<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 33-03790
CENTRAL FINANCIAL ACCEPTANCE CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 95-4574983
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
5480 East Ferguson Drive
Commerce, California 90022
--------------------------------------
(Address of principal executive offices)
(213) 720-8600
--------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether Registrant (1) has filed all reports to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
--- ---
Number of shares outstanding as of November 14, 1996: 7,277,000.
<PAGE> 2
CENTRAL FINANCIAL ACCEPTANCE CORPORATION
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page No.
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets at September 30, 1996 and December 31, 1995 . . . . . . . . . . . . . . . . . . 1
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended
September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . 9
PART II. OTHER INFORMATION
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------ ---------------
A S S E T S
<S> <C> <C>
Cash $ 5,257 $ 7
Consumer Finance receivables, net 98,992 90,471
Automobile Finance receivables, net 8,692 4,203
Prepaid expenses and other current assets 1,341 1,237
Deferred income taxes 2,469 2,473
Property and equipment, net 2,620 2,060
Intangible asset, net 3,300 1,399
-------- --------
Total assets $122,671 $101,850
======== =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Notes payable $ 55,454 $ 63,967
Accrued expenses and other current liabilities 5,084 1,825
Income taxes payable 1,643 1,576
Long-term debt 850 850
-------- --------
Total liabilities 63,031 68,218
-------- --------
Commitments and contingencies
Stockholder's equity:
Preferred stock, $.01 par value, 5,000,000
shares authorized; no shares outstanding - -
Common stock, $.01 par value, 20,000,000 shares
authorized; 7,277,000 and 5,150,000 shares issued and outstanding,
respectively 73 52
Paid-in capital 48,047 26,082
Retained earnings 11,520 7,498
-------- --------
Total stockholder's equity 59,640 33,632
-------- --------
Total liabilities and stockholder's equity $122,671 $101,850
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE> 4
CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ---------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Interest income on consumer finance receivables $6,107 $4,643 $17,150 $12,851
Interest income on auto finance receivables 461 32 1,063 32
Other income 3,103 1,066 6,492 2,883
------ ------ ------- -------
Total revenues 9,671 5,741 24,705 15,766
Costs and expenses:
Operating expenses 3,520 1,879 7,900 5,068
Provision for credit losses 2,189 1,293 6,468 3,708
Interest expense 1,001 1,038 3,483 3,210
------ ------ ------- -------
Total costs and expenses 6,710 4,210 17,851 11,986
------ ------ ------- -------
Income before discontinued operations & provision for income
taxes 2,961 1,531 6,854 3,780
Provision for income taxes 1,182 609 2,741 1,521
Income (Loss) from discontinued operations, (net of tax) (69) 122 (91) 141
------ ------ ------- -------
Net income $1,710 $1,044 $ 4,022 $ 2,400
====== ====== ======= =======
PER SHARE DATA:
- ---------------
Earnings per share before discontinued operations $ 0.25 $ 0.18 $ 0.70 $ 0.44
Earnings (Loss) per share discontinued operations (0.01) 0.02 (0.01) 0.03
------ ------ ------- -------
Earnings per share $ 0.24 $ 0.20 $ 0.69 $ 0.47
Weighted average common shares outstanding 7,254 5,150 5,856 5,150
Supplementary net income per share $ 0.23 $ 0.18 $ 0.63 $ 0.45
Supplementary weighted average number of common 7,277 7,277 7,277 7,277
shares outstanding
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 5
CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1996 1995
-------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,022 $ 2,400
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 146 292
Provision for credit losses 6,468 3,708
Deferred income taxes 4 153
Changes in assets and liabilities:
Prepaid expenses and other current assets (104) (1,094)
Accrued expenses and other current liabilities 3,326 998
-------- -------
Net cash provided by operating activities 13,862 6,457
-------- -------
Cash flows from investing activities:
Installment contracts (originated and acquired) collected, net (19,478) (9,880)
Capital expenditures (647) (93)
Acquisitions (1,960) -
-------- -------
Net cash used in investing activities (22,085) (9,973)
-------- -------
Cash flows from financing activities:
Capital contribution 21,986 3,589
Net (repayments of) proceeds from notes payable (8,513) 47
-------- -------
Net cash provided by financing activities 13,473 3,636
-------- -------
Net increase in cash 5,250 120
Cash, beginning of period 7 215
-------- -------
Cash, end of period $ 5,257 $ 335
======== =======
Cash paid during the period for:
Interest $ 3,570 $ 3,204
Income taxes $ 2,696 $ 807
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 6
CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements of Central
Financial Acceptance Corporation ("CFAC") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Rule 10-01 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of only normal recurring adjustments)
considered necessary for a fair presentation of the Company's financial
condition and operating results for the interim periods presented have been
included. Operating results for the quarter are not necessarily indicative of
the results that may be expected for the year ended December 31, 1996. These
interim financial statements should be read in conjunction with the prospectus
dated June 26, 1996, including the financial statements and notes contained
therein, filed with the Securities and Exchange Commission.
CFAC was formed in April 1996 and consummated its initial public offering
on July 2, 1996, when it sold 2.13 million shares of common stock, which
resulted in proceeds to the Company, net of underwriting discount of
approximately $23.7 million before expenses. CFAC was a wholly owned
subsidiary of Banner's Central Electric, Inc. Banner's Central Electric, Inc.
is wholly owned by Banner Holdings, Inc. ("Holdings") and was a consumer
products retailer that provided its customers with financing for the
merchandise it sells. On June 24, 1996, CFAC, Banner's Central Electric, Inc.
and Holdings entered into an agreement (the "Reorganization Agreement") whereby
Holdings contributed to Banner its investments in certain wholly owned
subsidiaries, along with the subsidiaries' operations, (the "Holdings
Subsidiaries") and Banner's Central Electric, Inc. contributed to CFAC its
investments in the Holdings Subsidiaries and the finance portion of its
consumer products business, and cash in such amount so as to leave CFAC with
$500,000 of cash on hand. Pursuant to the Reorganization Agreement, the
intercompany accounts between CFAC, Banner's Central Electric, Inc. and
Holdings that arose as a result of the Reorganization Agreement and from other
transactions, except with respect to income taxes, were forgiven and
reclassified as stockholder's equity.
In addition to the Reorganization Agreement, CFAC, Banner's Central
Electric, Inc. and Holdings entered into certain agreements for the purpose of
defining the ongoing relationships among them (see Note 9). The transactions
and agreements entered into pursuant to the Reorganization Agreement are
referred to herein as the "Reorganization." Management of CFAC believes that
such agreements provide for reasonable allocations of costs between the
parties.
The reorganization was accounted for at historical cost in a manner similar
to a pooling of interests. The accompanying condensed consolidated financial
statements reflect the combined historical operations of CFAC and its
subsidiaries as if the Reorganization had taken place at the beginning of the
periods presented, except for the contribution of cash in such amount so as to
leave CFAC with $500,000 upon the Reorganization. CFAC and its subsidiaries,
as reorganized, are referred to herein as "Central" or the "Company." Banner's
Central Electric, Inc., including the operations of Banner's Central Electric,
Inc. that remain after contributing the finance portion of its consumer
products business to CFAC, is referred to herein as "Banner."
Unaudited supplementary net income per share is based on the number of
common shares issued by the Company pursuant to the Reorganization and the
number of shares sold by the Company in its initial public offering, as if all
such shares were outstanding as of January 1, 1995, and also gives effect to a
reduction of interest expense, net of income tax expense, resulting from the
reduction of indebtedness upon application of the net proceeds of the proposed
offering as if it had occurred on January 1, 1995.
On August 1, 1996, Central Auto Sales, Inc. was sold to CFAC's parent
company for net book value. The condensed consolidated financial statements
have been restated to reflect this business as a discontinued operation.
4
<PAGE> 7
CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
2. NATURE OF OPERATIONS
The Company provides unsecured small loans and financing for the purchase
of consumer products for customers in the greater Los Angeles and San Francisco
areas, and beginning in 1995, finances the purchases of used cars and travel
tickets. Substantially all of the consumer product purchases that are financed
by the Company are made through related party relationships, as explained in
Note 9. The Company experiences the highest demand for its financial products
and services between October and December, and experiences the lowest demand
for its financial products and services between January and March. Effective
July 1996, the Company sold its used car business to Banner's, as further
explained in Note 9.
3. ACQUISITIONS
In May 1996, the Company acquired the business of, and assumed the
leasehold interests to six travel locations in greater Los Angeles. In
addition, in June 1996, the Company acquired the business of and assumed the
leasehold interest to 19 travel locations of which 14 are in greater Los
Angeles, two locations are in Chicago and one location is in each of Dallas,
Las Vegas and San Diego. In July 1996, the Company acquired the business of,
and assumed the leasehold interests in ten auto insurance locations in greater
Los Angeles. Such transactions are not material from a financial point of view.
4. EARNINGS PER COMMON SHARE
Earnings per common share have been computed on the basis of the weighted
average number of common shares outstanding. There were no common stock
equivalents for the periods presented.
5. FINANCE RECEIVABLES
Central's consumer finance receivables include installment contracts that
are financed through related party relationships, as explained in Note 9,
installment contracts purchased from unaffiliated third-party retailers that
sell the products or services and receivables that arise from unsecured small
loans and installment contracts that are originated when customers buy travel
tickets. Add-on interest of 11% to 13% per annum is included in the face
amount of the finance receivables together with administrative fees that are
charged on certain small loan contracts. The annual percentage rate varies
depending on the length of the contract and the amount of administrative fees.
The contracts provide for scheduled monthly payments and mature generally from
1 to 15 months. Central's automobile finance receivables arise when customers
buy used cars from Central Auto Sales, Inc. and sell the contracts to CFAC.
The contracts provide for scheduled monthly payments and mature generally from
36-42 months.
The Company generally provides an allowance for credit loses in the
consumer finance receivable portfolio at the time that the contract is
originated or purchased. The allowance for credit losses in the Company's
unsecured small loan business is provided for following the origination of the
loans over the period that the events giving rise to the credit losses are
estimated to occur. The Company's consumer finance receivables comprise
smaller-balance, homogeneous loans that are evaluated collectively to determine
an appropriate allowance for credit losses. The allowance for credit losses is
maintained at a level considered adequate to cover losses in the existing
portfolios. Collection of past due accounts is pursued by the Company, and
when the characteristics of an individual account indicate that collection is
unlikely, the account is charged off and turned over to a collection agency.
Accounts are generally charged off when they are 91 days past due.
5
<PAGE> 8
CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Deferred insurance revenue arises from the deferral of the recognition of
revenue from certain credit insurance contracts. Insurance premium revenue is
recognized over the life of the related contract using a method that
approximates the interest method.
<TABLE>
<CAPTION>
CONSUMER AUTOMOBILE
FINANCE RECEIVABLES FINANCE RECEIVABLES
-------------------------- --------------------------
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
-------------------------- --------------------------
1996 1995 1996 1995
--------- --------- -------- ----------
<S> <C> <C> <C> <C>
Gross receivable $119,796 $108,648 $11,173 $ 5,545
Deferred interest 13,104 12,245 2,481 1,342
------ ------- -------- -------
Net receivable 106,692 96,403 8,692 4,203
Deferred administrative fee & insurance 1,118 977 - -
Allowance for credit losses 6,582 4,955 - -
---------- -------- ------- -------
$ 98,992 $ 90,471 $ 8,692 $ 4,203
========== ======== ======= =======
</TABLE>
6. REVENUES
Interest income on the consumer finance and automobile finance receivables
is deferred and recognized over the lives of the contracts using the "interest
method" or the "Rule of 78s," which approximates the interest method.
Transaction fees on contracts financed through a related party relationship are
recognized using the interest method. Administrative fees are deferred and
recognized over the estimated average life of the contract using the "Rule of
78s." Administrative fees are included in other income in the condensed
consolidated statements of operations.
7. NOTES PAYABLE
Notes payable consist of:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------- -----------
1996 1995
------------- ---------
<S> <C> <C>
Bank of America line of credit $29,504 $40,317
Wells Fargo line of credit 25,950 23,650
-
------- -------
$55,454 $63,967
======= =======
</TABLE>
The Company has a credit agreement with Bank of America National Trust and
Savings Association (the "Bank of America Line of Credit") that, as amended,
provides for the issuance of notes up to $60,000,000, subject to an allowable
borrowing base. The amounts outstanding under these notes bear interest at
rates that are determined by the type of borrowing. Borrowings under the notes
are collateralized by certain receivables in the Company's consumer finance
receivable portfolio and Banner is a guarantor. The Bank of America Line of
Credit, as amended, matures on December 31, 1996 and contains certain
restrictive covenants that prohibit the Company from paying dividends and
require, among other things, the maintenance of certain financial ratios and
amounts. The amount of unused credit under the facility was limited by the
allowable borrowing base and was approximately $7,185,000 at September 30,
1996 and $962,000 at December 31, 1995.
The Company has a credit agreement with Wells Fargo Bank National
Association (the "Wells Fargo Line of Credit") that, as amended on October 10,
1996, provides for the issuance of notes up to $50,000,000 subject to an
allowable borrowing base. The amounts outstanding under these notes bear
interest at rates that are determined by the type of borrowing. Borrowings
under the notes are collateralized by certain receivables in the Company's
consumer finance receivable portfolio and by the Company's
6
<PAGE> 9
CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
automobile finance receivable portfolio. The Wells Fargo Line of Credit, as
amended on October 10,1996, expires on April 30, 1997. The credit facility
contains certain restrictive covenants that prohibit the Company from paying
dividends and require, among other things, the maintenance of certain financial
ratios and amounts. The amount of unused credit under the facility was limited
by the allowable borrowing base and was approximately $11,267,000 and
$4,134,000 at September 30, 1996 and December 31, 1995, respectively.
8. LONG-TERM DEBT
Long-term debt consists of a promissory note payable to a bank that bears
interest at the bank's reference rate. Interest is payable monthly and the
principal is due July 1998. The note is secured by a deed of trust.
9. RELATED PARTY TRANSACTIONS
As discussed in Note 1, on June 24, 1996, the Company entered into the
Reorganization Agreement, as modified and redefined, and certain other
agreements with Banner and Holdings (the "Financing Agreement," the "Option
Agreement," and the "Operating Agreement"). In addition in July 1996, the
Company entered into an "Automobile Financing Agreement," as noted below. The
accompanying condensed consolidated financial statements have been prepared as
if such agreements and the Reorganization Agreement were in place for the
periods presented.
The Financing Agreement, as amended and redefined in July 1996, grants the
Company an exclusive right for fifteen years from the date of the
Reorganization to originate the sale and provide financing for consumer
products sold in Banner's stores. Under this Agreement, Banner's is obligated
to provide all the required merchandise, facilities and support services to
accomplish such product sales. The Agreement further provides that Banner's is
obligated to reimburse the Company for the costs of originating the sales and
to pay it a transaction fee for providing financing. The Company may terminate
the Financing Agreement at any time upon one year prior written notice to
Banner's. In the accompanying condensed financial statements, the transaction
fee was computed on the basis of 1.6% of the net amount of the average of net
receivables of contracts financed for consumer product sales. Effective July
1, 1996, Banner's agreed to increase the transaction fee to 2.5% to reflect
higher costs associated with the Company providing financing under the
Financing Agreement. The transaction fee totalled $239,000 and $686,000 for
the three and nine months ended September 30, 1996, and as compared to $226,000
and $682,000 for the three and nine months ended September 30, 1995. Banner's
reimbursed the Company $787,000 and $2,231,000 for the three and nine months
ended September 30, 1996, as compared to $783,000 and $2,262,000 for the three
and nine months ended September 30, 1995. In the accompanying condensed
financial statements amounts reimbursed by Banner's are offset against the cost
incurred in originating sales of consumer products.
Effective in July 1996, the Company and Banner's entered into an Automobile
Financing Agreement, the "Auto Agreement," under which the Company sold its
used car business to Banner's for approximately its net book value, or
$865,000. Under the provision of the "Auto Agreement," Banner's will operate
the used car business while the Company will have an exclusive agreement with
Banner's to provide financing for a fifteen year period for all cars that
Banner's will sell. The "Auto Agreement" also provides for Banner's to assume
all existing liabilities and reserves relating to this business. In addition,
all future cars financed by the Company will be with full recourse back to
Banner's, and accordingly, Banner's will not provide any dealers discount for
cars sold pursuant to this Agreement. The condensed consolidated financial
statements have been restated to reflect the disposition of the automobile
business as a discontinued operation.
Pursuant to the Option Agreement, Holdings granted the Company an option,
exercisable for a two-year period commencing one year from the date of the
Reorganization, to acquire all of the outstanding capital stock of Banner (the
"Option") at an exercise price equal to the book value of Banner for the month
ended immediately preceding the exercise. If the Company exercises the Option,
the exercise price is payable in cash or in shares of the Company's common
stock.
The Operating Agreement provides, among other things, that Banner, Holdings
or their affiliates are obligated to provide to the Company, and the Company is
obligated to utilize, certain services, including accounting, management
information systems and employee benefits. If such services involve an
allocation of expenses, such allocation shall be made on a reasonable basis.
7
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CENTRAL FINANCIAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
To the extent that such services directly relate to the finance portion of the
consumer products business contributed by Banner to the Company, or to the
extent that other costs are incurred by Banner, Holdings or their affiliates
that directly relate to the Company, the Company is obligated to pay Banner's,
Holdings' or their affiliates' actual cost of providing such services or
incurring such costs. Employee benefit expenses are allocated to the Company
based on the ratio of actual payroll expenses of employees in the consumer
products business contributed by Banner to the Company compared to total
actual payroll expenses of Banner before such allocation. Accounting expenses
are allocated 50% to the Company. The operating costs of Banner's management
information systems function are allocated initially 50% to the Company for a
period of five years, subject to adjustment from time to time to reflect
changing costs and usage. Except for management information systems services,
the Operating Agreement continues until terminated by either the Company,
Holdings or Banner upon one year's prior written notice. Termination may be
made on a service-by-service basis or in total.
8
<PAGE> 11
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following sets forth certain information relating to the Company's
financial trends, credit quality and delinquency experienced for the Company's
consumer finance receivable portfolio, for the periods presented.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1996 1995 1996 1995
-------- -------- --------- --------
<S> <C> <C> <C> <C>
FINANCIAL TRENDS (000's omitted)
- ----------------
Gross receivable (at end of period) $119,796 $88,752 $119,796 $88,752
Deferred interest (at end of period) 13,104 9,347 13,104 9,347
-------- ------- -------- -------
Net receivable (at end of period) 106,692 79,405 106,692 79,405
Deferred administrative fees & insurance (at end of period) 1,118 670 1,118 670
Allowance for credit losses (at end of period) 6,582 4,615 6,582 4,615
-------- ------- -------- -------
Net carrying value $ 98,992 $74,120 $ 98,992 $74,120
======== ======= ======== =======
Average net receivable $101,719 $77,049 $ 96,947 $75,251
Average interest bearing liabilities(1) 50,933 51,225 58,742 51,131
Administrative fee income 519 278 1,388 809
Total interest income(2) 6,107 4,643 17,150 12,851
Total interest expense 1,001 1,038 3,483 3,210
-------- ------- -------- -------
Net interest income before provision for credit losses 5,106 3,605 13,667 9,641
Net provision for credit losses 2,189 1,293 6,468 3,708
Net write-off's 1,851 1,085 4,841 2,805
Average interest rate on average net receivables 24.0% 24.1% 23.6% 22.8%
Average interest rate on interest bearing liabilities 7.9% 8.1% 7.9% 8.4%
-------- ------- -------- -------
Net interest spread 16.1% 16.0% 15.7% 14.4%
======== ======= ======== =======
</TABLE>
(1) The amounts represent borrowings and related interest expense on the
Company's lines of credit, excluding amounts related to the Company's
other borrowings.
(2) The amounts represent interest income on consumer finance receivables,
excluding administrative fees, late charges and other charges, which
are included in the Condensed Consolidated Statements of Operations.
9
<PAGE> 12
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -------------------
1996 1995 1996 1995
------- ------- -------- -------
<S> <C> <C> <C> <C>
CREDIT QUALITY (000's omitted)
- --------------
Average net receivable $101,719 $77,049 $96,947 $75,251
Net provision for credit losses total 2,189 1,293 6,468 3,708
Net write-off's total 1,851 1,085 4,841 2,805
Provision for credit losses as a % of average net receivable 8.6% 6.7% 8.9% 6.6%
Net write-off's as a % of average net receivable 7.3% 5.6% 6.7% 5.0%
END OF PERIOD (000's omitted)
- -------------
Net receivable - - $106,692 $79,405
Allowance for credit losses - - 6,582 4,615
Allowance for credit losses as a % of net receivable - - 6.2% 5.8%
DELINQUENCY EXPERIENCE (000's omitted)
- ----------------------
Past due accounts (gross receivable)
31-60 days - - $ 3,588 $ 2,138
61 days or more - - 4,458 2,676
Accounts with payments 31 days or more past due
as a percentage of end of period gross receivables - - 6.7% 5.4%
AUTOMOBILE FINANCE PORTFOLIO
- ----------------------------
</TABLE>
The Company began providing financing of automobiles sold by Banner's in
mid-1995. At September 30, 1996 and December 31, 1995, the gross receivable of
this portfolio was $11.2 million and $5.5 million, respectively; the net
receivable was $8.7 million and $4.2 million, respectively.
10
<PAGE> 13
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH THE RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995.
Total revenues in the three months ended September 30, 1996 increased to
$9.7 million from $5.7 million in the three months ended September 30, 1995, an
increase of $4.0 million or 68.5%.
Interest income on the consumer finance receivables portfolio in the three
months ended September 30, 1996 increased to $6.1 million from $4.6 million in
the three months ended September 30, 1995, an increase of $1.5 million or
31.5%. This increase was primarily attributable to an increase in the
consumer finance receivable portfolio which averaged $101.7 million in the
three months ended September 30, 1996, compared to $77.0 million in the three
months ended September 30, 1995. The average interest rate the Company charged
on this portfolio decreased to 24.0% for the three months ended September 30,
1996, compared to 24.1% for the three months ended September 30, 1995.
Interest income on the automobile finance receivables portfolio in the
three months ended September 30, 1996 increased to $0.5 million. This business
commenced in July 1995.
Other income for the three months ended September 30, 1996 increased to
$3.1 million from $1.1 million in the three months ended September 30, 1995.
Other income in the three months ended September 30, 1996 includes an increase
of $.7 million of net revenues earned from the sale of airline tickets, which
commenced in June 1995. The remaining increase in other income was primarily
due to an increase of $.3 million in administrative fee income earned on small
loans, a $.5 million increase in late charges, and an increase of $.5 million
in insurance income from expansion of insurance products sold to consumers.
Operating expenses in the three months ended September 30, 1996 increased
to $3.5 million from $1.9 million in the three months ended September 30, 1995,
an increase of $1.6 million or 87.3%. Of this increase, $.6 million is
attributable to operating costs and expenses incurred in connection with the
sale of airline tickets, which business commenced in June 1995, and $.5 million
incurred in the sale of auto insurance, which business commenced in July 1996.
The remaining increase of $.5 million was primarily due to the expansion of the
small loan business and unaffiliated retailer business, including an increase
in the number of employees and related payroll expenses.
The provision for credit losses in the three months ended September 30,
1996 increased to $2.2 million from $1.3 million in the three months ended
September 30, 1995, an increase of $.9 million or 69.3%. This increase was
primarily due to the growth experienced by the Company in its consumer finance
and travel receivable portfolios, and to higher levels of write-off's.
Interest expense in the three months ended September 30, 1996 was flat
compared to the three months ended September 30, 1995.
As a result of the foregoing factors, net income in the three months
ended September 30, 1996 increased to $1.7 million from $1.0 million in the
three months ended September 30, 1995, an increase of $.7 million or 63.8%.
11
<PAGE> 14
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH THE RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995.
Total revenues in the nine months ended September 30, 1996 increased to
$24.7 million from $15.8 million in the nine months ended September 30, 1995,
an increase of $8.9 or 56.7%.
Interest income on the consumer finance receivable portfolio for the nine
months ended September 30, 1996 increased to $17.2 million from $12.9 million
in the nine months ended September 30, 1995, an increase of $4.3 million or
33.5%. This increase was primarily attributable to an increase in the consumer
finance receivable portfolio which averaged $96.9 million in the nine months
ended September 30, 1996, compared to $75.3 million in the nine months ended
September 30, 1995. The average interest rate the Company charged on this
portfolio increased to 23.6% for the nine months ended September 30, 1996,
compared to 22.8% for the nine months ended September 30, 1995.
Interest income on the automobile finance receivables portfolio for the
nine months ended September 30, 1996 increased to $1.1 million. This business
commenced in July 1995.
Other income for the nine months ended September 30, 1996 increased to
$7.6 million from $2.9 million in the nine months ended September 30, 1995, an
increase of $4.7 million or 162.1%. Other income increased in the nine months
ended September 30, 1996 by $1.3 million of net revenues earned from the sale
of airline tickets, which commenced in June 1995. The remaining increase in
other income was primarily due to an increase of $.7 million in administrative
fee income earned on small loans to customers, and a $1.1 million increase in
late charges earned on the Company's consumer finance receivable portfolio and
an increase of $1.1 million of interest earned on its automobile finance
receivable portfolio and an increase of $.5 million in insurance income from
the expansion of insurance products sold to consumers.
Operating expenses in the nine months ended September 30, 1996 increased
to $7.9 million from $5.1 million in the nine months ended September 30,
1995, an increase of $2.8 million or 55.9%. Of this increase, $1.1 million is
attributable to operating costs and expenses incurred in connection with the
sale of airline tickets and $.5 million incurred in the sale of auto insurance.
The remaining increase of $1.2 million was primarily due to the expansion of
the small loan business, including an increase in the number of employees and
related payroll expenses.
The provision for credit losses in the nine months ended September 30,
1996 increased to $6.5 million from $3.7 million in the nine months ended
September 30, 1995, an increase of $2.8 million or 74.4%. This increase was
primarily due to the growth experienced by the Company in its consumer finance
receivables and travel receivables portfolios and to higher levels of
write-off's.
Interest expense in the nine months ended September 30, 1996 increased to
$3.5 million from $3.2 million in the nine months ended September 30, 1995, an
increase of $.3 million or 8.5%. This increase was primarily due to a higher
level of borrowings under the lines of credit to support the growth of the
Company's consumer finance receivable and automobile finance receivable
portfolio, offset by lower interest rates.
As a result of the foregoing, net income in the nine months ended
September 30, 1996 increased to $4.0 million from $2.4 million in the nine
months ended September 30, 1995, an increase of $1.6 million or 67.6%.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations through the cash flow
generated from operations, borrowings under its Lines of Credit, and from
periodic contributions to capital made by Holdings and related entities.
For the nine months ended September 30, 1996, net cash provided from
operations totalled $13.9 million, while investing activities utilized $22.1
million of cash flow. During this period the Company raised $23.7 million in
its initial public offering, and paid down $ 8.5 million of notes payable.
Currently, the Company funds its lending activities and operations in part
with borrowings under the Bank of America Line of Credit and Wells Fargo Line
of Credit. The amount of credit available at any one time under the Bank of
America Line of
12
<PAGE> 15
Credit is limited to 75% of certain eligible contracts in the Company's
consumer finance receivable portfolio. As of September 30, 1996, the total
amount available to the Company under the Bank of America Line of Credit was
$36.7 million, of which $29.5 million was outstanding. The Bank of America
Line of Credit was amended as of August 30,1996 and expires on December 31,
1996. Borrowings under the Wells Fargo Line of Credit may be used only to
finance the Company's travel finance, auto finance and small loan businesses.
The amount of credit available at any one time under the Wells Fargo Line of
Credit is limited to 70% of eligible contracts. As of September 30, 1996, the
total amount available to the Company under the Wells Fargo Line of Credit, as
amended on October 10, 1996, was $37.2 million, of which approximately $26.0
million was outstanding. The Wells Fargo Line of Credit expires on April 30,
1997. The Company believes it will be able to renew both of its Lines of
Credit.
The Company requires substantial capital to finance its business.
Consequently, the Company's ability to grow and the future of its operations
will be affected by the availability of financing and the terms thereof. The
amount of debt the Company requires from time to time depends on the Company's
needs for cash, as determined by its operating performance and its ability to
borrow under the terms of its various loan agreements. The Company intends to
meet its short-term liquidity needs with cash flow from operations, a portion
of the proceeds from the Company's initial public offering and borrowings under
its Lines of Credit.
The net proceeds of the Company's initial public offering are expected to
be sufficient to fund the Company's liquidity requirements for more than 12
months if the Company were to maintain its operations at current levels.
However, the Company may need to arrange for additional bank borrowings, or
additional debt, or equity financing as it continues to grow. The Company
believes that its Lines of Credit can be renewed, that the increase in equity
resulting from the Offering will facilitate the Company's ability to incur
increased indebtedness, and that it can obtain alternative financing sources
that, together with cash flow from operations and the net proceeds form the
Offering, would provide the Company sufficient resources to meet its capital
requirements.
13
<PAGE> 16
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
10.1 Amendment #1 to third amended and restated loan agreement
dated as of August 31, 1996, by and between Central
Installment Credit Corporation and Bank of America NTSA.
10.2 Ninth Amendment to credit agreement dated as of October 10,
1996, by and between Central Consumer Finance Company and
Wells Fargo Bank NTSA.
* Incorporated by reference from the Company's Registration Statement on Form
S-1 (No. 333-3790)
(b) Reports
No reports on Form 8-K were required to be filed by the
Company during the nine month period ended September 30, 1996.
14
<PAGE> 17
SIGNATURES
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.
CENTRAL FINANCIAL ACCEPTANCE CORPORATION
November 14, 1996 /s/ GARY M. CYPRES
-------------------------------------------
Gary M. Cypres
Chairman of the Board, Chief Executive
Officer and President
November 14, 1996 /s/ NEAL E. GOWER
-------------------------------------------
Neal E. Gower
Principle Accounting Officer
15
<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description Page No.
- ------ ----------- --------
<S> <C>
10.1 Amendment #1 to third amended and restated loan agreement dated
as of August 31, 1996, by and between Central Installment Credit
Corporation and Bank of America NTSA.
10.2 Ninth Amendment to credit agreement dated as of October 10, 1996,
by and between Central Consumer Finance Company and Wells Fargo
Bank NTSA.
</TABLE>
____________________________
* Incorporated by reference from the Company's Registration Statement on
Form S-1 (No. 333-3790)
<PAGE> 1
AMENDMENT NUMBER ONE TO THIRD
AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDMENT NUMBER ONE TO THIRD AMENDED AND RESTATED LOAN AGREEMENT
(herein this "Amendment"), dated as of August 31, 1996, is entered into among
CENTRAL INSTALLMENT CREDIT CORPORATION, a California corporation ("Borrower")
and BANNER'S CENTRAL ELECTRIC, INC., a California corporation ("BCE"), on the
one hand, and, on the other hand, the financial institutions that are
signatories hereto (collectively referred to as the "Banks" and individually as
a "Bank"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as agent
(hereinafter, in such capacity, together with any successors thereto in such
capacity, referred to as the "Agent") for the Banks hereunder. This Amendment
is made with reference to that certain Third Amended and Restated Loan
Agreement dated as of June 24, 1996 among the Borrower, BCE, the Agent, and the
Banks (the "Loan Agreement"). This Amendment amends the Loan Agreement in the
manner and to the extent expressly set forth herein.
1. DEFINITIONS OF TERMS USED HEREIN. All terms defined in the Loan
Agreement, as amended hereby, and not otherwise defined herein, shall have the
meaning defined in the Loan Agreement, as amended hereby, when used herein.
2. AMENDMENTS.
(a) The definition of "Maturity Date" in Section 1.1 is
amended in full to read as follows:
"'MATURITY DATE' shall mean the earlier of (a) December
31, 1996, and (b) such earlier date of termination if the entire
Commitment is terminated pursuant to the terms of SECTION 2.11
hereof."
3. CONDITIONS. This Amendment shall become effective (the
"Effective Date") when the following condition is satisfied or waived by the
parties to whose benefit such condition runs:
a. Each party hereto shall have signed and delivered to the
Agent six original counterpart signatures (which may be provided by
facsimile followed promptly by the executed original) to this Amendment.
4. REPRESENTATIONS AND WARRANTIES. In order to induce the Agent
and each Bank to enter into this Amendment, the Borrower and BCE each make the
following representations and warranties, which shall be true, correct, and
complete in all respects as of the Effective Date:
a. The Borrower and BCE each have all requisite corporate
power to execute and deliver this Amendment.
-1-
<PAGE> 2
(b) This Amendment has been executed and delivered by the
Borrower and BCE and constitutes the legal, valid, and binding
obligations of the Borrower and BCE, enforceable against the Borrower
and BCE in accordance with its terms, except as the enforceability
hereof or thereof may be affected by: (i) bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting the
enforcement of creditors' rights generally; (ii) the limitation of
certain remedies by certain equitable principles of general
applicability; and (iii) the fact that the rights to indemnification and
thereunder or hereunder may be limited by federal or state securities
laws.
(c) The execution, delivery, and performance by the Borrower
and BCE of this Amendment does not and will not: (i) violate (A) any
provision of any material federal (including the Exchange Act), state,
or local law, rule, or regulation (including Regulations G, T, U, and X
of the Federal Reserve Board) binding on Borrower or BCE, or (B) any
order of any domestic governmental authority, court, arbitration board,
or tribunal binding on the Borrower or BCE, or (C) the articles of
incorporation or bylaws of the Borrower or BCE; or (ii) contravene any
provisions of, result in a breach of, constitute (with the giving of
notice or the lapse of time) a material default under, or result in the
creation of any Lien (other than a Permitted Lien) upon any of the
Assets of the Borrower or BCE pursuant to any Contractual Obligation of
Borrower or BCE; or (iii) require termination of any Contractual
Obligation of the Borrower or BCE.
d. No Event of Default or Unmatured Event of Default
exists.
5. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties on separate counterparts, each of which
counterparts, when so executed and delivered, shall be deemed to be an
original. All of such counterparts, taken together, shall constitute but one
and the same Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered as of the date first set forth above.
CENTRAL INSTALLMENT CREDIT CORPORATION
By: /s/ Gary Cypres
------------------------------------
Title: Chairman of the Board
---------------------------------
(signatures continue)
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<PAGE> 3
BANNER'S CENTRAL ELECTRIC, INC.
a California corporation
By: /s/ GARY CYPRES
---------------------------------
Title: President & CEO
------------------------------
BANK OF AMERICAN NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By: /s/ LAURA KNIGHT
---------------------------------
Title: Vice President
------------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, in its
individual capacity as a Bank
By: /s/ DONALD C. FAR
---------------------------------
Title: Vice President
------------------------------
SUMITOMO BANK OF CALIFORNIA,
as a Bank
By: /s/ STEVEN SMITH
---------------------------------
Title: Vice President
------------------------------
SANWA BANK CALIFORNIA, as a Bank
By: /s/ JOSEPH C. ARES
---------------------------------
Title: Vice President
------------------------------
-3-
<PAGE> 1
NINTH AMENDMENT TO CREDIT AGREEMENT
THIS NINTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered
into as of October 10, 1996, by and between CENTRAL CONSUMER FINANCE COMPANY, a
Delaware corporation ("Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION
("Bank").
RECITALS
WHEREAS, Borrower is currently indebted to Bank pursuant to the terms
and conditions of that certain Credit Agreement between Borrower and Bank dated
as of December 14, 1993, as amended from time to time ("Credit Agreement");
WHEREAS, Bank and Borrower have agreed to certain changes in the terms
and conditions set forth in the Credit Agreement and the promissory note
executed in connection therewith and have agreed to amend the Credit Agreement
and such promissory note to reflect said changes;
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree that the Credit
Agreement shall be amended as follows:
A. SUBJECT TO THE SATISFACTION OF EACH OF THE CONDITIONS PRECEDENT SET
FORTH IN SECTION B OF THIS AMENDMENT, THE CREDIT AGREEMENT IS HEREBY AMENDED
AS FOLLOWS:
1. Section 1.1(a) is hereby amended by deleting "THIRTY MILLION
DOLLARS ($30,000,000.00)" and by substituting for said amount "FIFTY MILLION
DOLLARS ($50,000,000.00)."
2. SECTION 1.1(a) is hereby amended by deleting "December 31, 1996" as
the last day on which Bank will make advances under the Line of Credit, and by
substituting for said date "April 30, 1997".
3. The definition of "Eligible Auto Contracts Receivable" in Section
1.1(a) is hereby amended by deleting the exclusion in paragraph "(vii)" and
substituting therefor the following:
(vii) any Auto Contract with an original term or an original
principal amortization schedule in excess of forty-two (42) months."
-1-
<PAGE> 2
4. The following new subsection 1.1(d) is incorporated into and
made a part of the Credit Agreement:
(d) Letter of Credit Subfeature.
(i) As a subfeature under the Line of Credit, Bank
agrees from time to time up to and including the April 30, 1997 to
issue commercial and standby letters of credit for the account of
Borrower (each, a "Letter of Credit" and collectively, "Letters of
Credit"); provided, however, that the form and substance of each Letter
of Credit shall be subject to approval by Bank, in its sole discretion,
and provided further, that the aggregate undrawn amount of all
outstanding Letters of Credit under this subfeature shall not at any
time exceed Three Million Dollars ($3,000,000.00). Each Letter of
Credit shall be issued for a term not to exceed three hundred
sixty-five (365) days, as designated by Borrower; provided, however,
that no Letter of Credit under this subfeature shall have an expiration
date subsequent to December 31, 1997 unless otherwise approved by Bank.
(ii) The undrawn amount of all Letters of Credit under
this subfeature shall be reserved under the Line of Credit and shall
not be available for advances thereunder. Each Letter of Credit shall
be subject to the additional terms and conditions of the Letter of
Credit Agreement and related documents, if any, required by Bank in
connection with the issuance of such Letter of Credit (each
individually, a "Letter of Credit Agreement" and collectively, "Letter
of Credit Agreements"). Each draft paid by Bank under a Letter of
Credit under this subfeature shall be deemed an advance under the Line
of Credit and shall be repaid in accordance with the terms and
conditions of this Agreement applicable to such advances; provided,
however, that if the Line of Credit is not available, for any reason
whatsoever, at the time any draft is paid by Bank, or if advances are
not available under the Line of Credit at such time due to any
limitation on borrowings set forth herein, then the full amount of such
draft shall be immediately due and payable, together with interest
thereon, from the date such amount is paid by Bank to the date such
amount is fully repaid by Borrower at the rate of interest applicable
to advances under the Line of Credit. In such event Borrower agrees
that Bank, in its sole discretion, may debit any demand deposit account
maintained by Borrower with Bank for the amount of any draft.
(iii) Notwithstanding anything contained herein to the
contrary, upon the date of termination of the Line of Credit (whether
voluntarily or involuntarily, by acceleration or otherwise), Borrower
shall furnish cash collateral to Bank in such amounts as Bank
determines are reasonably necessary to secure Bank from loss, cost,
damage, or exposure, including reasonable attorneys' fees and legal
expenses, in connection with any and all issued and outstanding
Letters
-2-
<PAGE> 3
of Credit and other contingent obligations, such cash collateral to be
of a value and character satisfactory to Bank in its sole discretion.
5. The following new subsection 1.2(d) is incorporated into and
made a part of the Credit Agreement:
(d) Letter of Credit Fees. Borrower shall pay to Bank fees
upon the issuance of each Letter of Credit, upon the payment or
negotiation by Bank of each draft under any Letter of Credit and upon
the occurrence of any other activity with respect to any Letter of
Credit (including the transfer, amendment or cancellation of any Letter
of Credit) determined in accordance with Bank's standard fees and
charges then in effect for such activity.
6. Section 4.9(a) is hereby amended by deleting the period at the
end thereof, and inserting thereat the following:
"up to (but not including) September 30, 1996, and not less
than $24,000,000.00 at any time on or after September 30, 1996."
B. CONDITIONS PRECEDENT.
It is a condition precedent to all of the accommodations granted
Borrower by Bank hereunder that each of the following conditions be satisfied on
or before October __, 1996, and all of such accommodations shall be effective
only upon satisfaction in full of each such condition.
(a) This Amendment shall be executed by Borrower and delivered to
Bank.
(b) Borrower shall execute and deliver to Bank a promissory note in
substantially the form of Exhibit A attached hereto (which promissory note shall
replace and be deemed the Line of Credit Note defined in and made pursuant to
the Credit Agreement).
(c) In connection with the Letter of Credit subfeature made a part
of the Credit Agreement as set forth above, Borrower shall execute and deliver
to Bank a Letter of Credit Agreement, Facsimile Letter Agreement, Indemnity
Agreement and such other related documents as Bank may require, in each case in
form and substance satisfactory to Bank.
(d) Borrower shall pay to Bank the fee for the accommodations
granted hereunder in accordance with Paragraph 1 of Section C below.
-3-
<PAGE> 4
(f) Borrower shall reimburse Bank for all of its costs and expenses
(including, without limitation, attorneys fees of Bank's inside and outside
counsel) incurred in connection with the preparation, negotiation and
implementation of this Amendment.
C. MISCELLANEOUS.
1. Borrower shall pay to Bank a non-refundable commitment fee for
the renewal of, and increase in, the Line of Credit and the other
accommodations granted Borrower hereunder, equal to $25,000.00, which
commitment fee shall be due and payable on the date this Amendment is executed
by Borrower and delivered to Bank.
2. The parties hereto acknowledge that notwithstanding the fact
that Bank may, for reasons of administrative convenience, decide not to take
possession of the original of each promissory note which evidences all or any
portion of any Eligible Contract Receivables, Bank reserves its right to do so
at any time hereafter; if Bank requests hereafter; if Bank requests hereafter,
Borrower shall immediately deliver such promissory notes to Bank (if Bank
requests, indorsed to the order of Bank); and such promissory notes remain
subject to Bank's security interest and Borrower is obligated to place a legend
thereon in accordance with the Credit Agreement.
3. Except as specifically provided herein, all terms and
conditions of the Credit Agreement remain in full force and effect, without
waiver or modification. Except as specifically defined herein, all terms
defined in the Credit Agreement shall have the same meaning when used in this
Amendment. This Amendment and the Credit Agreement shall be read together, as
one document.
4. Borrower hereby remakes all representations and warranties
contained in the Credit Agreement (including as amended hereby) and reaffirms
all covenants set forth therein as same may be modified hereby. Borrower
further certifies that as of the date of this Amendment there exists no Event
of Default as defined in the Credit Agreement, nor any
-4-
<PAGE> 5
condition, act or event which with the giving of notice or the passage of time
or both would constitute any such event of Default.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the day and year first written above.
CENTRAL CONSUMER FINANCE WELLS FARGO BANK,
COMPANY NATIONAL ASSOCIATION
By: /s/ Gary Cypres By: /s/ Perry Moreth
---------------------------- -----------------------------
Perry Moreth
Title: Vice President
-------------------------
-5-
<PAGE> 6
REVOLVING LINE OF CREDIT NOTE
$50,000,000.00 Los Angeles, California
October 10, 1996
FOR VALUE RECEIVED, the undersigned CENTRAL CONSUMER FINANCE COMPANY
("Borrower"), promises to pay to the order of WELLS FARGO BANK, NATIONAL
ASSOCIATION ("Bank") at its office at Los Angeles RCBO, 333 South Grand Avenue,
3rd Floor, Los Angeles, California 90071, or at such other place as the holder
hereof may designate, in lawful money of the United States of America and in
immediately available funds, the principal sum of FIFTY MILLION DOLLARS
($50,000,000.00), or so much thereof as may be advanced and be outstanding,
with interest thereon, to be computed on each advance from the date of its
disbursement as set forth herein.
DEFINITIONS:
As used herein, the following terms shall have the meanings set forth
after each, and any other term defined in this Note shall have the meaning set
forth at the place defined:
(a) "Business Day" means any day except a Saturday, Sunday or any
other day on which commercial banks in California are authorized or required by
law to close.
(b) "Fixed Rate Term" means a period commencing on a Business Day
and continuing for one (1), two (2) or three (3) months, as designated by
Borrower, during which all or a portion of the outstanding principal balance of
this Note bears interest determined in relation to LIBOR; provided however,
that no Fixed Rate Term may be selected for a principal amount less than Five
Hundred Thousand Dollars ($500,000.00); and provided further, that no Fixed
Rate Term shall extend beyond the scheduled maturity date hereof. If any Fixed
Rate Term would end on a day which is not a Business Day, then such Fixed Rate
Term shall be extended to the next succeeding Business Day.
(c) "LIBOR" means the rate per annum (rounded upward, if necessary,
to the nearest whole 1/8 of 1%) and determined pursuant to the following
formula:
LIBOR = BASE LIBOR
-------------------------------
100% - LIBOR Reserve Percentage
-1-
<PAGE> 7
(i) "Base LIBOR" means the rate per annum for United States
dollar deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the
understanding that such rate is quoted by Bank for the purpose of calculating
effective rates of interest for loans making reference thereto, on the first
day of a Fixed Rate Term for delivery of funds on said date for a period of
time approximately equal to the number of days in such Fixed Rate Term and in
an amount approximately equal to the principal amount to which such Fixed Rate
Term applies. Borrower understands and agrees that Bank may base its quotation
of the Inter-Bank Market Offered Rate upon such offers or other market
indicators of the Inter-Bank Market as Bank in its discretion deems appropriate
including, but not limited to, the rate offered for U.S. dollar deposits on the
London Inter-Bank Market.
(ii) "LIBOR Reserve Percentage" means the reserve percentage
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for "Eurocurrency Liabilities" (as defined in Regulation D of the
Federal Reserve Board, as amended), adjusted by Bank for expected changes in
such reserve percentage during the applicable Fixed Rate Term.
(d) "Prime Rate" means at any time the rate of interest most recently
announced within Bank at its principal office as its Prime Rate, with the
understanding that the Prime Rate is one of Bank's base rates and serves as the
basis upon which effective rates of interest are calculated for those loans
making reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Bank may
designate.
INTEREST:
(a) Interest. The outstanding principal balance of this Note shall
bear interest (computed on the basis of a 360-day year, actual days elapsed)
either (i) at a fluctuating rate per annum equal to the Prime Rate in effect
from time to time, or (ii) at a fixed rate per annum determined by Bank to be
two and one-quarter percent (2.25%) above LIBOR in effect on the first day of
the applicable Fixed Rate Term. When interest is determined in relation to the
Prime Rate, each change in the rate of interest hereunder shall become
effective on the date each Prime Rate change is announced within Bank. With
respect to each LIBOR selection hereunder, Bank is hereby authorized to note
the date, principal amount, interest rate and Fixed Rate Term applicable
thereto and any payments made thereon on Bank's books and records (either
manually or by electronic entry) and/or on any schedule attached to this Note,
which notations shall be prima facie evidence of the accuracy of the
information noted.
-2-
<PAGE> 8
(b) Selection of Interest Rate Options. At any time any portion of
this Note bears interest determined in relation to LIBOR, it may be continued
by Borrower at the end of the Fixed Rate Term applicable thereto so that all or
a portion thereof bears interest determined in relation to the Prime Rate or to
LIBOR for a new Fixed Rate Term designated by Borrower. At any time any portion
of this Note bears interest determined in relation to the Prime Rate, Borrower
may convert all or a portion thereof so that it bears interest determined in
relation to LIBOR for a Fixed Rate Term designated by Borrower. At such time as
Borrower requests an advance hereunder or wishes to select a LIBOR option for
all or a portion of the outstanding principal balance hereof, and at the end of
each Fixed Rate Term, Borrower shall give Bank notice specifying: (i) the
interest rate option selected by Borrower; (ii) the principal amount subject
thereto; and (iii) for each LIBOR selection, the length of the applicable Fixed
Rate Term. Any such notice may be given by telephone so long as, with respect
to each LIBOR selection, (A) Bank receives written confirmation from Borrower
not later than three (3) Business Days after such telephone notice is given,
and (B) such notice is given to Bank prior to 10:00 a.m., California time, on
the first day of the Fixed Rate Term. For each LIBOR option requested
hereunder, Bank will quote the applicable fixed rate to Borrower at
approximately 10:00 a.m., California time, on the first day of the Fixed Rate
Term. If Borrower does not immediately accept the rate quoted by Bank, any
subsequent acceptance by Borrower shall be subject to a redetermination by Bank
of the applicable fixed rate; provided however, that if Borrower fails to accept
any such rate by 11:00 a.m., California time, on the Business Day such quotation
is given, then the quoted rate shall expire and Bank shall have no obligation to
permit a LIBOR option to be selected on such day. If no specific designation of
interest is made at the time any advance is requested hereunder or at the end of
any Fixed Rate Term, Borrower shall be deemed to have made a Prime Rate interest
selection for such advance or the principal amount to which such Fixed Rate Term
applied.
(c) Limitation on LIBOR Portions. Unless Bank otherwise consents,
no more than one (1) portion of the outstanding principal balance of this Note
shall bear interest in relation to Bank's LIBOR at any time.
(d) Additional LIBOR Provisions.
(i) If Bank at any time shall determine that for any reason
adequate and reasonable means do not exist for ascertaining LIBOR, then Bank
shall promptly give notice thereof to Borrower. If such notice is given and
until such notice has been withdrawn by Bank, then (A) no new LIBOR option may
be selected by Borrower, and (B) any portion of the outstanding principal
balance hereof which bears interest determined in relation to LIBOR, subsequent
to the end of the
-3-
<PAGE> 9
Fixed Rate Term applicable thereto, shall bear interest determined in relation
to the Prime Rate.
(ii) If any law, treaty, rule, regulation or determination of a
court or governmental authority or any change therein or in the interpretation
or application thereof (each, a "Change in Law") shall make it unlawful for
Bank (A) to make LIBOR options available hereunder, or (B) to maintain interest
rates based on LIBOR, then in the former event, any obligation of Bank to make
available such unlawful LIBOR options shall immediately be canceled, and in the
latter event, any such unlawful LIBOR-based interest rates then outstanding
shall be converted, at Bank's option, so that interest on the portion of the
outstanding principal balance subject thereto is determined in relation to the
Prime Rate; provided however, that if any such Change in Law shall permit any
LIBOR-based interest rates to remain in effect until the expiration of the
Fixed Rate Term applicable thereto, then such permitted LIBOR-based interest
rates shall continue in effect until the expiration of such Fixed Rate Term.
Upon the occurrence of any of the foregoing events, Borrower shall pay to Bank
immediately upon demand such amounts as may be necessary to compensate Bank for
any fines, fees, charges, penalties or other costs incurred or payable by Bank
as a result thereof and which are attributable to any LIBOR options made
available to Borrower hereunder, and any reasonable allocation made by Bank
among its operations shall be conclusive and binding upon Borrower.
(iii) If any Change in Law or compliance by Bank with any request or
directive (whether or not having the force of law) from any central bank or
other governmental authority shall:
(A) subject Bank to any tax, duty or other charge with respect to any LIBOR
options, or change the basis of taxation of payments to Bank of principal,
interest, fees or any other amount payable hereunder (except for changes in the
rate of tax on the overall net income of Bank); or
(B) impose, modify or hold applicable any reserve, special deposit,
compulsory loan or similar requirement against assets held by, deposits or
other liabilities in or for the account of, advances or loans by, or any other
acquisition of funds by any office of Bank; or
(C) impose on Bank any other condition;
-4-
<PAGE> 10
and the result of any of the foregoing is to increase the cost to Bank of
making, renewing or maintaining any LIBOR options hereunder and/or to reduce
any amount receivable by Bank in connection therewith, then in any such case,
Borrower shall pay to Bank immediately upon demand such amounts as may be
necessary to compensate Bank for any additional costs incurred by Bank and/or
reductions in amounts received by Bank which are attributable to such LIBOR
options. In determining which costs incurred by Bank and/or reductions in
amounts received by Bank are attributable to any LIBOR options made available
to Borrower hereunder, any reasonable allocation made by Bank among its
operations shall be conclusive and binding upon Borrower.
(e) Payment of Interest. Interest accrued on this Note shall be
payable on the 1st day of each month, commencing November 1, 1996.
(f) Default Interest. From and after the maturity date of this Note,
or such earlier date as all principal owing hereunder becomes due and payable
by acceleration or otherwise, the outstanding principal balance of this Note
shall bear interest until paid in full at an increased rate per annum (computed
on the basis of a 360-day year, actual days elapsed) equal to four percent (4%)
above the rate of interest from time to time applicable to this Note.
BORROWING AND REPAYMENT:
(a) Borrowing and Repayment. Borrower may from time to time during
the term of this Note borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions of this Note and of any document executed in connection with or
governing this Note; provided however, that the total outstanding borrowings
under this Note shall not at any time exceed the principal amount stated above.
The unpaid principal balance of this obligation at any time shall be the total
amounts advanced hereunder by the holder hereof less the amount of principal
payments made hereon by or for any Borrower, which balance may be endorsed
hereon from time to time by the holder. The outstanding principal balance of
this Note shall be due and payable in full on April 30, 1997.
(b) Advances. Advances hereunder, to the total amount of the
principal sum stated above, may be made by the holder at the oral or written
request of (i) GARY CYPRES or NEAL GOWER or BRIAN COHEN or STEVE OLSON, any one
acting alone, who are authorized to request advances and direct the disposition
of any advances until written notice of the revocation of such authority is
received by the holder at the office designated above, or (ii) any person,
with respect to advances deposited to the credit of any account of any Borrower
with the holder, which advances, when so deposited, shall be conclusively
presumed to have been made to or
-5-
<PAGE> 11
for the benefit of each Borrower regardless of the fact that persons other than
those authorized to request advances may have authority to draw against such
account. The holder shall have no obligation to determine whether any person
requesting an advance is or has been authorized by any Borrower.
(c) Application of Payments. Each payment made on this
Note shall be credited first, to any interest then due and second, to the
outstanding principal balance hereof. All payments credited to principal shall
be applied first, to the outstanding principal balance of this Note which bears
interest determined in relation to the Prime Rate, if any, and second, to the
outstanding principal balance of this Note which bears interest determined in
relation to LIBOR, with such payments applied to the oldest Fixed Rate Term
first.
PREPAYMENT:
(a) Prime Rate. Borrower may prepay principal on any
portion of this Note which bears interest determined in relation to the Prime
Rate at any time, in any amount and without penalty.
(b) LIBOR. Borrower may prepay principal on any portion of
this Note which bears interest determined in relation to LIBOR at any time and
in the minimum amount of ONE HUNDRED THOUSAND DOLLARS ($100,000.00); provided
however, that if the outstanding principal balance of such portion of this Note
is less than said amount, the minimum prepayment amount shall be the entire
outstanding principal balance thereof. In consideration of Bank providing this
prepayment option to Borrower, or if any such portion of this Note shall become
due and payable at any time prior to the last day of the Fixed Rate Term
applicable thereto by acceleration or otherwise, Borrower shall pay to Bank
immediately upon demand a fee which is the sum of the discounted monthly
differences for each month from the month of prepayment through the month in
which such Fixed Rate Term matures, calculated as follows for each such month:
(i) Determine the amount of interest which would have
accrued each month on the amount prepaid at the interest
rate applicable to such amount had it remained
outstanding until the last day of the Fixed Rate Term
applicable thereto.
(ii) Subtract from the amount determined in (i) above the
amount of interest which would have accrued for the same
month on the amount prepaid for the remaining term of
such Fixed Rate Term at LIBOR in effect on the date of
prepayment for new loans made
-6-
<PAGE> 12
for such term and in a principal amount equal to the amount
prepaid.
(iii) If the result obtained in (ii) for any month is greater than
zero, discount that difference by LIBOR used in (ii) above.
Each Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Each Borrower, therefore, agrees to pay the above-described
prepayment fee and agrees that said amount represents a reasonable estimate of
the prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to
pay any prepayment fee when due, the amount of such prepayment fee shall
thereafter bear interest until paid at a rate per annum four percent (4%) above
the Prime Rate in effect from time to time (computed on the basis of a 360-day
year, actual days elapsed). Each change in the rate of interest on any such
past due prepayment fee shall become effective on the date each Prime Rate
change is announced within Bank.
EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms and
conditions of that certain Credit Agreement between Borrower and Bank dated as
of December 14, 1993, as amended from time to time (the "Credit Agreement").
Any default in the payment or performance of any obligation under this Note, or
any defined event of default under the Credit Agreement, shall constitute an
"Event of Default" under this Note.
MISCELLANEOUS:
(a) Remedies. Upon the occurrence of any Event of Default, the holder
of this Note, at the holder's option, may declare all sums of principal and
interest outstanding hereunder to be immediately due and payable without
presentment, demand, notice of nonperformance, notice of protest, protest or
notice of dishonor, all of which are expressly waived by each Borrower, and the
obligation, if any, of the holder to extend any further credit hereunder shall
immediately cease and terminate. Each Borrower shall pay to the holder
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of the holder's in-house counsel),
expended or incurred by the holder in connection with the enforcement of the
holder's rights and/or the collection of any amounts which become due to the
holder under this Note, and the prosecution or defense of any action in any way
related to this Note, including without limitation, any action for declaratory
relief,
-7-
<PAGE> 13
whether incurred at the trial or appellate level, in an arbitration proceeding
or otherwise, and including any of the foregoing incurred in connection with
any bankruptcy proceeding (including without limitation, any adversary
proceeding, contested matter or motion brought by Bank or any other person)
relating to any Borrower or any other person or entity.
(b) Obligations Joint and Several. Should more than one person or
entity sign this Note as a Borrower, the obligations of each such Borrower
shall be joint and several.
(c) Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of California.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date first written above.
CENTRAL CONSUMER FINANCE COMPANY
By: /s/ Gary Cypres
------------------------------------
Title:
-----------------------------
-8-
<PAGE> 14
WELLS FARGO BANK CORPORATE RESOLUTION: BORROWING
- --------------------------------------------------------------------------------
TO: WELLS FARGO BANK, NATIONAL ASSOCIATION
RESOLVED: That this corporation, CENTRAL CONSUMER FINANCE COMPANY,
proposes to obtain from time to time, or has obtained credit from Wells Fargo
Bank, National Association ("Bank").
BE IT FURTHER RESOLVED, that any one of the following officers:
PRESIDENT OR SECRETARY OR TREASURER OR CONTROLLER
together with any one of the following officers:
NONE
of this corporation be and they are hereby authorized and empowered for and on
behalf of and in the name of this corporation and as its corporate act and
deed:
(a) To borrow money from Bank and to assume any liabilities of any
other person or entity to Bank, in such form and on such terms and conditions as
shall be agreed upon by those authorized above and Bank, and to sign and deliver
such promissory notes and other evidences of indebtedness for money borrowed or
advanced and/or for indebtedness assumed as Bank shall require; such promissory
notes or other evidences of indebtedness may provide that advances be requested
by telephone communication and by any officer, employee or agent of this
corporation so long as the advances are deposited into any deposit account of
this corporation with Bank; this corporation shall be bound to Bank by, and
Bank may rely upon, any communication or act, including telephone
communications, purporting to be done by any officer, employee or agent of
this corporation provided that Bank believes, in good faith, that the same is
done by such person.
(b) To contract for the issuance by Bank of letters of credit, to
discount with Bank notes, acceptances and evidences of indebtedness payable to
or due this corporation, to endorse the same and execute such contracts and
instruments for repayment thereof to Bank as Bank shall require, and to enter
into foreign exchange transactions with or through Bank.
(c) To mortgage, encumber, pledge, convey, grant, assign or
otherwise transfer all or any part of this corporation's real or personal
property for the purpose of securing the payment of any of the promissory
notes, contracts, instruments and other evidences of indebtedness authorized
hereby, and to execute and deliver to Bank such deeds of trust, mortgages,
pledge agreements and/or other security agreements as Bank shall require.
-1-
<PAGE> 15
(d) To perform all acts and to execute and deliver all documents
described above and all other contracts and instruments which Bank deems
necessary or convenient to accomplish the purposes of this resolution and/or to
perfect or continue the rights, remedies and security interests to be given to
Bank hereunder, including without limitation, any modifications, renewals
and/or extensions of any of this corporation's obligations to Bank, however
evidenced; provided that the aggregate principal amount of all sums borrowed
and credits established pursuant to this resolution shall not at any time
exceed the sum of $50,000,000.00 outstanding and unpaid.
Loans made pursuant to a special resolution and loans made by offices
of Bank other than the office to which this resolution is delivered shall be in
addition to the foregoing limitation.
BE IT FURTHER RESOLVED, that the authority hereby conferred is in
addition to that conferred by any other resolution heretofore or hereafter
delivered to Bank and shall continue in full force and effect until Bank shall
have received notice in writing, certified by the Secretary of this
corporation, of the revocation hereof by a resolution duly adopted by the
Board of Directors of this corporation. Any such revocation shall be effective
only as to credit which is extended or committed by Bank, or actions which are
taken by this corporation pursuant to the resolutions contained herein,
subsequent to Bank's receipt of such notice. The authority hereby conferred
shall be deemed retroactive, and any and all acts authorized herein which were
performed prior to the passage of these resolutions are hereby approved and
ratified.
-2-
<PAGE> 16
CERTIFICATION
I, BRIAN S. COHEN, Secretary of CENTRAL CONSUMER FINANCE COMPANY, a
corporation created and existing under the laws of the State of California, do
hereby certify and declare that the foregoing is a full, true and correct copy
of the resolutions duly passed and adopted by the Board of Directors of said
corporation, by written consent of all Directors of said corporation or at a
meeting of said Board duly and regularly called, noticed and held on N/A, 1996,
at which meeting a quorum of the Board of Directors was present and voted in
favor of said resolutions; that said resolutions are now in full force and
effect; that there is no provision in the Articles of Incorporation or Bylaws
of said corporation, or any shareholder agreement, limiting the power of the
Board of Directors of said corporation to pass the foregoing resolutions and
that such resolutions are in conformity with the provisions of such Articles of
Incorporation and Bylaws; and that no approval by the shareholders of, or of
the outstanding shares of, said corporation is required with respect to the
matters which are the subject of the foregoing resolutions.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed the
corporate seal of said corporation as of October 9, 1996.
/s/ BRIAN S. COHEN
-----------------------------------
BRIAN S. COHEN, Secretary
of Central Consumer Finance Company
-3-
<PAGE> 17
[WELLS FARGO BANK LETTERHEAD]
October __, 1996
Central Consumer Finance Company
1810 South Main Street
Los Angeles, California 90015
Attention: __________________________
Subject: Facsimile Transmissions of Applications for
Issuance of, and Amendments to, Letters of Credit
Dear ____________________________:
Central Consumer Finance Company (the "Applicant"), a Delaware
corporation, has informed Wells Fargo Bank, N.A. ("Wells Fargo") that it may
from time to time wish to use its own facsimile transmission equipment ("FTE")
to transmit to Wells Fargo executed copies of applications (each an
"Application") for the issuance of, and amendments to, letters of credit. Each
such transmission sent by FTE shall be on Wells Fargo's Application for
Commercial Letter of Credit, a copy of which is attached hereto, Wells Fargo's
Application for Standby Letter of Credit, a copy of which is attached hereto,
or such other form as may be satisfactory to Wells Fargo, with each such
Application being duly completed and signed by the Applicant. Each Application
as received by Wells Fargo by FTE shall be referred to hereinafter as a
"Facsimile Application". This letter sets forth the terms and conditions under
which the Applicant may send Applications to Wells Fargo by FTE.
1. The Applicant will transmit by FTE completed, executed copies of the
Applications to Wells Fargo's Letter of Credit Operations at Wells Fargo Bank,
N. A., Trade Services Division, 9000 Flair Drive, El Monte, California 91731,
(818) 572-4610. The Applicant shall be responsible for insuring that the
Applications are duly executed by a person or persons authorized to contract
with Wells Fargo for the issuance of, or amendments to, letters of credit.
2. The Applicant acknowledges that Wells Fargo is not obligated to the
Applicant to accept Facsimile Applications and to issue or amend letters of
credit in accordance with such Facsimile Applications, but that Wells Fargo may
do so solely as a convenience to the Applicant. Wells Fargo may at any time
notify the Applicant that Wells Fargo no longer accepts Facsimile Applications.
3. The Applicant understands that Wells Fargo will not see the original of
the Applications underlying the Facsimile Applications, and that Wells Fargo
will thus have no means of verifying that (i) the signature or the entries on a
Facsimile Application are authentic, (ii) the Application underlying a
Facsimile Application bears an authorized signature or (iii) the Application
underlying a Facsimile
1
<PAGE> 18
Application contains the entries shown on the Facsimile Application. The
Applicant agrees that Wells Fargo will not be required to verify that the
signatures or any other entries on the Facsimile Applications are authentic
signatures or entries, whether such Facsimile Applications are received by
Wells Fargo before or after the date of this letter agreement, but that Wells
Fargo will only be required to examine such signatures for their conformity, in
the opinion of Wells Fargo, to the certified sample signatures, previously
delivered to Wells Fargo, of the officers of the Applicant who appear to have
signed such Facsimile Applications. The Applicant also understands that Wells
Fargo is agreeing to receive Facsimile Applications in this manner as an
accommodation to the Applicant, and the Applicant therefore accepts the risk
that a Facsimile Application, whether heretofore or hereafter received by Wells
Fargo, may not in fact contain authentic signatures or entries.
4. Each Facsimile Application, if it is on an Application for
Commercial Letter of Credit, each letter of credit or amendment issued pursuant
to such Facsimile Application, the issuance of each such letter of credit or
amendment and the transactions under each such letter of credit or amendment and
this letter agreement shall be subject to, and shall be governed by, the terms
and conditions of Wells Fargo's Continuing Commercial Letter of Credit
Agreement, a copy of which is attached hereto, or Wells Fargo's Continuing
Standby and Commercial Letter of Credit Agreement, a copy of which is attached
hereto. Each Facsimile Application, if it is on an Application for Standby
Letter of Credit, each letter of credit or amendment issued pursuant to such
Facsimile Application, the issuance of each such letter of credit or amendment
and the transactions under each such letter of credit or amendment and this
letter agreement shall be subject to, and shall be governed by, the terms and
conditions of Wells Fargo's Continuing Standby Letter of Credit Agreement, a
copy of which is attached hereto, or Wells Fargo's Continuing Standby and
Commercial Letter of Credit Agreement, a copy of which is attached hereto. To
the extent that this letter agreement is inconsistent with the letter of credit
agreement (each a "Letter of Credit Agreement") governing any Facsimile
Application, this letter agreement shall prevail.
5. The Applicant acknowledges that the use of FTE to transmit
Applications to Wells Fargo, and Wells Fargo's ability to issue and amend
letters of credit in accordance with Facsimile Applications so received, may be
interrupted by industrial disputes, acts of government, fires, power failures,
computer malfunctions, civil disturbances or other causes or events not within
the control of Wells Fargo.
6. Except in the case of Wells Fargo's gross negligence or willful
misconduct, the Applicant agrees, in addition to, and not in restriction of any
provision of any Letter of Credit Agreement governing any Facsimile
Application, that Wells Fargo will not be liable to the Applicant for, and that
the Applicant will reimburse and indemnify Wells Fargo against and hold Wells
Fargo harmless from, any damages, losses, liabilities, claims, damages,
obligations, penalties, actions, judgments, suits, expenses and/or costs, of
any kind whatsoever and howsoever caused, including, but not limited to, any
attorney's fees and/or expenses, paid, suffered or incurred by, or imposed upon,
the Applicant or Wells Fargo, as the case may be, directly or indirectly as a
result of, or in any way connected with, Wells Fargo's issuance or amendment of
any letter of credit in accordance with a Facsimile Application, whether such
Facsimile Application was received by Wells Fargo before or after the date of
this letter agreement.
2
<PAGE> 19
7. The Applicant agrees to reimburse Wells Fargo immediately upon
demand for any and all costs, expenses and/or attorneys' fees paid, suffered or
incurred by, or imposed upon, Wells Fargo in enforcing Wells Fargo's rights and
privileges under this letter agreement.
8. The Applicant agrees that all amounts payable by the Applicant
to Wells Fargo under this letter agreement will be payable immediately on
demand without any setoff or counterclaim.
9. The Applicant agrees that its obligations under this letter
agreement are unconditional and continuing whether or not any or all the
letters of credit issued pursuant to the Facsimile Applications have expired or
otherwise terminated.
10. The Applicant agrees that Wells Fargo's rights and privileges
under this letter agreement will inure to the benefit of Wells Fargo's
successors and assigns, and that the Applicant will not, and may not, assign
its obligations under this letter agreement to any person or entity without the
prior written consent of Wells Fargo.
11. The Applicant agrees that until this letter agreement is
terminated or amended to provide otherwise, and without further reference in
any other document, this letter agreement will apply to, be incorporated in and
govern all Facsimile Applications, and the issuance of all letters of credit or
amendments requested by such Facsimile Applications. The termination of this
letter agreement will not terminate the rights of Wells Fargo under Sections 6
and 7 of this letter agreement.
12. The Applicant agrees that this letter agreement, and Wells
Fargo's performance under this letter agreement, shall be governed by and be
construed in accordance with the "Uniform Customs and Practice for Documentary
Credits" (the "UCP"), and International Chamber of Commerce publication, in
force on the date of this letter agreement. The Applicant further agrees that
this letter agreement shall be governed by and be construed in accordance with
the laws of the State of California, except to the extent that such laws are
inconsistent with the UCP.
3
<PAGE> 20
Please indicate your agreement to the terms and conditions of this
letter agreement by signing and dating this letter in the spaces provided below
and returning this letter so signed and dated to Wells Fargo.
Sincerely,
WELLS FARGO BANK, N.A.
By: /s/ Perry Moreth
-----------------------------
Title: Vice President
----------------------
AGREED TO AND ACCEPTED BY:
CENTRAL CONSUMER FINANCE COMPANY
By: /s/ Gary Cypres
----------------------------
Title:
--------------------------
Date: October , 1996
--
4
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