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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 MARCH 31, 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)
<TABLE>
<CAPTION>
Delaware 33-0577635
<S> <C>
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>
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 April 30, 1998, there were 6,027,900 shares of registrant's
Common Stock, par value $.01 per share outstanding.
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1
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ONYX ACCEPTANCE CORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Financial Condition at
March 31, 1998 and December 31, 1997.................................................... 3
Condensed Consolidated Statements of Income for the three months
ended March 31, 1998 and March 31, 1997.................................................. 4
Consolidated Statements of Cash Flows for the three months ended
March 31, 1998, and March 31, 1997...................................................... 5
Notes to Consolidated Financial Statements................................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations......... 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.............................................................. 16
SIGNATURES.............................................................................................. 20
EXHIBIT INDEX........................................................................................... 21
</TABLE>
2
<PAGE> 3
ONYX ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash & cash equivalents ..................................................... $ 4,662,766 $ 991,010
Trust receivables ........................................................... 30,401,309 27,628,619
Contracts held for sale (Net of allowance) .................................. 86,451,394 64,342,309
Retained interest on securitized assets ..................................... 55,229,633 48,838,815
Other assets ............................................................... 5,378,025 4,767,490
------------ ------------
Total assets ..................................................... $182,123,127 $146,568,243
============ ============
LIABILITIES
Accounts payable ............................................................ $ 7,638,265 $ 8,458,147
Debt ........................................................................ 125,427,968 91,508,209
Other liabilities ........................................................... 7,669,076 6,046,395
------------ ------------
Total liabilities ................................................. 140,735,309 106,012,751
EQUITY
Common stock
Par value $.01 per share; authorized 15,000,000 shares;
issued and outstanding 6,026,563 as of March 31, 1998
and issued and outstanding
6,017,635 as of December 31, 1997 ............................ 60,265 60,176
Paid in capital ............................................................. 37,814,624 37,810,158
Retained earnings ........................................................... 3,512,929 2,685,158
------------ ------------
Total equity ..................................................... 41,387,818 40,555,492
------------ ------------
Total liabilities and equity ..................................... $182,123,127 $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 March 31,
----------------------------
1998 1997
----------- -----------
REVENUES: (UNAUDITED)
<S> <C> <C>
Finance Revenue .............................. $ 4,480,550 $ 1,881,992
Interest Expense ............................. 2,820,986 1,054,909
----------- -----------
Net Finance Revenue .......................... 1,659,564 827,083
Provision for Credit Losses .................. 306,988 293,270
----------- -----------
Net Finance Revenue after Provision
for Credit Losses ........................... 1,352,576 533,813
Gain on Sale of Contracts .................... 8,667,018 3,776,143
Service Fee Income ........................... 1,598,736 2,619,638
EXPENSES:
Salaries and Benefits .................... 5,941,169 3,417,324
Depreciation ............................. 426,982 201,983
Occupancy ................................ 372,441 324,091
General and administrative expenses ...... 3,462,744 1,937,752
----------- -----------
Total Expenses ............................... 10,203,336 5,881,150
----------- -----------
Net Income before Taxes ...................... 1,414,994 1,048,444
Income Taxes ............................. 587,223 436,000
----------- -----------
Net Income after Taxes ....................... $ 827,771 $ 612,444
=========== ===========
Net Income per share - Basic ................. $ 0.14 $ 0.10
Net Income per share - Diluted ............... $ 0.13 $ 0.10
Basic Shares Outstanding ..................... 6,024,820 5,962,174
Diluted Shares Outstanding ................... 6,420,551 6,403,911
</TABLE>
See the accompanying notes to the condensed consolidated financial statements.
4
<PAGE> 5
ONYX ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------
1998 1997
------------- -------------
(unaudited)
<S> <C> <C>
Net cash used in operating activities ................................. $ (29,236,094) $ (36,178,828)
INVESTING ACTIVITIES:
Purchases of property and equipment .............................. (678,605) (394,959)
------------- -------------
Cash used in investing activities ....................... (678,605) (394,959)
FINANCING ACTIVITIES:
Proceeds from exercise of options/warrants ....................... 4,553 52,974
Payments on capital lease obligations ............................ (140,589) (155,884)
Proceeds from drawdown on excess servicing line of credit ........ 2,451,268 8,000,000
Paydown of commercial paper related to securitization and sale ... (184,006,000) (83,500,000)
Proceeds from issuance of commercial paper (net of other payments) 205,360,997 112,093,298
Proceeds from subordinated debt .................................. 10,000,000 0
Payments in other loans .......................................... (83,774) (83,773)
------------- -------------
Net cash provided by financing activities ............... 33,586,455 36,406,615
------------- -------------
Increase (decrease) in cash and cash equivalents ........ 3,671,756 (167,172)
Cash and cash equivalents at beginning of period ...................... 991,010 603,028
------------- -------------
Cash and cash equivalents at end of period .............. $ 4,662,766 $ 435,856
============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid ......................................................... $ 2,826,407 $ 1,003,023
Capital lease additions ............................................... $ 86,786 $ 383,317
</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 three months ended
March 31, 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.
NOTE 2 - CONTRACTS HELD FOR SALE
Contracts held for sale consisted of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Contracts held for sale .............. $ 94,014,562 $ 71,216,278
Less unearned interest ............... 8,771,578 7,835,794
------------ ------------
85,242,984 63,380,484
Allowance for credit losses .......... (426,215) (316,902)
------------ ------------
84,816,769 63,063,582
Dealer participation ................. 1,634,625 1,278,727
------------ ------------
Total ................................ $ 86,451,394 $ 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.
Prepayment and credit loss assumptions are utilized to project future
earnings and are based on historical experience. Credit losses are estimated
using cumulative loss frequency and severity estimates by management. 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 excess spread 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 is reported as a separate component of shareholders'
equity as an unrealized gain or loss, net of deferred taxes.
6
<PAGE> 7
As of March 31, 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%, loss assumption of 2.0% and a discount rate of 3.50%
over the pass-through rate
The following table presents the balances and activity for retained
interest on securitized assets:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Beginning balance ................ $ 48,838,815 $ 29,632,039
Additions ........................ 15,750,000 45,940,000
Amortization ..................... (9,359,182) (26,733,224)
------------ ------------
Ending balance ................... $ 55,229,633 $ 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>
March 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Estimated net undiscounted RISA earnings .................... $ 91,108,852 $ 78,579,178
Off balance sheet allowance for losses ...................... 30,126,686 24,787,037
Discount to present value ................................... 5,752,533 4,953,326
------------ ------------
Retained interest in securitized assets ..................... $ 55,229,633 $ 48,838,815
------------ ------------
Outstanding balance of contracts sold through securitizations $784,922,131 $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.
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
March 31,
-------------------------
1998 1997
---------- ----------
<S> <C> <C>
Net Income ....................................... $ 827,771 $ 612,444
========== ==========
Weighted average shares outstanding .............. 6,024,820 5,962,174
Net effect of dilutive stock options/warrants .... 395,731 441,737
Diluted weighted average shares outstanding ...... 6,420,551 6,403,911
Net income per share:
Basic ............................................ $ 0.14 $ 0.10
========== ==========
Diluted .......................................... $ 0.13 $ 0.10
========== ==========
</TABLE>
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
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 in 18 states 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. Since commencing the purchase of Contracts in February 1994, the
Company has acquired more than $1.4 billion in Contracts from over 3,300
dealerships and has expanded its operations from a single office in Irvine,
California to eleven Auto Finance Centers.
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 in the amount of one percent per annum of
the outstanding principal balance of the Contracts securitized.
The Company experienced significant growth in its purchased volume of
Contracts. Purchased Contract volume increased to $218.2 million for the first
three months of 1998 from $125.7 million for the first three months of 1997,
representing an increase of 73.6%. This growth in acquisition volume is
attributable to the opening of three additional Auto Finance Centers since the
end of the first quarter of 1997 and the continued market penetration within the
Company's existing centers. The Company's servicing portfolio at March 31, 1998
was $884.7 million compared to $478.4 at March 31, 1997, an increase of 84.9%.
Total revenues, including servicing income during the first three months of 1998
were $11.9 million compared to $7.2 million for the same period ended March 31,
1997.
Net income for the first quarter of 1998 was $827,771 or $0.13 per
diluted share compared to $612,444 or $0.10 per diluted share in the first
quarter of 1997. The increase in earnings and earnings per diluted share
resulted from an increase in Contracts purchased or originated in addition to
the sale of $188.0 million in Contracts during the first quarter of 1998
compared to $90.0 million in the first quarter of 1997. Of the total Contracts
sold during the first quarter of 1998, $173.0 million of the sale was
securitized through a public offering similar in structure to the ten prior
securitizations completed by the Company since 1994, while $15.0 million was
sold on a whole loan basis, with servicing retained.
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
--------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DEC. 31, MARCH 31,
1997 1997 1997 1997 1998
-------- -------- ------------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Contracts purchased/originated during period $125,713 $145,548 $152,334 $182,310 $218,204
Average monthly volume during period ....... 41,904 48,516 50,778 60,770 72,735
Gain on sale of Contracts .................. 3,776 4,300 6,938 7,809 8,667
Total revenue (1) .......................... 7,223 8,711 9,551 10,465 11,925
Contracts securitized during period ........ 90,000 121,676 149,600 166,000 173,000
Contracts sold during period ............... 0 0 0 0 15,000
Servicing portfolio at period end .......... 478,440 564,922 649,563 757,277 884,692
</TABLE>
- --------------------
(1) Total revenue is comprised of net finance revenue, servicing fee income and
gain on sale of contracts
8
<PAGE> 9
RESULTS OF OPERATIONS
QUARTERS ENDED MARCH 31, 1998 AND 1997
Net Finance Revenue. Net finance revenue increased to $1,659,564 for
the quarter ended March 31, 1998 from $827,083 for the same period in 1997. The
increase is primarily attributable to an increase in the average amount of
Contracts held for sale during the quarter. Average Contracts held for sale were
$128.9 million during the first quarter of 1998, compared to $47.4 million
during the first quarter of 1997.
Provision for Credit Losses. During the quarter ended March 31, 1998,
the provision for credit losses totaled $306,988 compared to $293,270 for the
same period ended 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 $197,700 during the first quarter of 1998 compared to
$151,300 in the first quarter of 1997 due to an increase in the average
contracts held for sale in the period. Future provisions declined to $109,300
from $142,000 as the contracts held for sale increased $21.8 million during the
first quarter of 1998 vs. $28.4 million during the first quarter of 1997.
Gain on Sale of Contracts. The Company sold $188.0 million of Contracts
during the quarter ended March 31, 1998, resulting in a gain on sale of
Contracts of $8.7 million compared to a securitization of $90.0 million for the
first quarter of 1997 resulting in a gain on sale of $3.8 million. The gain on
the sale of contracts increased to 4.6% vs. 4.0% of the amount of Contracts
securitized and sold, as the net interest rate spread widened to 2.83% from
2.25%.
Servicing Fee Income. Servicing fee income declined to $1.6 million
during the first quarter of 1998 from $2.6 million during the same 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.
Salaries and Benefits Expense. The Company incurred salary and benefit
expenses of $5.9 million during the first quarter of 1998 compared with $3.4
million for the first quarter of 1997, an increase of 73.5%. This increase is
attributable to the incremental staffing requirements from the expansion of
operations and the growth of the servicing portfolio. The number of employees at
the Company increased from 250 at March 31, 1997 to 403 at March 31, 1998
Other Operating Expenses. Other operating expenses increased by 72% to
$4.3 million for the quarter ended March 31, 1998 from $2.5 million for the same
period ended March 31, 1997. The majority of the increases are due to the growth
of the servicing portfolio, to costs related to collection and customer service
operations and the opening of additional auto finance centers.
Net Income. The Company posted net income of $827,771 for the quarter
ended March 31, 1998 or $.13 per diluted share compared to $612,444 or $.10 per
diluted share for the same period of 1997. The increase in earnings and earnings
per diluted share resulted from an increase in the purchase and origination of
Contracts and the size of the Company's securitization during the quarter. The
Company securitized and sold $188.0 million in Contracts during the first
quarter of 1998 compared to $90.0 million in the first quarter of 1997. $173.0
million was securitized through a public offering similar in structure to the
ten prior securitizations completed by the Company since 1994, while $15.0
million was sold on a whole loan basis, with servicing retained.
9
<PAGE> 10
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 an 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
first quarter of 1998 the Company realized some of the benefits of the
centralization and training of the collection department. At March 31, 1998,
delinquencies for the servicing portfolio represented 1.77% of the amount of
Contracts in the Company's servicing portfolio or $15.63 million as compared to
3.13% at March 31, 1997 or $14.96 million. Loan losses for the servicing
portfolio as a percentage of average serviced loans outstanding increased to
1.84% during the quarter compared to 1.83% for the first quarter of 1997. It is
anticipated that with the reduction in the delinquency rate in 1998 over that
experienced during 1997, the annualized loss rate will improve in 1998 over the
2.03% loss rate for the year ended December 31, 1997.
DELINQUENCY EXPERIENCE OF SERVICING PORTFOLIO
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED MARCH 31,
--------------------------------------------------------
1998 1997
------------------------ ------------------------
Amount No. Amount No.
-------- ------ -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Servicing portfolio ............... $884,692 86,327 $478,440 45,740
Delinquencies(1)(2)
31-59 days ........... $ 9,194 937 $ 9,867 904
60-89 days ........... $ 2,863 277 $ 2,551 242
90+ days ............. $ 3,572 320 $ 2,542 214
Total ............................. $ 15,629 1,534 $ 14,960 1,360
Total delinquencies as a percent of
Servicing portfolio ............... 1.77% 1.78% 3.13% 2.97%
</TABLE>
- ------------
(1) Delinquencies include principal amounts only.
(2) The period of delinquency is based on the number of days payments are
contractually past due.
LOAN LOSS EXPERIENCE OF SERVICING PORTFOLIO
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED
MARCH 31,
------------------------------
1998 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Period end contracts outstanding ................. $ 884,692 $ 478,440
Average servicing portfolio(1) ................... $ 815,922 $ 433,147
Number of gross charge-offs ...................... 818 367
Gross charge-offs ................................ $ 4,457.6 $ 2,309.2
Net charge-offs .................................. $ 3,761.8 $ 1,979.7
Annualized net charge-offs as a percent of average
servicing portfolio .............................. 1.84% 1.83%
</TABLE>
- ------------
(1) Average is based on daily balances.
(2) Net charge-offs are gross charge-offs minus recoveries of Contracts
previously charged off.
10
<PAGE> 11
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 $29.2 million for the quarter ended
March 31, 1998, compared to $36.2 million used in the quarter ended March 31,
1997. Cash used in investing activities was $678,605 for the quarter ended March
31, 1998 compared to $394,959 for the quarter ended March 31, 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 $33.6 million for the quarter
ended March 31, 1998, compared to $36.4 million for the quarter ended March 31,
1997. Warehouse facilities and the issuance of subordinated debt contributed to
the cash increase during the quarter ended March 31, 1998. The Company's wholly
owned special purpose subsidiary, Onyx Acceptance Financial Corporation
("OAFC"), is party to a $200 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 ("MBIA") and is
currently rated A-1/P-1 by Standard & Poor's Ratings Group and Moody's Investor
Services, Inc., respectively (such ratings are not recommendations to invest and
are subject to change). 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.
Additionally, the Company has a $30 million collateralized credit facility
with State Street Bank of Boston and BankBoston (the "Revolving Credit
Facility") under which the Company may (subject to borrowing base availability)
borrow for working capital and expenditures for which the Company's $200 million
CP Facility is not otherwise available. Under the term of the Revolving Credit
Facility, the available borrowings are based on the following collateral based
formula: up to the lesser of 65% of the net book value of the Company's RISA and
trust receivables deemed eligible by the lenders or 75% of the value of such
RISA and trust receivables determined by such lenders in accordance with their
collateral valuation model. The Revolving Credit Facility converts from
revolving loans to fully-amortizing two-year term loans on June 30, 1998 or if
earlier, upon the occurrence of certain "credit triggers".
In the first quarter of 1998, the Company created a new finance subsidiary,
Onyx Acceptance Funding Corporation ("Fundco") through which two new lending
lines have been 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. A $50 million line (the "Residual Line") is used by the Company
to finance operating requirements. The amount available for borrowing is based
on 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 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%
11
<PAGE> 12
SECURITIZATIONS AND LOAN SALES.
In March 1998, the Company consummated a securitization in the amount of
$173.0 million with a pass-through rate of 5.95% and a net interest rate spread
inclusive of all costs of 2.83%, and a whole loan sale of $15.0 million. As a
result of these transactions, the Company realized a gain on securitization and
sale of approximately $8.7 million.
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 May 5, 1998, the Company had in effect an interest rate hedges for $210
million, which mature June 12, 1998, which the Company believes are adequate to
cover its next securitization or loan sale.
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. 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 $200 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
12
<PAGE> 13
the purchase price of Contracts. The CP Facility expires in September 1998. 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 $30 million Revolving Facility, unless extended,
converts on June 30, 1998 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 on the last
day of every month. 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 March 31, 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 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
13
<PAGE> 14
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, 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, thus requiring the
Company to pay down amounts outstanding under the Revolving Facility or Residual
Line or provide additional collateral to cure the 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
14
<PAGE> 15
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 on
Contracts funded by the Facility as program manager, 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.
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.
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<PAGE> 16
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
<TABLE>
<CAPTION>
EXHIBIT NO. Exhibit Title
- ---------- -------------
<S> <C>
*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 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
</TABLE>
16
<PAGE> 17
<TABLE>
<CAPTION>
EXHIBIT NO. Exhibit Title
- ---------- -------------
<S> <C>
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
*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.
</TABLE>
17
<PAGE> 18
<TABLE>
<CAPTION>
EXHIBIT NO. Exhibit Title
- ---------- -------------
<S> <C>
*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 Excess Servicing and Trust Receivable Revolving Credit and Term Loan Agreement among Onyx Acceptance Corporation,
State Street Bank and Trust Company and The First National Bank of Boston dated as of January 31, 1996.
*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.
#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.
</TABLE>
18
<PAGE> 19
<TABLE>
<CAPTION>
EXHIBIT NO. Exhibit Title
- ---------- -------------
<S> <C>
##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
21.1 Subsidiaries of the Registrant.
27.1 Financial Data Schedule.
</TABLE>
- -----------------
* Incorporated by reference from the Company's Registration
Statement on Form S-1 (Registration No. 333-680).
** 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).
(b) Reports on Form 8-K
Form 8-K dated April 28, 1998. Item 5 providing the Distribution
Date Statement for Distribution Date of April 15, 1998 for the Onyx Acceptance
Grantor Trust 1998-1.
19
<PAGE> 20
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: May 13, 1998
By: /s/ DON P. DUFFY
-----------------------------------------
Don P. Duffy
Executive Vice President and Principal
Financial Officer
Date: May 13, 1998
20
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EXHIBIT INDEX
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Exhibit No. DESCRIPTION Page
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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
21.1 Subsidiaries of the Registrant.................................
27.1 Financial Data Schedule........................................
</TABLE>
21
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EXHIBIT 10.101
TERM LOAN AGREEMENT
$10,000,000
BayView Capital Corporation,
a Delaware Corporation,
as Lender
and
Onyx Acceptance Corporation,
a Delaware Corporation,
as Borrower
Dated as of February 24, 1998
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TABLE OF CONTENTS
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PAGE
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ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02 Accounting Terms; GAAP Changes . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 1.03 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE II THE TERM LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.01 The Term Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.02 Borrowing Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.03 Evidence of Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.04 Minimum Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III INTEREST AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.01 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.02 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.03 Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.04 Highest Lawful Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE IV REDUCTION OR TERMINATION;
REPAYMENT; PREPAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.01 Reduction or Termination of the Commitments . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.02 Repayment of the Term Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.03 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 5.01 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.02 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VI SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6.01 Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6.02 Insolvency, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6.03 Senior Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 6.04 Senior Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 6.05 Turn-Over of Payments Received . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 6.06 Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 6.07 Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 6.08 Subordination Not Affected . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 6.09 Right To Retain Payment Received . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 6.10 Remedy Standstill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 6.11 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 6.12 Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 6.13 Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 6.14 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 6.15 Warranties, Representations, Covenants and Acknowledgments
of Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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2.
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ARTICLE VII CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 7.01 Conditions Precedent to Initial Borrowing . . . . . . . . . . . . . . . . . . . . . 20
SECTION 7.02 Conditions Precedent to All Term Loans . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VIII REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . 22
SECTION 8.01 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE IX AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 9.01 Reporting Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE X NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 10.01 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE XI EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 11.01 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 11.02 Effect of Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE XII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 12.01 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 12.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 12.03 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 12.04 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 12.05 Binding Effect; Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 12.06 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 12.07 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 12.08 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 12.09 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 12.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 12.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 12.12 Transaction Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 12.13 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 12.14 Jury Trial Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 12.15 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
EXHIBITS
FORM OF NOTE A
FORM OF WARRANT B
FORM OF NOTICE OF BORROWING C
FORM OF NOTICE OF PREPAYMENT D
FORM OF TRANSFERENCE ACKNOWLEDGMENT E
SCHEDULES
PERMITTED LIENS 1
LIST OF SUBSIDIARIES 2
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3.
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TERM LOAN AGREEMENT
This Term Loan Agreement (this "Agreement"), dated as of February 24,
1998, is made by and between Onyx Acceptance Corporation, a Delaware
corporation ("Borrower"), and BayView Capital Corporation, a Delaware
corporation ("Lender").
Borrower has requested that Lender make available to the Borrower
subordinated term loans upon the terms and conditions set forth in this
Agreement, to refinance certain existing indebtedness and to use for general
corporate purposes. Lender is willing to make available such subordinated term
loans to Borrower upon the terms and subject to the conditions set forth in
this Agreement.
Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Affiliate" means any Person which, directly or indirectly, controls,
is controlled by or is under common control with another Person. For purposes
of the foregoing, "control," "controlled by" and "under common control with"
with respect to any Person shall mean the possession, directly or indirectly,
of the power (i) to vote 10% or more of the securities having ordinary voting
power for the election of directors of such Person, or (ii) to direct or cause
the direction of the management and policies of such Person, whether through
the ownership of voting securities or by contract or otherwise.
"Bankruptcy Code" means the United States Bankruptcy Code, 11 U.S.C.
Sections 101 et seq., as the same may be amended, and any successor federal
statute, and all similar state bankruptcy, insolvency or reorganization laws.
"Borrower" has the meaning set forth in the recital of parties to this
Agreement.
"Borrowing" means a borrowing consisting of a Term Loan made at any
time pursuant to Article II.
"Business Day" means a day (i) other than Saturday or Sunday, and (ii)
on which commercial banks are open for business in San Francisco, California.
"Commitment" means $10,000,000 or, where the context so requires, the
obligation of Lender to make Term Loans up to such amount on the terms and
conditions set forth in this Agreement.
"Consolidated Net Income" means the consolidated net income of
Borrower as determined in accordance with GAAP, excluding extraordinary gains
or losses.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of Preferred Stock (other than Disqualified Stock) that
by its terms is not entitled to the payment of dividends unless such dividends
may be declared and paid only out of net earnings in respect of the year of
such declaration and payment, but only to the extent of any cash received by
such Person upon issuance of such Preferred Stock, less (x) all write-ups
(other than write-ups resulting from foreign currency translations and
write-ups of tangible assets of a going concern business made within 12 months
after the acquisition of such business) subsequent to the date of the Agreement
in the book value of any asset owned by such Person or a consolidated
Subsidiary of such Person and (y) all investments as of such date in non
consolidated Subsidiaries and in Persons that are not Subsidiaries.
"Debt" shall mean, with respect to any Person, (a) obligations of such
Person for borrowed money or which has been incurred in connection with the
acquisition of property or assets, (b) obligations secured by any lien upon
property or assets owned by such Person, even though such Person has not
assumed or become liable for the payment of such obligations and (c)
obligations created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person,
notwithstanding
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the fact that the rights and remedies of the seller, lender or lessor under
such agreement in the event of default are limited to repossession or sale of
property.
"Default" means an Event of Default or an event or condition which
with notice or lapse of time or both would constitute an Event of Default.
"Dollars" and the sign "$" each means lawful money of the United
States.
"Environmental Laws" means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directives, requests, licenses, authorizations and
permits of, and agreements with (including consent decrees), any Governmental
Authorities, in each case relating to or imposing liability or standards of
conduct concerning public health, safety and environmental protection matters,
including the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Clean Air Act, the Federal Water Pollution Control Act of
1972, the Solid Waste Disposal Act, the Federal Resource Conservation and
Recovery Act, the Toxic Substances Control Act, the Emergency Planning and
Community Right-to-Know Act, the California Hazardous Waste Control Law, the
California Solid Waste Management, Resource Recovery and Recycling Act, the
California Water Code and the California Health and Safety Code.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, including (unless the context otherwise requires) any rules or
regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which is under common control with Borrower within the meaning of
Section 4001(a)(14)(B) of ERISA and Sections 414(b) and (c) of the Internal
Revenue Code, or a member of an affiliated service group with Borrower within
the meaning of Section 414(m) of the Internal Revenue Code.
"Event of Default" has the meaning set forth in Section 11.01.
"Extended Maturity Date" has the meaning set forth in Section 4.02.
"Fifth Amendment to Amended and Restated Investors' Rights Agreement"
means that certain Fifth Amendment to Amended and Restated Investors Rights
Agreement, dated as of the date hereof, by and among Lender, Borrower and
certain other parties identified therein.
"Fiscal Year" means the fiscal year of Borrower and its consolidated
Subsidiaries.
"Funded Debt" means all of such Person having a final maturity of one
or more than one year from the date of determination thereof (or which is
renewable or extendible at the option of the obligor for a period or periods
more than one year from the date of determination provided that outstandings
under the credit facilities which are retired for a period of thirty (30)
consecutive days during each fiscal year will be defined as short term debt)
but excluding Permitted Debt.
"GAAP" means generally accepted accounting principles in the U.S. as
in effect from time to time.
"Governmental Authority" means any federal, state, local or other
governmental department, commission, board, bureau, agency, central bank,
court, tribunal or other instrumentality or authority, domestic or foreign,
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Hazardous Substances" means any toxic or hazardous substances,
materials, wastes, contaminants or pollutants, including asbestos, PCBs,
petroleum products and byproducts, and any substances defined or listed as
"hazardous substances," "hazardous materials," "hazardous wastes" or "toxic
substances" (or similarly identified), regulated under or forming the basis for
liability under any applicable Environmental Law.
"Indebtedness" for any Person shall mean at any time, without
duplication: (i) all indebtedness or other obligations of such Person for
borrowed money or for the deferred purchase price of property or services; (ii)
all obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses; (iii) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property); (iv) all
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reimbursement or other obligations of such Person under or in respect of
letters of credit and bankers acceptances, and all net obligations in respect
of derivative contracts; (v) all guaranty obligations; and (vi) all
indebtedness of another Person secured by any Lien upon or in property owned by
the Person for whom indebtedness is being determined, whether or not such
Person has assumed or become liable for the payment of such indebtedness of
such other Person.
"Interest Payment Date" means a date specified for the payment of
interest pursuant to Section 3.01(c).
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, including (unless the context otherwise requires) any rules or
regulations promulgated thereunder.
"Lender" has the meaning set forth in the recital of parties to this
Agreement.
"Lien" means any mortgage, deed of trust, pledge, security interest,
assignment, deposit arrangement, charge or encumbrance, lien (statutory or
other), or other preferential arrangement (including any conditional sale or
other title retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing or any agreement to give any
security interest).
"Loan Documents" means this Agreement, the Notes, the Warrant, and the
Fifth Amendment to the Amended and Restated Investors' Rights Agreement, and
all other certificates, documents, agreements and instruments delivered to
Lender under or in connection with this Agreement.
"Material Adverse Effect" means any event, matter, condition or
circumstance which (i) has or would reasonably be expected to have a material
adverse effect on the business, properties, results of operations or condition
(financial or otherwise) of Borrower; (ii) would materially impair the ability
of Borrower or any other Person to perform or observe its obligations under or
in respect of the Loan Documents, or (iii) affects the legality, validity,
binding effect or enforceability of any of the Loan Documents.
"Maturity Date" means the date two years after the date of this
Agreement.
"Minimum Amount" has the meaning set forth in Section 2.04.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Sections 3(37) and 4001(a)(3) of ERISA to which Borrower or an ERISA Affiliate
has an obligation to contribute.
"Notes" means any subordinated promissory note of Borrower payable to
Lender, in substantially the form of Exhibit "A".
"Notice" means a Notice of Borrowing or a Notice of Prepayment.
"Notice of Borrowing" has the meaning set forth in Section 2.02.
"Notice of Prepayment" has the meaning set forth in Section 4.03(b).
"Obligations" means the indebtedness, liabilities and other
obligations of Borrower to Lender under or in connection with any of the Loan
Documents, including all Term Loans, all interest accrued thereon (including
interest that, but for the filing of a petition in bankruptcy with respect to
any Borrower, would have accrued on the Obligations), all fees due under this
Agreement or any of the Loan Documents and all other amounts payable by
Borrower to Lender thereunder or in connection therewith.
"Pension Plan" means any employee pension benefit plan covered by
Title IV of ERISA (other than a Multiemployer Plan) that is maintained for
employees of Borrower or any ERISA Affiliate or with regard to which Borrower
or an ERISA Affiliate has an obligation to contribute.
"Permitted Debt" means Indebtedness of Borrower or any Subsidiary of
the Borrower which is now or hereafter outstanding under one or more (i)
warehouse facilities; provided, however that the assets purchased with the
proceeds of such Indebtedness are or, prior to any funding under the warehouse
facility with respect to such assets, were eligible to be recorded as held for
sale on the consolidated balance sheet of Borrower in accordance with GAAP;
and/or (ii) the Senior Loan Agreement and any other credit facilities which are
secured by a security interest in the residual interest in securitization
assets provided that the advance rate under these facilities are equal to or
greater than the greater of (x) 70% of the fair market value determined in
accordance with the formula set forth in such credit
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facilities or (y) 60% of the book value determined on a consolidated basis in
accordance with GAAP.
"Permitted Liens" means:
(i) the existing and proposed Liens listed in Schedule 1 or incurred
in connection with the extension, renewal or refinancing of the Indebtedness
secured by such existing Liens, including any Lien from time to time granted in
connection with or permitted to exist under the Senior Loan Agreement;
(ii) Liens for taxes, fees, assessments or other governmental charges
or levies, either not delinquent or being contested in good faith by
appropriate proceedings and which are adequately reserved or otherwise
appropriately provided for in accordance with GAAP;
(iii) Liens of landlords, materialmen, mechanics, warehousemen,
carriers or employees or other like Liens imposed by law arising in the
ordinary course of business and securing obligations either not delinquent or
being contested in good faith by appropriate proceedings and which are
adequately reserved or otherwise appropriately provided for in accordance with
GAAP and which do not in the aggregate materially impair the use or value of
the property to which they attach or risk the loss or forfeiture of title
thereto;
(iv) Liens consisting of deposits or pledges to secure the payment of
worker's compensation, unemployment insurance or other social security benefits
or obligations, or to secure the performance of bids, trade contracts, leases,
public or statutory obligations, surety or appeal bonds or other obligations of
a like nature incurred in the ordinary course of business (other than for
indebtedness or any Liens arising under ERISA);
(v) easements, rights of way, covenants, consents, reservations,
encroachments, variations and other similar restrictions, charges or
encumbrances (whether or not recorded) which do not (x) secure Indebtedness or
the deferred purchase price of any asset, (y) interfere materially with the
ordinary course of business or (z) in the aggregate materially impair the use
or value of the property to which they attach or risk the loss or forfeiture of
title thereto;
(vi) any judgment, attachment or similar Lien, but only if (A) the
judgment it secures has been discharged or execution thereof effectively stayed
pending appeal while such judgment is being contested in good faith and by
appropriate proceedings within thirty (30) days of the entry thereof, or shall
have been discharged within five Business Days of the expiration of any such
stay or (B) all such Liens in the aggregate (excluding Liens covered by
subclause (A)) at any time outstanding for the Borrower and its Subsidiaries do
not exceed $500,000 at any time;
(vii) Liens existing on any property acquired by Borrower or its
Subsidiaries at the time of its acquisition, provided that the Lien is confined
solely to the property so acquired and improvements thereon; and
(viii) Liens on assets of corporations which become Subsidiaries of
Borrower after the date hereof; provided that such Liens existed at the time
the respective corporations became Subsidiaries of Borrower and were not
created in anticipation thereof and provided, further, that neither Borrower
nor any other Subsidiary of Borrower shall have any liability in respect of
such Liens or the obligations secured by such Liens.
"Person" means an individual, corporation, partnership, joint venture,
trust, unincorporated organization or any other entity of whatever nature or
any Governmental Authority.
"Plan" means any employee pension benefit plan as defined in Section
3(2) of ERISA (including any Multiemployer Plan) and any employee welfare
benefit plan, as defined in Section 3(1) of ERISA (including any plan providing
benefits to former employees or their survivors) established or maintained by
Borrower or to which Borrower or any ERISA Affiliate has an obligation to
contribute.
"Preferred Stock" means stock or other preferred equity security of
the Borrower which is senior in right of liquidation of Borrower's common
stock.
"Premises" means any and all real property, including all buildings
and improvements now or hereafter located thereon and all appurtenances
thereto, now or hereafter owned, leased, occupied or used by Lender.
"Responsible Officer" means, with respect to any Person, the chief
executive officer, the president, the chief financial officer or the treasurer
of such Person, or any other senior officer of such Person having substantially
the same authority and responsibility; or, with respect to compliance with
financial covenants, the chief financial officer or the treasurer of any such
Person, or any other senior officer of such Person involved principally in the
financial administration or controllership function of such Person and having
substantially the same authority and responsibility.
"Restricted Payments" means dividends on any shares of common stock
and Preferred Stock and any other distribution not related to investments in
the ordinary course of business or an investment in the auto finance business.
"Senior Event of Default" means the occurrence of any Event of Default
under and as from time to time
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defined in the Senior Loan Agreement, or the Borrower's failure to pay any
installment of principal or interest on any Senior Obligations when due,
whether at stated maturity, by acceleration or otherwise, or failure to pay any
other amount due under any other Senior Obligations within five (5) days after
the due date or any other Event of Default under the Senior Obligations.
"Senior Lender" means State Street Bank and Trust Company for itself
and as Agent for all Banks from time to time party to the Senior Loan
Agreement, and each such Bank, individually, and each of their respective
participants, successors and assigns as holders or participants of Senior
Obligations and any other holder of Senior Obligations.
"Senior Obligations" means (i) that certain Excess Servicing and Trust
Receivable Revolving Credit and Term Loan Agreement dated as of January 31,
1996, by and among the Borrower and State Street Bank and Trust Company, for
itself and as Agent for BankBoston, N.A., formerly known as The First National
Bank of Boston, and such other banks as may from time to time be party thereto,
as heretofore and hereafter amended from time to time (as amended, the "Senior
Loan Agreement"), including any refinancings or extensions of such Senior Loan
Agreement, (ii) the principal of, premium, if any, and interest on loans and
other extensions of credit under any other loan agreement or other evidence of
Indebtedness in favor of any Senior Lender, all expenses, fees, reimbursements,
indemnities and other amounts owing pursuant to any such agreements and any
refinancings or extensions of such agreements and (ii) all Indebtedness of the
Borrower, including principal and interest on such Indebtedness, whether
outstanding on the date of this Agreement or thereafter created, incurred or
assumed, unless the instrument under which such Indebtedness is created,
incurred, assumed or guaranteed expressly provides that such Indebtedness is
not senior or superior in right of payment to the Notes; provided, however,
that the term "Senior Obligations" shall not include (a) any Indebtedness of
the Borrower to an Affiliate of the Borrower or any refinancings thereof, or
(b) any Indebtedness to any employee of Borrower or (c) any Indebtedness which
by its terms or the terms of the instrument creating or evidencing it, is
subordinated in right to payment to or pari passu with the Notes. All interest
accrued on any Senior Obligations shall constitute Senior Obligations both for
periods before and for periods after the commencement of any proceeding under
the Bankruptcy Code, regardless of whether the Senior Lender's claim for such
interest is allowable in any proceedings under the Bankruptcy Code.
"Solvent" means, as to any Person at any time, that (i) the fair value
of the property of such Person is greater than the amount of such Person's
liabilities (including disputed, contingent and unliquidated liabilities) as
such value is established and liabilities evaluated for purposes of Section
101(31) of the Bankruptcy Code; (ii) the present fair saleable value of the
property of such Person is not less than the amount that will be required to
pay the probable liability of such Person on its debts as they become absolute
and matured; (iii) such Person is able to realize upon its property and pay its
debts and other liabilities (including disputed, contingent and unliquidated
liabilities) as they mature in the normal course of business; (iv) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and liabilities
mature; and (v) such Person is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which such Person's
property would constitute unreasonably small capital.
"Subordinate Liabilities" means all Indebtedness of Borrower to Lender
for (a) principal of and interest on the Notes, together with any fees or
premiums under the Notes or this Agreement, and (b) all other indebtedness or
liabilities of Borrower , direct or indirect, contingent or noncontingent, now
existing or hereafter incurred or now or hereafter due and owing to Lender
under or with respect to the Notes or this Agreement, including fees, expenses,
costs, and post-petition interest in bankruptcy.
"Subsidiary" means any corporation, association, partnership, joint
venture or other business entity of which more than 50% of the voting stock or
other equity interest is owned directly or indirectly by any Person or one or
more of the other Subsidiaries of such Person or a combination thereof.
"Taxes" has the meaning set forth in Section 5.02(a).
"Term Commitment Expiry Date" means February 24, 2000.
"Term Loan" has the meaning set forth in Section 2.01.
8.
<PAGE> 9
"Termination Event" means any of the following:
(i) with respect to a Pension Plan, a reportable event
described in Section 4043 of ERISA and the regulations issued thereunder (other
than a reportable event not subject to the provisions for thirty (30)-day
notice to the PBGC under such regulations);
(ii) the withdrawal of Borrower or an ERISA Affiliate from
a Pension Plan during a plan year in which the withdrawing employer was a
"substantial employer" as defined in ERISA;
(iii) the taking of any actions (including the filing of a
notice of intent to terminate) to terminate a Pension Plan or the treatment of
a Plan amendment as a termination of a Pension Plan under Section 4041 of
ERISA;
(iv) any other event or condition which might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan; or
(v) the complete or partial withdrawal of Borrower or an
ERISA Affiliate from a Multiemployer Plan.
"Unfunded Accrued Benefits" means the excess of the present value of a
Plan's accrued benefits, as defined in Section 3(23) of ERISA, over the current
value of that Plan's assets, as defined in Section 3(26) of ERISA, determined
under such Plan as of the most recent valuation date for such Plan.
"United States" and "U.S." each means the United States of America.
"Warrant" means that certain warrant issued in favor of Lender by
Borrower on the date hereof, substantially in the form of Exhibit "B".
SECTION 1.02 Accounting Terms; GAAP Changes.
(a) Accounting Terms. Unless otherwise defined or the
context otherwise requires, all accounting terms not expressly defined herein
shall be construed, and all accounting determinations and computations required
under the Loan Documents shall be made, in accordance with GAAP, consistently
applied.
(b) GAAP Changes. If any changes in GAAP from those used
in the preparation of the financial statements dated as of December 31, 1996
referred to in Section 8.01(m) ("GAAP Changes") hereafter occasioned by the
promulgation of rules, regulations, pronouncements and opinions by or required
by the Financial Accounting Standards Board of the American Institute of
Certified Public Accountants (or successors thereto or agencies with similar
functions) result in a change in the method of calculation of, or in different
components in, any of the financial covenants, definitional provisions,
standards or other terms or conditions found in this Agreement, (i) the parties
hereto agree to enter into negotiations with respect to amendments to this
Agreement to conform those covenants, definitional provisions, standards or
other terms and conditions as criteria for evaluating Borrower's financial
condition and performance to substantially the same criteria as were effective
prior to such GAAP Change, and (ii) Borrower shall be deemed to be in
compliance with the affected covenant or other provision during the 90-day
period following any such GAAP Change if and to the extent that Borrower would
have been in compliance therewith under GAAP as in effect immediately prior to
such GAAP Change; provided, however, that this Section 1.02(b) shall not be
deemed to require Borrower or Lender to agree to modify any provision of this
Agreement or any other Loan Document to reflect any such GAAP Change and, if
the parties, in their sole discretion, fail to reach agreement on such
modifications prior to the end of the 90-day period referred to in clause (ii),
the terms of this Agreement shall remain unchanged and the compliance of
Borrower with the covenants and other provisions contained herein shall, upon
the expiration of such 90-day period, be calculated in accordance with GAAP
without giving effect to such GAAP Change.
SECTION 1.03 Interpretation. In the Loan Documents, except to the
extent the context otherwise requires:
9.
<PAGE> 10
(i) Any reference to an Article, a Section, a Schedule or
an Exhibit is a reference to an article or section thereof, or a schedule or an
exhibit thereto, respectively, and to a subsection or a clause is, unless
otherwise stated, a reference to a subsection or a clause of the Section or
subsection in which the reference appears.
(ii) The words "hereof," "herein," "hereto," "hereunder"
and the like mean and refer to this Agreement or any other Loan Document as a
whole and not merely to the specific Article, Section, subsection, paragraph or
clause in which the respective word appears.
(iii) The meaning of defined terms shall be equally
applicable to both the singular and plural forms of the terms defined.
(iv) The words "including," "includes" and "include" shall
be deemed to be followed by the words "without limitation."
(v) References to agreements and other contractual
instruments shall be deemed to include all subsequent amendments and other
modifications thereto, but only to the extent such amendments and other
modifications are not prohibited by the terms of the Loan Documents.
(vi) References to statutes or regulations are to be
construed as including all statutory and regulatory provisions consolidating,
amending or replacing the statute or regulation referred to.
(vii) Any table of contents, captions and headings are for
convenience of reference only and shall not affect the construction of this
Agreement or any other Loan Document.
(viii) In the computation of periods of time from a
specified date to a later specified date, the word "from" means "from and
including"; the words "to" and "until" each mean "to but excluding"; and the
word "through" means "to and including."
(ix) The use of a word of any gender shall include each of
the masculine, feminine and neuter genders.
ARTICLE II
THE TERM LOANS
SECTION 2.01 The Term Loans. Lender agrees, on the terms and
conditions hereinafter set forth, to make term loans (each a "Term Loan" and,
collectively, the "Term Loans") to Borrower from time to time as Borrower may
request (but in any event no later than the Term Commitment Expiry Date), in a
principal amount up to but not exceeding the Commitment. The Borrower may
borrow and repay and reborrow any amount under this Agreement.
SECTION 2.02 Borrowing Procedure. Each Borrowing by Borrower shall
be made upon written or telephonic notice (in the latter case to be confirmed
promptly in writing) from Borrower to Lender, which notice shall be received by
Lender not later than 10:00 a.m. (California time) on any business day prior to
the Term Commitment Expiry Date. Each such notice (a "Notice of Borrowing")
shall be in substantially the form of Exhibit "C" and shall be irrevocable and
binding upon Borrower. Provided that Borrower is then in compliance with the
applicable conditions set forth in Section 7.02, not later than 11:00 a.m.
(California time) on the date three Business Days following Lender's receipt of
a Notice of Lending, Lender shall make available such Borrowing, in immediately
available funds, to Borrower for Borrower's account as designated in the Notice
of Borrowing.
SECTION 2.03 Evidence of Indebtedness. As additional evidence of the
Indebtedness of Borrower to Lender resulting from the Term Loans made by
Lender, Borrower shall execute and deliver for account of Lender a Note, dated
the date of the corresponding Borrowing, in the principal amount of the Term
Loan made by Lender on such date.
SECTION 2.04 Minimum Amounts. Any Borrowing hereunder shall be in an
amount (a "Minimum Amount") no less than $500,000.
10.
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ARTICLE III
INTEREST AND FEES
SECTION 3.01 Interest.
(a) Interest Rate. Borrower shall pay interest on the
unpaid principal amount of each Term Loan made to Borrower from the date of
such Term Loan until the payment in full thereof, at the rate of nine and
one-half (9.5%) percent per annum.
(b) Interest Payment Dates. Interest on the Term Loans
shall be payable in arrears monthly on the last day of each month following the
month in which the related Borrowing was made and at the Maturity Date or the
Extended Maturity Date, as applicable, until payment in full. In the event any
Term Loan is prepaid, all accrued interest on the amount so prepaid shall be
payable.
SECTION 3.02 Fees.
(a) Commitment Fee. Borrower agrees to pay to Lender a
commitment fee of $200,000 at the closing.
(b) Fees Nonrefundable. All fees payable under this
Section 3.02 shall be nonrefundable.
SECTION 3.03 Computations. All computations of fees and interest
hereunder shall be made on the basis of a year of 365 days for the actual
number of days occurring in the period for which such interest is payable.
Notwithstanding the foregoing, if any Term Loan is repaid on the same day on
which it is made, such day shall be included in computing interest on such Term
Loan.
SECTION 3.04 Highest Lawful Rate. Anything herein to the contrary
notwithstanding, if during any period for which interest is computed hereunder,
the applicable interest rate, together with all fees, charges and other
payments which are treated as interest under applicable law, as provided for
herein or in any other Loan Document, would exceed the maximum rate of interest
which may be charged, contracted for, reserved, received or collected by Lender
in connection with this Agreement under applicable law (the "Maximum Rate"),
Borrower shall not be obligated to pay, and Lender shall not be entitled to
charge, collect, receive, reserve or take, interest in excess of the Maximum
Rate, and during any such period the interest payable hereunder shall be
limited to the Maximum Rate.
ARTICLE IV
REDUCTION OR TERMINATION;
REPAYMENT; PREPAYMENT;
OPTION TO TERM OUT
SECTION 4.01 Reduction or Termination of the Commitments. Borrower
may, upon prior notice to Lender as provided herein, terminate in whole or
reduce ratably in part, as of the date specified by Borrower in such notice,
any then unused portion of the Commitment, provided that each artial reduction
shall be in a Minimum Amount; and provided further, that once reduced in
accordance with this Section 4.01, the Commitment may not be increased.
SECTION 4.02 Repayment of the Term Loans. Borrower shall only be
required to pay interest on the outstanding Term Loans prior to the Maturity
Date at which time all outstanding principal and accrued and unpaid interest
shall be due in full unless Borrower has elected by written notice delivered
not less than ten (10) days prior to the Maturity Date to extend the Maturity
Date, provided no Default or Event of Default shall have occurred and be
continuing as of the Maturity Date (the "Extended Maturity Date") for three (3)
years from the date of the original Maturity Date. Borrower shall repay to
Lender the aggregate principal amount of the Term Loans in equal consecutive
monthly installments together with accrued and unpaid interest thereon,
commencing on the last day of the first month after the Maturity Date and
continuing until the Extended Maturity Date.
11.
<PAGE> 12
SECTION 4.03 Prepayments.
(a) Optional Prepayments. Borrower may, upon three
Business Days' notice to Lender, prepay the outstanding amount of any Term
Loans in whole or ratably in part, without premium or penalty. Any amount so
repaid may be reborrowed prior to the Term Commitment Expiry Date.
(b) Notice; Application. The notice given of any
prepayment pursuant to Section 4.03(a) (a "Notice of Prepayment") shall be
substantially in the form of Exhibit "D". If Borrower gives a Notice of
Prepayment, Borrower shall make such prepayment and the prepayment amount
specified in such Notice shall be due and payable on the date specified
therein, with accrued interest to such date on the amount prepaid.
ARTICLE V
PAYMENTS
SECTION 5.01 Payments.
(a) Payments. Borrower shall make each payment to be
made by it under the Loan Documents, unconditionally in full without set-off,
counterclaim or other defense, not later than 12:00 p.m. (California time) on
the day when due to Lender in Dollars and in same day or immediately available
funds, to the account designated by Lender.
(b) Application of Payments. Each payment by or on
behalf of Borrower hereunder shall, unless a specific determination is made by
Lender with respect thereto, be applied in the following order: (A) first, to
any fees, costs, expenses and other amounts due Lender; (B) second, to accrued
and unpaid interest due Lender; and (C) third, to principal due Lender.
(c) Extension. Whenever any payment hereunder shall be
stated to be due, or whenever any Interest Payment Date or any other date
specified hereunder would otherwise occur, on a day other than a Business Day,
then, except as otherwise provided herein, such payment shall be made, and such
Interest Payment Date or other date shall occur, on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of payment of interest or fees hereunder.
SECTION 5.02 Taxes.
(a) No Reduction of Payments. Borrower shall pay all
amounts of principal, interest, fees and other amounts due under the Loan
Documents free and clear of, and without reduction for or on account of, any
present and future taxes, levies, imposts, duties, fees, assessments, charges,
deductions or withholdings and all liabilities with respect thereto excluding,
in the case of Lender, income and franchise taxes imposed on it by the
jurisdiction under the laws of which Lender is organized or in which its
principal executive offices may be located or any political subdivision or
taxing authority thereof or therein, and by the jurisdiction of Lender's
principal place of business and any political subdivision or taxing authority
thereof or therein (all such nonexcluded taxes, levies, imposts, duties, fees,
assessments, charges, deductions, withholdings and liabilities being
hereinafter referred to as "Taxes"). If any Taxes shall be required by law to
be deducted or withheld from any payment from Borrower, Borrower shall increase
the amount paid so that Lender receives when due (and is entitled to retain),
after deduction or withholding for or on account of such Taxes (including
deductions or withholdings applicable to additional sums payable under this
Section 5.02), the full amount of the payment provided for in the Loan
Documents.
(b) Deduction or Withholding; Tax Receipts. If Borrower
makes any payment hereunder in respect of which it is required by law to make
any deduction or withholding, it shall pay the full amount to be deducted or
withheld to the relevant taxation or other authority within the time allowed
for such payment under applicable law and promptly thereafter shall furnish to
Lender an original or certified copy of a receipt
12.
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evidencing payment thereof, together with such other information and documents
as Lender may reasonably request.
ARTICLE VI
SUBORDINATION
SECTION 6.01 Subordination. So long as any Senior Obligations are
outstanding, Lender agrees, for itself and each future holder of the
Subordinate Liabilities, that the Subordinate Liabilities are and shall be
expressly subordinate and junior in right of payment and exercise of remedies
to all Senior Obligations in the manner and solely to the extent set forth in
this Article VI.
SECTION 6.02 Insolvency, Etc.
(a) In the event of any insolvency, bankruptcy,
receivership, liquidation, reorganization or other similar proceedings,
relative to Borrower or to its property, or in the event of any proceedings for
voluntary liquidation, dissolution or other winding up of Borrower, whether or
not involving insolvency or bankruptcy, so long as any Senior Obligations are
outstanding, the holders of Senior Obligations shall be entitled in any such
proceedings to receive payment in full in cash of all Senior Obligations before
Lender is entitled in such proceedings to receive any payment on account of the
Subordinate Liabilities, and to that end in any such Proceedings, so long as
any Senior Obligations remain outstanding, any payment or distribution of any
kind or character, whether in cash or in other property, to which Lender would
be entitled but for the provisions hereof (except securities which are
subordinate and junior in right of payment to all Senior Obligations then
outstanding) shall be delivered to the holders of Senior Obligations to the
extent necessary to make payment in full in cash of all Senior Obligations
remaining unpaid, after giving effect to any concurrent payment or distribution
to or for the holders of Senior Obligations in respect thereof.
(b) So long as any Senior Obligations remain outstanding and
at any time after the notice period required in the immediately following
sentence, the holders of Senior Obligations (or their representatives) are
authorized and empowered, in any proceedings described in Section 6.02(a), in
their own names or in the name of Lender, to (i) file claims, proofs of claim
and other instruments of similar character reasonably necessary to enforce the
obligations of Borrower in respect of the Subordinate Liabilities, and (ii)
receive and apply to the Senior Obligations every payment or distribution
referred to in Section 6.02(a) to which Lender is entitled in respect thereof
and give acquittance therefor. In the event that Lender shall fail to take
such action requested by the holders of Senior Obligations within five (5)
Business Days after such request, the holders of Senior Obligations may, as
attorney-in-fact for Lender, take such action on behalf of Lender in such
proceedings, and Lender hereby appoints the holders of Senior Obligations, or
any agent or representative designated by them for the purpose, as
attorney-in-fact for Lender, to (i) demand, sue for, collect and receive any
and all such monies or other assets and give acquittance therefor and to file
any claim, proof of claim or other instrument of similar character, and (ii) to
take such other action incidental thereto in its own name or in the name of
Lender as the holders of Senior Obligations may reasonably deem necessary; and
Lender will execute and deliver such other and further powers of attorney or
other instruments as the holders of Senior Obligations, or any agent or
representative designated by them for the purpose, may request in order to
accomplish the foregoing. Notwithstanding the foregoing, neither this Section
6.02 nor any other provision of this Agreement or the other Loan Documents or
Borrower's charter documents shall be construed to give any holder of Senior
Obligations any right to vote any Note, any shares of common stock of Borrower
represented by the Warrant or issued pursuant to the exercise of the Warrant or
any claim thereunder or with respect thereto, or any portion of any such Notes,
shares or claim, whether in connection with any resolution, arrangements, plan
of reorganization, compromise, settlement, election of trustees or otherwise.
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<PAGE> 14
SECTION 6.03 Senior Acceleration. In the event that all or any part
of the Senior Obligations held by any of the Senior Lenders have become due and
payable (at stated maturity, by demand, by acceleration or otherwise) under
circumstances in which Section 6.02 is not applicable, Lender shall not be
entitled to receive or retain any direct or indirect payment (in cash,
property, by set-off or otherwise) on or with respect to the Subordinate
Liabilities until payment in full in cash of all such accelerated Senior
Obligations shall have been made or otherwise provided for to the satisfaction
(confirmed in writing) of the holders thereof.
SECTION 6.04 Senior Events of Default.
(a) So long as a Senior Event of Default has occurred and
is continuing under circumstances in which Sections 6.02 and 6.03 are not
applicable, subject to Section 6.04(b), Lender shall not be entitled to receive
or retain any direct or indirect payment (in cash, property, by set-off or
otherwise) on or with respect to the Subordinate Liabilities.
(b) Notwithstanding the restrictions set forth in Section
6.04(a), if any amount which becomes due and payable (at stated maturity, by
demand, by acceleration or otherwise) on or with respect to the Subordinate
Liabilities is not paid as a result of the continuance of a Senior Event of
Default (under circumstances in which Sections 6.02 and 6.03 are not
applicable), Lender shall be entitled to receive and retain such amount after
the earlier of:
(i) the date on which all Senior Events of
Default have been cured or waived in writing by the Senior Lender; and
(ii) the date occurring one hundred twenty (120)
days after the date the Lender has received notice of the occurrence of a
Senior Event of Default (the period of time from the Lender's receipt of notice
of the occurrence of a Senior Event of Default to the earlier of the date on
which Senior Events of Default shall have been cured or waived or such one
hundred twenty (120) days being hereinafter referred to as the "Standstill
Period").
SECTION 6.05 Turn-Over of Payments Received.
(a) In the event that Borrower shall make any payment on
the Subordinate Liabilities or Lender shall receive any such payment, whether
by exercise of legal rights and remedies (including without limitation set-off)
or otherwise, including without limitation any exercise of remedies upon the
expiration of the remedy standstill period under Section 6.10 below, which
Lender is or was not permitted to receive and retain pursuant to Sections 6.02,
6.03, or 6.04, such payment shall be held in trust for the benefit of, and
shall be paid over promptly on demand to, the holders of Senior Obligations, or
their representative or representatives, as their respective interests may
appear, for application to the payment of all Senior Obligations remaining due
and payable until the same shall have been paid in full in cash, after giving
effect to any concurrent payment or distribution to the holders of such Senior
Obligations, provided, however, notwithstanding anything herein to the
contrary, Lender shall not be required to turn over any payment made to Lender
more than ninety (90) days prior to any demand pursuant to Section 6.04(a)
above. Without limiting the foregoing, the Lender shall be entitled to retain
all payments made in respect of the Subordinate Liabilities in accordance with
the terms of this Agreement unless, within ninety (90) days after receipt by
the Lender of any such payment, the Agent on behalf of the Senior Lenders shall
have notified the Lender of a Senior Event of Default, in which case the
Lenders shall forthwith pay over to the Agent on behalf of the Senior Lender
such payment or an amount of cash equal thereto for application in payment of
the Senior Obligations, provided, however, that if a trustee or debtor in
possession in bankruptcy of Borrower makes a demand on Lender to turn over any
payments received in the ninety (90)-day period immediately preceding the
bankruptcy filing, then the Lender shall be permitted to make payments of such
amounts to the trustee or debtor in possession in lieu of making such payments
to the Senior Lender.
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Nothing contained in this Article VI shall at any time prevent
Borrower from making, or prevent Lender from receiving or retaining, except as
provided in Sections 6.02, 6.03, 6.04, and 6.05, payments with respect to
Subordinate Liabilities in accordance with their respective terms as in effect
on the date hereof.
(b) The proceeds of any sale or other disposition (other
than to Lender) of Subordinate Liabilities in compliance with Section 6.12
hereof, which may be received by a holder thereof, shall not be treated as a
payment to which the holders of Senior Obligations are entitled under this
Agreement.
SECTION 6.06 Obligations Absolute. The provisions of this Article VI
are solely for the purpose of defining the relative rights of the holders of
Senior Obligations on the one hand and Lender on the other hand with respect to
the priority of payment and exercise of remedies of the various obligations of
Borrower to each of them. Nothing herein shall impair, as between Borrower and
Lender, the obligations of Borrower, which are unconditional and absolute, set
forth in this Agreement, nor shall anything in this Article VI prevent the
occurrence of any event of default under this Agreement or the Notes, or
prevent any Lender from exercising all remedies otherwise permitted by this
Agreement and the Notes, applicable law or otherwise, subject to (a) the
rights, if any, of the holders of Senior Obligations under Section 6.05 of this
Agreement to receive cash or property otherwise payable or deliverable to
Lender, and (b) the other restrictions on Lender in favor of the holders of
Senior Obligations set forth in Article VI.
SECTION 6.07 Subrogation. Upon and subject to the payment in full in
cash of the Senior Obligations, Lender shall be subrogated to the rights of the
holders of Senior Obligations to receive payments or distributions of assets of
Borrower applicable to the Senior Obligations until the Subordinate Liabilities
shall be paid in full in cash; and, for the purposes of such subrogation, no
payments or distributions to the holders of Senior Obligations to which Lender
would be entitled except for the provisions of this Article VI shall, as
between Borrower and its creditors other than the holders of Senior Obligations
and Lender, be deemed to be a payment on account of the Senior Obligations.
Lender hereby waives any claim against the Senior Lenders based on impairment
of Lender's rights of subrogation against Borrower due to the action or
inaction of the Senior Lenders or otherwise.
SECTION 6.08 Subordination Not Affected. Without the necessity of
any reservation of rights against or any notice to or further assent by Lender,
any demand for payment of any Senior Obligations made by any holder of Senior
Obligations may be rescinded in whole or in part by such holder and any Senior
Obligations may be continued, the holders of Senior Obligations may exercise or
refrain from exercising any rights and/or remedies against the Borrower and
others, if any, liable under the Senior Obligations, or any collateral security
therefor or right of offset with respect thereto, the Senior Indebtedness and
any agreement or instrument evidencing, securing or otherwise relating thereto
(including, without limitation the Senior Loan Agreement and the Notes, the
Security Documents and other Loan Documents (as each such term is defined in
the Senior Loan Agreement) may be amended, extended, modified, accelerated,
compromised, waived, surrendered or released by the holders of the Senior
Obligations, and any other agreement or instrument evidencing, securing or
otherwise relating to the Senior Obligations may be amended or modified in any
manner the Senior Lender deems in its best interest, all without impairing,
abridging, releasing or affecting the subordination provided for herein.
Lender waives any and all notice of or proof of reliance by the holders of
Senior Obligations upon the subordination provided for herein. The Senior
Obligations shall conclusively be deemed to have been created, contracted or
incurred in reliance upon the provisions of this Article VI.
SECTION 6.09 Right To Retain Payment Received. Notwithstanding
anything to the contrary herein, any payment in respect of the Subordinate
Liabilities which is not required to be held in trust for the benefit of, or
paid over to, the holders of Senior Obligations pursuant to Section 6.05 or
Section 6.10, and which is received by the Lender shall become the sole and
absolute property of Lender and shall not, by virtue of the provisions of this
Agreement or otherwise, be subject to any payment over or any distribution to
or claim by any holders of Senior Obligations or any other person.
SECTION 6.10 Remedy Standstill. For a period of one hundred twenty
(120) days following the commencement of any payment blockage under Section
6.02, 6.03 or 6.04, the Lender shall not, without the prior written consent of
each of the Senior Lenders:
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(a) Accelerate or otherwise make due and payable prior to
the original stated maturity thereof any Subordinated Liabilities or bring suit
or initiate any other proceedings to enforce its rights under the Agreement,
and the Notes;
(b) Exercise any rights (including, without limitation,
rights of set-off) with respect to any collateral, if any, securing the
Subordinated Liabilities, including any foreclosure or other action thereon; or
(c) Commence or cause to be commenced, or join with any
creditor other than the Senior Lenders in commencing, any bankruptcy,
insolvency or receivership proceeding against the Borrower.
To the extent that Lender is required under Section 6.05 to turn over
the proceeds of any exercise of its remedies against Borrower, then (i) any
exercise of remedies by the Lender upon the expiration of the remedy standstill
period set forth in this Section 6.10 shall be for the economic benefit of the
holders of the Senior Obligations; and (ii) any amounts which may be paid to or
otherwise recovered or obtained by the Lender in reliance on the expiration of
the remedy standstill period shall be held in trust for the benefit of, and
shall be paid over promptly on demand to, the holders of the Senior
Obligations, or their representative or representatives, as their respective
interest may appear, for application to the payment of all Senior Obligations
remaining due and payable until the same shall have been paid in full in cash.
SECTION 6.11 Notices.
(a) By Lender to the Senior Lenders. Lender shall
provide each of the Senior Lenders with notice of any default under this
Agreement simultaneously with giving notice to Borrower, provided, however,
that Lender shall have no liability to the Senior Lenders for Lender's failure
to provide the Senior Lenders with any notice required under this Section 6.11.
(b) By Borrower to Lender. Borrower shall promptly
provide Lender with copies of all notices of any default or intention to
exercise any remedies received by it from any Senior Lender immediately upon
its receipt thereof.
(c) By Senior Lenders to Lender. Any Senior Lender may
provide Lender with notice of a Senior Event of Default, and such notice shall
be effective if given in accordance with Section 12.02 below. Failure by any
Senior Lender to provide such notice shall not affect or impair the
enforceability of the subordination provisions of Article VI of this Agreement.
SECTION 6.12 Transfers. Lender shall not sell, assign or otherwise
transfer, in whole or in part, any Subordinate Liabilities or any interest
therein, to any other person or entity (a "Transferee") unless such Transferee
signs an acknowledgment in the form of Exhibit "E" hereto and delivers a signed
counterpart hereof acknowledged by Borrower to each Senior Lender, whereby each
such Transferee expressly acknowledges the subordination provided for in this
Article VI and agrees to be bound by all of the terms thereof.
SECTION 6.13 Modifications. No amendment, modification, termination
or waiver of any provision of this Article VI, or consent to any departure
therefrom, shall in any event be effective without the written concurrence of
the Senior Lenders, Lender and Borrower. However, nothing in this Article VI
or in the right of the Senior Lenders to collect, enforce or receive payment of
the Senior Obligations shall be construed to restrict in any respect whatsoever
the right of Lender to amend any other portion of the Loan Documents; provided
that no change to any payment or repayment terms or amortization rates of any
of Borrower's obligations to Lender may be made without the prior written
consent of the Senior Lenders.
SECTION 6.14 Termination. This Article VI shall remain in full force
and effect until payment in full of all Senior Obligations; provided that
payment in full of all or any Senior Obligations in connection with a
refinancing thereof shall not operate to terminate the provisions of this
Article VI, and; provided further that this Article VI shall continue to be
effective or be reinstated (as the case may be) if at any time payment of any
of the Senior Obligations is refunded or must otherwise be returned by the
Senior Lenders upon the bankruptcy, arrangement, reorganization or similar
proceeding for relief of debtors under state or federal law, all as though such
payment had not been made.
SECTION 6.15 Warranties, Representations, Covenants and
Acknowledgments of Lender.
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(a) The Lender represents to the Senior Lenders that to
the extent of any Term Loans made hereunder all Indebtedness of the Borrower to
the Lender is outstanding under this Agreement and the Notes issued pursuant
hereto, and that said Indebtedness has not heretofore been assigned, pledged
to, or subordinated in favor of, any other Person.
(b) The Lender represents to and covenants with the
Senior Lender that any and all Indebtedness of the Borrower to the Lender is
and shall remain unsecured.
(c) The Lender hereby covenants and agrees with the
Senior Lender that it will not amend or permit amendment of the terms of this
Agreement or any other agreement, document or instrument hereafter evidencing
any Subordinated Liabilities, without the prior written consent of the Senior
Lenders if such amendment would: (i) increase the principal amount of any
Subordinate Liabilities by more than $10,000,000; (ii) increase the rate of
interest accruing on the Subordinated Liabilities; (iii) change in any manner
the dates upon which any principal or interest payment on the Subordinated
Liabilities is due; (iv) change in any manner, or add, any affirmative or
negative covenants, events of default, redemption provisions or subordination
provisions of any Subordinated Liabilities that would have a Material Adverse
Effect on the Borrower.
(d) The execution, delivery and performance of this
Agreement has been duly authorized by all necessary action on the part of the
Lender, and this Agreement constitutes a valid and binding obligation of the
Lender, enforceable against it in accordance with its terms.
(e) The Lender acknowledges and agrees that this
Agreement is a "subordination agreement" within the meaning of Section 510(a)
of the United States Bankruptcy Code, 11 U.S.C. Section 510(a).
(f) The Lender will not in any proceeding, whether in
connection with a bankruptcy or insolvency or other event described in 6.02 or
otherwise, challenge or contest (or join in any challenge or contest by any
third party, or encourage any third party to challenge or contest) the Senior
Indebtedness or the perfection, superiority, priority, validity or
enforceability of any security interest or lien granted to the Senior Lenders
pursuant to the Senior Loan Agreement, the Notes, the Security Documents or
other Loan Documents (as each term is defined in the Senior Loan Agreement),
nor will the Lender challenge the validity or enforceability of such Loan
Agreement, Notes, Security Documents or other Loan Documents, or any provision
thereof. The Lender hereby acknowledges that the provisions of Article VI of
this Agreement are intended to be enforceable at all times, whether before or
after any proceeding or other event described in Section 6.02 of this
Agreement. The Lender hereby waives any right to require the Senior Lenders or
other holders of the Senior Obligations to marshal the collateral for such
Senior Obligations.
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.01 Conditions Precedent to Initial Borrowing. The
obligation of Lender to make its initial Term Loan hereunder shall be subject
to the satisfaction of each of the following conditions precedent before or
concurrently with such initial Term Loan:
(a) Loan Documents. Lender shall have received the
following Loan Documents in form and substance satisfactory to it: (i) this
Agreement, executed by Borrower, the Note evidencing the first Term Loan,
executed by Borrower; and (ii) each of the other Loan Documents, executed by
each of the respective parties thereto, reasonably requested by Lender.
(b) Additional Closing Documents and Actions. Lender
shall have received the following, in form and substance satisfactory to it:
(i) evidence of completion to the satisfaction of
Lender of such investigations, reviews and audits with respect to Borrower and
its operations as Lender reasonably may deem appropriate;
(ii) evidence that all (A) authorizations or
approvals of any Governmental Authority and (B) approvals or consents of any
other Person, required in connection with the execution, delivery and
performance of the Loan Documents shall have been obtained;
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(iii) the audited consolidated balance sheet of
Borrower and its Subsidiaries as at December 31, 1996, and the related
consolidated statements of income, shareholders' equity and cash flows for the
Fiscal Year then ended;
(iv) a certificate of a Responsible Officer of
Borrower, dated the date of the initial Borrowing, stating that (A) the
representations and warranties contained in Article VIII and in the other Loan
Documents are true and correct on and as of the date of such certificate as
though made on and as of such date and (B) on and as of the date of the initial
Borrowing, no Default shall have occurred and be continuing or shall result
from the initial Borrowing;
(c) Corporate Documents. Lender shall have received the
following, in form and substance satisfactory to it:
(i) certified copies of the certificate of
incorporation of Borrower, together with certificates as to good standing from
the Secretary of State or other Governmental Authority, as applicable, of
Borrower's state of incorporation and principal place of business, each dated
as of a recent date prior to the initial Borrowing;
(ii) a certificate of the Secretary or Assistant
Secretary of Borrower, dated the date of the initial Borrowing, certifying (A)
copies of the bylaws of Borrower and the resolutions of the Board of Directors
of Borrower authorizing the execution, delivery and performance of the Loan
Documents to which Borrower is a party and (B) the incumbency, authority and
signatures of each officer of Borrower authorized to execute and deliver such
Loan Documents to which Borrower is a party and act with respect thereto, upon
which certificate Lender may conclusively rely until Lender shall have received
a further certificate of the Secretary or an Assistant Secretary of Borrower
cancelling or amending such prior certificate;
SECTION 7.02 Conditions Precedent to All Term Loans. The obligation
of Lender to make any Term Loan to be made by it hereunder (including its
initial Term Loan) is subject to the satisfaction of the following conditions
precedent on the relevant Borrowing date:
(a) Notice. Lender shall have received a Notice of
Borrowing;
(b) Material Adverse Effect. On and as of the date of
such Borrowing, there shall have occurred no Material Adverse Effect since the
date of this Agreement (in the case of the initial Borrowing) or the date of
the most recent Borrowing (in the case of any subsequent Borrowing), as the
case may be.
(c) Representations and Warranties; No Default. On the
date of such Borrowing, both before and after giving effect thereto and to the
application of proceeds therefrom: (i) the representations and warranties
contained in Article VIII and in the other Loan Documents shall be true,
correct and complete in all material respects on and as of the date of such
Borrowing as though made on and as of such date; and (ii) no Default shall have
occurred and be continuing or shall result from such Borrowing. For purposes
of this Section 7.02(c), (I) references in Article VIII to financial statements
dated as of December 31, 1996 shall be deemed instead to refer to the last day
of the most recent month, quarter and year for which financial statements have
then been delivered in respect of the representation and warranty made in
Section VIII; and (II) effect shall be given to any amendments to the Schedules
and other disclosures made in writing by Borrower to Lender after the date of
the initial Borrowing and approved by Lender. The giving of any Notice of
Borrowing and the acceptance by Borrower of the proceeds of each Borrowing
shall each be deemed a certification to Lender on and as of the date of such
Borrowing such statements are true in all material respects.
(d) Additional Documents. Lender shall have received, in
form and substance satisfactory to it, such additional approvals, documents and
other information as Lender may reasonably request. Each Notice of Borrowing
submitted by Borrower hereunder shall constitute a representation and warranty
by Borrower, as of the date of each such notice and as of the date of each
Borrowing, that the conditions in subsections 7.02(b) and (c) have been
satisfied.
(e) No Senior Event of Default. No Senior Event of
Default shall have occurred and be continuing.
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ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
SECTION 8.01 Representations and Warranties. Borrower represents and
warrants to Lender as of the date hereof and continuing hereafter that, except
as set forth in a schedule hereto:
(a) Organization and Powers. Borrower is a corporation
duly organized, validly existing and in good standing under the law of the
jurisdiction of its incorporation, is qualified to do business and is in good
standing in each jurisdiction in which the failure so to qualify or be in good
standing would result in a Material Adverse Effect and has all requisite power
and authority to own its assets and carry on its business and to execute,
deliver and perform its obligations under the Loan Documents to which it is a
party.
(b) Authorization; No Conflict. The execution, delivery
and performance by Borrower of the Loan Documents have been duly authorized by
all necessary corporate action of Borrower and do not and will not (i)
contravene the terms of the certificate of incorporation and the bylaws of
Borrower or result in a breach of or constitute a default under any indenture
or loan or credit agreement or any other agreement, lease or instrument to
which Borrower is a party or by which it or its properties may be bound or
affected; (ii) violate any provision of any law, rule, regulation, order, writ,
judgment, injunction, decree or the like binding on or affecting Borrower; or
(iii) result in, or require, the creation or imposition of any Lien upon or
with respect to any of the properties of Borrower.
(c) Binding Obligation. The Loan Documents constitute,
or when delivered under this Agreement will constitute, legal, valid and
binding obligations of Borrower enforceable against Borrower in accordance with
their respective terms.
(d) Consents. No authorization, consent, approval,
license, exemption of, or filing or registration with, any Governmental
Authority, or approval or consent of any other Person, is required for the due
execution, delivery or performance by Borrower of any of the Loan Documents.
(e) No Defaults. Borrower is not in default under any
material contract, lease, agreement, judgment, decree or order to which it is a
party or by which it or its properties may be bound are likely to result in a
Material Adverse Effect.
(f) Title to Properties; Liens. Borrower has good and
marketable title to, or valid and subsisting leasehold interests in, its
properties and assets, and there is no Lien upon or with respect to any of such
properties or assets except for Permitted Liens.
(g) Litigation. There are no actions, suits or
proceedings pending or, to the best of Borrower's knowledge, threatened against
or affecting Borrower or the properties of Borrower before any Governmental
Authority or arbitrator which if determined adversely to Borrower is likely to
result in a Material Adverse Effect.
(h) Compliance with Environmental Laws. Except for
activities or situations that are unlikely to give rise to a liability that
could have a Material Adverse Effect: (i) Borrower is in full compliance with
all Environmental Laws, whether in connection with the ownership, use,
maintenance or operation of its Premises or the conduct of any business
thereon, or otherwise; (ii) there are no actions, suits, claims, notices of
violation, hearings, investigations or proceedings pending or, to the best of
Borrower's knowledge, threatened against or affecting Borrower with respect to
the ownership, use, maintenance and operation of the Premises, relating to
Environmental Laws or Hazardous Substances.
(i) ERISA.
(i) all Plans comply in all material respects, and
have been administered in material compliance with, the applicable provisions
of foreign law, ERISA and the Internal Revenue Code, and in accordance with
each Plan's terms;
(ii) no Termination Event has occurred and is
continuing, or is reasonably expected to occur;
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(iii) to the best knowledge of Borrower, there is no
condition or event under which Borrower, any ERISA Affiliate, or any Plan
maintained by Borrower or any ERISA Affiliate could be subject to any risk of
material liability under ERISA or the Internal Revenue Code, regardless of
whether Borrower or any ERISA Affiliate engaged in a transaction giving rise to
the liability; and
(iv) Borrower is not a party to any Multiemployer
Plans.
(j) Subsidiaries. The name, capital structure and
ownership of each Subsidiary of Borrower on the date of this Agreement is as
set forth in Schedule 2. All of the outstanding capital stock of, or other
interest in, each such Subsidiary has been validly issued, and is fully paid
and nonassessable. Except as set forth in Schedule 2, on the closing Borrower
has no equity interest in any Person.
(k) Taxes. Borrower has duly filed all tax and
information returns required to be filed (the failure of which to file is
likely to have a Material Adverse Effect), and has paid all taxes, fees,
assessments and other governmental charges or levies that have become due and
payable (the failure of which to pay is likely to have a Material Adverse
Effect), except to the extent such taxes or other charges are being contested
in good faith and are adequately reserved against or otherwise provided for in
accordance with GAAP.
(l) Insurance. The properties of Borrower are insured,
with financially sound and reputable insurance companies, in such amounts, with
such deductibles and covering such risks as is customarily carried by companies
engaged in similar businesses and owning similar properties in the localities
where Borrower or such Subsidiary operates.
(m) Financial Statements. The audited consolidated
balance sheet of Borrower and its Subsidiaries as at December 31, 1996, and the
related consolidated statements of income, shareholders' equity and cash flows
for the Fiscal Year then ended, are complete and correct and fairly present the
financial condition of Borrower and its Subsidiaries as at such dates and the
results of operations of Borrower and its Subsidiaries for the periods covered
by such statements, in each case in accordance with GAAP consistently applied
except as otherwise expressly noted therein. Since December 31, 1996, there
has been no Material Adverse Effect.
(n) Liabilities. Neither Borrower nor any of its
Subsidiaries has any material liabilities, fixed or contingent, that are not
reflected in the financial statements referred to in subsection (n), in the
notes thereto or otherwise disclosed in writing to Lender, other than
liabilities arising in the ordinary course of business since December 31, 1996.
(o) Labor Disputes, Etc. There are no strikes, lockouts
or other labor disputes against Borrower or any of its Subsidiaries, or, to the
best of Borrower's knowledge, threatened against or affecting Borrower or any
of its Subsidiaries, and no Event of Loss has occurred with respect to any
assets or property of Borrower which is likely to result in a Material Adverse
Effect.
(p) Solvency. Each of Borrower and its Subsidiaries is
Solvent.
(q) Investment Company Act. Borrower is not an
"investment company," or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
(r) Disclosure. None of the representations or
warranties made by Borrower in the Loan Documents as of the date of such
representations and warranties, and none of the statements contained in each
exhibit or report furnished by or on behalf of Borrower to Lender in connection
with the Loan Documents, contains any untrue statement of a material fact or
omits any material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they are
made, not misleading.
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ARTICLE IX
AFFIRMATIVE COVENANTS
SECTION 9.01 Reporting Covenants. So long as any of the Obligations
shall remain unpaid or Lender shall have any Commitment, Borrower hereby agrees
as to itself and its Subsidiaries, that:
(a) Payment of Notes. Borrower shall pay or cause to be
paid the principal of, premium, if any, and interest on the Notes on the dates
and in the manner provided in the Notes. Principal, premium, if any, and
interest shall be considered paid on the date due if the Lender, holds as of
10:00 a.m. California Time on the due date money deposited by the Borrower in
immediately available funds and designated for and sufficient to pay all
principal, premium, if any, and interest then due.
(b) Reports. Borrower shall furnish to Lender (i) within
45 days after the end of each of the first three quarterly fiscal periods in
each fiscal year of Borrower, unaudited consolidated financial statements of
the Borrower and its Subsidiaries and (ii) within ninety (90) days after the
end of each fiscal year of Borrower, annual audited consolidated financial
statements of Borrower and its Subsidiaries.
(c) Compliance Certificate. Borrower shall deliver to
Lender, within ninety (90) days after the end of each fiscal year, an officers'
certificate stating that a review of the activities of the Borrower and its
Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether the
Borrower has kept, observed, performed and fulfilled its obligations under this
Agreement, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge Borrower has kept,
observed, performed and fulfilled each and every covenant contained in this
Agreement and is not in default in the performance or observance of any of the
material terms, provisions and conditions of this Agreement (or, if a Default
or Event of Default shall have occurred, describing all such Defaults or Events
of Default of which he or she may have knowledge and what action Borrower is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
(d) Taxes. Borrower shall pay, and shall cause each of
its Subsidiaries to pay, prior to delinquency, all material taxes, assessments,
and governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment is not
adverse in any material respect to Lender.
(e) Corporate Existence. Borrower shall do or cause to
be done all things necessary to preserve and keep in full force and effect (i)
its corporate existence, and the corporate, partnership or other existence of
each of its Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of Borrower or any
such Subsidiary and (ii) the rights (charter and statutory), licenses and
franchises of Borrower and its Subsidiaries; provided, however, that Borrower
shall not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of Borrower and its Subsidiaries,
taken as a whole, and that the loss thereof is not adverse in any material
respect to Lender.
(f) Maintenance of Insurance. Borrower will keep all the
material property used in its business in good repair, working order and
condition, ordinary wear and tear excepted, and Borrower will, and will cause
each of its Subsidiaries to, carry and maintain in full force and effect, at
its own expense and with financially sound and reputable insurance companies,
insurance in such amounts, with such deductibles and covering such risks as is
customarily carried by companies engaged in the same or similar businesses and
owning similar properties in the localities where Borrower or its Subsidiaries
operate, including
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fire, extended coverage, business interruption, public liability, property
damage and worker's compensation; provided, however, that Borrower may maintain
a system of self-insurance in place of the aforementioned insurance, in an
amount not exceeding an amount as is customary for companies engaged in the
same or similar businesses and owning similar properties in the localities
where Borrower or its Subsidiaries operate.
(g) Keeping of Records and Books of Account. Borrower
will, and will cause each of its Subsidiaries to, keep adequate records and
books of account, in which complete entries will be made in accordance with
GAAP, reflecting all financial transactions of Borrower and its Subsidiaries.
(h) Additional Permitted and Senior Debt. Borrower will
provide to Lender (i) copies of any amendments to the Senior Loan Agreement and
(ii) written notice describing any Senior Debt or Permitted Debt which Borrower
incurs after the date of this Agreement. The only additional Senior Debt
incurred by Borrower shall be (i) incurred in connection with the refinancing
of the Senior Loan Agreement, (ii) warehouse financings, or (iii) residual
interest in securitization financings.
ARTICLE X
NEGATIVE COVENANTS
SECTION 10.01 Negative Covenants. So long as any of the Obligations
shall remain unpaid or Lender shall have any Commitment, Borrower hereby agrees
as to itself and its Subsidiaries, that:
(a) Restricted Payments. Borrower shall not make any
Restricted Payment during the term of this Agreement.
(b) Limitation on Additional Funded Debt. Borrower shall
not incur additional Funded Debt unless the ratio of Funded Debt to the latest
quarter Consolidated Net Worth is less than .75 to 1.
(c) Transactions with Affiliates. Borrower shall not,
and shall not permit any of its Subsidiaries to, make any payment to, or sell,
lease, transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into or make or amend any
transaction, contract, agreement, understanding, loan, advance or Guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms
that are no less favorable to the Borrower or the relevant Subsidiary than
those that would have been obtained in a comparable transaction by Borrower or
such Subsidiary with an unrelated Person.
(d) Limitation on Investment Company Status. Borrower
and its Subsidiaries shall not take any action, or otherwise permit to exist
any circumstance, that would require Borrower to register as an "investment
company" under the Investment Company Act of 1940, as amended.
(e) Restrictions on Fundamental Changes. Borrower will
not, nor will it permit any of its Subsidiaries to, merge with or consolidate
into any Person, except where:
(i) the successor entity is a United States Person;
(ii) the successor entity executes an assumption
agreement assuming all of the obligations of Borrower hereunder;
(iii) the pro forma financial statements for such a
merger or consolidation do not indicate an Event of Default; and
(iv) the pro forma financial statements for such a
merger or consolidation indicate that the successor entity would be eligible to
incur an additional $1.00 of Funded Debt.
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ARTICLE XI
EVENTS OF DEFAULT
SECTION 11.01 Events of Default. Any of the following events which
shall occur shall constitute an "Event of Default":
(a) Payments. Borrower shall fail to pay (i) within five
days following the date when due, any interest on any Term Loan or Notes (ii)
on the date when due, any principal of any Term Loan or Notes.
(b) Failure by Borrower to Perform Certain Negative
Covenants. Borrower allows thirty (30) days to pass on the noncompliance of
negative covenants after the earlier to occur of written notice or such
noncompliance first becomes known to any executive officer of Borrower.
(c) Failure by Borrower to Perform Certain Affirmative
Covenants. Borrower allows sixty (60) days to pass on the noncompliance of
affirmative covenants after the earlier to occur of written notice or such
noncompliance first becomes known to any executive officer of Borrower.
(d) Breach of Representations and Warranties. Any
representation or warranty by Borrower under this Agreement shall prove to have
been incorrect in any material respect when made and such representation and
warranty is not capable of being cured or the Borrower shall fail to make such
representation and warranty correct in all material respects within thirty (30)
days from the date such noncompliance becomes known to any executive officer of
Borrower.
(e) Bankruptcy. Borrower or any of its respective
Subsidiaries shall admit in writing its inability to, or shall fail generally
or be generally unable to, pay its debts (including its payrolls) as such debts
become due, or shall make a general assignment for the benefit of creditors; or
Borrower, or any such Subsidiary shall file a voluntary petition in bankruptcy
or a petition or answer seeking reorganization, to effect a plan or other
arrangement with creditors or any other relief under the Bankruptcy Code or
under any other state or federal law relating to bankruptcy or reorganization
granting relief to debtors, including without limitation the appointment of a
receiver, whether now or hereafter in effect, or shall file an answer admitting
the jurisdiction of the court and the material allegations of any involuntary
petition filed against Borrower or any such Subsidiary pursuant to the
Bankruptcy Code or any such other state or federal law; or Borrower or any such
Subsidiary shall be adjudicated a bankrupt, or shall make an assignment for the
benefit of creditors, or shall apply for or consent to the appointment of any
custodian, receiver or trustee for all or any substantial part of Borrower's or
any such Subsidiary's property, or shall take any action to authorize any of
the actions or events set forth above in this subsection; or an involuntary
petition seeking any of the relief specified in this subsection shall be filed
against Borrower or any such Subsidiary and shall not be dismissed within sixty
(60) days; or any order for relief shall be entered against Borrower or any
such Subsidiary in any involuntary proceeding under the Bankruptcy Code or any
such other state or federal law referred to in this subsection (d).
(f) Default Under Other Indebtedness. Borrower or any of
its respective Subsidiaries shall fail (i) to make any payment of any principal
of, or interest or premium on, any Indebtedness (other than in respect of the
Term Loans) in an aggregate principal amount outstanding of at least $2,000,000
when due (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise) or (ii) to perform or observe any term, covenant or
condition on its part to be performed or observed under any agreement or
instrument relating to any such Indebtedness, when required to be performed or
observed, and such failure shall continue after the applicable grace period, if
any, specified in such agreement or instrument, if the effect of such failure
to perform or observe is to cause the holder of such Indebtedness to exercise a
right to accelerate the maturity of such Indebtedness.
(g) Judgments. A final judgment or order for the payment
of money in excess of $1,000,000 which is not fully covered by third-party
insurance shall be rendered against any Borrower or any of its Subsidiaries;
provided, however, that there shall be a period of sixty (60) consecutive days
following such final judgment or
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order during which a stay of enforcement of such judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect.
(h) Tax Lien. A tax lien shall be filed against Borrower
for an amount in excess of $1,000,000.
SECTION 11.02 Effect of Event of Default. If any Event of Default
shall occur and be continuing, Lender may (i) by notice to Borrower, (A)
declare the Commitment to be terminated, whereupon the same shall forthwith
terminate, (B) declare the entire unpaid principal amount of the Term Loans and
the Notes, all interest accrued and unpaid thereon and all other Obligations to
be forthwith due and payable, whereupon such amounts with respect to the Term
Loans and the Notes, all such accrued interest and all such other Obligations
shall become and be forthwith due and payable, without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived
by Borrower, and (C) exercise on behalf of itself all rights and remedies
available to it under the Loan Documents or applicable law; provided that if an
event described in Section 11.01(d) shall occur, the results specified in this
clause (i) shall occur automatically, without the giving of any notice by
Lender to Borrower; and (ii) whether or not the actions referred to in clause
(i) have been taken, proceed to enforce all other rights and remedies available
to Lender under the Loan Documents and applicable law.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01 Amendments and Waivers. Except as otherwise provided
herein or in any other Loan Document, (i) no amendment to any provision of this
Agreement or any of the other Loan Documents shall in any event be effective
unless the same shall be in writing and signed by the parties thereto; and (ii)
no waiver of any provision of this Agreement or any other Loan Document, or
consent to any departure by Borrower or other party therefrom, shall in any
event be effective unless the same shall be in writing and signed by Lender.
Any such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 12.02 Notices. All notices and other communications provided
for hereunder and under the other Loan Documents shall, unless otherwise stated
herein, be in writing (including by facsimile transmission) and mailed, sent or
delivered to the respective parties hereto at or to their respective addresses
or facsimile numbers set forth below their names on the signature pages hereof,
or at or to such other address or facsimile number as shall be designated by
any party in a written notice to the other parties hereto. All such notices
and communications shall be effective (i) if delivered by hand, when delivered;
(ii) if sent by mail, upon the earlier of the date of receipt or five Business
Days after deposit in the mail, first class (or air mail, with respect to
communications to be sent to or from the United States), postage prepaid; and
(iii) if sent by facsimile transmission, when sent.
SECTION 12.03 No Waiver; Cumulative Remedies. No failure on the part
of Lender to exercise, and no delay in exercising, any right, remedy, power or
privilege under any Loan Document shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, remedy, power or privilege
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights and remedies under the Loan
Documents are cumulative and not exclusive of any rights, remedies, powers and
privileges that may otherwise be available to Lender.
SECTION 12.04 Survival. All covenants, agreements, representations
and warranties made in any Loan Documents shall, except to the extent otherwise
provided therein, survive the execution and delivery of this Agreement, the
Borrowings contemplated by this Agreement and the execution and delivery of the
Notes, and shall continue in full force and effect following the date hereof so
long as Lender has any Commitment, any Term Loans remain outstanding or any
other Obligations remain unpaid or any obligation to perform any other act
under any Loan Document remains unsatisfied during such period.
SECTION 12.05 Binding Effect; Assignment.
24.
<PAGE> 25
(a) Binding Effect. This Agreement shall become
effective as to Borrower and Lender when it shall have been executed by such
parties and thereafter shall be binding upon, inure to the benefit of and be
enforceable by Borrower and Lender and their respective successors and assigns.
(b) Assignment by Borrower. Neither Borrower nor Lender
shall have the right to assign its respective rights and obligations hereunder
or under the other Loan Documents or any interest herein or therein without the
prior written consent of the other party.
SECTION 12.06 Confidentiality. Lender shall hold all non-public
information relating to Borrower and its Subsidiaries obtained by it under the
Loan Documents in accordance with its customary procedures for handling
confidential information of this nature. Prior to any disclosure by Lender of
such non-public information, it shall, if permitted by applicable laws or
judicial order, notify Borrower of such pending disclosure.
SECTION 12.07 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA.
SECTION 12.08 Entire Agreement. The Loan Documents reflect the
entire agreement by and between Borrower and Lender with respect to the matters
set forth herein and therein and supersede any prior agreements, commitments,
drafts, communications, discussions and understandings, oral or written, with
respect thereto and is intended by each of the parties hereto to be the
complete statement of the terms and conditions, and the final expression, of
their agreement relating to the subject matter hereof and thereof.
SECTION 12.09 Interpretation. The Loan Documents are the result of
negotiations between and have been reviewed by counsel to Lender and Borrower
and are the product of all parties thereto. Accordingly, the Loan Documents
shall not be construed against Borrower merely because of Borrower's
involvement in the preparation thereof.
SECTION 12.10 Severability. Whenever possible, each provision of the
Loan Documents shall be interpreted in such manner as to be effective and valid
under all applicable laws and regulations. If, however, any provision of any
of the Loan Documents shall be prohibited by or invalid under any such law or
regulation in any jurisdiction, it shall, as to such jurisdiction, be deemed
modified to conform to the minimum requirements of such law or regulation, or,
if for any reason it is not deemed so modified, it shall be ineffective and
invalid only to the extent of such prohibition or invalidity without affecting
the remaining provisions of such Loan Document, or the validity or
effectiveness of such provision in any other jurisdiction.
SECTION 12.11 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute but one and the same
agreement.
SECTION 12.12 Transaction Costs. Borrower shall reimburse the Lender
for the reasonable out-of-pocket costs incurred in the documentation of this
Agreement including, without limitation, the reasonable fees and disbursements
of outside counsel of the Lender.
SECTION 12.13 Arbitration. The parties shall submit any dispute
concerning this interpretation or the enforcement of rights and duties under
this Agreement to final and binding arbitration pursuant to the rules of the
American Arbitration Association. At the request of any party, the
arbitrators, attorneys, parties to the arbitration, witnesses, experts, court
reporters, or other persons present at the arbitration shall agree in writing
to maintain the strict confidentiality of the arbitration proceedings.
Arbitration shall be conducted by a single, neutral arbitrator, or, at the
election of any party, three neutral arbitrators, appointed in accordance with
the arbitral rules identified above. The award of the arbitrator(s) shall be
enforceable according to the applicable provisions of the California Code of
Civil Procedure. The arbitrator(s) may award damages and/or permanent
injunctive relief, but in no event shall the arbitrator(s) have the authority
to award punitive or exemplary damages. Notwithstanding the foregoing, a party
may apply to a court of competent jurisdiction for relief in the form of a
temporary restraining order or preliminary injunction, or other provisional
remedy pending final determination of a claim through arbitration in accordance
with this paragraph. If proper notice of any hearing has been given, the
arbitrator(s) will have full power to proceed to take evidence or to perform
any other acts necessary to arbitrate the matter in the absence of any party
who fails to appear.
SECTION 12.14 Jury Trial Waivers. To the fullest extent permitted by
law, and as separately bargained-for-consideration, each party hereby waives
any right to trial by jury in any action, suit, proceeding, or counterclaim of
any kind arising out of or relating to this Agreement. Each party hereby
expressly acknowledges the inclusion of this jury trial waiver through the
initials of its duly authorized representative.
25.
<PAGE> 26
ONYX ACCEPTANCE CORPORATION BAYVIEW BANK
INITIALS_________ INITIALS_________
SECTION 12.15 Attorneys' Fees. If either party to this Agreement shall
bring any action, suit, counterclaim, appeal, arbitration, or mediation for any
relief against the other, declaratory or otherwise, to enforce the terms hereof
or to declare rights hereunder (collectively, an "Action"), the losing party
shall pay to the prevailing party a reasonable sum for attorneys' fees and
costs (at the prevailing party's attorneys' then-prevailing rates as increased
from time to time by the giving of advance written notice by such counsel to
such party) incurred in bringing and prosecuting such Action and/or enforcing
any judgment, order, ruling, or award (collectively, a "Decision") granted
therein, all of which shall be deemed to have accrued on the commencement of
such Action and shall be paid whether or not such Action is prosecuted to a
Decision. Any Decision entered in such Action shall contain a specific
provision providing for the recovery of attorneys' fees and costs incurred in
enforcing such Decision. The court or arbitrator may fix the amount of
reasonable attorneys' fees and costs on the request of either party. For the
purpose of this paragraph, attorneys' fees shall include, without limitation,
fees incurred in the following: (1) postjudgment motions and collection
actions; (2) contempt proceedings; (3) garnishment, levy, and debtor and third
party examinations; (4) discovery; and (5) bankruptcy litigations. "Prevailing
party" within the meaning of this paragraph includes, without limitation, a
party who agrees to dismiss an Action on the other party's payment of the sums
allegedly due or performance of the covenants allegedly breached, or who
obtains substantially the relief sought by it.
23.
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, as of the date first above written.
BORROWER
ONYX ACCEPTANCE CORPORATION
By: ______________________________________
John W. Hall
President and Chief Executive Officer
Address:
8001 Irvine Center Drive
Fifth Floor
Irvine, California 92718
Attn.: Don P. Duffy
Fax No. (714) 450-5503
LENDER
BAYVIEW CAPITAL CORPORATION
By: ______________________________________
Name:
Title:
Address:
1840 Gateway Drive
San Mateo, CA 94404
Attn: General Counsel
ACKNOWLEDGEMENT AND AGREEMENT OF LENDER AND SENIOR LENDERS
The Lender, by its signature below, acknowledges that the
subordination provisions set forth in Article VI of this Agreement have been
negotiated with and for the primary benefit of the Senior Lenders named below,
and further acknowledges that the Senior Lenders have consented to the
Borrower's execution of this Agreement and the continued availability of funds
to the Borrower under the Senior Loan Agreement in reliance upon the provisions
of Article VI. THE LENDER BY ITS SIGNATURE BELOW AGREES THAT THE PROVISIONS OF
ARTICLE VI SHALL BE ENFORCEABLE BY THE SENIOR LENDERS (SEVERALLY OR THROUGH
STATE STREET BANK AND TRUST COMPANY, AS AGENT FOR THE SENIOR LENDERS UNDER THE
SENIOR LOAN AGREEMENT.
24.
<PAGE> 28
IN WITNESS WHEREOF, this Agreement has been executed by the Lender in
favor of the Senior Lenders as an instrument under seal as of the date first
above written.
LENDER
BAYVIEW CAPITAL CORPORATION
By: ______________________________________
Name:
Title:
Address:
__________________________________
__________________________________
__________________________________
SENIOR LENDERS
STATE STREET BANK AND TRUST COMPANY,
INDIVIDUALLY AND AS AGENT
By: ______________________________________
Name:
Title:
Address:
__________________________________
__________________________________
__________________________________
BANKBOSTON, N.A., formerly known as
THE FIRST NATIONAL BANK OF BOSTON
By: ______________________________________
Name:
Title:
Address:
__________________________________
__________________________________
__________________________________
25.
<PAGE> 29
EXHIBIT "A"
TO TERM LOAN AGREEMENT
FORM OF NOTE
THIS NOTE IS SUBJECT TO THE SUBORDINATION PROVISIONS CONTAINED IN THAT CERTAIN
TERM LOAN AGREEMENT DATED AS OF FEBRUARY __, 1998 BY AND BETWEEN ONYX
ACCEPTANCE CORPORATION AS BORROWER AND BAYVIEW CAPITAL CORPORATION AS LENDER,
AND THE PRINCIPAL AND INTEREST OWING UNDER THIS NOTE ARE SUBORDINATED THEREBY
TO CERTAIN SENIOR OBLIGATIONS OF THE BORROWER AND THE HOLDER HEREOF IS BOUND BY
THE PROVISIONS CONTAINED IN SUCH TERM LOAN AGREEMENT TO WHICH REFERENCE IS
HEREBY MADE FOR ALL PURPOSES. A COPY OF THE TERM LOAN AGREEMENT AND THE
SUBORDINATION PROVISIONS CONTAINED THEREIN IS AVAILABLE FOR INSPECTION AT THE
BORROWER'S EXECUTIVE OFFICES.
SUBORDINATED PROMISSORY NOTE
Irvine, California
$__________ ______, 199__
For value received, the undersigned, Onyx Acceptance
Corporation, a Delaware corporation ("Borrower"), hereby unconditionally
promises to pay to the order of BayView Capital Corporation, a Delaware
corporation ("Lender"), the principal sum of ______________________
($__________) on the Maturity Date, or if Borrower has exercised its right
under Section 4.02 of the Term Loan Agreement (as defined below) on the
Extended Maturity Date. If such right is exercised, then the aggregate
outstanding principal amount under this Note on the Maturity Date shall be
repaid in 36 equal consecutive monthly installments, commencing on the first
month after the Maturity Date and continuing until the Extended Maturity Date.
Borrower further promises to pay interest on the Loan
outstanding hereunder from time to time at the interest rates, and payable on
the dates, set forth in the Term Loan Agreement referred to below.
Both principal and interest are payable in lawful money of the
United States of America and in same day or immediately available funds to
Lender, into the account designated by Lender.
Lender shall record the date and amount of the Loan made, the
amount of principal and interest due and payable from time to time hereunder,
each payment thereof and the resulting unpaid principal balance hereof, in
Lender's internal records, and any such recordation shall be rebuttable
presumptive evidence of the accuracy of the information so recorded; provided,
however, that Lender's failure so to record shall not limit or otherwise affect
the obligations of Borrower hereunder and under the Term Loan Agreement to
repay the principal of and interest on the Loan.
A-1
<PAGE> 30
This promissory note is one of the Notes referred to in, and
is subject to and entitled to the benefits of, the Term Loan Agreement, dated
as of February ____, 1998, (as amended, modified, renewed or extended from time
to time, the "Term Loan Agreement") by and between Borrower and Lender.
Capitalized terms used herein shall have the respective meanings assigned to
them in the Term Loan Agreement.
The Term Loan Agreement provides, among other things, for
acceleration (which in certain cases shall be automatic) of the maturity hereof
upon the occurrence of certain stated events, in each case without presentment,
demand, protest or further notice of any kind, all of which are hereby
expressly waived.
This promissory note is subject to prepayment in whole or in
part as provided in the Term Loan Agreement.
THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA.
ONYX ACCEPTANCE CORPORATION
By:_____________________________________
John W. Hall
President and Chief Executive Officer
A-2
<PAGE> 31
EXHIBIT "B"
FORM OF WARRANT
B-1
<PAGE> 32
EXHIBIT "C"
TO THE TERM LOAN AGREEMENT
FORM OF NOTICE OF BORROWING
[DATE]
BayView Capital Corporation
2121 South El Camino Real
San Mateo, California 94403
Re: Notice of Borrowing Pursuant to Section 2.02 of Term Loan Agreement
Ladies and Gentlemen:
The undersigned, Onyx Acceptance Corporation (the "Borrower"),
refers to the Term Loan Agreement dated as of February __, 1998 (as amended,
modified, renewed, extended, or replaced from time to time, the "Term Loan
Agreement"), between the Borrower and BayView Capital Corporation (the
"Lender"), the terms defined therein being used herein as therein defined, and
hereby gives you notice irrevocably, pursuant to Section 2.02 of the Credit
Agreement, of the borrowing specified herein:
1. The Business Day of the proposed borrowing is
______________.
2. The aggregate amount of the proposed borrowing is
$__________.
3. The payment instructions with respect to the funds to
be made available to the Borrower are as follows: ______________.
4. The Borrower hereby certifies that the following
statements are true on the date hereof, and will be true on the date of the
proposed borrowing, before and after giving effect thereto and to the
application of the proceeds therefrom.
(a) the representations and warranties of the
Borrower contained in Section 8.01 of the Credit Agreement are
true and correct as though made on and as of each such date
(except to the extent such representations and warranties
relate solely to an earlier date, in which case they are true
and correct as of such date, except that Section 8.01(m) of
the Credit Agreement shall be deemed instead to refer to the
last day of the most recent fiscal year and month for which
financial statements have then been delivered and except as
set forth in amendments to Schedules and other disclosures
made in writing to the Lender and approved by it); and
C-1
<PAGE> 33
(b) no Default exists or would result from such
proposed borrowing;
(c) the proposed borrowing equals or exceeds a
Minimum Amount, as required by Section 2.04 of the Credit
Agreement.
ONYX ACCEPTANCE CORPORATION
By:___________________________________
Its:__________________________________
C-2
<PAGE> 34
EXHIBIT "D"
FORM OF NOTICE OF PREPAYMENT
[DATE]
BayView Capital Corporation
2121 South El Camino Real
San Mateo, California 94403
Re: Notice of Prepayment Pursuant to Section 4.03(b) of the Term Loan
Agreement
Ladies and Gentlemen:
The undersigned, Onyx Acceptance Corporation (the "Borrower")
refers to the Term Loan Agreement dated as of February __, 1998 (as amended,
modified, renewed, extended or replaced from time to time the "Term Loan
Agreement") between the Borrower and BayView Corporation (the "Lender"), the
terms defined therein being used herein as therein defined, and hereby gives
you notice irrevocably pursuant to 403(b) of a prepayment of the outstanding
loans as follows:
1. The Business Day of the proposed prepayment is
____________.
2. The aggregate amount of the proposed prepayment is
$________ in principal and $________ of accrued and unpaid interest to the date
of the prepayment.
ONYX ACCEPTANCE CORPORATION
By:___________________________________
Its:__________________________________
D-1
<PAGE> 35
EXHIBIT "E"
FORM OF TRANSFERENCE ACKNOWLEDGMENT
E-1
<PAGE> 36
SCHEDULE 1
PERMITTED LIENS
<TABLE>
<CAPTION>
UCC NO. & DESCRIPTION FILE FILE NO. SECURED PARTY DEBTOR DESCRIPTION OF COLLATERAL
--------------------- ---- -------- ------------- ------ -------------------------
DATE
----
<S> <C> <C> <C> <C> <C>
ONYX ACCEPTANCE CORPORATION
1. Intentionally Omitted 09/21/94
Filing terminated
2. UCC-1 Financing 07/08/94 94138331 Comdisco, Inc. Onyx Acceptance All of Debtor's right,
Statement (CA Secretary of Corporation title and interest in
State) Equipment Schedule No.
VL-1, to Master Lease,
dated 1-7-94
3. Intentionally Omitted 02/15/96
Filing terminated
4. UCC-1 Financing 09/14/94 94186957 Comdisco, Inc. Onyx Acceptance All of Debtor's right,
Statement (CA Secretary of Corporation title and interest in
State) Equipment Schedule No.
VL-1, to Master Lease,
dated 1-7-94
5. UCC-1 Financing 09/21/94 94189286 Onyx Acceptance Onyx Acceptance Flow purchase of
Statement (CA Secretary of Financial Corporation, Corporation, as contracts
State) as Purchaser Seller
5.1 UCC-2 Amendment 04/12/96 96106C0017 Onyx Acceptance Onyx Acceptance (Filed to reflect change
to Financing Statement (CA Financial Corporation, Corporation, as of Onyx's State of
Secretary of State) as Purchaser Seller Incorporation to
Delaware)
5.2 UCC-2 Amendment 03/25/97 97085C0033 Onyx Acceptance Onyx Acceptance (Filed to add the name to
to Financing Statement (CA Corporation, as Seller Financial "Automotive Banking
Secretary of State) Corporation, as Network" as a trade name)
Purchaser
5.3 UCC-3 Amendment 08/28/97 97241C1090 Onyx Acceptance Onyx Acceptance (Filed to reflect
to Financing Statement (CA Financial Corporation Corporation, as evidence of release on
Secretary of State) Seller collateral as described
in Exhibit A to UCC-1)
5.4 UCC-2 Amendment 01/13/98 98014C0505 Onyx Acceptance Onyx Acceptance (Filed to amend
to Financing Statement Financial Corporation Corporation, as replacement of No.
(CA etary of State) Seller 94189286 Schedule I with
Schedule I as filed and
amended)
</TABLE>
1
<PAGE> 37
<TABLE>
<CAPTION>
UCC NO. & DESCRIPTION FILE FILE NO. SECURED PARTY DEBTOR DESCRIPTION OF COLLATERAL
--------------------- ---- -------- ------------- ------ -------------------------
DATE
----
<S> <C> <C> <C> <C> <C>
6. UCC-1 Financing 10/12/94 9429961051 Capital Market Onyx Acceptance All of Debtor's right,
Statement (CA Secretary of Assurance Corporation Corporation title and interest in and
State) to Account No. 8117911-
000 (Spread Account)
maintained by First
Interstate Bank
6.1 UCC-2 Amendment 02/15/96 96046C0715 Capital Market Onyx Acceptance All of Debtor's right,
to Financing Statement (CA Assurance Corporation Corporation title and interest in and
Secretary of State) to Account No. 8117911-
000 (Spread Account)
maintained by First
Interstate Bank
7. UCC-1 Financing 10/12/94 9429961058 Bankers Trust Company, Onyx Acceptance All of Debtor's right,
Statement (CA Secretary of as Yield Supplement Corporation title and interest in and
State) Agent for the to Account No. 360402657
Certificate holders and (Yield Supplement Reserve
the Insurer Account) maintained by
First Interstate Bank
8. UCC-1 Financing 01/20/95 9502561211 Comdisco, Inc. Onyx Acceptance All of Debtor's right,
Statement (CA Secretary of Corporation title and interest in
State) Equipment Schedule No.
VL-1, to Master Lease,
dated 1-7-94
9. UCC-1 Financing 04/20/95 9511160503 Capital Markets Onyx Acceptance All of Debtor's right,
Statement (CA Secretary of Assurance Corporation Corporation title and interest in and
State) to Account No. 14726
(Spread Account)
maintained by Bankers
Trust Company
9.1 UCC-2 Amendment 02/15/96 96047C0160 Capital Markets Onyx Acceptance All of Debtor's right,
to Financing Statement (CA Assurance Corporation Corporation title and interest in and
Secretary of State) to Account No. 14726
(Spread Account)
maintained by Bankers
Trust Company
10. UCC-1 Financing 04/24/95 9511760281 Banker Trust Company, Onyx Acceptance All of Debtor's right,
Statement (CA Secretary of as Yield Supplement Corporation title and interest in and
State) Agent for the to Account No. 360102670
Certificateholders and (Yield Supplement Reserve
the Insurer Account) maintained by
First Interstate Bank
11. UCC-1 Financing 04/25/95 9511761264 Comdisco, Inc. Onyx Acceptance All of Debtor's right,
Statement (CA Secretary of Corporation title and interest in
State) Equipment Schedule No.
VL-1, to Master Lease,
dated 1-7-94
12 UCC-1 Financing 10/19/95 9529660866 Comdisco, Inc. Onyx Acceptance This filing is for notice
Statement (CA Secretary of Corporation purposes only to evidence
State) a "true lease".
(Collateral: Furniture
and computer hardware as
described on Exhibit to
UCC-1)
13 UCC-1 Financing 01/17/96 9601860530 Comdisco, Inc. Onyx Acceptance This filing is for notice
Statement (CA Secretary of Corporation purposes only to evidence
State) a "true lease".
(Collateral: Furniture
and computer hardware as
described on Exhibit to
UCC-1)
</TABLE>
2
<PAGE> 38
<TABLE>
<CAPTION>
UCC NO. & DESCRIPTION FILE FILE NO. SECURED PARTY DEBTOR DESCRIPTION OF COLLATERAL
--------------------- ---- -------- ------------- ------ -------------------------
DATE
----
<S> <C> <C> <C> <C> <C>
14. UCC-1 Financing 12/12/95 9534760422 Lighthouse Capital Onyx Acceptance All presently existing
Statement (CA Secretary of Partners, L.P. Corporation and hereafter acquired
State) equipment leased by
Secured Party to Debtor
15. UCC-1 Financing 12/12/95 9534760433 Lighthouse Capital Onyx Acceptance All of Debtor's right,
Statement (CA Secretary of Partners, L.P. Corporation title and interest in and
State) to all presently existing
and hereafter acquired
computer software
16. UCC-1 Financing 12/12/95 9534760446 Lighthouse Capital Onyx Acceptance Computer hardware as
Statement (CA Secretary of Partners, L.P. Corporation specifically described on
State) Annex A to UCC-1
17. UCC-1 Financing 12/12/95 9534760459 Lighthouse Capital Onyx Acceptance Computer software as
Statement (CA Secretary of Partners, L.P. Corporation specifically described on
State) Annex A to UCC-1
18. UCC-1 Financing 02/16/96 9605160370 Lighthouse Capital Onyx Acceptance Computer hardware and
Statement (CA Secretary of Partners, L.P. Corporation telephone equipment as
State) specifically described on
Annex A to UCC-1
19 UCC-1 Financing 04/04/96 9609660028 Lighthouse Capital Onyx Acceptance Computer hardware and
Statement (CA Secretary of Partners, L.P. Corporation telephone equipment as
State) specifically described on
Annex A to UCC-1
20 UCC-1 Financing 04/04/96 9609660030 Lighthouse Capital Onyx Acceptance Computer software as
Statement (CA Secretary of Partners, L.P. Corporation specifically described on
State) Annex A to UCC-1
21 UCC-1 Financing 07/09/96 9619360279 Lighthouse Capital Onyx Acceptance Computer hardware, office
Statement (CA Secretary of Partners, L.P. Corporation furniture and telephone
State) equipment as specifically
described on Annex A to
UCC-1
22 UCC-1 Financing 10/09/96 9628560263 Lighthouse Capital Onyx Acceptance Computer hardware, office
Statement (CA Secretary of Partners, L.P. Corporation furniture and telephone
State) equipment as specifically
described on Annex A to
UCC-1
23. UCC-1 Financing 01/12/96 9601660029 State Street Bank and Onyx Acceptance All of Debtor's right,
Statement (CA Secretary of Trust Company, as Agent Corporation title and
State) interest in all assets
other than Excluded
Assets
23.1 UCC-2 02/05/96 96036C0237 State Street Bank and Onyx Acceptance All of Debtor's right,
Amendment to Financing Trust Company, as Agent Corporation title and interest in
Statement (CA Secretary of all assets other than
State) Excluded Assets
23.2 UCC-2 01/09/97 97009C0474 State Street Bank and Onyx Acceptance All of Debtor's right,
Amendment to Financing Trust Company, as Agent Corporation title and interest in all
Statement (CA Secretary of assets other than
State) Excluded Assets
</TABLE>
3
<PAGE> 39
<TABLE>
<CAPTION>
UCC NO. & DESCRIPTION FILE FILE NO. SECURED PARTY DEBTOR DESCRIPTION OF COLLATERAL
--------------------- ---- -------- ------------- ------ -------------------------
DATE
----
<S> <C> <C> <C> <C> <C>
23.3 UCC-2 97245C0375 State Street Bank and Onyx Acceptance (Filed to reflect release
Amendment to Financing 08/29/97 Trust Company, as Agent Corporation of collateral as
Statement (CA Secretary described in Schedule A
of State) to UCC-1)
23.4 UCC-2 10/09/97 97283C0331 State Street Bank and Onyx Acceptance (Amended to reflect
Amendment to Financing Trust Company, as Agent Corporation substitution of original
Statement (CA Secretary of filed Schedule I with
State) Amended and Restated
Schedule I)
24. UCC-1 Financing 02/15/96 9604760481 Onyx Acceptance Onyx Acceptance All of Debtor's right,
Statement (CA Secretary of Financial Corporation, Corporation, as title and interest
State) as Purchaser Seller arising from and in
connection with the 1995-
1 Spread Account
25. UCC-1 Financing 02/15/96 9604660978 Onyx Acceptance Onyx Acceptance All of Debtor's right,
Statement (CA Secretary of Financial Corporation, Corporation, as title and interest
State) as Purchaser Seller arising from and in
connection with the 1994-
1 Spread Account
26. UCC-1 Financing 02/15/96 9604760531 Capital Markets Onyx Acceptance All of Debtor's right,
Statement (CA Secretary of Assurance Corporation Corporation title and interest
State) arising from and in
connection with the 1996-
1 Spread Account
27. UCC-1 Financing 05/15/96 9613860049 Capital Markets Onyx Acceptance All of Debtor's right,
Statement (CA Secretary of Assurance Corporation Corporation title and interest
State arising from and in
connection with the 1996-
2 Spread Account
28. UCC-1 Financing 09/17/96 9626260267 Capital Markets Onyx Acceptance All of Debtor's right,
Statement (CA Secretary of Assurance Corporation Corporation title and interest
State arising from and in
connection with the 1996-
3 Spread Account
29. UCC-1 Financing 12/23/96 9635860961 Capital Markets Onyx Acceptance All of Debtor's right,
Statement (CA Secretary of Assurance Corporation Corporation title and interest
State) arising from and in
connection with the 1996-
4 Spread Account
30. UCC-1 Financing 12/23/96 9635860943 Bankers Trust Company Onyx Acceptance All of Debtor's right,
Statement (CA Secretary of Corporation title and interest
State) arising from and in
connection with the Yield
Supplement Reserve
Account GT 1996-4
31. UCC-1 Financing 03/25/97 9708560018 Bankers Trust Company, Onyx Acceptance All of Debtor's right,
Statement (CA Secretary of as Yield Supplement Corporation title and interest
State) Agent arising from and in
connection with the Yield
Supplement Reserve
Account GT 1997-1
</TABLE>
4
<PAGE> 40
<TABLE>
<CAPTION>
UCC NO. & DESCRIPTION FILE FILE NO. SECURED PARTY DEBTOR DESCRIPTION OF COLLATERAL
--------------------- ---- -------- ------------- ------ -------------------------
DATE
----
<S> <C> <C> <C> <C> <C>
32. UCC-1 Financing 03/25/97 9708560055 Capital Markets Onyx Acceptance All of Debtor's right,
Statement (CA Secretary of Assurance Corporation Corporation title and interest
State) arising from and in
connection with the 1997-
1 Spread Account
33. UCC-1 Financing 02/06/97 9704460446 Winthrop Resources Onyx Acceptance This filing is for
Statement (CA Secretary of Corporation Corporation notices purposes only to
State) evidence a "true lease".
(Collateral: any and all
equipment now or
hereafter the subject of
any lease agreements or
lease schedule as
described on Addendum No.
1 to UCC-1.)
34. UCC-1 Financing 05/27/97 0714860129 FBS Business Finance Onyx Acceptance 50% deposit of tenant
Statement (CA Secretary of Corporation Corporation improvement contract
State) amount, office furniture,
computer hardware and
leasehold improvements as
stated on Schedule A to
UCC-1
35. UCC-1 Financing 06/18/97 9717061106 Capital Markets Onyx Acceptance All of debtor's right,
Statement (CA Secretary of Assurance Corporation Corporation title and interest
State) arising from and in
connection with the 1997-
2 spread account
36. UCC-1 Financing 09/11/97 9725560810 Capital Markets Onyx Acceptance All of debtor's right,
Statement (CA Secretary of Assurance Corporation Corporation title and interest
State) arising from and in
connection with the 1997-
3 spread account
37. UCC-1 Financing 08/11/97 9722660708 First Commercial Onyx Acceptance Telephone equipment as
Statement (CA Secretary of Capital Corp. assigning Corporation specifically described on
State) to Community First Schedule A to UCC-1
Financial, Inc.
37.1 UCC-3 10/06/97 97282C0259 Community First Onyx Acceptance Assigning security
Assignment of Financing Financial, Inc. Corporation interest created by UCC-1
Statement (CA Secretary of File No. 9722660708 from
State) First Commercial Capital
Corp.
38. UCC-1 Financing 09/26/97 9727460109 First Commercial Onyx Acceptance All presently existing
Statement (CA Secretary of Capital Corp. and Linc Corporation and hereafter acquired
State) Capital, Inc. computer equipment,
telephone equipment,
office furniture and
machines, as stated in
Exhibit A and Schedule A
to UCC-1
39. UCC-1 Financing 10/07/97 9728760099 First Commercial Onyx Acceptance Computer hardware as
Statement (CA Secretary of Capital Corp. and Linc Corporation specifically described on
State) Capital, Inc. Schedule A to UCC-1
39.1 UCC-3 01/06/98 98007C0543 Linc Capital, Inc. Onyx Acceptance Assigning security
Assignment of Financing Corporation interest granted by UCC-1
Statement (CA Secretary of file No. 9728760099 from
State) First Commercial Capital
Corp.
</TABLE>
5
<PAGE> 41
<TABLE>
<CAPTION>
UCC NO. & DESCRIPTION FILE FILE NO. SECURED PARTY DEBTOR DESCRIPTION OF COLLATERAL
--------------------- ---- -------- ------------- ------ -------------------------
DATE
----
<S> <C> <C> <C> <C> <C>
40. UCC-1 Financing 01/02/98 9800860267 First Commercial Onyx Acceptance All presently existing
Statement (CA Secretary of Capital Corp. Corporation and hereafter acquired
State) computer equipment,
telephone equipment,
office furniture and
machines, as stated in
Exhibit A to UCC-1
</TABLE>
6
<PAGE> 42
SCHEDULE 2
LIST OF SUBSIDIARIES
<TABLE>
<S> <C>
1. Onyx Acceptance Financial Corporation, a Delaware corporation.
2. Onyx Acceptance Funding Corporation, a Delaware corporation.
3. ABNI, Inc., a Delaware corporation
4. C.U. Acceptance Corporation, a Delaware corporation.
</TABLE>
1
<PAGE> 1
EXHIBIT 10.102
ANNEX I
SUPPLEMENTAL TERMS TO
MASTER REPURCHASE AGREEMENT,
DATED AS OF FEBRUARY 4, 1998, AMONG
MERRILL LYNCH MORTGAGE CAPITAL INC.
AND
ONYX ACCEPTANCE FUNDING CORPORATION
APPLICABILITY. These Supplemental Terms (the "Supplemental Terms") to Master
Repurchase Agreement (the "Repurchase Agreement") modify the terms and
conditions of the Repurchase Agreement and the terms under which the
parties hereto may, from time to time, enter into Transactions (the
Repurchase Agreement, together with these Supplemental Terms, the
"Agreement"). The Agreement shall be read, taken and construed as one
and the same instrument. Capitalized terms used in these Supplemental
Terms and not otherwise defined herein shall have the meanings set forth
in the Repurchase Agreement.
ADDITIONAL DEFINITIONS.
Notwithstanding the definition set forth in Paragraph 2(j) of the
Repurchase Agreement, with respect to Eligible Assets, the
"Market Value" of Eligible Assets shall be the price of
Purchased Auto Loans, determined, as of any date of
determination, to be the fair market value thereof as determined
solely by Buyer; provided, however, that (i) a Market Value of
zero shall be assigned to each Eligible Asset that is more than
thirty (30) days delinquent, (ii) the Market Value of Eligible
Assets shall not in any event exceed the outstanding principal
amount thereof, (iii) any Eligible Asset that has been subject
to the Agreement for more than 120 days in aggregate shall have
a Market Value of zero, (iv) any Wet Eligible Asset that is
subject to the Agreement for more than three (3) business days
without having become a Dry Eligible Asset shall have a Market
Value of zero and (v) any Eligible Asset with respect to which
there is a breach of a representation or warranty that is not
cured within any applicable cure period shall have a Market
Value of zero.
"Affiliate Purchase Agreement" shall mean that certain Sale and
Servicing Agreement dated as of February 4, 1998 by and between
Seller and Onyx, a copy of which is attached as Exhibit G.
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<PAGE> 2
"Auto Loan" shall mean either (i) a promissory note and the related
security agreement or (ii) a retail installment sale contract
for a Financed Vehicle.
"Borrower" shall refer to the obligor on any Eligible Asset.
"Buyer" shall mean MLMCI.
"Buyer's Margin Percentage" shall refer to the percentage used to
calculate Buyer's Margin Amount, which shall be 112.5% unless
otherwise agreed by the parties and set forth in the related
Confirmation.
"Code" shall refer to the Internal Revenue Code of 1986, as amended.
"Computer Tape" shall mean a computer tape of information relating to
the Eligible Assets generated by the Servicer in a format
acceptable to the Custodian and Buyer.
"Contract" means the retail installment sale contract, or the promissory
note and related security agreement, relating to a Financed
Vehicle.
"Custody Agreement" shall refer to the Custody Agreement, by and among
Seller, Buyer and the Custodian, providing for the custody of
records relating to Eligible Assets, as the same may be amended,
supplemented or otherwise modified from time to time.
"Custodial Confirmation Statement" shall refer to the confirmation
statement issued by the party named as custodian in the Custody
Agreement that evidences ownership of the Eligible Assets
indicated thereon.
"Custodian" shall refer to Bankers Trust Company of California, N.A. and
its permitted successors as custodian under the Custody
Agreement.
"Custodian's Asset File" shall, as to each Eligible Asset, have the
meaning set forth in Section 2 of the Custody Agreement.
"Dealer" means the dealer who sold a Financed Vehicle and who originated
and assigned the related receivable to Onyx under an existing
Dealer Agreement.
"Dealer Agreement" means each agreement between a Dealer and Onyx,
substantially in the form of Exhibit F hereto.
2
<PAGE> 3
"Dry Eligible Asset" shall refer to an Eligible Asset with respect to
which the Required Documents are in the Custodian's custody.
"Eligible Assets" shall mean Purchased Auto Loans subject to the
Agreement.
"Financed Vehicle" shall mean a new or used automobile or light duty
trucks (including all accessories thereto) that is the subject
of an Auto Loan.
"GAAP" shall mean generally accepted accounting principles consistently
applied.
"Guarantee" shall mean the guarantee of Onyx to be delivered pursuant to
Paragraph 7(c)(viii).
"Indebtedness" shall mean, for any Person: (a) obligations created,
issued or incurred by such Person for borrowed money (whether by
loan, the issuance and sale of debt securities or the sale of
property to another Person subject to an understanding or
agreement, contingent or otherwise, to repurchase such property
from such Person); (b) obligations of such Person to pay the
deferred purchase or acquisition price of property or services,
other than trade accounts payable (other than for borrowed
money) arising, and accrued expenses incurred, in the ordinary
course of business so long as such trade accounts payable are
payable within 90 days of the date the respective goods are
delivered or the respective services are rendered; (c)
Indebtedness of others secured by a lien on the property of such
Person, whether or not the respective Indebtedness so secured
has been assumed by such Person; (d) obligations (contingent or
otherwise) of such Person in respect of letters of credit or
similar instruments issued or accepted by banks and other
financial institutions for account of such Person; (e) capital
lease obligations of such Person; (f) obligations of such Person
under repurchase agreements or like arrangements; (g)
Indebtedness of others guaranteed by such Person; (h) all
obligations of such Person incurred in connection with the
acquisition or carrying of fixed assets by such Person; and (i)
Indebtedness of general partnerships of which such Person is a
general partner.
"LIBOR" shall mean the London Interbank Offered Rate for one-month
United States Dollar deposits as set forth on page 8695 of
Knight-Ridder as of 8:00 a.m., New York City time, on the date
of determination.
3
<PAGE> 4
"Lien Certificate" means, as to each Financed Vehicle, the application
for title, the existing title, the lien entry form or the
receipt of registration, in each case noting the lien of Onyx on
the Financed Vehicle.
"List of Auto Loans" shall be as defined in Paragraph 3 of these
Supplemental Terms.
"Master Assignment Agreement" shall mean the Master Assignment
Agreement, dated as of February 4, 1998, between Seller and
Buyer.
"MLMCI" shall refer to Merrill Lynch Mortgage Capital Inc.
"Net Worth" shall refer to the sum of equity and subordinated debt of
Onyx, each as determined in accordance with GAAP on a
consolidated basis less the sum of (i) intercompany receivables,
(ii) loans to officers or employees of Onyx, (iii) good will and
(iv) deferred taxes.
"Obligor" means, with respect to any Eligible Asset, the purchaser or
co-purchasers of the Financed Vehicle and any other Person who
owes payments under the applicable Purchased Auto Loan.
"Onyx" shall mean Onyx Acceptance Corporation.
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, limited liability
company, trust, unincorporated association or government (or any
agency, instrumentality or political subdivision thereof).1
"Purchased Auto Loan" shall mean each Auto Loan purchased hereunder.
"Required Documents" means the documents relating to each Eligible Asset
(other than a Wet Eligible Asset) that are required to be
delivered to the Custodian under the Custody Agreement.
"Securities" shall be deemed to mean Eligible Assets and,
notwithstanding the use of the term "Securities" in the Master
Repurchase Agreement, in no event shall such Eligible Assets be
deemed to be securities for the purposes of any securities or
blue sky laws.
"Seller" shall refer to Onyx Acceptance Funding Corporation.
4
<PAGE> 5
"Seller's Affiliate" shall mean C.U. Acceptance Corporation or ABNI,
Inc., as applicable.
"Seller's Origination Guide" shall refer to the origination guide of
Onyx for Auto Loans in the form most recently accepted in
writing by Buyer.
"Seller's Physical Damage Policy" shall mean the blanket insurance
policy of Seller covering physical damage with respect to all
Financed Vehicles in the form attached hereto as Exhibit E.
"Servicer" means the servicer of the Eligible Assets, which may be Onyx
and which servicer shall be acceptable to Buyer in its sole
discretion.
"Transaction" shall, in addition to the definition set forth in the
Repurchase Agreement, refer to substitutions pursuant to
Paragraph 9 of the Repurchase Agreement.
"Wet Eligible Assets" shall mean Eligible Assets with respect to
which the Required Documents are not in the Custodian's custody
on the related Purchase Date.
CONFIRMATIONS. Each Confirmation shall be binding upon the parties hereto unless
written notice of objection is given by the objecting party to the other
party within one (1) business day after the objecting party's receipt of
such Confirmation. In the case of Transactions involving Auto Loans, the
Eligible Assets shall be identified on a detailed listing to be provided
by Seller to Buyer (a "List of Auto Loans") and may be identified in the
related Confirmation by reference to such lists.
MARGIN MAINTENANCE.
Paragraph 4(b) of the Repurchase Agreement is hereby modified to provide
that if the notice to be given by Buyer to Seller under such
paragraph is given at or prior to 10:00 a.m., New York City
time, Seller shall transfer the Additional Eligible Assets to
Buyer prior to the close of business in New York City on the
date of such notice, and if such notice is given after 10:00
a.m., New York City time, Seller shall transfer the Additional
Eligible Assets prior to the close of business in New York City
on the business day immediately following the date of such
notice. The Custody Agreement shall set forth further terms and
provisions relating to Buyer's and Seller's rights and
obligations under Paragraph 4 of the Repurchase Agreement.
5
<PAGE> 6
Paragraph 4 of the Repurchase Agreement is hereby modified by adding the
following at the end thereof:
"(f)In the event that Seller fails to comply with the
provisions of this Paragraph 4, Buyer shall not enter
into any additional Transactions hereunder after the
date of such failure."
INCOME PAYMENTS. Paragraph 5 of the Repurchase Agreement is hereby modified to
provide that, so long as no Event of Default shall have occurred and be
continuing, Seller shall be entitled to all payments of principal and
interest and principal prepayments payable to the holder of the Eligible
Assets. Upon the occurrence of an Event of Default, payment of principal
and interest and principal prepayments shall be paid directly to Buyer.
ASSIGNMENT; INTENT OF THE PARTIES; SECURITY INTEREST.
Seller hereby assigns and transfers to Buyer, for good and valuable
consideration the receipt and sufficiency of which is hereby
acknowledged by Seller, the Eligible Assets subject to each
Transaction including, without limitation, the Contracts
relating to the Purchased Auto Loans that are subject to each
Transaction.
In the event, for any reason, any Transaction is construed by any
court as a secured loan rather than a purchase and sale, the
parties intend that Seller shall have granted to Buyer, and the
Seller hereby does grant to Buyer, all right title and interest
of Seller in and to, and a lien upon and a continuing and
security interest in, all of Seller's right title and interest
to the Eligible Assets, all rights with respect thereto and all
proceeds thereof.
Seller shall pay all fees and expenses associated with perfecting such
security interest including, without limitation, the cost of
filing financing statements under the Uniform Commercial Code.
In the event that Buyer elects to engage in repurchase transactions
with the Eligible Assets or otherwise elects to pledge or
hypothecate such Eligible Assets, Seller shall, at the request
of Buyer and at the expense of Seller, provide Buyer's
counterparty in such repurchase transaction with an opinion of
counsel to the effect that such counterparty has a perfected
first priority security interest in the Eligible Assets.
6
<PAGE> 7
Notwithstanding Paragraph 9(b) of the Repurchase Agreement, it is the
intention of the parties that the Custodian, rather than Seller,
shall maintain custody of the Purchased Securities pursuant to
the Custody Agreement.
REPRESENTATIONS, WARRANTIES AND COVENANTS.
Each party represents and warrants, and shall on and as of the
Purchase Date of any Transaction be deemed to represent and
warrant, as follows:
The execution, delivery and performance of the Agreement and
the performance of each Transaction do not and will not
result in or require the creation of any lien, security
interest or other charge or encumbrance (other than
pursuant to the Agreement) upon or with respect to any
of its properties; and
The Agreement is, and each Transaction when entered into under the
Agreement will be, a legal, valid and binding obligation of it
enforceable against it in accordance with the terms of the
Agreement.
Seller represents and warrants to Buyer, and shall on and as of the
Purchase Date of any Transaction be deemed to represent and
warrant, as follows:
The documents disclosed by Seller to Buyer pursuant to the Agreement
are either original documents or genuine and true copies
thereof;
Seller is a separate and independent corporate entity from the
Custodian named in the Custody Agreement, Seller does not own a
controlling interest in such Custodian either directly or
through affiliates and no director or officer of Seller is also
a director or officer of such Custodian;
None of the Purchase Price for any Eligible Assets will be used either
directly or indirectly to acquire any security, as that term is
defined in Regulation T of the Regulations of the Board of
Governors of the Federal Reserve System, and Seller has not
taken any action that might cause any Transaction to violate any
regulation of the Federal Reserve Board;
Each Auto Loan conforms to the current market standards of
institutional securitization applicable to auto loans similar in
nature to the Auto Loans;
7
<PAGE> 8
Each Auto Loan was underwritten in accordance with the written
underwriting standards of Seller's Origination Guidelines
furnished by Seller to Buyer, and no change to such underwriting
standards has occurred since the date of the last written
revision to such standards was furnished to Buyer by Seller or
on behalf of Seller;
Since the date of the most recent consolidated financial statement of
Onyx, delivered by it pursuant to Paragraph 11 of these
Supplemental Terms, there has been no material adverse change in
the financial condition or results of operations of Seller or
Onyx;
Seller shall be at the time it delivers any Eligible Assets for any
Transaction, and shall continue to be, through the Purchase Date
relating to each such Transaction, the legal and beneficial
owner of such Eligible Assets, free of any lien, security
interest, option or encumbrance except for the security interest
created by or pursuant to the Agreement;
Seller has taken all action with respect to the Agreement, the Custody
Agreement and the transactions contemplated hereby and thereby
in order to comply with the provisions of all applicable law;
The aggregate outstanding Repurchase Price for Eligible Assets subject
to the Agreement as of any date that are Wet Eligible Assets
does not exceed (1) during each of the first three business days
after a periodic securitization of Eligible Assets by Seller or
an Affiliate, $500,000 for each such business day and (2) in all
other cases, $1,500,000;
Onyx and each Seller's Affiliate has all applicable licenses and other
authority to originate the Contracts originated by it and sell
such Contracts to Seller pursuant to the applicable Affiliate
Purchase Agreement;
Seller is a wholly owned subsidiary of Onyx and Seller's only business
is to purchase and sell Eligible Assets as contemplated hereby;
The chief executive office of Seller is located in the State of
California;
8
<PAGE> 9
The Seller's Physical Damage Policy is in the form of Exhibit E
hereto, as amended from time to time (so long as each such
amendment shall have been provided to Buyer) and is in full
force and effect and covers all Eligible Assets;
There exists for each Eligible Asset, other than Contracts originated
by a Seller's Affiliate, a fully executed Dealer Agreement in
the form of Exhibit F hereto;
The Affiliate Purchase Agreement has been duly authorized, executed and
delivered by the parties thereto and constitutes a valid and
binding agreement of the parties thereto, enforceable in
accordance with its terms; and
Buyer is a third party beneficiary to the Affiliate Purchase Agreement
and is entitled to enforce the rights of Seller thereunder.
Seller covenants with Buyer, from and after the date of the Agreement,
as follows:
Seller will take all actions necessary with respect to the Agreement,
the Custody Agreement and the transactions contemplated hereby
and thereby in order to maintain compliance with the provisions
of all applicable law;
Seller shall immediately notify Buyer if an Event of Default or an
event contemplated by Paragraph 9 of these Supplemental Terms
shall have occurred;
Seller shall deliver a Computer Tape relating to the Custody Agreement
to Buyer with such frequency as Buyer may require but in no
event less frequently than bi-monthly;
Seller shall deliver to Buyer a Weekly Report on the first business day
of each week during the term of the Agreement;
Seller shall not permit any change in its ownership without the prior
written consent of Buyer;
Seller shall notify Buyer in writing at least sixty (60) days prior to
any termination or attenuation of the Seller's Physical Damage
Policy;
Seller shall cause Onyx to deliver to Buyer, in writing within thirty
(30) days after the end of each calendar month, a certificate of
an authorized
9
<PAGE> 10
officer to the effect that none of the events contemplated by
Paragraph 8(a)(ix) or (x) have occurred and are continuing;
Seller shall cause Onyx to deliver to Buyer, in writing within thirty
(30) days after the end of each calendar quarter, a certificate
of an authorized officer to the effect that the events
contemplated by Paragraph 8(a)(viii) have not occurred; and
Seller shall proceed in good faith to cause Onyx amend Onyx's existing
warehouse agreements so as to enable Onyx to provide to Buyer a
guaranty substantially in the form of Exhibit D hereto, and
after such amendments have been made Seller shall cause Onyx to
provide such guaranty to Buyer.
EVENTS OF DEFAULT.
The term "Event of Default" shall, in addition to the definition set
forth in the Repurchase Agreement, include the following events:
Any governmental or self-regulatory authority shall take possession
of Buyer or Seller or Onyx or their property or appoint any
receiver, conservator or other official, or such party shall
take any action to authorize any of the actions set forth in
this clause (i).
Buyer shall have reasonably determined that Seller (or, when the
Guarantee is provided, Onyx) is or will be unable to meet its
commitments under the Agreement (or, in the case of Onyx, the
Guarantee), shall have notified Seller (or Onyx, as and when
applicable) of such determination and such party shall not have
responded with appropriate information to the contrary to the
satisfaction of Buyer within 24 hours.
The Agreement shall for any reason cease to create a valid, first
priority security interest in any of the Eligible Assets
purported to be covered thereby.
A final judgment by any competent court in the United States of
America for the payment of money in an amount of at least
$100,000 is rendered against Seller or Onyx, and the same
remains undischarged for a period of sixty (60) days during
which execution of such judgment is not effectively stayed.
10
<PAGE> 11
Any representation or warranty made by Seller in the Agreement or any
Custody Agreement shall have been incorrect or untrue when made
or repeated or when deemed to have been made or repeated.
Any covenant made by Seller in the Agreement or any Custody Agreement
shall have been breached in any material respect.
Any event of default or any event which with notice, the passage of
time or both shall constitute an event of default shall occur
and be continuing under any repurchase or other financing
agreement for borrowed funds or indenture for borrowed funds by
which Seller or Onyx is bound or affected shall occur and be
continuing including, without limitation, any such agreement of
Seller or Onyx to which Buyer or any of its affiliates is a
party.
Onyx shall experience losses or changes in its financial condition
(exclusive of amounts withdrawn for payment of taxes due and
payable by the shareholders of Onyx) that cause its Net Worth
for any two consecutive calendar quarters to be less than or
equal to 80% of its Net Worth as of the commencement of such
period.
The ratio of Onyx's total Indebtedness to Onyx's Net Worth determined as
of the end of each calendar month shall exceed 8:1.
Onyx's Net Worth shall at any time be less than $30,000,000.
Upon the occurrence and during the continuance of an Event of Default by
Seller:
All rights of Seller to receive payments which it would otherwise be
authorized to receive pursuant to Paragraph 5 of these
Supplemental Terms shall cease, and all such rights shall
thereupon become vested in Buyer, which shall thereupon have the
sole right to receive such payments and apply them to the
aggregate unpaid Repurchase Prices owed by Seller.
All payments which are received by Seller contrary to the provisions
of the preceding clause (i) shall be received in trust for the
benefit of Buyer and shall be segregated from other funds of
Seller.
11
<PAGE> 12
Buyer may exercise any self-help remedies permitted by applicable law.
The parties hereby agree that sales of Eligible Assets under Paragraph
11(d)(i) of the Repurchase Agreement shall be deemed to include
and permit sales of Eligible Assets pursuant to a securities
offering.
Buyer may, in its sole discretion upon the occurrence and during the
continuation of an Event of Default hereunder, proceed against
any assets held by it under any agreement between Buyer or any
of its affiliates and Seller (including, without limitation, the
Master Assignment Agreement) and shall have a right of set-off
against any amounts owed by Buyer or any such affiliate to
Seller under any such agreements. In addition, the parties agree
that Buyer may, in its sole discretion upon the occurrence and
during the continuation of an event of default under any
agreement between Buyer or any of its affiliates and Seller or
any of its affiliates (including, without limitation, the Master
Assignment Agreement), proceed against any assets held by it
hereunder and shall have a right of set-off against any amount
owed by Buyer to Seller hereunder.
EVENTS OF TERMINATION.
At the option of Buyer, exercised by written notice to Seller, the
Repurchase Date for each Transaction under the Agreement shall
be deemed to immediately occur in the event that:
In the judgment of Buyer a material adverse change shall have
occurred in the business, operations, properties,
prospects or condition (financial or otherwise) of
Seller or Onyx;
Buyer shall request written assurances as to the financial well-being
of Seller or Onyx and such assurances shall not have been
provided within 24 hours of such request;
Seller or Onyx shall be in default with respect to any normal and
customary covenants under any debt contract or agreement, any
servicing agreement or any lease to which it is a party, which
default could materially adversely affect the financial
condition of such party (which covenants include, but are not
limited to, an Act of Insolvency of Seller or Onyx or the
failure of Seller or Onyx to
12
<PAGE> 13
make required payments under such contract or agreement as they
become due);
The senior debt obligations or short-term debt obligations of Merrill
Lynch & Co., Inc. shall be rated below the four highest generic
grades (without regard to any pluses or minuses reflecting
gradations within such generic grades) by any nationally
recognized statistical rating organization;
Any representation or warranty made by Seller in the Agreement or any
Custody Agreement shall have been incorrect or untrue when made
or repeated or when deemed to have been made or repeated;
Seller shall fail to promptly notify Buyer of (i) the acceleration of
any debt obligation or the early termination of any credit
facility of Seller or Onyx; (ii) the amount and maturity of any
such debt assumed after the date hereof; (iii) any adverse
developments with respect to pending or future litigation
involving Seller or Onyx; and (iv) any other developments which
might reasonably be expected to materially and adversely affect
the financial condition of Seller or Onyx;
Seller shall have failed to comply in any material respect with its
obligations under the Custody Agreement; or
At any time after the issuance of the Guarantee, Onyx shall have failed
to comply in any material respect with its obligations under the
Guarantee.
The events specified in Paragraph 9(a) of these Supplemental Terms
which may, at the option of Buyer, cause an acceleration of the
Repurchase Date for a Transaction shall be in addition to any
other rights of Buyer to cause such an acceleration under the
Agreement.
FINANCIAL STATEMENTS. Seller shall furnish, or cause to be furnished, to Buyer:
as soon as available and in any event within sixty (60) days
after the close of each of the first three (3) quarters of each fiscal
year of Seller, Onyx's applicable quarterly Form 10-Q as filed with the
Securities and Exchange Commission, including the consolidating
statements for the Seller, subject to normal recurring year-end audit
adjustments, and as prepared in accordance with GAAP; and
13
<PAGE> 14
as soon as available and in any event within one hundred and
twenty (120) days after the close of each fiscal year of Onyx, a
consolidated audited balance sheet of Onyx, a consolidated audited
statement of income of Onyx and an audited consolidated statement of
changes in financial position of Onyx's consolidated financial group as
at the end of and for the fiscal year just closed, setting forth the
corresponding figures of the previous fiscal year, if applicable, in
comparative form, all in reasonable detail and certified (without any
qualification or exception deemed material by MLMCI); by independent
public accountants selected by Onyx and reasonably satisfactory to
MLMCI.
MINIMUM AND MAXIMUM TRANSACTION AMOUNTS; MARGIN. With respect to all
Transactions hereunder:
The minimum amount of any Transaction under the Agreement shall have an
aggregate Repurchase Price of $1,000,000;
The aggregate outstanding Repurchase Price for the Eligible Assets
subject to the Agreement at any one time shall not exceed
$100,000,000; and
Buyer's Margin Percentage with respect to each category of Eligible
Assets shall be as mutually agreed upon by Buyer and Seller.
REPURCHASE PRICE; PRICE DIFFERENTIAL. The Repurchase Price as of any date shall
include that portion of the Price Differential that has accrued but has
not been paid. The Price Differential shall accrue, be calculated and be
compounded on a daily basis for each Purchased Security (such
calculation to be made on the basis of a 360-day year and the actual
number of days elapsed). The Price Differential shall be payable monthly
in arrears to Buyer with respect to each Transaction. The Price
Differential for any Transaction shall, unless otherwise agreed by the
parties, be equal to the product of (i) the Repurchase Price (which
shall be the Purchase Price increased by the accrued and unpaid Price
Differential) and (ii) a per annum percentage seventy-five (75) basis
points (or such other number of basis points as Buyer and Seller shall
mutually agree) in excess of LIBOR. Payment of the Price Differential to
Buyer shall be made by wire transfer in immediately available funds.
14
<PAGE> 15
ADDITIONAL INFORMATION.
At any reasonable time, Seller shall permit Buyer, its agents or
attorneys, to inspect and copy any and all documents and data in
their possession pertaining to each Security that is the subject
of such Transaction. Such inspection shall occur upon the
request of Buyer at a mutually agreeable location during regular
business hours and on a date not more than two (2) business days
after the date of such request.
Seller agrees to provide Buyer from time to time with such information
concerning Seller of a financial or operational nature as Buyer
may reasonably request.
Seller shall provide Buyer with copies of all filings made by or on
behalf of Seller or any entity that controls Seller, with the
Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934, as amended, promptly upon making such
filings.
TRANSACTION PROCEDURES. Buyer may, in its sole discretion, reject any Security
from inclusion in a Transaction hereunder for any reason.
OPINIONS OF COUNSEL. Seller shall, on the date of the first Transaction
hereunder and, upon the request of Buyer, on the date of any subsequent
Transaction, cause to be delivered to Buyer, with reliance thereon
permitted as to any Person or entity that purchases the Eligible Assets
from Buyer in a repurchase transaction, a favorable opinion of counsel
to Seller and Onyx with respect to the matters set forth in Exhibit A
hereto, in form and substance reasonably acceptable to Buyer.
ADDITIONAL CONDITIONS. Prior to entering into the initial Transaction under the
Agreement, Seller shall cause each of the following conditions to occur:
A Custody Agreement in a form satisfactory to Buyer shall have been
executed and delivered by the parties thereto;
Seller shall have disclosed information satisfactory to Buyer with
respect to the scheduled maturities and termination provisions
of all outstanding credit facilities and debt of Seller;
Seller shall have delivered to Buyer an undated letter to Seller's
archivist authorizing and directing such
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<PAGE> 16
archivist to make available to Buyer and its agents all
printouts and all computer software pertaining to the Eligible
Assets; and
The Custodian shall have delivered to Buyer a Custodial Confirmation
Statement relating to the Eligible Assets subject to the
Transaction (which, in the case of Wet Eligible Assets, need
only list the Wet Eligible Assets that Seller has advised the
Custodian have been sold to Buyer hereunder).
REPURCHASE TRANSACTIONS. Buyer may in its sole election engage in repurchase
transactions with the Eligible Assets or otherwise pledge or hypothecate
the Eligible Assets with a counterparty of Buyer's choice; provided,
however, that no such transaction by Buyer shall relieve Buyer of its
obligations to Seller in connection with the repurchase by Seller of any
Eligible Assets in accordance with the terms of the Agreement.
NEW YORK JURISDICTION; WAIVER OF JURY TRIAL. Seller agrees to submit to
personal jurisdiction in the State of New York in any action or
proceeding arising out of the Agreement. Buyer and Seller each hereby
waives the right of trial by jury in any litigation arising hereunder.
SERVICING ARRANGEMENTS.
The parties hereto agree and acknowledge that, notwithstanding the
purchase and sale of the Eligible Assets contemplated hereby,
Seller shall cause the Eligible Assets to continue to be
serviced for the benefit of Buyer and, if Buyer shall exercise
its rights to sell the Eligible Assets pursuant to the Agreement
prior to the related Repurchase Date, Buyer's assigns; provided,
however, that the obligation of Seller to cause Eligible Assets
to be serviced for the benefit of Buyer as aforesaid shall cease
upon the payment to Buyer of the Repurchase Price therefor.
Seller shall cause the Eligible Assets to be serviced in accordance
with the servicing standards for similar assets employed by
prudent servicers in the auto loan industry for similar assets.
Seller shall cause the Servicer to enforce the rights of the owner of
the Eligible Assets in accordance with the standards of a
prudent lender in the auto loan industry.
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<PAGE> 17
Buyer may, in its sole discretion if an Event of Default shall have
occurred and be continuing, without payment of any termination
fee, servicing fee or any other amount to Seller, Onyx or any
Servicer, (i) sell its right to the Eligible Assets on a
servicing released basis or (ii) terminate the Servicer of the
Eligible Assets with or without cause.
Each Servicer of Eligible Assets must be approved by Buyer.
FURTHER ASSURANCES. Seller shall promptly provide such further
assurances or agreements as Buyer may request in order to effect
the purposes of the Agreement.
BUYER AS ATTORNEY-IN-FACT. Buyer is hereby appointed to act after the
occurrence and during the continuation of an Event of Default as
the attorney-in-fact of Seller for the purpose of carrying out
the provisions of the Agreement and taking any action and
executing any instruments that Buyer may deem necessary or
advisable to accomplish the purposes hereof, which appointment
as attorney-in-fact is irrevocable and coupled with an interest.
Without limiting the generality of the foregoing, Buyer shall
have the right and power after the occurrence and during the
continuation of any Event of Default to receive, endorse and
collect all checks made payable to the order of Seller
representing any payment on account of the principal of or
interest on any of the Purchased Securities and to give full
discharge for the same.
TERMINATION. Notwithstanding any provisions of Paragraph 15 of the
Master Repurchase Agreement to the contrary, the Agreement and
all Transactions outstanding hereunder shall terminate
automatically without any requirement for notice on the date
occurring eleven calendar months and twenty-nine days after the
date as of which the Agreement is entered into; provided,
however, that the Agreement and any Transaction outstanding
hereunder may be extended by mutual agreement of Buyer and
Seller; and provided further, however, that no such party shall
be obligated to agree to such an extension.
BINDING TERMS. All of the covenants, stipulations, promises and
agreements in the Agreement shall bind the successors and
assigns of the parties hereto, whether expressed or not.
NOTICES AND OTHER COMMUNICATIONS. Any provision of Paragraph 13 of the
Repurchase Agreement to the contrary notwithstanding, any notice
required or permitted by the Agreement shall be in writing
(including telegraphic, facsimile or telex communication) and
shall be effective and deemed delivered
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<PAGE> 18
only when received by the party to which it is sent; provided,
however, that a facsimile transmission shall be deemed to be
received when transmitted so long as the transmitting machine
has provided an electronic confirmation of such transmission.
Any such notice shall be sent to a party at the address or
facsimile transmission number set forth in Annex II attached
hereto.
INCORPORATION OF TERMS. The Repurchase Agreement as supplemented hereby
shall be read, taken and construed as one and the same
instrument.
EXPENSES. Seller shall pay its own expenses and all reasonable
out-of-pocket costs and expenses (including fees and
disbursements of counsel): (1) of Buyer incident to the
preparation and negotiation of the Agreement, the Custody
Agreement, any documents relating thereto, any amendments or
waivers thereto, the performance of due diligence reviews with
respect to the Eligible Assets and the protection of the rights
of Buyer thereunder(provided, however, that Seller shall not be
liable for such out-of-pocket costs and expenses in excess of
$35,000) and (2) of Buyer incident to the enforcement of payment
of amounts due under the Agreement or the Custody Agreement,
whether by judicial proceedings or otherwise, including, without
limitation, in connection with bankruptcy, insolvency,
liquidation, reorganization, moratorium or other similar
proceedings involving Seller. Notwithstanding any provision
hereof to the contrary, the obligations of Seller under this
Paragraph 26 shall be effective and enforceable whether or not
any Transaction remains outstanding and shall survive payment of
all other obligations owed by Seller to Buyer.
COUNTERPARTS. The Agreement may be executed in any number of
counterparts, each of which counterparts shall be deemed to be
an original, and such counterparts shall constitute but one and
the same instrument.
18
<PAGE> 19
EXHIBIT A
OPINIONS OF COUNSEL TO SELLER AND Onyx
[Opinions regarding the Guarantee shall be provided after the Guarantee
is issued.]
Seller is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and has the corporate
power and authority to execute, deliver and perform its obligations
under the Agreement and the Custody Agreement. Seller is duly qualified
to do business and is in good standing in each jurisdiction in which the
character of the business transacted by it requires such qualification
and in which the failure so to qualify would have a material adverse
effect on the business, properties, assets or condition (financial or
other) of Seller and its subsidiaries, considered as a whole.
Onyx is a corporation duly incorporated and validly existing and in good
standing under the laws of the State of Delaware and has the corporate
power and authority to execute, deliver and perform its obligations
under the Guarantee. Onyx is duly qualified to do business and is in
good standing in each jurisdiction in which the character of the
business transacted by it requires such qualification and in which the
failure so to qualify would have a material adverse effect on the
business, properties, assets or condition (financial or other) of Onyx
and its subsidiaries, considered as a whole.
The execution, delivery and performance by Seller of the Agreement and the
Custody Agreement (a) has been duly authorized by all necessary
corporate action on the part of Seller, (b) does not and will not
violate, or result in a breach of (1) the Certificate of Incorporation
or Bylaws of Seller, (2) the provisions of the Delaware General
Corporate Law or any California, New York or federal law, rule or
regulation applicable to Seller (other than California, New York and
federal securities laws, as to which no opinion is expressed) or (3) to
the best of counsel's knowledge, any order of any court or other
governmental authority to which Seller is a party or by which Seller or
any of its properties are bound or subject, where, in the case of items
(2) and (3), such violation or breach could have a material and adverse
effect on the ability of Seller to perform its obligations under the
Agreement or the Custody Agreement and (c) will not conflict
A-1-1
<PAGE> 20
with, or result in a breach, violation or acceleration of, or constitute
a default under any material agreement to which Seller is a party or by
which Seller is bound.
The execution, delivery and performance by Onyx of the Guaranty (a) has been
duly authorized by all necessary corporate action on the part of Onyx,
(b) does not and will not violate, or result in a breach of (1) the
Certificate of Incorporation or Bylaws of Onyx, (2) the provisions of
the Delaware General Corporation Law, or any California, New York or
federal law, rule or regulation applicable to Onyx (other than
California, New York and federal securities laws, as to which counsel
expresses no opinion) or (3) to the best of counsel's knowledge, any
order of any court or other governmental authority to which Onyx is a
party or by which Onyx or any of its properties are bound or subject,
where in the case of items (2) and (3) above, such violation or breach
could have a material and adverse effect on the ability of Onyx to
perform its obligations under the Guaranty and (d) will not conflict
with, or result in a breach, violation or acceleration of, or constitute
a default under any of the material agreements to which Onyx is a party
or by which it is bound.
Each of the Agreement and the Custody Agreement has been duly executed and
delivered by Seller and constitutes the legal, valid and binding
obligation of Seller enforceable against Seller in accordance with its
terms.
No authorization, consent approval, license, filing or registration with any
governmental or regulatory authority or agency is required under
California, New York or federal law for the validity of the execution
and delivery of, or performance by Seller of its obligations under the
Agreement and the Custody Agreement (except (a) such as have been
received or made, (b) such as may be required under California, New York
or federal securities laws, as to which no opinion is expressed, and (c)
such filings of financing or continuation statements as may be required
to be made under the Uniform Commercial Code in any jurisdiction).
The Guaranty has been duly executed and delivered by Onyx and constitutes the
legal, valid and binding obligation of Onyx enforceable against Onyx in
accordance with its terms.
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<PAGE> 21
To the best of counsel's knowledge, there is no action, suit, proceeding or
investigation before or by any court or governmental agency or body,
domestic or foreign, now pending or threatened against Seller which
could reasonably be expected to interfere with or materially and
adversely affect the consummation of the transactions contemplated in
the Agreement or the Custody Agreement.
To the best of counsel's knowledge, there is no action, suit, proceeding or
investigation before or by any court or governmental agency or body,
domestic or foreign, now pending or threatened against Onyx which could
reasonably be expected to interfere with or materially and adversely
affect the consummation of the transactions contemplated in the
Guaranty.
Assuming this Agreement does not transfer an ownership interest in a Purchased
Auto Loan, the Agreement creates in favor of Buyer a security interest
under the Uniform Commercial Code as currently in effect in the State of
New York. Upon delivery of a List of Auto Loans as required by the
Custody Agreement, the conveyance from time to time of Auto Loans
described on such List of Auto Loans by Seller to the Custodian, on
behalf of Buyer, in the State of California will perfect the security
interest in favor of Buyer under the Uniform Commercial Code as
currently in effect in the State of California (the "California UCC")
and, assuming Buyer acquires its security interest in such Purchased
Auto Loan in the ordinary course of its business and that Buyer acts
without knowledge that the specific Purchased Auto Loan is subject to a
security interest (other than the security interest in favor of Buyer),
such security interest of Buyer will be prior to any security interest
which may be perfected under Article 9 of the California UCC.
A-1-3
<PAGE> 22
EXHIBIT B
REPRESENTATIONS AND WARRANTIES
Characteristics of Eligible Assets. Each Eligible Asset (A) was fully
and properly executed by the parties thereto, (B) contains customary and
enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for realization against the collateral security, (C) is fully
amortizing and provides for level monthly payments which, if made when due,
shall fully amortize the amount financed over the original term and (D) provides
for, in the event that such Eligible Asset is prepaid in full, payment of an
amount that fully pays the principal balance and includes accrued but unpaid
interest at least through the date of prepayment in an amount at least equal to
its annual percentage rate. If such Eligible Asset was originated by a dealer,
such Eligible Asset, to the knowledge of Seller, was originated by the dealer
for the retail sale of a Financed Vehicle in the ordinary course of such
dealer's business, was purchased by Seller from such dealer for new value under
a Dealer Agreement and was validly assigned by the dealer to Seller. To the
knowledge of Seller, such dealer had all necessary licenses and permits to
originate Eligible Assets in the state where such dealer was located. If such
Eligible Asset was originated by an affiliate of Seller, such Eligible Asset was
originated for value by such affiliate in the ordinary course of its business to
finance the purchase of, or refinance, the related Financed Vehicle by the
related Obligor. Such affiliate of Seller had all necessary licenses and permits
to originate or purchase such Eligible Asset. Either the Eligible Assets
constitute substantially all of the motor vehicle receivables owned by Seller or
no adverse selection procedure was used in selecting the Eligible Assets from
among the motor vehicle receivables owned by Seller.
No Fraud or Misrepresentation. Each Eligible Asset was originated by a
dealer or an affiliate of Seller and was sold by the dealer to Seller (if
applicable) without any fraud or misrepresentation on the part of such dealer.
Compliance with Law. To the knowledge of Seller, all requirements of
applicable federal, state and local laws, and regulations thereunder (including,
without limitation, usury laws, the Federal Truth-in-Lending Act, the Equal
Credit Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting
Act, the Fair Debt Collection Practices Act, the Federal Trade Commission Act,
the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations "B" and
"Z", the Soldiers' and Sailors' Civil Relief Act of 1940, the state motor
vehicle
B-1
<PAGE> 23
retail installment sales act, and state adaptations of the National Consumer Act
and of the Uniform Consumer Credit Code and other consumer credit laws and equal
credit opportunity and disclosure laws) in respect of all of the Eligible Assets
and each and every sale of Financed Vehicles, have been complied with in all
material respects, and each Eligible Asset and the sale of the Financed Vehicle
evidenced by each Eligible Asset complied at the time it was originated or made
and now complies in all material respects with all applicable legal
requirements.
Origination. Each Eligible Asset was originated in the United States.
Binding Obligation. Each Eligible Asset represents the genuine, legal,
valid and binding payment obligation of the Obligor thereon, enforceable by the
holder thereof in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting the
enforcement of creditors' rights generally and by equitable limitations on the
availability of specific remedies, regardless of whether such enforceability is
considered in a proceeding in equity or at law; and all parties to each Eligible
Asset had full legal capacity to execute and deliver such Eligible Asset and all
other documents related thereto and to grant the security interest purported to
be granted thereby.
No Government Obligor. No Obligor is the United States of America or any
State or any agency, department, subdivision or instrumentality thereof.
Obligor Bankruptcy. At the Purchase Date, no Obligor had been identified
on the records of Seller as being the subject of a current bankruptcy
proceeding.
List of Auto Loans. The information set forth in the List of Auto Loans
is true and correct in all material respects as of the date of such list.
Marking Records. By the Purchase Date, Seller will have caused the
portions of its electronic ledger relating to the Eligible Assets to be clearly
and unambiguously marked to show that the Eligible Assets have been sold to
Buyer under the Master Repurchase Agreement.
Computer Tape. The Computer Tape was complete and accurate as of the
date of such tape and includes a description of the same Eligible Assets that
are described in the related List of Auto Loans.
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<PAGE> 24
Chattel Paper. The Eligible Assets constitute chattel paper within the
meaning of the UCC as in effect in the states in which the Obligors reside.
One Original. There is only one original executed copy of each Contract.
Eligible Assets in Force. No Eligible Asset has been satisfied,
subordinated or rescinded, and the Financed Vehicle securing each such Eligible
Asset has not been released from the lien of the related Eligible Asset in whole
or in part. No provisions of any Eligible Asset have been waived, altered or
modified in any respect since its origination, except by instruments or
documents identified in the Eligible Asset File. No Eligible Asset has been
modified as a result of application of the Soldiers' and Sailors' Civil Relief
Act of 1940, as amended.
Lawful Assignment. No Eligible Asset was originated in, or is subject to
the laws of, any jurisdiction the laws of which (a) would make unlawful, void or
voidable the sale, transfer and assignment of such Eligible Asset under this
Agreement or (b) would impair the validity or enforceability of any Eligible
Asset because of any such sale, transfer or assignment.
Good Title. No Eligible Asset has been sold, transferred, assigned or
pledged by Seller to any Person; immediately prior to the transfer thereof
pursuant to this Agreement, Seller had good and indefeasible title to and was
the sole owner of each Eligible Asset, free of any Lien and such title is freely
assignable pursuant to the terms hereof; immediately upon the transfer and
assignment thereof herein contemplated, Buyer shall have full ownership of and
good and marketable title to each Eligible Asset, free and clear of all Liens
and rights of others, and the transfer and assignment herein contemplated has
been perfected under the UCC. Neither Seller nor any dealer has a participation
in, or other right to receive, payments or proceeds in respect of any Eligible
Asset. Seller has not taken any action to convey any right to any Person that
would result in such Person having a right to payments received under any
related insurance policies or the related Dealer Agreements or to payments due
under such Eligible Assets.
Security Interest in Financed Vehicle. Each Eligible Asset has created a
valid, binding and enforceable first priority security interest in favor of
Seller in the related Financed Vehicle, which is in full force and effect. Each
Lien Certificate contained in the Custodian's Asset Files shows Seller, Onyx or
a Seller's Affiliate named as the original secured party under each Eligible
Asset and as the holder of a first priority security interest in such Financed
Vehicle.
B-3
<PAGE> 25
Seller's security interest in each Financed Vehicle has been validly assigned by
Seller to Buyer pursuant to this Agreement.
All Filings Made; Valid Security Interest. All filings (including UCC
filings) necessary in any jurisdiction to give Buyer a first perfected ownership
interest in the Eligible Assets have been made.
No Impairment. Seller has not done and will not do anything to convey
any right to any Person that would result in such Person having a right to
payments due under a Eligible Asset or otherwise to impair the rights of Buyer
in any Eligible Asset or the proceeds thereof.
No Release. No Eligible Asset is assumable by another Person in a manner
which would release the Obligor thereof from such Obligor's obligations to
Seller with respect to such Eligible Asset.
No Defenses. No Eligible Asset is subject to any right of rescission,
setoff, counterclaim or defense and, to the knowledge of Seller, no such right
has been asserted or threatened with respect to any Eligible Asset. The
operation of the terms of any Eligible Asset or the exercise of any right
thereunder will not render the Eligible Asset unenforceable in whole or in part
or subject to any right of rescission, setoff, counterclaim or defense, and to
the knowledge of Seller, no such right of rescission, setoff, counterclaim or
defense has been asserted with respect thereto.
No Default. To the knowledge of Seller, there has been no default,
breach, violation or event permitting acceleration under the terms of any
Eligible Asset (other than payment delinquencies of not more than 30 days), and
no condition exists or event has occurred and is continuing that with notice,
the lapse of time or both would constitute a default, breach, violation or event
permitting acceleration under the terms of any Eligible Asset, and there has
been no waiver of any of the foregoing. As of the related Purchase Date, no
Financed Vehicle had been repossessed.
Insurance. As of the Purchase Date, each Financed Vehicle is covered by
a vendor's single interest insurance policy (i) that provides coverage as to
such Financed Vehicle in an amount at least equal to the lesser of (a) the value
of such Financed Vehicle or (b) the principal amount due from the Obligor under
the related Eligible Asset, (ii) naming Seller and its successors and assigns as
loss payees and (iii) insuring against loss and damage due to fire, theft,
transportation, collision and other risks generally covered by comprehensive and
collision coverage and such coverage will not be voided or voidable due to
B-4
<PAGE> 26
the sales or pledges of the related Eligible Asset pursuant to this Agreement.
Each Eligible Asset requires the Obligor to maintain physical loss and damage
insurance, naming Seller and its successors and assigns as additional insured
parties, and each Eligible Asset permits the holder thereof to obtain physical
loss and damage insurance at the expense of the Obligor if the Obligor fails to
do so. No Financed Vehicle was or had previously been insured under a policy of
force-placed insurance on the related Purchase Date.
Past Due. At the Purchase Date, no Eligible Asset is more than 30 days
past due.
No Liens. There are no Liens or claims which have been filed, and, to
the knowledge of Seller, none pending or threatened to be filed, for work,
labor, materials or unpaid state or federal taxes affecting the vehicle securing
any Eligible Asset which are or may become liens prior or equal to the lien of
the Eligible Asset.
Remaining Principal Balance. At each Purchase Date, the principal
balance of each Eligible Asset set forth in the List of Auto Loans is true and
accurate in all material respects.
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EXHIBIT C
WEEKLY ACTIVITY REPORT
Reporting Period (_____________ - _____________) Friday to Friday
Beginning Repurchase Price
Buyer's Market Value (date - attach mark-to-market output)
Par Value of Eligible Assets (adjusted monthly for principal payments)
The lesser of 2 or 3.
Additions
+the lesser of Buyer's Market Value or the par value of
Purchased Securities (includes Additional Purchased Securities
and replacement Purchased Securities) - attach Confirmations
+Margin Deficit (if applicable)
+cumulative accrued Price Differential (Interest)
Subtractions
-the par value of Repurchased Securities - attach Confirmations
-par value of Eligible Assets
-par value of Eligible Assets - 120 day limitation
-Income payments attributable to principal (reported monthly -
attach master servicer report)
-Margin Excess (if applicable)
-cumulative paid Price Differential (Interest)
Aggregate Eligible Assets par value (summation of 4, 5, & 6)
The reciprocal of Buyer's Margin Percentage divided by 100.
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<PAGE> 28
EXHIBIT D
ONYX ACCEPTANCE CORPORATION
8001 IRVINE CENTER DRIVE
FIFTH FLOOR
IRVINE, CALIFORNIA 92618
February __, 1998
Merrill Lynch Mortgage Capital Inc.
Merrill Lynch World Headquarters
World Financial Center
North Tower
New York, New York 10281
Gentlemen:
This letter will confirm that Onyx Acceptance Corporation, a Delaware
corporation ("Onyx"), agrees to absolutely and unconditionally guaranty to
Merrill Lynch Mortgage Capital Inc. and any of its affiliates (collectively, the
"Beneficiary"), the full and prompt payment and performance of the obligations,
undertakings and liabilities of Onyx Acceptance Funding Corporation, a Delaware
corporation ("Assignor"), arising under the terms and provisions of a Master
Repurchase Agreement (the "Agreement"), dated as of February 4, 1998 by and
between Assignor and Merrill Lynch Mortgage Capital Inc. ("MLMCI"), in an amount
not to exceed 10% of the aggregate outstanding amount owed by Assignor to MLMCI
under the Agreement (such obligations, undertakings and liabilities are herein
referred to as the "Guarantied Obligations"). Onyx hereby expressly consents to
any amendment to the Agreement as may be agreed upon by Assignor and MLMCI and
waives notice of any such amendment. A copy of the Agreement is attached hereto
as Exhibit A. Capitalized terms used and not otherwise defined herein shall have
the meanings assigned in the Agreement.
Onyx hereby represents and warrants to you that Assignor is a direct or
an indirect wholly-owned subsidiary of Onyx.
Onyx hereby agrees that if Assignor shall fail at any time to make due
and punctual payment to the Beneficiary of any Guarantied Obligation or if
Assignor shall fail at any time to perform any other Guarantied Obligation to
the Beneficiary, Onyx will forthwith pay such amount and perform such obligation
without demand therefor.
Onyx covenants and agrees to immediately notify MLMCI if a
representation, warranty or covenant of Assignor under Agreement has been
breached or if an Event of Default shall have occurred.
Onyx, to the extent permitted by law, hereby waives any requirement that
the Beneficiary take legal action against Assignor before enforcing this
guaranty; agrees that its obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the Guarantied
Obligations or the dissolution, liquidation, reorganization or other change
regarding the Assignor or the Assignor seeking protection, or having a case or
proceeding commenced against it, under any law for the protection of debtors or
creditors; waives diligence, presentment, demand for payment or performance,
protest or notice or other formality of any kind whatsoever; waives filing of
claims with any court in case of the insolvency, reorganization or bankruptcy of
the Assignor;
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<PAGE> 29
waives any fact, event or circumstance that might otherwise constitute a legal
or equitable defense to or discharge of Onyx, including (but without typifying
or limiting this waiver) failure by the Beneficiary to perfect a security
interest in any collateral securing performance of any Guarantied Obligation and
any delay by the Beneficiary in exercising any of its rights hereunder. Onyx
covenants that this guaranty will not be discharged except by full and final
payment and performance to the Beneficiary of all Guarantied Obligations
incurred while it is effective, and agrees that this guaranty shall continue to
be effective or be reinstated (as the case may be) if at any time all or any
part of any payment or interest thereon or other performance by Assignor is
avoided or must otherwise be restored by the Beneficiary. Onyx hereby further
consents to any renewal or modification of any Guarantied Obligation or any
extension of the time within which such is to be performed and to any other
indulgences, whether before or after the date of this guaranty.
Onyx agrees to pay on demand all out-of-pocket expenses (including legal
fees and disbursements) incurred by the Beneficiary in connection with the
enforcement and protection of its rights hereunder.
This is a continuing guaranty and will remain in effect until thirty
(30) days after written notice of termination is received by Merrill Lynch
Mortgage Capital Inc., Merrill Lynch World Headquarters, World Financial Center,
North Tower, 8th Floor, New York, New York 10281, Attention: Timothy M.
Loughlin. Any such termination shall not affect or reduce Onyx's obligations
hereunder for any liability of Assignor that arose prior to the expiration of
said thirty-day period. This guaranty shall terminate and shall be of no further
force or effect upon full payment of all amounts due to MLMCI under the
Agreement. This guaranty shall inure to the benefit of any successor of the
Beneficiary and be binding on any successor or assignee of Onyx.
This guaranty shall be governed by and construed in accordance with the
laws of the State of New York. Onyx hereby agrees that (i) any dispute or
controversy arising out of or relating to this guaranty, the Agreement or the
Note shall be submitted to arbitration before the American Arbitration
Association, (ii) the arbitration proceedings shall be conducted in New York,
New York and (iii) the decision of the arbitrators shall be final and judgment
may be entered on the award. In the event that such arbitration is unavailable,
Onyx hereby submits to the jurisdiction of the United States Federal and New
York State courts situated in the City, County, and State of New York and hereby
agrees that any litigation arising out of or relating to this guaranty, the
Agreement or the Note shall be brought in such courts. Each provision and
agreement herein shall be treated as separate and independent from any other
provision or agreement herein and shall be enforceable notwithstanding the
non-enforceability of any such other provision or agreement.
Any demand by MLMCI for payment or performance by Onyx shall be by a
written demand to Onyx, which shall be deemed to have been duly given if made by
facsimile transmission to Onyx Acceptance Corporation, 8001 Irvine Center Drive,
Fifth Floor, Irvine, California 92618, Attention: Don P. Duffy, Phone: (714)
450-5505, Fax: (714) 450-5530 or if personally delivered at or upon the fifth
day after deposit in the mails, mailed by registered mail, postage prepaid, to
Onyx Acceptance Corporation, 8001 Irvine Center Drive, Fifth Floor, Irvine,
California 92618, Attention: Don P. Duffy.
Very truly yours,
ONYX ACCEPTANCE CORPORATION
By: _________________________
Name: _______________________
Title: ______________________
D-2
<PAGE> 30
EXHIBIT E
SELLER'S PHYSICAL DAMAGE POLICY
E-1
<PAGE> 31
EXHIBIT F
FORM OF DEALER AGREEMENT
F-2
<PAGE> 32
EXHIBIT G
AFFILIATE PURCHASE AGREEMENT
G-1
<PAGE> 33
ANNEX II
Names and Addresses for Communications Between Parties
MERRILL LYNCH MORTGAGE CAPITAL, INC.
Merrill Lynch World Headquarters
World Financial Center
North Tower - 8th Floor
New York, New York 10281
Attention: Timothy M. Loughlin
Telephone: (212) 449-5939
Telecopy: (212) 449-6673
with a copy to
Michael A. Blum
Director
Merrill Lynch World Headquarters
World Financial Center
North Tower - 8th Floor
New York, New York 10281
Telephone: (212) 449-8486
Telecopy: (212) 449-6673
and
Michael P. Peck, Esq.
Brown & Wood LLP
One World Trade Center
New York, New York 10048
Telephone: (212) 839-5576
Telecopy: (212) 839-5599
ONYX ACCEPTANCE FUNDING CORPORATION
8001 Irvine Center Drive
Fifth Floor
Irvine, California 92718
Attention: Don P. Duffy
Telephone: (714) 450-5505
Telecopy: (714) 450-5530
II-1
<PAGE> 1
EXHIBIT 10.103
MASTER ASSIGNMENT AGREEMENT
BETWEEN
ONYX ACCEPTANCE FUNDING CORPORATION
AND
MERRILL LYNCH MORTGAGE CAPITAL INC.
DATED AS OF FEBRUARY 4, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
SECTION 1. DEFINITIONS; CONSTRUCTION....................................................... 1
(a) Definitions........................................................ 1
(b) Accounting Terms and Determinations................................ 5
(c) Other Definitional Terms........................................... 5
SECTION 2. GRANT OF SECURITY INTEREST; DELIVERY OF
COLLATERAL; LOANS DISCRETIONARY.................................... 6
(a) Grant of Security Interest......................................... 6
(b) Delivery of Instruments of Transfer................................ 6
(c) Funding of Loans................................................... 6
SECTION 3. EARNINGS ON COLLATERAL.......................................................... 7
SECTION 4. CONFIRMATION STATEMENT.......................................................... 8
SECTION 5. MARGIN DETERMINATIONS........................................................... 8
(a) Margin Requirement................................................. 8
(b) Current Margin..................................................... 8
(c) Supplemental Collateral............................................ 8
(d) Release of Supplemental Collateral................................. 8
SECTION 6. RELEASE AND SUBSTITUTION OF COLLATERAL.......................................... 9
SECTION 7. CONDITIONS TO THE LOANS......................................................... 9
(a) Conditions to the Effective Date................................... 9
(b) Conditions Precedent to all Loans and Substitutions................ 10
SECTION 8. REPRESENTATIONS AND WARRANTIES.................................................. 12
(a) Due Incorporation.................................................. 12
(b) Authorization...................................................... 12
(c) No Conflict........................................................ 12
(d) Approvals, etc..................................................... 12
(e) Good Title......................................................... 13
(f) Tax Liens.......................................................... 13
(g) Financial Statements............................................... 13
(h) No Litigation...................................................... 13
(i) Disclosure......................................................... 13
(j) Permits, Licenses, Approvals, Consents, etc........................ 14
(k) The Investment Company Act......................................... 14
(l) Ownership of Assignor.............................................. 14
SECTION 9. AFFIRMATIVE COVENANTS........................................................... 14
(a) Financial Statements and Other Information......................... 14
(b) Existence, Conduct of Business, etc................................ 15
(c) Taxes.............................................................. 15
(d) Laws............................................................... 15
(e) Name and Locations................................................. 15
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
(f) Records............................................................ 16
(g) Pay Obligations.................................................... 16
(h) Notices............................................................ 16
SECTION 10. NEGATIVE COVENANTS........................................................ 16
(a) Liens.............................................................. 16
(b) Mergers, Sales, Dissolution, etc................................... 17
(c) Corporate Changes.................................................. 17
(d) Use of Proceeds.................................................... 17
(e) Further Covenants.................................................. 17
SECTION 11. EVENTS OF DEFAULT......................................................... 17
(a) Nonperformance..................................................... 17
(b) Termination of Interest............................................ 18
(c) Act of Insolvency.................................................. 18
(d) Material Adverse Change............................................ 18
(e) Default Under Other Contracts...................................... 18
(f) Merger or Consolidation............................................ 18
(g) Anticipated Insolvency............................................. 18
(h) Final Judgment..................................................... 18
(i) Breach of Credit Covenants......................................... 18
(j) Breach of Representation........................................... 19
(k) Breach of Covenant................................................. 19
SECTION 12. REMEDIES.................................................................. 19
(a) Action Regarding Collateral........................................ 19
(b) Deficiency......................................................... 20
(c) Private Sale....................................................... 20
(d) Application of Proceeds............................................ 20
(e) Default Rate of Interest........................................... 21
(f) Attorney-in-Fact................................................... 21
(g) Payments on Collateral to Assignor................................. 21
(h) Cross-Collateralization; Right of Set-Off.......................... 21
SECTION 13. MATURITY DATE; INTEREST PAYMENT DATES;
REPAYMENT OF PRINCIPAL............................................. 22
(a) Payment on Maturity Date........................................... 22
(b) Interest Payment................................................... 22
(c) Payment of Principal............................................... 22
(d) Event of Default................................................... 22
SECTION 14. PAYMENT OF TAX LIABILITY.................................................. 22
SECTION 15. GENERAL PROVISIONS........................................................ 22
(a) No Waiver.......................................................... 22
(b) Governing Law; Severability........................................ 23
(c) Construction....................................................... 23
(d) Assignment......................................................... 23
(e) Notices, Payments, Deliveries...................................... 23
(f) Termination........................................................ 24
(g) Aggregate Amount of Loans; Disbursement of Funds................... 24
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
(h) Expenses........................................................... 25
(i) MLMCI's Right to Pledge............................................ 25
(j) Indemnification.................................................... 25
(k) Further Assurances................................................. 25
(l) Remedies Cumulative................................................ 26
(m) Litigation......................................................... 26
EXHIBIT A A-1
LOAN SCHEDULE..............................................................................A-4
EXHIBIT B B-1
EXHIBIT C C-1
EXHIBIT D D-1
EXHIBIT E E-1
EXHIBIT F F-1
</TABLE>
iii
<PAGE> 5
THIS AGREEMENT is made as of the 4th day of February, 1998 by and
between ONYX ACCEPTANCE FUNDING CORPORATION ("Assignor") and MERRILL LYNCH
MORTGAGE CAPITAL INC. ("MLMCI"). By executing this Agreement, Assignor and MLMCI
agree to be bound by the terms of this Agreement.
WITNESSETH
WHEREAS the parties elect to enter into this Agreement and, at the
request of Assignor, MLMCI may from time to time at its option agree to make one
or more loans (in each instance, a "Loan") to Assignor, which Loans shall be
limited in aggregate outstanding principal amount to the Maximum Advance Amount,
said Loans to be evidenced by Assignor's Note (the "Note") of even date
herewith, maturing on the Maturity Date (as defined herein), a form of which is
attached hereto as Exhibit A; and
WHEREAS, in order to induce MLMCI to make Loans from time to time to
it, Assignor has agreed to assign and pledge to MLMCI and grant to MLMCI a lien
upon and a security interest in the Collateral (as hereinafter defined) for the
purpose of securing its obligations under the Note;
NOW, THEREFORE, in consideration of the foregoing and of the
covenants and agreements hereinafter set forth, Assignor and MLMCI agree as
follows:
DEFINITIONS; CONSTRUCTION
Definitions. As used herein, the following terms shall have the
meaning herein specified (to be equally applicable to be the singular and plural
forms of the terms defined):
"ABS Issuance Agreements" shall mean the agreements pursuant to which
the related Pledged ABS has been issued, including any agreements relating to
the payment or distribution of amounts to the holder of such Pledged ABS, which
agreements have been previously approved by MLMCI or its affiliate.
"Act of Insolvency" shall have the meaning ascribed to it in Section
11(c) hereof.
"Agreement" shall mean this Master Assignment Agreement, as amended,
supplemented or otherwise modified from time to time in accordance with its
terms.
"Approvals" shall have the meaning set forth in Section 8(d) hereof.
"Assignor" shall have the meaning set forth in the preamble hereof.
"Book Net Worth" shall refer to the equity of Assignor determined in
accordance with GAAP.
"Business Day" shall mean any day excluding Saturday, Sunday, or any
other day on which banks in New York, New York or California are authorized or
required by law to close or a day on which trading by and between banks in
Dollars in the London interbank market is not conducted.
"Closing Date" shall mean with respect to each Loan, the settlement date
set forth in the Confirmation Statement applicable to such Loan.
"Collateral" shall have the meaning ascribed thereto in Section 2 hereof
and shall include any Supplemental Collateral.
"Confirmation Statement" shall have the meaning set forth in Section 4
hereof.
<PAGE> 6
"Covenant Compliance Certificate" shall refer to a certificate of
Assignor and Onyx to the effect that there has not occurred any of the events
listed in Section 11(i) as of the date of such certificate.
"Current Margin" shall have the meaning ascribed to it in Section 5(b)
hereof.
"Default" shall mean any condition, act or event which, with notice or
lapse of time or both, would constitute an Event of Default.
"Default Rate" shall have the meaning specified in Section 12(e) hereof.
"Dollar" and the sign "$" shall mean lawful money of the United States
of America.
"Effective Date" shall mean the date that all of the conditions set
forth in Section 7 hereof have been met.
"Event of Default" shall have the meaning set forth in Section 11
hereof.
"GAAP" shall have the meaning specified in Section 1(b) hereof.
"Governmental Authority" shall mean any nation, government, or State, or
any political subdivision of any of them, or any court, entity or agency
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guaranty" shall mean the guaranty of Onyx substantially in the form set
forth at Exhibit E hereto.
"Indebtedness" shall mean, for any Person: (a) obligations created,
issued or incurred by such Person for borrowed money (whether by loan, the
issuance and sale of debt securities or the sale of property to another Person
subject to an understanding or agreement, contingent or otherwise, to repurchase
such property from such Person); (b) obligations of such Person to pay the
deferred purchase or acquisition price of property or services, other than trade
accounts payable (other than for borrowed money) arising, and accrued expenses
incurred, in the ordinary course of business so long as such trade accounts
payable are payable within 90 days of the date the respective goods are
delivered or the respective services are rendered; (c) Indebtedness of others
secured by a lien on the property of such Person, whether or not the respective
Indebtedness so secured has been assumed by such Person; (d) obligations
(contingent or otherwise) of such Person in respect of letters of credit or
similar instruments issued or accepted by banks and other financial institutions
for account of such Person; (e) capital lease obligations of such Person; (f)
obligations of such Person under repurchase agreements or like arrangements; (g)
Indebtedness of others guaranteed by such Person; (h) all obligations of such
Person incurred in connection with the acquisition or carrying of fixed assets
by such Person; and (i) Indebtedness of general partnerships of which such
Person is a general partner.
"Lien" shall mean any interest in property, or a claim by, a Person
other than the owner of such property, whether such interest is based on the
common law, statute or contract, and including, but not limited to, a security
interest, security title or lien arising from a security agreement, mortgage,
deed of trust, deed to secure debt, encumbrance, pledge, conditional sale,
financing statement or trust receipt or a lease, consignment or bailment for
security purposes.
"Loan" shall have the meaning set forth in the preamble hereof.
"Loan Documents" shall mean and include this Agreement, the Note, each
Confirmation Statement, the Guaranty, when delivered, and all instruments and
documents now or hereafter executed and/or delivered pursuant hereto or thereto
or in connection herewith or therewith.
2
<PAGE> 7
"Margin Requirement" shall have the meaning set forth in Section 5(a)
hereof.
"Margin Stock" shall have the meaning provided in Regulation G of the
Board of Governors of the Federal Reserve System.
"Market Value" shall mean the fair market value of any Pledged ABS (to
the date that it is first eligible to be redeemed) as determined in accordance
with MLMCI's valuation model for such type of Pledged ABS, which valuation model
shall take into account, among other variables deemed appropriate by MLMCI from
time to time, the appropriate prevailing discount rate, current market loss rate
assumptions and current market prepayment speeds; provided, however, that such
fair market value or valuation model may be modified by MLMCI in its discretion
using reasonable business judgment and taking into consideration relevant market
conditions at the time of such determination. The pricing assumptions used by
MLMCI in determining the fair market value of any Pledged ABS will be set forth
in the related Confirmation Statement.
"Master Repurchase Agreement" shall mean the Master Repurchase
Agreement, dated as of February 4, 1998, between MLMCI and Assignor, as the same
shall be amended from time to time.
"Material Adverse Change" shall mean, with respect to Assignor or Onyx,
as applicable, a material adverse change in (a) the business, operations,
properties, prospects or condition (financial or otherwise) of such Person or
(b) the ability of such Person to perform its obligations hereunder and under
the other Loan Documents.
"Maturity Date" shall mean with respect to each Loan the earlier of (a)
one year from the related Closing Date as specified in the Confirmation
Statement with respect to such Loan, subject to extension under Section 13(b),
and (b) the Termination Date.
"Maximum Advance Amount" shall mean, as of any date of determination,
the lesser of (i) $50,000,000 and (ii) 33% of the average aggregate amount of
advances outstanding under the Master Repurchase Agreement during each calendar
quarter; provided, however, that the first $10,000,000 of the Maximum Advance
Amount shall not be subject to the restriction in clause (ii) above from the
Effective Date until March 31, 1998.
"MLMCI" shall have the meaning set forth in the preamble hereof.
"Net Worth" shall refer to the sum of equity and subordinated debt of
Onyx determined in accordance with GAAP less the sum of (i) intercompany
receivables, (ii) loans to officers or employees of Onyx, (iii) goodwill and
(iv) deferred taxes, in every case determined on a consolidated basis.
"Note" shall have the meaning set forth in the preamble hereof.
"Obligations" shall mean the principal of and all interest on the Loans,
all fees, expenses, reimbursements (including, without limitation the reasonable
fees and expenses of attorneys), taxes and indemnities and other amounts payable
by the Assignor under the Loan Documents and under any other documents or
instruments executed and delivered by Assignor in connection therewith to MLMCI
pursuant to Section 2 hereof or any of their respective successors or assigns,
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising and however arising.
"Onyx" shall mean Onyx Acceptance Corporation, the direct or indirect
sole shareholder of Assignor.
"Outstanding Loans" shall mean on the date of determination thereof the
aggregate unpaid principal amount of each Loan made hereunder.
3
<PAGE> 8
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, limited liability company, trust,
unincorporated association or government (or any agency, instrumentality or
political subdivision thereof).
"Pledged ABS" shall mean any residual, subordinated or interest strip
class of asset backed securities (i) issued in connection with a securitization
involving Assignor, Onyx or an affiliate of either of them, and in which MLMCI
or an affiliate of MLMCI has acted as the lead or co-lead underwriter or
placement agent and (ii) pledged by Assignor hereunder and accepted by MLMCI in
connection with a Loan hereunder.
"Prime Rate" shall mean the prime rate of U.S. commercial banks as
published in The Wall Street Journal (or, if more than one such rate is
published, the average of such rates).
"Proceeds" shall have the meaning assigned to it under the UCC and, in
any event, shall include, but not be limited to, (i) any and all Proceeds of any
insurance, indemnity, warranty or guaranty payable to the Assignor from time to
time with respect to any of the Collateral, (ii) any and all payments (in any
form whatsoever) made or due and payable to Assignor from time to time in
connection with any reacquisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Authority
and any sale, transfer or other disposition of all or any part of the
Collateral, and (iv) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
"Substitute Collateral" shall have the meaning set forth in Section 6
hereof.
"Supplemental Collateral" shall mean collateral acceptable to MLMCI in
accordance with the provisions of Section 5(c) hereof.
"Termination Date" shall have the meaning ascribed to it in Section
15(f) hereof.
"UCC" shall mean the Uniform Commercial Code in effect from time to time
in the applicable jurisdiction.
Accounting Terms and Determinations. Unless otherwise defined or
specified herein, all accounting terms shall be construed herein, all accounting
determinations hereunder shall be made, all financial statements required to be
delivered hereunder shall be prepared and all financial records shall be
maintained in accordance with generally accepted accounting principles ("GAAP")
applied on a basis consistent with the financial statements referred to in
Sections 9(a)(i) and 9(a)(ii) hereof.
Other Definitional Terms. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement, and article, section, schedule, exhibit and like references are to
this Agreement unless otherwise specified. Any defined term which relates to a
document shall include within its definition any amendments, modifications,
renewals, restatements, extensions, supplements or substitutions which may have
been heretofore or may be hereafter executed in accordance with the terms
hereof.
4
<PAGE> 9
GRANT OF SECURITY INTEREST; DELIVERY OF
COLLATERAL; LOANS DISCRETIONARY
Grant of Security Interest. Assignor hereby grants, pledges,
assigns, transfers and delivers to MLMCI with respect to each Loan on the
Closing Date, and grants to MLMCI a lien upon and continuing security interest
in all of Assignor's right, title and interest in, to and under all of the
following whether now owned or existing, or at any time hereafter acquired or
arising, by Assignor or in which Assignor now has or at any time in the future
may acquire any right, title or interest (all of which being hereinafter
collectively called the "Collateral"): (i) the Pledged ABS described in the
Confirmation Statement delivered pursuant to Section 4 relating to a Loan, (ii)
any Supplemental Collateral that may be granted to MLMCI pursuant to Section
5(c) hereof (provided, however, that any representations, warranties or
covenants contained herein, and the grant of a lien and security interest with
respect to any Supplemental Collateral, shall be effective as to any
Supplemental Collateral (or any Proceeds, distributions or other amounts
realized in respect of such Supplemental Collateral) only upon the delivery of
such Supplemental Collateral to MLMCI pursuant to such Section 5(c) hereof),
(iii) all Proceeds, distributions and other amounts realized in respect of any
of the foregoing, as security for the due and punctual payment by Assignor of
the Note and any amounts that may become payable thereunder or hereunder and
(iv) with respect to any Loan, all books and records of Assignor pertaining to
any of the foregoing.
Delivery of Instruments of Transfer. Assignor shall, with respect to
each Loan, deliver to MLMCI the Collateral endorsed in the name of MLMCI or its
nominee or with properly endorsed instruments of transfer (including, without
limitation, any necessary assignments, corporate resolutions and opinions of
legal counsel) that will enable MLMCI to cause such Collateral to be so
registered without further action on the part of the Assignor and such
instruments of transfer to the appropriate transfer agent.
Funding of Loans. (i) MLMCI Discretion. MLMCI shall not be required
to make any Loans hereunder and any Loan hereunder shall be made by MLMCI in its
sole discretion upon written request delivered by Assignor to MLMCI not less
than one (1) Business Day prior to the applicable Closing Date.
Loan Advances. If MLMCI determines to make any Loan hereunder,
then in accordance with the related Confirmation Statement, MLMCI shall advance
such Loan to Assignor at a principal amount, described in such Confirmation
Statement, up to a maximum of 70% of the Market Value of the Collateral until
the Guaranty is delivered and 75% of the Market Value of the Collateral
thereafter. Each Loan advance hereunder shall be recorded as such by MLMCI and
be evidenced by the "Loan Schedule" attached to the Note, and any repayments of
each such Loan shall be recorded as such by MLMCI and be evidenced by such "Loan
Schedule"; provided, however, that the failure of such recordation by MLMCI
shall not affect the rights of the parties hereunder with respect to such Loan.
5
<PAGE> 10
Interest Rate. Each Loan shall bear interest, as calculated on a
monthly basis from and including the related Closing Date to but excluding the
date such Loan is paid in full, on the unpaid principal amount thereof from the
related Closing Date through maturity at a rate per annum equal to (a)
seventy-five (75) basis points in excess of the Prime Rate (determined daily)
with respect to Loans for which the provision of clause (ii) of the definition
of Maximum Advance Amount is not satisfied and (b) in all other cases, two
hundred and fifty (250) basis points over the prevailing London Interbank
Offered Rate for one-month United States Dollar deposits as set forth on page
8695 of Telerate as of 8:00 a.m. New York City time on the last Business Day of
the month preceding the month in which such interest is currently accruing.
MLMCI's Duty of Care. Except as herein provided in this Section
2(d), MLMCI's sole duty with respect to the Collateral shall be to use
reasonable care in the safekeeping, custody, use, operation and preservation of
the Collateral in its possession or control. MLMCI shall incur no liability to
Assignor for any act of government, act of God, or other destruction in whole or
in part or negligence or wrongful act of custodians or agents selected by and
supervised by MLMCI with reasonable care, or MLMCI's failure to provide adequate
protection or insurance for the Collateral. MLMCI shall have no obligation to
take any action to preserve any rights in any of the Collateral against prior
parties, and Assignor hereby agrees to take such action. Assignor shall defend
the Collateral against all such claims and demands of all persons, at all times,
as are adverse to MLMCI. MLMCI shall have no obligation to realize upon any
Collateral, except through proper application of any distributions with respect
to the Collateral made directly to MLMCI or its agent(s). So long as MLMCI shall
act in a commercially reasonable manner, Assignor hereby waives the defense of
impairment of the Collateral.
EARNINGS ON COLLATERAL
All payments and distributions, whether in cash or in kind, made on or
with respect to the Collateral shall, so long as an Event of Default as defined
in Section 11 hereof shall not have occurred and be continuing, be paid to the
registered holder thereof directly by the applicable paying agent, and upon
receipt by such holder such payments and distributions shall be released from
the lien and security interest granted to MLMCI hereunder. Subject to compliance
with the ABS Issuance Agreements, MLMCI may, in its sole discretion after the
occurrence and during the continuation of an Event of Default, cause all such
payments and distributions to be paid, delivered or transferred directly to
MLMCI.
6
<PAGE> 11
CONFIRMATION STATEMENT
MLMCI shall, with respect to each Loan, deliver a confirmation statement
substantially in the form attached hereto as Exhibit B (in each case, the
"Confirmation Statement") to Assignor confirming the agreement between Assignor
and MLMCI as to the specific terms of the Loan. Each such Confirmation Statement
shall constitute a binding agreement between Assignor and MLMCI, and this
Agreement is hereby incorporated in each such Confirmation Statement and made a
part thereof as if it were set out in full in each such Confirmation Statement.
Each such Confirmation Statement will be binding upon the parties hereto unless
written notice of objection is given by the objecting party to the other party
within two (2) Business Days after the objecting party's receipt of such
Confirmation Statement.
MARGIN DETERMINATIONS
Margin Requirement. A margin requirement (the "Margin Requirement")
expressed as a percentage shall be established by MLMCI with respect to each
Loan on the related Closing Date and shall be set forth in the related
Confirmation Statement. The Margin Requirement for any Loan shall be 30% until
the Guaranty is delivered and 25% thereafter.
Current Margin. MLMCI may, in its reasonable discretion, from time
to time calculate the Current Margin with respect to any Loan, which shall equal
the amount by which (i) 100% exceeds (ii) a fraction (expressed as a percentage)
(A) the numerator of which is the then outstanding principal amount of such Loan
together with accrued and unpaid interest thereon to the date of determination
and (B) the denominator of which shall be the then current Market Value of the
related Collateral (including any Supplemental Collateral delivered pursuant to
this Agreement) then held by MLMCI.
Supplemental Collateral. If MLMCI shall at any time determine with
respect to a Loan that the Current Margin is less than the related Margin
Requirement, MLMCI may in its discretion notify Assignor of such fact, and
Assignor shall, on the day of such notice, if such notice is received prior to
10:00 a.m. New York City time, and on the Business Day next succeeding the day
of such notice, if such notice is received after 10:00 a.m. New York City time,
deliver to MLMCI cash or Supplemental Collateral acceptable to MLMCI in its sole
reasonable judgment as Collateral hereunder, which cash shall be applied to
reduce the principal balance of the related Loan and which Supplemental
Collateral shall, in the aggregate, equal an amount such that, after giving
effect to the application of such cash and the delivery of such Supplemental
Collateral, the Current Margin for such Loan will be at least equal to the
related Margin Requirement. Delivery of Supplemental Collateral pursuant to this
Section 5(c) shall be in such manner as is acceptable to, and under such
additional conditions as may be required by, MLMCI in its sole reasonable
judgment.
Release of Supplemental Collateral. If at any time the Current
Margin for a Loan exceeds the Margin Requirement for such Loan and provided that
Assignor shall not have failed to satisfy the requirements of Section 5(c) with
respect to any notice thereunder given by MLMCI relating to any Loan, Assignor
may, upon notice to MLMCI, demand that MLMCI
7
<PAGE> 12
redeliver all or any portion of the Supplemental Collateral, provided, however,
that after giving effect to such redelivery, the Current Margin would not be
less than the Margin Requirement, and MLMCI shall make good delivery of such
Supplemental Collateral, in a manner equivalent to the manner in which such
Supplemental Collateral was delivered to MLMCI, no later than the Business Day
following receipt by MLMCI of such notice. In such connection, MLMCI shall
execute such other documents and take such other actions as the Assignor may
reasonably request in order to evidence and give effect to the release of such
Supplemental Collateral from the security interest granted by this Agreement.
RELEASE AND SUBSTITUTION OF COLLATERAL
Assignor may obtain the release from MLMCI of the security interest in
and lien on all or any part of the Collateral at any time, and from time to
time, by paying to MLMCI as a repayment the amount of the Loan outstanding with
respect to such Collateral to be so released and MLMCI shall effect such release
upon such repayment; provided, however, that the date of any such repayment must
be acceptable to MLMCI. Any release of the security interest in and lien on all
or any part of the Collateral as a result of a repayment or a substitution
pursuant to this Section shall be evidenced by the execution and delivery by
MLMCI of appropriate documentation to evidence such release.
MLMCI shall allow Assignor, in Assignor's sole discretion, to provide
collateral acceptable to MLMCI, in MLMCI's sole reasonable discretion, to be
substituted for existing Collateral of equal or greater market value. All
certificates or instruments representing such substituted collateral shall be
accompanied by duly executed instruments of transfer or assignments in blank,
all in form and substance reasonably satisfactory to MLMCI.
CONDITIONS TO THE LOANS
Conditions to the Effective Date. The obligation of MLMCI to enter
into this Agreement is subject to the satisfaction by Assignor of the following
conditions on the Effective Date:
Loan Documents. MLMCI shall have received the following documents
each in form and substance satisfactory to MLMCI and its counsel:
this Agreement, executed and delivered on behalf of Assignor by
a duly authorized officer of Assignor,
the Note, executed and delivered on behalf of Assignor by a duly
authorized officer of Assignor,
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the related Collateral, if delivery of the Collateral is
required in order to perfect MLMCI's security interest in such
Collateral, and
the Master Repurchase Agreement, executed and delivered on
behalf of Assignor by a duly authorized officer of Assignor.
Proceedings of Assignor. MLMCI shall have received a copy of the
resolutions in form and substance satisfactory to MLMCI and its counsel, of
Assignor authorizing (i) the execution, delivery and performance of the Loan
Documents and the other documents to be executed and/or delivered by it pursuant
hereto or thereto or in connection herewith or therewith, (ii) the borrowings
contemplated hereunder and (iii) the granting by it of the security interest
contemplated hereby, certified by a duly authorized officer of Assignor as of
the Effective Date, which certificate shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded as of the date
of such certificate.
Corporate Documents of Assignor. MLMCI shall have received true and
complete copies of the Certificate of Incorporation and By-Laws of Assignor
(including any and all amendments, supplements and modifications thereto)
certified to such effect by a duly authorized officer of Assignor as of the
Effective Date.
No Violation. The consummation of the transactions contemplated
hereby and by the other Loan Documents shall not contravene, violate or conflict
with, nor involve MLMCI in a violation of, any requirement of law.
Permits, Licenses, Approvals, Consent, etc. MLMCI shall have
received a certificate of a duly authorized officer of Assignor certifying that
all permits, licenses, approvals and consents required in connection with the
execution, delivery and performance by Assignor and the validity and
enforceability against Assignor of this Agreement and the other Loan Documents
have been obtained and such permits, licenses, approvals and consents are in
full force and effect and have not been amended, modified, revoked or rescinded.
Corporate Documents of Onyx. MLMCI shall have received true and
complete copies of the Certificate of Incorporation and By-Laws of Onyx
(including any and all amendments, supplements and modifications thereto)
certified to such effect by a duly authorized officer of Onyx as of the
Effective Date.
Additional Matters. All other documents and legal matters in
connection with the transactions contemplated by this Agreement and the other
Loan Documents shall be reasonably satisfactory in form and substance to MLMCI
and its counsel.
Conditions Precedent to all Loans and Substitutions. The making of
any Loan or the permitting of any substitution of Substitute Collateral by MLMCI
hereunder is, except as otherwise provided in this Section 7, subject to
compliance by Assignor with the following conditions precedent and the other
terms and conditions hereof and, the giving of any notice by
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Assignor with respect to a Loan pursuant to Section 4 and the acceptance of the
Proceeds of any Loan by Assignor and the substitution of any Substitute
Collateral shall be deemed certification by Assignor that the following
conditions shall have been met:
Representations and Warranties. Each of the representations and
warranties made by Assignor herein and in the other Loan Documents are true and
correct on and as of the Closing Date, before and after giving effect to the
Loan (and the application of the Proceeds therefrom) or the substitution, as
though made on and as of such date.
No Default. Before and after giving effect to such Loan (and the
application of Proceeds therefrom) or such substitution, no Default or Event of
Default shall have occurred and is continuing on and as of the Closing Date.
Financing Statements. The separate financing statement, instrument or
other document, if required by MLMCI to be recorded and/or filed with respect to
the subject Loan or substitution, shall have been so recorded and/or filed.
Good Standing Certificates. On or prior to the initial Closing Date
hereunder and from time to time thereafter as MLMCI may reasonably request (but
not more frequently than quarterly), MLMCI shall have received original
certificates, in form and substance satisfactory to MLMCI and its counsel, from
the Secretary of State or other appropriate authority of such jurisdiction,
evidencing the good standing of Assignor and Onyx in their respective
jurisdiction of incorporation and in each other jurisdiction where the ownership
of their respective property or the conduct of its business requires such
qualification.
Legal Opinion of Counsel to Assignor and Onyx. On or prior to the
initial Closing Date hereunder and on each date after the initial Closing Date
that a security interest in Collateral is granted to MLMCI hereunder Assignor
shall cause to be delivered to MLMCI an opinion of counsel to Assignor and Onyx
(which counsel may be internal counsel for Onyx and shall be satisfactory to
MLMCI), in substantially the form attached hereto as Exhibit C or such other
form as MLMCI and Assignor may mutually agree.
Recordings and Filings. All material instruments and documents
(including, without limitation, financing statements and continuation
statements) required to be filed hereunder in order to create in favor of MLMCI
a perfected security interest in the Collateral hereunder shall have been
properly filed in each office in each relevant jurisdiction and copies of such
instruments and documents, stamped to indicate such filing, shall have been
delivered to MLMCI.
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Proceedings of Onyx. On the date of delivery of the Guaranty MLMCI
shall have received a copy of the resolutions in form and substance satisfactory
to MLMCI and its counsel, of Onyx authorizing the execution, delivery and
performance of the Guaranty certified by a duly authorized officer of Onyx as of
the date of delivery of the Guaranty, which certificate shall state that the
resolutions thereby certified have not been amended, modified, revoked or
rescinded as of the date of such certificate.
Guaranty. On and after the date of delivery of the Guaranty, the
Guaranty shall be in full force and effect.
REPRESENTATIONS AND WARRANTIES
In order to induce MLMCI to enter into this Agreement and to make the
Loans hereunder, Assignor hereby represents and warrants to MLMCI, and shall on
and as of the Closing Date of each Loan and each date on which Substitute
Collateral is substituted, be deemed to represent and warrant to MLMCI, that:
Due Incorporation. Assignor has been duly organized and is validly
existing as a corporation in good standing under the laws of the state of its
incorporation and is duly qualified and in good standing in each other
jurisdiction where the conduct of its business or the ownership, lease or
operation of its property requires such qualification.
Authorization. Assignor has full power and authority to execute and
deliver the Loan Documents and to perform its obligations hereunder and
thereunder; the Loan Documents have each been duly authorized by all necessary
action and neither requires any additional approval of any directors or officers
other than that which has already been obtained, each has been duly executed and
delivered by Assignor and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms, subject, as to enforcement,
to bankruptcy, insolvency, reorganization or similar laws of general
applicability relating to or affecting creditors' rights, to the assumption that
enforcement will be undertaken in a commercially reasonable manner and to
general principles of equity and equitable remedies, regardless of whether
enforcement is considered in a proceeding in equity or at law.
No Conflict. Neither the execution and delivery nor the performance
by Assignor of this Agreement or the Note will conflict with the governing
instruments of Assignor or conflict with, result in a breach of or constitute a
default or require any consent under any instrument or agreement to which
Assignor is a party or by which Assignor may be bound, or any law, order or
regulation applicable to Assignor of any court, governmental agency, authority
or body having jurisdiction over Assignor and do not and will not result in or
require the creation of any lien, security interest or other charge or
encumbrance (other than pursuant hereto) upon or with respect to any of
Assignor's properties.
Approvals, etc. Neither the execution and delivery nor the
performance by Assignor of this Agreement requires any authorization, approval,
consent, license, exemption (other than
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any self-executing exemption), filing, registration or the taking of any other
action in respect of any federal or state authority except where the failure to
comply with such requirement would not adversely affect the delivery, execution
or performance by Assignor of this Agreement or cause a Material Adverse Change.
Good Title. (i) Subject to the ABS Issuance Agreements, Assignor is
the owner of the Collateral and such Collateral is free and clear of all
security interests, liens, charges, encumbrances and rights of others, except
for the lien and security interest created hereby, and on the related Closing
Date, MLMCI has a first priority lien on and security interest in the Collateral
(including all Proceeds, distributions and other amounts realized in respect
thereof) in favor of MLMCI, subject to no prior security interest, lien, charge,
encumbrance or rights of others, and, MLMCI having taken possession of the
Collateral endorsed in the name of MLMCI or its nominee or delivered with such
instruments of transfer as provided in Section 2(b) hereof, no further action,
including any filing or recordation of any document, is currently required in
order to establish and perfect the liens on and security interests in the
Collateral in favor of MLMCI against any third parties in any jurisdiction.
Assignor's chief executive office and the place where its books and
records concerning the Collateral are kept is set forth on Exhibit D hereto.
Each location of Assignor where any of the Collateral is located is set forth on
Exhibit D.
Tax Liens. There are no delinquent federal, state, city, county or
other taxes relating to Assignor, the Collateral or any arrangement pursuant to
which the Collateral is issued that might, in the reasonable judgment of MLMCI,
materially adversely affect any of the Collateral or cause a Material Adverse
Change in Assignor, and all such delinquent tax liabilities have been satisfied
except those that are being contested by Assignor in good faith and with respect
to which payment has been stayed by a court of competent jurisdiction.
Financial Statements. Since the date of the most recent financial
statement delivered by Assignor to MLMCI, there has been no Material Adverse
Change. Assignor shall provide MLMCI with such financial statements and other
information as is contemplated in Section 9(a) hereof.
No Litigation. There are no actions, suits, investigations, or other
proceedings pending, or, to the best knowledge of Assignor, after due inquiry,
threatened, against or affecting Assignor by or before any court, arbitrator,
Governmental Authority which challenge any of the transactions contemplated
under this Agreement or any other Loan Document or could result in a Material
Adverse Change and there are no preliminary or permanent injunctions or orders
by any court or other Governmental Authority pending affecting this Agreement or
any other Loan Document or any of the transactions contemplated hereby or
thereby.
Disclosure. No certificate, statement, report or other document
furnished and no representation or warranty made or to be furnished or made to
MLMCI by or on behalf of
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Assignor in or in connection with this Agreement or any transaction contemplated
hereby, or in connection with any other Loan Document or any transaction
contemplated thereby, at the time furnished, contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
necessary in order to make the statements contained therein not misleading.
Permits, Licenses, Approvals, Consents, etc. Assignor has obtained
any and all permits, licenses, approvals and consents of any Governmental
Authority or other Person as may be required in connection with the execution,
delivery and performance by and the validity and enforceability against Assignor
of this Agreement and the other Loan Documents and the consummation of the
transactions contemplated hereby or thereby (all such permits, licenses,
approvals and consents, if any, are in full force and effect and have not been
amended, modified, revoked or rescinded).
The Investment Company Act. Assignor is not an "investment company",
or an entity "controlled by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
Ownership of Assignor. Assignor is a direct or indirect
wholly-owned subsidiary of Onyx.
AFFIRMATIVE COVENANTS
Until the Obligations are paid and satisfied in full and this Agreement
has been terminated, Assignor covenants and agrees that it will:
Financial Statements and Other Information. Furnish to MLMCI:
as soon as available and in any event within sixty (60) days after
the close of each of the first three (3) quarters of each fiscal year of
Assignor, the Onyx applicable quarterly Form 10-Q as filed with the Securities
and Exchange Commission, including the consolidating statements for the
Assignor, subject to normal recurring year-end audit adjustments, and as
prepared in accordance with GAAP;
as soon as available and in any event within one hundred and twenty
(120) days after the close of each fiscal year of Onyx, a consolidated balance
sheet of Onyx, a consolidated statement of income of Onyx and a consolidated
statement of changes in financial position of Onyx's consolidated financial
group as at the end of and for the fiscal year just closed, setting forth the
corresponding figures of the previous fiscal year, if applicable, in comparative
form, all in reasonable detail and certified (without any qualification or
exception deemed material by MLMCI); by independent public accountants selected
by Onyx and reasonably satisfactory to MLMCI;
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concurrently with the delivery of the financial statements required
to be furnished by Section 9(a)(ii) hereof, a certificate signed by the chief
executive or financial officer of Assignor, stating (1) that a review of the
activities of Assignor during such quarter or fiscal year, as the case may be,
has been made under his or her immediate supervision with a view to determining
whether Assignor has observed, performed and fulfilled all of its obligations
under this Agreement and whether Assignor is in compliance with the
representations and warranties in Section 8 hereof and the covenants in Sections
9 and 10 hereof, and (2) that there existed during such quarter or fiscal year,
as the case may be, no Event of Default and no Default or if any such Event of
Default or Default did exist, specifying the nature thereof, the period of
existence thereof and what action Assignor proposes to take, or has taken, with
respect thereto;
promptly, and in any event no later than five (5) Business Days,
after the commencement thereof, written notice of any material actions, suits or
proceedings (including arbitrations) against Assignor or Onyx before any court
or other Governmental Authority;
immediately upon becoming aware of any development or other
information which is reasonably likely to result in a Material Adverse Change of
Assignor or Onyx, as applicable, written notice specifying the nature of such
development or information, such anticipated effect and action, if any, Assignor
or Onyx proposes to take or has taken with respect thereto;
with reasonable promptness of Assignor or Onyx, as applicable, such
other information respecting any matter likely to result in a Material Adverse
Change of Assignor or Onyx, as applicable, as MLMCI may reasonably request from
time to time.
Existence, Conduct of Business, etc. Continue to engage primarily in
the business of the same general type as now conducted by it and preserve, renew
and maintain in full force and effect its existence and all permits, licenses,
approvals, consents, rights, privileges and franchises necessary or desirable in
the conduct or transaction of its business or the ownership or operation of its
properties or the lease of its properties to which it is a lessee.
Taxes. Assignor will pay and discharge all taxes, levies, liens and
other charges on its assets and on the Collateral that, in each case, in any
manner would create any lien or charge upon the Collateral.
Laws. Assignor will at all times comply in all material respects
with all laws, ordinances, rules and regulations of any federal, state,
municipal or other public authority having jurisdiction over Assignor or any of
its assets.
Name and Locations. Assignor will immediately advise MLMCI in
writing of the opening of any new chief executive office or the closing of any
such office and of any change in Assignor's name or the places where the books
and records pertaining to the Collateral are kept.
Records. Assignor will maintain records with respect to the
Collateral and the conduct and operation of its business in conformity with
general industry standards and with no
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less a degree of prudence than if the Collateral were held by Assignor for its
own account and will furnish MLMCI, upon reasonable request by MLMCI or its
designated representative, with reasonable information with respect to the
Collateral and the conduct and operation of its business. Assignor will permit
MLMCI or its designated representative to inspect Assignor's records with
respect to the Collateral and the conduct and operation of its business upon
reasonable notice from MLMCI or its designated representative, at such
reasonable times and with reasonable frequency, and to make copies or extracts
of any and all thereof. MLMCI shall act in a commercially reasonable manner in
requesting and conducting any inspection relating to the conduct and operation
of Assignor's business.
Pay Obligations. Pay, discharge or otherwise satisfy at or before
maturity or before they become delinquent, as the case may be, all its material
obligations of whatever nature, except when the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and the
Assignor has established adequate reserves with respect thereto and no Liens
have attached to the Collateral or any portion thereof.
Notices. Promptly, and in any event within one (1) Business Day of
the occurrence thereof, notify MLMCI in writing of (i) the occurrence of any
Default or Event of Default hereunder or under any other Loan Document or (ii)
any event of default by any party thereto under any indenture, mortgage, deed of
trust, agreement or other instrument or contractual obligation to which the
Assignor is a party or by which any of its properties may be bound or affected
which could result in a Material Adverse Change, and specifying in each case the
action the Assignor has taken or proposes to take with respect thereto.
Covenant Compliance Certificate. Deliver or cause to be delivered a
Covenant Compliance Certificate to MLMCI on the first Business Day of each
calendar month.
Monthly Collateral Report. Furnish or cause to be furnished to
MLMCI, on the last Business Day of each month, a report for each Pledged ABS
substantially in the form of, and containing the information set forth on,
Exhibit F hereto.
Guaranty. Assignor shall proceed in good faith to cause Onyx to
amend Onyx's existing warehouse agreements so as to enable Onyx to provide to
MLMCI a guaranty substantially in the form of the Guaranty, and after such
amendments have been made Assignor shall proceed in good faith to cause Onyx to
provide such guaranty to MLMCI.
NEGATIVE COVENANTS
Until the Obligations are paid and satisfied in full and this Agreement
has been terminated, the Assignor covenants and agrees that it will not:
Liens. Create, incur, assume or suffer to exist, any Lien on any of
the Collateral whether now owned or hereafter acquired, other than Liens in
favor of MLMCI hereunder.
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Mergers, Sales, Dissolution, etc. (i) Merge into or consolidate with
any other Person without the prior consent of MLMCI, which consent shall not be
unreasonably withheld, or (ii) assign, transfer, sell, lease, or otherwise
dispose of any of the Collateral, or all or substantially all of its other
property or assets to any other Person or (iii) wind up, liquidate or dissolve,
or agree to do any of the foregoing.
Corporate Changes. Change its name, principal place of business, the
location where its books and records are kept with respect to the Collateral or
corporate structure or ownership on less than thirty (30) days prior written
notice to MLMCI. MLMCI is hereby notified and acknowledges the prospective
change in Assignor's principal place of business as described in Section 9(e)
above.
Use of Proceeds. The Proceeds of the Loans made pursuant to this
Agreement will not be used by the Assignor, directly or indirectly, for the
purpose of purchasing or carrying any Margin Stock or for the purpose of
reducing or retiring any debt which was originally incurred to purchase or carry
Margin Stock or for any other purpose which might constitute the Loans under
this Agreement as being "purpose credit" within the meaning of Regulation G or X
of the Board of Governors of the Federal Reserve System.
Further Covenants. Without prior written consent of MLMCI, Assignor
will not: (i) assign, sell, transfer, pledge or grant any security interest in
or lien on any of the Collateral to anyone except MLMCI, permit any financing
statement (except any financing statements in favor of MLMCI) or assignment
(except for any assignments in favor of MLMCI) to be on file in any public
office with respect thereto, (ii) permit or suffer to exist any security
interest, lien, charge, encumbrance or right of others to attach to any of the
Collateral, except as contemplated by this Agreement, or (iii) consent to any
amendment or supplement to any ABS Issuance Agreement that is reasonably likely
to result in a material adverse affect on the Market Value of the Pledged ABS,
but excluding in any event any amendment or supplement that effectuates a
letter-of-credit and the limited quarterly substitution into a related reserve
fund for the release of cash as contemplated in such ABS Issuance Agreement.
EVENTS OF DEFAULT
Each of the following, so long as it shall not have been remedied, shall
constitute an "Event of Default" hereunder:
Nonperformance. Any failure to pay, whether on the acceleration
thereof or otherwise, any amounts due under the Note or any failure to pay any
amount due under this Agreement or to perform any provision of this Agreement in
accordance herewith, or any material breach of any representation, warranty or
covenant set forth herein or in the Note.
Termination of Interest. The lapse or termination of Assignor's
interest in any of the Collateral.
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Act of Insolvency. The filing by Assignor or any affiliate, of a
petition in bankruptcy, the adjudication of Assignor or any affiliate as
insolvent or bankrupt, the petition or application by Assignor or any affiliate
for any receiver or trustee for itself or any substantial part of its property,
the commencement by Assignor or any affiliate of any proceeding relating to it
under any reorganization, arrangement, dissolution or liquidation law, or the
initiation of any such proceeding against Assignor or any affiliate, if Assignor
or such affiliate indicates by any act its consent thereto or if such proceeding
is not dismissed within sixty (60) days.
Material Adverse Change. In the reasonable judgment of MLMCI, a
Material Adverse Change with respect to Assignor or Onyx shall have occurred.
Default Under Other Contracts. Assignor shall be in default with
respect to any normal and customary covenants under any contract or agreement to
which it is a party (which covenants include, but are not limited to, an Act of
Insolvency of Assignor or the failure of Assignor to make required payments
under such contract or agreement as they become due) which default permits
acceleration of the obligations of Assignor under such contract or agreement by
any other party thereto and which default, in the reasonable judgment of MLMCI,
is likely to result in a Material Adverse Change with respect to Assignor or
Onyx.
Merger or Consolidation. Assignor shall merge or consolidate into
any entity or shall no longer be wholly-owned by Onyx unless MLMCI shall have
expressly consented to such merger or consolidation in writing, which consent
shall not be unreasonably withheld.
Anticipated Insolvency. MLMCI shall reasonably determine that
Assignor is or will be unable to meet its commitments hereunder or, on and after
the delivery of the Guaranty, that Onyx is or will be unable to meet its
commitments under the Guaranty, notifies Assignor of such determination and
Assignor shall not have responded with appropriate information to the contrary
to the satisfaction of MLMCI within thirty-six (36) hours.
Final Judgment. A final, non-appealable judgment by any competent
court in the United States for the payment of money in an amount of at least
$100,000 is rendered against Assignor or Onyx, and the same remains undischarged
and unpaid for a period of sixty (60) days during which execution of such
judgment is not effectively stayed.
Breach of Credit Covenants. The occurrence of any of the following:
(1) Onyx shall experience losses or changes in its financial
condition (exclusive of amounts withdrawn for payment of taxes due and
payable by the shareholders of Onyx) that cause its Net Worth for any
two consecutive calendar quarters to be less than or equal to 80% of its
Net Worth as of the commencement of such period.
(2) The ratio of Onyx's total Indebtedness to Onyx's Net Worth
determined as of the end of each calendar month shall exceed 8:1.
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(3) Onyx's Net Worth shall at any time be less than $30,000,000.
Breach of Representation. Any representation or warranty made by
Assignor herein shall have been incorrect or untrue in any material respect when
made or repeated or when deemed to have been made or repeated and which breach,
in the reasonable judgment of MLMCI, is likely to result in a Material Adverse
Change of Assignor or Onyx.
Breach of Covenant. Assignor shall breach in any material respect
any covenant made by it herein and MLMCI's interests shall have been materially
adversely affected thereby.
REMEDIES
Action Regarding Collateral. If an Event of Default shall occur,
MLMCI, without demand of performance or other demand or notice of any kind to
Assignor or any other person, all of which are hereby expressly waived, may
forthwith apply the cash, if any, then held by it as part of the Collateral
relating to any Loan to the payment of any of the Obligations, and, if there
shall be no such cash or the cash so applied shall not be sufficient to pay in
full all such Obligations, may thereafter collect, receive, appropriate, retain
and realize upon the Collateral, or any part thereof, and may forthwith sell,
assign, give an option or options to purchase, contract to sell, or otherwise
dispose of and deliver the Collateral, or any part thereof, in one or more
parcels at such public or private sale or sales, at such place or places, at
such price or prices and upon such other terms and conditions as MLMCI may deem
best (provided, however, that MLMCI shall act in all respects in a commercially
reasonable manner), for cash or on credit or for future delivery without
assumption of any credit risk, with the right of MLMCI upon any such sale or
sales to purchase all or any part of the Collateral so sold. Upon any sale,
transfer or other disposition of the Collateral pursuant hereto MLMCI shall have
the right to deliver, assign and transfer to the transferee thereof the
Collateral so sold. Each transferee upon any such transfer or other disposition
shall hold the property thereby acquired by it absolutely free from any claim or
right of any kind, including any equity or rights of redemption, of Assignor,
who hereby specifically waives all rights of redemption, stay or appraisal which
it has or may have under any rule of law or statute whether now existing or
hereafter adopted (in the latter case, to the extent permitted thereby).
Assignor agrees that MLMCI need give only such notice of the time and place of
any public or private sale (including any adjourned private sale) or other
intended disposition as may be required by market conditions and standards of
commercial reasonableness and that MLMCI need not in any event give more than
five (5) Business Days' notice that such sale or disposition is to take place.
Assignor agrees that the notice provided for in the preceding sentence is
reasonable notification of such matters.
MLMCI shall not be obligated to make any sale pursuant to any such
notice. MLMCI may, without notice or publication, adjourn any public or private
sale or cause the same to be adjourned from time to time by announcement at the
time and place fixed for the sale, and such sale may be made at any time or
place to which the same may be so adjourned. In case of any sale of all or any
part of the Collateral on credit or for future delivery, the Collateral so sold
may be retained by MLMCI until the selling price is paid by the purchaser
thereof, but MLMCI
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shall not incur any liability in case of the failure of such purchaser to take
up and pay for the Collateral so sold and, in case of any such failure, such
Collateral may again be sold upon like notice. MLMCI, however, instead of
exercising the power of sale herein conferred upon it, may proceed by a suit or
suits at law or in equity to foreclose the lien and security interest created
hereby and sell the Collateral, or any portion thereof, under a judgment or
decree of a court or courts of competent jurisdiction.
Deficiency. If the Proceeds of sale, collection, foreclosure or
other realization of or upon the Collateral are insufficient to cover the costs
and expenses of such realization and the payment in full of the Obligations,
Assignor shall remain liable for any deficiency.
Private Sale. MLMCI shall incur no liability as a result of the sale
of the Collateral (provided, however, that MLMCI shall act in a commercially
reasonable manner) or any part thereof, at any private sale. Assignor hereby
waives any claims against MLMCI or any holder or holders of the Note arising by
reason of the fact that the price at which the Collateral may have been sold at
such a private sale was less than the price which might have been obtained at a
public sale or was less than the aggregate amount of the Obligations, even if
MLMCI accepts the first offer received and does not offer the Collateral to more
than one offeree (provided, however, that MLMCI shall act in a commercially
reasonable manner).
Application of Proceeds. The Proceeds of any sale or other
realization of all or any part of the Collateral, and any other cash at the time
held by MLMCI under this Agreement, shall be applied by MLMCI in the following
order of priority:
First, to the payment of the costs and expenses of such sale and
all expenses (including the reasonable fees and expenses of counsel),
liabilities and advances made or incurred by MLMCI in connection
therewith.
Second, to the payment of all accrued interest under the Note
due or past due.
Third, to the payment of principal upon the Note due or past
due.
Fourth, to the payment of all other amounts owing under this
Agreement.
Fifth, to the payment to Assignor, or to such other person as a
court of competent jurisdiction may direct, of any surplus then
remaining from such Proceeds and other cash.
Default Rate of Interest. After demand is made with respect to the
Note or upon acceleration thereof, until the balance thereof shall be paid, the
Loan amounts due thereunder, shall bear interest at a per annum rate (based on a
year of 360 days and actual days elapsed) equal to two hundred (200) basis
points in excess of the interest rate for such Loan, but in no event higher than
the maximum rate permitted by law.
Attorney-in-Fact. Effective upon the occurrence of an Event of
Default hereunder, MLMCI is hereby appointed the attorney-in-fact of Assignor
for the purpose of carrying out the provisions of this Agreement and taking any
action and executing any instruments which MLMCI may deem necessary or advisable
to accomplish the purposes hereof, which
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appointment as attorney-in-fact is irrevocable and coupled with an interest.
Without limiting the generality of the foregoing, after an Event of Default has
occurred, MLMCI shall have the right and power to receive, endorse and collect
all checks made payable to the order of Assignor representing any distribution
in respect of the Collateral or any part thereof and to give full discharge for
the same.
Payments on Collateral to Assignor.
All rights of Assignor to receive any payments from the related
Collateral which it would otherwise be authorized to receive shall cease, and
all such rights shall thereupon become vested in MLMCI, which shall thereupon
have the sole right to receive and hold as Collateral such payments.
All payments which are received by Assignor contrary to the
provisions of the preceding subsection (i) shall be received in trust for the
benefit of MLMCI, shall be segregated from other funds of Assignor and shall be
promptly paid to MLMCI.
Cross-Collateralization; Right of Set-Off. MLMCI may, in its sole
discretion upon the occurrence and during the continuation of an Event of
Default hereunder, proceed against any assets held by it under the Master
Repurchase Agreement and shall have a right of set-off against any amounts owed
by MLMCI to Assignor under the Master Repurchase Agreement. In addition, the
parties agree that MLMCI may, in its sole discretion upon the occurrence and
during the continuation of an event of default under the Master Repurchase
Agreement, proceed against any assets held by it hereunder and shall have a
right of set-off against any amounts owed by MLMCI to Assignor hereunder.
MATURITY DATE; INTEREST PAYMENT DATES;
REPAYMENT OF PRINCIPAL
Payment on Maturity Date. Assignor and MLMCI hereby agree that the
Obligations of Assignor hereunder and under the Note are payable on the Maturity
Date unless earlier payment thereof is required pursuant to the terms of this
Agreement.
Interest Payment. Interest on each Loan shall be payable on the
dates described in the related Confirmation Statement.
Payment of Principal. The principal portion of each Loan may be
repaid in whole or in part at the discretion of Assignor on any date on which a
payment of interest is to be made thereon by Assignor pursuant to the terms of
this Agreement and the related Confirmation Statement provided that (i) Assignor
shall have provided MLMCI with not less than two (2) Business Days' written
notice of Assignor's intention to effect such repayment and the amount thereof,
(ii) all payments of interest then due and owing on the Loan are paid in full
and (iii) no Event of Default has occurred and is continuing with respect to any
of Assignor's Obligations hereunder or under the Note.
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<PAGE> 25
Event of Default. Nothing in this Section 13 shall be deemed to
limit the right of MLMCI to require, so long as an Event of Default shall have
occurred and is continuing, the payment by Assignor of all Obligations arising
hereunder and under the Note.
PAYMENT OF TAX LIABILITY
The Assignors and MLMCI agree that any tax or other liability (excluding
any tax liability arising from the receipt by MLMCI of interest income on any
Loan under this Agreement) incurred by the beneficial owner or the registered
holder of any Collateral pledged under the this Agreement shall be borne by
Assignor. So long as any Obligations are outstanding hereunder, Assignor agrees
to indemnify MLMCI for, and to hold MLMCI harmless against, any liability
inuring to MLMCI as a result of the endorsement of the Collateral in MLMCI's
name, or MLMCI's status as the lender hereunder or beneficial holder of such
Collateral, including, without limitation, any tax liability (excluding any tax
liability arising from the receipt by MLMCI of interest income on any Loan under
this Agreement) or liability for the payment of expenses of the trust funds
established under the applicable ABS Issuance Agreements.
GENERAL PROVISIONS
No Waiver. No waiver or amendment of or forbearance in enforcing any
provision of this Agreement nor consent to any departure by either party
herefrom shall be effective unless expressly granted in writing and shall be
limited to the extent expressed therein.
Governing Law; Severability. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and entirely performed therein. Unless otherwise defined herein,
terms defined in the UCC are used herein as defined therein. Each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by or be invalid under such law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
Construction. The captions in this Agreement are for convenience of
reference only and shall not affect the construction or interpretation of any of
the provisions hereof.
Assignment. This Agreement shall be binding upon and shall inure to
the benefit of each of the parties hereto and their respective successors and
assigns; provided, however, that neither this Agreement nor any rights or other
obligations hereunder may be assigned by Assignor without prior written consent
of MLMCI and any attempted or purported assignment hereof or thereof shall be
void. MLMCI may assign any or all of its rights hereunder without consent.
21
<PAGE> 26
Notices, Payments, Deliveries. Unless otherwise provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telegraphic, facsimile or telex communication), and such notices and
other communications shall, when mailed, telegraphed, communicated by facsimile
transmission or telexed, be effective when received at the address for notices
for the party to whom such notice or communications is to be given as follows:
If to MLMCI:
Merrill Lynch Mortgage Capital Inc.
Merrill Lynch World Headquarters
World Financial Center
North Tower - 8th Floor
New York, New York 10281
Attention: Timothy M. Loughlin
Telephone: (212) 449 - 5939
Telecopy: (212) 449 - 6673
With a copy to:
Attention: Michael A. Blum
Telephone: (212) 449 - 8486
Telecopy: (212) 449 - 6673
If to Assignor:
Onyx Acceptance Funding Corporation
8001 Irvine Center Drive
Suite 500
Irvine, California 92718
Attention: Don P. Duffy
Telephone: (714) 450-5505
Telecopy: (714) 450-5530
provided, however, that a facsimile or other form of electronic transmission
shall be deemed to be received by the parties hereto when transmitted so long as
the transmitting machine has provided an electronic confirmation of such
transmission and such facsimile or other form of electronic transmission is
confirmed with a printed paper copy thereof by mail or overnight courier
service. All payments on and deliveries of Collateral hereunder shall be made to
the address or account for payments and deliveries of such Collateral for the
party to whom such payment or delivery is to be made as set forth above. Either
party may revise any information relating to it by notice in writing to the
other party, which notice shall be effective on the third Business Day following
receipt thereof.
Termination. When all Obligations shall have been paid in full and
upon the written request of Assignor, this Agreement shall terminate and MLMCI
shall release its lien and security interest hereunder and assign, transfer and
deliver, against receipt, any remaining Collateral and money received in respect
thereof to or on the order of Assignor. Upon the request of Assignor, MLMCI will
then execute termination statements and such other documents as Assignor may
reasonably request as are necessary to make clear upon the public record the
termination of the lien and security interests created hereby with respect to
such assignment. The
22
<PAGE> 27
obligations of Assignor under Section 15(h) below shall, with respect to each
transaction entered into hereunder, survive any termination hereof.
Aggregate Amount of Loans; Disbursement of Funds.
The aggregate outstanding principal amount of the Loans made by
MLMCI hereunder shall be limited to the Maximum Advance Amount.
Assignor may request disbursement of amounts borrowed hereunder
upon not less than two (2) Business Days' written notice to MLMCI.
MLMCI is not obligated to make any Loan or advance under this
Agreement or pursuant to the Note; provided that MLMCI agrees in good
faith to give reasonable notice to Assignor of its intention not to make
any further Loans or advances hereunder.
Expenses.
Assignor shall pay its own costs and expenses and all reasonable
costs and expenses of MLMCI (including reasonable expenses for legal
services) incident to the preparation and negotiation of this Agreement
and any documents relating hereto, provided that Assignor's liability
for such costs and expenses of MLMCI shall not exceed a total of
$25,000.
Assignor agrees to pay to MLMCI on demand all reasonable costs and
expenses (including reasonable expenses for legal services) of any
subsequent enforcement of any of the provisions hereof, or of the
performance by MLMCI of any Obligations of Assignor in respect of the
Collateral which Assignor has failed or refused to perform, or any
actual or attempted sale, or any exchange, enforcement, collection,
compromise or settlement in respect of any of the Collateral and for the
custody, care or preservation of the Collateral (including insurance
costs) and defending or asserting rights and claims of MLMCI in respect
thereof, by litigation or otherwise, including expenses of insurance. In
addition, Assignor agrees to pay to MLMCI on demand all costs and
expenses (including reasonable expenses for legal services) of the
registration of the Collateral in the name of MLMCI or its nominee. All
such expenses shall be Obligations to MLMCI secured under this
Agreement.
MLMCI's Right to Pledge. Nothing in this Agreement shall preclude
MLMCI from engaging in transactions with third parties involving the selling
pursuant to a repurchase arrangement, pledging or hypothecating of the
Collateral, but no such transaction shall relieve MLMCI of its obligations
hereunder. MLMCI hereby grants to Assignor the right to perform in MLMCI's stead
under any repurchase, reverse repurchase, loan or similar transaction in which
MLMCI has sold, pledged or otherwise transferred any Pledged ABS in the event
that MLMCI has defaulted on its obligations to repurchase or accept redelivery
of such Pledged ABS in conformity with the terms of any such transaction and so
long as an Event of Default hereunder
23
<PAGE> 28
by Assignor shall not have occurred and be continuing. MLMCI further
acknowledges that each Pledged ABS identified in a Confirmation Statement and
included as Collateral for a Loan hereunder is unique and identifiable on the
date of such Loan and that an award of money damages would be insufficient to
compensate Assignor for the losses and damages incurred by Assignor in the event
of MLMCI's failure to release and redeliver any Pledged ABS upon the repayment
of the related Loan by Assignor as provided hereunder.
Indemnification. Assignor agrees to indemnify and hold harmless
MLMCI against all liabilities and expenses to which MLMCI may become subject
relating to any fees, taxes or liability to any third party resulting from any
action taken or omitted by or upon instructions of Assignor with respect to the
Collateral.
Further Assurances. Assignor agrees that, from time to time upon the
prior written request of MLMCI, it will (i) execute and deliver such further
documents and do such other acts and things as MLMCI may reasonably request in
order to fully effectuate the purposes of this Agreement and (ii) provide such
opinions of counsel concerning matters relating to this Agreement as MLMCI may
reasonably request.
Remedies Cumulative. All rights, remedies and powers of MLMCI
hereunder and in connection herewith are irrevocable and cumulative, and not
alternative or exclusive, and shall be in addition to all other rights, remedies
and powers of MLMCI whether under law, equity or agreement. In addition to the
rights and remedies granted to it in this Agreement or under the Note, MLMCI
shall have all the rights and remedies of a secured party under the UCC.
Litigation. Notwithstanding any termination hereof, Assignor hereby
agrees that any legal action or proceeding against it in connection herewith may
be brought in the courts of the State of New York or of the United States of
America located in the City and State of New York, Borough of Manhattan, as
MLMCI may elect, and Assignor hereby irrevocably submits to the jurisdiction of
each of said courts, and waives any objection on the grounds of venue, forum non
conveniens or similar grounds.
24
<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
ONYX ACCEPTANCE FUNDING CORPORATION
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
MERRILL LYNCH MORTGAGE CAPITAL INC.
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
25
<PAGE> 30
EXHIBIT A
THIS NOTE IS NOT A
NEGOTIABLE INSTRUMENT.
NO TRANSFER OR SALE OF THIS NOTE SHALL BE MADE UNLESS SUCH TRANSFER IS EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
AND ANY APPLICABLE STATE SECURITIES LAWS OR IS MADE IN ACCORDANCE WITH SAID ACT
AND LAWS.
NOTE
$50,000,000 New York, New York February 4, 1998
(subject to the Maximum Advance Amount)
FOR VALUE RECEIVED, ONYX ACCEPTANCE FUNDING CORPORATION (the "Assignor")
promises to pay to MERRILL LYNCH MORTGAGE CAPITAL INC. (the "Payee") the
principal sum of Fifty Million Dollars ($50,000,000) (or so much thereof as
shall have been advanced here against pursuant to the Master Assignment
Agreement and shall be outstanding), in lawful money of the United States of
America, in immediately available funds, with interest on each principal sum
advanced here against or the unpaid balance thereof with such frequency and to
such location as is specified in the related confirmation statement (in each
case, the "Confirmation Statement") for such advance (or on such other day and
with such other frequency and to such other location as may be mutually agreed
upon by the Assignor and the Payee) at said office and in said money and funds
from (and including) the date of the related Loan advance to (but excluding) the
related Maturity Date for such Loan at the rate per annum (based on a year of
360 days and actual days elapsed) indicated on the related Confirmation
Statement attached hereto, but in no event higher than the maximum rate
permitted by law, and after such Maturity Date, or upon acceleration as
hereinafter provided, until said balances shall be paid, at the rate per annum
(based on a year of 360 days and actual days elapsed) equal to two hundred (200)
basis points in excess of the interest rate for such advance, but in no event
higher than the maximum rate permitted by law.
Loans here against shall be in minimum amounts of $1,000,000. The
Assignor may request disbursement of amounts borrowed hereunder upon not less
than two (2) Business Days' written notice to the Payee. The Payee is not
obligated to make any advances hereunder. The Payee is hereby authorized by the
Assignor to endorse on the Loan Schedule amounts advanced here against, the rate
of interest relating thereto and any principal prepayments hereunder (as
permitted by the Assignment defined below), it being understood, however, that
failure to make any such endorsement shall not affect the obligations of the
Assignor hereunder in respect of the amounts advanced here against.
This Note is the Note referred to in the Master Assignment Agreement
(the "Master Assignment Agreement"), dated as of February 4, 1998, between
Assignor and the Payee, granting to the Payee a first priority perfected
security interest in the Collateral, as described therein. The holder is
entitled to the benefits of the Master Assignment Agreement and may enforce the
agreements of the Assignor contained therein and exercise the remedies provided
for thereby or otherwise available in respect thereof. All capitalized terms
used in this Note and not otherwise defined shall have the respective meanings
set forth in the Master Assignment Agreement except where the context clearly
indicates otherwise.
A-1
<PAGE> 31
This Note and all other present and future obligations of any and all
kinds of the Assignor in favor of the holder hereof, whether created directly or
acquired by assignment, whether absolute or contingent, shall, unless the holder
shall otherwise elect, forthwith be due and payable without notice or demand of
any kind (except as expressly provided in the Master Assignment Agreement), all
of which are expressly waived upon the occurrence of an Event of Default.
The Assignor hereby agrees that any legal action or proceeding against
it for enforcement of this Note or of any judgment with respect to this Note may
be brought in the courts of the State of New York or of the United States of
America located in the City and State of New York, Borough of Manhattan, as the
holder may elect, and the Assignor hereby irrevocably submits to the
jurisdiction of each of said courts, and waives any objection on the grounds of
venue, forum non conveniens or similar ground. The Assignor irrevocably consents
that service of process in any such action or proceeding may be made upon the
Assignor by the mailing thereof by the holder by United States registered or
certified mail, postage prepaid, to the Assignor at the address set forth herein
below the signature of the Assignor, and the Assignor hereby further agrees that
service of process in such manner shall be full and sufficient notice of any
such action or proceeding.
The Assignor waives diligence, presentment of any instrument, protest
and notice of non-payment or protest and any and all other notices and demands
whatsoever in connection with the delivery, acceptance, performance, default or
enforcement of this Note. The Assignor will pay on demand all costs of
collection (including reasonable attorneys' fees) paid or incurred by the holder
in enforcing this Note on default. As used herein, the world "holder" shall mean
the Payee or any endorsee of this Note who is in possession hereof, if this Note
is at the time payable to the bearer.
This Note shall be governed by and construed in accordance with the
laws of the State of New York applicable to agreements made and entirely
performed therein.
ONYX ACCEPTANCE FUNDING CORPORATION
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
A-2
<PAGE> 32
LOAN SCHEDULE
This Note evidences Loans made by the Payee to the Assignor and the repayment of
principal by the Assignor to the Payee, in the principal amounts and on the
dates and with the related interest rates set forth below as well as the total
amount advanced here against as of each such date:
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL TOTAL
DATE AMOUNT LOANED INTEREST RATE AMOUNT REPAID OUTSTANDING
---- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
- -------------- ------------- ------------- ------------- -----------
- -------------- ------------- ------------- ------------- -----------
- -------------- ------------- ------------- ------------- -----------
- -------------- ------------- ------------- ------------- -----------
- -------------- ------------- ------------- ------------- -----------
- -------------- ------------- ------------- ------------- -----------
</TABLE>
A-3
<PAGE> 33
EXHIBIT B
CONFIRMATION STATEMENT
MERRILL LYNCH MORTGAGE CAPITAL INC.
Date: __________________________
Assignor: Onyx Acceptance Funding Corporation
Address:
Attention:
Telephone:
Fax Number:
Re: LOAN PURSUANT TO MASTER ASSIGNMENT AGREEMENT
Gentlemen:
Merrill Lynch Mortgage Capital Inc. ("MLMCI") is pleased to confirm our Loan to
you (the "Assignor") pursuant to the Master Assignment Agreement (the "Master
Assignment Agreement"), dated as of February 4, 1998, between you and MLMCI
under the following terms and conditions:
1. Collateral Description: ________________________
A. Security Issue Date: ______________________
B. Percentage Ownership: _____________________%
C. Face Amount: $_____________________
D. Current Market Value: $_____________________
E. Margin Requirement: _____________________%
2. Loan: _____ New Funds _____ Roll
A. Amount: $______________
B. Closing Date: _______________
C. Interest Payment Date: The last Business Day of each month.
MLMCI's Wiring Instructions Assignor's Wiring Instructions
- --------------------------- ------------------------------
Bankers Trust New York
For the Account of Merrill Lynch
Mortgage Capital Inc.
Account Number: 00812914
ABA Number: 021-001-033
The Note, dated February 4, 1998, which evidences advances under
the Master Assignment Agreement will be annotated on the schedule attached
thereto to reflect the date, amount and interest rate relating to this advance.
B-1
<PAGE> 34
The Master Assignment Agreement is incorporated by reference
into this Confirmation Statement and made a part hereof as if it were fully set
forth herein. All capitalized terms used herein but not otherwise defined shall
have the meanings specified in the Master Assignment Agreement.
Very truly yours,
MERRILL LYNCH MORTGAGE CAPITAL INC.
By: ______________________________
Name: ________________________
Title: _______________________
AGREED AND ACKNOWLEDGED:
ONYX ACCEPTANCE FUNDING CORPORATION
By: _____________________________
Name: ___________________________
Title: ____________________________
B-2
<PAGE> 35
EXHIBIT C
[FORM OF OPINION OF COUNSEL TO THE ASSIGNOR]
[OPINIONS RELATING TO THE GUARANTY SHALL BE
DELIVERED WHEN THE GUARANTY IS DELIVERED]
Gentlemen:
We have acted as counsel to Onyx Acceptance Funding
Corporation, a Delaware corporation (the "Assignor"), in connection with (i) the
execution and delivery of the Master Assignment Agreement, dated as of February
4, 1998 (the "Agreement"), between the Assignor and Merrill Lynch Mortgage
Capital Inc., a Delaware corporation ("MLMCI") and (ii) the execution and
delivery of the Note, dated February 4, 1998 in the principal amount of
$50,000,000 ("Note") made by the Assignor to the order of MLMCI. In addition, we
have acted as counsel to Onyx Acceptance Corporation, a Delaware corporation
("Onyx"), in connection with its partial guaranty, dated February 4, 1998 (the
"Guaranty"), of the obligations of Assignor under the Agreement. Unless
otherwise defined herein, all defined terms used herein shall have the meanings
assigned thereto in the Agreement.
As counsel to the Assignor and Onyx, we have participated in
the preparation and negotiation of the Agreement, the Note, the Guaranty and the
other documents and instruments executed and delivered pursuant thereto and in
connection therewith by the Assignor.
In this connection, we have examined, among other documents,
the Certificate of Incorporation and By-Laws of the Assignor and Onyx, the
minutes of meetings of the Assignor, and such other documents and records of the
Assignor and Onyx as we have deemed relevant and necessary as a basis for the
conclusions contained in the opinions hereafter set forth. As to factual
matters, we have relied, among other things, without independent investigation,
on the factual representations of each of the Assignor and Onyx in officer's
certificates and such factual representations of each of the Assignor and Onyx
as appear in the Agreement, the Note, the Guaranty and the officer's
certificates. In addition, we have obtained and relied upon such other documents
and certificates as we have demed necessary or appropriate as a basis for the
opinions hereinafter expressed. In our examination, we have assumed the
genuineness of all signatures and the authenticity of all documents submitted to
us as originals and the conformity to originals of all documents submitted to us
photostatic copies.
Based upon the foregoing, we are of opinion that:
The Assignor is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power and authority to execute, deliver and perform its
obligations under the Agreement and the Note. Assignor is duly qualified to do
business and is in good standing in each jurisdiction in which the character of
the business transacted by it requires such qualification and in which the
failure so to qualify would have a material adverse effect on the business,
properties, assets or condition (financial or other) of Assignor and its
subsidiaries, considered as a whole.
Each of the Agreement and the Note has been duly executed and
delivered by Assignor and constitutes the legal, valid and binding obligation of
Assignor enforceable against Assignor in accordance with its terms.
C-1
<PAGE> 36
No authorization, consent approval, license, filing or
registration with any governmental or regulatory authority or agency is required
under California, New York or federal law for the validity of the execution and
delivery of, or performance by Assignor of its obligations under the Agreement
and the Note (except (a) such as have been received or made, (b) such as may be
required under California, New York or federal securities laws, as to which no
opinion is expressed, and (c) such filings of financing or continuation
statements as may be required to be made under the Uniform Commercial Code in
any jurisdiction).
The execution, delivery and performance by Assignor of the
Agreement and the Note (a) has been duly authorized by all necessary corporate
action on the part of Assignor, (b) does not and will not violate, or result in
a breach of (1) the Certificate of Incorporation or Bylaws of Assignor, (2) the
provisions of the Delaware General Corporate Law or any California, New York or
federal law, rule or regulation applicable to Assignor (other than California,
New York and federal securities laws, as to which no opinion is expressed) or
(3) to the best of counsel's knowledge, any order of any court or other
governmental authority to which Assignor is a party or by which Assignor or any
of its properties are bound or subject, where, in the case of items (2) and (3),
such violation or breach could have a material and adverse effect on the ability
of Assignor to perform its obligations under the Agreement or the Note and (c)
will not conflict with, or result in a breach, violation or acceleration of, or
constitute a default under any material agreement to which Assignor is a party
or by which Assignor is bound.
To the best of counsel's knowledge, there is no action, suit,
proceeding or investigation before or by any court or governmental agency or
body, domestic or foreign, now pending or threatened against Assignor which
could reasonably be expected to interfere with or materially and adversely
affect the consummation of the transactions contemplated in this Agreement or
the Note.
Onyx is a corporation duly incorporated and validly existing
and in good standing under the laws of the State of Delaware and has the
corporate power and authority to execute, deliver and perform its obligations
under the Guarantee. Onyx is duly qualified to do business and is in good
standing in each jurisdiction in which the character of the business transacted
by it requires such qualification and in which the failure so to qualify would
have a material adverse effect on the business, properties, assets or condition
(financial or other) of Onyx and its subsidiaries, considered as a whole.
The Guaranty has each been duly authorized, executed and
delivered by Onyx, and constitutes a valid and legally binding obligation of
Onyx enforceable against Onyx in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights generally and to
general equity principles.
The execution, delivery and performance by Onyx of the
Guaranty (a) has been duly authorized by all necessary corporate action on the
part of Onyx, (b) does not and will
C-2
<PAGE> 37
not violate, or result in a breach of (1) the Certificate of Incorporation or
Bylaws of Onyx, (2) the provisions of the Delaware General Corporation Law, or
any California, New York or federal law, rule or regulation applicable to Onyx
(other than California, New York and federal securities laws, as to which
counsel expresses no opinion) or (3) to the best of counsel's knowledge, any
order of any court or other governmental authority to which Onyx is a party or
by which Onyx or any of its properties are bound or subject, where in the case
of items (2) and (3) above, such violation or breach could have a material and
adverse effect on the ability of Onyx to perform its obligations under the
Guaranty and (d) will not conflict with, or result in a breach, violation or
acceleration of, or constitute a default under any of the material agreements to
which Onyx is a party or by which it is bound.
To the best of counsel's knowledge, there is no action, suit,
proceeding or investigation before or by any court or governmental agency or
body, domestic or foreign, now pending or threatened against Onyx which could
reasonably be expected to interfere with or materially and adversely affect the
consummation of the transactions contemplated in the Guaranty.
Each Pledged ABS will have been endorsed in a manner which
satisfies any requirement of endorsement in order to transfer all right, title
and interest in and to that Pledged ABS from Assignor to MLMCI. This Agreement
together with (a) the delivery of such related Pledged ABS to MLMCI and (b) the
endorsement of such Pledged ABS to MLMCI, creates a valid, perfected security
interest in such Pledged ABS in favor of MLMCI. Such security interest will have
the same priority and will be subject to the same security interests and liens
as apply to such Pledged ABS in the hands of Assignor.
Assignor acquired each Pledged ABS in a true sale from Onyx.
In the event of an insolvency proceeding against Onyx, the
assets of Assignor would not be consolidated with those of Onyx.
Very truly yours,
C-3
<PAGE> 38
EXHIBIT D
LOCATION OF CHIEF EXECUTIVE OFFICES AND COLLATERAL
Chief Executive Office
- ----------------------
Onyx Acceptance Funding Corporation
8001 Irvine Center Drive
Suite 500
Irvine, California 92718
Collateral
With respect to any Loan, the Pledged ABS to be delivered to, and
held by, MLMCI or its bailee.
D-1
<PAGE> 39
EXHIBIT E
ONYX ACCEPTANCE CORPORATION
8001 IRVINE CENTER DRIVE
FIFTH FLOOR
IRVINE, CALIFORNIA 92618
February __, 1998
Merrill Lynch Mortgage Capital Inc.
Merrill Lynch World Headquarters
World Financial Center
North Tower
New York, New York 10281
Gentlemen:
This letter will confirm that Onyx Acceptance Corporation, a
Delaware corporation ("Guarantor"), agrees to absolutely and unconditionally
guaranty to Merrill Lynch Mortgage Capital Inc. and any of its affiliates
(collectively, the "Beneficiary"), the full and prompt payment and performance
of the obligations, undertakings and liabilities of Onyx Acceptance Funding
Corporation, a Delaware corporation ("Assignor"), arising under the terms and
provisions of a Master Assignment Agreement (the "Agreement"), dated as of
February 4, 1998 by and between Assignor and Merrill Lynch Mortgage Capital Inc.
("MLMCI"), in an amount not to exceed 10% of the aggregate outstanding amount
owed by Assignor to MLMCI under the Agreement (such obligations, undertakings
and liabilities are herein referred to as the "Guarantied Obligations").
Guarantor hereby expressly consents to any amendment to the Agreement as may be
agreed upon by Assignor and MLMCI and waives notice of any such amendment. A
copy of the Agreement is attached hereto as Exhibit A. Capitalized terms used
and not otherwise defined herein shall have the meanings assigned in the
Agreement.
Guarantor hereby represents and warrants to you that Assignor
is a direct or an indirect wholly-owned subsidiary of Guarantor.
Guarantor hereby agrees that if Assignor shall fail at any
time to make due and punctual payment to the Beneficiary of any Guarantied
Obligation or if Assignor shall fail at any time to perform any other Guarantied
Obligation to the Beneficiary, Guarantor will forthwith pay such amount and
perform such obligation without demand therefor.
Guarantor covenants and agrees to immediately notify MLMCI if
a representation, warranty or covenant of Assignor under Agreement has been
breached or if an Event of Default shall have occurred.
Guarantor, to the extent consistent with applicable law,
hereby waives any requirement that the Beneficiary take legal action against
Assignor before enforcing this guaranty; agrees that its obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Guarantied Obligations or the dissolution, liquidation,
reorganization or other change regarding the Assignor or the Assignor seeking
protection, or having a case or proceeding commenced against it, under any law
for the protection of debtors or creditors; waives diligence, presentment,
demand for payment or performance, protest or notice or other
E-1
<PAGE> 40
formality of any kind whatsoever; waives filing of claims with any court in case
of the insolvency, reorganization or bankruptcy of the Assignor; waives any
fact, event or circumstance that might otherwise constitute a legal or equitable
defense to or discharge of Guarantor, including (but without typifying or
limiting this waiver) failure by the Beneficiary to perfect a security interest
in any collateral securing performance of any Guarantied Obligation and any
delay by the Beneficiary in exercising any of its rights hereunder, Guarantor
covenants that this guaranty will not be discharged except by full and final
payment and performance to the Beneficiary of all Guarantied Obligations
incurred while it is effective, and agrees that this guaranty shall continue to
be effective or be reinstated (as the case may be) if at any time all or any
part of any payment or interest thereon or other performance by Assignor is
avoided or must otherwise be restored by the Beneficiary. Guarantor hereby
further consents to any renewal or modification of any Guarantied Obligation or
any extension of the time within which such is to be performed and to any other
indulgences, whether before or after the date of this guaranty.
Guarantor agrees to pay on demand all out-of-pocket expenses
(including legal fees and disbursements) incurred by the Beneficiary in
connection with the enforcement and protection of its rights hereunder.
This is a continuing guaranty and will remain in effect until
thirty (30) days after written notice of termination is received by Merrill
Lynch Mortgage Capital Inc., Merrill Lynch World Headquarters, World Financial
Center, North Tower, 8th Floor, New York, New York 10281, Attention: Timothy M.
Loughlin. Any such termination shall not affect or reduce Guarantor's
obligations hereunder for any liability of Assignor that arose prior to the
expiration of said thirty-day period. This guaranty shall terminate and shall be
of no further force or effect upon full payment of all amounts due to MLMCI
under the Agreement. This guaranty shall inure to the benefit of any successor
of the Beneficiary and be binding on any successor or assignee of Guarantor.
This guaranty shall be governed by and construed in accordance
with the laws of the State of New York. Guarantor hereby agrees that (i) any
dispute or controversy arising out of or relating to this guaranty, the
Agreement or the Note shall be submitted to arbitration before the American
Arbitration Association, (ii) the arbitration proceedings shall be conducted in
New York, New York and (iii) the decision of the arbitrators shall be final and
judgment may be entered on the award. In the event that such arbitration is
unavailable, Guarantor hereby submits to the jurisdiction of the United States
Federal and New York State courts situated in the City, County, and State of New
York and hereby agrees that any litigation arising out of or relating to this
guaranty, the Agreement or the Note shall be brought in such courts. Each
provision and agreement herein shall be treated as separate and independent from
any other provision or agreement herein and shall be enforceable notwithstanding
the non-enforceability of any such other provision or agreement.
Any demand by MLMCI for payment or performance by Guarantor
shall be by a written demand to Guarantor, which shall be deemed to have been
duly given if made by facsimile transmission to Onyx Acceptance Corporation,
8001 Irvine Center Drive, Fifth Floor, Irvine, California 92618, Attention: Don
P. Duffy, Phone: (714) 450-5505, Fax: (714) 450-5530 or if personally delivered
at or upon the fifth day after deposit in the mails, mailed by registered mail,
postage prepaid, to Onyx Acceptance Corporation, 8001 Irvine Center Drive, Fifth
Floor, Irvine, California 92618, Attention: Don P. Duffy.
Very truly yours,
ONYX ACCEPTANCE CORPORATION
By: _________________________
Name: _______________________
Title: ______________________
E-2
<PAGE> 41
EXHIBIT F
MONTHLY COLLATERAL REPORT
INDEX DELINQUENCY
Issuer STATUS
Account Number (Current/Delinq/Fcir/REO)
Last Pay Date
SECURITIZATION INFO Months Delinquent
Deal 24 Months Status History
(ie CCCCCCC369CC369999FFFRRR)
LOAN ATTRIBUTES
Loan Type DEFAULT
Original Balance Defaulted Amount
Origination Date Liquidation Loss Amount
Maturity Date Default Date
Zip Code
County PREPAYMENT
State Prepay Amount
WAC Prepay Penalty Paid
RTM Amort Prepay Date
RTM Std
P&I ARM SPECIFIC
Current Balance Next IA Date
CLTV Reset Frequency
Property Type Margin
Occupancy Status Index
Loan Purpose Caps/Floors
Documentation Periodic Cap
Balloon Life Cap
Lien Life Floor
2nd Lien Ratio
Prepay Penalty Schedule
(ie 3yr penalty - 6mo interest)
Servicer
Loan Source (Retail/Corresp/Wholesale)
BORROWER INFORMATION
FICO Score
Credit Grade
DTI
F-1
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Onyx Acceptance Financial Corporation, a Delaware corporation
ABNI, Inc., a Delaware corporation
Onyx Acceptance Funding Corporation, a Delaware corporation
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,662,766
<SECURITIES> 0
<RECEIVABLES> 86,451,394
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 182,123,127
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 60,265
<OTHER-SE> 41,327,553
<TOTAL-LIABILITY-AND-EQUITY> 182,123,127
<SALES> 0
<TOTAL-REVENUES> 4,480,550
<CGS> 0
<TOTAL-COSTS> 10,203,336
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 306,988
<INTEREST-EXPENSE> 2,820,986
<INCOME-PRETAX> 1,414,994
<INCOME-TAX> 587,223
<INCOME-CONTINUING> 827,771
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 827,771
<EPS-PRIMARY> .14
<EPS-DILUTED> .13
</TABLE>
