<PAGE> 1
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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 JUNE 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.)
ONYX ACCEPTANCE CORPORATION
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 July 31, 1998, there were 6,159,104 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
----
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Statements of Financial Condition at
June 30, 1998 and December 31, 1997.................................... 3
Condensed Consolidated Statements of Income for the three months and
six months ended June 30, 1998 and June 30, 1997....................... 4
Condensed Consolidated Statements of Cash Flows for the six months ended
June 30, 1998, and June 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 4. Submission of Matters to a Vote of Security Holders....................... 15
Item 5. Other Information......................................................... 16
Item 6. Exhibits and Reports on Form 8-K.......................................... 20
SIGNATURES......................................................................... 24
EXHIBIT INDEX...................................................................... 25
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ONYX ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash & cash equivalents ................................. $ 657,869 $ 991,010
Trust receivables ....................................... 31,756,357 27,628,619
Contracts held for sale (Net of allowance) .............. 101,078,637 64,342,309
Retained interest in securitized assets ................. 63,010,874 48,838,815
Other assets ............................................ 5,963,802 4,767,490
------------ ------------
Total assets ................................. $202,467,539 $146,568,243
============ ============
LIABILITIES
Accounts payable ........................................ $ 7,540,871 $ 8,458,147
Debt .................................................... 142,560,098 91,508,209
Other liabilities ....................................... 9,604,986 6,046,395
------------ ------------
Total liabilities ............................. 159,705,955 106,012,751
EQUITY
Common stock
Par value $.01 per share; authorized 15,000,000 shares;
issued and outstanding 6,157,828 as of June 30,
1998 and issued and outstanding 6,017,635 as of
December 31, 1997 ................................... 61,578 60,176
Paid in capital ......................................... 37,832,718 37,810,158
Retained earnings ....................................... 4,867,288 2,685,158
------------ ------------
Total equity ................................. 42,761,584 40,555,492
------------ ------------
Total liabilities and equity ................. $202,467,539 $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 JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
1998 1997 1998 1997
------------- ----------- ------------ ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES:
Finance Revenue..................................... $ 5,221,533 $3,265,712 $ 9,702,083 $ 5,147,704
Interest Expense.................................... 3,616,724 1,830,284 6,437,710 2,885,192
----------- ---------- ----------- -----------
Net Finance Revenue................................. 1,604,809 1,435,428 3,264,373 2,262,512
Provision for Credit Losses......................... 324,819 211,324 631,807 504,594
----------- ---------- ----------- -----------
Net Finance Revenue after Provision for Credit
Losses............................................ 1,279,990 1,224,104 2,632,566 1,757,918
Gain on Sale of Contracts........................... 9,406,175 4,300,069 18,073,193 8,076,212
Service Fee Income.................................. 3,159,533 2,975,717 4,758,269 5,595,354
EXPENSES:
Salaries and Benefits........................... 6,334,576 4,327,419 12,275,745 7,744,744
Depreciation.................................... 499,356 258,819 926,338 460,801
Occupancy....................................... 442,412 333,183 814,853 657,274
General and administrative expenses............. 4,254,211 2,461,962 7,716,955 4,399,714
----------- ---------- ----------- -----------
Total Expenses...................................... 11,530,555 7,381,383 21,733,891 13,262,533
----------- ---------- ----------- -----------
Net Income before Taxes............................. 2,315,143 1,118,507 3,730,137 2,166,951
Income Taxes.................................... 960,784 465,297 1,548,007 901,297
----------- ---------- ----------- -----------
Net Income after Taxes.............................. $ 1,354,359 $ 653,210 $ 2,182,130 $ 1,265,654
=========== ========== =========== ===========
Net Income per share - Basic ....................... $0.22 $0.11 $0.36 $0.21
Net Income per share - Diluted ..................... $0.21 $0.10 $0.34 $0.20
Basic Shares Outstanding............................ 6,092,400 6,005,444 6,058,610 5,983,809
Diluted Shares Outstanding.......................... 6,533,804 6,374,934 6,477,178 6,389,423
</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>
SIX MONTHS ENDED JUNE 30,
-----------------------------
1998 1997
------------ -------------
(UNAUDITED)
<S> <C> <C>
Net cash used in operating activities....................... $(50,305,625) $ (56,556,748)
INVESTING ACTIVITIES:
Purchases of property and equipment.................... (1,582,662) (1,225,724)
------------ -------------
Cash used in investing activities............. (1,582,662) (1,225,724)
FINANCING ACTIVITIES:
Proceeds from exercise of options/warrants............. 23,960 56,112
Payments on capital lease obligations.................. (271,939) (201,035)
Proceeds from drawdown on excess servicing
line of credit....................................... 4,972,101 13,500,000
Payments to pay down excess service line............... (21,650,000) 0
Paydown of commercial paper related to securitization
and sale............................................. (362,006,000) (198,500,000)
Proceeds from issuance of commercial paper............. 420,654,572 243,913,253
Proceeds from subordinated debt........................ 10,000,000 0
Payments in other loans................................ (167,548) (167,548)
------------ -------------
Net cash provided by financing activities..... 51,555,146 58,600,782
------------ -------------
Increase (decrease) in cash and cash
equivalents................................. (333,141) 818,310
Cash and cash equivalents at beginning of period............ 991,010 603,028
------------ -------------
Cash and cash equivalents at end of period.... $ 657,869 $ 1,421,338
============ =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid............................................... $ 6,241,210 $ 2,751,361
Capital lease additions..................................... $ 97,628 $ 509,808
</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 unaudited 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 six months ended
June 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 quarter ended
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>
JUNE 30 DECEMBER 31
1998 1997
------------- -------------
<S> <C> <C>
Contracts held for sale .......................... $108,531,938 $71,216,278
Less unearned interest ........................... 8,587,086 7,835,794
------------ -----------
99,944,852 63,380,484
Allowance for credit losses....................... (499,724) (316,902)
------------ -----------
99,445,128 63,063,582
Dealer participation ............................. 1,633,509 1,278,727
------------ -----------
Total ............................................ $101,078,637 $64,342,309
============ ===========
</TABLE>
NOTE 3 - RETAINED INTEREST IN SECURITIZED ASSETS
SFAS 125 requires that following a transfer of financial assets, an
entity is to recognize the assets it controls and the liabilities it has
incurred, and derecognize assets for which control has been surrendered and
liabilities that have been extinguished.
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.
6
<PAGE> 7
Prepayment and credit loss assumptions are utilized to project future
earnings and are based on historical experience. All assumptions are evaluated
each quarter and adjusted, if appropriate, to reflect the actual performance of
the Contracts.
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 shareholders'
equity as an unrealized gain or loss, net of deferred taxes. As of June 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. 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>
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Beginning balance ..................... $ 48,838,815 $ 29,632,039
Additions ............................. 34,368,000 45,940,000
Amortization .......................... (20,195,941) (26,733,224)
------------ ------------
Ending balance ........................ $ 63,010,874 $ 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 future undiscounted retained
interest earnings to be received from securitizations. Estimated future
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>
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Estimated net undiscounted RISA earnings.......... $102,889,024 $ 78,579,178
Off balance sheet allowance for losses............ 33,674,263 24,787,037
Discount to present value......................... 6,203,887 4,953,326
------------ ------------
Retained interest in securitized assets........... $ 63,010,874 $ 48,838,815
============ ============
Outstanding balance of Contracts
sold through securitizations................... $896,037,921 $693,896,100
============ ============
</TABLE>
Management believes that the off balance sheet allowance for losses is
currently adequate to absorb potential losses in the sold portfolio.
7
<PAGE> 8
NOTE 4 - EARNINGS PER SHARE
The following is an illustration of the dilutive effect of the
Company's common stock equivalents on earnings per share ("EPS")
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, JUNE 30,
-------------------------- --------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Income.................................. $1,354,359 $ 653,210 $2,182,130 $1,265,654
========== ========== ========== ==========
Weighted average shares outstanding......... 6,092,400 6,005,444 6,058,610 5,983,809
Net effect of dilutive stock
options/warrants.......................... 441,404 369,490 418,568 405,614
Diluted weighted average shares outstanding. 6,533,804 6,374,934 6,477,178 6,389,423
Net income per share:
Basic....................................... $ .22 $ .11 $ .36 $ .21
========== ========== ========== ==========
Diluted..................................... $ .21 $ .10 $ .34 $ .20
========== ========== ========== ==========
</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 recognize all derivatives as either assets or
liabilities in the statement of financial position and measure 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.
8
<PAGE> 9
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 $1.6 million for the three months ended June 30, 1998
compared to $1.4 million for the same period in 1997. For the six months ended
June 30, 1998, net interest income was $3.3 million as compared to $2.3 million
for the same period in 1997. These increases are due to the higher amounts of
average Contracts held for sale during the period.
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. To protect against changes in interest rates, the Company
hedges Contracts prior to their securitization with forward interest rate swap
agreements. Gains or losses on these forward interest rate swap agreements are
deferred and are included as part of the basis of the underlying Contracts and
recognized when the Contracts are securitized.
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 $324,819 for the quarter ended June 30, 1998 compared to $211,324 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 $251,311 during the second quarter of 1998 compared to
$121,747 in the second quarter of 1997 due to an increase in the average
Contracts held for sale in the period. Future provisions totaled $73,508 and
$89,577 for the second quarter of 1998 and 1997 respectively. Contracts held for
sale increased by $14.7 million for the second quarter of 1998 vs. a $17.9
million increase for the second quarter of 1997. Provision for credit losses for
the six month period ended June 30, 1998 were $631,807 compared to $504,594 for
the period ended June 30, 1997. At June 30, 1998, Contracts held for sale were
$101.1 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 $9.4 million for
the three months ended June 30, 1998 compared to $4.3 million for the same
period of 1997. The increase in the gain on sale is primarily the result of an
increase in Contracts sold and, to a lesser extent, wider interest rate spreads.
For the six months ended June 30, 1998, the Company recorded a gain on sale of
$18.1 million compared to a gain on sale of $8.1 million for the same period in
1997. Contracts sold during the second quarter of 1998 totaled $208.8 million
compared to $121.7 million during the same period of 1997. Net interest rate
spreads, inclusive of all costs, increased to 2.79% for the second quarter 1998
securitization vs. 2.48% for the securitization completed in the second 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.
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 may also affect the
amount and timing of retained interest income. Contractual servicing income is
earned at a rate of 1% per annum on
9
<PAGE> 10
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 $3.2 million during the second
quarter of 1998 from $3.0 million during the same period in 1997 due primarily
to the growth in the servicing portfolio. Servicing fee income for the six month
period ended June 30, 1998 was $4.8 million compared to $5.6 million for the
like period in 1997. Higher contractual service fees due to the growth of the
servicing portfolio were offset by a reduction in the accrual for servicing
advances on delinquent Contracts and by an acceleration of the amortization of
the RISA.
OPERATING EXPENSES
Total operating expenses were $11.5 million for the three months ended
June 30, 1998 compared to $7.4 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
$1.0 billion at June 30, 1998 from $564.9 million at June 30, 1997. Total
operating expenses for the six month period ending June 30, 1998 were $21.7
million compared to $13.3 million for the same period in 1997.
The Company incurred salary and benefit expenses of $6.3 million during
the second quarter of 1998 compared with $4.3 million for the second quarter of
1997, an increase of 46.5%. 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
292 at June 30, 1997 to 449 at June 30, 1998. Salary and benefit expenses for
the six month period ended June 30, 1998 were $12.3 million compared to $7.7
million for the six months ending June 30, 1997.
Depreciation expenses increased to $0.5 million for the three months
ended June 30, 1998 compared to $0.3 million 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 $0.4 million for the three
months ending June 30, 1998 from $0.3 million in the like period in 1997.
General and administrative expenses increased to $4.3 million in the second
quarter of 1998 from $2.5 million in the second 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 six months ended 1998 and 1997 were 41.6%.
FINANCIAL CONDITION
CONTRACTS HELD FOR SALE
Contracts held for sale totaled $101.1 million at June 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 $381.8 million during the six 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 June 30, 1998 were $31.8 million as compared with $27.7
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, total revenue, securitization activity and servicing
portfolio during the past five fiscal quarters:
SELECTED QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED
-----------------------------------------------------------------
JUNE 30, SEPT. 30, DEC. 31, MAR 31, JUNE 30,
1997 1997 1997 1998 1998
---------- ---------- ---------- ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Contracts purchased/originated during period... $ 145,548 $ 152,334 $ 182,310 $ 218,204 $ 229,660
Average monthly volume during period........... 48,516 50,778 60,770 72,735 76,553
Gain on sale of Contracts...................... 4,300 6,938 7,809 8,667 9,406
Contracts securitized during period............ 121,676 149,600 166,000 173,000 208,759
Contracts sold during period................... 0 0 0 15,000 0
Servicing portfolio at period end.............. 564,922 649,563 757,277 884,692 1,009,246
</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, 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
second quarter of 1998 the Company continued to realize some of the benefits of
the centralization and training of the collection department. At June 30, 1998,
delinquencies for the servicing portfolio represented 1.49% of the amount of
Contracts in the Company's servicing portfolio or $15.1 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
1.78% during the quarter compared to 2.04% for the second quarter of 1997.
DELINQUENCY EXPERIENCE OF SERVICING PORTFOLIO
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------------------- --------------------------
AMOUNT NO. AMOUNT NO.
----------- ------- ---------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Servicing portfolio................ $1,009,246 98,918 $ 757,277 73,502
Delinquencies(1)(2)
31-59 days............ $ 9,041 921 $ 11,902 1,211
60-89 days............ $ 2,473 244 $ 3,370 346
90+ days.............. $ 3,552 332 $ 3,743 316
---------- ---------- ---------- ----------
Total.............................. $ 15,066 1,497 $ 19,015 1,873
Total delinquencies as a percent of
Servicing portfolio................ 1.49% 1.51% 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 SIX MONTH PERIOD FOR THE QUARTERS ENDED
ENDED JUNE 30, JUNE 30,
-------------------------- ----------------------
1998 1997 1998 1997
---------- -------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Period end Contracts outstanding................. $1,009,246 $564,922 $1,009,246 $564,922
Average servicing portfolio(1)................... 875,657 475,141 935,391 517,134
Number of gross charge-offs...................... 1,756 864 938 496
Gross charge-offs................................ 9,374.8 5,308.8 4,917.2 2,999.6
Net charge-offs.................................. 7,917.2 4,611.0 4,155.4 2,631.4
Annualized net charge-offs as a percent
of average Servicing portfolio.................. 1.81% 1.94% 1.78% 2.04%
</TABLE>
- ------------
(1) Average is based on daily balances.
(2) Net charge-offs are gross charge-offs minus recoveries of Contracts
previously charged off.
THE FOLLOWING TABLE ILLUSTRATES THE MONTHLY PERFORMANCE OF EACH OF THE
SECURITIZED POOLS OUTSTANDING FOR THE PERIOD FROM THE DATE OF SECURITIZATION
THROUGH JUNE 30, 1998:
<TABLE>
<CAPTION>
MONTH 95-1 96-1 96-2 96-3 96-4
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
1 0.00% 0.00% 0.01% 0.00% 0.00%
2 0.01% 0.03% 0.07% 0.02% 0.02%
3 0.02% 0.05% 0.20% 0.07% 0.05%
4 0.02% 0.11% 0.33% 0.16% 0.14%
5 0.05% 0.23% 0.46% 0.43% 0.24%
6 0.06% 0.40% 0.78% 0.54% 0.38%
7 0.08% 0.69% 0.98% 0.74% 0.53%
8 0.10% 0.82% 1.15% 0.97% 0.81%
9 0.21% 0.93% 1.39% 1.13% 0.98%
10 0.24% 1.15% 1.52% 1.32% 1.18%
11 0.29% 1.25% 1.69% 1.47% 1.43%
12 0.41% 1.47% 1.94% 1.60% 1.63%
13 0.55% 1.65% 2.08% 1.77% 1.73%
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
14 0.70% 1.79% 2.34% 1.94% 1.87%
15 0.83% 2.02% 2.52% 2.09% 2.07%
16 0.98% 2.25% 2.76% 2.27% 2.23%
17 1.06% 2.43% 2.89% 2.42% 2.33%
18 1.11% 2.59% 3.10% 2.57% 2.49%
19 1.27% 2.77% 3.14% 2.70% 2.62%
20 1.37% 2.93% 3.30% 2.83%
21 1.41% 3.06% 3.47% 2.94%
22 1.54% 3.15% 3.60% 3.00%
23 1.59% 3.21% 3.70%
24 1.69% 3.28% 3.81%
25 1.76% 3.40% 3.93%
26 1.83% 3.43% 4.06%
27 1.86% 3.55%
28 1.97% 3.60%
29 2.01% 3.73%
30 2.08% 3.75%
31 2.13%
32 2.16%
33 2.26%
34 2.27%
35 2.28%
36 2.28%
37 2.30%
38 2.28%
39 2.28%
</TABLE>
<TABLE>
<CAPTION>
MONTH 97-1 97-2 97-3 97-4 98-1 98-A
----- ----- ----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C>
1 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2 0.00% 0.00% 0.00% 0.00% 0.01%
3 0.03% 0.02% 0.02% 0.01% 0.02%
4 0.06% 0.07% 0.09% 0.04% 0.08%
5 0.13% 0.22% 0.13% 0.11%
6 0.26% 0.32% 0.24% 0.20%
7 0.37% 0.59% 0.36% 0.28%
8 0.52% 0.80% 0.47%
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
<S> <C> <C> <C>
9 0.60% 0.91% 0.62%
10 0.76% 1.07% 0.73%
11 0.92% 1.26%
12 1.02% 1.42%
13 1.13% 1.58%
14 1.23%
15 1.40%
16 1.56%
</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, including
cash held in spread accounts; (iv) settlements of hedging transactions; (v)
operating expenses; and (vi) interest expense. The capital resources available
to the Company include: (i) net interest income during the warehousing period;
(ii) contractual servicing fees; (iii) future servicing cash flows; (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.
Cash used in operating activities was $50.3 million for the six months
ended June 30, 1998, compared to $56.6 million used in the six months ended June
30, 1997. Increases in the proceeds from the sale of finance receivables
contributed to the reduction in cash used in operating activities. Cash used in
investing activities was $1.6 million for the quarter ended June 30, 1998
compared to $1.2 million for the quarter ended June 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 $51.5 million
for the quarter ended June 30, 1998, compared to $58.6 million for the quarter
ended June 30, 1997. Payments to reduce the balance in the excess servicing line
contributed to the decrease 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 $245 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. The advance rate to OAFC was increased during the first quarter of
1998 from 95% to 98% of adjusted eligible principal balance of each Contract.
This loan expires in September 1998. It is the intent of management to extend
the term of the facility for an additional three years.
In the first quarter of 1998, the Company created a new finance
subsidiary, Onyx Acceptance Funding Corporation ("Fundco") through which two new
lending lines were developed, each with Merrill Lynch Mortgage Capital, Inc. A
$100 million line (the "Merrill Line") provides funding for the purchase and
origination of Contracts. It provides an advance rate of approximately 95% of
the principal balance of each 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.
Residual Facilities
The Company has a $45 million residual facility with State Street Bank
of Boston, BankBoston, and the Travelers Insurance Company (the "Residual
Facility") under which the Company may (subject to borrowing base availability)
borrow for working capital and expenditures. Under the term of the Residual
Facility, the available
14
<PAGE> 15
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 if earlier, upon the
occurrence of certain "credit triggers".
Fundco has a $50 million facility line with Merrill Lynch Mortgage
Capital, Inc. (the "Residual Line"). The residual facility is used by the
Company to finance operating requirements. The amount available for borrowing is
determined using a collateral based formula of a percentage of the value of
excess cash flow to be received from certain securitizations and a percentage of
the amount of the Merrill Warehouse Line outstanding on a quarterly basis. The
interest rate is based on LIBOR and the facility has a term of one year and
matures in February 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 June, 1998, the Company consummated a securitization in the amount
of $208.8 million compared to $121.7 million in the second quarter of 1997. The
dollar weighted average investor rate for the second quarter 1998 securitization
was 5.87% and a net interest rate spread inclusive of all costs of 2.79% as
compared to a dollar weighted average investor rate 6.35% and a net interest
rate spread inclusive of all costs of 2.48% for the securitization completed in
the second quarter 1997. For the six month period ended June 30, 1998, the
Company securitized and sold a total of $396.8 million of retail installment
Contracts. Of this total, $381.8 million were securitized, while $15.0 million
were sold on a whole loan basis, with servicing retained. For the six months
ended June 30, 1998, the Company recorded a gain on sale of $18.1 million on
total sales and securitizations of $396.8 million as compared to a gain on sale
of $8.1 million with securitizations totaling $211.7 million for the first six
months of 1997.
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 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 August 5, 1998, the Company had executed forward interest rate swaps of
$220 million, which become effective September 11, 1998, which the Company
believes are adequate to cover its next securitization or loan sale.
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 recognize all derivatives as either assets or
liabilities in the statement of financial position and measure 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 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Stockholders on May 20, 1998
(the "Meeting"). At the Meeting, the stockholders were asked to vote on the
election of two directors, to approve an amendment to the Company's
15
<PAGE> 16
1996 Stock Option/Stock Issuance Plan (the "1996 Plan") and to ratify the
appointment of the Company's independent auditors.
1. Election of Directors
The stockholders approved the Company's director nominees, Mr. Thomas
C. Stickel and Mr. John W. Hall, to serve for a three year term expiring at the
Annual Meeting in the year 2001. The voting on the nominations was as follows:
<TABLE>
<CAPTION>
Nominee: Votes For Votes Against Abstentions
------- --------- ------------- -----------
<S> <C> <C> <C>
Thomas C. Stickel 4,529,988 2,900 62,000
John W. Hall 4,529,988 2,900 62,000
</TABLE>
2. Amendment to the Company's 1996 Stock Option/Stock Issuance Plan
The stockholders approved the Company's amendment to the Company's 1996
Stock Option/Stock Issuance Plan.
The voting went as follows:
<TABLE>
<CAPTION>
Votes For Votes Against Abstentions
--------- ------------- -----------
<S> <C> <C>
3,861,288 669,900 64,600
</TABLE>
3. Appointment of Independent Auditors The Company's proposal to ratify
the appointment of PricewaterhouseCoopers LLP as the Company's independent
auditors for the fiscal year ending December 31, 1998 was also approved by the
stockholders.
The voting went as follows:
<TABLE>
<CAPTION>
Votes For Votes Against Abstentions
--------- ------------- -----------
<S> <C> <C>
3,742,182 2,100 600
</TABLE>
Item 5. Other Information.
FORWARD LOOKING INFORMATION
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 can be identified by the use of forward-looking terminology such as
"may, "will," "expect," "anticipate," "estimate," "should" or "continue" or the
negative thereof or other variations thereon or comparable terminology. The
matters set forth in this Form 10-Q constitute cautionary statements identifying
important factors with respect to such forward-looking statements, including
certain risks and uncertainties, that could cause actual results to differ
materially from those in such forward-looking statements.
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 filing with the Securities and Exchange Commission.
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 and fund spread accounts; (iv)
settle hedge transactions; (v) satisfy working capital requirements and pay
operating expenses; 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.
16
<PAGE> 17
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 warehousing
facilities include a $245 million asset-backed commercial paper conduit program
(the "CP Facility"), of which MBIA is the program manager, and a $100 million
Libor based repurchase facility provided by Merrill Lynch Mortgage Capital Inc.
("Merrill Line"). The combined facilities allow the Company to finance up to 98%
of the purchase price of Contracts. The CP Facility expires in September 1998.
The management is in the process of extending the facility for an additional
three years. The Merrill Line has a term of one year and matures in February
1999. The Company currently has two revolving credit loans with institutional
lenders for working capital and expenditures for which the Company's warehouse
facilities are not otherwise available. The $45 million Revolving Facility,
unless extended, converts on June 11, 1999 into fully amortizing two-year term
loans maturing on June 29, 2000, and the $50 million Residual Line has a term of
one year and matures in February 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. These covenants include a minimum ratio
of tangible net worth to total liabilities plus tangible net worth, minimum
operating cash flow, minimum amount of Contracts serviced by the Company and
minimum cash on hand.
The continued availability of the Revolving 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
Revolving 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
Line 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 June 30,
1998 each of the Company's securitizations has utilized credit enhancement in
the form of a financial guarantee insurance policy issued by MBIA 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
17
<PAGE> 18
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
by the Company on the Contracts acquired by the Company and the interest rates
payable under its credit facilities during the warehousing period or for
certificates 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 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 certificates 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,
18
<PAGE> 19
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 Revolving Facility or Residual Line, possibly
requiring the Company to pay down amounts outstanding under the Revolving
Facility or Residual Line 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 pooling and
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 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 or the pooling and servicing agreements or the occurrence
of a trigger event that would block release of future servicing cash flows from
the Grantor 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 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.
19
<PAGE> 20
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 an
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
reduced economic activity or 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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
EXHIBIT
NO. EXHIBIT TITLE
------- -------------
*3.1 Omitted.
*3.2 Omitted.
*3.3 Omitted.
*3.4 Certificate of Incorporation of the Company.
*3.5 Bylaws of the Company.
*3.6 Omitted.
*4.1 Omitted.
+4.2 Rights Agreement dated as of July 8, 1997, between the Company
and American Stock Transfer and Trust Company, as Rights Agent
(which includes the form of Certificate of Designation for the
Series A Participating Preferred Stock and the form of Rights
Certificate of the Company.
*10.1 Form of Indemnification Agreement of the Company, a Delaware
corporation.
*10.2 Second Amended and Restated 1994 Stock Option Plan.
*10.3 Form of Notice of Grant of Stock Option under Second Amended and
Restated 1994 Stock Option Plan.
*10.4 Form of Stock Option Agreement under Second Amended and Restated
1994 Stock Option Plan.
*10.5 Form of Stock Purchase Agreement under Second Amended and
Restated 1994 Stock Option Plan.
*10.6 1994 Special Performance Option Grant Plan.
*10.7 Form of Notice of Grant of Stock Option under 1994 Special
Performance Option Grant Plan.
*10.8 Form of Stock Option Agreement under 1994 Special Performance
Option Grant Plan.
*10.9 Form of Stock Purchase Agreement under 1994 Special Performance
Option Grant Plan.
*10.10 Omitted
*10.11 Omitted
*10.12 Omitted
*10.13 Third Amendment to Amended and Restated Investors' Rights
Agreement between and among Onyx Acceptance Corporation and the
Investors identified therein dated as of November 27, 1995.
*10.14 Warrant to purchase Common Stock in favor of ContiTrade Services
Corporation from Onyx Acceptance Corporation dated as of February
1, 1994.
*10.15 First Amendment to Co-Sale and First Refusal Agreement between
and among Onyx Acceptance
20
<PAGE> 21
EXHIBIT
NO. EXHIBIT TITLE
------- -------------
Corporation, ContiFinancial Services Corporation, the Investors
and Managers, as defined therein, dated as of February 1, 1994.
*10.16 First Amendment to and Waiver of Certain Provisions of Investors'
Rights Agreement between Onyx Acceptance Corporation,
ContiFinancial Services Corporation, the Investors and the
Management Holders, as defined therein, dated as of February 1,
1994.
*10.17 Senior Subordinated Note and Warrant Purchase Agreement between
and among Onyx Acceptance Corporation, Capital Resource Lenders
II, L.P. and Dominion Fund III, L.P., dated as of November 17,
1994.
*10.18 Omitted
*10.19 Omitted
*10.20 Warrant to purchase Common Stock in favor of Capital Resource
Lenders II, L.P. from Onyx Acceptance Corporation dated as of
November 17, 1994.
*10.21 Warrant to purchase Common Stock in favor of Dominion Fund III,
L.P. from Onyx Acceptance Corporation dated as of November 17,
1994.
*10.22 Amended and Restated Co-Sale and First Refusal Agreement between
and among Onyx Acceptance Corporation and the Shareholders
identified therein dated as of November 17, 1994.
*10.23 Amended and Restated Investors' Rights Agreement between and
among Onyx Acceptance Corporation, the Investors and the
Management Holders identified therein dated as of November 17,
1994.
*10.24 Amended and Restated Voting Agreement between and among Onyx
Acceptance Corporation and the Shareholders identified therein
dated as of November 17, 1994.
*10.25 Omitted
*10.26 Omitted
*10.27 Omitted
*10.28 Omitted
*10.29 Omitted
*10.30 Sale and Servicing Agreement between Onyx Acceptance Corporation
and Onyx Acceptance Financial Corporation dated as of September
8, 1994.
*10.31 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 8, 1994.
*10.32 Triple-A One Funding Corporation Note in favor of Onyx Acceptance
Financial Corporation from Triple-A One Funding Corporation dated
as of September 12, 1994.
*10.33 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 8, 1994.
*10.34 Subordinated Security Agreement between Onyx Acceptance
Corporation and Onyx Acceptance Financial Corporation dated as of
September 8, 1994.
*10.35 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 8, 1994.
*10.36 Seller Note in favor of Onyx Acceptance Corporation from Onyx
Acceptance Financial Corporation dated September 12, 1994.
*10.37 Subordinated Note in favor of Onyx Acceptance Corporation from
Onyx Acceptance Financial Corporation dated September 12, 1994.
*10.38 Omitted.
*10.39 Omitted.
*10.40 Omitted.
*10.42 Omitted.
*10.43 Omitted.
*10.44 Omitted.
*10.45 First Amendment to Amended and Restated Investors' Rights
Agreement between and among Onyx Acceptance Corporation and
certain Investors identified therein dated as of December 15,
1994.
*10.46 Omitted.
*10.47 Omitted.
*10.48 Omitted.
*10.49 Omitted
*10.50 Omitted
21
<PAGE> 22
EXHIBIT
NO. EXHIBIT TITLE
------- -------------
*10.51 Omitted
*10.52 Omitted
*10.53 Omitted
*10.54 Omitted.
*10.55 Warrant to purchase Series A Preferred Stock in favor of
Comdisco, Inc. from Onyx Acceptance Corporation dated as of
January 7, 1994.
*10.56 Warrant to purchase Common Stock in favor of Lighthouse Capital
Partners from Onyx Acceptance Corporation dated November 3, 1995.
*10.57 Master Lease Agreement between Lighthouse Capital Partners and
Onyx Acceptance Corporation dated November 3, 1995.
*10.58 Second Amendment to Amended and Restated Investors' Rights
Agreement between and among Onyx Acceptance Corporation and the
Investors identified therein dated as of November 3, 1995.
*10.59 Omitted.
*10.60 Omitted.
*10.61 Option Agreement between Onyx Acceptance Corporation and John W.
Hall dated as of December 20, 1994.
*10.62 Promissory Note in favor of Onyx Acceptance Corporation from John
Hall dated as of December 20, 1994.
*10.63 Omitted.
*10.64 Omitted
*10.65 Omitted
*10.66 Stock Purchase Agreement between and among John W. Hall and
certain Investors identified therein dated as of June 7, 1995.
*10.67 Omitted.
*10.68 Omitted.
*10.69 Omitted.
*10.70 Onyx Acceptance Corporation 401(k) Plan dated January 1, 1994.
*10.71 Omitted.
*10.72 Omitted.
*10.73 Omitted.
*10.74 Omitted.
*10.75 Omitted
*10.76 Pledge and Security Agreement by and among Onyx Acceptance
Corporation, State Street Bank and Trust Company and The First
National Bank of Boston dated as of January 31, 1996.
*10.77 Subordination and Intercreditor Agreement by and among State
Street Bank and Trust Company, The First National Bank of Boston,
Capital Resource Lenders II, L.P., Dominion Fund III and Onyx
Acceptance Corporation dated as of January 31, 1996.
*10.78 1996-1 Spread Account Trust Agreement between Onyx Acceptance
Financial Corporation and Bankers Trust (Delaware) dated as of
February 6, 1996.
*10.79 1995-1 Spread Account Trust Agreement between Onyx Acceptance
Financial Corporation and Bankers Trust (Delaware) dated as of
February 6, 1996.
*10.80 1995-1 Purchase Agreement between Onyx Acceptance Corporation and
Onyx Acceptance Financial Corporation dated as of February 6,
1996.
*10.81 1994-1 Spread Account Trust Agreement between Onyx Acceptance
Financial Corporation and Bankers Trust (Delaware) dated as of
February 6, 1996.
*10.82 1994-1 Purchase Agreement between Onyx Acceptance Corporation and
Onyx Acceptance Financial Corporation dated as of February 6,
1996.
*10.83 Omitted.
*10.84 Omitted.
*10.85 1996 Stock Option/Stock Issuance Plan.
10.87 Omitted,.
10.88 Omitted.
10.89 Omitted.
10.90 Omitted.
10.91 Omitted.
**10.92 Form of Pooling and Servicing Agreement between Onyx Acceptance
Financial Corporation, Onyx Acceptance Corporation and Bankers
Trust Company in connection with 1997-1 Grantor Trust.
**10.93 Form of Underwriting Agreement between Onyx Acceptance Financial
Corporation and Merrill Lynch, Pierce, Fenner and Smith
Incorporated in connection with 1997-1 Grantor Trust.
22
<PAGE> 23
EXHIBIT
NO. EXHIBIT TITLE
------- -------------
#10.94 Form of Pooling and Servicing Agreement between Onyx Acceptance
Financial Corporation, Onyx Acceptance Corporation and Bankers
Trust Company in connection with 1997-2 Grantor Trust
#10.95 Form of Underwriting Agreement between Onyx Acceptance Financial
Corporation and Merrill Lynch, Pierce, Fenner and Smith
Incorporated in connection with 1997-2 Grantor Trust.
##10.96 Form of Pooling and Servicing Agreement between Onyx Acceptance
Financial Corporation, Onyx Acceptance Corporation and Bankers
Trust Company in connection with 1997-3 Grantor Trust.
##10.97 Form of Underwriting Agreement between Onyx Acceptance Financial
Corporation and Merrill Lynch Pierce, Fenner and Smith
Incorporation in connection with 1997-3 Grantor Trust.
###10.98 1997-4 Spread Account Trust Agreement between Onyx Acceptance
Financial Corporation and Bankers Trust (Delaware) Dated as of
December 12, 1997.
###10.99 Form of Pooling Servicing Agreement between Onyx Acceptance
Corporation, Onyx Acceptance Financial Corporation, and Bankers
Trust Company in connection with the 1997-4 Onyx Acceptance
Grantor Trust.
###10.100 Form of Underwriting Agreement between Onyx Acceptance Financial
Corporation, Onyx Acceptance Corporation and Merrill Lynch & Co.
in connection with the 1997-4 Onyx Acceptance Grantor Trust.
++10.101 Term Loan Agreement by and between Bay View Capital Corporation
and Onyx Acceptance Corporation Dated February 24, 1998.
++10.102 Master Repurchase Agreement Annex by and between Merrill Lynch
Mortgage Capital Inc. and Onyx Acceptance Funding Corporation
dated February 4, 1998
++10.103 Master Assignment Agreement by and between Merrill Lynch Mortgage
Capital Inc. and Onyx Acceptance Funding Corporation dated
February 4, 1998
10.104 Amended and Restated Residual Interest In Securitized Assets
Revolving Credit Agreement Dated June 12, 1998 by and among Onyx
Acceptance Corporation, State Street Bank and Trust Company,
BankBoston and The Travelers Insurance Company.
10.105 Amended and Restated Pledge and Security Agreement Dated June 12,
1998 by and among Onyx Acceptance Corporation, State Street Bank
and Trust Company, BankBoston and The Travelers Insurance
Company.
21.1 Subsidiaries of the Registrant.
27.1 Financial Data Schedule.
- ------------
* Incorporated by reference from the Company's Registration Statement on
Form S-1 (Registration No. 333-680).
** Incorporated by reference from the Company's Registration Statement on
Form S-1 (Registration No. 333-16601).
*** Incorporated by reference from the Company's Registration Statement on
Form S-1 (Registration No. 333-22301).
# Incorporated by reference from the Company's Registration Statement on
Form S-1 (Registration No. 333-28893).
## Incorporated by reference from the Company's Registration Statement on
Form S-1 (Registration No. 333-33471)
+ Incorporated by reference from the Company's Current Report on Form 8-K
dated July 8, 1997.
### Incorporated by reference from the Company's Registration Statement on
Form S-1 (Registration No. 333-40089).
++ Incorporated by reference from the Company's Form 10-Q for the period
ending March 31, 1998.
(b) Reports on Form 8-K
None.
23
<PAGE> 24
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: August 13, 1998
By: /s/ DON P. DUFFY
--------------------------------
Don P. Duffy
Executive Vice President and
Principal Financial Officer
Date: August 13, 1998
24
<PAGE> 25
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
10.104 Amended and Restated Residual Interest In Securitized
Assets Revolving Credit Agreement Dated June 12, 1998
by and among Onyx Acceptance Corporation, State Street
Bank and Trust Company, BankBoston and The Travelers
Insurance Company.
10.105 Amended and Restated Pledge and Security Agreement Dated
June 12, 1998 by and among Onyx Acceptance Corporation,
State Street Bank and Trust Company, BankBoston and The
Travelers Insurance Company.
21.1 Subsidiaries of the Registrant..........................
27.1 Financial Data Schedule.................................
25
<PAGE> 1
EXHIBIT 10.104
================================================================================
AMENDED AND RESTATED RESIDUAL INTEREST IN SECURITIZED ASSETS REVOLVING
CREDIT AND TERM LOAN AGREEMENT
dated as of June 12, 1998 by and among
ONYX ACCEPTANCE CORPORATION,
STATE STREET BANK AND TRUST COMPANY,
BANKBOSTON,
AND
THE TRAVELERS INSURANCE COMPANY
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 1. Amount and Terms of the Credit........................................................................1
1.1 Recitals; Commitments...............................................................................1
1.2 Revolving Credit Loans; Borrowing Base; Mechanics of Blocked Account; Borrowing Base Report.........2
1.3 Revolving Credit and Term Notes.....................................................................5
1.4 Conversion of Revolving Credit Loans to Term Loans..................................................6
1.5 Principal Amortization of the Notes After Conversion Date...........................................6
1.6 Fees................................................................................................7
1.7 Application of Funds Deposited Into Blocked Account After Event of Default..........................8
1.8 Prepayment; Repayment of Outstanding Loans in Excess of Available Line Commitment..................8
1.9 Security............................................................................................9
1.10 Default Rate Of Interest...........................................................................11
1.11 Notations..........................................................................................11
1.12 Form and Terms of Payment..........................................................................11
1.13 Pro Rata Treatment.................................................................................11
1.14 Capital Adequacy...................................................................................12
1.15 Special Provisions Concerning Collateral Value Model; Confidentiality..............................12
Section 2. Use of Proceeds......................................................................................13
Section 3. Representations and Warranties.......................................................................13
3.1 Organization, Standing, etc. of the Company........................................................13
3.2 Subsidiaries.......................................................................................13
3.3 Qualification......................................................................................14
3.4 Financial Information; Disclosure, etc.............................................................14
3.5 Licenses; Franchises, etc..........................................................................15
3.6 Material Agreements................................................................................15
3.7 Tax Returns and Payments...........................................................................16
3.8 Indebtedness, Liens and Investments, etc...........................................................16
3.9 Title to Properties; Liens.........................................................................16
3.10 Litigation, etc....................................................................................17
3.11 Authorization; Compliance with Other Instruments...................................................17
3.12 Credit Trigger Events..............................................................................17
3.13 Governmental and Other Third Party Consents........................................................18
3.14 Regulation U, etc..................................................................................18
3.15 Employee Retirement Income Security Act of 1974....................................................18
3.16 Ownership of Company; Outstanding Options or Warrants..............................................19
3.17 Environmental Matters..............................................................................19
3.18 Patents, Trademarks, Intellectual Property.........................................................20
3.19 Chief Executive Offices; Principal Place of Business; Real Property Owned or Leased................20
3.20 Names..............................................................................................20
3.21 Securities Laws....................................................................................20
3.22 Security Documents.................................................................................21
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
3.23 Depository and Other Accounts......................................................................21
3.24 Tax Status of Eligible Securitization Transactions.................................................21
3.25 Burdensome Obligations; Future Expenditures........................................................21
3.26 Insurance Policies.................................................................................21
3.27 Employment and Labor Agreements....................................................................22
3.28 CapMAC Indebtedness and Liabilities................................................................22
3.29 Charges to Excess Servicing........................................................................22
A. Section 4. Conditions Precedent to Closing Date........................................................22
4.1 Fees and Expenses of Lenders.......................................................................22
4.2 Forms of Legal Opinions; Execution of Loan Documents; No Material Adverse Effect...................23
4.3 Opinions and Certificates..........................................................................23
4.4 No Default; Representations and Warranties, etc....................................................24
4.5 Security Documents.................................................................................24
4.6 Insurance..........................................................................................25
4.7 Related Events.....................................................................................25
4.8 Reserved...........................................................................................25
4.9 Reserved...........................................................................................25
4.10 Proceedings and Documents..........................................................................25
4.11 Final Forms of Eligible Securitization Transaction Documents.......................................25
B. Section 4. Special Provisions Concerning Subsequent Eligible Securitization Transactions...............25
4.12 Subsequent Securitization Transactions.............................................................25
Section 5. Affirmative Covenants................................................................................26
5.1 Financial Statements, etc..........................................................................27
5.2 Legal Existence; Franchises; Compliance with Laws..................................................30
5.3 Insurance..........................................................................................30
5.4 Payment of Taxes...................................................................................31
5.5 Payment of Other Indebtedness, etc.................................................................32
5.6 Further Assurances.................................................................................32
5.7 Maintenance of Blocked Account; Eligible Securitization Transaction Document Amendments; Agreement
to Hold in Trust...............................................................................32
5.8 Communication with Accountants.....................................................................33
5.9 Performance of Servicing Duties; Clean-Up Calls....................................................33
5.10 Management.........................................................................................34
5.11 Key Person Life Insurance..........................................................................34
5.12 Notice of Default Under MLMC Credit Facility Documents.............................................34
5.13 Notice of Default Under BayView Subordinated Loan Documents........................................34
5.14 Notice of Default Under BayView Loan Sale Agreement................................................34
Section 6. Negative Covenants...................................................................................34
6.1 Indebtedness.......................................................................................34
6.2 Liens, etc.........................................................................................35
6.3 Loans, Guarantees and Investments..................................................................36
6.4 Collection Policies and Procedures.................................................................37
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
6.5 Restricted Payments................................................................................37
6.6 Capital Expenditures...............................................................................38
6.7 Subsidiaries, Mergers and Consolidations; Changes in Business......................................38
6.8 Sale of Assets.....................................................................................38
6.9 Compliance with ERISA..............................................................................39
6.10 Transactions with Affiliates.......................................................................39
6.11 Observance of Subordination Provisions, etc........................................................39
6.12 Environmental Liabilities..........................................................................39
6.13 Fiscal Year........................................................................................40
6.14 Amendments to Eligible Securitization Transaction Documents........................................40
6.15 Amendment to MLMC Credit Facility Documents........................................................40
6.16 Amendment to BayView Subordinated Loan Documents...................................................40
Section 7. Financial Covenants..................................................................................40
7.1 Net Worth (Including Subordinated Debt) to Total Liabilities and Net Worth Ratio...................41
7.2 Net Yield..........................................................................................41
7.3 Minimum Cash Balance...............................................................................41
7.4 Minimum Net Worth..................................................................................41
7.5 Minimum Subordinated Debt Plus Net Worth...........................................................42
7.6 Limitation on Quarterly Losses.....................................................................42
7.7 Minimum Servicing Balance..........................................................................42
7.8 Deferred Accounts..................................................................................42
7.9 Outstanding Balance of Loans.......................................................................42
Section 8. Defaults; Credit Triggers; Remedies..................................................................42
8.1 Events of Default; Acceleration....................................................................42
8.2 Remedies on Default, etc...........................................................................45
8.3 Credit Triggers....................................................................................46
Section 9. Definitions; Certain Rules of Construction...........................................................47
Section 10. Setoffs, Pro Rata Treatment; etc.....................................................................61
Section 11. Expenses; Indemnification............................................................................61
Section 12. Amendments and Waivers, etc..........................................................................63
Section 13. Nature of the Lenders' Obligations...................................................................64
A. Section 14. The Agent..................................................................................64
14.1 Appointment, Powers and Immunities................................................................64
14.2 Reliance by Agent.................................................................................65
14.3 Defaults..........................................................................................65
14.4 Rights as a Lender................................................................................65
14.5 Indemnification...................................................................................66
14.6 Non-Reliance on Agent and Other Lenders...........................................................66
14.7 Failure to Act....................................................................................67
14.8 Resignation of Agent..............................................................................67
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
14.9 Cooperation of Lenders............................................................................67
14.10 Security..........................................................................................67
14.11 Amendment of Section 14...........................................................................68
B. Section 14. Assignment and Participation...............................................................68
14.12 Conditions to Assignment by Lenders...............................................................68
14.13 Certain Representations and Warranties; Limitations; Covenants...................................69
14.14 Register..........................................................................................70
14.15 New Notes.........................................................................................70
14.16 Participants......................................................................................71
14.17 Disclosure........................................................................................71
14.18 Assignee or Participant Affiliated with the Company...............................................72
14.19 Miscellaneous Assignment Provisions...............................................................72
Section 15. Miscellaneous.......................................................................................73
15.1 Notices, etc......................................................................................73
15.2 Calculations, etc.................................................................................74
15.3 Governmental Approval.............................................................................74
15.4 Survival of Agreements, etc.......................................................................75
15.5 Counterparts, etc.................................................................................75
15.6 Entire Agreement, etc.............................................................................75
15.7 Governing Law, etc.; Construction.................................................................75
15.8 Jurisdiction; Waiver of Jury Trial................................................................76
</TABLE>
iv
<PAGE> 6
AMENDED AND RESTATED RESIDUAL INTEREST IN SECURITIZED ASSETS REVOLVING
CREDIT AND TERM LOAN AGREEMENT dated as of June 12, 1998 by and among Onyx
Acceptance Corporation, a Delaware corporation (the "Company"), State Street
Bank and Trust Company ("State Street"), BankBoston ("BankBoston") and The
Travelers Insurance Company ("Travelers"). State Street, BankBoston and
Travelers are sometimes herein collectively referred to as the "Lenders" and
each individually a "Lender". State Street, in its capacity as agent for the
Lenders hereunder, is sometimes herein referred to as the "Agent". Certain other
terms used herein are defined in Section 9. This Amended and Restated Residual
Interest in Securitized Assets Revolving Credit and Term Loan Agreement amends
and restates the Excess Servicing and Trust Receivable Revolving Credit and Term
Loan Agreement dated January 31, 1996 by and among the Company, State Street and
BankBoston, as amended by the First Amendment Agreement dated November 12, 1996
by and among the Company, State Street and BankBoston, as further amended by the
Second Amendment Agreement dated January 17, 1997 by and among the Company,
State Street and BankBoston, as further amended by the Third Amendment Agreement
dated August 29, 1997 by and among the Company, State Street and BankBoston, as
further amended by the Fourth Amendment Agreement dated September 30, 1997 by
and among the Company, State Street and BankBoston, as further amended by the
Fifth Amendment to Loan Agreement Including Third Amendment and Confirmation of
Pledge and Security Agreement dated February 4, 1998 by and among the Company,
State Street and BankBoston, as further amended by the Sixth Amendment to Loan
Agreement dated February 24, 1998 by and among the Company, State Street and
BankBoston and as further amended by the letter agreement dated March, 1998 by
and among the Company, State Street and BankBoston (as amended, modified and/or
supplemented, the "Loan Agreement").
The Company, the Lenders and the Agent hereby agree as follows:
Section 1. Amount and Terms of the Credit.
1.1 Recitals; Commitments. The Company wishes to establish revolving credits
with the Lenders in an aggregate principal amount at any one time outstanding
not in excess of Forty-Five Million Dollars ($45,000,000), to expire on the
Conversion Date (as defined below), in an aggregate principal amount not in
excess of the Available Line Commitment (as hereinafter defined) on the
Conversion Date.
Each Lender is severally willing to establish such a revolving credit
and to make such loans to the Company, subject to the terms and conditions
hereafter set forth, in the following maximum amounts at any one time
outstanding set forth opposite each Lender's name (each of such amounts being
hereinafter called each Lender's "Commitment", and collectively for all of the
<PAGE> 7
Lenders the "Total Commitment") and in the respective percentages set forth
opposite each Lender's name which shall be applicable to such credits and loans
hereunder (hereinafter such Lender's "Percentage"):
<TABLE>
<CAPTION>
Lender Commitment Percentage
------ ----------- -----------
<S> <C> <C>
State Street Bank $15,000,000 33.33%
and Trust Company
BankBoston $15,000,000 33.33%
Travelers $15,000,000 33.33%
----------- -----------
TOTAL $45,000,000 100.00%
===========
</TABLE>
1.2 Revolving Credit Loans; Borrowing Base; Mechanics of Blocked Account;
Borrowing Base Report.
(a) Establishment of Line of Credit. Subject to the terms and
conditions hereof, and in reliance upon the representations and warranties
contained herein, each Lender hereby severally establishes a revolving credit
facility (collectively, the "Line of Credit") convertible, subject to the
provisions of Section 1.4, into a term loan in favor of the Company in the
principal amount of its Revolving Credit Loan outstanding as of the Conversion
Date. Under the Line of Credit, subject to the terms and conditions hereof, the
Company may borrow prior to the Conversion Date from time to time, from each
Lender severally and not jointly, an aggregate principal amount at any time not
in excess of such Lender's Percentage of the Available Line Commitment in effect
on such date. As used herein, the term "Available Line Commitment" shall mean,
as of any date of determination, the lesser of (i) the Total Commitment or (ii)
the Borrowing Base. As used herein, the term "Borrowing Base" shall mean, as of
any date of determination, an amount equal to the lesser of:
(A) The "Net Book Value Model", which shall be an amount
equal to sixty-five percent (65%) of the Residual Interest in
Securitized Assets arising from the Eligible Securitization
Transactions from time to time included in the Borrowing Base,
calculated in accordance with the Agreed upon Accounting
Procedures; and
(B) An amount equal to seventy-five percent (75%)of the
Residual Interest in Securitized Assets arising from the
Eligible Securitization Transactions from time to time included
in the Borrowing Base, as calculated based on the Collateral
Value Model (as defined below);
2
<PAGE> 8
in each instance as reported on the most recently submitted Borrowing Base
Report. Each such borrowing pursuant to the Line of Credit is herein called a
"Revolving Credit Loan" and such borrowings are collectively called the
"Revolving Credit Loans". The Company and the Lenders may, from time to time by
written agreements signed by the Company and each of the Lenders, designate
certain of the Eligible Securitization Transactions for inclusion in the
Borrowing Base. As of the date of this Loan Agreement, the following Eligible
Securitization Transactions are included in the Borrowing Base: OAGT-1995-1,
OAGT-1996-1, OAGT-1996-2, OAGT-1996-3, OAGT-1996-4, OAGT-1997-1, OAGT-1997-2,
OAGT-1997-3 and OAGT-1998-1.
From time to time after the Closing Date, the Company may (but shall not
be obligated to) request that the Lenders include Subsequent Securitization
Transactions (as defined below) within the definition of Eligible Securitization
Transactions for all purposes of this Agreement (including, but not limited to,
inclusion in the Borrowing Base), the Pledge and Security Agreement and the
other Loan Documents. Any such inclusion of a Subsequent Securitization
Transaction within the definition of Eligible Securitization Transactions, and
the inclusion of any Eligible Securitization Transaction within the Borrowing
Base, shall be effected in accordance with the provisions of subsection 4.12 of
the Loan Agreement and may be accomplished by written agreement among the
Company and the Lenders, without necessity of formal amendment to this Agreement
or any other Loan Document (other than an amendment to the Pledge and Security
Agreement, the filing of financing statements, if necessary, and amendment to
Schedules to reflect the additional Pledged Collateral as defined in the Pledge
and Security Agreement).
The Company shall have the right at any time and from time to time to
request that the Lenders delete any Eligible Securitization Transaction from the
Borrowing Base, provided that simultaneously with any such request, the Company
pays down the outstanding Loans, if necessary, in an amount sufficient to cause
the outstanding balance of the Loans not to exceed the Available Line
Commitment, after re-calculating the Borrowing Base to give effect to the
removal of any such Eligible Securitization Transaction. The Agent shall
maintain a written record of those Eligible Securitization Transactions from
time to time included in the Borrowing Base, and such written record shall be
binding upon the Company for all purposes of this Agreement. The removal of any
Eligible Securitization Transaction from the Borrowing Base shall in no way
affect or impair the Lenders' security interest in and lien on Collateral
arising from or relating to such Eligible Securitization Transaction or the
Lenders' rights to apply proceeds thereof in repayment of the Loans in
accordance with the terms of the Loan Agreement, the Security Agreement and the
other Loan Documents.
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(b) Mechanics of Revolving Credit Loans. Each Revolving Credit
Loan shall be made by each Lender in such amount (not in excess of such Lender's
Commitment) as the Company shall request, provided that each borrowing shall be
in a minimum aggregate amount of $500,000 from all of the Lenders or such lesser
amount as may be equal to the then unused portion the Available Line Commitment.
Requests for borrowings hereunder shall in each case be made pro rata from each
of the Lenders in accordance with their respective Percentages of the Total
Commitment. Revolving Credit Loans shall be effected by separate wire transfers
from the respective Lenders to the Operating Account referred to below, and
shall be made at such times before the Conversion Date as the Company may
request by three (3) Banking Days' prior notice to each of the Lenders, provided
that the initial Revolving Credit Loans made in connection with the inclusion of
any Subsequent Securitization Transaction within the Borrowing Base pursuant to
subsection 4.13 below shall be funded by the Lenders not less than three (3)
Banking Days after issuance by the Lenders to the Company of written
confirmation that such subsequent securitization transaction will be an Eligible
Securitization Transaction as contemplated by such subsection 4.13. All
borrowing requests shall be in writing, or by telephonic communication confirmed
by telecopy or other facsimile transmission on the same day as the telephone
request, and shall specify the proposed date and the amount of the Revolving
Credit Loans. Upon receipt of any request for Revolving Credit Loans hereunder,
the Agent shall promptly notify the other Lenders, specifying the proposed date
and respective amounts thereof. Each Lender shall make each Revolving Credit
Loan hereunder on such proposed date by delivering to the Company's account at
Wells Fargo Bank, Newport Beach, California, ABA #: 121000248; Account #
4159359082; Beneficiary: Onyx Acceptance Corporation: Attn.: Jerry Wilkens;
Other Instructions: Loan Proceeds (together with any successor account from time
to time designated by the Company, the "Operating Account") the amount thereof
in immediately available funds by not later than 1:00 p.m. Boston time on the
date on which such Revolving Credit Loans are to be made.
(c) Mechanics of Blocked Account. Pursuant to the Eligible
Securitization Transaction Documents, and the documents governing any additional
Eligible Securitization Transaction(s), the Company shall cause the depository,
paying agent or, in the case of Pledged Certificates, spread account trustee or
other trustee or paying agent maintaining any Spread Account or other account
from which proceeds of the Collateral are to be released to the Company, to
release such proceeds directly to the Blocked Account. On or prior to the
earlier to occur of the Conversion Date or a Default or Event of Default the
Agent will, on the 17th day of each month, apply available funds on deposit in
the Blocked Account first, to the payment of the accrued but unpaid interest on
the Notes, and second, to the outstanding principal
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<PAGE> 10
balance of the Notes in the amount necessary to keep the aggregate outstanding
principal under the Notes within the Borrowing Base. As soon as reasonably
practicable, but in any event no later than the Banking Day next succeeding the
day on which available funds on deposit in the Blocked Account are so applied by
the Agent, available funds remaining on deposit in the Blocked Account will be
released to the Operating Account or to such other accounts as may from time to
time be designated by the Company in writing. After the Conversion Date,
available funds on deposit in the Blocked Account will be applied by the Agent
in accordance with subsection 1.5 below. After the occurrence of an Event of
Default, available funds on deposit in the Blocked Account will be applied by
the Agent in accordance with subsection 1.7 below.
(d) Reborrowings. During the period prior to the Conversion Date,
the Company may, at its option, from time to time prepay all or any portion of
the Revolving Credit Loans made from time to time hereunder, subject to the
provisions of subsection 1.8, and the Company may reborrow from time to time
hereunder amounts so paid up to the amount of the Available Line Commitment in
effect at the time of reborrowing.
(e) Borrowing Base Reports. On the date of each request for a
Revolving Credit Loan, and on the 10th Banking Day of each month (whether before
or after the Conversion Date), or the next succeeding Banking Day if the 10th
Banking Day of any month is not a Banking Day (or after and during the
continuance of a Default, on such more frequent basis as the Majority Lenders
may from time to time specify by notice to the Company), the Company shall
deliver to the Lenders a Borrowing Base Report, substantially in the form of
Exhibit A hereto (the "Borrowing Base Report"), each such Borrowing Base Report
to set forth in reasonable detail the information specified therein as of the
close of business on the immediately preceding month-end, and shall be signed by
the Chief Executive Officer, President, any Vice-President and/or Chief
Financial Officer of the Company. Such Borrowing Base Reports may be delivered
by overnight mail, courier, telex, telecopy or other facsimile transmission.
Each Borrowing Base Report will set forth, in such detail as the Lenders may
from time to time reasonably require, the Borrowing Base calculated in
accordance with subsection 1.2(a) above.
1.3 Revolving Credit and Term Notes.
(a) Form of Note. The Revolving Credit Loans made by each Lender
pursuant to this Section 1 shall not exceed such Lender's Commitment and shall
be evidenced by a revolving credit and term promissory note of the Company in a
principal amount equal to such Lender's Commitment and in the form attached
hereto as Exhibit B. There shall be one (1) note payable to the order of
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<PAGE> 11
each Lender (each such note being herein called a "Note" and all such notes
being herein collectively called the "Notes").
(b) Interest Rate. Each Note shall bear interest (computed on the
basis of the actual number of days elapsed over a 360-day year) on the unpaid
principal amount thereof at a rate per annum equal to one quarter of one percent
(1/4%) above the Prime Rate, payable monthly in arrears on the 17th day of each
month (whether prior to or after the Conversion Date), commencing on the first
such date next succeeding the date of issuance, and at maturity (whether by
acceleration or otherwise) and subject to the additional default rate provided
for in subsection 1.10. Each change in the rate of interest payable on the Notes
shall take effect simultaneously with the corresponding change in the Prime
Rate. Notwithstanding anything contained herein or in any other Loan Document to
the contrary, in no event shall the amount paid or agreed to be paid by the
Company as interest on the Notes exceed the highest lawful rate permissible
under any law applicable thereto.
1.4 Conversion of Revolving Credit Loans to Term Loans. Each Lender,
severally and not jointly, agrees that, upon the terms and subject to the
Company's compliance with all terms of this Agreement, and provided that there
shall occur no Default or Event of Default which has not been remedied or cured
in accordance with the terms of Section 12 prior to such Conversion Date, the
full outstanding principal balance of its Revolving Credit Loans (up to an
amount equal to such Lender's Percentage of the Available Line Commitment),
shall convert to a term loan on the Conversion Date (each such term loan being
called a "Term Loan", all such term loans being herein collectively called the
"Term Loans", and the Term Loans and the Revolving Credit Loans being sometimes
referred to collectively as the "Loans" and each individually as a "Loan"). The
Term Loan of each Lender shall be in a principal amount not exceeding such
Lender's Percentage of the Available Line Commitment on the Conversion Date, and
the Term Loans shall be pro rata from each of the Lenders in accordance with
their respective Percentages of the Total Commitment.
1.5 Principal Amortization of the Notes After Conversion Date. In addition
to the Company's ongoing obligation to pay accrued interest on the Notes
pursuant to subsection 1.3, which obligation shall be satisfied to the extent of
available funds in the Blocked Account prior to application of such funds in
repayment of principal in the amounts set forth below in this subsection 1.5,
the Company shall repay the outstanding principal balance of the Notes as of the
Conversion Date in not more than twenty-four (24) consecutive monthly
installments, due and payable on the 17th day of each month (or the next
succeeding Banking Day, if the 17th day of any month is not a Banking Day)
commencing with the first such date next succeeding the
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Conversion Date, each such monthly installment to be in an amount equal to the
greater of:
(a) All amounts paid into the Blocked Account by the trustee, paying
agent or depository or otherwise under each Eligible Securitization Transaction;
and
(b) An amount equal to one-twenty-fourth (l/24) of the outstanding
principal balance of the Notes on the Conversion Date.
1.6 Fees.
(a) Commitment Fee. The Company shall pay each Lender a commitment
fee (the "Commitment Fee") for the period commencing on the Closing Date to and
including the Conversion Date, or the earlier date of termination of the Line of
Credit hereunder, equal to fifteen one-hundredths of one percent (.15%) per
annum (computed on the basis of the actual number of days elapsed over a 360-day
year) of such Lender's Percentage of the average daily unused portion of the
Borrowing Base. The Commitment Fee shall be paid quarterly in arrears on the
last day of each March, June, September and December of each year, commencing on
the first such date next succeeding the Closing Date, and on the Conversion Date
or earlier date of termination of the Line of Credit.
(b) Changes Affecting Commitment Fee. If any change in any
requirement imposed upon any Lender by any law of the United States of America
or by any regulation, order, interpretation, ruling or official directive
(whether or not having the force of law) of the Board of Governors of the
Federal Reserve System, the Federal Deposit Insurance Corporation or any other
board or governmental or administrative agency of the United States of America
shall impose, increase, modify or deem applicable any reserve, special deposit,
assessment or other requirement against the Commitment of such Lender hereunder,
and the result of the foregoing, in the reasonable determination of such Lender,
is to impose an increased cost on such Lender that is attributable to the
maintaining of the Commitment, then the Commitment Fee payable to such Lender
shall be increased on the same basis as such fees are increased for all similar
commitments maintained by such Lender, for so long as the increased cost is
imposed on such Lender, to the extent reasonably determined by such Lender to be
necessary to compensate such Lender for such increased cost. The determination
by such Lender of the amount of such cost, if done in good faith, shall, in the
absence of manifest error, be conclusive, and at the Company's request such
Lender shall demonstrate the basis for such determination.
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1.7 Application of Funds Deposited Into Blocked Account After Event of
Default.
From and after the occurrence of a Default or Event of Default, such
Default or Event of Default not having previously been remedied or cured in
accordance with Section 12 below, and without prejudice to any other rights or
remedies of the Agent or the Lenders, all amounts paid into the Blocked Account
from whatever source shall be applied by the Agent as follows:
First, to the payment of the reasonable costs and expenses
incurred by the Agent and the Lenders in connection with such
Default or Event of Default;
Second, to the payment in full of all accrued and unpaid
interest due and owing on the Notes;
Third, to the payment in full of all unpaid principal of the
Notes; and
Fourth, to the payment in full of all other amounts owed by the
Borrowers to the Agent or any Lender pursuant to any Loan
Document.
The Agent's application of amounts paid into the Blocked Account in accordance
with this subsection 1.7 shall not affect, limit or impair in any manner the
rights and remedies of the Agent or the Lenders set forth in subsection 8.2
below.
1.8 Prepayment; Repayment of Outstanding Loans in Excess of Available Line
Commitment.
(a) Voluntary Prepayment. On at least three (3) Banking Days' prior
written notice to each Lender, the Company may, at its option, prepay the Notes
after the Conversion Date in whole at any time or in part from time to time,
without a premium or penalty of any kind attributable to such prepayment. Any
optional prepayment of the Notes in part shall be in an aggregate principal
amount of not less than $100,000 to all of the Lenders. Any prepayment in full
of the Notes after the Conversion Date shall be made together with accrued
interest on the amount prepaid to the date of such prepayment and all other fees
and expenses due the Lenders.
(b) If at any time (whether prior to or after the Conversion Date)
the aggregate outstanding principal amount of the Loans exceeds the Available
Line Commitment, the Company will immediately repay the Notes, without penalty
or premium, in an amount necessary to cause the outstanding principal amount of
the Loans not to exceed the Available Line Commitment; provided, however, that
if the outstanding principal amount of the Loans exceeds the Available Line
Commitment by reason of one or more
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<PAGE> 14
changes made by the Lenders to the Collateral Value Model, and the outstanding
principal amount of the Loans does not exceed the Available Line Commitment
before giving effect to such changes, then the Company shall have forty-five
(45) days within which to make such repayment. Except for payments made in
accordance with subsection 1.5, prepayments of the Notes after the Conversion
Date will be applied in inverse order of maturity.
1.9 Security. The Notes and all other obligations of the Company hereunder
and/or under the other Loan Documents shall be secured by and entitled to the
benefits of the following (except to the extent that any thereof may be
expressly waived by the Majority Lenders):
(a) A Pledge and Security Agreement (the "Pledge and Security
Agreement") for the ratable benefit of the Lenders pursuant to which the Company
shall have granted to the Agent a first priority perfected security interest in,
lien on and pledge of all tangible and intangible personal property and assets
of the Company of every kind and description including, without limitation,
"investment property", "accounts", "general intangibles", "chattel paper",
"inventory", and "equipment", as such terms are defined in any applicable
Uniform Commercial Code, one hundred percent (100%) of the issued and
outstanding the capital stock of Finco and the Pledged Certificates, together
with any and all other right, title and interest of the Company to receive
dividends, distributions, advances, loans or other payments of money in respect
of Residual Interest in Securitized Assets and Spread Accounts (including any
and all rights to investment, interest or other income on Spread Accounts and
any Collection Accounts to the extent released therefrom), and in all Eligible
Securitization Transaction Documents and in any and all other agreements,
documents and/or instruments of the Company or to which the Company is a party,
now existing or hereafter arising in connection with any securitization
transaction;
(b) For the Company's Irvine, California headquarters, and any other
location at which Collateral (as defined below) and/or records (to the extent
not also available at such Irvine, California headquarters) relating to the
Company's interests in any Eligible Securitization Transaction are maintained or
stored, a landlord's consent relating to the Agent's access to all such leased
premises;
(c) One or more letter agreement(s) among the Company, Finco, each
of the respective Spread Account Trustees and CapMAC; and
(d) Limited beneficial certificates (the "Pledged Certificates")
issued pursuant to the respective 1995-1, 1996-1, 1996-2, 1996-3, 1996-4,
1997-1, 1997-2, 1997-3 and 1998-1 Spread Account Trust Agreements between Finco
and the Spread Account
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Trustees named therein (collectively, the "Spread Account Trust Agreements"),
pursuant to which Spread Account Trust Agreements the OAGT 1995-1 Spread
Accounts were transferred to the 1995-1 Spread Account Trust, and the 1996-1,
1996-2, 1996-3, 1996-4, 1997-1, 1997-2, 1997-3 and 1998-1 Spread Accounts were
established in the name of the 1996-1, 1996-2, 1996-3, 1996-4, 1997-1, 1997-2,
1997-3 and 1998-1 Spread Account Trusts, respectively, and, solely to the extent
the Company requests (and the Lenders agree) that any Subsequent Securitization
Transactions become Eligible Securitization Transactions in accordance with
subsection 4.13 of the Loan Agreement, all additional limited beneficial
certificates issued pursuant to any Spread Account Trust Agreements to which the
Company or Finco may hereafter be a party, all owner certificates or other
certificates or instruments of any kind or nature evidencing ownership of or a
beneficial interest in any owner trust or other trust established by the Company
or Finco and which may hereafter be delivered by the Company to the Agent in
connection with any such Subsequent Securitization Transactions pursuant to the
terms of this Agreement and the Pledge and Security Agreement. The Company
expressly agrees and confirms that all such limited beneficial certificates, all
owner certificates or other certificates or instruments of any kind or nature
evidencing ownership of or a beneficial interest in any owner trust or other
trust established by the Company or Finco or similar instruments or certificates
evidencing the Company's interest in or right to receive distributions from any
Spread Account Trust established in connection with any Subsequent
Securitization Transaction which becomes an Eligible Securitization Transaction
pursuant to subsection 4.12 of this Agreement shall for all purposes of the Loan
Agreement, the Pledge and Security Agreement and each of the other Loan
Documents be included within the definition of Pledged Certificates, and shall
constitute Collateral for the Loans.
All of the agreements and instruments (including without limitation the
Spread Account Trust Agreements and the Pledged Certificates) described in this
subsection, together with any and all other agreements and instruments
heretofore or hereafter securing the Notes and the Company's other obligations
hereunder, are sometimes hereinafter referred to collectively as the "Security
Documents" and each individually as a "Security Document". All of the personal
property described in clauses (a), (b), and (d) of this subsection, together
with any additions thereto or replacements or proceeds thereof, and any other
real or personal property hereafter securing the Notes, are sometimes
hereinafter referred to collectively as the "Collateral". The Company agrees to
take such actions as may be necessary from time to time to cause the Agent for
the benefit of the Lenders to be secured by and entitled to the benefits of the
Security Documents as described in this subsection, including, without
limitation, the obtaining of consents of any third parties. The Security
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Documents shall be satisfactory in form and substance to the Lenders and their
counsel.
1.10 Default Rate Of Interest. In the event of any Event of Default,
including but not limited to the Company's failure to make any payment of
principal of or interest on any Note when due, whether at maturity or at a date
fixed for the payment of any installment or prepayment thereof or by
declaration, acceleration or otherwise, interest on the full outstanding balance
of principal and (to the extent permitted by law) interest on each Note shall,
during the continuance of such Event of Default, be payable on demand at a rate
per annum equal to two percent (2%) above the rate otherwise applicable to such
Note hereunder.
1.11 Notations. Prior to any sale or other disposition of any Note by any
Lender, such Lender shall make a notation on such Note (or on a paper annexed
thereto) of the unpaid principal amount thereof at the time outstanding, the
last date to which interest has been paid thereon and the amount of unpaid
interest accrued thereon to the date of such sale or disposition. Upon payment
in full of the principal of and interest on any Note, such Note shall be
canceled and returned to the Company, provided that no Note shall be canceled or
returned so long as the Lenders shall be obligated to make Revolving Credit
Loans hereunder.
1.12 Form and Terms of Payment. All payments by the Company of principal of
or interest on the Notes and of any fee due hereunder shall be made to the Agent
for the account of the Lenders (except for fees paid to the Agent solely for its
own account) at the address of the Agent hereinafter set forth in this Agreement
(or at such other address as the Agent shall have furnished to the Company in
writing) and shall be made in immediately available funds free of any
counterclaim, set-off or charge. The Company hereby authorizes the Agent to
charge the Company's Blocked Account, Operating Account or any other deposit
accounts from time to time maintained by the Company with the Agent for the
purpose of effecting such payments. If any payment of principal of or interest
on the Notes shall become due on a day which is not a Banking Day, such payment
may be made on the next succeeding Banking Day and such extension shall be
included in computing interest in connection with such payment.
1.13 Pro Rata Treatment. Each payment and prepayment of the principal of the
Notes shall be made pro rata among the Lenders based upon the respective unpaid
principal amounts of the Notes at the time outstanding. Each permanent reduction
of the Total Commitment shall be made pro rata among the Lenders based upon the
respective amount of each Lender's Percentage of the Total Commitment.
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1.14 Capital Adequacy. If after the date of this Agreement, any Lender shall
have reasonably determined that the adoption or implementation of any applicable
law, rule or regulation regarding capital requirements for the Lenders or any
Lender holding companies, or any change therein (including, without limitation,
any change according to a prescribed schedule of increasing requirements,
whether or not known on the date of this Agreement), or any change in the
interpretation or administration thereof by any governmental authority, central
Lender or comparable agency charged with the interpretation or administration
thereof, or compliance by such Lender with any request or directive of any such
Person regarding capital adequacy (whether or not having the force of law) has
the effect of reducing the return on such Lender's capital to a level below that
which such Lender could have achieved (taking into consideration such Lender's
policies with respect to capital adequacy immediately before such adoption,
implementation, change or compliance) but for such adoption, implementation,
change or compliance as a consequence of its Commitment to make Loans hereunder
by any amount reasonably deemed by such Lender to be material, the Company shall
pay to such Lender as an additional fee from time to time on demand such amount
as such Lender shall have reasonably determined to be necessary to compensate it
for such reduction. The determination by such Lender of such amount, if done on
the basis of any reasonable averaging and attribution methods, shall in the
absence of manifest error be conclusive, and at the Company's request, such
Lender shall demonstrate the basis of such determination.
1.15 Special Provisions Concerning Collateral Value Model; Confidentiality.
The Company and each of the Lenders (other than State Street) acknowledge and
agree with State Street that the Collateral Value Model is proprietary
information of State Street. In order to facilitate the Company's and each other
Lender's calculation of the applicable Borrowing Base under Section 1.2(a)(B)
above, State Street has delivered to the Company and each other Lender the full
text of the formulas used in the Collateral Value Model. The Company and each
Lender (other than State Street) hereby covenants to and agrees with State
Street that (i) it will hold the Collateral Value Model in confidence and not
disclose or deliver it in any form or variation to any third party, except those
persons in the Company's or such Lender's organization or their respective
advisors, (provided that the Company's and each Lender's advisors shall agree in
writing to hold the Collateral Value Model in confidence prior to its disclosure
to such advisors) who need to know such information in order to periodically
calculate the Borrowing Base (the "Permitted Purpose"), unless such information
becomes public knowledge or is otherwise required to be disclosed by law, (ii)
the Company and each Lender shall use the Collateral Value Model solely for the
Permitted Purpose and (iii) upon termination of this Agreement (in the case of
the Company) or
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termination of each Lender's Commitment, the Company and each Lender will return
the full text of the formulas used in the Collateral Value Model to State
Street. Without limiting the foregoing, the Company and each Lender covenants to
and agrees with State Street that it shall not duplicate, copy or in any manner
make extracts from the Collateral Value Model. THE COMPANY AND EACH LENDER
HEREBY SEVERALLY AGREE TO INDEMNIFY STATE STREET FOR ANY AND ALL DAMAGES,
LOSSES, COSTS OR EXPENSES INCURRED BY STATE STREET BY REASON OF SUCH PARTY'S
BREACH OF THE PROVISIONS OF THIS SUBSECTION 1.15.
Section 2. Use of Proceeds. The Company will use the proceeds of the Loans: (a)
to finance the cost of Capital Expenditures for the Company; and (b) for working
capital purposes for the Company. The Company will not, and will not permit any
Subsidiary to, directly or indirectly, use any part of such proceeds (i) for the
purpose of making any Restricted Payment other than those permitted by Section
6.5 hereof, (ii) for the purpose of purchasing or carrying any margin stock
within the meaning of Regulation U (12 CFR Part 221) of the Board of Governors
of the Federal Reserve System, or (iii) for any other purpose which would
violate any provision of any other applicable statute, regulation, order or
restriction.
Section 3. Representations and Warranties. In order to induce the Lenders to
enter into this Agreement and to make the Loans provided for hereunder, the
Company makes the following representations and warranties, which shall survive
the execution and delivery hereof and of the Notes, and which shall be deemed
re-made by the Company each time the Company submits a borrowing request to the
Lenders.
3.1 Organization, Standing, etc. of the Company. The Company is a
corporation duly organized and validly existing under the laws of the State of
Delaware, and has all requisite corporate power and authority to own and operate
its properties, to carry on its business as now conducted and proposed to be
conducted, to enter into this Agreement, the Security Documents to which it is a
party and all other documents to be executed by it in connection with the
transactions contemplated hereby, to grant the Agent for the benefit of the
Lenders a security interest in the Collateral, to issue the Notes and to carry
out the terms hereof and thereof.
3.2 Subsidiaries. Schedule 3.2 attached hereto correctly sets forth as to
each Subsidiary, its name, the jurisdiction of its incorporation, the number of
shares of its capital stock of each class outstanding and the number of such
outstanding shares owned by the Company and its Subsidiaries. Each such
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own and operate its properties, to
carry on its business as now conducted and now
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<PAGE> 19
proposed to be conducted and to enter into such of the Security Documents and
Eligible Securitization Transaction Documents as relate to it and all other
documents, if any, to be executed by it in connection with the transactions
contemplated hereby. All of the outstanding capital stock of each Subsidiary is
validly issued, fully-paid and nonassessable, and is owned by the Company or its
Subsidiaries as specified in Schedule 3.2, in each case free of any mortgage,
pledge, lien, security interest, charge, option or other encumbrance.
3.3 Qualification. The Company and its Subsidiaries are duly qualified or
licensed and in good standing as foreign corporations duly authorized to do
business in each jurisdiction in which the character of the properties owned or
the nature of the activities conducted makes such qualification or licensing
necessary.
3.4 Financial Information; Disclosure, etc. (a) The Company has furnished
the Lenders with the financial statements and other reports listed in Schedule
3.4 hereto. Such financial statements have been prepared in accordance with GAAP
applied on a consistent basis and fairly present the financial position and
results of operations of the Company and the other Persons, if any, to which
they relate as of the dates and for the periods indicated. Since December 31,
1997, there has not been any material adverse change in the business,
operations, properties or financial position of the Company (or, of the other
Persons to which such financial statements purport to relate).
(b) Neither this Agreement nor any financial statements, reports or
other documents or certificates furnished to the Lenders by the Company in
connection with the transactions contemplated hereby contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements herein or therein contained not misleading, except to the
extent that such financial statements, reports or other documents or
certificates expressly relate to an earlier date or are affected by the
consummation of the transactions contemplated by this Agreement.
(c) None of the Loans will render the Company unable to pay its
debts as they become due; the Company is not contemplating either the filing of
a petition by it under any state or federal bankruptcy or insolvency laws or the
liquidation of all or a major portion of its property; and the Company does not
have any knowledge of any person contemplating the filing of any such petition
against it. The Company (both before and after the making of the Loans, the
granting of security interests in favor of the Agent and the Lenders and the
consummation of the Related Events) is solvent (within the meaning of all
applicable fraudulent transfer or fraudulent conveyance statutes and acts, the
federal bankruptcy code and all other applicable laws) on a
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going concern basis and has assets having a fair value in excess of the amount
required to pay its probable liabilities on its existing debts (including the
Loans and contingent debts) as they become absolute and matured, and has, and
will have, access to adequate capital for the conduct of its business and the
ability to pay its debts from time to time incurred therewith as such debts
mature.
(d) The Company has furnished to the Lenders the cash flow
projections of (i) the Company and (ii) the Company and its Subsidiaries for the
two (2) year period beginning on January 1, 1998 (taking into account the
Related Events and the use of the proceeds of the initial Loans) which are
attached to this Agreement as part of Schedule 3.4 (the "Projections"). The
Projections were prepared based upon the best information and knowledge of the
Company (which information the Company believes was accurate and sufficient to
prepare the Projections and to rely thereon). To the extent the Projections are
based on assumptions, such assumptions are reasonable. Without limiting the
foregoing, the Projections demonstrate the ability of the Company to continue
its business as currently operated and proposed to be operated, and to meet all
of its obligations and liabilities on a current basis, taking into account (i)
all assumptions made, (ii) all known prospective business contingencies and off
balance sheet items, and (iii) the effect of this Agreement and the consummation
of the Related Events.
3.5 Licenses; Franchises, etc. Schedule 3.5 attached hereto accurately and
completely lists all material authorizations, licenses, permits and franchises
of any public or governmental regulatory body granted or assigned to the Company
or any Subsidiary and the same constitute the only material authorizations,
licenses, permits and franchises of any public or governmental regulatory body
which are necessary for the conduct of the business of the Company and its
Subsidiaries as now conducted and proposed to be conducted (such material
authorizations, licenses, permits and franchises, together with any extensions
or renewals thereof, being herein sometimes referred to collectively as the
"Licenses"). All of such Licenses are validly issued and in full force and
effect and the Company and its Subsidiaries have fulfilled and performed all of
their obligations with respect thereto and have full power and authority to
operate thereunder, except where the failure to obtain, maintain in effect or so
comply could not have a Material Adverse Effect.
3.6 Material Agreements. Schedule 3.6 attached hereto accurately and
completely lists all material agreements including servicing agreements,
sub-servicing agreements, leases, pooling and servicing agreements, agreements
with credit enhancers, other agreements executed in connection with
securitizations, underwriting agreements, dealer affiliation agreements,
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employment agreements or other agreements with management of the Company or any
Subsidiary and all other material agreements which, as of the Closing Date, will
be in effect in connection with the conduct of the business of the Company and
its Subsidiaries. Each of the Company and its Subsidiaries (as applicable) and,
to the best of the Company's knowledge, all third parties to such material
agreements, are in substantial compliance with the terms thereof, and no default
or event of default by the Company or, to the Company's knowledge, any other
party thereto, exists thereunder.
3.7 Tax Returns and Payments. The Company and its Subsidiaries have filed
all tax returns required by law to be filed and have paid all taxes, assessments
and other governmental charges levied upon any of their respective properties,
assets, income or franchises, other than those not yet delinquent and those, not
substantial in aggregate amount, being or about to be contested as provided in
subsection 5.4. The charges, accruals and reserves on the books of the Company
and its Subsidiaries in respect of their respective taxes are adequate in the
opinion of the Company, and the Company knows of no unpaid assessment for
additional taxes or of any basis therefor.
3.8 Indebtedness, Liens and Investments, etc. Schedule 3.8 attached hereto
correctly describes, as of the date or dates indicated therein, (i) all
outstanding Indebtedness of the Company and its Subsidiaries in respect of
borrowed money, Capital Leases and the deferred purchase price of property; (ii)
all existing mortgages, liens and security interests in respect of any property
or assets of the Company or its Subsidiaries; (iii) all outstanding investments
(other than investments made under any pooling and servicing agreement or
insurance agreement with respect to any securitization transaction), loans
(other than Automobile Loans) and advances of the Company and its Subsidiaries;
and (iv) all existing guarantees by the Company and its Subsidiaries.
3.9 Title to Properties; Liens. The Company and its Subsidiaries have good
and marketable title to all of their respective properties and assets, and none
of such properties or assets is subject to any mortgage, pledge, lien, security
interest, charge or encumbrance except the existing mortgages and security
interests referred to in Schedule 3.8 attached hereto and except minor liens and
encumbrances which in the aggregate are not substantial in amount, do not in any
case materially detract from the value of the property subject thereto or
materially impair the operations of the Company and its Subsidiaries and have
not arisen otherwise than in the ordinary course of business. The Company and
its Subsidiaries enjoy quiet possession under all leases to which they are
parties as lessees, and all of such leases are valid, subsisting and in full
force and effect on the Closing Date. None of such leases contains any
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provision restricting the incurrence of indebtedness by the lessee or any
unusual or burdensome provision materially adversely affecting the current and
proposed operations of the Company and its Subsidiaries.
3.10 Litigation, etc. There is no action, proceeding or investigation pending
or threatened (or any basis therefor known to the Company) which questions the
validity of this Agreement, the Notes, the Security Documents or the other
documents executed in connection herewith or any of the Related Events, or any
action taken or to be taken pursuant hereto or thereto, or which might
reasonably be expected to result, either in any case or in the aggregate, in any
material adverse change in the business operations, affairs or condition of the
Company or any Subsidiary or any of their respective properties or in any
material liability on the part of the Company or any Subsidiary.
3.11 Authorization; Compliance with Other Instruments. The execution,
delivery and performance of this Agreement, the Notes and the Security
Documents, and all documents and agreements executed by the Company in
connection with the Related Events have been duly authorized by all necessary
corporate action on the part of the Company and its Subsidiaries, will not
result in any violation of or be in conflict with or constitute a default under
any term of the charter or by-laws of the Company or any Subsidiary, or of any
agreement (including but not limited to any agreement executed in connection
with any Eligible Securitization Transaction), instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to the Company or any
Subsidiary, or result in the creation of any mortgage, lien, charge or
encumbrance upon any of the properties or assets of the Company or any
Subsidiary pursuant to any such term (except pursuant to the Security
Documents). This Agreement, the Notes, the Security Documents and each of the
other Loan Documents are valid, binding and enforceable obligations of the
Company. No consent of stockholders of the Company is necessary in order to
authorize the execution, delivery or performance of this Agreement, the Security
Documents, the issuance of the Notes or any other agreement executed in
connection with any of the Related Events. Neither the Company nor any
Subsidiary is in violation of any term of its charter or by-laws, or of any
material term of any agreement (including but not limited to any agreement
executed in connection with any Eligible Securitization Transaction) or
instrument to which it is a party, or, to the best of the Company's knowledge,
of any judgment, decree, order, statute, rule or governmental regulation
applicable to it which might reasonably be expected to have a Material Adverse
Effect.
3.12 Credit Trigger Events. Without limiting the scope of subsection 3.11, no
Credit Trigger has occurred under any agreement executed in connection with any
Eligible Securitization Transaction.
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3.13 Governmental and Other Third Party Consents. Except for such filings and
notices as have already been made or are being made prior to the Closing Date
pursuant to the Security Documents, none of the Company, any Subsidiary, any
shareholder of the Company or any other Subsidiary or Affiliate which is a party
to any of the Security Documents is required to obtain any order, consent,
approval or authorization of (collectively, the "Consents"), or required to make
any declaration or filing with, (i) any governmental unit or other regulatory
authority (including but not limited to the SEC) or (ii) any trustee, credit
enhancer, rating agency or other party to any Eligible Securitization
Transaction, in connection with the execution and delivery of this Agreement and
the issuance and delivery of the Notes pursuant hereto, or in connection with
the execution and delivery of the Security Documents and the granting of the
security interests in the Collateral pursuant thereto, or for the purpose of
maintaining in full force and effect each of the Licenses. Schedule 3.13
attached hereto accurately describes all of the Consents which have been or
prior to the Closing Date will be obtained and in full force and effect. The
time within which any administrative or judicial appeal, reconsideration,
rehearing or other review of any Consent may be taken or instituted has lapsed,
and no such appeal, reconsideration or rehearing or other review has been taken
or instituted.
3.14 Regulation U, etc. Neither the Company nor any Subsidiary owns or has
any present intention of acquiring any "margin stock" within the meaning of
Regulation U (12 CFR Part 221) of the Board of Governors of the Federal Reserve
System (herein called "margin stock"). None of the proceeds of the Loans will be
used, directly or indirectly, by the Company or any Subsidiary for the purpose
of purchasing or carrying, or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry, any margin
stock or for any other purpose which might constitute the transactions
contemplated hereby a "purpose credit" within the meaning of said Regulation U,
or cause this Agreement to violate Regulation U, Regulation T, Regulation X, or
any other regulation of the Board of Governors of the Federal Reserve System or
the Securities Exchange Act of 1934, as amended. If requested by any Lenders,
the Company will promptly furnish such Lenders with a statement in conformity
with the requirements of Federal Reserve Form U-1 referred to in said Regulation
U.
3.15 Employee Retirement Income Security Act of 1974. Schedule 3.15 attached
hereto sets forth a true and complete list of all employee benefit plans and
arrangements of the Company and its Subsidiaries, including, without limitation,
all pension, profit sharing or similar plans providing for a program of deferred
compensation to any employee or any plan subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The terms
used in this subsection
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3.15 and in subsection 5.1 and subsection 6.10 of this Agreement shall have the
meanings assigned thereto in the applicable provisions of ERISA and the Internal
Revenue Code of 1986, as amended (the "Code"), and the term "Affiliated Company"
shall mean the Company and all corporations, partnerships, trades or businesses
(whether or not incorporated) which constitute a controlled group of
corporations with the Company, a group of affiliated service groups or other
affiliated group, within the meaning of Section 414(b), Section 414(c), Section
414(m) or Section 414(o), respectively, of the Code, or Section 4001 of ERISA.
The Company and each employee benefit plan sponsored by an Affiliated Company
and, to the best of the Company's knowledge, each multiemployer plan (as defined
in Section 4001(a)(3) of ERISA) to which any Affiliated Company makes
contributions, are in material compliance with applicable provisions of ERISA
and the Code. No Affiliated Company has incurred any material liability to the
Pension Benefit Guaranty Corporation ("PBGC") or any employee benefit plan on
account of any failure to meet the contribution requirements of any such plan,
minimum funding requirements or prohibited transactions under ERISA or the Code,
termination of a single employer plan, partial or complete withdrawal from a
multiemployer plan, or the insolvency, reorganization or termination of any
multiemployer plan, and no event has occurred or conditions exist which present
a material risk that any Affiliated Company will incur any material liability on
account of any of the foregoing circumstances. The consummation of the
transactions contemplated by this Agreement will not result in any prohibited
transaction under ERISA or the Code for which an exemption is not available.
3.16 Ownership of Company; Outstanding Options or Warrants. All of the
Company's outstanding shares of capital stock are validly issued, fully paid and
nonassessable. There are no outstanding rights, options, warrants or agreements
for the purchase from, or sale or issuance by, the Company or any Subsidiary of
any of its capital stock or any securities convertible into or exchangeable for
such stock and neither the Company nor any Subsidiary is obligated in any manner
to issue any additional shares of capital stock.
3.17 Environmental Matters. Neither the Company nor any Subsidiary has ever
caused or permitted any Hazardous Material to be disposed of on or under any
real property owned, leased or operated by the Company and/or any Subsidiary and
no such real property has ever been used (by the Company and/or any Subsidiary
or, to the Company's knowledge, by any other Person) as (i) a disposal site or
permanent storage site for any Hazardous Material or (ii) a temporary storage
site for any Hazardous Material. The Company has been issued and is in
compliance with all material permits, licenses, approvals and other
authorizations relating to environmental matters and necessary or desirable for
its business, and has filed all notifications and
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reports relating to chemical substances, air emissions, underground storage
tanks, effluent discharges and Hazardous Material waste storage, treatment and
disposal required in connection with the operation of its businesses, the
failure to have or comply with which, individually or in the aggregate, has had
or could reasonably be expected to have a Material Adverse Effect. All Hazardous
Materials used or generated by the Company or any Subsidiary or any business
merged into or otherwise acquired by the Company or any Subsidiary have been
generated, accumulated, stored, transported, treated, recycled and disposed of
in compliance with all applicable laws and regulations, the violation of which
has any reasonable likelihood of having a Material Adverse Effect. Neither the
Company nor any of its Subsidiaries has any liabilities with respect to
Hazardous Materials, and to the knowledge of the Company, no facts or
circumstances exist which could give rise to liabilities with respect to the
violation (whether by the Company or any other Person) of any Environmental Law
and/or Hazardous Materials, which could have any Material Adverse Effect.
3.18 Patents, Trademarks, Intellectual Property. As of the Closing Date,
Schedule 3.18 attached hereto is a true, correct and complete list of all
material Proprietary Rights of the Company. The Company owns or otherwise has
rights to all such Proprietary Rights as indicated in such Schedule 3.18 and
such Proprietary Rights are adequate for the conduct of its business as now
conducted and now proposed to be conducted, without any known conflict with the
rights or claimed rights of others.
3.19 Chief Executive Offices; Principal Place of Business; Real Property
Owned or Leased. The chief executive office and principal place of business of
the Company is, and at all times prior to the date hereof has been, located at
8001 Irvine Center Drive, Suite 500, Irvine, California 92618. The Company shall
not make any change in the locations of its chief executive office or any of the
Collateral without giving the Agent at least thirty (30) days prior written
notice thereof. Scheduled 3.19 attached hereto lists all real property owned or
leased by the Company or any Subsidiary.
3.20 Names. The exact legal name of the Company is Onyx Acceptance
Corporation. During the last five years ending on the date hereof, the Company
has not conducted any business under any other name (including any trade or
assumed name).
3.21 Securities Laws. The Company is not a "holding company" or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company", as such terms are defined in the
Public Utility Holding Company Act of 1935. The Company is not an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940.
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3.22 Security Documents. The representations and warranties of the Company
contained in the Security Documents to which it is a party are true and correct
in all material respects, and the Company is in compliance in all material
respects with the terms of the Security Documents.
3.23 Depository and Other Accounts. Schedule 3.23 attached hereto lists all
Lenders and other financial institutions and depositories at which the Company
maintains (or has caused to be maintained) or will maintain deposit accounts,
spread accounts, yield supplement reserve accounts, operating accounts, trust
accounts, trust receivable accounts or other accounts of any kind or nature into
which funds of the Company (including funds in which the Company maintains a
contingent or residual interest) are from time to time deposited, and such
Schedule 3.23 correctly identifies the name and address of each depository, the
name in which each account is held, the purpose of the account and the complete
account number. The Company will from time to time notify the Lenders and
supplement such Schedule 3.23 as new accounts are established. The Company
hereby authorizes the Agent to attach such supplements to Schedule 3.23 from
time to time delivered by the Company to Schedule 3.23 attached hereto.
3.24 Tax Status of Eligible Securitization Transactions. None of the trusts
created in connection with the Eligible Securitization Transactions are
classified as an association taxable as a corporation for federal income taxes
or are otherwise taxed as a separate entity for federal income tax purposes.
3.25 Burdensome Obligations; Future Expenditures. Neither the Company nor any
of its Subsidiaries is party to or bound by any agreement (including, but not
limited to, the Material Agreements listed on Schedule 3.6 attached hereto),
instrument, deed or lease or is subject to any charter, by-law or other
restriction, commitment or requirement which, in the opinion of the management
of such Person, is so unusual or burdensome as in the foreseeable future to have
or cause or create a material risk of having or causing a Material Adverse
Effect. Neither the Company nor any of its Subsidiaries anticipate that the
future expenditures, if any, by the Company and its Subsidiaries needed to meet
the provisions of any federal, state or foreign governmental statutes, orders,
rules or regulations will be so burdensome as to have or cause, or create a
material risk of having or causing, a Material Adverse Change.
3.26 Insurance Policies. As of the Closing Date, Schedule 3.26 lists all
insurance policies of any kind or nature maintained by or on behalf of the
Company, as well as a summary of the principal terms of such insurance. All such
insurance policies, together with any insurance policies obtained by the Company
after the Closing Date, are in full force and effect and provide
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coverage of such risks and in such amounts as is customarily maintained for
businesses of the scope and size of the Company.
3.27 Employment and Labor Agreements. As of the Closing Date, Schedule 3.27
accurately and completely describes each employment agreement, agreement for the
payment of deferred compensation, severance or so-called change in control
agreement covering officers, managers or other Affiliates of the Company, as
well as all collective bargaining agreements or other labor agreements covering
any employees of the Company. A true and correct copy of each such agreement has
been furnished to the Agent.
3.28 CapMAC Indebtedness and Liabilities. Schedule 3.28 accurately and
completely describes each provision of each agreement, instrument, certificate
or document to which the Company, Finco, and/or any Spread Account Trust (or
Spread Account Trustee) and CapMAC and/or any Affiliate of CapMAC or any other
Credit Enhancer are a party pursuant to which the Company, Finco and/or any
Spread Account Trust (or Spread Account Trustee) has any Indebtedness or
obligation or liability for the payment of money of any kind or nature, matured
or unmatured, contingent or non-contingent to CapMAC or any Affiliate of CapMAC.
Schedule 3.28 sets forth, with respect to each item listed therein, the specific
Spread Account or other depository account or other collateral, if any, to which
any Credit Enhancer has recourse for payment of the related Indebtedness or
liability, or the Credit Enhancer as an unsecured creditor of the Company and/or
Finco with respect to such Indebtedness or liability. Except as expressly set
forth on Schedule 3.28, neither the Company nor Finco has, or at any time during
the term of this Agreement will have, any Indebtedness, liability or other
obligation (matured or unmatured, contingent or non-contingent) of any kind or
nature for the payment of money to any Credit Enhancer.
3.29 Charges to Excess Servicing. The Company has not taken and is not
required by the terms of SFAS 65 to take any charge to Excess Servicing.
A. Section 4. Conditions Precedent to Closing Date.
The obligation of each Lender to make any Loan hereunder is subject to
the following conditions:
4.1 Fees and Expenses of Lenders. The Company shall have paid in full all
costs and expenses (including reasonable attorneys' fees) incurred by or on
behalf of the Agent in connection with this Agreement through the Closing Date.
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4.2 Forms of Legal Opinions; Execution of Loan Documents; No Material
Adverse Effect.
(a) The Company's counsel shall have delivered the form of legal
opinion to be attached hereto as Exhibit C;
(b) This Agreement, the Security Agreement, the Notes, the Eligible
Securitization Transaction Documents, the Spread Account Trust Agreements and
such other Security Documents, instruments, schedules or certificates as shall
be designated by the Agent shall have been executed by the Company and the other
parties thereto and delivered to the Agent;
(c) Since December 31, 1997 there shall have occurred no event or
condition which could have a Material Adverse Effect; and
(d) The Agent shall have received such other documents as it may
reasonably have requested at any time at or prior to the Closing Date.
4.3 Opinions and Certificates. On and as of the Closing Date the Lenders
shall have received:
(a) (i) Satisfactory evidence of the filing of such financing
statements as the Agent shall deem necessary or advisable, (ii) physical
possession of all Pledged Collateral (as such term is defined in the Pledge and
Security Agreement), and (iii) the favorable opinion of counsel for the Company,
dated as of the Closing Date and in such form(s) as the Lenders and their
counsel may reasonably request.
(b) Copies of each legal opinion delivered on behalf of the Company
and its Subsidiaries in connection with the Eligible Securitization Transactions
in form and substance satisfactory to the Lenders and their counsel and
addressed to the Lenders. Without limiting the foregoing, the Agent and the
Lenders shall have received legal opinions (or bring downs of previously
delivered legal opinions, with appropriate reliance letters) concerning the tax
status, non-consolidation and true sale aspects of each of the Eligible
Securitization Transactions.
(c) A certificate, dated as of such date, signed by a principal
officer of the Company, certifying that the conditions precedent specified in
this Section 4 have been fulfilled.
(d) All other information and documents which the Lenders or their
counsel may reasonably have requested in connection with the transactions
contemplated by this Agreement and the Related Events, such information and
documents where appropriate to be certified by the proper Company officers or
governmental authorities.
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(e) A completed Borrowing Base Report, showing minimum availability
(after giving effect to the Related Events) under the Borrowing Base of an
amount equal to or greater than the Revolving Credit Loans requested (or
outstanding if no additional Revolving Credit Loans are requested) on the
Closing Date.
(f) The Perfection Certificates and the Solvency Certificates from
the Company and each of its Subsidiaries and the Projections.
(g) An officer's certificate, dated as of such date, as to the
absence of (i) any Default or Event of Default, (ii) any Credit Trigger and
(iii) any event or condition which could have a Material Adverse Effect.
(h) On the Closing Date only, a Compliance Certificate, which shall
thereafter be delivered in accordance with subsection 5.1(b).
(i) The Company's quarterly financial statements dated as of March
31, 1998.
4.4 No Default; Representations and Warranties, etc. On the Closing Date and
on the date of each Loan hereunder and on the Conversion Date: (i) the
representations and warranties of the Company contained in Section 3 of this
Agreement shall be true on and as of such dates as if they had been made on such
dates (except to the extent that such representations and warranties expressly
relate to an earlier date or are affected by the consummation of transactions
permitted under this Agreement); (ii) the Company shall be in compliance in all
material respects with all of the terms and provisions set forth herein on its
part to be observed or performed on or prior to such dates; (iii) after giving
effect to the Loans to be made on such dates, no Default or Event of Default,
shall have occurred and be continuing; (iv) since the date of this Agreement,
there shall have been no material adverse change in the assets or liabilities or
in the financial or other condition of the Company or any Subsidiary; and (v)
the Company shall not have knowledge of a decrease in the Available Line
Commitment since the date of the most recently submitted Borrowing Base Report.
Each request for a Loan hereunder shall constitute a representation and warranty
by the Company to the Lenders that all of the conditions specified in this
subsection 4.3 have been satisfied in all material respects as of the date of
each such Loan.
4.5 Security Documents. On or prior to the Closing Date, the Agent and each
of the Lenders shall have received (i) counterpart originals of the Loan
Agreement, Security Documents and such other Loan Documents as may be designated
by any Lender, together with any other documents required or contemplated by the
terms thereof, (ii) evidence that the various security interests and
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liens provided for in the Security Documents have been duly perfected and
recorded and that the Agent on behalf of the Lenders has a first priority
security interest in the Collateral and (iii) executed copies of the Eligible
Securitization Transaction Documents referred to in subsection 5.7.
4.6 Insurance. The Company shall have provided to the Lenders evidence of
insurance coverage in compliance with Section 5.3.
4.7 Related Events. Prior to the first Revolving Credit Loan hereunder, the
Related Events shall have been consummated in a manner satisfactory to the
Lenders and their counsel.
4.8 Reserved.
4.9 Reserved.
4.10 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated hereby (including but not limited
to the Related Events) and all documents and instruments incident hereto
(including but not limited to the accountants' letter provided for in subsection
5.8 and any other agreement or instruments to be delivered pursuant to the terms
of this Agreement) and thereto shall be satisfactory in form and substance to
the Lenders and their counsel.
4.11 Final Forms of Eligible Securitization Transaction Documents. The
Lenders shall have received, reviewed and confirmed that the forms of Eligible
Securitization Transaction Documents to be executed by all parties thereto are
acceptable in form and substance to the Lenders.
B. Section 4. Special Provisions Concerning Subsequent Eligible
Securitization Transactions.
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4.12 Subsequent Securitization Transactions. From time to time after the
Closing Date, the Company may (but shall not be obligated to) request that the
Lenders include future securitization transactions (collectively, the
"Subsequent Securitization Transactions") within the definition of Eligible
Securitization Transactions for all purposes of this Agreement (including, but
not limited to, inclusion in the Borrowing Base), the Pledge and Security
Agreement and the other Loan Documents. Any such inclusion of a Subsequent
Securitization Transaction within the definition of Eligible Securitization
Transactions, and the inclusion of any Eligible Securitization Transaction
within the Borrowing Base, shall be effected in accordance with the provisions
of this subsection 4.12 and may be accomplished by written agreement among the
Company and the Lenders, without necessity of formal amendment to this Agreement
or any other Loan Document (other than an amendment to the Pledge and Security
Agreement, the filing of financing statements, if necessary, and amendment to
the Schedules to the Pledge and Security Agreement to reflect the additional
Pledged Collateral).
The Lenders hereby agree with the Company to review the Required
Information submitted by the Company in connection with all Subsequent
Securitization Transactions requested by the Company for inclusion within the
Borrowing Base. The Company shall pay all reasonable attorney's fees incurred by
the Agent in connection with such review. Such Subsequent Securitization
Transactions will become Eligible Securitization Transactions (and, accordingly,
be included within the Borrowing Base) if all Lenders, in their sole discretion,
are satisfied with the size, asset type and quality, business and legal terms
and structure, documentation and legal opinions relating to and issued in
connection with such Subsequent Securitization Transaction. Written notification
shall be issued from the Lenders (such notice to be issued within ten (10)
Banking Days of confirmed receipt of all Required Information) to the Company
indicating whether the Lenders are willing to include a Subsequent
Securitization Transaction within the definition of Eligible Securitization
Transactions for purposes of this Agreement (and the Borrowing Base). The
Company will pay all costs and expenses (including reasonable attorney's fees of
the Agent) incurred by the Lenders in connection with the inclusion of
Subsequent Securitization Transactions within the Borrowing Base. The Company
shall be deemed to have complied with this subsection 4.12 with respect to any
Subsequent Securitization Transaction which becomes a Rejected Transaction.
Notwithstanding anything to the contrary in this subsection 4.12 or
elsewhere in this Loan Agreement, the Company shall have no obligation to submit
the Required Information relating to Subsequent Securitization Transactions to
the Lenders on a right of first refusal basis, and shall have no obligation to
request that the Lenders include such Subsequent Securitization
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Transactions within the definition of Eligible Securitization Transactions. In
the event the Company elects to request that the Lenders include a Subsequent
Securitization Transaction within the definition of Eligible Securitization
Transaction, the provisions of subsection 4.12 of the Loan Agreement shall
remain in full force and effect. In the event the Company (in its sole
discretion) elects not to request that the Lenders include a Subsequent
Securitization Transaction within the definition of Eligible Securitization
Transactions, such Subsequent Securitization Transaction shall be deemed a
Rejected Transaction for all purposes of this Agreement.
Section 5. Affirmative Covenants.
So long as any of the Loans shall remain available to the Company, and
until the principal of and interest on the Notes and all fees due hereunder and
all of the Company's obligations to the Lenders shall have been paid in full,
the Company agrees that:
5.1 Financial Statements, etc. The Company will furnish or cause to be
furnished to each Lender:
(a) Within 90 days after the end of each fiscal year of the Company,
(i) the audited consolidated and consolidating balance sheets of the Company and
its Subsidiaries as at the end of such year, and (ii) the related audited
consolidated and consolidating statements of income and surplus and cash flows
for such year, setting forth in comparative form with respect to such
consolidated financial statements figures for the previous fiscal year, all in
reasonable detail, together with the opinion thereon of independent public
accountants selected by the Company and satisfactory to the Lenders, which
opinion shall be in a form generally recognized as unqualified and shall state
that such financial statements have been prepared in accordance with GAAP
applied on a basis consistent with that of the preceding fiscal year (except for
changes, if any, which shall be specified and approved in such opinion) and that
the audit by such accountants in connection with such financial statements has
been made in accordance with generally accepted auditing standards related to
reporting, provided that such accountants' certification may be limited to the
consolidated financial statements in which case the consolidating financial
statements shall be signed by the Chief Financial Officer of the Company;
(b) (x) within 45 days after the end of each of the first three
quarterly accounting periods in each fiscal year of the Company, (i) the
unaudited consolidated and consolidating balance sheets of the Company and its
Subsidiaries as at the end of such period, and (ii) the related unaudited
consolidated and consolidating statements of income and surplus and cash flows
for such period and for the period from the beginning of the current
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fiscal year to the end of such period, all in reasonable detail and signed by a
principal officer of the Company; (y) no later than two (2) Banking Days prior
to the distribution date for any Eligible Securitization Transaction, a
compliance certificate substantially in the form of Exhibit D attached hereto
(the "Compliance Certificate") signed by a principal officer of the Company and
certifying that no event or condition which constitutes a Default or Event of
Default or Credit Trigger exists, and demonstrating the calculations used to
determine compliance with the financial covenants listed in such Compliance
Certificate; and (z) within 30 days after the end of each month, a copy of the
Company's monthly financial statement package for the immediately preceding
month, such monthly financial statement package to contain statistical
information on the financial performance of all securitization transactions
including but not limited to the Eligible Securitization Transactions, and to be
substantially in the form currently produced by the Company, with such changes
as are reasonably satisfactory to the Lenders;
(c) Together with the financial statements delivered pursuant to
subparagraph (a) above, a statement signed by the accountants who have reported
on the same to the effect that in connection with their examination of such
financial statements they have reviewed the provisions of this Agreement and
have no knowledge of any event or condition which constitutes a Default or Event
of Default or, if they have such knowledge, specifying the nature and period of
existence thereof, provided however, that in issuing such statement, such
independent accountants shall not be required to go beyond normal auditing
procedures conducted in connection with their opinion referred to above;
(d) Deleted.
(e) Promptly upon their becoming available, copies of all 10-Ks and
10-Qs and other periodic or special reports filed by the Company or any
Subsidiary, or by any party in connection with any Eligible Securitization
Transaction, with the SEC, or any such periodic or special reports filed with
any other federal, state or local governmental agency or authority, if such
other reports indicate any material change in the business, operations, affairs
or conditions of the Company or any Subsidiary or if copies thereof are
requested by any Lender, and copies of any material notices and other material
communications from the SEC or from any other federal, state or local
governmental agency or authority which specifically relate to the Company or any
Subsidiary;
(f) Forthwith upon any officer of the Company obtaining knowledge of
any condition or event which constitutes a Default or Event of Default or Credit
Trigger or which, after notice or lapse of time or both, would constitute a
Credit Trigger, a certificate signed by such officer specifying in reasonable
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detail the nature and period of existence thereof and what action the Company
has taken or proposes to take with respect thereto;
(g) Promptly upon receipt thereof, copies of all audit reports and
management letters, if any, submitted to the Company by independent public
accountants in connection with each interim or special audit of the books of the
Company made by such accountants and, upon request by any Lender, copies of all
financial statements, reports, notices and proxy statements, if any, sent by the
Company to its shareholders;
(h) Immediately, notice of: (i) the institution or commencement of
any action, suit, proceeding or investigation by or against or affecting the
Company or any of its assets which, if determined adversely to the Company,
could have a Material Adverse Effect; (ii) any litigation or proceeding
instituted by or against the Company, or any judgment, award, decree, order or
determination relating to any litigation or proceeding involving the Company
which could have a Material Adverse Effect; (iii) the imposition or creation of
any lien against any asset of the Company except those in favor of the Agent for
the benefit of the Lenders and those permitted by this Agreement; (iv) any
reportable event under ERISA, together with a statement of the Company's chief
executive officer, chief financial officer and/or controller as to the details
thereof and a copy of its notice thereof to the PBGC; (v) any known release or
threat of release of Hazardous Materials on or onto any site owned or operated
by the Company or the incurrence of any expense or loss in connection therewith
or upon the Company's obtaining knowledge of any investigation, action or the
incurrence of any expense or loss by any governmental authority in connection
with the containment or removal of any Hazardous Materials for which expense or
loss the Company may be liable or potentially responsible;
(i) Within 10 days after the end of each month (or the next
succeeding Banking Day if the tenth day of any month is not a Banking Day), the
servicer report for each Eligible Securitization Transaction, together with the
Borrowing Base Report described in subsection 1.2(e) above; and
(j) Immediately upon receipt or issuance by the Company or Finco,
copies of all reports, covenant compliance certificates, budgets, projections,
requests for waivers, notices of default, requests for amendments or other
material correspondence issued in connection with or relating to the Preferred
Stock Agreement, and, to the extent not inconsistent with any confidentiality
provisions, any agreement to which CapMAC or any Affiliate of CapMAC is a party
(including without limitation all agreements relating to the Finco warehouse
facility) and any other agreement to which the Company or Finco is now or
hereafter a party relating to Indebtedness for borrowed money.
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In addition to the financial information described above, the Company
will also furnish or cause to be furnished or made available to each Lender, (i)
the Borrowing Base Report at the times required under subsection 1.2(d), (ii)
upon request of the Agent, the electronic records and computer tapes maintained
by the Company summarizing the characteristics and distribution of the
Automobile Loans comprising the Eligible Securitization Transactions and (iii)
such other information regarding the business, affairs and condition of the
Company and its Subsidiaries, the Collateral, cash payments made by the Company
or its Subsidiaries in respect of taxes and the scheduled amortization of the
Residual Interest in Securitized Assets and Spread Accounts as such Lender may
from time to time reasonably request. The Company will permit each Lender to
inspect and audit the books and records and any of the properties or assets of
the Company and its Subsidiaries, not more than twice per year prior to the
occurrence of a Default or Event of Default or Credit Trigger, at the Company's
expense, and after any such occurrence, at such times as any Lender may from
time to time request, each such inspection to be at the Company's expense.
5.2 Legal Existence; Franchises; Compliance with Laws. The Company will, and
will cause each Subsidiary to: maintain its corporate existence and business;
maintain all properties which are reasonably necessary for the conduct of such
business, now or hereafter owned, in good repair, working order and condition;
take all actions necessary to maintain and keep in full force and effect its
rights and franchises, including the Licenses; and, except as otherwise provided
herein, comply with all applicable statutes, rules, regulations and orders of,
and all applicable restrictions imposed by, all governmental authorities in
respect of the conduct of its business and the ownership of its properties in
states in which the Company desires to continue business operations; provided
that (i) nothing in this subsection 5.2 shall be interpreted to restrict or in
any manner affect the Company's or any Subsidiary's ability to elect to
discontinue any line of business or to discontinue doing business in any state
if the Company or such Subsidiary deems such discontinuance to be in its or
their best interests, (ii) neither the Company nor any Subsidiary shall be
required by reason of this subsection to comply therewith at any time while the
Company or such Subsidiary shall be contesting its obligations to do so in good
faith by appropriate proceedings promptly initiated and diligently conducted,
and if it shall have set aside on its books such reserves, if any, with respect
thereto as are required by GAAP and deemed adequate by the Company and its
independent public accountants. The Company shall not, and shall not allow any
Subsidiary to, amend the terms of its charter.
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5.3 Insurance.
(a) Business Interruption Insurance. Each of the Company and its
Subsidiaries shall maintain with financially sound and reputable insurers
insurance related to interruption of business, either for loss of revenues or
for extra expense, in the manner customary for businesses of similar size
engaged in similar activities.
(b) Property Insurance. Each of the Company and its Subsidiaries
shall keep its assets which are of an insurable character insured by financially
sound and reputable insurers against theft and fraud and against loss or damage
by fire, explosion and hazards insured against by extended coverage to the
extent, in amounts and with deductibles at least as favorable as those generally
maintained by businesses of similar size engaged in similar activities.
(c) Liability Insurance. Each of the Company and its Subsidiaries
shall maintain with financially sound and reputable insurers insurance against
liability for hazards, risks and liability to persons and property, including
errors and omission insurance, to the extent, in amounts and with deductibles at
least as favorable as those generally maintained by businesses of similar size
engaged in similar activities.
(d) Requirements; Proceeds. Each insurance policy maintained
pursuant to this subsection 5.3 pertaining to any of the Collateral or pursuant
to subsection 5.11 below shall: (i) name the Agent as an additional insured and
loss payee pursuant to a so-called "standard mortgagee clause" and provide that
all proceeds shall be payable to the Agent; (ii) provide that no action of the
Company shall void such policy as to the Agent; and (iii) provide that the Agent
shall be notified of any proposed cancellation of such policy at least thirty
(30) days in advance of such proposed cancellation. Copies of all such policies
shall be delivered to the Agent upon request. In the event of a casualty loss,
the Company may apply the proceeds of any insurance to the restoration or
replacement of the property or asset which was the subject of such loss,
provided that (A) the Company shall have demonstrated to the reasonable
satisfaction of the Lenders that such property or asset will be restored to
substantially its previous condition or will be replaced by a substantially
identical property or asset, and (B) the Agent shall have received, if requested
by it, a favorable opinion from counsel for the Company, satisfactory in scope
and form to the Agent (on behalf of the Lenders), as to the Lenders' having a
prior security interest in and valid first lien on such restored or replaced
property or asset. As further assurance for the payment and performance of the
Loans and all other obligations hereunder, the Company hereby assigns to the
Agents for the benefit of the Lenders all sums, including any returned or
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unearned premiums, which may become payable under any policy of insurance in
respect of the Collateral and the Company hereby directs each insurer issuing
any such policy to make such payment of such sums directly to the Agent. No loss
or claim in excess of $250,000 shall be settled without the prior written
consent of the Agent.
5.4 Payment of Taxes. The Company will, and will cause each Subsidiary to,
pay and discharge promptly as they become due and payable all taxes, assessments
and other governmental charges or levies imposed upon it or its income or upon
any of its properties or assets, or upon any part thereof, as well as all lawful
claims of any kind (including claims for labor, materials and supplies) which,
if unpaid, might by law become a lien or a charge upon its property; provided
that neither the Company nor any Subsidiary shall be required to pay any such
tax, assessment, charge, levy or claim if the amount, applicability or validity
thereof shall currently be contested in good faith by appropriate proceedings
promptly initiated and diligently conducted and if the Company or such
Subsidiary, as the case may be, shall have set aside on its books such reserves,
if any, with respect thereto as are required by GAAP and deemed appropriate by
the Company and its independent public accountants.
5.5 Payment of Other Indebtedness, etc. Except as to matters being contested
in good faith and by appropriate proceedings, and subject to the provisions of
subsection 6.5 (Restricted Payments) and subsection 6.12 (Observance of
Subordination Provisions) hereof, the Company will, and will cause each
Subsidiary to, pay promptly when due, or in conformance with customary trade
terms, all other Indebtedness and obligations incident to the conduct of its
business, except where the failure to do so would not result in a Material
Adverse Effect.
5.6 Further Assurances. From time to time hereafter, the Company will
execute and deliver, or will cause to be executed and delivered, such additional
instruments, certificates or documents, and will take all such actions, as the
Agent may reasonably request, for the purposes of implementing or effectuating
the provisions of this Agreement, the Security Documents or the Notes, or of
more fully perfecting or renewing the rights of the Agent and the Lenders with
respect to the Collateral pursuant hereto or thereto. Upon the exercise by the
Lenders (or the Agent on their behalf) of any power, right, privilege or remedy
pursuant to this Agreement or the Security Documents which requires any consent,
approval, registration, qualification or authorization of any governmental
authority or instrumentality, the Company will execute and deliver, or will
cause the execution and delivery of, all applications, certifications,
instruments and other documents and papers that the Agent or the Lenders may be
required to obtain for such governmental consent, approval, registration,
qualification or
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authorization. In the event the Company or any Subsidiary shall at any time or
from time to time lease any additional real property, the Company will, if any
Collateral is to be located at such premises and not available at the Company's
Irvine, California headquarters, promptly execute and deliver, and cause to be
executed and delivered by the Company's landlord, to the Lenders (or the Agent
on their behalf) a landlord's consent relating to the Agent's access to the real
property leased by the Company, regardless of any rental payment default by the
Company or any of its Subsidiaries.
5.7 Maintenance of Blocked Account; Eligible Securitization Transaction
Document Amendments; Agreement to Hold in Trust. As of the Closing Date, the
Company will (i) establish a blocked account arrangement (the "Blocked Account")
with the Agent and (ii) execute and cause to be executed by all necessary
parties all such agreements or instruments as may be deemed necessary by the
Lenders or the trustee or paying agent under each Eligible Securitization
Transaction so as to ensure that such trustee or paying agent is directed to
make payments due the Company (except Normal Servicing Fees), whether in
connection with the Pledged Certificates or otherwise, directly into the Blocked
Account. All agreements, documents or instruments now or hereafter necessary to
(i) cause the issuance of the Pledged Certificates, the dividend thereof by
Finco to the Company and the pledge thereof by the Company to the Agent, (ii)
cause the trustee or paying agent under each Eligible Securitization Transaction
to deposit payments due the Company in connection with each such Eligible
Securitization Transaction directly to the Blocked Account (iii) ensure that the
Collateral and all proceeds thereof will be deposited directly to the Blocked
Account, regardless of whether the Company shall cease to be the servicer under
any Eligible Securitization Transaction for any reason, and (iv) otherwise give
effect to the transactions contemplated by this Agreement are referred to herein
collectively as the "Eligible Securitization Transaction Document Amendments".
To the extent that notwithstanding the Eligible Securitization Transaction
Document Amendments or the other Eligible Securitization Transaction Documents,
the Company or Finco receives any amounts attributable to any Eligible
Securitization Transaction which should have been deposited in the Blocked
Account, the Company will, and will cause Finco to, hold the same in trust for
the Lenders immediately upon receipt thereof, and deliver the same to the Agent
in the form received, together with the Company's endorsement thereon where
necessary to permit collection thereof for deposit into the Blocked Account.
5.8 Communication with Accountants. The Company authorizes the Lenders to
communicate directly with the Company's independent certified public accountants
and authorizes those accountants to disclose to the Lenders any and all
financial statements and other supporting financial documents and schedules.
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5.9 Performance of Servicing Duties; Clean-Up Calls. The Company shall, and
shall cause Finco to, comply in all material respects with the provisions of its
charter documents and by-laws and with the terms of the pooling and servicing
agreements and other Eligible Securitization Documents relating to each Eligible
Securitization Transaction, and perform the duties of servicer in compliance
with the terms thereof. To the extent the Company or Finco has or shall have the
right or ability to make a "clean-up" call under any Eligible Securitization
Transaction, the Company or Finco will not take any such action if, after giving
effect thereto, the aggregate outstanding principal balance of the Loans would
exceed the Borrowing Base unless, simultaneously with the purchase pursuant to
such "clean-up" call, the Company pays down the outstanding Loans to an amount
less than or equal to the Available Line Commitment after giving effect to such
"clean-up" call.
5.10 Management. Schedule 5.10 attached hereto sets forth the names and
titles of each officer and director of the Company. The Company will notify the
Agent in writing of any change in or addition to such officers and directors of
the Company.
5.11 Key Person Life Insurance. The Company shall maintain at all times "Key
Person" life insurance on the life of John W. Hall in the amount of at least
$3,000,000, and shall designate the Company as loss payee.
5.12 Notice of Default Under MLMC Credit Facility Documents. The Company
shall immediately notify the Agent and the Lenders of its receipt of any notice
of a default or event or default under any MLMC Credit Facility Documents.
5.13 Notice of Default Under BayView Subordinated Loan Documents. The Company
shall immediately notify the Agent and the Lenders of its receipt of any notice
of a default or event or default under the BayView Subordinated Loan Agreement.
5.14 Notice of Default Under BayView Loan Sale Agreement. The Company shall
immediately notify the Agent and the Lenders of its receipt of any notice of a
Default or Event of Default under the Bay View Loan Sale Agreement.
Section 6. Negative Covenants.
So long as any of the Loans shall remain available to the Company, and
until the principal of and interest on the Notes and all fees due hereunder and
all of the Company's obligations to the Lenders shall have been paid in full,
the Company agrees that:
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6.1 Indebtedness. The Company will not, and will not permit any Subsidiary
to, create, incur, assume or become or remain liable in respect of any
Indebtedness, except:
(a) Indebtedness to the Lenders hereunder;
(b) Current liabilities of the Company (other than for borrowed
money) incurred in the ordinary course of its business and in accordance with
customary trade practices;
(c) Existing Indebtedness of the Company or any Subsidiary referred
to in Schedule 3.8 attached hereto, in not more than the respective unpaid
principal amounts thereof specified in such Schedule;
(d) Indebtedness of the Company or any Subsidiary secured as
permitted by, and subject to the proviso to, subparagraph (c) of subsection 6.2;
(e) Non-recourse Indebtedness of the Company for money borrowed
using only the limited beneficial certificates issued by the spread account
trust or owner trust established in connection with a Rejected Transaction as
collateral;
(f) Indebtedness of Fundco under the MLMC Credit Facility Documents
in a maximum principal amount at any one time outstanding not to exceed
$150,000,000;
(g) Indebtedness of the Company under the BayView Subordinated Loan
Documents in a maximum principal amount at any one time outstanding not to
exceed $10,000,000;
(h) Up to $10,000,000 of additional subordinated debt on terms (i)
reasonably satisfactory to the Lenders and (ii) comparable to the BayView
Subordinated Debt; and
(i) Up to $50,000,000 of Indebtedness of Fundco to Smith Barney.
6.2 Liens, etc. The Company will not, and will not permit any Subsidiary to,
directly or indirectly, create, incur, assume or suffer to exist, any mortgage,
lien, charge or encumbrance on, or security interest in, or pledge of, or
conditional sale or other title retention agreement (including any Capital
Lease) with respect to, any real or personal property (tangible or intangible,
now existing or hereafter acquired) including but not limited to the Collateral,
except:
(a) Any lien securing Indebtedness to the Lenders;
(b) Liens for taxes not yet delinquent or being contested in good
faith as provided in subsection 5.4; mechanics',
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workmen's, materialmen's or other like liens arising in the ordinary course of
business in respect of obligations which are not yet due or which are being
contested in good faith (as to which adequate reserves have been established on
the Company's books); and other liens or encumbrances incidental to the conduct
of the business of the Company or any Subsidiary or to the ownership of their
respective properties or assets, which were not incurred in connection with the
purchase of property, borrowing of money or the obtaining of credit and which do
not detract from the value of the properties or assets of the Company and its
Subsidiaries or affect the use thereof in the operation of their business;
(c) Financing statements filed against the Company or any Subsidiary
in connection with any securitization transaction;
(d) Purchase money mortgages, liens and other security interests,
including Capital Leases, created in respect of property acquired by the Company
after the date hereof or existing in respect of property so acquired prior to
the date hereof, provided that (i) each such lien shall at all times be confined
solely to the item of property so acquired, and (ii) the aggregate principal
amount of indebtedness secured by all such liens (whether incurred prior to or
after the Closing Date) shall at no time exceed $3,500,000;
(e) Liens securing an amount not to exceed $2,500,000 securing the
Indebtedness described in subsection 6.3(e) below, provided, that such liens are
at all times limited solely to cash collateral posted by the Company to secure
such Indebtedness;
(f) Liens on Rejected Transaction limited beneficial certificates
securing Indebtedness described in subsection 6.1(e);
(g) Liens on the assets of Fundco securing its obligations in
respect of the MLMC Credit Facility;
(h) Financing statements filed against the Company by Finco, Fundco
or BayView filed solely for the purpose of evidencing true sales of chattel
paper consisting of Automobile Loans by the Company to Finco, Fundco, or
BayView, as the case may be; and
(i) Liens on Reject Transactions securing the Indebtedness described
in subsection 6.1(i).
6.3 Loans, Guarantees and Investments. The Company will not, and will not
permit any Subsidiary to, make or permit to remain outstanding any loan or
advance to, or guarantee or endorse (except as a result of endorsing negotiable
instruments for deposit or collection in the ordinary course of business) or
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otherwise assume or agree to purchase or otherwise remain liable with respect to
any obligation of, or enter into any indemnification agreement or make or own
any investment in, or acquire (except in the ordinary course of business) the
properties or assets of, any Person, except:
(a) Extensions of credit by the Company in connection with the
Company's automobile finance business in accordance with existing and customary
trade practices, including direct lending and bulk purchases of up to
$30,000,000 of portfolios of Automobile Loans;
(b) The outstanding investments, loans and advances, if any, and the
presently existing guarantees, if any, referred to in Schedule 3.8 attached
hereto;
(c) Cash Equivalents;
(d) Capital Expenditures, to the extent permitted by subsection 6.6;
(e) Loans, advances and investments in an aggregate amount not
exceed $2,500,000 necessary or appropriate for the hedging of interest rate
risks on loans held for sale by the Company or its Subsidiaries in the ordinary
course of business; and
(f) Indemnification agreements in favor of Credit Enhancers or
underwriters executed in connection with securitization transactions, or
indemnifications contained in agreements entered into in the ordinary course of
the Company's business and otherwise permitted under this Agreement.
6.4 Collection Policies and Procedures. The Company will not implement any
material change in its collection policies and procedures without first
delivering written notice of such change and the reason therefor to the Lenders.
6.5 Restricted Payments. The Company will not, and will not permit any
Subsidiary to, directly or indirectly declare, order, pay or make any Restricted
Payment or set aside any sum or property therefor if at the time of such
proposed action or immediately after giving effect thereto, any Default or Event
of Default exists, and unless expressly permitted by this subsection 6.5.
As used herein, the term "Restricted Payments" means (i) any dividend or
other distribution, direct or indirect, on or on account of any shares of any
class of stock of the Company now or hereafter outstanding (other than dividends
payable exclusively in shares of the Company's preferred stock); (ii) any
redemption, purchase or other acquisition, direct or indirect, of any shares of
any class of stock of the Company now or hereafter outstanding
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or of any warrants or rights to purchase any such stock (including, without
limitation, the repurchase of any such stock or warrant or any refund of the
purchase price thereof in connection with the exercise by the holder thereof of
any right of rescission or similar remedies with respect thereto); and (iii) any
payment in respect of Subordinated Debt (including, without limitation, the
BayView Subordinated Debt).
Subject to the foregoing, the Company may: (a) make scheduled monthly
payments of interest to BayView in respect of the BayView Subordinated Debt (but
in no event accelerated payments) at a per annum rate not to exceed nine and one
half percent (9 1/2%) and (b) make scheduled payments of principal to BayView in
respect of the BayView Subordinated Debt (but in no event accelerated payments)
commencing on February 25, 2000, and thereafter in accordance with the terms of
the BayView Subordinated Loan Agreement, until the principal amount of such
BayView Subordinated Debt is paid in full.
Notwithstanding anything to the contrary in the BayView Subordinated
Loan Documents, including without limitation, Article VI of the BayView
Subordinated Loan Agreement, the Company agrees that it will not at any time
make any payment of principal or interest in respect of the BayView Subordinated
Debt if any Default or Event of Default exists under the Loan Agreement, or if
such a Default or Event of Default would arise by reason of the Company's making
such payment.
6.6 Capital Expenditures. The Company will not make, or permit any
Subsidiary to make, any Capital Expenditure during any fiscal year if, after
giving effect thereto, the aggregate amount of all Capital Expenditures made by
the Company and its Subsidiaries during such fiscal year would exceed
$6,000,000, provided that in no event will the Company or any Subsidiary make
any single Capital Expenditure which exceeds $750,000.
6.7 Subsidiaries, Mergers and Consolidations; Changes in Business. The
Company will not, and will not permit any Subsidiary to, create any additional
Subsidiaries (provided that upon written notice to the Lenders the Company may
from time to time create wholly-owned, so-called bankruptcy remote special
purpose Subsidiaries for the sole purpose of entering into subsequent
securitization transactions), or enter into any merger or consolidation (or any
agreement relating to any merger or consolidation). The Company shall not engage
in any business other than the automobile finance business.
6.8 Sale of Assets. The Company will not, and will not permit any Subsidiary
to, sell, lease or otherwise dispose of any of its properties or assets, except
for (a) bona fide sales of Automobile Loans at par in the ordinary course of
business to a wholly-owned Subsidiary of the Company in connection with any
warehouse credit facility, (b) bona fide cash sales of Automobile
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Loans originated as permitted by this Agreement, for fair value in the ordinary
course of business in connection with securitization transactions and provided
that proceeds of any such sales are used by the Company to repay any related
loans under the applicable warehouse credit facility, if any, to the extent
required thereby, (c) bona fide sale of repossessed automobiles, and (d) sales
or other dispositions in the ordinary course of business of obsolete or unusable
property or assets (it being understood that Automobile Loans and related
receivables are excluded from this clause (d)) in each instance, without the
prior written consent of the Majority Lenders, such consent not to be
unreasonably withheld. Notwithstanding the foregoing, the Company may, and may
permit Finco or Fundco to, conduct bona fide sales of Automobile Loans for fair
value (but not less than par value) in the ordinary course of their respective
businesses to MLMC under the MLMC Credit Facility Documents or BayView under the
BayView Loan Sale Agreement, in the form of (i) flow sales by the Company
contemporaneously with the origination or purchase of such Automobile Loans, or
(ii) bulk sales by Finco or Fundco.
6.9 Compliance with ERISA. The Company will make, and will cause all
Affiliated Companies to make, all payments or contributions to employee benefit
plans required under the terms thereof and in accordance with applicable minimum
funding requirements of ERISA and the Code and applicable collective bargaining
agreements. The Company will cause all employee benefit plans sponsored by any
Affiliated Company to be maintained in material compliance with ERISA and the
Code. The Company will not engage, and will not permit or suffer any Affiliated
Company or any Person entitled to indemnification or reimbursement from the
Company or any Affiliated Company to engage, in any prohibited transaction for
which an exemption is not available. No Affiliated Company will terminate, or
permit the PBGC to terminate, any employee benefit plan or withdraw from any
multiemployer plan, in any manner which could result in material liability of
any Affiliated Company.
6.10 Transactions with Affiliates. The Company will not, and will not permit
any Subsidiary to, directly or indirectly, enter into any lease or other
transaction with any shareholder or with any Affiliate of the Company or such
shareholder, on terms that are less favorable to the Company or such Subsidiary
than those which might be obtained at the time from Persons who are not such a
shareholder or Affiliate.
6.11 Observance of Subordination Provisions, etc. The Company will not make,
or cause or permit to be made, any payments in respect of any Subordinated Debt,
in contravention of the subordination provisions contained in the evidence of
such Subordinated Debt or in contravention of any written agreement pertaining
thereto, nor will the Company (a) amend, modify or change in any manner any of
such subordination provisions without
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the prior written consent of the Majority Lenders or (b) amend, modify or change
in any manner adverse to the interests of the Lenders any of the other
provisions set forth in the agreements under which such Subordinated Debt is
outstanding or contained in the instruments or agreements evidencing or relating
to such Subordinated Debt.
6.12 Environmental Liabilities. The Company will not, and will not permit any
Subsidiary to, violate any Environmental Laws or other requirement of law, rule
or regulation regarding Hazardous Materials; and, without limiting the
foregoing, the Company will not and will not permit any Subsidiary or any other
Person to, dispose of any Hazardous Material into or onto, or (except in
accordance with applicable law) from, any real property owned, leased or
operated by the Company or any Subsidiary or in which the Company or any
Subsidiary holds, directly or indirectly, any legal or beneficial interest or
estate, nor allow any lien imposed pursuant to any law, regulation or order
relating to Hazardous Materials or the disposal thereof to be imposed or to
remain on such real property, except for liens being contested in good faith by
appropriate proceedings and for which adequate reserves have been established
and are being maintained on the books of the Company and its Subsidiaries.
6.13 Fiscal Year. The Company will not change its fiscal year end from
December 31 without prior written notice to the Agent.
6.14 Amendments to Eligible Securitization Transaction Documents. The Company
will not, and will not permit Finco or any other Subsidiary to amend, modify or
change (or consent to any such amendment, modification or change) in any manner
adverse to the interests of the Lenders any of the provisions set forth in the
Eligible Securitization Transaction Documents without the prior written consent
of the Lenders. Without limiting the foregoing, the Company will not consent or
agree, without the Lenders' consent, to any increase in the amount on deposit in
any Spread Account so as to maintain the rating of the related securitization
transaction.
6.15 Amendment to MLMC Credit Facility Documents. The Company will not, and
will not permit Fundco to, amend, modify or change (or consent to any such
amendment, modification or change) in any manner adverse to the interests of the
Lenders, any of the provisions set forth in the MLMC Credit Facility Documents,
without the prior written consent of the Lenders. Without limiting the
foregoing, the Company will not consent or agree to, or permit Fundco to consent
or agree to, any increase in the maximum aggregate amount of funds available to
Fundco under the MLMC Credit Facility Documents.
6.16 Amendment to BayView Subordinated Loan Documents. The Company will not
amend, modify or change (or consent to any such
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amendment, modification or change) in any of the provisions of the BayView
Subordinated Loan Documents if such amendment would: (i) increase the principal
amount of any BayView Subordinated Debt, (ii) increase the rate of interest
accruing on the BayView Subordinated Debt, (iii) change in any manner the dates
upon which any principal or interest payments on the BayView Subordinated Debt
are due, (iv) change in any manner, or add, any affirmative or negative
covenants, events of default, redemption provisions or subordination provisions
of any BayView Subordinated Debt that would adversely affect the rights of the
Lenders or otherwise have a material adverse effect on the Company.
Section 7. Financial Covenants. So long as any of the Loans shall remain
available to the Company, and until the principal of and interest on the Notes
and all fees and other amounts due hereunder and all of the Company's
obligations to the Lenders shall have been paid in full, the Company agrees
that:
7.1 Net Worth (Including Subordinated Debt) to Total Liabilities and Net
Worth Ratio. The Company will not, on the last day of any fiscal quarter, permit
the ratio of (a) its Net Worth plus the aggregate amount of the Company's unpaid
Subordinated Debt (including accrued but unpaid interest thereon) to (b) the
Company's Total Liabilities plus its Net Worth, to be less than .15:1.00.
7.2 Net Yield. The average Net Yield for all of the Company's Eligible
Securitization Transactions for any period of three (3) consecutive months shall
be greater than 0.0%.
7.3 Minimum Cash Balance. The Company will maintain a minimum balance of
unrestricted cash, Cash Equivalents and/or availability under the Available Line
Commitment on the last day of each month during the term of this Agreement of at
least $1,000,000.
7.4 Minimum Net Worth. The Company will not permit its Net Worth as of the
last day of the fiscal quarter of the Company ending March 31, 1998 to be less
than $40,000,000. The Company will not permit its Net Worth as of the last day
of any fiscal quarter of the Company ending after March 31, 1998 to be less than
an amount equal to (x) $40,000,000 plus, (y) on a cumulative basis, an amount
equal to seventy-five percent (75%) of the Company's positive Net Income during
each such fiscal quarter ending after March 31, 1998 minus (z) on a cumulative
basis from and after March 31, 1998, up to $3,000,000 in respect of "FASB 125
Net Worth Adjustments". As used herein, the term "FASB 125 Net Worth
Adjustments" shall mean downward adjustments in Net Worth required by Financial
Accounting Standing No. 125 issued by the Financial Accounting Standards Board.
Other than up to $3,000,000 in respect of FASB 125 Net Worth Adjustments, the
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minimum Net Worth covenant amount shall never decrease, regardless of whether
the Company shall have negative Net Income during any fiscal quarter.
Solely by way of example, if the Company had Net Income of
$1,000,000 for the second fiscal quarter of 1998, the minimum Net Worth
covenant at June 30, 1998 would be $40,000,000 plus ($1,000,000)(75%) =
$40,750,000. Going forward, the minimum Net Worth covenant at September
30, 1998 (the end of the third fiscal quarter of the Company) would be
an amount equal to $40,750,000 plus seventy-five percent (75%) of the
Company's Net Income for such third fiscal quarter. The numbers used in
this paragraph are for informational purposes only. The actual step-up
in the minimum Net Worth covenant will be calculated based upon the
Company's actual Net Income.
7.5 Minimum Subordinated Debt Plus Net Worth. The Company will not permit
the principal amount of outstanding Subordinated Debt plus its Net Worth as of
March 31, 1998 to be less than $50,000,000. The Company will not permit the
principal amount of outstanding Subordinated Debt plus its Net Worth as of the
last day of any fiscal quarter of the Company ending after March 31, 1998 to be
less than an amount equal to (x) $50,000,000 plus, (y) on a cumulative basis, an
amount equal to seventy-five percent (75%) of the Company's positive Net Income
during each such fiscal quarter ending after March 31, 1998 minus (z) on a
cumulative basis from and after March 31, 1998, up to $3,000,000 in respect of
FASB 125 Net Worth Adjustments. Other than up to $3,000,000 in respect of FASB
125 Net Worth Adjustments, the minimum Subordinated Debt plus Net Worth covenant
amount shall never decrease, regardless of whether the Company shall have
negative Net Income during any fiscal quarter.
7.6 Limitation on Quarterly Losses. The Company will not permit its Net
Income to be less than $0.00 for any two fiscal quarters during any rolling
period of four consecutive fiscal quarters of the Company.
7.7 Minimum Servicing Balance. The Company shall at all times maintain a
Minimum Servicing Balance of $885,000,000.
7.8 Deferred Accounts. The Company will not permit the number of accounts
deferred by the Company during any month, as a percentage of the total number of
accounts serviced by the Company as of the last day of such month, to exceed one
percent (1%).
7.9 Outstanding Balance of Loans. As of the end of any fiscal quarter, the
Company will not permit the outstanding balance of Loans hereunder to exceed
eighty-five percent (85%) of the Lenders' Value Model.
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Section 8. Defaults; Credit Triggers; Remedies.
8.1 Events of Default; Acceleration. If any of the following events (each an
"Event of Default") shall occur:
(a) The Company shall default in the payment of principal of or
interest on any Note or any other fee due hereunder when the same becomes due
and payable, whether at maturity or at a date fixed for the payment of any
installment or prepayment thereof or otherwise; provided that in the case of a
payment due pursuant to subsection 1.8(b), the Company shall make such payment
within two (2) Banking Days after becoming aware that the outstanding principal
amount of the Loans exceeds the Available Line Commitment; or
(b) The Company shall default in the performance of or compliance
with any term contained in Section 6 (and such default shall continue for ten
(10) days) or Section 7; or
(c) The Company shall default in the performance of or compliance
with any term contained herein other than those referred to above in this
Section 8 and such default shall not have been remedied within 30 days after
written notice thereof shall have been given to the Company by the Agent (on the
Lenders' behalf); or
(d) The Company, any Subsidiary or any shareholder of the Company
which is a party to any of the Security Documents shall default in the
performance of or compliance with any term contained in the Security Documents
or in the performance of or compliance with any term contained in any other
written agreement with the Lenders or the Agent on the Lenders' behalf, and such
default shall continue for more than the period of grace, if any, specified
therein and shall not have been waived pursuant thereto; or
(e) Any representation or warranty made by the Company herein or
pursuant hereto shall prove to have been false or incorrect in any material
respect when made; or
(f) The Company or any Subsidiary shall default in any payment due
on any Indebtedness in respect of borrowed money, any Capital Lease or the
deferred purchase price of property with a principal balance, lease balance or
purchase price (as the case may be) in excess of $1,000,000 outstanding as of
the date of such default, and such default shall continue for more than the
period of grace, if any, applicable thereto, or in the performance of or
compliance with any term of any evidence of such Indebtedness or of any
mortgage, indenture or other agreement relating thereto, and any such default
shall continue
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for more than the period of grace, if any, specified therein and shall not have
been waived pursuant thereto; or
(g) The Company shall discontinue its business or the Company or any
Subsidiary shall make an assignment for the benefit of creditors, or shall fail
generally to pay its debts as such debts become due, or shall apply for or
consent to the appointment of or taking possession by a trustee, receiver or
liquidator (or other similar official) of the Company or such Subsidiary or any
substantial part of the property of the Company or such Subsidiary, or shall
commence a case or have an order for relief entered against it under the federal
bankruptcy laws, as now or hereafter constituted, or any other applicable
federal or state bankruptcy, insolvency or other similar law, or if the Company
or any Subsidiary shall take any action to dissolve or liquidate the Company or
such Subsidiary; or
(h) If, within 60 days after the commencement against the Company or
any Subsidiary of a case under the federal bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy, insolvency or
other similar law, such case shall have been consented to or shall not have been
dismissed or all orders or proceedings thereunder affecting the operations or
the business of the Company and such Subsidiary stayed, or if the stay of any
such order or proceeding shall thereafter be set aside, or if within 60 days
after the entry of a decree appointing a trustee, receiver or liquidator (or
other similar official) of the Company or any Subsidiary or any substantial part
of the property of the Company or such Subsidiary, such appointment shall not
have been vacated; or
(i) A final judgment (which, with other outstanding final judgments
against the Company and its Subsidiaries, exceeds insurance coverage, if any,
acknowledged in writing by the insurer by an aggregate of $250,000) shall be
rendered against the Company or any Subsidiary and if, within 60 days after
entry thereof, such judgment shall not have been discharged or execution thereof
stayed pending appeal, or if, within 60 days after the expiration of any such
stay, such judgment shall not have been discharged, or if any such judgment
shall not be discharged forthwith upon the commencement of proceedings to
foreclose any lien, attachment or charge which may attach as security therefor
and before any of the property or assets of the Company or any Subsidiary shall
have been seized in satisfaction thereof; or
(j) If (i) the Company is replaced as servicer of any Eligible
Securitization Transaction, or any other event or condition occurs or exists
which in the Lenders' reasonable judgment impairs or creates a material risk of
impairment of the Company's legal right to receive payments in respect of the
Collateral, or (ii) the Company ceases to own 100% of the capital
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stock of Finco, a Delaware corporation, or (iii) if the Company or any
Subsidiary loses, fails to keep in force, suffers the termination or revocation
of or terminates, forfeits or suffers an amendment to any License which could
have a Material Adverse Effect on the operations of the Company or such
Subsidiary; or
(k) If John W. Hall ceases to be and perform the duties of President
of the Company, and is not replaced by a President acceptable in the reasonable
discretion of the Board of Directors of the Company within sixty (60) days; or
(l) Without limiting any provision set forth above in this
subsection 8.1, if the Company, Finco or Fundco shall fail to perform or observe
any of its obligations under any of the Loan Documents or the Eligible
Securitization Transaction Documents, and such failure could reasonably be
expected to have a Material Adverse Effect on the Company or Finco, or if the
validity of this Agreement, the Notes, any Security Document or other Loan
Document, or of any Eligible Securitization Transaction Document or the
Preferred Stock Agreement shall be challenged or disaffirmed by any party hereto
or thereto, or shall in any manner cease to be in full force and effect (other
than pursuant to its expiration or termination in accordance with its terms), or
if any notice of default shall be issued hereunder or thereunder by any party
hereto or thereto;
(m) If there shall occur any default or event of default under and
as from time to time defined in the MLMC Credit Facility Documents;
(n) If there shall occur any default or event of default under and
as from time to time defined in the BayView Subordinated Loan Documents; or
(o) If there shall occur any default or event of default under and
as from time to time defined in the BayView Loan Sale Documents.
then, and in any such event, and at any time thereafter, either or both of the
following actions may be taken: the Majority Lenders may by written notice to
the Company, (i) declare the principal of and accrued interest in respect of the
Notes to be forthwith due and payable, whereupon the principal of and accrued
interest in respect of the Notes shall become forthwith due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Company, and/or (ii) terminate the Total
Commitment, whereupon the Total Commitment of the Lenders (and the Commitment of
each individual Lender) to make Loans hereunder shall forthwith terminate
without any other notice of any kind; provided that, in the case of an Event of
Default arising by reason of the occurrence of any event described in
subsections 8.1(g) or
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8.1(h), such actions shall be deemed to have been automatically taken by the
Lenders and all obligations of the Company to the Lenders shall forthwith
automatically become due and payable without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived by the Company.
Without limiting any provision of this Agreement or any Security Document, a
Default or Event of Default hereunder shall also constitute a Default or Event
of Default under each Security Document.
8.2 Remedies on Default, etc. In case any one or more Events of Default
shall occur and be continuing, the Agent and the Lenders may proceed to protect
and enforce their rights by an action at law, suit in equity or other
appropriate proceeding, whether for the specific performance of any agreement
contained herein or in any Note or Security Document, or for an injunction
against a violation of any of the terms hereof or thereof, or in aid of the
exercise of any power granted hereby or thereby or by law. In case of a default
in the payment of any principal of or interest on any Note, or in the payment of
any fee due hereunder, the Company will pay to the Lenders such further amount
as shall be sufficient to cover the cost and expense of collection, including,
without limitation, reasonable attorneys' fees, expenses and disbursements. No
course of dealing and no delay on the part of the Agent or the Lenders in
exercising any right shall operate as a waiver thereof or otherwise prejudice
the rights of the Agent or the Lenders. No right conferred hereby or by any Note
or Security Document upon the Lenders shall be exclusive of any other right
referred to herein or therein or now or hereafter available at law, in equity,
by statute or otherwise. The application by the Agent of funds deposited into
the Blocked Account after a Default or Event of Default in accordance with
subsection 1.7 above shall not in any manner limit, restrict or impair the
exercise by the Agent (on behalf of the Lenders) of any right or remedy
available under this Agreement, any Security Documents or applicable law.
8.3 Credit Triggers. If any of the following events (each a "Credit
Trigger") shall occur with respect to any Eligible Securitization Transaction
which is included with in the Borrowing Base:
(a) Annualized Net Losses. Average annualized Net Losses for any
period of three (3) consecutive months exceeds (i) four percent (4%) of the
average principal amount of notes or certificates issued in connection with such
Eligible Securitization Transaction and outstanding during such three (3) month
period in the case of Eligible Securitization Transactions having a Pool Factor
greater than or equal to forty percent (40%), or (ii) six percent (6%) of the
average principal amount of notes or certificates issued in connection with such
Eligible Securitization Transaction and outstanding during such three (3)
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month period in the case of Eligible Securitization Transactions having a Pool
Factor of less than forty percent (40%); or
(b) Average 60-Day Delinquencies. The average of the previous three
month end dollar amounts of (x) Sixty (60) Day Delinquencies divided by (y) the
average of the principal amount of notes or certificates issued in connection
with such Eligible Securitization Transaction and outstanding on the last day of
each such month exceeds (i) four percent (4%) in the case of Eligible
Securitization Transactions having a Pool Factor greater than or equal to forty
percent (40%), or (ii) six percent (6%) in the case of Eligible Securitization
Transactions having a Pool Factor less than forty percent (40%); or
(c) Average Prepayments. Average monthly prepayments for any
Eligible Securitization Transaction, regardless of Pool Factor, for any period
of three (3) consecutive months exceeds two and one-quarter percent (2.25%) ABS;
or
(d) Net Yield. The Company will not permit the Net Yield for any
Eligible Securitization Transaction (i) with a Pool Factor of forty percent
(40%) or greater to be less than two and one-half percent (2-1/2%) for any
period of three (3) consecutive months and (ii) with a Pool Factor of less than
forty percent (40%) to be less than one and one-half percent (1 1/2%) for any
period of three (3) consecutive months.
(e) Trigger Events. There shall occur any Trigger Event (or other
event or condition, however defined, which has a substantially similar meaning
to the term "Trigger Event" as defined in the Insurance and Reimbursement
Agreements between the Company and CapMAC as in effect on the date hereof),
under any agreement between the Company and any Credit Enhancer, or any default,
event of default or credit trigger under and as defined in any Eligible
Securitization Transaction Document (any such event described in this subsection
8.3(e) being referred to herein as a "Trigger Event");
then, without notice to the Company or any other required action or notice by
the Lenders, the Eligible Securitization Transaction experiencing the Credit
Trigger shall automatically be removed from the Borrowing Base and, if removal
of such Eligible Securitization Transaction causes the outstanding principal
amount of the Loans to exceed the Available Line Commitment, then, without
notice to the Company or any other required action or notice by the Lenders, (i)
the obligations of the Lenders to make Revolving Credit Loans shall immediately
terminate, (ii) the date of occurrence of the Credit Trigger shall be deemed the
Conversion Date for all purposes of this Agreement and the Security Documents
and (iii) the outstanding principal balance of the Notes shall immediately begin
amortizing in accordance with the applicable provisions of this Agreement.
Without limiting
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the generality of the foregoing, and notwithstanding the automatic occurrence of
the Conversion Date, the Company shall immediately repay the Loans in an amount
sufficient to cause the outstanding balance of the Loans not to exceed the
Available Line Commitment.
Section 9. Definitions; Certain Rules of Construction. Certain capitalized terms
are used in this Agreement and in the other Loan Documents with the specific
meanings defined below in this Section 9. Except as otherwise explicitly
specified to the contrary or unless the context clearly requires otherwise, (a)
the capitalized term "Section" refers to section of this Agreement, (b) the
capitalized term "Exhibit" refers to exhibits to this Agreement, (c) refers to a
particular section included in subsections thereof, (d) the word "including"
shall be construed as "including without limitation", (e) accounting terms not
otherwise defined herein have the meaning provided under GAAP, (f) terms defined
in the UCC and not otherwise defined herein have the meaning provided under the
UCC, (g) references to particular statute or regulation include all rules and
regulations thereunder and any successor statute, regulation or rules, in each
case as from time to time in effect and (h) references to a particular Person
include such Person's successors and assigns to the extent not prohibited by
this Agreement and the other Loan Documents.
ABS: to calculate ABS prepayments from end period X to end
period Y:
ABS= ((1/Actual Balance)-(1/Scheduled Balance))/ ((Age Y/Actual
Balance)-(Age X/Scheduled Balance))
Where:
Actual Balance equals the balance at period Y
Age X equals the weighted average number of months from the pool
cut-off date to period X
Age Y equals the weighted average number of months from the pool
cut-off date to period Y
Scheduled Balance equals Beginning Period
Balance*((1-(1+(WAC/12))(Pmt Interval-Remaining
Term))/(1-(1+(WAC/12))(-Remaining Term)))
Where:
Beginning Period Balance equals the balance at Period X
WAC equals the weighted average coupon at Period X
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Payment Interval equals Age Y minus Age X
Remaining Term equals the weighted average maturity of the
remaining pool at period X
Affiliate: as applied to any Person, a spouse or relative of
such Person, any member, director or officer of such Person, any corporation,
association, firm or other entity of which such Person is a member, director or
officer, and any other Person directly or indirectly controlling, controlled by
or under direct or indirect common control with such Person. For all purposes of
this Agreement and each of the other Loan Documents, Triple-A One Funding
Corporation shall be deemed an Affiliate of CapMAC.
Affiliated Company: the meaning specified in subsection 3.15.
Agent: the meaning specified at the beginning of this Agreement.
Agreed Upon Accounting Procedures: shall mean the accounting
methodology employed by the Company and agreed to by Coopers & Lybrand in
connection with the Company's audited financial statements for the fiscal year
of the Company ended December 31, 1997.
Assignment and Acceptance: the meaning specified in subsection
14.12.
Automobile Loan(s): installment sale contracts and installment
loans and security interests, secured by automobiles, light trucks and vans.
Available Line Commitment: the meaning specified in subsection
1.2.
Banking Day: any day, excluding Saturday and Sunday and
excluding any other day which shall be in either Boston, Massachusetts or New
York, New York, a legal holiday or a day on which banking institutions are
authorized by law to close.
BayView: means BayView Capital Corporation, a Delaware
corporation.
BayView Loan Sale Agreement: shall mean that certain BayView
Loan Sale Agreement dated as of [_____________] by and between the Company and
BayView.
BayView Loan Sale Documents: shall mean, collectively, the
BayView Loan Sale Agreement, and all other agreements,
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documents, certificates and instruments executed and delivered in connection
therewith.
BayView Subordinated Debt: shall mean all Indebtedness of the
Company in a principal amount not to exceed $10,000,000 to BayView under the
BayView Subordinated Loan Documents.
BayView Subordinated Loan Agreement: shall mean that certain
Term Loan Agreement dated as of the date hereof by and between the Company and
BayView.
BayView Subordinated Loan Documents: shall mean, collectively,
the BayView Subordinated Loan Agreement, the Subordinated Promissory Note of the
Company in favor of BayView in the principal amount of $10,000,000, and all
other agreements, documents, certificates and instruments executed and delivered
in connection with the BayView Subordinated Loan Agreement.
Blocked Account: the meaning specified in subsection 5.7.
Borrowing Base: the meaning specified in subsection 1.2.
Borrowing Base Covenant(s): the meaning specified in subsection
1.2.
Borrowing Base Report: the meaning specified in subsection 1.2.
Capital Expenditure: any payment made directly or indirectly for
the purpose of acquiring or constructing fixed assets, real property or
equipment which in accordance with GAAP would be added as a debit to the fixed
asset account of the Person making such expenditure, including without
limitation, amounts paid or payable under any conditional sale or other title
retention agreement or under any lease or other periodic payment arrangement
which is of such a nature that payment obligations of the lessee or obligor
thereunder would be required by GAAP to be capitalized and shown as liabilities
on the balance sheet of such lessee or obligor.
Capital Lease: any lease of property (real, personal or mixed)
which, in accordance with GAAP, should be capitalized on the lessee's balance
sheet or for which the amount of the asset and liability thereunder as if so
capitalized should be disclosed in a note to such balance sheet.
CapMAC: means Capital Markets Assurance Corporation, a New York
stock insurance company or any successor-in-interest thereto, including MBIA
Insurance Corp.
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Cash Equivalents: (a) negotiable certificates of deposit, time
deposits (including sweep accounts), demand deposits and bankers' acceptances
having a maturity of nine months or less and issued by any United States
financial institution having capital and surplus and undivided profits
aggregating at least $100,000,000 and rated Prime-1 by Moody's Investors
Service, Inc. or A-1 by Standard & Poor's Ratings Group or issued by any Lender;
(b) corporate obligations having a maturity of nine months or less and rated
Prime-1 by Moody's Investors Service, Inc. or A-1 by Standard & Poor's Ratings
Group or issued by any Lender; (c) any direct obligation of the United States of
America or any agency or instrumentality thereof, or of any state or
municipality thereof, (i) which has a remaining maturity at the time of purchase
of not more than one year or which is subject to a repurchase agreement with any
Lender (or any other financial institution referred to in clause (a) above)
exercisable within one year from the time of purchase and (ii) which, in the
case of obligations of any state or municipality, is rated Aa or better by
Moody's Investors Services, Inc. or AA or better by Standard & Poor's Ratings
Group; and (d) any mutual fund or other pooled investment vehicle rated AA or
better by Moody's Investors Service, Inc. or Aa or better by Standard & Poor's
Ratings Group which invests principally in obligations described above.
Closing Date: means the date of this Agreement.
Code: the meaning specified in subsection 3.15.
Collateral: the meaning specified in subsection 1.9.
Collateral Value Model: shall mean the model utilized by the
Lenders to calculate the present value of the Collateral. The Collateral Value
Model (with such changes to correct any errors in the Collateral Value Model as
the Lenders may from time to time implement in their reasonable and good faith
business judgment, after reasonable consultation with the Company) shall be
re-run from time to time in the discretion of the Lenders at the office of the
Agent. The inclusion of any amount in the Borrowing Base based on the Collateral
Value Model (or Net Book Value Model) shall not be deemed a determination by the
Agent or any Lender as to the actual value of the Collateral; it being the
Company's responsibility to determine the value/collectibility of the
Collateral, and the Company shall bear all risks concerning the same. Without
limiting the foregoing, the Company acknowledges that it has received and
reviewed the Collateral Value Model, and expressly approves the Collateral Value
Model for all purposes of this Agreement, including for purposes of calculating
the Borrowing Base.
Collection Account: shall mean each account maintained by the
trustee or the servicer under the Eligible Securitization
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Transactions to accumulate principal and interest payment received from the
underlying obligations on the Automobile Loans relating to the Eligible
Securitization Transactions.
Commitment: the meaning specified in subsection 1.1.
Commitment Fee: the meaning specified in subsection 1.6.
Company: the meaning specified at the beginning of this
Agreement.
Compliance Certificate: the meaning specified in subsection 5.1.
Consents: the meaning specified in subsection 3.13.
Conversion Date: the earlier to occur of (i) June 30, 1999 or
the date of occurrence of any Credit Trigger with respect to any Eligible
Securitization Transaction which is, as of the date of such occurrence, included
within the Borrowing Base.
Credit Enhancer: means CapMAC, any Affiliate of CapMAC and/or
any other entity which is not an Affiliate of the Company that issues any surety
bond, letter of credit or other credit enhancement in connection with any
securitization transaction in which the Company (or a wholly-owned Subsidiary of
the Company) is the issuer.
Credit Trigger: the meaning specified in subsection 8.3.
Default: any event or condition, including but not limited to a
Credit Trigger, which, with the giving of notice, passage of time and/or
expiration of any applicable grace period would constitute an Event of Default.
Eligible Assignee: Any of (a) a commercial bank organized under
the laws of the United States, or any state thereof or the District of Columbia,
and having total assets in excess of $1,000,000,000; (b) a savings and loan
association or savings bank organized under the laws of the United States, or
any state thereof or the District of Columbia, and having a net worth of at
least $100,000,000, calculated in accordance with GAAP; (c) a commercial bank
organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development (the "OECD"), or a
political subdivision of any such country, and having total assets in excess of
$1,000,000,000, provided that such bank is acting through a branch or agency
located in the country in which it is organized or another country which is also
a member of the OECD; (d) the central bank of any country which is a member of
the
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OECD; (e) any insurance company; and (f) if, a Default, Event of Default or
Credit Trigger has occurred and is continuing, any other bank, insurance
company, commercial finance company or other financial institution or other
Person approved by the Agent, such approval not to be unreasonably withheld.
Eligible Securitization Transactions: means, as of the date of
this Agreement, collectively, Onyx Acceptance Grantor Trust 1995-1
("OAGT-1995-1"), Onyx Acceptance Grantor Trust 1996-1 ("OAGT-1996-1"), Onyx
Acceptance Grantor Trust 1996-2 ("OAGT-1996-2"), Onyx Acceptance Grantor Trust
1996-3 ("OAGT-1996-3"), Onyx Acceptance Grantor Trust 1996-4 ("OAGT-1996-4"),
Onyx Acceptance Grantor Trust 1997-1 ("OAGT-1997-1"), Onyx Acceptance Grantor
Trust 1997-2 ("OAGT-1997-2") and Onyx Acceptance Grantor Trust 1997-3
("OAGT-1997-3"), and Onyx Acceptance Grantor Trust 1998-1 ("OAGT-1998-1"),
together with any Subsequent Securitization Transaction which at any time
hereafter become an Eligible Securitization Transaction in accordance with
subsection 4.12 hereto, provided that upon the occurrence and during the
continuance of a Credit Trigger or Trigger Event, such securitization
transaction shall immediately be removed from the Borrowing Base for purposes of
calculating the Available Line Commitment, without impairing the Agent's lien
thereon. The parties hereto agree that it is the Company's present intent to
include Onyx Acceptance Owner Trust 1998-A as an Eligible Securitization
Transaction upon its closing.
Eligible Securitization Transaction Documents: shall mean,
collectively, the Eligible Securitization Transaction Document Amendments and
all agreements, documents, instruments and certificates executed and delivered
in connection with any securitization transaction which from time to time
becomes an Eligible Securitization Transaction in accordance with the terms of
this Agreement.
Eligible Securitization Transaction Document Amendments: the
meaning specified in subsection 5.7.
Environmental Laws: the Resource Conservation and Recovery Act,
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, the Superfund Amendments and Reauthorization Act of 1986, the
Federal Water Pollution Control Act, the Federal Clean Water Act, the Federal
Clean Air Act, the Toxic Substances Control Act and any other federal, state or
local statute, regulation, ordinance, order or decree relating to health, safety
and/or the environment, as now or hereafter in effect.
ERISA: the meaning specified in subsection 3.15.
Event of Default: the meaning specified in Section 8.
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FASB 125 Net Worth Adjustments: the meaning specified in
subsection 7.4.
Finco: Onyx Acceptance Financial Corporation, a special purpose
Delaware corporation and a wholly-owned Subsidiary of the Company.
Fundco: shall mean Onyx Acceptance Funding Corporation, a
Delaware corporation and a wholly-owned Subsidiary of the Company.
Future Servicing Cash Flows: calculated for each Eligible
Securitization Transaction as the difference between the cash collected from
obligors on Automobile Loans in each Eligible Securitization Transaction and the
sum of (i) principal and interest passed-through on the certificates issued to
investors in the Eligible Securitization Transaction, (ii) a one percent (1%)
annual servicing fee and (iii) other expenses, including surety bond premiums,
all other amounts payable to any Credit Enhancer and the underwriter's discount.
GAAP: shall mean generally accepted accounting principles,
consistently applied.
Hazardous Material: (a) any asbestos or insulation or other
material composed of or containing asbestos and (b) any petroleum product and
any hazardous, toxic or dangerous waste, substance or material defined as such
in (or for purposes of) the Comprehensive Environmental Response, Compensation
and Liability Act, any so-called "Superfund" or "Superlien" law, or any other
applicable federal, state, local or other statute, law, ordinance, code, rule,
regulation, order or decree regulating, relating to, or imposing liability or
standards of conduct concerning, any hazardous, toxic or dangerous waste,
substance or material, as now or at any time hereafter in effect.
Indebtedness: as applied to any Person, (i) all items (except
items of capital or surplus or of retained earnings) which in accordance with
GAAP would be included in determining total liabilities as shown on the
liability side of the balance sheet of such Person as of the date of which
Indebtedness is to be determined, including without limitation Subordinated Debt
and any Capital Lease, (ii) all indebtedness secured by any mortgage, pledge,
lien or conditional sale or other title retention agreement to which any
property or asset owned or held by such Person is subject, whether or not the
indebtedness secured thereby shall have been assumed, and (iii) all indebtedness
of others which such Person has directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary course of business),
discounted or sold with recourse or agreed (contingently or otherwise) to
purchase or repurchase or otherwise acquire, or in respect of which such Person
has agreed
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to supply or advance funds (whether by way of loan, stock purchase,
capital contributions or otherwise) or otherwise to become directly or
indirectly liable.
Interest Expense: for any period, the aggregate amount
(determined in accordance with GAAP) of interest paid or payable during such
period in respect of all Indebtedness for borrowed money, Capital Leases and the
deferred purchase price of property.
Lender or Lenders: the meanings specified at the beginning of
this Agreement.
Licenses: the meaning specified in subsection 3.5.
Line of Credit: the meaning specified in subsection 1.2.
Liquidation Proceeds: with respect to any defaulted Automobile
Loan, shall mean the sum of (x) net proceeds from the sale of the repossessed
vehicle(s) relating to such Automobile Loan and without duplication, (y)
insurance proceeds, if any, received in respect of such defaulted Automobile
Loan.
Loan or Loans: the meanings specified in subsection 1.4.
Loan Documents: collectively this Agreement, the Notes, the
Security Documents and any and all financing statements, agreements and
instruments now or hereafter related thereto or executed in connection
therewith, as amended from time to time.
Majority Lenders: at any time, (a) if none of the Loans shall be
outstanding, Lenders whose Percentages of the Total Commitment aggregate at
least fifty-one percent (51%) or (b) if any of the Loans shall be outstanding,
Lenders which are owed at least fifty-one percent (51%) of the aggregate
principal amount of all such Loans at the time outstanding.
Material Adverse Effect: means any event, matter or condition
which could have a material adverse effect on (a) the financial performance or
condition, assets, operations or financial or other condition of the Company and
its Subsidiaries taken as a whole, (b) the Company's ability to pay and perform
all of the Loans and other material obligations owing by it to the Lenders in
accordance with the terms thereof, and/or (c) the Collateral (or any portion
thereof) or the security interests of the Agent and the Lenders in the
Collateral (or any portion thereof), or the priority of such security interests.
Minimum Servicing Balance: shall mean the aggregate face amount
of all Automobile Loan contracts serviced by the
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Company under any pooling and servicing agreement or (without duplication) sale
and servicing agreement.
MLMC: shall mean Merrill Lynch Mortgage Capital Inc.
MLMC Credit Facility: shall mean the credit facilities and
related servicing and custodial arrangements created pursuant to the MLMC Credit
Facility Documents.
MLMC Credit Facility Documents: shall mean, collectively, the
Master Repurchase Agreement, September 1996 Version between MLMC as Buyer, and
Fundco as Seller, together with Annex I thereto; the Custody Agreement by and
among MLMC as Buyer, Fundco as Seller, and Bankers Trust Company of California,
N.A. as Custodian; all Exhibits and Schedules executed and delivered in
connection with the foregoing; and all other agreements, instruments, documents
and certificates at any time executed in connection with any of the foregoing.
Net Book Value: in connection with the calculation of
capitalized Residual Interest in Securitized Assets, shall mean the value of
such assets on the books of the Company, determined in accordance with GAAP.
Net Book Value Model: the meaning specified in subsection 1.2.
Net Income: net income (or loss), for the period in question,
determined in accordance with GAAP.
Net Loss(es): shall mean, with respect to each Automobile Loan
included in any Eligible Securitization Transaction, an amount equal to (x) the
amount necessary to repay all obligations (including principal, interest, late
charges, costs and expenses of collection and other fees) of the Person liable
for repayment of such Automobile Loan, minus (y) Liquidation Proceeds received
in respect of such Automobile Loan.
Net Worth: at any date of determination, shall mean the Total
Assets of the Company minus Total Liabilities of the Company, determined in
accordance with GAAP.
Net Yield: means on any day, the percentage equivalent of (a)
four multiplied by (b) a fraction, the numerator of which is equal to (i) the
aggregate of all interest collected on Contracts, as reported on the monthly
report delivered by the Servicer pursuant to Section 2.5(d) of the Pooling and
Servicing Agreement, during the three immediately preceding Collection Periods,
minus (i) the sum of (A) the aggregate of the sum of the Outstanding Principal
Balance of Contracts which became Liquidated Contracts other than by virtue of a
Full Prepayment during such three Collection Periods (less, any Liquidation
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Proceeds received with respect to such Liquidated Contracts) during such three
Collection Periods and (B) interest paid to the Certificate holders attributable
to that portion of the Certificate Balance related to Contracts and the
Servicing Fees paid to the Servicer during such three months, and the
denominator of which is equal to the average of the Pool Balance as of the last
day of each of such three immediately preceding Collection Periods. All
capitalized terms used in this "Net Yield" definition shall have the same
meanings herein as in the Insurance and Reimbursement Agreement dated as of
October 5, 1994 among the Company, Finco, CapMAC and the Trustee named therein,
as in effect on the date hereof.
Normal Servicing Fees: the one percent (1%) servicing fee paid
to the Company in connection with and under the terms of the applicable
indenture, pooling and servicing agreement or other agreement executed in
connection with Eligible Securitization Transactions.
Note or Notes: the meanings specified in subsection 1.3.
Operating Account: the meaning specified in subsection 1.2.
PBGC: the meaning specified in subsection 3.15.
Percentage: the meaning specified in subsection 1.1.
Person: a corporation, an association, a partnership, limited
liability company, an owner, grantor or master trust, a joint venture, an
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
Perfection Certificates: shall mean the form of perfection
certificate delivered by the Agent to be executed and delivered by the Company
and Finco.
Pledge and Security Agreement: the meaning specified in
subsection 1.9.
Pledged Certificates: the meaning specified in subsection 1.9.
Pool Factor: shall mean the percentage equivalent of a fraction,
the numerator of which is the outstanding principal balance of notes or
certificates issued in connection with an Eligible Securitization Transaction as
of any date of calculation, and the denominator of which is the outstanding
principal balance of notes or certificates originally issued in connection with
such Eligible Securitization Transaction.
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Preferred Stock Agreement: means that certain Securities
Purchase Agreement dated November 22, 1993, as amended, between the Company and
the Major Investors and Other Investors named therein.
Prime Rate: the per annum rate of interest announced from time
by the Agent in Boston, Massachusetts as its "prime rate".
Projections: the meaning specified in subsection 3.4.
Proprietary Rights: any patents, registered and common law
trademarks, service marks, trade names, copyrights, licenses and other similar
rights, including, without limitation, know-how, trade secrets and other
confidential information, and applications for each of the foregoing.
Register: the meaning specified in subsection 14.14.
Rejected Transaction: means any Subsequent Securitization
Transaction with respect to which (i) the Company has delivered to each of the
Lenders all of the Required Information, together with a written request that
such Subsequent Securitization Transaction become an Eligible Securitization
Transaction and be included within the Borrowing Base under this Agreement, and
(ii) the Lenders shall have delivered written notice to the Company that such
Subsequent Securitization Transaction will not be included as an Eligible
Securitization Transaction under this Agreement, or the Lenders shall not have
issued any response to the Company's submission of the Required Information and
written request within ten (10) Banking Days after confirmed receipt thereof by
the Lenders.
Related Events: the consummation of the transactions
contemplated by this Agreement, the Security Documents, and the Eligible
Securitization Transaction Documents, in accordance with the respective terms
thereof.
Required Information: with respect to any Subsequent
Securitization Transaction, shall mean: (i) the prospectus or, if a prospectus
is not yet available, a report outlining: initial pool balance; initial loan
balance; prefunding amount (if any); spread account initial deposit; spread
account maintenance level; spread account floor; spread account trigger levels;
weighted average coupon; weighted average maturity; estimated certificate coupon
rate; and (ii) service reports to date (if any); (iii) original book value; (iv)
current book value; and (vi) pool selection, with tables showing breakdowns and
averages of: original balances; current balances; coupon (APR) rate report;
original terms; remaining terms; collateral code (new, used, new light truck,
used light truck); vehicle model years; borrower
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monthly incomes; borrower length of employment; borrower length of residency;
borrower debt ratios; loan to values; and geographic distribution.
Residual Interest in Securitized Assets: equals the sum of (i)
the present value of Future Servicing Cash Flows to be distributed to the
Company in connection with an Eligible Securitization Transaction as determined
in accordance with Statement of Financial Accounting Standards No. 65 ("SFAS
65") and (ii) the accounts receivable of the Company arising from or relating to
Spread Accounts. Subsection (i) of this definition of the Residual Interest in
Securitized Assets represents the present value of Future Servicing Cash Flows
earned on each Eligible Securitization Transaction as determined in accordance
with SFAS 65. Future Servicing Cash Flows represent the difference between the
coupon rate on the Automobile Loans and the pass-through rate on the
certificates issued to the investors in the securitized pool in excess of a
Normal Servicing Fee of one percent (1%) and any other continuing costs such as
trustee or surety bond premiums. To determine Subsection (i) of this definition
of the Residual Interest in Securitized Assets, the Future Servicing Cash Flows
are first estimated using an assumed rate of prepayment that is intended to be
conservative relative to historical experience and then discounted at a market
rate commensurate with the risk associated with this type of investment.
Subsection (i) of this definition of the Residual Interest in Securitized Assets
is then reduced by a credit loss provision based upon historical experience and
deemed adequate to cover net losses over the life of the trust. The loss
provision is calculated using a discount rate commensurate with a risk-free
investment of similar maturity in accordance with Emerging Issues Task Force
Announcement 92-2. Subsection (i) of the Residual Interest in Securitized Assets
is subsequently amortized against servicing income on a level-yield basis.
Periodically the Company reviews the assumptions utilized in determining
Residual Interest in Securitized Assets. Should the present value of Future
Servicing Cash Flows prove to be insufficient to recover the capitalized amount,
a charge to servicing income would be made in accordance with SFAS 65.
Restricted Payment: the meaning specified in subsection 6.5.
Revolving Credit Loan or Loans: the meanings specified in
subsection 1.2.
SEC: the Securities and Exchange Commission or any governmental
authority succeeding to any of its functions.
Security Documents: the meaning specified in subsection 1.9.
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SFAS 65: the meaning specified in the definition of "Excess
Servicing".
Sixty (60) Day Delinquencies: shall mean, with respect to each
Eligible Securitization Transaction, the sum of all Sixty (60) Day Delinquency
Automobile Loans included in such Eligible Securitization Transaction. An
Automobile Loan shall, at any date of determination, be considered a Sixty (60)
Day Delinquency if all payments due in respect of such Automobile Loan shall not
have been made in full as of the two immediately preceding monthly payment
periods.
Solvency Certificates: shall mean the form of solvency
certificate delivered by the Agent, to be executed and delivered by the Company
and Finco.
Spread Accounts: with respect to each Eligible Securitization
Transaction, the named "Spread Account", together with all other cash collateral
accounts or other escrow or reserve accounts established and maintained by the
trustee for the benefit of certificate holders and/or the Credit Enhancer.
Spread Account Trust(s): collectively and individually, the
1995-1 Spread Account Trust, the 1996-1 Spread Account Trust, 1996-2 Spread
Account Trust, 1996-3 Spread Account Trust, 1996-4 Spread Account Trust, 1997-1
Spread Account Trust, 1997-2 Spread Account Trust, 1997-3 Spread Account Trust
and the 1998-1 Spread Account Trust.
Spread Account Trust Agreements: the meaning specified in
subsection 1.9.
Spread Account Trustee(s): collectively and individually the
trustees, from time to time named as Spread Account Trustee in each of the
Spread Account Trust Agreements.
Subordinated Debt: shall mean that portion of the Indebtedness
of the Company heretofore or hereafter consented to in writing by the Lenders
and which is made subordinate and junior in the right of payment to the Notes
and to the Company's other obligations to the Lenders hereunder by provisions
satisfactory in form and substance to the Lenders and their counsel. All
Indebtedness of the Company to its Subsidiaries or Affiliates will be
Subordinated Debt.
Subsequent Securitization Transaction(s): the meaning specified
in subsection 4.12.
Subsidiary: any corporation of which more than 50% of the
outstanding Voting Stock (other than director's qualifying shares) is at the
time owned or controlled by the Company or by one or more Subsidiaries or by the
Company and one or more Subsidiaries.
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Term Loan: the meaning specified in subsection 1.4.
Total Commitment: the meaning specified in subsection 1.1.
Total Assets: all assets of the Company which may be properly
classified as assets in accordance with GAAP.
Total Liabilities: all Indebtedness, and all other liabilities
which may be properly classified as liabilities in accordance with GAAP.
Trigger Event: the meaning specified in subsection 8.3.
Voting Stock: stock having ordinary voting power to elect a
majority of the board of directors of the corporation in question, irrespective
of whether or not at the time stock of any class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency.
Section 10. Setoffs, Pro Rata Treatment; etc. If the Company becomes insolvent,
howsoever evidenced, or any Default or Event of Default occurs and is
continuing, any Indebtedness from any Lender to the Company or any Subsidiary
may, without regard to the value or adequacy of the Collateral, be offset and
applied toward the payment of any Indebtedness from the Company to the Lenders,
whether or not such Indebtedness, or any part thereof shall then be due. The
Lenders agree among themselves that, with respect to all sums received by the
Lenders applicable to the payment of principal of or interest on the Notes,
equitable adjustment will be made among the Lenders so that, in effect, all such
sums shall be shared ratably by each of the Lenders whether received by
voluntary payment, by the exercise of the right of setoff or banker's lien, by
counterclaim or crossclaim or by the enforcement of any or all of the Notes. If
any Lender receives any payment on its Notes of a sum or sums in excess of its
pro rata portion, then such Lender receiving such excess payment shall purchase
for cash from the other Lenders an interest in their Notes in such amounts as
shall result in a ratable participation by each of the Lenders in the aggregate
unpaid amount of the Notes then outstanding, provided, however, that if all or
any portion of such excess payment is thereafter recovered from such Lender, the
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, but without interest.
Section 11. Expenses; Indemnification.
(a) Whether or not the transactions contemplated hereby shall be
consummated, the Company agrees (i) to pay all
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reasonable expenses, including reasonable fees and disbursements of counsel for
the Agent (subject to the term sheet), which the Agent has incurred or may
hereafter incur in connection with the preparation of this Agreement, the
Security Documents, the Notes, the Eligible Securitization Transaction Documents
and all other documents related hereto and thereto (including any amendment,
consent or waiver hereafter requested by the Company hereunder or thereunder)
and the transactions contemplated hereby or the protection, preservation and/or
enforcement of the rights of the Agent or the Lenders hereunder or under the
Notes or the Security Documents in the event of a Default hereunder or
thereunder (including without limitation amounts incurred with respect to any
so-called "workout" of the Loans) and (ii) to pay all taxes (other than the
Lenders' income taxes) and fees (including interest and penalties), including,
without limitation, all recording and filing fees, transfer and documentary
stamp and similar taxes, which may be payable in respect of the execution and
delivery of this Agreement, the Security Documents, the Notes, the Eligible
Securitization Transaction Documents and all other documents related hereto and
thereto (including any amendment, consent or waiver hereafter requested by the
Company hereunder or thereunder) and to indemnify the Agent and the Lenders and
hold the Agent and the Lenders harmless against any loss or liability resulting
from non-payment or delay in payment of any such tax. The Company hereby
authorizes the Agent to pay all such amounts described above to the Lenders and
to charge the same to the Operating Account or the Blocked Account or any other
depository account maintained by the Company with the Agent if the same are not
paid within five (5) days after the Agent and/or the Lender notifies the Company
of the amounts owed.
(b) The Company will indemnify the Agent, the Lenders, their
respective directors, officers and employees and each other Person, if any, who
controls the Agent or the applicable Lender, and will hold the Agent and the
Lenders and such other Persons harmless from and against any and all claims,
damages, losses, liabilities, judgments and expenses (including without
limitation all reasonable fees and expenses of counsel and all expenses of
litigation or preparation therefor) which the Agent, the Lenders or such other
Persons may incur or which may be asserted against the Lenders or such other
Persons in connection with or arising out of any investigation, litigation or
proceeding involving the Company or any shareholder or any Affiliate of the
Company or any such shareholder (including compliance with or contesting of any
subpoenas or other process issued against any Lender, or any director, officer
or employee of the Agent or any Lender, or any Person, if any, who controls the
Agent or any Lender in any proceeding involving the Company or any shareholder
or any Affiliate of the Company or any such shareholder), whether or not the
Agent or any Lender is party thereto, other than claims, damages, losses,
liabilities or judgments with respect to any matter as to which the Agent or
such Lender or such other Person
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seeking indemnity shall have been finally adjudicated not to have acted in good
faith or to have been grossly negligent in its actions or inactions. Promptly
upon receipt by any indemnified party hereunder of notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to be
made against the Company hereunder, notify the Company in writing of the
commencement thereof.
(c) The Company acknowledges and agrees that its agreements and
obligations under this Section 11 shall survive the termination of this
Agreement and repayment in full of the Loans. The Agent shall be entitled to
retain Collateral or require substitution therefor to the extent required to
reasonably assure the Agent and the Lenders of satisfaction of the Company's
obligations under this Section 11 and any Collateral not so required or, if
sufficient cash collateral is substituted, then all of the Collateral, shall be
released to the Company.
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Section 12. Amendments and Waivers, etc.
(a) Any term of this Agreement or of the Security Documents or the
Notes or the other Loan Documents may be amended and the observance of any term
of this Agreement or of the Security Documents or the Notes may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only with the written consent of the Company and the Majority
Lenders, provided that no such amendment or waiver shall, without the prior
written consent of all of the Agent, the Lenders or the holders of all of the
Notes at the time outstanding, (a) extend the fixed maturity or reduce the
principal amount of, or reduce the rate or extend the time of payment of
interest on, or reduce the amount or extend the time of payment of any principal
of, any Note, (b) change any Commitment or Percentage, (c) change the percentage
referred to in the definition of "Majority Lenders" contained in Section 9
hereof, (d) amend this Section 12, (e) include a Subsequent Securitization
Transaction within the definition of Eligible Securitization Transactions or (f)
without limiting clause (e) above, add (or replace after deletion) any Eligible
Securitization Transaction to the Borrowing Base. Once a Default or Event of
Default has occurred, such Default or Event of Default shall be deemed to exist
and be continuing for all purposes of this Agreement and the other Loan
Documents until the Majority Lenders or all of the Lenders (in the circumstances
described in the foregoing clauses (a) through (f)) shall have waived such
Default or Event of Default in writing, stated in writing that the same has been
remedied or cured to such Lenders' reasonable satisfaction or entered into an
Amendment to this Agreement which by its express terms cures or waives such
Default or Event of Default, at which time such Default or Event of Default
shall no longer be deemed to exist or to have continued. Any amendment or waiver
effected in accordance with this Section 12 shall be binding upon each holder of
any Note at the time outstanding, each future holder of any Note and the
Company.
(b) The failure of the Agent or the Lenders to insist upon the
strict performance of any term, condition or other provision of this Agreement
or the Security Documents or the Notes or to exercise any right or remedy
hereunder or thereunder shall not constitute a waiver by the Agent or the
Lenders of any such term, condition or other provision or Default or Event of
Default or Credit Trigger in connection therewith; and any waiver of any such
term, condition or other provision or of any such Default or Event of Default or
Credit Trigger shall not affect or alter this Agreement or the Security
Documents or the Notes, and each and every term, condition and other provision
of this Agreement, the Security Documents and the Notes shall, in such event,
continue in full force and effect and shall be operative with respect to any
other then existing or subsequent Default or Event of Default or Credit Trigger
in connection therewith.
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Section 13. Nature of the Lenders' Obligations. The Lenders' obligations to make
their respective Loans are several and not joint or joint and several. Any
Lender which is not in default in the performance of its said obligations may,
in its discretion, assume the obligations of any other Lender which is in
default.
A. Section 14. The Agent.
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14.1 Appointment, Powers and Immunities. Each Lender hereby irrevocably
appoints and authorizes the Agent to act as its agent hereunder and under each
of the Security Documents with such powers as are specifically delegated to the
Agent by the terms of this Agreement and the Security Documents, together with
such other powers as are reasonably incidental thereto. The Agent (which term as
used in this sentence and in subsection 14.5 and the first sentence of
subsection 14.6 hereof shall include reference to its Affiliates and its own and
its Affiliates' officers, directors, employees and agents): (a) shall have no
duties or responsibilities except those expressly set forth in this Agreement to
be a trustee for any Lender; (b) shall not be responsible to the Lenders for any
recitals, statements, representations or warranties contained in this Agreement
or any Security Document, or in any certificate or other document referred to or
provided for in, or received by any of them under, this Agreement or any
Security Document, or for the value, validity, effectiveness, genuineness,
enforceability, perfection or sufficiency of this Agreement, any Note, any
Security Document or any other document referred to or provided for herein or
therein or for any failure by the Company or any other Person to perform any of
its obligations hereunder or thereunder; (c) shall not be required to initiate
or conduct any litigation or collection proceedings hereunder except to the
extent requested by the Majority Lenders; and (d) shall not be responsible for
any action taken or omitted to be taken by it hereunder or under any Security
Document or other document or instrument referred to or provided for herein or
therein or in connection herewith, except for its own gross negligence or
willful misconduct. The Agent may employ agents and attorneys-in-fact and shall
not be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. Subject to the foregoing,
the Agent shall, on behalf of the Lenders: (i) execute any and all of the
Security Documents on behalf of the Lenders; (ii) hold and apply any and all
Collateral, and the proceeds thereof, at any time received by it, in accordance
with the provisions of the Security Documents and this Agreement; (iii) exercise
any and all rights, powers and remedies of the Lenders under this Agreement or
any of the Security Documents, including the giving of any consent or waiver or
the entering into of any amendment, subject to the provisions of Section 12(a);
(iv) execute, deliver and file UCC financing statements, mortgages, deeds of
trust, lease assignments and other such agreements, and possess instruments on
behalf of any or all of the Lenders; and (v) in the event of acceleration of the
Company's Indebtedness hereunder, use such efforts to sell or otherwise
liquidate or dispose of the Collateral referred to herein and in the Security
Documents and otherwise exercise the rights of the Lenders thereunder as the
Agent would customarily take with respect to loans made exclusively by it and of
a nature comparable to the Loans made hereunder.
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14.2 Reliance by Agent. The Agent shall be entitled to rely upon any
certifications, notices or other communications (including any communications by
telephone, telex, telegram or cable) believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or Persons,
and upon advice and statements of legal counsel, independent accountants and
other experts selected by the Agent. As to any matters not expressly provided
for by this Agreement, the Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder in accordance with instructions
signed by the Lenders (or the Majority Lenders, to the extent permitted by the
terms hereof), and such instructions of the Lenders or the Majority Lenders, as
applicable, and any action taken or failure to act pursuant thereto shall be
binding on all of the Lenders.
14.3 Defaults. The Agent shall not be deemed to have knowledge of the
occurrence of a Default, Event of Default or Credit Trigger (other than the
nonpayment of principal of or interest on the Notes) unless the Agent has
received written notice from a Lender or the Company specifying such Default,
Event of Default or Credit Trigger. In the event that the Agent receives such a
notice of the occurrence of a Default, Event of Default or Credit Trigger, the
Agent shall give prompt notice thereof to the Lenders (and shall give each
Lender prompt notice of each such nonpayment). The Agent shall (subject to
subsection 14.7) take such action with respect to such Default, Event of Default
or Credit Trigger as shall be directed by the Majority Lenders, provided that,
unless and until the Agent shall have received such directions, the Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default, Event of Default or Credit Trigger as it
shall deem advisable in the best interest of the Lenders.
14.4 Rights as a Lender. With respect to its Commitment and the Loans made by
it, the Agent in its capacity as a Lender hereunder shall have the same rights
and powers hereunder as any other Lender and may exercise the same as though it
were not acting as the Agent, and the term "Lender" or "Lenders" shall, unless
the context otherwise indicates, include the Agent in its individual capacity.
The Agent and its Affiliates may (without having to account therefor to any
Lender) accept deposits from, lend money to and generally engage in any kind of
banking, trust or other business with the Company and any of its Affiliates as
if it were not acting as the Agent, and the Agent may accept fees and other
consideration from the Company for services as the Agent or otherwise without
having to account for the same to the Lenders.
14.5 Indemnification. The Lenders agree to indemnify the Agent ratably in
accordance with the aggregate principal amount of the Notes held by the Lenders
(or, if no such principal or interest is at the time outstanding, ratably in
accordance with their respective Percentages of the Total Commitment), for any
and all
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liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or asserted against the Agent in any way relating to or
arising out of this Agreement, the Notes or any Security Document or any other
document contemplated by or referred to herein or the transactions contemplated
by or referred to herein or therein (including, without limitation, the costs
and expenses which the Company is obligated to pay but excluding, unless a
Default, Event of Default or Credit Trigger has occurred and is continuing,
normal administrative costs and expenses incident to the performance of its
agency duties hereunder) or the enforcement of any of the terms of this
Agreement, the Notes or any Security Document or of any such other documents,
provided that no Lender shall be liable for any of the foregoing to the extent
they arise from the gross negligence or willful misconduct of the party to be
indemnified.
14.6 Non-Reliance on Agent and Other Lenders. Each Lender agrees that it has,
independently and without reliance on the Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis of the Company, the Collateral, the Eligible Securitization
Transactions and the Related Events, and its own decision to enter into this
Agreement and that it will, independently and without reliance upon the Agent or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement. Without limiting the
foregoing, each Lender has analyzed and approved the Collateral Value Model, and
the Agent has no responsibility therefor. The Agent shall not be required to
keep itself informed as to the performance or observance by the Company of this
Agreement or any other document referred to or provided for herein or to inspect
the properties or books of the Company. Except for notices, reports and other
documents and information expressly required to be furnished to the Lenders by
the Agent hereunder, the Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the affairs,
financial condition or business of the Company (or any of its Affiliates) which
may come into the possession of the Agent or any of its Affiliates.
Notwithstanding the foregoing, the Agent will use its best efforts to provide to
the Lenders any and all information reasonably requested by them and reasonably
available to the Agent promptly upon such request.
14.7 Failure to Act. Except for action expressly required of the Agent
hereunder, the Agent shall in all cases be fully justified in failing or
refusing to act hereunder unless it shall be indemnified to its satisfaction by
the Lenders against any and
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all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action.
14.8 Resignation of Agent. Subject to the appointment and acceptance of a
successor Agent as provided below, the Agent may resign at any time by giving
notice thereof to the Lenders and the Company. Upon any such resignation, the
Majority Lenders shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Majority Lenders and shall
have accepted such appointment within 30 days after the retiring Agent's giving
of notice of resignation, then the retiring Agent may, on behalf of the Lenders,
appoint a successor Agent which shall be a Lender which has a combined capital
and surplus of at least $100,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations hereunder. After the retiring Agent's resignation
hereunder as Agent, the provisions of this Section 14 shall continue in effect
for its benefit in respect of any actions taken or omitted to be taken by it
while it was acting as the Agent.
14.9 Cooperation of Lenders. Each Lender shall (a) promptly notify the other
Lenders and the Agent of any Events of Default known to such Lender under this
Agreement and not reasonably believed to have been previously disclosed to the
other Lenders; (b) provide the other Lenders and the Agent with such information
and documentation as such other Lenders or the Agent shall reasonably request in
the performance of their respective duties hereunder, including all information
relative to the outstanding balance of principal, interest and other sums owed
to such Lender by the Company; and (c) cooperate with the Agent with respect to
any and all collections and/or foreclosure procedures at any time commenced
against the Company or otherwise in respect of the Collateral by the Agent on
behalf of the Lenders.
14.10 Security. Notwithstanding the foregoing, the Agent and the other Lenders
agree, as among themselves, that (i) the Agent shall not without the consent of
the Majority Lenders make any sale or disposition of the Collateral pursuant to
any of the Security Documents, and (ii) the Agent shall not without the consent
of all of the Lenders release the security interest of the Lenders in any of the
Collateral or release or discharge any Person which is a party to any of the
Security Documents from its obligations thereunder, except in each case as
expressly provided in the Security Documents, or consent or agree to any
amendment or waiver of any material provision of any of the Security Documents.
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The Agent acknowledges to the other Lenders that it is acting in an
agency capacity hereunder and that the security interest in the Collateral
granted under the Security Documents secures the Indebtedness of the Company
owing to all of the Lenders. In the event of any default, the Agent will apply
and/or pay over to the Lenders any net proceeds derived from the Collateral pro
rata on the basis of the then outstanding portion of the total Indebtedness of
the Company owed to the Lenders.
The Agent will be reimbursed or properly indemnified by the Lenders in
the event the Agent is requested by the Lenders to take or omit to take any
action with respect to the Collateral (any such reimbursement or indemnification
to be pro rata as provided in subsection 14.5). The Agent shall have the right
to retain counsel to advise it as to any action or decision with respect to the
Collateral and shall be reimbursed by the other Lenders for the cost of the same
(to the extent the Agent is not reimbursed by the Company) prior to distributing
any of the Collateral or any proceeds thereof (any such reimbursement to be pro
rata as aforesaid).
14.11 Amendment of Section 14. The Company hereby agrees that the foregoing
provisions of this Section 14 constitute an agreement among, and solely for the
benefit of, the Agent and the Lenders (and the Agent and the Lenders acknowledge
that the Company is not a party to or bound by such foregoing provisions) and
that any and all of the provisions of this Section 14 may be amended at any time
by the Lenders without the consent or approval of, or notice to, the Company
(other than the requirement of notice to the Company of the resignation of the
Agent).
B. Section 14. Assignment and Participation.
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14.12 Conditions to Assignment by Lenders. Except as provided herein, each
Lender may assign to one or more Eligible Assignees all or a portion of its
interests, rights and obligations under this Agreement (including all or a
portion of its Percentage and Commitment and the same portion of the Loans at
the time owing to it) and the Note held by it; provided that (i) the Agent and
the Company (so long as no Default, Event of Default or Credit Trigger is
existing) shall have given their prior written consent to such assignment (such
consent not to be unreasonably withheld), (ii) each such assignment shall be of
a constant, and not a varying, percentage of all the assigning Lender's rights
and obligations under this Credit Agreement, (iii) each assignment shall be in
an amount that is at least $2,000,000 and a whole multiple of $100,000 in excess
of such $2,000,000 and (iv) the parties to such assignment shall execute and
deliver to the Agent, for recording in the Register (as hereinafter defined), an
Assignment and Acceptance, in the form required by the Agent (an "Assignment and
Acceptance"), together with any Note subject to such assignment. Upon such
execution, delivery, acceptance and recording, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall be at
least seven (7) Banking Days after the execution thereof, (i) the assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender
hereunder, and (ii) the assigning Lender shall, to the extent provided in such
assignment and upon payment to the Agent of the registration fee referred to in
subsection 14.14, be released from its obligations under this Agreement. The
Company shall respond to any written request for the approval of an assignment
within seven (7) Banking Days of receipt thereof and the failure to respond
shall be deemed approval.
14.13 Certain Representations and Warranties; Limitations; Covenants. By
executing and delivering an Assignment and Acceptance, the parties to the
assignment thereunder confirm to and agree with each other and the other parties
hereto as follows:
(a) other than the representation and warranty that it is the legal
and beneficial owner of the interest being assigned thereby free and clear of
any adverse claim, the assigning Lender makes no representation of warranty,
express or implied, and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement, the other Loan Documents or any other
instrument or document furnished pursuant hereto or the attachment, perfection
or priority of any security interest;
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(b) the assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the Company
and its Subsidiaries, or the performance or observance by the Company and its
Subsidiaries of any of their obligations under this Agreement or any of the
other Loan Documents or any other instrument or document furnished pursuant
thereto or thereto;
(c) such assignee confirms that it has received a copy of this
Agreement, together with copies of the most recent financial statements referred
to in Section 5 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance;
(d) such assignee will, independently and without reliance upon the
assigning Lender, the Agent or any other Lender 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 Credit Agreement;
(e) such assignee represents and warrants that it is an Eligible
Assignee;
(f) such assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
and the other Loan Documents as are delegated to the Agent by the terms hereof
or thereof, together with such powers as are reasonably incidental thereto;
(g) such assignee agrees that it will perform in accordance with
their terms all of the obligations that by the terms of this Agreement are
required to be performed by it as a Lender; and
(h) such assignee represents and warrants that it is legally
authorized to enter into such Assignment and Acceptance.
14.14 Register. The Agent shall maintain a copy of each Assignment and
Acceptance delivered to it and a register or similar list (the "Register") for
the recordation of the names and addresses of each of the Lenders and the
Commitment and Percentage of, and principal amount of the Loans owing to the
Lenders from time to time. The entries in the Register shall be conclusive, in
the absence of manifest error, and the Company, the Agent and the Lenders may
treat each Person whose name is recorded in the Register as a Lender hereunder
for all purposes of this Agreement. The Register shall be available for
inspection by the Company and the Lenders at any reasonable time and from time
to time upon reasonable prior notice. Upon each recordation in the Register
arising from execution of an
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assignment and acceptance, the assigning Lender agrees to pay to the Agent a
registration fee in the sum of $2,500.
14.15 New Notes. Upon its receipt of an Assignment and Acceptance executed by
the parties to such assignment, together with each Note subject to such
assignment, the Agent shall (i) record the information contained therein in the
Register, and (ii) give prompt notice thereof to the Company and the Lenders
(other than the assigning Lender). Within seven (7) Banking Days after receipt
of such notice, the Company, at its own expense, shall execute and deliver to
the Agent, in exchange for each surrendered Note, a new Note to the order of
such Eligible Assignee in an amount equal to the amount assumed by such Eligible
Assignee pursuant to such Assignment and Acceptance and, if the assigning Lender
has retained some portion of its obligations hereunder, a new Note to the order
of the assigning Lender in an amount equal to the amount retained by it
hereunder. Such new Notes shall provide that they are replacements for the
surrendered Notes, shall be in an aggregate principal amount equal to the
aggregate principal amount of the surrendered Notes, shall be dated the
effective date of such Assignment and Acceptance and shall otherwise be in
substantially the form of the assigned Notes. Within seven (7) Banking Days of
issuance of any new Notes pursuant to this subsection 14.15, if so requested by
the Agent the Company shall deliver an opinion of counsel, addressed to the
Lenders and the Agent, relating to the due authorization, execution and delivery
of such new Notes and the legality, validity and binding effect thereof,
substantially in the same form as the corresponding portion of the legal opinion
delivered on the Closing Date. The surrendered Notes shall be canceled and
returned to the Company. The Company shall be reimbursed for reasonable expenses
incurred in connection with obtaining such opinion of counsel.
14.16 Participants. Each Lender may (subject to the provisions of this
subsection 14.16 and without the consent of the Agent) sell participations to
one or more Lenders or other entities in all or a portion of such Lender's
rights and obligations under this Agreement and the other Loan Documents;
provided that (i) each such participation shall be in amount of not less than
$1,000,000, (ii) any such sale or participation shall not affect the rights and
duties of the selling Lender hereunder to the Company, (iii) the only rights
granted to the participant pursuant to such participation arrangements with
respect to waivers, amendments or modifications of the Loan Documents shall be
the rights to approve waivers, amendments or modifications that would reduce the
principal of or the interest rate on any Loans, extend the term or increase the
amount of the Commitment of such Lender as it relates to such participant,
reduce the amount of any commitment fees to which such participant is entitled
or extend any regularly scheduled payment date for principal or interest and
(iv) each Lender desiring to sell a
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participation shall notify the Agent in writing prior to committing to such
sale.
14.17 Disclosure. The Lenders shall hold all non-public information relating
to the Company obtained by it under this Agreement in accordance with their
customary procedures for handling confidential information of this nature,
except for: (i) disclosure to their respective Affiliates or to their auditors
or counsel or to any agent or advisor acting on their behalf in connection with
the negotiation, execution or performance of the Loan Documents, provided that
such Person has been advised of the confidential nature of such information,
(ii) disclosure as reasonably required in connection with a transfer to a
prospective assignee or participant of all or part of such Lender's Loan or any
participation therein, as provided in subsection 14.12, (iii) disclosure as may
be required or requested by any governmental or regulatory authority or
representative thereof or pursuant to legal process, (iv) disclosure to any
Person in any proceeding necessary in such Lender's reasonable judgment to
protect its interests in connection with any claim or dispute involving the
Lenders and (v) any other disclosure with the prior written consent of the
Company. Prior to any disclosure by any Lenders of such non-public information
permitted under clause (iii) (other than in connection with an examination of
the financial condition of the Lenders or any of their Affiliates by any
governmental authority), such Lender shall, if permitted by applicable laws or
judicial order, notify the Company of such pending disclosure.
14.18 Assignee or Participant Affiliated with the Company. If any assignee
Lender is an Affiliate of the Company, then any such assignee Lender shall have
no right to vote as a Lender hereunder or under any of the other Loan Documents
for purposes of granting consents or waivers or for purposes of agreeing to
amendments or other modifications to any of the Loan Documents or for purposes
of making requests to the Agent, and the determination of the Majority Lenders
shall for all purposes of this Agreement and the other Loan Documents be made
without regard to such assignee Lender's interest in any of the Loans. If any
Lender sells a participating interest in any of the Loans to a participant, and
such participant is an Affiliate of the Company, then such transferor Lender
shall promptly notify the Agent of the sale of such participation. A transferor
Lender shall have no right to vote as a Lender hereunder or under any of the
other Loan Documents for purposes of granting consents or waivers or for
purposes of agreeing to amendments or modifications to any of the Loan Documents
or for purposes of making requests to the Agent to the extent that such
participation is beneficially owned by any Affiliate of the Company, and the
determination of the Majority Lenders shall for all purposes of this Agreement
and the other Loan Documents be made without regard to the interest of such
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transferor Lender in the Loans to the extent of such participation.
14.19 Miscellaneous Assignment Provisions. Any assigning Lender shall retain
its rights to be indemnified pursuant to Section 11 with respect to any claims
or actions arising prior to the date of such assignment. If any assignee Lender
is not incorporated under the laws of the United States of America or any state
thereof, it shall, prior to the date on which any interest or fees are payable
hereunder or under any of the other Loan Documents for its account, deliver to
the Company and the Agent certification as to its exemption from deduction or
withholding of any United States federal income taxes. Anything contained in
this Agreement to the contrary notwithstanding, any Lender may at any time
pledge all or any portion of its interest and rights under this Agreement
(including all or any portion of its Notes) to any of the twelve Federal Reserve
Lenders organized under Section 4 of the Federal Reserve Act, 12 U.S.C.
Section 341 without the Company's prior approval. No such pledge or the
enforcement thereof shall release the pledgor Lender from its obligations
hereunder or under any of the other Loan Documents.
Section 15. Miscellaneous.
15.1 Notices, etc. All notices and other communications hereunder shall be in
writing and shall be personally delivered or mailed by first class mail, postage
prepaid, as follows:
(a) If to the Lenders or the Agent:
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Attention: Russ J. Salisbury
with a copy to:
Peter M. Palladino, P.C.
Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, Massachusetts 02109
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and to:
BankBoston
100 Federal Street, 01-10-08
Boston, Massachusetts 02110
Attention: Deirdre Holland
and to:
The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183-2030
Attention: Investment Group - Private Placements
Facsimile: 860-954-5243
and in case of notices regarding payments to:
The Travelers Insurance Company
One Tower Square
Hartford, Connecticut 06183-2030
Attn: Investment Group - Cashier
Facsimile: 860-227-2299
(b) If to the Company:
Onyx Acceptance Corporation
8001 Irvine Center Drive, 5th Floor
Irvine, California 92718
Attention: Don P. Duffy and John Hall
with a copy to:
Roger M. Cohen, Esq.
Brobeck, Phleger & Harrison
38 Technology Drive
Irvine, California 92618
or to such other address or addresses as the party to whom such notice is
directed may have designated in writing to the other parties hereto. A notice
shall be deemed to have been given upon receipt by the party to whom such notice
is directed.
15.2 Calculations, etc. Calculations hereunder shall be made and financial data
required hereby shall be prepared, both as to classification of items and as to
amounts, in accordance with GAAP and practices which principles and practices
shall be consistently applied and in conformity with those used in the
preparation of the financial statements referred to herein.
15.3 Governmental Approval. The Company agrees to take any action which the
Lenders may reasonably request in order to obtain and enjoy the full rights and
benefits granted to the
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Lenders by this Agreement and the Security Documents, including specifically, at
the Company's own cost and expense, the use of its best efforts to assist in
obtaining approval of the any applicable governmental or regulatory authority or
court for any action or transaction contemplated by this Agreement or the
Security Documents which is then required by law.
15.4 Survival of Agreements, etc. This Agreement shall inure to the benefit
of the Lenders and their successors and assigns including any subsequent holder
or holders of the Notes, and the terms "Lenders" and "Lender" shall include any
such holder or holders whenever the context permits. In the event of a sale or
assignment by any Lender in accordance with the terms of this Agreement of all
or any part of the Loans or any of the Secured Obligations (as defined in the
Security Documents) held by it, such Lender may assign or transfer its rights
and interests under this Agreement and any one or more of the Security Documents
in whole or in part to the purchaser or purchasers thereof, whereupon such
purchaser or purchasers shall become vested with all of the powers and rights of
such Lender hereunder and thereunder, and such Lender shall thereafter be
forever released and fully discharged from any liability or responsibility
hereunder or thereunder accruing or arising after the effective date of the
assignment with respect to the rights and interests so assigned. All agreements,
representations and warranties made herein shall survive the execution and
delivery of this Agreement and the making of the Loans hereunder.
15.5 Counterparts, etc. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all the
counterparts shall together constitute one and the same instrument.
15.6 Entire Agreement, etc. This Agreement constitutes the entire contract
between the parties hereto and shall supersede and take the place of any other
instrument purporting to be an agreement of the parties hereto relating to the
transactions contemplated hereby. This Agreement may not be changed orally but
only by an agreement in writing signed by the party against whom any waiver,
change, modification or discharge is sought.
15.7 Governing Law, etc.; Construction. (a) This Agreement and the Notes,
including the validity thereof and the rights and obligations of the parties
hereunder and thereunder, shall be construed in accordance with and governed by
the internal laws of The Commonwealth of Massachusetts (without reference to
conflicts of laws principles) and is intended to take effect as a sealed
instrument. Except as prohibited by law which cannot be waived, the Company
hereby waives any right that it may have to claim or recover in any litigation
involving the Lenders any special, exemplary, punitive or consequential damages
or any damages other
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than, or in addition to, actual damages. The provisions of this Agreement are
severable; the unenforceability of any provision of this Agreement shall not
affect the validity, binding effect and enforceability of any other provision or
provisions of this Agreement.
(b) Any reference to this Agreement, the Notes, the Security
Documents and the other Loan Documents contained herein or in any other Loan
Document shall (unless otherwise indicated) be deemed to refer to such writing
as the same may be amended and/or restated from time to time in accordance with
the terms thereof. The words "herein", "hereof", "hereunder" and words of like
import shall refer to this Agreement as a whole and not to any particular
section or paragraph of this Agreement. In the event of any conflict between the
provisions of this Agreement (on the one hand) and the provisions of any of the
other Loan Documents (on the other hand), the provisions of this Agreement shall
prevail.
15.8 Jurisdiction; Waiver of Jury Trial. THE COMPANY, TO THE EXTENT THAT IT
MAY LAWFULLY DO SO, HEREBY CONSENTS TO SERVICE OF PROCESS, AND TO BE SUED, IN
THE COMMONWEALTH OF MASSACHUSETTS AND CONSENTS TO THE JURISDICTION OF THE COURTS
OF THE COMMONWEALTH OF MASSACHUSETTS AND THE UNITED STATES DISTRICT COURT FOR
THE DISTRICT OF MASSACHUSETTS, AS WELL AS TO THE JURISDICTION OF ALL COURTS TO
WHICH AN APPEAL MAY BE TAKEN FROM SUCH COURTS, FOR THE PURPOSE OF ANY SUIT,
ACTION OR OTHER PROCEEDING ARISING OUT OF ANY OF ITS OBLIGATIONS HEREUNDER OR
UNDER THE NOTES OR ANY OF THE SECURITY DOCUMENTS OR WITH RESPECT TO THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, AND EXPRESSLY WAIVES ANY AND ALL
OBJECTIONS IT MAY HAVE AS TO VENUE IN ANY SUCH COURTS. THE COMPANY FURTHER
AGREES THAT A SUMMONS AND COMPLAINT COMMENCING AN ACTION OR PROCEEDING IN ANY OF
SUCH COURTS SHALL BE PROPERLY SERVED AND SHALL CONFER PERSONAL JURISDICTION IF
SERVED PERSONALLY OR BY CERTIFIED MAIL TO IT AT ITS ADDRESS PROVIDED IN
SUBSECTION 15.1 OR AS OTHERWISE PROVIDED UNDER THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS. THE COMPANY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN
ANY PROCEEDING HEREAFTER INSTITUTED IN RESPECT OF THIS AGREEMENT, THE NOTE, THE
SECURITY DOCUMENTS, OR ANY OTHER DOCUMENTS EXECUTED IN CONNECTION HEREWITH OR
THEREWITH. The Company hereby certifies that neither the Agent nor the Lenders
nor any of their representatives, agents or counsel have represented, expressly
or otherwise, that the Lenders would not, in the event of any such suit, action
or proceeding, seek to enforce this waiver of right to trial by jury. The
Company acknowledges that the Lenders have been induced to enter into this
Agreement by, among other things, this waiver. The Company acknowledges that it
has read the provisions of this Agreement and in particular this paragraph; has
consulted legal counsel; understands the rights it is granting in this Agreement
and is waiving under this section in particular; and makes the above waiver
knowingly, voluntarily and intentionally.
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* * * * * * * * * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as a
sealed instrument as of the date first above written.
ONYX ACCEPTANCE CORPORATION
By:______________________________________
(Title)
STATE STREET BANK AND TRUST COMPANY,
INDIVIDUALLY AND AS AGENT
By:______________________________________
(Title)
BANKBOSTON
By:______________________________________
(Title)
THE TRAVELERS INSURANCE COMPANY
By:______________________________________
(Title)
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EXHIBIT 10.105
AMENDED AND RESTATED
PLEDGE AND SECURITY AGREEMENT
AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT (this "Agreement") dated
as of June 12, 1998 by and among Onyx Acceptance Corporation, a Delaware
corporation having its principal place of business at 8001 Irvine Center Drive,
5th Floor, Irvine, California 92718 (the "Company"), State Street Bank and Trust
Company ("State Street"), BankBoston ("BankBoston") and The Travelers Insurance
Company ("Travelers"), collectively with State Street and BankBoston, the
"Secured Parties", and each individually a "Secured Party"). State Street, in
its capacity as agent for the Secured Parties hereunder, is sometimes
hereinafter referred to as the "Agent", which term shall also be deemed to
include any successor(s) as Agent under the Loan Agreement (as hereinafter
defined) and any other party acting as agent for the Secured Parties hereunder.
This Amended and Restated Pledge and Security Agreement amends and restates the
Pledge and Security Agreement by and among the Company, State Street and
BankBoston dated as of January 31, 1996, as further amended by the First
Amendment Agreement dated as of November 12, 1996 by and among the Company,
State Street and BankBoston, as further amended by the Amendment and
Confirmation of Pledge and Security Agreement dated as of January 17, 1997 by
and among the Company, State Street, and BankBoston, as further amended by
Second Amendment and Confirmation of Pledge and Security Agreement dated as of
September 30, 1997 by and among the Company, State Street, and BankBoston, as
further amended by the Fifth Amendment to Loan Agreement, Including Third
Amendment and Confirmation of Pledge and Security Agreement dated as of February
4, 1998 by and among the Company, State Street and BankBoston and as further
amended from time to time through the date of this Agreement.
W I T N E S S E T H :
WHEREAS, the Company and the Secured Parties have entered into an Amended
and Restated Residual Interest in Securitized Assets Revolving Credit and Term
Loan Agreement dated as of the date hereof (as amended, modified and/or
supplemented from time to time, the "Loan Agreement") pursuant to which the
Secured Parties have agreed, subject to the terms and conditions set forth
therein, to make revolving credit loans and term loans to the Company
(collectively, the "Loans"), such Loans to be evidenced by the Company's
Revolving Credit and Term Notes payable to the order of the respective Secured
Parties (collectively, as amended, modified and/or supplemented from time to
time, the "Notes");
WHEREAS, Onyx Acceptance Financial Corporation, a Delaware corporation
("Finco"), is a wholly owned subsidiary of the
<PAGE> 2
Company, and Finco will derive significant benefits from the Loans inasmuch as,
inter alia, certain of the Loans will be used by Onyx to make advances for the
account of and loans to Finco; and
WHEREAS, the obligations of the Secured Parties to enter into the Loan
Agreement and continue to make the Loans are subject to the condition, among
others, that the Company shall execute and deliver this Agreement and grant the
security interests hereinafter described;
NOW, THEREFORE, in consideration of the willingness of the Secured Parties
to enter into the Loan Agreement and to agree, subject to the terms and
conditions set forth therein, to make the Loans to the Company pursuant thereto,
and for other good and valuable consideration, receipt and sufficiency of which
is hereby acknowledged, it is hereby agreed as follows:
Section 1. Certain Definitions. Capitalized terms used but not defined in
this Agreement shall have the meanings given to them in the Loan Agreement. In
addition to the descriptions contained in Section 2 hereof, the items of
Collateral referred to therein shall have all of the meanings ascribed to them
in the Uniform Commercial Code (the "UCC") as in effect from time to time in The
Commonwealth of Massachusetts.
Section 2. Security Interest. As security for the Secured Obligations
described in Section 3 hereof, the Company hereby grants, mortgages,
hypothecates, pledges, collaterally assigns, sets over and delivers to the Agent
for the benefit of each of the Secured Parties and creates a continuing security
interest in and lien on, all of the Company's right, title and interest in and
to all assets and properties of the Company of every kind and nature, now owned
or hereafter acquired by the Company, or in which the Company now or hereafter
has any rights, together with any and all additions and accessions thereto and
proceeds and products thereof (hereinafter referred to collectively as the
"Collateral") including without limitation the following:
(A) All Tangible and Intangible Personal Property. (a) All inventory,
goods, merchandise, raw materials, supplies, goods or work in process, finished
goods and other tangible personal property held by the Company for processing,
sale or lease or furnished or to be furnished by the Company under contracts of
service or to be used or consumed in the Company's business; (b) all accounts,
accounts receivable and notes, drafts, acceptances, letters of credit, bills of
exchange and other instruments representing or evidencing a right to payment for
goods sold or leased or for services rendered whether or not earned by
performance, as well as all right, title and interest of the Company in the
goods which have given rise thereto, including the right of stoppage in transit;
(c) all contract rights including
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<PAGE> 3
on-line service agreement contract rights and all rights to payment under any
contract not yet earned by performance and not evidenced by an instrument or
chattel paper; (d) all general intangibles of the Company, including without
limitation, going concern value, goodwill and all present and future
intellectual property rights of the Company, including without limitation, all
trademark, trade name and "dba" rights, all service marks and service names, all
copyright rights, all patent rights, all trade secrets, all know-how, and all
causes of action arising under all such intellectual property rights; (e) all of
the Company's chattel paper of every kind and description, provided that, the
Secured Parties' lien on specific chattel paper shall be deemed to be
automatically released in connection with the sale of such chattel paper as part
of the Company's warehouse financings or securitizations, in each instance to
the extent such sales are permitted by the terms of the Loan Agreement; (f) all
other rights of the Company to the payment of money of every kind and nature,
howsoever evidenced, including without limitation, amounts due from affiliates,
all tax refunds and/or abatements of every kind and nature, insurance proceeds,
proceeds from factoring agreements, interest rate hedge, swap or other interest
rate protection agreements, tort claims, causes of action of every kind and
description and all rights to deposits or advance payments and repayments; (g)
all books, customer lists, contract lists, advertiser lists, subscriber lists,
files, records (including without limitation computer programs, disks, tapes and
related electronic data processing media), general ledger sheets, books of
account, invoices, bills, certificates or documents of ownership, bills of sale,
business papers, correspondence, cards, data and data storage systems, and
writings of the Company or in which the Company has an interest in any way
relating to the Collateral and all rights of the Company to retrieval from third
parties of all such books and records including electronically processed and
recorded information pertaining to any Collateral; (h) all of the Company's
documents, documents of title, policies and certificates of insurance,
securities and instruments (whether negotiable or non-negotiable); (i) all cash,
funds and investments in any collateral account or accounts maintained from time
to time by the Company with the Secured Parties and all deposits and/or deposit
accounts maintained by the Company, and all money, deposits, funds and
instruments relating to the foregoing; (j) all liens, rights, remedies,
privileges, guaranties, indemnities, warranties, claims, security interests,
mortgages, securities and other encumbrances in favor of or assigned to the
Company for any of the foregoing; (k) all of the Company's equipment, machinery,
fixtures, furniture, office supplies and vehicles, (l) all of the Company's
rights under all present and future authorizations, permits, licenses and
franchises, to the fullest extent permitted by applicable law and (m) all
Investment Property (as defined in the UCC) and (n) all other personal property,
assets and things of value of every kind and nature, tangible or intangible,
absolute or contingent, legal
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<PAGE> 4
or equitable including, with respect to all Collateral described in clauses (a)
through (n), any such Collateral hereafter acquired; and
(B) All Rights to Payments Under Securitization Transactions. Without
limiting any provision of clause (A) above, (i) all of the Company's rights to
payment of money (whether such rights are classified under the applicable UCC as
general intangibles, accounts, certificated securities (including the Pledged
Certificates defined below), uncertificated securities or otherwise) arising out
of, related to or created in connection with Onyx Acceptance Grantor Trust
1995-1 (OAGT-1995-1), Onyx Acceptance Grantor Trust 1996-1 (OAGT-1996-1), Onyx
Acceptance Grantor Trust 1996-2 (OAGT-1996-2), Onyx Acceptance Grantor Trust
1996-3 (OAGT-1996-3), Onyx Acceptance Grantor Trust 1996-4 (OAGT-1996-4), Onyx
Acceptance Grantor Trust 1997-1 (OAGT-1997-1), Onyx Acceptance Grantor Trust
1997-2 (OAGT-1997-2), Onyx Acceptance Grantor Trust 1997-3 (OAGT-1997-3), Onyx
Acceptance Grantor Trust 1998-1 (OAGT-1998-1) and any future securitization
transaction to which the Company in any capacity and which, in accordance with
the provisions of subsection 4.12 of the Loan Agreement, becomes an Eligible
Securitization Transaction, including, without limitation, Onyx Acceptance Owner
Trust - 1998-A, as well as all servicing fees (including Normal Servicing Fees),
all Future Servicing Cash Flows, Residual Interest in Securitized Assets and
other amounts of every kind and description payable to the Company from any
source whatsoever in connection with any securitization transaction, now
existing or hereafter entered into by the Company, including, but not limited
to, amounts due the Company from Spread Accounts or yield supplement accounts
and/or pursuant to any pooling and servicing agreement, reinsurance agreement,
agreement with any credit enhancer, agreement with any provider of interest rate
hedges, swaps or other interest rate protection agreements of every kind and
description and (ii) all of the Company's rights (but none of its obligations or
liabilities), including without limitation, the right to receive payments under
any Eligible Securitization Transaction Document, whether evidenced by a Pledged
Certificate or otherwise, and any and all other agreements, documents or
instruments of the Company or to which the Company is a party or in which the
Company has an interest, now existing or hereafter arising in connection with
any securitization transaction; and
(C) Pledged Stock/Pledged Collateral. The shares of capital stock of Finco
and all dividends and distributions of every kind or nature attributable thereto
as well as other proceeds, income and profits thereof (the "Pledged Stock"), the
limited beneficial certificates (as more particularly described below, the
"Pledged Certificates") together with any dividends or other amounts of any kind
or nature from time to time made or paid to the Company relating to the Pledged
Stock, the Pledged Certificates or otherwise and all promissory notes (including
all promissory notes and other instruments evidencing an obligation
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<PAGE> 5
for payment of money payable to the Company), or additional securities or
collateral executed or acquired hereafter (such Pledged Stock, dividends and
other amounts, Pledged Certificates, promissory notes, additional securities or
collateral hereinafter collectively referred to as the "Pledged Collateral")
issued to the Company; and
(D) Proceeds and Products. All proceeds, including without limitation
insurance proceeds, and products of the items of Collateral described or
referenced in the foregoing clauses (A), (B) and (C).
The Company acknowledges and agrees that, in applying the law of any
jurisdiction that has heretofore enacted or hereafter enacts all or
substantially all of the uniform revisions of Article 8 of the Uniform
Commercial Code, with new provisions added to Article 9 as contemplated by such
revision, all as approved in 1994 by the American Law Institute and the National
Conference of Commissioners on Uniform State Laws, the foregoing definitions of
Collateral and Pledged Collateral shall be deemed to include "Investment
Property", as applicable, as defined in such new provisions of Article 9, it
being the intent of the Company, the Agent and each of the Secured Parties that
such property be included in the foregoing definition of Collateral, whether
prior to or after the effectiveness of such revision in any such jurisdiction.
As used herein, the term "Pledged Certificates" means, collectively, the
limited beneficial certificates issued by and pursuant to the terms of the
Spread Account Trust Agreements executed in connection with OAGT 1995-1, OAGT
1996-1, OAGT 1996-2, OAGT 1996-3, OAGT 1996-4, OAGT 1997-1, OAGT 1997-2, OAGT
1997-3 and OAGT 1998-1, each of which limited beneficial certificate evidences a
ninety-nine percent (99%) beneficial interest in all amounts from time to time
distributed by the Spread Account Trust issuing such certificate.
Notwithstanding the foregoing provisions of this Section 2, the Collateral
shall not include any and all assets that constitute Excluded Assets. As used
herein, the term "Excluded Assets" means (i) all chattel paper of every kind and
description held by the Company for resale to Finco pursuant to the Sale and
Servicing Agreement between the Company and Finco dated as of September 8, 1994,
as amended from time to time, (ii) any assets subject to an equipment or other
personal property lease which precludes the Company from granting a lien, (iii)
any collateral under any security agreement pertaining to any interest rate
hedge, swap or other interest rate protection agreements, to the extent such
agreements preclude the Company from granting a lien; (iv) any Future Servicing
Cash Flows, Residual Interest in Securitized Assets or other amounts payable in
connection with
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<PAGE> 6
any Rejected Transaction, regardless of whether such right to payment of money
is classified under the applicable UCC as general intangibles, accounts,
certificated securities, uncertificated securities or otherwise, so long such
right to payment is evidenced by a limited beneficial certificate; (v) any right
of payment under any insurance and reimbursement agreement in favor of Capital
Markets Assurance Corporation executed by the Company, (vi) two separate
promissory notes each dated September 12, 1994, payable to the Company from
Finco with principal amounts as determined in accordance with Section 5.1 of a
certain Sale and Servicing Agreement dated as of September 8, 1994 between the
Company and FINCO; (vii) a promissory note dated December 20, 1994 payable to
the Company from John W. Hall, in the original principal amount of $175,000;
(viii) a promissory note dated December 20, 1994, payable to the Company from G.
Brian MacInnis, in the original principal amount of $175,000; (ix) all of the
Company's right, title and interest, as the same may exist from time to time, in
and to (a) Account No. 8117911-000 maintained by First Interstate Bank of
California, 707 Wilshire Boulevard., W11-1, Los Angeles, California 90017 and
entitled "Spread Account Trust 1994-1 under Spread Account Trust Agreement
between Onyx Acceptance Financial Corporation, as Depositor, and Bankers Trust
(Delaware) as Trustee, subject to security interest of Capital Markets Assurance
Corporation"; (b) Account No. 14726 maintained by Bankers Trust Company, 4
Albany Street, New York, New York 10006 and entitled "Spread Account Trust
1995-1 under Spread Account Trust Agreement between Onyx Acceptance Financial
Corporation, as Depositor, and Bankers Trust (Delaware) as Trustee, subject to
security interest of Capital Markets Assurance Corporation"; and (c) Account No.
19350 maintained by Bankers Trust Company, 4 Albany Street, New York, New York
10006 and entitled "Spread Account Trust 1996-1 under Spread Account Trust
Agreement between Onyx Acceptance Financial Corporation, as Depositor, and
Bankers Trust (Delaware) as Trustee, subject to security interest of Capital
Markets Assurance Corporation" and (x) the Company's Triple-A One warehouse
facility. The term "Excluded Assets" shall also include (i) Account No. 20343
maintained by Bankers Trust Company, 4 Albany Street, New York, New York 10006
and entitled "1996-2 Spread Account Trust pursuant to the 1996-2 Spread Account
Trust Agreement dated as of May 15, 1996 between Onyx Acceptance Financial
Corporation, as Depositor, and Bankers Trust (Delaware) as Trustee, subject to
security interest of Capital Markets Assurance Corporation"; (ii) Account No.
22551 maintained by Bankers Trust Company, 4 Albany Street, New York, New York
10006 and entitled "1997-1 Spread Account Trust pursuant to the 1997-1 Spread
Account Trust Agreement dated as of March 25, 1997 between Onyx Acceptance
Financial Corporation, as Depositor, and Bankers Trust (Delaware) as Trustee,
subject to security interest of Capital Markets Assurance Corporation"; (iii)
Account No. 23340 maintained by Bankers Trust Company, 4 Albany Street, New
York, New York 10006 and entitled "Spread Account Trust 1997-2
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under Spread Account Trust Agreement between Onyx Acceptance Financial
Corporation, as depositor, and Bankers Trust (Delaware) as Trustee, subject to
security interest of Capital Markets Assurance Corporation"; (iv) Account No.
23881 maintained by Bankers Trust Company, 4 Albany Street, New York, New York
10006 and entitled "Spread Account Trust 1997-3 under Spread Account Trust
Agreement between Onyx Acceptance Financial Corporation, as Depositor, and
Bankers Trust (Delaware) as Trustee, subject to security interest of Capital
Markets Assurance Corporation"; and (v) Account No. [___] maintained by Bankers
Trust Company, 4 Albany Street, New York, New York 10006 and entitled "Spread
Account Trust 1998-1 under Spread Account Trust Agreement between Onyx
Acceptance Financial Corporation as Depositor, and Bankers Trust (Delaware) as
Trustee, subject to security interest of Capital Markets Assurance Corporation".
Section 3. Secured Obligations. The security interest hereby granted shall
secure the due and punctual payment and performance of the following
indebtedness, liabilities and obligations of the Company (herein called the
"Secured Obligations"): (a) principal of and premium, if any, and interest on
the Notes (including, without limitation, the payment of interest and other
amounts that would accrue and become due but for the filing of a petition in
bankruptcy or the operation of the automatic stay under Section 362(a) of Title
11 of the United States Code, as amended, or similar laws, as now or hereafter
in effect); and (b) any and all other obligations of any kind or nature
whatsoever of the Company to the Agent and/or the Secured Parties under the Loan
Agreement, the Notes, the Security Documents, the other Loan Documents or under
any agreement or instrument relating thereto, all as amended from time to time
and whether executed on or after the date hereof.
Section 4. Special Warranties and Covenants of Company. The Company hereby
represents, warrants and covenants to the Agent and the Secured Parties that:
(a) The Company is and will remain the legal and equitable owner of
the Collateral. Except for the security interest created hereunder and security
interests expressly permitted under the Loan Agreement, the Collateral is and
will remain free from any lien, security interest or encumbrance, and the
Company will defend the Collateral against all claims and demands of all Persons
at any time claiming the same or any interest therein. All items of Collateral
have been validly pledged, collaterally assigned and granted to the Agent for
the benefit of the Secured Parties, subject to no liens except as expressly
permitted under the Loan Agreement and, except for such liens expressly
permitted thereunder, the Agent has a first priority perfected lien on the
Collateral within the meaning of the applicable Uniform Commercial Code. The
Company has the full corporate and legal right, power and authority to pledge,
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<PAGE> 8
collaterally assign and grant a security interest in the Collateral to the Agent
for the benefit of the Lenders hereunder.
(b) The address shown at the beginning of this Agreement is the
principal place of business and chief executive office of the Company, and the
address at which its books and records are kept. Except for such principal place
of business, and the locations listed on Schedule I attached hereto, the Company
has no additional places of business or other locations at which Collateral is
stored. The Company will not change its principal or any other place of
business, or the location of any Collateral, or make any change in the Company's
name or conduct the Company's business operations under any fictitious business
or trade name, without, in any such case, at least thirty (30) days' prior
written notice to the Agent.
(c) The Company will not sell, offer to sell, lease or otherwise
transfer or dispose of any of the Collateral or any interest therein except as
may be permitted by the Loan Agreement.
(d) The Company will keep the Collateral insured as provided in the
Loan Agreement. The Company will comply with all of its material obligations
under each of the Eligible Securitization Transaction Documents. The Company
will not use or otherwise deal with the Collateral in violation of the Loan
Agreement, the Eligible Securitization Transaction Documents, any insurance
policy covering the Collateral or applicable law. The Company will pay promptly
when due all taxes, assessments and governmental charges on the Collateral or
for its use or operation, except for taxes and assessments permitted to be
contested as provided in the Loan Agreement. The Agent and/or the Secured
Parties may at its/their option upon the failure of the Company so to do in
compliance with the terms of this Agreement and the Loan Agreement, discharge
any taxes, liens, security interests or other encumbrances to which any
Collateral is at any time subject (including in respect of FICA and withholding
taxes) and the Company agrees to reimburse the Agent and/or the Secured Parties
(as the case may be) on demand for any payments made or expenses reasonably
incurred by the Agent and/or the Secured Parties pursuant to the foregoing
authorization, and any unreimbursed amounts shall constitute Secured Obligations
for all purposes hereof.
(e) The Company will promptly execute and deliver to the Agent for the
benefit of the Secured Parties such financing statements, certificates, and
other documents or instruments as the Agent and/or the Secured Parties may deem
reasonably necessary or advisable to enable the Agent and/or the Secured Parties
to perfect or from time to time renew the security interest granted hereby, and
to comply with all applicable laws and regulations, including, without
limitation, such financing
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<PAGE> 9
statements, certificates and other documents as the Agent and/or the Secured
Parties may deem reasonably necessary or advisable to perfect a security
interest in any additional Collateral hereafter acquired by the Company or in
any replacements or proceeds thereof. The Company hereby irrevocably authorizes
and appoints the Agent, on behalf of the Agent and/or the Secured Parties, to
the fullest extent permitted by applicable law, to execute such financing
statements, certificates and other documents in its stead, with full power of
substitution, as the Company's attorney-in-fact. The Company further agrees that
a carbon, photographic or other reproduction of a security agreement or
financing statement is sufficient as a financing statement under this Agreement.
(f) The Company will give the Agent on behalf of the Secured Parties
prior notice of each office of the Company at which records of the Company
pertaining to all items of Collateral are kept. Except as such notice is given
and unless otherwise permitted by the Loan Agreement, the Company's records
concerning all Collateral are and will be kept at the address shown at the
beginning of this Agreement as the principal place of business of the Company.
(g) The Company shall accord the Agent and the Secured Parties and
their representatives with such access as any Secured Party may from time to
time require, upon reasonable notice and at reasonable times, to all properties
owned or leased by the Company. The Agent and each Secured Party and its
representatives shall have the right, and the Company will permit the Agent and
any Secured Party and such representatives (at such times as they may reasonably
request) to examine, inspect, copy and make extracts from any and all of the
Collateral, subject to the confidentiality provisions of the Loan Agreement.
(h) If any Collateral (other than Pledged Certificates) is in the
possession of any third party, including but not limited to trustees or paying
agents on any Eligible Securitization Transactions and/or the Company's agents
or Affiliates, the Company shall notify such third parties of the security
interest of the Agent and the Secured Parties therein and instruct them to hold
the same for the account of the Agent and the Secured Parties and (subject to
the Agent's instructions) deliver such Collateral to the Blocked Account, and
will deliver such other notices and instructions to, and obtain waivers
(including but not limited to waivers of setoff and recoupment), acknowledgments
and financing statements from such third parties as the Agent and/or the Secured
Parties deem necessary.
(i) The Eligible Securitization Transaction Documents (x) are valid,
legally binding contracts, enforceable in accordance with their terms , and no
default on the part of the Company or any other party thereto has occurred and
is
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continuing, and (y) have not been amended or otherwise modified except as
disclosed in writing to the Secured Parties prior to the date hereof. The
Company has no knowledge of any condition, event, defect or circumstance which
would impair the Company's rights under the Eligible Securitization Transaction
Documents or the Company's right to receive payments in respect of the
Collateral, or any other event or condition which could reasonably be expected
to have a Material Adverse Effect. Notwithstanding the grant of the security
interest hereunder, the Company shall remain liable under each contract or
agreement included in the Collateral (including but not limited to the Eligible
Securitization Transaction Documents) to be observed or performed by the Company
thereunder. Neither the Agent nor the Secured Parties shall have any obligation
or liability under any such contract or agreement by reason of or arising out of
this Agreement or the receipt by the Agent or the Secured Parties of any payment
relating to any of the Collateral, nor shall the Agent or the Secured Parties be
obligated in any manner to perform any of the obligations of the Company under
or pursuant to any such contract or agreement, to make inquiry as to the nature
or sufficiency of any payment received by the Agent or the Secured Parties in
respect of the Collateral or as to the sufficiency of any performance by any
party under any such contract or agreement, 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 the Agent or the Secured Parties or to
which the Agent or the Secured Parties may be entitled at any time or times. The
Agent's (on behalf of the Secured Parties) sole duty with respect to the
custody, safe keeping and physical preservation of the Collateral in its
possession, under Section 9-207 of the UCC or otherwise, shall be to deal with
such Collateral in the same manner as the Agent deals with similar property for
its own account.
(j) The Pledged Stock has been duly and validly issued and is fully
paid and non-assessable. The Pledged Stock listed in Schedule II attached hereto
constitutes and shall at all times continue to constitute one hundred percent
(100%) of the presently issued and outstanding capital stock of Finco. There are
outstanding or issued no options, warrants or other rights of any nature (or any
options to acquired any such rights) to acquire shares of the capital stock of
Finco.
(k) If any additional shares of capital stock of any class of Finco or
if any promissory notes of Finco or other securities of Finco are issued to or
otherwise acquired by the Company after the date hereof, the same shall
constitute Pledged Collateral and shall be deposited and pledged with the Agent,
for the benefit of the Secured Parties, simultaneously with such acquisition.
The Company will not consent to or approve the issuance of any additional shares
of capital stock of any class of Finco.
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(l) The Pledged Certificates have been duly and validly issued by the
respective Spread Account Trusts, and have been sold by Finco to Onyx in
accordance with the respective 1995-1, 1996-1, 1996-2, 1996-3, 1996-4, 1997-1,
1997-2, 1997-3 and 1998-1 purchase agreements between Onyx and Finco, and all
applicable laws, including without limitation the General Corporation Law of the
State of Delaware, and all applicable federal and state fraudulent transfer and
fraudulent conveyance laws. The Company is the holder of record of each of the
Pledged Certificates on the books and records of the respective Spread Account
Trusts. Each Pledged Certificate evidences a beneficial right to receive
ninety-nine percent (99%) of all amounts from time to time released from (or not
required to be deposited into) the Spread Account maintained in the Spread
Account Trust issuing such Pledged Certificate. Each of the Pledged Certificates
is described on Schedule II attached hereto. There are outstanding or issued no
options, warrants or other rights of any nature (or any options to acquire any
such rights) to acquire the Pledged Certificates.
Section 5. Delivery of Pledged Collateral. Pursuant to the terms hereof, the
Company has endorsed, assigned and delivered to the Agent (f2 benefit of
the Secured Parties) all negotiable and non-negotiable instruments (including,
without limitation, the Pledge Collateral and any other certificated securities)
and chattel paper, if any, included in the Collateral pledged by it hereunder,
together with instruments of transfer or assignment duly executed in blank. All
negotiable or non-negotiable instruments (including, without limitation, the
Pledged Collateral and any other certificated securities) or chattel paper
constituting Collateral and hereafter acquired by the Company shall be promptly
delivered to the Agent (for the benefit of the Secured Parties) pursuant hereto,
shall be in suitable form for transfer by delivery, or shall be accompanied by
duly executed instruments of transfer or assignments in blank, and accompanied
in each case by any required transfer tax stamps, all in form and substance
satisfactory to the Agent. To the extent that any securities are uncertificated,
appropriate book-entry transfers reflecting the pledge of such securities
created hereby have been or, in the case of uncertificated securities hereafter
acquired by the Company, will at the time of such acquisition be, duly made for
the account of the Agent or one or more nominees of the Secured Parties, with
the issuer of such securities or other appropriate book-entry facility or
financial intermediary with the Agent having at all times the right to obtain
definitive certificates (in the Agent's name or in the name of one or more of
its nominees) where the issuer customarily or otherwise issues certificates, all
to be held as Collateral hereunder. The Company hereby acknowledges that the
Agent and/or the Secured Parties may, in its/their discretion, appoint one or
more financial institutions to act as the agent for the Agent or the
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<PAGE> 12
Secured Parties in holding (in one or more custodial account(s)) instruments or
other financial assets in which the Agent and the Secured Parties are granted a
security interest hereunder.
Section 6. Special Provisions Concerning Future Servicing Cash Flows,
Receivables and Residual Interest in Securitized Assets;
Distributions in Respect of Pledged Collateral.
(a) The Company will execute and cause to be executed by all necessary
parties all such agreements or instruments as may be deemed necessary by the
Agent or the trustee or paying agent under each Spread Account Trust established
in connection with each Eligible Securitization Transaction so as to ensure that
such trustee or paying agent is irrevocably directed to make payments due the
Company as registered holder of the Pledged Certificates or otherwise (except
Normal Servicing Fees) directly to the Blocked Account (account number - ABA #:
011000028 For: Account # 42525 Ref: Onyx Acceptance Facility, Attention: Loan
Operations, Joanne Dorgan M-11) maintained for the Company with the Agent, or
any successor account designated as the Blocked Account in the Loan Agreement).
The Company hereby irrevocably appoints the Agent as the true and lawful
attorney-in-fact of the Company with full power of substitution, in the name of
the Agent for the benefit of the Secured Parties or in the name of the Company
or otherwise, for the sole benefit of the Secured Parties but at the sole
expense of the Company, after the occurrence of an Event of Default and without
notice to or demand upon the Company: (i) to demand, collect, receive payment
of, receipt for, settle, compromise or adjust, and give discharges and releases
in respect of amounts payable to the Company constituting Collateral (including
without limitation the Pledged Collateral) (the "Receivables") or any of them;
(ii) to commence and prosecute any suits, actions or proceedings at law or in
equity in any court of competent jurisdiction to collect the Receivables or any
of them and to enforce any other rights in respect thereof or in respect of the
goods which have given rise thereto; (iii) to defend any suit, action or
proceeding brought against the Company with respect to any Receivables; (iv) to
settle, compromise or adjust any suit, action or proceeding described in clause
(ii) or (iii) above, and, in connection therewith, to give such discharges or
releases as the Agent may reasonably deem appropriate; (v) to endorse checks,
notes, drafts, acceptances, money orders, bills of lading, warehouse receipts or
other instruments or documents evidencing or securing the Receivables or any of
them; and (vi) generally to sell, assign, transfer, pledge, make any agreement
in respect of or otherwise deal with any Receivables or the goods which have
given rise thereto as fully and completely as though the Agent and the Secured
Parties were the Company for such purposes. The powers conferred on the Agent
and the Secured Parties by this Agreement are solely to protect any interest of
the Agent and the Secured Parties and shall not impose any duty upon the Agent
or the Secured Parties to exercise any such power,
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and if the Agent or the Secured Parties shall exercise any such power, they
shall be accountable only for amounts they actually receive as a result thereof
and shall not be responsible to the Company except for willful misconduct or
gross negligence. Neither the Agent nor the Secured Parties shall be under any
obligation to take steps necessary to preserve the rights in any Collateral
against third parties but may do so at its/their option. The Agent may at its
option at any time after an Event of Default shall have occurred transfer to
itself or to its nominee the Pledged Stock, and receive the income thereon and
on the Pledged Certificates and hold the same as Collateral hereunder.
(b) The Company represents and warrants that all Collateral consisting
of Future Servicing Cash Flows, Residual Interest in Securitized Assets and all
other rights to payment evidenced by the Pledged Certificates are and will at
all times hereafter remain free of and not be subject to any security interests,
liens or encumbrances of any nature (other than security interests, liens or
encumbrances in favor of (i) CapMAC or any Affiliate of CapMAC to the extent
listed on Schedule 3.28 to the Loan Agreement, (ii) the Spread Account Trustees
and (iii) the Secured Parties).
(c) All powers of attorney set forth in this Agreement are coupled
with an interest and shall be irrevocable until the Secured Obligations have
been indefeasibly paid in full. To the extent permitted by law, the Company
hereby ratifies all that said attorneys shall lawfully do or cause to be done by
virtue thereof.
(d) In case, upon the dissolution, winding up, liquidation or
reorganization of Finco whether in bankruptcy, insolvency or receivership
proceedings or upon an assignment for the benefit of creditors or any other
marshaling of the assets and liabilities of Finco or any voluntary proceedings
for the liquidation of the assets of Finco or otherwise, any sum shall be paid
or any property shall be distributed upon or with respect to any of the Pledged
Collateral, such sum shall be paid over to the Agent to be applied in payment of
the Secured Obligations in accordance with the Loan Agreement. In case any stock
dividend shall be declared on any of the Pledged Collateral, or any share of
stock or fraction thereof shall be issued pursuant to any stock split involving
any of the Pledged Collateral, or any distribution of capital (including,
without limitation, payments in respect of Residual Interest in Securitized
Assets or any other payment arising from or relating to any Eligible
Securitization Transaction) shall be made on any of the Pledged Collateral, or
any property shall be distributed upon or with respect to the Pledged Collateral
pursuant to recapitalization or reclassification of the capital of Finco, the
shares or other property so distributed shall be delivered to the Agent to be
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applied in payment of (in the case of cash or Cash Equivalents) or held as
additional collateral for (in the case of other property) the Secured
Obligations in accordance with the Loan Agreement.
(e) Right to Transfer into Name of Agent, etc. In case there shall
exist an Event of Default, but subject to the provisions of the UCC or other
applicable law, the Agent may cause all or any of the Pledged Collateral to be
transferred into its name or into the name of its nominee or nominees. So long
as no Event of Default shall exist, the Company shall be entitled to exercise as
the Company shall deem fit, but in a manner not inconsistent with the terms
hereof or of the Secured Obligations (including but not limited to the Loan
Agreement and the other Loan Documents), the voting power with respect to the
Pledged Collateral.
(f) Right of Agent to Exercise Voting Power, etc. In case there shall
exist an Event of Default, which shall not have been remedied or cured in
accordance with the Loan Agreement, the Agent shall be entitled to exercise the
voting power with respect to the Pledged Collateral, and to exercise any and all
rights of payment, conversion, exchange, subscription or any other rights,
privileges or options pertaining to the Pledged Collateral as if it were the
absolute owner thereof, including without limitation, the right to exchange, at
its discretion, any and all of the Pledged Collateral upon the merger,
consolidation, reorganization, recapitalization or other readjustment of Finco
or, upon the exercise of any such right, privilege or option pertaining to the
Pledged Collateral, and in connection therewith, to deposit and deliver any and
all of the Pledged Collateral with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and conditions as the Agent
may determine, all without liability except to account for property actually
received, but the Agent shall have no duty to exercise any of the aforesaid
rights, privileges or options and shall not be responsible for any failure to do
so or delay in so doing.
(g) Deletion of Eligible Securitization Transactions from Borrowing
Base - No Impairment of Collateral. The Company and the Secured Parties agree
that, from time to time in accordance with the terms of the Loan Agreement, the
Company may request that an Eligible Securitization Transaction be deleted from
the Borrowing Base, and further agree that any such deletion shall not under any
circumstances affect or impair the status of such Eligible Securitization
Transaction and any proceeds thereof as Collateral, as defined in this
Agreement. Without limiting the foregoing, except to the extent the Secured
Parties expressly release their security interest in and lien on any Eligible
Securitization Transaction in accordance with the applicable provisions of the
Loan Agreement, and agree in writing that such
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Eligible Securitization Transaction is being removed from the Loan Agreement for
both Borrowing Base and collateral purposes, all Eligible Securitization
Transactions will at all times be Collateral for the Loans and the other
obligations of the Company to the Secured Parties under the Loan Documents.
Section 7. Fixtures, etc. It is the intention of the parties hereto that
none of the Collateral shall become fixtures and the Company will take all such
reasonable actions as may be necessary to prevent any of the Collateral from
becoming fixtures. Without limiting the generality of the foregoing, the Company
will, if requested by the Agent, use its best efforts to obtain waivers of lien,
in form satisfactory to the Agent, from each lessor of real property on which
any of the Collateral is or is to be located unless such Collateral is also
located in the Company's Irvine, California headquarters.
Section 8. Events of Default. The Company shall be in default under this
Agreement upon the happening of any of the following events or conditions
(herein called "Events of Default"):
(a) Default shall be made in the due and punctual payment of principal
of or premium, if any, or interest on any of the Secured Obligations as and when
the same shall become due and payable (whether at maturity or at a date fixed
for any prepayment or installment or by demand, declaration or acceleration or
otherwise) and such default shall continue beyond the expiration of the
applicable period of grace, if any ("Payment Default"); or
(b) Any other Event of Default (as defined or provided in the Loan
Agreement or in any other Loan Document) shall occur; or
(c) There shall be a material breach of any representation, warranty,
covenant, term or provision contained herein, or any representation or warranty
made in this Agreement or in any certificate, document or instrument executed or
delivered from time to time in connection herewith or with any other Loan
Document proves to be untrue or misleading in any material respect when made.
Section 9. Rights and Remedies of Secured Parties; Consent to Appointment
of Receiver.
(a) In the event that any Event of Default shall have occurred, such
default not having previously been remedied or cured in accordance with the Loan
Agreement, the Agent may, and at the direction of the Majority Lenders the Agent
shall, declare all of the Secured Obligations to be immediately due and payable
and shall thereafter have the following rights and remedies: (a) all rights and
remedies provided by law, including, without
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limitation, those provided by the UCC; (b) all rights and remedies provided in
this Agreement; and (c) all rights and remedies provided in the Loan Agreement,
the Notes, the Security Documents or in any other Loan Document or agreement,
document or instrument pertaining to the Secured Obligations.
(b) Without limiting the generality of the foregoing Section 9(a) and
without derogating from any right, remedy or other provision contained in the
Loan Agreement or any other security document, at any time from and after the
occurrence of a payment default (as defined in Section 8(a)), the Secured
Parties shall have the right to apply for and have a receiver appointed by a
court of competent jurisdiction in any action taken by the Secured Parties to
enforce their rights and remedies hereunder in order to manage, protect and
preserve the collateral and continue the operation of the business of the
Company, or to sell or dispose of the collateral, and to collect all revenues
and profits thereof and apply the same to the payment of all expenses and other
charges of such receivership, including the compensation of the receiver, said
expenses to constitute part of the Secured Obligations, and to the payment of
the Secured Obligations as aforesaid. To the extent not prohibited by applicable
law, the Company hereby irrevocably consents to and waives any right to object
to or otherwise contest the appointment of receiver as provided above. The
Company (i) grants such waiver and consent knowingly after having discussed the
implications thereof with counsel, (ii) acknowledges that (a) the uncontested
right to have a receiver appointed for the foregoing purposes is considered
essential by the Secured Parties in connection with the enforcement of its
rights and remedies hereunder and under the loan documents, and (b) the
availability of such appointment as a remedy under the foregoing circumstances
was a material factor in inducing Secured Parties to make the loans to the
Company; and (iii) to the extent not prohibited by applicable law, agrees to
enter into any and all stipulations in any legal actions, or agreements or other
instruments in connection with the foregoing and to cooperate fully with the
Secured Parties in connection with the assumption and exercise of control by the
receiver over all or any portion of the collateral.
Section 10. Right of Secured Parties to Dispose of Collateral, etc.;
Restrictions on Transfer; etc.
(a) Without limiting the scope of Section 9 hereof, upon the
occurrence of any Event of Default, such default not having previously been
remedied or cured in accordance with the Loan Agreement, but subject to the
provisions of the UCC or other applicable law, the Agent may, and at the
direction of the Majority Lenders the Agent shall, take possession of the
Collateral and, in addition thereto, enter upon any premises on which the
Collateral or any part thereof may be situated and
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remove the same therefrom. The Agent may require the Company to make the
Collateral (to the extent the same is moveable) available to the Agent at a
place to be designated by the Agent which is reasonably convenient to both
parties. Unless the Collateral is perishable or threatens to decline speedily in
value or is of a type customarily sold on a recognized market, the Agent will
give the Company at least ten (10) days' prior written notice at the address of
the Company set forth in the Loan Agreement (or at such other address or
addresses as the Company shall specify in writing to the Agent) of the time and
place of any public sale thereof or of the time after which any private sale or
any other intended disposition thereof is to be made. Any such notice shall be
deemed to meet any requirement hereunder or under any applicable law (including
the UCC) that reasonable notification be given of the time and place of such
sale or other disposition. After deducting all reasonable costs and expenses of
collection, safekeeping, storage, custody, sale or other disposition and
delivery (including reasonable legal costs and attorneys' fees) and all other
charges against the Collateral, the residue of the proceeds of any such sale or
disposition shall be applied to the payment of the Secured Obligations in such
order of priority as the Secured Parties shall determine and any surplus shall
be returned to the Company or to any person or party lawfully entitled thereto.
In the event the proceeds of any sale, lease or other disposition of the
Collateral hereunder are insufficient to pay all of the Secured Obligations in
full, the Company will be liable for the deficiency, together with interest
thereon, at the maximum rate provided in the Loan Agreement, and for the costs
and expenses of collection of such deficiency, including, without limitation,
reasonable attorneys' fees, expenses and disbursements.
(b) Upon the occurrence of an Event of Default, such Event of Default
not having previously been remedied or cured in accordance with the Loan
Agreement, and without limiting in any manner the rights and remedies granted to
the Secured Party elsewhere in this Agreement, the Agent shall have the right at
any time or times thereafter to sell, resell, assign and deliver all or any of
the Pledged Collateral in one or more parcels at any exchange or broker's board
or at public or private sale. Unless the Pledged Collateral is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, the Secured Party will give the Company at least ten (10)
days' prior written notice (delivered in the manner specified in the Loan
Agreement) of the time and place of any public sale thereof or of the time after
which any private sale or any other intended disposition thereof is to be made.
Any such notice shall be deemed to meet any requirement hereunder or under any
applicable law (including the Uniform Commercial Code) that reasonable
notification be given of the time and place of such sale or other disposition.
Such notice may be given without any demand of performance or other demand, all
such
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demands being hereby expressly waived by the Company. All such sales shall
be at such commercially reasonable price or prices as the Secured Party shall
deem best and either for cash or on credit or for future delivery (without
assuming any responsibility for credit risk). At any such sale or sales the
Secured Party may purchase any or all of the Pledged Collateral to be sold
thereat upon such terms as the Secured Party may deem best. Upon any such sale
or sales the Pledged Collateral so purchased shall be held by the purchaser
absolutely free from any claims or rights of the Company of whatsoever kind or
nature, including any equity of redemption and any similar rights, all such
equity of redemption and any similar rights being hereby expressly waived and
released by the Company. In the event any consent, approval or authorization of
any governmental agency or other third party will be necessary to effectuate any
such sale or sales, the Company shall execute, and hereby agrees to cause Finco
to execute, all such applications or other instruments as may be required. The
proceeds of any such sale or sales, together with any other additional
collateral security at the time received and held hereunder, shall be received
and applied: first, to the payment of all costs and expenses of such sale,
including reasonable attorneys' fees; second, to the payment of the Secured
Obligations in such order of priority as the Secured Parties shall determine,
and any surplus thereafter remaining shall be paid to the Company or to whomever
may be legally entitled thereto.
The Company recognizes that the Secured Parties may be unable to effect a
public sale of all or a part of the Pledged Collateral by reason of certain
prohibitions contained in the Securities Act of 1933, as amended, but may be
compelled to resort to one or more private sales to a restricted group of
purchasers, each of whom will be obligated to agree, among other things, to
acquire such Pledged Collateral for its own account, for investment and not with
a view to the distribution or resale thereof. The Company acknowledges that
private sales so made may be at prices and upon other terms less favorable to
the seller than if such Pledged Collateral were sold at public sale, and that
the Secured Parties have no obligation to delay sale of any such Pledged
Collateral for the period of time necessary to permit such Pledged Collateral to
be registered for public sale under the Securities Act of 1933, as amended.
Without limiting the foregoing, the Company acknowledges and understands that
compliance with the Securities Act of 1933, as amended, or similar or successor
federal securities laws or applicable state securities and blue sky laws might
strictly limit the course of conduct of the Secured Parties in attempting to
dispose of all or any of the Pledged Collateral. Accordingly, the Company
acknowledges and understands that the Secured Parties may solicit offers to buy
the Pledged Collateral, or any part thereof, for cash, from a limited number of
investors deemed by the Secured Parties, in their sole judgment, to be
responsible parties who
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might be interested in purchasing such Pledged Collateral. The Company
understands and agrees that any such sale under such circumstances may not yield
a price equal to the price which might otherwise be obtained, and agrees that a
sale under such circumstances shall be deemed fair and reasonable under the
circumstances, and waives, to the fullest extent permitted by applicable law,
any right to contest or challenge such sale or the results thereof. The Company
agrees that any such private sales shall not be deemed to have been made in a
commercially unreasonable manner solely because they shall have been made under
the foregoing circumstances.
(c) To the extent that any restrictions imposed by the charter or
by-laws of Finco or any agreement to which Finco is a party or any other
document or instrument would in any way affect or impair the pledge of the
Pledged Collateral hereunder or the exercise by the Secured Parties of any right
granted hereunder, including, without limitation, the right of the Secured
Parties to dispose of the Pledged Collateral upon the occurrence of any Event of
Default, the Company hereby waives such restrictions, and represents and
warrants that it has caused Finco to take all necessary action to waive such
restrictions, and the Company hereby agrees that it will take any further action
which the Secured Parties may reasonably request in order that the Secured
Parties may obtain and enjoy the full rights and benefits granted to the Secured
Parties by this Agreement free of any such restrictions. The Agent is hereby
appointed the attorney-in-fact, with full power of substitution, of the Company
for the purpose of carrying out the provisions of this Pledge and Security
Agreement and taking any action including, without limitation, executing,
delivering and filing applications, certificates, instruments and other
documents and papers with governmental authorities and other third parties, and
executing any and all instruments including, without limitation, conveyances,
assignments and transfers which are required to be taken or executed by the
Company under this Pledge and Security Agreement, in the name of the Agent or on
behalf of and in the name of the Company. This appointment is coupled with an
interest, is irrevocable and durable and shall survive any subsequent
dissolution of the Company.
(d) All of the rights and remedies of the Agent and the Secured
Parties hereunder are cumulative, not exclusive, and enforceable successively,
alternatively or concurrently, at such time or times as the Agent and/or the
Secured Parties deem expedient.
Section 11. Right of Secured Parties to Use and Operate Collateral, etc.
Upon the occurrence and during the continuance of any Event of Default, such
default not having previously been remedied or cured in accordance with the Loan
Agreement, but subject to the provisions of the UCC or other applicable law, the
Agent shall
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have the right and power (but not the obligation) to take possession of all or
any part of the Collateral, and to exclude the Company and all persons claiming
under the Company wholly or partly therefrom, and thereafter to hold, store,
and/or use, operate, manage and control the same. In any such case the Agent
shall have all of the Company's right to manage and control the Collateral and
to carry on the business and to exercise all rights and powers of the Company in
respect thereto as the Agent shall deem best, including the right to enter into
any and all such agreements with respect to the operation of the Collateral or
any part thereof as the Agent may see fit; and the Agent shall be entitled to
collect and receive all rents, issues, profits, fees, revenues and other income
of the same and every part thereof. Such rents, issues, profits, fees, revenues
and other income shall be applied to pay the expenses of holding and operating
the Collateral and of conducting the business thereof, and of all maintenance,
repairs, replacements, alterations, additions and improvements, and to make all
payments which the Secured Parties may be required or may elect to make, if any,
for taxes, assessments, insurance and other charges upon the Collateral or any
part thereof, and all other payments which the Agent may be required or
authorized to make under any provision of this Agreement (including reasonable
legal costs and attorneys' fees). The remainder of such rents, issues, profits,
fees, revenues and other income shall be applied to the payment of the Secured
Obligations in such order of priority as the Secured Parties shall determine
and, unless otherwise provided by law or by a court of competent jurisdiction,
any surplus shall be returned to the Company or to any person or party lawfully
entitled thereto. Without limiting the generality of the foregoing (and without
derogating from any provision contained in the Loan Agreement or any other
Security Document), upon the occurrence of an Event of Default, the Agent shall
have the right to apply for and have a receiver appointed by a court of
competent jurisdiction in any action taken by the Agent and/or the Secured
Parties to enforce its/their rights and remedies hereunder in order to manage,
protect and preserve the Collateral and continue the operation of the business
of the Company, or to sell or dispose of the Collateral, and to collect all
revenues and profits thereof and apply the same to the payment of all expenses
and other charges of such receivership, including the compensation of the
receiver, said expenses to constitute part of the Secured Obligations, and to
the payment of the Secured Obligations as aforesaid.
Section 12. Waivers, etc. The Company hereby waives presentment,
demand, notice, protest and, except as is otherwise provided herein, all other
demands and notices in connection with this Agreement or the enforcement of the
Agent's and/or the Secured Parties' rights hereunder or in connection with any
Secured Obligations or any Collateral; consents to and waives notice of the
granting of renewals, extensions of time for payment or other
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indulgences to the Company or to any account debtor in respect of any
Receivable, or substitution, release or surrender of any Collateral, the
addition or release of persons primarily or secondarily liable on any Secured
Obligation or on any Receivable or other Collateral, the acceptance of partial
payments on any Secured Obligation or on any Receivable or other Collateral
and/or the settlement or compromise thereof. The Company also hereby waives any
rights and/or defenses the Company may have under any anti-deficiency laws or
other laws limiting, qualifying or discharging the Secured Obligations and/or
the remedies of the Agent and/or the Secured Parties against the Company. No
delay or omission on the part of the Agent and/or the Secured Parties in
exercising any right hereunder shall operate as a waiver of such right or of any
other right hereunder. Any waiver of any such right on any one occasion shall
not be construed as a bar to or waiver of any such right on any such future
occasion. The Company further waives any right it may have under the
constitution of The Commonwealth of Massachusetts, the States of California and
Delaware and under the constitution of any other state in which any of the
Collateral may be located, or under the Constitution of the United States of
America, to notice (other than any requirement of notice provided herein) or to
a judicial hearing prior to the exercise of any right or remedy provided by this
Agreement to the Agent and/or the Secured Parties and waives its rights, if any,
to set aside or invalidate any sale duly consummated in accordance with the
foregoing provisions hereof on the grounds (if such be the case) that the sale
was consummated without a prior judicial hearing. The Company's waivers under
this section have been made voluntarily, intelligently and knowingly and after
the Company has been apprised and counseled by its attorneys as to the nature
thereof and its possible alternative rights. Neither the Agent nor the Secured
Parties shall be required to marshal any present or future collateral security
(including but not limited to the Collateral) for, or other assurances of
payment of, the Secured Obligations or any of them or to resort to such
collateral security or other assurances of payment in any particular order, and
all of the Agent's and the Secured Parties rights hereunder and in respect of
such collateral security and other assurances of payment shall be cumulative and
in addition to all other rights, however existing or arising. To the extent that
it lawfully may, the Company hereby agrees that it will not invoke any law
relating to the marshaling of collateral which might cause delay in or impede
the enforcement of the rights of the Agent and/or the Secured Parties under this
Agreement or under any other instrument creating or evidencing any of the
Secured Obligations or under which any of the Secured Obligations is outstanding
or by which any of the Obligations is secured or payment thereof is otherwise
assured, and, to the extent that it lawfully may, the Company hereby irrevocably
waives the benefits of all such laws.
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Section 13. Termination; Assignment, etc. Subject to Section 14, this
Agreement and the security interest in the Collateral created hereby shall
terminate when all of the Secured Obligations have been indefeasibly paid in
full (provided that the Secured Parties are no longer obligated to make Loans
under the Loan Agreement). No waiver by the Agent and/or the Secured Parties or
by any other holder of Secured Obligations of any default shall be effective
unless in writing nor operate as a waiver of any other default or of the same
default on a future occasion. In the event of a sale or assignment by any
Secured Party of all or any of the Secured Obligations held by it, the Secured
Party may assign or transfer its rights and interests under this Agreement in
whole or in part to the purchaser or purchasers of such Secured Obligations,
whereupon such purchaser or purchasers shall become vested with all of the
powers and rights of the Secured Party hereunder, and the Secured Party shall
thereafter be forever released and fully discharged from any liability or
responsibility hereunder arising from and after the effective time of such
assignment or transfer with respect to the rights and interests so assigned.
Section 14. Reinstatement. Notwithstanding the provisions of Section 13,
this Agreement shall continue to be effective or be reinstated, as the case may
be, if at any time any amount received by any Secured Party in respect of the
Collateral is rescinded or must otherwise be restored or returned by the Secured
Party upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Company or any Affiliate of the Company or otherwise or
upon the appointment of any intervenor or conservator of, or trustee or similar
official for, the Company or any Affiliate of the Company or any substantial
part of its or their properties, or otherwise, all as though such payments had
not been made.
Section 15. Governmental and Other Third Party Approvals, etc. Upon the
occurrence of an Event of Default and the exercise by the Agent and/or the
Secured Parties of (or decision by the Agent and/or the Secured Parties to
exercise) any power, right, privilege or remedy pursuant to this Agreement which
requires any consent, approval, registration, qualification or authorization of
any governmental or regulatory authority or instrumentality, or any other third
party (including but not limited to rating agencies and third parties to the
Eligible Securitization Transaction Documents) the Company will execute and
deliver, or will cause the execution and delivery of, all applications,
certificates, instruments and other documents and papers that may be required
for such governmental, regulatory or other third party consent, approval,
registration, qualification or authorization. In the event the Company fails to
take any such action, the Company hereby irrevocably authorizes and appoints the
Agent to execute and deliver such documents in its stead,
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with full power of substitution, as the Company's attorney-in-fact.
Section 16. Notices. Except as otherwise provided herein, notice to the
Company or to the Agent or the Secured Parties shall be deemed to have been
sufficiently given or served for all purposes hereof if given to the parties and
in the manner specified in the Loan Agreement.
Section 17. Agency. The terms "Secured Party" or "Secured Parties" as used
herein shall be deemed to include any and all lenders now or hereafter party to
the Loan Agreement as a "Lender", and any other holder of any Secured
Obligation, and shall also be deemed to include the Agent acting on behalf of
all or any one or more of the Secured Parties in accordance with the Agency
provisions of the Loan Agreement. The Company shall not be a third party
beneficiary of such provisions. The Secured Parties acknowledge that the
security interest in the Collateral granted hereby secures the Secured
Obligations owing to the Agent and to each Secured Party. State Street Bank and
Trust Company may resign or be removed as Agent hereunder, and may be replaced
as Agent hereunder, in the same manner as is prescribed for resignation, removal
and replacement of the Agent in the Loan Agreement, and any successor Agent
shall succeed to all of the Agent's rights hereunder with respect to the
Collateral. The term "Agent" as used herein shall be deemed to include any such
other party acting as agent for the Secured Parties hereunder.
The Agent shall not be liable to any Secured Party for any error of
judgment or mistake of fact or for any acts of omission or commission, unless
the same are caused by the Agent's willful misconduct or gross negligence. The
Agent may act in reliance upon all instruments, documents or signatures believed
by it to be genuine and may assume that any person purporting to act or give
notices, writings, advice or instructions in connection with this Agreement is
duly authorized by the appropriate party so to do. The Agent will be reimbursed
or properly indemnified by each Secured Party in the event the Agent is
requested by the Secured Parties to take or omit to take any action with respect
to the Collateral (any such reimbursement or indemnification to be on the same
basis as set forth in the Loan Agreement). The Agent shall have the right to
retain counsel to advise it as to any action or decision with respect to the
Collateral and shall be reimbursed by the Secured Parties for the cost of the
same (to the extent the Agent is not reimbursed by the Company) prior to
distributing any of the Collateral or any proceeds thereof and the cost of such
reimbursement of the Agent shall constitute part of the Secured Obligations.
The provisions of this Section 17 shall apply to all other Security
Documents in which State Street Bank and Trust Company is serving as Agent for
the Secured Parties, and in which no specific agency
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provision is included, in the same manner as this Section 17 applies to this
Security Agreement.
Section 18. Miscellaneous. This Agreement shall inure to the benefit of and
be binding upon the Agent, the Secured Parties and the Company and their
respective successors and assigns (provided that the Company may not assign its
rights and obligations hereunder without the prior consent of the Secured
Parties), and the term "Lender" shall be deemed to include any other holder or
holders of any of the Secured Obligations. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby. References in this Agreement to the "Secured Parties" are
references to the Secured Parties severally, jointly and jointly and severally.
The section headings in this Agreement are for convenience of reference only and
shall not be considered in construing this Agreement. This Agreement may be
executed in any number of counterparts and by the different parties hereto on
separate counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
Section 19. Governing Law; Jurisdiction; Waiver of Jury Trial. This
Agreement shall be governed by the internal laws of The Commonwealth of
Massachusetts (without reference to conflicts of law principles). The Company,
to the extent that it may lawfully do so, hereby consents to service of process,
and to be sued, in The Commonwealth of Massachusetts and consents to the
jurisdiction of the courts of The Commonwealth of Massachusetts and the United
States District Court for the District of Massachusetts, as well as to the
jurisdiction of all courts to which an appeal may be taken from such courts, for
the purpose of any suit, action or other proceeding arising out of this
Agreement or any of its obligations hereunder or with respect to the
transactions contemplated hereby, and expressly waives any and all objections it
may have as to venue in any such courts. The Company further agrees that a
summons and complaint commencing an action or proceeding in any of such courts
shall be properly served and shall confer personal jurisdiction if served
personally or by certified mail to it at its address set forth above or as
otherwise provided under the laws of The Commonwealth of Massachusetts. The
Company irrevocably waives all right to a trial by jury in any suit, action or
other proceeding instituted by or against the Company in respect of its
obligations hereunder or the transactions contemplated hereby.
Section 20. Indemnification. The Company shall indemnify, defend and hold
the Secured Parties and the Agent harmless of and from any claim brought or
threatened against the Secured Parties and/or the Agent by the Company, any
guarantor or endorser of the Secured Obligations, or any other Person (as well
as from
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reasonable attorneys' fees and expenses in connection therewith) in accordance
with the Loan Agreement.
Section 21. Specific Performance. The Company stipulates that the remedies
of the Agent and the Secured Parties at law, in the event of any demand
(following notice to the extent expressly provided herein), or Event of Default
by the Company in the performance of or compliance with any of the terms and
provisions of this Agreement on its part to be observed or performed, are not
and will not be adequate, and that such terms may be specifically enforced by a
decree for the specific performance of any agreement or provision contained
herein or by an injunction against a violation of any of the terms of provisions
hereof or otherwise.
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IN WITNESS WHEREOF, the parties have executed this Agreement as a sealed
instrument as of the date first above written.
ONYX ACCEPTANCE CORPORATION
By:_______________________________
(Title)
STATE STREET BANK AND TRUST COMPANY,
for Itself and as Agent
By:_______________________________
(Title)
BANKBOSTON
By:_______________________________________
(Title)
THE TRAVELERS INSURANCE COMPANY
By:_______________________________________
(Title)
26
<PAGE> 27
Schedule I to Pledge
and Security Agreement
Places of Business and Locations of Collateral
27
<PAGE> 28
Schedule II to Pledge
and Security Agreement
Pledged Stock
<TABLE>
<CAPTION>
OWNER AND ADDRESS ISSUER/DESCRIPTION NO. OF SHARES CERTIFICATE NO
----------------- ------------------ ------------- --------------
<S> <C> <C> <C>
Onyx Acceptance Corporation Finco/Common 1,000 -
8001 Irvine Center Drive
5th Floor
Irvine, California 92718
</TABLE>
Pledged Notes
<TABLE>
<S> <C> <C> <C> <C>
MAKER PAYEE DATE PRINCIPAL AMOUNT
----- ----- ---- ----------------
</TABLE>
Pledged Certificates
<TABLE>
<CAPTION>
OWNER AND ADDRESS DESCRIPTION CERTIFICATE NO
<S> <C> <C>
Onyx Acceptance Corporation
8001 Irvine Center Drive
5th Floor
Irvine, California 92718
</TABLE>
28
<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
26
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 657,869
<SECURITIES> 0
<RECEIVABLES> 101,078,637
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 202,467,539
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 61,578
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 202,467,539
<SALES> 0
<TOTAL-REVENUES> 5,221,533
<CGS> 0
<TOTAL-COSTS> 11,530,555
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 324,819
<INTEREST-EXPENSE> 3,616,724
<INCOME-PRETAX> 2,315,143
<INCOME-TAX> 960,784
<INCOME-CONTINUING> 1,354,359
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,354,359
<EPS-PRIMARY> .22
<EPS-DILUTED> .21
</TABLE>
