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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1 TO
ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended
December 31, 1996
Commission File No. 0-23854
RELIANCE ACCEPTANCE GROUP, INC.
(formerly known as Cole Taylor Financial Group, Inc.)
Exact Name of Registrant as Specified in Charter
Delaware 36-3235321
-------- ----------
State or Other Jurisdiction of I.R.S. Employer
Incorporation or Organization Identification Number
400 North Loop 1604 East, Suite 200
San Antonio, Texas 78232
Address of Principal Executive Offices and Zip Code
(210) 496-5910
Registrant's Telephone Number, Including Area Code
<PAGE>
The undersigned registrant hereby amends the following items, financial
statements, exhibits and other portions of its Annual Report for 1996 on Form
10-K:
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Documents filed as part of the Form 10-K
(a)(1) The following Financial Statements are included on pages 28 through 50
of this Report:
Independent Auditors' Report - KPMG Peat Marwick LLP
Consolidated Balance Sheets as of December 31, 1996 and 1995
Consolidated Statements of Income for the years ended December 31, 1996, 1995
and 1994
Consolidated Statements of Changes in Stockholders' Equity for the years ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended December 31, 1996,
1995 and 1994
Notes to Consolidated Financial Statements
(a)(2) No financial statement schedules are included because such schedules are
not required or the information required has been presented in the
aforementioned financial statements.
(a)(3) Exhibits: The information called for by this paragraph is listed under
the caption "Exhibits" below.
(b) Reports on Form 8-K
The Company filed a Form 8-K on October 10, 1996. The Form 8-K was filed solely
to provide (i) the Company's historical financial statements restated for
discontinued operations (the "Restated Financials"), reflecting the
reclassification of the Company's historical financial statements for 1995, 1994
and 1993 to present the net assets and the results of operations of the banking
segment as a separate component, and (ii) Management's Discussion and Analysis
of Financial Condition and Results of Operations based upon the Restated
Financials.
(c) Exhibits
See Exhibit Index included herewith.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: April 9, 1997 Reliance Acceptance Group, Inc.
By: /s/ James I. Kaplan
---------------------------------------
James I. Kaplan
General Counsel and Corporate Secretary
RELIANCE ACCEPTANCE GROUP, INC.
(Formerly known as COLE TAYLOR FINANCIAL GROUP, INC.)
EXHIBIT INDEX
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<CAPTION>
Exhibit
Number Description Method of Filing
- ------- -------------------------------- ------------------------------
<S> <C> <C>
3.1 Amended and Restated Certificate Incorporated by reference to
of Incorporation of the Registrant Registration Statement on Form
S-1 (No. 33-75842)
3.2 Amended and Restated Bylaws of Incorporated by reference to
the Registrant Registration Statement on Form
S-1 (No. 33-75842)
3.3 Certificate of Amendment of Filed with this document
Certificate of Incorporation
dated February 12, 1997
4 Loan and Security Agreement, Filed with this document
dated July 12, by and between
Bank America Business Credit,
Inc., as Lender, Reliance
Acceptance Corporation, as
Borrower, and the other borrowers
named therein, as amended through
March 3, 1997
4.1 Indenture dated as of November Filed with this document
20, 1996, between the Originators
listed therein, as Sellers, and
Reliance Acceptance Corporation,
as Purchaser
4.2 Receivables Purchase Agreement, Filed with this document
dated as of November 20, 1996,
between the
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<CAPTION>
Exhibit
Number Description Method of Filing
------- ------------------------------------------- ---------------------------------------
<S> <C> <C>
Originators listed therein, as Sellers, and
Reliance Acceptance Corporation, as
Purchaser
4.3 Pooling and Servicing Agreement Filed with this document
Relating to Reliance Auto Receivables
Corporation Asset-Backed Notes, Series
1996-A, between Reliance Auto
Receivables Corporation, as Issuer,
Reliance Acceptance Corporation, in its
individual capacity and as Servicer, and
Harris Trust and Savings Bank, as
Trustee and Backup Servicer
10.1 Cole Taylor Financial Group, Inc. 1991 Incorporated by reference to Registration
Stock Option Plan* Statement on Form S-1 (No. 33-75842)
10.2 1985 Long-term Incentive Plan* Incorporated by reference to Registration
Statement on Form S-1 (No. 33-75842)
10.3 Cole Taylor Financial Group, Inc. Incorporated by reference to Registration
Employee Stock Ownership Plan* Statement on Form S-1 (No. 33-75842)
10.4 Cole Taylor Financial Group, Inc. Profit- Incorporated by reference to Registration
Sharing and Savings Plan* Statement on Form S-1 (No. 33-75842)
10.5 Form of Change of Control Severance Incorporated by reference to Registration
Agreement* Statement on Form S-1 (No. 33-75842)
10.6 Employment Agreement, dated as of July Filed with this document
31, 1996, between Cole Taylor Financial
Group, Inc., as Employer, and Howard
B. Silverman*
10.7 Employment Agreement, dated as of July Filed with this document
31, 1996, between Cole Taylor Financial
Group, Inc., as Employer, and Thomas L.
Barlow
11 Statement Regarding Computation of Incorporated by reference to Reliance
Earnings Per Share Acceptance Group, Inc. Annual Report
on Form 10-K, dated March 31, 1997
</TABLE>
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<TABLE>
<CAPTION>
Exhibit
Number Description Method of Filing
------- ------------------------------------------- ---------------------------------------
<S> <C> <C>
12 Statement Regarding Computation of Incorporated by reference to Reliance
Ratio of Earnings to Fixed Charges Acceptance Group, Inc. Annual Report
on Form 10-K, dated March 31, 1997
21 List of Subsidiaries Incorporated by reference to Reliance
Acceptance Group, Inc. Annual Report
on Form 10-K, dated March 31, 1997
23 Consent of KPMG Peat Marwick LLP Incorporated by reference to Reliance
Acceptance Group, Inc. Annual Report
on Form 10-K, dated March 31, 1997
27 Financial Data Schedule Incorporated by reference to Reliance
Acceptance Group, Inc. Annual Report
on Form 10-K, dated March 31, 1997
</TABLE>
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit to the Annual Report on Form 10-K.
The Company will furnish to any stockholder, upon written request, any exhibit
listed above upon payment by such stockholder of the Company's reasonable
expenses in furnishing any such exhibit.
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CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
COLE TAYLOR FINANCIAL GROUP, INC.
------------------------------------------
Adopted in accordance with the provisions
of Section 242 of the General Corporation
Law of the State of Delaware
------------------------------------------
The undersigned, being the Secretary of Cole Taylor Financial Group, Inc.
(the "Corporation"), a corporation organized and existing under and by virtue of
the Delaware General Corporation Law ("DGCL"), as amended, does hereby certify:
1. That the Certificate of Incorporation of the Corporation is
hereby amended by changing the Article numbered "FIRST" so that, as
amended, said Article shall read in its entirety as follows:
"FIRST: The name of the corporation is RELIANCE ACCEPTANCE GROUP,
INC."
2. That the foregoing amendment of the Certificate of Incorporation
of the Corporation has been duly adopted in accordance with Section 242 of
the DGCL.
3. That the Board of Directors of the Corporation duly adopted
resolutions setting forth the foregoing amendment, declaring said amendment
to be advisable and referring such amendment to the stockholders of the
Corporation for consideration thereof.
4. That the foregoing amendment has been duly adopted in accordance
with the provisions of the DGCL by the affirmative vote of the holders of a
majority of all outstanding stock entitled to vote at a meeting of
stockholders.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be
signed this 12th day of February, 1997.
COLE TAYLOR FINANCIAL GROUP, INC.
By: /s/ James I. Kaplan
------------------------------
Name: James I. Kaplan
Title: Secretary
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LOAN AND SECURITY AGREEMENT
dated July 12, 1994
between
BANKAMERICA BUSINESS CREDIT, INC.
and
COLE TAYLOR FINANCE CO.,
RELIANCE ACCEPTANCE CORP. OF COLORADO,
RELIANCE ACCEPTANCE CORP. OF FLORIDA,
RELIANCE ACCEPTANCE CORP. OF GEORGIA,
RELIANCE ACCEPTANCE CORP. OF INDIANA,
RELIANCE ACCEPTANCE CORP. OF LOUISIANA,
RELIANCE ACCEPTANCE CORP. OF NEW MEXICO,
RELIANCE ACCEPTANCE CORP. OF OHIO,
RELIANCE ACCEPTANCE CORP. OF TEXAS, AND
RELIANCE ACCEPTANCE CORP. OF TENNESSEE
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<S> <C>
ARTICLE ONE - DEFINITIONS
Terms Defined.................................................. 1
Adjusted LIBOR................................................. 1
Adjusted LIBOR Loans........................................... 1
Adjusted Net Earnings from Operations.......................... 1
Adjusted Tangible Assets....................................... 2
Adjusted Tangible Net Worth.................................... 2
Advance........................................................ 2
Advance Rate................................................... 2
Affiliate...................................................... 3
Availability................................................... 3
Bank........................................................... 4
Borrowing Base................................................. 4
Business Day................................................... 4
Closing Date................................................... 4
Code........................................................... 4
Collateral..................................................... 4
Collateral Report.............................................. 5
Collection Account Agreement................................... 5
Conversion Date................................................ 5
Contract Debtor................................................ 5
Contract....................................................... 5
Dealer......................................................... 6
Dealer Reserve................................................. 6
Dealer Agreement............................................... 6
Debt........................................................... 6
Default........................................................ 6
Delinquency Rate............................................... 6
Distribution................................................... 7
Dollars and the symbol "$" .................................... 7
Eligible Contracts............................................. 7
ERISA.......................................................... 9
Excess Availability............................................ 9
Facility Fee................................................... 9
Fiscal Year.................................................... 9
GAAP........................................................... 9
Goods.......................................................... 9
Gross Contract Payments........................................ 9
Instruments.................................................... 10
Intercompany Management Fees................................... 10
Interest Payment Due Date...................................... 10
Interest Period................................................ 10
Interest Rate Determination Date............................... 10
Interest Rate Option........................................... 10
Lender's Expenses.............................................. 11
LIBOR.......................................................... 11
LIBOR Reserve Percentage....................................... 12
Lien........................................................... 12
Loan........................................................... 12
Loan Documents................................................. 12
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London Business Day................................................ 12
Loss Reserve Percentage............................................ 12
Modified Contract.................................................. 13
Net Charge Offs.................................................... 13
Net Contract Payments.............................................. 13
Notice of Interest Rate Election................................... 13
Obligations........................................................ 13
Old Auto Contracts................................................. 13
Participant........................................................ 13
PBGC............................................................... 14
Permitted Liens.................................................... 14
Person............................................................. 14
Plan............................................................... 14
Property........................................................... 15
Reference Rate..................................................... 15
Reference Rate Loans............................................... 15
Reportable Event................................................... 15
Restricted Investment.............................................. 15
Rules.............................................................. 16
Security Documents................................................. 16
Subordinated Debt.................................................. 16
Subsidiary......................................................... 16
Total Credit Facility.............................................. 16
Unused Line Fee.................................................... 16
ARTICLE TWO - LOAN
Loan............................................................... 16
Monthly Statements Conclusive...................................... 17
ARTICLE THREE - INTEREST AND OTHER CHARGES
Interest Rate Option............................................... 18
Conversion, or Continuation, or Draw Down.......................... 18
Interest Periods................................................... 19
Interest Calculation............................................... 20
Payment of Interest................................................ 20
Adjusted LIBOR..................................................... 21
Funding Losses..................................................... 23
Facility Fee....................................................... 24
Unused Line Fee.................................................... 24
Default Interest Rate.............................................. 24
Maximum Interest Rate.............................................. 25
Capital Adequacy................................................... 25
ARTICLE FOUR - TERM
Term of Agreement and Loan Repayment............................... 26
Application of Payments............................................ 26
Termination of Security Interests.................................. 27
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ARTICLE FIVE - SECURITY INTEREST IN COLLATERAL
Creation of Security Interest in Collateral.............................................. 27
Financing Statements..................................................................... 27
Location of Collateral................................................................... 28
Delivery and Marking of Collateral....................................................... 28
Protection of Collateral; Reimbursement.................................................. 29
Monthly Reports Re Collateral............................................................ 29
Inspection............................................................................... 30
Verification............................................................................. 30
ARTICLE SIX - RECORDS AND SERVICING OF CONTRACTS
Records of Contracts..................................................................... 30
Servicing of Contracts................................................................... 31
Termination of Collection Rights......................................................... 31
Collection Account....................................................................... 31
ARTICLE SEVEN - REPRESENTATIONS, WARRANTIES AND COVENANTS
Representations and Warranties Reaffirmed................................................ 32
Warranties and Representations Re Contracts.............................................. 32
Warranties and Representations Re Collateral Generally................................... 33
Contract and Security Document Forms..................................................... 34
Solvent Financial Condition.............................................................. 34
Credit Guidelines........................................................................ 34
Organization, Authority, and Capital Structure........................................... 34
Financial Statements..................................................................... 34
Full Disclosure.......................................................................... 35
Pending Litigation....................................................................... 35
Title to Properties...................................................................... 35
Transaction is Legal and Authorized...................................................... 35
Taxes.................................................................................... 35
Compliance with Law...................................................................... 36
Borrower's Office........................................................................ 36
ERISA.................................................................................... 36
Name Changes............................................................................. 36
ARTICLE EIGHT - FINANCIAL AND OTHER COVENANTS
Payment of Taxes and Claims.............................................................. 37
Uniform Commercial Code Financing Statements and
Assignments of Contracts............................................................... 37
Maintenance of Properties and Existence.................................................. 37
Offices; FTC; Warranties................................................................. 37
Guaranties............................................................................... 38
Total Debt Ratio......................................................................... 38
Minimum Interest Coverage................................................................ 38
Prohibition on Distributions; Equity Capital Changes..................................... 38
Loss Reserves............................................................................ 39
Limitation on Amounts Paid to Dealers.................................................... 39
Unsubordinated Debt to Borrowing Base.................................................... 39
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Charge-Off Policy.................................................... 39
Minimum Adjusted Tangible Net Worth.................................. 40
Subordinated Obligations............................................. 40
Intercompany Management Fees......................................... 40
New Subsidiaries..................................................... 40
Dealer Agreement Forms............................................... 40
Debt................................................................. 41
Further Assurances................................................... 41
Merger; Liquidation.................................................. 41
Change in Business................................................... 41
Lender's Expenses.................................................... 41
Liens................................................................ 41
ERISA................................................................ 42
Restricted Investments Prohibition................................... 42
ARTICLE NINE - INFORMATION AS TO BORROWER
Financial Statements................................................. 42
Monthly and Annual Statements................................... 42
Projections..................................................... 43
Audit Reports................................................... 43
Requested Information........................................... 43
Notices......................................................... 43
ARTICLE TEN - CLOSING CONDITIONS
Representations and Warranties; Covenants; Defaults.................. 44
Delivery of Documents................................................ 44
Termination of Liens................................................. 44
Facility Fees........................................................ 45
Payment of Fees and Expenses......................................... 45
Required Approvals................................................... 45
No Material Adverse Change........................................... 45
ARTICLE ELEVEN - EVENTS OF DEFAULT: REMEDIES
Events of Default.................................................... 45
Interest or Principal........................................... 45
Payment of Other Sums........................................... 45
Warranties or Representations................................... 45
Breach of Certain Covenants..................................... 45
Breach of Other Covenants....................................... 46
Material Adverse Change......................................... 46
Bankruptcy, Etc................................................. 46
Attachment, Judgment, Tax Liens................................. 46
Default in Other Agreements..................................... 47
Assignment of Agreement......................................... 47
Payment of Subordinated Debt.................................... 47
Breach of Collection Account Agreement.......................... 47
Default Remedies..................................................... 47
Remedies Cumulative.................................................. 49
Waiver of Right of Offset............................................ 50
</TABLE>
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<PAGE>
ARTICLE TWELVE - GENERAL
Invalidated Payments.............................................. 50
Application of Code to Agreement.................................. 50
Parties, Successors and Assigns................................... 50
Notices........................................................... 52
Accounting Principles............................................. 53
Total Agreement................................................... 53
Governing Law..................................................... 53
Survival.......................................................... 53
Time of the Essence............................................... 53
Power of Attorney................................................. 53
Arbitration....................................................... 54
Litigation........................................................ 55
Severability...................................................... 55
Participant's Security Interests.................................. 55
Jury Trial Waiver, Etc............................................ 56
<PAGE>
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement ("Agreement") is made and entered into as
of July 12, 1994, between BankAmerica Business Credit, Inc., a Delaware
corporation ("Lender"), doing business as "BA Business Credit, Inc.," having an
address at 200 Lake Drive East, Suite 201, Cherry Hill, New Jersey 08002, and
Cole Taylor Finance Co., a Delaware corporation ("Parent Borrower"); Reliance
Acceptance Corp. of Colorado, a Delaware corporation; Reliance Acceptance Corp.
of Georgia, a Delaware corporation; Reliance Acceptance Corp. of Florida, a
Delaware corporation; Reliance Acceptance Corp. of Indiana, a Delaware
corporation; Reliance Acceptance Corp. of New Mexico, a Delaware corporation;
Reliance Acceptance Corp. of Ohio, an Ohio corporation; Reliance Acceptance
Corp. of Louisiana, a Louisiana corporation; Reliance Acceptance Corp. of Texas,
a Texas corporation; and Reliance Acceptance Corp. of Tennessee, a Delaware
corporation (collectively, "Subsidiary Borrowers"), whose the chief executive
offices are located at 350 East Dundee Road, Suite 203, Wheeling, Illinois
60090. (Parent Borrower and Subsidiary Borrowers are hereinafter collectively
referred to as "Borrower").
In consideration of the mutual covenants contained herein, the parties
agree as follows:
ARTICLE ONE - DEFINITIONS
-------------------------
1. Terms Defined. As used in this Agreement, the listed terms are defined
-------------
as follows:
1.1 Adjusted LIBOR shall mean the LIBOR adjusted and determined with
--------------
respect to the following formula:
* [LIBOR]
Adjusted LIBOR = ________________________________
[1.00-LIBOR Reserve Percentage]
* The amounts in brackets being rounded upwards if necessary, to the
next higher 1/100 of one percent.
1.2 Adjusted LIBOR Loans shall mean the applicable portions of the Loan
--------------------
bearing interest, during the Interest Period applicable to such Loan or portion
thereof, at a fixed rate determined with reference to the Adjusted LIBOR.
1.3 Adjusted Net Earnings from Operations shall mean, with respect to any
-------------------------------------
fiscal period of Borrower, Borrower's consolidated net income after provision
for income taxes for such fiscal period, as determined in accordance with GAAP
and reported on the financial
1
<PAGE>
statements for such period, less any and all of the following included in such
net income: (a) gain arising from the sale of capital assets; (b) gain arising
from any write-up in the book value of any asset; (c) earnings of any
corporation, substantially all the assets of which have been acquired by
Borrower in any manner, to the extent realized by such other corporation prior
to the date of acquisition; (d) earnings of any business entity in which
Borrower has an ownership interest unless (and only to the extent) such earnings
shall actually have been received by Borrower in the form of cash distributions;
(e) earnings of any Person (other than a Subsidiary Borrower) to which assets of
Borrower shall have been sold, transferred or disposed of, or into which
Borrower shall have been merged or which has been a party with Borrower to any
consolidation or other form of reorganization, prior to the date of such
transaction; (f) gain arising from the acquisition of any debt or equity
security of Borrower or from cancellation or forgiveness of debt; and (g) gain
arising from extraordinary items, as determined in accordance with GAAP, or from
any other nonrecurring transaction.
1.4 Adjusted Tangible Assets shall mean all assets except: (a) trademarks,
------------------------
trade names, franchises, goodwill, and other similar intangibles (except the
unamortized portion of the Facility Fee shall be treated as a tangible asset for
purposes of this calculation); (b) assets located and notes and receivables due
from obligors domiciled outside the United States of America, Puerto Rico, or
Canada; and (c) accounts, notes, and other receivables due from Affiliates or
employees.
1.5 Adjusted Tangible Assets Net Worth shall mean the remainder of (a)
----------------------------------
net book value (after deducting related depreciation, obsolescence,
amortization, valuation, and other proper reserves) of the Adjusted Tangible
Assets of Borrower, but excluding any amounts arising from write-ups of assets,
minus (b) the amount at which its liabilities (other than capital stock,
surplus, and retained earnings) would be shown on such balance sheet, and
including as liabilities all reserves for contingencies and other potential
liabilities.
1.6 Advance shall mean the proceeds of the Loan advanced from time to time
-------
by Lender to Borrower in accordance with the terms of this Agreement.
1.7 Advance Rate shall mean, as of any date of calculation, 83 percent,
------------
minus, if applicable, the greater of:
- -----
a. In the event that the Delinquency Rate for Borrower, computed on
a consolidated basis, exceeds 11 percent, then one whole percent for each whole
percent by which the Delinquency Rate exceeds 11 percent. (For example, if
Borrower's Collateral Reports for the month of March, delivered to Lender on
April 15, reflect
2
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that the Delinquency Rate for the Borrower on a consolidated basis, was 17.5
percent as of March 31, then the Advance Rate will immediately thereupon be 77
percent (calculated by subtracting 6 from 83 and if, as a result of such
calculation, an Over Advance was determined to have existed as of April 15,
based on an Advance Rate of 77 percent, then Borrower shall be required to pay
down the Loan accordingly.); or
b. In the event that the Delinquency Rate for more than half of the
Subsidiary Borrowers exceeds 12 percent, then one whole percent for each whole
percent by which the Delinquency Rate for such Subsidiary Borrowers, taken as a
whole, exceeds 12 percent. (For example, using the Collateral Reports described
above, if there were a total of seven subsidiary Borrowers and four had a
Delinquency Rate of more than 12 percent, this subtraction would apply. In such
event, a Delinquency Rate for the four Subsidiary Borrowers would be computed on
a consolidated basis and the appropriate Advance Rate reduction calculated on a
similar basis to that described in subsection 1.7 a. above.)
The date of calculation of the Advance Rate and the date any change therein
shall become effective is the date Borrower actually delivers to Lender its most
recent Collateral Report reflecting the Delinquency Rates for all of the
Subsidiary Borrowers. The Advance Rate, as so calculated shall remain in effect
until Borrower delivers to Lender its next most recent report reflecting the
Delinquency Rates for the Subsidiary Borrowers.
1.8 Affiliate shall mean: (a) any Person which directly or indirectly,
---------
controls, is controlled by or is under common control with, Borrower; (b) any
Person which beneficially owns or holds, directly, five percent or more of any
class of voting stock of Borrower; or (c) any Person, five percent or more of
any class of the voting stock (or if such Person is not a corporation, five
percent or more of the equity interest) of which is beneficially owned or held,
directly or indirectly, by Borrower. The term "control" (including the terms
"controlled by" and "under common control with") means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
or/and policies of the Person in question.
1.9 Availability shall mean, as of any date of calculation, the Advance
------------
Rate multiplied by the remainder of (a) aggregate amount of all Net Contract
Payments to be made under all Eligible Contracts, minus (b) the sum of (i) 50
-----
percent of the Dealer Reserve, plus (ii) Commercial Paper Indebtedness;
----
provided, however, that (a) the Net Contract Payments due under Old Auto
- -----------------
Contracts included in the Availability shall at no time exceed five percent of
all Net Contract Payments, and (b) in the event Borrower, after the date of this
Agreement, changes its method of accounting for the Dealer Reserve which has the
effect of
3
<PAGE>
accelerating the rate at which such reserve is recognized as income, then Lender
may increase the percentage rate applicable to the Dealer Reserve in order that
the Dealer Reserve deduction from Availability is the same as it would have been
had Borrower not changed such accounting method.
1.10 Bank shall mean Bank of America, N.T. & S.A., San Francisco,
----
California.
1.11 Borrowing Base shall mean the sum of the Adjusted Tangible Net Worth
--------------
of Borrower, plus all Subordinated Debt of Borrower.
1.12 Business Day shall mean any day that is not a Sunday or Saturday or
------------
any day on which banks in California are required or permitted to close.
1.13 Closing Date shall mean the date of this Agreement.
------------
1.14 Code shall mean the Uniform Commercial Code as adopted and in force in
----
the state of New Jersey as from time to time in effect and the Uniform
Commercial Code of any other jurisdiction as required under New Jersey Statues
Annotated, Section 12A:9-103.
1.15 Collateral shall mean all of the following, now owned and hereafter
----------
acquired:
a. all of Borrower's Contracts, including all returned or
repossessed Goods relating to such Contracts;
b. Security Documents relating to the Contracts, together with
Borrower's rights in the Property covered thereby;
c. all payments under the Contracts, in whatever form, including
cash, checks, notes, drafts, and other instruments for the payment of money;
d. all of Borrower's books and records relating to the Contracts
(including, without limitation, all computer records, computer programs, and
computer source codes, but excluding any computer or software licenses which
terminate or are terminable upon assignment);
e. all of Borrower's rights, but not its obligations, under all
Dealer Agreements, including all rights to require a dealer to repurchase a
Contract acquired from such dealer;
f. all proceeds of insurance including, without limitation, property
and casualty insurance, affecting the Contracts, and the Property subject
thereto;
4
<PAGE>
g. all proceeds, proceeds of proceeds, property, property rights,
privileges and benefits arising out of, from the enforcement of, or in
connection with the Contracts and Security Documents, the property rights and
the policies of insurance referred to above, all credit balances in favor of
Borrower on Lender's books, and all other general intangibles relating to or
arising out of the Contracts;
h. the collection accounts at Cole Taylor Bank into which proceeds
of the Contracts are swept on a daily basis;
i. any assets of Borrower in which Lender receives a security
interest or which thereafter come into Lender's possession, custody, or control;
and
j. all of Borrower's general intangibles.
1.16 Collateral Report shall mean a Loan Statement, Collateral Report, and
-----------------
Assignment on forms provided by Lender (or on such other form as approved by
Lender) in which Borrower has computed its Availability, the amount of the
requested Advance, and provided the other information requested therein.
1.17 Collection Account Agreement shall mean that certain Collection
----------------------------
Account Agreement substantially in the form attached hereto as Exhibit 1.17 and
incorporated herein.
1.18 Commercial Paper Indebtedness shall mean, as of any date of
-----------------------------
calculation, all Debt of Borrower owing under any commercial paper then
outstanding.
1.19 Conversion Date shall mean the Business Day on which a portion of the
---------------
Loan is converted to, continued as, or drawn down as an Adjusted LIBOR Loan.
1.20 Contract Debtor shall mean each Person who is obligated to Borrower to
---------------
perform any duty under or to make any payment pursuant to the terms of a
Contract.
1.21 Contract shall mean all of Borrower's right, title, and interest in
--------
and to each presently existing and hereafter arising loan account, account,
installment sale contract, contract right, Instrument, note, document, chattel
paper, general intangible, and all other forms of obligations owing to Borrower,
all rights of Borrower to receive payment thereof, together with all other
rights of Borrower obtained in connection therewith, and any collateral
therefor, including all rights under any and all Security Documents related to
the Contract.
5
<PAGE>
1.22 Dealer shall mean a dealer that has sold Goods to a Contract Debtor
------
pursuant to a Contract which Contract has been sold to Borrower.
1.23 Dealer Reserve shall mean, as of any date of calculation, the
--------------
aggregate Dollar amount held or owed by Borrower to Dealer which is subject to
the provisions of applicable Dealer Agreements between Borrower and its Dealers.
1.24 Dealer Agreement shall mean an agreement between Borrower and a Dealer
----------------
that governs the sale or assignment of Contracts from such Dealer to Borrower,
including any provisions for assignment (whether with or without recourse, a
repurchase obligation by the Dealer or a guaranty by such Dealer) contained in
such Contract or related Security Documents with respect thereto.
1.25 Debt shall mean (without duplication) all liabilities, obligations,
----
and indebtedness of Borrower to any Person, of any kind or nature, now or
hereafter owing, arising, due or payable, howsoever evidenced, created,
incurred, acquired, or owing, whether primary, secondary, direct or indirect,
contingent, fixed, or otherwise, and including, without in any way limiting the
generality of the foregoing: (i) Borrower's liabilities and obligations to trade
creditors; (ii) all Obligations; (iii) all obligations and liabilities to any
Person secured by a Lien on Borrower's Property, even though Borrower shall not
have assumed or become liable for the payment thereof; provided, however, that
-----------------
all such obligations and liabilities which are limited in recourse to such
Property shall be included in Debt only to the extent of the book value of such
property as would be shown on a balance sheet of Borrower prepared in accordance
with GAAP; (iv) all obligations and liabilities created or arising under any
lease or conditional sale or other title retention agreement with respect to
Property used or acquired by Borrower, even if the rights and remedies of the
lessor, seller, or lender thereunder are limited to repossession of such
Property; provided, however, that all such obligations and liabilities which are
-----------------
limited in recourse to such Property shall be included in Debt only to the
extent of the book value of such property as would be shown on a balance sheet
of Borrower prepared in accordance with GAAP; (v) all accrued pension fund and
other employee benefit plan obligations and liabilities; (vi) all obligations
and liabilities under each Guaranty; (vii) Subordinated Debt; and (viii)
deferred taxes.
1.26 Default shall mean an event or condition the occurrence of which
-------
would, with a lapse of time or the giving of notice or both, become an Event of
Default.
1.27 Delinquency Rate shall mean, as of any date of calculation, the
----------------
percentage determined by dividing (a) the aggregate amount of the Gross Contract
Payments to be made under
6
<PAGE>
Contracts with respect to which any payment due thereunder is 60 or more days
contractually delinquent, by (b) the aggregate amount of the Gross Contract
Payments to be made under all Contracts.
1.28 Distribution shall mean, in respect of any corporation (a) payment or
------------
making of any dividend or other distribution of property in respect to the
capital stock of such corporation, other than distributions in capital stock of
the same class; or (b) the redemption or other acquisition of any capital stock
of such corporation.
1.29 Dollars and the symbol "$" shall mean lawful money of the United
--------------------------
States of America.
1.30 Eligible Contracts shall mean only such Contracts which Lender, in its
------------------
reasonable discretion deems eligible, and without limiting Lender's
discretionary rights, satisfy at all times all of the following requirements as
determined by Lender, in its reasonable discretion:
a. the Contract is a bona fide, valid, and binding obligation of the
Contract Debtor, enforceable in accordance with its terms;
b. the Contract and related Security Documents are free of any claim
for credit, deduction, allowance, defense (including the defense of usury),
dispute, counterclaim or setoff;
c. the Contract is free of any prior assignment or Lien in favor of
any Person other than Lender;
d. the Contract correctly sets forth the terms thereof between
Borrower and the Contract Debtor, including the interest rate applicable
thereto;
e. the Security Documents correctly describe the Goods subject
thereto.
f. the signatures of all Contract Debtors are genuine and each
Contract Debtor had the legal capacity to enter into and execute such documents
on the date thereof;
g. the Contract strictly complies with all of Borrower's warranties
and representations contained herein with respect to Contracts;
h. the Contract Debtor under such Contract is not more than 60 days
contractually delinquent in making a payment scheduled thereunder, except as
specifically provided in subsection 1.30 j.;
7
<PAGE>
i. except as provided in subsection 1.30 h., neither Borrower nor
the Contract Debtor is in material default under the terms of the Contract
(e.g., the Property subject thereto is subject to repossession or has been sold
----
and the proceeds thereof applied to the Contract balance (the latter sometimes
being referred to as a "deficiency balance" Contract));
j. Borrower has not within any 12-month period granted to the
Contract Debtor more than two extensions of time (each not longer than one
month) for the payment of any sum due under the Contract;
k. repayment of the Contract is secured by a first Lien on Goods;
l. the terms of the Contract and Security Documents and all related
documents and instruments comply in all material respects with all applicable
laws;
m. all documents relating to the Contract, including those between
Borrower and the Contract Debtor, have been executed, are reasonably
satisfactory to Lender, and have been delivered to Lender or originals are
--
readily available to Lender in the files of Parent Borrower or each Subsidiary
Borrower, all as required under the terms of this Agreement;
n. the Contract Debtor is not an Affiliate of Borrower;
o. the Contract Debtor is a lawful resident of the continental
United States;
p. the creditworthiness of the Contract Debtor is reasonably
acceptable to Lender. Without limiting the generality of the foregoing, the
Contract Debtor's creditworthiness and the terms of the Contract shall conform
to Borrower's credit guidelines;
q. to the extent that the Contract balance includes sums
representing the financing of so-called "extended warranty plans," such plans
are (i) in substantial compliance with all applicable consumer credit laws,
including any and all special insurance laws relating thereto, and (ii)
underwritten by (x) a major automobile manufacturer, or an affiliate thereof, or
(y) an independent reputable and financially sound insurance company;
r. the original term of the Contract, together with any and all
extensions thereof, shall not exceed the number of months indicated opposite the
age of the Goods which are the subject of the Contract at the time the Contract
is originated;
8
<PAGE>
<TABLE>
<CAPTION>
Age of Goods (Model Years) Maximum Monthly Term
-------------------------- --------------------
<S> <C>
6 and more 36
4 or 5 42
3 or less 54
</TABLE>
s. the Contract is not a Modified Contract;
t. the Contract is chattel paper and has been stamped in accordance
with subsection 5.4 (b); and
u. the Contract Debtor is not subject to a bankruptcy proceeding.
1.31 ERISA shall mean the Employee Retirement Income Security Act of 1974,
-----
as amended.
1.32 Event of Default shall have the meaning given to that term in section
----------------
11.1.
1.33 Excess Availability shall mean, as of the date of determination, the
-------------------
remainder of Availability minus the unpaid balance of the Loan outstanding.
-----
1.34 Facility Fee shall have the meaning given to that term in subsection
------------
3.9.
1.35 Fiscal Year shall mean Borrower's fiscal year for accounting purposes.
-----------
The current fiscal year of Borrower will end on December 31, 1994.
1.36 GAAP shall mean at any particular time, with respect to Borrower,
----
generally accepted accounting principles as in effect at such time, consistently
applied; provided, however, that if employment of more than one principle shall
be permissible at such time in respect of a particular accounting matter, "GAAP"
shall refer to the principle which is then employed by Borrower with the
concurrence of its independent certified public accountants, who are reasonably
acceptable to Lender.
1.37 Goods shall mean any new or used motor vehicles, including equipment
-----
sold or financed in connection therewith, each being intended principally for
personal or family use by consumers, sold under a Contract.
1.38 Gross Contract Payments shall mean, as of any date of calculation, (a)
-----------------------
with respect to a Contract as to which interest is calculated on a precomputed
basis, all remaining unpaid, noncancelable payments to be made thereunder, and
(b) with respect
9
<PAGE>
to interest bearing Contracts, the remaining unpaid principal balance thereof,
together with all accrued but unpaid interest thereon.
1.39 Guaranty shall mean all obligations of a Person which in any manner
--------
directly or indirectly guarantees or assures, or in effect guarantees or
assures, the payment or performance of any indebtedness, dividend or other
obligation of any other Person (the "guaranteed obligations"), or to assure or
in effect assure the holder of the guaranteed obligations against loss in
respect thereof, including, without limitation, any such obligations incurred
through an agreement, contingent or otherwise: (a) to purchase the guaranteed
obligations or any Property constituting security therefor; (b) to advance or
supply funds for the purchase or payment of the guaranteed obligations or to
maintain a working capital or other balance sheet condition; or (c) to lease
Property or to purchase any debt or equity securities or other Property or
services.
1.40 Instruments shall have the same meaning as given to that term in the
-----------
Code, and shall include all negotiable instruments, notes secured by mortgages
or trust deeds, and any other writing which evidences a right to the payment of
money and is not itself a security agreement or lease, and is of a type which
is, in the ordinary course of business, transferred by delivery with any
necessary endorsement or assignment. The term "Instruments" shall not include
chattel paper.
1.41 Intercompany Management Fees shall mean all fees or other Debt due
----------------------------
from Borrower to any Affiliate for services rendered or facilities provided to
Borrower by such Affiliate.
1.42 Interest Payment Due Date shall have the meaning given to that term in
-------------------------
section 3.5.
1.43 Interest Period shall mean that period of time applicable to an
---------------
Adjusted LIBOR Loan, as determined pursuant to section 3.3 hereof.
1.44 Interest Rate Determination Date shall mean each date for determining
--------------------------------
the Adjusted LIBOR with respect to an Interest Period. The Interest Rate
Determination Date shall be the second London Business Day prior to the first
day of the related Interest Period for each Adjusted LIBOR Loan.
1.45 Interest Rate Option shall mean the Reference Rate or the Adjusted
--------------------
LIBOR selected by Borrower for all or any part of the Loan, as permitted by this
Agreement.
10
<PAGE>
1.46 Lender's Expenses shall mean:
-----------------
a. All reasonable expenses incurred by Lender in the preparation of
this Agreement and any and all amendments thereto, including its outside
attorney's fees and internally allocated costs of in-house counsel of Lender;
b. Except as otherwise expressly provided herein, all reasonable
out-of-pocket expenses incurred by Lender in the administration of this
Agreement and the Loan (excluding, however, any expenses incurred by Lender
which relate to the administration of any agreement between Lender and any
Participant), including but not limited to mailing costs and accounting fees;
c. All taxes levied against or paid by Lender (other than taxes on,
or measured by, the income of Lender) and all filing and recording fees, costs,
and reasonable expenses which may be incurred by Lender in respect to the filing
and/or recording of any document or instrument relating to the transactions
described in this Agreement;
d. All reasonable costs and expenses (including all allocated costs
of in-house counsel of Lender) incurred by Lender to collect the Collateral
(with or without suit), correct any Default or Event of Default, enforce any
provision of this Agreement, or gain possession of, maintain, handle, preserve,
store, ship, prepare for sale, and/or advertise to sell the Collateral, whether
or not the sale is consummated and collecting the Collateral with or without
suit; and
e. All reasonable costs, attorney's fees, and expenses of any kind
(including all allocated costs of in-house counsel of Lender) incurred in the
enforcement of this Agreement or the defense of legal proceedings involving any
claim made against Lender arising out of this Agreement or the protection of the
Collateral; provided, however, this provision shall not include any costs, fees,
-----------------
and expenses incurred by Lender in connection with any proceeding, claim, or
other matter relating solely to any claim or dispute between a Participant and
Lender.
1.47 LIBOR shall mean, relative to any Interest Period, the rate of
-----
interest determined by Bank to be the rate per annum at which Dollar deposits in
immediately available funds are offered to Bank by prime banks in the London
Eurodollar interbank market at or about 11:00 a.m. London time, two London
Business Days prior to the first day of the applicable Interest Period for a
period equal to such Interest Period in an amount approximately equal to the
principal amount requested to be drawn down, converted to, or continued as an
Adjusted LIBOR Loan, and for a period equal to such Interest Period.
11
<PAGE>
1.48 LIBOR Reserve Percentage shall mean, relative to any Interest Period,
------------------------
a percentage (expressed as a decimal) equal to the daily average during such
Interest Period of the percentages in effect on each day of such Interest
Period, as prescribed by the Federal Reserve System Board of Governors, for
determining the maximum aggregate reserve requirements (including any emergency,
supplemental, or other marginal reserve requirement) applicable to "Eurocurrency
Liabilities" pursuant to Regulation D or any other applicable regulation issued
from time to time by the Federal Reserve System Board of Governors which
prescribes reserve requirements applicable to "Eurocurrency Liabilities" as
currently defined in Regulation D having a term approximately equal to or
comparable to such Interest Period.
1.49 Lien shall mean: (a) any interest in Property securing an obligation
----
owed to, or a claim of a Person other than the owner of the Property, whether
such interest is based on common law, statute, or contract, and including
without limitation, a security interest, charge, claim, or lien arising from a
mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit
arrangement, agreement, security agreement, conditional sale contract, trust
receipt, or lease, consignment or bailment for security purposes; and (b) to the
extent not included under clause "(a)," any reservation, exception,
encroachment, easement, right-of-way, covenant, condition, restrictment, lease,
or other title exception or encumbrance affecting Property.
1.50 Loan shall mean the aggregate amount of all unpaid Advances, together
----
with all accrued and unpaid interest thereon, at any time owing by Borrower to
Lender.
1.51 Loan Account shall have the meaning given to that term in subsection
------------
12.4 g.
1.52 Loan Documents shall mean this Agreement and all other agreements,
--------------
instruments, and documents heretofore, now or hereafter evidencing, securing,
guaranteeing or otherwise relating to the Obligations, the Collateral (but
excluding the Collateral itself), Lender's security interests, or any other
aspect of the transactions contemplated by this Agreement.
1.53 London Business Day shall mean any Business Day on which commercial
-------------------
banks are open for international business (including dealings in Dollar
deposits) in London and San Francisco.
1.54 Loss Reserve Percentage shall mean, as of the date of calculation,
-----------------------
the greater of (a) 4 percent, or (b) the percentage calculated by dividing (i)
the aggregate amount of all Net Charge-Off's during each of the 12 calendar
months immediately preceding the date of calculation (numerator), by (ii) the
average monthly
12
<PAGE>
amount of Net Contract Payments outstanding as of the last day of each of those
12 months (denominator).
1.55 Maturity Date shall have the meaning given to that term in section
-------------
4.1.
1.56 Modified Contract shall mean a Contract which, at any time, (a) was
-----------------
in default for failure to pay for more than 60 days after its original
contractual due date any payment due thereunder and such payment default was
cured by adjusting or amending the Contract terms, or accepting a reduced
payment or otherwise, or (b) is a refinance or renewal of a prior Contract with
the Contract Debtor to accomplish any of the foregoing.
1.57 Net Charge Offs for any period shall mean the aggregate amount of all
---------------
payments due under Contracts which have been charged off during such period, as
reduced by the amount of cash actually received by Borrower during such period
on Contracts which had been charged off during previous periods or such period.
1.58 Net Contract Payments shall mean, as of any date of determination,
---------------------
the remainder of (a) the aggregate amount of the Gross Contract Payments due
under Contracts which have not been charged off by Borrower, minus (b) the
-----
aggregate amount of all unearned finance charges, unearned fees, and unearned
insurance premium income applicable thereto or included therein, as appropriate.
1.59 Notice of Interest Rate Election shall mean, with respect to Adjusted
--------------------------------
LIBOR Loans, a notice substantially in the form attached hereto as Exhibit 1.59
and made a part hereof.
1.60 Obligations shall mean all present and future Loans, advances,
-----------
liabilities, covenants, duties, and Debts owing by Borrower to Lender under the
terms of this Agreement, whether or not evidenced by any note, or other
instrument or document, whether arising from an extension of credit,
indemnification or otherwise, whether direct or indirect, absolute or
contingent, due or to become due, primary or secondary, as principal or
guarantor, and including without limitation, all interest, charges, expenses,
fees, attorneys fees, Lender's Expenses, filing fees, and any other sums
chargeable to Borrower hereunder or under another Loan Document.
1.61 Old Auto Contracts shall mean Eligible Contracts which are secured by
------------------
a Lien on Goods which are more than seven model years old at the inception of
the Contract.
1.62 Participant shall mean any financial institution which has been or
-----------
will be granted the right by Lender to participate in
13
<PAGE>
the Loan and who shall have entered into a participation agreement in form and
substance satisfactory to Lender.
1.63 PBGC shall mean the Pension Benefit Guaranty Corporation or any
----
Person succeeding to the functions thereof.
1.64 Permitted Liens shall mean: (a) Liens for taxes, assessments,
---------------
governmental charges, and claims not yet due and payable or Liens for taxes
being contested in good faith and by proper proceedings diligently pursued,
provided that a reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made therefor on any applicable financial
statements and that a stay of enforcement of any such Lien is in effect; (b)
Liens in favor of Lender; (c) Liens upon equipment granted in connection with
the acquisition of such equipment by Borrower provided the Lien attaches only to
such equipment; (d) statutory Liens of landlords, and Liens of carriers,
warehousemen, mechanics, materialmen, and repairmen, and other similar Liens
incurred in the ordinary course of business for sums not yet delinquent; (e)
Liens incurred or pledges or deposits made in the ordinary course of business in
connection with worker's compensation, unemployment insurance and other types of
social security or to secure the performance of tenders, statutory obligations,
surety, and appeal bonds; (f) any attachment, injunction, execution, tax lien,
or judgment for the payment of money which does not exceed $50,000 provided such
attachment, injunction execution, tax Lien or judgement is discharged or
execution thereon has been stayed within 30 days after the entry thereof; (g)
easements, rights of way, restrictions, and other similar charges or
encumbrances not interfering with the ordinary conduct of Borrower's business;
and (h) other Liens incidental to the conduct of the business of Borrower or the
ownership of its Property which were not incurred in connection with the
borrowing of money or the obtaining of advances or credit (whether of a purchase
money nature or otherwise) and which do not in the aggregate materially detract
from the value of such Property or materially impair the use thereof in the
operation of such business, provided such Liens, other than the Liens granted to
Lender, do not in the aggregate exceed $200,000 at any one time outstanding.
-------
1.65 Person means any individual, sole proprietorship, partnership, joint
------
venture, trust, unincorporated organization, association, corporation, or any
other entity.
1.66 Plan shall mean any pension or other employee benefit plan which is
----
subject to Title IV of ERISA, and which is: (a) a plan maintained by Borrower;
(b) a plan to which Borrower contributes or is required to contribute; (c) a
plan to which Borrower was required to make contributions at any time during the
five calendar years preceding the date of this Agreement; or (d)
14
<PAGE>
any other plan with respect to which Borrower has incurred or may incur
liability, including contingent liability, under Title IV of ERISA, either to
such plan or to the PBGC.
1.67 Property shall mean any interest in any kind of property or asset,
--------
whether personal or real property, or mixed, or tangible or intangible.
1.68 Reference Rate shall mean the rate publicly announced from time to
--------------
time by Bank, in its sole discretion as its reference rate. The Reference Rate
is not the lowest interest rate available from Bank. The Bank's Reference Rate
is based upon various factors, including Bank's costs and desired return,
general economic conditions, and other factors. Loans may be priced at, above,
or below the Reference Rate. The Reference Rate is merely a reference rate with
respect to which effective rates of interest are calculated. In the event Bank
shall abolish or abandon the practice of establishing its Reference Rate, Lender
shall designate a comparable reference rate which shall be deemed to be the
Reference Rate hereunder.
1.69 Reference Rate Loans shall mean Advances or applicable portions of
--------------------
the Loan bearing interest based upon the Reference Rate.
1.70 Reportable Event shall have the meaning assigned to that term in
----------------
Title IV of ERISA, including, without limitation, a reportable event described
in Section 4043 of ERISA or the regulations thereunder, a withdrawal from a Plan
described in Section 4063 of ERISA, or a cessation of operations described in
Section 4062(e) of ERISA.
1.71 Restricted Investment shall mean any interest in Property by Borrower
---------------------
in exchange for cash or other Property, whether in the form of an acquisition of
stock, debt security, or other indebtedness or obligation, or the purchase or
acquisition of any other Property, or by loan, advance capital contribution, or
subscription, except acquisitions of the following: (a) Contacts; (b) assets to
be used in the ordinary course of business by Borrower; (c) Goods acquired
through repossession and held for resale in the normal course of business; (d)
direct obligations of the United States of America, or any agency thereof, or
obligations guaranteed by the United States of America, provided, that such
obligations mature within one year from the date of acquisition thereof; (e)
certificates of deposit maturing within one year of the date of acquisition,
bankers acceptances or overnight bank deposits, in each case issued or created
by Cole Taylor Bank, or with a bank or trust company organized under the laws of
the United States or any state thereof having capital and surplus aggregating at
least $100,000,000; (f) commercial paper given the highest rating by a national
credit rating agency and maturing not more
15
<PAGE>
than 270 days from the date of creation thereof; (g) Debt authorized by Section
8.18; (h) investments in Restricted Subsidiaries; (i) bank deposits made in the
ordinary course of business; (j) assets owned by Borrower on the Closing Date;
and (k) loans to employees not exceeding $10,000 per employee and $100,000 in
the aggregate at any one time outstanding.
1.72 Restricted Subsidiary shall mean a Subsidiary, 100 percent of whose
---------------------
outstanding securities of any class or classes is legally and beneficially owned
by Parent Borrower.
1.73 Rules shall mean any law or regulation by which Lender or Borrower is
-----
bound.
1.74 Security Documents shall mean all security agreements, chattel
------------------
mortgages, deeds of trust, mortgages, or other security instruments, guaranties,
sureties, and agreements of every type and nature (including a certificate of
title) securing the obligations of a Contract Debtor under a Contract.
1.75 Subordinated Debt shall mean all debt of Borrower which at all times
-----------------
during the term of this Agreement is subordinated to the Obligations pursuant to
a written subordination agreement, the terms of which are satisfactory to Lender
in its sole and absolute discretion. Debt of Borrower to Cole Taylor Financial
Group, Inc. shall be considered Subordinated Debt provided (i) the principal is
not repayable while the Obligations are outstanding and (ii) interest is not
repayable while an Event of Default has occurred and is continuing.
1.76 Subsidiary means any corporation of which more than 50 percent of
----------
the outstanding securities of any class or classes, the holders of which are
ordinarily, in the absence of contingencies, entitled to elect a majority of the
corporate directors (or Persons performing similar functions), is at the time,
directly or indirectly through one or more intermediaries, owned by Borrower
and/or one of more of its Subsidiaries.
1.77 Total Credit Facility shall mean $100,000,000.
---------------------
1.78 Unused Line Fee shall have the meaning given to that term in section
---------------
3.10.
ARTICLE TWO - LOAN
------------------
2. Loan.
----
a. Upon the request of Borrower, made from time to time during the
term hereof, Lender agrees, subject to the terms and conditions of this
Agreement, to lend Borrower an aggregate
16
<PAGE>
principal amount not to exceed the lesser of (i) the Total Credit Facility or
(ii) Borrower's Availability; provided, however, no Advances will be made to
Borrower if an Event of Default exists which remains uncured or unwaived. All
such Advances shall be added to the Loan when made. Subject to the other terms
and conditions of this Agreement, funds paid by Borrower to Lender in full or
partial repayment of the Loan, during the term of this Agreement, may be
re-borrowed by Borrower.
b. Lender, in its sole and absolute discretion, may elect to make
Advances in excess of Borrower's Availability on one or more occasions (such
financial accommodations are hereinafter referred to as "Over Advances"), but if
it does so, Lender shall not be deemed thereby to have changed the limits of the
Total Credit Facility or Availability. Immediately upon demand by Lender for
repayment of the Over Advance, Borrower shall make such payment. All Over
Advances shall constitute part of the Loan hereunder and shall be subject to all
of the terms and conditions of this Agreement.
c. Each Advance request shall be conclusively presumed to be made by
a Person authorized by Borrower to do so and the crediting of the Advance to
Borrower's deposit account (which shall not be a payroll account), or as
Borrower shall direct, shall conclusively establish the obligation of Borrower
to repay such Advance as provided herein. Advances shall not be made into the
Collection Account. All Lender's Expenses and other charges due from Borrower to
Lender pursuant to this Agreement, may, at Lender's option, after notice to
Borrower, be charged to the Loan as of the date due from Borrower or the date
paid or incurred by Lender, as the case my be.
2.1 Monthly Statements Conclusive. Lender shall render monthly statements
-----------------------------
reflecting the amount of the Obligations owing by Borrower to Lender, including
statements of all principal, interest, and Lender's Expenses owing, and such
statements shall be conclusively presumed to be correct and accurate and shall
constitute an account stated (except for reversals and re-applications of
payments made to Lender as permitted under this Agreement and correction of
errors discovered by Lender) between Borrower and Lender unless, within 90 days
after receipt thereof by Borrower, Borrower shall deliver to Lender written
objection thereto specifying the errors, if any, contained in any such
statement.
17
<PAGE>
ARTICLE THREE - INTEREST AND OTHER CHARGES
------------------------------------------
3.1 Interest Rate Option.
--------------------
a. The Loan, until paid in full, shall henceforth bear interest on
the unpaid principal balance thereof from the initial funding date of each
Reference Rate Loan or the Conversion Date of each Adjusted LIBOR Loan as
follows:
i. with respect to Reference Rate Loans, the Reference Rate
plus .50 percent per annum. The interest rate on Reference Rate Loans shall be
adjusted as, when, and effective as of the first day of each month to equal the
Reference Rate on such date plus .50 percent per annum. Changes in the Reference
Rate shall occur without notice or demand of any kind, on all Reference Rate
Loans remaining from time to time unpaid; or
ii. with respect to Adjusted LIBOR Loans, at the Adjusted LIBOR
on the relevant Interest Rate Determination Date plus 2.50 percent per annum.
----
3.2 Conversion, or Continuation, or Draw Down. a. Subject to the
-----------------------------------------
provisions of this Article Three, Borrower shall have the option to (i) convert
all or a portion of the outstanding Loan from a Reference Rate Loan to one or
more Adjusted LIBOR Loans, (ii) convert all or any portion of the Loan from
Adjusted LIBOR Loans to a Reference Rate Loan on the expiration of the Interest
Period applicable thereto, (iii) upon expiration of the Interest Period
applicable to any Adjusted LIBOR Loan, to continue all or any portion thereof as
an Adjusted LIBOR Loan(s), and (iv) draw down all or any part of the Loan as an
Adjusted LIBOR Loan(s) or as a Reference Rate Loan; provided, however, no
-----------------
portion of the Loan may be continued as, converted to, or drawn down as a
Adjusted LIBOR Loan when a Default or Event of Default has occurred and is
continuing.
b. Whenever Borrower desires to change, or continue, or draw down a
portion of the Loan as an Adjusted LIBOR Loan, Borrower shall deliver by
overnight delivery or by confirmed facsimile transmission to Lender a properly
completed and executed Notice of Interest Rate Election no later than 11 a.m.
Cherry Hill, New Jersey, time, at least three London Business Days in advance of
the proposed Conversion Date or expiration of the current Interest Period, in
the case of a conversion or continuation, or draw down of the credit facility as
Adjusted LIBOR Loans. The Notice of Interest Rate Election shall specify: (i)
the proposed Conversion Date (which shall be a Business Day); and (ii) the
amount of the Loan to be continued, converted, or drawn down; and (iii) the
initial or continuation Interest Period(s) therefor; provided, however, that the
-------- -------
minimum amount of any draw down, conversion to, or continuation of Adjusted
LIBOR Loans shall be a minimum of $5.0
18
<PAGE>
million and integral multiples of $1.0 million in excess of that amount.
c. If at any time any Adjusted LIBOR Loan is outstanding with
respect to which a Notice of Interest Rate Election has not been delivered to
Lender in accordance with the terms of this Agreement specifying the basis for
determining the interest rate applicable thereto at the end of the applicable
Interest Period, then on the last day of any applicable Interest Period those
portions of the Loan shall be Reference Rate Loans until a Notice of Interest
Rate Election to the contrary has been given to Lender in accordance with the
terms of this Agreement.
d. Subject to the provisions of section 3.6 hereof, Adjusted LIBOR
Loans may only be converted into Reference Rate Loans or continued as Adjusted
LIBOR Loans on the expiration date of the Interest Period applicable thereto.
e. All outstanding portions of the Loan shall bear interest as a
Reference Rate Loan as determined pursuant to this Agreement, unless a Notice of
Interest Rate Election indicating that all or a portion of the Loan is to be an
Adjusted LIBOR Loan has been delivered to Lender in accordance with this section
3.2.
f. Any Notice of Interest Rate Election for conversion to or
continuation of, or a draw down of all or a portion of the Loan as an Adjusted
LIBOR Loan shall be irrevocable and Borrower shall continue to be bound to
convert, continue, or draw down in accordance therewith.
3.3 Interest Periods. The Interest Period for all Adjusted LIBOR Loans
----------------
shall mean the period beginning on (and including) that date on which such
Adjusted LIBOR Loan is made, continued as, or converted into, or drawn down as,
an Adjusted LIBOR Loan, pursuant to section 3.2 and ending on (but excluding,
for purposes of determining accrued interest) the day which numerically
corresponds to such date three months thereafter, provided, however, that:
-----------------
a. the Interest Period for any Adjusted LIBOR Loan shall commence on
the Conversion Date of such Adjusted LIBOR Loan;
b. except as provided in subsection 3.3 c. hereof, if an Interest
Period would otherwise expire on a day which is not a Business Day, such
Interest Period shall expire on the next succeeding Business Day;
c. any Interest Period which (i) begins on the last Business Day of
a calendar month (or a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last
Business Day of the relevant calendar month, or (ii) would expire on a day which
is not
19
<PAGE>
a Business Day, but is a day of the month after which no further Business Day
occurs in that month, such Interest Period shall expire on the last Business Day
of the month;
d. there shall be no more than seven Interest Periods in effect with
respect to Adjusted LIBOR Loans at any time outstanding; and
e. with respect to any Adjusted LIBOR Loan, no Interest Period shall
extend beyond the Maturity Date.
3.4 Interest Calculation. All interest (regardless of whether computed
--------------------
with regard to Adjusted LIBOR or the Reference Rate) shall be computed at the
close of each day by multiplying the outstanding Loan balance hereunder at the
close of business on that day by a daily interest factor, which daily interest
factor shall be calculated by dividing the aforesaid interest rates in effect on
that day by 360 (which results in more interest being charged than if 365 were
used). Lender shall calculate interest to be billed to Borrower with regard to
Adjusted LIBOR Loans based on the Interest Period set forth in the Notice or
Notices of LIBOR Election from Borrower to Lender. All Adjusted LIBOR Loans
shall bear interest from (and including) the first day of the applicable
Interest Period to (but excluding) the last day of such Interest Period at the
interest rate applicable to such Adjusted LIBOR Loan. All interest so computed
shall accrue for each and every day (365 days per year, 366 days per leap year)
on which any part of the Loan remains outstanding hereunder, including the day
on which any Advance is made regardless of the time of day the Advance is made,
and including the day on which funds are repaid unless repayment is credited by
Lender to the Loan prior to the close of Lender's business on the day of
receipt. Payments in immediately available federal funds received by Lender into
its account prior to 2:00 p.m. Cherry Hill, New Jersey, time on a Business Day,
shall be credited to the Obligations prior to the close of business on that day;
such funds received after 2:00 p.m. will be credited to the Obligations on the
next Business Day immediately following their receipt.
3.5 Payment of Interest. Until all Obligations have been paid in full,
-------------------
interest for each calendar month shall be due and payable on the fifteenth day
of the following month ("Interest Payment Due Date"), beginning with the
fifteenth day of the month immediately following the Closing Date. The monthly
interest charge shall be due and payable in full either by wire transfer of
immediately available funds or by such other means as is satisfactory to Lender.
In the event the fifteenth day of a particular month is not a Business Day, then
the Interest Payment Due Date shall be the first Business Day immediately
preceding the fifteenth day of a month which is a Business Day.
20
<PAGE>
3.6 Adjusted LIBOR.
--------------
a. Lender shall give Borrower prompt notice of the Adjusted LIBOR
determined by Lender for an Interest Period, and absent manifest or arithmetic
error, each determination of such rates by Lender shall be conclusive and
binding for all purposes hereof.
b. If Borrower requests a draw down of the credit facility as, or
conversion to, or continuation of an Adjusted LIBOR Loan for an Interest Period
and (a) Bank or Lender determines that, by reason of circumstances affecting the
interbank Eurodollar market generally, deposits in Dollars (in the applicable
amounts) are not then being offered to banks in the London Interbank Eurodollar
Market for the selected Interest Period, or (b) Lender shall certify in good
faith that the relevant rates of interest referred to in the definition of
Adjusted LIBOR will not accurately reflect the cost to Lender of making or
maintaining Adjusted LIBOR Loans for the Interest Periods therefor, then Lender
shall give notice thereof to Borrower not later than the proposed Conversion
Date, whereupon until Lender notifies Borrower that the circumstances giving
rise to such suspension no longer exist, the obligation of Lender to draw down,
convert, or continue any part of the Loan to bear interest at Adjusted LIBOR
shall be suspended so long as such circumstances exist.
c. If, after the date of this Agreement, the adoption of or any change in
applicable Rules or change in the interpretation or administration thereof, by a
governmental authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by Bank or Lender with
any request or directive (whether or not having the force of law) of any such
authority, central bank, or comparable agency shall make it unlawful or
impossible for Bank or Lender to draw down, convert, or maintain loans at
Adjusted LIBOR, Lender will forthwith notify Borrower of the circumstances and
the interest rates on the applicable portions of the outstanding Adjusted LIBOR
Loans shall be deemed to have been converted to the Reference Rate on either (a)
the last day of the then current Interest Period if Bank or Lender may lawfully
continue to maintain loans at the Adjusted LIBOR to such day, or (b) immediately
if Bank or Lender may not lawfully continue to maintain loans at Adjusted LIBOR
to such day.
d. If, after the date of this Agreement, any governmental authority,
central bank, or other comparable authority shall at any time impose, modify, or
deem applicable any reserve (including without limitation, any imposed by the
Board of Governors of the Federal Reserve System), any tax (including without
limitation, any United States interest equalization tax or similar tax however
named applicable to the acquisition or holding of debt obligations and any
interest or penalties with respect
21
<PAGE>
thereto), duty, charge, fee, deduction, withholding with respect to Adjusted
LIBOR Loans, special deposit or similar requirement against assets of, deposits
with or for the account of, or credit extended by, Lender, which changes the
basis of taxation of payments of principal and interest of Borrower to Lender,
or shall impose on Lender or Bank or the London Interbank Eurodollar Market any
other condition affecting loans at Adjusted LIBOR and the result of any of the
foregoing is to increase materially the cost to Bank or Lender of making or
maintaining the interest rate at Adjusted LIBOR or to reduce the amount of any
sum received or receivable by Lender under this Agreement by an amount deemed by
Lender or such Participant to be material, Lender will promptly notify Borrower
of any event of which it has knowledge occurring after the date hereof. If such
event occurs during any Interest Period or if Borrower requests conversion to
Adjusted LIBOR after notification of the event, said event will entitle Lender
to compensation pursuant to this subsection. A certificate of Lender claiming
compensation under this subsection, setting forth the basis for such
compensation, and setting forth the additional amount or amounts to be paid to
Lender hereunder shall be conclusive in the absence of manifest or arithmetic
error; and within five days after demand by Lender, Borrower shall pay to Lender
such additional amount or amounts as will compensate Lender for such increased
cost or reduction.
e. LIBOR shall be adjusted automatically on and as of the effective day
of any change in the relevant LIBOR Reserve Percentage.
f. Promptly upon notice from Lender, Borrower shall pay, prior to the
date on which penalties may attach thereto, all present and future stamp,
documentary, and other similar taxes, levies, or costs and charges whatsoever
imposed, assessed, levied, or collected on or in respect of Adjusted LIBOR Loans
solely as a result of the interest rate being determined by reference to
Adjusted LIBOR and/or the provisions of this Agreement relating to Adjusted
LIBOR and/or the recording, registration, notarization, or other formalization
of any of the foregoing and/or payments of principal, interest, or other amounts
made on or in respect of a Loan when the interest rate is determined by
reference to Adjusted LIBOR (all such taxes, levies, costs, and charges being
hereinafter collectively referred to as "Eurodollar Rate Tax"). Promptly after
the date on which payment of any such Eurodollar Rate Tax is due pursuant to
applicable law, Borrower will, at the request of Lender, furnish to Lender
evidence that Borrower has met its obligation under this subsection. Borrower
shall indemnify Lender against, and reimburse Lender on demand for, any
Eurodollar Rate Tax, as determined by Lender in its good faith discretion.
Lender, as appropriate, shall provide Borrower with appropriate receipts for any
payments or reimbursements made by Borrower pursuant to this subsection 3.6 f. A
certificate of Lender as to any amount
22
<PAGE>
payable pursuant to Article Three shall, absent manifest or arithmetic error, be
final, conclusive, and binding on all parties hereto.
g. Failure on the part of Lender to demand compensation for any
increased costs or reduction in amounts received or receivable with respect to
any Interest Period shall not constitute a waiver of Lender's right to demand
compensation with respect to such Interest Period or any other Interest Period,
provided demand therefor is made on Borrower not more than 90 days following the
event entitling Lender to such compensation. The protection of this subsection
3.6 g shall be available to Lender regardless of any possible contention of the
invalidity or inapplicability of the law, Rule, guideline, or other change or
condition which shall have occurred or been imposed.
3.7 Funding Losses. If Borrower fails to consummate any conversion to or
--------------
continuation or draw down of an Adjusted LIBOR Loan after a Notice of Interest
Rate Election has been delivered to Lender, Borrower shall reimburse Lender on
demand for any resulting loss or expense incurred by it (or by any Participant
in the related Loan) as if the Adjusted LIBOR Loan had been made on the date
specified in the Notice of Interest Rate Election at the interest rate
determined on the Interest Rate Determination Date and prepaid on the same date
in accordance with section 3.8; provided that Lender shall have delivered to
Borrower a certificate as to the amount of such loss or expense, which
certificate shall be conclusive in the absence of manifest or arithmetic error.
3.8 Prepayments; Prepayment Compensation For Adjusted LIBOR Loans.
-------------------------------------------------------------
Borrower shall, on demand by Lender, at any time and from time to time and as
often as the occasion therefor may arise, indemnify Lender against any and all
losses, costs, and expenses which Lender may at any time or from time to time
sustain or incur with respect to Adjusted LIBOR Loans as a consequence of the
failure of Borrower to borrow any Adjusted LIBOR Loan on the commencement date
of the Interest Period in respect thereof, or any prepayment of any principal of
any Adjusted LIBOR Loan or conversion of such Adjusted LIBOR Loan on a date
other than the last day of the Interest Period relating to the principal so
repaid or prepaid or so converted. Except as otherwise provided in section 4.2
below, all Loan repayments and prepayments shall be applied first to Reference
Rate Loans to the extent outstanding, then to Adjusted LIBOR Loans in the order
of the soonest to mature; if there is more than one Adjusted LIBOR Loan maturing
on any one day, then payment shall be applied to the Adjusted LIBOR Loan with
the higher rate of interest. Prepayments shall be in an aggregate amount of not
less than $5.0 million and integral multiples of $1.0 million. The losses,
costs, or expenses for which Borrower will indemnify Lender in the case of
repayment or prepayment of an Adjusted LIBOR Loan, as provided above, shall
include the amount by
23
<PAGE>
which (a) the total interest that would otherwise have become payable during the
period (`Reemployment Period') beginning on the date of such repayment or
prepayment and ending on the last day of the Interest Period pertaining to the
principal being prepaid or repaid exceeds the total amount of interest which
-------
would accrue and become payable to Lender during the Reemployment Period on the
principal so repaid or prepaid, if Lender, following such repayment or
prepayment, were to use its best efforts to reemploy as soon as possible (but in
any event within 3 days) the principal so prepaid or repaid by investing such
sum in obligations of the United States Treasury (excluding those commonly known
as `Flower Bonds') having a term substantially equal to the Reemployment Period.
The maturity date and yield to maturity of such United States Treasury
obligations shall be determined on the basis of quotations published in the Wall
----
Street Journal or similar publication on the prepayment or conversion date. If
- --------------
there shall be more than one debt obligation of the United States Treasury
maturing nearest in time to the expiration of the Reemployment Period then the
yield shall be the arithmetic average of the yields to maturity of all such
obligations.
3.9 Facility Fee. On the Closing Date Borrower shall pay to Lender a
------------
facility fee ("Facility Fee") equal to one-quarter of one percent of the Total
Credit Facility. Lender shall credit to the Facility Fee an amount equal to the
remainder of (a) Borrower's $100,000 deposit, paid to Lender pursuant to a
certain letter dated March 22, 1994, minus (b) Lender's Expenses incurred as of
-----
the date appearing on page one of this Agreement. Lender and Borrower agree that
the Facility Fee may be financed, at Lender's discretion, as an Advance to the
Loan.
3.10 Unused Line Fee. For every month during the term of this Agreement,
---------------
Borrower shall pay to Lender a fee ("Unused Line Fee") in an amount equal to
one-eighth of one percent per annum, multiplied by the amount by which (a) the
Total Credit Facility exceeds (b) the average closing daily unpaid balance of
the Loan during such month. Such fee, if any, shall be calculated on the basis
of a year of 360 days, actual days elapsed, and shall be payable to Lender on
the Interest Payment Due Date with respect to the prior month.
3.11 Default Interest Rate. If any Event of Default occurs, then
---------------------
commencing on the thirtieth day from the date such Event of Default occurs until
it is cured, if curable, or waived in writing by Lender, or until all
Obligations are paid and performed in full, Borrower shall pay interest on the
unpaid principal balance of the Reference Rate Loans and Adjusted LIBOR Loans at
a per annum rate three percent greater than the rate of interest otherwise
specified herein.
24
<PAGE>
3.12 Maximum Interest Rate. In no event shall the interest rate and other
---------------------
charges exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem applicable hereto.
In the event a court determines that Lender has received interest and other
charges in excess of the highest rate applicable hereto, Lender shall apply such
excess to the principal balance of the Obligations as of the date of such
determination. If no Obligations are then outstanding, then Lender shall refund
to Borrower such excess.
3.13 Capital Adequacy. If any change to an existing law or a future law,
----------------
regulation, or guideline, or the interpretation thereof by any court or
administrative or governmental authority charged with the administration
thereof, or compliance by Lender with any request or directive (whether or not
having the force of law) of any such authority, shall either (a) impose, modify,
or deem applicable or result in the application of, any reserve, special
deposit, capital maintenance, capital ratio, or similar requirements against
loans or loan commitments made by Lender or against any other extensions of
credit or commitments to extend credit or other assets of or any deposits or
other liabilities taken or entered into by Lender, or (b) cause Lender, in
anticipation of the effectiveness of any capital maintenance, capital ratio, or
similar requirement, to take reasonable action to enable itself to comply
therewith, or (c) impose on Lender any other condition regarding this Agreement
or the Total Credit Facility, and the result of any event referred to in clause
(a), (b), or (c) above shall be to increase the cost to Lender of making or
maintaining, or to impose upon Lender, or increase, any capital requirement
applicable as a result of the making or maintenance of, the Total Credit
Facility or the Obligations of Borrower or to reduce the amounts receivable by
Lender hereunder (which increase in cost or increase in (or imposition of)
capital requirements or reduction in amounts receivable may be determined by
Lender's reasonable allocation of the aggregate of such cost increases, capital
increases, or impositions or reductions in amount receivable resulting from such
events), then, upon demand by Lender, Borrower shall, at Borrower's option,
either (a) pay to Lender all outstanding Obligations without payment of the
earlier termination and prepayment premiums described in Section 4.1 hereof and
terminate this Agreement, or (b) immediately pay to Lender an amount sufficient
to compensate Lender for such increased cost or increase in (or the imposition
of) capital requirements or reduction in amounts receivable by Lender from the
date of such change, together with interest on each such amount from the date
demanded until payment in full thereof at the Default Rate of interest specified
in Section 3.11 hereof. Upon the occurrence of any event referred to in clause
(a), (b), or (c) above, a certificate setting forth in reasonable detail the
increased cost, reduction in amounts receivable, or amounts necessary to
compensate Lender as a result of an increase in (or imposition of) capital
25
<PAGE>
requirements submitted by Lender to Borrower, shall be conclusive, absent
manifest or arithmetic error, for all purposes.
ARTICLE FOUR - TERM
-------------------
4.1 Term of Agreement and Loan Repayment. This Agreement shall have an
------------------------------------
initial term of two years commencing on the Closing Date and terminating on July
12, 1996. (The date on which the term of the Agreement terminates being
hereinafter referred to as "Maturity Date"). The Loan shall be due and payable
in full on the Maturity Date without notice or demand and shall be repaid to
Lender by a wire transfer of immediately available funds. Borrower may at any
time terminate this Agreement prior to the Maturity Date by: (a) giving Lender
at least 60 days prior notice of intention to terminate this Agreement; (b)
paying and performing, as appropriate, all Obligations on or prior to the
effective date of termination; and (c) paying to Lender an early termination fee
equal to (i) three-quarters of one percent of the Total Credit Facility in the
event the effective date of termination is before the first anniversary of the
Closing Date; and (ii) one-half of one percent of the Total Credit Facility in
the event the effective date of termination occurs on or at any time after the
first anniversary date of the Closing Date. Upon the occurrence of an Event of
Default, Lender will have the rights and remedies set forth in this Agreement.
Notwithstanding the foregoing, the early termination fee shall be equal to
one-quarter of one percent of the Total Credit Facility, instead of the amount
indicated above, if (i) Borrower, at any time, requests an increase in the Total
Credit Facility by an amount which is not less than $25,000,000, but not more
than $50,000,000, without any other changes to any of the other provisions of
this Agreement, (ii) no Default or Event of Default exists at the time of such
request, (iii) at the time of the request the unpaid balance of the Loan is
equal to or greater than 60 percent of the Total Credit Facility, (iv) the
results of Borrower's operations have equaled or exceeded the projections
delivered by Borrower to Lender prior to the date of the request, and (v) Lender
does not, within 90 days of such request, agree to that increase. In the event
Lender grants the requested increase in the Total Credit Facility pursuant to
the previous sentence, Lender may only charge an additional facility fee equal
to one-quarter of one percent of the amount of the increase in the Total Credit
Facility, pro rated for the number of months remaining to the Maturity Date.
4.2 Application of Payments. All payments made by Borrower to Lender and
-----------------------
proceeds of the Collateral received by Lender shall be applied (a) first to the
payment of fees, interest, expenses, and all other Obligations due and payable
except unpaid principal, as determined by Lender, (b) second, to the payment of
unpaid principal that is due and payable; provided, however, that during
------------------
26
<PAGE>
the continuance of an Event of Default, Lender may apply all such payments to
the Obligations of Borrower in any amounts and in any priority as Lender shall
determine in its sole discretion, and (c) third, following termination, to
Borrower upon payment of all Obligations.
4.3 Termination of Security Interests. Notwithstanding termination, until
---------------------------------
the Loan and all other Obligations have been fully repaid (which shall be deemed
to occur only when Lender has received good funds), Lender shall retain a Lien
in all Collateral existing and thereafter arising and Borrower shall continue to
observe each and every covenant contained herein. Without limiting the
generality of the foregoing, after termination Borrower shall continue to assign
to Lender all Contracts and security therefor and shall, upon Lender's request,
immediately turn over to Lender, in kind, all proceeds received respecting the
Collateral. Only after termination and when Lender has received payment in full
of the Loan and all other Obligations, shall Lender execute a termination of all
security agreements and security interests given by Borrower to Lender
hereunder.
ARTICLE FIVE - SECURITY INTEREST IN COLLATERAL
----------------------------------------------
5.1 Creation of Security Interest in Collateral. Borrower hereby
-------------------------------------------
irrevocably and unconditionally grants Lender a continuing security interest in
all the Collateral and in all of Borrower's rights therein, whether presently
existing or hereafter acquired or arising, in order to secure prompt payment of
the Loan and the payment and performance by Borrower of all its other
Obligations. Lender's security interest in the Collateral shall attach to all
the Collateral without further act by Lender or Borrower. In the event any
Contract is evidenced by or consists of Instruments, Borrower shall immediately,
upon receipt thereof, endorse or assign (as appropriate), and deliver to Lender
such Instruments.
5.2 Financing Statements. Borrower agrees, at its own expense, to execute
--------------------
financing statements, continuation statements, and assignments of financing
statements provided for by the Code, together with any and all other instruments
or documents and to take such other action, including delivery, as may be
required to perfect or maintain Lender's security interest in the Collateral.
Unless prohibited by law, Borrower hereby appoints Lender and Lender's designee
as Borrower's attorney-in-fact (such appointment being coupled with an interest
and is, therefore, irrevocable) to sign Borrower's name and file or record, as
the case may be, at any time any such financing statements on Borrower's behalf.
27
<PAGE>
5.3 Location of Collateral.
----------------------
(a) Borrower represents and warrants that except for Collateral which
has been delivered to Lender under the terms hereof: (i) Schedule 5.3 is a
correct and complete list of the location of all books and records concerning
the Collateral, the locations of the Collateral, and location of all of
Borrower's places of business; (ii) the Collateral shall remain at all times in
the possession of Borrower; and (iii) the Collateral shall be kept at all times
only at the office of a Borrower who owns title to the Collateral (e.g.,
----
Reliance Acceptance Corp. of Texas shall only maintain at its offices Collateral
owned by that company, and not the Collateral of any other Borrower). Borrower
covenants and agrees that, except for Collateral in the possession of Lender, it
will not maintain the Collateral at any location other than those listed in
Schedule 5.3, and will not otherwise change or add to those locations, unless it
gives Lender at least 15 days prior notice thereof and executes and delivers to
Lender any and all financing statements and other documents that Lender requests
in connection therewith.
(b) Notwithstanding any provision of this Agreement to the contrary,
upon the occurrence of an Event of Default and the continuation thereof,
Borrower shall upon Lender's request immediately deliver to Lender, all
Contracts and related Security Documents then existing and thereafter arising.
Lender shall not be liable or responsible in any way for any act or default of
any carrier, forwarding agency, or other Person whatsoever sending or delivering
Collateral to Lender, but the same shall be at Borrower's sole risk. Lender
shall comply to the standards set forth in Section 12A:9-207 of the Code with
regard to the custody and preservation of any Collateral in Lender's possession
at any time.
5.4 Delivery and Marking of Collateral. (a) In the event that any of the
----------------------------------
Collateral is evidenced by Instruments, then prior to any Advance with respect
thereto, Borrower shall endorse to Lender's order and deliver to Lender the
original of such Instruments.
(b) Except with respect to Instruments delivered to Lender pursuant
to subsection 5.4(a) above, Borrower shall immediately following the execution
or receipt of a Contract, stamp on the Contracts the following words:
"This document is subject to a security interest in favor of
BankAmerica Business Credit, Inc.";
provided, however, Borrower shall have until a date 90 days after the date of
- -----------------
the Closing Date to stamp all Contracts existing on such date which the words
required under subsection 5.4(b).
28
<PAGE>
(c) Borrower shall store all Contracts and Security Documents in
secure cabinets at all times except when such documents are taken out thereof
during the normal course of business.
5.5 Protection of Collateral; Reimbursement. (a) Borrower shall pay all
---------------------------------------
expenses of protecting, storing, insuring, handling, maintaining, and shipping
the Collateral and any and all excise, property, sales, and use taxes levied by
any state, federal or local authority on any of the Collateral or in respect of
the sale thereof.
(b) If Borrower fails promptly to pay any portion of the expenses
specified in subsection 5.5 (a) when due, Lender may, at its option (but shall
not be required to), pay the same and charge such amount to the Loan balance,
and Borrower agrees promptly to reimburse Lender therefor with interest accruing
thereon daily at the rate of interest from time to time in effect for Reference
Rate Loans. All sums so paid or incurred by Lender for any of the foregoing and
any and all sums for which Borrower may become liable under this Agreement and
all reasonable costs and expenses (including Lender's Expenses) which Lender may
incur in enforcing or protecting its Lien or rights and interest in the
Collateral or any of its rights or remedies under this Agreement or any other
agreement between the parties hereto or in respect of any of the transactions
occurring under the Contracts until paid by Borrower to Lender with interest at
the rate of interest from time to time in effect for Reference Rate Loans, shall
be considered as part of the Obligations and as such, shall be secured by all
the Collateral.
5.6 Monthly Reports Re Collateral. Borrower shall deliver to Lender,
-----------------------------
within 15 days after the end of each calendar month during the term of this
Agreement, and at any other time as may be reasonably requested by Lender, all
of the following documents (which shall be reasonably satisfactory to Lender, in
form and content):
a. A Collateral Report;
b. A report reflecting the Delinquency Rate for each of the
Subsidiary Borrowers;
c. A certificate executed by the chief financial officer of
Borrower, certifying, inter alia, that Borrower is in compliance with all terms,
----------
covenants, and conditions contained in this Agreement and no Default or Event of
Default then exists; and
d. A summary of the aging of the Contracts on a contractual basis,
and upon Lender's request, a detailed aging report.
29
<PAGE>
5.7 Inspection. Borrower shall permit Lender and its representatives to
----------
make such verification and inspection of the Collateral and to make audits and
inspections, at any reasonable time and as frequently as Lender desires of
Borrower's books, accounts, records, correspondence and such other papers as it
may desire. In order to reimburse Lender for the cost of such verifications,
audits, and inspections, Borrower shall pay to Lender a monthly audit fee
calculated on a branch-by-branch basis, which fee for each branch shall equal
the lesser of (a) $250; or (b) the product of (i) .004, multiplied by (ii) one
----------
percent of the aggregate amount of the Gross Contract Payments to be made under
all Contracts administered by such branch office as of the last day of the month
with respect to which the fee is calculated. The monthly audit fee shall be
based on the total number of branch offices, as determined as of the last day of
the month for which the fee is calculated. Each monthly installment shall be
payable to Lender on each Interest Payment Due Date, commencing with the month
immediately following the Closing Date. Notwithstanding the foregoing, upon the
occurrence of any Event of Default, Borrower shall pay all Lender's cost
incurred in connection with the verification, audit, and inspection of the
Collateral without regard to the foregoing limitations. Borrower shall supply
copies of and permit Lender to copy such records and papers as Lender may
request, and shall permit Lender to discuss Borrower's affairs, finances, and
accounts with Borrower's employees, partners and independent public accountants
(and by this provision Borrower hereby authorizes said accountants to discuss
with Lender the finances and affairs of Borrower and each of its subsidiaries)
all at such reasonable times and as often as may be reasonably requested.
Borrower further agrees to supply Lender with such reasonable information
relating to Borrower and the Collateral as Lender shall request. In the event of
any litigation between Borrower and Lender, any right of civil discovery shall
be in addition to, but not in lieu of, Lender's rights under this section.
5.8 Verification. Lender may, from time to time, verify directly with
------------
Contract Debtors the validity, amount, and any other matters relating to the
Collateral by means of mail, telephone, or otherwise, either in the name of
Borrower or Lender or such other name as Lender may choose.
ARTICLE SIX - RECORDS AND SERVICING OF CONTRACTS
------------------------------------------------
6.1 Records of Contracts. Borrower shall keep or will cause to be kept in
--------------------
a safe place, at its chief executive office and other locations specified in
Schedule 5.3, proper and accurate books and records pertaining to the
Collateral. Borrower shall maintain a system, satisfactory to Lender, for
duplicating and storing, at a secure location, a duplicate set of books and
records concerning
30
<PAGE>
the Collateral. In addition, Borrower shall maintain a credit file for each
Contract Debtor, containing financial information reflecting the
credit-worthiness of each Contract Debtor.
6.2 Servicing of Contracts. At no expense to Lender, Borrower shall
----------------------
diligently and faithfully perform the following services relating to the
Contracts until (a) the occurrence of an Event of Default or a Default which
Default would reasonably be expected to have a material adverse effect on
Borrower on a consolidated basis (as determined by Lender in its reasonable
discretion), and (b) Lender has notified Borrower in writing that Borrower
shall cease providing such services:
a. Borrower shall collect all payments and other proceeds of the
Contracts and other Collateral; and
b. Borrower shall perform customary insurance follow-up with respect
to each policy of insurance covering the Property which is the subject of the
Contracts to ensure that such Property is insured.
6.3 Termination of Collection Rights. Following the occurrence of a
--------------------------------
Triggering Event of Default (as defined below) and the continuation thereof all
rights of Borrower to collect any payments due under the Collateral and all
rights of Borrower to exercise the consensual rights which it would otherwise be
entitled to exercise with respect thereto, shall, at the option of Lender and
upon written notice from Lender to Borrower, immediately terminate. Borrower
acknowledges and agrees that following a Triggering Event of Default and during
the continuance thereof, Lender shall be entitled to receive all of the
---
Contract payments, without deduction, even though this may render Borrower
insolvent and leave Borrower without any funds to pay its operating expenses.
Borrower, at Lender's request, shall immediately provide Lender with a current
list of the names, addresses, and Contract account numbers for all Contract
Debtors and shall following the occurrence of an Triggering Event of Default and
the continuation thereof at Lender's request, immediately direct all Contract
Debtors (pursuant to a form of notice prepared by Lender) to make all payments
due under the Contracts and the Collateral directly to Lender or to a bank
account designated by Lender, and Borrower shall otherwise cooperate with Lender
in that regard.
6.4 Collection Account. While any portion of the Loan is unpaid,
------------------
Borrower shall immediately, upon receipt thereof, deposit all cash proceeds of
the Collateral (including, for example, all regular monthly payments received
in connection with the Contracts) into a Collection Account, established by
Borrower and Lender under a Collection Account Agreement between Borrower,
Lender, and the bank identified therein. If, at any time, either (a) Borrower's
then-existing Excess Availability is equal to or less than 5
31
<PAGE>
percent of the then-outstanding Loan amount; or (b) upon the occurrence of an
Event of Default described in subsections 11.1 a., b., d., e., f., g., h., i.,
n., o., p., or q. ("Triggering Events of Default"), and the continuation
thereof, then at all times thereafter, Borrower's right to withdraw any funds
from the Collection Account shall immediately terminate and only Lender shall
thereafter have a right to withdraw any funds from the Collection Account.
Lender shall reinstate Borrower's right to withdraw funds from the Collection
Account in the event (a) where Borrower's withdrawal rights were terminated
because of inadequate Excess Availability, Borrower's Excess Availability is, at
all times, equal to or greater than 5 percent of the Loan balance during a 90-
day period, or (b) where Borrower's withdrawal rights were terminated because of
the occurrence of any of the Event of Defaults listed above, (i) no Default or
Event of Default then exists, and (ii) Borrower's excess Availability has been
equal to or greater than 5 percent of the Loan balance at all times during a 90-
day period.
ARTICLE SEVEN - REPRESENTATIONS, WARRANTIES AND COVENANTS
---------------------------------------------------------
7. Representations and Warranties Reaffirmed. Borrower represents and
-----------------------------------------
warrants by its execution of this Agreement, by each Collateral Report delivered
to Lender and with each Advance request, the following matters as of date of
each Advance. Each warranty and representation shall be deemed to be material
and to be automatically repeated with each Advance and shall be conclusively
presumed to have been relied upon by Lender regardless of any information
possessed or any investigation made by Lender. The warranties and
representations shall be cumulative and in addition to all other warranties,
representations, and agreements which Borrower shall give or cause to be given
to Lender, either now or hereafter.
7.1 Warranties and Representation Re Contracts. With respect to the
------------------------------------------
Contracts, Borrower represents and warrants that:
a. To the best of Borrower's knowledge, each Contract is a bona
fide, valid, and binding obligation of the Contract Debtor, enforceable in
accordance with its terms, and Borrowers does not know of any fact which impairs
or will impair the validity of any such Contract.
b. To the best of Borrower's knowledge, each Contract and related
Security Documents are free of any claim for credit, deduction, discount,
allowance, defense (including the defense of usury), dispute, counterclaim
or setoff.
c. [Intentionally Omitted.]
32
<PAGE>
d. To the best of Borrower's knowledge, each Contract correctly sets
forth the terms thereof between Borrower and the Contract Debtor, including the
interest rate applicable thereto.
e. To the best of Borrower's knowledge, the Security Documents
correctly describe the Goods subject thereto.
f. To the best of Borrower's knowledge, the signatures of all
Contract Debtors are genuine and each Contract Debtor had the legal capacity to
enter into and execute such documents on the date thereof.
g. There is only one original counterpart of the Contract executed
by the Contract Debtor which is in Borrower's sole possession (with the possible
exception of one duplicate original counterpart which, if in existence, is in
the Contract Debtor's sole possession).
7.2 Warranties and Representations Re Collateral Generally. Borrower
------------------------------------------------------
represents, warrants, and covenants to Lender that so long as any portion of the
Loan remains unpaid or any other Obligation of Borrower to Lender is to be
performed or paid, that:
a. All state and federal laws have been complied with in conjunction
with the Collateral, the noncompliance with which would have a material adverse
impact on the value, enforceability or collectability of the Collateral.
b. At the time of the pledge to Lender of any Collateral by
Borrower, Borrower has good and valid title to, and full right and authority to
pledge, the same to Lender.
c. Lender has at all times a first priority, perfected, Lien in all
of the Collateral, except that, with respect to repossessed automobiles,
materialmen and garagemen liens for repair services may, to the extent
authorized by law, have a priority.
d. Except for Permitted Liens, the Collateral (i) shall be owned
solely by Borrower, and no other Person, other than Lender, has or will have any
right, title, interest, claim or Lien therein and in any money resulting from
the lease, rental, sale or other disposition thereof, and (ii) shall remain
free and clear of any Liens.
e. Borrower shall pay and discharge, when due, all taxes, levies,
assessments and other charges upon the Collateral.
f. Any distribution of interest or principal, or loss of the
Collateral or any of the Property secured thereby, shall not release Borrower
from any of the Obligations.
33
<PAGE>
7.3 Contract and Security Document Forms. Borrower covenants that after
------------------------------------
the date hereof, only Contracts on forms submitted to Lender for its review
shall be used by Borrower for its transactions. Borrower shall not change or
vary the printed terms of such Contracts without Lender's prior written consent,
unless such change or variation is expressly required by applicable state and
federal laws. Lender may at any time, with respect to new forms of Contracts or
amendments to existing forms of Contract, require Borrower to provide to Lender
a certification from its counsel confirming that the form of Contract is in
material compliance with the Federal Truth in Lending Act, the applicable state
motor vehicle financing law, and such other applicable laws as Lender may
reasonably request.
7.4 Solvent Financial Condition. Immediately prior to the date of each
---------------------------
Advance, the present fair salable value of the assets of Borrower is greater
than the amount required to pay its liabilities, and Borrower is able to pay its
debts as they mature.
7.5 Credit Guidelines. Borrower represents and warrants that it shall not
-----------------
make any changes in its credit guidelines which would have the effect of
liberalizing Borrower's credit extension policies (a copy of which has been
previously furnished by Borrower to Lender) without Lender's prior written
consent which shall not be unreasonably withheld or delayed. Borrower's credit
guidelines shall state in detail the credit criteria used by Borrower in
determining the credit-worthiness of Contract Debtors with regard to the
Contracts originated by Borrower and/or originated by Dealers, as appropriate.
7.6 Organization, Authority, and Capital Structure. Parent Borrower and
----------------------------------------------
each Subsidiary Borrower (a) is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation; (b) has
all requisite power and authority and licenses, permits, and franchises
necessary to carry on its business the violation of which or failure to obtain
would materially and adversely affect its business or condition (financial or
otherwise) considered as a whole; and (c) has duly qualified and is authorized
to do business and is in good standing as an entity in each jurisdiction where
such qualification is necessary except where the failure to qualify would not
have a material adverse effect on Borrower. The authorized number of shares of
common stock of each Borrower and the number of such shares which are issued and
outstanding as of the date of this Agreement are listed in Schedule 7.6. (Lender
and Borrower acknowledge and agree that the Stock Pledge Agreement and Schedule
7.6 will be amended from time to time as Restricted Subsidiaries are formed
pursuant to section 8.16 below.)
7.7 Financial Statements. The financial statements of Borrower for the
--------------------
Fiscal Year ending December 31, 1993, are true and
34
<PAGE>
correct and have been prepared in accordance with generally accepted accounting
principles, practices and procedures, consistently applied (except for changes
in application in which Borrower's accountants concur) and present fairly the
financial position of Borrower as of such date and the results of its operations
for such period. Since December 31, 1993, there has been no material adverse
change in the condition, financial or otherwise, of Borrower as of such date.
7.8 Full Disclosure. The financial statements referred to in section 7.7
---------------
above, this Agreement, and any written statement furnished by Borrower to Lender
(copies of which have been previously delivered), do not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements contained therein or herein not misleading.
7.9 Pending Litigation. There are no proceedings pending, or to the
------------------
knowledge of Borrower threatened, against or affecting Borrower in any court or
before any governmental authority or arbitration board or tribunal which would
reasonably be expected to materially and adversely affecting the business,
profits or condition (financial or otherwise) of Borrower or the ability of
Borrower to repay or otherwise perform any of its Obligations to Lender.
Borrower is not in default with respect to any order of any court, governmental
authority or arbitration board or tribunal.
7.10 Title to Properties. Borrower has good and marketable title to the
-------------------
Property (including all of the Collateral) it purports to own and such Property
(other than the Collateral which shall not be subject to any Lien other than
Permitted Liens.
7.11 Transaction is Legal and Authorized. The execution and delivery of
-----------------------------------
this Agreement and related documents by Borrower, the grant of the Liens to
Lender in respect to the Collateral by Borrower, and compliance by Borrower with
all of the provisions of this Agreement are valid, legal, binding, and
enforceable in accordance with their terms, except as enforceability may be
limited by bankruptcy, reorganization, or similar laws relating to or affecting
the rights of creditors and will not conflict with or result in any breach of
any of the provisions of any material agreement, bylaws, charter or instrument
to which Borrower is a party.
7.12 Taxes. All tax returns required to be filed by Borrower in any
-----
jurisdiction have been filed or permitted extensions for filing such returns
have been properly obtained, and all taxes, assessments, and other governmental
charges upon Borrower, or upon any of its properties, income or franchises,
which are due and payable, have been paid except for such assessments and
charges which are immaterial in amount and have not been paid as a result of
Borrower's inadvertence. The provisions for reserves for taxes
35
<PAGE>
on the books of Borrower are adequate for all unaudited Fiscal Years, and for
its current fiscal period.
7.13 Compliance with Law. Borrower: (a) is not in violation of any laws,
-------------------
ordinances, or Rules to which it or its business is subject, the violation of
which would reasonably be expected to have a material adverse effect on Borrower
on a consolidated basis; and (b) has not used illegal, improper, fraudulent or
deceptive marketing techniques or unfair business practices with respect to the
Contracts. Borrower has complied in all material respects with all applicable
federal statutes and all rules and regulations promulgated thereunder and with
all provisions of law of each state whose laws and Rules relate to the
Contracts.
7.14 Borrower's Office. Borrower's chief executive office is located at
-----------------
the address stated on page one of this Agreement, and Borrower covenants and
agrees that it will not, without prior written notification to Lender, relocate
said chief executive office.
7.15 ERISA. (a) Borrower has no Plan other than those listed in Exhibit
-----
7.15 attached hereto. (b) No Plan has been terminated or partially terminated or
is insolvent or in reorganization, nor has any proceedings been instituted to
terminate or reorganize any Plan. (c) Borrower has not withdrawn from any Plan
in a complete or partial withdrawal, nor has a condition occurred which if
continued would result in a complete or partial withdrawal. (d) Borrower has no
withdrawal liability, including contingent withdrawal liability, to any Plan
pursuant to Title IV of ERISA. (e) Borrower has no liability to the PBGC other
than for required insurance premiums which have been paid when due. (f) No
Reportable Event has occurred with respect to a Plan. (g) No Plan has an
"accumulated funding deficiency" (whether or not waived) as defined in Section
302 of ERISA or in Section 412 of the Internal Revenue Code. (h) Each Plan is in
substantial compliance with ERISA, and Borrower has not received any notice
asserting that a Plan is not in compliance with ERISA. Neither Borrower nor any
other "party-in-interest" or "disqualified person" has engaged in a "prohibited
transaction" as such terms are defined in Section 4975 of the Internal Revenue
Code and Title I of ERISA, in connection with any Plan which would subject a
party-in-interest or disqualified person (after giving effect to any exemption)
to the tax on prohibited transactions imposed by Section 4975 of the Code or any
other liability.
7.16 Name Changes. Except as disclosed in writing by Borrower prior to the
------------
date hereof, Borrower has not, within the six-year period immediately preceding
the date hereof, changed its name, been the surviving entity of a merger or
consolidation, or acquired all or substantially all of the assets of any Person.
36
<PAGE>
ARTICLE EIGHT - FINANCIAL AND OTHER COVENANTS
---------------------------------------------
Borrower covenants that so long as any Obligation remains unpaid or is yet
to be performed, Borrower shall observe all of the covenants and promises
contained in this Article Eight.
8.1 Payment of Taxes and Claims. Borrower shall pay, before they become
---------------------------
delinquent, all taxes, assessments, and other governmental charges imposed upon
it or its property or the Collateral and all claims or demands which, if unpaid,
might result in the creation of a Lien upon its property or the Collateral;
provided, however, Borrower need not pay such taxes, assessments, and other
- -----------------
governmental charges so long as (i) they are contested by Borrower in good faith
by appropriate proceedings, (ii) adequate accounting reserves have been
established with respect thereto, and (iii) Borrower's title to, and it right to
use its Property and the Collateral are not materially adversely affected
thereby.
8.2 Uniform Commercial Code Financing Statements and Assignments of
---------------------------------------------------------------
Contracts. Prior to any Advance hereunder and at all times all filings of Code
- ---------
financing statements, assignments of the Contracts and all other filings,
recordings and action necessary to perfect Lender's Liens granted under this
Agreement shall have been filed or recorded and are in effect.
8.3 Maintenance of Properties and Existence. Borrower shall:
---------------------------------------
a. Maintain insurance with respect to its properties and business
against such casualties and contingencies of such types and in such amounts as
is customary in such business;
b. Keep true books, records, and accounts of all its business
transactions;
c. Except as provided in section 8.20, keep in full force and effect
its corporate existence, rights, licenses, and franchises, as the case may be,
except for licenses and franchises the non-existence of which would not
materially and adversely affect its business or condition (financial or
otherwise); and
d. Not violate any laws, ordinances, or governmental rules or
regulations to which it is subject which violation would reasonably be expected
to materially and adversely affect the business, profits, the Collateral,
Properties, or condition (financial or otherwise) of Borrower so that all
Contracts will be valid, binding and legally enforceable in accordance with
their terms, subsequent to the assignment thereof to Lender.
8.4 Offices; FTC; Warranties. a. Borrower agrees that it will operate at a
------------------------
licensed location in the jurisdiction requiring such license in conformity with
all such licensing and other laws
37
<PAGE>
applicable to the purchase of Contracts, including Motor Vehicle Retail
Installment Sales Acts, Sales Finance Agency Acts or any other law regulating
the business of acquiring Contracts from Dealers. To the extent Borrower does
not have a license for each location, it will immediately procure a license or
advise Lender of the reason that it is exempt from such licensing requirement or
that no such licensing requirement exists in the jurisdiction of such location.
b. Borrower is familiar with the Federal Trade Commission's used car
rule and is in compliance therewith to the extent Borrower is legally obligated
for such compliance.
c. Each Contract has been originated by a Dealer pursuant to a
Dealer Agreement that is enforceable in accordance with its terms against such
Dealer. To the extent that Borrower allows Dealers to finance so-called
"extended warranty plans," Borrower will (i) ensure that the cost of such plans
are disclosed and will be in substantial compliance with all applicable consumer
credit laws, including any and all special insurance laws relating thereto to
the extent Borrower is legally obligated for such compliance, and (ii) ensure
that such plans are underwritten by (x) a major automobile manufacturer, or an
Affiliate thereof, or (y) a reputable insurance company.
8.5 Guaranties. Except for the joint and several liability of Borrower
----------
under this Agreement, Borrower shall not become or be liable in respect of any
Guaranty except by endorsement, in the ordinary course of business, of
negotiable instruments for deposit or collection issued in the ordinary course
of Borrower's business.
8.6 Total Debt Ratio. Borrower shall not permit the ratio, calculated on a
----------------
consolidated basis as of the last day of each month, of (a) the aggregate amount
of all Debt (numerator) to (b) Adjusted Tangible Net Worth (denominator) to be
more than 9:1.
8.7 Minimum Interest Coverage. Borrower shall not permit the ratio,
-------------------------
calculated on a consolidated basis as of the last day of each quarter in each
Fiscal Year, of (a) the sum of Adjusted Net Earnings from Operations for such
quarter, plus interest expense and income taxes for such quarter (numerator), to
----
(b) interest expense and income taxes for such quarter (numerator), to (b)
interest expense for such quarter (denominator), to be less than 1.75:1.
8.8 Prohibition on Distributions: Equity Capital Changes. Borrower shall
----------------------------------------------------
not, without Lender's prior written consent, directly or indirectly (a) declare,
make, or incur any liability to make any Distribution; or (b) make any change in
its capital equity structure which would reasonably be expected to materially
adversely affect repayment of the Loan or other Obligations.
38
<PAGE>
8.9 Loss Reserves. Borrower shall maintain aggregate reserves for credit
-------------
losses, calculated on a consolidated basis as of the last day of each month in
an amount which shall not be less than the product of the Loss Reserve
Percentage, multiplied by the Net Contract Payments outstanding as of the date
----------
of determination. Aggregate reserves for credit losses shall include an
allowance for loan losses, Dealer Reserves, and dealer deferred certificates.
8.10 Limitation on Amounts Paid to Dealers. The average amount,
-------------------------------------
calculated as of the last day of each month on a cumulative, consolidated basis,
paid by Borrower to Dealers during each of the 12 calendar months immediately
preceding the date of calculation, for the purchase of Contracts which arise
from the credit sale of Goods shall not exceed the following: (a) in the case of
Contracts arising from a credit sale of new Goods, the invoice price therefor;
and (b) in the case of Contracts arising from the credit sale of used Goods, an
amount determined by utilizing the "average trade-in value" for all Goods which
are the subject of such Contracts, as established by the National Automobile
-------------------
Dealers Association Official Used Car Guide (the "Guide") in effect at the time
- -------------------------------------------
Borrower purchased the subject Contract. In the event that the Guide shall at
any time cease to be published, then Lender shall, thereafter, select a
comparable publication, as determined by Lender, in its sole discretion, for
determining the foregoing calculation. For purposes of this section 8.10, there
shall be excluded from the determination of the purchase price of a Contract,
that portion of the purchase price which was paid for sums included in the
unpaid Contract balance which arise from a purchase, on a credit basis, of
credit life and disability insurance, extended vehicle warranty insurance, and
other forms of insurance, and all taxes, title, license, and similar fees.
8.11 Unsubordinated Debt to Borrowing Base. Borrower shall not permit the
-------------------------------------
ratio, calculated on a consolidated basis as of the last day of each month, of
(a) the remainder of (i) Debt, minus (ii) all Subordinated Debt (numerator), to
-----
(b) Borrowing Base (denominator), to be more than 5:1.
8.12 Charge-Off Policy. Borrower shall establish and implement, in a
-----------------
manner satisfactory to Lender, a policy for charging off the unpaid balance of
its delinquent Contracts. Without limiting the generality of the foregoing,
Borrower's policy shall provide that on the last Business Day of each month
Borrower shall charge off the unpaid balance of all Contracts with respect to
which (a) any payment due thereunder is 180 or more days delinquent, as
determined on a contractual basis, or (b) the Goods which are the subject
thereof have been repossessed and sold for an amount less than the Contract
balance then owing and after application of the sale proceeds and all insurance
proceeds, if any, to such Contract balance, deficiency remains.
39
<PAGE>
8.13 Minimum Adjusted Tangible Net Worth. Borrower shall not permit its
-----------------------------------
Adjusted Tangible Net Worth, calculated on a consolidated basis as of the last
day of each month, to be less than: (a) $8,000,000 on December 31, 1994, (b)
$8,000,000 during the period January 1, 1995 through December 30, 1995, (c)
$15,000,000 on December 31, 1995, and (d) $15,000,000 for the period beginning
January 1, 1995, and at all times thereafter.
8.14 Subordinated Obligations. Except as previously and expressly
------------------------
consented to in writing by Lender or permitted by the terms of the applicable
subordination agreement, Borrower shall not directly or indirectly permit (a)
any payment to be made in respect of any Subordinated Debt; (b) the amendment,
rescission, or other modification of the provisions of any of Borrower's
Subordinated Debt; or (c) the prepayment or redemption of any part of any
Subordinated Debt of Borrower.
8.15 Intercompany Management Fees. Borrower shall not directly or
----------------------------
indirectly pay in any form (including, without limitation, salary, bonuses,
commissions, fees, and incentive compensation) any Intercompany Management Fees.
Notwithstanding the foregoing provisions of this section 8.15, Borrower may pay
such administrative and overhead expenses (including taxes) as are, from time to
time, reasonably allocated to Borrower by Cole Taylor Financial Group, Inc.
and/or Cole Taylor Bank.
8.16 New Subsidiaries. Borrower shall not, after the date of this
----------------
Agreement, form or incorporate any Subsidiaries; provided, however, upon 15 days
-----------------
prior notice to Lender and subject to the terms and conditions set forth in this
section 8.16, Borrower may form or incorporate a Restricted Subsidiary provided
no Default or Event of Default exists and is continuing at the time the
Restricted Subsidiary is formed or incorporated. Borrower shall cause each
Restricted Subsidiary to deliver to Lender within the 15 day period after its
formation or incorporation: (a) amendment(s) to this Agreement containing such
provisions as may be reasonably required by Lender, which shall include
provisions adding the Restricted Subsidiary as a "Borrower" under this Agreement
and perfecting Lender's security interest in the Collateral pledged by such
Restricted Subsidiary to Lender under this Agreement; (b) amendments to the
Security Agreement-Stock Pledge or other similar agreement, pledging the stock
of the Restricted Subsidiary to Lender; and (c) financing statements,
instruments, documents, certificates, and opinions required at that time by
Lender, each of which shall be satisfactory in form and content to Lender and
shall be substantially in the form as those delivered by Borrower to Lender on
the Closing Date.
8.17 Dealer Agreement Forms. Borrower covenants that only Dealer
----------------------
Agreements in the form attached hereto as Exhibit 8.17 and Dealer Agreements in
form(s) hereafter approved in writing by
40
<PAGE>
Lender shall be used by Borrower for all transactions which may now exist and
which may exist in the future with Dealers. Borrower shall not substantially
change the form of such Dealer Agreements without Lender's prior written
consent, which consent shall not be unreasonably withheld or delayed, unless
such change or variation is expressly required by applicable state and federal
laws.
8.18 Debt. Borrower shall not incur or maintain any Debt other than: (a)
----
the Obligations, (b) Debt owing by Subsidiary Borrowers and Parent Borrower to
one another, (c) Debt incurred to finance the purchase or lease of equipment,
(d) other Debt existing as of the Closing Date and reflected on Borrower's
financial statements for the most recently ended period reflected therein, (e)
unsecured Debt owing by Borrower to Cole Taylor Financial Group, Inc., and (f)
accounts payable, accrued payroll, accrued taxes, and other obligations arising
in the ordinary course of Borrower's business.
8.19 Further Assurances. Borrower shall from time to time execute and
------------------
deliver to Lender such other documents and shall take such other action as may
be requested by Lender in order to implement or effectuate the provisions of, or
more fully perfect the rights granted or intended to be granted by Borrower to
Lender pursuant to the terms of this Agreement or any other agreement executed
and delivered to Lender by Borrower.
8.20 Merger; Liquidation. Borrower shall not enter into any transaction
-------------------
of Merger, reorganization, or consolidation, or transfer, sell, assign, lease,
or otherwise dispose of all or any substantial part of its Property, or wind up,
liquidate, or dissolve, or agree to do any of the foregoing. Nothwithstanding
the foregoing, Borrower may close any office if, in Borrower's opinion, it is
appropriate to do so.
8.21 Change in Business. Borrower shall not make any material change in
------------------
its financial structure or in any of its business objectives, purposes, or
operations, or in the types of loans or Contracts extended by Borrower or the
collateral taken or payment provisions pertaining thereto.
8.22 Lender's Expenses. Upon demand by Lender, Borrower shall immediately
-----------------
reimburse Lender for all sums expended by Lender which constitute Lender's
Expenses, and Borrower hereby authorizes and approves all Advances and payments
by Lender on items constituting Lender's Expenses.
8.23 Liens. Borrower shall not permit to exist, or create, incur, assume
-----
any Lien on any Property now owned or hereafter acquired by it, except Permitted
Liens (other than the Collateral which shall not be subject to any Lien other
than a Lien in favor of Lender).
41
<PAGE>
8.24 ERISA. Borrower shall cause each Plan to be qualified within the
-----
meaning of Section 401(a) of the Internal Revenue Code and to be administered in
all respects in compliance with ERISA and Section 401(a) of the Internal Revenue
Code.
8.25 Fixed Charge Ratio. Borrower shall not permit the ratio, calculated on
------------------
a consolidated basis as of the last day of each Fiscal Year, of (a) Adjusted Net
Earnings from Operations, plus non-cash expenses for such Fiscal Year
(numerator), to (b) the sum of all capital expenditures, plus the aggregate
----
amount of all principal payments required to be made by Borrower on all long-
term debt during such Fiscal Year (excluding any amount owing to Lender under
this Agreement) (denominator), to be less than 1 to 1.
8.26 Restricted Investments Prohibition. Borrower shall not make any
----------------------------------
Restricted Investment.
ARTICLE NINE - INFORMATION AS TO BORROWER
-----------------------------------------
9.1 Financial Statements. Subject to the requirements of section 12.6,
--------------------
below, Borrower shall submit to Lender:
a. Monthly and Annual Statements. As soon as practicable: (1) after
-----------------------------
the end of each month in each Fiscal Year of Borrower, and in any event within
45 days after the end of such period, and (2) after the end of each Fiscal Year
of Borrower and in any event within 90 days thereafter with respect to Borrower,
copies of:
(i) balance sheets of Borrower as at the end of such monthly
period and such year;
(ii) statements of income of Borrower for such month and year;
(iii) statement of cash flows of Borrower during such year;
(iv) statements of changes in stockholders equity of Borrower
during such year;
(v) statements of material changes of accounting policies,
presentations, or principles made during such year;
(vi) upon Lender's request, Borrower's corporate tax returns
prepared by Borrower; and
(vii) notes to such financial statements.
42
<PAGE>
Monthly statements and annual statements shall all be in reasonable detail
and, upon Lender's request, shall be certified as complete and correct, subject
to change as resulting from year-end adjustments and shall contain a
certification that no Event of Default then exists, by the treasurer or chief
financial officer of Borrower. Annual statements shall be accompanied by a
report thereon unqualified as to scope by an independent certified public
accounting firm selected by Borrower and satisfactory to Lender.
b. Projections. Within 90 days of the end of the Fiscal Year of
-----------
Borrower, financial projections for the two following years; the projections for
the first year are to be prepared on a monthly basis and the projections for the
second year are to be prepared on an annual basis. Lender shall keep such
projections confidential, in accordance with its usual practices.
c. Audit Reports. Promptly upon receipt thereof, one copy of each
-------------
audit report, if any, submitted to Borrower by independent public accountants in
connection with any annual, interim, or special audit or examination made by
them of the books of Borrower.
d. Requested Information. With reasonable promptness, such other
---------------------
information as, from time to time, may be reasonably requested by Lender,
including the names and addresses of all Contract Debtors, current Contract
balances, a payment history for all Contracts, ageings, insurance claims
reports, and charge off and reserve reconciliations.
9.2 Notices. Borrower shall notify Lender in writing of the following
-------
matters at the following times (with each notice describing the subject matter
thereof in reasonable detail, and setting forth the action Borrower has taken or
proposes to take with respect thereto):
a. Promptly upon becoming aware of the existence of any condition or
event which constitutes a Default or Event of Default;
b. Promptly upon becoming aware of: (i) the assertion by the holder
of any capital stock of Borrower or of any Debt in an outstanding principal
amount in excess of $100,000 that a default exits with respect thereto or that
Borrower is not in compliance with the terms thereof; or (ii) the threat or
commencement by such holder of any enforcement action because of such asserted
default or noncompliance;
c. Promptly upon becoming aware of any material adverse change in
Borrower's Property, business, operations, or condition (financial or
otherwise), all as determined on a consolidated basis;
43
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d. Promptly upon becoming aware of any pending action, suit,
proceeding, or counterclaim by any Person, or any pending or threatened
investigation by any public authority, which would reasonably be expected to
materially and adversely affect the Collateral, repayment of the Obligations,
Lender's rights under this Agreement, or Borrower's business, Property,
operations, or condition (financial or otherwise), all as determined on a
consolidated basis;
e. Promptly upon becoming aware of any violation of any law,
statute, regulation, or ordinance of a public authority applicable to Borrower,
any Subsidiary, or their respective Properties which would reasonably be
expected to materially and adversely affect the Collateral, repayment of the
Obligations, Lender's rights under this Agreement, or Borrower's business,
Property, operations, or condition (financial or otherwise), all as determined
on a consolidated basis; and
f. Any change in Borrower's name, state of incorporation, or form of
organization, at least 20 days prior thereto.
ARTICLE TEN - CLOSING CONDITIONS
--------------------------------
Lender shall not be obligated to make any Advance to Borrower, unless all
of the following conditions precedent have been satisfied as of the Closing Date
and the conditions precedent specified in sections 10.1, 10.5, and 10.7 have
been satisfied as of the date of each Advance.
10.1 Representations and Warranties; Covenants; Defaults. Borrower's
---------------------------------------------------
representations and warranties contained in this Agreement and the other Loan
Documents shall be correct and complete; Borrower shall have performed and
complied with all covenants, agreements, and conditions contained herein and in
the other Loan Documents which are required to have been performed or complied
with; and there shall exist no Default or Event of Default.
10.2 Delivery of Documents. Borrower shall have delivered, or caused to
---------------------
be delivered, to the Lender the documents listed on Schedule 10.2 hereto and
such other documents, instruments and agreements as the Lender shall request in
connection herewith, duly executed by all parties thereto other than Lender, and
in form and substance satisfactory to the Lender and its counsel.
10.3 Termination of Liens. Lender shall have received duly executed UCC-3
--------------------
Termination Statements and other instruments, in form and substance satisfactory
to Lender, as shall be necessary to
44
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terminate and satisfy all Liens on the Collateral (other than those of Lender).
10.4 Facility Fees. Borrower shall have paid in full the Facility Fee.
-------------
10.5 Payment of Fees and Expenses. Borrower shall have paid all allocated
----------------------------
costs of in-house counsel and all special local counsel retained, and all other
fees and expenses of Lender payable under the terms of this Agreement.
10.6 Required Approvals. Lender shall have received certified copies of
------------------
all consents or approvals of any public authority or other Person which Lender
determines is required in connection with the transactions contemplated by this
Agreement.
10.7 No Material Adverse Change. There shall have occurred no material
--------------------------
adverse change in Borrower's business or financial condition, as determined on a
consolidated basis, or in the Collateral since December 31, 1993, and Lender
shall have received a certificate of Borrower's chief executive officer to such
effect.
ARTICLE ELEVEN - EVENTS OF DEFAULT: REMEDIES
--------------------------------------------
11.1 Events of Default. An "Event of Default" shall exist under this
-----------------
Agreement upon the occurrence of any of the following events or conditions (all
of which shall conclusively be deemed to be material):
a. Interest or Principal. Failure to pay when due or when declared
---------------------
due and payable, the principal of or interest on the Obligations within one
Business Day following the payment due date therefor except no such grace period
shall apply with respect to the payment of the Loan on the Maturity Date.
b. Payment of Other Sums. Failure to make payment, when required,
---------------------
of any other sums owing by Borrower to Lender (other than principal or
interest), pursuant to the terms of this Agreement after thirty days notice from
Lender to Borrower to pay such sum.
c. Warranties or Representations. Any warranty, representation, or
-----------------------------
other statement made to Lender by Borrower in this Agreement or in any
certificate furnished by Borrower in compliance with this Agreement shall have
been false or misleading in any material respect when made or furnished.
d. Breach of Certain Covenants. Failure by Borrower to comply with
---------------------------
the covenants set forth in sections 6.4, 8.6, 8.7, 8.8, 8.11, 8.13, 8.14, 8.20,
or 8.25 of this Agreement.
45
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e. Breach of Other Covenants. Failure by Borrower to comply with any
-------------------------
covenant set forth in this Agreement, other than the covenants contained in
sections 6.4, 8.6, 8.7, 8.8, 8.11, 8.13, 8.14, 8.20, or 8.25, or in any other
agreement executed in connection therewith within 30 days after written notice
from Lender to Borrower requesting that Borrower cure such breach.
f. Material Adverse Change. Any material adverse change in the
-----------------------
business or financial condition of Borrower as determined on a consolidated
basis after the date of this Agreement.
g. Voluntary Bankruptcy, Etc. Borrower or any Subsidiary shall: (i)
-------------------------
file a voluntary petition in bankruptcy or file a voluntary petition or answer
or otherwise commence any action or proceeding seeking reorganization,
arrangement or readjustment of its debt or for any other relief under the
Federal bankruptcy code, as amended, or under any other bankruptcy or insolvency
act or law, state or federal, now or hereafter existing, or consent to, approve
of, or acquiesce in, any such petition, action, or proceeding; (ii) apply for or
acquiesce in the appointment of a receiver, assignee, liquidator, sequestrator,
custodian, trustee or similar officer, for it or for all or a part of its
Property; (iii) make an assignment for the benefit of creditors; or (iv) be
unable generally to pay its debts as they become due.
h. Involuntary Bankruptcy, Etc. An involuntary petition shall be
---------------------------
filed or an action or proceeding otherwise commenced seeking reorganization,
arrangement, or readjustment of Borrower's or any Subsidiary's debts or for any
other relief under the federal bankruptcy code, as amended, or under any other
bankruptcy or insolvency act or law, state or federal, now or hereafter existing
which shall remain unstayed or undismissed for a period of 90 days after such
proceedings are first initiated; provided, however, Lender shall have no
-----------------
obligation to make any Advance during such period.
i. Appointment of Receiver, Etc. A receiver, assignee, liquidator,
----------------------------
sequestrator, custodian, trustee, or similar officer for Borrower or any
Subsidiary or any part of the Property shall be appointed involuntarily; or a
warrant of attachment, execution, or similar process shall be issued against any
part of the Property of Borrower or any Subsidiary which shall remain unstayed
or undismissed for a period of 90 days after such proceedings are first
initiated; provided, however, Lender shall have no obligation to make any
-----------------
Advance during such period.
j. Attachment, Judgment, Tax Liens. The issuance or filing against
-------------------------------
Borrower of any Lien, attachment, injunction, execution, tax Lien, or judgment
for the payment of money in excess
46
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of $250,000 which is not discharged in full or stayed within 30 days after
issuance of filing.
k. Default in Other Agreements. Unwaived or uncured default in the
---------------------------
payment of any sum due under any instrument of indebtedness for borrowed money
owed of at least $500,000 by Borrower to any Person or any other unwaived or
uncured default under such instrument of indebtedness which permits such
indebtedness to become due prior to its stated maturity or permits the holders
of such indebtedness to elect a majority of the board of directors or manage the
business of Borrower.
l. [Intentionally Omitted.]
m. [Intentionally Omitted.]
n. Assignment of Agreement. The assignment by Borrower of this
-----------------------
Agreement or its rights hereunder.
o. Payment of Subordinated Debt. If Borrower makes any payment on
----------------------------
account of any Subordinated Debt which is not expressly permitted by the terms
of the applicable subordination agreement.
p. Breach of Collection Account Agreement. A breach by Borrower of
--------------------------------------
any covenant contained in the Collection Account Agreement which is not cured by
Borrower within 10 days of Lender's notice to cure such breach.
q. Termination of Letter of Responsibility. The letter of
---------------------------------------
responsibility by Cole Taylor Financial Group, Inc. in favor of Lender shall be
terminated or retracted by Cole Taylor Financial Group, Inc., or Cole Taylor
Financial Group Inc. undertakes by court action or otherwise to have the letter
of responsibility declared unenforceable, or for any reason the letter of
responsibility is declared to be unenforceable by a court of competent
jurisdiction.
11.2 Default Remedies.
----------------
Upon the occurrence of an Event of Default and the continuance
thereof as provided in Section 11.1 above, Lender may, at its election
(provided, however, that upon the occurrence of an Event of Default under
subsections 11.1 g., h., and i. the following shall occur automatically),
without notice of its election and without demand (except notice shall be given
in connection with subsection 11.2(a), 11.2(b), 11.2(c) and 11.2(i), which
notice shall be effective immediately upon delivery), do any one or more of the
following, all of which are unconditionally and irrevocably authorized by
Borrower:
47
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a. Accelerate and declare immediately due and payable all
Obligations, including all principal and interest.
b. Reduce the Advance Rate, reduce the Availability, or restrict the
amount of any additional Advances.
c. Cease making any Advances to or for the benefit of Borrower under
this Agreement, and terminate further performance under this Agreement and any
other agreement between Borrower and Lender.
d. In its sole discretion, without liability to any other Person,
make such payments and do such acts as Lender considers necessary or
reasonable: (i) to protect the Collateral and/or its security interest therein;
(ii) to prevent any of Borrower's warranties or representations hereunder from
being or becoming incorrect, incomplete, or misleading; or (iii) to cause the
payment of any sum or performance of any duty of Borrower hereunder.
e. Send notice to all Contract Debtors directing them to make full
payment of their Contract payments directly to Lender, instead of Borrower. All
payments received by Borrower contrary to this subsection 11.2 e. shall be
received in trust for the exclusive right of Lender, shall be segregated from
other funds of Borrower, and shall forthwith be delivered to Lender.
f. Enter any and all premises where the Collateral is located and
take possession of the Collateral and/or require Borrower, at Borrower's
expense, to assemble the Collateral and either immediately deliver all of the
Collateral to Lender or make it available for delivery to Lender at a place or
places designated by Lender. Should Lender exercise its right to possession of
the Collateral hereunder, Borrower waives its right, if any, that Lender post a
bond or any other type of security.
g. Require Borrower to deliver to Lender all of the Contracts,
Security Documents, and other documents representing the Collateral and to
exercise, in Borrower's name, all of Borrower's rights thereunder.
h. Sell all or any part of the Collateral at either a public or
private sale, or both, by way of one or more contracts or transactions, for cash
or on terms, in such manner and at such places (including Borrower's premises)
as is commercially reasonable. Any deficiency in the Obligations which exists
after disposition of the Collateral, as provided above, will be immediately paid
by Borrower. Any excess will be returned to Borrower by Lender, subject,
however, to the rights of the holders of other Liens on the Collateral. Unless
a longer period is required by the Code, ten days notice to Borrower of any
public or
48
<PAGE>
private sale or other disposition of Collateral shall be reasonable notice
thereof and such sale shall be at such location(s) as Lender shall designate in
said notice. Lender shall have the right to bid at such sale on its own behalf.
Out of proceeds arising from any such sale, Lender shall retain an amount equal
to all costs and charges, including attorneys' fees for pursuing, reclaiming,
taking, keeping, storing, and advertising such Collateral for sale, selling and
any and all other charges and expenses in connection therewith. Any balance
shall be applied upon the Obligations of Borrower to Lender; and in the event of
deficiency, Borrower shall remain liable to Lender. Lender may, from time to
time, attempt to sell all or any part of the Collateral by a private placement
restricting the bidders and prospective purchasers. In so doing, Lender may
solicit offers to buy the Collateral, or any part of it, for cash, from a
limited number of purchasers deemed by Lender, in its reasonable judgment, to be
responsible parties who might be interested in purchasing the Collateral, and if
Lender solicits such offers from not less than three such purchasers then the
acceptance by Lender of the highest offer obtained therefrom shall be deemed to
be a commercially reasonable method of disposition of such Collateral.
i. Terminate this Agreement as to any future obligation of Lender,
but without affecting Lender's rights or remedies, or Borrower's Obligations,
under this Agreement. Neither such termination, nor the termination of this
Agreement by lapse of time, the giving of notice, or otherwise shall absolve,
release, or otherwise affect the liability of Borrower in respect of
transactions occurring prior to such termination, nor affect any of the Liens,
security interests, rights, powers and remedies of Lender, but they shall, in
all events, continue until all Obligations of Borrower to Lender are satisfied.
j. Exercise any and all other rights and remedies available under
the Code, this Agreement, any other agreement with Borrower, or available at law
or in equity, to enforce Lender's rights in the Collateral and obtain payment
and performance of the Obligations.
k. Appropriate and apply to any of the Obligations, any and all
balances, credits, deposits, accounts, reserves, indebtedness, or other monies,
whether accrued or not, due or owing to Borrower or held by Lender hereunder.
11.3 Remedies Cumulative. Borrower waives the right to require the filing
-------------------
of an undertaking or a bond by Lender in connection with its exercise of any of
the rights and remedies specified in section 11.2 above. All undertakings of
Borrower and the remedies of Lender contained in this Agreement, or in any
documents referred to herein concurrently or hereafter entered into, shall be
deemed cumulative. The failure or delay of Lender
49
<PAGE>
to exercise or enforce any rights or remedies under this Agreement or under any
of the aforesaid agreements or with respect to the Collateral shall not operate
as a waiver of such rights and remedies, but all such rights and remedies shall
continue in full force and effect until payment of all Loans and all other
Obligations shall have been fully satisfied, and all rights and remedies herein
provided for are cumulative and none are exclusive.
11.4 Waiver of Right of Offset. No portion of the Loan or other
-------------------------
Obligations secured by this Agreement shall be or deemed to be offset or
compensated by all or any part of any claims, causes of action, counterclaims or
counterclaim, whether liquidated or unliquidated, which Borrower may have
against Lender.
ARTICLE TWELVE - GENERAL
------------------------
12.1 Invalidated Payments. To the extent Borrower makes a payment to
--------------------
Lender, which payment or any part thereof is subsequently invalidated, declared
to be fraudulent or preferential, set aside, or is required to be repaid to a
trustee, receiver, custodian, or any other party under any bankruptcy act, state
or federal law, common law or equitable cause, then to the extent of such
payment or repayment, the Obligation or part thereof intended to be satisfied
shall be revived and continued in full force and effect as if said payment had
not been made.
12.2 Application of Code to Agreement. Any additional remedies available
--------------------------------
to Lender under the applicable provisions of the Code not specifically included
herein shall be deemed a part of this Agreement and Lender shall have the
benefit of any such additional remedies.
12.3 Parties, Successors and Assigns. This Agreement shall be binding upon
-------------------------------
Borrower and Lender, their respective successors and assigns and inure to the
benefit of the successors and assigns of Lender and Borrower.
12.4 Joint and Several Liability.
---------------------------
a. Parent Borrower and each Subsidiary Borrower agrees that each is
jointly and severally, directly and primarily liable to Lender for payment in
full of the Obligations and that such liability is independent of the duties,
obligations, and liabilities of the other Borrowers. Lender may bring a separate
action or actions on each, any, or all of the Obligations against any Borrower,
whether or not action is brought against the other Borrower(s).
b. Each Borrower agrees that any release which may be given by
Lender to the other Borrowers or any guarantor or endorser
50
<PAGE>
of any of the Obligations shall not release such other Borrowers from their
obligations hereunder.
c. Each Borrower hereby waives any right to assert against Lender
any defense (legal or equitable), setoff, counterclaim, or claims which any
Borrower individually may now or any time hereafter have against the other
Borrowers or any other party liable to Lender for repayment of the Obligations
in any manner or way whatsoever.
d. Any and all present and future indebtedness of a Borrower to the
other Borrowers is hereby subordinated to the full payment and performance of
the Obligations.
e. Each Borrower is presently informed as to the financial condition
of the other Borrowers and of all other circumstances which a diligent inquiry
would reveal and which bear upon the risk of nonpayment of the Obligations. Each
Borrower hereby covenants that it will keep itself informed as to the financial
condition of the other Borrowers, the status of the other Borrowers and of all
circumstances which bear upon the risk of nonpayment. Absent a written request
from any Borrower to Lender for information, each Borrower hereby waives any and
all rights it may have to require Lender to disclose to such Borrower any
information which Lender or any Lender may now or hereafter acquire concerning
the condition or circumstances of the other Borrower.
f. Each Borrower waives all rights to notices of default, existence,
creation, or incurring of new or additional indebtedness, and all other notices
of formalities to which such Borrower may, as joint and several Borrower
hereunder, be entitled.
g. At the request of Borrower to facilitate and expedite the
administration and accounting processes and procedures of their borrowings
hereunder, Lender has agreed, in lieu of maintaining separate loan accounts,
that Lender shall maintain a single loan account under the name of Parent
Borrower ("Loan Account"). The Loan shall be made jointly and severally to the
Parent Borrower and Subsidiary Borrowers and shall be charged to their Loan
account, together with all interest and other charges as permitted under and
pursuant to this Agreement. The Loan shall be credited with all repayments of
Obligations received by Lender, on behalf of Lender, from any Borrower as paid
into the Collection Account pursuant to the terms of this Agreement.
h. Requests for borrowings may be made by any Borrower, pursuant to
the terms of Article Two hereof. Each Borrower expressly agrees and acknowledges
that Lender shall have no responsibility to inquire into the correctness of the
apportionment or allocation of or any disposition by any of the Borrowers of (i)
any Obligations, or (ii) any of the expenses and other items
51
<PAGE>
charged to the Loan account pursuant to this Agreement. All Obligations and such
expenses and other items shall be made for the collective, joint and several
account of the Borrowers and shall be charged to their Loan account.
i. Each Borrower agrees and acknowledges that the administration of
the Obligations on a combined basis as set forth in this section 12.4 is being
done as an accommodation to Borrowers and at their request, and that Lender
shall incur no liability to any of the Borrowers as a result thereof. To induce
Lender to do so, and in consideration thereof, each of the Borrowers hereby
agrees to indemnify and hold Lender harmless from and against any and all
liability, expenses, loss, damage, claim of damage, or injury, made against
Lender by any of Borrowers or by any other Person, arising from or incurred by
reason of such administration of the Obligations.
j. Each Borrower represents and warrants to Lender that the
collective administration of the Obligations is being undertaken by Lender
pursuant to this section 12.4., because Borrowers are integrated in their
operation and administration and require financing on a basis permitting the
availability of credit from time to time to each of the Borrowers. Each
Borrower will derive benefit, directly and indirectly, from such collective
administration and credit availability because the successful operation of each
Borrower is enhanced by the continued successful performance of the integrated
group.
k. Each Borrower hereby waives any right of subrogation it has or
may have against the other Borrowers with respect to the Obligations or any
other indebtedness incurred pursuant to this Agreement. In addition, each
Borrower hereby waives any right to proceed against the other Borrowers, now or
hereafter, for contribution, indemnity, reimbursement, and any other rights and
claims, whether direct or indirect, liquidated or contingent, such Borrower may
now have or hereafter have as against any other Borrower with respect to the
Obligations or any other indebtedness incurred pursuant to this Agreement. Each
Borrower agrees that in light of the immediately foregoing waivers, the
execution of this Agreement shall not be deemed to make such Borrower a
'creditor' of any other Borrower, and that for purposes of (S)(S) 547 and 550 of
the United States Bankruptcy Code (11 U.S.C. (S)(S) 547, 550), such Borrower
shall not be deemed a 'creditor' of the other Borrower.
12.5 Notices. All notices, demands, or consents by any party on the other
-------
relating to this Agreement shall, except as otherwise provided herein, be in
writing and sent by certified mail, return receipt requested. Notices shall be
deemed received on the fifth Business Day after being deposited in a United
States post office box, postage prepaid, properly addressed to Borrower or to
Lender at the mailing address stated on page one of this Agreement or to
52
<PAGE>
such other addresses as Borrower or Lender may from time to time specify in
writing. Notices may also effectively be given by confirmed transmittal over
electronic transmitting devices such as NBI, TWIX, Telex or telecopy machine, if
the party to whom the notice is being sent has such a device in its office,
provided a complete copy of any notice so transmitted shall also be mailed in
the same manner as required for a mailed notice. Notices sent by electronic
transmitting device shall be deemed received on the date of confirmed
transmittal.
12.6 Accounting Principles. All accounting computations required to be
---------------------
made for the purposes of this Agreement shall be done in accordance with GAAP,
except where such principles are inconsistent with the express requirements of
this Agreement.
12.7 Total Agreement. This Agreement and all other agreements referred to
---------------
herein or delivered in connection herewith shall constitute the entire agreement
between the parties relating to the subject matter hereof, shall rescind all
prior agreements and understandings between the parties hereto relating to the
subject matter hereof, and shall not be changed or terminated orally.
12.8 Governing Law. This Agreement and all transactions hereunder, and all
-------------
the rights and Obligations of the parties hereto, shall be governed by the laws
of the state of New Jersey, without reference to its conflict of law rules.
12.9 Survival. All warranties, representations, and covenants made by
--------
Borrower under this Agreement shall be considered to have been relied upon by
Lender and shall survive the delivery to Lender of the Note regardless of any
investigation made by Lender or on its behalf.
12.10 Time of the Essence. Borrower acknowledges and agrees that time is
-------------------
of the essence with respect to all of its obligations hereunder.
12.11 Power of Attorney. Borrower hereby appoints Lender, and its agents
-----------------
and designees, the true and lawful agents and attorneys-in-fact of Borrower,
with full power of substitution, to do all of the following upon the occurrence
and continuation of an Event of Default (a) receive, open, and dispose of all
mail addressed to Borrower relating to the Collateral; (b) notify and direct the
United States Postal Service authorities by notice given in the name of Borrower
and signed on its behalf, to change the address for delivery of all mail
addressed to Borrower relating to the Collateral to an address to be designated
by Lender, and to cause such mail to be delivered to such designated address
where Lender may open all such mail and remove therefrom any notes, checks,
acceptances, drafts, money orders or other instruments in payment of the
Collateral in which Lender has a security interest
53
<PAGE>
hereunder and any documents relative thereto, with full power to endorse the
name of Borrower upon any such notes, checks, acceptances, drafts, money order
or other form of payment or on Collateral or security of any kind and to effect
the deposit and collection thereof, and Lender shall have the further right and
power to endorse the name of Borrower on any documents otherwise relating to
such Collateral; (c) sign the name of Borrower to drafts against Contract
Debtors or other account debtors, to send notices to such Contract Debtors or
account debtors, to execute on behalf of Borrower assignments, notices of
assignments, financing statements and other public records and notices on all
other instruments or documents; and (d) do any and all other things necessary or
proper to carry out the intent of this Agreement and to perfect and protect the
Liens and rights of Lender created under this Agreement. Borrower agrees that
neither Lender nor any of its agents, designees or attorneys-in-fact will be
liable for any acts of commission or omission, or for any error of judgment or
mistake of fact or law. The powers granted hereunder are coupled with an
interest and shall be irrevocable until the Loan and all other Obligations are
paid in full.
12.12 Arbitration.
-----------
a. Any controversy or claim between or among the parties arising out
of or relating to this Agreement or any agreements or instruments relating
hereto or delivered in connection herewith and any claim based upon or arising
from an alleged tort, shall at the request of any party be determined by
arbitration. The arbitration shall be conducted in accordance with the United
States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law
provision in this Agreement, and under the Commercial Rules of the American
Arbitration Association ("AAA"). The arbitration shall be conducted within
Camden County, New Jersey, or such other county as Borrower and Lender may
agree. The arbitrator(s) shall give effect to statutes of limitation in
determining any claim. Any controversy concerning whether an issue is arbitrable
shall be determined by the arbitrator(s). Judgment upon the arbitration award
may be entered in any court having jurisdiction. The institution and maintenance
of an action for judicial relief or pursuit of a provisional or ancillary remedy
shall not constitute a waiver of the right of any party, including the
plaintiff, to submit the controversy or claim to arbitration if any other party
contests such action for judicial relief.
b. No provision of this section shall limit the right of Lender to
exercise self-help remedies such as setoff, to foreclose against or sell any of
the Collateral, or to obtain provisional or ancillary remedies from a court of
competent jurisdiction before, after, or during the pendency of any arbitration
or other proceeding. The exercise of a remedy does not waive the right of either
party to resort to arbitration.
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12.13 Litigation. Subject to the provisions of section 12.12, state and
----------
federal courts located in the state of New Jersey shall have jurisdiction (but
not exclusive jurisdiction) to hear and determine any claims or disputes between
Borrower and Lender, pertaining to this Agreement. Borrower waives any right it
may have to assert the doctrine of forum non conveniens or object such venue.
--------------------
Borrower expressly submits and consents in advance to such jurisdiction in any
action or proceeding commenced in such courts.
12.14 Severability. To the extent any provision of this Agreement is not
------------
enforceable under applicable law, such provision shall be deemed null and void
and shall have no effect on the remaining portions of the Agreement.
12.15 Participant's Security Interests. Borrower acknowledges and agrees
--------------------------------
that Lender may, subject to the provisions of section 12.16, sell participations
in the Loan and that Lender may share all information received from, or relating
to, Borrower with the Participant. If a Participant shall at any time, with
Borrower's knowledge, participate with Lender in the Loan, Borrower grants to
each such Participant and Lender and each such Participant shall have and are
hereby given, a continuing security interest and Lien on any money, securities,
and other property of Borrower in the custody of the Participants, including the
right of setoff, to the extent of the Participant's participation in the
Obligations, and such participant shall be deemed to have the same right of
setoff to the extent of Participant's participation in the Obligations under
this Agreement as it would have if it were the direct lender. Lender agrees that
it will use its best efforts to negotiate the terms of any participation
agreement between Lender and any Participant so that the participation agreement
will not materially limit Lender's right to amend the terms of this Agreement
without the consent of the Participant, provided, however, Borrower acknowledges
-----------------
that any participation agreement that Lender may enter into with a Participant
may provide that Lender may not, without the consent of the Participant, agree
or consent to any (i) extension of the time of payment of any of Borrower's
obligations with respect to the Loan; (ii) increase in the amount of the
Commitment; (iii) reduction of the principal amount of, or the rate at which
interest accrues on the Loan; (iv) reduction in the Unused Line Fee or other
fees payable under the Loan Agreement; (v) release or substitution of any
guaranty of the Loan, or any Collateral for the Loan or (vi) amendment to the
definition of Availability, or Eligible Contract or Maturity Date in the Loan
Agreement.
12.16 Confidentiality. Lender agrees that it shall hold all non-public
---------------
information obtained pursuant to the requirements of this Agreement in
accordance with its customary procedures for handling confidential information
of that nature and will use such
55
<PAGE>
information only in connection with the transactions contemplated by this
Agreement; provided, however, Lender may disclose such information (a) to the
-----------------
extent required by law (including statute, rule, regulation, and judicial
process), (b) to counsel for Lender or to its accountants, each of whom shall be
bound by the confidentiality obligations set forth herein, (c) to bank examiners
and other appropriate governmental examining authorities, (d) if such
information is filed by Borrower with any governmental agency and available to
the public, (e) if such information has been previously disclosed by Borrower to
any Person not associated with Borrower, free of any restrictions as to further
disclosure, (f) to the extent necessary or appropriate in connection with any
obligation to which Lender is a party, and (g) to any actual or prospective
Participant provided such Participant or prospective Participant enters into a
confidentiality agreement the provisions of which are substantially similar to
those contained in this section 12.16. and (h) to any of Lender's affiliates who
agree to be subject to the provisions of this section 12.16.
12.17 Jury Trial Waiver, Etc. SUBJECT TO THE ARBITRATION PROVISION OF
----------------------
SECTION 12.12, BORROWER HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY (WHICH LENDER
ALSO WAIVES) AND THE RIGHT TO IMPOSE ANY NONCOMPULSORY COUNTERCLAIM IN ANY
ACTION, SUIT, PROCEEDING, OR ANY OTHER NON-COMPULSORY COUNTERCLAIM OF ANY KIND
(REGARDLESS OF THE THEORY OF LIABILITY SUCH AS TORT AND NON-TORT THEORIES)
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OBLIGATIONS, OR THE
COLLATERAL. BORROWER EXPRESSLY ACKNOWLEDGES THE INCLUSION OF THIS JURY TRIAL
WAIVER THROUGH THE INITIALS OF ITS DULY AUTHORIZED REPRESENTATIVE.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
LENDER AND BORROWER
SECURED PARTY
BankAmerica Business Credit, Cole Taylor Finance Co.,
Inc, a Delaware corporation a Delaware corporation
by_________________________ by_______________________________
Joseph F. Pignotti, Thomas L. Barlow, President
Executive Vice President
by_______________________________
Marjorie J. MacLean,
Assistant Secretary
[SIGNATURES CONTINUED ON NEXT PAGE.]
56
<PAGE>
OUT OF OR RELATING TO THIS AGREEMENT, THE OBLIGATIONS, OR THE COLLATERAL.
BORROWER EXPRESSLY ACKNOWLEDGES THE INCLUSION OF THIS JURY TRIAL WAIVER THROUGH
THE INITIALS OF ITS DULY AUTHORIZED REPRESENTATIVE.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first above written.
LENDER AND BORROWER
SECURED PARTY
BankAmerica Business Credit Cole Taylor Finance Co.,
Inc, a Delaware corporation a Delaware corporation
by /s/ Joseph F. Pignotti by /s/ Thomas L. Barlow
------------------------ --------------------------------
Joseph F. Pignotti, Thomas L. Barlow, President
Executive Vice President
by /s/ Marjorie J. MacLean
--------------------------------
Marjorie J. MacLean,
Assistant Secretary
Reliance Acceptance Corp. of
Colorado, a Delaware corporation
by /s/ Thomas L. Barlow
--------------------------------
Thomas L. Barlow President
by /s/ Marjorie J. MacLean
--------------------------------
Marjorie J. MacLean,
Assistant Secretary
Reliance Acceptance Corp. of
Florida, a Delaware corporation
by /s/ Thomas L. Barlow
--------------------------------
Thomas L. Barlow, President
by /s/ Marjorie J. MacLean
--------------------------------
Marjorie J. MacLean,
Assistant Secretary
[SIGNATURES CONTINUED ON NEXT PAGE.]
57
<PAGE>
Reliance Acceptance Corp. of
Georgia, a Delaware corporation
by /s/ Thomas L. Barlow
-----------------------------
Thomas L. Barlow, President
by /s/ Marjorie J. MacLean
-----------------------------
Marjorie J. MacLean,
Assistant Secretary
Reliance Acceptance Corp. of
Indiana, a Delaware corporation
by /s/ Thomas L. Barlow
-----------------------------
Thomas L. Barlow, President
by /s/ Marjorie J. MacLean
-----------------------------
Marjorie J. MacLean,
Assistant Secretary
Reliance Acceptance Corp. of
Louisiana, a Louisiana
corporation
by /s/ Thomas L. Barlow
-----------------------------
Thomas L. Barlow, President
by /s/ Marjorie J. MacLean
-----------------------------
Marjorie J. MacLean,
Assistant Secretary
Reliance Acceptance Corp. of
New Mexico, a Delaware
corporation
by /s/ Thomas L. Barlow
-----------------------------
Thomas L. Barlow, President
by /s/ Marjorie J. MacLean
-----------------------------
Marjorie J. MacLean,
Assistant Secretary
[SIGNATURES CONTINUED ON NEXT PAGE.]
58
<PAGE>
Reliance Acceptance Corp. of
Ohio, an Ohio corporation
by /s/ Thomas L. Barlow
-------------------------------
Thomas L. Barlow, President
by /s/ Marjorie J. MacLean
-------------------------------
Marjorie J. MacLean
Assistant Secretary
Reliance Acceptance Corp. of
Texas, a Texas corporation
by /s/ Thomas L. Barlow
-------------------------------
Thomas L. Barlow, President
by /s/ Marjorie J. MacLean
-------------------------------
Marjorie J. MacLean
Assistant Secretary
Reliance Acceptance Corp. of
Tennessee, a Delaware
corporation
by /s/ Thomas L. Barlow
-------------------------------
Thomas L. Barlow, President
by /s/ Marjorie J. MacLean
-------------------------------
Marjorie J. MacLean
Assistant Secretary
59
<PAGE>
EXHIBIT 1.17 TO LOAN AND SECURITY AGREEMENT
COLLECTION ACCOUNT AGREEMENT
This Collection Account Agreement ("Agreement") is made as of July ___,
1994, by and between BankAmerica Business Credit, Inc. ("Lender"), a Delaware
corporation, doing business as BA Business Credit, Inc., located at 200 Lake
Drive East, Suite 201, Cherry Hill, New Jersey 08002; Cole Taylor Bank ("Bank")
located at 350 East Dundee Road, Wheeling, Illinois 60090; and Cole Taylor
Finance Co., a Delaware corporation ("Company"), a Delaware corporation, located
at 350 East Dundee Road, Wheeling, Illinois 60090.
WITNESSETH
Whereas, Company authorizes and/or has established with Bank, at its office
specified above, accounts numbered 000090670 and 000090662, with the titles
Disbursement Account No.1 and Disbursement Account No.2 respectively
(individually and collectively "Collection Account"); and
Whereas, Company has, pursuant to a financing agreement, pledged, assigned,
and granted to Lender a continuing security interest in certain property
described therein, including, without limitation, all present and future
accounts, contract rights, instruments, documents, chattel paper and general
intangibles of Company, and all proceeds thereof, which may from time to time be
deposited in the Collection Account.
NOW, THEREFORE, in consideration of the foregoing and intending to be
legally bound, the parties agree as follows.
AGREEMENT
1. Deposits into Collection Account. Company agrees that all payments,
--------------------------------
whether in cash, by check or other instrument, or otherwise, received by Company
from its customers shall be deposited by Company in the Collection Account.
Company shall, upon Lender's request, furnish to Lender each day a collection
report setting forth, in such reasonable detail as Lender may request, the
deposits made during each day in the Collection Account, together with a copy of
each deposit slip issued in connection with such deposits.
2. Collection Account Drawing Rights. Company authorizes and directs that
---------------------------------
the sole signatories authorized to withdraw amounts from, to draw upon, or to
otherwise exercise any powers with respect to, the Collection Account and the
funds deposited therein, are and shall be the employees of Company identified in
Company's written authorization or such other Persons as Company may from time
to time designate in writing to Bank, and the
1
<PAGE>
officers or agents of Lender identified on Exhibit "B" attached hereto and made
a part hereof or such other Persons as Lender may from time to time designate in
writing to Bank. Funds deposited into the Collection Account may be withdrawn
subject to the Bank's funds availability schedule applied to corporate
(wholesale or non-retail) accounts, at any time or from time to time. Until such
time as Lender gives Bank Notice described in section 6 hereof, the parties
agree that all funds deposited in the Collection Account from time to time shall
be held by Bank for Company, shall be the property of Company, and all collected
funds may be withdrawn, at any time or from time to time, by check, draft, wire
transfer, or otherwise as Company shall determine. After receipt of Notice from
Lender in accordance with section 6 below and until the Notice is withdrawn by
Lender, all funds deposited in the Collection Account shall be held by Bank for
Lender, shall be the property of Lender, and all collected funds may be
withdrawn from time to time by Lender, and Company shall have no further
authority to withdraw any amount from, to draw upon, or to otherwise exercise
any powers as a depositor or owner with respect to the Collection Account and
the funds deposited therein. Company shall not give, and Bank shall not honor,
any instructions to change the authorized signatories on the Collection Account
unless such instructions are given, or approved, in writing by Lender.
3. Security Interest in Items to be Deposited. Lender and Company agree
------------------------------------------
that all checks, money orders, and other evidences of payment deposited in the
Collection Account, which checks will be made payable to Company without
Company's endorsement, from time to time shall be held by Bank for Company or
Lender, as appropriate, and subject to the security interest of Lender. Bank
consents to and acknowledges the security interest of Lender in all items
deposited in the Collection Account and all proceeds thereof held in such
Account. Bank consents to and acknowledges the security interest of Lender in
all items deposited in the Collection Account and all proceeds thereof held in
such Account.
4. Charges to Collection Account. Bank will not charge or debit, or
-----------------------------
exercise any right of offset or banker's Lien against, the Collection Account
except as provided below. Bank may charge the Collection Account for any items
deposited in the Collection Account which are returned for any reason or
otherwise not collected and may charge the Collection Account for all service
charges, commissions, expenses, and other items ordinarily chargeable to the
Collection Account. If there are not sufficient funds in the Collection Account
to pay such amounts, then Company agrees to pay Bank within ten business days of
written demand all such amounts, regardless of any other collection efforts Bank
may have expended. If Company does not pay Bank such amounts within ten business
days, then Lender agrees to pay Bank within ten business days of written demand
(i) all service charges, commissions, and expenses ordinarily chargeable to the
Collection
2
<PAGE>
Account, and (ii) after delivery of the Notice from Lender in accordance with
Section 6 hereof, items deposited in the Collection Account which are returned
for any reason or not collected otherwise. Company and Lender acknowledge
Company is obligated to pay all customary and reasonable Bank charges resulting
from the Collection Account. Company agrees to reimburse Lender for any monies
that Lender forwards to Bank in settlement of any charges as detailed above. In
the absence of willful misconduct on the part of Bank, Company agrees to bear
all risk of loss associated with the Collection Account. Bank hereby agrees to
accept cash payment in lieu of balances as compensation for service charges
incurred on, or normally charged to, the Collection Account.
5. Collection Account Records. Company hereby instructs Bank and Bank
--------------------------
agrees to furnish to Lender, with a copy to Company, bank statements with
respect to the Collection Account which are customarily provided to customers of
Bank at the times such statements are normally provided to customers of Bank,
through the normal method of transmission, U.S. Mail. Additionally, Company
hereby instructs Bank and Bank agrees to make available to Lender and Company,
upon request, copies of all daily debit and credit advices of the Collection
Account.
6. Bank's Notice. Bank will take the following actions upon receipt of
-------------
written notice ("Notice") from Lender until the Notice is withdrawn by Lender:
a. Bank shall (and in the event of such a Notice, Company hereby
irrevocably authorizes and instructs Bank to) cease honoring all drafts,
demands, withdrawal requests, or remittance instructions by Company made after
receipt of Notice.
b. Following the receipt of the Notice and at all times thereafter,
Bank shall hold solely for the account of Lender all funds which may be on
deposit in the Collection Account at the time the Notice is received by Bank and
all funds thereafter deposited into the Collection Account, and Bank will remit
all such collected funds (subject to section 4 above) directly to Lender, in
accordance with Bank's procedures then in effect as the funds are collected, by
electronic transfers to the account indicated below.
After receipt of the Notice, Bank hereby agrees and acknowledges that all
collected funds in the Collection Account shall be forwarded by wire transfer to
BA Business Credit, Inc., account number 910-2-640704 ("Concentration Account"),
at Chase Manhattan Bank, New York, New York, ABA No. 021000021, or such other
bank and/or account as Lender may from time to time designate in writing and, on
a daily basis, Bank will initiate an automated clearing house transfer to move
collected funds from Bank to the Concentration Account and Lender shall have
sole control over the Collection Account and the sole right to exercise and
enforce all
3
<PAGE>
rights and remedies with respect thereof. The Notice shall be effective when it
is received by Bank in writing at the address set forth in section 9 below (or
at such other address as Bank may specify by written notice received by Lender)
and when Bank has had a reasonable time, based upon the same standards as those
applicable to payment and stop payment instructions generally, to act thereon.
7. Termination. Upon receipt of Lender's prior written consent which
-----------
consent shall not be unreasonably withheld or delayed, this Agreement may be
terminated by Bank or Company at any time by giving 30 days prior written notice
to the other party.
8. Modification of Agreement. This Agreement cannot be changed, modified
-------------------------
or terminated without the prior written consent of Lender, Bank, and Company.
9. Notices. All notices or demands by any party on the other relating to
-------
this Agreement shall, except as otherwise provided herein, be in writing.
Notices shall be deemed received within five business days after being deposited
in a United States post office box, postage prepaid, properly addressed to
Company, Lender, or to Bank at the addresses stated below, subject to the
earlier receipt thereof as described in section 6.b. above. Notices may also
effectively be given by transmittal over electronic transmitting devices as NBI,
TWIX, Telex or telecopy machine, if the party to whom the notice is being sent
has such a device in its office, provided a complete copy of any notice so
transmitted shall also be mailed in the same manner as required for a mailed
notice. Notices given by electronic transmitting devices shall be deemed
effective on the day of transmission. All notices, including telephone notices,
daily debit and credit advices, monthly statements of account, photocopies,
returned items and general correspondence shall be sent to the following
addresses and, where applicable given at the following telephone numbers or to
such other Person or address as any party shall designate to the others from
time to time in writing:
A. BankAmerica Business Credit, Inc.
200 Lake Drive East, Suite 201
Cherry Hill, NJ 08002
Attention: Cindy Berwick
Telephone: 609-482-9500
Facsimile: 609-482-7075
B. Cole Taylor Finance Co.
350 East Dundee Road, Suite 203
Wheeling, Illinois 60090
Attention: Leo Knowles
Telephone: 708-808-6304
Facsimile: 708-537-4337
4
<PAGE>
C. Cole Taylor Bank
350 East Dundee Road, Suite 204
Wheeling, Illinois 60090
Attention: Randy Soderman
Telephone: 708-808-6329
Facsimile: 708-537-8128
10. Notice of Legal Process. If Bank receives any notice of legal process
-----------------------
of any kind relating to Company, Bank shall use its best efforts to give
reasonable oral notice to Lender of such legal process.
11. Indemnification. Company hereby agrees to indemnify and hold Bank
---------------
harmless from and against any and all liabilities, losses, costs, and expenses
incurred directly or indirectly by Bank as a consequence of Bank executing this
Agreement and performing its obligations hereunder, including reasonable
attorney's fees. Under no circumstances will Bank be liable for any
consequential or special damages to Company, Lender or any third party, as a
result of this Agreement.
12. Successors and Assigns; Governing Law. This Agreement shall be
-------------------------------------
binding upon and inure to the benefit of the successors and assigns of the
parties and shall be governed by and construed in accordance with the laws of
the state of New Jersey.
13. Counterparts. This Agreement may be executed in any number of
------------
counterparts, and by the parties hereto in separate counterparts, each of which
when so executed and delivered shall be deemed an original but all such
counterparts together shall constitute one and the same instrument.
14. Agreement Duly Authorized. All parties hereto represent and warrant
-------------------------
that they have taken all actions and obtained all authorizations, consents and
approvals as are conditions precedent to their authority to execute this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
shown above.
"COMPANY"
Cole Taylor Finance Co.,
a Delaware corporation
By___________________________________
Thomas L. Barlow, President
[SIGNATURES CONTINUED ON NEXT PAGE]
5
<PAGE>
"LENDER"
BankAmerica Business Credit, Inc.,
a Delaware corporation
By______________________________________
Joseph F. Pignotti,
Executive Vice President
"BANK"
Cole Taylor Bank
By______________________________________
________________________________________
Name and Title
Accepted this _______ day of July, 1994.
The following companies individually agree to be bound by all of the
foregoing terms and conditions of this Agreement and expressly grant to Lender a
security interest in all of the funds deposited into the Collection Account.
Executed this 12th day of July, 1994.
Reliance Acceptance Corp. of Colorado,
Reliance Acceptance Corp. of Florida,
Reliance Acceptance Corp. of Georgia,
Reliance Acceptance Corp. of Indiana,
Reliance Acceptance Corp. of Louisiana,
Reliance Acceptance Corp. of New Mexico,
Reliance Acceptance Corp. of Ohio,
Reliance Acceptance Corp. of Texas, and
Reliance Acceptance Corp. of Tennessee
by____________________________________
Thomas L. Barlow, President
by____________________________________
Marjorie J. MacLean,
Assistant Secretary
6
<PAGE>
EXHIBIT "B"
TO
COLLECTION ACCOUNT AGREEMENT
Authorized Persons - Lender
---------------------------
Name Signature Exemplar
---- ------------------
1. ________________ ________________________
2. ________________ ________________________
3. ________________ ________________________
1
<PAGE>
EXHIBIT 1.59 TO
LOAN AND SECURITY AGREEMENT
NOTICE OF INTEREST RATE ELECTION BY
COLE TAYLOR FINANCE CO.,
RELIANCE ACCEPTANCE CORP. OF COLORADO,
RELIANCE ACCEPTANCE CORP. OF FLORIDA,
RELIANCE ACCEPTANCE CORP. OF GEORGIA,
RELIANCE ACCEPTANCE CORP. OF INDIANA,
RELIANCE ACCEPTANCE CORP. OF LOUISIANA,
RELIANCE ACCEPTANCE CORP. OF NEW MEXICO,
RELIANCE ACCEPTANCE CORP. OF OHIO,
RELIANCE ACCEPTANCE CORP. OF TEXAS, AND
RELIANCE ACCEPTANCE CORP. OF TENNESSEE
To: BankAmerica Business Credit, Inc. ("Lender")
This Notice of Interest Rate Election ("Notice") is provided to Lender to
evidence the desire of Cole Taylor Finance Co.; Reliance Acceptance Corp. of
Colorado; Reliance Acceptance Corp. of Georgia; Reliance Acceptance Corp. of
Florida; Reliance Acceptance Corp. of Indiana; Reliance Acceptance Corp. of New
Mexico; Reliance Acceptance Corp. of Ohio; Reliance Acceptance Corp. of
Louisiana; Reliance Acceptance Corp. of Texas; and Reliance Acceptance Corp. of
Tennessee (individually and collectively "Borrower") to convert or continue the
basis for determining the interest rate on such portion of the Loan pursuant to
the terms of the Loan and Security Agreement ("Loan Agreement"), dated June 12,
1994, by and between Lender and Borrower. All capitalized terms not defined
herein shall have the meaning provided in the Loan Agreement unless the context
clearly requires to the contrary.
Borrower desires to (draw down) (convert) (continue) $_________________ of
such portion of the Loan for which (there is no present Interest Period) (the
Interest Period expires on _____________________) (to) (as) Adjusted LIBOR Loans
as follows: $_______________ Adjusted LIBOR Loans with an Interest Period of
three months; this notice is provided to Lender by 11 a.m. Cherry Hill, New
Jersey, time at least three London Business Days prior to the first day of such
Interest Period, which day is hereby requested to be ______________.
This Notice, if to convert all or any portion of the Loan, shall be,
subject only to sections 3.6.b., 3.6.c., 3.6.d. and 3.7 of the Loan Agreement,
IRREVOCABLE on and after the Interest Rate Determination Date pertaining to the
request made hereby.
1
<PAGE>
The undersigned hereby certifies that no Default or Event of Default has
occurred or is continuing on the date hereof.
"BORROWER"
Cole Taylor Finance Co.;
Reliance Acceptance Corp. of
Colorado; Reliance Acceptance Corp.
of Florida; Reliance Acceptance Corp.
of Georgia; Reliance Acceptance Corp.
of Indiana; Reliance Acceptance Corp.
of Louisiana; Reliance Acceptance
Corp. of New Mexico; Reliance
Acceptance Corp. of Ohio; Reliance
Acceptance Corp. of Tennessee; and
Reliance Acceptance Corp. of Texas
by______________________________
Type name: __________________
Type Title: _________________
2
<PAGE>
SCHEDULE 5.3 TO LOAN AND SECURITY AGREEMENT
(LOCATION OF BORROWER'S BOOKS AND RECORDS AND COLLATERAL)
Cole Taylor Finance Co. Reliance Acceptance Corp.
350 East Dundee Road, Suite 203 of Ohio
Wheeling, IL 60090 1425 E. Dublin Granville Rd.
Suite 203
Cole Taylor Finance Co. Columbus, OH 42229
400 N. Loop 1604 East, Ste. 315
San Antonio, TX 78232 Reliance Acceptance Corp.
of Florida
Reliance Acceptance Corp. 455 Douglas Avenue, Suite 1155
of Texas Altamonte Springs, FL 32714
10127 Morocco, Suite 210
San Antonio, TX 78216 Reliance Acceptance Corp.
of Indiana
Reliance Acceptance Corp. 6100 North Keystone, Suite 400
of Texas Indianapolis, IN 46220
2211 S. Interstate Hwy. 35
Suite 204 Reliance Acceptance Corp.
Austin, TX 78741 of Texas
9525 Katy Freeway, Suite 207
Reliance Acceptance Corp. Houston, TX 77024
of Texas
3765 South Alameda, Suite 426 Reliance Acceptance Corp.
Corpus Christi, TX 78411 of New Mexico
9301 Indian School Road NE.
Reliance Acceptance Corp. Suite 108
of Texas Albuquerque, NM 87112
1510 N. Hampton Rd., Ste. 270
DeSoto, TX 75115 Reliance Acceptance Corp.
of Ohio
Reliance Acceptance Corp. 26777 Lorain Road, Suite 209
of Texas North Olmstead, OH 44070
817 East Southmore, Suite 200
Pasadena, TX 77502 Reliance Acceptance Corp.
of Georgia
Reliance Acceptance Corp. 3953 Pleasantdale, Suite 103
of Ohio Atlanta, GA 30340
10979 Reed Hartman Hwy. #101
Cincinnati, OH 45242 Reliance Acceptance Corp.
of Indiana
Reliance Acceptance Corp. 4410 Executive Blvd., Suite 6B
of Texas Ft. Wayne, IN 46808
555 N. Interstate Hwy. 35
Suite 224 Reliance Acceptance Corp.
New Braunfels, TX 78130 of Ohio
1161 Lyons Road, Building E
Reliance Acceptance Corp. Centerville, OH 45458
of Georgia
2814 New Spring Rd. Ste. 112
Atlanta, GA 30339
1
<PAGE>
EXHIBIT 7.6
TO
LOAN AND SECURITY AGREEMENT
[AUTHORIZED SHARES OF STOCK/ISSUED AND OUTSTANDING]
<TABLE>
<CAPTION>
No. of Shares No. of Shares Percentage Certificate
Entity Authorized Outstanding Owned Number
- ------ ---------- ----------- ----- -----
<S> <C> <C> <C> <C>
Cole Taylor Finance Co. 25,000 100 100% 1
Reliance Acceptance
Corp. of Colorado 1,000 100 100% 1
Reliance Acceptance
Corp. of Florida 1,000 100 100% 1
Reliance Acceptance
Corp. of Georgia 1,000 100 100% 1
Reliance Acceptance
Corp. of Indiana 1,000 100 100% 1
Reliance Acceptance
Corp. of Louisiana 1,000 10 100% 1
Reliance Acceptance
Corp. of New Mexico 1,000 100 100% 1
Reliance Acceptance
Corp. of Ohio 1,000 10 100% 1
Reliance Acceptance
Corp. of Tennessee 1,000 100 100% 1
Reliance Acceptance
Corp. of Texas 200 100 100% 1
</TABLE>
2
<PAGE>
EXHIBIT 7.15 TO
LOAN AND SECURITY AGREEMENT
[LIST OF PLANS]
NONE
1
<PAGE>
EXHIBIT 8.18 TO
LOAN AND SECURITY AGREEMENT
[APPROVED FORM OF DEALER AGREEMENT]
1
<PAGE>
LETTER OF AGREEMENT
DEALER:_______________________ TERMS TO THIS AGREEMENT
ARE SUBJECT TO CHANGE
_______________________ -----------------------
_______________________
The following terms are incorporated into and made part of the attached
AUTOMOBILE RETAIL PURCHASE AGREEMENT:
RATES: At authorized rates and as shown on the Retail Rate Schedule in effect.
TERMS: 1994, 1995 (new and used) 48 months maximum term
1993, 1992 42 months maximum term
1991, 1990 36 months maximum term
1989, 1988 and older 24 months maximum term
On special situations Reliance Acceptance will finance up to 30 months on
1988 and older.
AMOUNT(S) FINANCED: Reliance will finance ________ of the current NADA Trade In
Value.
Example: NADA Trade In Value $5000.00
Hard Adds (+/- miles) + 500.00
-------
Total $5500.00
x
-------
Available to Finance
Contracts are non-recourse from time of funding, unless otherwise stipulated in
this Letter of Agreement.
AUTO WARRANTIES: Reliance Acceptance will pay to the Dealer 10% of the Auto
Warranty premium if Dealer sells Reliance Auto Warranty. The Dealer will pay to
Reliance Acceptance 10% of the Auto Warranty premium if Dealer sells "in-house"
Auto Warranty. A minimum of $100.00 will be retained or paid by Reliance
Acceptance. Reliance Acceptance will finance a _________ maximum premium.
CREDIT INSURANCE: Reliance Acceptance will finance 100% of the Credit Insurance
premium sold on each contract. Reliance Acceptance will pay the Dealer _________
of the gross premium whenever Dealer sells Reliance Credit Insurance. The Dealer
will pay Reliance Acceptance _________ of the gross premium if Dealer sells
"in-house" Credit Insurance.
DISCOUNT: Reliance Acceptance will retain a minimum of ________ of the amount
shown on Line 3 (unpaid balance of cash price) on each contract purchased. This
is a non-refundable discount.
APPLICATION PROCESSING: Reliance Acceptance will charge the Dealer a processing
fee of ________ on each contract purchased.
______________________________ _______________________________
BRANCH OFFICE DEALER
BY:___________________________ BY:____________________________
DATE:_________________________ DATE:__________________________
<PAGE>
AUTOMOBILE DEALER RETAIL PURCHASE AGREEMENT
The undersigned Dealer proposes to sell to the undersigned Finance Company, from
time to time, Promissory Notes, Security Agreements, Retail Installment
Contracts, Conditional Sales Contracts, or other instruments hereinafter
referred to as "Contracts", evidencing installment payment obligations owing
Dealer arising from the time sale of motor vehicles and secured by such
Contracts. It is understood that Finance Company shall have the sole discretion
to determine which Contracts it will purchase from Dealer.
1. Dealer represents and warrants that Contracts submitted to Finance Company
for purchase shall represent valid, bonafide sales for the respective
amount therein set forth in such Contracts and that such Contracts
represent sales of motor vehicles owned by Dealer free and clear of all
liens and encumbrances.
2. Upon purchase of Finance Company of any Contracts hereunder from Dealer,
Dealer shall endorse and assign to Finance Company both the obligations and
all pertinent security and security instruments, along with such
provisional endorsements as may be stipulated for such Contracts purchased
by Finance Company.
3. Rates that will apply shall be those stipulated from time to time by the
Finance Company in their Retail Rate Schedule which is incorporated by
reference herein and made a part of this Agreement. Year models for this
purpose will change on October 1st of each calendar year, unless otherwise
provided for by existing State regulations.
4. This Agreement shall be governed by, and construed and enforced in
accordance with the laws of the State in which this Agreement was executed.
5. No course of dealing between the Dealer and the Finance Company or any
delay or failure on the part of the Finance Company in exercising any
rights hereunder shall operate as a waiver of any rights of the Finance
Company, except to the extent expressly waived in writing by the Finance
Company.
6. No provisions hereof may be modified, changed or supplemented, except in
writing by a duly authorized representative of the Finance Company.
_______________________________ ______________________________
FINANCE COMPANY DEALER
BY:____________________________ BY:___________________________
DEALER
DATE:__________________________ DATE:____________NUMBER_______
<PAGE>
SCHEDULE 10.2
TO
LOAN AND SECURITY AGREEMENT
[LIST OF REQUIRED CLOSING DOCUMENTS]
Lender shall have received on or before the Closing Date all of the
following documents which shall be satisfactory to Lender in form and content:
1. Certificate of Secretary for each Borrower
2. UCC-1 financing statements for each Borrower.
3. Certificate of good standing for each Borrower
4. Statement of qualification for each Borrower for each Borrower
operating in a state other than the state of its incorporation.
5. Opinion of Borrower's counsel.
6. Certificate of Borrower's chief financial officer for each Borrower.
7. Payoff letters and releases.
8. Borrower's authorization letters.
9. UCC termination statements.
10. Security Agreement-Stock Pledge for the stock of each Subsidiary
Borrower of Parent Borrower.
11. Letter of Responsibility issued by Cole Taylor Financial Group, Inc.
12. Stock Certificates
13. Stock Powers
1
<PAGE>
AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT
This Amendment No. 1 to Loan and Security Agreement ("Amendment") is
entered into as of March 23, 1995, by and between BankAmerica Business Credit,
Inc., a Delaware corporation ("Lender") and Cole Taylor Finance Co., a Delaware
corporation; Reliance Acceptance Corp. of Colorado, a Delaware corporation;
Reliance Acceptance Corp. of Georgia, a Delaware corporation; Reliance
Acceptance Corp. of Florida, a Delaware corporation; Reliance Acceptance Corp.
of Indiana, a Delaware corporation; Reliance Acceptance Corp. of New Mexico, a
Delaware corporation; Reliance Acceptance Corp. of Ohio, an Ohio corporation;
Reliance Acceptance Corp. of Texas, a Texas corporation; and Reliance Acceptance
Corp. of Tennessee, a Delaware corporation; (individually and collectively,
"Existing Borrowers"),and Reliance Acceptance Corp. of Kentucky, a Delaware
corporation; Reliance Acceptance Corp. of Illinois, a Delaware corporation;
Reliance Acceptance Corp. of Minnesota, a Delaware corporation; Reliance
Acceptance Corp. of North Carolina, a Delaware corporation; Reliance Acceptance
Corp. of South Carolina, a Delaware corporation; Reliance Acceptance Corp. of
Arizona, a Delaware corporation; Reliance Acceptance Corp. of Iowa, a Delaware
corporation; Reliance Acceptance Corp. of Missouri, a Delaware corporation;
Reliance Acceptance Corp. of Nevada, a Delaware corporation; Reliance Acceptance
Corp. of Oregon, a Delaware corporation; and Reliance Acceptance Corp. of
Washington, a Delaware corporation (individually and collectively, "New
Borrowers").
RECITALS
--------
This Amendment is entered into in reference to the following facts:
a. Existing Borrowers and Lender entered into a Loan and Security
Agreement, dated as of July 12, 1994 (the Loan and Security Agreement, as
amended, modified, and supplemented prior to the date hereof being hereinafter
referred to as "Loan Agreement"). (The Loan Agreement, and all other documenting
the loan evidenced thereby and the security therefor are hereinafter
collectively referred to as "Loan Documents".)
b. New Borrowers are newly formed, wholly owned subsidiaries of Cole
Taylor Finance Co. Existing Borrowers desire to amend the Loan Agreement to
include New Borrowers as "Subsidiary Borrowers" and as "Borrower" thereunder and
to otherwise amend the Loan Agreement.
c. Lender is willing to amend the Loan Agreement subject to the
terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties agree as follows.
-1-
<PAGE>
SECTION ONE - AMENDMENTS
------------------------
1.1 Amendment of "Subsidiary Borrowers" and "Borrower." The term
---------------------------------------------------
"Subsidiary Borrowers" and "Borrower" as used in the Loan Agreement and other
Loan Documents are hereby amended to mean New Borrowers and Existing Borrowers,
individually and collectively. New Borrowers absolutely and unconditionally
assume all Obligations existing under the Loan Documents as of the date hereof,
expressly grant to Lender the security interests referenced therein in regard to
the Property of the New Borrowers of the type specified therein, and acknowledge
and agree that each of the New Borrowers shall be jointly and severally liable
for all Obligations, as more particularly provided in Section 12.4 of the Loan
Agreement.
1.2 Amendment of Section 1.7. Section 1.7 of the Loan Agreement is
------------------------
amended and restated to read in its entirety as follows:
"
1.7 Advance Rate shall mean Eighty-three percent (83%), provided,
------------
however:
(a) In the event that the Delinquency Rate, computed as of the
last day of each month for each of the three calendar months immediately
preceding the date of calculation, exceeds three percent (3.0%) but is not
more than three and one-half percent (3.5%) in one of those three months,
then the Advance Rate shall mean eighty-two percent (82%), and
(b) In the event that the Delinquency Rate, computed as of the
last day of each month for each of the three calendar months immediately
preceding the date of calculation, is equal to or greater than three and
one-half percent (3.5%) but is not more than four percent (4.0%) in one of
those three months, then the Advance Rate shall mean eighty-one percent
(81%), and
(c) In the event that the Delinquency Rate, computed as of the
last day of each month for each of the three calendar months immediately
preceding the date of calculation, is greater than four percent (4.0%),
then the Advance Rate shall mean eighty percent (80%).
The date of calculation of the Advance Rate and the date any change
therein shall become effective is the date Borrower actually delivers to
Lender its most recent Collateral Report reflecting the Delinquency Rates
for Borrower. The Advance Rate, as so calculated, shall
-2-
<PAGE>
remain in effect until Borrower delivers to Lender its next Collateral
Report reflecting the Delinquency Rates for the Borrower. (For
example, if Borrower's Collateral Reports for the months of March,
April, and May, delivered to Lender on June 15, reflect that the
Delinquency Rate for Borrower was 3.4 percent, 4.0 percent and 3.75
percent respectively, then the Advance Rate will immediately thereupon
be 82 percent for the period of June 15 to and including July 14 (the
next report being due on July 15), and if, as a result of such
calculation, an Over Advance was determined to have existed as of June
15, based on an Advance Rate of 82 percent, then Borrower shall be
required to pay down the Loan accordingly, and for example, if
Borrower's Collateral Reports for the months of March, April, and May,
delivered to Lender on June 15, reflect that the Delinquency Rate for
Borrower was 3.8 percent, 4.0 percent and 4.2 percent respectively,
then the Advance Rate will immediately thereupon be 81 percent for the
period of June 15 to and including July 14 (the next report being due
on July 15), and if, as a result of such calculation, an Over Advance
was determined to have existed as of June 15, based on an Advance Rate
of 81 percent, then Borrower shall be required to pay down the Loan
accordingly.)"
1.3 Amendment of Section 1.9. Section 1.9 of the Loan Agreement is
------------------------
amended and restated to read in its entirety as follows:
"1.9 Availability shall mean, as of any date of calculation, the
------------
remainder of (a) the sum of (i) the Advance Rate multiplied by the
aggregate amount of all Net Contract Payments to be made under all
Eligible Contracts which are not Alternative Finance Plan Eligible
Contracts, plus (ii) the Advance Rate multiplied by the lesser of (1)
----
the aggregate purchase price paid to Dealers for Alternative Finance
Plan Eligible Contracts then outstanding, or (2) the aggregate amount
of all Net Contract Payments due under such Contracts, minus (b) the
-----
sum of (i) the product of the Dealer Reserve Percentage multiplied by
the Dealer Reserve, plus (ii) Commercial Paper Indebtedness; provided,
---- ---------
however, that (a) the Net Contract Payments due under Old Auto
--------
Contracts included in the Availability shall at no time exceed five
percent (5%) of all Net Contract Payments, (b) the Net Contract
Payments due under Alternative Finance Plan Eligible Contracts
included in the Availability shall at no time exceed ten percent (10%)
of all Net Contract Payments, and (c) in the event Borrower, after the
date of this Agreement, changes its method of accounting for the
Dealer Reserve which has the effect of accelerating the rate at which
such reserve is recognized as income, then
-3-
<PAGE>
Lender may increase the percentage rate applicable to the Dealer
Reserve in order that the Dealer Reserve deduction from Availability
is the same as it would have been had Borrower not changed such
accounting method."
1.4 Amendment of Subsection 1.30 r. Subsection 1.30 r. of the Loan
------------------------------
Agreement is amended and restated to read in its entirety as follows:
"r. the original term of the Contract, together with any and all
extensions thereof, and the mileage of the Goods shall not exceed the
number of months and number of miles indicated opposite the age of the
Goods which are the subject of the Contract at the time the Contract is
originated:
<TABLE>
<CAPTION>
Age of Goods Maximum
------------ -------
(Model Years) Monthly Term Mileage Limit
------------- ------------ -------------
<S> <C> <C>
6 and more 36 No limit
4 or 5 42 No limit
3 or less 54 No limit
3 or less 60 35,000 or less"
</TABLE>
1.5 Amendment of Section 1.61. Section 1.61 of the Loan Agreement is
-------------------------
amended and restated to read in its entirety as follows:
"1.61 Old Auto Contracts shall mean Eligible Contracts which are
------------------
secured by a Lien on Goods which are more than seven model years old
at the inception of the Contract; provided, however, `Old Auto
-----------------
Contracts' shall not include Alternative Finance Plan Eligible
Contracts."
1.6 Amendment of Section 1.77. Section 1.77 of the Loan Agreement is
-------------------------
amended and restated to read in its entirety as follows:
"1.77 Total Credit Facility shall mean $150,000,000."
---------------------
1.7 Amendment of Section One. Article One of the Loan Agreement is
------------------------
amended by the addition of two new sections, numbered 1.79 and 1.80, which
shall read in their entirety as follows:
"1.79 Dealer Reserve Percentage shall mean sixty percent (60%),
-------------------------
provided, however, in the event the average Dealer Reserve for the
-------- -------
three immediately preceding months, calculated as of the last day
thereof, exceeds twelve percent (12%) of the Gross Contract Payments
then due under all Contracts purchased during such three months, then
the Dealer Reserve Percentage shall be one hundred percent (100%).
-4-
<PAGE>
1.80 `Alternative Finance Plan Eligible Contract' shall mean a
Contract which meets all of the criteria for an Eligible Contract except
for the criteria set forth in subsection 1.30 r of the Agreement, and, in
addition meets at all times all of the following requirements as determined
by Lender, in its reasonable discretion:
(a) The amount paid by Borrower to the Dealer to purchase the Contract
does not exceed the lesser of (i) fifty percent (50%) of the Net Contract
Payments due under the Contract on the date of purchase by Borrower, or
(ii) to the extent that the Contract Debtor's down payment for the subject
Goods was in the form of cash, and not in the form of a trade-in of other
Goods or other form of property, one hundred fifty percent (150%) of the
cash down payment paid by the Contract Debtor for the Goods;
(b) The original term of the Contract, together with any and all
extensions thereof, does not exceed 30 months; and
(c) The Contract is subject to a Dealer Agreement which provides that
(i) Borrower shall receive a monthly servicing fee based upon sums
collected from the Contract Debtor during each month of the term of the
Contract, (ii) Borrower shall do all billing and collecting of payments due
under the Contract, and (iii) the Dealer shall not receive any portion of
the payments paid by the Contract Debtor under the Contract unless and
until Borrower first receives from such monthly payments (after first
deducting Borrower's monthly servicing fee) an amount equal to the purchase
price paid to the Dealer for such Contract."
1.8 Amendment of Article Three. Article Three of the Loan Agreement is
--------------------------
amended by the addition of a new section, numbered 3.14, which shall read in its
entirety as follows:
"3.14 Commercial Paper Fee. For every month during the term of
--------------------
this Agreement, Borrower shall pay to Lender a fee ("Commercial Paper Fee")
in an amount equal to the product of five-eighths of one percent per annum,
multiplied by the average daily closing balance of the Commercial Paper
-------------
Indebtedness outstanding during such month. Such fee, if any, shall be
calculated on the basis of a year of 360 days, actual days elapsed, and
shall be payable to Lender on the Interest Payment Due Date with respect to
the prior month."
1.9 Amendment of Schedule 5.3. Schedule 5.3 of the Loan Agreement is
--------------------------
amended by the addition of nine new addresses which are follows:
-5-
<PAGE>
*Reliance Acceptance Corp. of Colorado
10800 East Bethany Drive, Ste. 325
Aurora, CO 80014
Reliance Acceptance Corp. of Florida
11570 San Jose Blvd.
Jacksonville, FL 32223
Reliance Acceptance Corp. of North Carolina
4401 East Independence Boulevard, Suite 204
Charlotte, North Carolina 29205
Reliance Acceptance Corp. of South Carolina
722-A Lowndes Hill Road
Greenville, SC 29607
Reliance Acceptance Corp. of Colorado
3630 Sinton Road, Suite 201
Colorado Springs, Colorado 80907
Reliance Acceptance Corp. of Tennessee
907 Two Mile Parkway, Ste. A-2
Goodlettsville, TN 37072
Reliance Acceptance Corp. of Texas
102 Oak Park Drive, Suite 104
Clute, TX 77531
Reliance Acceptance Corp. of Illinois
5501 West 79th Street, Suite 310
Burbank, Illinois 60457
Reliance Acceptance Corp. of Texas
8930 Four Winds Drive, Suite 100
San Antonio, Texas 78239
1.10 Amendment of Section 5.6. Section 5.6 of the Loan Agreement is
------------------------
amended by the addition of two new subsections, numbered 5.6 e and f, which
shall read in their entirety as follows:
"e. A summary of the aging of the Alternative Finance Plan Eligible
Contracts on a contractual basis, and upon Lender's request, a detailed
aging report for such Contracts; and
f. A report reflecting the Delinquency Rate for Alternative Finance
Plan Eligible Contracts for each of the Subsidiary Borrowers."
1.11 Amendment of Schedule 7.6. Schedule 7.6 of the Loan Agreement is
-------------------------
amended by the addition of the following corporations and related information:
<TABLE>
<CAPTION>
No. of Shares No. of Shares Percentage Certificate
Entity Authorized Outstanding Owned Number
------ ---------- ----------- ----- ------
<S> <C> <C> <C> <C>
Reliance Acceptance Corp.
of Kentucky 1,000 100 100% 1
Reliance Acceptance Corp.
of Illinois 1,000 100 100% 1
Reliance Acceptance Corp.
of Minnesota 1,000 100 100% 1
Reliance Acceptance Corp.
of North Carolina 1,000 100 100% 1
</TABLE>
-6-
<PAGE>
Reliance Acceptance Corp.
of South Carolina 1,000 100 100% 1
Reliance Acceptance Corp.
of Arizona 1,000 100 100% 1
Reliance Acceptance Corp.
of Iowa 1,000 100 100% 1
Reliance Acceptance Corp.
of Missouri 1,000 100 100% 1
Reliance Acceptance Corp.
of Nevada 1,000 100 100% 1
Reliance Acceptance Corp.
of Oregon 1,000 100 100% 1
Reliance Acceptance Corp.
of Washington 1,000 100 100% 1
1.12 Amendment of Section 8.10. Section 8.10 of the Loan Agreement is
-------------------------
amended and restated to read in its entirety as follows:
"8.10 Limitation of Amounts Paid to Dealers. The average
-------------------------------------
amount, calculated as of the last day of each month on a cumulative,
consolidated basis, paid by Borrower to Dealers during each of the 12
calendar months immediately preceding the date of calculation, for
the purchase of Contracts which arise from the credit sale of Goods
shall not exceed the following: (a) in the case of Contracts arising
from a credit sale of new Goods, the invoice price therefor; and (b)
in the case of Contracts arising from the credit sale of used Goods,
an amount determined by utilizing either (i) the `average trade-in
value' for the Goods which are the subject of such Contracts, as
established by the National Automobile Dealers Association Official
------------------------------------------------
Used Car Guide or (ii) the `wholesale value' for the Goods which are
--------------
the subject of such Contracts, as established by the Kelly Blue Book
---------------
Auto Market Report Official Guide (collectively and individually the
---------------------------------
"Guide") in the effect at the time Borrower purchased the subject
Contract. In the event that the Guide shall at any time cease to be
published, then Lender shall, thereafter, select a comparable
publication, as determined by Lender, in its sole discretion, for
determining the foregoing calculation. For purposes of this section
8.10, there shall be excluded from the determination of the purchase
price of a Contract, that portion of the purchase price which was
paid for sums included in the unpaid Contract balance which arise
from a purchase, on a credit basis, of credit
-7-
<PAGE>
life and disability insurance, extended vehicle warranty
insurance, and other forms of insurance, and all taxes, title,
license, and similar fees."
1.13 Amendment of Subsection 8.11. Section 8.11 of the Loan Agreement is
----------------------------
amended and restated to read in its entirety as follows:
"8.11 Unsubordinated Debt to Borrowing Base. Borrower shall
-------------------------------------
not permit the ratio, calculated on a consolidated basis as of
the last day of each month, of (a) the remainder of (i) Debt,
minus (ii) all Subordinated Debt (numerator), to (b) Borrowing
-----
Base (denominator), to be more than: 5:1; provided, however, if
-----------------
at any time the sum of the unpaid balance of the Loan plus the
----
aggregate principal amount of the Commercial Paper Indebtedness
is equal to or greater than $100,000,000, then Borrower shall not
permit the ratio at all times thereafter, as so calculated, to be
more than 3.75; 1."
1.14 Amendment of Section 8.13. Section 8.13 of the Loan Agreement is
-------------------------
amended and restated to read in its entirety as follows:
"8.13 Minimum Adjusted Tangible Net Worth. Borrower shall
-----------------------------------
not permit its Adjusted Tangible Net Worth, calculated on a
consolidated basis as of the last day of each month, to be less
than: (a) $8,000,000 on December 31, 1994, (b) $8,000,000 during
the period January 1, 1995, through December 30, 1995, (c)
$15,000,000 on December 31, 1995, and (d) $15,000,000 for the
period beginning January 1, 1996, and at all times thereafter."
1.15 Amendment of Section 8.18. Section 8.18 of the Loan Agreement is
-------------------------
amended and restated to read in its entirety as follows:
"8.18 Debt. Borrower shall not incur or maintain any Debt
----
other than: (a) the Obligations, (b) Debt owing by Subsidiary
Borrowers and Parent Borrower to one another, (c) Debt incurred
to finance the purchase or lease of equipment, (d) other Debt
existing as of the Closing Date and reflected on Borrower's
financial statements for the most recently ended period reflected
therein, (e) unsecured Debt owing by Borrower to Cole Taylor
Financial Group, Inc., (f) accounts payable, accrued payroll,
accrued taxes, and other obligations arising in the ordinary
course of Borrower's business, (g) loans to employees not
exceeding $200,000 in the aggregate at any one time, and (h)
Commercial Paper Indebtedness."
-8-
<PAGE>
1.16 Deletion of Subsection 11.1 f. Subsection 11.1 f of the Loan
-----------------------------
Agreement, entitled "Material Adverse Change", is hereby deleted from the Loan
Agreement in its entirety as is of no further force or effect.
1.17 Amendment of Section 11.1. Section 11.1 of the Loan Agreement is
-------------------------
amended by the addition of a new subsection, numbered 11.1 r, which shall read
in its entirety as follows:
"r. High Delinquency Rate. Borrower's Delinquency
---------------------
Rate, calculated on a consolidated basis as of the last day of
each month, for each of the three months immediately preceding
the date of calculation, exceeds four and one-half percent
(4.5%)."
1.18 Amendment of Article Twelve. Article Twelve of the Loan Agreement is
---------------------------
amended by the addition of a new section, numbered 12.18, which shall read in
its entirety as follows:
"12.18 Third Party Beneficiaries. This Agreement is solely
-------------------------
for the benefit of Borrower, and may not be relied on by any
other party."
1.19 Acknowledgment of Collection Account Agreement. New Borrowers
----------------------------------------------
individually agree to be bound by all of the terms of the that certain
Collection Account Agreement, dated as of July 12, 1994, by and between Lender
and Cole Taylor Finance Co. and expressly pledge, assign, and grant a security
interest to Lender in all funds deposited into the Collection Account.
SECTION TWO - CONDITIONS PRECEDENT TO AMENDMENTS
------------------------------------------------
2.1 Conditions Precedent to Amendment. This Amendment shall become
---------------------------------
legally binding upon Existing Borrowers, New Borrowers, and Lender only when
Borrower, Existing Borrowers, and New Borrowers shall have executed and
delivered to Lender or caused to be executed and delivered to Lender, as
appropriate, all of the following documents which are satisfactory to Lender in
form and content:
a. Certificate of Assistant Secretary of each of the Existing
Borrowers;
b. Certificate of Assistant Secretary of each of the New Borrowers;
c. Opinion of counsel for New Borrowers;
d. Amendment No. 1 to Security Agreement-Stock Pledge;
e. Stock Powers for the stock of New Borrowers and the original
stock certificates evidencing such stock;
-9-
<PAGE>
f. Good standing certificates for each of the New Borrowers;
g. Certificates of qualification for each of the New Borrowers;
h. UCC-1 financing statements for each of the New Borrowers to be
filed in the state of Illinois and for each of the New Borrowers and Cole Taylor
Finance Co. to be filed in the state (and if required, the county) in which each
of the New Borrowers operates or intends to operate;
i. Certificate of Assistant Secretary of Cole Taylor Finance Co.;
and
j. Reaffirmation letter from Cole Taylor Finance Group, Inc.
2.2 New Facility Fee. On the date Borrower executes this Amendment,
----------------
Borrower shall pay to Lender a facility fee ("New Facility Fee") equal to
one-quarter of one percent (0.25%) of $50,000,000, prorated for the number of
months remaining to the Maturity Date. Borrower and Lender agree that the New
Facility Fee may be financed, at Lender's discretion, as an Advance to the Loan.
SECTION THREE - REPRESENTATIONS AND WARRANTIES
----------------------------------------------
2.3 Acknowledgments of Borrowers. Existing Borrowers and New Borrowers
----------------------------
each hereby represent and warrant that: (a) the execution and delivery of this
Amendment and compliance by Existing Borrowers and New Borrowers with all of the
provisions of this Amendment (i) are within the powers and purposes of Existing
Borrowers and New Borrowers; (ii) have been duly authorized or approved by
Existing Borrowers New Borrower; and (iii) when executed and delivered by or on
behalf of Existing Borrowers and New Borrowers, will constitute valid and
binding obligations of Existing Borrowers and New Borrowers, enforceable in
accordance with its terms; (b) Existing Borrowers and New Borrowers have no
offsets or counterclaims against Lender or defenses to the payments due under
the Loan Documents; (c) Lender has a first perfected security interest in the
Collateral to secure the Obligations under the Loan Documents; and (d) the
recitals in this Amendment are true. Existing Borrowers each reaffirm its
obligation to pay all amounts due Lender under the Loan Documents in accordance
with the terms thereof, as modified hereby.
SECTION FOUR - GENERAL PROVISIONS
---------------------------------
4.1 Loan Documents Unmodified. Except as otherwise specifically modified
-------------------------
by this Amendment, all terms and provisions of the Loan Documents and all liens
and security interests created
-10-
<PAGE>
thereby shall remain unmodified and in full force and effect. Nothing contained
in this Amendment shall in any way impair the validity or enforceability of the
Loan Documents, as modified hereby, or alter, waive, annul, vary, affect, or
impair any provision, condition, or covenant contained therein or any rights,
power, or remedy granted therein.
4.2 Construction of Amendment. Each party hereto has cooperated in the
-------------------------
drafting and preparation of this Amendment and, as a result, this Amendment
shall not be construed against any party. This Amendment may be amended or
modified only by a written agreement signed by the parties hereto. This
Amendment may be executed in counterparts, each of which when so executed and
delivered shall be deemed an original but all such counterparts together shall
constitute one and the same instrument.
4.3 Parties, Successors and Assigns. This Amendment shall be binding upon
-------------------------------
and shall inure to the benefit of Borrower, Lender, and their respective
successors and assigns.
4.4 Definitions. Unless specifically defined herein, all capitalized
-----------
terms shall be defined in accordance with the Loan Agreement as amended by this
Amendment.
4.5 Severability. To the extent any provision of this Amendment is not
------------
enforceable under applicable law, such provision shall be deemed null and void
and shall have no effect on the remaining portions of the Amendment.
4.6 Total Agreement. This Amendment, and all other agreements referred to
---------------
herein or delivered in connection herewith, shall constitute the entire
agreement between the parties relating to the subject matter hereof, and shall
rescind all prior
-11-
<PAGE>
agreements and understandings between the parties hereto relating to the subject
matter hereof, and shall not be changed or terminated orally.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
"EXISTING BORROWERS"
Cole Taylor Finance Co.;
Reliance Acceptance Corp. of Colorado;
Reliance Acceptance Corp. of Georgia;
Reliance Acceptance Corp. of Florida;
Reliance Acceptance Corp. of Indiana;
Reliance Acceptance Corp. of New Mexico;
Reliance Acceptance Corp. of Ohio;
Reliance Acceptance Corp. of Tennessee;
and Reliance Acceptance Corp. of Texas
Date: March 23, 1995 by /s/ Thomas L. Barlow
----------------------------------------
Thomas L. Barlow, President
Date: March 23, 1995 by /s/ Marjorie J. MacLean
----------------------------------------
Marjorie J. MacLean, Assistant Secretary
"NEW BORROWERS"
Reliance Acceptance Corp. of Kentucky;
Reliance Acceptance Corp. of Illinois;
Reliance Acceptance Corp. of Minnesota;
Reliance Acceptance Corp. of North
Carolina; and Reliance Acceptance Corp. of
South Carolina; Reliance Acceptance Corp.
of Arizona; Reliance Acceptance Corp. of
Iowa; Reliance Acceptance Corp. of
Missouri; Reliance Acceptance Corp. of
Nevada; Reliance Acceptance Corp. of
Oregon; and Reliance Acceptance Corp. of
Washington
Date: March 23, 1995 by /s/ Thomas L. Barlow,
----------------------------------------
Thomas L. Barlow, President
Date: March 23, 1995 by /s/ Marjorie J. MacLean,
----------------------------------------
Marjorie J. MacLean, Assistant Secretary
[SIGNATURE OF LENDER CONTINUED ON NEXT PAGE.]
-12-
<PAGE>
"LENDER"
BankAmerica Business Credit, Inc.,
a Delaware corporation
Date: March 23, 1995 by /s/ Joseph F. Pignotti
------------------------------------
Joseph F. Pignotti
Executive Vice President
-13-
<PAGE>
AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT
This Amendment No. 2 to Loan and Security Agreement ("Amendment") is
entered into as of May 19, 1995, by and between BankAmerica Business Credit,
Inc., a Delaware corporation ("Lender") and Cole Taylor Finance Co., a Delaware
corporation; Reliance Acceptance Corp. of Colorado, a Delaware corporation;
Reliance Acceptance Corp. of Georgia, a Delaware corporation; Reliance
Acceptance Corp. of Florida, a Delaware corporation; Reliance Acceptance Corp.
of Indiana, a Delaware corporation; Reliance Acceptance Corp. of New Mexico, a
Delaware corporation; Reliance Acceptance Corp. of Ohio, an Ohio corporation;
Reliance Acceptance Corp. of Texas, a Texas corporation; and Reliance Acceptance
Corp. of Tennessee, a Delaware corporation; Reliance Acceptance Corp. of
Kentucky, a Delaware corporation; Reliance Acceptance Corp. of Illinois, a
Delaware corporation; Reliance Acceptance Corp. of Minnesota, a Delaware
corporation; Reliance Acceptance Corp. of North Carolina, a Delaware
corporation; Reliance Acceptance Corp. of South Carolina, a Delaware
corporation; Reliance Acceptance Corp. of Arizona, a Delaware corporation;
Reliance Acceptance Corp. of Iowa, a Delaware corporation; Reliance Acceptance
Corp. of Missouri, a Delaware corporation; Reliance Acceptance Corp. of Nevada,
a Delaware corporation; Reliance Acceptance Corp. of Oregon, a Delaware
corporation; and Reliance Acceptance Corp. of Washington, a Delaware corporation
(individually and collectively, "Borrowers").
RECITALS
--------
This Amendment is entered into in reference to the following facts:
a. Borrowers and Lender entered into a Loan and Security Agreement,
dated as of July 12, 1994 (the Loan and Security Agreement, as amended, modified
and supplemented prior to the date hereof being hereinafter referred to as "Loan
Agreement). (The Loan Agreement, and all other documents documenting the loan
evidenced thereby and the security therefor are hereinafter collectively
referred to as "Loan Documents".)
b. Borrowers desire to amend the Loan Agreement.
c. Lender is willing to amend the Loan Agreement subject to the
terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties agree as follows.
-1-
<PAGE>
SECTION ONE - AMENDMENTS
------------------------
1.1 Amendment of Section 1.9. Section 1.9 of the Loan Agreement is hereby
------------------------
amended and restated to read in its entirety as follows:
"1.9 Availability shall mean, as of any date of calculation, the
------------
remainder of (a) the sum of (i) the Advance Rate multiplied by
the aggregate amount of all Net Contract Payments to be made
under all Eligible Contracts which are not Alternative Finance
Plan Eligible Contracts, plus (ii) the Advance Rate multiplied by
----
the lesser of (1) the aggregate purchase price paid to Dealers
for Alternative Finance Plan Eligible Contracts then outstanding,
or (2) the aggregate amount of all Net Contract Payments due
under such Contracts, minus (b) the sum of (i) the product of
-----
the Dealer Reserve Percentage multiplied by the Dealer Reserve,
plus (ii) Commercial Paper Indebtedness (after giving effect to
----
the application of any Loan proceeds to the payment of such
Commercial Paper Indebtedness); provided, however, that (a) the
-----------------
Net Contract Payments due under Old Auto Contracts included in
the Availability shall at no time exceed five percent (5%) of all
Net Contract Payments, (b) the Net Contract Payments due under
Alternative Finance Plan Eligible Contracts included in the
Availability shall at no time exceed ten percent (10%) of all Net
Contract Payments, and (c) in the event Borrower, after the date
of this Agreement, changes its method of accounting for the
Dealer Reserve which has the effect of accelerating the rate at
which such reserve is recognized as income, then Lender may
increase the percentage rate applicable to the Dealer Reserve in
order that the Dealer Reserve deduction from Availability is the
same as it would have been had Borrower not changed such
accounting method."
1.2 Amendment of Section One. Article One of the Loan Agreement is hereby
------------------------
amended by the addition of four new sections, numbered 1.81, 1.82, 1.83, and
1.84, which shall read in their entirety as follows:
"1.81 Commercial Paper Advance shall mean an Advance
------------------------
intended by Borrower to be used to repay Commercial Paper
Indebtedness.
1.82 Commercial Paper Agreements shall mean (a) that certain
---------------------------
Commercial Paper Dealer Agreement, dated May ____, 1995, between
The Chicago Corporation, as dealer, Cole Taylor Finance Co., as
the issuer, and Cole Taylor Financial Group, Inc., as guarantor,
and that certain Depository Agreement, dated May ____, 1995,
between Cole Taylor Finance Co., as issuer, and FNBC, as agent;
and
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<PAGE>
(b) any other documents of a similar nature which have been
previously reviewed and approved by the Lender.
1.83 Depository Account shall mean the Note Account and any
------------------
other account indentified in the Commercial Paper Agreements as
the bank account from which FNBC or any other financial
institution acting as paying agent under the Commercial Paper
Agreements is required to pay off the Commercial Paper
Indebtedness.
1.84 FNBC shall mean The First National Bank of Chicago."
----
1.3 Amendment of Section 2. Section 2 of the Loan Agreement is hereby
----------------------
amended by the addition of a new subsection, numbered 2.d, which shall read in
its entirety as follows:
"d. Whenever Borrower desires a Commercial Paper
Advance, Borrower shall deliver to Lender a written borrowing
request which shall indicate that Borrower is requesting a
Commercial Paper Advance and shall specify: (i) the amount of the
Commercial Paper Advance; and (ii) the date of such Advance,
which shall be a Business Day. Each request for a Commercial
Paper Advance shall be accompanied by a Collateral Report. All
Commercial Paper Advances shall be made to the Depository
Account. Borrower acknowledges and agrees that Lender shall have
no obligation to make a Commercial Paper Advance except to the
same extent Lender is obligated to make any other Advance and all
Commercial Paper Advances are subject to all terms and conditions
of this Agreement, including without limitation, the provisions
of Article Ten hereof. Lender agrees to fund each requested
Commercial Paper Advance by 12 a.m. Cherry Hill, New Jersey,
time, on the day specified in Borrower's request. Lender shall
have no liability for any act or omission of FNBC or any other
depository or other paying agent or party to the Commercial Paper
Agreements. Each Borrower acknowledges and agrees that it shall
derive direct and indirect economic benefits from each Commercial
Paper Advance."
1.4 Amendment of Article Seven. Article Seven of the Loan Agreement is
--------------------------
hereby amended by the addition of a new section, numbered 7.17, which shall read
in its entirety as follows:
"7.17 Amendment of Commercial Paper Agreements. Borrower
----------------------------------------
shall not amend the Commercial Paper Agreements without Lender's
prior written consent, which shall not be unreasonably withheld
or delayed."
SECTION TWO - REPRESENTATIONS AND WARRANTIES
--------------------------------------------
-3-
<PAGE>
2.1 Acknowledgments of Borrowers. Borrowers each hereby represent and
----------------------------
warrant that: (a) the execution and delivery of this Amendment and compliance
by the Borrowers with all of the provisions of this Amendment (i) are within the
powers and purposes of the Borrowers; (ii) have been duly authorized or approved
by the Borrower; and (iii) when executed and delivered by or on behalf of the
Borrowers, will constitute valid and binding obligations of the Borrowers,
enforceable in accordance with its terms; (b) the Borrowers have no offsets or
counterclaims against Lender or defenses to the payments due under the Loan
Documents; (c) Lender has a first perfected security interest in the Collateral
to secure the Obligations under the Loan Documents; and (d) the recitals in this
Amendment are true. Each Borrower reaffirms its obligation to pay all amounts
due Lender under the Loan Documents in accordance with the terms thereof, as
modified hereby.
SECTION THREE - GENERAL PROVISIONS
----------------------------------
3.1 Loan Documents Unmodified. Except as otherwise specifically modified
-------------------------
by this Amendment, all terms and provisions of the Loan Documents and all liens
and security interests created thereby shall remain unmodified and in full force
and effect. Nothing contained in this Amendment shall in any way impair the
validity or enforceability of the Loan Documents, as modified hereby, or alter,
waive, annul, vary, affect, or impair any provision, condition, or covenant
contained therein or any rights, power, or remedy granted therein.
3.2 Construction of Amendment. Each party hereto has cooperated in the
-------------------------
drafting and preparation of this Amendment and, as a result, this Amendment
shall not be construed against any party. This Amendment may be amended or
modified only by a written agreement signed by the parties hereto. This
Amendment may be executed in counterparts, each of which when so executed and
delivered shall be deemed an original but all such counterparts together shall
constitute one and the same instrument.
3.3 Parties, Successors and Assigns. This Amendment shall be binding upon
-------------------------------
and shall inure to the benefit of Borrowers, Lender, and their respective
successors and assigns.
3.4 Definitions. Unless specifically defined herein, all capitalized
-----------
terms shall be defined in accordance with the Loan Agreement as amended by this
Amendment.
3.5 Severability. To the extent any provision of this Amendment is not
------------
enforceable under applicable law, such provision shall be deemed null and void
and shall have no effect on the remaining portions of the Amendment.
3.6 Total Agreement. This Amendment, and all other agreements referred to
---------------
herein or delivered in connection herewith,
-4-
<PAGE>
shall constitute the entire agreements between the parties relating to the
subject matter hereof, and shall resume all prior agreements and understandings
between the parties hereto relating to the subject matter hereof, and shall not
be changed or terminated orally.
IN WITNESS WHEREOF, the parties have started this Amendments as of the date
first written above.
"BORROWERS"
Cole Taylor Finance Co.;
Reliance Acceptance Corp. of Colorado,
Reliance Acceptance Corp. of Georgia,
Reliance Acceptance Corp. of Florida,
Reliance Acceptance Corp. of Indiana,
Reliance Acceptance Corp. of New Mexico,
Reliance Acceptance Corp. of Ohio,
Reliance Acceptance Corp. of Tennassee,
and Reliance Acceptance Corp. of Texas
Reliance Acceptance Corp. of Kentucky,
Reliance Acceptance Corp. of Illinois,
Reliance Acceptance Corp. of Minnesota,
Reliance Acceptance Corp. of North
Carolina, Reliance Acceptance Corp. of
South Carolina; Reliance Acceptance Corp.
of Arizona, Reliance Acceptance Corp. of
Iowa; Reliance Acceptance Corp. of
Missouri, Reliance Acceptance Corp. of
Nevada; Reliance Acceptance Corp. of
Oregan, and Reliance Acceptance Corp. of
Washington
Date: May 19, 1995 by /s/ William S. Race
-- ----------------------------
William S. Race,
Vice President and Treasurer
Date: May 19, 1995 by /s/ Marjorie J. MacLean
-- ----------------------------
Marjorie J. MacLean,
Assistant Secretary
"LENDER"
BankAmerica Business Credit, Inc.,
a Delaware corporation
Date: May 19, 1995 by /s/ James Magaluso
-- ----------------------------
James Magaluso
Vice President
-5-
<PAGE>
AMENDMENT NO. 3 TO LOAN AND SECURITY AGREEMENT
This Amendment No. 3 to Loan and Security Agreement ("Amendment") is
entered into as of September 30, 1995, by and between BankAmerica Business
Credit, Inc., a Delaware corporation ("Lender") and Cole Taylor Finance Co., a
Delaware corporation; Reliance Acceptance Corp. of Colorado, a Delaware
corporation; Reliance Acceptance Corp. of Georgia, a Delaware corporation;
Reliance Acceptance Corp. of Florida, a Delaware corporation; Reliance
Acceptance Corp. of Indiana, a Delaware corporation; Reliance Acceptance Corp.
of New Mexico, a Delaware corporation; Reliance Acceptance Corp. of Ohio, an
Ohio corporation; Reliance Acceptance Corp. of Texas, a Texas corporation;
Reliance Acceptance Corp. of Tennessee, a Delaware corporation, Reliance
Acceptance Corp. of Kentucky, a Delaware corporation; Reliance Acceptance Corp.
of Illinois, a Delaware corporation; Reliance Acceptance Corp. of Minnesota, a
Delaware corporation; Reliance Acceptance Corp. of North Carolina, a Delaware
corporation; Reliance Acceptance Corp. of South Carolina, a Delaware
corporation; Reliance Acceptance Corp. of Arizona, a Delaware corporation;
Reliance Acceptance Corp. of Iowa, a Delaware corporation; Reliance Acceptance
Corp. of Missouri, a Delaware corporation; Reliance Acceptance Corp. of Nevada,
a Delaware corporation; Reliance Acceptance Corp. of Oregon, a Delaware
corporation; and Reliance Acceptance Corp. of Washington, a Delaware corporation
(individually and collectively, "Borrowers").
RECITALS
--------
This Amendment is entered into in reference to the following facts:
a. Borrowers and Lender are parties to a Loan and Security
Agreement, dated as of July 12, 1994 (the Loan and Security Agreement, as
amended, modified, and supplemented prior to the date hereof being hereinafter
referred to as "Loan Agreement). (The Loan Agreement, and all other documents
documenting the loan evidenced thereby and the security therefor are hereinafter
collectively referred to as "Loan Documents".)
b. Borrowers desire to amend the Loan Agreement in certain respects.
c. Lender is willing to amend the Loan Agreement subject to the
terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties agree as follows.
<PAGE>
SECTION ONE - AMENDMENTS
------------------------
1.1 Amendment of Section 1.7. Section 1.7 of the Loan Agreement is hereby
------------------------
amended and restated to read in its entirety as follows:
"1.7 Advance Rate shall mean eighty-five percent (85%),
------------
provided, however:
-------- -------
(a) In the event that the Delinquency Rate, computed
as of the last day of each month for each of the three calendar
months immediately preceding the date of calculation, exceeds
three percent (3.0%) but is less than three and one-half percent
(3.5%) in one of those three months, then the Advance Rate shall
mean eighty-three percent (83%), and
(b) In the event that the Delinquency Rate, computed
as of the last day of each month for each of the three calendar
months immediately preceding the date of calculation, is equal to
or greater than three and one-half percent (3.5%) but is not more
than four percent (4.0%) in one of those three months, then the
Advance Rate shall mean eighty-two percent (82%), and
(c) In the event that the Delinquency Rate, computed
as of the last day of each month for each of the three calendar
months immediately preceding the date of calculation, is greater
than four percent (4.0%), then the Advance Rate shall mean eighty-
one percent (81%).
The date of calculation of the Advance Rate and the date any
change therein shall become effective is the date Borrower
actually delivers to Lender its most recent Collateral Report
reflecting the Delinquency Rates for Borrower. The Advance Rate,
as so calculated, shall remain in effect until Borrower delivers
to Lender its next Collateral Report reflecting the Delinquency
Rates for the Borrower. (For example, if Borrower's Collateral
Reports for the months of March, April, and May, delivered to
Lender on June 15, reflect that the Delinquency Rate for Borrower
was 3.4 percent, 4.0 percent and 3.75 percent respectively, then
the Advance Rate will immediately thereupon be 83 percent for the
period of June 15 to and including July 14 (the next report being
due on July 15), and if, as a result of such calculation, an Over
Advance was determined to have existed as of June 15, based on an
Advance Rate of 83 percent, then Borrower shall be required to
pay down the Loan accordingly, and for example, if Borrower's
Collateral Reports for the months of March, April, and May,
delivered to Lender on June 15, reflect that the
-2-
<PAGE>
Delinquency Rate for Borrower was 3.8 percent, 4.0 percent and
4.2 percent respectively, then the Advance Rate will immediately
thereupon be 82 percent for the period of June 15 to and
including July 14 (the next report being due on July 15), and if,
as a result of such calculation, an Over Advance was determined
to have existed as of June 15, based on an Advance Rate of 82
percent, then Borrower shall be required to pay down the Loan
accordingly.)"
1.2 Amendment of Subsection 3.1 a (ii). Subsection 3.1 a (ii) of the
-----------------------------------
Loan Agreement is hereby amended and restated to read in its entirety as
follows:
"(ii) with respect to Adjusted LIBOR Loans, at the
Adjusted LIBOR on the relevant Interest Rate Determination Date
plus two and one-quarter percent (2.25%) per annum."
----
1.3 Amendment of Section 3.14. Section 3.14 of the Loan Agreement is
-------------------------
hereby amended and restated to read in its entirety as follows:
"3.14 Commercial Paper Fee. For every month during the
-------------
term of this Agreement, Borrower shall pay to Lender a fee
("Commercial Paper Fee") equal to the product of (a) (i) five-
eights of one percent (0.625%) per annum prior to September 1,
1995, and (ii) five-sixteenths of one percent (0.3125%) per annum
on and after September 1, 1995, multiplied by (b) the average
-------------
daily closing balance of the Commercial Paper Indebtedness
outstanding during such month. Such fee, if any, shall be
calculated on the basis of a year of 360 days, actual days
elapsed, and shall be payable to Lender on the Interest Payment
Due Date with respect to the prior month."
1.4 Amendment of Section 4.1. Section 4.1 of the Loan Agreement is hereby
------------------------
amended and restated to read in its entirety as follows:
"4.1 Term of Agreement and Loan Repayment. This Agreement
------------------------------------
shall have an initial term commencing on the Closing Date and
terminating on July 12, 1997. (The date on which the term of the
Agreement terminates is hereinafter referred to as "Maturity
Date.") The Loan shall be due and payable in full on the Maturity
Date without notice or demand and shall be repaid to Lender by a
wire transfer of immediately available funds. Borrower may at any
time terminate this Agreement prior to the Maturity Date by: (a)
giving Lender at least 60 days prior notice of intention to
terminate this Agreement; (b) paying and performing, as
appropriate, all
-3-
<PAGE>
Obligations on or prior to the effective date of termination; and (c)
paying to Lender an early termination fee equal to (i) three-quarters of
one percent (0.75%) of the Total Credit Facility in the event the effective
date of termination is before the first anniversary of the Closing Date;
and (ii) one-half of one percent (0.5%) of the Total Credit Facility in the
event the effective date of termination occurs on or at any time after the
first anniversary date of the Closing Date. Notwithstanding the foregoing,
(a) the early termination fee shall be equal to zero, instead of the amount
indicated above, if (1) Borrower, at any time, requests an increase in the
Total Credit Facility by an amount which is not less than $25,000,000, but
not more than $50,000,000, without any other changes to any of the other
provisions of this Agreement, (2) no Default or Event of Default exists at
the time of such request, (3) at the time of the request the sum of the
unpaid balance of the Loan plus the aggregate amount of all Commercial
Paper Indebtedness is equal to or greater than sixty percent (60%) of the
Total Credit Facility, (4) the results of Borrower's operations have
equaled or exceeded the projections delivered by Borrower to Lender prior
to the date of the request, and (5) Lender does not, within ninety (90)
days of such request, agree to that increase; and (b) the early termination
fee shall be one-quarter of one percent (0.25%) if, the conditions
specified in clause (a) are satisfied and, in addition to an increase in
the Total Credit Facility, Borrower requests a lower interest rate as to
either Adjusted LIBOR Loans or Reference Rate Loans and/or less stringent
financial covenants than presently contained in Article VII hereof. In the
event Lender grants the requested increase in the Total Credit Facility
pursuant to the previous sentence, Lender may only charge an additional
facility fee equal to one-quarter of one percent of the amount of the
increase in the Total Credit Facility."
1.5 Amendment of Section 5.7. The second sentence of Section 5.7 of the
------------------------
Loan Agreement is hereby amended and restated to read in its entirety as
follows:
"In order to reimburse Lender for the cost of such verifications, audits,
and inspections, Borrower shall pay to Lender a monthly audit fee
calculated on a branch-by-branch basis, which fee for each branch shall
equal the lesser of (a) $200, or (b) the product of (i) .004, multiplied by
-------------
(ii) one percent (1.0%) of the aggregate amount of the Gross Contract
Payments to be made under all Contracts administered by such branch office
as of the last day of the month with respect to which the fee is
calculated."
-4-
<PAGE>
1.6 Amendment of Section 8.11. Section 8.11 of the Loan Agreement is
-------------------------
hereby amended and restated to read in its entirety as follows:
"8.11 Unsubordinated Debt to Borrowing Base. Borrower shall
-------------------------------------
not permit the ratio, calculated on a consolidated basis as of
the last day of each month, of (a) the remainder of (i) all Debt,
minus (ii) all Subordinated Debt (numerator), to (b)
-----
Borrowing Base (denominator), to be more than: (a) prior to July
1, 1995, 5 to 1; provided, however, if at any time prior to July
-----------------
1, 1995 the sum of the unpaid balance of the Loan plus the
----
aggregate principal amount of the Commercial Paper Indebtedness is
equal to or greater than $100,000,000, then Borrower shall not
permit the ratio at all times thereafter, as so calculated, to be
more than 3.75 to 1; and (b) on and after July 1, 1995, 5 to 1."
1.7 Amendment of Section 8.13. Section 8.13 of the Loan Agreement is
-------------------------
hereby amended and restated to read in its entirety as follows:
"8.13 Minimum Adjusted Tangible Net Worth. Borrower shall
-----------------------------------
not permit its Adjusted Tangible Net Worth, calculated on a
consolidated basis as of the last day of each month, to be less
than: (a) $8,000,000 prior to December 1, 1995, to and including
November 31, 1996; and (c) $22,500,000 for the period beginning
on December 1, 1996, and at all times thereafter."
SECTION TWO - CONDITIONS PRECEDENT TO AMENDMENTS
------------------------------------------------
2.1 Conditions Precedent to Amendment. This Amendment shall become
---------------------------------
legally binding upon Borrowers and Lender only when Borrowers shall have
executed and delivered to Lender or caused to be executed and delivered to
Lender, as appropriate, (a) a Certificate of Assistant Secretary of each of the
Borrowers and this Amendment, and (b) letter from Cole Taylor Financial Group,
Inc., reaffirming its obligations under its letter of responsibility.
SECTION THREE - REPRESENTATIONS AND WARRANTIES
----------------------------------------------
3.1 Acknowledgments of Borrowers. Borrowers each hereby represent and
----------------------------
warrant that: (a) the execution and delivery of this Amendment and compliance by
Borrowers with all of the provisions of this Amendment (i) are within the powers
and purposes of Borrowers; (ii) have been duly authorized or approved by
Borrowers; and (iii) when executed and delivered by or on behalf of Borrowers,
will
-5-
<PAGE>
constitute valid and binding obligations of Borrowers, enforceable in accordance
with its terms; (b) Borrowers have no offsets or counterclaims against Lender or
defenses to the payments due under the Loan Documents; (c) Lender has a first
perfected security interest in the Collateral to secure the Obligations under
the Loan Documents; and (d) the recitals in this Amendment are true. Borrowers
each reaffirm its obligation to pay all amounts due Lender under the Loan
Documents in accordance with the terms thereof, as modified hereby.
SECTION FOUR - GENERAL PROVISIONS
---------------------------------
4.1 Loan Documents Unmodified. Except as otherwise specifically modified
-------------------------
by this Amendment, all terms and provisions of the Loan Documents and all liens
and security interests created thereby shall remain unmodified and in full force
and effect. Nothing contained in this Amendment shall in any way impair the
validity or enforceability of the Loan Documents, as modified hereby, or alter,
waive, annul, vary, affect, or impair any provision, condition, or covenant
contained therein or any rights, power, or remedy granted therein.
4.2 Construction of Amendment. Each party hereto has cooperated in the
--------------------------
drafting and preparation of this Amendment and, as a result, this Amendment
shall not be construed against any party. This Amendment may be amended or
modified only by a written agreement signed by the parties hereto. This
Amendment may be executed in counterparts, each of which when so executed and
delivered shall be deemed an original but all such counterparts together shall
constitute one and the same instrument.
4.3 Parties, Successors and Assigns. This Amendment shall be binding
-------------------------------
upon and shall inure to the benefit of Borrower, Lender, and their respective
successors and assigns.
4.4 Definitions. Unless specifically defined herein, all capitalized
-----------
terms shall be defined in accordance with the Loan Agreement as amended by this
Amendment.
4.5 Severability. To the extent any provision of this Amendment is not
------------
enforceable under applicable law, such provision shall be deemed null and void
and shall have no effect on the remaining portions of the Amendment.
4.6 Total Agreement. This Amendment, and all other agreements referred
---------------
to herein or delivered in connection herewith, shall constitute the entire
agreement between the parties relating to the subject matter hereof, and shall
rescind all prior
-6-
<PAGE>
agreements and understandings between the parties hereto relating to the subject
matter hereof, and shall not be changed or terminated orally.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
"BORROWERS"
Cole Taylor Finance Co.; Reliance
Acceptance Corp. of Colorado;
Reliance Acceptance Corp. of
Georgia; Reliance Acceptance Corp.
of Florida; Reliance Acceptance
Corp. of Indiana; Reliance
Acceptance Corp. of New Mexico;
Reliance Acceptance Corp. of Ohio;
Reliance Acceptance Corp. of
Tennessee; Reliance Acceptance
Corp. of Texas; Reliance Acceptance
Corp. of Kentucky; Reliance
Acceptance Corp. of Illinois;
Reliance Acceptance Corp. of
Minnesota; Reliance Acceptance
Corp. of North Carolina; and
Reliance Acceptance Corp. of South
Carolina; Reliance Acceptance Corp.
of Arizona; Reliance Acceptance
Corp. of Iowa; Reliance Acceptance
Corp. of Missouri; Reliance
Acceptance Corp. of Nevada;
Reliance Acceptance Corp. of
Oregon; and Reliance Acceptance
Corp. of Washington
by /s/ Thomas L. Barlow,
---------------------------
Thomas L. Barlow, President
by /s/ Michael D. Bernick
---------------------------
Michael D. Bernick,
Treasurer
"LENDER"
BankAmerica Business Credit, Inc.,
a Delaware corporation
by /s/ Joseph F. Pignotti
---------------------------
Joseph F. Pignotti,
Executive Vice President
-7-
<PAGE>
AMENDMENT NO. 4 TO LOAN AND SECURITY AGREEMENT
This Amendment No. 4 to Loan and Security Agreement ("Amendment") is
entered into as of November 17, 1995, by and between BankAmerica Business
Credit, Inc., a Delaware corporation ("Lender") and Cole Taylor Finance Co., a
Delaware corporation; Reliance Acceptance Corp. of Colorado, a Delaware
corporation; Reliance Acceptance Corp. of Georgia, a Delaware corporation;
Reliance Acceptance Corp. of Florida, a Delaware corporation; Reliance
Acceptance Corp. of Indiana, a Delaware corporation; Reliance Acceptance Corp.
of New Mexico, a Delaware corporation; Reliance Acceptance Corp. of Ohio, an
Ohio corporation; Reliance Acceptance Corp, of Texas, a Texas corporation;
Reliance Acceptance Corp. of Tennessee, a Delaware corporation, Reliance
Acceptance Corp. of Kentucky, a Delaware corporation; Reliance Acceptance Corp.
of Illinois, a Delaware corporation; Reliance Acceptance Corp. of Minnesota, a
Delaware corporation; Reliance Acceptance Corp. of North Carolina, a Delaware
corporation; Reliance Acceptance Corp. of South Carolina, a Delaware
corporation; Reliance Acceptance Corp. of Arizona, a Delaware corporation;
Reliance Acceptance Corp. of Iowa, a Delaware corporation; Reliance Acceptance
Corp. of Missouri, a Delaware corporation; Reliance Acceptance Corp. of Nevada,
a Delaware corporation; Reliance Acceptance Corp. of Oregon, a Delaware
corporation; and Reliance Acceptance Corp. of Washington, a Delaware corporation
(individually and collectively, "Borrowers").
RECITALS
--------
This Amendment is entered into in reference to the following facts:
a. Borrowers and Lender are parties to a Loan and Security Agreement,
dated as of July 12, 1994 (the Loan and Security Agreement, as amended,
modified, and supplemented prior to the date hereof being hereinafter referred
to as "Loan Agreement"). (The Loan Agreement, and all other documents
documenting the loan evidenced thereby and the security therefor are hereinafter
collectively referred to as "Loan Documents".) Unless specifically defined
herein, all capitalized terms shall be defined in accordance with the Loan
Agreement as amended by this Amendment.
b. Borrowers desire to amend the Loan Agreement in certain respects.
c. Lender is willing to amend the Loan Agreement subject to the terms
and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties agree as follows.
SECTION ONE - AMENDMENTS
------------------------
1.1 Amendment of Section 1.77. Section 1.77 of the Loan Agreement is
-------------------------
amended and restated to read in its entirety as follows:
-1-
<PAGE>
"1.77 Total Credit Facility shall mean (a) $170,000,000 prior to
---------------------
January 1, 1996, and (b) $150,000,000 on and after January 1, 1996."
SECTION TWO - CONDITIONS PRECEDENT TO AMENDMENTS
------------------------------------------------
2.1 Conditions Precedent to Amendment. This Amendment shall become
---------------------------------
legally binding upon Borrowers and Lender only when:
(a) Borrowers shall have executed and delivered to Lender or caused
to be executed and delivered to Lender, as appropriate, (i) a Certificate of
Assistant Secretary of each of the Borrowers and this Amendment, and (ii) letter
from Cole Taylor Financial Group, Inc., reaffirming its obligations under its
letter of responsibility; and
(b) Borrowers shall have paid to Lender a fee of $15,000 as part of
the consideration for entering into this Amendment.
SECTION THREE - REPRESENTATIONS AND WARRANTIES
----------------------------------------------
3.1 Acknowledgements of Borrowers. Borrowers each hereby represent and
-----------------------------
warrant that: (a) the execution and delivery of this Amendment and compliance by
Borrowers with all of the provisions of this Amendment (i) are within the powers
and purposes of Borrowers; (ii) have been duly authorized or approved by
Borrowers; and (iii) when executed and delivered by or on behalf of Borrowers,
will constitute valid and binding obligations of Borrowers, enforceable in
accordance with its terms; (b) Borrowers have no offsets or counterclaims
against Lender or defenses to the payments due under the Loan Documents; (c)
Lender has a first perfected security interest in the Collateral to secure the
Obligations under the Loan Documents; and (d) the recitals in this Amendment are
true. Borrowers each reaffirm its obligation to pay all amounts due Lender under
the Loan Documents in accordance with the terms thereof, as modified hereby.
SECTION FOUR - GENERAL PROVISIONS
---------------------------------
4.1 Loan Documents Unmodified. Except as otherwise specifically modified
-------------------------
by this Amendment, all terms and provisions of the Loan Documents and all liens
and security interests created thereby shall remain unmodified and in full force
and effect. Nothing contained in this Amendment shall in any way impair the
validity or enforceability of the Loan Documents, as modified hereby, or alter,
waive, annul, vary, affect, or impair any provision, condition, or covenant
contained therein or any rights, power, or remedy granted therein.
4.2 Construction of Amendment. Each party hereto has cooperated in the
-------------------------
drafting and preparation of this Amendment and, as a result, this Amendment
shall not be construed against any party. This Amendment may be amended or
modified only by a written agreement
-2-
<PAGE>
signed by the parties hereto. This Amendment may be executed in counterparts,
each of which when so executed and delivered shall be deemed an original but all
such counterparts together shall constitute one and the same instrument.
4.3 Parties, Successors and Assigns. This Amendment shall be binding
-------------------------------
upon and shall inure to the benefit of Borrower, Lender, and their respective
successors and assigns.
4.4 Severability. To the extent any provision of this Amendment is not
------------
enforceable under applicable law, such provision shall be deemed null and void
and shall have no effect on the remaining portions of the Amendment.
4.5 Total Agreement. This Amendment, and all other agreements referred
---------------
to herein or delivered in connection herewith, shall constitute the entire
agreement between the parties relating to the subject matter hereof and shall
not be changed or terminated orally.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.
"BORROWERS"
Cole Taylor Finance Co.; Reliance
Acceptance Corp. of Colorado; Reliance
Acceptance Corp. of Georgia; Reliance
Acceptance Corp. of Florida; Reliance
Acceptance Corp. of Indiana; Reliance
Acceptance Corp. of New Mexico; Reliance
Acceptance Corp. of Ohio; Reliance
Acceptance Corp. of Tennessee; Reliance
Acceptance Corp. of Texas; Reliance
Acceptance Corp. of Kentucky; Reliance
Acceptance Corp. of Illinois; Reliance
Acceptance Corp. of Minnesota; Reliance
Acceptance Corp. of North Carolina; and
Reliance Acceptance Corp. of South
Carolina; Reliance Acceptance Corp. of
Arizona; Reliance Acceptance Corp. of
Iowa; Reliance Acceptance Corp. of
Missouri; Reliance Acceptance Corp. of
Nevada; Reliance Acceptance Corp. of
Oregon; and Reliance Acceptance Corp. of
Washington
by /s/ Thomas L. Barlow
------------------------------
Thomas L. Barlow, President
by /s/ Michael Bernick
------------------------------
Michael Bernick, Vice President
-3-
<PAGE>
"LENDER"
BankAmerica Business Credit, Inc.,
a Delaware corporation
by /s/ Joseph P. Pignotti
-------------------------
Joseph P. Pignotti,
Executive Vice President
<PAGE>
AMENDMENT NO. 5 TO LOAN AND SECURITY AGREEMENT
This Amendment No. 5 to Loan and Security Agreement ("Amendment") is
entered into as of December 26, 1995, by and between BankAmerica Business
Credit, Inc., a Delaware corporation ("Lender") and Cole Taylor Finance Co., a
Delaware corporation; Reliance Acceptance Corp. of Colorado, a Delaware
corporation; Reliance Acceptance Corp. of Georgia, a Delaware corporation;
Reliance Acceptance Corp. of Florida, a Delaware corporation; Reliance
Acceptance Corp. of Indiana, a Delaware corporation; Reliance Acceptance Corp.
of New Mexico, a Delaware corporation; Reliance Acceptance Corp. of Ohio, an
Ohio corporation; Reliance Acceptance Corp. of Texas, a Texas corporation;
Reliance Acceptance Corp. of Tennessee, a Delaware corporation; Reliance
Acceptance Corp. of Kentucky, a Delaware corporation; Reliance Acceptance Corp.
of Illinois, a Delaware corporation; Reliance Acceptance Corp. of Minnesota, a
Delaware corporation; Reliance Acceptance Corp. of North Carolina, a Delaware
corporation; Reliance Acceptance Corp. of South Carolina, a Delaware
corporation; Reliance Acceptance Corp. of Arizona, a Delaware corporation;
Reliance Acceptance Corp. of Iowa, a Delaware corporation; Reliance Acceptance
Corp. of Missouri, a Delaware corporation; Reliance Acceptance Corp. of Nevada,
a Delaware corporation; Reliance Acceptance Corp. of Oregon, a Delaware
corporation; and Reliance Acceptance Corp. of Washington, a Delaware corporation
(individually and collectively, "Borrowers").
RECITALS
--------
This Amendment is entered into in reference to the following facts:
a. Borrowers and Lender are parties to a Loan and Security
Agreement, dated as of July 12, 1994 (the Loan and Security Agreement, as
amended, modified, and supplemented prior to the date hereof being hereinafter
referred to as "Loan Agreement"). (The Loan Agreement, and all other documents
documenting the loan evidenced thereby and the security therefor are hereinafter
collectively referred to as "Loan Documents".) Unless specifically defined
herein, all capitalized terms shall be defined in accordance with the Loan
Agreement as amended by this Amendment.
b. Borrowers desire to amend the Loan Agreement in certain
respects.
c. Lender is willing to amend the Loan Agreement subject to
the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows.
-1-
<PAGE>
SECTION ONE - AMENDMENTS
------------------------
1.1 Amendment of Section 1.77. Section 1.77 of the Loan Agreement is
--------------------------
amended and restated to read in its entirety as follows:
"1.77 Total Credit Facility shall mean $200,000,000."
---------------------
SECTION TWO - CONDITIONS PRECEDENT TO AMENDMENTS
------------------------------------------------
2.1 Conditions Precedent to Amendment. This Amendment shall become
---------------------------------
legally binding upon Borrowers and Lender only when:
(a) Borrowers shall have executed and delivered to Lender or caused
to be executed and delivered to Lender, as appropriate, (i) a Certificate of
Assistant Secretary of each of the Borrowers, and (ii) letter from Cole Taylor
Financial Group, Inc., reaffirming its obligations under its letter of
responsibility; and
(b) Borrowers shall have paid to Lender a fee of $125,000 as part of
the consideration for entering into this Amendment.
SECTION THREE - REPRESENTATIONS AND WARRANTIES
----------------------------------------------
3.1 Acknowledgments of Borrowers. Borrowers each hereby represent and
----------------------------
warrant that: (a) the execution and delivery of this Amendment and compliance
by Borrowers with all of the provisions of this Amendment (i) are within the
powers and purposes of Borrowers; (ii) have been fully authorized or approved by
Borrowers; and (iii) when executed and delivered by or on behalf of Borrowers,
will constitute valid and binding obligations of Borrowers, enforceable in
accordance with its terms; (b) Borrowers have no offsets or counterclaims
against Lender or defenses to the payments due under the Loan Documents; and (c)
Lender has a first perfected security interest in the Collateral to secure the
Obligations under the Loan Documents. Borrowers reaffirm their obligations to
pay all amounts due Lender under the Loan Documents in accordance with the terms
thereof, as modified hereby.
SECTION FOUR - GENERAL PROVISIONS
---------------------------------
4.1 Loan Documents Unmodified. Except as otherwise specifically modified
-------------------------
by this Amendment, all terms and provisions of the Loan Documents and all liens
and security interests created thereby shall remain unmodified and in full force
and effect. Nothing contained in this Amendment shall in any way impair the
validity or enforceability of the Loan Documents, as
-2-
<PAGE>
modified hereby, or alter, waive, annul, vary, affect, or impair any provision,
condition, or covenant contained therein or any rights, power, or remedy granted
therein.
4.2 Parties, Successors and Assigns. This Amendment shall be binding
-------------------------------
upon and shall inure to the benefit of Borrower, Lender, and their respective
successors and assigns.
4.3 Severability. To the extent any provision of this Amendment is not
------------
enforceable under applicable law, such provision shall be deemed null and void
and shall have no effect on the remaining portions of the Amendment.
4.4 Total Agreement. This Amendment and all other agreements referred to
---------------
herein or delivered in connection herewith shall constitute the entire agreement
between the parties relating to the subject matter hereof and shall not be
changed or terminated orally.
4.5 Construction of Amendment. Each party hereto has cooperated in the
-------------------------
drafting and preparation of this Amendment and, as a result, this Amendment
shall not be construed against any party. This Amendment may be amended or
modified only by a written agreement
-3-
<PAGE>
signed by the parties hereto. This Amendment may be executed in counterparts,
each of which when so executed and delivered shall be deemed an original but all
such counterparts together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
"BORROWERS"
Cole Taylor Finance Co.; Reliance Acceptance Corp. of
Colorado; Reliance Acceptance Corp. of Georgia;
Reliance Acceptance Corp. of Florida; Reliance
Acceptance Corp. of Indiana; Reliance Acceptance
Corp. of New Mexico; Reliance Acceptance Corp. of
Ohio; Reliance Acceptance Corp. of Tennessee;
Reliance Acceptance Corp. of Texas; Reliance
Acceptance Corp. of Kentucky; Reliance Acceptance
Corp. of Illinois; Reliance Acceptance Corp. of
Minnesota; Reliance Acceptance Corp. of North
Carolina; and Reliance Acceptance Corp. of South
Carolina; Reliance Acceptance Corp. of Arizona;
Reliance Acceptance Corp. of Iowa; Reliance
Acceptance Corp. of Missouri; Reliance Acceptance
Corp. of Nevada; Reliance Acceptance Corp. of Oregon;
and Reliance Acceptance Corp. of Washington
By: /s/ Thomas L. Barlow
-------------------------------------------------
Thomas L. Barlow, President
By: /s/ Michael Bernick
-------------------------------------------------
Michael Bernick, Vice President
"LENDER"
BankAmerica Business Credit, Inc.
By: /s/ Joseph F. Pignotti
-------------------------------------------------
Joseph F. Pignotti
Executive Vice President
-4-
<PAGE>
AMENDMENT NO. 6 TO LOAN AND SECURITY AGREEMENT
This Amendment No. 6 to Loan and Security Agreement ("Amendment") is
entered into as of March ___, 1996, by and between BankAmerica Business Credit,
Inc., a Delaware corporation ("Lender") and Cole Taylor Finance Co., a Delaware
corporation; Reliance Acceptance Corp. of Colorado, a Delaware corporation;
Reliance Acceptance Corp. of Georgia, a Delaware corporation; Reliance
Acceptance Corp, of Florida, a Delaware corporation; Reliance Acceptance Corp.
of Indiana, a Delaware corporation; Reliance Acceptance Corp. of New Mexico, a
Delaware corporation; Reliance Acceptance Corp. of Ohio, an Ohio corporation;
Reliance Acceptance Corp. of Texas, a Texas corporation; Reliance Acceptance
Corp. of Tennessee, a Delaware corporation, Reliance Acceptance Corp. of
Kentucky, a Delaware corporation; Reliance Acceptance Corp. of Illinois, a
Delaware corporation; Reliance Acceptance Corp. of Minnesota, a Delaware
corporation; Reliance Acceptance Corp. of North Carolina, a Delaware
corporation; Reliance Acceptance Corp. of South Carolina, a Delaware
corporation; Reliance Acceptance Corp. of Arizona, a Delaware corporation;
Reliance Acceptance Corp. of Iowa, a Delaware corporation; Reliance Acceptance
Corp. of Missouri, a Delaware corporation; Reliance Acceptance Corp. of Nevada,
a Delaware corporation; Reliance Acceptance Corp. of Oregon, a Delaware
corporation; and Reliance Acceptance Corp. of Washington, a Delaware corporation
(individually and collectively, "Existing Borrowers") and Reliance Acceptance
Corp. of Utah, a Delaware corporation.
RECITALS
--------
This Amendment is entered into in reference to the following facts:
(a) Existing Borrowers and Lender are parties to a Loan and Security
Agreement, dated as of July 12, 1994 (the Loan and Security Agreement, as
amended, modified, and supplemented prior to the date hereof being hereinafter
referred to as "Loan Agreement"). Unless specifically defined herein, all
capitalized terms shall be defined in accordance with the Loan Agreement as
amended by this Amendment.
(b) New Borrower is a newly formed, wholly owned subsidiary of Cole
Taylor Finance Co. Existing Borrowers desire to amend the Loan Agreement to
include New Borrower as one of the "Subsidiary Borrowers" and as "Borrower"
thereunder and to otherwise amend the Loan Agreement.
(c) Lender is willing to amend the Loan Agreement subject to the terms
and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties agree as follows.
-1-
<PAGE>
SECTION ONE - AMENDMENTS
------------------------
1.1 Amendment of "Subsidiary Borrowers" and "Borrower." The term
---------------------------------------------------
"Subsidiary Borrowers" and "Borrower" as used in the Loan Agreement are hereby
amended to mean New Borrower and Existing Borrowers, individually and
collectively. New Borrower hereby absolutely and unconditionally assumes all
Obligations existing under the Loan Agreement as of the date hereof, expressly
grants to Lender the security interests referenced therein in regard to the
Property of New Borrower of the type specified therein, and acknowledges and
agrees that New Borrower shall be jointly and severally liable for all
Obligations, as more particularly provided in Section 12.4 of the Loan
------------
Agreement.
1.2 Amendment of Section 1.77. Section 1.77 of the Loan Agreement is
--------------------------
amended and restated to read in its entirety as follows:
"1.77 Total Credit Facility shall mean $220,000,000."
---------------------
1.3 Amendment of Article One. Article One of the Loan Agreement is
------------------------
amended by the addition of a new section, numbered 1.84, which shall read in its
entirety as follows:
"1.84 Repossession Value shall mean the sum of (a) value of a
------------------
repossessed vehicle, as reflected on Borrower's books and records, which
was the subject of a Contract, minus (b) the amount of any insurance claims
-----
and refunds applicable thereto."
1.4 Amendment of Schedule 7.6. Schedule 7.6 of the Loan Agreement is
-------------------------
amended by the addition of the following corporation and related information:
<TABLE>
<CAPTION>
No. of Shares No. of Shares Percentage Certificate
Entity Authorized Outstanding Owned Number
------ ---------- ----------- ----- ------
<S> <C> <C> <C> <C>
Reliance Acceptance
Corp. of Utah 1.000 100 100% 1
</TABLE>
1.5 Amendment of Section 8.6. Section 8.6 of the Loan Agreement is hereby
------------------------
amended and restate to read in its entirety as follows:
"8.6 Total Debt Ratio. Borrower shall not permit the ratio,
-----------------
calculated on a consolidated basis as of the last day of each month, of (a)
the aggregate amount of all Debt (numerator) to (b) Adjusted Tangible Net
Worth (denominator) to be more than 10:1."
1.6 Amendment of Article Eight. Article Eight of the Loan Agreement is
--------------------------
hereby amended by the addition of a new section, numbered 8.27, which shall read
in its entirety as follows:
-2-
<PAGE>
"8.27 Repossession Inventory. Borrower shall charge off the
----------------------
Repossession Value of a vehicle for which more than one hundred twenty
(120) days have elapsed since the date Borrower has repossessed the
vehicle."
SECTION TWO - CONDITIONS PRECEDENT TO AMENDMENTS
------------------------------------------------
2.1 Conditions Precedent to Amendment. This Amendment shall become
---------------------------------
legally binding upon Existing Borrowers, New Borrower, and Lender only when the
Existing Borrowers, Cole Taylor Finance Co. and New Borrower shall have executed
and delivered to Lender or caused to be executed and delivered to Lender, as
appropriate, all of the following documents, satisfactory to Lender in form and
content: (a) a Certificate of Assistant Secretary of each of the Existing
Borrowers; (b) a Certificate of Assistant Secretary of the New Borrower; (c)
opinion of counsel for New Borrower; (d) Amendment No. 2 to Security Agreement
- -----------------------------------
Stock Pledge; (e) a Stock Power for the original stock certificates evidencing
New Borrower's stock; (f) a good standing certificate for the New Borrower; (g)
a certificate of qualification for the New Borrower; (h) UCC-1 financing
statements for the New Borrower, to be filed in the state of Illinois, Texas,
and Utah and for Cole Taylor Finance Co. to be filed in the state of Utah; (i) a
Certificate of Assistant Secretary of Cole Taylor Finance Co.; (j) Amendment No.
1 to Subordination Agreement; and (k) a letter from Cole Taylor Financial Group,
Inc., reaffirming its obligations under its letter of responsibility.
-3-
<PAGE>
2.2 New Facility Fee. On the date Borrower executes this Amendment,
----------------
Borrower shall pay to Lender a facility fee ("New Facility Fee") equal to
one-quarter of one percent (0.25%) of $20,000,000. Borrower and Lender agree
that the New Facility Fee may be financed, at Lender's discretion, as an Advance
to the Loan.
SECTION THREE - REPRESENTATIONS AND WARRANTIES
----------------------------------------------
3.1 Acknowledgments of Borrowers. Existing Borrowers and New
----------------------------
Borrower each hereby represent and warrant that: (a) the execution and delivery
of this Amendment and compliance by Existing Borrowers and New Borrower with all
of the provisions of this Amendment (i) are within the powers and purposes of
Existing Borrowers and New Borrower; (ii) have been duly authorized or approved
by Existing Borrowers and New Borrower; and (iii) when executed and delivered by
or on behalf of Existing Borrowers and New Borrower, will constitute valid and
binding obligations of Existing Borrowers and New Borrower, enforceable in
accordance with its terms; (b) Existing Borrowers and New Borrower have no
offsets or counterclaims against Lender or defenses to the payments due under
the Loan Agreement; and (c) Lender has a first perfected security interest in
the Collateral to secure the Obligations under the Loan Agreement. Existing
Borrowers each reaffirm their obligations to pay all amounts due Lender under
the Loan Agreement in accordance with the terms thereof, as modified hereby.
SECTION FOUR - GENERAL PROVISIONS
---------------------------------
4.1 Loan Agreement Unmodified. Except as otherwise specifically
-------------------------
modified by this Amendment, all terms and provisions of the Loan Agreement and
all liens and security interests created thereby shall remain unmodified and in
full force and effect. Nothing contained in this Amendment shall in any way
impair the validity or enforceability of the Loan Agreement, as modified hereby,
or alter, waive, annul, vary, affect, or impair any provision, condition, or
covenant contained therein or any rights, power, or remedy granted therein.
4.2 Parties, Successors, and Assigns. This Amendment shall be
--------------------------------
binding upon and shall inure to the benefit of Existing Borrower, New Borrower,
Lender, and their respective successors and assigns.
4.3 Severability. To the extent any provision of this Amendment is
------------
not enforceable under applicable law, such provision shall be deemed null and
void and shall have no effect on the remaining portions of the Amendment.
4.4 Total Agreement. This Amendment and all other agreements
---------------
referred to herein or delivered in connection herewith shall constitute the
entire agreement between the parties relating to the subject matter hereof and
shall not be changed or terminated orally.
-4-
<PAGE>
4.5 Construction of Amendment. Each party hereto has cooperated in the
-------------------------
drafting and preparation of this Amendment and, as a result, this Amendment
shall not be construed against any party. This Amendment may be amended or
modified only by a written agreement signed by the parties hereto. This
Amendment may be executed in counterparts, each of which when so executed and
delivered shall be deemed an original but all such counterparts together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
"EXISTING BORROWERS"
Cole Taylor Finance Co.; Reliance Acceptance Corp. of
Colorado; Reliance Acceptance Corp. of Georgia; Reliance
Acceptance Corp. of Florida; Reliance Acceptance Corp. of
Indiana; Reliance Acceptance Corp. of New Mexico; Reliance
Acceptance Corp. of Ohio; Reliance Acceptance Corp. of
Tennessee; Reliance Acceptance Corp. of Texas; Reliance
Acceptance Corp. of Kentucky; Reliance Acceptance Corp. of
Illinois; Reliance Acceptance Corp. of Minnesota; Reliance
Acceptance Corp. of North Carolina; and Reliance Acceptance
Corp. of South Carolina; Reliance Acceptance Corp. of
Arizona; Reliance Acceptance Corp. of Iowa; Reliance
Acceptance Corp. of Missouri; Reliance Acceptance Corp. of
Nevada; Reliance Acceptance Corp. of Oregon; and Reliance
Acceptance Corp. of Washington.
By: /s/ Thomas L. Barlow
---------------------------------------
Thomas L. Barlow, President
By: /s/ Michael D. Bernick
---------------------------------------
Michael D. Bernick, Vice President
"NEW BORROWER"
Reliance Acceptance Corp. of Utah,
a Delaware corporation
By: /s/ Thomas L. Barlow
---------------------------------------
Thomas L. Barlow, President
By: /s/ Michael D. Bernick
---------------------------------------
Michael D. Bernick, Vice President
[SIGNATURE OF LENDER CONTINUED ON NEXT PAGE.]
-5-
<PAGE>
"LENDER"
BankAmerica Business Credit, Inc.
By: /s/ Joseph F. Pignotti
--------------------------------------
Joseph F. Pignotti,
Executive Vice President
-6-
<PAGE>
AMENDMENT NO. 7 TO LOAN AND SECURITY AGREEMENT
This Amendment No. 7 to Loan and Security Agreement ("Amendment") is
entered into as of April 30, 1996, by and between BankAmerica Business Credit,
Inc., a Delaware corporation ("Lender") and Cole Taylor Finance Co., a Delaware
corporation; Reliance Acceptance Corp. of Colorado, a Delaware corporation;
Reliance Acceptance Corp. of Georgia, a Delaware corporation; Reliance
Acceptance Corp. of Florida, a Delaware corporation; Reliance Acceptance Corp.
of Indiana, a Delaware corporation; Reliance Acceptance Corp. of New Mexico, a
Delaware corporation; Reliance Acceptance Corp. of Ohio, an Ohio corporation;
Reliance Acceptance Corp. of Texas, a Texas corporation; Reliance Acceptance
Corp. of Tennessee, a Delaware corporation, Reliance Acceptance Corp. of
Kentucky, a Delaware corporation; Reliance Acceptance Corp. of Illinois, a
Delaware corporation; Reliance Acceptance Corp. of Minnesota, a Delaware
corporation; Reliance Acceptance Corp. of North Carolina, a Delaware
corporation; Reliance Acceptance Corp. of South Carolina, a Delaware
corporation; Reliance Acceptance Corp. of Arizona, a Delaware corporation;
Reliance Acceptance Corp. of Iowa, a Delaware corporation; Reliance Acceptance
Corp. of Missouri, a Delaware corporation; Reliance Acceptance Corp. of Nevada,
a Delaware corporation; Reliance Acceptance Corp. of Oregon, a Delaware
corporation; and Reliance Acceptance Corp. of Washington, a Delaware
corporation, and Reliance Acceptance Corp. of Utah, a Delaware corporation
(individually and collectively, "Borrowers").
RECITALS
--------
This Amendment is entered into in reference to the following facts:
(a) Borrowers and Lender are parties to a Loan and Security
Agreement, dated as of July 12, 1994 (the Loan and Security Agreement, as
amended, modified, and supplemented prior to the date hereof being hereinafter
referred to as "Loan Agreement"). Unless specifically defined herein, all
capitalized terms shall be defined in accordance with the Loan Agreement as
amended by this Amendment.
(b) Borrower and Lender desire to amend the Loan Agreement in
certain respects subject to the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties agree as follows.
SECTION ONE - AMENDMENTS
------------------------
1.1 Amendment of Section 1.77. Section 1.77 of the Loan Agreement is
-------------------------
amended and restated to read in its entirety as follows:
"1.77 Total Credit Facility shall mean $250,000,000."
---------------------
-1-
<PAGE>
SECTION TWO - CONDITIONS PRECEDENT TO AMENDMENTS
------------------------------------------------
2.1 Conditions Precedent to Amendment. This Amendment shall become
---------------------------------
legally binding upon Borrowers and Lender only when the Borrowers and Cole
Taylor Finance Co. shall have executed and delivered to Lender or caused to be
executed and delivered to Lender (a) this Agreement and (b) a letter from Cole
Taylor Financial Group, Inc. reaffirming its obligations under its Letter of
Responsibility.
2.2 New Facility Fee. On the date Borrower executes this Amendment,
----------------
Borrower shall pay to Lender a facility fee ("New Facility Fee") $75,000.
Borrower and Lender agree that the New Facility Fee may be financed, at Lender's
discretion, as an Advance to the Loan.
SECTION THREE - REPRESENTATIONS AND WARRANTIES
----------------------------------------------
3.1 Acknowledgments of Borrowers. Borrowers each hereby represent and
----------------------------
warrant that: (a) the execution and delivery of this Amendment and compliance by
Borrowers with all of the provisions of this Amendment (i) are within the powers
and purposes of Borrowers; (ii) have been duly authorized or approved by
Borrowers; and (iii) when executed and delivered by or on behalf of Borrowers
will constitute valid and binding obligations of Borrowers, enforceable in
accordance with its terms; (b) Borrowers have no offsets or counterclaims
against Lender or defenses to the payments due under the Loan Agreement; and (c)
Lender has a first perfected security interest in the Collateral to secure the
Obligations under the Loan Agreement. Borrowers each reaffirm their obligations
to pay all amounts due Lender under the Loan Agreement in accordance with the
terms thereof, as modified hereby.
SECTION FOUR - GENERAL PROVISIONS
---------------------------------
4.1 Loan Agreement Unmodified. Except as otherwise specifically modified
-------------------------
by this Amendment, all terms and provisions of the Loan Agreement and all liens
and security interests created thereby shall remain unmodified and in full force
and effect. Nothing contained in this Amendment shall in any way impair the
validity or enforceability of the Loan Agreement, as modified hereby, or alter,
waive, annul, vary, affect, or impair any provision, condition, or covenant
contained therein or any rights, power, or remedy granted therein.
4.2 Parties, Successors and Assigns. This Amendment shall be binding
-------------------------------
upon and shall inure to the benefit of Borrowers, Lender, and their respective
successors and assigns.
4.3 Severability. To the extent any provision of this Amendment is not
------------
enforceable under applicable law, such provision shall be deemed null and void
and shall have no effect on the remaining portions of the Amendment.
4.4 Total Agreement. This Amendment and all other agreements referred to
---------------
herein or delivered in connection herewith shall constitute the entire agreement
between the parties relating to the subject matter hereof and shall not be
changed or terminated orally.
-2-
<PAGE>
4.5 Construction of Amendment. Each party hereto has cooperated in the
-------------------------
drafting and preparation of this Amendment and, as a result, this Amendment
shall not be construed against any party. This Amendment may be amended or
modified only by a written agreement signed by the parties hereto. This
Amendment may be executed in counterparts, each of which when so executed and
delivered shall be deemed an original but all such counterparts together shall
consitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
"BORROWERS"
Cole Taylor Finance Co.; Reliance Acceptance Corp. of
Colorado; Reliance Acceptance Corp. of Georgia; Reliance
Acceptance Corp. of Florida; Reliance Acceptance Corp. of
Indiana; Reliance Acceptance Corp. of New Mexico; Reliance
Acceptance Corp. of Ohio; Reliance Acceptance Corp. of
Tennessee; Reliance Acceptance Corp. of Texas; Reliance
Acceptance Corp. of Kentucky; Reliance Acceptance Corp. of
Illinois; Reliance Acceptance Corp. of Minnesota; Reliance
Acceptance Corp. of North Carolina; Reliance Acceptance Corp.
of South Carolina; Reliance Acceptance Corp. of Arizona;
Reliance Acceptance Corp. of Iowa; Reliance Acceptance Corp.
of Missouri; Reliance Acceptance Corp. of Nevada; Reliance
Acceptance Corp. of Oregon; Reliance Acceptance Corp. of
Washington and Reliance Acceptance Corp. of Utah
By: /s/ Thomas L. Barlow
----------------------------------------
Thomas L. Barlow, President
By: /s/ Michael D. Bernick
----------------------------------------
Michael D. Bernick, Vice President
"LENDER"
BankAmerica Business Credit, Inc.
By: /s/ Joseph F. Pignotti
----------------------------------------
Joseph F. Pignotti,
Executive Vice President
-3-
<PAGE>
AMENDMENT NO. 8 TO LOAN AND SECURITY AGREEMENT
This Amendment No. 8 to Loan and Security Agreement ("Amendment") is
entered into as of July 22, 1996, by and between BankAmerica Business Credit,
Inc., a Delaware corporation ("Lender") and Cole Taylor Finance Co., a Delaware
corporation; Reliance Acceptance Corp. of Colorado, a Delaware corporation;
Reliance Acceptance Corp. of Georgia, a Delaware corporation; Reliance
Acceptance Corp. of Florida, a Delaware corporation; Reliance Acceptance Corp.
of Indiana, a Delaware corporation; Reliance Acceptance Corp. of New Mexico, a
Delaware corporation; Reliance Acceptance Corp. of Ohio, an Ohio corporation;
Reliance Acceptance Corp. of Texas, a Texas corporation; Reliance Acceptance
Corp. of Tennessee, a Delaware corporation; Reliance Acceptance Corp. of
Kentucky, a Delaware corporation; Reliance Acceptance Corp. of Illinois, a
Delaware corporation; Reliance Acceptance Corp. of Minnesota, a Delaware
corporation; Reliance Acceptance Corp. of North Carolina, a Delaware
corporation; Reliance Acceptance Corp. of South Carolina, a Delaware
corporation; Reliance Acceptance Corp. of Arizona, a Delaware corporation;
Reliance Acceptance Corp. of Iowa, a Delaware corporation; Reliance Acceptance
Corp. of Missouri, a Delaware corporation; Reliance Acceptance Corp. of Nevada,
a Delaware corporation; Reliance Acceptance Corp. of Oregon, a Delaware
corporation; and Reliance Acceptance Corp. of Washington, a Delaware
corporation; and Reliance Acceptance Corp. of Utah, a Delaware corporation
(individually and collectively, "Borrowers").
RECITALS
--------
This Amendment is entered into in reference to the following facts:
(a) Borrowers and Lender are parties to a Loan and Security Agreement,
dated as of July 12, 1994 (the Loan and Security Agreement, as amended,
modified, and supplemented prior to the date hereof being hereinafter referred
to as "Loan Agreement"). Unless specifically defined herein, all capitalized
terms shall be defined in accordance with the Loan Agreement as amended by this
Amendment.
(b) Borrower and Lender desire to amend the Loan Agreement in certain
respects subject to the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties agree as follows.
SECTION ONE - AMENDMENTS
------------------------
1.1 Amendment of Section 1.77. Section 1.77 of the Loan Agreement is
-------------------------
amended and restated to read in its entirety as follows:
"1.77 Total Credit Facility shall mean (a) $275,000,000 prior to
---------------------
November 15, 1996, and (b) $250,000,000 at all times thereafter."
1.2 Amendment of Section 8.27. Section 8.27 of the Loan Agreement is
-------------------------
hereby amended and restated to read in its entirety as follows:
"8.27 Repossession Inventory. Borrower shall charge off the
----------------------
Repossession Value of a vehicle for which more than one hundred twenty
(120)
-1-
<PAGE>
days have elapsed since the date Borrower has repossessed the vehicle. A
vehicle shall be deemed to have been repossessed as of the date the
Borrower or any person acting on its behalf obtains physical possession
of the vehicle, regardless of any right which the Contract Debtor may
have under state law or otherwise to redeem the vehicle."
SECTION TWO - CONDITIONS PRECEDENT TO AMENDMENTS
------------------------------------------------
2.1 Conditions Precedent to Amendment. This Amendment shall become
---------------------------------
legally binding upon Borrowers and Lender only when the Borrowers and Cole
Taylor Finance Co. shall have executed and delivered to Lender or caused to be
executed and delivered to Lender (a) this Agreement and (b) a letter from Cole
Taylor Financial Group, Inc. reaffirming its obligations under its Letter of
Responsibility.
2.2 New Facility Fee. On the date Borrower executes this Amendment,
----------------
Borrower shall pay to Lender a facility fee ("New Facility Fee") $20,833.34.
Borrower and Lender agree that the New Facility Fee may be financed, at Lender's
discretion, as an Advance to the Loan.
SECTION THREE - REPRESENTATIONS AND WARRANTIES
----------------------------------------------
3.1 Acknowledgments of Borrowers. Borrowers each hereby represent and
----------------------------
warrant that: (a) the execution and delivery of this Amendment and compliance by
Borrowers with all of the provisions of this Amendment (i) are within the powers
and purposes of Borrowers; (ii) have been duly authorized or approved by
Borrowers; and (iii) when executed and delivered by or on behalf of Borrowers
will constitute valid and binding obligations of Borrowers, enforceable in
accordance with its terms; (b) Borrowers have no offsets or counterclaims
against Lender or defenses to the payments due under the Loan Agreement; and (c)
Lender has a first perfected security interest in the Collateral to secure the
Obligations under the Loan Agreement. Borrowers each reaffirm their obligations
to pay all amounts due Lender under the Loan Agreement in accordance with the
terms thereof, as modified hereby.
SECTION FOUR - GENERAL PROVISIONS
---------------------------------
4.1 Loan Agreement Unmodified. Except as otherwise specifically modified
-------------------------
by this Amendment, all terms and provisions of the Loan Agreement and all liens
and security interests created thereby shall remain unmodified and in full force
and effect. Nothing contained in this Amendment shall in any way impair the
validity or enforceability of the Loan Agreement, as modified hereby, or alter,
waive, annul, vary, affect, or impair any provision, condition, or covenant
contained therein or any rights, power, or remedy granted therein.
4.2 Parties, Successors and Assigns. This Amendment shall be binding
-------------------------------
upon and shall insure to the benefit of Borrowers, Lender, and their respective
successors and assigns.
4.3 Severability. To the extent any provision of this Amendment is not
------------
enforceable under applicable law, such provision shall be deemed null and void
and shall have no effect on the remaining portions of the Amendment.
4.4 Total Agreement. This Amendment and all other agreements referred to
---------------
herein or delivered in connection herewith shall constitute the entire agreement
between the parties relating to the subject matter hereof and shall not be
changed or terminated orally.
-2-
<PAGE>
4.5 Construction of Amendment. Each party hereto has cooperated in
-------------------------
the drafting and preparation of this Amendment and, as a result, this Amendment
shall not be construed against any party. This Amendment may be amended or
modified only by a written agreement signed by the parties hereto. This
Amendment may be executed in counterparts, each of which when so executed and
delivered shall be deemed an original but all such counterparts together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.
"BORROWERS
Cole Taylor Finance Co.; Reliance Acceptance
Corp. of Colorado; Reliance Acceptance Corp. of
Georgia; Reliance Acceptance Corp. of Florida;
Reliance Acceptance Corp. of Indiana; Reliance
Acceptance Corp. of New Mexico; Reliance
Acceptance Corp. of Ohio; Reliance Acceptance
Corp. of Tennessee; Reliance Acceptance Corp. of
Texas; Reliance Acceptance Corp. of Kentucky;
Reliance Acceptance Corp. of Illinois; Reliance
Acceptance Corp. of Minnesota; Reliance
Acceptance Corp. of North Carolina; Reliance
Acceptance Corp. of South Carolina; Reliance
Acceptance Corp. of Arizona; Reliance Acceptance
Corp. of Iowa; Reliance Acceptance Corp. of
Missouri; Reliance Acceptance Corp. of Nevada;
Reliance Acceptance Corp. of Oregon; Reliance
Acceptance Corp. of Washington and Reliance
Acceptance Corp. of Utah
By: /s/ Thomas L. Barrow
-----------------------------------------
Thomas L. Barrow, President
By: /s/ Michael D. Bernick
------------------------------------------
Michael D. Bernick, Vice President
"LENDER"
BankAmerica Business Credit, Inc.
By: /s/ Joseph F. Pignotti
-----------------------------------------
Joseph F. Pignotti,
Executive Vice President
-3-
<PAGE>
[SIGNATURE OF LENDER CONTINUED ON NEXT PAGE]
<PAGE>
"LENDER"
BankAmerica Business Credit, Inc.
By:
----------------------------------------
Joseph F. Pignotti,
Executive Vice President
-5-
<PAGE>
AMENDMENT NO. 9 TO LOAN AND SECURITY AGREEMENT
This Amendment No. 9 to Loan and Security Agreement ("Amendment") is
entered into as of September 16, 1996, by and between BankAmerica Business
Credit, Inc., a Delaware corporation ("Lender") and Cole Taylor Finance Co., a
Delaware corporation; Reliance Acceptance Corp. of Colorado, a Delaware
corporation; Reliance Acceptance Corp. of Georgia, a Delaware corporation;
Reliance Acceptance Corp. of Florida, a Delaware corporation; Reliance
Acceptance Corp. of Indiana, a Delaware corporation; Reliance Acceptance Corp.
of New Mexico, a Delaware corporation; Reliance Acceptance Corp. of Ohio, an
Ohio corporation; Reliance Acceptance Corp. of Texas, a Texas corporation;
Reliance Acceptance Corp. of Tennessee, a Delaware corporation, Reliance
Acceptance Corp. of Kentucky, a Delaware corporation; Reliance Acceptance Corp.
of Illinois, a Delaware corporation; Reliance Acceptance Corp. of Minnesota, a
Delaware corporation; Reliance Acceptance Corp. of North Carolina, a Delaware
corporation; Reliance Acceptance Corp. of South Carolina, a Delaware
corporation; Reliance Acceptance Corp. of Arizona, a Delaware corporation;
Reliance Acceptance Corp. of Iowa, a Delaware corporation; Reliance Acceptance
Corp. of Missouri, a Delaware corporation; Reliance Acceptance Corp. of Nevada,
a Delaware corporation; Reliance Acceptance Corp. of Oregon, a Delaware
corporation; and Reliance Acceptance Corp. of Washington, a Delaware
corporation, and Reliance Acceptance Corp. of Utah, a Delaware corporation
(individually and collectively, "Borrowers").
RECITALS
--------
This Amendment is entered into in reference to the following facts:
(a) Borrowers and Lender are parties to a Loan and Security
Agreement, dated as of July 12, 1994 (the Loan and Security Agreement, as
amended, modified, and supplemented prior to the date hereof being hereinafter
referred to as "Loan Agreement"). Unless specifically defined herein, all
capitalized terms shall be defined in accordance with the Loan Agreement as
amended by this Amendment.
(b) Borrowers and Lender desire to amend the Loan Agreement in
certain respects subject to the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties agree as follows.
SECTION ONE - AMENDMENTS
------------------------
1.1 Amendment of Section 1.77. Section 1.77 of the Loan Agreement is
-------------------------
amended and restated to read in its entirety as follows:
"1.77 Total Credit Facility shall mean (a) $295,000,000 from
---------------------
September 16, 1996 to November 15, 1996, and (b) $250,000,000 at all times
thereafter."
SECTION TWO - CONDITIONS PRECEDENT TO AMENDMENTS
------------------------------------------------
2.1 Conditions Precedent to Amendment. This Amendment shall become
---------------------------------
legally binding upon Borrowers and Lender only when the Borrowers and Cole
Taylor Finance Co. shall have executed and delivered to Lender or caused to be
executed and delivered to Lender (a)
-1-
<PAGE>
this Agreement and (b) a letter from Cole Taylor Financial Group, Inc.
reaffirming its obligations under its Letter of Responsibility.
2.2 New Facility Fee. On the date Borrowers execute this Amendment,
----------------
Borrower shall pay to Lender a facility fee ("New Facility Fee") of $12,500.
Borrowers and Lender agree that the New Facility Fee may be financed, at
Lender's discretion, as an Advance to the Loan.
SECTION THREE-REPRESENTATIONS AND WARRANTIES
--------------------------------------------
3.1 Acknowledgments of Borrowers. Borrowers each hereby represent and
----------------------------
warrant that: (a) the execution and delivery of this Amendment and compliance
by Borrowers with all of the provisions of this Amendment (i) are within the
powers and purposes of Borrowers; (ii) have been duly authorized or approved by
Borrowers; and (iii) when executed and delivered by or on behalf of Borrowers
will constitute valid and binding obligations of Borrowers, enforceable in
accordance with its terms; (b) Borrowers have no offsets or counterclaims
against Lender or defenses to the payments due under the Loan Agreement; (c)
Lender has a first perfected security interest in the Collateral to secure the
Obligations under the Loan Agreement; and (d) no Default or Event of Default has
occurred and is continuing. Borrowers each reaffirm their obligations to pay
all amounts due Lender under the Loan Agreement in accordance with the terms
thereof, as modified hereby.
SECTION THREE - GENERAL PROVISIONS
----------------------------------
4.1 Loan Agreement Unmodified. Except as otherwise specifically modified
-------------------------
by this Amendment, all terms and provisions of the Loan Agreement and all liens
and security interests created thereby shall remain unmodified and in full force
and effect. Nothing contained in this Amendment shall in any way impair the
validity or enforceability of the Loan Agreement, as modified hereby, or alter,
waive, annul, vary, affect, or impair any provision, condition, or covenant
contained therein or any rights, power or remedy granted therein.
4.2 Parties, Successors and Assigns. This Amendment shall be binding
-------------------------------
upon and shall inure to the benefit of Borrowers, Lender, and their respective
successors and assigns.
4.3 Severability. To the extent any provision of this Amendment is not
------------
enforceable under applicable law, such provision shall be deemed null and void
and shall have no effect on the remaining portions of this Amendment.
4.4 Total Agreement. This Amendment, the Loan Documents, and all other
---------------
agreements referred to herein or delivered in connection herewith shall
constitute the entire agreement between the parties relating to the subject
matter hereof and shall not be changed or terminated orally.
4.5 Construction of Amendment. Each party hereto has cooperated in the
-------------------------
drafting and preparation of this Amendment and, as a result, this Amendment
shall not be construed against each party. This Amendment may be amended or
modified only by a written agreement signed by the parties hereto. This
Amendment may be executed in counterparts, each of which when so executed
-2-
<PAGE>
and delivered shall be deemed an original but all such counterparts together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.
"BORROWERS"
Cole Taylor Finance Co.; Reliance Acceptance
Corp. of Colorado; Reliance Acceptance Corp. of
Georgia; Reliance Acceptance Corp. of Florida;
Reliance Acceptance Corp. of Indiana; Reliance
Acceptance Corp. of New Mexico; Reliance
Acceptance Corp. of Ohio; Reliance Acceptance
Corp. of Tennessee; Reliance Acceptance Corp. of
Texas; Reliance Acceptance Corp. of Kentucky;
Reliance Acceptance Corp. of Illinois; Reliance
Acceptance Corp. of Minnesota; Reliance
Acceptance Corp. of North Carolina; Reliance
Acceptance Corp. of South Carolina; Reliance
Acceptance Corp. of Arizona; Reliance Acceptance
Corp. of Iowa; Reliance Acceptance Corp. of
Missouri; Reliance Acceptance Corp. of Nevada;
Reliance Acceptance Corp. of Oregon; Reliance
Acceptance Corp. of Washington and Reliance
Acceptance Corp. of Utah;
By: /s/ Thomas L. Barlow
-----------------------------------------
Thomas L. Barlow, President
By: /s/ Michael D. Bernick
------------------------------------------
Michael D. Bernick, Vice President
"LENDER"
BankAmerica Business Credit, Inc.
By:
-----------------------------------------
Paul A. Cottone,
Senior Vice President
-3-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.
"BORROWERS
Reliance Acceptance Corporation; Reliance
Acceptance Corp. of Colorado; Reliance
Acceptance Corp. of Georgia; Reliance Acceptance
Corp. of Florida; Reliance Acceptance Corp. of
Indiana; Reliance Acceptance Corp. of New
Mexico; Reliance Acceptance Corp. of Ohio;
Reliance Acceptance Corp. of Tennessee; Reliance
Acceptance Corp. of Texas; Reliance Acceptance
Corp. of Kentucky; Reliance Acceptance Corp. of
Illinois; Reliance Acceptance Corp. of
Minnesota; Reliance Acceptance Corp. of North
Carolina; Reliance Acceptance Corp. of South
Carolina; Reliance Acceptance Corp. of Arizona;
Reliance Acceptance Corp. of Iowa; Reliance
Acceptance Corp. of Missouri; Reliance
Acceptance Corp. of Nevada; Reliance Acceptance
Corp. of Oregon; Reliance Acceptance Corp. of
Washington and Reliance Acceptance Corp. of
Utah
By: /s/ Howard B. Silverman
------------------------------------------
Howard B. Silverman, Chairman
By: /s/ James L. Kaplan
------------------------------------------
James L. Kaplan,
General Counsel and Corporate Secretary
"LENDER"
BankAmerica Business Credit, Inc.
By: /s/ Joseph P. LaCognata
-----------------------------------------
Joseph P. LaCognata,
Executive Vice President
-7-
<PAGE>
AMENDMENT NO.10 TO LOAN AND SECURITY AGREEMENT
This Amendment No. 10 to Loan and Security Agreement ("Amendment") is
entered into as of November 14, 1996, by and between BankAmerica Business
Credit, Inc., a Delaware corporation ("Lender") and Reliance Acceptance
Corporation, a Delaware corporation (formerly known as Cole Taylor Finance Co.);
Reliance Acceptance Corp. of Colorado, a Delaware corporation; Reliance
Acceptance Corp. of Georgia, a Delaware corporation; Reliance Acceptance Corp.
of Florida, a Delaware corporation; Reliance Acceptance Corp. of Indiana, a
Delaware corporation; Reliance Acceptance Corp. of New Mexico, a Delaware
corporation; Reliance Acceptance Corp. of Ohio, an Ohio corporation; Reliance
Acceptance Corp. of Texas, a Texas corporation; Reliance Acceptance Corp. of
Tennessee, a Delaware corporation, Reliance Acceptance Corp. of Kentucky, a
Delaware corporation; Reliance Acceptance Corp. of Illinois, a Delaware
corporation; Reliance Acceptance Corp. of Minnesota, a Delaware corporation;
Reliance Acceptance Corp. of North Carolina, a Delaware corporation; Reliance
Acceptance Corp. of South Carolina, a Delaware corporation; Reliance Acceptance
Corp. of Arizona, a Delaware corporation; Reliance Acceptance Corp. of Iowa, a
Delaware corporation; Reliance Acceptance Corp. of Missouri, a Delaware
corporation; Reliance Acceptance Corp. of Nevada, a Delaware corporation;
Reliance Acceptance Corp. of Oregon, a Delaware corporation; and Reliance
Acceptance Corp. of Washington, a Delaware corporation, and Reliance Acceptance
Corp. of Utah, a Delaware corporation (individually and collectively,
"Borrowers").
RECITALS
--------
This Amendment is entered into in reference to the following facts:
(a) Borrowers and Lender are parties to a Loan and Security
Agreement, dated as of July 12, 1994 (the Loan and Security Agreement, as
amended, modified, and supplemented prior to the date hereof being hereinafter
referred to as "Loan Agreement). Unless specifically defined herein, all
capitalized terms shall be defined in accordance with the Loan Agreement as
amended by this Amendment.
(b) Borrowers and Lender desire to amend the Loan Agreement in
certain respects subject to the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties agree as follows.
SECTION ONE - AMENDMENTS
-------------------------
1.1 Amendment of Section 1.77. Section 1.77 of the Loan Agreement is
--------------------------
amended and restated to read in its entirety as follows:
"1.77 Total Credit Facility shall mean (a) $295,000,000 from September
---------------------
30, 1996 to and including December 14, 1996, and (b) $250,000,000 at all
times thereafter."
-1-
<PAGE>
SECTION TWO - CONDITIONS PRECEDENT TO AMENDMENTS
-----------------------------------------------
2.1 Conditions Precedent to Amendment. This Amendment shall become legally
---------------------------------
binding upon Borrowers and Lender only when the Borrowers and Reliance
Acceptance Corporation shall have executed and delivered to Lender or caused to
be executed and delivered to Lender (a) this Amendment and (b) a letter from
Cole Taylor Financial Group, Inc. reaffirming its obligations under its Letter
of Responsibility.
SECTION THREE - REPRESENTATIONS AND WARRANTIES
----------------------------------------------
3.1 Acknowledgments of Borrowers. Borrowers each hereby represent and
----------------------------
warrant that: (a) the execution and delivery of this Amendment and compliance
by Borrowers with all of the provisions of this Amendment (i) are within the
powers and purposes of Borrowers; (ii) have been duly authorized or approved by
Borrowers; and (iii) when executed and delivered by or on behalf of Borrowers
will constitute valid and binding obligations of Borrowers, enforceable in
accordance with its terms; (b) Borrowers have no offsets or counterclaims
against Lender or defenses to the payments due under the Loan Agreement; (c)
Lender has a first perfected security interest in the Collateral to secure the
Obligations under the Loan Agreement; and (d) no Default or Event of Default has
occurred and is continuing. Borrowers each reaffirm their obligations to pay all
amounts due Lender under the Loan Agreement in accordance with the terms
thereof, as modified hereby.
SECTION THREE - GENERAL PROVISIONS
----------------------------------
4.1 Loan Agreement Unmodified. Except as otherwise specifically modified
-------------------------
by this Amendment, all terms and provisions of the Loan Agreement and all liens
and security interests created thereby shall remain unmodified and in full force
and effect. Nothing contained in this Amendment shall in any way impair the
validity or enforceablity of the Loan Agreement, as modified hereby, or alter,
waive, annul, vary, effect, or impair any provision, condition, or covenant
contained therein or any rights, power, or remedy granted therein.
4.2 Parties, Successors and Assigns. This Amendment shall be binding upon
-------------------------------
and shall inure to the benefit of Borrowers, Lender, and their respective
successors and assigns.
4.1 Severability. To the extent any provision of this Amendment is not
------------
enforceable under applicable law, such provision shall be deemed null and void
and shall have no effect on the remaining portions of the Amendment.
4.2 Total Agreement. This Amendment, the Loan Documents, and all other
---------------
agreements referred to herein or delivered in connection herewith shall
constitute the entire agreement between the parties relating to the subject
matter hereof and shall not be changed or terminated orally.
4.3 Construction of Amendment. Each party hereto has cooperated in the
-------------------------
drafting and preparation of this Amendment and, as a result, this Amendment
shall not be construed against any party. This Amendment may be amended or
modified only by a written agreement signed by the parties hereto. This
Amendment may be executed in counterparts, each of which when so executed and
delivered shall be deemed an original but all such counterparts together shall
constitute one and the same instrument.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
"BORROWERS"
Reliance Acceptance Corporation; Reliance Acceptance
Corp. of Colorado; Reliance Acceptance Corp. of Georgia;
Reliance Acceptance Corp. of Florida; Reliance Acceptance
Corp. of Indiana; Reliance Acceptance Corp. of New
Mexico; Reliance Acceptance Corp. of Ohio; Reliance
Acceptance Corp. of Tennessee; Reliance Acceptance Corp.
of Texas; Reliance Acceptance Corp. of Kentucky; Reliance
Acceptance Corp. of Illinois; Reliance Acceptance Corp.
of Minnesota; Reliance Acceptance Corp. of North
Carolina; Reliance Acceptance Corp. of South Carolina;
Reliance Acceptance Corp. of Arizona; Reliance Acceptance
Corp. of Iowa; Reliance Acceptance Corp. of Missouri;
Reliance Acceptance Corp. of Nevada; Reliance Acceptance
Corp. of Oregon; Reliance Acceptance Corp. of Washington
and Reliance Acceptance Corp. of Utah
By:_____________________________________________
Thomas L. Barlow, President
By: /s/ Michael D. Bernick
---------------------------------------------
Michael D. Bernick, Vice President
"LENDER"
BankAmerica Business Credit, Inc.
By:_____________________________________________
Joseph P. La Cognata,
Executive Vice President
-3-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
"BORROWERS"
Reliance Acceptance Corporation; Reliance Acceptance
Corp. of Colorado; Reliance Acceptance Corp. of Georgia;
Reliance Acceptance Corp. of Florida; Reliance Acceptance
Corp. of Indiana; Reliance Acceptance Corp. of New
Mexico; Reliance Acceptance Corp. of Ohio; Reliance
Acceptance Corp. of Tennessee; Reliance Acceptance Corp.
of Texas; Reliance Acceptance Corp. of Kentucky; Reliance
Acceptance Corp. of Illinois; Reliance Acceptance Corp.
of Minnesota; Reliance Acceptance Corp. of North
Carolina; Reliance Acceptance Corp. of South Carolina;
Reliance Acceptance Corp. of Arizona; Reliance Acceptance
Corp. of Iowa; Reliance Acceptance Corp. of Missouri;
Reliance Acceptance Corp. of Nevada; Reliance Acceptance
Corp. of Oregon; Reliance Acceptance Corp. of Washington
and Reliance Acceptance Corp. of Utah
By: /s/ Thomas L. Barlow
---------------------------------------------
Thomas L. Barlow, President
By:_____________________________________________
Michael D. Bernick, Vice President
"LENDER"
BankAmerica Business Credit, Inc.
By:_____________________________________________
Joseph P. La Cognata,
Executive Vice President
-3-
<PAGE>
AMENDMENT NO. 11 TO LOAN AND SECURITY AGREEMENT
This Amendment No. 11 to Loan and Security Agreement ("Amendment") is
entered into as of November 20, 1996, by and between BankAmerica Business
Credit, Inc., a Delaware corporation ("Lender") and Reliance Acceptance
Corporation (formerly, "Cole Taylor Finance Co.") (individually, "Reliance"), a
Delaware corporation; Reliance Acceptance Corp. of Colorado, a Delaware
corporation; Reliance Acceptance Corp. of Georgia, a Delaware corporation;
Reliance Acceptance Corp. of Florida, a Delaware corporation; Reliance
Acceptance Corp. of Indiana, a Delaware corporation; Reliance Acceptance Corp.
of New Mexico, a Delaware corporation; Reliance Acceptance Corp. of Ohio, an
Ohio corporation; Reliance Acceptance Corp. of Texas, a Texas corporation;
Reliance Acceptance Corp. of Tennessee, a Delaware corporation, Reliance
Acceptance Corp. of Kentucky, a Delaware corporation; Reliance Acceptance Corp.
of Illinois, a Delaware corporation; Reliance Acceptance Corp. Minnesota, a
Delaware corporation; Reliance Acceptance Corp. of North Carolina, a Delaware
corporation; Reliance Acceptance Corp. of South Carolina, a Delaware
corporation; Reliance Acceptance Corp. of Arizona, a Delaware corporation;
Reliance Acceptance Corp. of Iowa, a Delaware corporation; Reliance Acceptance
Corp. of Missouri, a Delaware corporation; Reliance Acceptance Corp. of Nevada,
a Delaware corporation; Reliance Acceptance Corp. of Oregon, a Delaware
corporation; Reliance Acceptance Corp. of Washington, a Delaware corporation,
and Reliance Acceptance Corp. of Utah, a Delaware corporation (Reliance and the
other entities, individually and collectively, "Borrowers").
RECITALS
--------
This Amendment is entered into in reference to the following facts:
(a) Borrowers and Lender are parties to a Loan and Security
Agreement, dated as of July 12, 1994 (the Loan and Security Agreement, as
amended, modified, and supplemented prior to the date hereof being hereinafter
referred to as "Loan Agreement"). Unless specifically defined herein, all
capitalized terms shall be defined in accordance with the Loan Agreement as
amended by this Amendment.
(b) Reliance and certain of the other Borrowers are about to enter
into a certain transaction ("Securitization Transaction") whereby:
(i) Certain of the Borrowers will sell to Reliance certain of
their Contracts and certain other Property related thereto, pursuant to the
terms of a certain Receivables Purchase Agreement, dated as of November 20,
1996;
(ii) Reliance will concurrently therewith enter into a Pooling
and Servicing Agreement, dated as of November 20, 1996, with Reliance Auto
Receivables Corporation (the "Issuer"), a wholly owned subsidiary of Reliance,
whereby Reliance will sell and/or contribute to the Issuer those Contracts and
the other related Property acquire from those Borrowers;
-1-
<PAGE>
(iii) The Issuer will concurrently therewith enter into an
Indenture, dated as of November 20, 1996, with Harris Trust and Savings Bank
("Trustee"), whereby the Issuer will sell its notes to various third parties and
will grant to the Trustee a security interest in the "Indenture Collateral," as
defined in the Indenture, including the Contracts and the other related
Property; and
(iv) Lender will release its Lien in those Contracts and the
other Property related thereto.
(c) Borrowers desire to amend the Loan Agreement to facilitate the
Securitization Transaction and Lender is willing to do so.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties agree as follows.
SECTION ONE - AMENDMENTS
------------------------
1.1 Amendment of Chief Executive Office. The address of the Borrowers'
-----------------------------------
chief executive office is hereby amended to be "400 North Loop 1604 East, Suite
210, San Antonio, Texas 78232," in place and instead of "350 East Dundee Road,
Suite 203, Wheeling, Illinois, 60090."
1.2 Amendment of Article One, Article One of the Loan Agreement is hereby
------------------------
amended by the addition of twenty new sections, numbered 1.85 through 1.104,
which shall read in their entirety as follows:
"1.85 Collateral Insurance means a vendor's single interest
--------------------
or other collateral protection insurance policy with respect to a
Financed Vehicle.
1.86 Dealer Assignment means an assignment executed by a
-----------------
Dealer conveying a Receivable to an Originator.
1.87 Financed Vehicle means a new or used automobile or
----------------
light truck, together with all accessions thereto, securing or
purporting to secure a Contract Debtor's indebtedness under a
Receivable.
1.88 Force-Placed Insurance means insurance which the
----------------------
Servicer has, if a Contract Debtor fails to obtain or maintain
physical loss and damage insurance, obtained with respect to the
related Financed Vehicle and advanced the premiums for such
insurance on behalf of the Contract Debtor.
1.89 Indenture shall mean that certain Indenture, dated as
---------
of
-2-
<PAGE>
November 20, 1996, between the Issuer and Harris Trust and
Savings Bank.
1.90 Issuer means Reliance Auto Receivables Corporation, a
------
Delaware corporation, a wholly owned Subsidiary of Reliance.
1.91 Insurance Policy means any insurance policy benefiting
----------------
the holder of a Receivable providing loss or physical damage,
credit life, credit disability, theft, mechanical breakdown or
similar coverage with respect to the Financed Vehicle or the
related Contract Debtor.
1.92 Liquidated Receivable means a Receivable as to which
---------------------
(i) 120 or more days have elapsed since the Servicer repossessed
the Financed Vehicle (following the expiration of any applicable
redemption period), (ii) the Servicer has determined in good
faith that all amounts it expects to recover have been received,
(iii) 5% of more of any payment scheduled thereunder has become
180 or more days delinquent, or (iv) the related Financed Vehicle
has been sold and all of the proceeds have been received with
respect to such Receivable (including proceeds of Insurance
Policies)
1.93 Liquidation Proceeds means all amounts realized with
--------------------
respect to a Liquidated Receivable, including proceeds of
Insurance Policies, net of (i) reasonable out-of-pocket expenses
incurred by the Servicer in connection with the collection of
such Receivable and the repossession and disposition of the
related Financed Vehicle and (ii) amounts that are required to be
refunded to the Contract Debtor on such Receivable.
1.94 Originators shall mean Reliance Acceptance Corp. of
-----------
Florida, Reliance Acceptance Corp. of Georgia, Reliance
Acceptance Corp. of Illinois, Reliance Acceptance Corp. of
Indiana, Reliance Acceptance Corp. of Kentucky, Reliance
Acceptance Corp. of Missouri, Reliance Acceptance Corp. of
Nevada, Reliance Acceptance Corp. of New Mexico, Reliance
Acceptance Corp. of North Carolina, Reliance Acceptance Corp. of
Ohio, Reliance Acceptance Corp. of South Carolina, Reliance
Acceptance Corp. of Tennessee, and Reliance Acceptance Corp. of
Texas.
1.95 Other Conveyed Property means, with respect to each
-----------------------
Receivable (1) all of the right, title, and interest of Reliance
and the Originators in, to and under a Receivable and all monies
paid or payable thereon or in respect thereof on and after
November 1, 1996, including Liquidation Proceeds and recoveries
received with respect to such Receivable; (2) the security
interests in the Financed Vehicles granted by the Contract Debtor
pursuant to the Receivable and any other interest of Reliance and
the Originators in the Financed Vehicles and other property
-3-
<PAGE>
(including the right to receive future Liquidation Proceeds) that
secures a Receivable and that has been acquired by Reliance or an
Originator pursuant to the liquidation of any such Receivable;
(3) The Insurance Policies and any proceeds of any Insurance
Policies relating to the Receivable, the related Contract Debtor
or the related Financed Vehicle, including rebates of premiums,
all Collateral Insurance and any Fore-Placed Insurance relating
to the Receivable; (4) the rights of Reliance and any Originator
against Dealers with respect to the Receivable under the Dealer
Agreements and the Dealer Assignments; (5) all items contained in
the Receivables File related to the Receivable and any and all
other documents that Reliance or the Originators keep on file in
accordance with their customary procedures relating to the
Receivable, the Contract Debtors or the related Financed
Vehicle; and (6) all proceeds and related investments of any of
the foregoing, all present and future claims, demands, causes and
choses in action in respect of any or all of the foregoing and
all payments on or under any all proceeds of every kind and nature
whatsoever in respect of any or all of the foregoing.
1.96 Pooling and Servicing Agreement shall mean that certain
-------------------------------
Pooling and Servicing Agreement relating to Reliance Acceptance Auto
Receivables Corporation Asset Backed Notes, Series 1996-A,
between the Issuer, Reliance, as servicer, and Harris Trust and
Savings Bank, as backup servicer and as trustee.
1.97 Receivable shall mean each of the Contracts listed in
----------
Exhibit 1.97 to this Agreement.
1.98 Receivables File means the following documents,
----------------
electronic entries, instruments and writings pertaining to a
particular Receivable: (i) the original of a Receivable (together
with any agreements modifying the Receivable, including extension
agreements, (ii) the original credit application, or copy
thereof, of each Contract Debtor, executed by each such Contract
Debtor; and (iii) the original certificate of title of the
Financed Vehicle.
1.99 Reliance shall mean Reliance Acceptance Corporation,
--------
a Delaware corporation, formerly known as Cole Taylor Finance Co.
1.100 Reliance Purchase Agreement shall mean that certain
---------------------------
Receivables Purchase Agreement, dated as of November 20, 1996,
between each of the Originators, as sellers, and Reliance, as
buyer.
1.101 Servicer shall mean Reliance or such other entity
--------
acting as servicer under the terms of the Pooling and Servicing
Agreement
1.102 Securitization Transaction shall mean a transaction
--------------------------
whereby
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<PAGE>
(i) the Originators will sell to Reliance the Receivables and
the Other Conveyed Property, pursuant to the terms of the
Reliance Purchase Agreement, (ii) Reliance will concurrently
therewith enter into the Pooling and Servicing Agreement with
the Issuer, whereby Reliance will sell and/or contribute to
the Issuer the Receivables and the Other Conveyed Property;
(iii) the Issuer will concurrently therewith enter into the
Indenture with Harris Trust and Savings Bank ("Trustee"),
whereby the Issuer will sell its notes to various third
parties and will grant to the Trustee a security interest in
the "Indenture Collateral," as defined in the Indenture,
including the Receivables and the Other Conveyed Property;
and (iv) Lender will release its Lien in the Receivables and
Other Conveyed Property.
1.103 Subservicing Agreement shall mean the Subservicing
----------------------
Agreement, dated as of November 20, 1996, between the Originators
named therein, as Subservicers, and the Servicer.
1.104 Subservicer means any of the Persons named as a
-----------
Subservicer in the Subservicing Agreement."
1.3 Amendment of Section 1.15. Section 1.15 of the Loan Agreement is
-------------------------
hereby amended by the addition of the following provisions, which shall be
inserted at the end of that section:
"Notwithstanding any provision of this Section 1.15 and any of the other
provisions of this Agreement to the contrary, the term "Collateral" shall
not include the Receivables and the Other Conveyed Property."
1.4 Amendment of Section 1.64. Section 1.64 of the Loan Agreement is
-------------------------
hereby amended by the addition of a new clause "(i)", which shall be inserted
immediately after clause "(h)" thereof and which shall read in its entirety as
follows:
"(i) Liens on the Issuer's Property, including the Receivables
and Other Conveyed Property."
1.5 Amendment of Article Five. Article Five of the Loan Agreement is
-------------------------
hereby amended by the addition of a new section, numbered 5.9, which shall read
in its entirety as follows:
"5.9 Release of Collateral. Borrower shall not sell or
---------------------
otherwise dispose of the Collateral or any interest therein.
Notwithstanding the foregoing, Lender hereby releases its
Lien on the Receivables and the Other Conveyed Property,
-5-
<PAGE>
1.6 Amendment of Article Six. Article Six of the Loan Agreement is hereby
------------------------
amended by the addition of a new section, numbered 6.5, which shall read in its
entirety as follows:
"6.5 The Borrower covenants and agrees that at all times
after December 20, 1996, it shall (a) not deposit any of the
payments or other proceeds received with respect to the
Receivables and Other Conveyed Property into the Collection
Account, and (b) deposit into the Collection Account only the
proceeds of the Collateral. Upon Lender's request, the Borrower
shall promptly deliver to Lender a report, satisfactory to Lender
in form and content and for such periods of time as Lender may
specify, indicating in detail the sources and applications of (i)
the funds deposited into the Collection Account and (ii) the funds
received and paid out under the terms of the Indenture and the
Pooling and Servicing Agreement, including a list of the Contracts
and Receivables with respect to which such funds were received,
and the amount received in connection with each such Contract and
Receivable"
1.7 Amendment of Section 8.5. Section 8.5 of the Loan Agreement is hereby
------------------------
amended and restated to read in its entirety as follows:
"8.5 Guaranties. Except for the joint and several liability
----------
of Borrower under this Agreement, Borrower shall not become or be
liable in respect of any Guaranty, except (a) by endorsement, in
the ordinary
-6-
<PAGE>
course of business, of negotiable instruments for deposit or
collection issued in the ordinary course of Borrower's business,
and (b) the Guaranties under the terms of the Reliance Purchase
Agreement, the Indenture, the Pooling and Servicing Agreement, and
other Related Documents (as defined in the Pooling and Servicing
Agreement)."
1.8 Amendment of Section 8.16. Section 8.16 of the Loan Agreement is
-------------------------
hereby amended by the addition of the following provisions, which shall be
inserted at the end of that section:
"Notwithstanding any provision of this Section 8.16 to the
------------
contrary, the Borrower may incorporate the Issuer, provided,
however, the Issuer shall not be considered a "Borrower" under
this Agreement, none of the Issuer's Property shall be pledged to
the Lender as Collateral, and none of the capital stock issued by
the Issuer shall be pledged to the Lender."
1.9 Amendment of Section 8.18. Section 8.18 of the Loan Agreement is
-------------------------
hereby amended by the addition of a clause "(g)", which shall be inserted
immediately after clause "(f)" of that section, and which shall read in its
entirety as follows:
"(g) Debt incurred under the Reliance Purchase Agreement, the
Indenture, the Pooling and Servicing Agreement and the Related
Documents (as defined in the Pooling and Servicing Agreement)."
1.10 Addition of Exhibit. The Loan Agreement is hereby amended by the
-------------------
addition of an Exhibit 1.97, attached hereto as Annex-I, which is to be inserted
at the end of the Loan Agreement.
SECTION TWO - CONDITIONS PRECEDENT TO AMENDMENTS
------------------------------------------------
2.1 Conditions Precedent to Amendment. This Amendment shall become
---------------------------------
legally binding upon Borrowers and Lender only when the Borrowers shall have
executed and delivered to Lender or caused to be executed and delivered to
Lender (a) this Amendment and (b) a letter from Cole Taylor Financial Group,
Inc. reaffirming its obligations under its Letter of Responsibility.
SECTION THREE - REPRESENTATIONS AND WARRANTIES
----------------------------------------------
3.1 Acknowledgements of Borrowers. Each of the Borrowers hereby
-----------------------------
represents and warrants that: (a) the execution and delivery of this Amendment
and compliance by Borrowers with all of the provisions of this Amendment (i) are
within the powers and purposes of Borrowers; (ii) have been duly authorized or
approved by Borrowers; and (iii) when executed and delivered by or on behalf of
Borrowers will constitute valid and binding obligations of Borrowers,
enforceable in accordance with its terms; (b) Borrowers have no offsets or
-7-
<PAGE>
counterclaims against Lender or defenses to the payments due under the Loan
Agreement; (c) Lender has a first perfected security interest in the Collateral
to secure the Obligations under the Loan Agreement; (d) no Default or Event of
Default has occurred and is continuing or would exist after giving effect to
each sale of Receivables and Other Conveyed Property pursuant to the
Securitization Transaction, and (e) no Over Advance would exist after giving
effect to the sale of the Receivables and the Other Conveyed Property pursuant
to the Securitization Transaction. Each Borrower reaffirms its obligations to
pay all amounts due Lender under the Loan Agreement in accordance with the terms
thereof, as modified hereby.
3.2 Agreement of Lender. The Lender agrees, upon satisfaction of the
-------------------
conditions specified in Article Two of this Agreement, to deliver to the
Borrowers, from time to time, UCC-3 partial releases and such other documents as
the Borrowers may reasonably request, to more fully evidence the Lender's
release of its Lien in the Receivables and the Other Conveyed Property.
SECTION FOUR - GENERAL PROVISIONS
---------------------------------
4.1 Loan Agreement Unmodified. Except as otherwise specifically modified
-------------------------
by this Amendment, all terms and provisions of the Loan Agreement and all liens
and security interests created thereby shall remain unmodified and in full force
and effect. Nothing contained in this Amendment shall in any way impair the
validity or enforceability of the Loan Agreement, as modified hereby, or alter,
waive, annul, vary, affect, or impair any provision, condition, or covenant
contained therein or any rights, power, or remedy granted therein.
4.2 Parties, Successors and Assigns. This Amendment shall be binding upon
-------------------------------
and shall inure to the benefit of Borrowers, Lender, and their respective
successors and assigns.
4.3 Severability. To the extent any provision of this Amendment is not
------------
enforceable under applicable law, such provision shall be deemed null and void
and shall have no effect on the remaining portions of the Amendment.
4.4 Total Agreement. This Amendment, the Loan Documents, and all other
---------------
agreements referred to herein or delivered in connection herewith shall
constitute the entire agreement between the parties relating to the subject
matter hereof and shall not be changed or terminated orally.
4.5 Construction of Amendment. Each party hereto has cooperated in the
-------------------------
drafting and preparation of this Amendment and, as a result, this Amendment
shall not be construed against any party. This Amendment may be amended or
modified only by a written agreement signed by the parties hereto. This
Amendment may be executed in counterparts, each of which when so executed
-8-
<PAGE>
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<PAGE>
and delivered shall be deemed an original but all such counterparts together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
"BORROWERS"
Reliance Acceptance Corporation; Reliance Acceptance
Corp. of Colorado; Reliance Acceptance Corp. of Georgia;
Reliance Acceptance Corp. of Florida; Reliance Acceptance
Corp. of Indiana; Reliance Acceptance Corp. of New
Mexico; Reliance Acceptance Corp. of Ohio; Reliance
Acceptance Corp. of Tennessee; Reliance Acceptance Corp.
of Texas; Reliance Acceptance Corp. of Kentucky; Reliance
Acceptance Corp. of Illinois; Reliance Acceptance Corp.
of Minnesota; Reliance Acceptance Corp. of North
Carolina; Reliance Acceptance Corp. of South Carolina;
Reliance Acceptance Corp. of Arizona; Reliance Acceptance
Corp. of Iowa; Reliance Acceptance Corp. of Missouri;
Reliance Acceptance Corp. of Nevada; Reliance Acceptance
Corp. of Oregon; Reliance Acceptance Corp. of Washington
and Reliance Acceptance Corp. of Utah
By:_____________________________________________
Thomas L. Barlow, President
By:_____________________________________________
Michael D. Bernick, Vice President
"LENDER"
BankAmerica Business Credit, Inc.
By: /s/ Joseph P. La Cognata
---------------------------------------------
Joseph P. La Cognata,
Executive Vice President
-10-
<PAGE>
and delivered shall be deemed an original but all such counterparts together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
"BORROWERS"
Reliance Acceptance Corporation; Reliance Acceptance
Corp. of Colorado; Reliance Acceptance Corp. of Georgia;
Reliance Acceptance Corp. of Florida; Reliance Acceptance
Corp. of Indiana; Reliance Acceptance Corp. of New
Mexico; Reliance Acceptance Corp. of Ohio; Reliance
Acceptance Corp. of Tennessee; Reliance Acceptance Corp.
of Texas; Reliance Acceptance Corp. of Kentucky; Reliance
Acceptance Corp. of Illinois; Reliance Acceptance Corp.
of Minnesota; Reliance Acceptance Corp. of North
Carolina; Reliance Acceptance Corp. of South Carolina;
Reliance Acceptance Corp. of Arizona; Reliance Acceptance
Corp. of Iowa; Reliance Acceptance Corp. of Missouri;
Reliance Acceptance Corp. of Nevada; Reliance Acceptance
Corp. of Oregon; Reliance Acceptance Corp. of Washington
and Reliance Acceptance Corp. of Utah
By:_____________________________________________
Thomas L. Barlow, President
By: /s/ Michael D. Bernick
---------------------------------------------
Michael D. Bernick, Vice President
"LENDER"
BankAmerica Business Credit, Inc.
By:_____________________________________________
Joseph P. La Cognata,
Executive Vice President
-8-
<PAGE>
and delivered shall be deemed an original but all such counterparts together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
"BORROWERS"
Reliance Acceptance Corporation; Reliance Acceptance
Corp. of Colorado; Reliance Acceptance Corp. of Georgia;
Reliance Acceptance Corp. of Florida; Reliance Acceptance
Corp. of Indiana; Reliance Acceptance Corp. of New
Mexico; Reliance Acceptance Corp. of Ohio; Reliance
Acceptance Corp. of Tennessee; Reliance Acceptance Corp.
of Texas; Reliance Acceptance Corp. of Kentucky; Reliance
Acceptance Corp. of Illinois; Reliance Acceptance Corp.
of Minnesota; Reliance Acceptance Corp. of North
Carolina; Reliance Acceptance Corp. of South Carolina;
Reliance Acceptance Corp. of Arizona; Reliance Acceptance
Corp. of Iowa; Reliance Acceptance Corp. of Missouri;
Reliance Acceptance Corp. of Nevada; Reliance Acceptance
Corp. of Oregon; Reliance Acceptance Corp. of Washington
and Reliance Acceptance Corp. of Utah
By: /s/ Thomas L. Barlow
---------------------------------------------
Thomas L. Barlow, President
By:_____________________________________________
Michael D. Bernick, Vice President
"LENDER"
BankAmerica Business Credit, Inc.
By:_____________________________________________
Joseph P. La Cognata,
Executive Vice President
-9-
<PAGE>
WAIVER OF DEFAULTS AND
AMENDMENT NO. 12 TO LOAN AND SECURITY AGREEMENT
This Waiver of Defaults and Amendment No. 12 to Loan and Security Agreement
("Amendment") is entered into as of March 3, 1997, by and between BankAmerica
Business Credit, Inc. ("Lender") and Reliance Acceptance Corporation; Reliance
Acceptance Corp. of Colorado; Reliance Acceptance Corp. of Georgia; Reliance
Acceptance Corp. of Florida; Reliance Acceptance Corp. of Indiana; Reliance
Acceptance Corp. of New Mexico; Reliance Acceptance Corp. of Ohio; Reliance
Acceptance Corp. of Texas; Reliance Acceptance Corp. of Tennessee; Reliance
Acceptance Corp. of Kentucky; Reliance Acceptance Corp. of Illinois; Reliance
Acceptance Corp. of Minnesota; Reliance Acceptance Corp. of North Carolina;
Reliance Acceptance Corp. of South Carolina; Reliance Acceptance Corp. of
Arizona; Reliance Acceptance Corp. of Iowa; Reliance Acceptance Corp. of
Missouri; Reliance Acceptance Corp. of Nevada; Reliance Acceptance Corp. of
Oregon; Reliance Acceptance Corp. of Washington; and Reliance Acceptance Corp.
of Utah (collectively, the "Borrowers").
RECITALS
This Amendment is entered into in reference to the following facts:
(a) The Borrowers and the Lender are parties to a Loan and Security
Agreement, dated as of July 12, 1994 (the Loan and Security Agreement, as
amended, modified, and supplemented prior to the date hereof being hereinafter
referred to as the "Loan Agreement"). Unless specifically defined herein, all
capitalized terms shall be defined in accordance with the Loan Agreement as
amended by this Amendment.
(b) Reliance Acceptance Group, Inc. (f/k/a Cole Taylor Financial
Group, Inc.) ("RAGI"), the sole shareholder of Reliance Acceptance Corporation
(f/k/a Cole Taylor Finance Co.) ("Old Reliance"), agreed to a transaction (the
"Spin-Off Transaction") whereby, among other things, (i) Cole Taylor Bank, a
wholly-owned subsidiary of RAGI, formed a new wholly-owned subsidiary, Cole
Taylor Auto Finance, Inc. ("CTAF"), to which Cole Taylor Bank contributed its
used automobile receivables business and a certain amount in cash, (ii) Cole
Taylor Bank distributed the capital stock of CTAF to RAGI, (iii) Old Reliance
merged with and into CTAF, and CTAF, as the surviving corporation, changed its
name to "Reliance Acceptance Corporation" ("New Reliance"), (iv) RAGI
transferred all of the outstanding shares of Cole Taylor Bank and certain other
assets of RAGI to certain shareholders of RAGI, in exchange for such
shareholders' outstanding shares of RAGI, and (v) Cole Taylor Financial Group,
Inc. changed its name to "Reliance Acceptance Group, Inc.", all as more
particularly described in a certain Amended and Restated Share Exchange
Agreement ("Share Exchange Agreement"), dated as of June 12, 1996, between RAGI
and such shareholders.
(c) The Borrowers desire that the Lender (i) consent to the Spin-Off
Transaction, (ii) waive certain defaults existing under the Loan Agreement, and
(iii) amend the Loan Agreement in certain respects and the Lender is willing to
do so.
-1-
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties agree as follows.
SECTION ONE CONSENT
-------------------
1.1 Consent to Spin-Off Transaction. Notwithstanding any provision of the
Loan Documents which may restrict or prohibit the entering into and the
consummation of the transactions described in the Share Exchange Agreement, the
Lender hereby consents to the entering into and consummation of the Spin-Off
Transaction, and the Lender hereby further waivers any Events of Default that
may have occurred in connection therewith.
SECTION TWO - WAIVER OF DEFAULTS
--------------------------------
2.1 Waiver of Defaults. The Lender hereby waives the following Events of
Default: (a) the ratio of (i) the aggregate amount of all Debt, to (ii) Adjusted
Tangible Net Worth, as of each of December 31, 1996 and January 31, 1997, was
greater than the maximum permitted ratio under Section 8.6 of the Loan
Agreement; (b) the ratio of (i) Adjusted Net Earnings from Operations for the
quarter ending December 31, 1996, plus interest expense and income taxes for
such quarter, to (ii) interest expense for such quarter, as of the quarter
ending December 31, 1996, was less than the minimum required ratio under Section
8.7 of the Loan Agreement; (c) the ratio of (i) all Debt minus all Subordinated
Debt, to (ii) Borrowing Base, as of each of December 31, 1996 and January 31,
1997, was greater than the maximum permitted ratio under Section 8.11 of the
Loan Agreement; and (d) the Borrower's Adjusted Tangible Net Worth, as of each
of December 31, 1996 and January 31, 1997, was less than the minimum required
amount under Section 8.13 of the Loan Agreement.
2.2 Effect of Waiver. The waiver set forth in Section 2.1 above is only
applicable and shall only be effective in the specific instance and for the
specific purpose for which given. Such waiver is expressly limited to the facts
and circumstances referred to herein and shall not operate (a) as a waiver of or
consent to non-compliance with any other section of the Loan Agreement or any
other Loan Document, (b) as a waiver of, or a restriction on or prejudice with
respect to, any right, power or remedy of the Lender under the Loan Agreement or
any other Loan Document, or (c) as a waiver of or consent to any other Event of
Default or Default under the Loan Agreement or any other Loan Document.
SECTION THREE - ASSUMPTION
--------------------------
3.1 Assumption by New Reliance. New Reliance hereby absolutely and
unconditionally assumes and confirms all Obligations existing under the Loan
Documents as of the date hereof, expressly grants to the Lender the security
interests referenced therein in regard to the Property of New Reliance of the
type specified therein, absolutely and unconditionally assumes and confirms all
obligations and liabilities of Old Reliance under any and all agreements,
instruments and other documents to which Old Reliance was a party, and
-2-
<PAGE>
acknowledges and agrees that it shall be jointly and severally liable for all
Obligations, as more particularly provided in Section 12.4 of the Loan
Agreement. The term "Borrower" as used in the Loan Agreement and the other Loan
Documents is hereby amended to include New Reliance in addition to all of the
other Borrowers.
SECTION FOUR - AMENDMENTS
4.1 Amendment to Section 1.9. Section 1.9 of the Loan Agreement is hereby
amended and restated to read in its entirety as follows:
"1.9 Availability means, as of any date of calculation, the remainder
of (a) the sum of (i) the Advance Rate multiplied by the aggregate amount
of all Net Contract Payments payable under all Eligible Contracts which are
not Alternative Finance Plan Eligible Contracts, plus (ii) the Advance Rate
multiplied by the lesser of (1) the aggregate purchase price paid by the
Borrower to Dealers for Alternative Finance Plan Eligible Contracts, or (2)
the aggregate amount of all Net Contract Payments payable under such
Contracts, minus (b) the sum of (i) the Dealer Reserve, plus (ii) the
Commercial Paper indebtedness (after giving effect to the application of
any Loan proceeds to the payment of such Commercial Paper Indebtedness);
provided, however, (a) the Net Contract Payments payable under Old Amo
Contracts included in the Availability shall at no time exceed five percent
(5%) of all Net Contract Payments, and (b) the Net Contract Payments
payable under Alternative Finance Plan Eligible Contracts included in the
Availability shall at no time exceed ten percent (10%) of all Net Contract
Payments."
4.2 Amendment of Section 1.79. Section 1.79 of the Loan Agreement is hereby
deleted from the Loan Agreement in its entirety and shall be of no further force
or effect.
4.3 Amendment of Section 8.6. Section 8.6 of the Loan Agreement is hereby
amended and restated to read in its entirety as follows:
"8.6 Total Debt Ratio. The Borrower shall not permit the ratio,
calculated on a consolidated basis as of the last day of each month, of (a)
the aggregate amount of all Debt, to (b) Adjusted Tangible Net Worth, to
exceed 6 to 1."
4.4 Amendment of Section 8.7. Section 8.7 of the Loan Agreement is hereby
amended and restated to read in its entirety as follows:
"8.7 Minimum Interest Coverage Ratio. The Borrower shall not permit
the ratio, calculated on a consolidated basis as of the last day of each
quarter in each Fiscal Year, of (a) Adjusted Net Earnings from Operations
for such fiscal quarter, plus interest expense and income taxes
-3-
<PAGE>
for such quarter, minus Distributions made during such quarter, to (b)
interest expense for such quarter, to be less than 1.75 to 1."
4.5 Amendment of Section 8.8. Section 8.8 of the Loan Agreement is hereby
amended and restated to read in its entirety as follows:
"8.8. Prohibition on Distributions; Equity Capital Changes. The
Borrower shall not, without the Lender's prior written consent, directly or
indirectly, (a) declare, make or incur any liability to make any
Distribution; or (b) make any change in its capital equity structure which
would reasonably be expected to materially and adversely affect payment of
the Loan or other Obligations; provided, however, the Borrower may (a) make
Distributions during its Fiscal Year ending December 31, 1997, provided,
(i) the aggregate amount of all such Distributions does not exceed
$6,000,000, and (ii) at the time of the Distributions no Default and no
Event of Default has occurred and is continuing or would rank therefrom,
after giving effect to such Distributions."
4.6 Amendment of Section 8.11. Section 8.11 of the Loan Agreement is hereby
amended and restated to read in its entirety as follows:
"8.11 Unsubordinated Debt to Borrowing Base. The Borrower shall not
permit the ratio, calculated on a consolidated basis as of the last day of
each month, of (a) all Debt minus all Subordinated Debt, to (b) Borrowing
Base, to exceed 3.5 to 1."
4.7 Amendment of Section 8.13. Section 8.13 of the Loan Agreement is hereby
amended and restated to read in its entirety as follows:
"8.13 Minimum Adjusted Tangible Net Worth. The Borrower shall not
permit its Adjusted Tangible Net Worth, calculated on a consolidated basis
as of the last day of each month, to be less than (a) $90,000,000 prior to
and including December 30, 1997; and (b) $120,000,000 thereafter."
4.8 Amendment of Section 12.6. Section 12.6 of the Loan Agreement is hereby
amended by the addition of a new sentence to be inserted at the end of that
section which shall read in its entirety as follows:
"Notwithstanding any provision of this Section to the contrary, the
Borrower shall account for all asset securitization transactions, such as
the Securitization Transaction, using the 'as earned' method, and not the
'gain-on-sale' method of accounting treatment."
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<PAGE>
SECTION FIVE - CONDITIONS PRECEDENT TO AMENDMENT
----------------------------------------------
5.1 Conditions Precedent to Amendment. This Amendment (including the
consent and waiver contained in Section 1.1 above and the waiver contained in
Section 2.1 above) shall become legally binding upon the Borrowers and the
Lender only when the Borrowers shall have (a) executed and delivered to the
Lender this Amendment, together with the following items, satisfactory to the
Lender in form and content: (i) a copy, certified by the Delaware Secretary of
State, of the articles of incorporation of New Reliance, (ii) a Certificate of
the Secretary or an Assistant Secretary of New Reliance, certifying as to the
by-laws of New Reliance, resolutions of the Board of Directors of New Reliance
authorizing the execution and delivery by New Reliance of this Amendment, and
the incumbency and signatures of officers of New Reliance authorized to execute
this amendment and other Loan Documents on behalf of New Reliance, (iii) a
Certificate of the Secretary or an Assistant Secretary of New Reliance,
certifying as true and correct the copies attached thereto of the documents
relating to the merger of Old Reliance into CTAF, (iv) a copy, certified by the
Delaware Secretary of State, of the certificate of name change of New Reliance,
and (v) a certificate of the chief financial officer of New Reliance certifying
that, as of the date of the effectiveness of this Amendment, (1) no Default or
Event of Default has occurred and is continuing, and (2) the Adjusted Tangible
Net Worth of the Borrowers is not less than $90,000,000 as a result of the
merger of Old Reliance into CTAF, (b) increased their Adjusted Tangible Net
Worth to an amount which is not less than $90,000,000 as a result of the merger
of Old Reliance into CTAF, and (c) caused to be executed and delivered to the
Lender a letter from RAGI reaffirming its obligations under its letter of
responsibility, together with a copy, certified by the Delaware Secretary of
State, of the certificate of name change for RAGI.
5.2 Amendment Fee. On the date the Borrowers execute this Amendment, the
Borrowers shall pay to Lender an amendment fee (the "Amendment Fee") equal to
$50,000. The Borrowers and the Lender agree that the Amendment Fee may be
financed, at Lender's discretion, as an Advance of the Loan.
SECTION SIX - REPRESENTATIONS AND WARRANTIES
------------------------------------------
6.1 Acknowledgements of Borrowers. Each of the Borrowers hereby
represents and warrants that: (a) the execution and delivery of this Amendment
and compliance by the Borrowers with all of the provisions of this Amendment (i)
are within the powers and purposes of the Borrowers; (ii) have been duly
authorized or approved by the Borrowers; and (iii) when executed and delivered
by or on behalf of the Borrowers will constitute valid and binding obligation of
the Borrowers, enforceable in accordance with its terms; (b) the Borrowers have
no ???? or counterclaims against the Lender or defenses to the payments due
under the Loan Agreement; (c) the Lender has a first perfected security interest
in the Collateral to secure the Obligations under the Loan Agreement; and (d) no
Default or Event of Default has occurred and is continuing as of the date
hereof.
6.2 Further Acknowledgement of Borrowers. Each of the Borrowers hereby
further represents and warrants that all of the assets transferred to CTAF by
Cole Taylor Bank were
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<PAGE>
transferred to CTAF free and clear of any liens thereon of any kind whatsoever
and free and clear of any indebtedness or other obligations associated
therewith, and that, immediately prior to the time of the consummation of the
merger of Old Reliance into CTAF, all of the assets of CTAF were free and clear
of any liens thereon of any kind whatsoever and CTAF had no indebtedness or
other obligations of any kind whatsoever, except, in each such case, for any
obligations of CTAF to Cole Taylor Bank arising under a Participation Agreement
dated February 11, 1997 between CTAF and Cole Taylor Bank, which Participation
Agreement, however, has now been terminated by the parties thereto so that, as
of the date of the effectiveness of this Amendment, New Reliance has no duties
or liabilities arising thereunder.
SECTION SEVEN--GENERAL PROVISIONS
---------------------------------
7.1 Loan Agreement Unmodified. Except as otherwise specifically modified
by this Amendment, all terms and provisions of the Loan Agreement and all liens
and security interests created thereby shall remain unmodified and in full force
and effect. Nothing contained in this Amendment shall in any way impair the
validity or enforceability of the Loan Agreement, as modified hereby, or alter,
waive, annul, vary, affect, or impair any provision, condition, or covenant
contained therein or any rights, power, or remedy granted therein.
7.2 Parties, Successors and Assists. This Amendment shall be binding upon
and shall inure to the benefit of the Borrowers, the Lender, and their
respective successors and assigns.
7.3 Severability. To the extent any provision of this Amendment is not
enforceable under applicable law, such provision shall be deemed null and void
and shall have no effect on the remaining portions of the Amendment.
7.4 Total Agreement. This Amendment, the Loan Documents, and all other
agreements referred to herein or delivered in connection herewith shall
constitute the entire agreement between the parties relating to the subject
matter hereof and shall not be changed or terminated orally.
7.5 Construction of Amendment. Each party hereto has cooperated in the
drafting and preparation of this Amendment and, as a result, this Amendment
shall not be construed against any party. This Amendment may be amended or
modified only by a written agreement signed by the parties hereto. This
Amendment may be executed in counterparts, each of which when so executed and
delivered shall be deemed an original but all such counterparts together shall
constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.
"BORROWERS"
Reliance Acceptance Corporation;
Reliance Acceptance Corp. of Colorado;
Reliance Acceptance Corp. of Georgia;
Reliance Acceptance Corp. of Florida;
Reliance Acceptance Corp. of Indiana;
Reliance Acceptance Corp. of New Mexico;
Reliance Acceptance Corp. of Ohio;
Reliance Acceptance Corp. of Tennessee;
Reliance Acceptance Corp. of Texas;
Reliance Acceptance Corp. of Kentucky;
Reliance Acceptance Corp. of Illinois;
Reliance Acceptance Corp. of Minnesota;
Reliance Acceptance Corp. of North
Carolina; Reliance Acceptance Corp. of
South Carolina; Reliance Acceptance Corp.
of Arizona; Reliance Acceptance Corp. of
Iowa; Reliance Acceptance Corp. of
Missouri; Reliance Acceptance Corp. of
Nevada; Reliance Acceptance Corp. of
Oregon; Reliance Acceptance Corp. of
Washington and Reliance Acceptance Corp.
of Utah
By: /s/ Howard B. Silverman
-------------------------------------
Howard B. Silverman, Chairman
By: /s/ James I. Kaplan
-------------------------------------
James I. Kaplan,
General Counsel and Corporate
Secretary
"LENDER"
BankAmerica Business Credit, Inc.
By: /s/ Joseph P. LaCongata
-------------------------------------
Joseph P. LaCognata,
Executive Vice President
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================================================================================
INDENTURE
between
RELIANCE AUTO RECEIVABLES CORPORATION
and
HARRIS TRUST AND SAVINGS BANK
as Trustee
Dated as of November 20, 1996
================================================================================
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Table of Contents
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ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.1. Definitions............................................ 3
SECTION 1.2. Rules of Construction.................................. 9
ARTICLE II
The Notes
SECTION 2.1. Form................................................... 10
SECTION 2.2. Execution, Authentication and Delivery................. 10
SECTION 2.3. Temporary Notes........................................ 11
SECTION 2.4. Registration; Registration of Transfer and Exchange.... 11
SECTION 2.5. Mutilated, Destroyed, Lost or Stolen Notes............. 13
SECTION 2.6. Persons Deemed Owners.................................. 14
SECTION 2.7. Payment of Principal and Interest; Defaulted Interest.. 14
SECTION 2.8. Cancellation........................................... 15
SECTION 2.9. Release of Collateral.................................. 15
SECTION 2.10. Book-Entry Notes....................................... 16
SECTION 2.11. Notices to Clearing Agency............................. 17
SECTION 2.12. Definitive Notes....................................... 17
SECTION 2.13. Certain Transfer Restrictions.......................... 17
SECTION 2.14. Legending of Notes..................................... 19
SECTION 2.15. Conditions to Issuance of Notes........................ 20
SECTION 2.16. Custody of the Receivable Files........................ 21
ARTICLE III
Covenants
SECTION 3.1. Payment of Principal and Interest...................... 21
SECTION 3.2. Maintenance of Office or Agency........................ 22
SECTION 3.3. Money for Payments To Be Held in Trust................. 22
SECTION 3.4. Existence.............................................. 24
SECTION 3.5. Protection of the Trust Estate......................... 24
SECTION 3.6. Opinions as to the Trust Estate........................ 25
SECTION 3.7. Performance of Obligations; Servicing of Receivables... 26
SECTION 3.8. Negative Covenants..................................... 27
SECTION 3.9. Annual Statement as to Compliance...................... 28
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SECTION 3.10. Issuer May Consolidate, etc., Only on Certain Terms.... 28
SECTION 3.11. Successor or Transferee................................ 30
SECTION 3.12. No Other Business...................................... 31
SECTION 3.13. No Borrowing........................................... 31
SECTION 3.14. Servicer's Obligations; Related Documents.............. 31
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities...... 31
SECTION 3.16. Capital Expenditures................................... 31
SECTION 3.17. Notice of Events of Default............................ 31
SECTION 3.18. Further Instruments and Acts........................... 32
SECTION 3.19. Compliance with Laws................................... 32
SECTION 3.20. Tax Treatment.......................................... 32
SECTION 3.21. Investment Company Act................................. 32
SECTION 3.22. Liens.................................................. 32
SECTION 3.23. Conduct of Business.................................... 32
SECTION 3.24. Representations and Warranties......................... 33
ARTICLE IV
Satisfaction and Discharge
SECTION 4.1. Satisfaction and Discharge of Indenture................ 36
SECTION 4.2. Payment of Moneys Held by Paying Agent................. 36
SECTION 4.3. Release of Trust Estate................................ 37
ARTICLE V
Remedies
SECTION 5.1. Events of Default...................................... 37
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment..... 38
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement
by Trustee; Authority of Controlling Party............. 40
SECTION 5.4. Remedies; Priorities................................... 42
SECTION 5.5. Optional Preservation of the Receivables............... 44
SECTION 5.6. Limitation of Suits.................................... 45
SECTION 5.7. Unconditional Rights of Noteholders To Receive
Principal and Interest................................. 45
SECTION 5.8. Restoration of Rights and Remedies..................... 46
SECTION 5.9. Rights and Remedies Cumulative......................... 46
SECTION 5.10. Delay or Omission Not a Waiver......................... 46
SECTION 5.11. Control by Noteholders................................. 46
SECTION 5.12. Waiver of Past Defaults................................ 47
SECTION 5.13. Undertaking for Costs.................................. 47
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SECTION 5.14. Waiver of Stay or Extension Laws....................... 48
SECTION 5.15. Action on Notes........................................ 48
SECTION 5.16. Performance and Enforcement of Certain Obligations..... 48
ARTICLE VI
The Trustee
SECTION 6.1. Duties of the Trustee.................................. 49
SECTION 6.2. Rights of Trustee...................................... 52
SECTION 6.3. Individual Rights of the Trustee....................... 53
SECTION 6.4. Trustee's Disclaimer................................... 53
SECTION 6.5. Notice of Defaults..................................... 53
SECTION 6.6. Reports by Trustee to the Holders...................... 53
SECTION 6.7. Compensation, Reimbursement and Indemnity.............. 54
SECTION 6.8. Replacement of the Trustee............................. 55
SECTION 6.9. Successor Trustee by Merger............................ 56
SECTION 6.10. Appointment of Co-Trustee or Separate Trustee.......... 57
SECTION 6.11. Corporate Trustee Required; Eligibility................ 58
SECTION 6.12. Appointment and Powers................................. 59
SECTION 6.13. Limitation on Liability................................ 59
SECTION 6.14. Reliance upon Documents................................ 60
SECTION 6.15. Representations and Warranties of the Trustee.......... 60
SECTION 6.16. Waiver of Setoffs...................................... 61
ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.1. Issuer To Furnish Trustee Names and Addresses of
Noteholders............................................ 61
SECTION 7.2. Preservation of Information; Communications to
Noteholders............................................ 61
SECTION 7.3. Reports by Issuer...................................... 62
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.1. Collection of Money.................................... 62
SECTION 8.2. Collection Account and Spread Account.................. 62
SECTION 8.3. General Provisions Regarding Accounts.................. 63
SECTION 8.4. Release of Trust Estate................................ 63
SECTION 8.5. Opinion of Counsel..................................... 64
SECTION 8.6. Purchase of Receivables................................ 64
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ARTICLE IX
Supplemental Indentures
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SECTION 9.1. Supplemental Indentures Without Consent of Noteholders. 65
SECTION 9.2. Supplemental Indentures With Consent of Noteholders.... 66
SECTION 9.3. Execution of Supplemental Indentures................... 68
SECTION 9.4. Effect of Supplemental Indenture....................... 68
SECTION 9.5. Reference in Notes to Supplemental Indentures.......... 68
ARTICLE X
Redemption of Notes
SECTION 10.1. Redemption............................................. 69
SECTION 10.2. Form of Redemption Notice.............................. 69
SECTION 10.3. Notes Payable on Redemption Date....................... 69
ARTICLE XI
Miscellaneous
SECTION 11.1. Compliance Certificates and Opinions, etc.............. 70
SECTION 11.2. Form of Documents Delivered to Trustee................. 71
SECTION 11.3. Acts of Noteholders.................................... 72
SECTION 11.4. Notices, etc., to the Trustee, Issuer and Rating
Agencies............................................... 73
SECTION 11.5. Notices to Noteholders; Waiver......................... 73
SECTION 11.6. [Reserved]............................................. 74
SECTION 11.7. Effect of Headings and Table of Contents............... 74
SECTION 11.8. Successors and Assigns................................. 74
SECTION 11.9. Severability........................................... 74
SECTION 11.10. Benefits of Indenture.................................. 74
SECTION 11.11. Legal Holidays......................................... 75
SECTION 11.12. Governing Law.......................................... 75
SECTION 11.13. Counterparts........................................... 75
SECTION 11.14. Recording of Indenture................................. 75
SECTION 11.15. Trust Obligation....................................... 75
SECTION 11.16. No Petition............................................ 76
SECTION 11.17. Inspection............................................. 76
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EXHIBITS
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EXHIBIT A Form of Note
EXHIBIT B Form of Note Depository Agreement
EXHIBIT C Form of Section 3.9 Officers' Certificate
EXHIBIT D Purchaser Representation Letter (Non-Rule 144A)
EXHIBIT E Purchaser Representation Letter (Rule 144A)
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INDENTURE, dated as of November 20, 1996, between RELIANCE AUTO RECEIVABLES
CORPORATION, a Delaware corporation (the "Issuer"), and HARRIS TRUST AND SAVINGS
BANK, an Illinois banking corporation, as trustee and not in its individual
capacity (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 Issuer's 6.10% Asset Backed
Notes, Series 1996-A (each, a "Note"; and collectively, the "Notes") and the
Note Insurer.
As security for the payment and performance by the Issuer of the Secured
Obligations (as defined below), the Issuer has agreed to assign the Indenture
Collateral (as defined below) as collateral to the Trustee on behalf of the
Noteholders and the Note Insurer.
MBIA Insurance Corporation (the "Note Insurer") has issued and delivered a
financial guaranty insurance policy, dated as of the Closing Date (such policy,
together with the related endorsements, the "Policy"), pursuant to which the
Note Insurer guarantees certain scheduled payments on the Notes.
As an inducement to the Note Insurer to issue and deliver the Policy, the
Issuer has executed and delivered the Insurance and Indemnity Agreement, dated
as of the Closing Date (as amended from time to time, the "Insurance
Agreement"), between the Note Insurer, the Trustee, the Backup Servicer, the
Issuer and Reliance Acceptance Corporation.
As an additional inducement to the Note Insurer to issue the Policy, and as
security for the performance by the Issuer of the Secured Obligations, the
Issuer has agreed to assign the Indenture Collateral as collateral to the
Trustee for the benefit of the Note Insurer.
GRANTING CLAUSE
The Issuer hereby Grants to the Trustee at the Closing Date, on behalf of
and for the benefit of the Secured Parties to secure the performance of the
Secured Obligations, all of the Issuer's right, title and interest in, to and
under the following, whether now existing or hereafter arising or acquired
(collectively, the "Indenture Collateral"):
(a) the Receivables, all monies paid or payable thereon or in respect
thereof thereunder on or after the Cutoff Date, including all Liquidation
Proceeds and recoveries received with respect to such Receivables;
<PAGE>
(b) the security interests in the Financed Vehicles granted by Obligors
pursuant to the Receivables and any other interest of the Issuer in the Financed
Vehicles and other property (including the right to receive future Liquidation
Proceeds) that secures any of the Receivables and that has been acquired by or
on behalf of the Issuer pursuant to the liquidation of such Receivable;
(c) the Insurance Policies and any proceeds from any Insurance Policies
relating to the Receivables, the Obligors or the related Financed Vehicles,
including rebates of premiums, all Collateral Insurance and any Force-Placed
Insurance relating to the Receivables or the related Financed Vehicles;
(d) all funds on deposit from time to time in the Collection Account and
the Spread Account and all investments therein and proceeds thereof (including
all income thereon);
(e) the Pooling and Servicing Agreement, including the right to cause
Reliance or the Servicer to purchase Receivables from the Issuer under certain
circumstances;
(f) the rights of Reliance and any Originator against Dealers with respect
to the Receivables or the related Financed Vehicles under the Dealer Agreements
and Dealer Assignments as the same may relate to the Receivables or the related
Financed Vehicles;
(g) the Receivables Purchase Agreement and the Subservicing Agreement;
(h) all items contained in the Receivable File related to each Receivable
and any and all other documents that Reliance, any Originator or the Servicer
keeps on file in accordance with its customary procedures relating to the
Receivables, the Obligors or the related Financed Vehicles; and
(i) all proceeds and investments of any of the foregoing, all present and
future claims, demands, causes and choses in action in respect of any or all of
the foregoing and all payments on or under and all proceeds of every kind and
nature whatsoever in respect of any or all of the foregoing.
The foregoing Grant is made in trust to secure the payment of the Secured
2
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Obligations.
The Trustee, as Trustee on behalf of the Holders and for the benefit of the
Note Insurer, acknowledges such Grant, accepts the trusts under this Indenture
in accordance with this Indenture and agrees to perform its duties required in
this Indenture to the end that the interests of the Holders of the Notes may be
adequately and effectively protected.
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.1. Definitions. (a) Except as otherwise specified herein or as
the context may otherwise require, the following terms have the respective
meanings set forth below for all purposes of this Indenture:
"Act" has the meaning specified in Section 11.3(a).
"Authorized Officer" means, with respect to the Issuer, any officer of the
Issuer who is authorized to act for the Issuer in matters relating to the Issuer
and who is identified on the list of Authorized Officers delivered by the Issuer
to the Trustee and the Note Insurer on the Closing Date (as such list may be
modified or supplemented by the Issuer from time to time thereafter).
"Book-Entry Notes" means a beneficial interest in the Notes, ownership and
transfers of which shall be made through book entries by a Clearing Agency as
described in Section 2.10.
"Clearing Agency" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act that has been designated as the
"Clearing Agency" for purposes of this Indenture.
"Clearing Agency Participant" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
"Closing Date" means November 20, 1996.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and Treasury Regulations promulgated thereunder.
3
<PAGE>
"Commission" shall mean the Securities and Exchange Commission.
"Corporate Trust Office" means the principal office of the Trustee at which
at any particular time its corporate trust business shall be administered, which
office at the date of the execution of this Indenture is located at 311 West
Monroe Street, Chicago, Illinois 60606; or at such other address as the Trustee
may designate from time to time by notice to the Noteholders, the Note Insurer
and the Issuer, or the principal corporate trust office of any successor Trustee
(the address of which the successor Trustee shall notify the Noteholders, the
Note Insurer and the Issuer).
"Default" means any event or circumstance that is, or with notice or the
lapse of time or both would become, an Event of Default.
"Definitive Notes" shall mean definitive, fully registered Notes. The
Definitive Notes shall be typewritten, printed, lithographed or engraved or
produced by any combination of these methods (with or without steel engraved
borders), all as determined by the officers executing such Notes, as evidenced
by their execution of such Notes.
"Event of Default" has the meaning specified in Section 5.1.
"Eligible Account" means (i) A segregated account or accounts maintained
with a depository institution or trust company whose long-term unsecured debt
obligations are rated "A+" by Standard & Poor's and "A1" by Moody's, or (ii) a
segregated trust account or accounts maintained with a Federal or state
chartered depository institution that is acceptable to the Note Insurer and
subject to regulation regarding fiduciary funds on deposit substantially similar
to 12 C.F.R. Section 9.10(b), or (iii) a trust account at the Trustee's
Corporate Trust Office, provided that such account shall be a segregated account
at any time at which the Trustee's long-term unsecured debt obligations are
rated below "BBB" by Standard & Poor's and provided that such Trustee is
acceptable to the Note Insurer.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Grant" means mortgage, pledge, bargain, sell, warrant, alienate, remise,
release, convey, assign, transfer, create and grant a Lien upon and a security
interest in and right of set-off against, deposit, set over and confirm pursuant
to this Indenture, and other forms of the verb "to Grant" shall have correlative
meanings. A Grant of the Indenture Collateral or of any other agreement or
instrument shall include all rights, powers and options (but none of the
obligations) of the Granting party thereunder, including the immediate and
continuing right to claim for,
4
<PAGE>
collect, receive and give receipt for principal and interest payments in respect
of the Indenture Collateral and all other moneys payable thereunder, to give and
receive notices and other communications, to make waivers or other agreements,
to exercise all rights and options, to bring Proceedings in the name of the
Granting party or otherwise and generally to do and receive anything that the
Granting party is or may be entitled to do or receive thereunder or with respect
thereto.
"Holder" means the Person in whose name a Note is registered on the Note
Register.
"Indenture" means this Indenture as amended or supplemented from time to
time in accordance with the terms hereof.
"Indenture Collateral" has the meaning specified in the Granting Clause of
this Indenture.
"Independent" means, when used with respect to any specified Person, that
the Person: (a) is in fact independent of the Issuer, any other obligor upon the
Notes, Reliance and any Affiliate of any of the foregoing Persons, (b) does not
have any direct financial interest or any material indirect financial interest
in the Issuer, any such other obligor, Reliance or any Affiliate of any of the
foregoing Persons and (c) is not connected with the Issuer, any such other
obligor, Reliance or any Affiliate of any of the foregoing Persons as an
officer, employee, promoter, underwriter, trustee, partner, director or Person
performing similar functions.
"Independent Certificate" means a certificate or opinion to be delivered to
the Trustee and the Note Insurer under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.1, made by
an Independent appraiser or other expert duly licensed and of recognized
standing appointed by an Issuer Order, and such opinion or certificate shall
state that the signer has read the definition of "Independent" in this Indenture
and that the signer is Independent within the meaning thereof.
"Initial Purchasers" means BA Securities, Inc. and First Chicago Capital
Markets, Inc.
"Issuer" means Reliance Auto Receivables Corporation until a permitted
successor replaces it and, thereafter, means such successor.
"Issuer Order" and "Issuer Request" means a written order or request,
respectively, signed in the name of the Issuer by any one of its Authorized
Officers and delivered to the Trustee.
5
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"Note" is defined in the recitals. Each Note shall be substantially in the
form of Exhibit A.
"Note Depository Agreement" means the agreement between the Issuer, the
Trustee and The Depository Trust Company, as the initial Clearing Agency, dated
as of the Closing Date, substantially in the form of Exhibit B.
"Note Interest Rate" means 6.10% per annum, calculated on the basis of a
360-day year consisting of twelve 30-day months.
"Note Majority" means, as of any date of determination, Holders of Notes
representing more than 50% of the Note Balance.
"Note Owner" means, with respect to a Book-Entry Note, the Person who is
the owner of such Book-Entry Note, as reflected on the books of the Clearing
Agency, or on the books of a Person maintaining an account with the Clearing
Agency (directly as a Clearing Agency Participant or as an indirect participant,
in each case in accordance with the rules of the Clearing Agency and such
Clearing Agency Participant, as applicable).
"Note Register" and "Note Registrar" have the respective meanings specified
in Section 2.4.
"Note Voting Amount" means Holders of Notes representing at least two-
thirds of the Note Balance.
"Noteholder" means a Holder.
"Officers' Certificate" means a certificate signed by any two Authorized
Officers of the Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.1, and delivered to
the Trustee and the Note Insurer.
"Opinion of Counsel" means one or more written opinions of counsel (who
may, except as otherwise expressly provided in this Indenture, be Independent
counsel to the Issuer), which counsel and opinion shall be reasonably
satisfactory to the Trustee and the Controlling Party, and which shall comply
with any applicable requirements of Section 11.1 and shall be in form and
substance reasonably satisfactory to the Trustee and the Controlling Party.
6
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"Outstanding" means, as of the date of determination, all Notes theretofore
authenticated and delivered under this Indenture except:
(i) Notes theretofore cancelled by the Note Registrar or delivered to
the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent in trust for the Holders of such Notes (provided, however,
that if such Notes are to be redeemed, notice of such redemption has been
duly given pursuant to this Indenture); and
(iii) Notes in exchange for or in lieu of other Notes that have been
authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Trustee is presented that any such Notes are held by a
bona fide purchaser;
provided, however, that Notes which have been paid with proceeds of the Policy
shall continue to remain Outstanding for purposes of this Indenture until the
Note Insurer has been paid as subrogee hereunder or reimbursed pursuant to the
Insurance Agreement as evidenced by a written notice from the Note Insurer
delivered to the Trustee, and the Note Insurer shall be deemed to be the Holder
of such Notes to the extent of any payments thereon made by the Note Insurer;
and provided, further, that in determining whether the Holders of the requisite
Note Balance have given any request, demand, authorization, direction, notice,
consent or waiver hereunder or under any Related Document, Notes owned by the
Issuer, any other obligor upon the Notes, Reliance or any Affiliate of any of
the foregoing Persons shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent or
waiver, only Notes that a Responsible Officer of the Trustee actually knows to
be so owned shall be so disregarded. Notes so owned that have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Notes and that the pledgee is not the Issuer, any other obligor upon the Notes,
Reliance or any Affiliate of any of the foregoing Persons.
"Paying Agent" means the Trustee or any other Person that meets the
eligibility standards for the Trustee specified in Section 6.11 and, so long as
no Insurer Default shall have occurred and be continuing, is consented to by the
Note Insurer and is authorized by the Issuer to make the payments to and
distributions from the Collection Account, including payment of principal of or
interest on the
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Notes on behalf of the Issuer.
"Pooling and Servicing Agreement" means the Pooling and Servicing
Agreement, dated as of November 20, 1996, between the Issuer, Reliance, in its
individual capacity and as Servicer, and Harris Trust and Savings Bank, as
Trustee and as Backup Servicer.
"Predecessor Note" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.5 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Proceeding" means any suit in equity, action at law or other judicial or
administrative proceeding.
"Purchaser Representation Letter" means a letter substantially in the form
of Exhibit D or Exhibit E.
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have been given prior notice thereof and that each of the
Rating Agencies shall have notified the Servicer, the Note Insurer, the Trustee
and the Issuer in writing that such action will not result in a reduction or
withdrawal of the then current rating of the Notes.
"Redemption Date" means the Payment Date specified by the Servicer pursuant
to Section 10.1.
"Redemption Price" means the aggregate unpaid principal amount of the
Notes, plus accrued and unpaid interest thereon to but excluding the related
Redemption Date.
"Registered Holder" means the Person in whose name a Note is registered on
the Note Register on the applicable Record Date.
"Rule 144A" means Rule 144A under the Securities Act.
"Secured Obligations" means all amounts and obligations that the Issuer may
at any time owe under this Indenture or any other Related Document to or on
behalf of the Note Insurer or the Trustee for the benefit of the Noteholders and
the Note Insurer.
8
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"Secured Parties" means the Trustee on behalf of the Noteholders and the
Note Insurer.
"Securities Act" means the Securities Act of 1933, as amended.
"State" means any one of the 50 states of the United States of America or
the District of Columbia.
"Termination Date" means the latest of:
(i) the expiration of the Policy and the return of the Policy to the
Note Insurer for cancellation; and
(ii) the date of full and indefeasible payment and performance of all
Secured Obligations.
"Trust Estate" means all the money, instruments, rights and other property
that are subject or intended to be subject to the Lien and security interest of
this Indenture for the benefit of the Noteholders and the Note Insurer
(including all property and interests Granted to the Trustee), including all
proceeds thereof.
"Trustee" means Harris Trust and Savings Bank, not in its individual
capacity but solely as Trustee under this Indenture, or any successor Trustee
under this Indenture acceptable to the Note Insurer.
"Trustee Fee" has the meaning assigned to such term in Section 6.7.
(b) Except as otherwise specified herein or as the context may otherwise
require, the capitalized terms used but not defined herein have the respective
meanings set forth in the Pooling and Servicing Agreement.
SECTION 1.2. Rules of Construction. Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting principles
as in effect on the date hereof;
(iii) "or" is not exclusive;
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(iv) "including" means "including, without limitation,"; and
(v) words in the singular include the plural and words in the plural
include the singular.
ARTICLE II
The Notes
SECTION 2.1. Form. The Notes, together with the Trustee's certificate of
authentication, shall be in substantially the forms set forth in Exhibit A, with
such appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture, and may have such letters, numbers
or other marks of identification and such legends or endorsements placed
thereon, as may, consistently herewith, be determined by the officers executing
such Notes, as evidenced by their execution of the Notes. Any portion of the
text of any Note may be set forth on the reverse thereof, with an appropriate
reference thereto on the face of the Note.
Each Note shall be dated the date of its authentication. The terms of the
Notes set forth in Exhibit A are part of the terms of this Indenture.
SECTION 2.2. Execution, Authentication and Delivery. The Notes shall be
executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signature of individuals who were at
any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
The Trustee shall upon satisfaction of the conditions set forth in Section
2.15 authenticate and deliver Notes for original issue in an aggregate principal
amount of $126,060,667. The Note Balance at any time may not exceed such amount.
Each Note shall be dated the date of its authentication. The Notes shall be
issuable as registered Notes in the minimum denomination of $250,000 and in
integral multiples of $1,000 in excess thereof; provided, however, that one Note
may be issued in an additional amount equal to any remaining portion of the
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original Note Balance.
No Note shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose, unless there appears on such Note a certificate
of authentication substantially in the form provided for herein executed by the
Trustee by the manual signature of one of its authorized signatories, and such
certificate of authentication shall be conclusive evidence, and the only
evidence, that such Note has been duly authenticated and delivered hereunder.
SECTION 2.3. Temporary Notes. Pending the preparation of Definitive Notes,
the Issuer may execute, and upon receipt of an Issuer Order, the Trustee shall
authenticate and deliver, temporary Notes that are printed, lithographed,
typewritten, mimeographed or otherwise produced, of the tenor of the Definitive
Notes in lieu of which they are issued and with such variations not inconsistent
with this Indenture as the officers executing such Notes may determine, as
evidenced by their execution of such Notes.
If temporary Notes are issued, the Issuer will cause Definitive Notes to be
prepared without unreasonable delay or initially issued as Book-Entry Notes in
accordance with Sections 2.10 and 2.12. After the preparation of Definitive
Notes, the temporary Notes shall be exchangeable for Definitive Notes upon
surrender of the temporary Notes at the office or agency of the Issuer to be
maintained as provided in Section 3.2, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Notes, the Issuer shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
like principal amount of Definitive Notes of authorized denominations. Until so
exchanged, the temporary Notes shall in all respects be entitled to the same
benefits under this Indenture as Definitive Notes.
SECTION 2.4. Registration; Registration of Transfer and Exchange. The
Issuer shall cause to be kept a register (the "Note Register") in which, subject
to such reasonable regulations as it may prescribe, the Issuer shall provide for
the registration of Notes and the registration of transfers of Notes. The
Trustee shall be the "Note Registrar" for the purpose of registering Notes and
transfers of Notes as herein provided. Upon any resignation of any Note
Registrar, the Issuer shall promptly appoint a successor acceptable to the Note
Insurer or, if it elects not to make such an appointment, assume the duties of
the Note Registrar.
If a Person other than the Trustee is appointed by the Issuer as the Note
Registrar, the Issuer will give the Trustee and the Note Insurer prompt written
notice of the appointment of such Note Registrar and of the location, and any
change in the location, of the Note Register, and the Trustee and the Note
Insurer
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shall have the right to inspect the Note Register at all reasonable times, to
obtain copies thereof, and to rely upon a certificate executed on behalf of the
Note Registrar by an Executive Officer thereof as to the names and addresses of
the Holders of the Notes and the principal amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the office or
agency of the Issuer to be maintained as provided in Section 3.2, if the
requirements of Section 8-401(1) of the UCC are met, the Issuer shall execute,
the Trustee shall authenticate and the Noteholder shall obtain from the Trustee,
in the name of the designated transferee or transferees, one or more new Notes
in any authorized denominations of a like aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other new Notes in
any authorized denominations of a like aggregate principal amount, upon
surrender of the Notes to be exchanged at such office or agency. Whenever any
Notes are so surrendered for exchange, if the requirements of Section 8-401(1)
of the UCC are met, the Issuer shall execute, the Trustee shall authenticate and
the Noteholder shall obtain from the Trustee, the Notes that the Noteholder
making the exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Trustee duly executed by, the Holder
thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in the Securities Transfer Agent's Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Note
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Exchange Act.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Issuer or the Trustee may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of Notes,
other than exchanges pursuant to Section 2.3 or 9.5 not involving any transfer.
Notwithstanding anything else to the contrary contained herein, the
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obligation of the Issuer to pay the principal of and interest on the Notes is
not a general obligation of the Issuer, but is limited solely to the Trust
Estate pledged hereunder and the Policy.
SECTION 2.5. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
mutilated Note is surrendered to the Trustee, or the Trustee receives evidence
to its satisfaction of the destruction, loss or theft of any Note, and (ii)
there is delivered to the Trustee and the Note Insurer such security or
indemnity as may be required by the Note Insurer, the Trustee and the Issuer to
hold the Issuer, the Trustee and the Note Insurer, respectively, harmless, then,
in the absence of notice to the Issuer, the Note Registrar or the Trustee that
such Note has been acquired by a bona fide purchaser, and provided that the
requirements of Section 8-405 of the UCC are met, the Issuer shall execute, and
upon its request the Trustee shall authenticate and deliver, in exchange for or
in lieu of any such mutilated, destroyed, lost or stolen Note, a replacement
Note; provided, however, that if any such destroyed, lost or stolen Note, but
not a mutilated Note, shall have become, or within seven days shall be, due and
payable, or shall have been called for redemption, instead of issuing a
replacement Note, the Issuer may pay such destroyed, lost or stolen Note when so
due or payable or upon the Redemption Date without surrender thereof. If, after
the delivery of such replacement Note (or payment of a destroyed, lost or stolen
Note pursuant to the proviso to the preceding sentence), a bona fide purchaser
of the original Note in lieu of which such replacement Note was issued presents
for payment such original Note, the Issuer, the Note Insurer and the Trustee
shall be entitled to recover such replacement Note (or such payment) from the
Person to whom it was delivered or any Person taking such replacement Note from
such Person to whom such replacement Note was delivered (or payment made) or any
assignee of such Person, except a bona fide purchaser, and shall be entitled to
recover upon the security or indemnity provided therefor to the extent of any
loss, damage, cost or expense incurred by the Issuer or the Trustee in
connection therewith.
Upon the issuance of any replacement Note under this Section 2.5, the
Issuer or the Trustee may require the payment by the Holder of such Note of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and any other reasonable expenses (including the fees and
expenses of the Trustee) connected therewith.
Every replacement Note issued pursuant to this Section 2.5 in replacement
of any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any
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and all other Notes duly issued hereunder.
The provisions of this Section 2.5 are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.6. Persons Deemed Owners. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Trustee, the Note Insurer
and any agent of the Issuer, the Trustee or the Note Insurer may treat the
Person in whose name any Note is registered as of the preceding Record Date as
the owner of such Note for the purpose of receiving payments of principal of and
interest, if any, on such Note and for all other purposes whatsoever, whether or
not such Note be overdue, and none of the Issuer, the Note Insurer, the Trustee
nor any agent thereof shall be affected by notice to the contrary.
SECTION 2.7. Payment of Principal and Interest; Defaulted Interest. (a) The
Notes shall accrue interest at the Note Interest Rate, and such interest shall
be payable on each Payment Date as and to the extent provided in Section 4.5 of
the Pooling and Servicing Agreement and Section 3.1 of this Indenture. Any
installment of interest or principal, if any, payable on any Note that is
punctually paid or duly provided for by the Issuer on the applicable Payment
Date shall be paid to the Person in whose name such Note (or one or more
Predecessor Notes) is registered on the related Record Date by check mailed
first-class, postage prepaid, to such Person's address as it appears on the Note
Register on such Record Date. However, unless Definitive Notes have been issued
to Note Owners, with respect to Notes registered on each Record Date in the name
of the nominee of the Clearing Agency (initially, such nominee to be Cede &
Co.), payment will be made by wire transfer in immediately available funds to
the account designated by such nominee. Notwithstanding the above, the final
installment of principal payable with respect to the Notes (and except for the
Redemption Price for any Note called for redemption pursuant to Section 10.1)
shall be payable as provided in Section 2.7(b)(ii). The funds represented by any
such checks returned undelivered shall be held in accordance with Section 3.3.
(b)(i) The principal of each Note shall be payable in installments on each
Payment Date (including the Final Scheduled Payment Date) as and to the extent
provided in this Indenture and in Section 4.5 of the Pooling and Servicing
Agreement. Notwithstanding the foregoing (and subject to the provisions of
Sections 5.1 and 5.2), the entire Note Balance shall be due and payable, ratably
to all Noteholders, on the date on which an Event of Default shall have occurred
and be continuing if the Note Insurer has declared the Notes to be immediately
due and payable so long as an Insurer Default shall not have occurred and be
continuing,
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or if an Insurer Default shall have occurred and be continuing, on the date on
which an Event of Default shall have occurred and be continuing if the Trustee
or a Note Majority has declared the Notes to be immediately due and payable in
the manner provided in Section 5.2.
(ii) The Trustee shall notify the Person in whose name a Note is
registered at the close of business on the Record Date preceding the
Payment Date on which the Issuer expects that the final installment of
principal of and interest on such Note will be paid. Such notice shall be
mailed no later than five days prior to such final Payment Date and shall
specify that such final installment will be payable only upon presentation
and surrender of such Note and shall specify the place where such Note may
be presented and surrendered for payment of such installment. Notices in
connection with redemptions of Notes shall be mailed to Noteholders as
provided in Section 10.2.
(c) If the Issuer defaults in a payment of interest on the Notes, the
Issuer shall pay, in any lawful manner, defaulted interest (plus interest on
such defaulted interest to the extent lawful) at the Note Interest Rate from the
Payment Date for which such payment is in default. The Issuer shall pay such
defaulted interest to the Persons who are Noteholders in accordance with Section
4.5 of the Pooling and Servicing Agreement.
(d) Promptly following the date on which all principal of and interest on
the Notes has been paid in full, the Trustee shall, if the Note Insurer has paid
any amount in respect of the Notes under the Policy that has not been reimbursed
to it, deliver such surrendered Notes to the Note Insurer.
SECTION 2.8. Cancellation. Subject to Section 2.7(d), all Notes surrendered
for payment, registration of transfer, exchange or redemption shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly cancelled by the Trustee. Subject to Section 2.7(d), the
Issuer may at any time deliver to the Trustee for cancellation any Notes
previously authenticated and delivered hereunder that the Issuer may have
acquired in any manner whatsoever, and all Notes so delivered shall be promptly
cancelled by the Trustee. No Notes shall be authenticated in lieu of or in
exchange for any Notes cancelled as provided in this Section except as expressly
permitted by this Indenture. Subject to Section 2.7(d), all cancelled Notes may
be held or disposed of by the Trustee in accordance with its standard retention
or disposal policy as in effect at the time.
SECTION 2.9. Release of Collateral. Subject to Section 11.1 and except
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(i) in connection with the discharge, in the ordinary course of business, by the
Servicer of its servicing obligations under Article III of the Pooling and
Servicing Agreement or (ii) in accordance with Sections 2.4, 2.5, 3.4(c), 3.7
and 8.1 of the Pooling and Servicing Agreement, the Trustee shall release
property from the Lien of this Indenture only upon receipt of an Issuer Request
accompanied by an Officers' Certificate and an Opinion of Counsel and the
written consent of the Note Insurer and the Trustee (acting at the written
instruction of Holders representing the Note Voting Amount).
SECTION 2.10. Book-Entry Notes. The Notes, upon original issuance, shall be
issued in the form of typewritten Notes representing the Book-Entry Notes, to be
delivered to The Depository Trust Company (the initial Clearing Agency), or its
custodian, by, or on behalf of, the Issuer. Such Notes shall initially be
registered on the Note Register in the name of Cede & Co., the nominee of the
initial Clearing Agency, and no Note Owner shall receive a Definitive Note
representing such Note Owner's interest in such Note, except as provided in
Section 2.12. Unless and until Definitive Notes have been issued to Note Owners:
(i) this Section 2.10 shall be in full force and effect;
(ii) the Note Registrar and the Trustee may deal with the Clearing
Agency for all purposes (including the payment of principal of and interest
on the Notes) as the authorized representative of the Note Owners;
(iii) to the extent that this Section 2.10 conflicts with any other
provisions of this Indenture, this Section 2.10 shall control;
(iv) the rights of Note Owners shall be exercised only through the
Clearing Agency and shall be limited to those established by law and
agreements between such Note Owners and the Clearing Agency and/or the
Clearing Agency Participants pursuant to the Note Depository Agreement.
Unless and until Definitive Notes are issued, the Clearing Agency will make
book-entry transfers among the Clearing Agency Participants and receive and
transmit payments of principal of and interest on the Notes to such
Clearing Agency Participants; and
(v) whenever this Indenture requires or permits actions to be taken
based upon instructions or directions of Holders of Notes evidencing a
specified percentage of the Note Balance, the Clearing Agency shall be
deemed to represent such percentage only to the extent that it has received
instructions to such effect from Note Owners and/or Clearing Agency
Participants owning or representing, respectively, such required percentage
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of the beneficial interest in the Notes and has delivered such instructions to
the Trustee.
SECTION 2.11. Notices to Clearing Agency. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes have been issued to Note Owners, the Trustee shall give
all such notices and communications to the Clearing Agency.
SECTION 2.12. Definitive Notes. If (i) the Servicer advises the Trustee and
the Note Insurer in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities with respect to the Notes, and
the Servicer is unable to locate a qualified successor, (ii) the Servicer at its
option advises the Trustee and the Note Insurer in writing that it elects to
terminate the book-entry system through the Clearing Agency or (iii) after the
occurrence of an Event of Default or a Servicer Termination Event, Note Owners
representing the Note Majority advise the Clearing Agency in writing that the
continuation of a book-entry system through the Clearing Agency is no longer in
the best interests of the Note Owners, then the Clearing Agency has undertaken
to notify all Note Owners and the Trustee of the occurrence of any such event
and of the availability of Definitive Notes to Note Owners requesting the same.
Upon surrender to the Trustee of the typewritten Notes representing the Book-
Entry Notes by the Clearing Agency, accompanied by registration instructions,
the Issuer shall execute, and the Trustee shall authenticate, the Definitive
Notes in accordance with the instructions of the Clearing Agency. None of the
Issuer, the Note Registrar or the Trustee shall be liable for any delay in
delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Notes, the Trustee shall recognize the Holders of the Definitive Notes as
Noteholders.
SECTION 2.13. Certain Transfer Restrictions. No Note or any interest
therein may be sold or transferred (including by pledge or hypothecation) unless
such sale or transfer is (i) pursuant to a valid registration under the
Securities Act and any applicable state securities or "Blue Sky" laws, (ii)
pursuant to Rule 144A or (iii) pursuant to another exemption from the
registration requirements of the Securities Act and subject to the receipt by
the Trustee and the Note Insurer of a certification by the transferee and an
opinion of counsel (satisfactory to the Issuer and the Trustee and the Note
Insurer) to the effect that the transfer is in compliance with the Securities
Act, and, in each case, in compliance with any applicable state securities or
"Blue Sky" laws. Prior to any sale or transfer of the Notes or any interest
therein described in clause (ii) above, each prospective purchaser of the Notes
shall be deemed to have represented and agreed as follows:
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(1) It is a qualified institutional buyer as defined in Rule 144A and is
acquiring the Notes or any interest therein for its own institutional account or
for the account of a qualified institutional buyer.
(2) It is aware the sale is being made in reliance on Rule 144A and it is
not acquiring the Notes or any interest therein with a view to, or for resale in
connection with, a distribution that would constitute a public offering within
the meaning of the Securities Act or a violation of the Securities Act, and
that, if in the future it decides to resell, pledge or otherwise transfer any
Notes or any interest therein, such Notes or any interest therein may be resold,
pledged or transferred only (a) to a person who the seller reasonably believes
is a qualified institutional buyer (as defined in Rule 144A) that purchases for
its own account or for the account of a qualified institutional buyer to whom
notice is given that the resale, pledge or transfer is being made in reliance on
Rule 144A, or (b) pursuant to another exemption from registration under the
Securities Act, in each case in accordance with any applicable securities laws
of any state of the United States.
(3) It understands that the Notes will bear a legend substantially as set
forth in Section 2.14.
(4) It acknowledges that the Trustee, the Issuer, the Note Insurer, the
Initial Purchasers and their affiliates, and others will rely upon the truth and
accuracy of the foregoing acknowledgements, representations and agreements. If
it is acquiring any Notes or any interest therein for the account of one or more
qualified institutional buyers, it represents that it has sole investment
discretion with respect to each such account and that it has full power to make
the foregoing acknowledgements, representations and agreements on behalf of each
such account.
(5) It either (a) is not acquiring the Notes or any interest therein with
the assets of any "plan" subject to Section 4975 of the Code or Title I of the
Employee Income Security Act of 1974, as amended ("ERISA"), or (b) its purchase
and holding of the Notes or any interest therein will not result in a nonexempt
prohibited transaction under Section 406(a) of ERISA or Section 4975 of the
Code, or (c) its purchase and holding of the Notes meets the requirements for an
exemption under Department of Labor Prohibited Transaction Exemption 95-60.
Each purchaser of the Notes or any interest therein will be required to
execute or to have executed a Purchaser Representation Letter substantially in
the form of Exhibit D or E, or may deliver such other representations (or an
opinion of counsel) as may be approved by the Issuer, the Note Insurer or the
Initial Purchasers, to the effect that such transfer may be made pursuant to an
exemption from registration under the Securities Act and any applicable state
securities laws.
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In addition, such prospective purchaser shall be responsible for providing
additional information or certification, as shall be reasonably requested by the
Trustee, the Issuer, the Note Insurer or the Initial Purchasers, to support the
truth and accuracy of the foregoing acknowledgements, representations and
agreements, it being understood that such additional information is not intended
to create additional restrictions on the transfer of the Notes or any interest
therein. Neither the Issuer nor the Trustee is obligated to register the Notes
under the Securities Act or any state securities laws.
In determining compliance with the transfer restrictions contained in this
Section 2.13, the Trustee may rely upon a written opinion of counsel (which may
include in-house counsel of the transferor), the cost of obtaining which shall
be an expense of the Holder of the Note to be transferred (or the transferee
thereof).
Any Noteholder desiring to effect a transfer of any Note (or interest
therein) shall, and does hereby agree to indemnify the Trustee, the Servicer,
the Note Insurer and the Issuer against any liability, cost or expense
(including attorneys' fees) that may result if the transfer is not exempt from
registration or is not made in accordance with Federal and state laws.
SECTION 2.14. Legending of Notes. Each Note shall bear a legend in
substantially the following form:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES OR "BLUE SKY"
LAWS. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES THAT THIS NOTE MAY
BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) SO LONG AS THIS NOTE
IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
("RULE 144A") TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER
TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, (2) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR (3) IN RELIANCE ON ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUBJECT TO THE
RECEIPT BY THE TRUSTEE AND THE NOTE INSURER OF A CERTIFICATION OF THE
TRANSFEREE AND AN
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OPINION OF COUNSEL (SATISFACTORY TO THE ISSUER AND THE TRUSTEE AND THE NOTE
INSURER) TO THE EFFECT THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES.
SECTION 2.15. Conditions to Issuance of Notes. The Notes to be issued on
the Closing Date may be executed by the Issuer and delivered to the Trustee for
authentication, and thereupon, the same shall be authenticated and delivered by
the Trustee upon Issuer Order and upon receipt by the Trustee of the following:
(a) the Receivables Purchase Agreement and the Pooling and Servicing
Agreement with the related Schedule of Receivables attached thereto;
(b) evidence of the delivery of the original executed counterpart of each
Receivable and each Lien Certificate to the Custodians;
(c) corporate resolutions of each of the Issuer, the Servicer and Reliance
authorizing, as applicable, the execution, delivery and performance of the
Related Documents and the transactions contemplated hereby and by the other
Related Documents, certified by the secretary or an assistant secretary of the
Issuer, the Servicer or Reliance, as applicable;
(d) a copy of an officially certified document, dated not more than 30 days
prior to the Closing Date, evidencing the due organization and good standing of
each of the Issuer, the Servicer and Reliance in their respective states of
incorporation;
(e) copies of the certificate or articles of incorporation and by-laws of
each of the Issuer, the Servicer and Reliance, certified by the secretary or an
assistant secretary of the Issuer, the Servicer and Reliance, as applicable;
(f) (i) evidence of filing with the Secretary of State of the State (and
the relevant county, if required by the applicable state law) of each
Originator's chief executive office of UCC-1 financing statements executed by
each such Originator, as debtor, and naming Reliance as secured party, and the
Receivables and the Other Conveyed Property as collateral; (ii) evidence of
filing with the Secretary of State of the State (and with the relevant county,
if required by the applicable state law) of Reliance's chief executive office of
UCC-1 financing statements executed by Reliance, as debtor, and naming the
Issuer as secured party, and the Receivables and the Other Conveyed Property as
collateral; and (iii) evidence of filing with the Secretary of State of the
State (and with the relevant county, if required by the
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applicable state law) of the Issuer's chief executive office of UCC-1 financing
statements executed by the Issuer, as debtor, and naming the Trustee for the
benefit of the Noteholders and the Note Insurer as secured parties, and the
Trust Estate as collateral;
(g) a certificate listing the Servicing Officers as of the Closing Date;
(h) a note guaranty insurance policy for the Notes being issued by the Note
Insurer on such date;
(i) evidence of the deposit of the Spread Account Initial Deposit into the
Spread Account;
(j) evidence of the deposit by the Issuer into the Collection Account of
any amounts paid on the Receivables since the Cutoff Date; and
(k) such other documents as the Trustee or the Note Insurer may reasonably
require.
SECTION 2.16. Custody of the Receivable Files. The Custodians, on behalf of
the Trustee, shall hold the Receivable Files pursuant to the Custodian
Agreement. Each Custodian shall hold each Receivable File for the benefit of
Noteholders and the Note Insurer, and maintain accurate records pertaining to
each Receivable File to maintain a current inventory thereof. Each Receivable
held by a Custodian shall be stamped with a legend stating "This contract has
been stamped to evidence that it has been sold to Reliance Auto Receivables
Corporation and is subject to a first perfected security interest of Harris
Trust and Savings Bank, as Trustee on behalf of the holders of Notes issued by
Reliance Auto Receivables Corporation and MBIA Insurance Corporation." Pursuant
to the Custodian Agreement, upon the written request of a Servicing Officer,
each Custodian shall perform such acts as reasonably requested by the Servicer
and otherwise cooperate with the Servicer in the enforcement of the Issuer's,
the Noteholders' and the Note Insurer's rights and remedies with respect to the
Receivables Files held by such Custodian.
ARTICLE III
Covenants
SECTION 3.1. Payment of Principal and Interest. The Issuer shall duly and
punctually pay the principal and interest, if any, on the Notes in accordance
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with the terms of the Notes and this Indenture. Without limiting the foregoing,
the Issuer shall distribute (or cause to be distributed) the amounts on deposit
in the Collection Account and the Spread Account on each Payment Date as and to
the extent provided in Section 4.5 of the Pooling and Servicing Agreement or if
an Event of Default has occurred and the Notes have been declared due and
payable in accordance with the terms hereof and such acceleration has not been
rescinded, principal and interest on the Notes shall be payable in accordance
with Section 5.4(b). Amounts properly withheld under the Code or any applicable
State law by any Person from a payment to any Noteholder of interest and/or
principal shall be considered as having been paid by the Issuer to such
Noteholder for all purposes of this Indenture.
SECTION 3.2. Maintenance of Office or Agency. The Trustee shall maintain in
the Borough of Manhattan, The City of New York, an office or agency where Notes
may be surrendered for registration of transfer or exchange, and where notices
and demands to or upon the Issuer in respect of the Notes and this Indenture may
be served. The Issuer hereby initially appoints the Trustee to serve as its
agent for the foregoing purposes. The Trustee will give prompt written notice to
the Issuer and the Note Insurer of the location, and of any change in the
location, of any such office or agency. If at any time the Trustee shall fail to
maintain any such office or agency or shall fail to furnish the Issuer with the
address thereof, such surrenders, notices and demands may be made or served at
the Corporate Trust Office, and the Issuer hereby appoints the Trustee as its
agent to receive all such surrenders, notices and demands.
SECTION 3.3. Money for Payments To Be Held in Trust. As provided in Section
8.2(a), all payments of amounts due and payable with respect to any Notes that
are to be made from amounts withdrawn from the Collection Account pursuant to
Section 8.2(b) shall be made on behalf of the Issuer by the Trustee or by
another Paying Agent, and no amounts so withdrawn from the Collection Account
for payments of Notes shall be paid over to the Issuer, except as provided in
Section 4.5 of the Pooling and Servicing Agreement.
On or before each Payment Date (including the Final Scheduled Payment Date)
and Redemption Date, the Issuer shall deposit or cause to be deposited in the
Collection Account an aggregate sum sufficient to pay the amounts then becoming
due under the Notes as and to the extent provided in Section 4.5 of the Pooling
and Servicing Agreement, such sum to be held in trust for the benefit of the
Persons entitled thereto and (unless the Paying Agent is the Trustee) shall
promptly notify the Trustee of its action or failure so to act.
The Issuer shall cause each Paying Agent (other than the Trustee) to
execute
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and deliver to the Trustee and the Note Insurer an instrument in which such
Paying Agent shall agree with the Trustee (and if the Trustee acts as Paying
Agent, it hereby so agrees), subject to the provisions of this Section 3.3, that
such Paying Agent shall:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and pay such sums to such Persons as herein provided;
(ii) give the Trustee and the Note Insurer notice of any Default by
the Issuer (or any other obligor upon the Notes) of which it has actual
knowledge in the making of any payment required to be made with respect to
the Notes;
(iii) at any time during the continuance of any such Default, upon
the written request of the Trustee, forthwith pay to the Trustee all sums
so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to the
Trustee all sums held by it in trust for the payment of Notes if at any
time it ceases to meet the standards required to be met by a Paying Agent;
and
(v) comply with all requirements of the Code and any applicable State
law with respect to the withholding from any payments made by it on any
Notes of any applicable withholding taxes imposed thereon and with respect
to any applicable reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, by Issuer Order,
direct any Paying Agent to pay to the Trustee all sums held in trust by such
Paying Agent, such sums to be held by the Trustee upon the same trusts as those
upon which the sums were held by such Paying Agent; and upon such payment by any
Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money held
by the Trustee or any Paying Agent in trust for the payment of any amount due
with respect to any Note and remaining unclaimed for two years after such amount
has become due and payable shall be discharged from such trust and upon Issuer
Request, with the consent of the Note Insurer, shall be deposited by the Trustee
in the Collection Account; and the Holder of such Note shall thereafter, as an
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unsecured general creditor, look only to the Issuer for payment thereof (but
only to the extent of the amounts so paid to the Issuer), and all liability of
the Trustee, the Note Insurer or such Paying Agent with respect to such trust
money shall thereupon cease; provided, however, that if such money or any
portion thereof had been previously deposited by the Note Insurer with the
Trustee for the payment of principal or interest on the Notes, to the extent any
amounts are owing to the Note Insurer, such amounts shall be paid promptly to
the Note Insurer upon receipt of a written request by the Note Insurer to such
effect; and provided, further, that the Trustee or such Paying Agent, before
being required to make any such repayment, shall at the expense and direction of
the Issuer cause to be published at least once, in a newspaper published in the
English language, customarily published on each Business Day and of general
circulation in The City of New York, notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such publication, any unclaimed balance of such money then
remaining will be repaid to the Issuer. The Trustee shall also adopt and employ,
at the expense of the Issuer, any other reasonable means of notification of such
repayment (including mailing notice of such repayment to Holders whose Notes
have been called but have not been surrendered for redemption or whose right to
or interest in moneys due and payable but not claimed is determinable from the
records of the Trustee or of any Paying Agent, at the last address of record for
each such Holder).
SECTION 3.4. Existence. The Issuer shall keep in full effect its existence,
rights and franchises as a corporation under the laws of the State of Delaware
and shall obtain and preserve its qualification to do business in each
jurisdiction in which such qualification is or shall be necessary to protect the
validity and enforceability of this Indenture, the Notes, the Indenture
Collateral and each other instrument or agreement included in the Trust Estate
or to enforce its rights under the Receivables and with respect to the Financed
Vehicles.
SECTION 3.5. Protection of the Trust Estate. The Issuer intends the
security interest Granted pursuant to this Indenture in favor of the Secured
Parties to be prior to all other Liens in respect of the Trust Estate, and the
Issuer shall take all actions necessary to obtain and maintain, in favor of the
Trustee for the benefit of the Secured Parties, a first Lien on and a first
priority, perfected security interest in the Trust Estate. On or prior to the
Closing Date, the Issuer and Reliance shall file UCC-1 financing statements as
provided in Section 2.15(f). In addition, the Issuer shall from time to time
execute and deliver all such supplements and amendments hereto and all such
financing statements, continuation statements,
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instruments of further assurance and other instruments, and shall take such
other action necessary or advisable to:
(i) Grant more effectively all or any portion of the Trust Estate;
(ii) maintain the Trust Estate free and clear of all prior Liens;
(iii) maintain or preserve the Lien and security interest (and the
priority thereof) in favor of the Trustee for the benefit of the Secured
Parties created by this Indenture or carry out more effectively the
purposes hereof;
(iv) perfect, publish notice of or protect the validity of any Grant
made or to be made by this Indenture;
(v) enforce any of the Indenture Collateral;
(vi) preserve and defend title to the Trust Estate and the rights of
the Trustee and the Noteholders in such Trust Estate against the claims of
all Persons; and
(vii) pay all taxes or assessments levied or assessed upon the Trust
Estate when due.
The Issuer hereby designates the Trustee as its agent and attorney-in-fact to
execute any financing statement, continuation statement, instrument of further
assurance or other instrument required to be executed to accomplish the
foregoing; provided, however, that the Trustee shall not be obligated to execute
such instruments except upon instruction from the Note Insurer, the Servicer or
the Issuer.
SECTION 3.6. Opinions as to the Trust Estate. (a) On the Closing Date, the
Issuer shall furnish to the Trustee and the Note Insurer an Opinion of Counsel
either stating that, in the opinion of such counsel, such action has been taken
with respect to the execution and filing of any financing statements and
continuation statements, as are necessary to perfect and make effective the
first priority Lien and security interest in the Indenture Collateral in favor
of the Trustee for the benefit of the Secured Parties created by this Indenture
and reciting the details of such action, or stating that, in the opinion of such
counsel, no such action is necessary to make such Lien and security interest
effective.
(b) On or before April 30 in each calendar year, commencing April 30, 1997,
the Issuer shall furnish to the Trustee and the Note Insurer an Opinion of
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Counsel either stating that, in the opinion of such counsel, such action has
been taken with respect to the execution and filing of any financing statements
and continuation statements, as is necessary to maintain the first priority Lien
and security interest in the Indenture Collateral created by this Indenture and
reciting the details of such action, or stating that in the opinion of such
counsel no such action is necessary to maintain such Lien and security interest.
Such Opinion of Counsel shall also describe the execution and filing of any
financing statements and continuation statements, that will, in the opinion of
such counsel, be required to maintain the Lien and security interest of this
Indenture in the Indenture Collateral until April 30 in the following calendar
year.
SECTION 3.7. Performance of Obligations; Servicing of Receivables. (a) The
Issuer shall not take, or fail to take, any action and shall use its best
efforts not to permit any action to be taken by others that would release any
Person from any material covenants or obligations under any instrument or
agreement included in the Trust Estate or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
expressly provided in this Indenture, the Pooling and Servicing Agreement or
such other instrument or agreement.
(b) The Issuer may contract with other Persons reasonably acceptable to the
Controlling Party to assist it in performing its duties under this Indenture,
and any performance of such duties by a Person identified to the Trustee and the
Note Insurer in an Officers' Certificate of the Issuer shall be deemed to be
action taken by the Issuer; provided, however, that nothing in this Section
3.7(b) or any such contract shall be deemed to release or otherwise limit the
Issuer's obligations under the Notes or this Indenture. Pursuant to the Pooling
and Servicing Agreement, the Issuer has contracted with the Servicer to assist
the Issuer in performing its duties under the Notes and this Indenture.
(c) The Issuer shall punctually perform and observe all of its obligations
and agreements contained in this Indenture, the other Related Documents and in
the instruments and agreements included in the Trust Estate, including filing or
causing to be filed any UCC financing statements and continuation statements
required to be filed by this Indenture and the Pooling and Servicing Agreement
in accordance with and within the time periods provided for herein and therein.
(d) If notice of termination has been given to the Servicer of the
Servicer's rights and powers pursuant to Section 7.2 of the Pooling and
Servicing Agreement, the Backup Servicer shall be appointed as successor
Servicer in accordance with Section 7.3 of the Pooling and Servicing Agreement
(unless the Note Insurer shall
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have exercised its option pursuant to Section 7.3(b) of the Pooling and
Servicing Agreement to appoint an alternative successor servicer).
(e) Upon any termination of the Servicer's rights and powers pursuant to
the Pooling and Servicing Agreement, the Issuer shall promptly notify the
Trustee. As soon as a successor Servicer is appointed by the Controlling Party,
the Issuer shall notify the Trustee of such appointment, specifying in such
notice the name and address of such successor Servicer.
(f) The Issuer agrees that it shall not waive timely performance or
observance by the Servicer, the Backup Servicer or Reliance of their respective
duties under Related Documents without prior consent of the Controlling Party or
if the effect thereof would adversely affect the Holders.
SECTION 3.8. Negative Covenants. So long as any Notes are Outstanding, the
Issuer shall not:
(i) except as expressly permitted by this Indenture or the Pooling
and Servicing Agreement, sell, transfer, exchange or otherwise dispose of
any of the properties or assets of the Issuer, including those included in
the Trust Estate;
(ii) claim any credit on, or make any deduction from the principal or
interest payable in respect of, the Notes (other than amounts properly
withheld from such payments under the Code or applicable State law) or
assert any claim against any present or former Noteholder by reason of the
payment of the taxes levied or assessed upon any part of the Trust Estate;
(iii) (A) permit the validity or effectiveness of this Indenture to
be impaired, or permit the Lien of this Indenture to be amended,
hypothecated, subordinated, terminated or discharged, or permit any Person
to be released from any covenants or obligations with respect to the Notes
under this Indenture except as may be expressly permitted hereby, (B)
permit any Lien, charge, excise, claim, security interest, mortgage or
other encumbrance (other than the Lien of this Indenture) to be created on
or extend to or otherwise arise upon or burden the Trust Estate or any part
thereof or any interest therein or the proceeds thereof (other than any
Liens which are junior to or are otherwise subordinated to the Lien in
favor of the Trustee (and to which the Trustee has consented in writing)
and tax Liens, mechanics' Liens and other Liens that arise by operation of
law, in each case on a Financed Vehicle and arising solely as a result of
an action or omission of the related Obligor), or (C) permit the Lien of
this Indenture
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not to constitute a valid first priority (other than with respect to any
such tax Lien, mechanics' Lien or other Lien not considered a Lien)
security interest in the Trust Estate; or
(iv) agree to cause the Spread Account to secure or otherwise be
accessible by any class or series of notes issued by the Issuer (other than
the Notes) without the prior written consent of the Note Insurer and the
Holders of the Note Voting Amount and without prior written notice to the
Rating Agencies.
SECTION 3.9. Annual Statement as to Compliance. The Issuer shall deliver to
the Trustee and the Note Insurer, on or before April 30 of each year, commencing
April 30, 1997, an Officers' Certificate, substantially in the form of Exhibit
C, stating that:
(i) a review of the activities of the Issuer during such year and of
performance under this Indenture has been made under such Authorized
Officers' supervision; and
(ii) to the best of such Authorized Officers' knowledge, based on
such review, the Issuer has complied with all conditions and covenants
under this Indenture throughout such year or, if there has been a default
in the compliance of any such condition or covenant, specifying each such
default known to such Authorized Officers and the nature and status
thereof.
SECTION 3.10. Issuer May Consolidate, etc., Only on Certain Terms. (a) The
Issuer shall not consolidate or merge with or into any other Person, unless:
(i) the Person (if other than the Issuer) formed by or surviving such
consolidation or merger shall be a Person organized and existing under the
laws of the United States of America or any State and shall expressly
assume, by an indenture supplemental hereto, executed and delivered to the
Trustee and the Note Insurer, in form satisfactory to the Trustee and the
Note Insurer, the due and punctual payment of the principal of and interest
on all Notes and the performance or observance of every agreement and
covenant of this Indenture on the part of the Issuer to be performed or
observed, all as provided herein;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
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(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and shall
have delivered copies thereof to the Trustee) to the effect that such
transaction will not have any material adverse tax consequence to any
Noteholder;
(v) any action that is necessary to maintain the Lien and security
interest created by this Indenture shall have been taken;
(vi) the Issuer shall have delivered to the Trustee and the Note
Insurer an Officers' Certificate and an Opinion of Counsel each stating
that such consolidation or merger and such supplemental indenture comply
with this Section 3.10 and that all conditions precedent provided for in
this Section 3.10 relating to such transaction have been complied with
(including any filing required by the Exchange Act); and
(vii) until the Notes are paid in full and all amounts owing to the
Note Insurer under the Related Documents have been paid in full and if no
Insurer Default shall have occurred and be continuing, the Note Insurer in
its sole discretion has consented thereto in writing.
(b) The Issuer shall not convey or transfer all or substantially all of its
properties or assets, including those included in the Trust Estate, to any
Person, unless:
(i) the Person that acquires by conveyance or transfer the properties
and assets of the Issuer the conveyance or transfer of which is hereby
restricted shall: (A) be a United States citizen or a Person organized and
existing under the laws of the United States of America or any State, (B)
expressly assumes, by an indenture supplemental hereto, executed and
delivered to the Trustee and the Note Insurer, in form satisfactory to the
Trustee and the Note Insurer, the due and punctual payment of the principal
of and interest on all Notes and the performance or observance of every
agreement and covenant of this Indenture on the part of the Issuer to be
performed or observed, all as provided herein, (C) expressly agrees by
means of such supplemental indenture that all right, title and interest so
conveyed or transferred shall be subject and subordinate to the rights of
Holders of the Notes, and (D) unless otherwise provided in such
supplemental indenture, expressly agrees to indemnify, defend and hold
harmless the Issuer against and from any loss, liability or expense arising
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under or related to this Indenture and the Notes;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and shall
have delivered copies thereof to the Trustee and the Note Insurer) to the
effect that such transaction will not have any material adverse tax
consequence to any Noteholder;
(v) any action that is necessary to maintain the Lien and security
interest created by this Indenture shall have been taken;
(vi) the Issuer shall have delivered to the Trustee and the Note
Insurer an Officers' Certificate and an Opinion of Counsel each stating
that such conveyance or transfer and such supplemental indenture comply
with this Section 3.10 and that all conditions precedent provided for in
this Section 3.10 relating to such transaction have been complied with
(including any filing required by the Exchange Act); and
(vii) until the Notes are paid in full and all amounts owing to the
Note Insurer under the Related Documents have been paid in full and if no
Insurer Default shall have occurred and be continuing, the Note Insurer in
its sole discretion has consented thereto in writing.
SECTION 3.11. Successor or Transferee. (a) Upon any consolidation or merger
of the Issuer in accordance with Section 3.10(a), the Person formed by or
surviving such consolidation or merger (if other than the Issuer) shall succeed
to, and be substituted for, and may exercise every right and power of, the
Issuer under this Indenture with the same effect as if such Person had been
named as the Issuer herein.
(b) Upon a conveyance or transfer of all or substantially all the assets
and properties of the Issuer pursuant to Section 3.10(b), the Issuer shall be
released from every covenant and agreement of this Indenture to be observed or
performed on the part of the Issuer with respect to the Notes immediately upon
the delivery of written notice from the Issuer to the Trustee stating that the
Issuer is to be so released; provided, however, that notwithstanding the
foregoing, the Issuer shall not be released from any liability with respect to
covenants and agreements to be
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observed or performed on the part of the Issuer prior to the date of such
release unless its successor explicitly undertakes to accept such liability.
SECTION 3.12. No Other Business. The Issuer shall not engage in any
business other than financing, purchasing, owning, selling and managing of the
Receivables in the manner contemplated by its certificate of incorporation, this
Indenture and the other Related Documents and activities incidental thereto.
SECTION 3.13. No Borrowing. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for (i) the Notes, (ii) obligations owing from time to time
to the Note Insurer under the Related Documents and (iii) any other indebtedness
permitted by the Related Documents. The proceeds of the Notes shall be used to
fund the Spread Account Initial Deposit and to pay the Issuer's organizational,
transactional and start up expenses. Net amounts remaining after such payments
shall be distributed by the Issuer to its stockholders. The Issuer shall incur
no additional borrowed money indebtedness other than the Notes unless (i) such
indebtedness is rated at least investment grade by the Rating Agencies, (ii)
each of the parties to the documentation related to such indebtedness shall have
signed documentation containing a provision substantially similar to Section
11.16, (iii) such indebtedness does not permit recourse to the Trust Estate and
(iv) the Rating Agencies shall have confirmed in writing to the Note Insurer at
the expense of Reliance or its Affiliates that the risk to the Note Insurer in
insuring the Notes will remain at least investment grade.
SECTION 3.14. Servicer's Obligations; Related Documents. The Issuer shall
(i) cause the Servicer to comply with the Pooling and Servicing Agreement and
(ii) enforce all of its rights under the Related Documents.
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities. Except as
expressly contemplated by the Pooling and Servicing Agreement or this Indenture,
the Issuer shall not make any loan or advance or credit to, or guarantee
(directly or indirectly or by an instrument having the effect of assuring
another's payment or performance on any obligation or capability of so doing or
otherwise), endorse or otherwise become contingently liable, directly or
indirectly, in connection with the obligations, stocks or dividends of, or own,
purchase, repurchase or acquire (or agree contingently to do so) any stock,
obligations, assets or securities of, or any other interest in, or make any
capital contribution to, any other Person.
SECTION 3.16. Capital Expenditures. The Issuer shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either
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realty or personalty).
SECTION 3.17. Notice of Events of Default. The Issuer shall give the
Trustee, the Note Insurer and the Rating Agencies prompt written notice of each
Event of Default hereunder and each Default or breach on the part of the
Servicer, the Note Insurer or Reliance of their respective obligations under any
Related Document, in each case of which it becomes aware.
SECTION 3.18. Further Instruments and Acts. Upon request of the Trustee or
the Note Insurer, the Issuer shall execute and deliver such further instruments
and do such further acts as may be reasonably necessary or proper to carry out
more effectively the purpose of this Indenture.
SECTION 3.19. Compliance with Laws. The Issuer shall comply with the
requirements of all applicable laws, the non-compliance with which would,
individually or in the aggregate, materially and adversely affect the ability of
the Issuer to perform its obligations under any Related Document.
SECTION 3.20. Tax Treatment. The Issuer has structured this Indenture and
the Notes with the intention that the Notes will qualify under applicable
federal, state and local tax law as indebtedness of the Issuer. The Issuer and
each Holder agrees to treat, and take no action inconsistent with the treatment
of, the Notes (or any beneficial interest therein) as indebtedness for purposes
of federal, state and local income or franchise taxes and any other tax imposed
on or measured by income. Each Holder, by acquisition of a beneficial interest
in a Note, agrees to be bound by the provisions of this Section 3.20.
SECTION 3.21. Investment Company Act. The Issuer shall conduct its
operations in a manner that will not subject it to registration as an
"investment company" under the Investment Company Act of 1940, as amended.
SECTION 3.22. Liens. The Issuer shall not contract for, create, incur or
suffer to exist any Lien upon any of its property or assets, whether now owned
or hereafter acquired, except for any Lien created by any of the Related
Documents.
SECTION 3.23. Conduct of Business. The Issuer shall (a) conduct its
business solely in its own name through its duly authorized officers or agents
so as not to mislead others as to the identity of the Issuer with which those
others are concerned, and particularly shall use its best efforts to avoid the
appearance of conducting business on behalf of Reliance or any Affiliate thereof
or that the assets of the Issuer are available to pay the creditors of Reliance
or any Affiliate thereof; (b) maintain corporate records and books of account
separate from those of
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Reliance or any Affiliate thereof; (c) maintain an arm's-length relationship
with Reliance and each Affiliate thereof, and the Issuer shall not hold itself
out as being liable for the debts of Reliance or any Affiliate thereof; (d) keep
its assets and its liabilities wholly separate from those of all other entities,
including Reliance or any Affiliate thereof, except as otherwise anticipated by
the Related Documents; (e) not maintain bank accounts or other depository
accounts to which Reliance or any Affiliate thereof or of the Issuer is an
account party, into which Reliance or any Affiliate thereof or of the Issuer
makes deposits or from which Reliance or any Affiliate thereof or of the Issuer
has the power to make withdrawals, except as otherwise permitted by Sections
3.2, 4.1 and 4.2 of the Pooling and Servicing Agreement; (f) shall obtain proper
authorization for all the Issuer's actions requiring such authorization; (g)
shall obtain proper authorization from its stockholders for all action requiring
approval of its stockholders; (h) shall pay operating expenses and liabilities
from the Issuer's own funds; (i) shall disclose in its annual financial
statements the effects of the Issuer's transactions under the Related Documents
in accordance with generally accepted accounting principles and shall disclose
that the assets of the Issuer are not available to pay creditors of Reliance or
any Originator; (j) shall continuously maintain the resolutions, agreements and
other instruments underlying the transactions described in the Related Documents
as official records; (k) shall insure that any consolidated financial statements
of Reliance have notes to the effect that the Issuer is a separate entity whose
creditors have a claim on its assets prior to those assets becoming available to
its equity holders; and (l) comply with the provisions of its Certificate of
Incorporation and by-laws and not amend, supplement or otherwise modify its
Certificate of Incorporation or by-laws except in accordance therewith.
SECTION 3.24. Representations and Warranties. The Issuer hereby makes the
following representations and warranties for the benefit of the Trustee, the
Note Insurer and the Noteholders on which the Trustee relies in accepting the
Trust Estate in trust and in authenticating the Notes. Such representations and
warranties are made as of the Closing Date and, except as specifically provided
herein, shall survive the transfer, grant and assignment of the Trust Estate to
the Trustee.
(a) Organization and Good Standing. The Issuer is a corporation duly
organized, validly existing and in good standing under the law of its state of
incorporation and each other state where the nature of its business requires it
to qualify, except to the extent that the failure to so qualify would not in the
aggregate materially adversely affect the ability of the Issuer to perform its
obligations under the Related Documents;
(b) Authorization. The Issuer has the power, authority and legal right to
execute, deliver and perform under the terms of the Related Documents and the
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execution, delivery and performance of the Related Documents have been duly
authorized by the Issuer by all necessary corporate action;
(c) Binding Obligation. Each of (i) this Indenture, assuming due
authorization, execution and delivery by the Trustee, (ii) the Insurance
Agreement, assuming due authorization, execution and delivery by the Note
Insurer, the Trustee, the Backup Servicer, and the Servicer, and (iii) the
Pooling and Servicing Agreement, assuming due authorization, execution and
delivery by Reliance, the Backup Servicer, the Trustee and the Servicer,
constitutes a legal, valid and binding obligation of the Issuer, enforceable
against the Issuer in accordance with its terms except that (A) such enforcement
may be subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws (whether statutory, regulatory or decisional) now or hereafter in
effect relating to creditors' rights generally and (B) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
certain equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought, whether a proceeding at law or in equity;
(d) No Violation. The consummation of the transactions contemplated by the
fulfillment of the terms of the Related Documents will not conflict with, result
in any breach of any of the terms and provisions of or constitute (with or
without notice, lapse of time or both) a default under the organizational
documents or bylaws of the Issuer, or any material indenture, agreement,
mortgage, deed of trust or other instrument to which the Issuer is a party or by
which it is bound, or in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of such indenture, agreement, mortgage, deed of
trust or other such instrument, other than any Lien created or imposed pursuant
to the terms of the Related Documents, or violate any law or, to the best of the
Issuer's knowledge, any material order, rule or regulation applicable to the
Issuer of any court or of any Federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over the Issuer
or any of its properties;
(e) No Proceedings. There are no proceedings or investigations to which the
Issuer, or any of its Affiliates, is a party pending, or, to the knowledge of
the Issuer, threatened, before any court, regulatory body, administrative agency
or other tribunal or governmental instrumentality (A) asserting the invalidity
of the Related Documents, (B) seeking to prevent the issuance of any of the
Notes or the consummation of any of the transactions contemplated by the Related
Documents or (C) seeking any determination or ruling that would materially and
adversely affect the performance by the Issuer of its obligations under, or the
validity or enforceability of, the Related Documents.
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(f) Approvals. All approvals, authorizations, consents, orders or other
actions of any Person, or of any court, governmental agency or body or official,
required in connection with the execution and delivery of the Related Documents
by the Issuer and with the valid and proper authorization, issuance and sale of
the Notes pursuant hereto (except approvals of state securities officials under
the blue sky laws) have been or will be taken or obtained on or prior to the
Closing Date.
(g) Place of Business. The Issuer's principal place of business and chief
executive office is located at 400 North Loop 1604 East, Suite 210, San Antonio,
Texas 78232.
(h) Transfer and Assignment. Upon the delivery to the Custodians of the
Receivables Files, the Trustee for the benefit of the Noteholders and the Note
Insurer shall have a first priority perfected security interest in the
Receivables, the Financed Vehicles, and in the proceeds thereof, except for
Liens permitted under the Related Documents and limited with respect to proceeds
to the extent set forth in Section 9-306 of the UCC as in effect in the
applicable jurisdiction. All filings (including UCC filings) and other actions
as are necessary in any jurisdiction to perfect the ownership or other interest
of the Trustee in the Trust Estate, including the transfer of the Receivables
Files and the payment of any fees, have been made.
(i) Parent of the Issuer. Reliance is the registered owner of all of the
issued and outstanding common stock of the Issuer, all of which common stock has
been validly issued, is fully paid and nonassessable.
(j) Pooling and Servicing Agreement. As of the Closing Date, the Issuer has
entered into the Pooling and Servicing Agreement with Reliance relating to its
acquisition of the Receivables and its security interest in the Financed
Vehicles, and the representations and warranties made by Reliance relating to
the Receivables and the Financed Vehicles have been validly assigned to and are
for the benefit of the Issuer, the Trustee, the Note Insurer and the
Noteholders.
(k) The Loan Contracts. The Issuer hereby restates and makes each of the
representations and warranties with respect to the Receivables and the Financed
Vehicles that are made by Reliance in Section 2.3(a) of the Pooling and
Servicing Agreement.
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ARTICLE IV
Satisfaction and Discharge
SECTION 4.1. Satisfaction and Discharge of Indenture. This Indenture shall
cease to be of further effect with respect to the Notes except as to (i) rights
of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.2, 3.3 and 3.20, (v)
the rights, obligations and immunities of the Trustee hereunder (including the
rights of the Trustee under Section 6.7 and the obligations of the Trustee under
Section 4.2) and (vi) the rights of Noteholders and the Note Insurer as
beneficiaries hereof with respect to the property so deposited with the Trustee
payable to all or any of them, and the Trustee, on demand of and at the expense
of the Issuer, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture with respect to the Notes, when:
(A) all Notes theretofore authenticated and delivered (other than (i)
Notes that have been destroyed, lost or stolen and that have been replaced
or paid as provided in Section 2.5 and (ii) Notes for whose payment money
has theretofore been deposited in trust or segregated and held in trust by
the Issuer and thereafter repaid to the Issuer or discharged from such
trust, as provided in Section 3.3) have been delivered to the Trustee for
cancellation and the Policy has expired and been returned to the Note
Insurer for cancellation;
(B) the Issuer has paid or caused to be paid all amounts owed to the
Note Insurer and all other sums payable hereunder by the Issuer; and
(C) the Issuer has delivered to the Trustee and the Note Insurer an
Officers' Certificate, an Opinion of Counsel and (if required by the
Trustee or the Note Insurer) an Independent Certificate from a firm of
certified public accountants, each meeting the applicable requirements of
Section 11.1(a) and, subject to Section 11.2, each stating that all
conditions precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
SECTION 4.2. Payment of Moneys Held by Paying Agent. In connection with the
satisfaction and discharge of this Indenture with respect to the Notes, all
moneys then held by any Paying Agent other than the Trustee under this Indenture
with respect to such Notes shall, upon demand of the Issuer, be paid to the
Trustee to be held and applied according to Section 3.3 and Section 4.5 of the
Pooling and
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Servicing Agreement, and thereupon such Paying Agent shall be released from all
further liability with respect to such moneys.
SECTION 4.3. Release of Trust Estate. The Trustee shall, on or after the
Termination Date, release any remaining portion of the Trust Estate from the
Lien created by this Indenture. Subject to Section 2.9, the Trustee shall
release property from the Lien created by this Indenture pursuant to this
Section 4.3 only upon receipt of a written request of the Issuer accompanied by
an Officer's Certificate. The Trustee shall surrender the Policy to the Note
Insurer upon the payment of the Notes in full.
ARTICLE V
Remedies
SECTION 5.1. Events of Default. "Event of Default," wherever used herein,
means any one of the following events (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any Governmental Authority):
(i) default in the payment of any interest on any Note when the same
becomes due and payable, and such default shall continue for a period of
five Business Days;
(ii) default in the payment of the principal of any Note when the
same becomes due and payable;
(iii) default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a covenant or
agreement a default in the observance or performance of which is elsewhere
in this Section 5.1 specifically dealt with) or in any Related Document, or
any representation or warranty of the Issuer made in this Indenture or in
any Related Document or in any certificate or other writing delivered
pursuant hereto or in connection herewith proving to have been incorrect in
any material respect as of the time when the same shall have been made, and
such default shall have a material adverse effect on the interests of the
Noteholders or the Note Insurer and shall continue or not be cured, or the
circumstance or condition in respect of which such misrepresentation or
warranty was incorrect shall not have been eliminated or otherwise cured,
for a period of 30 days after there shall have been given, by registered or
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certified mail, to the Issuer and the Note Insurer by the Trustee or to the
Issuer, the Note Insurer and the Trustee by the Holders of at least 25% of
the Note Balance, a written notice specifying such default or incorrect
representation or warranty and requiring it to be remedied and stating that
such notice is a "Notice of Default" hereunder;
(iv) the filing of a petition for relief by a court having
jurisdiction in the premises in respect of the Issuer or any substantial
part of its property in an involuntary case under any applicable Federal or
State bankruptcy, insolvency or other similar law now or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Issuer or for any substantial part
of its property, or ordering the winding-up or liquidation of the affairs
of the Issuer and such petition shall remain unstayed and in effect for a
period of 60 consecutive days;
(v) the commencement by the Issuer of a voluntary case under any
applicable Federal or State bankruptcy, insolvency or other similar law now
or hereafter in effect, or the consent by the Issuer to the entry of an
order for relief in an involuntary case under any such law, or the consent
by the Issuer to the appointment or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official
of the Issuer or for any substantial part of its property, or the making by
the Issuer of any general assignment for the benefit of creditors, or the
failure by the Issuer generally to pay its debts as such debts become due,
or the taking of action by the Issuer in furtherance of any of the
foregoing; or
(vi) the failure to pay the Note Balance of the Notes on the Final
Scheduled Payment Date.
SECTION 5.2. Acceleration of Maturity; Rescission and Annulment. If an
Insurer Default shall not have occurred and be continuing and an Event of
Default shall have occurred and be continuing, then the Note Insurer may declare
all the Notes to be immediately due and payable, by a notice in writing to the
Issuer (and to the Trustee), and upon any such declaration, the Note Balance,
together with accrued and unpaid interest thereon through the date of
acceleration, shall become immediately due and payable. If an Insurer Default
shall have occurred and be continuing and an Event of Default shall have
occurred and be continuing, the Trustee in its discretion may, or if so
requested in writing by Note Voting Amount shall, declare by written notice to
the Issuer that the Notes become, whereupon they shall become, immediately due
and payable, together with accrued and unpaid interest thereon. In the event of
an acceleration of the Notes by operation of this Section 5.2, the Trustee shall
continue to be entitled to make
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claims under the Policy pursuant to Sections 5.4 and 5.5 of the Pooling and
Servicing Agreement for payments on the Notes. Payments under the Policy
following acceleration of the Notes shall be applied by the Trustee to pay
interest and principal on the Notes according to clauses FIFTH and SIXTH of
Section 5.4(b).
If the Notes are accelerated due to an Event of Default, the Note Insurer
shall have the right (in addition to its obligation to pay payments on the Notes
in accordance with the Policy), but not the obligation, to make payments under
the Policy or otherwise of interest and principal due on the Notes, in whole or
in part, on any date or dates following such acceleration as the Note Insurer,
in its sole discretion, shall elect. In no event may the Note Insurer make
distributions with respect to the Notes later than required by the Note
Insurer's obligation to make payments on the Notes in accordance with the
Policy.
At any time after such declaration of acceleration of maturity has been
made by the Trustee and before a judgment or decree for payment of the money due
has been obtained by the Trustee as hereinafter in this Article V provided, the
Note Voting Amount, by written notice to the Issuer and the Trustee, may rescind
and annul such declaration and its consequences if:
(i) the Issuer has paid or deposited with the Trustee a sum
sufficient to pay:
(A) all payments of principal of and interest on all Notes and
all other amounts that would then be due hereunder or upon such Notes
if the Event of Default giving rise to such acceleration had not
occurred; and
(B) all sums paid or advanced, together with interest thereon,
by the Trustee or the Note Insurer hereunder or by the Note Insurer
under the Insurance Agreement or the Policy and the reasonable
compensation, expenses, disbursements and advances of the Trustee and
the Note Insurer and their agents and counsel incurred in connection
with the enforcement hereof to the date of such payment or deposit;
and
(ii) all Events of Default, other than the nonpayment of the
principal of the Notes that has become due solely by such acceleration,
have been cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any right
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consequent thereto.
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by
Trustee; Authority of Controlling Party. (a) The Issuer covenants that if the
Notes are accelerated following the occurrence of an Event of Default, the
Issuer will, upon demand of the Trustee, pay to it as and to the extent provided
in Section 4.5 of the Pooling and Servicing Agreement, for the benefit of the
Holders of Notes, the whole amount then due and payable on such Notes for
principal and interest, with interest upon the overdue principal at the Note
Interest Rate, and, to the extent payment at such rate of interest shall be
legally enforceable, upon overdue installments of interest, at the Note Interest
Rate, and in addition thereto such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee and its agents
and counsel.
(b) Each Secured Party hereby irrevocably and unconditionally appoints the
Controlling Party as the true and lawful attorney in fact of such Secured Party
for so long as such Secured Party is not the Controlling Party, with full power
of substitution, to execute, acknowledge and deliver any notice, document,
certificate, paper, pleading or instrument and to do in the name of the
Controlling Party as well as in the name, place and stead of such Secured Party
such acts, things and deeds for or on behalf of and in the name of such Secured
Party under this Indenture (including under Section 5.4) and under the Related
Documents which such Secured Party could or might do or which may be necessary,
desirable or convenient to effect the purposes contemplated hereunder and under
the Related Documents and following the occurrence of an Event of Default,
exercise full right, power and authority to take, or defer from taking, any and
all acts with respect to the administration, maintenance or disposition of the
Trust Estate.
(c) If an Event of Default occurs and is continuing, the Trustee may at the
direction of the Controlling Party, as more particularly provided in Section
5.4, proceed to protect and enforce its rights and the rights of the
Noteholders, by such appropriate Proceedings as the Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy or
legal or equitable right vested in the Trustee by this Indenture or by law.
(d) If there shall be pending, relative to the Issuer or any other obligor
upon the Notes or any Person having or claiming an ownership interest in the
Trust Estate, Proceedings under Title 11 of the United States Code or any other
applicable Federal or State bankruptcy, insolvency or other similar law, or in
case
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a receiver, assignee, trustee in bankruptcy or reorganization, liquidator,
sequestrator or similar official shall have been appointed for or taken
possession of the Issuer or its property or such other obligor or Person, or in
case of any other comparable judicial Proceedings relative to the Issuer or
other obligor upon the Notes, or to the creditors or property of the Issuer or
such other obligor, the Trustee, irrespective of whether the principal of any
Notes shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand
pursuant to this Section 5.3, shall be entitled and empowered, by intervention
in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes and to file
such other papers or documents as may be necessary or advisable in order to
have the claims of the Trustee (including any claim for reasonable
compensation to the Trustee and each predecessor Trustee, and their
respective agents, attorneys and counsel, and for reimbursement of all
expenses and liabilities incurred, and all advances made, by the Trustee
and each predecessor Trustee, except as a result of negligence or bad
faith), the Note Insurer and the Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law or regulations, to vote on
behalf of the Holders of the Notes in any election of a trustee, a standby
trustee or any Person performing similar functions in any such Proceedings;
(iii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute all amounts received with
respect to the claims of the Noteholders and of the Trustee on their
behalf; and
(iv) to file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee or
the Holders of Notes allowed in any Proceedings relative to the Issuer, its
creditors and its property;
and any trustee, receiver, liquidator, assignee, custodian, sequestrator or
other similar official in any such Proceeding is hereby authorized by each of
such Noteholders to make payments to the Trustee, and, if the Trustee shall
consent to the making of payments directly to such Noteholders, to pay to the
Trustee such amounts as shall be sufficient to cover reasonable compensation to
the Trustee, each predecessor Trustee and their respective agents, attorneys and
counsel, and all other expenses and liabilities incurred, and all advances made,
by the Trustee and each predecessor Trustee except as a result of negligence or
bad faith.
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(e) Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or vote for or accept or adopt on behalf of any
Noteholder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof or to authorize the
Trustee to vote in respect of the claim of any Noteholder in any such proceeding
except, as aforesaid, to vote for the election of a trustee in bankruptcy or
similar Person.
(f) All rights of action and of asserting claims under this Indenture or
under any of the Notes may be enforced by the Trustee without the possession of
any of the Notes or the production thereof in any trial or other Proceedings
relative thereto, and any such action or Proceedings instituted by the Trustee
shall be brought in its own name and as trustee of an express trust, and any
recovery of judgment, subject to the payment of the expenses, disbursements and
compensation of the Trustee, each predecessor Trustee and their respective
agents and attorneys, shall be for the ratable benefit of the Holders of the
Notes and the Note Insurer.
(g) In any Proceedings brought by the Trustee or to which the Trustee shall
be a party (and also any Proceedings involving the interpretation of any
provision of this Indenture), the Trustee shall be held to represent all the
Holders of the Notes, and it shall not be necessary to make any Noteholder a
party to any such Proceedings.
SECTION 5.4. Remedies; Priorities. (a) If an Event of Default shall have
occurred and be continuing, the Trustee, at the direction of the Controlling
Party, shall (subject to Section 5.5) exercise any one or more of the following
remedies, whether sequentially or concurrently:
(i) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Trust Estate;
(ii) exercise any remedies of a secured party under the UCC and take
any other appropriate action to protect and enforce the rights and remedies
of the Secured Parties;
(iii) sell the Trust Estate, or any portion thereof or rights or
interest therein, at one or more public or private sales called and
conducted in any manner permitted by law;
(iv) elect to have the Issuer maintain possession of the Receivables
and continue to apply collections on such Receivables as if there had been
no declaration of acceleration; and
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(v) make demand upon the Servicer, by written notice, that the
Servicer deliver to the Trustee all Receivable Files;
provided, however, that, if the Trustee is the Controlling Party, the Trustee
may not sell or otherwise liquidate the Trust Estate following an Event of
Default, unless: (A) all the Noteholders consent thereto, (B) the proceeds of
such sale or liquidation distributable to the Noteholders are sufficient to
discharge in full all amounts then due and unpaid upon such Notes for principal
and interest together with any unpaid Reimbursement Amounts and (C) the Trustee
determines that the Trust Estate will not continue to provide sufficient funds
for the payment of principal of and interest on the Notes as they would have
become due if the Notes had not been declared due and payable, and the Trustee
provides prior written notice to the Rating Agencies and the Note Insurer and
obtains the consent of Holders of the Note Voting Amount. In determining such
sufficiency or insufficiency with respect to clauses (B) and (C) above, the
Trustee may, but need not, obtain and rely upon an opinion of an Independent
investment banking or accounting firm of national reputation as to the
feasibility of such proposed action and as to the sufficiency of the Trust
Estate for such purpose.
(b) If the Trustee collects any money or property pursuant to this Article
V (excluding any payments made under the Policy), it shall pay out such money or
property according to the priorities set forth below:
FIRST: To the payment to the Trustee of the Trustee Fee then due, and any
costs or expenses incurred by it in connection with enforcing the remedies
provided for in this Article V;
SECOND: If Reliance is no longer acting as the Servicer, to the payment to
the Servicer of the Total Servicing Fee then due;
THIRD: To the payment to the Backup Servicer of all accrued and unpaid
expenses up to $100,000 relating to the assumption of servicing responsibilities
by the Backup Servicer and of the Backup Servicing Fee then due and to the
Custodians (other than any Originator or Reliance) of the Custodian Fee then due
to the extent not paid by the Servicer;
FOURTH: To the payment to the Note Insurer of the Premium then due;
FIFTH: To the Noteholders for amounts due and unpaid on the Notes for
interest, ratably, without preference or priority of any kind;
SIXTH: To the Noteholders for amounts equal to the Note Balance,
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ratably, without preference or priority of any kind;
SEVENTH: To the payment to the Note Insurer of any Reimbursement Amounts
and any other amounts due from the Issuer under the Insurance Agreement;
EIGHTH: To reimburse the Note Insurer and the Noteholders for any costs or
expenses incurred in connection with any enforcement action with respect to this
Indenture or the Notes;
NINTH: To the payment to the Servicer of any other amounts due the Servicer
as expressly provided herein and in the Pooling and Servicing Agreement;
TENTH: To the payment to the Trustee, the Backup Servicer and the
Custodians, any other amounts due to the Trustee, the Backup Servicer or the
Custodians as expressly provided herein and in the Pooling and Servicing
Agreement (including any amounts due to the Backup Servicer or any other
successor Servicer, in either case when acting as Servicer, to cover
indemnification obligations of the Issuer);
ELEVENTH: To the payment to the Issuer of any surplus amounts.
The Trustee may fix a special record date and special payment date for any
payment to Noteholders pursuant to this Section. At least 15 days before such
special record date, the Trustee shall mail to each Noteholder and the Issuer a
notice that states the special record date, the special payment date and the
amount to be paid.
SECTION 5.5. Optional Preservation of the Receivables. If the Trustee is
the Controlling Party and if the Notes have been declared to be due and payable
under Section 5.2 following an Event of Default, and such declaration and its
consequences have not been rescinded and annulled, the Trustee may, but need
not, elect to retain possession of the Trust Estate and effect the collection
thereof rather than dispose of or liquidate the Trust Estate. It is the desire
of the parties hereto and the Noteholders that there be at all times sufficient
funds for the payment of principal of and interest on the Notes, and the Trustee
shall take such desire into account when determining whether or not to retain
possession of the Trust Estate. In determining whether to retain possession of
the Trust Estate and effect the collection thereof, the Trustee may, but need
not, obtain and rely upon an opinion of an Independent investment banking or
accounting firm of national reputation as to the feasibility of such proposed
action and as to the sufficiency of the Trust Estate for such purpose. Subject
to Section 5.11 and for purposes of effecting the
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collection of the Trust Estate, the Trustee may (but shall not be required to)
reasonably exercise any judgment or take any action not otherwise inconsistent
with the terms hereof.
SECTION 5.6. Limitation of Suits. No Holder of any Note shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless an Insurer Default has occurred and is continuing and:
(i) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(ii) the Holder(s) of not less than 25% of the Note Balance have made
written request to the Trustee to institute such Proceeding in respect of
such Event of Default in its own name as Trustee hereunder;
(iii) such Holder(s) have offered to the Trustee indemnit satisfactory
to the Trustee against the costs, expenses and liabilities to be incurred
in complying with such request;
(iv) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute such Proceeding; and
(v) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Note Majority.
It being understood and intended that no one or more Holder(s) of Notes shall
have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holder(s) of Notes or to obtain or to seek to obtain priority or
preference over any other Holder(s) or to enforce any right under this
Indenture, except in the manner herein provided.
If the Trustee shall receive conflicting or inconsistent requests and
indemnity from two or more groups of Noteholders, each representing less than a
Note Majority, the Trustee in its sole discretion may determine what action, if
any, shall be taken, notwithstanding any other provisions of this Indenture.
SECTION 5.7. Unconditional Rights of Noteholders To Receive Principal and
Interest. Notwithstanding any other provisions in this Indenture, the Holder of
any Note shall have the right, which is absolute and unconditional, to receive
payment of the principal of and interest, if any, on such Note on or after the
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respective due dates thereof expressed in such Note or in this Indenture (or, in
the case of redemption, on or after the Redemption Date) and to institute suit
for the enforcement of any such payment pursuant to Section 5.6, and such right
shall not be impaired without the consent of such Holder.
SECTION 5.8. Restoration of Rights and Remedies. If the Controlling Party
or any Noteholder has instituted any Proceeding to enforce any right or remedy
under this Indenture and such Proceeding has been discontinued or abandoned for
any reason or has been determined adversely to the Controlling Party or to such
Noteholder, then and in every such case the Issuer, the Controlling Party and
the Noteholders shall, subject to any determination in such Proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Controlling Party and the Noteholders
shall continue as though no such Proceeding had been instituted.
SECTION 5.9. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Controlling Party or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.10. Delay or Omission Not a Waiver. No delay or omission of the
Controlling Party, the Trustee or any Holder of Notes to exercise any right or
remedy accruing upon any Default or Event of Default shall impair any such right
or remedy or constitute a waiver of any such Default or Event of Default or an
acquiescence therein. Every right and remedy given by this Article V or by law
to the Trustee, the Controlling Party or to the Noteholders may be exercised
from time to time, and as often as may be deemed expedient, by the Trustee, the
Controlling Party or by the Noteholders, as the case may be.
SECTION 5.11. Control by Noteholders. If the Trustee is the Controlling
Party, the Holders of the Note Voting Amount shall have the right to direct the
time, method and place of conducting any Proceeding for any remedy available to
the Trustee with respect to the Notes or exercising any trust or power conferred
on the Trustee; provided, however, that:
(i) such direction shall not be in conflict with any rule of law
or with this Indenture;
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(ii) except as otherwise expressly provided in Section 5.4, any
direction to the Trustee to sell or liquidate the Trust Estate shall be by
all the Noteholders;
(iii) if the conditions set forth in Section 5.5 have been satisfied
and the Trustee elects to retain the Trust Estate pursuant to such Section,
then any direction to the Trustee by Holders of Notes representing less
than 100% of the Note Balance to sell or liquidate the Trust Estate shall
be of no force and effect; and
(iv) the Trustee may take any other action deemed proper by the
Trustee that is not inconsistent with such direction;
provided, however, that, subject to Section 6.1, the Trustee need not take any
action that it reasonably determines might involve it in liability or would
reasonably be expected to materially adversely affect the rights of any
Noteholder(s) not consenting to such action.
SECTION 5.12. Waiver of Past Defaults. The Note Insurer or, if an Insurer
Default has occurred and is continuing, the Holders of the Note Voting Amount
may waive any past Default or Event of Default and its consequences except a
Default (a) in payment of principal of or interest on any of the Notes or (b) in
respect of a covenant or provision hereof that cannot be modified or amended
without the consent of the Holder of each Note. In the case of any such waiver,
the Issuer, the Note Insurer, the Trustee and the Holders of the Notes shall be
restored to their former positions and rights hereunder, respectively; but no
such waiver shall extend to any subsequent or other Default or Event of Default
or impair any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed to
have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereto.
SECTION 5.13. Undertaking for Costs. All parties to this Indenture agree,
and each Holder of any Note by such Holder's acceptance thereof shall be deemed
to have agreed, that any court may in its discretion require, in any suit for
the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken, suffered or omitted by it as Trustee,
the filing by any party litigant in such suit of an undertaking to pay the costs
of such suit, and that such court may in its discretion assess reasonable costs,
including reasonable
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attorney's fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section 5.13 shall not apply to (a) any suit
instituted by the Trustee or the Note Insurer, (b) any suit instituted by any
Noteholder(s) holding in the aggregate more than 10% of the Note Balance or (c)
any suit instituted by any Noteholder for the enforcement of the payment of
principal of or interest on any Note on or after the respective due dates
expressed in such Note and in this Indenture (or, in the case of redemption, on
or after the Redemption Date).
SECTION 5.14. Waiver of Stay or Extension Laws. The Issuer covenants (to
the extent that it may lawfully do so) that it will not at any time insist upon,
or plead or in any manner whatsoever, claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
the Issuer (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
SECTION 5.15. Action on Notes. The Trustee's right to seek and recover
judgment on the Notes or under this Indenture shall not be affected by the
seeking, obtaining or application of any other relief under or with respect to
the Notes or this Indenture. Neither the Lien of this Indenture nor any rights
or remedies of the Trustee, the Note Insurer or the Noteholders shall be
impaired by the recovery of any judgment by the Trustee against the Issuer or by
the levy of any execution under such judgment upon any portion of the Trust
Estate or upon any of the assets of the Issuer.
SECTION 5.16. Performance and Enforcement of Certain Obligations. (a)
Promptly following a request from the Trustee to do so (after the occurrence of
an Event of Default as otherwise required under this Article V or upon the
direction of the Controlling Party) and at the Issuer's expense, the Issuer
shall take all such lawful action as the Trustee or the Note Insurer may request
to compel or secure the performance and observance by Reliance and the Servicer,
as applicable, of each of their obligations to the Issuer under or in connection
with the Pooling and Servicing Agreement and any other Related Document in
accordance with the terms thereof, and to exercise any and all rights, remedies,
powers and privileges lawfully available to the Issuer under or in connection
with the Pooling and Servicing Agreement and any other Related Document to the
extent and in the manner directed by the Trustee, including the transmission of
notices of default on the part of Reliance or the Servicer thereunder and the
institution of legal or administrative actions or proceedings to compel or
secure performance by Reliance
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or the Servicer of each of their obligations under the Pooling and Servicing
Agreement and any other Related Document.
(b) If an Event of Default has occurred and is continuing, the Trustee
shall upon the direction of the Controlling Party, or if the Trustee is the
Controlling Party, may, exercise all rights, remedies, powers, privileges and
claims of the Issuer against Reliance or the Servicer under or in connection
with the Pooling and Servicing Agreement and any other Related Document,
including the right or power to take any action to compel or secure performance
or observance by Reliance or the Servicer of each of their obligations to the
Issuer thereunder and to give any consent, request, notice, direction, approval,
extension or waiver under the Pooling and Servicing Agreement and any other
Related Document, and any right of the Issuer to take such action shall be
suspended.
(c) Promptly following a request from the Trustee to do so (after the
occurrence of an Event of Default as otherwise required under this Article V or
upon direction of the Controlling Party) and at the Issuer's expense, the Issuer
shall take all such lawful action as the Trustee may request to compel or secure
the performance and observance by (i) the Dealers of each of their respective
obligations to Reliance under or in connection with the Dealer Agreements in
accordance with the terms thereof, (ii) by the Originators under the Receivables
Purchase Agreement, the Subservicing Agreement and the Custodian Agreement and
(iii) by Reliance under or in connection with the Pooling and Servicing
Agreement and to exercise any and all rights, remedies, powers and privileges
lawfully available to the Issuer under or in connection with all such agreements
to the extent and in the manner directed by the Trustee, including the
transmission of notices of default on the part of Reliance thereunder and the
institution of legal or administrative actions or proceedings to compel or
secure performance (i) by the Dealers of each of their respective obligations
under the Dealer Agreements, (ii) by the Originators of each of their respective
obligations under the Receivables Purchase Agreement, the Subservicing Agreement
and the Custodian Agreement or (iii) by Reliance of each of its obligations
under the Pooling and Servicing Agreement.
ARTICLE VI
The Trustee
SECTION 6.1. Duties of the Trustee. (a) If an Event of Default has occurred
and is continuing, the Trustee shall exercise the rights and powers vested in it
by this Indenture and use the same degree of care and skill in their exercise as
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a prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(b) Subject to Section 6.1(a):
(i) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture and its other Related
Documents and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; provided,
however, in the case of any such certificates or opinions that by any
provision hereof are specifically required to be furnished to the Trustee,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture and the
other Related Documents.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act or its own wilful misconduct, except
that:
(i) this clause (c) does not limit the effect of clause (b) of this
Section;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to this Indenture;
(iv) the Trustee shall not be charged with knowledge of an Event of
Default or Servicer Termination Event unless a Responsible Officer obtains
actual knowledge of such event or the Trustee receives written notice of
such event from the Issuer, Reliance, the Note Insurer, the Servicer or
Holders owning Notes aggregating not less than 10% of the Note Balance; and
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(v) the Trustee shall have no duty to monitor the performance of the
Issuer, Reliance or the Servicer, nor shall it have any liability in
connection with malfeasance or nonfeasance by the Issuer, Reliance or the
Servicer. The Trustee shall have no liability in connection with compliance
of the Issuer, Reliance or the Servicer with statutory or regulatory
requirements related to the Receivables. The Trustee shall not make or be
deemed to have made any representations or warranties with respect to the
Receivables or the validity or sufficiency of any pledge or assignment of
the Receivables to the Trustee.
(d) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Issuer.
(e) Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law, this Indenture or the Pooling and
Servicing Agreement.
(f) No provision of this Indenture, including Section 6.13, shall require
the Trustee to expend or risk its own funds or otherwise incur or be subjected
to financial liability in the performance of any of its duties hereunder or in
the exercise of any of its rights or powers, if it shall have reasonable grounds
to believe that repayments of such funds or adequate indemnity satisfactory to
it against any loss, liability or expense is not reasonably assured to it;
provided that nothing contained in this clause (f) shall limit the effect of
clause (c).
(g) The Trustee shall, upon one Business Day's prior notice to the Trustee,
permit any representative of the Note Insurer or the Issuer, during the
Trustee's normal business hours, to examine all books of account, records,
reports and other papers of the Trustee relating to the Notes, to make copies
and extracts therefrom and to discuss the Trustee's affairs and actions, as such
affairs and actions relate to the Trustee's duties with respect to the Notes,
with the Trustee's officers and employees responsible for carrying out the
Trustee's duties with respect to the Notes. All expenses incurred by the Trustee
in connection with such examination shall be borne by the Issuer.
(h) In no event shall the Trustee be required to perform, or be responsible
for the manner of performance of, any of the obligations of the Servicer, or any
other party, under the Pooling and Servicing Agreement except that Harris Trust
and Savings Bank, solely in its capacity as Backup Servicer, shall perform and
be responsible for such obligations during such time, if any, as the Backup
Servicer shall be the successor to, and be vested with the rights, powers,
duties and privileges of the Servicer in accordance with the terms of the
Pooling and Servicing
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Agreement.
(i) The Trustee shall, and hereby agrees that it shall, perform all of the
obligations and duties required of it under the Pooling and Servicing Agreement.
(j) The Trustee shall, and hereby agrees that it shall, hold the Policy in
trust, and shall hold any proceeds of any claim on the Policy in trust solely
for the use and benefit of the Noteholders. The Trustee shall deliver to the
Rating Agencies notice of any change made to the Policy prior to the Termination
Date. For avoidance of doubt, unless the Rating Agency Condition is satisfied,
no modification shall be made to the Policy without the prior written consent of
the Holders of Notes.
(k) Without limiting the generality of this Section 6.1, the Trustee, in
its capacity as Trustee, shall have no duty, unless specifically set forth in
this Indenture or the Related Documents, (i) to see to any recording, filing or
depositing of this Indenture or any agreement referred to herein or any
financing statement evidencing a security interest in the Financed Vehicles, or
to see to the maintenance of any such recording or filing or depositing or to
any recording, refiling or redepositing of any thereof, (ii) to see to the
payment or discharge of any tax, assessment or other governmental charge or any
Lien or encumbrance of any kind owing with respect to, assessed or levied
against any part of the Trust Estate, (iii) to confirm or verify the contents of
any reports or certificates delivered to the Trustee pursuant to this Indenture
or the Pooling and Servicing Agreement believed by the Trustee to be genuine and
to have been signed or presented by the proper party or parties, or (iv) to
inspect the Financed Vehicles at any time or ascertain or inquire as to the
performance or observance of any of the Issuer's or the Servicer's
representations, warranties or covenants or the Servicer's duties and
obligations as Servicer.
SECTION 6.2. Rights of Trustee. (a) The Trustee may conclusively rely and
shall be fully protected in acting on any document reasonably 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 any such document.
(b) The Trustee shall not be liable for any action it takes or omits to
take in good faith in reliance on the Officers' Certificate or Opinion of
Counsel.
(c) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents, attorneys
or a custodian or nominee, and the Trustee shall not be responsible for any
misconduct or negligence on the part of, or for the supervision of, any such
agent,
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attorney, custodian or nominee appointed with due care by it.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute wilful
misconduct, negligence or bad faith.
(e) The Trustee may consult with counsel, and the advice or opinion of
counsel with respect to legal matters relating to this Indenture and the Notes
shall be full and complete authorization and protection from liability in
respect to any action taken, omitted or suffered by it hereunder in good faith
and in accordance with the advice or opinion of such counsel.
(f) The Trustee shall not be required to make any initial or periodic
examination of any files or records related to the Receivables for the purpose
of establishing the presence or absence of defects, the compliance by the Issuer
with its representations and warranties or for any other purpose.
(g) If the Trustee is also acting as Paying Agent or Note Registrar
hereunder, the rights and protections afforded to the Trustee pursuant to this
Article VI shall also be afforded to such Paying Agent or Note Registrar.
SECTION 6.3. Individual Rights of the Trustee. The Trustee shall not, in
its individual capacity, but may in a fiduciary capacity, become the owner of
Notes. The Trustee may otherwise deal with the Issuer or its Affiliates with the
same rights it would have if it were not the Trustee. Any Paying Agent, Note
Registrar, co-registrar or co-paying agent may do the same with like rights.
However, the Trustee must comply with Sections 6.11 and 6.12.
SECTION 6.4. Trustee's Disclaimer. The Trustee shall not be responsible
for, and makes no representation as to the validity or adequacy of, this
Indenture, the Trust Estate or the Notes; shall not be accountable for the
Issuer's use of the proceeds from the Notes; and shall not be responsible for
any statement of the Issuer in this Indenture or in any document issued in
connection with the sale of the Notes or in the Notes other than the Trustee's
certificate of authentication.
SECTION 6.5. Notice of Defaults. If a Default, Event of Default,
Distribution Increase, Collateral Perfection Trigger or Servicer Termination
Event occurs and is continuing and is known to a Responsible Officer, the
Trustee shall mail to each Noteholder and the Note Insurer notice of the
Default, Event of Default, Distribution Increase, Collateral Perfection Trigger
or Servicer Termination Event within three Business Days after such Responsible
Officer has
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knowledge of such Default, Event of Default, Distribution Increase, Collateral
Perfection Trigger or Servicer Termination Event. Except in the case of a
Default in payment of principal of or interest on any Note, the Trustee may
withhold such notice to the Noteholders if and so long as a committee of its
Responsible Officers in good faith determines that withholding the notice is in
the interests of Noteholders.
SECTION 6.6. Reports by Trustee to the Holders. The Trustee shall deliver
to each Noteholder such information as may be reasonably required to enable such
Holder to prepare its Federal and State income tax returns within a reasonable
period after the end of each calendar year.
SECTION 6.7. Compensation, Reimbursement and Indemnity. (a) Pursuant to
Section 4.5 of the Pooling and Servicing Agreement and Section 5.4(b), the
Issuer shall pay to the Trustee from time to time a monthly fee with respect to
each Collection Period for its services under, or in connection with, this
Indenture (the "Trustee Fee"), which shall be paid on each Payment Date pursuant
to priority second of Section 4.5 of the Pooling and Servicing Agreement and
shall equal the greater of (i) one-twelfth of 0.01% multiplied by the Note
Balance as of the first day of the related Collection Period and (ii) $500. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. Pursuant to the Pooling and Servicing Agreement,
the Servicer shall reimburse the Trustee for all reasonable out-of-pocket
expenses incurred or made by it, including costs of collection, in addition to
the Trustee Fee. Such expenses shall include securities transaction charges and
the reasonable compensation and expenses, disbursements and advances of the
Trustee's agents, counsel, accountants and experts but, with respect to
securities transaction charges, only to the extent such charges have not been
waived due to the Trustee's receipt of payment from any financial institution
with respect to certain eligible investments specified by the Servicer pursuant
to Section 4.1(c) of the Pooling and Servicing Agreement. If the Servicer fails
to pay the expenses of the Trustee described in the two preceding sentences, the
Issuer shall be obligated to pay such expenses solely from amounts payable to
the Issuer pursuant to Section 4.5(xi) of the Pooling and Servicing Agreement.
(b) The Issuer shall indemnify the Trustee and its officers, directors,
employees and agents against any and all loss, liability or expense (including
attorneys' fees) incurred by them in connection with the administration of this
trust and the performance of its duties hereunder, which indemnification shall
be paid solely from amounts payable to the Issuer pursuant to Section 4.5(xi) of
the Pooling and Servicing Agreement or, if applicable, shall be payable pursuant
to Section 4.5(x) of the Pooling and Servicing Agreement. The Trustee shall
notify the Issuer
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promptly of any claim for which it may seek indemnity. Failure by the Trustee to
so notify the Issuer shall not relieve the Issuer of its obligations hereunder.
The Trustee may have separate counsel and the Issuer shall pay the fees and
expenses of such counsel solely from amounts payable to the Issuer pursuant to
Section 4.5(xi) of the Pooling and Servicing Agreement or, if applicable, shall
be payable pursuant to Section 4.5 (x) of the Pooling and Servicing Agreement.
The Issuer need not reimburse any expense or indemnify against any loss,
liability or expense incurred by the Trustee through the Trustee's own willful
misconduct, negligence or bad faith.
The Issuer's payment obligations to the Trustee pursuant to this Section
6.7 shall survive the discharge of this Indenture. When the Trustee incurs
expenses after the occurrence of an Event of Default specified in Section 5.1(v)
or (vi), the expenses are intended to constitute expenses of administration
under Title 11 of the United States Code or any other applicable Federal or
State bankruptcy, insolvency or similar law. Notwithstanding anything else set
forth in this Indenture or the Related Documents, the Trustee agrees that the
obligations of the Issuer to the Trustee hereunder and under the Related
Documents shall be recourse to the Trust Estate only from amounts payable to the
Issuer pursuant to Section 4.5(xi) of the Pooling and Servicing Agreement and
specifically shall not be recourse to the other assets of the Issuer.
SECTION 6.8. Replacement of the Trustee. No resignation or removal of the
Trustee and no appointment of a successor Trustee shall become effective until
the acceptance of appointment by a successor Trustee acceptable to the Note
Insurer pursuant to this Section 6.8. Subject to the preceding sentence, the
Trustee may resign at any time by providing 60 days prior written notice to the
Issuer, the Note Insurer and the Noteholders or sooner if so required by law.
The Issuer may, with the consent of the Controlling Party, and, at the request
of the Controlling Party shall, remove the Trustee if:
(i) the Trustee fails to comply with Section 6.11;
(ii) the filing of a petition for relief by a court having
jurisdiction in the premises in respect of the Trustee, or any substantial
part of its property in an involuntary case under any applicable Federal or
State bankruptcy, insolvency or other similar law now or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Trustee or for any substantial part
of its property, or ordering the winding-up or liquidation of the affairs
of the Trustee and such petition shall remain unstayed and in effect for a
period of 60 consecutive days;
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(iii) the commencement by the Trustee of a voluntary case under any
applicable Federal or State bankruptcy, insolvency or other similar law now
or hereafter in effect, or the consent by the Trustee to the entry of an
order for relief in an involuntary case under any such law, or the consent
by the Trustee to the appointment or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official
of the Trustee or for any substantial part of its property, or the making
by the Trustee of any general assignment for the benefit of creditors, or
the failure by the Trustee generally to pay its debts as such debts become
due, or the taking of action by the Trustee in furtherance of any of the
foregoing;
(iv) the Trustee otherwise becomes incapable of acting; or
(v) the Trustee has materially failed to perform any of its duties
hereunder or under any other Related Document or has materially breached
any representation and warranty made under the Related Documents.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason (the Trustee in such event being referred to herein as
the retiring Trustee), the Issuer shall promptly provide written notice of such
event to the Rating Agencies, the Note Insurer and the Noteholders and shall
appoint a successor Trustee acceptable to the Controlling Party. If the Issuer
fails to appoint such a successor Trustee, the Controlling Party may appoint a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee, the Note Insurer and to the Issuer. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Noteholders and the Note Insurer. The retiring Trustee shall
promptly transfer all property held by it as Trustee to the successor Trustee
and shall be paid all fees and expenses owed through the date of termination.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Controlling
Party, the Issuer or a Note Majority may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this Section,
the Issuer's obligations under Section 6.7 shall continue for the benefit of the
retiring Trustee. The retiring Trustee shall have no liability for any act or
omission by any successor Trustee.
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SECTION 6.9. Successor Trustee by Merger. If the Trustee consolidates with,
merges or converts into, or transfers all or substantially all its corporate
trust business or assets to, another corporation or banking association, the
resulting, surviving or transferee corporation without any further act shall be
the successor Trustee. The Trustee shall provide the Rating Agencies, the Note
Insurer and the Issuer prior written notice of any such transaction; provided,
however, that such corporation or banking association shall be otherwise
qualified and eligible under Section 6.11.
If at the time of any such succession by merger, conversion or
consolidation to the Trustee any of the Notes shall have been authenticated but
not delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Trustee may authenticate such Notes either
in the name of any predecessor trustee hereunder or in the name of the successor
to the Trustee; and in all such cases such certificates of authentication shall
have the full force and effect to the same extent given to the certificate of
authentication of the Trustee anywhere in the Notes or in this Indenture.
SECTION 6.10. Appointment of Co-Trustee or Separate Trustee. (a)
Notwithstanding any other provisions of this Indenture, at any time, for the
purpose of meeting any legal requirement of any jurisdiction in which any part
of the Trust Estate may at the time be located, the Trustee, with the consent of
the Controlling Party, shall have the power and may execute and deliver all
instruments to appoint one or more Person(s) to act as co-trustee(s), or
separate trustee(s), of all or any part of the Trust Estate, and to vest in such
Person(s), in such capacity and for the benefit of the Noteholders, such title
to the Trust Estate, or any part thereof, and, subject to the other provisions
of this Section, such powers, duties, obligations, rights and trusts as the
Trustee may consider necessary or desirable. No co-trustee or separate trustee
hereunder shall be required to meet the terms of eligibility as a successor
trustee under Section 6.11 and no notice to Noteholders of the appointment of
any co-trustee or separate trustee shall be required under Section 6.8;
provided, however, that each co-trustee and separate trustee must be acceptable
to the Note Insurer.
(b) Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Trustee shall be conferred or imposed upon and exercised or
performed by the Trustee and such separate trustee or co-trustee jointly
(it
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being understood that such separate trustee or co-trustee is not authorized
to act separately without the Trustee joining in such act), except to the
extent that under any law of any jurisdiction in which any particular
act(s) are to be performed, the Trustee shall be incompetent or unqualified
to perform such act(s), in which event such rights, powers, duties and
obligations (including the holding of title to the Trust Estate or any
portion thereof in any such jurisdiction) shall be exercised and performed
singly by such separate trustee or co-trustee, but solely at the direction
of the Trustee;
(ii) no trustee hereunder shall be personally liable by reason
of any act or omission of any other trustee hereunder; and
(iii) the Trustee may at any time accept the resignation of or
remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Indenture and the conditions
of this Article VI. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Indenture,
specifically including every provision of this Indenture relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Trustee as its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Indenture on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
(e) The Trustee shall have no obligation to determine whether a co-trustee
or separate trustee is legally required in any jurisdiction in which any part of
the Trust Estate may be located.
SECTION 6.11. Corporate Trustee Required; Eligibility. There shall at all
times be a trustee hereunder which shall be a corporation or association
organized and doing business under the laws of the United States of America or
of
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any state, authorized under such laws to exercise corporate trust powers, having
a combined capital and surplus of at least $100,000,000, acceptable to the Note
Insurer, subject to supervision or examination by Federal or state authority and
having an office within the United States of America, and which shall have a
commercial paper or other short-term rating of the highest short-term rating
categories by each of the Rating Agencies, or otherwise acceptable to each of
the Rating Agencies. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purposes of this Section 6.11, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section 6.11, it shall resign immediately in the
manner and with the effect hereinafter specified in this Article VI.
SECTION 6.12. Appointment and Powers. Subject to the terms and conditions
hereof, each of the Secured Parties hereby appoints Harris Trust and Savings
Bank as Trustee with respect to the Indenture Collateral, and Harris Trust and
Savings Bank hereby accepts such appointment and agrees to act as the Trustee on
behalf of the Secured Parties with respect to the Indenture Collateral for the
Secured Parties, to maintain custody and possession of such Indenture Collateral
(except as otherwise provided hereunder) pursuant to the Pooling and Servicing
Agreement and the Custodian Agreement and to perform the other duties of the
Trustee in accordance with the provisions of this Indenture. Each Secured Party
hereby authorizes the Trustee to take such action on its behalf, and to exercise
such rights, remedies, powers and privileges hereunder, as the Controlling Party
may direct and as are specifically authorized to be exercised by the Trustee by
the terms hereof, together with such actions, rights, remedies, powers and
privileges as are reasonably incidental thereto. The Trustee shall act upon and
in compliance with the written instructions of the Controlling Party delivered
pursuant to this Indenture promptly following receipt of such written
instructions; provided, however, that the Trustee shall not be required to act
in accordance with any instructions for which it has not received indemnity
satisfactory to the Trustee. Receipt of such instructions shall not be a
condition to the exercise by the Trustee of its express duties hereunder, except
where this Indenture provides that the Trustee is permitted to act only
following and in accordance with such instructions.
SECTION 6.13. Limitation on Liability. Neither the Trustee nor any of its
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them hereunder or in connection herewith, except
that the Trustee shall be liable for its negligence (other than errors in
judgment), bad faith or willful misconduct; nor shall the Trustee be responsible
for the validity,
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effectiveness, value, sufficiency or enforceability against the Issuer of this
Indenture or any of the Indenture Collateral (or any part thereof).
Notwithstanding any term or provision of this Indenture, the Trustee shall incur
no liability to the Issuer or the Secured Parties for any action taken or
omitted by the Trustee in connection with the Indenture Collateral, except for
the negligence or willful misconduct on the part of the Trustee and, further,
shall incur no liability to the Secured Parties except for negligence (other
than errors in judgment) or willful misconduct in carrying out its duties to the
Secured Parties. Subject to Section 6.14, the Trustee shall be protected and
shall incur no liability to any such party in relying upon the accuracy, acting
in reliance upon the contents, and assuming the genuineness of any notice,
demand, certificate, signature, instrument or other document reasonably believed
by the Trustee to be genuine and to have been duly executed by the appropriate
signatory, and (absent actual knowledge to the contrary) the Trustee shall not
be required to make any independent investigation with respect thereto. The
Trustee shall at all times be free independently to establish to its reasonable
satisfaction, but shall have no duty to independently verify, the existence or
nonexistence of facts that are a condition to the exercise or enforcement of any
right or remedy hereunder or under any of the Related Documents. The Trustee may
consult with counsel, and shall not be liable for any action taken or omitted to
be taken by it hereunder in good faith and in accordance with the advice of such
counsel selected by it with due care, which advice shall be confirmed in
writing. The Trustee shall not be under any obligation to exercise any of the
remedial rights or powers vested in it by this Indenture at the request or
direction of any of the Noteholders pursuant to this Indenture unless such
Noteholders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred by it in
compliance with such request or direction.
SECTION 6.14. Reliance upon Documents. In the absence of bad faith, willful
misconduct or negligence on its part, the Trustee shall be entitled to rely on
any communication, instrument, paper or other document reasonably believed by it
to be genuine and correct and to have been signed or sent by the proper Person
or Persons and shall have no liability in acting, or omitting to act, where such
action or omission to act is in reasonable reliance upon any statement or
opinion contained in any such document or instrument.
SECTION 6.15. Representations and Warranties of the Trustee. The Trustee
represents and warrants to the Issuer and to each Secured Party as follows:
(a) Due Organization. The Trustee is an Illinois banking corporation duly
organized, validly existing and in good standing under the laws of Illinois, and
is duly authorized and licensed under applicable law to conduct its business as
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presently conducted.
(b) Corporate Power. The Trustee has all requisite right, power and
authority to execute and deliver this Indenture and to perform all of its duties
as Trustee hereunder (whether performed by the Trustee or through co-trustees or
separate trustees appointed pursuant to Section 6.10).
(c) Due Authorization. The execution and delivery by the Trustee of this
Indenture and the other Related Documents to which it is a party, and the
performance by the Trustee of its duties hereunder and thereunder, have been
duly authorized by all necessary corporate proceedings and no further approvals
or filings, including any governmental approvals, are required for the valid
execution and delivery by the Trustee or the performance by the Trustee, of this
Indenture and such other Related Documents.
(d) Valid and Binding Indenture. The Trustee has duly executed and
delivered this Indenture and each other Related Document to which it is a party,
and each of this Indenture and each such other Related Document constitutes the
legal, valid and binding obligation of the Trustee, enforceable against the
Trustee in accordance with its respective terms, except as (i) such
enforceability may be limited by bankruptcy, insolvency, reorganization and
similar laws relating to or affecting the enforcement of creditors' rights
generally and (ii) the availability of equitable remedies may be limited by
equitable principles of general applicability.
SECTION 6.16. Waiver of Setoffs. The Trustee hereby expressly waives any
and all rights of setoff that the Trustee may otherwise at any time have under
applicable law with respect to the Collection Account and agrees that amounts in
the Collection Account shall at all times be held and applied solely in
accordance with the provisions hereof.
ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.1. Issuer To Furnish Trustee Names and Addresses of Noteholders.
The Issuer will furnish or cause to be furnished to the Trustee (a) not more
than five days after the earlier of (i) each Record Date and (ii) three months
after the last Record Date, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders of Notes as of such Record
Date, and (b) at such other times as the Trustee may request in writing, within
30 days after receipt by the Issuer of any such request, a list of similar form
and
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content as of a date not more than 10 days prior to the time such list is
furnished; provided, however, that so long as the Trustee is the Note Registrar,
no such list shall be required to be furnished. The Trustee or, if the Trustee
is not the Note Registrar, the Issuer shall furnish to the Note Insurer at such
times as the Note Insurer may request a copy of the list.
SECTION 7.2. Preservation of Information; Communications to Noteholders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of the Holders of Notes contained in the
most recent list furnished to the Trustee as provided in Section 7.1 and the
names and addresses of Holders of Notes received by the Trustee in its capacity
as Note Registrar. The Trustee may destroy any list furnished to it as provided
in Section 7.1 upon receipt of a new list so furnished.
(b) Three or more Noteholders, or one or more Holder(s) of Notes evidencing
at least 25% of the Note Balance, may obtain a list of the names and addresses
of Holders of Notes of record as of the most recent Record Date in order to
communicate with other Noteholders with respect to their rights under this
Indenture or under the Notes.
SECTION 7.3. Reports by Issuer. (a) The Issuer shall supply to the Trustee
(and the Trustee shall transmit by mail to all Noteholders) such information
pertaining to the Issuer as may be necessary to afford Noteholders the ability
to sell or transfer the Notes pursuant to Rule 144A.
(b) Unless the Issuer otherwise determines after notice to the Servicer,
the Note Insurer and the Trustee, the fiscal year of the Issuer shall end on
December 31 of each year.
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.1. Collection of Money. Except as otherwise expressly provided
herein, the Trustee may demand payment or delivery of, and shall receive and
collect, directly and without intervention or assistance of any fiscal agent or
other intermediary, all money and other property payable to or receivable by the
Trustee pursuant to this Indenture. The Trustee shall apply all such money
received by it as provided in this Indenture. Except as otherwise expressly
provided in this Indenture, if any default occurs in the making of any payment
or performance under any agreement or instrument that is part of the Trust
Estate, the Trustee may
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take such action as may be appropriate to enforce such payment or performance,
including the institution and prosecution of appropriate Proceedings. Any such
action shall be without prejudice to any right to claim a Default or Event of
Default under this Indenture and any right to proceed thereafter as provided in
Article V.
SECTION 8.2. Collection Account and Spread Account. (a) On or prior to the
Closing Date, the Issuer shall cause the Servicer to establish and maintain, in
the name of the Trustee, for the benefit of the Noteholders and the Note
Insurer, the Collection Account and the Spread Account as provided in Section
4.1 of the Pooling and Servicing Agreement.
(b) On each Payment Date and Redemption Date, the Trustee shall distribute
amounts on deposit in the Collection Account and the Spread Account to the
Persons and in the amounts and order of priority set forth in Section 4.5 of the
Pooling and Servicing Agreement.
SECTION 8.3. General Provisions Regarding Accounts. (a) So long as no
Default or Event of Default shall have occurred and be continuing, all or a
portion of the funds in the Collection Account and the Spread Account shall be
invested and reinvested by the Trustee in Eligible Investments in accordance
with Section 4.1(c) of the Pooling and Servicing Agreement.
(b) Subject to Section 6.1(c), the Trustee shall not in any way be held
liable for the selection of Eligible Investments or by reason of any
insufficiency in the Collection Account or the Spread Account resulting from any
loss on any Eligible Investment included therein, except for losses attributable
to the Trustee's failure to make payments on such Eligible Investments issued by
the Trustee, in its commercial capacity as principal obligor and not as trustee,
in accordance with their terms.
SECTION 8.4. Release of Trust Estate. (a) Subject to the payment of its
fees and expenses pursuant to Section 6.7, the Trustee, when required by this
Indenture, shall execute instruments to release property from the Lien of this
Indenture, or convey the Trustee's interest in the same, in a manner and under
circumstances that are not inconsistent with this Indenture and the Pooling and
Servicing Agreement. No party relying upon an instrument executed by the Trustee
as provided in this Article shall be bound to ascertain the Trustee's authority,
inquire into the satisfaction of any conditions precedent or see to the
application of any moneys.
(b) The Trustee shall, at such time as there are no Notes Outstanding and
all sums due to the Trustee pursuant to Section 6.7 and all Reimbursement
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Amounts due to the Note Insurer have been paid and all other Secured Obligations
have been paid in full, release any remaining portion of the Trust Estate that
secured the Notes from the Lien of this Indenture and release to the Issuer or
any other Person entitled thereto any funds then on deposit in the Collection
Account. The Trustee shall release property from the Lien of this Indenture
pursuant to this paragraph only upon receipt of an Issuer Request accompanied by
an Officers' Certificate and an Opinion of Counsel meeting the applicable
requirements of Section 11.1 and the written consent of the Controlling Party.
SECTION 8.5. Opinion of Counsel. The Trustee and the Note Insurer shall
receive at least seven days' notice when requested by the Issuer to take any
action pursuant to Section 8.4(a), accompanied by copies of any instruments
involved, and the Trustee shall also require, as a condition to such action, an
Opinion of Counsel delivered to the Trustee and the Note Insurer stating the
legal effect of any such action, outlining the steps required to complete the
same, and concluding that all conditions precedent to the taking of such action
have been complied with and such action will not materially and adversely impair
the security for the Notes or the rights of the Noteholders or the Note Insurer
in contravention of this Indenture; provided, however, that such Opinion of
Counsel shall not be required to express an opinion as to the fair value of the
Trust Estate. Counsel rendering any such opinion may rely, without independent
investigation, on the accuracy and validity of any certificate or other
instrument delivered to the Trustee in connection with any such action.
SECTION 8.6. Purchase of Receivables.
(a) If at any time the Issuer, the Note Insurer or the Trustee discovers or
is notified by the Servicer that any of the representations and warranties of
Reliance in the Pooling and Servicing Agreement were incorrect at the time as of
which such representations and warranties were made, then the Person discovering
such defect, omission, or circumstance shall promptly notify the Note Insurer
and the other parties hereto.
(b) In the event that any representation or warranty of Reliance set forth
in Section 2.3(a) of the Pooling and Servicing Agreement is incorrect and has a
material adverse effect on the interests of the Note Insurer or the Holders of
the Notes in any Receivable, then the Issuer shall require Reliance pursuant to
the Pooling and Servicing Agreement to eliminate or otherwise cure the
circumstance or condition which has caused such representation or warranty to be
incorrect by the second Accounting Date following Reliance's discovery or notice
thereof. If Reliance fails or Reliance or the Servicer is unable to cure such
circumstance or condition in accordance with the Pooling and Servicing
Agreement, or if a Lien
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Certificate with respect to a Financed Vehicle is not delivered to a Custodian
within 120 days after the Closing Date (or within 180 days after the Closing
Date with respect to Lien Certificates to be issued in the states of Indiana or
Nevada), then the Issuer shall require Reliance to purchase, pursuant to the
Pooling and Servicing Agreement, any Receivable as to which such representation
or warranty is incorrect or any Receivable as to which a Lien Certificate has
not been delivered to a Custodian, within the time specified in Section 2.6 of
the Pooling and Servicing Agreement. The proceeds of a purchase shall be
remitted by the Issuer to the Servicer for deposit by the Servicer in the
Collection Account pursuant to Section 3.2(d) of the Pooling Servicing
Agreement.
(c) If the Issuer fails to enforce the purchase or substitution obligation
of Reliance under the Pooling and Servicing Agreement, the Trustee is hereby
appointed attorney-in-fact to act on behalf of and in the name of the Issuer to
require such purchase.
ARTICLE IX
Supplemental Indentures
SECTION 9.1. Supplemental Indentures Without Consent of Noteholders.
(a) Without the consent of the Holders of Notes but with the prior written
consent of the Controlling Party and with prior written notice to the Rating
Agencies, the Issuer and the Trustee, when authorized by an Issuer Order, at any
time and from time to time, may enter into one or more indentures supplemental
hereto in form satisfactory to the Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property at any time
subject to the Lien of this Indenture, or better to assure, convey and
confirm unto the Trustee any property subject or required to be subjected
to the Lien of this Indenture, or to subject to the Lien of this Indenture
additional property;
(ii) to evidence the succession, in compliance with the applicable
provisions hereof, of another Person to the Issuer, and the assumption by
any such successor of the covenants of the Issuer herein and in the Notes;
(iii) to add to the covenants of the Issuer, for the benefit of the
Holders of Notes and the Note Insurer, or to surrender any right or power
herein conferred upon the Issuer;
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(iv) to convey, transfer, assign, mortgage or pledge any property to
or with the Trustee;
(v) to cure any ambiguity or to correct any provision herein or in any
supplemental indenture that may be inconsistent with any other provision
herein or in any supplemental indenture or to make any other provisions
with respect to matters or questions arising under this Indenture or in any
supplemental indenture; provided, however, that in the Opinion of Counsel
such action shall not materially adversely affect the interests of the
Holders of Notes; or
(vi) to evidence and provide for the acceptance of the appointment
hereunder by a successor trustee with respect to the Notes and to add to or
change any of the provisions of this Indenture as shall be necessary to
facilitate the administration of the trusts hereunder by more than one
trustee, pursuant to the requirements of Article VI.
The Trustee is hereby authorized to join in the execution of any such
supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained. If an Insurer Default has occurred
and is continuing, written consent of the Note Insurer shall be required prior
to the execution of such supplemental indenture or indentures unless such action
shall not, as evidenced by an Opinion of Counsel delivered to the Note Insurer
and the Trustee, adversely affect in any material respect the interests of the
Note Insurer.
(b) The Issuer and the Trustee, when authorized by an Issuer Order, may,
without the consent of the any of the Holders of Notes but with the consent of
the Controlling Party and with prior written notice to the Rating Agencies,
enter into an indenture or indentures supplemental hereto to cure any ambiguity,
to correct or supplement any provisions in this Indenture or for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders of Notes under this Indenture; provided, however, that such action shall
not, as evidenced by an Opinion of Counsel, adversely affect in any material
respect the interests of any Noteholder or, if an Insurer Default has occurred
and is continuing, the Note Insurer.
SECTION 9.2. Supplemental Indentures With Consent of Noteholders. The
Issuer and the Trustee, when authorized by an Issuer Order, may, with prior
written notice to the Rating Agencies and with the prior written consent of the
Controlling Party and the Note Majority enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any
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manner or eliminating any of the provisions of this Indenture or of modifying in
any manner the rights of the Holders of Notes under this Indenture; provided,
however, that if an Insurer Default has occurred and is continuing, written
consent of the Note Insurer shall be required prior to the execution of such
supplemental indenture or indentures unless such action shall not, as evidenced
by an Opinion of Counsel delivered to the Note Insurer and the Trustee,
adversely affect in any material respect the interests of the Note Insurer;
provided further, that, subject to the express rights of the Note Insurer under
the Related Documents, including its rights to agree to certain modifications of
the Receivables pursuant to Section 3.2 of the Pooling and Servicing Agreement,
no such supplemental indenture shall, without the consent of the Holder of each
Outstanding Note affected thereby:
(i) change the date of payment of any installment of principal of or
interest on any Note, or reduce the principal amount thereof, the interest
rate thereon or the Redemption Price with respect thereto, change the
provisions of this Indenture relating to the application of collections on,
or the proceeds of the sale of, the Trust Estate to the payment of
principal of or interest on the Notes, or change any place of payment
where, or the coin or currency in which, any Note or the interest thereon
is payable, or impair the right to institute suit for the enforcement of
the provisions of this Indenture requiring the application of funds
available therefor, as provided in Article V, to the payment of any such
amount due on or after the respective due dates thereof (or, in the case of
redemption, on or after the Redemption Date);
(ii) reduce the percentage of the Note Balance, the consent of the
Holders of which is required for any such supplemental indenture, or the
consent of the Holders of which is required for any waiver of compliance
with certain provisions of this Indenture or certain defaults hereunder and
their consequences provided for in this Indenture;
(iii) modify or alter the provisions of the proviso to the definition
of "Outstanding";
(iv) reduce the percentage of the Note Balance required to direct the
Trustee to direct the Issuer to sell or liquidate the Trust Estate pursuant
to Section 5.4 or 5.11;
(v) permit the creation of any Lien ranking prior to or on a parity
with the Lien of this Indenture with respect to any part of the Trust
Estate or, except as otherwise permitted or contemplated herein, terminate
the Lien of this Indenture on any property at any time subject hereto or
deprive
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any Holder of Notes of the security provided by the Lien of this Indenture;
or
(vi) become effective if the Rating Agency Condition in respect
thereof shall have not been satisfied.
It shall not be necessary for any Act of the Noteholders under this Section
9.2 to approve the particular form of any proposed supplemental indenture, but
it shall be sufficient if such Act shall approve the substance thereof. The
manner of obtaining such consents (and any other consents of Noteholders
provided for in this Indenture or in any other Related Document) and of
evidencing the authorization of the execution thereof by Noteholders shall be
subject to such reasonable requirements as the Trustee may provide.
Promptly after the execution by the Issuer and the Trustee of any
supplemental indenture pursuant to this Section 9.2, the Trustee shall mail to
the Holders of the Notes to which such amendment or supplemental indenture
relates a notice setting forth in general terms the substance of such
supplemental indenture. Any failure of the Trustee to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental indenture.
SECTION 9.3. Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modifications thereby of the trusts created
by this Indenture, the Trustee shall be entitled to receive, and subject to
Sections 6.1 and 6.2, shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of such supplemental indenture is authorized
or permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture that affects the Trustee's own
rights, duties, liabilities or immunities under this Indenture or otherwise.
SECTION 9.4. Effect of Supplemental Indenture. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and be deemed to be modified and amended in accordance therewith with respect
to the Notes affected thereby, and the respective rights, limitations of rights,
obligations, duties, liabilities and immunities under this Indenture of the
Trustee, the Issuer and the Holders of the Notes shall thereafter be determined,
exercised and enforced hereunder subject in all respects to such modifications
and amendments, and all the terms and conditions of any such supplemental
indenture shall be and be deemed to be part of the terms and conditions of this
Indenture for any and all purposes.
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SECTION 9.5. Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article may, and if required by the Trustee shall, bear a
notation in form approved by the Trustee as to any matter provided for in such
supplemental indenture. If the Issuer or the Trustee shall so determine, new
Notes so modified as to conform, in the opinion of the Trustee and the Issuer,
to any such supplemental indenture may be prepared and executed by the Issuer
and authenticated and delivered by the Trustee in exchange for Outstanding
Notes.
ARTICLE X
Redemption of Notes
SECTION 10.1. Redemption. On any Payment Date on which the Servicer
exercises its option to purchase the Receivables pursuant to Section 8.1 of the
Pooling and Servicing Agreement, the Notes are subject to redemption for a
purchase price equal to the Redemption Price. Pursuant to said Section 8.1, the
Servicer shall furnish notice of such redemption to the Issuer, the Trustee, the
Backup Servicer, the Rating Agencies and the Note Insurer not later than 10 days
prior to the Redemption Date and the Servicer shall deposit with the Trustee in
the Collection Account the aggregate Purchase Amounts for the Receivables on or
before the date of redemption.
SECTION 10.2. Form of Redemption Notice. Notice of redemption under Section
10.1 shall be given by the Trustee by first-class mail, postage prepaid, mailed
not less than 5 days prior to the applicable Redemption Date to each Holder of
Notes, at such Holder's address appearing in the Note Register, or if the Notes
are held at the Clearing Agency, then pursuant to the Clearing Agency's normal
notice requirements.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price; and
(iii) the place where such Notes are to be surrendered for payment of
the Redemption Price (which shall be the office or agency of the Issuer to
be maintained as provided in Section 3.2).
Notice of redemption of the Notes shall be given by the Trustee in the name
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and at the expense of the Issuer. Failure to give notice of redemption, or any
defect therein, to any Holder of any Note shall not impair or affect the
validity of the redemption of any other Note.
SECTION 10.3. Notes Payable on Redemption Date. The Notes or portions
thereof to be redeemed shall, following notice of redemption pursuant to this
Article X, become due and payable on the Redemption Date at the Redemption
Price.
If there are not sufficient funds in the Collection Account and the Spread
Account on the Payment Date on which the Notes are to be redeemed available to
pay the Redemption Price, the notice of redemption shall be deemed to have been
revoked and the Notes shall not be redeemed on the Redemption Date. Payments
will be made on such Payment Date in accordance with Section 4.5 of the Pooling
and Servicing Agreement as though no notice of redemption had been given and the
Notes shall continue to bear interest at the Note Interest Rate.
ARTICLE XI
Miscellaneous
SECTION 11.1. Compliance Certificates and Opinions, etc. (a) Upon any
application or request by the Issuer to the Trustee to take any action under
this Indenture, the Issuer shall furnish to the Trustee and the Note Insurer (i)
an Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with
and (ii) an Opinion of Counsel stating that in the opinion of such counsel all
such conditions precedent, if any, have been complied with, except that, in the
case of any such application or request as to which the furnishing of such
documents is specifically required by this Indenture, no additional certificate
or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate or opinion has
read or has caused to be read such covenant or condition and the
definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
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(iii) a statement that, in the opinion of each such signatory, such
signatory has made (or has caused to be made) such examination or
investigation as is necessary to enable such signatory to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(iv) a statement as to whether, in the opinion of each such signatory,
such condition or covenant has been complied with.
(b)(i) Prior to the deposit of any Indenture Collateral or other property
or securities with the Trustee that is to be made the basis for the release of
any property or securities subject to the Lien of this Indenture, the Issuer
shall, in addition to any obligation imposed in Section 11.1(a) or elsewhere in
this Indenture, furnish to the Trustee and the Note Insurer (so long as no
Insurer Default shall have occurred and be continuing) an Officers' Certificate
certifying or stating the opinion of each person signing such certificate as to
the fair value (within 90 days of such deposit) to the Issuer of the Indenture
Collateral or other property or securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to the Trustee and the
Note Insurer an Officers' Certificate described in clause (i), the Issuer
shall also deliver to the Trustee and the Note Insurer an Independent
Certificate as to the same matters, if the fair value to the Issuer of the
Indenture Collateral or other property or securities to be so deposited and
of all other such Indenture Collateral or other property or securities made
the basis of any such withdrawal or release since the commencement of the
then-current fiscal year of the Issuer, as set forth in the certificates
delivered pursuant to clause (i) and this clause (ii), is 10% or more of
the Note Balance, but such a certificate need not be furnished with respect
to any Indenture Collateral or other property or securities so deposited if
the fair value thereof to the Issuer as set forth in the related Officers'
Certificate is less than $25,000 or less than one percent of the Note
Balance.
SECTION 11.2. Form of Documents Delivered to Trustee. In any case where
several matters are required to be certified by, or covered by an opinion of,
any specified Person, it is not necessary that all such matters be certified by,
or covered by the opinion of, only one such Person, or that they be so certified
or covered by only one document, but one such Person may certify or give an
opinion with respect to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as to such
matters in one or several documents.
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Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate, opinion or representations
with respect to the matters upon which his certificate or opinion is based
is/are erroneous. Any such certificate of an Authorized Officer or Opinion of
Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Servicer, Reliance or the Issuer, stating that the information with respect to
such factual matters is in the possession of the Servicer, Reliance or the
Issuer, as applicable, unless such Authorized Officer or counsel knows, or in
the exercise of reasonable care should know, that the certificate, opinion or
representations with respect to such matters is/are erroneous.
Where any Person is required or permitted to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
Whenever in this Indenture, in connection with any application, certificate
or report to the Trustee, it is provided that the Issuer shall deliver any
document as a condition of the granting of such application, or as evidence of
the Issuer's compliance with any term hereof, it is intended that the truth and
accuracy, at the time of the granting of such application or at the effective
date of such certificate or report (as the case may be), of the facts and
opinions stated in such document shall in such case be conditions precedent to
the right of the Issuer to have such application granted or to the sufficiency
of such certificate or report. The foregoing shall not, however, be construed to
affect the Trustee's right to rely upon the truth and accuracy of any statement
or opinion contained in any such document as provided in Article VI.
SECTION 11.3. Acts of Noteholders. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Noteholders may be embodied in and evidenced by one or more
instrument(s) of substantially similar tenor signed by such Noteholders in
person or by agents duly appointed in writing; and except as herein otherwise
expressly provided, such action shall become effective when such instrument(s)
are delivered to the Trustee, and, where it is hereby expressly required, to the
Issuer. Such instrument(s) (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Noteholders
signing such instrument(s). Proof of execution of any such instrument or of a
writing appointing any such agent shall be sufficient for any purpose of this
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Indenture and (subject to Section 6.1) conclusive in favor of the Trustee and
the Issuer, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such instrument
or writing may be proved in any manner that the Trustee deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or Act by the Holder of any Notes shall bind the Holder of every Note issued
upon the registration thereof, in exchange therefor or in lieu thereof, in
respect of anything done, omitted or suffered to be done by the Trustee or the
Issuer in reliance thereon, whether or not notation of such action is made upon
such Note.
SECTION 11.4. Notices, etc., to the Trustee, Issuer and Rating Agencies.
Any request, demand, authorization, direction, notice, consent, waiver or Act of
Noteholders, or other documents provided or permitted by this Indenture, shall
be in writing and, if such request, demand, authorization, direction, notice,
consent, waiver or Act of Noteholders is to be made upon, given or furnished to
or filed with:
(a) the Trustee by any Noteholder or by the Issuer, shall be
sufficient for every purpose hereunder if made, given, furnished or filed
in writing to or with the Trustee at its Corporate Trust Office, or
(b) the Issuer by the Trustee or by any Noteholder, shall be
sufficient for every purpose hereunder if in writing and mailed, first-
class, postage prepaid, to the Issuer addressed to: Reliance Auto
Receivables Corporation, 400 North Loop, 1604 East, Suite 210, San Antonio,
Texas 78232, Attention: Michael D. Bernick, Telecopy No.: (210) 402-0761,
with a copy to James I. Kaplan, 980 North Michigan Avenue, 14th Floor,
Chicago, Illinois 60611, Telecopy No.: (312) 214-7683 or at any other
address previously furnished in writing to the Trustee by the Issuer. The
Issuer shall promptly transmit any notice received by it from the
Noteholders to the Trustee.
Notices required to be given to the Rating Agencies and the Note Insurer by
the Issuer or the Trustee shall be in writing, personally delivered or mailed by
certified mail, return receipt requested, to their respective addresses set
forth in Section 9.9 of the Pooling and Servicing Agreement.
SECTION 11.5. Notices to Noteholders; Waiver. Where this Indenture
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provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. Any notice shall be deemed effective on the day following such
mailing. In any case where notice to Noteholders is given by mail, neither the
failure to mail such notice nor any defect in any notice so mailed to any
particular Noteholder shall affect the sufficiency of such notice with respect
to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by any Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Noteholders shall be filed with the Trustee but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such a waiver.
In case, by reason of the suspension of regular mail service, it shall be
impractical to mail notice of any event to Noteholders when such notice is
required to be given pursuant to this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies, failure to
give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute a Default or Event of
Default.
SECTION 11.6. [Reserved].
SECTION 11.7. Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
SECTION 11.8. Successors and Assigns. All covenants and agreements in this
Indenture and the Notes by the Issuer shall bind its successors and assigns,
whether so expressed or not. All agreements of the Trustee in this Indenture
shall bind its successors, co-trustees and agents of the Trustee.
SECTION 11.9. Severability. Any provision of this Indenture or the Notes
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without
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invalidating the remaining provisions hereof or of the Notes, as applicable, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
SECTION 11.10. Benefits of Indenture. The Note Insurer and its successors
and assigns shall be express third party beneficiaries to the provisions of this
Indenture, and shall be entitled to rely upon and directly to enforce such
provisions of this Indenture. Nothing in this Indenture or in the Notes, express
or implied, shall give to any Person, other than the parties hereto and their
successors hereunder, the Noteholders, any other party secured hereunder and any
other Person with an ownership interest in any part of the Trust Estate, any
benefit or any legal or equitable right, remedy or claim under this Indenture.
The Note Insurer may disclaim any of its rights and powers under this Indenture
(in which case the Trustee may exercise such right or power hereunder), but not
its duties and obligations under the Policy, upon delivery of a written notice
to the Trustee.
SECTION 11.11. Legal Holidays. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next Business Day with the same force and effect as if
made on the date on which nominally due, and no interest shall accrue for the
period from and after any such nominal date.
SECTION 11.12. Governing Law. This Indenture shall be construed in
accordance with the laws of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 11.13. Counterparts. This Indenture may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 11.14. Recording of Indenture. If this Indenture is subject to
recording in any public recording offices, such recording is to be effected by
the Issuer and, at its expense, accompanied by an Opinion of Counsel (which may
be counsel to the Trustee or any other counsel reasonably acceptable to the
Trustee and the Controlling Party) to the effect that such recording is
necessary either for the protection of the Noteholders or any other Person
secured hereunder or for the enforcement of any right or remedy granted to the
Trustee under this Indenture.
SECTION 11.15. Trust Obligation. No recourse may be taken, directly
75
<PAGE>
or indirectly, with respect to the obligations of the Issuer or the Trustee on
the Notes or under this Indenture or any certificate or other writing delivered
in connection herewith or therewith, against (i) the Trustee in its individual
capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any
partner, owner, beneficiary, officer, director, employee or agent of (a) the
Trustee in its individual capacity, (b) any owner of a beneficial interest in
the Issuer or the Trustee or (c) of any successor or assign of the Trustee in
its individual capacity, except as any such Person may have expressly agreed (it
being understood that the Trustee has no such obligations in its individual
capacity) and except that any such partner, owner or beneficiary shall be fully
liable, to the extent provided by applicable law, for any unpaid consideration
for stock, unpaid capital contribution or failure to pay any installment or call
owing to such entity.
SECTION 11.16. No Petition. The Trustee, by entering into this Indenture,
and each Noteholder, by accepting a Note, hereby covenant and agree that they
shall not at any time institute against the Issuer, or join in any institution
against the Issuer of, any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings, or other proceedings under any United States Federal
or State bankruptcy or similar law in connection with any obligations relating
to the Notes, this Indenture or any other Related Document. The foregoing shall
not limit the rights of the Trustee to file any claim in or otherwise take any
action with respect to any insolvency proceeding that was instituted against the
Issuer by any Person other than the Trustee.
SECTION 11.17. Inspection. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Trustee and the Note Insurer,
during the Issuer's normal business hours, to examine all the books of account,
records, reports and other papers of the Issuer, to make copies and extracts
therefrom, to cause such books to be audited by Independent certified public
accountants, and to discuss the Issuer's affairs, finances and accounts with the
Issuer's officers, employees and Independent certified public accountants, all
at such reasonable times and as often as may be reasonably requested. The
Trustee and the Note Insurer shall and shall cause its representatives to hold
in confidence all such information; provided, however, that the foregoing shall
not be construed to prohibit (i) disclosure of any and all information that is
or becomes publicly known, or information obtained by the Trustee and the Note
Insurer from sources other than the Issuer, Reliance or the Servicer, (ii)
disclosure of any and all information (A) if required to do so by any applicable
statute, law, rule or regulation, (B) to any government agency or regulatory or
self-regulatory body having or claiming authority to regulate or oversee any
aspects of the Trustee's or the Note Insurer's business or that of its
Affiliates, (C) pursuant to any subpoena, civil investigative demand or similar
demand or request of any court, regulatory
76
<PAGE>
authority, arbitrator or arbitration to which the Trustee or the Note Insurer,
such Noteholder or an Affiliate thereof or any officer, director, employee or
shareholder thereof is subject, (D) in any preliminary or final offering
circular, registration statement or contract or other document pertaining to the
transactions contemplated by the Indenture and approved in advance by the Issuer
or (E) to any Affiliate, independent or internal auditor, agent, employee or
attorney of the Trustee, the Note Insurer or such Noteholder having a need to
know the same; provided, however, that the Trustee, the Note Insurer or such
Noteholder advises such recipient of the confidential nature of the information
being disclosed and such recipient agrees to keep such information confidential,
(iii) any other disclosure authorized by the Issuer, Reliance or the Servicer or
(iv) disclosure to the other parties to the transactions contemplated by the
Related Documents and the Noteholders.
77
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed by their respective officers duly authorized as of the
day and year first above written.
RELIANCE AUTO RECEIVABLES
CORPORATION, as Issuer
By:________________________________
Michael D. Bernick
Treasurer
HARRIS TRUST AND SAVINGS BANK,
not in its individual capacity, but solely as
Trustee
By:________________________________
Name:
Title:
<PAGE>
EXHIBIT A
to Indenture
FORM OF NOTES
-------------
REGISTERED $____________/1/
No. R-___ CUSIP NO. _____________
Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer or
its agent for registration of transfer, exchange or payment, and any Note
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY
TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES OR "BLUE SKY" LAWS.
THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES THAT THIS NOTE MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) SO LONG AS THIS NOTE IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A"), TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A, PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER
- -----------------
/1/Denominations of $250,000 and integral multiples of $1,000 in excess thereof.
<PAGE>
THE SECURITIES ACT OR (3) IN RELIANCE ON ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUBJECT TO THE RECEIPT
BY THE TRUSTEE AND THE NOTE INSURER OF A CERTIFICATION OF THE TRANSFEREE
AND AN OPINION OF COUNSEL (SATISFACTORY TO THE TRUSTEE, THE ISSUER AND THE
NOTE INSURER) TO THE EFFECT THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES.
SECTION 2.13 AND SECTION 2.14 OF THE INDENTURE CONTAIN FURTHER RESTRICTIONS
ON THE TRANSFER AND RESALE OF THIS NOTE AND ANY INTEREST HEREIN. EACH
TRANSFEREE OF THIS NOTE, BY ACCEPTANCE HEREOF, IS DEEMED TO HAVE ACCEPTED
THIS NOTE, SUBJECT TO THE FOREGOING RESTRICTIONS ON TRANSFERABILITY. IN
ADDITION, EACH TRANSFEREE OF THIS NOTE, BY ACCEPTANCE HEREOF, IS DEEMED TO
HAVE MADE THE REPRESENTATIONS AND AGREEMENTS SET FORTH IN SECTION 2.13.
RELIANCE AUTO RECEIVABLES CORPORATION
6.10% ASSET BACKED NOTES, SERIES 1996-A
Reliance Auto Receivables Corporation, a Delaware corporation
(including any successor, the "Issuer"), for value received, hereby
promises to pay to CEDE & CO., or registered assigns, the principal sum of
__________________ DOLLARS ($___________), partially payable on each
Payment Date from the Collection Account in respect of principal on the
Notes pursuant to Section 3.1 of the Indenture and Section 4.5 of the
Pooling and Servicing Agreement; provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on the earlier of
the Final Scheduled Payment Date and the Redemption Date, if any, pursuant
to Section 10.1 of the Indenture. The Issuer will pay interest on this Note
at the rate per annum shown above, on each Payment Date until the principal
of this Note is paid or made available for payment, on the principal amount
of this Note outstanding on the close of business on the day preceding such
Payment Date, subject to certain limitations contained in Section 3.1 of
the Indenture and Section 4.5 of the Pooling and Servicing Agreement.
Interest on this Note will accrue for each Payment Date from the most
recent Payment Date on which interest has been paid to but excluding the
then current Payment Date or, if no interest has yet been paid, from
November 20, 1996. Interest will be computed on the basis of a 360-day year
of twelve 30-day months. Such principal of and interest on this Note shall
be paid in the manner specified in the Indenture.
A-2
<PAGE>
The principal of and interest on this Note are payable in such coin
or 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 Issuer 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.
The Notes are entitled to the benefits of a financial guaranty
insurance policy (the "Policy") issued by MBIA Insurance Corporation (the
"Note Insurer"), pursuant to which the Note Insurer has unconditionally
guaranteed payments of the Interest Distributable Amount and the
Noteholders' Principal Payment Amount on each Payment Date, all as more
fully set forth in the Indenture.
"Statement of Insurance" attached hereto.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set
forth on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Trustee by manual signature, this Note shall not be entitled to any
benefit under the Indenture referred to on the reverse hereof, or be valid
or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer.
Dated: November 20, 1996
RELIANCE AUTO RECEIVABLES CORPORATION
By:________________________________
Name:___________________________
Title:__________________________
A-3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Dated: November 20, 1996
_________________________________,
not in its individual capacity but
solely as Trustee
By:______________________________
Authorized Signatory
A-4
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its 6.10% Asset Backed Notes, Series 1996-A (the "Notes"),
all issued under an Indenture dated as of November 20, 1996 (such
Indenture, as supplemented or amended, is herein called the "Indenture"),
between the Issuer and Harris Trust and Savings Bank, not in its individual
capacity but solely as trustee (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 and obligations thereunder of the Issuer, the Trustee
and the Holders of the Notes. The Notes are subject to all terms of the
Indenture. All terms used in this Note that are not otherwise defined
herein and that are defined in the Indenture shall have the meanings
assigned to them in or pursuant to the Indenture.
The Notes are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the Indenture.
The Issuer shall pay interest on overdue installments of interest at
the Note Interest Rate to the extent lawful.
As provided in the Indenture, the Notes are subject to redemption
pursuant to Section 10.1 of the Indenture, in whole, but not in part, on
any Payment Date on which the Servicer (with the consent of the Note
Insurer under certain circumstances) exercises its option to purchase the
Receivables pursuant to Section 8.1 of the Pooling and Servicing Agreement.
Under Section 8.1 of the Pooling and Servicing Agreement, the Servicer has
an option to purchase the Receivables (with the consent of the Note Insurer
if a draw on the Policy has occurred or if such purchase would result in a
claim on the Policy or in any amount owing to the Note Insurer remaining
unpaid), on any Payment Date on or after the date on which the Note Balance
is less than or equal to 10% of the Note Balance on the Closing Date.
Each Noteholder or Note Owner, by acceptance of a Note, or, in the
case of a Note Owner, a beneficial interest in the Note, covenants and
agrees that no recourse may be taken, directly or indirectly, with respect
to the obligations of the Issuer or the Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection
therewith, against (i) the Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director or employee of (a) the Trustee in its
individual capacity, (b) any holder of a beneficial interest in the Issuer
or the Trustee or of (c) any successor or assign of the Trustee in its
individual capacity,
A-5
<PAGE>
except as any such Person may have expressly agreed and except that any
such partner, owner or beneficiary shall be fully liable, to the extent
provided by applicable law, for any unpaid consideration for stock, unpaid
capital contribution or failure to pay any installment or call owing to
such entity.
It is the intent of the Issuer, the Servicer, the Noteholders and the
Note Owners that, for purposes of Federal and State income tax and any
other tax measured in whole or in part by income, the Notes will qualify as
indebtedness of the Issuer. The Noteholders, by acceptance of a Note, agree
to treat, and to take no action inconsistent with the treatment of, the
Notes for such tax purposes as indebtedness of the Issuer.
Each Noteholder or Note Owner, by acceptance of a Note, or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees
that by accepting the benefits of the Indenture that such Noteholder will
not at any time institute against the Issuer, or join in any institution
against the Issuer of, any bankruptcy, reorganization or arrangement,
insolvency or liquidation proceedings under any United States Federal or
State bankruptcy or similar law in connection with any obligations relating
to the Notes, the Indenture or the Related Documents.
This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties
hereunder and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which
is absolute and unconditional, to pay the principal of and interest on this
Note at the times, place and rate, and in the coin or currency, herein
prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Related Documents, neither Harris Trust and Savings Bank,
in its individual capacity, any owner of a beneficial interest in the
Issuer, nor any of their respective partners, beneficiaries, agents,
officers, directors, employees, successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on, or performance of, or omission to perform, any
of the covenants, obligations or indemnifications contained in this Note or
the Indenture, it being expressly understood that said covenants,
obligations and indemnifications have been made by the Trustee for the sole
purposes of binding the interests of the Trustee in the assets of the
Issuer. The Holder of this Note by the acceptance hereof agrees that,
except as expressly provided in the Related Documents, in the case of an
Event of Default under the
A-6
<PAGE>
Indenture, the Holder shall have no claim against any of the foregoing for
any deficiency, loss or claim therefrom; provided, however, that nothing
contained herein shall be taken to prevent recourse to, and enforcement
against, the assets of the Issuer for any and all liabilities, obligations
and undertakings contained in the Indenture or in this Note.
A-7
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
_________________________________________________________________
FOR VALUE RECEIVED, the undersigned hereby sells,
assigns and transfers unto _______________________________
__________________________________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably
constitutes and appoints ______________________, attorney, to transfer said
Note on the books kept for registration thereof, with full power of
substitution in the premises.
Dated: _____________ _______________________________ *
Signature Guaranteed:
____________________________________________
Signatures must be guaranteed by an "eligible
guarantor institution" meeting the requirements of
the Note Registrar, which requirements include
membership or participation in STAMP or such other
"signature guarantee program" as may be determined
by the Note Registrar in addition to, or in
substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
_________________________
* NOTE: The signature to this assignment must correspond with the name
of the registered owner as it appears on the face of the within Note
in every particular without alteration, enlargement or any change
whatsoever.
A-8
<PAGE>
EXHIBIT C
to Indenture
FORM OF SECTION 3.9 OFFICERS' CERTIFICATE
-----------------------------------------
____________, 199_
_________________________
_________________________
_________________________
Attention:_______________
Pursuant to Section 3.9 of the Indenture, dated as of November 20,
1996 (the "Indenture"), between Reliance Auto Receivables Corporation (the
"Issuer") and Harris Trust and Savings Bank, as Trustee, the undersigned
hereby certify that:
(a) a review of the activities of the Issuer during the previous
fiscal year and of performance under the Indenture has been made under
the supervision of the undersigned; and
(b) to the best knowledge of the undersigned, based on such
review, the Issuer has complied with all conditions and covenants
under the Indenture throughout such year. [or, if there has been a
default in the compliance of any such condition or covenant, this
certificate is to specify each such default known to the undersigned
and the nature and status thereof]
RELIANCE AUTO RECEIVABLES
CORPORATION
By:________________________________
Name:___________________________
Title:__________________________
<PAGE>
EXHIBIT D
to Indenture
Representation Letter
(Non-Rule 144A)
Harris Trust and Savings Bank
311 West Monroe Street
Chicago, Illinois 60606
Reliance Auto Receivables Corporation
400 North Loop 1604 East
Suite 210
San Antonio, Texas 78232
BA Securities, Inc.
231 South LaSalle Street
17th Floor
Chicago, Illinois 60697
First Chicago Capital Markets, Inc.
One First National Plaza
Chicago, Illinois 60670
Re: Reliance Auto Receivables Corporation
_____% Asset Backed Notes, Series 1996-A
----------------------------------------
The undersigned purchaser ("Purchaser") understands that the purchase
of the above-referenced notes described on the Schedule attached hereto
(the "Notes") may be made only by institutions that are "Accredited
Investors" under Sections 501(a)(1), (2), (3) and (7) of Regulation D, as
promulgated under the Securities Act of 1933, as amended (the "1933 Act"),
which includes banks, savings and loan associations, registered brokers and
dealers, insurance companies, investment companies, and organizations
described in Section 501(c)(3) of the Internal Revenue Code, corporations,
business trusts and partnerships, not formed for the specific purpose of
acquiring the Notes offered, with total assets in excess of $5,000,000.
The undersigned represents on behalf of the Purchaser that the Purchaser is
an "Accredited Investor" within the meaning of such definition. Purchaser
is urged to review carefully the responses, representations and warranties
it is making herein.
<PAGE>
Representations and Warranties
------------------------------
Purchaser makes the following representations and warranties in order
to permit the Trustee, Reliance Auto Receivables Corporation ("Reliance
Auto Receivables"), BA Securities, Inc. and First Chicago Capital Markets,
Inc. to determine its suitability as a purchaser of Notes and to determine
that the exemption from registration relied upon by Reliance Auto
Receivables under Section 4(2) of the 1933 Act is available to it.
1. The execution and delivery of this Representation Letter has been
duly authorized by the Purchaser by all necessary corporate action on its
part, including due authorization and approval by the Board of Directors or
other governing body of the purchaser.
2. The Purchaser understands that the Notes have not been and will
not be registered under the 1933 Act in reliance upon the exemption
provided in Section 4(2) of the 1933 Act or any other applicable exemption,
that the Notes have not and will not be registered or qualified under the
securities or "blue sky" laws of any jurisdiction, that the Notes (and any
interest therein) may be resold (which resale is not currently
contemplated) or otherwise transferred only if so registered or qualified
or if an exemption from registration or qualification is available, that
Reliance Auto Receivables is not required to register the Notes and that
any transfer must comply with Sections 2.13 and 2.14 of the Indenture
relating to the Notes.
3. The Purchaser will comply with all applicable federal and state
securities laws in connection with any subsequent resale of the Notes (or
any in interest therein).
4. The Purchaser is a sophisticated institutional investor and has
knowledge and experience in financial and business matters and is capable
of evaluating the merits and risks of its investment in the Notes (or any
interest therein) and is able to bear the economic risk of such investment.
The Purchaser has been given such information concerning the Notes, the
underlying retail installment contracts and Reliance Auto Receivables as it
has requested.
5. The Purchaser is acquiring the Notes (or any interest therein) as
principal for its own account (or for the account of one or more other
institutional investors for which it is acting as duly authorized fiduciary
or agent) for the purpose of investment and not with a view to or for sale
in connection with any distribution thereof, subject nevertheless to any
requirement of law that the disposition of the Purchaser's property will at
all times be and remain within its
D-2
<PAGE>
control.
6. Neither the Purchaser nor anyone acting on its behalf has offered,
transferred, pledged, sold or otherwise disposed of any Note, any interest
in any Note to, or solicited any offer to buy or accept a transfer, pledge
or other disposition of any Note or any interest in any Note with, any
person in any manner, or made any general solicitation by means of general
advertising or in any other manner, or taken any other action, which would
constitute a distribution of the Notes under the 1933 Act or which would
render the disposition of any Note a violation of Section 5 of the 1933 Act
or any state securities law, require registration or qualification pursuant
thereto, nor will it act, nor has it authorized or will it authorize any
person to act, in such manner with respect to the Notes.
7. The Purchaser represents that it either (a) is not acquiring the
Notes or any interest therein with the assets of any "plan" subject to
Section 4975 of the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or (b) its purchase and holding
of the Notes or any interest therein will not result in a nonexempt
prohibited transaction under Section 406(a) of ERISA or Section 4975 of the
Code, or (c) its purchase and holding of the Notes meets the requirements
for an exemption under Department of Labor Prohibited Transaction Exemption
95-60.
8. The Purchaser understands that there is no market, nor is there
any assurance that a market will develop, for the Notes and that the Issuer
does not have any obligation to make or facilitate any such market (or to
otherwise repurchase the Notes from the Purchaser) under any circumstances.
9. The Purchaser has consulted with its own legal counsel,
independent accountants and financial advisors to the extent it deems
necessary regarding the tax consequences to it of ownership of the Notes,
is aware that its taxable income with respect to the Notes in any
accounting period may not correspond to the cash flow (if any) from the
Notes for such period, and is not purchasing the Notes in reliance on any
representations of the Issuer or its counsel with respect to tax matters.
10. The Purchaser understands that such Note will bear a legend as
set forth in the form of Note included in the Indenture.
11. The Purchaser agrees that it will obtain from any purchaser of
the Notes (or any interest therein) from it substantially the same
representations, warranties and agreements contained in (i) the foregoing
paragraphs 1 through 10 and in this paragraph 11 or (ii) Exhibit E to the
Indenture.
D-3
<PAGE>
The representations and warranties contained herein will be binding
upon the heirs, executors, administrators and other successors of the
undersigned. If there is more than one signatory hereto, the obligations,
representations, warranties and agreements of the undersigned are made
jointly and severally.
Executed at ______________________________________, this ______ day of
_____________, 199__.
________________________________
Purchaser's Name (Print)
By______________________________
Signature
Its_____________________________
________________________________
Address of Purchaser
________________________________
Purchaser's Taxpayer
Identification Number
D-4
<PAGE>
EXHIBIT E
to Indenture
Representation Letter
(Rule 144A)
Harris Trust and Savings Bank
311 West Monroe Street
Chicago, Illinois 60606
Reliance Auto Receivables Corporation
400 North Loop 1604 East
Suite 210
San Antonio, Texas 78232
BA Securities, Inc.
231 South LaSalle Street
17th Floor
Chicago, Illinois 60697
First Chicago Capital Markets, Inc.
One First National Plaza
Chicago, Illinois 60670
Re: Reliance Auto Receivables Corporation
_____% Asset Backed Notes, Series 1996-A
----------------------------------------
Dear Sirs:
___________________ (the "Purchaser") is today purchasing in a private
resale from Reliance Auto Receivables Corporation (the "Issuer") the above
captioned notes (the "Notes"), issued pursuant to the Indenture dated as of
November 20, 1996 between Reliance Auto Receivables Corporation, as issuer
(the "Company") and __________________________, as trustee (the "Trustee").
In connection with the purchase of the Notes, the Purchaser hereby
represents and warrants to you as follows:
1. The execution and delivery of this Representation Letter has been
duly authorized by the Purchaser by all necessary corporate action on its
part.
<PAGE>
2. The Purchaser understands that the Notes have not been and will
not be registered under the Securities Act of 1933, as amended (the "1933
Act"), in reliance upon the exemption provided in Section 4(2) of the 1933
Act or any other applicable exemption, that the Notes have not and will not
be registered or qualified under the securities or "blue sky" laws of any
jurisdiction, that the Notes (and any interest therein) may be resold
(which resale is not currently contemplated) or otherwise transferred only
if so registered or qualified or if an exemption from registration or
qualification is available, that Reliance Auto Receivables Corporation is
not required to register the Notes and that any transfer must comply with
Sections 2.13 and 2.14 of the Indenture relating to the Notes.
3. The Purchaser is not acquiring the Notes (or any interest therein)
with a view to, or for resale in connection with, a distribution that would
constitute a public offering within the meaning of the 1933 Act or a
violation of the 1933 Act or any state securities law (subject to the
understanding that disposition of the Purchaser's property will remain at
all times within its control). The Purchaser is not an affiliate of the
Trustee, any custodian of the Notes or the Company or any affiliate
thereof.
4. The Purchaser agrees that if at some time it wishes to dispose of
or exchange any of the Notes (or any interest therein), it will not
transfer or exchange any of the Notes unless such transfer or exchange is
in accordance with the provisions of Sections 2.13 and 2.14 of the
Indenture.
5. The Purchaser is a qualified institutional buyer as defined in
Rule 144A of the 1933 Act and has completed either of the forms of
certification to that effect attached hereto as Annex 1 or Annex 2; it is
aware that the sale to it is being made in reliance on Rule 144A; it is
acquiring the Notes (or any interest therein) for its own account or for
the account of a qualified institutional buyer, it understands that such
Notes (or any interest therein) may be resold, pledged or transferred only
(i) to a person who the Purchaser reasonably believes is a qualified
institutional buyer that purchases for its own account or for the account
of a qualified institutional buyer to whom notice is given that the resale,
pledge or transfer is being made in reliance on Rule 144A; or (ii) pursuant
to another exemption from registration under the 1933 Act.
6. Neither the Purchaser nor anyone acting on its behalf has offered,
transferred, pledged, sold or otherwise disposed of any Note, any interest
in any Note to, or solicited any offer to buy or accept a transfer, pledge
or other disposition of any Note or any interest in any Note with, any
person in any manner, or made any general solicitation by means of general
advertising or in any other manner, or taken any other action, which would
constitute a distribution of the Notes under the 1933 Act or which would
render the disposition of any Note a violation of Section 5 of the 1933 Act
or any state securities law, require
E-2
<PAGE>
registration or qualification pursuant thereto, nor will it act, nor has it
authorized or will it authorize any person to act, in such manner with
respect to the Notes.
7. The Purchaser represents that it either (a) is not acquiring the
Notes or any interest therein with the assets of any "plan" subject to
Section 4975 of the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or (b) its purchase and holding
of the Notes or any interest therein will not result in a nonexempt
prohibited transaction under Section 406(a) of ERISA or Section 4975 of the
Code, or (c) its purchase and holding of the Notes meets the requirements
for an exemption under Department of Labor Prohibited Transaction Exemption
95-60.
8. The Purchaser understands that there is no market, nor is there
any assurance that a market will develop, for the Notes and that the Issuer
does not have any obligation to make or facilitate any such market (or to
otherwise repurchase the Notes from the Purchaser) under any circumstances.
9. The Purchaser has consulted with its own legal counsel,
independent accountants and financial advisors to the extent it deems
necessary regarding the tax consequences to it of ownership of the Notes,
is aware that its taxable income with respect to the Notes in any
accounting period may not correspond to the cash flow (if any) from the
Notes for such period, and is not purchasing the Notes in reliance on any
representations of the Issuer or its counsel with respect to tax matters.
10. The Purchaser has reviewed the Confidential Offering Circular
(the "Offering Circular") dated November 14, 1996, with respect to the
Notes, and the agreements and other materials referred to therein, and has
had the opportunity to ask questions and receive answers concerning the
terms and conditions of the transactions contemplated by the Offering
Circular and to obtain additional information necessary to verify the
accuracy and completeness of any information furnished to the Purchaser or
to which the Purchaser had access.
11. The Purchaser hereby further agrees to be bound by all the terms
and conditions of the Notes as provided in the Indenture.
E-3
<PAGE>
12. If the Purchaser sells any of the Notes (or any interest
therein), the Purchaser will obtain from any subsequent purchaser
representations substantially similar to those contained in (i) this
Representation Letter or (ii) Exhibit D to the Indenture.
Very truly yours,
Dated: By:
--------------- ---------------------
Name:
E-4
<PAGE>
Annex I to Exhibit E
Qualified Institutional Buyer Status Under SEC Rule 144A
--------------------------------------------------------
(Buyers other than investment companies)
Harris Trust and Savings Bank
311 West Monroe Street
Chicago, Illinois 60606
Reliance Auto Receivables Corporation
400 North Loop 1604 East
Suite 210
San Antonio, Texas 78232
BA Securities, Inc.
231 South LaSalle Street
17th Floor
Chicago, Illinois 60697
First Chicago Capital Markets, Inc.
One First National Plaza
Chicago, Illinois 60670
Re: Reliance Auto Receivables Corporation
_____% Asset Backed Notes, Series 1996-A
Name of Buyer: ______________________________ ("Buyer")
I hereby certify that as indicated below, I am the President, Chief
Financial Officer, Senior Vice President or other executive officer of
Buyer.
In connection with purchases by Buyer from time to time, I hereby
certify to you and, if you act as broker for one or more customers, to such
customers, that Buyer is a "qualified institutional buyer" as defined in
Rule 144A under the Securities Act of 1933, as amended ("Rule 144A"),
because (i) Buyer owned and/or invested on a discretionary basis
$_______/1/ in securities (except for the
---------------------------
/1/ Buyer must own and/or invest on a discretionary basis at least
$100,000,000 in securities unless Buyer is a dealer, and, in that case,
Buyer must own and/or invest on a discretionary basis at least $10,000,000
in securities.
<PAGE>
excluded securities referred to below) as of the end of Buyer's most recent
fiscal year (such amount being calculated in accordance with Rule 144A) and
(ii) Buyer satisfies the criteria in the category marked below.
Corporation, etc. Buyer is a corporation (other than a bank, savings
and loan association or similar institution), Massachusetts or similar
business trust, partnership, or charitable organization described in
Section 501(c)(3) of the Internal Revenue Code.
Bank. Buyer (a) is a national bank or banking institution organized
under the laws of any State, territory or the District of Columbia,
the business of which is substantially confined to banking and is
supervised by the State or territorial banking commission or similar
official or is a "foreign bank or equivalent institution, and (b) has
an audited net worth of at least $25,000,000 as demonstrated in its
latest annual financial statements, a copy of which is attached
hereto.
Savings and Loan. Buyer (a) is a savings and loan association,
building and loan association, cooperative bank, homestead association
or similar institution, which is supervised and examined by a State or
Federal authority having supervision over any such institution or is a
foreign savings and loan association or equivalent institution and (b)
has an audited net worth of at least $25,000,000 as demonstrated in
its latest annual financial statements, a copy of which is attached
hereto.
Broker-dealer. Buyer is a dealer registered pursuant to Section 15 of
the Securities Exchange Act of 1934, as amended.
Insurance Company. Buyer is an insurance company whose primary and
predominant business activity is the writing of insurance or the
reinsuring of risks underwritten by insurance companies and which is
subject to supervision by the insurance commissioner or a similar
official or agency of a State, territory or the District of Columbia.
State or Local Plan. Buyer is a plan established and maintained by a
State, its political subdivisions, or any agency or instrumentality of
a State or its political subdivisions, for the benefit of its
employees.
ERISA Plan. Buyer is an employee benefit plan within the meaning of
Title I of the Employee Retirement Income Security Act of 1974, as
amended.
Investment Advisor. Buyer is an investment advisor registered under
the
2
<PAGE>
Investment Advisers Act of 1940, as amended.
The term "securities" as used herein does not include (i) securities
of issuers that are affiliated with Buyer (ii) securities that are part of
an unsold allotment to or subscription by Buyer (if Buyer is a dealer),
(iii) securities issued or guaranteed by the U.S. or any instrumentality
thereof, (iv) bank deposit notes and certificates of deposit, (v) loan
participations, (vi) repurchase agreements, (vii) securities owned but
subject to a repurchase agreement and (viii) currency, interest rate and
commodity swaps.
For purposes of determining the aggregate of securities owned and/or
invested on a discretionary basis by Buyer, Buyer used the cost of such
securities to Buyer and did not include any of the securities referred to
in the preceding paragraph.
Further, in determining such aggregate amount, Buyer may have included
securities owned by subsidiaries of Buyer, but only if such subsidiaries
are consolidated with Buyer in its financial statements prepared in
accordance with generally accepted accounting principles and if the
investments of such subsidiaries are managed under Buyer's direction.
However, such securities were not included if Buyer is a majority-owned,
consolidated subsidiary of another enterprise and Buyer is not itself a
reporting company under the Securities Exchange Act of 1934, as amended.
Buyer acknowledges that it is familiar with Rule 144A and understands
that you and your customers (if you act as a broker for one or more
customers) are and will continue to rely on the statements made herein
because one or more sales by you for your own account or your customers
account to Buyer may be in reliance on Rule 144A.
Will Buyer be purchasing Rule 144A
securities only for Buyer's own account?
------- ------
Yes No
If the answer to this question is "no", Buyer agrees that, in
connection with any purchase of securities sold to Buyer for the account of
a third party (including any separate account) in reliance on Rule 144A,
buyer will only purchase for the account of a third party that at the time
is a "qualified institutional buyer" within the meaning of Rule 144A. In
addition, Buyer agrees that Buyer will not purchase securities for a third
party unless Buyer has obtained a current representation letter from such
third party or taken other appropriate steps contemplated by Rule 144A to
conclude that such third party independently meets the definition of
"qualified
3
<PAGE>
institutional buyer" set forth in Rule 144A.
Buyer agrees to notify you of any changes in the information and
conclusions herein. Until such notice is given to you, Buyer's purchase of
securities from you, or through you from your customers, will constitute a
reaffirmation of the foregoing certifications and acknowledgments as of the
date of such purchase.
Further, if Buyer is a bank or savings and loan as provided above,
Buyer agrees that it will furnish you with updated annual financial
statements promptly after they become available.
Date: _________________ Very truly yours,
______________________________
Print Name of Buyer
By____________________________
Name:
Title:
4
<PAGE>
Annex 2 to Exhibit E
Harris Trust and Savings Bank
311 West Monroe Street
Chicago, Illinois 60606
Reliance Auto Receivables Corporation
400 North Loop 1604 East
Suite 210
San Antonio, Texas 78232
BA Securities, Inc.
231 South LaSalle Street
17th Floor
Chicago, Illinois 60697
First Chicago Capital Markets, Inc.
One First National Plaza
Chicago, Illinois 60670
Re: Reliance Auto Receivables Corporation
_____% Asset Backed Notes, Series 1996-A
----------------------------------------
Name of Buyer: ________________________________________
("Buyer")
Name of Investment Adviser: ___________________________
("Adviser")
I hereby certify that, as indicated below, I am the President, Chief
Financial Officer or Senior Vice President of Buyer or, if Buyer is a
"qualified institutional buyer" as defined in Rule 144A under the
Securities Act of 1933, as amended ("Rule 144A"), because Buyer is part of
a Family of Investment Companies (as defined below), of Adviser.
In connection with purchases by Buyer from time to time, I hereby
certify to you and, if you act as broker for one or more customers, to such
customers, that Buyer is a "qualified institutional buyer" as defined in
Rule 144A because (i) Buyer is an investment company registered under the
Investment Company Act of 1940, as amended and (ii) as marked below, Buyer
alone, or Buyer's Family of Investment Companies, owned at least
$100,000,000 in securities (other than the excluded securities referred to
below) as of the end of Buyer's most recent fiscal year.
1
<PAGE>
______ Buyer owned $__________ in securities (other than the excluded
securities referred to below) as of the end of Buyer's most
recent fiscal year (such amount being calculated in accordance
with Rule 144A).
______ Buyer is part of a Family of Investment Companies which owned
in the aggregate $_______ in securities (other than the excluded
securities referred to below) as of the end of Buyer's most
recent fiscal year (such amount being calculated in accordance
with Rule 144A).
For purposes of determining the amount of securities owned by Buyer or
Buyer's Family of Investment Companies, I used the cost of such securities.
The term "Family of Investment Companies" as used herein means two or
more registered investment companies (or series thereof) that have the same
investment adviser or investment advisers that are affiliated (by virtue of
being majority owned subsidiaries of the same parent or because one
investment adviser is a majority owned subsidiary of the other).
The term "securities" as used herein does not include (i) securities
of issuers that are affiliated with Buyer or are part of Buyer's Family of
Investment Companies, (ii) securities issued or guaranteed by the U.S., or
any instrumentality thereof, (iii) bank deposit notes and certificates of
deposit, (iv) loan participations, (v) repurchase agreements, (vi)
securities owned but subject to a repurchase agreement and (vii) currency,
interest rate and commodity swaps.
On behalf of Buyer, I acknowledge that Buyer is familiar with Rule
144A and understands that you and your customers (if you act as a broker
for one or more customers) are and will continue to rely on the statements
made herein because one or more sales to Buyer by you for your own account
or your customer's account will be in reliance on Rule 144A. In addition,
on behalf of Buyer, I agree that, in connection with any purchase of
securities sold by or through you in reliance on Rule 144A, Buyer will only
purchase for Buyer's own account.
Finally, on behalf of Buyer or Adviser (as appropriate), I also agree
to notify you of any changes in the information and conclusions herein.
Until such notice is given to you, Buyer's purchase from time to time of
securities from you,
2
<PAGE>
or through you from your customers, will constitute a reaffirmation of the
foregoing certifications and acknowledgements by me as of the date of such
purchase.
Date: _________________ Very truly yours,
____________________________
Name:
Title:
On behalf of:
____________________________
Name of Buyer:
or
____________________________
Name of Adviser:
3
<PAGE>
DRAFT 11/16/96
RECEIVABLES PURCHASE AGREEMENT
between
THE ORIGINATORS LISTED ON THE
SIGNATURE PAGE ATTACHED HERETO,
as Sellers
and
RELIANCE ACCEPTANCE CORPORATION,
as Purchaser
_________________________________________
Dated as of November 20, 1996
_________________________________________
<PAGE>
RECEIVABLES PURCHASE AGREEMENT
RECEIVABLES PURCHASE AGREEMENT, dated as of November 20, 1996 ("this
Agreement"), between RELIANCE ACCEPTANCE CORPORATION, a Delaware corporation
("Reliance" or the "Purchaser"), RELIANCE ACCEPTANCE CORP. OF FLORIDA, a
Delaware corporation; RELIANCE ACCEPTANCE CORP. OF GEORGIA, a Delaware
corporation; RELIANCE ACCEPTANCE CORP. OF ILLINOIS, a Delaware corporation;
RELIANCE ACCEPTANCE CORP. OF INDIANA, a Delaware corporation; RELIANCE
ACCEPTANCE CORP. OF KENTUCKY, a Delaware corporation; RELIANCE ACCEPTANCE CORP.
OF MISSOURI, a Delaware corporation; RELIANCE ACCEPTANCE CORP. OF NEVADA, a
Delaware corporation; RELIANCE ACCEPTANCE CORP. OF NEW MEXICO, a Delaware
corporation; RELIANCE ACCEPTANCE CORP. OF NORTH CAROLINA, a Delaware
corporation; RELIANCE ACCEPTANCE CORP. OF OHIO, an Ohio corporation; RELIANCE
ACCEPTANCE CORP. OF SOUTH CAROLINA, a Delaware corporation; RELIANCE ACCEPTANCE
CORP. OF TENNESSEE, a Delaware corporation; and RELIANCE ACCEPTANCE CORP. OF
TEXAS, a Texas corporation (each of the foregoing entities, individually, a
"Seller", and, collectively, the "Sellers").
In consideration of the mutual agreements contained herein, the Purchaser and
the Sellers hereby agree as follows:
Section 1. Definitions. Capitalized terms used herein without definition
shall have the meanings set forth in the Pooling and Servicing Agreement, dated
as of November 20, 1996 (as it may be amended or supplemented from time to time,
the "Pooling and Servicing Agreement"), between Reliance Auto Receivables
Corporation, as Issuer, Reliance, in its individual capacity and as Servicer,
and Harris Trust and Savings Bank, as Trustee and Backup Servicer.
Section 2. Conveyance of Receivables. (a) Subject to the terms and
conditions of this Agreement, each Seller hereby sells, transfers, assigns and
otherwise conveys to the Purchaser, without recourse (but without limitation of
its obligations under this Agreement): (1) all of the right, title and interest
of such Seller in, to and under the Receivables that have been originated by
such Seller and identified on Schedule 1 and all monies paid or payable thereon
or in respect thereof on or after the Cutoff Date, including all Liquidation
Proceeds and recoveries received with respect to such Receivables; (2) the
security interests in the Financed Vehicles granted by Obligors pursuant to such
Receivables and any other interest of such Seller in the Financed Vehicles and
other property (including the right to receive future Liquidation Proceeds) that
secures any such Receivable and that has been acquired by or on behalf of such
Seller pursuant to the liquidation of any such Receivable; (3) the Insurance
Policies and any proceeds from any Insurance Policies relating to such
Receivables, the Obligors or the related Financed Vehicles, including rebates of
premiums, all Collateral Insurance and any Force-Placed Insurance relating to
such Receivables; (4) the rights of such Seller against Dealers with respect to
such Receivables
<PAGE>
under the Dealer Agreements and the Dealer Assignments; (5) all items contained
in the Receivable Files related to such Receivables and any and all other
documents that such Seller keeps on file in accordance with its customary
procedures relating to such Receivables, the Obligors or the related Financed
Vehicles; and (6) all proceeds and investments of any of the foregoing, all
present and future claims, demands, causes and choses in action in respect of
any or all of the foregoing and all payments on or under and all proceeds of
every kind and nature whatsoever in respect of any or all of the foregoing
(collectively, the "Other Conveyed Property").
(b) It is the intention of each Seller and the Purchaser that the
transfer and assignment contemplated by this Agreement shall constitute a sale
of the Receivables and Other Conveyed Property from such Seller to the Purchaser
and the beneficial interest in and title to the Receivables and the Other
Conveyed Property shall not be part of such Seller's estate in the event of the
filing of a bankruptcy petition by or against such Seller under any bankruptcy
law. If, notwithstanding the intent of such Seller or the Purchaser, the
transfer and assignment contemplated hereby is held not to be a sale, such
Seller hereby grants a first priority security interest to the Purchaser in the
Receivables and the Other Conveyed Property and this Agreement shall constitute
a security agreement.
(c) In consideration for the Receivables and the Other Conveyed
Property sold to the Purchaser as described in Section 2(a), the Purchaser
shall, on the Closing Date, deliver to each Seller a Non-Negotiable Term Note in
the form attached as Exhibit A in an amount equal to the aggregate principal
balance as of the Cutoff Date for the Receivables being sold by each such
Seller.
(d) The conveyance of the Receivables and the Other Conveyed Property
shall take place at a closing (the "Closing") at the offices of Mayer, Brown &
Platt, 190 South LaSalle Street, Chicago, Illinois 60603 on the Closing Date.
Section 3. Representations and Warranties of Seller. By its execution of
this Agreement, each Seller makes the following representations and warranties
on which the Purchaser relies in accepting the Receivables and the Other
Conveyed Property. Unless otherwise specified, such representations and
warranties speak as of the Closing Date, but shall survive the sale, transfer
and assignment of the Receivables and the Other Conveyed Property to the
Purchaser.
(a) Schedule of Representations. The representations and warranties
set forth on the Schedule of Representations attached as Schedule 2 hereto are
true and correct in all material respects with respect to the Receivables being
sold by such Seller.
(b) Organization and Good Standing. Such Seller has been duly
organized and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, with power and authority to own
its properties and to conduct its business as such
-2-
<PAGE>
properties are currently owned and such business is currently conducted, and had
at all relevant times, and now has, the power and authority to (i) acquire, own,
sell and otherwise transfer the Receivables and the Other Conveyed Property to
the Purchaser and (ii) enter into and perform its obligations hereunder and
under the Related Documents to which such Seller is a party.
(c) Due Qualification. Such Seller is duly qualified to do business
as a foreign corporation in good standing and has obtained all necessary
licenses and approvals in all jurisdictions where the failure to do so would
have a material adverse effect on (i) such Seller's ability to transfer the
Receivables and the Other Conveyed Property to the Purchaser pursuant to this
Agreement, (ii) the validity or enforceability of the Receivables and the Other
Conveyed Property being sold by such Seller or (iii) such Seller's ability to
perform its obligations hereunder and under the Related Documents to which such
Seller is a party.
(d) Power and Authority. Such Seller has the power and authority to
execute and deliver this Agreement and the Related Documents to which such
Seller is a party and to carry out its terms and their terms, respectively; such
Seller has power and authority to sell and assign the Receivables and the Other
Conveyed Property to be sold and assigned to and deposited with the Purchaser by
it and has duly authorized such sale and assignment to and deposit with the
Purchaser by all necessary corporate action; and the execution, delivery and
performance of this Agreement and the Related Documents to which such Seller is
a party have been duly authorized by such Seller by all necessary corporate
action.
(e) Valid Transfer; Binding Obligations. This Agreement effects, as
of the Closing Date, a valid transfer and assignment of the Receivables and the
Other Conveyed Property from such Seller to the Purchaser enforceable against
such Seller and the creditors of and any purported purchasers from such Seller,
and this Agreement and the Related Documents to which such Seller is a party,
when duly executed and delivered by the other parties thereto, shall constitute
valid and binding obligations of such Seller enforceable in accordance with
their respective terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by equitable limitations on the availability of
specific remedies, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
(f) No Violation. The execution, delivery and performance by such
Seller of this Agreement and the Related Documents to which such Seller is a
party, the consummation of the transactions contemplated hereby and thereby and
the fulfillment of the terms hereof and thereof do not (i) conflict with, result
in any breach of any of the terms and provisions of, or constitute (with or
without notice or lapse of time or both) a default under, the articles of
incorporation or by-laws of such Seller, or any indenture, agreement, mortgage,
deed of trust or other instrument to which such Seller is a party or by which it
is bound, (ii) result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement, mortgage,
deed of trust or other instrument or (iii) violate any law, order, rule or
-3-
<PAGE>
regulation applicable to such Seller of any Governmental Authority having
jurisdiction over such Seller or any of its properties, other than such
conflicts, breaches, defaults, creation or imposition of Liens or violations
that do not have a material adverse effect on (i) such Seller's ability to
transfer the Receivables and the Other Conveyed Property to the Purchaser
pursuant to this Agreement, (ii) the validity or enforceability of the
Receivables and the Other Conveyed Property being sold by such Seller or (iii)
such Seller's ability to perform its obligations hereunder and under the Related
Documents to which Seller is a party.
(g) No Proceedings. There are no proceedings or investigations
pending or, to the best of such Seller's knowledge, threatened against such
Seller, before any Governmental Authority having jurisdiction over such Seller
or its properties (i) asserting the invalidity of this Agreement or any of the
Related Documents, (ii) seeking to prevent the issuance of the Notes or the
consummation of any of the transactions contemplated by this Agreement or any of
the Related Documents, (iii) seeking any determination or ruling that would have
a material adverse effect on the performance by such Seller of its obligations
under, or the validity or enforceability of, this Agreement or any of the
Related Documents or the validity or enforceability of the Receivables and the
Other Conveyed Property being sold by such Seller, or (iv) seeking to materially
and adversely affect the federal income tax or other federal, state or local tax
attributes of the Notes or seeking to impose any excise, franchise, transfer or
similar tax upon the Notes or the sale and assignment of the Receivables and
Other Conveyed Property being sold by such Seller hereunder.
(h) No Consents. No consent, approval, license, authorization or
order of, or declaration, registration or filing with, any Governmental
Authority or other Person is required to be made by such Seller in connection
with the execution, delivery or performance of this Agreement or the Related
Documents to which such Seller is a party or the consummation of the
transactions contemplated hereby or thereby, except such as have been duly made,
effected or obtained.
(i) Chief Executive Office. The chief executive office of such Seller
is located at 400 North Loop, 1604 East, Suite 210, San Antonio, Texas 78232.
(j) Consummation of Transactions. The transactions contemplated by
the Related Documents are being consummated by such Seller in furtherance of its
ordinary business purposes, with no contemplation of insolvency and with no
intent to hinder, delay or defraud any of its present or future creditors.
(k) Consideration. The consideration received by such Seller as set
forth herein is fair consideration having value reasonably equivalent to or in
excess of the value of the related Receivables and Other Conveyed Property and
the performance of such Seller's obligations hereunder.
-4-
<PAGE>
(l) Insolvency. Neither on the date of the transactions contemplated
by the Related Documents or immediately before or after such transactions, nor
as a result of the transactions, will such Seller:
(i) be insolvent such that the sum of its debts is greater than
all of its respective property, at a fair valuation;
(ii) be engaged in or about to engage in business or a
transaction for which any property remaining with such Seller will be an
unreasonably small capital or the remaining assets of such Seller will be
unreasonably small in relation to its respective business or the
transaction; and
(iii) have intended to incur, or believed it would incur, debts
that would be beyond its respective ability to pay as such debts mature or
become due. Such Seller's assets and cash flow enable it to meet its
present obligations in the ordinary course of business as they become due.
(m) Assets. Both immediately before and after the transactions
contemplated by the Related Documents (i) the present fair salable value of such
Seller's assets was or will be in excess of the amount that will be required to
pay its probable liabilities as they then exist and as they become absolute and
matured; and (ii) the sum of such Seller's assets was or will be greater than
the sum of its debts, valuing its assets at a fair salable value.
Section 4. Repurchase of Receivables Upon Breach of Warranty. Each Seller
hereby acknowledges that Reliance has assigned all of its right, title and
interest in, to and under this Agreement to the Issuer and the Issuer has
pledged such right, title and interest to the Trustee on behalf of the
Noteholders and the Note Insurer. Each Seller hereby covenants and agrees with
Reliance for the benefit of Reliance, the Issuer, the Trustee and the Note
Insurer that, in the event that a breach of any of the representations and
warranties of such Seller contained in Section 3(a) shall cause Reliance to be
obligated under Section 2.4 of the Pooling and Servicing Agreement to repurchase
any Receivable as to which a breach has occurred, such Seller shall repurchase
each such Receivable repurchased by Reliance under Section 2.4 of the Pooling
and Servicing Agreement on the date and for the amount specified in Section 2.4
of the Pooling and Servicing Agreement. The obligation of a Seller to
repurchase any Receivable as to which a breach has occurred and is continuing
shall, if such obligation is fulfilled, constitute the sole remedy against such
Seller for such breach available to the Purchaser and any breaches of the
representations or warranties with respect to such Receivable shall be deemed
cured as of the date of such repurchase.
Section 5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
the principles of conflicts
-5-
<PAGE>
of laws thereof and the obligations, rights and remedies of the parties under
this Agreement shall be determined in accordance with such laws.
Section 6. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
Section 7. Assignment. Notwithstanding anything to the contrary contained
in this Agreement, this Agreement may not be assigned by the Purchaser or any
Seller without the prior written consent of the Trustee and the Note Insurer (if
an Insurer Default shall not have occurred and be continuing).
Section 8. Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, each of which counterparts shall be deemed to be an
original, and all of which counterparts shall constitute but one and the same
instrument.
Section 9. Notices. All demands, notices and communications under this
Agreement shall be in writing, personally delivered or mailed by certified mail,
return receipt requested, and shall be deemed to have been duly given upon
receipt (a) in the case of the Purchaser, at the following address: 400 North
Loop, 1604 East, Suite 210, San Antonio, Texas 78232, Telecopy No.: (210) 402-
0761, with a copy to James I. Kaplan, 980 North Michigan Avenue, 14th Floor,
Chicago, Illinois 60611, Telecopy No.: (312) 214-7683, (b) in the case of the
Sellers, at 400 North Loop, 1604 East, Suite 210, San Antonio, Texas 78232,
Telecopy No.: (210) 402-0761, with a copy to James I. Kaplan, 980 North Michigan
Avenue, 14th Floor, Chicago, Illinois 60611, Telecopy No.: (312) 214-7683, (c)
at such other address as shall be designated by any such party in a written
notice to the other parties.
Section 10. Successors and Assigns. This Agreement shall be binding upon
the parties hereof and their respective successors and assigns, and shall inure
to the benefit of and be enforceable by the parties hereof and their respective
successors and assigns permitted hereunder.
Section 11. Nonpetition Covenant. Until the date that is one year and one
day following the payment in full of all amounts due in respect of the Notes and
all amounts due under the Insurance Agreement, none of the parties hereto shall
petition or otherwise invoke, or join any other Person in petitioning or
invoking, the process of any Governmental Authority for the purpose of
commencing or sustaining a case against the Issuer under any federal or state
bankruptcy, insolvency or similar law or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Issuer or any substantial part of its respective property, or ordering the
winding up or liquidation of the affairs of the Issuer.
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<PAGE>
Section 12. Third-Party Beneficiaries. The Note Insurer and the Trustee
for the benefit of the Noteholders shall be express third-party beneficiaries to
the provisions of this Agreement and shall be entitled to rely upon and directly
enforce such provisions of this Agreement. Except as set forth in the preceding
sentence, nothing in this Agreement, express or implied, shall give to any
Person, other than the parties hereto and their successors hereunder and
permitted assigns, any benefit or any legal or equitable right, remedy or claim
under this Agreement.
Section 13. Amendment. This Agreement may be amended by the Sellers and
Reliance with the prior written consent of the Trustee and the Note Insurer (so
long as an Insurer Default shall not have occurred and be continuing); provided,
however, that if an Insurer Default shall have occurred and is continuing,
written consent of the Note Insurer shall be required unless such amendment
shall not, as evidenced by an Opinion of Counsel delivered to the Trustee and
the Note Insurer, adversely affect in any material respect the interests of the
Note Insurer.
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<PAGE>
IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be duly executed by their respective officers, effective as of the
day and year first above written.
RELIANCE ACCEPTANCE CORPORATION,
as Purchaser
By: ___________________________________
Name:
Title:
RELIANCE ACCEPTANCE CORP. OF FLORIDA,
as Seller
By: ___________________________________
Name:
Title:
RELIANCE ACCEPTANCE CORP. OF GEORGIA,
as Seller
By: ___________________________________
Name:
Title:
RELIANCE ACCEPTANCE CORP. OF ILLINOIS,
as Seller
By: ___________________________________
Name:
Title:
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<PAGE>
RELIANCE ACCEPTANCE CORP. OF INDIANA,
as Seller
By: ___________________________________
Name:
Title:
RELIANCE ACCEPTANCE CORP. OF KENTUCKY,
as Seller
By: ___________________________________
Name:
Title:
RELIANCE ACCEPTANCE CORP. OF MISSOURI,
as Seller
By: ___________________________________
Name:
Title:
RELIANCE ACCEPTANCE CORP. OF NEVADA,
as Seller
By: ___________________________________
Name:
Title:
-9-
<PAGE>
RELIANCE ACCEPTANCE CORP. OF
NEW MEXICO, as Seller
By: ___________________________________
Name:
Title:
RELIANCE ACCEPTANCE CORP. OF
NORTH CAROLINA, as Seller
By: ___________________________________
Name:
Title:
RELIANCE ACCEPTANCE CORP. OF OHIO,
as Seller
By: ___________________________________
Name:
Title:
RELIANCE ACCEPTANCE CORP. OF
SOUTH CAROLINA, as Seller
By: ___________________________________
Name:
Title:
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<PAGE>
RELIANCE ACCEPTANCE CORP. OF
TENNESSEE, as Seller
By: ___________________________________
Name:
Title:
RELIANCE ACCEPTANCE CORP. OF TEXAS,
as Seller
By: ___________________________________
Name:
Title:
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<PAGE>
SCHEDULE 2
REPRESENTATIONS AND WARRANTIES OF SELLERS
1. Characteristics of Receivables. Each Receivable: (1) was originated
in the United States of America by a Dealer for the retail sale of a Financed
Vehicle in the ordinary course of such Dealer's business in accordance in all
material respects with Reliance's Credit and Collection Policy and such Dealer
had all necessary licenses and permits to originate Receivables in the state
where such Dealer was located; (2) was fully and properly executed by the
parties thereto; (3) was purchased by an Originator from such Dealer under an
existing Dealer Agreement or pursuant to a Dealer Assignment; (4) contains
customary and enforceable provisions such that the rights and remedies of the
holder or assignee thereof shall be adequate for realization against any
collateral security; (5) provides for level monthly payments in U.S. dollars
(provided that the period in the first Collection Period and the payment in the
final Collection Period of the Receivable may be minimally different from the
normal period and level payment), which, if made when due, shall fully amortize
the Amount Financed over the original term; (6) has not been amended, modified
or supplemented (including any extensions to such Receivable's original term)
and has not had collections with respect thereto waived; (7) had a remaining
maturity, as of the Cutoff Date, of not less than 6 months and not more than 59
months; (8) had an original maturity of not more than 60 months; (9) had a
remaining Principal Balance as of the Cutoff Date of at least $500 and not more
than $27,000; (10) had an Annual Percentage Rate of at least 12% and not more
than 25%; (11) was not more than 30 days past due as of the Cutoff Date; (12)
has a final scheduled payment date on or before September 30, 2001; (13) had at
least one Scheduled Payment made prior to the Cutoff Date; and (14) is a
Scheduled Interest Receivable. As of its date of origination, no Receivable was
due from an Obligor who had defaulted under a previous contract with an
Originator.
2. Dealer Agreements and Assignments. Each Receivable was originated by
a Dealer and was sold by the Dealer to an Originator, without any fraud or
misrepresentation on the part of such Dealer. Each Dealer that originated a
Receivable for sale to an Originator has been selected based on Reliance's
underwriting criteria. The Dealer Agreement or the Dealer Assignment
constitutes the entire agreement between the Dealer and the related Originator
with respect to the sale of the related Receivable to the Originator. Each such
Dealer Agreement and each such Dealer Assignment is "without recourse" to the
related Dealer (other than warranty repurchases by such Dealer) and is in full
force and effect and is the legal, valid and binding obligation of such Dealer.
The Originator has paid the purchase price (as specified in the applicable
Dealer Agreement or Dealer Assignment) for each Receivable and owes no other
payment to such Dealer for such Receivable.
3. Compliance with Law. All requirements of applicable federal, state
and local laws, and regulations thereunder (including usury laws, the Federal
Truth-in-Lending Act, the Equal
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Credit Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting
Act, the Fair Debt Collection Practices Act, the Federal Trade Commission Act,
the Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations "B" and
"Z", the Soldiers' and Sailors' Civil Relief Act of 1940, each applicable state
Motor Vehicle Retail Installment Sales Act, and state adaptations of the
National Consumer Act and of the Uniform Consumer Credit Code and other consumer
credit laws and equal credit opportunity and disclosure laws) in respect of the
Receivables and the Financed Vehicles, and any insurance or service contracts
sold in connection therewith, have been complied with in all material respects,
and each Receivable and the sale of the Financed Vehicle evidenced by each
Receivable complied at the time it was originated or made and now complies in
all material respects with all applicable legal requirements.
4. No Adverse Selection. No selection procedures materially adverse to
Reliance, the Noteholders or the Note Insurer were utilized in selecting the
Receivables from similar receivables owned by the Originators on the Cutoff
Date.
5. Binding Obligation. Each Receivable represents the legal, valid and
binding obligation of the Obligor thereon and is enforceable by the holder
thereof in accordance with its terms, except (A) as enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting the
enforcement of creditors' rights generally and by equitable limitations on the
availability of specific remedies, regardless of whether such enforceability is
considered in a proceeding in equity or at law and (B) as such Receivable may be
modified by the application after the Cutoff Date of the Soldiers' and Sailors'
Civil Relief Act of 1940, as amended; and all parties to each Receivable had
full legal capacity to execute and deliver such Receivable and all other
documents related thereto and to grant the security interest purported to be
granted thereby.
6. Obligors. Each Obligor (i) is located in the United States, (ii) is
not the United States of America or any other Governmental Authority, and (iii)
is not Reliance or any subsidiary or Affiliate thereof.
7. Obligor Bankruptcy. At the Cutoff Date, no Obligor had been
identified on the records of any Originator as being the subject of a current
bankruptcy proceeding.
8. Schedule of Receivables; Computer Tape. The information set forth in
the Schedule of Receivables has been produced from the Electronic Ledger, and
such information was true and correct in all material respects as of the close
of business on the Cutoff Date. The Computer Tape made available by the
Originators to Reliance on the Closing Date was true, complete and correct in
all material respects as of the Cutoff Date and includes a description of the
same Receivables that are described in the Schedule of Receivables.
9. Marking Records. By the Closing Date, the Originators will have
caused the portions of the Electronic Ledger relating to the Receivables to be
clearly and unambiguously
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marked to show that the Receivables have been sold to Reliance by the
Originators in accordance with the terms of this Agreement.
10. One Original. There is only one original executed copy of each
Receivable.
11. Receivable Files Complete. There exists a Receivable File pertaining
to such Receivable and such Receivable File contains (a) a fully executed
original of the Receivable, (b) the original executed credit application or a
copy thereof and (c) the original Lien Certificate indicating that the Financed
Vehicle is owned by the Obligor and subject to the interest of Reliance or an
Originator as first lienholder or secured party or, if such original Lien
Certificate has not been received, a copy of the application therefor. Each of
such documents that is required to be signed by the Obligor has been signed by
the Obligor in the appropriate spaces. All blanks on any form have been
properly filled in and each form has otherwise been correctly prepared. The
complete Receivable File for each Receivable currently is in the possession of a
Custodian.
12. Receivables in Force. No Receivable has been satisfied, subordinated
or rescinded, nor has any Financed Vehicle securing each such Receivable been
released from the Lien of the related Receivable in whole or in part. Each
Receivable is, and as of the Cutoff Date will be, in full force and effect in
accordance with its respective terms and neither the related Originator nor any
Obligor has or will have suspended or reduced any payments or obligations due or
to become due thereunder by reason of a default by the other party to such
Receivable. Each Originator has duly fulfilled all obligations to be fulfilled
on its part under or in connection with the origination, acquisition and
assignment of the Receivables and the related security interests, including
giving any notices or consents necessary to effect the acquisition of the
Receivable by Reliance and of the related security interests by Reliance.
13. Lawful Assignment. No Receivable was originated in, or is subject to
the laws of, any jurisdiction the laws of which would make unlawful, void or
voidable the sale, transfer and assignment of such Receivable under the
Receivables Purchase Agreement or the Pooling and Servicing Agreement. Neither
the Issuer, Reliance nor any Originator has entered into any agreement with any
account debtor that prohibits, restricts or conditions the assignment of any
portion of the Receivables. The rights with respect to each Receivable are
assignable by the related Originator without the consent or notice of any Person
other than consents or notices which will have been obtained or made on or
before the Closing Date.
14. Good Title. Immediately prior to the conveyance of the Receivables to
Reliance pursuant to this Agreement, the Originators were the sole owners
thereof and had good and valid title thereto free of any Lien (other than the
BABC Liens, which shall be released on or before the Closing Date) and, upon
execution and delivery of this Agreement by Reliance, Reliance shall have good
and valid title to and will be the sole owner of such Receivables free of any
Lien. No Dealer or other Person has a participation in, or other right to
receive, proceeds of any Receivable. No Originator has taken any action to
convey any right to any Person that would
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<PAGE>
result in such Person having a right to payments received under the related
Insurance Policies or the related Dealer Agreements or Dealer Assignments or to
payments due under such Receivables.
15. Security Interest in Financed Vehicle and Receivable. Each Receivable
created or shall create a valid, binding and enforceable first priority security
interest in favor of an Originator in the Financed Vehicle, and such Receivable
together with the related security interest has been duly assigned by an
Originator to Reliance. The Lien Certificate and original certificate of title
for each Financed Vehicle show, or, if a new or replacement Lien Certificate is
being applied for with respect to such Financed Vehicle, the Lien Certificate
will be received within 120 days of the Closing Date (or within 180 days of the
Closing Date with respect to Lien Certificates to be issued in the states of
Indiana or Nevada) and will show Reliance or an Originator named as the original
secured party under each Receivable as the holder of a first priority security
interest in such Financed Vehicle. With respect to each Receivable for which
the Lien Certificate has not yet been returned from the Registrar of Titles,
written evidence has been received from the related Dealer that such Lien
Certificate showing Reliance or an Originator as first lienholder has been
applied for. Immediately after the sale, contribution, transfer and assignment
thereof by the Originators to Reliance, each Receivable will be secured by an
enforceable and perfected first priority security interest in the Financed
Vehicle in favor of Reliance as secured party, which security interest is prior
to all other Liens upon and security interests in such Financed Vehicle that now
exist or may hereafter arise or be created (except, as to priority, for any lien
for taxes, labor or materials affecting a Financed Vehicle). As of the Cutoff
Date, there were no Liens or claims for taxes, work, labor or materials
affecting a Financed Vehicle.
16. All Filings Made. All filings (including UCC filings) required to be
made by any Person and all actions required to be taken or performed by any
Person in any jurisdiction to give Reliance a first priority perfected lien on,
or ownership interest in, the Receivables and the proceeds thereof and the Other
Conveyed Property have been made, taken or performed.
17. No Impairment. No Originator has done anything to convey any right to
any Person that would result in such Person having a right to payments due under
the Receivable or otherwise to impair the rights of Reliance, the Note Insurer,
the Trustee and the Noteholders in any Receivable or the proceeds thereof.
18. No Defenses. As of the Cutoff Date, no Receivable was subject to any
right of rescission, setoff, claim, counterclaim or defense, including the
defense of usury, whether arising out of transactions concerning the Receivable
or otherwise, and the operation of any of the terms of the Receivable or the
exercise by Reliance, the Originator or the Obligor of any right under the
Receivable will not render the Receivable unenforceable in whole or in part, and
no such right has been asserted or threatened with respect to any Receivable.
There is not any right of rescission, offset, defense, claim or counterclaim to
the obligation of the related Obligor to pay any amount due under each
Receivable for which the Amount Financed includes the cost or premium for any
extended warranty or service agreement. With respect to each Receivable for
which the Amount
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Financed includes the cost or premium for an extended warranty or service
agreement, any amounts payable due to the cancellation of such extended warranty
or service agreement will not reduce the Amount Financed unless such amounts are
received and deposited into the Collection Account.
19. No Default. There has been no default, breach, violation or event
permitting acceleration under the terms of any Receivable (other than payment
delinquencies of not more than 30 days), and no condition exists or event has
occurred and is continuing that with notice or the lapse of time would
constitute a default, breach, violation or event permitting acceleration under
the terms of any Receivable, and there has been no waiver of any of the
foregoing. As of the Cutoff Date, no Financed Vehicle had been repossessed.
20. Insurance. At the time of the origination of the related Receivable,
each Financed Vehicle was covered by a comprehensive and collision insurance
policy (i) in an amount at least equal to the lesser of (a) its maximum
insurable value or (b) the principal amount due from the Obligor under the
related Receivable, (ii) naming Reliance or an Originator as loss payee and
(iii) insuring against loss and damage due to fire, theft, transportation,
collision and other risks generally covered by comprehensive and collision
coverage. Each Receivable requires the Obligor to keep the related Financed
Vehicle in good condition and repair and to maintain physical loss and damage
insurance, naming Reliance and its successors and assigns as additional insured
parties, and each Receivable permits the holder thereof to obtain physical loss
and damage insurance at the expense of the Obligor if the Obligor fails to do
so.
21. Contract Not Assumable. Each Receivable prohibits the sale,
assignment or transfer of the Obligor's interest therein or the assumption of
the Receivable by another Person in a manner that would release the Obligor
thereof from the Obligor's obligation.
22. No Advances. Neither Reliance nor any Originator has made any
advances in order for the Receivable to qualify for inclusion in the Trust
Estate.
23. Chattel Paper. Each Receivable constitutes "chattel paper" for
purposes of Section 9-105(l)(b) and 9-308 of the UCC and has been delivered to
the Custodian which originated such Receivable.
24. Titling Documentation. All documents necessary to permit the Trustee
to submit the Lien Certificates for each Financed Vehicle to the applicable
Department of Motor Vehicles for retitling in the name of the Trustee as secured
party have been delivered to the Trustee.
25. Full Disbursement. At the time of origination of each Receivable, the
proceeds of such Receivable were fully disbursed. There is no requirement for
future advances thereunder, and all fees and expenses in connection of such
Receivable have been paid.
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26. Taxes and Assessments. Each Receivable contains provisions requiring
the Obligor to pay all taxes and assessments imposed on or with respect to the
related Financed Vehicle.
27. Prepayments. Each Receivable does not permit early termination or
prepayment unless the amount to be paid by or on behalf of the Obligor in
respect of such prepayment or termination is at all times equal to or in excess
of the related Amount Financed plus accrued and unpaid interest.
28. Substitutions. No Receivable provides for the substitution, exchange
or addition of any Financed Vehicle subject to such Receivable.
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<PAGE>
POOLING AND SERVICING AGREEMENT
RELATING TO
RELIANCE AUTO RECEIVABLES CORPORATION ASSET BACKED NOTES,
Series 1996-A
between
RELIANCE AUTO RECEIVABLES CORPORATION
Issuer
RELIANCE ACCEPTANCE CORPORATION
In its individual capacity
and as Servicer
and
HARRIS TRUST AND SAVINGS BANK
Trustee and Backup Servicer
_________________________________________
Dated as of November 20, 1996
_________________________________________
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS................................................. 1
Section 1.1. Definitions............................................ 1
Section 1.2. Usage of Terms......................................... 22
Section 1.3. Calculations........................................... 22
Section 1.4. Section References..................................... 22
Section 1.5. No Recourse............................................ 22
Section 1.6. Material Adverse Effect................................ 23
ARTICLE II CONVEYANCE OF RECEIVABLES;
REPRESENTATIONS, WARRANTIES AND COVENANTS................... 23
Section 2.1. Conveyance of Receivables.............................. 23
Section 2.2. Custody of Receivable Files............................ 24
Section 2.3. Representations and Warranties of Reliance............. 26
Section 2.4. Repurchase of Receivables Upon Breach of Warranty...... 30
Section 2.5. Assignment of Receivables.............................. 30
Section 2.6. Collecting Lien Certificates........................... 31
Section 2.7. Covenants of Reliance.................................. 32
Section 2.8. Indemnification........................................ 35
ARTICLE III ADMINISTRATION AND SERVICING OF RECEIVABLES................. 35
Section 3.1. Duties of the Servicer................................. 35
Section 3.2. Collection of Receivable Payments;
Modifications of Receivables........................... 37
Section 3.3. Realization Upon Receivables........................... 38
Section 3.4. Insurance.............................................. 39
Section 3.5. Maintenance of Security Interests in Vehicles.......... 41
Section 3.6. Covenants, Representations and Warranties of
Servicer............................................... 42
Section 3.7. Purchase of Receivables Upon Breach of Covenant........ 45
Section 3.8. Total Servicing Fee; Payment of Certain Expenses
by Servicer............................................ 46
Section 3.9. Servicer's Certificate................................. 46
Section 3.10. Annual Statement as to Compliance;
Notice of Servicer Termination Event................... 48
Section 3.11. Annual Independent Accountants' Report................. 48
Section 3.12. Access to Certain Documentation and
Information Regarding Receivables...................... 49
Section 3.13. Monthly Tape; Certain Duties of Backup Servicer........ 49
Section 3.14 Duties of the Servicer under the Indenture............. 50
Section 3.15. Fidelity Bond and Errors and Omissions Policy.......... 51
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<PAGE>
Section 3.16. Compliance with Laws................................... 52
ARTICLE IV ACCOUNTS; COLLECTIONS; PAYMENTS;
STATEMENTS TO NOTEHOLDERS................................... 52
Section 4.1. Accounts............................................... 52
Section 4.2. Servicer Reimbursements................................ 53
Section 4.3. Application of Collections............................. 53
Section 4.4. Additional Deposits.................................... 54
Section 4.5. Payments............................................... 54
Section 4.6. [Reserved]............................................. 56
Section 4.7. Statements to Noteholders.............................. 56
Section 4.8. Optional Deposits by the Note Insurer.................. 57
ARTICLE V THE SPREAD ACCOUNT AND THE POLICY........................... 57
Section 5.1. Spread Account Initial Deposit; Spread Account
Required Amount........................................ 57
Section 5.2. Policy................................................. 58
Section 5.3. Withdrawals from Spread Account........................ 58
Section 5.4. Claims Under Policy.................................... 58
Section 5.5. Preference Claims...................................... 59
Section 5.6. Surrender of Policy.................................... 60
ARTICLE VI THE SERVICER................................................ 60
Section 6.1. Liability of Servicer; Indemnities..................... 60
Section 6.2. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer or Backup Servicer........ 61
Section 6.3. Limitation on Liability of Servicer, Backup
Servicer and Others.................................... 63
Section 6.4. Delegation of Duties................................... 65
Section 6.5. Servicer and Backup Servicer Not to Resign............. 65
Section 6.6 Indemnification........................................ 66
Section 6.7 Backup Servicer Indemnification........................ 67
Section 6.8 Representations of Backup Servicer..................... 68
ARTICLE VII SERVICER TERMINATION EVENTS................................. 69
Section 7.1. Servicer Termination Event............................. 69
Section 7.2. Consequences of a Servicer Termination Event........... 71
Section 7.3. Appointment of Successor............................... 72
Section 7.4. Notification to Noteholders............................ 74
Section 7.5. Waiver of Past Defaults................................ 74
ARTICLE VIII TERMINATION................................................. 74
Section 8.1. Optional Purchase of All Receivables................... 74
ARTICLE IX MISCELLANEOUS PROVISIONS.................................... 75
Section 9.1. Amendment.............................................. 75
Section 9.2. Protection of Title to Issuer.......................... 76
Section 9.3. Governing Law.......................................... 78
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<PAGE>
Section 9.4. Severability of Provisions............................. 78
Section 9.5. Assignment............................................. 78
Section 9.6. Third-Party Beneficiaries.............................. 78
Section 9.7. Note Insurer as Controlling Party...................... 79
Section 9.8. Counterparts........................................... 79
Section 9.9. Notices................................................ 79
Section 9.10. Successors and Assigns................................. 80
Section 9.11. Nonpetition Covenant................................... 80
SCHEDULES
Schedule A -- Schedule of Receivables
Schedule B -- Representations and Warranties of Reliance
EXHIBITS
Exhibit A -- Form of Servicer's Certificate
Exhibit B -- Form of Reliance's Credit and Collection Policy
Exhibit C -- Form of Dealer Agreement
Exhibit D -- Form of Request for Release and Receipt Documents
Exhibit E -- Form of Dealer Assignment
Exhibit F -- List of Servicing Officers
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<PAGE>
POOLING AND SERVICING AGREEMENT, dated as of November 20, 1996 (this
"Agreement"), between RELIANCE ACCEPTANCE CORPORATION, a Delaware corporation,
in its individual capacity ("Reliance") and as Servicer (the "Servicer"),
RELIANCE AUTO RECEIVABLES CORPORATION, a Delaware corporation, as Issuer (the
"Issuer"), and HARRIS TRUST AND SAVINGS BANK, an Illinois banking corporation,
as Trustee (in such capacity, the "Trustee") and as Backup Servicer (in such
capacity, the "Backup Servicer").
In consideration of the mutual agreements contained herein, the Issuer, the
Servicer, the Trustee and the Backup Servicer hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. All capitalized terms used herein but not
defined herein shall have the meanings set forth in the Indenture (as defined
below). Whenever capitalized and used in this Agreement, the following words
shall have the following meanings:
Accountants' Report: As defined in Section 3.11.
Accounting Date: With respect to a Payment Date or Determination Date, the
last day of the Collection Period preceding such Payment Date or Determination
Date (such date being referred to as the "related Accounting Date" with respect
to such Payment Date or Determination Date).
Administrative Receivable: With respect to any Collection Period, a
Receivable that the Servicer is required to purchase pursuant to Section 3.7 or
that the Servicer has elected to purchase pursuant to Section 3.4(c).
Affiliate: With respect to any Person, any other Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with such specified Person. For the purposes of this definition, the term
"control" (including the terms "controlling," "controlled by" and "under common
control with") means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
Aggregate Principal Balance: (i) With respect to the Closing Date, the
Cutoff Date Principal Balance, (ii) with respect to any Determination Date or
Payment Date, the sum of the Principal Balances (computed as of the related
Accounting Date) for all Receivables (other than Liquidated Receivables and
Purchased
<PAGE>
Receivables) and (iii) with respect to any other date of determination, the sum
of the Principal Balances (computed as of such date of determination) for all
Receivables (other than Liquidated Receivables and Purchased Receivables).
Agreement: This Pooling and Servicing Agreement and all exhibits and
schedules hereto.
Amount Available: With respect to any Payment Date, the sum of (i) the
Available Funds with respect to the related Determination Date, plus (ii) the
Spread Account Draw Amount, if any, with respect to such Payment Date deposited
by the Trustee into the Collection Account pursuant to Section 5.3, plus (iii)
the Deficiency Amount, if any, received by the Trustee from the Note Insurer
with respect to such Payment Date.
Amount Financed: With respect to a Receivable, the aggregate amount
initially advanced to the Obligor under such Receivable toward the purchase
price of the related Financed Vehicle and related costs, including amounts
advanced in respect of accessions, insurance premiums (not including any
premiums for Force-Placed Insurance), service and warranty policies or contracts
and other items customarily financed as part of retail automobile installment
sale contracts or installment loans.
Annual Percentage Rate or APR: With respect to a Receivable, the rate per
annum of finance charges stated in such Receivable as the "annual percentage
rate" (within the meaning of the Federal Truth-in-Lending Act); provided,
however, that if, after the Closing Date, the rate per annum with respect to a
Receivable as of the Closing Date is reduced as a result of (i) an insolvency
proceeding involving the Obligor or (ii) pursuant to the Soldiers' and Sailors'
Civil Relief Act of 1940, the Annual Percentage Rate or APR shall refer to such
reduced rate.
Available Funds: With respect to any Determination Date, the sum of (i) the
Collected Funds received by the Servicer during the related Collection Period,
(ii) the aggregate Purchase Amounts of all Receivables that became Purchased
Receivables as of the related Deposit Date and (iii) all income from investments
of funds in the Collection Account during the related Collection Period.
BABC: BankAmerica Business Credit, Inc., a Delaware corporation.
BABC Liens: The security interests in the Receivables and the Other
Conveyed Property granted by Cole Taylor Finance Co. (whose name has been
changed to Reliance Acceptance Corporation), as debtor, in favor of BABC, as
secured party, in connection with the Loan and Security Agreement, dated July
12, 1994, as amended,
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<PAGE>
between BABC, Cole Taylor Finance Co. and the other Borrowers named therein.
Backup Servicer: Harris Trust and Savings Bank, its successor in interest
pursuant to Section 7.2 or such Person as shall have been appointed as Backup
Servicer or successor Servicer pursuant to Section 7.3.
Backup Servicer Fee: With respect to each Payment Date, an amount equal to
the greater of (i) one-twelfth of 0.015% multiplied by the Note Balance as of
the open of business on the first day of the related Collection Period and (ii)
$750.
Basic Servicing Fee: With respect to any Payment Date, the fee payable to
the Servicer for services rendered during the related Collection Period, which
shall be equal to one-twelfth of 3.00% multiplied by the Aggregate Principal
Balance as of the first day of the related Collection Period.
Board Resolution: With respect to any Person, a resolution passed by the
board of directors of such Person, in accordance with the required procedures as
prescribed by law of such Person's state of incorporation or organization and
such Person's by-laws or other similar incorporation or charter documents.
Business Day: Any day other than a Saturday, Sunday or other day on which
commercial banking institutions or trust companies in San Antonio, Texas, New
York, New York, Chicago, Illinois or the principal place of business of any
successor Servicer or successor Trustee are authorized or obligated by law or
order to be closed.
Calendar Quarter: As of any date of determination, the three-month period
ending on the last day of March, June, September or December.
Closing: As defined in Section 2.1(c).
Closing Date: November 20, 1996.
Code: As defined in the Indenture.
Collateral Insurance: As defined in Section 3.4(a).
Collateral Perfection Trigger: The occurrence and continuance of any of
the following events:
(A) a Servicer Termination Event;
(B) a Distribution Increase; or
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(C) one or more courts of competent jurisdiction have issued one or more
final, nonappealable orders to the effect that the Trustee is not the secured
party with respect to all or any portion of the Financed Vehicles and the
aggregate of the initial Principal Balances of the related Receivables as of the
Cutoff Date equals or exceeds 5% of the Cutoff Date Principal Balance; provided,
however, that if a Collateral Perfection Trigger of the type described in this
clause (C) occurs, such Collateral Perfection Trigger shall apply only to the
Receivables affected thereby.
Collected Funds: With respect to any Determination Date, the amount of
funds representing collections on the Receivables received by the Servicer
during the related Collection Period, including all Liquidation Proceeds
collected during the related Collection Period (but excluding any Purchase
Amounts with respect to Purchased Receivables) and all amounts paid by the
Dealers under Dealer Agreements with respect to the Receivables.
Collection Account: The account designated as the Collection Account in,
and which is established and maintained pursuant to, Section 4.1.
Collection Period: With respect to a Payment Date or Determination Date,
the calendar month preceding the month in which such Payment Date or
Determination Date occurs (such calendar month being referred to as the "related
Collection Period" with respect to such Payment Date or Determination Date).
Computer Tape: The computer tape or diskette generated by or on behalf of
the Issuer that provides information relating to the Receivables conveyed to the
Issuer hereunder.
Controlling Party: The Note Insurer, so long as no Insurer Default shall
have occurred and be continuing, and the Trustee for the benefit of the
Noteholders, for so long as an Insurer Default shall have occurred and is
continuing.
Cram Down Loss: With respect to a Receivable, if a court of appropriate
jurisdiction in an insolvency proceeding shall have issued an order reducing the
amount owed on such Receivable or otherwise modifying or restructuring the
Scheduled Payments to be made on such Receivable, an amount equal to the excess
of the Principal Balance of such Receivable immediately prior to such order over
the principal balance of such Receivable as so reduced. A "Cram Down Loss"
shall be deemed to have been realized on the date of issuance of such order.
Credit and Collection Policy: With respect to Reliance as Servicer and any
of its Affiliates as Subservicers, the Credit and Collection Policy of Reliance,
substantially in the form of Exhibit B, as such policy may be amended from time
to time in accordance
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<PAGE>
with Section 3.1 and with respect to any successor Servicer (other than an
Affiliate of Reliance), the customary and usual collection and servicing
procedures that institutions that service comparable automobile receivables
utilize in servicing such receivables.
Credit Support Amount: With respect to any Determination Date or Payment
Date, the sum of (i) Overcollateralization plus (ii) the amount on deposit in
the Spread Account as of such date (after giving effect to all withdrawals from
the Spread Account on such Payment Date or the Payment Date following such
Determination Date, as applicable).
Credit Support Percentage: With respect to any Determination Date or
Payment Date, the ratio of the Credit Support Amount to the Aggregate Principal
Balance.
Credit Support Required Percentage: 12.25%; provided, however, that if a
Portfolio Performance Test has been violated and not Deemed Cured, 19.50%.
Cumulative Net Default Rate: With respect to any Determination Date, the
ratio of (i) the Aggregate Principal Balance of Receivables that have become
Defaulted Receivables during the related Collection Period and all prior
Collection Periods after the Cutoff Date (to the extent such Defaulted
Receivables have not been subsequently made current by the related Obligor's
payment thereunder of any delinquent amounts), less all Liquidation Proceeds
received during the related and all such prior Collection Periods, to (ii) the
Cutoff Date Principal Balance.
Custodian: The Originators, Reliance and any other Person named from time
to time as custodian in the Custodian Agreement acting as agent for the Trustee,
which Person must be acceptable to the Controlling Party.
Custodian Agreement: The Custodian Agreement, dated as of November 20,
1996, between the Originators named therein, as Custodians, the Trustee and the
Note Insurer.
Custodian Fee: With respect to any Custodian or Custodians other than
Reliance or its Affiliates, such fee as agreed upon between such Custodian or
Custodians and the Trustee and as approved in writing by the Note Insurer.
Cutoff Date: November 1, 1996.
Cutoff Date Principal Balance: $132,695,439.33.
Dealer: A seller of new or used automobiles or light trucks that
originated one or more of the Receivables and sold such Receivable, directly or
indirectly, to an Originator.
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<PAGE>
Dealer Agreement: An agreement between an Originator and a Dealer relating
to the sale of retail installment sale contracts and installment notes to such
Originator and all documents and instruments relating thereto substantially in
the form attached as Exhibit C.
Dealer Assignment: With respect to a Receivable, the assignment executed by
a Dealer conveying such Receivable to an Originator substantially in the form
attached as Exhibit E.
Deemed Cured: The following Portfolio Performance Tests shall be "Deemed
Cured" if the following events with respect to any Determination Date occur:
(a) the average Delinquency Ratio for any three consecutive Collection
Periods following the Collection Period with respect to which such Portfolio
Performance Test was violated falls below the percentage for the applicable
Determination Date specified in clause (a) of the definition of "Portfolio
Performance Test";
(b) the average Monthly Net Default Rate for any three consecutive
Collection Periods following the Collection Period with respect to which such
Portfolio Performance Test was violated falls below 0.75%; provided, however,
that when the Note Factor is less than or equal to 0.2500000 and so long as the
Credit Support Percentage is equal to or greater than 14%, 1.25%; and
(c) the Cumulative Net Default Rate as of any Determination Date following
the Determination Date on which such Portfolio Performance Test was violated
falls below the percentage for the applicable Determination Date specified in
clause (c) of the definition of "Portfolio Performance Test."
Defaulted Receivable: With respect to any Collection Period, a Receivable
as to which the earliest of the following has occurred: (i) the Servicer has
repossessed the Financed Vehicle and the applicable redemption period has
expired during such Collection Period; (ii) 5% or more of any Scheduled Payment
is 90 or more days delinquent as of the related Accounting Date; or (iii) the
Servicer has determined in good faith on or prior to the related Accounting Date
that all amounts it expects to recover have been received.
Deficiency Amount: As defined in Section 5.4(a).
Delinquency Ratio: With respect to each Determination Date, the ratio of
(i) the average Aggregate Principal Balance of Receivables with 5% or more of
any Scheduled Payment 31 or more days delinquent as of the related Accounting
Date (other than Defaulted Receivables), to (ii) the outstanding Aggregate
Principal Balance of Receivables as of the related Accounting Date.
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<PAGE>
Deposit Date: With respect to any Determination Date, the Business Day
preceding such Determination Date.
Determination Date: With respect to any Payment Date, the earlier of (i)
the eighth day of the calendar month in which such Payment Date occurs (or, if
such day is not a Business Day, the next Business Day), and (ii) the fifth
Business Day preceding the Payment Date.
Distribution Increase: Any of the following events shall have occurred,
unless in the case of clauses (iii) through (xii) only the occurrence of such
event is waived in writing by the Controlling Party:
(i) The entry of a decree or order for relief by a court or regulatory
authority having jurisdiction in respect of the Servicer, Reliance or the Issuer
in an involuntary case under the federal bankruptcy laws, as now or hereafter in
effect, or another present or future federal or state bankruptcy, insolvency or
similar law, or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Servicer, Reliance or the Issuer
or of any substantial part of their property or ordering the winding up or
liquidation of the affairs of the Servicer, Reliance or the Issuer or the
commencement of an involuntary case under the federal bankruptcy laws, as now or
hereinafter in effect, or another present or future federal or state bankruptcy,
insolvency or similar law, and such case is not dismissed within 60 days;
(ii) The commencement by the Servicer, Reliance or the Issuer 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, Reliance or the Issuer to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Servicer,
Reliance or the Issuer or of any substantial part of their property or the
making by the Servicer, Reliance or the Issuer of an assignment for the benefit
of creditors or the failure by the Servicer, Reliance or the Issuer generally to
pay their debts as such debts become due or the taking of corporate action by
the Servicer, Reliance or the Issuer in furtherance of any of the foregoing;
(iii) Failure or failures on the part of the Servicer, Reliance or the
Issuer duly to observe or perform any other covenants or agreements of the
Servicer, Reliance or the Issuer set forth in this Agreement or any other
Related Document, which failure or failures (i) materially and adversely affect
the rights of the Noteholders or the Note Insurer, and (ii) continue unremedied
for a period of 30 days after the earlier of (A) the date on which the Servicer,
Reliance or the Issuer, as the case may
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<PAGE>
be, becomes aware of such failure or (B) the date on which written notice of
such failure or failures, requiring the same to be remedied, shall have been
given by the Note Insurer (or, if an Insurer Default shall have occurred and be
continuing, by the Holders of the Note Voting Amount) or the Trustee on behalf
of the Noteholders;
(iv) Any representation or warranty of the Servicer, Reliance or the Issuer
made in this Agreement or any other Related Document shall prove to be incorrect
in any material respect as of the time when the same shall have been made, and
the incorrectness of such representation or warranty has a material adverse
effect on the Noteholders or the Note Insurer and, within 30 days after the
earlier of (A) the date on which the Servicer, Reliance or the Issuer, as the
case may be, becomes aware of such breach or (B) the date on which written
notice thereof shall have been given by the Note Insurer (or, if an Insurer
Default shall have occurred and be continuing, by the Holders of more than 25%
of the then outstanding Note Balance) or the Trustee on behalf of the
Noteholders, the circumstances or condition in respect of which such
representation or warranty was incorrect shall not have been eliminated or
otherwise cured;
(v) A payment under the Policy shall have been made by the Note Insurer;
(vi) As of any Determination Date, the average Delinquency Ratio for the
three preceding Collection Periods exceeds (i) prior to the seventh
Determination Date, 3.00% and (ii) on or after the seventh Determination Date,
3.15%;
(vii) As of any Determination Date after the sixth Determination Date, the
average Monthly Net Default Rate for the three preceding Collection Periods
exceeds (a) 1.00% or (b) if as of such Determination Date (after giving effect
to all payments to be made pursuant to Section 4.5(i) through (vi) on the
related Payment Date) the Note Factor will be less than or equal to 0.2500000
and the Credit Support Percentage will be equal to or greater than 14%, 1.75%;
or
(viii) As of any Determination Date, the Cumulative Net Default Rate
exceeds the following amounts:
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<TABLE>
<CAPTION>
Determination Dates Cumulative Net
After Closing Default Rate
------------------- ---------------
<S> <C>
1-3 1.500%
4-6 2.500
7-9 3.125
10-12 4.750
13-15 6.750
16-18 9.000
19-21 10.750
22-24 13.000
25-27 14.750
28 and thereafter 16.750;
</TABLE>
(ix) the occurrence of an uncured Servicer Termination Event (other than
an event described in Section 7.1(h));
(x) one or more courts of competent jurisdiction have issued one or more
final, nonappealable orders to the effect that the Trustee on behalf of the
Noteholders and the Note Insurer does not have a valid perfected first priority
security interest in the Receivables;
(xi) except as permitted by the relevant Related Document, any assignment
by any of the Servicer, Reliance or the Issuer of its rights and obligations
under any Related Document or any attempt to make such assignment without the
prior written consent of the Note Insurer; or
(xii) so long as Reliance is the Servicer, Reliance or any of its
Affiliates shall default in the payment of principal of or interest on any
indebtedness for borrowed money beyond any applicable period of grace provided
in the instrument or agreement under which such indebtedness was created and are
not cured within 30 days, if the aggregate amount of the indebtedness in respect
of which such default or defaults shall have occurred is at least $10,000,000.
Draw Date: With respect to any Payment Date, the fourth Business Day
preceding such Payment Date.
Electronic Ledger: The electronic master record of the retail installment
sales contracts or installment loans of Reliance.
Eligible Account: As defined in the Indenture.
Eligible Investments: Any one or more of the following types of
investments:
(i) (A) direct interest-bearing obligations of, and interest-bearing
obligations fully guaranteed as to full and timely payment
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<PAGE>
of principal and interest by, the United States or any agency or instrumentality
of the United States the obligations of which are backed by the full faith and
credit of the United States; and (B) direct interest-bearing obligations of, and
interest-bearing obligations fully guaranteed as to full and timely payment of
principal and interest by, the Federal National Mortgage Association or the
Federal Home Loan Mortgage Corporation, but only if, at the time of investment,
such obligations are rated "AAA" by Standard & Poor's and "Aaa" by Moody's;
(ii) demand or time deposits in, certificates of deposit of, demand notes
of or bankers' acceptances issued by any depository institution or trust company
organized under the laws of the United States or any state and subject to
supervision and examination by federal and/or state banking authorities
(including, if applicable, the Trustee or any agent of the Trustee acting in
their respective commercial capacities); provided, however, that the short-term
unsecured debt obligations of such depository institution or trust company at
the time of such investment, or contractual commitment providing for such
investment, are rated "A-1+" by Standard & Poor's and "P-1" by Moody's;
(iii) repurchase obligations with a term not to exceed 45 days pursuant to
a written agreement (A) with respect to any obligation described in clause (i)
above, where the Trustee has taken actual or constructive delivery of such
obligation in accordance with Section 4.1, and (B) entered into with a
depository institution or trust company organized under the laws of the United
States or any State thereof, the deposits of which are insured by the Federal
Deposit Insurance Corporation and the short-term unsecured debt obligations of
which at the time of investment, or contractual commitment providing for such
investment, are rated "A-1+" by Standard & Poor's and "P-1" by Moody's
(including, if applicable, the Trustee or any agent of the Trustee acting in
their respective commercial capacities); provided, however, that collateral
transferred pursuant to such repurchase obligation must be of the type described
in clause (i) above and must (a) be valued daily at current market price plus
accrued interest, (b) pursuant to such valuation, be equal at all times to at
least 105% of the cash transferred by the Trustee in exchange for such
collateral and (c) be delivered to the Trustee or, if the Trustee is supplying
the collateral, an agent for the Trustee, in such a manner as to accomplish
perfection of a security interest in the collateral by possession of
certificated securities;
(iv) commercial paper that (A) is payable in United States dollars, (B) at
the time of investment, or contractual commitment providing for such investment,
is rated "A-1+" by Standard & Poor's and "P-1" by Moody's and (C) has an
original maturity of less than 365 days;
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(v) money market mutual funds registered under the Investment Company Act
of 1940, as amended, having a rating, at the time of such investment, from each
of the Rating Agencies in the highest investment category granted thereby; and
(vi) any other demand or time deposit, obligation, security or investment
as may be acceptable to the Rating Agencies and the Controlling Party, as
evidenced by the prior written consent of the Rating Agencies and the
Controlling Party.
Eligible Servicer: Reliance, the Backup Servicer or another Person that (i)
is servicing a portfolio of motor vehicle retail installment sales contracts
and/or motor vehicle installment loans, (ii) is legally qualified and has the
capacity to service the Receivables, (iii) has demonstrated the ability to
service with reasonable skill and care a portfolio of motor vehicle retail
installment sales contracts and/or motor vehicle installment loans similar to
the Receivables, (iv) is qualified and entitled to use, pursuant to a license or
other written agreement, and agrees to maintain the confidentiality of, the
software that the Servicer uses in connection with performing its duties and
responsibilities under this Agreement or otherwise has available software that
is adequate to perform its duties and responsibilities under this Agreement, (v)
has a minimum net worth of $10,000,000 and (vi) if an Insurer Default shall not
have occurred and be continuing, is acceptable to the Note Insurer.
ERISA: The Employee Retirement Income Security Act of 1974, as amended.
Final Scheduled Payment Date: July 15, 2002 (or, if such day is not a
Business Day, the next Business Day).
Financed Vehicle: A new or used automobile or light truck, together with
all accessions thereto, securing or purporting to secure an Obligor's
indebtedness under a Receivable.
Floor Amount: With respect to any Determination Date or any Payment Date,
an amount equal to $1,000,000.
Force-Placed Insurance: As defined in Section 3.4(b).
Governmental Authority: Any court or federal or state regulatory body,
administrative agency or other tribunal or other governmental instrumentality.
Indenture: The Indenture, dated as of November 20, 1996, between the Issuer
and the Trustee.
Indenture Collateral: As defined in the Indenture.
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<PAGE>
Independent Accountants: As defined in Section 3.11(a).
Independent Certificate: As defined in the Indenture.
Insurance Add-On Amount: As defined in Section 3.4.
Insurance Agreement: The Insurance and Indemnity Agreement, dated as of
November 20, 1996, between the Note Insurer, the Servicer, the Backup Servicer,
the Trustee, Reliance and the Issuer.
Insurance Policy: With respect to a Receivable, any insurance policy
benefiting the holder of the Receivable providing loss or physical damage,
credit life, credit disability, theft, mechanical breakdown or similar coverage
with respect to the Financed Vehicle or the related Obligor.
Insurer Default: The occurrence and continuance of any of the following
events:
(A) the Note Insurer shall have failed to make a payment required
under the Policy in accordance with its terms;
(B) the entry of a decree or order for relief by a court or regulatory
authority having jurisdiction in respect of the Note Insurer in an
involuntary case under the federal bankruptcy laws, as now or hereafter in
effect, or another present or future federal or state bankruptcy,
insolvency or similar law, or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Note
Insurer or of any substantial part of its property or ordering the winding
up or liquidation of the affairs of the Note Insurer or the commencement of
an involuntary case under the federal bankruptcy laws, as now or
hereinafter in effect, or another present or future federal or state
bankruptcy, insolvency or similar law, and such case is not dismissed
within 60 days; or
(C) the commencement by the Note Insurer 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 Note Insurer to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Note Insurer or of any
substantial part of its property or the making by the Note Insurer of an
assignment for the benefit of creditors or the failure by the Note Insurer
generally to pay its debts as such debts become due or the taking of
corporate action by the Note Insurer in furtherance of any of the
foregoing.
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Interest Carryover Shortfall: As of the close of business on any Payment
Date, the excess, if any, of (i) the Interest Distributable Amount for such
Payment Date over (ii) the amount of interest that the holders of the Notes
actually received on such Payment Date.
Interest Distributable Amount: With respect to any Payment Date, the sum of
(i) one-twelfth of the product of the Note Interest Rate multiplied by the Note
Balance as of the close of business on the related Accounting Date, plus (ii)
any outstanding Interest Carryover Shortfall with respect to the preceding
Payment Date, plus 30 days of interest on such outstanding Interest Carryover
Shortfall, to the extent permitted by law, at the Note Interest Rate.
Issuer: As defined in the first paragraph of this Agreement.
Issuer Order: As defined in the Indenture.
Lien: Any security interest, lien, charge, pledge, preference, equity or
encumbrance of any kind, including tax liens, mechanics' liens and any liens
that attach by operation of law.
Lien Certificate: With respect to a Financed Vehicle, an original
certificate of title, certificate of lien or other notification issued by the
Registrar of Titles of the applicable state to a secured party that indicates
that the lien of the secured party on the Financed Vehicle is recorded on the
original certificate of title. In any jurisdiction in which the original
certificate of title is required to be given to the Obligor, the term "Lien
Certificate" shall mean only a certificate or notification issued to a secured
party.
Liquidated Receivable: With respect to any Collection Period, a Receivable
as to which (i) 120 or more days have elapsed since the Servicer repossessed the
Financed Vehicle (following the expiration of any applicable redemption period),
(ii) the Servicer has determined in good faith on or prior to the last day of
such Collection Period that all amounts it expects to recover have been
received, (iii) 5% or more of any Scheduled Payment has become 180 or more days
delinquent on or prior to the last day of such Collection Period or (iv) the
related Financed Vehicle has been sold and all of the proceeds have been
received with respect to such Receivable (including proceeds of Insurance
Policies). Any Receivable that becomes a Purchased Receivable shall not be a
Liquidated Receivable.
Liquidation Proceeds: With respect to a Liquidated Receivable, all amounts
realized with respect to such Receivable (other than amounts withdrawn from the
Spread Account and drawings under the Policy), including proceeds of Insurance
Policies, net of (i)
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<PAGE>
reasonable out-of-pocket expenses incurred by the Servicer in connection with
the collection of such Receivable and the repossession and disposition of the
related Financed Vehicle and (ii) amounts that are required to be refunded to
the Obligor on such Receivable; provided, however, that the Liquidation Proceeds
with respect to any Receivable shall in no event be less than zero.
Losses: As defined in Section 6.6.
Monthly Net Default Rate: With respect to any Determination Date, the
ratio of (i) the Aggregate Principal Balance of Receivables that became
Defaulted Receivables during the related Collection Period, less any Liquidation
Proceeds received with respect to any previously Defaulted Receivables during
the related Collection Period, to (ii) the Aggregate Principal Balance of
Receivables as of the related Accounting Date.
Monthly Records: All records and data maintained by the Servicer or the
Originators with respect to the Receivables and the Obligors, including all
branch ledger cards.
Moody's: Moody's Investors Service, Inc., or any successor thereto.
Note Balance: As of the Closing Date, an amount equal to 95% of the Cutoff
Date Principal Balance and, thereafter, an amount equal to the Note Balance as
of the Closing Date reduced by all amounts distributed to the Noteholders that
are allocable to principal.
Note Factor: As of any Payment Date, a seven-digit decimal figure equal to
the Note Balance as of the close of business on such Payment Date divided by the
Note Balance as of the Closing Date.
Noteholder: As defined in the Indenture.
Noteholders' Principal Payment Amount: With respect to any Payment Date,
the greater of: (i) the lesser of (a) the Principal Distributable Amount and (b)
the Payment Amount less amounts distributed pursuant to Section 4.5(i) through
(iv); and (ii) the amount by which the Note Balance as of the preceding Payment
Date (after giving effect to all payments of principal on the Notes on such
preceding Payment Date) exceeds the Aggregate Principal Balance as of the
related Accounting Date; provided, however, that with respect to the Payment
Date which is the Final Scheduled Payment Date, the "Noteholders' Principal
Payment Amount" shall equal the Note Balance.
Note Insurer: MBIA Insurance Corporation, a New York insurance company, or
any successor thereto, as issuer of the Policy.
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<PAGE>
Note Interest Rate: As defined in the Indenture.
Note Majority: As defined in the Indenture.
Note Register: As defined in the Indenture.
Note Registrar: As defined in the Indenture.
Notice of Claim: A written or telecopied notice from the Trustee to the
Note Insurer, substantially in the form of Exhibit A to the Policy.
Obligor: With respect to a Receivable, the purchaser or the co-purchasers
of the Financed Vehicle and any other Person or Persons who are primarily or
secondarily obligated to make payments under such Receivable.
Officer's Certificate: With respect to any Person, a certificate signed by
the chairman of the board, the vice chairman, the president, the chief financial
officer or any vice president, in each case, of such Person.
Opinion of Counsel: A written opinion of counsel reasonably acceptable in
form and substance to the Controlling Party and, if such opinion or a copy
thereof is required to be delivered to the Note Insurer, reasonably acceptable
(as to form and substance) to the Note Insurer, and, if such opinion or a copy
thereof is required to be delivered to the Trustee, reasonably acceptable (as to
form and substance) to the Trustee.
Originator: An Affiliate of Reliance that has purchased Receivables from
Dealers pursuant to Dealer Agreements and Dealer Assignments and then has
transferred such Receivables to Reliance pursuant to the Receivables Purchase
Agreement.
Other Conveyed Property: All property conveyed by Reliance to the Issuer
pursuant to this Agreement (other than the Receivables) as set forth in Section
2.1(a).
Overcollateralization: With respect to any Determination Date or Payment
Date, the amount by which the Aggregate Principal Balance exceeds the Note
Balance (after giving effect to any payments with respect to the Notes on such
Payment Date or on the Payment Date following such Determination Date, as
applicable).
Overcollateralization Percentage: With respect to any Determination Date
or Payment Date, the ratio of Overcollateralization to the Aggregate Principal
Balance.
Payment Amount: With respect to a Payment Date, the sum of (i) the
Available Funds with respect to such Payment Date, plus
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(ii) the Spread Account Draw Amount, if any, with respect to such Payment Date
deposited by the Trustee into the Collection Account pursuant to Section 5.3,
plus (iii) any amounts specified in Section 4.8 and received by the Trustee from
the Note Insurer with respect to such Payment Date.
Payment Date: The 15th day of each calendar month, or if such 15th day is
not a Business Day, the next succeeding Business Day, commencing December 16,
1996 and including the Final Scheduled Payment Date.
Person: Any legal person, including any individual, corporation,
partnership, limited liability company, joint venture, estate, association,
joint stock company, trust, unincorporated organization or government or any
agency or political subdivision thereof.
Policy: The note guaranty insurance policy number 22453 issued by the Note
Insurer to the Trustee for the benefit of the Noteholders, including any
endorsements thereto.
Portfolio Performance Test: A Portfolio Performance Test shall be violated
as of any Determination Date if any one or more of the following events occurs
and shall not have been Deemed Cured as of such Determination Date or waived by
the Note Insurer:
(a) On or after the third Determination Date and to and including the
sixth Determination Date, the average Delinquency Ratio for the three preceding
Collection Periods exceeds 2.50% and on or after the seventh Determination Date,
the average Delinquency Ratio for the three preceding Collection Periods exceeds
2.65%;
(b) On or after the sixth Determination Date, the average Monthly Net
Default Rate for the three preceding Collection Periods exceeds (a) 0.75% or (b)
if as of such Determination Date (after giving effect to all payments to be made
pursuant to Section 4.5(i) through (vi) on the related Payment Date) the Note
Factor will be less than or equal to 0.2500000 and the Credit Support Percentage
will be equal to or greater than 14%, 1.25%; or
(c) As of any Determination Date, the Cumulative Net Default Rate exceeds
the following amounts:
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<TABLE>
<CAPTION>
Determination Dates Cumulative Net
After Closing Default Rate
------------------- ---------------
<S> <C>
1-3 1.250%
4-6 2.000
7-9 2.750
10-12 3.500
13-15 5.000
16-18 6.750
19-21 8.000
22-24 9.750
25-27 11.000
28 and thereafter 12.500
</TABLE>
Preference Amount: Any amount previously distributed to a Noteholder
on the Notes that is recoverable and sought to be recovered as a voidable
preference by a trustee in bankruptcy pursuant to the United States Bankruptcy
Code (11 U.S.C.), as amended from time to time, in accordance with a final
nonappealable order of a court having competent jurisdiction.
Premium: As defined in the Insurance Agreement.
Principal Balance: With respect to any Receivable, as of any date, the
Amount Financed minus (i) that portion of all amounts received on or prior to
such date and allocable to principal in accordance with the terms of such
Receivable, and (ii) any Cram Down Loss in respect of such Receivable.
Principal Carryover Shortfall: As of the close of business on any
Payment Date, the excess, if any, of (i) the Principal Distributable Amount,
over (ii) the amount of principal that the holders of the Notes actually
received on such Payment Date.
Principal Distributable Amount: With respect to any Payment Date,
without duplication, the lesser of (a) the Note Balance as of the open of
business on such Payment Date and (b) the sum of (i) the sum of: (A) the
principal portion of all Collected Funds received by the Servicer during the
related Collection Period and deposited into the Collection Account on or before
the related Determination Date, including the principal portion of all
prepayments, (B) the Principal Balance as determined on the close of business on
the related Accounting Date of all Receivables that became Liquidated
Receivables during the related Collection Period (other than Purchased
Receivables), (C) the principal portion of the Purchase Amount of all
Receivables that became Purchased Receivables as of the related Deposit Date,
and (D) the aggregate amount of Cram Down Losses that shall have been realized
during the related Collection Period, plus (ii) any Principal Carryover
Shortfall with respect to the preceding Payment Date.
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Purchase Amount: With respect to a Receivable, the Principal Balance and
all accrued and unpaid interest on the Receivable as of the date of purchase.
Purchased Receivable: With respect to any Collection Period, any Warranty
Receivable or Administrative Receivable as to which the Purchase Amount has been
deposited in the Collection Account by the Issuer or the Servicer, as
applicable, on or before the related Deposit Date and any Receivable purchased
by the Servicer pursuant to Section 8.1 as to which the Purchase Amount has been
deposited in the Collection Account by the Servicer.
Rating Agency: Each of Moody's and Standard & Poor's, so long as such
Persons maintain a rating on the Notes; and if either Moody's or Standard &
Poor's no longer maintains a rating on the Notes, such other nationally
recognized statistical rating organization selected by the Note Majority and
Reliance and (so long as an Insurer Default shall not have occurred and be
continuing) acceptable to the Note Insurer.
Receivable: A retail installment sale contract or installment loan
(and related security agreement) for a new or used automobile or light truck
(and all accessions thereto) that is included in the Schedule of Receivables,
and all rights and obligations under such a contract or loan.
Receivable File: The documents, electronic entries, instruments and
writings listed in Section 2.2 pertaining to a particular Receivable.
Receivables Purchase Agreement: The Receivables Purchase Agreement,
dated as of November 20, 1996, between Reliance and each of the Originators.
Record Date: The Business Day preceding the related Payment Date.
Registrar of Titles: With respect to any state, the Governmental
Authority responsible for the registration of, and the issuance of certificates
of title relating to, motor vehicles and liens thereon.
Reimbursement Amounts: Any payments made by the Note Insurer under
the Policy, any unpaid Premiums due the Note Insurer and any amounts paid by the
Note Insurer pursuant to Section 4.8 or Section 5.5(b). Reimbursement Amounts
shall be payable from the flow of funds in accordance with Section 4.5.
Reimbursement Amounts shall include interest on the above amounts calculated at
the "prime rate" of interest set forth in The Wall Street Journal ("Prime") plus
200 basis points. Interest shall accrue on all Reimbursement Amounts on a
monthly basis, as of each Payment Date,
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<PAGE>
at Prime plus 200 basis points assuming a 360-day year comprised of 12 months of
30 days each.
Related Documents: This Agreement, the Indenture, the Notes, the
Indemnification Agreement, dated as of November 20, 1996, among Reliance, the
Note Insurer, BA Securities, Inc. and First Chicago Capital Markets, Inc., the
Policy, the Insurance Agreement, the Custodian Agreement, the Subservicing
Agreement, the Receivables Purchase Agreement, the Purchase Agreement, dated as
of November 20, 1996, between the Issuer and the initial purchasers of the Notes
and the other agreements executed in connection therewith. The Related
Documents to be executed by any party are referred to herein as "such party's
Related Documents," "its Related Documents" or by a similar expression.
Request for Release of Documents: The request prepared by the Servicer
substantially in the form of Exhibit D.
Responsible Officer: When used with respect to the Trustee, any officer of
the Trustee assigned by the Trustee to administer its corporate trust affairs
relating to the Issuer. When used with respect to any other Person, the
President, any Vice-President or Assistant Vice-President or the Controller of
such Person, or any other officer or employee having similar functions.
Schedule of Receivables: The schedule of all retail installment sales
contracts and installment loans held by the Issuer that is attached as Schedule
A, as such schedule may be amended from time to time, each of which shall
include with respect to each Receivable: (a) a number identifying the
Receivable, (b) the Principal Balance as of the Cutoff Date, (c) the Obligor,
(d) the Obligor's billing address, (e) the original and remaining months to
maturity of the Receivable, (f) the Scheduled Payment, (g) the Annual Percentage
Rate, (h) the dates of the first and last Scheduled Payment, (i) the original
Amount Financed and (j) the Obligor's telephone number (after the time period
set forth in Section 2.1(d)).
Schedule of Representations: The Schedule of Representations and Warranties
of Reliance attached as Schedule B.
Scheduled Interest Receivable: A Receivable under which the portion of
any payment thereon allocable to interest and the portion allocable to principal
is determined in accordance with the "Rule of 78s."
Scheduled Payment: With respect to any Collection Period for any
Receivable, the amount set forth in such Receivable as required to be paid by
the Obligor thereon in such Collection Period. If after the Closing Date, the
Obligor's obligation under a Receivable with respect to a Collection Period has
been modified so as to
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<PAGE>
differ from the amount specified in such Receivable as a result of (i) the order
of a court in an insolvency proceeding involving the Obligor, (ii) the Soldiers'
and Sailors' Civil Relief Act of 1940 or (iii) modifications or extensions of
the Receivable permitted by Section 3.2(b), the Scheduled Payment with respect
to such Collection Period shall refer to the Obligor's payment obligation with
respect to such Collection Period as so modified.
Servicer: Reliance Acceptance Corporation, a Delaware corporation, its
successor in interest pursuant to Section 6.2 or, after any termination of the
Servicer upon a Servicer Termination Event, the Backup Servicer or any other
successor Servicer.
Servicer Termination Event: An event described in Section 7.1.
Servicer's Certificate: With respect to each Determination Date, a
certificate, completed by and executed on behalf of the Servicer, in accordance
with Section 3.9, substantially in the form attached as Exhibit A.
Servicing Officers: Those Persons listed on Exhibit F, as such list may be
amended from time to time by the Servicer upon notice to the Trustee and the
Note Insurer.
Split-off Transactions: As defined in Section 2.7(i).
Spread Account: The Spread Account established and maintained pursuant
to Section 4.1(b).
Spread Account Draw Amount: As defined in Section 5.3.
Spread Account Initial Deposit: As defined in Section 5.1.
Spread Account Percentage: With respect to any Determination Date or
Payment Date, shall mean:
(a) from the Closing Date through and including the later of (i) the
Payment Date upon which the Credit Support Percentage exceeds the Credit
Support Required Percentage and (ii) the eighth Payment Date, 7.25%; and
(b) after the period described in clause (a) above, the greater of (1)
the percentage equivalent of a fraction the numerator of which is the Floor
Amount and the denominator of which is the Aggregate Principal Balance as
of the related Accounting Date and (2) the difference between the Credit
Support Required Percentage and the Overcollateralization Percentage.
Spread Account Required Amount: With respect to any Determination Date or
Payment Date, an amount equal to the product
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<PAGE>
of the Spread Account Percentage and the Aggregate Principal Balance; provided,
however, that if a Distribution Increase has occurred and has not been waived by
the Note Insurer, the Spread Account Required Amount shall be an amount equal to
the Floor Amount.
Standard & Poor's: Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. or any successor thereto.
Subservicer: Any of the Persons named as a Subservicer under the
Subservicing Agreement.
Subservicing Agreement: The Subservicing Agreement, dated as of November
20, 1996, between the Originators named therein, as Subservicers, and the
Servicer.
Supplemental Servicing Fee: With respect to any Collection Period, all
administrative fees and charges paid by or on behalf of Obligors, including late
fees, prepayment fees and liquidation fees collected on the Receivables during
such Collection Period.
Tangible Net Worth: With respect to any Person and any date of
determination, the difference between:
(i) the tangible assets of such Person and its Affiliates calculated
in accordance with generally accepted accounting principles, as reduced by
adequate reserves in each case where a reserve is proper; and
(ii) all indebtedness, including subordinated debt, of such Person
and its Affiliates; provided, however, that: (A) in no event shall there
be included in the above calculation any intangible assets such as patents,
trademarks, trade names, copyrights, licenses, good will, organizational
costs, advances or loans to, or receivables from directors, officers,
employees or affiliates, prepaid assets, amounts relating to covenants not
to compete, pension assets, deferred charges or treasury stock of any
securities unless the same are readily marketable in the United States of
America or entitled to be used as a credit against federal income tax
liabilities; (B) securities included as such intangible assets shall be
taken in account at their current market price or cost, whichever is lower;
and (C) any write-up in the book value of any assets shall not be taken
into account.
Total Servicing Fee: The sum of the Basic Servicing Fee and the
Supplemental Servicing Fee.
Transfer Taxes: As defined in Section 2.7(j).
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<PAGE>
Trust Estate: As defined in the Indenture.
Trust Property: The property and proceeds conveyed pursuant to Section
2.1(a), together with certain monies paid or payable on or after the Cutoff
Date, the Policy, the Collection Account (including all Eligible Investments
therein and all proceeds therefrom), the Spread Account (including all Eligible
Investments therein and all proceeds therefrom) and certain other rights under
the Receivables Purchase Agreement, the Subservicing Agreement, the Indenture
and this Agreement.
Trustee: The Person acting as Trustee under this Agreement and the
Indenture, its successors in interest and any successor Trustee under this
Agreement and the Indenture.
UCC: The Uniform Commercial Code as in effect in the relevant jurisdiction.
Warranty Receivable: With respect to any Collection Period, a Receivable
that Reliance has become obligated to repurchase pursuant to Section 2.4.
Section 1.2. Usage of Terms. With respect to all terms used in this
Agreement, the singular includes the plural and the plural includes the
singular, words importing any gender include the other genders, references to
"writing" include printing, typing, lithography and other means of reproducing
words in a visible form, references to agreements and other contractual
instruments include all subsequent amendments, modifications or supplements
thereto or changes therein entered into in accordance with their respective
terms and not prohibited by this Agreement, references to Persons include their
permitted successors and assigns, and the terms "include" or "including" mean
"include without limitation" or "including without limitation."
Section 1.3. Calculations. All calculations of the amount of interest
accrued on the Notes and all calculations of the amount of the Basic Servicing
Fee shall be made on the basis of a 360-day year consisting of twelve 30-day
months. All references to the Principal Balance of a Receivable as of a
Accounting Date shall refer to the close of business on such day.
Section 1.4. Section References. All references to Articles, Sections,
paragraphs, subsections, exhibits and schedules shall be to such portions of
this Agreement unless otherwise specified.
Section 1.5. No Recourse. No recourse may be taken, directly or
indirectly, under this Agreement or any certificate or other writing delivered
in connection herewith or therewith, against any stockholder, officer or
director, as such, of the
22
<PAGE>
Issuer, the Servicer, the Backup Servicer or the Trustee or of any predecessor
or successor of the Issuer, the Servicer, the Backup Servicer or the Trustee.
Section 1.6. Material Adverse Effect. Whenever a determination is to be
made under this Agreement as to whether a given event, action, course of conduct
or set of facts or circumstances could or would have a material adverse effect
on the Issuer, the Noteholders or the Note Insurer (or any similar or analogous
determinations), such determination shall be made without taking into account
the insurance provided by the Policy.
ARTICLE II
CONVEYANCE OF RECEIVABLES;
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.1. Conveyance of Receivables. (a) Subject to the terms and
conditions of this Agreement, Reliance hereby sells, contributes, transfers,
assigns and otherwise conveys to the Issuer, without recourse (but without
limitation of its obligations under this Agreement): (1) all of the right, title
and interest of Reliance in, to and under the Receivables and all monies paid or
payable thereon or in respect thereof on or after the Cutoff Date, including all
Liquidation Proceeds and recoveries received with respect to such Receivables;
(2) the security interests in the Financed Vehicles granted by Obligors pursuant
to the Receivables and any other interest of Reliance in the Financed Vehicles
and other property (including the right to receive future Liquidation Proceeds)
that secures any of the Receivables and that has been acquired by or on behalf
of Reliance or an Originator pursuant to the liquidation of any such Receivable;
(3) the Insurance Policies and any proceeds from any Insurance Policies relating
to the Receivables, the Obligors or the related Financed Vehicles, including
rebates of premiums, all Collateral Insurance and any Force-Placed Insurance
relating to the Receivables; (4) the rights of Reliance and any Originator
against Dealers with respect to the Receivables under the Dealer Agreements and
the Dealer Assignments; (5) the Receivables Purchase Agreement and the
Subservicing Agreement; (6) all items contained in the Receivable Files related
to each Receivable and any and all other documents that Reliance or the
Originators keep on file in accordance with its customary procedures relating to
the Receivables, the Obligors or the related Financed Vehicles; and (7) all
proceeds and investments of any of the foregoing, all present and future claims,
demands, causes and choses in action in respect of any or all of the foregoing
and all payments on or under and all proceeds of every kind and nature
whatsoever in respect of any or all of the foregoing (collectively, the "Other
Conveyed Property").
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<PAGE>
(b) It is the intention of Reliance that the transfer, contribution and
assignment contemplated by this Agreement shall constitute a sale or
contribution of the Receivables and Other Conveyed Property from Reliance to the
Issuer and the beneficial interest in and title to the Receivables and the Other
Conveyed Property shall not be part of Reliance's estate in the event of the
filing of a bankruptcy petition by or against Reliance under any bankruptcy law.
If, notwithstanding the intent of Reliance, the transfer and assignment
contemplated hereby is held not to be a sale, Reliance hereby grants a first
priority security interest to the Issuer in the Receivables and the Other
Conveyed Property for the benefit of Trustee on behalf of the Noteholders and
the Note Insurer, and this Agreement shall constitute a security agreement. In
consideration for the Receivables and the Other Conveyed Property sold to the
Issuer as described in Section 2.1(a), the Issuer shall, on the Closing Date,
pay to Reliance approximately $123,042,400 (representing approximately 92.7% of
the Cutoff Date Principal Balance and the remaining 7.3% representing a
contribution by Reliance to the Issuer). Reliance is treating the transfer of
the Receivables and the Other Conveyed Property on the Closing Date as a sale or
contribution to the Issuer for federal, state and local income tax, reporting
and accounting purposes. The affiliated group of which Reliance and the Issuer
are members within the meaning of Section 1504 of the Code is treating the
Receivables as owned by the Issuer for federal, state and local income tax
purposes, is including in the computation of the Issuer's gross income from the
Receivables, is treating the Notes as debt of the Issuer, and is causing the
Issuer to deduct the interest paid or accrued with respect to the Notes in
accordance with such group's applicable method of accounting.
(c) The conveyance of the Receivables and the Other Conveyed Property shall
take place at a closing (the "Closing") at the offices of Mayer, Brown & Platt,
190 South LaSalle Street, Chicago, Illinois 60603 on the Closing Date.
(d) Within 60 days after the Closing Date, the Servicer shall deliver to
the Backup Servicer and the Note Insurer a revised Schedule of Receivables
indicating that for each Receivable the related Obligor's telephone number has
been entered into the Electronic Ledger.
Section 2.2. Custody of Receivable Files.
(a) In connection with the sale, contribution, transfer and assignment of
the Receivables and the Other Conveyed Property to the Issuer pursuant to this
Agreement and simultaneously with the execution and delivery of this Agreement,
the Trustee shall enter into the Custodian Agreement with the Custodians,
pursuant to which the Trustee shall revocably appoint the Custodians, and the
Custodians shall accept such appointment, to act as the agents of
24
<PAGE>
the Trustee as custodians of the following documents or instruments (with
respect to each Receivable), which shall be deemed to be delivered to the
Custodians on the Closing Date by the segregation (within 30 days after the
Closing Date) of the following documents or instruments by the applicable
Custodians from the documentation held by such Custodians in connection with
motor vehicle installment sales contracts or installment loans that are not
related to the Receivables:
(i) The fully executed original of the Receivable (together with any
agreements modifying the Receivable, including any extension agreements);
(ii) The original credit application, or a copy thereof, of each
Obligor, executed by each such Obligor; and
(iii) The original Lien Certificate (when received) indicating that
the Financed Vehicle is owned by the Obligor and subject to the interest of
Reliance or an Originator as first lienholder or secured party, or, if such
original Lien Certificate has not yet been received, a copy of the
application therefor, if any, showing Reliance or an Originator as secured
party.
(b) Within 30 days after the Closing Date, the Servicer shall stamp each
contract evidencing a Receivable to indicate that it has been sold to Reliance
Auto Receivables Corporation and is subject to a first perfected security
interest of Harris Trust and Savings Bank, as Trustee on behalf the Holders of
the Notes issued by Reliance Auto Receivables Corporation and on behalf of MBIA
Insurance Corporation. Within 90 days after the Closing Date, at the expense of
the Servicer, the Servicer shall cause the Independent Accountants to verify
that a statistically significant sample of Receivables held by randomly selected
Custodians have been so stamped and segregated from other loan files held by
such Custodians and to send a copy of such written verification to the Note
Insurer and the Trustee.
(c) Upon payment in full of any Receivable (including upon payment by
Reliance or the Servicer of any Purchase Amount), the Servicer shall notify the
applicable Custodian pursuant to a certificate of an officer of the Servicer
(which certificate shall include a statement to the effect that all amounts
received in connection with such payments that are required to be deposited in
the Collection Account have been so deposited) and shall request delivery of the
Receivable and Receivable File to the Servicer or Reliance, as applicable. From
time to time as appropriate for servicing and enforcing any Receivable, each
Custodian shall, upon delivery to such Custodian of a Request for Release of
Documents signed by a Servicing Officer, cause the original Receivable and the
related Receivable File to be released to the Servicer, as
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<PAGE>
agent and bailee of such Custodian. The Servicer's receipt of a Receivable or
Receivable File pursuant to the preceding sentence shall obligate the Servicer
to return such Receivable or Receivable File to the applicable Custodian when
its need by the Servicer has ceased, unless the Receivable is purchased as
described in Section 2.4 or 3.7; provided, however, that the Servicer shall be
permitted to release any Lien Certificate in connection with any sale of a
repossessed Financed Vehicle in accordance with its duties under Article III;
and provided, further, that so long as Reliance is acting as Servicer and it
and/or its Affiliates are acting both as Custodians and as Subservicers, none of
the certificates or notices described in this Section 2.2(c) need be provided.
(d) Upon the occurrence of a Collateral Perfection Trigger, the Controlling
Party may instruct the Trustee and the Servicer to transfer and deliver, and the
Servicer and the Trustee shall promptly cause the transfer and delivery of, each
of the documents and instruments with respect to each Receivable listed in
Section 2.2(a) from the Custodians to the Trustee or to another custodian that
is designated in writing by the Controlling Party. If Reliance or Affiliates of
Reliance are acting as Custodians, the costs and expenses of any such transfer
of documents and instruments shall be paid by Reliance.
Section 2.3. Representations and Warranties of Reliance. By its
execution of this Agreement, Reliance makes the following representations and
warranties on which the Issuer relies in accepting the Receivables and the Other
Conveyed Property and in issuing the Notes, on which the Trustee relies in
authenticating the Notes and on which the Note Insurer relies in issuing the
Policy. Unless otherwise specified, such representations and warranties speak
as of the Closing Date, but shall survive the sale, contribution, transfer and
assignment of the Receivables and the Other Conveyed Property to the Issuer.
(a) Schedule of Representations. The representations and warranties set
forth on the Schedule of Representations are true and correct in all material
respects.
(b) Organization and Good Standing. Reliance has been duly organized and
is validly existing as a corporation in good standing under the laws of the
State of Delaware, with power and authority to own its properties and to conduct
its business as such properties are currently owned and such business is
currently conducted, and had at all relevant times, and now has, the power and
authority to (i) acquire, own, sell and otherwise transfer the Receivables and
the Other Conveyed Property to the Issuer and (ii) enter into and perform its
obligations hereunder and under its Related Documents.
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<PAGE>
(c) Due Qualification. Reliance is duly qualified to do business as a
foreign corporation in good standing and has obtained all necessary licenses and
approvals in all jurisdictions where the failure to do so would have a material
adverse effect on (i) Reliance's ability to transfer the Receivables and the
Other Conveyed Property to the Issuer pursuant to this Agreement, (ii) the
validity or enforceability of the Receivables and the Other Conveyed Property or
(iii) Reliance's ability to perform its obligations hereunder and under its
Related Documents.
(d) Power and Authority. Reliance has the power and authority to execute
and deliver this Agreement and its Related Documents and to carry out its terms
and their terms, respectively; Reliance has power and authority to sell,
contribute and assign the Receivables and the Other Conveyed Property to be sold
and assigned to and deposited with the Issuer by it and has duly authorized such
sale, contribution and assignment to and deposit with the Issuer by all
necessary corporate action; and the execution, delivery and performance of this
Agreement and Reliance's Related Documents have been duly authorized by Reliance
by all necessary corporate action.
(e) Valid Transfer; Binding Obligations. This Agreement effects, as of the
Closing Date, a valid transfer and assignment of the Receivables and the Other
Conveyed Property from Reliance to the Issuer enforceable against Reliance and
the creditors of and any purported purchasers thereof from Reliance, and this
Agreement and Reliance's Related Documents, when duly executed and delivered by
the other parties thereto, shall constitute valid and binding obligations of
Reliance enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights generally and by
equitable limitations on the availability of specific remedies, regardless of
whether such enforceability is considered in a proceeding in equity or at law.
(f) No Violation. The execution, delivery and performance by Reliance of
this Agreement and its Related Documents, the consummation of the transactions
contemplated hereby and thereby and the fulfillment of the terms hereof and
thereof do not (i) conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time or both) a
default under, the articles of incorporation or by-laws of Reliance, or any
indenture, agreement, mortgage, deed of trust or other instrument to which
Reliance is a party or by which it is bound, (ii) result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms of any
such indenture, agreement, mortgage, deed of trust or other instrument or (iii)
violate any law, order, rule or regulation applicable to Reliance of any
Governmental Authority having jurisdiction over Reliance or any of its
properties, other than such conflicts,
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breaches, defaults, creation or imposition of Liens or violations that do not
have a material adverse effect on (1) Reliance's ability to transfer the
Receivables and the Other Conveyed Property to the Issuer pursuant to this
Agreement, (2) the validity or enforceability of the Receivables and the Other
Conveyed Property or (3) Reliance's ability to perform its obligations hereunder
and under its Related Documents.
(g) No Proceedings. There are no proceedings or investigations pending or,
to the best of Reliance's knowledge, threatened against Reliance, before any
Governmental Authority having jurisdiction over Reliance or its properties (A)
asserting the invalidity of this Agreement or any of the Related Documents, (B)
seeking to prevent the issuance of the Notes or the consummation of any of the
transactions contemplated by this Agreement or any of the Related Documents, (C)
seeking any determination or ruling that would have a material adverse effect on
the performance by Reliance of its obligations under, or the validity or
enforceability of, this Agreement or any of the Related Documents or the
validity or enforceability of the Receivables and the Other Conveyed Property,
or (D) seeking to materially and adversely affect the federal income tax or
other federal, state or local tax attributes of the Notes or seeking to impose
any excise, franchise, transfer or similar tax upon the Notes or the sale,
contribution and assignment of the Receivables and Other Conveyed Property
hereunder.
(h) No Consents. No consent, approval, license, authorization or order of,
or declaration, registration or filing with, any Governmental Authority or other
Person is required to be made by Reliance in connection with the execution,
delivery or performance of this Agreement or its Related Documents or the
consummation of the transactions contemplated hereby or thereby, except such as
have been duly made, effected or obtained.
(i) Chief Executive Office. The chief executive office of Reliance is at
400 North Loop 1604 East, Suite 210, San Antonio, Texas 78232.
(j) Performance of Covenants. Reliance does not believe, nor does it have
any reasonable cause to believe, that it cannot perform its covenants contained
in this Agreement.
(k) Consummation of Transactions. The transactions contemplated by the
Related Documents are being consummated by Reliance in furtherance of its
ordinary business purposes, with no contemplation of insolvency and with no
intent to hinder, delay or defraud any of its present or future creditors.
(l) Consideration. The consideration received by Reliance as set forth
herein is fair consideration having value reasonably
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<PAGE>
equivalent to or in excess of the value of the Receivables and the Other
Conveyed Property and the performance of Reliance's obligations hereunder.
(m) Insolvency. Neither on the date of the transactions contemplated by
the Related Documents or immediately before or after such transactions, nor as a
result of the transactions, will Reliance:
(A) be insolvent such that the sum of its debts is greater than all of
its respective property, at a fair valuation;
(B) be engaged in or about to engage in business or a transaction for
which any property remaining with Reliance will be an unreasonably small
capital or the remaining assets of Reliance will be unreasonably small in
relation to its respective business or the transaction; and
(C) have intended to incur, or believed it would incur, debts that
would be beyond its respective ability to pay as such debts mature or
become due. Reliance's assets and cash flow enable it to meet its present
obligations in the ordinary course of business as they become due.
(n) Assets. Both immediately before and after the transactions
contemplated by the Related Documents (a) the present fair salable value of
Reliance's assets was or will be in excess of the amount that will be required
to pay its probable liabilities as they then exist and as they become absolute
and matured; and (b) the sum of Reliance's assets was or will be greater than
the sum of its debts, valuing its assets at a fair salable value.
(o) Tax Returns. All tax returns or extensions required to be filed by
Reliance in any jurisdiction have in fact been filed, and all taxes,
assessments, fees and other governmental charges upon Reliance, or upon any of
the respective properties, income or franchises of Reliance, shown to be due and
payable on such returns have been, or will be, paid when due (other than taxes,
assessments, fees and other charges (A) being contested in good faith and (B)
with respect to which the failure to pay would not, individually or in the
aggregate have a material adverse effect on Reliance or its ability to perform
its obligations under the Related Documents). To the best of Reliance's
knowledge, all such tax returns are true and correct and Reliance has no
knowledge of any proposed additional tax assessment against it in any material
amount nor of any basis therefor.
(p) No Violation. Reliance (i) is not in violation of any laws,
ordinances, governmental rules or regulations to which it is subject, (ii) has
not failed to obtain any licenses, permits,
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franchises or other governmental authorizations necessary to the ownership of
its property or to the conduct of its business, and (iii) is not in violation in
any material respect of any term of any agreement, charter, bylaw or instrument
to which it is a party or by which it may be bound and, in each case, such
violation or failure to obtain would have a material adverse effect on the
business or condition (financial or otherwise) of Reliance.
(q) Consolidated Returns. Reliance and the Issuer are members of an
affiliated group with the meaning of Section 1504 of the Internal Revenue Code,
which will file a consolidated federal income tax return at all times until
termination of the Related Documents.
(r) Common Stock of Issuer. Reliance is the registered owner of all of the
issued and outstanding common stock of the Issuer, all of which common stock is
validly issued, fully paid and nonassessable.
(s) ERISA. Reliance does not maintain any "employee pension benefit plan"
nor is it under "common control" or have common control with any entity with a
"multi-employer plan" (as such terms are defined in Section 3(2) of ERISA) that
is subject to title IV of ERISA.
Section 2.4. Repurchase of Receivables Upon Breach of Warranty. Upon
discovery by any of Reliance, the Servicer, the Note Insurer, the Issuer or the
Trustee of a breach of any of the representations and warranties of Reliance
contained in Section 2.3(a) that has a material adverse effect on the interests
of the Noteholders or the Note Insurer in any Receivable, the party discovering
such breach shall give prompt written notice to the others; provided, however,
that the failure to give any such notice shall not affect any obligation of
Reliance under this Section 2.4; and provided, further, that any Receivable
listed on a certification by a Custodian pursuant to the second or third
sentence of Section 3(a) of the Custodian Agreement shall be deemed to be a
Receivable for which Reliance has breached the representation and warranty set
forth in paragraph 11 or 15, as applicable, of the Schedule of Representations
in respect of the related Receivable that has a material adverse effect on the
interest of the Noteholders and the Note Insurer. As of the second Accounting
Date (or, at Reliance's election, the first Accounting Date) following its
discovery or its receipt of notice of any such breach Reliance shall, unless
such breach shall have been cured in all material respects, repurchase such
Receivable from the Issuer and, on or before the Deposit Date following such
Accounting Date, Reliance shall pay the Purchase Amount to the Issuer pursuant
to Section 4.4. The obligation of Reliance to repurchase any Receivable as to
which a breach has occurred and is continuing shall, if such obligation is
fulfilled, constitute the sole remedy
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against Reliance for such breach available to the Note Insurer (other than as
provided in Sections 2.02(q) and 3.04 of the Insurance Agreement), the Trustee
(other than as provided in Section 2.8) on behalf of the Noteholders or the
Noteholders and any breaches of the representations or warranties with respect
to such Receivables shall be deemed cured as of the date of such purchase.
Section 2.5. Assignment of Receivables. With respect to all
Administrative Receivables and all Warranty Receivables purchased by the
Servicer or Reliance and all Receivables purchased by the Servicer pursuant to
Section 8.1, the Trustee shall take any and all actions reasonably requested by
Reliance or the Servicer, at the expense of the requesting party, to assign,
without recourse, representation or warranty, to Reliance or the Servicer, as
applicable, all the Issuer's right, title and interest in and to such Purchased
Receivables, all monies due thereon on and after the date of purchase, the
security interests in the Receivables, the related Financed Vehicles and the
Other Conveyed Property with respect thereto, proceeds from any Insurance
Policies, proceeds from recourse against Dealers (including the enforcement of
repurchase obligations) on such Receivables and the interests of the Issuer in
certain rebates of premiums and other amounts relating to the Insurance Policies
and any documents relating thereto, such assignment being an assignment outright
and not for security; and Reliance or the Servicer, as applicable, shall
thereupon own such Purchased Receivable, and all such security and documents,
free of any further obligation to the Issuer, the Trustee, the Note Insurer or
the Noteholders with respect thereto. The Trustee shall take any and all
actions reasonably requested by Reliance or the Servicer, at the expense of the
requesting party, to release its security interest in each Purchased Receivable,
in the related Financed Vehicle and in the Other Conveyed Property with respect
thereto. The Servicer shall remove such Purchased Receivable from the Schedule
of Receivables and mark the Electronic Ledger accordingly and shall send a copy
of the amended Schedule of Receivables to the Trustee and the Note Insurer.
Section 2.6. Collecting Lien Certificates. With respect to each
Receivable File that was delivered to a Custodian on or before the Closing Date
without a Lien Certificate, the Servicer shall use its best efforts to collect
the applicable Lien Certificate from the Registrar of Titles as promptly as
practicable. If such Lien Certificate showing Reliance or an Originator as
first lienholder is not received by such Custodian within 120 days after the
Closing Date (or within 180 days after the Closing Date with respect to Lien
Certificates to be issued in the states of Indiana or Nevada), then the
representation and warranty in paragraph 15 of the Schedule of Representations
in respect of such Receivable shall be deemed to have been breached in a manner
that has a material adverse effect on the Noteholders and the Note Insurer, and
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Reliance shall be obligated to purchase such Receivable under Section 2.4.
Section 2.7. Covenants of Reliance.
(a) Reliance will duly fulfill all obligations on its part to be fulfilled
under or in connection with each Receivable, will not change or modify the terms
of the Receivables except as expressly permitted by the terms of Related
Documents and will do nothing to impair the rights of the Issuer or the Trustee
in the Receivables or the Financed Vehicles or the acquisition by the Issuer of
the Receivables or the Other Conveyed Property. If the rights of Reliance under
any Receivable, any guaranty of the related Obligor's obligations under any
Receivable or any Insurance Policy are not assignable or have not been assigned
to the Issuer or to the Trustee, Reliance will enforce such rights on behalf of
the Issuer and the Trustee.
(b) Reliance will comply, in all material respects, with all acts, rules,
regulations, orders, decrees and directions of any Governmental Authority
applicable to the Indenture Collateral or any part thereof; provided, however,
that Reliance may contest any act, regulation, order, decree or direction in any
reasonable manner which shall not materially and adversely affect the rights of
the Issuer or the Trustee in the Indenture Collateral.
(c) Reliance will advise the Issuer, the Note Insurer and the Trustee
promptly, in reasonable detail, of the occurrence of any breach by Reliance of
any of its representations, warranties and covenants contained herein following
discovery by Reliance of any such breach. Reliance shall notify the Issuer, the
Trustee and the Note Insurer promptly after becoming aware of any Lien on any
Indenture Collateral.
(d) Reliance will execute or endorse, acknowledge and deliver to the Issuer
and the Trustee from time to time such schedules, confirmatory assignments,
conveyances, powers of attorney, and other reassurances or instruments and take
such further similar actions relating to the Receivables, the related Financed
Vehicles and the rights covered by the Related Documents, as the Issuer or the
Trustee may reasonably request to preserve and maintain title to the Indenture
Collateral and the rights of the Trustee and the Holders of Notes therein
against the claims of all Persons and parties.
(e) Reliance (i) will (A) maintain its books and records separate from the
books and records of the Issuer and (B) maintain bank accounts separate from
those of the Issuer and (C) maintain two independent directors on the Issuer's
board of directors, so long as Reliance is a shareholder of the Issuer and (ii)
will not (X) take any action that would cause the dissolution or liquidation
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of the Issuer or (Y) guarantee (directly or indirectly), endorse or otherwise
become contingently liable (directly or indirectly) for the obligations of the
Issuer. This subsection (e) shall survive termination of this Agreement.
(f) The annual financial statements of Reliance will disclose the effects
of the transactions contemplated by the Related Documents as a financing by the
Issuer in accordance with generally accepted accounting principles. The
financial statements of Reliance and the Issuer will also disclose that the
assets of the Issuer are not available to pay creditors of Reliance. The
resolutions, agreements and other instruments underlying the Related Documents
will be continuously maintained by Reliance as official records.
(g) The affiliated group of which Reliance and the Issuer are members
within the meaning of Section 1504 of the Code shall treat the Receivables as
owned by the Issuer for federal, state and local income tax purposes, shall
include in the computation of the Issuer's gross income the income from the
Receivables, shall treat the Notes as debt of the Issuer and shall cause the
Issuer to deduct the interest paid or accrued with respect to the Notes in
accordance with such group's applicable method of accounting.
(h) If Reliance elects to transfer the common stock of the Issuer to an
affiliate or pledge a security interest in such common stock, as a condition to
such sale or pledge Reliance shall provide prior notice thereof to the Rating
Agencies and, on behalf of the Issuer, obtain an agreement from the transferee
or the secured party that it will take no action that would cause the Issuer to
breach any of its covenants under any Related Document, and that for so long as
the Indenture is in effect, it will not file any involuntary petition or
otherwise institute any bankruptcy, reorganization, insolvency or liquidation
proceeding or other proceeding under any federal or state bankruptcy or similar
law against the Issuer.
(i) Reliance shall not merge or consolidate with any other Person, convey,
transfer or lease all or substantially all its assets (in one transaction or a
series of transactions) to another Person, or permit any other Person to become
the successor to all or substantially all of its business or assets unless,
after the merger, consolidation, conveyance, transfer, lease or succession, the
successor or surviving entity shall be capable of fulfilling the obligations of
Reliance contained in this Agreement and shall be reasonably acceptable to the
Controlling Party; provided, however, that none of the provisions of this clause
(i) shall prohibit the split-off transactions currently pending with respect to
Reliance and its Affiliates pursuant to which Reliance will be merged into a
corporation that will be renamed Reliance Acceptance Corporation and Reliance
will remain an indirect wholly-owned
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subsidiary of Cole Taylor Financial Group, Inc., to be renamed Reliance
Acceptance Group, Inc. (the "Split-off Transactions"). Any corporation (i) into
which Reliance may be merged or consolidated, (ii) resulting from any merger or
consolidation to which Reliance shall be a party, (iii) that acquires by
conveyance, transfer or lease substantially all of the assets of Reliance or
(iv) succeeding to the business of Reliance, in any of the foregoing cases shall
execute an agreement of assumption to perform every obligation of Reliance under
this Agreement and, whether or not such assumption agreement is executed, shall
be the successor to Reliance under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties to this
Agreement, anything in this Agreement to the contrary notwithstanding; provided,
however, that the corporation into which Reliance is merged in connection with
the Split-off Transaction shall be the successor to Reliance under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties to this Agreement; and provided, further, that
nothing contained herein shall be deemed to release Reliance from any obligation
hereunder. Reliance shall provide prior written notice of any merger,
consolidation or succession pursuant to this Section 2.7(i) to the Trustee, the
Note Insurer and each Rating Agency. Notwithstanding the foregoing, Reliance
shall not merge or consolidate with any other Person or permit any other Person
to become a successor to all or substantially all of its business or assets,
unless Reliance shall have provided prior notice to the Rating Agencies and (x)
immediately after giving effect to such transaction, no representation or
warranty made pursuant to Section 2.3 shall have been breached in any material
respect (for purposes hereof, such representations and warranties shall speak as
of the date of the consummation of such transaction) and no event that, after
notice or lapse of time, would become a Collateral Perfection Trigger or Event
of Default shall have occurred, (y) Reliance shall have delivered to the
Trustee, the Rating Agencies and the Note Insurer an Officer's Certificate and
an Opinion of Counsel, each stating that such consolidation, merger or
succession and such agreement of assumption comply with this Section 2.7(i) and
(z) Reliance shall have delivered to the Trustee, the Rating Agencies and the
Note Insurer an Opinion of Counsel, stating in the opinion of such counsel,
either (A) all financing statements and continuation statements and amendments
thereto have been executed and filed that are necessary to preserve and protect
the interests of the Issuer and the Trustee on behalf of the Noteholders and the
Note Insurer in the Receivables and the Other Conveyed Property or (B) no such
action shall be necessary to preserve and protect such interest; provided,
however, that, in connection with the Split-off Transactions, Reliance also
shall deliver to the Trustee, the Rating Agencies and the Note Insurer an
Opinion of Counsel stating that if Reliance became a debtor in a bankruptcy
proceeding, the bankruptcy court would not substantively consolidate the assets
and liabilities of the Issuer with those of Reliance and shall not be
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required to deliver the Opinion of Counsel described in clause (y) above.
(j) If the Issuer or the Trustee receives actual notice of any tax, fee or
governmental charge payable by Reliance, the Issuer or the Trustee to any
federal, state or local government as a direct result of the sale, contribution,
transfer, assignment or conveyance of the Receivables and the Other Conveyed
Property ("Transfer Taxes"), other than Transfer Taxes which have been paid by
Reliance, arising out of the sale, contribution, transfer, assignment or
conveyance of the Receivables and the Other Conveyed Property, on written demand
by the Issuer or the Trustee or upon Reliance otherwise being given notice
thereof by the Issuer or the Trustee Reliance shall pay and otherwise indemnify
and hold the Issuer, the Trustee and the Note Insurer harmless, on an after-tax
basis, from and against any and all such Transfer Taxes (it being understood
that the Noteholders, the Trustee, the Issuer and the Note Insurer shall have no
obligation to pay such Transfer Taxes).
Section 2.8. Indemnification. Notwithstanding Section 2.4 and Section
3.7 or any other provision of any Related Document, Reliance agrees to indemnify
the Note Insurer, the Trustee, the Noteholders, each of their respective
parents, subsidiaries and Affiliates and any of their directors, officers,
employees or agents against any and all claims, losses, penalties, fines,
forfeitures, legal fees and related costs, judgments and any other costs, fees
and expenses incurred by such Person due to any claim, counterclaim, rescission,
set-off or defense asserted by an Obligor relating to the goods and services
provided under a Receivable.
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES
Section 3.1. Duties of the Servicer. The Servicer is hereby authorized
to act as agent for the Issuer and on behalf of the Trustee and the Note Insurer
and in such capacity shall manage, service, administer and make collections on
the Receivables and perform the other actions required by the Servicer under
this Agreement. The Servicer agrees that its servicing of the Receivables shall
be carried out in accordance with its Credit and Collection Policy and customary
and usual procedures of institutions that service motor vehicle retail
installment sales contracts and installment loans and with the same degree of
skill and attention that the Servicer exercises from time to time with respect
to comparable motor vehicle receivables that it services for its own account or
the account of others. In performing such duties, to the extent consistent with
the foregoing, it shall comply with its Credit and Collection Policy, as such
Credit and Collection Policy may be amended from time to time, so long as such
amendments shall not materially and adversely affect the interests
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of the Noteholders, the Note Insurer or the Issuer. The Servicer's duties shall
include collection and posting of all payments, responding to inquiries of
Obligors on the Receivables, investigating delinquencies, sending payment
coupons to Obligors, reporting any required tax information to Obligors,
monitoring the collateral, accounting for collections and furnishing monthly and
annual statements to the Trustee, the Issuer and the Note Insurer with respect
to distributions, monitoring the status of Insurance Policies with respect to
the Financed Vehicles and performing the other duties specified herein. The
Servicer shall also administer and enforce all rights of the holder of the
Receivables provided for in the Dealer Agreements, the Dealer Assignments, the
Insurance Policies and the Receivables Purchase Agreement, to the extent they
relate to the Receivables, the Financed Vehicles or the Obligors. To the extent
consistent with the standards, policies and procedures otherwise required
hereby, the Servicer shall follow its customary standards, policies and
procedures and shall have full power and authority, acting alone, to do any and
all things in connection with management, servicing, administration and
collection of the Receivables that it may deem necessary or desirable. Without
limiting the generality of the foregoing, the Servicer is hereby authorized and
empowered by the Issuer to execute and deliver, on behalf of the Issuer, any and
all instruments of satisfaction or cancellation, or of partial or full release
or discharge, and all other comparable instruments, with respect to the
Receivables and the Financed Vehicles, in each case subject to any applicable
limitations on amendments and modifications to Receivables set forth in Section
3.2(b) and 3.2(c). The Servicer is authorized to release Liens on Financed
Vehicles granted by the Receivables in order to collect insurance proceeds with
respect thereto and to liquidate such Financed Vehicles in accordance with its
customary standards, policies and procedures. The Servicer is hereby authorized
to commence, in its own name or in the name of the Issuer, legal proceedings to
enforce Receivables or to commence or participate in any other legal proceedings
(including bankruptcy proceedings) relating to or involving Receivables,
Obligors or Financed Vehicles. If the Servicer commences or participates in
such legal proceedings in its own name, the Issuer shall thereupon be deemed to
have automatically assigned such Receivables to the Servicer solely for purposes
of commencing or participating in any such proceedings as a party or claimant,
and the Servicer is authorized and empowered by the Issuer to execute and
deliver in the Servicer's name any notices, demands, claims, complaints,
responses, affidavits or other documents or instruments in connection with any
such proceedings. The Issuer shall furnish the Servicer with any powers of
attorney and other documents that the Servicer may reasonably request and that
the Servicer deems necessary or appropriate and take any other steps that the
Servicer may deem necessary or appropriate to enable the Servicer to carry out
its servicing and administrative duties under this Agreement.
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Section 3.2. Collection of Receivable Payments; Modifications of
Receivables.
(a) Consistent with the standards, policies and procedures required by this
Agreement, the Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of the Receivables as and when the
same shall become due, and shall follow such collection procedures as set forth
in its Credit and Collection Policy and as it follows with respect to comparable
automobile receivables that it services for its own account or the account of
others and otherwise act with respect to the Receivables, the Dealer Agreements,
the Dealer Assignments, the Insurance Policies, the Receivables Purchase
Agreement and the Other Conveyed Property in such manner as will, in the
reasonable judgment of the Servicer, maximize the amount to be received by the
Issuer with respect thereto. The Servicer is authorized in its discretion to
waive any prepayment charge, late payment charge or any other similar fees that
may be collected in the ordinary course of servicing any Receivable.
(b) The Servicer may at any time agree to a modification or amendment of a
Receivable in order to (i) change the Obligor's regular due date to another date
within the Collection Period in which such due date occurs, (ii) change the
Obligor's regular due date to a date in the Collection Period following the
Collection Period in which such due date occurs; provided, however, that any
such change shall only be permitted once during the term of a Receivable or
(iii) reamortize the Scheduled Payments on the Receivable following a partial
prepayment of principal (other than any such reamortization that results in a
payment extension).
(c) The Servicer may grant payment extensions on, or agree to other
modifications or amendments to, a Receivable (in addition to those modifications
permitted by Section 3.2(b)) only as set forth below:
(i) In no event may a Receivable be extended more than two times
within any twelve month period, more than three times during the term of
the Receivable or beyond the Collection Period six months preceding the
Final Scheduled Payment Date; provided, however, that (A) no extension may
be granted unless at least three Scheduled Payments have been made on the
Receivable, (B) no second extension may be granted unless six Scheduled
Payments have been made on the Receivable and (C) no third extension may be
granted unless nine Scheduled Payments have been made on the Receivable;
and
(ii) The Servicer shall not amend or modify a Receivable (except as
otherwise permitted in Section 3.2(b) and this Section 3.2(c)) without the
consent of the Note Insurer or a
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Note Majority (if an Insurer Default shall have occurred and be
continuing).
Notwithstanding any third-party processing arrangement, or any of the
provisions of this Agreement relating to any third-party processing arrangement,
the Servicer shall remain obligated and liable to the Issuer, the Note Insurer
and the Noteholders for servicing and administering the Receivables and the
Other Conveyed Property in accordance with the provisions of this Agreement
without diminution of such obligation or liability by virtue thereof.
(d) The Servicer shall remit all payments by or on behalf of the Obligors
(including Liquidation Proceeds) received directly by the Servicer or by an
Originator to the Collection Account as soon as practicable, but in no event
later than three Business Days after receipt thereof.
Section 3.3. Realization Upon Receivables.
(a) Consistent with the standards, policies and procedures required by this
Agreement, the Servicer shall use its best efforts to repossess (or otherwise
comparably convert the ownership of) and liquidate any Financed Vehicle securing
a Receivable with respect to which the Servicer has determined that payments
thereunder are not likely to be resumed, as soon as practicable after default on
such Receivable but in no event later than the date on which at least 5% of a
Scheduled Payment has become 120 days delinquent; provided, however, that the
Servicer may elect not to repossess a Financed Vehicle within such time period
if in its good faith judgment it determines that the proceeds ultimately
recoverable with respect to such Receivable would be increased by forbearance.
The Servicer is authorized to follow such customary practices and procedures as
it shall deem necessary or advisable, consistent with the standard of care
required by Section 3.1, which practices and procedures may include reasonable
efforts to realize upon any recourse to Dealers, the sale of the related
Financed Vehicle at public or private sale, the submission of claims under an
Insurance Policy and other actions by the Servicer in order to realize upon a
Receivable. The foregoing is subject to the provision that, in any case in
which the Financed Vehicle shall have suffered damage, the Servicer shall not
expend funds in connection with any repair or towards the repossession of such
Financed Vehicle unless it shall determine in its reasonable discretion that
such repair or repossession shall increase the proceeds of liquidation of the
related Receivable by an amount greater than the amount of such expenses. All
amounts received upon liquidation of a Financed Vehicle shall be remitted
directly by the Servicer as provided in Section 3.2(d). The Servicer shall be
entitled to recover all reasonable out-of-pocket expenses incurred by it in the
course of repossessing and liquidating a Financed Vehicle into cash proceeds,
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but only out of the cash proceeds of such Financed Vehicle, any deficiency
obtained from the Obligor or any amounts received from the related Dealer, which
amounts in reimbursement may be retained by the Servicer (and shall not be
required to be deposited as provided in Section 3.2(d)) to the extent of such
expenses. The Servicer shall pay on behalf of the Issuer any personal property
taxes assessed on repossessed Financed Vehicles. The Servicer shall be entitled
to reimbursement of any such tax from Liquidation Proceeds with respect to such
Receivables.
(b) If the Servicer elects to commence a legal proceeding to enforce a
Dealer Agreement or Dealer Assignment, the act of commencement shall be deemed
to be an automatic assignment from the Issuer to the Servicer of the rights
under such agreements for purposes of collection only. If, however, in any
enforcement suit or legal proceeding it is held that the Servicer may not
enforce any such agreement on the grounds that it is not a real party in
interest or a Person entitled to enforce such agreement, the Trustee, at the
Servicer's expense, or the Issuer, at the Servicer's expense, shall take such
steps as the Servicer deems necessary to enforce such agreement, including
bringing suit in its name or the name of the Issuer or of the Issuer and the
Trustee for the benefit of the Noteholders and the Note Insurer. All amounts
recovered shall be remitted directly by the Servicer as provided in Section
3.2(d).
Section 3.4. Insurance.
(a) The Servicer shall require, in accordance with its customary servicing
policies and procedures, that each Financed Vehicle be insured by the related
Obligor under the Insurance Policies referred to in Paragraph 20 of the Schedule
of Representations and shall monitor the status of such physical loss and damage
insurance coverage thereafter, in accordance with its Credit and Collection
Policy (to the extent consistent with the standards required by Section 3.1).
If the Servicer shall determine that an Obligor has failed to obtain or maintain
physical loss and damage insurance covering the related Financed Vehicle that
satisfies the conditions set forth in such Paragraph 20 (including during the
repossession of such Financed Vehicle), the Servicer may enforce the rights of
the holder of the Receivable under the Receivable to require the Obligor to
obtain such physical loss and damage insurance in accordance with its Credit and
Collection Policy. The Servicer may maintain a vendor's single interest or
other collateral protection insurance policy with respect to all Financed
Vehicles ("Collateral Insurance"), which policy shall by its terms insure
against physical loss and damage if any Obligor fails to maintain physical loss
and damage insurance with respect to the related Financed Vehicle. All policies
of Collateral Insurance shall be endorsed with clauses providing for loss
payable to the Servicer. Costs incurred by the Servicer in
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maintaining such Collateral Insurance shall be paid by the Servicer out of its
own funds with no right of reimbursement therefor unless, with respect to a
successor Servicer other than Reliance or an Affiliate thereof, the Note Insurer
directs such successor Servicer to obtain and maintain Collateral Insurance.
(b) The Servicer may, if an Obligor fails to obtain or maintain physical
loss and damage insurance, obtain insurance with respect to the related Financed
Vehicle and advance on behalf of such Obligor, as required under the terms of
the insurance policy, the premiums for such insurance (such insurance being
referred to herein as "Force-Placed Insurance"). All policies of Force-Placed
Insurance shall be endorsed with clauses providing for loss payable to the
Servicer. Any cost incurred by the Servicer in maintaining such Force-Placed
Insurance shall only be recoverable out of premiums paid by the Obligors or
Liquidation Proceeds with respect to the Receivable, as provided in Section
3.4(c).
(c) In connection with any Force-Placed Insurance obtained hereunder, the
Servicer may, in the manner and to the extent permitted by applicable law,
require the Obligors to repay the entire premium to the Servicer. In no event
shall the Servicer include the amount of the premium in the Amount Financed
under the related Receivable. For all purposes of this Agreement, the premium
charged to the Obligor if the Servicer obtains Forced-Placed Insurance (the
"Insurance Add-On Amount") with respect to any Receivable having Force-Placed
Insurance shall be treated as a separate obligation of the Obligor and shall not
be added to the Principal Balance of such Receivable, and amounts allocable
thereto shall not be available for distribution on the Notes. The Servicer
shall retain and separately administer the right to receive payments from
Obligors with respect to Insurance Add-On Amounts or rebates of Forced-Placed
Insurance premiums. If an Obligor makes a payment with respect to a Receivable
having Force-Placed Insurance, the payment shall be applied first to any unpaid
Scheduled Payments to the extent due and payable and then to the Insurance Add-
On Amount. Liquidation Proceeds on any Receivable shall be used first to pay
the Principal Balance and accrued interest on such Receivable and then to pay
the related Insurance Add-On Amount. If an Obligor under a Receivable with
respect to which the Servicer has placed Force-Placed Insurance fails to make
payments of such Insurance Add-On Amount as due, and the Servicer has determined
that eventual payment of the Insurance Add-On Amount is unlikely, the Servicer
may, but shall not be required to, purchase such Receivable from the Issuer for
the Purchase Amount on any subsequent Deposit Date. Any such Receivable and any
Receivable with respect to which the Servicer has placed Force-Placed Insurance
that has been paid in full (excluding any Insurance Add-On Amounts) shall be
assigned to the Servicer.
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(d) The Servicer may sue to enforce or collect upon the Insurance Policies
in its own name or as agent of the Issuer. If the Servicer elects to commence a
legal proceeding to enforce an Insurance Policy, the act of commencement shall
be deemed to be an automatic assignment of the rights of the Issuer under such
Insurance Policy to the Servicer for purposes of collection only. If, however,
in any enforcement suit or legal proceeding it is held that the Servicer may not
enforce an Insurance Policy on the grounds that it is not a real party in
interest or a holder entitled to enforce the Insurance Policy, the Issuer, at
the Servicer's expense, shall take such steps as the Servicer deems necessary to
enforce such Insurance Policy, including bringing suit in its name or the name
of the Issuer and the Trustee for the benefit of the Noteholders and the Note
Insurer.
(e) The Servicer shall cause itself (or a Subservicer) to be named as named
insured under all Insurance Policies.
Section 3.5. Maintenance of Security Interests in Vehicles.
(a) Consistent with the policies and procedures required by this Agreement,
the Servicer shall take such steps on behalf of the Issuer as are necessary to
maintain perfection of the Trustee, on behalf of the Noteholders and the Note
Insurer, in the security interest in each Receivable and the security interest
created by each Receivable in the related Financed Vehicle, including obtaining
the execution by the Obligors and the recording, registering, filing, re-
recording, re-filing and re-registering of all security agreements, financing
statements and continuation statements as are necessary to maintain the security
interest granted by the Obligors under the respective Receivables. The Trustee
and the Issuer hereby authorize the Servicer, and the Servicer agrees, to take
any and all steps necessary to perfect or re-perfect such security interest on
behalf of the Issuer as necessary because of the relocation of a Financed
Vehicle or for any other reason. If the assignment of a Receivable to the
Issuer is insufficient, without a notation on the related Financed Vehicle's
certificate of title, or without fulfilling any additional administrative
requirements under the laws of the state in which the Financed Vehicle is
located, to perfect a security interest in the related Financed Vehicle in favor
of the Trustee, the Servicer and Reliance each hereby agree that the designation
of Reliance or an Originator as the secured party on the certificate of title is
in its capacity as agent of the Trustee, solely for purposes of providing
perfection of the security interest therein.
(b) Upon the occurrence of a Collateral Perfection Trigger, the Controlling
Party may instruct the Trustee and the Servicer to take or cause to be taken
such action as may, in the opinion of counsel to the Controlling Party, be
reasonably necessary to perfect or re-perfect the security interests in the
Financed
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Vehicles securing the Receivables in the name of the Trustee by amending the
title documents of such Financed Vehicles or by such other reasonable means as
may, in the opinion of counsel to the Controlling Party, be reasonably necessary
or prudent. Reliance hereby agrees to pay promptly all expenses related to such
perfection or re-perfection or naming of the Trustee as the secured party and to
take promptly all action necessary therefor. In addition, prior to the
occurrence of a Collateral Perfection Trigger, the Controlling Party may
instruct the Trustee and the Servicer to take or cause to be taken such action
as may, in the opinion of counsel to the Controlling Party, be reasonably
necessary to perfect or re-perfect the security interest in the Financed
Vehicles underlying the Receivables in the name of the Trustee, including by
amending the title documents of such Financed Vehicles or by such other
reasonable means as may, in the opinion of counsel to the Controlling Party, be
reasonably necessary or prudent; provided, however, that if the Controlling
Party requests that the title documents be amended prior to the occurrence of a
Collateral Perfection Trigger, all out-of-pocket expenses of Reliance, the
Issuer, the Servicer or the Trustee in connection with such action shall be
reimbursed to the Servicer or the Trustee, as applicable, by the Controlling
Party. Reliance hereby appoints the Trustee as its attorney-in-fact to take any
and all steps required to be performed by Reliance pursuant to this Section
3.5(b), including execution of Lien Certificates or any other documents in the
name and stead of Reliance, and the Trustee hereby accepts such appointment.
Section 3.6. Covenants, Representations and Warranties of Servicer. By
its execution and delivery of this Agreement, the Servicer makes the following
representations, warranties and covenants on which the Issuer relies in
accepting the Receivables and issuing the Notes, on which the Trustee relies in
authenticating the certificates and on which the Note Insurer relies in issuing
the Policy.
(a) The Servicer covenants as follows:
(i) Liens in Force. The Financed Vehicle securing each Receivable
shall not be released in whole or in part from the security interest
granted by the Receivable, except upon payment in full of the Receivable,
sale of such Receivable in accordance with Section 3.3(a), purchase of the
Receivable pursuant to Sections 2.4, 3.7 or 8.1 or as otherwise
contemplated herein;
(ii) No Impairment. The Servicer shall do nothing to impair in any
material respect the rights of the Issuer, the Note Insurer, the Trustee or
the Noteholders in the Receivables or the Other Conveyed Property;
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(iii) No Amendments. The Servicer shall not extend or otherwise amend
the terms of any Receivable, except in accordance with Section 3.2;
(iv) Restrictions on Liens. The Servicer shall not (A) create, incur
or suffer to exist, or agree to create, incur or suffer to exist, or
consent to cause or permit in the future (upon the happening of a
contingency or otherwise) the creation, incurrence or existence of any Lien
on, or restriction on transferability of, the Receivables, except for the
Lien in favor of the Trustee for the benefit of the Noteholders and Note
Insurer and the restrictions on transferability imposed by this Agreement
and the Related Documents or (B) sign or file under the UCC of any
jurisdiction any financing statement that names Reliance, any Originator or
the Servicer as a debtor, or sign any security agreement authorizing any
secured party thereunder to file such financing statement, with respect to
the Receivables, except in each case any such instrument solely securing
the rights and preserving the Lien of the Trustee, for the benefit of the
Noteholders and the Note Insurer or as otherwise permitted under this
Agreement or the Related Documents; and
(v) Stamping of Receivables. The Servicer shall stamp each Receivable
pursuant to Section 2.2(b).
(vi) Copies of Receivables File. The Servicer shall maintain a copy
of each contract evidencing a Receivable required to be in each Receivable
File pursuant to Section 2 of the Custodian Agreement.
(b) The Servicer represents, warrants and covenants as of the Closing Date
as to itself:
(i) Organization and Good Standing. The Servicer has been duly
organized and is validly existing as a corporation in good standing under
the laws of its jurisdiction of organization, with power and authority to
own its properties and to conduct its business as such properties are
currently owned and such business is currently conducted, and had at all
relevant times, and now has, power and authority to enter into and perform
its obligations under this Agreement and its Related Documents;
(ii) Due Qualification. The Servicer is duly qualified to do business
as a foreign corporation in good standing and has obtained all necessary
licenses and approvals in all jurisdictions where the failure to do so
would have a material adverse effect on its ability to perform its
obligations hereunder and under its Related Documents;
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(iii) Power and Authority. The Servicer has the power and authority
to execute and deliver this Agreement and its Related Documents and to
carry out its terms and their terms, and the execution, delivery and
performance of this Agreement and the Servicer's Related Documents have
been duly authorized by the Servicer by all necessary corporate action;
(iv) Binding Obligation. This Agreement and the Servicer's Related
Documents, when duly executed and delivered by the other parties thereto,
shall constitute valid and binding obligations of the Servicer enforceable
in accordance with their respective terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, or other similar laws
affecting the enforcement of creditors' rights generally and by equitable
limitations on the availability of specific remedies, regardless of whether
such enforceability is considered in a proceeding in equity or at law;
(v) No Violation. The execution, delivery and performance by the
Servicer of this Agreement and its Related Documents, the consummation of
the transactions contemplated hereby and thereby, and the fulfillment of
the terms hereof and thereof, do not (A) conflict with, result in any
breach of any of the terms and provisions of, or constitute (with or
without notice or lapse of time or both) a default under, the certificate
of incorporation or bylaws of the Servicer, or any indenture, agreement,
mortgage, deed of trust or other instrument to which the Servicer is a
party or by which it is bound, (B) result in the creation or imposition of
any Lien upon any of its properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust or other instrument, or (C)
violate any law, order, rule or regulation applicable to the Servicer of
any Governmental Authority having jurisdiction over the Servicer or any of
its properties, other than such conflicts, breaches, defaults, creation or
imposition of Liens or violations that do not have a material adverse
effect on the Servicer's ability to perform its obligations hereunder and
under its Related Documents;
(vi) No Proceedings. There are no proceedings or investigations
pending or, to the best of the Servicer's knowledge, threatened against the
Servicer, before any Governmental Authority having jurisdiction over the
Servicer or its properties (A) asserting the invalidity of this Agreement
or any of the Related Documents, (B) seeking to prevent the issuance of the
Notes or the consummation of any of the transactions contemplated by this
Agreement or any of the Related Documents, (C) seeking any determination or
ruling that would have a material adverse effect on the performance by the
Servicer of its obligations under, or the validity or enforceability of,
this Agreement or any of the Related
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Documents or the validity or enforceability of a material portion of the
Receivables and the Other Conveyed Property or (D) seeking to materially
and adversely affect the federal income tax or other federal, state or
local tax attributes of the Notes or seeking to impose any excise,
franchise, transfer or similar tax upon the Notes or the sale, contribution
and assignment of the Receivables hereunder;
(vii) No Consents. No consent, license, approval, authorization or
order of, or registration, declaration or filing with, any Governmental
Authority or other Person is required to be made by the Servicer in
connection with the execution, delivery or performance of this Agreement or
its Related Documents or the consummation of the transactions contemplated
hereby or thereby, except such as have been duly made, effected or
obtained;
(viii) Investment Company. The Servicer is not an investment company
which is required to register under the Investment Company Act of 1940, as
amended; and
(ix) Standard of Care. The Servicer has serviced the Receivables
and Financed Vehicles in a manner consistent with industry standards for
motor vehicle loans and motor vehicles similar to the Receivables and
Financed Vehicles, and in any event in a prudent and commercially
reasonable manner, and has conducted its servicing operations in a manner
consistent with industry standards for servicing of automobile loan
portfolios.
Section 3.7. Purchase of Receivables Upon Breach of Covenant. Upon
discovery by any of the Servicer, the Note Insurer, the Issuer or the Trustee of
a breach of any of the covenants set forth in Sections 3.5 or 3.6(a) that has a
material adverse effect on the interests of the Noteholders or the Note Insurer
in any Receivable, the party discovering such breach shall give prompt written
notice to the others; provided, however, that the failure to give any such
notice shall not affect any obligation of the Servicer under this Section 3.7.
As of the second Accounting Date (or, at the Servicer's election, the first
Accounting Date) following its discovery or receipt of notice of any such
breach, the Servicer shall, unless such breach shall have been cured in all
material respects, purchase from the Issuer the Receivable(s) affected by such
breach and, on or before the related Deposit Date, the Servicer shall deposit
the related Purchase Amount into the Collection Account pursuant to Section 4.4.
The obligation of the Servicer to purchase any Receivable with respect to which
such a breach has occurred and is continuing shall, if such obligation is
fulfilled, constitute the sole remedy against the Servicer for such breach
available to the Note Insurer (other than as provided in Sections 2.02(q) or
3.04 of the Insurance Agreement, so long as
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Reliance is the Servicer), the Noteholders or the Trustee on behalf of the
Noteholders and any breaches of the representations or warranties with respect
to such Receivables shall be deemed cured as of the date of such purchase.
Section 3.8. Total Servicing Fee; Payment of Certain Expenses by
Servicer. On each Payment Date, the Servicer shall be entitled to receive out
of the Payment Amount in the Collection Account the Basic Servicing Fee and any
Supplemental Servicing Fee for the related Collection Period pursuant to Section
4.5. The Servicer shall be required to pay all expenses incurred by it in
connection with its activities under this Agreement, including taxes imposed on
the Servicer, expenses incurred in connection with distributions and reports
made by the Servicer to Noteholders or the Note Insurer. The Servicer shall be
liable for the fees and expenses of the Custodians, any Subservicers and the
Independent Accountants and the fees (to the extent not paid pursuant to Section
4.5 or Section 5.4 of the Indenture) and expenses of the Trustee and the Backup
Servicer.
Section 3.9. Servicer's Certificate. No later than 10:00 a.m., New York
City time, on each Determination Date, the Servicer shall deliver to the
Trustee, the Backup Servicer, the Note Insurer and each Rating Agency a
Servicer's Certificate executed by a Responsible Officer of the Servicer
containing, among other things:
(i) the date of the Accounting Date, the related Determination Date and the
related Payment Date;
(ii) the amount on deposit and the application of funds from the Collection
Account specifying each of the payments set forth in Section 4.5 as of the
related Determination Date, specifying the Collected Funds and Purchase Amounts
received during the related Collection Period and the Interest Distributable
Amount, the Principal Distributable Amount and the Noteholders' Principal
Payment Amount for the related Payment Date;
(iii) the amount on deposit in the Spread Account, the Credit Support
Amount, the Credit Support Percentage, the Credit Support Required Percentage,
the Floor Amount, the Overcollateralization, the Overcollateralization
Percentage, the Spread Account Draw Amount, the Spread Account Percentage and
the Spread Account Required Amount, each as of the related Determination Date;
(iv) the amount of investment earnings or investment losses on amounts
deposited in the Collection Account and the Spread Account;
(v) the amount of Liquidation Proceeds received during the related
Collection Period and the aggregate amount of all
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Liquidation Proceeds from the Cutoff Date through the end of the related
Collection Period;
(vi) the aggregate Principal Balance of Receivables 30-59, 60-89 and 90 or
more days delinquent and the calculation of the average Delinquency Ratio with
respect to the three preceding Collection Periods;
(vii) the aggregate Principal Balance of Defaulted Receivables for the
related Collection Period and the calculation of the average Monthly Net Default
Rate with respect to the three preceding Collection Periods;
(viii) the aggregate Principal Balance of Defaulted Receivables since the
Cutoff Date and the calculation of the Cumulative Net Default Rate;
(ix) the weighted average coupon on the outstanding portfolio of
Receivables as of the end of the related Collection Period;
(x) the Aggregate Principal Balance as of the related Accounting Date;
(xi) the Note Balance and the Note Factor as of the related Payment Date
(after giving effect to all payments of principal on such Payment Date);
(xii) the calculation of the Deficiency Amount, if any, with respect to the
related Payment Date;
(xiii) the calculation of the amounts to be reimbursed to the Note Insurer
on the related Payment Date for prior payments by the Note Insurer;
(xiv) an indication of whether any of the following events occurred during
the related Collection Period: (a) a violation of any Portfolio Performance
Test, (b) an Event of Default as defined in the Indenture, (c) a Collateral
Perfection Trigger, (d) a Distribution Increase, (e) a Servicer Termination
Event and (f) an Event of Default as defined in the Insurance Agreement;
(xv) an identification by account number (as set forth in the Schedule of
Receivables) of all Receivables that (a) became Purchased Receivables as of the
related Deposit Date, (b) became Liquidated Receivables during the Collection
Period or (c) were paid in full during the related Collection Period; and
(xvi) the number of Receivables for which extensions have been granted
during the related Collection Period.
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Such Servicer's Certificate shall be signed by a Servicing Officer and shall
state that, to the best of such Person's knowledge, such Servicer's Certificate
is accurate in all material respects.
A copy of such Servicer's Certificate may be obtained by any Noteholder by a
request in writing to the Trustee addressed to the Corporate Trust Office.
Section 3.10. Annual Statement as to Compliance; Notice of Servicer
Termination Event.
(a) The Servicer shall deliver to the Issuer, the Trustee, the Backup
Servicer, the Note Insurer and each Rating Agency, on or before April 30 (or 120
days after the end of the Servicer's fiscal year, if other than December 31) of
each year, beginning on April 30, 1997, an Officer's Certificate of the
Servicer, dated as of the preceding December 31 (or other applicable date),
stating that (i) a review of the activities of the Servicer during the preceding
12-month period (or such other period as shall have elapsed from the Closing
Date to the date of the first such certificate) and of its performance under
this Agreement has been made under such officer's supervision, and (ii) to such
officer's knowledge, based on such review, the Servicer has fulfilled all its
obligations under this Agreement throughout such period, or, if there has been a
default in the fulfillment of any such obligation, specifying each such default
known to such officer and the nature and status thereof.
(b) The Servicer shall deliver to the Issuer, the Trustee, the Backup
Servicer, the Note Insurer and each Rating Agency, promptly after having
obtained knowledge thereof, but in no event later than three Business Days
thereafter, written notice in an Officer's Certificate of any event that, with
the giving of notice or lapse of time, would become a Servicer Termination Event
under Section 7.1.
Section 3.11. Annual Independent Accountants' Report.
(a) The Servicer shall cause KPMG Peat Marwick or another firm of
nationally recognized independent certified public accountants acceptable to the
Note Insurer (the "Independent Accountants"), who may also render other services
to the Servicer or to the Issuer, to deliver to the Issuer, the Trustee, the
Backup Servicer, the Note Insurer and each Rating Agency, on or before April 30
(or 120 days after the end of the Servicer's fiscal year, if other than December
31) of each year, beginning on April 30, 1997, with respect to the twelve months
ended the preceding December 31 (or other applicable date) (or such other period
as shall have elapsed from the Closing Date to the date of such certificate), a
statement (the "Accountants' Report"), addressed to the Board of Directors of
the Servicer, the Issuer, the Trustee, the Backup Servicer and the Note Insurer,
to the effect that such
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firm has audited the books and records of the Servicer and issued its report
thereon and that: (i) such audit was made in accordance with generally accepted
auditing standards, and accordingly included such tests of the accounting
records and such other auditing procedures as such firm considered necessary in
the circumstances; (ii) the firm is independent of the Issuer and the Servicer
within the meaning of the Code of Professional Ethics of the American Institute
of Certified Public Accountants; and (iii) certain agreed upon procedures were
performed relating to three randomly selected Servicer's Certificates (including
a reconciliation of all amounts set forth in such Servicer's Certificates) and
the only exceptions or errors in the Servicer's Certificates found therein are
set forth in such report.
(b) A copy of the Accountants' Report may be obtained by any Noteholder by
a request in writing to the Trustee addressed to the Corporate Trust Office.
Section 3.12. Access to Certain Documentation and Information Regarding
Receivables. The Servicer shall provide to representatives of the Issuer, the
Trustee, the Backup Servicer and the Note Insurer reasonable access to the
documentation regarding the Receivables. In each case, such access shall be
afforded without charge but only upon reasonable request and during normal
business hours. Nothing in this Section 3.12 shall derogate from the obligation
of the Servicer to observe any applicable law prohibiting disclosure of
information regarding the Obligors, and the failure of the Servicer to provide
access as a result of such obligation shall not constitute a breach of this
Section 3.12.
Section 3.13. Monthly Tape; Certain Duties of Backup Servicer. (a) On or
before the third Business Day, but in no event later than the seventh calendar
day, of each month, the Servicer shall deliver to the Trustee and the Backup
Servicer and, at the Note Insurer's request, the Note Insurer a computer tape or
a diskette (or any other electronic transmission acceptable to the Trustee, the
Note Insurer and the Backup Servicer) in a format acceptable to the Trustee, the
Note Insurer and the Backup Servicer containing the information with respect to
the Receivables as of the preceding Accounting Date necessary for preparation of
the Servicer's Certificate relating to the next Determination Date and necessary
to determine the application of collections as provided in Section 4.3 and 4.5.
(b) The Backup Servicer shall use such tape or diskette (or other means of
electronic transmission acceptable to the Trustee, the Note Insurer and the
Backup Servicer) to verify all information and calculations in the Servicer's
Certificate delivered by the Servicer. The Backup Servicer shall certify to the
Controlling Party that it has verified all information and calculations in the
Servicer's Certificate in accordance with this Section 3.13 and
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shall notify the Servicer and the Controlling Party of any discrepancies, in
each case on or before the second Business Day following the Determination Date;
provided, however, that the Backup Servicer shall not be responsible for the
content or accuracy of any information provided by the Servicer therein. If the
Backup Servicer reports any discrepancies, the Servicer and the Backup Servicer
shall attempt to reconcile such discrepancies prior to the related Payment Date,
but in the absence of a reconciliation, the Servicer's Certificate shall control
for the purpose of calculations and distributions with respect to the related
Payment Date. If the Backup Servicer and the Servicer are unable to reconcile
discrepancies with respect to a Servicer's Certificate by the related Payment
Date, the Servicer shall cause the Independent Accountants, at the Servicer's
expense, to audit the Servicer's Certificate and, prior to the third Business
Day, but in no event later than the fifth calendar day, of the following month,
reconcile the discrepancies. The effect, if any, of such reconciliation shall
be reflected in the Servicer's Certificate for such next succeeding
Determination Date.
(c) Other than the duties specifically set forth in this Agreement, the
Backup Servicer shall have no obligations hereunder, including with respect to
supervising, verifying, monitoring or administering the performance of the
Servicer. The Backup Servicer shall have no liability for any actions taken or
omitted by the Servicer, except for the express duties set forth herein.
Section 3.14 Duties of the Servicer under the Indenture. The Servicer
(or in the case of clause (b) below, Reliance if Reliance is not the Servicer
hereunder) shall perform on behalf of the Issuer the following duties of the
Issuer under the Indenture (references are to the applicable Sections in the
Indenture):
(a) the direction to the Paying Agent, if any, to deposit moneys with
the Trustee (Section 3.3);
(b) the obtaining and preserving of the Issuer's qualification to do
business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of the Indenture, the
Notes, the Indenture Collateral and each other instrument and agreement
included in the Trust Estate (Section 3.4);
(c) the preparation of all supplements, amendments, financing
statements, continuation statements, instruments of further assurance and
other instruments, in accordance with Section 3.5 of the Indenture,
necessary to protect the Trust Estate (Section 3.5);
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(d) the delivery of the Opinion of Counsel on the Closing Date and
the annual delivery of Opinions of Counsel, in accordance with Section 3.6
of the Indenture, as to the Trust Estate, and the annual delivery of the
Officers' Certificate and certain other statements, in accordance with
Section 3.9 of the Indenture, as to compliance with the Indenture (Sections
3.6 and 3.9);
(e) the preparation and obtaining of documents and instruments
required for the release of the Issuer from its obligations under the
Indenture (Section 3.10);
(f) the monitoring of the Issuer's obligations as to the satisfaction
and discharge of the Indenture and the preparation of an Officers'
Certificate and the obtaining of the Opinion of Counsel and the Independent
Certificate relating thereto (Section 4.1);
(g) the preparation of any written instruments required to confirm
more fully the authority of any co-trustee or separate trustee and any
written instruments necessary in connection with the resignation or removal
of any co-trustee or separate trustee (Sections 6.8, 6.9 and 6.10);
(h) the preparation of Issuer Orders, Officers' Certificates and
Opinions of Counsel and all other actions necessary with respect to
investment and reinvestment of funds in the Collection Account (Sections
8.2 and 8.3);
(i) the preparation of Issuer Orders and the obtaining of Opinions of
Counsel with respect to the execution of supplemental indentures (Sections
9.1, 9.2 and 9.3);
(j) the preparation of all Officers' Certificates, Opinions of
Counsel and Independent Certificates with respect to any requests by the
Issuer to the Trustee to take any action under the Indenture (Section
11.1(a));
(k) the preparation and delivery of Officers' Certificates and the
obtaining of Independent Certificates, if necessary, for the release of
property from the Lien of the Indenture (Section 11.1(b)); and
(l) the recording of the Indenture, if applicable (Section 11.14).
Section 3.15. Fidelity Bond and Errors and Omissions Policy. The Servicer
has obtained, and shall continue to maintain in full force and effect, a
fidelity bond and errors and omissions policy of a type and in such amount as is
customary for servicers engaged in the business of servicing automobile
receivables.
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Section 3.16. Compliance with Laws. The Servicer shall comply in all
material respects with the requirements of all applicable laws (including any
federal or state laws regulating the collection or enforcement of consumer debts
and/or the foreclosure upon, and repossession of, vehicles) in the discharge of
its duties and obligations hereunder.
ARTICLE IV
ACCOUNTS; COLLECTIONS; PAYMENTS;
STATEMENTS TO NOTEHOLDERS
Section 4.1. Accounts. (a) The Trustee shall establish the Collection
Account in the name of the Trustee for the benefit of the Noteholders and the
Note Insurer. The Collection Account shall be an Eligible Account and initially
shall be a segregated trust account established with the Trustee.
(b) The Trustee shall establish the Spread Account in the name of the
Trustee for the benefit of the Noteholders and the Note Insurer. The Spread
Account shall be an Eligible Account and initially shall be a segregated trust
account established with the Trustee.
(c) All amounts held in the Collection Account and the Spread Account
shall, to the extent permitted by applicable laws, rules and regulations, be
invested by the Trustee, as directed by the Servicer, in Eligible Investments
that mature not later than one Business Day prior to the Payment Date for the
Collection Period to which such amounts relate. Any such written direction
shall certify that any such investment is authorized by this Section 4.1. Upon
receipt of such written direction or upon an investment pursuant to clause (v)
of the definition of Eligible Investments due to the failure of the Servicer to
provide such written direction, the Trustee shall confirm the credit rating or,
if more than one credit rating has been assigned, each such credit rating of
each institution in which funds are invested. Investments in Eligible
Investments in the case of the Collection Account, shall be made in the name of
the Trustee on behalf of the Noteholders and the Note Insurer, and in the case
of the Spread Account, shall be made in the name of the Trustee on behalf of the
Noteholders and the Note Insurer, and such investments shall not be sold or
disposed of prior to their maturity. Any investment of funds in the Collection
Account and the Spread Account shall be made in Eligible Investments held by a
financial institution with respect to which (a) such institution has noted the
Trustee's interest therein by book entry or otherwise and (b) a confirmation of
the Trustee's interest has been sent to the Trustee by such institution,
provided that such Eligible Investments are (i) specific certificated securities
(as such term is used in the Illinois UCC), and (ii) either (A) in the
possession of such
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institution or (B) in the possession of a clearing corporation (as such term is
used in the Illinois UCC), registered in the name of such clearing corporation,
not endorsed for collection or surrender or any other purpose not involving
transfer, not containing any evidence of a right or interest inconsistent with
the Trustee's security interest therein, and held by such clearing corporation
in an account of such institution. Subject to the other provisions hereof, the
Trustee shall have sole control over each such investment and the income
thereon, and any certificate or other instrument evidencing any such investment,
if any, shall be delivered directly to the Trustee or its agent, together with
each document of transfer, if any, necessary to transfer title to such
investment to the Trustee in a manner that complies with this Section 4.1. All
interest, dividends, gains upon sale and other income from, or earnings on,
investments of funds in the Collection Account and the Spread Account shall be
distributed as and to the extent provided in Section 4.5.
(d) On the Closing Date prior to the issuance of the Notes, the Servicer
shall deposit in the Collection Account (i) all Scheduled Payments and
prepayments of Receivables received by the Servicer on or after the Cutoff Date
and prior to the Closing Date and (ii) all Liquidation Proceeds and proceeds of
Insurance Policies realized in respect of Financed Vehicles and applied by the
Servicer on or after the Cutoff Date.
Section 4.2. Servicer Reimbursements. The Servicer shall be entitled to
be reimbursed from amounts on deposit in, or to be deposited in, the Collection
Account with respect to a Collection Period for amounts previously deposited in
the Collection Account but later determined by the Servicer to have resulted
from mistaken deposits or postings or checks returned for insufficient funds.
The amount to be reimbursed hereunder that is not reimbursed from amounts to be
deposited into the Collection Account prior to the related Payment Date shall be
paid to the Servicer on the related Payment Date pursuant to Section 4.5(i).
Upon the request of the Trustee or the Note Insurer, the Servicer shall certify
any amount to be reimbursed hereunder and shall supply such other information as
may be necessary in the opinion of the Trustee and the Note Insurer to verify
the accuracy of such certification.
Section 4.3. Application of Collections. For purposes of this Agreement,
all collections for a Collection Period shall be applied by the Servicer as
follows:
(a) With respect to each Receivable, payments by or on behalf of the
Obligor (other than Supplemental Servicing Fees with respect to such
Receivable, to the extent collected) shall be applied first to interest
accrued through the date of payment and then to unpaid principal. With
respect to each Liquidated Receivable, Liquidation Proceeds shall be
applied
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first to principal and then to interest with respect to such Receivable.
Any prepayment of principal during each Collection Period shall be
immediately applied to reduce the principal balance of the Receivable
during such Collection Period.
(b) With respect to each Receivable that has become a Purchased
Receivable on any Deposit Date, the Purchase Amount shall be applied to
interest and principal on the Receivable in accordance with the terms of
the Receivable as if the Purchase Amount had been paid by the Obligor on
the Accounting Date. Nothing contained herein shall relieve any Obligor of
any obligation relating to any Receivable.
(c) All amounts collected that are payable to the Servicer as
Supplemental Servicing Fees hereunder shall be deposited in the Collection
Account and paid to the Servicer in accordance with Section 4.5(i).
(d) All payments by or on behalf of an Obligor received with respect
to any Purchased Receivable after the Accounting Date preceding the Deposit
Date on which the Purchase Amount was paid by Reliance or the Servicer
shall be paid to Reliance or the Servicer, respectively, and shall not be
included in the Available Funds.
Section 4.4. Additional Deposits. On or before each Deposit Date, the
Servicer or the Issuer shall deposit into the Collection Account the aggregate
Purchase Amounts with respect to Purchased Receivables. All such deposits of
Purchase Amounts shall be made in immediately available funds. On or before
each Payment Date, the Trustee shall remit to the Collection Account any amounts
withdrawn from the Spread Account pursuant to Section 5.3. Upon receipt, the
Trustee shall remit to the Collection Account any amounts delivered to the
Trustee by the Note Insurer.
Section 4.5. Payments. From the Collection Account, on each Payment
Date, except as provided in Section 5.4 of the Indenture, the Trustee shall
(based solely on the information contained in the Servicer's Certificate
delivered with respect to the related Determination Date) distribute the
following amounts to the holders of record on the Record Date and in the
following order of priority:
(i) first, from the Payment Amount, to the Servicer, the Basic
Servicing Fee for the related Collection Period, any Supplemental Servicing
Fees for the related Collection Period, and any amounts specified in
Section 4.2, to the extent the Servicer has not reimbursed itself in
respect of such amounts pursuant to Section 4.2, and in each case any such
fees or
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amounts that are accrued and unpaid from prior Collection Periods;
(ii) second, from the remaining Payment Amount, pro rata to the Backup
Servicer all accrued and unpaid expenses up to $100,000 relating to the
assumption of servicing responsibilities by the Backup Servicer, to the
Trustee, all accrued and unpaid Trustee fees, to the Backup Servicer, all
accrued and unpaid Backup Servicer Fees, and to the Custodian (other than
any Originator or Reliance), all accrued and unpaid Custodian Fees to the
extent not paid by the Servicer;
(iii) third, from the remaining Payment Amount to the Note Insurer,
the Premium for such Payment Date;
(iv) fourth, from the remaining Amount Available to the Noteholders,
the Interest Distributable Amount for such Payment Date;
(v) fifth, from the remaining Amount Available to the Noteholders, the
Noteholders' Principal Payment Amount for such Payment Date;
(vi) sixth, from the remaining Payment Amount to the Note Insurer, to
the extent of any Reimbursement Amounts;
(vii) seventh, if a Distribution Increase has occurred and has not
been waived by the Controlling Party, any remaining Available Funds and any
amounts on deposit in the Spread Account in excess of the Spread Account
Required Amount shall be paid to Noteholders in payment of principal on the
Notes until the Note Balance is reduced to zero;
(viii) eighth, any remaining Available Funds to the Spread Account to
the extent necessary to make the amount on deposit in the Spread Account
equal to the Spread Account Required Amount (after giving effect to all
withdrawals from the Spread Account on such date);
(ix) ninth, from remaining Available Funds the costs and expenses
incurred in connection with the transfer of the Receivable Files pursuant
to Section 2.2(d) or re-titling of the Financed Vehicles pursuant to
Section 3.5(b), to the extent Reliance has failed to pay such amounts
pursuant to Section 2.2(d) or Section 3.5(b);
(x) tenth, any remaining Available Funds to the Backup Servicer or
any other successor Servicer, in either case when acting as Servicer, to
cover indemnification obligations of the Issuer; and
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(xi) eleventh, any remaining Available Funds and any amounts on
deposit in the Spread Account in excess of the Spread Account Required
Amount shall be paid to the Issuer.
Section 4.6. [Reserved].
Section 4.7. Statements to Noteholders. (a) On each Payment Date, the
Trustee shall include with each distribution to each Noteholder, a statement
prepared by the Servicer (which statement shall also be provided to the Note
Insurer and to each Rating Agency), based on information in the Servicer's
Certificate delivered on the related Determination Date pursuant to Section 3.9,
setting forth for such Payment Date and the Collection Period relating to such
Payment Date the following information:
(i) the amount of such payment allocable to principal;
(ii) the amount of such payment allocable to interest;
(iii) the amount of each such payment described in clause (i) or (ii)
payable out of amounts withdrawn from the Spread Account or pursuant to a
claim on the Policy and the amount remaining in the Spread Account;
(iv) the Note Balance (after giving effect to payments made on such
Payment Date);
(v) the amount of fees paid by the Issuer to the Servicer with respect
to such Collection Period;
(vi) the amount of each of the Interest Carryover Shortfall and the
Principal Carryover Shortfall, if any, on such Payment Date and the change
in such amounts from those of the prior Payment Date;
(vii) the Note Factor (after giving effect to payments made on such
Payment Date);
(viii) the aggregate Purchase Amount, if any, for the related Deposit
Date, the aggregate principal amount of Receivables that became Liquidated
Receivables during the related Collection Period and the aggregate amount
of Liquidation Proceeds collected during the related Collection Period;
(ix) the average Delinquency Ratio for the three Collection Periods
preceding the current Collection Period, the average Monthly Net Default
Rate for the three Collection Periods preceding the current Collection
Period, and the Cumulative Net Default Rate as of the related Determination
Date;
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(x) whether any Distribution Increase, Event of Default under the
Indenture or Collateral Perfection Trigger has occurred and has not been
waived as of the related Determination Date;
(xi) whether any Portfolio Performance Test has been violated as of
the related Determination Date or, if a Portfolio Performance Test has been
violated on a prior Determination Date, whether such Portfolio Performance
Test has been Deemed Cured as of the related Determination Date; and
(xii) whether, to the knowledge of the Servicer, a Servicer
Termination Event has occurred and has not been waived as of the related
Determination Date or an Insurer Default has occurred and is continuing.
Each amount set forth pursuant to clauses (i), (ii) and (vi) above shall be
expressed as a dollar amount per $1,000 of original principal balance of a Note.
A copy of such statement may be obtained by any Note Owner by a request in
writing to the Trustee addressed to the Corporate Trust Officer.
(b) Within the prescribed period of time for tax reporting purposes after
the end of each calendar year during the term of this Agreement, the Trustee
shall mail, to each Person who at any time during such calendar year shall have
been a Holder of a Note, a statement containing the sum of the amounts set forth
in clauses (i), (ii) and (v).
Section 4.8. Optional Deposits by the Note Insurer. The Note Insurer
shall at any time, and from time to time, have the option (but shall not be
required, except as provided in Section 5.4 and in accordance with the terms of
the Policy) to deliver amounts to the Trustee for deposit into the Collection
Account to provide funds in respect of the payment of fees or expenses of any
provider of services to the Issuer with respect to such Payment Date.
ARTICLE V
THE SPREAD ACCOUNT AND THE POLICY
Section 5.1. Spread Account Initial Deposit; Spread Account Required
Amount. On the Closing Date from the proceeds of the sale of the Notes the
Trustee, upon receipt of such proceeds, shall make an initial Spread Account
deposit in the amount of $2,322,170.19 (the "Spread Account Initial Deposit"),
which is equal to 1.75% of the Cutoff Date Principal Balance. As of each
Payment Date,
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pursuant to Section 4.5(viii) the Issuer shall deposit from the remaining
Available Funds the amount necessary to make the amount on deposit in the Spread
Account equal to the Spread Account Required Amount.
Section 5.2. Policy. The Issuer agrees, simultaneously with the
execution and delivery of this Agreement, to cause the Note Insurer to issue the
Policy for the benefit of the Issuer and the Noteholders in accordance with the
terms thereof.
Section 5.3. Withdrawals from Spread Account. If the Servicer's
Certificate with respect to any Determination Date shall state that the amount
of the Available Funds with respect to such Determination Date is less than the
sum of (a) the amounts payable on the related Payment Date pursuant to clauses
(i) through (iv) of Section 4.5, (b) the Principal Distributable Amount and (c)
the amount payable on the related Payment Date pursuant to clause (vi) of
Section 4.5 if so directed by the Note Insurer (such deficiency being a "Spread
Account Draw Amount"), then the Trustee shall withdraw from the Spread Account
funds in the amount of such Spread Account Draw Amount (to the extent of the
funds available therein) on or prior to the next Payment Date. The amounts
withdrawn by the Trustee from the Spread Account shall be deposited by the
Trustee into the Collection Account pursuant to Section 4.4.
Section 5.4. Claims Under Policy. (a) The Trustee shall determine on the
related Draw Date whether the sum of (i) the amount of Available Funds with
respect to such Determination Date (as stated in the Servicer's Certificate with
respect to such Determination Date), plus (ii) the amount of the Spread Account
Draw Amount, if any, to be withdrawn by the Trustee from the Spread Account
pursuant to Section 5.3 with respect to such Payment Date would be insufficient,
after giving effect to the distributions required by Section 4.5(i) through
(iii), to pay the sum of the Interest Distributable Amount and the amount set
forth in Section 4.5(v) for the related Payment Date, then the Trustee shall
furnish to the Note Insurer no later than 12:00 noon, New York City time, on the
related Draw Date a completed Notice of Claim in the amount of the shortfall in
amounts so available to pay the Interest Distributable Amount and the amount set
forth in Section 4.5(v) with respect to such Payment Date (the amount of any
such shortfall being hereinafter referred to as the "Deficiency Amount").
Amounts paid by the Note Insurer under the Policy shall be deposited by the
Trustee into the Collection Account pursuant to Section 4.4 for payment to
Noteholders on the related Payment Date and shall remain uninvested.
(b) Any notice delivered by the Trustee to the Note Insurer pursuant to
Section 5.4(a) shall specify the Deficiency Amount claimed under the Policy and
shall constitute a "Notice of Claim" under the Policy. In accordance with the
provisions of the Policy,
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the Note Insurer is required to pay to the Trustee the Deficiency Amount
properly claimed thereunder by 12:00 noon, New York City time, on the later of
(i) the fourth Business Day following receipt on a Business Day of the Notice of
Claim, and (ii) the applicable Payment Date. Any payment made by the Note
Insurer under the Policy shall be applied solely to the payment of the Notes and
for no other purpose.
(c) The Trustee shall (i) receive as attorney-in-fact of each Noteholder
any Deficiency Amount from the Note Insurer and (ii) deposit the same in the
Collection Account for disbursement to the Noteholders as set forth in clauses
(iv) and (v) of Section 4.5. Any and all Deficiency Amounts disbursed by the
Trustee from claims made under the Policy shall not be considered payment by the
Issuer or from the Spread Account with respect to such Notes and shall not
discharge the obligations of the Issuer with respect thereto. The Note Insurer
shall, to the extent it makes any payment with respect to the Notes, become
subrogated to the rights of the recipients of such payments to the extent of
such payments. Subject to and conditioned upon any payment with respect to the
Notes by or on behalf of the Note Insurer, the Trustee shall assign to the Note
Insurer all rights to the payment of interest or principal with respect to the
Notes that are then due for payment to the extent of all payments made by the
Note Insurer, and the Note Insurer may exercise any option, vote, right, power
or the like with respect to the Notes to the extent that it has made payment
pursuant to the Policy. To evidence such subrogation, the Note Registrar shall
note the Note Insurer's rights as subrogee upon the Note Register of Noteholders
upon receipt from the Note Insurer of proof of payment by the Note Insurer of
any Insured Payment (as defined in the Policy). Pursuant to the Indenture, the
Note Registrar and the Trustee shall accept a voucher or other evidence of
payment as prima facie evidence of such payment.
(d) The Trustee shall enforce on behalf of the Noteholders the obligations
of the Note Insurer under the Policy. Notwithstanding any other provision of
this Agreement, the Noteholders are not entitled to institute proceedings
directly against the Note Insurer.
Section 5.5. Preference Claims. (a) If the Trustee has received a
certified copy of an order of the appropriate court that any amount paid on a
Note has been avoided in whole or in part as a preference payment under
applicable bankruptcy law, the Trustee shall so notify the Note Insurer, shall
comply with the provisions of the Policy to obtain payment by the Note Insurer
of such avoided payment, and shall, at the time it provides notice to the Note
Insurer, notify Holders of the Notes by mail that, if any Noteholder's payment
is so recoverable, such Noteholder shall be entitled to payment pursuant to the
terms of the Policy. The Note
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Insurer shall make such payment pursuant to the terms of the Policy.
(b) Pursuant to the terms of the Policy, the Note Insurer shall pay any
Insured Payment (as defined in the Policy) that is a Preference Amount on the
Business Day following receipt on a Business Day by the Fiscal Agent (as defined
in the Policy) of (i) a certified copy of the order requiring the return of a
preference payment, (ii) an opinion of counsel satisfactory to the Note Insurer
that such order is final and not subject to appeal, (iii) an assignment in such
form as is reasonably required by the Note Insurer, irrevocably assigning to the
Note Insurer all rights and claims of the Noteholder relating to or arising
under the Notes against the debtor which made such preference payment or
otherwise with respect to such preference payment and (iv) appropriate
instruments to effect the appointment of the Note Insurer as agent for such
Noteholder in any legal proceeding related to such preference payment, such
instruments being in a form satisfactory to the Note Insurer, provided that if
such documents are received after 12:00 noon, New York City time, on such
Business Day, they will be deemed to be received on the following Business Day.
Such payments shall be disbursed to the receiver or trustee in bankruptcy named
in the final order of the court exercising jurisdiction on behalf of the
Noteholder, and not to any Noteholder directly unless such Noteholder has
returned principal or interest paid on the Notes to such receiver or trustee in
bankruptcy, in which case such payment shall be disbursed to such Noteholder.
Section 5.6. Surrender of Policy. The Trustee shall surrender the Policy
to the Note Insurer for cancellation upon payment of all amounts due under the
Notes.
ARTICLE VI
THE SERVICER
Section 6.1. Liability of Servicer; Indemnities.
(a) The Servicer (in its capacity as such) shall be liable hereunder only
to the extent of the obligations in this Agreement specifically undertaken by
the Servicer and the representations made by the Servicer.
(b) The Servicer shall defend, indemnify and hold harmless the Issuer, the
Trustee, the Backup Servicer, Reliance, the Note Insurer and their respective
officers, directors, agents and employees:
(i) from and against any and all costs, expenses, losses, damages,
claims and liabilities, including reasonable fees and expenses of counsel
and expenses of litigation
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arising out of or resulting from the use, ownership or operation by the
Servicer or any Affiliate thereof of any Financed Vehicle;
(ii) from and against any taxes that may at any time be asserted
against any of such parties with respect to the transactions contemplated
in this Agreement, including any sales, gross receipts, tangible or
intangible personal property, privilege or license taxes (but not including
any federal or other income taxes, including franchise taxes asserted with
respect to, and as of the date of, the sale or contribution of the
Receivables and the Other Conveyed Property to the Issuer or the issuance
and original sale of the Notes) and costs and expenses in defending against
the same; and
(iii) from and against any and all costs, expenses, losses, claims,
damages, and liabilities to the extent that such cost, expense, loss,
claim, damage, or liability arose out of, or was imposed upon, the Issuer,
the Trustee, the Backup Servicer or the Note Insurer by reason of the
breach of this Agreement by the Servicer, the negligence, misfeasance or
bad faith of the Servicer in the performance of its duties under this
Agreement or by reason of reckless disregard of its obligations and duties
under this Agreement.
(c) Indemnification under this Section 6.1 shall include reasonable fees
and expenses of counsel and expenses of litigation. If the Servicer has made
any indemnity payments pursuant to this Section 6.1 and the recipient thereafter
collects any of such amounts from others, the recipient shall promptly repay
such amounts collected to the Servicer, without interest.
Section 6.2. Merger or Consolidation of, or Assumption of the Obligations
of, the Servicer or Backup Servicer.
(a) The Servicer shall not merge or consolidate with any other Person,
convey, transfer or lease substantially all its assets as an entirety to another
Person, or permit any other Person to become the successor to all or
substantially all of its business or assets unless, after the merger,
consolidation, conveyance, transfer, lease or succession, the successor or
surviving entity shall be capable of fulfilling the duties of the Servicer
contained in this Agreement, shall be reasonably acceptable to the Controlling
Party, and shall be an Eligible Servicer; provided, however, that none of the
provisions of this Section 6.2 shall prohibit the Split-off Transactions. Any
corporation (i) into which the Servicer may be merged or consolidated, (ii)
resulting from any merger or consolidation to which the Servicer shall be a
party, (iii) that acquires by conveyance, transfer or lease substantially all of
the assets of the Servicer or (iv) succeeding
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to the business of the Servicer, in any of the foregoing cases shall execute an
agreement of assumption to perform every obligation of the Servicer under this
Agreement and, whether or not such assumption agreement is executed, shall be
the successor to the Servicer under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties to this
Agreement, anything in this Agreement to the contrary notwithstanding; provided,
however, that the corporation into which Servicer is merged in connection with
the Split-off Transaction shall be the successor to Servicer under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties to this Agreement; and provided, further, that
nothing contained herein shall be deemed to release the Servicer from any
obligation hereunder. The Servicer shall provide prior written notice of any
merger, consolidation or succession pursuant to this Section 6.2(a) to the
Trustee, the Note Insurer and each Rating Agency. Notwithstanding the
foregoing, the Servicer shall not merge or consolidate with any other Person or
permit any other Person to become a successor to all or substantially all of its
business or assets, unless the Servicer shall have provided prior notice to the
Rating Agencies and (x) immediately after giving effect to such transaction, no
representation or warranty made pursuant to Section 3.6 shall have been breached
in any material respect (for purposes hereof, such representations and
warranties shall speak as of the date of the consummation of such transaction)
and no event that, after notice or lapse of time, would become a Collateral
Perfection Trigger or an Event of Default under the Indenture shall have
occurred, (y) the Servicer shall have delivered to the Trustee, the Rating
Agencies and the Note Insurer an Officer's Certificate and an Opinion of
Counsel, each stating that such consolidation, merger or succession and such
agreement of assumption comply with this Section 6.2(a) and (z) the Servicer
shall have delivered to the Trustee, the Rating Agencies and the Note Insurer an
Opinion of Counsel, stating in the opinion of such counsel, either (A) all
financing statements and continuation statements and amendments thereto have
been executed and filed that are necessary to preserve and protect the interests
of the Issuer and the Trustee on behalf of the Noteholders and the Note Insurer
in the Receivables and the Other Conveyed Property or (B) no such action shall
be necessary to preserve and protect such interest; provided, however, that, in
connection with the Split-off Transactions, the Servicer shall also deliver to
the Trustee, the Rating Agencies and the Note Insurer an Opinion of Counsel
stating that if the Servicer became a debtor in a bankruptcy proceeding, the
bankruptcy court would not substantively consolidate the assets and liabilities
of the Issuer with those of the Servicer and shall not be required to deliver
the Opinion of Counsel described in clause (y) above.
(b) Any corporation (i) into which the Backup Servicer may be merged,
consolidated or converted, (ii) resulting from any merger,
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consolidation or conversion to which the Backup Servicer shall be a party, (iii)
that acquires by conveyance, transfer or lease substantially all of the assets
of the Backup Servicer, or (iv) succeeding to the business of the Backup
Servicer, in any of the foregoing cases shall execute an agreement of assumption
to perform every obligation of the Backup Servicer under this Agreement and,
whether or not such assumption agreement is executed, shall be the successor to
the Backup Servicer under this Agreement without the execution or filing of any
paper or any further act on the part of any of the parties to this Agreement,
anything in this Agreement to the contrary notwithstanding; provided, however,
that nothing contained herein shall be deemed to release the Backup Servicer
from any obligation; and provided, further, that such corporation is acceptable
to the Note Insurer.
Section 6.3. Limitation on Liability of Servicer, Backup Servicer and
Others.
(a) Neither the Servicer, the Backup Servicer nor any of the directors,
officers, employees or agents of the Servicer or the Backup Servicer shall be
under any liability to the Issuer, the Noteholders, the Trustee or the Note
Insurer, except as provided in this Agreement, for any action taken or for
refraining from the taking of any action pursuant to this Agreement; provided,
however, that this provision shall not protect the Servicer, the Backup Servicer
or any such Person against any liability that would otherwise be imposed by
reason of a breach of this Agreement or willful misfeasance, bad faith or
negligence in the performance of its duties.
(b) Unless acting as Servicer hereunder and except as provided herein, the
Backup Servicer shall not be liable for any obligation of the Servicer contained
in this Agreement, and the Trustee, the Issuer, the Note Insurer and the
Noteholders shall look only to the Servicer to perform such obligations.
(c) The parties expressly acknowledge and consent to Harris Trust and
Savings Bank acting in the possible dual capacity of Backup Servicer or
successor Servicer and in the capacity as Trustee. Harris Trust and Savings
Bank may, in such dual capacity, discharge its separate functions fully, without
hinderance or regard to conflict of interest principles, duty of loyalty
principles or other breach of fiduciary duties to the extent that any such
conflict or breach arises from the performance by Harris Trust and Savings Bank
of express duties set forth in this Agreement in any of such capacities, all of
which defenses, claims or assertions are hereby expressly waived by the other
parties hereto except in the case of negligence and willful misconduct by Harris
Trust and Savings Bank.
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(d) The Backup Servicer shall have no responsibility and shall not be in
default hereunder nor incur any liability for any failure, error, malfunction or
any delay in carrying out any of its duties under this Agreement if any such
failure or delay results from the Backup Servicer acting in accordance with
information prepared or supplied by the Servicer or the failure of the Servicer
to prepare or provide such information. The Backup Servicer shall have no
responsibility, shall not be in default and shall incur no liability (i) for any
act or failure to act by the Servicer, the Issuer, the Controlling Party or the
Trustee or for any inaccuracy or omission in a notice or communication received
by the Backup Servicer from any such party or (ii) that is due to or results
from the invalidity, unenforceability of any Receivable under applicable law or
the breach or the inaccuracy of any representation or warranty made with respect
to any Receivable.
(e) Neither the Backup Servicer nor any successor Servicer offers any
representations concerning, and shall have no liability hereunder with respect
to, the collectibility, enforceability or other characteristics of the
Receivables as such. Notwithstanding any other provision of this Agreement,
neither the Backup Servicer nor any successor Servicer shall be liable hereunder
for (a) any act taken or any omission by the Backup Servicer or such successor
Servicer, as applicable, acting in good faith in conformity with the written
consent or approval of the Controlling Party or (b) the Backup Servicer's or
such successor Servicer's, as applicable, performance (or lack of performance)
under this Agreement, or any other Related Document, except with regard to acts
or omissions of the Backup Servicer or such successor Servicer, as applicable,
constituting negligence, bad faith, willful misfeasance or recklessness.
Neither the Backup Servicer nor any successor Servicer shall have any
responsibility and shall not be in default hereunder or incur any liability for
any failure, error, malfunction or any delay in carrying out any of its duties
under this Agreement, or any Related Document, if any such failure or delay
results from the Backup Servicer or such successor Servicer, as applicable,
acting in accordance with applicable laws, regulations or rules or from acts of
God, war, insurrection, strikes, stoppages of labor, power or equipment failure
(including that of any common carrier or transmission line), emergency
conditions, tornado, flood, fire, earthquake or similar event, adverse weather
conditions or any other factor, medium, instrumentality or any cause beyond the
Backup Servicer's or such successor Servicer's, as applicable, control or for
information prepared or supplied by a Person other than the Backup Servicer or
such successor Servicer, as applicable, or the failure of any such Person to
prepare or provide such information. Without limiting the foregoing, any
liability of the Backup Servicer or such successor Servicer, as applicable,
under or in connection with this Agreement, or any Related Document shall be
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limited to direct damages caused as a result of its negligence or willful
misconduct and neither the Backup Servicer nor any successor Servicer shall in
any event have any liability for any indirect, consequential or punitive
damages.
Section 6.4. Delegation of Duties. (a) The Servicer has delegated
duties under this Agreement to the Subservicers as specified in the Subservicing
Agreement. The Servicer may also delegate duties under this Agreement to other
Affiliates of Reliance with the prior written consent of the Controlling Party,
the Trustee and the Backup Servicer. The Servicer also may at any time perform
through sub-contractors the specific duties of (i) repossession of Financed
Vehicles, (ii) tracking Financed Vehicles' insurance and (iii) pursuing the
collection of deficiency balances on certain defaulted Receivables, in each case
without the consent of the Controlling Party or the Backup Servicer. The
Servicer may also perform other specific duties through such sub-contractors in
accordance with its Credit and Collection Policy with the prior consent of the
Controlling Party. No such delegation or sub-contracting of duties by the
Servicer, whether pursuant to the Subservicing Agreement or otherwise, shall
relieve the Servicer of its responsibility with respect to such duties.
(b) The Backup Servicer and any successor Servicer may delegate its duties
under this Agreement to sub-contractors without the prior written consent of the
Controlling Party and the Trustee. No such delegation or sub-contracting of
duties by the Backup Servicer or any successor Servicer shall relieve the Backup
Servicer or such successor Servicer, as applicable, of its responsibility with
respect to such duties.
Section 6.5. Servicer and Backup Servicer Not to Resign. Subject to the
provisions of Section 6.2, neither the Servicer nor the Backup Servicer (except
as provided below) shall resign from the obligations and duties imposed on it by
this Agreement as Servicer or Backup Servicer except upon a determination that
by reason of a change in legal requirements the performance of its duties under
this Agreement would cause it to be in violation of such legal requirements, and
the Note Insurer (so long as an Insurer Default shall not have occurred and be
continuing) or a Note Majority (if an Insurer Default shall have occurred and be
continuing) does not elect to waive the obligations of the Servicer or the
Backup Servicer, as the case may be, to perform the duties that render it
legally unable to act or to delegate those duties to another Person. Any such
determination permitting the resignation of the Servicer or Backup Servicer
shall be evidenced by an Opinion of Counsel to such effect delivered and
acceptable to the Trustee and the Note Insurer (unless an Insurer Default shall
have occurred and be continuing). No resignation of the Servicer shall become
effective until, so long as no Insurer Default shall have occurred and be
continuing, the Backup Servicer or an entity acceptable to
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the Note Insurer shall have assumed the responsibilities and obligations of the
Servicer or, if an Insurer Default shall have occurred and be continuing, the
Backup Servicer or a successor Servicer that is an Eligible Servicer shall have
assumed the responsibilities and obligations of the Servicer. The Backup
Servicer may resign for any reason, provided an entity acceptable to the
Controlling Party shall have assumed the responsibilities and obligations of the
Backup Servicer prior to the effectiveness of any such resignation. The Backup
Servicer may be removed by the Note Insurer or, if an Insurer Default has
occurred and is continuing by the Note Majority, at any time if one of the
following events have occurred: (i) the Backup Servicer shall cease to meet the
eligibility requirements for the Trustee under Section 6.11 of the Indenture and
shall fail to resign after written request therefor by the Issuer, the Note
Insurer by any Noteholder, (ii) the Backup Servicer shall become incapable of
acting or shall be adjudged a bankrupt or insolvent, or a receiver of the Backup
Servicer or of its property shall be appointed, or any public officer shall take
charge or control of the Backup Servicer or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation, or (iii) the Backup
Servicer has failed in any material respect to perform its duties hereunder or
has breached any material representation or warranty made herein. Upon the
Backup Servicer's resignation or termination pursuant to this Section 6.5,
notice thereof shall be provided to the Rating Agencies and the Note Insurer.
No resignation or termination of the Backup Servicer shall become effective
until, so long as no Insurer Default shall have occurred and be continuing, an
entity acceptable to the Note Insurer shall have assumed the responsibilities
and obligations of the Backup Servicer or, if an Insurer Default shall have
occurred and be continuing, a Person that is an Eligible Servicer shall have
assumed the responsibilities and obligations of the Backup Servicer; provided,
however, that if a successor Backup Servicer is not appointed within 60 days
after the Backup Servicer has given notice of its resignation and has provided
the Opinion of Counsel required by this Section 6.5, the Backup Servicer may
petition a court for its removal.
Section 6.6 Indemnification. (a) The Issuer agrees to indemnify and
hold the Backup Servicer and any successor Servicer and any officers, directors,
employees or agents of the Backup Servicer and such successor Servicer harmless
against any and all claims, losses, penalties, fines, forfeitures, legal fees
and related costs, judgments and any other costs, fees and expenses
(collectively, "Losses") that the Backup Servicer or such successor Servicer, as
applicable, may sustain in connection with claims asserted at any time by third
parties against the Backup Servicer or such successor Servicer, as applicable,
which result from (i) any act taken or any omission by the Backup Servicer or
such successor Servicer, as applicable, acting in good faith in
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conformity with the written consent or approval of the Controlling Party or (ii)
the Backup Servicer's or such successor Servicer's, as applicable, performance
(or lack of performance) under this Agreement, unless such Losses are the result
of an act or omission of the Backup Servicer or such successor Servicer, as
applicable, constituting negligence, bad faith, willful misfeasance or
recklessness; provided, however, that any amounts of such indemnification shall
be paid solely from amounts paid to the Issuer pursuant to Section 4.5(xi) or,
if applicable, shall be payable pursuant to Section 4.5(x).
(b) Reliance agrees to indemnify and hold the Backup Servicer and any
successor Servicer and any officers, directors, employees or agents of the
Backup Servicer and such successor Servicer harmless against any and all claims,
losses, penalties, fines, forfeitures, legal fees and related costs, judgments
and any other costs, fees and expenses (collectively, "Losses") that the Backup
Servicer or such successor Servicer, as applicable, may sustain in connection
with claims asserted at any time by third parties against the Backup Servicer or
such successor Servicer, as applicable, which result from the breach of the
representation and warranty set forth in paragraph 3 of the Schedule of
Representations.
Section 6.7 Backup Servicer Indemnification.
(a) The Backup Servicer agrees to indemnify, reimburse for and hold the
Note Insurer harmless against any and all claims, losses, penalties, fines,
forfeitures, legal fees and related costs, judgments, and any other costs, fees
and expenses (including legal fees) that the Note Insurer may sustain resulting
from the negligence or wilful misconduct of the Backup Servicer in the
performance of its duties hereunder or in the servicing of the Receivables in
compliance with the terms of this Pooling and Servicing Agreement. The Backup
Servicer shall not be liable or responsible for any of the representations,
covenants, warranties, responsibilities, duties or liabilities of the Servicer.
The Backup Servicer shall immediately notify the Note Insurer if a claim is made
by a third party with respect to this Pooling and Servicing Agreement, and the
Backup Servicer shall assume (with the consent of the Note Insurer) the defense
of any such claim and advance all expenses in connection therewith, including
reasonable counsel fees, and promptly advance funds to pay, discharge and
satisfy any judgment or decree which may be entered against the Backup Servicer
or the Note Insurer in respect of such claim.
(b) The Issuer shall immediately notify the Note Insurer if a claim is made
by a third party with respect to this Pooling and Servicing Agreement.
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(c) The obligations of the Backup Servicer and the Issuer under this
Section 6.7 shall survive the termination of this Pooling and Servicing
Agreement.
Section 6.8 Representations of Backup Servicer.
(a) The Backup Servicer has been duly organized and is validly existing as
an Illinois banking corporation in good standing under the laws of Illinois,
with power and authority to own its properties and to conduct its business as
such properties shall be currently owned and such business is presently
conducted.
(b) The Backup Servicer has the power and authority to execute and deliver
this Pooling and Servicing Agreement and the Insurance Agreement and to carry
out their terms; and the execution and delivery, and performance of this Pooling
and Servicing Agreement and the Insurance Agreement shall have been duly
authorized by the Backup Servicer by all necessary corporate action.
(c) Each of this Pooling and Servicing Agreement and the Insurance
Agreement constitutes a legal, valid, and binding obligation of the Backup
Servicer enforceable in accordance with its respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization, or
other similar laws affecting the enforcement of creditors' rights in general and
by general principles of equity, regardless of whether such enforceability shall
be considered in a proceeding in equity or at law.
(d) The consummation of the transactions contemplated by this Pooling and
Servicing Agreement and the Insurance Agreement and the fulfillment of the terms
thereof shall not conflict with, result in any breach of any of the terms and
provisions of, nor constitute (with or without notice of lapse of time) a
default under, the articles of incorporation or by-laws of the Backup Servicer,
or any indenture, agreement, or other instrument to which the Backup Servicer is
a party or by which it shall be bound; nor result in the creation or imposition
of any Lien upon any of its properties pursuant to the terms of any such
indenture, agreement, or other instrument; nor violate any law or any order,
rule, or regulation applicable to the Backup Servicer of any court or of any
Federal or state regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over the Backup Servicer or its properties.
(e) There are no proceedings or investigations pending or, to the Backup
Servicer's best knowledge, threatened before any court, regulatory body,
administrative agency, or other governmental instrumentality having jurisdiction
over the Backup Servicer or its properties (i) asserting the invalidity of this
Pooling and
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Servicing Agreement, the Indenture or the Insurance Agreement, (ii) seeking to
prevent the consummation of any of the transactions contemplated by this Pooling
and Servicing Agreement, the Indenture or the Insurance Agreement, (iii) seeking
any determination or ruling that might materially and adversely affect the
performance by the Backup Servicer of its obligations under, or the validity or
enforceability of, this Pooling and Servicing Agreement or the Insurance
Agreement.
ARTICLE VII
SERVICER TERMINATION EVENTS
Section 7.1. Servicer Termination Event. For purposes of this Agreement,
each of the following shall constitute a "Servicer Termination Event":
(a) Any failure by the Servicer to make deposits into the Collection
Account or to deliver to the Trustee for distribution to Noteholders any
proceeds or payment required to be so delivered under the terms of this
Agreement (provided that such failure shall not constitute a Servicer
Termination Event if such failure is not caused by the negligence of the
Servicer or is caused by circumstances beyond the control of the Servicer,
unless such failure continues unremedied for a period of one Business Day after
the earlier of receipt of written notice by the Servicer from the Trustee or
(unless an Insurer Default shall have occurred and be continuing) the Note
Insurer or discovery of such failure by a Responsible Officer of the Servicer);
or
(b) Failure by the Servicer to deliver to the Trustee and the Note
Insurer the Servicer's Certificate by the close of business on each
Determination Date, failure on the part of the Servicer to observe in all
material respects its covenants and agreements set forth in Section 6.2(a) or
the failure by the Servicer to enforce Sections 3(e) or (f) of the Subservicing
Agreement; or
(c) Failure or failures on the part of the Servicer duly to observe or
perform any other covenants or agreements of the Servicer set forth in this
Agreement, which failure or failures (i) materially and adversely affect the
rights of the Noteholders or the Note Insurer, and (ii) continue unremedied for
a period of 30 days after the date on which written notice of such failure or
failures, requiring the same to be remedied, shall have been given to the
Servicer by the Trustee or the Note Insurer (or, if an Insurer Default shall
have occurred and be continuing, by Holders of more than 25% of the sum of the
then outstanding Note Balance); or
(d) The entry of a decree or order for relief by a court or regulatory
authority having jurisdiction in respect of the Servicer in an involuntary case
under the federal bankruptcy laws, as now or
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hereafter in effect, or another present or future federal or state bankruptcy,
insolvency or similar law, or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Servicer or of
any substantial part of its property or ordering the winding up or liquidation
of the affairs of the Servicer and the continuance of any such decree or order
unstayed and in effect for a period of 60 consecutive days or the commencement
of an involuntary case under the federal bankruptcy laws, as now or hereinafter
in effect, or another present or future federal or state bankruptcy, insolvency
or similar law, and such case is not dismissed within 60 days; or
(e) 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, 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
(f) (x) So long as Reliance is the Servicer, prior to the Split-off
Transactions, Reliance's Tangible Net Worth falls below $25 million plus 75% of
the cumulative net after tax net income since September 30, 1996. After the
Split-off Transactions, as reported in audited quarterly financial statements
immediately following the Split-off Transactions, Reliance's Tangible Net Worth
falls below $80 million plus 75% of the cumulative after tax net income since
such date, such cumulative amount being calculated without any offset or
reduction for net losses incurred during any period since such date; provided,
however, that after the Split-off Transactions, no Distribution Increase with
respect to this clause (f) shall occur if Reliance maintains a Tangible Net
Worth of at least $100 million or (y) if Reliance is not the Servicer, the
Servicer's Tangible Net Worth falls below $20,000,000; or
(g) So long as Reliance is the Servicer, Reliance or any of its Affiliates
shall default in the payment of principal of or interest on any indebtedness for
borrowed money beyond any applicable period of grace provided in the instrument
or agreement under which such indebtedness was created, if the aggregate amount
of the indebtedness in respect of which such default or defaults shall have
occurred is at least $5,000,000; or
(h) So long as Reliance is the Servicer, one or more nonappealable
judgments or decrees or settlements shall be entered against Reliance or any of
its Affiliates involving a liability (not paid or covered by insurance) of 10%
of Reliance's Tangible
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Net Worth as of the end of the most recent Calendar Quarter or more in the
aggregate for Reliance and its Affiliates, and all such judgments or decrees
shall not have been vacated, discharged, stayed or bonded pending appeal within
60 days from the entry thereof; or
(i) A Distribution Increase shall have occurred and shall not have been
waived by the Controlling Party (other than a Distribution Increase of the type
described in clause (iv) of the definition of Distribution Increase with respect
to the Issuer or Reliance).
Section 7.2. Consequences of a Servicer Termination Event. If a Servicer
Termination Event shall occur and be continuing, the Note Insurer (or, if an
Insurer Default shall have occurred and be continuing either the Trustee (to the
extent it has knowledge thereof) or a Note Majority), by notice given in writing
to the Servicer (and to the Trustee if given by the Note Insurer or the
Noteholders) may terminate all of the rights and obligations of the Servicer
under this Agreement. On or after the receipt by the Servicer of such written
notice, all authority, power, obligations and responsibilities of the Servicer
under this Agreement, whether with respect to the Notes, the Receivables, the
Other Conveyed Property or otherwise, automatically shall pass to, be vested in
and become obligations and responsibilities of the Backup Servicer (or such
other successor Servicer appointed by the Controlling Party); provided, however,
that the successor Servicer shall have no liability with respect to (i) any
obligation that was required to be performed by the terminated Servicer prior to
the date that the successor Servicer becomes the Servicer or (ii) any claim of a
third party based on any alleged action or inaction of the terminated Servicer.
The successor Servicer is authorized and empowered by this Agreement to execute
and deliver, on behalf of the terminated Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination, whether to complete the transfer and endorsement of the
Receivables, the Other Conveyed Property and related documents to show the
Trustee on behalf of the Noteholders and the Note Insurer as lienholder or
secured party on the related Lien Certificates, or otherwise. The terminated
Servicer agrees to cooperate with the successor Servicer in effecting the
termination of the responsibilities and rights of the terminated Servicer under
this Agreement, including the transfer to the successor Servicer for
administration by it of all cash amounts that shall at the time be held by the
terminated Servicer for deposit, or shall have been deposited by the terminated
Servicer, in the Collection Account or thereafter received with respect to the
Receivables and the delivery to the successor Servicer of all Receivable Files
and Monthly Records and a computer tape in readable form as of the most recent
Business Day containing all
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information necessary to enable the successor Servicer to service the
Receivables. In addition, upon the occurrence of a Servicer Termination Event
the Servicer shall, if so requested by the Controlling Party, deliver to the
Backup Servicer its Monthly Records within 15 days after demand therefor and a
computer tape containing as of the close of business on the date of demand all
of the data maintained by the Servicer in computer format in connection with
servicing the Receivables. The terminated Servicer shall grant the Trustee, the
successor Servicer and the Controlling Party reasonable access during normal
business hours to the terminated Servicer's premises at the terminated
Servicer's expense.
Section 7.3. Appointment of Successor.
(a) On and after the time the Servicer receives a notice of termination
pursuant to Section 7.2 or upon the resignation of the Servicer pursuant to
Section 6.5, the Backup Servicer (unless the Controlling Party shall have
exercised its option pursuant to Section 7.3(b) to appoint an alternate
successor Servicer) shall be the successor in all respects to the Servicer in
its capacity as Servicer under this Agreement and the transactions set forth or
provided for in this Agreement, and shall be subject to all the rights,
responsibilities, restrictions, duties, liabilities and termination provisions
relating thereto placed on the Servicer by the terms and provisions of this
Agreement except as otherwise stated herein. The Trustee and such successor
shall take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession. If a successor Servicer is acting as Servicer
hereunder, it shall be subject to termination under Section 7.2 upon the
occurrence of any Servicer Termination Event applicable to it as Servicer.
(b) The Controlling Party may exercise at any time its right to appoint as
successor to the Servicer a Person other than the Person serving as Backup
Servicer at the time, and (without limiting the Note Insurer's obligations under
the Policy) shall have no liability to the Trustee, Reliance, the Issuer, the
Person then serving as Backup Servicer, any Noteholders or any other Person if
it does so. Notwithstanding the foregoing, if the Backup Servicer shall be
legally unable or unwilling to act as Servicer, and an Insurer Default shall
have occurred and be continuing, the Backup Servicer, the Trustee or a Note
Majority may petition a court of competent jurisdiction to appoint any Eligible
Servicer as the successor to the Servicer. Pending appointment pursuant to the
preceding sentence, the Backup Servicer shall act as successor Servicer unless
it is legally unable to do so, in which event the outgoing Servicer shall
continue to act as Servicer until a
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successor that is an Eligible Servicer has been appointed and accepted such
appointment. Subject to Section 6.5, no provision of this Agreement shall be
construed as relieving the Backup Servicer of its obligation to succeed as
successor Servicer upon the termination of the Servicer pursuant to Section 7.2
or the resignation of the Servicer pursuant to Section 6.5. If, upon the
termination of the Servicer pursuant to Section 7.2 or the resignation of the
Servicer pursuant to Section 6.5, the Controlling Party appoints a successor
Servicer other than the Backup Servicer, the Backup Servicer shall not be
relieved of its duties as Backup Servicer hereunder.
(c) Any successor Servicer shall be entitled to such compensation (whether
payable out of the Collection Account or otherwise) as the Servicer would have
been entitled to under this Agreement if the Servicer had not resigned or been
terminated hereunder. If any successor Servicer is appointed as a result of the
Backup Servicer's refusal (in breach of the terms of this Agreement) to act as
Servicer although it is legally able to do so, the Controlling Party and such
successor Servicer may agree on reasonable additional compensation to be paid to
such successor Servicer by the Backup Servicer, which additional compensation
shall be paid by such breaching Backup Servicer in its individual capacity and
solely out of its own funds. If any successor Servicer is appointed for any
reason other than the Backup Servicer's refusal to act as Servicer although
legally able to do so, the Controlling Party and such successor Servicer may
agree on additional reasonable compensation to be paid to such successor
Servicer. In addition, any successor Servicer shall be entitled to reasonable
transition expenses incurred in acting as successor Servicer, such expenses to
be paid by the terminated or resigning servicer.
(d) No provision of this Agreement shall require any successor Servicer to
expend its own funds or otherwise incur or be subjected to financial liability
in the performance of its duties hereunder if such successor Servicer shall have
reasonable grounds to believe that repayments of such funds or adequate
indemnity satisfactory to it against any loss, liability or expense is not
reasonably assured to it (whether through reimbursement pursuant to the terms
hereof or otherwise) and such successor Servicer has notified the Controlling
Party of such determination; provided, however, that nothing contained herein
shall excuse any successor Servicer for failure to perform its duties hereunder
if such expenditure of funds or incurrence of or subjection to liability could
reasonably be expected to result from such successor Servicer's negligence or
willful misconduct. Upon receipt of a notice pursuant to the foregoing, the
Controlling Party may terminate such successor Servicer and appoint another
successor Servicer in accordance with the terms of this Agreement. No such
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termination shall be effective until an Eligible Servicer has accepted
appointment in replacement of such successor Servicer.
Section 7.4. Notification to Noteholders. Upon any termination of, or
appointment of a successor to, the Servicer pursuant to this Article VII, the
Trustee shall give prompt written notice thereof to the Note Insurer, each
Rating Agency and to the Noteholders at their respective addresses appearing in
the Note Register.
Section 7.5. Waiver of Past Defaults. The Note Insurer or (if an Insurer
Default shall have occurred and be continuing) a Note Majority may, on behalf of
all Holders of Notes, waive any default by the Servicer in the performance of
its obligations hereunder and its consequences. Upon any such waiver of a past
default, such default shall cease to exist, and any Servicer Termination Event
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereon. The Note Insurer shall provide prompt
written notice of any such waiver to the Trustee. The Trustee shall provide the
Noteholders and the Note Insurer with notice of any waiver of any default by the
Servicer hereunder.
ARTICLE VIII
TERMINATION
Section 8.1. Optional Purchase of All Receivables. As an administrative
convenience, on each Payment Date as of which the Note Balance is less than 10%
of the Note Balance on the Closing Date, the Servicer shall have the option to
purchase all (but not less than all) of the Receivables and the Other Conveyed
Property (with the consent of the Note Insurer, if a draw on the Policy has
occurred or if such purchase would result in a claim on the Policy or would
result in any amount owing to the Note Insurer remaining unpaid). To exercise
such option, the Servicer shall pay the aggregate Purchase Amounts for the
Receivables. Notwithstanding the foregoing, no such purchase by the Servicer
shall be permitted unless the aggregate Purchase Amounts for the Receivables
plus all funds in the Collection Account and the Spread Account available to pay
interest and principal on the Notes on such Payment Date equals or exceeds the
outstanding Note Balance and accrued and unpaid interest on the Notes. The
Servicer shall promptly notify the Issuer, the Trustee, the Backup Servicer, the
Note Insurer and Rating Agencies of any proposed exercise of such option at
least 10 days prior to such Payment Date.
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ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1. Amendment. (a) This Agreement may be amended by the Issuer,
the Servicer, the Backup Servicer and the Trustee, with the prior written
consent of the Note Insurer (so long as an Insurer Default shall not have
occurred and be continuing) but without the consent of any of the Noteholders,
(i) to cure any ambiguity, (ii) to correct or supplement any provisions in this
Agreement or (iii) for the purpose of adding any provision to or changing in any
manner or eliminating any provision of this Agreement or of modifying in any
manner the rights of the Noteholders, provided, that such action shall not, as
evidenced by an Opinion of Counsel delivered to the Trustee, the Rating Agencies
and the Note Insurer, adversely affect in any material respect the interests of
the Noteholders or the Note Insurer.
(b) This Agreement may also be amended from time to time by the Issuer, the
Servicer, the Backup Servicer and the Trustee, with the prior written consent of
the Note Insurer (so long as an Insurer Default shall not have occurred and be
continuing) and with the consent of a Note Majority (which consent of any Holder
of a Note given pursuant to this Section 9.1(b) or pursuant to any other
provision of this Agreement shall be conclusive and binding on such Holder and
on all future Holders of such Note and of any Note issued upon the transfer
thereof or in exchange thereof or in lieu thereof whether or not notation of
such consent is made upon the Note), for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of this
Agreement, or of modifying in any manner the rights of the Holders of Notes;
provided, however, that no such amendment shall (a) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, collections of
payments on Receivables, payments that shall be required to be made on any Note
or the Note Interest Rate, (b) amend any provisions of Section 4.5 in such a
manner as to affect the priority of payment of interest or principal to
Noteholders, or (c) reduce the aforesaid percentage required to consent to any
such amendment or any waiver hereunder, without the consent of the Holders of
all Notes then outstanding; provided, however, that if an Insurer Default has
occurred and is continuing, written consent of the Note Insurer shall be
required unless such action shall not, as evidenced by an Opinion of Counsel
delivered to the Trustee and the Note Insurer, adversely affect in any material
respect the interests of the Note Insurer.
(c) Prior to the execution of any such amendment or consent under Section
9.1(a) or (b), the Trustee shall furnish five days' prior written notification
of the substance of such amendment or consent to each Rating Agency and the Note
Insurer.
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(d) Promptly after the execution of any such amendment or consent under
Section 9.1(b), the Trustee shall furnish written notification of the substance
of such amendment or consent to each Noteholder.
(e) It shall not be necessary for the consent of Noteholders pursuant to
Section 9.1(b) to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents (and any other consents of
Noteholders provided for in this Agreement) and of evidencing the authorization
of the execution thereof by Noteholders shall be subject to such reasonable
requirements as the Trustee may prescribe.
(f) Prior to the execution of any amendment to this Agreement, the Trustee
and the Note Insurer, upon request, shall be entitled to receive and the Trustee
shall be entitled to rely upon an Opinion of Counsel stating that the execution
of such amendment is authorized or permitted by this Agreement, in addition to
the Opinion of Counsel referred to in Section 9.2(i). The Trustee may, but shall
not be obligated to, enter into any such amendment that affects the Trustee's
own rights, duties or immunities under this Agreement or otherwise.
Section 9.2. Protection of Title to Issuer. (a) The Servicer shall execute
and file such financing statements and cause to be executed and filed such
continuation and other statements, all in such manner and in such places as may
be required by law fully to preserve, maintain and protect the interest of the
Issuer, the Trustee and the Note Insurer under the Related Documents in the
Trust Property and in the proceeds thereof. The Servicer shall deliver (or cause
to be delivered) to the Trustee and the Note Insurer file-stamped copies of, or
filing receipts for, any document filed as provided above, as soon as available
following such filing. Reliance and the Issuer shall cooperate fully with the
Servicer in connection with the obligations set forth above and shall execute
any and all documents reasonably required to fulfill the intent of this Section
9.2(a).
(b) Neither the Issuer, Reliance nor the Servicer shall change its name,
identity or corporate structure in any manner that would make any financing
statement or continuation statement filed by the Servicer in accordance with
Section 9.2(a) above seriously misleading within the applicable provisions of
the UCC or any title statute, unless it shall have given the Trustee and the
Note Insurer at least 60 days prior written notice thereof, and shall promptly
file appropriate amendments to all previously filed finance statements and
continuation statements.
(c) Each of Reliance and the Servicer shall give the Issuer and the Note
Insurer at least 60 days prior written notice of any
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relocation of its principal executive office if, as a result of such relocation,
the applicable provisions of the UCC would require the filing of any amendment
of any previously filed financing or continuation statement or of any new
financing statement. The Servicer shall at all times maintain each office from
which it services Receivables and its principal executive office within the
United States of America.
(d) The Servicer shall maintain accounts and records as to each Receivable
accurately and in sufficient detail to permit (i) the reader thereof to know at
any time the status of such Receivable, including payments and recoveries made
and payments owing (and the nature of each) and (ii) reconciliation between
payments or recoveries on (or with respect to) each Receivable and the amounts
from time to time deposited in the Collection Account in respect of such
Receivable.
(e) Each of the Servicer and Reliance shall maintain its computer systems
so that, from and after the time of sale and contribution under this Agreement
of the Receivables to the Issuer, the Servicer's and Reliance's master computer
records (including any backup archives) that refer to any Receivable indicate
clearly that the Receivable is owned by the Issuer. Indication of the Issuer's
ownership of a Receivable shall be deleted from or modified on each of the
Servicer's and Reliance's computer systems when, and only when, the Receivable
has been paid in full or has become a Purchased Receivable.
(f) If at any time Reliance or the Servicer proposes to sell, grant a
security interest in, or otherwise transfer any interest in automotive
receivables (other than the Receivables) to any prospective purchaser, lender or
other transferee, the Servicer shall give to such prospective purchaser, lender
or other transferee computer tapes, records or printouts (including any restored
from backup archives) that, if they refer in any manner whatsoever to any
Receivable, indicate clearly that such Receivable has been sold and is owned by
the Issuer (unless such Receivable has been paid in full or has become a
Purchased Receivable).
(g) Upon reasonable notice, the Servicer shall permit the Trustee, the
Backup Servicer, the Note Insurer, the Issuer and their respective agents, at
any time during normal business hours to inspect, audit and make copies of and
abstracts from the Servicer's records regarding any Receivables or any other
portion of the Trust Property.
(h) The Servicer shall furnish to the Trustee, the Backup Servicer, the
Issuer and the Note Insurer at any time upon request a list of all Receivables
then held as part of the Trust Property, together with a reconciliation of such
list to the Schedule of Receivables and to each of the Servicer's Certificates
furnished
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before such request indicating removal of Receivables from the Trust Property.
The Trustee shall hold any such list and Schedule of Receivables for examination
by interested parties during normal business hours at the Corporate Trust Office
upon reasonable notice by such Persons of their desire to conduct an
examination.
(i) The Issuer and the Servicer (or the applicable party in the case of
Section 9.2(b) or (c)) shall deliver to the Trustee and the Note Insurer
simultaneously with the execution and delivery of this Agreement and of each
amendment thereto and upon the occurrence of the events giving rise to an
obligation to give notice pursuant to Section 9.2(b) or (c), an Opinion of
Counsel (a) stating that, in the opinion of such counsel, all financing
statements and continuation statements have been executed and filed that are
necessary fully to preserve and protect the interest of the Trustee in the Trust
Property, and reciting the details of such filing or referring to prior Opinions
of Counsel in which such details are given or (b) stating that, in the opinion
of such counsel, no such action is necessary to preserve and protect such
interest.
Section 9.3. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
the principles of conflicts of laws thereof and the obligations, rights and
remedies of the parties under this Agreement shall be determined in accordance
with such laws.
Section 9.4. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Notes or the
rights of the Holders thereof.
Section 9.5. Assignment. Notwithstanding anything to the contrary contained
in this Agreement, except as provided in Section 6.2 and as provided in the
provisions of this Agreement concerning the resignation of the Servicer and the
Backup Servicer, this Agreement may not be assigned by the Issuer, Reliance or
the Servicer without the prior written consent of the Trustee and the Note
Insurer.
Section 9.6. Third-Party Beneficiaries. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Except as otherwise provided in this Article
IX, no other Person shall have any right or obligation hereunder. The Note
Insurer shall be an express third-party beneficiary to the provisions of
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this Agreement and shall be entitled to rely upon and directly enforce such
provisions of this Agreement. Nothing in this Agreement, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and permitted assigns, any benefit or any legal or equitable right,
remedy or claim under this Agreement. Except as expressly stated otherwise
herein or in the Related Documents, any right of the Note Insurer to direct,
appoint, consent to, approve of, or take any action under this Agreement, shall
be a right exercised by the Note Insurer in its sole and absolute discretion.
Section 9.7. Note Insurer as Controlling Party. Each Noteholder by purchase
of the Notes held by it acknowledges that the Trustee on behalf of the Issuer,
as partial consideration of the issuance of the Policy, has agreed that the Note
Insurer shall have certain rights hereunder for so long as no Insurer Default
shall have occurred and be continuing. So long as an Insurer Default has
occurred and is continuing, any provision giving the Note Insurer the right to
direct, appoint or consent to, approve of, or take any action under this
Agreement shall be inoperative, as expressly provided in the related provisions,
during the period of such Insurer Default and such right shall instead vest in
the Trustee acting at the direction of the Holders of Notes. The Note Insurer
may disclaim any of its rights and powers under this Agreement (but not its
duties and obligations under the Policy) upon delivery of a written notice to
the Trustee.
Section 9.8. Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, each of which counterparts shall be deemed to be an
original, and all of which counterparts shall constitute but one and the same
instrument.
Section 9.9. Notices. All demands, notices and communications under this
Agreement shall be in writing, personally delivered or mailed by certified mail,
return receipt requested, and shall be deemed to have been duly given upon
receipt (a) in the case of the Issuer, at the following address: 400 North Loop
1604 East, Suite 210, San Antonio, Texas 78323, Attention: Michael D. Bernick,
Telecopy No.: (210) 402-0761, with a copy to James I. Kaplan, 980 North Michigan
Avenue, 14th Floor, Chicago, Illinois 60611, Telecopy No.: (312) 214-7683 (b) in
the case of the Servicer, at the following address: 400 North Loop 1604 East,
Suite 210, San Antonio, Texas 78232, Attention: Michael D. Bernick, Telecopy
No.: (210) 402-0761, with a copy to James I. Kaplan, 980 North Michigan Avenue,
14th Floor, Chicago, Illinois 60611, Telecopy No.: (312) 214-7683 (c) in the
case of the Trustee, at the Corporate Trust Office, Telecopy No.: (312) 461-
3525, (d) in the case of each Rating Agency, 99 Church Street, New York, New
York 10007 (for Moody's) and 26 Broadway, New York, New York 10004 (for Standard
& Poor's), and (e) in the case of the Note Insurer, at the following address:
113 King Street, Armonk, New York 10504
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Attention: Insured Portfolio Management-Structured Finance, Telecopy No.: (914)
765-3810, or at such other address as shall be designated by any such party in a
written notice to the other parties. Any notice required or permitted to be
mailed to a Noteholder shall be given by first class mail, postage prepaid, at
the address of such Holder as shown in the Note Register, and any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Noteholder receives such
notice.
Section 9.10. Successors and Assigns. This Agreement shall be binding upon
the parties hereof and their respective successors and assigns, and shall inure
to the benefit of and be enforceable by the parties hereof and their respective
successors and assigns permitted hereunder. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the Trustee
and the Noteholders and their respective permitted successors and assigns, if
any. Any request, notice, direction, consent, waiver or other instrument or
action by any Noteholder shall bind its successors and assigns.
Section 9.11. Nonpetition Covenant. Until the date that is one year and one
day following the payment in full of all amounts due in respect of the Notes and
all amounts due under the Insurance Agreement, none of the parties hereto shall
petition or otherwise invoke, or join any other Person in petitioning or
invoking, the process of any Governmental Authority for the purpose of
commencing or sustaining a case against the Issuer under any federal or state
bankruptcy, insolvency or similar law or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Issuer or any substantial part of its respective property, or ordering the
winding up or liquidation of the affairs of the Issuer.
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IN WITNESS WHEREOF, the Issuer, Reliance, the Servicer, the Backup Servicer
and the Trustee have caused this Pooling and Servicing Agreement to be duly
executed by their respective officers, effective as of the day and year first
above written.
RELIANCE AUTO RECEIVABLES CORPORATION, as Issuer
By:______________________________________________
Michael D. Bernick
Treasurer
RELIANCE ACCEPTANCE CORPORATION, in its individual
capacity and as Servicer
By:______________________________________________
Michael D. Bernick
Treasurer
HARRIS TRUST AND SAVINGS BANK,
not in its individual capacity, but
solely as Trustee and Backup Servicer
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
<PAGE>
SCHEDULE A
SCHEDULE OF RECEIVABLES
[On file with the Trustee and Reliance Acceptance Corporation]
A-1
<PAGE>
SCHEDULE B
REPRESENTATIONS AND WARRANTIES OF RELIANCE
1. Characteristics of Receivables. Each Receivable: (1) was originated
in the United States of America by a Dealer for the retail sale of a Financed
Vehicle in the ordinary course of such Dealer's business in accordance in all
material respects with Reliance's Credit and Collection Policy and such Dealer
had all necessary licenses and permits to originate Receivables in the state
where such Dealer was located; (2) was fully and properly executed by the
parties thereto; (3) was purchased by an Originator from such Dealer under an
existing Dealer Agreement or pursuant to a Dealer Assignment and was purchased
by Reliance from such Originator under the Receivables Purchase Agreement; (4)
contains customary and enforceable provisions such that the rights and remedies
of the holder or assignee thereof shall be adequate for realization against any
collateral security; (5) provides for level monthly payments in U.S. dollars
(provided that the period in the first Collection Period and the payment in the
final Collection Period of the Receivable may be minimally different from the
normal period and level payment), which, if made when due, shall fully amortize
the Amount Financed over the original term; (6) has not been amended, modified
or supplemented (including any extensions to such Receivable's original term)
and has not had collections with respect thereto waived; (7) had a remaining
maturity, as of the Cutoff Date, of not less than 6 months and not more than 59
months; (8) had an original maturity of not more than 60 months; (9) had a
remaining Principal Balance as of the Cutoff Date of at least $500 and not more
than $27,000; (10) had an Annual Percentage Rate of at least 12% and not more
than 25%; (11) was not more than 30 days past due as of the Cutoff Date; (12)
has a final scheduled payment date on or before September 30, 2001; (13) had at
least one Scheduled Payment made prior to the Cutoff Date; and (14) is a
Scheduled Interest Receivable. As of its date of origination, no Receivable was
due from an Obligor who had defaulted under a previous contract with Reliance.
2. Dealer Agreements and Assignments. Each Receivable was originated by
a Dealer and was sold by the Dealer to an Originator, without any fraud or
misrepresentation on the part of such Dealer. Each Dealer that originated a
Receivable for sale to the Originator or Reliance has been selected based on
Reliance's underwriting criteria. The Dealer Agreement or the Dealer Assignment
constitutes the entire agreement between the Dealer and the related Originator
with respect to the sale of the related Receivable to the Originator. Each such
Dealer Agreement and each such Dealer Assignment is "without recourse" to the
related Dealer (other than warranty repurchases by such Dealer) and is in full
force and effect and is the legal, valid and binding obligation of such
B-1
<PAGE>
Dealer. The Originator has paid the purchase price (as specified in the
applicable Dealer Agreement or Dealer Assignment) for each Receivable in full
and owes no other payment to such Dealer for such Receivable.
3. Compliance with Law. All requirements of applicable federal, state
and local laws, and regulations thereunder (including usury laws, the Federal
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Billing
Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the Federal
Reserve Board's Regulations "B" and "Z", the Soldiers' and Sailors' Civil Relief
Act of 1940, each applicable state Motor Vehicle Retail Installment Sales Act,
and state adaptations of the National Consumer Act and of the Uniform Consumer
Credit Code and other consumer credit laws and equal credit opportunity and
disclosure laws) in respect of the Receivables and the Financed Vehicles, and
any insurance or service contracts sold in connection therewith, have been
complied with in all material respects, and each Receivable and the sale of the
Financed Vehicle evidenced by each Receivable complied at the time it was
originated or made and now complies in all material respects with all applicable
legal requirements.
4. No Adverse Selection. No selection procedures materially adverse to
the Noteholders or the Note Insurer were utilized in selecting the Receivables
from similar receivables owned by Reliance or its Affiliates on the Cutoff Date.
5. Binding Obligation. Each Receivable represents the legal, valid and
binding obligation of the Obligor thereon and is enforceable by the holder
thereof in accordance with its terms, except (A) as enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting the
enforcement of creditors' rights generally and by equitable limitations on the
availability of specific remedies, regardless of whether such enforceability is
considered in a proceeding in equity or at law and (B) as such Receivable may be
modified by the application after the Cutoff Date of the Soldiers' and Sailors'
Civil Relief Act of 1940, as amended; and all parties to each Receivable had
full legal capacity to execute and deliver such Receivable and all other
documents related thereto and to grant the security interest purported to be
granted thereby.
6. Obligors. Each Obligor (i) is located in the United States, (ii) is
not the United States of America or any other Governmental Authority, and (iii)
is not Reliance or any subsidiary or Affiliate thereof.
B-2
<PAGE>
7. Obligor Bankruptcy. At the Cutoff Date, no Obligor had been identified
on the records of Reliance or any Originator as being the subject of a current
bankruptcy proceeding.
8. Schedule of Receivables; Computer Tape. The information set forth in the
Schedule of Receivables has been produced from the Electronic Ledger, and such
information was true and correct in all material respects as of the close of
business on the Cutoff Date. The Computer Tape made available by Reliance to the
Issuer and the Note Insurer on the Closing Date was true, complete and correct
in all material respects as of the Cutoff Date and includes a description of the
same Receivables that are described in the Schedule of Receivables.
9. Marking Records. By the Closing Date, Reliance will have caused the
portions of the Electronic Ledger relating to the Receivables to be clearly and
unambiguously marked to show that the Receivables have been sold to the Issuer
by Reliance in accordance with the terms of this Agreement.
10. One Original. There is only one original executed copy of each
Receivable.
11. Receivable Files Complete. There exists a Receivable File pertaining to
such Receivable and such Receivable File contains (a) a fully executed original
of the Receivable, (b) the original executed credit application or a copy
thereof and (c) the original Lien Certificate indicating that the Financed
Vehicle is owned by the Obligor and subject to the interest of Reliance or an
Originator as first lienholder or secured party or, if such original Lien
Certificate has not been received, a copy of the application therefor. Each of
such documents that is required to be signed by the Obligor has been signed by
the Obligor in the appropriate spaces. All blanks on any form have been properly
filled in and each form has otherwise been correctly prepared. The complete
Receivable File for each Receivable currently is in the possession of a
Custodian.
12. Receivables in Force. No Receivable has been satisfied, subordinated
or rescinded, nor has any Financed Vehicle securing each such Receivable been
released from the Lien of the related Receivable in whole or in part. Each
Receivable is, and as of the Cutoff Date will be, in full force and effect in
accordance with its respective terms and none of Reliance, the related
Originator or any Obligor has or will have suspended or reduced any payments or
obligations due or to become due thereunder by reason of a default by the other
party to such Receivable. Each of Reliance and the related Originator has duly
fulfilled all obligations to be fulfilled on its or their part under or in
connection with the origination, acquisition and assignment of the Receivables
and the related security interests, including giving any notices or
B-3
<PAGE>
consents necessary to effect the acquisition of the Receivable by the Issuer and
of the related security interests by the Trustee.
13. Lawful Assignment. No Receivable was originated in, or is subject to
the laws of, any jurisdiction the laws of which would make unlawful, void or
voidable the sale, transfer and assignment of such Receivable under the
Receivables Purchase Agreement or this Agreement. Neither the Issuer, Reliance
nor any Originator has entered into any agreement with any account debtor that
prohibits, restricts or conditions the assignment of any portion of the
Receivables. The rights with respect to each Receivable are assignable by the
related Originator and Reliance without the consent or notice of any Person
other than consents or notices which will have been obtained or made on or
before the Closing Date.
14. Good Title. Immediately prior to the conveyance of the Receivables to
the Issuer pursuant to this Agreement, Reliance was the sole owner thereof and
had good and valid title thereto free of any Lien (other than the BABC Liens,
which shall be released on or before the Closing Date) and, upon execution and
delivery of this Agreement by the Issuer, the Issuer shall have good and valid
title to and will be the sole owner of such Receivables free of any Lien. No
Dealer or other Person has a participation in, or other right to receive,
proceeds of any Receivable. Neither Reliance nor any Originator has taken any
action to convey any right to any Person that would result in such Person having
a right to payments received under the related Insurance Policies or the related
Dealer Agreements or Dealer Assignments or to payments due under such
Receivables.
15. Security Interest in Financed Vehicle and Receivable. Each Receivable
created or shall create a valid, binding and enforceable first priority security
interest in favor of Reliance or an Originator in the Financed Vehicle, and such
Receivable together with the related security interest has been duly assigned by
the applicable Originator to Reliance, by Reliance to the Issuer and by the
Issuer to the Trustee. The Lien Certificate and original certificate of title
for each Financed Vehicle show, or, if a new or replacement Lien Certificate is
being applied for with respect to such Financed Vehicle, the Lien Certificate
will be received within 120 days of the Closing Date (or within 180 days of the
Closing Date with respect to Lien Certificates to be issued in the states of
Indiana or Nevada) and will show Reliance or an Originator named as the original
secured party under each Receivable as the holder of a first priority security
interest in such Financed Vehicle. With respect to each Receivable for which
the Lien Certificate has not yet been returned from the Registrar of Titles,
written evidence has been received from the related Dealer that such Lien
Certificate showing Reliance or an Originator as first lienholder has been
applied for. Immediately after the
B-4
<PAGE>
sale, contribution, transfer and assignment thereof by Reliance to the Issuer,
each Receivable will be secured by an enforceable and perfected first priority
security interest in the Financed Vehicle in favor of the Trustee as secured
party, which security interest is prior to all other Liens upon and security
interests in such Financed Vehicle that now exist or may hereafter arise or be
created (except, as to priority, for any lien for taxes, labor or materials
affecting a Financed Vehicle). As of the Cutoff Date, there were no Liens or
claims for taxes, work, labor or materials affecting a Financed Vehicle.
16. All Filings Made. All filings (including UCC filings) required to be
made by any Person and all actions required to be taken or performed by any
Person in any jurisdiction to give the Issuer a first priority perfected lien
on, or ownership interest in, the Receivables and the proceeds thereof and the
Other Conveyed Property have been made, taken or performed.
17. No Impairment. Neither Reliance nor any Originator has done anything
to convey any right to any Person that would result in such Person having a
right to payments due under the Receivable or otherwise to impair the rights of
the Note Insurer, the Trustee and the Noteholders in any Receivable or the
proceeds thereof.
18. No Defenses. As of the Cutoff Date, no Receivable was subject to any
right of rescission, setoff, claim, counterclaim or defense, including the
defense of usury, whether arising out of transactions concerning the Receivable
or otherwise, and the operation of any of the terms of the Receivable or the
exercise by Reliance, the Originator or the Obligor of any right under the
Receivable will not render the Receivable unenforceable in whole or in part, and
no such right has been asserted or threatened with respect to any Receivable.
There is not any right of rescission, offset, defense, claim or counterclaim to
the obligation of the related Obligor to pay any amount due under each
Receivable for which the Amount Financed includes the cost or premium for any
extended warranty or service agreement. With respect to each Receivable for
which the Amount Financed includes the cost or premium for an extended warranty
or service agreement, any amounts payable due to the cancellation of such
extended warranty or service agreement will not reduce the Amount Financed
unless such amounts are received and deposited into the Collection Account.
19. No Default. There has been no default, breach, violation or event
permitting acceleration under the terms of any Receivable (other than payment
delinquencies of not more than 30 days), and no condition exists or event has
occurred and is continuing that with notice or the lapse of time would
constitute a default, breach, violation or event permitting acceleration under
the terms of any Receivable, and there has been no waiver of any of the
foregoing. As of the Cutoff Date, no Financed Vehicle had been repossessed.
B-5
<PAGE>
20. Insurance. At the time of the origination of the related Receivable,
each Financed Vehicle was covered by a comprehensive and collision insurance
policy (i) in an amount at least equal to the lesser of (a) its maximum
insurable value or (b) the principal amount due from the Obligor under the
related Receivable, (ii) naming Reliance or an Originator as loss payee and
(iii) insuring against loss and damage due to fire, theft, transportation,
collision and other risks generally covered by comprehensive and collision
coverage. Each Receivable requires the Obligor to keep the related Financed
Vehicle in good condition and repair and to maintain physical loss and damage
insurance, naming Reliance and its successors and assigns as additional insured
parties, and each Receivable permits the holder thereof to obtain physical loss
and damage insurance at the expense of the Obligor if the Obligor fails to do
so.
21. Contract Not Assumable. Each Receivable prohibits the sale, assignment
or transfer of the Obligor's interest therein or the assumption of the
Receivable by another Person in a manner that would release the Obligor thereof
from the Obligor's obligation.
22. No Advances. Neither Reliance nor any Originator has made any
advances in order for the Receivable to qualify for inclusion in the Trust
Estate.
23. Chattel Paper. Each Receivable constitutes "chattel paper" for
purposes of Section 9-105(l)(b) and 9-308 of the UCC and has been delivered to
the Custodian which originated such Receivable.
24. Titling Documentation. All documents necessary to permit the Trustee
to submit the Lien Certificates for each Financed Vehicle to the applicable
Department of Motor Vehicles for retitling in the name of the Trustee as secured
party have been delivered to the Trustee.
25. Full Disbursement. At the time of origination of each Receivable, the
proceeds of such Receivable were fully disbursed. There is no requirement for
future advances thereunder, and all fees and expenses in connection of such
Receivable have been paid.
26. Taxes and Assessments. Each Receivable contains provisions requiring
the Obligor to pay all taxes and assessments imposed on or with respect to the
related Financed Vehicle.
27. Prepayments. Each Receivable does not permit early termination or
prepayment unless the amount to be paid by or on behalf of the Obligor in
respect of such prepayment or termination is at all times equal to or in excess
of the related Amount Financed plus accrued and unpaid interest.
B-6
<PAGE>
28. Substitutions. No Receivable provides for the substitution, exchange
or addition of any Financed Vehicle subject to such Receivable.
B-7
<PAGE>
EXHIBIT A
FORM OF SERVICER'S CERTIFICATE
[On file with the Trustee and Reliance Acceptance Corporation]
A-1
<PAGE>
EXHIBIT B
FORM OF RELIANCE'S CREDIT AND COLLECTION POLICY
<PAGE>
SCHEDULE 1
SCHEDULE OF RECEIVABLES
[On file with the Trustee and Reliance Acceptance Corporation]
<PAGE>
]PAGE>
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT made as of the 31st day of July, 1996 by and among Cole
Taylor Financial Group, Inc. ("Employer"), a corporation duly organized and
existing under and by virtue of the laws of the State of Delaware, and Howard B.
Silverman ("Executive").
WHEREAS, Employer, through its subsidiaries, and Executive currently have
an employment agreement in place; and
WHEREAS, Employer desires to continue to employ Executive and to record its
understandings in that regard; and
WHEREAS, Executive is willing to accept such continuation of employment
under the terms and conditions set forth herein; and
WHEREAS, the employment, the duration thereof, the compensation to be paid
to Executive and the other terms and provisions of this Agreement were duly
fixed, stated, approved and authorized for and on behalf of Employer by the
action of the Compensation Committee of its Board of Directors.
NOW THEREFORE, in consideration of the premises, covenants and
Considerations hereinafter contained, it is mutually agreed as follows:
1. Title and Term. Employer hereby agrees to, does hereby, employ
Executive as Chairman of the Board of Directors of Employer for a term beginning
on the Closing Date of the Share Exchange Agreement entered into on June 12,
1996 by and among Employer and those certain persons known as the Taylor Family
("Closing Date"), and ending on December 31, 2001, unless extended as
hereinafter provided or sooner terminated as hereinafter provided. Employer also
agrees to nominate Executive for election to its Board of Directors during the
term of this Agreement and any extensions thereof.
2. Prior Agreements. Employer and Executive hereby agree that the prior
employment agreement shall become null and void as of the Closing Date;
provided, however, that Executive shall be entitled to all compensation until
the Closing Date pursuant to such prior employment agreement.
3. Compensation. In consideration of the services to be rendered by
Executive, Executive shall receive compensation as follows:
(a) Executive shall be compensated at the "Base Rate" then in effect
for such Executive at the Closing Date; or at such higher amount as the Board of
Directors of the
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<PAGE>
Finance Company may hereafter fix, which shall then become the Executive's new
Base Rate. Executive's Base Rate salary shall be subject to periodic review
by the Board of Directors of Employer, which may determine to increase the
same, but Executive's Base Rate shall not be reduced during the term of this
Agreement. Such salary shall be paid in installments, in accordance with the
executive compensation policy of the Employer in effect during the term hereof.
(b) Executive shall be entitled to continuation of Employer benefits
presently provided, including, but not limited to, group health and life
insurance, matching 401K, deferred compensation program, stock options, and
executive key man life insurance.
(c) Executive shall be entitled to the use of a Employer-owned or
leased automobile for business purposes; the year, make and model of such
automobile shall be appropriate to the Employer's business. Employer hereby
grants Executive an option to purchase such Employer-owned automobile for the
depreciated book value, consistent with current policies of the Employer.
(d) The Employer shall pay to Executive, in addition to his Base Rate
salary, incentive compensation determined and paid in accordance with any
incentive compensation program for senior executive officers of the Employer,
and Executive shall be entitled to ten percent (10%) of the total incentive
compensation pool. Such incentive compensation payment shall be of an amount not
less than that which would have been calculated using the Incentive Compensation
Program and formula that was in effect of for fiscal 1995. The determination of
the amount of incentive compensation payable to Executive shall be made
separately for each calendar year, and there shall be no reason of any
subsequent determinations of adjustments. The incentive compensation determined
with respect to each year shall be paid for each year. At Executive's option,
75% of the estimated amount shall be paid on or about December 15 of such year
and the remainder, as adjusted for the actual calculation, shall be paid not
later than the publication of the audited financial statements for such year. If
Executive's employment is terminated during the year, other than for cause,
incentive compensation for such year shall be prorated based on the length of
employment during the year, and paid in accordance with the foregoing schedule.
4. Duties. Executive shall serve the Employer as indicated in paragraph 1
hereof and shall perform such duties as may be entrusted and set forth in the
by-laws of the Employer or resolutions of its Board Directors or as customarily
performed by one holding his position in a similar business or enterprise, and
shall also render such other and unrelated services and duties as may be
assigned him from time to time by the Employer. Such duties shall be rendered at
such place or places as the Employer shall in good faith require or as the
interest, needs, business or opportunity of the Employer and its subsidiaries
shall require, provided however, that the office of the Chairman of Reliance
Acceptance Corporation shall be located in Chicago, Illinois, and that Executive
is not requested or required to relocate from Chicago, Illinois.
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<PAGE>
5. Best Effects of Executive. Executive agrees that he will faithfully,
industriously and to the best of his ability, experience and talents, devote his
time and attention to the performance of all duties that may be required of and
from him, pursuant to the express and implied terms hereof, all to the
reasonable satisfaction of the Employer. Employer acknowledges that Executive
may engage in other business activities for his own account, including
consulting and serving on boards of directors of other companies, so long as
such activities are free from any conflicts of interest with Employer or its
subsidiaries. Vacations shall be discretionary but shall be taken in such a
manner as not unreasonably to interfere with the performance of Executive's
duties or to disrupt the business of the Employer, and shall be consistent with
the policies of the Employer for vacation time applicable to senior executive
officers thereof.
6. Reimbursement for Expenses. The Employer will arrange for the payment or
reimbursement of reasonable and necessary business expenses incurred by
Executive in the performance of his duties hereunder, including, but not limited
to, expenditures for travel, meals, hotel accommodations and the like, after
submission of vouchers supporting such expenditures and their business
relationship as shall be required for deduction of the payments by the Employer
for federal and state income tax purposes. In addition, the Employer shall pay
for or reimburse Executive for dues and related business expenses incurred by
Executive at a luncheon club of Executive's choice in Chicago, Illinois. In the
event Executive's expense account is disallowed as a business expense by the
Internal Revenue Service due to the lack of supporting evidence, Executive shall
be responsible to the Employer for any adverse tax consequence incurred by the
Employer or its affiliates as a result thereof. Executive agrees to include the
amount of any such disallowance as added compensation to him and to pay the
resulting increases in income tax on such added compensation.
7. Executive's Rights Under Certain Plans Now or Hereafter in Effect.
The parties hereto agree that nothing contained herein is intended or shall be
deemed to preclude the Employer from granting to Executive, or Executive from
receiving, any stock option or as depriving Executive of his right to
participate in any profit sharing, pension, discretionary bonus, or other
remuneration plan or in a group insurance or similar employee benefit plan
established by or made available to the employees of the Employer, and in which
Executive would otherwise be entitled to participate as an employee of the
Employer under terms of such plan.
8. Extension of Term. Unless written notification is given to either
party prior to January 1, 1999, the term of this Agreement shall be
automatically extended to December 31, 2002. After January 1, 1999, unless
written notification is given to either party prior to each subsequent January
1, the term of this Agreement shall again be automatically extended for one
additional year on each such January 1.
9. Termination of This Agreement Prior to Expiration of Term.
Employer may terminate this Agreement for just cause at any time, but only
after (a) notice to Executive describing a just cause or causes why he should
no longer be employed by Employer because of his illegal activities, disclosure
of confidential or private information of the Employer, siding a competitor of
the Employer to Employee's detriment, refusal or failure to continue the
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<PAGE>
performance of duties set forth in Paragraph 4 hereof at any time during the
term of this Agreement, or other action that is prejudicial to the best
interests of the Employer, (b) an opportunity for him to be heard before the
entire Board of Directors of Employer, and (c) a decision by at least a majority
of the entire Board adverse to Executive.
Executive will receive full compensation for any period of temporary
illness or temporary incapacity during the term of this Agreement. However, the
Employer shall have the right to terminate this Agreement if illness or
incapacity shall be of a character so as to disable Executive from rendering
satisfactory services to the Employer, which determination shall be made by the
Board of Directors thereof, for a period of more than 90 consecutive days during
any 12 month period.
If Executive is terminated by Employer for any reason other than for cause
or illness or incapacity, or if an event occurs whereby the authority or powers
of Executive are significantly diminished, the Employer shall pay to Executive
in a lump sum payment, all future amounts that would be payable to executive for
future salary and incentive compensation pursuant to this Agreement, which
amounts may be reasonably estimated for such purpose.
Termination or expiration of this Agreement shall not relieve Executive of
his obligations under Sections 11 and 12.
10. Assignment. Employer shall have the right, in its sole discretion, to
assign this Agreement to its successor or assigns, and all covenants and
agreements hereunder shall inure to the benefit of and be enforceable by said
successors or assigns and this Agreement shall thereby become the obligation of
Employer's successors and assigns. The term successor and assign shall include
any corporation which buys all or substantially all of Employer's assets, or
substantially all of its stock, or with which or into which it is merged or
consolidated.
11. Confidential Information. Executive recognizes that as a key member of
the staff of the Employer, he will occupy a position of trust with respect to
business information of a secret or confidential nature which is the property of
Employer, the Employer or their subsidiaries or affiliates, and which will be
imparted to or developed by Executive from time to time in the course of his
duties. Executive therefore agrees that he will not, during or subsequent to his
employment hereunder, use, divulge, furnish or make accessible to anyone
(otherwise than in the regular course of the business of the Employer) any
knowledge or information, techniques, plans, computer designs, computer programs
whether embodied in source or object code, computer languages or formats,
customer lists, dealer lists, procedure manuals, personnel records, non-public
financial statements or any other information proprietary to Employer, the
Employer or their subsidiaries or affiliates; and that he will return promptly
upon termination of his employment for whatever reason (or in the event of his
death, his personal representative shall return) to the Employer at its
direction and expense any and all copies of records, drawings, writings,
blueprints, materials, memoranda and other data pertaining to such secret or
confidential information.
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<PAGE>
12. Restrictive Covenant. The Employer has incurred and will
continue to incur great expense in order to develop its business, and is relying
upon Executive's faithful performance of this Agreement in connection therewith.
Executive thus further agrees that, during the term of this Agreement, he will
not, directly or indirectly, alone or as a member of a partnership, or as an
officer, stockholder (owning more than ten percent of the outstanding stock),
corporate director, employee, consultant or representative of any company or
entity, engage in competition with the Employer.
13. Remedy. Executive understands that the Employer would not have
any adequate remedy at law for the material breach or threatened breach by
Executive of any one or more of the covenants set forth in this Agreement and
agrees that in the event of any such material breach or threatened breach, the
Employer may, in addition to the other remedies which may be available to it:
(a) File a suit in equity to enjoin Executive from the breach or
threatened breach of such covenants, and/or
(b) File a suit in equity to enforce the provisions of Paragraphs 11
and 12 hereof.
14. Waiver. Any waiver by any party hereto of any provision of this
Agreement shall not operate as or be construed as a waiver of any subsequent
breach thereof.
15. Insurance. Executive agrees that Employer and/or the Employer may,
from time to time, apply for and take out in its own name and at its own
expense, life, health, accident, or other insurance or an annuity contract upon
Executive, that it may deem necessary or advisable to protect its interest
hereunder; and Executive agrees to submit to any medical or other examination
necessary for such purpose and to assist and cooperate in procuring such
insurance; and Executive agrees that he shall have no right, title or interest
in or to such insurance.
16. Modification. The parties hereto agree that this document contains
the entire understanding and agreement between them and cannot be amended,
modified or supplemented in any respect, except by an agreement in writing
signed by the party against whom enforcement of any amendment, modification or
supplement is sought.
17. Governing Law. This Agreement shall be governed by, and construed in
accordance with the laws of the State of Delaware.
18. Severability. In the event any provision of this Agreement is held to
be invalid, the remaining provisions shall not be affected thereby.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
COLE TAYLOR FINANCIAL GROUP, INC.
By: /s/ Ross Mangans
----------------------------------
Ross Mangans
Authorized Director and
Chairman of the Compensation Committee
HOWARD B. SILVERMAN
/s/ Howard B. Silverman
----------------------------------
Howard B. Silverman
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<PAGE>
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT made as of the 31st day of July, 1996 by and among Cole
Taylor Financial Group, Inc. ("Employer"), a corporation duly organized and
existing under and by virtue of the laws of the State of Delaware, and Thomas L.
Barlow ("Executive").
WHEREAS, Employer, through its subsidiaries, and Executive currently
have an employment agreement in place; and
WHEREAS, Employer desires to continue to employ Executive and to
record its understandings in that regard; and
WHEREAS, Executive is willing to accept such continuation of
employment under the terms and conditions set forth herein; and
WHEREAS, the employment, the duration thereof, the compensation to
be paid to Executive and the other terms and provisions of this Agreement were
duly fixed, stated, approved and authorized for and on behalf of Employer by the
action of the Compensation Committee of its Board of Directors.
NOW THEREFORE, in consideration of the premises, covenants and
considerations hereinafter contained, it is mutually agreed as follows:
1. Title and Term. Employer hereby agrees to, and does hereby, employ
Executive as President and Chief Executive Officer of Employer for a term
beginning on the Closing Date of the Share Exchange Agreement entered into on
June 12, 1996 by and among Employer and those certain persons known as the
Taylor Family ("Closing Date"), and ending on December 31, 2001, unless extended
as hereinafter provided or sooner terminated as hereinafter provided. Employer
also agrees to nominate Executive for election to its Board of Directors during
the term of this Agreement and any extensions thereof.
2. Prior Agreements. Employer and Executive hereby agree that all
prior employment agreements and amendments thereto shall become null and void as
of the Closing Date; provided, however, that Executive shall be entitled to all
compensation until the Closing Date pursuant to such prior employment agreements
and amendments thereto, including the Change of Control payment to which
Executive is entitled pursuant to an amendment to such agreement.
3. Compensation. In consideration of the services to be rendered
by Executive, Executive shall receive compensation as follows:
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<PAGE>
(a) Executive shall be compensated at the "Base Rate" then in effect
for such Executive at the Closing Date; or at such higher amount as the Board of
Directors of the Finance Company may hereafter fix, which shall then become the
Executive's new Base Rate. Executive's Base Rate salary shall be subject to
periodic review by the Board of Directors of Employer, which may determine to
increase the same, but Executive's Base Rate shall not be reduced during the
term of this Agreement. Such salary shall be paid in installments, in
accordance with the executive compensation policy of the Employer in effect
during the term hereof.
(b) Executive shall be entitled to continuation of Employer benefits
presently provided, including, but not limited to, group health and life
insurance, matching 401K, deferred compensation program, stock options, and
executive key man life insurance.
(c) Executive shall be entitled to the use of a Employer-owned or
leased automobile for business purposes; the year, make and model of such
automobile shall be appropriate to the Employer's business. Employer hereby
grants Executive an option to purchase such Employer-owned automobile for the
depreciated book value, consistent with current policies of the Employer.
(d) The Employer shall pay to Executive, in addition to his Base Rate
salary, incentive compensation determined and paid in accordance with any
incentive compensation program for senior executive officers of the Employer,
and Executive shall be entitled to forty-five percent (45%) of the total
incentive compensation pool. Such incentive compensation payment shall be of an
amount not less than that which would have been calculated using the Incentive
Compensation Program and formula that was in effect for fiscal 1995. The
determination of the amount of incentive compensation payable to Executive shall
be made separately for each calendar year, and there shall be no reason of any
subsequent determinations or adjustments. The incentive compensation determined
with respect to each year shall be paid for each year. At Executive's option,
75% of the estimated amount shall be paid on or about December 15 of such year
and the remainder, as adjusted for the actual calculation, shall be paid not
later than the publication of the audited financial statements for such year. If
Executive's employment is terminated during the year, other than for cause,
incentive compensation for such year shall be prorated based on the length of
employment during the year, and paid in accordance with the foregoing schedule.
4. Duties. Executive shall serve the Employer as indicated in paragraph
1 hereof and shall perform such duties as may be entrusted and set forth in the
by-laws of the Employer or resolutions of its Board of Directors or as
customarily performed by one holding his position in a similar business or
enterprise, and shall also render such other and unrelated services and duties
as may be assigned him from time to time by the Employer. Such duties shall be
rendered at such place or places as the Employer shall in good faith require or
as the interest, needs, business or opportunity of the Employer and its
subsidiaries shall require, provided however, that the executive offices of
Reliance Acceptance Corporation shall remain in San
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<PAGE>
Antonio, Texas, and that Executive is not requested or required to relocate
from San Antonio, Texas.
5. Best Efforts of Executive. Executive agrees that he will
faithfully, industriously and to the best of his ability, experience and
talents, devote his time and attention to the performance of all duties that may
be required of and from him, pursuant to the express and implied terms hereof,
all to the reasonable satisfaction of the Employer. Employer acknowledges that
Executive may engage in other business activities for his own account, including
consulting and serving on boards of directors of other companies, so long as
such activities are free from any conflicts of interest with Employer or its
subsidiaries. Vacations shall be discretionary but shall be taken in such a
manner as not unreasonably to interfere with the performance of Executive's
duties or to disrupt the business of the Employer, and shall be consistent with
the policies of the Employer for vacation time applicable to senior executive
officers thereof.
6. Reimbursement for Expenses. The Employer will arrange for the
payment or reimbursement of reasonable and necessary business expenses incurred
by Executive in the performance of his duties hereunder, including, but not
limited to expenditures for travel, meals, hotel accommodations and the like,
after submission of vouchers supporting such expenditures and their business
relationship as shall be required for deduction of the payments by the Employer
for federal and state income tax purposes. In addition, the Employer shall pay
for or reimburse Executive for dues and related business expenses incurred by
Executive at a country club of Executive's choice in San Antonio, Texas. In the
event Executive's expense account is disallowed as a business expense by the
Internal Revenue Service due to the lack of supporting evidence, Executive shall
be responsible to the Employer for any adverse tax consequence incurred by the
Employer or its affiliates as a result thereof. Executive agrees to include the
amount of any such disallowance as added compensation to him and to pay the
resulting increases in income tax on such added compensation.
7. Executive's Rights Under Certain Plans Now or Hereafter In Effect.
The parties hereto agree that nothing contained herein is intended to or shall
be deemed to preclude the Employer from granting to Executive, or Executive from
receiving, any stock option or as depriving Executive of his right to
participate in any profit sharing, pension, discretionary bonus, or other
remuneration plan or in a group insurance or similar employee benefit plan
established by or made available to the employees of the Employer, and in which
Executive would otherwise be entitled to participate as an employee of the
Employer under the terms of such plan.
8. Extension of Term. Unless written notification is given to either
party prior to January 1, 1999, the term of this Agreement shall be
automatically extended to December 31, 2002. After January 1, 1999, unless
written notification is given to either party prior to each subsequent January
1, the term of this Agreement shall again be automatically extended for one
additional year on each such January 1.
9. Termination of This Agreement Prior to Expiration of Term.
Employer may terminate this Agreement for just cause at any time, but only after
(a) notice to
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<PAGE>
Executive describing a just cause or causes why he should no longer be employed
by Employer because of his illegal activities, disclosure of confidential or
private information of the Employer, aiding a competitor of the Employer to
Employer's detriment, refusal or failure to continue the performance of duties
set forth in Paragraph 4 hereof at any time during the term of this Agreement,
or other action that is prejudicial to the best interests of the Employer, (b)
an opportunity for him to be heard before the entire Board of Directors of
Employer, and (c) a decision by at least a majority of the entire Board adverse
to Executive.
Executive will receive full compensation for any period of temporary
illness or temporary incapacity during the term of this Agreement. However, the
Employer shall have the right to terminate this Agreement if illness or
incapacity shall be of a character so as to disable Executive from rendering
satisfactory services to the Employer, which determination shall be made by the
Board of Directors thereof, for a period of more than 90 consecutive days during
any 12 month period.
If Executive is terminated by Employer for any reason other than for
cause or illness or incapacity, or if an event occurs whereby the authority or
powers of Executive are significantly diminished, the Employer shall pay to
Executive in a lump sum payment, all future amounts that would be payable to
executive for future salary and incentive compensation pursuant to this
Agreement, which amounts may be reasonably estimated for such purpose.
Termination or expiration of this Agreement shall not relieve
Executive of his obligations under Sections 11 and 12.
10. Assignment. Employer shall have the right, in its sole
discretion, to assign this Agreement to its successor or assigns, and all
covenants and agreements hereunder shall inure to the benefit of and be
enforceable by said successors or assigns and this Agreement shall thereby
become the obligation of Employer's successors and assigns. The term successor
and assign shall include any corporation which buys all or substantially all of
Employer's assets, or substantially all of its stock, or with which or into
which it is merged or consolidated.
11. Confidential Information. Executive recognizes that as a key
member of the staff of the Employer, he will occupy a position of trust with
respect to business information of a secret or confidential nature which is the
property of Employer, the Employer or their subsidiaries or affiliates, and
which will be imparted to or developed by Executive from time to time in the
course of his duties. Executive therefore agrees that he will not, during or
subsequent to his employment hereunder, use, divulge, furnish or make accessible
to anyone (otherwise than in the regular course of the business of the Employer)
any knowledge or information, techniques, plans, computer designs, computer
programs whether embodied in source or object code, computer languages or
formats, customer lists, dealer lists, procedure manuals, personnel records,
non-public financial statements or any other information proprietary to
Employer, the Employer or their subsidiaries or affiliates; and that he will
return promptly upon termination of his employment for whatever reason (or in
the event of his death, his personal representative shall return) to the
Employer at its direction and expense any and all copies of records, drawings,
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<PAGE>
writings, blueprints, materials, memoranda and other data pertaining to such
secret or confidential information.
12. Restrictive Covenant. The Employer has incurred and will continue
to incur great expense in order to develop its business, and is relying upon
Executive's faithful performance of this Agreement in connection therewith.
Executive thus further agrees that, during the term of this Agreement, he will
not, directly or indirectly, alone or as a member of a partnership, or as an
officer, stockholder (owning more than ten percent of the outstanding stock),
corporate director, employee, consultant or representative of any company or
entity, engage in competition with the Employer.
13. Remedy. Executive understands that the Employer would not have
any adequate remedy at law for the material breach or threatened breach by
Executive of any one or more of the covenants set forth in this Agreement and
agrees that in the event of any such material breach or threatened breach, the
Employer may, in addition to the other remedies which may be available to it:
(a) File a suit in equity to enjoin Executive from the breach or
threatened breach of such covenants, and/or
(b) File a suit in equity to enforce the provisions of
Paragraphs 11 and 12 hereof.
14. Waiver. Any waiver by any party hereto of any provision of this
Agreement shall not operate as or be construed as a waiver of any subsequent
breach thereof.
15. Insurance. Executive agrees that Employer and/or the Employer
may, from time to time, apply for and take out in its own name and at its own
expense, life, health, accident, or other insurance or an annuity contract upon
Executive, that it may deem necessary or advisable to protect its interest
hereunder; and Executive agrees to submit to any medical or other examination
necessary for such purpose and to assist and cooperate in procuring such
insurance; and Executive agrees that he shall have no right, title or interest
in or to such insurance.
16. Modification. The parties hereto agree that this document
contains the entire understanding and agreement between them and cannot be
amended, modified or supplemented in any respect, except by an agreement in
writing signed by the party against whom enforcement of any amendment,
modification or supplement is sought.
17. Governing Law. This Agreement shall be governed by, and construed
in accordance with the laws of the State of Delaware.
18. Severability. In the event any provision of this Agreement is
held to be invalid, the remaining provisions shall not be affected thereby.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
COLE TAYLOR FINANCIAL GROUP, INC.
By: /s/ Ross Mangano
--------------------------------------
Ross Mangano
Authorized Director and
Chairman of the Compensation Committee
THOMAS L. BARLOW
/s/ Thomas L. Barlow
------------------------------------------
Thomas L. Barlow
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