Manager, which consent shall not be unreasonably withheld or delayed.
Section 5.3. Subordinated Note. (a) on the Closing Date,
Finco shall issue to the Seller the subordinated note substantially in the form
of Exhibit B (the "Subordinated Note"). The principal amount of the Subordinated
Note shall be calculated pursuant to the Daily Report and, on any day, shall be
equal to the Subordinated Interest on such day; provided, however, that the
principal amount of the Subordinated Note shall be fixed on and not be
recalculated after the Commitment Termination Date; provided, further, that in
no event shall the principal amount of the Subordinated Note calculated pursuant
to the Daily Report at any time exceed the Required Overcollateralization
Amount.
(a) Interest on the principal amount of the Subordinated Note
shall accrue at a rate set forth in the Subordinated Note. Principal and
interest payments on the Subordinated Note may be made to the extent permitted
by the Triple-A One Security Agreement. Principal amounts outstanding on the
Subordinated Note shall increase concurrently with the payment of the Purchase
Price pursuant to the terms of Section 2.3(a)(ii), 2.3(a)(iii) and 2.3(b)
hereof. Principal payments on the Subordinated Note shall become payable only
upon the release of Collateral by the Collateral Agent pursuant to Section 23(b)
of the Triple-A One Security
21
<PAGE> 25
Agreement. Except to the extent permitted by the Triple-A One Security
Agreement, the Seller agrees not to ask, demand, sue for or take or receive from
Finco in cash or other property, by set-off or in any other manner, (including,
without limitation, from or by way of the Collateral), payment of all or any
part of the Subordinated Note.
(b) The Seller agrees upon any distribution of all or any of
the assets of Finco to creditors of Finco upon the dissolution, winding up,
total or partial liquidation, arrangement, reorganization, adjustment,
protection, relief, or composition of Finco or its debts, any payment or
distribution of any kind (including, without limitation, cash, property,
securities and any payment or distribution which may be payable or deliverable
by reason of the payment of any other Debt of Finco being subordinated to the
payment of the Subordinated Note) in respect of the Subordinated Note that
otherwise would be payable or deliverable upon or with respect to the
Subordinated Note, directly or indirectly, by set-off or in any other manner,
including, without limitation, from or by way of the Collateral, shall be paid
or delivered directly to the Collateral Agent for application (in the case of
cash) to or as Collateral (in the case of non-cash property or securities) for
the payment or prepayment in full of, the Obligations (other than the
Subordinated Note) until the Obligations shall have been indefeasibly paid in
full in cash. The Collateral Agent is irrevocably authorized and empowered (in
its own name or in the name of the Seller or otherwise), but shall have no
obligation, to demand, sue for, collect and receive every payment or
distribution referred to in the preceding sentence and give acquittance therefor
and to file claims and proofs of claim and take such other action (including,
without limitation, voting the Subordinated Note and enforcing any security
interest or other lien securing payment of the Subordinated Note) as the
Collateral Agent may deem necessary or advisable for the exercise or enforcement
of any of the rights or interest of Triple-A One. The Seller shall duly and
promptly take such action as the Collateral Agent may request to (i) collect the
Subordinated Note for the account of Triple-A One and to file appropriate claims
or proofs of claim in respect of the Subordinated Note, (ii) execute and deliver
to the Collateral Agent such powers of attorney, assignments or other
instruments as the Collateral Agent may request in order to enable the
Collateral Agent to enforce any and all claims with respect to, and any security
interests and other liens securing payment of, the Subordinated Note, (iii)
collect and receive any and all payments or distributions which may be payable
or deliverable upon or with respect to the Subordinated Note.
(c) All payments or distributions upon or with respect to the
Subordinated Note that are received by the Seller contrary to the provisions of
the Operative Documents shall be received in trust for the benefit of Triple-A
One, shall be segregated from other funds and property held by Seller and shall
be forthwith paid over to the Collateral Agent in the same form as so received
(with any necessary endorsement) to be applied (in the case of cash) to, or held
as Collateral (in the case of non-cash property or securities) for the payment
or prepayment in full of, the Obligations (other than the Subordinated Note)
until the Obligations shall have been indefeasibly paid in full in cash. The
Seller agrees that no payment or distribution to Triple-A One pursuant to the
provisions of the Subordinated Note shall entitle the Seller to exercise any
rights of subrogation in respect thereof against Finco until the Obligations
(other than the Subordinated Note) and all principal and interest under the
Seller Note shall have been indefeasibly paid in full in cash. The Seller and
Finco hereby waive promptness, diligence,
22
<PAGE> 26
notice of acceptance and any other notice with respect to any of the Obligations
and any requirement that the Collateral Agent protect, secure, perfect or insure
any security interest or lien on any property subject thereto or exhaust any
right or take any action against Finco or any other Person or any Collateral.
(d) The Subordinated Note is secured by the Collateral
pursuant to the Subordinated Security Agreement, subject to the prior lien of
the Collateral Agent under the Triple-A One Security Agreement. No payments may
be received, directly or indirectly, by the Seller (and if received, the Seller
agrees to return such payments to Finco) on the Subordinated Note unless Finco
has paid all amounts required pursuant to the Triple-A One Security Agreement to
be paid prior to any payments in respect of the Subordinated Note.
(e) The Seller agrees and confirms that the Collateral Agent
shall not have any duty whatsoever to the Seller as holder of the Subordinated
Note and that the Collateral Agent shall not be liable to the Seller for any
action taken or omitted to be taken with respect to the Subordinated Note.
(f) Prior to the indefeasible payment in full in cash of the
other Obligations, the Seller will not seek to collect any amounts owing under
the Subordinated Note in any manner or exercise or enforce any of its rights
under the Subordinated Security Agreement.
(g) The Seller and Finco further agree that at no time
hereafter will any part of the indebtedness represented by the Subordinated Note
be represented by any negotiable instruments or other writings except the
Subordinated Note.
(h) The Seller and Finco waive notice of and consent to the
creation of the Triple-A One Loans and any of the other Obligations, any
extensions granted or other action taken by Triple-A One, the Surety Provider,
the Program Manager, the Collateral Agent or the Bank Collateral Agent with
respect thereto, the taking or releasing of Collateral or any obligors or
guarantors for the payment thereof, and the releasing of the Seller or any other
subordinated creditors. No failure or delay by Triple-A One, the Surety
Provider, the Program Manager, the Collateral Agent or the Bank Collateral Agent
to exercise any right granted herein, or in any other agreement or by law shall
constitute a waiver of such right or of any other right.
(i) Finco and the Seller agree to execute and deliver to
Triple-A One, the Surety Provider, the Program Manager, the Collateral Agent and
the Bank Collateral Agent such additional documents and to take such further
actions as Triple-A One, the Surety Provider, the Program Manager, the
Collateral Agent or the Bank Collateral Agent may hereafter require.
(j) The terms of the Subordinated Note and the subordination
effected hereby, and the rights of Triple-A One, the Surety Provider, the
Program Manager, the Collateral Agent and the Bank Collateral Agent and the
obligations of the Seller and Finco arising hereunder, shall not be affected,
modified or impaired in any manner or to any extent by (a) any amendment or
modification of or supplement to any provision of the Operative Documents or any
instrument or document executed or delivered pursuant thereto or in connection
with the transactions contemplated thereby; (b) the validity or enforceability
of any of such documents; (c) any
23
<PAGE> 27
exercise or non-exercise of any right, power or remedy under or in respect of
the other Obligations or any instruments or documents related thereto or arising
at law; or (d) any waiver, consent, release, indulgence, extension, renewal,
modification, delay or other action, inaction or omission in respect of the
other Obligations or any of the instruments or documents related thereto.
Section 5.4. Restrictions on Transfer of Subordinated Note.
Neither the Subordinated Note nor any right of the Seller to receive any payment
thereunder, shall be assigned, transferred, exchanged, pledged, hypothecated,
participated or otherwise conveyed; provided, however, that the Seller may
pledge or otherwise transfer the Subordinated Note with the prior written
consent of the Program Manager, which consent shall not be unreasonably withheld
or delayed; provided, further, that any pledgee of the Subordinated Note shall
be bound by all of the terms applicable to the Subordinated Note set forth in
the Operative Documents.
ARTICLE VI
TERMINATION OF COMMITMENT
Section 6.1. Termination. (a) Subject to the payment of any
and all fees required to be paid pursuant to the Fee Letter Agreement, the
Seller may terminate the Triple-A One Commitment at any time by giving ten
Business Days prior written notice to Finco and the Program Manager provided,
however, that such termination shall not become effective until five Business
Days after all of the Commercial Paper has matured and has been paid in full in
cash.
(a) The Triple-A One Commitment shall terminate on the
Commitment Termination Date.
Section 6.2. Remedies. (a) On the Commitment Termination
Date, all purchases by, and sales to, Finco of Contracts hereunder shall
immediately cease.
(a) On and after the Commitment Termination Date, Finco shall
have, in addition to all other rights under this Agreement, all rights and
remedies provided under any applicable law.
(b) On and after the Commitment Termination Date, Finco shall
continue to maintain its interest in all Purchased Contracts created prior to
such date and all amounts received as payments on Purchased Contracts will
continue to be paid to Finco.
ARTICLE VII
INDEMNIFICATION, ADDITIONAL COSTS AND INSPECTION
Section 7.1. Indemnities. (a) Without limiting any other
rights that Finco may have hereunder or under applicable law, the Seller hereby
agrees to indemnify Finco and its directors, employees, officers and successors
and assigns (collectively, the "Indemnified Parties") from and against any and
all damages, losses, claims, liabilities and related costs and expenses,
including all attorneys' fees and disbursements (all of the foregoing being
collectively referred to as the "Indemnified Amounts"), awarded against or
incurred by any of them arising out of or as a result of this Agreement, the
Operative Documents or Finco's ownership of any
24
<PAGE> 28
Purchased Contracts, excluding, however, recourse (except as otherwise
specifically provided in this Agreement) for uncollectible Purchased Contracts.
Without limiting the generality of the foregoing, the Seller shall indemnify the
Indemnified Parties for all Indemnified Amounts relating to or resulting from:
(i) the transfer of an ownership interest in any Contract
other than an Eligible Contract;
(ii) reliance on any representation or warranty made by the
Seller (or any of its Responsible Officers) or the Servicer (or any of
its Responsible Officers), if the Seller or any Affiliate of the Seller
is acting as the Servicer, under or in connection with the Operative
Documents, and any information or report delivered by the Seller
pursuant hereto, which shall have been false or incorrect in any
material respect when made or deemed made;
(iii) the failure by the Seller to comply with any applicable
law, rule or regulation with respect to any Purchased Contract or the
nonconformity of any Purchased Contract with any such applicable law,
rule or regulation;
(iv) the failure to vest and maintain vested in Finco or to
transfer to Finco, legal and equitable title to and ownership of, an
ownership interest in the Contracts that are, or are intended to be,
Purchased Contracts, together with all proceeds thereof, including,
without limitation, all Collections and other items that constitute
proceeds, free and clear of any Lien whether existing at the time of
the Purchase of such Contract or at any time thereafter;
(v) the failure to file, in a timely manner, financing
statements or other similar instruments or documents required under the
UCC in effect in the state in which the Seller's principal place of
business is located or the location of the Collateral as required under
such law or other applicable laws with respect to any Contracts sold to
Finco, whether at the time of any Purchase or at any subsequent time;
(vi) any defense, setoff, counterclaim, recoupment or
reduction of liability whatsoever under any Purchased Contract, arising
out of a breach by the Seller of any obligation under such Purchased
Contract or arising out of any other agreement, indebtedness or
liability at any time owing to or in favor of any other Person from the
Seller (it being understood that all such obligations of the Seller
shall be and remain enforceable against and only against the Seller and
shall not be enforceable against Finco);
(vii) any failure of the Seller to perform its duties or
obligations in accordance with the provisions of this Agreement;
(viii) any products liability claim or personal injury or
property damage suit or other similar or related claim or action of
whatever sort arising out of or in
25
<PAGE> 29
connection with merchandise or services which are the subject of any
Purchased Contract or any Vehicle;
(ix) the failure by the Seller to pay when due any taxes
payable by it, including without limitation, franchise taxes and sales,
excise or personal property taxes payable in connection with the
Contracts;
(x) the failure by the Seller or the Servicer (if the Servicer
is the Seller or an Affiliate of the Seller) to be duly qualified to do
business, to be in good standing or to have filed appropriate
fictitious or assumed name registration documents in any jurisdiction;
(xi) the commingling of Collections at any time with other
funds;
(xii) the failure of any Lock-Box Bank or the Clearing Account
Bank to remit any amounts held in its Lock-Box or in the Clearing
Account as the case may be pursuant to the instructions of the Servicer
or the Collateral Agent, whether by reason of the exercise of setoff
rights or otherwise; and
(xiii) any repayment by Finco which is required by law, or
which Finco, Triple-A One or the Collateral Agent believes in good
faith is required by law (as a preference or otherwise) of an amount
that previously caused a reduction in principal amount of the Seller
Note and any interest thereon required or believed in good faith by
Finco, Triple-A One or the Collateral Agent to be required.
Notwithstanding the foregoing, Finco hereby agrees that under no circumstances
shall the Seller be liable for, or required to pay any Indemnified Amount, other
than as set forth in Section 4.5, resulting from, (i) the credit risk of an
Obligor, or for which payment therefor would otherwise constitute recourse to
the Seller for an uncollectible Contract or Contracts or (ii) gross negligence
or willful misconduct on the part of the Indemnified Party to which such
Indemnified Amount would otherwise be due.
(b) Any Indemnified Amount due hereunder shall be payable on
demand.
Section 7.2. Rights of Inspection. Finco and its
representatives and assigns, including without limitation the Program Manager
and the Surety Provider shall at all times have full and free access during
normal business hours (a) to the Seller's officers and independent accountants
in order to discuss the affairs, finances and accounts of the Seller insofar as
they relate to the Contracts, the Files and/or the Vehicles and the transactions
contemplated hereby and (b) to all the books, correspondence and records of the
Seller insofar as they relate to the Contracts, the Files and/or the Vehicles
and the transactions contemplated hereby, and Finco and its representatives and
assigns, including without limitation the Program Manager and the Surety
Provider may examine the same, take extracts therefrom and make photocopies
thereof, and the Seller agrees to render to Finco, and its representatives and
assigns, including without limitation the Program Manager and the Surety
Provider, at the Seller's sole cost and expense, such clerical and other
assistance as may be requested with regard thereto.
26
<PAGE> 30
ARTICLE VIII
THE SERVICER
Section 8.1. Appointment of Servicer. Finco hereby appoints
the Seller to act as servicer of the Purchased Contracts in the name of and on
behalf of Finco in accordance with the provisions hereof and the Seller hereby
accepts such appointment. The Servicer shall use reasonable care in performing
its duties as servicer hereunder and, without limiting the foregoing, shall
service the Purchased Contracts in accordance with the Credit and Collection
Policy, attached hereto as Schedule 8.1.
Section 8.2. Collections. (a) On each Business Day, all
Collections received in any Lock-Box shall be transferred to the Clearing
Account on such Business Day. All Collections received by the Servicer in any
other manner shall be transferred to the Clearing Account on the next Business
Day following receipt and until so transferred, the Servicer shall hold such
cash and other items in trust for the benefit of Finco. All Collections in the
Clearing Account shall be transferred to the Collection Account on the next
Business Day after such Collections are transferred into the Clearing Account.
(a) The Servicer will, at the Servicer's cost and expense and
as agent in the name of and on behalf of Finco, but subject at any time to the
right of Finco to direct and control, endeavor to collect, as and when the same
becomes due, all amounts owing on each Purchased Contract. In the event of
default by an Obligor under any Purchased Contract, the Servicer shall have the
power and authority, on behalf of Finco, to take such action in respect of such
Purchased Contract and the Vehicle related thereto as the Servicer, in the
absence of contrary instructions from Finco, may deem advisable, including the
power to sell such Purchased Contract. In the enforcement or collection of any
Purchased Contract, the Servicer shall be entitled to sue thereon in its own
name or as agent for Finco, in either case, for the account of Finco.
(b) In the event the Servicer accepts in payment of any
Purchased Contract the taking of repossession of the Vehicle, the Servicer
agrees to use its reasonable efforts to resell such Vehicle for the account of
Finco and shall remit to Finco the gross sale proceeds thereof, net of any costs
incurred by any Person with respect to any such repossession and resale. Finco
shall have no obligation to take any action or commence any proceedings to
realize upon any Purchased Contract or to enforce any of its rights or remedies
with respect thereto. Any moneys collected by the Servicer pursuant to this
subsection shall be segregated by the Servicer, held in trust by the Servicer
for Finco and shall be remitted to the Collection Account on the Business Day of
receipt thereof by the Servicer.
Section 8.3. Maintenance of Records; Quarterly and Annual
Reports. (a) The books of account and other records pertaining to the Purchased
Contracts are the property of Finco. Finco agrees that the Servicer shall hold
such records as Finco's agent. The Servicer shall maintain all books of account
and other records pertaining to the Purchased
27
<PAGE> 31
Contracts in such form as will enable Finco or the Program Manager or their
designees to determine at any time the status of the Purchased Contracts. The
Servicer will permit Finco or the Program Manager and any Person designated by
Finco or the Program Manager, during regular business hours, to inspect, audit,
check and make abstracts from all books, accounts, records, or other papers
pertaining to such Purchased Contracts. From time to time, at the request of
Finco or the Program Manager, the Servicer, at its own expense, will deliver to
Finco and the Program Manager and any Person designated by Finco or the Program
Manager any records and invoices pertaining to the Purchased Contracts and
evidence thereof as Finco or the Program Manager or such designee may deem
necessary to enable it to enforce its rights thereunder. In addition, at the
request of Finco or the Program Manager after delivery of a Servicer Termination
Notice, the Servicer will deliver all such records and invoices pertaining
thereto (including bills of lading) and other evidence thereof to any Person
selected by the Program Manager. Whether or not any such item is the property of
Finco, each computer record, invoice, ledger card, account record or other
evidence of, or record relating to, the Purchased Contracts maintained at the
office of the Servicer or the office of Seller, if requested by Finco or the
Program Manager, will be marked as the Program Manager may direct. Upon request
of the Program Manager, the Servicer will segregate from all other Contracts
then owned or being serviced by the Servicer all documents relating to the
Purchased Contracts and will hold in trust (if such document is not owned by
Finco) and safely keep such documents in separate filing cabinets or other
suitable containers marked to show Finco's interest with such legend as shall be
specified by the Program Manager and maintained in such place or places as shall
be designated by the Program Manager.
(a) The Servicer will deliver to Finco and the Program Manager
and any Person designated by the Program Manager, within 45 days after the end
of each fiscal quarter of the Servicer, a certificate of a Responsible Officer
of the Servicer stating that (a) a review of the activities of the Servicer
during the preceding fiscal quarter and of its performance under this Agreement
was made under the supervision of the officer signing such certificate and (b)
based on such review, the Servicer has fully performed all its obligations under
this Agreement throughout such period (including its obligations to prepare and
deliver each Investor Report, Daily Report and Monthly Report) in compliance
with the terms of this Agreement, or, if there has been a default in the
performance of any such obligation, specifying each such default known to such
officer and the nature and status thereof.
(b) The Servicer, at its expense, will cause a firm of
independent public accountants satisfactory to the Program Manager to furnish a
report (the "Annual Report") to Finco and the Program Manager and any Person
designated by the Program Manager, on or before March 31st of each year,
beginning on March 31, 1995, stating that such firm has examined certain
documents and records relating to the servicing of the Contracts during the
preceding fiscal year and that such examination, which has been conducted
substantially in accordance with audit guides or audit programs generally
recognized to be applicable to audits of receivables similar to the Contracts,
has disclosed no items of noncompliance with the provisions of this Agreement
throughout such period which, in the opinion of such firm, are material, except
for such items of non-compliance as shall be set forth in such report.
28
<PAGE> 32
Section 8.4. Servicing Fee. On each Determination Date, to
the extent provided for in the Triple-A One Security Agreement, as full
compensation for its servicing activities hereunder, the Servicer shall be
entitled to receive the Servicing Fee.
Section 8.5. Resignation; Sub-Contracting. (a) The obligation
of the Servicer to service the Purchased Contracts is personal to the Servicer
and the parties recognize that another Person may not be qualified to perform
such obligations. Accordingly, the Servicer's obligation to service the
Purchased Contracts hereunder shall be specifically enforceable and shall be
absolute and unconditional in all circumstances, including, without limitation,
after the occurrence and during the continuation of any Servicer Termination
Event hereunder; provided, however, that a Successor Servicer may be appointed
pursuant to Section 8.12 hereof.
(a) The Servicer shall not resign from the obligations and
duties hereby imposed on it as Servicer except upon determination that (i) the
performance of its duties hereunder is no longer permissible under any
applicable law and (ii) there is no reasonable action which the Servicer could
take to make the performance of its duties hereunder permissible under any such
applicable law. Any determination permitting the resignation of the Servicer
shall be evidenced as to clause (i) above by an opinion of counsel to such
effect delivered to Finco and the Program Manager. Except to the extent
inconsistent with any such applicable law, no such resignation shall become
effective until a Successor Servicer shall have assumed the responsibilities and
obligations of the Servicer in accordance with Section 8.12 hereof.
(b) If the performance of its duties hereunder is no longer
permissible under applicable law or the cost of such performance is such that
its continuation as Servicer is not warranted as a financial matter, the
Servicer may, with the prior written consent of the Program Manager, subcontract
with any other Person to service, administer or collect the Purchased Contracts,
provided that the Person with whom the Servicer so subcontracts shall not become
the Servicer hereunder and the Servicer shall remain liable for the performance
of the duties and obligations of the Servicer pursuant to the terms hereof.
Section 8.6. Termination. The Servicer's obligations under
this Agreement shall terminate upon the termination of the Triple-A One Credit
Agreement; provided, however, that the Servicer shall continue to be obligated
to do all things necessary to apply Collections on the Purchased Contracts that
it receives after such termination in the manner provided in this Agreement and
to perform its obligations hereunder with respect thereto. Upon termination of
this Agreement all authority and power granted to the Servicer under this
Agreement shall pass to and be vested in Finco. The Servicer shall transfer (i)
its electronic records relating to the Purchased Contracts to Finco in such
electronic form as Finco may reasonably request, (ii) all other records,
correspondence and documents to Finco in the manner and at such times as Finco
may reasonably request, (iii) at Finco's expense, upon the request of Finco,
notify all Obligors that the Servicer is no longer the Servicer, (iv) at Finco's
expense, take all such further action as Finco shall reasonably request to
effect the termination of the rights of the Servicer to conduct servicing
hereunder, including, without limitation, the transfer to Finco of all authority
of the Servicer to (A) service Purchased Contracts as provided hereunder, and
(B)
29
<PAGE> 33
receive Collections which shall on the date of such termination be held by
the Servicer for deposit or which shall thereafter be received with respect to
any Purchased Contract.
Section 8.7. Delivery of Investor Report. On each
Determination Date, the Servicer shall deliver to Finco and the Program Manager,
no later than 9:00 A.M. (New York City time) on such Determination Date, a
report, substantially in the form of Exhibit F (the "Investor Report"), together
with a certificate, substantially in the form of Exhibit G (the "Servicer's
Certificate"), covering the Determination Period immediately preceding such
Determination Date.
Section 8.8. Daily Report. No later than 9:00 A.M. (New York
City time) on each Payment Date, the Servicer shall deliver a report,
substantially in the form of Exhibit H (the "Daily Report"), to Finco and the
Program Manager, together with a Servicer's Certificate.
Section 8.9. Monthly Report. No later than 9:00 A.M. (New
York City time) on each Determination Date, the Servicer shall deliver a report,
substantially in the form of Exhibit I (the "Monthly Report") to Finco and the
Program Manager, together with a Servicer's Certificate, covering the
Determination Period immediately preceding such Determination Date.
Section 8.10. Servicer Termination Events. If any of the
following events (each a "Servicer Termination Event") shall have occurred and
be continuing:
(a) the Servicer shall fail to make any payment, transfer or
deposit required to be made hereunder within two Business Days of the date on
which such payment, transfer or deposit is due to be made;
(b) the Servicer shall fail to give any notice within three
Business Days after the same is required to be given hereunder;
(c) the Servicer shall fail to submit (i) an Investor Report
or a Monthly Report within three Business Days of the day on which such report
shall have been required to be submitted, (ii) a Daily Report within one
Business Day of the day on which such report is required to be submitted or
(iii) an Annual Report within 10 days of the day on which such Annual Report
shall have been required to be submitted;
(d) the Servicer shall fail to observe or perform any other
covenant or agreement applicable to it contained herein and such failure shall
remain unremedied for a period of 10 days;
(e) the Servicer shall enter a corporate transaction in breach
of the covenant at Section 4.4(f) hereof;
(f) any representation, warranty, certification or statement
made by the Servicer in this Agreement or in any certificate, financial
statement or other document delivered pursuant to this Agreement shall prove to
have been incorrect in any material respect when made;
30
<PAGE> 34
(g) a Bankruptcy Event shall have occurred with respect to the
Servicer;
(h) the Wind-Down Date shall have occurred;
then, the Program Manager may, in its discretion, terminate the Servicer by
giving five Business Days notice thereof in writing to the Servicer and Seller
which notice shall state the effective date of such termination (a "Servicer
Termination Notice"). On and after the effective date stated in a Servicer
Termination Notice, the Program Manager may, in its discretion, implement a
Complete Servicing Transfer.
Section 8.11. Servicer Termination. (a) After the Program
Manager gives the Servicer a Servicer Termination Notice, (i) prior to the
appointment of a Successor Servicer pursuant to Section 8.12, the Program
Manager may administer the administrative, servicing and collection functions of
the Servicer in any manner it deems fit, (ii) the Program Manager shall, at any
time thereafter, be entitled to notify the Obligors on any Purchased Contracts
to make payment of amounts due thereunder directly to Finco or the Program
Manager or as the Program Manager may direct and (iii) the Servicer shall, at
its own expense, (A) if so requested by the Program Manager, endorse each
instrument that is payable to the Servicer, if any, evidencing any Purchased
Contract to the Program Manager in such manner as the Program Manager shall
direct and (B) perform any and all acts and execute any and all documents as may
be reasonably requested by the Program Manager in order to effect the purposes
of this Agreement. After receipt by the Servicer of a Servicer Termination
Notice, if the Program Manager does not elect to replace the Servicer with a
Successor Servicer, the Program Manager shall have the right to appoint a firm
of public accountants or any other Person the Program Manager may choose, to
monitor the servicing of the Purchased Contracts by the Servicer and to furnish
to Finco, at the expense of the Servicer, such letters, certificates or reports
thereon as the Program Manager shall reasonably request. The Servicer shall
cooperate with such firm in the subsequent monitoring of its servicing of the
Purchased Contracts pursuant to this Agreement and any fees and expenses in
connection therewith shall be paid by the Servicer.
(a) After receipt by the Servicer of a Servicer Termination
Notice, if the Program Manager elects to appoint a Successor Servicer, then:
(i) On the date that a Successor Servicer shall have
been appointed by the Program Manager pursuant to Section 8.12, all
authority and power of the then Servicer under this Agreement shall
pass to and be vested in such Successor Servicer, and, without
limitation, the Program Manager is hereby authorized and empowered to
execute and deliver on behalf of the Servicer, as attorney-in-fact or
otherwise, all documents and other instruments upon the failure of the
Servicer to execute or deliver such documents or instruments, and (upon
the failure of the Servicer to cooperate) to do and accomplish all
other acts or things necessary or appropriate to effect the purposes of
such transfer of servicing rights.
(ii) The Servicer agrees to cooperate with the
Program Manager and the Successor Servicer in effecting the termination
of the responsibilities and rights of the Servicer to conduct servicing
hereunder, including, without limitation, the transfer to
31
<PAGE> 35
such Successor Servicer of all authority of the Servicer to service the
Purchased Contracts provided for under this Agreement, including,
without limitation, all authority to receive Collections which shall on
the date of transfer be held by the Servicer for deposit, or which
shall thereafter be received with respect to the Purchased Contracts.
(iii) The Servicer shall promptly transfer duplicate,
back-up, or original tapes, and all other electronic media constituting
all of its electronic records relating to the Purchased Contracts and
records relating to the Commercial Paper Notes to the Successor
Servicer in such electronic form as the Successor Servicer may
reasonably request and shall promptly transfer to the Successor
Servicer all other records, correspondence and documents necessary for
the continued servicing of the Purchased Contracts in the manner and at
such times as the Successor Servicer shall reasonably request.
(iv) At any time following the appointment of a
Successor Servicer, such Successor Servicer shall be authorized to take
any and all steps in the name of the previous Servicer and on behalf of
the previous Servicer necessary or desirable, in the determination of
such Successor Servicer, to collect all amounts due under any and all
Purchased Contracts, including, without limitation endorsing the name
of the previous Servicer on checks and other instruments representing
Collections, and enforcing the Purchased Contracts.
Section 8.12. Appointment of Successor Servicer. (a) On and
after the receipt by the Servicer of a Servicer Termination Notice, the Servicer
shall continue to perform all servicing functions under this Agreement until the
later of (i) the appointment of a Successor Servicer or (ii) the date specified
in the Servicer Termination Notice or otherwise specified by the Program Manager
in writing or, if no such date is specified in the Servicer Termination Notice,
until a date mutually agreed upon by the Servicer and the Program Manager. The
Program Manager shall (as promptly as possible after the giving of a Servicer
Termination Notice) appoint a successor servicer (the "Successor Servicer") and
such Successor Servicer shall accept its appointment by a written assumption in
a form acceptable to the Program Manager.
(a) Upon its appointment, the Successor Servicer shall be the
successor in all respects to the Servicer with respect to servicing functions
under this Agreement and shall be subject to all the responsibilities, duties
and liabilities relating thereto placed on the Servicer by the terms and
provisions hereof, and all references in this Agreement to the Servicer shall be
deemed to refer to the Successor Servicer. Any Successor Servicer, by its
acceptance of its appointment, will automatically agree to be bound by the terms
and provisions of the Liquidity Agreement, if any are applicable. Any Successor
Servicer shall make all representations and warranties that the Servicer makes
hereunder.
(b) In connection with such appointment and assumption, the
Program Manager may, subject to the provisions of the Triple-A One Security
Agreement, make arrangements for the payment of the Servicing Fee to the
Successor Servicer.
ARTICLE IX
MISCELLANEOUS
32
<PAGE> 36
Section 9.1. Notices, Etc. Except where telephonic
instructions or notices are authorized herein to be given, all notices, demands,
instructions and other communications required or permitted to be given to or
made upon any party hereto shall be in writing and shall be personally delivered
or sent by overnight courier service or by registered, certified or express
mail, postage prepaid, return receipt requested, or by facsimile copy, or
telegram (with messenger delivery specified in the case of a telegram) and shall
be deemed to be delivered for purposes of this Agreement on (a) the second
Business Day following the day on which such notice was placed in the custody of
the U.S. Postal Service, (b) the next Business Day following the day on which
such notice was placed in the custody of any overnight courier service,
including express mail service or (c) the same Business Day on which such notice
is sent by telegram, messenger or facsimile. Unless otherwise specified in a
notice sent or delivered in accordance with the foregoing provisions of this
subsection, notices, demands, instructions and other communications in writing
shall be given to or made upon the respective parties hereto at their respective
addresses (or to their respective facsimile numbers) indicated below, and, in
the case of telephonic instructions or notices, by calling the telephone number
or numbers indicated for such party below:
If to the Seller: Onyx Acceptance Corporation
8001 Irvine Center Drive
Irvine, California 92618
Attention: Executive Vice President
Tel. No.: (949) 790-5600
Telecopier No.: (949) 450-5530
If to the Servicer: Onyx Acceptance Corporation
8001 Irvine Center Drive
Irvine, California 92618
Attention: Executive Vice President
Tel. No.: (949) 790-5600
Telecopier No.: (949) 450-5530
If to Finco: Onyx Acceptance Financial Corporation
8001 Irvine Center Drive
Irvine, California 92618
Attention: Chief Financial Officer
Tel. No.: (949) 790-5600
Telecopier No.: (949) 450-0338
33
<PAGE> 37
If to the
Program Manager: CapMAC Financial Services, Inc.
885 Third Avenue
New York, New York 10022
Attention: Chief Underwriting Officer
Tel. No.: (212) 755-1155
Telecopier No.: (212) 755-5462
A copy of any notice delivered to or required to be sent by
the Seller or Servicer hereunder shall be sent by the Seller or the Servicer to
the holder of the Subordinated Note.
Section 9.2. Successors and Assigns. This Agreement shall be
binding upon the parties hereto and their respective successors and assigns and
shall inure to the benefit of the parties hereto and their respective successors
and assigns; provided that the Seller shall not assign any of its rights or
obligations hereunder without the prior written consent of Finco and the Program
Manager. Except as expressly permitted hereunder or in the Operative Documents,
Finco shall not assign any of its rights or obligations hereunder without the
prior written consent of the Program Manager.
Section 9.3. Confirmation of Intent; Security Interest. The
parties hereto intend that the transfers to Finco by the Seller of Purchased
Contracts, all monies due or to become due with respect thereto and all
collateral security therefor, all proceeds of the foregoing, including, without
limitation, all Recoveries, as provided for herein be treated under applicable
state law and federal bankruptcy law, at all times and in each case, as absolute
and complete sales by the Seller to Finco; provided, however, that if for any
reason any such transfer is not considered a sale, the Seller hereby grants to
Finco a security interest in all such transferor's right, title and interest in
the Purchased Contracts and all other assets transferred to Finco pursuant to
Sections 2.1(a) and 2.1(b) hereof, as collateral security for the repayment by
the Seller of a loan in the amount of the aggregate Purchase Price paid to it.
Section 9.4. Payments. All payments made hereunder, except as
provided for in Section 2.3(b) hereof, shall be made by 9:00 a.m. (New York City
time) on the day provided for herein. Amounts not paid when due under this
Agreement shall bear interest until paid in full at a rate equal at all times to
the lesser of (a) the Default Rate and (b) the maximum rate permitted by
applicable law, payable on demand. Whenever any payment to be made under this
Agreement shall be stated to be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day.
Section 9.5. Rights to Enable Successor Servicing. For the
purpose of enabling Finco or a Successor Servicer to perform the functions of
servicing and collecting the Purchased Contracts upon a Complete Servicing
Transfer, the Servicer shall on or prior to the Closing Date execute and deliver
the On-Line Service Agreement, as set forth on Schedule 9.5. The Servicer hereby
represents and warrants to Finco that such On-Line Service Agreement embodies
all rights and properties necessary or appropriate for the servicing and
collecting functions with respect to Purchased Contracts and hereby covenants
that to the extent Finco or the Collateral Agent deem it necessary or
appropriate, it will immediately transfer, assign and set
34
<PAGE> 38
over to Finco, the Collateral Agent or such party as the Collateral Agent shall
designate any other rights or assets upon the occurrence of a Wind-Down Event to
enable and ease successor servicing hereunder.
Section 9.6. Costs; Expenses and Taxes. In addition to the
rights of indemnification granted pursuant to Section 7.1 hereof, the Seller
agrees to pay on demand to Finco (a) all costs and expenses in connection with
the development, preparation, execution, delivery and administration (including
periodic auditing by Finco or its agents or representatives) of this Agreement,
and the other Operative Documents, including, without limitation, the reasonable
fees and expenses of counsel for any Indemnified Party with respect hereto and
with respect to advising any such Indemnified Party as to their respective
rights and remedies under this Agreement, and (b) all costs and expenses, if any
(including reasonable counsel fees and expenses), in connection with the
enforcement of this Agreement, and the other Operative Documents.
Section 9.7. Severability Clause. Any provisions of this
Agreement which are prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provisions in any other jurisdiction.
Section 9.8. Amendments; Governing Law; JURY TRIAL WAIVER.
This Agreement and the rights (including those of the Program Manager and the
Collateral Agent) and obligations of the parties hereunder (a) may not be
changed orally but only by an instrument in writing signed by the party against
which enforcement is sought and (b) shall be construed in accordance with and
governed by the laws of the State of New York. No amendment shall be effective
without prior written notice thereof to S&P and Moody's. EACH PARTY HERETO
HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING (ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR BY ANY OF THE OTHER OPERATIVE DOCUMENTS) IN
WHICH THEY SHALL BE ADVERSE PARTIES.
Section 9.9. No Recourse. Except as otherwise expressly
provided in Section 4.5 and 7.1 of this Agreement, it is understood and agreed
that the Seller shall not be liable for the payment of the principal of the
Loans, or any Commercial Paper or for the payment of any business taxes or for
any losses suffered by Finco in respect of ownership of the Purchased Contracts.
The preceding sentence shall not relieve the Seller from any liability hereunder
with respect to its representations, warranties, covenants and other payment and
performance obligations herein described. The Seller is not making any
representations or warranties regarding the collectibility of the Purchased
Contracts or the future performance of the Obligors under the Purchased
Contracts.
Section 9.10. Further Assurances. The Seller agrees to do
such further acts and things and to execute and deliver to Finco such
assignments, agreements, powers and
35
<PAGE> 39
instruments as may be necessary or desirable in order for Finco to carry into
effect the purposes of this Agreement and the other Operative Documents or to
better assure and confirm unto Finco its rights, powers and remedies hereunder
and under the other Operative Documents, including, without limitation, to
record, notify, obtain consents and file and to re-record, re-notify, re-obtain
consents and re-file all such documents and instruments, at such time or times,
in such manner and at such places, all as may be necessary to preserve and
protect the position of the Seller or Finco, as the case may be, hereunder and
under the other Operative Documents. This covenant shall survive the termination
of this Agreement.
Section 9.11. Termination. This Agreement shall terminate on
the later of (a) the date after the Commitment Termination Date of the payment
in full of all amounts due hereunder and the performance of all obligations
hereunder and (b) the date on which the Triple-A One Credit Agreement is
terminated; provided, however, that all representations, warranties, remedies
and indemnities of the Seller herein, and the agreements of the Seller made
pursuant to Section 9.15 hereof shall survive the termination of this Agreement.
Section 9.12. Assignment to Program Manager. Finco hereby
assigns to the Program Manager, all of its rights hereunder, including, without
limitation, the rights of Finco under Section 6.2. The Seller consents to such
assignment and agrees that the Program Manager shall be entitled to enforce this
Agreement directly against the Seller. In addition, Finco agrees to act as agent
on behalf of the Program Manager and shall not consent or agree to any waiver,
amendment or other modification of this Agreement or any of the other Operative
Documents to which it is a party without the Program Manager's prior written
consent, and shall take and refrain from taking any action, and shall exercise
and refrain from exercising any of its rights under the Operative Documents as
requested by the Program Manager from time to time, including, without
limitation, the right to deliver a Servicer Termination Notice.
Section 9.13. Counterparts. This Agreement may be executed in
any number of counterparts, and by the different parties hereto on the same or
separate counterparts, each of which shall be deemed to be an original
instrument.
Section 9.14. Headings. Section headings used in this
Agreement are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement.
Section 9.15. No Bankruptcy Petition Against Finco. The Seller
covenants and agrees that prior to the date which is one year and one day after
the payment in full of all Commercial Paper issued by, and all Triple-A One
Loans made by, Triple-A One and all other obligations under the Operative
Documents it will not institute against, or join any other Person in instituting
against, Finco any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any federal or state
bankruptcy or similar law.
36
<PAGE> 40
IN WITNESS WHEREOF, the Seller and Finco have caused this Sale
and Servicing Agreement to be duly executed by their duly authorized officers,
all on the day and year first above written.
ONYX ACCEPTANCE CORPORATION,
as Seller and Servicer
By:______________________________
Name:
Title:
ONYX ACCEPTANCE FINANCIAL CORPORATION
By:______________________________
Name:
Title:
Acknowledged and Agreed:
CAPMAC FINANCIAL SERVICES, INC.,
as Program Manager
By:______________________________
Name:
Title:
37
<PAGE> 41
EXHIBIT A
SELLER NOTE
New York, New York
September 12, 1994
ONYX ACCEPTANCE FINANCIAL CORPORATION, a Delaware corporation
("Finco"), hereby promises to pay to the order of ONYX ACCEPTANCE CORPORATION, a
California corporation (the "Seller"), the principal amount of this Seller Note,
determined as described below, together with interest thereon equal to the
Seller Note Interest Rate in lawful money of the United States of America.
Capitalized terms used herein but not defined herein shall have the meanings
assigned to such terms in the Definitions List, dated as of the date hereof,
entered into in connection with the Sale and Servicing Agreement, dated as of
September 8, 1994, between the Seller and Finco (such agreement, as it may from
time to time be amended, supplemented or otherwise modified in accordance with
its terms, the "Sale Agreement").
The principal amount of this Seller Note at any time shall be
determined in accordance with the provisions of Section 5.1 of the Sale
Agreement. All principal and accrued interest on this Seller Note shall be due
and payable on the Scheduled Maturity Date; provided, however, that, no payments
may be made, directly or indirectly, on this Seller Note (and if made, the
Seller agrees to return such payments to Finco) until Finco has paid all amounts
required pursuant to the Triple-A One Security Agreement to be paid prior to any
payments in respect of this Seller Note. This Seller Note represents solely an
obligation of Finco to make certain payments from funds available under the
Triple-A One Security Agreement and only to the extent, in the manner and at the
times set forth in the Triple-A One Security Agreement. This Seller Note does
not represent a security interest in the Collateral.
Payments of principal of and interest on this Seller Note
shall be made by wire transfer of immediately available funds to such account of
the Seller as the Seller may designate in writing.
This Seller Note is the Seller Note referred to in the Sale
Agreement.
Finco hereby waives diligence, presentment, demand, protest
and notice of any kind whatsoever. The nonexercise by the holder of any of its
rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.
All amounts evidenced by this Seller Note and all payments and
prepayments of the principal hereof and the respective dates and maturity dates
thereof shall be endorsed by the holder hereof on Schedule 1 attached hereto and
made a part hereof or on a continuation thereof which shall be attached hereto
and made a part hereof, or otherwise recorded by such holder in its internal
records; provided, however, that the failure of the holder hereof to make such a
<PAGE> 42
notation or any error in such a notation shall not affect the obligations of
Finco under this Seller Note.
It is the intention of Finco and the Seller to conform
strictly to applicable usury laws. Accordingly, if the transactions contemplated
hereby would be usurious under applicable law (including the laws of the State
of New York and the laws of the United States of America), then, in that event,
notwithstanding anything to the contrary in any agreement entered into in
connection with this Seller Note, it is agreed as follows: (i) the aggregate of
all consideration that constitutes interest under applicable law that is taken,
reserved, contracted for, charged or received under this Seller Note or any
other agreement or document executed in connection with this Seller Note shall
under no circumstances exceed the maximum amount of interest allowed by
applicable law, and any excess shall be credited to other amounts due under this
Seller Note by the holder hereof (or if this Seller Note shall have been paid in
full, refunded to Finco); and (ii) in the event that the maturity of this Seller
Note is accelerated for any reason or in the event of any required or permitted
prepayment, then such consideration that constitutes interest may never include
more than the maximum amount allowed by applicable law, and excess interest, if
any, provided for in this Seller Note or otherwise shall be canceled
automatically as of the date of such acceleration or prepayment and, if
theretofore prepaid, shall be credited to other amounts due under this Seller
Note (or if this Seller Note shall have been paid in full, refunded to Finco).
In the event that applicable law provides for a ceiling on the rate of interest
chargeable hereunder, that ceiling shall be the indicated rate ceiling.
The Seller agrees that it shall have no right to cause, by way
of acceleration or otherwise, any payment of principal hereunder to become due
or payable prior to the times provided in the Triple-A One Security Agreement.
Each holder of this Seller Note agrees to be bound by all of
the provisions of the Operative Documents, including, without limitation, the
covenant that prior to the date which is one year and one day after the payment
in full of all Commercial Paper issued, and all Triple-A One Loans made, by
Triple-A One and all other obligations under the Operative Documents, it will
not institute, or join any other Person in instituting, against Finco any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
or other similar proceedings under any federal or state bankruptcy law or
similar law.
This Seller Note may not be assigned, transferred, exchanged,
pledged, hypothecated, participated or otherwise conveyed, except with the prior
written consent of the Program Manager.
2
<PAGE> 43
THIS SELLER NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
ONYX ACCEPTANCE FINANCIAL CORPORATION
By:_____________________________________
Name:
Title:
3
<PAGE> 44
Schedule 1 to
Seller Note
<TABLE>
<CAPTION>
Principal Payments and Maturity Notation Made
Date Amount Pre-payments Date By
- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
</TABLE>
4
<PAGE> 45
EXHIBIT B
SUBORDINATED NOTE
THIS SUBORDINATED NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT FOR ANY
OFFER OR SALE PURSUANT TO, AND IN COMPLIANCE WITH, THE SECURITIES ACT AND THE
RULES AND REGULATIONS THEREUNDER.
THIS SUBORDINATED NOTE IS THE SUBORDINATED NOTE REFERRED TO IN THE SALE AND
SERVICING AGREEMENT, AND IS SUBORDINATE AND JUNIOR IN RIGHT OF PAYMENT TO ALL OF
THE OBLIGATIONS TO THE EXTENT AND IN THE MANNER PROVIDED IN ARTICLE V OF THE
SALE AND SERVICING AGREEMENT; AND THE HOLDER BY ACCEPTANCE HEREOF AGREES TO BE
BOUND BY ALL THE PROVISIONS OF ARTICLE V OF THE SALE AND SERVICING AGREEMENT.
New York, New York
September 12, 1994
ONYX ACCEPTANCE FINANCIAL CORPORATION, a Delaware corporation
("Finco"), hereby promises to pay to the order of ONYX ACCEPTANCE CORPORATION, a
California corporation (the "Seller"), the principal amount of this Subordinated
Note, determined as described below, together with interest thereon at a rate
per annum of LIBOR + 6% in lawful money of the United States of America.
Capitalized terms used herein but not defined herein shall have the meanings
assigned to such terms in the Definitions List attached to the Sale and
Servicing Agreement dated as of September 8, 1994, between Finco and the Seller
(such agreement, as it may from time to time be amended, supplemented or
otherwise modified in accordance with its terms, the "Sale Agreement").
The principal amount of this Subordinated Note at any time
shall be determined in accordance with the provisions of Section 5.3 of the Sale
Agreement. All principal of and interest on this Subordinated Note shall be due
and payable at the times provided in the Sale Agreement, it being understood and
agreed that, except as provided in Section 5.3 of the Sale Agreement, no
payments may be made, directly or indirectly, on this Subordinated Note until
all the Obligations have been indefeasibly paid in full in cash. This
Subordinated Note is secured by the Collateral pursuant to the Subordinated
Security Agreement subject to the prior lien of the Collateral Agent under the
Triple-A One Security Agreement. No payments may be received, directly or
indirectly, by the Seller (and if received, the Seller agrees to return such
payments to Finco) on this Subordinated Note unless Finco has paid all amounts
required pursuant to the
<PAGE> 46
Triple-A One Security Agreement to be paid prior to any payment in respect of
this Subordinated Note.
Payments of principal on this Subordinated Note shall be made
by wire transfer of immediately available funds to such account of the Seller as
the Seller may designate in writing.
This Subordinated Note is the Subordinated Note referred to in
the Sale Agreement, and is subordinate and junior in right of payment to all the
Obligations to the extent and in the manner provided in Section 5.3 of the Sale
Agreement and the holder by acceptance hereof agrees to be bound by all the
provisions of Section 5.3 of the Sale Agreement.
Finco hereby waives diligence, presentment, demand, protest
and notice of any kind whatsoever. The nonexercise by the holder of any of its
rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.
All amounts evidenced by this Subordinated Note and all
payments and prepayments of the principal hereof and the respective dates and
maturity dates thereof shall be endorsed by the holder hereof on Schedule 1
attached hereto and made a part hereof or on a continuation thereof which shall
be attached hereto and made a part hereof, or otherwise recorded by such holder
in its internal records; provided, however, that the failure of the holder
hereof to make such a notation or any error in such a notation shall not affect
the obligations of Finco under this Subordinated Note.
It is the intention of Finco and the Seller to conform
strictly to applicable usury laws. Accordingly, if the transactions contemplated
hereby would be usurious under applicable law (including the laws of the State
of New York and the laws of the United States of America), then, in that event,
notwithstanding anything to the contrary in any agreement entered into in
connection with this Subordinated Note, it is agreed as follows: (i) the
aggregate of all consideration that constitutes interest, if any, under
applicable law that is taken, reserved, contracted for, charged or received
under this Subordinated Note or any other agreement or document executed in
connection with this Subordinated Note shall under no circumstances exceed the
maximum amount of interest allowed by applicable law, and any excess shall be
credited to other amounts due under this Subordinated Note by the holder hereof
(or if this Subordinated Note shall have been paid in full, refunded to Finco);
and (ii) in the event that maturity of this Subordinated Note is accelerated for
any reason, or in the event of any required or permitted prepayment, then such
consideration that constitutes interest may never include more than the maximum
amount allowed by applicable law, and excess interest, if any, provided for in
this Subordinated Note or otherwise shall be cancelled automatically as of the
date of such acceleration or prepayment and, if theretofore prepaid, shall be
credited to other amounts due under this Subordinated Note (or if this
Subordinated Note shall have been paid in full, refunded to Finco). In the event
that applicable law provides for a ceiling on the rate of interest, if any,
chargeable hereunder, that ceiling shall be the indicated rate ceiling.
2
<PAGE> 47
The Seller agrees that it shall have no right to cause, by way
of acceleration or otherwise, any payment of principal hereunder to become due
or payable, prior to the times provided in the Triple-A One Security Agreement.
Each holder of this Note agrees to be bound by all of the
provisions of the Operative Documents, including, without limitation, the
covenant that prior to the date which is one year and one day after the payment
in full of all Commercial Paper issued, and all Triple-A One Loans made, by
Triple-A One and all other Obligations under the Operative Documents, it will
not institute against, or join any other Person in instituting against, Finco
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceeding under the law of the United States or
any state of the United States.
This Subordinated Note shall not be assigned, transferred,
exchanged, pledged, hypothecated, participated or otherwise conveyed, except
with the prior written consent of the Program Manager.
3
<PAGE> 48
THIS SUBORDINATED NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
ONYX ACCEPTANCE FINANCIAL CORPORATION
By:_____________________________________
Name:
Title:
4
<PAGE> 49
Schedule 1 to
Subordinated Note
<TABLE>
<CAPTION>
Principal Payments and Maturity Notation Made
Date Amount Pre-payments Date By
<S> <C> <C> <C> <C>
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
</TABLE>
5
<PAGE> 50
EXHIBIT C
ONYX ACCEPTANCE CORPORATION
OFFICER'S CERTIFICATE
The undersigned certifies that he is the [President] [Chief
Financial Officer] [an Executive Vice President] of Onyx Acceptance Corporation,
a Delaware corporation (the "Seller"), and that as such he is duly authorized to
execute and deliver this certificate on behalf of the Seller in connection with
the Amended and Restated Sale and Servicing Agreement dated as of September 4,
1998 (the "Sale Agreement"), between the Seller and Onyx Acceptance Financial
Corporation, a Delaware corporation ("Finco") (all capitalized terms used herein
without definition having the respective meanings specified in the Definitions
List attached to the Sale Agreement), and further certifies that:
1. no event with respect to the Seller has occurred
and is continuing which would constitute a Wind-Down Event or
Unmatured Wind-Down Event;
2. each of the agreements and conditions of the
Seller to be performed on or before the date hereof pursuant
to the Sale Agreement have been performed in all material
respects;
3. The Seller has possession of each Contract set
forth on the Contract List delivered to Triple-A One and the
Program Manager on the date hereof (the "Specified
Contracts");
4. Within one Business Day of the date hereof, the
Seller shall apply the cash proceeds of the Purchase Price
paid to it on the date hereof by Finco to purchase the
Specified Contracts.
5. The Seller has delivered the Specified Contracts
to Finco on or prior to the date hereof.
IN WITNESS WHEREOF, I have affixed hereunto my signature this
day of , _____.
ONYX ACCEPTANCE FINANCIAL CORPORATION
By:_____________________________________
Name:
Title:
<PAGE> 51
EXHIBIT D
LIST OF LOCK-BOX BANKS AND NUMBERS OF LOCK-BOXES
LOCK BOX BANK:
Wells Fargo Bank
2030 Main Street
Suite 900
Irvine, California 92714
Lock Box Account
Acct. # 4159359066
<PAGE> 52
EXHIBIT E
CLEARING ACCOUNT BANK AND ACCOUNT NUMBER
The Clearing Account, No. 4159359173, is maintained at Wells Fargo
Bank, 2030 Main Street, Suite 900, Irvine, California 92714.
<PAGE> 53
EXHIBIT F
[FORM OF INVESTOR REPORT]
To be delivered
<PAGE> 54
EXHIBIT G
[Form of Servicer's Certificate]
This Servicer's Certificate is delivered pursuant to the
Amended and Restated Sale and Servicing Agreement (the "Sale Agreement") dated
as of September 4, 1998 between Onyx Acceptance Corporation and Onyx Acceptance
Financial Corporation. Capitalized terms not defined herein have the meanings
ascribed to such terms in the Definitions List attached to the Sale Agreement.
The undersigned hereby certifies that he is a Responsible
Officer of Onyx Acceptance Corporation holding the office set forth beneath his
signature below, and that he is duly authorized to execute this Servicer's
Certificate on behalf of the Servicer and further certifies that the information
set forth in the report to which this Certificate is attached is true and
correct in all material respects, that there is currently no Unmatured Wind-Down
Event or Wind-Down Event and that all calculations and applications of cash were
performed in accordance with the Operative Documents.
IN WITNESS WHEREOF, I have affixed hereunto my signature this
day of , ____.
ONYX ACCEPTANCE CORPORATION
By:______________________________________
Name:
Title:
<PAGE> 55
EXHIBIT H
[FORM OF DAILY REPORT]
<PAGE> 56
EXHIBIT I
[FORM OF MONTHLY REPORT]
<PAGE> 57
SCHEDULE 4.1(h)-1
PRINCIPAL PLACE OF BUSINESS, ETC. OF SELLER
Onyx Acceptance Corporation's (the "Seller") principal place of
business, chief executive office and the location of the offices where it keeps
all of the records relating to the Contracts including, without limitation, the
Files, is:
8001 Irvine Center Drive
Irvine, California 92718
<PAGE> 58
SCHEDULE 4.1(h)-2
PRINCIPAL PLACE OF BUSINESS, ETC. OF SERVICER
Onyx Acceptance Corporation's (the "Servicer") principal place of
business, chief executive office and the location of the offices where it keeps
all of the records relating to the Contracts including, without limitation, the
Files, is:
8001 Irvine Center Drive
Irvine, California 92718
<PAGE> 59
SCHEDULE 4.1(j)-1
TRADE NAMES OF SELLER
Onyx Acceptance Corporation (the "Seller") has no trade names,
fictitious names, assumed names or "doing business as" names other than the
following:
"Doing Business As" Name Business for which Name is Used
1. Automotive Banking Network Marketing/Advertising
2. AutoBank Services Used car sales
3. Mesa Auto Used car sales
4. Auto Fund Name reserved but not used
5. Automotive Funding Services Name reserved but not used
<PAGE> 60
SCHEDULE 4.1(j)-2
TRADE NAMES OF SELLER
Onyx Acceptance Corporation (the "Servicer") has no trade names,
fictitious names, assumed names or "doing business as" names other than the
following:
"Doing Business As" Name Business for which Name is Used
1. Automotive Banking Network Marketing/Advertising
2. AutoBank Services Used car sales
3. Mesa Auto Used car sales
4. Auto Fund Name reserved but not used
5. Automotive Funding Services Name reserved but not used
<PAGE> 61
SCHEDULE 4.1(q)-1
SUBSIDIARIES OF SELLER
The subsidiaries of the Onyx Acceptance Corporation (the "Seller") are
as follows:
(i) Onyx Acceptance Financial Corporation
(ii) Onyx Acceptance Funding Corporation
(iii) ABNI, Inc.
(iv) C.U. Acceptance Corporation
<PAGE> 62
SCHEDULE 4.1(q)-2
SUBSIDIARIES OF SERVICER
Onyx Acceptance Corporation (the "Servicer") has only one subsidiary:
Onyx Acceptance Financial Corporation, a Delaware corporation.
<PAGE> 63
SCHEDULE 8.1
CREDIT AND COLLECTION POLICY
<PAGE> 64
SCHEDULE 9.5
LICENSES, PATENTS, COMPUTER HARDWARE AND SOFTWARE, ETC.
1. Agreement for On-Line Service
2. Acknowledgement of Security Interest Under Agreement for On-Line
Service
<PAGE> 1
EXHIBIT 10.107
EXECUTION COPY
ONYX ACCEPTANCE FINANCIAL CORPORATION
--------------------------
AMENDED AND RESTATED
TRIPLE-A ONE CREDIT AGREEMENT
dated as of September 4, 1998
----------------------------
TRIPLE-A ONE FUNDING CORPORATION
CAPMAC FINANCIAL SERVICES, INC.
CAPITAL MARKETS ASSURANCE CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINITIONS.............................................................2
1.1 Defined Terms..........................................................2
SECTION 2. AMOUNT AND TERMS OF TRIPLE-A ONE COMMITMENT.............................2
2.1 Triple-A One Commitment...............................................2
2.2. Triple-A One Note....................................................3
2.3. Availability of Borrowings...........................................3
2.4. Mandatory and Optional Prepayments....................................3
2.5. Interest; Fees........................................................4
2.6. Proceeds..............................................................5
2.7. Collection Account....................................................5
2.8. Reduction of Triple-A One Commitment..................................5
2.9. Taxes.................................................................5
SECTION 3. REPRESENTATIONS AND WARRANTIES..........................................6
3.1. Representations and Warranties of Finco...............................6
SECTION 4. CONDITIONS PRECEDENT.....................................................9
4.1. Conditions to Effectiveness...........................................9
4.2. Conditions to Each Triple-A One Loan.................................11
4.3. Conditions to Release of Proceeds of Triple-A One Loans from
Disbursement Sub-Account...........................................12
SECTION 5. AFFIRMATIVE COVENANTS..................................................13
5.1. Financial Statements.................................................13
5.2. Certificates; Other Information......................................13
5.3. Payment of Obligations...............................................14
5.4. Conduct of Business and Maintenance of Existence.....................14
5.5. Maintenance of Property; Insurance...................................14
5.6. Inspection of Property; Files, Books and Records; Discussions........14
5.7. Notices..............................................................14
5.8. Delivery of Other Reports............................................15
5.9. Annual Certificate...................................................15
5.10. Further Assurances..................................................15
5.11. Independent Director and Officer....................................15
5.12. Instructions to Obligors............................................16
5.13. Cooperation in Making Calculations..................................16
5.14 Interest Rate Hedge Mechanisms......................................16
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
SECTION 6. NEGATIVE COVENANTS.....................................................16
6.1. Limitation on Debt...................................................17
6.2. Limitation on Liens..................................................17
6.3. Limitation on Fundamental Changes....................................17
6.4. Limitation on Sale of Assets.........................................17
6.5. Purchased Contracts..................................................17
6.6. Limitation on Dividends..............................................17
6.7. Limitation on Capital Expenditures...................................18
6.8. Limitation on Investments, Loans and Advances........................18
6.9. Transactions with Affiliates.........................................18
6.10. Sale and Leaseback..................................................18
6.11. Corporate Documents.................................................18
6.12. Capital Stock.......................................................18
6.13. Fiscal Year.........................................................18
6.14. Limitation on Negative Pledge Clauses...............................18
6.15. Activities of Finco.................................................19
6.16. Agreements..........................................................19
6.17. Bank Accounts.......................................................19
6.18. Successor Servicer..................................................19
6.19. Servicing of Contracts..............................................19
6.20. Prohibitions Regarding Subordinated Note............................20
6.21. Lock-Box Banks......................................................20
6.22. Contract Files.....................................................20
SECTION 7. WIND-DOWN EVENTS; REMEDIES.............................................20
SECTION 8. INVESTMENT MANAGEMENT..................................................21
8.1. Directions to Triple-A One...........................................21
8.2. Permitted Investments................................................21
8.3. Conditions...........................................................21
SECTION 9. THE PROGRAM MANAGER....................................................22
SECTION 10. MISCELLANEOUS.........................................................23
10.1. Amendments and Waivers..............................................23
10.2. Notices.............................................................23
10.3. No Waiver; Cumulative Remedies......................................24
10.4. Survival of Representations and Warranties..........................25
10.5. Payment of Expenses and Taxes.......................................25
10.6. Successors and Assigns; Participations.............................26
10.7. Termination.........................................................27
10.8. Counterparts........................................................27
10.9. Severability........................................................27
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
10.11. GOVERNING LAW......................................................28
10.12. SUBMISSION TO JURISDICTION; WAIVERS................................28
10.13. Acknowledgments....................................................29
10.14. WAIVER OF JURY TRIAL...............................................29
10.15. No Bankruptcy Petition Against Triple-A One........................29
10.16. Triple-A One's Credit Decision.....................................29
</TABLE>
EXHIBITS
EXHIBIT A - DEFINITIONS LIST
EXHIBIT B - TRIPLE-A ONE NOTE
EXHIBIT C - NOTICE OF BORROWING
EXHIBIT D - TRIPLE-A ONE SECURITY AGREEMENT
EXHIBIT E - FORM OF OFFICER'S CERTIFICATE OF FINCO
EXHIBIT F - FORM OF LOCK-BOX AGREEMENT
EXHIBIT G - FORM OF INTEREST RATE SWAP SURETY BOND
iii
<PAGE> 5
AMENDED AND RESTATED
TRIPLE-A ONE CREDIT AGREEMENT
CREDIT AGREEMENT, dated as of September 4, 1998 (the "Triple-A One
Credit Agreement"), among ONYX ACCEPTANCE FINANCIAL CORPORATION, a Delaware
corporation ("Finco"), TRIPLE-A ONE FUNDING CORPORATION, a Delaware corporation
("Triple-A One") and CAPMAC FINANCIAL SERVICES, INC., a Delaware corporation
("CapMAC Financial Services"), as Program Manager (in such capacity, the
"Program Manager") and CAPITAL MARKETS ASSURANCE CORPORATION, a New York stock
insurance company ("CapMAC") as Collateral Agent (in such capacity, the
"Collateral Agent").
W I T N E S S E T H:
WHEREAS, pursuant to the Sale Agreement, Finco purchases certain
Contracts from time to time from Onyx Acceptance Corporation, a Delaware
corporation (the "Seller") and the Seller acts as Servicer of the Purchased
Contracts;
WHEREAS, Finco from time to time requests that Triple-A One make
Triple-A One Loans to Finco, the proceeds of which are used to purchase
Contracts from the Seller in accordance with the terms of the Sale Agreement;
WHEREAS, as collateral security for its obligations under this Triple-A
One Credit Agreement, Finco has collaterally assigned the Purchased Contracts,
its rights under the Sale Agreement, all of its right, title, interest in and to
the Lock-Boxes and the Collection Account to the Collateral Agent for the
benefit of Triple-A One pursuant to the Triple-A One Security Agreement;
WHEREAS, Triple-A One funds such loans by (a) the issuance of
Commercial Paper or (b) if Triple-A One is unable for any reason to issue
Commercial Paper, by borrowing under the Liquidity Agreement;
WHEREAS, Capital Markets Assurance Corporation (the "Surety Provider"),
Finco, the Seller and Triple-A One have entered into the Insurance Agreement
pursuant to which, among other things, the Surety Provider has issued a surety
bond to Triple-A One to guarantee repayment of the Triple-A One Loans;
WHEREAS, subject to the terms and conditions set forth herein, Triple-A
One is willing to make the Triple-A One Loans to Finco; and
WHEREAS, the parties hereto have entered into the Triple-A One Credit
Agreement dated as of September 8, 1994 (as amended to the date hereof, the
"Original Credit Agreement");
WHEREAS, the parties hereto wish to amend and restate the Original
Credit Agreement as hereinafter provided.
1
<PAGE> 6
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
1.1. Defined Terms. (a) As used in this Triple-A One Credit
Agreement, the Triple-A One Note, the Triple-A One Security Agreement
or any certificate or other document made or delivered pursuant hereto
or thereto, the capitalized terms used herein and therein shall, unless
otherwise defined herein or therein, have the meanings assigned to them
in the Amended and Restated Definitions List dated as of the date
hereof that refers to this Triple-A One Credit Agreement, which is
incorporated herein by reference and attached as Exhibit A hereto (the
"Definitions List").
(a) As used herein, in the Triple-A One Note and in the
Triple-A One Security Agreement, or any certificate or other document
made or delivered pursuant hereto and thereto, accounting terms not
defined in the Definitions List and accounting terms partly defined in
the Definitions List to the extent not defined, shall have the
respective meanings given to them under GAAP.
(b) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Triple-A One Credit Agreement shall
refer to this Triple-A One Credit Agreement as a whole and not to any
particular provision of this Triple-A One Credit Agreement, and
Section, subsection, Schedule and Exhibit references are to this
Triple-A One Credit Agreement unless otherwise specified.
(c) Capitalized terms used herein, in the Triple-A One Note
and in the Triple-A One Security Agreement shall be equally applicable
to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF TRIPLE-A ONE COMMITMENT
2.1. Triple-A One Commitment. Subject to the terms and
conditions hereof, Triple-A One agrees to make revolving credit loans
("Triple-A One Loans") to Finco from time to time during the Commitment
Period in an aggregate amount not to exceed the Triple-A One
Commitment; provided, however, that in no event shall Triple-A One make
any Triple-A One Loan, if, after giving effect to such Triple-A One
Loan, either (a) the Outstanding Principal Amount would exceed the
Maximum Program Amount or the Aggregate Liquidity Commitment (as
defined in the Liquidity Agreement) or (b) a Borrowing Base Deficiency
would exist; provided, further, that the amount of any Triple-A One
Loan made on any Triple-A One Borrowing Date shall not exceed the sum
of (i) the net proceeds from the sale of Transaction Commercial Paper
on such Triple-A One Borrowing Date plus (ii) the proceeds of Loans on
such Triple-A One Borrowing Date. The proceeds of such Triple-A One
Loans shall be disbursed to the Disbursement Sub-Account pursuant to
Section 4.2 and released from the Disbursement Sub-Account pursuant to
Section 4.3. During the Commitment Period, Finco may use the Triple-A
One Commitment by borrowing, prepaying the Triple-A One Loans in whole
or in part, and reborrowing, all in accordance with the terms and
conditions hereof.
2
<PAGE> 7
2.2. Triple-A One Note. The Triple-A One Loans shall be
evidenced by a promissory note of Finco, substantially in the form of
Exhibit B hereto (the "Triple-A One Note"), payable to the order of
Triple-A One. The Program Manager shall record the date and amount of
each Triple-A One Loan made and the date and amount of each payment of
principal thereof, and any such recordation shall constitute prima
facie evidence of the accuracy of the information so recorded. The
Triple-A One Note shall (a) be dated the date of issuance thereof, or,
with respect to any amendment thereof, the date of such amendment, (b)
be stated to mature on the Scheduled Maturity Date and (c) provide for
the payment of interest in accordance with subsection 2.5.
2.3. Availability of Borrowings. Finco may request Triple-A
One Loans on any Business Day during the Commitment Period by giving
Triple-A One prior irrevocable notice of each borrowing in the form of
Exhibit C hereto ("Notice of Borrowing") by 10:00 A.M. (New York City
time) on the Business Day prior to a Triple-A One Borrowing Date which
shall specify the (a) Triple-A One Borrowing Date for such borrowing
and (b) the amount of the Triple-A One Loan requested. The proceeds of
such Triple-A One Loans will be made available to Finco by Triple-A One
by crediting a sub-account (the "Disbursement Sub-Account") of the
Collection Account with immediately available funds by 10:00 A.M. (New
York time) on the Triple-A One Borrowing Date.
2.4. Mandatory and Optional Prepayments.
(a) Prior to the Commitment Termination Date, Finco shall, on
each Business Day (each a "Triple-A One Payment Date") on which the
Program Manager notifies Finco that amounts are owing hereunder, repay
the principal of the Triple-A One Loans in the amount stated by the
Program Manager to be due and payable on such Triple-A One Payment
Date. The Program Manager shall give Finco notice of the amount payable
by 10:00 A.M. (New York City time) on the Business Day immediately
preceding each Triple-A One Payment Date. Finco shall make the payment
required by such notice by 10:00 A.M. (New York City time) on the
applicable Triple-A One Payment Date by depositing such amount in the
Collection Account in immediately available funds. The amount payable
by Finco as determined by the Program Manager shall be an amount equal
to the sum of (i) the Principal Portion of the Transaction Commercial
Paper maturing on the applicable Triple-A One Payment Date that will
not be funded from the net proceeds of either the sale of Commercial
Paper on such date or a borrowing under the Liquidity Agreement
(assuming that such proceeds are allocated to the Principal Portion of
the Commercial Paper before the interest relating to such Commercial
Paper), (ii) the principal amount due and payable on such date under
the Liquidity Agreement and not funded from the net proceeds from the
sale of Commercial Paper on such date or a borrowing under the
Liquidity Agreement, and (iii) the amount necessary to cure any
Borrowing Base Deficiency existing on such date or that would exist at
the close of business on such date (after giving effect to the amount
of any payment made on such day in respect of subclauses (i) or (ii) of
this subsection 2.4(a)). On and after the Commitment Termination Date,
principal on the Triple-A One Loans shall be paid as provided in the
Triple-A One Security Agreement.
3
<PAGE> 8
(b) Finco may at any time and from time to time prepay the
Triple-A One Loans, in whole or in part, without premium or penalty,
upon at least three Business Days' irrevocable notice to the Program
Manager, specifying the date and amount of prepayment; provided that,
upon notice given by Triple-A One, Finco shall indemnify Triple-A One
and hold Triple-A One harmless from any funding loss (in an amount
equal to the amount of interest Triple-A One would have received but
for such prepayment less the interest earned on investing such funds)
and expense which Triple-A One may sustain or incur as a consequence of
such prepayment. If any such notice is given, the amount specified in
such notice shall be due and payable on the date specified therein.
(c) On each Liquidation Day Finco shall prepay all amounts
outstanding under the Triple-A One Note and this Triple-A One Credit
Agreement to the extent of Collections available on each such day and
in the order set forth in subsection 5(b) of the Triple-A One Security
Agreement.
2.5. Interest; Fees. (a) Finco shall pay to Triple-A One,
pursuant to the terms and conditions of the Triple-A One Security
Agreement, as interest on the Triple-A One Loans outstanding, the
following amounts on the following dates (each a "Triple-A One Interest
Payment Date"):
(i) on each day that Commercial Paper matures, an amount
equal to the imputed interest on such maturing
Commercial Paper plus all Facilities Fees, Facilities
Costs and Finco Expenses payable on such date
pursuant to the Fee Letter Agreement;
(ii) on each Determination Date, interest due and accrued
on Loans which were outstanding at any time during
the prior Determination Period and not prepaid
pursuant to subsection 2.7 of the Liquidity
Agreement;
(iii) on each Determination Date, all Facilities Fees
payable on such date pursuant to the Fee Letter
Agreement accrued during the prior Determination
Period; and
(iv) on each day that any interest is required to be paid
in respect of the prepayment, pursuant to subsection
2.7 of the Liquidity Agreement, of any Loan, an
amount equal to such interest.
(b) Finco agrees to pay the Servicing Fee to the Servicer on
each Determination Date, as provided for in the Triple-A One Security
Agreement.
2.6. Proceeds. The proceeds of the Triple-A One Loans shall be
used by Finco solely to purchase Contracts from the Seller pursuant to
the Sale Agreement and to pay other amounts expressly permitted under
the terms and conditions of the Operative Documents.
4
<PAGE> 9
2.7. Collection Account. Finco has established, on or prior to
the date hereof, a bank account (No. 4154359090) at Wells Fargo Bank in
the name of the Collateral Agent for the benefit of Triple-A One (the
"Collection Account"). Finco shall cause the Servicer to deposit all
Collections to the Clearing Account on the same day as Collections are
received in the Lock-Boxes and on the next Business Day after
Collections are received in any other manner, and to transfer all
Collections on deposit in the Clearing Account to the Collection
Account on the next Business Day after such Collections are received by
the Servicer in the Clearing Account. Finco shall make transfers and
withdrawals from the Collection Account solely as permitted by the
terms and conditions of the Triple-A One Security Agreement.
2.8. Reduction of Triple-A One Commitment. Finco shall have
the right from time to time, upon not less than five Business Days'
notice to Triple-A One, to reduce the Triple-A One Commitment to an
amount not less than the sum of (a) the Face Amount of the Outstanding
Commercial Paper and (b) the aggregate principal amount of the Loans
outstanding; provided, however, that in no event shall the Triple-A One
Commitment be reduced to less than $50,000,000. Each such reduction
shall be in an amount equal to $5,000,000 or any multiple thereof and
shall reduce permanently the Triple-A One Commitment then in effect.
2.9. Taxes. All payments made by Finco under this Triple-A One
Credit Agreement and the Triple-A One Note shall be made free and clear
of, and without deduction or withholding for or on account of, any
present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter
imposed, levied, collected, withheld or assessed by any Governmental
Authority having taxing authority, excluding income taxes and franchise
taxes (imposed in lieu of income taxes) imposed on Triple-A One, as a
result of any present or former connection between the jurisdiction of
the government or taxing authority imposing such tax or any political
subdivision or taxing authority thereof or therein and Triple-A One
(excluding a connection arising solely from Triple-A One having
executed, delivered or performed its obligations or received a payment
under, or enforced, this Triple-A One Credit Agreement or the Triple-A
One Note) (all such non-excluded taxes, levies, imposts, duties,
charges, fees, deductions and withholdings being hereinafter called
"Taxes"). If any Taxes are required to be withheld from any amounts
payable to or under the Triple-A One Note, the amounts so payable to
Triple-A One shall be increased to the extent necessary to yield to
Triple-A One (after payment of all Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in
this Triple-A One Credit Agreement and the Triple-A One Note. Whenever
any Taxes are payable by Finco, as promptly as possible thereafter
Finco shall send to Triple-A One, a certified copy of an original
official receipt received by Finco showing payment thereof. If Finco
fails to pay any Taxes when due to the appropriate taxing authority or
fails to remit to Triple-A One the required receipts or other required
documentary evidence, Finco shall indemnify Triple-A One for any
incremental Taxes, interest or penalties that Triple-A One is legally
required to pay as a result of any such failure. The agreements in this
5
<PAGE> 10
subsection shall survive the termination of this Triple-A One Credit
Agreement and the payment of the Triple-A One Note.
SECTION 3. REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of Finco. To induce
Triple-A One to enter into this Amended and Restricted Triple-A One
Credit Agreement and to make the Triple-A One Loans, Finco hereby
represents and warrants to Triple-A One that:
(a) Financial Condition. The balance sheet of Finco as at June
30, 1998 and the related statements of income and of cash flows for the
six month period then ended certified by a Responsible Officer, are
complete and correct and present fairly the financial condition of
Finco as at such date, and the results of its operations and its
consolidated cash flows for the period then ended. All such financial
statements, including the related schedules and notes thereto, have
been prepared in accordance with GAAP applied consistently throughout
the period involved (except as approved by such Responsible Officer and
as disclosed therein). Finco does not have, and at the date of the
balance sheet referred to above, did not have any Debt, contingent
liability or liability for taxes, or any long-term lease or unusual
forward or long-term commitment, including, without limitation, any
interest rate or foreign currency swap or exchange transaction.
(b) Corporate Existence; Compliance with Law. Finco (i) is
duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization, (ii) has the corporate power and
authority, and the legal right, to own and operate its property, to
lease the property it operates as lessee and to conduct the business in
which it is currently engaged, (iii) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction
where its ownership, lease or operation of property or the conduct of
its business requires such qualification and (iv) is in compliance with
all Requirements of Law.
(c) Corporate Power; Authorization; Enforceable Obligations.
Finco has the corporate power and authority, and the legal right, to
make, deliver and perform this Triple-A One Credit Agreement and the
other Operative Documents to which it is a party and to borrow
hereunder and has taken all necessary corporate action to authorize the
borrowings on the terms and conditions of this Triple-A One Credit
Agreement and the other Operative Documents to which it is a party and
to authorize the execution, delivery and performance of this Triple-A
One Credit Agreement and the other Operative Documents to which it is a
party. All consents or authorization of, filing with or other act by or
in respect of, any Governmental Authority or any other Person required
to be obtained, made or given by it in connection with the borrowings
hereunder or with the execution, delivery, performance, validity or
enforceability of this Triple-A One Credit Agreement or the other
Operative Documents to which it is a party have been so obtained, made
or received. This Triple-A One Credit Agreement and each other
Operative Document to
6
<PAGE> 11
which it is a party has been duly executed and delivered on behalf of
Finco. This Triple-A One Credit Agreement and each other Operative
Document to which it is a party constitutes a legal, valid and binding
obligation of Finco enforceable against Finco in accordance with its
terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in
equity or at law).
(d) No Legal Bar. The execution, delivery and performance of
this Triple-A One Credit Agreement and the other Operative Documents,
the borrowings hereunder and the use of the proceeds thereof will not
violate any Requirement of Law or Contractual Obligation of Finco and
will not result in, or require, the creation or imposition of any Lien
on any of its properties or revenues pursuant to any such Requirement
of Law or Contractual Obligation.
(e) No Material Litigation. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is
pending or threatened by or against Finco or against any of its
properties or revenues (i) with respect to this Triple-A One Credit
Agreement or the other Operative Documents or any of the transactions
contemplated hereby or thereby, or (ii) which could have a material
adverse effect on the business, properties, assets, operations or
condition, financial or otherwise, of Finco, or the ability of Finco to
perform its obligations hereunder or under the other Operative
Documents.
(f) No Default; No Wind-Down Event. Finco is not in default
under or with respect to any of its Contractual Obligations in any
respect which could have a material adverse effect on the business,
operations, properties, assets, or condition, financial or otherwise,
of Finco, or on the ability of Finco to perform its obligations
hereunder or under the other Operative Documents. No Wind-Down Event or
Unmatured Wind-Down Event has occurred and is continuing.
(g) No Burdensome Restrictions. Finco is not a party to or
subject to any Contractual Obligation (other than the Operative
Documents) which could have a material adverse effect on the business,
properties, assets, operations or condition, financial or otherwise, of
Finco, or on the ability of Finco to carry out its obligations
hereunder or under the other Operative Documents.
(h) Taxes. Finco has filed or caused to be filed all Federal,
state and other tax returns which are required to be filed by it and
has paid all taxes shown to be due and payable on said returns or on
any Federal, state and other tax assessments made against it or any of
its property and all other taxes, fees or other charges imposed on it
or any of its property by any Governmental Authority having taxing
power; no tax Lien has been filed against it (except for tax Liens
described in subsection 6.2(a) hereof), and no claim is being asserted
by any Governmental Authority, with respect to any such tax, fee or
other charge.
(i) ERISA. Neither Finco nor any ERISA Affiliate of Finco has
participated in any Multiemployer Plan. Except for the Seller, neither
Finco nor any ERISA Affiliate
7
<PAGE> 12
of Finco has maintained any Single Employer Plan. No Reportable Event
has occurred during the five-year period prior to the date on which
this representation is made or deemed made with respect to any Plan of
the Seller, and each such Plan has complied with the applicable
provisions of ERISA and the Code. The present value of all accrued
benefits under each such Plan (based on those assumptions used to fund
the Plans) did not, as of the last annual valuation date prior to the
date on which this representation is made or deemed made, exceed the
value of the assets of such Plan allocable to such accrued benefits.
(j) Investment Company Act; Other Regulations. Finco is not an
"investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as
amended. Finco is not subject to regulation under any Federal or State
statute or regulation which limits its ability to incur Debt.
(k) Subsidiaries. Finco has no Subsidiaries. Finco is a wholly
owned subsidiary of the Seller.
(l) Purpose of Loans. The proceeds of the Triple-A One Loans
shall be used by Finco solely to purchase Contracts from the Seller
pursuant to the Sale Agreement and to pay other amounts expressly
permitted under the terms and conditions of the Operative Documents.
(m) No Deduction. Finco is not required to make any deduction
or withholding from payments to be made by it to Triple-A One under
this Triple-A One Credit Agreement or the other Operative Documents,
and the execution and performance of this Triple-A One Credit Agreement
and any of the other Operative Documents does not make Finco liable for
any registration tax, stamp duty or similar tax or duty imposed by any
authority of or within its jurisdiction of incorporation, which tax or
duty has not been, or will not be, paid when due.
(n) No Priority Claims. Finco has no liability in respect of
any unsecured Debt, or in respect of any guarantee by Finco of the
obligations of another, under which the lender, creditor or lessor or
the Person in whose favor such guarantee is given has any right, by
operation of law or otherwise, to have any claim in respect of such
obligation or guarantee first satisfied out of the general assets of
Finco in priority to the claims of its general creditors.
(o) Title; Liens. Except for the Lien granted to the
Collateral Agent pursuant to the Triple-A One Security Agreement and
the other Liens permitted pursuant to the Operative Documents and the
Lien granted to the Seller pursuant to the Subordinated Security
Agreement, Finco owns each item of the Collateral free and clear of any
and all Liens or claims of others. No security agreement, financing
statement or other public notice with respect to all or any part of the
Collateral is on file or of record in any public office, except such as
may have been filed in favor of the Collateral Agent pursuant to the
Triple-A One Security Agreement and Liens with respect to taxes
described in subsection 6.2(a) hereof.
8
<PAGE> 13
(p) Ownership of Contracts. Each Purchase by Finco of
Contracts constitutes a valid sale of the Contracts to Finco and
creates in favor of Finco a perfected ownership interest in and valid,
legal and equitable title to such Contracts, which ownership interest
is not subject to any Lien.
(q) No Petition. There is no intent to file a voluntary
petition under the federal bankruptcy laws with respect to Finco.
(r) Separate Corporate Existence. Finco is a special purpose
corporation whose primary activities are restricted in its articles of
incorporation to purchasing Contracts from the Seller, entering into
agreements for the servicing thereof, borrowing funds secured thereby
and conducting such other activities as necessary or appropriate to
carry out its primary activities. Finco's certificate of incorporation
provides for at least two Independent Directors as set forth at Section
5.11 hereof, and requires, inter alia, the unanimous vote of its Board
of Directors to take corporate action to institute, file or consent to
insolvency or bankruptcy proceedings.
SECTION 4. CONDITIONS PRECEDENT
4.1. Conditions to Effectiveness. The effectiveness of this
Amended and Restated Triple-A One Credit Agreement is subject to the
satisfaction, on or prior to the date hereof, of the following
conditions precedent:
(a) Operative Documents. The Program Manager and Triple-A One
shall have received (i) this Amended and Restated Triple-A One Credit
Agreement executed and delivered by a duly authorized officer of Finco,
(ii) the Third Amended and Restated Triple-A One Note executed and
delivered by a duly authorized officer of Finco, (iii) the Amended and
Restated Triple-A One Security Agreement (substantially in the form of
Exhibit D hereto), executed and delivered by a duly authorized officer
of Finco, (iv) copies of all the other amended and restated Operative
Documents, executed by all parties thereto and in form and substance
satisfactory to the Program Manager, and (v) such other documents or
instruments as may be reasonably requested by the Program Manager or
Triple-A One.
(b) Corporate Proceedings. The Program Manager and Triple-A
One shall have received a copy of the resolutions, in form and
substance satisfactory to the Program Manager and Triple-A One, of the
Board of Directors of each of the Seller and Finco authorizing the
execution, delivery and performance of the Operative Documents to which
it is a party certified by the Secretary or an Assistant Secretary of
each such corporation, as of the date hereof, which certificate shall
state that the resolutions thereby certified have not been amended,
modified, revoked or rescinded and shall be in form and substance
satisfactory to the Program Manager and Triple-A One.
(c) Corporate Documents; Incumbency. (i) The Program Manager
and Triple-A One shall have received copies of the certificate of
incorporation and by-laws of each of the Seller and Finco certified as
of the date hereof as complete and correct copies
9
<PAGE> 14
thereof by its Secretary or Assistant Secretary and (ii) a certificate
of the Secretary or an Assistant Secretary of each of the Seller and
Finco, certifying the names and true signatures of the officers of the
Seller and Finco authorized to sign the Operative Documents to which it
is a party.
(d) No Violation. The consummation of the transactions
contemplated hereby and by the other Operative Documents shall not
contravene, violate or conflict with, nor involve the Seller or Finco
in any violation of, any Requirement of Law except to the extent that
any such contravention, violation, conflict or involvement would not
adversely affect the transactions contemplated hereby and by the other
Operative Documents.
(e) Fees. The Program Manager, the Surety Provider and the
Collateral Agent shall have received in immediately available funds any
fees due and payable to it, all as set forth in the Fee Letter
Agreement. The Bank Agent and each Bank shall have received in
immediately available funds any fees due and payable to it, all as set
forth at Section 2.5 of the Liquidity Agreement and in the Liquidity
Fee Letter Agreement dated April 30, 1998 between the Seller and the
Bank Agent.
(f) Legal Opinions. The Program Manager and Triple-A One shall
have received (i) the executed legal opinion of counsel to the Seller
and Finco with respect to the enforceability of their obligations under
the Operative Documents and the Triple-A One Note and (ii) the executed
legal opinion of counsel to Finco to the effect that the security
interest granted by Finco to the Collateral Agent for the benefit of
Triple-A One pursuant to the Triple-A One Security Agreement continues
to be a valid first priority security interest.
(g) UCC Searches. The Program Manager and Triple-A One shall
have received lien searches and other evidence as to the absence of any
Lien on or security interest in the Contracts in form and substance
satisfactory to the Program Manager and Triple-A One. Any termination
statements or releases requested by the Program Manager or Triple-A One
to be filed with respect to the Contracts shall have been filed.
(h) Diligence. The operation of the Seller's billing,
collection and information systems with respect to the Contracts shall
be satisfactory to the Collateral Agent.
(i) Recovery Procedure and Alternate Servicing Plan. The
Program Manager and Triple-A One shall be satisfied with the recovery
procedure and Alternate Servicing Plan implemented for the Seller's MIS
system, (the "Recovery Procedure"), a copy of each of which has been
provided to the Program Manager.
(j) Internal Controls. The Program Manager and Triple-A One
shall be satisfied that the Seller has implemented all necessary
internal and other systems and procedures to monitor collections on
account of the Contracts to gather all information and furnish all
reports required under the Operative Documents and to monitor
compliance with the Operative Documents.
10
<PAGE> 15
(k) Consents. The Program Manager and Triple-A One shall have
received copies of all consents, licenses and approvals, if any,
required in connection with the execution, delivery and performance by
it and the validity and enforceability against it of the Operative
Documents to which it is a party and such consents, licenses and
approvals shall be in full force and effect.
(l) Surety Provider Credit Risk. S&P and Moody's shall each
have informed the Surety Provider that the transactions contemplated by
this Triple-A One Credit Agreement and the other Operative Documents
(without regard to the Surety Bonds) is an investment-grade risk.
(m) Commercial Paper Ratings. The Commercial Paper Notes shall
be rated A-1 by S&P and P-1 by Moody's.
(n) Insurance. The Program Manager shall have received
evidence that the Blanket Policy or other form of insurance acceptable
to the Program Manager is in full force and effect.
(o) Note Bond. The Surety Provider and Triple-A One shall have
executed an endorsement to the Note Bond to reflect an insured
obligation of $325,000,000.
(p) Rating Agency Notice. Each of Moody's and S&P shall have
received prior written notice of the amendment and restatement of the
Operative Documents.
(q) Sub-Lease Agreement. The Program Manager and Triple-A One
shall have received an amendment to the Sublease and Administrative
Services Agreement executed by Onyx and Finco providing for the lease
of storage space by Onyx to Finco for the location of the Files to be
maintained by Finco on behalf of the Collateral Agent.
4.2. Conditions to Each Triple-A One Loan. The agreement of
Triple-A One to make any Triple-A One Loan requested to be made by it
on any date (including, without limitation, the initial Triple-A One
Loan) is subject to the satisfaction of the following conditions
precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by Finco or the Seller in or
pursuant to any of the Operative Documents shall be true and correct on
and as of such date as if made on and as of such date.
(b) Finco shall have delivered a Notice of Borrowing.
(c) After giving effect to the Triple-A One Loan to be made on
such day, the requirements of Section 2.1 shall not have been violated.
The proceeds of all Triple-A One Loans shall be deposited in the
Disbursement Sub-Account. Each borrowing by Finco hereunder shall constitute a
representation and warranty by
11
<PAGE> 16
Finco as of the date of such Triple-A One Loan that the conditions contained in
this subsection 4.2 have been satisfied.
4.3. Conditions to Release of Proceeds of Triple-A One Loans
from Disbursement Sub-Account.
(a) The agreement of Triple-A One to release the proceeds of
Triple-A One Loans from the Disbursement Sub-Account is subject to the
satisfaction of the following conditions precedent:
(b) Representations and Warranties. Each of the
representations and warranties made by Finco or the Seller in or
pursuant to any of the Operative Documents shall be true and correct on
and as of such date as if made on and as of such date.
(c) Contract List. The Program Manager, Triple-A One and the
Collateral Agent shall have received the Contract List relating to each
Contract to be purchased with the proceeds of such Triple-A One Loan.
(d) Officer's Certificates. The Program Manager and Triple-A
One shall have received an Officer's Certificate from Finco, dated the
date the proceeds of such Triple-A One Loan are requested to be
disbursed from the Distribution Sub-Account, executed by the president,
the chief financial officer, the chief executive officer or any
executive vice president, in the form of Exhibit E hereto. Finco shall
have received from the Seller an Officer's Certificate, dated the date
the proceeds of such Triple-A One Loan are requested to be disbursed
from the Distribution Sub-Account, in the form of Exhibit C to the Sale
Agreement, and shall have delivered such Certificate to the Program
Manager and Triple-A One.
(e) Additional Documents. The Program Manager, the Collateral
Agent and Triple-A One shall have received each additional document,
instrument, legal opinion or item of information reasonably requested
by Triple-A One, the Collateral Agent or the Program Manager in respect
of any aspect or consequence of the transactions contemplated hereby or
by any other Operative Document.
(f) Additional Matters. All corporate and other proceedings,
documents, instruments and legal matters specified in subsection 4.1
hereof, or required after the date hereof, shall be satisfactory in
form and substance to Triple-A One, the Program Manager and the
Collateral Agent.
(g) Borrowing Base. No Borrowing Base Deficiency shall exist
on the day of the release of funds from the Disbursement Sub-Account as
reported on the Daily Report.
(h) Contract Files. A File relating to each Contract to be
purchased with the proceeds of such Triple-A One Loan shall have been
delivered by the Seller to Finco to be held by Finco for the benefit of
Triple-A One in segregated fireproof facilities.
12
<PAGE> 17
Each release of the proceeds of Triple-A One Loans to Finco
hereunder shall constitute a representation and warranty by Finco as of
the date of such Triple-A One Loan that the conditions contained in
this subsection 4.3 have been satisfied.
SECTION 5. AFFIRMATIVE COVENANTS
Finco hereby agrees that, so long as this Triple-A One Credit
Agreement remains in effect, Finco shall:
5.1. Financial Statements. Furnish to Triple-A One and the
Program Manager:
(a) as soon as available, but in any event within 90 days
after the end of each fiscal year of Finco, a copy of the balance sheet
as at the end of such year and the related statements of income and of
cash flows for such year, setting forth in each case in comparative
form the figures for the previous year (except for Finco's first fiscal
year for which there are no comparative figures for the previous fiscal
year), reported on by PricewaterhouseCoopers LLP or other independent
certified public accountants of nationally recognized standing; and
(b) as soon as available, but in any event not later than 45
days after the end of each of the first eleven monthly periods of each
fiscal year of Finco, the unaudited balance sheet of Finco as at the
end of such monthly period and the related unaudited statements of
income and of cash flows of Finco for such period and the portion of
the fiscal year through the end of such period, setting forth in each
case in comparative form the figures for the previous year, certified
by a Responsible Officer as being fairly stated in all respects
(subject to normal year-end audit adjustments);
all such financial statements to be complete and correct in all
respects and to be prepared in detail and in accordance with GAAP applied
consistently throughout the periods reflected therein and with prior periods
(except as approved by such accountants or officer, as the case may be, and
disclosed therein).
5.2. Certificates; Other Information. Furnish to Triple-A One
and the Program Manager:
(a) concurrently with the delivery of the financial statements
referred to in subsection 5.1(a), a certificate of the independent
certified public accountants reporting on such financial statements
stating that in making its normal examination for purposes of its
annual audit no knowledge was obtained of any Wind-Down Event or
Unmatured Wind-Down Event, except as specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 5.1(a) and 5.1(b), a certificate of a
Responsible Officer stating that Finco
13
<PAGE> 18
during such period has observed or performed all of its covenants and
other agreements, and satisfied every condition, contained in this
Triple-A One Credit Agreement and the other Operative Documents to be
observed, performed or satisfied by it, and that such Officer has
obtained no knowledge of any Unmatured Wind-Down Event or Wind-Down
Event, except as specified in such certificate;
(c) within five Business Days after the same are sent, copies
of all financial statements, reports and other communications that
Finco may make to, or file or have with, the SEC or any state
securities commission; and
(d) promptly, such additional financial and other information
as Triple-A One or the Program Manager may from time to time request.
5.3. Payment of Obligations. Pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the
case may be, all its obligations of whatever nature.
5.4. Conduct of Business and Maintenance of Existence.
Continue to engage in business of the same type as now conducted by it
and preserve, renew and keep in full force and effect its corporate
existence and take all action to maintain all rights, privileges and
franchises necessary or desirable in the normal conduct of its
business; and comply in all material respects with all Contractual
Obligations and Requirements of Law.
5.5. Maintenance of Property; Insurance. Keep all property
useful and necessary in its business in good working order and
condition; maintain, or cause to be maintained on its behalf, the
Blanket Policy or other form of insurance acceptable to the Program
Manager and, with financially sound and reputable insurance companies,
insurance on all its property in at least such amounts and against at
least such risks as are usually insured against in the same general
area by companies engaged in the same or a similar business, and
furnish to Triple-A One (with a copy to the Program Manager), at least
annually, and otherwise upon written request, full information as to
the insurance carried.
5.6. Inspection of Property; Files, Books and Records;
Discussions. Keep proper books of records and account in which full,
true and correct entries in conformity with GAAP and all Requirements
of Law shall be made of all dealings and transactions in relation to
its business and activities; and permit representatives of Triple-A One
and the Program Manager to visit and inspect any of its properties and
examine and make abstracts from any of its books and records and the
Files at any time and as often as may be desired on prior notice during
normal business hours and to discuss the business, operations,
properties and financial and other condition of Finco with officers and
employees of Finco and with its independent certified public
accountants.
5.7. Notices. Promptly give notice to Triple-A One and the
Program Manager of:
14
<PAGE> 19
(a) the occurrence of any Wind-Down Event or Unmatured
Wind-Down Event;
(b) any (i) default or event of default by Finco under any
Contractual Obligation of Finco or (ii) litigation, investigation or
proceeding which may exist at any time affecting Finco; and
(c) a material adverse change in the business, properties,
assets, operations or condition (financial or otherwise) of Finco.
Each notice pursuant to this subsection shall be accompanied
by a statement of a Responsible Officer setting forth details of the
occurrence referred to therein and stating what action Finco proposes
to take with respect thereto.
5.8. Delivery of Other Reports. Furnish, or instruct the
Servicer to deliver any reports required to be delivered by Finco or
the Servicer pursuant to any Operative Document to which Finco or the
Servicer is a party or which Finco or the Servicer has signed.
5.9. Annual Certificate. Concurrently with the delivery, on
account of each fiscal year, of the financial statements of Finco
required to be delivered pursuant to subsection 5.1(a) hereof, furnish
to Triple-A One, a certificate of a Responsible Officer of Finco to the
effect that the facts upon which counsel to Finco relied in giving its
legal opinion that the Seller and Finco would not be substantively
consolidated for purposes of the United States Bankruptcy Code of 1978,
as amended, have not changed so as to render such opinion no longer
valid.
5.10. Further Assurances. Do such further acts and things and
execute and deliver to Triple-A One or the Program Manager such
assignments, agreements, powers and instruments as are required by
Triple-A One or the Program Manager to carry into effect the purposes
of this Triple-A One Credit Agreement and the other Operative Documents
or to better assure and confirm unto Triple-A One or the Program
Manager its rights, powers and remedies hereunder and under the other
Operative Documents, including, without limitation, to obtain such
consents and give such notices, and to file and record all such
documents and instruments, and renew each such consent, notice, filing
and recordation, at such time or times, in such manner and at such
places, as may be necessary or desirable to preserve and protect the
position of Triple-A One and the Program Manager hereunder and under
the other Operative Documents. This covenant shall survive the
termination of this Triple-A One Credit Agreement.
5.11. Independent Director and Officer. Maintain at all times
at least two Independent Directors. An "Independent Director" shall be
an individual who is not at such time, and shall not have been at any
time during the preceding five years (i) a director, officer, employee
or affiliate of Onyx Acceptance Corporation or any of its Subsidiaries
or Affiliates, or of any major creditor thereof, or (ii) the beneficial
owner at the time of such individual's appointment as an Independent
Director or at any time
15
<PAGE> 20
thereafter while serving as an Independent Director, of more than 1,000
shares in the aggregate of all classes of common stock of Onyx
Acceptance Corporation, or if greater, such number of shares the value
of which constitutes more than 10% of such individual's net worth. The
term "major creditor" shall mean a financial institution to which Onyx
Acceptance Corporation has outstanding indebtedness for borrowed money
in a sum sufficiently large as would reasonably be expected to
influence the judgment of the proposed Independent Director adversely
to the interests of Finco when its interests are adverse to those of
Onyx Acceptance Corporation.
5.12. Instructions to Obligors. Instruct all Obligors to cause
all Collections to be deposited directly into a Lock-Box.
5.13. Cooperation in Making Calculations. Cooperate with
Triple-A One and the Program Manager at all times in the calculation of
all formulas used in any Operative Document, including without
limitation, deliver in written or electronic form, any and all data and
other information necessary or required in the calculation of the
Borrowing Base, Net Yield and Finco Expenses and all calculations
necessary or required to perform such calculation. Finco hereby agrees
to provide all such information on or before each date, without prior
request by Triple-A One or the Program Manager, such information or
data is required to make any such calculation and to provide such
information and data in such form as may be immediately used by
Triple-A One and the Program Manager without further interpretation or
purchase or license of any software. Finco does hereby further agree
that if it fails to provide any such information or data as required in
this subsection 5.13, Triple-A One or the Program Manager may use any
estimate of any amount or calculation that it, in its sole discretion,
determines.
5.14. Interest Rate Hedge Mechanisms. Maintain or cause to be
maintained Interest Rate Hedge Mechanisms in notional amount(s)
required by Moody's and S&P to cover amounts outstanding under the
warehouse facility from time to time, satisfactory to Moody's and S&P
and to the Collateral Agent and the Program Manager. Upon the execution
of each Interest Rate Hedge Mechanism, Finco shall deliver executed
copies of such Interest Rate Hedge Mechanism to the Collateral Agent
and the Program Manager.
5.15. Contract Files. Maintain continuous custody of the Files
(other than those held by the Custodian pursuant to the Custodian
Agreement for so long as the Custodian Agreement is in effect) on
behalf of the Collateral Agent in secure and fireproof facilities in
accordance with the customary standards for such custody as certified
to the Program Manager and the Collateral Agent.
SECTION 6. NEGATIVE COVENANTS
Finco hereby agrees that, so long as this Triple-A One Credit Agreement
remains in effect, Finco shall not directly or indirectly:
16
<PAGE> 21
6.1. Limitation on Debt. Create, incur, assume or suffer to
exist any Debt, except indebtedness in respect of the Triple-A One
Loans, the Triple-A One Note, other obligations of Finco under the
Operative Documents, including, without limitation, the Seller Note and
the Subordinated Note.
6.2. Limitation on Liens. Create, incur, assume or suffer to
exist any Lien upon any of its property, assets or revenues, whether
now owned or hereafter acquired, except:
(a) Liens for taxes not yet due;
(b) Liens in favor of the Collateral Agent as provided in the
Operative Documents; and
(c) Liens in favor of the Seller securing the Subordinated
Note.
6.3. Limitation on Fundamental Changes. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself
(or suffer any liquidation or dissolution), or convey, sell, lease,
assign, transfer or otherwise dispose of, all or substantially all of
its property, business or assets, or make any material change in its
present method of conducting business.
6.4. Limitation on Sale of Assets. Convey, sell, lease,
assign, transfer or otherwise dispose of any of its property, business
or assets (including, without limitation, Contracts and leasehold
interests), whether now owned or hereafter acquired, except as
expressly permitted by the Operative Documents.
6.5. Purchased Contracts.
(a) Sell, assign or otherwise encumber any Purchased Contract,
except as expressly permitted by the Operative Documents; or
(b) Cancel, terminate, amend, modify or waive any term or
condition of any Purchased Contract (including the granting of rebates
or adjustments with respect thereto), except in accordance with the
Credit and Collection Policy.
6.6. Limitation on Dividends. Declare or pay any dividend on,
or make any payment on account of, or set apart assets for a sinking or
other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any shares of any class of Capital
Stock of Finco or any warrants or options to purchase any such Stock,
whether now or hereafter outstanding, or make any other distribution in
respect thereof, either directly or indirectly, whether in cash or
property or in obligations of Finco except (i) dividends payable solely
in common stock of Finco, and (ii) payments pursuant to any agreement
or other arrangement approved in writing by the Program Manager to
share taxes of any affiliated, consolidated, unitary, combined or
similar group including the Seller and Finco and (iii) cash dividends
to the extent permitted by the Triple-A One
17
<PAGE> 22
Security Agreement, provided that after giving effect thereto no
Wind-Down Event or Unmatured Wind-Down event shall have occurred and be
continuing.
6.7. Limitation on Capital Expenditures. Make or commit to
make (by way of the acquisition of securities of a Person or otherwise)
any expenditure in respect of the purchase or other acquisition of
fixed or capital assets.
6.8. Limitation on Investments, Loans and Advances. Make any
advance, loan, extension of credit or capital contribution to, or
purchase any stock, bonds, notes, debentures or other securities of or
any assets constituting a business unit of, or make any other
investment in, any Person, except:
(a) purchases of Contracts pursuant to the Sale Agreement; and
(b) investments in Permitted Investments of funds, if any, on
deposit in the Collection Account.
6.9. Transactions with Affiliates. Enter into any transaction,
including, without limitation, any purchase, sale, lease or exchange of
property or the rendering of any service, with any Affiliate, except
for (i) Purchases, (ii) transactions expressly permitted by the
Operative Documents and (iii) any agreement or other arrangement
satisfactory to the Program Manager to share taxes of any affiliated,
consolidated, unitary, combined or similar group including the Seller
and Finco.
6.10. Sale and Leaseback. Enter into any arrangement with any
Person providing for the leasing by Finco of real or personal property
which has been or is to be sold or transferred by Finco to such Person
or to any other Person to whom funds have been or are to be advanced by
such Person on the security of such property or rental obligations of
Finco.
6.11. Corporate Documents. Amend its Certificate of
Incorporation or By-Laws.
6.12. Capital Stock. Issue any shares of capital stock in
addition to the shares issued and paid for as of the Closing Date or
permit during the term of this Triple-A One Credit Agreement any
transfers of any shares of its capital stock.
6.13. Fiscal Year. Permit the fiscal year of Finco to end on a
day other than December 31st.
6.14. Limitation on Negative Pledge Clauses. Enter into any
agreement with any Person other than Triple-A One or the Program
Manager pursuant to the Operative Documents which prohibits or limits
the ability of Finco to create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired except with the prior written consent of Triple-A
One and the Program Manager.
18
<PAGE> 23
6.15. Activities of Finco. Engage in any business or activity
of any kind or enter into any transaction or indenture, mortgage,
instrument, agreement, contract, lease or other undertaking which is
not directly related to the transactions contemplated and authorized
hereby or by the other Operative Documents other than an agreement or
other arrangement approved in writing by the Program Manager to share
taxes of any affiliated, consolidated, unitary, combined or similar
group including the Seller and Finco.
6.16. Agreements.
(a) Except for the Operative Documents and as expressly
permitted by the Operative Documents, become a party to, or permit any
of its properties to be bound by, any indenture, mortgage, instrument,
contract, agreement, lease or other undertaking, or issue any power of
attorney except to Triple-A One or, pursuant to the Sale Agreement, to
the Servicer, or cancel, terminate, amend, supplement, modify or waive
any of the provisions of the Sale Agreement or request, consent or
agree to or suffer to exist or permit any such cancellation,
termination, amendment, supplement, modification or waiver.
(b) Permit the Seller or the Servicer to assign any of their
respective rights or obligations under the Sale Agreement, except as
expressly permitted by the Sale Agreement.
(c) On any Determination Date, permit the sum of (i) the Face
Amount of Outstanding Commercial Paper, (ii) the outstanding principal
amount of Loans and (iii) accrued and unpaid Facilities Costs to exceed
the Maximum Program Amount.
(d) Permit the Servicer to change the forms of the Monthly
Report, the Daily Report, the Annual Report, the Investor Report or any
other document required to be delivered by it pursuant to the Sale
Agreement without the prior written consent of the Program Manager.
(e) On any day, permit a Borrowing Base Deficiency to exist.
6.17. Bank Accounts. Move the Bank Accounts from the
institution at which they are maintained on the Closing Date without
the prior written consent of the Program Manager.
6.18. Successor Servicer. Permit any change of Servicer,
except in accordance with the Sale Agreement.
6.19. Servicing of Contracts.
(a) Permit any change in the method by which Collections are
made, unless instructed to in writing by the Program Manager, in which
case Finco does hereby agree to implement any and all such changes as
soon as practicable.
19
<PAGE> 24
(b) Amend, modify or otherwise change or agree to any
amendment, modification or other change in the Credit and Collection
Policy without the prior written consent of the Program Manager to each
such proposed amendment, modification or change.
6.20. Prohibitions Regarding Subordinated Note. Make any
payment or prepayment of, or purchase, redeem or otherwise acquire, or
amend any provisions pertaining to the subordination or the terms of
payment of, the Subordinated Note except as permitted by the terms of
the Operative Documents.
6.21. Lock-Box Banks. Add or terminate any bank as a Lock-Box
Bank from those delivering a Lock-Box Agreement in the form of Exhibit
F hereto (a "Lock-Box Agreement"), or make any change in its
instructions to Obligors regarding payments to be made to any Lock-Box
Bank, unless the Collateral Agent shall have received notice of such
addition of any Lock-Box Bank, a Lock-Box Agreement in the form of
Exhibit F hereto executed by Finco, the Collateral Agent and such
Lock-Box Bank shall have been delivered to the Collateral Agent; or
deposit or otherwise credit, or cause or permit to be so deposited or
credited, Collections to any lock-box account except the Lock-Boxes,
the Clearing Account and the Collection Account.
6.22. Contract Files. Transfer the Files to any Person or
permit the Files to be maintained at any location other than (i) 8001
Irvine Center Drive, Irvine, California, or at the offices of the
Custodian so long as the Custodian Agreement is in effect prior to
January 1, 1999, or (ii) 27051 Towne Centre Drive, Foothill Ranch,
California, in each case in fireproof facilities owned or leased by
Finco as certified to the Program Manager and the Collateral Agent,
without the consent of the Program Manager and Collateral Agent.
SECTION 7. WIND-DOWN EVENTS; REMEDIES
If a Wind-Down Event shall have occurred, the Triple-A One Commitment
shall terminate as of the Wind-Down Date. Upon the occurrence of a Wind-Down
Event, and upon the written instructions of the Program Manager, Finco shall
take such action or shall cause such action to be taken pursuant to any and all
Interest Rate Hedge Mechanisms and/or enter into any Hedge Agreement at the sole
expense of Finco promptly upon the request of the Program Manager. In addition,
the Program Manager shall be entitled to exercise any additional rights it may
have pursuant to the Operative Documents, including, without limitation, the
right to implement a Complete Servicing Transfer under the Sale Agreement, the
right to intercept the payments of Obligors directly to the Program Manager, and
the right to enforce the Collateral Agent's rights in and to the On-Line Service
Agreement, as described in Section 2(j) of the Triple-A One Security Agreement,
and the rights provided under the FDI Service Agreement and the Supplemental
Service Agreement.
20
<PAGE> 25
SECTION 8. INVESTMENT MANAGEMENT
8.1. Directions to Triple-A One. Subject to subsection 8.3
hereof, the Program Manager agrees that it will follow the directions
of Finco, including all standing directions furnished to it by Finco,
in the instances specified below and Triple-A One agrees that it will
comply with such directions of Finco communicated to the Program
Manager.
(a) Finco shall notify the Program Manager of the Type,
Interest Period (in the case of Eurodollar Loans), Maturity Date,
amount and purpose of the Loans, to enable the Program Manager to give
the Bank Agent the notice required pursuant to the Liquidity Agreement.
Such notice shall be received by the Program Manager no later than
12:00 noon (New York City time) on the Borrowing Date, in the case of
Base Rate Loans, and 12:00 noon (New York City time) three Working Days
prior to the Borrowing Date in the case of Eurodollar Loans;
(b) Finco shall notify the Program Manager of the amount, date
of issue and maturity of Commercial Paper to be sold to enable the
Program Manager to deliver any instructions required to be given
pursuant to the Issuing and Paying Agreement. Such information shall be
delivered to the Program Manager by 12:00 noon (New York City time) on
the Business Day immediately preceding the date of issue of such
Commercial Paper.
In the event the Program Manager does not receive timely notice
from Finco, the parties hereto agree that the Program Manager shall instruct
Triple-A One to issue Commercial Paper or borrow under the Liquidity Agreement
and Triple-A One shall comply therewith on such terms as the Program Manager
determines in its sole discretion.
8.2. Permitted Investments Finco shall notify the Program
Manager of the type and maturity of Permitted Investments into which
the funds in the Collection Account shall be invested. Such notice
shall be received by the Program Manager no later than 10:00 A.M. (New
York City time) on each Business Day.
8.3. Conditions. Neither the Program Manager nor Triple-A One
shall be obligated to comply with the directions of Finco (including
all standing directions furnished to it by Finco) given pursuant to
subsection 8.1(b) hereof in any of the following instances:
(a) the maturity date of the Commercial Paper directed to be
sold would occur after the Scheduled Maturity Date; or
(b) such directions could result in Triple-A One issuing
commercial paper in violation of the Issuing and Paying Agreement; or
(c) such directions do not provide the best execution
(including, without limitation, the discount applicable to, or the
maturity of, the Commercial Paper directed
21
<PAGE> 26
to be sold) of the Commercial Paper to be sold, as determined by the
Program Manager in its sole discretion; or
(d) market conditions exist (as determined by the Program
Manager in its sole discretion) that prevent the execution of Finco's
request to issue Commercial Paper.
SECTION 9. THE PROGRAM MANAGER
(a) The Program Manager agrees (i) that it will not reduce the
Liquidity Commitments pursuant to subsection 2.6 of the Liquidity
Agreement below the Triple-A One Commitments then in effect and, (ii)
in the event that the Triple-A One Commitment is reduced pursuant to
Section 2.8 of this Triple-A One Credit Agreement, to reduce the
Liquidity Commitments by an equivalent amount, pursuant to subsection
2.6 of the Liquidity Agreement.
(b) The Program Manager agrees that it shall cause Triple-A
One to use its best efforts to sell Commercial Paper so long as either
(A) each of the Banks has a short-term debt rating equal to A-1 and P-1
or (B) if any Bank has a lower short-term debt rating, the sale of
Commercial Paper will not cause Triple-A One's short-term rating by
Moody's, S&P or Duff & Phelps Credit Rating Co. to fall below A-1 and
P-1. Except as set forth in clause (B), the parties hereto agree that
if any Bank's short-term debt rating falls below A-1 and P-1, neither
the Program Manager, Triple-A One, nor any of their Affiliates shall
have any obligation to issue or cause to be issued Commercial Paper.
The Program Manager agrees that it will use commercially reasonable
efforts to replace a downgraded Bank.
(c) Neither the Program Manager nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates shall be
liable for any action lawfully taken or omitted to be taken by it in
connection with this Triple-A One Credit Agreement or any other
Operative Document (except for its or such Person's own gross
negligence or willful misconduct).
(d) The Program Manager shall be entitled to rely, and shall
be fully protected in relying, upon any note, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram,
telecopy, telex or teletype message, statement, order or other document
or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon
advice and statements of legal counsel (including, without limitation,
counsel to the Seller, the Servicer or Finco) independent accountants
and other experts selected by the Program Manager.
(e) The Program Manager agrees to notify Moody's and S&P of
(i) each amendment entered into with respect to any Operative Document,
(ii) any payment default by Triple-A One under the Liquidity Agreement
or by the Surety Provider under a Surety Bond and (iii) the termination
of the Triple-A One Commitment.
22
<PAGE> 27
SECTION 10. MISCELLANEOUS
10.1. Amendments and Waivers. None of this Triple-A One Credit
Agreement, the Triple-A One Note, any other Operative Document to which
Triple-A One, the Collateral Agent, the Program Manager or Finco is a
party, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this subsection.
Triple-A One, the Program Manager, the Collateral Agent and Finco may,
from time to time, enter into written amendments, supplements or
modifications hereto and to the Triple-A One Note and the other
Operative Documents to which they are parties for the purpose of adding
any provisions to this Triple-A One Credit Agreement or the Triple-A
One Note or such other Operative Documents or changing in any manner
the rights of Triple-A One, the Program Manager, the Collateral Agent
or Finco hereunder or thereunder and, in addition, waiving, on such
terms and conditions as Triple-A One, the Program Manager or the
Collateral Agent may specify in such instrument, any of the
requirements of this Triple-A One Credit Agreement or the Triple-A One
Note or such other Operative Documents or any Unmatured Wind-Down Event
or Wind-Down Event and its consequences. The foregoing notwithstanding,
no waiver of paragraph (o) of the definition of Wind-Down Event shall
in any case be effective for more than 15 days. Any such waiver and any
such amendment, supplement or modification shall be binding upon
Triple-A One, the Program Manager, the Collateral Agent and all future
holders of the Triple-A One Note, provided that such waiver, amendment,
supplement or modification shall not be effective without prior written
notice thereof to S&P and Moody's. In the case of any waiver, Triple-A
One, the Program Manager, the Collateral Agent and Finco shall be
restored to their former position and rights hereunder and under the
Triple-A One Note and any other Operative Documents to which they are
parties, and any Unmatured Wind-Down Event or Wind-Down Event waived
shall be deemed to be cured and not continuing; but no such waiver
shall extend to any subsequent or other Unmatured Wind-Down Event or
Wind-Down Event, or impair any right consequent thereon.
10.2. Notices. Except where telephonic instructions or notices
are authorized herein to be given, all notices, demands, instructions
and other communications required or permitted to be given to or made
upon any party hereto shall be in writing and shall be personally
delivered or sent by overnight courier service, or by registered,
certified or express mail, postage prepaid, return receipt requested,
or by facsimile copy, or telegram (with messenger delivery specified in
the case of a telegram) and shall be deemed to be delivered for
purposes of this Triple-A One Credit Agreement on: (a) the second
Business Day following the day on which such notice was placed in the
custody of the U.S. Postal Service, (b) the next Business Day following
the day on which such notice was placed in the custody of any overnight
courier service, including express mail service or (c) the same
Business Day on which such notice is sent by telegram, messenger or
facsimile. Unless otherwise specified in a notice sent or delivered in
accordance with the foregoing provisions of this subsection, notices,
demands, instructions and other communications in writing shall be
given to or made upon the respective parties hereto at their respective
addresses (or to their respective facsimile
23
<PAGE> 28
numbers) indicated below, and, in the case of telephonic instructions
or notices, by calling the telephone number or numbers indicated for
such party below:
If to Finco: Onyx
Acceptance Financial Corporation
8001 Irvine Center Drive
Irvine, California 92618
Attention: Chief Financial Officer
Tel. No.: (949) 790-5600
Telecopier No.: (949) 450-5530
If to the Seller: Onyx Acceptance Corporation
8001 Irvine Center Drive
Irvine, California 92618
Attention: Executive Vice President
Tel. No.: (949) 790-5600
Telecopier No.: (949) 450-5530
If to the Program Manager: CapMAC Financial Services, Inc.
885 Third Avenue
New York, New York 10022
Attention: Chief Underwriting
Officer
Tel. No.: 212-755-1155
Telecopier No.: 212-755-5462
If to Triple-A One: Triple-A One Funding Corporation
c/o MBIA Insurance Corporation,
as Administrative Agent
885 Third Avenue
New York, New York, 10022
Attention: Chief Underwriting Officer
Tel. No.: 212-755-1155
Telecopier No.: 212-755-5462
A copy of any notice delivered to or required to be sent by Finco
hereunder shall be sent by Finco to the holder of the Subordinated Note.
10.3. No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of Triple-A One or the
Collateral Agent any right, remedy, power or privilege hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise
of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein
provided are cumulative and not exclusive of any rights, remedies,
powers and privileges provided by law.
24
<PAGE> 29
10.4. Survival of Representations and Warranties. All
representations and warranties made hereunder and in any document,
certificate or statement delivered pursuant hereto or in connection
herewith shall survive the execution and delivery of this Triple-A One
Credit Agreement and the Triple-A One Note.
10.5. Payment of Expenses and Taxes. Finco agrees, on demand,
to (a) pay or reimburse Triple-A One, the Program Manager and the
Collateral Agent for all its out-of-pocket costs and expenses incurred
in connection with the preparation and execution of, and any amendment,
supplement or modification to, this Triple-A One Credit Agreement, the
Triple-A One Note and the other Operative Documents and any other
documents prepared in connection herewith or therewith, and the
consummation of the transactions contemplated hereby and thereby,
including, without limitation, any and all collateral audit fees, the
reasonable fees and disbursements of counsel to Triple-A One, the
Program Manager and the Collateral Agent, (b) pay or reimburse Triple-A
One, the Program Manager and the Collateral Agent for all its costs and
expenses incurred in connection with the enforcement or preservation of
any rights under this Triple-A One Credit Agreement, the Triple-A One
Note, the other Operative Documents and any such other documents,
including, without limitation, reasonable fees and disbursements of
counsel to Triple-A One, the Program Manager and the Collateral Agent
and (c) pay, indemnify, and hold Triple-A One, the Program Manager and
the Collateral Agent harmless from, any and all recording and filing
fees and any and all liabilities with respect to, or resulting from any
delay in paying, any registration tax, stamp, duty and other similar
taxes or duties, if any, which may be payable or determined to be
payable in connection with the execution and delivery of, or
consummation of any of the transactions contemplated by, or any
amendment, supplement or modification of, or any waiver or consent
under or in respect of, this Triple-A One Credit Agreement, the
Triple-A One Note, the other Operative Documents and any such other
documents, and (d) pay, indemnify, and hold Triple-A One, the Program
Manager and the Collateral Agent harmless from and against any and all
other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Triple-A One Credit Agreement,
the Triple-A One Note and the other Operative Documents, (all the
foregoing, collectively, the "indemnified liabilities"), provided that
Finco has no obligation hereunder to the Program Manager, the
Collateral Agent or Triple-A One with respect to indemnified
liabilities arising from the gross negligence or willful misconduct of
the Program Manager, the Collateral Agent or Triple-A One.
Notwithstanding the foregoing, if Triple-A One enters into agreements
similar to the Triple-A One Credit Agreement, the Triple-A One Note or
any of the other Operative Documents with one or more other Persons
("Other Borrowers"), Triple-A One shall allocate such indemnified
liabilities which are attributable to Finco and to the Other Borrowers
to Finco and to each Other Borrower; provided, however, that if such
indemnified liabilities are attributable to Finco and not attributable
to any Other Borrower, Finco shall be solely liable for such
indemnified liabilities or if such indemnified liabilities are
attributable to Other Borrowers and not attributable to Finco, such
Other Borrowers shall be solely liable for such indemnified
liabilities. The
25
<PAGE> 30
agreements in this subsection shall survive repayment of the Triple-A
One Note and all other amounts payable hereunder.
10.6. Successors and Assigns; Participations.
(a) This Triple-A One Credit Agreement shall be binding upon
and inure to the benefit of Finco, Triple-A One, the Program Manager
and the Collateral Agent and all future holders of the Triple-A One
Note and their respective successors and assigns, except that Finco may
not assign or transfer any of its rights or obligations under this
Triple-A One Credit Agreement and Triple-A One may not assign or
transfer any of its rights or obligations under this Triple-A One
Credit Agreement without the prior consent of Finco, which consent
shall not unreasonably be withheld.
(b) Triple-A One may, in accordance with applicable law, at
any time sell to one or more banks or other entities ("Participants")
participating interests in any Triple-A One Loan owing to it, the
Triple-A One Note, the Triple-A One Commitment or any other interest of
Triple-A One hereunder and under the other Operative Documents. In the
event of any such sale by Triple-A One of participating interests to a
Participant, Triple-A One's obligations under this Triple-A One Credit
Agreement to the other parties hereto shall remain unchanged, Triple-A
One shall remain solely responsible for the performance thereof,
Triple-A One shall remain the holder of the Triple-A One Note for all
purposes under this Triple-A One Credit Agreement and the other
Operative Documents, and Finco shall continue to deal solely and
directly with Triple-A One in connection with Triple-A One's rights and
obligations under this Triple-A One Credit Agreement and the other
Operative Documents. Finco agrees that if amounts outstanding under
this Triple-A One Credit Agreement and the Triple-A One Note are due
and unpaid, or shall have been declared or shall have become due and
payable upon the occurrence of the Wind-Down Date, each Participant
shall be deemed to have the right of setoff in respect of its
participating interest in amounts owing under this Triple-A One Credit
Agreement and the Triple-A One Note to the same extent as if the amount
of its participating interest were owing directly to it under this
Triple-A One Credit Agreement or the Triple-A One Note. Finco also
agrees that each Participant shall be entitled to the benefits of
subsection 2.9 and 10.5 with respect to its participation in the
Triple-A One Commitment and the Triple-A One Loans outstanding from
time to time; provided, that no Participant shall be entitled to
receive any greater amount pursuant to such subsections than Triple-A
One would have been entitled to receive in respect of the amount of the
participation transferred by Triple-A One to such Participant had no
such transfer occurred.
(c) Subject to the terms and conditions of the Confidentiality
Agreement, Finco authorizes Triple-A One to disclose to any Participant
and any prospective Participant any and all financial information in
its possession concerning the Seller, Finco and their affiliates which
has been delivered to it by or on behalf of such Person pursuant to
this Triple-A One Credit Agreement or which has been delivered to it by
or on behalf of such Person in connection with its credit evaluation of
the Seller, Finco and their
26
<PAGE> 31
Affiliates prior to becoming a party to this Triple-A One Credit
Agreement. Each Participant shall agree in writing that it shall be
bound by the provisions applicable to the Program Manager set forth in
the Confidentiality Agreement.
(d) If, pursuant to this subsection 10.6, any interest in this
Triple-A One Credit Agreement or the Triple-A One Note is transferred
or assigned to any Participant or assignee which is organized under the
laws of any jurisdiction other than the United States or any state
thereof, Triple-A One shall cause such Participant or assignee, as a
condition to the effectiveness of such transfer, (i) to represent to
Triple-A One and Finco that under applicable law and treaties then in
effect no taxes will be required to be withheld by Finco or Triple-A
One with respect to any payments to be made to such Participant or
assignee in respect of the Triple-A One Loans, (ii) to furnish to Finco
either U.S. Internal Revenue Service Form 4224 (or any successor form)
or U.S. Internal Revenue Service Form 1001 (or any successor form)
(wherein such Participant or assignee claims entitlement to complete
exemption from U.S. federal withholding tax on all interest payments
hereunder) and (iii) to agree (for the benefit of Triple-A One and
Finco) timely to provide Triple-A One and Finco a new Form 4224 (or any
successor form) or Form 1001 (or any successor form) upon the
expiration or obsolescence of any previously delivered form and
comparable statements in accordance with and if permitted under
applicable U.S. laws and regulations and amendments then in effect duly
executed and completed by such Participant or assignee, and to comply
from time to time with all applicable U.S. laws and regulations with
regard to such withholding tax exemption.
(e) Triple-A One shall not grant to any Participant the right
to consent to any amendment or waiver entered into in accordance with
subsection 10.1 except for any such amendment or waiver which would
increase the Triple-A One Commitment, or reduce the amount or extend
the due date of any principal of or interest on the Triple-A One Note.
10.7. Termination. This Triple-A One Credit Agreement shall
terminate following the Commitment Termination Date upon payment in
full of all outstanding principal, interest and other amounts due
hereunder which are payable on such date.
10.8. Counterparts. This Triple-A One Credit Agreement may be
executed by one or more of the parties to this Triple-A One Credit
Agreement on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the
same instrument.
10.9. Severability. Any provision of this Triple-A One Credit
Agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
27
<PAGE> 32
10.10. Integration. This Triple-A One Credit Agreement
represents the agreement of Finco, Triple-A One, the Program Manager
and the Collateral Agent with respect to the subject matter hereof, and
there are no promises, undertakings, representations or warranties by
Triple-A One, the Program Manager or the Collateral Agent relative to
the subject matter hereof not expressly set forth or referred to herein
or in the other Operative Documents.
10.11. GOVERNING LAW. THIS TRIPLE-A ONE CREDIT AGREEMENT AND
THE TRIPLE-A ONE NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
UNDER THIS TRIPLE-A ONE CREDIT AGREEMENT AND THE TRIPLE-A ONE NOTE
SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH,
THE LAW OF THE STATE OF NEW YORK.
10.12. SUBMISSION TO JURISDICTION; WAIVERS. FINCO HEREBY
IRREVOCABLY AND UNCONDITIONALLY:
(a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS TRIPLE-A ONE CREDIT AGREEMENT AND THE OTHER
OPERATIVE DOCUMENTS TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND
ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE
GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE COURTS
OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK,
AND APPELLATE COURTS FROM ANY THEREOF;
(b) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT
IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR
THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND
AGREES NOT TO PLEAD OR CLAIM THE SAME;
(c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR
CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE
PREPAID, TO ITS ADDRESS SET FORTH IN SUBSECTION 10.2 OR AT SUCH OTHER
ADDRESS OF WHICH ALL OF THE OTHER PARTIES HERETO SHALL HAVE BEEN
NOTIFIED PURSUANT THERETO;
(d) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY
RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING
REFERRED TO IN THIS SUBSECTION ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES.
28
<PAGE> 33
10.13. Acknowledgments. Finco hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Triple-A One Credit Agreement, the
Triple-A One Note and the other Operative Documents;
(b) neither Triple-A One, the Surety Provider, the Program
Manager nor the Collateral Agent has any fiduciary relationship to
Finco, and the relationship between Triple-A One and Finco is solely
that of debtor and creditor;
(c) no joint venture exists between Finco and Triple-A One;
and
(d) the Triple-A One Note will be pledged to the Bank
Collateral Agent pursuant to the Note Pledge Agreement.
10.14. WAIVER OF JURY TRIAL. FINCO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS TRIPLE-A ONE CREDIT AGREEMENT OR THE TRIPLE-A ONE NOTE
OR ANY OTHER OPERATIVE DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
10.15. No Bankruptcy Petition Against Triple-A One. Finco
covenants and agrees that it will not institute against, or join any
other Person in instituting against, Triple-A One any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or
other proceedings under any federal or state bankruptcy or similar law.
10.16. Triple-A One's Credit Decision. Triple-A One
acknowledges that it has, independently and without reliance upon the
Program Manager, the Surety Provider or any of their Affiliates and
based on the financial statements referred to in Section 3.1(a) hereof
and Section 4.1(e) of the Sale Agreement and such other documents and
information as it has deemed appropriate, made its own credit analysis
and decision to enter into this Triple-A One Credit Agreement and,
subject to the conditions set forth in this Triple-A One Credit
Agreement, to make Triple-A One Loans hereunder. Triple-A One also
acknowledges that it will, independently and without reliance upon the
Program Manager, the Surety Provider or any of their Affiliates and
based on such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or not
taking action under this Triple-A One Credit Agreement.
29
<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have caused this Triple-A One
Credit Agreement to be duly executed and delivered in New York, New York by
their proper and duly authorized officers as of the day and year first above
written.
ONYX ACCEPTANCE FINANCIAL CORPORATION
By:_________________________________
Name:
Title:
TRIPLE-A ONE FUNDING CORPORATION
By: MBIA Insurance Corporation,
its attorney in fact
By:_________________________________
Name:
Title:
CAPMAC FINANCIAL SERVICES, INC.,
as Program Manager
By:_________________________________
Name:
Title:
CAPITAL MARKETS ASSURANCE CORPORATION,
as Collateral Agent
By:_________________________________
Name:
Title:
30
<PAGE> 35
EXHIBIT A
[DEFINITIONS LIST]
See TAB 1
1
<PAGE> 36
EXHIBIT B
[FORM OF TRIPLE-A ONE NOTE]
$[ ] New York, New York
FOR VALUE RECEIVED, the undersigned, Onyx Acceptance Financial
Corporation, a Delaware corporation ("Finco"), promises to pay to the order of
Triple-A One Funding Corporation ("Triple A One"), on the date specified in
Section 2.2 of the Triple-A One Credit Agreement hereinafter referred to, at the
office of Triple-A One at c/o MBIA Insurance Corporation, as administrative
agent, 885 Third Avenue, New York, New York, in lawful money of the United
States of America and in immediately available funds, the principal amount of
[ ] $[ ], or, if less, the aggregate unpaid principal amount of all Triple-A One
Loans made by Triple-A One to Finco pursuant to the Triple-A One Credit
Agreement, and to pay interest at such office, in like money, from the date
hereof on the unpaid principal amount of such Triple-A One Loans from time to
time outstanding at the rates and on the dates specified in Section 2.5 of the
Triple-A One Credit Agreement.
Triple-A One is authorized to record, on the schedule annexed
hereto and made a part hereof or on other appropriate records of Triple-A One,
the date and amount of each Triple-A One Loan made by Triple-A One, each
continuation thereof, the interest rate from time to time on each Triple-A One
Loan and the date and amount of each payment or prepayment of principal thereof.
Any such recordation shall constitute prima facie evidence of the accuracy of
the information so recorded, provided that the failure of Triple-A One to make
any such recordation (or any error in such recordation) shall not affect the
obligations of Finco hereunder or under the Triple-A One Credit Agreement in
respect of the Triple-A One Loans.
This Triple-A One Note is the Triple-A One Note referred to in
the Triple-A One Credit Agreement dated as of September 4, 1998 (as amended,
supplemented or otherwise modified and in effect from time to time, the
"Triple-A One Credit Agreement") among Finco, Triple-A One, CapMAC Financial
Services, Inc., as Program Manager and CapMAC, as Collateral Agent, and is
entitled to the benefits thereof. Capitalized terms used herein without
definition have the meanings assigned to them in the Triple-A One Credit
Agreement.
This Triple-A One Note is subject to optional and mandatory
prepayment as provided in the Triple-A One Credit Agreement.
Upon the occurrence of the Wind-Down Date, Triple-A One shall
have all of the remedies specified in the Triple-A One Credit Agreement. Finco
hereby waives presentment, demand, protest and all notices of any kind.
1
<PAGE> 37
THIS TRIPLE-A ONE NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
ONYX ACCEPTANCE FINANCIAL
By:_________________________________
Name:
Title:
2
<PAGE> 38
Schedule 1 to
TRIPLE-A ONE NOTE
<TABLE>
<CAPTION>
Principal Interest on Prepayment
of Triple-A Triple-A of Triple-A
Date One Loans One Loans One Loans Notation By
<S> <C> <C> <C> <C>
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
</TABLE>
DATED:
1
<PAGE> 39
EXHIBIT C
NOTICE OF BORROWING
Onyx Acceptance Financial Corporation hereby requests that Triple-A One
Funding Corporation make a Triple-A One Loan to it on [insert Triple-A One
Borrowing Date] in the amount of [amount of Triple-A One Loan requested] by
crediting the Collection Account by 3:00 p.m. (New York City time) on [insert
Triple-A One Borrowing Date] (capitalized terms used herein have the meaning
assigned to them in the Amended and Restated Triple-A One Credit Agreement dated
as of September 4, 1998, as amended, modified or supplemented from time to
time). Onyx Acceptance Financial Corporation hereby certifies as of the date
hereof that the representations and warranties made in Section 3 of the Triple-A
One Credit Agreement are true and correct on and as of the Triple-A One
Borrowing Date for such Triple-A One Loan, both before and after giving effect
to such Triple-A One Loan.
-------------------------------------
BY: [RESPONSIBLE OFFICER OF FINCO]
TITLE:
Dated: ____________________
1
<PAGE> 40
EXHIBIT D
[TRIPLE-A ONE SECURITY AGREEMENT]
See TAB 4
1
<PAGE> 41
EXHIBIT E
[FORM OF FINCO OFFICER'S CERTIFICATE]
The undersigned [President] [Chief Financial Officer] [Chief Executive
Officer] [Executive Vice President] of Onyx Acceptance Financial Corporation
("Finco") hereby certifies that as such he is authorized to execute and deliver
this certificate on behalf of Finco in connection with the Amended and Restated
Triple-A One Credit Agreement dated as of September 4, 1998 (as amended,
supplemented or otherwise modified, the "Triple-A One Credit Agreement") among
Finco, CapMAC Financial Services, Inc. and Capital Markets Assurance Corporation
(all capitalized terms used herein without definition having the respective
meanings specified in the Definitions List attached to the Triple-A One Credit
Agreement), and further certify as follows:
Finco shall apply the proceeds of the Triple-A One Loan which are being
disbursed to Finco on the date hereof (the "Loan Proceeds") solely for the
purpose of purchasing from the Seller, pursuant to the Sale Agreement, those
Contracts set forth on the Contracts List delivered to the Program Manager and
Triple-A One on the date hereof and such Loan Proceeds shall be applied [on the
date hereof].
IN WITNESS WHEREOF, I have affixed hereunto my signature this_________
day of_________.
By:_____________________________________
Name:
Title:
<PAGE> 42
EXHIBIT F
[Form of Lock-Box Agreement]
[Name and address of Bank]
Gentlemen:
We refer to lock-box/bank account No. [ ] maintained with you (the
"Lock-Box Account") by us (sometimes referred to as "Finco"). We have entered
into a Credit Agreement (the "Triple-A one Credit Agreement") with Triple-A One
Funding Corporation ("Triple-A One") and CapMAC Financial Services, Inc., as
program manager, and Capital Markets Assurance Corporation, as collateral agent
(the "Collateral Agent"), dated as of , 1994, and the Triple-A One Security
Agreement, dated as of , 1994 with Triple-A One and the Collateral Agent
pursuant to which we have granted a security interest in the Lock-Box Account to
the Collateral Agent. The Triple-A One Credit Agreement requires the execution
and delivery of this agreement by you.
By signing this agreement, you agree that on and after delivery to you
of a letter in the form of Attachment A hereto (the "Letter"), the Lock-Box
Account shall, on the terms provided herein, be maintained by you for the
benefit of, and the amounts from time to time therein held by you for the
Collateral Agent. Until the time of delivery of the Letter, the Lock-Box Account
is to be processed in accordance with the standard procedures currently in
effect. All service charges and fees with respect to the Lock-Box Account shall
be payable by Finco as currently arranged or, after delivery of the Letter to
you, by debit to the Lock-Box Account as described below.
Upon delivery to you of the Letter, all further instructions thereafter
regarding the Lock-Box Account shall be under the sole dominion and control of
the Collateral Agent.
Instructions from the Collateral Agent may include, but shall not be
limited to:
(a) Notice of the establishment of a Clearing Account into which
all monies collected in the Lock-Box Account shall thereafter
be transferred. Such transfers will be in accordance with your
availability of funds procedures applicable to Finco and will
encompass all collected deposits less any deductions for
returned items. Transfers between the Lock-Box Account and the
Clearing Account may be carried out using either Fed wire
transfers or ACH (Automated Clearing House) entries.
(b) The right to specify when payments are to be made by you out
of or in connection with the Lock-Box Account.
<PAGE> 43
(c) A requirement that duplicate monthly bank statements for the
Lock-Box Account and the Clearing Account be mailed directly
to an address specified by the Collateral Agent.
By signing this agreement, you agree that after delivery to you of the
Letter you shall not make any charges or debits to the Lock-Box Account, or
exercise any right of setoff or banker's lien with respect thereto except as
provided herein. Finco and the Collateral Agent agree that you may at any time
debit the Lock-Box Account for any items deposited in the Lock-Box Account which
may be returned or otherwise not collected, and, after delivery to you of the
Letter, for your standard and customary fees in connection with the maintenance
of the Lock-Box Account. The Collateral Agent hereby indemnifies you from any
loss arising from items returned or otherwise not collected the funds of which
were transferred in accordance with instructions from the Collateral Agent.
Any notice provided for in this agreement may be personally delivered,
sent by telex, telecopy or U.S. mail, certified return receipt requested, to the
address, telex or telecopy number set forth under the signature to this
agreement of the party to be notified (or to such other address, telex or
telecopy number as shall be designated in writing by such party to all other
parties to this agreement). All notices shall be effective upon receipt. Notice
from the Collateral Agent will be signed by an authorized signatory thereof as
confirmed in the incumbency certificate sent to you together with the Letter.
You may terminate this agreement only upon thirty days' prior written
notice to that effect to the Collateral Agent. After such termination, incoming
mail addressed to the Lock-Box Account shall be forwarded in accordance with the
Collateral Agent's instructions. This agreement may also be terminated upon
written notice to you by the Collateral Agent. Except as otherwise provided in
this paragraph, this agreement may not be terminated or amended without the
prior written consent of the Collateral Agent.
This agreement shall inure to the benefit of and shall be binding upon
the respective successors and assigns of the parties hereto, but it may not be
assigned in whole or in part by any party without the prior written consent of
the other parties.
Very truly yours,
ONYX ACCEPTANCE FINANCIAL CORPORATION
By:______________________________________
Name:
Title:
Address: 8001 Irvine Center Dr.
Irvine, CA 92718
2
<PAGE> 44
AGREED TO:
CAPITAL MARKETS ASSURANCE CORPORATION,
as Collateral Agent
By:_______________________________
Name:
Title:
Address: 885 Third Avenue
New York, NY 10022
[Name of Bank]
By:_______________________________
Name:
Title:
Address:
3
<PAGE> 45
ATTACHMENT A
to Form of Lock-Box Agreement
Form of Notice to Lock-Box Bank
(Date)
[Name and Address of Bank]
Gentlemen:
Pursuant to that certain letter agreement among us and
Onyx Acceptance Financial Corporation ("Finco"), dated , _____ (the
"Agreement") , we hereby notify you that Finco has transferred exclusive
ownership and control of Finco's lock-box (bank) account No. [__________]
maintained with you (the "Lock-Box Account") to Capital Markets Assurance
Corporation (the "Collateral Agent").
Attached hereto is an incumbency certificate establishing that the
person signing below on behalf of the Collateral Agent is duly authorized and
indicating the names of the other officers of the Collateral Agent who are
authorized to give you instructions pursuant to the Agreement.
By signing the Agreement, Finco has agreed that, pursuant to the terms
of the Agreement, the Collateral Agent is, from and after this date, irrevocably
entitled to exercise any and all rights in respect of or in connection with the
Lock-Box Account, including, without limitation, the right to specify when
payments are to be made out of or in connection with the Lock-Box Account.
Very truly yours,
CAPITAL MARKETS ASSURANCE CORPORATION,
as Collateral Agent
By:______________________________________
Name:
Title:
Address: 885 Third Avenue
New York, N.Y. 10022
<PAGE> 46
EXHIBIT G
[FORM OF INTEREST RATE SWAP SURETY BOND]
CAPITAL MARKETS ASSURANCE CORPORATION
SURETY BOND
[DATE]
SURETY BOND NO.SB
RE: MASTER AGREEMENT, SCHEDULE AND CONFIRMATION AMONG AND
BETWEEN ONYX ACCEPTANCE FINANCIAL CORPORATION ("ONYX
FINANCIAL") AND BANK BOSTON, N.A. (THE "BENEFICIARY"), AND
ANY TRANSACTIONS THEREUNDER (THE "INSURED AGREEMENT").
INSURED OBLIGATION: OBLIGATION OF ONYX FINANCIAL TO PAY THE GUARANTEED PAYMENT
UNDER THE INSURED AGREEMENT.
BENEFICIARY: BANKBOSTON, N.A.
CAPITAL MARKETS ASSURANCE CORPORATION ("CapMAC"), for adequate
consideration received and subject to the terms of this surety bond (the "Surety
Bond"), hereby unconditionally and irrevocably guarantees to the Beneficiary the
Insured Obligation. CapMAC agrees to pay to the Beneficiary each Guaranteed
Payment, provided, however that in no event shall the aggregate amount paid by
CapMAC under this Surety Bond (other than with respect to Avoided Payments)
exceed $5,000,000 (the "Surety Bond Amount").
Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to them in the Insured Agreement. The following
terms shall have the meanings set forth below:
"Business Day" shall mean any day other than a
Saturday, Sunday or a day on which banking institutions in
either the City of New York, New York or Boston Massachusetts
are authorized to close.
"Guaranteed Payment" shall mean, with respect to each
Transaction under the Insured Agreement and each Scheduled
Payment Date thereunder, the amount payable by Onyx Financial
to the Beneficiary on such Scheduled Payment Date less any
amounts so paid by or for the account of Onyx Financial.
"Insolvency Proceeding" means the commencement, after
the date hereof, of any bankruptcy, insolvency, readjustment
of debt, reorganization, marshaling of assets
1
<PAGE> 47
and liabilities or similar proceedings by or against any
Person, or the commencement, after the date hereof, of any
proceedings by or against Onyx Financial for the winding up or
liquidation of its affairs, or the consent after the date
hereof to the appointment of a trustee, conservator, receiver
or liquidator in any bankruptcy, insolvency, readjustment of
debt, marshaling of assets, reorganization and liabilities or
similar proceedings of or relating to Onyx Financial.
"Term" means, with respect to this Surety Bond, the
period from, and including, the date of issuance hereof, to
the later of:
(i) payment by CapMAC of the full Insured Obligations; and
(ii) the date that is one year and one day following the final
Scheduled Payment Date, provided that, if an Insolvency
Proceeding is existing by or against Onyx Financial during
such one year and one day period, then this Surety Bond and
CapMAC's obligations hereunder shall terminate on the date of
the conclusion or dismissal of such Insolvency Proceeding
without continuing jurisdiction by the court in such
Insolvency Proceeding, provided further, that, this Surety
Bond shall not terminate prior to the date on which CapMAC has
made all payments required to be made under the terms of this
Surety Bond in respect of such Avoided Payments.
In the event of any payment made under this Surety Bond CapMAC shall be
subrogated to all rights of the Beneficiary with respect to the Insured
Agreement.
CapMAC will pay to the Beneficiary, irrevocably and unconditionally and
without the assertion of any defenses to payment, including fraud in inducement
or fact, the amount demanded in immediately available funds at 1:00 p.m. New
York City time on the Business Day next succeeding presentation to CapMAC (as
hereinafter provided) of a notice for payment in the form of Exhibit A hereto
("Notice for Payment"), appropriately completed and executed by the Beneficiary.
Presentation of any Notice for Payment under this Surety Bond shall be
made by 10:00 a.m. New York City time on any Business Day by (a) delivery of the
original Notice for Payment to CapMAC at its address set forth below, or (b)
facsimile transmission of the original Notice for Payment to CapMAC at its
facsimile number set forth below. If presentation is made by facsimile
transmission, the Beneficiary shall (i) promptly, but in any event within one
hour of transmission, confirm transmission by telephone to CapMAC at its
telephone number set forth below, and (ii) as soon as reasonably practicable,
deliver the original Notice for Payment to CapMAC at its address set forth
below.
If the payment of any amount paid by Onyx Financial to the Beneficiary
under the Insured Agreement is voided (a "Preference Event") under any
applicable bankruptcy, insolvency, receivership or similar law in an Insolvency
Proceeding, and, as a result of such a
2
<PAGE> 48
Preference Event, the Beneficiary is required to return such voided payment, or
any portion of such voided payment (an "Avoided Payment"), CapMAC will pay, an
amount equal to such Avoided Payment, irrevocably, absolutely and
unconditionally and without the assertion of any defenses to payment, including
fraud in inducement or fact or any other circumstances that would have the
effect of discharging a surety in law or in equity, upon receipt by CapMAC from
the Beneficiary of (x) a certified copy of a final order of a court exercising
jurisdiction in such Insolvency Proceeding to the effect that the Beneficiary is
required to return any such payment or portion thereof during the Term of this
Surety Bond because such payment was voided under applicable law, with respect
to which order the appeal period has expired without an appeal having been filed
(the "Final Order"), (y) an assignment, in form reasonably satisfactory to
CapMAC, irrevocably assigning to CapMAC all rights and claims of such
Beneficiary relating to or arising under such Avoided Payment and (z) a Notice
for Payment in the form of Exhibit A hereto appropriately completed and executed
by the Beneficiary. Such payment shall be disbursed to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the Order
and not to the Beneficiary directly.
CapMAC shall make payments due in respect of Avoided Payments prior to
1:00 p.m. New York City time on the second Business Day following CapMAC's
receipt of the documents required under clauses (x) through (z) of the preceding
paragraph. Any such documents received by CapMAC after 3:00 p.m. New York City
time on any Business Day or on any day that is not a Business Day shall be
deemed to have been received by CapMAC prior to 3:00 p.m. on the next succeeding
Business Day. All payments made by CapMAC hereunder in respect of Avoided
Payments will be made with CapMAC's own funds.
This Surety Bond is neither transferable nor assignable without the
prior written consent of CapMAC but it shall inure to the benefit of the
successors of the Beneficiary, if any.
All notices, presentations, transmissions, deliveries and
communications made by the Beneficiary to CapMAC with respect to this Surety
Bond shall specifically refer to the number of this Surety Bond and shall be
made to CapMAC at:
Capital Markets Assurance Corporation
885 Third Avenue, 14th Floor
New York, N.Y. 10022
Attention: Managing Director,
Consumer Structured Finance
Telephone: (212) 755-1155
Facsimile: (212) 755-5477
or such other address, telephone number or facsimile number as CapMAC may
designate to the Beneficiary in writing from time to time. Each such notice,
presentation, delivery and communication shall be effective only upon actual
receipt by CapMAC.
The obligations of CapMAC under this Surety Bond are irrevocable,
primary, absolute and unconditional (except as expressly provided herein) and
neither the failure of the Beneficiary
3
<PAGE> 49
or Onyx Financial or any other person to perform any covenant or obligation in
favor of CapMAC (or otherwise), nor the nonpayment of any premium to CapMAC, nor
the failure or omission to make a demand permitted hereunder, nor the
commencement of any bankruptcy, debtor or other insolvency proceeding by or
against the Beneficiary or Onyx Financial or any other person shall in any way
affect or limit CapMAC's obligations under this Surety Bond. If an action or
proceeding to enforce this Surety Bond is brought, the Beneficiary shall be
entitled to recover from CapMAC costs and expenses reasonably incurred,
including without limitation reasonable fees and expenses of counsel.
There shall be no acceleration payment due under this Surety Bond
unless such acceleration is at the sole option of CapMAC.
CapMAC hereby waives and agrees not to assert any and all rights to
require the Beneficiary to make demand on or to proceed against any person,
party or security prior to demanding payment under this Surety Bond.
No defenses, set-offs and counterclaims of any kind available to CapMAC
so as to deny payment of any amount due in respect of this Surety Bond will be
valid and CapMAC hereby waives and agrees not to assert any and all such
defenses, set-offs and counterclaims, including, without limitation, any such
rights acquired by subrogation, assignment or otherwise.
Upon the termination of this Surety Bond, the Beneficiary shall
forthwith deliver the original of this Surety Bond to CapMAC for cancellation.
This Surety Bond is not covered by the property/casualty insurance fund
specified in Article Seventy-six of the New York State insurance law.
This Surety Bond sets forth in full the undertaking of CapMAC, and
shall not be modified, altered or affected by any other agreement or instrument,
including any modification or amendment thereto, or by the merger, consolidation
or dissolution of Onyx Financial and may not be canceled or revoked by CapMAC
prior to the time it is terminated in accordance with the express terms hereof.
4
<PAGE> 50
THIS SURETY BOND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, CapMAC has caused this Surety Bond to be executed
on the date first written above.
CAPITAL MARKETS ASSURANCE CORPORATION
By:__________________________
5
<PAGE> 1
EXHIBIT 10.108
EXECUTION COPY
AMENDED AND RESTATED TRIPLE-A ONE SECURITY AGREEMENT
AMENDED AND RESTATED TRIPLE-A ONE SECURITY AGREEMENT, dated as of
September 4, 1998, among ONYX ACCEPTANCE FINANCIAL CORPORATION, a Delaware
corporation ("Finco"), TRIPLE-A ONE FUNDING CORPORATION, a Delaware corporation
("Triple-A One"), and CAPITAL MARKETS ASSURANCE CORPORATION, a New York stock
insurance company as collateral agent on behalf of and for the benefit of
Triple-A One (in such capacity, the "Collateral Agent").
W I T N E S S E T H :
WHEREAS, Triple-A One issues CP Notes or borrows from the Banks under
the Liquidity Agreement and with the proceeds thereof makes Triple-A One Loans
to Finco for the purpose of purchasing Contracts;
WHEREAS, as a condition precedent to the Triple-A One Credit Agreement
Finco executed and delivered this Triple-A One Security Agreement to the
Collateral Agent for the benefit of Triple-A One; and
WHEREAS, the parties hereto wish to amend and restate this Triple-A One
Security Agreement as hereinafter provided;
NOW, THEREFORE, in consideration of the premises and to induce Triple-A
One to make its Triple-A One Loans to Finco under the Triple-A One Credit
Agreement, Finco hereby agrees with the Collateral Agent as follows:
SECTION 1. Defined Terms.
(a) As used in this Triple-A One Security Agreement or any
certificate or other document made or delivered pursuant
hereto, the capitalized terms used herein and therein shall,
unless otherwise defined herein, have the meanings assigned to
them in the Amended and Restated Definitions List dated as of
the date hereof that refers to this Triple-A One Security
Agreement, which is incorporated herein by reference (the
"Definitions List").
(b) As used herein and in any certificate or other document made
or delivered pursuant hereto, accounting terms not defined in
the Definitions List and accounting terms partly defined in
the Definitions List to the extent not defined, shall have the
respective meanings given to them under GAAP.
<PAGE> 2
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Triple-A One Security
Agreement shall refer to this Triple-A One Security Agreement
as a whole and not to any particular provision of this
Triple-A One Security Agreement, and paragraph references are
to this Triple-A One Security Agreement unless otherwise
specified.
(d) Capitalized terms used herein shall be equally applicable to
both the singular and plural forms of such terms.
(e) The following terms that are defined in the UCC are used
herein as so defined: Chattel Paper, Documents, Equipment,
General Intangibles, Instruments and Proceeds.
SECTION 2. Grant of Security Interest. As collateral security for the prompt
and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations, Finco
hereby assigns, pledges, grants, conveys, transfers, delivers and sets
over to the Collateral Agent for its benefit and for the ratable
benefit of the holders of the Obligations a security interest in all
Finco's right, title and interest in, to and under the following,
whether now owned or hereafter acquired, in each case only as related
to the Purchased Contracts (collectively, the "Collateral"). For
further clarification, all Collateral as heretofore described in this
Section 2 shall relate to and be in respect of Purchased Contracts as
defined herein, subject to any and all provisos, as applicable,
expressly included in the definition thereof.
(a) all chattel paper, including, without limitation, the
Purchased Contracts and other contracts related to the
Purchased Contracts (as the same may be amended, modified,
supplemented, restated or replaced from time to time) and
amounts paid or payable with respect thereto;
(b) all Files (including all Dealer Assignments) and Contract
Lists, and all right, title and interest of Finco in and to
the documents, agreements and instruments included in the
Files, including, without limitation, rights of recourse of
Finco against Vehicle Dealers;
(c) all Insurance Policies and all rights of Finco in all
Insurance Policies;
(d) all security interests, Liens, guaranties, mortgages and other
encumbrances in favor of or assigned or transferred to Finco
in and to Contracts and Vehicles, and all accessions thereto
and replacements thereof, and in any other property in which a
security interest is assigned or transferred to Finco;
2
<PAGE> 3
(e) all of Finco's Equipment and Inventory, general ledger sheets,
files, records, books of account, invoices, bills,
certificates or documents of ownership, bills of sale,
business papers, correspondence, tapes, cards, computer tapes
and all other data and data storage systems (whether in the
possession of Finco or any other Person) relating to any of
the foregoing;
(f) all deposit accounts, moneys, deposits, funds, accounts and
instruments relating to the foregoing;
(g) each Lock-Box, the funds on deposit in the Clearing Account
pursuant to Section 5(d) hereof, the Collection Account
(including, without limitation, all funds at any time on
deposit therein and all Permitted Investments in which such
funds may at any time be invested);
(h) the Sale Agreement and all other Operative Documents to which
Finco is a party, including, without limitation, all rights of
Finco to amounts due or to become due under or in connection
with such agreements;
(i) any Hedge Agreement;
(j) all rights in and to the On-Line Service Agreement; and
(k) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing.
SECTION 3. Bank Accounts; Possession of Contracts and Files.
(a) Subject to the Collection Account Agreement and the Lock-Box
Agreements, the Collateral Agent shall have sole dominion and
control over the Bank Accounts, and no other Person shall have
any right of withdrawal therefrom.
(b) The Collateral Agent shall have the right to hold the
Purchased Contracts. The Collateral Agent may in its sole
discretion, designate the Servicer or any other Person, as
custodian and bailee of the Collateral Agent, to hold the
Purchased Contracts. For so long as the Custodian Agreement is
in effect, the Custodian shall hold the Purchased Contracts.
Thereafter, unless otherwise instructed by the Collateral
Agent, Finco shall hold the Purchased Contracts as custodian
and bailee of the Collateral Agent. To the extent required to
service the Purchased Contracts in accordance with the Sale
Agreement, the Custodian or Finco, as the case may be, may
release the Purchased Contracts and Files to the Servicer, to
be held by the Servicer as custodian and bailee of the
Collateral Agent during the Servicer's possession thereof. The
Servicer shall promptly return all such Purchased Contracts
3
<PAGE> 4
and Files to the Custodian or Finco, as the case may be, or
any such other Person as the Collateral Agent shall direct
when possession thereof by the Servicer is no longer required
for servicing such Purchased Contracts in accordance with the
Sale Agreement. In addition, the Servicer shall return the
Purchased Contracts to the Custodian, Finco, the Collateral
Agent or any such other person as the Collateral Agent shall
direct at any time upon receipt of a request from the
Collateral Agent to such effect.
SECTION 4. Daily Procedures and Distributions of Collections Prior to the
Commitment Termination Date. On each Business Day prior to the
Commitment Termination Date:
(a) Deposits.
(i) the Servicer and Finco shall transfer to the Clearing
Account (A) all Collections received on such day in
the Lock-Boxes and (B) all Collections received by
the Servicer or Finco in any other manner on the
previous Business Day;
(ii) Finco shall transfer to the Collection Account all
Collections received in the Clearing Account within
one Business Day after such Collections are received
in the Clearing Account;
(iii) if a payment of the principal of the Triple-A One
Loans is required on such Business Day pursuant to
subsection 2.4 of the Triple-A One Credit Agreement,
Finco shall deposit the amount required into the
Collection Account; and
(iv) the Servicer shall transfer to a sub-account of the
Collection Account (the "Accrued Costs and Interest
Sub-Account") on such Business Day an amount equal to
the sum of the Accrued Facilities Costs Amount and
the Accrued Interest Amount for such day.
Until the transfers set forth in Section 4(a)(i), (ii) and (iii) are made, Finco
and the Servicer shall hold in trust for the benefit of Finco and Triple-A One
all such amounts and Collections and shall not commingle such amounts and
Collections with other funds of the Servicer or Finco other than funds of the
Servicer or Finco in the Lock-Boxes and the Clearing Account.
(b) Distributions. The Servicer shall make distributions from
amounts on deposit in the Collection Account for the following
purposes in the following order of priority, in each case to
the extent such amounts are due and payable on such Business
Day and to the Person entitled thereto:
4
<PAGE> 5
(i) an amount necessary to cure any Borrowing Base
Deficiency shall be transferred to the Triple-A One
Account and applied to reduce the principal of the
Triple-A One Note;
(ii) an amount equal to the Servicing Fee;
(iii) an amount equal to interest on the Triple-A One Loans
(from the Accrued Costs and Interest Sub-Account) and
on the Seller Notes, pro rata according to the
respective amounts of interest due on the Triple-A
One Loans and Seller Notes;
(iv) from Accrued Costs and Interest Sub-Account, an
amount equal to Facilities Costs;
(v) an amount equal to the principal of the Triple-A One
Loans prepaid or required to be prepaid on such
Business Day pursuant to subsection 2.4(a) or (b) of
the Triple-A One Credit Agreement;
(vi) an amount equal to interest on all unreimbursed
drawings under the Surety Bonds;
(vii) an amount equal to all unreimbursed drawings under
the Surety Bonds;
(viii) an amount equal to the sum of the Finco Expenses and
all other Obligations;
(ix) for the purchase of Contracts pursuant to the Sale
Agreement;
(x) an amount equal to interest and principal due on the
Subordinated Note; and
(xi) an amount equal to all remaining amounts in the
Collection Account for other duly authorized
corporate purposes of Finco.
provided, however, that, on any Business Day, no distribution shall be made
pursuant to (ix) or (x) above if the conditions set forth in Section 3.2 of the
Sale Agreement have not been satisfied.
(c) Disbursement Sub-Account. Amounts on deposit in the
Disbursement Sub-Account shall be released in such amounts and
at such times as are set forth in Section 4.3 of the Triple-A
One Credit Agreement.
(d) Permitted Investments. Amounts on deposit in the Accrued Costs
and Interest Sub-Account and the Disbursement Sub-Account of
the Collection
5
<PAGE> 6
Account may be invested in Permitted Investments, provided
that such Investments shall be selected so that the maturity
dates thereof correspond to the dates on which such amounts
are required to be distributed in accordance with the
provisions of Section 4(b).
SECTION 5. Daily Procedures and Distributions of Collections on each
Liquidation Day. On each Liquidation Day:
(a) Deposits.
(i) the Servicer and Finco shall transfer to the Clearing
Account (A) all Collections received on such day in
the Lock-Boxes and (B) all Collections received by
the Servicer or Finco in any other manner on the
previous Business Day;
(ii) Finco shall transfer to the Collection Account all
Collections received in the Clearing Account within
one Business Day after such Collections are received
in the Clearing Account;
(iii) Finco shall deposit all amounts received by Finco in
respect of any Hedge Agreement into the Collection
Account. Until such transfers are made, Finco and the
Servicer shall hold in trust for the benefit of Finco
and Triple-A One all such amounts and Collections and
shall not commingle such amounts and Collections with
other funds of the Servicer or Finco other than funds
in the Lock-Boxes and the Clearing Account.
(b) Distributions. The Servicer shall make distributions from
amounts on deposit in the Collection Account for the following
purposes in the following order of priority, in each case to
the extent such amounts are due and payable on such day and to
the Person entitled thereto:
first, an amount equal to interest on the Triple-A
One Loans and the Seller Note, pro rata according to the
respective amounts of interest due on the Triple-A One Loans
and Seller Note;
second, an amount equal to Facilities Costs;
third, an amount equal to the principal of the
Triple-A One Loans required to be prepaid pursuant to
subsection 2.4(c) of the Triple-A One Credit Agreement;
fourth, an amount equal to interest on all
unreimbursed drawings under the Surety Bonds;
6
<PAGE> 7
fifth, an amount equal to all unreimbursed drawings
under the Surety Bonds;
sixth, an amount equal to the principal of the Seller
Note;
seventh, an amount equal to the sum of all Finco
Expenses and all other Obligations;
eighth, an amount equal to the principal of and
interest due on the Subordinated Note;
ninth, an amount equal to the Servicing Fee; and
tenth, all remaining amounts to Finco, or to such
Persons and in such amounts as a court of competent
jurisdiction may direct.
(c) Permitted Investments. Amounts on deposit in the Accrued Costs
and Interest Sub-Account and the Disbursement Sub-Account of
the Collection Account may be invested in Permitted
Investments, provided that such Investments shall be selected
so that the maturity dates thereof correspond to the dates on
which such amounts are required to be distributed in
accordance with the provisions of Section 5(b).
(d) Clearing Account. The Clearing Account is a general clearing
account held by and in the name of Finco into which
Collections as well as collections on other assets are
deposited. The parties hereto agree and acknowledge that (i)
any Collections transferred to the Clearing Account prior to
the transfer of such Collections to the Collection Account
will be subject at all times to the security interest of
Triple-A One created hereunder and (ii) that the balance in
the Clearing Account may not at any time fall below the amount
deposited representing Collections which have not been
transferred to the Collection Account. Finco hereby
represents, warrants, covenants and agrees that it shall not
move the Clearing Account set forth in Exhibit E to the Sale
Agreement or modify, amend or waive any term of the Clearing
Account Agreement without (a) providing for a successor
Clearing Account, (b) notifying the Collateral Agent 10 days
prior to such change and (c) causing such new Clearing Account
to operate in the manner described herein.
SECTION 6. Rights of Collateral Agent; Limitations on Collateral
Agent's Obligations.
(a) Collateral Agent Not Liable under Contracts. The Collateral
Agent shall not have any obligation or liability under any
Contract by reason of or
7
<PAGE> 8
arising out of this Triple-A One Security Agreement or the
receipt by the Collateral Agent of any payment relating to
such Contract, nor shall the Collateral Agent be obligated in
any manner to perform any such obligations under or pursuant
to any Contract, to make any payment, to make any inquiry as
to the nature or the sufficiency of any payment received by it
or as to the sufficiency of any performance by any party under
any Contract, to present or file any claim, to take any action
to enforce any performance or to collect the payment of any
amounts which may have been assigned to it or to which it may
be entitled at any time or times.
(b) Notice to Obligors. At any time upon the request of the
Collateral Agent, Finco shall notify the Obligors that the
Contracts have been assigned to the Collateral Agent and that
payments in respect thereof shall be made directly to the
Collateral Agent. The Collateral Agent may in its own name or
in the name of others communicate with the Obligors to verify
with them to its satisfaction the existence, amount and terms
of any Purchased Contracts.
(c) Analysis of Contracts. The Collateral Agent shall have the
right to make test verifications of the Contracts in any
manner and through any medium that it considers advisable, and
Finco shall furnish all such assistance and information as the
Collateral Agent may require in connection therewith. In
addition, at any time and from time to time, upon the
Collateral Agent's request and at the expense of Finco, Finco
shall cause independent public accountants or others
satisfactory to the Collateral Agent to furnish to the
Collateral Agent reports showing reconciliations, aging and
test verifications of, and trial balances for, the Contracts.
(d) Proceeds. Subject to the provisions of Section 4(a) and 5(a),
any Proceeds, when collected by Finco, shall be forthwith
deposited by Finco in the exact form received, duly endorsed
by Finco to the Collateral Agent if required, in the
Collection Account, subject to withdrawal by the Collateral
Agent only, and, until so turned over, shall be held by Finco
in trust for the Collateral Agent. Such Proceeds shall
continue to be collateral security for all of the Obligations
and shall not constitute payment thereof until applied as
hereinafter provided. The Collateral Agent shall apply all or
any part of the funds on deposit in the Collection Account in
accordance with Sections 4 and 5 hereof. Upon the request of
the Collateral Agent, Finco shall deliver or cause to be
delivered to the Collateral Agent all Files relating to the
Purchased Contracts, including original and other documents
evidencing, and relating to, the transactions which created
the Purchased Contracts, including, without limitation, all
original orders, invoices, receipts and similar documents.
8
<PAGE> 9
(e) Document Delivery. In connection with the security interest
granted herein, on or prior to each date on which a Triple-A
One Loan is disbursed from the Disbursement Sub-Account, Finco
shall have received from the Seller the original Contract and
complete Files relating to each Contract for which such
Triple-A One Loan was made on such date. Finco shall hold such
Contracts and Files for the benefit of the Collateral Agent,
and, upon request of the Collateral Agent, Finco shall deliver
such Contracts and Files to the Collateral Agent or to such
Person as the Collateral Agent may designate in its sole
discretion. In addition, Finco shall mark the following
notation on the computer tape for such Contract and File: "The
Contracts herein have been pledged to secure the debt of Finco
to Triple-A One Funding Corporation, and its successors and
assigns pursuant to that certain Amended and Restated Triple-A
One Security Agreement dated as of September 4, 1998 among
Triple-A One Funding Corporation, Finco and Capital Markets
Assurance Corporation, as Collateral Agent".
SECTION 7. Representations and Warranties. Finco hereby represents and
warrants that:
(a) Title; No Other Liens. Except for the Lien granted to the
Collateral Agent pursuant to this Triple-A One Security
Agreement and the other Liens permitted pursuant to any of the
other Operative Documents, Finco owns each item of the
Collateral free and clear of any and all Liens or claims of
others. No security agreement, financing statement or other
public notice with respect to all or any part of the
Collateral is on file or of record in any public office,
except such as may have been filed in favor of the Collateral
Agent pursuant to this Triple-A One Security Agreement or as
may be permitted pursuant to the Triple-A One Credit
Agreement.
(b) Perfected First Priority Liens. The Liens granted pursuant to
this Triple-A One Security Agreement constitute perfected
first priority Liens on the Collateral in favor of the
Collateral Agent and are enforceable as such against all
creditors of and purchasers from Finco and, in the case of any
Collateral constituting fixtures, against any owner or
purchaser of the real property where any of the Equipment is
located and any present or future creditor obtaining a Lien on
such real property.
(c) Chief Executive Office. Finco's chief executive office and
chief place of business is located at 8001 Irvine Center
Drive, Irvine, California 92618.
(d) Locations. All Collateral is located at the addresses listed
on Schedule 7(d) hereto.
9
<PAGE> 10
SECTION 8. Covenants. Finco covenants and agrees with the Collateral
Agent that until the Obligations are paid in full and the
Triple-A One Commitment is terminated:
(a) Further Documentation; Pledge of Instruments. At any time and
from time to time, upon the written request of the Collateral
Agent, and at the sole expense of Finco, Finco will promptly
and duly execute and deliver such further instruments and
documents and take such further action as the Collateral Agent
may request for the purpose of obtaining or preserving the
full benefits of this Triple-A One Security Agreement and of
the rights and powers herein granted, including, without
limitation, the filing of any financing or continuation
statements under the UCC with respect to the Liens created
hereby, including all steps necessary to maintain perfection
of the security interest of Finco in each Vehicle. Finco also
hereby authorizes the Collateral Agent to file any such
financing or continuation statement without the signature of
Finco to the extent permitted by applicable law. If any amount
payable under or in connection with any of the Collateral
shall be or become evidenced by any additional promissory
note, other Instrument or Chattel Paper, such note, Instrument
or Chattel Paper shall be immediately delivered to the
Collateral Agent or such other person as the Collateral Agent
in its sole discretion may designate, duly endorsed in a
manner satisfactory to the Collateral Agent, to be held as
Collateral pursuant to this Triple-A One Security Agreement.
(b) Indemnification. Finco will pay, and save the Collateral Agent
harmless from, any and all liabilities, costs and expenses
(including, without limitation, legal fees and expenses) (i)
with respect to, or resulting from, any delay in paying, any
and all excise, sales or other taxes which may be payable or
determined to be payable with respect to any of the
Collateral, (ii) with respect to, or resulting from, any delay
in complying with any Requirement of Law applicable to any of
the Collateral or (iii) in connection with any of the
transactions contemplated by this Triple-A One Security
Agreement. In any suit, proceeding or action brought by the
Collateral Agent in respect of any Contract for any sum owing
thereunder, or to enforce any provisions of any Contract,
Finco will save, indemnify and keep the Collateral Agent
harmless from and against all expense, loss or damage suffered
by reason of any defense, setoff, counterclaim, recoupment or
reduction or liability whatsoever of the account debtor or
obligor thereunder, arising out of a breach by Finco of any
obligation thereunder or arising out of any other agreement,
indebtedness or liability at any time owing to or in favor of
such account debtor or obligor or its successors from Finco.
Notwithstanding the foregoing, the parties hereto hereby agree
that under no circumstances shall Finco be liable for, or
required to pay any
10
<PAGE> 11
amount pursuant to this paragraph (b), resulting from gross
negligence or willful misconduct on the part of the Collateral
Agent.
(c) Maintenance of Records. Finco will keep and maintain, or cause
to be maintained by the Servicer, at its own cost and expense
satisfactory and complete records of the Collateral,
including, without limitation, a record of all payments
received and all credits granted with respect to the Purchased
Contracts. Finco will mark its books and records pertaining to
the Collateral to evidence this Triple-A One Security
Agreement and the security interests granted hereby. At any
time upon the request of the Collateral Agent, Finco shall,
during normal business hours, turn over any books and records
to the Collateral Agent or to its representatives that the
Collateral Agent shall so request.
(d) Right of Inspection. The Collateral Agent shall at all times
have full and free access during normal business hours to all
the books, correspondence and records of Finco and to all
Contracts and Files held by Finco, and the Collateral Agent or
its representatives may examine the same, take extracts
therefrom and make photocopies thereof, and Finco agrees to
render to the Collateral Agent, at Finco's cost and expense,
such clerical and other assistance as may be reasonably
requested with regard thereto.
(e) Compliance with Laws, etc. Finco will comply with all
Requirements of Law applicable to the Collateral or any part
thereof or to the operation of Finco's business; provided,
however, that Finco may contest any Requirement of Law in any
reasonable manner which shall not, in the sole opinion of the
Collateral Agent, adversely affect the Collateral Agent's
rights or the priority of its Liens on the Collateral.
(f) Compliance with Terms of Contracts, etc. Finco will perform
and comply with all its obligations under the Purchased
Contracts and all its other Contractual Obligations relating
to the Collateral.
(g) Payment of Obligations. Finco will pay promptly when due all
taxes, assessments and governmental charges or levies imposed
upon the Collateral or in respect of its income or profits
therefrom, as well as all claims of any kind (including,
without limitation, claims for labor, materials and supplies)
against or with respect to the Collateral, except that no such
charge need be paid if (i) the validity thereof is being
contested in good faith by appropriate proceedings, (ii) such
proceedings do not involve any danger of the sale, forfeiture
or loss of any of the Collateral or any interest therein and
(iii) such charge is adequately reserved against on Finco's
books in accordance with GAAP.
11
<PAGE> 12
(h) Limitation on Liens on Collateral. Finco will not create,
incur or permit to exist, will defend the Collateral against,
and will take such other action as is necessary to remove, any
Lien or claim on or to the Collateral, other than the Liens
created hereby and other than as permitted pursuant to the
Triple-A One Credit Agreement, and will defend the right,
title and interest of the Collateral Agent in and to any of
the Collateral against the claims and demands of all Persons
whomsoever.
(i) Limitations on Dispositions of Collateral. Finco will not
sell, transfer, lease or otherwise dispose of any of the
Collateral, or attempt, offer or contract to do so.
(j) Limitations on Modifications, Waivers, Extensions of
Contracts. Finco will not, and will not permit any other
Person to, (i) amend, modify, terminate or waive any provision
of any Purchased Contract in any manner which could have an
adverse effect on the value of such Purchased Contract as
Collateral except in accordance with clause (k) of this
Section 8, (ii) fail to exercise promptly and diligently each
and every right which it may have under each Purchased
Contract, (iii) fail to deliver to the Collateral Agent, upon
the request of the Collateral Agent, a copy of each demand,
notice or document received by it relating in any way to any
Purchased Contract, (iv) fail to deliver to the Collateral
Agent a copy of each demand, notice or document sent to each
Obligor; and (v) act otherwise than in accordance with the
Credit and Collection Policy.
(k) Limitations on Discounts, Compromises, Extensions of
Contracts. Other than pursuant to the Credit and Collection
Policy, Finco will not, and will not permit any other Person
to, grant any extension of the time of payment of any of the
Purchased Contracts, compromise, compound or settle the same
for less than the full amount thereof, release, wholly or
partially, any Person liable for the payment thereof, or allow
any credit or discount whatsoever thereon.
(l) Maintenance of Equipment. Finco will maintain each item of
Equipment in good operating condition, ordinary wear and tear
and immaterial impairments of value and damage by the elements
excepted, and will provide all maintenance, service and
repairs necessary for such purpose.
(m) Further Identification of Collateral. Finco will furnish to
the Collateral Agent from time to time statements and
schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral as
the Collateral Agent may reasonably request, all in reasonable
detail.
12
<PAGE> 13
(n) Notices. Finco will advise the Collateral Agent promptly, in
detail, at its address set forth in the Triple-A One Credit
Agreement, (i) of any Lien (other than Liens created or
permitted hereby) on, or claim asserted against, any of the
Collateral and (ii) of the occurrence of any other event which
could have in the reasonable exercise of the judgment of the
Collateral Agent a material adverse effect on the Collateral
or on the Liens created hereunder.
A copy of any notice delivered to or required to be sent by Finco hereunder
shall be sent by Finco to the holder of the Subordinated Note.
(o) Changes in Locations, Name, etc. Finco will not, without
providing 30 days prior written notice to the Collateral
Agent, Triple-A One and the Program Manager (and, in the case
of clause (iv), without the prior written consent of the
Collateral Agent), and without filing any UCC financing
statements necessary or desirable (in the opinion of Triple-A
One or the Program Manager) to maintain the perfection and
priority of the Collateral Agent's security interest in the
Collateral, as provided for herein (i) change the location of
its chief executive office/chief place of business from that
specified in Section 7(c) or remove its books and records from
such location, (ii) permit any Equipment that it may acquire
to be kept at a location other than that specified in Section
7(d), (iii) change its name, identity or corporate structure
to such an extent that any financing statement filed by the
Collateral Agent in connection with this Triple-A One Security
Agreement would become misleading or (iv) change the location
where the Purchased Contracts and the Files are maintained.
SECTION 9. Collateral Agent's Appointment as Attorney-in-Fact.
(a) Powers. Finco hereby irrevocably constitutes and appoints the
Collateral Agent and any officer or agent thereof, with full
power of substitution, as its true and lawful attorney-in-fact
with full irrevocable power and authority in the place and
stead of Finco and in the name of Finco or in its own name,
from time to time in the Collateral Agent's discretion, for
the purpose of carrying out the terms of this Triple-A One
Security Agreement, to take any and all lawful and appropriate
action and to execute any and all documents and instruments
which may be necessary or desirable to accomplish the purposes
of this Triple-A One Security Agreement, and, without limiting
the generality of the foregoing, Finco hereby gives the
Collateral Agent the power and right, on behalf of Finco,
without notice to or assent by Finco, to do the following:
(i) upon the occurrence and during the continuance of any
Unmatured Wind-Down Event or Wind-Down Event, in the
name of Finco or its
13
<PAGE> 14
own name, or otherwise, to take possession of and
endorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of
moneys due under any Instrument, General Intangible
or Contract and to file any claim or to take any
other action or proceeding in any court of law or
equity or otherwise deemed appropriate by the
Collateral Agent for the purpose of collecting any
and all such moneys due under any Instrument, General
Intangible or Contract whenever payable;
(ii) to pay or discharge taxes and Liens levied or placed
on or threatened against the Collateral; and
(iii) upon the occurrence and during the continuance of any
Unmatured Wind-Down Event or Wind-Down Event, (A) to
direct any party liable for any payment under any of
the Collateral to make payment of any and all moneys
due or to become due thereunder directly to the
Collateral Agent or as the Collateral Agent shall
direct and to notify the Lock-Box Banks to follow the
instructions of the Collateral Agent; (B) to ask or
demand for, collect, receive payment of and receipt
for, any and all moneys, claims and other amounts due
or to become due at any time in respect of or arising
out of any Collateral; (C) to sign and endorse any
invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against
debtors, assignments, verifications, notices and
other documents in connection with any of the
Collateral; (D) to commence and prosecute any suits,
actions or proceedings at law or in equity in any
court of competent jurisdiction to collect the
Collateral or any proceeds thereof and to enforce any
other right in respect of any Collateral; (E) to
defend any suit, action or proceeding brought against
Finco with respect to any Collateral; (F) to settle,
compromise or adjust any suit, action or proceeding
described in clause (E) above and, in connection
therewith, to give such discharges or releases as the
Collateral Agent may deem appropriate; (G) generally,
to sell, transfer, pledge and make any agreement with
respect to or otherwise deal with any of the
Collateral pursuant to Section 11 hereof as fully and
completely as though the Collateral Agent were the
absolute owner thereof for all purposes, and to do,
at the Collateral Agent's option and Finco's expense,
at any time, or from time to time, all lawful acts
and things which the Collateral Agent deems necessary
to protect, preserve or realize upon the Collateral
and the Collateral Agent's Liens thereon and to
effect the intent of this Triple-A One Security
Agreement, all as fully and effectively as Finco
might do; (H) implement the Alternate
14
<PAGE> 15
Servicing Plan; and (I) compel the transfer of
Finco's interest in all rights (by license,
sublicense or otherwise) of any computer software
necessary to collect the Contracts including without
limitation, any items on Schedule I hereto.
Finco hereby ratifies all that said attorneys shall lawfully do or cause to be
done by virtue hereof.
(b) Other Powers. Finco also authorizes the Collateral Agent, at
any time and from time to time, to execute, in connection with
the sale provided for in Section 11 hereof, any endorsements,
assignments or other instruments of conveyance or transfer
with respect to the Collateral.
(c) No Duty on Collateral Agent's Part. The powers conferred on
the Collateral Agent hereunder are solely to protect the
Collateral Agent's interests in the Collateral and shall not
impose any duty upon it to exercise any such powers. The
Collateral Agent shall be accountable only for amounts that it
actually receives as a result of the exercise of such powers,
and neither it nor any of its officers, directors, employees
or agents shall be responsible to Finco for any act or failure
to act hereunder, except for its own gross negligence or
willful misconduct.
SECTION 10. Performance by Collateral Agent of Finco's Obligations. If Finco
fails to perform or comply with any of its agreements contained herein
and the Collateral Agent, as provided for by the terms of this Triple-A
One Security Agreement, shall itself perform or comply, or otherwise
cause performance or compliance, with such agreement, the expenses of
the Collateral Agent incurred in connection with such performance or
compliance, together with interest thereon until paid in full at a rate
per annum equal to the Default Rate, shall be payable by Finco to the
Collateral Agent on demand and shall constitute Obligations secured
hereby.
SECTION 11. Remedies. If a Wind-Down Event shall occur and be continuing, the
Collateral Agent may exercise in addition to all other rights and
remedies granted to it in this Triple-A One Security Agreement and in
any other instrument or agreement securing, evidencing or relating to
the Obligations, all rights and remedies of a secured party under the
UCC. Without limiting the generality of the foregoing, the Collateral
Agent, without demand of performance or other demand, presentment,
protest, advertisement or notice of any kind (except the notice
specified below of time and place of public or private sale) to or upon
Finco or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon
the Collateral, or any part thereof, and/or may forthwith sell, lease,
assign, give an option or options to purchase, or otherwise dispose of
and deliver said Collateral or any part thereof (or contract to do any
of
15
<PAGE> 16
the foregoing), in one or more parcels at public or private sale or
sales, at any exchange, broker's board or office of the Collateral
Agent or elsewhere upon such terms and conditions as it may deem
advisable and at such prices as it may deem best, for cash or on credit
or for future delivery without assumption of any credit risk. The
Collateral Agent shall have the right upon any such public sale or
sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of said Collateral so sold,
free of any right or equity of redemption in Finco, which right or
equity is hereby waived or released. Finco further agrees, at the
Collateral Agent's request, to assemble the Collateral and the Files
and make them available to the Collateral Agent at places which the
Collateral Agent shall select, whether at Finco's premises or
elsewhere. The Collateral Agent shall apply the net proceeds of any
such collection, recovery, receipt, appropriation, realization or sale,
after deducting all costs and expenses of every kind incurred therein
or incidental to the care or safekeeping of any of the Collateral or in
any way relating to the Collateral or the rights of the Collateral
Agent hereunder, including, without limitation, attorneys' fees and
disbursements, to the payment in whole or in part of the Obligations,
in such order as the Collateral Agent may elect, and only after such
application and after the payment by the Collateral Agent of any other
amount required by any provision of law, including, without limitation,
Section 9-504(1)(c) of the UCC, need the Collateral Agent account for
the surplus, if any, to Finco. Subject at all times to the priority of
the security interest of the Liquidity Banks under the Note Pledge
Agreement and the powers of the Bank Agent and the Bank Collateral
Agent on behalf of the Liquidity Banks thereunder and under the other
Operative Documents, should the Collateral Agent elect to exercise its
option hereunder to liquidate or otherwise dispose of the Collateral,
the Collateral Agent shall do so for an amount sufficient to cover the
amount of the Obligations, all fees, expenses and liabilities hereunder
and the Subordinated Note. To the extent permitted by applicable law,
Finco waives all claims, damages, and demands against the Collateral
Agent arising out of the repossession, retention or sale of the
Collateral. If any notice of a proposed sale or disposition of
Collateral shall be required by law, such notice shall be deemed
reasonably and properly given if given (effective upon dispatch) in any
manner provided in the Triple-A One Credit Agreement at least 10 days
before such sale or disposition. Finco shall remain liable for any
deficiency if the proceeds of any sale or other disposition of the
Collateral are insufficient to pay the Obligations and the fees and
disbursements of any attorneys employed by the Collateral Agent to
collect such deficiency.
SECTION 12. Limitation on Collateral Agent's Duties in Respect of Collateral.
The Collateral Agent's sole duty with respect to the custody,
safekeeping and physical preservation of the Collateral in its
possession, under Section 9-207 of the UCC or otherwise, shall be to
deal with it in the same manner as the Collateral Agent deals with
similar property for its own account. Neither the Collateral Agent nor
any of its directors, officers, employees or agents shall be liable for
failure to demand,
16
<PAGE> 17
collect or realize upon all or any part of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of Finco or otherwise.
SECTION 13. Powers Coupled with an Interest. All powers of attorney,
authorizations and agencies herein contained with respect to the
Collateral are irrevocable and are powers coupled with an interest.
SECTION 14. Severability. Any provision of this Triple-A One Security Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof,
and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.
SECTION 15. Assignment to Banks and Surety Provider. Finco does hereby
acknowledge the pledge by Triple-A One of the Liquidity Pledged
Collateral as security under the Note Pledge Agreement. Finco hereby
waives its rights under Section 9-112 of the UCC, including without
limitation all rights under Sections 9-502(2), 9-504(1), 9-208, 9-505,
9-506, 9-507(1) and 9-208(2) of the UCC otherwise granted to it
pursuant to Section 9-112 of the UCC.
SECTION 16. Triple-A One Surety Bond. Triple-A One hereby assigns to the
Collateral Agent the right of Triple-A One to make drawings under the
Surety Bond naming Triple-A One as beneficiary. The Collateral Agent
hereby agrees to make, on a timely basis, all drawings (including,
without limitation, drawings in respect of any Avoided Payment, as such
term is defined in such Surety Bond) permitted to be made by delivery
of a Notice for Payment under such Surety Bond.
SECTION 17. Section and Paragraph Headings. The section and paragraph headings
used in this Triple-A One Security Agreement are for convenience of
reference only and are not to affect the construction hereof or be
taken into consideration in the interpretation hereof.
SECTION 18. No Waiver; Cumulative Remedies. The Collateral Agent shall not by
any act (except pursuant to the execution of a written instrument
pursuant to Section 19 hereof), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to
have acquiesced in any Unmatured Wind-Down Event or Wind-Down Event or
in any breach of any of the terms and conditions hereof. No failure to
exercise, nor any delay in exercising, on the part of the Collateral
Agent, any right, power or privilege hereunder shall operate as a
waiver thereof. No single or partial exercise of any right, power or
privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A
waiver by the Collateral Agent of any right or remedy
17
<PAGE> 18
hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Collateral Agent would otherwise have on any
future occasion. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not
exclusive of any rights or remedies provided by law.
SECTION 19. Waivers and Amendments; Successors and Assigns. None of the terms
or provisions of this Triple-A One Security Agreement may be waived,
amended, supplemented or otherwise modified except by a written
instrument executed by Finco and the Collateral Agent and with prior
written notice thereof to S&P and Moody's. This Triple-A One Security
Agreement shall be binding upon the successors and assigns of Finco and
shall inure to the benefit of the Collateral Agent and its successors
and assigns.
SECTION 20. Integration. This Triple-A One Security Agreement represents the
agreement of Finco with respect to the subject matter hereof, and there
are no promises, undertakings, representations or warranties by the
Collateral Agent relative to subject matter hereof not expressly set
forth or referred to herein or in the other Operative Documents.
SECTION 21. Counterparts. This Triple-A One Security Agreement may be executed
by one or more of the parties to this Triple-A One Security Agreement
on any number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same
instrument.
SECTION 22. GOVERNING LAW. THIS TRIPLE-A ONE SECURITY AGREEMENT AND THE RIGHTS
AND OBLIGATIONS OF FINCO UNDER THIS TRIPLE-A ONE SECURITY AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH,
THE LAW OF THE STATE OF NEW YORK.
SECTION 23. Termination and Release.
(a) This Triple-A One Security Agreement and the security
interests created or granted hereby shall remain in full force
and effect until the indefeasible payment in full in cash of
all of the Obligations, at which time, following the receipt
by the Collateral Agent of written notice from the Program
Manager that such Obligations have been so paid, the security
interest created or granted hereby shall terminate and the
Collateral Agent shall, at the sole expense of Finco, execute
and deliver such documents and instruments (including without
limitation UCC termination statements) necessary to evidence
the termination of such security interest, as Finco `may
reasonably request.
18
<PAGE> 19
(b) (i) Finco Request for Release. Finco intends from time to time
to sell Purchased Contracts and other related Collateral to
(x) entities which will then privately or publicly sell
securities backed by such Purchased Contracts and Collateral,
(y) in whole loan bulk sales to unaffiliated third parties or
(z) in whole loan bulk sales to Onyx Acceptance Funding
Corporation, in each case, for a cash purchase price of not
less than the aggregate Outstanding Balance of such Purchased
Contracts plus accrued and unpaid interest thereon.
Notwithstanding anything to the contrary in Sections 6.4, 6.5,
and 6.16 of the Triple-A One Credit Agreement, Finco shall be
permitted to sell Purchased Contracts pursuant to the
foregoing provisions only upon satisfaction of the following
conditions precedent:
(A) sales pursuant to clause (x) shall occur no more
frequently than once each calendar quarter;
(B) sales pursuant to clause (y) shall occur no more
frequently than once each calendar quarter;
(C) sales pursuant to clause (z) shall occur no more
frequently than once each month;
(D) sales pursuant to clause (y) shall occur
contemporaneously with sales pursuant to clause (x);
(E) sales pursuant to clauses (x) and (y) shall not
be to any entity which is a direct competitor of CapMAC or
MBIA Insurance Corporation, including, without limitation,
Ambac Assurance Corporation, Financial Security Assurance
Corporation, Financial Guaranty Insurance Corporation or any
affiliate thereof;
(F) the aggregate Outstanding Balances of the
Purchased Contracts sold by Finco in each such sale pursuant
to clause (y) shall not exceed 20% of the aggregate
Outstanding Balances of the Purchased Contracts then owned by
Finco, without the prior written consent of the Program
Manger;
(G) the aggregate Outstanding Balances of the
Purchased Contracts sold by Finco in each such sale pursuant
to clause (z) shall not exceed 35% of the aggregate
Outstanding Balances of the Purchased Contracts then owned by
Finco, without the prior written consent of the Program
Manger;
(H) in no event shall the aggregate Outstanding
Balances of Purchased Contracts sold by Finco during any
calendar quarter pursuant to
19
<PAGE> 20
clauses (y) and (z) together exceed 35% of the weighted
average daily aggregate Outstanding Balances of all Purchased
Contracts owned by Finco during such calendar quarter without
the prior written consent of the Program Manger;
(I) each of the Seller and Finco shall be in
compliance with all of its covenants in the Operative
Documents; and
(J) The Program Manager shall have received copies of
all documents executed in connection with such sale.
The proceeds of all sales by Finco pursuant to clauses (x),
(y) and (z) above shall be applied to prepay the Triple-A One
Note and the Subordinated Note. Upon not less than 5 Business
Days' prior written notice to the Collateral Agent, Finco may
request that specified Purchased Contracts and other related
Collateral be released in connection with such sales and the
prepayment of the Triple-A One Note as provided in Section
2.4(b) of the Triple-A One Credit Agreement. In connection
with such request, Finco shall execute and deliver to the
Collateral Agent a Lien Release Request Certificate in the
form attached hereto as Exhibit A. In selecting the Purchased
Contracts enumerated in its Lien Release Request Certificate
delivered to the Collateral Agent pursuant hereto, Finco shall
employ selection procedures which are not adverse to the
interests of Triple-A One or the Collateral Agent. Finco shall
deliver to the Program Manager (i) monthly servicer reports
for all Contracts serviced but not owned by Onyx aggregated by
portfolio and owner and (ii) copies of all material
amendments, waivers or modifications to any documents executed
in connection with the sale of Purchased Contracts by Finco.
(ii) Collateral Agent Release. Upon receipt of an
amount in immediately available funds equal to the sum of the
principal amount of such prepayment, all interest accrued
thereon to the day of such prepayment and unpaid and all other
Obligations of Finco and the Seller accrued to the date of
such prepayment and unpaid under any Operative Document, to be
paid by Finco from the Collection Account pursuant to Section
4(b) hereof, the Collateral Agent shall, at the sole expense
of Finco, execute and deliver a Collateral Agent Lien Release
Certificate in the form attached hereto as Exhibit B which
shall evidence the release of its security interest in
Purchased Contracts having an Outstanding Balance equal to the
principal amount of the Triple-A One Note being prepaid
divided by the Net Advance Rate on such day.
20
<PAGE> 21
(iii) Documents and Filings. In connection with any
such release pursuant to this Section 23, Finco and the
Collateral Agent, shall at the sole expense of Finco, execute
and deliver any documents and instruments necessary to
evidence the release of the Collateral Agent's security
interest in such Purchased Contracts and other Collateral,
including without limitation, forms UCC-2 prepared for filing
in all appropriate jurisdictions.
21
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have caused this Triple-A One
Security Agreement to be duly executed and delivered as of the date first above
written.
ONYX ACCEPTANCE FINANCIAL CORPORATION
By:_____________________________________
Name:
Title:
TRIPLE-A ONE FUNDING CORPORATION
By: MBIA Insurance Corporation,
its attorney-in-fact
By:___________________________________
Name:
Title:
CAPITAL MARKETS ASSURANCE CORPORATION,
as Collateral Agent
By:____________________________________
Name:
Title:
22
<PAGE> 23
SCHEDULE 7(d)
LOCATIONS OF COLLATERAL
The Collateral is located at:
1. Onyx Acceptance Financial Corporation
8001 Irvine Center Drive
Suite 500
Irvine, California 92718
2. Bankers Trust Company of California, N.A.
3 Park Plaza, 16th Floor
Irvine, California 92714
Attn: Joe Campbell
<PAGE> 24
SCHEDULE I
Intellectual Property
1. Agreement for On-Line Service
2. Acknowledgement of Security Interest Under Agreement for On-Line
Service
<PAGE> 25
EXHIBIT A
LIEN RELEASE REQUEST CERTIFICATE
from Finco to the Collateral Agent and Seller
pursuant to Section 23 of Triple-A One Security Agreement
and Section 19 of Subordinated Security Agreement
[ date ]
Capital Markets Assurance Corporation,
as Collateral Agent
885 Third Avenue
New York, New York 10022
Attention: Chief Underwriting Officer
Onyx Acceptance Corporation
8001 Irvine Center Drive
5th Floor
Irvine, California 92618
Attention: Regan E. Kelly, Esq.
Re: Onyx Acceptance Financial Corporation/Commercial Paper Program -
Request for Release of Lien
Ladies and Gentlemen:
Onyx Acceptance Financial Corporation ("Finco") refers to (i)
the Amended and Restated Triple A-One Security Agreement dated as of September
4, 1998 as amended, supplemented or otherwise modified, (the "Triple-A One
Security Agreement"), and (ii) the Amended and Restated Subordinated Security
Agreement dated as of September 4, 1998 (as amended, supplemented or otherwise
modified, the "Subordinated Security Agreement"). Terms not otherwise defined
herein are used herein as defined in the Amended and Restated Definitions List
dated September 4, 1998.
Finco submits this Lien Release Request Certificate pursuant
to Section 23 of the Triple-A One Security Agreement and Section 19 of the
Subordinated Security Agreement and requests that the Capital Markets Assurance
Corporation, in its capacity as Collateral Agent under the Triple-A One Security
Agreement and Onyx Acceptance Corporation in its capacity as Seller under the
Subordinated Security Agreement ("Onyx") release (and Onyx cause its assignee to
release) all of their liens on and security interests in the assets described on
Schedule 1
25
<PAGE> 26
attached hereto (and all proceeds thereof, all books, records and computer
records pertaining thereto and all other assets that constitute Collateral which
are specifically related to the assets described in Schedule 1).
ONYX ACCEPTANCE FINANCIAL CORPORATION
By:_______________________________
Name:_____________________________
Title ______________________________
26
<PAGE> 27
EXHIBIT B
COLLATERAL AGENT LIEN RELEASE CERTIFICATE
pursuant to Section 23 of Triple-A One Security Agreement
[Date]
Onyx Acceptance Financial Corporation
8001 Irvine Center Drive
5th Floor
Irvine, California 92618
Re: Partial Collateral Release
Ladies and Gentlemen:
We hereby refer to the Lien Release Request Certificate
submitted by Onyx Acceptance Financial Corporation ("Finco") dated
__________________________, a copy of which is attached hereto (the "Request
Certificate"). Pursuant to the Request Certificate, Capital Markets Assurance
Corporation, acting in its capacity as the Collateral Agent under the Triple-A
One Security Agreement and as Bank Collateral Agent under the Note Pledge
Agreement, hereby releases its liens on and security interests in the assets
identified in Schedule 1 attached to the Request Certificate (and all proceeds
thereof, all books, records and computer records pertaining thereto and all
other assets that constitute Collateral which are specifically related to the
assets described in that Schedule 1).
This Lien Release Certificate may be executed in any number of
counterparts.
CAPITAL MARKETS ASSURANCE CORPORATION,
as Collateral Agent and Bank Collateral Agent
By ______________________________
Name:____________________________
Title _____________________________
27
<PAGE> 1
EXHIBIT 10.109
AMENDMENT AND RESTATED
SUBORDINATED SECURITY AGREEMENT
SUBORDINATED SECURITY AGREEMENT, dated as of September 4, 1998 between
ONYX ACCEPTANCE FINANCIAL CORPORATION, a Delaware corporation ("Finco") and ONYX
ACCEPTANCE CORPORATION, a Delaware corporation (the "Seller")
W I T N E S S E T H :
WHEREAS, pursuant to the Amended and Restated Sale and Servicing
Agreement (the "Sale Agreement") dated as of the date hereof between the Seller
and Finco, the Seller from time to time sells to Finco and Finco from time to
time purchases from the Seller certain loans secured by automobiles and light
trucks (the "Contracts");
WHEREAS, a portion of the purchase price for the Contracts is
represented by a subordinated note issued by Finco to the Seller (the
"Subordinated Note");
WHEREAS, Finco has entered into the Amended and Restated Triple-A One
Security Agreement dated as of the date hereof (the "Triple-A One Security
Agreement") with Triple-A One Funding Corporation ("Triple-A One") and Capital
Markets Assurance Corporation, as collateral agent (the "Collateral Agent")
pursuant to which Finco has granted to the Collateral Agent a first priority
security interest in the Contracts and certain other collateral;
WHEREAS, in order to secure the Subordinated Note, Finco has granted to
the Seller a subordinated security interest in the Contracts and certain other
collateral, subject to the prior rights of the Collateral Agent;
WHEREAS, the Seller's security interests in the Contracts and certain
other collateral granted pursuant to this Agreement is subordinated to the
rights of the Collateral Agent and its rights to exercise any remedies under
this Agreement are limited for so long as any amounts secured under the Triple-A
One Security Agreement or the Note Pledge Agreement are outstanding; and
WHEREAS, the Seller and Finco wish to amend and restate this
Subordinated Security Agreement as hereinafter provided;
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and to induce the
Seller to sell Contracts to Finco pursuant to the Sale Agreement, Finco hereby
agrees with the Seller as follows:
SECTION 1. Defined Terms.
(a) As used in this Subordinated Security Agreement or
any certificate or other document made or delivered
pursuant hereto, the capitalized terms used herein
and therein shall, unless otherwise defined herein,
have the meanings assigned to them in the Amended and
Restated Definitions List dated as of the date hereof
that is attached to the Sale Agreement, which is
incorporated herein by reference (the "Definitions
List").
(b) As used herein and in any certificate or other
document made or delivered pursuant hereto,
accounting terms not defined in the Definitions List
and accounting terms partly defined in the
Definitions List to the extent not defined, shall
have the respective meanings given to them under
GAAP.
(c) The words "hereof", "herein" and "hereunder" and
words of similar import when used in this
Subordinated Security Agreement shall refer to this
Subordinated Security Agreement as a whole and not to
any particular provision of this Subordinated
Security Agreement, and paragraph references are to
this Subordinated Security Agreement unless otherwise
specified.
(d) Capitalized terms used herein shall be equally
applicable to both the singular and plural forms of
such terms.
(e) The following terms that are defined in the UCC are
used herein as so defined: Chattel Paper, Equipment,
General Intangibles, Instruments and Proceeds.
SECTION 2. Grant of Security Interest. As collateral security for the
prompt and complete payment and performance when due (whether
at the stated maturity or otherwise) of the Subordinated Note
and all other obligations of Finco to the Seller hereunder
(collectively, the "Obligations") and subject to the prior
rights of the Collateral Agent under the Triple-A One Security
Agreement, Finco hereby assigns, pledges, grants, conveys,
transfers, delivers and sets over to the Seller a security
interest in all Finco's right, title and interest in, to and
under the following, whether now owned or hereafter acquired,
in each case only as related to the Purchased Contracts
(collectively, the "Collateral"). For further clarification,
all Collateral as
2
<PAGE> 3
heretofore described in this Section 2 shall relate to and be
in respect of Purchased Contracts as defined herein, subject
to any and all provisos, as applicable, expressly included in
the definition thereof.
(a) all chattel paper, including, without limitation, the
Purchased Contracts and other contracts related to
the Purchased Contracts (as the same may be amended,
modified, supplemented, restated or replaced from
time to time) and amounts paid or payable with
respect thereto;
(b) all Files (including all Dealer Assignments) and
Contract Lists, and all right, title and interest of
Finco in and to the documents, agreements and
instruments included in the Files, including, without
limitation, rights of recourse of Finco against
Vehicle Dealers;
(c) all Insurance Policies and all rights of Finco in all
Insurance Policies;
(d) all security interests, Liens, guaranties, mortgages
and other encumbrances in favor of or assigned or
transferred to Finco in and to Contracts and
Vehicles, and all accessions thereto and replacements
thereof, and in any other property in which a
security interest is assigned or transferred to
Finco;
(e) all of Finco's Equipment, general ledger sheets,
files, records, books of account, invoices, bills,
certificates or documents of ownership, bills of
sale, business papers, correspondence, tapes, cards,
computer tapes and all other data and data storage
systems (whether in the possession of Finco or any
other Person) relating to any of the foregoing;
(f) all deposit accounts, moneys, deposits, funds,
accounts and instruments relating to the foregoing;
(g) each Lock-Box, the funds on deposit in the Clearing
Account pursuant to Section 5(d) of the Triple-A One
Security Agreement, the Collection Account
(including, without limitation, all funds at any time
on deposit therein and all Permitted Investments in
which such funds may at any time be invested);
(h) all Operative Documents to which Finco is a party,
including, without limitation, all rights of Finco to
amounts due or to become due under or in connection
with such agreements;
3
<PAGE> 4
(i) any Hedge Agreement;
(j) all rights in and to the On-Line Service Agreement;
and
(k) to the extent not otherwise included, all Proceeds
and products of any and all of the foregoing.
SECTION 3. Notice to Obligors. Subject to the terms of Section 21
hereof and Section 5.3 of the Sale Agreement and of the other
Operative Documents, at any time upon the request of the
Seller, Finco shall notify the Obligors that the Purchased
Contracts have been reassigned to the Seller and that payments
in respect thereof shall be made directly to the Seller.
Subject to the terms of Section 21 hereof and Section 5.3 of
the Sale Agreement and of the other Operative Documents, the
Seller may in its own name or in the name of others
communicate with the Obligors to verify with them to its
satisfaction the existence, amount and terms of any Purchased
Contracts.
(a) Analysis of Contracts. Subject to the terms of
Section 21 hereof, Section 5.3 of the Sale Agreement
and of the other Operative Documents, the Seller
shall have the right to make test verifications of
the Contracts in any manner and through any medium
that it considers advisable, and Finco shall furnish
or cause to be furnished by the Servicer all such
assistance and information as the Seller may require
in connection therewith. In addition, at any time and
from time to time, upon the Seller's request, Finco
shall cause independent public accountants or others
satisfactory to the Seller to furnish to the Seller
reports showing reconciliations, aging and test
verifications of, and trial balances for, the
Contracts.
(b) Proceeds. Subject to the terms of Section 21 hereof
and Section 5.3 of the Sale Agreement and of the
other Operative Documents, any Proceeds, when
collected by Finco, shall be forthwith turned over to
the Seller by Finco in the exact form received, duly
endorsed by Finco to the Seller, and until so turned
over, shall be held by Finco in trust for the Seller.
Such Proceeds shall continue to be collateral
security for all of the Obligations and shall not
constitute payment thereof until applied as set forth
in the Triple-A One Security Agreement. Subject to
the terms of Section 21 hereof and Section 5.3 of the
Sale Agreement and of the other Operative Documents,
upon the request of the Seller, Finco shall deliver
or cause to be delivered to the Seller all Files
relating to the Purchased Contracts, including
original and other documents evidencing, and relating
to, the transactions which created the Purchased
Contracts, including,
4
<PAGE> 5
without limitation, all original orders, invoices,
receipts and similar documents.
(c) Document Delivery. Subject to the terms of Section 21
hereof (it being understood that for so long as the
Triple-A One Security Agreement is in effect the
provisions of that Agreement shall control), upon the
request of the Seller, Finco shall deliver to the
Seller the original Contract and complete Files
relating to each Purchased Contract. In addition,
Finco shall mark the following notation on the
computer tape for such Contract and File: "The
Contracts herein have been pledged to secure the debt
of Finco to Onyx Acceptance Corporation, and its
successors and assigns pursuant to that certain
Amended and Restated Subordinated Security Agreement
dated as of September 4, 1998 between Onyx Acceptance
Corporation and Finco".
SECTION 4. Representations and Warranties. Finco hereby represents and
warrants that:
(a) Title; No Other Liens. Except for the Lien granted to
the Collateral Agent pursuant to the Triple-A One
Security Agreement and the Lien granted to the Seller
pursuant to this Subordinated Security Agreement and
the other Liens permitted pursuant to any of the
other Operative Documents, Finco owns each item of
the Collateral free and clear of any and all Liens or
claims of others. No security agreement, financing
statement or other public notice with respect to all
or any part of the Collateral is on file or of record
in any public office, except such as may have been
filed in favor of the Collateral Agent pursuant to
the Triple-A One Security Agreement and in favor of
the Seller pursuant to this Subordinated Security
Agreement or as may be permitted pursuant to any
Operative Document.
(b) Perfected Liens. The Liens granted pursuant to this
Subordinated Security Agreement constitute perfected
Liens on the Collateral in favor of the Seller,
subject only to the prior Lien of the Collateral
Agent, and are enforceable as such against all
creditors of and purchasers from Finco and, in the
case of any Collateral constituting fixtures, against
any owner or purchaser of the real property where any
of the Equipment is located and any present or future
creditor obtaining a Lien on such real property.
(c) Chief Executive Office. Finco's chief executive
office and chief place of business is located at 8001
Irvine Center Drive, Irvine, California 92618.
5
<PAGE> 6
(d) Locations. All Collateral is located at the addresses
listed on Schedule 4(d) hereto.
SECTION 5. Covenants. Subject to the terms of Section 21 hereof and
Section 5.3 of the Sale Agreement, Finco covenants and agrees
with the Seller that until the Obligations are paid in full
and the Sale Agreement is terminated:
(a) Further Documentation. At any time and from time to
time, upon the written request of the Seller, and at
the sole expense of Finco, Finco will promptly and
duly execute and deliver such further instruments and
documents and take such further action as the Seller
may request for the purpose of obtaining or
preserving the full benefits of this Subordinated
Security Agreement and of the rights and powers
herein granted, including, without limitation, the
filing of any financing or continuation statements
under the UCC with respect to the Liens created
hereby, including all steps necessary to maintain
perfection of the security interest of Finco in each
Vehicle; provided, however, that Finco shall not be
obligated to take any action which, in the reasonable
judgment of the Collateral Agent, would violate or
conflict with the terms of the Triple-A One Security
Agreement or any other Operative Document. Subject to
the terms of Section 21 hereof and Section 5.3 of the
Sale Agreement and of the other Operative Documents,
Finco also hereby authorizes the Seller to file any
such financing or continuation statement without the
signature of Finco to the extent permitted by
applicable law.
(b) Maintenance of Records. Finco will keep and maintain,
or cause to be maintained by the Servicer, at its
cost and expense satisfactory and complete records of
the Collateral, including, without limitation, a
record of all payments received and all credits
granted with respect to the Purchased Contracts.
Finco will mark or cause the Servicer to mark its
books and records pertaining to the Collateral to
evidence this Subordinated Security Agreement and the
subordinated security interest granted hereby. With
the prior written consent of the Collateral Agent, at
any time upon the request of the Seller, Finco shall,
during normal business hours, turn over or cause the
Servicer to turn over any books and records to the
Seller or to its designated representatives.
(c) Compliance with Laws, etc. Finco will comply with all
Requirements of Law applicable to the Collateral or
any part thereof or to the operation of Finco's
business; provided, however, that Finco may contest
any Requirement of Law in any reasonable
6
<PAGE> 7
manner which shall not, in the sole opinion of the
Seller, adversely affect the Seller's rights or the
priority of its Liens on the Collateral.
(d) Compliance with Terms etc. Finco will perform and
comply with all its Contractual Obligations relating
to the Subordinated Note.
(e) Limitation on Liens on Collateral. Finco will not
create, incur or permit to exist, will defend the
Collateral against, and will take such other action
as is necessary to remove, any Lien or claim on or to
the Collateral, other than the Liens created by the
Triple-A One Security Agreement, the Liens created
hereby and other than as permitted pursuant to the
Operative Documents, and will defend the right, title
and interest of the Seller in and to any of the
Collateral against the claims and demands of all
Persons whomsoever.
(f) Limitations on Dispositions of Collateral. Finco will
not sell, transfer, lease or otherwise dispose of any
of the Collateral, or attempt, offer or contract to
do so.
(g) Limitations on Modifications, Waivers, Extensions of
Contracts. Finco will not, and will not permit the
Servicer to, (i) amend, modify, terminate or waive
any provision of any Purchased Contract in any manner
which could have an adverse effect on the value of
such Purchased Contract as Collateral, (ii) fail to
exercise promptly and diligently each and every right
which Finco may have under each Purchased Contract
and (iii) act otherwise than in accordance with the
Credit and Collection Policy.
(h) Limitations on Discounts, Compromises, Extensions of
Contracts. Other than pursuant to the Credit and
Collection Policy, Finco will not, and will not
permit the Servicer to, grant any extension of the
time of payment of any of the Purchased Contracts,
compromise, compound or settle the same for less than
the full amount thereof, release, wholly or
partially, any Person liable for the payment thereof,
or allow any credit or discount whatsoever thereon.
(i) Maintenance of Equipment. Finco will maintain each
item of Equipment in good operating condition,
ordinary wear and tear and immaterial impairments of
value and damage by the elements excepted, and will
provide all maintenance, service and repairs
necessary for such purpose.
(j) Changes in Locations, Name, etc. Finco will not,
without providing 30 days prior written notice to the
Seller, and without filing any
7
<PAGE> 8
UCC financing statements necessary or desirable (in
the opinion of the Seller) to maintain the perfection
and priority of the Seller's security interest in the
Collateral, as provided for herein (i) change the
location of its chief executive office/chief place of
business from that specified in Section 4(c) or
remove its books and records from such location, (ii)
permit any Equipment that it may acquire to be kept
at a location other than that specified in Section
4(d), or (iii) change its name, identity or corporate
structure to such an extent that any financing
statement filed by the Seller in connection with this
Subordinated Security Agreement would become
misleading.
SECTION 6. Seller's Appointment as Attorney-in-Fact.
(a) Powers. Subject to the terms of Section 21 hereof and
Section 5.3 of the Sale Agreement and of the other
Operative Documents, Finco hereby irrevocably
constitutes and appoints the Seller and any officer
or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and
stead of Finco and in the name of Finco or in its own
name, from time to time in the Seller's discretion,
for the purpose of carrying out the terms of this
Subordinated Security Agreement, to take any and all
lawful and appropriate action and to execute any and
all documents and instruments which may be necessary
or desirable to accomplish the purposes of this
Subordinated Security Agreement, and, without
limiting the generality of the foregoing, Finco
hereby gives the Seller the power and right, on
behalf of Finco, without notice to or assent by
Finco, to do the following:
(i) upon the occurrence and during the
continuance of any Unmatured Wind-Down Event
or Wind-Down Event, in the name of Finco or
its own name, or otherwise, to take
possession of and endorse and collect any
checks, drafts, notes, acceptances or other
instruments for the payment of moneys due
under any Instrument, General Intangible or
Purchased Contract and to file any claim or
to take any other action or proceeding in
any court of law or equity or otherwise
deemed appropriate by the Seller for the
purpose of collecting any and all such
moneys due under any Instrument, General
Intangible or Purchased Contract whenever
payable;
8
<PAGE> 9
(ii) to pay or discharge taxes and Liens levied
or placed on or threatened against the
Collateral; and
(iii) upon the occurrence and during the
continuance of any Unmatured Wind-Down Event
or Wind-Down Event, (A) to direct any party
liable for any payment under any of the
Collateral to make payment of any and all
moneys due or to become due thereunder
directly to the Seller or as the Seller
shall direct and to notify the Lock-Box
Banks to follow the instructions of the
Seller; (B) to ask or demand for, collect,
receive payment of and receipt for, any and
all moneys, claims and other amounts due or
to become due at any time in respect of or
arising out of any Collateral; (C) to sign
and endorse any invoices, freight or express
bills, bills of lading, storage or warehouse
receipts, drafts against debtors,
assignments, verifications, notices and
other documents in connection with any of
the Collateral; (D) to commence and
prosecute any suits, actions or proceedings
at law or in equity in any court of
competent jurisdiction to collect the
Collateral or any thereof and to enforce any
other right in respect of any Collateral;
(E) to defend any suit, action or proceeding
brought against Finco with respect to any
Collateral; (F) to settle, compromise or
adjust any suit, action or proceeding
described in clause (E) above and, in
connection therewith, to give such
discharges or releases as the Seller may
deem appropriate; (G) generally, to sell,
transfer, pledge and make any agreement with
respect to or otherwise deal with any of the
Collateral pursuant to Section 8 hereof as
fully and completely as though the Seller
were the absolute owner thereof for all
purposes, and to do, at the Seller's option
and Finco's expense, at any time, or from
time to time, all lawful acts and things
which the Seller deems necessary to protect,
preserve or realize upon the Collateral and
the Seller's Liens thereon and to effect the
intent of this Subordinated Security
Agreement, all as fully and effectively as
Finco might do; and (H) compel the transfer
of Finco's interest in all rights (by
license, sublicense or otherwise) of any
computer software necessary to collect the
Purchased Contracts including without
limitation, any items on Schedule I hereto.
Finco hereby ratifies all that said attorneys shall lawfully do or
cause to be done by virtue hereof.
9
<PAGE> 10
(b) Other Powers. Subject to the terms of Section 21
hereof and Section 5.3 of the Sale Agreement and of
the other Operative Documents, Finco also authorizes
the Seller, at any time and from time to time, to
execute, in connection with the sale provided for in
Section 8 hereof, any endorsements, assignments or
other instruments of conveyance or transfer with
respect to the Collateral.
(c) No Duty on Seller's Part. The powers conferred on the
Seller hereunder are solely to protect the Seller's
interests in the Collateral and shall not impose any
duty upon it to exercise any such powers. The Seller
shall be accountable only for amounts that it
actually receives as a result of the exercise of such
powers, and neither it nor any of its officers,
directors, employees or agents shall be responsible
to Finco for any act or failure to act hereunder,
except for its own gross negligence or willful
misconduct.
SECTION 7. Performance by Seller of Finco's Obligations. Subject to
the terms of Section 21 hereof and Section 5.3 of the Sale
Agreement and of the other Operative Documents, if Finco fails
to perform or comply with any of its agreements contained
herein, the Seller, as provided for by the terms of this
Subordinated Security Agreement, shall itself perform or
comply, or otherwise cause performance or compliance, with
such agreement.
SECTION 8. Remedies. Subject to the terms of Section 21 hereof and
Section 5.3 of the Sale Agreement and of the other Operative
Documents, if a Wind-Down Event shall occur and be continuing,
the Seller may exercise in addition to all other rights and
remedies granted to it in this Subordinated Security Agreement
and in any other instrument or agreement securing, evidencing
or relating to the Obligations, all rights and remedies of a
secured party under the UCC. Without limiting the generality
of the foregoing, the Seller, without demand of performance or
other demand, presentment, protest, advertisement or notice of
any kind (except the notice specified below of time and place
of public or private sale) to or upon Finco or any other
Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may
forthwith sell, lease, assign, give an option or options to
purchase, or otherwise dispose of and deliver said Collateral
or any part thereof (or contract to do any of the foregoing),
in one or more parcels at public or private sale or sales, at
any exchange, broker's board or office of the Seller or
elsewhere upon such terms and conditions as it may deem
advisable and at such prices as it may deem best, for cash or
on credit or for future delivery without assumption of any
credit risk. The Seller shall have
10
<PAGE> 11
the right upon any such public sale or sales, and, to the
extent permitted by law, upon any such private sale or sales,
to purchase the whole or any part of said Collateral so sold,
free of any right or equity of redemption in Finco, which
right or equity is hereby waived or released. Finco further
agrees, at the Seller's request, to assemble the Collateral
and the Files and make them available to the Seller at places
which the Seller shall select, whether at Finco's premises or
elsewhere. The Seller shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization or
sale, after deducting all costs and expenses of every kind
incurred therein or incidental to the care or safekeeping of
any of the Collateral or in any way relating to the Collateral
or the rights of the Seller hereunder, including, without
limitation, attorneys' fees and disbursements, to the payment
in whole or in part of the Obligations, in such order as the
Seller may elect, and only after such application and after
the payment by the Seller of any other amount required by any
provision of law, including, without limitation, Section
9-504(1)(c) of the UCC, need the Seller account for the
surplus, if any, to Finco. To the extent permitted by
applicable law, Finco waives all claims, damages, and demands
against the Seller arising out of the repossession, retention
or sale of the Collateral. If any notice of a proposed sale or
disposition of Collateral shall be required by law, such
notice shall be deemed reasonably and properly given if given
(effective upon dispatch) in any manner provided in the Sale
Agreement at least 10 days before such sale or disposition.
Finco shall remain liable for any deficiency if the proceeds
of any sale or other disposition of the Collateral are
insufficient to pay the Obligations and the fees and
disbursements of any attorneys employed by the Seller to
collect such deficiency.
SECTION 9. Limitation on Seller's Duties in Respect of Collateral. The
Seller's sole duty with respect to the custody, safekeeping
and physical preservation of the Collateral in its possession,
under Section 9-207 of the UCC, shall be to deal with it in
the same manner as the Seller deals with similar property for
its own account. Neither the Seller nor any of its directors,
officers, employees or agents shall be liable for failure to
demand, collect or realize upon all or any part of the
Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral upon
the request of Finco or otherwise.
SECTION 10. Powers Coupled with an Interest. All powers of attorney,
authorizations and agencies herein contained with respect to
the Collateral are irrevocable and are powers coupled with an
interest.
SECTION 11. Severability. Any provision of this Subordinated Security
Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such
11
<PAGE> 12
jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 12. Assignment. Finco does hereby acknowledge that the Seller
may pledge or otherwise transfer the Subordinated Note and all
security therefore granted hereunder with the prior written
consent of Triple-A One and the Program Manager. Finco hereby
waives its rights under Section 9-112 of the UCC, including
without limitation all rights under Sections 9-502(2),
9-504(1), 9-208, 9-505, 9-506, 9-507(1) and 9-208(2) of the
UCC otherwise granted to it pursuant to Section 9-112 of the
UCC.
SECTION 13. Section and Paragraph Headings. The section and paragraph
headings used in this Subordinated Security Agreement are for
convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the
interpretation hereof.
SECTION 14. No Waiver; Cumulative Remedies. The Seller shall not by any
act (except pursuant to the execution of a written instrument
pursuant to Section 15 hereof), delay, indulge, omit or
otherwise be deemed to have waived any right or remedy
hereunder or in any breach of any of the terms and conditions
hereof. No failure to exercise, nor any delay in exercising,
on the part of the Seller, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder
shall preclude any other or further exercise thereof or the
exercise or any other right, power or privilege. A waiver by
the Seller of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or
remedy which the Seller would otherwise have on any future
occasion. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are
not exclusive of any rights or remedies provided by law.
SECTION 15. Waivers and Amendments; Successors and Assigns. None of the
terms or provisions of this Subordinated Security Agreement
may be waived, amended, supplemented or otherwise modified
except by a written instrument executed by Finco and the
Seller with the prior written consent of the Collateral Agent
and the Program Manager; provided, however, that for so long
as the Triple-A One Security Agreement shall be in effect, if
the Collateral Agent shall have consented to a waiver,
amendment, supplement or modification under the Triple-A One
Security Agreement, the consent of the Seller shall be deemed
automatically given under the comparable provision of this
Subordinated Security Agreement. No amendment shall be
12
<PAGE> 13
effective without prior written notice thereof to S&P and
Moody's. This Subordinated Security Agreement shall be binding
upon the successors and assigns of Finco and shall inure to
the benefit of the Seller and its successors and assigns.
SECTION 16. Integration. This Subordinated Security Agreement
represents the agreement of Finco with respect to the subject
matter hereof, and there are no promises, undertakings,
representations or warranties by the Seller relative to
subject matter hereof not expressly set forth or referred to
herein or in the other Operative Documents.
SECTION 17. Counterparts. This Subordinated Security Agreement may be
executed by one or more of the parties to this Subordinated
Security Agreement on any number of separate counterparts, and
all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
SECTION 18. GOVERNING LAW. THIS SUBORDINATED SECURITY AGREEMENT AND THE
RIGHTS AND OBLIGATIONS OF FINCO UNDER THIS SUBORDINATED
SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK.
SECTION 19. Termination and Release.
(a) This Subordinated Security Agreement and the security
interests created or granted hereby shall remain in
full force and effect until the indefeasible payment
in full in cash of the Obligations and the
Subordinated Note, at which time, following the
receipt by the Seller of (i) written notice from the
Program Manager that the Obligations have been so
paid, and (ii) payment in full of the Subordinated
Note, the security interest created or granted hereby
shall terminate and the Seller shall, execute and
deliver such documents and instruments (including
without limitation UCC termination statements)
necessary to evidence the termination of such
security interest, as Finco may reasonably request.
(b) (i) Finco Request for Release. Finco intends from
time to time to sell Purchased Contracts and other
related Collateral to (x) entities which will then
privately or publicly sell securities backed by such
Purchased Contracts and Collateral, (y) in whole loan
bulk sales to unaffiliated third parties or (z) in
whole loan bulk sales to Onyx Acceptance Funding
Corporation, in each case, for a cash purchase price
of not less than the
13
<PAGE> 14
aggregate Outstanding Balance of such Purchased
Contracts plus accrued and unpaid interest thereon.
The proceeds of all sales by Finco pursuant to
clauses (x), (y) and (z) above shall be applied to
prepay the Triple-A One Note and the Subordinated
Note. Upon not less than 5 Business Days' prior
written notice to the Seller, Finco may request that
specified Purchased Contracts and other related
Collateral be released in connection with such sales
and the prepayment. In connection with such request,
Finco shall execute and deliver to the Seller a Lien
Release Request Certificate in the form attached
hereto as Exhibit A. In selecting the Purchased
Contracts enumerated in its Lien Release Request
Certificate delivered to the Seller pursuant hereto,
Finco shall employ selection procedures which are not
adverse to the interests of the Seller.
(ii) Seller Release. Upon the release by the
Collateral Agent of its interest in whole or in part in the
Purchased Contracts pursuant to Section 23(b) of the Triple-A
One Security Agreement, the Seller shall, at the sole expense
of Finco, execute and deliver a Seller Lien Release
Certificate in the form attached hereto as Exhibit B which
shall evidence the release of its security interest in the
Purchased Contracts released by the Collateral Agent under the
Triple-A One Security Agreement.
(iii) Documents and Filings. In connection with any
such release pursuant to this Section 19, Finco and the
Seller, shall at the sole expense of Finco, execute and
deliver any documents and instruments necessary to evidence
the release of the Seller's security interest in such
Purchased Contracts and other Collateral, including without
limitation, forms UCC-2 prepared for filing in all appropriate
jurisdictions.
SECTION 20. Conflict. In the event of any conflict between the terms
of this Subordinated Security Agreement, on the one hand, and
the terms of the Subordinated Note, Section 5.3 of the Sale
Agreement or any other Operative Document, on the other hand,
the terms of the Subordinated Note, Section 5.3 of the Sale
Agreement or such other Operative Document, as the case may
be, shall prevail.
SECTION 21. Standstill on Exercise of Rights. The Seller and Finco
agree that neither the Seller nor any permitted assignee of
the Seller may exercise or take any action to enforce any of
the rights granted by Finco to the Seller in this Subordinated
Security Agreement until such time as all of the Obligations
(as defined in the Definitions List) of Finco to Triple-A One,
the Banks, the Surety Provider, the Program Manager, the
Collateral Agent, the Bank Agent and the Bank Collateral Agent
under the Operative Documents have been indefeasibly paid in
full in cash.
14
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this Subordinated
Security Agreement to be duly executed and delivered as of the date first above
written.
ONYX ACCEPTANCE FINANCIAL CORPORATION
By:_________________________________
Name:
Title:
ONYX ACCEPTANCE CORPORATION
By:_____________________________
Name:
Title:
15
<PAGE> 16
SCHEDULE 4(d)
Locations of Collateral
The Collateral is located at:
1. Onyx Acceptance Financial Corporation
8001 Irvine Center Drive
Suite 500
Irvine, California 92718
2. Bankers Trust Company of California, N.A.
3 Park Plaza, 16th Floor
Irvine, California 92714
Attn: Joe Campbell
<PAGE> 17
SCHEDULE I
Intellectual Property
1. Agreement for On-Line Service
2. Acknowledgement of Security Interest Under Agreement for On-Line
Service
<PAGE> 18
EXHIBIT A
LIEN RELEASE REQUEST CERTIFICATE
from Finco to the Collateral Agent and Seller
pursuant to Section 23 of Triple-A One Security Agreement
and Section 19 of Subordinated Security Agreement
[ date ]
Capital Markets Assurance Corporation,
as Collateral Agent
885 Third Avenue
New York, New York 10022
Attention: Chief Underwriting Officer
Onyx Acceptance Corporation
8001 Irvine Center Drive
5th Floor
Irvine, California 92618
Attention: Regan E. Kelly, Esq.
Re: Onyx Acceptance Financial Corporation/Commercial
Paper Program - Request for Release of Lien
Ladies and Gentlemen:
Onyx Acceptance Financial Corporation ("Finco") refers to (i)
the Amended and Restated Triple-A One Security Agreement dated as of September
4, 1998 as amended, supplemented or otherwise modified, (the "Triple-A One
Security Agreement"), and (ii) the Amended and Restated Subordinated Security
Agreement dated as of September 4,1998 (as amended, supplemented or otherwise
modified, the "Subordinated Security Agreement"). Terms not otherwise defined
herein are used herein as defined in the Amended and Restated Definitions List
dated September 4, 1998.
18
<PAGE> 19
Finco submits this Lien Release Request Certificate pursuant
to Section 23 of the Triple-A One Security Agreement and Section 19 of the
Subordinated Security Agreement and requests that the Capital Markets Assurance
Corporation, in its capacity as Collateral Agent under the Triple-A One Security
Agreement and Onyx Acceptance Corporation in its capacity as Seller under the
Subordinated Security Agreement ("Onyx") release (and Onyx cause its assignee to
release) all of their liens on and security interests in the assets described on
Schedule 1 attached hereto (and all proceeds thereof, all books, records and
computer records pertaining thereto and all other assets that constitute
Collateral which are specifically related to the assets described in Schedule
1).
ONYX ACCEPTANCE FINANCIAL CORPORATION
By:_______________________________
Name:_____________________________
Title:____________________________
19
<PAGE> 20
EXHIBIT B
SELLER LIEN RELEASE CERTIFICATE
pursuant to Section 19 of Subordinated Security Agreement
[Date]
Onyx Acceptance Financial Corporation
8001 Irvine Center Drive
5th Floor
Irvine, California 92618
Re: Partial Collateral Release
Ladies and Gentlemen:
We hereby refer to the Lien Release Request Certificate
submitted by Onyx Acceptance Financial Corporation ("Finco") dated
__________________________, a copy of which is attached hereto (the "Request
Certificate"). Pursuant to the Request Certificate, Onyx Acceptance Corporation,
acting in its capacity as Seller under the Subordinated Security Agreement,
hereby releases (and represents and warrants that it has caused its assignee to
so release) its liens on and security interests in the assets identified in
Schedule 1 attached to the Request Certificate (and all proceeds thereof, all
books, records and computer records pertaining thereto and all other assets that
constitute Collateral which are specifically related to the assets described in
that Schedule 1).
This Lien Release Certificate may be executed in any number of
counterparts.
ONYX ACCEPTANCE CORPORATION
as Seller
By:_________________________________
Name:_______________________________
Title:______________________________
20
<PAGE> 1
EXHIBIT 10.110
EXECUTION COPY
================================================================================
CAPITAL MARKETS ASSURANCE CORPORATION
--------------------------
AMENDED AND RESTATED
INSURANCE AND INDEMNITY AGREEMENT
dated as of September 4, 1998
----------------------------
TRIPLE-A ONE FUNDING CORPORATION
ONYX ACCEPTANCE FINANCIAL CORPORATION
ONYX ACCEPTANCE CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions...............................................................2
ARTICLE 2
THE SURETY BONDS; PAYMENT OBLIGATION;
INDEMNIFICATION; SUBROGATION
Section 2.1 Surety Bonds..............................................................2
Section 2.2 Conditions Precedent to Obligations of the Surety Provider................2
Section 2.3 Premium and Fees..........................................................4
Section 2.4 Payment Obligations.......................................................4
Section 2.5 Indemnification...........................................................4
Section 2.6 Payment Procedure.........................................................4
Section 2.7 No Recourse...............................................................5
Section 2.8 Subrogation...............................................................5
Section 2.9 Increased Costs...........................................................5
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of the Surety Provider.....................6
Section 3.2 Representations and Warranties of Finco...................................7
Section 3.2 Representations and Warranties of Triple-A One............................7
Section 3.4 Representations and Warranties of Seller..................................7
ARTICLE 4
COVENANTS
Section 4.1 Covenants of Finco........................................................8
Section 4.2 Covenants of Triple-A One.................................................8
Section 4.3 Covenants of Seller.......................................................8
ARTICLE 5
FURTHER AGREEMENTS
Section 5.1 Term of Insurance Agreement; Survival.....................................9
Section 5.2 Obligations Absolute......................................................9
Section 5.3 Assignments; Third-party Rights..........................................10
Section 5.4 Reinsurance..............................................................10
Section 5.5 Liability of the Surety Provider.........................................10
ARTICLE 6
EVENTS OF DEFAULT; REMEDIES
SECTION 6.1 Events of Default........................................................11
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 7
MISCELLANEOUS
Section 7.1 Amendments, Etc..........................................................11
Section 7.2 Notices..................................................................11
Section 7.3 No Waiver; Remedies and Severability.....................................12
Section 7.4 Limitation on Interest...................................................13
SECTION 7.5 GOVERNING LAW............................................................13
Section 7.6 Submission to Jurisdiction...............................................13
Section 7.7 Counterparts.............................................................13
Section 7.8 Paragraph Headings, Etc..................................................13
SECTION 7.9 WAIVER OF JURY TRIAL.....................................................14
Section 7.10 No Bankruptcy Petition..................................................14
Section 7.11 Expenses and Taxes......................................................14
EXHIBITS
Exhibit A Form of Note Bond
Exhibit B Form of Liquidity Bond
Exhibit C Definitions List
</TABLE>
ii
<PAGE> 4
AMENDED AND RESTATED INSURANCE AND INDEMNITY AGREEMENT
THIS INSURANCE AND INDEMNITY AGREEMENT ("Insurance
Agreement") is made as of September 4, 1998 among CAPITAL MARKETS ASSURANCE
CORPORATION, a New York stock insurance company (the "Surety Provider"), ONYX
ACCEPTANCE FINANCIAL CORPORATION, a Delaware corporation ("Finco"), TRIPLE-A ONE
FUNDING CORPORATION, a Delaware corporation ("Triple-A One") and ONYX ACCEPTANCE
CORPORATION, a Delaware corporation (the "Seller").
WITNESSETH:
WHEREAS, Finco is a special purpose corporation, whose sole
purpose is to purchase certain automobile and light truck loans and the security
interests in the Vehicles securing such loans, including certain insurance
policies related thereto from the Seller pursuant to the Sale Agreement between
the Seller and Finco;
WHEREAS, in order to enable it to purchase Contracts from
the Seller, Finco has entered into a revolving credit agreement with Triple-A
One, pursuant to which Triple-A One has agreed to make loans to Finco secured by
the Contracts and other assets of Finco. Triple-A One funds such loans by
issuing Commercial Paper from time to time or by borrowing under the Liquidity
Agreement;
WHEREAS, Triple-A One, the Bank Agent and the Banks have
entered into the Liquidity Agreement, pursuant to which the Banks have agreed to
make loans to Triple-A One from time to time in the event that amounts received
from Finco are insufficient to repay maturing Commercial Paper or because
Triple-A One is unable for any reason to issue Commercial Paper;
WHEREAS, the Surety Provider is authorized to transact the
financial guaranty insurance business in the State of New York and has issued a
surety bond (the "Note Bond") for the benefit of Triple-A One guaranteeing
payment of the Triple-A One Note by Finco and surety bond (the "Liquidity Bond")
for the benefit of the Bank Agent guaranteeing payment of the Liquidity Notes by
Triple-A One and has agreed to issue a swap bond under certain circumstances
(the "Swap Bond") for the benefit of the provider of the Interest Rate Hedge
Mechanism guaranteeing Finco's obligations under such Interest Rate Hedge
Mechanism (the Note Bond, the Liquidity Bond and the Swap Bond are referred to
herein collectively as the "Surety Bonds" and individually as a "Surety Bond");
WHEREAS, the parties hereto, among other things, desire to
specify the payment of the premium in respect of the Surety Bonds, the indemnity
and reimbursement obligations of Finco and the Seller to the Surety Provider
under the Surety Bonds, and to provide for certain other matters related
thereto; and
WHEREAS, the parties hereto wish to amend and restate this
Insurance Agreement as hereinafter provided;
<PAGE> 5
NOW, THEREFORE, in consideration of the premises and to
induce the Surety Provider to issue the Surety Bonds, the parties hereto hereby
agree as follows:
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions
(a) As used in this Insurance Agreement, the capitalized terms used
herein shall, unless otherwise defined herein, have the meanings assigned to
them in the Amended and Restated Definitions List dated as of the date hereof
that refers to this Insurance Agreement which is incorporated herein by
reference (the "Definitions List").
(b) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Insurance Agreement shall refer to this Insurance
Agreement as a whole and not to any particular provision of this Insurance
Agreement, and Section, subsection, Schedule and Exhibit references are to this
Insurance Agreement unless otherwise specified.
(c) Capitalized terms used herein shall be equally applicable to both
the singular and plural forms of such terms.
ARTICLE 2
THE SURETY BONDS; PAYMENT OBLIGATION;
INDEMNIFICATION; SUBROGATION
Section 2.1. Surety Bonds. The Surety Provider agrees,
subject to the conditions hereinafter set forth, on the date hereof to execute
an endorsement to the Note Bond in the form of Exhibit A hereto and an
endorsement to the Liquidity Bond in the form of Exhibit B hereto.
Section 2.2 Conditions Precedent to Obligations of the
Surety Provider. (a) The obligations of the Surety Provider under this Insurance
Agreement are subject to the satisfaction of the following conditions on the
date hereof:
(i)(A) The conditions set forth in subsection 3.1 of the
Sale Agreement, subsection 4.1 of the Liquidity Agreement and
subsection 4.1 of the Triple-A One Credit
2
<PAGE> 6
Agreement shall have been satisfied, (B) the Surety Provider shall
have received original executed copies of each document, certificate
and opinion required to be delivered to the Program Manager or the
Collateral Agent pursuant to subsection 4.1 of the Triple-A One
Credit Agreement and Section 3.1 of the Sale Agreement, and (C) each
such document, certificate and opinion shall be in form and substance
satisfactory to the Surety Provider.
(ii) The representations and warranties of Triple-A One set
forth in subsection 3.1 of the Liquidity Agreement and Section 5 of
the Note Pledge Agreement shall be true and correct.
(iii) The representations and warranties of Finco set forth
in subsection 3.2 of this Insurance Agreement and subsection 3.1 of
the Triple-A One Credit Agreement shall be true and correct.
(iv) The representations and warranties of (A) the Seller
set forth in subsection 3.4 of this Insurance Agreement and
subsections 4.1 and 4.2 of the Sale Agreement and (B) the Servicer
set forth in subsection 4.1 of the Sale Agreement shall be true and
correct.
(v) The Surety Provider shall have received certified
copies, dated the Closing Date, of (A) the articles of incorporation
and by-laws of each of the Seller and Finco, (B) the resolutions of
the Board of Directors of each of the Seller and Finco approving the
execution and delivery of the amended and restated Operative
Documents to which it is a party, and (C) all documents evidencing
other necessary corporate action by each of the Seller and Finco and
all governmental approvals obtained by the Seller or Finco, if any,
that are necessary for the consummation of the transactions
contemplated by the Operative Documents.
(vi) The Surety Provider shall have received a certificate,
dated the Closing Date, of the Secretary or an Assistant Secretary of
each of the Seller and Finco, certifying the names and true
signatures of the officers of each of the Seller and Finco authorized
to sign the Operative Documents to which it is a party.
(vii) No statute, rule, regulation or order shall have been
enacted, entered or deemed applicable by any government or
governmental or administrative agency or court which would make the
transactions contemplated by this Insurance Agreement or any of the
other Operative Documents illegal or otherwise prevent the
consummation thereof.
3
<PAGE> 7
Section 2.3. Premium and Fees. In consideration of the
issuance by the Surety Provider of the Surety Bonds, Finco shall pay to the
Surety Provider the premiums in the amounts and on the dates set forth in the
Fee Letter Agreement.
Section 2.4 Payment Obligations. Finco agrees to pay to the
Surety Provider the following:
(a) On the date of any payment by the Surety Provider of any amount
under any Surety Bond, a sum equal to the amount so paid;
(b) Within ten days of receipt by it of any invoice therefor, any and
all unreimbursed charges and expenses of the Surety Provider in connection with
any payment under any Surety Bond including, but not limited to, all reasonable
attorneys' and accountants' fees and expenses, and all fees and charges paid or
incurred by the Surety Provider in connection with any accounts established to
facilitate payments under any Surety Bond; and
(c) On demand, interest on any amounts payable under this Insurance
Agreement (including without limitation the amounts described in Section 2.3 and
subparagraphs (a) and (b) of this Section 2.4) from the date such amounts become
due until paid in full, after as well as before judgment, at the Default Rate
calculated on the basis of the actual number of days elapsed and a 360 day year.
Section 2.5 Indemnification.
(a) In addition to any and all rights of reimbursement, subrogation
or any other rights pursuant hereto or under law or equity, Finco and the
Seller, jointly and severally agree to pay, and to protect, indemnify and save
harmless, the Surety Provider and its officers, directors, shareholders,
employees and agents from and against any and all losses, liabilities (including
penalties), actions, suits, judgments, demands, damages, claims, costs or
expenses of any nature arising out of or relating to the transactions
contemplated by the Operative Documents (any such item being a "Claim").
(b) The indemnity provided by this Section 2.5 shall not inure to the
benefit of the Surety Provider to the extent of a Claim arising by reason of any
gross negligence or willful misconduct of the Surety Provider. The obligation of
the Seller to provide the indemnity under this Section 2.5 shall not inure to
the benefit of the Surety Provider to the extent of a Claim arising by reason of
the credit risk of an Obligor or for which payment therefor would otherwise
constitute recourse to the Seller for an uncollectible Contract.
Section 2.6 Payment Procedure. In the event of any payment
by the Surety Provider under any Surety Bond, Finco agrees to accept the voucher
or other evidence of payment as prima facie evidence of the propriety thereof
and of Finco's liability therefor to the Surety Provider. All payments to be
made to the Surety Provider under this Insurance Agreement shall be made to the
Surety Provider in Dollars in immediately available funds to the account
designated by the Surety
4
<PAGE> 8
Provider prior to 1:00 P.M. (New York City time) on the date when due.
Section 2.7 No Recourse. No recourse shall be had for the
payment of any amount owing hereunder or any other obligation or claim arising
out of or based upon this Insurance Agreement against any shareholder, employee,
officer, director or incorporator of Finco except for claims arising out of the
gross negligence or willful misconduct of such shareholder, employee, officer,
director or incorporator of Finco.
Section 2.8 Subrogation. In furtherance of and not in
limitation of the Surety Provider's equitable right of subrogation, Finco and
Triple-A One acknowledge and agree that, with respect to payments made by the
Surety Provider pursuant to any Surety Bond, the Surety Provider shall be fully
subrogated, to the extent of the aggregate of all such payments and interest due
on any unreimbursed amounts thereof, to the rights of Triple-A One under the
Triple-A One Credit Agreement and the Triple-A One Security Agreement and to the
rights of Finco under the Sale Agreement, including, without limitation, in
respect of the Contracts. Each of Finco and Triple-A One agrees to execute such
instruments and to take such actions as the Surety Provider may request to
effectuate such subrogation and to perfect the rights of the Surety Provider.
Section 2.9 Increased Costs.
(a) If due to either (i) the introduction of or any change (including
without limitation, any change by way of imposition or increase of reserve
requirements) in or in the interpretation of any law or regulation or (ii) the
compliance with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), there shall be
any increase in the cost to the Surety Provider of issuing, funding or
maintaining any Surety Bond, then Finco and the Seller, jointly and severally
shall from time to time, upon demand by the Surety Provider, pay to the Surety
Provider additional amounts determined as a per annum rate applied to either the
highest Face Amount of Commercial Paper plus outstanding Loans during the
preceding two Determination Periods or the outstanding amount under such Surety
Bond, as may be appropriate, sufficient to compensate the Surety Provider for
such increased cost. A certificate in reasonable detail as to the rate for such
increased cost, the basis therefor, and calculation thereof, shall be submitted
to Finco and the Seller by the Surety Provider, and shall be conclusive and
binding for all purposes, absent manifest error.
(b) If either (i) the introduction of or any change in or in the
interpretation of any law or regulation or (ii) the compliance with 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 the Surety Provider or any
corporation controlling the Surety Provider and the Surety Provider determines
that the amount of such capital is increased by or based upon the existence of
outstanding amounts under any Surety Bond, or the Surety Provider's commitment
under any Surety Bond and other
5
<PAGE> 9
commitments of this type, then, upon demand by the Surety Provider, Finco and
the Seller shall, jointly and severally, immediately pay to the Surety Provider,
from time to time as specified by the Surety Provider, additional amounts
determined as a per annum rate applied to either the highest Face Amount of
Commercial Paper plus outstanding Loans during the preceding two Determination
Periods or the outstanding amount under such Surety Bond as may be appropriate,
sufficient to compensate the Surety Provider in the light of circumstances, to
the extent that the Surety Provider determines such increase in capital to be
allocable to the existence of such Surety Bond. A certificate in reasonable
detail as to the rate for such increased cost, the basis therefor, and
calculation thereof, submitted to Finco by the Surety Provider, shall be
conclusive and binding for all purposes, absent manifest error.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of the Surety
Provider. The Surety Provider represents and warrants to Triple-A One and to
Finco, as of the date hereof, as follows:
(a) Due Organization. The Surety Provider is a duly incorporated and
subsisting New York stock insurance company authorized under an effective
certificate of authority to do business in the State of New York, and in each
jurisdiction where the failure to be so authorized under an effective
certificate of authority would have a material adverse effect on the Surety
Provider's performance of its obligations under any Surety Bond or this
Insurance Agreement.
(b) Power and Authority. The Surety Provider has all necessary power
and authority to execute and deliver this Insurance Agreement, to issue the
endorsements to the Surety Bonds and to perform all of its obligations hereunder
and thereunder.
(c) Due Authorization. The execution, delivery and performance by the
Surety Provider of this Insurance Agreement and the Surety Bonds (i) have been
duly authorized by all necessary corporate action and (ii) do not require any
approvals or consents of, or any notice to or filing with, any person or
governmental agency or department (except for filings with the Insurance
Department of the State of New York, all of which have been made), which, if not
obtained or made, would result in a material adverse effect on the Surety
Provider's performance of its obligations hereunder and under the Surety Bonds.
(d) Valid and Binding Agreement. This Insurance Agreement has been
duly executed and delivered by the Surety Provider, and this Insurance
Agreement, when executed and delivered by all the parties thereto, and the
endorsements to the Surety Bonds, when executed by the Surety Provider, will
constitute legal, valid and binding obligations of the Surety Provider,
enforceable against the Surety Provider in accordance with their terms, except
as the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, conservation,
6
<PAGE> 10
moratorium or similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
Section 3.2 Representations and Warranties of Finco. As of
the date hereof and each Purchase Date, Finco makes to the Surety Provider each
representation and warranty set forth in Section 3.1 of the Triple-A One Credit
Agreement, and each such representation and warranty is hereby incorporated
herein by reference, as if set forth herein in full.
Section 3.3 Representations and Warranties of Triple-A One
. Triple-A One represents and warrants to the Surety Provider, as of the date
hereof, as follows:
(a) Corporate Existence; Compliance with Law. Triple-A One (i) is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (ii) has the corporate power and authority,
and the legal right, to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently engaged,
(iii) is duly qualified as a foreign corporation and in good standing under the
laws of each jurisdiction where its ownership, lease or operation of property or
the conduct of its business requires such qualification and (iv) is in
compliance with all Requirements of Law except to the extent that the failure to
comply therewith would not, in the aggregate, have a material adverse effect on
Triple-A One.
(b) Corporate Power; Authorization; Enforceable Obligations. Triple-A
One has the corporate power and authority, and the legal right, to make, deliver
and perform this Insurance Agreement and the other Operative Documents to which
it is a party and has taken all necessary corporate action to authorize the
execution, delivery and performance of this Insurance Agreement and the other
Operative Documents to which it is a party. No consent or authorization of,
filing with or other act by or in respect of, any Governmental Authority or any
other Person is required in connection with the execution, delivery,
performance, validity or enforceability of the Insurance Agreement or the other
Operative Documents to which it is a party. This Insurance Agreement has been,
and each Operative Document to which Triple-A One is a party when executed and
delivered will be, duly executed and delivered on behalf of Triple-A One. This
Insurance Agreement constitutes, and each other Operative Document to which
Triple-A One is a party when executed and delivered will constitute, a legal,
valid and binding obligation of Triple-A One enforceable against Triple-A One in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).
(c) No Legal Bar. Triple-A One is not an "investment company", or a
company
7
<PAGE> 11
"controlled" by an "investment company", within the meaning of the Investment
Company Act of 1940, as amended.
Section 3.4 Representations and Warranties of Seller. As of
the date hereof and each Purchase Date, the Seller hereby makes to Triple-A One
and to the Surety Provider each representation and warranty made by it in
Sections 4.1 and 4.2 of the Sale Agreement, and each such representation and
warranty is hereby incorporated herein by reference, as if set forth in full
herein.
ARTICLE 4
COVENANTS
Section 4.1 Covenants of Finco. Finco hereby covenants and
agrees that during the term of this Insurance Agreement:
(a) Finco shall comply with all of the covenants, terms and
agreements set forth in (i) the Triple-A One Credit Agreement (including,
without limitation, the covenants set forth in Sections 5 and 6 thereof), (ii)
the Triple-A One Security Agreement (including, without limitation, the
covenants set forth in Section 8 thereof) and (iii) any other Operative Document
to which it is a party.
(b) Finco shall provide the Surety Provider with written notice
immediately upon becoming aware of any breach by it of any covenant, term or
agreement set forth in the Triple-A One Credit Agreement, the Triple-A One
Security Agreement, this Insurance Agreement or any other Operative Document to
which it is a party.
Section 4.2 Covenants of Triple-A One. Triple-A One hereby
covenants and agrees that during the term of this Insurance and Agreement:
(a) Triple-A One shall comply with all of the covenants, terms and
agreements set forth in (i) the Liquidity Agreement (including, without
limitation, the covenants set forth in Section 5 thereof), (ii) the Note Pledge
Agreement (including, without limitation, the covenants set forth in Section 6
thereof) and (iii) any other Operative Document to which it is a party.
(b) Triple-A One shall provide the Surety Provider with written
notice immediately upon becoming aware of any breach by it under the Liquidity
Agreement, the Note Pledge Agreement, this Insurance Agreement or any other
Operative Document to which it is a party.
(c) Triple-A One shall not sell any Commercial Paper unless, on the
date of each such sale, the sum of the Face Amount of Commercial Paper, after
giving effect to the sale of Commercial Paper and the payment of any maturing
Commercial Paper on such day, and the
8
<PAGE> 12
outstanding principal amount of the Loans, is not greater than the Maximum
Program Amount.
Section 4.3 Covenants of Seller. Seller hereby covenants
and agrees that during the term of this Insurance Agreement:
(a) It shall comply with all of the covenants, terms and agreements
made by it as Seller and as Servicer and set forth in (i) the Sale Agreement
(including, without limitation, the covenants set forth in Sections 4.3, 4.4,
4.5 and 4.6 thereof) and (ii) any other Operative Document to which it is a
party.
(b) It shall provide the Surety Provider with written notice
immediately upon becoming aware of any breach by it of any covenant, term or
agreement set forth in the Sale Agreement, this Insurance Agreement or any other
Operative Document to which it is a party.
ARTICLE 5
FURTHER AGREEMENTS
Section 5.1 Term of Insurance Agreement; Survival. This
Insurance Agreement shall terminate on the later to occur of the date that (i)
the Surety Bonds have been terminated in accordance with their terms and (ii)
all amounts due and payable under this Insurance Agreement have been irrevocably
paid in full. The representations, warranties, covenants and indemnities of each
of the Seller, Finco and Triple-A One referred to or contained in this Insurance
Agreement and each Operative Document to which it is a party and the provisions
of subsections 2.4, 2.5, 2.7, 2.9 and 7.11 of this Insurance Agreement shall
survive the termination of this Insurance Agreement.
Section 5.2 Obligations Absolute. The obligations of each
of the Seller and Finco under this Insurance Agreement are absolute and
unconditional and will be paid or performed strictly in accordance with the
terms hereof, irrespective of:
(a) any lack of validity or enforceability of, or any amendment or
other modifications of, or waiver with respect to, any Operative Document;
(b) any amendment or waiver of, or consent to departure from, any
Surety Bond;
(c) any exchange or release or non-perfection of any item of
Collateral;
(d) the existence of any claim, set off, defense or other rights that
the Seller or Finco may have at any time against the Surety Provider, any
beneficiary or any transferee of any Surety Bond (or any persons or entities for
whom the Surety Provider, any such beneficiary or any such transferee may be
acting) or any other person or entity whether in connection with any Surety
9
<PAGE> 13
Bond, this Insurance Agreement, any other Operative Document or any unrelated
transactions;
(e) any statement or any other document presented under any Surety
Bond proving to be forged, fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any respect whatsoever;
(f) the inaccuracy or alleged inaccuracy of any statement upon which
any drawing under any Surety Bond is based;
(g) payment by the Surety Provider under any Surety Bond against
presentation of a draft or certificate which does not comply with the terms of
such Surety Bond;
(h) the bankruptcy or insolvency of the Surety Provider or any other
party to any Operative Document;
(i) any default or alleged default of the Surety Provider under any
Surety Bond;
(j) any termination of this Insurance Agreement pursuant to Section
5.1;
(k) any defense based upon the failure of the Collateral Agent to
receive all or part of the amounts payable on the Triple-A One Note, or of the
Servicer to receive all or part of the Servicing Fee or other compensation
required under the Operative Documents or otherwise, or any nonapplication or
misapplication of the proceeds of any drawing upon any Surety Bond; and
(l) any other circumstances or happenings whatsoever.
Section 5.3 Assignments; Third-party Rights. This Insurance
Agreement shall be a continuing obligation and shall (a) be binding upon the
parties hereto and their respective successors and permitted assigns and (b)
inure to the benefit of and be enforceable by each party hereto and each of
their respective successors and permitted assigns. None of the Seller, Finco or
Triple-A One may assign this Insurance Agreement, or delegate any of its duties
hereunder, without the prior written consent of the Surety Provider.
Section 5.4 Reinsurance. The Surety Provider shall have the
right to give participations in its rights under this Insurance Agreement and to
enter into contracts of reinsurance with respect to any Surety Bond, provided
that the Surety Provider agrees that any such disposition will not alter or
affect in any way whatsoever its obligations hereunder and under such Surety
Bond and, provided, further, that any reinsurer or participant will not have any
rights against the Seller, Finco or Triple-A One and that the Seller, Finco or
Triple-A One shall have no obligation to have any communication or relationship
whatsoever with any reinsurer or participant with respect to the obligations of
the Surety Provider hereunder and under such Surety Bond.
Section 5.5 Liability of the Surety Provider. The Surety
Provider shall not be
10
<PAGE> 14
responsible to the Seller, Triple-A One or Finco for any act or omission of the
Issuing and Paying Agent, the Program Manager, Triple-A One, the Bank Agent, any
Bank, the Dealer or any other Person. It is understood that neither the Surety
Provider, nor any of its officers, directors or employees shall be liable or
responsible for: (a) the use which may be made of any Surety Bond by or for any
acts or omissions of the Issuing and Paying Agent, the Program Manager, Triple-A
One, the Bank Agent, any Bank, the Dealer or any other Person in connection
therewith or (b) the validity, sufficiency, accuracy or genuineness of documents
presented in connection with a drawing on any Surety Bond, or of any endorsement
thereon, even if such documents should in fact prove to be in any or all
respects invalid, insufficient, fraudulent or forged.
ARTICLE 6
EVENTS OF DEFAULT; REMEDIES
SECTION 6.1 Events of Default. The occurrence of any
Wind-Down Event shall constitute an Event of Default hereunder. Upon the
occurrence of an Event of Default hereunder, the Surety Provider may at any time
thereafter: (i) deliver a Notice of Wind-Down, (ii) exercise any of its rights
and remedies under this Insurance Agreement or any other Operative Document and
(iii) take whatever action at law or in equity as may appear necessary or
desirable in its judgment to collect the amounts then due and unpaid under this
Insurance Agreement or any other Operative Document or to enforce performance
and observance of any obligation, agreement or covenant of the Seller or Finco
under this Insurance Agreement or the other Operative Documents.
ARTICLE 7
MISCELLANEOUS
Section 7.1 Amendments, Etc. No amendment or waiver of any
provision of this Insurance Agreement, nor consent to any departure therefrom,
shall in any event be effective without prior written notice thereof to S&P and
Moody's and unless in writing and signed by each of the parties hereto, provided
that any waiver so granted shall extend only to the specific event or occurrence
so waived and not to any other similar event or occurrence which occurs
subsequent to the date of such waiver.
Section 7.2 Notices. Except where telephonic instructions
or notices are authorized herein to be given, all notices, demands, instructions
and other communications required or permitted to be given to or made upon any
party hereto shall be in writing and shall be personally delivered or sent by
overnight courier service, or registered, certified or express mail, postage
prepaid, return receipt requested, or by facsimile copy, or telegram (with
messenger delivery specified in the case of a telegram) and
11
<PAGE> 15
shall be deemed to be delivered for purposes of this Insurance Agreement on: (i)
the second Business Day following the day on which such notice was placed in the
custody of the U.S. Postal Service, (ii) the next Business Day following the day
on which such notice was placed in the custody of any overnight courier service,
including express mail service or (iii) the same Business Day on which such
notice is sent by telegram, messenger or facsimile. Unless otherwise specified
in a notice sent or delivered in accordance with the foregoing provisions of
this subsection, notices, demands, instructions and other communications in
writing shall be given to or made upon the respective parties hereto at their
respective addresses (or to their respective facsimile numbers) indicated below,
and, in the case of telephonic instructions or notices, by calling the telephone
number or numbers indicated for such party below:
If to Triple-A One: Triple-A One Funding Corporation
c/o MBIA Insurance Corporation,
as Administrative Agent
885 Third Avenue
New York, New York 10022
Attention: Chief Underwriting Officer
Telephone: (212) 755-1155
Telecopier: (212) 755-5462
If to the Capital Markets Assurance Corporation
Surety Provider: 885 Third Avenue
New York, New York 10022
Attention: Chief Underwriting Officer
Telephone: (212) 755-1155
Telecopier: (212) 755-5462
If to Finco: Onyx Acceptance Financial Corporation
8001 Irvine Center Drive
Irvine, California 92618
Attention: Chief Financial Officer
Telephone: (949) 790-5600
Telecopier: (949) 450-5530
If to the Seller: Onyx Acceptance Corporation
8001 Irvine Center Drive
Irvine, California 92618
Attention: Executive Vice President
Telephone: (949) 450-5509
Telecopier: (949) 450-5530
A copy of any notice delivered to or required to be sent by
the Seller or Finco hereunder shall be sent by the
Seller or Finco to the holder of the Subordinate Note.
Section 7.3 No Waiver; Remedies and Severability.
12
<PAGE> 16
No failure on the part of the Surety Provider to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise hereof or the exercise of any other right. The remedies herein provided
are cumulative and not exclusive of any remedies provided by law. The parties
further agree that the holding by any court of competent jurisdiction that any
remedy pursued by the Surety Provider hereunder is unavailable or unenforceable
shall not affect in any way the ability of the Surety Provider to pursue any
other remedy available to it. In the event any provision of this Insurance
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, the parties hereto agree that such holding shall not invalidate or
render unenforceable any other provision hereof.
Section 7.4 Limitation on Interest. No provision of this
Insurance Agreement shall require the payment or permit the collection of
interest in excess of the maximum rate permitted by applicable law.
SECTION 7.5 GOVERNING LAW. THIS INSURANCE AGREEMENT SHALL
BE CONSTRUED, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 7.6 Submission to Jurisdiction. Each of the parties
hereto hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action
or proceeding relating to this Insurance Agreement and the other
Operative Documents to which it is a party, or for recognition and
enforcement of any judgment in respect thereof, to the non-exclusive
general jurisdiction of the courts of the State of New York, the
courts of the United States of America for the Southern District of
New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be
brought in such courts and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such party at its address set forth in Section 7.2 or at
such other address of which such party shall have given notice to
each other party pursuant thereto; and
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or
shall limit the right to sue in any other jurisdiction.
Section 7.7 Counterparts.
13
<PAGE> 17
This Insurance Agreement may be executed in counterparts by the parties hereto,
and each such counterpart shall be considered an original and all such
counterparts shall constitute one and the same instrument.
Section 7.8 Paragraph Headings, Etc. The headings of
paragraphs contained in this Insurance Agreement are provided for convenience
only. They form no part of this Insurance Agreement and shall not affect its
construction or interpretation.
SECTION 7.9 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS INSURANCE AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
Section 7.10 No Bankruptcy Petition. Each of the Seller and
Finco covenants and agrees that, prior to the date which is one year and one day
after the payment in full of all Commercial Paper issued by, and all Triple-A
One Loans made by, Triple-A One and all other obligations under this Insurance
Agreement and the other Operative Documents, it will not institute against, or
join any other Person in instituting against, Triple-A One any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any federal or state bankruptcy or similar law.
Section 7.11 Expenses and Taxes. Finco agrees, within ten
days of billing, to (a) pay or reimburse the Surety Provider for all of its
out-of-pocket costs and expenses incurred in connection with the preparation and
execution of, and any amendment, supplement or modification to, this Insurance
Agreement and any other documents prepared in connection herewith, and the
consummation of the transactions contemplated hereby and thereby, including,
without limitation, the reasonable fees and disbursements of counsel to the
Surety Provider, (b) pay or reimburse the Surety Provider for all of its costs
and expenses incurred in connection with the enforcement or preservation of any
rights under this Insurance Agreement and any such other documents, including,
without limitation, all reasonable fees and disbursements of counsel to the
Surety Provider, whether incurred in connection with the foreclosure upon, sale
or other disposition of any Collateral in which the Surety Provider has a
security interest pursuant to its rights of subrogation, to the extent not
recovered from such collateral, or otherwise and (c) pay, indemnify, and hold
the Surety Provider harmless from, any and all recording and filing fees and any
and all liabilities with respect to, or resulting from any delay in paying, any
registration tax, stamp, duty and other similar taxes or duties, if any, which
may be payable or determined to be payable in connection with the execution and
delivery of, or consummation of any of the transactions contemplated by, or any
amendment, supplement or modification of, or any waiver or consent under or in
respect of, this Insurance Agreement or any such other documents.
14
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have executed this
Insurance Agreement, all as of the day and year first
above mentioned.
CAPITAL MARKETS ASSURANCE CORPORATION,
as Surety Provider
By: _________________________________
Name:
Title:
TRIPLE-A ONE FUNDING CORPORATION
By: MBIA Insurance Corporation, its attorney in fact
By: _________________________________
Name:
Title:
ONYX ACCEPTANCE FINANCIAL CORPORATION
By: _________________________________
Name:
Title:
ONYX ACCEPTANCE CORPORATION,
as Seller
By: _________________________________
Name:
Title:
15
<PAGE> 19
EXHIBIT A
FORM OF ENDORSEMENT TO NOTE BOND
<PAGE> 20
EXHIBIT B
FORM OF ENDORSEMENT TO LIQUIDITY BOND
<PAGE> 21
EXHIBIT C
DEFINITIONS LIST
See TAB 1
<PAGE> 1
EXHIBIT 10.111
EXECUTION COPY
================================================================================
MASTER LOAN AGREEMENT
BETWEEN
ONYX ACCEPTANCE FUNDING CORPORATION
AND
SALOMON BROTHERS REALTY CORP.
DATED AS OF SEPTEMBER 3, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 1. DEFINITIONS; CONSTRUCTION.................................................... 1
(a) Definitions....................................................................... 1
(b) Accounting Terms and Determinations............................................... 5
(c) Other Definitional Terms.......................................................... 5
Section 2. GRANT OF SECURITY INTEREST; DELIVERY OF COLLATERAL; LOANS DISCRETIONARY...... 5
(a) Grant of Security Interest........................................................ 5
(b) Delivery of Instruments of Transfer............................................... 6
(c) Funding of Loans.................................................................. 6
(d) SBRC's Duty of Care............................................................... 6
Section 3. EARNINGS ON COLLATERAL........................................................ 7
Section 4. CONFIRMATION STATEMENT........................................................ 7
Section 5. MARGIN DETERMINATIONS......................................................... 7
(a) Margin Requirement................................................................ 7
(b) Current Margin.................................................................... 7
(c) Supplemental Collateral........................................................... 7
(d) Release of Supplemental Collateral................................................ 8
Section 6. RELEASE AND SUBSTITUTION OF COLLATERAL........................................ 8
Section 7. CONDITIONS TO THE LOANS....................................................... 9
(a) Conditions to the Effective Date.................................................. 9
(b) Conditions Precedent to all Loans and Substitutions............................... 10
Section 8. REPRESENTATIONS AND WARRANTIES................................................ 11
(a) Due Incorporation................................................................. 11
(b) Authorization..................................................................... 11
(c) No Conflict....................................................................... 12
(d) Approvals, etc.................................................................... 12
(e) Good Title........................................................................ 12
(f) Tax Liens......................................................................... 12
(g) Financial Statements.............................................................. 13
(h) No Litigation..................................................................... 13
(i) Disclosure........................................................................ 13
(j) Permits, Licenses, Approvals, Consents, etc....................................... 13
(k) The Investment Company Act........................................................ 13
(l) Ownership of Borrower............................................................. 13
Section 9. AFFIRMATIVE COVENANTS......................................................... 13
(a) Financial Statements and Other Information........................................ 14
(b) Existence, Conduct of Business, etc............................................... 15
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
(c) Taxes............................................................................. 15
(d) Laws.............................................................................. 15
(e) Name and Locations................................................................ 15
(f) Records........................................................................... 15
(g) Pay Obligations................................................................... 15
(h) Notices........................................................................... 15
(i) Covenant Compliance Certificate................................................... 16
(j) Monthly Collateral Report......................................................... 16
(k) Guaranty.......................................................................... 16
Section 10. NEGATIVE COVENANTS............................................................ 16
(a) Liens............................................................................. 16
(b) Mergers, Sales, Dissolution, etc.................................................. 16
(c) Corporate Changes................................................................. 16
(d) Use of Proceeds................................................................... 16
(e) Further Covenants................................................................. 16
Section 11. EVENTS OF DEFAULT............................................................. 17
(a) Nonperformance.................................................................... 17
(b) Termination of Interest........................................................... 17
(c) Act of Insolvency................................................................. 17
(d) Material Adverse Change........................................................... 17
(e) Default Under Other Contracts..................................................... 17
(f) Merger or Consolidation........................................................... 17
(g) Anticipated Insolvency............................................................ 18
(h) Final Judgment.................................................................... 18
(i) Breach of Credit Covenants........................................................ 18
(j) Breach of Representation.......................................................... 18
(k) Breach of Covenant................................................................ 18
Section 12. REMEDIES ..................................................................... 18
(a) Action Regarding Collateral....................................................... 18
(b) Deficiency........................................................................ 19
(c) Private Sale...................................................................... 19
(d) Application of Proceeds........................................................... 20
(e) Default Rate of Interest.......................................................... 20
(f) Attorney-in-Fact.................................................................. 20
(g) Payments on Collateral to Borrower................................................ 20
(h) Cross-Collateralization; Right of Set-Off......................................... 21
Section 13. MATURITY DATE; INTEREST PAYMENT DATES; REPAYMENT OF PRINCIPAL................. 21
(a) Payment on Maturity Date.......................................................... 21
(b) Interest Payment.................................................................. 21
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
(c) Payment of Principal.............................................................. 21
(d) Event of Default.................................................................. 21
Section 14. PAYMENT OF LIABILITIES........................................................ 21
Section 15. GENERAL PROVISIONS............................................................ 22
(a) No Waiver......................................................................... 22
(b) Governing Law; Severability....................................................... 22
(c) Construction...................................................................... 22
(d) Assignment........................................................................ 22
(e) Notices, Payments, Deliveries..................................................... 22
(f) Termination....................................................................... 23
(g) Aggregate Amount of Loans; Disbursement of Funds.................................. 23
(h) Expenses.......................................................................... 24
(i) SBRC's Right to Pledge............................................................ 24
(j) Indemnification................................................................... 25
(k) Further Assurances................................................................ 25
(l) Remedies Cumulative............................................................... 25
(m) Litigation........................................................................ 25
EXHIBIT A................................................................................. A-1
EXHIBIT B................................................................................. B-1
EXHIBIT C................................................................................. C-1
EXHIBIT D................................................................................. D-1
EXHIBIT E................................................................................. E-1
EXHIBIT F................................................................................. F-1
</TABLE>
iii
<PAGE> 5
THIS AGREEMENT is made as of the 3rd day of September, 1998 by and
between ONYX ACCEPTANCE FUNDING CORPORATION ("Borrower") and SALOMON BROTHERS
REALTY CORP. ("SBRC"). By executing this Agreement, Borrower and SBRC agree to
be bound by the terms of this Agreement.
WITNESSETH
WHEREAS the parties elect to enter into this Agreement and, at the
request of Borrower, SBRC may from time to time at its option agree to make one
or more loans (in each instance, a "Loan") to Borrower, which Loans shall be
limited in aggregate outstanding principal amount to the Maximum Advance Amount,
said Loans to be evidenced by Borrower's Note (the "Note") of even date
herewith, maturing on the Maturity Date (as defined herein), a form of which is
attached hereto as Exhibit A; and
WHEREAS, in order to induce SBRC to make Loans from time to time to it,
Borrower has agreed to assign and pledge to SBRC and grant to SBRC a lien upon
and a security interest in the Collateral (as hereinafter defined) for the
purpose of securing its obligations under the Note;
NOW, THEREFORE, in consideration of the foregoing and of the covenants
and agreements hereinafter set forth, Borrower and SBRC agree as follows:
Section 1. DEFINITIONS; CONSTRUCTION
(a) Definitions. As used herein, the following terms shall have the
meaning herein specified (to be equally applicable to be the singular and plural
forms of the terms defined):
"ABS Issuance Agreements" shall mean the agreements pursuant to which
the related Pledged ABS has been issued, including any agreements relating to
the payment or distribution of amounts to the holder of such Pledged ABS, which
agreements have been previously approved by SBRC or its affiliate.
"Act of Insolvency" shall have the meaning ascribed to it in Section
11(c) hereof.
"Agreement" shall mean this Master Loan Agreement, as amended,
supplemented or otherwise modified from time to time in accordance with its
terms.
"Approvals" shall have the meaning set forth in Section 8(d) hereof.
"Book Net Worth" shall refer to the equity of Borrower determined in
accordance with GAAP.
"Borrower" shall have the meaning set forth in the preamble hereof.
<PAGE> 6
"Business Day" shall mean any day excluding Saturday, Sunday, or any
other day on which banks in New York, New York or California are authorized or
required by law to close or a day on which trading by and between banks in
Dollars in the London interbank market is not conducted.
"Closing Date" shall mean with respect to each Loan, the settlement date
set forth in the Confirmation Statement applicable to such Loan.
"Collateral" shall have the meaning ascribed thereto in Section 2 hereof
and shall include any Supplemental Collateral.
"Confirmation Statement" shall have the meaning set forth in Section 4
hereof.
"Covenant Compliance Certificate" shall refer to a certificate of
Borrower and Onyx to the effect that there has not occurred any of the events
listed in Section 11(i) as of the date of such certificate.
"Current Margin" shall have the meaning ascribed to it in Section 5(b)
hereof.
"Default" shall mean any condition, act or event which, with notice or
lapse of time or both, would constitute an Event of Default.
"Default Rate" shall have the meaning specified in Section 12(e) hereof.
"Dollar" and the sign "$" shall mean lawful money of the United States
of America.
"Effective Date" shall mean the date that all of the conditions set
forth in Section 7(a)(i) hereof have been met.
"Event of Default" shall have the meaning set forth in Section 11
hereof.
"GAAP" shall have the meaning specified in Section 1(b) hereof.
"Governmental Authority" shall mean any nation, government, or state, or
any political subdivision of any of them, or any court, entity or agency
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guaranty" shall mean the guaranty of Onyx substantially in the form set
forth at Exhibit E hereto.
"Indebtedness" shall mean, for any Person: (a) obligations created,
issued or incurred by such Person for borrowed money (whether by loan, the
issuance and sale of debt securities or the sale of property to another Person
subject to an understanding or agreement, contingent or otherwise, to repurchase
such property from such Person); (b) obligations of such Person to pay the
deferred purchase or acquisition price of property or services, other than trade
accounts
2
<PAGE> 7
payable (other than for borrowed money) arising, and accrued expenses incurred,
in the ordinary course of business so long as such trade accounts payable are
payable within ninety (90) days of the date the respective goods are delivered
or the respective services are rendered; (c) Indebtedness of others secured by a
lien on the property of such Person, whether or not the respective Indebtedness
so secured has been assumed by such Person; (d) obligations (contingent or
otherwise) of such Person in respect of letters of credit or similar instruments
issued or accepted by banks and other financial institutions for account of such
Person; (e) capital lease obligations of such Person; (f) obligations of such
Person under repurchase agreements or like arrangements; (g) Indebtedness of
others guaranteed by such Person; (h) all obligations of such Person incurred in
connection with the acquisition or carrying of fixed assets by such Person; and
(i) Indebtedness of general partnerships of which such Person is a general
partner.
"Lien" shall mean any interest in property, or a claim by, a Person
other than the owner of such property, whether such interest is based on the
common law, statute or contract, and including, but not limited to, a security
interest, security title or lien arising from a security agreement, mortgage,
deed of trust, deed to secure debt, encumbrance, pledge, conditional sale,
financing statement or trust receipt or a lease, consignment or bailment for
security purposes.
"Loan" shall have the meaning set forth in the preamble hereof.
"Loan Documents" shall mean and include this Agreement, the Note, each
Confirmation Statement, the Guaranty, when delivered, and all instruments and
documents now or hereafter executed and/or delivered pursuant hereto or thereto
or in connection herewith or therewith.
"Margin Requirement" shall have the meaning set forth in Section 5(a)
hereof.
"Margin Stock" shall have the meaning provided in Regulation U of the
Board of Governors of the Federal Reserve System.
"Market Value" shall mean the fair market value of any Pledged ABS (to
the date that it is first eligible to be redeemed in connection with an optional
purchase under the related ABS Issuance Agreement) as determined by SBRC in its
reasonable business judgment. The pricing assumptions used by SBRC in
determining the fair market value of any Pledged ABS will be set forth in the
related Confirmation Statement.
"Material Adverse Change" shall mean, with respect to Borrower or Onyx,
as applicable, a material adverse change in (a) the business, operations,
properties, prospects or condition (financial or otherwise) of such Person or
(b) the ability of such Person to perform its obligations hereunder and under
the other Loan Documents.
"Maturity Date" shall mean with respect to each Loan the earlier of (a)
one year from the related Closing Date as specified in the Confirmation
Statement with respect to such Loan and (b) the Termination Date.
3
<PAGE> 8
"Maximum Advance Amount" shall mean, as of any date of determination,
$50,000,000.
"Net Worth" shall refer to the sum of equity and subordinated debt of
Onyx determined in accordance with GAAP less the sum of (i) intercompany
receivables, (ii) loans to officers or employees of Onyx, (iii) goodwill and
(iv) deferred taxes, in every case determined on a consolidated basis.
"Note" shall have the meaning set forth in the preamble hereof.
"Obligations" shall mean the principal of and all interest on the Loans,
all fees, expenses, reimbursements (including, without limitation the reasonable
fees and expenses of attorneys), taxes and indemnities and other amounts payable
by the Borrower under the Loan Documents and under any other documents or
instruments executed and delivered by Borrower in connection therewith to SBRC
pursuant to Section 2 hereof or any of their respective successors or assigns,
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising and however arising.
"Onyx" shall mean Onyx Acceptance Corporation, the direct or indirect
sole shareholder of Borrower.
"Outstanding Loans" shall mean on the date of determination thereof the
aggregate unpaid principal amount of each Loan made hereunder.
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, limited liability company, trust,
unincorporated association or government (or any agency, instrumentality or
political subdivision thereof).
"Pledged ABS" shall mean any residual, subordinated or interest strip
class of asset backed securities (i) issued in connection with a securitization
involving Borrower, Onyx or an affiliate of either of them, and in which SBRC or
an affiliate of SBRC has acted as the lead underwriter or placement agent and
(ii) pledged by Borrower hereunder and accepted by SBRC in connection with a
Loan hereunder.
"Proceeds" shall have the meaning assigned to it under the UCC and, in
any event, shall include, but not be limited to, (i) any and all Proceeds of any
insurance, indemnity, warranty or guaranty payable to the Borrower from time to
time with respect to any of the Collateral, (ii) any and all payments (in any
form whatsoever) made or due and payable to Borrower from time to time in
connection with any reacquisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Authority
and any sale, transfer or other disposition of all or any part of the
Collateral, and (iv) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
"SBRC" shall have the meaning set forth in the preamble hereof.
4
<PAGE> 9
"Substitute Collateral" shall have the meaning set forth in Section 6
hereof.
"Supplemental Collateral" shall mean collateral acceptable to SBRC in
accordance with the provisions of Section 5(c) hereof.
"Termination Date" shall have the meaning ascribed to it in Section
15(f) hereof.
"UCC" shall mean the Uniform Commercial Code in effect from time to time
in the applicable jurisdiction.
(b) Accounting Terms and Determinations. Unless otherwise defined or
specified herein, all accounting terms shall be construed herein, all accounting
determinations hereunder shall be made, all financial statements required to be
delivered hereunder shall be prepared and all financial records shall be
maintained in accordance with generally accepted accounting principles ("GAAP")
applied on a basis consistent with the financial statements referred to in
Sections 9(a)(i) and 9(a)(ii) hereof.
(c) Other Definitional Terms. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement, and article, section, schedule, exhibit and like references are to
this Agreement unless otherwise specified. Any defined term which relates to a
document shall include within its definition any amendments, modifications,
renewals, restatements, extensions, supplements or substitutions which may have
been heretofore or may be hereafter executed in accordance with the terms
hereof.
Section 2. GRANT OF SECURITY INTEREST; DELIVERY OF COLLATERAL; LOANS
DISCRETIONARY
(a) Grant of Security Interest. Borrower hereby grants, pledges,
assigns, transfers and delivers to SBRC with respect to each Loan on the Closing
Date, and grants to SBRC a lien upon and continuing security interest in all of
Borrower's right, title and interest in, to and under all of the following
whether now owned or existing, or at any time hereafter acquired or arising, by
Borrower or in which Borrower now has or at any time in the future may acquire
any right, title or interest (all of which being hereinafter collectively called
the "Collateral"): (i) the Pledged ABS described in the Confirmation Statement
delivered pursuant to Section 4 relating to a Loan, (ii) any Supplemental
Collateral that may be granted to SBRC pursuant to Section 5(c) hereof
(provided, however, that any representations, warranties or covenants contained
herein, and the grant of a lien and security interest with respect to any
Supplemental Collateral, shall be effective as to any Supplemental Collateral
(or any Proceeds, distributions or other amounts realized in respect of such
Supplemental Collateral) only upon the delivery of such Supplemental Collateral
to SBRC pursuant to such Section 5(c) hereof), (iii) all Proceeds, distributions
and other amounts realized in respect of any of the foregoing, as security for
the due and punctual payment by Borrower of the Note and any amounts that may
become payable thereunder or
5
<PAGE> 10
hereunder and (iv) with respect to any Loan, all books and records of Borrower
pertaining to any of the foregoing.
(b) Delivery of Instruments of Transfer. Borrower shall, with respect to
each Loan, deliver to SBRC the Collateral endorsed in the name of SBRC or its
nominee or with properly endorsed instruments of transfer (including, without
limitation, any necessary assignments, corporate resolutions and opinions of
legal counsel) that will enable SBRC to cause such Collateral to be so
registered without further action on the part of the Borrower and such
instruments of transfer to the appropriate transfer agent.
(c) Funding of Loans. (i) SBRC Discretion. SBRC shall not be required to
make any Loans hereunder and any Loan hereunder shall be made by SBRC in its
sole discretion upon written request delivered by Borrower to SBRC not less than
one (1) Business Day prior to the applicable Closing Date.
(i) Loan Advances. If SBRC determines to make any Loan
hereunder, then in accordance with the related Confirmation Statement,
SBRC shall advance such Loan to Borrower at a principal amount,
described in such Confirmation Statement, up to a maximum of 70% of the
Market Value of the Collateral. Each Loan advance hereunder shall be
recorded as such by SBRC and be evidenced by the "Loan Schedule"
attached to the Note, and any repayments of each such Loan shall be
recorded as such by SBRC and be evidenced by such "Loan Schedule";
provided, however, that the failure of such recordation by SBRC shall
not affect the rights of the parties hereunder with respect to such
Loan.
(ii) Interest Rate. Each Loan shall bear interest, as calculated
on a monthly basis from and including the related Closing Date to but
excluding the date such Loan is paid in full, on the unpaid principal
amount thereof from the related Closing Date through maturity at a rate
per annum equal to two hundred and fifty (250) basis points in excess of
the prevailing London Interbank Offered Rate for one-month United States
Dollar deposits as set forth on page 8695 of Telerate as of 8:00 a.m.
New York City time on the last Business Day of the month preceding the
month in which such interest is currently accruing.
(d) SBRC's Duty of Care. Except as herein provided in this Section 2(d),
SBRC's sole duty with respect to the Collateral shall be to use reasonable care
in the safekeeping, custody, use, operation and preservation of the Collateral
in its possession or control. SBRC shall incur no liability to Borrower for any
act of government, act of God, or other destruction in whole or in part or
negligence or wrongful act of custodians or agents selected by and supervised by
SBRC with reasonable care, or SBRC's failure to provide adequate protection or
insurance for the Collateral. SBRC shall have no obligation to take any action
to preserve any rights in any of the Collateral against prior parties, and
Borrower hereby agrees to take such action. Borrower shall defend the Collateral
against all such claims and demands of all persons, at all times, as are adverse
to SBRC. SBRC shall have no obligation to realize upon any Collateral, except
through
6
<PAGE> 11
proper application of any distributions with respect to the Collateral made
directly to SBRC or its agent(s). So long as SBRC shall act in a commercially
reasonable manner, Borrower hereby waives the defense of impairment of the
Collateral.
Section 3. EARNINGS ON COLLATERAL
All payments and distributions, whether in cash or in kind, made on or
with respect to the Collateral shall, so long as an Event of Default as defined
in Section 11 hereof shall not have occurred and be continuing, be paid to the
registered holder thereof directly by the applicable paying agent, and upon
receipt by such holder such payments and distributions shall be released from
the lien and security interest granted to SBRC hereunder. Subject to compliance
with the ABS Issuance Agreements, SBRC may, in its sole discretion after the
occurrence and during the continuation of an Event of Default, cause all such
payments and distributions to be paid, delivered or transferred directly to
SBRC.
Section 4. CONFIRMATION STATEMENT
SBRC shall, with respect to each Loan, deliver a confirmation statement
substantially in the form attached hereto as Exhibit B (in each case, the
"Confirmation Statement") to Borrower confirming the agreement between Borrower
and SBRC as to the specific terms of the Loan. Each such Confirmation Statement
shall constitute a binding agreement between Borrower and SBRC, and this
Agreement is hereby incorporated in each such Confirmation Statement and made a
part thereof as if it were set out in full in each such Confirmation Statement.
Each such Confirmation Statement will be binding upon the parties hereto unless
written notice of objection is given by the objecting party to the other party
within two (2) Business Days after the objecting party's receipt of such
Confirmation Statement.
Section 5. MARGIN DETERMINATIONS
(a) Margin Requirement. A margin requirement (the "Margin Requirement")
expressed as a percentage shall be established by SBRC with respect to each Loan
on the related Closing Date and shall be set forth in the related Confirmation
Statement. The Margin Requirement for any Loan shall be 30%.
(b) Current Margin. SBRC may, in its reasonable discretion, from time to
time calculate the Current Margin with respect to any Loan, which shall equal
the amount by which (i) 100% exceeds (ii) a fraction (expressed as a percentage)
(A) the numerator of which is the then outstanding principal amount of such Loan
together with accrued and unpaid interest thereon to the date of determination
and (B) the denominator of which shall be the then current Market Value of the
related Collateral (including any Supplemental Collateral delivered pursuant to
this Agreement) then held by SBRC.
(c) Supplemental Collateral. If SBRC shall at any time determine with
respect to a Loan that the Current Margin is less than the related Margin
Requirement, SBRC may in its
7
<PAGE> 12
discretion notify Borrower of such fact, and Borrower shall, on the day of such
notice, if such notice is received prior to 10:00 a.m. New York City time, and
on the Business Day next succeeding the day of such notice, if such notice is
received after 10:00 a.m. New York City time, deliver to SBRC cash or
Supplemental Collateral acceptable to SBRC in its sole reasonable judgment as
Collateral hereunder, which cash shall be applied to reduce the principal
balance of the related Loan and which Supplemental Collateral shall, in the
aggregate, equal an amount such that, after giving effect to the application of
such cash and the delivery of such Supplemental Collateral, the Current Margin
for such Loan will be at least equal to the related Margin Requirement. Delivery
of Supplemental Collateral pursuant to this Section 5(c) shall be in such manner
as is acceptable to, and under such additional conditions as may be required by,
SBRC in its sole reasonable judgment.
(d) Release of Supplemental Collateral. If at any time the Current
Margin for a Loan exceeds the Margin Requirement for such Loan and provided that
Borrower shall not have failed to satisfy the requirements of Section 5(c) with
respect to any notice thereunder given by SBRC relating to any Loan, Borrower
may, upon notice to SBRC, demand that SBRC redeliver all or any portion of the
Supplemental Collateral, provided, however, that after giving effect to such
redelivery, the Current Margin would not be less than the Margin Requirement,
and SBRC shall make good delivery of such Supplemental Collateral, in a manner
equivalent to the manner in which such Supplemental Collateral was delivered to
SBRC, no later than the Business Day following receipt by SBRC of such notice.
In such connection, SBRC shall execute such other documents and take such other
actions as the Borrower may reasonably request in order to evidence and give
effect to the release of such Supplemental Collateral from the security interest
granted by this Agreement.
Section 6. RELEASE AND SUBSTITUTION OF COLLATERAL
(a) Borrower may obtain the release from SBRC of the security interest
in and lien on all or any part of the Collateral at any time, and from time to
time, by paying to SBRC as a repayment the amount of the Loan outstanding with
respect to such Collateral to be so released and SBRC shall effect such release
upon such repayment; provided, however, that the date of any such repayment must
be acceptable to SBRC. Any release of the security interest in and lien on all
or any part of the Collateral as a result of a repayment or a substitution
pursuant to this Section shall be evidenced by the execution and delivery by
SBRC of appropriate documentation to evidence such release.
(b) SBRC shall allow Borrower, in Borrower's sole discretion, to provide
collateral acceptable to SBRC, in SBRC's sole reasonable discretion, to be
substituted for existing Collateral of equal or greater market value. All
certificates or instruments representing such substituted collateral shall be
accompanied by duly executed instruments of transfer or assignments in blank,
all in form and substance reasonably satisfactory to SBRC.
8
<PAGE> 13
Section 7. CONDITIONS TO THE LOANS
(a) Conditions to the Effective Date. The obligation of SBRC to enter
into this Agreement is subject to the satisfaction by Borrower of the following
conditions on the Effective Date:
(i) Loan Documents. SBRC shall have received the following
documents each in form and substance satisfactory to SBRC and its
counsel:
a. this Agreement, executed and delivered on behalf of
Borrower by a duly authorized officer of Borrower,
b. the Note, executed and delivered on behalf of Borrower
by a duly authorized officer of Borrower,
c. the related Collateral, if delivery of the Collateral is
required in order to perfect SBRC's security interest in
such Collateral, and
d. a financing statement on form UCC-1 signed by Borrower,
describing the Collateral and naming Borrower as the
debtor and SBRC as the secured party.
(ii) Proceedings of Borrower. SBRC shall have received a copy of
the resolutions in form and substance satisfactory to SBRC and its
counsel, of Borrower authorizing (i) the execution, delivery and
performance of the Loan Documents and the other documents to be executed
and/or delivered by it pursuant hereto or thereto or in connection
herewith or therewith, (ii) the borrowings contemplated hereunder and
(iii) the granting by it of the security interest contemplated hereby,
certified by a duly authorized officer of Borrower as of the Effective
Date, which certificate shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded as of
the date of such certificate.
(iii) Corporate Documents of Borrower. SBRC shall have received
true and complete copies of the Certificate of Incorporation and By-Laws
of Borrower (including any and all amendments, supplements and
modifications thereto) certified to such effect by a duly authorized
officer of Borrower as of the Effective Date.
(iv) Proceedings of Onyx. SBRC shall have received a copy of the
resolutions, in form and substance satisfactory to SBRC and its counsel,
of Onyx authorizing the execution, delivery and performance of the
Guaranty certified by a duly authorized officer of Onyx as of the
Effective Date, which certificate shall state that the resolutions
thereby certified have not been amended, modified, revoked or rescinded
as of the date of such certificate.
9
<PAGE> 14
(v) No Violation. The consummation of the transactions
contemplated hereby and by the other Loan Documents shall not
contravene, violate or conflict with, nor involve SBRC in a violation
of, any requirement of law.
(vi) Permits, Licenses, Approvals, Consent, etc. SBRC shall have
received a certificate of a duly authorized officer of Borrower
certifying that all permits, licenses, approvals and consents required
in connection with the execution, delivery and performance by Borrower
and the validity and enforceability against Borrower of this Agreement
and the other Loan Documents have been obtained and such permits,
licenses, approvals and consents are in full force and effect and have
not been amended, modified, revoked or rescinded.
(vii) Corporate Documents of Onyx. SBRC shall have received true
and complete copies of the Certificate of Incorporation and By-Laws of
Onyx (including any and all amendments, supplements and modifications
thereto) certified to such effect by a duly authorized officer of Onyx
as of the Effective Date.
(viii) Additional Matters. All other documents and legal matters
in connection with the transactions contemplated by this Agreement and
the other Loan Documents shall be reasonably satisfactory in form and
substance to SBRC and its counsel.
(b) Conditions Precedent to all Loans and Substitutions. The making of
any Loan or the permitting of any substitution of Substitute Collateral by SBRC
hereunder is, except as otherwise provided in this Section 7, subject to
compliance by Borrower with the following conditions precedent and the other
terms and conditions hereof and, the giving of any notice by Borrower with
respect to a Loan pursuant to Section 4 and the acceptance of the Proceeds of
any Loan by Borrower and the substitution of any Substitute Collateral shall be
deemed certification by Borrower that the following conditions shall have been
met:
(i) Representations and Warranties. Each of the representations
and warranties made by Borrower herein and in the other Loan Documents
are true and correct on and as of the Closing Date, before and after
giving effect to the Loan (and the application of the Proceeds
therefrom) or the substitution, as though made on and as of such date.
(ii) No Default. Before and after giving effect to such Loan
(and the application of Proceeds therefrom) or such substitution, no
Default or Event of Default shall have occurred and is continuing on and
as of the Closing Date.
(iii) Financing Statements. The separate financing statement,
instrument or other document, if required by SBRC to be recorded and/or
filed with respect to the subject Loan or substitution, shall have been
so recorded and/or filed.
10
<PAGE> 15
(iv) Good Standing Certificates. On or prior to the initial
Closing Date hereunder and from time to time thereafter as SBRC may
reasonably request (but not more frequently than quarterly), SBRC shall
have received original certificates, in form and substance satisfactory
to SBRC and its counsel, from the Secretary of State or other
appropriate authority of such jurisdiction, evidencing the good standing
of Borrower and Onyx in their respective jurisdiction of incorporation
and in each other jurisdiction where the ownership of their respective
property or the conduct of its business requires such qualification.
(v) Legal Opinion of Counsel to Borrower and Onyx. On or prior
to the initial Closing Date hereunder and on each date after the initial
Closing Date that a security interest in Collateral is granted to SBRC
hereunder Borrower shall cause to be delivered to SBRC an opinion of
counsel to Borrower and Onyx (which counsel may be internal counsel for
Onyx and shall be satisfactory to SBRC), in substantially the form
attached hereto as Exhibit C or such other form as SBRC and Borrower may
mutually agree.
(vi) Recordings and Filings. All material instruments and
documents (including, without limitation, financing statements and
continuation statements) required to be filed hereunder in order to
create in favor of SBRC a perfected security interest in the Collateral
hereunder shall have been properly filed in each office in each relevant
jurisdiction and copies of such instruments and documents, stamped to
indicate such filing, shall have been delivered to SBRC.
(vii) Guaranty. On and after the date of delivery of the
Guaranty, the Guaranty shall be in full force and effect.
Section 8. REPRESENTATIONS AND WARRANTIES
In order to induce SBRC to enter into this Agreement and to make the
Loans hereunder, Borrower hereby represents and warrants to SBRC, and shall on
and as of the Closing Date of each Loan and each date on which Substitute
Collateral is substituted, be deemed to represent and warrant to SBRC, that:
(a) Due Incorporation. Borrower has been duly organized and is validly
existing as a corporation in good standing under the laws of the state of its
incorporation and is duly qualified and in good standing in each other
jurisdiction where the conduct of its business or the ownership, lease or
operation of its property requires such qualification.
(b) Authorization. Borrower has full power and authority to execute and
deliver the Loan Documents and to perform its obligations hereunder and
thereunder; the Loan Documents have each been duly authorized by all necessary
action and neither requires any additional approval of any directors or officers
other than that which has already been obtained, each has been duly executed and
delivered by Borrower and constitutes its legal, valid and binding
11
<PAGE> 16
obligation, enforceable against it in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization or similar laws of
general applicability relating to or affecting creditors' rights, to the
assumption that enforcement will be undertaken in a commercially reasonable
manner and to general principles of equity and equitable remedies, regardless of
whether enforcement is considered in a proceeding in equity or at law.
(c) No Conflict. Neither the execution and delivery nor the performance
by Borrower of this Agreement or the Note will conflict with the governing
instruments of Borrower or conflict with, result in a breach of or constitute a
default or require any consent under any instrument or agreement to which
Borrower is a party or by which Borrower may be bound, or any law, order or
regulation applicable to Borrower of any court, governmental agency, authority
or body having jurisdiction over Borrower and do not and will not result in or
require the creation of any lien, security interest or other charge or
encumbrance (other than pursuant hereto) upon or with respect to any of
Borrower's properties.
(d) Approvals, etc. Neither the execution and delivery nor the
performance by Borrower of this Agreement requires any authorization, approval,
consent, license, exemption (other than any self-executing exemption), filing,
registration or the taking of any other action in respect of any federal or
state authority except where the failure to comply with such requirement would
not adversely affect the delivery, execution or performance by Borrower of this
Agreement or cause a Material Adverse Change.
(e) Good Title.
(i) Subject to the ABS Issuance Agreements, Borrower is the
owner of the Collateral and such Collateral is free and clear of all
security interests, liens, charges, encumbrances and rights of others,
except for the lien and security interest created hereby, and on the
related Closing Date, SBRC has a first priority lien on and security
interest in the Collateral (including all Proceeds, distributions and
other amounts realized in respect thereof) in favor of SBRC, subject to
no prior security interest, lien, charge, encumbrance or rights of
others, and, SBRC having taken possession of the Collateral endorsed in
the name of SBRC or its nominee or delivered with such instruments of
transfer as provided in Section 2(b) hereof, no further action,
including any filing or recordation of any document, is currently
required in order to establish and perfect the liens on and security
interests in the Collateral in favor of SBRC against any third parties
in any jurisdiction.
(ii) Borrower's chief executive office and the place where its
books and records concerning the Collateral are kept is set forth on
Exhibit D hereto. Each location of Borrower where any of the Collateral
is located is set forth on Exhibit D.
(f) Tax Liens. There are no delinquent federal, state, city, county or
other taxes relating to Borrower, the Collateral or any arrangement pursuant to
which the Collateral is issued that might, in the reasonable judgment of SBRC,
materially adversely affect any of the Collateral
12
<PAGE> 17
or cause a Material Adverse Change in Borrower, and all such delinquent tax
liabilities have been satisfied except those that are being contested by
Borrower in good faith and with respect to which payment has been stayed by a
court of competent jurisdiction.
(g) Financial Statements. Since the date of the most recent financial
statement delivered by Borrower to SBRC, there has been no Material Adverse
Change. Borrower shall provide SBRC with such financial statements and other
information as is contemplated in Section 9(a) hereof.
(h) No Litigation. There are no actions, suits, investigations, or other
proceedings pending, or, to the best knowledge of Borrower, after due inquiry,
threatened, against or affecting Borrower by or before any court, arbitrator,
Governmental Authority which challenge any of the transactions contemplated
under this Agreement or any other Loan Document or could result in a Material
Adverse Change and there are no preliminary or permanent injunctions or orders
by any court or other Governmental Authority pending affecting this Agreement or
any other Loan Document or any of the transactions contemplated hereby or
thereby.
(i) Disclosure. No certificate, statement, report or other document
furnished and no representation or warranty made or to be furnished or made to
SBRC by or on behalf of Borrower in or in connection with this Agreement or any
transaction contemplated hereby, or in connection with any other Loan Document
or any transaction contemplated thereby, at the time furnished, contains or will
contain any untrue statement of a material fact or omits or will omit to state
any material fact necessary in order to make the statements contained therein
not misleading.
(j) Permits, Licenses, Approvals, Consents, etc. Borrower has obtained
any and all permits, licenses, approvals and consents of any Governmental
Authority or other Person as may be required in connection with the execution,
delivery and performance by and the validity and enforceability against Borrower
of this Agreement and the other Loan Documents and the consummation of the
transactions contemplated hereby or thereby (all such permits, licenses,
approvals and consents, if any, are in full force and effect and have not been
amended, modified, revoked or rescinded).
(k) The Investment Company Act. Borrower is not an "investment company",
or an entity "controlled by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
(l) Ownership of Borrower. Borrower is a direct or indirect wholly-owned
subsidiary of Onyx.
Section 9. AFFIRMATIVE COVENANTS
Until the Obligations are paid and satisfied in full and this Agreement
has been terminated, Borrower covenants and agrees that it will:
13
<PAGE> 18
(a) Financial Statements and Other Information. Furnish to SBRC:
(i) as soon as available and in any event within sixty (60) days
after the close of each of the first three (3) quarters of each fiscal
year of Borrower, the Onyx applicable quarterly Form 10-Q as filed with
the Securities and Exchange Commission, including the consolidating
statements for the Borrower, subject to normal recurring year-end audit
adjustments, and as prepared in accordance with GAAP;
(ii) as soon as available and in any event within one hundred
and twenty (120) days after the close of each fiscal year of Onyx, a
consolidated balance sheet of Onyx, a consolidated statement of income
of Onyx and a consolidated statement of changes in financial position of
Onyx's consolidated financial group as at the end of and for the fiscal
year just closed, setting forth the corresponding figures of the
previous fiscal year, if applicable, in comparative form, all in
reasonable detail and certified (without any qualification or exception
deemed material by SBRC); by independent public accountants selected by
Onyx and reasonably satisfactory to SBRC;
(iii) concurrently with the delivery of the financial statements
required to be furnished by Section 9(a)(ii) hereof, a certificate
signed by the chief executive or financial officer of Borrower, stating
(1) that a review of the activities of Borrower during such quarter or
fiscal year, as the case may be, has been made under his or her
immediate supervision with a view to determining whether Borrower has
observed, performed and fulfilled all of its obligations under this
Agreement and whether Borrower is in compliance with the representations
and warranties in Section 8 hereof and the covenants in Sections 9 and
10 hereof, and (2) that there existed during such quarter or fiscal
year, as the case may be, no Event of Default and no Default or if any
such Event of Default or Default did exist, specifying the nature
thereof, the period of existence thereof and what action Borrower
proposes to take, or has taken, with respect thereto;
(iv) promptly, and in any event no later than five (5) Business
Days, after the commencement thereof, written notice of any material
actions, suits or proceedings (including arbitrations) against Borrower
or Onyx before any court or other Governmental Authority;
(v) immediately upon becoming aware of any development or other
information which is reasonably likely to result in a Material Adverse
Change of Borrower or Onyx, as applicable, written notice specifying the
nature of such development or information, such anticipated effect and
action, if any, Borrower or Onyx proposes to take or has taken with
respect thereto;
(vi) with reasonable promptness, such other information
respecting any matter likely to result in a Material Adverse Change of
Borrower or Onyx, as applicable, as SBRC may reasonably request from
time to time.
14
<PAGE> 19
(b) Existence, Conduct of Business, etc. Continue to engage primarily in
the business of the same general type as now conducted by it and preserve, renew
and maintain in full force and effect its existence and all permits, licenses,
approvals, consents, rights, privileges and franchises necessary or desirable in
the conduct or transaction of its business or the ownership or operation of its
properties or the lease of its properties to which it is a lessee.
(c) Taxes. Borrower will pay and discharge all taxes, levies, liens and
other charges on its assets and on the Collateral that, in each case, in any
manner would create any lien or charge upon the Collateral.
(d) Laws. Borrower will at all times comply in all material respects
with all laws, ordinances, rules and regulations of any federal, state,
municipal or other public authority having jurisdiction over Borrower or any of
its assets.
(e) Name and Locations. Borrower will immediately advise SBRC in writing
of the opening of any new chief executive office or the closing of any such
office and of any change in Borrower's name or the places where the books and
records pertaining to the Collateral are kept.
(f) Records. Borrower will maintain records with respect to the
Collateral and the conduct and operation of its business in conformity with
general industry standards and with no less a degree of prudence than if the
Collateral were held by Borrower for its own account and will furnish SBRC, upon
reasonable request by SBRC or its designated representative, with reasonable
information with respect to the Collateral and the conduct and operation of its
business. Borrower will permit SBRC or its designated representative to inspect
Borrower's records with respect to the Collateral and the conduct and operation
of its business upon reasonable notice from SBRC or its designated
representative, at such reasonable times and with reasonable frequency, and to
make copies or extracts of any and all thereof. SBRC shall act in a commercially
reasonable manner in requesting and conducting any inspection relating to the
conduct and operation of Borrower's business.
(g) Pay Obligations. Pay, discharge or otherwise satisfy at or before
maturity or before they become delinquent, as the case may be, all its material
obligations of whatever nature, except when the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and the
Borrower has established adequate reserves with respect thereto and no Liens
have attached to the Collateral or any portion thereof.
(h) Notices. Promptly, and in any event within one (1) Business Day of
the occurrence thereof, notify SBRC in writing of (i) the occurrence of any
Default or Event of Default hereunder or under any other Loan Document or (ii)
any event of default by any party thereto under any indenture, mortgage, deed of
trust, agreement or other instrument or contractual obligation to which the
Borrower is a party or by which any of its properties may be bound or affected
which could result in a Material Adverse Change, and specifying in each case the
action the Borrower has taken or proposes to take with respect thereto.
15
<PAGE> 20
(i) Covenant Compliance Certificate. Deliver or cause to be delivered a
Covenant Compliance Certificate to SBRC on the first Business Day of each
calendar month.
(j) Monthly Collateral Report. Furnish or cause to be furnished to SBRC,
on the last Business Day of each month, a report for each Pledged ABS
substantially in the form of, and containing the information set forth on,
Exhibit F hereto.
(k) Guaranty. Assignor shall proceed in good faith to cause Onyx to
amend Onyx's existing warehouse agreements so as to enable Onyx to provide to
SBRC a guaranty substantially in the form of the Guaranty, and after such
amendments have been made Assignor shall proceed in good faith to cause Onyx to
provide such guaranty to SBRC.
Section 10. NEGATIVE COVENANTS
Until the Obligations are paid and satisfied in full and this Agreement
has been terminated, the Borrower covenants and agrees that it will not:
(a) Liens. Create, incur, assume or suffer to exist, any Lien on any of
the Collateral whether now owned or hereafter acquired, other than Liens in
favor of SBRC hereunder.
(b) Mergers, Sales, Dissolution, etc. (i) Merge into or consolidate with
any other Person without the prior consent of SBRC, which consent shall not be
unreasonably withheld, or (ii) assign, transfer, sell, lease, or otherwise
dispose of any of the Collateral, or all or substantially all of its other
property or assets to any other Person or (iii) wind up, liquidate or dissolve,
or agree to do any of the foregoing.
(c) Corporate Changes. Change its name, principal place of business, the
location where its books and records are kept with respect to the Collateral or
corporate structure or ownership on less than thirty (30) days prior written
notice to SBRC. SBRC is hereby notified and acknowledges the prospective change
in Borrower's principal place of business as described in Section 9(e) above.
(d) Use of Proceeds. The Proceeds of the Loans made pursuant to this
Agreement will not be used by the Borrower, directly or indirectly, for the
purpose of purchasing or carrying any Margin Stock or for the purpose of
reducing or retiring any debt which was originally incurred to purchase or carry
Margin Stock or for any other purpose which might constitute the Loans under
this Agreement as being "purpose credit" within the meaning of Regulation U or X
of the Board of Governors of the Federal Reserve System.
(e) Further Covenants. Without prior written consent of SBRC, Borrower
will not: (i) assign, sell, transfer, pledge or grant any security interest in
or lien on any of the Collateral to anyone except SBRC, permit any financing
statement (except any financing statements in favor of SBRC) or assignment
(except for any assignments in favor of SBRC) to be on file in any public office
with respect thereto, (ii) permit or suffer to exist any security interest,
lien, charge,
16
<PAGE> 21
encumbrance or right of others to attach to any of the Collateral, except as
contemplated by this Agreement, or (iii) consent to any amendment or supplement
to any ABS Issuance Agreement that is reasonably likely to result in a material
adverse affect on the Market Value of the Pledged ABS, but excluding in any
event any amendment or supplement that effectuates a letter-of-credit and the
limited quarterly substitution into a related reserve fund for the release of
cash as contemplated in such ABS Issuance Agreement.
Section 11. EVENTS OF DEFAULT
Each of the following, so long as it shall not have been remedied, shall
constitute an "Event of Default" hereunder:
(a) Nonperformance. Any failure to pay, whether on the acceleration
thereof or otherwise, any amounts due under the Note or any failure to pay any
amount due under this Agreement or to perform any provision of this Agreement in
accordance herewith, or any material breach of any representation, warranty or
covenant set forth herein or in the Note.
(b) Termination of Interest. The lapse or termination of Borrower's
interest in any of the Collateral.
(c) Act of Insolvency. The filing by Borrower or any affiliate, of a
petition in bankruptcy, the adjudication of Borrower or any affiliate as
insolvent or bankrupt, the petition or application by Borrower or any affiliate
for any receiver or trustee for itself or any substantial part of its property,
the commencement by Borrower or any affiliate of any proceeding relating to it
under any reorganization, arrangement, dissolution or liquidation law, or the
initiation of any such proceeding against Borrower or any affiliate, if Borrower
or such affiliate indicates by any act its consent thereto or if such proceeding
is not dismissed within sixty (60) days.
(d) Material Adverse Change. In the reasonable judgment of SBRC, a
Material Adverse Change with respect to Borrower or Onyx shall have occurred.
(e) Default Under Other Contracts. Borrower shall be in default with
respect to any normal and customary covenants under any contract or agreement to
which it is a party (which covenants include, but are not limited to, an Act of
Insolvency of Borrower or the failure of Borrower to make required payments
under such contract or agreement as they become due) which default permits
acceleration of the obligations of Borrower under such contract or agreement by
any other party thereto and which default, in the reasonable judgment of SBRC,
is likely to result in a Material Adverse Change with respect to Borrower or
Onyx.
(f) Merger or Consolidation. Borrower shall merge or consolidate into
any entity or shall no longer be wholly-owned by Onyx unless SBRC shall have
expressly consented to such merger or consolidation in writing, which consent
shall not be unreasonably withheld.
17
<PAGE> 22
(g) Anticipated Insolvency. SBRC shall reasonably determine that
Borrower is or will be unable to meet its commitments hereunder or, on and after
the delivery of the Guaranty, that Onyx is or will be unable to meet its
commitments under the Guaranty, notifies Borrower of such determination and
Borrower shall not have responded with appropriate information to the contrary
to the satisfaction of SBRC within thirty-six (36) hours.
(h) Final Judgment. A final, non-appealable judgment by any competent
court in the United States for the payment of money in an amount of at least
$100,000 is rendered against Borrower or Onyx, and the same remains undischarged
and unpaid for a period of sixty (60) days during which execution of such
judgment is not effectively stayed.
(i) Breach of Credit Covenants. The occurrence of any of the following:
(1) Onyx shall experience losses or changes in its financial
condition (exclusive of amounts withdrawn for payment of taxes due and
payable by the shareholders of Onyx) that cause its Net Worth for any
two consecutive calendar quarters to be less than or equal to 80% of its
Net Worth as of the commencement of such period.
(2) The ratio of Onyx's total Indebtedness to Onyx's Net Worth
determined as of the end of each calendar quarter shall exceed 8:1.
(3) Onyx's Net Worth shall at any time be less than $35,000,000.
(j) Breach of Representation. Any representation or warranty made by
Borrower herein shall have been incorrect or untrue in any material respect when
made or repeated or when deemed to have been made or repeated and which breach,
in the reasonable judgment of SBRC, is likely to result in a Material Adverse
Change of Borrower or Onyx.
(k) Breach of Covenant. Borrower shall breach in any material respect
any covenant made by it herein and SBRC's interests shall have been materially
adversely affected thereby.
Section 12. REMEDIES
(a) Action Regarding Collateral. If an Event of Default shall occur,
SBRC, without demand of performance or other demand or notice of any kind to
Borrower or any other person, all of which are hereby expressly waived, may
forthwith apply the cash, if any, then held by it as part of the Collateral
relating to any Loan to the payment of any of the Obligations, and, if there
shall be no such cash or the cash so applied shall not be sufficient to pay in
full all such Obligations, may thereafter collect, receive, appropriate, retain
and realize upon the Collateral, or any part thereof, and may forthwith sell,
assign, give an option or options to purchase, contract to sell, or otherwise
dispose of and deliver the Collateral, or any part thereof, in one or more
parcels at such public or private sale or sales, at such place or places, at
such price or prices and upon such other terms and conditions as SBRC may deem
best (provided, however, that SBRC shall act in all respects in a commercially
reasonable manner), for cash or on credit or for future
18
<PAGE> 23
delivery without assumption of any credit risk, with the right of SBRC upon any
such sale or sales to purchase all or any part of the Collateral so sold. Upon
any sale, transfer or other disposition of the Collateral pursuant hereto SBRC
shall have the right to deliver, assign and transfer to the transferee thereof
the Collateral so sold. Each transferee upon any such transfer or other
disposition shall hold the property thereby acquired by it absolutely free from
any claim or right of any kind, including any equity or rights of redemption, of
Borrower, who hereby specifically waives all rights of redemption, stay or
appraisal which it has or may have under any rule of law or statute whether now
existing or hereafter adopted (in the latter case, to the extent permitted
thereby). Borrower agrees that SBRC need give only such notice of the time and
place of any public or private sale (including any adjourned private sale) or
other intended disposition as may be required by market conditions and standards
of commercial reasonableness and that SBRC need not in any event give more than
five (5) Business Days' notice that such sale or disposition is to take place.
Borrower agrees that the notice provided for in the preceding sentence is
reasonable notification of such matters.
SBRC shall not be obligated to make any sale pursuant to any such
notice. SBRC may, without notice or publication, adjourn any public or private
sale or cause the same to be adjourned from time to time by announcement at the
time and place fixed for the sale, and such sale may be made at any time or
place to which the same may be so adjourned. In case of any sale of all or any
part of the Collateral on credit or for future delivery, the Collateral so sold
may be retained by SBRC until the selling price is paid by the purchaser
thereof, but SBRC shall not incur any liability in case of the failure of such
purchaser to take up and pay for the Collateral so sold and, in case of any such
failure, such Collateral may again be sold upon like notice. SBRC, however,
instead of exercising the power of sale herein conferred upon it, may proceed by
a suit or suits at law or in equity to foreclose the lien and security interest
created hereby and sell the Collateral, or any portion thereof, under a judgment
or decree of a court or courts of competent jurisdiction.
(b) Deficiency. If the Proceeds of sale, collection, foreclosure or
other realization of or upon the Collateral are insufficient to cover the costs
and expenses of such realization and the payment in full of the Obligations,
Borrower shall remain liable for any deficiency.
(c) Private Sale. SBRC shall incur no liability as a result of the sale
of the Collateral (provided, however, that SBRC shall act in a commercially
reasonable manner) or any part thereof, at any private sale. Borrower hereby
waives any claims against SBRC or any holder or holders of the Note arising by
reason of the fact that the price at which the Collateral may have been sold at
such a private sale was less than the price which might have been obtained at a
public sale or was less than the aggregate amount of the Obligations, even if
SBRC accepts the first offer received and does not offer the Collateral to more
than one offeree (provided, however, that SBRC shall act in a commercially
reasonable manner).
19
<PAGE> 24
(d) Application of Proceeds. The Proceeds of any sale or other
realization of all or any part of the Collateral, and any other cash at the time
held by SBRC under this Agreement, shall be applied by SBRC in the following
order of priority:
First, to the payment of the costs and expenses of such sale and
all expenses (including the reasonable fees and expenses of
counsel), liabilities and advances made or incurred by SBRC in
connection therewith.
Second, to the payment of all accrued interest under the Note
due or past due.
Third, to the payment of principal upon the Note due or past
due.
Fourth, to the payment of all other amounts owing under this
Agreement.
Fifth, to the payment to Borrower, or to such other person as a
court of competent jurisdiction may direct, of any surplus then
remaining from such Proceeds and other cash.
(e) Default Rate of Interest. After demand is made with respect to the
Note or upon acceleration thereof, until the balance thereof shall be paid, the
Loan amounts due thereunder, shall bear interest at a per annum rate (based on a
year of 360 days and actual days elapsed) equal to two hundred (200) basis
points in excess of the interest rate for such Loan, but in no event higher than
the maximum rate permitted by law.
(f) Attorney-in-Fact. Effective upon the occurrence of an Event of
Default hereunder, SBRC is hereby appointed the attorney-in-fact of Borrower for
the purpose of carrying out the provisions of this Agreement and taking any
action and executing any instruments which SBRC may deem necessary or advisable
to accomplish the purposes hereof, which appointment as attorney-in-fact is
irrevocable and coupled with an interest. Without limiting the generality of the
foregoing, after an Event of Default has occurred, SBRC shall have the right and
power to receive, endorse and collect all checks made payable to the order of
Borrower representing any distribution in respect of the Collateral or any part
thereof and to give full discharge for the same.
(g) Payments on Collateral to Borrower.
(i) All rights of Borrower to receive any payments from the
related Collateral which it would otherwise be authorized to receive
shall cease, and all such rights shall thereupon become vested in SBRC,
which shall thereupon have the sole right to receive and hold as
Collateral such payments.
(ii) All payments which are received by Borrower contrary to the
provisions of the preceding subsection (i) shall be received in trust
for the benefit of SBRC, shall be segregated from other funds of
Borrower and shall be promptly paid to SBRC.
20
<PAGE> 25
(h) Cross-Collateralization; Right of Set-Off. SBRC may, in its sole
discretion upon the occurrence and during the continuation of an Event of
Default hereunder, proceed against any assets held by it under any agreement
with Borrower or Onyx and shall have a right of set-off against any amounts owed
by SBRC to Borrower or Onyx under any such agreement. In addition, the parties
agree that SBRC may, in its sole discretion upon the occurrence and during the
continuation of an event of default under any such agreement, proceed against
any assets held by it hereunder and shall have a right of set-off against any
amounts owed by SBRC to Borrower hereunder.
Section 13. MATURITY DATE; INTEREST PAYMENT DATES; REPAYMENT OF
PRINCIPAL
(a) Payment on Maturity Date. Borrower and SBRC hereby agree that the
Obligations of Borrower hereunder and under the Note are payable on the Maturity
Date unless earlier payment thereof is required pursuant to the terms of this
Agreement.
(b) Interest Payment. Interest on each Loan shall be payable on the
dates described in the related Confirmation Statement.
(c) Payment of Principal. The principal portion of each Loan may be
repaid in whole or in part at the discretion of Borrower on any date on which a
payment of interest is to be made thereon by Borrower pursuant to the terms of
this Agreement and the related Confirmation Statement provided that (i) Borrower
shall have provided SBRC with not less than two (2) Business Days' written
notice of Borrower's intention to effect such repayment and the amount thereof,
(ii) all payments of interest then due and owing on the Loan are paid in full
and (iii) no Event of Default has occurred and is continuing with respect to any
of Borrower's Obligations hereunder or under the Note.
(d) Event of Default. Nothing in this Section 13 shall be deemed to
limit the right of SBRC to require, so long as an Event of Default shall have
occurred and is continuing, the payment by Borrower of all Obligations arising
hereunder and under the Note.
Section 14. PAYMENT OF LIABILITIES
The Borrower and SBRC agree that any tax or other liability (excluding
any tax liability arising from the receipt by SBRC of interest income on any
Loan under this Agreement) incurred by the beneficial owner or the registered
holder of any Collateral pledged under the this Agreement shall be borne by
Borrower. So long as any Obligations are outstanding hereunder, Borrower agrees
to indemnify SBRC for, and to hold SBRC harmless against, any liability inuring
to SBRC as a result of the endorsement of the Collateral in SBRC's name, or
SBRC's status as the lender hereunder or beneficial holder of such Collateral,
including, without limitation, any tax liability (excluding any tax liability
arising from the receipt by SBRC of interest income on any Loan under this
Agreement) or liability for the payment of expenses of the trust funds
established under the applicable ABS Issuance Agreements.
21
<PAGE> 26
Section 15. GENERAL PROVISIONS
(a) No Waiver. No waiver or amendment of or forbearance in enforcing any
provision of this Agreement nor consent to any departure by either party
herefrom shall be effective unless expressly granted in writing and shall be
limited to the extent expressed therein.
(b) Governing Law; Severability. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and entirely performed therein. Unless otherwise defined herein,
terms defined in the UCC are used herein as defined therein. Each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by or be invalid under such law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
(c) Construction. The captions in this Agreement are for convenience of
reference only and shall not affect the construction or interpretation of any of
the provisions hereof.
(d) Assignment. This Agreement shall be binding upon and shall inure to
the benefit of each of the parties hereto and their respective successors and
assigns; provided, however, that neither this Agreement nor any rights or other
obligations hereunder may be assigned by Borrower without prior written consent
of SBRC and any attempted or purported assignment hereof or thereof shall be
void. SBRC may assign any or all of its rights hereunder without consent.
(e) Notices, Payments, Deliveries. Unless otherwise provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telegraphic, facsimile or telex communication), and such notices and
other communications shall, when mailed, telegraphed, communicated by facsimile
transmission or telexed, be effective when received at the address for notices
for the party to whom such notice or communications is to be given as follows:
If to SBRC:
Salomon Brothers Realty Corp.
7 World Trade Center
New York, New York 10048
Attention: John L. McWilliams
33rd Floor
Telephone: (212) 783-5478
Telecopy: (212) 783-3848
22
<PAGE> 27
With a copy to:
Attention: Martha Bailey, Esq.
39th Floor
Telephone: (212) 783-5897
Telecopy: (212) 783-3848
If to Borrower:
Onyx Acceptance Funding Corporation
8001 Irvine Center Drive
Suite 500
Irvine, California 92718
Attention: Don P. Duffy
Telephone: (714) 450-5505
Telecopy: (714) 450-5530
provided, however, that a facsimile or other form of electronic transmission
shall be deemed to be received by the parties hereto when transmitted so long as
the transmitting machine has provided an electronic confirmation of such
transmission and such facsimile or other form of electronic transmission is
confirmed with a printed paper copy thereof by mail or overnight courier
service. All payments on and deliveries of Collateral hereunder shall be made to
the address or account for payments and deliveries of such Collateral for the
party to whom such payment or delivery is to be made as set forth above. Either
party may revise any information relating to it by notice in writing to the
other party, which notice shall be effective on the third Business Day following
receipt thereof.
(f) Termination. When all Obligations shall have been paid in full and
upon the written request of Borrower, this Agreement shall terminate (the date
of such termination, the "Termination Date") and SBRC shall release its lien and
security interest hereunder and assign, transfer and deliver, against receipt,
any remaining Collateral and money received in respect thereof to or on the
order of Borrower. Upon the request of Borrower, SBRC will then execute
termination statements and such other documents as Borrower may reasonably
request as are necessary to make clear upon the public record the termination of
the lien and security interests created hereby with respect to such assignment.
The obligations of Borrower under Section 15(h) below shall, with respect to
each transaction entered into hereunder, survive any termination hereof.
(g) Aggregate Amount of Loans; Disbursement of Funds.
(i) The aggregate outstanding principal amount of the Loans made
by SBRC hereunder shall be limited to the Maximum Advance Amount.
23
<PAGE> 28
(ii) Borrower may request disbursement of amounts borrowed
hereunder upon not less than two (2) Business Days' written notice to
SBRC.
(iii) SBRC is not obligated to make any Loan or advance under
this Agreement or pursuant to the Note; provided that SBRC agrees in
good faith to give reasonable notice to Borrower of its intention not to
make any further Loans or advances hereunder.
(h) Expenses.
(i) Borrower shall pay its own costs and expenses and all
reasonable costs and expenses of SBRC (including reasonable expenses for
legal services) incident to the preparation and negotiation of this
Agreement and any documents relating hereto, provided that Borrower's
liability for such costs and expenses of SBRC shall not exceed a total
of $40,000.00.
(ii) Borrower agrees to pay to SBRC on demand all reasonable
costs and expenses (including reasonable expenses for legal services) of
any subsequent enforcement of any of the provisions hereof, or of the
performance by SBRC of any Obligations of Borrower in respect of the
Collateral which Borrower has failed or refused to perform, or any
actual or attempted sale, or any exchange, enforcement, collection,
compromise or settlement in respect of any of the Collateral and for the
custody, care or preservation of the Collateral (including insurance
costs) and defending or asserting rights and claims of SBRC in respect
thereof, by litigation or otherwise, including expenses of insurance. In
addition, Borrower agrees to pay to SBRC on demand all costs and
expenses (including reasonable expenses for legal services) of the
registration of the Collateral in the name of SBRC or its nominee. All
such expenses shall be Obligations to SBRC secured under this Agreement.
(i) SBRC's Right to Pledge. Nothing in this Agreement shall preclude
SBRC from engaging in transactions with third parties involving the selling
pursuant to a repurchase arrangement, pledging or hypothecating of the
Collateral, but no such transaction shall relieve SBRC of its obligations
hereunder. SBRC hereby grants to Borrower the right to perform in SBRC's stead
under any repurchase, reverse repurchase, loan or similar transaction in which
SBRC has sold, pledged or otherwise transferred any Pledged ABS in the event
that SBRC has defaulted on its obligations to repurchase or accept redelivery of
such Pledged ABS in conformity with the terms of any such transaction and so
long as an Event of Default hereunder by Borrower shall not have occurred and be
continuing. SBRC further acknowledges that each Pledged ABS identified in a
Confirmation Statement and included as Collateral for a Loan hereunder is unique
and identifiable on the date of such Loan and that an award of money damages
would be insufficient to compensate Borrower for the losses and damages incurred
by Borrower in the event of SBRC's failure to release and redeliver any Pledged
ABS upon the repayment of the related Loan by Borrower as provided hereunder.
24
<PAGE> 29
(j) Indemnification. Borrower agrees to indemnify and hold harmless SBRC
against all liabilities and expenses to which SBRC may become subject relating
to any fees, taxes or liability to any third party resulting from any action
taken or omitted by or upon instructions of Borrower with respect to the
Collateral.
(k) Further Assurances. Borrower agrees that, from time to time upon the
prior written request of SBRC, it will (i) execute and deliver such further
documents and do such other acts and things as SBRC may reasonably request in
order to fully effectuate the purposes of this Agreement and (ii) provide such
opinions of counsel concerning matters relating to this Agreement as SBRC may
reasonably request.
(l) Remedies Cumulative. All rights, remedies and powers of SBRC
hereunder and in connection herewith are irrevocable and cumulative, and not
alternative or exclusive, and shall be in addition to all other rights, remedies
and powers of SBRC whether under law, equity or agreement. In addition to the
rights and remedies granted to it in this Agreement or under the Note, SBRC
shall have all the rights and remedies of a secured party under the UCC.
(m) Litigation. Notwithstanding any termination hereof, Borrower hereby
agrees that any legal action or proceeding against it in connection herewith may
be brought in the courts of the State of New York or of the United States of
America located in the City and State of New York, Borough of Manhattan, as SBRC
may elect, and Borrower hereby irrevocably submits to the jurisdiction of each
of said courts, and waives any objection on the grounds of venue, forum non
conveniens or similar grounds.
25
<PAGE> 30
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
ONYX ACCEPTANCE FUNDING CORPORATION
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
SALOMON BROTHERS REALTY CORP.
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
26
<PAGE> 31
EXHIBIT A
THIS NOTE IS NOT A
NEGOTIABLE INSTRUMENT.
NO TRANSFER OR SALE OF THIS NOTE SHALL BE MADE UNLESS SUCH TRANSFER IS EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
AND ANY APPLICABLE STATE SECURITIES LAWS OR IS MADE IN ACCORDANCE WITH SAID ACT
AND LAWS.
NOTE
$50,000,000 New York, New York September 3, 1998
(subject to the Maximum Advance Amount)
FOR VALUE RECEIVED, ONYX ACCEPTANCE FUNDING CORPORATION (the "Borrower")
promises to pay to SALOMON BROTHERS REALTY CORP. (the "Payee") the principal sum
of Fifty Million Dollars ($50,000,000) (or so much thereof as shall have been
advanced here against pursuant to the Master Loan Agreement and shall be
outstanding), in lawful money of the United States of America, in immediately
available funds, with interest on each principal sum advanced here against or
the unpaid balance thereof with such frequency and to such location as is
specified in the related confirmation statement (in each case, the "Confirmation
Statement") for such advance (or on such other day and with such other frequency
and to such other location as may be mutually agreed upon by the Borrower and
the Payee) at said office and in said money and funds from (and including) the
date of the related Loan advance to (but excluding) the related Maturity Date
for such Loan at the rate per annum (based on a year of 360 days and actual days
elapsed) indicated on the related Confirmation Statement attached hereto, but in
no event higher than the maximum rate permitted by law, and after such Maturity
Date, or upon acceleration as hereinafter provided, until said balances shall be
paid, at the rate per annum (based on a year of 360 days and actual days
elapsed) equal to two hundred (200) basis points in excess of the interest rate
for such advance, but in no event higher than the maximum rate permitted by law.
Loans here against shall be in minimum amounts of $1,000,000. The
Borrower may request disbursement of amounts borrowed hereunder upon not less
than two (2) Business Days' written notice to the Payee. The Payee is not
obligated to make any advances hereunder. The Payee is hereby authorized by the
Borrower to endorse on the Loan Schedule amounts advanced here against, the rate
of interest relating thereto and any principal prepayments hereunder (as
permitted by the Assignment defined below), it being understood, however, that
failure to make
A-1
<PAGE> 32
any such endorsement shall not affect the obligations of the Borrower hereunder
in respect of the amounts advanced here against.
This Note is the Note referred to in the Master Loan Agreement (the
"Master Loan Agreement"), dated as of September 3, 1998, between Borrower and
the Payee, granting to the Payee a first priority perfected security interest in
the Collateral, as described therein. The holder is entitled to the benefits of
the Master Loan Agreement and may enforce the agreements of the Borrower
contained therein and exercise the remedies provided for thereby or otherwise
available in respect thereof. All capitalized terms used in this Note and not
otherwise defined shall have the respective meanings set forth in the Master
Loan Agreement except where the context clearly indicates otherwise.
This Note and all other present and future obligations of any and all
kinds of the Borrower in favor of the holder hereof, whether created directly or
acquired by assignment, whether absolute or contingent, shall, unless the holder
shall otherwise elect, forthwith be due and payable without notice or demand of
any kind (except as expressly provided in the Master Loan Agreement), all of
which are expressly waived upon the occurrence of an Event of Default.
The Borrower hereby agrees that any legal action or proceeding against
it for enforcement of this Note or of any judgment with respect to this Note may
be brought in the courts of the State of New York or of the United States of
America located in the City and State of New York, Borough of Manhattan, as the
holder may elect, and the Borrower hereby irrevocably submits to the
jurisdiction of each of said courts, and waives any objection on the grounds of
venue, forum non conveniens or similar ground. The Borrower irrevocably consents
that service of process in any such action or proceeding may be made upon the
Borrower by the mailing thereof by the holder by United States registered or
certified mail, postage prepaid, to the Borrower at the address set forth herein
below the signature of the Borrower, and the Borrower hereby further agrees that
service of process in such manner shall be full and sufficient notice of any
such action or proceeding.
The Borrower waives diligence, presentment of any instrument, protest
and notice of non-payment or protest and any and all other notices and demands
whatsoever in connection with the delivery, acceptance, performance, default or
enforcement of this Note. The Borrower will pay on demand all costs of
collection (including reasonable attorneys' fees) paid or incurred by the holder
in enforcing this Note on default. As used herein, the world "holder" shall mean
the Payee or any endorsee of this Note who is in possession hereof, if this Note
is at the time payable to the bearer.
A-2
<PAGE> 33
This Note shall be governed by and construed in accordance with the laws
of the State of New York applicable to agreements made and entirely performed
therein.
ONYX ACCEPTANCE FUNDING CORPORATION
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
A-3
<PAGE> 34
LOAN SCHEDULE
This Note evidences Loans made by the Payee to the Borrower and the repayment of
principal by the Borrower to the Payee, in the principal amounts and on the
dates and with the related interest rates set forth below as well as the total
amount advanced here against as of each such date:
<TABLE>
<CAPTION>
PRINCIPAL INTEREST PRINCIPAL TOTAL
DATE AMOUNT LOANED RATE AMOUNT REPAID OUTSTANDING
- ------------ --------------------- ----------- ---------------------- -------------------
<S> <C> <C> <C> <C>
- ------------ --------------------- ----------- ---------------------- -------------------
- ------------ --------------------- ----------- ---------------------- -------------------
- ------------ --------------------- ----------- ---------------------- -------------------
- ------------ --------------------- ----------- ---------------------- -------------------
- ------------ --------------------- ----------- ---------------------- -------------------
</TABLE>
A-4
<PAGE> 35
EXHIBIT B
CONFIRMATION STATEMENT
SALOMON BROTHERS REALTY CORP.
Date:
-----------------------------------
Borrower: Onyx Acceptance Funding Corporation
Address:
Attention:
Telephone:
Fax Number:
Re: LOAN PURSUANT TO MASTER LOAN AGREEMENT
Gentlemen:
Salomon Brothers Realty Corp. ("SBRC") is pleased to confirm our Loan to you
(the "Borrower") pursuant to the Master Loan Agreement (the "Master Loan
Agreement"), dated as of September 3, 1998, between you and SBRC under the
following terms and conditions:
1. Collateral Description:
-----------------------
A. Security Issue Date:
-----------------------
B. Percentage Ownership: %
-----------------------
C. Face Amount: $
-----------------------
D. Current Market Value: $
-----------------------
E. Margin Requirement: %
-----------------------
2. Loan: New Funds Roll
------ -----
A. Amount: $
-----------------------
B. Closing Date:
-----------------------
C. Interest Payment Date: The last Business Day of each month.
B-1
<PAGE> 36
SBRC's Wiring Instructions Borrower's Wiring Instructions
The Note, dated September __, 1998, which evidences advances under the
Master Loan Agreement will be annotated on the schedule attached thereto to
reflect the date, amount and interest rate relating to this advance.
The Master Loan Agreement is incorporated by reference into this
Confirmation Statement and made a part hereof as if it were fully set forth
herein. All capitalized terms used herein but not otherwise defined shall have
the meanings specified in the Master Loan Agreement.
Very truly yours,
SALOMON BROTHERS REALTY CORP.
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
AGREED AND ACKNOWLEDGED:
ONYX ACCEPTANCE FUNDING CORPORATION
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
B-2
<PAGE> 37
EXHIBIT C
[FORM OF OPINION OF COUNSEL TO THE BORROWER]
[OPINIONS RELATING TO THE GUARANTY SHALL BE
DELIVERED WHEN THE GUARANTY IS DELIVERED]
Gentlemen:
We have acted as counsel to Onyx Acceptance Funding Corporation, a
Delaware corporation (the "Borrower"), in connection with (i) the execution and
delivery of the Master Loan Agreement, dated as of September 3, 1998 (the
"Agreement"), between the Borrower and Salomon Brothers Realty Corp., a Delaware
corporation ("SBRC") and (ii) the execution and delivery of the Note, dated
September 3, 1998 in the principal amount of $50,000,000 ("Note") made by the
Borrower to the order of SBRC. In addition, we have acted as counsel to Onyx
Acceptance Corporation, a Delaware corporation ("Onyx"), in connection with its
partial guaranty, dated September 3, 1998 (the "Guaranty"), of the obligations
of Borrower under the Agreement. Unless otherwise defined herein, all defined
terms used herein shall have the meanings assigned thereto in the Agreement.
As counsel to the Borrower and Onyx, we have participated in the
preparation and negotiation of the Agreement, the Note, the Guaranty and the
other documents and instruments executed and delivered pursuant thereto and in
connection therewith by the Borrower.
In this connection, we have examined, among other documents, the
Certificate of Incorporation and By-Laws of the Borrower and Onyx, the minutes
of meetings of the Borrower, and such other documents and records of the
Borrower and Onyx as we have deemed relevant and necessary as a basis for the
conclusions contained in the opinions hereafter set forth. As to factual
matters, we have relied, among other things, without independent investigation,
on the factual representations of each of the Borrower and Onyx in officer's
certificates and such factual representations of each of the Borrower and Onyx
as appear in the Agreement, the Note, the Guaranty and the officer's
certificates. In addition, we have obtained and relied upon such other documents
and certificates as we have deemed necessary or appropriate as a basis for the
opinions hereinafter expressed. In our examination, we have assumed the
genuineness of all signatures and the authenticity of all documents submitted to
us as originals and the conformity to originals of all documents submitted to us
photostatic copies.
Based upon the foregoing, we are of opinion that:
1. The Borrower is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware and has the corporate
power and authority to
C-1
<PAGE> 38
execute, deliver and perform its obligations under the Agreement and the Note.
Borrower is duly qualified to do business and is in good standing in each
jurisdiction in which the character of the business transacted by it requires
such qualification and in which the failure so to qualify would have a material
adverse effect on the business, properties, assets or condition (financial or
other) of Borrower and its subsidiaries, considered as a whole.
2. Each of the Agreement and the Note has been duly executed and
delivered by Borrower and constitutes the legal, valid and binding obligation of
Borrower enforceable against Borrower in accordance with its terms.
3. No authorization, consent approval, license, filing or registration
with any governmental or regulatory authority or agency is required under
California, New York or federal law for the validity of the execution and
delivery of, or performance by Borrower of its obligations under the Agreement
and the Note (except (a) such as have been received or made, (b) such as may be
required under California, New York or federal securities laws, as to which no
opinion is expressed, and (c) such filings of financing or continuation
statements as may be required to be made under the Uniform Commercial Code in
any jurisdiction).
4. The execution, delivery and performance by Borrower of the Agreement
and the Note (a) has been duly authorized by all necessary corporate action on
the part of Borrower, (b) does not and will not violate, or result in a breach
of (1) the Certificate of Incorporation or Bylaws of Borrower, (2) the
provisions of the Delaware General Corporate Law or any California, New York or
federal law, rule or regulation applicable to Borrower (other than California,
New York and federal securities laws, as to which no opinion is expressed) or
(3) to the best of counsel's knowledge, any order of any court or other
governmental authority to which Borrower is a party or by which Borrower or any
of its properties are bound or subject, where, in the case of items (2) and (3),
such violation or breach could have a material and adverse effect on the ability
of Borrower to perform its obligations under the Agreement or the Note and (c)
will not conflict with, or result in a breach, violation or acceleration of, or
constitute a default under any material agreement to which Borrower is a party
or by which Borrower is bound.
5. To the best of counsel's knowledge, there is no action, suit,
proceeding or investigation before or by any court or governmental agency or
body, domestic or foreign, now pending or threatened against Borrower which
could reasonably be expected to interfere with or materially and adversely
affect the consummation of the transactions contemplated in this Agreement or
the Note.
6. Onyx is a corporation duly incorporated and validly existing and in
good standing under the laws of the State of Delaware and has the corporate
power and authority to execute, deliver and perform its obligations under the
Guarantee. Onyx is duly qualified to do business and is in good standing in each
jurisdiction in which the character of the business transacted by it requires
such qualification and in which the failure so to qualify would have a material
adverse effect on the business, properties, assets or condition (financial or
other) of Onyx and its subsidiaries, considered as a whole.
C-2
<PAGE> 39
7. The Guaranty has each been duly authorized, executed and delivered by
Onyx, and constitutes a valid and legally binding obligation of Onyx enforceable
against Onyx in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights generally and to general equity
principles.
8. The execution, delivery and performance by Onyx of the Guaranty (a)
has been duly authorized by all necessary corporate action on the part of Onyx,
(b) does not and will not violate, or result in a breach of (1) the Certificate
of Incorporation or Bylaws of Onyx, (2) the provisions of the Delaware General
Corporation Law, or any California, New York or federal law, rule or regulation
applicable to Onyx (other than California, New York and federal securities laws,
as to which counsel expresses no opinion) or (3) to the best of counsel's
knowledge, any order of any court or other governmental authority to which Onyx
is a party or by which Onyx or any of its properties are bound or subject, where
in the case of items (2) and (3) above, such violation or breach could have a
material and adverse effect on the ability of Onyx to perform its obligations
under the Guaranty and (d) will not conflict with, or result in a breach,
violation or acceleration of, or constitute a default under any of the material
agreements to which Onyx is a party or by which it is bound.
9. To the best of counsel's knowledge, there is no action, suit,
proceeding or investigation before or by any court or governmental agency or
body, domestic or foreign, now pending or threatened against Onyx which could
reasonably be expected to interfere with or materially and adversely affect the
consummation of the transactions contemplated in the Guaranty.
10. Each Pledged ABS will have been endorsed in a manner which satisfies
any requirement of endorsement in order to transfer all right, title and
interest in and to that Pledged ABS from Borrower to SBRC. This Agreement
together with (a) the delivery of such related Pledged ABS to SBRC and (b) the
endorsement of such Pledged ABS to SBRC, creates a valid, perfected security
interest in such Pledged ABS in favor of SBRC. Such security interest will have
the same priority and will be subject to the same security interests and liens
as apply to such Pledged ABS in the hands of Borrower.
11. Borrower acquired each Pledged ABS in a true sale from Onyx.
12. In the event of an insolvency proceeding against Onyx, the assets of
Borrower would not be consolidated with those of Onyx.
Very truly yours,
C-3
<PAGE> 40
EXHIBIT D
LOCATION OF CHIEF EXECUTIVE OFFICES AND COLLATERAL
Chief Executive Office
Onyx Acceptance Funding Corporation
8001 Irvine Center Drive
Suite 500
Irvine, California 92718
Collateral
With respect to any Loan, the Pledged ABS to be delivered to, and held
by, SBRC or its bailee.
D-1
<PAGE> 41
EXHIBIT E
ONYX ACCEPTANCE CORPORATION
8001 IRVINE CENTER DRIVE
FIFTH FLOOR
IRVINE, CALIFORNIA 92618
September 3, 1998
Salomon Brothers Realty Corp.
7 World Trade Center
New York, New York 10048
Gentlemen:
This letter will confirm that Onyx Acceptance Corporation, a Delaware
corporation ("Guarantor"), agrees to absolutely and unconditionally guaranty to
Salomon Brothers Realty Corp. and any of its affiliates (collectively, the
"Beneficiary"), the full and prompt payment and performance of the obligations,
undertakings and liabilities of Onyx Acceptance Funding Corporation, a Delaware
corporation ("Borrower"), arising under the terms and provisions of a Master
Loan Agreement (the "Agreement"), dated as of September 3, 1998 by and between
Borrower and Salomon Brothers Realty Corp. ("SBRC"), in an amount not to exceed
10% of the aggregate outstanding amount owed by Borrower to SBRC under the
Agreement (such obligations, undertakings and liabilities are herein referred to
as the "Guarantied Obligations"). Guarantor hereby expressly consents to any
amendment to the Agreement as may be agreed upon by Borrower and SBRC and waives
notice of any such amendment. A copy of the Agreement is attached hereto as
Exhibit A. Capitalized terms used and not otherwise defined herein shall have
the meanings assigned in the Agreement.
Guarantor hereby represents and warrants to you that Borrower is a
direct or an indirect wholly-owned subsidiary of Guarantor.
Guarantor hereby agrees that if Borrower shall fail at any time to make
due and punctual payment to the Beneficiary of any Guarantied Obligation or if
Borrower shall fail at any time to perform any other Guarantied Obligation to
the Beneficiary, Guarantor will forthwith pay such amount and perform such
obligation without demand therefor.
Guarantor covenants and agrees to immediately notify SBRC if a
representation, warranty or covenant of Borrower under Agreement has been
breached or if an Event of Default shall have occurred.
E-1
<PAGE> 42
Guarantor, to the extent consistent with applicable law, hereby waives
any requirement that the Beneficiary take legal action against Borrower before
enforcing this guaranty; agrees that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Guarantied Obligations or the dissolution, liquidation, reorganization or other
change regarding the Borrower or the Borrower seeking protection, or having a
case or proceeding commenced against it, under any law for the protection of
debtors or creditors; waives diligence, presentment, demand for payment or
performance, protest or notice or other formality of any kind whatsoever; waives
filing of claims with any court in case of the insolvency, reorganization or
bankruptcy of the Borrower; waives any fact, event or circumstance that might
otherwise constitute a legal or equitable defense to or discharge of Guarantor,
including (but without typifying or limiting this waiver) failure by the
Beneficiary to perfect a security interest in any collateral securing
performance of any Guarantied Obligation and any delay by the Beneficiary in
exercising any of its rights hereunder, Guarantor covenants that this guaranty
will not be discharged except by full and final payment and performance to the
Beneficiary of all Guarantied Obligations incurred while it is effective, and
agrees that this guaranty shall continue to be effective or be reinstated (as
the case may be) if at any time all or any part of any payment or interest
thereon or other performance by Borrower is avoided or must otherwise be
restored by the Beneficiary. Guarantor hereby further consents to any renewal or
modification of any Guarantied Obligation or any extension of the time within
which such is to be performed and to any other indulgences, whether before or
after the date of this guaranty.
Guarantor agrees to pay on demand all out-of-pocket expenses (including
legal fees and disbursements) incurred by the Beneficiary in connection with the
enforcement and protection of its rights hereunder.
This is a continuing guaranty and will remain in effect until thirty (30) days
after written notice of termination is received by Salomon Brothers Realty
Corp., 7 World Trade Center, 33rd Floor, New York, New York 10048, Attention:
John L. McWilliams. Any such termination shall not affect or reduce Guarantor's
obligations hereunder for any liability of Borrower that arose prior to the
expiration of said thirty-day period. This guaranty shall terminate and shall be
of no further force or effect upon full payment of all amounts due to SBRC under
the Agreement. This guaranty shall inure to the benefit of any successor of the
Beneficiary and be binding on any successor or assignee of Guarantor.
This guaranty shall be governed by and construed in accordance with the
laws of the State of New York. Guarantor hereby agrees that (i) any dispute or
controversy arising out of or relating to this guaranty, the Agreement or the
Note shall be submitted to arbitration before the American Arbitration
Association, (ii) the arbitration proceedings shall be conducted in New York,
New York and (iii) the decision of the arbitrators shall be final and judgment
may be entered on the award. In the event that such arbitration is unavailable,
Guarantor hereby submits to the jurisdiction of the United States Federal and
New York State courts situated in the City, County, and State of New York and
hereby agrees that any litigation arising out of or relating to this guaranty,
the Agreement or the Note shall be brought in such courts. Each provision and
agreement herein shall be treated as separate and independent from any other
provision or
E-2
<PAGE> 43
agreement herein and shall be enforceable notwithstanding the non-enforceability
of any such other provision or agreement.
Any demand by SBRC for payment or performance by Guarantor shall be by a
written demand to Guarantor, which shall be deemed to have been duly given if
made by facsimile transmission to Onyx Acceptance Corporation, 8001 Irvine
Center Drive, Fifth Floor, Irvine, California 92618, Attention: Don P. Duffy,
Phone: (714) 450-5505, Fax: (714) 450-5530 or if personally delivered at or upon
the fifth day after deposit in the mails, mailed by registered mail, postage
prepaid, to Onyx Acceptance Corporation, 8001 Irvine Center Drive, Fifth Floor,
Irvine, California 92618, Attention: Don P. Duffy.
Very truly yours,
ONYX ACCEPTANCE CORPORATION
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
E-3
<PAGE> 44
EXHIBIT F
MONTHLY COLLATERAL REPORT
F-1
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Onyx Acceptance Financial Corporation, a Delaware corporation
ABNI, Inc., a Delaware corporation
Onyx Acceptance Funding Corporation, a Delaware corporation
C. U. Acceptance Corporation, a Delaware corporation
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 5,771,881
<SECURITIES> 0
<RECEIVABLES> 125,345,160
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 244,251,484
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 61,687
<OTHER-SE> 44,637,695
<TOTAL-LIABILITY-AND-EQUITY> 244,251,484
<SALES> 0
<TOTAL-REVENUES> 18,967,983
<CGS> 0
<TOTAL-COSTS> 12,878,210
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 597,957
<INTEREST-EXPENSE> 4,213,990
<INCOME-PRETAX> 3,302,701
<INCOME-TAX> 1,373,923
<INCOME-CONTINUING> 1,928,778
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,928,778
<EPS-PRIMARY> .31
<EPS-DILUTED> .30
</TABLE>
