<PAGE> 1
As filed with the Securities and Exchange Commission on November ___, 1998
Registration No. 333-44189
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2 TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
(Name of issuer in its charter)
<TABLE>
<S> <C>
TEXAS 6153 75-2740548
(State or jurisdiction of (Primary Industrial (I.R.S. Employer
incorporation or organization) Classification Code No.) Identification No.)
1120 N.W. 63rd Amy Waters
Suite G-108 200 South Rogers, Suite 300A
Oklahoma City, Oklahoma 73116 Waxahachie, Texas 75165
(405) 843-3135 (972) 938-9090
(Address, including the zip code & telephone (Name, address, including zip code
number, including area code of and telephone number, including area code
Registrant's principal executive office) of agent for service)
</TABLE>
_____________________________
Copy to:
Amy Waters
Attorney at Law
200 South Rogers
Suite 300A
Waxahachie, Texas 75165
(972) 938-9090
_____________________________
Approximate date of commencement of proposed sale to public: As soon as
practicable after the effective date of this Registration Statement.
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Title of Each Amount Proposed Maximum Proposed Amount of
Class of Securities to be Offering Price Maximum Aggregate Registration
to be Registered Registered Per Unit Offering Price Fee
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<S> <C> <C> <C> <C>
Callable Asset-Backed $40,000,000 100% $40,000,000 $11,800.00
Promissory Notes Due
December 31, 2000,
December 31, 2001,
December 31, 2002,
December 31, 2003,
December 31, 2004,
December 31, 2005,
December 31, 2006, and
December 31, 2007
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</TABLE>
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 2
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
Cross-Reference Sheet
showing location in the Prospectus of
information required by items of Form S-1
<TABLE>
<CAPTION>
Form S-1 Number and Caption Location in Prospectus
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<S> <C> <C>
1. Front of Registration Statement and
Outside Front Cover of Prospectus Outside Front Cover Page;
Front Page of Prospectus
2. Inside Front and Outside Back Cover Inside Front Cover Page; Outside
Pages of Prospectus Back Cover Page
3. Summary Information and Risk Factors Prospectus Summary; Risk Factors;
The Company
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price *
6. Dilution *
7. Selling Security-Holders *
8. Plan of Distribution Plan of Distribution
9. Description of Securities Description of the Notes
10. Interest of Named Experts and Counsel Experts; Legal Matters
11. Information with Respect to the
Registrant
(a) Description of Business The Company; Purchase and
Collection of Contracts
(b) Description of Property *
(c) Legal Proceedings *
(d) Stockholder Matters *
(e) Financial Statements Financial Statements
(f) Selected Financial Data *
(g) Supplementary Financial Date *
(h) Management's Discussion and Analysis Management's Discussion and
of Financial Condition and Results of Operations Analysis of Financial Condition
(i) Changes in and Disagreements with Accountants *
(j) Market Risk Disclosures *
(k) Directors and Executive Officers The Company; Management
(l) Executive Compensation Allowed Expenses and Flow of
Contract Proceeds
(m) Security Ownership of Certain Beneficial Security Ownership of
Owners and Management Beneficial Owners and
Management
(n) Certain Relationships and Related
Transactions Management
12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities *
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(*) None or Not Applicable
<PAGE> 3
$40,000,000 (Maximum) $100,000 (Minimum)
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
CALLABLE ASSET-BACKED PROMISSORY NOTES
<TABLE>
<CAPTION>
Initial Interest Rate Class Maturity Date
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<S> <C> <C>
7.75% A-1 December 31, 2000
8.75 A-2 December 31, 2001
9.50 A-3 December 31, 2002
10.00 A-4 December 31, 2003
10.40 A-5 December 31, 2004
10.80 A-6 December 31, 2005
11.00 A-7 December 31, 2006
11.00 A-8 December 31, 2007
</TABLE>
U.S. Automobile Acceptance SNP-IV, Inc., a newly organized Texas
corporation (the "Company), is hereby offering up to $40,000,000 in principal
amount of its Callable Asset-Backed Promissory Notes (the "Notes"). The Notes
bear interest at an initial annual rate ranging from 7.75% to 11%, paid monthly
(the "Interest"). The Interest rates and amounts available for each class of
Notes will be established by the Company from time to time based on market
conditions and the Company's financial requirements. Once determined, the rate
of Interest payable on a Note will remain fixed for the term of that Note.
Notes may be purchased in multiples of $1,000, subject to a minimum purchase
requirement of $5,000. Purchasers of multiple classes of Notes shall be
subject to a minimum purchase requirement of $2,000 for each class purchased.
The Notes are secured by (i) retail installment finance contracts
secured by used automobiles and light trucks (the "Contracts") to be purchased
by the Company, and (ii) certain other collateral described herein. The
Contracts will be purchased from automobile dealerships, automobile sale
divisions of national rental car companies and finance companies (the
"Sellers"), often at a discount, using (a) the net proceeds from the sale of
the Notes offered hereby, and (b) the net collection proceeds from previously
purchased Contracts. The Company has contracted with U.S. Automobile
Acceptance Corporation ("USAAC" or the "Servicer"), to provide purchasing and
collecting services. USAAC is an affiliate of the Company.
(Continued at page 2)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK, INCLUDING
RISKS OF DEFAULT ON THE CONTRACTS. SEE "RISK FACTORS" AT PAGE 8. DEBT
SECURITIES OFFERED WITH HIGH INTEREST OR YIELD GENERALLY INVOLVE MORE RISK THAN
MANY OTHER MEDIUM TERM DEBT INSTRUMENTS WITH LOWER INTEREST OR YIELD. NO
PROVISION HAS BEEN MADE BY THE COMPANY TO ESTABLISH A SINKING FUND TO PAY THE
INTEREST ON THE NOTES OR TO REPAY THE PRINCIPAL.
PROCEEDS OF THE CONTRACTS AND PROCEEDS FROM ANY ADDITIONAL SELLER
RECOURSE OR CREDIT SUPPORT AGREEMENTS WILL BE THE SOLE SOURCE OF PAYMENTS ON
THE NOTES. THE NOTES DO NOT REPRESENT AN OBLIGATION OF U.S. AUTOMOBILE
ACCEPTANCE CORPORATION, THE TRUSTEE, OR ANY OF THEIR AFFILIATES.
THERE CAN BE NO ASSURANCES THAT THE SAME QUALITY OF CONTRACTS WILL BE
AVAILABLE THROUGHOUT THE TERM OF THE NOTES. LOWER QUALITY CONTRACTS WILL
RESULT IN HIGHER DELINQUENCIES, INCREASED CHARGE-OFFS, HIGHER REPOSSESSION
RATES AND LOSSES, AND HIGHER GENERAL AND ADMINISTRATIVE EXPENSES.
DELINQUENCY AND REPOSSESSION RATES FOR THE CLASS OF RETAIL INSTALLMENT
SALES CONTRACTS COMPRISED OF USED MOTOR VEHICLES ARE EXPECTED TO BE HIGHER THAN
FOR CONTRACTS RESULTING FROM THE SALE OF NEW VEHICLES. OBLIGORS UNDER THE
CONTRACTS ARE ANTICIPATED TO BE NON-PRIME CREDITS.
NO PUBLIC MARKET IS EXPECTED TO DEVELOP FOR THESE SECURITIES.
INVESTORS SHOULD EXPECT TO RETAIN OWNERSHIP OF THE NOTES AND BEAR THE ECONOMIC
RISKS OF THEIR INVESTMENT FOR THE ENTIRE TERM OF THE NOTES.
<TABLE>
<CAPTION>
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Price to Broker's Commission Proceeds to
Public and Expenses (1)(3) Company(2)(3)
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<S> <C> <C> <C>
Per Note 100% 7% 93%
Total Minimum $ 100,000 $ 7,000 $ 93,000
Total Maximum $ 40,000,000 $ 2,800,000 $ 37,200,000
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</TABLE>
(1) Payable by the Company to participating licensed broker-dealers.
(2) Before deduction of a 5% fee payable by the Company to USAAC as
reimbursement of registration, legal, accounting, printing, trustee,
marketing and other out-of-pocket fees and expenses and allocated
general administrative and overhead expenses relating to the Offering
and the organization of the Company borne by USAAC and for services
provided by USAAC in connection with the Offering and organization of
the Company. A portion of such fee (up to 1% of the Offering price)
may be paid to licensed broker-dealers as a non- accountable expense
allowance, and a portion of such fee (up to 0.5% of the Offering
price) may be paid for due diligence and expenses. See "Use of
Proceeds" for an estimated breakdown of these expenses.
(3) Broker-dealer commissions will range from 3-7%. Minimum proceeds to
the Company has been calculated assuming the maximum commission is
paid.
This Prospectus is dated , 1998
<PAGE> 4
The Company's business is the purchase and collection of the
Contracts, and the Company's only significant assets will be the Contracts.
The purchasers of the Notes (the "Noteholders") must look to the Contracts and
related motor vehicle collateral as the primary source of payment on the Notes,
as the Company has no other significant assets. See "Risk Factors." In many
instances the Sellers will provide the Company some form of recourse, which
will provide additional collateral support for the Notes.
The Offering will terminate on November 30, 2000, unless sooner
terminated by the Company for certain reasons. See "Plan of Distribution."
The Notes are being sold on a "best efforts" basis on behalf of the
Company by licensed soliciting broker- dealers that are members of the National
Association of Securities Dealers, Inc., who have been or may hereafter be
engaged by the Company. The Notes may also be offered and sold by employees of
the Company. Investor funds will be held in an escrow account at BancFirst,
Oklahoma City, Oklahoma, until a minimum of $100,000 in principal amount of the
Notes (the "Minimum Subscription Amount") are sold. In the event the Minimum
Subscription Amount is not subscribed within ninety (90) days after the date
the Offering is declared effective by the Securities and Exchange Commission
(the "Escrow Termination Date"), the Offering will be terminated and the
escrowed funds will be promptly returned to the investors by the escrow agent.
In such event no expenses will be deducted from the escrowed funds, and no
interest will be paid on such funds. When the Minimum Subscription Amount has
been raised, the escrowed funds will be released to the Company. Any
subsequent sales proceeds from the Notes will be immediately available for use
by the Company. The Company reserves the right to reject any subscription in
whole or in part.
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form S-1 (together
with all exhibits and schedules thereto, the "Registration Statement") with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended, with respect to the registration of the Notes offered
pursuant to this Prospectus. This Prospectus, which forms a part of the
Registration Statement, does not contain all of the information included in the
Registration Statement and the exhibits thereto. For further information,
reference is made to the Registration Statement and amendments thereof and to
the exhibits thereto, which may be inspected and copied at the public reference
facilities maintained by the Commission at its Public Reference Section, Room
1024, 450 Fifth Street, N.W., Washington, D. C. 20549, and at its regional
offices located as follows: Chicago Regional Office, Citicorp Center, 500 W.
Madison Street, Suite 1400, Chicago, Illinois 60661; and New York Regional
Office, 7 World Trade Center, Suite 1300, New York, New York 10048; at
prescribed rates. The Commission maintains a Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The address of such site is
http://www.sec.gov. The Company is not currently subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934.
REPORTS TO NOTEHOLDERS
The Company will furnish to the Noteholders annual reports of the
Company containing audited financial statements. The Company will also furnish
to the Noteholders quarterly reports containing unaudited summary financial
statements of the Company and other summary information regarding the
Contracts, including the information required to be included in Form 10-Q. An
IRS Form 1099 will be mailed to each Noteholder by January 31 of each year.
AUTHORIZED REPRESENTATIONS
No person is authorized to give any information on or to make any
representations about the Company, the Notes or any other matter referred to
herein, other than the information and representations contained in this
Prospectus and any supplements or amendments thereto. If any other information
or representation is given or made, such information or representation may not
be relied upon as having been authorized by the Company. This Prospectus does
not constitute an offer to sell, or the solicitation of any offer to buy, the
securities offered hereby in any state in which, or to any person to whom, such
an offer would be unlawful.
2
<PAGE> 5
MINIMUM SUITABILITY STANDARDS
THIS OFFERING IS OPEN ONLY TO INVESTORS WHICH MEET THE COMPANY'S
MINIMUM UNIFORM SUITABILITY STANDARD OR THE APPLICABLE STATE SUITABILITY
STANDARD, WHICHEVER IS MORE STRINGENT. IN ORDER TO MEET THE COMPANY'S MINIMUM
UNIFORM SUITABILITY STANDARD, A POTENTIAL INVESTOR MUST (I) HAVE A GROSS ANNUAL
INCOME OF AT LEAST $25,000 AND A NET WORTH (EXCLUSIVE OF PERSONAL RESIDENCE,
FURNISHINGS AND AUTOMOBILES) OF AT LEAST $25,000, OR (II) HAVE A NET WORTH
(EXCLUSIVE OF PERSONAL RESIDENCE, FURNISHINGS AND AUTOMOBILES) OF AT LEAST
$40,000, WITHOUT REFERENCE TO INCOME. IN ADDITION, THE INVESTOR'S INVESTMENT
MAY NOT EXCEED TEN PERCENT (10%) OF THE INVESTOR'S NET WORTH (EXCLUSIVE OF
PERSONAL RESIDENCE, FURNISHINGS AND AUTOMOBILES). EACH INVESTOR (OR HIS OR HER
REGISTERED REPRESENTATIVE) WILL BE REQUIRED TO REPRESENT, IN WRITING, THAT THE
INVESTOR SATISFIES THE APPLICABLE STANDARDS.
IOWA INVESTORS: ALL IOWA INVESTORS MUST MEET THE FOLLOWING MINIMUM
SUITABILITY STANDARDS: (I) $40,000 NET WORTH (EXCLUSIVE OF HOME, HOME
FURNISHINGS, AND PERSONAL AUTOMOBILES) AND $40,000 GROSS ANNUAL INCOME, OR (II)
$125,000 NET WORTH (EXCLUSIVE OF HOME, HOME FURNISHINGS, AND PERSONAL
AUTOMOBILES).
(The remainder of this page left intentionally blank)
3
<PAGE> 6
SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus.
OVERVIEW Using the net proceeds of this Offering (the
"Offering"), the Company will purchase from automobile
dealers, automobile sale divisions of national rental
car companies, and finance companies (the "Sellers")
retail installment finance contracts secured by used
automobiles and light trucks (the "Contracts"). The
Contracts will generally be purchased at discounts
ranging from 0% to 25% below the total future net
principal balance owed on such Contracts. The
purchase discount will vary depending on the credit
worthiness of the borrower, the age and mileage of the
vehicle financed, and the availability and financial
strength added by additional recourse or credit
support agreements provided by the Seller. These
credit support agreements, when obtained, will be in
the form of repurchase agreements, limited guaranty
agreements, cash hold-back arrangements, or contract
replacement guarantees.
The Company has contracted with U.S. Automobile
Acceptance Corporation, an affiliate of the Company
("USAAC"), to provide ongoing servicing of the
Contracts purchased, including accounting,
administration and collections of payments due under
the Contracts. In addition, USAAC will oversee
enforcement and administration of recourse agreements,
and oversee the repossession and sale of vehicles
securing any Contract in default.
The Company and USAAC may, in some instances,
subcontract servicing, collection and repossession
functions to third parties. The subcontractors that
will provide subcontract services have substantial
prior experience providing servicing, collection and
repossession functions for their own account and/or on
behalf of other automobile finance companies.
Compensation to third parties for providing Contract
services, if any, will be paid by USAAC out of its
fees. See "Purchase and Collection of Contracts."
All proceeds from the collection of the Contracts are
deposited in a master collection bank account (the
"Master Collections Account"). Collections on the
Contracts are used to pay Interest on the Notes and
"Allowed Expenses," which generally include Contract
acquisition fees, Contract servicing and
administration, trustee fees, bank charges, legal and
accounting fees, taxes, repossession costs, repair and
liquidation expenses, insurance premiums, vehicle
warranty service contract charges, cost of enforcement
of recourse agreements, salaries and other general and
administrative expenses. The general and
administrative expenses to be incurred by the Company
are expenses that will be incurred in connection with
the purchasing, collection and servicing of motor
vehicle installment contracts (the "Contracts"). The
Company will use cash proceeds available from Contract
collections, less Allowed Expenses, to purchase
additional Contracts, often at a discount. See
"Security for the Notes - The Contract Proceeds,
Master Cash Accounts" and "Allowed Expenses and Flow
of Contract Proceeds."
The Notes provide for monthly payments of Interest at
an initial annual rate ranging from 7.75% to 11.0%.
All unpaid principal and accrued Interest are payable
at each respective class maturity date (the "Maturity
Date"). Investors in this Offering will receive an
IRS Form 1099 following the end of each calendar
year. See "Description of the Notes - Payments of
Principal and Interest."
CLASSES OF NOTES;
MATURITY Callable Asset-Backed Promissory Notes (the "Notes")
issued to each Noteholder. Eight classes of Notes
will be issued pursuant to the Indenture of Trust
between the Company and Sterling Trust Company, as
Trustee (see "Indenture of Trust"): Class A-1 Notes,
due December 31, 2000, will bear interest at an
initial rate of 7.75%; Class A-2 Notes, due December
31, 2001, will bear interest at an initial rate of
8.75%; Class A-3 Notes, due December 31, 2002, will
bear interest at an initial rate of 9.5%; Class A-4
Notes, due
4
<PAGE> 7
December 31, 2003, will bear interest at an initial
rate of 10%; Class A-5 Notes, due December 31, 2004,
will bear interest at an initial rate of 10.4%; Class
A-6 Notes, due December 31, 2005, will bear interest
at an initial rate of 10.8%; Class A-7 Notes, due
December 31, 2006, will bear interest at an initial
rate of 11.0%; and Class A-8 Notes, due December 31,
2007, will bear interest at an initial rate of 11.0%.
INDENTURE OF TRUST An Indenture of Trust will be entered into between
the Company and the Trustee, for the benefit of
Noteholders. The Trustee will accept title to the
Security Agreement on behalf of Noteholders. The
duties of the Trustee are to hold the Security
Agreement, to perform certain obligations in the event
of a default in the payment of the principal and
Interest on the Notes, and to execute and deliver to
the Company partial or full satisfaction of the
Security Agreement upon partial or full repayment of
the Notes. The form of Indenture of Trust is Exhibit
B to the Prospectus. See "Indenture Provisions" for a
summary of the Indenture of Trust agreement.
THE TRUSTEE Sterling Trust Company will be the Trustee under the
Indenture for the Notes. The Company is obligated to
pay the fees and expenses of the Trustee relating to
the Notes. To secure the Company's payment of such
fees and expenses, the Trustee has a lien prior to the
Notes on the Trust Estate.
THE COMPANY U.S. Automobile Acceptance SNP-IV, Inc. (the
"Company") is a newly organized Texas corporation.
The Company has been formed for the purpose of
purchasing, collecting and servicing motor vehicle
retail installment contracts (the "Contracts"). It
does not have, and does not expect to have in the
future, any significant assets other than the
Contracts and proceeds thereof that secure the Notes.
The Notes are secured by the Contracts and the related
motor vehicle collateral, and in many instances by
additional recourse agreements from Sellers. The
Company was incorporated under the laws of the State
of Texas on January 2, 1998. The Company's principal
executive offices are located at 1120 N.W. 63rd, Suite
G-108, Oklahoma City, Oklahoma 73116 and its telephone
number is (405) 843-3135. See "The Company."
OFFERING AMOUNT Up to a maximum amount of $40,000,000 in principal
amount of the Notes. Investor funds will be held in
escrow until subscriptions for a minimum amount of
$100,000 in principal amount of the Notes (the
"Minimum Subscription Amount") has been received. See
"Plan of Distribution" hereafter in this Summary for
additional information concerning the escrow.
INTEREST PAYMENTS
TO NOTEHOLDERS The Interest rates payable on the Notes offered
hereby will be established by the Company from time to
time based on market conditions and the Company's
financial requirements. The Company will constantly
re-evaluate its Interest rates based on such
analysis. Once determined, the rate of Interest
payable on a Note will remain fixed for the term of
the Note. The Company reserves the right to vary from
time to time, in its discretion, the Interest rates it
offers on the Notes based on numerous factors
including, but not limited to, the desire to attract
new investors, or receipts of Notes in excess of
current or projected financial requirements.
The initial Interest rates will range from 7.75% to
11.0% per annum on the outstanding principal balance
of each Note. Interest is payable on the fifteenth
(l5th) day of each month beginning with the first full
calendar month following the issuance of such Note and
upon maturity (the "Payment Dates"). The record date
for each payment of Interest on the Notes is the close
of business on the first day of the month of the
Payment Date for that payment. See "Description of
the Notes -Payments of Principal and Interest."
EFFECTIVE YIELD Although the initial stated Interest rate on the
Notes is 7.75% to 11.0% per annum, the effective
Interest rate will be 7.747% to 10.996%, because each
payment of Interest will be paid 15 days after the
month over which it accrued.
5
<PAGE> 8
PRINCIPAL PAYMENTS
TO NOTEHOLDERS No principal payments will be required to be made on
the Notes until Maturity, except that in the event the
Company has been unable to invest the net proceeds
from the sale of the Notes in suitable Contracts for a
period of one hundred eighty (180) days following the
termination date of the Offering, the uninvested net
proceeds at such date will be utilized for a mandatory
partial redemption of the Notes within forty-five (45)
days following such date. In addition, principal
payments may be made in connection with an early
redemption and orderly liquidation. See "Description
of the Notes - Payments of Principal and Interest,"
"- Redemption," and " - Early Redemption and Orderly
Liquidation."
SECURITY FOR THE
NOTES THE CONTRACTS. The Notes will be secured by
specified motor vehicle retail installment sales
contracts (the "Contracts") and the proceeds thereof.
These Contracts will be secured by liens on used
automobiles and light trucks (the "Financed Vehicles")
and will be purchased by the Company from automobile
dealerships, automobile sale divisions of national
rental car companies, and finance companies (the
"Sellers"), often at a discount, using (i) the net
proceeds from the sale of Notes, and (ii) any
remaining net collection proceeds from previously
purchased Contracts after deduction for payments of
Interest and Allowed Expenses. In addition, the
Sellers will often provide some form of recourse
agreements, which will provide additional collateral
support for the Notes. The Company presently intends
to utilize employees, independent commission agents
and USAAC to assist in locating eligible Contracts.
Commissions or Contract note purchase fees paid to
independent agents will be negotiated, with a normal
fee being approximately 1-3% of the outstanding
principal balance of the Contracts acquired. The
Company has no arrangements or agreements with any
Sellers at this time with respect to the purchase of
Contracts. See "Security for the Notes."
THE CONTRACT PROCEEDS. The proceeds from the
Contracts also will constitute security for the Notes
under the Indenture. All proceeds from the Contracts
will be deposited to a master collection account
maintained by the Company (the "Master Collection
Account"). The amounts in the Master Collection
Account attributable to the Contracts will be directly
transferred to an operating account maintained by the
Company (the "Master Operating Account"). The Company
will have the right to cause that portion of the funds
contained in the Master Operating Account which is
attributable to the Contracts to be withdrawn or
applied for the following purposes: (1) to the Note
Redemption Fund for the payment of any Interest due on
the outstanding Notes on each Payment Date, (2) to any
amounts due the Trustee for its fees and expenses;
(3) to the payment of any other Allowed Expenses of
the Company; and (4) to the purchase of additional
eligible Contracts. The Trustee will be provided
regular reports by which the use of such funds may be
monitored. See "Security for the Notes - The
Contract Proceeds, Master Cash Accounts."
THE SERVICING AGREEMENT. The Company has granted a
security interest to the Trustee in all of its rights
under the Servicing Agreement. See "Security for the
Notes - The Servicing Agreement."
PURCHASE OF
THE CONTRACTS The Company will purchase Contracts using (i) the
net proceeds from the sale of Notes, and (ii) any
remaining net collection proceeds from previously
purchased Contracts, after deduction for payments of
Interest and Allowed Expenses. In connection with
such purchases, the Contracts will satisfy certain
purchasing criteria. Obligors under the Contracts are
anticipated to be non-prime credit individuals and
will be somewhat less credit-worthy than prime credit
purchasers of automobiles. See "Purchase and
Collection of Contracts."
6
<PAGE> 9
REDEMPTION OF
NOTES The Company may, at any time, elect to redeem the
Notes in whole or in part. A partial redemption from
time to time would reduce the average life of the
Notes, and thereby reduce the overall return, but not
the annual rate of return, to the Noteholders. In the
event that prior to one hundred eighty (180) days
following the termination date of the Offering the
Company has been unable to invest the net proceeds
from the sale of the Notes in suitable Contracts, the
uninvested net proceeds at such date will be utilized
for a mandatory partial redemption of the Notes within
forty-five (45) days following such date. In
addition, Notes may be redeemed in the event the
Company is unable to purchase suitable Contracts
throughout the term of the Notes.
EARLY REDEMPTION AND
ORDERLY LIQUIDATION If the Company, at its sole discretion, determines,
during the term of the Notes, that there will be
insufficient assets to fully repay the Notes at
Maturity because of sustained operating losses,
excessive credit losses or repossessions, or because
the Company is unable to purchase suitable Contracts
throughout the term of the Notes for the business of
the Company to be profitable, the Company may proceed
with an orderly liquidation and early redemption of
the Notes. In such an event, the Company shall give
notice to the Trustee of its intent to orderly
liquidate the Company's assets, and all net collection
proceeds from the Contracts following the deduction of
Allowed Expenses will be required to be deposited in
the Note Redemption Account for payment of the Notes.
The Company will immediately begin to take action to
cause the Contracts to be fully collected and/or sold
for cash within a period of one year from the date of
the orderly liquidation notice. The Paying Agent will
continue to make monthly cash distributions to
Noteholders until all assets of the Company have been
distributed to the Noteholders. Such cash
distributions will be distributed pro rata to each
Noteholder based on the outstanding unpaid principal
balance of each Note as of the date of the orderly
liquidation notice. Any losses incurred will be
similarly allocated pro rata to all outstanding
Noteholders.
SERVICING The Servicer will be U.S. Automobile Acceptance
Corporation ("USAAC"), an affiliate of the Company,
whose principal offices are located at 1120 N.W. 63rd,
Suite G-108, Oklahoma City, Oklahoma 73116. USAAC is
to provide services for the administration and
collecting of the Contracts on behalf of the Company.
USAAC has limited operating history, and its
management has limited experience in the servicing and
collection of consumer contracts, including those
secured by automobiles. USAAC may subcontract with
third parties to provide certain of these services.
USAAC will be paid $21.50 per month per Contract for
servicing and collecting the Contracts.
TAX STATUS The Notes will be taxable obligations under the
Internal Revenue Code of 1986, as amended, and
Interest paid or accrued will be taxable to non-exempt
holders of the Notes. See "Federal Income Tax
Consequences."
USE OF PROCEEDS The Company intends to use no less than 88% of the
net proceeds from the sale of the Notes for the
purchase of Contracts and no more than 12% of such
proceeds to pay commissions, fees and expenses as
stated in this Prospectus. See "Use of Proceeds."
DENOMINATIONS The Notes will be issued in fully registered form in
denominations of $1,000 and integral multiples
thereof.
NO RATING The Company has not sought, does not intend to seek,
and is not required by the Indenture or any other
document, to obtain a rating of the Notes by a rating
agency.
RISK FACTORS An investment in the Notes entails risks, including
the risk of default on the Contracts. See "Risk
Factors."
PLAN OF
DISTRIBUTION The Notes will be offered and sold on a "best
efforts" basis on behalf of the Company by licensed
soliciting broker-dealers that are members of the
National Association of
7
<PAGE> 10
Securities Dealers, Inc., and are qualified to offer
and sell the Notes in a particular state, who have
been or may hereafter be engaged by the Company. The
Notes may also be offered and sold by employees of the
Company. Investor funds will be held in a
subscription escrow account until the minimum of
$100,000 in principal amount of the Notes (the
"Minimum Subscription Amount") are sold. If the
Minimum Subscription Amount is not subscribed within
ninety (90) days after the date the Offering is
declared effective by the Securities and Exchange
Commission (the "Escrow Termination Date"), the
Offering will be terminated, and the escrowed funds
will be promptly returned to the subscribing investors
by the escrow agent. No interest will be paid to
investors on escrowed funds. Upon receipt of the
Minimum Subscription Amount, the escrowed funds will
be released to the Company. See "Plan of
Distribution."
RISK FACTORS
An investment in the Notes entails risks. In considering a purchase
of these securities, prospective investors should carefully consider the risks
involved.
LIMITED ASSETS AND OPERATING HISTORY
The Company has no prior operating history and does not have, and is
not expected to have, any significant assets other than the Contracts and the
proceeds thereof that secure the Notes. While the Notes remain outstanding, the
Company will not engage in any business other than the purchase, collection and
servicing of the Contracts (including repossession and resale of the vehicle
collateral). USAAC, with whom the Company has contracted for the purchasing
and servicing of the Contracts on the Company's behalf, began operations in
1995 and has limited operating history.
POSSIBLE LACK OF AVAILABILITY OF CONTRACTS
The success of the Company, in large part, depends on its ability to
keep its assets continuously invested in Contracts. There can be no assurances
that the Company will be able to keep its assets so invested, which may result
in lower rates of return. In addition, there can be no assurances that the
same quality of Contracts will be available for purchase with the net
collection proceeds of the original Contracts purchased. Lower quality
Contracts will result in higher delinquencies, increased charge-offs, higher
repossession rates and losses, and higher general and administrative expenses.
EARLY REDEMPTION OF NOTES
The Company may, at any time, elect to redeem the Notes in whole or in
part. A partial redemption from time to time would reduce the average life of
the Notes, and thereby reduce the overall return, but not the annual rate of
return, to the Noteholders. In the event that the Company has been unable to
invest the total net proceeds from the sale of the Notes in suitable Contracts
prior to one hundred eighty (180) days following the termination date of the
Offering, the uninvested net proceeds at such date will be utilized for a
mandatory partial redemption of the Notes within forty-five (45) days following
such date. In addition, Notes may be redeemed in the event the Company is
unable to purchase suitable Contracts throughout the term of the Notes. In
such a case, Notes will be redeemed on a random basis, by lot.
LONGER TERM NOTES MAY INVOLVE GREATER RISK
If the financial position of the Company should deteriorate during the
term of the Notes after Notes with earlier redemption dates have been repaid,
there may be insufficient funds available to repay the remaining outstanding
Notes. Holders of Notes with earlier maturity dates may therefore receive
disproportionate payments, and holders of Notes with later maturity dates may
incur losses.
NO SINKING FUND
No provision has been made by the Company to establish a sinking fund,
that is, a segregated fund with annually scheduled payments, in order to pay
the Interest or principal on the Notes. There can be no assurance that
8
<PAGE> 11
sufficient funds will be available to make the Interest payments when due or to
repay the principal amount of the Notes at maturity.
CONFLICTS OF INTEREST
USAAC, which provides purchasing and collection services to the
Company, also provides similar services to U.S. Automobile Acceptance SNP-III,
Inc. ("SNP-III"), a limited purpose corporation engaged in the same business as
the Company which began operations in February 1997, and U.S. Automobile
Acceptance 1995-I, Inc. ("USAA 1995-I"), a limited purpose corporation engaged
in the same business as the Company which began operation in October 1995.
Consequently, there will be conflicts of interest with respect to allocation of
management time, services, overhead expenses and functions. Management
anticipates that it will devote approximately 50% of its time initially to the
business of the Company. After the initial purchase of Contracts, management
anticipates spending approximately 25% of its time on the Company's business.
If necessary, additional staff will be employed to take care of the business of
the Company. Expenses will be apportioned on a pro rata basis. However, there
can be no assurance that any particular conflict may not be resolved in a
manner that adversely affects Noteholders. Management will have conflicts of
interest with respect to the choice of Contracts purchased by the Company or by
parties other than the Company. In addition, this Note Offering is one of
which management believes will be a series of future note or other securities
offerings of similar limited purpose corporations, trusts or other entities
under the common control of Company management. Accordingly, management
expects there will be additional conflicts of interest in the future. Although
management of the Company, USAA 1995-I, and SNP-III have established a policy
for apportioning business opportunities among affiliates on a pro rata basis,
the risk exists that an entity other than the Company will receive more
favorable treatment with respect to business opportunities, including the
purchase of Contracts. If an insufficient supply of eligible Contracts is
available for purchase, there can be no assurances that the Company will be
able to keep its assets so invested, which may result in lower rates of return
to the investors, and/or early redemption of the Notes. See "Purchase and
Collection of Contracts - Allocation of Available Contracts."
The Company has contracted with USAAC, an affiliate, to act as
Servicer of the Contracts to be purchased. The Company did not seek
competitive bids before contracting with USAAC, and amounts to be paid to USAAC
have not been determined by arms-length negotiation. There can be no assurance
that any of these conflicts will be resolved in a manner that will not
adversely affect Noteholders.
RELIANCE ON MANAGEMENT
The Company's day-to-day affairs, including but not limited to
evaluating the Contracts, determining which Contracts are to be purchased,
effecting Contract purchases, and overseeing the servicing of the Contracts,
will be administered entirely through, and decisions with respect thereto will
be made exclusively by, management of the Company and USAAC. The sole officer
and director of the Company is Michael R. Marshall. The success of the
Company, therefore, will depend on the quality of the services provided by Mr.
Marshall and persons under the control of Mr. Marshall. See "Management."
RELIANCE ON LOCAL ECONOMY DUE TO GEOGRAPHIC CONCENTRATION OF CONTRACTS
The Company anticipates that most Contracts that will be purchased
will originate in the States of Oklahoma and Texas. This practice may subject
the Company to the risk that a downturn in the economy in such region of the
country would more greatly affect the Company than if its business were more
geographically diversified. See "The Company - Business of the Company."
PROBLEMS WITH COLLECTIONS AND REPOSSESSIONS; POSSIBILITY OF POOR PERFORMANCE OF
CONTRACTS
The Contracts represent the financing of the sale of used motor
vehicles. The delinquency and repossession rates for this class of retail
installment sales contracts are expected to be higher than for contracts
resulting from the sale of new vehicles.
Based upon management's previous experience and preliminary
negotiations for the purchase of Contracts, the Company believes that Contracts
bearing interest at close to legal rate ceilings in a number of states where
Contracts will be acquired will be available at discounts during the life of
the Notes. Accordingly, the Company
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<PAGE> 12
expects to meet its obligations on the Notes by generally purchasing Contracts
at a range of 75% - 100% of the remaining principal balance of the Contracts,
bearing interest at rates higher than the Notes. The collection proceeds of
such Contracts will be the source for payment of the Notes, as the total future
installments required to be paid under such Contracts would be substantially
greater than the payments on the Notes.
The Company believes that the aggregate dollar amount of the Contracts
securing the Notes will increase until the Maturity Date. As a result of the
reinvestment by the Company of the net collection proceeds from existing
Contracts, after deduction for Interest and Allowed Expenses, and the purchase
of additional Contracts, the Company believes that the ratio of the aggregate
principal of the outstanding Notes to the total unpaid installments of the
Contracts securing the Notes will continue to increase.
As a consequence of the foregoing, the Company believes that prior to
maturity the Notes will be secured by Contracts whose aggregate value exceeds
the principal amount of the Notes and that the net collection proceeds from the
Contracts, after deduction of Allowed Expenses, will be sufficient to make the
required payments on the Notes. Nevertheless, the actual collection rates for
the Company's Contracts are impossible to predict precisely. Substantial
adverse changes in collectability rates caused by changes in economic
conditions or other factors could adversely affect the Company's ability to
collect on the Contracts. If the Contracts do not collectively perform as
expected by the Company, the Company's ability to make the required payments on
the Notes could also be adversely affected. If Contract Obligors fail in
sufficient quantities to make payments on their respective Contracts and the
Company is unable to sufficiently enforce recourse agreements or resell
Financed Vehicles for enough to cover the outstanding balances on such
Contracts, the Company might become unable to pay the Notes in full.
LACK OF MARKET FOR NOTES
No public market presently exits for the Notes. Although certain
broker-dealers may determine to make a market in the Notes, there can be no
assurance that a secondary market will develop, or that if one develops it will
continue for the life of the Notes. Noteholders have no right to require
redemption of the Notes and may not be able to liquidate their investment in
the Notes in the event of an emergency or for any other reason, and the Notes
may not be readily accepted as collateral for loans. Accordingly, investors
should anticipate holding the Notes until maturity. The Notes should be
purchased only by persons who have no need for liquidity in their investment.
DELAYS IN CONTRACT PURCHASES COULD ADVERSELY AFFECT BUSINESS OF COMPANY
To maximize its investment yields, the Company expects to purchase
Contracts using the net proceeds from the sale of Notes without significant
delay after the receipt of such proceeds. If unforeseen delays occur, the
Company's overall profitability and ability to repay the Notes could be
adversely affected because the yields of the short-term investment alternatives
for such funds, i.e., rates in the interim, are expected to be much less than
the yields anticipated to be received by the Company from the Contracts. The
Company may only invest such funds in bank accounts, bank money-market
accounts, short-term certificates of deposit issued by a bank, or short-term
securities issued or guaranteed by the U.S. Government.
CERTAIN LEGAL MATTERS RELATING TO THE CONTRACTS
PRIORITY LIENS IN FINANCED VEHICLES. Statutory liens for repairs or
unpaid taxes may have priority even over a perfected security interest in the
Financed Vehicles, and certain state and federal laws permit the confiscation
of motor vehicles used in unlawful activity which may result in the loss of a
secured party's perfected security interest in a confiscated motor vehicle.
Liens for repairs or taxes, or the confiscation of a Financed Vehicle, could
arise or occur at any time during the term of a Contract. No notice may
necessarily be given to the Company or USAAC in the event such a lien arises or
confiscation occurs.
BANKRUPTCIES AND DEFICIENCY JUDGMENTS. Certain statutory provisions,
including federal and state bankruptcy and insolvency laws, may limit or delay
the ability of USAAC or the Company to repossess and resell Financed Vehicles
or enforce a deficiency judgment. In addition, the Company may determine in
its discretion that a deficiency judgment is not an appropriate or economically
viable remedy, or may settle at a significant discount any deficiency judgment
that it does obtain. In the event that deficiency judgments are not obtained,
are not satisfied, are satisfied at a discount or are discharged in whole or in
part in bankruptcy proceedings, the loss will reduce the collateral securing
the Notes, and if other collateral or recourse agreements are insufficient may
adversely
10
<PAGE> 13
affect the ability of the Company to repay the Notes. Losses incurred during
the normal course of business will not be allocated to the Noteholders.
In the event that USAAC were declared bankrupt, there may be delays in
the collection of the Contracts; however, such an event should not affect the
nature or extent of the collateral securing the Notes. In the event of a
bankruptcy by the Company, the Trustee is empowered to file such proofs of
claim and other papers or documents to have the claims of the Trustee and the
Noteholders allowed in any judicial proceedings relative to the Company, its
creditors or its property.
DIFFICULTIES IN COMPLYING WITH CONSUMER PROTECTION LAWS. Numerous
federal and state consumer protection laws impose requirements upon the
origination and collection of retail installment contracts. State laws impose
finance charge ceilings and other restrictions on consumer transactions and may
require certain contract disclosures in addition to those required under
federal law. These requirements impose specific statutory liabilities upon
creditors who fail to comply with their provisions. A risk exists that this
liability could affect the ability of the Company, as an assignee of the
Contracts, to enforce the Contracts. In addition, certain of these laws make
an assignee of such contract liable to the Obligor thereon for any violation by
the assignor. Accordingly, the Company, as holder of the Contracts, may be
subject to liability to an Obligor under one or more of the Contracts.
COMPETITION
The Company has numerous competitors engaged in the business of buying
new and used motor vehicle retail installment contracts at a discount,
including affiliates of the Company. In addition, the Company competes to some
extent with providers of alternative financing services, such as floor plan
lines of credit from financial institutions, lease financing and dealer
self-financing. National or regional rental car companies, auction houses,
dealer groups or other firms with greater financial resources than the Company
could elect to compete with the Company in its market. These competitive
factors could have a material adverse effect upon the operations of the
Company.
LACK OF DAMAGE INSURANCE
The owners of the Financed Vehicles may fail to maintain physical
damage insurance. As a consequence, in the event any theft or physical damage
to a Financed Vehicle occurs and no such insurance exists, the Company may
suffer a loss unless the owner is otherwise able to pay for repairs or
replacement or its obligations under the related Contract. If the Company
incurs significant losses from uninsured Financed Vehicles, its ability to pay
the Notes may be adversely affected.
SALE OF SMALL AMOUNT OF NOTES COULD ADVERSELY AFFECT PROFITS
The Offering may be consummated by the Company with the sale of as
little as $100,000 in principal amount of the Notes. In the event the Company
sells only a small portion of the Notes, the performance of individual
Contracts in the pool securing the Notes will have a greater effect on the
ability of the Company to pay the Notes than if a large portion of the offered
Notes are sold. In addition, although most of the Allowed Expenses of the
Company will generally vary with the amount of Contracts, relatively small
amounts of fixed fees and expenses payable to the Trustee and for on-going
banking, accounting and legal services may not vary in proportion with the
amount of the Contracts and may be relatively higher if only a small portion of
the Notes are sold than if a large portion of the Notes are sold. If the fixed
Allowed Expenses are higher than expected, the Company's ability to repay a
small amount of Notes may be adversely affected.
YEAR 2000 MAY ADVERSELY IMPACT BUSINESS OF COMPANY
Many existing computer programs use only two digits to identify a year
in the date field. These programs were designed and developed without
considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create erroneous results by
or at the Year 2000. Although the Company has received assurances from its
information technology consultants that it will not need to significantly
modify or replace any of its current systems in order to comply with Year 2000
issues, the Company does rely on third parties for certain functions that could
be impacted by Year 2000 issued. If functions anticipated to be
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<PAGE> 14
provided by these third parties become unavailable because of Year 2000
problems, the business of the Company could be adversly impacted.
FORWARD-LOOKING INFORMATION
This Prospectus contains certain forward-looking information regarding
the plans and objectives of the Company, including plans and objectives
relating to the acquisition of Contracts and the availability of funds with
which to make payments principal and Interest on the Notes. The
forward-looking statements included herein are based on current expectations
that involve numerous risks and uncertainties. Assumptions relating to the
foregoing involve judgments with respect to, among other things, future
economic, competitive and market conditions and future business decisions, all
of which are difficult or impossible to predict accurately and many of which
are beyond the control of the Company. Although the Company believes that the
assumptions underlying the forward-looking statements are reasonable, any of
the assumptions could be inaccurate and, therefore, there can be no assurance
that the forward-looking statements included in this Prospectus will prove to
be accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, including, without limitation, the
risks set forth under "Risk Factors," the inclusion of such information should
not be regarded as a representation by the Company or any other person that the
objectives and plans of the Company will be achieved.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 18, 1998.
<TABLE>
<S> <C>
SHAREHOLDERS' EQUITY
Common Stock, $1.00 par value, $ 1,000
authorized 3,000 shares, issued
and outstanding 1,000 shares
Paid-in Capital $ 499,000
-------
TOTAL SHAREHOLDERS' EQUITY $ 500,000
</TABLE>
USE OF PROCEEDS
The Company intends to apply a minimum of 88% of the proceeds from the
sale of any Notes to the purchase of Contracts. The Company will pay to
licensed broker-dealers engaged by the Company a commission of up to 7%. The
Company will also pay to USAAC a fee of 5% of the gross proceeds from the sale
of Notes, as reimbursement for paying the registration, legal, accounting,
printing, marketing, trustee and other out-of-pocket fees and expenses, for
bearing the general administrative and overhead expenses associated with the
Offering and the organization of the Company, and for the services provided by
USAAC in connection with the Offering and organization of the Company. All
expenses related to this Offering, other than the commissions and fees payable
to licensed broker-dealers, will be advanced by USAAC. In the event USAAC
advances amounts in excess of 5% of the Offering proceeds, such excess amount
shall be borne by USAAC. If amounts advanced by USAAC are less than 5% of the
Offering proceeds, the balance of the 5% will represent compensation to USAAC.
The following table sets forth the anticipated use of proceeds from the
Offering, reflecting the Minimum and Maximum Subscription Amounts:
<TABLE>
<CAPTION>
Minimum Maximum
------- -------
<S> <C> <C>
Purchase of Contracts $ 86,240 $ 34,496,000
Contract Purchase Fees (1) 1,760 704,000
Broker-Dealer Commissions (2) 7,000 2,800,000
Legal, Accounting & Printing Expenses (3) 5,000 200,000
Trustee and Escrow Fees (3)(4) -0- 50,000
Other Offering Expenses (3)(4)(5) -0- 350,000
Marketing Expenses & Due Diligence (3)(4)(6) -0- 600,000
Compensation to USAAC (3)(4)(7) -0- 800,000
----------- -----------
TOTAL $ 100,000 $ 40,000,000
</TABLE>
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<PAGE> 15
_________________________
(1) To be paid to automobile contract suppliers.
(2) Broker-dealer commissions are assumed to the maximum of 7% for
presentation purposes in this table.
(3) To be paid or reimbursed to an affiliate.
(4) The anticipated expenses of the Offering if only the Minimum
Subscription Amount is raised are in excess of $5,000. Only $5,000
will be reimbursed to USAAC.
(5) Includes SEC registration fee, Blue Sky fees and miscellaneous
expenses.
(6) Anticipated to be paid to registered broker-dealers as a
non-accountable expense allowance and due diligence expense
reimbursement.
(7) If the Maximum Subscription Amount is raised, the Company anticipates
that a portion of the 5% reimbursement will represent profit to USAAC.
PLAN OF DISTRIBUTION
The Company is offering up to $40,000,000 in aggregate principal amount
of the Notes. The Notes are being sold on a "best efforts" basis on behalf of
the Company by licensed soliciting broker-dealers that are members of the
National Association of Securities Dealers, Inc. ("NASD") and that are
qualified to offer and sell the Notes in a particular state, as have been or
may hereafter be engaged by the Company. The Notes may also be offered and
sold by employees of the Company.
The Company has agreed to pay to soliciting broker-dealers, in
consideration for their services, a sales commission of 3% to 7% of the
principal amount of Notes which the broker-dealers sell. In addition,
broker-dealers may be paid up to an additional 1.5% of the principal amount of
Notes sold by broker-dealers, which represents 1% for a non- accountable
expense allowance and 0.5% for due diligence. Such fees, if any, will be paid
out of the 5% payable to USAAC. The total compensation to be paid to NASD
members in connection with the Offering will not exceed 8.5%, which includes up
to 7% for sales commissions, 1% for a non-accountable expense allowance, and
0.5% for due diligence and expenses. The Company has agreed to indemnify the
broker-dealers against certain liabilities, including liabilities under
applicable securities laws.
Minimum suitability requirements have been established. Subscribers
will not be deemed suitable for an investment in the Notes unless they meet one
of two minimum standards established by the Company. All subscribers must
represent that they (i) have a minimum net worth of $25,000, together with an
annual income of a minimum of $25,000, excluding personal residence,
furnishings and automobiles, OR (ii) they have a minimum net worth of $40,000,
without reference to annual income, excluding personal residence, furnishings
and automobiles. Residents of certain states must meet the Company's minimum
standards or the applicable state standard, whichever is more stringent. The
minimum investment is $5,000.
Investor subscriptions are to be made payable to, and will be held in
an escrow account by BancFirst, Oklahoma City, Oklahoma, as escrow agent, until
the Minimum Subscription Amount of $100,000 in principal amount of the Notes
has been raised. In the event that the Minimum Subscription Amount is not
subscribed within ninety (90) days after the date the Offering is declared
effective by the Securities and Exchange Commission (the "Escrow Termination
Date") or any earlier termination of the Offering as hereinafter provided, the
Offering will be terminated and the escrowed funds will be promptly returned to
the subscribing investors by the escrow agent. No interest will be paid to
investors on escrowed funds. When the Minimum Subscription Amount has been
reached, the escrowed funds will be released to the Company. Any subsequent
sales proceeds from the sale of additional Notes will be immediately available
for use by the Company. All subscriptions are subject to the right of the
Company to reject any subscription in whole or in part.
The Offering will terminate on November 30, 2000, unless sooner
terminated by the Company upon the sale of all of the Notes, or if the Company
believes that suitable Contracts will not be available for purchase by the
Company or that additional selling efforts will be unsuccessful. Although
early termination of the Offering may result in the Company selling less than
the Maximum Subscription Amount and may expose prior purchasers of Notes to
certain risks, the Company does not believe an early termination will have a
material adverse effect on any prior purchasers of Notes. The aforedescribed
termination provisions are the exclusive termination provisions for the
Offering.
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<PAGE> 16
DESCRIPTION OF THE NOTES
GENERAL
The Notes are general obligations of the Company, and the holders of
the Notes will have recourse against the assets of the Company; however,
substantially all of the Company's assets will be the Contracts. The Company
has not sought, does not intend to seek, and is not required to obtain, a
rating of the Notes by a rating agency.
The Notes will be issued pursuant to a trust indenture agreement (the
"Indenture"), between the Company and Sterling Trust Company, as trustee (the
"Trustee"). Material terms of the Indenture are disclosed herein. The Trustee
will accept title to the Security Agreement on behalf of Noteholders. The
duties of the Trustee are to hold the Security Agreement, to perform certain
obligations in the event of a default in the payment of the principal and
Interest on the Notes, and to execute and deliver to the Company partial or
full satisfaction of the Security Agreement upon partial or full repayment of
the Notes. See "Indenture Provisions" for a more complete summary of the
Indenture of Trust agreement. The form of Indenture of Trust is Exhibit B to
the Prospectus.
No public market exists for the Notes. Accordingly, Investors should
expect to retain ownership of the Notes and bear the economic risks of their
investment for the life of the Notes.
CLASSES OF NOTES
Eight classes of Notes will be issued pursuant to the Indenture of
Trust between the Company and Sterling Trust Company, as Trustee (see
"Indenture of Trust"): Class A-1 Notes, due December 31, 2000, will bear
interest at an initial rate of 7.75%; Class A-2 Notes, due December 31, 2001,
will bear interest at an initial rate of 8.75%; Class A-3 Notes, due December
31, 2002, will bear interest at an initial rate of 9.5%; Class A-4 Notes, due
December 31, 2003, will bear interest at an initial rate of 10%; Class A-5
Notes, due December 31, 2004, will bear interest at an initial rate of 10.4%;
Class A-6 Notes, due December 31, 2005, will bear interest at an initial rate
of 10.8%; Class A-7 Notes, due December 31, 2006, will bear interest at an
initial rate of 11.0%; and Class A-8 Notes, due December 31, 2007, will bear
interest at an initial rate of 11.0%.
ISSUANCE OF NOTES; TRANSFERS
The Notes will be issued in an aggregate principal amount of up to
$40,000,000, in minimum denominations of $1,000 and integral multiples thereof.
The minimum investment amount for each investor is $5,000. Purchasers of
multiple classes of Promissory Notes shall be subject to a minimum purchase
requirement of $2,000 for each class purchased. The Company may charge a
reasonable fee for any transfer or exchange of a Note.
PAYMENTS OF PRINCIPAL AND INTEREST
The Interest rates payable on the Notes offered hereby will be
established by the Company from time to time based on market conditions and the
Company's financial requirements. The Company will constantly re-evaluate its
Interest rates based on such analysis. Once determined, the rate of Interest
payable on a Note will remain fixed for the term of the Note. The Company
reserves the right to vary from time to time, in its discretion, the Interest
rates it offers on the Notes based on numerous factors including, but not
limited to, the desire to attract new investors, or receipts of Notes in excess
of current or projected financial requirements.
Each Note will accrue Interest from the date of issuance. The initial
Interest rates will range from 7.75% to 11.0% per annum. Interest shall be
computed on the basis of a 365-day year but is paid in twelve (12) equal
monthly installments regardless of the number of days in each month. The
Company will be required to make monthly payments of Interest, paid in arrears,
on the outstanding principal balance. Payments of Interest will be due and
payable on the fifteenth (15th) day of each successive calendar month (for
Interest accruing during the prior month or months), commencing with the first
full calendar month following the issuance of the Note, and upon the Maturity
Date. The principal balance of the Note will be due and payable on the
Maturity Date. Any installment of Interest which is not paid when and as due
will accrue interest at the lesser of 15% or the highest lawful rate of
interest from the date due to the date of payment. Although the initial stated
interest rate on the Notes is 7.75% to 11.0% per annum, the effective interest
rate will be somewhat lower because each payment of Interest will be paid 15
days after the month over which it accrued.
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<PAGE> 17
All payments of Interest will be made by check mailed to Noteholders
registered as of the close of business on the first day of the month of the
Payment Date, at their addresses appearing on the Note Register, or by
electronic transfer, except that all payments of principal and the payment of
Interest due on each Note at maturity or upon redemption in whole or in part
will be made only upon presentation and surrender of such Note on or after the
Maturity Date or Redemption Date, as the case may be, at the office of the
Company.
The Company expects to use the amounts collected under the Contracts to
make the required payments under the Notes. All installments and other
proceeds from the Contracts will be deposited in the Master Collection Account
maintained by the Company for all of the various motor vehicle retail
installment contracts ("Contracts"). USAAC and the Company have agreed to
deposit all installments and other proceeds, including proceeds from sales of
repossessed vehicles, net of repossession expenses, into the Master Collection
Account. On a periodic basis, the funds in the Master Collection Account will
be transferred to a Master Operating Account maintained by the Company.
Payments of Interest on the Notes will be made on each Payment Date by
the Company, or its designee. On or prior to the business day immediately
preceding each Payment Date, the Company will transfer to the Note Redemption
Account that portion of the funds in the Master Operating Account which,
together with any funds in the Note Redemption Account, is sufficient to pay
the accrued Interest due on the outstanding Notes on such Payment Date. Prior
to collection of the Contracts, funds to pay Interest will be advanced by USAAC
and reimbursed as Contracts are collected.
REDEMPTION
No principal payments will be made on the Notes until the earlier of
maturity or any redemption at the election of the Company of the Notes in whole
or in part, except in the event that prior to one hundred eighty (180) days
following the termination date of the Offering the Company has been unable to
invest the total net proceeds from the sale of the Notes in suitable Contracts,
the uninvested net proceeds at such date will be utilized for a mandatory
partial redemption of the Notes within forty-five (45) days following such
date. In addition, Notes may be redeemed in the event the Company is unable to
purchase suitable Contracts throughout the term of the Notes. In such a case,
Notes will be redeemed on a random basis, by lot. Losses incurred during the
normal course of business will not be allocated to the Noteholders.
Redemption of the Notes must occur at the option of the Company on any
Payment Date and may be in whole or from time to time in part. Any redemption
of Notes will be at 100% of the principal amount thereof being redeemed,
together with Interest accrued to the Redemption Date, without any premium or
penalty. Notice will be mailed to all Noteholders setting forth (i) the
Redemption Date, (ii) the Redemption Price, (iii) the name and address of the
Paying Agent, (iv) a statement that the Notes must be delivered to the Paying
Agent, and (iv) a statement that interest on the Notes, or portion thereof
being redeemed, ceases to accrue on and after the Redemption Date. In the case
of notice to the holder of any Note to be redeemed in part, a new Note or Notes
in principal amount equal to the unredeemed portion of such Note will be
issued. In the event of partial redemption of the Notes, the Notes to be
redeemed in whole or in part will be selected on a random basis, by lot.
EARLY REDEMPTION AND ORDERLY LIQUIDATION
If the Company, at its sole discretion, determines, during the term of
the Notes, that there will be insufficient assets to fully repay the Notes at
Maturity because of sustained operating losses, excessive credit losses or
repossessions, or because the Company is unable to purchase suitable Contracts
throughout the term of the Notes for the business of the Company to be
profitable, the Company may proceed with an orderly liquidation and early
redemption of the Notes. In such an event, the Company shall give 30 days
written notice to the Trustee of its intent to orderly liquidate the Company's
assets. Commencing immediately after the written notice of orderly liquidation
is delivered to the Trustee, all net collection proceeds from the Contracts
following the deduction of Allowed Expenses will be required to be deposited in
the Note Redemption Account for payment of the Notes. The Company will
immediately begin to take action to cause the Contracts to be fully collected
and/or sold for cash within a period of one year from the date of the orderly
liquidation notice. The Paying Agent will continue to make monthly cash
distributions to Noteholders until all assets of the Company have been
distributed to the Noteholders. The Company is authorized to hold a minimum
operating cash reserve of $300,000 during the period of the orderly
liquidation. All remaining Company cash after payment of Allowed Expenses will
be distributed to the Noteholders as a final
15
<PAGE> 18
distribution within 120 days after the completion of the orderly liquidation
period. All cash distributions during the orderly liquidation will be
distributed pro rata to each Noteholder based on the outstanding unpaid
principal balance of each Note as of the date of the orderly liquidation
notice. Any losses incurred will be similarly allocated pro rata to all
outstanding Noteholders.
REPORTS TO NOTEHOLDERS
The Company intends to furnish to the holders of the Notes on a
quarterly basis information containing unaudited quarterly financial statements
and other summary information regarding the Contracts, including information
required to be filed in Form 10-Q. Annually, the Company will furnish audited
financial statements of the Company to the Noteholders, prepared in accordance
with generally accepted accounting principles.
MINIMUM YIELD REQUIREMENTS
In the event that only the Minimum Subscription Amount of $100,000 is
raised, the Company anticipates that the average annual rate of return required
from the Contracts purchased to fully pay Allowed Expenses and Interest on the
Notes during their term, and to repay the principal and Interest at the due
date, will be approximately 29%, or $29,000 annually. An approximate breakdown
of such amount is as follows: 11% ($11,000 annually) for Interest on the
Notes; 8% ($8,000 annually) for trustee fees; 1% ($1,000 annually) for legal
fees; 2% ($2,000 annually) for accounting fees; 4% ($4,000 annually) for
servicing and collection expenses; and 3% ($3,000 annually) for recovery of
initial Offering costs. In the event that only the Minimum Subscription Amount
of $100,000 is raised, costs in excess of $29,000 shall be borne by USAAC. See
"Allowed Expenses and Flow of Contract Proceeds - Summary of Allowed Expenses."
SECURITY FOR THE NOTES
GENERAL
The collateral securing the Notes (the "Trust Estate") will consist of
all of the Company's right, title and interest in (a) the Contracts, together
with all payments and instruments received with respect thereto, (b) the
Servicing Agreement, (c) the Master Collection Account, the Master Operating
Account, the Note Redemption Account and all funds (including investments)
therein, (d) all repossessed or returned Financed Vehicles, and (e) all
proceeds of the conversion, voluntary or involuntary, of any of the foregoing
into cash or other liquid property. In some instances the Seller will provide
the Company some form of recourse, such as contract repurchase agreements,
limited guaranty agreements, cash hold-back arrangements, or contract
replacement guarantees. These recourse agreements will be additional
collateral securing the notes. Pursuant to the Indenture, the Trustee has been
granted a lien senior to the lien of the Indenture in order to secure payment
of its fees and expenses as Trustee under the Indenture.
THE CONTRACTS
Each of the Contracts will be a retail installment sales contract and
will be secured by a used automobile or light-duty truck (a "Financed
Vehicle"). The title to each Financed Vehicle will reflect the security
interest of the Company. The Contracts will constitute a part of the Trust
Estate and will be purchased by the Company using (i) the net proceeds from the
sale of Notes, or (ii) any remaining net collection proceeds from any
previously purchased Contracts after deduction for payments of Interest and
Allowed Expenses. A UCC financing statement covering the Contracts, and also
covering the proceeds therefrom, will be filed in the appropriate public
office. The Company has no arrangements or agreements with any Sellers at this
time with respect to the purchase of Contracts.
THE NOTE REDEMPTION ACCOUNT
The Company has established a trust account at a financial institution
(the "Note Redemption Account"). The Note Redemption Account will relate
solely to the Notes and to the Contracts securing the Notes. Funds in the Note
Redemption Account will not be commingled with any other moneys of the Company.
All moneys deposited from time to time in the Note Redemption Account will be
held as part of the Trust Estate. The funds in the Note Redemption Account
will be employed by the Company or the Paying Agent to pay Interest on the
Notes on each Payment Date. Funds in the Note Redemption Account may be
invested as directed by the Company, but may not be invested in affiliates of
the Company. The Company may only specify investment in (i) bank accounts,
(ii) bank
16
<PAGE> 19
money-market accounts, (iii) short-term certificates of deposit issued by a
bank, or (iv) short-term securities issued or guaranteed by the U.S.
Government. The ability of the Company to direct the investment of funds in
the Note Redemption Account, however, limits the protection provided by the
Trustee.
THE CONTRACT PROCEEDS, MASTER CASH ACCOUNTS
The Company has established two types of master accounts (the "Master
Accounts") for the benefit of the Company. The first type account is the
"Master Collection Account," into which all payments made on or with respect
to the Contracts will be deposited. The Master Collection Account will be an
account at a financial institution where all remittance checks, drafts and
other instruments for the Contracts will be deposited. Servicing
subcontractors will be required under their subcontracts to promptly remit
payments collected by them to the Master Collection Account. USAAC has also
agreed to deposit in the Master Collection Account any payment proceeds
received directly by USAAC, including any proceeds from resales of returned or
repossessed Financed Vehicles, net of liquidation expenses, and any recoveries
from insurance claims on Financed Vehicles. The Company will periodically
transfer all collected funds from the Master Collection Account into the
second account, the "Master Operating Account." The funds may be invested as
directed by the Company.
Collections or other proceeds from the Contracts in the Master
Collection Account or the Master Operating Account, or otherwise in its
possession or control, are the Company's property and subject to the security
interest of the Trustee.
It is the intention of the Company to cause the funds contained in the
Master Operating Account to be withdrawn or applied for the following purposes:
first, to the payment of any Allowed Expenses of the Company; second, to any
amounts due the Trustee for its fees and expenses; third, through a direct
transfer to the Note Redemption Account, to the payment of any Interest due on
the outstanding Notes on each Payment Date; and fourth, to the purchase of
additional eligible Contracts.
On or before the business day immediately preceding each Payment Date,
the Company will cause to be transferred directly from the Master Operating
Account to the Note Redemption Account that portion of the funds in the Master
Operating Account which, together with any funds in the Note Redemption
Account, is sufficient to make all Interest payments on the Notes.
THE SERVICING AGREEMENT
The Company has granted to the Trustee a security interest in all of
its rights under the Servicing Agreement. The Servicer is an affiliate of the
Company. The Company may terminate the Servicing Agreement, upon written
notice to USAAC, for failure of USAAC to provide adequate services as required
under the terms of the Servicing Agreement. Upon such termination, all rights,
duties, obligations and responsibilities of USAAC with respect to the related
Contracts (except for any obligation of USAAC to indemnify the Company) will
vest in and be assumed by the Company or any servicing agent that the Company
may designate.
ALLOWED EXPENSES AND FLOW OF CONTRACT PROCEEDS
The "Allowed Expenses" of the Company will include but are not limited
to the expenses and fees including contract servicing, purchase and investor
administration fees, trustee fees, bank fees and charges, legal fees, title
transfer fees, account fees, contract purchase fees, insurance, repossession,
repair and liquidation expenses, enforcement costs of recourse agreements,
federal state and local taxes, reasonable out-of-pocket expenses incurred in
connection with any sale of Contracts, salaries, and other general and
administrative expenses of the Company (collectively the "Allowed Expenses").
The general and administrative expenses to be incurred by the Company are
expenses that will be incurred in connection with the purchasing, collection
and servicing of motor vehicle installment contracts (the "Contracts"). As set
forth below, portions of such expenses will be paid to affiliates of the
Company.
The following table summarizes the Company's present estimates of its
anticipated Allowed Expenses. Actual incurred Allowed Expenses may vary
significantly from these estimates. In the event that only the Minimum
17
<PAGE> 20
Subscription Amount is raised, certain of these expenses will be paid by USAAC,
as indicated. See "Description of the Notes - Minimum Yield Requirements."
Summary of Estimated Allowed Expenses
<TABLE>
<CAPTION>
Allowed Expense Estimated Amount
--------------- ----------------
<S> <C>
Servicing and Operating Fees (to be paid
to affiliates of the Company)
Contract Servicing Fee $21.50 per month per Contract, subject to certain
limitations (1)
Purchase Administration Fee $125 per Contract purchased (2)
Investor Administration Fee 1/12th of 1.0% of the aggregate outstanding principal amount
of the Notes, paid monthly, and 1/12th of 1% of aggregate
funds held in investment accounts, paid monthly (2)
Trustee, Registrar and Custodial Fees
Annual Administration $ 8,000 per year
Note Payments and Registrar Services $12 per year per Note 2
Note Certificate Corrections $10 each (2)
Bank Fees
Master Collection Account $100 to $20,000 per year (varies with volume)
Operating Account $100 to $20,000 per year (varies with number of
transactions)
Legal Fees
Annual Attorney's Opinion to Trustee $1,000 - $10,000
Title Transfers $14 per Contract
Accounting Fees
Annual Audit and Outside Accounting $1,000 - $60,000
Annual Tax Return $1,000 - $10,000
Printing & Mailing $300 - $20,000 (2)
Total Annual Servicing, Operating, Trustee, Bank, Estimated to average (i) $2,000,000 if maximum
Legal, Accounting, Administrative amount of Notes is sold, or (ii) $18,000 if the
Minimum Subscription Amount only is sold
Contract Purchase Fees(3) 1% - 3% per Contract (2)
Repossession, Repair and Liquidation Expenses Estimated to average from $500 to $3,000 for each
repossessed vehicle
Costs of Enforcement of Recourse Enforcement of recourse agreements reduces
Agreements repossessions, repairs and liquidation expenses
Federal Income Taxes Varies with taxable income
State Corporate Income and Franchise Taxes Varies by state
</TABLE>
____________________
(1) Limited to a maximum of $120,000 in any month, for calendar
years 1998 and 1999. This fee will be adjusted at the beginning of
each calendar year for inflation using the U.S. Dept. of Labor
Consumer Price Index.
(2) Will be paid by USAAC or will not be incurred, if only the
Minimum Subscription Amount is raised.
(3) To be paid to independent automobile contract brokers. These
fees are expected to amount to approximately $700,000 initially. See
"Purchase and Collection of Contracts - General."
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<PAGE> 21
FLOW OF CONTRACT PROCEEDS
Payments under the Contracts will generally be paid by the Obligors to
the Servicer, who will deposit the funds into the Master Collection Account.
The following chart generally illustrates the flow of Contract proceeds from
the Obligors through the Master Accounts to the various applications of such
proceeds including payment of Allowed Expenses, trustee fees and expenses,
Interest payments on Notes, reinvestment in additional contracts, and the
accumulation of funds to pay the Notes.
<TABLE>
<S> <C> <C> <C>
================================================================================================================
Servicer Collects Servicer Deposits Company Transfers Funds Company Utilizes Funds
Installments Installment Collections from Master Collection in Master Operating
Into Master Collection Account To Master Account as Follows(1)
Account Operating Account
- ----------------------------------------------------------------------------------------------------------------
-> -> ->
================================================================================================================
</TABLE>
(1) Various Proceeds Applications
1. Allowed Expenses.
2. Trustee's fees and expenses.
3. Interest paid by transfers to Note Redemption Account for
payment to Noteholders.
4. Any remaining proceeds used to purchase additional eligible
Contracts.
THE COMPANY
GENERAL
U.S. Automobile Acceptance SNP-IV, Inc. (the "Company") is a newly
incorporated Texas corporation. The Company is wholly owned by Michael R.
Marshall, an individual and resident of Oklahoma. The Company has no
subsidiaries. There is no trading market for the capital stock or Notes of the
Company. The principal offices of the Company are located at 1120 N.W. 63rd,
Suite G-108, Oklahoma City, Oklahoma 73116. The telephone number is (405)
843-3135.
THE BUSINESS OF THE COMPANY
The Company was established for the purpose of purchasing, collecting
and servicing motor vehicle retail installment contracts. The motor vehicle
retail installment sales contracts to be purchased by the Company and pledged
to secure the Notes (the "Contracts") are generally expected to be purchased at
discounts from the net remaining principal balance thereof and will be secured
by used automobiles and light trucks (the "Financed Vehicles"). The Contracts
will generally be from residents of Texas and Oklahoma and will be purchased
from motor vehicle dealers, national rental car companies, and finance
companies, and Sellers will in many instances provide some form of recourse.
The Company may expand its Seller group to other states as the Company
determines to be appropriate. The Company will not participate in the retail
sales by the automobile dealers of the Financed Vehicles from which the
Contracts will arise. Obligors under the Contracts are anticipated to be
non-prime customers who are somewhat less credit-worthy than prime credit
purchasers of automobiles.
The funds necessary to purchase the Contracts will initially be
provided from the sale of the Notes offered hereby. After the payment of
Interest due upon the Notes and Allowed Expenses, the net collection proceeds
from the Contracts will be used to purchase additional eligible Contracts.
The Company presently anticipates that the Contracts purchased by the
Company will relate primarily to Financed Vehicles where wholesale values range
from $4,000 to $25,000. The Company believes that banks and other traditional
financing institutions are not well equipped to finance used motor vehicles,
due to the large number of relatively small notes or installment contracts, the
institutions' lack of due diligence and collection capability with respect to
used motor vehicles, and the inability of such institutions to approve or
evaluate contracts on a timely, cost-effective basis. Consumer used automobile
receivables are management and collection intensive and require constant
supervision, review and knowledge of repossession and resale services. The
Company believes that the subcontractors selected by the Company and Servicer
will provide this industry expertise at a low marginal cost.
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<PAGE> 22
The Company has no material properties, operating history or pending
legal proceedings. The Company intends to register with all required state
credit commissions as a holder of motor vehicle retail installment sales
contracts.
PURCHASE AND COLLECTION OF CONTRACTS
The Contracts will be purchased by the Company and administered on
behalf of the Company under a Servicing Agreement, the material terms of which
are disclosed in this Prospectus. USAAC, as Servicer, will be responsible for
providing ongoing servicing of the Contracts purchased, including accounting,
administration and collections of payments due under the Contracts. In
addition, USAAC will oversee enforcement and administration of recourse
agreements, and oversee the repossession and sale of vehicles securing any
Contract in default. The Servicing Agreement allows USAAC to subcontract with
industry-qualified third parties to perform its obligations thereunder. Any
such subcontract will not relieve USAAC, as Servicer, from liability for its
obligations under the Servicing Agreement. The Company has granted a security
interest in the Servicing Agreement to the Trustee as security for the Notes
and for the Obligations of the Company. References herein to the "Servicer"
are also to any successor or permitted assignee of the Servicer performing the
duties of the Servicer under the Servicing Agreement.
GENERAL
The Company and USAAC presently intend to utilize independent
commission agents as well as employees of USAAC and Company to assist in
locating eligible Contracts. The Company has established certain criteria as a
general guide to govern the purchase of Contracts. The Servicing Agreement
establishes criteria to govern the servicing of Contracts, including the
performance of certain collection activities.
CERTAIN CONTRACT PURCHASE CRITERIA
The Company will endeavor to purchase the Contracts at discounts to
their aggregate remaining unpaid principal balances. In addition, the Company
will seek to obtain Contracts whose maturities are less than the remaining
useful lives of the Financed Vehicles and which require substantial down
payments by the Obligors.
With respect to the credit information to be supplied by Obligors on
the Contracts, the Company has established certain credit criteria to be
satisfied by each Obligor. In order to satisfy these criteria, an Obligor,
among other things, must be able to provide verifiable personal references,
must have a valid driver's license issued by his state of residence, must have
been a resident of such state for a minimum of six months, and must be at least
18 years of age and have no co-signors on the Contract except immediate family
members. In order to verify the foregoing information, the Company or USAAC
will be required to obtain from the Seller a copy of the credit application
executed by the Obligor which contains the necessary information, to verify by
telephone or otherwise the Obligor's addresses, employment and personal
references and to obtain a credit report from a credit reporting agency or from
the Dealer. Usually the credit report will be obtained directly from a credit
reporting agency.
Although Obligors under the Contracts are anticipated to be somewhat
less credit-worthy than typical purchasers of new automobiles from new car
dealers, the Company has established certain general criteria to be used as a
guide to purchasing Contracts. These criteria are as indicated below; however,
at the discretion of the Company actual purchase of packages and individual
Contracts may vary substantially from this guide:
* The Company expects the purchase discount will generally range between
0% and 25% depending on the credit worthiness of each individual buyer,
the age and mileage of the financed vehicle, and the availability and
financial strength added by additional recourse agreements provided by
the Sellers.
* In many instances, the Seller will be required to provide some form of
recourse which is satisfactory to the Company, such as contract
repurchase agreements, limited guaranty agreements, cash hold-back
arrangements, or contract replacement guarantees.
* Contracts will usually have an original term of 66 months or less.
* The age of each Financed Vehicle may not exceed those listed in the
appropriate automobile market guides, which are modified periodically.
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<PAGE> 23
* The Obligors on the Contracts are required to make a down payment in
cash plus net trade-in allowance of 10-25% of the purchase price of
the Financed Vehicles.
* The interest rate on the Contracts will not violate any applicable
usury laws.
* The wholesale value for a Financed Vehicle will generally be greater
than $4,000 and less than $25,000. The Company believes that $4,000 is
the minimum value automobile economically feasible for the Company to
finance and $25,000 the maximum desirable.
* The Obligors on the Contracts must have supplied certain credit
information, and credit verification procedures must have been
performed by the Company or Servicer.
SELLER CRITERIA
Contracts may be purchased from automobile dealers who meet the
following criteria:
* A net worth, exclusive of goodwill or other intangible values, of
$100,000, or a parent or affiliate which meets the net worth criterion
and guarantees the performance of the obligations of the automobile
dealer under the purchase agreements and recourse agreements;
* A minimum of two years of successful operation as an automobile dealer,
as evidenced by financial statements or prior tax returns;
* Verifiable banking references;
* Dealership property owned by dealer or subject to lease of sufficient
length to indicate long term presence; and
* Satisfactory on-site premises inspection.
* Sellers including automobile sale divisions of national rental car
companies and finance companies must meet the same net worth criterion
utilized for automobile dealers.
COLLECTION OF PAYMENTS
Under the Servicing Agreement, USAAC is obligated to exercise
discretionary powers involved in the management, administration and collection
of the Contracts and to bear all costs and expenses incurred in connection
therewith. USAAC may, in some instances, subcontract its collecting functions
to qualified third parties. Funds collected by the subcontracting servicers
will be required to be deposited directly to the Master Collection Account and
not to the servicer's account.
USAAC or subcontractor must contact any Obligor on a past due Contract
within fifteen (15) days after the payment due date to pursue collections. Any
material extensions, modifications, or acceptances of partial payments by
Obligors, and any related necessary Contract amendments or default waivers by
USAAC, must be approved by the chief credit officer or president of the
Company. When any Contract becomes over thirty (30) days past due, USAAC and
the Company will take immediate appropriate action to enforce recourse
agreements on behalf of the Company. "Past Due" is defined as 15 days after
the payment due date. USAAC will pursue repossession, subject to compliance
with all state and federal laws relating thereto, of the Financed Vehicle
securing any Contract whose Obligor is (i) past due by at least four scheduled
installments in the case of bi-weekly or semi-monthly installments or two
scheduled installments in the case of monthly installments, and (ii) has failed
for 60 consecutive days, in the case of bi-weekly or semi-monthly installments,
or 75 days, in the case of monthly installments, to remit any sums against the
obligations under the Contract. USAAC may commence repossession sooner if it
deems such activity to be prudent and in the best interests of the Company.
USAAC is also required to document the reasons for each chargeoff of any
material unpaid amount from an Obligor under any Contract. As indicated by the
foregoing repossession requirements, to maximize its return the Company prefers
to continue collecting installments on the Contract despite a missed
installment by the Obligor in lieu of repossession of the vehicle.
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<PAGE> 24
USAAC is required to deliver monthly to the Company a report certifying
that all Contracts managed by USAAC were serviced in material accordance with
the Servicing Agreement and that USAAC is not in default under the Servicing
Agreement. The report also will contain collection information on each
Contract since the date of the last such report and a reconciliation of the
deposits into the Master Account, if any.
SERVICER COMPENSATION
USAAC is entitled under the Servicing Agreement to receive a monthly
fee (the "Servicing Fee") per outstanding Contract of $21.50 per month, subject
to certain limitations. Such compensation shall be limited to a maximum of
$120,000 in any month. In addition, the Contract Servicing Fee will be
adjusted, if necessary, so that the total annual Allowed Expenses do not exceed
$18,000 in the event only the Minimum Subscription Amount is sold. In each
case, fees will be adjusted annually by the pro rata published Consumer Price
Index inflation factor. The Servicing Fee is intended to compensate and
reimburse USAAC for administering the collection of the Contracts, including
collecting and posting all payments, responding to inquiries of Obligors on the
Contracts, investigating delinquencies, sending payment coupons to Obligors,
and reporting any required tax information to Obligors. USAAC will be entitled
to reimbursement of its costs and expenses incurred in the repossession,
preparation for sale and resale of any Financed Vehicle and reimbursement of
costs of enforcement of recourse agreements. Compensation to subcontracting
servicers for providing Contract servicing, if any, will be paid by USAAC out
of its Contract Servicing Fees.
ALLOCATION OF AVAILABLE CONTRACTS
Although the Company's management and consultants anticipate that a
sufficient supply of Contracts will be available for purchase throughout the
term of the Notes, a policy has been established for apportioning business
opportunities among the Company, SNP-III, USAA 1995-I, and future affiliated
entities. In the event a limited number of suitable Contracts are available at
a time when several affiliated entities wish to purchase Contracts, the
Contracts will be divided among the entities on a pro rata basis, according to
the amount of funds each entity has available for contract purchase.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth information, as of September 30, 1998,
relating to the beneficial ownership of the Company's capital stock by any
person or "group", as that term is used is Section 13(d)(3) of the Securities
Exchange Act of 1934 (the "Exchange Act"), known to the Company to own
beneficially five percent (5%) or more of the outstanding shares of Common
Stock, and known to the Company to be owned by each director of the Company and
by all officers and directors of the Company as a group. Except as otherwise
noted, each of the persons named below is believed by the Company to possess
sole voting and investment power with respect to the shares of Common Stock
beneficially owned by each person.
<TABLE>
<CAPTION>
Name of Director or Amount and Nature of Beneficial Ownership(1)
Name and Address of Percentage of
Beneficial Owner Number of Shares Class Outstanding
- ---------------- ---------------- -----------------
<S> <C> <C>
Mr. Michael R. Marshall 1,000 100%
1120 N.W. 63rd, Suite G-108
Oklahoma City, Oklahoma 73116
</TABLE>
- -----------------------------
(1) The information as to beneficial ownership of Common Stock has
been furnished by the Company and the sole director and officer of the Company.
MANAGEMENT
BUSINESS BACKGROUND AND EXPERIENCE
The name, age, background and principal occupation of the sole director
and executive officer of the Company are set forth below:
22
<PAGE> 25
Mr. Michael R. Marshall, age 49, is Chairman of the Board and President
of the Company and its Servicer, U.S. Automobile Acceptance Corporation. Mr.
Marshall is Chairman of the Board of Directors, president, and the owner of all
the outstanding common stock of U.S. Automobile Acceptance SNP-III, Inc.
("SNP-III"), and U.S. Automobile Acceptance 1995-I, Inc. ("USAA 1995-I"), both
limited purpose corporations with business activities similar to the proposed
activities of the Company.
Mr. Marshall holds a Bachelor of Business Administration Degree in
Accounting which he obtained in 1971 from Texas A&M University and is a
Certified Public Accountant, licensed to practice in Texas. From 1971 through
1977 Mr. Marshall was employed at Coopers & Lybrand, an international firm of
Certified Public Accountants, which he served in various capacities including
general practice manager of its Oklahoma City office. Mr. Marshall was
self-employed from 1977 to 1982 as a practicing Certified Public Accountant and
as a corporate financial consultant and since 1982 has been President and Chief
Executive Officer of Settlers Capital Corporation, an Oklahoma corporation
which specializes in assisting companies in the placement of private and public
debt and equity finance transactions. Additionally, from 1981 through 1988,
Mr. Marshall was the President of Settlers Energy Corporation, an Oklahoma
corporation, which specialized in purchasing, managing and liquidation of
secured oil and gas loans of distressed financial institutions.
Mr. Marshall has eighteen years experience as a participating investor
and originator of various secured commercial lending transactions and has more
than fifteen years experience in structuring, monitoring, management and
liquidation of secured lending transactions. Mr. Marshall has since early 1994
devoted substantially all of his time to the automobile finance business.
PERSONNEL
Mr. Robert P. Billy, age 50, has been on the Board of Directors of
USAAC for two years. Mr. Billy joined USAAC on a full-time basis in September
1997. Mr. Billy was, from September 1995 to September 1997 executive vice
president of Metro Bank, National Association, located in Oklahoma City,
Oklahoma, and from September 1989 through February 1995 was executive vice
president of First Enterprise Bank, located in Oklahoma City, Oklahoma. Mr.
Billy has previously been a banker for more than 27 years and has previously
been the senior bank lending officer for various new and used automobile
dealerships and for the largest used automobile auction in the State of
Oklahoma. Mr. Billy assists USAAC and the Company with developing plans for
portfolio credit management and assists in the selection process for
determining eligible automobile dealerships for participation in the USAAC
automobile finance programs and in the credit screening of Contracts to be
purchased by the Company. Mr. Billy holds a Bachelor of Business
Administration in Management and Finance from Central State University in
Edmond, Oklahoma, and has attended various advanced banking and credit
management schools.
SERVICER
U.S. Automobile Acceptance Corporation, a Texas corporation and
affiliate of the Company (the "Servicer") was formed in January 1995 to begin
to consolidate management and operations of Michael R. Marshall's automobile
finance activities. All of the outstanding stock of U.S. Automobile Acceptance
Corporation is owned by Mr. Marshall. As of May 31, 1998, the Servicer's
assets consisted principally of cash and marketable securities of approximately
$1,500,000 and its advances to affiliated automobile finance related entities
as described herein. The Servicer has no significant liabilities and is not
presently a party to any litigation.
U.S. Automobile Acceptance Corporation will be the Servicer pursuant to
the Servicing Agreement, and, as such, will provide all of the staffing,
administration and overhead necessary to administrate and collect automobile
finance contracts for the Company. Among the specific functions USAAC will
provide are accounting, administration of collections of payments, dealer
selection and supervision, enforcement of recourse agreements, and the
repossession and sale of repossessed vehicles. USAAC may subcontract a portion
of the required services to third parties.
PRIOR ACTIVITIES OF SIMILAR BUSINESSES UNDER COMMON CONTROL
U.S. Automobile SNP-I, Inc. ("SNP-I"), incorporated in 1993, had
operations and activities similar to those proposed for SNP-IV. In late 1994,
SNP-I completed the sale of a publicly registered note offering in the amount
of approximately $2,400,000. SNP-I became fully operational in early 1995 and
had profitable finance operations
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<PAGE> 26
during the years ended December 31, 1995 and 1996. In accordance with the note
terms, effective January 1, 1997, SNP-I ceased purchasing additional contracts
and began retaining all net collections from its contracts to pay off its
investor notes. SNP-I redeemed all its outstanding notes payable in November
1997.
In June 1995, U.S. Automobile Acceptance 1995-I, Inc. ("USAA 1995-I"),
a Texas corporation, commenced an offering of $9,900,000 of publicly registered
secured promissory notes due December 31, 1999. In September 1995, USAA 1995-I
exceeded the minimum subscription escrow requirement and began its contract
purchasing activities. The note offering continued until it was fully
subscribed in August 1996. The initial contract purchasing activities of USAA
1995-I were completed in early 1997. As of December 31, 1997, USAA 1995-I had
purchased approximately 1200 automobile finance contracts with aggregate
balances of approximately $9,000,000. USAA 1995-I incurred approximately
$300,000 in initial losses from finance operations during the period from
September 1995 through December 31, 1996. The initial losses were incurred
during the "development stage of USAA 1995-I and resulted substantially from
payment of interest on investor notes prior to purchase of interest-yielding
finance contracts from automobile dealers. The finance operations became
profitable after completion of the initial finance contract portfolio purchases
in early 1997. Net finance income of USAA 1995-I during the year ended
December 31, 1997 was approximately $250,000. Credit losses in 1996 and 1997
approximated 5% annually. U.S. Automobile Acceptance Corporation serves as the
servicer for U.S. Automobile Acceptance 1995-I, Inc.
U.S. Automobile Acceptance SNP-III, Inc. ("SNP-III") was incorporated
in June 1996 as a Texas corporation. SNP- III filed a Registration Statement
in 1996 with the Securities and Exchange Commission and various state
securities agencies with respect to its offering of up to $24,000,000 of 11%
publicly registered Promissory Notes due December 31, 2001. The offering
commenced in late 1996. As of April 15, 1998, the note offering was completed.
SNP-III has incurred initial operating losses of approximately $500,000 during
the period from November 1996 through December 31, 1997, which resulted
substantially from payment of interest on investor notes prior to purchase of
interest-yielding finance contracts from automobile dealers. This is referred
to as negative interest spread. SNP-III is presently considered to be in the
"development stage" as substantially all of its efforts have been expended in
establishing the new business, raising capital and purchasing initial finance
contracts. SNP-III expects to incur continued negative interest spread until
the initial purchase of the finance contract portfolio is substantially
completed, in the fourth quarter of 1998. Accordingly, SNP-III expects finance
operations will become profitable in the fourth quarter of 1998 or the first
quarter of 1999. As of April 15, 1998 SNP-III had received note subscriptions
totaling $23,998,000 and had purchased contracts with aggregate balance
receivables totaling approximately $20,000,000. SNP-III had incurred only
nominal credit losses through April 15, 1998. U.S. Automobile Acceptance
Corporation serves as the servicer for U.S. Automobile Acceptance SNP-III,
Inc.
DELINQUENCY, CREDIT LOSS AND REVENUE INFORMATION OF CONTRACT SERVICER
OPERATIONS
U.S. Automobile Acceptance Corporation began contract servicing
activities for its affiliates in late 1995. The following tables set forth
information relating to Servicer delinquency, credit loss and revenue
experience for each year indicated with respect to all contracts it has
purchased and continues to service.
<TABLE>
<CAPTION>
December 31
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Total Contract Balances $ 351,000 $ 7,930,000 $ 20,520,000
Total Delinquent Contracts
(includes contracts with balances
over 30 days past due) $ 9,000 $ 631,000 $ 1,609,000
Delinquent Contracts as a % of
Total Contracts 2.5% 7.9% 7.8%
Repossession Losses -0- $ 249,000 $ 663,000
Repossession Losses as a % of
Total Contracts -0- 3.1% 3.2%
Interest Revenue $ 15,000 $ 940,000 $ 2,665,000
</TABLE>
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<PAGE> 27
All the above 1995 information represents the initial start-up of the
Servicer operations and statistical data presented has been prepared based on
only a few months operations and is not comparable to 1996 and 1997 data.
Accordingly, 1995 data is not discussed herein. The Servicer's Contract
portfolio has continually increased and number of Contracts serviced, total
Contract balances and related interest revenues have increased each year.
Delinquencies in excess of 30 days or more and repossession losses as a
percentage of total Contracts have remained relatively flat. The average
portfolio APR interest rates for 1996 and 1997 is in excess of 20% and most
Contracts were purchased at a discount. Average Contract balances are
generally increasing which is a result of a continuing effort to purchase
Contracts on newer used automobiles. Repossession losses as a % of total
Contracts may not represent future results because the Servicer's Contract
portfolio is continually increasing and is relatively newly purchased.
Management expects actual future repossession losses will be higher than
reflected herein.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In addition to owning 100% of the Company's Common Stock, Mr. Marshall
owns all of the outstanding common stock of USAAC, USAA 1995-I, and SNP-III.
Operations and activities of USAA 1995-I and SNP-III are similar to the planned
activities and operations of the Company.
The Company will pay to USAAC a fee of 5% of the gross proceeds from
the sale of Notes, as reimbursement for paying the registration, legal,
accounting, printing, marketing, trustee and other out-of-pocket fees and
expenses, for bearing the general administrative and overhead expenses
associated with the Offering and the organization of the Company, and for the
services provided by USAAC in connection with the Offering and organization of
the Company. All expenses related to this Offering, other than the commissions
and fees payable to licensed broker-dealers, will be advanced by USAAC. In the
event USAAC advances amounts in excess of 5% of the Offering proceeds, such
excess amount shall be borne by USAAC. If amounts advanced by USAAC are less
than 5% of the Offering proceeds, the balance of the 5% will represent
compensation to USAAC.
Pursuant to the Servicing Agreement, USAAC will be paid a contract
servicing fee of $21.50 per month per Contract, limited to a maximum of
$120,000 in any month, for calendar year 1998. This fee will be adjusted at the
beginning of each calendar year for inflation, using the U.S. Department of
Labor Consumer Price Index. In addition, USAAC will receive a purchase
administration fee of $125 per Contract purchased. USAAC will also receive an
investor administration fee equal to 1/12th of 1% of the aggregate outstanding
principal amount of the Notes, payable monthly, and 1/12th of 1% of aggregate
funds held in investment accounts, payable monthly.
The Company, USAA 1995-I, SNP-III, and USAAC will have conflicts of
interest in allocating management time, services, overhead and functions.
Management of the Company intends to resolve any such conflicts in a manner
that is fair and equitable to the Company, but there can be no assurance that
any particular conflict may not be resolved in a manner that adversely affects
Noteholders. Management of the Company will endeavor to ensure that it has
sufficient staff personnel to be fully capable of discharging its
responsibilities to all affiliated entities, but there can be no assurance that
such personnel will be available. Although management has established a policy
for apportioning business opportunities on a pro rata basis among affiliates,
the risk exists that an entity other than the Company will receive more
favorable treatment with respect to business opportunities, including the
purchase of Contracts. If an insufficient supply of eligible Contracts is
available for purchase, there can be no assurances that the Company will be
able to keep its assets so invested, which may result in lower rates of return
to the investors and/or early redemption of the Notes. See "Risk Factors
- -Conflicts of Interest."
There are no family relationships among any of the directors and
executive officers of the Company. Except as indicated herein, none of the
Company's directors hold directorships in any company with a class of
securities registered pursuant to Section 12 of the Exchange Act or subject to
the requirements of Section 15(d) of the Exchange Act or any company registered
as an investment company under the Investment Company Act of 1940.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
GENERAL
As of the date of this Prospectus, the Company has had no operating
history. The net proceeds of the sale of the Notes will be employed to purchase
the Contracts. While the Notes remain outstanding, the Company will
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<PAGE> 28
not engage in any business other than the purchase, collection and servicing of
the Contracts (including repossession and resale of the vehicle collateral).
The Company's use of the net collection proceeds from the Contracts
will be restricted to payments on the Notes and to payments of Allowed Expenses
and purchases of additional eligible Contracts.
CAPITAL RESOURCES AND LIQUIDITY
The Company's primary sources of funds for payment of interest on the
Notes will be proceeds from the Contracts and any income on the reinvestment of
such proceeds. The Company does not have, nor is it expected to have in the
future, any significant source of capital for payment of interest on the Notes
and the expenses incurred by it other than proceeds from the Contracts and any
income from reinvestment of such proceeds. Payment of the principal or
Interest on the Notes is not guaranteed by any other person or entity.
Nevertheless, management of the Company believes that the Company will realize
sufficient proceeds from the foregoing sources to pay all installments of
Interest when due on the Notes.
IMPACT OF YEAR 2000
Many existing computer programs use only two digits to identify a year
in date field. These programs were designed and developed without considering
the impact of the upcoming change in the century. If not corrected, this could
result in a system failure or calculations of erroneous results by or at the
Year 2000.
The Servicer's information technology consultant recently assessed the
Servicer's readiness to manage Year 2000 issues. This included a review of all
current computer systems in use, as well as communications with significant
data processing subcontractors to determine the extent to which the Servicer's
operations are vulnerable to third parties' failure to correct their own Year
2000 issues. Based on the overall assessment performed, the Servicer has
determined that it will not need to significantly modify or replace any of its
current systems in order to comply with Year 2000 issues. In addition, based
upon communications with significant third party data processing
subcontractors, the Servicer is not aware of any material impact on their
systems relating to the transition to the Year 2000. The Company's total cost
of Year 2000 related issues is not expected to have a material adverse effect
on the Company's results of operations.
However, should the Servicer have a significant failure of its computer
systems or its subcontractors' systems related to Year 2000 issues, the
Servicer could be required to account for, manage and administrate Contract
purchases, Contract collections, investor administration and investor
distributions manually or on a reduced computerized basis for a period of time.
Because of management's prior experience utilizing manual and partially
computerized systems and due to the relatively small number of Contract
purchases and investor subscriptions expected by the Company prior to December
31, 1999, the Company does not expect the Year 2000 issues to be a significant
financial exposure.
INDENTURE OF TRUST PROVISIONS
The following summaries describe material provisions of the Indenture.
Where particular provisions or terms used in the Indenture are referred to, the
actual provisions are incorporated herein by reference.
An Indenture of Trust will be entered into between the Company and the
Trustee, Sterling Trust Company, for the benefit of Noteholders.
The Company is obligated to pay the fees and expenses of the Trustee
relating to the Notes. To secure the Company's payment of such fees and
expenses, the Trustee has a lien prior to the Notes on the Trust Estate. The
Trustee will accept title to the Security Agreement on behalf of the
Noteholders. A description of the Indenture of Trust is set forth below. The
duties of the Trustee are to hold the Security Agreement, to perform certain
obligations in the event of a default in the payment of the principal and
Interest on the Notes, and to execute and deliver to the Company partial or
full satisfaction of the Security Agreement upon partial or full repayment of
the Notes.
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<PAGE> 29
The Company shall file with the Trustee within 15 days after it files
them with the SEC copies of the annual reports and of the information,
documents, and other reports (or copies of such portions of any of the
foregoing as the SEC may by rules and regulations prescribe). The Company also
shall comply with the other provisions of TAU by filing annually a certificate
of compliance with the Trustee. Copies of any reports filed are available upon
request to Noteholders. No fees will be charged in excess of the Company's
out-of-pocket expenses in providing such reports.
The following constitute Events of Default under the Indenture of
Trust:
(1) the Company fails to pay Interest payments on the Notes when due,
and such failure to pay continues for a period of more than five days;
(2) the Company fails to pay principal of any Notes when due, except
during an orderly liquidation, and such failure to pay continues for a period
of more than five days;
(3) the Company fails to comply with any of its other agreements in
the Notes, the Security Documents, or the Indenture and the default continues
for the period and after the notice specified below;
(4) the Company, pursuant to or within the meaning of any Bankruptcy
Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it in
any involuntary case,
(c) consents to the appointment of a Receiver of it or for any
substantial part of its property,
(d) makes a general assignment for the benefit of its creditors,
or
(e) fails generally to pay its debts as they become due; or
(5) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(a) is for relief against the Company in an involuntary case,
(b) appoints a Receiver of the Company or for any substantial
part of its property, or
(c) orders the liquidation of the Company,
and the order or decree remains unstayed and in effect for 90 days.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar federal or state law for the relief of debtors. The term "Receiver"
means any receiver, trustee, assignee, liquidator, or similar official under
any Bankruptcy Law.
A default under section (3) above is not an Event of Default until the
Trustee or the Holders of at least twenty-five percent (25%) in principal
amount of the Notes notify the Company of the Default and the Company does not
cure the Default within 90 days after receipt of the notice. The notice must
specify the Default, demand that it be remedied, and state that the notice is a
"Notice of Default."
If an Event of Default occurs, the Trustee shall, at the direction of
Holders of at least twenty-five percent (25%) in principal amount of the Notes
by written notice to the Company, declare the principal of and accrued Interest
on all the Notes to be due and payable immediately. After a declaration such
principal and Interest shall be due and payable immediately.
If an Event of Default occurs, the Trustee may pursue any available
remedy by proceeding at law or in equity, upon receipt of sufficient indemnity,
to collect the payment of principal and Interest on the Notes or to enforce the
performance of any provision of the Notes, the Security Documents or the
Indenture. Notwithstanding anything to the contrary in the Indenture, the
Trustee is required to proceed against and liquidate all Collateral before
looking to any other assets of the Company.
The Holders of not less than seventy-five percent (75%) in Notes at the
time outstanding may consent on behalf of the Holders of all such Notes to the
postponement of any Interest payment for a period not exceeding three years
from its due date. The Holders of a majority of the Notes may consent to the
waiver of any past default and its consequences, except a default in payment of
principal and Interest or any other waiver prohibited under the terms of the
Indenture.
The Holders of a majority in principal amount of the Notes may direct
the time, method, and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on
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<PAGE> 30
it. The Trustee, however, may refuse to follow any direction that conflicts
with law or this Indenture, that is unduly prejudicial to the rights of other
Noteholders, or that may subject the Trustee to liability.
If the Trustee collects any money subsequent to an Event of Default, it
shall pay out the money in the following order:
First: to the Trustee for amounts due;
Second: to the payment of Allowed Expenses (except in an Event of
Default, payments of Allowed Expenses to affiliates will be
subordinated to the payment of principal and Interest to
Noteholders);
Third: to Noteholders for amounts due and unpaid on the Notes for
Interest, then principal, ratably, without preference or
priority of any kind, according to the amounts due and
payable on the Notes for principal and Interest; and
Fourth: to the Company and USAAC as a payment of amounts in excess
of Trustee fees and costs, Allowed Expenses, and Interest
and principal due on the Notes.
If the Company, at its sole discretion, determines, during the term of
the Notes, that there will be insufficient assets to fully repay the Notes at
Maturity because of sustained operating losses, excessive credit losses or
repossessions, or because the Company is unable to purchase suitable Contracts
throughout the term of the Notes for the business of the Company to be
profitable, the Company may proceed with an orderly liquidation and early
redemption of the Notes. In such an event, the Company shall give 30 days
written notice to the Trustee of its intent to orderly liquidate the Company's
assets. Commencing immediately after the written notice of orderly liquidation
is delivered to the Trustee, all net collection proceeds from the Contracts
following the deduction of Allowed Expenses will be required to be deposited in
the Note Redemption Account for payment of the Notes. The Company will
immediately begin to take action to cause the Contracts to be fully collected
and/or sold for cash within a period of one year from the date of the orderly
liquidation notice. The Paying Agent will continue to make monthly cash
distributions to Noteholders until all assets of the Company have been
distributed to the Noteholders. The Company may hold a minimum operating cash
reserve of $300,000 during the period of the orderly liquidation. All
remaining Company cash after payment of Allowed Expenses will be distributed to
the Noteholders as a final distribution within 120 days after the completion of
the orderly liquidation period. Cash distributions during the orderly
liquidation will be distributed pro rata to each Noteholder based on the
outstanding unpaid principal balance of each Note as of the date of the orderly
liquidation notice, and losses incurred will be similarly allocated pro rata.
The Company may amend or supplement the Indenture or the Notes without
notice to or consent of any Noteholder to cure any ambiguity, omission, defect,
or inconsistency, or to make any change that does not adversely affect the
rights of any Noteholder.
The Company may amend or supplement the Indenture, the Security
Documents, or the Notes without notice to any Noteholder but with the written
consent of the Holders of not less than a majority in principal amount of the
Notes. The Holders of a majority in principal amount of the Notes may waive
compliance by the Company with any provision of this Indenture, the Security
Documents, or the Notes without notice to any Noteholder. Without the consent
of each Noteholder affected, however, an amendment, supplement, or waiver, may
not:
(1) reduce the amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
(2) reduce the rate or extend the time for payment of Interest on any
Note;
(3) reduce the principal of or extend the fixed maturity of any Note;
(4) make any Note payable in money other than that stated in the
Note;
(5) waive a default on payment of principal or of Interest on any
Note; or
(6) impair the right to institute suits to enforce payments due on
any Note on or after the respective due dates.
The Company shall furnish to the Trustee a certificate or opinion of an
appraiser or other expert as to the fair value of any property or securities to
be released from the lien of the Security Documents, which certificate or
opinion shall state that in the opinion of the person making the same the
proposed release will not impair the security under the Security Documents in
contravention of the provisions thereof, and requiring further that such
certificate or opinion shall be made by an independent appraiser, or other
expert, if the fair value of such property
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<PAGE> 31
or securities and of all other property or securities released since the
commencement of the then current calendar year, as set forth in the
certificates or opinions required by the Indenture, is 40% or more of the
aggregate principal amount of the Notes at the time outstanding; but such a
certificate or opinion of an independent appraiser or other expert shall not be
required in the case of any release of property or securities, if the fair
value thereof as set forth in the certificate or opinion required by this
paragraph is less than $25,000 or less than 1% of the aggregate principal
amount of the Notes at the time outstanding.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the Notes may remove the Trustee by so
notifying the removed Trustee and may appoint a successor Trustee with the
Company's consent. The Company may remove the Trustee if:
(a) the Trustee fails to comply with certain minimum capital
requirements;
(b) the Trustee is adjudged a bankrupt or an insolvent;
(c) a receiver or other public officer takes charge of the Trustee or
its property;
(d) the Trustee otherwise becomes incapable of acting; or
(e) the Trustee is sold or otherwise liquidates.
CERTAIN LEGAL ASPECTS OF THE CONTRACTS
GENERAL
The Contracts are "chattel paper" as defined in the Uniform Commercial
Code (the "UCC"). Pursuant to the UCC, a security interest in chattel paper
may be perfected by taking possession of the chattel paper or by the filing of
a UCC financing statement with the Secretary of State of the state in which a
corporate debtor's principal place of business is located, which in the case of
the Company is the Secretary of State of Oklahoma.
Upon any purchase of Contracts by the Company, the original Contracts
and related title documents for the Financed Vehicles will be delivered to the
Company. Upon its purchase, each Contract will be physically marked to indicate
the security interest therein of the Company. ln addition, a UCC financing
statement will be filed in the appropriate public office to perfect by filing
and giving notice of the Company's security interest in the Contracts and all
proceeds therefrom.
SECURITY INTERESTS IN FINANCED VEHICLES
The Company expects that a significant portion of the Contracts will be
originated in Oklahoma and Texas. Under the UCC as adopted in Oklahoma and
Texas and most other states, retail installment sale contracts such as the
Contracts constitute security agreements for personal property and contain
grants of security interests in the Financed Vehicles.
Perfection of security interests in the Financed Vehicles is generally
governed by the motor vehicle registration laws of the state in which the
vehicle is located. In Oklahoma and Texas and in many other states, a security
interest in a motor vehicle is perfected by notation of the secured party's
lien on the vehicle's certificate of title.
Upon the purchase of the Contracts, the Seller is required to assign
the Contracts (and the security interests arising thereunder in the Financed
Vehicles) to the Company. The Seller will also provide evidence that proper
applications for certificates of title have been made to ensure that the
Company will be named as the lienholder on the certificates of title relating
to the financed vehicles.
Under the laws of Oklahoma and Texas and many other states, liens for
repairs performed on a motor vehicle and liens for certain unpaid taxes take
priority over even a perfected security interest in a vehicle. The Internal
Revenue Code of 1986 also grants priority to certain federal tax liens over the
lien of a secured party. Certain state and federal laws permit the
confiscation of motor vehicles under certain circumstances if used in unlawful
activities, which may result in the loss of a secured party's perfected
security interest in the confiscated motor vehicle. Upon the purchase of each
Contract, the Seller is required to warrant that the Contract creates a valid,
subsisting and enforceable first priority security interest in favor of the
Company in the Financed Vehicle. However, liens for repairs or taxes, or the
confiscation of a Financed Vehicle, could arise or occur at any time during the
term of a Contract. No notice will be given to the Company in the event such a
lien arises or confiscation occurs.
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<PAGE> 32
If the owner of a Financed Vehicle relocates to another state, under
the laws of most states the perfected security interest in the Financed Vehicle
would continue for several months after such relocation and thereafter, in most
instances, until the owner re-registers the Financed Vehicle in such state.
Almost all states generally require surrender of a certificate of title to
re-register a titled vehicle. Therefore, the Company must surrender
possession, if it holds the certificate of title to such Financed Vehicle,
before the Financed Vehicle owner may effect the re-registration. In addition,
the Company should receive, absent clerical errors or fraud, notice of
surrender of the certificate of title because the Company will be listed as
lienholder on its face. Accordingly, the Company will have notice and the
opportunity to re-perfect its security interest in the Financed Vehicle in the
state of relocation. If the Financed Vehicle owner moves to one of the few
states which does not require surrender of a certificate of title for
registration of a motor vehicle, re-registration could defeat perfection. In
the ordinary course of servicing the Contracts, the Servicer or the Company
takes steps to effect such re-perfection upon receipt of notice of
re-registration or other information from the Obligor as to relocation.
Similarly, when an Obligor under a Contract sells a Financed Vehicle, the
Company must surrender possession of the certificate of title or the Company
will receive notice as a result of its lien noted thereon. Accordingly, the
Company will have an opportunity to require satisfaction of the related Contact
before release of the lien.
REPOSSESSION
In the event of default by an Obligor on a Contract, the holder of the
Contract has all the remedies of a secured party under the UCC. The UCC
remedies of a secured party include the right to repossession by self-help
means, unless such means would constitute a breach of the peace. Unless the
Obligor under a Contract voluntarily surrenders a vehicle, self-help
repossession, by an individual independent repossession specialist engaged by
the Servicer or the Company, is the method presently anticipated to be employed
when an Obligor defaults. Self-help repossession is accomplished by retaking
possession of the Financed Vehicle. If the Obligor objects or raises a defense
to repossession, or if applicable state law so requires, a court order must be
obtained from the appropriate state court and repossess the vehicle in
accordance with that order.
NOTICE OF SALE; REDEMPTION RIGHTS
In the event of default by the Obligor, some jurisdictions require that
the Obligor be notified of the default and be given a time period within which
the Obligor may cure the default prior to repossession. Generally, this right
of reinstatement may be exercised on a limited number of occasions in any
one-year period.
In most jurisdictions, the UCC and other state laws require the secured
party to provide the Obligor with reasonable notice of the date, time and place
of any public sale or the date after which any private sale of the collateral
may be held. Unless the Obligor waives his rights after default, the Obligor
has the right to redeem the collateral prior to actual sale by paying the
secured party the unpaid installments of the Contract (less any required
discount for prepayment) plus reasonable expenses for repossessing, holding and
preparing the collateral for disposition and arranging for this sale, plus in
some jurisdictions, reasonable attorneys' fees, or, in some states, by payment
of delinquent installments. It is presently anticipated that repossessed
vehicles will generally be resold by the Servicer or the Company, its
participating dealer network or through wholesale automobile networks or
auctions which are attended principally by dealers.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The Servicer or the Company will apply the proceeds of resale of the
repossessed vehicles first to reimburse itself for its expenses of resale and
repossession and then to the satisfaction of the obligations of the Obligor on
the Contract. While some states impose prohibitions or limitations on
deficiency judgments if the net proceeds from resale do not cover the full
amount of the Contract obligations, some states allow a deficiency judgment to
be sought. A deficiency judgment is a personal judgment against the Obligor
for the difference between the amount of the obligations of the Obligor and the
net proceeds from resale. A defaulting Obligor on a Contract typically lacks
capital or income following the repossession of the Obligor's Financed Vehicle.
Therefore, the Servicer or the Company may determine in its discretion that
pursuit of a deficiency judgment is not an appropriate or economically viable
remedy or may settle at a significant discount any deficiency judgment that it
does obtain.
Certain statutory provisions, including federal and state bankruptcy
and insolvency laws, may limit or delay the ability of the Company or the
Servicer to repossess and resell the Financed Vehicles or enforce a deficiency
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<PAGE> 33
judgment. In the event that deficiency judgments are not obtained, are not
satisfied, are satisfied at a discount or are discharged, in whole or in part,
in bankruptcy proceedings, including bankruptcy proceedings under Chapter 13 of
the Bankruptcy Reform Act of 1978, as amended, the loss will be borne by the
Company and may adversely affect the ability of the Company to repay the Notes.
Occasionally, after resale of a vehicle and payment of all expenses and
obligations, there is a surplus of funds. In that case, the UCC requires the
secured party to remit the surplus to the former Obligor.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related
regulations impose substantial requirements upon dealers and services involved
in consumer finance. These laws include, but are not limited to, the
Trust-In-Lending Act, the Equal Credit Opportunity Act, the Federal Trade
Commission Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the
Fair Debt Collection Practices Act, the Magnuson-Moss Warranty Act, the Federal
Reserve Board's Regulations B and Z, state adaptations of the National Consumer
Act and of the Uniform Consumer Credit Code, state motor vehicle retail
installment sales acts, retail installment sales acts, and other similar laws.
Also, state laws impose finance charge ceilings and other restrictions on
consumer transactions and require contract disclosure in addition to those
required under federal law. These requirements impose specific statutory
liabilities upon creditors who fail to comply with their provisions. In some
cases, this liability could affect an assignee's ability to enforce consumer
finance contracts such as the Contracts.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade
Commission (the "FTC Rule"), the provisions of which are generally duplicated
by the Uniform Consumer Credit Code, other state statutes, or the common law in
certain states, is intended to defeat the ability of the transferor of a
consumer credit contract (such as the Contracts), which transferor is the
seller of the goods that gave rise to the transaction, to transfer such
contract free of notice of claims by the debtor thereunder. The effect of this
rule is to subject the assignee of such a contract to all claims and defenses
which the Obligor under the contract could assert against the seller of the
goods. Most of the Contracts will be subject to the requirements of the FTC
Rule. Accordingly, the Company, as holder of the Contracts, may be subject to
any claims or defenses that the purchaser of the Financed Vehicle may assert
against the seller of the Financed Vehicle. Such claims are limited to a
maximum liability equal to the amounts paid by the Obligor on the Contract.
The Obligor, however, may also assert the rule to offset remaining amounts due
on the Contract as a defense against any claim brought by the Company against
such Obligor.
Under most state motor vehicle dealer licensing laws, sellers of motor
vehicles are required to be licensed to sell motor vehicles at retail sale.
Furthermore, federal odometer regulations promulgated under the Motor Vehicle
Information and Cost Savings Act require that all sellers of new and used
vehicles furnish a written statement signed by the seller certifying the
accuracy of the odometer reading. If a seller is not properly licensed or if
an odometer disclosure statement was not provided to the purchaser of a
Financed Vehicle, the Obligor may be able to assert a defense against the
seller of the vehicle.
Courts have imposed general equitable principals on secured parties
pursuing repossession of collateral or litigation involving deficiency
balances. These equitable principals may have the effect of relieving an
Obligor from some or all of the legal consequences of a default.
In several cases, the obligors have asserted that the self-help
remedies of secured parties under the UCC and related laws violate the due
process protections provided under the 14th Amendment to the Constitution of
the United States. Courts have generally upheld the notice provisions of the
UCC and related laws as reasonable or have found that the repossession and
resale by the creditors do not involve sufficient state action to afford
constitutional protection to consumers.
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a secured party
to realize upon collateral or enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
lender from repossessing a motor vehicle, and, as part of the rehabilitation
plan, reduce the amount of the secured indebtedness to the market value of the
motor vehicle at the
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<PAGE> 34
time of bankruptcy (as determined by the court), leaving the party providing
financing a general unsecured creditor for the remainder of the indebtedness.
A bankruptcy court may also reduce the monthly payments due under a contract or
change the rate of interest and time of repayment of the indebtedness.
TRANSFERS OF VEHICLES
The terms of the Contracts prohibit the sale or transfer of the
Financed Vehicle securing a Contract without the secured party's consent and
allow for the acceleration of the maturity of the Contract upon a sale or
transfer without its consent. In most circumstances, the Company will not
consent to a sale or transfer of a Financed Vehicle by an Obligor unless the
Obligor prepays the Contract.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material federal income tax
consequences to holders of the Notes based on the opinion of Tyson Hopkins,
Independent Certified Public Accountant. This discussion is based on the
provisions of the Code, the Treasury Regulations promulgated thereunder, and
administrative and judicial interpretations thereof, all in effect as of the
date hereof and all which are subject to change (possibly on a retroactive
basis). This discussion does not purport to deal with all aspects of federal
income taxation that may be relevant to a particular holder of Notes in light
of such holder's personal investment circumstances nor does this discussion
address special tax implications which may be applicable to certain types of
holders of the notes subject to special treatment under the Code (including,
without limitation, financial institutions, broker-dealers, regulated
investment companies, life- insurance companies, tax-exempt organizations
(except as set forth separately), foreign corporations and non-resident
aliens). No consideration of state, local or foreign taxation is included
herein. The Company has not sought, nor does it intend to seek, any rulings
from the IRS relating to the tax issues addressed herein.
FACTUAL ASSUMPTIONS UTILIZED TO DETERMINE TAX CONSEQUENCES
U.S. Automobile Acceptance SNP-IV, Inc. will be selling certain Notes
to United States investors paying a stated rate of interest over a stated
period of time. The redemption price of the Notes will not be subject to any
premiums or discounts. The stated interest amounts carry an adequate market
rate of interest. There will be no premiums, or additional inducements to
Noteholders to be issued as a result of the purchase. The Interest on the
Notes will be paid monthly over the life of the Notes. At maturity, the Notes
will be redeemed at face value.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
The Notes will be treated as capital assets (generally, property held
for investment) within the meaning of Sec. 1221 of the Code. Accordingly, the
Noteholders' basis in the Notes will be the face amount paid to acquire the
Notes and there will be no amortization of basis over the life of the Notes.
Assuming a market develops for the Notes and a Noteholder is able to sell his
investment in the marketplace, the Note holder would realize a gain or loss
based upon the difference between the sales proceeds received and the
Noteholder's basis in the Note. In the event the Notes become worthless, the
Noteholder would then incur a capital loss for federal income tax purposes.
Noteholders who report their income on the cash method of accounting
for federal income tax purposes are required to include interest in their gross
income in the taxable year in which it is received. Accrual method taxpayers
are generally required to include the interest in their gross income in the
taxable year in which interest accrues.
PURCHASE OF NOTES BY EXEMPT PLANS AND OTHER EXEMPT ORGANIZATIONS
Generally, trusts forming part of a pension, profit sharing, or Keogh
plan meeting the requirements of Sec. 401 (a) of the Code (all collectively
referred to a "Exempt Plans"), and individual retirement accounts and trusts
("IRAs and IRTs"), as well as certain charitable and other organizations
described in Code Sec. 501(c) are exempt from federal income tax. However,
this exemption does not apply where "unrelated business taxable income" is
derived by the Exempt Plan, IRAs, IRTs and other exempt organizations from the
conduct of any trade or business which is not substantially related to the
exempt function of the entity. If Exempt Plans, IRAs, IRTs and other
32
<PAGE> 35
exempt organizations receive unrelated business taxable income, the Exempt
Plans, IRAs, IRTs and other exempt organizations will be subject to a tax
imposed by Sec. 511 of the Code on the portion of their income constituting
unrelated business taxable income. An Exempt Plan, IRA, IRT or other exempt
organizations will also be subject to alternative minimum tax on the unrelated
business taxable income.
Unrelated business taxable income is defined as the gross income
derived by an Exempt Plan, IRA, IRT or other exempt organizations from any
unrelated trade or business regularly carried on by such entity, less allowed
deductions directly connected with the carrying on of such trade or business.
However, certain types of income, including interest, dividends, royalties,
gains or losses from the sale or exchange of property (other than property held
as inventory of held primarily for sale to customers in the ordinary course of
trade or business) or rental payments from real property are excluded from the
unrelated business taxable income computation.
If an excluded category of income constitutes "unrelated debt-financed
income" then such income is not excluded from the computation of unrelated
business taxable income. Unrelated debt-financed income is the percentage of
gross income derived from or on account of property with respect to which there
is "acquisition indebtedness" equal to the ratio which the average acquisition
indebtedness with respect to the property bears to the acquisition basis of
such property. A portion of the deductions which are directly connected with
the property are allowed in the computation of unrelated debt-financed income.
Generally, acquisition indebtedness is indebtedness incurred directly or
indirectly in connection with the acquisition of property as well as
indebtedness the incurrence of which was reasonably foreseeable at the time of
the acquisition of the property. Therefore, if an Exempt Plan, IRA, IRT or
other exempt organization borrows funds to acquire the Notes, the interest
received on such Notes may be classified as unrelated business taxable income
on which an Exempt Plan, IRA, IRT or other exempt organizations may be taxed.
In considering an investment in the Notes of the Company of a portion
of the assets of an Exempt Plan, IRA or IRT a fiduciary should consider: (I)
whether the investment is in accordance with the documents and instruments
governing the Exempt Plan, IRA or IRT, (ii) whether the investment satisfies
the diversification requirements of Sec. 404 (a 1 c) of the Employee
Retirement Income Security Act of 1974 ("ERISA"), (iii) whether the investment
is prudent, because there may not be a market created in which he can sell or
otherwise dispose of the Notes or because the Notes are not adequately secured,
(iv) whether the assets of the Company are considered to be "plan assets" under
Department of Labor Regulation 2510.3-101, and 9v) whether the income would be
unrelated business taxable income because of the use of acquisitions
indebtedness as a source of the funds used to acquire the Notes.
FEDERAL TAX CONSEQUENCES TO U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
The Company will utilize the proceeds from the sale of the Notes to
obtain certain contracts from automobile dealers, finance companies and others.
The Company will recognize a portion of its collections as interest income and
the remainder as principal repayment of the contracts. An offsetting deduction
will be taken for the amortization of the basis in the contracts to determine
gross income. From these amounts, service fees, interest on the Notes, and
other administrative costs will be deducted to derive taxable income.
EXEMPT PLANS, IRAS, IRTS OR OTHER EXEMPT ORGANIZATIONS ARE STRONGLY
URGED TO CONSULT THEIR TAX ADVISORS RELATIVE TO THE POSSIBILITY OF UNRELATED
BUSINESS TAXABLE INCOME AND ITS CONSEQUENCES TO THEIR SPECIFIC CIRCUMSTANCES
PRIOR TO AN INVESTMENT IN THE NOTES OF THE COMPANY.
THIS SUMMARY OF THE TAX LAWS UNDER THE INTERNAL REVENUE CODE DOES NOT
INCLUDE A DISCUSSION OF ANY RULES OR REGULATIONS ENACTED OR PROMULGATED BY THE
DEPARTMENT OF LABOR UNDER ERISA. ANY INVESTOR SUBJECT TO ERISA OR DEPARTMENT
OF LABOR REGULATIONS RELATING TO EXEMPT PLANS SHOULD CONSULT ITS ADVISORS
REGARDING AN INVESTMENT IN THE NOTES.
INDEX OF DEFINED TERMS
"Allowed Expenses" shall mean Contract acquisition fees, Contract
servicing and administration expenses, trustee fees, bank charges, legal and
accounting fees, taxes, repossession costs, repair and liquidation expenses,
33
<PAGE> 36
insurance premiums, vehicle warranty service contract charges, cost of
enforcement of recourse agreements, salaries and other general and
administrative expenses of the Company.
"Bankruptcy Law" shall mean Title 11, United States Code, or any
similar federal or state law for the relief of debtors.
"Code" shall mean the Internal Revenue Code.
"Commission" shall mean the United States Securities and Exchange
Commission.
"Contracts" shall mean the retail installment finance contracts secured
by used automobiles and light trucks, to be purchased by the Company.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974.
"Escrow Termination Date" shall mean the date ninety (90) days after
the Offering is declared effective by the Securities and Exchange Commission
that the Offering will terminate and the escrowed funds will be returned to the
investors.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Financed Vehicles" shall mean the used automobiles and light trucks
that will secure the Contracts.
"Indenture" shall mean the trust indenture agreement between the
Company and Sterling Trust Company, as trustee.
"Interest" shall mean the interest on the Company's Callable
Asset-Backed Promissory Notes, the initial annual rate of which shall range
from 7.75% to 11%, which shall be payable monthly.
"Master Accounts" shall mean the Master Collections Account and the
Master Operating Account.
"Master Collections Account" shall mean the master collection bank
account to be maintained by the Company, into which all proceeds from the
collection of the Contracts shall be deposited.
"Master Operating Account" shall mean the operating account maintained
by the Company, into which funds in the Master Collection Account shall be
transferred.
"Maturity Date" shall mean the date upon which all unpaid principal of
a Note and accrued Interest thereon shall be due and payable.
"Minimum Subscription Amount" shall mean $100,000 in principal amount
of the Notes.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Note Redemption Account" shall mean the trust account at a financial
institution established by the Company, which will relate solely to the Notes
and to the Contracts securing the Notes. Funds in the Note Redemption Account
will not be commingled with any other moneys of the Company.
"Noteholders" shall mean the purchasers of the Notes offered hereby.
"Notes" shall mean the Callable Asset-Backed Promissory Notes with
initial annual interest rates ranging from 7.75% to 11%, offered by the Company
pursuant to this Prospectus.
"Offering" shall mean the offering of Callable Asset-Backed Promissory
Notes by the Company pursuant to this Prospectus.
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<PAGE> 37
"Paying Agent" shall mean U.S. Automobile Acceptance Corporation, or
its designee, in its role as paying agent for payment of interest and principal
on the Notes to Noteholders.
"Payment Dates" shall mean the fifteenth (l5th) day of each month
beginning with the first full calendar month following the issuance of a Note
and upon maturity, that Interest shall be paid.
"Registration Statement" shall mean the registration statement on Form
S-1, together with all exhibits and schedules thereto, that the Company has
filed with the Securities and Exchange Commission.
"SNP-I" shall mean U.S. Automobile Acceptance SNP-I, Inc., a Delaware
corporation, that is an affiliate of the Company.
"SNP-III" shall mean U.S. Automobile Acceptance SNP-III, Inc., a Texas
corporation, that is an affiliate of the Company.
"Sellers" shall mean the automobile dealerships, automobile sale
divisions of national rental car companies and finance companies from whom
Contracts will be purchased by the Company.
"Servicer" shall mean U.S. Automobile Acceptance Corporation, a Texas
corporation, which is the parent of the Company and which will act as servicer
for the Contracts and provide purchasing and collecting services.
"Servicing Agreement" shall mean the agreement to be entered into
between the Company and USAAC, pursuant to which USAAC is to provide purchasing
and collecting services relating to the Contracts.
"Servicing Fee" shall mean the monthly fee to be paid to the Servicer
pursuant to the Servicing Agreement of $21.50 per month per outstanding
Contract, subject to certain limitations.
"Trust Estate" shall mean the collateral securing the Notes, which will
consist of all of the Company's right, title and interest in (a) the Contracts,
together with all payments and instruments received with respect thereto, (b)
the Servicing Agreement, (c) the Master Collection Account, the Master
Operating Account, the Note Redemption Account and all funds (including
investments) therein, (d) all repossessed or returned Financed Vehicles, and
(e) all proceeds of the conversion, voluntary or involuntary, of any of the
foregoing into cash or other liquid property.
"Trustee" shall mean Sterling Trust Company in its capacity as trustee
pursuant to the Indenture.
"UCC" shall mean the Uniform Commercial Code.
"USAA 1995-I" shall mean U.S. Automobile Acceptance 1995-I, Inc., a
Texas corporation, that is an affiliate of the Company.
"USAAC" shall mean U.S. Automobile Acceptance Corporation, a Texas
corporation, which is the parent of the Company and which will act as servicer
for the Contracts and provice purchasing and collecting services.
EXPERTS
The financial statements of the Company included in this Prospectus
have been audited by Tyson Hopkins, Oklahoma City, Oklahoma, independent
certified public accountant, whose report thereon appears elsewhere herein, and
have been so included in reliance upon the report and authority of such firm as
an expert in auditing and accounting. Tyson Hopkins has also delivered his
opinion to the Company as to the federal income tax matters discussed under
"Federal Income Tax Consequences."
LEGAL MATTERS
Certain matters with respect to the validity of the Notes have been
passed upon the Company by Amy Waters, Attorney at Law, Waxahachie, Texas. The
discussion of the federal income tax consequences relating to the Notes has
been passed upon by Tyson Hopkins, independent certified public accountant,
Oklahoma City, Oklahoma.
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<PAGE> 38
TYSON HOPKINS
CERTIFIED PUBLIC
ACCOUNTANT
P.O. BOX 12127
OKLAHOMA CITY, OK
73157
(405) 789-3617
INDEPENDENT AUDITOR'S REPORT
Board of Directors
U.S. Automobile Acceptance SNP-IV, Inc.
I have audited the balance sheet of U.S. Automobile Acceptance SNP-IV, Inc. (the
Company) as of September 18, 1998, and the related statement of stockholders'
equity for the period from the date of incorporation on January 2, 1998 through
September 18, 1998. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of U.S. Automobile Acceptance SNP-IV,
Inc. and the changes in stockholders' equity as of and for the period ended
September 18, 1998, in conformity with generally accepted accounting principles.
TYSON HOPKINS
Certified Public Accountant
Oklahoma City, Oklahoma
October 8, 1998
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<PAGE> 39
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
(a development stage enterprise)
BALANCE SHEET
As of September 18, 1998
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS
Cash and cash equivalents $ 500,000
OTHER ASSETS
Note offering costs 104,000
Organization costs 700
---------
TOTAL ASSETS $ 604,700
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
COMMITMENTS (Notes B and C)
LIABILITIES:
Due to affiliate $ 104,700
STOCKHOLDERS' EQUITY
Common stock - $1.00 par value,
3,000 shares authorized, 1,000
shares issued and outstanding 1,000
Paid-in capital 499,000
---------
Total stockholders' equity 500,000
---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 604,700
=========
</TABLE>
See accompanying notes to financial statements
37
<PAGE> 40
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
(a development stage enterprise)
STATEMENT OF STOCKHOLDERS' EQUITY
For the period from the date of incorporation on January 2, 1998
through September 18, 1998
<TABLE>
<CAPTION>
Common Stock Paid-In
Shares Amount Capital Total
------ ------ ------- -----
<S> <C> <C> <C> <C>
Balance prior to
incorporation on
January 2, 1998 -0- -0- -0- -0-
Issuance of common stock
for cash, par value
$1,00, sales price
$500.00 per share 1,000 $ 1,000 $499,000 $500,000
----- ------- -------- --------
Balances, Sept. 18, 1998 1,000 $ 1,000 $499,000 $500,000
===== ======= ======== ========
</TABLE>
See accompanying notes to financial statements
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<PAGE> 41
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
NOTE A - DESCRIPTION OF BUSINESS
GENERAL
U.S. Automobile Acceptance SNP-IV, Inc. (Company) was incorporated on January 2,
1998 as a Texas Corporation. The Company was formed to purchase, collect and
service retail installment sale financing contracts created by the sale of used
automobiles and light trucks. The Company has to filed a Registration Statement
with the Securities and Exchange Commission and various state security boards
with respect to its offering of up to $40,000,000 of Promissory Notes. Upon
completion of the review process of the various federal and state regulatory
authorities the Company will at that time begin the Note offering. Thereafter,
the Company will initiate its principal business operations only after a minimum
of $100,000 in Note subscriptions is received.
The Company's fiscal year will end on December 31.
DEVELOPMENT STAGE ENTERPRISE
The Company is considered to be in the "development stage" as substantially all
of its efforts have been expended in establishing the new business and planned
principal operations have not commenced. In addition, as the Company has
received no income and incurred no expenses since inception, statements of
income and cash flows are not applicable.
NOTE B - SECURED NOTE OFFERING
The Company plans to offer on a "best efforts basis" up to $40,000,000 of
Promissory Notes. The Notes will be offered through licensed broker-dealers. The
broker-dealers will be paid commissions from the proceeds of the Note sale.
Additionally, the Company will pay an additional 5% of the Note proceeds to an
affiliate, U.S. Automobile Acceptance Corporation, as reimbursement of
registration, legal, accounting, printing, marketing and other out-of-pocket
fees and expenses and allocated general and administrative overhead relating to
the offering and the organization of the Company which will be initially borne
by the affiliate and for services provided by the affiliate in connection with
the offering and organization of the Company. The remainder of the Note sale
proceeds will be used to acquire retail installment contracts, generally at a
discount, collateralized by used automobiles and light trucks (Contracts).
Investor subscription funds received are to be held in an escrow bank account
until subscriptions for $100,000 in principal amount of the Notes have been
received by the Company.
The Notes will be issued under the terms of an Indenture Agreement. The Notes
will be secured by the Contracts and proceeds thereof.
39
<PAGE> 42
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
(a development stage enterprise)
Use of proceeds of Contract collections is restricted to payments on the notes,
payment of certain allowed expenses of the Company and the purchase of
additional Contracts.
NOTE C - SIGNIFICANT RISKS AND UNCERTAINTIES
Noteholders may incur risks and uncertainties including concentration of assets
since the Company is not expected to have any significant assets other than
automobile finance contracts and since most of the Company's borrowers and the
related automobile collateral are expected to be located in the states of Texas
and Oklahoma. Other risks include limited operating history of the Company,
possible decline in future availability and quality of finance contracts to be
purchased due to increased competition, possible conflicts of interest between
the Company and other affiliates with operations similar to those of the
Company.
In the event the proposed Note offering raises only the minimum amount
($100,000) or the Note offering is relatively small, certain operating expenses
will be higher in proportion to future revenues than if the offering is
substantially larger, and the Company may be unable to pay certain of these
expenses. These minimum required expenses or other unforseen expenses could
impair the economic viability of the Company.
The Company is reliant on the Servicer for all management, operations and
administrative support services, including but not limited to Contract
purchasing, general Contract collections, enforcement of various dealer recourse
agreements, collateral repossessions and all other general administrative
functions. In the event of future economic problems of the Servicer or the
Servicer is otherwise unable to properly provide the required services,
Noteholders could be adversely affected and could incur a substantial loss of
investment.
NOTE D - RELATED PARTY TRANSACTIONS
Michael R. Marshall, an individual and resident of Oklahoma, is the owner 100%
of the issued and outstanding common stock of the Company. Total consideration
for the common stock and paid-in capital contributed to the Company by its sole
stockholder is $500,000.
All Note offering and organization costs will be paid by U.S. Automobile
Acceptance Corporation (USAAC) and if the offering is successfully completed,
the Company will pay 5% of the proceeds of the Note offering to USAAC as
described in Note B. Proceeds from the offering utilized to reimburse the Note
offering and organization costs cannot exceed 5% of the offering. The Company
will only be liable for these costs if the offering is successful. Pre-offering
cost incurred as of September 18, 1998 is approximately $105,000. These costs
have been recorded as a liability and capitalized as an asset on the balance
sheet of the Company. Upon the completion of the offering, Note offering costs
will be amortized over the term of the Notes. Organization costs will be
amortized over 60 months.
40
<PAGE> 43
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
(a development stage enterprise)
The Company's Contracts will be administrated, serviced and collected on behalf
of the Company by U.S. Automobile Acceptance Corporation, an affiliate of the
Company (Servicer). The Servicer intends to subcontract a portion of the
servicing of the Contracts to third parties.
The Servicer will be paid a servicing fee of $21.50 per month, per Contract. In
addition, U.S. Automobile Acceptance Corporation will be paid a one time
purchase administration fee of $125 per Contract purchased, paid monthly, and
will be paid a monthly investor administration fee of 1/12th of 1% of the
aggregate principal amount of the Notes outstanding, and 1/12th of 1% of
aggregate funds held in investment accounts.
41
<PAGE> 44
EXHIBIT A
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
CALLABLE ASSET-BACKED PROMISSORY NOTE
No. ________________
U.S. Automobile Acceptance SNP-IV, Inc., a Texas corporation (herein
referred to as the "Company"), for value received, hereby promises to pay to
_______________________________________________________________________ or
registered assigns, the principal sums as set forth below:
<TABLE>
<S> <C> <C> <C>
$_________________ Class A-1 Promissory Notes Interest rate: _________
Due December 31, 2000
$_________________ Class A-2 Promissory Notes Interest Rate: _________
Due December 31, 2001
$_________________ Class A-3 Promissory Notes Interest Rate: _________
Due December 31, 2002
$_________________ Class A-4 Promissory Notes Interest rate: _________
Due December 31, 2003
$_________________ Class A-5 Promissory Notes Interest Rate: _________
Due December 31, 2004
$_________________ Class A-6 Promissory Notes Interest Rate: _________
Due December 31, 2005
$_________________ Class A-7 Promissory Notes Interest Rate: _________
Due December 31, 2006
$_________________ Class A-8 Promissory Notes Interest Rate: _________
Due December 31, 2007
TOTAL: $________________
</TABLE>
Each of the above dates represents the stated maturity date of the
principal of such Note(s) (the "Stated Maturity"). The Company further agrees
to pay interest (computed on the basis of the unpaid portion of said principal
sum outstanding from time to time from the date of issue), until the principal
amount of this Note is paid in full at the rate per annum stated herein, which
interest shall be due and payable upon the fifteenth day of each calendar month
(for such interest accruing during the prior month or months) commencing with
the first calendar month after the issuance hereof and upon the Stated Maturity
(each a "Payment Date"). Interest is calculated on the basis of a 365-day year
but is paid in 12 equal monthly installments, regardless of the number of days
in each month.
This Note is one of a duly authorized issue of Notes of the Company,
designated as its Callable Asset-Backed Promissory Notes (herein called the
"Notes"), all issued and to be issued under an Indenture (herein called the
"Indenture"), between the Company and Sterling Trust Company (the "Trustee",
which term includes any successor Trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for
a statement of the respective rights thereunder of the Company, the Trustee and
the Holders of the Notes.
The principal of and interest on this Note are payable in such
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the
Company with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of this
Note. Any installment of interest which is not paid when and as due shall bear
interest, at the lesser of fifteen percent (15%) or the maximum amount allowed
by law, from the date due to the date of payment thereof.
A-1
<PAGE> 45
Monthly payment of interest shall be made by check or electronic
transfer, mailed or transferred to the person whose name appears as the Holder
of this Note on the Note Register as of the first day of the month in which
such Payment Date occurs (the "Record Date") without requiring that this Note
be submitted for notation of payment. Checks returned undelivered will be held
by the Company or its designee for payment to the person entitled thereto.
Payment of the outstanding principal of and accrued interest on this Note at
the Stated Maturity or of the Redemption Price (as hereinafter defined) payable
on any Redemption Date (as hereinafter defined) as of which this Note or any
portion hereof has been called for redemption shall be made upon presentation
of this Note to the Paying Agent appointed by the Company for such purpose.
The payment of principal and accrued interest on the Notes, when due,
is secured by the Trust Estate, which consists of, among other things, a first
priority, perfected security interest in specific motor vehicle retail
installment contracts and the funds in the Master Collection Account, the
Master Operating Account, and the Note Redemption Account (as such terms are
defined in the Indenture).
If an Event of Default shall occur and be continuing with respect to
the Notes, the Notes, and all principal and unpaid accrued interest, may be
declared due and payable in the manner and with the effect provided in the
Indenture.
The Notes may be redeemed or partially redeemed any time during the
term of the Notes on any Payment Date (the "Redemption Date"), at a redemption
price of 100% of the principal amount being redeemed (the "Redemption Price"),
together with accrued and unpaid interest on the unpaid principal amount
thereof to the date fixed for redemption. Notice of such redemption shall be
mailed by the Company not later than the twentieth day, and not earlier than
the sixtieth day, before the date fixed for redemption to the Holders of the
Notes so to be redeemed.
If provision is made for the redemption and payment of this Note or
any portion, this Note or such portion shall thereupon cease to bear interest
from and after the Redemption Date. In the event of redemption of any Note in
part only, a new Note or Notes for the unredeemed portion thereof shall be
issued in the name of the registered holder thereof upon surrender thereof.
If the Company, at its sole discretion, determines, during the term of
this Note, that there will be insufficient assets to fully repay the Notes at
Maturity because of sustained operating losses, excessive credit losses or
repossessions, or because the Company is unable to purchase suitable Contracts
throughout the term of the Notes for the business of the Company to be
profitable, the Company may proceed with an orderly liquidation and early
redemption of the Notes. In such an event, the Company shall give 30 days
written notice to the Trustee of its intent to orderly liquidate the Company's
assets. Commencing immediately after the written notice of orderly liquidation
is delivered to the Trustee, all net collection proceeds from the Contracts
following the deduction of Allowed Expenses will be required to be deposited in
the Note Redemption Account for payment of the Notes. The Company will
immediately begin to take action to cause the Contracts to be fully collected
and/or sold for cash within a period of one year from the date of the orderly
liquidation notice. The Paying Agent will continue to make monthly cash
distributions to Noteholders until all assets of the Company have been
distributed to the Noteholders. The Company is authorized to hold a minimum
operating cash reserve of $300,000 during the period of the orderly
liquidation. All remaining Company cash after payment of Allowed Expenses will
be distributed to the Noteholders as a final distribution within 120 days after
the completion of the orderly liquidation period. All cash distributions
during the orderly liquidation will be distributed pro rata to each Noteholder
based on the outstanding unpaid principal balance of each Note as of the date
of the orderly liquidation notice. Any losses incurred will be similarly
allocated pro rata to all outstanding Noteholders.
The transfer of this Note may be registered on the Note Register of
the Company, upon surrender of this Note for registration of transfer at the
office or agency designated by the Company, duly endorsed by, or accompanied by
a written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Notes of authorized denominations and
for the same aggregate principal amount will be issued to the designated
transferee or transferees.
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Prior to the due presentment for registration of transfer of this
Note, the Company, the Trustee and any agent of the Company or the Trustee may
treat the person in whose name this Note is registered as the owner thereof for
all purposes, whether or not this Note be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Notes under the Indenture at any
time by the Company with the consent of the Holders of Notes representing more
than 50% of the principal amount of all Notes at the time outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the principal amount of the Notes at the time
outstanding, on behalf of the Holders of all the Notes, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Note shall be conclusive and binding upon such Holder and upon
all future holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note. The Indenture also permits
the Trustee to amend or waive certain terms and conditions set forth in the
Indenture without the consent of Holders of the Note issued thereunder.
The term "Company" as used in this Note includes any successor to the
Company under the Indenture.
The Notes are exchangeable for a like aggregate principal amount of a
different authorized denomination, as requested by the Holder.
This Note shall be construed in accordance with, and governed by, the
laws of the State of Texas applicable to agreements made and to be performed
therein.
IN WITNESS WHEREOF, U.S. Automobile Acceptance SNP-IV, Inc. has caused
this instrument to be duly executed.
Dated: __________________________
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.,
a Texas Corporation
By: _________________________________
Authorized Officer
Authenticated by:
_________________________
Authorized Officer
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EXHIBIT B
INDENTURE OF TRUST
This Indenture of Trust is dated as of the________day of______ ,
199____ , by and between U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC. (the
"Company"), and Sterling Trust Company (the "Trustee").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Company's Callable
Asset-Backed Promissory Notes.
NOW, THEREFORE, for valuable consideration, the receipt, adequacy, and
sufficiency of which is hereby acknowledged, the parties agree as follows:
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Allowed Expenses" means expenses to be paid from collection proceeds
from the Contracts, which include Contract acquisition fees, Contract servicing
and administration expenses, trustee fees, bank charges, legal and accounting
fees, taxes, repossession costs, repair and liquidation expenses, insurance
premiums, vehicle warranty service contract charges, cost of enforcement of
recourse agreements, salaries and other general and administrative expenses.
The general and administrative expenses to be incurred by the Company are
expenses that will be incurred in connection with the purchasing, collection
and servicing of notor vehicle installment contracts (the "Contracts").
"Collateral" means the collateral as described in the Security
Agreement, which includes all of the following: (i) any and all Contracts
acquired with the funds constituting the indebtedness or with funds received
from the repayment of the Contracts or the replacement contracts received from
automobile dealerships to replace any of the Contracts (the "Replacement
Contracts"), which Contracts or Replacement Contracts are originated in
connection with the financing of new and used automobiles and light-duty trucks
(the "Vehicles"), including all rights to receive payments thereunder and
security interests in and instruments of title to the Vehicles, whether now
owned or hereafter acquired; (ii) all funds in the Debtor bank accounts styled
Master Collections Account, Master Operating Account and Note Redemption
Account; (iii) all proceeds of an offering pursuant to the Registration
Statement of the Company filed with the Securities and Exchange Commission (the
"Registration Statement"); and (iv) all products thereof and all cash and
noncash proceeds of any of the foregoing, in any form, including, without
limitation, proceeds of insurance policies from the loss thereof, all titles to
the Vehicles and all assignment of liens, all Contracts, Vehicle titles,
assignments, recourse agreements, other documents and instruments in the
possession of the Company, and any documents or instruments in the possession,
custody and control of the Servicer, any substitute servicer, or any
independent custodian.
"Company" means the party named as such in this Indenture until a
successor replaces it and thereafter means the successor.
"Contracts" means retail installment sales contracts backed by liens
on used automobiles and light trucks to be purchased by the Company from
automobile dealerships, automobile sale divisions of national rental car
companies and finance companies.
"Default" means any event which is, or after notice or lapse of time
or both would be, an Event of Default pursuant to Section 6.01 of this
Indenture of Trust.
"Financed Vehicles" means the used automobiles and light trucks which
are security for the Contracts.
"Holder" or "Noteholder" means the person in whose name a Note is
registered on the Registrar's books.
"Indenture" means this Indenture of Trust, as amended or supplemented
from time to time.
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"Master Collections Account" means the bank account into which all
proceeds from the collection of the Contracts are to be deposited.
"Master Operating Account" means the operating account to be
maintained by the Company into which the amounts in the Master Collections
Account attributable to the Contracts will be directly transferred.
"Net Collection Proceeds" means collection proceeds remaining from the
Contracts after deduction for payments of interest and Allowed Expenses.
"Note Redemption Account" the interest-bearing account into which the
Company will deposit the net collection proceeds, from the Contracts for
payment on the Notes.
"Notes" means the Callable Asset-Backed Promissory Notes of the
Company issued pursuant to this Indenture.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer, or the Secretary of the Company.
"Officer's Certificate" means a certificate signed by an Officer or by
an Assistant Treasurer or Assistant Secretary of the Company.
"Paying Agent" means U.S. Automobile Acceptance Corporation, or its
designee.
"Payment Date" means the fifteenth (l5th) day of each month beginning
with the first full calendar month following the issuance of a Note, that
payments of interest shall be made, and upon maturity, when the final payment
consisting of principal and accrued interest shall be made.
"Redemption Date" means such Payment Date, that the Notes may be
redeemed at the option of the Company.
"Redemption Price" means the price, equal to 100% of the principal
amount to be redeemed, and any accrued but unpaid interest, to be paid to
Noteholders upon redemption of the Notes.
"Registrar" means U.S. Automobile Acceptance Corporation, or its
designee.
"SEC" means the Securities and Exchange Commission.
"Security Documents" means the Security Agreement which provides that
the Collateral is pledged as security for the Notes.
"Servicer" means U.S. Automobile Acceptance Corporation, a Texas
corporation, with which the Company has contracted to provide purchasing and
collecting services, or any substitute servicer with which the Company may
contract.
"Servicing Agreement" means the agreement between the Company and the
Servicer pursuant to which the Contracts will be serviced on behalf of the
Company.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Section 77 aaa,
et seq.) as in effect on the date of this Indenture.
"Trust Estate" means all of the Company's right, title and interest in
(a) the Contracts and the Replacement Contracts, together with all payments and
instruments received with respect thereto, (b) the Servicing Agreement, (c) the
Master Collections Account, the Master Operating Account, the Note Redemption
Account and all funds (including investments) therein, (d) all repossessed or
returned Financed Vehicles, and (e) all proceeds of the conversion, voluntary
or involuntary, of any of the foregoing into cash or other liquid property.
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"Trustee" means the party named as such in this Indenture until a
successor replaces it and thereafter means the successor.
SECTION 1.02. OTHER DEFINITIONS.
TERM DEFINED IN SECTION
- ---- ------------------
"Bankruptcy Law" 6.01
"Legal Holiday" 8.10
"Paying Agent" 2.03
"Registrar" 2.03
"Receiver" 6.01
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"Indenture Securities" means the Notes.
"Indenture Security Holder" means a Noteholder.
"Indenture to be Qualified" means this Indenture.
"Indenture Trustee" or "Institutional Trustee" means the Trustee.
"Obligor" on the Indenture Securities means the Company.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute, or defined by SEC rule have
the meanings assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted
accounting principles;
(c) "or" is not exclusive; and
(d) words in the singular include the plural and in the plural
include the singular.
ARTICLE 2
THE SECURITIES
SECTION 2.01. FORM AND DATING.
The Notes shall be substantially in the form of Exhibit "A" to this
Indenture. The Notes may have notations, legends, or endorsements required by
law or usage. The Company shall approve the form of the Notes and any notation,
legend, or endorsement on them. Each Note shall be dated the date of its
issuance.
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SECTION 2.02. EXECUTION AND AUTHENTICATION.
An Officer of U.S. Automobile Acceptance Corporation, or its designee,
shall sign and authenticate the Notes. Execution of the Notes is permitted by
the manual or facsimile signature of the obligor and authentication may be made
by manual signature. The signature shall be conclusive evidence that the Note
has been authenticated under this Indenture. If an Officer who signed a Note no
longer holds that office at a later date, the Note shall be valid
nevertheless.
The aggregate principal amount of Notes outstanding at any time may
not exceed $40,000,000. Note denominations of $1,000 or any multiple thereof
are authorized.
SECTION 2.03. REGISTRATION AND PAYMENT
U.S. Automobile Acceptance Corporation, its designee, or any
successor, shall act as Registrar and Paying Agent for purposes of registration
or transfer of the Notes and for payment of interest and principal on the
Notes. The Registrar shall keep a register of the Notes and of their transfer
and exchange. Notes shall be presented to the Paying Agent for final payment.
SECTION 2.04. NOTEHOLDER LISTS.
The Trustee shall preserve the most recent list provided to it by the
Registrar of the names and addresses of Noteholders. At the end of each month
during the offering to the end of each six months after the close of the
offering, the Registrar shall furnish to the Trustee and at such other times as
the Trustee may request in writing a list in such form and as of such date of
the names and addresses of Noteholders. The Trustee may conclusively rely on
such list.
SECTION 2.05. REGISTRATION, TRANSFER, AND EXCHANGE.
When a Note is presented to the Registrar or a Co-registrar with a
request to register transfer, the Registrar shall register the transfer as
requested. To permit transfer and exchanges of the type provided for in Section
7.05, an Officer shall authenticate Notes at the Registrar's request. The
Company may charge a reasonable fee for any transfer, but not for any exchange
pursuant to Section 7.05.
ARTICLE 3
TRUSTEE
SECTION 3.01. ACCEPTANCE OF TRUST.
The Trustee hereby accepts the appointment as Trustee under the terms
and conditions hereof.
SECTION 3.02. DUTIES OF TRUSTEE.
(a) Upon the occurrence of an Event of Default, and upon receipt of
notice of such Event of Default by the Trustee, the Trustee shall obtain and
hold the Collateral under the Security Documents in trust for the benefit of
the Noteholders and exercise any rights granted to it under the Security
Documents.
(b) If an Event of Default has occurred, the Trustee shall exercise
its rights and powers, as set forth in this Section 3.02 and in Section 3.03
below, and use the same degree of care and skill in their exercise as a prudent
man would exercise or use under the circumstances in the conduct of his own
affairs. Except during the continuance of an Event of Default, the Trustee
shall perform only those duties that are specifically set forth in this
Indenture and no others.
(c) The Trustee may not be relieved from liability for its own grossly
negligent action, its own grossly negligent failure to act, or its own willful
misconduct or breach of contract, except that the Trustee shall not be liable
for any error of judgment made in good faith and/or in reliance upon opinion of
counsel, unless it is proved that the Trustee was grossly negligent in
ascertaining the pertinent facts.
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(d) The Trustee may refuse to perform any duty or exercise any right
or power unless it receives indemnity satisfactory to it against any loss,
liability, or expense.
(e) The Trustee shall not be liable for interest on any money received
by it.
(f) The Trustee is authorized and directed to enter into the Security
Agreement on behalf of the Noteholders solely in its capacity as Trustee under
this Indenture.
SECTION 3.03. RIGHTS OF TRUSTEE.
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the any such document.
(b) The Trustee shall not be liable for any action it takes or omits
to take in good faith in reliance on the Officer's Certificate or opinion of
counsel. The Trustee may consult with counsel and any advice or opinion of
counsel shall be full and complete protection in respect of any action taken or
not taken by it hereunder in reliance upon such advice or opinion of counsel.
(c) The Trustee may act through agents and attorneys and shall not be
responsible for the misconduct or negligence of any agent or attorney appointed
with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights
or powers.
SECTION 3.04. TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of
this Indenture, the Security Documents or the Notes. The recitals contained
herein and in the Notes shall be taken as statements of the Company and the
Trustee assumes no responsibility for their correctness. The Trustee shall
not be accountable for the Company's use of the proceeds from the Notes, and it
shall not be responsible for any statement in the Notes or in any prospectus
used in the sale of the Notes.
SECTION 3.05. INDIVIDUAL RIGHTS OF TRUSTEE, ETC.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company with the same
rights it would have if it were not Trustee. Any Paying Agent, Registrar, or
Co-registrar may do the same with like rights.
SECTION 3.06. REPORTS BY TRUSTEE TO HOLDERS.
If required under the provisions of TIA Section 313(a), within 60 days
after each December 31st beginning with the December 31st following the date of
this Indenture, the Trustee shall provide to the Noteholders specified in TIA
Section 313(c) a brief report dated as of such December 31st that complies with
TIA Section 313(a). The Trustee also shall comply with TIA Section 313(b).
Within the time period provided for in TIA Section 313(b), the Trustee shall
provide to those Noteholders specified in TIA Section 313(c) the brief reports
required by TIA Section 313(b).
SECTION 3.07. COMPENSATION AND INDEMNITY.
The Company agrees:
(a) to pay the Trustee from time to time, in its capacity as Trustee,
reasonable compensation for all services rendered by it hereunder, including
extraordinary services such as default administration (which compensation shall
not be limited by a provision of law in regard to the compensation of the
trustee of an express trust);
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(b) to reimburse the Trustee, in its capacity as Trustee, upon its
request for all reasonable expenses and disbursements incurred or made by the
Trustee (including the reasonable compensation, disbursements and expenses of
its agents and counsel), except any such expenses or disbursements as may be
attributable to its negligence or bad faith; and
(c) to indemnify the Trustee, in its capacity as Trustee, for, and to
hold it harmless against any loss, cost, liability, claim or expense incurred
without gross negligence or bad faith on its part related to or arising out of
the acceptance of and administration of the duties of the Trustee, in its
capacity as Trustee hereunder, including, without limitation, the costs and
expenses of defending itself against any claim or liability in connection with
the exercise or performance of any of its powers or duties hereunder. The
Company shall reimburse the Trustee upon its request for any legal expenses in
connection with the foregoing.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Notes on all money or property of the
Company. The obligations of the Company in this Section shall survive the
discharge of this Indenture or resignation or removal of the Trustee.
When the Trustee incurs expenses or renders services after the
occurrence of an Event of Default, the expenses and the compensation for
services are intended to constitute expenses of administration under any
Bankruptcy Law.
SECTION 3.08. REPLACEMENT OF TRUSTEE.
The Trustee, in its capacity as Trustee, may resign by so notifying
the Company. The Holders of a majority in principal amount of the Notes may
remove the Trustee, in its capacity as Trustee, by so notifying the removed
Trustee and may appoint a successor Trustee, with the Company's consent. The
Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 3.10;
(b) the Trustee is adjudged a bankrupt or an insolvent;
(c) a receiver or other public officer takes charge of the
Trustee or its property;
(d) the Trustee otherwise becomes incapable of acting; or
(e) the Trustee is sold or otherwise liquidates.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee, for any reason, the Company shall promptly appoint a
successor Trustee. The resignation or removal of the Trustee shall not be
effective until a successor Trustee has been appointed.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, and the resignation or removal of the retiring Trustee shall
become effective. The successor Trustee shall have the rights, powers, and
duties of the Trustee under Sections 3.02 and 3.03 of this Indenture. A
successor Trustee shall give notice of its succession to each Noteholder as
provided in Section 8.02.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of a majority in principal amount of the Notes may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 3.10, any Noteholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
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SECTION 3.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to another
corporation, the resulting, surviving, or transferee corporation upon approval
of the Company shall be the successor Trustee. The Company shall notify the
Trustee whether such approval will be granted within 30 days after the Company
receives written notice of such consolidation, merger, conversion, or transfer
of corporate trust business by the Trustee.
SECTION 3.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1). The Trustee shall have a combined capital
and surplus of at least $150,000 as set forth in its most recent published
annual report of condition. The Trustee shall comply with TIA Section 310(b).
SECTION 3.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST CORPORATION.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
SECTION 3.13 CO-TRUSTEE.
At any time for the purpose of meeting any legal requirements of any
jurisdiction, including in case of the exercise of any rights or remedies of
the Trustee upon an Event of Default hereunder, the Company and the Trustee
acting jointly shall have the power to appoint an additional institution or
individual as a separate or co-trustee and to vest in such separate or
co-trustee such powers, duties, obligations and rights as the Trustee and the
Company may consider necessary or desirable. If the Company shall not join in
such appointment within fifteen days after receipt of a request of the Trustee
to do so, or if an Event of Default shall have occurred and be continuing, the
Trustee alone shall have the power to make such appointment.
Upon the appointment of a separate or co-trustee, all rights, powers,
duties and obligations conferred or imposed upon the Trustee may be exercised
and performed by the Trustee and such separate or co-trustee jointly except to
the extent that under any law in any jurisdiction in which any act or acts are
to be performed the Trustee shall not be permitted or qualified to perform such
act or acts in which event such act or acts shall be exercised and performed by
the separate or co-trustee at the written direction of the Trustee.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
(a) The Company shall cause the Paying Agent to promptly pay the
principal of and interest on the Notes on the dates and in the manner provided
in the Notes, from funds in the Note Redemption Account; provided, however,
that the Paying Agent shall be required to pay the Notes only from and to the
extent of the moneys transferred by the Company to the Note Redemption Account
pursuant to Sections 4.01(b) and 4.01(c).
(b) To facilitate payment of the Notes, the Company shall transfer to
the Note Redemption Account at least one (1) business day prior to the Payment
Date or Redemption Date for the Notes sufficient money to make the required
principal and interest payments.
(c) Redemption of the Notes may occur at the option of the Company on
any Payment Date and may be in whole or from time to time in part. Except in
connection with an orderly liquidation pursuant to Article 5 hereof, any
redemption of Notes will be at 100% of the principal amount thereof being
redeemed, together with Interest accrued as of the Redemption Date, without any
premium or penalty. Notice will be mailed to all Noteholders setting forth (i)
the Redemption Date, (ii) the Redemption Price, (iii) the name and address of
the Paying Agent, (iv) a statement that the Notes must be delivered to the
Paying Agent, and (v) a statement that interest on the Notes, or portion
thereof being redeemed, ceases to accrue on and after the Redemption Date. In
the case
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of notice to the holder of any Note to be redeemed in part, a new Note or Notes
in principal amount equal to the unredeemed portion of such Note will be
issued. In the event of partial redemption of the Notes, the Notes to be
redeemed in whole or in part will be selected on a random basis, by lot, as
solely determined by the Company.
SECTION 4.02. COMPLIANCE CERTIFICATE.
The Company shall deliver to the Trustee within 120 days after the end
of each fiscal year of the Company an Officers' Certificate stating whether or
not the Company or the signers know of any Default by the Company in performing
its covenants under the Indenture, the Security Agreement, or the Custodian
Agreement. If they do know of such Default, the Officer's Certificate shall
describe the Default.
SECTION 4.03. SEC REPORTS.
The Company shall file with the Trustee within 15 days after it files
such documents with the SEC copies of the annual reports and of the
information, documents, and other reports (or copies of such portions of any of
the foregoing as the SEC may by rules and regulations prescribe). The Company
also shall comply with the other provisions of TIA Section 314(a).
ARTICLE 5
EARLY REDEMPTION AND ORDERLY LIQUIDATION
SECTION 5.01. GENERAL.
If the Company, at its sole discretion, determines, during the term of
the Notes, that there will be insufficient assets to fully repay the Notes at
Maturity because of sustained operating losses, excessive credit losses or
repossessions, or because the Company is unable to purchase suitable Contracts
throughout the term of the Notes for the business of the Company to be
profitable, the Company may proceed with an orderly liquidation and early
redemption of the Notes. In such an event, the Company shall give 30 days
written notice to the Trustee of its intent to orderly liquidate the Company's
assets.
SECTION 5.02. LIQUIDATION.
Commencing immediately after the written notice of orderly liquidation
is delivered to the Trustee, all net collection proceeds from the Contracts
following the deduction of Allowed Expenses will be required to be deposited in
the Note Redemption Account for payment of the Notes. The Company will
immediately begin to take action to cause the Contracts to be fully collected
and/or sold for cash within a period of one year from the date of the orderly
liquidation notice. The Paying Agent will continue to make monthly cash
distributions to Noteholders until all assets of the Company have been
distributed to the Noteholders. The Company is authorized to hold a minimum
operating cash reserve of $300,000 during the period of the orderly
liquidation. All remaining Company cash after payment of Allowed Expenses will
be distributed to the Noteholders as a final distribution within 120 days after
the completion of the orderly liquidation period.
SECTION 5.03. NOTEHOLDERS TO PARTICIPATE PRO RATA.
All cash distributions during the orderly liquidation will be
distributed pro rata to each Noteholder based on the outstanding unpaid
principal balance of each Note as of the date of the orderly liquidation
notice. Any losses incurred will be similarly allocated pro rata to all
outstanding Noteholders.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
Subject to the limitations set forth in this Article 6, an Event of
Default occurs if and when:
(1) the Company fails to cause the interest payments on the Notes
to be paid when due, and such failure to pay continues for a
period of more than five days;
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(2) the Company fails to cause the principal of any Notes to be
paid when due, except in connection with an orderly
liquidation as set forth in Article 5 hereof, and such
failure to pay continues for a period of more than five days;
(3) the Company fails to comply with any of its other agreements
in the Notes, the Security Documents, or this Indenture and
the Default continues for the period and after the notice
specified below;
(4) the Company, pursuant to or within the meaning of any
Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it
in any involuntary case,
(c) consents to the appointment of a Receiver of it or for
any substantial part of its property,
(d) makes a general assignment for the benefit of its
creditors, or
(e) fails generally to pay its debts as they become due; or
(5) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(a) is for relief against the Company in an involuntary
case,
(b) appoints a Receiver of the Company or for any
substantial part of its property, or
(c) orders the liquidation of the Company,
and the order or decree remains unstayed and in effect for
90 days.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar federal or state law for the relief of debtors. The term "Receiver"
means any receiver, trustee, assignee, liquidator, or similar official under
any Bankruptcy Law.
A Default under section 6.01(3) is not an Event of Default until the
Trustee or the Holders of at least twenty-five percent (25%) in principal
amount of the Notes notify the Company of the Default and the Company does not
cure the Default within 90 days after receipt of the notice. The notice must
specify the Default, demand that it be remedied, and state that the notice is a
"Notice of Default."
SECTION 6.02. ACCELERATION.
If an Event of Default occurs as provided in Section 6.01, the Trustee
shall, at the direction of Holders of at least twenty-five percent (25%) in
principal amount of the Notes by written notice to the Company, declare the
principal of and accrued interest on all the Notes to be due and payable
immediately. After a declaration such principal and interest shall be due and
payable immediately.
SECTION 6.03. OTHER REMEDIES; LIMITATION.
Subject to the provisions of the preceding paragraph, if an Event of
Default occurs, as provided in Section 6.01, the Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal and interest on the Notes or to enforce the performance of any
provision of the Notes, the Security Documents or this Indenture.
Notwithstanding anything to the contrary in this Agreement, the
Trustee is required to proceed against and liquidate all Collateral before
looking to any other assets of the Company.
B-9
<PAGE> 56
SECTION 6.04. POSTPONEMENT OF INTEREST PAYMENT; WAIVER OR DEFAULT.
The Holders of not less than seventy-five percent (75%) of the Notes
at the time outstanding may consent on behalf of the Holders of all such Notes
to the postponement of any interest payment for a period not exceeding three
years from its due date or to the waiver of any past Default and its
consequences, except a Default in payment of principal and interest or any
other waiver prohibited under Section 7.02.
SECTION 6.05. CONTROL BY MAJORITY.
The Holders of a majority in principal amount of the Notes may direct
the time, method, and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on it. The
Trustee, however, may refuse to follow any direction that conflicts with law or
this Indenture, that is unduly prejudicial to the rights of other Noteholders,
or that may subject the Trustee to personal liability.
SECTION 6.06. LIMITATION ON SUITS.
A Noteholder may not use this Indenture to prejudice the rights of
another Noteholder or to obtain a preference or priority over the other
Noteholder.
A Noteholder may not institute any suit if and to the extent that the
institution or prosecution thereof or the entry of judgment therein would,
under applicable law, result in the surrender, impairment, waiver, or loss of
the lien of the Indenture upon any property subject to such lien.
SECTION 6.07. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee, in its capacity as Trustee, for amounts
due under Section 3.07;
Second: to the payment of Allowed Expenses (except in an Event
of Default, payments of Allowed Expenses to affiliates
will be subordinated to the payment of principal and
Interest to Noteholders);
Third: to Noteholders for amounts due and unpaid on the Notes
for interest, then principal, ratably, without
preference or priority of any kind, according to the
amounts due and payable on the Notes for principal and
interest; and
Fourth: to the Company as a payment of amounts in excess of
Trustee fees and costs, Allowed Expenses, and interest
and principal due on the Notes.
ARTICLE 7
AMENDMENTS, SUPPLEMENTS, AND WAIVERS
SECTION 7.01. WITHOUT CONSENT OF HOLDERS.
The Company may amend or supplement this Indenture or the Notes
without notice to or consent of any Noteholder to cure any ambiguity, omission,
defect, or inconsistency, or to make any change that does not adversely affect
the rights of any Noteholder.
SECTION 7.02. WITH CONSENT OF HOLDERS.
The Company may amend or supplement this Indenture, the Security
Documents, or the Notes without notice to any Noteholder but with the written
consent of the Holders of not less than a majority in principal amount of the
Notes. The Holders of a majority in principal amount of the Notes may waive
compliance by the Company with any provision of this Indenture, the Security
Documents, or the Notes without notice to any Noteholder.
B-10
<PAGE> 57
Without the consent of each Noteholder affected, however, an amendment,
supplement, or waiver, except the waiver pursuant to Section 6.04, may not:
(1) reduce the amount of Notes whose Holders must consent to an
amendment, supplement or waiver,
(2) reduce the rate or extend the time for payment of interest on
any Note;
(3) reduce the principal of or extend the fixed maturity of any
Note;
(4) make any Note payable in money other than that stated in the
Note; or
(5) waive a default on payment of principal or of interest on any
Note.
(6) impair the right to institute suite to enforce payments due
on any Note on or after the respective due dates.
SECTION 7.03. COMPLIANCE WITH TRUST INDENTURE ACT
The terms hereof provide that it will comply with provisions of the
TIA. Every amendment to or supplement of this Indenture, the Security
Documents, or the Notes shall comply with the TIA as then in effect.
SECTION 7.04. REVOCATION AND EFFECT OF CONSENTS.
A consent to an amendment, supplement, or waiver by a Holder of a Note
shall bind the Holder and every subsequent Holder of a Note or portion of a
Note that evidences the same debt as the consenting Holder's Note, even if
notation of the consent is not made on any Note.
After an amendment, supplement, or waiver becomes effective, it shall
bind every Noteholder unless it makes a change described in Sections 7.02(2)
through (5). In that case the amendment, supplement, or waiver shall bind each
Holder of a Note who has consented to it and every subsequent Holder of a Note
or portion of a Note that evidences the same debt as the consenting Holder's
Note.
SECTION 7.05. NOTATION ON OR EXCHANGE OF SECURITIES.
If an amendment, supplement, or waiver changes the terms of a Note,
the Company may require the Holder of the Note to deliver it to the Company.
The Company may place an appropriate notation on the Note about the changed
terms and return it to the Holder. Alternatively, if the Company so determines,
the Company in exchange for the Note shall issue and the Company shall
authenticate a new Note that reflects the changed terms.
SECTION 7.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amendment, supplement, or waiver authorized
pursuant to this Article.
The Trustee may rely upon an Officer's Certificate and an opinion of
counsel as conclusive evidence that any amendment, supplement or waiver
complies with the provisions of this Indenture.
ARTICLE 8
MISCELLANEOUS
SECTION 8.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies, or conflicts
with another provision which is required to be included in this Indenture by
the TIA, the required provision shall control.
B-11
<PAGE> 58
SECTION 8.02. NOTICES.
Any notice or communication shall be sufficiently given if in writing
and delivered in person or mailed by first-class mail addressed as follows:
If to the Company: U.S. Automobile Acceptance SNP-IV, Inc.
1120 N.W. 63rd, Suite G-106
Oklahoma City, Oklahoma 73116
If to the Trustee: Sterling Trust Company
P.O. Box 2526
Waco, Texas 76702
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication to Noteholders shall be sufficiently given
if mailed by first-class mail to each Registered Noteholder.
Any notice or communication mailed to a Noteholder shall be mailed to
him at his address as it appears on the lists or registration books of the
Registrar and shall be sufficiently given to him if so mailed within the time
prescribed.
Failure to give notice or communication to a Noteholder or any defect
in it shall not affect its sufficiency with respect to other Noteholders. If a
notice or communication is mailed, it is duly given, whether or not the
Noteholder receives or reads it.
SECTION 8.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Within five business days after the receipt by the Trustee of a
written application by any three or more Noteholders stating that the
applicants desire to communicate with other Noteholders with respect to their
rights under this Indenture or under the Notes, and accompanied by a copy of
the form of proxy or other communication which such applicants propose to
transmit, and by reasonable proof that each such applicant has owned a Note for
a period of at least six months preceding the date of such application, the
Trustee shall, at its election, either (1) afford to such applicants access to
all information so furnished to or received by the Trustee, or (2) inform such
applicants as to the approximate number of Noteholders according to the most
recent information so furnished to or received by the Trustee, and as to the
approximate cost of mailing to such Noteholders the form of proxy or other
communication, if any, specified in such application. If the Trustee shall
elect not to afford to such applicants access to such information, the Trustee
shall, upon the written request of such applicants, mail to all such
Noteholders copies of the form of proxy or other communication which is
specified in such request, with reasonable promptness after a tender to the
Trustee of the material to be mailed and of payment or provision for payment,
of the reasonable expenses of such mailing, unless within five days after such
tender, the Trustee shall mail to such applicants, and file with the SEC
together with a copy of the material to be mailed, a written statement to the
effect that such mailing would be contrary to the best interests of the
Noteholders or would be in violation of applicable law. Such written statement
shall specify the basis of such opinion. After opportunity for hearing upon the
objections specified in the written statement so filed, the SEC may, and if
demanded by the Trustee or by such applicants shall, enter an order either
sustaining one or more of such objections or refusing to sustain any of them.
If the SEC shall enter an order refusing to sustain any of such objections, or
if, after the entry of an order sustaining one or more of such objections, the
SEC shall find, after notice and opportunity for hearing, that all objections
so sustained have been met, and shall enter an order so declaring, the Trustee
shall mail copies of such material to all such Noteholders with reasonable
promptness after the entry of such order and the renewal of such tender.
SECTION 8.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application to take any action under this
Indenture, the Company shall furnish to the Trustee an Officer's Certificate
stating that, in the opinion of the Company and the signers, all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with.
B-12
<PAGE> 59
SECTION 8.05. CERTIFICATES OF FAIR VALUE.
The Company shall furnish to the Trustee a certificate or opinion of
an appraiser or other expert as to the fair value of any property or securities
to be released from the lien of the Security Documents, which certificate or
opinion shall state that in the opinion of the person making the same the
proposed release will not impair the security under the Security Documents in
contravention of the provisions thereof, and requiring further that such
certificate or opinion shall be made by an independent appraiser, or other
expert, if the fair value of such property or securities and of all other
property or securities released since the commencement of the then current
calendar year, as set forth in the certificates or opinions required by this
Section 8.06, is 40% or more of the aggregate principal amount of the Notes at
the time outstanding; but such a certificate or opinion of an independent
appraiser or other expert shall not be required in the case of any release of
property or securities, if the fair value thereof as set forth in the
certificate or opinion required by this paragraph is less than $25,000 or less
than 1% of the aggregate principal amount of the Notes at the time outstanding.
Any such certificate or opinion may be made by an officer or employee
of the Company who is duly authorized to make such certificate or opinion by
the Company from time to time except in cases in which this Section requires
that such certificate or opinion be made by an independent person, in which
case, the certificate or opinion shall be made by an independent appraiser, or
other expert selected or approved by the Trustee in the exercise of reasonable
care. The Trustee shall not be liable for any such expense or for the actions
or omissions of such independent appraiser or other expert.
SECTION 8.06. STATEMENTS REQUIRED IN CERTIFICATE AND OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenants in this Indenture shall include:
(1) a statement the person making such certificate has read such
covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements contained in such certificate or
opinion are based;
(3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with.
SECTION 8.07. WHEN TREASURY SECURITIES DISREGARDED.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver, or consent, Notes owned by the
Company or by any person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company shall be disregarded,
except that for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, waiver, or consent, only Notes
which the Trustee knows are so owned shall be disregarded. Also, subject to the
foregoing, only Notes outstanding at the time shall be considered in any such
determination.
SECTION 8.08. ACTION BY NOTEHOLDERS.
Whenever in this Indenture it is provided that the Holders of a
specified percentage in aggregate principal amount of the Notes may take any
action (including the making of any demand or request, the giving of any
notice, consent, or waiver, or the taking of any other action), the fact that
at the time of taking any such action the Holders of such specified percentage
have joined therein may be evidenced by any instrument or any number of
instruments of similar tenor executed by Noteholders in person or by agent or
proxy appointed in writing.
B-13
<PAGE> 60
SECTION 8.09. LEGAL HOLIDAYS.
A "Legal Holiday" is a Saturday, a Sunday, a legal holiday, or a day
on which banking institutions are not required to be open. If a payment date is
a Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday.
SECTION 8.10. GOVERNING LAW.
This Indenture, the Security Documents, and the Notes shall be
governed by the laws of the State of Texas, provided the duties and
responsibilities of the Trustee shall be construed under the laws of the
jurisdiction of its organization or incorporation applied without giving effect
to any conflicts-of-law principles. Venue shall lie in the County of Dallas.
SECTION 8.11. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan,
or debt agreement of the Company. Any such indenture, loan, or debt agreement
may not be used to interpret this Indenture.
SECTION 8.12. SUCCESSORS.
All agreements of the Company in this Indenture, the Security
Documents, and the Notes shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successors.
SECTION 8.13. DUPLICATE ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
IN WITNESS WHEREOF, the parties have signed this Indenture as of the
day and year first above written.
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC., a Texas
Corporation
By:
---------------------------------------------
Its:
--------------------------------------------
STERLING TRUST COMPANY
By:
---------------------------------------------
Its:
--------------------------------------------
B-14
<PAGE> 61
Exhibit A
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
CALLABLE ASSET-BACKED PROMISSORY NOTE
No.
------------------
U.S. Automobile Acceptance SNP-IV, Inc., a Texas corporation (herein
referred to as the "Company"), for value received, hereby promises to
pay_________ to or registered assigns, the principal sums as set forth below:
<TABLE>
<S> <C> <C> <C>
$ Class A-1 Promissory Notes Interest rate:
----------------- Due December 31, 2000 -----------------
$ Class A-2 Promissory Notes Interest Rate:
----------------- Due December 31, 2001 -----------------
$ Class A-3 Promissory Notes Interest Rate:
----------------- Due December 31, 2002 -----------------
$ Class A-4 Promissory Notes Interest rate:
----------------- Due December 31, 2003 -----------------
$ Class A-5 Promissory Notes Interest Rate:
----------------- Due December 31, 2004 -----------------
$ Class A-6 Promissory Notes Interest Rate:
----------------- Due December 31, 2005 -----------------
$ Class A-7 Promissory Notes Interest Rate:
----------------- Due December 31, 2006 -----------------
$ Class A-8 Promissory Notes Interest Rate:
----------------- Due December 31, 2007 -----------------
TOTAL:
$
-----------------
</TABLE>
Each of the above dates represents the stated maturity date of the
principal of such Note(s) (the "Stated Maturity"). The Company further agrees
to pay interest (computed on the basis of the unpaid portion of said principal
sum outstanding from time to time from the date of issue), until the principal
amount of this Note is paid in full at the rate per annum stated herein, which
interest shall be due and payable upon the fifteenth day of each calendar month
(for such interest accruing during the prior month or months) commencing with
the first calendar month after the issuance hereof and upon the Stated Maturity
(each a "Payment Date"). Interest is calculated on the basis of a 365-day year
but is paid in 12 equal monthly installments, regardless of the number of days
in each month.
This Note is one of a duly authorized issue of Notes of the Company,
designated as its Callable Asset- Backed Promissory Notes (herein called the
"Notes"), all issued and to be issued under an Indenture (herein called the
"Indenture"), between the Company and Sterling Trust Company (the "Trustee",
which term includes any successor Trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for
a statement of the respective rights thereunder of the Company, the Trustee and
the Holders of the Notes.
The principal of and interest on this Note are payable in such
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the
Company with respect to this Note shall be applied first to interest due and
payable on this Note as provided above and then to the unpaid principal of this
Note. Any installment of interest which is not paid when and as due shall bear
interest, at the lesser of fifteen percent (15%) or the maximum amount allowed
by law, from the date due to the date of payment thereof.
B-15
<PAGE> 62
Monthly payment of interest shall be made by check or electronic
transfer, mailed or transferred to the person whose name appears as the Holder
of this Note on the Note Register as of the first day of the month in which
such Payment Date occurs (the "Record Date") without requiring that this Note
be submitted for notation of payment. Checks returned undelivered will be held
by the Company or its designee for payment to the person entitled thereto.
Payment of the outstanding principal of and accrued interest on this Note at
the Stated Maturity or of the Redemption Price (as hereinafter defined) payable
on any Redemption Date (as hereinafter defined) as of which this Note or any
portion hereof has been called for redemption shall be made upon presentation
of this Note to the Paying Agent appointed by the Company for such purpose.
The payment of principal and accrued interest on the Notes, when due,
is secured by the Trust Estate, which consists of, among other things, a first
priority, perfected security interest in specific motor vehicle retail
installment contracts and the funds in the Master Collection Account, the
Master Operating Account, and the Note Redemption Account (as such terms are
defined in the Indenture).
If an Event of Default shall occur and be continuing with respect to
the Notes, the Notes, and all principal and unpaid accrued interest, may be
declared due and payable in the manner and with the effect provided in the
Indenture.
The Notes may be redeemed or partially redeemed any time during the
term of the Notes on any Payment Date (the "Redemption Date"), at a redemption
price of 100% of the principal amount being redeemed (the "Redemption Price"),
together with accrued and unpaid interest on the unpaid principal amount
thereof to the date fixed for redemption. Notice of such redemption shall be
mailed by the Company not later than the twentieth day, and not earlier than
the sixtieth day, before the date fixed for redemption to the Holders of the
Notes so to be redeemed.
If provision is made for the redemption and payment of this Note or
any portion, this Note or such portion shall thereupon cease to bear interest
from and after the Redemption Date. In the event of redemption of any Note in
part only, a new Note or Notes for the unredeemed portion thereof shall be
issued in the name of the registered holder thereof upon surrender thereof.
If the Company, at its sole discretion, determines, during the term of
this Note, that there will be insufficient assets to fully repay the Notes at
Maturity because of sustained operating losses, excessive credit losses or
repossessions, or because the Company is unable to purchase suitable Contracts
throughout the term of the Notes for the business of the Company to be
profitable, the Company may proceed with an orderly liquidation and early
redemption of the Notes. In such an event, the Company shall give 30 days
written notice to the Trustee of its intent to orderly liquidate the Company's
assets. Commencing immediately after the written notice of orderly liquidation
is delivered to the Trustee, all net collection proceeds from the Contracts
following the deduction of Allowed Expenses will be required to be deposited in
the Note Redemption Account for payment of the Notes. The Company will
immediately begin to take action to cause the Contracts to be fully collected
and/or sold for cash within a period of one year from the date of the orderly
liquidation notice. The Paying Agent will continue to make monthly cash
distributions to Noteholders until all assets of the Company have been
distributed to the Noteholders. The Company is authorized to hold a minimum
operating cash reserve of $300,000 during the period of the orderly
liquidation. All remaining Company cash after payment of Allowed Expenses will
be distributed to the Noteholders as a final distribution within 120 days after
the completion of the orderly liquidation period. All cash distributions during
the orderly liquidation will be distributed pro rata to each Noteholder based
on the outstanding unpaid principal balance of each Note as of the date of the
orderly liquidation notice. Any losses incurred will be similarly allocated pro
rata to all outstanding Noteholders.
The transfer of this Note may be registered on the Note Register of
the Company, upon surrender of this Note for registration of transfer at the
office or agency designated by the Company, duly endorsed by, or accompanied by
a written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Notes of authorized denominations and
for the same aggregate principal amount will be issued to the designated
transferee or transferees.
Prior to the due presentment for registration of transfer of this
Note, the Company, the Trustee and any agent of the Company or the Trustee may
treat the person in whose name this Note is registered as the owner thereof for
all purposes, whether or not this Note be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
B-16
<PAGE> 63
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Notes under the Indenture at any
time by the Company with the consent of the Holders of Notes representing more
than 50% of the principal amount of all Notes at the time outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the principal amount of the Notes at the time
outstanding, on behalf of the Holders of all the Notes, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Note shall be conclusive and binding upon such Holder and upon
all future holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note. The Indenture also permits
the Trustee to amend or waive certain terms and conditions set forth in the
Indenture without the consent of Holders of the Note issued thereunder.
The term "Company" as used in this Note includes any successor to the
Company under the Indenture.
The Notes are exchangeable for a like aggregate principal amount of a
different authorized denomination, as requested by the Holder.
This Note shall be construed in accordance with, and governed by, the
laws of the State of Texas applicable to agreements made and to be performed
therein.
IN WITNESS WHEREOF, U.S. Automobile Acceptance SNP-IV, Inc. has caused
this instrument to be duly executed.
Dated:
------------------------------ U.S. AUTOMOBILE ACCEPTANCE SNP-IV,
INC., a Texas Corporation
By:
---------------------------------
Authorized Officer
Authenticated by:
- -------------------------
Authorized Officer
B-17
<PAGE> 64
EXHIBIT C
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
SUBSCRIPTION AGREEMENT - CALLABLE ASSET-BACKED PROMISSORY NOTES
The Investor named below, by payment of the purchase price for such Callable
Asset-Backed Promissory Notes ("Notes"), by the delivery of a check payable to
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC. hereby subscribes for the Notes
indicated below (minimum purchase of $5,000) with additional increments of
$1,000. Purchasers of multiple classes of Notes shall be subject to the minimum
purchase requirements of $2,000 for each class purchased. By such payment, the
named Investor further acknowledges receipt of the Prospectus and any Supplement
and the Subscription Agreement, the terms of which govern the investment in the
Notes being subscribed for hereby.
A. INVESTMENT:
<TABLE>
<CAPTION>
Class Amount
Purchased Class Maturity Date
------------ ----- -------------
<S> <C> <C>
$________________ A-1 December 31, 2000
$________________ A-2 December 31, 2001
$________________ A-3 December 31, 2002
$________________ A-4 December 31, 2003
$________________ A-5 December 31, 2004
$________________ A-6 December 31, 2005
$________________ A-7 December 31, 2006
$________________ A-8 December 31, 2007
TOTAL: $________________
Initial Purchase [ ] Additional Purchase [ ] Date of Investor's check ____________________
</TABLE>
B. REGISTRATION:
Registered Owner: Co-Owner:
------------------------- ------------------------
Mailing Address:
-----------------------------------------------------------
City, State & Zip:
----------------------------------------------------------
Residence Address (if different from above):
--------------------------------
Birth Date Owner: / / Birth Date Co-Owner: / /
----- ----- ----- ----- ----- -----
Social Security No. Owner:
----------------------------------------
Social Security No. Co-Owner:
-------------------------------------
U.S. Citizen [ ] Other [ ]
Corporate or Custodial Tax ID
------------------------------------
Telephone #: (H) ( )
---------- --------------------------------
(O) ( )
---------- --------------------------------
C. OWNERSHIP: [ ] Individual Ownership [ ] IRA or Keogh
[ ] Joint Tenants with Rights of Survivorship
[ ] Trust/Date of Trust Established Pension/Trust __ /__ /__ (S.E.P.)
[ ] Tenants in Common [ ] Tenants by the Entirety
[ ] Corporate Ownership [ ] Partnership [ ] Other__________________
D. SIGNATURES: BY SIGNING BELOW, I/WE REPRESENT THAT I/WE MEET THE
SUITABILITY STANDARDS SET FORTH IN THE PROSPECTUS UNDER "SUITABILITY
STANDARDS" AND AM/ARE INVESTING NO MORE THAN 10% OF MY/OUR NET WORTH (AS
DEFINED IN THE PROSPECTUS).
Signatures - Registered Owner:
-------------------------------------------------
Co-Owner:
---------------------------------------------------------
C-1
<PAGE> 65
E. Print Names of Custodian or Trustee:
----------------------------------------
Authorized Signature
----------------------------------------
Date: Witness Signature
--------------- ----------------------------------------
F. PAYMENT SHOULD BE SENT TO (IF DIFFERENT THAN REGISTERED OWNER):
Name: c/o
--------------------------------- -----------------------------------
Address: Account Number:
--------------------------------------- -----------------
City, State & Zip: Telephone Number:
------------------------------ --------------
G. BENEFICIAL OWNER(S): All reports and financial statements will normally be
sent to the registered owner at the address in Section B. If reports and
financial statements are to be sent to the Beneficial Owner of an IRA or Keogh,
insert name of the Beneficial Owner.
Name of Beneficial Owner Only: Telephone Number:
------------------ --------------
Address:
-----------------------------------------------------------------------
City, State & Zip:
-------------------------------------------------------------
H. BROKER-DEALER/REGISTERED REPRESENTATIVE DATA: ALL LINES MUST BE COMPLETED.
ANY MISSING SIGNATURES MAY DELAY PROCESSING OF THIS ORDER.
Broker-Dealer NASD Firm Name:
--------------------------------------------------
Telephone Number:
--------------------
Main Office Address:
------------------------------------------------------------
City, State & Zip:
-------------------------------------------------------------
Print or Type name of Broker-Dealer,
Principal or other Authorized Signator:
----------------------------------------
Authorized Signature:
----------------------------------------------------------
Print or Type Name of Registered Representative:
-------------------------------
Telephone Number:
---------------------
Signature:
---------------------------------------------------------------------
Branch Office Address:
---------------------------------------------------------
City, State & Zip
--------------------------------------------------------------
- -------------------------------------------------------------------------------
MAIL TO: U.S. Automobile Acceptance SNP-IV, Inc.,
1120 N.W. 63rd, Suite G-108,
Oklahoma City, OK 73116
(405) 843-3135 FAX (405) 848-7777
===============================================================================
ALL CHECKS FROM INVESTORS MUST BE TRANSMITTED TO THE ESCROW AGENT
BY NOON OF THE NEXT BUSINESS DAY FOLLOWING RECEIPT
C-2
<PAGE> 66
No dealer, salesman or any other person
has been authorized to give any
information or to make any representations
in connection with the Offering described
herein, other than those contained in this
Prospectus. If given or made, such other
information or representations must not be
relied upon as having been authorized by
the Company or by any Underwriter. This
Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy
any securities offered hereby in any
jurisdiction to any person to whom it is
unlawful to make such an offer or
solicitation in such jurisdiction. The
delivery of this Prospectus at any time
does not imply that the information herein
is correct as of any time subsequent to
its date.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary 4
Risk Factors 8
Capitalization 12
Use of Proceeds 12
Plan of Distribution 13
Description of the Notes 13
Security for the Notes 16
Allowed Expenses and Flow of Contract
Proceeds 18
The Company 19
Purchase and Collection of Contracts 20
Security Ownership of Certain
Beneficial Owners and Management 22
Management 22
Management's Discussion and Analysis
of Financial Condition 25
Indenture of Trust Provisions 26
Certain Legal Aspects of the Contracts 29
Federal Income Tax Consequences 32
Index of Defined Terms 33
Experts 35
Legal Matters 35
Financial Statements 36
Exhibits
Form of Callable Asset-Backed
Promissory Note A-1
Indenture of Trust B-1
Subscription Agreement C-1
Until termination of this Offering, all
dealers effecting transactions in the
registered securities, whether or not
participating in this distribution, are
required to deliver a prospectus.
</TABLE>
$40,000,000
CALLABLE ASSET-BACKED
PROMISSORY NOTES
U.S.
AUTOMOBILE
ACCEPTANCE
SNP-IV,
INC.
<PAGE> 67
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
All expenses, including all allocated general administrative
and overhead expenses, related to the offering or the organization of the
Company will be borne by U.S. Automobile Acceptance Corporation ("USAAC"), an
affiliate of the Company. The Company will reimburse USAAC for all or a part of
such expenses through a payment by the Company to USAAC of a fee of 5% of the
gross proceeds from any sales of the Notes.
The following table sets forth a reasonable itemized statement of all
anticipated out-of-pocket and overhead expenses (subject to future
contingencies) to be incurred in connection with the distribution of the
securities being registered, reflecting the minimum and maximum subscription
amounts.
<TABLE>
<CAPTION>
Minimum Maximum
------- -------
<S> <C> <C>
SEC Registration Fee $ 11,800 $ 11,800
Printing and Engraving Expenses 5,000 90,000
Legal Fees and Expenses 35,000 80,000
Trustee Fees 15,000 35,000
Escrow Fees 10,000 15,000
Marketing and Due Diligence Expenses 3,000 600,000
Accounting Fees and Expenses 10,000 30,000
Blue Sky Fees and Expenses 10,000 75,000
Miscellaneous 4,200 63,200
-------- ----------
TOTAL $104,000 $1,000,000
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Incorporation of the Company ("Articles") provide for
indemnification of Directors in accordance with the Texas Business Corporation
Act. Article Six of the Articles provides as follows:
A director of the Corporation is not liable to the Corporation
or its shareholders for monetary damages for an act or omission in the
director's capacity as a director, except that this Article Six does
not eliminate or limit the liability of a director for:
(a) a breach of a director's duty of loyalty to the
Corporation or its shareholders;
(b) an act or omission not in good faith or that involves
intentional misconduct or a knowing violation of the
law;
(c) a transaction from which a director received an
improper benefit, whether or not the benefit resulted
from an action taken within the scope of the
director's office;
(d) an act or omission for which the liability of a
director is expressly provided for by statute; or
(e) an act related to an unlawful stock repurchase or
payment of a dividend.
The Broker-Dealer Selling Agreement also provides for indemnification
of the Company, and its officers, directors and employees against certain
liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In 1998, the Company issued 1,000 shares of Common Stock to Michael R.
Marshall, an individual and resident of Oklahoma, for cash in the amount of
$500,000, to commence business.
The issuance of these shares was exempt from registration under Section
4(2) of the Securities Act of 1933 as a transaction not involving a public
offering. No commissions were paid in connection with this transaction.
ITEM 16. EXHIBITS
The following Exhibits are filed as part of the Registration Statement:
<PAGE> 68
<TABLE>
<CAPTION>
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
- ----------- -------------------------
<S> <C>
3.1 - Articles of Incorporation
3.2 - By-Laws
4.1* - The Indenture is Exhibit B to the Prospectus.
4.2* - The Form of Callable Asset-Backed Promissory Note is Exhibit A to the Prospectus.
5.1* - Opinion of Amy Waters, Attorney at Law, regarding validity of Notes
8.1* - Opinion of Tyson Hopkins, CPA, regarding tax matters
10.1* - Form of Security Agreement among U.S. Automobile Acceptance SNP-IV, Inc., the Noteholder,
and Sterling Trust Company, as Trustee
10.2* - Form of Custodian Agreement among U.S. Automobile Acceptance SNP-IV, Inc., Sterling Trust
Company, as Trustee, and U.S. Automobile Acceptance Corporation
10.3 - Form of Servicing Agreement between U.S. Automobile Acceptance SNP-IV, Inc. and U.S.
Automobile Acceptance Corporation
10.4* - Form of Subscription Escrow Agreement
10.5* - Form of Broker-Dealer Selling Agreement
10.6* - Form of Subscription Agreement is Exhibit C to the Prospectus.
10.7* - Form of Continuing Purchase and Sale Agreement
23.1* - Consent of Amy Waters, Attorney at Law (included in her opinion as Exhibit 5.1)
23.2* - Consent of Tyson Hopkins, CPA
</TABLE>
- ----------------------------------
*Filed with this amendment
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes to:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
Registration Statement; and
(iii) Include any additional or changed material information of the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(4) The undersigned registrant hereby undertakes to file an application
for the purpose of determining the eligibility of the trustee to act under
subsection (a) of section 310 of the Trust Indenture Act ("Act") in accordance
with the rules and regulations prescribed by the Commission under section
305(b)(2) of the Act.
II-2
<PAGE> 69
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form S-1 and authorizes this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Waxahachie, State of Texas, on the 30th day of
October, 1998.
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
By: /s/ Michael R. Marshall
------------------------------
Michael R. Marshall, President
----------------------------------------
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following person in the
capacity and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Michael R. Marshall President; Secretary; October 30, 1998
- ------------------------- Treasurer; Sole Director;
Michael R. Marshall Chief Financial and Accounting
Officer
</TABLE>
II-3
<PAGE> 70
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
- ----------- -------------------------
<S> <C>
3.1 - Articles of Incorporation
3.2 - By-Laws
4.1* - The Indenture is Exhibit B to the Prospectus.
4.2* - The Form of Callable Asset-Backed Promissory Note is Exhibit A to the Prospectus.
5.1* - Opinion of Amy Waters, Attorney at Law, regarding validity of Notes
8.1* - Opinion of Tyson Hopkins, CPA, regarding tax matters
10.1* - Form of Security Agreement among U.S. Automobile Acceptance SNP-IV, Inc., the
Noteholder, and Chase Bank of Texas, as Trustee
10.2* - Form of Custodian Agreement among U.S. Automobile Acceptance SNP-IV, Inc.,
Chase Bank of Texas, as Trustee, and U.S. Automobile Acceptance Corporation
10.3 - Form of Servicing Agreement between U.S. Automobile Acceptance SNP-IV, Inc.
and U.S. Automobile Acceptance Corporation
10.4* - Form of Subscription Escrow Agreement
10.5* - Form of Broker-Dealer Selling Agreement
10.6* - Form of Subscription Agreement is Exhibit C to the Prospectus.
10.7* - Form of Continuing Purchase and Sale Agreement
23.1* - Consent of Amy Waters, Attorney at Law (included in her opinion as Exhibit 5.1)
23.2* - Consent of Tyson Hopkins, CPA
</TABLE>
- ----------------------------------
* Filed with this amendment
<PAGE> 1
EXHIBIT 5.1
[AMY WATERS LETTERHEAD]
October 30, 1998
U.S. Automobile Acceptance SNP-IV, Inc.
1120 N.W. 63rd
Suite G-106
Oklahoma City, Oklahoma 73116
Gentlemen:
Reference is hereby made to the Registration Statement on Form S-1,
File No. 333-44189 (the "Registration Statement"), of U.S. Automobile SNP-IV,
Inc., a Texas corporation (the "Company"), filed under the Securities Act of
1933, as amended (the "Act"), covering the proposed issuance and sale of up to
$40,000,000 aggregate principal amount of Asset-Backed Promissory Notes (the
"Notes"), to be issued under an indenture (the "Indenture") to be entered into
between the Company and Sterling Trust Company, as trustee (the "Trustee").
In connection therewith, I have reviewed originals or copies
authenticated to my satisfaction of all documents, certificates, records and
instruments of the Company which I believe are necessary or appropriate in
rendering this opinion, including (i) the Certificate of Incorporation and
By-Laws of the Company, (ii) the Minute Book of the Company containing the
minutes of directors' and shareholders' meetings and actions, (iii) the
Registration Statement and all exhibits thereto, including the proposed forms
of the Notes and the Indenture, and (iv) such certificates of public officials
and of officers of the Company as I have deemed necessary as a basis for the
opinions herein expressed. As to some questions of fact material to these
opinions, I have, where relevant facts were not independently established,
relied upon a certificate of officers of the Company.
Based upon the foregoing, I am of the opinion that:
1. The Company is a corporation duly incorporated and validly
existing under the laws of the State of Texas, pursuant to the Texas Business
Corporation Act.
2. The Indenture and the Notes have been validly authorized by
the Company. After the Indenture has been duly executed and delivered on
behalf of the Company and the Trustee named therein, the Notes, when executed,
authenticated, issued and delivered, and sold as contemplated by the
Registration Statement, will be legally issued under the Texas Business
Corporation Act, and the Federal Securities Act of 1933, as amended, and will
constitute valid and binding obligations of the Company.
<PAGE> 2
U.S. Automobile Acceptance SNP-IV, Inc.
October 30, 1998
Page 2
I hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement and to the
reference to this firm under the heading "Legal Matters" in the Prospectus
included therein. This letter consent does not constitute a consent under
Section 7 of the Act, and in permitting my name to appear under the heading
"Legal Matters" I have not certified any part of the Registration Statement,
or, except in connection with the filing of this opinion, otherwise come within
the category of persons whose consent is required under Section 7 or under the
rules or regulations of the Securities and Exchange Commission.
Sincerely,
Amy Waters
<PAGE> 1
EXHIBIT 8.1
[TYSON HOPKINS LETTERHEAD]
October 8, 1998
U.S. Automobile Acceptance SNP-IV, Inc.
1120 N.W. 63rd St.
Suite 108
Oklahoma City, OK 73116
RE: Federal Tax Consequences relating to
investments in Notes of the Company
Gentlemen,
You have requested my opinion regarding the material Federal Income Tax
Consequences of investment in Notes by Note holders of U.S. Automobile
Acceptance SNP-IV, Inc. ("the Company"). I have prepared my opinion from certain
information provided by you and certain facts. I have reviewed the drafts of the
prospectus as included in the Registration Statement under the Securities Act of
1933 of U.S. Automobile Acceptance SNP-IV, Inc. pursuant to which the Notes will
be offered ("the prospectus").
I am of the opinion that the Federal Income Tax Consequences section of
the prospectus states all material Federal Income Tax Consequences to holders of
Notes of the Company. I explicitly confirm and adopt all matters as set forth in
the Federal Income Tax Consequences section of the prospectus and are thereby
deemed to be incorporated in my opinion.
Sincerely,
/s/ Tyson Hopkins
Tyson Hopkins
Certified Public Accountant
<PAGE> 1
EXHIBIT 10.1
SECURITY AGREEMENT
This SECURITY AGREEMENT (hereinafter called this "Agreement") is made
_____________________, 199__, by and between U.S. AUTOMOBILE ACCEPTANCE SNP-IV,
INC., a Texas corporation, located at 1120 N.W. 63rd, Suite G-106, Oklahoma
City, Oklahoma 73116 (hereinafter called "Debtor") and
__________________________ as Trustee on behalf of those persons listed on
Schedule A (which persons and the Trustee are hereinafter collectively called
"Trustee").
In consideration of the covenants and conditions stated in this
Agreement the parties agree as follows:
1. INDEBTEDNESS SECURED.
This Agreement and the Security Interest secure the payment of
certain Callable Asset-Backed Promissory Notes issued and executed by Debtor,
pursuant to the Indenture of Trust (the "Indenture") dated ___________________,
1998, by and between Debtor and _____________________________ and made payable
to the holders of such Callable Asset- Backed Promissory Notes in the aggregate
principal sum of up to $40,000,000 (hereinafter collectively called the
"Note"), together with all other indebtedness of every kind or nature owing by
Debtor to Trustee, whether now existing or hereafter incurred, direct or
indirect, absolute or contingent, and whether the indebtedness is from time to
time reduced and thereafter increased or entirely extinguished and thereafter
reincurred, and including any costs and expenses incurred by Trustee pursuant
to this Agreement, the Note or any other note or evidence of indebtedness (all
of such is herein sometimes referred to as the "Indebtedness").
2. SECURITY INTEREST.
For value received, Debtor hereby grants to Trustee a security
interest (the "Security Interest') in and to all of the following: (i) any and
all retail motor vehicle installment sale contracts (the "Contracts") acquired
with the funds constituting the Indebtedness or with funds received from the
repayment of said Contracts or the Replacement Contracts (the "Replacement
Contracts"), which Contracts or Replacement Contracts are originated in
connection with the financing of new and used automobiles and light-duty trucks
(the "Vehicles"), including all rights to receive payments thereunder and
security interests in and instruments of title to the Vehicles, whether now
owned or hereafter acquired; (ii) all funds in the Debtor bank accounts styled
Master Collections Accounts, Master Operating Account and Note Redemption
Account; (iii) all proceeds of an offering pursuant to the Registration
Statement of Debtor filed with the Securities and Exchange Commission (the
"Registration Statement"); and (iv) all products thereof and all cash and
noncash proceeds of any of the foregoing, in any form, including, without
limitation, proceeds of insurance policies from the loss thereof, all titles to
the Vehicles and all assignment of liens, all Contracts, Vehicle Titles,
assignments, dealer recourse agreements, other documents and instruments in the
possession of the Debtor, and any documents or instruments in the possession,
custody and control of any Contract Servicer or any independent Custodian (all
of the foregoing hereinafter called the "Collateral"); provided, however, that
the security interest granted hereunder is subject to the conditions and
limitations set forth in the Registration Statement.
3. REPRESENTATION AND WARRANTIES OF DEBTOR.
Debtor represents and warrants and, so long as any portion of
the Indebtedness remains unpaid, shall be deemed continuously to represent and
warrant that:
3.1. Debtor is the owner of the Collateral free and clear
of all security interests or other encumbrances and claims of any kind or
nature in favor of any third persons, and Trustee has a first priority,
perfected security interest in all of the Collateral;
3.2. Debtor is authorized to enter into this Agreement and
into the transactions contemplated hereby and evidenced by the Note;
3.3. The Collateral is used or bought for use solely in
business operations, and all of the relevant Collateral will remain personal
property regardless of the manner in which any of it may be affixed to real
property.
1
<PAGE> 2
3.4 Upon an Event of Default on the Notes or in this
Security Agreement, as described in section 6 hereof, Debtor shall cause any
Contract Servicer or independent Custodian to deliver to the Trustee all
Collateral in the possession of such Contract Servicer or independent
Custodian.
4. COVENANTS OF DEBTOR.
Debtor covenants that so long as any Indebtedness remains unpaid,
Debtor:
4.1. Will defend the Collateral against the claims and
demands of all other parties, except purchasers of inventory in the ordinary
course of business;
4.2. Will keep the Collateral free and clear from all
security interests, liens and other encumbrances and claims of any kind or
nature in favor of any third persons, except the Security Interest; and Debtor
will not pledge the Collateral as security for any debts or obligations other
than the Notes;
4.3. Will maintain in accordance with reasonable
accounting practices, consistently applied, accurate and complete records
concerning the Collateral; and will, upon request made from time to time,
permit the Trustee or its agents to inspect the Collateral and the Debtor's
records concerning the Collateral;
4.4. Upon an uncured Event of Default and upon request by
the Trustee will deliver to the Trustee or its agents, any instruments,
documents of title and chattel paper representing or relating to the Collateral
or any part thereof, and all schedules, invoices, shipping, or delivery
receipts, together with the endorsements or assignments;
4.5. Will notify the Trustee in writing at least fifteen
(15) days in advance of any change in the Debtor's address specified on the
first page of this Agreement, of any change in the location or of any
additional locations at which the Collateral is kept of any change in the
address at which records concerning the Collateral are kept and of any change
in the location of the Debtor's residence, chief executive office or principal
place of business;
4.6. Will execute and deliver to the Trustee such
financing statements and other documents and take such other action, to
perfect, protect or continue the perfection of the Security Interest and effect
the purposes of this Agreement;
4.7. Will pay or cause to be paid when due all taxes,
assessments and other charges of every kind and nature which may be levied or
assessed upon or against the transaction contemplated hereby or the Collateral;
4.8. Will not make any distributions to shareholders or
payments to affiliates except as set forth in the Registration Statement;
4.9. Will use the Collateral only for the purposes set
forth in the Registration Statement and will not commingle the Collateral
constituting cash with funds of any person or entity other than Debtor;
4.10. Upon an uncured Event of Default and upon request by
the Trustee, will deliver any Collateral in the form of funds in Debtor's
Master Collections Accounts, Master Operating Account, and Note Redemption
Account to the Trustee and will surrender control of said accounts to the
Trustee;
5. VERIFICATION OF COLLATERAL.
Upon an Event of Default, Trustee shall have the right to verify the
existence of the Collateral in any manner and through any medium which Trustee
may consider appropriate, and Debtor shall furnish such assistance and
information and perform such acts as Trustee may require in connection
therewith.
2
<PAGE> 3
6. DEFAULT.
6.1. Events of Default. Subject to the following
limitations, an Event of Default occurs if
a. the Debtor fails to make a payment of
interest on any Note when the same becomes
due and payable, and such failure to pay
continues for a period of more than five
days;
b. the Debtor fails to make a payment of the
principal of any Note when the same becomes
due and payable, and such failure to pay
continues for a period of more than five
days;
c. the Debtor fails to comply with any of its
other agreements in the Notes, this Agreement
or the Indenture of Trust and the Default
continues for the period and after the notice
specified below;
d. the Debtor pursuant to or within the meaning
of any Bankruptcy Law:
(1) commences a voluntary case,
(2) consents to the entry of an order
for relief against it in any
involuntary case,
(3) consents to the appointment of a
Receiver of it or for any
substantial part of its property,
(4) makes a general assignment for the
benefit of its creditors, or
(5) fails generally to pay its debts as
they become due; or
e. a court of competent jurisdiction enters an
order or decree under any Bankruptcy Law
that:
(1) is for relief against the Debtor in
an involuntary case,
(2) appoints a Receiver of the Debtor or
for any substantial part of its
property, or
(3) orders the liquidation of the
Debtor, and the order or decree
remains unstayed and in effect for
90 days.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar federal or state law for the relief of debtors. The term "Receiver"
means any receiver, trustee, assignee, liquidator, or similar official under
any Bankruptcy Law.
A Default under section 6.1.c is not an Event of Default until the
Trustee or the Noteholders holding at least twenty-five percent in principal
amount of the Notes notifies the Debtor of the default and the Debtor does not
cure the default within 90 days after receipt of the notice. The notice must
specify the default, demand that it be remedied, and state that the notice is a
"Notice of Default."
6.2. Rights and Remedies Upon Default. If an Event of
Default occurs, the Trustee, by written notice to the Debtor, shall declare the
principal of and accrued interest on all the Notes to be due and payable
immediately. After a declaration such principal and interest shall be due and
payable immediately. If an Event of Default occurs and is continuing, the
Trustee may pursue any available remedy by proceeding at law or in equity to
collect the payment of principal and interest on the Notes or to enforce the
performance of any provision of the Notes or this Agreement.
3
<PAGE> 4
Notwithstanding anything to the contrary in this Agreement, the
Trustee is required to proceed against and liquidate all Collateral before
looking to any other assets of the Debtor.
6.3. Notice. Debtor agrees that any notice by Trustee of
any sale, lease or other disposition of the Collateral or any other intended
action hereunder, whether required by the Uniform Commercial Code or otherwise,
shall constitute reasonable notice to Debtor if the notice is mailed by regular
or certified mail, postage prepaid, at least ten (10) days before the date of
any public sale, lease or other disposition of the Collateral, or the time
after which any private sale, lease or other disposition of the Collateral is
to take place, to Debtor's address as specified in this Agreement or to any
other address which Debtor has notified Trustee in writing as the address to
which notices shall be given to Debtor.
6.4. Costs. Debtor shall pay all costs and expenses
incurred by Trustee in enforcing this Agreement, realizing upon any Collateral
and collecting any Indebtedness. Costs and expenses will include but not be
limited to all reasonable attorneys' and paralegals' fees and expenses.
6.5. Deficiency. In the event that the proceeds of the
Collateral are insufficient to satisfy the entire unpaid Indebtedness, Debtor
will be responsible for the deficiency and shall pay the same upon demand.
Trustee will account to Debtor for any proceeds of the Collateral in excess of
the Indebtedness and the costs and expenses referred to in Section 6.4.
7. MISCELLANEOUS.
7.1. Perfection of Security Interest. Debtor shall take
any and all steps necessary to perfect the security interest granted to Trustee
hereby. If Debtor fails to take any such step, Trustee may, at Debtor's
expense, file at any time, any financing statement or statements relating to
the Collateral (with or without Debtor's signature thereon), and to take any
other action deemed necessary or appropriate by Trustee to perfect and to
continue perfection of the Security Interest. A photocopy of this Agreement is
sufficient as a financing statement and may be filed as such if Trustee so
elects.
7.2. Continuing Agreement. This Agreement is a continuing
agreement with respect to the subject matter hereof and shall remain in full
force and effect until all of the Indebtedness now or hereafter contracted for
or created or existing and any extensions or renewals of the Indebtedness
together with all interest thereon has been paid in full.
7.3. Right to Proceeds. In the event of a continuing
Event of Default, the Trustee may demand, collect, and sue for all proceeds of
the Collateral (either in Debtor's or Trustee's name at the latter's option)
with the right to enforce, compromise, settle, or satisfy any claim. Debtor
hereby irrevocably appoints Trustee as Debtor's attorney-in-fact to endorse, by
writing or stamp, Debtor's name on all checks, commercial paper, and other
instruments pertaining to the proceeds. Such appointment is binding and
coupled with an interest. Debtor also authorizes Trustee to collect and apply
against the Indebtedness any refund of insurance premiums or any insurance
proceeds payable on account of the loss of or damage to any of the Collateral
and hereby irrevocably appoints Trustee as Debtor's attorney-in-fact to
endorse, by writing or stamp, any check or draft representing such proceeds or
refund.
7.4. Non-Waiver. No delay or omission by Trustee in
exercising any right or remedy hereunder or with respect to any Indebtedness
shall operate as a waiver of that or any other right or remedy, and no single
or partial exercise of any right or remedy shall preclude Trustee from any
other or future exercise of the right or remedy or the exercise of any other
right or remedy. Trustee may agree to a cure of any default by Debtor in any
reasonable manner without waiving any other prior or subsequent default by
Debtor.
7.5. Third Parties. Trustee shall have no obligation to
take, and Debtor shall have the sole responsibility for taking, any steps to
preserve rights against all prior parties to any document of title, general
intangible, instrument or chattel paper in Trustee's possession as Collateral
or proceeds of the Collateral.
4
<PAGE> 5
7.6. Assignments. Debtor's rights and obligations under
this Agreement are not assignable in whole or in part by operation of law or
otherwise. Trustee may not assign its rights and obligations under this
Agreement, in whole or in part, without consent of Debtor.
7.7. Definitions; Multiple Parties; Section Headings. The
term "person" when referred to herein shall mean an individual, partnership,
corporation or any other legal entity. If more than one Debtor executes this
Agreement, the term "Debtor" includes each of the Debtors as well as all of
them, and their obligations under this Agreement shall be joint and several.
Whenever the context so requires, the neuter gender includes the feminine and
masculine and the singular number includes the plural. Unless otherwise
defined herein or the context requires otherwise, terms used herein shall have
the same meaning as defined in the Uniform Commercial Code as enacted by the
State of Oklahoma. Section headings are used herein for convenience only and
do not alter or limit the meaning of the language contained in each section.
7.8. Amendment; Waiver. This Agreement may not be
modified or amended nor shall any provision of it be waived except by a written
instrument signed by Debtor and by Trustee.
7.9. Choice of Law; Waiver of Jury Trial. This Agreement
has been delivered in the State of Oklahoma and shall be interpreted, and the
rights and liabilities of the parties hereto determined, in accordance with the
internal laws (as opposed to the conflicts of law provisions) of the State of
Oklahoma. Debtor agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in any other jurisdiction by suit on
the judgment or in any other manner provided by law. Nothing in this paragraph
shall affect or impair Trustee's right to serve legal process in any manner
permitted by law, or Trustee's right to bring any action or proceeding against
Debtor, or the property of Debtor, in the courts of any other jurisdiction.
7.10. Expenses. Debtor shall pay all costs and expenses
relating to this Agreement and the Indebtedness, including but not limited to,
filing and recording fees, documentary stamps including, without limitation,
and Trustee's attorney's fees and expenses.
7.11. Notice. Except as otherwise provided herein, any
notice required hereunder shall be in writing and shall be deemed to have been
validly served, given or delivered upon deposit in the United States certified
or registered mails, with proper postage prepaid, addressed to the party to be
notified as follows:
<TABLE>
<S> <C> <C>
a. If to Debtor at: U.S. Automobile Acceptance SNP-IV, Inc.
1120 N.W. 63rd, Suite G-106
Oklahoma City, Oklahoma 73116
b. If to Trustee at:
-----------------------
-----------------------
-----------------------
Attention: Corporate Trust Department
</TABLE>
or to such other address as each party may designate for itself by like notice.
7.12. Severability. If any provision of this Agreement is
prohibited by, or is unlawful or unenforceable under, any applicable law of any
jurisdiction, such provision shall, as to such jurisdiction, be ineffective to
the extent of such prohibition without invalidating the remaining provisions
hereof, provided, however, that any such prohibition in any jurisdiction shall
not invalidate such provision in any other jurisdiction.
7.13. Reliance by Trustee. All covenants, agreements,
representations and warranties made herein by Debtor shall, notwithstanding any
investigation by Trustee, be deemed to be material to and to have been relied
upon by Trustee.
7.14. Entire Agreement. This Agreement, the Note and the
other instruments, agreements and documents contemplated hereby contain the
entire security agreement between Trustee and Debtor with respect to the subject
matter hereof and supersedes and cancels any prior understanding and agreement
between Trustee and Debtor with respect thereto.
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<PAGE> 6
7.15. Binding Effect Subject to the assigned provisions of
this section of the agreement, this Agreement shall be binding upon the heirs,
personal representatives, successors and assigns of Debtor and shall inure to
the benefit of the successors and assigns of Trustee.
7.16. Time. Time is of the essence in this Agreement.
7.17. Attorney's Fees. The parties hereby agree that in
the event any of the terms and conditions contained in this Agreement, including
the indemnification provisions contained herein, must be enforced by reason of
any past, existing or future delinquency of payment, of failure of observance or
of performance by any of the parties hereto, in each such instance, the
defaulting party shall be liable for reasonable collection and/or legal fees,
trial and appellate levels, any expenses and legal fees incurred, including time
spent in supervision of paralegal work and paralegal time, and any other
expenses and costs incurred in connection with the enforcement of any available
remedy.
7.18. Capacity. The Trustee as Trustee is entering into
this Agreement solely in its capacity as Trustee under the Indenture and shall
be entitled to the privileges, immunities and protections afforded it thereunder
in any actions taken by it as Trustee hereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
DEBTOR:
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
By:
-------------------------------------
Its:
-------------------------------------
TRUSTEE: ON BEHALF OF SECURED PARTIES
By:
-------------------------------------
Its:
-------------------------------------
6
<PAGE> 7
SCHEDULE A
COLLECTIVE LIST OF PERSONS
CONSTITUTING THE SECURED PARTY
7
<PAGE> 1
EXHIBIT 10.2
CUSTODIAN AGREEMENT
THIS CUSTODIAN AGREEMENT is made and entered into as of this ____ day
of _________________, 199__, between U.S. Automobile Acceptance SNP-IV, Inc.,
a Texas corporation (the "Debtor"), Sterling Trust Company, as Trustee (the
"Secured Party") and U.S. Automobile Acceptance Corporation, a Texas
corporation (the "Custodian").
R E C I T A L S:
A. The Debtor has duly authorized the offer and sale of Callable
Asset-Backed Promissory Notes (the "Notes") in the aggregate principal sum of
up to $40,000,000, which Notes are backed by certain Collateral as set forth in
a Security Agreement between the Debtor and Secured Party.
B. In order to perfect its security interest in the Collateral as
granted under the Security Agreement, Secured Party has requested and Debtor
has agreed to deposit the Collateral with the Custodian subject to the terms
and conditions of this Agreement.
1 . The above recitals are true and correct and are incorporated
herein by reference. All capitalized terms shall have the same meaning as in
the Security Agreement between Debtor and Secured Party of even date herewith.
2. Debtor or its Agent will deposit with Custodian the
Collateral. The Custodian will have possession, custody and control of the
Collateral on behalf of the Secured Party and shall maintain the Collateral in
its possession. The Custodian will have no responsibility for Collateral it
does not receive.
3. The Custodian will release to the Debtor each Contract and
related documents including the Vehicle Title constituting the Collateral upon
receipt of an affidavit signed and sworn to by a duly authorized officer of
Debtor that (a) Debtor has received payment in full from the obligor under the
Contract, (b) Debtor needs the contract and related documents to effect a
contract exchange or settlement under the terms of a recourse agreement, (c)
Debtor needs the Vehicle Title to repossess a Vehicle after default on a
Contract, or (d) any administrative event for which release for mailing to the
State is required under statute, rule, regulation or practice such as change in
name of Vehicle owner due to marriage or divorce, change of address Vehicle
owner, or notation of a subordinate lien on the Title. Upon a release of a
Vehicle Title pursuant to 3(b) and (d) above, the Debtor or its Agent shall
promptly return the Vehicle Title or new exchanged title to the Custodian upon
receipt of the title after the changes have been made by the appropriate state
agency. Upon an Event of Default on the Notes or in the Security Agreement,
Custodian shall deliver to the Trustee as representative of Secured Party all
Collateral promptly upon request of the Secured Party.
4. The Custodian undertakes to perform only such duties as are
expressly set forth herein, and no implied duties or obligations shall be read
into this Agreement against the Custodian.
5. The Custodian may without investigation act in reliance upon
any writing or instrument or signature which it, in good faith, believes to be
genuine, may assume without investigation the validity and accuracy of any
statement or assertion contained in such a writing or instrument, and may
assume without investigation that any person purporting to give any writing,
notice, advice or instructions in connection with the provisions hereof has
been duly authorized to do so. The Custodian shall not be liable in any manner
for the sufficiency or correctness as to form, manner and execution, or
validity of any instrument deposited into this escrow, nor as to the identity,
authority or right of any person executing the same; and its duties hereunder
shall be limited to the safekeeping of such agreements, monies, instruments or
other documents received by it as such escrow holder, and for the disposition
of the same in accordance with the written instrument accepted by it in the
escrow or written instructions received by it.
6. The Debtor hereby agrees to indemnify the Custodian and hold
it harmless from any and all claims, liabilities, losses, actions, suits or
proceedings at law or in equity, or any other expenses, fees or charges of any
character or nature, which it may incur or with which it may be threatened by
reason of its acting as Custodian, against any and all expenses, including
attorneys' fees and the cost of defending any action, suit or proceeding or
resisting any claim. The Custodian shall be vested with a lien on all property
deposited hereunder for indemnification, subject to the lien of the Trustee,
for attorneys' fees or charges of any character or nature, which may be
incurred by said Custodian by reason of disputes arising between the makers of
this escrow as to the correct interpretation of this Agreement and instructions
given to the Custodian hereunder, or otherwise, with the right of said
Custodian, regardless
1
<PAGE> 2
of the instructions aforesaid to hold the said property until and unless said
additional expenses, fees and charges shall be fully paid.
7. If the parties be in disagreement about the interpretation of
this Custodian Agreement or about the rights and obligations or the propriety
or any action contemplated by the Custodian hereunder, the Custodian may, in
its sole discretion, file an action in interpleader to resolve the said
disagreement. The Custodian shall be indemnified for all costs, including
reasonable attorneys' fees, in connection with the aforesaid interpleader
action, and shall be fully protected in suspending all or a part of its
activities under this Agreement until a final judgment in the interpleader
action is received.
8. The Custodian may consult with counsel of its own choice and
shall have full and complete authorization and protection for any action taken
or suffered by it hereunder in good faith and in accordance with the opinion of
such counsel. The Custodian shall otherwise not be liable for any mistakes of
fact or error of judgment or for any acts or omissions of any kind unless
caused by its willful misconduct or gross negligence.
9. The Custodian may resign upon thirty days' written notice to
the parties in this Agreement. If a successor Custodian is not appointed
within a thirty-day period, the Custodian may petition a court of competent
jurisdiction and name a successor.
10. The Debtor shall pay the Custodian such fees and compensation,
if any, as shall be mutually agreed.
11. The warranties, representations, covenants and agreements set
forth herein shall be continuous and shall survive the termination of this
Agreement or any part hereof.
12. This Agreement contains the entire understanding between the
parties hereto with respect to the transactions contemplated hereby, and this
Agreement supersedes in all respects all written or oral understandings and
agreements heretofore existing between the parties hereto.
13. This Agreement may not be modified or amended except by an
instrument in writing duly executed by the parties hereto. No waiver of
compliance with any provision or condition hereof and no consent provided for
herein shall be effective unless evidenced by an instrument in writing duly
executed by the party hereto sought to be charged with such waiver or consent.
14. Notices and requests required or permitted hereunder shall be
deemed to be delivered hereunder if mailed with postage prepaid or delivered,
in writing.
15. This Agreement may be executed in one or more counterparts,
and all such counterparts shall constitute one and the same instrument
16. Captions used herein are for convenience only and are not a
part of this Agreement and shall not be used in construing it.
17. The parties to this Agreement acknowledge that the performance
of their respective obligations hereunder is essential to the consummation of
the transactions contemplated by this Agreement. Each of them further
acknowledges that no party will have an adequate remedy at law if any other
party will have an adequate remedy at law if any other party fails to perform
its or their obligations hereunder. In such event, each party shall have the
right, in addition to any other rights or remedies it may have, to compel
specific performance of this Agreement.
18. The Debtor shall reimburse the Custodian for any expenses in
connection with this Agreement and the transactions contemplated hereby,
including the fees and expenses of its counsel, certified public accountants
and other experts.
19. This Agreement shall not be assignable by any of the parties
to this Agreement without the prior written consent of all other parties to
this Agreement.
20. The parties to this Agreement agreed that jurisdiction and
venue shall properly lie in Dallas County, Texas, with respect to any legal
proceedings arising from this Agreement. Such jurisdiction and venue is merely
2
<PAGE> 3
permissive; and jurisdiction and venue also shall continue to lie in any court
where jurisdiction and venue are found to be proper. The parties further agree
that the mailing of any process shall constitute valid and lawful process
against them.
21. This Agreement has been negotiated and prepared in the State
of Texas, and the validity, construction and enforcement of, and the remedies
under, this Agreement shall be governed in accordance with the laws of the
State of Texas (except that if any choice of law provision under Texas law
would result in the application of the law of a state or jurisdiction other
than the State of Texas, such provision shall not apply).
22. The invalidity or unenforceability of any particular provision
hereof shall not affect the remaining provisions of this Agreement, and this
Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
23. The rights and obligations of the parties hereunder shall
inure to the benefit of, and be binding and enforceable upon the respective
successors, assigns and transferees of either party.
24. This Custodian Agreement shall terminate and the Custodian
discharged of all responsibility hereunder at such time as the Custodian shall
receive a written affidavit signed and sworn to by a duly authorized officer of
Debtor that the Notes have been repaid in full or the Custodian has delivered
all Collateral to the Trustee as provided in paragraph 3.
25. Upon the occurrence of an Event of Default under the Notes or
the Security Documents, Custodian shall deliver to the Trustee all Collateral
in Custodian's possession.
IN WITNESS WHEREOF, the parties hereto have executed this Custodian
Agreement on the day and year first above written.
DEBTOR:
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC., a
Texas Corporation
By:
-------------------------------------
Its:
-------------------------------------
SECURED PARTY:
STERLING TRUST COMPANY
By:
-------------------------------------
Its:
-------------------------------------
CUSTODIAN:
U.S. AUTOMOBILE ACCEPTANCE CORPORATION
a Texas corporation
By:
-------------------------------------
Its:
-------------------------------------
3
<PAGE> 1
EXHIBIT 10.4
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
SUBSCRIPTION ESCROW AGREEMENT
AGREEMENT made effective as of _____________________ between U.S.
Automobile Acceptance SNP-IV, Inc., a Texas corporation (the "Company"), and
BancFirst ("Agent").
WHEREAS, Company is offering for subscription up to $40,000,000
principal amount of its Callable Asset-Backed Promissory Notes (the "Notes") on
the terms and conditions set forth in its prospectus (the "Prospectus"), a copy
of which has been furnished to Agent; and
WHEREAS, Company desires for Agent to perform the services of
depository and escrow agent with respect to subscriptions to the Company made
by prospective purchasers of the Notes (the 'Investors');
NOW, THEREFORE, the parties hereto agree as follows:
1. Agent shall deposit all subscription checks and other payments
for the Notes by Investors which it receives into an escrow account maintained
by Agent (the "Escrow Fund"). Checks shall be made payable to the Agent until
the minimum subscriptions of $100,000 have been received by the Agent.
2. The Company reserves the right to reject any subscription.
The Company shall promptly refund the subscription amount which has been
rejected to the Investor unless the subscription amount is on deposit with
Agent, in which case Agent, upon written direction of the Company, shall make
such refund, if any, as soon as Agent has collected funds on such Investor's
check.
3. Prior to the close of business on __________ (the specified
"escrow termination date"), Agent shall verify with Company whether or not the
minimum required subscriptions in Notes have been received.
4. If subscriptions for at least $100,000 in Notes (the "Minimum
Subscription Amount") have been received by Agent prior to the close of
business on the escrow termination date, the Company shall within fifteen (15)
business days advise Agent in writing that the offering was successful. Upon
receipt of such written notification, Agent shall terminate this escrow and
release such subscription proceeds plus any interest earned to the Company or
its designee at such time and in such amount as the Company shall specify.
After terminating the escrow in accordance herewith, Agent shall remit any
subscription proceeds received directly to Company. Anything herein to the
contrary notwithstanding, amounts received by the Agent in the form of checks
shall not be deemed to have been received and shall not be available for
distribution until such amounts have been collected by Agent. Amounts received
by Agent in the form of a wire transfer will be deemed to be collected funds on
the day of receipt.
5. If the Minimum Subscription Amount has not been received prior
to the close of business on the escrow termination date, all amounts received
by Agent shall be returned directly by Agent to Investors, as soon thereafter
as such amounts are collected. The Company shall provide Agent with written
directions specifying the name and address of, and the amount to be paid to,
each Investor to whom money is to be returned. Interest earned on the funds
shall be paid to the Company or its designee.
6. Agent shall have no authority or obligation to exercise
discretion as to the investment of the Escrow Fund, but will invest and
reinvest the Escrow Fund as directed by the Company, only in investments
permitted by Rule 15c2-4 under the Securities Exchange Act of 1934.
7. Agent shall be under no duty or responsibility to enforce
collection of any checks delivered to Agent hereunder. Agent shall promptly
notify and return to Company any check or instrument received from Company or
Investor upon which payment is refused, together with the related documents
which were delivered to Agent. If any check or instrument delivered to Agent
under this Agreement is uncollectible and if Agent has distributed funds
represented by such item pursuant to the terms hereof or pursuant to the
direction of the Company, Agent shall notify Company and shall deliver the
returned check or instrument to Company and Company shall immediately reimburse
Agent for the amount of funds uncollectible.
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<PAGE> 2
8. Agent shall provide all administrative and reporting services
contemplated by this Agreement to effect the purpose stated herein.
9. Agent is not a party to, nor is it bound by, any agreement out
of which this Agreement may arise including, but not limited to, the
Prospectus. Agent is not charged with notice of the existence of any agreement
out of which this Agreement may arise other than the Prospectus. Agent is not
charged with notice of the terms of the Prospectus (other than those recited
herein).
10. Agent may resign by giving ten (10) days prior written notice
to Company hereto by registered or certified mail at the address hereinbelow
set forth, and until a successor Agent is named and accepts its appointment,
Agent shall have no duty save to hold funds uninvested held pursuant hereto.
11. It is understood and agreed further, that Agent shall:
(a) Be protected in acting upon any notice, request,
certificate, approval, consent or other paper believed by it to be genuine and
to be signed by the proper party or parties;
(b) Be authorized to disregard in the sole discretion of
Agent any and all notices and warnings that may be given to it by Company
hereto or by any other person, firm, association, or corporation. Agent may,
with prior notice to Company, affording Company an opportunity to respond,
however, in its discretion obey the order, judgment, decree or levy of any
court, whether with competent jurisdiction or of any agency of the United
States or any political subdivision thereof, or of any agency of the State of
Texas or of any political subdivision thereof, and Agent is hereby authorized,
in its sole discretion, to comply with and obey any such orders, judgments,
decrees or levies. If, however, Agent, in its sole discretion and upon
consultation with counsel, concludes in good faith that it need not comply with
or obey any such orders, judgments, decrees or levies, Agent need not do so.
In any event, Agent shall not be liable by reason of such action or omission to
act to the Company or to any other person, firm, association or corporation,
even if thereafter any such order, decree, judgment or levy be reversed,
modified, annulled, set aside or vacated;
(c) Be entitled to consult with Agent's counsel and,
except for gross negligence or willful misconduct, shall not be liable for any
action taken or omitted by Agent in accordance with the opinion and advice of
such counsel whether such counsel be a member of Agent's house counsel staff or
independent counsel;
(d) Be indemnified by Company against any claim or charge
made against Agent by reason of its acting or failure to act in connection with
any of the transactions contemplated hereby, and against any loss Agent may
sustain in carrying out the terms of this Agreement, except as a result of
Agent's gross negligence or willful misconduct; and
(e) Be entitled to compensation from Company for acting
hereunder in accordance with the fee schedule attached hereto.
12. Each party to this Agreement shall be deemed conclusively to
have given and delivered any notice required to be given or delivered hereunder
if the same is in writing, signed by such party and mailed by registered and
certified mail, postage prepaid, addressed to the other party hereto, at the
address set forth below; provided, however, that the verification required of
Agent by Paragraph 3 above, shall be given orally (by telephone or in person)
by contacting or at or respectively, and then confirmed in writing if Company
so requests. Any written notices required by this Agreement shall be addressed
as follows:
If to Agent:
BancFirst
101 North Broadway
P.O. Box 26788
Oklahoma City, Oklahoma 73126-0788
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<PAGE> 3
If to Company:
U.S. Automobile Acceptance SNP-IV, Inc.
1120 N.W. 63rd, Suite G-108
Oklahoma City, Oklahoma 73116
13. This Agreement expressly and exclusively sets forth the duties
of Agent with respect to any and all matters pertinent hereto and no implied
duties or obligations shall be read into this Agreement against Agent.
14. Unless and until the Escrow is delivered to Company, it is
specifically recognized and agreed that Company shall not have any right, title
or interest in such funds; it being the intention of the parties hereto that
the Escrow Fund shall not be subject to claims against Company or any of its
affiliates unless and until the minimum subscription amount is achieved and
delivery of the funds thereof is made, as aforesaid, and the escrow account
hereunder is ended.
15. This Agreement is being made in and is intended to be
constructed according to the laws of the State of Texas. It shall inure to and
be binding upon the parties hereto, their successors and assigns the terms of
this Agreement shall commence with the date hereof and shall continue until the
offering of the minimum subscription amount is achieved or fails to be achieved
by escrow termination date, and the Escrow Fund is disposed under the provision
of this Agreement.
16. Agent shall deposit all funds received in insured accounts
such that each Investor which deposits funds in insured to the maximum amount
allowed under FDIC regulations, irrespective of the aggregate amount of funds
received from all Investors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by duly authorized representatives as of the
date first above written.
COMPANY:
U.S. Automobile Acceptance SNP-IV, Inc.
By:
-------------------------------------
Its:
-------------------------------------
AGENT:
BancFirst
By:
-------------------------------------
Its:
-------------------------------------
3
<PAGE> 1
EXHIBIT 10.5
BROKER-DEALER SELLING AGREEMENT
FOR THE SALE OF
CALLABLE ASSET-BACKED PROMISSORY NOTES
ISSUED BY U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
By our signature to this Broker-Dealer Selling Agreement, we agree
with U.S. Automobile Acceptance SNP-IV, Inc. (the "Issuer") to the following
terms governing the sale of the Callable Asset-Backed Promissory Notes (the
"Notes") which are issued on the terms and conditions described in the
Prospectus filed with the Securities and Exchange Commission in connection with
the Issuer's Registration Statement, as amended. It is intended that the
offering and the sale of the Notes will be made pursuant to and in compliance
with the Securities Act of 1933 (the "Act"), and in compliance with the By-Laws
of the National Association of Securities Dealers, Inc. (the "NASD").
1. We agree to act as a Broker-Dealer in connection with the offering of
the Notes of the Issuer.
2. We agree to solicit subscriptions for the purchase of Notes from
qualified persons on the terms and conditions set forth herein and in
the Prospectus. In connection therewith, we agree to comply with the
terms and conditions of this Agreement and we agree to use our best
efforts to solicit subscriptions for the Notes from purchasers
acceptable to the Issuer.
3. We will obtain from each purchaser a properly executed Subscription
Agreement accompanied by Purchaser's check in full payment of
purchaser's subscription, which shall be supplied to the Issuer for
review and acceptance or rejection. Checks shall be transmitted to the
Escrow Agent by noon of the next business day following receipt. We
will make every reasonable effort to be assured that each person who
may be offered or sold Notes meets the suitability standards set forth
in the Prospectus and that an investment in said Notes is appropriate
to such person's investment objectives and financial situation. In
connection therewith, we will obtain and preserve information from
each investor which indicates that the investor meets such suitability
standards and shall, upon request by the Issuer, make copies of such
information available to the Issuer.
4. We understand that the Issuer may reject any subscription for any
reason, and we agree that any such rejection of a subscription
obtained by us or on our account shall be deemed not to be a sale made
by us or on our account. We acknowledge that subscribers checks shall
be made payable to the Issuer's escrow agent, Texas Commerce Bank
National Association. Subscriber's funds will be held in escrow and
invested in compliance with SEC Rule 15c-2-4. We agree to comply with
NASD Net Capital Rules pertaining to the handling of clients funds and
applicable notices to members, including 93-30 and 92-72.
5. We understand that we are not authorized to act as agent for the
Issuer in connection with any transaction, and we agree that we will
not act as agent or purport to do so. Any act to be performed by us
with respect to the offering of Notes pursuant hereto shall be as an
independent contractor.
6. Subject to the terms and conditions contained in this Agreement, we
will be paid for Notes sold for which we have acted as a Broker-Dealer
pursuant to this Agreement on a commission only basis, with such
commission to be _________% of the gross amount invested. We will bear
the cost of our own expenses incurred in the solicitation of sales.
Commissions will be payable within 10 days of the Issuer's receipt of
funds, except that no commissions or fees will be paid until the
minimum subscription amount of $100,000 is achieved. We acknowledge
that no commissions shall be due and owing to us unless and until all
of the terms and conditions set forth herein, in the Prospectus, and
in the subscription documents have been met. Further, we understand
that a minimum subscription amount of $100,000 has been established
and must be achieved before funds will be released to the Issuer.
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<PAGE> 2
7. We hereby acknowledge receipt of the Prospectus for the offering of
Callable Asset-Backed Promissory Notes.
8. The Issuer will furnish us with a copy of any amendment or supplement
to the Prospectus.
9. We confirm that we are appropriately registered as a broker-dealer
with the Securities and Exchange Commission and in all states in which
we will conduct business and are a member in good standing of the
NASD. We also agree not to solicit subscriptions for the Notes that
will result in a violation of the securities laws of the United
States, or of any state, or any rule or regulation thereunder, or of
any rules of any securities exchange. We agree to comply with all
applicable NASD Rules of Fair Practice, including Article III,
Sections 8, 24, 25 and 36 thereof.
10. We represent that there is not now pending or threatened against us
any action or proceeding of which we have been advised, either in any
court of competent jurisdiction, before the Securities and Exchange
Commission or any state securities commission concerning activities as
a broker or dealer, nor have we been named as a "cause" in any such
action or proceeding.
11. In the event any action or proceeding of the type referred to in
Paragraph 10 above shall be instituted or threatened against us at any
time, or in the event there shall be filed by or against us in any
court pursuant to any federal, state, local or municipal statute a
petition in bankruptcy or insolvency or for reorganization or for the
appointment of a receiver or trustee of assets, or if we make an
assignment for the benefit of creditors, the Issuer shall have the
right on three days' written notice to terminate this Agreement.
12. Upon request, the Issuer will inform us as to the states in which the
Issuer has been advised by counsel that the Notes have been qualified
for sale under the respective state securities laws, but the Issuer
does not assume any responsibility or obligation as to our right to
sell the Notes in any state. We understand and agree that under no
circumstances will we engage in any activities hereunder in any
jurisdiction (a) in which the Issuer has not informed us that the
Notes are qualified for sale under the applicable securities laws, or
(b) in which we may not lawfully so engage.
13. We confirm that our commitment to use our best efforts to solicit
subscriptions for the Notes will not result in a violation of the
securities laws of the United States, including but not limited to the
Act or any rule or regulation thereunder, or the securities laws of
any state in which we will conduct business and the rules and
regulations thereunder, or of any rules of any securities exchange to
which we are subject or of any restriction imposed upon us by any such
exchange or governmental authority and agree to indemnify the Issuer
for any and all damages and liabilities resulting from the same.
14. We represent that in connection with the offering:
A. We will comply in all respects with 1) the provisions of
this Broker-Dealer Agreement, and 2) the Issuer's policies
and procedures for firms engaging in die solicitation of
sales of the Notes;
B. We will comply with any applicable limitations in the manner
of offering as required by the Act and applicable state
securities laws, including without limitation, the
requirements of SEC Rule 15c2-8 with respect to delivery of
prospectuses;
C. Prior to making any sale, we will have reasonable grounds to
believe, after making reasonable inquiry, that each
purchaser meets the requirements of the Act, the NASD and
applicable state securities laws as to the suitability of
the investment for such purchaser;
D. No owner, partner, director, or officer of our Broker-Dealer
firm has within the last five years been subject to any of
the following administrative or judicial actions (by the
Securities and Exchange Commission or any State Securities
Commission);
1. Registration Stop Order (Issuance of Securities);
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<PAGE> 3
2. Securities related felony conviction;
3. Securities related administrative order;
4. Any administrative order involving fraud or
deceit;
5. Securities related injunction.
E. We have no current effective administrative order revoking a
securities exemptions or qualification; and,
F. We have not been suspended or expelled by the NASD.
G. We agree to indemnify and hold the Issuer, its officers,
directors and employees, harmless from any costs associated
with claims arising or alleged to arise out of a breach of
the foregoing representations.
15. Subject to the conditions set forth below, the Issuer agrees to
indemnify and hold us harmless, and each person, if any, who controls,
or is employed by, us within the meaning of Section 15 of the
Securities Act of 1933, as follows:
(1) Against any loss, liability, claim, damage and expense
arising out of (including but not limited to expenses
reasonably incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any
claim whatsoever based upon) any untrue or alleged untrue
statement of a material fact contained in the Prospectus (as
amended and supplemented), or the omission or alleged
omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not
misleading; and
(2) Against any loss, liability, claim, damage and expense to
the extent of the aggregate amount paid in settlement of any
litigation, commenced or threatened, or of any claim based
upon any untrue statement or omission or any alleged untrue
statement or omission of a material fact in the Prospectus,
as amended and supplemented (including but not limited to
expenses reasonably incurred in investigating, preparing or
defending against any such litigation or claim), if such
settlement is effected with the Issuer's written consent.
In no case shall the Issuer be liable with respect to claims made
against us unless the Issuer shall be notified, by letter or by
telegram confirmed by letter, of any action commenced against us
within a reasonable time after we shall have been served with a
summons or other legal process giving information as to the nature and
basis of the claim, but failure to so notify the Issuer shall not
relieve the Issuer from any liability which it shall have otherwise
than on account of this indemnity agreement. The Issuer shall be
entitled to participate at its own expense in the defense, or if it so
elects within a reasonable time after receipt of such notice, to
assume the defense of any suit brought to enforce any such claim, but
if it elects to assume the defense, such defense shall be conducted by
counsel chosen by it and satisfactory to it. If the Issuer elects to
assume the defense of any such suit and retain counsel, we shall bear
the fees and expenses of any additional counsel thereafter retained by
us.
16. This Agreement may be terminated by either party at any tine by
written notice to that effect sent to the other party at the address
shown in this Agreement. An attempt to assign any rights and
obligations under this Agreement shall constitute automatic
termination of this Agreement.
17. The representations and warranties set forth in this Agreement will
remain in full force and effect, regardless of any investigation made
by or on behalf of either of us and will survive termination of this
Agreement and the delivery of and payment for the Notes.
18. Any notice from the Issuer to us at the address set forth below shall
be deemed to have been duly given if mailed, or if communicated by
telegraph or telephone and subsequently confirmed in writing to us.
3
<PAGE> 4
19. This Agreement may be modified only by a writing signed by the parties
hereto.
20. We hereby further agree that in the event that a dispute arises
between the undersigned broker-dealer and the Issuer or any of its
officers, directors, employees, agents, attorneys or accountants,
arising out of, in connection with or as a result of the execution of
this Agreement or as a result of any Subscription Agreement tendered
by any subscriber to Notes, we hereby expressly agree that such
disputes shall be resolved through arbitration rather than litigation
and agree to submit such disputes for resolution to the NASD in
Dallas, Texas, within five (5) days after receiving a written request
from any of the aforesaid parties to do so. We understand that our
failure to submit any dispute to arbitration as requested may result
in the commencement of an arbitration proceeding against us. We
further agree that any hearing scheduled after an arbitration
proceeding is initiated by either we, the undersigned broker-dealer,
or any of the aforesaid parties, shall take place in Dallas County,
Texas. We acknowledge that the result of the arbitration proceeding
shall be final and binding on all of the parties to the proceeding,
and by agreeing to arbitration we are waiving our right to seek
remedies in Court.
We have indicated our confirmation of this Agreement by executing and delivering
it to the Issuer in duplicate. If accepted, the Issuer will execute this
Agreement, whereupon it shall constitute a binding contract between us.
Dated this ___ day of ____________________, 199___.
-----------------------------------------
Broker-Dealer (Please Print)
By:
--------------------------------------
Signature
Phone #
-------------------------- -----------------------------------------
(Print Name)
-----------------------------------------
Address
-----------------------------------------
City, State, Zip Code
Copies of Investor Correspondence Commissions should be mailed to:
should be mailed to:
- --------------------------------- -----------------------------------------
at the above address at the above address
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
By:
--------------------------------------
Title:
-----------------------------------
Date Accepted:
---------------------------
4
<PAGE> 1
EXHIBIT 10.7
U.S. AUTOMOBILE ACCEPTANCE CORPORATION
CONTINUING PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT, dated as of __________________________ (the
"Agreement"), is made and entered into by and between U.S. AUTOMOBILE ACCEPTANCE
SNP-IV, INC. (the "Purchaser"), and ___________________________________________
(the "Seller"). The Purchaser is a corporation with its principal place of
business at 1120 NW 63rd, Suite G-108, Oklahoma City, OK 73116. The Seller's
principal place of business is at _____________________________________________.
Subject to the terms hereof, the Seller agrees to convey, and the Purchaser
agrees to acquire, the new and used automobile and light-duty truck installment
sale contracts and installment loan agreements now, previously and hereafter
acquired, (collectively, the "Contracts").
In consideration of the premises and the mutual agreements hereinafter set
forth, the receipt and sufficiency of which are hereby acknowledged, the
Purchaser and the Seller agree as follows:
ARTICLE 1
DEFINITIONS
Whenever used herein, unless the context otherwise requires the following words
and phrases have the following meanings:
SECTION 1.1 AMOUNT FINANCED shall mean as to any Contract the amount financed
under the Contract toward the purchase price of the Financed Vehicle and related
closing costs as shown in the contract documentation evidencing such Contract
and as disclosed for Truth-In-Lending purposes.
SECTION 1.2 AGREEMENT shall mean this Purchase and Sale Agreement and all
amendments hereof and supplements hereto.
SECTION 1.3 ANNUAL PERCENTAGE RATE OR APR shall mean as to any Contract
and any time, the contractual rate of interest then being borne by such
Contract, as determined therein.
SECTION 1.4 CLOSING DATE shall mean the dates as the Seller and the Purchaser
shall agree.
SECTION 1.5 COMPUTER TAPE shall mean the computer tape, floppy disks and
print-outs generated by the Seller which provided information relating to the
Contracts.
SECTION 1.6 CONTRACT shall mean the automobile and light-duty truck installment
sale contracts described in the Contract Schedule. The Contracts include,
without limitation, all related security interests and any rights to receive
payments which are received pursuant thereto from and after the purchase Date.
SECTION 1.7 CONTRACT FILE shall mean as to any Contract (a) the original copy of
the Contract, (b) the original certificate of title for the related Financed
Vehicle with the first lien therein in favor of the Seller noted thereon, (c)
any extension, modification or waiver agreement(s) relating to such Contract,
and (d) all documents evidencing the existence of any Insurance Policies.
SECTION 1.8 PURCHASE DATE shall mean the date the contract is purchased by the
purchaser or such other date as the purchaser and seller shall agree.
SECTION 1.9 FINANCED VEHICLE shall mean the Motor Vehicle, together with all
accessions thereto, securing an Obligor's indebtedness under a Contract.
SECTION 1.10 INSURANCE POLICIES shall mean all physical damage, comprehensive
and collision, fire and theft insurance policies maintained by the Obligors with
respect to the Financed Vehicles, the vendor's single interest insurance policy
providing coverage upon repossession of a Financed Vehicle, and any credit life
and disability insurance maintained by or on behalf of the Obligors and
benefiting the holders of the Contracts.
SECTION 1.11 MOTOR VEHICLE shall mean a used automobile or light-duty truck.
SECTION 1.12 OBLIGOR shall mean each person who is indebted under, or has
guaranteed, a Contract, or who has acquired a Financed Vehicle subject to a
Contract.
SECTION 1.13 PERSON shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, incorporated organization, or
government or any agency or political subdivision thereof.
SECTION 1.14 UCC shall mean the Uniform Commercial Code as now in effect in the
relevant jurisdiction or as hereafter amended.
ARTICLE 2
SALE AND CONVEYANCE OF CONTRACTS; POSSESSION OF CONTRACT FILES
SECTION 2.1 SALE AND CONVEYANCE OF CONTRACTS(a) The Seller, concurrently with
the execution and delivery hereof, does hereby sell, transfer, assign, set over
and convey to the Purchaser all right, title and interest of the Seller in, to
and under: (i) the Contracts, including all payments of principal and interest,
late charges and other similar payments due thereon and accruing after the
Purchase Date; (ii) The security interests created by the Contracts, and other
rights of the Seller arising out of such security interests, in the Financed
Vehicles; (iii) all Insurance Policies relating to the Financed Vehicles or the
Contracts; (iv) all documents and information contained in the Contract Files;
and (v) all proceeds derived from any of the foregoing. (b) At the request of
the Purchaser, the Seller will, at the Seller's expense, promptly: (i) take or
cause to be taken any further action necessary or appropriate to effect or
perfect the sale and conveyance made hereby; (ii) execute or cause to be
executed such documents and instruments as are necessary or appropriate to
effect or perfect the sale and conveyance made hereby; and (iii) obtain from
third parties all documents, instruments, waivers and releases necessary, and
to take all other action requested by the Purchaser, to facilitate the sale and
conveyance made hereby.
SECTION 2.2 PURCHASE PRICE; PAYMENTS. (a) The purchase price for the Contracts
shall be the amount set forth on the purchaser's funding commitment. Upon
satisfaction of the conditions in the commitment, the Purchaser shall pay the
Purchase Price to the Seller. (b) The Purchaser shall be entitled to all
payments on the Contracts received on and after the Purchase Date, including
uncollected but earned interest.
SECTION 2.3. INDEMNITY BY THE SELLER.
The Seller shall protect, defend, indemnify and hold the Purchaser and its
assigns and their attorneys, accountants, employees, officers and directors
harmless from and against all losses, liabilities, damages, judgments, claims,
counterclaims, demands, actions, proceedings, costs and expenses (including
reasonable attorneys' fees) of every kind and character resulting from or
relating to or arising out of (a) the inaccuracy, nonfulfillment or breach of
any representation, warranty, covenant or agreement made by the Seller herein,
or (b) any legal action, including any counterclaim, to the extent it is based
upon alleged facts that, if true, would constitute a breach of any
representation, warranty, covenant, of violation of a state of federal consumer
protection law, or agreement made by the Seller herein, or (c) any actions or
omissions of the Seller or any employee or agent of the Seller, or any reckless
or willful misconduct with respect to any of the Contracts or the Financed
Vehicles.
ARTICLE 3
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller hereby
represents and warrants to, and agrees with, the Purchaser as of the Closing
Date as follows:
ORGANIZATION AND GOOD STANDING. The Seller has the power to own
its assets and to transact the business in which it is currently engaged. The
Seller is duly qualified to do business and is in good standing in each
jurisdiction in which the character of the business transacted.
<PAGE> 2
AUTHORIZATION; BINDING OBLIGATIONS. The Seller has the power and authority to
make, execute, deliver and perform this Agreement and effect all of the
transactions contemplated to be performed by it under this Agreement, and has
taken all necessary action to authorize the execution, delivery and performance
of this Agreement.
NO VIOLATIONS. The execution, delivery and performance of this Agreement by the
Seller will not violate any provision of any existing law or regulation or any
order or decree of any court of competent jurisdiction applicable to the Seller
or the charter or bylaws of the Seller, or constitute a material breach of any
mortgage, indenture, loan agreement or other contract to which the seller is a
party or by which the Seller may be bound.
LITIGATION. No litigation or administrative proceeding of or before any court,
tribunal or governmental body is currently pending or, to the knowledge of the
Seller, threatened against the Seller or any of its properties, including
specifically the Contracts.
SECTION 3.2. WARRANTIES AS TO EACH CONTRACT. The Seller hereby makes the
following warranties as to each Contract conveyed by it to the Purchaser
hereunder:
CHARACTERISTICS OF CONTRACTS. The Contract (i) has been originated by the Seller
in the ordinary course of the Seller's business and has been fully and properly
executed by the parties thereto, (ii) is secured by a valid, subsisting, and
enforceable first priority security interest in favor of the Seller in the
Financed Vehicle, which security interest is assignable by the Seller to the
Purchaser, (iii) contains customary and enforceable provisions such as to render
the rights and remedies of the holder thereof adequate for realization against
the collateral for the benefits of the security provided thereby, (iv) provides
for payments which fully amortize the Amount Financed over the original term and
provide interest at the related APR over the term of the loan, (v) provides for,
in the event the Contract is prepaid, a prepayment that fully prepays the
outstanding principal balance thereof and includes accrued and unpaid interest
at least through the date of prepayment in an amount equal to the APR and (vi)
has not, as of the Purchase Date, been modified as a result of the Soldiers' and
Sailors' Civil Relief Act of 1940, as amended.
CONTRACT SCHEDULE. The information set forth in the Contract Schedule with
respect to such Contract was true and correct as of the opening of business on
the Closing Date, and the Closing Date principal balance and the APR of each
such Contract have been accurately and correctly calculated.
COMPLIANCE WITH LAW. The Contract, and the sale of the related Financed Vehicle,
complied with at the time it was originated or made, and will comply as of the
Purchase Date, in all respects with all requirements of applicable federal,
state and local laws, and regulations thereunder, including without limitation,
the Federal Truth-In-Lending Act, the Equal Credit Opportunity Act, the Fair
Credit Billing Act, the Fair Credit Reporting Act, the Fair Debt Collection
Practices Act, Federal Reserve Board Regulations B, Z and AA, any state
adaptations of the National Consumer Credit Protection Act, any state
adaptations of the Uniform Consumer Credit Code, and, to the best of Seller's
information and belief, any other applicable consumer credit, equal opportunity,
and disclosure laws.
BINDING OBLIGATION. The Contract constitutes the genuine, bona-fide, valid, and
binding obligation of the Obligor, enforceable by the holder thereof in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally and the application of equitable principles
(regardless of whether such enforcement is considered in a proceeding or in
equity or at law). No Obligor has filed or had filed against it any protection
for relief, rearrangement of its debts or other protection from its creditors
under any state or federal bankruptcy or insolvency laws.
CONTRACTS IN FORCE. The Contract has not been satisfied, subordinated, waived,
restricted, rescinded or held to be invalid or unenforceable, and the Financed
Vehicle has not been released from the lien granted by the Contract in whole or
in part.
NO AMENDMENT OR WAIVER. No provision of the Contract has been amended, waived,
altered or modified in any respect, except pursuant to a document, instrument or
writing included in the Contract File and reflected in the Electronic Ledger and
no such amendment, waiver, alteration or modification causes such Contract not
to conform to the other warranties contained in this Section, nor renders it
invalid or unenforceable.
NO DEFENSES. The Contract is not subject to any right of rescission, setoff,
counterclaim or defense including the defense of usury, and the operation of any
of the terms of the Contract, or the exercise of any right thereunder, will not
render the Contract unenforceable in whole or in part or subject to any right of
rescission, right of cancellation, setoff, counterclaim or defense, including
the defense of usury and no such right of rescission, right of cancellation,
setoff, counterclaim or defense has been asserted with respect thereto. The
interest rate charged in each Contract is lawful in the jurisdiction governing
the transactions.
NO LIENS. There are no undisclosed liens or claims, including liens for work,
labor, materials or unpaid state or federal taxes relating to the Financed
Vehicle, that are or may be liens prior to, or equal to or coordinate with, the
lien granted by the Contract.
GOOD TITLE. The Contract has not been sold, assigned, hypothecated, pledged or
otherwise conveyed by the Seller to any person other than the Purchaser, and,
immediately prior to the transfer and assignment herein contemplated, the Seller
(i) had good and marketable title to the Contract free and clear of any
encumbrance, equity, lien, pledge, charge, claim, security interest or other
right or title of any third party, (ii) was the sole owner thereof, and (iii)
had full right, power and authority to transfer and assign the Contract to the
Purchaser without lien, claim or interest of any kind by any Person.
Immediately upon the transfer and assignment of the Contract to the Purchaser,
the Purchaser shall have good and marketable title to the Contract, free and
clear of any encumbrance, equity, lien, pledge, charge, claim, security interest
or other right or title of any other Person and the transfer will be valid and
enforceable under the UCC.
LAWFUL ASSIGNMENT. The Contract has not been originated in, and is not subject
to the laws of, any jurisdiction under which the sale, transfer and assignment
of such Contract hereunder or pursuant to which transfers of the Contracts are
unlawful, void or voidable.
ALL FILINGS MADE. All filings, including UCC filings, necessary in any
jurisdiction to give the Purchaser a first priority perfected security interest
(or ownership interest) in the Contract have been made.
ONE ORIGINAL. There is only one original executed Contract, which has been
conveyed by the Seller to the Purchaser.
OBLIGATIONS; NO IMPAIRMENT. The Seller has fulfilled all obligations on its part
to be fulfilled under, or in connection with, the Contract in a timely manner
and has done nothing to impair the rights of the Purchaser in the Contract or
the proceeds thereof.
NO FRAUD OR MISREPRESENTATIONS. The Contract was originated without any conduct
constituting fraud or misrepresentation, failure of consideration, or forgery or
alteration.
POSSESSION. Immediately after the Purchase Date, the Purchaser will have
possession of the original Contract and the related Contract File, and the
original title to the automobile securing the Contract, and there are and there
will be no undisclosed custodial agreements in effect adversely affecting the
right or ability of the Seller to make, or cause to be made, any delivery
required hereunder.
TAXES. All ad valorem or excise taxes of any nature or description whatsoever
and all recording fees and title transfer costs relating to the Contracts have
been paid in full.
INFORMATION. All financial statements, tax returns, journals, ledgers, customer
applications, bookout sheets, and all other information furnished to the
Purchaser in connection with the purchase of the Contracts was or will be at the
time furnished true and correct in all respects, and the Seller has not made any
untrue statement of material fact or omitted to state any material fact to the
Purchaser or any of its officers and agents in connection with the purchase by
the Purchaser of the Contracts.
DOWN PAYMENT. The seller acknowledges that the amount of the down payment shown
on the contract is material information upon which the purchaser has relied in
negotiating the amount to be paid to the seller, and seller therefore represents
and warrants that the down payment reflected on the contract has actually been
paid, and is not subject to any set-off, refund, or rebate.
SECTION 3.3. OTHER WARRANTIES AS TO THE CONTRACTS. The Seller represents and
warrants that:
AMOUNTS. The aggregate future payments, both principal and interest, of the
Contract/s as of the Purchase Date were equal to the amount set forth in the
contract/s.
CHARACTERISTICS. The Contracts had the following characteristics in the as of
the Purchase Date: (i) each Contract is a retail installment sales contract for
the purposes of used Financed Vehicle statutes; (ii) each Contract was
originated in the State of Oklahoma; (iii) all Financed Vehicles securing the
Contracts have never been titled as salvaged, reconditioned, reconstructed, or
flood damaged Motor Vehicles and (iv) the mileage of each vehicle is as
represented in the purchase agreements.
<PAGE> 3
MARKING RECORDS. By the Closing Date, the Seller will have caused the portions
of the Electronic Ledger relating to the Contracts to be clearly an
unambiguously marked to show that such Contracts are owned by the Purchaser and,
upon the Purchaser's request, shall provide the Purchaser with evidence of such
marking.
NO ASSIGNMENT. The Seller has not taken any action to convey any right to any
Person that would result in such Person having a right to payments received
under the Insurance Policies or payments due under the Contract that is senior
to, or equal with, that of the Purchaser.
SECTION 3.4 MISREPRESENTATIONS; BREACH OF WARRANTIES AND/OR COVENANTS. In the
event of seller misrepresentation, breach of warranties or covenants of the
seller, seller will immediately upon demand by the purchaser, repurchase any
contracts affected by said misrepresentation or breach. The repurchase price
shall be the principal amount owed on each affected contract, plus accrued
interest, cost of repossession, legal costs, and any other cost or damages
incurred by the purchaser related to said misrepresentation or breach.
ARTICLE 4
OBLIGOR PAYMENT DEFAULTS; FULL AND LIMITED RECOURSE
See Attached - Insert
ARTICLE 5
MISCELLANEOUS PROVISIONS
SECTION 5.1. AMENDMENT. This Agreement may be amended from time to time by the
Seller and the Purchaser by written agreement signed by the Seller and the
Purchaser.
SECTION 5.2. DISPUTES. In the event of a dispute regarding the breach of any
representations or warranty, or the performance of this agreement, and if the
Seller and the Purchaser cannot otherwise agree, the matter shall be submitted
to binding arbitration under the International Rules of the American Arbitration
Association, before an independent qualified expert by both parties in Oklahoma
City, Oklahoma.
SECTION 5.3. FURTHER ASSURANCES. In order to facilitate enforcement of the
Investor's rights hereunder with respect to the Contracts and the Financed
Vehicles, the Seller shall, promptly after the request by the Purchaser or its
assigns, and at the Seller's expense, do and perform or cause to be done and
performed every reasonable act and thing necessary or advisable to carry out to
the intent of this Agreement (including, without limitation, that the Purchaser
has the right and ability to enforce payment and performance of the Contracts.)
The Seller hereby grants a limited power of attorney to the Purchaser for the
specific purpose of exercising all rights and remedies the Seller would have
with respect to the Contracts and the Financed Vehicles securing them, but for
sale of the Contracts to the Purchaser.
SECTION 5.4. COUNTERPARTS. For the purpose of facilitating the execution of this
Agreement as herein provided and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and such counterparts shall
constitute but one and the same instrument
SECTION 5.5. SURVIVAL. The obligations of the Seller and the Purchaser under
this Agreement and the representations and warranties in Article III shall
survive the sale of the Contracts to the Purchaser.
SECTION 5.6. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Oklahoma and the obligations, rights and remedies of
the parties hereunder shall be determined in accordance with such laws without
giving effect to the conflict of laws principles thereof. This Agreement is
performable in Dallas County, Texas and Oklahoma County, Oklahoma which is
proper venue for all legal proceedings.
SECTION 5.7. NOTICES. All demands, notices and communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered personally,
telecopied (with receipt confirmed by telephone call to the person, or a member
of the department, specified for attention) or mailed by first class mail,
postage prepaid as follows:
IF TO PURCHASER:
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
1120 NW 63RD #G-108
OKLAHOMA CITY, OKLAHOMA 73116
<TABLE>
<S> <C>
IF TO SELLER:
---------------------------------------------------
---------------------------------------------------
--------------------------------------------------- or to such other address as may hereafter be furnished by
either party to the other.
</TABLE>
SECTION 5.8. SEVERABILITY OF PROVISIONS. If any one or more of the covenants,
agreements, provisions or terms of this Agreement shall be held invalid for any
reason whatsoever, then such covenants, agreements, provisions or terms shall be
deemed severable from the remaining covenants, agreements, provisions or terms
of this Agreement and shall in no way affect the validity or enforceability of
the other provisions of this Agreement.
SECTION 5.9. NO PARTNERSHIP. Nothing herein contained shall be deemed or
construed to create a co-partnership or joint venture between the parties
hereto.
SECTION 6.0. SUCCESSOR AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the Seller and the Purchaser and their respective successors
and assigns.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused their names to be
signed hereto by their respective officers thereunto duly authorized as of the
day and year first above written.
<TABLE>
<S> <C>
SELLER: BY:
------------------------------------------- ----------------------------------------------
NAME: TITLE:
------------------------------------------- ----------------------------------------------
PURCHASER:U.S. AUTOMOBILE ACCEPTANCE SNP IV, INC. BY:
----------------------------------------------
NAME: TITLE:
------------------------------------------- ----------------------------------------------
</TABLE>
<PAGE> 4
FORM OF BILL OF SALE
____________________________________________, (the "Seller") hereby
absolutely sells, transfers, assigns, sets-over and conveys to U. S. AUTOMOBILE
ACCEPTANCE SNP-IV, INC., the ("Purchaser"), all rights, title, and interest in
and to:
(a) the Contracts, including all payment of principal and
interest, late charges and other similar payments due now,
previously, and hereafter acquired thereon and accruing after
the Purchase Date, and all payments on the Contracts received
prior to the Purchase Date which have not been applied to the
amount due on the Contracts as of the Purchase Date;
(b) the security interests created by the Contracts, and other
rights of the Seller rising out of such security interests, in
the Financed Vehicles;
(c) all Insurance Policies relating to the Financed Vehicles or
the Contracts;
(d) all documents and information contained in the Contract Files;
(e) all proceeds derived from any of the foregoing.
Terms not defined herein have the meanings assigned to them in the Sale
and Purchase Agreement, dated between the Seller and the Purchaser.
This Bill of Sale shall be governed by the laws of the United States
without regard to conflicts of laws rules thereof.
DATED: ____________________________
By:________________________________
Name_______________________________
Title:_____________________________
<PAGE> 5
RESOLUTIONS
I, SECRETARY OF ______________________________________________CERTIFY THAT
THE FOLLOWING RESOLUTIONS HAVE BEEN DULY ADOPTED BY THE BOARD OF DIRECTORS OF
__________________________________ AND THAT SUCH RESOLUTIONS HAVE NOT BEEN
AMENDED OR RESCINDED AS OF THIS DATE.
"Resolved that the officers of the corporations are hereby authorize to
execute such documents and take such actions as may be necessary to complete the
sale of the contracts to that certain Sale and Purchase Agreement dated
___________________ by and between this corporation and U.S. AUTOMOBILE
ACCEPTANCE SNP-IV, INC.
Signed this _____ day of ____________, 199_.
-------------------------------------------
SECRETARY
<PAGE> 6
INCUMBENCY CERTIFICATE
DATE:_______________________
This will certify that __________________________________, whose signature
appears on the Sale and Purchase Agreement dated ______________________, is the
_______________________ of _____________________________________________ and is
authorized and empowered to execute such Sale and Purchase Agreement on behalf
of such corporation.
----------------------------------
Signature/Corporate Officer
----------------------------------
Printed Name/Title
This certificate is furnished as Secretary of .
--------------------------------
----------------------------------
Signature/Corporate Officer
----------------------------------
Printed Name/Title
<PAGE> 7
INSERT OPTIONS TO CONTINUING PURCHASE AND SALE AGREEMENT - ARTICLE 4
1. OBLIGOR PAYMENT DEFAULTS; FULL RECOURSE; REPURCHASE AGREEMENT
SECTION 4.1 FULL RECOURSE PERIOD. Cash Repurchase of
Defaulting Contracts. In the event any Obligor defaults on a Contract
prior to or on the due date of _____ monthly installment(s), Seller
agrees to immediately repurchase such Contract or Contracts. Payment to
Purchaser for repurchase of Contracts will be made within ten (10)
business days following the default. Repurchased Contracts will be paid
for in an amount that will cause no loss of principal or interest to
the purchasers.
SECTION 4.2 DEFAULT. The Obligor shall be in default on a
Contract if he fails to perform any payment obligation, fails to obtain
or maintain property damage insurance, or commits any action or fails
to take any action that would give rise to the right of repossession
under the Contract.
SECTION 4.3 RESALE OF REPOSSESSION. Seller agrees to offer for
resale, at Purchaser's option, vehicles that Purchaser has repossessed
that were collateral on Contracts purchased from Seller. Seller agrees
to use reasonable efforts to sell the vehicles on Contracts that will
be acceptable to Purchaser.
2. OBLIGOR DEFAULTS; DELINQUENCIES; REPLACEMENT OF CONTRACTS
SECTION 4.1 CASH REPURCHASE OR REPLACEMENT OF DELINQUENT
CONTRACTS. In the event any of the Contracts become delinquent for a
period of thirty (30) days or more, Seller agrees to immediately
repurchase or replace such Contract or Contracts, with a Contract or
Contracts, acceptable to Purchaser, secured by title to automobiles or
light trucks, with the same net outstanding principal balance, the same
aggregate interest rate and similar remaining payment terms and number
of payments die so as to cause no loss of principal or interest to
Purchaser. If Contracts are to be repurchased, this event will occur
within ten (10) business days following the thirty (30) calendar days
of delinquency. Repurchased Contracts will be paid for in an amount
that will cause no loss of principal or interest to the purchasers. The
replacement Contracts shall be a similar instrument of like amount with
similar provisions secured by collateral of equal or greater fair
market value and shall be replaced within ten (10) business days
following the thirtieth (30) calendar day of delinquency. A cash
adjustment will be made for replacement Contract differences at the
time of the change. Replacement Contracts will be considered the same
as a newly purchased Contract and will be treated accordingly if the
Contract becomes delinquent.
3. OBLIGOR DEFAULTS; FULL AND LIMITED RECOURSE; REPLACEMENT OF CONTRACTS
SECTION 4.1 CLASS A VEHICLES DEFINED. A vehicles qualifies as
a Class A vehicle if, at the Closing Date as defined in Section 1.4,
the vehicle:
(a) is a passenger car and
(i) has less than 50,000 actual miles, and
(ii) the difference between the current calendar year and the
model year as stated on the certificate of title is 6 or less.
(b) is a truck and
(i) has less than 60,000 actual miles, and
(ii) the difference between the current calendar year and the
model year as stated on the certificate of title is 6 or less.
SECTION 4.2 CLASS B VEHICLES DEFINED. Any vehicle that does
not qualify as a Class A vehicle is a Class B vehicle.
<PAGE> 8
SECTION 4.3 RECOURSE ON DEFAULTING CLASS A CONTRACTS. On any
Contract on a Class A vehicle that goes into default at any time prior
to or on the due date of the _____ monthly installment, or before the
end of ____ months form the Closing date on Contracts that are not
payable monthly, the seller agrees to repurchase the Contract. The
repurchase price shall be the amount paid to Seller by Purchaser,
reduced by any principal reduction made by the debtor prior to default,
and increased by any unpaid interest that has accrued prior to default.
Seller also agrees to reimburse Purchaser for any attorney fees and
court costs incurred by Purchaser in obtaining possession of the
vehicle. Default, for purpose of this Article 4, shall include any
conditions of default stated in the retail installment contract, and
(1) any payment default, (2) any vehicle that is wrecked, (3) any
bankruptcy filing by the debtor, (4) any skip that can not be located,
and (5) any vehicle deemed by Purchaser, in its sole discretion, to be
inoperable or in unsatisfactory mechanical and operating condition.
SECTION 4.4 RECOURSE ON DEFAULTING CLASS B CONTRACTS. (A) On
any Contract on a Class B vehicle that goes into default at any time
prior to on the due day of the ____ monthly installment, or before the
end or ___ months from the closing date on Contracts that are not
payable monthly, the seller agrees to repurchase the Contract. The
repurchase price shall be the amount paid to Seller by Purchaser,
reduced by any principal reduction made by the debtor prior to default,
and increased by any unpaid interest that has accrued prior to default.
Seller also agrees to reimburse Purchaser for any attorney fees and
court costs incurred by Purchaser in obtaining Possession of the
vehicle. Default, for purpose of this Article 4, shall include any
conditions of default stated in the retail installment contract, and
(1) any payment default, (2) any vehicle that is wrecked, (3) any
bankruptcy filing by the debtor, (4) any skip that can not be located,
and (5) any vehicle deemed by Purchaser, in its sole discretion, to be
inoperable or in unsatisfactory mechanical and operating condition. (B)
On any Contract on a Class B vehicle that goes into default during the
period of ___ days beginning the day after the repurchase period
referred to above expires, the Purchase shall have limited recourse
against Seller as described below:
(1) Seller shall have the option or repurchasing the Contract
under the terms of Section 4.4 (a) above; (2) ____ of any
deficiency remaining after the vehicle is sold at a wholesale
auto auction, with the proceeds first applied using the
repurchase formula act set forth in Section 4.4 (a). (3)
Replacement of the Contract with a new Contract generated by
selling the vehicle in a retail transaction approved by
Purchaser. If the sale is approved by Purchaser, the Seller
shall retain the down payment received or ten percent of the
selling price, whichever is less, as compensation for
reselling the vehicle. The Seller shall pay one-half the cost
of reconditioning the vehicle for resale up to a maximum of
$_____ as the Seller's share. If the vehicle is re-sold in a
transaction accepted by Purchaser within 45 days of the time
the vehicle is reconditioned, and the new Contract is properly
assigned to Purchase, the Seller will have no further
obligation to Purchaser with regard to the original Contract.
If the Seller fails, the Seller shall sell the vehicle at a
wholesale auto auction, applying the proceeds first to the
repurchase formula described in Section 4.4 (a) above. If any
deficiency remains, the Seller shall immediately pay one-half
of the deficiency to Purchaser.
SECTION 4.5 RESALE OF REPOSSESSION. Seller agrees to offer for
resale, at Purchaser's option, vehicles that Purchaser has repossessed
that were collateral on Contracts purchased by Purchaser from Seller.
Seller agrees to use reasonable efforts to sell the vehicles on
Contracts that will be acceptable to Purchaser.
4. OBLIGOR DEFAULT; RESALE OF REPOSSESSION
SECTION 4.1 RESALE OF REPOSSESSION. Seller agrees to offer for
resale, at Purchaser's option, vehicles that Purchaser has repossessed
that were collateral on Contracts purchased by Purchaser from Seller.
Seller agrees to use reasonable efforts to sell the vehicles on
Contracts that will be acceptable to Purchaser.
5. OBLIGOR DEFAULT; OTHER DEALER RECOURSE
SECTION 5.2 ASSIGNMENT. This Assignment is subject to the
provisions set out below in the paragraph(s) initialed by Assignor, if
any.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITOR
I consent to the use in Amendment No. 2 to the Form S-1 Registration Statement
Under the Securities Act of 1933, of U.S. Automobile Acceptance SNP-IV, Inc. of
my report dated October 8, 1998, on the balance sheet of U.S. Automobile
Acceptance SNP-IV, Inc. as of September 18, 1998 and the related statement of
changes in stockholders' equity for the period from incorporation on January 2,
1998 through September 18, 1998, to the use of my opinion regarding the material
federal income tax consequences of investment in the Notes, which is an exhibit
to the Registration Statement, and to the use of my name appearing under the
heading "Experts".
/s/ Tyson Hopkins
Tyson Hopkins
Certified Public Accountant
Oklahoma City, Oklahoma
October 8, 1998
