<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
Commission File Number 0-26410
JAYHAWK ACCEPTANCE CORPORATION
------------------------------
(Exact name of registrant as specified in its charter)
Texas 75-2486444
- - ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Two Galleria Tower
13455 Noel Road, Suite 1800, Dallas, TX 75240
- - --------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 663-1000
------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ ------
At May 8, 1996, the latest practicable date, there were
23,866,897 shares of Common Stock, $.01 par value, outstanding.
See exhibit index on page 14.
Page 1
<PAGE>
JAYHAWK ACCEPTANCE CORPORATION
------------------------------
INDEX TO QUARTERLY REPORT ON FORM 10-Q
--------------------------------------
PART I. FINANCIAL INFORMATION
- - ------------------------------
<TABLE>
<CAPTION>
Item 1. Financial Statements Page
<S> <C> <C>
Consolidated Balance Sheets at March 31, 1996 (Unaudited) and December 31, 1995.. 3
Consolidated Statements of Income for the three months ended
March 31, 1996 and 1995 (Unaudited).............................................. 4
Consolidated Statement of Shareholders' Equity for the three months ended
March 31, 1996 (Unaudited)....................................................... 5
Consolidated Statements of Cash Flows for the three months ended
March 31, 1996 and 1995 (Unaudited).............................................. 6
Notes to Consolidated Financial Statements (Unaudited)........................... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................................. 8
<CAPTION>
PART II. OTHER INFORMATION
- - ----------------------------
<S> <C> <C>
Item 6. Exhibits and Reports on Form 8-K................................................. 12
SIGNATURES ........................................................................................ 13
</TABLE>
Page 2
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements
- - -----------------------------
JAYHAWK ACCEPTANCE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
----------- ------------
<S> <C> <C>
(Unaudited)
Cash and cash equivalents........................ $ 383 $ 120
Restricted cash.................................. 11,826 --
Installment contracts receivable................. 230,306 167,491
Allowance for credit losses...................... (3,594) (2,308)
-------- --------
Installment contracts receivable, net............ 226,712 165,183
Furniture, fixtures and equipment, net........... 5,923 5,004
Deferred income taxes............................ 1,488 2,088
Other assets..................................... 1,941 978
-------- --------
Total assets..................................... $248,273 $173,373
======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Liabilities:
Accounts payable and accrued liabilities.... $ 7,461 $ 7,982
Deferred dealer fees, net................... 2,483 2,052
Dealer holdbacks, net....................... 108,336 82,373
Revolving credit facility................... 43,205 32,386
Secured notes payable....................... 36,352 --
-------- --------
Total liabilities................................ 197,837 124,793
Shareholders' Equity:
Common stock, $.01 par value;
40,000,000 shares authorized; 20,510,296 and
20,486,046 shares issued and outstanding
at March 31, 1996 and December 31, 1995,
respectively............................... 205 205
Additional paid-in capital............. 47,273 47,461
Retained earnings...................... 2,958 914
-------- --------
Total shareholders' equity....................... 50,436 48,580
-------- --------
Total liabilities and shareholders' equity....... $248,273 $173,373
======== ========
</TABLE>
See notes to consolidated financial statements.
Page 3
<PAGE>
JAYHAWK ACCEPTANCE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1996 1995
--------------------
Revenues:
<S> <C> <C>
Finance charges.................. $ 8,161 $ 2,732
Dealer fees...................... 1,715 782
Service contracts................ 263 --
------- -------
10,139 3,514
Costs and expenses:
Sales and marketing.............. 1,778 783
Operating........................ 2,991 1,434
Provision for credit losses...... 814 284
Provision for service contract
claims.......................... 197 --
Interest......................... 1,217 169
------- -------
6,997 2,670
------- -------
Income before income taxes......... 3,142 844
Income taxes....................... 1,098 209
------- -------
Net income......................... $ 2,044 $ 635
======= =======
Net income per share............... $ .10 $ .04
======= =======
Weighted average number of shares
outstanding....................... 20,785 17,217
======= =======
</TABLE>
See notes to consolidated financial statements.
Page 4
<PAGE>
JAYHAWK ACCEPTANCE CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Preferred Additional
Stock Common Paid-In Retained
Series A Stock Capital Earnings Total
----------- --------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $ -- $205 $47,461 $ 914 $48,580
Costs associated with issuance of 3,000,000
shares in public offering..................... -- -- (277) -- (277)
Issuance of 24,250 shares of common stock
upon exercise of stock options................ -- -- 89 -- 89
Net income...................................... -- -- -- 2,044 2,044
--------- ---- ------- ------ -------
Balance at March 31, 1996....................... $ -- $205 $47,273 $2,958 $50,436
========= ==== ======= ====== =======
</TABLE>
See notes to consolidated financial statements.
Page 5
<PAGE>
JAYHAWK ACCEPTANCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income....................................................... $ 2,044 $ 635
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................. 438 145
Provision for credit losses................................... 814 284
Provision for service contract claims......................... 197 --
Deferred income taxes......................................... 600 (516)
Changes in operating assets and liabilities:
Other assets................................................ 50 (242)
Accounts payable and accrued liabilities.................... (164) 485
Income taxes payable........................................ (352) 725
Deferred dealer fees, net................................... (301) 270
-------- --------
Net cash provided by operating activities............................. 3,326 1,786
Cash flows from investing activities:
Payments to dealers.............................................. (52,722) (11,503)
Collections of principal on installment
contracts receivable............................................ 15,857 5,413
Capital expenditures............................................. (1,355) (784)
-------- --------
Net cash used in investing activities................................. (38,220) (6,874)
Cash flows from financing activities:
Net borrowings under line-of-credit agreement................... 10,819 4,500
Net proceeds from the issuance of secured notes payable......... 24,526 --
Proceeds from sales of common stock, net........................ (188) 6
-------- --------
Net cash provided by financing activities............................ 35,157 4,506
-------- --------
Net increase (decrease) in cash and cash equivalents................. 263 (582)
Cash and cash equivalents at the beginning of the period............. 120 6,124
-------- --------
Cash and cash equivalents at the end of period....................... $ 383 $ 5,542
======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest.......................................... $ 909 $ 120
======== ========
Cash paid for income taxes...................................... $ 850 $ --
======== ========
</TABLE>
See notes to consolidated financial statements.
Page 6
<PAGE>
JAYHAWK ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements of
Jayhawk Acceptance Corporation (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for fair presentation have been included. Operating
results for the three month period ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the year
ended December 31, 1996. For further information, refer to the financial
statements and footnotes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1995, filed with the
Securities and Exchange Commission on March 27, 1996.
On November 15, 1995, the Company entered into an agreement with
First Extended Service Corporation ("First Extended") pursuant to which
First Extended performs certain claims administration services on behalf
of the Company with respect to extended service agreement programs the
Company offers to its Dealers. Under the extended service agreement
programs, the Dealer can sell a vehicle service product to a customer
whose installment sales contract ("Contract" or "Installment Contract")
is purchased by the Company, which reimburses the customer for certain
repairs made to the vehicle securing the Contract. Upon its purchase of
an extended service contract, the Company defers and amortizes the
service contract fees and related costs on a straight-line basis over the
term of the contract. A provision is also recorded for the estimated
amount of service claims incurred over the Contract service period.
Note 2 - Net Income per Share
The weighted average number of common and common equivalent shares
outstanding for the purposes of computing net income per share were
20,784,997 and 17,216,900 for the three months ended March 31, 1996 and
1995, respectively. Incremental shares resulting from the issuance of
convertible preferred stock and stock options issued prior to the
Company's initial public offering have been included in the weighted
average shares outstanding for 1995.
Note 3 - Securitization
On March 15, 1996, the Company completed its first securitization
transaction. Pursuant to this transaction, the Company contributed
Contracts having an aggregate principal balance of approximately $65
million and approximately $5 million in cash (which generally represents
the amount of principal collected on such Contracts between January 15,
1996 and the closing of the securitization transaction) to a business
trust wholly-owned by the Company (the "Trust"), and the Trust sold
approximately $42 million aggregate principal amount of notes (the
"Notes") in a private placement to institutional investors. The notes
bear interest at a fixed rate of approximately 6% per annum and have a
stated maturity of September 15, 1999. As a result of the structure of
the transaction, the Company did not recognize any gain upon contributing
the Contracts to the Trust and the Contracts will continue to be
reflected in the Company's consolidated balance sheet.
Proceeds of approximately $10.4 million from the sale of the Notes
were deposited in an account (the "Pre-Funding Account") with the Trustee
pursuant to an indenture (the "Note Indenture Trustee") and, subject to
certain conditions, were to be released to the Company as additional
Contracts meeting specified eligibility requirements were contributed to
the Trust and pledged to the Note Indenture Trustee in an amount
approximately equal to 45% of the principal amount of the Contracts so
contributed and pledged. Any portion of the Pre-Funding Account not
released to the Company on or before June 30, 1996 was to be used to
prepay the Notes. Additional cash deposits of $1.4 million are pledged
to the Note Indenture Trustee. These amounts are classified as
restricted cash in the Company's consolidated balance sheet at March 31,
1996. On April 30, 1996, Contracts having an aggregate principal balance
of approximately $23.3 million were contributed to the Trust and pledged
to the Note Indenture Trustee and the funds in the Pre-Funding Account
were released to the Company.
Page 7
<PAGE>
Note 4 - Subsequent Events
On April 10, 1996, the Company completed the public sale of
3,000,000 shares of its Common Stock (the "Offering"). The net proceeds
from the Offering (approximately $36,570,000) were used to reduce
borrowings under the Company's revolving credit facility. For further
information about the Offering, refer to the Company's Registration
Statement on Form S-1 (No. 333-02150).
On May 2, 1996, the underwriters of the Offering exercised their
overallotment option for 350,000 shares of the Company's Common Stock,
the sale of which was completed on May 8, 1996. The net proceeds from
the sale of these shares (approximately $4,301,500) were used to reduce
borrowings under the Company's revolving credit facility.
Item 2. Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations
-------------------------
Results of Operations
Three Months Ended March 31, 1996 Compared to Three Months Ended
March 31, 1995
Total Revenue. Total revenue increased from $3,514,000 for the
three months ended March 31, 1995 to $10,139,000 for the same period in
1996, an increase of $6,625,000 or 189%. The increase was primarily due
to increased finance charges resulting from the increased number of
Installment Contracts held in the Company's portfolio, and, to a lesser
extent, a $242 (5.7%) increase in the average Contract size. Finance
charges increased from $2,732,000 for the three months ended March 31,
1995 to $8,161,000 for the same period in 1996, an increase of $5,429,000
or 199%. The Company purchased 20,058 Installment Contracts during the
three months ended March 31, 1996, an increase of 233% over the same
period in 1995, and the Company's installment contracts receivable
balance increased from $48,539,000 as of March 31, 1995 to $230,306,000
as of March 31, 1996, an increase of $181,767,000 or 374%. Dealer fees
also contributed to the increase in total revenue. Dealer fees increased
by $933,000 for the three months ended March 31, 1996 over the same
period in 1995 or 119%. The number of dealers enrolled in the Company's
program increased from 886 as of March 31, 1995 to 2,367 as of March 31,
1996, an increase of 1,481 dealers or 167%. The average annualized yield
on the Company's portfolio decreased from 26% to 16% for the quarters
ended March 31, 1995 and March 31, 1996, respectively. The decrease in
the average annualized yield is primarily attributable to the longer
average original term of Contracts purchased in the first quarter of
1996, when compared with the first quarter of 1995, and to a lesser
extent, the higher percentage of non-accrual contracts as a percentage of
the total number of Contracts included within the Company's portfolio
during the first quarter of 1996 when compared with the first quarter of
1995. Non-accrual contracts as a percentage of the total number of
Contracts included within the Company's portfolio increased from 18% at
March 31, 1995 to 22% at March 31, 1996. This increase was due in part
to an increase in the average age of the Contracts included within the
portfolio between the respective periods. See "--Credit Loss Policy."
Service contract revenue was $263,000 for the three months ended March
31, 1996. The Company recognized no service contract revenue during the
three months ended March 31, 1995, as the Company did not offer the
service contract program at that time.
Sales and Marketing. Sales and marketing expenses increased from
$783,000 for the three months ended March 31, 1995 to $1,778,000 for the
same period in 1996, but decreased as a percentage of total revenue from
22% for the first quarter of 1995 to 18% for the first quarter of 1996.
The dollar increase in sales and marketing expenses is primarily a result
of the continued effort by the Company to expand the number of dealers
participating in the Company's program. The decrease in sales and
marketing expenses as a percentage of total revenue was primarily the
result of economies of scale associated with increased total revenue.
Operating Expenses. Operating expenses increased from $1,434,000
for the three months ended March 31, 1995 to $2,991,000 for the same
period in 1996, an increase of $1,557,000 or 109%, but decreased as a
percentage of total revenue from 41% for the first quarter of 1995 to 29%
for the first quarter of 1996. The dollar increase in operating expenses
is primarily a result of the overall expansion in the Company's
operations. The decrease in operating expenses as a percentage of total
revenue was primarily the result of economies of scale associated with
increased total revenue.
Page 8
<PAGE>
Provision for Credit Losses. The amount provided for credit losses
increased from $284,000 for the three months ended March 31, 1995 to
$814,000 for the same period in 1996, but stayed constant at 8% as a
percentage of total revenue. See "--Credit Loss Policy."
Provision for Service Contract Claims. The Company provided $197,000
for service contract claims for the three months ended March 31, 1996. No
amount was provided for the three months ended March 31, 1995, as the
Company did not offer the service contract program at that time.
Interest Expense. Interest expense increased from $169,000 during
the first quarter of 1995 to $1,217,000 during the same period in 1996.
The increase was due to higher average borrowings used to fund operations
and the purchase of Contracts. The Company anticipates that interest
expense will increase to the extent borrowings are used to fund growth of
the Company.
Income Taxes. The Company's effective income tax rate was 35% for
the three-month period ended March 31, 1996, as compared with an
effective income tax rate of 25% for the same period in 1995.
Installment Contracts Receivable
Installment contracts receivable consist of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
Gross installment contracts receivable....... $273,751 $198,397
Unearned finance charges..................... (43,445) (30,906)
-------- --------
Installment contracts receivable............. $230,306 $167,491
======== ========
Changes in gross installment contracts
receivable are as follows (in thousands):
<CAPTION>
Three Months Ended
March 31,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Balance, beginning of period................. $198,397 $ 41,106
Gross amount of installment contracts
accepted.................................... 108,588 23,623
Cash collections on installment contracts
receivable.................................. (25,180) (8,017)
Charge offs.................................. (8,054) (58)
-------- --------
Balance, end of period....................... $273,751 $ 56,654
======== ========
</TABLE>
The increase in charge-offs between the three months ended March 31, 1996
and the three months ended March 31, 1995 is primarily attributable to
the increase in the average age of such Contracts, the growth in gross
installment contracts receivable and the Company's charge-off policy. See
"-- Credit Loss Policy."
Page 9
<PAGE>
Dealer Holdbacks
Dealer holdbacks, net, consist of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
Dealer holdbacks........................ $ 218,996 $158,746
Less: Acquisition payments............. (110,660) (76,373)
--------- --------
Dealer holdbacks, net................... $ 108,336 $ 82,373
========= ========
</TABLE>
Credit Loss Policy
The Company regularly reviews its Installment Contracts receivable
portfolio to determine the adequacy of its allowance for credit losses.
Amounts provided for credit losses include the provision for credit
losses, as well as an amount recorded upon the purchase of Installment
Contracts.
The level of related dealer holdbacks and the possible impact of
economic conditions on the creditworthiness of obligors are given major
consideration in determining the adequacy of the allowance. Credit loss
experience, changes in the character, size and age of the installment
contracts receivable portfolio and management's judgment are other
factors used in assessing the overall adequacy of the allowance and the
resulting provision for credit losses. Ultimate losses may vary from
current estimates and the amount of the provision, which is a current
expense, may be either greater or less than actual charge-offs.
The Company's non-accrual contracts as a percentage of the total
number of Contracts included within the Company's portfolio were 22% and
18% as of March 31, 1996 and March 31, 1995, respectively. The Company
believes that this increase in non-accrual contracts as a percentage of
the total number of Contracts included within the Company's portfolio was
due primarily to an increase in the average age of the Contracts included
within its portfolio. Because the Company specifically targets used
vehicle buyers who do not qualify for traditional financing, these non-
accrual percentages are considered by the Company to be reasonable. The
Company anticipates that as the average age of the Contracts included
within its portfolio increases, the Company's non-accrual contracts as a
percentage of the total number of Contracts included within the Company's
portfolio will increase.
The following table sets forth certain information regarding charge-offs
and the provision for credit losses (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1996 1995
---- ----
<S> <C> <C>
Gross installment contracts receivable charged off....... $8,054 $ 58
Charged against dealer holdbacks..................... 6,443 47
Charged against unearned finance charges............. 1,206 3
Charged against allowance for credit losses......... 405 8
Provision for credit losses............................. 814 284
</TABLE>
Revenue on installment contracts receivable is recognized under the
interest method of accounting until the underlying obligation is 120 days
contractually past due or the collateral securing the Contract is
repossessed, whichever occurs first. At such time, the Company suspends
the accrual of revenue.
Page 10
<PAGE>
Principal balances on which no material payment has been received
for a significant period of time (in no event greater than one year) are
charged-off against the related dealer holdback and, if insufficient, the
allowance for credit losses. Because any remaining outstanding
Installment Contracts in the applicable dealer pool are available to
recover acquisition payments paid upon the Company's purchase of
Contracts included within such pool and as the acquisition payment
generally approximates 50% of the principal amount of the Contract, the
risk of loss to the Company is mitigated.
Liquidity and Capital Resources
The Company's principal need for capital is to fund acquisition
payments to dealers upon its purchase of Installment Contracts. The
Company's cash needs resulting from acquisition payments and the payment
of dealer holdbacks to dealers increased from approximately $11.5 million
for the three months ended March 31, 1995 to approximately $52.7 million
for the three months ended March 31, 1996.
The Company maintains a revolving credit facility, under which it
may borrow up to $65 million, based on defined levels of qualified
installment contracts receivable. Borrowings under the Company's
revolving credit facility were approximately $32.4 million as of December
31, 1995 and, after applying approximately $23.8 million of the proceeds
from the Company's securitization transaction completed on March 15, 1996
to repay borrowings under the facility, were approximately $43.2 million
as of March 31, 1996. As of May 8, 1996 and after applying an aggregate
of approximately $41.5 million of the proceeds from the public offering
and sale of 3,350,000 shares of its Common Stock in the second quarter of
fiscal 1996 and approximately $10.4 million released from the Pre-Funding
Account established in connection with the securitization transaction
completed in the first quarter of fiscal 1996 to repay borrowings under
the facility, borrowings under the Company's revolving credit facility
were approximately $10.2 million and the amount of the facility the
Company had in excess of current borrowings was approximately $54.8
million. See Notes 3 and 4 of "Item 1. Financial Statements."
To the extent the Company's acquisition payment to a Dealer upon
purchase of a Contract continues to exceed the incremental amount of
borrowings available under the Company's revolving credit facility with
respect to such Contract, additional capital will be required to fund the
Company's rapid growth. Such additional capital may be generated by
either additional debt or equity financing. The Company believes that
cash flow from collections on Installment Contracts and borrowings under
its revolving credit facility will be adequate to fund the Company's
operations through the end of the Company's current fiscal year at its
current rate of growth.
Seasonality
The Company's operations are affected by higher delinquency rates
during certain holiday periods, as well as higher sales of used vehicles
during the annual period at the beginning of the calendar year when many
persons are receiving state and federal tax refunds.
Page 11
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
Exhibit Number Description
-------------- -----------
10.1 Sixth Amendment dated April 25, 1996 to Loan
and Security Agreement dated April 4, 1995,
between the Company and Fleet Capital
Corporation
10.2 Subsequent Transfer Agreement dated April 30,
1996, between the Company, individually and as
Servicer, Jayhawk Funding Trust I, as Issuer,
Norwest Bank Texas, N.A., as Trustee, and
Norwest Bank Minnesota, National Association,
as backup Servicer
11 Statement re Computation of Per Share Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K; No reports on Form 8-K were filed during
the quarter ended March 31, 1996.
Page 12
<PAGE>
SIGNATURES
-----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
JAYHAWK ACCEPTANCE CORPORATION
Date: May 13, 1996 By: /s/ Jerry W. Bayless
--------------------
Jerry W. Bayless
Executive Vice President, Chief
Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
Page 13
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit Number Description
- - -------------- ------------------------------------------
<C> <S>
10.1 Sixth Amendment dated April 25, 1996
to Loan and Security Agreement dated
April 4, 1995 between the Company and
Fleet Capital Corporation
10.2 Subsequent Transfer Agreement dated
April 30, 1996, between the Company,
individually and as Servicer, Jayhawk
Funding Trust I, as Issuer, Norwest Bank
Texas, N.A., as Trustee, and Norwest Bank
Minnesota, National Association, as backup
Servicer
11 Statement re Computation of Per Share
Earnings
27 Financial Data Schedule
</TABLE>
Page 14
<PAGE>
EXHIBIT 10.1
SIXTH AMENDMENT TO
LOAN AND SECURITY AGREEMENT
---------------------------
THIS SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT ("this Amendment")
--------------
is made and entered into this 25th of April, 1996, but effective April 10, 1996,
by and between JAYHAWK ACCEPTANCE CORPORATION, a Texas corporation ("Borrower"),
--------
and FLEET CAPITAL CORPORATION, a Connecticut corporation ("Lender").
------
RECITALS
A. Borrower and Lender have entered into that certain Loan and
Security Agreement, dated April 4, 1995, as amended by (i) that certain First
Amendment to Loan and Security Agreement, dated July 11, 1995, by and between
Borrower and Lender, (ii) that certain Second Amendment to Loan and Security
Agreement, dated December 29, 1995, by and between Borrower and Lender, (iii)
that certain Third Amendment to Loan and Security Agreement, dated January 25,
1996, by and between Borrower and Lender, (iv) that certain Fourth Amendment to
Loan and Security Agreement dated March 7, 1996, by and between Borrower and
Lender, and (v) that certain Fifth Amendment to Loan and Security Agreement
dated March 15, 1996, by and between Borrower and Lender (as amended, the "Loan
----
Agreement").
- - ---------
B. Borrower and Lender desire to amend the Loan Agreement and the
Other Agreements to allow and provide for certain matters as hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties, intending to be legally bound, agree as
follows:
ARTICLE I
Definitions
-----------
1.01 Capitalized terms used in this Amendment are
defined in the Loan Agreement, as amended hereby, unless otherwise stated.
ARTICLE II
Amendments
----------
2.01 Amendment to Appendix A of the Loan Agreement; Amendment to the
---------------------------------------------------------------
Definition of "Borrowing Base". Effective as of the date hereof, the definition
- - -----------------------------
of "Borrowing Base" contained in Appendix A of the Loan Agreement is hereby
--------------
deleted in its entirety, and the following substituted therefor:
"Borrowing Base - as at any date of determination thereof, an amount
--------------
equal to the lesser of:
1
<PAGE>
(i) the Revolving Credit Commitment; or
(ii) an amount equal to:
(a) 40% of the sum of (A) the Net Eligible Account Amount
outstanding at such date with no installment greater than 45 days
past due on a contractual basis, plus (B) the Net Eligible
----
Diminutive Account Amount outstanding at such date;
PLUS
(b) the lesser of (A) $3,900,000 or (B) 40% of the Net
Eligible Account Amount, with an installment greater than 45 days
past due and less than 60 days past due, on a contractual basis."
2.02 Amendment to Appendix A of the Loan Agreement; Deletion of
----------------------------------------------------------
Definitions. Effective as of the date hereof, Appendix A of the Loan Agreement
is hereby amended to delete in its entirety the definitions of "Fourth
------
Amendment", "Guarantor", "Guaranty", and "Permitted Overadvance Amount".
--------- -------- ----------------------------
2.03 Amendment to Section 2.1.1 of the Loan Agreement. Effective as of the
------------------------------------------------
date hereof, Section 2.1.1 of the Loan Agreement is hereby deleted in its
-------------
entirety, and the following substituted therefor:
"2.1.1 Rates of Interest. Interest shall accrue on the principal
-----------------
amount of the Revolving Credit Loans outstanding at the end of each day at
a fluctuating rate per annum equal to the Base Rate (the 'Applicable Annual
-----------------
Rate'). The Applicable Annual Rate shall increase or decrease by an amount
----
equal to any increase or decrease in the Base Rate, effective as of the
opening of business on the day that any such change in the Base Rate
occurs."
2.04 Deletion of Section 4.2.6 of the Loan Agreement. Effective as of the
-----------------------------------------------
date hereof, Section 4.2.6 of the Loan Agreement is hereby deleted in its
-------------
entirety.
2.05 Deletion of Section 8.1.9 of the Loan Agreement. Effective as of the
-----------------------------------------------
date hereof, Section 8.1.9 of the Loan Agreement is hereby deleted in its
-------------
entirety.
2.06 Deletion of Section 10.1.16 of the Loan Agreement. Effective as of
-------------------------------------------------
the date hereof, (i) Section 10.1.16 of the Loan Agreement is hereby deleted in
---------------
its entirety and (ii) Section 10.1.17 of the Loan Agreement is hereby renumbered
---------------
as Section 10.1.16.
---------------
2
<PAGE>
ARTICLE III
Conditions Precedent
--------------------
3.01 Conditions to Effectiveness. The effectiveness of this Amendment
---------------------------
is subject to the satisfaction of the following conditions precedent, unless
specifically waived in writing by Lender:
(a) Lender shall have received (i) this Amendment, duly executed by
Borrower, (ii) a company general certificate in the form of Annex A attached
-------
hereto (hereinafter referred to as the "Company General Certificate") certified
---------------------------
by the Secretary or Assistant Secretary of the Borrower acknowledging (A) that
the Borrower's Board of Directors has met and has adopted, approved, consented
to and ratified resolutions which authorize the execution, delivery and
performance by the Borrower of this Amendment and all other Loan Documents to
which the Borrower is or is to be a party, and (B) the names of the officers of
the Borrower authorized to sign this Amendment and each of the other Loan
Documents to which the Borrower is or is to be a party hereunder (including the
certificates contemplated herein) together with specimen signatures of such
officers, (iii) a closing certificate signed by the Executive Vice President and
the Treasurer of Borrower, dated as of the date of this Amendment, stating that
(A) the representations and warranties set forth in Section 7 of the Loan
---------
Agreement are true and correct as of such date, (B) Borrower is on such date in
compliance with all the terms and provisions set forth in the Loan Agreement, as
amended by this Amendment, and (C) on such date no Default or Event of Default
has occurred or is continuing, and (iv) such additional documents, instruments
and information as Lender or its legal counsel may request;
(b) The representations and warranties contained herein and in the
Loan Agreement and the other Loan Documents, as each is amended hereby, shall be
true and correct as of the date hereof, as if made on the date hereof;
(c) No Default or Event of Default shall have occurred and be
continuing;
(d) All corporate proceedings taken in connection with the
transactions contemplated by this Amendment and all documents, instruments and
other legal matters incident thereto shall be satisfactory to Lender and its
legal counsel.
ARTICLE IV
No Waiver
---------
Nothing contained in this Amendment shall be construed as a waiver by
Lender of any covenant or provision of the Loan Agreement, the other Loan
Documents, this Amendment, or of any other contract or instrument between
Borrower and Lender, and the failure of Lender at any time or times hereafter to
require strict performance by Borrower of any provision thereof shall not waive,
affect or diminish any right of Lender to thereafter demand strict compliance
therewith. Lender hereby reserves all rights granted under the Loan Agreement,
the other Loan Documents, this Amendment and any other contract or instrument
between Borrower and Lender.
3
<PAGE>
ARTICLE V
Ratifications, Representations and Warranties
---------------------------------------------
5.01 Ratifications. The terms and provisions set forth in this
-------------
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Loan Agreement and the other Loan Documents, and, except as
expressly modified and superseded by this Amendment, the terms and provisions of
the Loan Agreement and the other Loan Documents are ratified and confirmed and
shall continue in full force and effect. Borrower and Lender agree that the Loan
Agreement and the other Loan Documents, as amended hereby, shall continue to be
legal, valid, binding and enforceable in accordance with their respective terms.
5.02 Representations and Warranties. Borrower hereby represents and
------------------------------
warrants to Lender that (a) the execution, delivery and performance of this
Amendment and any and all other Loan Documents executed and/or delivered in
connection herewith have been authorized by all requisite corporate action on
the part of Borrower and will not violate the Articles of Incorporation or
Bylaws of Borrower; (b) the representations and warranties contained in the Loan
Agreement, as amended hereby, and any other Loan Documents are true and correct
on and as of the date hereof and on and as of the date of execution hereof as
though made on and as of each such date; (c) no Default or Event of Default
under the Loan Agreement, as amended hereby, has occurred and is continuing; and
(d) Borrower is in full compliance with all covenants and agreements contained
in the Loan Agreement and the other Loan Documents, as amended hereby.
ARTICLE VI
Miscellaneous Provisions
------------------------
6.01 Survival of Representations and Warranties. All representations
------------------------------------------
and warranties made in the Loan Agreement or any other Loan Documents,
including, without limitation, any document furnished in connection with this
Amendment, shall survive the execution and delivery of this Amendment and the
other Loan Documents, and no investigation by Lender or any closing shall affect
the representations and warranties or the right of Lender to rely upon them.
6.02 Reference to Loan Agreement. Each of the Loan Agreement and the
---------------------------
Other Agreements, and any and all other agreements, documents or instruments now
or hereafter executed and delivered pursuant to the terms hereof or pursuant to
the terms of the Loan Agreement, as amended hereby, are hereby amended so that
any reference in the Loan Agreement and such other Loan Documents to the Loan
Agreement shall mean a reference to the Loan Agreement as amended hereby.
6.03 Expenses of Lender. As provided in the Loan Agreement, Borrower
------------------
agrees to pay on demand all costs and expenses incurred by Lender in connection
with the preparation, negotiation, and execution of this Amendment and the other
Loan Documents executed pursuant hereto and any and all amendments,
modifications, and supplements thereto, including, without limitation, the costs
and fees of Lender's legal counsel, and all costs and expenses incurred by
Lender in connection with the enforcement or preservation of any rights under
the Loan Agreement, as amended hereby, or any other Loan Documents, including,
without, limitation, the costs and fees of Lender's legal counsel.
4
<PAGE>
6.04 Severability. Any provision of this Amendment held by a court of
------------
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
6.05 Successors and Assigns. This Amendment is binding upon and
----------------------
shall inure to the benefit of Lender and Borrower and their respective
successors and assigns, except that Borrower may not assign or transfer any of
its rights or obligations hereunder without the prior written consent of Lender.
6.06 Counterparts. This Amendment may be executed in one or more
------------
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
instrument.
6.07 Effect of Waiver. No consent or waiver, express or implied,
----------------
by Lender to or for any breach of or deviation from any covenant or condition by
Borrower shall be deemed a consent to or waiver of any other breach of the same
or any other covenant, condition or duty.
6.08 Headings. The headings, captions, and arrangements used in this
--------
Amendment are for convenience only and shall not affect the interpretation of
this Amendment.
6.09 Applicable Law. THIS AMENDMENT AND ALL OTHER AGREEMENTS EXECUTED
--------------
PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE PERFORMABLE IN AND
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS.
6.10 Final Agreement. THE LOAN AGREEMENT AND THE OTHER LOAN
---------------
DOCUMENTS, EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE EXPRESSION OF THE
PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE THIS AMENDMENT IS
EXECUTED. THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS AMENDED HEREBY,
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES. NO MODIFICATION, RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY
PROVISION OF THIS AMENDMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED
BY BORROWER AND LENDER.
6.11 Release. BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE,
-------
COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE
WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR
5
<PAGE>
ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO REPAY THE "OBLIGATIONS" OR TO SEEK
AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM LENDER. BORROWER HEREBY
VOLUNTARILY AND KNOWINGLY RELEASES AND FOREVER DISCHARGES LENDER, ITS
PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE
CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND
LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED,
SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN
EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS
EXECUTED, WHICH THE BORROWER MAY NOW OR HEREAFTER HAVE AGAINST LENDER, ITS
PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND
IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION
OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY "LOANS", INCLUDING,
WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING
OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE
EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN AGREEMENT OR OTHER LOAN
DOCUMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT.
IN WITNESS WHEREOF, this Amendment has been executed and is effective
as of the dates first above-written.
"BORROWER"
JAYHAWK ACCEPTANCE CORPORATION
By: /s/ Jerry W. Bayless
--------------------------------------
Jerry W. Bayless
Executive Vice President and Treasurer
"LENDER"
FLEET CAPITAL CORPORATION
By: /s/ H. Michael Wills
----------------------------------------
H. Michael Wills
Vice President
6
<PAGE>
EXHIBIT 10.2
SUBSEQUENT TRANSFER AGREEMENT
This SUBSEQUENT TRANSFER AGREEMENT is dated as of April 30, 1996 (the
"Subsequent Transfer Date") and is entered into by and between Jayhawk
Acceptance Corporation, a Texas corporation (in its individual capacity, "JAC"
and as Servicer under the Contribution and Servicing Agreement referred to
below, the "Servicer"), Jayhawk Funding Trust I, a limited purpose Delaware
business trust (the "Issuer"), Norwest Bank Texas, N.A., a national banking
association, as Trustee, and Norwest Bank Minnesota, National Association, as
Backup Servicer.
Reference is hereby made to the Indenture (the "Indenture"), dated as of
March 15, 1996, and the Series 1996A Supplement (the "Series Supplement"), dated
as of March 15, 1996, each by and between the Issuer and the Trustee; and
reference is also hereby made to the Contribution and Servicing Agreement (the
"Contribution and Servicing Agreement"), dated as of March 15, 1996, by and
between JAC, the Servicer, the Issuer, the Trustee, and the Backup Servicer.
Capitalized terms used and not otherwise defined herein have the meanings
assigned to them in the Indenture, as supplemented by the Series Supplement, or
the Contribution and Servicing Agreement, as applicable.
RECITALS:
A. Pursuant to the terms of the Contribution and Servicing Agreement, JAC
and the Issuer agreed to the contribution by JAC to the Issuer of Subsequent
Contracts following the Closing Date.
B. Pursuant to the terms of the Indenture and the Series Supplement, the
Issuer and the Trustee agreed to the pledge by the Issuer to the Trustee on
behalf of the Trust Estate and for the benefit of the Noteholders and the Note
Insurer of Subsequent Contracts following the Closing Date.
C. JAC, the Servicer, the Issuer, the Trustee, and the Backup Servicer
desire to enter into this Subsequent Transfer Agreement to reflect (i) the
contribution to the capital of, conveyance to, and assignment to the Issuer by
JAC without recourse (except as otherwise specifically provided in the
Contribution and Servicing Agreement) of certain motor vehicle retail
installment sale contracts which constitute Subsequent Contracts, as set forth
on the Amendment to Contract Schedule attached hereto as Schedule A (the "Added
----------
Contracts"), and (ii) the Grant to the Trustee by the Issuer on behalf of the
Trust Estate, without recourse (except as otherwise specifically provided in the
Indenture), of all of the Issuer's right, title, and interest in and to such
Added Contracts.
NOW, THEREFORE, in consideration of the premises herein contained and for
other good and valuable consideration, the receipt and sufficiency of which are
mutually acknowledged, JAC, the Servicer, the Issuer, the Trustee, and the
Backup Servicer hereby agree as follows:
<PAGE>
1. Terms of the Subsequent Transfer. JAC and the Issuer hereby agree to
--------------------------------
the contribution to the capital of, conveyance to, and assignment to the Issuer
by JAC of the Added Contracts; and the Issuer and the Trust hereby agree to the
Grant by the Issuer to the Trustee on behalf of the Trust Estate and for the
ratable benefit of the Noteholders and the Note Insurer of the Added Contracts.
The Subsequent Release Amount with respect to the Added Contracts is
$10,449,905.85, and the Subsequent Cutoff Date with respect to the Added
Contracts is April 26, 1996.
2. Contribution by JAC to the Issuer of the Added Contracts.
--------------------------------------------------------
(a) JAC does hereby contribute to the capital of, convey to, and assign to
the Issuer without recourse (except as otherwise specifically provided in the
Contribution and Servicing Agreement), and does hereby grant to the Issuer all
the right, title, and interest of JAC in and to the following and any and all
benefits accruing to the Issuer from (but none of JAC's obligations under): (i)
the Added Contracts; (ii) all rights with respect to the Added Contracts
(including all guaranties and other agreements or arrangements of whatever
character from time to time supporting or securing payment of any Added
Contract, and all rights with respect to any agreement or arrangement with the
vendors, Dealers, or manufacturers of the Financed Vehicles to the extent
specifically related to any Added Contract, including, without limitation, the
related Dealer Agreements); (iii) all payments on or with respect to the Added
Contracts received on or after the Subsequent Cutoff Date, including, without
limitation, all Insurance Proceeds and Liquidation Proceeds; (iv) the security
interests in the related Financed Vehicles created by the Added Contracts; (v)
the original Added Contracts, the Title Documents, applications for Title
Documents relating to the related Financed Vehicles, and the Contract Files
relating to the Added Contracts; and (vi) proceeds of the foregoing (including,
but not by way of limitation, all cash proceeds, accounts, accounts receivable,
notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance
proceeds, condemnation awards, rights to payment of any and every kind, and
other forms of obligations and receivables which at any time constitute all or
part or are included in the proceeds of any of the foregoing), in each case
whether now owned or hereafter acquired.
(b) With respect to the Added Contracts, JAC has delivered to or at the
direction of the Issuer, the Contract Files, the Assignments, and the related
Collection Account Deposit pursuant to the terms of the Contribution and
Servicing Agreement.
(c) The expenses and costs relating to the delivery of the Added Contracts
and this Agreement shall be borne by JAC.
3. Grant by the Issuer to the Trustee of the Added Contracts. The Issuer
---------------------------------------------------------
does hereby Grant to the Trustee for the ratable benefit of the Noteholders and
the Note Insurer, as security for the Issuer's obligations hereunder and under
the Series Supplement and Series 1996A Notes, without recourse, all of the
Issuer's right, title, and interest in and to the following and any and all
benefits accruing to the Issuer from (but none of the Issuer's obligations
under): (i) the Added Contracts; (ii) all rights with respect to the Added
Contracts (including all guaranties and other agreements or arrangements of
whatever character from time to time supporting or securing payment of any Added
Contract, and all rights with respect to any agreement or arrangement with the
vendors, Dealers, or manufacturers of the Financed Vehicles to the extent
specifically
-2-
<PAGE>
related to any Added Contract, including, without limitation, the related Dealer
Agreements); (iii) all payments on or with respect to the Added Contracts
received on or after the Subsequent Cutoff Date, including without limitation,
all Insurance Proceeds and Liquidation Proceeds; (iv) the security interests in
the related Financed Vehicles created by the Added Contracts; (v) the original
Added Contracts, the Title Documents, applications for Title Documents, and UCC
financing statements relating to the related Financed Vehicles, and the Contract
Files relating to the Added Contracts; (vi) all rights of the Issuer pursuant to
this Agreement; and (vii) proceeds of the foregoing (including, but not by way
of limitation, all cash proceeds, accounts, accounts receivable, notes, drafts,
acceptances, chattel paper, checks, deposit accounts, insurance proceeds,
condemnation awards, rights to payment of any and every kind, and other forms of
obligations and receivables which at any time constitute all or part or are
included in the proceeds of any of the foregoing), in each case whether now
owned or hereafter acquired.
The foregoing Grant does not constitute and is not intended to result in a
creation or an assumption by the Trustee, any Noteholder or the Note Insurer of
any obligation of the Issuer, JAC, the Servicer, or any other Person in
connection with the Trust Estate or under any agreement or instrument relating
thereto.
The Trustee acknowledges its acceptance on behalf of the Noteholders and
the Note Insurer of all right, title, and interest previously held by the Issuer
in and to the Trust Estate, and declares that it shall maintain such right,
title, and interest in accordance with the provisions of the Indenture and the
Series Supplement and agrees to perform the duties of the Trustee set forth in
the Indenture and the Series Supplement.
4. Representations and Warranties; Conditions Precedent.
----------------------------------------------------
(a) JAC hereby (i) affirms to the Issuer, the Trustee, the Note Insurer,
and the Backup Servicer the representations, warranties, and covenants set forth
in Section 2.03(a)(i) through (x) and (xii) of the Contribution and Servicing
Agreement as of the Subsequent Transfer Date, and (ii) affirms to the Issuer,
the Trustee, the Note Insurer, and the Backup Servicer the representations,
warranties, and covenants set forth in Section 2.03(xi) and (xiii) of the
Contribution and Servicing Agreement as of the Subsequent Transfer Date, with
respect to the Added Contracts;
(b) JAC hereby represents, warrants, and covenants to the Issuer, the
Trustee, the Note Insurer, and the Backup Servicer that, as of the Subsequent
Transfer Date (or as of such other date as is specified below):
(i) JAC has not selected the Added Contracts in a manner that it
believes is adverse to the interests of the Noteholders or the Note
Insurer;
(ii) taking into consideration the Added Contracts, as of the related
Subsequent Cutoff Date, assuming the Added Contracts had been included in
the Contracts pledged to the Trustee as of such date: (A) the weighted
average APR of the overall pool of Contracts would have been greater than
or equal to 18.25%, (B) the weighted average remaining term to maturity of
the Contracts would have been less than
-3-
<PAGE>
or equal to 24 months, (C) the percentage of the Aggregate Contract
Principal Balance attributable to Contracts due from Obligors residing in
any single state would have been no more than 9.99%, (D) the portion of the
overall pool of Contracts purchased from any single Dealer would have been
less than or equal to 1.50% (other than those Dealers previously approved
by the Note Insurer and then only to the limit established for each such
Dealer by the Note Insurer), and (E) the percentage of the Aggregate
Contract Principal Balance attributable to Contracts bearing interest at an
APR less than 10% would have been less than or equal to 6%;
(iii) no more than 10% of the Added Contracts are between 31 and 60
days past due; and
(iv) no Added Contract has a scheduled maturity later than April 30,
1999;
(v) no Added Contract has a stated maturity later than the Stated
Maturity;
(vi) the related Obligor with respect to each Added Contract has made
at least one Scheduled Payment; and
(vii) taking into consideration the Added Contracts and any Subsequent
Contracts previously Granted to the Trustee, no more than 60% of the Pre-
Funding Account Deposit has been applied to pay Release Amounts in
connection with the Grant of Subsequent Contracts purchased by JAC after
January 15, 1996.
(c) The Issuer hereby reaffirms the representations, warranties, and
covenants set forth in Sections 3.02 and 3.03 of the Indenture.
5. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
-------------
THE LAWS OF THE STATE OF TEXAS, AND THE OBLIGATIONS, RIGHTS, AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS; PROVIDED,
HOWEVER, THAT SECTION 4 OF THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF TEXAS, AND THE OBLIGATIONS, RIGHTS, AND REMEDIES OF THE
PARTIES HEREUNDER WITH RESPECT TO SUCH SECTION 4 SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
6. Successors and Assigns. All covenants and agreements in this
----------------------
Agreement shall inure to the benefit of and be binding upon JAC, the Issuer, and
the Trustee and their respective successors and permitted assigns. The Note
Insurer and its successors and assigns shall be a third-party beneficiary to the
provisions of this Agreement, and shall be entitled to rely upon and directly to
enforce such provisions of this Agreement so long as no Note Insurer Default
shall have occurred and be continuing. 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.
-4-
<PAGE>
7. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which, when so executed, shall be deemed to be an
original, but all which together shall constitute one and the same instrument.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their names to be signed
hereto by their respective officers thereunto duly authorized, as of the date
and year first above written.
JAYHAWK ACCEPTANCE CORPORATION,
in its individual capacity and as Servicer
By: /s/ WILLIAM K. BIXBY, III
--------------------------------------------------
William K. Bixby, III
Vice President of Finance
JAYHAWK FUNDING TRUST I, as Issuer
By: /s/ WILLIAM K. BIXBY, III
--------------------------------------------------
William K. Bixby, III
Vice President
NORWEST BANK TEXAS, N.A., as Trustee
By: /s/ PAMELA M. JONES
--------------------------------------------------
Pamela M. Jones
Vice President
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Backup Servicer
By: /s/ BONNIE SEIDEMAN
--------------------------------------------------
Bonnie Seideman
Assistant Vice President
-6-
<PAGE>
Exhibit 11
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
Primary:
Net income............................. $ 2,044,000 $ 635,000
=========== ===========
Shares as adjusted:
Weighted average common shares
outstanding......................... 20,497,233 14,280,436
Assumed conversion of Series A
convertible preferred stock -- 2,694,915
Incremental shares from outstanding
stock options as determined under
the treasury stock method........... 287,764 241,549
----------- -----------
Shares as adjusted..................... 20,784,997 17,216,900
=========== ===========
Net income per share................... $ .10 $ .04
=========== ===========
Fully diluted:
Net income............................. $ 2,044,000 $ 635,000
=========== ===========
Shares as adjusted:
Weighted average common shares
outstanding......................... 20,497,233 14,280,436
Assumed conversion of Series A
convertible preferred stock......... -- 2,694,915
Incremental shares from outstanding
stock options as determined under
the treasury stock method........... 301,101 241,549
----------- -----------
Shares as adjusted..................... 20,798,334 17,216,900
=========== ===========
Net income per share................... $ .10 $ .04
=========== ===========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 12,209<F1>
<SECURITIES> 0
<RECEIVABLES> 230,306
<ALLOWANCES> 3,594
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 7,705
<DEPRECIATION> 1,782
<TOTAL-ASSETS> 248,273
<CURRENT-LIABILITIES> 43,813
<BONDS> 43,205<F2>
0
0
<COMMON> 47,478
<OTHER-SE> 2,958
<TOTAL-LIABILITY-AND-EQUITY> 248,273<F3>
<SALES> 0
<TOTAL-REVENUES> 10,139
<CGS> 0
<TOTAL-COSTS> 4,769
<OTHER-EXPENSES> 197
<LOSS-PROVISION> 814
<INTEREST-EXPENSE> 1,217
<INCOME-PRETAX> 3,142
<INCOME-TAX> 1,098
<INCOME-CONTINUING> 2,044
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,044
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
<FN>
<F1>INCLUDES RESTRICTED CASH OF $11,826.
<F2>TWO-YEAR REVOLVING CREDIT FACILITY WHICH PERMITS BORROWINGS OF UP TO $65
MILLION AT A VARIABLE RATE OF INTEREST (9.25% AT MARCH 31, 1996).
<F3>INCLUDES DEALER HOLDBACKS OF $108,336.
</FN>
</TABLE>
