<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
---------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER: 28050
ONYX ACCEPTANCE CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 33-0577635
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Onyx Acceptance Corporation
27051 Towne Centre Drive
Foothill Ranch, CA 92610
(949) 465-3900
- --------------------------------------------------------------------------------
(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 [ ] NO [X]
As of November 4, 1999, there were 6,177,804 shares of registrant's
Common Stock, par value $.01 per share outstanding.
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<PAGE> 2
ONYX ACCEPTANCE CORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Financial Condition at
September 30, 1999 and December 31, 1998..................... 3
Condensed Consolidated Statements of Income for the three and
nine months ended September 30, 1999 and September 30, 1998.. 4
Consolidated Statements of Common Stock and Stockholders'
Equity at September 30, 1999 and December 31, 1998........... 5
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 1999 and September 30, 1998....... 6
Notes to Condensed Consolidated Financial Statements............. 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk....... 16
PART II. OTHER INFORMATION
Item 5. Other Information................................................ 17
Item 6. Exhibits and Reports on Form 8-K................................. 23
SIGNATURES............................................................... 24
EXHIBIT INDEX
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ONYX ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- -------------
ASSETS (UNAUDITED)
<S> <C> <C>
Cash and cash equivalents ....................... $ 4,787,831 $ 1,928,991
Credit enhancement assets ....................... 130,900,443 112,953,193
Contracts held for sale (net of allowance) ...... 195,535,962 152,760,781
Other assets .................................... 11,070,086 7,778,759
------------- -------------
Total assets .......................... $ 342,294,322 $ 275,421,724
============= =============
LIABILITIES
Accounts payable ................................ $ 16,911,952 $ 10,959,913
Debt ............................................ 255,071,383 209,600,061
Other liabilities ............................... 19,602,844 11,038,029
------------- -------------
Total liabilities ..................... 291,586,179 231,598,003
EQUITY
Common stock
Par value $.01 per share; authorized 15,000,000
shares; issued and outstanding 6,177,804 as of
September 30, 1999 and 6,171,034 as of
December 31, 1998 ............................ 61,778 61,710
Paid in capital ................................. 37,892,071 37,839,151
Retained earnings ............................... 13,084,689 5,922,860
Accumulated other comprehensive loss, net
of tax ....................................... (330,395) --
------------- -------------
Total equity ......................... 50,708,143 43,823,721
------------- -------------
Total liabilities and equity ......... $ 342,294,322 $ 275,421,724
============= =============
</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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- -----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES:
Interest income ................. $ 7,153,382 $ 7,001,062 $19,642,344 $16,703,145
Interest expense ................ 5,487,589 4,213,990 14,053,421 10,651,700
----------- ----------- ----------- -----------
Net interest income ............. 1,665,793 2,787,072 5,588,923 6,051,445
Gain on sale of contracts ....... 13,723,258 9,676,893 40,520,626 25,911,096
Service fee income .............. 8,237,101 4,007,969 19,757,636 10,015,975
Total revenues .................. 23,626,152 16,471,934 65,867,185 41,978,516
EXPENSES:
Provision for credit losses ..... 203,579 597,957 952,560 1,229,764
Salaries and benefits ........... 10,325,902 7,216,960 29,567,166 19,492,705
Depreciation .................... 953,902 565,600 2,510,463 1,307,918
Occupancy ....................... 822,111 500,371 2,484,771 1,315,224
General and administrative
expenses....................... 6,892,601 4,595,279 18,109,783 12,496,254
----------- ----------- ----------- -----------
Total expenses .................. 19,198,095 13,476,167 53,624,743 35,841,865
----------- ----------- ----------- -----------
Net income before taxes ......... 4,428,057 2,995,767 12,242,442 6,136,651
Income taxes .................... 1,837,644 1,243,243 5,080,613 2,546,709
----------- ----------- ----------- -----------
Net income after taxes .......... $ 2,590,413 $ 1,752,524 $ 7,161,829 $ 3,589,942
=========== =========== =========== ===========
Net income per share - Basic .... $ 0.42 $ 0.28 $ 1.16 $ 0.59
Net income per share - Diluted... $ 0.39 $ 0.27 $ 1.10 $ 0.56
Basic shares outstanding ........ 6,175,817 6,162,374 6,172,628 6,093,198
Diluted shares outstanding ...... 6,656,463 6,381,882 6,527,643 6,445,412
</TABLE>
See the accompanying notes to the condensed consolidated financial statements.
4
<PAGE> 5
ONYX ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL COMPREHENSIVE RETAINED
PAID LOSS NET EARNINGS
SHARES COMMON STOCK IN CAPITAL OF TAX (DEFICIT) TOTAL
--------- ------------ ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997 6,017,635 $ 60,176 $37,810,158 $ (152,924) $37,717,410
Issuance of common stock 153,399 1,534 28,993 30,527
Net income 6,075,784 6,075,784
--------- -------- ----------- ------------- ---------- -----------
BALANCE, DECEMBER 31, 1998 6,171,034 61,710 37,839,151 5,922,860 43,823,721
Issuance of common stock 6,770 68 52,920 52,988
Comprehensive income:
Unrealized losses in
securitized assets, net of
tax of $229,597 $(330,395) (330,395)
Net income 7,161,829 7,161,829
--------- -------- ----------- --------- ----------- -----------
Total comprehensive income $(330,395) $ 7,161,829 $ 6,831,434
--------- -------- ----------- --------- ----------- -----------
BALANCE, SEPTEMBER 30, 1999 6,177,804 $ 61,778 $37,892,071 $(330,395) $13,084,689 $50,708,143
========= ======== =========== ========= =========== ===========
</TABLE>
See the accompanying notes to the condensed consolidated financial statements.
5
<PAGE> 6
ONYX ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------
1999 1998
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES:
Net cash used in operating activities .......... $ (37,386,541) $ (76,587,801)
INVESTING ACTIVITIES:
Purchases of property and equipment ............ (5,002,155) (2,411,692)
--------------- ---------------
(5,002,155) (2,411,692)
--------------- ---------------
FINANCING ACTIVITIES:
Proceeds from exercise of options/warrants ..... 52,989 32,981
Payments on capital lease obligations .......... (276,775) (473,577)
Payments on excess servicing line of credit .... (27,117,539) (10,027,900)
Proceeds from drawdown on excess servicing
line of credit ............................... 34,257,170 26,000,000
Paydown of warehouse lines related to
securitization and sale ...................... (1,026,000,000) (624,456,000)
Proceeds from warehouse lines .................. 1,063,485,007 682,956,181
Proceeds from subordinated debt ................ 0 10,000,000
Proceeds from other loans
Proceeds from (payments on) other loans......... 846,684 (251,321)
--------------- ---------------
Net cash provided by financing activities ...... 45,247,536 83,780,364
--------------- ---------------
Increase in cash and cash equivalents ........ 2,858,840 4,780,871
Cash and cash equivalents at beginning of period 1,928,991 991,010
--------------- ---------------
Cash and cash equivalents at end of period ..... $ 4,787,831 $ 5,771,881
=============== ===============
</TABLE>
See the accompanying notes to the condensed consolidated financial statements.
6
<PAGE> 7
ONYX ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1
BASIS OF PRESENTATION
The condensed consolidated financial statements included herein are
unaudited and have been prepared by the Company in accordance with generally
accepted accounting principles for interim financial reporting and Securities
and Exchange Commission regulations. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to the regulations. In the opinion of management, the financial
statements reflect all adjustments (of a normal and recurring nature) which are
necessary to present fairly the financial position, results of operations and
cash flows for the interim periods. Operating results for the three and nine
months ended September 30, 1999 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1999. The condensed
consolidated financial statements should be read in conjunction with the audited
financial statements and footnotes thereto for the year ended December 31, 1998
included in the Company's 1998 Annual Report on Form 10-K as amended on Form
10K/A, and Forms 10-Q for the quarters ended March 31, 1999, and June 30, 1999.
USE OF ESTIMATES
In conformity with generally accepted accounting principles, management
utilizes assumptions and estimates that affect the reported value of credit
enhancement assets and the gain on sale of Contracts. Such assumptions include,
but are not limited to, estimates of loan prepayments, defaults, recovery rates
and present value discount rates. The Company uses a combination of its own
historical experience, industry statistics and expectation of future performance
to determine such estimates. Actual results may differ from the Company's
estimates due to numerous factors both within and beyond the control of Company
management. Changes in these factors could require the Company to revise its
assumptions concerning the amount of voluntary prepayments, the frequency and or
severity of defaults and the recovery rates associated with the disposition of
repossessed vehicles.
NOTE 2 - CONTRACTS HELD FOR SALE
Contracts held for sale consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- -------------
<S> <C> <C>
Contracts held for sale ...... $ 202,240,294 $ 160,386,439
Less unearned interest ....... (6,985,060) (8,434,206)
------------- -------------
195,255,234 151,952,233
Allowance for credit losses... (1,276,276) (1,052,178)
Dealer participation ......... 1,557,004 1,860,726
------------- -------------
Total .................... $ 195,535,962 $ 152,760,781
============= =============
</TABLE>
NOTE 3 -- CREDIT ENHANCEMENT 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.
Credit enhancement assets consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Trust receivable .................... $ 5,712,501 $ 3,712,501
RISA ................................ 125,187,942 109,240,692
------------ ------------
Total ........................... $130,900,443 $112,953,193
============ ============
</TABLE>
7
<PAGE> 8
Trust receivable represents servicer advances and initial deposits to
the spread accounts.
Retained interest in securitized assets ("RISA") is capitalized upon
securitization of contracts and 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 financial
guarantee insurance premiums and projected credit losses, after giving effect to
estimated prepayments. During 1999 and 1998, the Company utilized prepayment
rates of 1.75% ABS in computing RISA. Original cumulative net credit loss
assumptions utilized for 1999 and 1998 securitization transactions ranged from
3.5% to 4.0%. The Company used a discount rate during 1999 and 1998 of 350 to
450 basis points over the certificate rates paid to investors at the time of
securitization in discounting future earnings.
RISA is classified in a manner similar to available for sale securities
and as such is marked to market each quarter. The Company is not aware of an
active market for the purchase or sale of RISA, and accordingly, the Company
determines the estimated fair value of the RISA by discounting the expected cash
flows released from the trust (the "Cash-Out Method") using a discount rate
which the Company believes is commensurate with the risks involved. Any changes
in the market value of RISA are reported as a separate component of
shareholders' equity as an unrealized gain or loss, net of deferred taxes.
The following table presents the balances and activity of RISA for the
nine and twelve-month period ended September 1999 and December 1998
respectively:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- -------------
<S> <C> <C>
Beginning Balance .......... $ 109,240,692 $ 64,357,850
Additions .................. 73,011,652 80,632,733
Amortization ............... (56,504,410) (35,749,891)
Change in unrealized
gain/loss on securities
available for sale ....... (559,992) --
------------- -------------
Ending Balance ............. $ 125,187,942 $ 109,240,692
============= =============
</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 rates paid to the investors, less the
contractually specified servicing fee of 1.0% and financial guarantee insurance
premiums, after giving effect to estimated prepayments and assuming no losses.
To arrive at the RISA, this amount is reduced by the off balance sheet allowance
established for potential future losses and by discounting to present value.
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
-------------- ---------------
<S> <C> <C>
Estimated net undiscounted RISA earnings... $ 224,025,166 $ 176,600,869
Off balance sheet allowance for losses..... (76,601,346) (51,009,542)
Discount to present value ................. (22,235,878) (16,350,635)
-------------- --------------
Retained interest in securitized assets.... $ 125,187,942 $ 109,240,692
============== ==============
Outstanding balance of contracts sold
through securitizations ................. $1,721,926,813 $1,183,157,096
============== ==============
</TABLE>
8
<PAGE> 9
NOTE 4 - NET INCOME PER SHARE
The following table sets forth the computation of basic and diluted net
income per share ("EPS"):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- ---------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income ............................ $2,590,413 $1,752,524 $7,161,829 $3,589,942
Weighted average shares outstanding.... 6,175,817 6,162,374 6,172,628 6,093,198
Net effect of dilutive stock
options/warrants .................... 480,646 219,508 355,015 352,214
Diluted weighted average shares
outstanding ......................... 6,656,463 6,381,882 6,527,643 6,445,412
Net income per share:
Basic EPS ............................. 0.42 0.28 1.16 0.59
Diluted EPS ........................... 0.39 0.27 1.10 0.56
</TABLE>
NOTE 5 - NEW PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"). SFAS 133 establishes accounting and reporting
standards for derivative contracts, and for hedging activities. The new standard
requires that all derivatives be recognized as either assets or liabilities in
the consolidated statements of financial condition and that those instruments be
measured at fair value. If certain conditions are met, a derivative may be
specifically designated as a hedging instrument. The accounting for changes in
the fair value of a derivative (that is, unrealized gains and losses) depends on
the intended use of the derivative and the resulting designation. The statement
is effective in the first quarter of year 2001. The Company is presently
assessing the effect of SFAS 133 on the consolidated financial statements of the
Company.
NOTE 6 - CONTINGENCIES
The Company is party to various legal proceedings similar to actions
brought against other companies in the motor vehicle finance industry, which are
or may or may not be covered under insurance policies it holds. The Company
vigorously defends such proceedings; however, there is no assurance as to the
results. Based upon information presently available, the Company believes that
the final outcome of all such proceedings should not have a material adverse
effect upon the Company's results of operations, cash flows or financial
condition.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Onyx Acceptance Corporation ("Onyx" or the "Company") is a specialized
consumer finance company engaged in the purchase, securitization and servicing
of motor vehicle retail installment contracts ("Contracts") originated by
franchised and select independent automobile dealerships, and to a lesser
extent, the origination or purchase of motor vehicle loans on a direct basis
through its subsidiaries. The Company focuses its efforts on acquiring Contracts
collateralized by late model used and, to a lesser extent, new motor vehicles,
entered into with purchasers whom the Company believes have a favorable credit
profile.
The Company generates revenues primarily through the purchase,
origination, warehousing, subsequent securitization and ongoing servicing of
Contracts. The Company earns net interest income on Contracts held during the
warehousing period. Upon the securitization and sale of Contracts, the Company
recognizes a gain on sale of Contracts, receives future servicing cash flows and
earns servicing fees from the trusts over the life of the related
securitization.
9
<PAGE> 10
RESULTS OF OPERATIONS
Prior to securitizing Contracts, the Company earns interest income on
its Contracts, pays interest on funds used to purchase the Contracts and absorbs
any credit losses. After securitization, the net earnings are recorded as
retained interest income as a component of servicing income.
NET INTEREST INCOME
Net interest income is the difference between the interest income earned
on Contracts held for sale, and the interest costs associated with the Company's
borrowings during the warehouse period. Net interest income totaled $1.7 million
for the three months ended September 30, 1999 compared to $2.8 million for the
same period in 1998. For the nine months ended September 30, 1999, net interest
income was $5.6 million as compared to $6.1 million for the same period in 1998.
These decreases are primarily due to the lower amounts of average Contracts held
for sale during the warehouse period. The lower average warehouse balances were
the result of changes in the timing of the securitizations. In each of the 1999
securitizations, the Company elected to execute the securitization during the
second month of the quarter, rather than the third month as performed in each of
the transactions in 1998.
GAIN ON SALE OF CONTRACTS
The Company recorded a gain on sale of Contracts of $13.7 million for
the three months ended September 30, 1999, compared to $9.7 million for the same
period in 1998. For the nine months ended September 30, 1999, the Company
recorded a gain on sale of $40.5 million compared to a gain on sale of $25.9
million for the same period in 1998. The increase in the gain on sale is
primarily the result of an increase in the amount of Contracts sold. Contracts
securitized during the three and nine month periods of 1999 totaled $400.0
million and $1.1 billion respectively, compared to a securitization of $250.0
million for the three month period ended September 1998, and a combined sale and
securitization of $646.8 million for the nine month period ended September 1998.
The net interest rate spread, inclusive of all costs, declined to 2.86% for the
third quarter 1999 securitization versus 3.18% for the securitization completed
in the third quarter of 1998. Interest rate spread is affected by product mix,
general market conditions and overall market interest rates. The risks inherent
in interest rate fluctuations are reduced through hedging activities. To protect
against changes in interest rates, the Company hedges Contracts prior to their
securitization with forward interest rate swap agreements. Gains or losses on
these forward interest rate swap agreements are included as part of the basis of
the underlying Contracts and recognized when the Contracts are securitized.
SERVICE FEE INCOME
Service fee income includes retained interest income, contractual
servicing income and other fee income. Retained interest income represents
excess spread earned on securitized Contracts less any losses not absorbed by
the off balance sheet allowance for losses. Retained interest income is
dependent upon the average excess spread on the securitized Contracts and the
size of the serviced portfolio. Changes in the amount of prepayments and credit
losses may also affect the amount and timing of retained interest income.
Contractual service fee income is earned at a rate of 1% per annum on the
outstanding balance of Contracts securitized. Other fee income consists
primarily of documentation fees, late charges and deferment fees and is
dependent on the number of Contracts originated and the size of the servicing
portfolio. Increased competition may also affect the amount of other fee income
that the Company may earn when originating or servicing Contracts.
Service fee income increased to $8.2 million and $19.8 million for the
three and nine month period ending September 30, 1999, compared to $4.0 million
and $10.0 million for the same periods in 1998. These increases are due
primarily to higher amounts of contractual service fees, late fees and document
fees as a result of the growth in the servicing portfolio.
PROVISION FOR CREDIT LOSSES
The Company maintains an allowance for credit losses to cover
anticipated losses for Contracts held for sale. The allowance for credit losses
is increased by adjusting the provision for credit losses to cover additional
Contracts originated and increases in loss estimates and decreased by actual
losses on the Contracts held for sale or by the reduction of the amount of
Contracts held for sale. The level of the allowance is based principally on the
outstanding balance of Contracts held for sale and the historical loss trends
for the period of time the Contracts are held before being sold in a
securitization. When the Company sells Contracts in a securitization
transaction, it reduces its allowance for credit losses and factors potential
losses into its calculation of gain on sale. The Company believes that the
allowance for credit losses is currently adequate to absorb potential losses.
The provision for credit losses totaled
10
<PAGE> 11
$203,579 and $952,560 for the three and nine month period ending September 30,
1999, compared to $597,957 and $1,229,764 for the same period in 1998. Provision
for credit losses consists of net credit losses incurred during the warehousing
period plus future provision for losses reserved against the net changes in
Contracts held for sale during the period. Net credit losses accounted for
$251,680 and $728,616 during the three and nine month period ending September
30, 1999, compared to $182,358 and $631,345 for the same periods in 1998. Future
provisions totaled ($48,101) and $223,944 for the three and nine month period
ending September 30, 1999, compared to $415,599 and $598,419 for the same period
in 1998. The negative future provision for the third quarter of 1999 was caused
by the reduction in Contracts held for sale. Contracts held for sale decreased
to $195.3 million at September 30, 1999 versus $206.4 million at June 30, 1999.
OPERATING EXPENSES
Total operating expenses were $19.2 million for the three months ended
September 30, 1999 compared to $13.5 million for the same period in 1998. The
increase in total operating expenses is primarily attributable to an increase in
the amount of Contracts serviced by the Company. The serviced portfolio
increased to $1.9 billion at September 30, 1999 from $1.2 billion at September
30, 1998. Total operating expenses for the nine-month period ending September
30, 1999 were $53.6 million compared to $35.8 million for the same period in
1998.
The Company incurred salary and benefit expenses of $10.3 million during
the third quarter of 1999 compared with $7.2 million for the third quarter of
1998, an increase of approximately 43%. This increase is attributable to the
incremental staffing requirements related to the expansion of operations and the
growth of the servicing portfolio. The number of employees at the Company
increased from 499 at September 30, 1998 to 683 at September 30, 1999. Salary
and benefit expenses for the nine-month period ended September 30, 1999 were
$29.6 million compared to $19.5 million for the nine months ending September 30,
1998.
Depreciation expenses increased to $953,902 and $2.5 million for the
three and nine months ended September 30, 1999 compared to $565,600 and $1.3
million for the same periods of 1998, as the Company continued to invest in
technology and infrastructure. Continued expansion into new markets resulted in
an increase in occupancy costs to $822,111 for the three months ending September
30, 1999 from $500,371 in the like period in 1998. General and administrative
expenses increased to $6.9 million in the third quarter of 1999, from $4.6
million in the third quarter of 1998. Higher expenses are primarily due to an
increase in the dollar amount of the servicing portfolio.
INCOME TAXES
The Company files federal and state tax returns. The effective tax rates
for September 30, 1999 and 1998 were 41.5%.
FINANCIAL CONDITION
CONTRACTS HELD FOR SALE
Contracts held for sale totaled $195.3 million at September 30, 1999,
compared to $152.0 million at December 31, 1998. The balance in the held for
sale portfolio is largely dependent upon the timing of the origination and
securitization of Contracts. The Company completed a securitization transaction
of $400.0 million during the third quarter of 1999 compared to a securitization
of $250.0 million during the third quarter of 1998. The Company plans to
continue to securitize Contracts on a regular basis.
11
<PAGE> 12
The following table illustrates the changes in the Company's Contract
acquisition volume, securitization activity and servicing portfolio during the
past five fiscal quarters:
SELECTED QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED
--------------------------------------------------------------------
SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1998 1998 1999 1999 1999
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Contracts purchased/originated during period... $ 286,470 $ 304,200 $ 357,757 $ 374,075 $ 398,802
Average monthly volume during period .......... 95,490 101,400 119,252 124,691 132,934
Gain on sale of Contracts ..................... 9,677 10,506 12,328 14,470 13,723
Contracts securitized during period ........... 250,000 280,000 310,000 350,000 400,000
Servicing portfolio at period end ............. 1,176,153 1,345,961 1,542,612 1,729,338 1,924,881
</TABLE>
ASSET QUALITY
The Company monitors and attempts to minimize delinquencies and losses
through timely collections and the use of a predictive dialing system. At
September 30, 1999, delinquencies represented 2.68% of the amount of Contracts
in its servicing portfolio compared to 2.83% at December 31, 1998. Net
charge-offs as a percentage of the average servicing portfolio were 1.80% for
the quarter ended September 30, 1999, compared to 1.72% for the same period in
1998.
Off balance sheet reserves at September 30, 1999 were 4.45% versus 4.31%
at December 31, 1998. Off balance sheet reserves are those reserves established
and maintained on Contracts sold to the grantor and owner trusts in connection
with securitized Contracts.
DELINQUENCY EXPERIENCE OF SERVICING PORTFOLIO
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 DECEMBER 31, 1998
----------------------- -----------------------
AMOUNT NO. AMOUNT NO.
---------- ------- ---------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Servicing portfolio .... $1,924,881 $189,062 $1,345,961 $131,862
Delinquencies(1)(2)
31-59 days............ 29,324 3,067 26,410 2,766
60-89 days............ 11,219 1,141 6,876 691
90+ days.............. 10,992 1,068 4,790 455
---------- -------- ---------- --------
Total .................. $ 51,535 $ 5,276 $ 38,076 $ 3,912
========== ======== ========== ========
Total delinquencies as a
percent of servicing
portfolio............. 2.68% 2.79% 2.83% 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 THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Period end contracts outstanding ......... $1,924,881 $1,176,153 $1,924,881 $1,176,153
Average servicing portfolio(1) ........... $1,824,799 $1,083,919 $1,629,779 $ 945,077
Number of gross charge-offs .............. 1,646 984 4,508 2,740
Gross charge-offs ........................ $ 9,426 $ 5,453 $ 24,528 $ 14,827
Net charge-offs(2) ....................... $ 8,198 $ 4,659 $ 21,373 $ 12,576
Annualized net charge-offs as a
percent of average Servicing portfolio.. 1.80% 1.72% 1.75% 1.77%
</TABLE>
- ------------
(1) Average is based on daily balances.
(2) Net charge-offs are gross charge-offs minus recoveries of Contracts
previously charged off.
12
<PAGE> 13
THE FOLLOWING TABLE ILLUSTRATES THE MONTHLY PERFORMANCE OF EACH OF THE
SECURITIZED POOLS OUTSTANDING FOR THE PERIOD FROM THE DATE OF SECURITIZATION
THROUGH SEPTEMBER 30, 1999:
<TABLE>
<CAPTION>
96-1 96-2 96-3 96-4 97-1 97-2 97-3 97-4 98-1 98-A 98-B 98-C 99-A 99-B 99-C
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 0.00% 0.01% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2 0.03% 0.07% 0.02% 0.02% 0.00% 0.00% 0.00% 0.00% 0.01% 0.01% 0.00% 0.02% 0.00% 0.00% 0.01%
3 0.05% 0.20% 0.07% 0.05% 0.03% 0.02% 0.02% 0.01% 0.02% 0.03% 0.02% 0.02% 0.02% 0.03%
4 0.11% 0.33% 0.16% 0.14% 0.06% 0.07% 0.09% 0.04% 0.08% 0.07% 0.08% 0.04% 0.05% 0.07%
5 0.23% 0.46% 0.43% 0.24% 0.13% 0.22% 0.13% 0.11% 0.14% 0.14% 0.19% 0.15% 0.11% 0.14%
6 0.40% 0.78% 0.54% 0.38% 0.26% 0.32% 0.24% 0.20% 0.24% 0.23% 0.33% 0.27% 0.21%
7 0.69% 0.98% 0.74% 0.53% 0.37% 0.59% 0.36% 0.28% 0.40% 0.37% 0.45% 0.46% 0.35%
8 0.82% 1.15% 0.97% 0.81% 0.52% 0.80% 0.47% 0.43% 0.53% 0.42% 0.61% 0.57% 0.49%
9 0.93% 1.39% 1.13% 0.98% 0.60% 0.91% 0.62% 0.55% 0.68% 0.51% 0.82% 0.74%
10 1.15% 1.52% 1.32% 1.18% 0.76% 1.07% 0.73% 0.72% 0.85% 0.70% 0.95% 0.94%
11 1.25% 1.69% 1.47% 1.43% 0.92% 1.26% 0.81% 0.87% 1.04% 0.85% 1.10% 1.12%
12 1.47% 1.94% 1.60% 1.63% 1.02% 1.42% 0.94% 0.95% 1.20% 1.01% 1.20%
13 1.65% 2.08% 1.77% 1.73% 1.13% 1.58% 1.10% 1.08% 1.33% 1.17% 1.36%
14 1.79% 2.34% 1.94% 1.87% 1.23% 1.68% 1.23% 1.19% 1.46% 1.37%
15 2.02% 2.52% 2.09% 2.07% 1.40% 1.80% 1.38% 1.36% 1.61% 1.48%
16 2.25% 2.76% 2.27% 2.23% 1.56% 1.97% 1.58% 1.42% 1.71% 1.59%
17 2.43% 2.89% 2.42% 2.33% 1.68% 2.10% 1.68% 1.52% 1.88%
18 2.59% 3.10% 2.57% 2.49% 1.75% 2.23% 1.77% 1.64% 2.01%
19 2.77% 3.14% 2.70% 2.62% 1.85% 2.35% 1.91% 1.75% 2.17%
20 2.93% 3.30% 2.83% 2.73% 1.92% 2.48% 2.04% 1.85%
21 3.06% 3.47% 2.94% 2.84% 1.98% 2.59% 2.11% 1.97%
22 3.15% 3.60% 3.00% 2.93% 2.09% 2.72% 2.20% 2.08%
23 3.21% 3.70% 3.08% 3.02% 2.17% 2.81% 2.31%
24 3.28% 3.81% 3.17% 3.10% 2.22% 2.85% 2.41%
25 3.40% 3.93% 3.28% 3.22% 2.31% 2.93% 2.51%
26 3.43% 4.06% 3.38% 3.29% 2.38% 2.96%
27 3.55% 4.13% 3.43% 3.39% 2.44% 3.09%
28 3.60% 4.22% 3.54% 3.46% 2.50% 3.17%
29 3.73% 4.23% 3.59% 3.58% 2.55%
30 3.75% 4.29% 3.69% 3.61% 2.63%
31 3.79% 4.31% 3.77% 3.64% 2.67%
32 3.85% 4.33% 3.75% 3.72%
33 3.88% 4.37% 3.77% 3.74%
34 3.90% 4.39% 3.79% 3.77%
35 3.94% 4.39% 3.81%
36 3.94% 4.42% 3.83%
37 3.94% 4.42% 3.84%
38 3.97% 4.43%
39 3.99% 4.45%
40 3.96% 4.46%
41 3.96% 4.45%
42 3.95%
43 3.96%
44 3.94%
45 3.97%
</TABLE>
13
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
The Company requires substantial cash and capital resources to operate
its business. Its primary uses of cash include: (i) acquisition of Contracts;
(ii) payments of dealer participation; (iii) securitization costs; (iv)
settlements of hedging transactions; (v) operating expenses; and (vi) interest
expense. The capital resources available to the Company include: (i) interest
income during the warehousing period; (ii) servicing fees; (iii) releases from
spread accounts; (iv) settlements of hedging transactions; (v) sales of
Contracts in securitizations; and (vi) borrowings under its credit facilities.
Management believes that the resources available to the Company provide the
needed capital to fund the expansion of the Company, Contract purchases, and
investments in origination and servicing capabilities.
Cash used in operating activities was $37.4 million for the nine months
ended September 30, 1999, compared to $76.6 million used in the nine months
ended September 30, 1998. The decrease in cash used in operating activities was
primarily due to an increase in accounts payable. Cash used in investing
activities was $5.0 million for the nine months ended September 30, 1999,
compared to $2.4 million for the nine months ended September 30, 1998. A
reduction in the use of the Company's capital lease lines coupled with the
relocation of the Company's corporate headquarters contributed to the increase
in investing activities. Cash provided by financing activities was $45.2 million
for the nine months ended September 30, 1999, compared to $83.8 million for the
nine months ended September 30, 1998 Higher spread account cash releases from
securitization trusts combined with a lower net change in Contracts held for
sale during 1999 versus 1998 reduced the requirement for financing sources. The
Company also issued $10.0 million in subordinated debt during the previous year.
CP Facilities. As of September 30, 1999, the Company was party to two
auto loan warehousing programs (the "CP Facilities"), one a $375 million
facility with Triple-A One Funding Corporation ("Triple-A"), the other a $150
million facility with Park Avenue Receivables Corporation ("Parco"). Two of the
Company's special purpose subsidiaries, Onyx Acceptance Financial Corporation
("Finco" for the Triple-A One Facility) and newly created Onyx Acceptance
Receivables Corporation ("Recco" for the Parco Facility), are the borrowers
under the CP Facilities. The CP Facilities are used to fund the purchase or
origination of Contracts. Triple-A and Parco are both rated commercial paper
asset-backed conduits sponsored by MBIA Insurance Corporation ("MBIA") and the
Chase Manhattan Bank ("Chase"), respectively. MBIA provides credit enhancement
for both facilities by issuing financial guarantee insurance policies covering
all principal and interest obligations owed for the borrowings under the
facilities. The Company pledges its Contracts held for sale to borrow from
Triple-A and from Parco. The liquidity facility supporting Triple-A was renewed
in September for another year; the three-year term of the Triple-A facility, now
in its second year and expiring in September 2001, is subject to the annual
renewal of the liquidity facility. The Parco facility was executed in August
1999, and has a one-year term.
The Merrill Line. A subsidiary of the Company, Onyx Acceptance Funding
Corporation ("Fundco"), has an uncommitted $100 million line (the "Merrill
Line"), with Merrill Lynch Mortgage Capital, Inc. ("MLMCI"), which provides
warehouse funding for the purchase or origination of Contracts and is used in
concert with the CP Facilities the Company currently has in place. The Merrill
Line currently matures in February 2000.
14
<PAGE> 15
The Residual Lines. Fundco has two residual facilities. During July,
Fundco renegotiated its facility with MLMCI. As a result, the facility was
reduced to $10.0 million and is now a committed facility. In addition, the
facility is now a stand-alone line not related to the Merrill line. Fundco has a
$50 million line with Salomon Smith Barney Realty Corporation ("SBRC"). (the
"SBRC Line" and together with the facility with MLMCI, the "Residual Lines").
The Residual Lines are used by the Company to finance operating requirements.
The lines utilize a collateral-based formula that sets borrowing availability
based on a percentage of the value of excess cash flow to be received from
certain securitizations. The facility provided by MLMCI currently matures in
February 2000. Each loan under SBRC Line matures one year after the date of the
loan; the Company expects each loan to be renewed at term.
Excess Servicing Facility. The Company is party to a collateralized loan
("Excess Servicing Facility") with a lending group for up to $45 million, which
was used for working capital and other expenditures. The Excess Servicing
Facility matured in June 1999. This line is now in the amortization period and
all cash flows from the underlying securitizations, which are collateral, are
being used to repay the outstanding principal balance.
The facilities and lines above contain affirmative, negative and
financial covenants typical of such credit facilities. The Company was in
compliance with these covenants as of September 30, 1999.
Hedging and Interest Rate Risk Management. The Company employs a hedging
strategy that is intended to minimize the risk of interest rate fluctuations and
which historically has involved the execution of forward interest rate swaps or
use of a pre-funding structure for the Company's securitizations. The Company is
not required to maintain collateral on the outstanding hedging program.
Securitization. Regular securitizations are an integral part of the
Company's business plan because they allow the Company to increase its
liquidity, provide for redeployment of its capital and reduce risks associated
with interest rate fluctuations. The Company has developed a securitization
program that involves selling interests in pools of its Contracts to investors
through the public issuance of AAA/Aaa rated asset-backed securities. The
Company completed three AAA/Aaa rated publicly underwritten asset-backed
securitizations in the amount of $1.1 billion during the first nine months of
1999.
The net proceeds of these securitizations were used to pay down
outstanding indebtedness incurred under the Company's credit facilities to
purchase Contracts, thereby creating availability for the purchase of additional
Contracts. Since 1994, the Company has securitized $3.0 billion of its Contracts
in 17 separate transactions. In each of its securitizations, the Company has
sold its Contracts to a newly formed grantor or owner trust, which issued
certificates or notes in an amount equal to the aggregate principal balance of
the Contracts.
To improve the level of profitability from the sale of securitized
Contracts, the Company arranges for credit enhancement to achieve an improved
credit rating on the asset-backed securities issued. This credit enhancement has
taken the form of a financial guaranty issued by MBIA, which issues a financial
guaranty insurance policy (the "Financial Guarantee Insurance Policy") insuring
the ultimate payment of principal and the timely payment of interest due on the
asset-backed securities.
The Company receives servicing fees for its duties relating to the
accounting for and collection of the Contracts. In addition, the Company is
entitled to the future servicing cash flows. Generally, the Company sells the
Contracts at face value and without recourse, except that certain
representations and warranties with respect to the Contracts are provided by the
Company as the servicer and Onyx Acceptance Financial Corporation ("OAFC") as
the seller to the trusts.
Gains on sale of Contracts in securitizations provide 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.
15
<PAGE> 16
YEAR 2000
The Company is substantially dependent on its and third party computer
systems, business applications and other information technology systems ("IT
systems"), due to the nature of its consumer finance business and the increasing
number of electronic transactions in the industry. Historically, many IT systems
were developed to recognize the year as a two-digit number, with the digits "00"
being recognized as the year 1900. The year 2000 ("Year 2000") presents a number
of potential problems for such systems, including potentially significant
processing errors or failures. Given the Company's reliance on its computer
systems, the Company's results of operations and cash flows could be materially
adversely affected by any significant errors or failures.
The Company has developed and is in the midst of executing a
comprehensive plan designed to address the "Year 2000" issue for its in house
and third party IT applications. Last year, the Company completed a detailed
risk assessment of its various in-house and third party computer systems,
business applications and other affected systems, formulated a plan for specific
remediation efforts and began certain of such remediation efforts. The Company
assembled survey data from third party vendors and certain other parties with
which the Company communicates electronically to determine the compliance
efforts being undertaken by these parties and to assess the Company's potential
exposure to any non-compliant systems operated by these parties. The Company
completed its remediation efforts during the third quarter of 1999 and is
currently continuing the testing of its in-house and third party systems and
applications.
The Company currently estimates that its costs related to Year 2000
compliance remediation for Company-owned IT systems and applications will be
approximately $450,000 in 1999. The amount expected to be expended during 1999
represents approximately 9% of the Company's IT budget. The Company currently
expects that its Year 2000 testing will be completed during the fourth quarter
of 1999. The Company expenses Year 2000 testing costs as incurred. The Company
believes that it has an effective plan in place to resolve the Year 2000 issue
in a timely manner. As noted above, the Company has not yet completed all
necessary processes of its Year 2000 plan. The Company plans to continuously
monitor the status of completion of its Year 2000 plan and, based on such
information, will develop contingency plans as necessary.
In the event that the Company does not complete any additional phases of
its plan, the Company may be unable to perform its key operating activities,
such as the purchase of loans and the invoicing, collecting and application of
obligor repayments. The Company could be subject to litigation for computer
systems failure, such as improper application of repayments and resulting
incorrect credit reporting to credit bureaus. In addition, disruptions in the
economy generally resulting from Year 2000 issues could also materially
adversely affect the Company. The amount of potential liability and lost revenue
cannot reasonably be estimated at this time.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities"
("SFAS No. 133"). SFAS No. 133 establishes the accounting and reporting
standards for derivative instruments, and for hedging activities. It requires
that an entity recognizes all derivatives as either assets or liabilities in the
statement of financial position and measures those instruments at fair value.
The Company is presently assessing the presentation and effect of SFAS
No. 133 on the financial statements of the Company.
SFAS No. 133 is effective in the first quarter of 2001.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Because the Company's funding strategy is dependent upon the issuance of
interest-bearing securities and the incurrence of debt, fluctuations in interest
rates impact the Company's profitability. As a result, the Company employs
various hedging strategies to limit certain risks of interest rate fluctuations.
See "Management's Discussion and Analysis -- Hedging and Interest Rate Risk
Management" and "Risk Factors -- We are Subject to Interest Rate Fluctuations."
16
<PAGE> 17
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
FORWARD LOOKING STATEMENTS
The preceding Management's Discussion and Analysis of the Company's
Financial Condition and Results of Operations contain certain "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, which provides a new "safe harbor" for these types of statements. This
Quarterly Report on Form 10-Q contains forward-looking statements which reflect
the current views of Onyx Acceptance Corporation with respect to future events
and financial performance. These forward looking statements are subject to
certain risks and uncertainties, including those identified below which could
cause actual results to differ materially from historical results or those
anticipated. Forward-looking terminology can be identified by the use of terms
such as "may," "will," "expect," "anticipate," "estimate," "should" or
"continue" or the negative thereof or other variations thereon or comparable
terminology. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of their dates. Onyx Acceptance
Corporation undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. The following factors could cause actual results to differ
materially from historical results or those anticipated: (1) the level of demand
for auto contracts, which is affected by such external factors as the level of
interest rates, the strength of the various segments of the economy, debt burden
held by consumers and demographics of the lending markets of Onyx Acceptance
Corporation; (2) continued dealer relationships; (3) fluctuations between
consumer interest rates and the cost of funds; (4) federal and state regulation
of auto lending operations; (5) competition within the consumer lending
industry; (6) the availability and cost of securitization transactions and (7)
the availability and cost of warehouse and residual financing.
RISK FACTORS
You should carefully consider the following risks in your evaluation of
us and our Common Stock. The risks and uncertainties described below are not the
only ones facing our company. Additional risks and uncertainties, including but
not limited to credit, economic, competitive, governmental and financial factors
affecting our operations, markets, financial products, and services and other
factors discussed in our filings with the Securities and Exchange Commission,
may also adversely impact and impair our business. If any of these risks
actually occur, our business, results of operations, cash flows or financial
condition would likely suffer. In such case, the trading price of our common
stock could decline, and you may lose all or part of the money you paid to buy
our Common Stock.
WE NEED SUBSTANTIAL CASH RESOURCES.
We require a substantial amount of cash resources to operate our
business. Among other things, we use such sources to:
o acquire Contracts;
o pay dealer participation;
o pay securitization costs and fund spread accounts;
o settle hedge transactions;
o satisfy working capital requirements and pay operating expenses; and
o pay interest expense.
A substantial portion of our revenues in any period is represented by
gain on sale of Contracts generated by a securitization in such period but the
cash underlying such revenues is received over the life of the Contracts. In
addition, cash paid by us for dealer participation is not recovered at the time
of securitizations, but over the life of the Contract.
We have operated and expect to continue to operate on a negative cash
flow basis and expect to do so in the future as long as the volume of Contract
purchases continues to grow. We have historically funded these negative
operating cash flows principally through borrowings from financial institutions,
sales of equity securities and acquisition of subordinated indebtedness. We
cannot assure you,
17
<PAGE> 18
however, that (1) we will have access to the capital markets in the future for
equity, debt issuances or securitizations, or (2) financing through borrowings
or other means will be available on acceptable terms to satisfy our cash
requirements. If we are unable to access the capital markets or obtain
acceptable financing, our results of operations, financial condition and cash
flows would be materially and adversely affected. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
WE DEPEND ON WAREHOUSE FINANCING.
We depend on warehousing facilities with financial institutions to
finance the purchase or origination of Contracts pending securitization. Our
business strategy requires that such financing continue to be available during
the warehousing period.
Whether the CP Facilities continue to be available to us depends on,
among other things, whether we maintain a target net yield for the Contracts
financed under the CP Facilities and comply with certain financial covenants
contained in the sale and servicing agreement between us, as seller, and one of
our wholly-owned special purpose finance subsidiaries, OAFC or RECCO, as
purchaser. These financial covenants include:
o a minimum ratio of net worth plus subordinated debt to total assets;
o a maximum ratio of credit enhancement assets to tangible net worth;
o earnings before interest, depreciation and taxes coverage ratio; and
o minimum cash on hand.
Fundco has a warehouse line of credit with MLMCI, Whether the Merrill
Line continues to be available to us depends on whether we meet certain debt to
equity ratios and minimum equity requirements.
We cannot assure you that our CP Facilities or the Merrill Line will be
available to us or that they will be available on favorable terms. If we are
unable to arrange new warehousing credit facilities or extend our existing
credit facilities when they come due, our results of operations, financial
condition and cash flows could be materially and adversely affected.
WE DEPEND ON RESIDUAL FINANCING.
When we sell our Contracts in securitizations, we receive cash and a
residual interest in the securitized assets ("RISA"). The RISA represents the
future cash flows to be generated by the Contracts in excess of the interest
paid on the securities issued in the securitization and other costs of servicing
the Contracts and completing the securitization. (See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Securitization").
We generally use the RISA from each securitization as collateral to borrow cash
to finance our operations. The amount of cash advanced by our lenders under our
residual lines of credit depends on a collateral formula that is determined in
large part by how well our securitized Contracts perform. If our portfolio of
securitized Contracts experienced higher delinquency and loss ratios than
expected, then the amount of money we could borrow under the residual lines
would be reduced. The reduction in availability under these residual lines could
materially and adversely affect our operations, financial condition and cash
flows.
Whether our Excess Servicing Facility avoids default or an acceleration
depends on, among other things, whether we meet financial covenants that are
substantially similar to those of the CP Facilities. Additionally, we are
subject, under the documentation governing the Residual Lines, 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 loss of access to
the CP Facilities or the Residual Lines could materially and adversely
affect our operations, financial condition and cash flows.
WE DEPEND ON SECURITIZATIONS TO GENERATE REVENUE.
We rely significantly upon securitizations to generate cash proceeds for
repayment of our warehouse credit facilities and to create availability to
purchase additional Contracts. Further, gain on sale of Contracts generated by
our securitizations represents a
18
<PAGE> 19
significant portion of our revenues. Our ability to complete securitizations of
our Contracts is affected by the following factors, among other things:
o conditions in the securities markets generally;
o conditions in the asset-backed securities market specifically;
o the credit quality of our portfolio of Contracts; and
o our ability to obtain credit enhancement.
If we were unable to profitably securitize a sufficient number of our
Contracts in a particular financial reporting period, then our revenues for such
period could decline and could result in lower income or a loss for such period.
In addition, unanticipated delays in closing a securitization could also
increase our interest rate risk by increasing the warehousing period for our
Contracts. See "Management's Discussion and Analysis of Results of Operations
and Financial Condition--Liquidity and Capital Resources."
WE DEPEND ON CREDIT ENHANCEMENT.
From inception through September 30, 1999, each of our securitizations
has utilized credit enhancement in the form of a financial guarantee insurance
policy issued by MBIA, or its predecessor, in order to achieve AAA/Aaa ratings.
This form of credit enhancement reduces the costs of the securitizations
relative to alternative forms of credit enhancements currently available to us.
MBIA is not required to insure future securitizations, and we are not restricted
in our ability to obtain credit enhancement from providers other than MBIA or to
use other forms of credit enhancement. We cannot assure you that:
o we will be able to continue to obtain credit enhancement in any form
from MBIA;
o we will be able to obtain credit enhancement from any other provider
of credit enhancement on acceptable terms; or
o future securitizations will be similarly rated.
We also rely on MBIA financial guarantee insurance policies to reduce
our borrowing cost under the CP Facilities. If MBIA's credit rating is
downgraded or if it withdraws our credit enhancement, we could be subject to
higher interest costs for our future securitizations and financing costs during
the warehousing period. Such events could have a material adverse effect on our
results of operations, financial condition and cash flows.
WE ARE SUBJECT TO INTEREST RATE FLUCTUATIONS.
Our profitability is largely determined by the difference, or "spread,"
between the effective rate of interest received by us on the Contracts acquired
and the interest rates payable under our credit facilities during the
warehousing period and for securities issued in securitizations.
Several factors affect our ability to manage interest rate risk. First,
the Contracts are purchased or originated at fixed interest rates, while amounts
borrowed under our credit facilities bear interest at variable rates that are
subject to frequent adjustment to reflect prevailing rates for short-term
borrowings. Our policy is to increase the buy rates we issue to dealerships or
to increase rates we use to solicit consumers for Contracts in response to
increases in our 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 our competitors may limit our ability to pass through all or most of
our increased costs of warehousing financing.
Second, the spread can be adversely affected after a Contract is
purchased or originated and while it is held during the warehousing period by
increases in the prevailing rates in the commercial paper markets. While the CP
Facilities permit us to select maturities of up to 270 days for commercial paper
issued under the CP Facilities, if we selected a shorter maturity or had a delay
in completing a securitization we would face this risk.
19
<PAGE> 20
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 or originated by us
have fixed rates, we bear the risk of spreads narrowing because of interest rate
increases during the period from the date the Contracts are purchased until the
pricing of our securitization of such Contracts. We employ a hedging strategy
that is intended to minimize this risk and which historically has involved the
execution of forward interest rate swaps or use of a pre-funding structure for
our securitizations. However, we cannot assure you that this strategy will
consistently or completely offset adverse interest rate movements during the
warehousing period or that we will not sustain losses on hedging transactions.
Our hedging strategy requires estimates by management of monthly Contract
acquisition volume and timing of our securitizations. If such estimates are
materially inaccurate, then our gains on sales of Contracts, results of
operations and cash flows could be materially and adversely affected.
We also have exposure to interest rate fluctuations under the Residual
Lines. The interest rates are based on LIBOR. The LIBOR lines reset each month.
In periods of increasing interest rates, our cash flows, results of operations
and financial condition could be adversely affected.
In addition, we have some interest rate exposure to falling interest
rates 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 prices. Such a rate decline would reduce the
interest rate spread because the interest rate on the notes and/or the
certificates would remain fixed. In time, this would negatively impact the gains
on sale of Contracts and our results of operations and cash flows.
WE WILL BE ADVERSELY AFFECTED WHEN CONTRACTS ARE PREPAID OR DEFAULTED.
Our results of operations, financial condition, cash flows and liquidity
depend, to a material extent, on the performance of Contracts purchased,
originated, warehoused and securitized by us. A portion of the Contracts
acquired by us may default or prepay during the warehousing period. We bear 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. We maintain 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 we would recognize as an expense
the losses in excess of such allowance and our results of operations could be
adversely affected. In addition, under the terms of the CP Facilities and the
Merrill Line, we are not able to borrow against defaulted Contracts.
Our servicing income can also be adversely affected by prepayment of or
defaults under Contracts in the servicing portfolio. Our contractual servicing
revenue is based on a percentage of the outstanding principal balance of such
Contracts. Thus, if Contracts are prepaid or charged-off, then our servicing
revenue will decline to the extent of such prepaid or charged-off Contracts.
The gain on sale of Contracts recognized by us in each securitization
and the value of the retained interest in securitized assets ("RISA") in each
transaction reflects management's estimate of future credit losses and
prepayments for the Contracts included in such securitization. If actual rates
of credit loss or prepayments, or both, on such Contracts exceed those
estimated, the value of the RISA would be impaired. We periodically review our
credit loss and prepayment assumptions relative to the performance of the
securitized Contracts and to market conditions. In this event, our results of
operations and liquidity could be materially adversely affected if credit loss
or prepayment levels on securitized Contracts substantially exceed anticipated
levels. If necessary, we would write-down the value of the RISA through a
reduction to servicing fee income. Further, any write down of RISA would reduce
the amount available to us under our residual lines, thus requiring us to pay
down amounts outstanding under the facilities or provide additional collateral
to cure the borrowing base deficiency.
WE WILL BE ADVERSELY AFFECTED IF WE LOSE SERVICING RIGHTS.
Our results of operations, financial condition and cash flows would be
materially and adversely affected if any of the following were to occur:
o loss of the servicing rights under our sale and servicing agreements
for the CP Facilities;
o loss of the servicing rights under the applicable pooling and
servicing or sale and servicing agreement of a grantor trust or owner
trust, respectively; or
o a trigger event that would block release of future servicing cash
flows from the grantor trusts' or owner trusts' respective spread
accounts.
20
<PAGE> 21
We are entitled to receive servicing income only while we act as
servicer under the applicable sale and servicing agreement or pooling and
servicing agreement for securitized Contracts. Under the CP Facilities, our
right to act as servicer can be terminated by MBIA upon the occurrence of
certain events.
OUR QUARTERLY EARNINGS MAY FLUCTUATE.
Our revenues and losses have fluctuated in the past and are expected to
fluctuate in the future principally as a result of the following factors:
o the timing and size of our securitizations;
o variations in the volume of our Contract acquisitions;
o the interest rate spread between our cost of funds and the average
interest rate of purchased Contracts;
o the effectiveness of our hedging strategies; and
o the investor rate for securitizations.
Any significant decrease in our quarterly revenues could have a material
adverse effect on our results of operations, financial condition and cash flows.
WE DEPEND ON KEY PERSONNEL.
Our future operating results depend in significant part upon the
continued service of our key senior management personnel, none of whom is bound
by an employment agreement. Our future operating results also depend in part
upon our ability to attract and retain qualified management, technical, and
sales and support personnel for our operations. Competition for such personnel
is intense. We cannot assure you that we 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 our inability to attract
and retain skilled employees, as needed, could materially and adversely affect
our results of operations, financial condition and cash flows. We presently
maintain a key man life insurance policy on John W. Hall, our president and
chief executive officer, in the amount of $3 million.
OUR INDUSTRY IS HIGHLY COMPETITIVE.
Competition in the field of financing retail motor vehicle 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 we do. 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 us. Our ability to compete successfully depends largely upon our
relationships with dealerships and the willingness of dealerships to offer those
Contracts that meet our underwriting criteria to us for purchase. We cannot
assure you that we will be able to continue to compete successfully in the
markets we serve.
WE MAY BE HARMED BY ADVERSE ECONOMIC CONDITIONS.
We are a motor vehicle consumer auto finance company whose activities
are dependent upon the sale of motor vehicles. Our ability to continue to
acquire Contracts in the markets in which we operate and to expand into
additional markets is dependent upon the overall level of sales of new and used
motor vehicles in those markets. A prolonged downturn in the sale of new and
used motor vehicles, whether nationwide or in the California markets, could have
a material adverse impact upon us, our results of operations and our ability to
implement our business strategy.
21
<PAGE> 22
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 Contracts. We cannot assure you that such economic conditions will
not occur, or that such conditions will not result in severe reductions in our
revenues or the cash flows available to us to permit us to remain current on our
credit facilities. See "Risk Factors--We Need Substantial Cash Resources."
WE ARE SUBJECT TO MANY REGULATIONS.
Our business is subject to numerous federal and state consumer
protection laws and regulations, which, among other things:
o require us to obtain and maintain certain licenses and qualifications;
o limit the interest rates, fees and other charges we are allowed to
charge;
o limit or prescribe certain other terms of our Contracts;
o require specific disclosures; and
o define our rights to repossess and sell collateral.
We believe that we are 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 our ability to operate our business. However, we will
be materially and adversely affected if we fail to comply with:
o applicable laws and regulations;
o changes in existing laws or regulations;
o changes in the interpretation of existing laws or regulations; or
o any additional laws or regulations that may be enacted in the future.
WE ARE SUBJECT TO LITIGATION RISKS.
We are party to various legal proceedings, similar to actions brought
against other companies in the motor vehicle finance industry. While we intend
to vigorously defend ourselves in such proceedings, there is a chance that our
results of operation and cash flows could be materially adversely affected by
unfavorable outcomes.
WE MAY HAVE COMPUTER PROBLEMS RELATED TO THE YEAR 2000.
Because of the nature of our consumer finance business and the
increasing number of electronic transactions in this industry, we have come to
rely heavily on our own and third party computer systems, business applications
and other information technology systems ("IT systems"). Historically, many IT
systems were developed to recognize the year as a two-digit number, with the
digit "00" being recognized as the year 1900. The year 2000 presents a number of
potential problems for such systems, including potentially significant
processing errors or failure. Given our reliance on computer systems, our
results of operations and cash flows could be materially adversely affected by
any significant errors or failures. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Year 2000."
22
<PAGE> 23
ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K
(a) Exhibits
EXHIBIT NO. EXHIBIT TITLE
----------- -------------
*3.4 Certificate of Incorporation of the Company.
*3.5 Bylaws of the Company.
10.103(a) Second Amendment to Master Assignment Agreement between
Onyx Acceptance Funding Corporation and Merrill Lynch
Mortgage Capital Inc. dated July 7, 1999.
10.104(a) Second Amendment to Loan Agreement and Pledge and Security
Agreement by and among Onyx Acceptance Corporation, State
Street Bank and Trust Company, BankBoston, and The
Travelers Insurance Company dated August 9, 1999.
10.105(a) First Amendment to Loan Agreement and Confirmation of
Pledge and Security Agreement by and among Onyx Acceptance
Corporation, State Street Bank and Trust Company,
BankBoston, and The Travelers Insurance Company dated June
29, 1999.
10.119 Sale and Servicing Agreement between Onyx Acceptance
Corporation as Seller and Servicer and Onyx Acceptance
Receivables Corporation, as Purchaser, dated August 9,
1999
10.120 Security Agreement between Onyx Acceptance Receivables
Corporation and The Chase Manhattan Bank as Funding Agent,
dated August 9, 1999
10.121 Subordinated Security Agreement between Onyx Acceptance
Receivables Corporation, and Onyx Acceptance Corporation,
dated August 9, 1999
10.122 Asset Purchase Agreement among Park Avenue Receivables
Corporation, The Chase Manhattan Bank and Onyx Acceptance
Receivables Corporation, dated August 9, 1999
10.123 Funding Agreement among Onyx Acceptance Receivables
Corporation, Park Avenue Receivables Corporation and The
Chase Manhattan Bank, dated August 9, 1999
21.1 Subsidiaries of the Registrant.
27.1 Financial Data Schedule.
- ------------
* Incorporated by reference from the Company's Registration Statement on Form
S-1 (Registration No. 333-680)
(b) Reports on Form 8-K
None.
23
<PAGE> 24
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ONYX ACCEPTANCE CORPORATION
By: /s/ JOHN W. HALL
---------------------------------
John W. Hall
President and Principal
Executive Officer
Date: November 4, 1999
By: /s/ DON P. DUFFY
---------------------------------
Don P. Duffy
Executive Vice President and
Principal Financial Officer
Date: November 4, 1999
24
<PAGE> 25
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT TITLE
----------- -------------
*3.4 Certificate of Incorporation of the Company.
*3.5 Bylaws of the Company.
10.103(a) Second Amendment to Master Assignment Agreement between
Onyx Acceptance Funding Corporation and Merrill Lynch
Mortgage Capital Inc. dated July 7, 1999.
10.104(a) Second Amendment to Loan Agreement and Pledge and Security
Agreement by and among Onyx Acceptance Corporation, State
Street Bank and Trust Company, BankBoston, and The
Travelers Insurance Company dated August 9, 1999.
10.105(a) First Amendment to Loan Agreement and Confirmation of
Pledge and Security Agreement by and among Onyx Acceptance
Corporation, State Street Bank and Trust Company,
BankBoston, and The Travelers Insurance Company dated June
29, 1999.
10.119 Sale and Servicing Agreement between Onyx Acceptance
Corporation as Seller and Servicer and Onyx Acceptance
Receivables Corporation, as Purchaser, dated August 9,
1999
10.120 Security Agreement between Onyx Acceptance Receivables
Corporation and The Chase Manhattan Bank as Funding Agent,
dated August 9, 1999
10.121 Subordinated Security Agreement between Onyx Acceptance
Receivables Corporation, and Onyx Acceptance Corporation,
dated August 9, 1999
10.122 Asset Purchase Agreement among Park Avenue Receivables
Corporation, The Chase Manhattan Bank and Onyx Acceptance
Receivables Corporation, dated August 9, 1999
10.123 Funding Agreement among Onyx Acceptance Receivables
Corporation, Park Avenue Receivables Corporation and The
Chase Manhattan Bank, dated August 9, 1999
21.1 Subsidiaries of the Registrant.
27.1 Financial Data Schedule.
- ------------
* Incorporated by reference from the Company's Registration Statement on Form
S-1 (Registration No. 333-680)
<PAGE> 1
EXHIBIT 10.103(a)
================================================================================
AMENDMENT NO. 2
TO
MASTER ASSIGNMENT AGREEMENT
BETWEEN
ONYX ACCEPTANCE FUNDING CORPORATION
AND
MERRILL LYNCH MORTGAGE CAPITAL INC.
DATED AS OF JULY 7, 1999
================================================================================
<PAGE> 2
THIS AMENDMENT NO. 2 (the "Amendment") is made as of July 7, 1999 by and between
ONYX ACCEPTANCE FUNDING CORPORATION (the "Assignor") and MERRILL LYNCH MORTGAGE
CAPITAL INC. ("MLMCI"). By executing this Amendment, the Assignor and MLMCI
agree to be bound by the terms of the Agreement as amended hereby.
WITNESSETH
WHEREAS, the parties entered into a Master Assignment Agreement, dated
as of February 4, 1998, and Amendment No. 1 thereto, dated as of February 2,
1999 (as so amended, the "Agreement"); and
WHEREAS, the parties desire to amend the Agreement in the manner
provided herein;
NOW, THEREFORE, in consideration of the foregoing and of the covenants
and agreements hereinafter set forth, Assignor and MLMCI agree as follows:
SECTION 1. DEFINITIONS
(a) Capitalized terms used herein and not otherwise defined shall
have the meanings assigned in the Agreement. Capitalized terms used in the
Agreement whose definitions are modified in this Amendment shall, for all
purposes of the Agreement, be deemed to have such modified definitions.
(b) The definition of the following terms is hereby amended and
restated as follows:
"Maximum Advance Amount" shall mean $10,000,000.
"Margin Requirement" shall mean 55% for all purposes under the
Agreement including, without limitation, the second sentence of Section
5(a) thereof.
SECTION 2. AMENDED NOTE
The Note is amended as set forth in Exhibit A hereto.
SECTION 3. AMENDED PROVISIONS
Any provision of the Agreement to the contrary notwithstanding, the
following provisions shall govern any Loan made under the Agreement as amended
hereby:
(a) The maximum amount of any Loan shall be 45% of the Market Value
of the Collateral securing such Loan.
<PAGE> 3
(b) This Amendment shall not become effective until Assignor has
paid to MLMCI, by wire transfer in immediately available funds, an amount equal
to $50,000.
(c) Each Loan shall bear interest, as calculated on a monthly basis
from and including the related Closing Date to but excluding the date such Loan
is paid in full, on the unpaid principal amount thereof from the related Closing
Date through maturity at a rate per annum equal to two hundred and fifty (250)
basis points 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.
(d) Collateral eligible to secure Loans shall consist solely of
residual interests (i) originated in consumer auto loan securitizations that
were lead managed by an affiliate of MLMCI, (ii) that are currently cash flowing
as of the related Closing Date and (iii) that are registered in the name of
MLMCI or its designee.
(e) Notwithstanding Section 2(c) of the Agreement, MLMCI shall be
obligated to make Loans under the Agreement as amended hereby so long as the
terms and conditions set forth in the Agreement as amended hereby are satisfied
and no Event of Default shall have occurred and be continuing.
(f) Assignor agrees, at the sole option of MLMCI, to terminate the
Agreement as amended hereby and convert all Loans into repurchase arrangements
with an affiliate of MLMCI.
(g) Any provision of the Agreement to the contrary notwithstanding,
distribution on Collateral may at MLMCI's sole discretion be used to satisfy any
amount by which the Margin Requirement exceeds the Current Margin or any amounts
due and owing to MLMCI under the Agreement as amended hereby.
(h) The address of the Assignor in Section 15(e) of the Agreement
and of the Chief Executive Office in Exhibit D of the Agreement is hereby
amended to the following:
Onyx Acceptance Funding Corporation
27051 Towne Centre Drive
Suite 200
Foothill Ranch, California 92610
Attention: Don P. Duffy, Chief Financial Officer
Telephone: (949) 465-3505
Telecopy: (949) 465-3530
SECTION 4. EXPENSES
The expenses of the parties in connection with this Amendment
(including, without limitation, the fees and expenses of counsel to MLMCI
incurred in connection with the
2
<PAGE> 4
preparation of this Amendment which fees and expenses shall be $5,000) shall be
promptly paid by Assignor upon demand.
SECTION 5. GOVERNING LAW; SEVERABILITY
This Amendment 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. Each provision of this Amendment shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Amendment 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 Amendment.
SECTION 6. INTERPRETATION
The provisions of the Agreement shall be read so as to give effect to
the provisions of this Amendment.
SECTION 7. RATIFICATION AND CONFIRMATION
As amended by this Amendment, the Agreement is hereby in all respects
ratified and confirmed, and the Agreement as amended by this Amendment shall be
read, taken and construed as one and the same instrument.
SECTION 8. COUNTERPARTS
This Amendment may be executed in any number of counterparts, each of
which counterparts shall be deemed to be an original, and all such counterparts
shall constitute but one and the same instrument.
3
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.
ONYX ACCEPTANCE FUNDING CORPORATION
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
MERRILL LYNCH MORTGAGE CAPITAL INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
4
<PAGE> 6
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.
AMENDED AND RESTATED NOTE
$10,000,000
New York, New York July 7, 1999
FOR VALUE RECEIVED, ONYX ACCEPTANCE FUNDING CORPORATION (the "Assignor")
promises to pay to MERRILL LYNCH MORTGAGE CAPITAL INC. (the "Payee") the
principal sum of $10,000,000 (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 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. Assignor
may request disbursement of amounts borrowed hereunder upon not less than one
(1) Business Day written notice to the Payee. The Payee is hereby authorized by
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
Assignor hereunder in respect of the amounts advanced here against.
A-5
<PAGE> 7
This Note is the Note referred to in the Amendment No. 2, dated as of
July 7, 1999, to Master Assignment Agreement, dated as of February 4, 1998, as
amended by Amendment No.1 thereto, dated as of February 2, 1999 (as so amended,
the "Master Assignment Agreement"), 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 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.
This Note and all other present and future obligations of any and all
kinds of 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.
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 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. Assignor irrevocably consents that service of
process in any such action or proceeding may be made upon Assignor by the
mailing thereof by the holder by United States registered or certified mail,
postage prepaid, to Assignor at 27051 Towne Centre Drive, Suite 200, Foothill
Ranch, California 92610, Attention: Don P. Duffy, Chief Financial Officer, and
Assignor hereby further agrees that service of process in such manner shall be
full and sufficient notice of any such action or proceeding.
A-6
<PAGE> 8
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. 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-7
<PAGE> 9
LOAN SCHEDULE
This Note evidences Loans made by the Payee to Assignor and the
repayment of principal by 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>
INTEREST PRINCIPAL AMOUNT
DATE PRINCIPAL AMOUNT LOANED RATE REPAID TOTAL OUTSTANDING
---- ----------------------- -------- ---------------- -----------------
<S> <C> <C> <C> <C>
- -------- ------------------- --------- ------------------ --------------
- -------- ------------------- --------- ------------------ --------------
- -------- ------------------- --------- ------------------ --------------
- -------- ------------------- --------- ------------------ --------------
- -------- ------------------- --------- ------------------ --------------
- -------- ------------------- --------- ------------------ --------------
</TABLE>
A-8
<PAGE> 1
EXHIBIT 10.104(a)
SECOND AMENDMENT TO LOAN AGREEMENT AND
PLEDGE AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO AMENDED AND RESTATED RESIDUAL INTEREST IN
SECURITIZED ASSETS REVOLVING CREDIT AND TERM LOAN AGREEMENT (this "Second
Amendment") is dated as of August 9, 1999, by and among Onyx Acceptance
Corporation, a California corporation (the "Company"), and State Street Bank and
Trust Company ("State Street"), BankBoston N.A. ("BankBoston") and The Travelers
Insurance Company ("Travelers"). State Street, BankBoston and Travelers are
sometimes herein collectively referred to as the "Lenders" and each individually
as a "Lender". State Street in its capacity as agent for the Lenders hereunder
is sometimes herein referred to as the "Agent". This Second Amendment amends
certain provisions of (i) that certain Amended and Restated Residual Interest in
Securitized Assets Revolving Credit and Term Loan Agreement dated as of June 12,
1998 by and among the Company, the Lenders and the Agent (as amended by and
through a certain First Amendment to Loan Agreement and Confirmation of Pledge
and Security Agreement dated as of June 29, 1999 (the "First Amendment") and as
further amended by and through the date of this Second Amendment, the "Loan
Agreement") and (ii) that certain Amended and Restated Pledge and Security
Agreement dated June 12, 1998 by and between the Company, the Lenders and the
Agent (as amended by the First Amendment and as further amended by and through
the date of this Second Amendment, the "Pledge Agreement"). Certain capitalized
terms relating to the transactions contemplated by this Second Amendment are
defined in Section 1(h) below. Capitalized terms used herein and not otherwise
defined shall have the same meanings herein as in the Loan Agreement.
PREAMBLE
The Company has advised the Agent and the Lenders that it desires to
create a new wholly-owned subsidiary, Onyx Acceptance Receivables Corporation, a
Delaware corporation ("Recco"), and cause Recco to execute the Chase Credit
Facility Documents and enter into the Chase Credit Facility described below. The
creation of Recco by the Company, Recco's entering into the Chase Credit
Facility and the consummation of the transactions contemplated by the Chase
Credit Facility Documents are prohibited by certain provisions of the Loan
Agreement. The Company has requested, and the Agent and the Lenders have agreed,
<PAGE> 2
subject to the terms and conditions set forth herein, that the Loan Agreement be
amended to permit the Company to create Recco and to permit Recco to enter into
the Chase Credit Facility and consummate the other transactions contemplated by
the Chase Credit Facility Documents.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company, the Agent, and the
Lenders hereby agree as follows:
1. Amendments to Loan Agreement.
(a) Amendment to Section 5.
(i) Section 5 (Affirmative Covenants) of the Loan Agreement is
amended by adding the following provision to subsection 5.2 at the end
thereof:
", provided that the Company and Recco are allowed to amend Recco's
charter as set forth on the amended charter attached hereto as Exhibit
A."
(ii) Section 5 of the Loan Agreement is further amended by adding
the following subsection 5.15 thereto:
"5.15 Notice of Default Under Chase Credit Facility Documents. The
Company shall immediately notify the Agent and the Lenders of its
receipt of any notice of a default or event or default under any Chase
Credit Facility Documents."
(b) Amendment to Subsection 6.1 of the Loan Agreement. Subsection 6.1
of the Loan Agreement is hereby amended by adding the following subsection (j)
thereto:
"(j) Indebtedness of Recco under the Chase Credit Facility Documents in
a maximum principal amount at any one time outstanding not to exceed
$153,000,000."
(c) Amendment to Subsection 6.2.
(i) Subsection 6.2 of the Loan Agreement is hereby amended by
deleting clause (h) and replacing it with the following:
"(h) Financing statements filed against the Company by Findco, Fundco,
BayView or Recco filed solely for the purpose of evidencing true sales
of chattel paper consisting of Automobile Loans by the Company to
Findco, Fundco, BayView or Recco, as the case may be; and"
2
<PAGE> 3
(ii) Subsection 6.2 of the Loan Agreement is further amended by
adding the following clause (j) thereto:
"(j) Liens on the assets of Recco securing its obligations in respect
of the Chase Credit Facility."
(f) Amendment to Subsection 6.7. Subsection 6.7 of the Loan Agreement
is hereby amended by adding the following sentence at the end thereof:
"The Lenders expressly agree that the Company may (i) create Recco for
the purpose of causing Recco to execute the Chase Credit Facility
Documents and (ii) become the "Seller" and "Servicer" under the Chase
Credit Facility."
(e) Amendment to Subsection 6.8. Subsection 6.8 of the Loan Agreement
is hereby amended by deleting the last sentence thereof and replacing it with
the following:
"Notwithstanding the foregoing, the Company may, and may permit Findco,
Fundco or Recco to conduct bona fide sales of Automobile Loans for fair
value (but not less than par value) in the ordinary course of their
respective businesses to MLMC under the MLMC Credit Facility Documents,
BayView under the BayView Loan Sale Agreement and Chase under the Chase
Credit Facility Documents, in the form of (i) flow sales by the Company
contemporaneously with the origination or purchase of such Automobile
Loans or (ii) bulk sales by Finco, Fundco or Recco. Recco is also
authorized to conduct bona fide sales of Automobile Loans for fair
value (but not less than par value) in the ordinary course of its
business to the Company, Finco or Fundco as part of a securitization
permitted by the Loan Agreement."
(f) Amendment to Section 6. Section 6 (Negative Covenants) of the Loan
Agreement is hereby amended by adding the following subsection 6.17 thereto:
"6.17 Amendment to Chase Credit Facility Documents. The
Company will not, and will not permit Recco, to amend, modify or change
(or consent to any
3
<PAGE> 4
such amendment, modification or change) in any manner adverse to the
interests of the Lenders, any of the provisions set forth in the Chase
Credit Facility Documents, without the prior written consent of the
Lenders. Without limiting the foregoing, the Company will not consent
or agree to, or permit Recco to consent or agree to, any increase in
the maximum aggregate amount of funds available to Recco under the
Chase Credit Facility Documents."
(g) Amendment to Subsection 8.1. Subsection 8.1 (Events of Default;
Acceleration) of the Loan Agreement is hereby amended by adding the following
clause (p) thereto:
"(p) If there shall occur any default or event of default under and as
from time to time defined in the Chase Credit Facility Documents."
(h) Amendments to Section 9. Section 9 of the Loan Agreement is hereby
amended by adding the following definitions alphabetically therein:
"Recco: shall mean Onyx Acceptance Receivables Corporation, a
Delaware corporation and a wholly-owned Subsidiary of the Company."
"Chase: shall mean The Chase Manhattan Bank, a New York banking
corporation."
"Chase Credit Facility: shall mean the credit facilities and
related servicing and custodial arrangements created pursuant to the
Chase Credit Facility Documents."
"Chase Credit Facility Documents: shall mean, collectively, the
Funding Agreement, the Premium Side Letter Agreement, the Sale
Agreement, the Collection Account Agreement, the Fee Letter Agreement,
the Security Agreement, the Loan Note, the Subordinated Note, the Note
Policy, the Sublease and Administrative Services Agreement, the
Insurance Agreement, the Intercreditor Agreement, the Subordinated
Security Agreement, the Tax Sharing Agreement, the Certificate of
Incorporation and By-Laws of Recco, any documents related to Interest
Rate Hedge Mechanisms, each as defined in the Definitions List dated as
of August 9, 1999 related to the Chase Credit Facility and any other
agreement or instrument related or delivered to any party to any of the
foregoing pursuant to or in connection with any of the foregoing."
4
<PAGE> 5
(i) Amendment to Subsection 15.1. Section 15.1 (Notices) of the Loan
Agreement is amended by deleting the address of Onyx Acceptance Corporation and
replacing it with:
"27051 Towne Centre Drive, Foothill Ranch, CA 92610, Attention:
Don P. Duffy and John Hall".
(j) Amendments to Schedules to Loan Agreement.
(i) Schedule 3.2 of the Loan Agreement is hereby amended by adding
the following thereto:
<TABLE>
<S> <C> <C>
"Onyx Acceptance Receivables Corporation, a 1,000 shares Common 1,000 shares Common
Delaware Corporation (Incorporated August 3, 1999) Stock outstanding Stock issued to the
Company
</TABLE>
(ii) Schedule 3.23 of the Loan Agreement is hereby amended by
adding the following thereto:
<TABLE>
<CAPTION>
Bank Account Name Account Number Account Purpose
---- ------------ -------------- ---------------
<S> <C> <C> <C>
Wells Fargo Bank Collection Account 4047105606 Deposit account used to
2030 Main Street accumulate obligor payments
Suite 900 each month on loans related
Irvine, CA 92714 to Chase Credit facility.
</TABLE>
(iii) Schedule 3.28 of the Loan Agreement is hereby amended by
adding the following thereto:
<TABLE>
<CAPTION>
Instrument or Description of Description of
Obligors Creditor Document Obligation Collateral
-------- -------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Onyx Acceptance MBIA Insurance Insurance and Covenants of None
Corporation Corporation Indemnity Agreement Seller
dated as of
August 9, 1999,
related to the
Chase Credit
Facility
Onyx Acceptance MBIA Insurance Premium Side Letter Costs and None
Corporation Corporation Agreement related expenses of MBIA
to Chase Credit related to the
Facility Chase Credit
Facility
</TABLE>
5
<PAGE> 6
2. Confirmation of Representations, Warranties, Exhibits and Schedules
to the Loan Agreement.
The Company, by execution of this Second Amendment, certifies to the
Agent and each of the Lenders that each of the representations and warranties
set forth in the Loan Agreement, the Security Documents and the other Loan
Documents is true and correct as of the date hereof, except to the extent such
representations and warranties expressly relate to an earlier date, as if fully
set forth in this Second Amendment and that, as of the date hereof, no Default
or Event of Default has occurred and is continuing under the Loan Agreement, any
Security Documents, any other Loan Document or any Eligible Securitization
Transaction Document. The Company acknowledges and agrees that this Second
Amendment shall become a part of the Loan Agreement and shall be a Loan
Document.
3. Conditions Precedent.
Prior to or concurrently with the execution by the Agent and the
Lenders of this Second Amendment, and as a condition to the effectiveness hereof
and of the Lenders to make Loans for the account of the Company on and after the
date hereof:
(a) The Company shall have delivered to the Agent and each of the
Lenders' copies of the fully executed Chase Credit Facility Documents, provided
that the Company shall not be required to deliver to the Agent any document
subject to a confidentiality agreement with MBIA Insurance Corporation;
(b) The Company shall have delivered to the Agent a copy of Recco's
organizational documents, including Recco's amended charter in the form to be
filed with the Delaware Secretary of State;
(c) The Company shall have delivered to the Agent, for the benefit of
the Lenders, stock certificates evidencing all of the outstanding capital stock
of Recco, with related stock powers executed in blank; and
(d) This Agreement and all other agreements, instruments and
certificates reasonably required by the Lenders in connection herewith and
therewith shall have been executed and delivered by each of the parties thereto.
6
<PAGE> 7
4. Conditions to Lending; Compliance with Loan Documents, etc.
The Company hereby represents and warrants to the Agent and the Lenders
that all of the conditions precedent to lending specified in Section 4 of the
Loan Agreement have been and continue to be satisfied as of the date hereof.
Without limiting the generality of the foregoing, the Company hereby confirms
that (a) the Company is in compliance with all of the terms and provisions set
forth in the Loan Agreement, the Security Documents and each of the other Loan
Documents, as amended hereby, and each of the Eligible Securitization
Transaction Documents, on its part to be observed or performed on or prior to
the date hereof; (b) without limiting the foregoing, no Default or Event of
Default has occurred and is continuing; and (c) since December 31, 1998 there
has been no material adverse change in the assets or liabilities or in the
financial or other condition of the Company, except as disclosed in the
Company's or Finco's periodic filings with the SEC.
5. Amendment to Pledge and Security Agreement and related Schedules; No
Novation; Effect; Ratification and Acknowledgment of Security Documents;
Counterparts; Governing Law.
(a) Section 2(c) of the Pledge Agreement is amended by deleting the
definition of "Pledged Stock" where it appears therein and replacing it with the
following:
"The shares of capital stock of Finco and Recco and all dividends
and distributions of every kind or nature attributable thereto as
well as other proceeds, income and profits thereof (collectively,
the "Pledged Stock"),"
(b) Section 2 of the Pledge Agreement is amended by deleting the first
clause (i) from the definition of "Excluded Assets" where it appears therein and
replacing it with the following:
"(i) all chattel paper of every kind and description held by the
Company for resale to (a) Finco pursuant to the Sale and Servicing
Agreement between the Company and Finco dated as of September 8,
1994, as amended from time to time or (b) Recco pursuant to the
Sale Agreement between the Company and Recco dated as of August 9,
1999, as amended from time to time,"
7
<PAGE> 8
(c) Schedule II to the Pledge and Security Agreement is amended by
deleting the "Pledged Stock" Section of Schedule II to the Pledge and Security
Agreement and replacing it with the revised Pledged Stock section attached
hereto.
(d) Except to the extent specifically amended hereby, the Loan
Agreement, the Notes, each of the Security Documents and all other Loan
Documents shall be unaffected hereby and shall remain in full force and effect.
The Company hereby acknowledges, confirms and ratifies its obligations under the
Loan Agreement, the Notes, each of the Security Documents and all other Loan
Documents. This Second Amendment may be executed in any number of counterparts,
and by the different parties on separate counterparts, each of which, when so
executed and delivered, shall be an original, but all the counterparts shall
together constitute one instrument. This Second Amendment shall be governed by
the internal laws of The Commonwealth of Massachusetts (without reference to
conflicts of law principles) and shall be binding upon and inure to the benefit
of the parties hereto and the respective successors and assigns. The Company
shall pay all reasonable out-of-pocket expenses of the Agent in connection with
the preparation, execution and delivery of this Second Amendment.
8
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment as a sealed instrument as of the date first above written.
ONYX ACCEPTANCE CORPORATION
By:
----------------------------------
(Title)
STATE STREET BANK AND TRUST COMPANY,
INDIVIDUALLY AND AS AGENT
By:
----------------------------------
(Title)
BANKBOSTON, N.A.
By:
----------------------------------
(Title)
THE TRAVELERS INSURANCE COMPANY
By:
----------------------------------
(Title)
9
<PAGE> 10
SCHEDULE II TO PLEDGE AND SECURITY AGREEMENT
PLEDGED STOCK
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
NO. OF CERT.
OWNER AND ADDRESS DESCRIPTION SHARES NO.
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Onyx Acceptance Corporation Common Stock of Onyx Acceptance 1,000 1
27051 Towne Centre Drive Financial Corporation
Foothill Ranch, CA 92610
- -------------------------------------------------------------------------------------------------------------
Onyx Acceptance Corporation Common Stock of Onyx Acceptance 1,000 C-1
27051 Towne Centre Drive Receivables Corporation
Foothill Ranch, CA 92610
- -------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 11
CERTIFICATE OF INCORPORATION
of
ONYX ACCEPTANCE RECEIVABLES CORPORATION
ARTICLE I
NAME
The name of the corporation is Onyx Acceptance Receivables Corporation
(the "Corporation").
ARTICLE II
REGISTERED OFFICE AND REGISTERED AGENT
The address of the registered office of the Corporation in the State of
Delaware is 9 East Loockerman Street, City of Dover, County of Kent and the name
of the registered agent is National Registered Agents, Inc.
ARTICLE III
CORPORATE PURPOSE
The purposes of the Corporation are:
(a) to purchase or otherwise acquire from Onyx Acceptance Corporation, a
Delaware corporation (together with any successor in interest by merger or
otherwise, the "Seller"), Seller's right, title and interest in certain loans
and retail installment contracts purchased by the Seller in the ordinary course
of its business from vehicle dealers, which loans and retail installment
contracts arise from the sale of automobiles, vans and light trucks by such
vehicle dealers and which loans and retail installment contracts are secured by
such automobiles, vans and light trucks, all amounts due and to become due under
such loans and retail installment contracts, all rights of the vehicle dealers
with respect thereto and all proceeds thereof (collectively, the "Contracts");
(b) to hold and enjoy all of the rights and privileges of any
certificates or other indicia of beneficial ownership issued by owner trusts,
grantor trusts or any other person in connection with the issuance of
asset-backed securities relating to the Contracts (such interests, together with
the Contracts, the "Assets");
(c) to engage in any activities necessary to purchase, acquire, own,
hold, sell, endorse, transfer, assign, pledge and finance the Assets including,
without limitation, the grant of a security interest in such Assets;
<PAGE> 12
(d) to engage in any activities necessary to hold, receive, exchange,
otherwise dispose of and otherwise deal in and exercise all rights, powers,
privileges, and all other incidents of ownership or possession with respect to
all of the Corporation's property, including, without limitation, the Assets and
any property or interests which may be acquired by the Corporation as a result
of any distribution in respect of the Assets;
(e) to engage in any activities necessary to authorize, execute and
deliver any other agreement, notice or document in connection with the
activities described above, including the filing of any notices, applications
and other documents necessary or advisable to comply with any applicable laws,
statutes, rules and regulations;
(f) to engage in any activities necessary or appropriate to authorize,
execute, deliver and perform any agreement, notice or document in order to sell
any of the Contracts to a grantor trust, owner trust or other person in
connection with the issuance of asset-backed securities or to otherwise sell,
transfer, or dispose of any of the Assets;
(g) to hold and enjoy all of the rights and privileges of the Assets
pursuant to any trust agreement, purchase agreement, pooling and servicing
agreement, indenture or other similar agreement or document;
(h) to engage in such lawful activities and to exercise such powers
permitted to corporations under the General Corporation Law of the State of
Delaware (the "GCL") that are incidental to or connected with the foregoing
business or purposes or necessary to accomplish the foregoing.
ARTICLE IV
CAPITAL STOCK
The total number of shares of all classes of stock that the Corporation
shall have authority to issue is 1,000 shares. All 1,000 authorized shares of
stock of the Corporation shall be designated as Common Stock, par value $.01
each.
(a) Voting. Except as otherwise expressly provided by law, all voting
rights shall be vested in the holders of the Common Stock, and each holder of
one or more shares of Common Stock shall be entitled to one vote for each such
share on all matters that come before any meeting of the stockholders of the
Corporation.
(b) Dividends. No dividends may be declared or paid, nor may any
distributions be made upon any capital stock of the Corporation (other than
dividends and distributions payable only in shares of capital stock of the
Corporation), nor shall any of the Corporation's assets be applied, directly or
indirectly, to the redemption, retirement, purchase or other acquisition of any
capital stock of the Corporation if the effect of such declaration, payment,
distribution or application of assets would be to reduce the sum of the
Corporation's paid-in capital determined in accordance with generally accepted
accounting principles or would cause a default or event of default or wind-down
event under an agreement, instrument or other undertaking to which the
Corporation is a party or by which the Corporation or any of its property is
bound.
2
<PAGE> 13
(c) Liquidation. In the event of the dissolution, liquidation or winding
up of the affairs of the Corporation, whether voluntarily or involuntarily, the
holders of the Common Stock shall be entitled to share ratably in all remaining
assets of the Corporation.
ARTICLE V
NO PREEMPTIVE RIGHTS
No holder of any class of capital stock of the Corporation, whether now
or hereafter authorized, shall be entitled, as such, as a matter of right, to
subscribe for or purchase any part of any new or additional issue of capital
stock of the Corporation of any class whatsoever, or of securities convertible
into or exchangeable for capital stock of the Corporation of any class
whatsoever, whether now or hereafter authorized, or whether issued for cash,
property or services.
ARTICLE VI
INCORPORATOR
The name and mailing address of the incorporator is Frank Jackson, Jr.,
38 Technology Drive, Irvine, California, 92618.
ARTICLE VII
DIRECTORS PROTECTED
A director shall be fully protected in relying in good faith upon the
books of account or other records of the Corporation or statements prepared by
any of its officers or by independent public accountants or by an appraiser
selected with reasonable care by the Board of Directors as to the value and
amount of the assets, liabilities and/or net profits of the Corporation, or any
other facts pertinent to the existence and amount of surplus or other funds from
which dividends might properly be declared and paid, or with which the
Corporation's capital stock might properly be purchased or redeemed.
ARTICLE VIII
ELECTION OF DIRECTORS
(a) Elections of directors need not be by written ballot unless the
Bylaws of the Corporation shall so provide.
(b) The Corporation shall at all times (except as noted hereafter in the
event of death, incapacity, resignation or removal) have at least two
Independent Directors. An "Independent Director" shall be an individual who,
except in his or her capacity as an Independent Director of the Corporation, is
not, and has not been during the two years immediately before such individual's
appointment as an Independent Director, (i) a partner, director, officer, holder
of any equity interest, significant customer, supplier, independent contractor,
creditor or employee of the Corporation or its Affiliates; (ii) affiliated with
the
3
<PAGE> 14
Corporation or its Affiliates or with a significant customer, supplier, creditor
or independent contractor of the Corporation or its Affiliates; (iii) a spouse,
parent, sibling, or child of any person described by (i) or (ii) above;
provided, however, than an individual shall not be deemed to be ineligible to be
an Independent Director solely because such individual serves or has served in
the capacity of an "independent director," "independent trustee" or in a similar
capacity in any "special purpose entity" formed by Onyx Acceptance Corporation
or any of its Affiliates. In the event of the death, incapacity, resignation or
removal of any Independent Director or in the event that any director acting as
an Independent Director shall cease to satisfy the eligibility conditions for an
Independent Director, the Board of Directors shall promptly appoint a
replacement Independent Director. The Board of Directors shall not vote on any
matter requiring the vote of the Independent Directors under this Certificate of
Incorporation unless at least two Independent Directors are then serving on the
Board.
As used herein, the term "Affiliate" shall mean, with respect to a
Person, any Person other than such Person (i) which owns beneficially, directly
or indirectly, any equity interest in such Person, or (ii) which controls or is
under common control with such Person. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise. The term "Person" refers to any
individual, corporation, partnership, limited liability company, estate, trust
(including any beneficiary thereof), association, private foundation within the
meaning of Section 509(a) of the Internal Revenue Code of 1986, joint-stock
company, unincorporated organization, any government or agency or political
subdivision thereof, any group as that term is used for purposes of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended, or any other
entity.
ARTICLE IX
AUTHORITY TO AMEND BYLAWS
The Board of Directors of the Corporation, acting by majority vote, may
alter, amend or repeal the Bylaws of the Corporation.
ARTICLE X
RESTRICTIONS ON LIABILITY
Section 1. A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the GCL, or (iv) for any
transaction from which the director derived any improper personal benefit. If
the GCL is amended after approval by the stockholders of this Article X to
authorize corporate action further eliminating or limiting the personal
liability of directors then the liability of each director of the Corporation
shall be eliminated to the fullest extent permitted by the GCL as so amended.
Any repeal or modification of the foregoing provisions of this Article X by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
4
<PAGE> 15
Section 2. The holders of the capital stock of the Corporation shall not
be personally liable for the payment of the Corporation's debts and the private
property of the holders of the capital stock of the Corporation shall not be
subject to the payment of debts of the Corporation to any extent whatsoever.
ARTICLE XI
INDEMNIFICATION OF DIRECTORS,
OFFICERS AND OTHERS
To the fullest extent permitted by applicable law, the Corporation is
authorized to provide indemnification of (and advancement of expenses to) its
directors and officers (and any other person to which Delaware law permits the
Corporation to provide indemnification) through Bylaw provisions, agreements
with such agents or other persons, vote of stockholders or disinterested
directors or otherwise, in excess of the indemnification and advancement
otherwise permitted by Section 145 of the General Corporation Law of the State
of Delaware, subject solely to limits created by applicable Delaware law
(statutory or non-statutory), with respect to actions for breach of duty to the
Corporation, its stockholders and others; provided, however, that any such
indemnification obligation on the part of the Corporation to its directors and
officers shall be payable solely to the extent the Corporation has available
funds in excess of those necessary to repay its obligations to any credit
enhancement provider or lender to the Corporation which has a security interest
in the Contracts.
Any repeal or modification of any of the foregoing provisions of this
Article XI shall not adversely affect any right or protection of a director,
officer, agent or other person existing at the time of, or increase the
liability of any director of this corporation with respect to any acts or
omissions of such director, officer or agent occurring prior to, such repeal or
modification.
ARTICLE XII
MISCELLANEOUS
Notwithstanding any other provision of this Certificate of Incorporation
and any provision of law that otherwise so empowers the Corporation, the
Corporation shall not by action of the stockholders of the Corporation do any of
the following without the affirmative vote of 100% of the members of the Board
of Directors of the Corporation:
(a) engage in any business or activity other than as set forth in
Article III hereof;
(b) dissolve or liquidate, in whole or in part;
(c) consolidate or merge with or into any other entity or convey or
transfer its properties and assets substantially as an entirety to any entity;
or
5
<PAGE> 16
(d) institute proceedings to be adjudicated a bankrupt or insolvent, or
consent to the institution of bankruptcy or insolvency proceedings against it,
or file a petition seeking or consent to reorganization or relief under any
applicable federal or state law relating to bankruptcy, or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Corporation or a substantial part of its property, or
make any assignment for the benefit of creditors, or admit in writing its
inability to pay its debts generally as they become due, or declare or effect a
moratorium on its debt or take any corporate action in furtherance of any such
action.
ARTICLE XIII
RESERVATION OF RIGHT TO AMEND
CERTIFICATE OF INCORPORATION
Except for Articles III, VIII, XI, XII and this Article XIII, which
shall not be amended, altered, changed or repealed by action of the stockholders
of the Corporation without (w) the affirmative vote of 100% of the members of
the Board of Directors of the Corporation, (x) the prior written consent of each
trustee under any agreement pursuant to which a trust or other entity has issued
certificates or notes ("Securities") which are outstanding and are backed by
Contracts, (y) the prior written consent of any credit enhancement provider or
lender to the Corporation which has a security interest in the Contracts and (z)
the prior written consent of each nationally recognized rating agency which has
been requested to rate any series or class of Securities and which is then
rating such Securities, the Corporation reserves the right, subject to the
unanimous written consent of all of the holders of shares of the Corporation's
capital stock, to amend, alter, change or repeal any other provision contained
in this Certificate of Incorporation in the manner now or hereafter prescribed
by law, and, except as expressly provided in this Certificate of Incorporation
or by law, all rights and powers conferred in this Certificate of Incorporation
on stockholders, directors and officers are subject to this reserved power.
IN WITNESS WHEREOF, the undersigned has signed this Certificate of
Incorporation this 3rd day of August 1999.
/s/ Frank Jackson, Jr.
------------------------------
Frank Jackson, Jr.
Incorporator
6
<PAGE> 17
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ONYX ACCEPTANCE RECEIVABLES CORPORATION
Onyx Acceptance Receivables Corporation, a corporation organized and
existing under the laws of the State of Delaware (the "Corporation"), hereby
certifies as follows:
1. The name of the Corporation is Onyx Acceptance Receivables
Corporation. The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on August 3, 1999.
2. This Certificate of Amendment of Certificate of Incorporation was
duly adopted by the directors and sole stockholder of the Corporation in
accordance with the provisions of Section 242 of the General Corporation Law of
the State of Delaware.
3. Article XII of the Certificate of Incorporation of the Corporation is
hereby deleted and amended to read in its entirety as follows:
ARTICLE XII
MISCELLANEOUS
Notwithstanding any other provision of this Certificate of Incorporation
and any provision of law that otherwise so empowers the Corporation, the
Corporation shall not do any of the following without (i) the approval, as and
if required under the GCL, of the stockholders of the Corporation and (ii) the
affirmative vote of 100% of the members of the Board of Directors of the
Corporation:
(a) engage in any business or activity other than as set forth
in Article III hereof;
(b) dissolve or liquidate, in whole or in part;
(c) consolidate or merge with or into any other entity or convey
or transfer its properties and assets substantially as an entity to any
entity; or
(d) institute proceedings to be adjudicated a bankrupt or
insolvent, or consent to the institution of bankruptcy or insolvency
proceedings against it, or file a petition seeking or consent to
reorganization or relief under any applicable federal or state law
relating to bankruptcy, or consent to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official)
of the Corporation or a substantial part of its property, or make any
assignment for the benefit of creditors, or admit in writing its
inability to pay its debts generally as they become due, or declare or
effect a moratorium on its debt or take any corporate action in
furtherance of any such action.
<PAGE> 18
4. Article XIII of the Certificate of Incorporation of the Corporation
is hereby deleted and amended to read in its entirety as follows:
ARTICLE XIII
RESERVATION OF RIGHT TO AMEND
CERTIFICATE OF INCORPORATION
Except for Article III, VIII, XI, XII and this Article XIII, which shall
not be amended, altered, changed or repealed without unanimous written consent
of all the holders of shares of the Corporation's capital stock and without (w)
the affirmative vote of 100% of the members of the Board of Directors of the
Corporation, (x) the prior written consent of each trustee under any agreement
pursuant to which a trust or other entity has issued certificates or notes
("Securities") which are outstanding and are backed by Contracts, (y) the prior
written consent of any credit enhancement provider or lender to the Corporation
which has a security interest in the Contracts and (z) the prior written consent
of each nationally recognized rating agency which has been requested to rate any
series or class of Securities and which is then rating such Securities, the
Corporation reserves the right, subject to the unanimous written consent of all
the holders of shares of the Corporation's capital stock, to amend, alter,
change or repeal any other provision contained in this Certificate of
Incorporation in the manner now or hereafter prescribed by law, and, except as
expressly provided in this Certificate of Incorporation or by law, all rights
and powers conferred in this Certificate of Incorporate on stockholders,
directors and officers are subject to this reserved power.
5. In accordance with the provisions of Section 103(d) of the General
Corporation Law of the State of Delaware, this Certificate of Amendment of
Incorporation shall become effective upon its filing date.
IN WITNESS WHEREOF, Onyx Acceptance Receivables Corporation has caused
this Certificate of Amendment of Incorporation to be signed by its Secretary
this 5th day of August, 1999.
ONYX ACCEPTANCE RECEIVABLES CORPORATION
By: /s/ Michael A. Krahelski
-----------------------------------
Michael A. Krahelski
Secretary
2
<PAGE> 1
EXHIBIT 10.105(a)
FIRST AMENDMENT TO LOAN AGREEMENT AND
CONFIRMATION OF PLEDGE AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED RESIDUAL INTEREST IN
SECURITIZED ASSETS REVOLVING CREDIT AND TERM LOAN AGREEMENT (this "Amendment")
is dated as of June 29, 1999, by and among Onyx Acceptance Corporation, a
California corporation (the "Company"), and State Street Bank and Trust Company
("State Street"), BankBoston N.A. ("BankBoston") and The Travelers Insurance
Company ("Travelers"). State Street, BankBoston and Travelers are sometimes
herein collectively referred to as the "Lenders" and each individually a
"Lender". State Street in its capacity as agent for the Lenders hereunder is
sometimes herein referred to as the "Agent". This Amendment amends certain
provisions of (i) that certain Amended and Restated Residual Interest in
Securitized Assets Revolving Credit and Term Loan Agreement dated as of June 12,
1998 by and among the Company, the Lenders and the Agent (as amended by and
through the date of this First Amendment, the "Loan Agreement") and (ii) that
certain Amended and Restated Pledge and Security Agreement dated June 12, 1998
by and between the Company, the Lenders and the Agent (the "Pledge Agreement").
Capitalized terms used herein and not otherwise defined shall have the same
meanings herein as in the Loan Agreement.
BACKGROUND
The Company and the Lenders have agreed to add Onyx Acceptance Grantor
Trust 1997-4 ("OAGT-1997-4"), Onyx Acceptance Owner Trust 1998-A ("OAOT 1998-A")
and Onyx Acceptance Owner Trust 1998-C ("OAOT 1998-C") as Eligible
Securitization Transactions, as such term is used in the Loan Agreement, for the
purpose of enabling the Company to include OAGT 1997-4, OAOT 1998-A and OAOT
1998-C in the Borrowing Base and thereby add to availability thereunder and to
delete OAGT 1995-1 from the Borrowing Base, subject to the terms and conditions
set forth below.
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company, the Agent, and the Lenders hereby
agree as follows:
<PAGE> 2
1. Amendments to Loan Agreement.
(a) Section 1.2(a) of the Loan Agreement (Establishment of Line
of Credit) is amended by (i) adding "OAGT 1997-4, OAOT 1998-A and OAOT 1998-C"
to and (ii) deleting "OAGT 1995-1" from, the list of Eligible Securitization
Transactions that are included in the Borrowing Base.
(b) Section 1.9(d) of the Loan Agreement (Security) is amended
by inserting "OAGT 1997-4, OAOT 1998-A and OAOT 1998-C" to the lists of Pledged
Certificates and Spread Account Trust Agreements, as applicable, appearing
therein.
(c) (i) Section 9 of the Loan Agreement (Definitions) is amended
by inserting the date March 2, 1998 in the definition of BayView Loan Sale
Agreement.
(ii) Section 9 of the Loan Agreement is further amended
by adding "Onyx Acceptance Grantor Trust 1997-4, Onyx Acceptance Owner Trust
1998-A, and Onyx Acceptance Owner Trust 1998-C" to the definition of "Eligible
Securitization Transactions".
(iii) Section 9 of the Loan Agreement is further amended
by adding "1997-4 Spread Account Trust" to the definition of Spread Account
Trust(s) appearing therein.
2. Amendments to Amended and Restated Pledge and Security Agreement
("Pledge Agreement").
(a) Section 2 of the Pledge Agreement (Security Interest) is
hereby amended by adding "Onyx Acceptance Grantor Trust 1997-4 (OAGT 1997-4),
Onyx Acceptance Owner Trust 1998-A (OAOT 1998-A) and Onyx Acceptance Owner Trust
1998-C (OAOT 1998-C)" to the list of securitization transactions appearing in
paragraph (B) thereof.
(b) Section 2 of the Pledge Agreement is further amended by
inserting "OAGT 1997-4, OAOT 1998-A and OAOT 1998-C" in the definition of
Pledged Certificates appearing therein.
(c) Section 2 of the Pledge Agreement is further amended by
adding the following to the definition of "Excluded Assets" appearing therein:
"Excluded Assets shall also include Account No. 21217 maintained
by Bankers Trust Company, 4 Albany Street, New York, New York 10006 and
entitled "1996-3 Spread Account Trust pursuant to the 1996-3 Spread
<PAGE> 3
Account Trust Agreement dated as of September 17, 1996 between Onyx
Acceptance Financial Corporation, as Depositor, and Bankers Trust
[Delaware] as Trustee, subject to security interest of Capital Markets
Assurance Corporation"; Account No. 21879 maintained by Bankers Trust
Company, 4 Albany Street, New York, New York 10006 and entitled "1996-4
Spread Account Trust pursuant to the 1996-4 Spread Account Trust
Agreement dated as of December 23, 1996 between Onyx Acceptance
Financial Corporation, as Depositor, and Bankers Trust [Delaware] as
Trustee, subject to security interest of Capital Markets Assurance
Corporation"; and Account No. 24609 maintained by Bankers Trust Company,
4 Albany Street, New York, New York 10006 and entitled "1997-4 Spread
Account Trust pursuant to the 1997-4 Spread Account Trust Agreement
dated as of December 12, 1997 between Onyx Acceptance Financial
Corporation, as Depositor, and Bankers Trust [Delaware] as Trustee,
subject to security interest of Capital Markets Assurance Corporation".
(d) Section 2 of the Pledge Agreement is further amended by
adding the number "25303" in the blank appearing in the reference to the account
maintained by Bankers Trust Company for the 1998-1 Spread Account Trust
appearing in the definition of Excluded Assets therein.
3. Amendment to Schedules to Pledge Agreement.
Schedule II to the Pledge Agreement is hereby amended by adding the
entries "Limited Beneficial Certificate issued under Onyx Acceptance Grantor
Trust 1997-4, and Residual Interest Certificates issued under Onyx Acceptance
Owner Trust 1998-A, and Onyx Acceptance Owner Trust 1998-C" thereto.
4. Confirmation of Representations and Warranties in Loan Agreement and
Security Documents.
The Company, by execution of this Amendment, certifies to the Agent and
each of the Lenders that each of the representations and warranties set forth in
the Loan Agreement, the Security Documents and the other Loan Documents and the
schedules to each of the Loan Documents are true and correct as of the date
hereof, except to the extent such representations and warranties or schedules
expressly relate to an earlier date, and except with respect to non-material
changes made to the warehouse facility sections described in Schedule 3.28 which
have been
<PAGE> 4
previously reviewed with the Agent, as if fully set forth in this Amendment and
that, as of the date hereof, no Default or Event of Default has occurred and is
continuing under the Loan Agreement, any other Loan Document or any Eligible
Securitization Transaction Document. The Company acknowledges and agrees that
this Amendment shall become a part of the Loan Agreement and shall be a Loan
Document.
5. Conditions Precedent.
Prior to or concurrently with the execution by the Agent and the Lenders
of this Amendment, and as a condition to the obligation of the Lenders to make
Loans for the account of the Company in respect of availability generated by
OAGT 1997-4, OAOT 1998-A and OAOT 1998-C on and after the date hereof:
(a) The Company shall have delivered to the Agent all Required
Information with respect to OAGT 1997-4, OAOT 1998-A and OAOT 1998-C;
(b) The Company shall have delivered to the Agent copies of
irrevocable payment directives from the Company to the OAGT 1997-4 spread
account trustee, the OAOT 1998-A owner trustee and the OAOT 1998-C owner trustee
directing such trustees to release proceeds relating to the applicable account
solely to the Blocked Account;
(c) The Company shall have delivered to the Agent, to be held by
the Agent as a Pledged Certificate under the Pledge Agreement, the (i) Spread
Account Trust 1997-4 Limited Beneficial Certificate, (ii) the 1998-A Residual
Interest Certificate, and (iii) the 1998-C Residual Interest Certificate issued
to the Company in connection therewith, together with duly executed certificate
assignments relating thereto, and copies of the authentication order executed by
Onyx Acceptance Funding Corporation or Onyx Acceptance Financial Corporation (as
applicable), if any, in connection therewith;
(d) The Company shall have obtained a written agreement from
Merrill Lynch pursuant to which Merrill Lynch agrees to promptly file UCC
termination statements relating to its security interest in OAGT 1997-4
following the release of OAGT 1997-4 from Merrill Lynch's residual financing
facility;
(e) The Company shall have delivered executed UCC amendments
reflecting the addition of OAGT 1997-4, OAOT
<PAGE> 5
1998-A and OAOT 1998-C as Eligible Securitization Transactions; and
(f) The Company shall deliver to the Agent such other
instruments, certificates or documents as the Lenders may reasonably request,
each of which shall be in form and substance satisfactory to the Agent and the
Lenders for the purposes of implementing or effectuating the provisions of the
Loan Agreement, as amended hereby.
6. Conditions to Lending; Compliance with Loan Documents, etc.
The Company hereby represents and warrants to the Agent and the Lenders
that all of the conditions precedent to lending specified in Section 4 of the
Loan Agreement have been and continue to be satisfied as of the date hereof.
Without limiting the generality of the foregoing, the Company hereby confirms
that (a) the Company is in compliance with all of the terms and provisions set
forth in the Loan Agreement, the Security Documents and each of the other Loan
Documents, as amended hereby, on its part to be observed or performed on or
prior to the date hereof; (b) without limiting the foregoing, no Default or
Event of Default has occurred and is continuing; and (c) since December 31, 1998
there has been no material adverse change in the assets or liabilities or in the
financial or other condition of the Company.
7. Confirmation of Security Documents; Counterparts; Governing Law.
Except to the extent specifically amended hereby, the Loan Agreement,
each of the Security Documents and all other Loan Documents shall be unaffected
hereby and shall remain in full force and effect. This Amendment may be executed
in any number of counterparts, and by the different parties on separate
counterparts, each of which, when so executed and delivered, shall be an
original, but all the counterparts shall together constitute one instrument.
This Amendment shall be governed by the internal laws of The Commonwealth of
Massachusetts (without reference to conflicts of law principles) and shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns. The Company shall pay all reasonable out-of-pocket
expenses of the Agent in connection with the preparation, execution and delivery
of this Amendment.
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as a
sealed instrument as of the day of June, 1999.
ONYX ACCEPTANCE CORPORATION
By:
(Title)
STATE STREET BANK AND TRUST COMPANY,
INDIVIDUALLY AND AS AGENT
By:
(Title)
BANKBOSTON N.A.
By:
(Title)
THE TRAVELERS INSURANCE COMPANY
By:
(Title)
<PAGE> 1
EXHIBIT 10.119
================================================================================
SALE AND SERVICING AGREEMENT
between
ONYX ACCEPTANCE CORPORATION
as Seller and Servicer
and
ONYX ACCEPTANCE RECEIVABLES CORPORATION,
as Purchaser
Dated as of August 9, 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I DEFINITIONS...................................1
SECTION 1.1. Definitions.................................................1
ARTICLE II PURCHASES AND SALES...........................2
SECTION 2.1. Agreements to Purchase and to Sell..........................2
SECTION 2.2. Purchase Price..............................................3
SECTION 2.3. Payment of Purchase Price...................................3
SECTION 2.4. Delivery....................................................4
ARTICLE III CONDITIONS TO PURCHASE........................4
SECTION 3.1. Conditions to Effectiveness.................................4
SECTION 3.2. Conditions Precedent to Payment of Purchase Price...........4
ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS.....5
SECTION 4.1. Representations and Warranties of the Seller
and the Servicer............................................5
SECTION 4.2. Representations and Warranties of the Seller
Concerning Contracts.......................................11
SECTION 4.3. Covenants of Seller........................................13
SECTION 4.4. Covenants of Servicer......................................20
SECTION 4.5. Repurchase of Ineligible Contracts.........................22
SECTION 4.6. Financial Covenants of Seller..............................22
SECTION 4.7. Representations and Warranties of Recco....................24
ARTICLE V SUBORDINATED NOTE............................25
SECTION 5.1. Subordinated Note..........................................25
SECTION 5.2. Restrictions on Transfer of Subordinated Note..............28
ARTICLE VI TERMINATION OF COMMITMENT....................29
SECTION 6.1. Remedies Following the Termination Date. ..................29
ARTICLE VII INDEMNIFICATION, ADDITIONAL COSTS
AND INSPECTION...............................29
</TABLE>
ii
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 7.1. Indemnities................................................29
SECTION 7.2. Rights of Inspection.......................................32
ARTICLE VIII THE SERVICER.................................32
SECTION 8.1. Appointment of Servicer....................................32
SECTION 8.2. Collections................................................32
SECTION 8.3. Maintenance of Records; Quarterly and Annual Reports.......33
SECTION 8.4. Servicing Fee..............................................35
SECTION 8.5. Resignation; Sub-Contracting...............................35
SECTION 8.6. Termination................................................36
SECTION 8.7. Delivery of Monthly Report.................................36
SECTION 8.8. Daily Report...............................................37
SECTION 8.9. [RESERVED].................................................37
SECTION 8.10. Servicer Termination Events................................37
SECTION 8.11. Servicer Termination.......................................38
SECTION 8.12. Appointment of Successor Servicer..........................39
ARTICLE IX MISCELLANEOUS................................40
SECTION 9.1. Notices, Etc...............................................40
SECTION 9.2. Successors and Assigns.....................................42
SECTION 9.3. Confirmation of Intent; Security Interest..................42
SECTION 9.4. Payments...................................................42
SECTION 9.5. [RESERVED].................................................43
SECTION 9.6. Costs; Expenses and Taxes..................................43
SECTION 9.7. Severability Clause........................................43
SECTION 9.8. Amendments; Governing Law; Jury Trial Waiver...............43
SECTION 9.9. No Recourse................................................43
SECTION 9.10. Further Assurances.........................................44
SECTION 9.11. Termination................................................44
SECTION 9.12. Assignment to Funding Agent................................44
SECTION 9.13. Counterparts...............................................45
SECTION 9.14. Headings...................................................45
SECTION 9.15. No Bankruptcy Petition Against Recco.......................45
</TABLE>
iii
<PAGE> 4
EXHIBITS
<TABLE>
<S> <C>
EXHIBIT A [RESERVED]................................................A-1
EXHIBIT B SUBORDINATED NOTE.........................................B-1
EXHIBIT C ONYX ACCEPTANCE CORPORATION OFFICER'S CERTIFICATE.........C-1
EXHIBIT D LIST OF LOCK-BOX BANKS AND NUMBERS OF LOCK-BOXES..........D-1
EXHIBIT E CLEARING ACCOUNT BANK AND ACCOUNT NUMBER..................E-1
EXHIBIT F [RESERVED]................................................F-1
EXHIBIT G [Form of Servicer's Certificate]..........................G-1
EXHIBIT H [FORM OF DAILY REPORT]....................................H-1
EXHIBIT I [FORM OF MONTHLY REPORT]..................................I-1
SCHEDULE 4.1(h)-1 PRINCIPAL PLACE OF BUSINESS, ETC.
OF SELLER.................................................I-1
SCHEDULE 4.1(h)-2 PRINCIPAL PLACE OF BUSINESS, ETC. OF SERVICER.............I-2
SCHEDULE 4.1(k)-1 TRADE NAMES OF SELLER.....................................I-3
SCHEDULE 4.1(k)-2 TRADE NAMES OF SERVICER...................................I-4
SCHEDULE 4.1(r)-1 SUBSIDIARIES OF SELLER....................................I-5
SCHEDULE 4.1(r)-2 SUBSIDIARIES OF SERVICER..................................I-6
</TABLE>
iv
<PAGE> 5
SALE AND SERVICING AGREEMENT
This SALE AND SERVICING AGREEMENT (as amended, supplemented or otherwise
modified and in effect from time to time, this "Agreement"), dated as of August
9, 1999, is between ONYX ACCEPTANCE CORPORATION, a Delaware corporation, as
seller (together with its successors and assigns in such capacity, the "Seller")
and as servicer (together with its successors and assigns in such capacity, the
"Servicer"), and ONYX ACCEPTANCE RECEIVABLES CORPORATION, a Delaware corporation
(together with its successors and assigns, "Recco"), as the purchaser.
W I T N E S S E T H:
WHEREAS, the Seller in the ordinary course of its business originates
and purchases loans secured by automobiles, vans and light trucks;
WHEREAS, the Seller wishes to sell certain of such loans from time to
time to Recco and Recco desires to purchase such loans; and
WHEREAS, from time to time in accordance with the consummation of the
transactions contemplated herein, Recco desires to finance the purchases of such
loans by advances made by the Lenders, which advances will be secured by the
loans purchased by Recco.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions.
(1) As used in this Agreement, capitalized terms used herein shall,
unless otherwise defined herein, have the meanings assigned to them in the
Definitions List dated as of the date hereof that refers to this Agreement,
which is incorporated herein by reference (as amended from time to time, the
"Definitions List").
<PAGE> 6
(2) 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 Section,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(3) Capitalized terms used herein shall be equally applicable to
both the singular and plural forms of such terms.
ARTICLE II
PURCHASES AND SALES
SECTION 1.2. Agreements to Purchase and to Sell.
(1) On each Purchase Date occurring prior to the Termination Date,
the Seller does hereby agree to sell, transfer, assign, set over and otherwise
convey, without recourse (except as expressly provided herein), to Recco and
Recco does hereby agree to purchase, without recourse (except as expressly
provided herein) all right, title and interest of the Seller in and to (i) all
Contracts listed on a Contract List delivered by the Seller to Recco, the Surety
Provider and the Funding Agent that have Outstanding Balances as of the close of
business on the Business Day immediately preceding such Purchase Date and all
payment and enforcement rights (but not any obligations) to, in and under such
Contracts, all rights in and to any Insurance Policies and any and all security
interests in the Vehicles, (ii) all monies due and to become due, and all
amounts received, with respect to the foregoing, (iii) any and all Files related
to such Contracts, including the Dealer Assignment related to each Contract (iv)
all proceeds of the foregoing (including, without limitation, "proceeds" as
defined in Section 9-306 of the UCC as in effect in the State of California) and
(v) all Recoveries related to such Contracts. The Seller may sell Contracts not
listed on a Contract List to its Affiliates and other entities from time to
time.
(2) It is the express and specific intent of the parties that the
transfer of the Purchased Contracts from the Seller to Recco, as provided in
this Agreement, is and shall be construed for all purposes as a true, complete
and absolute sale of the Purchased Contracts.
2
<PAGE> 7
(3) The Seller acknowledges that the Purchased Contracts are subject
to the security interest of the Funding Agent for the benefit of the Secured
Parties.
(4) In selecting the Contracts to be sold pursuant to clauses (a)
and (b), the Seller shall employ selection procedures which are not adverse to
the interests of Recco, the Funding Agent or the Secured Parties.
SECTION 1.3. Purchase Price.
(1) The amount payable to the Seller by Recco on each Purchase Date
occurring prior to the Termination Date in connection with any sale hereunder
shall be equal to the aggregate Outstanding Balances of the Contracts set forth
on the Contract List for such Purchase Date (the "Purchase Price"), as set forth
in the Daily Report dated such Purchase Date.
(2) The Outstanding Balance of Finance Charges shall not be included
in the calculation of the Purchase Price of any Contracts purchased on any
Purchase Date.
SECTION 1.4. Payment of Purchase Price.
(1) Prior to 5:00 P.M. (New York City time) on the second Business
Day preceding each Purchase Date, the Servicer will determine the Purchase Price
to be paid on such Purchase Date. The Purchase Price shall be paid on the
related Purchase Date in the manner provided below:
(1) in cash, in an amount equal to the lesser of (A)
Available Funds on such Purchase Date and (B) the Purchase Price;
(2) to the extent that the Purchase Price exceeds the amount
of the cash payment in (i) above, such excess shall be paid, on the
initial Purchase Date, by means of the issuance to the Seller of the
Subordinated Note in an initial principal amount equal to the
Subordinated Interest on such Purchase Date, and on each Purchase Date
thereafter, by adjusting the principal amount of the Subordinated Note
to equal the Subordinated Interest on such Purchase Date; and
(3) to the extent that the Purchase Price exceeds the amount
of the cash payment in (i) above and the adjustment to the principal
amount of the Subordinated Note in accordance with (ii)
3
<PAGE> 8
above, such excess shall be paid on the initial Purchase Date by means of a
contribution to the capital of Recco.
(2) Unless otherwise specified herein, all payments of the Purchase
Price shall be made not later than 4:00 P.M. (New York City time) on the date
specified therefor in lawful money of the United States of America in same day
funds by depositing such amounts in the bank account designated in writing by
the Seller to Recco, with a copy to the Funding Agent.
SECTION 1.5. Delivery. The Seller hereby agrees that all chattel paper
and instruments (as each such term is defined in the UCC), if any, representing
or evidencing any of the Purchased Contracts shall be promptly transferred to
Recco pursuant to duly executed transfer instruments in form and substance
satisfactory to Recco, the Surety Provider and the Funding Agent. All such
chattel paper and instruments shall be delivered into the possession of Recco or
to such Person as Recco may designate, on or prior to the related Purchase Date.
ARTICLE III
CONDITIONS TO PURCHASE
SECTION 1.6. Conditions to Effectiveness. On or prior to the date
hereof, the following conditions shall have been satisfied:
(1) the conditions set forth in Section 4.1 of the Funding Agreement
shall have been satisfied; and
(2) a Responsible Officer of the Servicer shall have executed and
delivered an officer's certificate to Recco, with copies to Surety Provider and
the Funding Agent, listing the servicing officers of the Servicer.
SECTION 1.7. Conditions Precedent to Payment of Purchase Price. As a
condition precedent to the obligation of Recco to make payment of the Purchase
Price on any Purchase Date, the following conditions shall have been satisfied
on or prior to such Purchase Date:
(1) no Unmatured Event of Default, Event of Default or Replacement
Event shall have occurred and be continuing on such Purchase Date or would
result from such payment or from the application of the proceeds therefrom.
4
<PAGE> 9
By accepting payment for the Purchased Contracts the Seller shall be deemed to
certify that this condition has been satisfied;
(2) Recco shall have received all other approvals, legal opinions,
documents, instruments or items of information as it may request and all of the
foregoing shall be satisfactory in form and substance to Recco, and all
corporate and other proceedings required to be taken following the Closing Date
shall be satisfactory in form and substance to Recco;
(3) all corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the transactions
contemplated by this Agreement and the other Operative Documents shall be
satisfactory in form and substance to Recco;
(4) an authorized officer of the Seller shall have executed and
delivered an officer's certificate to Recco, with copies to the Surety Provider
and the Funding Agent, substantially in the form of Exhibit C; and
(5) the conditions set forth in Sections 4.1, 4.2 and 4.3 of the
Funding Agreement shall have been satisfied.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 1.8. Representations and Warranties of the Seller and the
Servicer. The Seller represents and warrants to Recco, the Surety Provider and
the Funding Agent, as of the date of this Agreement and as of any future
Purchase Date, and the Servicer represents and warrants (except as to clause (m)
of this Section 4.1, as to which the Servicer makes no representation or
warranty) to Recco and the Funding Agent, as of the date of this Agreement and
as of each Purchase Date, as follows:
(1) Corporate Existence. It is a corporation duly incorporated,
validly existing and in good standing under the laws of the state of its
incorporation, and is duly qualified to do business and is in good standing in
every jurisdiction in which the nature of its business requires it to be so
qualified.
(2) Corporate Power; Authorization; Non-Contravention. The
execution, delivery and performance by it of this Agreement and all other
agreements, instruments and documents to be delivered by it hereunder, and the
5
<PAGE> 10
transactions contemplated hereby and thereby, are within its corporate powers,
have been duly authorized by all necessary corporate action, do not contravene
(i) any Requirement of Law applicable to it or (ii) any Contractual Obligation
of it, and do not result in or require the creation of any Lien or any other
claim upon or with respect to any of its properties (other than those
contemplated hereunder); and no transaction contemplated hereby requires
compliance with any bulk sales act or similar law. This Agreement and all the
other Operative Documents to which it is a party have been duly executed and
delivered on its behalf.
(3) No Consents. No authorization or approval or other action by,
and no notice to or filing with, any Governmental Authority or regulatory body
is required for the due execution, delivery and performance by it of this
Agreement or any other agreement, document or instrument to be delivered by it
hereunder, or for the perfection of, or the exercise by, Recco of its rights or
remedies under this Agreement, or any other agreement, document or instrument,
except for the filing of the UCC financing statements referred to in clause (o)
of this Section 4.1, all of which, on or prior to the Closing Date, shall have
been duly made and shall be in full force and effect.
(4) Enforceable Obligation. This Agreement is and will be its legal,
valid and binding obligation, enforceable against it in accordance with its
terms except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforceability of creditors' rights generally and by general equitable
principles (whether considered in proceedings in equity or at law).
(5) Financial Condition. Its unaudited, consolidated and
consolidating balance sheets and those of its consolidated Subsidiaries as at
June 30, 1999 and the related unaudited statements of income and retained
earnings and of cash flows of it and its consolidated Subsidiaries for the
fiscal year then ended, certified by PricewaterhouseCoopers LLP or other
independent certified public accountants of nationally recognized standing,
copies of all of which have been furnished to Recco, the Surety Provider and the
Funding Agent, fairly present the financial condition of it and its consolidated
Subsidiaries as at such date and the results of the operations of it and its
consolidated Subsidiaries for the period ending on such date, all in accordance
with GAAP, and since June 30, 1999 there has been no adverse change in such
condition or operations or in the collectibility of the Contracts.
(6) Material Litigation. Except as otherwise disclosed in writing to
Recco, the Surety Provider and the Funding Agent prior to the date hereof, there
is
6
<PAGE> 11
no pending or threatened material action, suit or proceeding against or
affecting it or any of its Subsidiaries or any of their respective officers or
directors, in such capacity, or the property of it or of any of its
Subsidiaries, in any court, or before any arbitrator of any kind, or before or
by any governmental body.
(7) Accuracy of Information. (i) Each exhibit, financial statement,
document, book, record, report and other item of written information furnished
by it to the Funding Agent, the Surety Provider or Recco in connection with the
Operative Documents is accurate as of its date and as of the date so furnished
and (ii) all financial projections contained therein are based on reasonable and
stated assumptions, and no such document contains any material misstatement of
fact or omits to state a material fact.
(8) Principal Place of Business. Its principal place of business and
chief executive office is located at the address referred to in Section 9.1 and
the locations of the offices where it keeps all the records relating to the
Contracts, including without limitation, the Files are listed on Schedule
4.1(h)-1 (as to the Seller) and on Schedule 4.1(h)-2 (as to the Servicer)
hereto.
(9) Lock-Box. The names and addresses of all the Lock-Box Banks,
together with the account numbers of each Lock-Box, are specified in Exhibit D
hereto. Each Obligor has been directed to remit all funds in respect of the
Purchased Contracts only into the Lock-Boxes.
(10) Clearing Account. The Clearing Account is specified in Exhibit
E.
(11) Names. Except as set forth on Schedule 4.1(k)-1 (as to the
Seller) and Schedule 4.1(k)-2 (as to the Servicer), it has no tradenames,
fictitious names, assumed names or "doing business as" names.
(12) ERISA.
(1) Schedule B (Actuarial Information) to its 1994 annual
report (Form 5500 Series) for each Plan, copies of which will be filed
with the IRS and furnished to the Funding Agent, the Surety Provider and
Recco, will be complete and accurate and fairly present the funding
status of such Plan.
(2) Each Plan which is intended to be qualified under
Section 401(a) of the Code has been determined by the IRS to be so
7
<PAGE> 12
qualified or such determination has been requested, and each trust
related to any such Plan has been determined to be exempt from federal
income tax under Section 501(a) of the Code, or such determination has
been requested, and neither it nor any ERISA Affiliate has breached any
of the responsibilities, obligations or duties imposed on it by ERISA,
the Code or regulations promulgated thereunder with respect to any Plan.
(3) Neither it nor any ERISA Affiliate maintains or
contributes to any employee welfare benefit plan within the meaning of
Section 3(1) of ERISA which provides benefits to employees after
termination of employment other than as required by Section 601 of
ERISA.
(4) No Plan has incurred any accumulated funding deficiency
(as defined in Section 302 of ERISA and 412(a) of the Code), whether or
not waived.
(5) Neither it nor any ERISA Affiliate nor any fiduciary of
any Plan (i) has engaged in a nonexempt prohibited transaction described
in Sections 406 of ERISA or 4975 of the Code or (ii) has taken or failed
to take any action which would constitute or result in an ERISA
Termination Event.
(6) Neither it nor any ERISA Affiliate has incurred, and no
condition exists or event or transaction has occurred with respect to
any Plan that could result in, any withdrawal liability under Section
4201 of ERISA that remains unpaid or liability to the PBGC which remains
outstanding other than the payment of premiums, and there are no premium
payments which have become due which are unpaid.
(7) Neither it nor any ERISA Affiliate has (i) failed to
make a required contribution or payment to a Plan, (ii) made a complete
or partial withdrawal from a Multiple Employer Plan or a Multiemployer
Plan or (iii) failed to make a required installment or any other
required payment under Section 412 of the Code on or before the due date
for such installment or other payment.
(8) Neither it nor any ERISA Affiliate is required to
provide security to a Plan under Section 401(a)(29) of the Code due to
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a Plan amendment that results in an increase in current liabilities for
the plan year.
(13) Treatment of Transaction. It has not prepared any financial
statement which accounts for the transactions contemplated hereby in any manner
other than the sale of the Purchased Contracts by it, and it has not in any
other respect accounted for or treated the transactions in the Purchased
Contracts by it contemplated hereby (including, but not limited to, accounting
and tax reporting purposes) in any manner other than as a sale of, or absolute
assignment of, its full right, title and ownership interest in, the Purchased
Contracts, to Recco.
(14) Requirements of Law. Neither it nor any Subsidiary is in
violation of any Requirement of Law that could materially adversely affect its
operations or the conduct of its businesses or which is inconsistent with the
transactions contemplated by this Agreement.
(15) UCC Filings to Evidence Sale and Ownership Transfer. All filings
and recordings (including pursuant to the UCC in effect in the state in which
its principal place of business is located) required to perfect a first priority
ownership interest in the Purchased Contracts in favor of Recco have been
accomplished and are in full force and effect.
(16) Taxes. It has filed or caused to be filed all Federal, state and
other tax returns which are required to be filed and has paid all taxes shown to
be due and payable on said returns or on any Federal, state and other tax
assessments made against it or any of its property and all other taxes, fees or
other charges imposed on it or any of its property by any Governmental Authority
having taxing power (other than any the amount or validity of which are
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been provided on the
books of the Seller); no tax Lien has been filed, and no claim is being
asserted, with respect to any such tax, fee or other charge.
(17) Investment Company Act; other Regulations. It is not an
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. It is not
subject to regulation under any Federal or state statute or regulation which
limits its ability to incur Debt.
(18) Subsidiaries. Schedule 4.1(r)-1 (as to the Seller) and Schedule
4.1(r)-2 (as to the Servicer) lists all of its Subsidiaries.
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(19) Year 2000 Compliance.
(1) It has (a) initiated a review and assessment of all
areas within its and each of its Subsidiaries' business and operations
(including those affected by suppliers, vendors and customers) that
could be adversely affected by the "Year 2000 Problem" (that is, the
risk that computer applications used by it or any of its Subsidiaries
(or suppliers, vendors and customers) may be unable to recognize and
perform properly date-sensitive functions involving certain dates prior
to and any date after December 31, 1999), (b) developed a plan and
timeline for addressing the Year 2000 Problem on a timely basis, and (c)
to date, implemented that plan in accordance with that timetable. Based
on the foregoing, it believes that all computer applications (including
those of its suppliers, vendors and customers) that are material to its
or any of its Subsidiaries' business and operations are reasonably
expected on a timely basis to be able to perform properly date-sensitive
functions for all dates before and after January 1, 2000 (that is, be
"Year 2000 Compliant"), except to the extent that a failure to do so
could not be reasonably expected to have a material adverse effect on it
or on the Program, or result in a Event of Default.
(2) It (a) has completed a review and assessment of all
computer applications (including, but not limited to those of its
suppliers, vendors, customers, and any third party servicers), which are
related to or involved in the origination, collection, management or
servicing of the Purchased Contracts (the "Receivables Systems") and
(ii) has determined that such Receivable Systems are Year 2000 Compliant
or will be Year 2000 Compliant on or before December 31, 1999 and
thereafter.
(3) The costs of all assessment, remediation, testing and
integration related to its plan for becoming Year 2000 Compliant will
not have a material adverse effect on its financial condition or
operations.
SECTION 1.9. Representations and Warranties of the Seller Concerning
Contracts. On each Purchase Date the Seller represents and warrants to Recco,
the Surety Provider and the Funding Agent as follows:
(1) Eligible Contract. Each Contract to be sold by it on such day is
an Eligible Contract.
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(2) Liens. Each Contract to be sold by it on such day is owned by it
free and clear of any Lien or claim of any kind or any offset and, upon transfer
to Recco pursuant to this Agreement, Recco will acquire a valid ownership
interest in each Purchased Contract free and clear of any Lien or claim of any
kind or any offset and no effective financing statement or other instrument
similar in effect covering any such Purchased Contract shall at any time be on
file in any recording office except those relating to this Agreement and the
transactions contemplated hereby.
(3) Compliance with Laws. Each Contract to be sold by it on such day
complies with all laws and regulations applicable thereto, including, without
limitation, all consumer credit laws.
(4) Enforceable Obligations. Each Contract to be sold by it on such
day is in full force and effect and represents a legal, valid and binding
obligation of the Obligor enforceable against the Obligor in accordance with its
terms (except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforceability of creditors' rights generally and by general equitable
principles whether considered in proceedings in equity or at law) and
constitutes "chattel paper" under the UCC in effect in the state in which the
principal place of business of the Seller is located.
(5) Valid Sale. The sale pursuant to this Agreement by the Seller
and the purchase by Recco of the Purchased Contracts on such Purchase Date
constitutes and will constitute a valid sale of such Purchased Contracts and the
other Collateral and the proceeds thereof, which sale is and will be enforceable
against the Seller and all existing and future creditors of the Seller and all
subsequent purchasers from the Seller or Recco of any of the Purchased
Contracts. Upon the filing of the financing statements described in Section
4.1(o) with the Secretary of State of the State of California evidencing the
sale of the Purchased Contracts to Recco and, in the case of Purchased Contracts
hereafter created and the proceeds thereof, upon the sale, transfer and
assignment thereof to Recco, Recco shall have a first priority perfected
ownership interest in the Purchased Contracts and the other Collateral.
(6) Credit and Collection Policy. The Credit and Collection Policy
has been complied with in all respects with respect to each Contract to be sold
by it on such day and no change has been made in the character of its business
or (except to the extent required by law and of which the Surety Provider and
the Funding Agent have received written notice prior to the applicable Purchase
Date) in the Credit and Collection Policy, which change could, in either case,
impair the collectibility of any Purchased Contract.
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(7) Contract Information. The Contract Information delivered by the
Seller to Recco (if the Seller is the Servicer) or by the Seller to the Servicer
(if the Seller is not the Servicer) with respect to each Purchased Contract on
such Purchase Date is true and correct.
(8) Inspections. Each Contract that is not originated by a Vehicle
Dealer has been inspected by CSI Escrow Document Services, Inc., the Servicer or
any other inspection company reasonably acceptable to the Funding Agent and the
Surety Provider ("Inspector"), and the Inspector has issued a written inspection
report (the "Vehicle Condition Report") describing the Vehicle and the equipment
in the Vehicle, confirming the vehicle identification number and certifying that
the Vehicle is in good repair.
(9) Repossessed Vehicles. As of the last day of any month, the
aggregate Outstanding Balance of Purchased Contracts secured by Vehicles
previously repossessed by the Seller (each, a "Repossessed Vehicle") shall not
exceed 1% of the aggregate Outstanding Balance of all Purchased Contracts then
financed by the Lenders.
(10) Documentation. (A) All documents used by the Seller in
connection with the purchase or origination of Contracts (including, without
limitation, any security agreement, loan contract or promissory note), and all
certificates of title and entries in the Paperless Title System for Vehicles
securing Contracts use the following words to identify the lender, secured party
or obligee: (i) "Onyx Acceptance Corporation" or some abbreviation thereof which
unmistakably identifies the Seller as secured party or (ii) "ABNI, Inc." or
"C.U. Acceptance Corporation"; provided, however, that the name "ABNI, Inc." or
"C.U. Acceptance Corporation" may only be used in such documents with respect to
Contracts in a given state to the extent that an opinion of counsel, addressed
to the Surety Provider and in form and substance reasonably acceptable to the
Surety Provider, shall be delivered to the Surety Provider with respect to any
state where the Outstanding Balance of all Contracts, in all facilities for
which the Surety Provider has issued an insurance policy and which have Obligors
with mailing addresses in such state and for which the related certificates of
title and/or entries in the related Paperless Title System have the secured
party, lender or obligee named as "ABNI, Inc." or "C.U. Acceptance Corporation,"
exceeds $350,000 in the aggregate for such state.
(11) Contract Files. It has delivered to Recco the Files relating to
each Contract sold to Recco on such Purchase Date; provided, however, that as to
any Purchased Contract, if (a) as evidenced by an opinion of counsel delivered
to and in form and substance satisfactory to the Funding Agent and the Surety
Provider, (x) an optical image or other representation of the Files is
enforceable in the relevant
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jurisdictions to the same extent as the original of such document and (y) such
optical image or other representation does not impair the ability of an owner of
such Contract to transfer its interest in such Contract, and (b) the retention
of such documents in such format will not result in a reduction of the then
current rating of the transaction and PARCO, without regard to the Note Policy,
such optical image or other representation may be held by the Servicer, as
custodian for PARCO in lieu of the Files.
SECTION 1.10. Covenants of Seller. The Seller covenants and agrees with
Recco that so long as this Agreement shall remain in effect:
(1) Corporate Existence. It will preserve and maintain its corporate
existence, rights, franchises and privileges in the jurisdiction of its
incorporation, and qualify and remain qualified and in good standing as a
foreign corporation in each jurisdiction where the failure to maintain such
existence, rights, franchises, privileges and qualifications could affect (i)
the rights or interests of Recco hereunder, (ii) the collectibility of any
Contract or (iii) its ability to perform its obligations hereunder.
(2) Master Record of the Contracts. It will, at its own cost and
expense, retain a master record of the Contracts sold by it and copies of all
documents and records relating to each such Purchased Contract and, at its own
cost and expense, mark such master record to the effect that the Purchased
Contracts listed thereon have been sold to Recco.
(3) Recovery Procedure. It will maintain its Recovery Procedure in
good operational order and permit representatives of Recco access to its
management employees to fully discuss such Recovery Procedure during normal
business hours. If it obtains a third party to maintain such Recovery Procedure,
then it shall arrange to permit representatives of Recco access during normal
business hours to such system to make such inspections and examinations as it
deems necessary.
(4) Conduct of Business. It will comply with all applicable laws,
rules, regulations, and orders with respect to it, its business and properties
and all Contracts it originates or purchases, the failure to comply with which
could have a material adverse affect on it or on such Contracts.
(5) Defense of the Purchased Contracts. It will not create, permit
or suffer to exist, and will take such other actions as are necessary to remove,
any Lien, claim or right in, to or on any Purchased Contract, and will defend
the right, title and interest of Recco in and to the Purchased Contracts against
the claims and
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demands of all Persons whomsoever, other than (i) the Liens created hereby and
by the transactions contemplated hereby or (ii) Liens for taxes which are being
contested in good faith by appropriate proceedings, provided that adequate
reserves with respect thereto are maintained on the books of Recco in conformity
with GAAP.
(6) Notice. It will advise Recco (with a copy to the Funding Agent
and the Surety Provider) in detail, of (i) any Lien asserted or claim made
against any Purchased Contract, (ii) the occurrence of any breach by it of any
of its representations, warranties and covenants contained herein, (iii) the
occurrence of any Event of Default or Unmatured Event of Default (with notice to
S&P and Moody's), (iv) any litigation, investigation or proceeding which may
exist at any time between it and any Governmental Authority or other Person or
default or event of default under any of its Contractual Obligations, which in
either case could have a material adverse effect on the value of the Purchased
Contracts or its ability to satisfy its obligations hereunder and (v) any
material adverse change in its business, properties, operations or financial or
other condition or the occurrence of any other event which could have an adverse
effect on the collectibility or value of the Purchased Contracts, in each case
immediately upon ascertaining or obtaining knowledge of any of the foregoing.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action it proposes to take with respect thereto.
(7) Maintain Interest.
(1) It shall, with respect to any and all Purchased
Contracts and security interests in Vehicles sold hereunder, at its
expense, perform all acts and execute all documents requested by Recco,
the Surety Provider or the Funding Agent, as the case may be, at any
time to evidence, perfect, maintain and enforce the ownership interest
and security interest, respectively, of Recco and the Funding Agent
therein and the first priority of such ownership interest and security
interest, respectively. It will, at the request of a duly authorized
officer of Recco or the Funding Agent or the Surety Provider, execute
and deliver financing statements evidencing the ownership interest of
Recco in all of the foregoing, which financing statements must be
satisfactory in form and substance to the Funding Agent and the Surety
Provider, and the Seller authorizes Recco to file one or more financing
statements signed only by Recco. It also hereby irrevocably appoints
Recco its attorney-in-fact to file one or more financing
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statements signed on behalf of the Seller by Recco as the
attorney-in-fact of the Seller.
(2) It will not, without providing 30 days' notice to Recco,
the Surety Provider and the Funding Agent, and without filing such
amendments to any previously filed financing statements as Recco, the
Surety Provider or the Funding Agent may require, (A) change the
location of its chief executive office or the location of the offices
where the documents and records relating to the Contracts are kept or
(B) change its name, identity or corporate structure in any manner which
might make any financing statement or continuation statement filed by it
pursuant to the transactions contemplated hereby seriously misleading
within the meaning of 9-402(7) of any applicable enactment of the UCC.
(8) Annual Certificate. It will deliver to Recco, the Surety
Provider and the Funding Agent concurrently with the delivery of its annual
financial statements delivered pursuant to subsection (l) of this Section 4.3, a
Certificate of a Responsible Officer dated as of a date during the 90-day period
following the end of the immediately preceding fiscal year, either (i) stating
that such action has been taken with respect to the recording, registering,
filing, re-recording, re-registering and re-filing of financing statements,
continuation statements or other instructions or documents as is necessary to
preserve and protect the interest of Recco in and to the Purchased Contracts and
Vehicles and reciting the details of such action or referring to opinions of
counsel in which such details are given and stating what action is required to
be taken in the subsequent 13-month period to preserve and protect such interest
or (ii) stating that no such action is necessary to preserve and protect such
interest.
(9) Credit and Collection Policy. It will (i) at all times comply
with its Credit and Collection Policy, including, but not limited to, its
customary practices with respect to granting rebates and discounts and (ii) not
change the terms of the contracts and agreements relating to the Contracts
(including, without limitation, the terms of sale or the interest rate charged
to any Obligor under any Contract), its normal policies and procedures with
respect to the servicing thereof (including, without limitation, the amount and
timing of finance charges, fees and write-offs) or its Credit and Collection
Policy, except with the prior written consent of the Surety Provider and the
Funding Agent or as required by any Requirement of Law (in which case the
Servicer shall give the Surety Provider and the Funding Agent immediate written
notice of such Requirement of Law).
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(10) Collections. If it receives Collections, it agrees to hold such
Collections in trust for the benefit of Recco and any such Collections received
in the Lock-Boxes shall be transferred to the Clearing Account on the same
Business Day and any Collections received in any other manner shall be
transferred to the Clearing Account on the next Business Day after receipt.
Collections shall be transferred from the Clearing Account to the Collection
Account on the next Business Day after deposit into the Clearing Account.
(11) Obligations Under the Contracts and Dealer Assignments. It will
duly fulfill all obligations on its part to be fulfilled under or in connection
with each Contract and Dealer Assignment and will do nothing (except as may be
permitted by Section 4.5 hereof) to impair the rights of Recco in the Purchased
Contracts. It agrees that, for the benefit of Recco, it will continue to make
and pursue claims on the Contracts sold by it hereunder to the extent that any
law, regulation or contractual provision requires that it directly make and
pursue such claims, for the benefit of Recco; provided that the Seller agrees
that it is making and pursuing such claims for the benefit of Recco and its
assignees, and that any funds received by the Seller based on such claims will
be transferred to the Clearing Account within one Business Day of being received
and will thereafter be transferred to the Collection Account on the next
Business Day after deposit into the Clearing Account.
(12) Financial Statements. It will furnish to Recco (with a copy to
the Funding Agent and the Surety Provider):
(1) as soon as available, but in any event within 90 days
after the end of each fiscal year, a copy of its consolidated balance
sheets as at the end of such year and the related statements of income
and retained earnings and of cash flows for such year, setting forth in
each case in comparative form the figures for the previous year, audited
by PricewaterhouseCoopers or other independent certified public
accountants of nationally recognized standing;
(2) as soon as available, but in any event not later than 90
days after the end of each of its fiscal years, a copy of its unaudited
consolidating balance sheets as at the end of such year and the related
consolidating statements of income and retained earnings and of cash
flows for such year, setting forth in each case in comparative form the
figures for the previous year, certified by a Responsible Officer as
being fairly stated in all respects;
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(3) as soon as available, but in any event not later than 45
days (or 90 days with respect to the fourth quarter) after the end of
each quarterly period of each of its fiscal years, a copy of its
unaudited consolidated and consolidating balance sheets, as at the end
of such quarter and the related unaudited statements of income and
retained earnings and of consolidated cash flows for such period and the
portion of the fiscal year through the end of such period, setting forth
in each case in comparative form the projected budget amounts for such
period and the figures for the previous year, certified by a Responsible
Officer as being fairly stated in all respects when considered in
relation to its financial statements (subject to normal year-end audit
adjustments); and
all such financial statements to be complete and correct in all respects
and to be prepared in detail and in accordance with GAAP applied
consistently throughout the periods reflected therein and with prior
periods; provided, however, that the unaudited financial statements
referred to in clause (iii) above need not contain footnotes required
under GAAP.
(13) Certificates; Other Information. It will furnish to Recco, with
a copy to the Funding Agent and the Surety Provider:
(1) concurrently with the delivery of the financial
statements referred to in clause (i) of paragraph (l) a certificate of
its independent certified public accountants reporting on such financial
statements stating that in making its normal examination for purposes of
its annual audit no knowledge was obtained of any Event of Default or
Unmatured Event of Default, except as specified in such certificate;
(2) concurrently with the delivery of the financial
statements referred to in clauses (i) and (ii) of paragraph (l) a
certificate of a Responsible Officer stating that during such period it
has observed or performed all of its covenants and other agreements, and
satisfied every condition, contained in this Agreement and the other
Operative Documents to be observed, performed or satisfied by it, and
that such Officer has obtained no knowledge of any Unmatured Event of
Default or Event of Default except as specified in such certificate;
such certificate shall set forth the details of each Unmatured Event of
Default and Event of Default and the action which it has taken and
proposes to take with respect thereto;
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(3) solely to the Surety Provider, no later than December
15th of each year, projections by it of its operating budget and cash
flow budget on a monthly basis for the next fiscal year, certified by a
Responsible Officer as being prepared in good faith on the basis of the
assumptions stated therein, which assumptions were reasonable in light
of conditions existing at the time of delivery thereof and represented,
at the time of delivery, as its best estimate of its future financial
performance;
(4) within five Business Days after the same are sent, made
or filed, copies of all financial statements and reports which it may
send to, make to, or file with, the Securities and Exchange Commission
or any state securities commission and any financial statements and
reports which it may send to, make to, or file with, any other
Governmental Authority; and
(5) promptly, such additional financial and other
information as Recco may from time to time reasonably request.
(14) Delivery of Other Reports. It will furnish, or instruct the
Servicer to furnish any other reports required to be delivered pursuant to this
Agreement and the other Operative Documents.
(15) Annual Certificate. Concurrently with the delivery of its
financial statements with respect to each fiscal year required to be delivered
pursuant to clauses (i) and (ii) of paragraph (l), it will furnish to Recco, the
Surety Provider and the Funding Agent, a certificate of a Responsible Officer to
the effect that the facts upon which counsel to the Seller relied in giving its
legal opinion on the Closing Date, to the effect that the Seller and Recco would
not be substantively consolidated for purposes of the Bankruptcy Code, have not
changed.
(16) Insurance.
(1) It will maintain, or cause to be maintained on its
behalf, with financially sound and reputable insurance companies,
insurance on all its property in at least such amounts and against at
least such risks as are usually insured against in the same general area
by companies engaged in the same or a similar business and furnish to
Recco (with a copy to the Funding Agent and the Surety Provider), at
least annually, and otherwise upon written request, full information as
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to the insurance carried. All such insurance policies relating to any
Collateral shall name Recco and the Funding Agent as additional insureds
and loss payees, as applicable, and shall provide that Recco, the Surety
Provider and the Funding Agent receive at least 30 days' prior written
notice of the cancellation thereof.
(2) It will require each Obligor to obtain physical damage
insurance covering the Vehicle as of the execution of the related
Purchased Contract. It will monitor such physical damage insurance with
respect to each Purchased Contract. It will maintain in full force and
effect the Blanket Policy. It will immediately deposit to the Collection
Account all amounts received by it in respect of or as proceeds of any
Insurance Policy.
(17) Merger or Consolidation. It shall not be a party to any merger,
consolidation, or other corporate transaction pursuant to which the surviving
entity or corporate successor is (i) not Onyx Acceptance Corporation, or (ii)
not rated at least investment grade by the Rating Agencies, unless the Funding
Agent and the Surety Provider shall have otherwise consented in writing (with
notice to S&P and Moody's).
(18) Local Counsel Opinions. In the event that, at any time, the
Outstanding Balance of all Purchased Contracts originated in a single state
(other than the State of California) equals or exceeds 10% of the aggregate
Outstanding Balance of all Purchased Contracts, then the Seller shall, within 30
days following the occurrence of such event, deliver to Recco, the Funding
Agent, the Surety Provider, S&P and Moody's an opinion of counsel with respect
to the requirements under the applicable laws of such state for the assignment
of a security interest in a Vehicle to the Funding Agent for the benefit of the
Secured Parties. Such opinion of counsel shall be rendered by a firm the
attorneys of which are admitted to the practice of law in such state, and such
opinion shall be in form and substance acceptable to the Funding Agent and the
Surety Provider.
SECTION 1.11. Covenants of Servicer. The Servicer covenants and agrees
with Recco, the Surety Provider and the Funding Agent that so long as this
Agreement shall remain in effect:
(1) Corporate Existence. It will preserve and maintain its existence
as a corporation in good standing under the laws of the state of its
incorporation and in every jurisdiction where the failure to maintain such
existence or good standing could adversely affect the rights and interests of
Recco, the Funding
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Agent or the Secured Parties hereunder, or its ability to perform its
obligations hereunder.
(2) Preservation of Electronic Ledger. It will, at its own cost and
expense, (i) retain the electronic ledger used by it as a master record of the
Purchased Contracts and copies of all documents relating to each Purchased
Contract as custodian for Recco, the Funding Agent, the Secured Parties and
other Persons with interests in the Purchased Contracts, (ii) mark such
electronic ledger to the effect that the Purchased Contracts have been
transferred and assigned to Recco and are subject to a security interest in
favor of the Funding Agent for the benefit of the Secured Parties, (iii) arrange
for and maintain for the term of this Agreement an appropriate off-site location
for the storage of duplicate or back-up tapes containing the master record of
the Purchased Contracts and deliver or cause to be delivered on at least a
weekly basis to such site, such duplicate or back-up tapes, (iv) provide or
arrange for irrevocable access by the Funding Agent, the Surety Provider and
Recco to the off-site storage facility maintained by the Servicer pursuant to
subsection 4.4(b)(iii) hereof and (v) deliver duplicate or back-up tapes
containing the master record of the Purchased Contracts to the Funding Agent or
the Surety Provider upon request by the Funding Agent or the Surety Provider.
(3) Notices, etc. It will advise Recco, the Surety Provider and the
Funding Agent promptly, in reasonable detail, (i) of any Lien asserted or claim
made against any of the Purchased Contracts of which it obtains knowledge, (ii)
of the occurrence of any breach by it of any of its representations, warranties
and covenants contained herein and (iii) of the occurrence of any other event,
which could have a material adverse effect on its business, properties or
financial or other condition or on the Program or on its ability to perform its
obligations hereunder.
(4) Right of Inspection. It will permit each of Recco, the Surety
Provider and the Funding Agent, and their representatives, at all times to have
full and free access, during normal business hours, to all of its books,
correspondence and records insofar as they relate to the Contracts, the Vehicles
or the Files, and Recco, the Surety Provider and the Funding Agent, and their
representatives may examine the same, take extracts therefrom and make
photocopies thereof, and it agrees to render to Recco, the Surety Provider and
the Funding Agent, or their representatives, at its sole cost and expense such
clerical and other assistance as may be reasonably requested with regard
thereto.
(5) Delivery of Notices, Etc. It will deliver or cause to be
delivered to Recco, the Surety Provider and the Funding Agent, as the case may
be, such notices, documents, reports, certificates and other documents (i)
required to be
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delivered by it pursuant to the Operative Documents and (ii) as may be
reasonably requested by the Funding Agent or the Surety Provider from time to
time.
(6) Merger or Consolidation. It shall not be a party to any merger,
consolidation, or other corporate transaction pursuant to which the surviving
entity or corporate successor is (i) not Onyx Acceptance Corporation, or (ii)
not rated at least investment grade by the Rating Agencies, unless the Surety
Provider and the Funding Agent shall have otherwise consented in writing (with
notice to S&P and Moody's).
(7) FDI Service Agreement. It will maintain the FDI Service
Agreement or a similar agreement with a service provider acceptable to the
Funding Agent and the Surety Provider in full force and effect at all times. It
shall perform its obligations under the FDI Service Agreement and the Agreement
Regarding the Use of FDI's Services for the benefit of the Funding Agent and the
Secured Parties, including, without limitation, the payment of all fees and
expenses thereunder. It shall not amend, terminate or otherwise modify the FDI
Service Agreement without the written consent of the Funding Agent and the
Surety Provider, which shall not be unreasonably withheld.
SECTION 1.12. Repurchase of Ineligible Contracts. On each Business Day,
the Seller will notify the Servicer and Recco of the aggregate Outstanding
Balances of Purchased Contracts, if any, that are determined to be Ineligible
Contracts as of the preceding Business Day. The Seller shall repurchase such
Ineligible Contracts on the next Determination Date (a "Repurchase Date") by
depositing in the Collection Account the Purchase Price originally paid by Recco
with respect to such Ineligible Contract, plus an amount equal to the amount of
interest (calculated at the rate of interest per annum as set forth in such
Ineligible Contract) that accrued on such Ineligible Contract from and including
the Purchase Date related to such Ineligible Contract to, but excluding, the
Repurchase Date, less an amount equal to the amount of Collections received by
Recco and deposited to the Collection Account with respect to such Ineligible
Contract to, but excluding the Repurchase Date. On such Repurchase Date upon the
payment in full in cash of the Repurchase Price by the Seller, Recco shall
automatically and without further action (other than the execution and filing of
applicable UCC financing statements in connection with the reconveyance of such
Ineligible Contract) be deemed to transfer, assign, set-over and otherwise
convey to the Seller, without recourse, representation or warranty, all the
right, title and interest of Recco in and to such Ineligible Contracts, all
monies due or to become due with respect thereto, and all proceeds thereof.
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SECTION 1.13. Financial Covenants of Seller. The Seller covenants and
agrees with Recco, the Funding Agent and the Surety Provider that so long as
this Agreement shall remain in effect:
(1) Ratio of Adjusted Tangible Net Worth to Total Assets. The ratio
of Adjusted Tangible Net Worth to Total Assets shall be at least 15% as of the
end of each fiscal quarter.
(2) Minimum Adjusted EBITDA Coverage. The minimum Adjusted EBITDA
Coverage shall be greater than 1.5 as of the end or each fiscal quarter.
(3) Ratio of Securitization Assets to Adjusted Tangible Net Worth.
The ratio of Securitization Assets to Adjusted Tangible Net Worth shall not be
greater than 3:1 as of the end of each fiscal quarter.
(4) Minimum Cash Balance. The Minimum Cash Balance shall be an
amount equal to not less than $ 1,000,000 as of the last day of each calendar
month.
As used in this Section 4.6, the following terms shall have the
following meanings:
"Adjusted EBITDA Coverage": The sum of: (1) pre-tax income, (2) interest
expense, (3) amortization of excess servicing asset and (4) other amortization
and depreciation, less any gain on sale recognized according to FASB 125,
divided by interest expense, each of the above listed items as they appear in
the consolidated financial statements of Onyx prepared in accordance with GAAP.
"Adjusted Tangible Net Worth": The sum of (i) Net Worth and (ii)
Subordinated Debt; provided, however, that Subordinated Debt shall not exceed
20% of Net Worth.
"Minimum Cash Balance": (a) As of the last day of each calendar month
(other than March, June, September and December), the aggregate amount of cash
on hand or on deposit in banks with respect to Onyx and its Subsidiaries and (b)
as of the last day of each calendar quarter, cash and cash equivalents as it
appears in the consolidated financial statements of Onyx and its Subsidiaries
prepared in accordance with GAAP (and filed with the SEC on Form 10-Q and 10-K).
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"Net Worth": The amount equal to Total Assets minus Total Liabilities of
Onyx and its Subsidiaries on a consolidated basis calculated in accordance with
GAAP minus any intangible assets including inter alia, good will, franchises and
intellectual property.
"Securitization Assets": The sum of: (1) trust receivables and (2)
excess servicing (retained interest in securitized assets net of amortization),
each of the above listed items as they appear in the consolidated financial
statements of Onyx and its Subsidiaries prepared in accordance with GAAP.
Subordinated Debt: The total subordinated debt and non-common equity
(i.e. preferred stock) of Onyx and its Subsidiaries on a consolidated basis
having original maturities of 3 years or more plus the outstanding principal
balance of the $10,000,000 subordinated debt of Onyx in favor of BayView Capital
Corporation, as lender.
"Total Assets": All assets which in accordance with GAAP would be
included in determining total assets as shown on the assets side of the
consolidated balance sheet of Onyx and its Subsidiaries.
"Total Liabilities": All liabilities which in accordance with GAAP would
be included in determining total liabilities as shown on the liability side of
the consolidated balance sheet of Onyx and its Subsidiaries.
SECTION 1.14. Representations and Warranties of Recco. Recco represents
and warrants to the Seller, the Surety Provider and the Funding Agent that, as
of the date hereof and as of each Purchase Date:
(1) Corporate Existence. Recco is a corporation duly incorporated,
validly existing and in good standing under the laws of Delaware and is duly
qualified to do business, and is in good standing in every jurisdiction in which
the nature of its business requires it to be so qualified.
(2) Corporate Power; Authorization; Non-Contravention. The
execution, delivery and performance by Recco of this Agreement and all other
agreements, instruments and documents to be delivered by it hereunder, and the
transactions contemplated hereby and thereby, are within Recco's corporate
powers, have been duly authorized by all necessary corporate action, do not
contravene (i) Recco's charter or by-laws, (ii) any Requirement of Law
applicable to Recco or (iii) any Contractual Obligation, and do not result in or
require the creation of any Lien
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upon or with respect to any of its properties (other than as contemplated
hereunder and under the terms and conditions of the Operative Documents). This
Agreement has been duly executed and delivered on behalf of Recco.
(3) Enforceable Obligation. This Agreement is the legal, valid and
binding obligation of Recco enforceable against Recco in accordance with its
terms except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforceability of creditors' rights generally and by general equitable
principles (whether considered in a proceeding in equity or at law).
ARTICLE V
SUBORDINATED NOTE
SECTION 1.15. Subordinated Note. (a) On the Closing Date, Recco shall
issue to the Seller the subordinated note substantially in the form of Exhibit B
(the "Subordinated Note"). The principal amount of the Subordinated Note shall
be calculated pursuant to the Daily Report and, on any day, shall be equal to
the Subordinated Interest on such day; provided, however, that the principal
amount of the Subordinated Note shall be fixed on and not be recalculated after
the Termination Date; provided, further, that in no event shall the principal
amount of the Subordinated Note calculated pursuant to the Daily Report at any
time exceed the Required Overcollateralization Amount.
(1) Interest on the principal amount of the Subordinated Note shall
accrue at a rate set forth in the Subordinated Note. Principal and interest
payments on the Subordinated Note may be made to the extent permitted by the
Security Agreement. Principal amounts outstanding on the Subordinated Note shall
increase concurrently with the payment of the Purchase Price pursuant to the
terms of Section 2.3(a)(ii) hereof. Principal payments on the Subordinated Note
shall become payable only upon the release of Collateral by the Funding Agent
pursuant to Section 21(b) of the Security Agreement. Except to the extent
permitted by the Security Agreement, the Seller agrees not to ask, demand, sue
for or take or receive from Recco in cash or other property, by set-off or in
any other manner, (including, without limitation, from or by way of the
Collateral), payment of all or any part of the Subordinated Note.
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(2) The Seller agrees upon any distribution of all or any of the
assets of Recco to creditors of Recco upon the dissolution, winding up, total or
partial liquidation, arrangement, reorganization, adjustment, protection,
relief, or composition of Recco or its debts, any payment or distribution of any
kind (including, without limitation, cash, property, securities and any payment
or distribution which may be payable or deliverable by reason of the payment of
any other Debt of Recco being subordinated to the payment of the Subordinated
Note) in respect of the Subordinated Note that otherwise would be payable or
deliverable upon or with respect to the Subordinated Note, directly or
indirectly, by set-off or in any other manner, including, without limitation,
from or by way of the Collateral, shall be paid or delivered directly to the
Funding Agent for application (in the case of cash) to or as Collateral (in the
case of non-cash property or securities) for the payment or prepayment in full
of, the Obligations (other than the Subordinated Note) until the Obligations
shall have been indefeasibly paid in full in cash. The Funding Agent is
irrevocably authorized and empowered (in its own name or in the name of the
Seller or otherwise), but shall have no obligation, to demand, sue for, collect
and receive every payment or distribution referred to in the preceding sentence
and give acquittance therefor and to file claims and proofs of claim and take
such other action (including, without limitation, voting the Subordinated Note
and enforcing any security interest or other lien securing payment of the
Subordinated Note) as the Funding Agent may deem necessary or advisable for the
exercise or enforcement of any of the rights or interest of the Secured Parties.
The Seller shall duly and promptly take such action as the Funding Agent or the
Surety Provider may request to (i) collect the Subordinated Note for the account
of the Secured Parties and to file appropriate claims or proofs of claim in
respect of the Subordinated Note, (ii) execute and deliver to the Funding Agent
such powers of attorney, assignments or other instruments as the Funding Agent
may request in order to enable the Funding Agent to enforce any and all claims
with respect to, and any security interests and other liens securing payment of,
the Subordinated Note, (iii) collect and receive any and all payments or
distributions which may be payable or deliverable upon or with respect to the
Subordinated Note.
(3) All payments or distributions upon or with respect to the
Subordinated Note that are received by the Seller contrary to the provisions of
the Operative Documents shall be received in trust for the benefit of the
Secured Parties, shall be segregated from other funds and property held by the
Seller and shall be forthwith paid over to the Funding Agent in the same form as
so received (with any necessary endorsement) to be applied (in the case of cash)
to, or held as Collateral (in the case of non-cash property or securities) for
the payment or prepayment in full of, the Obligations (other than the
Subordinated Note) until the Obligations shall have
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been indefeasibly paid in full in cash. The Seller agrees that no payment or
distribution to the Secured Parties pursuant to the provisions of the
Subordinated Note shall entitle the Seller to exercise any rights of subrogation
in respect thereof against Recco until the Obligations (other than the
Subordinated Note) and all principal and interest under the Seller Note shall
have been indefeasibly paid in full in cash. The Seller and Recco hereby waive
promptness, diligence, notice of acceptance and any other notice with respect to
any of the Obligations and any requirement that the Funding Agent protect,
secure, perfect or insure any security interest or lien on any property subject
thereto or exhaust any right or take any action against Recco or any other
Person or any Collateral.
(4) The Subordinated Note is secured by the Collateral pursuant to
the Subordinated Security Agreement, subject to the prior lien of the Funding
Agent under the Security Agreement. No payments may be received, directly or
indirectly, by the Seller (and if received, the Seller agrees to return such
payments to Recco) on the Subordinated Note unless Recco has paid all amounts
required pursuant to the Security Agreement to be paid prior to any payments in
respect of the Subordinated Note.
(5) The Seller agrees and confirms that the Funding Agent shall not
have any duty whatsoever to the Seller as holder of the Subordinated Note and
that the Funding Agent shall not be liable to the Seller for any action taken or
omitted to be taken with respect to the Subordinated Note.
(6) Prior to the indefeasible payment in full in cash of the other
Obligations, the Seller will not seek to collect any amounts owing under the
Subordinated Note in any manner or exercise or enforce any of its rights under
the Subordinated Security Agreement.
(7) The Seller and Recco further agree that at no time hereafter
will any part of the indebtedness represented by the Subordinated Note be
represented by any negotiable instruments or other writings except the
Subordinated Note.
(8) The Seller and Recco waive notice of and consent to the creation
of the Loans and any of the other Obligations, any extensions granted or other
action taken by the Lenders, the Surety Provider and the Funding Agent with
respect thereto, the taking or releasing of Collateral or any obligors or
guarantors for the payment thereof, and the releasing of the Seller or any other
subordinated creditors. No failure or delay by the Lenders, the Surety Provider
or the Funding
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Agent to exercise any right granted herein, or in any other agreement or by law
shall constitute a waiver of such right or of any other right.
(9) Recco and the Seller agree to execute and deliver to the
Lenders, the Surety Provider and the Funding Agent such additional documents and
to take such further actions as the Lenders, the Surety Provider or the Funding
Agent may hereafter require.
(10) The terms of the Subordinated Note and the subordination
effected hereby, and the rights of the Lenders, the Surety Provider and the
Funding Agent and the obligations of the Seller and Recco arising hereunder,
shall not be affected, modified or impaired in any manner or to any extent by
(a) any amendment or modification of or supplement to any provision of the
Operative Documents or any instrument or document executed or delivered pursuant
thereto or in connection with the transactions contemplated thereby; (b) the
validity or enforceability of any of such documents; (c) any exercise or
non-exercise of any right, power or remedy under or in respect of the other
Obligations or any instruments or documents related thereto or arising at law;
or (d) any waiver, consent, release, indulgence, extension, renewal,
modification, delay or other action, inaction or omission in respect of the
other Obligations or any of the instruments or documents related thereto.
SECTION 1.16. Restrictions on Transfer of Subordinated Note. Neither the
Subordinated Note nor any right of the Seller to receive any payment thereunder,
shall be assigned, transferred, exchanged, pledged, hypothecated, participated
or otherwise conveyed; provided, however, that the Seller may pledge or
otherwise transfer the Subordinated Note with the prior written consent of the
Funding Agent and the Surety Provider (with notice to S&P and Moody's), which
consent shall not be unreasonably withheld or delayed; provided, further, that
any such transferee or pledgee of the Subordinated Note shall (i) be bound by
all of the terms applicable to the Subordinated Note set forth in the Operative
Documents and (ii) execute an agreement substantially in the form of Section
9.15 hereof.
ARTICLE VI
TERMINATION OF COMMITMENT
SECTION 1.17. Remedies Following the Termination Date.
(1) On the Termination Date, all purchases by, and sales to, Recco
of Contracts hereunder shall immediately cease.
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(2) On and after the Termination Date, Recco shall have, in addition
to all other rights under this Agreement, all rights and remedies provided under
any applicable law.
(3) On and after the Termination Date, Recco shall continue to
maintain its interest in all Purchased Contracts created prior to such date and
all amounts received as payments on Purchased Contracts will continue to be paid
to Recco.
ARTICLE VII
INDEMNIFICATION, ADDITIONAL COSTS AND INSPECTION
SECTION 1.18. Indemnities. (A) Without limiting any other rights that
Recco may have hereunder or under applicable law, the Seller hereby agrees to
indemnify Recco and its directors, employees, officers and successors and
assigns (collectively, the "Indemnified Parties") from and against any and all
damages, losses, claims, liabilities and related costs and expenses, including
all attorneys' fees and disbursements (all of the foregoing being collectively
referred to as the "Indemnified Amounts"), awarded against or incurred by any of
them arising out of or as a result of this Agreement, the Operative Documents or
Recco's ownership of any Purchased Contracts, excluding, however, recourse
(except as otherwise specifically provided in this Agreement) for uncollectible
Purchased Contracts. Without limiting the generality of the foregoing, the
Seller shall indemnify the Indemnified Parties for all Indemnified Amounts
relating to or resulting from:
(1) the transfer of an ownership interest in any Contract
other than an Eligible Contract;
(2) reliance on any representation or warranty made by the
Seller (or any of its Responsible Officers) or the Servicer (or any of
its Responsible Officers), if the Seller or any Affiliate of the Seller
is acting as the Servicer, under or in connection with the Operative
Documents, and any information or report delivered by the Seller
pursuant hereto, which shall have been false or incorrect in any
material respect when made or deemed made;
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(3) the failure by the Seller to comply with any applicable
law, rule or regulation with respect to any Purchased Contract or the
nonconformity of any Purchased Contract with any such applicable law,
rule or regulation;
(4) the failure to vest and maintain vested in Recco or to
transfer to Recco, legal and equitable title to and ownership of, an
ownership interest in the Contracts that are, or are intended to be,
Purchased Contracts, together with all proceeds thereof, including,
without limitation, all Collections and other items that constitute
proceeds, free and clear of any Lien whether existing at the time of the
Purchase of such Contract or at any time thereafter;
(5) the failure to file, in a timely manner, financing
statements or other similar instruments or documents required under the
UCC in effect in the state in which the Seller's principal place of
business is located or the location of the Collateral as required under
such law or other applicable laws with respect to any Contracts sold to
Recco, whether at the time of any Purchase or at any subsequent time;
(6) any defense, setoff, counterclaim, recoupment or
reduction of liability whatsoever under any Purchased Contract, arising
out of a breach by the Seller of any obligation under such Purchased
Contract or arising out of any other agreement, indebtedness or
liability at any time owing to or in favor of any other Person from the
Seller (it being understood that all such obligations of the Seller
shall be and remain enforceable against and only against the Seller and
shall not be enforceable against Recco);
(7) any failure of the Seller to perform its duties or
obligations in accordance with the provisions of this Agreement;
(8) any products liability claim or personal injury or
property damage suit or other similar or related claim or action of
whatever sort arising out of or in connection with merchandise or
services which are the subject of any Purchased Contract or any Vehicle;
(9) the failure by the Seller to pay when due any taxes
payable by it, including without limitation, franchise taxes and sales,
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excise or personal property taxes payable in connection with the
Contracts;
(10) the failure by the Seller or the Servicer (if the
Servicer is the Seller or an Affiliate of the Seller) to be duly
qualified to do business, to be in good standing or to have filed
appropriate fictitious or assumed name registration documents in any
jurisdiction;
(11) the commingling of Collections at any time with other
funds;
(12) the failure of any Lock-Box Bank or the Clearing Account
Bank to remit any amounts held in its Lock-Box or in the Clearing
Account as the case may be, whether by reason of the exercise of setoff
rights or otherwise; and
(13) any failure by the Seller to be Year 2000 Compliant.
Notwithstanding the foregoing, Recco hereby agrees that under no circumstances
shall the Seller be liable for, or required to pay any Indemnified Amount, other
than as set forth in Section 4.5, resulting from, (i) the credit risk of an
Obligor, or for which payment therefor would otherwise constitute recourse to
the Seller for an uncollectible Contract or Contracts or (ii) gross negligence
or willful misconduct on the part of the Indemnified Party to which such
Indemnified Amount would otherwise be due.
(2) Any Indemnified Amount due hereunder shall be payable on demand.
SECTION 1.19. Rights of Inspection. Recco and its representatives and
assigns, including without limitation the Funding Agent and the Surety Provider,
shall at all times have full and free access during normal business hours (a) to
the Seller's officers and independent accountants in order to discuss the
affairs, finances and accounts of the Seller insofar as they relate to the
Purchased Contracts, the related Files and/or the Vehicles and the transactions
contemplated hereby and (b) to all the books, correspondence and records of the
Seller insofar as they relate to the Purchased Contracts, the related Files
and/or the Vehicles and the transactions contemplated hereby, and Recco and its
representatives and assigns, including without limitation the Funding Agent and
the Surety Provider may examine the same, take extracts therefrom and make
photocopies thereof, and the Seller agrees to render to Recco, and its
representatives and assigns, including
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without limitation the Funding Agent and the Surety Provider, at the Seller's
sole cost and expense, such clerical and other assistance as may be requested
with regard thereto. All such reasonable expenses of the Funding Agent and the
Surety Provider shall be for the account of the Seller and shall be provided for
or reimbursed upon presentment of an invoice requesting same.
ARTICLE VIII
THE SERVICER
SECTION 1.20. Appointment of Servicer. Recco hereby appoints the Seller
to act as servicer of the Purchased Contracts in the name of and on behalf of
Recco in accordance with the provisions hereof and the Seller hereby accepts
such appointment. The Servicer shall use reasonable care in performing its
duties as servicer hereunder and, without limiting the foregoing, shall service
the Purchased Contracts in accordance with the Credit and Collection Policy.
SECTION 1.21. Collections.
(1) On each Business Day, all Collections received in any Lock-Box
shall be transferred to the Clearing Account on the next Business Day. All
Collections received by the Servicer in any other manner shall be transferred to
the Clearing Account on the next Business Day following receipt and until so
transferred, the Servicer shall hold such cash and other items in trust for the
benefit of Recco. All Collections in the Clearing Account shall be transferred
to the Collection Account on the next Business Day after such Collections are
transferred into the Clearing Account.
(2) The Servicer will, at the Servicer's cost and expense and as
agent in the name of and on behalf of Recco, but subject at any time to the
right of Recco to direct and control, endeavor to collect, as and when the same
becomes due, all amounts owing on each Purchased Contract. In the event of
default by an Obligor under any Purchased Contract, the Servicer shall have the
power and authority, on behalf of Recco, to take such action in respect of such
Purchased Contract and the Vehicle related thereto as the Servicer, in the
absence of contrary instructions from Recco, may deem advisable, including the
power to sell such Purchased Contract. In the enforcement or collection of any
Purchased Contract, the Servicer shall be entitled to sue thereon in its own
name or as agent for Recco, in either case, for the account of Recco.
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(3) In the event the Servicer accepts in payment of any Purchased
Contract the taking of repossession of the Vehicle, the Servicer agrees to use
its reasonable efforts to resell such Vehicle for the account of Recco and shall
remit to Recco the gross sale proceeds thereof, net of any costs incurred by any
Person with respect to any such repossession and resale. Recco shall have no
obligation to take any action or commence any proceedings to realize upon any
Purchased Contract or to enforce any of its rights or remedies with respect
thereto. Any moneys collected by the Servicer pursuant to this subsection shall
be segregated by the Servicer, held in trust by the Servicer for Recco and shall
be remitted to the Collection Account on the Business Day of receipt thereof by
the Servicer.
SECTION 1.22. Maintenance of Records; Quarterly and Annual Reports.
(1) The books of account and other records pertaining to the
Purchased Contracts are the property of Recco. Recco agrees that the Servicer
shall hold such records as Recco's agent. The Servicer shall maintain all books
of account and other records pertaining to the Purchased Contracts in such form
as will enable Recco or the Funding Agent or their designees to determine at any
time the status of the Purchased Contracts. The Servicer will permit Recco, the
Surety Provider or the Funding Agent and any Person designated by Recco, the
Surety Provider or the Funding Agent, during regular business hours, to inspect,
audit, check and make abstracts from all books, accounts, records, or other
papers pertaining to such Purchased Contracts. From time to time, at the request
of Recco, the Surety Provider or the Funding Agent, the Servicer, at its own
expense, will deliver to Recco, the Surety Provider and the Funding Agent and
any Person designated by Recco, the Surety Provider or the Funding Agent any
records and invoices pertaining to the Purchased Contracts and evidence thereof
as Recco, the Surety Provider or the Funding Agent or such designee may deem
necessary to enable it to enforce its rights thereunder. In addition, at the
request of Recco, the Surety Provider or the Funding Agent after delivery of a
Servicer Termination Notice, the Servicer will deliver all such records and
invoices pertaining thereto (including bills of lading) and other evidence
thereof to any Person selected by the Funding Agent (acting at the direction of
the Controlling Party). Whether or not any such item is the property of Recco,
each computer record, invoice, ledger card, account record or other evidence of,
or record relating to, the Purchased Contracts maintained at the office of the
Servicer or the office of Seller, if requested by Recco, the Surety Provider or
the Funding Agent, will be marked as the Funding Agent or the Surety Provider
may direct. Upon request of the Funding Agent (acting at the direction of the
Controlling Party), the Servicer will segregate from all other Contracts then
owned or being serviced by the Servicer all documents relating to the Purchased
Contracts and will hold in trust (if
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such document is not owned by Recco) and safely keep such documents in separate
filing cabinets or other suitable containers marked to show Recco's interest
with such legend as shall be specified by the Funding Agent (acting at the
direction of the Controlling Party) and maintained in such place or places as
shall be designated by the Funding Agent (acting at the direction of the
Controlling Party).
(2) The Servicer will deliver to Recco, the Surety Provider and the
Funding Agent and any Person designated by the Funding Agent and the Surety
Provider, within 45 days after the end of each fiscal quarter of the Servicer, a
certificate of a Responsible Officer of the Servicer stating that (a) a review
of the activities of the Servicer during the preceding fiscal quarter and of its
performance under this Agreement was made under the supervision of the officer
signing such certificate and (b) based on such review, the Servicer has fully
performed all its obligations under this Agreement throughout such period
(including its obligations to prepare and deliver each Daily Report and Monthly
Report) in compliance with the terms of this Agreement, or, if there has been a
default in the performance of any such obligation, specifying each such default
known to such officer and the nature and status thereof.
(3) The Servicer, at its expense, will cause a firm of independent
public accountants satisfactory to the Funding Agent and the Surety Provider to
furnish a report (the "Annual Report") to Recco, the Surety Provider and the
Funding Agent and any Person designated by the Funding Agent, on or before March
31st of each year, beginning on March 31, 2000, stating that such firm has
examined certain documents and records relating to the servicing of the
Contracts during the preceding fiscal year and that such examination, which has
been conducted substantially in accordance with audit guides or audit programs
generally recognized to be applicable to audits of receivables similar to the
Contracts, has disclosed no items of noncompliance with the provisions of this
Agreement throughout such period which, in the opinion of such firm, are
material, except for such items of non-compliance as shall be set forth in such
report.
SECTION 1.23. Servicing Fee. On each Business Day, to the extent
provided for in the Security Agreement, as full compensation for its servicing
activities hereunder, the Servicer shall be entitled to receive the Servicing
Fee.
SECTION 1.24. Resignation; Sub-Contracting.
(1) The obligation of the Servicer to service the Purchased
Contracts is personal to the Servicer and the parties recognize that another
Person
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may not be qualified to perform such obligations. Accordingly, the Servicer's
obligation to service the Purchased Contracts hereunder shall be specifically
enforceable and shall be absolute and unconditional in all circumstances,
including, without limitation, after the occurrence and during the continuation
of any Servicer Termination Event hereunder; provided, however, that a Successor
Servicer may be appointed pursuant to Section 8.12 hereof.
(2) The Servicer shall not resign from the obligations and duties
hereby imposed on it as Servicer except upon determination that (i) the
performance of its duties hereunder is no longer permissible under any
applicable law and (ii) there is no reasonable action which the Servicer could
take to make the performance of its duties hereunder permissible under any such
applicable law. Any determination permitting the resignation of the Servicer
shall be evidenced as to clause (i) above by an opinion of counsel to such
effect delivered to Recco, the Surety Provider and the Funding Agent. Except to
the extent inconsistent with any such applicable law, no such resignation shall
become effective until a Successor Servicer shall have assumed the
responsibilities and obligations of the Servicer in accordance with Section 8.12
hereof.
(3) If the performance of its duties hereunder is no longer
permissible under applicable law or the cost of such performance is such that
its continuation as Servicer is not warranted as a financial matter, the
Servicer may, with the prior written consent of the Funding Agent and the Surety
Provider subcontract with any other Person to service, administer or collect the
Purchased Contracts, provided that the Person with whom the Servicer so
subcontracts shall not become the Servicer hereunder and the Servicer shall
remain liable for the performance of the duties and obligations of the Servicer
pursuant to the terms hereof.
SECTION 1.25. Termination. The Servicer's obligations under this
Agreement shall terminate upon the termination of the Funding Agreement;
provided, however, that the Servicer shall continue to be obligated to do all
things necessary to apply Collections on the Purchased Contracts that it
receives after such termination in the manner provided in this Agreement and to
perform its obligations hereunder with respect thereto. Upon termination of this
Agreement all authority and power granted to the Servicer under this Agreement
shall pass to and be vested in Recco. The Servicer shall transfer (i) its
electronic records relating to the Purchased Contracts to Recco in such
electronic form as Recco may reasonably request, (ii) all other records,
correspondence and documents to Recco in the manner and at such times as Recco
may reasonably request, (iii) at Recco's expense, upon the request of Recco,
notify all Obligors that the Servicer is no longer the Servicer, (iv) at Recco's
34
<PAGE> 39
expense, take all such further action as Recco shall reasonably request to
effect the termination of the rights of the Servicer to conduct servicing
hereunder, including, without limitation, the transfer to Recco of all authority
of the Servicer to (A) service Purchased Contracts as provided hereunder, and
(B) receive Collections which shall on the date of such termination be held by
the Servicer for deposit or which shall thereafter be received with respect to
any Purchased Contract.
SECTION 1.26. Delivery of Monthly Report. On each Determination Date,
the Servicer shall deliver to Recco, the Surety Provider and the Funding Agent,
no later than 3:00 P.M. (New York City time) on such Determination Date, a
report, substantially in the form of Exhibit I (the "Monthly Report"), together
with a certificate, substantially in the form of Exhibit G (the "Servicer's
Certificate"), covering the Determination Period immediately preceding such
Determination Date.
SECTION 1.27. Daily Report. No later than 3:00 P.M. (New York City time)
on each Purchase Date, the Servicer shall deliver a report, substantially in the
form of Exhibit H (the "Daily Report"), to Recco, the Surety Provider and the
Funding Agent, together with a Servicer's Certificate.
SECTION 1.28. [RESERVED]
SECTION 1.29. Servicer Termination Events. If any of the following
events (each a "Servicer Termination Event") shall have occurred and be
continuing:
(1) the Servicer shall fail to make any payment, transfer or deposit
required to be made hereunder within two Business Days of the date on which such
payment, transfer or deposit is due to be made;
(2) the Servicer shall fail to give any notice within three Business
Days after the same is required to be given hereunder;
(3) the Servicer shall fail to submit (i) a Monthly Report within
three Business Days of the day on which such report shall have been required to
be submitted, (ii) a Daily Report within one Business Day of the day on which
such report is required to be submitted or (iii) an Annual Report within 10 days
of the day on which such Annual Report shall have been required to be submitted;
(4) the Servicer shall fail to observe or perform any other covenant
or agreement applicable to it contained herein and such failure shall remain
unremedied for a period of 10 days;
35
<PAGE> 40
(5) the Servicer shall enter a corporate transaction in breach of
the covenant at Section 4.4(f) hereof;
(6) any representation, warranty, certification or statement made by
the Servicer in this Agreement or in any certificate, financial statement or
other document delivered pursuant to this Agreement shall prove to have been
incorrect in any material respect when made;
(7) a Bankruptcy Event shall have occurred with respect to the
Servicer;
(8) an Event of Default shall have occurred;
then, the Controlling Party may, in its discretion, terminate the Servicer by
giving five Business Days notice thereof in writing to the Servicer and Seller
which notice shall state the effective date of such termination (a "Servicer
Termination Notice"). On and after the effective date stated in a Servicer
Termination Notice, the Controlling Party may, in its discretion, implement a
Complete Servicing Transfer.
SECTION 1.30. Servicer Termination. (a) After the Controlling Party
gives the Servicer a Servicer Termination Notice, (i) prior to the appointment
of a Successor Servicer pursuant to Section 8.12, the Controlling Party may
administer the administrative, servicing and collection functions of the
Servicer in any manner it deems fit, (ii) the Controlling Party shall, at any
time thereafter, be entitled to notify the Obligors on any Purchased Contracts
to make payment of amounts due thereunder directly to Recco or the Controlling
Party or as the Controlling Party may direct and (iii) the Servicer shall, at
its own expense, (A) if so requested by the Controlling Party, endorse each
instrument that is payable to the Servicer, if any, evidencing any Purchased
Contract to the Funding Agent in such manner as the Controlling Party shall
direct and (B) perform any and all acts and execute any and all documents as may
be reasonably requested by the Controlling Party in order to effect the purposes
of this Agreement. After receipt by the Servicer of a Servicer Termination
Notice, if the Controlling Party does not elect to replace the Servicer with a
Successor Servicer, the Controlling Party shall have the right to appoint a firm
of public accountants or any other Person the Controlling Party may choose, to
monitor the servicing of the Purchased Contracts by the Servicer and to furnish
to Recco, at the expense of the Servicer, such letters, certificates or reports
thereon as the Controlling Party shall reasonably request. The Servicer shall
cooperate with such firm in the subsequent monitoring of its servicing of the
36
<PAGE> 41
Purchased Contracts pursuant to this Agreement and any fees and expenses in
connection therewith shall be paid by the Servicer.
(1) After receipt by the Servicer of a Servicer Termination Notice,
if the Controlling Party elects to appoint a Successor Servicer, then:
(1) On the date that a Successor Servicer shall have been
appointed by the Controlling Party pursuant to Section 8.12, all
authority and power of the then Servicer under this Agreement shall pass
to and be vested in such Successor Servicer, and, without limitation,
the Controlling Party is hereby authorized and empowered to execute and
deliver on behalf of the Servicer, as attorney-in-fact or otherwise, all
documents and other instruments upon the failure of the Servicer to
execute or deliver such documents or instruments, and (upon the failure
of the Servicer to cooperate) to do and accomplish all other acts or
things necessary or appropriate to effect the purposes of such transfer
of servicing rights.
(2) The Servicer agrees to cooperate with the Controlling
Party and the Successor Servicer in effecting the termination of the
responsibilities and rights of the Servicer to conduct servicing
hereunder, including, without limitation, the transfer to such Successor
Servicer of all authority of the Servicer to service the Purchased
Contracts provided for under this Agreement, including, without
limitation, all authority to receive Collections which shall on the date
of transfer be held by the Servicer for deposit, or which shall
thereafter be received with respect to the Purchased Contracts.
(3) The Servicer shall promptly transfer duplicate, back-up,
or original tapes, and all other electronic media constituting all of
its electronic records relating to the Purchased Contracts and records
relating to the Commercial Paper to the Successor Servicer in such
electronic form as the Successor Servicer may reasonably request and
shall promptly transfer to the Successor Servicer all other records,
correspondence and documents necessary for the continued servicing of
the Purchased Contracts in the manner and at such times as the Successor
Servicer shall reasonably request.
(4) At any time following the appointment of a Successor
Servicer, such Successor Servicer shall be authorized to take any and
all steps in the name of the previous Servicer and on behalf of the
37
<PAGE> 42
previous Servicer necessary or desirable, in the determination of such
Successor Servicer, to collect all amounts due under any and all
Purchased Contracts, including, without limitation endorsing the name of
the previous Servicer on checks and other instruments representing
Collections, and enforcing the Purchased Contracts.
SECTION 1.31. Appointment of Successor Servicer. (a) On and after the
receipt by the Servicer of a Servicer Termination Notice, the Servicer shall
continue to perform all servicing functions under this Agreement until the later
of (i) the appointment of a Successor Servicer or (ii) the date specified in the
Servicer Termination Notice or otherwise specified by the Controlling Party in
writing or, if no such date is specified in the Servicer Termination Notice,
until a date mutually agreed upon by the Servicer and the Controlling Party. The
Controlling Party shall (as promptly as possible after the giving of a Servicer
Termination Notice) appoint a successor servicer (the "Successor Servicer") and
such Successor Servicer shall accept its appointment by a written assumption in
a form acceptable to the Controlling Party.
(1) Upon its appointment, the Successor Servicer shall be the
successor in all respects to the Servicer with respect to servicing functions
under this Agreement and shall be subject to all the responsibilities, duties
and liabilities relating thereto placed on the Servicer by the terms and
provisions hereof, and all references in this Agreement to the Servicer shall be
deemed to refer to the Successor Servicer. Any Successor Servicer shall make all
representations and warranties that the Servicer makes hereunder.
(2) In connection with such appointment and assumption, the
Controlling Party may, subject to the provisions of the Security Agreement, make
arrangements for the payment of the Servicing Fee to the Successor Servicer.
ARTICLE IX
MISCELLANEOUS
SECTION 1.32. Notices, Etc. Except where telephonic instructions or
notices are authorized herein to be given, all notices, demands, instructions
and other communications required or permitted to be given to or made upon any
party hereto shall be in writing and shall be personally delivered or sent by
overnight courier service or by registered, certified or express mail, postage
prepaid, return receipt requested, or by facsimile copy, or telegram (with
messenger delivery specified in the case of a telegram) and shall be deemed to
be delivered for purposes
38
<PAGE> 43
of this Agreement on (a) the third Business Day following the day on which such
notice was placed in the custody of the U.S. Postal Service, (b) the next
Business Day following the day on which such notice was placed in the custody of
any overnight courier service, including express mail service or (c) the same
Business Day on which such notice is sent by telegram, messenger or facsimile.
Unless otherwise specified in a notice sent or delivered in accordance with the
foregoing provisions of this subsection, notices, demands, instructions and
other communications in writing shall be given to or made upon the respective
parties hereto at their respective addresses (or to their respective facsimile
numbers) indicated below, and, in the case of telephonic instructions or
notices, by calling the telephone number or numbers indicated for such party
below:
If to the Seller: Onyx Acceptance Corporation
27051 Towne Centre Drive, 1st Floor
Foothill Ranch, California 92610
Attention: Executive Vice President
and Chief Financial Officer
Tel. No.: (949) 465-3658
Telecopier No.: (949) 465-3992
If to the Servicer: Onyx Acceptance Corporation
27051 Towne Centre Drive, 1st Floor
Foothill Ranch, California 92610
Attention: Executive Vice President
and Chief Financial Officer
Tel. No.: (949) 465-3658
Telecopier No.: (949) 465-3992
If to Recco: Onyx Acceptance Receivables
Corporation
27051 Towne Centre Drive, Suite 210
Foothill Ranch, California 92610
Attention: Chief Financial Officer
Tel. No.: (949) 465-3505
Telecopier No.: (949) 465-3530
If to the Funding Agent: The Chase Manhattan Bank
450 West 33rd Street, 14th Floor
New York, New York 10001
Attention: Structured Finance Services,
PARCO Manager
39
<PAGE> 44
Telephone: (212) 946-3478
Telecopy: (212) 946-7776
If to the Surety Provider: MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Attention: Insured Portfolio Management,
Structured Finance
Telephone: (914) 273-4949
Telecopy: (914) 765-3163
A copy of any notice delivered to or required to be sent by the Seller
or Servicer hereunder shall be sent by the Seller or the Servicer to the holder
of the Subordinated Note.
SECTION 1.33. Successors and Assigns. This Agreement shall be binding
upon the parties hereto and their respective successors and assigns and shall
inure to the benefit of the parties hereto and the Surety Provider and their
respective successors and assigns; provided that the Seller shall not assign any
of its rights or obligations hereunder without the prior written consent of
Recco, the Surety Provider and the Funding Agent. Except as expressly permitted
hereunder or in the Operative Documents, Recco shall not assign any of its
rights or obligations hereunder without the prior written consent of the Funding
Agent and the Surety Provider.
SECTION 1.34. Confirmation of Intent; Security Interest. The parties
hereto intend that the transfers to Recco by the Seller of Purchased Contracts,
all monies due or to become due with respect thereto and all collateral security
therefor, all proceeds of the foregoing, including, without limitation, all
Recoveries, as provided for herein be treated under applicable state law and
federal bankruptcy law, at all times and in each case, as absolute and complete
sales by the Seller to Recco; provided, however, that if for any reason any such
transfer is not considered a sale, the Seller hereby grants to Recco a security
interest in all such transferor's right, title and interest in the Purchased
Contracts and all other assets transferred to Recco pursuant to Sections 2.1(a)
and 2.1(b) hereof, as collateral security for the repayment by the Seller of a
loan in the amount of the aggregate Purchase Price paid to it.
SECTION 1.35. Payments. All payments made hereunder, except as provided
for in Section 2.3(b) hereof, shall be made by 2:00 P.M. (New York City time) on
the day provided for herein. Amounts not paid when due under this Agreement
shall bear interest until paid in full at a rate equal at all times to the
40
<PAGE> 45
lesser of (a) the Default Rate and (b) the maximum rate permitted by applicable
law, payable on demand. Whenever any payment to be made under this Agreement
shall be stated to be due on a day other than a Business Day, such payment shall
be made on the next succeeding Business Day.
SECTION 1.36. [RESERVED]
SECTION 1.37. Costs; Expenses and Taxes. In addition to the rights of
indemnification granted pursuant to Section 7.1 hereof, the Seller agrees to pay
on demand to Recco (a) all costs and expenses in connection with the
development, preparation, execution, delivery and administration (including
periodic auditing by Recco or its agents or representatives) of this Agreement,
and the other Operative Documents, including, without limitation, the reasonable
fees and expenses of counsel for any Indemnified Party with respect hereto and
with respect to advising any such Indemnified Party as to their respective
rights and remedies under this Agreement, and (b) all costs and expenses, if any
(including reasonable counsel fees and expenses), in connection with the
enforcement of this Agreement, and the other Operative Documents.
SECTION 1.38. Severability Clause. Any provisions of this Agreement
which are prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provisions in any other jurisdiction.
SECTION 1.39. Amendments; Governing Law; Jury Trial Waiver. This
Agreement and the rights (including those of the Funding Agent and the Surety
Provider) and obligations of the parties hereunder (a) may not be changed orally
but only by an instrument in writing signed by the party against which
enforcement is sought and the Surety Provider and (b) shall be construed in
accordance with and governed by the laws of the State of New York. No amendment
shall be effective without prior written notice thereof to S&P and Moody's. Each
party hereto hereby irrevocably waives all rights to trial by jury in any action
or proceeding (arising out of or relating to this Agreement or any of the
transactions contemplated hereby or by any of the other Operative Documents) in
which they shall be adverse parties.
SECTION 1.40. No Recourse. Except as otherwise expressly provided in
Section 4.5 and 7.1 of this Agreement, it is understood and agreed that the
Seller shall not be liable for the payment of the principal of the Loans, or any
41
<PAGE> 46
Commercial Paper or for the payment of any business taxes or for any losses
suffered by Recco in respect of ownership of the Purchased Contracts. The
preceding sentence shall not relieve the Seller from any liability hereunder
with respect to its representations, warranties, covenants and other payment and
performance obligations herein described. The Seller is not making any
representations or warranties regarding the collectibility of the Purchased
Contracts or the future performance of the Obligors under the Purchased
Contracts.
SECTION 1.41. Further Assurances. The Seller agrees to do such further
acts and things and to execute and deliver to Recco such assignments,
agreements, powers and instruments as may be necessary or desirable in order for
Recco to carry into effect the purposes of this Agreement and the other
Operative Documents or to better assure and confirm unto Recco its rights,
powers and remedies hereunder and under the other Operative Documents,
including, without limitation, to record, notify, obtain consents and file and
to re-record, re-notify, re-obtain consents and re-file all such documents and
instruments, at such time or times, in such manner and at such places, all as
may be necessary to preserve and protect the position of the Seller or Recco, as
the case may be, hereunder and under the other Operative Documents. This
covenant shall survive the termination of this Agreement.
SECTION 1.42. Termination. This Agreement shall terminate on the later
of (a) the date after the Termination Date of the payment in full of all amounts
due hereunder and the performance of all obligations hereunder and (b) the date
on which the Funding Agreement is terminated; provided, however, that all
representations, warranties, remedies and indemnities of the Seller herein, and
the agreements of the Seller made pursuant to Section 9.15 hereof shall survive
the termination of this Agreement.
SECTION 1.43. Assignment to Funding Agent. Recco hereby assigns to the
Funding Agent, all of its rights hereunder, including, without limitation, the
rights of Recco under Section 6.2. The Seller consents to such assignment and
agrees that the Funding Agent shall be entitled to enforce this Agreement
directly against the Seller. In addition, Recco agrees to act as agent on behalf
of the Funding Agent and shall not consent or agree to any waiver, amendment or
other modification of this Agreement or any of the other Operative Documents to
which it is a party without the Funding Agent's and the Surety Provider's prior
written consent, and shall take and refrain from taking any action, and shall
exercise and refrain from exercising any of its rights under the Operative
Documents as requested by the Controlling Party from time to time, including,
without limitation, the right to deliver a Servicer Termination Notice.
42
<PAGE> 47
SECTION 1.44. Counterparts. This Agreement may be executed in any number
of counterparts, and by the different parties hereto on the same or separate
counterparts, each of which shall be deemed to be an original instrument.
SECTION 1.45. Headings. Section headings used in this Agreement are for
convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
SECTION 1.46. No Bankruptcy Petition Against Recco. The Seller covenants
and agrees that prior to the date which is one year and one day after the
payment in full of all Commercial Paper issued by, and all Loans made by, the
Lenders and all other Obligations under the Operative Documents it will not
institute against, or join any other Person in instituting against, Recco any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any federal or state bankruptcy or similar law.
43
<PAGE> 48
IN WITNESS WHEREOF, the Seller and Recco have caused this Sale and
Servicing Agreement to be duly executed by their duly authorized officers, all
on the day and year first above written.
ONYX ACCEPTANCE CORPORATION, as Seller
and Servicer
By:
-------------------------------------
Name:
Title:
ONYX ACCEPTANCE
RECEIVABLES CORPORATION
By:
-------------------------------------
Name:
Title:
Acknowledged and Agreed:
THE CHASE MANHATTAN BANK,
as Funding Agent
By:
----------------------------------
Name:
Title:
MBIA INSURANCE CORPORATION,
as Surety Provider
By:
----------------------------------
Name:
Title:
<PAGE> 49
EXHIBIT A
[RESERVED]
A-1
<PAGE> 50
EXHIBIT B
SUBORDINATED NOTE
THIS SUBORDINATED NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT FOR ANY
OFFER OR SALE PURSUANT TO, AND IN COMPLIANCE WITH, THE SECURITIES ACT AND THE
RULES AND REGULATIONS THEREUNDER.
THIS SUBORDINATED NOTE IS THE SUBORDINATED NOTE REFERRED TO IN THE SALE AND
SERVICING AGREEMENT, AND IS SUBORDINATE AND JUNIOR IN RIGHT OF PAYMENT TO ALL OF
THE OBLIGATIONS TO THE EXTENT AND IN THE MANNER PROVIDED IN ARTICLE V OF THE
SALE AND SERVICING AGREEMENT; AND THE HOLDER BY ACCEPTANCE HEREOF AGREES TO BE
BOUND BY ALL THE PROVISIONS OF ARTICLE V OF THE SALE AND SERVICING AGREEMENT.
New York, New York
August 9, 1999
ONYX ACCEPTANCE RECEIVABLES CORPORATION, a Delaware corporation
("Recco"), hereby promises to pay to the order of ONYX ACCEPTANCE CORPORATION, a
Delaware corporation (the "Seller"), the principal amount of this Subordinated
Note, determined as described below, together with interest thereon at a rate
per annum equal to the LIBOR Rate + 6% in lawful money of the United States of
America. Capitalized terms used herein but not defined herein shall have the
meanings assigned to such terms in the Definitions List attached to the Sale and
Servicing Agreement dated as of August 9, 1999, between Recco and the Seller
(such agreement, as it may from time to time be amended, supplemented or
otherwise modified in accordance with its terms, the "Sale Agreement").
The principal amount of this Subordinated Note at any time shall be
determined in accordance with the provisions of Section 5.3 of the Sale
Agreement. All principal of and interest on this Subordinated Note shall be due
and payable at
B-1
<PAGE> 51
the times provided in the Sale Agreement, it being understood and agreed that,
except as provided in Section 5.3 of the Sale Agreement, no payments may be
made, directly or indirectly, on this Subordinated Note until all the
Obligations have been indefeasibly paid in full in cash. This Subordinated Note
is secured by the Collateral pursuant to the Subordinated Security Agreement
subject to the prior lien of the Funding Agent under the Security Agreement. No
payments may be received, directly or indirectly, by the Seller (and if
received, the Seller agrees to return such payments to Recco) on this
Subordinated Note unless Recco has paid all amounts required pursuant to the
Security Agreement to be paid prior to any payment in respect of this
Subordinated Note.
Payments of principal on this Subordinated Note shall be made by wire
transfer of immediately available funds to such account of the Seller as the
Seller may designate in writing.
This Subordinated Note is the Subordinated Note referred to in the Sale
Agreement, and is subordinate and junior in right of payment to all the
Obligations to the extent and in the manner provided in Section 5.3 of the Sale
Agreement and the holder by acceptance hereof agrees to be bound by all the
provisions of Section 5.3 of the Sale Agreement.
Recco hereby waives diligence, presentment, demand, protest and notice
of any kind whatsoever. The nonexercise by the holder of any of its rights
hereunder in any particular instance shall not constitute a waiver thereof in
that or any subsequent instance.
All amounts evidenced by this Subordinated Note and all payments and
prepayments of the principal hereof and the respective dates and maturity dates
thereof shall be endorsed by the holder hereof on Schedule 1 attached hereto and
made a part hereof or on a continuation thereof which shall be attached hereto
and made a part hereof, or otherwise recorded by such holder in its internal
records; provided, however, that the failure of the holder hereof to make such a
notation or any error in such a notation shall not affect the obligations of
Recco under this Subordinated Note.
It is the intention of Recco and the Seller to conform strictly to
applicable usury laws. Accordingly, if the transactions contemplated hereby
would be usurious under applicable law (including the laws of the State of New
York and the laws of the United States of America), then, in that event,
notwithstanding anything to the contrary in any agreement entered into in
connection with this Subordinated Note, it is agreed as follows: (i) the
aggregate of all consideration that
B-2
<PAGE> 52
constitutes interest, if any, under applicable law that is taken, reserved,
contracted for, charged or received under this Subordinated Note or any other
agreement or document executed in connection with this Subordinated Note shall
under no circumstances exceed the maximum amount of interest allowed by
applicable law, and any excess shall be credited to other amounts due under this
Subordinated Note by the holder hereof (or if this Subordinated Note shall have
been paid in full, refunded to Recco); and (ii) in the event that maturity of
this Subordinated Note is accelerated for any reason, or in the event of any
required or permitted prepayment, then such consideration that constitutes
interest may never include more than the maximum amount allowed by applicable
law, and excess interest, if any, provided for in this Subordinated Note or
otherwise shall be cancelled automatically as of the date of such acceleration
or prepayment and, if theretofore prepaid, shall be credited to other amounts
due under this Subordinated Note (or if this Subordinated Note shall have been
paid in full, refunded to Recco). In the event that applicable law provides for
a ceiling on the rate of interest, if any, chargeable hereunder, that ceiling
shall be the indicated rate ceiling.
The Seller agrees that it shall have no right to cause, by way of
acceleration or otherwise, any payment of principal hereunder to become due or
payable, prior to the times provided in the Security Agreement.
Each holder of this Note agrees to be bound by all of the provisions of
the Operative Documents, including, without limitation, the covenant that prior
to the date which is one year and one day after the payment in full of all
Commercial Paper issued, and all Loans made, by the Lenders and all other
Obligations under the Operative Documents, it will not institute against, or
join any other Person in instituting against, Recco any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
similar proceeding under the law of the United States or any state of the United
States.
This Subordinated Note shall not be assigned, transferred, exchanged,
pledged, hypothecated, participated or otherwise conveyed, except with the prior
written consent of the Funding Agent and the Surety Provider.
B-3
<PAGE> 53
THIS SUBORDINATED NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE.
ONYX ACCEPTANCE RECEIVABLES
CORPORATION
By:
-------------------------------------
Name:
Title:
B-4
<PAGE> 54
Schedule 1 to
Subordinated Note
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Payments and Maturity Notation Made
Date Principal Amount Pre-payments Date By
---- ---------------- ------------ -------- -------------
<S> <C> <C> <C> <C>
- ----------- ---------------- ------------ -------- -------------
- ----------- ---------------- ------------ -------- -------------
- ----------- ---------------- ------------ -------- -------------
- ----------- ---------------- ------------ -------- -------------
- ----------- ---------------- ------------ -------- -------------
- ----------- ---------------- ------------ -------- -------------
- ----------- ---------------- ------------ -------- -------------
- ----------- ---------------- ------------ -------- -------------
</TABLE>
B-5
<PAGE> 55
EXHIBIT C
ONYX ACCEPTANCE CORPORATION
OFFICER'S CERTIFICATE
The undersigned certifies that he is the [President] [Chief Financial
Officer] [an Executive Vice President] of Onyx Acceptance Corporation, a
Delaware corporation (the "Seller"), and that as such he is duly authorized to
execute and deliver this certificate on behalf of the Seller in connection with
the Sale and Servicing Agreement, dated as of August 9, 1999 (as amended, the
"Sale Agreement"), between the Seller and Onyx Acceptance Receivables
Corporation, a Delaware corporation ("Recco") (all capitalized terms used herein
without definition having the respective meanings specified in the Definitions
List attached to the Sale Agreement), and further certifies that:
1. no event with respect to the Seller has occurred and is
continuing which would constitute an Event of Default or Unmatured Event
of Default;
2. each of the agreements and conditions of the Seller to
be performed on or before the date hereof pursuant to the Sale Agreement
have been performed in all material respects;
3. The Seller has possession of each Contract set forth on
the Contract List delivered to the Funding Agent on the date hereof (the
"Specified Contracts");
4. Within one Business Day of the date hereof, the Seller
shall apply the cash proceeds of the Purchase Price paid to it on the
date hereof by Recco to purchase the Specified Contracts.
5. The Seller has delivered the Specified Contracts to
Recco on or prior to the date hereof.
C-1
<PAGE> 56
IN WITNESS WHEREOF, I have affixed hereunto my signature this ____ day
of _______, ______.
ONYX ACCEPTANCE CORPORATION
By:
-------------------------------------
Name:
Title:
C-2
<PAGE> 57
EXHIBIT D
LIST OF LOCK-BOX BANKS AND NUMBERS OF LOCK-BOXES
LOCK BOX BANK:
Wells Fargo Bank
2030 Main Street
Suite 900
Irvine, California 92714
Lock Box Account
Acct. # 4159359066
D-1
<PAGE> 58
EXHIBIT E
CLEARING ACCOUNT BANK AND ACCOUNT NUMBER
The Clearing Account, No. 4159359173, is maintained at Wells Fargo Bank,
2030 Main Street, Suite 900, Irvine, California 92714.
E-1
<PAGE> 59
EXHIBIT F
[RESERVED]
F-1
<PAGE> 60
EXHIBIT G
[Form of Servicer's Certificate]
This Servicer's Certificate is delivered pursuant to the Sale and
Servicing Agreement (as amended, the "Sale Agreement") dated as of August 9,
1999 between Onyx Acceptance Corporation and Onyx Acceptance Receivables
Corporation. Capitalized terms not defined herein have the meanings ascribed to
such terms in the Definitions List attached to the Sale Agreement.
The undersigned hereby certifies that he is a Responsible Officer of
Onyx Acceptance Corporation holding the office set forth beneath his signature
below, and that he is duly authorized to execute this Servicer's Certificate on
behalf of the Servicer and further certifies that the information set forth in
the report to which this Certificate is attached is true and correct in all
material respects, that there is currently no Unmatured Event of Default or
Event of Default and that all calculations and applications of cash were
performed in accordance with the Operative Documents.
IN WITNESS WHEREOF, I have affixed hereunto my signature this ____ day
of ___________, _____.
ONYX ACCEPTANCE
CORPORATION
By:
-------------------------------------
Name:
Title:
G-1
<PAGE> 61
EXHIBIT H
[FORM OF DAILY REPORT]
DOCUMENT DELIVERED AT CLOSING.
H-1
<PAGE> 62
EXHIBIT I
[FORM OF MONTHLY REPORT]
DOCUMENT DELIVERED AT CLOSING.
I-1
<PAGE> 63
SCHEDULE 4.1(h)-1
PRINCIPAL PLACE OF BUSINESS, ETC. OF SELLER
Onyx Acceptance Corporation's (the "Seller") principal place of
business, chief executive office and the location of the offices where it keeps
all of the records relating to the Contracts including, without limitation, the
Files, is:
27051 Towne Centre Drive
Foothill Ranch, California 92610
Schick Data Bank
26862 Vista Terrace
Lake Forest, California
I-1
<PAGE> 64
SCHEDULE 4.1(h)-2
PRINCIPAL PLACE OF BUSINESS, ETC. OF SERVICER
Onyx Acceptance Corporation's (the "Servicer") principal place of
business, chief executive office and the location of the offices where it keeps
all of the records relating to the Contracts including, without limitation, the
Files, is:
27051 Towne Centre Drive
Foothill Ranch, California 92610
Schick Data Bank
26862 Vista Terrace
Lake Forest, California
I-2
<PAGE> 65
SCHEDULE 4.1(k)-1
TRADE NAMES OF SELLER
Onyx Acceptance Corporation (the "Seller") has no trade names,
fictitious names, assumed names or "doing business as" names other than the
following:
<TABLE>
<CAPTION>
"Doing Business As" Name Business for which Name is Used
------------------------ -------------------------------
<S> <C>
1. Automotive Banking Network Marketing/Advertising
2. AutoBank Services Used car sales
3. Mesa Auto Used car sales
4. Auto Fund Name reserved but not used
5. Automotive Funding Services Name reserved but not used
</TABLE>
I-3
<PAGE> 66
SCHEDULE 4.1(k)-2
TRADE NAMES OF SERVICER
Onyx Acceptance Corporation (the "Servicer") has no trade names,
fictitious names, assumed names or "doing business as" names other than the
following:
<TABLE>
<CAPTION>
"Doing Business As" Name Business for which Name is Used
------------------------ -------------------------------
<S> <C>
1. Automotive Banking Network Marketing/Advertising
2. AutoBank Services Used car sales
3. Mesa Auto Used car sales
4. Auto Fund Name reserved but not used
5. Automotive Funding Services Name reserved but not used
</TABLE>
I-4
<PAGE> 67
SCHEDULE 4.1(r)-1
SUBSIDIARIES OF SELLER
The subsidiaries of Onyx Acceptance Corporation (the "Seller") are as
follows:
(i) Onyx Acceptance Financial Corporation
(ii) Onyx Acceptance Funding Corporation
(iii) ABNI, Inc.
(iv) C.U. Acceptance Corporation
(v) Onyx Acceptance Receivables Corporation
I-5
<PAGE> 68
SCHEDULE 4.1(r)-2
SUBSIDIARIES OF SERVICER
The subsidiaries of Onyx Acceptance Corporation (the "Servicer") are as
follows:
(i) Onyx Acceptance Financial Corporation
(ii) Onyx Acceptance Funding Corporation
(iii) ABNI, Inc.
(iv) C.U. Acceptance Corporation
(v) Onyx Acceptance Receivables Corporation
I-6
<PAGE> 1
EXHIBIT 10.120
================================================================================
SECURITY AGREEMENT
between
ONYX ACCEPTANCE RECEIVABLES CORPORATION
and
THE CHASE MANHATTAN BANK,
as Funding Agent
Dated as of August 9, 1999
================================================================================
<PAGE> 2
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of August 9, 1999 (as amended,
supplemented or otherwise modified and in effect from time to time, this
"Agreement"), is between ONYX ACCEPTANCE RECEIVABLES CORPORATION, a Delaware
corporation ("Recco"), and THE CHASE MANHATTAN BANK, a New York banking
corporation, as funding agent for the benefit of the Secured Parties (in such
capacity, the "Funding Agent").
W I T N E S S E T H :
WHEREAS, the Lenders will from time to time make Loans to Recco
for the purpose of purchasing Contracts; and
WHEREAS, it is a condition precedent to the Funding Agreement
that Recco execute and deliver this Security Agreement to the Funding Agent for
the benefit of the Secured Parties;
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Recco hereby agrees with the
Funding Agent as follows:
SECTION 1. Defined Terms.
(1) As used in this Agreement or any certificate or other document
made or delivered pursuant hereto, the capitalized terms used
herein and therein shall, unless otherwise defined herein, have
the meanings assigned to them in the Definitions List dated as
of the date hereof that refers to this Agreement, which is
incorporated herein by reference (the "Definitions List").
(2) As used herein and in any certificate or other document made or
delivered pursuant hereto, accounting terms not defined in the
Definitions List and accounting terms partly defined in the
Definitions List to the extent not defined, shall have the
respective meanings given to them under GAAP.
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<PAGE> 3
(3) 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 paragraph references are to this Agreement unless
otherwise specified.
(4) Capitalized terms used herein shall be equally applicable to
both the singular and plural forms of such terms.
(5) The following terms that are defined in the UCC are used herein
as so defined: Chattel Paper, Documents, Equipment, General
Intangibles, Instruments and Proceeds.
SECTION 2. Grant of Security Interest. As collateral security
for the prompt and complete payment and performance when due (whether at the
stated maturity, by acceleration or otherwise) of the Obligations, Recco hereby
assigns, pledges, grants, conveys, transfers, delivers and sets over to the
Funding Agent for its benefit and for the ratable benefit of the Secured Parties
a security interest in all Recco's right, title and interest in, to and under
the following, whether now owned or hereafter acquired, in each case (other than
clause (i)) only as related to the Purchased Contracts (collectively, the
"Collateral"). For further clarification, all Collateral as heretofore described
in this Section 2 (other than clause (i)) shall relate to and be in respect of
Purchased Contracts as defined herein, subject to any and all provisos, as
applicable, expressly included in the definition thereof.
(1) all chattel paper, including, without limitation, the Purchased
Contracts and other contracts related to the Purchased Contracts
(as the same may be amended, modified, supplemented, restated or
replaced from time to time) and amounts paid or payable with
respect thereto;
(2) all Files (including all Dealer Assignments) and Contract Lists,
and all right, title and interest of Recco in and to the
documents, agreements and instruments included in the Files,
including, without limitation, rights of recourse of Recco
against Vehicle Dealers;
(3) all Insurance Policies and all rights of Recco in all Insurance
Policies;
(4) all security interests, Liens, guaranties, mortgages and other
encumbrances in favor of or assigned or transferred to Recco in
and to Purchased Contracts and Vehicles, and all accessions
thereto and replacements thereof, and in any other property in
which a security interest is assigned or transferred to Recco;
3
<PAGE> 4
(5) all of Recco's Equipment and Inventory, General Intangibles,
Documents, Instruments, Accounts, general ledger sheets, files,
records, books of account, invoices, bills, certificates or
documents of ownership, bills of sale, business papers,
correspondence, tapes, cards, computer tapes and all other data
and data storage systems (whether in the possession of Recco or
any other Person) relating to any of the foregoing;
(6) all deposit accounts, moneys, deposits, funds, accounts and
instruments relating to the foregoing;
(7) the Collection Account (including, without limitation, all funds
at any time on deposit therein and all Permitted Investments in
which such funds may at any time be invested);
(8) the Sale Agreement and all other Operative Documents to which
Recco is a party, including, without limitation, all rights of
Recco to amounts due or to become due under or in connection
with such agreements;
(9) any Hedge Agreement and any guarantees or other credit
enhancement associated therewith; and
(10) to the extent not otherwise included, all Proceeds and products
of any and all of the foregoing.
SECTION 3. Bank Accounts; Possession of Contracts and Files.
(1) Subject to the Collection Account Agreement, the Funding Agent
shall have sole dominion and control over the Bank Accounts, and
no other Person shall have any right of withdrawal therefrom.
(2) The Controlling Party shall have the right to hold the Purchased
Contracts. The Controlling Party may in its sole discretion,
designate Recco or any other Person, as custodian and bailee of
the Funding Agent for the benefit of the Secured Parties, to
hold the Purchased Contracts. To the extent required to service
the Purchased Contracts in accordance with the Sale Agreement,
Recco may release the Purchased Contracts and Files to the
Servicer, to be held by the Servicer as custodian and bailee of
the Funding Agent during the Servicer's
4
<PAGE> 5
possession thereof. The Servicer shall promptly return all such
Purchased Contracts and Files to Recco or any such other Person
as the Controlling Party shall direct when possession thereof by
the Servicer is no longer required for servicing such Purchased
Contracts in accordance with the Sale Agreement. In addition,
the Servicer shall return the Purchased Contracts to Recco, the
Funding Agent, the Surety Provider or any such other Person as
the Funding Agent (at the direction of the Controlling Party)
shall direct at any time upon receipt of a request from the
Funding Agent to such effect.
SECTION 4. Daily Procedures and Distributions of Collections
Prior to the Termination Date. On each Business Day prior to the Termination
Date:
(1) Deposits.
(1) the Servicer and Recco shall transfer or cause to be
transferred to the Clearing Account (A) all Collections
received on the previous Business Day in the Lock-Boxes
and (B) all Collections received by the Servicer or
Recco in any other manner on the previous Business Day;
(2) the Servicer shall transfer or cause to be transferred
to the Collection Account all Collections received in
the Clearing Account within one Business Day after such
Collections are received in the Clearing Account;
(3) if a payment of the principal of the Loans is required
on such Business Day pursuant to Section 2.4 of the
Funding Agreement, Recco shall deposit the amount
required into the Collection Account;
(4) the Servicer shall transfer from the Collection Account
to a sub-account of the Collection Account (the "Accrued
Costs and Interest Sub-Account") on such Business Day an
amount equal to the sum of the Accrued Facilities Costs
Amount and the Accrued Interest Amount for such day; and
(5) Recco shall deposit all amounts received in respect of
any Hedge Agreement into the Collection Account except,
so long as no Event of Default or Unmatured Event of
Default shall
5
<PAGE> 6
have occurred and be continuing, for amounts received
prior to the Hedge Effective Date.
Until the transfers set forth in Section 4(a)(i), (ii), (iii) and (v) are made,
Recco and the Servicer shall hold in trust for the benefit of the Funding Agent
for the benefit of the Secured Parties all such amounts and Collections and
shall not commingle such amounts and Collections with other funds of the
Servicer or Recco other than funds of the Servicer or Recco in the Lock-Boxes
and the Clearing Account.
(2) Distributions. The Servicer shall make distributions from
amounts on deposit in the Collection Account for the following
purposes in the following order of priority, in each case to the
extent such amounts are due and payable on such Business Day and
to the Person entitled thereto:
(1) an amount necessary to cure any Borrowing Base
Deficiency shall be applied to reduce the principal of
the Loan Note;
(2) if Onyx Acceptance Corporation or an Affiliate is not
the Servicer, an amount equal to the Servicing Fee (up
to an amount calculated on the basis of a Servicing Fee
Percentage equaling 1%);
(3) to the counterparty of each Hedge Agreement on or after
the Hedge Effective Date, the fixed rate payment payable
by Recco under each such Hedge Agreement;
(4) on each Determination Date, from the Accrued Costs and
Interest Sub-Account, an amount equal to interest on the
Loan Note in respect of interest accrued on the Loans
during the related Determination Period; provided that
the aggregate of the amounts paid pursuant to clauses
(iv) and (v) hereof on any Determination Date shall not
exceed the Capped Amount;
(5) on each Determination Date, from the Accrued Costs and
Interest Sub-Account, the Facilities Fees; provided that
the aggregate of the amounts paid pursuant to clauses
(iv) and (v) hereof on any Determination Date shall not
exceed the Capped Amount;
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<PAGE> 7
(6) from the Accrued Costs and Interest Sub-Account, an
amount equal to the Facilities Costs;
(7) an amount equal to the principal of and unpaid interest
on the Loans prepaid or required to be prepaid on such
Business Day pursuant to Section 2.4(a) or (b) of the
Funding Agreement;
(8) either (A) an amount equal to the Servicing Fee (if Onyx
Acceptance Corporation or an Affiliate thereof is the
Servicer) or (B) an amount equal to the portion of the
Servicing Fee not paid pursuant to clause (ii) above (if
Onyx Acceptance Corporation or an Affiliate thereof is
not the Servicer);
(9) an amount equal to interest on all unreimbursed drawings
under the Policies;
(10) an amount equal to all unreimbursed drawings under the
Policies and all other amounts owing to the Surety
Provider under the Premium Side Letter Agreement and the
Insurance Agreement;
(11) on each Determination Date, in the following order of
priority, from the Accrued Costs and Interest
Sub-Account, (A) an amount equal to all interest accrued
on Loans during the related Determination Period in
excess of the Capped Amount not otherwise paid pursuant
to clause (iv) above and (B) an amount equal to all
Facilities Fees in excess of the Capped Amount not
otherwise paid pursuant to clause (v) above;
(12) an amount equal to the sum of the Recco Expenses and all
other Obligations;
(13) for the purchase of Contracts pursuant to the Sale
Agreement;
(14) an amount equal to interest and principal due on the
Subordinated Note; and
(15) an amount equal to all remaining amounts in the
Collection Account for other duly authorized corporate
purposes of Recco.
7
<PAGE> 8
provided, however, that, on any Business Day, no distribution shall be made
pursuant to (xiii) or (xiv) above if the conditions set forth in Section 3.2 of
the Sale Agreement have not been satisfied.
(3) Permitted Investments. Amounts on deposit in the Accrued Costs
and Interest Sub-Account and the Disbursement Sub-Account may be
invested in Permitted Investments, provided that such
Investments shall be selected so that the maturity dates thereof
correspond to the dates on which such amounts are required to be
distributed in accordance with the provisions of Section 4(b).
SECTION 5. Daily Procedures and Distributions of Collections on
each Liquidation Day. On each Liquidation Day:
(1) Deposits.
(1) the Servicer and Recco shall transfer or cause to be
transferred to the Clearing Account (A) all Collections
received on the previous Business Day in the Lock-Boxes
and (B) all Collections received by the Servicer or
Recco in any other manner on the previous Business Day;
(2) the Servicer shall transfer or cause to be transferred
to the Collection Account all Collections received in
the Clearing Account within one Business Day after such
Collections are received in the Clearing Account;
(3) Recco shall deposit all amounts received by Recco in
respect of any Hedge Agreement into the Collection
Account except, so long as no Event of Default or
Unmatured Event of Default shall have occurred and be
continuing, for amounts received prior to the Hedge
Effective Date. Until such transfers are made, Recco and
the Servicer shall hold in trust for the benefit of the
Funding Agent for the benefit of the Secured Parties all
such amounts and Collections and shall not commingle
such amounts and Collections with other funds of the
Servicer or Recco other than funds in the Lock-Boxes and
the Clearing Account.
(2) Distributions. The Servicer shall make distributions from
amounts on deposit in the Collection Account for the following
purposes in the
8
<PAGE> 9
following order of priority, in each case to the extent such
amounts are due and payable on such day and to the Person
entitled thereto:
first, if Onyx Acceptance Corporation or an Affiliate is
not the Servicer, an amount equal to the Servicing Fee (up to an
amount calculated on the basis of a Servicing Fee Percentage
equaling 1%);
second, to the counterparty of each Hedge Agreement, the
fixed rate payment payable by Recco under each such Hedge
Agreement;
third, on each Determination Date, an amount equal to
interest on the Loan Note in respect of interest accrued on the
Loans during the related Determination Period; provided that the
aggregate of the amounts paid pursuant to clauses third and
fourth hereof on any Determination Date shall not exceed the
Capped Amount;
fourth, on each Determination Date, an amount equal to
the Facilities Fees; provided that the aggregate of the amounts
paid pursuant to clauses third and fourth hereof for any
Determination Date shall not exceed the Capped Amount;
fifth, an amount equal to the Facilities Costs;
sixth, an amount equal to the principal of and unpaid
interest on the Loans required to be prepaid pursuant to Section
2.4(c) of the Funding Agreement;
seventh, an amount equal to interest on all unreimbursed
drawings under the Policies;
eighth, an amount equal to all unreimbursed drawings
under the Policies and all other amounts owing to the Surety
Provider under the Premium Side Letter Agreement and the
Insurance Agreement;
ninth, in the following order of priority, (A) an amount
equal to all interest accrued on Loans during the related
Determination Period in excess of the Capped Amount not
otherwise paid pursuant to clause third above and (B) an amount
equal to all Facilities Fees in excess of the Capped Amount not
otherwise paid pursuant to clause fourth above;
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<PAGE> 10
tenth, an amount equal to the sum of all Recco Expenses
and all other Obligations;
eleventh, an amount equal to the principal of and
interest due on the Subordinated Note;
twelfth, either (A) an amount equal to the Servicing Fee
(if Onyx Acceptance Corporation or an Affiliate thereof is the
Servicer) or (B) an amount equal to the portion of the Servicing
Fee not otherwise paid pursuant to clause first above (if Onyx
Acceptance Corporation or an Affiliate thereof is not the
Servicer); and
thirteenth, all remaining amounts to Recco, or to such
Persons and in such amounts as a court of competent jurisdiction
may direct.
(3) Permitted Investments. Amounts on deposit in the Accrued Costs
and Interest Sub-Account and the Disbursement Sub-Account may be
invested in Permitted Investments, provided that such Permitted
Investments shall be selected so that the maturity dates thereof
correspond to the dates on which such amounts are required to be
distributed in accordance with the provisions of Section 5(b).
(4) Clearing Account. The Clearing Account is a general clearing
account held by and in the name of Onyx Acceptance Financial
Corporation into which Collections as well as collections on
other assets are deposited. The parties hereto agree and
acknowledge that (i) any Collections transferred to the Clearing
Account prior to the transfer of such Collections to the
Collection Account will be subject at all times to the terms of
the Intercreditor Agreement and (ii) the balance in the Clearing
Account may not at any time fall below the amount deposited
representing Collections which have not been transferred to the
Collection Account.
(5) Optional Deposits by Surety Provider. The Surety Provider shall
at any time, and from time to time, have the option (but shall
not be required, except in accordance with the terms of the Note
Policy) to deliver amounts to the Funding Agent for deposit into
the Collection Account to provide funds in respect of the
payment of fees or expenses of any provider of services to Recco
or to any other Person or in respect of any amounts payable
pursuant to Section 4(b) or 5(b)
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<PAGE> 11
hereof. Any payment under this Section 5(e) shall constitute an
amount paid under the Note Policy.
SECTION 6. Rights of Funding Agent; Limitations on Funding
Agent's Obligations.
(1) Funding Agent Not Liable under Contracts. The Funding Agent
shall not have any obligation or liability under any Contract by
reason of or arising out of this Agreement or the receipt by the
Funding Agent of any payment relating to such Contract, nor
shall the Funding Agent be obligated in any manner to perform
any such obligations under or pursuant to any Contract, to make
any payment, to make any inquiry as to the nature or the
sufficiency of any payment received by it or as to the
sufficiency of any performance by any party under any Contract,
to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may
have been assigned to it or to which it may be entitled at any
time or times.
(2) Notice to Obligors. At any time upon the request of the Funding
Agent (acting at the direction of the Controlling Party), Recco
shall notify the Obligors that the Contracts have been assigned
to the Funding Agent and that payments in respect thereof shall
be made directly to the Funding Agent. The Funding Agent (acting
at the direction of the Controlling Party) may in its own name
or in the name of others communicate with the Obligors to verify
with them to its satisfaction the existence, amount and terms of
any Purchased Contracts.
(3) Analysis of Contracts. The Funding Agent and the Surety Provider
shall have the right to make test verifications of the Purchased
Contracts in any manner and through any medium that it considers
advisable, and Recco shall furnish all such assistance and
information as the Funding Agent and the Surety Provider may
require in connection therewith. In addition, at any time and
from time to time, upon the Funding Agent's or Surety Provider's
request and at the expense of Recco, Recco shall cause
independent public accountants or others satisfactory to the
Funding Agent and the Surety Provider to furnish to the Funding
Agent and the Surety Provider reports showing reconciliations,
aging and test verifications of, and trial balances for, the
Purchased Contracts.
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<PAGE> 12
(4) Proceeds. Subject to the provisions of Section 4(a) and 5(a),
any Proceeds, when collected by Recco, shall be forthwith
deposited by Recco in the exact form received, duly endorsed by
Recco to the Funding Agent if required, in the Collection
Account, subject to withdrawal by the Funding Agent only, and,
until so turned over, shall be held by Recco in trust for the
Funding Agent. Such Proceeds shall continue to be collateral
security for all of the Obligations and shall not constitute
payment thereof until applied as hereinafter provided. The
Funding Agent shall apply all or any part of the funds on
deposit in the Collection Account in accordance with Sections 4
and 5 hereof. Upon the request of the Funding Agent or the
Surety Provider, Recco shall deliver or cause to be delivered to
the Funding Agent all Files relating to the Purchased Contracts,
including original and other documents evidencing, and relating
to, the transactions which created the Purchased Contracts,
including, without limitation, all original orders, invoices,
receipts and similar documents.
(5) Document Delivery. In connection with the security interest
granted herein, on or prior to each date on which a Loan is
disbursed from the Disbursement Sub-Account, Recco shall have
received from the Seller the original Purchased Contract and
complete Files relating to each Purchased Contract for which
such Loan was made on such date. Recco shall hold such Purchased
Contracts and Files for the benefit of the Funding Agent, and,
upon request of the Funding Agent or the Surety Provider, Recco
shall deliver such Contracts and Files to the Funding Agent or
to such Person as the Funding Agent or the Surety Provider may
designate. In addition, Recco shall mark the following notation
on the computer tape for such Purchased Contract and File: "The
Purchased Contracts herein have been pledged to secure the debt
of Recco to the Secured Parties, and their successors and
assigns pursuant to that certain Security Agreement dated as of
August 9, 1999 between Recco and The Chase Manhattan Bank, as
Funding Agent for the benefit of the Secured Parties".
SECTION 7. Representations and Warranties. Recco hereby
represents and warrants that:
(1) Title; No Other Liens. Except for the Lien granted to the
Funding Agent pursuant to this Agreement and the other Liens
permitted pursuant to any of the other Operative Documents,
Recco owns each
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<PAGE> 13
item of the Collateral free and clear of any and all Liens or
claims of others. No security agreement, financing statement or
other public notice with respect to all or any part of the
Collateral is on file or of record in any public office, except
such as may have been filed in favor of the Funding Agent
pursuant to this Agreement or as may be permitted pursuant to
the Funding Agreement.
(2) Perfected First Priority Liens. The Liens granted pursuant to
this Agreement constitute perfected first priority Liens on the
Collateral in favor of the Funding Agent and are enforceable as
such against all creditors of and purchasers from Recco and, in
the case of any Collateral constituting fixtures, against any
owner or purchaser of the real property where any of the
Equipment is located and any present or future creditor
obtaining a Lien on such real property.
(3) Chief Executive Office. Recco's chief executive office and chief
place of business is located at 27051 Towne Centre Drive, Suite
210 Foothill Ranch, California 92610.
(4) Locations. All Collateral is located at the addresses listed on
Schedule 7(d) hereto.
SECTION 8. Covenants. Recco covenants and agrees with the
Funding Agent for the benefit of the Secured Parties that until the Obligations
are paid in full:
(1) Further Documentation; Pledge of Instruments. At any time and
from time to time, upon the written request of the Funding Agent
or the Surety Provider, and at the sole expense of Recco, Recco
will promptly and duly execute and deliver such further
instruments and documents and take such further action as the
Funding Agent may request for the purpose of obtaining or
preserving the full benefits of this Agreement and of the rights
and powers herein granted, including, without limitation, the
filing of any financing or continuation statements under the UCC
with respect to the Liens created hereby, including all steps
necessary to maintain perfection of the security interest of
Recco in each Vehicle. Recco also hereby authorizes the Funding
Agent and the Surety Provider to file any such financing or
continuation statement without the signature of Recco to the
extent permitted by applicable law. If any amount payable under
or in connection with any of the Collateral shall be or become
evidenced by any
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<PAGE> 14
additional promissory note, other Instrument or Chattel Paper,
such note, Instrument or Chattel Paper shall be immediately
delivered to the Funding Agent or such other person as the
Funding Agent may designate, duly endorsed in a manner
satisfactory to the Funding Agent, to be held as Collateral
pursuant to this Agreement.
(2) Indemnification. Recco will pay, and save the Funding Agent and
the Surety Provider harmless from, any and all liabilities,
costs and expenses (including, without limitation, legal fees
and expenses) (i) with respect to, or resulting from, any delay
in paying, any and all excise, sales or other taxes (excluding
income and franchise taxes) which may be payable or determined
to be payable with respect to any of the Collateral, (ii) with
respect to, or resulting from, any delay in complying with any
Requirement of Law applicable to any of the Collateral or (iii)
in connection with any of the transactions contemplated by this
Agreement. In any suit, proceeding or action brought by the
Funding Agent or the Surety Provider in respect of any Purchased
Contract for any sum owing thereunder, or to enforce any
provisions of any Purchased Contract, Recco will save, indemnify
and keep the Funding Agent and the Surety Provider harmless from
and against all expense, loss or damage suffered by reason of
any defense, setoff, counterclaim, recoupment or reduction or
liability whatsoever of the account debtor or obligor
thereunder, arising out of a breach by Recco of any obligation
thereunder or arising out of any other agreement, indebtedness
or liability at any time owing to or in favor of such account
debtor or obligor or its successors from Recco. Notwithstanding
the foregoing, the parties hereto hereby agree that under no
circumstances shall Recco be liable for, or required to pay any
amount pursuant to this paragraph (b), resulting from gross
negligence or willful misconduct on the part of the Funding
Agent or the Surety Provider.
(3) Maintenance of Records. Recco will keep and maintain, or cause
to be maintained by the Servicer, at its own cost and expense
satisfactory and complete records of the Collateral, including,
without limitation, a record of all payments received and all
credits granted with respect to the Purchased Contracts. Recco
will mark its books and records pertaining to the Collateral to
evidence this Agreement and the security interests granted
hereby. At any time upon the request of the Funding Agent or
Surety Provider, Recco shall, during normal business hours, turn
over any books and records to the Funding Agent or
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<PAGE> 15
the Surety Provider or to its representatives that the Funding
Agent or the Surety Provider shall so request.
(4) Right of Inspection. The Funding Agent and the Surety Provider
shall at all times have full and free access during normal
business hours to all the books, correspondence and records of
Recco and to all Purchased Contracts and Files held by Recco,
and the Funding Agent and the Surety Provider or their
respective representatives may examine the same, take extracts
therefrom and make photocopies thereof, and Recco agrees to
render to the Funding Agent and the Surety Provider, at Recco's
cost and expense, such clerical and other assistance as may be
reasonably requested with regard thereto.
(5) Compliance with Laws, etc. Recco will comply with all
Requirements of Law applicable to the Collateral or any part
thereof or to the operation of Recco's business; provided,
however, that Recco may contest any Requirement of Law in any
reasonable manner which shall not, in the reasonable opinion of
the Funding Agent or the Surety Provider, adversely affect the
rights of the Funding Agent or the Secured Parties or the
priority of the Lien of the Funding Agent on the Collateral.
(6) Compliance with Terms of Contracts, etc. Recco will perform and
comply with all its obligations under the Purchased Contracts
and all its other Contractual Obligations relating to the
Collateral.
(7) Payment of Obligations. Recco will pay promptly when due all
taxes, assessments and governmental charges or levies imposed
upon the Collateral or in respect of its income or profits
therefrom, as well as all claims of any kind (including, without
limitation, claims for labor, materials and supplies) against or
with respect to the Collateral, except that no such charge need
be paid if (i) the validity thereof is being contested in good
faith by appropriate proceedings, (ii) such proceedings do not
involve any danger of the sale, forfeiture or loss of any of the
Collateral or any interest therein and (iii) such charge is
adequately reserved against on Recco's books in accordance with
GAAP.
(8) Limitation on Liens on Collateral. Recco will not create, incur
or permit to exist, will defend the Collateral against, and will
take such other action as is necessary to remove, any Lien or
claim on or to the
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<PAGE> 16
Collateral, other than the Liens created hereby and other than
as permitted pursuant to the Funding Agreement, and will defend
the right, title and interest of the Funding Agent in and to any
of the Collateral against the claims and demands of all Persons
whomsoever.
(9) Limitations on Dispositions of Collateral. Recco will not sell,
transfer, lease or otherwise dispose of any of the Collateral,
or attempt, offer or contract to do so, except as provided for
in this Agreement.
(10) Limitations on Modifications, Waivers, Extensions of Contracts.
Recco will not, and will not permit any other Person to, (i)
amend, modify, terminate or waive any provision of any Purchased
Contract in any manner which could have an adverse effect on the
value of such Purchased Contract as Collateral except in
accordance with clause (k) of this Section 8, (ii) fail to
exercise promptly and diligently each and every right which it
may have under each Purchased Contract, (iii) fail to deliver to
the Funding Agent and the Surety Provider, upon the request of
the Funding Agent and the Surety Provider, a copy of each
demand, notice or document received by it relating in any way to
any Purchased Contract, (iv) fail to deliver to the Funding
Agent and the Surety Provider a copy of each demand, notice or
document sent to each Obligor at the request of the Funding
Agent or the Surety Provider; and (v) act otherwise than in
accordance with the Credit and Collection Policy.
(11) Limitations on Discounts, Compromises, Extensions of Contracts.
Other than pursuant to the Credit and Collection Policy, Recco
will not, and will not permit any other Person to, grant any
extension of the time of payment of any of the Purchased
Contracts, compromise, compound or settle the same for less than
the full amount thereof, release, wholly or partially, any
Person liable for the payment thereof, or allow any credit or
discount whatsoever thereon.
(12) Maintenance of Equipment. Recco will maintain each item of
Equipment in good operating condition, ordinary wear and tear
and immaterial impairments of value and damage by the elements
excepted, and will provide all maintenance, service and repairs
necessary for such purpose.
(13) Further Identification of Collateral. Recco will furnish to the
Funding Agent from time to time statements and schedules further
identifying
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<PAGE> 17
and describing the Collateral and such other reports in
connection with the Collateral as the Funding Agent may
reasonably request, all in reasonable detail.
(14) Notices. Recco will advise the Funding Agent and the Surety
Provider promptly, in detail, at its address set forth in the
Funding Agreement, (i) of any Lien (other than Liens created or
permitted hereby) on, or claim asserted against, any of the
Collateral and (ii) of the occurrence of any other event which
could have in the reasonable exercise of the judgment of the
Funding Agent or the Surety Provider a material adverse effect
on the Collateral or on the Liens created hereunder. Recco will
promptly notify S&P and Moody's of any amendment to any Interest
Rate Hedge Mechanism.
A copy of any notice delivered to or required to be sent by Recco hereunder
shall be sent by Recco to the holder of the Subordinated Note.
(15) Changes in Locations, Name, etc. Recco will not, without
providing 30 days prior written notice to the Funding Agent and
the Surety Provider (and, in the case of clause (iv), without
the prior written consent of the Funding Agent and the Surety
Provider), and without filing any UCC financing statements
necessary or desirable (in the opinion of the Funding Agent and
the Surety Provider) to maintain the perfection and priority of
the Funding Agent's security interest in the Collateral as
provided for herein, (i) change the location of its chief
executive office/chief place of business from that specified in
Section 7(c) or remove its books and records from such location,
(ii) permit any Equipment that it may acquire to be kept at a
location other than that specified in Section 7(d), (iii) change
its name, identity or corporate structure to such an extent that
any financing statement filed by the Funding Agent in connection
with this Agreement would become misleading or (iv) change the
location where the Purchased Contracts and the Files are
maintained.
SECTION 9. Funding Agent's Appointment as Attorney-in-Fact.
(1) Powers. Recco hereby irrevocably constitutes and appoints the
Funding Agent and any officer or agent thereof, with full power
of substitution, as its true and lawful attorney-in-fact with
full irrevocable power and authority in the place and stead of
Recco and in the name of Recco or in its own name, from time to
time in the Funding
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<PAGE> 18
Agent's discretion, for the purpose of carrying out the terms of
this Agreement, to take any and all lawful and appropriate
action and to execute any and all documents and instruments
which may be necessary or desirable to accomplish the purposes
of this Agreement, and, without limiting the generality of the
foregoing, Recco hereby gives the Funding Agent the power and
right, on behalf of Recco, without notice to or assent by Recco,
to do the following:
(1) at the direction of the Controlling Party, upon the
occurrence and during the continuance of any Unmatured
Event of Default or Event of Default, in the name of
Recco or its own name, or otherwise, to take possession
of and endorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of
moneys due under any Instrument, General Intangible or
Contract and to file any claim or to take any other
action or proceeding in any court of law or equity or
otherwise deemed appropriate by the Funding Agent for
the purpose of collecting any and all such moneys due
under any Instrument, General Intangible or Contract
whenever payable;
(2) to pay or discharge taxes and Liens levied or placed on
or threatened against the Collateral; and
(3) at the direction of the Controlling Party, upon the
occurrence and during the continuance of any Unmatured
Event of Default or Event of Default, (A) to direct any
party liable for any payment under any of the Collateral
to make payment of any and all moneys due or to become
due thereunder directly to the Funding Agent or as the
Controlling Party shall direct; (B) to ask or demand
for, collect, receive payment of and receipt for, any
and all moneys, claims and other amounts due or to
become due at any time in respect of or arising out of
any Collateral; (C) to sign and endorse any invoices,
freight or express bills, bills of lading, storage or
warehouse receipts, drafts against debtors, assignments,
verifications, notices and other documents in connection
with any of the Collateral; (D) to commence and
prosecute any suits, actions or proceedings at law or in
equity in any court of competent jurisdiction to collect
the Collateral or any proceeds thereof and to enforce
any other right in respect of any Collateral; (E) to
defend any suit, action or proceeding brought against
Recco with respect
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<PAGE> 19
to any Collateral; (F) to settle, compromise or adjust
any suit, action or proceeding described in clause (E)
above and, in connection therewith, to give such
discharges or releases as the Funding Agent may deem
appropriate; (G) generally, to sell, transfer, pledge
and make any agreement with respect to or otherwise deal
with any of the Collateral pursuant to Section 11 hereof
as fully and completely as though the Funding Agent were
the absolute owner thereof for all purposes, and to do,
at the Funding Agent's option and Recco's expense, at
any time, or from time to time, all lawful acts and
things which the Funding Agent deems necessary to
protect, preserve or realize upon the Collateral and the
Funding Agent's Liens thereon and to effect the intent
of this Agreement, all as fully and effectively as Recco
might do; and (H) implement the Alternate Servicing
Plan.
Recco hereby ratifies all that said attorneys shall lawfully do or cause to be
done by virtue hereof.
(2) Other Powers. Recco also authorizes the Funding Agent, at any
time and from time to time, to execute, in connection with the
sale provided for in Section 11 hereof, any endorsements,
assignments or other instruments of conveyance or transfer with
respect to the Collateral.
(3) No Duty on Funding Agent's Part. The powers conferred on the
Funding Agent hereunder are solely to protect the Funding
Agent's interests in the Collateral and shall not impose any
duty upon it to exercise any such powers. The Funding Agent
shall be accountable only for amounts that it actually receives
as a result of the exercise of such powers, and neither it nor
any of its officers, directors, employees or agents shall be
responsible to Recco for any act or failure to act hereunder,
except for its own gross negligence or willful misconduct.
SECTION 10. Performance by Funding Agent of Recco's Obligations.
If Recco fails to perform or comply with any of its agreements contained herein
and the Funding Agent, as provided for by the terms of this Agreement, shall
itself perform or comply, or otherwise cause performance or compliance, with
such agreement, the expenses of the Funding Agent incurred in connection with
such performance or compliance, together with interest thereon until
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<PAGE> 20
paid in full at a rate per annum equal to the Default Rate, shall be payable by
Recco to the Funding Agent on demand and shall constitute Obligations secured
hereby.
SECTION 11. Remedies. If an Event of Default shall occur and be
continuing, the Funding Agent may with the consent of, and shall at the
direction of, the Controlling Party, exercise in addition to all other rights
and remedies granted to it in this Agreement and in any other instrument or
agreement securing, evidencing or relating to the Obligations, all rights and
remedies of a secured party under the UCC. Without limiting the generality of
the foregoing, the Funding Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except the notice
specified below of time and place of public or private sale) to or upon Recco or
any other Person (all and each of which demands, defenses, advertisements and
notices are hereby waived), may in such circumstances forthwith collect,
receive, appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell, lease, assign, give an option or options to purchase,
or otherwise dispose of and deliver said Collateral or any part thereof (or
contract to do any of the foregoing), in one or more parcels at public or
private sale or sales, at any exchange, broker's board or office of the Funding
Agent or elsewhere upon such terms and conditions as it may deem advisable and
at such prices as it may deem best, for cash or on credit or for future delivery
without assumption of any credit risk. The Funding Agent shall have the right
upon any such public sale or sales, and, to the extent permitted by law, upon
any such private sale or sales, to purchase the whole or any part of said
Collateral so sold, free of any right or equity of redemption in Recco, which
right or equity is hereby waived or released. Recco further agrees, at the
Funding Agent's request, to assemble the Collateral and the Files and make them
available to the Funding Agent at places which the Funding Agent shall select,
whether at Recco's premises or elsewhere. The Funding Agent shall apply the net
proceeds of any such collection, recovery, receipt, appropriation, realization
or sale, after deducting all costs and expenses of every kind incurred therein
or incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Funding Agent hereunder,
including, without limitation, attorneys' fees and disbursements, to the payment
in whole or in part of the Obligations, in such order as the Funding Agent may
elect, and only after such application and after the payment by the Funding
Agent of any other amount required by any provision of law, including, without
limitation, Section 9-504(1)(c) of the UCC, need the Funding Agent account for
the surplus, if any, to Recco. To the extent permitted by applicable law, Recco
waives all claims, damages, and demands against the Funding Agent arising out of
the repossession, retention or sale of the Collateral. If any notice of a
proposed sale or disposition of Collateral shall be required by law, such notice
shall be deemed reasonably and properly given if given (effective upon
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<PAGE> 21
dispatch) in any manner provided in the Funding Agreement at least 10 days
before such sale or disposition. Recco shall remain liable for any deficiency if
the proceeds of any sale or other disposition of the Collateral are insufficient
to pay the Obligations and the fees and disbursements of any attorneys employed
by the Funding Agent to collect such deficiency.
Upon the occurrence of an Event of Default, and upon the written
instructions of the Controlling Party, Recco shall take such action or shall
cause such action to be taken pursuant to any and all Interest Rate Hedge
Mechanisms and/or enter into any Hedge Agreement at the sole expense of Recco
promptly upon the request of the Controlling Party.
SECTION 12. Limitation on Funding Agent's Duties in Respect of
Collateral. The Funding Agent's sole duty with respect to the custody,
safekeeping and physical preservation of the Collateral in its possession, under
Section 9-207 of the UCC or otherwise, shall be to deal with it in the same
manner as the Funding Agent deals with similar property for its own account.
Neither the Funding Agent nor any of its directors, officers, employees or
agents shall be liable for failure to demand, collect or realize upon all or any
part of the Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
Recco or otherwise.
SECTION 13. Powers Coupled with an Interest. All powers of
attorney, authorizations and agencies herein contained with respect to the
Collateral are irrevocable and are powers coupled with an interest.
SECTION 14. Severability. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 15. Section and Paragraph Headings. The section and
paragraph headings used in this Agreement are for convenience of reference only
and are not to affect the construction hereof or be taken into consideration in
the interpretation hereof.
SECTION 16. No Waiver; Cumulative Remedies. The Funding Agent
shall not by any act (except pursuant to the execution of a written instrument
pursuant to Section 17 hereof), delay, indulgence, omission or otherwise
21
<PAGE> 22
be deemed to have waived any right or remedy hereunder or to have acquiesced in
any Unmatured Event of Default or Event of Default or in any breach of any of
the terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Funding Agent, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by the Funding Agent of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which the Funding Agent
would otherwise have on any future occasion. The rights and remedies herein
provided are cumulative, may be exercised singly or concurrently and are not
exclusive of any rights or remedies provided by law.
SECTION 17. Waivers and Amendments; Successors and Assigns. None
of the terms or provisions of this Agreement may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
Recco, the Funding Agent and the Surety Provider and with prior written notice
thereof to S&P and Moody's. This Agreement shall be binding upon the successors
and assigns of Recco and shall inure to the benefit of the Funding Agent and its
successors and assigns.
SECTION 18. Integration. This Agreement represents the agreement
of Recco with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Funding Agent relative to
subject matter hereof not expressly set forth or referred to herein or in the
other Operative Documents.
SECTION 19. Counterparts. This Agreement may be executed by one
or more of the parties to this Agreement on any number of separate counterparts,
and all of said counterparts taken together shall be deemed to constitute one
and the same instrument.
SECTION 20. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York.
SECTION 21. Termination and Release.
(1) This Agreement and the security interests created or granted
hereby shall remain in full force and effect until the
indefeasible payment in full in cash of all of the Obligations,
at which time, following the receipt by the Funding Agent of
written notice from the Lenders and the Surety Provider that
such Obligations have been so paid, the
22
<PAGE> 23
security interest created or granted hereby shall terminate and
the Funding Agent shall, at the sole expense of Recco, execute
and deliver such documents and instruments (including without
limitation UCC termination statements) necessary to evidence the
termination of such security interest, as Recco may reasonably
request.
(2) (i) Recco Request for Release. Recco intends from time to time
to sell Purchased Contracts and other related Collateral to (x)
entities which will then privately or publicly sell securities
backed by such Purchased Contracts and Collateral, (y) in whole
loan bulk sales to unaffiliated third parties or (z) in whole
loan bulk sales to Onyx Acceptance Corporation, in each case,
for a cash purchase price of not less than the aggregate
Outstanding Balance of such Purchased Contracts plus accrued and
unpaid interest thereon; provided that, at least once per annum,
Recco shall conduct a sale such that, after giving effect to
such sale, the Outstanding Balances of all Purchased Contracts
owned by Recco is equal to or less than 25% of the Outstanding
Balances of all Purchased Contracts immediately prior to such
sale. Notwithstanding anything to the contrary in Sections 6.4,
6.5, and 6.16 of the Funding Agreement, Recco shall be permitted
to sell Purchased Contracts pursuant to the foregoing provisions
only upon satisfaction of the following conditions precedent:
(1) sales pursuant to clause (x) shall occur no more
frequently than once each calendar quarter;
(2) sales pursuant to clauses (x) and (y) shall not
be to any entity which is a direct competitor of the Surety
Provider, including, without limitation, Ambac Assurance
Corporation, Financial Security Assurance Corporation, Financial
Guaranty Insurance Corporation or any affiliate thereof;
(3) each of the Seller and Recco shall be in
compliance with all of its covenants in the Operative Documents
and no adverse selection procedures shall have been used by
Recco or the Servicer in selecting Purchased Contracts for such
sales; and
(4) The Funding Agent and the Surety Provider shall
have received copies of all documents executed in connection
with such sale.
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<PAGE> 24
The proceeds of all sales by Recco pursuant to clauses (x), (y)
and (z) above shall be applied to prepay the Loan Note and the
Subordinated Note. Upon not less than 5 Business Days' prior
written notice to the Funding Agent and the Surety Provider,
Recco may request that specified Purchased Contracts and other
related Collateral be released in connection with such sales and
the prepayment of the Loan Note as provided in Section 2.4(b) of
the Funding Agreement. In connection with such request, Recco
shall execute and deliver to the Funding Agent and the Surety
Provider a Lien Release Request Certificate in the form attached
hereto as Exhibit A. In selecting the Purchased Contracts
enumerated in its Lien Release Request Certificate delivered to
the Funding Agent and the Surety Provider pursuant hereto, Recco
shall employ selection procedures which are not adverse to the
interests of the Funding Agent, the Lenders or the Surety
Provider. Recco shall deliver to the Funding Agent and the
Surety Provider (i) monthly servicer reports for all Contracts
serviced but not owned by Onyx aggregated by portfolio and owner
and (ii) copies of all material amendments, waivers or
modifications to any documents executed in connection with the
sale of Purchased Contracts by Recco.
(ii) Funding Agent Release. Upon receipt of an amount in
immediately available funds equal to the sum of the principal
amount of such prepayment, all interest accrued and to accrue
thereon and unpaid and all other costs and Obligations of Recco
and the Seller associated with such prepayment and unpaid under
any Operative Document (including, without limitation, amounts
payable pursuant to Section 2.4(b) of the Funding Agreement), to
be paid by Recco from the Collection Account pursuant to Section
4(b) hereof, the Funding Agent shall, with the consent of the
Surety Provider at the sole expense of Recco, execute and
deliver a Funding Agent Lien Release Certificate in the form
attached hereto as Exhibit B which shall evidence the release of
its security interest in Purchased Contracts having an
Outstanding Balance equal to the principal amount of the Loan
Note being prepaid divided by the Net Advance Rate on such day.
(iii) Documents and Filings. In connection with any such release
pursuant to this Section 21, Recco and the Funding Agent shall,
at the sole expense of Recco, execute and deliver any documents
and instruments necessary to evidence the release of the Funding
Agent's security interest in such Purchased Contracts and other
Collateral,
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including without limitation, forms UCC-2 prepared for filing in
all appropriate jurisdictions.
SECTION 22. Funding Agent Direction; Replacement Policy. (a)
Except as otherwise specifically provided otherwise herein and in the other
Operative Documents, the Funding Agent shall obtain the consent of the
Controlling Party when taking action or refraining from taking action in
connection with any amendment, waiver, consent (or consent to departure from)
this Agreement or any of the other Operative Documents.
(b) Recco further agrees that, after the occurrence of a
Replacement Event and upon the request of the Funding Agent (acting at the
direction of the Required APA Banks), Recco will obtain a Replacement Policy
acceptable to the Funding Agent and the Required APA Banks within thirty (30)
days of such request, and Recco shall pay or cause to be paid all amounts due
and payable to the current Surety Provider pursuant to the terms of the
Operative Documents. In furtherance of the foregoing, following the occurrence
of a Replacement Event, the Funding Agent hereby acknowledges and agrees that,
notwithstanding anything to the contrary contained herein or in any other
Operative Document, upon the direction of the Required APA Banks, the Funding
Agent shall release the Note Policy to the Surety Provider, provided that (i) a
Replacement Policy acceptable to (and issued by an entity acceptable to) the
Funding Agent, the Required APA Banks, Moody's and S&P has been previously or
simultaneously delivered to the Funding Agent and (ii) all amounts due and
payable to the current Surety Provider pursuant to the terms of this Agreement
and the other Operative Documents have been paid in full.
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<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed and delivered as of the date first above written.
ONYX ACCEPTANCE RECEIVABLES
CORPORATION
By:
-------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, as Funding
Agent for the benefit of
the Secured Parties
By:
-------------------------------------
Name:
Title:
Accepted and agreed as of the date first above written:
MBIA INSURANCE CORPORATION,
as Surety Provider
By:
-----------------------------------
Name:
Title:
ONYX ACCEPTANCE CORPORATION,
as Servicer
By:
-----------------------------------
Name:
Title:
<PAGE> 27
SCHEDULE 7(d)
Locations of Collateral
The Collateral is located at:
Onyx Acceptance Receivables Corporation
27051 Towne Centre Drive, Suite 210
Foothill Ranch, California 92610
Schick Data Bank
26862 Vista Terrace
Lake Forest, California
<PAGE> 28
EXHIBIT A
LIEN RELEASE REQUEST CERTIFICATE
from Recco to the Funding Agent, the Surety Provider and Seller
pursuant to Section 21 of the Security Agreement
and Section 19 of Subordinated Security Agreement
[ date ]
The Chase Manhattan Bank,
as Funding Agent
450 West 33rd Street, 14th Floor
New York, New York 10001
Attention: Structured Finance Services, PARCO Manager
Onyx Acceptance Corporation
27051 Towne Centre Drive
Foothill Ranch, California 92610
Attention: Don Duffy
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Attention: Insured Portfolio Management, Structured Finance
Re: Onyx Acceptance Receivables Corporation/Commercial Paper Program--
Request for Release of Lien
Ladies and Gentlemen:
Onyx Acceptance Receivables Corporation ("Recco") refers to (i)
the Security Agreement dated as of August 9, 1999 (as amended, supplemented or
otherwise modified, the "Security Agreement"), and (ii) the Subordinated
Security Agreement dated as of August 9, 1999 (as amended, supplemented or
otherwise modified, the "Subordinated Security Agreement"). Terms not otherwise
defined herein are used herein as defined in the Definitions List dated August
9, 1999, which is incorporated herein by reference.
Recco submits this Lien Release Request Certificate pursuant to
Section 21 of the Security Agreement and Section 19 of the Subordinated Security
<PAGE> 29
Agreement and requests that The Chase Manhattan Bank, in its capacity as Funding
Agent for the benefit of the Secured Parties under the Security Agreement, and
Onyx Acceptance Corporation, in its capacity as Seller under the Subordinated
Security Agreement ("Onyx"), each release (and Onyx cause its assignee to
release) all of their liens on and security interests in the assets described on
Schedule 1 attached hereto (and all proceeds thereof, all books, records and
computer records pertaining thereto and all other assets that constitute
Collateral which are specifically related to the assets described in Schedule
1).
ONYX ACCEPTANCE RECEIVABLES
CORPORATION
By:
-------------------------------------
Name:
Title:
<PAGE> 30
EXHIBIT B
FUNDING AGENT LIEN RELEASE CERTIFICATE
pursuant to Section 21 of the Security Agreement
[Date]
Onyx Acceptance Receivables Corporation
27051 Towne Centre Drive
Foothill Ranch, California 92610
Re: Partial Collateral Release
Ladies and Gentlemen:
We hereby refer to the Lien Release Request Certificate
submitted by Onyx Acceptance Receivables Corporation ("Recco") dated
_______________, a copy of which is attached hereto (the "Request Certificate").
Pursuant to the Request Certificate, The Chase Manhattan Bank, acting in its
capacity as the Funding Agent under the Security Agreement, hereby releases its
liens on and security interests in the assets identified in Schedule 1 attached
to the Request Certificate (and all proceeds thereof, all books, records and
computer records pertaining thereto and all other assets that constitute
Collateral which are specifically related to the assets described in that
Schedule 1).
This Lien Release Certificate may be executed in any number of
counterparts.
THE CHASE MANHATTAN BANK, as
Funding Agent for the benefit of
the Secured Parties
By:
-------------------------------------
Name:
Title:
<PAGE> 31
Consented to and agreed
as of the date first above written:
MBIA INSURANCE CORPORATION
By:
----------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.121
SUBORDINATED SECURITY AGREEMENT
SUBORDINATED SECURITY AGREEMENT, dated as of August 9, 1999 (as amended,
supplemented or otherwise modified and in effect, this "Agreement"), between
ONYX ACCEPTANCE RECEIVABLES CORPORATION, a Delaware corporation (together with
its successors and assigns, "Recco") and ONYX ACCEPTANCE CORPORATION, a Delaware
corporation (together with its successors and assigns, the "Seller").
W I T N E S S E T H :
WHEREAS, pursuant to the Sale and Servicing Agreement (as amended, the
"Sale Agreement") dated as of the date hereof between the Seller and Recco, the
Seller from time to time sells to Recco and Recco from time to time purchases
from the Seller certain loans secured by automobiles, vans and light trucks (the
"Contracts");
WHEREAS, a portion of the purchase price for the Contracts is
represented by a subordinated note issued by Recco to the Seller (the
"Subordinated Note");
WHEREAS, Recco has entered into the Security Agreement, dated as of the
date hereof (as amended, the "Security Agreement") with The Chase Manhattan
Bank, as Funding Agent for the benefit of the Secured Parties, pursuant to which
Recco has granted to the Funding Agent a first priority security interest in the
Purchased Contracts and certain other collateral;
WHEREAS, in order to secure the Subordinated Note, Recco has granted to
the Seller a subordinated security interest in the Purchased Contracts and
certain other collateral, subject to the prior rights of the Funding Agent for
the benefit of the Secured Parties; and
WHEREAS, the Seller's security interests in the Purchased Contracts and
certain other collateral granted pursuant to this Agreement is subordinated to
the rights of the Funding Agent for the benefit of the Secured Parties and its
rights to exercise any remedies under this Agreement are limited for so long as
any amounts secured under the Security Agreement are outstanding.
<PAGE> 2
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Defined Terms.
(1) As used in this Agreement or any certificate or other document
made or delivered pursuant hereto, the capitalized terms used
herein and therein shall, unless otherwise defined herein, have
the meanings assigned to them in the Definitions List dated as
of the date hereof that is attached to the Sale Agreement, which
is incorporated herein by reference (the "Definitions List").
(2) As used herein and in any certificate or other document made or
delivered pursuant hereto, accounting terms not defined in the
Definitions List and accounting terms partly defined in the
Definitions List to the extent not defined, shall have the
respective meanings given to them under GAAP.
(3) 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 paragraph references are to this Agreement unless
otherwise specified.
(4) Capitalized terms used herein shall be equally applicable to
both the singular and plural forms of such terms.
(5) The following terms that are defined in the UCC are used herein
as so defined: Chattel Paper, Equipment, General Intangibles,
Instruments and Proceeds.
SECTION 2. Grant of Security Interest. As collateral security for the
prompt and complete payment and performance when due (whether at the stated
maturity or otherwise) of the Subordinated Note and all other obligations of
Recco to the Seller hereunder (collectively, the "Obligations") and subject to
the prior rights of the Funding Agent under the Security Agreement, Recco hereby
assigns, pledges, grants, conveys, transfers, delivers and sets over to the
Seller a security interest in all Recco's right, title and interest in, to and
under the following, whether now owned or
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<PAGE> 3
hereafter acquired, in each case only as related to the Purchased Contracts
(collectively, the "Collateral"). For further clarification, all Collateral as
heretofore described in this Section 2 shall relate to and be in respect of
Purchased Contracts, subject to any and all provisos, as applicable, expressly
included in the definition thereof.
(1) all chattel paper, including, without limitation, the Purchased
Contracts and other contracts related to the Purchased Contracts
(as the same may be amended, modified, supplemented, restated or
replaced from time to time) and amounts paid or payable with
respect thereto;
(2) all Files (including all Dealer Assignments) and Contract Lists,
and all right, title and interest of Recco in and to the
documents, agreements and instruments included in the Files,
including, without limitation, rights of recourse of Recco
against Vehicle Dealers;
(3) all Insurance Policies and all rights of Recco in all Insurance
Policies;
(4) all security interests, Liens, guaranties, mortgages and other
encumbrances in favor of or assigned or transferred to Recco in
and to Purchased Contracts and Vehicles, and all accessions
thereto and replacements thereof, and in any other property in
which a security interest is assigned or transferred to Recco;
(5) all of Recco's Equipment, general ledger sheets, files, records,
books of account, invoices, bills, certificates or documents of
ownership, bills of sale, business papers, correspondence,
tapes, cards, computer tapes and all other data and data storage
systems (whether in the possession of Recco or any other Person)
relating to any of the foregoing;
(6) all deposit accounts, moneys, deposits, funds, accounts and
instruments relating to the foregoing;
(7) the Collection Account (including, without limitation, all funds
at any time on deposit therein and all Permitted Investments in
which such funds may at any time be invested);
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<PAGE> 4
(8) all Operative Documents to which Recco is a party, including,
without limitation, all rights of Recco to amounts due or to
become due under or in connection with such agreements;
(9) any Hedge Agreement; and
(10) to the extent not otherwise included, all Proceeds and products
of any and all of the foregoing.
SECTION 3. Notice to Obligors. Subject to the terms of Section 21 hereof
and the provisions of the other Operative Documents, at any time upon the
request of the Seller, Recco shall notify the Obligors that the Purchased
Contracts have been reassigned to the Seller and that payments in respect
thereof shall be made directly to the Seller. Subject to the terms of Section 21
hereof and the provisions of the other Operative Documents, the Seller may in
its own name or in the name of others communicate with the Obligors to verify
with them to its satisfaction the existence, amount and terms of any Purchased
Contracts.
(1) Analysis of Contracts. Subject to the terms of Section 21 hereof
and the provisions of the other Operative Documents, the Seller
shall have the right to make test verifications of the Purchased
Contracts in any manner and through any medium that it considers
advisable, and Recco shall furnish or cause to be furnished by
the Servicer all such assistance and information as the Seller
may require in connection therewith. In addition, at any time
and from time to time, upon the Seller's request, Recco shall
cause independent public accountants or others satisfactory to
the Seller to furnish to the Seller reports showing
reconciliations, aging and test verifications of, and trial
balances for, the Purchased Contracts.
(2) Proceeds. Subject to the terms of Section 21 hereof and the
provisions of the other Operative Documents, any Proceeds, when
collected by Recco, shall be forthwith turned over to the Seller
by Recco in the exact form received, duly endorsed by Recco to
the Seller, and until so turned over, shall be held by Recco in
trust for the Seller. Such Proceeds shall continue to be
collateral security for all of the Obligations and shall not
constitute payment thereof until applied as set forth in the
Security Agreement. Subject to the terms of Section 21 hereof
and the provisions of the other Operative Documents, upon the
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<PAGE> 5
request of the Seller, Recco shall deliver or cause to be
delivered to the Seller all Files relating to the Purchased
Contracts, including original and other documents evidencing,
and relating to, the transactions which created the Purchased
Contracts, including, without limitation, all original orders,
invoices, receipts and similar documents.
(3) Document Delivery. Subject to the terms of Section 21 hereof (it
being understood that for so long as the Security Agreement is
in effect the provisions of that Agreement shall control), upon
the request of the Seller, Recco shall deliver to the Seller the
original Contract and complete Files relating to each Purchased
Contract. In addition, Recco shall mark the following notation
on the computer tape for such Contract and File: "The Contracts
herein have been pledged to secure the debt of Recco to Onyx
Acceptance Corporation, and its successors and assigns pursuant
to that certain Subordinated Security Agreement dated as of
August 9, 1999 between Onyx Acceptance Corporation and Recco".
SECTION 4. Representations and Warranties. Recco hereby represents and
warrants that:
(1) Title; No Other Liens. Except for the Lien granted to the
Funding Agent pursuant to the Security Agreement and the Lien
granted to the Seller pursuant to this Agreement and the other
Liens permitted pursuant to any of the other Operative
Documents, Recco owns each item of the Collateral free and clear
of any and all Liens or claims of others. No security agreement,
financing statement or other public notice with respect to all
or any part of the Collateral is on file or of record in any
public office, except such as may have been filed in favor of
the Funding Agent pursuant to the Security Agreement and in
favor of the Seller pursuant to this Agreement or as may be
permitted pursuant to any Operative Document.
(2) Perfected Liens. The Liens granted pursuant to this Subordinated
Security Agreement constitute perfected Liens on the Collateral
in favor of the Seller, subject only to the prior Lien of the
Funding Agent, and are enforceable as such against all creditors
of and purchasers from Recco and, in the case of any
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Collateral constituting fixtures, against any owner or purchaser
of the real property where any of the Equipment is located and
any present or future creditor obtaining a Lien on such real
property.
(3) Chief Executive Office. Recco's chief executive office and chief
place of business is located at 27051 Towne Centre Drive, Suite
210, Foothill Ranch, California 92610.
(4) Locations. All Collateral is located at the addresses listed on
Schedule 4(d) hereto.
SECTION 5. Covenants. Subject to the terms of Section 21 hereof, Recco
covenants and agrees with the Seller that until the Obligations are paid in full
and the Sale Agreement is terminated:
(1) Further Documentation. At any time and from time to time, upon
the written request of the Seller, and at the sole expense of
Recco, Recco will promptly and duly execute and deliver such
further instruments and documents and take such further action
as the Seller may request for the purpose of obtaining or
preserving the full benefits of this Agreement and of the rights
and powers herein granted, including, without limitation, the
filing of any financing or continuation statements under the UCC
with respect to the Liens created hereby, including all steps
necessary to maintain perfection of the security interest of
Recco in each Vehicle; provided, however, that Recco shall not
be obligated to take any action which, in the reasonable
judgment of the Funding Agent (acting at the direction of the
Controlling Party), would violate or conflict with the terms of
the Security Agreement or any other Operative Document. Subject
to the terms of Section 21 hereof and the provisions of the
other Operative Documents, Recco also hereby authorizes the
Seller to file any such financing or continuation statement
without the signature of Recco to the extent permitted by
applicable law.
(2) Maintenance of Records. Recco will keep and maintain, or cause
to be maintained by the Servicer, at its cost and expense
satisfactory and complete records of the Collateral, including,
without limitation, a record of all payments received and all
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<PAGE> 7
credits granted with respect to the Purchased Contracts. Recco
will mark or cause the Servicer to mark its books and records
pertaining to the Collateral to evidence this Agreement and the
subordinated security interest granted hereby. With the prior
written consent of the Funding Agent and the Surety Provider, at
any time upon the request of the Seller, Recco shall, during
normal business hours, turn over or cause the Servicer to turn
over any books and records to the Seller or to its designated
representatives.
(3) Compliance with Laws, etc. Recco will comply with all
Requirements of Law applicable to the Collateral or any part
thereof or to the operation of Recco's business; provided,
however, that Recco may contest any Requirement of Law in any
reasonable manner which shall not, in the reasonable opinion of
the Seller, adversely affect the Seller's rights or the priority
of its Liens on the Collateral.
(4) Compliance with Terms etc. Recco will perform and comply with
all its Contractual Obligations relating to the Subordinated
Note.
(5) Limitation on Liens on Collateral. Recco will not create, incur
or permit to exist, will defend the Collateral against, and will
take such other action as is necessary to remove, any Lien or
claim on or to the Collateral, other than the Liens created by
the Security Agreement, the Liens created hereby and other than
as permitted pursuant to the Operative Documents, and will
defend the right, title and interest of the Seller in and to any
of the Collateral against the claims and demands of all Persons
whomsoever.
(6) Limitations on Dispositions of Collateral. Recco will not sell,
transfer, lease or otherwise dispose of any of the Collateral,
or attempt, offer or contract to do so, except as provided for
in this Agreement.
(7) Limitations on Modifications, Waivers, Extensions of Contracts.
Recco will not, and will not permit the Servicer to, (i) amend,
modify, terminate or waive any provision of any Purchased
Contract in any manner which could have an ad-
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<PAGE> 8
verse effect on the value of such Purchased Contract as
Collateral, (ii) fail to exercise promptly and diligently each
and every right which Recco may have under each Purchased
Contract and (iii) act otherwise than in accordance with the
Credit and Collection Policy.
(8) Limitations on Discounts, Compromises, Extensions of Contracts.
Other than pursuant to the Credit and Collection Policy, Recco
will not, and will not permit the Servicer to, grant any
extension of the time of payment of any of the Purchased
Contracts, compromise, compound or settle the same for less than
the full amount thereof, release, wholly or partially, any
Person liable for the payment thereof, or allow any credit or
discount whatsoever thereon.
(9) Maintenance of Equipment. Recco will maintain each item of
Equipment in good operating condition, ordinary wear and tear
and immaterial impairments of value and damage by the elements
excepted, and will provide all maintenance, service and repairs
necessary for such purpose.
(10) Changes in Locations, Name, etc. Recco will not, without
providing 30 days prior written notice to the Seller, and
without filing any UCC financing statements necessary or
desirable (in the opinion of the Seller) to maintain the
perfection and priority of the Seller's security interest in the
Collateral, as provided for herein (i) change the location of
its chief executive office/chief place of business from that
specified in Section 4(c) or remove its books and records from
such location, (ii) permit any Equipment that it may acquire to
be kept at a location other than that specified in Section 4(d),
or (iii) change its name, identity or corporate structure to
such an extent that any financing statement filed by the Seller
in connection with this Agreement would become misleading.
SECTION 6. Seller's Appointment as Attorney-in-Fact.
(1) Powers. Subject to the terms of Section 21 hereof and the
provisions of the other Operative Documents, Recco hereby
irrevocably constitutes and appoints the Seller and any officer
or agent thereof, with full power of substitution, as its true
and
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lawful attorney-in-fact with full irrevocable power and
authority in the place and stead of Recco and in the name of
Recco or in its own name, from time to time in the Seller's
discretion, for the purpose of carrying out the terms of this
Agreement, to take any and all lawful and appropriate action and
to execute any and all documents and instruments which may be
necessary or desirable to accomplish the purposes of this
Agreement, and, without limiting the generality of the
foregoing, Recco hereby gives the Seller the power and right, on
behalf of Recco, without notice to or assent by Recco, to do the
following:
(1) upon the occurrence and during the continuance
of any Unmatured Event of Default or Event of Default, in the
name of Recco or its own name, or otherwise, to take possession
of and endorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due
under any Instrument, General Intangible or Purchased Contract
and to file any claim or to take any other action or proceeding
in any court of law or equity or otherwise deemed appropriate by
the Seller for the purpose of collecting any and all such moneys
due under any Instrument, General Intangible or Purchased
Contract whenever payable;
(2) to pay or discharge taxes and Liens levied or
placed on or threatened against the Collateral; and
(3) upon the occurrence and during the continuance
of any Unmatured Event of Default or Event of Default, (A) to
direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to
become due thereunder directly to the Seller or as the Seller
shall direct; (B) to ask or demand for, collect, receive payment
of and receipt for, any and all moneys, claims and other amounts
due or to become due at any time in respect of or arising out of
any Collateral; (C) to sign and endorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts,
drafts against debtors, assignments, verifications, notices and
other documents in connection with any of the Collateral; (D) to
commence and prosecute any suits, actions or proceedings at law
or in equity in any court of
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competent jurisdiction to collect the Collateral or any thereof
and to enforce any other right in respect of any Collateral; (E)
to defend any suit, action or proceeding brought against Recco
with respect to any Collateral; (F) to settle, compromise or
adjust any suit, action or proceeding described in clause (E)
above and, in connection therewith, to give such discharges or
releases as the Seller may deem appropriate; and (G) generally,
to sell, transfer, pledge and make any agreement with respect to
or otherwise deal with any of the Collateral pursuant to Section
8 hereof as fully and completely as though the Seller were the
absolute owner thereof for all purposes, and to do, at the
Seller's option and Recco's expense, at any time, or from time
to time, all lawful acts and things which the Seller deems
necessary to protect, preserve or realize upon the Collateral
and the Seller's Liens thereon and to effect the intent of this
Agreement, all as fully and effectively as Recco might do.
Recco hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof.
(2) Other Powers. Subject to the terms of Section 21 hereof and the
provisions of the other Operative Documents, Recco also
authorizes the Seller, at any time and from time to time, to
execute, in connection with the sale provided for in Section 8
hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
(3) No Duty on Seller's Part. The powers conferred on the Seller
hereunder are solely to protect the Seller's interests in the
Collateral and shall not impose any duty upon it to exercise any
such powers. The Seller shall be accountable only for amounts
that it actually receives as a result of the exercise of such
powers, and neither it nor any of its officers, directors,
employees or agents shall be responsible to Recco for any act or
failure to act hereunder, except for its own gross negligence or
willful misconduct.
SECTION 7. Performance by Seller of Recco's Obligations. Subject to the
terms of Section 19 hereof and the provisions of the other Operative Documents,
if Recco fails to perform or comply with any of its agreements contained herein,
the Seller, as provided for by the terms of this Agreement, shall itself perform
or comply, or otherwise cause performance or compliance, with such agreement.
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SECTION 8. Remedies. Subject to the terms of Section 21 hereof and the
provisions of the other Operative Documents, if an Event of Default shall occur
and be continuing, the Seller may exercise in addition to all other rights and
remedies granted to it in this Agreement and in any other instrument or
agreement securing, evidencing or relating to the Obligations, all rights and
remedies of a secured party under the UCC. Without limiting the generality of
the foregoing, the Seller, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except the notice
specified below of time and place of public or private sale) to or upon Recco or
any other Person (all and each of which demands, defenses, advertisements and
notices are hereby waived), may in such circumstances forthwith collect,
receive, appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell, lease, assign, give an option or options to purchase,
or otherwise dispose of and deliver said Collateral or any part thereof (or
contract to do any of the foregoing), in one or more parcels at public or
private sale or sales, at any exchange, broker's board or office of the Seller
or elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The Seller shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon any such private
sale or sales, to purchase the whole or any part of said Collateral so sold,
free of any right or equity of redemption in Recco, which right or equity is
hereby waived or released. Recco further agrees, at the Seller's request, to
assemble the Collateral and the Files and make them available to the Seller at
places which the Seller shall select, whether at Recco's premises or elsewhere.
The Seller shall apply the net proceeds of any such collection, recovery,
receipt, appropriation, realization or sale, after deducting all costs and
expenses of every kind incurred therein or incidental to the care or safekeeping
of any of the Collateral or in any way relating to the Collateral or the rights
of the Seller hereunder, including, without limitation, attorneys' fees and
disbursements, to the payment in whole or in part of the Obligations, in such
order as the Seller may elect, and only after such application and after the
payment by the Seller of any other amount required by any provision of law,
including, without limitation, Section 9-504(1)(c) of the UCC, need the Seller
account for the surplus, if any, to Recco. To the extent permitted by applicable
law, Recco waives all claims, damages, and demands against the Seller arising
out of the repossession, retention or sale of the Collateral. If any notice of a
proposed sale or disposition of Collateral shall be required by law, such notice
shall be deemed reasonably and properly given if given (effective upon dispatch)
in any manner provided in the Sale Agreement at least 10 days before such sale
or disposition. Recco shall remain liable for any deficiency if the proceeds of
any sale or other disposition of the Collateral are
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insufficient to pay the Obligations and the expenses, including the fees and
disbursements of any attorneys employed by the Seller, to collect such
deficiency.
SECTION 9. Limitation on Seller's Duties in Respect of Collateral. The
Seller's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the
UCC, shall be to deal with it in the same manner as the Seller deals with
similar property for its own account. Neither the Seller nor any of its
directors, officers, employees or agents shall be liable for failure to demand,
collect or realize upon all or any part of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of Recco or otherwise.
SECTION 10. Powers Coupled with an Interest. All powers of attorney,
authorizations and agencies herein contained with respect to the Collateral are
irrevocable and are powers coupled with an interest.
SECTION 11. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 12. Assignment. Recco does hereby acknowledge that the Seller
may pledge or otherwise transfer the Subordinated Note and all security
therefore granted hereunder with the prior written consent of the Funding Agent
(acting at the direction of the Controlling Party). Recco hereby waives its
rights under Section 9-112 of the UCC, including without limitation all rights
under Sections 9-502(2), 9-504(1), 9-208, 9-505, 9-506, 9-507(1) and 9-208(2) of
the UCC otherwise granted to it pursuant to Section 9-112 of the UCC.
SECTION 13. Section and Paragraph Headings. The section and paragraph
headings used in this Agreement are for convenience of reference only and are
not to affect the construction hereof or be taken into consideration in the
interpretation hereof.
SECTION 14. No Waiver; Cumulative Remedies. The Seller shall not by any
act (except pursuant to the execution of a written instrument pursuant to
Section 15 hereof), delay, indulge, omit or otherwise be deemed to have waived
any right or remedy hereunder or in any breach of any of the terms and
conditions hereof. No failure to exercise, nor any delay in exercising, on the
part of
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the Seller, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
or any other right, power or privilege. A waiver by the Seller of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Seller would otherwise have on any future occasion.
The rights and remedies herein provided are cumulative, may be exercised singly
or concurrently and are not exclusive of any rights or remedies provided by law.
SECTION 15. Waivers and Amendments; Successors and Assigns. None of the
terms or provisions of this Agreement may be waived, amended, supplemented or
otherwise modified except by a written instrument executed by Recco and the
Seller with the prior written consent of the Funding Agent and the Controlling
Party; provided, however, that for so long as the Security Agreement shall be in
effect, if the Funding Agent shall have consented to a waiver, amendment,
supplement or modification under the Security Agreement, the consent of the
Seller shall be deemed automatically given under the comparable provision of
this Agreement. No amendment shall be effective without prior written notice
thereof to S&P and Moody's. This Agreement shall be binding upon the successors
and assigns of Recco and shall inure to the benefit of the Seller and its
successors and assigns.
SECTION 16. Integration. This Agreement represents the agreement of
Recco with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Seller relative to subject
matter hereof not expressly set forth or referred to herein or in the other
Operative Documents.
SECTION 17. Counterparts. This Agreement may be executed by one or more
of the parties to this Agreement on any number of separate counterparts, and all
of said counterparts taken together shall be deemed to constitute one and the
same instrument.
SECTION 18. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
SECTION 19. Termination and Release.
(1) This Agreement and the security interests created or granted
hereby shall remain in full force and effect until the
indefeasible payment in full in cash of the Obligations and the
Subordi-
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nated Note, at which time, following the receipt by the Seller
of (i) written notice from the Funding Agent and the Surety
Provider that the Obligations have been so paid, and (ii)
payment in full of the Subordinated Note, the security interest
created or granted hereby shall terminate and the Seller shall,
execute and deliver such documents and instruments (including
without limitation UCC termination statements) necessary to
evidence the termination of such security interest, as Recco may
reasonably request.
(2) (i) Recco Request for Release. Recco intends from time to time
to sell Purchased Contracts and other related Collateral to (x)
entities which will then privately or publicly sell securities
backed by such Purchased Contracts and Collateral, (y) in whole
loan bulk sales to unaffiliated third parties or (z) in whole
loan bulk sales to Onyx Acceptance Corporation, in each case,
for a cash purchase price of not less than the aggregate
Outstanding Balance of such Purchased Contracts plus accrued and
unpaid interest thereon. The proceeds of all sales by Recco
pursuant to clauses (x), (y) and (z) above shall be applied to
prepay the Loan Note and the Subordinated Note. Upon not less
than 5 Business Days' prior written notice to the Seller, Recco
may request that specified Purchased Contracts and other related
Collateral be released in connection with such sales and the
prepayment. In connection with such request, Recco shall execute
and deliver to the Seller a Lien Release Request Certificate in
the form attached hereto as Exhibit A. In selecting the
Purchased Contracts enumerated in its Lien Release Request
Certificate delivered to the Seller pursuant hereto, Recco shall
employ selection procedures which are not adverse to the
interests of the Seller.
(1) Seller Release. Upon the release by the Funding
Agent of its interest in whole or in part in the Purchased
Contracts pursuant to Section 21(b) of the Security Agreement,
the Seller shall, at the sole expense of Recco, execute and
deliver a Seller Lien Release Certificate in the form attached
hereto as Exhibit B which shall evidence the release of its
security interest in the Purchased Contracts released by the
Funding Agent under the Security Agreement.
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(2) Documents and Filings. In connection with any
such release pursuant to this Section 19, Recco and the Seller,
shall at the sole expense of Recco, execute and deliver any
documents and instruments necessary to evidence the release of
the Seller's security interest in such Purchased Contracts and
other Collateral, including without limitation, forms UCC-2
prepared for filing in all appropriate jurisdictions.
SECTION 20. Conflict. In the event of any conflict between the terms of
this Agreement, on the one hand, and the terms of the Subordinated Note, or any
other Operative Document, on the other hand, the terms of the Subordinated Note
or such other Operative Document, as the case may be, shall prevail.
SECTION 21. Standstill on Exercise of Rights. The Seller and Recco agree
that neither the Seller nor any permitted assignee of the Seller may exercise or
take any action to enforce any of the rights granted by Recco to the Seller in
this Agreement until such time as all of the Obligations (as defined in the
Definitions List) of Recco to the Lenders, the Funding Agent and the Surety
Provider under the Operative Documents have been indefeasibly paid in full in
cash.
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IN WITNESS WHEREOF, the parties hereto have caused this Subordinated
Security Agreement to be duly executed and delivered as of the date first above
written.
ONYX ACCEPTANCE RECEIVABLES
CORPORATION
By:
-------------------------------------
Name:
Title:
ONYX ACCEPTANCE CORPORATION
By:
-------------------------------------
Name:
Title:
Acknowledged and agreed as
of the date first above written:
THE CHASE MANHATTAN BANK,
as Funding Agent
By:
----------------------------------
Name:
Title:
<PAGE> 17
SCHEDULE 4(d)
Locations of Collateral
The Collateral is located at:
Onyx Acceptance Receivables Corporation
27051 Towne Centre Drive, Suite 210
Foothill Ranch, California 92610
Schick Data Bank
26862 Vista Terrace
Lake Forest, California
<PAGE> 18
EXHIBIT A
LIEN RELEASE REQUEST CERTIFICATE
from Recco to the Funding Agent and Seller
pursuant to Section 21 of the Security Agreement
and Section 19 of Subordinated Security Agreement
[ date ]
The Chase Manhattan Bank,
as Funding Agent
450 West 33rd Street, 14th Floor
New York, New York 10001
Attention: Structured Finance Services, PARCO Manager
Onyx Acceptance Corporation
27051 Towne Centre Drive, Suite 210
Foothill Ranch, California 92610
Attention: Don P. Duffy
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Attention: Insured Portfolio Management
Structured Finance
Re: Onyx Acceptance Receivables Corporation/Commercial Paper Program--
Request for Release of Lien
Ladies and Gentlemen:
Onyx Acceptance Receivables Corporation ("Recco") refers to (i) the
Security Agreement dated as of August 9, 1999 (as amended, supplemented or
otherwise modified, the "Security Agreement"), and (ii) the Subordinated
Security Agreement dated as of August 9, 1999 (as amended, supplemented or
otherwise modified, the "Subordinated Security Agreement"). Terms not otherwise
defined herein are used herein as defined in the Definitions List dated August
9, 1999, which is incorporated herein by reference.
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Recco submits this Lien Release Request Certificate pursuant to Section
21 of the Security Agreement and Section 19 of the Subordinated Security
Agreement and requests that The Chase Manhattan Bank, in its capacity as Funding
Agent for the benefit of the Secured Parties under the Security Agreement, and
Onyx Acceptance Corporation, in its capacity as Seller under the Subordinated
Security Agreement ("Onyx"), each release (and Onyx cause its assignee to
release) all of their liens on and security interests in the assets described on
Schedule 1 attached hereto (and all proceeds thereof, all books, records and
computer records pertaining thereto and all other assets that constitute
Collateral which are specifically related to the assets described in Schedule
1).
ONYX ACCEPTANCE RECEIVABLES
CORPORATION
By:
-------------------------------------
Name:
Title:
<PAGE> 20
EXHIBIT B
SELLER LIEN RELEASE CERTIFICATE
pursuant to Section 19 of Subordinated Security Agreement
[Date]
Onyx Acceptance Receivables Corporation
27051 Towne Centre Drive, Suite 210
Foothill Ranch, California 92610
Re: Partial Collateral Release
Ladies and Gentlemen:
We hereby refer to the Lien Release Request Certificate
submitted by Onyx Acceptance Receivables Corporation ("Recco") dated ________, a
copy of which is attached hereto (the "Request Certificate"). Pursuant to the
Request Certificate, Onyx Acceptance Corporation, acting in its capacity as
Seller under the Subordinated Security Agreement, hereby releases (and
represents and warrants that it has caused its assignee to so release) its liens
on and security interests in the assets identified in Schedule 1 attached to the
Request Certificate (and all proceeds thereof, all books, records and computer
records pertaining thereto and all other assets that constitute Collateral which
are specifically related to the assets described in that Schedule 1).
This Lien Release Certificate may be executed in any number of
counterparts.
ONYX ACCEPTANCE CORPORATION,
as Seller
By:
-------------------------------------
Name:
Title:
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EXHIBIT 10.122
================================================================================
ASSET PURCHASE AGREEMENT
by and among
PARK AVENUE RECEIVABLES CORPORATION,
and
THE CHASE MANHATTAN BANK,
as Funding Agent,
and
THE SEVERAL FINANCIAL INSTITUTIONS
PARTY HERETO FROM TIME TO TIME,
as APA Banks
Dated as of August 9, 1999
(Onyx Acceptance Receivables Corporation)
================================================================================
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS
<TABLE>
<S> <C> <C>
SECTION 1.1. Incorporation by Reference........................................1
SECTION 1.2. Other Defined Terms...............................................1
ARTICLE II PURCHASE COMMITMENT
SECTION 2.1. Liquidity Purchases ..............................................8
SECTION 2.2. Several Commitments of the APA Banks..............................9
SECTION 2.3. Nonrecourse Nature of Transactions...............................10
SECTION 2.4. Payments; Indemnity..............................................10
SECTION 2.5. Reduction of Commitment..........................................11
SECTION 2.6. Issuance of Commercial Paper.....................................11
ARTICLE III REPRESENTATIONS AND WARRANTIES
SECTION 3.1. PARCO Disclaimer of Representations and Warranties...............13
SECTION 3.2. Representations and Warranties of the APA Bank...................13
ARTICLE IV THE FUNDING AGENT
SECTION 4.1. Appointment......................................................15
SECTION 4.2. Delegation of Duties.............................................15
SECTION 4.3. Exculpatory Provisions...........................................15
SECTION 4.4. Reliance by Funding Agent........................................16
SECTION 4.5. Notice of Events of Default and other Events.....................16
SECTION 4.6. Non-Reliance on Funding Agent....................................17
SECTION 4.7. Indemnification..................................................17
SECTION 4.8. Funding Agent in its Individual Capacity.........................18
SECTION 4.9. Successor Funding Agent..........................................18
SECTION 4.10. Chase Conflict Waiver............................................19
ARTICLE V MISCELLANEOUS
SECTION 5.1. Waivers; Amendments, etc. .......................................20
SECTION 5.2. Notices .........................................................20
SECTION 5.3. Governing Law; Submission to Jurisdiction........................21
SECTION 5.4. Severability; Counterparts; Waiver of Setoff.....................21
SECTION 5.5. Successors and Assigns; Participations; Assignments..............21
</TABLE>
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<TABLE>
<S> <C> <C>
SECTION 5.6. Effectiveness of this Agreement..................................24
SECTION 5.7. No Petition......................................................24
SECTION 5.8. Waiver of Trial by Jury..........................................24
SECTION 5.9. Limited Recourse.................................................24
SECTION 5.10. Liability of Funding Agent.......................................25
ANNEXES AND EXHIBITS
ANNEX I List of Commitments
EXHIBIT A Form of Transfer Supplement
EXHIBIT B Form of Opinion
EXHIBIT C Notice Address
</TABLE>
ii
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ASSET PURCHASE AGREEMENT
(Onyx Acceptance Receivables Corporation)
THIS ASSET PURCHASE AGREEMENT, dated as of August 9, 1999, is by and
among PARK AVENUE RECEIVABLES CORPORATION, a Delaware corporation (together with
its successors and assigns, "PARCO"), THE CHASE MANHATTAN BANK, a New York
banking corporation, individually as an APA Bank hereunder and as Funding Agent,
and THE SEVERAL FINANCIAL INSTITUTIONS PARTY HERETO FROM TIME TO TIME with
respect to the transactions contemplated by that certain Funding Agreement,
dated as of August 9, 1999 (as amended, supplemented or otherwise modified and
in effect from time to time, the "Funding Agreement"), by and among PARCO, the
Funding Agent, ONYX ACCEPTANCE RECEIVABLES CORPORATION, a Delaware corporation,
as borrower (together with its successors and assigns in such capacity, the
"Borrower").
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION I.1. Incorporation by Reference. Capitalized terms used herein
and not otherwise defined herein shall have the meanings attributed to such
terms in, or incorporated by reference into, the Definitions List dated August
9, 1999 (the "Definitions List") and incorporated by reference into the Funding
Agreement.
SECTION I.2. Other Defined Terms. As used in this Agreement, the
following terms have the following meanings:
"Adjusted Liquidity Price" shall mean, in determining the Purchase Price
of the PARCO Interest on any Transfer Date:
OC + NDR
where:
OC = the sum of all amounts (including Collections received
by a Transaction Party) which are due and owing to
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PARCO under the Operative Documents which have not yet
been remitted to PARCO.
NDR = the aggregate Outstanding Balance of all Purchased
Contracts minus the aggregate Outstanding Balance of all
Defaulted Contracts (net of Recoveries).
Each of the foregoing shall be determined from the most recent Monthly
Report delivered to the Funding Agent.
"Affected APA Bank" shall have the meaning specified in Section 5.5(c).
"Aggregate Commitment" shall mean the sum of the Commitments set forth
on Annex I hereto (which amount shall, at all times, be equal to the "Aggregate
Commitment" as defined in the Definitions List.
"Agreement" shall mean this Asset Purchase Agreement, as amended,
supplemented or otherwise modified and in effect from time to time in accordance
with the terms hereof.
"APA Banks" shall mean the Persons listed on Annex I hereto (including,
without limitation, Chase), and the Persons which from time to time may become a
party hereto in accordance with Section 5.5(c).
"Article" shall mean a numbered article of this Agreement, unless
otherwise specified.
"Borrower" shall have the meaning specified in the recitals hereto.
"Business Day" shall have the meaning specified in the Definitions List.
"Chase" shall mean The Chase Manhattan Bank, in its individual capacity,
and its successors.
"Chase Roles" shall have the meaning specified in Section 4.10.
"Collections" shall have the meaning specified in the Definitions List.
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"Commercial Paper" shall have the meaning specified in the Definitions
List.
"Commitment" shall mean, with respect to any APA Bank, the amount set
forth on Annex I hereto opposite such APA Bank's name, or in its Transfer
Supplement, as the same may be reduced from time to time in accordance with
Section 2.5 or Section 5.5(c).
"Commitment Expiry Date" shall have the meaning specified in the
Definitions List.
"Defaulted Contracts" shall have the meaning specified in the
Definitions List.
"Defaulting APA Bank" shall have the meaning specified in Section
2.2(b).
"Discount" shall mean the interest or discount component of Commercial
Paper, as applicable.
"Event of Default" shall have the meaning specified in the Definitions
List.
"Federal Funds Rate" shall mean, for any day, an interest rate per annum
equal to (a) the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or (b) if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 11:00 A.M. (New
York time) on such day on such transactions received by the Funding Agent from
three (3) federal funds brokers of recognized standing selected by the Funding
Agent in its sole discretion.
"Funding Account" shall have the meaning specified in Section 2.4(a).
"Funding Agent" shall mean Chase, in its capacity as Funding Agent for
the benefit of the Secured Parties under the Operative Documents, for the
benefit of the APA Banks under this Agreement, and for the benefit of PARCO
pursuant to
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Section 2.4(a) of this Agreement, and not in its individual capacity or as an
APA Bank.
"Funding Agreement" shall have the meaning specified in the recitals
hereto.
"Funding Balance" shall mean, with respect to any APA Bank at any time
of determination thereof, an amount equal to such APA Bank's Pro Rata Share of
all amounts due and owing to PARCO in respect of the PARCO Interest under the
Operative Documents as at such date.
"Manager" shall mean Global Securitization Services, LLC, a Delaware
limited liability company, and its permitted successors and assigns as PARCO
manager.
"Non-Defaulting APA Bank" shall have the meaning specified in Section
2.2(b).
"Operative Documents" shall have the meaning specified in the
Definitions List.
"Outstanding Balance" shall have the meaning specified in the
Definitions List.
"Outstanding Principal Amount" shall have the meaning specified in the
Definitions List.
"PARCO" shall have the meaning specified in the recitals hereto.
"PARCO Administrative Agent" shall mean Chase, as administrative agent
on behalf of PARCO, and its successors and assigns in such capacity.
"PARCO Insolvency Event" shall mean the occurrence of any one or more of
the following: (a) any proceeding shall have been instituted by PARCO seeking to
adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition of it
or its debts under any law relating to bankruptcy, insolvency or reorganization
or relief of debtors, or seeking the entry of any order for relief or the
appointment of a receiver, trustee or other similar official for it or any
substantial part of its property, or (b) any
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proceeding of the type described in the foregoing clause (a) shall be instituted
against PARCO and shall have remained undismissed for a period of sixty (60)
consecutive days, or an order granting relief requested in any such proceeding
shall be entered.
"PARCO Interest" shall mean, on any day, the beneficial interest of
PARCO in the Loans and the Operative Documents.
"PARCO Residual Amount" shall have the meaning specified in Section
2.4(d) hereof.
"PARCO Wind-Down Event" shall have the meaning specified in the
Definitions List.
"Participant" shall have the meaning specified in Section 5.5(b).
"Person" shall have the meaning specified in the Funding Agreement.
"Pro Rata Share" shall mean, on any date of determination, with respect
to any APA Bank, the ratio (expressed as a percentage) of such APA Bank's
Commitment to the Aggregate Commitment at such time.
"Purchase" shall mean any assignment by PARCO to the APA Banks of the
PARCO Interest pursuant to Section 2.1.
"Purchased Contracts" shall have the meaning specified in the
Definitions List.
"Purchase Date" shall mean the date specified by PARCO in a Sale Notice
as being the effective date of PARCO's assignment to the APA Banks of the PARCO
Interest.
"Purchase Price" shall mean, at any Purchase Date, an amount equal to
either (a) if the ratings assigned by each Rating Agency to the claims paying
ability of the Surety Provider is investment-grade or above, the Outstanding
Principal Amount or (b) if the ratings assigned by each Rating Agency are not
investment-grade, the Adjusted Liquidity Price, as clauses (a) and (b) shall be
increased by the sum of (i) all accrued and unpaid Discount on all outstanding
Tranches of Commercial Paper issued to fund the Outstanding Principal Amount
from the issuance date(s) thereof to the Purchase Date plus (ii) the aggregate
Discount to accrue on all
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outstanding Tranches of Commercial Paper issued to fund the Outstanding
Principal Amount from and including the Purchase Date to and excluding the
maturity date of each such Tranche.
"Purchase Price Deficit" shall have the meaning specified in Section
2.2(b).
"Purchaser(s)" shall have the meaning specified in Section 5.5(c).
"Rating Agency" shall mean Moody's, S&P or any other nationally
recognized statistical rating organization from which a rating for the
Commercial Paper was requested by PARCO and is currently in effect.
"Rating Confirmation" shall mean, with respect to any subject amendment,
modification, waiver or other action to be taken pursuant to the terms of this
Agreement, a confirmation by each of the Rating Agencies that such proposed
amendment, modification, waiver or action shall not result in a downgrade or
withdrawal of each Rating Agency's then current rating of the Commercial Paper
or any other debt securities, rated at the request of PARCO, by each such Rating
Agency.
"Reduction Percentage" shall mean, with respect to any Purchase for
which the Adjusted Liquidity Price is included in the calculation of the
Purchase Price therefor, the percentage equivalent of a fraction, the numerator
of which is the PARCO Residual Amount for such Purchase and the denominator of
which is the sum of (i) the Adjusted Liquidity Price and (ii) the PARCO Residual
Amount.
"Sale Notice" shall mean an irrevocable written notice given by an
authorized signer or authorized officer of PARCO (or on behalf of PARCO by
Chase, in its capacity as PARCO's administrative agent) to the Funding Agent
committing to sell, assign and transfer to the APA Banks, the PARCO Interest,
which notice shall designate (a) the applicable Purchase Date, (b) the PARCO
Interest and the Outstanding Principal Amount, (c) the Purchase Price (including
a calculation of the Purchase Price), (d) that no PARCO Insolvency Event has
occurred and (f) wire transfer instructions specifying the account(s) into which
the proceeds of the Purchase Price shall be deposited.
"Section" shall mean a numbered section of this Agreement unless
otherwise specified.
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"Seller" shall mean Onyx Acceptance Corporation, a Delaware corporation,
and its permitted successors and assigns in such capacity.
"Servicer" shall mean Onyx Acceptance Corporation, a Delaware
corporation, and its permitted successors and assigns in such capacity.
"S&P" shall mean Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., and its successors and assigns.
"Surety Provider" shall mean MBIA Insurance Corporation, a New York
stock insurance company, and its permitted successors and assigns.
"Transaction Party" shall mean each of the Borrower, the Servicer, the
Seller, the Surety Provider and any Obligor.
"Transfer Supplement" shall have the meaning specified in Section
5.5(c).
"Unmatured Event of Default" shall have the meaning specified in the
Definitions List.
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ARTICLE II
PURCHASE COMMITMENT
SECTION II.1. Liquidity Purchases.
(a) Sales by PARCO. From time to time prior to the Commitment Expiry
Date, PARCO shall, following a PARCO Wind-Down Event, be obligated to deliver a
Sale Notice to the Funding Agent. Each Sale Notice shall be delivered by PARCO
to the Funding Agent prior to 12:30 P.M. (New York time) on the Purchase Date
and shall constitute an irrevocable offer by PARCO to sell all of the PARCO
Interest at the Purchase Price. Each Sale Notice shall be deemed to be a
representation and warranty by PARCO that no PARCO Insolvency Event shall have
occurred and be continuing. Each APA Bank hereby agrees to purchase from PARCO
such APA Bank's Pro Rata Share of the PARCO Interest for a purchase price equal
to such APA Bank's Pro Rata Share of the Purchase Price on the Purchase Date
(which date, subject to Section 2.1(b) below, may be the same as the date of the
Sale Notice). Notwithstanding anything to the contrary set forth in this
Agreement, no APA Bank shall have any obligation hereunder to purchase the PARCO
Interest or any portion thereof from PARCO if, on such Purchase Date, any PARCO
Insolvency Event shall have occurred and be continuing. The Funding Agent shall
promptly advise each APA Bank (by telecopy or by telephone call promptly
confirmed in writing by telecopy) of the receipt and content of the Sale Notice
and shall promptly advise PARCO of each APA Bank's Pro Rata Share of the
Purchase Price thereunder. The Purchase Price shall be deposited in immediately
available funds into the account(s) of PARCO specified in the Sale Notice.
Promptly following the occurrence of a PARCO Wind-Down Event, the
Funding Agent shall notify the Surety Provider.
(b) Timing of Sale Notice and Purchase Date. If, at or prior to
12:30 P.M. (New York time) on any Business Day, PARCO delivers the Sale Notice
to the Funding Agent specifying that the Purchase Date shall be the same date as
the date of the Sale Notice, the Funding Agent shall, by no later than 1:00 P.M.
(New York time), notify each APA Bank of such Sale of Notice. Each APA Bank
shall make a purchase of the PARCO Interest by advancing immediately available
funds on such date to PARCO's account at the principal office of the Funding
Agent no later than 2:00 P.M. (New York time). Notwithstanding the fact that the
Purchase Date may occur on a date which is later than the date on which the Sale
Notice is delivered to the Funding Agent, the several obligations of each APA
Bank to accept such transfer and to make payment of the amounts required to be
paid by it pursuant
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to Section 2.2 shall arise immediately upon receipt by the Funding Agent of the
Sale Notice. Regardless of when the Sale Notice is received, any APA Bank may
designate any one or more of its domestic or foreign branches, offices or
affiliates through which it will fund its Pro Rata Share of the Purchase Price
for a Purchase, and the term "APA Bank" shall include any such branch, office or
affiliate for such purpose.
SECTION II.2. Several Commitments of the APA Banks. (a) Each APA Bank
hereby absolutely and unconditionally severally commits (except as provided in
Section 2.1(a)) to PARCO and to the Funding Agent to provide the Funding Agent,
on the Purchase Date (if notice has been given in accordance with Section
2.1(b)) at the principal office of the Funding Agent in The City of New York for
delivery to PARCO, with immediately available funds in an amount equal to such
APA Bank's Pro Rata Share of the Purchase Price, whereupon such APA Bank shall
become an assignee of PARCO under the Funding Agreement and the other Operative
Documents with an undivided interest in the Transferred Assets equal to such APA
Bank's Pro Rata Share of the PARCO Interest. The APA Banks' several obligations
under this Section 2.2(a) to provide the Funding Agent with funds shall
terminate on the Commitment Expiry Date. Notwithstanding anything contained in
this Section 2.2(a) or elsewhere in this Agreement to the contrary, no APA Bank
shall be obligated to provide the Funding Agent with aggregate funds in
connection with a Purchase in an amount that would exceed such APA Bank's unused
Commitment then in effect. The failure of any APA Bank to make its Pro Rata
Share of the Purchase Price available to the Funding Agent shall not relieve any
other APA Bank of its obligations hereunder.
(b) Defaulting APA Banks. If, by 2:00 P.M. (New York time), one or
more APA Banks (each, a "Defaulting APA Bank", and each APA Bank other than the
Defaulting APA Bank being referred to as a "Non-Defaulting APA Bank") fails to
make its Pro Rata Share of the Purchase Price available to the Funding Agent
pursuant to Section 2.1(a) (the aggregate amount not so made available to the
Funding Agent being herein called the "Purchase Price Deficit"), then the
Funding Agent shall, by no later than 2:30 P.M. (New York time), instruct each
Non-Defaulting APA Bank to pay, by no later than 3:00 P.M. (New York time), in
immediately available funds, to the account designated by the Funding Agent, an
amount equal to the lesser of (x) such Non-Defaulting APA Bank's proportionate
share (based upon the relative Commitments of the Non-Defaulting APA Banks) of
the Purchase Price Deficit and (y) its unused Commitment. A Defaulting APA Bank
shall forthwith, upon demand, pay to the Funding Agent for the ratable benefit
of the Non-Defaulting APA Banks all amounts paid by each Non-Defaulting APA Bank
on behalf of such Defaulting APA Bank, together with interest thereon, for each
day from the date a
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payment was made by a Non-Defaulting APA Bank until the date such Non-Defaulting
APA Bank has been paid such amounts in full, at a rate per annum equal to the
sum of the Federal Funds Rate plus 2%. In addition, without prejudice to any
other rights that PARCO may have under applicable law, each Defaulting APA Bank
shall pay to PARCO, forthwith upon demand, the difference between the Defaulting
APA Bank's unpaid Pro Rata Share of the Purchase Price and the amount paid with
respect thereto by the Non-Defaulting APA Banks, together with interest thereon,
for each day from the date of the Funding Agent's request for such Defaulting
APA Bank's Pro Rata Share of the Purchase Price pursuant to Section 2.1(b) until
the date the requisite amount is paid to PARCO in full, at a rate per annum
equal to the sum of the Federal Funds Rate plus 2%.
SECTION II.3. Nonrecourse Nature of Transactions. Each of the Funding
Agent and the APA Banks hereby agrees that all Purchases shall be without
recourse of any kind to PARCO or the Funding Agent, except as expressly provided
in Sections 4.3 and 4.7 with respect to the Funding Agent.
SECTION II.4. Payments; Indemnity.
(a) Payments Generally. On or prior to the Settlement Date, the
Funding Agent shall establish a demand deposit account with Chase for the
benefit of PARCO and the APA Banks (the "Funding Account"), into which all
payments received in respect of the PARCO Interest shall be deposited. The
Funding Agent, on behalf of PARCO and the APA Banks, shall have the sole right
of withdrawal from the Funding Account. For so long as any amounts remain due
and owing to PARCO or the APA Banks hereunder or under the Operative Documents,
the Funding Agent shall distribute all payments received by it pursuant to the
Operative Documents immediately after receipt thereof by withdrawing funds on
deposit in the Funding Account and remitting such funds (i) to PARCO to the
extent of amounts owed to it pursuant to the Operative Documents, and (ii)
immediately after giving effect to the payment in clause (a)(i), if any, to the
APA Banks ratably in accordance with their Pro Rata Shares (calculated without
regard to that portion of the Commitment of a Defaulting APA Bank which such
Defaulting APA Bank failed to fund pursuant to this Agreement). Such transfers
shall be made to the Funding Agent by withdrawing funds on deposit in the
Funding Account and remitting such funds to the accounts of PARCO and the
several APA Banks specified by each of them from time to time.
(b) Requests for Indemnity under the Operative Documents. The
Funding Agent shall, at the written request of any APA Bank, make demand of
PARCO for payment of any amounts from time to time claimed by the such APA
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Banks pursuant to the Operative Documents, and the Funding Agent shall, upon its
receipt of such amounts, distribute them to each such APA Bank.
(c) Payments Conditional upon Receipt from PARCO or the Transaction
Parties. Anything in this Agreement to the contrary notwithstanding, the Funding
Agent shall have no obligation to make any payments to the APA Banks unless and
until it has received such amounts from PARCO or the Transaction Parties
pursuant to the Funding Agreement or the other Operative Documents.
(d) PARCO Residual Amount. If (i) the Adjusted Liquidity Price is
included in the calculation of the Purchase Price for any Purchase of the PARCO
Interest, and (ii) on the related Purchase Date, the Adjusted Liquidity Price is
less than the Outstanding Principal Amount (the amount of such insufficiency,
the "PARCO Residual Amount"), then, in such event, each APA Bank hereby agrees
that the Funding Agent, for the benefit of PARCO, shall immediately remit to
PARCO its Reduction Percentage of any amounts received by the Funding Agent from
any Transaction Party on any Business Day in respect of either Collections in
respect of interest or any reduction of the Outstanding Principal Amount.
SECTION II.5. Reduction of Commitments. The Commitment of each APA Bank
and the Aggregate Commitment shall be automatically reduced by the amount of any
permanent reduction of the PARCO Interest pursuant to the Funding Agreement. The
Funding Agent shall notify each APA Bank and each Rating Agency of the
occurrence of any such reduction specified in the immediately preceding sentence
promptly after the Funding Agent (individually or in its capacity as Funding
Agent) becomes aware of the same. In addition to the foregoing, the Commitment
of each APA Bank and the Aggregate Commitment shall be reduced to zero on (i)
the Commitment Expiry Date and (ii) the date an Event of Default has been
declared by the Funding Agent under the Security Agreement (after giving effect
to any Purchases required to be made by the APA Banks under Sections 2.1 and 2.2
hereof).
SECTION 2.6. Issuance of Commercial Paper. PARCO hereby covenants and
agrees that all Commercial Paper issued by PARCO to fund all or a portion of the
Outstanding Principal Amount shall have maturities not exceeding, from the date
of issuance thereof, the lesser of 270 days and the number of days from and
including such date of issuance to but excluding the fifth (5th) Business Day
prior to the Commitment Expiry Date.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION III.1. PARCO Disclaimer of Representations and Warranties. By
executing and delivering any Sale Notice pursuant to Section 2.2(a), (a) PARCO
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection with
the Funding Agreement and the other Operative Documents or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of the
Funding Agreement and the other Operative Documents, or any other instrument or
document furnished pursuant thereto or in connection therewith, and (b) PARCO
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of any Transaction Party or the performance or
observance by any Transaction Party of any of its obligations under the Funding
Agreement and the other Operative Documents or any other instrument or document
furnished pursuant thereto or in connection therewith.
SECTION III.2. Representations and Warranties of the APA Bank. Each of
the APA Banks (a) confirms that it has received copies of the Funding Agreement
and the other Operative Documents; (b) represents and warrants to the Funding
Agent and PARCO that it has, independently and without reliance upon the Funding
Agent (in its capacity as such), PARCO or any other APA Bank, and based on such
documents and information as it has deemed appropriate, made its own appraisal
of and investigation into the business, operations, property, prospects,
financial and other conditions and creditworthiness of the Transaction Parties,
and made its own decision to enter into this Agreement; (c) represents that it
will, independently and without reliance upon the Funding Agent (in its capacity
as such), PARCO or any other APA Bank to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement,
the Funding Agreement and the other Operative Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, prospects, financial and other condition and
creditworthiness of the Transaction Parties; (d) appoints and authorizes the
Funding Agent to take such action as agent on its behalf and to exercise such
powers under this Agreement, the Funding Agreement and the other Operative
Documents as are delegated to the Funding Agent by the terms hereof and thereof,
together with such powers as are reasonably incidental thereto; (e) represents
and warrants that it is a corporation or a banking association duly organized
and validly existing under the laws of its jurisdiction of incorporation or
organization and has all corporate power to perform its obligations hereunder;
(f) represents and warrants that no authorization or approval or other action
by, and no notice to or
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filing with, any governmental authority or regulatory body is required for the
due execution, delivery and performance by it of this Agreement, which has not
otherwise been obtained; (g) represents and warrants that the execution,
delivery and performance of this Agreement are within its corporate powers, have
been duly authorized by all necessary corporate action, do not contravene or
violate (i) its certificate or articles of incorporation or association or
by-laws, (ii) any law, rule or regulation applicable to it, (iii) any
restrictions under any agreement, contract or instrument to which it is a party
or any of its property is bound, or (iv) any order, writ, judgment, award,
injunction or decree binding on or affecting it or its property, and do not
result in the creation or imposition of any adverse claim on its assets, which
contravention or violation in any of the foregoing cases could have a material
adverse effect on its financial condition or its ability to perform its
obligations hereunder; (h) represents and warrants that this Agreement
constitutes its legal, valid and binding obligations enforceable against it in
accordance with their terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws relating
to limiting creditors' rights generally and by equitable principles (regardless
of whether such enforceability is considered in a proceeding in equity or at
law); and (i) represents and warrants that this Agreement has been duly
authorized, executed and delivered by it.
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<PAGE> 17
ARTICLE IV
THE FUNDING AGENT
SECTION IV.1. Appointment. PARCO and each APA Bank hereby irrevocably
designates and appoints Chase as Funding Agent on its behalf under the Operative
Documents and under Section 2.4(a) of this Agreement, and each APA Bank hereby
irrevocably designates and appoints Chase as Funding Agent on its behalf under
this Agreement. In furtherance of the foregoing, PARCO and each APA Bank hereby
authorizes the Funding Agent to take such action on its behalf under the
provisions of this Agreement and the Operative Documents and to exercise such
powers and perform such duties as are expressly delegated to the Funding Agent
by the terms of the Agreement, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement or the other Operative Documents, the Funding Agent shall not
have any duties or responsibilities, except those expressly set forth herein or
therein, or any fiduciary relationship with any APA Bank or PARCO, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities on the part of the Funding Agent shall be read into this Agreement
or any Operative Document or shall otherwise exist against the Funding Agent.
The provisions of this Article IV are solely for the benefit of the Funding
Agent, PARCO and each APA Bank, and no Transaction Party shall have any rights
as a third-party beneficiary or otherwise under any of the provisions hereof. In
performing its functions and duties solely under this Agreement, subject to the
provisions of Section 5.10 hereof, the Funding Agent shall act solely as the
agent of the APA Banks and does not assume nor shall be deemed to have assumed
any obligation or relationship of trust or agency with or for PARCO.
SECTION IV.2. Delegation of Duties. The Funding Agent may execute any of
its duties under this Agreement by or through its subsidiaries, affiliates,
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Funding Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.
SECTION IV.3. Exculpatory Provisions. Neither the Funding Agent nor any
of its directors, officers, agents or employees shall be (a) liable for any
action lawfully taken or omitted to be taken by it or them or any Person
described in Section 4.2 under or in connection with this Agreement, the Funding
Agreement or the other Operative Documents (except for its, their or such
Person's own gross negligence or willful misconduct), or (b) responsible in any
manner to any APA
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<PAGE> 18
Bank for any recitals, statements, representations or warranties contained in
the Funding Agreement or the other Operative Documents or in any certificate,
report, statement or other document referred to or provided for in, or received
under or in connection with, such agreements or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of the Funding
Agreement or the other Operative Documents, this Agreement or any other document
furnished in connection therewith or herewith, or for any failure of PARCO to
perform its obligations under the Funding Agreement or any other Operative
Document or for the satisfaction of any condition specified in the Funding
Agreement or any other Operative Document. Except as otherwise required under
the Operative Documents, the Funding Agent shall not be under any obligation to
any APA Bank to ascertain or to inquire as to the observance or performance of
any of the agreements or covenants contained in, or conditions of, the Funding
Agreement or the other Operative Documents, or to inspect the properties, books
or records of PARCO or any Transaction Party.
SECTION IV.4. Reliance by Funding Agent. The Funding Agent shall in all
cases be entitled to rely, and shall be fully protected in relying, upon any
note, writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including, without limitation, counsel to PARCO
and each APA Bank), independent accountants and other experts selected by the
Funding Agent. The Funding Agent shall in all cases be fully justified in
failing or refusing to take any action under this Agreement, the Funding
Agreement, any other Operative Document or any other document furnished in
connection herewith or therewith unless it shall first receive such advice or
concurrence of the Required APA Banks or all of the APA Banks, as applicable, as
it deems appropriate, or it shall first be indemnified to its satisfaction by
the APA Banks against any and all liability, cost and expense which may be
incurred by it by reason of taking or continuing to take any such action. The
Funding Agent shall in all cases be fully protected in acting, or in refraining
from acting, under this Agreement, the Funding Agreement or any other Operative
Document or any other document furnished in connection herewith or therewith in
accordance with a request of the Required APA Banks or all of the APA Banks, as
applicable, and such request and action taken or failure to act pursuant thereto
shall be binding upon all of the APA Banks.
SECTION IV.5. Notice of Events of Default and other Events. The Funding
Agent shall not be deemed to have knowledge or notice of the occurrence of any
Event of Default or Unmatured Event of Default or PARCO Wind-Down Event unless
the Funding Agent has received notice from any APA Bank, PARCO or any
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<PAGE> 19
Transaction Party referring to the Funding Agreement or any other Operative
Document stating that an Event of Default or Unmatured Event of Default or PARCO
Wind-Down Event has occurred thereunder and describing such event. If the
Funding Agent receives such a notice, the Funding Agent shall promptly give
notice thereof to each APA Bank and each Rating Agency. Subject to the
provisions of Section 5.1(b), to the extent the Funding Agent is entitled to
consent to or withhold its consent of any waiver or amendment of the Funding
Agreement in accordance with the terms thereof, the Funding Agent shall (a) give
prompt notice to each APA Bank and the Rating Agencies of any such waiver or
amendment of which it is aware, and (b) take such action with respect to such
waiver, amendment, or Event of Default or Unmatured Event of Default as shall be
directed by the Required APA Banks; provided, however, that unless and until the
Funding Agent shall have received such directions, the Funding Agent may (but
shall not be obligated to) take such action, or refrain from taking such action,
with respect to such Event of Default or Unmatured Event of Default, as
applicable, as the Funding Agent shall deem advisable and in the best interests
of the APA Banks.
SECTION IV.6. Non-Reliance on Funding Agent. PARCO and each of the APA
Banks expressly acknowledges that neither the Funding Agent, nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates has made
any representations or warranties to it and that no act by the Funding Agent
hereafter taken, including, without limitation, any review of the affairs of
PARCO or any APA Bank, shall be deemed to constitute any representation or
warranty by the Funding Agent. The Funding Agent shall not have any duty or
responsibility to provide the APA Banks with any credit or other information
concerning the business, operations, property, prospects, financial and other
condition or creditworthiness of PARCO, any APA Bank or any Transaction Party
which may come into the possession of the Funding Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates.
SECTION IV.7. Indemnification. Each of the APA Banks agrees to indemnify
the Funding Agent and its officers, directors, employees, representatives and
agents (to the extent not reimbursed by the Borrower or any other Person under
the Operative Documents, and without limiting the obligation of the Borrower or
such other Person to do so in accordance with the terms of the Operative
Documents), from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever (including, without limitation, the reasonable
fees and disbursements of counsel for the Funding Agent or the affected Person
in connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not the Funding Agent or such affected
Person shall be designated a party
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<PAGE> 20
thereto) that may at any time be imposed on, incurred by or asserted against the
Funding Agent or such affected Person as a result of, or arising out of, or in
any way related to or by reason of, any of the transactions contemplated
hereunder or under the Operative Documents or the execution, delivery or
performance of this Agreement, any other Operative Document or any other
document furnished in connection herewith or therewith (but excluding any such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the gross negligence or
willful misconduct of the Funding Agent or such affected Person).
SECTION IV.8. Funding Agent in its Individual Capacity. The Funding
Agent and its Affiliates may make loans to, accept deposits from and generally
engage in any kind of business with PARCO or any Transaction Party or any
Affiliate of such Persons as though the Funding Agent were not the Funding Agent
hereunder. With respect to the acquisition of the PARCO Interest pursuant to
this Agreement, the Funding Agent shall have the same rights and powers under
this Agreement as any APA Bank and may exercise the same as though it were not
the Funding Agent, and the term "APA Bank" shall include the Funding Agent in
its individual capacity as an APA Bank.
SECTION IV.9. Successor Funding Agent. The Funding Agent may, upon five
(5) days' notice to PARCO, the APA Banks and the Rating Agencies, and the
Funding Agent will, upon the direction of APA Banks having 66-2/3% of the Pro
Rata Shares (calculated without regard to the Pro Rata Share of Chase or any
Affiliate of Chase), resign as Funding Agent; provided, in either case, that an
APA Bank agrees to become the successor Funding Agent hereunder in accordance
with the next sentence. If the Funding Agent shall resign as Funding Agent under
this Agreement, then the Required APA Banks during such period shall appoint
from among the APA Banks a successor agent, whereupon such successor agent
shall, with a Rating Confirmation, succeed to the rights, powers and duties of
the Funding Agent, and the term "Funding Agent" shall mean such successor agent,
effective upon its acceptance of such appointment, and the former Funding
Agent's rights, powers and duties as Funding Agent shall be terminated, without
any other or further act or deed on the part of such former Funding Agent or any
of the parties to this Agreement. After the retiring Funding Agent's resignation
hereunder as Funding Agent, the provisions of this Article IV shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Funding Agent under this Agreement.
SECTION IV.10. Chase Conflict Waiver. Chase acts as PARCO Administrative
Agent, as issuing and paying agent for PARCO's Commercial Paper, as provider of
other backup facilities for PARCO, as Funding Agent on behalf of PARCO, the
Surety Provider and the several APA Banks under the Operative
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<PAGE> 21
Documents, and may provide other services or facilities from time to time (the
"Chase Roles"). Without limiting the generality of Section 4.8, each APA Bank
hereby acknowledges and consents to any and all Chase Roles, waives any
objections it may have to any actual or potential conflict of interest caused by
Chase's acting as the Funding Agent or an APA Bank hereunder and acting as or
maintaining any of the Chase Roles, and agrees that in connection with any Chase
Role, Chase may take, or refrain from taking, any action which it in its
discretion deems appropriate. The APA Banks are hereby notified that PARCO may
delegate responsibility for signing and/or sending Sale Notices to Chase as the
PARCO Administrative Agent.
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<PAGE> 22
ARTICLE V
MISCELLANEOUS
SECTION V.1. Waivers; Amendments, etc.
(a) No Waiver; Remedies Cumulative. No failure or delay on the part
of the Funding Agent or any APA Bank in exercising any power, right or remedy
under this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power, right or remedy preclude any other further
exercise thereof or the exercise of any other power, right or remedy. The rights
and remedies herein provided shall be cumulative and nonexclusive of any rights
and remedies provided by law. Any waiver of this Agreement shall be effective
only for the specific purpose for which given.
(b) Amendments, Etc. This Agreement may be amended, supplemented,
modified or waived with the written consent of all parties hereto; provided that
no such amendment, supplement, modification or waiver shall become effective
without prior written notice to each of the Rating Agencies. Notwithstanding the
foregoing, without the consent of the APA Banks, the Funding Agent and PARCO may
amend this Agreement solely to add additional Persons as APA Banks. Any such
amendment, supplement, modification or waiver shall apply to each of the APA
Banks equally and shall be binding upon PARCO, the APA Banks and the Funding
Agent. In the case of any waiver, PARCO, the APA Banks and the Funding Agent
shall be restored to their former positions and rights hereunder.
(c) Integration. This Agreement, the Funding Agreement, the other
Operative Documents and the writings referred to in Section 2.4(a) contain a
final and complete integration of all prior expressions by the parties hereto
with respect to the subject matter hereof and shall constitute the entire
agreement among the parties hereto with respect to the subject matter hereof,
superseding all prior oral or written understandings.
SECTION V.2. Notices. Except as otherwise expressly provided herein, all
communications and notices provided for hereunder shall be in writing and shall
be (a) hand-delivered by messenger, (b) sent by reputable overnight or second
business day courier, or (c) sent by telecopy or similar electronic transmission
directed to the applicable address or telecopy number, as the case may be, set
forth on Exhibit A hereto (as amended from time to time) or at such other
address or telecopy number as any party may hereafter specify in writing to the
Funding Agent
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<PAGE> 23
for the purpose of receiving notices. Each such notice or other communication
shall be effective only upon receipt thereof.
SECTION V.3. Governing Law; Submission to Jurisdiction. This Agreement
shall be governed by, and construed in accordance with, the laws of the State of
New York.
SECTION V.4. Severability; Counterparts; Waiver of Setoff. 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 when taken together shall constitute one and
the same agreement. Any provisions of this Agreement which are prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. Each APA Bank and the Funding Agent hereby waives any right
of setoff it may have or to which it may be entitled under this Agreement from
time to time against PARCO or its assets.
SECTION V.5. Successors and Assigns; Participations; Assignments.
(a) Successors and Assigns. This Agreement shall be binding upon the
parties hereto and their respective successors and permitted assigns. No APA
Bank may participate, assign or sell any portion of its rights hereunder except
as required by operation of law, in connection with the merger, consolidation or
dissolution of any APA Bank or as provided in this Section 5.5. No assignment
hereunder shall become effective without a Rating Confirmation.
(b) Participations. Any APA Bank may, with the consent of the
Funding Agent and in the ordinary course of its business and in accordance with
applicable law, at any time sell to one or more Persons (each, a "Participant")
participating interests in its rights and obligations hereunder and under the
Operative Documents; provided, however, that each Participant shall purchase an
identical percentage in such selling APA Bank's Commitment, unused Commitment
and Funding Balance. Notwithstanding any such sale by an APA Bank of
participating interests to a Participant, such APA Bank's rights and obligations
under this Agreement shall remain unchanged, such APA Bank shall remain solely
responsible for the performance thereof, and PARCO and the Funding Agent shall
continue to deal solely and directly with such APA Bank in connection with such
APA Bank's rights and obligations under this Agreement and the other Operative
Documents. Each APA Bank agrees that any agreement between such APA Bank and any
such Partici-
20
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pant in respect of such participating interest shall not restrict such APA
Bank's right to agree to any amendment, supplement, waiver or modification to
this Agreement.
(c) Assignments to Purchasers.
(i) Any APA Bank may at any time and from time to time, upon
the prior written consent of PARCO and the Funding Agent, assign to one
or more accredited investors or other Persons ("Purchaser(s)") all or
any part of its rights and obligations under this Agreement and the
other Operative Documents pursuant to a supplement to this Agreement,
substantially in the form of Exhibit A hereto (each, a "Transfer
Supplement"), executed by the Purchaser, such selling APA Bank and, as
applicable, the Funding Agent; and provided however that (A) each
Purchaser shall purchase an identical percentage in such selling APA
Bank's Commitment, unused Commitment and Funding Balance, (B) any such
assignment cannot be for an amount less than the lesser of (1)
$10,000,000 and (2) such selling APA Bank's Commitment or Funding
Balance (calculated at the time of such assignment), (C) each Purchaser
must be (1) a financial institution incorporated in an OECD country and
rated at least A-1/P-1 (or the equivalent short-term rating) by the
Rating Agencies and (2) a "qualified institutional buyer" (as defined in
Rule 144A under the Securities Act of 1933, as amended) and (D) each
Purchaser shall deliver to the Funding Agent and PARCO an opinion of
such Purchaser's counsel in substantially the form of Exhibit B hereto.
(ii) Each of the APA Banks agrees that in the event that it
shall cease to have short-term debt ratings of at least A-1 by S&P and
at least P-1 by Moody's, or, if such APA Bank does not have short-term
debt which is rated by S&P's and Moody's, in the event that the parent
corporation of such APA Bank has rated short-term debt, such parent
corporation ceases to have short-term debt ratings of at least A-1 by
S&P and at least P-1 by Moody's (each, an "Affected APA Bank"), such
Affected APA Bank shall be obliged, at the request of PARCO and the
Funding Agent, to assign all of its rights and obligations hereunder to
(x) one or more other APA Banks selected by PARCO and the Funding Agent
which are willing to accept such assignment, or (y) another financial
institution rated at least A-1/P-1 (or the equivalent short-term rating)
by the Rating Agencies) nominated by the Funding Agent and consented to
by PARCO (which consent shall not be unreasonably withheld) and the
Funding Agent, and willing to participate in this facility through the
Commitment Expiry Date in the place of such Affected APA Bank; provided
that (i) the Affected APA Bank receives payment in full,
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pursuant to a Transfer Supplement and/or, as applicable, an assignment,
of an amount equal to the Affected APA Bank's Funding Balance and any
other amounts due and owing under the Funding Agreement and the other
Operative Documents in respect of such Affected APA Bank's Funding
Balance and (ii) such nominated financial institution, if not an
existing APA Bank, satisfies all the requirements of this Agreement and
provides the Funding Agent with an opinion of counsel in substantially
the form of Exhibit B hereto.
(iii) Upon (A) execution of a Transfer Supplement, (B)
delivery of an executed copy thereof to PARCO, the Funding Agent and
delivery to the Funding Agent and PARCO of an opinion of such
Purchaser's counsel in substantially the form of Exhibit B hereto, (C)
payment, if applicable, by the Purchaser to such selling APA Bank of an
amount equal to the purchase price agreed between such selling APA Bank
and the Purchaser and (D) receipt by PARCO of a Rating Confirmation,
such selling APA Bank shall be released from its obligations hereunder
and under the other Operative Documents to the extent of such assignment
and the Purchaser shall, for all purposes, be an APA Bank party to this
Agreement and the Funding Agreement and, if and when applicable, an
assignee of PARCO's right to receive payments under the Funding
Agreement and the other Operative Documents and shall have all the
rights and obligations of an APA Bank under this Agreement and the
Funding Agreement to the same extent as if it were an original party
hereto or thereto, and no further consent or action by PARCO, the APA
Banks or the Funding Agent shall be required. The amount of the assigned
portion of the selling APA Bank's Funding Balance allocable to the
Purchaser shall be equal to the Transferred Percentage (as defined in
the Transfer Supplement) of such selling APA Bank's Funding Balance
which is transferred thereunder regardless of the purchase price paid
therefor. Such Transfer Supplement shall be deemed to amend this
Agreement and the Funding Agreement to the extent, and only to the
extent, necessary to reflect the addition of the Purchaser as an APA
Bank and the resulting adjustment of the selling APA Bank's Commitment
arising from the purchase by the Purchaser of all or a portion of the
selling APA Bank's rights, obligations, and interest hereunder and under
the Funding Agreement and the other Operative Documents.
SECTION V.6. Effectiveness of this Agreement. This Agreement, and the
obligations of the Funding Agent and the APA Banks hereunder, shall become
effective when the Funding Agent has received counterparts hereof, duly executed
by the Funding Agent, PARCO and each of the APA Banks. Upon
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<PAGE> 26
effectiveness of this Agreement and the Funding Agreement, each APA Bank shall
have all of the rights and benefits of an "APA Bank" under the Funding Agreement
and the other Operative Documents, and each APA Bank shall assume, and be bound
by and liable for, all of the duties and obligations of an "APA Bank" thereunder
to the extent specified therein, in each case as if such rights, benefits,
duties and obligations were set forth in their entirety herein.
SECTION V.7. No Petition. The Funding Agent and each APA Bank hereby
covenant and agree that, prior to the date which is one year and one day after
the payment in full of all outstanding Commercial Paper of PARCO, such party
will not institute against, or join any other Person in instituting against,
PARCO any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceeding under the laws of any jurisdiction. The
provisions of this Section 5.7 shall survive termination of this Agreement.
SECTION V.8. Waiver of Trial by Jury. To the extent permitted by
applicable law, the Funding Agent, each APA Bank and PARCO each irrevocably
waive all right of trial by jury in any action, proceeding or counterclaim
arising out of or in connection with this Agreement or the Operative Documents
or any matter arising hereunder or thereunder.
SECTION V.9. Limited Recourse. Notwithstanding anything to the contrary
contained herein, the obligations of PARCO under this Agreement are solely the
corporate obligations of PARCO and, in the case of obligations of PARCO other
than Commercial Paper, shall be payable at such time as funds are received by or
are available to PARCO in excess of funds necessary to pay in full all
outstanding Commercial Paper and, to the extent funds are not available to pay
such obligations, the claims relating thereto shall not constitute a claim
against PARCO but shall continue to accrue. Each party hereto agrees that the
payment of any claim (as defined in Section 101 of Title 11, United States Code
(Bankruptcy)) of any such party shall be subordinated to the payment in full of
all Commercial Paper.
No recourse under any obligation, covenant or agreement of PARCO
contained in this Agreement shall be had against any incorporator, stockholder,
officer, director, employee or agent of PARCO, the PARCO Administrative Agent,
the Funding Agent, the Manager or any of their Affiliates (solely by virtue of
such capacity) by the enforcement of any assessment or by any legal or equitable
proceeding, by virtue of any statute or otherwise; it being expressly agreed and
understood that this Agreement is solely a corporate obligation of PARCO
individually, and that no personal liability whatever shall attach to or be
incurred by any incorporator, stockholder, officer, director, member, employee
or agent of PARCO, the PARCO
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Administrative Agent, the Funding Agent, the Manager or any of their Affiliates
(solely by virtue of such capacity) or any of them under or by reason of any of
the obligations, covenants or agreements of PARCO contained in this Agreement,
or implied therefrom, and that any and all personal liability for breaches by
PARCO of any of such obligations, covenants or agreements, either at common law
or at equity, or by statute, rule or regulation, of every such incorporator,
stockholder, officer, director, employee or agent is hereby expressly waived as
a condition of and in consideration for the execution of this Agreement;
provided that the foregoing shall not relieve any such Person from any liability
it might otherwise have as a result of fraudulent actions taken or omissions
made by them. The provisions of this Section 5.9 shall survive termination of
this Agreement.
SECTION V.10. Liability of Funding Agent. Notwithstanding any provision
of this Agreement: (i) the Funding Agent shall not have any obligations under
this Agreement other than those specifically set forth herein, and no implied
obligations of the Funding Agent shall be read into this Agreement; and (ii) in
no event shall the Funding Agent be liable under or in connection with this
Agreement for indirect, special, or consequential losses or damages of any kind,
including lost profits, even if advised of the possibility thereof and
regardless of the form of action by which such losses or damages may be claimed.
Neither the Funding Agent nor any of its directors, officers, agents or
employees shall be liable for any action taken or omitted to be taken in good
faith by it or them under or in connection with this Agreement, except for its
or their own gross negligence or willful misconduct. Without limiting the
foregoing, the Funding Agent (a) may consult with legal counsel (including
counsel for PARCO and the APA Banks), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts, (b) shall not be responsible to PARCO for any
statements, warranties or representations made in or in connection with this
Agreement or the Funding Agreement, (c) shall not be responsible to PARCO for
the due execution, legality, validity, enforceability, genuineness, sufficiency
or value of this Agreement or the Funding Agreement, (d) shall incur no
liability under or in respect of any of the Commercial Paper or other
obligations of PARCO under this Agreement or the Funding Agreement and (e) shall
incur no liability under or in respect of this Agreement or the Funding
Agreement by acting upon any notice (including notice by telephone), consent,
certificate or other instrument or writing (which may be by facsimile) believed
by it to be genuine and signed or sent by the proper party or parties.
Notwithstanding anything else herein or in the Funding Agreement or the other
Operative Documents, it is agreed that where the Funding Agent may be required
under this Agreement or the Funding Agreement or the other Operative Documents
to give notice of any event or condition or to take any action as a result of
the occur-
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<PAGE> 28
rence of any event or the existence of any condition, the Funding Agent agrees
to give such notice or take such action only to the extent that it has actual
knowledge of the occurrence of such event or the existence of such condition,
and shall incur no liability for any failure to give such notice or take such
action in the absence of such knowledge.
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<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have caused this Asset Purchase
Agreement to be executed and delivered by their duty authorized officers or
signatories as of the date hereof.
PARK AVENUE RECEIVABLES
CORPORATION
By:
-------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
as an APA Bank
By:
-------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
as Funding Agent
By:
-------------------------------------
Name:
Title:
<PAGE> 30
ANNEX I
The Chase Manhattan Bank $153,000,000
<PAGE> 31
EXHIBIT A
[FORM OF TRANSFER SUPPLEMENT]
THIS TRANSFER SUPPLEMENT is entered into as of the _____ day of
________, 19__, by and between ____________________ ("Seller") and _____________
("Purchaser").
PRELIMINARY STATEMENTS
A0 This Transfer Supplement is being executed and delivered in
accordance with Section 5.5(c) of that certain Asset Purchase Agreement, dated
as of August 9, 1999 (as amended, supplemented or otherwise modified and in
effect from time to time, the "Agreement"), by and among Park Avenue Receivables
Corporation, a Delaware corporation, a Delaware corporation, the several APA
Banks party thereto from time to time, and The Chase Manhattan Bank, a New York
banking corporation, individually and as Funding Agent. Capitalized terms used
herein and not otherwise defined herein are used with the meanings set forth in,
or incorporated by reference into, the Agreement.
B0 The Seller is an APA Bank party to the Agreement and the Funding
Agreement, and the Purchaser wishes to become an APA Bank thereunder.
C0 The Seller is selling and assigning to the Purchaser an
undivided ___% (the "Transferred Percentage") interest in all of Seller's rights
and obligations under the Agreement, the Funding Agreement and the other
Operative Documents, including, without limitation, the Seller's Commitment and
(if applicable) the Seller's Funding Balance as set forth herein.
The parties hereto hereby agree as follows:
1 The transfer effected by this Transfer Supplement shall become
effective (the "Transfer Effective Date") two (2) Business Days (or such other
date selected by the Funding Agent in its sole discretion) following the date on
which a transfer effective notice substantially in the form of Schedule II to
this Transfer Supplement ("Transfer Effective Notice") is delivered by the
Funding Agent to PARCO, the Seller and the Purchaser. From and after the
Transfer Effective Date, the Purchaser shall be an APA Bank party to the
Agreement and the Funding Agreement for all purposes thereof as if the Purchaser
were an original party thereto and the Purchaser agrees to be bound by all of
the terms and provisions contained therein.
A-1
<PAGE> 32
2 If there is no Outstanding Principal Amount on the Transfer
Effective Date, Seller shall be deemed to have hereby transferred and assigned
to the Purchaser, without recourse, representation or warranty (except as
provided in paragraph 6 below), and the Purchaser shall be deemed to have hereby
irrevocably taken, received and assumed from the Seller, the Transferred
Percentage of the Seller's Commitment and all rights and obligations associated
therewith under the terms of the Agreement, including, without limitation, the
Transferred Percentage of the Seller's future funding obligations under Section
2.2(a) of the Agreement.
3 If there is an Outstanding Principal Amount, at or before 12:00
noon, local time of the Seller, on the Transfer Effective Date, the Purchaser
shall pay to the Seller, in immediately available funds, an amount equal to the
sum of (i) the Transferred Percentage of an amount equal to the Seller's Funding
Balance (such amount, being hereinafter referred to as the "Purchaser's Funding
Balance"); (ii) all accrued but unpaid (whether or not then due) interest
attributable to the Purchaser's Funding Balance; and (iii) accrued but unpaid
fees and other costs and expenses payable in respect of the Purchaser's Funding
Balance for the period commencing upon each date such unpaid amounts commence
accruing, to and including the Transfer Effective Date (the "Purchaser's
Acquisition Cost"), whereupon, the Seller shall be deemed to have transferred
and assigned to the Purchaser, without recourse, representation or warranty
(except as provided in paragraph 6 below), and the Purchaser shall be deemed to
have hereby irrevocably taken, received and assumed from the Seller, the
Transferred Percentage of the Seller's Commitment and its Funding Balance and
all related rights and obligations under the Agreement, the Funding Agreement
and the Operative Documents, including, without limitation, the Transferred
Percentage of the Seller's future funding obligations under Section 2.2(a) of
the Agreement.
4 Concurrently with the execution and delivery hereof, the Seller
will provide to the Purchaser copies of all documents requested by the Purchaser
which were delivered to such Seller pursuant to the Agreement.
5 Each of the parties to this Transfer Supplement agrees that at
any time and from time to time upon the written request of any other party, it
will execute and deliver such further documents and do such further acts and
things as such other party may reasonably request in order to effect the
purposes of this Transfer Supplement.
6 By executing and delivering this Transfer Supplement, the Seller
and the Purchaser confirm to and agree with each other, the Funding Agent and
the APA Banks as follows: (a) other than the representation and warranty that it
has not created any adverse claim upon any interest being transferred hereunder,
the Seller makes no representation or warranty and assumes no responsibility
with respect to any statements, warranties or representations made by any other
Person in or in connection with the Agreement, the
A-2
<PAGE> 33
Funding Agreement or the other Operative Documents or the execution, legality,
validity, enforceability, genuineness, sufficiency or value thereof or any other
instrument or document furnished pursuant thereto or the perfection, priority,
condition, value or sufficiency of any collateral; (b) the Seller makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of PARCO, the Funding Agent, or any Transaction Party or the
performance or observance by PARCO, the Funding Agent or any Transaction Party
of any of their respective obligations under the Agreement, the Funding
Agreement or any other Operative Document or any other instrument or document
furnished pursuant thereto or in connection therewith; (c) the Purchaser
confirms that it has received a copy of the Agreement, the Funding Agreement and
the other Operative Documents, together with such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Transfer Supplement; (d) the Purchaser will,
independently and without reliance upon the Funding Agent, PARCO, or any other
APA Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Agreement or the Operative Documents; (e) the
Purchaser appoints and authorizes the Funding Agent to take such action as agent
on its behalf and to exercise such powers under the Agreement as are delegated
to the Funding Agent by the terms thereof, together with such powers as are
reasonably incidental thereto; (f) the Purchaser was not formed for the purpose
of acquiring the interest being acquired hereunder; and (h) the Purchaser agrees
that it will perform in accordance with their terms all of the obligations
which, by the terms of the Agreement, the Funding Agreement and the other
Operative Documents, are required to be performed by it as an APA Bank or as the
holder of PARCO's interest thereunder.
7 Each party hereto represents and warrants to and agrees with the
Funding Agent that it is aware of and will comply with the provisions of the
Agreement, including, without limitation, Sections 2.2, 5.5(c) and 5.7 thereof.
8 Schedule I hereto sets forth the revised Commitment of the
Seller and the Commitment of the Purchaser, as well as administrative
information with respect to the Purchaser.
9 This Transfer Supplement shall be governed by, and construed in
accordance with, the laws of the State of New York.
A-3
<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have caused this Transfer
Supplement to be executed by their respective duly authorized officers of the
date hereof.
[SELLER]
By:
-------------------------------------
Name:
Title:
[PURCHASER]
By:
-------------------------------------
Name:
Title:
A-4
<PAGE> 35
SCHEDULE I TO TRANSFER SUPPLEMENT
LIST OF PURCHASING OFFICES, ADDRESSES
FOR NOTICES AND COMMITMENT AMOUNTS
Date: ________________, 19__
Transferred Percentage: _____%
<TABLE>
<CAPTION>
Pro
Commitment Commitment Outstanding Rata
Seller [existing] [revised] Funding Balance Share
- ------ ---------- --------- --------------- -----
<S> <C> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
Pro
Commitment Outstanding Rata
Purchaser [initial] Funding Balance Share
- --------- --------- --------------- -----
<S> <C> <C> <C>
</TABLE>
Address for Notices:
- ------------------------
- ------------------------
- ------------------------
Attention:
Telephone:
Telecopy:
A-5
<PAGE> 36
SCHEDULE II TO TRANSFER SUPPLEMENT
TRANSFER EFFECTIVE NOTICE
TO:________________________, Seller
_______________________
_______________________
TO:_______________________, Purchaser
_______________________
_______________________
The undersigned, as Funding Agent under the Asset Purchase Agreement,
dated as of August 9, 1999 (as amended, supplemented or otherwise modified and
in effect from time to time), by and among Park Avenue Receivables Corporation,
a Delaware corporation, the several APA Banks party thereto from time to time,
and The Chase Manhattan Bank, a New York banking corporation, individually and
as Funding Agent, hereby acknowledges receipt of executed counterparts of a
completed Transfer Supplement dated as of ______, 19__ between ___________, as
Seller, and _____________, as Purchaser. Capitalized terms defined in such
Transfer Supplement are used herein as therein defined or incorporated by
reference therein.
1 Pursuant to such Transfer Supplement, you are advised that the
Transfer Effective Date will be ___________, 19__.
2 The Funding Agent each hereby consents to the Transfer
Supplement as required by Section 5.5(c) of the Agreement.
[3. Pursuant to such Transfer Supplement, the Purchaser is required
to pay $_______ to the Seller at or before 12:00 noon (local time of the Seller)
on the Transfer Effective Date in immediately available funds.]
Very truly yours,
THE CHASE MANHATTAN BANK,
as Funding Agent
By:
-------------------------------------
Authorized Signatory
A-6
<PAGE> 37
EXHIBIT B
FORM OF OPINION OF COUNSEL
Park Avenue Receivables Corporation Standard & Poor's Ratings Services
c/o Global Securitization Services, LLC 55 Water Street
25 West 43rd Street, Suite 704 New York, New York 10041
New York, New York 10036
The Chase Manhattan Bank, as Moody's Investors Service, Inc.
Funding Agent, Depositary, 99 Church Street
Liquidity Agent, Liquidity Bank, New York, New York 10007
L/C Agent and L/C Bank
270 Park Avenue
New York, New York 10017
Re: Transfer Supplement dated as of __________ with [Name of Bank]
Ladies and Gentlemen:
We have acted as counsel for [Name of Bank] (the "Bank") in
connection with (i) the Asset Purchase Agreement, dated as of August 9, 1999 (as
amended, supplemented or otherwise modified to the date hereof, the "Agreement";
terms defined therein and not otherwise defined in this letter shall have the
respective meanings ascribed therein), by and among Park Avenue Receivables
Corporation, a Delaware corporation, the several APA Banks party thereto from
time to time, and The Chase Manhattan Bank, a New York banking corporation,
individually and as Funding Agent, and (ii) the Transfer Supplement (the
"Transfer Supplement"), dated as of ____________, 199__, between [Name of
Seller] as "Seller" (as defined therein) and the Bank as "Purchaser" (as defined
therein), consented to by the Funding Agent.
1. The Bank is a ____________ organized, validly existing and in
good standing under the laws of ____________. The Bank has the corporate power
and authority to execute and deliver the Transfer Supplement and to perform its
obligations under the Agreement.
2. No governmental approval, which has not been obtained or
taken and is not in full force and effect, is required to authorize, or is
required in connection with, the execution or delivery by the Bank of the
Transfer Supplement or the performance by the Bank of its obligations thereunder
and under the Agreement.
B-1
<PAGE> 38
3. Neither the execution and delivery of the Transfer Supplement
by the Bank, nor the consummation of the transactions contemplated thereby and
by the Agreement, will contravene, or result in a violation of, any law
applicable to the Bank.
4. The Transfer Supplement has been duly authorized, executed
and delivered by the Bank, and the Agreement, as amended by the Transfer
Supplement, constitutes the legal, valid and binding obligation of the Bank,
enforceable against the Bank in accordance with its terms, except such
enforceability may be limited by bankruptcy, insolvency, receivership,
conservatorship or other similar laws, regulations and administrative orders of
general application relating to or affecting the enforcement of creditors'
rights in general and the rights of creditors of banks as the same may be
applied in the event of the bankruptcy, insolvency, receivership,
conservatorship or other similar event in respect of the Bank or by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
5. With the exception of obligations being given priority by
statute or regulation, the obligations of the Bank under the Agreement, as
amended by the Transfer Supplement, will rank pari passu with all obligations of
the Bank which are not contractually subordinated to payment of such
obligations.
Very truly yours,
[NOTE THAT ADDITIONAL OPINIONS MAY BE REQUIRED FROM
FOREIGN APA BANKS]
B-2
<PAGE> 39
EXHIBIT C
NOTICE ADDRESSES
If to PARCO:
Park Avenue Receivables Corporation
c/o Global Securitization Services, LLC
25 West 43rd Street, Suite 704
New York, New York 10036
Attention: Vice President
Telephone: (212) 302-5151
Telecopy: (212) 302-8767
If to the Funding Agent or to the APA Banks:
The Chase Manhattan Bank
450 West 33rd Street, 14th Floor
New York, New York 10001
Attention: Structured Finance Services,
PARCO Manager
Telephone: (212) 946-3478
Telecopy: (212) 946-8098
with a copy to:
Chase Securities Inc.
270 Park Avenue, 7th Floor
New York, New York 10017
Attention: Tino Luzano
Telephone: (212) 834-5381
Telecopy: (212) 834-6562
C-1
<PAGE> 1
EXHIBIT 10.123
================================================================================
FUNDING AGREEMENT
by and among
ONYX ACCEPTANCE RECEIVABLES CORPORATION
PARK AVENUE RECEIVABLES CORPORATION,
as a Lender
and
THE CHASE MANHATTAN BANK,
as Funding Agent and as a Lender
Dated as of August 9, 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINITIONS...........................................................2
1.1. Defined Terms.......................................................2
SECTION 2. AMOUNT AND TERMS OF THE FACILITY......................................3
2.1. Loans by PARCO and the APA Banks....................................3
2.2. Loan Note...........................................................4
2.3. Availability of Borrowings..........................................4
2.4. Principal Payments; Optional Prepayments............................5
2.5. Interest............................................................6
2.6. Proceeds............................................................7
2.7. Collection Account..................................................7
2.8. Reduction of the Facility Limit and the Aggregate Commitment........7
2.9. Taxes...............................................................7
2.10. Illegality..........................................................8
2.11. Broken Funding......................................................9
2.12. Inability to Determine Eurodollar Rate.............................10
SECTION 3. REPRESENTATIONS AND WARRANTIES.......................................11
3.1. Representations and Warranties of Recco............................11
SECTION 4. CONDITIONS PRECEDENT.................................................15
4.1. Conditions to Effectiveness........................................15
4.2. Conditions to Each Loan............................................18
4.3. Conditions to Release of Proceeds of Loans from Disbursement
Sub-Account.......................................................19
SECTION 5. AFFIRMATIVE COVENANTS................................................22
5.1. Financial Statements...............................................22
5.2. Certificates; Other Information....................................22
5.3. Payment of Obligations.............................................23
5.4. Conduct of Business and Maintenance of Existence...................23
5.5. Maintenance of Property; Insurance.................................23
5.6. Inspection of Property; Files, Books and Records; Discussions......23
5.7. Notices............................................................24
5.8. Delivery of Other Reports..........................................24
5.9. Annual Certificate.................................................24
5.10. Further Assurances.................................................25
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
5.11. Independent Director...............................................25
5.12. Instructions to Obligors...........................................25
5.13. Cooperation in Making Calculations.................................25
5.14. Interest Rate Hedge Mechanisms.....................................26
5.15. Contract Files.....................................................26
5.16. Permitted Investments..............................................26
5.17. Separate Existence.................................................26
SECTION 6. NEGATIVE COVENANTS...................................................28
6.1. Limitation on Debt.................................................28
6.2. Limitation on Liens................................................28
6.3. Limitation on Fundamental Changes..................................28
6.4. Limitation on Sale of Assets.......................................28
6.5. Purchased Contracts................................................28
6.6. Limitation on Dividends............................................29
6.7. Limitation on Capital Expenditures.................................29
6.8. Limitation on Investments, Loans and Advances......................29
6.9. Transactions with Affiliates.......................................29
6.10. Sale and Leaseback.................................................30
6.11. Corporate Documents................................................30
6.12. Capital Stock......................................................30
6.13. Fiscal Year........................................................30
6.14. Limitation on Negative Pledge Clauses..............................30
6.15. Activities of Recco................................................30
6.16. Agreements.........................................................30
6.17. Bank Accounts......................................................31
6.18. Successor Servicer.................................................31
6.19. Servicing of Contracts.............................................31
6.20. Prohibitions Regarding Subordinated Note...........................31
6.21. Lock-Box Banks.....................................................31
6.22. Contract Files.....................................................32
SECTION 7. EVENTS OF DEFAULT OR REPLACEMENT ....................................33
SECTION 8. THE FUNDING AGENT....................................................33
SECTION 9. MISCELLANEOUS........................................................34
9.1. Amendments and Waivers.............................................34
9.2. Notices............................................................35
9.3. No Waiver; Cumulative Remedies.....................................37
9.4. Survival of Representations and Warranties.........................37
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
9.5. Payment of Expenses and Taxes......................................37
9.6. Successors and Assigns; Participations.............................38
9.7. Termination........................................................40
9.8. Counterparts.......................................................40
9.9. Severability.......................................................40
9.10. Integration........................................................40
9.11. Governing Law......................................................41
9.12. Submission to Jurisdiction; Waivers................................41
9.13. Acknowledgments....................................................41
9.14. Waiver of Jury Trial...............................................42
9.15. No Bankruptcy Petition.............................................42
9.16. Limited Recourse; Waiver of Setoff.................................42
9.17. Confidentiality....................................................43
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
9.17. Confidentiality...................................................42
</TABLE>
iv
<PAGE> 6
EXHIBITS
EXHIBIT A Definitions List
EXHIBIT B Loan Note
EXHIBIT C Notice of Borrowing
EXHIBIT D Security Agreement
EXHIBIT E Form of Officer's Certificate of Recco
v
<PAGE> 7
FUNDING AGREEMENT
This FUNDING AGREEMENT, dated as of August 9, 1999 (as amended,
supplemented or otherwise modified and in effect, the "Funding Agreement"), is
by and among ONYX ACCEPTANCE RECEIVABLES CORPORATION, a Delaware corporation
(together with its successors and assigns, "Recco"), PARK AVENUE RECEIVABLES
CORPORATION, a Delaware corporation ("PARCO") and THE CHASE MANHATTAN BANK, a
New York banking corporation, as funding agent for the benefit of the Secured
Parties (together with its successors and assigns in such capacity, the "Funding
Agent") and individually as an APA Bank.
W I T N E S S E T H:
WHEREAS, pursuant to the Sale Agreement, Recco purchases certain
Contracts from time to time from Onyx Acceptance Corporation, a Delaware
corporation, as seller (together with its successors and assigns, the "Seller"),
and the Seller acts as Servicer of the Purchased Contracts;
WHEREAS, Recco from time to time requests that the Lenders make Loans to
Recco, the proceeds of which are used to purchase Contracts from the Seller in
accordance with the terms of the Sale Agreement;
WHEREAS, as collateral security for its obligations under this
Agreement, Recco has collaterally assigned the Purchased Contracts, its rights
under the Sale Agreement, all of its right, title, interest in and to the
Collection Account to the Funding Agent for the benefit of the Secured Parties
pursuant to the Security Agreement;
WHEREAS, MBIA Insurance Corporation (together with its successors and
assigns, the "Surety Provider"), Recco, the Seller and the Servicer have entered
into the Insurance Agreement pursuant to which, among other things, the Surety
Provider has issued a financial guaranty insurance policy to the Funding Agent
for the benefit of the Lenders to guarantee repayment of the Loans made by the
Lenders; and
<PAGE> 8
WHEREAS, subject to the terms and conditions set forth herein, the
Lenders are willing to make the Loans to Recco.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS
0.1. Defined Terms. (A) As used in this Agreement, the Loan Note, the
Security Agreement or any certificate or other document made or delivered
pursuant hereto or thereto, the capitalized terms used herein and therein shall,
unless otherwise defined herein or therein, have the meanings assigned to them
in the Definitions List dated as of the date hereof that refers to this
Agreement, which is incorporated herein by reference and attached as Exhibit A
hereto (the "Definitions List").
(1) As used herein, in the Loan Note and in the Security Agreement,
or any certificate or other document made or delivered pursuant hereto and
thereto, accounting terms not defined in the Definitions List and accounting
terms partly defined in the Definitions List to the extent not defined, shall
have the respective meanings given to them under GAAP.
(2) 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 Section,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(3) Capitalized terms used herein, in the Loan Note and in the
Security Agreement shall be equally applicable to both the singular and plural
forms of such terms.
2
<PAGE> 9
SECTION 2. AMOUNT AND TERMS OF THE FACILITY
0.1. Loans by PARCO and the APA Banks. (a) Prior to a PARCO Wind-Down
Event, on any Business Day, PARCO, on an offering basis only, agrees to make
Loans to Recco at the CP Rate, in each case for a funding period not exceeding
the lesser of 270 days and the number of days from and including such Business
Day to but excluding the fifth (5th) Business Day prior to Commitment Expiry
Date, commencing and ending on Business Days requested by Recco after
consultation with PARCO (but in the sole discretion of PARCO). Following a PARCO
Wind-Down Event but prior to the Termination Date or should PARCO otherwise fail
to make Loans, the APA Banks shall make Loans to Recco at either the Base Rate
or the Eurodollar Rate. Loans at the Eurodollar Rate shall be for a period of
one, two or three months requested by Recco and agreed to by the Funding Agent
commencing on a Business Day requested by Recco and agreed to by the Funding
Agent; provided, however, that if such funding period would expire on a day
which is not a Business Day, such funding period shall expire on the next
succeeding Business Day; provided, further, that if such funding period would
expire on (a) a day which is not a Business Day but is a day of the month after
which no further Business Day occurs in such month, such funding period shall
expire on the next preceding Business Day or (b) a Business Day for which there
is no numerically corresponding day in the applicable subsequent calendar month,
such funding period shall expire on the last Business Day of such month. Loans
made by the APA Banks at the Base Rate shall, prior to the occurrence of an
Event of Default or an Unmatured Event of Default, commence and end on Business
Days selected by Recco for terms not exceeding 1 day; following an Event of
Default or an Unmatured Event of Default, if no Replacement Event has occurred
and is continuing, Loans made by the APA Banks shall bear interest at the Base
Rate for a period not exceeding one Business Day in each instance; following an
Event of Default or an Unmatured Event of Default, if a Replacement Event has
occurred and is continuing, Loans made by the APA Banks shall bear interest at
the Base Rate plus 2% for a period not exceeding one Business Day in each
instance.
(b) Interest on each Loan at the CP Rate and the Eurodollar Rate shall
be computed on the basis of the actual number of days elapsed in a year
consisting of 360 days. Interest on each Loan at the Base Rate shall be computed
on the basis of the actual number of days elapsed in a year consisting of 365 or
366 days, as applicable.
(c) No Loan shall be made hereunder if, after giving effect to such
Loan, either (i) the Termination Date has occurred, (ii) the Outstanding
Principal
3
<PAGE> 10
Amount of all Loans made by the Lenders would exceed the Facility Limit, (iii)
with respect to each Lender, the Outstanding Principal Amount of all Loans made
by such Lender would exceed such Lender's ratable share of the Facility Limit or
its Commitment, (iv) a Borrowing Base Deficiency would exist or (v) a
Replacement Event has occurred and is continuing.
(d) The proceeds of all Loans shall be disbursed to the Disbursement
Sub-Account.
0.2. Loan Note. The Loans shall be evidenced by a promissory note of
Recco, substantially in the form of Exhibit B hereto (as amended, supplemented
or otherwise modified and in effect from time to time, the "Loan Note"), payable
to the order of the Funding Agent for the benefit of the Lenders. The Funding
Agent shall record the date and amount of each Loan made and the date and amount
of each payment of principal thereof, and any such recordation shall constitute
prima facie evidence of the accuracy of the information so recorded. The Loan
Note shall (a) be dated the date of issuance thereof, or, with respect to any
amendment thereof, the date of such amendment, (b) be stated to mature on the
Scheduled Maturity Date (unless otherwise extended with the consent of the
Lenders and the Surety Provider) and (c) provide for the payment of interest in
accordance with Section 2.5.
0.3. Availability of Borrowings. (a) Prior to a PARCO Wind-Down Event,
Recco may request Loans on any Business Day up to the Termination Date by giving
the Funding Agent prior irrevocable notice of each borrowing in the form of
Exhibit C hereto ("Notice of Borrowing") by 11:00 A.M. (New York time) one
Business Day prior to a Borrowing Date.
(b) Following a PARCO Wind-Down Event, but prior to the Termination
Date, if no Event of Default has occurred and is continuing, Recco may request
Loans on any Business Day by giving the Funding Agent a Notice of Borrowing (i)
in the case of Eurodollar Fundings, by 5:00 P.M. (New York time) no later than
three (3) Business Days prior to the Borrowing Date and (ii) in the case of BR
Fundings, by 10:00 A.M. (New York time) on the Borrowing Date.
(c) Following an Event of Default, the rate applicable to all
outstanding borrowings shall be the Base Rate in effect as of 10:00 A.M. (New
York time) on such Borrowing Date.
(d) The proceeds of such Loans will be made available to Recco by the
applicable Lenders by crediting a sub-account of the Collection Account (the
"Disbursement Sub-Account") with immediately available funds by 4:00 P.M. (New
York time) on the Borrowing Date; provided that any such release of funds to
Recco
4
<PAGE> 11
shall be subject to the conditions precedent set forth in Section 4.3; provided
further that amounts on deposit in the Disbursement Sub-Account shall not exceed
$1.8 million at any time.
0.4. Principal Payments; Optional Prepayments.
(1) All principal of Loans shall be payable by Recco in the
following manner: (i) in the case of any tranche of Commercial Paper, on the
maturity date thereof and (ii) in the case of any Eurodollar Funding or BR
Funding, on the last day of the related funding period (any such day, a "Payment
Date"). Recco shall make any such payment by no later than 1:00 P.M. (New York
time) on the applicable Payment Date by transferring such amount in immediately
available funds by wire transfer to an account specified by the Funding Agent.
The amount payable by Recco as determined by the Funding Agent shall be an
amount equal to the sum of (i) the Outstanding Principal Amount of Loans made
with the proceeds of Commercial Paper maturing on the applicable Payment Date
that will not be funded from the net proceeds of the sale of Commercial Paper on
such date, (ii) the outstanding principal amount of Loans made by the APA Banks
that are due and payable on such date and (iii) the amount necessary to cure any
Borrowing Base Deficiency existing on such date or that would exist at the close
of business on such date (after giving effect to the amount of any payment made
on such day in respect of subclauses (i) or (ii) of this Section 2.4(a)). On and
after the Termination Date, principal on the Loans shall be paid as provided in
the Security Agreement. Any amounts paid under the Note Policy with respect to
principal shall be applied by the Funding Agent to prepay the Loan Note.
(2) Recco may at any time and from time to time prepay the Loans, in
whole or in part, without premium or penalty, upon at least three Business Days'
irrevocable notice to the Funding Agent, specifying the date and amount of
prepayment; provided that, upon notice given by the Funding Agent, Recco shall
indemnify the Funding Agent and the Lenders and hold the Funding Agent and the
Lenders harmless from any funding loss (in an amount equal to the amount of
interest or discount the Lenders would have received but for such prepayment
less the interest earned on investing such funds) and expense which the Funding
Agent and the Lenders may sustain or incur as a consequence of such prepayment.
If any such notice is given, the amount specified in such notice shall be due
and payable on the date specified therein.
(3) On each Liquidation Day, Recco shall prepay all amounts
outstanding under the Loan Note and this Agreement to the extent of amounts on
5
<PAGE> 12
deposit in the Collection Account available on each such day and in the order
set forth in Section 5(b) of the Security Agreement.
0.5. Interest. (A) Recco shall pay to the Funding Agent for the benefit
of the Lenders, pursuant to the terms and conditions of the Security Agreement,
as interest on the Loans outstanding, the following amounts on the following
dates:
(1) in the case of Commercial Paper, on each Determination Date, an
amount equal to the discount or interest, as applicable, that
accrued on all Commercial Paper that was outstanding during the
preceding Determination Period;
(2) in the case of a Eurodollar Funding or a BR Funding, on each
Determination Date, in an amount equal to the interest that
accrued on all BR Fundings and Eurodollar Fundings outstanding
during the preceding Determination Period; and
(3) on each day that any interest is required to be paid in respect
of the prepayment of any Loan, an amount equal to such interest
through and including such day; provided that, in the case of a
Loan made with the proceeds of Commercial Paper, the aggregate
amount of interest payable in respect of such Loan shall include
all interest or discount in respect of such Commercial Paper
through and including the maturity date thereof; provided
further that, in the case of any such interest or discount in
respect of Commercial Paper paid pursuant to this clause
(a)(iii) by Recco, PARCO hereby agrees to remit to Recco, as
promptly as possible after receipt thereof, any investment
income earned by or on behalf of PARCO in respect of that
portion of interest or discount accruing from the date of
prepayment of the related Loan to and including the maturity
date of the related Commercial Paper.
(4) Recco agrees to pay the Servicing Fee to the Servicer on each
Business Day, as provided for in the Security Agreement.
0.6. Proceeds. The proceeds of the Loans shall be used by Recco solely
to purchase Contracts from the Seller pursuant to the Sale Agreement.
6
<PAGE> 13
0.7. Collection Account. Recco has established, on or prior to the date
hereof, a bank account (No. 4047105606) at Wells Fargo Bank in the name of the
Funding Agent for the benefit of the Secured Parties (the "Collection Account").
Recco shall cause the Servicer to deposit all Collections to the Clearing
Account on the next Business Day after Collections are received in the
Lock-Boxes and on the next Business Day after Collections are received in any
other manner, and to transfer all Collections on deposit in the Clearing Account
to the Collection Account on the next Business Day after such Collections are
received by the Servicer in the Clearing Account. Recco shall make transfers and
withdrawals from the Collection Account solely as permitted by the terms and
conditions of the Security Agreement.
0.8. Reduction of the Facility Limit and the Aggregate Commitment. Recco
shall have the right from time to time, upon not less than five Business Days'
notice to the Funding Agent, the Surety Provider and the Lenders, to reduce the
Facility Limit and the Aggregate Commitment to an amount not less than the sum
of the Outstanding Principal Amount of the Loans and an amount equal to 102% of
the Facility Limit, respectively; provided, however, that in no event shall the
Facility Limit be reduced to less than $50,000,000. Each such reduction in the
Facility Limit shall be in an amount equal to $5,000,000 or any multiple thereof
and shall reduce permanently the Facility Limit (and the corresponding reduction
in the Aggregate Commitment) then in effect.
0.9. Taxes. All payments made by Recco under this Agreement and the Loan
Note shall be made free and clear of, and without deduction or withholding for
or on account of, any present or future income, stamp or other taxes, levies,
imposts, duties, charges, fees, deductions or withholdings, now or hereafter
imposed, levied, collected, withheld or assessed by any Governmental Authority
having taxing authority, excluding income taxes and franchise taxes (imposed in
lieu of income taxes) imposed on the Lenders, as a result of any present or
former connection between the jurisdiction of the government or taxing authority
imposing such tax or any political subdivision or taxing authority thereof or
therein and any such Lender (all such non-excluded taxes, levies, imposts,
duties, charges, fees, deductions and withholdings being hereinafter called
"Taxes"). If any Taxes are required to be withheld from any amounts payable to
or under the Loan Note, the amounts so payable to the applicable Lender shall be
increased to the extent necessary to yield to such Lender (after payment of all
Taxes) interest or any such other amounts payable hereunder at the rates or in
the amounts specified in this Agreement and the Loan Note. Whenever any Taxes
are payable by Recco, as promptly as possible thereafter Recco shall send to the
applicable Lender (with a copy to the Funding Agent and the Surety Provider) a
certified copy of an original official receipt received by Recco showing payment
thereof. If Recco fails to pay any Taxes when due to the appropri-
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ate taxing authority or fails to remit to a Lender the required receipts or
other required documentary evidence, Recco shall indemnify such Lender for any
incremental Taxes, interest or penalties that such Lender is legally required to
pay as a result of any such failure. The agreements in this Section 2.9 shall
survive the termination of this Agreement and the payment of the Loan Note.
0.10. Illegality. (A) Notwithstanding any other provision herein, if,
after the Closing Date, the adoption of any law or bank regulatory guideline or
any amendment or change in the interpretation of any existing or future law or
bank regulatory guideline by any Governmental Authority charged with the
administration, interpretation or application thereof, or the compliance with
any directive of any Governmental Authority (in the case of any bank regulatory
guideline, whether or not having the force of law), shall make it unlawful for
any APA Bank to acquire or maintain a Eurodollar Funding at the applicable
Eurodollar Rate as contemplated by this Agreement, (i) such APA Bank shall,
within forty-five (45) days after receiving actual knowledge thereof, deliver a
certificate to Recco (with a copy to the Funding Agent and the Surety Provider)
setting forth the basis for such illegality, which certificate shall be
conclusive absent manifest error, (ii) upon delivery of such certificate, the
commitment of such APA Bank hereunder to make a portion of a Eurodollar Funding,
continue any portion of a Eurodollar Funding as such and convert a BR Funding to
a Eurodollar Funding shall forthwith be cancelled, and such cancellation shall
remain in effect so long as the circumstance described above exists, and (iii)
such APA Bank's portion of any Eurodollar Funding then outstanding shall be
converted automatically to a BR Funding on the last day of the related funding,
or within such earlier period as required by law.
If any conversion of a portion of a Eurodollar Funding described in
Section 2.11 occurs on a day which is not the last day of the related funding,
Recco shall pay to such APA Bank such reasonable amounts, if any, as may be
required to compensate such APA Bank for the costs of such conversion. If
circumstances subsequently change so that it is no longer unlawful for an
affected APA Bank to acquire or to maintain a portion of a Eurodollar Funding as
contemplated hereunder, such APA Bank will, as soon as reasonably practicable
after such APA Bank knows of such change in circumstances, notify Recco, the
Surety Provider and the Funding Agent, and upon receipt of such notice, the
obligations of such APA Bank to acquire or maintain its acquisition of portions
of Eurodollar Fundings or to convert its portion of a BR Funding into portions
of Eurodollar Fundings shall be reinstated.
(b) By its execution of the Asset Purchase Agreement, each APA Bank
agrees that, upon the occurrence of any event giving rise to the operation of
Section 2.10(a) with respect to such APA Bank, it will, if requested by Recco or
the
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Surety Provider and to the extent permitted by law or by the relevant
Governmental Authority, endeavor in good faith to change the office at which it
books its portions of Eurodollar Fundings hereunder if such change would make it
lawful for such APA Bank to continue to acquire or to maintain its acquisition
of portions of Eurodollar Fundings hereunder; provided that such change may be
made in such manner that such APA Bank, in its sole determination, suffers no
unreimbursed cost or expense or any other material disadvantage whatsoever.
0.11. Broken Funding. In the event of (a) the payment of any principal
of any Eurodollar Funding other than on the last day of such funding (including
as a result of the occurrence of the Termination Date or an optional prepayment
of a Eurodollar Funding), (b) the conversion of any Eurodollar Funding other
than on the last day of such related funding, or (c) any failure to borrow,
convert, continue or prepay any Eurodollar Funding on the date specified in any
notice delivered pursuant hereto, then, in any such event, Recco shall
compensate the applicable APA Banks for the loss, cost and expense attributable
to such event. Such loss, cost or expense to any APA Banks may include an amount
determined by such APA Bank to be the excess, if any, of (i) the amount of
yield, as the case may be, which would have accrued on the principal amount of
such Eurodollar Funding had such event not occurred, at a Eurodollar Rate that
would have been applicable to such Eurodollar Funding, for the period from the
date of such event to the last day of such funding (or, in the case of a failure
to borrow, convert or continue, for the period that would have been the funding
period for such funding), over (ii) the amount of interest which would accrue on
such principal amount for such period at the interest rate which such APA Bank
would bid were it to bid, at the commencement of such period, for dollar
deposits of a comparable amount and period from other banks in the interbank
eurodollar market. Within forty-five (45) days after any APA Bank hereunder
receives actual knowledge of any of the events specified in this Section 2.11, a
certificate of such APA Bank setting forth in such reasonable detail as Recco
shall reasonably request a calculation of any amount or amounts that such APA
Bank is entitled to receive pursuant to this Section 2.11 and the reason(s)
therefor shall be delivered to Recco and the Surety Provider and shall be
conclusive absent manifest error. Recco shall pay each such APA Bank the amount
shown as due on any such certificate on the later of the tenth (10th) Business
Day or the next succeeding Determination Date after receipt thereof.
0.12. Inability to Determine Eurodollar Rate. If, prior to the first day
on which any Eurodollar Funding commences, the Funding Agent shall have
determined or shall have been notified (which determination or notification, in
the absence of manifest error, shall be conclusive and binding upon Recco) that,
by reason of circumstances affecting the relevant market, adequate and
reasonable
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means do not exist for ascertaining a Eurodollar Rate for such funding, then, in
such event, the Funding Agent shall give telecopy or telephonic notice thereof
(confirmed in writing) to Recco and the APA Banks as soon as practicable (but,
in any event, within forty-five (45) days after such determination or notice, as
applicable) thereafter. Until such notice has been withdrawn by the Funding
Agent, no further Eurodollar Fundings shall be made. The Funding Agent agrees to
withdraw any such notice as soon as reasonably practicable after the Funding
Agent is notified of a change in circumstances which makes such notice
inapplicable.
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SECTION 3. REPRESENTATIONS AND WARRANTIES
0.1. Representations and Warranties of Recco. To induce the Funding
Agent and the Secured Parties to enter into this Agreement and the Lenders to
make Loans hereunder, Recco hereby represents and warrants to the Funding Agent
and the Secured Parties that:
(1) Financial Condition. The balance sheet of Recco as at June 30,
1999 and the related statements of income and of cash flows for the six month
period then ended certified by a Responsible Officer, are complete and correct
and present fairly the financial condition of Recco as at such date, and the
results of its operations and its consolidated cash flows for the period then
ended. All such financial statements, including the related schedules and notes
thereto, have been prepared in accordance with GAAP applied consistently
throughout the period involved (except as approved by such Responsible Officer
and as disclosed therein). Recco does not have, and at the date of the balance
sheet referred to above, did not have any Debt, contingent liability or
liability for taxes, or any long-term lease or unusual forward or long-term
commitment, including, without limitation, any interest rate or foreign currency
swap or exchange transaction.
(2) Corporate Existence; Compliance with Law. Recco (i) is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (ii) has the corporate power and authority,
and the legal right, to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently engaged,
(iii) is duly qualified as a foreign corporation and in good standing under the
laws of each jurisdiction where its ownership, lease or operation of property or
the conduct of its business requires such qualification and (iv) is in
compliance with all Requirements of Law.
(3) Corporate Power; Authorization; Enforceable Obligations. Recco
has the corporate power and authority, and the legal right, to make, deliver and
perform this Agreement and the other Operative Documents to which it is a party
and to borrow hereunder and has taken all necessary corporate action to
authorize the borrowings on the terms and conditions of this Agreement and the
other Operative Documents to which it is a party and to authorize the execution,
delivery and performance of this Agreement and the other Operative Documents to
which it is a party. All consents or authorization of, filing with or other act
by or in respect of, any Governmental Authority or any other Person required to
be obtained, made or given by it in connection with the borrowings hereunder or
with the execution, delivery, performance, validity or enforceability of this
Agreement or the other
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Operative Documents to which it is a party have been so obtained, made or
received. This Agreement and each other Operative Document to which it is a
party has been duly executed and delivered on behalf of Recco. This Agreement
and each other Operative Document to which it is a party constitutes a legal,
valid and binding obligation of Recco enforceable against Recco in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).
(4) No Legal Bar. The execution, delivery and performance of this
Agreement and the other Operative Documents, the borrowings hereunder and the
use of the proceeds thereof will not violate any Requirement of Law or
Contractual Obligation of Recco and will not result in, or require, the creation
or imposition of any Lien on any of its properties or revenues pursuant to any
such Requirement of Law or Contractual Obligation.
(5) No Material Litigation. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or
threatened by or against Recco or against any of its properties or revenues (i)
with respect to this Agreement or the other Operative Documents or any of the
transactions contemplated hereby or thereby, or (ii) which could have a material
adverse effect on the business, properties, assets, operations or condition,
financial or otherwise, of Recco, or the ability of Recco to perform its
obligations hereunder or under the other Operative Documents.
(6) No Default; No Event of Default. Recco is not in default under
or with respect to any of its Contractual Obligations in any respect which could
have a material adverse effect on the business, operations, properties, assets,
or condition, financial or otherwise, of Recco, or on the ability of Recco to
perform its obligations hereunder or under the other Operative Documents. No
Event of Default or Unmatured Event of Default has occurred and is continuing.
(7) No Burdensome Restrictions. Recco is not a party to or subject
to any Contractual Obligation (other than the Operative Documents) which could
have a material adverse effect on the business, properties, assets, operations
or condition, financial or otherwise, of Recco, or on the ability of Recco to
carry out its obligations hereunder or under the other Operative Documents.
(8) Taxes. Recco has filed or caused to be filed all Federal, state
and other tax returns which are required to be filed by it and has paid all
taxes shown
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to be due and payable on said returns or on any Federal, state and other tax
assessments made against it or any of its property and all other taxes, fees or
other charges imposed on it or any of its property by any Governmental Authority
having taxing power; no tax Lien has been filed against it (except for tax Liens
described in subsection 6.2(a) hereof), and no claim is being asserted by any
Governmental Authority, with respect to any such tax, fee or other charge.
(9) ERISA. Neither Recco nor any ERISA Affiliate of Recco has
participated in any Multiemployer Plan. Except for the Seller, neither Recco nor
any ERISA Affiliate of Recco has maintained any Single Employer Plan. No
Reportable Event has occurred during the five-year period prior to the date on
which this representation is made or deemed made with respect to any Plan of the
Seller, and each such Plan has complied with the applicable provisions of ERISA
and the Code. The present value of all accrued benefits under each such Plan
(based on those assumptions used to fund the Plans) did not, as of the last
annual valuation date prior to the date on which this representation is made or
deemed made, exceed the value of the assets of such Plan allocable to such
accrued benefits.
(10) Investment Company Act; Other Regulations. Recco 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. Recco is
not subject to regulation under any Federal or state statute or regulation which
limits its ability to incur Debt.
(11) Subsidiaries. Recco has no Subsidiaries. Recco is a wholly owned
subsidiary of the Seller.
(12) Purpose of Loans. The proceeds of the Loans shall be used by
Recco solely to purchase Contracts from the Seller pursuant to the Sale
Agreement.
(13) No Deduction. Recco is not required to make any deduction or
withholding from payments to be made by it to the Funding Agent, the Surety
Provider and the Lenders under this Agreement or the other Operative Documents,
and the execution and performance of this Agreement and any of the other
Operative Documents does not make Recco liable for any registration tax, stamp
duty or similar tax or duty imposed by any authority of or within its
jurisdiction of incorporation, which tax or duty has not been, or will not be,
paid when due.
(14) No Priority Claims. Recco has no liability in respect of any
unsecured Debt, or in respect of any guarantee by Recco of the obligations of
another, under which the lender, creditor or lessor or the Person in whose favor
such
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guarantee is given has any right, by operation of law or otherwise, to have any
claim in respect of such obligation or guarantee first satisfied out of the
general assets of Recco in priority to the claims of its general creditors.
(15) Title; Liens. Except for the Lien granted to the Funding Agent
for the benefit of the Secured Parties pursuant to the Security Agreement and
the other Liens permitted pursuant to the Operative Documents and the Lien
granted to the Seller pursuant to the Subordinated Security Agreement, Recco
owns each item of the Collateral free and clear of any and all Liens or claims
of others. No security agreement, financing statement or other public notice
with respect to all or any part of the Collateral is on file or of record in any
public office, except such as may have been filed in favor of the Funding Agent
for the benefit of the Secured Parties pursuant to the Security Agreement and in
favor of the Seller pursuant to the Subordinated Security Agreement and Liens
with respect to taxes described in Section 6.2(a) hereof.
(16) Ownership of Contracts. Each Purchase by Recco of Contracts
constitutes a valid sale of the Contracts to Recco and creates in favor of Recco
a perfected ownership interest in and valid, legal and equitable title to such
Contracts, which ownership interest is not subject to any Lien.
(17) No Petition. There is no intent to file a voluntary petition
under the federal bankruptcy laws with respect to Recco.
(18) Separate Corporate Existence. Recco is a special purpose
corporation whose primary activities are restricted in its certificate of
incorporation to purchasing Contracts from the Seller, entering into agreements
for the servicing thereof, borrowing funds secured thereby and conducting such
other activities as necessary or appropriate to carry out its primary
activities. Recco's certificate of incorporation provides for at least two
Independent Directors as set forth at Section 5.11 hereof, and requires, inter
alia, the unanimous vote of its Board of Directors to take corporate action to
institute, file or consent to insolvency or bankruptcy proceedings.
SECTION 4. CONDITIONS PRECEDENT
0.1. Conditions to Effectiveness. The effectiveness of this Agreement is
subject to the satisfaction, on or prior to the date hereof, of the following
conditions precedent:
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(1) Operative Documents. The Funding Agent, the Surety Provider and
each Lender shall have received (i) this Agreement executed and delivered by a
duly authorized officer of Recco, (ii) the Loan Note executed and delivered by a
duly authorized officer of Recco, (iii) the Security Agreement (substantially in
the form of Exhibit D hereto), executed and delivered by a duly authorized
officer of Recco, (iv) solely to the Surety Provider, a copy of the Credit and
Collection Policy, (v) copies of all the other Operative Documents, executed by
all parties thereto and in form and substance satisfactory to the Funding Agent,
the Surety Provider and the Lenders, and (vi) such other documents or
instruments as may be reasonably requested by the Funding Agent, the Surety
Provider or the Lenders.
(2) Corporate Proceedings. The Funding Agent, the Surety Provider
and the Lenders shall have received a copy of the resolutions, in form and
substance satisfactory to the Funding Agent, the Surety Provider and the
Lenders, of the Board of Directors of each of the Seller and Recco authorizing
the execution, delivery and performance of the Operative Documents to which it
is a party certified by the Secretary or an Assistant Secretary of each such
corporation, as of the date hereof, which certificate shall state that the
resolutions thereby certified have not been amended, modified, revoked or
rescinded and shall be in form and substance satisfactory to the Funding Agent,
the Surety Provider and the Lenders.
(3) Corporate Documents; Incumbency. (i) The Funding Agent, the
Surety Provider and the Lenders shall have received copies of the certificate of
incorporation and by-laws of each of the Seller and Recco certified as of the
date hereof as complete and correct copies thereof by its Secretary or Assistant
Secretary and (ii) a certificate of the Secretary or an Assistant Secretary of
each of the Seller and Recco, certifying the names and true signatures of the
officers of the Seller and Recco authorized to sign the Operative Documents to
which it is a party.
(4) No Violation. The consummation of the transactions contemplated
hereby and by the other Operative Documents shall not contravene, violate or
conflict with, nor involve the Seller or Recco in any violation of, any
Requirement of Law except to the extent that any such contravention, violation,
conflict or involvement would not adversely affect the transactions contemplated
hereby and by the other Operative Documents.
(5) Fees. The Surety Provider, the Funding Agent, Chase Securities,
Inc. and the Lenders shall have received in immediately available funds any fees
due and payable to any of them, all as set forth in the Fee Letter Agreement and
the Premium Side Letter Agreement.
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(6) Legal Opinions. The Funding Agent, the Surety Provider and the
Lenders shall have received (i) the executed legal opinion of counsel to the
Seller and Recco with respect to the enforceability of their obligations under
the Operative Documents and the Loan Note, (ii) the executed legal opinions of
counsel to the Seller and Recco to the effect that (A) the Seller and Recco
would not be substantively consolidated for purposes of the Bankruptcy Code and
(B) that each Purchase by Recco of Contracts constitutes a true sale of
Contracts, (iii) the executed legal opinion of counsel to Recco to the effect
that the security interest granted by Recco to the Funding Agent for the benefit
of the Secured Parties pursuant to the Security Agreement is a valid first
priority security interest and (iv) such other legal opinions as the Funding
Agent or the Surety Provider may reasonably require.
(7) UCC Searches. The Funding Agent, the Surety Provider and the
Lenders shall have received lien searches and other evidence as to the absence
of any Lien on or security interest in the Contracts in form and substance
satisfactory to the Funding Agent, the Surety Provider and the Lenders. Any
termination statements or releases requested by the Funding Agent, the Surety
Provider or the Lenders to be filed with respect to the Contracts shall have
been filed.
(8) Diligence. The operation of the Seller's billing, collection and
information systems with respect to the Contracts shall be satisfactory to the
Funding Agent, the Surety Provider and the Lenders.
(9) Recovery Procedure and Alternate Servicing Plan. The Funding
Agent, the Surety Provider and the Lenders shall be satisfied with the recovery
procedure and Alternate Servicing Plan implemented for the Seller's MIS system,
(the "Recovery Procedure"), a copy of each of which has been provided to the
Funding Agent and the Surety Provider.
(10) Internal Controls. The Funding Agent, the Surety Provider and
the Lenders shall be satisfied that the Seller has implemented all necessary
internal and other systems and procedures to monitor collections on account of
the Contracts, to gather all information and furnish all reports required under
the Operative Documents and to monitor compliance with the Operative Documents.
(11) Consents. The Funding Agent, the Surety Provider and the Lenders
shall have received copies of all consents, licenses and approvals, if any,
required in connection with the execution, delivery and performance by it and
the validity and enforceability against it of the Operative Documents to which
it is a party and such consents, licenses and approvals shall be in full force
and effect.
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(12) Surety Provider Credit Risk. S&P and Moody's shall each have
informed the Surety Provider that the transactions contemplated by this
Agreement and the other Operative Documents (without regard to the Note Policy)
is an investment-grade risk.
(13) Commercial Paper Ratings. The Commercial Paper shall be rated
A-1 by S&P and P-1 by Moody's.
(14) Insurance. The Funding Agent and the Surety Provider shall have
received evidence that the Blanket Policy or other form of insurance acceptable
to the Funding Agent is in full force and effect.
(15) Note Policy. The Surety Provider shall have issued the Note
Policy to the Funding Agent for the benefit of the Lenders.
(16) Sub-Lease Agreement. The Funding Agent, the Surety Provider and
the Lenders shall have received a copy of the Sublease and Administrative
Services Agreement executed by Onyx and Recco providing for the lease of storage
space by Onyx to Recco for the location of the Files to be maintained by Recco
on behalf of the Secured Parties.
(17) Additional Documents. The Funding Agent, the Surety Provider and
the Lenders shall have received each additional document, instrument, legal
opinion or item of information reasonably requested by the Funding Agent, the
Surety Provider and the Lenders in respect of any aspect or consequence of the
transactions contemplated hereby or by any other Operative Document.
(18) Additional Matters. All corporate and other proceedings,
documents, instruments and legal matters specified in Section 4.1 hereof, or
required after the date hereof, shall be satisfactory in form and substance to
the Funding Agent, the Surety Provider and the Lenders.
(19) Collection Account and Collection Account Agreement. Recco shall
have established the Collection Account, and the financial institution at which
the Collection Account is established shall have executed and delivered the
Collection Account Agreement in form and substance acceptable to the Funding
Agent and the Surety Provider (as amended, supplemented or otherwise modified
and in effect from time to time, the "Collection Account Agreement").
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(20) Lien Certificate. The Funding Agent and the Surety Provider
shall have received a certificate of a Responsible Officer of each of the Seller
and Recco to the effect that the Purchased Contracts are not subject to any
Lien, except Liens created by the Operative Documents.
(21) Filings. The Funding Agent and the Surety Provider shall have
received acknowledgment copies of proper financing statements, duly filed under
the Uniform Commercial Code of all jurisdictions that the Funding Agent and the
Surety Provider may deem necessary or desirable in order to perfect the
ownership interest of Recco created by the Sale Agreement and the security
interests created by the Security Agreement and all other filings,
notifications, consents and recordings necessary to consummate the transactions
contemplated hereunder and under the Operative Documents shall be accomplished
and the Funding Agent and the Surety Provider shall have received evidence of
such filings, notifications, consents and recordings satisfactory in form and
substance to the Funding Agent and the Surety Provider.
0.2. Conditions to Each Loan. The agreement of any Lender to make any
Loan requested to be made by it on any date (including, without limitation, the
initial Loan) is subject to the satisfaction of the following conditions
precedent (it being understood and agreed that PARCO makes Loans on an offering
basis only and will make Loans only prior to a PARCO Wind-Down Event):
(22) Each of the representations and warranties made by Recco or the
Seller in or pursuant to any of the Operative Documents shall be true and
correct on and as of such date as if made on and as of such date.
(23) Recco shall have delivered a Notice of Borrowing to the Funding
Agent and the Surety Provider.
(24) After giving effect to the Loan to be made on such day, the
requirements of Section 2.1 shall not have been violated.
(25) The Funding Agent, the Surety Provider and the Lenders shall
have received an Officer's Certificate from Recco, dated the date the proceeds
of such Loan are requested to be disbursed, executed by the president, the chief
financial officer, the chief executive officer or any executive vice president,
in the form of Exhibit E hereto. Recco shall have received from the Seller an
Officer's Certificate, dated the date the proceeds of such Loan are requested to
be disbursed, in the form of Exhibit C to the Sale Agreement, and shall have
delivered such Certificate to the Funding Agent, the Surety Provider and the
Lenders.
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(26) No Borrowing Base Deficiency shall exist as reported on the
Daily Report.
(27) A File relating to each Contract to be purchased with the
proceeds of such Loan shall have been delivered by the Seller to Recco to be
held by Recco for the benefit of the Funding Agent on behalf of the Secured
Parties in segregated fireproof facilities; provided, however, that so long as
MBIA is the surety provider with respect to this Program and all other
financings entered into by Recco and Onyx Acceptance Financial Corporation, the
Files may be stored in the same facilities on an unsegregated basis with the
files of Onyx Acceptance Financial Corporation.
The proceeds of all Loans shall be deposited in the Disbursement
Sub-Account. Each borrowing by Recco hereunder shall constitute a representation
and warranty by Recco as of the date of such Loan that the conditions contained
in this subsection 4.2 have been satisfied.
0.3. Conditions to Release of Proceeds of Loans from Disbursement
Sub-Account. The agreement of Recco to release the proceeds of Loans from the
Disbursement Sub-Account is subject to the satisfaction of the following
conditions precedent:
(28) Representations and Warranties. Each of the representations and
warranties made by Recco or the Seller in or pursuant to any of the Operative
Documents shall be true and correct on and as of such date as if made on and as
of such date.
(29) Contract List. The Funding Agent and the Surety Provider shall
have received the Contract List relating to each Contract to be purchased with
the proceeds of such Loan.
(30) Officer's Certificates. The Funding Agent and the Surety
Provider shall have received an Officer's Certificate from Recco, dated the date
the proceeds of such Loan are requested to be disbursed from the Disbursement
Sub-Account, executed by the president, the chief financial officer, the chief
executive officer or any executive vice president, in the form of Exhibit E
hereto.
Recco shall have received from the Seller an Officer's Certificate,
dated the date the proceeds of such Loan are requested to be disbursed from the
Disbursement Sub-Account, in the form of Exhibit C to the Sale Agreement, and
shall have delivered such certificate to the Funding Agent and Surety Provider.
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(31) Additional Documents. The Funding Agent and the Surety Provider
shall have received each additional document, instrument, legal opinion or item
of information reasonably requested by the Funding Agent and the Surety Provider
in respect of any aspect or consequence of the transactions contemplated hereby
or by any other Operative Document.
(32) Additional Matters. All corporate and other proceedings,
documents, instruments and legal matters specified in Section 4.1 hereof, or
required after the date hereof, shall be satisfactory in form and substance to
the Funding Agent and the Surety Provider.
(33) Borrowing Base. No Borrowing Base Deficiency shall exist on the
day of the release of funds from the Disbursement Sub-Account as reported on the
Daily Report.
(34) Contract Files. A File relating to each Contract to be purchased
with the proceeds of such Loan shall have been delivered by the Seller to Recco
to be held by Recco for the benefit of the Funding Agent for the benefit of the
Secured Parties in segregated fireproof facilities; provided, however, that so
long as MBIA is the surety provider with respect to this Program and all other
financings entered into by Recco and Onyx Acceptance Financial Corporation, the
Files may be stored in the same facilities on an unsegregated basis with the
files of Onyx Acceptance Financial Corporation.
Each release of the proceeds of Loans to Recco hereunder shall
constitute a representation and warranty by Recco as of the date of such Loan
that the conditions contained in this Section 4.3 have been satisfied.
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SECTION 5. AFFIRMATIVE COVENANTS
Recco hereby agrees that, so long as this Agreement remains in effect,
Recco shall:
0.1. Financial Statements. Furnish to the Funding Agent, the Surety
Provider and the Lenders:
(1) as soon as available, but in any event within 90 days after the
end of each fiscal year of Recco, a copy of the balance sheet as at the end of
such year and the related statements of income and of cash flows for such year,
setting forth in each case in comparative form the figures for the previous year
(except for Recco's first fiscal year for which there are no comparative figures
for the previous fiscal year), audited by PricewaterhouseCoopers LLP or other
independent certified public accountants of nationally recognized standing; and
(2) as soon as available, but in any event not later than 45 days
after the end of each of the first eleven monthly periods of each fiscal year of
Recco, the unaudited balance sheet of Recco as at the end of such monthly period
and the related unaudited statements of income and of cash flows of Recco for
such period and the portion of the fiscal year through the end of such period,
setting forth in each case in comparative form the figures for the previous
year, certified by a Responsible Officer as being fairly stated in all respects
(subject to normal year-end audit adjustments);
all such financial statements to be complete and correct in all respects and to
be prepared in detail and in accordance with GAAP applied consistently
throughout the periods reflected therein and with prior periods (except as
approved by such accountants or officer, as the case may be, and disclosed
therein).
0.2. Certificates; Other Information. Furnish to the Funding Agent, the
Surety Provider and the Lenders:
(3) concurrently with the delivery of the financial statements
referred to in Section 5.1(a), a certificate of the independent certified public
accountants reporting on such financial statements stating that in making its
normal examination for purposes of its annual audit no knowledge was obtained of
any Event of Default or Unmatured Event of Default, except as specified in such
certificate;
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(4) concurrently with the delivery of the financial statements
referred to in Sections 5.1(a) and 5.1(b), a certificate of a Responsible
Officer stating that Recco during such period has observed or performed all of
its covenants and other agreements, and satisfied every condition, contained in
this Agreement and the other Operative Documents to be observed, performed or
satisfied by it, and that such Officer has obtained no knowledge of any
Unmatured Event of Default or Event of Default, except as specified in such
certificate;
(5) within five Business Days after the same are sent, copies of all
financial statements, reports and other communications that Recco may make to,
or file or have with, the SEC or any state securities commission; and
(6) promptly, such additional financial and other information as the
Funding Agent, the Surety Provider or the Lenders may from time to time request.
0.3. Payment of Obligations. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature.
0.4. Conduct of Business and Maintenance of Existence. Continue to
engage in business of the same type as now conducted by it and preserve, renew
and keep in full force and effect its corporate existence and take all action to
maintain all rights, privileges and franchises necessary or desirable in the
normal conduct of its business; and comply in all material respects with all
Contractual Obligations and Requirements of Law.
0.5. Maintenance of Property; Insurance. Keep all property useful and
necessary in its business in good working order and condition; maintain, or
cause to be maintained on its behalf, the Blanket Policy or other form of
insurance acceptable to the Funding Agent and the Surety Provider and, with
financially sound and reputable insurance companies, insurance on all its
property in at least such amounts and against at least such risks as are usually
insured against in the same general area by companies engaged in the same or a
similar business, and furnish to the Funding Agent, the Surety Provider and the
Lenders, at least annually, and otherwise upon written request, full information
as to the insurance carried.
0.6. Inspection of Property; Files, Books and Records; Discussions. Keep
proper books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities; and permit
representatives
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of the Funding Agent, the Surety Provider and the Lenders to visit and inspect
any of its properties and examine and make abstracts from any of its books and
records and the Files at any time and as often as may be desired on prior notice
during normal business hours and to discuss the business, operations, properties
and financial and other condition of Recco with officers and employees of Recco
and with its independent certified public accountants.
0.7. Notices. Promptly give notice to the Funding Agent, the Surety
Provider and the Lenders of:
(7) the occurrence of any Event of Default or Unmatured Event of
Default (with notice to S&P and Moody's);
(8) any (i) default or event of default by Recco under any
Contractual Obligation of Recco or (ii) litigation, investigation or proceeding
which may exist at any time affecting Recco; and
(9) a material adverse change in the business, properties, assets,
operations or condition (financial or otherwise) of Recco.
Each notice pursuant to this Section 5.7 shall be accompanied by a
statement of a Responsible Officer setting forth details of the occurrence
referred to therein and stating what action Recco proposes to take with respect
thereto.
0.8. Delivery of Other Reports. Furnish, or instruct the Servicer to
deliver any reports required to be delivered by Recco or the Servicer pursuant
to any Operative Document to which Recco or the Servicer is a party or which
Recco or the Servicer has signed.
0.9. Annual Certificate. Concurrently with the delivery, on account
of each fiscal year, of the financial statements of Recco required to be
delivered pursuant to Section 5.1(a) hereof, furnish to the Funding Agent, the
Surety Provider and the Lenders, a certificate of a Responsible Officer of Recco
to the effect that the facts upon which counsel to Recco relied in giving its
legal opinion that the Seller and Recco would not be substantively consolidated
for purposes of the United States Bankruptcy Code of 1978, as amended, have not
changed so as to render such opinion no longer valid.
0.10. Further Assurances. Do such further acts and things and execute
and deliver to the Funding Agent, the Surety Provider and the Lenders such
assignments, agreements, powers and instruments as are required by the Funding
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Agent, the Surety Provider or the Lenders to carry into effect the purposes of
this Agreement and the other Operative Documents or to better assure and confirm
unto the Funding Agent, the Surety Provider and the Lenders, their respective
rights, powers and remedies hereunder and under the other Operative Documents,
including, without limitation, to obtain such consents and give such notices,
and to file and record all such documents and instruments, and renew each such
consent, notice, filing and recordation, at such time or times, in such manner
and at such places, as may be necessary or desirable to preserve and protect the
position of the Funding Agent and the Secured Parties hereunder and under the
other Operative Documents. This covenant shall survive the termination of this
Agreement.
0.11. Independent Director. Maintain at all times at least two
Independent Directors. For purposes of this Section 5.11, "Independent Director"
shall have the meaning set forth in Recco's Certificate of Incorporation as in
effect on the date hereof.
0.12. Instructions to Obligors. Instruct all Obligors to cause all
Collections to be deposited directly into a Lock-Box.
0.13. Cooperation in Making Calculations. Cooperate with the Funding
Agent, the Surety Provider and the Lenders at all times in the calculation of
all formulas used in any Operative Document, including without limitation,
deliver in written or electronic form, any and all data and other information
necessary or required in the calculation of the Borrowing Base, Net Yield and
Recco Expenses and all calculations necessary or required to perform such
calculation. Recco hereby agrees to provide all such information on or before
each date, without prior request by the Funding Agent, the Surety Provider and
the Lenders, such information or data is required to make any such calculation
and to provide such information and data in such form as may be immediately used
by the Funding Agent, the Surety Provider and the Lenders without further
interpretation or purchase or license of any software. Recco does hereby further
agree that if it fails to provide any such information or data as required in
this Section 5.13, the Funding Agent, on behalf of the Secured Parties and the
Surety Provider, may use any estimate of any amount or calculation that it, in
its sole discretion, determines.
0.14. Interest Rate Hedge Mechanisms. Maintain or cause to be maintained
at all times Interest Rate Hedge Mechanisms to cover amounts outstanding under
the warehouse facility from time to time, satisfactory to Moody's, S&P, the
Funding Agent, the Surety Provider and the Lenders. Upon the execution of each
Interest Rate Hedge Mechanism, Recco shall deliver executed copies of such
Interest Rate Hedge Mechanism to the Funding Agent, the Surety Provider and the
Lenders.
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0.15. Contract Files. Maintain continuous custody of the Files (other
than those held by the Servicer, as agent for Recco pursuant to the Sale
Agreement) on behalf of the Funding Agent in secure and fireproof facilities in
accordance with the customary standards for such custody as certified to the
Funding Agent for the benefit of the Secured Parties; provided that such Files
shall be segregated from those of the Seller, and shall be readily identifiable
(by notation, segregation or otherwise) from files relating to Onyx Acceptance
Financial Corporation.
0.16. Permitted Investments. Notify the Funding Agent of the type and
maturity of Permitted Investments into which the funds in the Collection Account
shall be invested. Such notice shall be received by the Funding Agent no later
than 10:00 A.M. (New York City time) on each Business Day.
0.17. Separate Existence. At all times:
(10) maintain its own deposit account or accounts, separate from
those of any Affiliate, with commercial banking institutions and ensure that its
funds will not be diverted to any other Person or for other than its own
corporate uses, nor will such funds be commingled with the funds of any
Affiliate (other than funds deposited to the Clearing Account or the Lock-Box
Account, which funds may be commingled for a period not exceeding two (2)
Business Days);
(11) to the extent that it shares the same officers or other
employees as any of its Affiliates, the salaries of and the expenses related to
providing benefits to such officers and other employees shall be fairly
allocated among such entities, and each such entity shall bear its fair share of
the salary and benefit costs associated with all such common officers and
employees;
(12) to the extent that it jointly contracts with any of its
Affiliates to do business with vendors or service providers or to share overhead
expenses, the costs incurred in so doing shall be allocated fairly among such
entities, and each such entity shall bear its fair share of such costs. To the
extent that it contracts or does business with vendors or service providers
where the goods and services provided are partially for the benefit of any other
Person, the costs incurred in so doing shall be fairly allocated to or among
such entities for whose benefit the goods or services are provided, and each
such entity shall bear its fair share of such costs;
(13) enter into all material transactions with its Affiliates,
whether currently existing or hereafter entered into, only on an arm's length
basis, it being
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understood and agreed that the transactions contemplated in the Operative
Documents meet the requirements of this paragraph (d);
(14) maintain office space that is physically segregated from the
office space of any of its Affiliates and, to the extent that it and any of its
Affiliates have offices in the same location, there shall be a fair and
appropriate allocation of overhead costs among them, and each such entity shall
bear its fair share of such expenses;
(15) conduct its affairs strictly in accordance with its certificate
of incorporation and observe all necessary, appropriate and customary corporate
formalities, including, but not limited to, separate stationery, holding all
regular and special stockholders' and directors' meetings appropriate to
authorize all corporate action, keeping separate and accurate minutes of its
meetings, passing all resolutions or consents necessary to authorize actions
taken or to be taken, and maintaining accurate and separate books, records,
financial records and accounts, including, but not limited to, payroll and
intercompany transaction accounts;
(16) hold itself out as a separate entity, pay its own liabilities
out of its own funds, and not assume or guarantee any of the liabilities of any
of its Affiliates; and
(17) take, or refrain from taking, as the case may be, all other
actions that are necessary to be taken or not to be taken in order to comply
with this Section 5.17.
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SECTION 6. NEGATIVE COVENANTS
Recco hereby agrees that, so long as this Agreement remains in effect,
Recco shall not directly or indirectly (without the prior written consent of the
Funding Agent and the Surety Provider):
0.1. Limitation on Debt. Create, incur, assume or suffer to exist any
Debt, except indebtedness in respect of the Loans, the Loan Note, other
obligations of Recco under the Operative Documents, including, without
limitation, the Subordinated Note.
0.2. Limitation on Liens. Create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except:
(1) Liens for taxes not yet due;
(2) Liens in favor of the Funding Agent as provided in the Operative
Documents; and
(3) Liens in favor of the Seller securing the Subordinated Note.
0.3. Limitation on Fundamental Changes. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets, or make any material change in its present method of conducting
business.
0.4. Limitation on Sale of Assets. Convey, sell, lease, assign, transfer
or otherwise dispose of any of its property, business or assets (including,
without limitation, Contracts and leasehold interests), whether now owned or
hereafter acquired, except as provided in the Operative Documents.
0.5. Purchased Contracts.
(4) Sell, assign or otherwise encumber any Purchased Contract,
except as provided in the Operative Documents; or
(5) Cancel, terminate, amend, modify or waive any term or condition
of any Purchased Contract (including the granting of rebates or
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adjustments with respect thereto), except in accordance with the Credit and
Collection Policy.
0.6. Limitation on Dividends. Declare or pay any dividend on, or make
any payment on account of, or set apart assets for a sinking or other analogous
fund for, the purchase, redemption, defeasance, retirement or other acquisition
of, any shares of any class of Capital Stock of Recco or any warrants or options
to purchase any such Stock, whether now or hereafter outstanding, or make any
other distribution in respect thereof, either directly or indirectly, whether in
cash or property or in obligations of Recco except (i) dividends payable solely
in common stock of Recco, and (ii) payments pursuant to any agreement or other
arrangement approved in writing by the Funding Agent and the Surety Provider to
share taxes of any affiliated, consolidated, unitary, combined or similar group
including the Seller and Recco and (iii) cash dividends to the extent permitted
by the Security Agreement, provided that after giving effect thereto no Event of
Default or Unmatured Event of Default shall have occurred and be continuing.
0.7. Limitation on Capital Expenditures. Make or commit to make (by way
of the acquisition of securities of a Person or otherwise) any expenditure in
respect of the purchase or other acquisition of fixed or capital assets.
0.8. Limitation on Investments, Loans and Advances. Make any advance,
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of or any assets constituting a
business unit of, or make any other investment in, any Person, except:
(6) purchases of Contracts pursuant to the Sale Agreement; and
(7) investments in Permitted Investments of funds, if any, on
deposit in the Collection Account.
0.9. Transactions with Affiliates. Enter into any transaction,
including, without limitation, any purchase, sale, lease or exchange of property
or the rendering of any service, with any Affiliate, except for (i) Purchases,
(ii) transactions expressly permitted by the Operative Documents and (iii) any
agreement or other arrangement satisfactory to the Funding Agent, the Surety
Provider and the Lenders to share taxes of any affiliated, consolidated,
unitary, combined or similar group including the Seller and Recco.
0.10. Sale and Leaseback. Enter into any arrangement with any Person
providing for the leasing by Recco of real or personal property which has been
or is to be sold or transferred by Recco to such Person or to any other Person
to
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whom funds have been or are to be advanced by such Person on the security of
such property or rental obligations of Recco.
0.11. Corporate Documents. Amend its Certificate of Incorporation or
By-Laws.
0.12. Capital Stock. Issue any shares of capital stock in addition to
the shares issued and paid for as of the Closing Date or permit during the term
of this Agreement any transfers of any shares of its capital stock; provided,
however, that its parent company may pledge the stock of Recco.
0.13. Fiscal Year. Permit the fiscal year of Recco to end on a day other
than December 31st.
0.14. Limitation on Negative Pledge Clauses. Enter into any agreement
with any Person other than the Funding Agent, the Surety Provider and the
Lenders pursuant to the Operative Documents which prohibits or limits the
ability of Recco to create, incur, assume or suffer to exist any Lien upon any
of its property, assets or revenues, whether now owned or hereafter acquired
except with the prior written consent of the Funding Agent, the Surety Provider
and the Lenders.
0.15. Activities of Recco. Engage in any business or activity of any
kind or enter into any transaction or indenture, mortgage, instrument,
agreement, contract, lease or other undertaking which is not directly related to
the transactions contemplated and authorized hereby or by the other Operative
Documents other than an agreement or other arrangement approved in writing by
the Funding Agent and the Surety Provider to share taxes of any affiliated,
consolidated, unitary, combined or similar group including the Seller and Recco.
0.16. Agreements.
(8) Except for the Operative Documents and as expressly permitted by
the Operative Documents, become a party to, or permit any of its properties to
be bound by, any indenture, mortgage, instrument, contract, agreement, lease or
other undertaking, or issue any power of attorney except to the Funding Agent
or, pursuant to the Sale Agreement, to the Servicer, or cancel, terminate,
amend, supplement, modify or waive any of the provisions of the Sale Agreement
or request, consent or agree to or suffer to exist or permit any such
cancellation, termination, amendment, supplement, modification or waiver.
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(9) Permit the Seller or the Servicer to assign any of their
respective rights or obligations under the Sale Agreement, except as expressly
permitted by the Sale Agreement.
(10) Permit the Servicer to change the forms of the Monthly Report,
the Daily Report, the Annual Report or any other document required to be
delivered by it pursuant to the Sale Agreement.
(11) On any day, permit a Borrowing Base Deficiency to exist.
0.17. Bank Accounts. Move the Bank Accounts from the institution at
which they are maintained on the Closing Date.
0.18. Successor Servicer. Permit any change of Servicer, except in
accordance with the Sale Agreement.
0.19. Servicing of Contracts.
(12) Permit any change in the method by which Collections are made,
unless instructed to in writing by the Funding Agent and the Surety Provider, in
which case Recco does hereby agree to implement any and all such changes as soon
as practicable.
(13) Amend, modify or otherwise change or agree to any amendment,
modification or other change in the Credit and Collection Policy without the
prior written consent of the Funding Agent and the Surety Provider to each such
proposed amendment, modification or change (with notice to S&P and Moody's).
0.20. Prohibitions Regarding Subordinated Note. Make any payment or
prepayment of, or purchase, redeem or otherwise acquire, or amend any provisions
pertaining to the subordination or the terms of payment of, the Subordinated
Note except as permitted by the terms of the Operative Documents.
0.21. Lock-Box Banks. Add or terminate any bank as a Lock-Box Bank or
make any change in its instructions to Obligors regarding payments to be made to
any Lock-Box Bank, unless the Funding Agent and the Surety Provider shall have
received notice of such addition of any Lock-Box Bank; or deposit or otherwise
credit, or cause or permit to be so deposited or credited, Collections to any
lock-box account except the Lock-Boxes, the Clearing Account and the Collection
Account.
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0.22. Contract Files. Transfer the Files to any Person or permit the
Files to be maintained at any location other than as set forth in the Sale
Agreement, in fireproof facilities owned, leased or utilized by Recco as
certified to the Funding Agent and the Surety Provider.
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SECTION 7. EVENTS OF DEFAULT OR REPLACEMENT
EVENT; REMEDIES
7.1. Events of Default or Replacement Event; Remedies. If an Event of
Default or a Replacement Event shall have occurred, the Aggregate Commitment of
the APA Banks to make Loans to Recco up to the Facility Limit shall terminate as
of the Termination Date. Upon the occurrence of an Event of Default, and upon
the written instructions of the Controlling Party, Recco shall take such action
or shall cause such action to be taken pursuant to any and all Interest Rate
Hedge Mechanisms and/or enter into any Hedge Agreement at the sole expense of
Recco promptly upon the request of the Controlling Party. In addition, the
Controlling Party shall be entitled to exercise any additional rights it may
have pursuant to the Operative Documents, including, without limitation, the
right to implement a Complete Servicing Transfer under the Sale Agreement and
the right to intercept the payments of Obligors directly to the Funding Agent.
SECTION 8. THE FUNDING AGENT
8.1. Funding Agent. (a) Notwithstanding any provision of this Agreement
and the other Operative Documents: (i) the Funding Agent shall not have any
obligations other than those specifically set forth herein, and no implied
obligations of the Funding Agent shall be read into this Agreement; and (ii) in
no event shall the Funding Agent be liable under or in connection with this
Agreement for indirect, special, or consequential losses or damages of any kind,
including lost profits, even if advised of the possibility thereof and
regardless of the form of action by which such losses or damages may be claimed.
Neither the Funding Agent nor any of its directors, officers, agents or
employees shall be liable for any action taken or omitted to be taken in good
faith by it or them under or in connection with this Agreement, except for its
or their own gross negligence or willful misconduct. Without limiting the
foregoing, the Funding Agent (1) may consult with legal counsel (including
counsel for the Secured Parties), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts, (2) shall not be responsible to the Secured Parties,
Recco, the Seller or the Servicer for any statements, warranties or
representations made in or in connection with this Agreement or the other
Operative Documents, (3) shall not be responsible to the Secured Parties, Recco,
the Seller or the Servicer for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or the other
Operative Documents, (4) shall incur no liability under or in
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respect of any of PARCO's commercial paper or other obligations of PARCO under
this Agreement or the other Operative Documents and (5) shall incur no liability
under or in respect of this Agreement or the other Operative Documents by acting
upon any notice (including notice by telephone), consent, certificate or other
instrument or writing (which may be by facsimile) reasonably believed by it to
be genuine and signed or sent by the proper party or parties. Notwithstanding
anything else herein or in the other Operative Documents, it is agreed that
where the Funding Agent may be required under this Agreement or the other
Operative Documents to give notice of any event or condition or to take any
action as a result of the occurrence of any event or the existence of any
condition, the Funding Agent agrees to give such notice or take such action only
to the extent that it has actual knowledge of the occurrence of such event or
the existence of such condition, and shall incur no liability for any failure to
give such notice or take such action in the absence of such knowledge.
(b) The Chase Manhattan Bank acts as Funding Agent and as administrative
agent for PARCO, as issuing and paying agent for PARCO's commercial paper, as
provider of other backup facilities for PARCO, and may provide other services or
facilities from time to time (collectively, the "Chase Roles"). Each of the
parties hereto hereby acknowledges and consents to any and all Chase Roles,
waives any objections it may have to any actual or potential conflict of
interest caused by Chase's acting as the Funding Agent or as an APA Bank under
this Agreement and acting as or maintaining any of the Chase Roles, and agrees
that in connection with any Chase Role, The Chase Manhattan Bank may take, or
refrain from taking, any action which it in its discretion deems appropriate.
SECTION 9. MISCELLANEOUS
0.1. Amendments and Waivers. None of this Agreement, the Loan Note, any
other Operative Document to which the Funding Agent, the Lenders or Recco is a
party, nor any terms hereof or thereof may be amended, supplemented or modified
except in accordance with the provisions of this subsection. The Funding Agent,
the Lenders, the Surety Provider and Recco may, from time to time, enter into
written amendments, supplements or modifications hereto and to the Loan Note and
the other Operative Documents for the purpose of adding any provisions to this
Agreement or the Loan Note or such other Operative Documents or changing in any
manner the rights of the Funding Agent, the Lenders or Recco hereunder or
thereunder and, in addition, waiving, on such terms and conditions as the
Funding Agent, the Surety Provider and the Lenders may specify in such
instrument, any of the requirements of this Agreement or the Loan Note or such
other Operative Documents or any Unmatured Event of Default or Event of Default
and its consequences. The forego-
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ing notwithstanding, no waiver of paragraph (o) of the definition of Event of
Default shall in any case be effective for more than 15 days. Any such waiver
and any such amendment, supplement or modification shall be binding upon the
Funding Agent, the Surety Provider and the Lenders and all future holders of the
Loan Note and each of S&P and Moody's shall receive notice thereof. In the case
of any waiver, the Funding Agent, the Surety Provider, the Lenders and Recco
shall be restored to their former position and rights hereunder and under the
Loan Note and any other Operative Documents, and any Unmatured Event of Default
or Event of Default waived shall be deemed to be cured and not continuing; but
no such waiver shall extend to any subsequent or other Unmatured Event of
Default or Event of Default, or impair any right consequent thereon.
0.2. Notices. Except where telephonic instructions or notices are
authorized herein to be given, all notices, demands, instructions and other
communications required or permitted to be given to or made upon any party
hereto shall be in writing and shall be personally delivered or sent by
overnight courier service, or by registered, certified or express mail, postage
prepaid, return receipt requested, or by facsimile copy, or telegram (with
messenger delivery specified in the case of a telegram) and shall be deemed to
be delivered for purposes of this Agreement on: (a) the second Business Day
following the day on which such notice was placed in the custody of the U.S.
Postal Service, (b) the next Business Day following the day on which such notice
was placed in the custody of any overnight courier service, including express
mail service or (c) the same Business Day on which such notice is sent by
telegram, messenger or facsimile. Unless otherwise specified in a notice sent or
delivered in accordance with the foregoing provisions of this Section, notices,
demands, instructions and other communications in writing shall be given to or
made upon the respective parties hereto at their respective addresses (or to
their respective facsimile numbers) indicated below, and, in the case of
telephonic instructions or notices, by calling the telephone number or numbers
indicated for such party below:
If to Recco:
ONYX ACCEPTANCE RECEIVABLES CORPORATION
27051 Towne Centre Drive, Suite 210
Foothill Ranch, California 92610
Attention: Chief Financial Officer
Tel. No.: (949) 465-3505
Telecopier No.: (949) 465-3530
If to the Seller:
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ONYX ACCEPTANCE CORPORATION
27051 Towne Centre Drive, 1st Floor
Foothill Ranch, California 92610
Attention: Executive Vice President
and Chief Financial Officer
Tel. No.: (949) 465-3658
Telecopier No.: (949) 465-3992
If to PARCO:
PARK AVENUE RECEIVABLES CORPORATION
c/o Global Securitization Services, LLC
25 West 43rd Street, Suite 704
New York, New York 10036
Attention: President
Telephone: (212) 302-5151
Telecopy: (212) 302-8767
(with a copy to the Funding Agent)
If to the Funding Agent or the APA Banks:
THE CHASE MANHATTAN BANK
450 West 33rd Street, 14th Floor
New York, New York 10001
Attention: Structured Finance Services, PARCO Manager
Telephone: (212) 946-3478
Telecopy: (212) 946-7776
with a copy to:
CHASE SECURITIES INC.
270 Park Avenue, 7th Floor
New York, New York 10017
Attention: Paterno Luzano
Telephone: (212) 834-5381
Telecopy: (212) 834-6562
If to the Surety Provider:
MBIA Insurance Corporation
113 King Street
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Armonk, New York 10504
Attention: Insured Portfolio Management, Structured Finance
Telephone: (914) 273-4949
Telecopy: (914) 765-3163
A copy of any notice delivered to or required to be sent by Recco
hereunder shall be sent by Recco to the holder of the Subordinated Note.
0.3. No Waiver; Cumulative Remedies. No failure to exercise and no delay
in exercising, on the part of the Funding Agent, the Surety Provider or the
Lenders any right, remedy, power or privilege hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not exclusive
of any rights, remedies, powers and privileges provided by law.
0.4. Survival of Representations and Warranties. All representations and
warranties made hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall survive the execution
and delivery of this Agreement and the Loan Note.
0.5. Payment of Expenses and Taxes. Recco agrees, on demand, to (a) pay
or reimburse the Funding Agent, the Surety Provider and the Lenders for all its
out-of-pocket costs and expenses incurred in connection with the preparation and
execution of, and any amendment, supplement or modification to, this Agreement,
the Loan Note and the other Operative Documents and any other documents prepared
in connection herewith or therewith, and the consummation of the transactions
contemplated hereby and thereby, including, without limitation, any and all
collateral audit fees, the reasonable fees and disbursements of counsel to the
Funding Agent, the Surety Provider and the Lenders, (b) pay or reimburse the
Funding Agent, the Surety Provider and the Lenders for all of their costs and
expenses incurred in connection with the enforcement or preservation of any
rights under this Agreement, the Loan Note, the other Operative Documents and
any such other documents, including, without limitation, reasonable fees and
disbursements of counsel to the Funding Agent, the Controlling Party, the Surety
Provider and the Lenders and (c) pay, indemnify, and hold the Funding Agent, the
Surety Provider and the Lenders harmless from, any and all recording and filing
fees and any and all liabilities with respect to, or resulting from any delay in
paying, any registration tax, stamp, duty and other similar taxes or duties, if
any, which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation of any of
36
<PAGE> 43
the transactions contemplated by, or any amendment, supplement or modification
of, or any waiver or consent under or in respect of, this Agreement, the Loan
Note, the other Operative Documents and any such other documents, and (d) pay,
indemnify, and hold the Funding Agent, the Surety Provider and the Lenders
harmless from and against any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Agreement, the Loan Note and
the other Operative Documents, (all the foregoing, collectively, the
"indemnified liabilities"), provided that Recco has no obligation hereunder to
the Funding Agent, the Surety Provider and the Lenders with respect to
indemnified liabilities arising from the gross negligence or willful misconduct
of the Funding Agent, the Surety Provider or the Lenders. The agreements in this
Section 9.5 shall survive repayment of the Loan Note and all other amounts
payable hereunder.
0.6. Successors and Assigns; Participations.
(1) This Agreement shall be binding upon and inure to the benefit of
the Funding Agent, the Surety Provider and the Lenders and all future holders of
the Loan Note and their respective successors and assigns, except that Recco may
not assign or transfer any of its rights or obligations under this Agreement.
PARCO may not assign its rights hereunder without prior notice to the Surety
Provider and without the consent of Recco and the Surety Provider (which consent
shall not be unreasonably withheld); provided that no such consent shall be
required in the event of any assignment by PARCO to (i) an APA Bank pursuant to
the Asset Purchase Agreement or (ii) a commercial paper vehicle administered by
Chase. On and after the date hereof, the Funding Agent shall notify Recco and
the Surety Provider of any new or exiting APA Banks.
(2) Any APA Bank may, in accordance with applicable law, at any time
sell to one or more banks or other entities ("Participants") participating
interests in any Loan owing to it, the Loan Note, its Commitment or any other
interest of such APA Bank hereunder and under the other Operative Documents. In
the event of any such sale by an APA Bank of participating interests to a
Participant, such APA Bank's obligations under this Agreement to the other
parties hereto shall remain unchanged, such APA Bank shall remain solely
responsible for the performance thereof, such APA Bank shall remain the holder
of the Loan Note for all purposes under this Agreement and the other Operative
Documents, and Recco shall continue to deal solely and directly with such APA
Bank in connection with such APA Bank's rights and obligations under this
Agreement and the other Operative Documents. Recco agrees that if amounts
outstanding under this Agreement and the
37
<PAGE> 44
Loan Note are due and unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of the Termination Date, each Participant
shall be deemed to have the right of setoff in respect of its participating
interest in amounts owing under this Agreement and the Loan Note to the same
extent as if the amount of its participating interest were owing directly to it
under this Agreement or the Loan Note. Recco also agrees that each Participant
shall be entitled to the benefits of Sections 2.9 and 9.5 with respect to its
participation in such APA Bank's Commitment and the Loans outstanding from time
to time; provided that no Participant shall be entitled to receive any greater
amount pursuant to such Sections than such APA Bank would have been entitled to
receive in respect of the amount of the participation transferred by such APA
Bank to such Participant had no such transfer occurred.
(3) If, pursuant to this Section 9.6, any interest in this Agreement
or the Loan Note is transferred or assigned to any Participant or assignee which
is organized under the laws of any jurisdiction other than the United States or
any state thereof, the applicable APA Bank shall cause such Participant or
assignee, as a condition to the effectiveness of such transfer, (i) to represent
to the Funding Agent, such APA Bank and Recco that under applicable law and
treaties then in effect no taxes will be required to be withheld by Recco, the
Funding Agent or such Participant or assignee with respect to any payments to be
made to such Participant or assignee in respect of the Loans, (ii) to furnish to
the Funding Agent, such APA Bank and Recco either U.S. Internal Revenue Service
Form 4224 (or any successor form) or U.S. Internal Revenue Service Form 1001 (or
any successor form) (wherein such Participant or assignee claims entitlement to
complete exemption from U.S. federal withholding tax on all interest payments
hereunder) and (iii) to agree (for the benefit of the Funding Agent, such APA
Bank and Recco) timely to provide the Funding Agent, such APA Bank and Recco a
new Form 4224 (or any successor form) or Form 1001 (or any successor form) upon
the expiration or obsolescence of any previously delivered form and comparable
statements in accordance with and if permitted under applicable U.S. laws and
regulations and amendments then in effect duly executed and completed by such
Participant or assignee, and to comply from time to time with all applicable
U.S. laws and regulations with regard to such withholding tax exemption.
(4) No APA Bank shall grant to any Participant the right to consent
to any amendment or waiver entered into in accordance with Section 9.1, except
for any such amendment or waiver which would increase such APA Bank's
Commitment, or reduce the amount or extend the due date of any principal of or
interest on the Loan Note.
38
<PAGE> 45
0.7. Termination. This Agreement shall terminate following the
Termination Date upon payment in full of all outstanding principal, interest and
other amounts due hereunder and under the Operative Documents which are payable
to the Funding Agent, the Surety Provider and the Lenders on such date.
0.8. Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
0.9. Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
0.10. Integration. This Agreement represents the agreement of Recco, the
Funding Agent and the Secured Parties with respect to the subject matter hereof,
and there are no promises, undertakings, representations or warranties by the
Funding Agent or the Secured Parties relative to the subject matter hereof not
expressly set forth or referred to herein or in the other Operative Documents.
0.11. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York.
0.12. Submission to Jurisdiction; Waivers. Recco hereby irrevocably and
unconditionally:
(5) submits for itself and its property in any legal action or
proceeding relating to this agreement and the other operative documents to which
it is a party, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the courts of the State of
New York, the courts of the United States of America for the Southern District
of New York, and appellate courts from any thereof;
(6) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
39
<PAGE> 46
(7) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to its address set
forth in Section 9.2 or at such other address of which all of the other parties
hereto shall have been notified pursuant thereto; and
(8) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or proceeding referred to in
this subsection any special, exemplary, punitive or consequential damages.
0.13. Acknowledgments. Recco hereby acknowledges that:
(9) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement, the Loan Note and the other Operative Documents;
(10) neither the Funding Agent, the Lenders nor the Surety Provider
has any fiduciary relationship to Recco, and the relationship between each
Lender, on the one hand, and Recco, on the other hand, is solely that of debtor
and creditor; and
(11) no joint venture exists between Recco and any Lender.
0.14. Waiver of Jury Trial. Recco hereby irrevocably and unconditionally
waives trial by jury in any legal action or proceeding relating to this
Agreement or the Loan Note or any other Operative Document and for any
counterclaim therein.
0.15. No Bankruptcy Petition. Each of Recco, the Funding Agent, the APA
Banks and the Surety Provider covenants and agrees that it will not institute
against, or join with or knowingly cooperate or encourage any other Person in
instituting against, PARCO any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any federal or
state bankruptcy or similar law. Each of the Seller, the Lenders, the Funding
Agent and the Surety Provider covenants and agrees that it will not institute
against, or join with or knowingly cooperate or encourage any other Person in
instituting against, Recco any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any federal or
state bankruptcy or similar law.
0.16. Limited Recourse; Waiver of Setoff. (a) Notwithstanding anything
to the contrary contained herein, the obligations of PARCO under this Agreement
are solely the corporate obligations of PARCO and, in the case of
40
<PAGE> 47
obligations of PARCO other than PARCO's commercial paper, shall be payable at
such time as funds are actually received by, or are available to, PARCO in
excess of funds necessary to pay in full all of PARCO's outstanding commercial
paper and, to the extent funds are not available to pay such obligations, the
claims relating thereto shall not constitute a claim against PARCO but shall
continue to accrue. Each party hereto agrees that the payment of any claim (as
defined in Section 101 of Title 11 of the Bankruptcy Code) of any such party
shall be subordinated to the payment in full of all of PARCO's outstanding
commercial paper.
No recourse under any obligation, covenant or agreement of PARCO
contained in this Agreement shall be had against any incorporator, stockholder,
officer, director, member, manager, employee or agent of PARCO or any of their
Affiliates (solely by virtue of such capacity) by the enforcement of any
assessment or by any legal or equitable proceeding, by virtue of any statute or
otherwise; it being expressly agreed and understood that no personal liability
whatever shall attach to or be incurred by any incorporator, stockholder,
officer, director, member, manager, employee or agent of PARCO or any of their
Affiliates (solely by virtue of such capacity) or any of them under or by reason
of any of the obligations, covenants or agreements of PARCO contained in this
Agreement, or implied therefrom, and that any and all personal liability for
breaches by PARCO of any of such obligations, covenants or agreements, either at
common law or at equity, or by statute, rule or regulation, of every such
incorporator, stockholder, officer, director, member, manager, employee or agent
is hereby expressly waived as a condition of and in consideration for the
execution of this Agreement; provided that the foregoing shall not relieve any
such Person from any liability it might otherwise have as a result of fraudulent
actions taken or fraudulent omissions made by them or in any case of the gross
negligence, bad faith or willful misconduct of any such Person.
(b) Each of the Funding Agent, Recco, the APA Banks and the Seller
hereby waives any right of setoff it may have or to which it may be entitled
under this Agreement and the Operative Documents from time to time against PARCO
or its assets.
0.17. Confidentiality. (a) Recco shall maintain, and shall cause each
officer, employee and agent of itself and its Affiliates to maintain, the
confidentiality of the Operative Documents and all other confidential
proprietary information with respect to PARCO, the Funding Agent and the APA
Banks and each of their respective businesses obtained by them in connection
with the structuring, negotiation and execution of the transactions contemplated
herein and in the other Operative Documents, except for information that has
become publicly available or information disclosed (i) to legal counsel,
accountants and other professional advisors to Recco
41
<PAGE> 48
and its Affiliates, (ii) as required by law, regulation or legal process or
(iii) in connection with any legal or regulatory proceeding to which Recco or
any of its Affiliates is subject. Recco hereby consents to the disclosure of any
non-public information with respect to it received by PARCO, the Funding Agent
or any APA Bank to (i) any of PARCO, the Funding Agent or any APA Bank, (ii) any
nationally recognized rating agency providing a rating or proposing to provide a
rating to PARCO's Commercial Paper, (iii) any placement agent which proposes to
offer and sell PARCO's Commercial Paper, (iv) any provider of PARCO's
program-wide liquidity or credit support facilities, (v) any potential APA Bank
to which Recco has consented (which consent shall not be unreasonably withheld)
or (vi) any participant or potential participant to which Recco has consented
(which consent shall not be unreasonably withheld) (which Person, in the case of
clauses (iii) - (vi), agrees in writing to be bound by the confidentiality
provisions of this Section.
(b) Notwithstanding the foregoing, each of the Surety Provider, PARCO,
the Funding Agent and the APA Banks shall maintain, and shall cause each
officer, employee and agent of itself and its Affiliates to maintain, the
confidentiality of the Operative Documents and all other confidential
proprietary information with respect to Recco and its Affiliates and each of
their respective businesses obtained by them in connection with the structuring,
negotiation and execution of the transactions contemplated herein and in the
other Operative Documents, except for information that has become publicly
available or information disclosed (i) to legal counsel, accountants, reinsurers
and other professional advisors to the Surety Provider, PARCO, the Funding
Agent, the APA Banks and their Affiliates, (ii) as required by law, regulation
or legal process or (iii) in connection with any legal or regulatory proceeding
to which the Funding Agent, the Surety Provider, PARCO, the APA Banks or any of
their Affiliates is subject.
(c) The foregoing confidentiality provisions shall survive the
termination of this Agreement and the Program.
42
<PAGE> 49
IN WITNESS WHEREOF, the parties hereto have caused this Funding
Agreement to be duly executed and delivered in New York, New York by their
proper and duly authorized officers as of the day and year first above written.
ONYX ACCEPTANCE RECEIVABLES
CORPORATION
By:
-------------------------------------
Name:
Title:
PARK AVENUE RECEIVABLES
CORPORATION, as a Lender
By:
-------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, as
Funding Agent
By:
-------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, as
an APA Bank
By:
-------------------------------------
Name:
Title:
43
<PAGE> 50
Accepted and agreed as of
the date first above written:
MBIA INSURANCE CORPORATION,
as Surety Provider
By:
----------------------------------
Name:
Title:
44
<PAGE> 51
EXHIBIT A
[DEFINITIONS LIST]
A-1
<PAGE> 52
EXHIBIT B
[FORM OF LOAN NOTE]
$150,000,000
New York, New York Date: August 9, 1999
FOR VALUE RECEIVED, the undersigned, Onyx Acceptance Receivables
Corporation, a Delaware corporation ("Recco"), promises to pay to the order of
The Chase Manhattan Bank, as Funding Agent for the benefit of the Lenders
(together with its successors and assigns in such capacity, the "Funding
Agent"), on the date specified in Section 2.2 of the Funding Agreement
hereinafter referred to, at the office of the Funding Agent at 270 Park Avenue,
New York, New York, in lawful money of the United States of America and in
immediately available funds, the principal amount of ONE HUNDRED FIFTY MILLION
DOLLARS ($150,000,000) or, if less, the aggregate unpaid principal amount of
all Loans made by the Lenders to Recco pursuant to the Funding Agreement, and to
pay interest at such office, in like money, from the date hereof on the unpaid
principal amount of such Loans from time to time outstanding at the rates and on
the dates specified in Section 2.5 of the Funding Agreement.
The Funding Agent is authorized to record, on the schedule
annexed hereto and made a part hereof or on other appropriate records of the
Funding Agent, the date and amount of each Loan made by the Lenders, each
continuation thereof, the interest rate from time to time on each Loan and the
date and amount of each payment or prepayment of principal thereof. Any such
recordation shall constitute prima facie evidence of the accuracy of the
information so recorded, provided that the failure of the Funding Agent to make
any such recordation (or any error in such recordation) shall not affect the
obligations of Recco hereunder or under the Funding Agreement in respect of the
Loans.
This Loan Note is the Loan Note referred to in that certain
Funding Agreement, dated as of August 9, 1999 (as amended, supplemented or
otherwise modified and in effect from time to time, the "Funding Agreement"), by
and among Recco, Park Avenue Receivables Corporation, the Funding Agent and The
Chase Manhattan Bank, as an APA Bank, and is entitled to the benefits thereof.
Capitalized terms used herein without definition have the meanings assigned to
them in, or incorporated by reference into, the Funding Agreement.
B-1
<PAGE> 53
This Loan Note is subject to optional and mandatory prepayment
as provided in the Funding Agreement.
Upon the occurrence of an Event of Default, the Controlling
Party and the Funding Agent shall have all of the remedies specified in the
Funding Agreement, the Security Agreement and the other Operative Documents.
Recco hereby waives presentment, demand, protest and all notices of any kind.
This Loan Note shall be governed by, and construed in accordance
with, the laws of the State of New York.
ONYX ACCEPTANCE RECEIVABLES
CORPORATION
By:
-------------------------------------
Name:
Title:
B-2
<PAGE> 54
Schedule 1 to
Loan Note
<TABLE>
<CAPTION>
Principal Interest on Prepayment
Date of Loans Loans of Loans Notation By
- ---- -------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
- ------------ ------------ ------------ ------------ ------------
</TABLE>
DATED:
B-1
<PAGE> 55
EXHIBIT C
NOTICE OF BORROWING
Onyx Acceptance Receivables Corporation hereby requests that the
Lenders make a Loan to it on [insert Borrowing Date] (the "Borrowing Date") in
the amount of [amount of Loan requested] by wire transfer in immediately
available funds to the Disbursement Sub-Account by 4:00 P.M. (New York City
time) on the Borrowing Date (capitalized terms used herein have the meanings
assigned to them in, or incorporated by reference into, the Funding Agreement,
dated as of August 9, 1999 (as amended, the "Funding Agreement"), by and among
Onyx Acceptance Receivables Corporation, The Chase Manhattan Bank and Park
Avenue Receivables Corporation). Onyx Acceptance Receivables Corporation hereby
certifies as of the date hereof that the representations and warranties made in
Section 3 of the Funding Agreement are true and correct on and as of the
Borrowing Date for such Loan, both before and after giving effect to such Loan.
ONYX ACCEPTANCE RECEIVABLES
CORPORATION
By:
-------------------------------------
Name:
Title:
Date:____________, ________
C-1
<PAGE> 56
EXHIBIT D
[SECURITY AGREEMENT]
See Tab 4
D-1
<PAGE> 57
EXHIBIT E
[FORM OF RECCO OFFICER'S CERTIFICATE]
The undersigned [President] [Chief Financial Officer] [Chief
Executive Officer] [Executive Vice President] of Onyx Acceptance Receivables
Corporation ("Recco") hereby certifies that as such he is authorized to execute
and deliver this certificate on behalf of Recco in connection with the Funding
Agreement, dated as of August 9, 1999 (as amended, supplemented or otherwise
modified, the "Funding Agreement"), by and among Recco, Park Avenue Receivables
Corporation and The Chase Manhattan Bank (all capitalized terms used herein
without definition having the respective meanings specified in, or incorporated
by reference into, the Funding Agreement), and further certify as follows:
Recco shall apply the proceeds of the Loan which are being
disbursed to Recco on the date hereof (the "Loan Proceeds") solely for the
purpose of purchasing from the Seller, pursuant to the Sale Agreement, those
Contracts set forth on the Contracts List delivered to the Funding Agent and the
Surety Provider on the date hereof and such Loan Proceeds shall be applied on
________, _____.
IN WITNESS WHEREOF, I have affixed hereunto my signature this ____ day
of __________ _____.
By:
-------------------------------------
Name:
Title:
E-1
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Onyx Acceptance Financial Corporation, a Delaware corporation
ABNI, Inc., a Delaware corporation
Onyx Acceptance Funding Corporation, a Delaware corporation
C. U. Acceptance Corporation, a Delaware corporation
Onyx Acceptance Receivables Corporation, a Delaware corporation
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 4,787,831
<SECURITIES> 0
<RECEIVABLES> 195,535,962
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 342,294,322
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 61,778
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 342,294,322
<SALES> 0
<TOTAL-REVENUES> 23,626,152
<CGS> 0
<TOTAL-COSTS> 19,198,095
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 203,579
<INTEREST-EXPENSE> 5,487,589
<INCOME-PRETAX> 4,428,057
<INCOME-TAX> 1,837,644
<INCOME-CONTINUING> 2,590,413
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,590,413
<EPS-BASIC> .42
<EPS-DILUTED> .39
</TABLE>
