<PAGE> 1
As filed with the Securities and Exchange Commission on January 13, 1998
Registration No. _________
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
(Name of issuer in its charter)
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-106 200 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
Registrant's principal executive office) area code of agent for service)
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Copy to:
Amy Waters
Attorney at Law
200 South Rogers
Suite 300A
Waxahachie, Texas 75165
(972) 938-9090
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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
<TABLE>
<CAPTION>
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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>
Asset-Backed $40,000,000 100% $40,000,000 $11,800.00
Promissory Notes Due
December 31, 2003
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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 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.
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<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>
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 Date *
(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 *
</TABLE>
- ----------------------
(*) None or Not Applicable
<PAGE> 3
$40,000,000 (MAXIMUM) $100,000 (MINIMUM)
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
ASSET-BACKED PROMISSORY NOTES
DUE DECEMBER 31, 2003
U.S. Automobile Acceptance SNP-IV, Inc., a Texas corporation (the
"Company"), which is a newly organized, single purpose corporation, is hereby
offering up to $40,000,000 in principal amount of its Asset-Backed Promissory
Notes (the "Notes") due December 31, 2003. The Notes bear interest at an
initial annual rate of 10.5%, paid monthly (the "Interest"). The Interest rate
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
$2,000.
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 (the "Automobile Dealers") generally
at a discount, using (a) the net proceeds from the sale of the Notes offered
herby, and (b) the net collection proceeds from previously purchased Contracts.
The Company has contracted with Automobile Acceptance Corporation ("USAAC" or
the "Servicer"), to provide purchasing and collecting services. USAAC is an
affiliate of the Company.
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 Automobile Dealers will provide the Company some form of dealer
recourse, which will provide additional collateral support for the Notes.
The offering will terminate on April 30, 1999, unless sooner terminated by
the Company for certain reasons. (See "Plan of Distribution.")
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." 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.
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) Company(2)
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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 expenses allowance, and 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.
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 Chase Bank of
Texas 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 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.
-------------------------
This Prospectus is dated , 1998
<PAGE> 4
AVAILABLE INFORMATION
The Company has filed a Registration Statement with the Securities and
Exchange Commission (the "Commission") with respect to 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 are available for inspection without charge at the
office of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and copies of which may be obtained from the Commission at prescribed rates. 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.
MINIMUM SUITABILITY STANDARD
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.
(The remainder of this page left intentionally blank)
2
<PAGE> 5
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 dealerships (the
"Automobile Dealers") retail installment finance contracts
secured by used automobiles and light trucks (the
"Contracts"). The Contracts will generally be purchased at
discounts ranging from 2% 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
Automobile Dealer. These dealer 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 Automobile Dealer compliance and review, oversee
enforcement and administration of dealer 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 or to qualified Automobile Dealers. 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 master collections bank accounts (the "Master
Collections Accounts"). 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 and vehicle
warranty service contract charges, cost of enforcement of
dealer recourse agreements, salaries and other general and
administrative expenses. The Company will use cash proceeds
available from Contract collections, less Allowed Expenses,
to purchase additional Contracts, generally 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 of 10.5% and payment of outstanding
principal on December 31, 2003 (or earlier under some
circumstances). All unpaid principal and accrued Interest
are payable at maturity on December 31, 2003 (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.
NOTES Asset-Backed Promissory Notes due December 31, 2003 (the
"Notes") issued to each Noteholder.
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
3
<PAGE> 6
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 Chase Bank of Texas 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 Trustee
will also act as "escrow agent" to hold subscription
proceeds until a minimum of $100,000 in Notes are sold.
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 automobiles dealers. 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-106, 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 rate will be 10.5% per annum on the
outstanding principal balance of each Note payable on the
fifteenth (15th) 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
10.5% 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.
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. See
"Description of the Notes - Payments of Principal and
Interest."
MATURITY December 31, 2003.
4
<PAGE> 7
SECURITY FOR THE THE CONTRACTS. The Notes will be secured by specified motor
NOTES 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 (the "Automobile Dealers"), 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
Automobile Dealers will often provide some form of dealer
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 Contracts will be
originated by Automobile Dealers not affiliated with the
Company or USAAC. 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 master
collection accounts maintained by the Company (the "Master
Collections Accounts"). The amounts in the Master
Collections Accounts 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 somewhat less credit-worthy
than prime credit purchasers of automobiles from new car
dealers. Management of the Company believes that an adequate
supply of eligible Contracts will be available for purchase,
based on its experience in the industry; however, there can
be no assurances that Contracts will continue to be
available. See "Purchase and Collection of Contracts.
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.
5
<PAGE> 8
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-106, 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 and notes, including those
secured by automobiles. USAAC may subcontract with third
parties to provide certain of these services and may
sometimes subcontract collecting services to selected
Automobile Dealers. 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 "Certain Federal Income Tax Considerations."
USE OF PROCEEDS The Company intends to use 88% of the net proceeds from the
sale of the Notes for the purchase of Contracts and 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, 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 certain 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 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. 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 certain risks. In considering a purchase
of these securities, prospective investors should carefully consider the risks
involved, including the following:
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.
PURCHASING AND AVAILABILITY OF CONTRACTS; REDEMPTION OF NOTES
The success of the Company, in large part, depends on its ability to keep
its assets continuously invested in Contracts. While the Company believes that
an adequate supply of eligible Contracts will be available for
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<PAGE> 9
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.
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.
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 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
1995-1, Inc. ("USAA 1995-1"), 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. 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
1995-1, 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. The sole director of the Company may face legal consequences based
on his conflicting duties of loyalty, which may adversely affect the Company and
his ability to serve the Company and USAAC.
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. Accordingly, no person should
purchase any of the Notes offered hereby unless he is willing to entrust all
aspects of the management and control of the business of the Company to Mr.
Marshall. See "Management."
7
<PAGE> 10
COLLECTIONS AND REPOSSESSIONS; 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 expects to meet its obligations on the Notes by
generally purchasing Contracts at a range of 75% - 98% 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
substantially 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 dealer 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
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.
FLOW OF CONTRACT PROCEEDS
Automobile Dealers may, in some instances, collect payments by the Obligors
under the Contracts and deposit them into the Master Collections Accounts.
Although the Company has strict standards for selecting the Automobile Dealers,
the risk exists that a Dealer will withhold funds or fail to make timely
deposits. Such practices by Automobile Dealers would have an adverse effect on
the business of the Company and could affect its ability to pay principal and/or
Interest to Noteholders when due.
8
<PAGE> 11
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 dealer recourse agreements are insufficient
may adversely affect the ability of the Company to repay the Notes.
In the event that either USAAC or an Automobile Dealer 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. In the event of a bankruptcy by an
Automobile Dealer, the servicing of Contracts purchased from that Automobile
Dealer would be assumed by USAAC and/or subcontracted to a secondary Servicer.
In the event an Automobile Dealer has collected payments on Contracts it is
servicing and fails to deposit them in the Master Collections Accounts,
notwithstanding its obligation to do so, the Company may have difficulty
recovering such funds in the event of such Automobile Dealer's bankruptcy. It is
the intention of the Company, however, to take such actions as may be necessary
to minimize the effect on the collateral securing the Notes in the event of an
Automobile Dealer's bankruptcy.
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.
9
<PAGE> 12
SALE OF SMALL AMOUNT OF NOTES
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.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
January 6, 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 $ 49,000
--------
TOTAL SHAREHOLDERS' EQUITY $ 50,000
</TABLE>
USE OF PROCEEDS
The Company intends to apply 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 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 7,000 2,800,000
Legal, Accounting & Printing Expenses (2) 5,000 200,000
Trustee and Escrow Fees (2)(3) -0- 50,000
Other Offering Expenses (2)(3)(4) -0- 350,000
Marketing Expenses & Due Diligence (2)(3)(5) -0- 600,000
Compensation to USAAC (2)(3)(6) -0- 800,000
-------- ------------
TOTAL $100,000 $ 40,000,000
</TABLE>
- --------------
(1) To be paid to automobile contract suppliers.
(2) To be paid or reimbursed to an affiliate.
(3) 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.
(4) Includes SEC registration fee, Blue Sky fees and miscellaneous expenses.
10
<PAGE> 13
(5) Anticipated to be paid to registered broker-dealers as a
non-accountable expense allowance and due diligence expense
reimbursement.
(6) 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 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 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 $2,000.
Investor subscriptions are to be made payable to, and will be held in
an escrow account by Chase Bank of Texas, 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. 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 April 30, 1999, 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.
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, 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 Chase Bank of Texas, as trustee (the
"Trustee"). The following summaries of certain provisions of the
11
<PAGE> 14
Indenture and the summaries included under "The Indenture of Trust Provisions"
do not purport to be complete and are subject to, and qualified in their
entirety by reference to, the provisions of the Indenture. 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.
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 $2,000. The Company may
charge a reasonable fee for any transfer or exchange of a Note. Each Note will
mature on December 31, 2003.
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 reevalute 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 rate will be 10.5% 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 at such rate of 10.5% per annum. 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 10.5% 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.
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, 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 Collections Accounts
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 Collections
Accounts. On a periodic basis, the funds in the Master Collections Accounts
will be transferred to a Master Operating Account maintained by the Company.
Payment 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
12
<PAGE> 15
Payment Date. Prior to collection of the Contracts, funds to pay Interest will
be advanced by USAAC and reimbursed as Contracts are collected.
REDEMPTION
The stated maturity of the principal of the Notes is December 31, 2003. 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.
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.
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 Collections Accounts, 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 Automobile Dealer will provide the
Company some form of dealer recourse, such as contract repurchase agreements,
limited guaranty agreements, cash hold-back arrangements, or contract
replacement guarantees. These dealer 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.
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<PAGE> 16
THE CONTRACTS
Each of the Contracts will be a retail installment sales contract
originated by a motor vehicle dealer and purchased by the Company and will be
secured by a used automobile or light-duty truck (a "Financed Vehicle"). 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 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 a 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 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
Collections Account," into which all payments made on or with respect to the
Contracts will be deposited. These Master Collections Accounts will be
"lock-box" type accounts at financial institutions where all remittance checks,
drafts and other instruments for the Contracts will be deposited. All servicing
subcontractors will be required under their subcontracts to promptly remit
payments collected by them to the Master Collections Accounts. USAAC has also
agreed to deposit in the Master Collections Accounts 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 Collections Accounts 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 Collections
Accounts or the Master Operations 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
14
<PAGE> 17
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 dealer 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"). 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
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 $7,500 per year
Note Payments and Registrar Services $12 per year per Note (2)
Note Certificate Corrections $10 each (2)
Bank Fees
Master Collections Accounts $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
</TABLE>
- -----------------------------
(1) 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. 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.
15
<PAGE> 18
<TABLE>
<CAPTION>
Allowed Expense Estimated Amount
--------------- ----------------
<S> <C>
Contract Purchase Fees(3) 1%-3% per Contract(2)
Repossession, Repair and Liquidation Expenses Estimated to average from $ 1,000 to $3,000 for each
repossessed vehicle
Costs of Enforcement of Dealer Recourse Enforcement of dealer 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>
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 Collections Accounts. 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>
<CAPTION>
===========================================================================================================
Servicer/Dealer Servicer/Dealer Company Transfers Company Utilizes Funds
Collects Installments Deposits Installment Funds From Master in Master Operating
Collections Into Master Collections Accounts To Account as Follows(1)
Collections Accounts Master Operating
Account
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
* * *
===========================================================================================================
</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-106, 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 be
purchased from independent motor vehicle dealers located principally in Texas
- ----------------------
(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."
16
<PAGE> 19
and Oklahoma, and Automobile Dealers will in many instances provide some form of
dealer recourse. The Company may expand its dealer 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 creditworthy than prime credit
purchasers of automobiles from new car dealers.
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 $2,000 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.
The Company has no material properties, assets, 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. 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 Automobile Dealer compliance and
review, oversee enforcement and administration of dealer 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. The following summaries do not purport to be
complete and are subject to, and qualified in their entirety by reference to,
the provisions of the Servicing Agreement. 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 Dealer a copy of the credit
17
<PAGE> 20
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 2%
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 Automobile
Dealers.
* In many instances, the Automobile Dealer will be required to provide some
form of dealer 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.
* 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
$2,000 and less than $25,000. The Company believes that $2,000 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.
DEALER CRITERIA
Contracts will generally 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, servicing subcontracts, and dealer 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.
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.
USACC may, in some instances, subcontract its collecting functions to parties or
to
18
<PAGE> 21
selected Automobile Dealers. Funds collected by the subcontracting servicers
will be required to be deposited directly to the Master Collections Accounts 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 dealer 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 charge-off 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.
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 Accounts, 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 $12,000 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 dealer 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 January 6, 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 and 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
19
<PAGE> 22
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-106
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:
Mr. Michael R. Marshall, age 48, 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"), U.S. Automobile Acceptance 1995-I, Inc. ("USAA 1995-I") and U.S.
Automobile Acceptance SNP-I, Inc. ("SNP-I") all 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.
EMPLOYEES AND CONSULTANTS
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 formerly executive vice president of Metro Bank, National
Association, located in Oklahoma City, Oklahoma. Mr. Billy has previously been a
banker for more than 20 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.
Mr. David B. Christofferson, age 49, serves as corporate financial and
legal consultant to USAAC and the Company. Mr. Christofferson is presently
Executive Vice President and General Counsel for Frontier Natural Gas
20
<PAGE> 23
Corporation, an over-the-counter publicly traded oil and gas company, located in
Houston, Texas. Mr. Christofferson was, from 1982-1989, Vice President and
General Counsel of Settlers Capital Corporation and was involved in assisting
with the business, corporate finance and legal planning. Mr. Christofferson has
substantial experience in structuring and monitoring secured lending
transactions, and from 1974-1981 he served as a commercial lending officer for
several Oklahoma banks. Mr. Christofferson received his Bachelors Degree in
Finance in 1971 and a Juris Doctorate in 1974 from the University of Oklahoma.
He also received a Master of Divinity Degree from Phillips University in 1985.
Mr. Christofferson will devote approximately 10% of his time to the business of
the U.S. Automobile Acceptance Corporation and the Company, and will function as
an in-house counsel, assisting with offering structure, corporate finance
matters, contract review, and financial planning.
SERVICER
U.S. Automobile Acceptance Corporation, a Texas corporation (the
"Servicer") was formed in January 1995 to begin to consolidate management and
operations of Michael R. Marshall's automobile finance activities. As of
September 30, 1997, the Servicer 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. The
company changed its name from Settlers Acceptance Corporation to U.S. Automobile
Acceptance Corporation in June 1996.
U.S. Automobile Acceptance Corporation will be servicer pursuant to the
Servicing Agreement. USAAC will provide 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 dealer recourse agreements, and the repossession and sale of
repossessed vehicles. USAAC intends to subcontract a portion of the required
services to third parties and certain Automobile Dealers.
PRIOR ACTIVITIES OF SIMILAR BUSINESSES UNDER COMMON CONTROL
U.S. Automobile SNP-I, Inc. ("SNP-I"), formerly named U.S. Automobile
Acceptance Corporation, 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 $2,386,000. In January
1995, Michael R. Marshall acquired 100% of the common stock of SNP-I. SNP-I
became fully operational in early 1995 and had profitable finance operations
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 began redeeming all its outstanding notes payable in
November 1997. SNP-I has incurred nominal operating losses during the note
redemption period. SNP-I incurred credit losses averaging approximately 4%
annually. The company changed its name from U.S. Automobile Acceptance
Corporation to U.S. Automobile Acceptance SNP-I, Inc. in May 1996.
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 of $500,000 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 September 30, 1997, USAA 1995-I had
purchased approximately 1400 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 SNP-III 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 nine months ended
September 30, 1997 was approximately $250,000. Credit losses in 1996 and 1997
have approximated 3% annually.
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 became effective
in late 1996. As of January 1, 1998,
21
<PAGE> 24
the note offering is in process and is expected to continue through early to mid
1998. SNP-III incurred initial operating losses of approximately $340,000
during the period from November 1996 through September 30, 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. The SNP-III business plan projects raising $2 million dollars of
investor note funds through the first few months of 1998 and projects purchasing
$2 million per month of automobile finance contracts. SNP-III expects to incur
continued negative interest spread until the initial purchase of the finance
contract portfolio is substantially completed. Accordingly, SNP-III expects
finance operations will become profitable in the third quarter of 1998. As of
December 15, 1997 SNP-III had received note subscriptions totaling approximately
$18,000,000 and had purchased contracts with aggregate balance receivables
totaling approximately $12,000,000. SNP-III had incurred only nominal credit
losses through December 31, 1997.
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, SNP-I, USAA 1995-I, and SNP-III.
Operations and activities of SNP-I, USAA 1995-I, and SNP-III are similar to the
planned activities and operations of the Company.
The Company, SNP-I, 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 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.
22
<PAGE> 25
INDENTURE OF TRUST PROVISIONS
The following summaries describe certain provisions of the Indenture. The
summaries do not purport to be complete and are subject to, and qualified in
their entirety by reference to, the provisions of the Indenture, and where
particular provisions or terms used in the Indenture are referred to, the actual
provisions are incorporated by reference as part of such summaries.
An Indenture of Trust will be entered into between the Company and the
Trustee, Chase Bank of Texas, 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 also act as "escrow agent" to hold subscription proceeds until a
minimum of $100,000 in Notes are sold. 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.
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 TIA 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;
(2) the Company fails to pay principal of any Notes when due;
(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 a majority 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 and is continuing, the Trustee may, 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
23
<PAGE> 26
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, 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
Debtor.
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 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.
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.
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 such property or securities
24
<PAGE> 27
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.
Within ten (10) days of the mailing of monthly Interest payments to the
Noteholders, the Company shall deliver to the Trustee an Officer's Certificate
stating that such payment has been made. The same procedure shall be followed
with respect to the payment of the principal on the Notes. If the Company fails
to make all or a portion of any or all Interest or principal payments on the
Notes when due, the Company shall deliver a notice to the Trustee and to each
Noteholder within ten (10) days, specifying with instructions the steps that
need to be taken by the Noteholder under this Indenture, if any, to declare an
Event of Default hereunder and the consequences of not taking such steps. Upon
the receipt by the Trustee of an Officer's Certificate that any Notes have been
paid in full and in compliance with the requirements of TIA Sec. 314(d), the
Trustee shall execute and deliver to the Company a partial satisfaction of the
Security Documents in recordable form furnished to it by the Company, which the
Company may record in the Public Records. Upon such delivery to the Trustee of
an Officer's Certificate that all Notes have been paid in full and in compliance
with the requirements of TIA Sec. 314(d) (together with all accrued Interest),
the Trustee shall execute and deliver to the Company a full satisfaction of the
Security Documents to the extent furnished to it by the Company, and the Trustee
and the Company shall be relieved of all further obligations.
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. In 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.
25
<PAGE> 28
Upon the purchase of the Contracts, the originating Dealers are required to
assign the Contracts (and the security interests arising thereunder in the
Financed Vehicles) to the Company. The originating Dealers 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 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 Dealer 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.
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 four 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,
subcontract 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.
26
<PAGE> 29
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 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.
27
<PAGE> 30
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 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.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion of certain federal income tax considerations
relating to an investment in the Notes is based upon the opinion of Tyson
Hopkins, independent certified public accountant.
INTEREST ON NOTES
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. Accrued method taxpayers are
generally required to include the interest in their gross income in the taxable
year in which the 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 Section 401(a) of the Code (all collectively
referred to as "Exempt Plans"), and individual retirement accounts and trusts
("IRAs and IRTs"), as well as certain charitable and other organizations
described in Code Section 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 exempt
organizations receive unrelated business taxable income, the Exempt Plans, IRAs,
IRTs and other exempt organizations will be subject to a tax imposed by Section
511 of the Code on the portion of their income constituting unrelated business
taxable income. As 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 organization 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 or 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.
28
<PAGE> 31
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 reclassified as unrelated business taxable income on which the
Exempt Plan, IRA, IRT or other exempt organization 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 Section 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 (v) whether the income would
be unrelated business taxable income because of the use of acquisition
indebtedness as a source of the funds used to acquire the Notes.
EXEMPT PLANS, IRAS, IRTS AND 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 IS OF THE TAX LAWS UNDER THE INTERNAL REVENUE CODE AND 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.
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 "Certain Federal
Income Tax Considerations."
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 considerations relating to the Notes has
been passed upon by Tyson Hopkins, independent certified public accountant,
Oklahoma City, Oklahoma.
29
<PAGE> 32
[TYSON HOPKINS LETTERHEAD]
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 January 6, 1998, and the related statement of stockholders'
equity for the period from the date of incorporation on January 2, 1998 through
January 6, 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 January 6, 1998, in conformity with generally accepted accounting
principles.
/s/ TYSON HOPKINS
TYSON HOPKINS
Certified Public Accountant
Oklahoma City, Oklahoma
January 9, 1998
30
<PAGE> 33
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
(a development stage enterprise)
BALANCE SHEET
As of January 6, 1998
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 50,000
OTHER ASSETS
Note offering costs 12,500
Organization costs 700
----------
TOTAL ASSETS $ 63,200
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
COMMITMENTS (Notes B and C)
LIABILITIES:
Due to affiliate $ 13,200
STOCKHOLDERS' EQUITY
Common stock - $1.00 par value,
3,000 shares authorized, 1,000
shares issued and outstanding 1,000
Paid-in capital 49,000
----------
Total stockholders' equity 50,000
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 63,200
==========
</TABLE>
See accompanying notes to financial statements
31
<PAGE> 34
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 January 6, 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-
January 1998, issuance
of common stock for
cash, par value $1.00,
sales price $50.00 per
share 1,000 $ 1,000 $ 49,000 $ 50,000
----- ------- -------- --------
Balances, January 6, 1998 1,000 $ 1,000 $ 49,000 $ 50,000
===== ======= ======== ========
</TABLE>
See accompanying notes to financial statements
32
<PAGE> 35
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 intends to file 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 equaling 7.0% of 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 escrow by a third-party trustee 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
33
<PAGE> 36
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
(a development stage enterprise)
Notes will be secured by the Contracts and proceeds thereof.
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 $50,000.
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 January 6, 1998 is approximately $13,000.
These costs have been recorded as a liability and capitalized as an asset on
the balance sheet of the Company. Upon
34
<PAGE> 37
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
(a development stage enterprise)
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.
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.
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<PAGE> 38
EXHIBIT A
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
ASSET-BACKED PROMISSORY NOTE DUE DECEMBER 31, 2003
$ 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 sum of ________________ _____________ Dollars
on December 31, 2003 (the "Stated Maturity" of such principal), and 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 of _______ percent (___%) per
annum, 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. The Interest rate will be established by the
Company from time to time; however, once determined, the rate of Interest
payable on this Note will remain fixed for the term of the Note.
This Note is one of a duly authorized issue of Notes of the Company,
designated as its Asset-Backed Promissory Notes Due December 31, 2003 (herein
called the "Notes"), all issued and to be issued under an Indenture (herein
called the "Indenture"), between the Company and Chase Bank of Texas (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.
Monthly payment of interest shall be made by check mailed 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
security interest in specific motor vehicle retail installment contracts and
the funds in the Master Collections Accounts, 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 will be redeemed beginning after January 1, 2003, and, at
the option of the Company, 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
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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.
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.
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 under its corporate seal.
Dated:
--------------------------
U.S. AUTOMOBILE ACCEPTANCE SNP-IV,
INC., a Texas Corporation
By:
----------------------------------
Authorized Officer
[SEAL]
Attest:
--------------------------
Authorized Officer
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<PAGE> 40
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 Chase Bank of Texas (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 Asset-Backed
Promissory Notes due on December 31, 2003.
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.
"Collateral" means the collateral as described in the Security
Documents.
"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 used
automobile dealerships.
"Default" means any event which is, or after notice or lapse of time
or both would be, an Event of Default.
"Financed Vehicles" means the used automobiles and light trucks which
are security for the Contracts.
"Holder" or "Noteholders" 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.
"Master Collections Accounts" means the bank accounts 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
Accounts attributable to the Contracts will be directly transferred.
"Note Redemption Account" the interest-bearing account into which the
Company will deposit the net collection proceeds from the Contracts after
January 1, 2003, for payment on the Notes.
"Notes" means the 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.
"Payment Date" means the fifteenth (15th) day of each month beginning
with the first full calendar month following the issuance of a Note, and upon
maturity, that payments of interest and/or principal shall be made.
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"Redemption Date" means such Payment Date, after January 1, 2003, 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, to paid to Noteholders upon redemption of the Notes.
"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. Sections 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, together with all payments and instruments received with
respect thereto, (b) the Servicing Agreement, (c) the Master Collections
Accounts, 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.
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer its corporate trust matters.
"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.
<TABLE>
<CAPTION>
TERM DEFINED IN SECTION
---- ------------------
<S> <C>
"Bankruptcy Law" 5.01
"Legal Holiday" 7.10
"Paying Agent" 2.03
"Registrar" 2.03
"Receiver" 5.01
</TABLE>
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:
"Commission" means the SEC.
"Indenture Securities" means the Notes.
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"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.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
An Officer 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
Chase Bank of Texas, or the successor Trustee, 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 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
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<PAGE> 43
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 6.05, 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 6.05.
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, 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 and is continuing, the
Trustee shall exercise its rights and powers 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
negligent action, its own negligent failure to act, or its own willful
misconduct, except that the Trustee shall not be liable for any error of
judgment made in good faith unless it is proved that the Trustee was negligent
in ascertaining the pertinent facts.
(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 except as otherwise agreed with the Company.
(f) The Trustee is authorized and directed to enter into the
Security Agreements on behalf of the Noteholders solely in its capacity as
Trustee under the 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 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. 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.
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<PAGE> 44
(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, Registrar and Paying Agent, 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);
(b) to reimburse the Trustee, in its capacity as Trustee,
Registrar and Paying Agent, upon its request for all reasonable expenses,
disbursements and advances 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,
Registrar and Paying Agent, for, and to hold it harmless against any loss,
cost, liability, claim or expense incurred without 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, Registrar and Paying
Agent, 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.
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SECTION 3.08. REPLACEMENT OF TRUSTEE.
The Trustee, in its capacity as Trustee, Registrar and Paying Agent,
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,
Registrar and Paying Agent, by so notifying the removed Trustee and may appoint
a successor Trustee, Registrar, and/or Paying Agent 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, Registrar or Paying Agent for any reason, the Company shall
promptly appoint a successor Trustee, Registrar or Paying Agent.
A successor Trustee, Registrar or Paying Agent shall deliver a written
acceptance of its appointment to the retiring Trustee, Registrar or Paying
Agent and to the Company. Immediately after that, the retiring Trustee,
Registrar or Paying Agent shall transfer all property held by it as Trustee,
Registrar or Paying Agent to the successor Trustee, Registrar or Paying Agent,
the resignation or removal of the retiring Trustee, Registrar or Paying Agent
shall become effective, and the successor Trustee, Registrar or Paying Agent
shall have the rights, powers, and duties of the Trustee, Registrar or Paying
Agent under this Indenture. A successor Trustee, Registrar or Paying Agent
shall give notice of its succession to each Noteholder as provided in Section
7.02.
If a successor Trustee, Registrar or Paying Agent does not take office
within 60 days after the retiring Trustee, Registrar or Paying Agent resigns or
is removed, the retiring Trustee, Registrar or Paying Agent, 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,
Registrar or Paying Agent.
If the Trustee, Registrar or Paying Agent fails to comply with Section
3.10, any Noteholder may petition any court of competent jurisdiction for the
removal of the Trustee, Registrar or Paying Agent and the appointment of a
successor Trustee, Registrar or Paying Agent.
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, Registrar and Paying Agent. 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.
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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 Paying Agent 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; 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 Paying Agent pursuant to Sections 4.01(b) and 4.01(c).
(b) To facilitate payment of the Notes, the Company shall transfer
to the Paying Agent 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. 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 (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 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.
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 signers know of any Default by the Company in performing its covenants
under the Indenture. 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
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 TIA Section 314(a).
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ARTICLE 5
DEFAULTS AND REMEDIES
SECTION 5.01. EVENTS OF DEFAULT.
Subject to the limitations set forth in this Article 5, 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;
(2) the Company fails to cause the principal of any Notes to be
paid when due;
(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 5.01 (3) is not an Event of Default until the
Trustee or the Holders of at least a majority 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 5.02. ACCELERATION.
If an Event of Default occurs and is continuing as provided in Section
5.01, the Trustee may, 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.
B-8
<PAGE> 48
SECTION 5.03. OTHER REMEDIES; LIMITATION.
Subject to the provisions of the preceding paragraph, if an Event of
Default occurs and is continuing, as provided in Section 5.01, 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 Debtor.
SECTION 5.04. 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. 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 Section
6.02.
SECTION 5.05. 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 5.06. 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 5.07. 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,
Registrar and Paying Agent, for amounts due
under Section 3.07;
Second: to the payment of Allowed Expenses as defined
in the registration statement (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.
The Trustee may fix a record date and payment date for any payment to
Noteholders.
B-9
<PAGE> 49
ARTICLE 6
AMENDMENTS, SUPPLEMENTS, AND WAIVERS
SECTION 6.01. 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 6.02. 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. Without the consent
of each Noteholder affected, however, an amendment, supplement, or waiver,
except the waiver pursuant to Section 5.04, 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 6.03. 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 6.04. 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. Any such Holder or subsequent
Holder, however, may revoke the consent as to his Note or portion of the Note.
The Trustee must receive the notice of revocation before the date the
amendment, supplement or waiver becomes effective.
After an amendment, supplement, or waiver becomes effective, it shall
bind every Noteholder unless it makes a change described in Sections 6.02(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 6.05. 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.
B-10
<PAGE> 50
SECTION 6.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amendment, supplement, or waiver authorized
pursuant to this Article if the amendment, supplement, or waiver does not
adversely affect the rights of the Trustee. If it does, the Trustee may but
need not sign it.
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 7
MISCELLANEOUS
SECTION 7.01. 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.
SECTION 7.02. 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: Chase Bank of Texas
2200 Ross Avenue
Dallas, Texas 75201
Attn: Corporate Trust Department
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 7.03. 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
B-11
<PAGE> 51
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, in the opinion of Trustee, 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 bearing 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 7.04. 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 signers, all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with.
SECTION 7.05. 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 7.06, 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 7.06. 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;
B-12
<PAGE> 52
(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 7.07. 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 7.08. 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.
SECTION 7.09. 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 7.10. 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.
SECTION 7.11. 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 7.12. NO RECOURSE AGAINST OTHERS.
All liability of any director, officer, employee, or stockholder, as
such, of the Company is waived and released.
SECTION 7.13. 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 7.14. 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.
B-13
<PAGE> 53
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:
--------------------------------------
CHASE BANK OF TEXAS
By:
---------------------------------------
Its:
--------------------------------------
B-14
<PAGE> 54
Exhibit A
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
ASSET-BACKED PROMISSORY NOTE DUE DECEMBER 31, 2003
$ 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 sum of _____________________________ Dollars
on December 31, 2003 (the "Stated Maturity" of such principal), and 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 of _______ percent (___%) per
annum, 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. The Interest rate will be established by the
Company from time to time; however, once determined, the rate of Interest
payable on this Note will remain fixed for the term of the Note.
This Note is one of a duly authorized issue of Notes of the Company,
designated as its Asset-Backed Promissory Notes Due December 31, 2003 (herein
called the "Notes"), all issued and to be issued under an Indenture (herein
called the "Indenture"), between the Company and Chase Bank of Texas (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.
Monthly payment of interest shall be made by check mailed 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
security interest in specific motor vehicle retail installment contracts and
the funds in the Master Collections Accounts, 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 will be redeemed beginning after January 1, 2003, and, at
the option of the Company, 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
B-15
<PAGE> 55
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.
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.
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 under its corporate seal.
Dated:
----------------------------
U.S. AUTOMOBILE ACCEPTANCE SNP-IV,
INC., a Texas Corporation
By:
--------------------------------
Authorized Officer
[SEAL]
Attest:
---------------------------
Authorized Officer
B-16
<PAGE> 56
EXHIBIT C
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
SUBSCRIPTION AGREEMENT - ASSET-BACKED NOTES
The Investor named below, by payment of the purchase price for such
Asset-Backed Notes, by the delivery of a check payable to U.S. AUTOMOBILE
ACCEPTANCE SNP-IV, INC.- Escrow Account/Chase Bank of Texas hereby subscribes
for Asset- Backed Notes indicated below (minimum purchase of $2000) of U.S.
Automobile Acceptance SNP-IV, Inc. Notes may be purchased in increments of
$1,000. 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 Asset-Backed Notes being subscribed for
hereby.
<TABLE>
<S> <C>
A. INVESTMENT: (1) Amount of Asset-Backed Notes Purchased $
-----------------
(2) Initial Purchase [ ] Additional Purchase [ ] Date of Investor's check
-----------------
B. REGISTRATION: Mr. Mr.
Mrs. Mrs.
(4) Registered Owner: Ms. Co-Owner: Ms.
----------------------- ---------------------------------------------
(5) Mailing Address: City, State & Zip:
-------------------------- -----------------------------------------
(6) Residence Address (if different from above):
--------------------------------------------------------------
(7) Birth Date: / / (8) Birth Date Co-Owner: / /
---------- --------- --------- --------- -------- -------
(9) Please indicate Citizenship Status: (10) Social Security #: / /
--------- -------- -------
U.S. Citizen [ ] Other [ ] Co-Owner SS #: / /
--------- -------- -------
(11) Telephone #: (H) ( ) Corporate or Custodial:
---------- ------------------------------------------
(0) ( ) Taxpayer ID #: - -
---------- ------------------------------------------- --------- --- ---------
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."
Signatures - Registered Owner: Co-Owner
--------------------------------- -------------------------------------------------
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: Date: 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
-------------------------------------- ------------------------------------------
</TABLE>
================================================================================
MAIL TO: U.S. Automobile Acceptance SNP-IV, Inc., 1120 N.W. 63rd, Suite G-106,
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-1
<PAGE> 57
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 person to whom it is unlawful to make such an
offer or solicitation in such 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 item subsequent to its date.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Summary 3
Risk Factors 6
Capitalization 10
Use of Proceeds 10
Plan of Distribution 11
Description of the Notes 11
Security for the Notes 13
Allowed Expenses and Flow of Contract
Proceeds 15
The Company 16
Purchase and Collection of Contracts 17
Security Ownership of Certain
Beneficial Owners and Management 19
Management 20
Management's Discussion and Analysis
of Financial Condition 22
Indenture of Trust Provisions 23
Certain Legal Aspects of the Contracts 25
Certain Federal Income Tax Considerations 28
Experts 29
Legal Matters 29
Financial Statements 30
Exhibits
Form of Asset-Backed Promissory
Note Due December 31, 2003 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
ASSET-BACKED PROMISSORY NOTES
DUE DECEMBER 31, 2003
U.S.
AUTOMOBILE
ACCEPTANCE
SNP-IV,
INC.
<PAGE> 58
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 January 1998, the Company issued 1,000 shares of Common
Stock to Michael R. Marshall, an individual and resident of Oklahoma, at $50.00
per share, for cash in the amount of $50,000, 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.
II-1
<PAGE> 59
ITEM 16. EXHIBITS
The following Exhibits are filed as part of the Registration
Statement:
<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 11% Secured 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, a Texas 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.
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>
- ----------------------------------
*To be filed by 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 small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer 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.
II-2
<PAGE> 60
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 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Oklahoma City, State of Oklahoma, on the 9th day of
January, 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; January 9, 1998
- ------------------------------ Treasurer; Sole Director
Michael R. Marshall
</TABLE>
II-3
<PAGE> 61
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 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.
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>
- ------------------------------
(*) To be filed by amendment
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF INCORPORATION OF
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
<PAGE> 2
[SEAL OF THE STATE OF TEXAS]
THE STATE OF TEXAS
SECRETARY OF STATE
CERTIFICATE OF INCORPORATION
OF
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
CHARTER NUMBER 01472111
THE UNDERSIGNED, AS SECRETARY OF STATE OF THE STATE OF TEXAS, HEREBY
CERTIFIES THAT THE ATTACHED ARTICLES OF INCORPORATION FOR THE ABOVE NAMED
CORPORATION HAVE BEEN RECEIVED IN THIS OFFICE AND ARE FOUND TO CONFORM TO LAW.
ACCORDINGLY, THE UNDERSIGNED, AS SECRETARY OF STATE, AND BY VIRTUE OF
THE AUTHORITY VESTED IN THE SECRETARY BY LAW, HEREBY ISSUES THIS CERTIFICATE OF
INCORPORATION.
ISSUANCE OF THIS CERTIFICATE OF INCORPORATION DOES NOT AUTHORIZE THE
USE OF A CORPORATE NAME IN THIS STATE IN VIOLATION OF THE RIGHTS OF ANOTHER
UNDER THE FEDERAL TRADEMARK ACT OF 1946, THE TEXAS TRADEMARK LAW, THE ASSUMED
BUSINESS OR PROFESSIONAL NAME ACT OR THE COMMON LAW.
DATED JAN. 2, 1998
EFFECTIVE JAN. 2, 1998
[SEAL OF THE STATE OF TEXAS] /s/ ALBERTO R. GONZALES
---------------------------------------
Alberto R. Gonzales, Secretary of State
<PAGE> 3
ARTICLES OF INCORPORATION
OF
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
ARTICLE ONE
The name of the corporation is U.S. Automobile Acceptance SNP-IV, Inc.
(the "Corporation").
ARTICLE TWO
The period of duration of the Corporation is perpetual.
ARTICLE THREE
The purpose for which the Corporation is organized is the transaction
of any and all lawful business for which corporations may be incorporated under
the Texas Business Corporation Act.
ARTICLE FOUR
The aggregate number of shares which the Corporation shall have
authority to issue is three thousand (3,000) shares of common stock, par value
$1.00 per share.
ARTICLE FIVE
The Corporation will not commence business until it has received for
the issuance of shares consideration of the value of one thousand dollars
($1,000.00), consisting of money, labor done or property actually received.
ARTICLE SIX
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.
<PAGE> 4
ARTICLE SEVEN
The street address of its initial registered office is 200 South
Rogers Street, Suite 300, Waxahachie, Texas 75165, and the name of its initial
registered agent at such address is Amy Waters.
ARTICLE EIGHT
The number of directors constituting the initial board of directors is
one (1), and the name and address of the person who is to serve as director
until the first annual meeting of the shareholders or until his successor is
elected and qualified is:
Michael R. Marshall
1120 N.W. 63rd
Suite G-106
Oklahoma City, Oklahoma 73116
ARTICLE NINE
The shareholders of the Corporation shall not be entitled to cumulate
their votes in the election of directors. No shareholder shall have, as a
shareholder of the Corporation, any preemptive right to acquire, purchase, or
subscribe for the purchase of any additional, unissued or treasury shares of
any class of stock of the Corporation, whether now or hereafter authorized, or
any bonds, debentures or other securities of the Corporation convertible into
or exchangeable for, or carrying or accompanied by any rights to acquire,
purchase or subscribe for the purchase of, any such unissued or treasury
shares.
ARTICLE TEN
The name and address of the incorporator is Amy Waters, 200 South
Rogers, Suite 300, Waxahachie, Texas 75165.
DATED, this the 2nd day of January, 1998.
/s/ AMY WATERS
-----------------------------
Amy Waters
2
<PAGE> 1
EXHIBIT 3.2
BY-LAWS OF
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
<PAGE> 2
BY-LAWS
OF
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL OFFICE. The principal office of U.S. Automobile
Acceptance SNP-IV, Inc. (the "Corporation") may be within or without the State
of Texas, at such place as the board of directors of the Corporation (the
"Board of Directors") by resolution may from time to time determine.
SECTION 2. OTHER OFFICES. The Corporation may also have offices at
such other places both within and without the State of Texas as the Board of
Directors may from time to time determine or the business of the Corporation
may require.
ARTICLE II
SHAREHOLDERS
SECTION 1. TIME AND PLACE OF REGULAR AND SPECIAL MEETINGS. Meetings of
the Corporation's shareholders, both regular and special, shall be held at such
time and place, within or outside the State of Texas, as may be determined by
resolution of the Board of Directors from time to time.
SECTION 2. ANNUAL MEETINGS. Annual meetings of the Corporation's
shareholders shall be held at such time and place, and on such date during the
month of April of each year, as shall be determined by or in the manner
authorized by the Board of Directors. At each annual meeting, the shareholders
shall elect a Board of Directors and transact such other business as may
properly be brought before the meeting. The date of the annual meeting of the
shareholders may be held on a date different than that specified herein if the
Board of Directors so determines and so states in the notice of the meeting or
in a duly executed waiver thereof.
SECTION 3. SPECIAL MEETINGS. Special meetings of the shareholders,
for any purpose or purposes, unless otherwise prescribed by statute, the
Articles of Incorporation or these Bylaws, may be called by the Chairman of the
Board, the President, the Board of Directors or the holders of at least ten
percent (10%) of all the shares entitled to vote at the proposed special
meeting, unless the Articles of Incorporation provide for a number of shares
greater than or less than ten percent (10%), but not greater than fifty percent
(50%), in which event special meetings of the shareholders may be called by the
holders of at least the percentage of shares so specified in the Articles of
Incorporation. Only business within the purpose or purposes described in the
notice of special meeting of shareholders may be conducted at the meeting.
SECTION 4. NOTICE. Written or printed notice stating the place, day
and hour of any shareholders meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not
less than ten (10) nor more than sixty (60) days before the date of the
meeting, either personally or by mail, by or at the direction of the President,
the
<PAGE> 3
Secretary or the officer or person calling the meeting, to each shareholder of
record entitled to vote at such meeting. If mailed, such notice shall be
deemed to be delivered when deposited in the United States mail, postage
prepaid, addressed to the shareholder at the shareholder's address as it
appears on the stock transfer books of the Corporation. Any notice required to
be given to any shareholder under any provision of the statutes, the Articles
of Incorporation or these Bylaws need not be given to the shareholder if: (1)
notice of two (2) consecutive annual meetings and all notices of meetings held
during the period between those annual meetings, if any, or (2) all (but in no
event less than two (2)) payments (if sent by first class mail) of
distributions or interest on securities during a twelve- (12) month period have
been mailed to that person, addressed at his address as shown on the records of
the Corporation, and have been returned undeliverable. Any action or meeting
taken or held without notice to such a person shall have the same force and
effect as if the notice had been duly given and, if the action taken by the
Corporation is reflected in any articles or document filed with the Secretary
of State, those articles or that document may state that notice was duly given
to all persons to whom notice was required to be given. If such a person
delivers to the Corporation a written notice setting forth his then current
address, the requirement that notice be given to that person shall be
reinstated.
SECTION 5. RECORD DATE. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or entitled to receive a distribution by the Corporation
(other than a distribution involving a purchase or redemption by the
Corporation of any of its own shares) or a share dividend, or in order to make
a determination of shareholders for any other proper purpose, the Board of
Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case shall not be more than
sixty (60) days and, in case of a meeting of shareholders, not less than ten
(10) days prior to the date on which the particular action requiring such
determination of shareholders entitled to vote at any meeting of shareholders
has been made as provided in this Section, and such determination shall apply
to any adjournment thereof. The stock transfer book of the Corporation need
not be closed for the purpose of making a determination of shareholders under
this Section. For purposes of determining the shareholders entitled to vote or
to receive a dividend, if the stock transfer books are not closed and no record
date is fixed for the determination of shareholders, the date on which the
notice of the meeting is mailed, or the date on which the resolution declaring
a dividend is adopted, as the case may be, shall be the record date for such
determination of shareholders. When a determination of shareholders entitled
to vote at any meeting of shareholders has been made as provided herein, such
determination shall apply to any adjournment thereof, except where the
determination has been made through closing the stock transfer books and the
stated period of closing has expired.
SECTION 6. LIST OF SHAREHOLDERS. The officer or agent of the
Corporation having charge of the stock transfer book of the Corporation shall
make, at least ten (10) days before each meeting of the shareholders, a
complete list of the shareholders entitled to vote at such meeting or any
adjournment thereof, arranged in alphabetical order, with the address of and
the number of voting shares held by each shareholder, which list, for a period
of ten (10) days prior to such meeting, shall be kept on file at the registered
office of the Corporation and shall be subject to inspection by any shareholder
at any time during the usual business hours. Such list shall also be produced
and kept open at the time and place of the meeting and shall be prima facie
evidence as
-2-
<PAGE> 4
to the identity of the shareholders entitled to examine such list or transfer
books or to vote at any meeting of shareholders. Failure to comply with any
requirements of this Section 6 shall not affect the validity of any action
taken at such meeting.
SECTION 7. QUORUM. The holders of a simple majority of the issued and
outstanding shares entitled to vote thereat, present in person or represented
by proxy, shall constitute a quorum at all meetings of the shareholders for the
transaction of business, except as otherwise provided by the Corporation's
Articles of Incorporation, the Texas Business Corporation Act (herein called
the "Act") or other law. If, however, such quorum shall not be present or
represented at any meeting of the shareholders, the shareholders entitled to
vote, present in person or represented by proxy, shall have power to adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting when a quorum shall be present or represented, any business may be
transacted that might have been transacted at the meeting as originally
notified. Once a quorum is constituted, the shareholders present or
represented by proxy at a meeting may continue to transact business until
adjournment, notwithstanding the subsequent withdrawal therefrom of such number
of shareholders as to leave less than a quorum.
SECTION 8. VOTING. When a quorum is present at any meeting, the vote
of the holders of a majority of the shares present or represented by proxy at
such meeting and entitled to vote shall decide any question brought before such
meeting and shall be the act of the shareholders' meeting, unless the vote of a
greater number is required by these By-Laws, the Articles of Incorporation, the
Act or other law.
Each shareholder shall, at every meeting of the shareholders, be
entitled to one vote in person or by proxy for each share having voting power
held by such shareholder, except to the extent that the voting rights of the
shares of any class or classes are limited or denied by the Articles of
Incorporation. Each outstanding share, regardless of class, shall be entitled
to one vote on each matter submitted to a vote at a meeting of shareholders,
except as and to the extent otherwise provided by statute or by the Articles of
Incorporation. At any meeting of the shareholders, every shareholder having
the right to vote shall be entitled to vote either in person or by proxy
executed in writing by such shareholder or by his duly authorized attorney in
fact. No proxy shall be valid after eleven (11) months from the date of its
execution unless otherwise provided in the proxy. Each proxy shall be
revocable unless the proxy form conspicuously states that the proxy is
irrevocable and the proxy is coupled with an interest. Proxies coupled with an
interest include the appointment as proxy of: (1) a pledgee; (2) a person who
purchased or agreed to purchase, or owns or holds an option to purchase the
shares; (3) a creditor of the Corporation who extended it credit under terms
requiring the appointment; (4) an employee of the Corporation whose employment
contract requires the appointment; or (5) a party to a voting agreement created
under Section B, Article 2.30 of the Texas Business Corporation Act. Each
proxy shall be filed with the Secretary of the Corporation prior to or at the
time of the meeting.
Shares of its own stock belonging to the Corporation or held by it in
a fiduciary capacity shall not be voted, directly or indirectly, at any
meeting, and shall not be counted in determining the total number of
outstanding shares at any given time.
-3-
<PAGE> 5
SECTION 9. ACTION BY UNANIMOUS CONSENT. Any action required to be
taken at any annual or special meeting of the shareholders of the Corporation
may be taken without a meeting, without prior notice, if a consent in writing,
setting forth the action so taken, is signed by all of the shareholders
entitled to vote with respect to the subject matter thereof.
SECTION 10. PRESENCE AT MEETINGS BY MEANS OF COMMUNICATIONS EQUIPMENT.
Subject to the provisions of Section 4 of this Article, shareholders may
participate in and hold a meeting of shareholders by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a
meeting held pursuant to this section shall constitute presence in person at
such meeting, except where a person participates in such a meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting is not lawfully called or convened.
ARTICLE III
DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the
Corporation shall be managed by its Board of Directors, which may exercise all
of the powers of the Corporation and do all such lawful acts and things as are
not by these By-Laws, the Articles of Incorporation, the Act or other law
directed or required to be exercised or done by the shareholders.
SECTION 2. NUMBER OF DIRECTORS. Unless otherwise provided in the
Articles of Incorporation, the number of directors of the Corporation shall be
fixed from time to time by resolution of the Board of Directors, but in no case
shall the number of directors be less than one (1). Until otherwise fixed by
resolution of the Board of Directors, the number of Directors shall be one (1).
No decrease in the number of directors shall have the effects of reducing the
term on any incumbent director. Directors shall be elected at each annual
meeting of the shareholders, except as provided in Section 3 of this Article,
and each director shall hold office until the annual meeting of shareholders
following the director's election or until the earlier of the director's death,
resignation, removal from office or until the director's successor is elected
and qualifies. Directors need not be residents of the State of Texas or
shareholders of the Corporation.
SECTION 3. VACANCIES. Subject to the other provisions of this
Section, any vacancy occurring in the Board of Directors may be filled by the
affirmative vote of a majority of the remaining directors, even though the
remaining directors may constitute less than a quorum of the Board of Directors
as fixed by Section 8 of this Article. A director elected to fill a vacancy
shall be elected for the unexpired term of the predecessor in office. Any
directorship to be filled by reason of an increase in the number of directors
may be so filled by the remaining Directors for a term of office continuing
only until the next election of one or more directors by the shareholders;
provided, however, that the Board of Directors may not fill more than two
vacancies due to an increase in the number of directors during the period
between two successive annual meetings of shareholders. Any vacancy occurring
in the Board of Directors or any directorship to be filled by reason of an
increase in the number of directors may be filled by election at an annual or
special meeting of shareholders called for that purpose. Shareholders
-4-
<PAGE> 6
holding a majority of the issued and outstanding shares entitled to vote may,
at any time, with or without cause, terminate the term of office of all or any
of the directors by a vote at any annual or special meeting called for that
purpose; provided, that if cumulative voting is not denied by the Articles of
Incorporation, if less than the entire Board is to be removed, no one of the
directors may be removed if the votes cast against removal would be sufficient
to elect that director if then cumulatively voted at an election of the entire
Board of Directors. Such removal shall be effective immediately upon such
shareholder action even if a successor is not elected simultaneously.
SECTION 4. ANNUAL MEETINGS. The first meeting of each newly elected
Board of Directors shall be held, without further notice, immediately following
the annual meeting of the shareholders at the same place unless, by unanimous
consent of the directors then elected and serving, such time or place shall be
changed.
SECTION 5. REGULAR AND SPECIAL MEETINGS. The Board of Directors of
the Corporation may hold meetings, both regular and special, either within or
without the State of Texas.
SECTION 6. TIME AND PLACE OF REGULAR MEETINGS. Regular meetings of
the Board of Directors may be held with or without notice at such time and
place as the Board of Directors may from time to time determine by resolution.
SECTION 7. TIME AND PLACE OF SPECIAL MEETINGS. Special meetings of
the Board of Directors may be called by or at the request of the President or
the Secretary and shall be called by the President or Secretary at the written
request of a majority of the incumbent directors. The person or persons
authorized to call special meetings of the Board of Directors may fix the time
and place for holding any special meeting of the Board of Directors so called.
Notice of any special meeting shall be given at least twenty-four (24) hours
previous thereto if given either personally (including written notice delivered
personally or telephone) or by telegram, and at least seventy-two (72) hours
previous thereto if given by written notice mailed to each director at the
address of the director's business or residence. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice or waiver of notice of such
meeting. If mailed, the notice shall be deemed to be delivered when deposited
in the United States mail addressed, in the above-specified manner, with
postage thereon prepaid. If notice be given by telegram, notice shall be
deemed to be delivered when delivered to the telegraph company for
transmission. Any director may waive notice of any meeting, as provided in
Article IV, Section 2 of these By-Laws. The attendance of a director at a
meeting shall constitute a waiver of notice of such meeting, except when a
director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened.
SECTION 8. QUORUM AND VOTING. At all meetings of the Board of
Directors, the presence of a simple majority of the number of directors fixed
in the manner provided by Section 2 of this Article shall be necessary and
sufficient to constitute a quorum for the transaction of business, and the
affirmative vote of at least a majority of the directors present at any meeting
at which there is a quorum shall be the act of the Board of Directors, except
as may be otherwise
-5-
<PAGE> 7
specifically provided by these By-Laws, the Articles of Incorporation, the Act
or other law. If a quorum shall not be present at any meeting of directors, a
majority of the directors present thereat may adjourn the meeting, from time to
time without notice other than such announcement at the meeting, until a quorum
shall be present.
SECTION 9. CHAIRMAN OF THE BOARD. The Board of Directors may, by
resolution adopted by a majority of the full Board of Directors, designate one
director as Chairman of the Board, who shall, if available, preside at all
meetings of the Board of Directors and all meetings of the shareholders.
SECTION 10. EXECUTIVE AND OTHER COMMITTEES. Subject to the
restrictions of Texas law, the Board of Directors, by resolution adopted by a
majority of the full Board of Directors, may designate among its members an
Executive Committee and one or more other committees to consist of one or more
directors, one of whom may be designated Chairman and who shall preside at all
meetings of such Committee. Each such Committee to the extent provided in such
resolution or in the Articles of Incorporation or in the By-Laws, shall have
and may exercise all of the authority of the Board of Directors, except that no
such committee shall have the authority of the Board of Directors in reference
to amending the Articles of Incorporation, approving a plan of merger or
consolidation, recommending to the shareholders the sale, lease, or exchange of
all or substantially all of the property and assets of the Corporation
otherwise than in the usual and regular course of its business, recommending to
the shareholders a voluntary dissolution of the Corporation or a revocation
thereof, amending, altering, or repealing these By-Laws or adopting new By-Laws
for the Corporation, filling vacancies in the Board of Directors or any such
committee, electing or removing officers or members of any such committee,
fixing the compensation of any member of such committee or altering or
repealing any resolution of the Board of Directors that by its terms provides
that it shall not be so amendable or repealable; and, unless such resolution,
the Articles of Incorporation, or these By-Laws expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of shares of the Corporation. All such committees shall
keep regular minutes or records of their proceedings and report the same to the
Board of Directors when requested. The designation of such committee and the
delegation thereto of authority shall not operate to relieve the Board of
Directors or any member thereof of any responsibility imposed by law.
SECTION 11. COMPENSATION OF DIRECTORS. Directors, in their capacity
as Directors, shall not receive any salary or compensation for their services,
but, by resolution of the Board of Directors, or pursuant to contract, a fixed
sum for expenses of attendance, if any, may be allowed for attendance at each
annual, regular or special meeting of the Board of Directors. Members of the
Executive Committee and other Special Committees may, by resolution of the
Board of Directors, or pursuant to contract, be allowed like reimbursement for
attending committee meetings. Nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
SECTION 12. ACTION BY UNANIMOUS CONSENT. Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if a written consent, setting
forth the action so taken, is signed by all the members of
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the Board of Directors or the committee, as the case may be, and such written
consent shall have the same force and effect as a unanimous vote at such
meeting.
SECTION 13. PRESENCE AT MEETINGS BY MEANS OF COMMUNICATION EQUIPMENT.
Members of the Board of Directors or any committee created by the Board of
Directors may participate in and hold a meeting of the Board or such committee
by means of conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each other, and
participation in a meeting held pursuant to this section shall constitute
presence in person at such meeting, except where a director participates in
such a meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting is not lawfully called or convened.
ARTICLE IV
NOTICES
SECTION 1. FORM OF NOTICE. Whenever under the provisions of these
By-Laws, the Articles of Incorporation, the Act or other law, notice is
required to be given to any director, officer, shareholder or other person and
no provision is made as to how such notice shall be given, it shall not be
construed to mean personal notice exclusively, but any such notice may be given
in writing, by registered or certified mail, postage prepaid, return receipt
requested, addressed to such person at such address as appears on the books of
the Corporation. Any notice required or permitted to be given by mail shall be
deemed to be given when deposited in the United States mail as herein
prescribed.
SECTION 2. WAIVER. Whenever any notice is required to be given to any
director, officer, shareholder or other person under the provisions of these
By-Laws, the Articles of Incorporation, the Act or other law, a waiver thereof
in writing signed by the person or persons entitled to such notice, whether
before or after the time stated in such notice, shall be equivalent to the
giving of such notice.
ARTICLE V
OFFICERS
SECTION 1. GENERAL. The elected officers of the Corporation shall be
a President, a Secretary and a Treasurer. The Board of Directors may also
elect or appoint one or more Vice Presidents, one or more Assistant
Secretaries, one or more Assistant Treasurers and such other officers and
assistant officers as may be deemed necessary, all of whom shall also be
officers. Any two or more offices may be held by the same person.
SECTION 2. ELECTION. The Board of Directors shall elect the officers
of the Corporation at each annual meeting of the Board of Directors. The Board
of Directors may from time to time elect or appoint such other officers and
agents as it shall deem necessary and shall determine the remuneration of all
officers and agents if any such compensation is awarded. The officers shall
hold office until the earlier of their death, resignation, removal from office
or until their respective successors are chosen and qualify. Officers need not
be members of the Board of
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Directors. Any officer or agent elected or appointed by the Board of Directors
may be removed, with or without cause, at any time by a majority vote of the
entire Board of Directors. Election of appointment of an officer or agent
shall not of itself create contract rights.
SECTION 3. PRESIDENT. The President shall be the chief executive
officer of the Corporation, shall preside at all meetings of the directors or
shareholders, shall have responsibility for the general and active management
of the business of the Corporation, and shall see that all orders and
resolutions of the Board of Directors are carried into effect. The President
and such other officers as the Board of Directors may determine shall execute
all contracts requiring a seal and shall execute any mortgages, conveyances or
other legal instruments in the name of and on behalf of the Corporation, but
this provision shall not prohibit the delegation of such powers by the
President to some other agent or attorney-in-fact of the Corporation.
SECTION 4. VICE PRESIDENTS. Each Vice President, if any, shall
generally assist the President in the management of the Corporation and shall
perform the duties and exercise the powers delegated by the President or from
time to time assigned by the Board of Directors. Each Vice President, in the
order of seniority or in any other order determined by the Board of Directors,
shall, in the absence or disability of the President, perform the duties and
exercise the powers of the President.
SECTION 5. SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and the shareholders, record all votes and actions there
taken, maintain the minutes or records of all such proceedings in a book to be
kept for that purpose, keep in safe custody the seal of the Corporation and
shall perform like duties for the Executive Committee and any other committees
of the Board of Directors when requested. The Secretary shall give, or cause
to be given, notice of all meetings of the shareholders and special meetings of
the Board of Directors, and shall perform such other duties as may be
prescribed by the Board of Directors and President.
SECTION 6. ASSISTANT SECRETARIES. Any Assistant Secretary shall, in
the absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties as may be
prescribed by the Board of Directors and the President.
SECTION 7. TREASURER. The Treasurer shall be the chief financial and
accounting officer of the Corporation and, subject to the direction of the
President and the Board of Directors, shall have custody of all corporate funds
and securities, shall deposit all monies and other valuable effects in the name
and to the credit of the Corporation in such depositories as may be designated
from time to time by the Board of Directors, shall manage the disbursements of
the Corporation's funds in satisfaction of its corporate obligations and in a
manner consistent with its business objectives, taking proper receipts or
vouchers for such disbursements, shall keep full and accurate records and books
of account of all the Corporation's receipts and disbursements, shall render to
the President and/or the Board of Directors upon request an accounting of all
the financial transactions taken on behalf of the Corporation and the financial
condition of the Corporation, shall be responsible for planning and budgeting
the Corporation's receipts,
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disbursements and capital requirements, and shall perform such other duties as
may from time to time be prescribed by the Board of Directors and the
President.
SECTION 8. ASSISTANT TREASURERS. Any Assistant Treasurer shall, in
the absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties as may be
prescribed by the Board of Directors and the President.
SECTION 9. BONDING. If required by the Board of Directors, all or
some of the officers, employees or agents of the Corporation shall give the
Corporation a bond in such form, in such sum and with such surety or sureties
as shall be satisfactory to the Board of Directors, for the faithful
performance of the duties of their office or position and for the restoration
to the Corporation, in case of their death, resignation, retirement or removal
from office, of all books, papers, vouchers, money and other property belonging
to the Corporation of whatever kind in their possession or under their custody
or control.
ARTICLE VI
CERTIFICATES REPRESENTING SHARES
SECTION 1. FORM OF CERTIFICATES. The Corporation shall deliver
certificates representing all shares to which shareholders are entitled.
Certificates representing shares of the Corporation shall be in such form as
shall be approved and adopted by the Board of Directors and shall be numbered
consecutively and entered in the books of the Corporation as they are issued.
Each certificate shall state on the face thereof that the Corporation is
organized under the laws of the State of Texas, the corporate name registered
under the laws of the State of Texas, the name of the registered holder, the
number, class of shares, and the designation of the series, if any, which said
certificate represents, the par value of the shares or a statement that the
share are without par value and such other information as required by these
By-Laws, the Articles of Incorporation, the Act or other law. Certificates
shall be signed by the President or any Vice President and by the Secretary or
any Assistant Secretary, and may be sealed with the seal of the Corporation or
a facsimile thereof. If any certificate is countersigned by a transfer agent
or registered by a registrar, either of which is other than the Corporation or
an employee of the Corporation, the signatures of the Corporation's officers
may be facsimiles. In case any officer or officers who have signed, or whose
facsimile signature or signatures have been used on such certificate or
certificates, shall cease to be such officer or officers of the Corporation
before such certificate or certificates have been delivered by the Corporation
or its agents, such certificate or certificates may nevertheless be issued and
delivered as though the person or persons who signed the certificate or
certificates or whose facsimile signature or signatures have been used thereon
had not ceased to be such officer or officers of the Corporation.
SECTION 2. LOST CERTIFICATES. The Corporation may direct that a new
certificate be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate to be lost or
destroyed. When authorizing the issue of a new certificate, the Board of
Directors, in its discretion and as a condition precedent to the issuance
thereof, may require the owner of the lost or destroyed certificate, or the
owner's legal representative, to advertise the same in such manner
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as it shall require and/or give the Corporation a bond in such form, in such
sum, and with such surety or sureties as it may direct, as indemnity against
any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost or destroyed.
SECTION 3. TRANSFER OF SHARES. Shares of stock shall be transferable
only on the books of the Corporation by the holder thereof in person or by his
duly authorized attorney. Subject to compliance with any restrictions on
transfer conspicuously noted on any certificate, upon surrender to the
Corporation or to the transfer agent of the Corporation of a certificate
representing shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Corporation or the transfer agent of the Corporation to issue a new certificate
to the person entitled thereto, cancel the old certificate, and record the
transaction upon its books.
SECTION 4. REGISTERED SHAREHOLDERS. The Corporation shall be entitled
to recognize the holder of record of any share or share of stock as the holder
in fact thereof and, accordingly, shall not be bound to recognize any equitable
or other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
SECTION 5. UNCERTIFICATED SHARES. Notwithstanding any other provision
of this Article, the Board of Directors may by resolution provide that some or
all of any or all classes and series of shares of the Corporation shall be
uncertificated shares; provided, that such resolution shall not apply to shares
already represented by a certificate until such certificate is surrendered to
the Corporation. After the issuance or transfer of uncertificated shares, the
Corporation shall send to the registered owner of such uncertificated shares a
written notice containing the information required to be set forth or stated on
certificates pursuant to these By-Laws, the Articles of Incorporation, the Act,
the Texas Business and Commerce Code or other law. Except as otherwise
expressly provided by law, the rights and obligations of the holders of
uncertificated shares and the rights and obligations of the holders of
certificates representing shares of the same class and series shall be
identical.
ARTICLE VII
INDEMNIFICATION AND INSURANCE
1. INDEMNIFICATION OF DIRECTORS. The Corporation shall indemnify
a person who was, is, or is threatened to be made, a named defendant or
respondent in a proceeding because the person is or was a director against any
judgments, penalties (including excise and similar taxes), fines, settlements
and reasonable expenses actually incurred by the person in connection with the
proceeding if it is determined, in the manner described below, that the person
(a) conducted himself in good faith, (b) reasonably believed, in the case of
conduct in his official capacity as a director of the Corporation, that his
conduct was in the Corporation's best interests, and in all other cases, that
his conduct was at least not opposed to the Corporation's best interests and
(c) in the case of any criminal proceeding, had no reasonable cause to believe
his conduct was unlawful; provided that if the person is found liable to the
Corporation or is found liable on the basis that personal benefit was
improperly received by the person, the indemnification (i) shall be
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limited to reasonable expenses actually incurred by the person in connection
with the proceeding and (ii) shall not be made in respect of any proceeding in
which the person shall have been found liable for willful or intentional
misconduct in the performance of his duty to the Corporation.
The determinations required above that the person has satisfied the
prescribed conduct and belief standards must be made (1) by a majority vote of
a quorum consisting of directors who at the time of the vote are not named
defendants or respondents in the proceeding, (2) if such a quorum cannot be
obtained, by a majority vote of a committee of the Board of Directors,
designated to act in the matter by a majority vote of all directors, consisting
solely of two (2) or more directors who at the time of the vote are not named
defendants or respondents in the proceeding, (3) by special legal counsel
selected by the Board of Directors or a committee of the Board by vote as set
forth in clause (1) or (2) of this sentence, or, if such a quorum cannot be
obtained and such a committee cannot be established, by a majority vote of all
directors, or (4) the shareholders in a vote that excludes the shares held by
directors who are named defendants or respondents in the proceeding. The
determination as to reasonableness of expenses must be made in the same manner
as the determination that the person has satisfied the prescribed conduct and
belief standards, except that if the determination that the person has
satisfied the prescribed conduct and belief standards is made by special legal
counsel, the determination as to reasonableness of expenses must be made by the
Board of Directors or a committee of the Board by vote as set forth in clause
(1) or (2) of the immediately preceding sentence or, if such a quorum cannot be
obtained and such a committee cannot be established, by a majority vote of all
directors.
The termination of a proceeding by judgment, order, settlement or
conviction, or on a plea of nolo contendere or its equivalent is not of itself
determinative that the person did not meet the requirements for indemnification
set forth above. A person shall be deemed to have been found liable in
respect of any claim, issue or matter only after the person shall have been so
adjudged by a court of competent jurisdiction after exhaustion of all appeals
therefrom.
Notwithstanding any other provision of these Bylaws, the Corporation
shall pay or reimburse expenses incurred by a director in connection with his
appearance as a witness or other participation in a proceeding at a time when
he is not a named defendant or respondent in the proceeding.
2. ADVANCEMENT OF EXPENSES TO DIRECTORS. Reasonable expenses
incurred by a director who was, is, or is threatened to be made, a named
defendant or respondent in a proceeding shall be paid or reimbursed by the
Corporation, in advance of the final disposition of the proceeding and without
any of the determinations specified in Section 1 of this Article, after the
Corporation receives a written affirmation by the director of his good faith
belief that he has met the standard of conduct necessary for indemnification
under Section 1 of this Article and a written undertaking by or on behalf of
such director to repay the amount paid or reimbursed if it is ultimately
determined that he has not met those requirements. The written undertaking
described in the immediately preceding sentence to repay the amount paid or
reimbursed to the director by the Corporation must be an unlimited general
obligation of the director but need not be secured and it may be accepted
without reference to financial ability to make repayment.
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3. OFFICERS. The Corporation shall indemnify and advance
expenses to an officer of the Corporation to the same extent that it is
required to indemnify and advance expenses to directors under these Bylaws or
by statute. In addition, the Corporation may indemnify and advance expenses to
an officer of the Corporation to such further extent, consistent with law, as
may be provided by the Articles of Incorporation, these Bylaws, general or
specific action of the Board of Directors, or contract or as permitted or
required by common law.
4. OTHERS. The Corporation may indemnify and advance expenses to
an employee or agent of the Corporation to the same extent that it is required
to indemnify and advance expenses to directors under these Bylaws or by
statute. The Corporation may indemnify and advance expenses to persons who are
not or were not officers, employees or agents of the Corporation but who are or
were serving at the request of the Corporation as a director, officer, partner,
venturer, proprietor, trustee, employee, agent or similar functionary of
another corporation for profit subject to the provisions of the Texas Business
Corporation Act, corporation for profit organized under laws other than the
laws of Texas, partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other enterprise to the same extent that it is required to
indemnify and advance expenses to directors under this Article or by statute.
The Corporation may indemnify and advance expenses to an employee, agent or
other person serving at the request of the Corporation (as described above in
this Section 4) who is not a director to such further extent, consistent with
law, as may be provided by the Articles of Incorporation, these Bylaws, general
or specific action of the Board of Directors, or contract or as permitted or
required by common law.
5. INSURANCE AND OTHER ARRANGEMENT. The Corporation may purchase
and maintain insurance or establish and maintain another arrangement on behalf
of any person who is or was a director, officer, employee or agent of the
Corporation or who is or was serving at the request of the Corporation as a
director, officer, partner, venturer, proprietor, trustee, employee, agent or
similar functionary of another corporation for profit subject to the provisions
of the Texas Business Corporation Act, corporation for profit organized under
laws other then the laws of Texas, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise, against or in
respect of any liability asserted against him and incurred by him in such a
capacity or arising out of his status as such a person, whether or not the
Corporation would have the power to indemnify him against that liability under
these Bylaws or by statute. If the insurance or other arrangement is with a
person or entity that is not regularly engaged in the business of providing
insurance coverage, the insurance or arrangement may provide for payment of a
liability with respect to which the Corporation would not have the power to
indemnify the person only if including coverage for the additional liability
has been approved by the shareholders of the Corporation.
Without limiting the power of the Corporation to purchase, procure,
establish or maintain any kind of insurance or other arrangement, the
Corporation may, for the benefit of persons indemnified by the Corporation, (1)
create a trust fund; (2) establish any form of self-insurance; (3) secure its
indemnity obligation by grant of a security interest or other lien on the
assets of the Corporation; or (4) establish a letter of credit, guaranty or
surety arrangement. The insurance or
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other arrangement may be purchased, procured, maintained or established within
the Corporation or with any insurer or other person deemed appropriate by the
Board of Directors regardless of whether all or part of the stock or other
securities of the insurer or other person are owned in whole or part by the
Corporation. In the absence of fraud, the judgment of the Board of Directors
as to the terms and conditions of the insurance or other arrangement and the
identity of the insurer or other person participating in an arrangement shall
be conclusive and the insurance or arrangement shall not be voidable and shall
not subject the directors approving the insurance or arrangement to liability,
on any ground, regardless of whether directors participating in the approval
are beneficiaries of the insurance or arrangement.
6. REPORT TO SHAREHOLDERS. Any indemnification of or advance of
expenses to a director in accordance with this Article or the provisions of any
statute shall be reported in writing to the shareholders with or before the
notice or waiver of notice of the next shareholders' meeting or with or before
the next submission to shareholders of a consent to action without a meeting
and, in any case, within the 12-month period immediately following the date of
the indemnification or advance.
7. ENTITLEMENT. These indemnification provisions shall inure to
each of the directors, officers, employees and agents of the Corporation, and
other persons serving at the request of the Corporation (as provided in this
Article), whether or not the claim asserted against him is based on matters
that antedate the adoption of this Article, and in the event of his death shall
extend to his legal representatives; but such rights shall not be exclusive of
any other rights to which he may be entitled.
8. DEFINITIONS. For purposes of this Article:
(a) The term "expenses" includes court costs and attorneys' fees;
(b) The term "proceeding" means any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
arbitrative or investigative, any appeal in such an action, suit or proceeding,
and any inquiry or investigation that could lead to such an action, suit or
proceeding;
(c) The term "director" means any person who is or was a director
of the Corporation and any person who, while a director of the Corporation, is
or was serving at the request of the Corporation as a director, officer,
partner, venturer, proprietor, trustee, employee, agent or similar functionary
of another corporation for profit subject to the provisions of the Act.
(d) The term "corporation" includes any domestic or foreign
predecessor entity of the Corporation in a merger, consolidation, or other
transaction in which the liabilities of the predecessor are transferred to the
Corporation by operation of law and in any other transaction in which the
Corporation by operation of law and in any other transaction in which the
Corporation assumes the liabilities of the predecessor but does not
specifically exclude liabilities that are the subject matter of this article.
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(e) The term "official capacity means (a) when used with respect to
a director, the office of director in the Corporation, and (b) when used with
respect to a person other than a director, the elective or appointive office in
the Corporation held by the officer or the employment or agency relationship
undertaken by the employee or agent in behalf of the Corporation but (c) in
both Paragraphs (a) and (b) does not include service for any other foreign or
domestic corporation or any partnership, joint venture, sole proprietorship,
trust, employee benefit plan, or other enterprise.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. Dividends upon the outstanding shares of the
Corporation, subject to the provisions of these By-Laws, the Articles of
Incorporation, the Act or other law and any agreements or obligations of the
Corporation, if any, may be declared by the Board of Directors at any regular
or special meeting. Dividends may be declared and paid in cash, in property,
or in shares of the Corporation, provided that all such declarations and
payments of dividends shall be in strict compliance with all applicable laws,
these By-Laws and the Articles of Incorporation. The Board of Directors, or a
committee thereof, may fix in advance a record date for the purposes of
determining shareholders entitled to receive payment of any dividend, such
record date to be not more than fifty (50) days prior to the payment date of
such dividend. In the absence of any action by the Board of Directors, or a
committee thereof, the date upon which the Board of Directors, or a committee
thereof, adopts the resolution declaring such dividend shall be the record
date.
SECTION 2. RESERVES. There may be created by resolution of the Board
of Directors out of the earned surplus of the Corporation such reserve or
reserves as the Board of Directors from time to time, in its discretion, deems
proper to provide for contingencies, or to equalize dividends, or to repair or
maintain any property of the Corporation, or for such other proper purpose as
the Board of Directors shall deem beneficial to the Corporation, and the Board
of Directors may modify or abolish any reserve in the same manner in which it
was created.
SECTION 3. FISCAL YEAR. The fiscal year of the Corporation shall be
fixed from time to time by resolution of the Board of Directors, but unless
otherwise fixed by the Board of Directors, it shall begin on January 1 and end
on December 31 of each calendar year.
SECTION 4. SEAL. The Corporation may have a seal that may be used by
causing it or a facsimile thereof to be impressed or affixed or in any manner
reproduced. Any officer of the Corporation shall have authority to affix the
seal to any document requiring it.
SECTION 5. RESIGNATION. Any director, officer, or employee or agent
of the Corporation may resign by giving written notice to the Board of
Directors, the President or the Secretary. The resignation shall take effect
at the time specified therein, or immediately upon delivery if no time is
specified therein. Unless specified in such notice, the acceptance of such
resignation shall not be necessary to make it effective.
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SECTION 6. REPAYMENT REQUIREMENT. If any payment made to an officer,
employee or agent of the Corporation for salary, commission, bonus, interest,
rent, entertainment reimbursement or otherwise shall be disallowed in whole or
in part by the Internal Revenue Service as an expenses deductible by the
Corporation, the full amount disallowed shall be reimbursed by such officer,
employee or agent to the Corporation. It shall be the duty of the Board of
Directors to enforce repayment of each such amount disallowed. In lieu of
payment by the officer or agent, subject to the determination of the Board of
Directors, proportionate amounts may be withheld from the officer, employee or
agent's future compensation payment or reimbursements until the amount owed to
the Corporation has been recovered. The provisions of this section shall be
deemed part of the contract of employment between the Corporation and each of
its officers, employees and agents.
SECTION 7. GUARANTY OF OBLIGATIONS OF DIRECTORS, AND OFFICERS AND
EMPLOYEES. When determined by the Board of Directors to be in the best
interest of the Corporation, the Corporation may guaranty the obligations of
any director, officer or employee of the Corporation. As used in this Section,
the term "guaranty" means a guaranty, mortgage, pledge, security agreement or
other agreement making the Corporation or its assets responsible respecting the
obligation or obligations of such director, officer, or employee.
SECTION 8. INTERESTED DIRECTORS AND OFFICERS. No contract or
transaction between the Corporation and one or more of its directors or
officers, or between any corporation, partnership, association or other
organization in which one or more of the directors or officers of the
Corporation are directors, officers or partners, or have a financial interest,
shall be void or voidable solely by reason of such relationship, or solely
because the director or officer is present at or participates in the meeting of
the Board of Directors of the Corporation or a committee thereof that
authorizes the contract or transaction, or solely because such person's votes
are counted for such purposes, if any one of the following conditions are met:
(A) the material facts as to the relationship or interest of
the director or officer and as to the contract or transaction are
disclosed or are known to the Board of Directors of the Corporation,
or the committee thereof that authorizes the contract or transaction,
and the Board of Directors of the Corporation or committee thereof, in
good faith authorizeS the contract or transaction by the affirmative
votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or
(B) the material facts as to the relationship or interest of
the director or officer and as to the contract or transaction are
disclosed or are known to the shareholders of the Corporation entitled
to vote thereon, and the contract or transaction is specifically
approved in good faith by the shareholders of the Corporation at the
annual or special meeting of shareholders called for that purpose; or
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(C) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified by the Board of
Directors of the Corporation, a committee thereof, or the shareholders
of the Corporation.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or the Corporation
or of a committee thereof that authorizes the contract or transaction.
SECTION 9. MISCELLANEOUS. These By-Laws and any amendments hereto
shall be interpreted and enforced under the laws of the State of Texas. Unless
expressly provided for otherwise in these By-Laws or the Articles of
Incorporation the Corporation, its shareholders, directors, officers, employees
and agents shall be governed by, and exercise the full range of powers
permitted or authorized by then prevailing Texas law, including amendments to
the Act that may be made from time to time. If a court or other administrative
body determines that any provision or clause in these By-Laws or any amendment
hereto is void, illegal, unreasonable or unenforceable, the other provisions
and clauses shall remain in full force and effect, and any provision or clause
so decreed to be void, illegal, unreasonable or unenforceable shall, to the
extent permissible by law, be limited so that it is enforceable and shall
remain in effect to the greatest extent permissible. The headings herein of
articles and sections are inserted for convenience only and shall not be deemed
to constitute a part of these By-Laws. Use of masculine terminology in these
By-Laws shall be construed to include the feminine as well as the neuter, and
unless the context requires otherwise, the singular shall include the plural
and vice versa.
ARTICLE IX
AMENDMENTS TO BY-LAWS
SECTION 1. AMENDMENTS. Unless specifically provided for otherwise
herein, these By-Laws may be altered, amended, modified or repealed, or new
By-Laws may be adopted, at any meeting of the Board of Directors at which a
quorum is present by the affirmative vote of a majority of the directors
present at such meeting.
CERTIFICATE OF ADOPTION
The undersigned, Secretary of the Corporation, hereby certifies that
the foregoing By-Laws were duly adopted by the Board of Directors of the
Corporation effective the 5th day of January, 1998.
--------------------------------
Michael R. Marshall, Secretary
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EXHIBIT 8.1
OPINION OF TYSON HOPKINS, CPA
<PAGE> 2
[TYSON HOPKINS LETTERHEAD]
January 9, 1998
Mr. Michael R. Marshall, President
U.S. Automobile Acceptance SNP-IV, Inc.
1120 N.W. 63rd Street
Suite G-106
Oklahoma City, Oklahoma 73116
Re: Federal Income tax considerations relating to
investment in Notes
Dear Mr. Marshall:
You have requested that I review and express an opinion regarding the Federal
income aspects of certain investments in notes by noteholders of U.S.
Automobile Acceptance SNP-IV, Inc. This letter intends to describe the expected
Federal income tax consequences of the interest income from the notes and the
tax treatment U.S. taxpayers and U.S. tax exempt entities.
I have prepared this summary from information provided by you and am basing my
conclusion on the following facts.
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 are no premiums or additional inducements to
noteholders that is properly includible as a result of the
note purchase. The interest on the notes will be payable
monthly during the life of the notes.
Section 61 of the Internal Revenue Code and the regulations issued by the
Internal Revenue Code and the regulations issued by the Internal Revenue
Service require that interest income be includible in gross income of
taxpayer/investors. Accrual basis taxpayers are required to include the
interest income when earned, even though it may not be received at that time.
Cash basis taxpayers are required to include in gross income the
<PAGE> 3
interest received regardless of the period in which it is earned.
You may have investors who are classified for Federal income tax purposes as
exempt. Generally, trusts forming part of a pension, profit sharing, or Keogh
plan meeting the requirements of Section 401(a) of the Code (all collectively
referred to as 'Exempt Plans'), and individual retirement accounts and trust
('IRAs and IRTs'), as well as certain charitable and other organizations
described in Code Section 501 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 exempt
organizations receive unrelated business taxable income, the Exempt Plans,
IRAs, IRTs and other exempt organizations will be subject to a tax imposed by
Section 511 of the Code on the portion of their income constituting unrelated
business taxable income. An Exempt Plan, IRA, IRT or other exempt organization
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 organization 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 or 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 reclassified as unrelated business taxable income
on which the Exempt Plan, IRA, IRT and other exempt organization may be taxed.
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<PAGE> 4
In considering an investment in the Notes of the Company of a portion of the
assets of an Exempt Plan, IRA, IRT or 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 Section 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 Section 2510.3-101, and (v) whether the income
would be unrelated business taxable income because of the use of acquisition
indebtedness as a source of the funds used to acquire the Notes.
This opinion considers only the items discussed herein. It is not to include
oral or other opinions that may have been discussed. If any of the facts
change, my opinion may change. I assume no responsibility for updating my
opinion unless specifically engaged in writing to do so.
Sincerely,
/s/ TYSON HOPKINS
Tyson Hopkins,
Certified Public Accountant
3
<PAGE> 1
EXHIBIT 10.1
FORM OF SECURITY AGREEMENT
<PAGE> 2
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 Chase Bank of Texas 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 Asset-Backed Promissory Notes issued and executed by Debtor, pursuant
to the Indenture of Trust (the "Indenture") dated ___________________, 1996, by
and between Debtor and Chase Bank of Texas and made payable to the holders of
such 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
sums advanced and 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, 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.
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<PAGE> 3
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 bank
account to the Trustee and will surrender control of said accounts to the
Trustee;
5. VERIFICATION OF COLLATERAL.
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.
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<PAGE> 4
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;
b. the Debtor fails to make a payment of the
principal of any Note when the same becomes
due and payable;
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 a majority 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 and is continuing the Trustee, by written notice to the Debtor,
may 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.
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<PAGE> 5
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.
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<PAGE> 6
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 notice to or 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 Texas. 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 Texas 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
Texas. 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:
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: Chase Bank of Texas
2200 Ross Avenue
Dallas, TX 75201
Attention: Corporate Trust Department
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> 7
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
CHASE BANK OF TEXAS
By:
------------------------------------
Its:
-----------------------------------
6
<PAGE> 8
SCHEDULE A
COLLECTIVE LIST OF PERSONS
CONSTITUTING THE SECURED PARTY
7
<PAGE> 1
EXHIBIT 10.2
FORM OF CUSTODIAN AGREEMENT
<PAGE> 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"), CHASE BANK OF TEXAS 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
Asset-Backed Promissory Notes (the "Notes") in the aggregate principal sum of
up to $40,000,000 due on or before December 31, 2003, 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 dealer 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. The custodian shall
maintain a surety bond with terms and in the amount as determined by the
Debtor. The costs of such bond shall be paid or reimbursed by the Debtor.
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, for attorneys' fees or charges of any
character or nature, which may be incurred by said Custodian by reason of
disputes arising
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<PAGE> 3
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 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 Company 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.
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<PAGE> 4
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
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 and shall be
performed 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:
CHASE BANK OF TEXAS
By:
-------------------------------------
Its:
------------------------------------
CUSTODIAN:
U.S. AUTOMOBILE ACCEPTANCE CORPORATION
a Texas corporation
By:
-------------------------------------
Its:
------------------------------------
3
<PAGE> 1
EXHIBIT 10.3
FORM OF SERVICING AGREEMENT
<PAGE> 2
SERVICING AGREEMENT
THIS SERVICING AGREEMENT, dated as of _____________, 199__, between
U.S. Automobile Acceptance Corporation, a Texas corporation, in its capacity as
Contract Servicer ("Servicer") of certain used motor vehicle promissory notes
("Contracts") of U.S. Automobile Acceptance SNP-IV, Inc., a Texas corporation
("Company"), herein enter into this Servicing Agreement as follows.
WITNESSETH:
WHEREAS, it is contemplated that following any purchase of designated
Automobile Finance Contracts (the "Contracts"), the Servicer will assist the
Company to collect the sums due thereon from the Obligors on the Purchased
Contracts so transferred and account to Company therefor as provided herein;
and
WHEREAS, Company has requested the Servicer to undertake to assist the
Company with the collection and servicing responsibilities with respect to any
and all of the Contracts;
NOW, THEREFORE, the parties agree as follows:
(1) Appointment of and Acceptance by the Servicer of Servicing
Obligations.
A. The Servicer, on behalf of Company, shall during the
term of this Agreement assist the Company to manage, administer and collect
each of the Contracts and shall exercise discretionary powers involved in such
management, administration and collection, and shall bear all costs and
expenses incurred in connection therewith, that may be necessary or advisable
in carrying out the Agreement. In the management, administration and
collection of the Contracts, the Servicer shall use at least the same care and
apply the same policies that a prudent man would exercise under the
circumstances if he owned the Contracts.
B. The Servicer shall have full power and authority to
do those things in connection with such servicing, administration and
collection activities which it may deem necessary or desirable in order to
maximize receipts collected from Obligors or enforce dealer recourse
agreements, and foreclose and sell vehicles related to defaulted Contracts, if
necessary. Without limiting the generality of the foregoing, the Servicer is
hereby authorized and empowered to execute and deliver, on behalf of Company,
instruments of satisfaction or cancellation, or of partial or full release or
discharge, and all other comparable instruments. The Servicer shall not
commence any legal action against an Obligor in the name of Company without the
prior written consent of Company. Company shall furnish the Servicer with any
powers of attorney and other documents necessary or appropriate to enable the
Servicer to carry out its servicing and administrative duties hereunder.
(2) Term. This Agreement shall commence as of the date first
written above and shall continue so long as the Company has any outstanding
Contracts that remain to be collected, absent an Event of Default.
(3) Compensation. In exchange for the services provided to
Company as described and governed herein, Servicer shall receive before the
tenth day of the month following a month in which such services are provided, a
Servicing Fee equal to twenty-one and 50/100 dollars ($21.50) per month times
the aggregate number of Contracts serviced by Servicer during the previous
month. Such aggregate number of Contracts shall equal the sum of all Contracts
identified on Contracts Schedules to periodically be added as exhibits to this
Agreement. Monthly 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 $12,000 in
the event only the Minimum Subscription Amount is sold (as such terms are
defined in the Company's Prospectus). The Servicer's monthly per Contract
Servicing fee shall be increased each year by the pro rata annually published
Consumer Price Index inflation factor.
Additionally, any third-party expenditures pursuant to
collection of defaulted Contracts, repossession and sale of foreclosed vehicle,
and enforcement of dealer recourse agreements shall be paid by the Company as
reimbursement to the Servicer within ten (10) days after receipt of invoice
from Servicer.
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<PAGE> 3
(4) Representations and Warranties of the Servicer. The Servicer
represents and warrants to Company that:
A. Organization and Good Standing. The Servicer is a
corporation duly organized, existing and in good standing under the laws of
Texas, and has full corporate power, authority and legal right to own its
properties and conduct its business as such properties are presently owned and
such business is presently contemplated, and to execute, deliver and perform
its obligations under this Agreement.
B. Due Qualification. The Servicer is duly qualified to
do business in the State of Texas and each other state where such qualification
is required in order to service the Contracts as required by this Agreement and
has obtained all necessary licenses, approvals or consents as are required
under applicable law to perform its duties hereunder.
C. Due Authorization. The execution, delivery and
performance of this Agreement has been duly authorized by the Servicer by all
necessary corporate action on the part of the Servicer.
D. Binding Obligation. This Agreement constitutes a
legal, valid and binding obligation of the Servicer, enforceable in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereinafter in effect, affecting the enforcement of creditors' rights in
general and such enforceability may be limited by general principles of equity
(whether considered in a proceeding at law or in equity).
E. No Violation. The execution and delivery of this
Agreement by the Servicer, and the performance of the transactions contemplated
by this Agreement and the fulfillment of the terms hereof applicable to the
Servicer, will not conflict with, violate, result in any breach of any of the
material terms and provisions of, or constitute (with or without notice or
lapse of time or both) a default under, any requirement of law applicable to
the Servicer or any indenture, contract, agreement, mortgage, deed of trust or
other instrument to which the Servicer is a party or by which it is bound.
(5) Covenants of the Servicer. The Servicer covenants that:
A. From and after the date hereof until such time as
this Agreement terminates, Servicer, shall at its own expense, direct all
Obligors on the Contracts and all Subcontract Servicers to remit all
collections and payments directly to, or otherwise cause all payments on the
Contracts to be deposited in, the Company's Master Collections Accounts.
Servicer shall have no ownership in or authority to amend, modify, change or
terminate the Master Collections Accounts. Servicer agrees and covenants that
it will utilize remittance instructions directing all payments be remitted
directly to the Master Collections Accounts, and Servicer additionally agrees
that all cash, checks, notes, drafts or other items which it receives
attributable to the Contracts including proceeds from dealer recourse
agreements, from resale of repossessed Financed Vehicles and recoveries on
insurance claims, shall be deposited in the Master Collections Accounts within
two business days of receipt.
B. Operations. The Servicer shall collect the Contracts
in an orderly and efficient manner consistent with good business practices and
in accordance with all applicable federal, state and local laws and
regulations.
C. Records. So long as Company has not given notice of
termination pursuant to Section 9, the Servicer shall (i) if required by
Company hold in trust and safely keep all Purchased Contract Closing Documents
and such other documents as may be required for the enforcement of the
Contracts; (ii) keep such accounts and other records as will enable Company to
determine the status of the Contracts; (iii) keep such books and records at its
offices or the offices of its subcontractors, identified in Section 3 herein;
and (iv) permit Company and its representatives at any time to inspect, audit,
check and make abstracts from Servicer's accounts, records, correspondence and
other papers pertaining to the Contracts. Servicer shall maintain its
respective records with respect to the Contracts in a manner such that the
Servicer can produce a computer file containing a listing (by Obligor) of all
Contracts, together with the account balance of such accounts and the payment
history related thereto. The Servicer shall provide Company with monthly
reports updating the information relating to account balances and activity and
certifying the amounts collected on the Contracts during the preceding month.
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<PAGE> 4
D. Continuation Statements. The Servicer shall execute
and file documents which shall create a first priority security interest in
favor of Company in each Financed Vehicle, including registration of the
Certificates of Title in the name of Company, and/or any other documents
requested by Company or which may be required by law to preserve fully and
protect the interest of Company in and to the Contracts.
E. Principal Executive Office. The Servicer shall not,
without providing thirty days' notice to Company, and without filing such
amendments to any previously filed financing statements as Company may require,
(i) change the county where its principal executive office or the offices where
the records relating to the Contracts are kept, or (ii) change its name,
identity or corporate structure in any manner which would, could or might make
any financing statement or continuation statement filed by Company or the
Servicer or any provision hereof seriously misleading within the meaning any
applicable enactment of the Uniform Commercial Code.
F. No Impairment. The Servicer will duly fulfill all
obligations on its part to be fulfilled under or in connection with each
Contracts and will do nothing to materially impair the rights of Company in the
Contracts.
G. Compliance with Law. The Servicer will comply, in
all material respects, with all acts, rules, regulations, orders, decrees and
directions of any governmental authority applicable to the Contracts or any
part thereof; provided, however, that the Servicer may contest any act
regulation, order, decree or direction in any reasonable manner which shall not
materially and adversely affect the rights of Company in the Contracts. The
Servicer will comply, in all material respects, with any obligation of a holder
of a Purchased Contract to the Obligor thereof arising under such Purchased
Contract or under applicable laws.
H. Security Interest. The Servicer will not sell,
pledge, assign or transfer to any other person, or grant, create, incur, assume
or suffer to exist any lien on any Contracts, or the books or records relating,
to any Contracts, or any interest therein: the Servicer will immediately
notify Company of the existence of any lien on any Contracts: the Servicer
shall defend the right, title and interest of Company in, to and under the
Contracts, whether now existing or hereafter transferred to Company, against
all claims of third parties claiming through or under the Servicer.
(6) Maintenance or Internal Control and Procedures. Servicer
shall, at all times during the term of this Agreement, follow internal control
procedures consistent with loan servicing industry standards and, at the
request of Company, will supply same in written form for review purposes.
(7) Computer. Servicer shall, at all times during the term of
this Agreement, utilize in the operation of its business the industry standard
computer software and contract information maintenance system, such system to
be approved by Company.
(8) Servicer Events or Default. The occurrence and continuation
of any one of the following events shall be a "Servicer Event of Default" under
this Agreement.
A. Failure on the part of the Servicer (i) to
immediately remit collections on the Contracts to the Master Collections
Accounts or (ii) remit payments to the Company or the Trustee under the
Indenture, when due and continuance of such failure for ten Business Days;
B. An involuntary case is commenced or filed against the
Servicer under the federal bankruptcy laws, as now or hereafter in effect, or
any other present or future federal or state bankruptcy, insolvency or similar
law, or for the appointment of a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of the Servicer or of any
substantial part of its property, or for the winding up of the affairs of,
liquidation, dissolution, or reorganization of the Servicer;
C. An order for relief shall be entered in a case under
title 11 of the United States Code in which the Servicer is a debtor, or the
Servicer shall become insolvent or admit in writing its inability to pay its
debts as they come due, or the commencement by the Servicer of a voluntary case
under the federal bankruptcy laws, as now or hereafter in effect, or any other
present or future federal or state bankruptcy, insolvency or similar law, or
the consent by the Servicer to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee,
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<PAGE> 5
custodian, sequestrator or other similar official of the Servicer or of any
substantial part of its property or the making by the Servicer of an assignment
for the benefit of creditors or the failure by the Servicer generally to pay
its debts as such debts become due or the taking of corporate action by the
Servicer in furtherance of any of the foregoing; or
D. Failure by Servicer to service and collect amounts
due from Obligors under Contracts and/or to adequately enforce dealer recourse
agreements as required by this Agreement.
(9) Remedies.
A. If a Servicer Event of Default shall have occurred,
Company may, by notice given in writing to the Servicer, terminate all of the
rights and obligations of the Servicer under this Agreement. Notwithstanding
any termination of the rights and obligations of the Servicer, the Servicer
shall remain responsible for any acts or omissions to act by it as Servicer
prior to such termination.
B. Company is hereby authorized and empowered (upon the
failure of the Servicer to cooperate) to execute and deliver, on behalf of the
Servicer as attorney-in-fact or otherwise, all documents and other instruments
upon the failure of the Servicer to execute or deliver such documents or
instruments, and to do and accomplish all other acts or things necessary or
appropriate to effect the purposes of a transfer of servicing rights to a
successor servicer.
C. The Servicer agrees to cooperate with Company and any
successor servicer in effecting the termination of the responsibilities and
rights of the Servicer to conduct servicing hereunder, including, without
limitation, the transfer to such successor servicer of all authority of the
Servicer to service the Contracts provided for under this Agreement, including,
without limitation, all authority over all collections which shall on the date
of transfer be held by the Servicer for deposit or which shall thereafter be
received with respect to the Contracts.
D. The Servicer shall promptly transfer its records
relating to the Contracts to a successor servicer in such form as such
successor servicer may reasonably request and shall promptly transfer to such
successor servicer all other records, correspondence and documents necessary
for the continued servicing of the Contracts in the manner and at such times as
the successor servicer shall reasonably request. To the extent that compliance
with this Section shall require the Servicer to disclose to such successor
servicer information of any kind which the Servicer reasonably deems to be
confidential, such successor servicer shall be required to enter into such
customary licensing and confidentiality agreements as the Servicer shall
reasonably deem necessary to protect its interest.
(10) Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns. Upon approval by the Company, the Servicer may contract with
industry-qualified third parties for the performance of any or all of its
obligations arising hereunder but no such contract shall relive Servicer from
liability for its performance hereunder.
(11) Company Event of Default Servicer's Remedies. In the event
that Company should fail to pay any fees or compensation due under this
Agreement, within ten (10) days of the date they are due, or are submitted for
payment, whichever is less, or shall fail to perform any of its duties or to
observe or perform any other term, covenant, condition or agreement provided
within this Agreement, said failure shall constitute an event of default by the
Company. In the event of such default, Purchaser shall have the option of
terminating this Agreement in addition to all remedies available in equity or
law.
(12) Modifications and Waivers. No delay on the part of any party
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver of any right, power or privilege hereunder
operate as a waiver of any other right, power or privilege hereunder, nor shall
any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof, or the exercise of any other
right, power or privilege hereunder. All rights and remedies herein provided
are cumulative and are not exclusive of any rights or remedies which the
parties hereto may otherwise have at law or in equity. No waiver shall be
valid in the absence of the written and signed consent of the party against
which enforcement of such is sought.
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<PAGE> 6
(13) Notice. Except as otherwise specifically provided herein, any
notice hereunder shall be in writing (including telegraphic or telecopy
communication) and, if mailed, shall be deemed to be given when sent by
registered or certified mail, postage prepaid, or if telegraphed when delivered
to the telegraph company, or if telecopied when transmitted, or otherwise when
delivered in person to the address and a receipt given for, in all such
instances addressed to the respective party, at such address as the addressee
may, by written notice received by the other party hereto, designate as the
appropriate address for purposes of notice hereunder.
(14) Amendment. This Agreement may be amended, supplemented or
modified only with the written consent of the parties hereto.
(15) Choice of Law. THIS AGREEMENT, AND THE VALIDITY AND
ENFORCEMENT HEREOF, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
SUBSTANTIVE LAWS OF THE STATE OF OKLAHOMA.
(16) Severability. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under present or future laws effective
during the term of this Agreement, the legality, validity and enforceability of
the remaining provisions of this Agreement shall not be affected thereby, and
in lieu of each such illegal, invalid or unenforceable provision there shall be
added automatically as a part of this Agreement a provision as similar in terms
of such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
(17) Entire Agreement. This instrument embodies the entire
agreement between the parties relating to the subject matter hereof and
supersedes all prior agreements and understandings, if any, relating to the
subject matter hereof.
(18) Counterparts. This Agreement may be executed in one or more
counterparts, each of which for all purposes is to be deemed an original.
(19) Survival. All covenants, agreements, undertakings,
indemnities, representations and warranties made herein shall survive both the
execution and the termination hereof and shall not be affected by any
investigation made by any party.
(20) Further Assurances. Servicer shall furnish to Company at the
request of the Company such additional information concerning the Contracts as
Company may from time to time reasonably request in order to establish
compliance with the terms and conditions of this Agreement, and shall execute,
acknowledge and deliver, or cause to be executed, acknowledged or delivered,
such supplements hereto and such further instruments as may reasonably be
required or appropriate and permitted by law to further express the intention,
or to facilitate the performance of, this Agreement.
"COMPANY"
U.S. AUTOMOBILE ACCEPTANCE SNP-IV, INC.
By:
-------------------------------------
Its:
------------------------------------
"SERVICER"
U.S. AUTOMOBILE ACCEPTANCE CORPORATION
By:
-------------------------------------
Its:
------------------------------------
5
<PAGE> 7
EXHIBIT TO SERVICING AGREEMENT
SERVICING CRITERIA
At all times during the term of the Servicing Agreement therein,
Servicer shall perform its duties in material accordance with the Servicing
Agreement, and observe the following covenants and criteria (referred to as the
"servicing criteria"):
I. SERVICING ACTIVITY REPORT
1. Servicer shall prepare, and deliver monthly to Company,
Servicing Activity Certificate (the "Certificate'), and the
president of Servicer shall certify as to the authenticity and
accuracy therein, that all Contacts managed by Servicer were
serviced in material accordance with the terms and conditions
of the Servicing Agreement, and that no Servicer Event of
Default as described in the Servicing Agreement has occurred
since the date of the last such Certificate.
2. The Certificate shall contain collection information on each
Contract since the date of the last such Certificate,
including adequately segregated information of all past due
accounts, repossessions, charge-offs, and extensions.
Supporting documents shall be made available to Company on a
demand basis, and such records shall be properly and safely
maintained.
3. The Certificate shall be delivered to Company on or before the
fifteenth day of the month following the month covered
thereunder.
II. COLLECTION POLICY
1. Contracts and all subcontract servicers will be issued advice
or instructions which will specifically request that all
payments be made to Company's Master Collections Accounts.
2. Servicer shall contact any Obligor on a past due Contract
within ten days after the payment due date for the purpose of
pursuing collection and shall adequately update all credit and
collection file records with respect to such activities.
3. Any material extensions, modifications, or acceptances of
partial payments by Obligors, and any related necessary
Contract amendments and/or default waivers by Servicer, shall
be approved by the chief credit officer or president of
Company or its assigns, and all necessary third party charges
and explanations relating thereto shall be documented.
III. FORECLOSURE/REPOSSESSION POLICY
1. The Servicer will take immediate appropriate action to enforce
dealer recourse agreement on behalf of the Company. The
Company will, if necessary, pursue repossession action,
subject to compliance with all state and Federal laws relating
thereto, against the Financed Vehicle underlying any Contract
whose Obligor is (i) four payments past due in the case of
biweekly or semi-monthly Notes, (ii) two payments past due in
the case of monthly notes, and who have failed for (i) sixty
consecutive days to remit any sums against payment obligations
under the respective Contract for biweekly or semi-monthly
Contracts, and (ii) seventy-five days for monthly Contracts.
Nothing contained in this Section shall be construed to limit
Servicer from pursuing repossession or any other collection
technique, subject to related state and Federal laws, sooner
than the time contemplated in (i) and (ii) above if Servicer
in its discretion deems such activity to be prudent and in the
best interests of Servicer, Company, or their assigns.
2. For each chargeoff of any material unpaid amount from an
Obligor under any Contract, Servicer shall document the
reasons for such chargeoff, shall maintain all third-party
related documentation for such chargeoff and shall notify (and
document such notification) customary credit bureaus regarding
the Obligor's deficiency.
6
<PAGE> 1
EXHIBIT 10.4
FORM OF SUBSCRIPTION ESCROW AGREEMENT
<PAGE> 2
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
Chase Bank of Texas ("Agent").
WHEREAS, Company is offering for subscription up to $40,000,000
principal amount of its Asset-Backed Promissory Notes Due December 31, 2003
(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> 3
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:
Chase Bank of Texas
2200 Ross Avenue
Dallas, TX 75201
2
<PAGE> 4
If to Company:
U.S. Automobile Acceptance SNP-IV, Inc.
1120 N.W. 63rd, Suite G-106
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:
Chase Bank of Texas
By:
----------------------------------------
Its:
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EXHIBIT 23.2
CONSENT OF TYSON HOPKINS, CPA
<PAGE> 2
CONSENT FOR INDEPENDENT AUDITOR'S REPORT
I consent to the use in the Form S-1 Registration Statement Under the
Securities Act of 1933, of U.S. Automobile Acceptance SNP-IV, Inc. of my report
dated January 9, 1998, on the balance sheet of U.S. Automobile Acceptance
SNP-IV, Inc. as of January 6, 1998 and the related statement of changes in
stockholders' equity for the period from incorporation on January 2, 1998
through January 6, 1998 and to the use of my name appearing under the heading
"Experts". Additionally, I consent to the inclusion of my opinion as to
certain federal income tax considerations dated January 9, 1998.
/s/ TYSON HOPKINS
Tyson Hopkins
Certified Public Accountant
Oklahoma City, Oklahoma
January 9, 1998
